activities and projects of accredited

non-government
organizations
(NGOs) throughout the country.

CASE DIGEST: 2015 SC TAXATION

CASES
January 2015
1.) BANCO DE ORO, ET AL., Petitioners,
RIZAL COMMERCIAL BANKING
CORPORATION
AND
RCBC
CAPITAL CORPORATION, CAUCUS
OF
DEVELOPMENT
NGO
NETWORKS, Petitioner- Intervenors
VS.
REPUBLIC
OF
THE
PHILIPPINES,
THE
COMMISSIONER OF INTERNAL
REVENUE, BUREAU OF INTERNAL
REVENUE,
SECRETARY
OF
FINANCE,
DEPARTMENT
OF
FINANCE,
THE
NATIONAL
TREASURER AND BUREAU OF
TREASURY, Respondents (G.R. No.
198756, January 13, 2015)

A zero-coupon bond is a bond

bought at a price substantially lower
than its face value (or at a deep
discount), with the face value repaid
at the time of maturity. It does not
make periodic interest payments, or
have so called "coupons" hence the
term zero-coupon bond. However,
the discount to face value
constitutes the return to the bond
holder.

The Bureau of Internal Revenue, in

reply to CODE-NGOs letters dated
May 10, 15, and 25, 2001, issued
BIR Ruling No. 020-2001 on the tax
treatment of the proposed PEACe
Bonds, it is signed by then
Commissioner of Internal Revenue
Ren G. Baez and confirmed that
the PEACe Bonds would not be
classified as deposit substitutes and
would not be subject to the
corresponding withholding tax:

FACTS:

By letter dated March 23, 2001, the

Caucus of Development NGO
Networks (CODE-NGO) with the
assistance of its financial advisors,
Rizal Commercial Banking Corp.
("RCBC"), RCBC Capital Corp.
("RCBC Capital"), CAPEX Finance
and Investment Corp. ("CAPEX")
and SEED Capital Ventures, Inc.
(SEED), requested an approval
from the Department of Finance for
the issuance by the Bureau of
Treasury of 10-year zero-coupon
Treasury Certificates (T-notes).
The T-notes would initially be
purchased by a special purpose
vehicle on behalf of CODE-NGO,
repackaged and sold at a premium
to investors as the PEACe Bonds.
The net proceeds from the sale of
the Bonds will be used to endow a
permanent fund (Hanapbuhay
Fund) to finance meritorious

Thus, to be classified as "deposit

substitutes", the borrowing of funds
must be obtained from twenty (20) or
more individuals or corporate lenders
at any one time. In the light of your
representation that the PEACe Bonds
will be issued only to one entity, i.e.,
CODE-NGO, the same shall not be
considered as "deposit substitutes"
falling within the purview of the above
definition. Hence, the withholding tax
on deposit substitutes will not apply.

Meanwhile, in the memorandum

dated July 4, 2001, Former
Treasurer Eduardo Sergio G. Edeza
(Former
Treasurer
Edeza)
questioned the propriety of issuing
the bonds directly to a special
purpose vehicle considering that the

latter was not a Government

Securities Eligible Dealer (GSED).
Former
Treasurer
Edeza
recommended that the issuance of
the Bonds "be done through the
Automated
Debt
Auction
Processing System (ADAPS)" and
that CODE-NGO should get a
GSED to bid in [sic] its behalf.

The Bureau of Treasury announced

that "P30.0B worth of 10-year Zero
[-] Coupon Bonds [would] be
auctioned
on
October
16,
2001. The notice stated that the
Bonds shall be issued to not more
than 19 buyers/lenders. The
Auction Guidelines reiterated that
the Bonds to be auctioned are "[n]ot
subject to 20% withholding tax as
the issue will be limited to a
maximum of 19 lenders in the
primary market (pursuant to BIR
Revenue Regulation No. 020 2001).

After the auction, RCBC which

participated on behalf of CODENGO was declared as the winning
bidder having tendered the lowest
bids. Accordingly, on October 18,
2001, the Bureau of Treasury
issued P35 billion worth of Bonds at
yield-to-maturity of 12.75% to
RCBC for approximately P10.17
billion, resulting in a discount of
approximately P24.83 billion.

RCBC Capital entered into an

underwriting
Agreement with
CODE-NGO, whereby RCBC
Capital was appointed as the Issue
Manager and Lead Underwriter for
the offering of the PEACe Bonds.
RCBC Capital sold the Government
Bonds in the secondary market for
an
issue
price
of P11,995,513,716.51. Petitioners
purchased the PEACe Bonds on
different dates.

The Bureau of Internal Revenue,

citing three (3) of its rulings
rendered in 2004 and 2005, namely:
BIR Ruling No. 007-04 dated July
16, 2004; BIR Ruling No. DA-49104 dated September 13, 2004; and
BIR Ruling No. 008-05 dated July
28, 2005, declared the following:
The Php 24.3 billion discount on the
issuance of the PEACe Bonds should be
subject to 20% Final Tax on interest
income from deposit substitutes. It is
now settled that all treasury bonds
(including PEACe Bonds), regardless
of the number of purchasers/lenders at
the time of origination/issuance are
considered deposit substitutes. In the
case of zero-coupon bonds, the
discount (i.e. difference between face
value and purchase price/discounted
value of the bond) is treated as interest
income of the purchaser/holder. Thus,
the Php 24.3 interest income should
have been properly subject to the 20%
Final Tax as provided in Section
27(D)(1) of the Tax Code of 1997.

On October 17, 2011, replying to an

urgent query from the Bureau of
Treasury, the Bureau of Internal
Revenue issued BIR Ruling No. DA
378-2011 clarifying that the final
withholding tax due on the discount
or interest earned on the PEACe
Bonds should "be imposed and
withheld not only on RCBC/CODE
NGO but also [on] all subsequent
holders of the Bonds." Also on the
same date, petitioners filed a
petition for certiorari, prohibition,
and/or mandamus (with urgent
application for a temporary
restraining order and/or writ of
preliminary injunction) before this
court.

October 18, 2011, this court issued

a temporary restraining order
(TRO)
"enjoining
the

implementation of BIR Ruling No.

370-2011 against the [PEACe
Bonds,] subject to the condition that
the 20% final withholding tax on
interest income there from shall be
withheld by the petitioner banks and
placed in escrow pending resolution
of [the] petition."

1. The PEACEBOND Ruling which

held that all treasury bonds are
deposit substitutes is erroneous. The
tax ruling disregards the 20-lender
rule requirement before a borrowing
may be considered a public
borrowing, hence amounting to the
issuance of a deposit substitute.

On October 28, 2011, RCBC and

RCBC Capital filed a motion for
leave of court to intervene and to
admit petition-in-intervention dated
October 27, 2011, which was
granted by this court on November
15, 2011.

On November 27, 2012, petitioners

filed their "Manifestation with
Urgent Reiterative Motion to
direct respondents to comply with
the Temporary Restraining Order.

2. The gains referred to in Section 32

(B) (7) (g) of the Tax Code does not
include interest which represents
forebearance for the use of money.
The said gains are (i) gains realized
from trading of the bonds before
their maturity date and (ii) the
redemption gains of the last
bondholder who acquired the bond
at the secondary trading. The gains
of the last bondholders of the
PEACEBONDS on redemption,
thereof, are redemption gains and
not interest income.

ISSUE:
Whether or not the PEACe Bonds
are "deposit substitutes" and thus subject to
20% final withholding tax under the 1997
National Internal Revenue Code? Related to
this question is the interpretation of the phrase
"borrowing from twenty (20) or more
individual or corporate lenders at any one
time" under Section 22(Y) of the 1997 National
Internal Revenue Code, particularly on
whether the reckoning of the 20 lenders
includes trading of the bonds in the secondary
market.

RULING:
The Court ordered the Bureau of
Treasury (BTr) to immediately release
and pay to the eight (8) redeeming
bondholders of the PEACEBONDS, the
amount corresponding to 20% final
withholding tax (FWT) that was
withheld by the BTr upon the redemption
of the bonds pursuant to BIR Ruling No.
370-2011 (PEACEBOND Ruling).
The salient points of the Decision are as
follows:

3. The phrase at any one time in the

below quoted definition of a deposit
substitute in Section 22 (Y) of the
Tax Code cannot be given a
restrictive meaning. Section 22 (Y)
states:
The term 'deposit substitutes' shall mean
an alternative form of obtaining funds from
the public (the term 'public' means
borrowing from twenty (20) or more
individual or corporate lenders at any one
time), other than deposits, through the
issuance, endorsement, or acceptance of
debt instruments for the borrower's own
account, for the purpose of relending or
purchasing of receivables and other
obligations, or financing their own needs
or the needs of their agent or dealer.

The phrase at any one time

applies to the primary and
secondary
market
of
debt
instruments.
4. It may not be concluded that the
PEACEBONDS had been issued to
one singular lender (underwriter)

because the underwriting agreement

and term sheet of the underwriter
reflected that there were several
undisclosed number of investors to
whom the PEACEBONDS were
distributed.
5. Should it be found that the
underwriter
sold
the
PEACEBONDS to more than 20
lenders, the ten-year prescriptive
period for making an assessment
under Section 222 of the Tax Code,
and not the general three-year
prescriptive period, shall apply. In
such case, the appropriate FWT on
the interest income may still be
collected
from
the
underwriter/lender.

gas turbine and other power

generating plants and related
facilities for conversion into
electricity, coal, distillate and
other fuel provided by and under
contract with the Government,
or
any
subdivision,
instrumentality
or
agency
thereof, or any governmentowned
or
controlled
corporations or any entity
engaged in the development,
supply or distribution of energy.

The respondent filed its annual

income tax return (ITR) for
calendar years 2002 and 2003
on April 15, 2003 and April 15,
2004, respectively, reflecting
overpaid income taxes or excess
creditable withholding taxes in
the amounts of P6,232,003.00
and P10,134,410.00 for taxable
years
2002
and
2003,
respectively.

On March 22, 2005, the

respondent
filed
an
administrative claim for refund
or issuance of tax credit
certificate with the Bureau of
Internal Revenue (BIR) in the
total amount of P16,366,413.00,
representing
the
overpaid
income tax or the excess
creditable withholding tax of the
respondent for calendar years
2002 and 2003.

Due to the inaction of the BIR

and in order to toll the running
of the two-year prescriptive
period for claiming a refund
under Section 229 of the
National Internal Revenue Code
(NIRC) of 1997, the respondent
filed a petition for review in the
Court of Tax Appeals (CTA) on
April 14, 2005. On May 15,
2008, the CTA in Division

QUESTIONS: a.) Based on the case, what

is the nature of the deposit substitutes?
Cite your legal basis.
b.) If in case the underwriter sold the
PEACe Bonds to more than 20 lenders,
what prescriptive period for making a tax
assessment should be followed under
Section 222 of NIRC? Explain your answer.

2.) REPUBLIC OF THE PHILIPPINES

represented by the COMMISSIONER
OF INTERNAL REVENUE, Petitioner
VS.
TEAM
(PHILS.)
ENERGY
CORPORATION (formerly MIRANT
(PHILS.)
ENERGY
CORPORATION), Respondent
(G.R.
No. 188016, January 14, 2015)

FACTS:

Respondent,
a
domestic
corporation,
is
primarily
engaged in the business of
developing,
designing,
constructing,
erecting,
assembling,
commissioning,
owning, operating, maintaining,
rehabilitating, and managing

rendered its decision in favor of

the respondent. It ordered the
petitioner to refund or to issue a
tax credit certificate in favor of
the respondent. The CTA in
Division found that the
respondent had signified in its
ITRs for the same years its
intent to have its excess
creditable tax withheld for
calendar years 2002 and 2003 be
refunded,
and
that
the
respondents administrative and
judicial claims for refund had
been timely filed within the twoyear prescriptive period under
Section 204 (C) in relation to
Section 229 of the NIRC

The petitioner then filed a

motion for reconsideration, but
the CTA in Division denied the
motion on September 5, 2008.
The petitioner brought a petition
for review before the CTA En
Banc. On April 15, 2009, the
CTA En Banc rendered a
decision dismissing the Petition
for Review.
The petitioner asserts the
necessity of submission of the
quarterly
return
of
the
respondent to prove its
entitlement to the refund
pursuant to Sec. 76 of the NIRC
because such quarterly returns
would establish the correctness
of the total amount of payments
made and the taxes due as
reported on the adjusted return
at the end of the year. Petitioner
has brought this appeal.
Section 76. Final Adjusted ReturnEvery corporation liable to tax under
Section 27 shall file a final adjustment
return covering the total taxable
income for the preceding calendar of
fiscal year. If the sum of the quarterly
tax payments made during the said

taxable year is not equal to the total

tax due on the entire taxable income of
that year, the corporation shall either:
(A) Pay the balance of the tax still due;
or
(B) Carry over the excess credit; or
(C) Be credited or refunded withthe
excess amount paid, as the case may
be.

ISSUE:
Whether or not the respondent
proved its entitlement to the refund?
RULING:
The court denied the petition for
review on certiorari.
The requirements for entitlement of
a corporate taxpayer for a refund or the
issuance of tax credit certificate involving
excess withholding taxes are as follows:
1. That the claim for refund was
filed
within
the
two-year
reglementary period pursuant to
Section 229 of the NIRC;
2. When it is shown on the ITR that
the income payment received is
being declared part of the taxpayers
gross income; and
3. When the fact of withholding is
established by a copy of the
withholding tax statement, duly
issued by the payor to the payee,
showing the amount paid and
income tax withheld from that
amount.
The court do not expound anymore
on the first requirement because even the
petitioner does not contest that the
respondent filed its administrative and

judicial claim for refund within the

statutory period.
With regard to the second
requirement, it is fundamental that the
findings of fact by the CTA in Division are
not to be disturbed without any showing of
grave abuse of discretion considering that
the members of the Division are in the best
position to analyze the documents
presented by the parties. Consequently, we
adopt the findings of the CTA in Division,
which the CTA En Banc cited, as follows:
that the total amount of Creditable
Withholding Tax per Annual ITRs for
calendar years ended December 31, 2002
and December 31, 2003 agrees with the
total amount of Creditable Withholding Tax
presented on petitioners Schedule of
Creditable Withholding Tax Certificates for
the calendar years ended December 31,
2002 and December 31, 2003.
With respect to the third
requirement, the respondent proved that it
had met the requirement by presenting the
10 certificates of creditable taxes withheld
at source. The petitioner did not challenge
the respondents compliance with the
requirement.
When the respondent was able to
establish prima facie its right to the refund
by testimonial and object evidence, the
petitioner should have presented rebuttal
evidence to shift the burden of evidence
back to the respondent. Indeed, the
petitioner ought to have its own copies of
the respondents quarterly returns on file,
on the basis of which it could rebut the
respondent's claim that it did not carry over
its unutilized and excess creditable
withholding taxes for the immediately
succeeding quarters. The BIR's failure to
present such vital document during the trial
in order to bolster the petitioner's
contention against the respondent's claim
for the tax refund was fatal.

QUESTION: Based on the case, when is

the reckoning of the commencement of the
two-year period within which to file a
refund or tax credit of erroneously or
illegally collected taxes? Cite your legal
basis.
3.) ROHM APOLLO SEMICONDUCTOR
PHILIPPINES, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
168950, January 14, 2015)

FACTS:

Petitioner (Rohm Apollo) is a

domestic corporation registered
with the Securities and Exchange
Commission. It is also registered
with the Philippine Economic Zone
Authority as an Ecozone Export
Enterprise. Petitioner is in the
business
of
manufacturing
semiconductor
products,
particularly microchip transistors
and tantalium capacitors. Further, it
is registered with the Bureau of
Internal Revenue (BIR) as a valueadded taxpayer.

Sometime in June 2000, prior to the

commencement of its operations on
1 September 2001, Rohm Apollo
engaged the services of Shimizu
Philippine
Contractors,
Inc.
(Shimizu) for the construction of a
factory. For services rendered by
Shimizu, petitioner made initial
payments of P198,551,884.28 on 7
July 2000 and P132,367,923.58 on
3 August 2000.

Petitioner treated the payments as

capital goods purchases and thus
filed with the BIR an administrative
claim for the refund or credit of
accumulated unutilized creditable
input taxes on 11 December 2000.
As the close of the taxable quarter
when the purchases were made was
30
September
2000,
the

administrative claim was filed well

within the two-year prescriptive
period.

Pursuant to Section 112(D) of the

1997 Tax Code, the Commissioner
of Internal Revenue (CIR) had a
period of 120 days from the filing of
the application for a refund or credit
on 11 December 2000, or until 10
April 2001, to act on the claim. The
waiting period, however, lapsed
without any action by the CIR on
the claim.
Instead of filing a judicial claim
within 30 days from the lapse of the
120-day period on 10 April, or until
10 May 2001, Rohm Apollo filed a
Petition for Review with the CTA
docketed as CTA Case No. 6534 on
11 September 2002. It was under the
belief that a judicial claim had to be
filed
within
the
two-year
prescriptive period ending on 30
September 2002.
On 27 May 2004, the CTA First
Division rendered a Decision
denying the judicial claim for a
refund or tax credit. The CTA First
Division held, among others, that
petitioner must have at least
submitted its VAT return for the
third quarter of 2001, since it was in
that period that it began its business
operations. The purpose was to
verify if indeed petitioner did not
carry over the claimed input VAT to
the third quarter or the succeeding
quarters.
On 14 July 2004, petitioner filed a
Motion for Reconsideration, but the
tax court stood by its Decision. On
18 January 2005, the taxpayer
elevated the case to the CTA En
Banc via a Petition for Review. On
22 June 2005, the CTA En Banc
rendered its Decision denying
Rohm Apollos Petition for Review.
Petitioner filed this Rule 45
Petition, arguing that it has satisfied

all the legal requirements for a valid

claim for refund or tax credit of
unutilized input VAT.
ISSUE:
Whether or not the CTA acquired
jurisdiction over the claim for the refund or
tax credit of unutilized input VAT?

RULING:
The court denied the Petition on the
ground that the petitioners judicial claim
for a refund/tax credit was filed beyond the
prescriptive period.
Section 112(D) of the 1997 Tax
Code states the time requirements for filing
a judicial claim for the refund or tax credit
of input VAT. The legal provision speaks of
two periods: the period of 120 days, which
serves as a waiting period to give time for
the CIR to act on the administrative claim
for a refund or credit; and the period of 30
days, which refers to the period for filing a
judicial claim with the CTA. It is the 30-day
period that is at issue in this case.
The
landmark
case
of
Commissioner of Internal Revenue v. San
Roque Power Corporation has interpreted
Section 112 (D). The Court held that the
taxpayer can file an appeal in one of two
ways: (1) file the judicial claim within 30
days after the Commissioner denies the
claim within the 120-day waiting period,
or (2) file the judicial claim within 30
days from the expiration of the 120-day
period if the Commissioner does not act
within that period.
On 11 December 2000, petitioner
filed with the BIR an application for the
refund or credit of accumulated unutilized
creditable input taxes. Thus, the CIR had a
period of 120 days from 11 December
2000, or until 10 April 2001, to act on the
claim. It failed to do so, however. Rohm

Apollo should then have treated the CIRs

inaction as a denial of its claim. Petitioner
would then have had 30 days, or until 10
May 2001, to file a judicial claim with the
CTA. But Rohm Apollo filed a Petition for
Review with the CTA only on 11
September 2002. The judicial claim was
thus filed late.
Justice Carpio stated: The old rule
that the taxpayer may file the judicial claim,
without waiting for the Commissioner's
decision if the two-year prescriptive period
is about to expire, cannot apply because
that rule was adopted before the enactment
of the 30-day period. The 30-day period
was adopted precisely to do away with the
old rule, so that under the VAT System the
taxpayer will always have 30 days to file the
judicial claim even if the Commissioner
acts only on the 120th day, or does not act
at all during the 120-day period. With the
30-day period always available to the
taxpayer, the taxpayer can no longer file a
judicial claim for refund or credit of input
VAT without waiting for the Commissioner
to decide until the expiration of the 120-day
period. The 30-day period to appeal is
mandatory and jurisdictional.
As a general rule, the 30-day period
to appeal is both mandatory and
jurisdictional. The only exception to the
general rule is when BIR Ruling No. DA489-03 was still in force, that is, between 10
December 2003 and 5 October 2010, The
BIR Ruling excused premature filing,
declaring that the taxpayer-claimant need
not wait for the lapse of the 120-day period
before it could seek judicial relief with the
CTA by way of Petition for Review.
Premature filing is allowed for cases
falling during the time when BIR Ruling
No. DA-489-03 was in force; nevertheless,
late filing is absolutely prohibited even for
cases falling within that period. The
petitioner filed its judicial claim with the
CTA on 11 September 2002. This was
before the issuance of BIR Ruling No. DA-

489-03 on 10 December 2003. Thus, Rohm

Apollo could not have benefited from the
BIR Ruling. Besides, its situation was not a
case of premature filing of its judicial claim
but one of late filing. To repeat, its judicial
claim was filed on 11 September 2002
long after 10 May 2001, the last day of the
30-day period for appeal. The case thus
falls under the general rule the 30-day
period is mandatory and jurisdictional.
Hence, the CTA lost jurisdiction
over Rohm Apollos claim for a refund or
credit.
QUESTIONS: a.) What is the general rule
with regard to the 30-day period to appeal
after the Commissioner denies the claim
within the 120-day waiting period or from
the expiration of the 120-day period if the
Commissioner does not act within that
period? Cite your legal basis.
b.) If in case the taxpayer claiming for a tax
refund seek judicial relief by filing a
Petition for Review with the Court of Tax
Appeals without waiting for the lapse of the
120-day period, will the Court of Tax
Appeals acquire jurisdiction? Explain your
answer.
4.) CBK
POWER
COMPANY
LIMITED, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. Nos.
193383-84, January 14, 2015)
COMMISSIONER OF INTERNAL
REVENUE, Petitioner
VS.
CBK
POWER
COMPANY
LIMITED, Respondent
(G.R.
Nos.
193407-08)

FACTS:

CBK Power is a limited partnership

duly organized and existing under
the laws of the Philippines, and
primarily
engaged
in
the
development and operation of the
Caliraya, Botocan, and Kalayaan

hydro electric power generating

plants in Laguna (CBK Project).

the Bureau of Internal Revenue

(BIR): (a) fifteen percent (15%) for
Fortis-Belgium, Fortis-Netherlands,
and Raiffesen Bank; and (b) twenty
percent (20%) for Industrial Bank of
Japan and Mizuho Bank.

To finance the CBK Project, CBK

Power obtained in August 2000 a
syndicated loan from several
foreign banks, i.e., BNP Paribas,
Dai-ichi Kangyo Bank, Limited,
Industrial Bank of Japan, Limited,
and Societe General (original
lenders), acting through an InterCreditor Agent, Dai-ichi Kangyo
Bank, a Japanese bank that
subsequently merged with the
Industrial Bank of Japan, Limited
(Industrial Bank of Japan) and the
Fuji Bank, Limited (Fuji Bank),
with the merged entity being named
as Mizuho Corporate Bank (Mizuho
Bank). One of the merged banks,
Fuji Bank, had a branch in the
Philippines, which became a branch
of Mizuho Bank as a result of the
merger.
Certain portions of the loan were
subsequently assigned by the
original lenders to various other
banks, including Fortis Bank
(Nederland)
N.V.
(FortisNetherlands) and Raiffesen Zentral
Bank Osterreich AG (Raiffesen
Bank). Fortis-Netherlands, in turn,
assigned its portion of the loan to
Fortis Bank S.A./N.V. (FortisBelgium), a resident of Belgium.
Fortis Netherlands and Raiffesen
Bank, on the other hand, are
residents of Netherlands and
Austria, respectively.
In February 2001, CBK Power
borrowed money from Industrial
Bank of Japan, Fortis-Netherlands,
Raiffesen Bank, Fortis-Belgium,
and Mizuho Bank for which it
remitted interest payments from
May 2001 to May 2003. It allegedly
withheld final taxes from said
payments based on the following
rates, and paid the same to the
Revenue District Office No. 55 of

BANK

COUNTRY
OF
RESIDENC
E

PREFERENTIA
L RATE
UNDER THE
RELEVANT
TAX TREATY

Fortis
Bank
S.A./N.V.

Belgium

10%
(Article
11[1], RP-Belgium
Tax Treaty)

Industrial
Bank of
Japan

Japan

10%
(Article
11[3], RP-Japan
Tax Treaty)

Raiffesen
Zentral
Bank
Osterreic
h AG

Austria

10%
(Article
11[3], RP-Japan
Tax Treaty)

Mizuho
Corporate
Bank

Japan

10%
(Article
11[3], RP-Japan
Tax Treaty)

On April 14, 2003, CBK Power

filed a claim for refund of its excess
final withholding taxes allegedly
erroneously withheld and collected
for the years 2001 and 2002 with the
BIR Revenue Region No. 9. The
claim for refund of excess final
withholding taxes in 2003 was
subsequently filed on March 4,
2005.

CTA Case No. 6699 was filed by

CBK Power on June 6, 2003
seeking the refund of excess final
withholding tax in the total amount
of P6,393,267.20 covering the year
2001 with respect to interest income
derived
by
[Fortis-Belgium],
Industrial Bank of Japan, and
[Raiffesen Bank].

CTA Case No. 6884 was filed by

CBK Power on March 5, 2004
seeking for the refund of the amount
of P8,136,174.31 covering the year
2002 with respect to interest income
derived by [Fortis- Belgium],

Industrial Bank of Japan, [Mizuho

Bank], and [Raiffesen Bank].

CTA Case No. 7166 was filed by

CBK [Power] on March 9, 2005
seeking for the refund of [the
amount of] P1,143,517.21covering
the year 2003 with respect to
interest income derived by [Fortis
Belgium], and [Raiffesen Bank].

CTA Case Nos. 6699 and 6884 were

consolidated first on June 18, 2004.
Subsequently, however, all three
cases CTA Case Nos. 6699, 6884,
and 7166 were consolidated in a
Resolution dated August 3, 2005.

The CTA First Division Rulings:

In a Decision dated August 28,
2008, the CTA First Division
granted the petitions and ordered the
refund of the amount of
15,672,958.42 upon a finding that
the relevant tax treaties were
applicable to the case. The CTA
First
Division
categorically
declared in the August 28, 2008
Decision
that
the
required
International Tax Affairs Division
(ITAD) ruling was not a condition
sine qua non for the entitlement of
the tax relief sought by CBK
Power, however, upon motion for
reconsideration filed by the
Commissioner, the CTA First
Division amended its earlier
decision by reducing the amount of
the refund from P15,672,958.42
to P14,835,720.39 on the ground
that CBK Power failed to obtain an
ITAD ruling with respect to its
transactions
with
FortisNetherlands.
CBK Power elevated the matter to
the CTA En Banc on petition for
review, docketed as C.T.A E.B. No.
494. The Commissioner likewise
filed his own petition for review,
which was docketed as C.T.A. E.B.

No. 469. Said petitions were

subsequently consolidated.

CBK Power raised the lone issue of

whether or not an ITAD ruling is
required before it can avail of the
preferential tax rate. On the other
hand, the Commissioner claimed
that CBK Power failed to exhaust
administrative remedies when it
filed its petitions before the CTA
First Division, and that said
petitions were not filed within the
two-year prescriptive period for
initiating judicial claims for refund.

The CTA En Banc Ruling: The

CTA En Banc affirmed the ruling of
the CTA First Division that a prior
application with the ITAD is indeed
required by Revenue Memorandum
Order (RMO) 1-2000, which
administrative issuance has the
force and effect of law and is just as
binding as a tax treaty.

CBK Powers motion for partial

reconsideration
and
the
Commissioners
motion
for
reconsideration of the foregoing
Decision were both denied in a
Resolution dated August 16, 2010
for lack of merit; hence, the present
consolidated petitions.

ISSUE:
Whether or not the BIR may add a
requirement prior application for an ITAD
ruling that is not found in the income tax
treaties signed by the Philippines before a
taxpayer can avail of preferential tax rates
under said treaties?
RULING:
- G.R. Nos. 193383-84: The Court
holds that the CTA En Banc committed
reversible error in affirming the reduction
of the amount of refund to CBK Power
from 15,672,958.42 to P14,835,720.39 to
exclude its transactions with Fortis-

Netherlands for which no ITAD ruling was

obtained. CBK Powers petition in G.R.
Nos. 193383-84 is therefore granted.
The obligation to comply with a tax
treaty must take precedence over the
objective of RMO No. 1-2000. Logically,
noncompliance with tax treaties has
negative implications on international
relations, and unduly discourages foreign
investors. While the consequences sought
to be prevented by RMO No. 1-2000
involve an administrative procedure, these
may be remedied through other system
management processes, e.g., the imposition
of a fine or penalty. But we cannot totally
deprive those who are entitled to the benefit
of a treaty for failure to strictly comply with
an administrative issuance requiring prior
application for tax treaty relief.
CBK Power could not have applied
for a tax treaty relief 15 days prior to its
payment of the final withholding tax on the
interest paid to its lenders precisely because
it erroneously paid said tax on the basis of
the regular rate as prescribed by the NIRC,
and not on the preferential tax rate provided
under the different treaties. As stressed by
the Court, the prior application requirement
under RMO No. 1-2000 then becomes
illogical.
Since CBK Power had requested for
confirmation from the ITAD on June 8,
2001 and October 28, 2002 before it filed on
April 14, 2003 its administrative claim for
refund of its excess final withholding taxes,
the same should be deemed substantial
compliance with RMO No. 1-2000.
- G.R. Nos. 193407-08: The petition
of the Commissioner in G.R. Nos. 19340708 is denied for lack of merit. CBK Powers
administrative and judicial claims for
refund of its excess final withholding taxes
covering taxable year 2003 were filed
within the two-year prescriptive period.

Commissioner argues that the

failure on the part of CBK Power to give
him a reasonable time to act on said claim
is violative of the doctrines of exhaustion of
administrative remedies and of primary
jurisdiction. CBK Power maintains that it
would be prejudicial to wait for the
Commissioners ruling before it files its
judicial claim since it only has 2 years from
the payment of the tax within which to file
both its administrative and judicial claims.
DISPOSITIVE: The petition in G.R. Nos.
193383-84 is GRANTED. The Decision dated
March 29, 2010 and the Resolution dated August
16, 2010 of the Court of Tax Appeals (CTA) En
Banc in C.T.A. E.B. Nos. 469 and 494 are hereby
REVERSED and SET ASIDE and a new one
entered REINSTATING the Decision of the CTA
First Division dated August 28, 2008 ordering the
refund in favor of CBK Power Company Limited
the amount of Pl5,672,958.42 representing its
excess final withholding taxes for the taxable
years 2001 to 2003, and the petition in G.R. Nos.
193407-08 is DENIED for lack of merit.
5.) PANAY POWER CORPORATION
(formerly AVON RIVER POWER
HOLDINGS
CORPORATION), Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
203351, January 21, 2015)

FACTS:

Petitioner is a domestic corporation

organized and existing under and by
virtue of Philippine laws, it is
engaged in the business of
acquiring, holding, owning, and
operating power generation assets
for lighting and power purposes and
whole selling the electric power to
the National Power Corporation,
private electric utilities and electric
cooperatives, and for the carrying
on of all business incident thereto.

On January 26, 2004, petitioner

filed its quarterly VAT return for the
fourth
quarter
of
2003.
Subsequently, petitioner filed two
(2) amendments to its quarterly

VAT return for the said period on

January 28, 2005 and January 19,
2006, respectively, with the latter
amendment reflecting a total
unutilized input VAT amounting to
P14,122,347.21. According to
petitioner, the aforesaid amount
pertains to the input VAT that it
paid on its purchases of capital
goods and services consisting of
power generation assets located in
Iloilo City which input VAT have
not been utilized against any output
VAT liability for the fourth quarter
of 2003 or even for subsequent
quarters.

On December 29, 2005, petitioner

filed an administrative claim for
refund/credit of its unutilized input
VAT
in
the
amount
of
P14,122,347.21 before the Revenue
District Office No. 51 of the BIR.
Thereafter, on January 20, 2006,
petitioner filed a judicial claim for
tax refund/credit by way of a
petition for review before the CTA,
docketed as CTA Case No. 7402.
The
CTA
Division
denied
petitioners
claim
for
tax
refund/credit for lack of merit. The
CTA Division found that while
petitioner presented the testimony
of its Senior Accounting Manager
stating that the subject purchases
were for capital goods and services
which were capitalized and
reflected in petitioners books as
depreciable assets, it nevertheless
failed to submit any evidence to
corroborate the same since
petitioner did not submit its books
of accounts and audited financial
statements for the calendar year
2003.
The CTA Division, in an Amended
Decision denied petitioners motion
for reconsideration and dismissed
its claim for tax refund/credit
outright on a different ground. It

found that petitioner filed its

judicial claim for tax refund/credit
on January 20, 2006, or a mere 22
days after it filed its administrative
claim on December 29, 2005. The
CTA Division held that the
observance of the 120-day period
provided under Section 112 (D) of
the National Internal Revenue Code
(NIRC)
is
mandatory
and
jurisdictional to the filing of a
judicial claim for tax refund/credit,
thus concluding that petitioners
judicial claim for tax refund/credit
must be dismissed for being
prematurely filed.

The CIR appealed to the CTA En

Banc. The CTA En Banc affirmed
the Amended Decision of the CTA
Division.

ISSUE:
Whether or not the CTA En Banc
correctly affirmed the CTA Divisions
outright dismissal of petitioners claim for
tax refund/credit on the ground of
prematurity?

RULING:
The petition is partly meritorious. In
the Aichi case cited by both the CTA
Division and the CTA En Banc, the Court
held that the observance of the 120-day
period is a mandatory and jurisdictional
requisite to the filing of a judicial claim for
refund before the CTA. Consequently, its
non-observance would lead to the dismissal
of the judicial claim on the ground of lack
of jurisdiction.
In CIR v. San Roque Power
Corporation (San Roque), the Court
recognized an exception to the mandatory
and jurisdictional nature of the 120-day
period. It ruled that BIR Ruling No. DA-

489-03 dated December 10, 2003 provided

a valid claim for equitable estoppel under
Section 246 of the NIRC. In essence, the
aforesaid BIR Ruling stated that the
"taxpayer-claimant need not wait for the
lapse of the 120-day period before it could
seek judicial relief with the CTA by way of
Petition for Review."

necessarily involve questions of fact, which

are not reviewable and cannot be passed
upon by the Court in the exercise of its
power to review under Rule 45 of the Rules
of Court. Hence, the Court deems it prudent
to remand the case to the CTA Division
for resolution of the instant case on the
merits.

Recently, in Taganito Mining

Corporation v. CIR, the Court reconciled
the pronouncements in the Aichi and San
Roque cases in the following manner:
Reconciling the pronouncements in the
Aichi and San Roque cases, the rule must
therefore be that during the period
December 10, 2003 (when BIR Ruling No.
DA-489-03 was issued) to October 6, 2010
(when the Aichi case was promulgated),
taxpayers-claimants need not observe the
120-day period before it could file a judicial
claim for refund of excess input VAT
before the CT A. Before and after the
aforementioned period (i.e., December 10,
2003 to October 6, 2010), the observance of
the 120-day period is mandatory and
jurisdictional to the filing of such claim.

QUESTION: What are the administrative

remedies available to a taxpayer in order to
claim refund/credit of its unutilized input
VAT? Cite your legal basis.

In this case, records disclose that

petitioner filed its administrative and
judicial claims for refund/credit of its input
VAT on December 29, 2005 and January
20, 2006, respectively, or during the period
when BIR Ruling No. DA-489-03 was in
place, i.e., from December 10, 2003 to
October 6, 2010. As such, it need not wait
for the expiration of the 120-day period
before filing its judicial claim before the
CTA, and hence, is deemed timely filed. In
view of the foregoing, the CTA En Banc
erred in dismissing outright petitioner's
claim on the ground of prematurity.
The Court is not inclined to grant
outright petitioner's claim of tax
refund/credit
in
the
amount
of
P14,122,347.21 representing unutilized
input VAT for the fourth quarter of 2003.
This is because the determination of
petitioner's entitlement to such claim would

6.) WINEBRENNER
&
IIGO
INSURANCE
BROKERS,
INC., Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
206526, January 28, 2015)

FACTS:

On April 15, 2004, petitioner filed

its Annual Income Tax Return for
CY 2003.

About two years thereafter or on

April 7, 2006, petitioner applied for
the administrative tax credit/refund
claiming entitlement to the refund
of its excess or unutilized creditable
withholding tax (CWT) for CY
2003, by filing BIR Form No. 1914
with the Revenue District Office
No. 50 of the Bureau of Internal
Revenue (BIR).

There being no action taken on the

said claim, a petition for review was
filed by petitioner before the CTA
on April 11, 2006. The case was
docketed as CTA Case No. 7440
and was raffled to the Special First
Division (CTA Division). CTA
Division
partially
granted
petitioners claim for refund of
excess and unutilized CWT for CY

2003 in the reduced amount

of P2,737,903.34 in its April 13,
2010 Decision (original decision).

On July 27, 2011, the CTA-Division

reversed itself. In an Amended
Decision, it denied the entire claim
of petitioner. It reasoned out that
petitioner should have presented as
evidence its first, second and third
quarterly Income Tax Returns
(ITRs) for the year 2004 to prove
that the unutilized CWT being
claimed had not been carried over to
the succeeding quarters.
Petitioner elevated the case to the
CTA En Banc praying for the
reversal of the Amended Decision
of the CTA Division. The CTA-En
Banc affirmed the Amended
Decision of the CTA-Division. It
stated that before a cash refund or an
issuance of tax credit certificate for
unutilized excess tax credits could
be granted, it was essential for
petitioner to establish and prove, by
presenting the quarterly ITRs of the
succeeding years, that the excess
CWT was not carried over to the
succeeding
taxable
quarters
considering that the option to carry
over in the succeeding taxable
quarters could not be modified in
the final adjustment returns (FAR),
because petitioner did not present
the first, second and third quarterly
ITRs for CY 2004, despite having
offered and submitted the Annual
ITR/FAR for the same year, the
CTA-En Banc stated that the
petitioner failed to discharge its
burden, hence, no refund could be
granted.

