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Dizon v CTA (Taxation)

G.R. No. 209651, November 26, 2014

Dizon v CTA G.R. No. 140944 April 30, 2008

MARCELO INVESTMENT AND MANAGEMENT CORPORATION,


AND THE HEIRS OF EDWARD T. MARCELO, NAMELY,
KATHERINE J. MARCELO, ANNA MELINDA J. MARCELO
REVILLA, AND JOHN STEVEN J. MARCELO, Petitioners, v. JOSE
T. MARCELO, JR., Respondent.

FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a
petition for the probate of his will was filed with Branch 51 of the
Regional Trial Court (RTC) of Manila (probate court). The probate
court then appointed retired Supreme Court Justice Arsenio P. Dizon
(Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon
(petitioner) as Special and Assistant Special Administrator,
respectively, of the Estate of Jose (Estate). Petitioner alleged that
several requests for extension of the period to file the required estate
tax return were granted by the BIR since the assets of the estate, as
well as the claims against it, had yet to be collated, determined and
identified.
ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the
admission of the pieces of evidence which were not formally offered
by the BIR; and
2. Whether the actual claims of the aforementioned creditors may be
fully allowed as deductions from the gross estate of Jose despite the
fact that the said claims were reduced or condoned through
compromise agreements entered into by the Estate with its creditors
Or Whether or not the CA erred in affirming the CTA in the latter's
determination of the deficiency estate tax imposed against the
Estate.
RULING:
1. Yes. While the CTA is not governed strictly by technical rules of
evidence, as rules of procedure are not ends in themselves and are
primarily intended as tools in the administration of justice, the
presentation of the BIR's evidence is not a mere procedural
technicality which may be disregarded considering that it is the only
means by which the CTA may ascertain and verify the truth of BIR's
claims against the Estate. The BIR's failure to formally offer these
pieces of evidence, despite CTA's directives, is fatal to its cause

DECISION
PEREZ, J.:
The vesting of succession rights on the heirs upon the death of the
decedent gives occasion for the baring of sibling disaccords right at
the onset of the estate proceedings which is the determination of the
administrator of the decedents estate. In such instances, the
liquidation, partition and distribution of the decedents estate is
prolonged and the issue of administration becomes, contrary to its
very objective, itself the hindrance to the ultimate goal of settlement
of the decedents estate. We catch a glimpse of that in this case.
Before us is a petition for review on certiorari under Rule 45 of the
Rules of Court assailing the 24 May 2013 Decision of the Court of
Appeals in CA-G.R. CV No. 95219 1 which affirmed the Order2 of the
Regional Trial Court (RTC), Branch 76, Quezon City appointing
respondent Jose T. Marcelo, Jr. (Jose, Jr.) as the new regular
administrator of the intestate estate of decedent Jose T. Marcelo, Sr.
The facts herein occurred in two stages: (1) the first litigation
between two of Jose Marcelo, Sr.s (Jose, Sr.) compulsory heirs, his
sons, Edward, (ascendant of herein petitioners, heirs of Edward T.
Marcelo, Katherine J. Marcelo, Anna Melinda J. Marcelo Revilla, and
John Steven J. Marcelo) and respondent Jose, Jr., for the
appointment of regular administrator of Jose, Sr.s estate; and (2)
after Edward was appointed regular administrator of Jose, Sr.s
estate and Edwards death in 2009, respondent Jose, Jr.s revival of
his pursuit to administer his fathers, Jose, Sr.s, estate.
These details of these stages follow:chanroblesvirtuallawlibrary

2. Yes. The claims existing at the time of death are significant to, and
should be made the basis of, the determination of allowable
deductions. Also, as held in Propstra v. U.S., where a lien claimed
against the estate was certain and enforceable on the date of the
decedent's death, the fact that the claimant subsequently settled for
lesser amount did not preclude the estate from deducting the entire
amount of the claim for estate tax purposes. This is called the dateof-death valuation rule.

FIRST DIVISION

On 24 August 1987, decedent Jose, Sr. died intestate. He was


survived by his four compulsory heirs: (1) Edward, (2) George, (3)
Helen
and
(4)
respondent
Jose,
Jr.
Initially, petitioner Marcelo Investment and Management Corporation
(MIMCO) filed a Petition for the issuance of Letters of Administration
of the estate of Jose, Sr. before the RTC, Branch 76, Quezon City
docketed as S.P. Proc. No. Q-88-1448. At first, Helen, along with her
brother, Jose, Jr. separately opposed MIMCOs petition; the two
prayed for their respective appointment as administrator. Edward
opposed Helens and Jose, Jr.s respective petitions for issuance of
Letters of Administration in their favor and Edward himself prayed for
his appointment as regular administrator. Ultimately, MIMCO, George
and Edward banded together: (1) opposed Helens and Jose, Jr.s
petitions, and (2) prayed for Edwards appointment as regular
administrator
of
Jose,
Sr.s
estate.
On 21 September 1989, pending issuance of letters of
administration, the RTC appointed Helen and Jose, Jr. as special
administrators.

In an Order dated 13 December 1991, the RTC appointed Edward as


regular administrator of Jose, Sr.s estate:
WHEREFORE, PREMISES CONSIDERED, this Court resolves as it
hereby resolves to appoint Edward T. Marcelo as the Regular
Administrator of the estate of the late Jose P. Marcelo, Sr. upon the
posting of a bond amounting to THREE HUNDRED THOUSAND
PESOS (P300,000.00). The aforementioned appointment shall take
effect upon his oath as such and conditioned by a bond of
P300,000.00 which shall insure the fidelity of the said regular
administrator in the performance of his duties and obligations as
such.3
Taking issue with the RTCs Order and questioning Edwards
appointment, Jose, Jr. filed successive oppugnant motions: (1)
motion for reconsideration of the 13 December 1991 Order; and (2)
omnibus motion alleging the RTC Acting Presiding Judge Efren N.
Ambrosios (Judge Ambrocio) unusual interest and undue haste in
issuing letters of administration in favor of Edward.
In an Order dated 12 March 1992, the RTC, through Judge Ambrosio,
denied Jose, Jr.s motion for reconsideration:
WHEREFORE, prescinding from the foregoing, and fortified by the
balm of clear judicial conscience, the herein motion is hereby denied.
The letters of administration under date of March 4, 1992 issued in
favor of Edward T. Marcelo is maintained with full force and effect.
The letters testamentary issued in favor of Special Administrator,
Jose T. Marcelo, Jr. under date of October 2, 1989 as well as the
bond posted by him are hereby ordered cancelled. Likewise, the
Special Administrator, Jose T. Marcelo, Jr. is hereby ordered to
forthwith deliver to the regular administrator the goods, chattels,
money and estate of the deceased in his hands.4
In the same vein of denial, the RTC ruled on the Omnibus Motion,
thus:
After a re-examination of the evidence adduced by the parties and a
consideration of the arguments raised in the aforecited pleadings,
this court arrived at a conclusion that no substantial error was
committed by then Acting Presiding Judge Edren N. Ambrosio which
would warrant a reversal of the questioned orders, namely, the order
dated December 13, 1991 and March 12, 1992.5
Adamant on his competence to better administer his fathers estate,
Jose, Jr. appealed Edwards appointment as regular administrator to
the Court of Appeals in CA-G.R. CV No. 43674. However, the
appellate court affirmed in toto6 the Orders dated 1 October 1993, 13
December 1991 and 12 March 1992 of the intestate court.
The question of who between Edward and Jose, Jr. should
administer their fathers estate reached us in G.R. No. 123883 (Jose
Marcelo, Jr. v. Court of Appeals and Edward Marcelo): we did not find
reversible error in the appellate courts decision in CA-G.R. CV No.
43674. We disposed of the case via a Minute Resolution dated 22
May 1996,7 ultimately affirming the RTCs and the appellate courts
separate rulings of Edwards competence and better suited ability to
act as regular administrator of Jose, Sr.s estate.
Thereafter, Jose, Jr. persistently opposed Edwards actions as
administrator and his inventory of Jose, Sr.s estate. He filed anew
serial motions which culminated in the following 23 June 2000 Order
of the RTC:
After a careful study of the arguments raised by the parties in
support of their respective claims, the Court finds that the
motion filed by oppositor [Jose, Jr.] is not well-taken.

