Beruflich Dokumente
Kultur Dokumente
MEDIALDEA, J.:
The petition seeks to declare unconstitutional Executive Order
No. 73 dated November 25, 1986, which We quote in full, as
follows (78 O.G. 5861):
EXECUTIVE ORDER No. 73
PROVIDING FOR THE COLLECTION OF
REAL PROPERTY TAXES BASED ON THE
1984 REAL PROPERTY VALUES, AS
PROVIDED FOR UNDER SECTION 21 OF
THE REAL PROPERTY TAX CODE, AS
AMENDED
WHEREAS, the collection of real property
taxes is still based on the 1978 revision of
property values;
WHEREAS, the latest general revision of
real property assessments completed in
1984 has rendered the 1978 revised values
obsolete;
WHEREAS, the collection of real property
taxes based on the 1984 real property
values was deferred to take effect on
January 1, 1988 instead of January 1, 1985,
thus depriving the local government units of
an additional source of revenue;
WHEREAS, there is an urgent need for local
governments to augment their financial
resources to meet the rising cost of
rendering effective services to the people;
the
the
are
No.
of Ermita-Malate Hotel, et al. v. Mayor of Manila (G.R. No. L24693, July 31, 1967, 20 SCRA 849) andSison v. Ancheta, et
al. (G.R. No. 59431, July 25, 1984, 130 SCRA 654).
The reliance on these two cases is certainly misplaced
because the due process requirement called for therein applies
to the "power to tax." Executive Order No. 73 does not impose
new taxes nor increase taxes.
Indeed, the government recognized the financial burden to the
taxpayers that will result from an increase in real property
taxes. Hence, Executive Order No. 1019 was issued on April
18, 1985, deferring the implementation of the increase in real
property taxes resulting from the revised real property
assessments, from January 1, 1985 to January 1, 1988.
Section 5 thereof is quoted herein as follows:
SEC. 5. The increase in real property taxes
resulting from the revised real property
assessments as provided for under Section
21 of Presidential Decree No. 464, as
amended by Presidential Decree No. 1621,
shall be collected beginning January 1, 1988
instead of January 1, 1985 in order to enable
the Ministry of Finance and the Ministry of
Local Government to establish the new
systems of tax collection and assessment
provided herein and in order to alleviate the
condition of the people, including real
property owners, as a result of temporary
economic difficulties. (emphasis supplied)
The issuance of Executive Order No. 73 which changed the
date of implementation of the increase in real property taxes
from January 1, 1988 to January 1, 1987 and therefore
repealed Executive Order No. 1019, also finds ample
justification in its "whereas' clauses, as follows:
WHEREAS, the collection of real property
taxes based on the 1984 real property
values was deferred to take effect on
January 1, 1988 instead of January 1,
1985, thus depriving the local government
units of an additional source of revenue;
WHEREAS, there is an urgent need for local
governments to augment their financial
resources to meet the rising cost of
rendering
effective
services
to
the
people; (emphasis supplied)
xxx xxx xxx
The other allegation of ROAP that Presidential Decree No. 464
is unconstitutional, is not proper to be resolved in the present
petition. As stated at the outset, the issue here is limited to the
constitutionality of Executive Order No. 73. Intervention is not
- versus -
THE
HONORABLE
EXECUTIVE
SECRETARY
EDUARDO ERMITA; HONORABLE SECRETARY OF
THE DEPARTMENT OF FINANCE CESAR PURISIMA;
and HONORABLE COMMISSIONER OF INTERNAL
REVENUE GUILLERMO PARAYNO, JR.,
Respondents.
x-------------------------x
AQUILINO Q. PIMENTEL, JR., LUISA P. EJERCITOESTRADA, JINGGOY E. ESTRADA, PANFILO M.
LACSON, ALFREDO S. LIM, JAMBY A.S. MADRIGAL,
AND SERGIO R. OSMEA III,
Petitioners,
- versus EXECUTIVE SECRETARY EDUARDO R. ERMITA,
CESAR V. PURISIMA, SECRETARY OF FINANCE,
GUILLERMO L. PARAYNO, JR., COMMISSIONER OF
THE BUREAU OF INTERNAL REVENUE,
Respondents.
x-------------------------x
ASSOCIATION OF PILIPINAS SHELL DEALERS, INC.
represented by its President, ROSARIO ANTONIO;
PETRON DEALERS ASSOCIATION represented by its
President, RUTH E. BARBIBI; ASSOCIATION OF
CALTEX DEALERS OF THE PHILIPPINES represented
by its President, MERCEDITAS A. GARCIA; ROSARIO
ANTONIO doing business under the name and style
of ANB NORTH SHELL SERVICE STATION; LOURDES
MARTINEZ doing business under the name and style
of SHELL GATE N. DOMINGO; BETHZAIDA TAN doing
business under the name and style of ADVANCE
SHELL STATION; REYNALDO P. MONTOYA doing
business under the name and style of NEW LAMUAN
SHELL SERVICE STATION; EFREN SOTTO doing
business under the name and style of RED FIELD
SHELL SERVICE STATION; DONICA CORPORATION
represented by its President, DESI TOMACRUZ;
RUTH E. MARBIBI doing business under the name
and style of R&R PETRON STATION; PETER M.
UNGSON doing business under the name and style of
CLASSIC STAR GASOLINE SERVICE STATION;
MARIAN SHEILA A. LEE doing business under the
G.R.
G.R.
Its mother bill is House Bill No. 3555. The House Committee
on Ways and Means approved the bill on February 2, 2005.
The President also certified it as urgent onFebruary 8, 2005.
The House of Representatives approved the bill on second and
third reading on February 28, 2005.
Meanwhile, the Senate Committee on Ways and
Means approved Senate Bill No. 1950[4] on March 7, 2005, in
substitution of Senate Bill Nos. 1337, 1838 and 1873, taking
into consideration House Bill Nos. 3555 and 3705. Senator
Ralph G. Recto sponsored Senate Bill No. 1337, while Senate
Bill Nos. 1838 and 1873 were both sponsored by Sens.
Franklin M. Drilon, Juan M. Flavier and Francis N. Pangilinan.
The President certified the bill on March 11, 2005, and was
approved by the Senate on second and third reading on April
13, 2005.
On the same date, April 13, 2005, the Senate agreed
to the request of the House of Representatives for a committee
conference on the disagreeing provisions of the proposed bills.
AUSTRIA-MARTINEZ, J.:
PANGANIBAN
. . mitigating
measures . . .
mitigating
measures
and
the location and
situation of each
product, of each
service, of each
company, isnt it?
ATTY. BANIQUED : Yes, Your Honor.
J. PANGANIBAN : Alright. So thats one
reason why we
had to issue a
TRO pending the
clarification of all
these and we
wish
the
government will
take
time
to
clarify all these by
means of a more
detailed
implementing
rules, in case the
law is upheld by
this Court. . . .[6]
to fix the rate of taxes under Article VI, Section 28(2) of the
1987 Philippine Constitution.
G.R. No. 168207
On June 9, 2005, Sen. Aquilino Q. Pimentel, Jr., et al.,
filed
a
petition
for certiorari likewise
assailing
the
constitutionality of Sections 4, 5 and 6 of R.A. No. 9337.
Aside from questioning the so-called stand-by
authority of the President to increase the VAT rate to 12%, on
the ground that it amounts to an undue delegation of legislative
power, petitioners also contend that the increase in the VAT
rate to 12% contingent on any of the two conditions being
satisfied violates the due process clause embodied in Article
III, Section 1 of the Constitution, as it imposes an unfair and
additional tax burden on the people, in that: (1) the 12%
increase is ambiguous because it does not state if the rate
would be returned to the original 10% if the conditions are no
longer satisfied; (2) the rate is unfair and unreasonable, as the
people are unsure of the applicable VAT rate from year to year;
and (3) the increase in the VAT rate, which is supposed to be
an incentive to the President to raise the VAT collection to at
least 2 4/5 of the GDP of the previous year, should only be
based on fiscal adequacy.