RULING:
CIR is ordered to REFUND to
petitioner the amount of P2,737,903.34 as
excess creditable withholding tax paid for
taxable year 2003. The April 13, 2010
Decision of the Court of Tax Appeals
Special First Division is REINSTATED.
A taxpayer who seeks a refund of
excess and unutilized CWT must:
1) File the claim with the CIR
within the two year period from the
date of payment of the tax;
2) Show on the return that the
income received was declared as
part of the gross income; and
3) Establish the fact of withholding
by a copy of a statement duly
issued by the payor to the payee
showing the amount paid and the
amount of tax withheld.
The irrevocability rule under
Section 76 of the NIRC means that once an
option, either for refund or issuance of tax
credit certificate or carry-over of CWT has
been exercised, the same can no longer be
modified for the succeeding taxable years.
The fact of having carried over
petitioners 2003 excess credits to
succeeding taxable year is in issue.
According to the CTA-En Banc and the
CIR, the only evidence that can sufficiently
show that carrying over has been made is to
present the quarterly ITRs. Some members
of this Court adhere to the same view. The
Court however cannot.

ISSUE:

Proving that no carry-over has been

made does not absolutely require the
presentation of the quarterly ITRs.

Whether or not the submission and

presentation of the quarterly ITRs of the
succeeding quarters of a taxable year is
indispensable in a claim for refund?

Requiring that the ITR or the FAR

of the succeeding year be presented to the

BIR in requesting a tax refund has no basis

in law and jurisprudence.
Section 76 of the Tax Code does not
mandate it. The law merely requires the
filing of the FAR for the preceding not the
succeeding taxable year. Indeed, any
refundable amount indicated in the FAR of
the preceding taxable year may be credited
against the estimated income tax liabilities
for the taxable quarters of the succeeding
taxable year. However, nowhere is there
even a tinge of a hint in any provisions of
the [NIRC] that the FAR of the taxable year
following the period to which the tax credits
are originally being applied should also be
presented to the BIR. What Section 76
requires, just like in all civil cases, is to
prove the prima facie entitlement to a claim,
including the fact of not having carried over
the excess credits to the subsequent quarters
or taxable year. It does not say that to prove
such a fact, succeeding quarterly ITRs are
absolutely needed.
The absence of any amount written
in the Prior Year excess Credit Tax
Withheld portion of petitioners 2004
annual ITR clearly shows that no prior
excess credits were carried over in the first
four quarters of 2004. And since petitioner
was able to sufficiently prove that excess
tax credits in 2003 were not carried over to
taxable year 2004 by leaving the item "Prior
Years Excess Credits" as blank in its 2004
annual ITR, then petitioner is entitled to a
refund. Unfortunately, the CTA, in denying
entirely the claim, merely relied on the
absence of the quarterly ITRs despite being
able to verify the truthfulness of the
declaration that no carry over was indeed
effected by simply looking at the 2004
annual ITR.
Verily, with the petitioner having
complied with the requirements for refund,
and without the CIR showing contrary
evidence other than its bare assertion of the
absence of the quarterly ITRs, copies of
which are easily verifiable by its very own

records, the burden of proof of establishing

the propriety of the claim for refund has
been sufficiently discharged. Hence, the
grant of refund is proper.
The Court does not, and cannot,
however, grant the entire claimed amount
as it finds no error in the original decision
of the CTA Division granting refund to the
reduced amount of P2,737,903.34. This
finding of fact is given respect, if not
finality, as the CTA, which by the very
nature of its functions of dedicating itself
exclusively to the consideration of the tax
problems has necessarily developed an
expertise on the subject.
QUESTIONS: a.) What is the nature of the
Final Adjustment Return (FAR)? Cite
your legal basis.
b.) What are the two options available for
taxpayer to settle his income tax liabilities
if there is excess quarterly income tax
payments? Explain each option.
c.) Are Income Tax Returns (ITRs) the only
evidence that can sufficiently show that
carrying over the excess credit has been
made? Explain your answer.
February 2015
1.) CHINA
BANKING
CORPORATION, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
172509, February 4, 2015)

FACTS:

Petitioner,
China
Banking
Corporation (CBC) is a universal
bank duly organized and existing
under the laws of the Philippines.
For the taxable years 1982 to 1986,
CBC was engaged in transactions
involving sales of foreign exchange
to the Central Bank of the
Philippines (now Bangko Sentral ng
Pilipinas), commonly known as

SWAP transactions. Petitioner did

not file tax returns or pay tax on the
SWAP transactions for those
taxable years.

Petitioner received an assessment

from the Bureau of Internal
Revenue (BIR) finding CBC liable
for deficiency documentary stamp
tax (DST) on the sales of foreign
bills of exchange to the Central
Bank.
On 8 May 1989, petitioner, through
its vice-president, sent a letter of
protest to the BIR. On 6 December
2001, more than 12 years after the
filing of the protest, the
Commissioner of Internal Revenue
(CIR)
rendered
a
decision
reiterating the deficiency DST
assessment and ordered the
payment thereof plus increments
within 30 days from receipt of the
Decision.
CBC filed a Petition for Review
with the CTA. The CTA Second
Division denied the Petition of
CBC. The CTA ruled that a SWAP
arrangement should be treated as a
telegraphic transfer subject to
documentary stamp tax.
Petitioner appealed to the CTA En
Banc. The appellate tax court,
however, dismissed the Petition for
Review in a Decision dated 1
December 2005. CBC filed a
Motion for Reconsideration on 21
December 2005, but it was denied in
a 20 March 2006 Resolution. The
taxpayer now comes to this Court
with a Rule 45 Petition, reiterating
the arguments it raised at the CTA
level and invoking for the first time
the argument of prescription.

ISSUE:

Whether or not the right of the BIR

to collect the assessed DST from CBC is
barred by prescription?

RULING:
The court grants the Petition on
the ground that the right of the BIR to
collect the assessed DST is barred by the
statute of limitations.
The Bureau of Internal Revenue
(BIR) issued the assessment for deficiency
DST on 19 April 1989, when the applicable
rule was Section 319(c) of the National
Internal Revenue Code of 1977, as
amended. In that provision, the time limit
for the government to collect the assessed
tax is set at three years, to be reckoned from
the date when the BIR mails/releases/sends
the assessment notice to the taxpayer.
Further, Section 319(c) states that the
assessed tax must be collected by distraint
or levy and/or court proceeding within the
three-year period.
In this case, the records do not show
when the assessment notice was mailed,
released or sent to CBC. Nevertheless, the
latest possible date that the BIR could have
released, mailed or sent the assessment
notice was on the same date that CBC
received it, 19 April 1989. Assuming
therefore that 19 April 1989 is the
reckoning date, the BIR had three years to
collect the assessed DST. However, the
records of this case show that there was
neither a warrant of distraint or levy served
on CBC's properties nor a collection case
filed in court by the BIR within the threeyear period.
The attempt of the BIR to collect the
tax through its Answer with a demand for
CBC to pay the assessed DST in the CTA
on 11 March 2002 did not comply with
Section 319(c) of the 1977 Tax Code, as
amended. The demand was made almost

thirteen years from the date from which the

prescriptive period is to be reckoned. Thus,
the attempt to collect the tax was made way
beyond the three-year prescriptive period.
The running of the statute of
limitations was not suspended by the
request for reinvestigation.
The fact that the taxpayer in this
case may have requested a reinvestigation
did not toll the running of the three-year
prescriptive period. Section 320 of the 1977
Tax Code states:
Sec. 320. Suspension of running of
statute.The running of the statute of
limitations provided in Sections 318 or 319
on the making of assessment and the
beginning of distraint or levy or a
proceeding in court for collection, in
respect of any deficiency, shall be
suspended for the period during which the
Commissioner is prohibited from making
the assessment or beginning distraint or
levy or a proceeding in court and for sixty
days thereafter; when the taxpayer requests
for a re-investigation which is granted by
the Commissioner; when the taxpayer
cannot be located in the address given by
him in the return filed upon which a tax is
being assessed or collected: Provided, That
if the taxpayer informs the Commissioner of
any change in address, the running of the
statute of limitations will not be suspended;
when the warrant of distraint and levy is
duly served upon the taxpayer, his
authorized representative, or a member of
his household with sufficient discretion,
and no property could be located; and when
the taxpayer is out of the Philippines.
A request for reinvestigation alone
will not suspend the statute of limitations.
Two things must concur: there must be a
request for reinvestigation and the CIR
must have granted it. In the present case,
there is no showing from the records that
the CIR ever granted the request for
reinvestigation filed by CBC. That being

the case, it cannot be said that the running

of the three-year prescriptive period was
effectively suspended.
In this case, petitioner may have
raised the question of prescription only on
appeal to this Court. The BIR could have
crushed the defense by the mere invocation
of the rule against setting up the defense of
prescription only at the appeal stage. The
government, however, failed to do so. On
the contrary, the BIR was silent despite
having the opportunity to invoke the bar
against the issue of prescription.
A new ruling is entered
DENYING respondent's claim for
deficiency DST in the amount
of P11,383,165.50.
QUESTIONS: a.) What is the nature of the
Documentary Stamp Tax? Cite your
legal basis.
b.) Who are the persons liable to pay the
Documentary Stamp Tax? Cite your legal
basis.
2.) NIPPON EXPRESS (PHILIPPINES)
CORP., Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
185666, February 4, 2015)

FACTS:

As aptly found by the CTA in

Division, the factual antecedents of
the case are undisputed: Petitioner is
registered with the Large Taxpayers
District Office of the Bureau of
Internal Revenue in Makati City as,
among others, a Value-Added Tax
(VAT) taxpayer rendering freight
forwarding services.

For the calendar year 2000,

petitioners gross receipts were
primarily derived from rendering its
services to Philippine Economic
Zone Authority (PEZA)-registered

clients. Likewise, it incurred total

sales of P1,063,357,608.74. Also,
for the same year, petitioner paid
input
taxes
amounting
to P31,846,253.57.

The amount of total sales

attributable to zero-rated sales
would be P24,826,667.61.

Under the premise that it is entitled

to a refund of the amount
of P24,826,667.61, petitioner filed
four separate applications for tax
credit/refund with the One-Stop
Shop Inter-Agency Tax Credit and
Duty Drawback Center of the
Department of Finance (OSSACDOF) on September 24, 2001.

Receiving no resolution from

OSSAC-DOF, petitioner filed the
instant petition for review on April
24, 2002 pursuant to Section 112 in
relation to Section 229 of the 1997
Tax Code, as amended

On 15 June 2007, the CTA in

Division denied due course and
accordingly dismissed petitioners
claim for the issuance of a TCC on
the ground of its failure to comply
with
the
substantiation
requirements. It explained that the
sales invoices, transfer slips, and
credit memos presented in support
thereof did not comply with the
substantiation
requirements
provided for under Sections 106,
108, and 113 of the National
Internal Revenue Code (NIRC) of
1997, as amended, considering that
petitioners sales are sales of
services which should only be
supported by official receipts.

Petitioner appealed to the CTA En

Banc by filing a Petition for
Review. The CTA En Banc
affirmed both the Decision and

Resolution rendered by the CTA in

Division in CTA Case No. 6464,
pronouncing that although Sections
113 and 237 of the NIRC of 1997,
as amended, and Section 4.108-1 of
Revenue Regulations (RR) No. 795 use the words "invoice" and
"receipt"
without
distinction,
nevertheless, the NIRC of 1997, as
amended,
provides
separate
provisions, which must be read in
relation thereto: Section 106 for
VAT on sale of goods or properties,
and Section 108 for VAT on sale of
services and use or lease of
properties. Clearly, the CTA En
Banc agreed with the court a quos
findings that the evidence submitted
by petitioner, i.e. sales invoices,
transfer slips, credit memos, cargo
manifests, and credit notes, as well
as formal report of the independent
certified public accountant (ICPA),
to prove its zero-rated sales, were
insufficient so as to entitle it to the
issuance of a TCC since the
aforesaid legal provisions do not
provide for any other document that
can be used as an alternative to, or
in lieu of an invoice and official
receipts.
ISSUE:
Whether or not petitioner is entitled
to a tax credit certificate (TCC) in the
amount of P24,826,667.61 allegedly
representing its excess and unutilized input
VAT for the taxable year 2000, in
accordance with the provisions of the NIRC
of 1997, as amended?
RULING:
The claim for refund is by
prescription BARRED.
Records reveal that the CTA in
Division in C.T.A. Case No. 6464 merely
focused on the compliance with the
substantiation
requirements,
which

particularly ruled that the evidence

submitted by petitioner to prove its zerorated sales were insufficient so as to entitle
it to the issuance of a TCC. The same
findings were adopted and affirmed in toto
by the CTA En Banc in the assailed 20
August 2008 Decision.
As regards the substantiation
requirements, it is worthy to mention that in
Kepco
Philippines
Corporation
v.
Commissioner of Internal Revenue, the
High Court ruled that under the law, a VAT
invoice is necessary for every sale, barter or
exchange of goods or properties while a
VAT official receipt properly pertains to
ever; lease of goods or properties, and every
sale, barter or exchange of services. In other
words, the VAT invoice is the seller's best
proof of the sale of the goods or services to
the buyer while the VAT receipt is the
buyer's best evidence of the payment of
goods or services received from the seller.
Thus, the High Court concluded that VAT
invoice and VAT receipt should not be
confused as referring to one and the same
thing. Certainly, neither does the law intend
the two to be used interchangeably.
Section 112(D) of the NIRC of 1997
categorically states that in case of failure on
the part of the respondent to act on the
application within the 120-day period
prescribed by law, petitioner only has 30
days after the expiration of the 120-day
period to appeal the unacted claim with the
CTA. Since petitioners judicial claim for
the aforementioned quarters for taxable
year 2000 was filed before the CTA only on
24 April 2002, which was way beyond the
mandatory 120+30 days to seek judicial
recourse, such noncompliance with the
mandatory period of 30 days is fatal to its
refund claim on the ground of prescription.
The CTA has no jurisdiction over
petitioner's judicial appeal considering that
its Petition for Review was filed beyond the
mandatory 30-day period pursuant to
Section 112(D) of the NIRC of 1997, as
amended, and consistent with the ruling in
the San Roque case. Consequently,

petitioner's instant claim for refund must be

denied.
QUESTION: What are the instances when
a taxpayer may claim for refund or tax
credit of excess input taxes? Explain each
instance.

3.) NORTHERN MINDANAO POWER

CORPORATION, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
185115, February 18, 2015)

FACTS:

Petitioner is engaged in the

production sale of electricity as an
independent power producer and
sells electricity to National Power
Corporation (NPC). It allegedly
incurred input value-added tax
(VAT) on its domestic purchases of
goods and services that were used in
its production and sale of electricity
to NPC. For the 3rd and the 4th
quarters of taxable year 1999,
petitioners input VAT totaled
to P2,490,960.29,
while
that
incurred for all the quarters of
taxable year 2000 amounted
to P3,920,932.55.

Petitioner filed an administrative

claim for a refund on 20 June 2000
for the 3rd and the 4th quarters of
taxable year 1999, and on 25 July
2001 for taxable year 2000 in the
sum of P6,411,892.84.

Alleging inaction of respondent on

these
administrative
claims,
petitioner filed a Petition with the
CTA on 28 September 2001. The
CTA First Division denied the
Petition and the subsequent Motion
for Reconsideration for lack of
merit. The Court in Division found
that the term "zero-rated" was not
imprinted on the receipts or invoices
presented by petitioner in violation

of Section 4.108-1 of Revenue

Regulations No. 7-95. Petitioner
failed to substantiate its claim for a
refund and to strictly comply with
the invoicing requirements of the
law and tax regulations.

On appeal to the CTA En Banc, the

Petition was likewise denied. The
court ruled that for every sale of
services, VAT shall be computed on
the basis of gross receipts indicated
on the official receipt. Official
receipts are proofs of sale of
services and cannot be interchanged
with sales invoices as the latter are
used for the sale of goods.

from the date of submission of complete

documents in support of the application
within which to decide on the
administrative claim. The burden of
proving entitlement to a tax refund is on
the taxpayer. Absent any evidence to
the contrary, it is presumed that in order
to discharge its burden, petitioner
attached to its applications complete
supporting documents necessary to
prove its entitlement to a refund. Thus,
the 120-day period for the CIR to act on
the administrative claim commenced on
20 June 2000 and 25 July 2001.
Both judicial claims must be
disallowed.

ISSUE:
1.) Whether or not the CTA acquired
jurisdiction over the claim for a
refund of input VAT covering the
3rd and the 4th quarters of taxable
year 1999 and on 25 July 2001
covering all the quarters of taxable
year 2000?
2.) Whether or not Section 4.108-1 of
Revenue Regulations (RR) No. 795 which expanded the statutory
requirements for the issuance of
official receipts and invoices found
in Section 113 of the 1997 Tax Code
by providing for the additional
requirement of the imprinting of the
terms zero-rated is constitutional?

* Claim for a refund of input VAT covering

the 3rd and the 4th quarters of taxable year
1999: Counting 120 days from 20 June
2000, the CIR had until 18 October 2000
within which to decide on the claim of
petitioner for the period covering the 3rd
and the 4th quarters of taxable year 1999. If
after the expiration of that period
respondent still failed to act on the
administrative claim, petitioner could
elevate the matter to the court within 30
days or until 17 November 2000.

1.) The CTA did not acquire

jurisdiction over the claim for a refund of
input VAT covering the 3rd and the 4th
quarters of taxable year 1999 and taxable
year 2000.

Petitioner belatedly filed its judicial

claim with the CTA on 28 September 2001.
Petitioners claim for the 3rd and the 4th
quarters of taxable year 1999 was filed 319
days after the expiration of the 30-day
period. It already lost its right to claim a
refund or credit of its alleged excess input
VAT attributable to zero-rated or
effectively zero-rated sales for the 3rd and
the 4th quarters of taxable year 1999 by
virtue of its own failure to observe the
prescriptive periods.

Pursuant to Section 112(D) of

the NIRC of 1997, CIR had 120 days

* Claim for the refund of input VAT

covering all quarters of taxable year 2000:

RULING:

For the year 2000, records show that

petitioner filed its Petition with the CTA on
28 September 2001 without waiting for the
expiration of the 120-day period. Barely 64
days had lapsed when the judicial claim was
filed with the CTA. On 28 September 2001
the date on which petitioner filed its
judicial claim for the period covering
taxable year 2000 - the 120+30 day
mandatory period was already in the law
and BIR Ruling No. DA-489-03 had not yet
been issued. Considering this fact,
petitioner did not have an excuse for not
observing the 120+30 day period. The
judicial claim was thus prematurely filed
for failure of petitioner to observe the 120day waiting period.
2.) Revenue Regulations (RR) No.
7-95 is constitutional. In fact, this Court has
consistently held as fatal the failure to print
the word "zero-rated" on the VAT invoices
or official receipts in claims for a refund or
credit of input VAT on zero-rated sales,
even if the claims were made prior to the
effectivity of R.A. 9337. Clearly then, the
present Petition must be denied.

cause dismissal of the claim? Explain your

answer.
March 2015
1.) CARGILL
PHILIPPINES,
INC., Petitioner VS. COMMISSIONER
OF
INTERNAL
REVENUE,
Respondent (G.R. No. 203774, March 11,
2015)

FACTS:

Cargill is a domestic corporation

duly organized and existing under
Philippine laws whose primary
purpose is to own, operate, run, and
manage plants and facilities for the
production, crushing, extracting, or
otherwise
manufacturing
and
refining of coconut oil, coconut
meal, vegetable oil, lard, margarine,
edible oil, and other articles of
similar nature and their byproducts.

Petitioner filed its quarterly VAT

returns for the second quarter of
calendar year 2001 up to the third
quarter of fiscal year 2003, covering
the period April 1, 2001 to February
28, 2003, and, later, its quarterly
VAT returns for the fourth quarter
of fiscal year 2003 to the first
quarter of fiscal year 2005, covering
the period March 1, 2003 to August
31, 2004. rgill maintained that said
overpayments were due to its export
sales of coconut oil, the proceeds of
which were paid for in acceptable
foreign currency and accounted for
in accordance with the rules and
regulations of the Bangko Sentralng
Pilipinas and, thus, are zero-rated
for VAT purposes.

On June 27, 2003, Cargill filed an

administrative claim for refund of
its unutilized input VAT in the
amount of P26,122,965.81 for the
period of April 1, 2001 to February

A VAT invoice is the seller's best

proof of the sale of goods or services to the
buyer, while a VAT receipt is the buyer's
best evidence of the payment of goods or
services received from the seller. A VAT
invoice and a VAT receipt should not be
confused and made to refer to one and the
same thing. Certainly, neither does the law
intend the two to be used alternatively.
QUESTIONS: a.) What are the
information(s) contained in the VAT
invoice or VAT official receipt? Cite your
legal basis.
b.) If in case, the taxpayer claiming refund
failed to print the needed information in the
VAT invoice or VAT official receipt, will it

28, 2003 (first refund claim).

Thereafter, or on June 30, 2003, it
filed a judicial claim for refund, by
way of a petition for review, before
the CTA, docketed as CTA Case
No. 6714. On September 29, 2003,
it subsequently filed a supplemental
application with the BIR increasing
its claim for refund of unutilized
input VAT to the amount of
P27,847,897.72.

On May 31, 2005, Cargill filed a

second administrative claim for
refund of its unutilized input VAT
in the amount of P22,194,446.67 for
the period of March 1, 2003 to
August 31, 2004 (second refund
claim) before the BIR. On even
date, it filed a petition for review
before the CTA, docketed as CTA
Case No. 7262.
The CTA Division, in a Resolution
dated July 10, 2007, ordered the
consolidation of CTA Case No.
6714 with CTA Case No. 7262 for
having common questions of law
and facts.
The CTA Division Ruling: The
CTA Division partially granted
Cargills claims for refund of
unutilized input VAT and thereby
ordered the CIR to issue a tax credit
certificate in the reduced amount of
P3,053,469.99,
representing
Cargills unutilized input VAT
attributable to its VAT zero-rated
export sales for the period covering
April 1, 2001 to August 31, 2004.
Amended decision of CTA
Division: The CTA Division
superseded
and
consequently
reversed its August 24, 2010
Decision. Citing the case of CIR v.
Aichi Forging Company of Asia,
Inc. (Aichi), it held that the 120-day
period provided under Section
112(D) of the National Internal
Revenue Code (NIRC) must be

observed prior to the filing of a

judicial claim for tax refund. As
Cargill failed to comply therewith,
the CTA Division, without ruling on
the
merits,
dismissed
the
consolidated cases for being
prematurely filed.

Decision of CTA En Banc: The

CTA En Banc affirmed the CTA
Divisions April 20, 2011 Amended
Decision, reiterating that Cargills
premature filing of its claims
divested the CTA of jurisdiction,
and perforce, warranted the
dismissal of its petitions.

ISSUE:
Whether or not the CTA En Banc
correctly affirmed the CTA Divisions
outright dismissal of Cargills claims for
refund of unutilized input VAT on the
ground of prematurity?
RULING:
The
petition
is
partly
meritorious. Considering that Cargills
claims for refund covered periods before
the effectivity of RA 9337, Section 112 of
the NIRC, as amended by RA 8424, should,
therefore, be the governing law.
In this case, records disclose that
anent Cargills first refund claim, it filed its
administrative claim with the BIR on June
27, 2003, and its judicial claim before the
CTA on June 30, 2003, or before the period
when BIR Ruling No. DA-489-03 was in
effect, i.e., from December 10, 2003 to
October 6, 2010. As such, it was incumbent
upon Cargill to wait for the lapse of the 120day period before seeking relief with the
CTA, and considering that its judicial claim
was filed only after three (3) days later, the
CTA En Banc, thus, correctly dismissed
Cargills petition in CTA Case No. 6714 for
being prematurely filed.
In contrast, records show that with
respect to Cargills second refund claim, its
administrative and judicial claims were
both filed on May 31, 2005, or during the

period of effectivity of BIR Ruling NO.

DA-489-03, and, thus, fell within the
exemption window period contemplated
in San Roque, i.e., when taxpayer-claimants
need not wait for the expiration of the 120day period before seeking judicial relief.
Verily, the CTA En Banc erred when it
outrightly dismissed CTA Case No. 7262on
the ground of prematurity.
The Court finds that Cargills
second refund claim in the amount of
P22,194,446.67
which
allegedly
represented unutilized input VAT covering
the period March 1, 2003 to August 31,
2004 should not be instantly granted. This
is because the determination of Cargills
entitlement to such claim, if any, would
necessarily involve factual issues and, thus,
are evidentiary in nature which are beyond
the pale of judicial review under a Rule 45
petition where only pure questions of law,
not of fact, may be resolved.43 Accordingly,
the prudent course of action is to remand
CTA Case No. 7262 to the CTA Division
for resolution on the merits.

Gotesco defaulted on its loan

obligations. PNB foreclosed the
mortgaged property; a certificate of
sale was issued in favor of PNB. As
it prepared for the consolidation of
its ownership over the foreclosed
property, PNB paid the BIR
Eighteen Million Six Hundred
Fifteen
Thousand
Pesos
(P18,615,000) as documentary
stamp tax (DST). PNB also
withheld and remitted to the BIR
withholding taxes equivalent to six
percent (6%) of the bid price.

Pending the issuance of the

Certificate Authorizing Registration
(CAR), the BIR informed PNB that
it is imposing interests, penalties
and surcharges of on capital gains
tax and on DST. To facilitate the
release of the CAR, petitioner paid
all the surcharges, interests and
penalties assessed against it in the
total amount of Php77,172,555.28.

On October 27, 2005, it filed an

administrative claim for the refund
of excess withholding taxes with the
BIR. A day after, or on October 28,
2005, it filed its petition for review
before the tax court.

In its claim for refund, PNB

explained that it inadvertently
applied the six percent (6%)
creditable withholding tax rate on
the sale of real property classified as
ordinary asset, when it should have
applied the five percent (5%)
creditable withholding tax rate on
the sale of ordinary asset, as
provided in Section 2.57.2 (J)(B) of
Revenue Regulation (RR) No. 2-98
as amended by RR No. 6-01,
considering that Gotesco is
primarily engaged in the real estate
business. Therefore, PNB claimed
that it erroneously withheld and
remitted to the BIR excess taxes of
Php12,400,004.71.

2.) PHILIPPINE
NATIONAL
BANK, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
206019, March 18, 2015)

FACTS:

GotescoTyan Ming Development,

Inc.
(Gotesco),
a
Filipino
corporation engaged in the real
estate business, entered on April 7,
1995 into a syndicated loan
agreement
with
petitioner
Philippine National Bank (PNB)
and three (3) other banks. To secure
the loan, Gotesco mortgaged a sixhectare expanse known as the Ever
Ortigas Commercial Complex,
under a mortgage trust indenture
agreement in favor of PNB, through
its Trust Banking Group, as trustee.

The CTA Specil First Division

(First Division), in CTA Case No.
7588, ordered the CIR to refund to
PNB P77,172,555.28 representing
its claim for refund of interests,
surcharges and penalties on capital
gains taxes and documentary stamp
taxes for the year 2003. However,
the First Division denied PNBs
claim for the refund of excess
creditable withholding taxes for
insufficiency of evidence.
PNB filed a Motion for
Reconsideration,
attaching
therewith, among others, Gotescos
2003 ITR and the latters Schedule
of Prepaid Tax, which the First
Division admitted as part of the
records.
The First Division issued a
Resolution denying PNBs MR
mainly because there were no
documents or schedules to support
the figures reported in Gotescos
2003 ITR to show that no part of the
creditable withholding tax sought to
be refunded was used, in part, for
the settlement of Gotescos tax
liabilities for the same year. It stated
that PNB should have likewise
presented the Certificate of
Creditable Tax Withheld at Source
(BIR Form No. 2307) issued to
Gotesco in relation to the creditable
taxes withheld reported in its 2003
ITR. BIR Form No. 2307, so
declared in the Resolution, will
confirm whether or not that the
amount being claimed by PNB was
indeed not utilized by Gotesco to
offset its taxes.
PNB filed an appeal before the
CTA En Banc by way of a Petition
for Review. However, the CTA En
Banc denied the Petition for
Review. The income tax returns
alone are not enough to fully

support petitioners contention that

no part of the creditable withholding
tax sought to be refunded by
petitioner
was
utilized
by
GOTESCO.
ISSUE:
Whether or not PNB is entitled to
the refund of creditable withholding taxes
erroneously paid to the BIR?
RULING:
YES. The petition is impressed with
merit. The court directed the respondent to
refund to petitioner Philippine National
Bank, within thirty (30) days from the
finality of the Decision, the amount of
Php12,400,004.71, representing excess
creditable withholding taxes withheld and
paid for the year 2003. Although PNB was
not able to submit Gotescos BIR Form No.
2307, the Court is persuaded and so
declares that PNB submitted evidence
sufficiently showing Gotescos nonutilization of the taxes withheld subject of
the refund.
In this case, PNB was able to
establish, through the evidence it presented,
that Gotesco did not in fact use the claimed
creditable withholding taxes to settle its tax
liabilities, to reiterate: (1) Gotescos 2003
Audited Financial Statements, which still
included the mortgaged property in the
asset account Properties and Equipment,
proving that Gotesco did not recognize the
foreclosure sale and therefore, the payment
by PNB of the creditable withholding taxes
corresponding to the same; (2) Gotescos
2003 ITRs, which the CTA Special First
Division required to show that the excess
creditable withholding tax claimed for
refund was not used by Gotesco, along with
the 2003 Schedule of Prepaid Tax which
itemized in detail the withholding taxes
claimed by Gotesco for the year 2003

amounting to P6,014,433.00; (3) the

testimony of Gotescos former accountant,
proving that the amount subject of PNBs
claim for refund was not included among
the creditable withholding taxes stated in
Gotescos 2003 ITR; and(4) the
Withholding Tax Remittance Returns (BIR
Form 1606) proving that the amount of
P74,400,028.49 was withheld and paid by
PNB in the year 2003.

Pre-Assessment
Notice
dated
November 10, 1999 against TRB.

Ergo, the evidence on record

sufficiently proves that the claimed
creditable withholding tax was withheld
and remitted to the BIR, that such
withholding and remittance was erroneous,
and that the claimed creditable withholding
tax was not used by Gotesco to settle its tax
liabilities.

would like to point out that Special Savings

Deposits being savings deposit accounts
are not subject to the documentary stamp
tax.
Likewise,
Trust
Indenture
Agreement[s] are not subject to
documentary stamp tax for the reason that
relationship established between parties is
that of the trustor and trustee, wherein the
funds and/or properties of the trustor are
given to the Trustee Bank not as a deposit
but under a Common Trust Fund
maintained and to be managed by the
Trustee.

QUESTION:
Differentiate
final
withholding tax (FWT) from creditable
withholding tax (CWT). Cite your legal
basis.
3.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS.
TRADERS ROYAL BANK, Respondent
(G.R. No. 167134, March 18, 2015)

FACTS:

Traders Royal Bank (TRB) is a

domestic
corporation
duly
registered with the Securities and
Exchange
Commission
and
authorized by the Bangko Sentral ng
Pilipinas (BSP) to engage in
commercial banking. On the
strength of the Letter of Authority
No. 000018565 dated July 27, 1998,
the Bureau of Internal Revenue
(BIR) conducted an investigation
concerning all national internal
revenue tax liabilities of TRB for
taxable years 1996-1997. Following
the investigation, the BIR issued a

The BIR issued a Formal Letter of

Demand and Assessment Notice all
dated December 27, 1999, against
TRB for deficiency DST for 1996
and 1997, in the total amount
ofP28,867,296.90.
TRB
Vice
President Navarro wrote a letter
dated January 7, 2000 protesting the
assessments of the BIR on the
following grounds: In response, we

The CIR denied the protest of TRB.

The CIR adopted the position of the
BIR examiners that the Special
Savings Deposit should be deemed
a time deposit account subject to
documentary stamp tax (DST)
under Section 180 of the Tax Code
of 1977. CIR denied the protest of
herein protestant-bank. Assessment
Notice Nos. ST-DST-96-0234-99
and
ST-DST-97-0233-99
demanding payment of the
respective
amounts
of
P10,517,740.57
and P18,349,556.33
as
documentary stamp taxes for the
taxable years 1996 and 1997.

TRB filed a Petition for Review

with the CTA, the parties stipulated
the following issues to be resolved
by the CTA Division:

The CIR and TRB filed with the

CTA en banc separate Petitions for
Review. The CTA en banc
promulgated its Decision in CTA
EB No. 32 on February 14, 2005,
dismissing the Petition of the CIR
and affirming the cancellation by
the CTA Division of the
assessments against TRB for DST
on its Trust Indenture Agreements
for 1996 to 1997.

The CTA en banc, in a Decision

dated April 26, 2005 in CTA EB
No. 34, similarly dismissed the
Petition of TRB and upheld the
ruling of the CTA Division that
TRB was liable for DST on its
Special Savings Deposits for 1996
to 1997, plus surcharge and
delinquency interest.

A. Whether or not Special Saving

Deposits and Mega Savings
Deposits [both are Special Savings
Accounts (SSA)] are subject to
documentary stamp tax (DST)
under Section 180 of the Tax Code.
B. Whether or not the ordinary
saving account passbook issued by
[TRB can be considered a
certificate of deposit subject to
documentary stamp tax (DST).
C. Whether or not the Trust
Indenture Agreements are subject
to documentary stamp tax (DST)
under Section 180 of the Tax Code.

The CTA Division rendered a

Decision, resolving the first two
issues in favor of the CIR and the
last one in favor of TRB. The CTA
Division agreed with the CIR that
the Special Savings Deposits and
Time Deposits were akin to each
other in that the bank would
acknowledge the receipt of money
on deposit which the bank promised
to pay to the depositor, bearer, or to
the order of the bearer after a
specified period of time. The CTA
Division, however, concurred with
TRB that the Trust Indenture
Agreements were different from the
certificate of deposit. TRB is
ordered to pay CIR the deficiency
documentary stamp taxes for the
years 1996 and 1997.

ISSUE:
Whether or not the Trust Indenture
Agreements constituted deposits or trusts?
RULING:
The BIR posits that the Agreements
were deposits subject to DST; while TRB
proffers that the Agreements were trusts
exempt from DST. Surprisingly, not a
single copy of a Trust Indenture Agreement
and/or the Certificate of Participation
(issued to the client as evidence of the trust)
could be found in the records of the case.
The burden fell upon TRB to produce the
Trust Indenture Agreements, not only
because the said Agreements were in its
possession, but more importantly, because
its protest against the DST assessments was
entirely grounded on the allegation that said
Agreements were trusts. TRB was the
petitioner before the CTA in C.T.A. Case

No. 6392 and it was among its affirmative

allegations that the said Trust Indenture
Agreements were trusts, thus, TRB had the
obligation of proving this fact. It is a basic
rule of evidence that each party must prove
its affirmative allegation.
TRB made no attempt to explain
why it did not present the Trust Indenture
Agreements, and it also did not take the
effort to establish that any of the
exceptional circumstances under Rule 130,
Section 9 of the Revised Rules of Court,
allowing "a party to modify, explain or add
to the terms of written agreement," was
extant in this case.
In contrast, records show that the
BIR examiners conducted a thorough audit
and investigation of the books of account of
TRB. Mr. Alexander D. Martinez, a BIR
Revenue Officer, testified that it took the
BIR team of examiners more than one-year
to conduct and complete the audit and
examination of the documents of TRB,
which consisted of approximately 20,000
pages.
Given the failure of TRB to present
proof of error in the tax assessments of the
BIR, the Court affirms the same.
The liabilities of TRB for deficiency DST on its Trust Indenture
Agreements for 1996 and 1997 are computed as follows:
1996
Trust Fund
Tax Rate

1997

QUESTION: If in case the BIR issued a

notice of assessment against a domestic
corporation, informing the corporation of
its alleged deficiency documentary stamp
taxes on its Trust Indenture Agreements.
The domestic corp. filed a letter protest
before the BIR contesting said assessment.
After more than a year from the filing of the
letter protest, the BIR informed the
domestic corp. that the latters letter protest
was denied on the ground that the
assessment had already become final,
executory and demandable. The BIR
reasoned that its failure to decide the case
within 180 days from filing of the letter
protest should have prompted the domestic
corp. to seek recourse before the Court of
Tax Appeals by filing a petition for review
within thirty days after the expiration of the
180-day period. Accordingly, the domestic
corporations failure to file a petition for
review before the CTA rendered the
assessment
final,
executory
and
demandable. Is the contention of the BIR
correct? Explain your answer.
4.) SILICON
PHILIPPINES,
INC.
(FORMERLY INTEL PHILIPPINES
MANUFACTURING, INC.), Petitioner,
VS. COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
173241, March 25, 2015)

P 567,500,927.000 P 55,783,860.92
.30/200

.30/200

Basic Tax

851,251.50

83,676.00

Add: Surcharge

212,812.88

20,919.00

P 1,064,064.38

P 104,595.00

Total

1996 and 1997 plus 20% delinquency

interest.

Respondent Traders Royal Bank is

ORDERED to pay the deficiency
Documentary Stamp Taxes on its Trust
Indenture Agreements for the taxable years

FACTS:

SPI, formerly known as Intel

Philippines Manufacturing, Inc., is
a corporation duly organized and
existing under Philippine laws, and
engaged in the business of
designing,
developing,
manufacturing, and exporting
advance and large-scale integrated

circuit components, commonly

referred to in the industry as
Integrated Circuits or ICs. It is
registered with the Bureau of
Internal Revenue (BIR) as a VAT
taxpayer and with the Board of
Investments as a preferred pioneer
enterprise enjoying a six-year
income holiday.