Anent the submission of complete list of stockholders of all the


Marcelo group of companies together with the number and current
par value of their respective shareholding, suffice it to say that as
correctly pointed out by regular administrator [Edward], the shares of
stock of the decedent will be equally distributed to the heirs that there
is
no
necessity
therefor.
Considering oppositors insistence on the submission by regular
administrator of a true and updated list as well as current market
values of all real estate and personal properties of the decedent, the
[c]ourt hereby directs herein oppositor [Jose, Jr.] to inform the regular
administrator of such data to aid the regular administrator in the
preparation of a complete and accurate inventory of the real and
personal properties comprising the estate of Jose, Sr.
As regards oppositor [Jose, Jr.s] prayer for the submission by regular
administrator of a true and complete accounting of the subject
corporations reckoned from the death of [Jose, Sr.] up to the present,
the [c]ourt likewise sees no need therefor as said corporations are
not parties to the case and have separate and distinct personalities
from
the
stockholders.
With respect to the project of partition, it appears that regular
administrator had already furnished oppositor [Jose, Jr.] with a copy
thereof. Considering however oppositor [Jose, Jr.s] oral motion for
regular administrator to identify the heirs of the decedent and to
secure their conformity to the project of partition, oppositor [Jose, Jr.]
is given ten (10) days from receipt of the project of partition bearing
the conformity of the heirs within to (sic) to comment thereon.
Thereafter, the parties are directed to submit their project of partition
for approval and consideration of the [c]ourt.8(Emphasis supplied)
On 15 January 2001, Edward filed a Manifestation and Motion stating
that:
1. Oppositor [Jose, Jr.] now conforms to, and has accordingly signed,
the attached Liquidation of the Inventory of the Estate of Jose P.
Marcelo, Sr. as of July 26, 2000 x x x.
2. Regular Administrator [Edward] respectfully prays that the
Liquidation, duly signed by all four (4) compulsory heirs, be approved
as the project of partition of the Estate of Jose P. Marcelo Sr. 9
and moved for the approval of the Liquidation of the Inventory of the
Estate of Jose, Sr. as the project of partition of the Estate of Jose, Sr.
The project of partition reads:
LIQUIDATION OF THE INVENTORY OF THE ESTATE OF JOSE P.
MARCELO,
SR.
AS OF JULY 26, 2000
I. Settlement of the claims against the estate (SCH IV)
Payables
1. Marcelo Chemical & Pigment
P 1,556,002.06
Corp.
2. Maria Cristina Fertilizer Corp. 797,487.00
3. Marcelo Rubber & Latex
542,932.74
Products, Inc.
4. Marcelo Investment & Mgnt.
532,066.35
Corp.
5. Marcelo Steel Corporation
1,108,252.19

6. H. Marcelo & Co., Inc.


TOTAL

2,356,684.99
P 6,893,425.33

Considering that the Estate as of June 3, 1999 has no sufficient cash


to pay-off the above claims of P6,893,425.33, I can work out an
offsetting arrangement since the Estate has also receivables from
these companies as shown below:chanroblesvirtuallawlibrary

1. MCPC
2. MCFC
3. MRLP
4. MIMCO
5. MSC
6. H. Marcelo
TOTAL

SCH. III-A
Shares of Stock
P337,018.00
300,000.00
1,288,580.00
0.00
11,370.00
881,040.00
P2,818,008.00

SCH. III-B
Receivables
P 0.00
0.00
3,595,500.00
0.00
532,419.04
802,521.15
P 4,930,440.19

Total
P 337,018.00
300,000.00
4,884,080.00
0.00
543,789.04
1,683,561.15
P7,748,448.19

If the above receivables and equity with total value of P7,748,448.19


will be offset against the claims of P6,893,425.33 the net will show
the following:chanroblesvirtuallawlibrary

Companies

SCH. III-A & B


Equity
&
Claims
Receivables
P 337,018.00 P1,556,002.06
300,000.00
797,487.00
4,884,080.00
542,932.74
532,066.35
543,789.04
1,108,252.19

SCH. IV
Net
Claims
(Receivables)
P1,218,984.06
497,487.00
(4,341,147.26)
532,066.35
564,463.15

1. MCPC
2. MCFC
3. MRLP
4. MIMCO
5. MSC
6. H. MARCELO
1,683,561.15
2,356,684.99
673,123.84
& CO., Inc.
TOTAL
P7,748,448.19 P6,893,425.33 P (855,022.86)

Based on the offsetting except for MRLP, which the Estate has net
receivables of P4,341,147.26 there will be net claims or payables of
P3,486,124.40 as follows:chanroblesvirtuallawlibrary
1. MCPC
2. MCFC
3. MIMCO
4. MSC
5. H. Marcelo & Co.
TOTAL

P1,218,984.06
497,487.00
532,066.35
564,463.15
673,123.84
P3,486,124.40

It is recommended that the net from MRLP of P4,341,147.26 be


deducted
to
the
above
claims
as
shown
below:chanroblesvirtuallawlibrary
Net Receivables from MRLP
Net Claim
Net Receivables from MRLP