Petitioners further claim that the inclusion of a standby authority granted to the President by the Bicameral
Conference Committee is a violation of the no-amendment rule
upon last reading of a bill laid down in Article VI, Section 26(2)
of the Constitution.
Before
R.A.
No.
9337
took
effect,
petitioners ABAKADA GURO Party List, et al., filed a petition
for prohibition on May 27, 2005. They question the
constitutionality of Sections 4, 5 and 6 of R.A. No. 9337,
amending Sections 106, 107 and 108, respectively, of the
National Internal Revenue Code (NIRC). Section 4 imposes a
10% VAT on sale of goods and properties, Section 5 imposes a
10% VAT on importation of goods, and Section 6 imposes a
10% VAT on sale of services and use or lease of properties.
These
questioned
provisions
contain
a
uniform proviso authorizing
the
President,
upon
recommendation of the Secretary of Finance, to raise the VAT
rate to 12%, effective January 1, 2006, after any of the
following conditions have been satisfied, to wit:
RESPONDENTS COMMENT
The Office of the Solicitor General (OSG) filed a
Comment in behalf of respondents. Preliminarily, respondents
contend that R.A. No. 9337 enjoys the presumption of
constitutionality and petitioners failed to cast doubt on its
validity.
10
11
House
No.3705
Bill
Provides for
12% VAT on
every sale of
goods
or
properties
(amending
Sec. 106 of
NIRC); 12%
VAT
on
importation of
goods
(amending
Sec. 107 of
NIRC);
and
12% VAT on
Provides
for
12% VAT in
general on sales
of
goods
or
properties and
reduced
rates
for
sale
of
certain
locally
manufactured
goods
and
petroleum
products
and
raw materials to
be used in the
manufacture
Provides for a
single rate of
10% VAT on sale
of
goods
or
properties
(amending Sec.
106 of NIRC),
10% VAT on sale
of
services
including sale of
electricity
by
generation
companies,
transmission and
distribution
sale
of
services and
use or lease
of properties
(amending
Sec. 108 of
NIRC)
thereof
(amending Sec.
106 of NIRC);
12% VAT on
importation
of
goods
and
reduced
rates
for
certain
imported
products
including
petroleum
products
(amending Sec.
107 of NIRC);
and 12% VAT on
sale of services
and use or lease
of
properties
and a reduced
rate for certain
services
including power
generation
(amending Sec.
108 of NIRC)
companies, and
use or lease of
properties
(amending Sec.
108 of NIRC)
No
similar
provision
Provides
that
the
VAT
imposed
on
power
generation and
on the sale of
petroleum
products
shall
be absorbed by
generation
companies
or
sellers,
respectively, and
shall not be
passed on to
consumers
Provides that
the input tax
credit
for
capital goods
on which a
VAT has been
paid shall be
No
similar
provision
12
equally
distributed
over 5 years
or
the
depreciable
life of such
capital goods;
the input tax
credit
for
goods
and
services other
than
capital
goods
shall
not
exceed
5% of the
total amount
of such goods
and services;
and
for
persons
engaged
in
retail trading
of goods, the
allowable
input
tax
credit
shall
not
exceed
11% of the
total amount
of
goods
purchased.
years
or
the
depreciable life
of such capital
goods; the input
tax credit for
goods
and
services
other
than
capital
goods shall not
exceed 90% of
the output VAT.
No
similar
provision
No
similar
provision
Provided
for
amendments to
several
NIRC
provisions
regarding
corporate
income,
percentage,
franchise
and
excise taxes
13
14
Rates
of
Income Tax
on Domestic
Corporation
28(A)
(1)
Tax
on
Resident
Foreign
Corporation
28(B)
(1)
Intercorporate
Dividends
34(B)
(1)
Intercorporate
Dividends
116
Tax
on
Persons
Exempt from
VAT
117
Percentage
Tax
on
domestic
carriers and
keepers
of
Garage
119
Tax
on
franchises
121
Tax on banks
and
NonBank
Financial
Intermediarie
s
148
Excise
on
Tax
15
manufacture
d oils and
other fuels
151
Excise
Tax
on
mineral
products
236
Registration
requirements
237
Issuance of
receipts
or
sales
or
commercial
invoices
288
Disposition of
Incremental
Revenue
16
17
No
Undue
Delegati
on
of
Legislati
ve
Power
value-added
tax collection as
a percentage of
Gross Domestic
Product (GDP)
of the previous
year
exceeds
two and fourfifth percent (2
4/5%) or
Tax
18
value-added
tax
collection as a
percentage
of
Gross Domestic
Product (GDP)
of the previous
year
exceeds
two and fourfifth percent (2
4/5%) or
(ii) national government
deficit
as
a
percentage
of
GDP
of
the
previous
year
exceeds
one
and
one-half
percent (1 %).
SEC. 6. Section 108 of the same
Code, as amended, is hereby further
amended to read as follows:
value-added
tax
collection as a
percentage
of
Gross Domestic
Product (GDP)
of the previous
year
exceeds
two and four-
fifth percent (2
4/5%) or
(ii) national government
deficit
as
a
percentage
of
GDP
of
the
previous
year
exceeds
one
and
one-half
percent
(1
%). (Emphasis
supplied)
Petitioners allege that the grant of the stand-by
authority to the President to increase the VAT rate is a virtual
abdication by Congress of its exclusive power to tax because
such delegation is not within the purview of Section 28 (2),
Article VI of the Constitution, which provides:
The Congress may, by law,
authorize the President to fix within specified
limits, and may impose, tariff rates, import
and export quotas, tonnage and wharfage
dues, and other duties or imposts within the
framework of the national development
program of the government.
They argue that the VAT is a tax levied on the sale,
barter or exchange of goods and properties as well as on the
sale or exchange of services, which cannot be included within
the purview of tariffs under the exempted delegation as the
latter refers to customs duties, tolls or tribute payable upon
merchandise to the government and usually imposed on goods
or merchandise imported or exported.
Petitioners ABAKADA GURO Party List, et al., further
contend that delegating to the President the legislative power
to tax is contrary to republicanism. They insist that
accountability, responsibility and transparency should dictate
the actions of Congress and they should not pass to the
President the decision to impose taxes. They also argue that
the law also effectively nullified the Presidents power of
control, which includes the authority to set aside and nullify the
acts of her subordinates like the Secretary of Finance, by
mandating the fixing of the tax rate by the President upon the
recommendation of the Secretary of Finance.
Petitioners Pimentel, et al. aver that the President has
ample powers to cause, influence or create the conditions
provided by the law to bring about either or both the conditions
precedent.
On the other hand, petitioners Escudero, et al. find
bizarre and revolting the situation that the imposition of the
12% rate would be subject to the whim of the Secretary of
Finance, an unelected bureaucrat, contrary to the principle of
no taxation without representation. They submit that the
Secretary of Finance is not mandated to give a favorable
recommendation and he may not even give his
recommendation. Moreover, they allege that no guiding
standards are provided in the law on what basis and as to how
he will make his recommendation. They claim, nonetheless,
that any recommendation of the Secretary of Finance can
easily be brushed aside by the President since the former is a
mere alter ego of the latter, such that, ultimately, it is the
19
20
(i)
Value-added
tax
collection
as
a
percentage
of
Gross
Domestic Product (GDP)
of the previous year
exceeds two and four-fifth
percent (2 4/5%); or
(ii)
National
government deficit as a
percentage of GDP of the
previous year exceeds one
and one-half percent (1
%).
21
22
2.
23
24
25
26
27
Progressivity of Taxation
28
29
On August 23, 2010 the Office of the Solicitor General filed the
governments comment.[4] The government avers that the NIRC
imposes VAT on all kinds of services of franchise grantees,
including tollway operations, except where the law provides
otherwise; that the Court should seek the meaning and intent
of the law from the words used in the statute; and that the
imposition of VAT on tollway operations has been the subject
as early as 2003 of several BIR rulings and circulars.[5]
The government also argues that petitioners have no
right to invoke the non-impairment of contracts clause since
they clearly have no personal interest in existing toll operating
agreements (TOAs) between the government and tollway
operators. At any rate, the non-impairment clause cannot limit
the States sovereign taxing power which is generally read into
contracts.