SPI filed on May 6, 1999 with the

One-Stop Shop Inter-Agency Tax
Credit and Duty Drawback Center
of the Department of Finance an
Application for Tax Credit/Refund
of Value-Added Tax Paid covering
the Third Quarter of 1998.

When respondent Commissioner of

Internal Revenue (CIR) failed to act
upon its aforesaid Application for
Tax Credit/Refund, SPI filed on
September 29, 2000 a Petition for
Review before the CTA Division.
The CTA Division rendered a
Decision on November 24, 2003
only partially granting the claim of
SPI for tax credit/refund. The CTA
Division disallowed the claim of
SPI for tax credit/refund of input
VAT
in
the
amount
of
P23,105,548.83 for failure of SPI to
properly substantiate the zero-rated
sales to which it attributed said
taxes.

SPI filed a Motion for Partial

Reconsideration and Supplemental
Motion for Partial Reconsideration
of the foregoing Decision dated
November 24, 2003 of the CTA
Division. In a Resolution dated
August 10, 2004, the CTA Division

additionally noted that the claim of

SPI covered the period of July 1,
1998 to September 30, 1998 and it
was issued a permit to generate
computerized sales invoices and
official receipts only on August 31,
2002.

SPI sought recourse from the

CTA En Banc by filing a Petition
for Review assailing the Decision
dated November 24, 2003 and
Resolution dated August 10, 2004
of the CTA Division. The CTA En
Banc found no cogent justification
to disturb the conclusion spelled out
in the assailed Decision dated
November 24, 2003 and Resolution
dated August 10, 2004 of the CTA
Division.

SPI
filed
a
Motion
for
Reconsideration but said Motion
was denied for lack of merit by the
CTA En Banc in a Resolution dated
June 26, 2006.

ISSUE:
Whether or not SPI is entitled to
claim from refund of Input VAT
attributable to its zero-rated sales?
RULING:
No, because the Petition for Review
of Silicon Philippines, Inc. seeking tax
credit/refund of the input Value-Added Tax
attributable to its zero-rated sales and on its
purchases of capital goods for the Third
Quarter of 1998, docketed as CTA Case No.
6170 before the Court of Tax Appeals
Division, is filed out of time. SPI filed
on May 6, 1999 its administrative claim for
tax credit/refund of the input VAT

attributable to its zero-rated sales and on its

purchases of capital goods for the Third
Quarter of 1998. The two-year prescriptive
period for filing an administrative claim,
reckoned from the close of the taxable
quarter, prescribed on September 30,
2000. Therefore, the herein administrative
claim of SPI was timely filed. However,
SPI belatedly filed its judicial claim. It
filed its Petition for Review with the
CTA 391 days after the lapse of the 120day period without the CIR acting on its
application for tax credit/refund, way
beyond the 30-day period under Section
112 of the 1997 Tax Code.
Because the 30-day period for filing
its judicial claim had already prescribed by
the time SPI filed its Petition for Review
with the CTA Division, the CTA Division
never acquired jurisdiction over the said
Petition. The CTA Division had absolutely
no jurisdiction to act upon, take cognizance
of, and render judgment upon the Petition
for Review of SPI in CTA Case No. 6170,
regardless of the merit of the claim of
SPI. The Court stresses that the 120/30-day
prescriptive periods are mandatory and
jurisdictional, and are not mere technical
requirements.
SUMMARY OF RULES ON
PRESCRIPTIVE PERIODS FOR
CLAIMING REFUND OR CREDIT OF INPUT
VAT
The lessons of this case may be summed up as
follows
A. Two-Year Prescriptive Period
1.

It is only the administrative claim

that must be filed within the twoyear prescriptive period. (Aichi)

2.

The proper reckoning date for the

two-year prescriptive period is the
close of the taxable quarter when
the relevant sales were made.
(San Roque)

3.

The only other rule is the Atlas

ruling, which applied only from 8
June 2007 to 12 September
2008. Atlas states that the twoyear prescriptive period for filing
a claim for tax refund or credit of
unutilized input VAT payments
should be counted from the date of
filing of the VAT return and
payment of the tax. (San Roque)

B. 120+30 Day Period

1.

The taxpayer can file an appeal in

one of two ways: (1) file the
judicial claim within thirty days
after the Commissioner denies the
claim within the 120-day period,
or (2) file the judicial claim within
thirty days from the expiration of
the 120-day period if the
Commissioner does not act within
the 120-day period.

2.

The 30-day period always applies,

whether there is a denial or
inaction on the part of the CIR.

3.

As a general rule, the 30-day

period to appeal is both
mandatory and jurisdictional.
(Aichi and San Roque)

4.

As an exception to the general

rule, premature filing is allowed
only if filed between 10 December
2003 and 5 October 2010, when
BIR Ruling No. DA-489-03 was
still in force. (San Roque)

5.

Late
filing
is
absolutely
prohibited, even during the time
when BIR Ruling No. DA-489-03
was in force. (San Roque)

QUESTION: What are the

requirements for the grant of a
judicial claim for VAT
refund/credit? Cite your legal
basis.
5.) EASTERN
TELECOMMUNICATIONS
PHILIPPINES, INC., Petitioner VS.
COMMISSIONER OF INTERNAL

REVENUE, Respondent
183531, March 25, 2015)

(G.R.

No.

International
Telegraph
and
Telephony
and
implemented
between the contracting parties in
consonance with a set of procedural
guidelines denominated as Traffic
Settlement Procedure.

FACTS:

ETPI is a domestic corporation. It

registered with the Bureau of
Internal Revenue (BIR) as a VAT
taxpayer.
As a telecommunications company,
ETPI
entered
into
various
international service agreements
with
international
telecommunications carriers and
handles
incoming
telecommunications services for
non-resident
foreign
telecommunication companies and
the relay of said international calls
within and around other places in
the Philippines. Consequently, to
broaden its distribution coverage of
telecommunications
services
throughout the country, ETPI
entered into various interconnection
agreements
with
local
carriers that can readily relay the sa
id foreign calls to the intended local
end-receiver.
The
non-resident
foreign
corporations pays ETPI in US
dollars inwardly remitted through
the Philippine local banks,
Metropolitan Banking Corporation,
Hong Kong and Shanghai Banking
Corporation and Citibank through
the manner and mode of payments
based on an internationally
established standard which is
embodied in a Blue Book, or
Manual,
prepared
by
the
Consultative
Commission
of

ETPI seasonably filed its Quarterly

VAT Returns for the year 1998
which
were,
however,
simultaneously
amended
on
February 22, 2001 to correct its
input VAT on domestic purchases
of goods and services and on
importation of goods and to reflect
its zero-rated and exempt sales for
said year.

On January 25, 2000, ETPI filed an

administrative claim with the BIR
for the refund of the amount of
P9,265,913.42 representing excess
input tax attributable to its
effectively zero-rated sales in 1998
pursuant to Section 112 of the
Republic Act (R.A.) No. 8424, also
known as the National Internal
Revenue Code of 1997 (NIRC), as
implemented
by
Revenue
Regulations (RR) No. 5-87 and as
amended by RR No. 7-95.

Pending review by the BIR, ETPI

filed a Petition for Review before
the CTA on February 21, 2000 in
order to toll the two-year
reglementary period under Section
229 of the NIRC. The case was
docketed as C.T.A. Case No.
6019. The BIR Commissioner
opposed the petition and averred
that no judicial action can be
instituted by a taxpayer unless a

claim has been duly filed before

it. Considering the importance of
such procedural requirement, the
BIR stressed that ETPI did not file a
formal/written claim for refund but
merely submitted a quarterly VAT
return for the 4th quarter of 1998
contrary to what Section 229 of the
NIRC prescribes.

In a Decision dated November 19,

2003, the CTA denied the petition
because the VAT official receipts
presented by ETPI to support its
claim failed to imprint the word
zero-rated on its face in violation
of the invoicing requirements under
Section 4.108-1 of RR No. 7-95.

The CTA further mentioned that

even if ETPI is entitled to a refund,
it still failed to present sales
invoices covering its VATable and
exempt sales for purposes of
allocating its input taxes. It also
criticized ETPI for filing its 1998
audited financial records on
February 22, 2001 when the same
should have been reported to the
BIR as early as February 22,
1999. It
being
so,
the
CTA ratiocinated that tax refunds,
being in the nature of tax
exemptions,
are
construed
in strictissimi juris against the
taxpayer. Thus, ETPIs noncompliance with what the tax laws
and regulations require resulted to
the denial of its claim for VAT
refund.

ETPI moved for the CTAs

reconsideration but it was denied in

the Resolution dated March 19,

2004. ETPI filed a petition before
the Court of Appeals (CA) which
referred the case to the CTA En
Banc due to the passage of R.A. No.
9282.

On April 30, 2008, the CTA En

Banc rendered a Decision which
affirmed the decision of the old
CTA. In its disquisition, the CTA
En Banc stated that VAT-registered
persons must comply with the
invoicing requirements prescribed
in Sections 113(A) and 237 of the
NIRC. Moreover, the invoicing
requirements enumerated in Sectio
n 4.108-1 of RR No. 7-95 are
mandatory due to the word shall
and not may. Hence, noncompliance with any thereof would
disallow any claim for tax credit or
VAT refund.

CTA Presiding Justice Ernesto

Acosta filed a Concurring and
Dissenting Opinion wherein he
disagreed with the majoritys view
regarding the supposed mandatory
requirement of imprinting the term
zero-rated on official receipts or
invoices. He stated that Section 113
in relation to Section 237 of the
NIRC does not require the
imprinting of the phrase zerorated on an invoice or official
receipt for the document to be
considered valid for the purpose of
claiming a refund or an issuance of
a tax credit certificate. Hence, the
absence of the term zero-rated in
an invoice or official receipt does
not affect its admissibility or
competency as evidence in support

of a refund claim. Assuming that

stamping the term zero-rated on
an invoice or official receipt is a
requirement of the current NIRC,
the denial of a refund claim is not
the imposable penalty for failure to
comply
with
that
requirement. Nevertheless,
PJ
Acosta agreed with the majoritys
decision to deny the claim due to
ETPIs failure to prove the input
taxes it paid on its domestic
purchases of goods and services
during the period involved.

ETPI filed a motion for

reconsideration which was denied
in the Resolution dated July 2,
2008. Hence, this petition.

ISSUE:
Whether or not the CTA erred in
denying ETPIs claim for refund of input
taxes resulting from its zero-rated sales?
RULING:
No. The word zero-rated is
required on the invoices or receipts
issued by VAT-registered taxpayers.
ETPI posits that the NIRC allows
VAT-registered taxpayers to file a claim for
refund of input taxes directly attributable to
zero-rated
transactions
subject
to
compliance with certain conditions. To
bolster its averment, ETPI pointed out that
the imprint of the word zero-rated on the
face of the sales invoice or receipt is merely
required in RR No. 7-95 which cannot
prevail over a taxpayers substantive right
to claim a refund or tax credit for its input
taxes. And, that the lack of the word zerorated on its invoices and receipts does not
justify an outright denial of its claim for
refund or tax credit considering that it has

presented equally relevant and competent

evidence to prove its claim. Moreover, its
clients
are
non-resident
foreign
corporations which are exempted from
paying VAT. Thus, it cannot take
advantage of its omission to print the word
zero-rated on its invoices and sales
receipts.
The Secretary of Finance has the
authority to promulgate the necessary rules
and regulations for the effective
enforcement of the provisions of the
NIRC. Such rules and regulations are given
weight and respect by the courts in view of
the rule-making authority given to those
who formulate them and their specific
expertise in their respective fields.
An applicant for a claim for tax ref
und or tax credit must not only prove
entitlement to the claim but also
compliance with all the documentary and
evidentiary requirements. Consequently,
the old CTA, as affirmed by the CTA En
Banc, correctly ruled that a claim for the
refund of creditable input taxes must be
evidenced by a VAT invoice or official
receipt in accordance with Section
110(A)(1) of the NIRC. Sections 237 and
238 of the same Code as well as Section
4.108-1 of RR No. 7-95 provide for the
invoicing requirements that all VATregistered taxpayers should observe, such
as: (a) the BIR Permit to Print; (b) the Tax
Identification Number of the VATregistered purchaser; and (c) the word
zero-rated imprinted thereon. Thus, the
failure to indicate the words zero-rated on
the invoices and receipts issued by a
taxpayer would result in the denial of
the claim for refund or tax credit.
ETPI failed to substantiate its
claim for refund or tax credit.
ETPI argues that its quarterly
returns for the year 2008 substantiate the

amounts of its taxable and exempt sales

which show the amounts of its taxable
sales, zero-rated sales and exempt
sales. Moreover, the submission of its
invoices and receipts including the
verification of its independent CPA are all
sufficient to support its claim.

Tax Exemptions- The Authority shall be

exempt from realty taxes imposed by the
National Government or any of its political
subdivisions,
agencies
and
instrumentalities: Provided, that no tax
exemption herein granted shall extend to
any subsidiary which may be organized by
the Authority.

The Court is not persuaded.

June 2015
1.) MACTAN-CEBU
INTERNATIONAL AIRPORT
AUTHORITY
(MCIAA), Petitioner VS. CITY
OF LAPU-LAPU AND ELENA
T.
PACALDO, Respondents
(G.R. No. 181756, June 15, 2015)

On September 11, 1996, however,

this Court rendered a decision in
Mactan-Cebu International Airport
Authority v. Marcos4 (the 1996
MCIAA case) declaring that upon
the effectivity of Republic Act No.
7160 (The Local Government Code
of 1991), petitioner was no longer
exempt from real estate taxes.

On January 7, 1997, respondent

City issued to petitioner a Statement
of Real Estate Tax assessing the lots
comprising
the
Mactan
International Airport in the amount
of P162,058,959.52.
Petitioner
complained that there were
discrepancies in said Statement of
Real Estate Tax.

Upon request of petitioners

General Manager, the Secretary of
the Department of Justice (DOJ)
issued Opinion No. 50, Series of
1998,8 and we quote the pertinent
portions of said Opinion below:

FACTS:

Petitioner
Mactan-Cebu
International Airport Authority
(MCIAA) was created by Congress
on July 31, 1990 under Republic
Act No. 6958 to "undertake the
economical, efficient and effective
control,
management
and
supervision
of
the
Mactan
International Airport in the
Province of Cebu and the Lahug
Airport in Cebu City and such other
airports as may be established in the
Province of Cebu." It is represented
in this case by the Office of the
Solicitor General.
Respondent City of Lapu-Lapu is a
local government unit and political
subdivision, created and existing
under its own charter with capacity
to sue and be sued. Respondent
Elena T. Pacaldo was impleaded in
her capacity as the City Treasurer of
respondent City.

Upon its creation, petitioner

enjoyed exemption from realty
taxes under the following provision
of Republic Act No. 6958: Section 14.

You further state that among the

real properties deemed transferred to
MCIAA are the airfield, runway, taxiway
and the lots on which the runway and
taxiway are situated, the tax declarations
of which were transferred in the name of
the MCIAA. In 1997, the City of Lapu-Lapu
imposed real estate taxes on these
properties invoking the provisions of the
Local Government Code. It is your view
that these properties are not subject to real

property tax because they are exclusively

used for airport purposes. You said that the
runway and taxiway are not only used by
the commercial airlines but also by the
Philippine Air Force and other government
agencies. As such and in conjunction with
the above interpretation of Section 15 of
R.A. No. 6958, you believe that these
properties are considered owned by the
Republic of the Philippines. The query is
resolved in the affirmative. The properties
used for airport purposes (i.e. airfield,
runway, taxiway and the lots on which the
runway and taxiway are situated) are
owned by the Republic of the Philippines.

The respondent City, in the

course of the hearing of its motion,
presented to this Court a certified copy of
its Ordinance No. 44 (Omnibus Tax
Ordinance of the City of Lapu-Lapu),
Section 25 whereof authorized the
collection of a rate of one and one-half (1
1/2) [per centum] from owners, executors
or administrators of any real estate lying
within the jurisdiction of the City of LapuLapu, based on the assessed value as
shown in the latest revision.

The City Assessor, therefore, is

hereby instructed to transfer the
assessment of the subject airfield,
runway, taxiway and the lots on
which the runway and taxiway are
situated, from the "Taxable Roll" to
the "Exempt Roll" of real
properties.

It would seem from the foregoing

provisions that once the taxpayer fails to
redeem within the one-year period,
ownership fully vests on the local
government unit concerned. Thus, when in
the present case petitioner failed to redeem
the parcels of land acquired by respondent
City, the ownership thereof became fully
vested on respondent City without the latter
having to perform any other acts to perfect
its
ownership.
Corollary
thereto,
ownership on the part of respondent City
has become a fait accompli.

Respondent City Treasurer Elena

Pacaldo sent petitioner a Statement
of Real Property Tax Balances up to
the year 2002. Petitioner claimed
that the statement again included the
lots utilized solely and exclusively
for public purpose such as the
airfield, runway, and taxiway and
the lots on which these are built.
Petitioner filed a petition for
prohibition with the Regional Trial
Court (RTC) of Lapu-Lapu City
with prayer for the issuance of a
temporary restraining order (TRO)
and/or a writ of preliminary
injunction. Branch 53 of RTC LapuLapu City then issued a 72-hour
TRO. The RTC issued an Order on
December 28, 2004 granting
petitioners application for a writ of
preliminary injunction.

However,
upon
motion
of
respondents, the RTC lifted the writ
of preliminary injunction. The RTC
reasoned as follows:

WHEREFORE, in the light of the

foregoing considerations, respondents
motion for reconsideration is granted, and
the order of this Court dated December 28,
2004
is
hereby
reconsidered.
Consequently, the writ of preliminary
injunction issued by this Court is hereby
lifted.

Court of Appeals promulgated the

questioned Decision on October 8,
2007, holding that petitioner is a
government-owned or controlled
corporation and its properties are
subject to realty tax. Also, the Court
of Appeals held that petitioners
airport terminal building, airfield,
runway, taxiway, and the lots on
which they are situated are not
exempt from real estate tax
reasoning as follows:
Under the Local Government Code,
enacted pursuant to the constitutional

mandate of local autonomy, all natural and

juridical persons, including governmentowned or controlled corporations
(GOCCs), instrumentalities and agencies,
are no longer exempt from local taxes even
if previously granted an exemption. The
only exemptions from local taxes are those
specifically provided under the Code itself,
or those enacted through subsequent
legislation.

ISSUE:
Whether or not Petitioner is a
Government Instrumentality exempt from
paying Real Property Taxes?
RULING:
The petition is GRANTED.
Petitioner is an instrumentality of the
government; thus, its properties actually,
solely and exclusively used for public
purposes, consisting of the airport terminal
building, airfield, runway, taxiway and the
lots on which they are situated, are not
subject to real property tax and respondent
City is not justified in collecting taxes from
petitioner over said properties. The
2006 MIAA case governs. A government
instrumentality like MIAA falls under
Section 133(o) of the Local Government
Code, which states:
SEC. 133. Common Limitations on the
Taxing Powers of Local Government Units. - Unless
otherwise provided herein, the exercise of the taxing
powers of provinces, cities, municipalities, and
barangays shall not extend to the levy of the
following:
(o) Taxes, fees or charges of any kind on
the National Government, its agencies and
instrumentalities and local government units.

There is no question, therefore, that

unless the Airport Lands and Buildings are
withdrawn by law or presidential
proclamation from public use, they are
properties of public dominion, owned by
the Republic and outside the commerce of
man.

However, portions of the Airport

Lands and Buildings that MIAA leases to
private entities are not exempt from real
estate tax. For example, the land area
occupied by hangars that MIAA leases to
private corporations is subject to real estate
tax. In such a case, MIAA has granted the
beneficial use of such land area for a
consideration to a taxable person and
therefore such land area is subject to real
estate tax.
To reiterate, petitioner MCIAA is
vested with corporate powers but it is not a
stock or non-stock corporation, which is a
necessary condition before an agency or
instrumentality is deemed a governmentowned or controlled corporation. Like
MIAA, petitioner MCIAA has capital under
its charter but it is not divided into shares of
stock. It also has no stockholders or voting
shares.
We hereby adopt and apply to
petitioner MCIAA the findings and
conclusions of the Court in the
2006MIAA case, and we quote: To
summarize, MIAA is not a governmentowned or controlled corporation under
Section 2(13) of the Introductory
Provisions of the Administrative Code
because it is not organized as a stock or
non-stock corporation. Neither is MIAA a
government-owned
or
controlled
corporation under Section 16, Article XII of
the 1987 Constitution because MIAA is not
required to meet the test of economic
viability. MIAA is a government
instrumentality vested with corporate
powers and performing essential public
services pursuant to Section 2(10) of the
Introductory
Provisions
of
the
Administrative Code. As a government
instrumentality, MIAA is not subject to any
kind of tax by local governments under
Section 133(o) of the Local Government
Code. The exception to the exemption in
Section 234(a) does not apply to MIAA
because MIAA is not a taxable entity under
the Local Government Code. Such

exception applies only if the beneficial use

of real property owned by the Republic is
given to a taxable entity.

Initially, the RTC dismissed the

collection case due to the
continuous
absences
of
respondents counsel during trial.
On appeal to the CA, and eventually
the Court, the said case was
reinstated and trial on the merits
continued before the RTC.

The RTC Ruling: the RTC granted

petitioners Demurrer to Plaintiffs
Evidence,
and
accordingly,
dismissed respondents collection
case on the ground of insufficiency
of evidence. The RTC opined that
fraud is never presumed and must
be established by clear and
convincing
evidence,
which
petitioner failed to do, thus,
necessitating the dismissal of the
complaint.

The CA Ruling: The CA referred

the records of the collection case to
the CTA for proper disposition of
the appeal taken by respondent
while the CA admitted that it had no
jurisdiction to take cognizance of
respondents appeal, as jurisdiction
is properly lodged with the CTA, it
nevertheless opted to relax
procedural rules in not dismissing
the appeal outright.

QUESTIONS: a.) What is the nature of the

Corporate Return? Cite your legal basis.
b.) Can local governments tax the national
government,
its
agencies,
and
instrumentalities? Explain your answer.
2.) MITSUBISHI
MOTORS
PHILIPPINES
CORPORATION, Petitioner VS.
BUREAU
OF
CUSTOMS, Respondents (G.R.
No. 209830, June 17, 2015)

FACTS:

The instant case arose from a

collection suit for unpaid taxes and
customs duties in the aggregate
amount of P46,844,385.00 filed by
respondent
against
petitioner
Mitsubishi Motors Philippines
Corporation.
Respondent alleged that from 1997
to1998, petitioner was able to
secure tax credit certificates (TCCs)
from
various
transportation
companies; after which, it made
several importations and utilized
said TCCs for the payment of
various customs duties and taxes in
the
aggregate
amount
of P46,844,385.00. Believing the
authenticity
of
the
TCCs,
respondent allowed petitioner to use
the same for the settlement of such
customs duties and taxes. However,
a post-audit investigation of the
Department of Finance revealed
that the TCCs were fraudulently
secured with the use of fake
commercial and bank documents,
and thus, respondent deemed that
petitioner never settled its taxes and
customs duties pertaining to the
aforesaid importations.

ISSUE:
Whether or not the Court of Appeals
correctly referred the records of the
collection case to the Court of Tax Appeals
for proper disposition of the appeal taken by
respondent?
RULING:
The Court finds that the CA erred in
referring the records of the collection case
to the CTA for proper disposition of the
appeal taken by respondent.

When a court has no jurisdiction

over the subject matter, the only power it
has is to dismiss the action.
Section 7 of Republic Act No. (RA) 1125, as amended
by RA 9282, reads:
Sec. 7. Jurisdiction. The CTA shall exercise:
xxxx
c. Jurisdiction over tax collection cases as herein
provided:
xxxx
2. Exclusive appellate jurisdiction in tax collection
cases:
a. Over appeals from the judgments, resolutions or
orders of the Regional Trial Courts in tax collection
cases originally decided by them in their respective
territorial jurisdiction.
Section 3, Rule 4 of the Revised Rules of the Court
of Tax Appeals, as amended, states:
Sec. 3. Cases within the jurisdiction of the Court in
Divisions. The Court in Divisions shall exercise:
xxxx
c. Exclusive jurisdiction over tax collections cases,
to wit:
xxxx
2. Appellate jurisdiction over appeals from the
judgments, resolutions or orders of the Regional
Trial Courts in tax collection cases originally
decided by them within their respective territorial
jurisdiction.

In the instant case, the CA has no

jurisdiction over respondents appeal;
hence, it cannot perform any action on the
same except to order its dismissal pursuant
to Section 2, Rule 50 of the Rules of Court.
Therefore, the act of the CA in referring
respondents wrongful appeal before it to
the CTA under the guise of furthering the
interests of substantial justice is blatantly
erroneous, and thus, stands to be corrected.
Finally, in view of respondents
availment of a wrong mode of appeal via
notice of appeal stating that it was elevating
the case to the CA instead of appealing by
way of a petition for review to the CTA
within thirty (30) days from receipt of a
copy of the RTCs August 3, 2012 Order, as
required by Section 11 of RA 1125, as
amended by Section 9 of RA 9282 the
Court is constrained to deem the RTC's
dismissal of respondent's collection case

against petitioner final and executory. It is

settled that the perfection of an appeal in the
manner and within the period set by law is
not only mandatory, but jurisdictional as
well, and that failure to perfect an appeal
within the period fixed by law renders the
judgment appealed from final and
executory.
3.) COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner
VS.
PUREGOLD DUTY FREE,
INC., Respondent (G.R. No.
202789, June 22, 2015)
Dissenting Opinion: Justice Villarama, Jr.

FACTS:

Puregold is engaged in the sale of

various
consumer
goods
exclusively within the Clark Special
Economic Zone (CSEZ), and
operates its store under the authority
and
jurisdiction
of
Clark
Development" Corporation (CDC)
and CSEZ.

As an enterprise located within

CSEZ and registered with the CDC,
Puregold
had
been
issued
Certificate of Tax Exemption No.
94-4, later superseded by Certificate
of Tax Exemption No. 98-54, which
enumerated the tax incentives
granted to it, including tax and dutyfree importation of goods. The
certificates were issued pursuant to
Sec. 5 of Executive Order No. (EO)
80, extending
to
business
enterprises operating within the
CSEZ all the incentives granted to
enterprises within the Subic Special
Economic Zone (SSEZ) under RA
7227, otherwise known as the
"Bases
Conversion
and
Development Act of 1992."

In accordance with the tax

exemption certificates granted to

respondent Puregold, it filed its

Annual Income Tax Returns and
paid the five percent (5%)
preferential tax, in lieu of all other
national and local taxes for the
period of January 1998 to May
2004.

Deputy Commissioner for Special

Concerns/OIC-Large
Taxpayers
Service of the Bureau of Internal
Revenue Kim Jacinto-Henares
issued a Preliminary Assessment
Notice regarding unpaid VAT and
excise tax on wines, liquors and
tobacco products imported by
Puregold from January 1998 to May
2004. In due time, Puregold
protested the assessment.
Pending the resolution of Puregold's
protest, Congress enacted RA 9399,
specifically to grant a tax amnesty
to business enterprises affected by
this Court's rulings in John Hay
People's Coalition v. Lim and
Coconut Oil Refiners. Under RA
9399, availment of the tax amnesty
relieves the qualified taxpayers of
any
civil,
criminal
and/or
administrative liabilities arising
from, or incident to, nonpayment of
taxes, duties and other charges.

Puregold of its liability for

deficiency VAT, excise taxes, and
inspection fees under Sec. 131 (A)
of the 1997 National Internal
Revenue Code (1997 NIRC).

Puregold filed a Petition for Review

with the CTA questioning the
timeliness of the assessment and
arguing that the doctrines of
operative fact and non-retroactivity
of rulings bar the Commissioner of
Internal Revenue from assessing it
of deficiency VAT and excise taxes.

The CTA 2nd Division issued a

Resolution
ordering
the
cancellation of the protested
assessment against Puregold in
view of its availment of tax amnesty
under RA 9399.

The CIR filed a Petition for Review

with the CTA En Banc assailing the
adverted Resolutions of the CTA
2nd Division. The CTA En Banc
promulgated its Decision denying
the CIR's petition.
After a careful review of the
records and arguments raised by the
petitioner, we agree with respondent's
contention that the same are merely a
rehash of previous arguments already
passed upon and discussed by the Court.

Puregold availed itself of the tax

amnesty under RA 9399.
Puregold received a formal letter of
demand from the BIR for the
payment of P2,780,610,174.51,
supposedly representing deficiency
VAT and excise taxes on its
importations of alcohol and tobacco
products from January 1998 to May
2004.
The BIR issued a Final Decision on
Disputed Assessment stating that
the availment of the tax amnesty
under RA 9399 did not relieve

Petitioner's arguments rely on (1)

the applicability of Section 131(A) of the
National Internal Revenue Code of 1997
(Tax Code); and, (2) that the subject
deficiency taxes are not covered by the tax
amnesty under R.A. No. 9399. These
contentions have been discussed and
resolved by the CTA Second Division and
there are no compelling reasons to deviate
from the said rulings.

CIR's motion for reconsideration

was likewise denied by the CTA En
Banc. Hence, this petition.

ISSUE:

Whether or not the CTA En Banc

gravely erred, as its ruling is contrary to the
intent of RA No. 9399 which excludes
deficiency tax?
RULING:
The CTA En Banc did not gravely
err in its ruling. The petition is denied. The
assessment against respondent Puregold
Duty Free, Inc. in the amount of
P2,780,610,174.51,
supposedly
representing deficiency value added tax
(VAT) and excise taxes on its importations
of alcohol and tobacco is cancelled. It is
worth noting that the CTA has ruled that the
amnesty provision of RA 9399 covers the
deficiency taxes assessed on Puregold and
rejected the arguments raised on the matter
by the CIR. It cannot be emphasized
enough that the findings of the CTA merit
utmost respect, considering that its function
is by nature dedicated exclusively to the
consideration of tax problems.
The issue on the coverage and
applicability of RA 9399 to Puregold has
already been addressed and disposed of by
the CTA when it pointed out that RA 9399
covers all applicable tax and duty
liabilities, inclusive of fines, penalties,
interests and other additions thereto.
Consequently, the government, through the
enactment of RA 9399, has expressed its
intention to waive its right to collect taxes,
which in this case is the tax imposed under
Sec. 131(A) of the 1997 NIRC, subject to
the condition that Puregold has complied
with the requirements provided therein.
Hence, to conclude that respondent
Puregold - a registered business enterprise
operating within the CSEZ - cannot avail of
the amnesty extended by the law with
regard to its liability under Section 131(A)
of the 1997 NIRC simply goes against the
plain and unambiguous language of RA
9399.

Furthermore, to review the factual

milieu, Puregold enjoyed duty free
importations and exemptions from local
and national taxes under EO 80, a privilege
which extended to business enterprises
operating within the CSEZ all the
incentives granted to enterprises within
SSEZ by RA 7227.
Hence, Puregold was repeatedly
issued tax exemption certificates and the
BIR itself did not assess any deficiency
taxes from the time the 1997 NIRC took
effect in January 1998.
QUESTIONS: a.) Who are the persons
liable to excise tax on imported articles?
Cite your legal basis.
b.) Can Congress enact a law withdrawing
a tax exemption privilege on importation?
Explain your answer.
4.) PROVINCE OF LEYTE, herein
represented by MR. RODOLFO
BADIABLE, in his capacity as
the ICO-Provincial Treasurer,
Province of Leyte, Petitioner VS.
ENERGY
DEVELOPMENT
CORPORATION, Respondent
(G.R. No. 203124, June 22, 2015)

FACTS:

Sometime in 2006 and 2007, the

Province of Leyte issued four (4)
separate franchise tax assessments
against
Energy
Development
Corporation (EDC) which the latter,
in turn, protested separately. When
the Province of Leyte effectively
denied all protests, EDC appealed
such denials before the Regional
Trial Court of Tacloban City,
Branch 6 (RTC). Upon motion of
EDC, the RTC issued an Order
dated February 4, 2008 directing the
consolidation of said appeals.

Notwithstanding the pendency of

the cases before the RTC, the
Province of Leyte issued another tax

assessment against EDC, with the

Assistant Provincial Treasurer
verbally intimating to EDC that he
was under strict instruction from the
Governor to enforce the collection
of tax through the available
administrative remedies upon the
lapse of the sixty (60)-day period
mentioned in the assessment.

This prompted EDC to file a Motion

for Issuance of Writ of Preliminary
Injunction praying that the RTC
enjoin the Province of Leyte "from
assessing, or attempting to assess,
collecting or attempting to collect
franchise taxes from, and availing
itself of enforcement remedies or
actions against EDC until [the
pending cases before the RTC shall
have been resolved with finality.

RTC Ruling: RTC denied EDCs

motion on the ground that its grant
would in effect dispose of the cases
before it. However, on EDCs
motion, the RTC issued an Order
setting aside its earlier order, and
accordingly, directed the issuance
of a writ of preliminary injunction
in its favor.

Aggrieved, the Province of Leyte

elevated the matter before the CA
by way of a petition for certiorari.

CA Ruling: the CA dismissed the

petition on the ground that, inter alia
"there was no proper proof of
service of the petition to the adverse
party. Certainly, registry receipts
can hardly be considered sufficient
proper proof of receipt by the
addressee of registered mail." The
Province of Leyte moved for
reconsideration, which
was,
however, denied in a Resolution.

ISSUE:

Whether or not the CA correctly

dismissed the Province of Leytes certiorari
petition before it due to its failure to provide
proof of service of the same on EDC?
RULING:
This case is remanded to the Court
of Appeals to thresh out its merits.
The instant case was elevated to the
CA via a petition for certiorari which is, by
nature, an original and independent action,
and therefore, not considered as part of the
trial that had resulted in the rendition of the
judgment or order complained of. Being an
original action, there is a need for the CA to
acquire jurisdiction over the person of the
parties to the case before it can resolve the
same on the merits. Naturally, the CA
acquired jurisdiction over the person of the
petitioner which is the Province of Leyte
in this case upon the filing of the certiorari
petition. On the other hand, Section 4, Rule
46 of the Rules of Court, which covers
cases originally filed before the CA,
provides how the CA is able to acquire
jurisdiction over the person of the
respondent:
SEC.4. Jurisdiction over person of
respondent, how acquired. The court shall acquire
jurisdiction over the person of the respondent by the
service on him of its order or resolution indicating
its initial action on the petition or by his voluntary
submission
to
such
jurisdiction.

Records reveal that the CA served

its Resolution dated November 4, 2009
indicating its initial action on the Province
of Leytes certiorari petition before it, i.e.,
directing EDC to file a comment to the
petition, among others. In fact, the EDC
complied with such directive by filing its
comment dated December 14, 2009 to such
petition. Hence, the CA had already
acquired jurisdiction over both parties to
the instant case.
Relying on Aramburo v. CA, the
CA held that while the Province of Leyte

presented the registry receipt, it failed to

include the registry return card; hence, there
was no valid proof of service to EDC,
which must then result in the dismissal of
the Province of Leytes petition. The CA
erred in this regard. It cannot be denied that
EDC was already aware of the certiorari
proceedings before the CA and that
jurisdiction had been acquired over its
person. The CA, therefore, should have
brushed aside the Province of Leytes
procedural mishap and resolved the case on
the merits in the interest of substantial
justice.
The demands of justice require the
CA to resolve the issues before it,
considering that what is at stake here are
taxes, albeit locally imposed in this case,
which are the nations lifeblood through
which government agencies continue to
operate and with which the State discharges
its functions for the welfare of its
constituents. Thus, it is far better and more
prudent for the Court to excuse a technical
lapse and afford the parties a substantive
review of the case in order to attain the ends
of justice than to dismiss the same on mere
technicalities.
QUESTION: The Municipality of ABC
passed an ordinance imposing a tax on the
sale or transfer of real property (local
transfer tax). X, who sold a parcel of land
which he inherited, refused to pay and
argued that such tax can only be collected
by the National Government. On the other
hand, the Municipality argues that under the
Constitution, it has the power to create its
own sources of revenue. Is the contention of
ABC Municipality correct? Explain your
answer.
5.) JOSE
J.
FERRER,
JR., Petitioner
VS.
CITY
MAYOR
HERBERT
BAUTISTA, CITY COUNCIL
OF QUEZON CITY, CITY
TREASURER OF QUEZON
CITY, and CITY ASSESSOR
OF
QUEZON

CITY, Respondents (G.R.

210551, June 30, 2015)

No.

FACTS:

On October 17, 2011, respondent

Quezon City Council enacted
Ordinance No. SP-2095, S-2011, or
the Socialized Housing Tax of
Quezon City.

Effective for five (5) years, the

Socialized Housing Tax ( SHT )
shall be utilized by the Quezon City
Government for the following
projects: (a) land purchase/land
banking; (b) improvement of
current/existing socialized housing
facilities; (c) land development; (d)
construction of core houses,
sanitary
cores,
medium-rise
buildings and other similar
structures; and (e) financing of
public-private
partnership
agreement of the Quezon City
Government and National Housing
Authority ( NHA ) with the private
sector.

Under certain conditions, a tax

credit shall be enjoyed by taxpayers
regularly paying the special
assessment:
SECTION 7- TAX CREDIT.
Taxpayers dutifully paying the special
assessment tax as imposed by this
ordinance shall enjoy a tax credit. The tax
credit may be availed of only after five (5)
years of continue[d] payment. Further, the
taxpayer availing this tax credit must be a
taxpayer in good standing as certified by
the City Treasurer and City Assessor.

Petitioner alleges that he is a

registered co-owner of a 371square-meter residential property in
Quezon City, and that, on January 7,
2014, he paid his realty tax which
already included the garbage fee.