P4,341,147.26
3,486,124.40
P 855,022.86

II. After the claims are settled based on the above recommendation,
the Estate will have the following assets for distribution to the four (4)
of us:chanroblesvirtuallawlibrary
1. PCIB (to be updated)
3,099.81
2. Shares of Stocks
No. Of Shares
a. MTRC
12,874
b. MRLP
85,502
c. Farmer Fertilizer Corp. 5,000
d. Republic Broadcasting
18,054
System
e. Seafront Resources
6,000,000
f. Industrial Finance
137
g. Astro Mineral
500,000
h. Sta. Mesa Market
42,105
i. Atlas Consolidated
122
Mining
j. Phil. Long Distance
180
Telephone
k. Jinico (Jabpract Minind) 2,500,000
l. Baguio Country Club
1
4. Receivables Marcelo
Fiberglass
*

Based

at

3,099.81
Amount
P1,287,400.00
855,022.86
5,000.00
18,054.00
60,000.00
1,370.00
5,000.00
42,105.00
2,562.00
130,050.00
25,000.00
12,500.00
212,729.17
Par

Value

Above assets will be distributed equally by the four (4) of us


depending if these will be sold or not. It is very important to note that
equal distribution will be based on actual selling price minus taxes
and other deduction if any, on the above inventories of estate
properties.
Sgd.
EDWARD
Regular Administrator

T.

MARCELO

Conforme:chanroblesvirtuallawlibrary
Sgd.
_________________
GEORGE

T.

MARCELO
Sgd.

____________________
JOSE
T.

MARCELO,

JR.

Sgd.
________________
HELEN T. MARCELO10
On 16 February 2001, the RTC issued an Order approving the
partition of Jose, Sr.s estate as proposed by Edward:
Regular administrator [Edward] manifests that oppositor Jose T.
Marcelo, Jr. had already expressed his conformity to the Liquidation
of the Inventory of the Estate of Jose P. Marcelo, Sr., as of July 26,
2000, as evidenced by his signature therein. He therefore prays that
the said document which bears the conformity of all four (4)

compulsory heirs of Jose P. Marcelo, Sr. be approved as the project


of partition of the estate of Jose P. Marcelo, Sr.
Finding said liquidation of the Inventory of the Estate of Jose P.
Marcelo, Sr. to bear the conformity of all the heirs of the decedent
and considering further that the period for filing of money claims
against the subject estate had already lapsed, the Court resolves to
approve said liquidation of Inventory as the project of partition of the
estate
of
Jose
P.
Marcelo,
Sr.
Nonetheless, let the distribution of the estate of Jose P. Marcelo, Sr.
among his compulsory heirs in accordance with the approved
Liquidation of the Inventory of the Estate of Jose P. Marcelo, Sr. be
deferred until herein regular administrator Edward T. Marcelo has
submitted to the Court proof of payment of estate taxes of the subject
estate.11
On 14 September 2001, the RTC archived the intestate proceedings,
S.P. Proc. No. Q-88-1448, pending Edwards submission of proof of
payment of estate taxes as directed in the 16 February 2001
Order.12chanrobleslaw
On 3 July 2009, Edward died, 13 ushering in the antecedents to the
present
controversy.
Wasting no time, Jose, Jr. moved to revive the intestate proceedings
involving his fathers estate, S.P. Proc. No. Q-88-1448, and moved
for his appointment as new regular administrator thereof.
Petitioners MIMCO and heirs of Edward, joined by George, opposed
Jose, Jr.s motion and nominated Atty. Henry Reyes as regular
administrator
in
Edwards
stead.
On 6 January 2010, the RTC issued the assailed Order, now
appointing Jose, Jr. as regular administrator of Jose, Sr.s estate:
Contrary to the assertion of petitioners, there is no showing that the
[c]ourt has previously declared oppositor-movant [Jose, Jr.] unfit to
be
appointed
as
an
administrator.
The estate is left with no one who will administer the estate, i.e., to
liquidate the estate and distribute the residue among the heirs. As
well-settled, to liquidate means to determine the assets of the estate
and to pay all debts and expenses. Records clearly show that the
estate taxes due to the government have not been paid. It is, in fact,
held that approval of the project of partition does not necessarily
terminate administration x x x. There is a necessity to appoint a new
regular administrator. Equally noteworthy is that the judicially
approved inventory was prepared way back on August 30, 2000. It is
but
imperative
that
the
same
be
updated.
In the sound judgment of the [c]ourt, oppositor-movant [Jose, Jr.], a
legitimate child of the decedent, appears to occupy higher interest
than Atty. Henry A. Reyes in administering the subject estate.

updated inventory of all goods, chattels, rights, credits, and estate of


the deceased which shall come to his possession or knowledge or to
the
possession
of
any
other
person
for
him;
b. To administer according to the Rules of Court rules, all goods,
chattels, rights, credits, and estate which shall at any time come to
his possession or to the possession of any other person for him, and
from the proceeds to pay and discharge all debts, legacies, and
charges on the same, or such dividends thereon as shall be decreed
by the court, not to mention the taxes due to the government;
c. To render a true and just account of his administration to the [c]ourt
within one (1) year; and at any other time when required by the
Court;
and
d. To perform all orders of the [c]ourt.14
Petitioners filed an Omnibus Motion for Reconsideration of the 6
January 2010 Order and now moved for the appointment instead of
George as administrator of Jose, Sr.s estate. After Comment on the
Omnibus Motion, the RTC issued another Order dated 23 March
2010, denying the Omnibus Motion and affirming the appointment of
Jose,
Jr.
as
new
regular
administrator.
Petitioners appealed the RTCs twin Orders dated 6 January 2010
and 23 March 2010 before the appellate court. This time around, the
Court of Appeals affirmed Jose, Jr.s appointment as new regular
administrator. Ruling that the selection of administrator lies in the
sound discretion of the trial court, the Court of Appeals held
that:chanroblesvirtuallawlibrary
1. The prior Order dated 13 December 1991 of the RTC appointing
Edward as regular administrator instead of Jose, Jr., which
appointment was affirmed by this Court in G.R. No. 123883, did not
make a finding on Jose, Jr.s fitness and suitableness to serve as
regular
administrator;
and
2. On the whole, Jose, Jr. is competent and not wanting in
understanding and integrity, to act as regular administrator of Jose,
Sr.s
estate.
Hence, this appeal by certiorari ascribing grave error in the Court of
Appeals Decision, to wit:
A.
THERE WAS NO NEED TO APPOINT AN ADMINISTRATOR FOR
THE ESTATE OF JOSE P. MARCELO, SR. AS THERE WAS THEN
NO PENDING INCIDENTS IN THE ESTATE PROCEEDINGS TO
WARRANT THE APPOINTMENT OF AN ADMINISTRATOR.
B.