Finally, the government contends that the non-inclusion of VAT
in the parametric formula for computing toll rates cannot
exempt tollway operators from VAT. In any event, it cannot be
claimed that the rights of tollway operators to a reasonable rate
of return will be impaired by the VAT since this is imposed on
top of the toll rate. Further, the imposition of VAT on toll fees
would have very minimal effect on motorists using the tollways.
In their reply[6] to the governments comment,
petitioners point out that tollway operators cannot be regarded
as franchise grantees under the NIRC since they do not hold
legislative franchises. Further, the BIR intends to collect the
VAT by rounding off the toll rate and putting any excess
collection in an escrow account. But this would be illegal since
only the Congress can modify VAT rates and authorize its
disbursement. Finally, BIR Revenue Memorandum Circular 632010 (BIR RMC 63-2010), which directs toll companies to
record an accumulated input VAT of zero balance in their
books as of August 16, 2010, contravenes Section 111 of the
NIRC which grants entities that first become liable to VAT a
transitional input tax credit of 2% on beginning inventory. For
this reason, the VAT on toll fees cannot be implemented.
The Issues Presented
The case presents two procedural issues:
1. Whether or not the Court may treat the petition for
declaratory relief as one for prohibition; and
2. Whether or not petitioners Diaz and Timbol have
legal standing to file the action.
The case also presents two substantive issues:
1. Whether or not the government is unlawfully
expanding VAT coverage by including tollway operators and
tollway operations in the terms franchise grantees and sale of
services under Section 108 of the Code; and
2. Whether or not the imposition of VAT on tollway
operators a) amounts to a tax on tax and not a tax on services;
b) will impair the tollway operators right to a reasonable return
of investment under their TOAs; and c) is not administratively
feasible and cannot be implemented.
The Courts Rulings
A. On the Procedural Issues:
30
31
32
33
Conclusion
In fine, the Commissioner of Internal Revenue did not
usurp legislative prerogative or expand the VAT laws coverage
when she sought to impose VAT on tollway operations. Section
108(A) of the Code clearly states that services of all other
franchise grantees are subject to VAT, except as may be
provided under Section 119 of the Code.Tollway operators are
not among the franchise grantees subject to franchise tax
under the latter provision. Neither are their services among the
VAT-exempt transactions under Section 109 of the Code.
If the legislative intent was to exempt tollway
operations from VAT, as petitioners so strongly allege, then it
would have been well for the law to clearly say so. Tax
exemptions must be justified by clear statutory grant and
based on language in the law too plain to be mistaken. [37] But
as the law is written, no such exemption obtains for tollway
operators. The Court is thus duty-bound to simply apply the
law as it is found.
Lastly, the grant of tax exemption is a matter of
legislative policy that is within the exclusive prerogative of
Congress. The Courts role is to merely uphold this legislative
policy, as reflected first and foremost in the language of the tax
statute. Thus, any unwarranted burden that may be perceived
to result from enforcing such policy must be properly referred
to Congress. The Court has no discretion on the matter but
simply applies the law.
The VAT on franchise grantees has been in the
statute books since 1994 when R.A. 7716 or the Expanded
Value-Added Tax law was passed. It is only now, however, that
the executive has earnestly pursued the VAT imposition
against tollway operators. The executive exercises exclusive
discretion in matters pertaining to the implementation and
execution of tax laws. Consequently, the executive is more
properly suited to deal with the immediate and practical
consequences of the VAT imposition.
WHEREFORE,
the
Court DENIES respondents
Secretary of Finance and Commissioner of Internal Revenues
motion for reconsideration of its August 24, 2010
resolution, DISMISSES the petitioners Renato V. Diaz and
Aurora Ma. F. Timbols petition for lack of merit, and SETS
ASIDE the Courts temporary restraining order dated August
13, 2010.
SO ORDERED.
34
ANGELES CITY,
Petitioner,
- versus -
CORONA, C.
VELASCO, JR.,On January 1, 1992, RA 7160 or the Local Government
LEONARDO-DE
Code (LGC)CASTRO,
of 1991 was passed into law, conferring upon provinces
DEL and cities the power, among others, to impose tax on businesses
PEREZ,
enjoying franchise.[4] In accordance with the LGC, the Sangguniang
Panlungsod of Angeles City enacted on December 23, 1993 Tax
Promulgated:
Ordinance No. 33, S-93, otherwise known as the Revised Revenue
June Code
29, 2010
of Angeles City (RRCAC).
DECISION
(b)
(c)
(d)
35
Issue
Being a special civil action for certiorari, the issue in the
instant case is limited to the determination of whether the RTC gravely
abused its discretion in issuing the writ of preliminary injunction
enjoining Angeles City and its City Treasurer from levying, selling, and
disposing the properties of AEC. All other matters pertaining to the
validity of the tax assessment and AECs tax exemption must
therefore be left for the determination of the RTC where the main case
is pending decision.
Petitioners Arguments
Petitioners main argument is that the collection of taxes
cannot be enjoined by the RTC, citing Valley Trading Co., Inc. v.
Court of First Instance of Isabela, Branch II, [23] wherein the lower
courts denial of a motion for the issuance of a writ of preliminary
injunction to enjoin the collection of a local tax was upheld. Petitioner
further reasons that since the levy and auction of the properties of a
delinquent taxpayer are proper and lawful acts specifically allowed by
the LGC, these cannot be the subject of an injunctive writ. Petitioner
likewise insists that AEC must first pay the tax before it can protest the
assessment. Finally, petitioner contends that the tax exemption
claimed by AEC has no legal basis because RA 4079 has been
expressly repealed by the LGC.
Private respondents Arguments
Private respondent AEC on the other hand asserts that there was no
grave abuse of discretion on the part of the RTC in issuing the writ of
preliminary injunction because it was issued after due notice and
36
37
38
August 3, 2007
Accordingly[,]
the
hereby DISMISSED.
Petition
for
Review
is
SO ORDERED.7
Upon review, the Court of Appeals reversed the CTA and
directed the latter to resolve respondents petition for review.
Applying Section 204(c)8 of the 1997 National Internal
Revenue Code (NIRC), the Court of Appeals ruled that
respondents filing of an amended return indicating an
overpayment was sufficient compliance with the requirement of
a written claim for refund. 9 The decretal portion of the Court of
Appeals decision reads:
WHEREFORE, finding the petition to be meritorious,
this
Court GRANTS it
due
course
and REVERSES the
appealed
Resolutions
and DIRECTS the Court of Tax Appeal[s] to resolve
the petition for review on the merits.
SO ORDERED.10
Petitioner sought reconsideration, but it was denied. Hence,
the instant petition raising the following questions of law:
I.
On March 21, 1997, respondent and her husband filed with the
BIR their Joint Individual Income Tax Return for the year 1996.
Later, on June 17, 1997, respondent, through her
representative, filed an amended return and a Non-Resident
Citizen Income Tax Return, and paid the BIR P17,693.37 plus
interests in the amount ofP14,455.76. On October 8, 1997, she
filed another amended return indicating an overpayment
of P358,274.63.
Claiming that the income taxes withheld and paid by Intel and
respondent
resulted
in
an
overpayment
ofP340,918.92,4 respondent filed on April 15, 1999 a petition
for review docketed as C.T.A. Case No. 5828 with the Court of
Tax Appeals (CTA). The Commissioner of Internal Revenue
(CIR) moved to dismiss the petition for failure of respondent to
file the mandatory written claim for refund before the CIR.
II.
WHETHER OR NOT THE CTA HAS JURISDICTION
TO TAKE [COGNIZANCE] OF RESPONDENTS
PETITION FOR REVIEW.11
39
xxxx
Provided, however, That a return filed showing an
overpayment shall be considered as a written claim
for credit or refund.
xxxx
Along the same vein, respondent invokes the liberal application
of technicalities in tax refund cases, conformably with our
ruling in BPI-Family Savings Bank, Inc. v. Court of
Appeals.14 We are, however, unable to agree with respondents
submission on this score.