The instant petition was filed on

January 17, 2014. We issued a TRO

on February 5, 2014, which

enjoined the enforcement of
Ordinance Nos. SP-2095 and SP2235 and required respondents to
comment on the petition without
necessarily giving due course
thereto.

The imposition of the SHT and the

garbage fee cannot be justified by
the Quezon City Government as an
exercise of its power to create
sources of income under Section 5,
Article X of the 1987 Constitution.
According to petitioner, the
constitutional provision is not a
carte blanche for the LGU to tax
everything under its territorial and
political jurisdiction as the
provision itself admits of guidelines
and limitations.

ISSUES:
1. Whether or not Ordinance No.
SP-2095, S-2011 or the
Socialized Housing Tax is
valid?
2. Whether or not Ordinance No.
SP-2235, S-2013 on Garbage
Fees is valid?
a. Whether or not
Ordinance No. SP-2235, S-2013 on
Garbage Fee violates the rule on
double taxation?

RULING:
1. The constitutionality and legality of
Ordinance No. SP-2095, S-2011, or the
"Socialized Housing Tax of Quezon City,"
is sustained for being consistent with
Section 43 of Republic Act No. 7279.
Ordinance No. SP-2095 imposes a
Socialized Housing Tax equivalent to 0.5%
on the assessed value of land in excess of
Php100,000.00. This special assessment is

the same tax referred to in R.A. No. 7279 or

the UDHA. The SHT is one of the sources
of funds for urban development and
housing program. Section 43 of the law
provides:
Sec. 43. Socialized Housing Tax
Consistent with the constitutional principle that the
ownership and enjoyment of property bear a social
function and to raise funds for the Program, all local
government units are hereby authorized to impose
an additional one-half percent (0.5%) tax on the
assessed value of all lands in urban areas in excess
of Fifty thousand pesos (P50,000.00).

The SHT charged by the Quezon

City Government is a tax which is within its
power to impose. The tax is not a pure
exercise of taxing power or merely to raise
revenue; it is levied with a regulatory
purpose. The levy is primarily in the
exercise of the police power for the general
welfare of the entire city. It is greatly
imbued with public interest. Removing
slum areas in Quezon City is not only
beneficial to the underprivileged and
homeless constituents but advantageous to
the real property owners as well. The
situation will improve the value of the their
property investments, fully enjoying the
same in view of an orderly, secure, and safe
community, and will enhance the quality of
life of the poor, making them law-abiding
constituents and better consumers of
business products.
2. Ordinance No. SP-2235, S-2013,
which collects an annual garbage fee on all
domestic households in Quezon City, is
hereby declared as unconstitutional and
illegal.
Certainly, as opposed to petitioners
opinion, the garbage fee is not a tax. In
Smart
Communications,
Inc.
v.
Municipality of Malvar, Batangas ,the
Court had the occasion to distinguish these
two concepts:
In Progressive Development Corporation v.
Quezon City, the Court declared that "if the
generating of revenue is the primary purpose and

regulation is merely incidental, the imposition is a

tax; but if regulation is the primary purpose, the fact
that incidentally revenue is also obtained does not
make the imposition a tax.
In Victorias Milling Co., Inc. v. Municipality of
Victorias, the Court reiterated that the purpose and
effect of the imposition determine whether it is a tax
or a fee, and that the lack of any standards for such
imposition gives the presumption that the same is a
tax.

Although a special charge, tax, or

assessment may be imposed by a municipal
corporation, it must be reasonably
commensurate to the cost of providing the
garbage service. To pass judicial scrutiny, a
regulatory fee must not produce revenue in
excess of the cost of the regulation because
such fee will be construed as an illegal tax
when the revenue generated by the
regulation exceeds the cost of the
regulation.
Petitioner argues that the Quezon
City Government already collects garbage
fee under Section 47 of R.A. No. 9003,
which authorizes LGUs to impose fees in
amounts sufficient to pay the costs of
preparing, adopting, and implementing a
solid waste management plan, and that it
has access to the SWM Fund under Section
46 of the same law. Moreover, Ordinance
No. S-2235 is inconsistent with R.A. No.
9003, because the ordinance emphasizes
the collection and payment of garbage fee
with no concern for segregation,
composting and recycling of wastes. It also
skips the mandate of the law calling for the
active involvement of the barangay in the
collection, segregation, and recycling of
garbage.

In another U.S. case, the garbage fee

was considered as a "service charge" rather
than a tax as it was actually a fee for a
service given by the city which had
previously been provided at no cost to its
citizens.
Hence, not being a tax, the
contention that the garbage fee under
Ordinance No. SP-2235 violates the rule on
double taxation must necessarily fail.
QUESTIONS: a.) Do local governments
have the power to tax? Explain your
answer.
b.) Does the direct grant of taxing power to
the local governments mean that the
legislature may no longer provide
limitations and guidelines to such power?
Explain your answer.
July 2015
1.) FORTUNE
TOBACCO
ORPORATION, Petitioner VS.
COMMISSIONER
OF
INTERNAL
REVENUE,
Respondent (G.R. No. 192024,
July 01, 2015)

FACTS:

We accordingly say that the

designation given by the municipal
authorities does not decide whether the
imposition is properly a license tax or a
license fee.
In Georgia, U.S.A., assessments for
garbage collection services have been
consistently treated as a fee and not a tax.

Petitioner
is
the
manufacturer/producer of, among
others, the following cigarette
brands, with tax rate classification
based on net retail price prescribed
by Republic Act No. 4280:
Brand

Tax Rate

Champion M 100
Camel F King
Camel Lights Box 20's
Camel Filters Box 20's
Winston F King
Winston Lights

P1.00
P1.00
P1.00
P1.00
P5.00
P5.00

Prior to January 1, 1997, the abovementioned cigarette brands were

subject to ad valorem tax pursuant

to then Section 142 of the Tax Code
of 1977, as amended. However, on
January 1, 1997, R.A. No. 8240
took effect causing a shift from the
ad valorem tax (AVT) system to the
specific tax system. As a result of
such shift, the aforesaid cigarette
brands were subjected to specific
tax under Section 142 thereof now
renumbered as Section 145 of the
Tax Code of 1997.

ISSUE:
Whether or not there is sufficient
evidence to warrant the grant of petitioner's
claim for tax refund?
RULING:

To implement the provisions for a

twelve percent (12%) increase of
excise tax on cigars and cigarettes
packed by machines by January 1,
2000, the Secretary of Finance,
upon recommendation of the
respondent
Commissioner
of
Internal Revenue, issued Revenue
Regulations No. 17-99, dated
December 16, 1999:
RR No. 17-99 likewise provides
in the last paragraph of Section 1 thereof,
"that the new specific tax rate for any
existing brand of cigars, cigarettes packed
by machine, distilled spirits, wines and
fermented liquor shall not be lower than
the excise tax that is actually being paid
prior to January 1, 2000."

its claim to the CTA En Banc, but

was rebuffed after the tax tribunal
found no cause to reverse the
findings and conclusions of the
CTA Division.

Petitioner filed a claim for tax credit

or refund under Section 229 of the
NIRC for erroneously or illegally
collected specific taxes covering the
period June to December 31, 2004
in
the
total
amount
of
Php219,566,450.00.
Petitioner filed a Petition for
Review which was raffled to the
Former First Division of this Court.
After trial on the merits, the Former
First Division of this Court rendered
the assailed Decision, which
consistently ruled that RR 17-99 is
contrary to law and that there is
insufficiency of evidence on the
claim for refund. Petitioner elevated

Petition of Petitioner is denied.

Petitioner failed to provide sufficient
evidence to prove its claim and the amount
thereof.
Petitioner relied heavily on
photocopied documents to prove its
claim. The other documentary evidence
submitted by petitioner was refused
admission for being merely photocopies.
In this case, petitioner did not even
attempt to provide a plausible reason as to
why the original copies of the documents
presented could not be produced before the
CTA or any reason that the application of
any of the foregoing exceptions could be
justified. Although petitioner presented one
(1) witness to prove its claim, it appears that
this witness was not even a signatory to any
of the disputed documentary evidence.
Petitioner's evidence, even if
considered, fails to prove that it is entitled
to its claim for refund. Clearly, it is
petitioner's burden to prove the allegations
made in its claim for refund. For a claim for
refund to be granted, the manner in proving
it must be in accordance with the prescribed
rules of evidence. It would have been
erroneous had the CTA En Banc relied on
petitioner's own Excise Tax Refund
Computation
Summary
or
the
unsatisfactory explanation of its lone
witness to justify its claim for tax refund.

This Court is simply pointing to

the rule that claims for refunds are the
exception, rather than the rule, and that
each claim for refund, in order to be
granted, must be clearly set forth and
established in accordance with the rules
of evidence.
As it has been said, time and again,
that claims for tax refunds are in the nature
of tax exemptions which result in loss of
revenue for the government. Upon the
person claiming an exemption from tax
payments rests the burden of justifying the
exemption by words too plain to be
mistaken and too categorical to be
misinterpreted; it is never presumed nor be
allowed solely on the ground of equity.

On January 15, 2007, CBC paid the

amount
of P267,128.70
and
protested, thru a Letter dated
January 12, 2007, the imposition of
business tax under Section 21 of the
Manila Revenue Code in the
amount ofP154,398.50, on the
ground that it is not liable of said
additional business tax and the same
constitutes double taxation.

On March 27, 2007, respondent

wrote a letter-reply to petitioners
Letter dated February 8, 2007,
reiterating that respondent already
protested the additional assessment
under Section 21 of the Manila
Revenue Code in its Letter dated
January 12, 2007. In the same
Letter, respondent averred that
pursuant to Section 195 of the Local
Government Code ("LGC ''),
petitioner had until March 16, 2007
within which to decide the protest,
and considering that respondent
received the Letter dated February
8, 2007, four days after the deadline
to decide and petitioner did not even
resolve the protest, respondent
formally demanded the refund of
the
amount
of P154,398.50,
representing the business tax
collected under Section 21 of the
Manila Revenue Code.

Respondent CBC filed a Petition for

Review with the RTC. The RTC,
rendered its decision granting the
petition filed by CBC and ordered
the City Treasurer to refund the
amount
of P154,398.50,
representing the assessment paid by
it under Section 21 of Manila
Ordinance No. 7988, as amended by
Tax Ordinance No. 8011.

The RTC resolved to deny the

motion for reconsideration filed by
the City Treasurer.

Decision of the CTA Division: CTA

Division reversed the decision of the

QUESTIONS: a.) What are the

requirements needed in order that the
application for VAT refund/tax credit may
be approved? Cite your legal basis.
b.) Should an application for refund/credit
be accompanied by copies of the taxpayers
VAT return(s) for the taxable quarter(s)
concerned? Explain your answer.
2.) CHINA
BANKING
CORPORATION, Petitioner
VS.
CITY
TREASURER
OF
MANILA, Respondent
(G.R.
No. 204117, July 1, 2015)

FACTS:

On January 2007, on the basis of the

reported income of respondent
CBC's Sto. Cristo Branch, Binondo,
Manila,
amounting
to P34,310,777.34 for the year
ending December 31, 2006,
respondent CBC was assessed the
amount
of P267,128.70
by
petitioner City Treasurer of Manila,
consisting of local business tax,
business permits, and other fees for
taxable year 2007.

RTC, effectively dismissing CBCs

protest against the disputed
assessment. It found that the RTC
did not have jurisdiction over the
said petition for because it was filed
out of time. The CTA Division
noted that the petition for review
was filed one (1) day beyond the
reglementary period allowed by
Section 195 of the Local
Government
Code (LGC)
to
taxpayers who wished to appeal a
denial of a protest due to the
inaction of the City Treasurer.
Consequently, the CTA Division
ruled that the City Treasurers
assessment against CBC had
attained finality.

Decision of the CTA En Banc: The

CTA En Banc affirmed the ruling of
the CTA Division in toto, reiterating
that the petition for review was filed
out of time.

ISSUE:
Whether or not the Honorable Court
of Tax Appeals gravely erred in
disregarding the law and interest of
substantial justice by reversing the ruling of
the trial court solely because of its assumed
pronouncement that the original petition
was filed one (1) day beyond the
reglementary period?
RULING:
The petition lacks merit. The Court,
however, is of the view that the period
within which the City Treasurer must act on
the protest, and the consequent period to
appeal a "denial due to inaction," should be
reckoned from January 15, 2007, the date
CBC filed its protest, and not March 27,
2007. Consequently, the Court finds that
the CTA En Banc did not err in ruling that
CBC had lost its right to challenge the City

Treasurers "denial due to inaction." On this

matter, Section 195 of the LGC is clear:
SECTION 195. Protest of Assessment. When the local treasurer or his duly authorized
representative finds that correct taxes, fees, or
charges have not been paid, he shall issue a notice
of assessment stating the nature of the tax, fee or
charge, the amount of deficiency, the surcharges,
interests and penalties. Within sixty (60) days from
the receipt of the notice of assessment, the taxpayer
may file a written protest with the local treasurer
contesting the assessment; otherwise, the
assessment shall become final and executory. The
local treasurer shall decide the protest within sixty
(60) days from the time of its filing . If the local
treasurer finds the protest to be wholly or partly
meritorious, he shall issue a notice canceling wholly
or partially the assessment. However, if the local
treasurer finds the assessment to be wholly or partly
correct, he shall deny the protest wholly or partly
with notice to the taxpayer. The taxpayer shall have
thirty (30) days from the receipt of the denial of the
protest or from the lapse of the sixty (60)-day period
prescribed herein within which to appeal with the
court of competent jurisdiction otherwise the
assessment becomes conclusive and unappealable.

Time and again, it has been held that

the perfection of an appeal in the manner
and within the period laid down by law is
not only mandatory but also jurisdictional.
The failure to perfect an appeal as required
by the rules has the effect of defeating the
right to appeal of a party and precluding the
appellate court from acquiring jurisdiction
over the case.
At the risk of being repetitious, the
Court declares that the right to appeal is
neither a natural right nor a part of due
process. It is merely a statutory privilege,
and may be exercised only in the manner
and in accordance with the provisions of the
law.
3.) CLARK INVESTORS AND
LOCATORS ASSOCIATION
INC., Petitioner
VS.
SECRETARY OF FINANCE
AND COMMISSIONER OF
INTERNAL
REVENUE, Respondents (G.R.
No. 200670, July 6, 2015)

within the Clark Freeport Zone,

filed the instant petition alleging
that respondents acted with grave
abuse of discretion in issuing RR 22012. It argues that by imposing the
VAT and excise tax on the
importation of petroleum and
petroleum products from abroad
and into the Freeport or Economic
Zones, RR 2-2012 unilaterally
revoked the tax exemption granted
by RA No. 7227 and RA No. 9400
to the businesses and enterprises
operating within the Subic Special
Economic Zone and Clark Freeport
Zone.

FACTS:

On March 13, 1992, Congress

enacted RA No. 7227 which
mandated
the
accelerated
conversion of the Clark and Subic
military reservations into special
economic zones. Based on Section
12 (c) of the said law, in lieu of
national and local taxes, all
businesses
and
enterprises
operating within the Subic Special
Economic Zone shall pay a
preferential gross income tax rate of
five percent (5%). In addition,
Section 12 (b) also provides that
such businesses and enterprises
shall be exempt from the payment
of all taxes and duties on the
importation of raw materials,
capital, and equipment into the
Subic Special Economic Zone.
This tax and fiscal incentives under
RA No. 7227was further extended
to the Clark Freeport Zone upon
enactment of RA No. 9400 on
March 20, 2007. This made the
businesses and enterprises within
the Clark Freeport Zone exempt
from the payment of all taxes and
duties on the importation of raw
materials, capital and equipment.
On February 17, 2012, the Dept. of
Finance, upon recommendation of
the BIR, issued RR 2-2012 which
imposed VAT and excise tax on the
importation of petroleum and
petroleum products from abroad
and into the Freeport or Economic
Zones.
Herein petitioner, which represents
the businesses and enterprises

This petition for certiorari prays for

the issuance of a TRO and/or writ of
preliminary injunction to annul and
set aside RR 2-2012 issued by the
Department of Finance upon
recommendation of the BIR.

ISSUE:
Whether or not The Secretary of
Finance acted with grave abuse of
discretion in issuing RR 2-2012 that
imposes VAT and excise tax on the
importation of petroleum and petroleum
products from abroad and into Freeport or
Economic Zones, as it is claimed to have
unilaterally revoked tax exemption granted
by RA 7227 and RA 9400?
RULING:
The Court denied the petition for
being an improper remedy.
FIRSTLY, a petition for certiorari
under Rule 65 of the 1997 Rules of Civil
Procedure, as amended, is a special civil
action that may be invoked ONLY against

a tribunal, board, or officer exercising

judicial or quasi-judicial functions. Before
a tribunal, board, or officer may exercise
judicial or quasi-judicial acts, it is necessary
that there be a law that gives rise to some
specific rights of persons or property under
which adverse claims to such rights are
made, and the controversy ensuing
therefrom is brought before a tribunal,
board, or officer clothed with power and
authority to determine the law and
adjudicate the respective rights of the
contending parties.
In determining whether a Revenue
Regulation is quasi-legislative in nature, the
legal basis of the Secretary of Finance in the
issuance thereof must be examined. RR 22012 was issued by the Secretary of
Finance based on Section 244 of the NIRC.
Section 244 is an express grant of authority
to the Secretary of Finance to promulgate
all needful rules and regulations for the
effective enforcement of the provisions of
the NIRC. And since RR 2-2012 was
issued by the Secretary of Finance based on
Section 244 of the NIRC, such
administrative issuance is therefore quasilegislative in nature which is outside the
scope of a petition for certiorari.
SECONDLY, Supreme Court
explained that it could not be denied that
even if the petition is filed as a certiorari, in
real essence, it seeks the declaration by the
High Court of the unconstitutionality and
illegality of the questioned rule, thus
partaking the nature, in reality, of one for
declaratory relief over which the SC has
only appellate, not original, jurisdiction.
LASTLY, although the SC, the CA
and the RTC have concurrent jurisdiction to
issue writs of certiorari, prohibition,
mandamus, quo warranto, habeas corpus
and injunction, such concurrence does not
give the petitioner unrestricted freedom of
choice of court forum, as hierarchy of

courts must be respected. That hierarchy is

determinative of the venue of appeals, and
also serves as a general determinant of the
appropriate forum for petitions for the
extraordinary writs.
A direct invocation of the Supreme
Court's original jurisdiction to issue these
writs should be allowed only when there are
special and important reasons therefore,
clearly and specifically set out in the
petition. This is [an] established policy. It is
a policy necessary to prevent inordinate
demands upon the Court's time and
attention which are better devoted to those
matters within its exclusive jurisdiction,
and to prevent further over-crowding of the
Court's docket.
4.) REPUBLIC
OF
THE
PHILIPPINES, rep. by the
COMMISSIONER
OF
CUSTOMS, Petitioner
VS.
PHILIPPINE AIRLINES, INC.
(PAL), Respondent (G.R. Nos.
209353-54, July 6, 2015)
x-----------------------x

COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner
VS.
PHILIPPINE AIRLINES, INC.
(PAL), Respondent (G.R. Nos.
211733-34)

FACTS:

The case stemmed from a claim for

a refund by respondent Philippine
Airlines, Inc. (PAL) of the amount
of P4,469,199.98 representing the
alleged erroneously paid excise tax
for the period covering July 2005 to
February 2006. On 18 January
2007, PAL filed written claims for a
refund with the BIR. For failure of
the BIR to act on the administrative
claim, PAL filed two separate
Petitions for Review with the CTA.

The CTA consolidated the two

petitions and tried them jointly. The
CTA Second Division rendered a
Decision granting the Petitions and
ordered the CIR and the
Commissioner of Customs (COC)
to refund PAL in the total amount
of P4,469,199.98.

The CIR and the COC filed their

respective
Motions
for
Reconsideration, which were both
denied in a Resolution dated 28
June 2012.

CTA EB No. 920: The CIR, in its

Petition for Review before the CTA
En banc, raised the issue of whether
PAL is entitled to a tax refund of the
alleged erroneously paid excise tax.
The CIR argued that Presidential
Decree No. 1590, particularly
Section 13 thereof, had already been
expressly amended by Republic Act
No. 9334. Moreover, PAL failed to
prove that the alleged commissary
supplies were not locally available
in reasonable quantity, quality and
price
considering
that
no
independent credible evidence was
presented but merely PAL' s own
employee where testimony was
self-serving and not comprehensive.
CTA EB No. 922: A separate
Petition for Review was filed before
the CTA En Banc by the COC. The
latter argued that the case should
have been dismissed outright, as it
stated no cause of action against
petitioner, which merely acted as a
collecting agent for the CIR. The
COC further alleged that PAL had
also failed to exhaust the latter's
administrative remedies with the
former.
Ruling of the CTA En Banc: The
appeals were consolidated. The
CTA ruled that respondent PAL was
entitled to a refund of excise taxes
paid on the latter's commissary

supplies. The appellate court

explained that the exemption
granted to PAL under P.D. 1590
was not expressly repealed by R.A.
9334. The court also found that the
articles imported were intended for
the operations of PAL and were not
locally available in reasonable
quantity, quality or price. The latter
is therefore entitled to a refund of
erroneously paid excise tax in the
total amount of P4,469,199.98.

The COC directly filed a Petition

before this Court herein docketed as
G.R. Nos. 209353-54. While, the
CIR
filed
a
Motion
for
Reconsideration herein docketed as
G.R. Nos. 211733-34.

ISSUE:
Whether or not Sections 6 and 10 of
R.A. 9334 repealed Section 13 of P .D.
1590?
RULING:
The petitions are denied and ruled
that R.A. 9334 was not expressly repealed
by P.D. 1590.The controversy before the
Court is not novel. In CIR v. PAL, the Court
has already passed upon the very same
issues raised by the same petitioners. The
only differences are the taxable period
involved and the amount of refundable tax.
A reading of the pertinent
provisions of P.D. 1590 and R.A. 9334
shows that there was no express repeal of
the grant of exemption:
P.D. NO. 1590-SECTION 13. In
consideration of the franchise and rights hereby
granted, the grantee shall pay to the Philippine
Government during the life of this franchise
whichever of subsections (a) and (b) hereunder will
result in a lower tax:
(a) The basic corporate income tax based on the
grantee's annual net taxable income computed in

accordance with the provisions of the National

Internal Revenue Code; or
b) A franchise tax of two per cent (2%) of the gross
revenues derived by the grantee from all sources,
without distinction as to transport or nontransport
operations; provided, that with respect to
international air-transport service, only the gross
passenger, mail, and freight revenues from its
outgoing flights shall be subject to this tax.
The tax paid by the grantee under either of the above
alternatives shall be in lieu of all other taxes, duties,
royalties, registration, license, and other fees and
charges of any kind, nature, or description, imposed,
levied, established, assessed, or collected by any
municipal, city, provincial, or national authority or
government agency, now or in the future, including
but not limited to the following:
(2) All taxes, including compensating taxes, duties,
charges, royalties, or fees due on all importations by
the grantee of aircraft, engines, equipment,
machinery, spare parts, accessories, commissary
and catering supplies, aviation gas, fuel, and oil,
whether refined or in crude form and other articles,
supplies, or materials; provided, that such articles
or supplies or materials are imported for the use of
the grantee in its transport and non transport
operations and other activities incidental thereto
and are not locally available in reasonable quantity,
quality, or price;
SECTION 24. This franchise, as amended, or any
section or provision hereof may only be modified,
amended, or repealed expressly by a special law or
decree that shall specifically modify, amend, or
repeal this franchise or any section or provision
thereof.
R.A. NO. 9334- SECTION 6. Section 131
of the National Internal Revenue Code of 1997, is
hereby amended to read as follows:
SEC. 131. Payment of Excise Taxes on Imported
Articles.
(A) Persons Liable. Excise taxes on imported
articles shall be paid by the owner or importer to the
Customs Officers, conformably with the regulations
of the Department of Finance and before the release
of such articles from the customs house, or by the
person who is found in possession of articles which
are exempt from excise taxes other than those legally
entitled to exemption.
In the case of tax-free articles brought or imported
into the Philippines by persons, entities, or agencies

exempt from tax which are subsequently sold,

transferred or exchanged in the Philippines to
nonexempt persons or entities, the purchasers or
recipients shall be considered the importers thereof,
and shall be liable for the duty and internal revenue
tax due on such importation.
The provision of any special or general law to the
contrary notwithstanding, the importation of cigars
and cigarettes, distilled spirits, fermented liquors
and wines into the Philippines, even if destined for
tax and duty-free shops, shall be subject to all
applicable taxes, duties, charges, including excise
taxes due thereon. This shall apply to cigars and
cigarettes, distilled spirits, fermented liquors and
wines brought directly into the duly chartered or
legislated freeports of the Subic Special Economic
and Freeport Zone, created under Republic Act No.
7227; the Cagayan Special Economic Zone and
Freeport, created under Republic Act No. 7922; and
the Zamboanga City Special Economic Zone,
created under Republic Act No. 7903, and such
other freeports as may hereafter be established or
created by law: Provided, further, That importations
of cigars and cigarettes, distilled spirits, fermented
liquors and wines made directly by a governmentowned and operated duty-free shop, like the DutyFree Philippines (DFP), shall be exempted from all
applicable duties only: Provided, still further, That
such articles directly imported by a governmentowned and operated duty-free shop, like the DutyFree Philippines, shall be labeled 'duty-free' and
'not for resale': Provided, finally, That the removal
and transfer of tax and duty-free goods, products,
machinery, equipment and other similar articles
other than cigars and cigarettes, distilled spirits,
fermented liquors and wines, from one freeport to
another freeport, shall not be deemed on
introduction into the Philippine customs territory.

The tax privilege of PAL provided

in Sec. 13 of PD 1590 has not been revoked
by Sec. 131 of the NIRC of 1997, as
amended
by
Sec.
6
of
RA
9334. Noteworthy is the fact that PD 1590
is a special law, which governs the
franchise of PAL. Between the provisions
under PD 1590 as against the provisions
under the NIRC of 1997, as amended by
9334, which is a general law, the former
necessary prevails.
The franchise of PAL remains the
governing law on its exemption from taxes.
Its payment of either basic corporate
income tax or franchise tax - whichever is

lower - shall be in lieu of all other taxes,

duties, royalties, registrations, licenses, and
other fees and charges, except only real
property tax. The phrase "in lieu of all other
taxes" includes but is not limited to taxes,
duties, charges, royalties, or fees due on all
importations by the grantee of the
commissary and catering supplies, provided
that such articles or supplies or materials
are imported for the use of the grantee in its
transport and nontransport operations and
other activities incidental thereto and are
not locally available in reasonable quantity,
quality, or price. However, upon the
amendment of the 1997 NIRC, Section 22
of R.A. 9337 abolished the franchise tax
and subjected PAL and similar entities to
corporate income tax and value-added tax
(VAT). PAL nevertheless remains exempt
from taxes, duties, royalties, registrations,
licenses, and other fees and charges,
provided it pays corporate income tax as
granted in its franchise agreement.
Accordingly, PAL is left with no other
option but to pay its basic corporate income
tax, the payment of which shall be in lieu of
all other taxes, except VAT, and subject to
certain conditions provided in its charter.
The CTA found that PAL had paid
basic corporate income tax for fiscal year
ending 31 March 2006. PAL may now
claim exemption from taxes, duties,
charges, royalties, or fees due on all
importations of its commissary and
catering supplies, provided it shows that 1)
such articles or supplies or materials are
imported for use in its transport and
nontransport operations and other
activities incidental thereto; and 2) they
are not locally available in reasonable
quantity, quality, or price.
5.) BATANGAS CITY, MARIA
TERESA GERON, IN HER
CAPACITY
AS
CITY
TREASURER OF BATANGAS
CITY AND TEODULFO A.
DEGUITO,
IN
HIS

CAPACITY AS CITY LEGAL

OFFICER OF BATANGAS
CITY, Petitioners
VS.
PILIPINAS
SHELL
PETROLEUM
CORPORATION, Respondent
(G.R. No. 187631, July 08, 2015)

FACTS:

Petitioner Batangas City is a local

government unit (LGU) with the
capacity to sue and be sued under its
Charter and Section 22 (a) (2) of the
Local Government Code (LGC) of
1991. Petitioners Teodulfo A.
Deguito and Benjamin E. Pargas are
the City Legal Officer and City
Treasurer, respectively, of Batangas
City.

Respondent
Pilipinas
Shell
Petroleum Corporation operates an
oil refinery and depot in Tabagao,
Batangas City, which manufactures
and produces petroleum products
that are distributed nationwide.

On February 20, 2001, petitioner

Batangas City, through its City
Legal Officer, sent a notice of
assessment
to
respondent
demanding the payment of
P92,373,720.50
and
P312,656,253.04 as business taxes
for its manufacture and distribution
of petroleum products. Respondent
was also required and assessed to
pay the amount of P4,299,851.00 as
Mayor's Permit Fee based on the
gross sales of its Tabagao Refinery.
The assessment was allegedly
pursuant of Section 134 of the LGC
of 1991 and Section 23 of its
Batangas City Tax Code of 2002.

Respondent filed a protest on April

17, 2002 contending among others
that it is not liable for the payment
of the local business tax either as a
manufacturer or distributor of
petroleum products. It further
argued that the Mayor's Permit Fees
are
exorbitant,
confiscatory,
arbitrary, unreasonable and not
commensurable with the cost of
issuing a license.

Respondent filed a "Motion for

Partial Reconsideration." The RTC
denied respondent's motion for lack
of merit. Hence, respondent filed a
Petition for Review with Extremely
Urgent Application for a Temporary
Restraining Order and/or a Writ of
Preliminary Injunction with the
CTA Second Division on April 27,
2005.

Petitioners denied respondent's

protest and declared that under
Section 14 of the Batangas City Tax
Code of 2002, they are empowered
to withhold the issuance of the
Mayor's Permit for failure of
respondent to pay the business taxes
on its manufacture and distribution
of petroleum products. Respondent
filed a Petition for Review pursuant
to Section 195 of the LGC of 1991
before the RTC of Batangas City.

Considering the urgency of the

resolution
of
respondent's
Application for the Issuance of a
Writ of Preliminary Injunction, the
CTA Second Division granted the
said application and ordered
petitioners to hold in abeyance the
collection of the questioned
manufacturer and distributor's
taxes, conditioned upon the filing of
respondent of a surety bond in the
amount of P500,000,000.00.

The CTA Second Division granted

respondent's petition. It held that
respondent is not subject to the
business taxes on the manufacture
and distribution of petroleum
products because of the express
limitation provided under Section
133(h) of the LGC.

Respondent filed a "Motion for

Clarification" on the exact amount
to be refunded by petitioners as
regards the Mayor's Permit Fees.
CTA Second Division found the
motion
partly
meritorious. The fallo of
said
decision reads:

The RTC of Batangas City rendered

a Decision. The fallo of said
decision reads:
WHEREFORE, in view of the
foregoing premises, this Court hereby
renders judgment as follows:

1.

The taxes on the privilege of engaging in

the business of manufacturing, distribution
or dealing in petroleum products in the
amount
of
P92,373,750.50
and
P312,656,253.04, respectively, imposed
by Batangas City on Pilipinas Shell, is
VALID.

2.

Declaring the Mayor's Permit Fee in the

amount of P4,299,851.00 based on gross
receipts/sales as grossly excessive and
unreasonable considering the aforesaid
business taxes.

WHEREFORE, in view of the

foregoing, [respondent]'s Motion for

Clarification is partly GRANTED.

Accordingly, the dispositive portion of this
Court's Decision dated June 21, 2007 is
hereby AMENDED as follows:

business of manufacturing and distribution

of petroleum products?

WHEREFORE,
premises
considered, the judgment/order of the RTC
Branch II of Batangas City is hereby
MODIFIED. As to the business taxes on the
manufacture and distribution of petroleum
products, we find the [respondent] not
liable for the same. As to the mayor's
permit, we find that it is excessive.
Accordingly, the [petitioner] is hereby (a)
declared legally proscribed from imposing
business taxes on the manufacture and
distribution of petroleum products and (b)
to refund in the form of tax credit the
excessive mayor's permit in the amount of
THREE MILLION EIGHT HUNDRED
SEVENTY
THOUSAND
EIGHT
HUDNRED
SIXTY
PESOS
(P3,870,860.00)

RULING:

SO ORDERED.

SECTION 5. Each local government unit

shall have the power to create its own sources of
revenues and to levy taxes, fees, and charges subject
to such guidelines and limitations as the Congress
may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall
accrue exclusively to the local governments.

Petitioners filed a motion for

reconsideration
against
said
decision but the same was denied by
the CTA Second Division in a
Resolution. Petitioners filed a
Petition for Review praying for the
reversal of the Amended Decision
and Resolution of the CTA Second
Division.
The
CTA En
Banc promulgated a Decision
affirming in toto the Amended
Decision of the CTA Second
Division. The CTA En Banc found
no cogent reason to disturb the
findings and conclusions of the
CTA Second Division. Unfazed,
petitioners filed a motion for
reconsideration. The CTA En Banc
denied petitioners' motion for
reconsideration for lack of merit.
Hence, this petition.

ISSUE:
Whether or not a Local Government
Unit is empowered under the Local
Government Code to impose business taxes
on persons or entities engaged in the

The court denied the petition, and

affirmed the decision of the CTA En Banc.
At the outset, it must be emphasized
that although the power to tax is inherent in
the State, the same is not true for LGUs
because although the mandate to impose
taxes granted to LGUs is categorical and
long established in the 1987 Philippine
Constitution, the same is not all
encompassing as it is subject to limitations
as explicitly stated in Section 5, Article X
of the 1987 Constitution:

It is already well-settled that

although the power to tax is inherent in the
State, the same is not true for the LGUs to
whom the power must be delegated by
Congress and must be exercised within the
guidelines and limitations that Congress
may provide.
Section 133(h) of the LGC clearly
specifies the two kinds of taxes which
cannot be imposed by LGUs: (1) excise
taxes on articles enumerated under the
NIRC, as amended; and (2) taxes, fees or
charges on petroleum products.
Strictly speaking, as long as the
subject matter of the taxing powers of the
LGUs is the petroleum products per se or
even the activity or privilege related to the
petroleum products, such as manufacturing
and distribution of said products, it is
covered by the said limitation and thus, no
levy can be imposed.

On the contrary, Section 143 of the

LGC defines the general power of LGUs to
tax businesses within its jurisdiction. Thus,
the omnibus grant of power to LGUs under
Section 143(h) of the LGC cannot
overcome the specific exception or
exemption in Section 133(h) of the same
Code. This is in accord with the rule on
statutory construction that specific
provisions must prevail over general ones.

Section
263. Purchase
of
Property By the Local Government Units
for Want of Bidder. - In case there is no
bidder for the real property advertised for
sale as provided herein, the real property
tax and the related interest and costs of
sale, the local treasurer conducting the
sale shall purchase the property in behalf
of the local government unit concerned to
satisfy the claim and within two (2) days
thereafter shall make a report of his
proceedings which shall be reflected upon
the records of his office. It shall be the duty
of the Registrar of Deeds concerned upon
registration with his office of any such
declaration of forfeiture to transfer the title
of the forfeited property to the local
government unit concerned without the
necessity of an order from a competent
court.

6.) THE CITY OF DAVAO,

REPRESENTED BY THE
CITY
TREASURER
OF
DAVAO CITY, Petitioner VS.
THE INTESTATE ESTATE
OF AMADO S. DALISAY,
REPRESENTED BY SPECIAL
ADMINISTRATOR
ATTY.
NICASIO
B.
PADERNA, Respondent (G.R.
No. 207791, July 15, 2015)

FACTS:

The Estate of Amado S. Dalisay (the

Estate) owned the following
properties, all situated in Davao
City:

Within one (1) year from the date of such

forfeiture, the taxpayer or any of his
representative, may redeem the property by
paying to the local treasurer the full
amount of the real property tax and the
related interest and the costs of sale. If the
property is not redeemed as provided
herein, the ownership thereof shall be
vested on the local government unit
concerned.

1. Lot 1, Pcs-11-001298, covered by

Transfer Certificate of Title (TCT) No. T202211 with Tax Declaration No. E-1-3410484;
2. Lot 6, Pcs-11-001298, covered by TCT
No. T-202215 with Tax Declaration No. E1-34-10488;
3. Lot 7, Pcs-11-001298, covered by TCT
No. T-202216 with Tax Declaration No. E1-34-10489;
4. Lot 2, Pcs-11-001298, covered by TCT
No. T-202212 with Tax Declaration No. E1-34-10492; and
5. Building erected in Lot No. 26-B and
covered by Tax Declaration No. E-1-3410480.

These properties were advertised

for sale at a public auction for nonpayment of real estate taxes.

No bidders appeared on the date of

the public auction, thus, the
aforesaid properties were acquired
by the City Government of Davao
pursuant to Section 263 of Republic
Act (R.A.) No. 7160 of the Local
Government Code of 1991 (LGC)
which provides:

More than a year after the public

auction, the Declarations of
Forfeiture for the five (5) properties
were separately issued by the City
Treasurer. On September 13, 2006,
the Estate delivered a written tender
of payment to the City Treasurer
and, at the same time, tendered the
amount of P5,000,000.00. The City,
however, refused to accept the
same. This constrained the Estate to
file the Notice to Deposit the
P5,000,000.00 with the Office of

the Clerk of Court, RTC, at the

disposal of the City Treasurer. In
doing so, the Estate was made to
pay legal fees amounting to
P75,200.00.
An
action
for
redemption, consignation and
damages against the City was
consequently filed by the Estate
with the RTC.