Before he enters upon the execution of his trust, and letters of


administration issue, he shall give a bond in the amount of
P200,000.00, conditioned as follows:chanroblesvirtuallawlibrary

THE COURT OF APPEALS ERRED IN APPOINTING JOSE, JR. AS


THE ADMINISTRATOR OF JOSE, SR.S ESTATE CONSIDERING
THAT JOSE, JR. WAS FOUND, BY A FINAL, IMMUTABLE, AND
UNALTERABLE JUDGMENT, TO BE UNFIT TO ACT AS SUCH.
THUS, THE COURT OF APPEALS WAS CLEARLY MISTAKEN
WHEN IT DISREGARDED THE EARLIER PRONOUNCEMENT ON
THE UNFITNESS OF JOSE, JR. TO ACT AS AN ADMINISTRATOR
AS IT GOES AGAINST THE PRINCIPLE OF CONCLUSIVENESS
OF JUDGMENT.

a. To make and return to the [c]ourt, within three (3) months, an

C.

WHEREFORE, premises considered, oppositor Jose T. Marcelo, Jr.


is appointed as the new regular administrator of the estate of Jose T.
Marcelo,
Sr.

THE COURT OF APPEALS VIOLATED THE PETITIONERS RIGHT


TO DUE PROCESS, WHEN IT AFFIRMED THE RTC ORDERS,
WITHOUT EVEN BOTHERING TO EXPLAIN WHY JOSE, JR. AND
NOT GEORGE, SHOULD BE APPOINTED AS ADMINISTRATOR OF
JOSE, SR.S ESTATE.15
The appeal is impressed with merit. While we agree with the lower
courts that the appointment of a regular administrator is still
necessary, we disagree with the appointment of Jose, Jr. as new
regular
administrator
of
Jose,
Sr.s
estate.
We first dispose of the issue of whether the appointment of a regular
administrator is still necessary at this liquidation, partition and
distribution stage of the intestate proceedings involving Jose, Sr.s
estate.
Petitioners contend that the appointment of a regular administrator is
unnecessary where there remains no pending matter in the
settlement of Jose, Sr.s estate requiring attention and administration.
Specifically, petitioners point out that there is no existing or
unliquidated debt against the estate of Jose, Sr, the settlement
thereof being already at the liquidation, partition and distribution
stage. Further on that, the liquidation and proposed partition had long
been
approved
by
the
probate
court.
We are not convinced. The settlement of Jose, Sr.s estate is not yet
through and complete albeit it is at the liquidation, partition and
distribution
stage.
Rule 90 of the Rules of Court provides for the Distribution and
Partition of the Estate. The rule provides in pertinent part:
SECTION 1. When order for distribution of residue made. x x x
No distribution shall be allowed until payment of the obligations
above mentioned has been made or provided for, unless the
distributees, or any of them, give a bond, in a sum to be fixed by the
court, conditioned for the payment of said obligations within such
time
as
the
court
directs.cralawred
x

SEC. 3. By whom expenses of partition paid. If at the time of the


distribution the executor or administrator has retained sufficient
effects in his hands which may lawfully be applied for the expenses
of partition of the properties distributed, such expenses of partition
may be paid by such executor or administrator when it appears
equitable to the court and not inconsistent with the intention of the
testator; otherwise, they shall be paid by the parties in proportion to
their respective shares or interest in the premises, and the
apportionment shall be settled and allowed by the court, and, if any
person interested in the partition does not pay his proportion or
share, the court may issue an execution in the name of the executor
or administrator against the party not paying for the sum assessed.
In this case, we observe that the Liquidation of the Inventory of the
Estate, approved by the RTC in its Order dated 16 February 2001, is
not yet in effect and complete. We further note that there has been
no manifestation forthcoming from any of the heirs, or the parties in
this case, regarding the completion of the proposed liquidation and
partition of the estate. In fact, as all parties are definitely aware, the
RTC archived the intestate proceedings pending the payment of
estate
taxes.

For clarity, we refer to the Liquidation of the Inventory of the Estate,


which was divided into two (2) parts: (1) Settlement of the Claims
against the Estate, and (2) After Settlement of the Claims, distribution
of the remaining assets of the estate to the four (4) compulsory heirs.
The same document listed payables and receivables of the estate
dependent
on
a
number
of
factors
and
contingencies:chanroblesvirtuallawlibrary
1. Payables to various companies where the Marcelo family had
equity amounting to P6,893,425.33;
Considering that the Estate as of June 3, 1999 has no sufficient cash
to pay-off the above claims of P6,893,425.33, [Edward] can work out
an offsetting arrangement since the Estate has also receivables or
equity from these companies as shown below: 16chanrobleslaw
xxxx
2. Receivables from the same companies amounting to
P7,748,448.19;
If the above receivables and equity with total value of P7,748,448.19
will be offset against the claims of P6,893,425.33 the net will show
the
following:17chanrobleslaw
xxxx
3. An offsetting of the payables and receivables to be arranged by
the
then
regular
administrator,
Edward;
and
4. Offsetting of the receivables from Marcelo Rubber & Latex
Products, Inc. amounting to P4,341,147.26 against the net claims
against the estate amounting to P3,486,124.40 resulting in net
receivables of the estate in the amount of P855,022.86.
There has been no showing from either of the parties that the
receivables of, and claims against, Jose, Sr.s estate has been
actually liquidated, much less, if an offsetting occurred with the
companies listed in the inventory on one hand, and Jose, Sr.s estate,
on the other. Although the Marcelo family, in particular the
compulsory heirs of Jose, Sr., hold equity in the corporations
mentioned in the inventory, considering that the corporations are
family owned by the Marcelos, these corporations are different
juridical persons with separate and distinct personalities from the
Marcelo patriarch, the decedent, Jose, Sr. 18chanrobleslaw
More importantly, the liquidation scheme appears yet to be effected,
the actual partition of the estate, where each heir separately holds
his share in the estate as that which already belongs to him, remains
intangible and the ultimate distribution to the heirs still held in
abeyance pending payment of estate taxes. 19chanrobleslaw
Significantly, even the Liquidation of the Inventory of Jose, Sr.s
estate states that the valuation amount of the shares of stock as
listed therein is based on par value, which may have varied given the
passage of time. The same document delivers a very important
notation that the equal distribution of the listed assets of the estate
will depend on the actual selling price of these assets less taxes and
other deductions:
Above assets will be distributed equally by the four (4) [compulsory
heirs] depending if these will be sold or not. It is very important to
note that equal distribution will be based on actual selling price minus
taxes and other deduction if any, on the above inventories of estate
properties.20
To date, more than a decade has passed since the intestate
proceedings were archived, thus, affecting the value of the estates