The applicable law on refund of taxes pertaining to the 1996
compensation income is Section 230 of the old Tax Code,
which was the law then in effect, and not Section 204(c) of the
new Tax Code, which was effective starting only on January 1,
1998.
Noteworthy, the requirements under Section 230 for refund
claims are as follows:
1. A written claim for refund or tax credit must be
filed by the taxpayer with the Commissioner;
2. The claim for refund must be a categorical
demand for reimbursement;
3. The claim for refund or tax credit must be filed, or
the suit or proceeding therefor must be commenced in
court within two (2) years from date of payment of
the tax or penalty regardless of any supervening
cause.15 (Emphasis ours.)
In our view, the law is clear. A claimant must first file a written
claim for refund, categorically demanding recovery of overpaid
taxes with the CIR, before resorting to an action in court. This
obviously is intended, first, to afford the CIR an opportunity to
correct the action of subordinate officers; and second, to notify
the government that such taxes have been questioned, and the
notice should then be borne in mind in estimating the revenue
available for expenditure.16
Thus, on the first issue, we rule against respondents
contention. Entrenched in our jurisprudence is the principle that
tax refunds are in the nature of tax exemptions which are
construed strictissimi juris against the taxpayer and liberally in
favor of the government. As tax refunds involve a return of
revenue from the government, the claimant must show
indubitably the specific provision of law from which her right
arises; it cannot be allowed to exist upon a mere vague
implication or inference17 nor can it be extended beyond the
ordinary and reasonable intendment of the language actually
used by the legislature in granting the refund.18 To repeat, strict
compliance with the conditions imposed for the return of
40
41
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the
Rules of Court, seeking to set aside the en bancDecision of the
Court of Tax Appeals (CTA) in CTA EB No. 37 dated 22
February 2005,1 ordering the petitioner to withdraw and cancel
Assessment Notice No. 000688-80-7333 issued against
respondent Philippine Global Communication, Inc. for its 1990
income tax deficiency. The CTA, in its assailed en
banc Decision, affirmed the Decision of the First Division of the
CTA dated 9 June 20042 and its Resolution dated 22
September 2004 in C.T.A. Case No. 6568.
Respondent, a corporation engaged in telecommunications,
filed its Annual Income Tax Return for taxable year 1990 on 15
April 1991. On 13 April 1992, the Commissioner of Internal
Revenue (CIR) issued Letter of Authority No. 0002307,
authorizing the appropriate Bureau of Internal Revenue (BIR)
officials to examine the books of account and other accounting
records of respondent, in connection with the investigation of
respondents 1990 income tax liability. On 22 April 1992, the
BIR sent a letter to respondent requesting the latter to present
for examination certain records and documents, but
respondent failed to present any document. On 21 April 1994,
respondent received a Preliminary Assessment Notice dated
13 April 1994 for deficiency income tax in the amount
of P118,271,672.00, inclusive of surcharge, interest, and
compromise penalty, arising from deductions that were
disallowed for failure to pay the withholding tax and interest
expenses that were likewise disallowed. On the following day,
22 April 1994, respondent received a Formal Assessment
Notice with Assessment Notice No. 000688-80-7333, dated 14
April 1994, for deficiency income tax in the total amount
of P118,271,672.00.3
On 6 May 1994, respondent, through its counsel Ponce Enrile
Cayetano Reyes and Manalastas Law Offices, filed a formal
protest letter against Assessment Notice No. 000688-80-7333.
Respondent filed another protest letter on 23 May 1994,
through another counsel Siguion Reyna Montecillo & Ongsiako
Law Offices. In both letters, respondent requested for the
cancellation of the tax assessment, which they alleged was
invalid for lack of factual and legal basis.4
On 16 October 2002, more than eight years after the
assessment was presumably issued, the Ponce Enrile
Cayetano Reyes and Manalastas Law Offices received from
the CIR a Final Decision dated 8 October 2002 denying the
respondents protest against Assessment Notice No. 00068880-7333, and affirming the said assessment in toto.5
On 15 November 2002, respondent filed a Petition for Review
with the CTA. After due notice and hearing, the CTA rendered a
Decision in favor of respondent on 9 June 2004. 6 The CTA
ruled on the primary issue of prescription and found it
unnecessary to decide the issues on the validity and propriety
of the assessment. It decided that the protest letters filed by
the respondent cannot constitute a request for reinvestigation,
hence, they cannot toll the running of the prescriptive period to
collect the assessed deficiency income tax.7 Thus, since more
than three years had lapsed from the time Assessment Notice
No. 000688-80-7333 was issued in 1994, the CIRs right to
collect the same has prescribed in conformity with Section 269
of the National Internal Revenue Code of 19778 (Tax Code of
1977). The dispositive portion of this decision reads:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the petitioner. Accordingly,
respondents Final Decision dated October 8, 2002 is
hereby REVERSED and SET ASIDE and respondent
is hereby ORDERED to WITHDRAW and CANCEL
Assessment Notice No. 000688-80-7333 issued
against the petitioner for its 1990 income tax
deficiency because respondents right to collect the
same has prescribed.9
The CIR moved for reconsideration of the aforesaid Decision
but was denied by the CTA in a Resolution dated 22
September 2004.10 Thereafter, the CIR filed a Petition for
Review with the CTA en banc, questioning the aforesaid
Decision and Resolution. In its en banc Decision, the CTA
affirmed the Decision and Resolution in CTA Case No. 6568.
The dispositive part reads:
WHEREFORE, premises considered, the Petition for
Review is hereby DISMISSED for lack of merit.
Accordingly, the assailed Decision and Resolution in
CTA Case No. 6568 are hereby AFFIRMED in toto.11
Hence, this Petition for Review on Certiorari raising the
following grounds:
THE COURT OF TAX APPEALS, SITTING EN BANC,
COMMITTED REVERSIBLE ERROR IN AFFIRMING
THE ASSAILED DECISION AND RESOLUTION IN
CTA CASE NO. 6568 DECLARING THAT THE RIGHT
OF THE GOVERNMENT TO COLLECT THE
DEFICIENCY INCOME TAX FROM RESPONDENT
FOR THE YEAR 1990 HAS PRESCRIBED
A. THE PRESCRIPTIVE PERIOD WAS
INTERUPTED
WHEN
RESPONDENT
FILED TWO LETTERS OF PROTEST
DISPUTING IN DETAIL THE DEFICIENCY
ASSESSMENT
IN
QUESTION
AND
REQUESTING THE CANCELLATION OF
SAID ASSESSMENT. THE TWO LETTERS
OF PROTEST ARE, BY NATURE,
REQUESTS FOR REINVESTIGATION OF
THE DISPUTED ASSESSMENT.
42
B.
THE
REQUESTS
FOR
REINVESTIGATION OF RESPONDENT
WERE GRANTED BY THE BUREAU OF
INTERNAL REVENUE.12
This Court finds no merit in this Petition.
The main issue in this case is whether or not CIRs right to
collect respondents alleged deficiency income tax is barred by
prescription under Section 269(c) of the Tax Code of 1977,
which reads:
Section 269. Exceptions as to the period of limitation
of assessment and collection of taxes. x x x
xxxx
c. Any internal revenue tax which has been assessed
within the period of limitation above-prescribed may
be collected by distraint or levy or by a proceeding in
court within three years following the assessment of
the tax.
The law prescribed a period of three years from the date the
return was actually filed or from the last date prescribed by law
for the filing of such return, whichever came later, within which
the BIR may assess a national internal revenue tax.13 However,
the law increased the prescriptive period to assess or to begin
a court proceeding for the collection without an assessment to
ten years when a false or fraudulent return was filed with the
intent of evading the tax or when no return was filed at all.14 In
such cases, the ten-year period began to run only from the
date of discovery by the BIR of the falsity, fraud or omission.