The period of redemption had long

expired on July 19, 2005, a year
after the subject properties were
acquired by the City during the
public auction for want of a bidder.
Hence, its refusal to accept the
tendered amount was valid and for a
lawful
cause.
On June 6, 2008, the RTC ruled in
favor of the Estate, finding the
latter's evidence as preponderantly
acceptable in establishing its right
of redemption. The City was
ordered to: 1) receive the
P5,000,000.00 deposited with the
Clerk of Court, as full payment of
the redemption price of the forfeited
properties; and 2) issue a certificate
of redemption in favor of the Estate.
Further, actual damages and
attorneys fees in the amount of
P75,200.00
and
P50,000.00,
respectively, were awarded in favor
of the Estate.
The CA affirmed the ruling of the
RTC. Hence, this petition.

ISSUE:
Whether or not the one (1) year
redemption period of forfeited tax
delinquent properties purchased by the
local government for want of a bidder is
reckoned from the date of the auction or
sale or from the date of the issuance of the
declaration of forfeiture?
RULING:

Decision of the Court of Appeals

are reversed and set aside.
Section 263 of the LGC lacks
definiteness as to the reckoning point for
the redemption of tax delinquent properties.
It merely employs the phrase, "within one
(1) year from the date of such forfeiture."
On one hand, the City avers that the period
commences from the date of the forfeiture,
that is, the date of the auction. On the other
hand, the Estate insists that the redemption
period begins from the date when the
declarations of forfeiture were issued.
For the Court, the arguments of the
City point toward a more just and fair
resolution of the perceived vagueness in the
law.
The better theory that is consistent
with the subject matter of the provision is
that forfeiture of tax delinquent properties
transpires no later than the purchase made
by the city due to lack of a bidder from the
public. This happens on the date of the sale,
and not upon the issuance of the declaration
of forfeiture.
The Court, however, can only
commiserate with the situation of the state
and its lost chance of recovering its
property, as it still sees no reason to depart
from the general rule. The following
circumstances became the object of the
Court's perplexity:
1. The Estate does not dispute the
validity of the notices with respect to the
public auction. This brings the Court to the
safe assumption that there was valid
constructive notice as to possible danger of
forfeiture of the properties prior to the
auction. The Estate, with its administrator
in the person of Nicasio B. Paderna, is
undoubtedly bound by this. Corollary
thereto, the delinquent status of the
properties may not be said to have been
surprising news to the Estate.

2. Just the same, it took the Estate

more than one (1) year from the date of the
auction of which it was properly notified, to
inquire from the City Treasurer's Office
regarding the amount of the redemption
price due. On the same date of inquiry or on
September 11, 2006, the Estate was
furnished a handwritten summary of the
amount due for redemption. It is fair to
suppose that at this point, the Estate became
aware that no declaration of forfeiture had
yet been issued by the City Treasurer.

consolidation of ownership over the

properties by the City.
7.) COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner
VS.
LA TONDENA DISTILLERS,
INC. (LTDI [now GINEBRA
SAN MIGUEL]), Respondent
(G.R. No. 175188, July 15, 2015)

FACTS:

Respondent La Tondea Distillers,

Inc. entered into a Plan of Merger
with
Sugarland
Beverage
Corporation (SBC), SMC Juice,
Inc. (SMCJI), and Metro Bottled
Water Corporation (MBWC). As a
result of the merger, the assets and
liabilities
of
the
absorbed
corporations were transferred to
respondent,
the
surviving
corporation. Respondent later
changed its corporate name to
Ginebra San Miguel, Inc. (GSMI).

Respondent requested for a

confirmation of the tax-free nature
of the said merger from the Bureau
of Internal Revenue (BIR).

The BIR issued a ruling stating that

pursuant to Section 40(C)(2) and
(6)(b) of the 1997 National Internal
Revenue Code (NIRC), no gain or
loss shall be recognized by the
absorbed corporations as transferors
of all assets and liabilities.
However, the transfer of assets,
such as real properties, shall be
subject to DST imposed under
Section 196 of the NIRC. On
various dates from October 31,
2001 to November 15, 2001,
respondent paid to the BIR the DST.

On October 14, 2003, claiming that

it is exempt from paying DST,
respondent filed with petitioner
Commissioner of Internal Revenue

3. Two (2) days after this inquiry,

and as if a reaction thereto, the City
Treasurer issued the subject five (5)
Declarations of Forfeiture on September
13, 2006. Now with full confidence on the
said document and its expressed statement
that the property owner had one year from
the date of its issuance, within which to
redeem the properties, the Estate lost no
time in tendering its payment for the
redemption of the properties.
The delay on the part of the Estate
to at least inquire into the outcome of the
auction and its misplaced reliance on a
curious document heightens the belief of
the Court that the City may not be deprived
of a right that has long been vested in its
favor. The odd timing in the issuance of the
Declarations of Forfeiture and its very
contents which observably benefit the
Estate to the core form a nagging doubt that
may not be easily shrugged off. This
hinders the Court from applying the
exceptions to the rule on estoppel, when
doing this would result in more
impropriety.
The period to redeem the subject
properties of this case had long expired on
July 19, 2005, and since then, the forfeiture
of the properties had become absolute. The
failure of the Estate to validly exercise its
right of redemption within the statutory
period had already resulted in the

(CIR) an administrative claim for

tax refund or tax credit in the
amount
of
14,140,980.00,
representing the DST it allegedly
erroneously paid on the occasion of
the merger.

The 2nd Division of the CTA

rendered a Decision finding
respondent entitled to its claim for
tax refund or tax credit in the
amount
of
14,140,980.00,
representing its erroneously paid
DST for the taxable year 2001. The
2nd Division of the CTA ruled that
Section 196 of the NIRC does not
apply because there is no purchaser
or buyer in the case of a merger.
Petitioner elevated the matter to the
CTA En Banc via a Petition for
Review. The CTA En Banc
rendered the assailed Decision,
finding no reversible error on the
part of the 2nd Division of the CTA
in granting respondents claim for
tax refund or tax credit. The CTA
En Banc opined that Section 196 of
the NIRC does not apply to a merger
as the properties subject of a merger
are not sold, but are merely
absorbed
by
the
surviving
corporation. In other words, the
properties are transferred by
operation of law, without any
further act or deed.

ISSUE:
Whether or not the CTA En Banc
erred in ruling that respondent is exempt
from payment of DST?
RULING:
The petition is denied. The court
ordered CIR to grant respondent's claim
for tax refund or tax credit in the amount
of P14,140,980.00,
representing
its
erroneously paid DST for the taxable
year 2001.

In Commissioner of Internal
Revenue v. Pilipinas Shell Petroleum
Corporation, the Supreme Court already
ruled that Section 196of the NIRC does not
include the transfer of real property from
one corporation to another pursuant to a
merger. It explained that:
[W]e do not find merit in petitioners
contention that Section 196 covers all transfers and
conveyances of real property for a valuable
consideration. A perusal of the subject provision
would clearly show it pertains only to sale
transactions where real property is conveyed to a
purchaser for a consideration. The phrase "granted,
assigned, transferred or otherwise conveyed" is
qualified by the word "sold" which means that
documentary stamp tax under Section 196 is
imposed on the transfer of realty by way of sale and
does not apply to all conveyances of real property.
Indeed, as correctly noted by the respondent, the fact
that Section 196 refers to words "sold", "purchaser"
and "consideration" undoubtedly leads to the
conclusion that only sales of real property are
contemplated therein.

Following the doctrine of stare

decisis, which dictates that when a court has
reached a conclusion in one case, it should
be applied to those that follow if the facts
are substantially the same, even though the
parties may be different, we find that
respondent is not liable for DST as the
transfer of real properties from the absorbed
corporations to respondent was pursuant to
a merger. And having complied with the
provisions of Sections 204(C) and 229 of
the NIRC, we agree with the CTA that
respondent is entitled to a refund of the DST
it erroneously paid on various dates
between October 31, 2001 to November 15,
2001 in the total amount of 14,140,980.00.
Likewise
without
merit
is
petitioners contention that respondent
cannot claim exemption under RA 9243 as
this was enacted only in 2004 or after
respondents tax liability accrued. To be
clear, respondent did not file its claim for
tax refund or tax credit based on the
exemption found in RA 9243. Rather, it
filed a claim for tax refund or tax credit on
the ground that Section 196 of the NIRC

does not include the transfer of real

property pursuant to a merger. In fact, the
ratio decidendi (or reason for the decision)
in Pilipinas Shell Petroleum Corporation
was based on Section 196 of the NIRC, in
relation to Section 80 of the Corporation
Code, not RA 9243. In that case, RA 9243
was mentioned only to emphasize that "the
enactment of the said law now removes any
doubt and had made clear that the transfer
of real properties as a consequence of
merger or consolidation is not subject to
[DST]."

In June 2012, Petron imported

12,802,660 liters of alkylate and
paid value-added tax (VAT) in the
total amount of 41,657,533.00 as
evidenced by Import Entry and
Internal
Revenue
Declaration
(IEIRD) No. SN 122406532. Based
on the Final Computation, said
importation was subjected by the
Collector of Customs of Port
Limay, Bataan, upon instructions of
the Commissioner of Customs
(COC), to excise taxes of P4.35 per
liter, or in the aggregate amount of
P55,691,571.00, and consequently,
to an additional VAT of 12% on the
imposed excise tax in the amount of
P6,682,989.00. The imposition of
the excise tax was supposedly
premised
on
Customs
Memorandum Circular (CMC) No.
164-2012 dated July 18, 2012,
implementing the Letter dated June
29, 2012 issued by the CIR, which
states that: Alkylate which is a
product of distillation similar to that
of naphta, is subject to excise tax
under Section 148(e) of the National
Internal Revenue Code (NIRC) of
1997.

In view of the CIR's assessment,

Petron filed before the CTA a
petition for review, docketed as
CTA Case No. 8544, raising the
issue of whether its importation of
alkylate as a blending component is
subject
to
excise
tax
as
contemplated under Section 148 (e)
of the NIRC. CIR filed a motion to
dismiss on the grounds of lack of
jurisdiction and prematurity. CTA
gave due course to Petron's petition,
finding that: (a) the controversy was
not essentially for the determination
of the constitutionality, legality or
validity of a law, rule or regulation
but a question on the propriety or
soundness
of
the
CIR's
interpretation of Section 148 (e) of

QUESTION: What is the basic

consideration in determining whether a
consolidation or merger is tax-free? Cite
your legal basis.

8.) COMMISSION
OF
INTERNAL
REVENUE, Petitioner
VS.
COURT OF TAX APPEALS
(SECOND DIVISION) and
PETRON
CORPORATION,
Respondents (G.R. No. 207843,
July 15, 2015)

FACTS:

Petron, which is engaged in the

manufacture and marketing of
petroleum
products,
imports
alkylate as a raw material or
blending component for the
manufacture of ethanol-blended
motor gasoline. For the period
January 2009 to August 2011, as
well as for the month of April 2012,
Petron transacted an aggregate of 22
separate importations for which
petitioner the Commissioner of
Internal Revenue (CIR) issued
Authorities to Release Imported
Goods (ATRIGs), categorically
stating that Petron's importation of
alkylate is exempt from the payment
of the excise tax.

the NIRC which falls within the

exclusive jurisdiction of the CTA
under Section 4 thereof, particularly
under the phrase "other matters
arising under [the NIRC]";17 and
(b)
there
are
attending
circumstances that exempt the case
from the rule on non-exhaustion of
administrative remedies, such as the
great irreparable damage that may
be suffered by Petron from the
CIR's final assessment of excise tax
on its importation.

CIR sought immediate recourse to

the Court, through the instant
petition, alleging that the CTA
committed grave abuse of discretion
when it assumed authority to take
cognizance of the case despite its
lack of jurisdiction to do so.

ISSUE:
Whether or not Court of Tax
Appeals had jurisdiction?
RULING:
The CTA had no jurisdiction. The
case does not fall within the jurisdiction of
the CTA because the phrase "other matters
arising under this Code," as stated in the
second paragraph of Section 4 of the NIRC,
should be understood as pertaining to those
matters directly related to the preceding
phrase "disputed assessments, refunds of
internal revenue taxes, fees or other
charges, penalties imposed in relation
thereto". It cannot extend to evaluating the
soundness of the interpretation of tax laws
by the CIR.
Moreover, Section 4 of the NIRC
confers upon the CIR both: (a) the power to
interpret tax laws in the exercise of her
quasi-legislative function; and (b) the
power to decide tax cases in the exercise of
her quasi-judicial function. It also

delineates the jurisdictional authority to

review the validity of the CIR's exercise of
the said powers, thus:
SEC. 4. Power of the Commissioner to
Interpret Tax Laws and to Decide Tax Cases. - The
power to interpret the provisions of this Code and
other tax laws shall be under the exclusive and
original
jurisdiction of the Commissioner, subject to review
by the Secretary of Finance.
The power to decide disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or
other matters arising under this Code or other laws
or portions thereof administered by the Bureau of
Internal Revenue is vested in the Commissioner,
subject to the exclusive appellate jurisdiction of the
Court of Tax Appeals.

The CTA is a court of special

jurisdiction, with power to review by appeal
decisions involving tax disputes rendered
by either the CIR or the COC. Conversely,
[the CTA] has no jurisdiction to determine
the validity of a ruling issued by the CIR or
the COC in the exercise of their quasi
legislative powers to interpret tax laws.
In this case, Petron's tax liability
was premised on the COC's issuance of
CMC No. 164-2012, which gave effect to
the CIR's June 29, 2012 Letter interpreting
Section 148 (e) of the NIRC as to include
alkylate among the articles subject to
customs duties, hence, Petron's petition
before the CTA ultimately challenging the
legality and constitutionality of the CIR's
aforesaid interpretation of a tax provision.
In line with the foregoing discussion,
however, the CIR correctly argues that the
CTA had no jurisdiction to take cognizance
of the petition as its resolution would
necessarily involve a declaration of the
validity or constitutionality of the CIR's
interpretation of Section 148 (e) of the
NIRC, which is subject to the exclusive
review by the Secretary of Finance and
ultimately by the regular courts. Hence, as
the CIR's interpretation of a tax provision
involves an exercise of her quasi-legislative
functions, the proper recourse against the
subject tax ruling expressed in CMC No.

164-2012 is a review by the Secretary of

Finance and ultimately the regular courts.
There being no protest ruling by the
customs collector that was appealed to the
COC, the filing of the petition before the
CTA was premature as there was nothing
yet to review. Verily, the fact that there is
no decision by the COC to appeal from
highlights Petron's failure to exhaust
administrative remedies prescribed by law.
Before a party is allowed to seek the
intervention of the courts, it is a pre
condition that he avail of all administrative
processes afforded him, such that if a
remedy
within
the
administrative
machinery can be resorted to by giving the
administrative officer every opportunity to
decide on a matter that comes within his
jurisdiction, then such remedy must be
exhausted first before the court's power of
judicial review can be sought, otherwise,
the premature resort to the court is fatal to
one's cause of action.

Being in the business of generating

of renewable sources of energy
through hydro power, petitioner
maintained that it was entitled to
zero-percent (0%) VAT, as the sales
of electric power to National Power
Corporation (NPC) qualified as
zero-rated sales pursuant to Section
108(B) (7) of the National Internal
Revenue Code (NIRC).

Petitioner filed with the BIR an

administrative claim for the refund
of excess and unused input VAT in
the amount of P 4,217,955.84 for
the second quarter of taxable year
2008.

Petitioner filed on 29 October 2010

a Motion for Leave to File
Supplemental Petition for Review.
In its motion, it manifested that it
had submitted to the BIR on 20
September 2010 the last set of
supporting documents related to its
administrative claim for a refund.
The motion was granted by the CTA
Division, which then required
petitioner to file the Supplemental
Petition for Review and respondent,
a Supplemental Answer.

Respondent CIR filed a Motion to

Dismiss on 8 November 2010 on the
ground of lack of jurisdiction. The
CTA Second Division granted the
motion and dismissed the Petition
for being filed out of time.

On appeal, the CTA En Banc denied

the Petition and ruled that the
judicial claim had been filed out of
time. It held that, under Section
112(C) of the NIRC, the 120-day
period for the BIR to act on the
claim should be reckoned from 28
December 2009 or the date of filing
of petitioner's administrative claim
with the tax agency. Counting 120
days from 28 December 2009, the
BIR had until 27 April 2010 to
decide the administrative claim.

9.) HEDCOR, INC., Petitioner VS.

COMMISSIONER
OF
INTERNAL
REVENUE, Respondent (G.R.
No. 207575, July 15, 2015)

FACTS:

Petitioner is a domestic corporation

primarily engaged in the operation
of hydro-electric power plants and
the generation of hydro-electric
power.
Petitioner alleged that in the course
of operating its business, it
purchased domestic goods and
services, as well as capital goods,
and paid the corresponding VAT as
part of the purchase price. However,
after deductions of output tax due
from the accumulated input tax,
petitioner still had an unused or
excess input VAT in the total
amount of P4,217,955.84.

Thereafter, petitioner had until 27

May 2010 or 30 days to appeal to
the CTA either the decision or the
inaction of the BIR. Thus, the filing
of the Petition for Review with the
CTA Division on 6 July 2010 was
clearly beyond the period allowed
by law.

The Motion for Reconsideration

filed by petitioner was also denied
by the CTA En Banc for lack of
merit. Hence, this Petition.

ISSUE:
Whether or not the CTA gravely
erred and has no authority to deviate from
the clear and literal meaning of Section 112
(D) of the NIRC by counting the 120-day
period from the filing of the administrative
claim and not from the last submission of
complete documents in the administrative
proceedings with the BIR?
RULING:
The Petition lacks merit. The
requirements for a taxpayer be able to claim
a refund or credit of its input tax are found
in Section 112 of the NIRC, as amended,
the relevant portions of which read:
Sec. 112. Refunds or Tax Credits of Input
Tax.
(C) Period within which Refund or Tax
Credit of Input Taxes shall be made. In proper
cases, the Commissioner shall grant a refund or
issue the tax credit certificate for creditable input
taxes within one hundred twenty (120) days from the
date of submission of complete documents in support
of the application filed in accordance with
Subsection (A) hereof. In case of full or partial
denial of the claim for tax refund or tax credit, or the
failure on the part of the Commissioner to act on the
application within the period prescribed above, the
taxpayer affected may, within thirty (30) days from
the receipt of the decision denying the claim or after
the expiration of the one hundred twenty day period,
appeal the decision or the unacted claim with the
Court of Tax Appeals.

Pursuant to Section 112(C) of the

NIRC, respondent had 120 days from the
date of submission of complete documents
in support of the application within which
to decide on the administrative claim.
Thereafter, the taxpayer affected by the
CIR's decision or inaction may appeal to the
CTA within 30 days from the receipt of the
decision or from the expiration of the 120day period. Compliance with both periods
is jurisdictional, considering that the 30-day
period to appeal to the CTA is dependent on
the 120-day period. The period of 120 days
is a prerequisite for the commencement of
the 30-day period to appeal.
Considering that the administrative
claim was filed on 28 December 2009,
petitioner had only until 27 May 2010
(counting 120+30 days) to appeal to the
CTA the decision or inaction of the BIR.
Petitioner belatedly filed its judicial claim
with the CTA on 6 July 2010.
Petitioner insists, though, that it
filed on 20 September 2010 the complete
documents supporting its administrative
claim; the 120-day period should then be
counted from that date. To prove its
assertion, it attached to the Supplemental
Petition for Review a Transmittal Letter
marked as Annex "A." Based on this letter,
petitioner contends that its judicial claim
was filed within the allowable period set by
law. The court does not agree.
The Court finds that the Transmittal
Letter submitted by petitioner is not a
substantial submission that would warrant a
change in the reckoning date for the 120day period for the BIR to act on the claim
for refund. As aptly found by the CT A, the
letter does not even bear any stamp marking
that would show that it was legitimately
received by the BIR. The only proof of
receipt was a signature, which was not even
identified by petitioner.
To allow petitioner's allegations to
prevail would set a dangerous precedent, as

the reckoning period for the 120 days would

be at the mercy of taxpayers. They will then
submit complete supporting documents
even after the two-year prescriptive period
for filing an administrative claim has
lapsed. This is obviously not the intention
of the law.
What is peculiar to this case is that
prior to the alleged completion of its
supporting documents, petitioner had
already filed its judicial claim with the
CTA.
10.) M/V DON MARTIN VOY
047 AND ITS CARGOES OF
6,500 SACKS OF IMPORTED
RICE, PALACIO SHIPPING,
INC.,
AND
LEOPOLDO
JUNIOR
PAMULAKLAKIN, Petitioners
VS. HON. SECRETARY OF
FINANCE,
BUREAU
OF
CUSTOMS,
AND
THE
DISTRICT COLLECTOR OF
CAGAYAN DE ORO CITY,
Respondents (G.R. No. 160206
July 15, 2015)

FACTS:

Petitioner Palacio Shipping, Inc.

(Palacio) was the owner of the M/V
Don Martin, a vessel of Philippine
registry engaged in coastwise trade. On
January 25, 1999, the M/V Don Martin
docked at the port of Cagayan de Oro
City with its cargo of 6,500 sacks of
rice consigned to petitioner Leopoldo
"Junior"
Pamulaklakin
(Pamulaklakin). According to the
petitioners, the vessel left Calbayog
City on January 24, 1999 loaded with
the 6,500 sacks of rice purchased in
Sablayan, Occidental Mindoro.
Based on an intelligence report to the
effect that the cargo of rice being
unloaded from the M/V Don Martin
had been smuggled, the Economic
Intelligence and Investigation Bureau

(EIIB), with the assistance of the

Bureau
of
Customs
(BOC),
apprehended and seized the vessel and
its entire rice cargo on January 26,
1999.8 The District Collector of
Customs in Cagayan de Oro City then
issued a warrant of seizure and
detention pursuant to Section 23019 of
the Tariff and Customs Code of the
Philippines (TCCP).
At the hearing on the seizure, the
petitioners represented that the vessel
was a common carrier; and that the
6,500 sacks of rice had been locally
produces and acquired.
On March 24, 1999, the District
Collector of Customs Marietta Z.
Pacasum rendered her ruling whereby
she concluded that in the absence of a
showing of lawful entry into the
country the 6,500 sacks of rice were of
foreign origin and thus subject to
seizure and forfeiture for violation of
Section 2530 (f) and (l) No. 1 of the
TCCP and that the presentation of the
supporting documents was just a
strategy to conceal the true nature and
origin of the rice cargo in order to
mislead the Customs authorities. The
results of the Laboratory Analysis of
samples of the subject rice by the NFA
and the Philippine Institute reveal that
the grain length is unusually long with
7.2 mm. for both Orion and Platinum
2000 rice samples as compared to the
grain length of most Philippine
Varieties which ranges from 5.8mm. to
6.9mm.

District Collector of Customs Ruling

ordered that the 6,500 sacks of imported rice
subject of this seizure proceedings be, as they
are hereby forfeited in favour of the
Government of the Republic of the Philippines
to be disposed of in a manner provided by law.
The order to release the vessel was elevated to
the Secretary of Finance for automatic review.
The Secretary of Finance Edgardo B. Espiritu

reversed the order for the release of the vessel

based on the finding that the operator of the
vessel is the shipper of the smuggled goods.
CTA Ruling rendered decision in favour of
the petitioners.
Court of Appeals Ruling The Decision and
the Resolution of the Court of Tax Appeals
ordering the release of the 6,500 sacks of rice
and carrying vessel M/V Don Martin is
reversed and set aside.

ISSUES:
a. Whether or not the Court of Appeals
erred in declaring the subject articles
forfeited in favour of the Government
considering that the rice shipment was
produced and purchased locally.
b. Whether
or
not
the
factual
determination of the Court of Tax
Appeals can be reversed by the Court
of Appeals despite the fact that the
decision of the Tax Court is supported
by substantial evidence.
c. Whether or not the rice shipment
constituted smuggling or unlawful
importation.
RULING:
The action of Collector of Customs was
appealable to the Commissioner of Customs,
whose decision was subject to the exclusive
appellate jurisdiction of the CTA, whose
decision was in turn appealable to the CA.

Here, however, it was obvious that the

CA did not modify or alter any of the
factual findings of the CTA, but only
re-assessed the findings because of the
conflicting conclusions reached by the
CTA and the BOC. After its reassessment, the CA declared that the
conclusions by the BOC and the
Secretary of Finance were more
sustainable and convincing than those
of the CTA.
According to the CTA, in order that a
shipment be liable to forfeiture, it must
be proved that fraud has been
committed by the consignee/importer

to evade the payment of the duties due.

This is clear under Section 2530 (f) and
(l) of the TCCP. To establish the
existence of fraud, the onus probandi
rests on the Respondents who ordered
the forfeiture of the shipment of rice
and its carrying vessel M/V Don
Martin.
The law penalizes the importation of
any merchandise in any manner
contrary to law. Yet the shipment of the
6,500 sacks of rice was clearly not
contrary to law; hence it did not
constitute unlawful importation as
defined under TCCP. The phrase
contrary to law qualifies the phrases
imports or brings into the Philippines
and assists in so doing, not the word
article.
The respondents insistence was based
on the premise that the rice shipment
was imported. The premise was plainly
erroneous. With the petitioners having
convincingly established that the 6,500
sacks of rice were of local origin, the
shipment need not be accompanied by
import documents. Nor was it shown
that the shipment did not meet other
legal requirements. There were no
other circumstances that indicated that
the 6,500 sacks of rice were
fraudulently transported into the
Philippines; on the contrary, the
petitioners
submitted
documents
supporting the validity and regularity
of the shipment.

The Court GRANTS the petition for review on

certiorari.
11.) CE CASECNAN WATER AND
ENERGY COMPANY, INC,
Petitioner
VS. COMMISSIONER OF
INTERNAL
REVENUE,
Respondent. (G.R. No. 203928,
July 22, 2015)

FACTS:

CE Casecnan was incorporated on

September 21, 1994. Its primary
purpose was to design, develop,
construct, assemble, commission
and operate hydro-electric power
plants related facilities: for
government or any of its
subdivisions, instrumentalities, or
agencies, as well as for any
government-owned and controlled
corporation engaged in energy,
development,
supply,
or
distribution.
CE Casecnan filed its quarterly
VAT returns for the first to fourth
quarters of 2006 on April 25, 2006,
July 25, 2006, October 25, 2006 and
January 25, 2006. Subsequently, it
filed amended VAT returns for
these taxable quarters on February
22, 2007 and July 25, 2007.
For the first to fourth quarters
quarters of 2006, CE Casecnan had
unutilized input VAT credits from
its domestic purchases of goods,
services rendered by non-residents,
and importation of non-capital
goods in the total amount of
P45,445,453.76
Of the total accumulated VAT, the
amount of P26,066,286.96 was
attributable to CE Casecnans zerorated sales of power generation
services to the National Irrigation
Administration for the first to fourth
quarters of 2006.
On September 26, 2007, CE
Casecnan filed before the BIR an
administrative claim for refund or
issuance of tax credit certificate for
the excess or unutilized input VAT.
On March 14, 2008, CE Casecnan
filed its Petition for Review, due to
the inaction of the Commissioner of

Internal
Revenue
on
its
administrative claim.
CTA 2nd Division Ruling denied
judicial claim for having been filed
beyond the thirty (30) day period
prescribed in Sec. 112 of the Tax
Code.
CTA En Banc Ruling appeal was
denied relying upon the ruling in
Aichi case which provides that:
The 120 and 30 day periods
under Section 112 (c) of the Tax
Code are mandatory, and noncompliance is fatal to a judicial
claim for refund.

ISSUE/S:
a. Whether the Court of Tax Appeals
En Banc erred in denying petitioner
CE Casecnan claim for refund due
to prescription.

RULING:
a. Petitioners judicial claim was filed
beyond the thirty-day period
required in Section 112 (c) of the
Tax Code. The administrative claim
for refund was filed on September
26, 2007. Thus, the 120 day perio
for the BIR to act on the claim
lapsed on January 24, 2008.
Petitioner had until February 23,
2008 to file a petition before the
CTA, but it filed only on March 14,
2008. Petitioner was late by 19
days.
Similarly, this court rejects
petitioners claim that Aichi and
San Roque should not be applied
retroactively as it would be unjust to
the other claimants who relied on
the old doctrine (that both
administrative and judicial claims

should be filed before the lapse of

the two-year period).
The claims in Aichi and San Roque
were filed before this case. In Aichi,
this court first squarely addressed
the particular issue on prematurity
of a judicial claim based on its
interpretation of the language of the
Tax Code. In that case, this court did
not defer application of the rule laid
down. Rather, it ordered the CTA to
dismiss Aichis appeal due to the
premature filing of its claim for
refund or credit of input VAT.
Clearly, the thirty-day statutory
period within which to file a petition
for review is jurisdictional. Noncompliance bars the Court of Tax
Appeals from taking cognizance of
the appeal and determining the
veracity of the tax refund or credit
claim.

in
the
total
amount
of
P238,545,052.38
inclusive
of
surcharges; (b) deficiency onshore
tax for the taxable year 1996 in the
total amount of P997,333.89
inclusive of surcharges and interest;
and (c) deficiency withholding tax
on compensation for the taxable
years 1996 and 1997 in the total
amount of P564,542.67 inclusive of
interest. The Resolution denied ING
Bank's Motion for Reconsideration.

ING Bank filed a Manifestation and

Motion stating that it availed itself
of the government's tax amnesty
program under Republic Act No.
9480 with respect to its deficiency
documentary stamp tax and
deficiency onshore tax liabilities.

ING Bank "paid the deficiency

assessments for the compromise
penalty,
1997
deficiency
documentary stamp tax and 1997
deficiency final tax in the respective
amounts of P1,000.00, P1,000.00
and P75,013.25 [the original
amount of P73,752.47 plus
additional interest]."ING Bank,
however, "protested [on the same
day] the remaining ten (10)
deficiency tax assessments in the
total amount of P672,576,939.18."

ING Bank filed a Petition for

Review before the Court of Tax
Appeals. The Petition was filed to
seek
"the
cancellation
and
withdrawal of the deficiency tax
assessments for the years 1996 and
1997, including the alleged
deficiency documentary stamp tax
on special savings accounts,
deficiency onshore tax, and
deficiency withholding tax on
compensation.

12.) ING BANK N.V., ENGAGED

IN BANKING OPERATIONS
IN THE PHILIPPINES AS ING
BANK
N.V.
MANILA
BRANCH, Petitioner
VS.
COMMISSIONER
OF
INTERNAL
REVENUE, Respondent (G.R.
No. 167679, July 22, 2015)

FACTS:

This is a Petition for Review

appealing the April 5, 2005
Decision of the Court of Tax
Appeals En Banc, which in turn
affirmed the August 9, 2004
Decision and November 12, 2004
Resolution of the Court of Tax
Appeals Second Division. The
August 9, 2004 Decision held
petitioner ING Bank, N.V. Manila
Branch (ING Bank) liable for (a)
deficiency documentary stamp tax
for the taxable years 1996 and 1997

Court of Tax Appeals Second

Division rendered its Decision, with
the following disposition:

WHEREFORE, the assessments for

1996 and 1997 deficiency income tax, 1996 and
1997 deficiency branch profit remittance tax
and 1997 deficiency documentary stamp tax on
IBCLs exceeding five days are hereby
CANCELLED and WITHDRAWN. However,
the assessments for 1996 and 1997 deficiency
withholding tax on compensation, 1996
deficiency onshore tax and 1996 and 1997
deficiency documentary stamp tax on special
savings accounts are hereby UPHELD.

Both the Commissioner of

Internal Revenue and ING Bank filed
their
respective
Motions
for
Reconsideration. Both Motions were
denied through the Second Division's
Resolution.
ING Bank filed its appeal before
the Court of Tax Appeals En Banc. The
Court of Tax Appeals En Banc denied
due course to ING Bank's Petition for
Review and dismissed the same for lack
of merit.
On December 20, 2007, ING
Bank filed a Manifestation and Motion
informing this court that it had availed
itself of the tax amnesty authorized and
granted under Republic Act No. 9480
covering "all national internal revenue
taxes for the taxable year 2005 and prior
years, with or without assessments duly
issued therefore, that have remained
unpaid as of December 31, 2005. ING
Bank stated that it filed before the
Bureau of Internal Revenue its Notice
of Availment of Tax Amnesty under
Republic Act No. 9480 on December
14, 2007.

2. Whether or not petitioner

ING Bank is liable for deficiency
withholding tax on accrued bonuses for the
taxable years 1996 and 1997?
RULING:
1. The assessments with respect to
petitioner ING Bank's liabilities for
deficiency documentary stamp taxes on its
special savings accounts for the taxable
years 1996 and 1997 and deficiency tax on
onshore interest income under the foreign
currency deposit system for taxable year
1996 are hereby set aside solely in view of
petitioner ING Bank's availment of the tax
amnesty program under Republic Act No.
9480.
Petitioner ING Bank showed that it
complied with the requirements set forth
under Republic Act No. 9480. Respondent
Commissioner of Internal Revenue never
questioned or rebutted that petitioner ING
Bank fully complied with the requirements
for tax amnesty under the law. Moreover,
the contestability period of one (1) year
from the time of petitioner ING Bank's
availment of the tax amnesty law on
December
14,
2007
lapsed.
Correspondingly, it is fully entitled to the
immunities and privileges mentioned under
Section 6 of Republic Act No. 9480:
SEC. 6. Immunities and Privileges. Those who availed themselves of the tax amnesty
under Section 5 hereof and have fully complied
with all its conditions shall be entitled to the
following immunities and privileges:
a.

The taxpayer shall be immune from the

payment of taxes, as well as addition
thereto, and the appurtenant civil, criminal
or administrative penalties under the
National Internal Revenue Code of 1997,
as amended, arising from, the failure to pay
any and all internal revenue taxes for
taxable year 2005 and prior years.

b.

The taxpayer's Tax Amnesty Returns and

the SALN as of December 31, 2005 shall
not be admissible as evidence in all

ISSUE:
1. Whether or not petitioner
ING Bank may validly avail itself of the tax
amnesty granted by Republic Act No.
9480? And

proceedings that pertain to taxable year

2005 and prior years, insofar as such
proceedings relate to internal revenue
taxes, before judicial, quasi-judicial or
administrative bodies in which he is a
defendant or respondent, and except for the
purpose of ascertaining the networth
beginning January 1. 2006, the same shall
not be examined, inquired or looked into by
any person or government office. However,
the taxpayer may use this as a defense,
whenever appropriate, in cases brought
against him.
c.

The books of accounts and other records of

the taxpayer for the years covered by the
tax amnesty availed of shall not be
examined:
Provided,
That
the
Commissioner of Internal Revenue may
authorize in writing the examination of the
said books of accounts and other records to
verify the validity or correctness of a claim
for any tax refund, tax credit (other than
refund or credit of taxes withheld on
wages), tax incentives, and/or exemptions
under existing laws.

The documentary stamp tax and

onshore income tax are covered by the
tax amnesty program under Republic
Act No. 9480 and its Implementing
Rules and Regulations.77 Moreover, as
to the deficiency tax on onshore interest
income, it is worthy to state that
petitioner ING Bank was assessed by
respondent Commissioner of Internal
Revenue, not as a withholding agent,
but as one that was directly liable for the
tax on onshore interest income and
failed to pay the same.
Considering petitioner ING Bank's
tax amnesty availment, there is no more
issue regarding its liability for
deficiency documentary stamp taxes on
its special savings accounts for 1996
and 1997 and deficiency tax on onshore
interest income for 1996, including
surcharge and interest.
2. Petitioner is still liable for the
amounts of P167,384.97 and P397,157.70
representing deficiency withholding taxes

on compensation for the respective years of

1996 and 1997.
Under the National Internal
Revenue
Code,
every
form
of
compensation for personal services is
subject to income tax and, consequently, to
withholding tax. The term "compensation"
means all remunerations paid for services
performed by an employee for his or her
employer, whether paid in cash or in kind,
unless specifically excluded under Sections
32(B) and 78(A) of the 1997 National
Internal Revenue Code. The name
designated to the remuneration for services
is immaterial. Thus, "salaries, wages,
emoluments and honoraria, bonuses,
allowances (such as transportation,
representation, entertainment, and the like),
[taxable] fringe benefits [,] pensions and
retirement pay, and other income of a
similar nature constitute compensation
income" that is taxable.
Petitioner ING Bank accrued or
recorded the bonuses as deductible expense
in its books. Therefore, its obligation to
withhold the related withholding tax due
from the deductions for accrued bonuses
arose at the time of accrual and not at the
time of actual payment.
Petitioner ING Bank already
recognized a definite liability on its part
considering that it had deducted as business
expense from its gross income the accrued
bonuses due to its employees. Underlying
its accrual of the bonus expense was a
reasonable expectation or probability that
the bonus would be achieved. In this sense,
there was already a constructive payment
for income tax purposes as these accrued
bonuses were already allotted or made
available to its officers and employees.
QUESTIONS: a.) What is the nature of
tax amnesty? Does Tax Amnesty have
prospective application? Cite your legal
basis.

b.) Are bonuses to employees allowable

deductions from gross income? Explain
your answer.

1997 Tax Code. The case was

docketed as CTA Case No. 8246.

Respondent filed another judicial

claim for the issuance of a tax credit
certificate in the amount of
P31,680,290.87,
representing
unutilized input taxes on its local
purchases and importations of
goods other than capital goods,
local purchases of services,
including unutilized amortized
input taxes on capital goods
exceeding one million for the period
of April 1, 2009 to June 30, 2009,
all attributable to the zero rated
sales for the same period. The case
was docketed as CTA Case No.
8302.

Respondent filed a motion for

consolidation.

The CTA granted the motion for

consolidation and set the pre-trial
conference on November 3, 2011.
Atty. Mauricio failed to appear at
the scheduled pre-trial conference
as he was on leave for health
reasons from October to December
2011. The pretrial was reset to
December 1, 2011. Petitioner's
counsel, Atty. Sandico, who was
then assigned to handle the
consolidated cases, filed his
consolidated pre-trial brief on
November 15, 2011. However, on
the December 1, 2011 pre-trial
conference, Atty. Sandico failed to
appear, thus private respondent
moved that petitioner be declared in
default.