assets.
From all of the foregoing, it is apparent that the intestate proceedings
involving Jose, Sr.s estate still requires a regular administrator to
finally settle the estate and distribute remaining assets to the heirs of
the
decedent.
We now come to the issue of whether Jose, Jr. may be appointed as
regular administrator despite the previous Order of the RTC on 13
December 1991, affirmed by the appellate court and this Court in
G.R. No. 123883, that as between Jose, Jr. and Edward, the latter
was better suited to act as regular administrator of their fathers
estate. Stated differently, whether Jose, Jr.s previous nonappointment as regular administrator of Jose, Sr.s estate bars his
present appointment as such even in lieu of Edward who is now
dead.
A close scrutiny of the records reveals that in all of Jose, Jr.s
pleadings opposing Edwards appointment as regular administrator,
he simultaneously prayed for his appointment as regular
administrator of their fathers estate. In short, he proffered his
competence and qualification to be appointed as regular
administrator as a legal issue for resolution of the courts. Essentially,
Jose, Jr. was weighed and found wanting by the RTC, the appellate
court,
and
this
Court.
In its 13 December 1991 Order, the RTC categorically ruled on who
between Edward and Jose, Jr. was fit to administer the estate of
Jose, Sr., framing the issue in this wise:
The [c]ourts choice as to who among the [compulsory heirs] will be
appointed regular administrator of the estate of Jose, Sr. is now
limited to Edward and Jose, Jr. in view of the withdrawal of Helen T.
Marcelo.
It is this [c]ourts observation that the continuous internal wranglings
between the heirs would achieve nothing. In the meantime, the
estate of the late Jose, Marcelo, Sr. is dragged further into the
quagmire of dissipation and loss. It would not be amiss to state that
the animosity among the interested [petitioners therein], Edward and
Jose, Jr. have considerably increased since the filing of their
respective petitions, but the [c]ourt on the basis of their qualifications
will have to decide whom to appoint as regular administrator.
Willingness to act and/or serve as regular administrator is no longer
in issue here as both applicants are undoubtedly willing to serve as
such. However, after subjecting the evidence, both testimonial and
documentary to careful judicial study, this [c]ourt now resolves as it
hereby resolves to appoint Edward T. Marcelo as regular
administrator of the estate of the late Jose, Sr.
As aptly cited by petitioner, Edward T. Marcelo, there can be no
adverse conclusion that may be inferred from the withdrawal of a
petition or nomination. While it may be true that initially the petition
for the issuance of letters testamentary was filed by Marcelo
Investment and Management Corporation (MIMCO for brevity) and
by Danilo O. Ibay as nominee of Edward and George Marcelo, the
same did not constitute a waiver on the part of Edward T. Marcelo.
This can be gleaned from the withdrawal of the nomination of Danilo
O. Ibay and the subsequent filing of Edward T. Marcelo of his petition
for the appointment as legal administrator on September 14, 1989.
Further, nowhere in the provisions of the Revised Rules of Court is
such a nomination of a party other than a compulsory heir prohibited.

The documents presented by Jose, Jr. purporting to show that the


deceased had other assets other than those enumerated in the
original petition filed by MIMCO and which should have been
included in the estate cannot be accorded any weight or credence by
this [c]ourt, as the individual who supposedly prepared the document
was never identified and the sources of information not disclosed.
Upon the other hand, the petition filed by MIMCO was based on the
Financial Statements prepared by an independent auditor, A. F.
Pablo and Associates. On the basis of the information provided by
MIMCO in the original petition, this [c]ourt can determine the
probable value and nature of the estate of the deceased Jose P.
Marcelo,
Sr.
There is no argument that both Edward and Jose, Jr. are willing to
serve as regular administrator but undoubtedly, Edward appears to
be more responsible and competent that his younger brother, Jose,
Jr. This is bolstered by the fact that the family corporations and his
own personal corporation are presently of sound financial condition.
This success, the [c]ourt believes can be attributed to the
management skills and the sound management policies Edward has
adopted throughout the years. Likewise, it can be deduced that
among the four (4) children of Jose, Sr., it was Edward whom he
trusted the most. The deceased valued the opinion of Edward on
decisions that had to be made and he would have Edward around in
his meetings to discuss matter relating to the corporations which he
managed. Further, as can be gleaned from the evidence presented
by Jose, Jr., it was Edward Marcelo who was appointed as trustee to
vote the deceaseds share in a Marcelo Corporation, Polaris
Marketing Corporation. It was also Edward who was made cosignatory when the deceased deposited money in the bank to be
given to the children of Jose, Jr. It is thus quite evident that Edward
was really the most trusted child of the deceased.
Upon the other hand, this court looks with deep concern the manner
by which Jose, Jr. treats the corporate properties of the Marcelo
Group of Companies. Evidence shows that sometime October 21,
1998, Jose, Jr. took evidencing liabilities of the deceased and other
pertinent records and up to the present has not returned them. Jose,
Jr. cannot justify the taking of the records/or borrowing of the same
by asserting that he is now keeping them in his capacity as Special
Administrator as he was appointed Special Administrator only on
September 21, 1989 whereas the records were borrowed as early
as October 21, 1988. Be that as it may, what belies Jose, Jr.s
assertion is the fact that the records of the corporation which were
allegedly borrowed/taken do not form part of the estate of Jose, Sr.
but to the corporation from where they were taken.
Likewise, it should be noted that the appointment of Jose, Jr. as one
of the Special Administrators does not necessarily make him more
qualified to be appointed as regular administrator. The records of the
case will bear out, that the appointment of a Special Administrator
was premised on the need to have someone, oversee, manage and
preserve the estate of Jose, Sr., as there was the danger of the
estate being dissipated. Moreover, the [c]ourt never touched on the
issue of the qualifications of the applicants, as there was in fact, no
evidence presented on the matter, other than the bare allegations of
the applicants that they were all qualified to act as such. 21 (Citations
omitted)
Notably, the decision of the trial court appointing Edward as the
Administrator of the Estate of Jose, Sr., which decision had the
imprimatur of a final resolution by this Court, was not merely a
comparison of the qualifications of Edward and Jose, Jr., but a

finding of the competence of Edward compared to the unfitness of


Jose,
Jr.
As against this Order of the RTC, its subsequent opposite Order
dated 6 January 2010 appointing Jose, Jr. as new regular
administrator only had two (2) sentences to essentially reverse the
previous findings.
Contrary to the assertion of petitioners, there is no showing that the
[c]ourt has previously declared [Jose, Jr.] unfit to be appointed as an
administrator.cralawred
x