If the BIR issued this assessment within the three-year period
or the ten-year period, whichever was applicable, the law
provided another three years after the assessment for the
collection of the tax due thereon through the administrative
process of distraint and/or levy or through judicial
proceedings.15 The three-year period for collection of the
assessed tax began to run on the date the assessment notice
had been released, mailed or sent by the BIR.16
The assessment, in this case, was presumably issued on 14
April 1994 since the respondent did not dispute the CIRs
claim. Therefore, the BIR had until 13 April 1997. However, as
there was no Warrant of Distraint and/or Levy served on the
respondents nor any judicial proceedings initiated by the BIR,
the earliest attempt of the BIR to collect the tax due based on
this assessment was when it filed its Answer in CTA Case No.
6568 on 9 January 2003, which was several years beyond the
three-year prescriptive period. Thus, the CIR is now prescribed
from collecting the assessed tax.
The provisions on prescription in the assessment and
collection of national internal revenue taxes became law upon
the recommendation of the tax commissioner of the
Philippines. The report submitted by the tax commission clearly
states that these provisions on prescription should be enacted
to benefit and protect taxpayers:
Under the former law, the right of the Government to
collect the tax does not prescribe. However, in
43
44
45
possibly make the taxpayer feel that the demand was not
unreasonable or that no harassment or injustice is meant by
the Government. There was no legal, or even a moral,
obligation preventing the CIR from collecting the assessed tax.
In a similar case, Cordero v. Conda,31 the Court did not
suspend the running of the prescription period where the acts
of the taxpayer did not prevent the government from collecting
the tax.
The government also urges that partial payment is
"acknowledgement of the tax obligation", hence a
"waiver on the defense of prescription." But partial
payment would not prevent the government from
suing the taxpayer. Because, by such act of payment,
the government is not thereby "persuaded to
postpone collection to make him feel that the demand
was not unreasonable or that no harassment or
injustice is meant." Which, as stated in Collector v.
Suyoc Consolidated Mining Co., et al., L-11527,
November 25, 1958, is the underlying reason behind
the rule that prescriptive period is arrested by the
taxpayers
request
for
reexamination
or
reinvestigation even if "he has not previously waived
it [prescription] in writing."
The Court reminds us, in the case of Commissioner of Internal
Revenue v. Algue, Inc., 32 of the need to balance the conflicting
interests of the government and the taxpayers.
Taxes are the lifeblood of the government and so
should be collected without unnecessary hindrance.
On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate
the very reason for government itself. It is therefore
necessary to reconcile the apparently conflicting
interest of the authorities and the taxpayers so that
the real purpose of taxation, which is the promotion of
common good, may be achieved.
Thus, the three-year statute of limitations on the collection of
an assessed tax provided under Section 269(c) of the Tax
Code of 1977, a law enacted to protect the interests of the
taxpayer, must be given effect. In providing for exceptions to
such rule in Section 271, the law strictly limits the suspension
of the running of the prescription period to, among other
instances, protests wherein the taxpayer requests for a
reinvestigation. In this case, where the taxpayer merely filed
two protest letters requesting for a reconsideration, and where
the BIR could not have conducted a reinvestigation because
no new or additional evidence was submitted, the running of
statute of limitations cannot be interrupted. The tax which is the
subject of the Decision issued by the CIR on 8 October 2002
affirming the Formal Assessment issued on 14 April 1994 can
no longer be the subject of any proceeding for its collection.
Consequently, the right of the government to collect the alleged
deficiency tax is barred by prescription.
IN VIEW OF THE FOREGOING, the instant Petition
is DENIED. The assailed en banc Decision of the CTA in CTA
EB No. 37 dated 22 February 2005, cancelling Assessment
Notice No. 000688-80-7333 issued against Philippine Global
Communication, Inc. for its 1990 income tax deficiency for the
reason that it is barred by prescription, is hereby AFFIRMED.
No costs.
46
SO ORDERED.
47
- versus -
CHICO-NAZARIO,
Respondent.
Promulgated:
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CHICO-NAZARIO, J.:
over P6,500,000.00 up to
P25,000,000.00 - - - - - - - - - - - - - - - - - - -- P36,000.00 plus 50% of 1%
in excess of P6,500,000.00
xxxx
48
xxxx
(D) Excisable goods subject to VAT
(1) Distilled spirits
(2) Wines
xxxx
xxxx
49
I.
On 4 May 2007, petitioners filed with the CTA a
Motion for Extension of Time to File Petition for Review,
praying for a 15-day extension or until 20 May 2007 within
which to file their Petition. The Motion for Extension of
petitioners was docketed as C.T.A. AC No. 31, raffled to the
CTA First Division.
II.
Again, on 18 May 2007, petitioners filed, through
registered mail, a Second Motion for Extension of Time to File
a Petition for Review, praying for another 10-day extension, or
until 30 May 2007, within which to file their Petition.
WHETHER OR NOT
PETITIONERS SUBSTANTIALLY
COMPLIED
WITH
THE
REGLEMENTARY PERIOD TO
TIMELY APPEAL THE CASE FOR
REVIEW BEFORE THE [CTA
DIVISION].
III.
WHETHER
OR
NOT
PETITIONER
CITY
OF MANILA CAN STILL ASSESS
TAXES UNDER [SECTIONS] 14
AND 21 OF [TAX ORDINANCE NO.
7794, AS AMENDED].
IV.
50
First Division on 30 May 2007, the same was filed well within
the reglementary period for doing so.
xxxx
xxxx
(c) On
exporters,
and
on
manufacturers,
millers,
producers,
wholesalers, distributors, dealers or retailers
of essential commodities enumerated
hereunder at a rate not exceeding one-half
(1/2) of the rates prescribed under
subsections (a), (b) and (d) of this Section:
xxxx
xxxx
51
52
for Review with the CTA was to expire on 5 May 2007, thus,
compelling them to seek an extension of 15 days, or until 20
May 2007, to file said Petition was unnecessary and
superfluous. Even without said Motion for Extension,
petitioners could file their Petition for Review until 20 May
2007, as it was still within the 30-day reglementary period
provided for under Section 11 of Republic Act No. 9282; and
implemented by Section 3(a), Rule 8 of the Revised Rules of
the CTA.
53
Petitioners never offered an explanation for their noncompliance with Section 4 of Rule 5, and Section 2 of Rule 6 of
the Revised Rules of the CTA. Hence, although the Court had,
in previous instances, relaxed the application of rules of
procedure, it cannot do so in this case for lack of any
justification.
Contrary to the assertions of petitioners, the CocaCola case is indeed applicable to the instant case. The pivotal
issue raised therein was whether Tax Ordinance No. 7988 and
Tax Ordinance No. 8011 were null and void, which this Court
resolved in the affirmative. Tax Ordinance No. 7988 was
declared by the Secretary of the Department of Justice (DOJ)
as null and void and without legal effect due to the failure of
herein petitioner City of Manila to satisfy the requirement under
the law that said ordinance be published for three consecutive
days. Petitioner City of Manila never appealed said declaration
of the DOJ Secretary; thus, it attained finality after the lapse of
the period for appeal of the same. The passage of Tax
Ordinance No. 8011, amending Tax Ordinance No. 7988, did
not cure the defects of the latter, which, in any way, did not
legally exist.
54
SO ORDERED.
55
July 3, 2013
SWEDISH
MATCH
PHILIPPINES,
INC., Petitioner,
vs.
THE TREASURER OF THE CITYOF MANILA, Respondent.
DECISION
SERENO, CJ.:
This is a Petition for Review on Certiorari1 filed by Swedish
Match Philippines, Inc. (petitioner) under Rule 45 of the 1997
Rules of Civil Procedure assailing the Court of Tax Appeals En
Bane (CTA En Bane) Decision2 dated 1 October 2007 and
Resolution3 dated 14 January 2008 in C.T.A. EB No. 241.
THE FACTS
On 20 October 2001, petitioner paid business taxes in the total
amount of P470,932.21.4 The assessed amount was based on
Sections 145 and 216 of Ordinance No. 7794, otherwise known
as the Manila Revenue Code, as amended by Ordinance Nos.