Petitioner filed a Motion to Lift

Order of Default alleging that the
failure to attend the pre-trial
conference on November 3, 2011
was due to confusion in office
procedure in relation to the
consolidation of CTA Case No.

13.) COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner
VS.
COURT OF TAX APPEALS
AND
CBK
POWER
COMPANY
LIMITED, Respondents (G.R.
Nos. 203054-55, July 29, 2015)

FACTS:

Respondent CBK Power Company

Limited is a special purpose entity
engaged in all aspects of (1) design,
financing, construction, testing,
commissioning,
operation,
maintenance, management, and
ownership of Kalayaan II pumped
storage hydroelectric power plant,
the new Caliraya Spillway in
Laguna; and (2) the rehabilitation,
expansion,
commissioning,
operation,
maintenance
and
management of the Caliraya,
Botocan,
and
Kalayaan
I
hydroelectric power plants and their
related facilities in Laguna.
Respondent filed with the CTA a
judicial claim for the issuance of a
tax credit certificate in the amount
of P17,784,968.91, representing
unutilized input taxes on its local
purchases and importations of
goods other than capital goods,
local purchases of services,
payment of services rendered by
non-residents, including unutilized
amortized input taxes on capital
goods exceeding one million for the
period of January 1, 2009 to March
31, 2009, all attributable to zero
rated sales for the same period,
pursuant to Section 112 (A) of the

8246 with CTA Case No. 8302

since the latter was being handled
by a different lawyer; that when the
pre-trial conference was reset to
December 1, 2011, petitioner's
counsel, Atty. Sandico, had to
attend the hearing of another case in
the CTA's First Division also at 9:00
a.m., hence, he unintentionally
missed the pre-trial conference of
the consolidated cases.

CTA issued the second assailed

Resolution denying the motion to
lift order of default.

Petitioner filed a motion for

reconsideration on April 27, 2012.
The CTA denied the motion for
reconsideration. Petitioner files the
instant petition for certiorari

There is no doubt that the CTA

Order dated December 23, 2011 granting
private respondent's motion to declare
petitioner as in default and allowing
respondent to present its evidence ex parte,
is an interlocutory order as it did not finally
dispose of the case on the merits but will
proceed for the reception of the former's
evidence to determine its entitlement to its
judicial claim for tax credit certificates.
Even the CTA's subsequent orders denying
petitioner's motion to lift order of default
and denying reconsideration thereof are all
interlocutory orders since they pertain to
the order of default.
Since the CTA Orders are merely
interlocutory, no appeal can be taken
therefrom. Section 1, Rule 41 of the 1997
Rules of Civil Procedure, as amended,
which applies suppletorily to proceedings
before the Court of Tax Appeals, provides:

ISSUE:
Whether or not there is no plain,
speedy and adequate remedy in the ordinary
course of law but the filing of a petition for
certiorari under Rule 65 of the Rules of
Court?

Section 1. Subject of appeal. - An

appeal may be taken from a judgment or
final order that completely disposes of the
case, or of a paiticular matter therein when
declared by these Rules to be appealable.
No appeal may be taken from:
xxxx
(c) An interlocutory order

RULING:
Private respondent claims that
petitioner chose an erroneous remedy when
it filed a petition for certiorari with us since
the proper remedy on any adverse
resolution of any division of the CTA is an
appeal by way of a petition for review with
the CTA en bane; that it is provided under
Section 2 (a)(l) of Rule 4 of the Revised
Rules of the Court of Tax Appeals
(RRCTA) that the Court en bane shall
exercise exclusive appellate jurisdiction to
review by appeal the decision or resolutions
on motions for reconsideration or new trial
of the Court in division in the exercise of its
exclusive appellate jurisdiction over cases
arising from administrative agencies such
as the Bureau of Internal Revenue. The
court is not persuaded.

Hence, petitioner's filing of the

instant petition for certiorari assailing the
interlocutory orders issued by the CTA is in
conformity with the above-quoted
provision.
As to the merit of the petition,
petitioner argues that the order declaring it
as in default and allowing the ex-parte
presentation of private respondent's
evidence was excessive as it has no
intention of defying the scheduled pre-trial
conferences.
The petition for certiorari is
granted. The consolidated cases are
hereby remanded to the CTA Third
Division to give petitioner the chance to
present evidence.

QUESTION: What is the jurisdiction of

the Court of Tax Appeals? Is it limited only
to tax collection cases? Explain your
answer.

noted that the CIR was given a

period of one hundred twenty (120)
days within which to either grant or
deny the claim for VAT refund or
credit. ALPI, however, filed its
judicial claim before the CTA only
6 days after the filing of the
administrative claim for tax credit
with the CIR. The failure of ALPI to
observe the compulsory 120-day
period warranted the dismissal of its
petition.

14.) COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner VS. AIR
LIQUIDE
PHILIPPINES,
INC., Respondent (G.R. No.
210646, July 29, 2015)

FACTS:

Respondent
Air
Liquide
Philippines, Inc. (ALPI) is a
domestic corporation registered
with the Bureau of Internal Revenue
(BIR) as a Value-Added Tax (VAT)
entity. It sells chemical products
and renders certain related services
to the Philippine Economic Zone
Authority (PEZA) enterprises. On
January 22, 2008, ALPI filed with
the BIR its Quarterly VAT Return
for the 4th quarter of 2007.

On December 23, 2009, ALPI filed

with petitioner Commissioner of
Internal Revenue (CIR), through
BIR Revenue District Office (RDO)
No. 121, an application for issuance
of a tax credit certificate for its
unutilized input VAT in the amount
of P23,254,465.64 attributable to its
transactions with PEZA-registered
enterprises for the 4th quarter of
2007.

Only six (6) days later, ALPI filed

its petition for review with the CTA
Division, without awaiting the
resolution of its application for tax
credit certificate or the expiration of
the 120-day period under Section
112(C) of the National Internal
Revenue Code.

The CTA Division, instead of ruling

on the merits, dismissed the judicial
claim for VAT refund for lack of
jurisdiction. The CTA Division

ALPI moved for reconsideration,

but the motion was denied by the
CTA Division. Aggrieved, ALPI
filed a petition for review with the
CTA En Banc.

The CTA En Banc rendered the

assailed decision and reversed the
ruling of the CTA Division, citing
the consolidated cases of CIR v. San
Roque, CIR v. Taganito and CIR v.
Philex (San Roque). In these cases,
the Court recognized the legal
effects of BIR Ruling No. DA-48903, which stated that the "taxpayerclaimant need not wait for the lapse
of the 120-day period before it
could seek judicial relief with the
CTA by way of Petition for
Review." CTA Case No. 8017 is
hereby REMANDED to the CTASecond Division for the proper and
immediate determination of the
propriety of the claim for refund or
tax credit certificate. Thereafter, the
CTA-Second Division shall make a
declaration of the specific amount
of refund or tax credit certificate to
which petitioner is entitled to, if
any.

ISSUE:
Whether or not the CTA Division
acquired jurisdiction over Respondents
Petition for Review?

RULING:

refundable or creditable amount due to

ALPI, if any.

Petition is denied, the case

is remanded to the CTA Second Division
for the proper determination of the
refundable or creditable amount due to the
respondent, if any.
To elucidate on the seemingly
conflicting doctrines, San Roque clarified,
once and for all, that BIR Ruling No. DA489-03 was a general interpretative rule.
Thus, all taxpayers can rely on the said BIR
ruling from the time of its issuance on
December 10, 2003 up to its reversal by this
Court in Aichi on October 6, 2010, where it
was held that the 120+30-day periods are
mandatory and jurisdictional. In other
words, the Aichi ruling was prospective in
application.
In the present case, ALPI can
benefit from BIR Ruling No. DA-489-03. It
filed its judicial claim for VAT credit
certificate on December 29, 2009, well
within the interim period from December
10, 2003 to October 6, 2010, so there was
no need to wait for the lapse of 120 days
prescribed in Section 112 (c) of the NIRC.
To reiterate, San Roque, held that
BIR Ruling No. DA-489-03 was a general
interpretative rule because it was a response
to a query made, not by a particular
taxpayer, but by a government agency
tasked with processing tax refunds and
credits. Thus, it applies to all taxpayers
alike, and not only to one particular
taxpayer.
In the furtherance of the doctrinal
pronouncements in San Roque, the better
approach would be to apply BIR Ruling No.
DA-489-03 to all taxpayers who filed their
judicial claim for VAT refund within the
period of exception from December 10,
2003 to October 6, 2010. Consequently, this
case must be remanded to the CTA Division
for the proper determination of the

15.) COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner
VS.
STANDARD
CHARTERED
BANK, Respondent (G.R. No.
192173, July 29, 2015)

FACTS:

On July 14, 2004, respondent

received petitioners Formal Letter
of Demand dated June 24, 2004, for
alleged deficiency income tax, final
income tax- Foreign Currency
Deposit Unit (FCDU), withholding
tax compensation (WTC), expanded
withholding
tax (EWT),
final
withholding tax (FWT), and
increments for taxable year 1998 in
the
aggregate
amount
of
P33,326,211.37.

On August 12, 2004, respondent

protested the said assessment by
filing a letter-protest dated August
9, 2004 addressed to the BIR
Deputy Commissioner for Large
Taxpayers Service stating the
factual and legal bases of the
assessment, and requested that it be
withdrawn and cancelled.
Petitioner at present, has not
rendered a decision on the
respondents protest, Therefore, in
view of this inaction, respondent
filed the present petition for review.
In its Supplemental Petition for
Review, (respondent) seeks to be
fully credited of the payments it
made to cover the deficiency
(WTC) and (FWT). Finding merit in
respondents motion, the same was
granted.

Thereafter, the parties (petitioner

and respondent) were ordered to file
their simultaneous memoranda,
after which, the case shall be
deemed submitted for decision.

The CTA in division ruled in favor

of the respondent, granting its
petition for the cancellation and
setting aside the Formal Letter of
Demand and Assessment served
upon them on the ground that
petitioners right to assess as
already barred by prescription. It
also denied petitioners motion for
reconsideration.

Petitioner then appealed to the CTA

en banc by filing a petition for
review and the CTA en banc
affirmed in toto both the aforesaid
decision and Resolution rendered
by the CTA in division.

ISSUE:
Whether or not Petitioners right to
assess respondent for deficiency income
tax, final income tax FCDU, and EWT
covering taxable year 1998 has already
prescribed?
RULING:
Petition is denied for lack of merit.
Under Sec. 203 of the NIRC, the
period for petitioner to assess and collect an
internal revenue tax is limited only to three
years. Thus, in the present case, petitioner
only had three years, counted from the date
of actual filing of the return or from the last
date prescribed by law for the filing of such
return, whichever comes later, to assess a
national internal revenue tax or to begin a
court proceeding for the collection thereof

without an assessment. There are however

exceptions to this rule as the provision
authorizes the extension of the original
three-year prescriptive period by the
execution of a valid waiver, where the
taxpayer and the Commissioner of Internal
Revenue (CIR) may stipulate to extend the
period of assessment by a written
agreement executed prior to the lapse of the
period prescribed by law, and by
subsequent written agreements before the
expiration of the period previously agreed
upon.
Petitioner contends that there is a
valid waiver that effectively extended the
original three-year prescriptive period.
However it was found by the CTA in
division that applying the rules and rulings,
the waivers in question were defective and
that the subject waivers of the Statute of
Limitations were in clear violation of RMO
No. 20-90.
Therefore, the Formal Letter of
Demand and Assessment Notices dated 24
June 2004 for deficiency income tax,
FCDU, and EWT in the aggregate amount
of P33,076,944.18, including increments,
were issued by the BIR beyond the threeyear prescriptive period and are
therefore void.
QUESTIONS: a.) Discuss the prescriptive
period for the assessment and collection of
taxes. Cite your legal basis.
b.) What are the grounds for the suspension
of the running of the Statute of Limitations
for the assessment and collection of taxes?
Cite your legal basis.
August 2015
1.) MANILA

ELECTRIC
COMPANY, Petitioner VS. THE CITY
ASSESSOR AND CITY TREASURER
OF LUCENA CITY, Respondents (G.R.
No. 166102, August 05, 2015)

Lucena a tax equal to 5% of its gross

earnings, and "[s]aid tax shall be
due and payable quarterly and shall
be in lieu of any and all taxes of any
kind, nature, or description levied,
established, or collected x x x, on its
poles,
wires,
insulators,
transformers
and
structures,
installations,
conductors,
and
accessories, x x x, from which taxes
the grantee (MERALCO) is hereby
expressly exempted."

FACTS:

MERALCO is a private corporation

organized and existing under
Philippine laws to operate as a
public utility engaged in electric
distribution. MERALCO has been
successively granted franchises to
operate in Lucena City beginning
1922 until present time.

MERALCO received from the City

Assessor of Lucena a copy of Tax
Declaration No. 019-6500 covering
the following electric facilities,
classified as capital investment, of
the company: (a) transformer and
electric post; (b) transmission line;
(c) insulator; and (d) electric meter,
located in Quezon Ave. Ext., Brgy.
Gulang-Gulang, Lucena City.
Under Tax Declaration No. 0196500, these electric facilities had a
market value of P81,811,000.00 and
an
assessed
value
of
P65,448,800.00, and were subjected
to real property tax as of 1985.

MERALCO
appealed
Tax
Declaration No. 019-6500 before
the LBAA of Lucena City.
MERALCO claimed that its capital
investment consisted only of its
substation facilities, the true and
correct value of which was only
P9,454,400.00;
and
that
MERALCO was exempted from
payment of real property tax on said
substation facilities.
LBAA
rendered
a
Decision, finding that under its
franchise, MERALCO was required
to pay the City Government of

The LBAA lastly ordered that Tax

Declaration No. 019-6500 would
remain and the poles, wires,
insulators,
transformers,
and
electric meters of MERALCO
would be continuously assessed, but
the City City Assessor would stamp
on the said Tax Declaration the
word "exempt."

The City Assessor of Lucena filed

an appeal with the CBAA, which
was docketed as CBAA Case No.
248. In its Decision, the CBAA
affirmed the assailed LBAA
judgment. Apparently, the City
Assessor of Lucena no longer
appealed said CBAA Decision and
it became final and executory.

Six years later, MERALCO

received a letter from the City
Treasurer of Lucena, which stated
that the company was being
assessed
real
property
tax
delinquency on its machineries
beginning 1990, in the total amount
of P17,925,117.34.

The City Treasurer of Lucena

requested that MERALCO settle the
payable amount soon to avoid
accumulation of penalties. Attached
to the letter were the following
documents:
(a)
Notice
of
Assessment issued by the City
Assessor of Lucena, pertaining to
Tax Declaration No. 019-7394,
which increased the market value
and assessed value of the
machinery; (b) Property Record
Form; and (c) Tax Declaration No.
019-6500.
MERALCO
appealed
Tax
Declaration Nos. 019-6500 and
019-7394 before the LBAA of
Lucena City. In its Decision
regarding Tax Declaration Nos.
019-6500 and 019-7394, the LBAA
declared that Sections 234 and
534(f) of the Local Government
Code repealed the provisions in the
franchise of MERALCO and
Presidential
Decree
No.
551 pertaining to the exemption of
MERALCO from payment of real
property tax on its poles, wires,
insulators,
transformers,
and
meters. The LBAA refused to apply
as res judicata its earlier judgment
in LBAA-89-2, as affirmed by the
CBAA, because it involved
collection of taxes from 1985 to
1989, while the present case
concerned the collection of taxes
from 1989 to 1997; and LBAA is
only an administrative body, not a
court or quasi-judicial body.
MERALCO went before the CBAA
on appeal, CBAA, in its Decision,

agreed with the LBAA that

MERALCO could no longer claim
exemption from real property tax on
its machineries with the enactment
of Republic Act No. 7160,
otherwise known as the Local
Government Code of 1991.

MERALCO sought recourse from

the Court of Appeals by filing a
Petition for Review under Rule 43
of the Rules of Court.

Court of Appeals rendered a

Decision rejecting all arguments
proffered by MERALCO. The
appellate court found no deficiency
in the Notice of Assessment issued
by the City Assessor of Lucena. The
Court of Appeals further ruled that
there was no more basis for the real
property
tax
exemption
of
MERALCO under the Local
Government Code and that the
withdrawal of said exemption did
not violate the non-impairment
clause of the Constitution.

MERALCO similarly failed to

persuade the Court of Appeals that
the transformers, transmission lines,
insulators, and electric meters
mounted on the electric posts of
MERALCO
were
not
real
properties. The appellate court
invoked
the
definition
of
"machinery" under Section 199(o)
of the Local Government Code and
then wrote that:
We firmly believe and so hold that
the wires, insulators, transformers and
electric meters mounted on the poles of
[MERALCO] may nevertheless be
considered as improvements on the land,
enhancing its utility and rendering it useful
in distributing electricity. The said

properties are actually, directly and

exclusively used to meet the needs of
[MERALCO] in the distribution of
electricity.
In addition, "improvements on
land are commonly taxed as realty even
though for some purposes they might be
considered personalty. It is a familiar
personalty phenomenon to see things
classed as real property for purposes of
taxation which on general principle might
be considered personal property.

The Court of Appeals denied the

Motion for Reconsideration of
MERALCO. Hence, this petition.

ISSUE:
Whether or not transformers,
electric
posts,
transmission
lines,
insulators, and electric meters of Manila
Electric Company are real properties
subject to real property tax?
RULING:
Yes, the Court finds that the
transformers, electric posts, transmission
lines, insulators, and electric meters of
MERALCO are no longer exempted from
real property tax and may qualify as
"machinery" subject to real property tax
under the Local Government Code.
Nevertheless, the Court declares null and
void the appraisal and assessment of said
properties of MERALCO by the City
Assessor in 1997 for failure to comply with
the requirements of the Local Government
Code and, thus, violating the right of
MERALCO to due process.
Just when the franchise of
MERALCO in Lucena City was about to
expire, the Local Government Code took
effect on January 1, 1992, Sections 193 and
234 of which provide:
Section 193. Withdrawal of Tax
Exemption Privileges. - Unless otherwise provided

in this Code, tax exemptions or incentives granted

to, or presently enjoyed by all persons, whether
natural or juridical, including government-owned
or controlled corporations, except local water
districts, cooperatives duly registered under R.A.
No. 6938, non-stock and nonprofit hospitals and
educational institutions, are hereby withdrawn upon
the effectivity of this Code.
Section 234. Exemptions from Real
Property Tax. - The following are exempted from
payment of the real property tax:
(a) Real property owned by the Republic of the
Philippines or any of its political subdivisions except
when the beneficial use thereof has been granted, for
consideration or otherwise, to a taxable person;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, nonprofit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively
used for religious, charitable or educational
purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts
and government-owned or controlled corporations
engaged in the supply and distribution of water
and/or generation and transmission of electric
power;
(d) All real property owned by duly registered
cooperatives as provided for under R.A. No. 6938;
and
(e) Machinery and equipment used for pollution
control
and
environmental
protection.
Except as provided herein, any exemption from
payment of real property tax previously granted to,
or presently enjoyed by, all persons, whether natural
or juridical, including all government-owned or
controlled corporations are hereby withdrawn upon
the effectivity of this Code.

It is settled that tax exemptions must

be clear and unequivocal. A taxpayer
claiming a tax exemption must point to a
specific provision of law conferring on the
taxpayer, in clear and plain terms,
exemption from a common burden. Any
doubt whether a tax exemption exists is
resolved against the taxpayer. MERALCO

has failed to present herein any express

grant of exemption from real property tax
of its transformers, electric posts,
transmission lines, insulators, and electric
meters that is valid and binding even under
the Local Government Code.
Nevertheless, the appraisal and
assessment of the transformers, electric
posts, transmission lines, insulators, and
electric meters of MERALCO as machinery
under Tax Declaration Nos. 019-6500 and
019-7394 were not in accordance with the
Local Government Code and in violation
of
the right to due process of MERALCO and,
therefore, null and void.
The Local Government Code
defines "appraisal" as the "act or process of
determining the value of property as of a
specific date for a specific purpose."
"Assessment" is "the act or process of
determining the value of a property, or
proportion thereof subject to tax, including
the discovery, listing, classification, and
appraisal of the properties[.]" When it
comes to machinery, its appraisal and
assessment are particularly governed by
Sections 224 and 225 of the Local
Government Code, which read:
Section 224. Appraisal and Assessment of
Machinery. - (a) The fair market value of a brandnew machinery shall be the acquisition cost. In all
other cases, the fair market value shall be
determined by dividing the remaining economic life
of the machinery by its estimated economic life and
multiplied by the replacement or reproduction cost.
(b) If the machinery is imported, the acquisition cost
includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes,
plus cost of inland transportation, handling, and
installation charges at the present site. The cost in
foreign currency of imported machinery shall be
converted to peso cost on the basis of foreign
currency exchange rates as fixed by the Central
Bank.

Section 225. Depreciation Allowance for

Machinery. - For purposes of assessment, a
depreciation allowance shall be made for machinery
at a rate not exceeding five percent (5%) of its
original cost or its replacement or reproduction
cost, as the case may be, for each year of
use: Provided, however, That the remaining value
for all kinds of machinery shall be fixed at not less
than twenty percent (20%) of such original,
replacement, or reproduction cost for so long as the
machinery is useful and in operation.

It is apparent from these two

provisions that every machinery must be
individually appraised and assessed
depending on its acquisition cost,
remaining economic life, estimated
economic life, replacement or reproduction
cost, and depreciation.
A perusal of the documents received
by MERALCO on October 29, 1997 reveals
that none of them constitutes a valid notice
of assessment of the transformers, electric
posts, transmission lines, insulators, and
electric meters of MERALCO.
The Court cannot help but attribute
the lack of a valid notice of assessment to
the apparent lack of a valid appraisal and
assessment conducted by the City Assessor
of Lucena in the first place. It appears that
the City Assessor of Lucena simply lumped
together all the transformers, electric posts,
transmission lines, insulators, and electric
meters of MERALCO under Tax
Declaration Nos. 019-6500 and 019-7394,
contrary to the specificity demanded under
Sections 224 and 225 of the Local
Government Code for appraisal and
assessment of machinery. The City
Assessor and the City Treasurer of Lucena
did not even provide the most basic
information such as the number of
transformers, electric posts, insulators, and
electric meters or the length of the
transmission lines appraised and assessed
under Tax Declaration Nos. 019-6500 and
019-7394. There is utter lack of factual
basis for the assessment of the transformers,

electric
posts,
insulators, and
MERALCO.

transmission
lines,
electric meters of

C.T.A. EB No. 589: TPC filed a

claim for refund with the Bureau of
Internal Revenue, Revenue District
Office No. 83, for alleged unutilized
input VAT for the four quarters of
2004 in the total amount of
P17,443,855.22. TPCs claim was
elevated to the CTA on 24 April
2006 and docketed as C.T.A. Case
No. 7471. CTA First Division partly
granted the Petition and ordered the
refund of P8,617,425.41 to TPC. In
its Motion for Reconsideration, the
CIR raised the issue of failure to
submit the legally required
documents in its administrative
application for a refund; but on 15
September 2010, the CTA En Banc
denied the CIRs appeal. The court
ruled that the non-submission of
supporting documents to the
administrative level is not fatal to
the claim for a refund.

C.T.A. EB No. 708: TPC filed with

BIR RDO No. 83 an administrative
claim for the refund of the alleged
unutilized input VAT for the four
quarters of 2003 in the total amount
of P15,838,539.48. The First
Division partly granted the refund,
but only in the amount of
P185,395.11. Upon Motion for
Reconsideration of both parties, the
Special First Division rendered an
Amended Decision. The original
Decision was set aside and the
Motion for Reconsideration of the
CIR, granted. Citing CIR v. Aichi
Forging Company of Asia,
Inc. (Aichi), the CTA Special First
Division ruled that it had no
jurisdiction over TPCs Petitions,
which were thus dismissed.

QUESTIONS: a.) Are GOCCs, agencies

and instrumentalities owned and control by
the government liable to pay income tax?
Explain your answer.
b.) Who has the power to grant tax
exemptions? Cite your legal basis.
c.) What are the other instances where tax
exemptions may be granted other than by
act of Congress? Cite your legal basis.
2.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. TOLEDO
POWER COMPANY, Respondent (G.R.
No. 195175, August 10, 2015)
-x x x x xTOLEDO
POWER
COMPANY, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. NO.
199645)

FACTS:

Toledo Power Company (TPC) is

engaged in the business of power
generation and subsequent sale
thereof to the National Power
Corporation (NPC), Cebu Electric
Cooperative III (CEBECO), Atlas
Consolidated
Mining
and
Development Corporation, and
Atlas Fertilizer Corporation.

Pursuant to Section 6, Chapter II of

Republic Act No. 9136, otherwise
known as the Electric Power
Industry Reform Act of 2001
(EPIRA), value-added tax (VAT) on
sales of generated power by
generation companies are zerorated.

The appeal of TPC to the CTA En

Banc was also dismissed.

The CIR filed a Petition before this

Court assailing the Decision of the
CTA En Banc C.T.A. EB No. 589,
docketed as G.R. No. 195175. The
CIR mainly points out that the law
requires the submission of complete
supporting documents to the BIR
before the 120-day audit period
shall apply, and before the taxpayer
can avail itself of the judicial
remedies provided for by law. In
this case, TPC failed to submit
complete documents in support of
its application for a tax refund. To
the CIR, such disregard of a
mandatory requirement warranted
the denial of TPCs claim for a
refund.
TPC appealed the denial of its claim
in C.T.A. EB No. 708, which was
docketed as G.R. No. 199645. TPC
alleged that Section 229 of the
NIRC of 1997, which gives
taxpayers two years within which to
claim a refund, should be applied to
this case, considering that the
prevailing rule at the time the
Petitions were filed was that the
120-30 day period was neither
mandatory nor compulsory. Also,
TPC posits that Aichi should not be
applied retroactively, and that there
are differences between the factual
milieu of this case and that of Aichi.

ISSUE:
Whether or not TPC is entitled to
the refund of its alleged unutilized input
VAT for the first and the second quarters of

taxable year 2003, as well as for the four

quarters of taxable year 2004?
RULING:
G.R. No. 195175: Theoretically,
from 23 December 2004, the CIR had 120
days or until 22 April 2005 within which to
decide the administrative claim. Thereafter,
since it rendered no decision within the
120-day period, TPC had until 22 May
2005 to file its Petition to the CTA.
In this case, however, since the
filing of the administrative claim was done
within the period where BIR Ruling No.
DA-489-03 was recognized valid, TPC is
not compelled to observe the 120-day
waiting period. Nevertheless, it should
have filed the Petition within 30 days after
the expiration of the 120-day period.
San Roque recognized BIR Ruling
No. DA-489-03 which allowed the
premature filing of a judicial claim as an
exception to the mandatory observance of
the 120-day period. By virtue of the
doctrines laid down in San Roque, TPC
should have filed its judicial claim from 23
December 2004 until 22 May 2005;
however, it filed its Petition to the CTA
only on 24 April 2006.
TPC lost its right to claim a
refund or credit of its alleged excess
input VAT attributable to zero-rated or
effectively zero-rated sales for taxable
year 2004 by virtue of its own failure to
observe the prescriptive periods.
G.R. No. 199645: In both C.T.A.
Case Nos. 7233 and 7294, the
administrative claim for the refund of
unutilized input VAT attributable to the
zero-rated or effectively zero-rated sales
was timely filed on 23 December 2004,
which was within two years from the close
of the first and the second quarters of 2003
when the sales were made. In sum, the CTA

has jurisdiction over the Petition of TPC,

but only in C.T.A. Case No. 7233 or the
claim for refund of unutilized input VAT
attributable to zero-rated or effectively
zero-rated sales for the first quarter of
2003. However, considering that the
original Decision of the CTA First Division
did not separate the computation of the
refundable amount of input VAT for the
first and the second quarters of 2003, we
cannot determine the actual amount that
may be attributed to the first quarter of
2003. Thus, a remand of the case to the
CTA is necessary.
The case in G.R. No. 199645 is
hereby remanded to the Court of Tax
Appeals for the purpose of the computation
of the refundable input VAT attributable to
the zero-rated or effectively zero-rated sales
of Toledo Power Corporation for the first
quarter of 2003.

and importation of non-capital

goods.

On November 30, 2006, CE Luzon

filed an administrative claim for
refund of its unutilized input VAT
in the amount of P20,546,004.87
before the BIR. Thereafter, or on
January 3, 2007, it filed a judicial
claim for refund, by way of a
petition for review, before the CTA,
docketed as CTA Case No. 7558.

The CTA Division partially granted

CE Luzon's claim for tax refund,
and thereby ordered the CIR to issue
a tax credit certificate in the reduced
amount
of
P14,879,312.65,
representing its unutilized input
VAT which was attributable to its
VAT zero-rated sales for the year
2005. It found that while CE Luzon
timely filed its administrative and
judicial claims within the two (2)year prescriptive period, it,
however, failed to duly substantiate
the remainder of its claim for
unutilized input VAT, resulting in
the partial denial thereof.

Dissatisfied, both parties moved for

partial reconsideration. In an
Amended Decision, the CTA
Division partially granted CE
Luzon's motion for reconsideration,
and consequently directed the CIR
to issue a tax credit certificate in the
reduced
amount
of
P17,277,938.47, finding that CE
Luzon has sufficiently proven that it
is entitled to an additional input
VAT
in
the
amount
of
P2,398,625.82. On the other hand,

3.) CE LUZON GEOTHERMAL POWER

COMPANY,
INC., Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
200841-42, August 26, 2015

FACTS:

CE Luzon is a domestic corporation

duly organized and existing under
Philippine laws engaged in the
business of power generation.
It filed its quarterly VAT returns for
the year 2005 on April 25, 2005,
July 25, 2005, October 25, 2005,
and January 25, 2006, which
reflected an overpayment of
P20,546,004.87.
CE
Luzon
maintained that its overpayment
was due to its domestic purchases of
non-capital goods and services,
services rendered by non-residents,

the CTA Division denied the CIR's

motion for reconsideration for lack
of merit.

CE Luzon and the CIR respectively

appealed to the CTA En Banc,
docketed as CTA EB No. 591 and
CTA EB No. 628, which were
ordered
consolidated
in
a
Resolution.
The CTA En Banc set aside the
CTA Division's findings, holding
that CE Luzon's premature filing of
its claim divested the CTA of
jurisdiction. It ruled that the filing of
a judicial claim must be made
within thirty (30) days to be
computed from either: (a) the
receipt of the CIR's decision; or (b)
after the expiration of the 120-day
period for the CIR to act. It noted
that CE Luzon's petition was filed
on January 3, 2007, or only after the
lapse of 34 days from the time it
filed its administrative claim with
the BIR on November 30, 2006.
Thus, considering that CE Luzon
hastily filed its petition, its judicial
claim must be dismissed for being
filed prematurely.

ISSUE:
Whether or not the CTA En
Banc correctly ordered the outright
dismissal of CE Luzon's claims for tax
refund of unutilized input VAT on the
ground of prematurity?
RULING:
No. The CTA En Banc erred when
it outrightly dismissed CE Luzons
petition on the ground of prematurity.
Records show that CE Luzon's

administrative and judicial claims were

filed on November 30, 2006 and
January 3, 2007, respectively, or during
the period of effectivity of BIR Ruling
No. DA-489-03 and, thus, fell within
the window period stated in San Roque,
i.e., when taxpayer-claimants need not
wait for the expiration of the 120-day
period before seeking judicial relief.
The Court is not wont to instantly
grant CE Luzon's refund claim in the
amount of P20,546,004.87 which
allegedly represented unutilized input
VAT for the year 2005. This is because
the determination of CE Luzon's
entitlement to such claim, if any, would
necessarily involve factual issues and,
thus, are evidentiary in nature which are
beyond the pale of judicial review under
a Rule 45 petition where only pure
questions of law, not of fact, may be
resolved. Accordingly, the prudent
course of action is to remand the case to
the CTA En Banc for resolution on the
merits, consistent with the Court's
ruling in Panay Power Corporation v.
CIR.
September 2015
1.) CHEVRON
PHILIPPINES
INC., Petitioner VS. COMMISSIONER
OF
INTERNAL
REVENUE,
Respondent
(G.R.
No.
210836,
September 01, 2015)

FACTS:

Chevron Phils. Inc. (Chevron) sold

and delivered petroleum products to
CDC in the period from August
2007 to December 2007. Chevron
did not pass on to CDC the excise
taxes paid on the importation of the
petroleum products sold to Clark
Development Corporation (CDC) in
taxable year 2007; hence, it filed an

administrative claim for tax refund

or issuance of tax credit certificate.
Considering
that
respondent
Commissioner of Internal Revenue
(CIR) did not act on the
administrative claim for tax refund
or tax credit, Chevron elevated its
claim to the CTA by petition for
review.

CTA First Division denied

Chevron's judicial claim for tax
refund or tax credit through its
decision and later on also denied
Chevron's
Motion
for
Reconsideration. In due course,
Chevron appealed to the CTA En
Banc, which affirmed the ruling of
the CTA First Division, stating that
there was nothing in Section 135(c)
of the NIRC that explicitly
exempted Chevron as the seller of
the imported petroleum products
from the payment of the excise
taxes; and holding that because it
did not fall under any of the
categories exempted from paying
excise tax, Chevron was not entitled
to the tax refund or tax credit.
Chevron sought reconsideration,
but the CTA En Banc denied its
motion for that purpose in the
resolution.
Chevron appealed to the Court, but
the Court (Second Division) denied
the petition for review on certiorari
through the resolution for failure to
show any reversible error on the
part of the CTA En Banc. Hence,
Chevron has filed the Motion for
Reconsideration.

ISSUE:
Whether or not Chevron was
entitled to the tax refund or the tax credit for
the excise taxes paid on the importation of
petroleum products that it had sold to CDC
in 2007?
RULING:
Yes, Chevron was entitled to the
refund or credit of the excise taxes
erroneously paid on the importation of the
petroleum products sold to CDC.
Pursuant to Section 135(c),
petroleum products sold to entities that are
by law exempt from direct and indirect
taxes are exempt from excise tax. As a dulyregistered enterprise in the Clark Special
Economic Zone, CDC has been exempt
from paying direct and indirect taxes
pursuant to Section 24 of Republic Act No.
7916 (The Special Economic Zone Act of
1995), in relation to Section 15 of Republic
Act No. 9400 (Amending Republic Act No.
7227, otherwise known as the Bases
Conversion Development Act of 1992).
Inasmuch as its liability for the
payment of the excise taxes accrued
immediately upon importation and prior to
the removal of the petroleum products from
the customs house, Chevron was bound to
pay, and actually paid such taxes. But the
status of the petroleum products as exempt
from the excise taxes would be confirmed
only upon their sale to CDC in 2007. Before
then, Chevron did not have any legal basis
to claim the tax refund or the tax credit as
to the petroleum products. Consequently,
the payment of the excise taxes by Chevron
upon its importation of petroleum products
was deemed illegal and erroneous upon the
sale of the petroleum products to CDC.
Section 204 of the NIRC explicitly allowed
Chevron as the statutory taxpayer to claim
the refund or the credit of the excise taxes
thereby paid.

QUESTION: What is the difference

between a tax credit and tax deduction? Cite
your legal basis.
2.) BUREAU OF CUSTOMS, Petitioner
VS. THE HONORABLE AGNES VST
DEVANADERA,
ACTING
SECRETARY, DEPARTMENT OF
JUSTICE;
HONORABLE
JOVENCITO R. ZUO, PEDRITO L.
RANCES, ARMAN A. DE ANDRES,
PAUL CHI TING CO, KENNETH
PUNDANERA, MANUEL T. CO,
SALLY L. CO, STANLEY L. TAN,
ROCHELLE E. VICENCIO, LIZA R.
MAGAWAY,
JANICE
L.
CO,
VIVENCIO ABAO, GREG YU,
EDWIN AGUSTIN, VICTOR D.
PIAMONTE, UNIOIL PETROLEUM
PHILIPPINES, INC., AND OILINK,
INTERNATIONAL, INC., Respondents
(G.R. No. 193253, September 08, 2015)

OILINK guilty and imposed an

administrative fine. A Hold Order
was thereafter issued against all
shipments of OILINK, for failure to
settle its outstanding account with
the BOC and to protect the interest
of the government.

UNIOIL Petroleum Philippines,

Inc. (UNIOIL) requested for
permission to withdraw base oils
from OILINKs temporarily closed
terminal, citing its existing
Terminalling Agreement with
OILINK for the storage of
UNIOILs aromatic process oil and
industrial lubricating oils. This
request was granted.

A Warrant of Seizure and Detention

was issued by the District Collector,
directing the BOC officials to seal
and padlock the oil tanks/depots of
OILINK located in Bataan. Despite
said Warrant, UNIOIL was allowed
to withdraw oil according to its
earlier request.

A complaint-affidavit was filed

against OILINK and UNIOIL,
esaccusing both companies of
unlawful
importation
and
fraudulent practice against customs
revenue. The State Prosecutor of the
Department of Justice (DOJ)
recommended the dismissal of the
complaint-affidavit for lack of
probable cause.