In the sound judgment of the [c]ourt, [Jose, Jr.], a legitimate child of


the decedent, appears to occupy a higher interest than Atty. Henry A.
Reyes in administering the subject estate.22
The first sentence contained in the Order of 6 January 2010 is
disproven by the definite finding of deep concern in the original
Order. The second sentence does not amount to a finding of a
qualification superior to that of the rest of the children of Jose, Sr.
In affirming the issuance of letters of administration to Jose, Jr., the
appellate court dwelt largely on the considerable latitude allowed a
probate court in the determination of a persons suitability for the
office of judicial administrator. The Court of Appeals only briefly
delved into Jose, Jr.s numerous attempts to be appointed regular
administrator of Jose, Sr.s estate which were all denied previously by
the same probate court:
The RTC Order dated 13 December 1991, as affirmed by this [c]ourt
in Decision dated 30 March 1995, and by the Supreme Court in the
Resolution dated 22 May 1996, did not declare [respondent] Jose, Jr.
unfit to serve as administrator. What was ruled upon by the RTC, and
affirmed by this [c]ourt, and by the Supreme Court, was the
appointment of Edward as the administrator of Jose, Sr.s estate, and
the denial of [respondent] Jose, Jr.s opposition to Edwards
appointment. Nowhere was there any categorical ruling, or a definite
finding, that [respondent] Jose, Jr. was, unfit to execute the duties of
the trust by reason of drunkenness, improvidence, or want of
understanding or integrity, or by reason of conviction of an offense
involving moral turpitude. Thus, there is no merit in [petitioners]
contention that the finding on the unfitness of [respondent] Jose, Jr.
became binding, and precluded the RTC from appointing
[respondent] Jose, Jr., as the new regular administrator of Jose, Sr.s
estate.

Court of Appeals in the two stages of this litigation, we put into proper
perspective the 13 December 1991 Order of the RTC appointing
Edward over Jose, Jr. as regular administrator of their fathers estate,
which Order was upheld by us in G.R. No. 123883.
Section 1, Rule 78 of the Rules of Court provides for the general
disqualification of those who wish to serve as administrator:
SECTION 1. Who are incompetent to serve as executors or
administrators. No person is competent to serve as executor or
administrator who:chanroblesvirtuallawlibrary
(a) Is a minor;
(b) Is not a resident of the Philippines; and
Is in the opinion of the court unfit to execute the duties of the trust
by reason of drunkenness, improvidence, or want of
(c)
understanding or integrity, or by reason of conviction of an
offense involving moral turpitude.
Section 6 of the same rule, on the other hand, lists an order of
preference in instances when there is a contest of who should be
appointed administrator:
SEC. 6. When and to whom letters of administration granted. If no
executor is named in the will, or the executor or executors are
incompetent, refuse the trust, or fail to give bond, or a person dies
intestate, administration shall be granted:chanroblesvirtuallawlibrary
(a) To the surviving spouse, or next of kin, or both, in the discretion of
the court, or to such person as such surviving spouse, or next of kin,
requests to have appointed, if competent and willing to serve;
(b) If such surviving spouse, or next of kin, or the person selected by
them, be incompetent or unwilling, or if the surviving spouse, or next
of kin, neglects for thirty (30) days after the death of the person to
apply for the administration or to request that administration be
granted to some other person, it may be granted to one or more of
the principal creditors, if competent and willing to serve;
(c) If there is no such creditor competent and willing to serve, it may
be granted to such other person as the court may select.
Because Edward and Jose, Jr. are both compulsory heirs of Jose,
Sr., they were, at the time the issue of administration first cropped,
equally preferred to administer Jose, Sr.s estate. Necessarily, the
courts also delved into the question of their suitableness and fitness
to serve as administrator, preferring one over the other, framing it as
Edward being more fit and suited to be administrator:

Jurisprudence has long held that the selection of an administrator lies


in the sound discretion of the trial court. The determination of a
persons suitability for the office of judicial administrator rests, to a
great extent, in the sound judgment of the court exercising the power
of appointment and said judgment is not to be interfered with on
appeal unless the said court is clearly in error.

1.

Edward has kept the Marcelo family corporations and his


own in good financial condition;

2.

The trust reposed by the decedent on Edward who voted


on Jose, Sr.s behalf in a Marcelo corporation; and

The RTC did not err in appointing Jose, Jr. as the new administrator,
even though his previous prayer for appointment was denied.
Notably, by virtue of Edwards death, the office of the regular
administrator of Jose, Sr.s estate was vacated, and it was within the
jurisdiction of the RTC, as probate court, to appoint a new
administrator.23
Evidently, the Court of Appeals like the RTC in its second order,
closed its eyes on the facts detailed by the RTC in the first order.

3.

Edward being made a co-signatory for money deposited for


Jose, Jr.s own children.

Considering the two (2) sets of conflicting rulings of the RTC and the

Plainly, the RTC in its Order dated 13 December 1991, found Edward
competent to serve as regular administrator, more competent than
Jose, Jr., preferred despite equal status in the Order of Preference,
manifesting none of the disqualifications set by law. Still and all, the
same Order likewise judged Jose, Jr.s suitableness and fitness, or
lack thereof, for the office of administrator, albeit in comparison with
Edward and not with the rest of Jose, Sr.s children. Jose, Jr. was

not what Edward was. The fact however, that Edward was made cosignatory for money deposited for Jose, Jr.s own children is a telling
commentary against Jose, Jr.s competence, if not integrity.
Then too, the RTC in the original order made a specific finding,
[viewing it] with deep concern, Jose, Jr.s handling of the records of
the Marcelo Group of Companies. It euphemistically called taking of
the records evidencing liabilities of the decedent as
borrowed/taken. However, the RTC noted that such cannot be
justified as the records and other pertinent documents taken do not
form part of the estate of Jose P. Marcelo, Sr. but to the corporation
from where they were taken.ChanRoblesVirtualawlibrary
Contrary to the recent rulings of the RTC and the Court of Appeals
appointing Jose, Jr. as administrator, there is a previous and
categorical ruling on Jose, Jr.s fitness to serve as such:
It is Jose T. Marcelos position that he is more competent, qualified
and suitable for the position of regular administrator. This, above all
else is the main thrust of this second motion for reconsideration.
However, the court in the exercise of its sound discretion after a
consideration of the evidence adduced by both parties, ruled
otherwise and instead appointed Edward T. Marcelo as regular
administrator.cralawred
x x x True, Jose T. Marcelo, Jr. was initially appointed as Special
Administrator of the estate of their deceased father but the same was
without the benefit of a hearing on the qualifications of the parties
concerned. x x x This did not however confer on Jose Marcelo, Jr. as
Special Administrator a better right to the office of regular
administrator.
x
x
x.cralawred