7988 and 8011. Out of that amount, P164,552.04
corresponded to the payment under Section 21.7
Assenting that it was not liable to pay taxes under Section 21,
petitioner wrote a letter8 dated 17 September 2003 to herein
respondent claiming a refund of business taxes the former had
paid pursuant to the said provision. Petitioner argued that
payment under Section 21 constituted double taxation in view
of its payment under Section 14.
On 17 October 2003, for the alleged failure of respondent to
act on its claim for a refund, petitioner filed a Petition for
Refund of Taxes9 with the RTC of Manila in accordance with
Section 196 of the Local Government Code of 1991. The
Petition was docketed as Civil Case No. 03-108163.
On 14 June 2004, the Regional Trial Court (RTC), Branch 21 of
Manila rendered a Decision10 in Civil Case No. 03-108163
dismissing the Petition for the failure of petitioner to plead the
latters capacity to sue and to state the authority of Tiarra T.
Batilaran-Beleno (Ms. Beleno), who had executed the
Verification and Certification of Non-Forum Shopping.
In denying petitioners Motion for Reconsideration, the RTC
went on to say that Sections 14 and 21 pertained to taxes of a
different nature and, thus, the elements of double taxation
were wanting in this case.
On appeal, the CTA Second Division affirmed the RTCs
dismissal of the Petition for Refund of Taxes on the ground that
petitioner had failed to state the authority of Ms. Beleno to
institute the suit.
board
to
sign
Certification
the
of
56
the time of the filing of the Petition. The Petition, therefore, was
defective due to the flawed Verification and Certification of
Non-Forum Shopping, which were insufficient in form and
therefore a clear violation of Section 5, Rule 7 of the 1997
Rules of Civil Procedure.
We rule for petitioner.
Time and again, this Court has been faced with the issue of the
validity of the verification and certification of non-forum
shopping, absent any authority from the board of directors.
The power of a corporation to sue and be sued is lodged in the
board of directors, which exercises its corporate powers.14 It
necessarily follows that "an individual corporate officer cannot
solely exercise any corporate power pertaining to the
corporation
without
authority
from
the
board
of
directors."15 Thus, physical acts of the corporation, like the
signing of documents, can be performed only by natural
persons duly authorized for the purpose by corporate by-laws
or by a specific act of the board of directors.16
Consequently, a verification signed without an authority from
the board of directors is defective. However, the requirement of
verification is simply a condition affecting the form of the
pleading and non-compliance does not necessarily render the
pleading fatally defective.17 The court may in fact order the
correction of the pleading if verification is lacking or, it may act
on the pleading although it may not have been verified, where
it is made evident that strict compliance with the rules may be
dispensed with so that the ends of justice may be served.18
Respondent cites this Courts ruling in PAL v. FASAP,19 where
we held that only individuals vested with authority by a valid
board resolution may sign a certificate of non-forum shopping
on behalf of a corporation. The petition is subject to dismissal if
a certification was submitted unaccompanied by proof of the
signatorys authority.20 In a number of cases, however, we have
recognized exceptions to this rule. Cagayan Valley Drug
Corporation v. Commissioner of Internal Revenue21 provides:
In a slew of cases, however, we have recognized the authority
of some corporate officers to sign the verification and
certification against forum shopping. In Mactan-Cebu
International Airport Authority v. CA, we recognized the
authority of a general manager or acting general manager to
sign the verification and certificate against forum shopping; in
Pfizer v. Galan, we upheld the validity of a verification signed
by an "employment specialist" who had not even presented
any proof of her authority to represent the company; in Novelty
Philippines, Inc., v. CA, we ruled that a personnel officer who
signed the petition but did not attach the authority from the
company is authorized to sign the verification and non-forum
shopping certificate; and in Lepanto Consolidated Mining
Company v. WMC Resources International Pty. Ltd. (Lepanto),
we ruled that the Chairperson of the Board and President of
the Company can sign the verification and certificate against
57
58
59
WHEREFORE,
premises
considered,
judgment is hereby rendered in favor of the
plaintiff and ordering defendants to CANCEL
and SET ASIDE Assessment Notice
dated October 25, 2000and Notice of
Assessment dated November 19, 2001.
SO ORDERED.[3]
On appeal, the Court of Appeals (CA) rendered its
Decision[4] dated November 20, 2006, the dispositive portion of
which reads:
WHEREFORE,
the
decision
appealed from is hereby ordered SET ASIDE
and a new one entered DISMISSING the
plaintiff/appellees complaint
WITHOUT
PREJUDICE.
SO ORDERED.[5]
The CA sustained respondents claim that the petition
filed with the RTC should have been dismissed due to
petitioners failure to show that Atty. Maria Theresa B. Ramos
(Atty. Ramos), petitioners Manager for Tax and Legal Affairs
and the person who signed the Verification and Certification of
Non-Forum Shopping, was duly authorized by the Board of
Directors.
Its motion for reconsideration having been denied in a
Resolution[6] dated February 9, 2007, petitioner now comes
before the Court via a Petition for Review on Certiorari under
Rule 45 of the Rules of Court, on the following grounds:
(1) THE COURT OF APPEALS ERRED IN
DISMISSING THE CASE FOR LACK
OF
SHOWING
THAT
THE
SIGNATORY OF THE VERIFICATION/
CERTIFICATION
IS
NOT
SPECIFICALLY AUTHORIZED FOR
AND IN BEHALF OF PETITIONER.
(2) THE COURT OF APPEALS ERRED IN
GIVING
DUE
COURSE
TO
RESPONDENTS
APPEAL,
CONSIDERING THAT IT HAS NO
JURISDICTION OVER THE SAME,
THE MATTERS TO BE RESOLVED
BEING PURE QUESTIONS OF LAW,
JURISDICTION OVER WHICH IS
VESTED
ONLY
WITH
THIS
HONORABLE COURT.
(3) ASSUMING THE COURT OF APPEALS
HAS
JURISDICTION
OVER
RESPONDENTS
APPEAL,
SAID
COURT ERRED IN NOT DECIDING
ON THE MERITS OF THE CASE FOR
THE
SPEEDY
DISPOSITION
THEREOF, CONSIDERING THAT THE
DEFICIENCY LOCAL BUSINESS TAX
ASSESSMENTS
ISSUED
BY
RESPONDENT
ARE
CLEARLY
INVALID AND CONTRARY TO THE
PROVISIONS
OF
THE
PASIG
REVENUE CODE AND THE LOCAL
GOVERNMENT CODE.[7]
60
61
preceding
xxxx
(Emphasis supplied)
The above provision specifically refers to gross receipts which
is defined under Section 131 of the Local Government Code,
as follows:
xxxx
(n) Gross Sales or Receipts include the total
amount of money or its equivalent
representing
the
contract
price,
compensation or service fee, including the
amount charged or materials supplied with
the services and the deposits or advance
payments actually or constructively received
during the taxable quarter for the services
performed or to be performed for another
person excluding discounts if determinable
at the time of sales, sales return, excise tax,
and value-added tax (VAT);
xxxx
The law is clear. Gross receipts include money or its equivalent
actually or constructively received in consideration of services
rendered or articles sold, exchanged or leased, whether actual
or constructive.
In Commissioner of Internal Revenue v. Bank of Commerce,
[17]
the Court interpreted gross receipts as including those
which were actually or constructively received, viz.:
Actual receipt of interest income is not
limited to physical receipt. Actual receipt
may either be physical receipt or
constructive receipt. When the depository
bank withholds the final tax to pay the tax
liability of the lending bank, there is prior to
the withholding a constructive receipt by the
lending bank of the amount withheld. From
the amount constructively received by the
62
The
last
means
of
acquiring possession under Article
531 refers to juridical actsthe
acquisition of possession by
sufficient titleto which the law gives
the force of acts of possession.
Respondent argues that only items
of income actually received should
be included in its gross receipts. It
claims that since the amount had
already been withheld at source, it
did not have actualreceipt thereof.
We clarify. Article 531 of
the Civil Code clearly provides that
the acquisition of the right of
possession is through the proper
acts
and
legal
formalities
established therefor.