The BOC filed a petition for

certiorari with the Court of Appeals,
which dismissed the petition
outright due to procedural defects,

FACTS:

The Bureau of Customs (BOC)

informed the President of OILINK
International, Inc. (OILINK) that
the Post Entry Audit Group of the
BOC will be conducting a
compliance audit. Thus a pre-audit
conference was held, whereby
OILINK made a partial submission
of the required documents.
OILINK expressed its willingness
to comply with the request for the
production of additional documents,
but claimed that it was hampered by
the resignation of its employees
from the Accounting and Supply
Department. The Audit Team
informed OILINK of the adverse
effects of its continuous refusal to
furnish the required documents.
An administrative case was filed
against OILINK before the Legal
Service of the BOC, which found

namely: (a) it contained no

explanation why service thereof
was not done personally; (b) it had
no
proper
verification
and
certification
against
forum
shopping; and (c) docket and other
lawful fees were not fully paid.
Hence, this petition for review on
certiorari.
ISSUE:
Whether or not the Court of Appeals
(CA) have jurisdiction over the subject
matter of the case?
RULING:
No, it is the Court of Tax Appeals
that has jurisdiction over this case.
Although
the
question
of
jurisdiction over the subject matter was not
raised by either of the parties, the Court
deemed it proper to address such question
before delving into the procedural and
substantive issues of the instant petition.
The elementary rule is that the CA
has jurisdiction to review the resolution of
the DOJ through a petition for certiorari
under Rule 65 of the Rules of Court on the
ground that the Secretary of Justice
committed grave abuse of discretion
amounting to lack or excess of jurisdiction.
However, with the passage of RA 9282,
amending RA 1125, enlarging the
membership of the CA and elevating its
rank to the level of a collegiate court with
special jurisdiction, it is no longer clear
which between the CA and the CTA has
jurisdiction to review through a petition for
certiorari the DOJ resolution in preliminary
investigations involving tax and tariff
offenses.
Concededly, there is no clear
statement under R.A. No. 1125, the
amendatory R.A. No. 9282, let alone in the

Constitution, that the CTA has original

jurisdiction over a petition for certiorari.
The Court declared that the CA's original
jurisdiction over a petition for certiorari
assailing the DOJ resolution in a
preliminary investigation involving tax and
tariff offenses was necessarily transferred
to the CTA pursuant to Section 7 of R.A.
No. 9282, and that such petition shall be
governed by Rule 65 of the Rules of Court,
as amended. Accordingly, it is the CTA, not
the CA, which has jurisdiction over the
petition for certiorari assailing the DOJ
resolution of dismissal of the BOC's
complaint-affidavit
against
private
respondents for violation of the Tariffs and
Customs Code of the Philippines (TCCP).
QUESTION: Is Court of Appeals and
Court of Tax Appeals equal in ranking? Is
there a difference between the two? Cite
your legal basis.
3.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. NIPPON
EXPRESS
(PHILS.)
CORPORATION, Respondent (G.R. No.
212920, September 16, 2015)

FACTS:

Nippon is a domestic corporation

duly organized and existing under
Philippine laws which is primarily
engaged in the business of freight
forwarding, namely, in the
international and domestic air and
sea freight and cargo forwarding,
hauling,
carrying,
handling,
distributing, loading, and unloading
general cargoes and all classes of
goods, wares, and merchandise, and
the operation of container depots,
warehousing, storage, hauling, and
packing facilities.

It filed its quarterly VAT returns for

the year 2002 on April 25, 2002,
July 25, 2002, October 25, 2002,
and January 27, 2003, respectively.
It maintained that during the said
period it incurred input VAT
attributable to its zero-rated sales in
the amount of P28,405,167.60, from
which only P3,760,660.74 was
applied as tax credit, thus, reflecting
refundable excess input VAT in the
amount of P24,644,506.86.

Nippon filed an administrative

claim for refund of its unutilized
input VAT in the amount of
P24,644,506.86 for the year 2002
before the BIR. A day later, or on
April 23, 2004, it filed a judicial
claim for tax refund, by way of
petition for review, before the CTA,
docketed as CTA Case No. 6967.

The CTA Division partially granted

Nippon's claim for tax refund, and
thereby ordered the CIR to issue a
tax credit certificate in the reduced
amount
of
P2,614,296.84,
representing its unutilized input
VAT which was attributable to its
zero-rated sales.

It found that while Nippon timely

filed its administrative and judicial
claims within the two (2)-year
prescriptive period, it, however,
failed to show that the recipients of
its services - which, in this case,
were mostly Philippine Economic
Zone
Authority
registered
enterprises - were non-residents
"doing business outside the
Philippines."
Accordingly,
it

concluded that Nippon's purported

sales therefrom could not qualify as
zero-rated sales, hence, the
reduction in the amount of tax credit
certificate claimed.

Nippon filed a motion to withdraw,

considering that the BIR, acting on
its administrative claim, already
issued a tax credit certificate in the
amount of P21,675,128.91 on July
27, 2011. The CIR moved for
reconsideration. The CTA Division
granted Nippon's motion to
withdraw and, thus, considered the
case closed and terminated. It found
that
pursuant
to Revenue
Memorandum Circular No. 49-03
(RMC No. 49-03) dated August 15,
2003, Nippon correctly availed of
the proper remedy notwithstanding
the promulgation of the August 10,
2011 Decision. Aggrieved, the CIR
elevated its case to the CTA En
Banc.

The CTA En Banc affirmed the July

31, 2012 Resolution of the CTA
Division granting Nippon's motion
to withdraw. It debunked the CIR's
assertions that Nippon failed to
comply with the requirements set
forth in RMC No. 49-03 - i.e., that
Nippon failed to notify the BIR that
it agreed with its findings and to file
the necessary motion before the
CTA Division prior to the
promulgation of its Decision noting that RMC No. 49-03 did not
expressly require a taxpayer to
inform the BIR of its assent nor
prescribe a definite period for filing
a motion to withdraw.

ISSUE:
Whether or not the CTA properly
granted Nippon's motion to withdraw?
RULING:
No. The CTA committed a
reversible error in granting Nippon's
motion to withdraw. The August 10, 2011
Decision of the CTA Division should
therefore be reinstated, without prejudice,
however, to the right of either party to
appeal the same in accordance with the
Revised Rules of the Court of Tax Appeals
(RRCTA).

already time-barred for being filed on April

22, 2004, or beyond the two (2)-year
prescriptive period pursuant to Section
112(A) of the National Internal Revenue
Code of 1997. Although prescription was
not raised as an issue, it is well-settled that
if the pleadings or the evidence on record
show that the claim is barred by
prescription,
the
Court
may motu
proprio order its dismissal on said ground.
December 2015
1.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS.
TOLEDO POWER COMPANY,
Respondent (G.R. No. 196415,
December 02, 2015)
-x x x x xTOLEDO
POWER
COMPANY, Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
196451)

Impelled by the BIR's supervening

issuance of the July 27, 2011 Tax Credit
Certificate, Nippon filed a motion to
withdraw the case, proffering that:
Having arrived at a reasonable settlement
of the issues with the [CIR]/BIR, and to avoid
incurring further legal and related costs, not to
mention the time and resources of [the CTA],
[Nippon] most respectfully moves for the
withdrawal of its Petition for Review.

While it is true that the CTA

Division has the prerogative to grant a
motion to withdraw under the authority of
the foregoing legal provisions, the attendant
circumstances in this case should have
incited it to act otherwise.
It should be pointed out that the
August 10, 2011 Decision was rendered by
the CTA Division after a full-blown hearing
in which the parties had already ventilated
their claims. Thus, the findings contained
therein were the results of an exhaustive
study of the pleadings and a judicious
evaluation of the evidence submitted by the
parties, as well as the report of the
commissioned certified public accountant.
The Court has observed that based
on the records, Nippon's administrative
claim for the first taxable quarter of 2002
which closed on March 31, 2002 was

FACTS:

Toledo Power Corporation (TPC) is

a general partnership principally
engaged in the business of power
generation and sale of electricity to
the National Power Corporation
(NPC), Cebu Electric Cooperative
III (CEBECO), Atlas Consolidated
Mining
and
Development
Corporation (ACMDC), and Atlas
Fertilizer Corporation (AFC).

TPC filed with the Bureau of

Internal Revenue (BIR) Regional
District Office (RDO) No. 83 an
administrative claim for refund or
credit of its unutilized input Value
Added Tax (VAT) for the taxable
year 2002 in the total amount of
P14,254,013.27 under Republic Act

No. 9136 or the Electric Power

Industry Reform Act of 2001
(EPIRA) and the National Internal
Revenue Code of 1997 (NIRC).

Due to the inaction of the

Commissioner of Internal Revenue,
TPC filed with the CTA a Petition
for Review, docketed as CTA Case
No. 6961 and raffled to the CTA
First Division.

In response to the Petition for

Review, the CIR argued that TPC
failed to prove its entitlement to a
tax refund or credit.

The CTA Division rendered a

Decision partially granting TPC's
claim in the reduced amount of
P7,598,279.29. Since
NPC
is
exempt from the payment of all
taxes, including VAT, the CTA
Division allowed TPC to claim a
refund or credit of its unutilized
input VAT attributable to its zerorated sales of electricity to NPC for
the taxable year 2002. The CTA
Division, however, denied the claim
attributable to TPC's sales of
electricity to CEBECO, ACMDC
and AFC due to the failure of TPC
to prove that it is a generation
company under the EPIRA.

TPC
moved
for
partial
reconsideration contending that as
an existing generation company, it
was not required to obtain a COC
from the ERC as a prerequisite for
its operations, and that the issue of
whether it is a generation company
was never raised during the trial.

The CIR, likewise, sought partial

reconsideration arguing that the
administrative claim was merely
pro forma since TPC failed to
submit the complete documents
required
under
Revenue
Memorandum Order (RMO) No.
53-98, which were necessary to
ascertain the correct amount to be
refunded in the administrative
claim.

The CTA Division issued a

Resolution denying both motions
for lack of merit. It maintained that
TPC timely filed its administrative
claim for refund and that its failure
to comply with RMO No. 53-98 was
not fatal. The CTA Division also
said that in claiming a refund under
the EPIRA, the taxpayer must prove
that it was duly authorized by the
ERC to operate a generation facility
and that it derived its sales from
power generation. In this case, TPC
failed to present a COC to prove that
it was duly authorized by the ERC
to operate as a generation facility in
2002.

Unfazed, both parties elevated the

case before the CTA En Banc. The
CTA En Banc rendered a Decision
dismissing both Petitions. It
sustained the findings of the CTA
Division
that
both
the
administrative and the judicial
claims were timely filed and that
TPC's non-compliance with RMO
No. 53-98 was not fatal to its claim.
Also, since TPC was not yet issued
a COC in 2002, the CTA En
Banc agreed with the CTA Division
that TPC's sales of electricity to

CEBECO, ACMDC, and AFC for

the taxable year 2002 could not
qualify for a VAT zero-rating under
the EPIRA. Both parties moved for
partial reconsideration but the
CTA En Banc denied both motions
for lack of merit. Hence, the instant
Petitions.
ISSUE:
A. Whether the administrative and
the judicial claims for tax refund or credit
were timely and validly filed?
B. Whether the TPC is entitled to
the full amount of its claim for tax refund or
credit?
RULING:
In this case, TPC applied for a claim
for refund or credit of its unutilized input
VAT for the taxable year 2002 on
December 22, 2003. Since the CIR did not
act on its application within the 120-day
period, TPC appealed the inaction on April
22, 2004. Clearly, both the administrative
and the judicial claims were filed within
the prescribed period provided in
Section 112 of the NIRC.
TPC is not entitled to a refund or
credit of unutilized input VAT
attributable to its sales of electricity to
CEBECO, ACMDC, and AFC. Section 6
of the EPIRA provides that the sale of
generated power by generation companies
shall be zero-rated. Section 4 (x) of the
same law states that a generation company
"refers to any person or entity authorized by
the ERC to operate facilities used in the
generation of electricity." Corollarily, to be
entitled to a refund or credit of unutilized
input VAT attributable to the sale of
electricity under the EPIRA, a taxpayer
must establish: (1) that it is a generation
company, and (2) that it derived sales from
power generation.

TPC failed to present a COC from

the ERC during the trial. On partial
reconsideration, TPC argued that there was
no need for it to present a COC because the
parties already stipulated in the JSFI that
TPC is a generation company and that it
became entitled to the rights under the
EPIRA when it filed its application with the
ERC on June 20, 2002.
In this case, when the EPIRA took
effect in 2001, TPC was an existing
generation facility. And at the time the sales
of electricity to CEBECO, ACMDC, and
AFC were made in 2002, TPC was not yet
a generation company under EPIRA.
Although it filed an application for a COC
on June 20, 2002, it did not automatically
become a generation company. It was only
on June 23, 2005, when the ERC issued a
COC in favor of TPC, that it became a
generation company under EPIRA.
Consequently, TPC's sales of electricity to
CEBECO, ACMDC, and AFC cannot
qualify for VAT zero-rating under the
EPIRA.
The Petitions are hereby DENIED.
The Decision and the Resolution of the
Court of Tax Appeals in CTA EB Nos. 623
and 629 are hereby AFFIRMED.
QUESTIONS: a.) Who is the withholding
agent? Cite your legal basis.
b.) May a withholding agent file a claim for
tax refund? Cite your legal basis.
2.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner
VS.
NEXT MOBILE, INC., Respondent
(G.R. No. 212825, December 7,
2015)

FACTS:

On April 15, 2002, respondent Next

Mobile filed with the BIR its Annual
Income Tax Return for taxable year

ending
December
31,
2001.
Respondent also filed its Monthly
Remittance Returns of Final Income
Taxes
Withheld,
its
Monthly
Remittance Return of Expanded
Withholding Taxes and its Monthly
Remittance Returns of Income Taxes
Withheld on Compensation.
Respondent received a copy of the
Letter of Authority from the Regional
Director Nestor S. Valeroso to examine
respondents books of accounts and
other
accounting
records
and
withholding taxes for the period
covering January 1, 2001 December
31, 2001.
Ma. Lida Sarmiento, respondents
Director of Finance, subsequently
executed several waivers of the Statute
of Limitations to extend the
prescriptive period of assessment of
taxes due in taxable year ending 2001.
On September 26, 2005, respondent
received from the BIR Preliminary
Assessment Notice dated September
16, 2005 to which it filed a Reply. On
October 25, 2005, respondent received
a Formal Letter of Demand and
Assessment
Notices/Demand,
demanding the payment of deficiency
income tax, final withholding tax,
expanded withholding tax, increments
for late remittance of taxes withheld,
and compromise penalty for failure to
file returns/late filing/late remittance of
taxes withheld.

CTA Former First Division Ruling Granted

respondents Petition for Review and declared
the FLD and Assessment Notices/Demand
cancelled and withdrawn for being issued
beyond the three-year prescriptive period
provided by law. It was held that the adverted
FLD and the FAN were issued beyond the
three-year prescriptive period. Petitioner failed
to substantiate its allegation by clear and
convincing proof that respondent filed a false or
fraudulent return. Also, the Waivers executed

by Sarmiento did not validly extend the threeyear prescriptive period to assess respondent for
deficiency income tax.
CTA En Banc Ruling Denied Petition for
Review and affirmed the Decision of the former
CTA First Division.

ISSUE:
1.) Whether or not the CIRs right to assess
respondents deficiency taxes had
already prescribed.

RULING:

Section 203 of NIRC mandates BIR to

assess internal revenue taxes within 3
years from the last day prescribed by
law for the filing of the tax return.
Hence, an assessment notice issued
after the three-year prescriptive period
is not valid and effective but with
exceptions provided.
Section 222(b) of the NIRC provides
that the period to assess and collect
taxes may only be extended upon a
written agreement between the CIR and
the taxpayer executed before the
expiration of the three-year prescriptive
period.
In the instant case, the CTA found the
Waivers defective because of the
following:
a. They were executed without a
notarized board authority;
b. The dates of acceptance by the
BIR were not indicated therein;
and
c. The fact of receipt by
respondent of its copy of the
Second Waiver was not
indicated on the face of the
original Second Waiver.
Here, respondent through Sarmiento,
executed five Waivers in favour of
petitioner. However, her authority to

sign these Waivers was not presented

upon their submission to the BIR. In
fact, later on, her authority to sign was
questioned by respondent itself, the
very same entity that caused her to sign
such in the first place. Thus it is clear
that respondent violated RMO No. 2090 which stated that in case of a
corporate taxpayer, the waiver must be
signed by its responsible officials and
RDAO
01-05
which
requires
presentation of a written and notarized
authority to the BIR.
In this case, respondent, after
deliberately
executing
defective
waivers, raised the very same
deficiencies it caused to avoid the tax
liability determined by the BIR during
the extended assessment period. It must
be remembered that by virtue of these
waivers, respondent was given the
opportunity to gather and submit
documents to substantiate its claims
before the CIR during the investigation.
It was able to postpone the payment of
taxes, as well as contest negotiate the
assessment against it. Yet after
enjoying these benefits, respondent
challenged the validity of the Waivers
when the consequences thereof were
not in its favour.
It is true that petitioner was also at fault
here because it was careless in
complying with the requirements of
RMO No. 20-90 and RDAO 01-05.
Nevertheless, petitioners negligence
may be addressed by enforcing the
provisions imposing administrative
liabilities upon the officers responsible
for these errors. The BIRs right to
assess and collect taxes should not be
jeopardized merely because of the
mistakes and lapses of its officers,
especially in cases like this where the
taxpayer is obviously in bad faith.

The Court resolves to GRANT the petition

and let this case be remanded to the Court of
Tax Appeals for further proceedings.

3.) PILIPINAS
TOTAL
GAS,
INC., Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
207112, December 08, 2015)

FACTS:

Petitioner Pilipinas Total Gas, Inc.

(Total Gas) is engaged in the
business of selling, transporting and
distributing industrial gas. It is also
engaged in the sale of gas
equipment and other related
businesses. For this purpose, Total
Gas registered itself with the Bureau
of Internal Revenue (BIR) as a VAT
taxpayer.

Total Gas filed its Original

Quarterly VAT Returns for the first
and second quarters of 2007,
respectively with the BIR.

It filed its Amended Quarterly VAT

Returns for the first two quarters of
2007 reflecting its sales subject to
VAT, zero-rated sales, and
domestic purchases of non-capital
goods and services.

Total Gas filed an administrative

claim for refund of unutilized input
VAT for the first two quarters of
taxable year 2007, inclusive of
supporting documents.

Total Gas elevated the matter to the

CTA in view of the inaction of the
Commissioner of Internal Revenue
(CIR).

ISSUE:

The CTA Division dismissed the

petition for being prematurely filed.
It explained that Total Gas failed to
complete the necessary documents
to substantiate a claim for refund of
unutilized input VAT on purchases
of goods and services enumerated
under Revenue Memorandum
Order (RMO) No. 53-98.
Total
Gas
sought
for
reconsideration from the CTA
Division, but its motion was denied
for lack of merit.

1.) Whether or not the judicial

claim
for refund was belatedly filed on 23 January
2009, or way beyond the 30-day period to
appeal as provided in Section 112(c) of the
Tax Code, as amended; and
2.) Whether or not the submission
of
incomplete documents at the administrative
level (BIR) renders the judicial claim
premature and dismissible for lack of
jurisdiction.
RULING:

The CTA En Banc likewise denied

the petition for review of Total Gas
for lack of merit. The CTA En
Banc ruled that the CTA Division
had no jurisdiction over the case
because Total Gas failed to
seasonably file its petition. The
CTA En Banc affirmed the CTA
Division that Total Gas failed to
submit the complete supporting
documents to warrant the grant of
its application for refund. Quoting
the pertinent portion of the decision
of its division, the CTA En
Banc likewise concurred in its
finding that the judicial claim of
Total Gas was prematurely filed
because the 120-day period for the
CIR to decide the claim had yet to
commence to run due to the lack of
essential documents.
Total Gas filed a motion for
reconsideration, but it was denied in
the assailed resolution of the CTA
En Banc. Hence, the present
petition.

1.) Judicial claim timely filed.

The
rule is that from the date an administrative
claim for excess unutilized VAT is filed, a
taxpayer has thirty (30) days within which
to submit the documentary requirements
sufficient to support his claim, unless given
further extension by the CIR. Then, upon
filing by the taxpayer of his complete
documents to support his application, or
expiration of the period given, the CIR has
120 days within which to decide the claim
for tax credit or refund. Should the
taxpayer, on the date of his filing, manifest
that he no longer wishes to submit any other
addition documents to complete his
administrative claim, the 120 day period
allowed to the CIR begins to run from the
date of filing.
In all cases, whatever documents a
taxpayer intends to file to support his claim
must be completed within the two-year
period under Section 112(A) of the NIRC.
The 30-day period from denial of the claim
or from the expiration of the 120-day period
within which to appeal the denial or
inaction of the CIR to the CTA must also be
respected.

It is observed that the CIR made no

effort to question the inadequacy of the
documents submitted by Total Gas. It
neither gave notice to Total Gas that its
documents were inadequate, nor ruled to
deny its claim for failure to adequately
substantiate its claim. Thus, for purposes of
counting the 120-day period, it should be
reckoned from August 28, 2008, the date
when Total Gas made its "submission of
complete documents to support its
application" for refund of excess unutilized
input VAT. Consequently, counting from
this later date, the BIR had 120 days to
decide the claim or until December 26,
2008. With absolutely no action or notice
on the part of the BIR for 120 days, Total
Gas had 30 days or until January 25, 2009
to file its judicial claim.

above, such notice by way of a written

request is required by the CIR to be sent to
Total Gas. Neither was there any decision
made denying the administrative claim of
Total Gas on the ground that it had failed to
submit all the required documents. It was
precisely the inaction of the BIR which
prompted Total Gas to file the judicial
claim. Thus, by failing to inform Total Gas
of the need to submit any additional
document, the BIR cannot now argue that
the judicial claim should be dismissed
because it failed to submit complete
documents.
The case is REMANDED to the
CTA Third Division for trial de novo.
QUESTION: Explain the three (3) stages
or aspects of taxation, namely: Levy,
Assessment or Collection, and Payment.

Total Gas, thus, timely filed its

judicial claim on January 23, 2009.
2.) The alleged failure of Total
Gas to submit the complete documents at
the administrative level did not render its
petition for review with the CTA
dismissible for lack of jurisdiction. First,
the 120-day period had commenced to run
and the 120+30 day period was, in fact,
complied with. As already discussed, it is
the taxpayer who determines when
complete documents have been submitted
for the purpose of the running of the 120day period. It must again be pointed out
that this in no way precludes the CIR from
requiring additional documents necessary
to decide the claim, or even denying the
claim if the taxpayer fails to submit the
additional documents requested.
Second, the CIR sent no written
notice informing Total Gas that the
documents were incomplete or required it
to submit additional documents. As stated

3.) REPUBLIC
OF
THE
PHILIPPINES,
REPRESENTED
BY
THE
BUREAU
OF
CUSTOMS, Petitioner
VS.
PILIPINAS SHELL PETROLEUM
CORPORATION, Respondent
(G.R. No. 209324, December 09,
2015)

FACTS:

Pilipinas
Shell
Petroleum
Corporation (PSPC), a domestic
corporation registered with the
Board of Investments (BOI), is
engaged in the importation, refining
and sale of petroleum products in
the country. For its importations,
PSPC was assessed and required to
pay customs duties and internal
revenue taxes.

Under Deed of Assignment dated

May 7, 1997, Filipino Way
Industries (FWI) assigned the
following Tax Credit Certificates
(TCCs)
to
PSPC:
TCC# 006889

P 2,542,918.00

TCC # 006977

2,573,422.00

TCC# 006978

2,559,493.00

TCC # 006979

2,413,079.00

TOTAL

P10,088,912.00

The Bureau of Customs (BOC)

accepted and allowed PSPC to use
the above TCCs to pay the customs
duties and taxes due on its oil
importations.

The One-Stop Shop Inter-Agency

Tax Credit and Duty Drawback
Center through then Finance
Secretary Edgardo B. Espiritu,
informed
BIR
Commissioner
Beethoven L. Rualo that pursuant
to EXCOM Resolution No. 03-0599, it has cancelled various Tax
Debit Memos (TDMs) issued to
PSPC and Petron Corporation
against their TCCs which were
found to have been fraudulently
issued and transferred. These
include the subject TCCs sold by
FWI to PSPC.

The Republic of the Philippines

represented by the BOC filed the
present collection suit in the RTC
(Civil Case No. 02-103191) for the
payment of P10,088,912.00 still
owed by PSPC after the invalidation
of the subject TCCs.

Meanwhile, PSPC filed with the

Court of Tax Appeals (CTA Case
No. 6484) a petition for review
questioning the factual and legal
bases of BOC's collection efforts.

The RTC denied the motion to

dismiss and PSPC eventually filed
its answer questioning the RTC's
jurisdiction. When the RTC issued a
notice of pre-trial, PSPC moved for
reconsideration of the order denying
its motion to dismiss. The RTC
denied
the
motion
for
reconsideration, prompting PSPC to
elevate the matter to the CA via a
petition for certiorari. On October
23, 2003, the CA rendered decision
denying PSPC's petition. With the
denial
of
its
motion
for
reconsideration, PSPC sought
recourse from this Court in a
petition for review on certiorari. In
a Decision dated March 6, 2008,
this Court denied PSPC's petition.

The CTA denied BOC's motion to

dismiss on the ground of
prescription. When the CTA denied
the
BOC's
motion
for
reconsideration, the BOC appealed
to the CA, which reversed the
questioned CTA resolutions. PSPC
again sought recourse from this
Court via a petition for review on
certiorari (G.R. No. 176380). By
Decision dated June 18, 2009, we
denied the petition and held that the
present case does not involve a tax
protest case within the jurisdiction
of the CTA to resolve.

ISSUE:

Whether or not petitioner's claim is

barred by prescription?
RULING:
Petitioners claim is not barred by
prescription. As already mentioned, BOC's
collection suit is not based on any new or
revised assessment because the original
assessments which had long become final
and uncontestable, were already settled by
PSPC with the use of the subject TCCs.
With the cancellation of the TCCs,
the tax liabilities of PSPC under the original
assessments were considered unpaid, hence
BOC's demand letters and the action for
collection in the RTC. To repeat, these
assessed customs duties and taxes were
previously assessed and paid by the
taxpayer, only that the TCCs turned out to
be spurious and hence worthless certificates
that did not extinguish PSPC's tax
liabilities.
The applicable provision is Section
1204 of the Tariff and Customs Code,
which states:
Section 1204. Liability of Importer for
Duties. Unless relieved by laws or regulations,
the liability for duties, taxes, fees and other charges
attaching on importation constitutes a personal debt
due from the importer to the government which can
be discharged only by payment in full of all duties,
taxes, fees and other charges legally accruing. It
also constitutes a lien upon the articles imported
which may be enforced while such articles are in the
custody or subject to the control of the government.

The case is hereby remanded to

the Regional Trial Court of Manila,
Branch 49 for the conduct of trial
proceedings in Civil Case No. 02-103191
with utmost deliberate dispatch.

the Court of Tax Appeals on

November 29, 2002.

CASE DIGEST: 2016 SC TAXATION

CASES
January 2016

CTA 1st Division Ruling: The

Court of Tax Appeals First Division
rendered its Decision denying the
Petition for Review and, hence, the
claim for refund. It found that Air
Canada was engaged in business in
the Philippines through a local agent
that sells airline tickets on its behalf.
As such, it should be taxed as a
resident foreign corporation at the
regular rate of 32%. Further,
according to the Court of Tax
Appeals First Division, Air Canada
was deemed to have established a
"permanent establishment" in the
Philippines under Article V (2) (i)
of the Republic of the PhilippinesCanada Tax Treaty by the
appointment of the local sales agent,
"in which the petitioner uses its
premises as an outlet where sales of
[airline] tickets are made.

CTA En Banc Ruling: The Court

of Tax Appeals En Bane affirmed
the findings of the First
Division. The En Banc ruled that
Air Canada is subject to tax as a
resident foreign corporation doing
business in the Philippines since it
sold airline tickets in the
Philippines.

1.) AIR CANADA, Petitioner VS.

COMMISSIONER OF INTERNAL
REVENUE, Respondent
(G.R.
No.
169507, January 11, 2016)

FACTS:

Air Canada is a "foreign corporation

organized and existing under the
laws of Canada. On April 24, 2000,
it was granted an authority to
operate as an offline carrier by the
Civil Aeronautics Board, subject to
certain conditions, which authority
would expire on April 24, 2005. As
an off-line carrier, Air Canada does
not have flights originating from or
coming to the Philippines and does
not operate any airplane in the
Philippines.

Air Canada engaged the services of

Aerotel Ltd., Corp. (Aerotel) as its
general sales agent in the
Philippines. Aerotel "sells Air
Canada's passage documents in the
Philippines.

Air Canada filed a written claim for

refund of alleged erroneously paid
income taxes amounting to
P5,185,676.77 before the Bureau of
Internal Revenue, Revenue District
Office No. 47-East Makati. It found
basis from the revised definition of
Gross Philippine Billings under
Section 28(A) (3) (a) of the 1997
National Internal Revenue Code.
To prevent the running of the
prescriptive period, Air Canada
filed a Petition for Review before

ISSUE(S):
a. Whether or not Air Canada as an
offline international carrier selling
passage documents through a
general sales agent in the
Philippines, is a resident foreign
corporation?
b. Whether or not Air Canada is
subject to 2 tax on Gross

Philippine Billings or subject to

32% regular corporate income tax?
c. Whether or not Air Canada is
entitled of refund pertaining
allegedly to erroneously paid tax on
Gross Philippine Billings from the
third quarter of 2000 to the second
quarter of 2002?
RULING:
a. Petitioner, an offline carrier, is a
resident foreign corporation for
income tax purposes. Petitioner
falls within the definition of resident
foreign corporation under Section
28(A)(1) of the 1997 National
Internal Revenue Code, thus, it may
be subject to 32%53 tax on its
taxable income. Petitioner is
undoubtedly "doing business" or
"engaged in trade or business" in the
Philippines.
Aerotel performs acts or works or
exercises functions that are
incidental and beneficial to the
purpose of petitioner's business.
The activities of Aerotel bring direct
receipts or profits to petitioner.
There is nothing on record to show
that Aerotel solicited orders alone
and for its own account and without
interference from, let alone
direction of, petitioner. On the
contrary, Aerotel cannot "enter into
any contract on behalf of [petitioner
Air Canada] without the express
written consent of [the latter,] and it
must
perform its
functions
according to the standards required
by petitioner. Through Aerotel,
petitioner is able to engage in an
economic
activity
in
the
Philippines.

b. The tax (Gross Philippine Billings)

attaches only when the carriage of
persons, excess baggage, cargo, and
mail originated from the Philippines
in a continuous and uninterrupted
flight, regardless of where the
passage documents were sold.
Not having flights to and from the
Philippines, petitioner is clearly not
liable for the Gross Philippine
Billings tax.
While petitioner is taxable as a
resident foreign corporation under
Section 28(A)(1) of the 1997
National Internal Revenue Code on
its taxable income116 from sale of
airline tickets in the Philippines, it
could only be taxed at a maximum
of
1
1/2%
of
gross
revenues, pursuant to Article VIII
of the Republic of the PhilippinesCanada Tax Treaty that applies to
petitioner as a "foreign corporation
organized and existing under the
laws of Canada.
c. Finally, we reject petitioner's
contention that the Court of Tax
Appeals erred in denying its claim
for refund of erroneously paid Gross
Philippine Billings tax on the
ground that it is subject to income
tax under Section 28(A) (1) of the
National Internal Revenue Code
because (a) it has not been assessed
at all by the Bureau of Internal
Revenue for any income tax
liability; and (b) internal revenue
taxes cannot be the subject of set-off
or compensation.
In this case, the P5,185,676.77
Gross Philippine Billings tax paid
by petitioner was computed at the

rate of 1 1/2% of its gross revenues

amountingtoP345,711,806.08149 fr
om the third quarter of 2000 to the
second quarter of 2002. It is quite
apparent that the tax imposable
under Section 28(A)(1) of the 1997
National Internal Revenue Code
[32% of taxable income, that is,
gross income less deductions] will
exceed the maximum ceiling of 1
1/2% of gross revenues as decreed
in Article VIII of the Republic of the
Philippines-Canada Tax Treaty.
Hence, no refund is forthcoming.

For taxable year 2000, the quarterly

VAT returns filed by MPC on April
25, 2000, July 25, 2000, October 24,
2000, and August 27, 2001 showed
an excess input VAT paid on
domestic purchases of goods,
services and importation of goods in
the amount of P127,140,331.85.

On March 11, 2002, MPC filed

before the BIR an administrative
claim for refund of its input VAT
covering the taxable year of 2000, in
accordance with Section 112,
subsections (A) and (B) of the
NIRC. Thereafter, or on March 26,
2002, fearing that the period for
filing a judicial claim for refund was
about to expire, MPC proceeded to
file a petition for review before the
CTA, docketed as CTA Case No.
6417, without waiting for the CIR's
action on the administrative claim.

CTA 2nd Division Ruling: The

CTA Second Division rendered a
Decision partially granting MPC's
claim for refund, and ordering the
CIR to grant a refund or a tax credit
certificate, but only in the reduced
amount
of
P118,749,001.55,
representing MPC's unutilized input
VAT incurred for the second, third
and fourth quarters of taxable year
2000. The CTA Second Division
held that by virtue of NAPOCOR's
exemption from direct and indirect
taxes as provided for in Section
1311 of
Republic
Act
No.
6395, MPC's sale of services to
NAPOCOR is subject to VAT at 0%
rate.

As explained by the Supreme Court,

the rationale for the [NAPOCOR's]

QUESTION: Is a deficiency tax

assessment a bar to a claim for tax
refund or tax credit? Explain your
answer.
2.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. MIRANT
PAGBILAO CORPORATION (NOW
TEAM ENERGY CORPORATION),
Respondent (G.R. No. 180434, January
20, 2016)

FACTS:

Mirant Pagbilao Corporation is a

duly-registered
Philippine
corporation located at Pagbilao
Grande Island in Pagbilao, Quezon,
and primarily engaged in the
generation and distribution of
electricity to the National Power
Corporation (NAPOCOR) under a
build, operate, transfer scheme. As
such, it is registered with the Bureau
of Internal Revenue (BIR) as a
Value-Added Tax (VAT) taxpayer.

On November 26, 1999, the BIR

approved MPC's application for
Effective Zero-Rating for the
construction and operation of its
power plant.

tax exemption is to ensure cheaper

power. If the BIR's recent view is to
be implemented, the VAT being an
indirect tax may be passed on by the
seller of electricity to [NAPOCOR].
Effectively, this means that
electricity will be sold at a higher
rate to the consumers. Estimates
show that a 10% VAT on electricity
which
is
purchased
by
[NAPOCOR] from its independent
power producers will increase
power cost, by about P1.30 billion a
year. The effect on the consumer is
an additional charge of P0.59 per
kilowatt-hour. The recognition of
[NAPOCOR's] broad privilege will
inure to the benefit of the Filipino
consumer.

Meanwhile, the CIR filed a motion

for reconsideration of the amended
decision. However, on November
13, 2006, the CTA Second Division
issued a Resolution denying the
motion. Thereafter, the CIR filed a
petition for review before the
CTA En Banc.

CTA En Banc Ruling: (a) MPC's

claim to the refund of P810,047.31
is disallowed for lack of supporting
documents. Tax refunds, being in
the nature of tax exemptions, are
construed
in
strictissimi
juris against the claimant. Thus, a
mere summary list submitted by
MPC is considered immaterial to
prove the amount of its claimed
unutilized input taxes.

(IEIRDs) duly validated for actual

payment of input tax" and that other
documents may be adduced to
determine its payment.19 Here, the
IEIRDs presented by MPC did not show
payment of the input taxes and the
amounts indicated therein differed from
the bank debit advice. More so, the bank
debit advice did not properly describe
the mode of payment of the input tax
which made it difficult to determine
which payee, and to what kind of
payment did the bank debit advices
pertain to.

(c) The denial of MPC's motion for new

trial was correct since it was pointless to
require MPC to submit additional
documents in support of the unutilized
input tax of P3,310,109.20, in view of
MPC's admission that the VAT official
receipts and invoices were not even premarked and proffered before the court.
Regrettably, without such documents,
the CTA could not in any way properly
verify the correctness of the certified
public accountant's conclusion.
ISSUE:
Whether or not the CTA erred in
granting MPC's claim for refund of its
excess input VAT payments on domestic
purchases of goods, services and
importation of goods attributable to zerorated sales for taxable year 2000?

RULING:
(b) MPC's claim for the refund of
P836,768.00 as input taxes is denied
due to lack of proof of payment. As a
rule, "input tax on importations should
be supported with Import Entry and
Internal
Revenue
Declarations

In the present dispute, compliance

with the requirements on administrative
claims with the CIR, which are to precede
judicial actions with the CTA, indubitably
impinge on the tax court's jurisdiction.

In CIR v. Aichi Forging Company of Asia,

Inc., the Court ruled that the premature
filing of a claim for refund or credit of input
VAT before the CTA warrants a dismissal,
inasmuch as no jurisdiction is acquired by
the tax court. Pertinent thereto are the
provisions of Section 112 of the NIRC at
the time of MPC's filing of the
administrative and judicial claims, and
which prescribe the periods within which to
file and resolve such claims.

REGIONAL DIRECTOR, REVENUE

REGION NO. 6, Respondents (G.R. No.
208731, January 27, 2016)

FACTS:

PAGCOR claims that it is a duly

organized government-owned and
controlled corporation existing
under and by virtue of Presidential
Decree No. 1869, as amended, with
business address at the 6th Floor,
Hyatt Hotel and Casino, Pedro Gil
corner M.H. Del Pilar Streets,
Malate, Manila. It was created to
regulate, establish and operate clubs
and casinos for amusement and
recreation, including sports gaming
pools, and such other forms of
amusement and recreation.

Respondent CIR, on the other hand,

is the Head of the BIR with
authority, among others, to resolve
protests on assessments issued by
her office or her authorized
representatives.

PAGCOR provides a car plan

program to its qualified officers
under which sixty percent (60%) of
the car plan availment is shouldered
by PAGCOR and the remaining
forty percent (40%) for the account
of the officer, payable in five (5)
years.