court, conditioned for the payment of said obligations within such


time as the court directs.25
Given the factual considerations that led to the prior findings on the
unfitness of Jose, Jr. to act as regular administrator; the Affidavit of
Helen26 preferring George as administrator; and the conformity on
record of the rest of Jose, Sr.s heirs to Georges administration as
reflected in petitioners Appellants Brief before the Court of Appeals:
More importantly, consistent with Section 6, Rule 78 of the Rules of
Court, not only is George the eldest son of Jose, Sr. and, therefore,
his most immediate kin, he has, moreover, been chosen by the rest
of the heirs of Jose, Sr. to perform the functions of an administrator.
In this regard, in addition to George and the heirs of Edward, Helen
executed an Affidavit to manifest her opposition to Jose, Jr. and to
support the appointment of George and herself as joint
administrators, a copy of which was given to the [Court of Appeals.] 27
we thus issue Letters of Administration to George to facilitate and
close the settlement of Jose, Sr.s estate. 28chanrobleslaw
WHEREFORE, the petition is GRANTED. The Decision of the Court
of Appeals in CA-G.R. CV No. 95219 and the Order dated 6 January
2010 of the Regional Trial Court, Branch 76, Quezon City in S.P.
Proc. No. Q-88-1448 are REVERSED and SET ASIDE. Letters of
Administration shall issue to George T. Marcelo upon payment of a
bond to be set by the Regional Trial Court, Branch 76, Quezon City.
The Regional Trial Court, Branch 76, Quezon City is likewise directed
to complete the settlement of the decedents, Jose T. Marcelo, Sr.s,
estate with dispatch starting from an Order setting a deadline for the
parties to pay the estate taxes and to inform this Court when such
has
been
paid.
SO

ORDERED.cralawlawlibrary

The third assigned error raised by [Jose, Jr.] that both trial judges
erred in not appointing Special Administrator Jose T. Marcelo, Jr. as
Regular Administrator considering his tested probity and competence
as special administrator, his good name and integrity in accordance
with the evidence, is devoid of merit, as already discussed earlier.
The findings of the lower court in this regard deserve full
consideration x x x.24
Undoubtedly, there has been a declaration that Jose, Jr. is unfit and
unsuitable
to
administer
his
fathers
estate.
To obviate further delay in the settlement of Jose, Sr.s estate, we
emphasize that such is already at the liquidation and distribution
stage which project of partition had long been conformed to by the
parties.
We note that this case has been unnecessarily prolonged and
resulted in added litigation by the non-payment of estate taxes which
is the ultimate responsibility of the heirs having inchoate right in the
estate, should there be assets remaining, to be partitioned and
distributed. The inheritance tax is an obligation of the estate,
indirectly the heirs:
SECTION 1. When order for distribution of residue made. When
the debts, xxx, and inheritance tax, if any, chargeable to the estate in
accordance
with
law,
have
been
paid,
xxx.
No distribution shall be allowed until payment of the obligations
above mentioned has been made or provided for, unless the
distributees, or any of them, give a bond, in a sum to be fixed by the

Sereno, Chief Justice (Chairperson), Leonardo-De Castro, Bersamin,


and Villarama, Jr.,* JJ., concur.
Marcos II vs. CA
273 SCRA 47 1997
Facts: Ferdinand R. Marcos II assailed the decision of the Court of
Appeals declaring the deficiency income tax assessments and estate
tax assessments upon the estate and properties of his late father
despite the pendency of the probate proceedings of the will of the
late President. On the other hand, the BIR argued that the States
authority to collect internal revenue taxes is paramount.
Petitioner further argues that "the numerous pending court cases
questioning the late president's ownership or interests in several
properties (both real and personal) make the total value of his estate,
and the consequent estate tax due, incapable of exact pecuniary
determination at this time. Thus, respondents' assessment of the
estate tax and their issuance of the Notices of Levy and sale are
premature and oppressive." He points out the pendency of
Sandiganbayan Civil Case Nos. 0001-0034 and 0141, which were
filed by the government to question the ownership and interests of
the late President in real and personal properties located within and
outside the Philippines. Petitioner, however, omits to allege whether
the properties levied upon by the BIR in the collection of estate taxes
upon the decedent's estate were among those involved in the said
cases pending in the Sandiganbayan. Indeed, the court is at a loss
as to how these cases are relevant to the matter at issue. The mere
fact that the decedent has pending cases involving ill-gotten wealth

does not affect the enforcement of tax assessments over the


properties indubitably included in his estate.
Issue: Is the contention of Marcos correct?
Held: No. The approval of the court, sitting in probate or as a
settlement tribunal over the deceaseds estate, is not a mandatory
requirement in the collection of estate taxes.

whether the probate court, after admitting the will to probate but
before payment of the estates debts and obligations, has the
authority: (1) to grant an allowance from the funds of the estate for
the support of the testators grandchildren; (2) to order the release of
the titles to certain heirs; and (3) to grant possession of all properties
of the estate to the executor of the will.
RULING:

There is nothing in the Tax Code, and in the pertinent remedial laws
that implies the necessity of the probate or estate settlement court's
approval of the state's claim for estate taxes, before the same can be
enforced
and
collected.

1. No. Be that as it may, grandchildren are not entitled to provisional


support from the funds of the decedents estate. The law clearly limits
the allowance to widow and children and does not extend it to the
deceaseds grandchildren, regardless of their minority or incapacity.

The enforcement of tax laws and the collection of taxes are of


paramount importance for the sustenance of government. Taxes are
the lifeblood of government and should be collected without
unnecessary hindrance. However, such collection should be made in
accordance with law as any arbitrariness will negate the existence of
government itself.

2. No. No distribution shall be allowed until the payment of the


obligations above-mentioned has been made or provided for, unless
the distributees, or any of them, give a bond, in a sum to be fixed by
the court, conditioned for the payment of said obligations within such
time as the court directs.

It is not the Department of Justice which is the government agency


tasked to determine the amount of taxes due upon the subject estate,
but the Bureau of Internal Revenue whose determinations and
assessments are presumed correct and made in good faith. The
taxpayer has the duty of proving otherwise. In the absence of proof
of any irregularities in the performance of official duties, an
assessment will not be disturbed. Even an assessment based on
estimates is prima facie valid and lawful where it does not appear to
have been arrived at arbitrarily or capriciously. The burden of proof is
upon the complaining party to show clearly that the assessment is
erroneous. Failure to present proof of error in the assessment will
justify the judicial affirmance of said assessment. In this instance,
petitioner has not pointed out one single provision in the
Memorandum of the Special Audit Team which gave rise to the
questioned assessment, which bears a trace of falsity. Indeed, the
petitioner's attack on the assessment bears mainly on the alleged
improbable and unconscionable amount of the taxes charged. But
mere rhetoric cannot supply the basis for the charge of impropriety of
the assessments made.