The
withholding process is one such
act. There may not be actual receipt
of the income withheld; however, as
provided for in Article 532,
possession by any person without
any power whatsoever shall be
considered as acquired when
ratified by the person in whose
name the act of possession is
executed.
In our withholding tax
system, possession is acquired by
the payor as the withholding agent
of the government, because the
taxpayer ratifies the very act of
possession for the government.
There is thus constructive receipt.
The processes of bookkeeping and
accounting for interest on deposits
and yield on deposit substitutes that
are subjected to FWT are indeedfor
legal
purposestantamount
to
delivery, receipt or remittance.[19]
Revenue Regulations No. 16-2005 dated September 1,
2005[20] defined and gave examples of constructive receipt, to
wit:
SEC. 4. 108-4. Definition of Gross Receipts.
-- x x x
Constructive receipt occurs when the
money consideration or its equivalent is
placed at the control of the person who
rendered the service without restrictions by
the payor. The following are examples of
constructive receipts:
(1) deposit in banks which are made
available to the seller of services without
restrictions;
(2) issuance by the debtor of a notice to
offset any debt or obligation and acceptance
thereof by the seller as payment for services
rendered; and
63
Petitioner, Present:
QUISUMBING, J.,
Chairperson,
(a)
- versus - CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO
, JR.
BANK OF THE PHILIPPINE
ISLANDS,
Respondent. Promulgated:
June 26, 2006
x---------------------------------------------------------------------------x
On interest, commissions
and discounts from lending
activities as well as income
from financial leasing, on the
basis of remaining maturities
of instruments from which
such receipts are derived.
(4)
DECISION
TINGA, J.:
(ii) Over
seven
(7)
years . . . . . . . . . . . . . . 0%
(b) On dividends . . . . . . . . . . . . .
. . . . . . . . . . 0%
(c) On royalties,
property, real or
rentals
of
personal, profits
from
exchange and all other items
treated
as gross income under
Section
28
of
this
Code . . . . . . . . . . . 5%
64
For the four (4) quarters of the year 1996, BPI computed its 5%
gross receipts tax payments by including in its tax base the
20% final tax on interest income that had been withheld and
remitted directly to the Bureau of Internal Revenue (BIR).
BPI wrote the BIR a letter dated 15 July 1998 citing the CTA
Decision in Asian Bank and requesting a refund of alleged
overpayment of taxes representing 5% gross receipts taxes
paid on the 20% final tax withheld at source.
65
As
commonly
understood, the term gross
receipts means the entire
receipts
without
any
deduction. Deducting any
amount from the gross
receipts
changes
the
result, and the meaning, to
net
receipts.
Any
deduction
from
gross
receipts is inconsistent
with a law that mandates a
tax on gross receipts,
unless the law itself makes
an
exception.
As
explained by the Supreme
Court of Pennsylvania in
Commonwealth
of
Pennsylvania
v. Koppers Company, Inc.,
Highly
refined and
technical tax
concepts
have
been
developed by
the
accountant
and
legal
technician
primarily
because of
the impact of
federal
income tax
legislation.
However,
this in no
way should
affect
or
control
the
normal
usage
of
words in the
construction
of
our
statutes; and
we
see
nothing that
would
require
us
not to include
the proceeds
here
in
question in
the
gross
receipts
allocation
unless
statutorily
such
inclusion is
prohibited. U
nder
the
ordinary
basic
methods of
handling
accounts,
the
term
gross
receipts, in
the absence
of
any
statutory
definition of
the
term,
must
be
taken
to
include the
whole total
gross
receipts
without any
deductions,
x x x.
[Citations
omitted]
(Emphasis
supplied)
Likewise,
in Laclede Gas Co. v. City
of St. Louis, the Supreme
Court of Missouri held:
word
The
gross
66
appearing in
the
term
gross
receipts, as
used in the
ordinance,
must
have
been
and
was
there
used as the
direct
antithesis of
the
word
net. In
its
usual
and
ordinary
meaning
gross
receipts of a
business is
the
whole
and
entire
amount
of
the receipts
without
deduction,
x x x.
On
the contrary,
net receipts
usually are
the receipts
which remain
after
deductions
are
made
from
the
gross
amount
thereof of the
expenses
and cost of
doing
business,
including
fixed charges
and
depreciation.
Gross
receipts
become net
receipts after
certain
proper
deductions
are
made
from
the
gross.
And
in the use of
the
words
gross
receipts, the
instant
ordinance, of
course,
precluded
plaintiff from
first
deducting its
costs
and
expenses of
doing
business, etc
., in arriving
at the higher
base figure
upon which it
must pay the
5% tax under
this
ordinance.
(Emphasis
supplied)
Absent
a
statutory definition, the
term gross receipts is
understood in its plain and
ordinary meaning. Words
in a statute are taken in
their usual and familiar
signification,
with
due
regard to their general and
popular
use.
The
Supreme Court of Hawaii
held
in Bishop
Trust
Company v. Burns that
xx
x It
is
fundamental
that
in
construing or
interpreting a
statute,
in
order
to
ascertain the
intent of the
legislature,
the language
used therein
is to be taken
in
the
generally
accepted
and
usual
sense.
Courts
will
presume that
the words in
a
statute
were used to
express their
meaning in
common
usage. This
principle
is
equally
applicable to
a
tax
statute. [Cita
tions omitted]
67
(Emphasis
supplied)
the
expenses
of
management.
Websters New
International Dictionary, in
fact,
defines gross as
whole or entire.
68
69
70
x x x [T]he
room
charges
entrusted by the foreign travel
agencies
to
the
private
respondent do not form part of
its gross receipts within the
definition of the Tax Code. The
said receipts never belonged to
the private respondent. The
private
respondent
never
benefited from their payment to
the local hotels. x x x [T]his
arrangement was only to
accommodate
the
foreign
travel agencies.
ownership
of
money
representing
interest, the money constitutes income or
receipt of the taxpayer.
BPI argues that to include the 20% final tax withheld in its
gross receipts tax base would be to tax twice its passive
income and would constitute double taxation. Granted that
interest income is being taxed twice, this, however, does not
amount to double taxation. There is no double taxation if the
law imposes two different taxes on the same income, business
or property. [36] In Solidbank, we ruled, thus:
71
SO ORDERED.
72
GONZAGA-REYES, J.:
This is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to set aside the decision of the Court of
Appeals dated November 7, 1996 in CA-GR SP No. 40802
affirming the decision of the Court of Tax Appeals in CTA Case
No. 5136.
The antecedent facts as found by the Court of Tax Appeals are
not disputed, to wit:
[Respondent], a domestic corporation
organized and operating under the Philippine
laws, entered into a license agreement with
SC Johnson and Son, United States of
America (USA), a non-resident foreign
corporation based in the U.S.A. pursuant to
which the [respondent] was granted the right
to use the trademark, patents and
technology owned by the latter including the
right to manufacture, package and distribute
the products covered by the Agreement and
secure
assistance
in
management,
marketing and production from SC Johnson
and Son, U. S. A.
The said License Agreement was duly
registered with the Technology Transfer
Board of the Bureau of Patents, Trade Marks
and Technology Transfer under Certificate of
Registration No. 8064 (Exh. "A").
73
that the "most favored nation" clause under the RP-US Tax
Treaty refers to royalties paid under similar circumstances as
those royalties subject to tax in other treaties; that the phrase
"paid under similar circumstances" does not refer to payment
of the tax but to the subject matter of the tax, that is, royalties,
because the "most favored nation" clause is intended to allow
the taxpayer in one state to avail of more liberal provisions
contained in another tax treaty wherein the country of
residence of such taxpayer is also a party thereto, subject to
the basic condition that the subject matter of taxation in that
other tax treaty is the same as that in the original tax treaty
under which the taxpayer is liable; thus, the RP-US Tax Treaty
speaks of "royalties of the same kind paid under similar
circumstances". S.C. Johnson also contends that the
Commissioner is estopped from insisting on her interpretation
that the phrase "paid under similar circumstances" refers to the
manner in which the tax is paid, for the reason that said
interpretation is embodied in Revenue Memorandum Circular
("RMC") 39-92 which was already abandoned by the
Commissioner's predecessor in 1993; and was expressly
revoked in BIR Ruling No. 052-95 which stated that royalties
paid to an American licensor are subject only to 10%
withholding tax pursuant to Art 13(2)(b)(iii) of the RP-US Tax
Treaty in relation to the RP-West Germany Tax Treaty. Said
ruling should be given retroactive effect except if such is
prejudicial to the taxpayer pursuant to Section 246 of the
National Internal Revenue Code.