On October 10, 2007, [PAGCOR]

received a Post Reporting Notice
dated September 28, 2007 from BIR
Regional Director Alfredo Misajon
[RD Misajon] of Revenue Region 6,
Revenue District No. 33, for an
informal conference to discuss the
result of its investigation on
PAGCOR's internal revenue taxes
in 2004. The Post Reporting Notice

MPC filed its petition for review

with the CTA on March 26, 2002, or a mere
15 clays after it filed an administrative
claim for refund with the CIR on March 11,
2002. It then did not wait for the lapse of
the 120-day period expressly provided for
by law within which the CIR shall grant or
deny the application for refund.
Clearly, MPC's failure to observe
the mandatory 120-day period under the
law was fatal to its immediate filing of a
judicial claim before the CTA. It rendered
the filing of the CTA petition premature,
and barred the tax court from acquiring
jurisdiction over the same. Thus, the
dismissal of the petition is in order. "Tax
refunds or tax credits - just like tax
exemptions - are strictly construed against
taxpayers, the latter having the burden to
prove strict compliance with the conditions
for the grant of the tax refund or credit."
QUESTION:
A taxpayer received, on January
15, 1993 an assessment for an internal
revenue tax deficiency. On February 10,
1993, the taxpayer forthwith filed a petition
for review with the Court of Tax Appeals.
Could the Tax Court entertain the petition?
Explain your answer.
3.) PHILIPPINE AMUSEMENT AND
GAMING CORPORATION, Petitioner
VS.
BUREAU
OF
INTERNAL
REVENUE, COMMISSIONER OF
INTERNAL
REVENUE,
AND

shows
that
PAGCOR
has
deficiencies on Value Added Tax
(VAT), Withholding Tax on VAT
(WTV), Expanded Withholding
Tax (EWT), and Fringe Benefits
Tax (FBT).

on the provisions of Revenue

Regulations (RR) No. 3-98 and that
its protest was forwarded to the
Assessment Division for further
action.

Subsequently, the BIR abandoned

the
claim
for
deficiency
assessments on VAT, WTV and
EWT in the Letter to PAGCOR
dated November 23, 2007 in view of
the
principles
laid
down
in Commissioner
of
Internal
Revenue vs. Acesite Hotel
Corporation [G.R. No. 147295]
exempting PAGCOR and its
contractors from VAT. However,
the assessment on deficiency FBT
subsists and remains due to date.

On January 17, 2008, PAGCOR

received a Final Assessment Notice
[FAN] dated January 14, 2008, with
demand for payment of deficiency
FBT for taxable year 2004 in the
amount of P48,589,507.65.

On January 24, 2008, PAGCOR

filed a protest to the FAN addressed
to [RD Misajon] of Revenue Region
No. 6 of the BIR.

On August 14, 2008, PAGCOR

elevated its protest to respondent
CIR in a Letter dated August 13,
2008, there being no action taken
thereon as of that date.

In a Letter dated September 23,

2008 received on September 25,
2008, PAGCOR was informed that
the Legal Division of Revenue
Region No. 6 sustained Revenue
Officer Ma. Elena Llantada on the
imposition of FBT against it based

On November 19, 2008, PAGCOR

received a letter from the OICRegional Director, Revenue Region
No. 6 (Manila), stating that its letter
protest was referred to Revenue
District Office No. 33 for
appropriate action.
On March 11, 2009, [PAGCOR]
filed the instant Petition for Review
alleging respondents' inaction in its
protest on the disputed deficiency
FBT.

CTA 1st Division Ruling: The

CTA 1st Division issued the
assailed decision dated 6 July 2011
and ruled in favor of respondents.
The CTA 1st Division ruled that RD
Misajon's issuance of the FAN was
a valid delegation of authority, and
PAGCOR's administrative protest
was validly and seasonably filed on
24 January 2008. The petition for
review filed with the CTA
1st Division, however, was filed out
of time.

As earlier stated, PAGCOR timely

filed its administrative protest on
January 24, 2008. In accordance
with Section 228 of the Tax Code,
respondent CIR or her duly
authorized representative had 180
days or until July 22, 2008 to act on
the protest. After the expiration of
the 180-day period without action
on the protest, as in the instant case,
the
taxpayer,
specifically
PAGCOR, had 30 days or until
August 21, 2008 to assail the non-

determination

of

its

protest.

Clearly, the conclusion that the

instant Petition for Review was filed
beyond the reglementary period for
appeal on March 11, 2009,
effectively depriving the Court of
jurisdiction over the petition, is
inescapable.
And as provided in Section 228 of
the NIRC, the failure of PAGCOR
to appeal from an assessment on
time rendered the same final,
executory
and
demandable.
Consequently, PAGCOR is already
precluded from disputing the
correctness of the assessment. The
failure to comply with the 30-day
statutory period would bar the
appeal and deprive the Court of Tax
Appeals of its jurisdiction to
entertain and determine the
correctness of the assessment.
CTA En Banc Ruling: The CTA
En Banc dismissed PAGCOR's
petition for review and affirmed the
CTA 1st Division's Decision and
Resolution. The CTA En Bane ruled
that the protest filed before the RD
is a valid protest; hence, it was
superfluous for PAGCOR to raise
the protest before the CIR. When
PAGCOR filed its administrative
protest on 24 January 2008, the CIR
or
her
duly
authorized
representative had 180 days or until
22 July 2008 to act on the protest.
After the expiration of the 180 days,
PAGCOR had 30 days or until 21
August 2008 to assail before the
CTA the non-determination of its
protest.

ISSUE(S):

Whether or not the court gravely

erred in dismissing the protest of PAGCOR
due to premature filing?
RULING:
The CTA 1st Division and CTA En Banc
both established that PAGCOR received a
FAN on 17 January 2008, filed its protest to
the FAN addressed to RD Misajon on 24
January 2008, filed yet another protest
addressed to the CIR on 14 August 2008,
and then filed a petition before the CTA on
11 March 2009. There was no action on
PAGCOR's protests filed on 24 January
2008 and 14 August 2008. PAGCOR would
like this Court to rule that its protest before
the CIR starts a new period from which to
determine the last day to file its petition
before the CTA.
The CIR, on the other hand, denied
PAGCOR's claims of exemption with the
issuance of its 18 July 2011 letter. The letter
asked PAGCOR to settle its obligation of
P46,589,507.65, which consisted of tax,
surcharge and interest. PAGCOR's failure
to settle its obligation would result in the
issuance of a Warrant of Distraint and/or
Levy and a Warrant of Garnishment.
PAGCOR did not wait for the RD or
the CIR's decision on its protest. PAGCOR
made separate and successive filings before
the RD and the CIR before it filed its
petition with the CTA.
PAGCOR's protest to the RD on 24
January 2008 was filed within the 30-day
period prescribed in Section 228 and
Section 3.1.5. The RD did not release any
decision on PAGCOR's protest; thus,
PAGCOR was unable to make use of the
first option as described above to justify an
appeal to the CTA. The effect of the lack of
decision from the RD is the same, whether
we consider PAGCOR's April 2008
submission of documents16 or not.

PAGCOR has clearly failed to

comply with the requisites in disputing an
assessment as provided by Section 228 and
Section 3.1.5. Indeed, PAGCOR's lapses in
procedure have made the BIR's assessment
final, executory and demandable, thus
obviating the need to further discuss the
issue of the propriety of imposition of
fringe benefits tax.

or credit of the excise taxes paid on

the foregoing sales, totalling
P49,058,733.09. Due to the inaction
of the Bureau of Internal Revenue
(BIR) on its claims, Pilipinas Shell
decided to file a petition for review
with the CTA.

CTA 2nd Division Ruling: The

CTA Second Division rendered its
Decision granting Pilipinas Shell's
claim but at a reduced amount of
P39,305,419.49.7 Said amount was
computed based on Pilipinas Shell's
sales and deliveries of petroleum
products to international carriers
sourced from its own tax-paid
inventories.
The
claim
for
refund/credit of the excise taxes
from the sales and deliveries
coming from the portion sourced
from Petron was disallowed by the
CTA on the ground that Pilipinas
Shell is not the proper party to claim
the same.

CTA En Banc Ruling: The

CTA En Banc rendered the assailed
decision dismissing the BIR's
petition for lack of merit and
affirming the assailed CTA decision
and resolution. Its motion for
reconsideration having been denied
per assailed Resolution dated
October 18, 2007, the CIR now
comes to this Court on petition for
review.

The Supreme Court denied the

petition for lack of jurisdiction due to
premature filing.
QUESTION: Is protest at the time of
payment of taxes and duties, a requirement
to preserve the taxpayers right to claim a
refund? Explain your answer.
February 2016
1.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. PILIPINAS
SHELL
PETROLEUM
CORPORATION, Respondent (G.R. No.
180402, February 10, 2016)

FACTS:

Pilipinas Shell sold and delivered

petroleum products to various
international carriers of the
Philippines or foreign registry for
their use outside the Philippines for
the period of November 2000 to
March 2001. A portion of these
sales and deliveries was sourced by
Pilipinas Shell from Petron
Corporation (Petron) by virtue of a
"loan or borrow agreement"
between them. The excise taxes
paid by Petron were passed on to
Pilipinas Shell and the latter, in turn,
sold these to international carriers
net of excise taxes. The other
portion was sourced by Pilipinas
Shell from its tax-paid inventories.

ISSUE:
Whether or not Pilipinas Shell is not
entitled to a refund/credit of the excise taxes
paid on its sales and deliveries to
international carriers?
RULING:

Pilipinas Shell subsequently filed

two separate claims for the refund

Pilipinas
Shell
sought
a
refund/credit of the excise taxes allegedly
paid erroneously on sales and deliveries of
gas and fuel oils to various international
carriers during the period of October to
December 2001. As in the present case,
Pilipinas Shell alleged that it was exempt
from payment of excise taxes levied on its
petroleum products sold and delivered to
international carriers of foreign registry.
The same petitioner in this case, the CIR, as
represented by the Office of the Solicitor
General, objected to the tax refund/credit
granted by the CTA, also on the same
ground raised in the present case that the
excise tax on petroleum products is levied
on the manufacturer of the petroleum
product regardless of its purchaser or buyer
and that the grant of exemption under
Section 135 of the NIRC simply means that
the manufacturer cannot pass on to the
international carrier-buyer the excise taxes
it paid on its petroleum products.
Initially, the Court sustained CIR's
arguments, reversed the CTA ruling and
denied Pilipinas Shell's claim for tax
refund/credit. In a Decision dated April 25,
2012, the Court concluded that Pilipinas
Shell's locally manufactured petroleum
products are subject to excise tax under
Section 148 of the NIRC. The Court also
ruled that the exemption from excise tax
payment on petroleum products under
Section 135 (a) "merely allows the
international carriers to purchase petroleum
products without the excise tax component
as an added cost in the price fixed by the
manufacturers
or
distributors/sellers.
Consequently, the oil companies which
sold such petroleum products to
international carriers are not entitled to a
refund of excise taxes previously paid on
the goods."
QUESTION: Explain the extent of
authority of the Commissioner of Internal

Revenue to compromise and abate taxes?

Cite your legal basis.
2.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. GJM
PHILIPPINES MANUFACTURING,
INC., Respondent (G.R. No. 202695,
February 29, 2016)

FACTS:

On April 12, 2000, GJM filed its

Annual Income Tax Return for the
year 1999. Thereafter, its parent
company, Warnaco (HK) Ltd.,
underwent bankruptcy proceedings,
resulting in the transfer of
ownership over GJM and its global
affiliates to Luen Thai Overseas
Limited in December 2001. On
August 26, 2002, GJM informed the
Revenue District Officer (RDO) of
Trece Martirez, through a letter, that
on April 29, 2002, it would be
cancelling its registered address in
Makati and transferring to Rosario,
Cavite, which I under RDO No. 54.
On August 26, 2002, GJMs request
for transfer of its tax registration
from RDO No. 48 to RDO No. 53
was confirmed through Transfer
Confirmation Notice No. OCN ITR
000018688.

On October 18, 2002, the Bureau of

Internal Revenue sent a letter of
informal conference informing
GJM that the report of investigation
on its income and business tax
liabilities for 1999 had been
submitted. The report disclosed that
GJM was still liable for an income
tax
deficiency
and
the
corresponding 20% interest, as well
as for the compromise penalty in the
total amount of P1,192,541.51. Said
tax deficiency allegedly resulted

from
the
disallowances/understatements.

On February 12, 2003, the Bureau

of Internal Revenue issued a PreAssessment Notice and Details of
Discrepancies against GJM. On
April 14, 2003, it issued an undated
Assessment Notice, indicating a
deficiency income tax assessment in
the amount of P1,480,099.29. On
July 25, 2003, the BIR issued a
Preliminary
Collection
Letter
requesting GJM to pay said income
tax deficiency for the taxable year
1999. Said letter was addressed to
GJMs former address in Pio Del
Pilar, Makati. On August 18, 2003,
although the BIR sent a Final Notice
before seizure to GJMs address in
Cavite, the latter claimed that it did
not receive the same.

The company then filed its letter

protest dated January 7, 2004,
which the BIR denied on January
15, 2004. GJM filed a Petition for
Review before the CTA.

CTA 1st Division Ruling: The

deficiency income tax assessment in
the amount of P1,480,099.29,
inclusive of interest, for taxable
year 1999, covered by Formal
Assessment Notice and the Warrant
of DIstraint and/or Levy dated
November 27, 2003, both issued
against petitioner by respondent, are
Cancelled and Withdrawn.

CTA En Banc Ruling: The petition

for review is denied.

ISSUE(S):
a. Whether or not the Formal
Assessment Notice (FAN) for

deficiency income tax issued to

GJM for taxable year 1999 was
released, mailed, and sent within the
three (3) year prescriptive period
under section 203 of the NIRC of
1997?
b. Whether or not the BIRs right to
assess GJM for deficiency income
tax for taxable year 1999 has
already prescribed?
RULING:
a. The CIR has three (3) years from the
date of the actual filing of the return
or from the last day of prescribed by
law for the filing of the return,
whichever is later, to assess internal
revenue taxes. Here, GJM filed its
Annual Income Tax Return for the
taxable year 1999 on April 12,
2000.
The
three
(3)-year
prescriptive period, therefore was
only until April 15, 2003. The
records reveal that the BIR sent the
FAN through registered mail on
April 14, 2003, well-within the
required period. The Court has held
that when an assessment is made
within the prescriptive period, as in
the case at bar, receipt by the
taxpayer may or may not be within
said period. But it must be clarified
that the rule does not dispense with
the requirement that the taxpayer
should actually receive the
assessment notice, even beyond the
prescriptive period. If the taxpayer
denies
having
received
an
assessment from the BIR, it then
becomes incumbent upon the latter
to prove by competent evidence that
such notice was indeed received by
the addressee.

To prove the fact of mailing, it is

essential to present:
1. The registry receipt issued by
the Bureau of Posts or the
Registry return card.
2. If could not be located, a
certification issued by the
Bureau of Posts and any other
pertinent document executed
with its intervention.
b. The BIRs failure to prove GJMs
receipt of the assessment leads to no
other conclusion but that no
assessment
was
issued.
Consequently, the governments
right to issue an assessment for the
said period has already prescribed.
QUESTION: When is a revenue tax
considered delinquent? Explain your
answer.
March 2016
1.) SILICON
PHILIPPINE,
INC.,
Petitioner VS. COMMISSIONER OF
INTERNAL REVENUE, Respondent
(G.R. No. 182737, March 2, 2016)

FACTS:

Petitioner is a corporation engaged

in the business of designing,
developing, manufacturing and
exporting
integrated
circuit
components. It is a preferred
pioneer enterprise registered with
the Board of Investments. It is
likewise registered with the Bureau
of Internal Revenue (BIR) as a VAT
taxpayer by virtue of its sale of
goods and services with a permit to
print accounting documents like
sales invoices and official receipts.
Petitioner sought to recover the
VAT it paid on imported capital
goods for the 2nd, 3rd and 4th

quarters of 2001, therefore, it filed

for a tax credit / refund to the CIR.
However, the Honorable Supreme
Court has ruled that the judicial
claims were filed beyond the
120+30 day period.

ISSUE:
Whether or not the Court of Tax
Appeals has acquired jurisdiction over the
case?
RULING:
No, the CTA did not acquire
jurisdiction over the case ergo their rulings
are not decisions in contemplation of law.
The Honorable Supreme Court stated that:
Upon
the
filing
of
an
administrative claim, respondent is given a
period of 120 days within which to (1) grant
a refund or issue the tax credit certificate for
creditable input taxes; or (2) make a full or
partial denial of the claim for a tax refund
or tax credit. Failure on the part of
respondent to act on the application within
the 120-day period shall be deemed a
denial.
Note that the 120-day period begins
to run from the date of submission of
complete documents supporting the
administrative claims. If there is no
evidence showing that the taxpayer was
required to submit or actually submitted
additional documents after the filing of the
administrative claim, it is presumed that the
complete documents accompanied the
claim when it was filed.
Considering that there is no
evidence in this case showing that

petitioner made later submissions of

documents in support of its administrative
claims, the 120-day period within which
respondent is allowed to act on the claims
shall be reckoned from 16 October 1 and 4
September 2002.
The judicial claim shall be filed
within a period of 30 days after the receipt
of respondents decision or ruling or after
the expiration of the 120-day period,
whichever is sooner.
Aside from a specific exception to
the mandatory and jurisdictional nature of
the periods provided by the law, any claim
filed in a period less than or beyond the
120+30 days provided by the NIRC is
outside the jurisdiction of the CTA.

In compliance with his duty to his

home country, Pacquiao filed his
2008 income tax return on April 15,
2009 reporting his Philippinesourced
income.
It
was
subsequently amended to include
his US-sourced income.

The controversy began on March

25, 2010, when Pacquiao received a
Letter of Authority from the
Regional District Office No. 43 of
the Bureau of Internal Revenue for
the examination of his books of
accounts and other accounting
records for the period covering
January 1, 2008 to December 31,
2008.

On April 15, 2010, Pacquiao filed

his 2009 income tax return, which
although reflecting his Philippinessourced income, failed to include
his income derived from his
earnings in the US. He also failed to
file his Value Added Tax (VAT)
returns for the years 2008 and 2009.

Commissioner on Internal Revenue

issued another Letter of Authority,
authorizing the BIRs National
Investigation Division (NID) to
examine the books of accounts and
other accounting records of both
Pacquiao and Jinkee for the last 15
years, from 1995 to 2009.

The petitioners, through counsel,

wrote a letter questioning the
propriety of the CIR investigation.
According to the petitioners, they
were already subjected to an earlier
investigation by the BIR for the
years prior to 2007, and no fraud
was ever found to have been
committed. They added that
pursuant to the March LA issued by
the RDO, they were already being
investigated for the year 2008.

April 2016
1.) SPOUSES
EMMANUEL
D.
PACQUIAO
AND
JINKEE
J.
PACQUIAO, Petitioners VS. THE
COURT OF TAX APPEALS (1st
DIVISION)
AND
THE
COMMISSIONER OF INTERNAL
REVENUE, Respondents (G.R. No.
213394, April 6, 2016)

FACTS:

Due to his success, Pacquiao was

able to amass income from both the
Philippines and the United States of
America. His income from the US
came primarily from the purses he
received for the boxing matches he
took part under Top Rank, Inc. On
the other hand, his income from the
Philippines consisted of talent fees
received from various Philippine
corporations
for
product
endorsements,
advertising
commercials
and
television
appearances.

The NID informed the counsel of

the petitioners that the July LA
issued by the CIR had effectively
cancelled and superseded the March
LA issued by its RDO.
On January 5 and 21, 2011, the
petitioners
submitted
various
income tax related documents for
the years 2007-2009. As for the
years 1995 to 2006, the petitioners
explained that they could not
furnish the bureau with the books of
accounts and other tax related
documents as they had already been
disposed in accordance with Section
235 of the Tax Code. They added
that even if they wanted to, they
could no longer find copies of the
documents because during those
years, their accounting records were
then managed by previous counsels,
who had since passed away. Finally,
the petitioners pointed out that their
tax liabilities for the said years had
already been fully settled with then
CIR Jose Mario Buag, who after a
review, found no fraud against
them.
After
conducting
its
own
investigation, the CIR made its
initial assessment finding that the
petitioners were unable to fully
settle their tax liabilities. Thus, the
CIR issued its Notice of Initial
Assessment-Informal Conference
(NIC), dated January 31, 2012,
directly addressed to the petitioners,
informing them that based on the
best evidence obtainable, they were
liable for deficiency income taxes in
the amount of P714,061,116.30 for
2008 and P1,446,245,864.33 for
2009, inclusive of interests and
surcharges.
The petitioners filed their protest
against the Preliminary Assessment
Notice (PAN).

After denying the protest, the BIR

issued its Formal Letter Demand,
finding the petitioners liable for
deficiency income tax and VAT
amounting to P766,899,530.62 for
taxable
years
2008
and
P1,433,421,214.61 for 2009.

The BIR issued its Final Decision

on Disputed Assessment (FDDA),
addressed to Pacquiao only,
informing him that the CIR found
him liable for deficiency income tax
and VAT for taxable years 2008 and
2009 which, inclusive of interests
and surcharges, amounted to a total
of P2,261,217,439.92.

Aggrieved that they were being

made liable for deficiency income
taxes for the years 2008 and 2009,
the petitioners sought redress and
filed a petition for review with the
CTA.

Meanwhile, in a letter, dated

October 14, 2013, the BIR-ARMD
informed the petitioners that they
were denying their request to defer
the collection enforcement action
for lack of legal basis. The same
letter also informed the petitioners
that despite their initial payment,
the amount to be collected from
both of them still amounted to
P3,259,643,792.24, for deficiency
income tax for taxable years 2008
and 2009, and P46,920,235.74 for
deficiency VAT for the same
period. A warrant of distraint and/or
levy against Pacquiao and Jinkee
was included in the letter.

Aggrieved, the petitioners filed the

subject Urgent Motion for the CTA
to lift the warrants of distraint, levy
and garnishments issued by the CIR
against their assets and to enjoin the
CIR from collecting the assessed

deficiency taxes pending

resolution of their appeal.

the

The CTA issued the first assailed

resolution granting the petitioners
Urgent Motion, ordering the CIR to
desist from collecting on the
deficiency tax assessments against
the petitioners. In its resolution, the
CTA noted that the amount sought
to be collected was way beyond the
petitioners net worth, which, based
on Pacquiaos Statement of Assets,
Liabilities and Net Worth (SALN),
only
amounted
to
P1,185,984,697.00.
Considering that the petitioners still
needed to cover the costs of their
daily subsistence, the CTA opined
that the collection of the total
amount of P3,298,514,894.35 from
the petitioners would be highly
prejudicial to their interests and
should, thus, be suspended pursuant
to Section 11 of R.A. No. 1125, as
amended.
The petitioners sought partial
reconsideration of the April 22,
2014 CTA resolution, praying for
the reduction of the amount of the
bond required or an extension of 30
days to file the same. On July 11,
2014, the CTA issued the second
assailed resolution denying the
petitioners motion to reduce the
required cash deposit or bond, but
allowed them an extension of thirty
(30) days within which to file the
same.

ISSUE:
Whether or not Respondent Court
acted with grave abuse of discretion
amounting to lack or excess of jurisdiction
when it imposed a bond requirement which
will effectively prevent Petitioners from
continuing the prosecution of its appeal

from the arbitrary and bloated assessments

issued by Respondent Commissioner?
RULING:
Section 11 of R.A. No. 1125, as
amended by R.A. No. 9282, embodies the
rule that an appeal to the CTA from the
decision of the CIR will not suspend the
payment, levy, distraint, and/or sale of any
property of the taxpayer for the satisfaction
of his tax liability as provided by existing
law. When, in the view of the CTA, the
collection may jeopardize the interest of the
Government and/or the taxpayer, it may
suspend the said collection and require the
taxpayer either to deposit the amount
claimed or to file a surety bond.
Essentially, the petitioners ascribe
grave abuse of discretion on them part of
the CTA when it issued the subject
resolutions requiring them to deposit the
amount of P3,298,514,894.35 or post a
bond in the amount of P4,947,772,341.53
as a condition for its order enjoining the
CIR from collecting the taxes from them.
It is clear that the authority of the
courts to issue injunctive writs to restrain
the collection of tax and to dispense with
the deposit of the amount claimed or the
filing of the required bond is not simply
confined to cases where prescription has set
in. As explained by the Court in those cases,
whenever it is determined by the courts that
the method employed by the Collector of
Internal Revenue in the collection of tax is
not sanctioned by law, the bond
requirement under Section 11 of R.A. No.
1125 should be dispensed with. The
purpose of the rule is not only to prevent
jeopardizing the interest of the taxpayer, but
more importantly, to prevent the absurd
situation wherein the court would declare
that the collection by the summary methods
of distraint and levy was violative of law,
and then, in the same breath require the
petitioner to deposit or file a bond as a

prerequisite for the issuance of a writ of

injunction.
As the CTA is in a better position to
make such a preliminary determination, a
remand to the CTA is in order. To resolve
the issue of whether the petitioners should
be required to post the security bond under
Section 11 of R.A. No. 1125, and, if so, in
what amount, the CTA must take into
account, among others, the following:
1. Whether the requirement of a
Notice of Informal Conference
was complied with;
2. Whether the 15-year period
subject
of
the
CIRs
investigation is arbitrary and
excessive;
3. Whether fraud was duly
established;
4. Whether the FLD issued against
the petitioners was irregular;
5. Whether the FDDA, the PCL,
the FNBS, and the Warrants of
Distraint and/or Levy were
validly issued.

QUESTIONS: a.) May the Court of Tax

Appeals issue an Injunction to enjoin the
collection of taxes by the Bureau of Internal
Revenue? Explain your answer.
b.) May the tax liability of a taxpayer be
compromised during the pendency of an
appeal? Explain your answer.
2.) COMMISSIONER OF INTERNAL
REVENUE, Petitioner VS. LIQUIGAZ
PHILIPPINES
CORPORATION,
Respondent (G.R. No. 215534, April 18,
2016)
--------x x x-------LIQUIGAZ
PHILIPPINES
CORPORATION,
Petitioner
VS.
COMMISSIONER OF INTERNAL
REVENUE, Respondent (G.R. No.
215557)

FACTS:

Liquigaz Philippines Corporation is

a corporation duly organized and
existing under Philippine Laws. On
July 11, 2006, it received a copy of
Letter of Authority (LOA) No.
00067824, dated July 4, 2006,
issued by the CIR, authorizing the
investigation of all internal revenue
taxes for taxable year 2005.

On April 9, 2008, Liquigaz received

an undated letter purporting to be a
Notice of Informal Conference
(NIC), as well as the detailed
computation of its supposed tax
liability. On May 28, 2008, it
received a copy of the Preliminary
Assessment Notice (PAN), dated
May 20, 2008, together with the
attached details of discrepancies for
the calendar year ending December
31, 2005. Upon investigation,
Liquigaz was initially assessed with
deficiency
withholding
tax
liabilities, inclusive of interest, in
the
aggregate
amount
of
P23,931,708.72.

DISPOSITIVE: WHEREFORE, the petition is

PARTIALLY GRANTED. Let a Writ of Preliminary
Injunction be issued, enjoining the implementation
of the April 22; 2014 and July 11, 2014 Resolutions
of the Court of Tax Appeals, First Division, in CTA
Case No. 8683, requiring the petitioners to first
deposit a cash bond in the amount of
P3,298,514,894.3 5 or post a bond of
P4,947,772,341.53, as a condition to restrain the
collection of the deficiency taxes assessed against
them.
Accordingly, the case is hereby REMANDED to the
Court of Tax Appeals, First Division, which is
ordered to conduct a preliminary hearing to
determine whether the dispensation or reduction of
the required cash deposit or bond provided under
Section 11, Republic Act No. 1125 is proper to
restrain the collection of deficiency taxes assessed
against the petitioners.
After the posting of the required bond, or if the Court
of Tax Appeals, First Division, determines that no
bond is necessary, shall proceed to hear and resolve
the petition for review pending before it.

On June 25, 2008, it received a

Formal
Letter
of
Demand
(FLD)/Formal Assessment Notice
(FAN), together with its attached
details of discrepancies, for the
calendar year ending December 31,
2005.

On July 25, 2008, Liquigaz filed its

protest against the FLD/FAN and
subsequently submitted supporting
documents.

On July 1, 2010, it received a copy

of the Final Decision on Disputed
Assessment (FDDA) covering the
tax audit under LOA No. 00067824
for the calendar year ending
December 31, 2005. As reflected in
the FDDA, CIR still found Liquigaz
liable for deficiency withholding
tax liabilities.

Consequently, on July 29, 2010,

Liquigaz filed its Petition for
Review before the CTA Division
assailing the validity of the FDDA
issued by the CIR.

CTA Division Ruling: It partially

granted
Liquigazs
petition
cancelling the EWT and FBT
assessments but affirmed with
modification the WTC assessments.
It ruled that the portion of the
FDDA relating to the EWT and the
FBT assessment was void.
Unlike the PAN and the FDL/FAN,
the FDDA issued did not provide
the details thereof; hence, liquigaz
had no way of knowing what items
were considered by the CIR in
arriving
at
the
deficiency

assessments. This was true because

the FDDA reflected a different
amount from what was stated in the
FDL/FAN. The taxpayer was not
notified of the Factual Bases as
required in the Section 228 of the
NIRC.
It upheld the WTC assessment
against Liquigaz. It noted that the
factual bases used in the FLD and
the FDDA with regard thereto were
the same as the difference in the
amount merely resulted from the
use of a different tax rate.
The CTA Division agreed with
Liquigaz that the tax rate of 25.40%
was more appropriate because it
represents the effective tax
compensation paid. It relied on the
report prepared by the courtcommissioned
independent
accountant, which found that
Liquigaz was unable to substantiate
the discrepancy found by the CIR
on its withholding tax liability on
compensation.

CTA En Banc Ruling: It affirmed

the CTA Division Ruling. It
reiterated its pronouncement that
the taxpayer should be informed in
writing of the law and the facts on
which the assessment was made
applies to FDDA otherwise the
assessment would be void. FDDA
determined the final tax liability of
the taxpayer, which may be the
subject of an appeal before the
CTA. It emphasized the need for
stating the factual bases as the
FDDA reflected different amounts

than that
FLD/FAN.

contained

in

the

ISSUE:
Whether or not the Court of Tax
Appeals En Banc erred in partially
upholding the validity of the assessment as
to the withholding tax on compensation but
declaring invalid the assessment on
expanded withholding tax and fringe
benefits tax?
RULING:
A void FDDA does not ipso facto
render the assessment void
Where a taxpayer questions an
assessment and asks the Collector to
reconsider or cancel the same because he
(taxpayer) believes that he is not liable
therefor, the assessment becomes a
disputed assessment that the Collector
must decide, and the taxpayer can appeal to
the CTA only upon receipt of the of the
decision of the Collector on the disputed
assessment.
From the foregoing, it is clear that
what is appealable to the CTA is the
decision of the CIR on disputed
assessment and not the assessment itself.
Clearly, a decision of the CIR on a
disputed assessment differs from the
assessment itself. Hence, the invalidity of
one does not necessarily result to the
invalidity of the other unless the law or
regulations otherwise provide.
The FDDA must state the facts
and the law on which it is based to
provide the taxpayer the opportunity to
file an intelligent appeal
The reason for requiring that
taxpayers be informed in writing of the
facts and law on which the assessment is
made is the constitutional guarantee that no
person shall be deprived of his property

without due process of law. Merely

notifying the taxpayer of its tax liabilites
without elaborating on its details is
insufficient.
The Court, however, finds that the
CTA erred in concluding that the
assessment on EWT and FBT deficiency
was void because the FDDA covering the
same was void. The assessment remains
valid notwithstanding the nullity of FDDA
because the assessment itself differs from
the decision on the disputed assessment.
The Court agrees that the FDDA
substantially informed Liquigaz of its tax
liabiliities with reggard to its WTC
assessment. As highlighted by the CTA, the
basis for the assessment was the same for
the FLD and the FDDA, where the salaries
reflected in thhe ITR and the alphalist were
compared
resulting
in
discrepanct
withholding taxes on compensation merely
arose from the modification of the tax rates
used in the FDDA. The Court notes it was
Liquigaz which proposed the rate of
25.40% as a more appropriate tax rate as it
is represented the effective tax on
compensation paid for the taxable year
2005. As such, Liquigaz was effectively
informed in writing of the factual bases of
its assessment for WTC because the basis
for the FDDa, with regards to the WTC, was
identical with the FAN which had a detail
of discrepancy attached to it.
QUESTION:
A domestic corporation
failed to withhold and remit the tax on
income received from Philippine sources by
a non-resident foreign corporation. In
addition to the civil penalties provided for
under the Tax Code, a compromise penalty
was imposed for violation of the
withholding tax provisions. May the
Commissioner of Internal Revenue legally
enforce the collection of compromise
penalty? Explain your answer.

3.) COMMISSIONER OF CUSTOMS,

COLLECTOR OF CUSTOMS OF THE
PORT OF BATANGAS, AND THE
BUREAU OF CUSTOMS, Petitioners
VS. PILIPINAS SHELL PETROLEUM
CORPORATION (PSPC), WILLIE J.
SARMIENTO,
PSPC
VICEPRESIDENT FOR FINANCE AND
TREASURER,
AND
ATTY.
CIPRIANO U. ASILO, Respondents
(G.R.No. 205002, April 20, 2016)

On November 11, 2009, petitioner

COC denied the appeal and ordered
PSPC to to pay the unpaid taxes to
avoid the application of Section
1508 of the Tariff and Customs
Code of the Philippines.

On December 3, 2009, PSPC filed

with the CTA a Petition for Review
assailing the Letter-Decisions of
petitioner COC. PSPC also filed a
Verified Motion for the issuance of
a Suspension Order against the
collection of taxes with a prayer for
immediate issuance of TRO.

CTA 1st Division Ruling: Issued a

Resolution
granting
PSPCs
application for a TRO for a period
of 60 days. Also, it issued a
resolution denying respondent
PSPCs request for suspension
order.

In light of the denial of the Verified

Motion, petitioner District Collector
issued a Memorandum ordering the
personnel of BOC in the Port of
Batangas o hold the delivery of all
import shipments of PSPC to satisfy
its excise tax liabilities.

PSPC filed with RTC of Batangas

City a Complaint of Injunction with
prayer for the ex-parte issuance of a
72-hour TRO. In the Verification
and Certification attached to the
complaint, it has a declaration that
there is a pending case before the
CTA; however it involves different
issues and/or reliefs. Petitioners
filed with CTA a Motion to Cite
respondents in Contempt of Court.

FACTS:

Respondent
Pilipinas
Shell
Petroleum Corporation (PSPC) is a
domestic corporation engaged in the
business of manufacturing and
selling petroleum products for
distribution in the Philippines.
On January 30, 2009, petitioner
District Collector Juan N. Tan, the
Collector of Customs of the Port of
Batangas, issued a demand letter
asking respondent PSPC to pay the
excise tax and value-added tax
(VAT), plus penalty on its
importation of catalytic cracked
gasoline (CCG) and light catalytic
cracked gasoline (LCCG) for the
years 2006-2008 in the total amount
of P21,419,603,310.00.
PSPC, refused to heed the demand
and, instead, issued a letter dated
February 13, 2009 questioning the
factual or legal basis of the demand.

On February 18, 2009, petitioner

District Collector issued another
letter reiterating the demand for the
payment of the said unpaid taxes.

On March 5, 2009, PSPC appealed

the
matter
to
petitioner
Commissioner of Customs (COC)
Napoleon Morales.

CTA 3rd Division Ruling: Denied

the Motion to Cite Respondents in
Direct Contempt of Court.
Reason: although the parties in
CTA case and the Batangas
injunction case are the same, the
CTA found that the rights asserted
and the reliefs prayed for are
different. The CTA case assails the
Letter-Decisions,
while
the
Batangas Injunction Case opposes
the Memorandum dated February 9,
2010.

CTA En Banc Ruling: Affirmed

the decision of CTA 3rd Division.

ISSUE:
Whether or not CTA committed
reversible error when it ruled that
respondents did not commit wilful and
deliberate forum shopping?
RULING:
Petition
is
denied.
Under
prevailing jurisprudence, forum shopping
can be committed in three ways, to wit:
a. Filing multiple cases based on the
same cause of action and with the
same prayer, the previous case not
having been resolved yet (litis
pendentia);
b. Filing multiple cases based on the
same cause of action and [with] the
same prayer, the previous case
having been finally resolved (res
judicata);
c. Filing multiple cases based on the
same cause of action but with
different prayers (splitting of causes
of action, where the ground for
dismissal is also either litis
pendentia or res judicata).
Forum shopping exists when a party
seeks a favourable opinion in another

forum, other than by an appeal or by

certiorari, as a result of an adverse opinion
in one forum, or when he institutes two or
more actions or proceedings grounded on
the same cause, hoping that one or the other
court would make a favourable disposition
of his case.
Elements of Forum Shopping:
a. Identity of the parties or, at least, of
the parties who represent the same
interest in both actions;
b. Identity of the rights asserted and
relief prayed for, as the latter is
founded on the same set of facts;
and
c. Identity of the two preceding
particulars, such that any judgment
rendered in the other action will
amount to res judicata in the action
under consideration or will
constitute litis pendentia.
In the CTA case, respondent PSPC
seeks the reversal of the Letter-Decisions of
petitioner COC in order to prevent
petitioners from imposing payment of
excise tax and VAT for importations of
CCG and LCGG for the years 2004-2009.
While in Batangas Injunction case,
respondent PSPC seeks to prevent
petitioners from entering its refinery and
from seizing its importations pursuant to
Section 1508 of the TCCP by virtue of the
Memorandum dated February 9, 2010.

QUESTIONS: a.) Whenever the decision

of the Collector of Customs is adverse to
the government, it is automatically elevated
to the Commissioner for review and, if it is
affirmed by him, it is automatically
elevated to the Secretary of Finance for
review. What is the basis of the automatic
review procedure in the Bureau of
Customs? Explain your answer.

b.) Explain each of the special customs

duties authorized under the Tariff and
Customs Code?