Petitioner filed Reply alleging that the fact that the certification
against forum shopping was signed by petitioner's counsel is
not a fatal defect as to warrant the dismissal of this petition
since Circular No. 28-91 applies only to original actions and not
to appeals, as in the instant case. Moreover, the requirement
that the certification should be signed by petitioner and not by
counsel does not apply to petitioner who has only the Office of
the Solicitor General as statutory counsel. Petitioner reiterates
that even if the phrase "paid under similar circumstances"
embodied in the most favored nation clause of the RP-US Tax
Treaty refers to the payment of royalties and not taxes, still the
presence or absence of a "matching credit" provision in the
said RP-US Tax Treaty would constitute a material
circumstance to such payment and would be determinative of
the said clause's application.1wphi1.nt
We address first the objection raised by private respondent
that the certification against forum shopping was not executed
by the petitioner herself but by her counsel, the Office of the
Solicitor General (O.S.G.) through one of its Solicitors, Atty.
Tomas M. Navarro.
SC Circular No. 28-91 provides:
SUBJEC
T:
ADDITIO
NAL
REQUISI
74
TES
The circular expressly requires that a certificate of non-forum
FOR
shopping should be attached to petitions filed before this Court
PETITIO and the Court of Appeals. Petitioner's allegation that Circular
NS
No. 28-91 applies only to original actions and not to appeals as
FILED in the instant case is not supported by the text nor by the
WITH
obvious intent of the Circular which is to prevent multiple
THE
petitions that will result in the same issue being resolved by
SUPRE different courts.
ME
COURT Anent the requirement that the party, not counsel, must certify
AND
under oath that he has not commenced any other action
THE
involving the same issues in this Court or the Court of Appeals
COURT or any other tribunal or agency, we are inclined to accept
OF
petitioner's submission that since the OSG is the only lawyer
APPEAL for the petitioner, which is a government agency mandated
S
TOunder Section 35, Chapter 12, title III, Book IV of the 1987
PREVENAdministrative Code 4 to be represented only by the Solicitor
T
General, the certification executed by the OSG in this case
FORUM constitutes substantial compliance with Circular No. 28-91.
SHOPPI
NG ORWith respect to the merits of this petition, the main point of
MULTIPLcontention in this appeal is the interpretation of Article 13 (2)
E FILING(b) (iii) of the RP-US Tax Treaty regarding the rate of tax to be
OF
imposed by the Philippines upon royalties received by a nonPETITIO resident foreign corporation. The provision states insofar as
NS ANDpertinent
COMPLAthat
INTS
TO: xxx
xxx xxx
The attention of the Court has been called to
the filing of multiple petitions and complaints
involving the same issues in the Supreme
Court, the Court of Appeals or other tribunals
or agencies, with the result that said courts,
tribunals or agencies have to resolve the
same issues.
(1) To avoid the foregoing, in every petition
filed with the Supreme Court or the Court of
Appeals, the petitioner aside from complying
with pertinent provisions of the Rules of
Court and existing circulars, must certify
under oath to all of the following facts or
undertakings: (a) he has not theretofore
commenced any other action or proceeding
involving the same issues in the Supreme
Court, the Court of Appeals, or any tribunal
or
agency; . . .
(2) Any violation of this revised Circular will
entail the following sanctions: (a) it shall be a
cause for the summary dismissal of the
multiple petitions or complaints; . . .
1) Royalties derived by a
resident of one of the
Contracting States from
sources within the other
Contracting State may be
taxed by both Contracting
States.
2) However, the tax
imposed
by
that
Contracting State shall not
exceed.
a) In the
case of
the
United
States,
15
percent
of
the
gross
amount
of
the
royalties
, and
b) In the
case of
75
the
Philippin
es, the
least of:
(i)
25
percent
of
the
gross
amount
of
the
royalties;
ances to
a
resident
of a third
State.
xxx xxx xxx
(emphas
is
supplied
)
(ii)
15Respondent S. C. Johnson and Son, Inc. claims that on the
percent basis of the quoted provision, it is entitled to the concessional
of
thetax rate of 10 percent on royalties based on Article 12 (2) (b) of
gross
the RP-Germany Tax Treaty which provides:
amount
of
the
(2)
However,
such
royalties,
royalties may also be
where
taxed in the Contracting
the
State in which they arise,
royalties
and according to the law of
are paid
that State, but the tax so
by
a
charged shall not exceed:
corporati
on
xxx xxx xxx
registere
d
with
b)
10
the
percent
Philippin
of
the
e Board
gross
of
amount
Investme
of
nts and
royalties
engaged
arising
in
from the
preferred
use of,
areas of
or
the
activities;
right
to
and
use, any
patent,
(iii)
tradema
lowest
rk,
rate
of
design
Philippin
or
e tax that
model,
may be
plan,
imposed
secret
on
formula
royalties
or
of
the
process,
same
or from
kind paid
the use
under
of or the
similar
right to
circumst
use,
76
industria
l,
commer
cial, or
scientific
equipme
nt, or for
informati
on
concerni
ng
industria
l,
commer
cial
or
scientific
experien
ce.
as
a
credit
against
German
income
and
corporati
on
tax
payable
in
respect
of
the
following
items of
income
arising
in
the
Republic
of
the
Philippin
es, the
tax paid
under
the laws
of
the
Philippin
es
in
accorda
nce with
this
Agreem
ent on:
dd)
royalties,
as
defined
in
paragrap
h 3 of
Article
12;
77
Philippin
e
tax
shall be
deemed
to be
xxx xxx xxx
cc) in the
case of
royalties
The RP-US Tax Treaty contains no similar
for which
"matching credit" as that provided under the
the tax is
RP-West Germany Tax Treaty. Hence, the
reduced
tax on royalties under the RP-US Tax Treaty
to 10 or
is not paid under similar circumstances as
15
per
those obtaining in the RP-West Germany Tax
cent
Treaty. Therefore, the "most favored nation"
accordin
clause in the RP-West Germany Tax Treaty
g
to
cannot be availed of in interpreting the
paragrap
provisions of the RP-US Tax Treaty. 5
h 2 of
Article
12,
20
The petition is meritorious.
percent
of
theWe are unable to sustain the position of the Court of Tax
gross
Appeals, which was upheld by the Court of Appeals, that the
amount phrase "paid under similar circumstances in Article 13 (2) (b),
of such(iii) of the RP-US Tax Treaty should be interpreted to refer to
royalties. payment of royalty, and not to the payment of the tax, for the
xxx xxx xxx
According to petitioner, the taxes upon royalties under the RPUS Tax Treaty are not paid under circumstances similar to
those in the RP-West Germany Tax Treaty since there is no
provision for a 20 percent matching credit in the former
convention and private respondent cannot invoke the
concessional tax rate on the strength of the most favored
nation clause in the RP-US Tax Treaty. Petitioner's position is
explained thus:
Under the foregoing provision of the RPWest Germany Tax Treaty, the Philippine tax
paid on income from sources within the
Philippines is allowed as a credit against
German income and corporation tax on the
same income. In the case of royalties for
which the tax is reduced to 10 or 15 percent
according to paragraph 2 of Article 12 of the
RP-West Germany Tax Treaty, the credit
shall be 20% of the gross amount of such
royalty. To illustrate, the royalty income of a
German resident from sources within the
Philippines arising from the use of, or the
right to use, any patent, trade mark, design
or model, plan, secret formula or process, is
taxed at 10% of the gross amount of said
78
79
80
81