3. No. The right of an executor or administrator to the possession and


management of the real and personal properties of the deceased is
not absolute and can only be exercised so long as it is necessary for
the payment of the debts and expenses of administration, He cannot
unilaterally assign to himself and possess all his parents properties
and the fruits thereof without first submitting an inventory and
appraisal of all real and personal properties of the deceased,
rendering a true account of his administration, the expenses of
administration, the amount of the obligations and estate tax, all of
which are subject to a determination by the court as to their veracity,
propriety and justness.

VITUG vs CA Case Digest


VITUG vs CA
188 SCRA 755

PNB VS SANTOS
FACTS: This case is a chapter in an earlier suit decided by this Court
Estate of Hilario Ruiz v CA G.R. No. 118671. January 29, 1996
FACTS:
Hilario M. Ruiz executed a holographic will naming as his heirs his
only son, Edmond Ruiz, his adopted daughter, private respondent
Maria Pilar Ruiz Montes, and his three granddaughters,
On April 12, 1988, Hilario Ruiz died.
On June 29, 1992, four years after the testators death, it was private
respondent Maria Pilar Ruiz Montes who filed before the Regional
Trial Court, Branch 156, Pasig, a petition for the probate and
approval of Hilario Ruizs will and for the issuance of letters
testamentary to Edmond Ruiz
ISSUE:

involving the probate of the two wills of the late Dolores Luchangco
Vitug, who died in New York, U. S.A. naming private respondent
Rowena Faustino-Corona executrix. In said decision, the court
upheld the appointment of Nenita Alonte as co-special administrator
of Mrs. Vitugs estate with her (Mrs. Vitugs) widower, petitioner
Romarico G. Vitug, pending probate.
Romarico G. Vitug filed a motion asking for authority from the probate
court to sell certain shares of stock and real properties belonging to
the estate to cover allegedly his advances to the estate, plus
interests, which he claimed were personal funds. As found by the CA

the alleged advances were spent for the payment of estate tax,

Neither is the survivorship agreement a donation inter vivos, for

deficiency estate tax, and increment thereto.

obvious reasons, because it was to take effect after the death of one
party. Secondly, it is not a donation between the spouses because it

Rowena Corona opposed the motion to sell on the ground that the

involved no conveyance of a spouses own properties to the other.

same funds withdrawn were conjugal partnership properties and part


of the estate, and hence, there was allegedly no ground for

It is also our opinion that the agreement involves no modification

reimbursement. She also sought his ouster for failure to include the

petition of the conjugal partnership, as held by the Court of Appeals,

sums in question for inventory and for concealment of funds

by mere stipulation and that it is no cloak to circumvent the law

belonging to the estate.

on conjugal property relations. Certainly, the spouses are not


prohibited by law to invest conjugal property, say, by way of a joint

Vitug insists that the said funds are his exclusive property having

and several bank account, more commonly denominated in banking

acquired the same through a survivorship agreement executed with

parlance as an and/or account. In the case at bar, when the

his late wife and the bank.

spouses Vitug opened savings account No. 35342-038, they merely

The trial courts upheld the validity of such agreement.


On the other hand, the CA held that the survivorship agreement
constitutes a conveyance mortis causa which did not comply with
the formalities of a valid will as prescribed by Article 805 of the Civil
Code, and secondly, assuming that it is a mere donation inter vivos,
it is a prohibited donation under the provisions of Article 133 of the
Civil Code.
ISSUE: W/N the survivorship agreement between the spouses Vitug
constitutes a donation?

put what rightfully belonged to them in a money-making venture.


They did not dispose of it in favor of the other, which would have
arguably been sanctionable as a prohibited donation.
The conclusion is accordingly unavoidable that Mrs. Vitug having
predeceased her husband, the latter has acquired upon her death a
vested right over the amounts under savings account No. 35342-038
of the Bank of America. Insofar as the respondent court ordered their
inclusion in the inventory of assets left by Mrs. Vitug, we hold that the
court was in error. Being the separate property of petitioner, it forms
no more part of the estate of the deceased.
DELPHER TRADES CORPORATION vs. IAC

HELD: NO. The conveyance in question is not, first of all, one of


mortis causa, which should be embodied in a will. A will has been

G.R. No. L-69259 January 26, 1988

defined as a personal, solemn, revocable and free act by which a


capacitated person disposes of his property and rights and declares
or complies with duties to take effect after his death. In other words,
the bequest or device must pertain to the testator. In this case, the
monies subject of savings account No. 35342-038 were in the nature
of conjugal funds In the case relied on, Rivera v. Peoples Bank and
Trust Co., we rejected claims that a survivorship agreement purports
to deliver one partys separate properties in favor of the other, but
simply, their joint holdings.
There is no showing that the funds exclusively belonged to one party,
and hence it must be presumed to be conjugal, having been acquired
during the existence of the marital relations.

Facts:
Delfin Pacheco and sister Pelagia were the owners of a parcel of
land in Polo (now Valenzuela). On April 3, 1974, they leased to
Construction Components International Inc. the property and
providing for a right of first refusal should it decide to buy the said
property.
Construction Components International, Inc. assigned its rights and
obligations under the contract of lease in favor of Hydro Pipes
Philippines, Inc. with the signed conformity and consent of Delfin and
Pelagia. In 1976, a deed of exchange was executed between
lessors Delfin and Pelagia Pacheco and defendant Delpher Trades
Corporation whereby the Pachecos conveyed to the latter the leased
property together with another parcel of land also located in Malinta
Estate, Valenzuela for 2,500 shares of stock of defendant corporation
with a total value of P1.5M.

On the ground that it was not given the first option to buy the leased
property pursuant to the proviso in the lease agreement, respondent
Hydro Pipes Philippines, Inc., filed an amended complaint for
reconveyance of the lot.
Trivia lang: Delpher Trades Corp is owned by the Pacheco Family,
managed by the sons and daughters of Delfin and Pelagia. Their
primary defense is that there is no transfer of ownership because the
Pachecos remained in control of the original co-owners. The transfer
of ownership, if anything, was merely in form but not in substance.
Issue: WON the Deed of Exchange of the properties executed by the
Pachecos and the Delpher Trades Corporation on the other was
meant to be a contract of sale which, in effect, prejudiced the Hydro
Phil's right of first refusal over the leased property included in the
"deed of exchange"? NO

Held:
By their ownership of the 2,500 no par shares of stock, the Pachecos
have control of the corporation. Their equity capital is 55% as against
45% of the other stockholders, who also belong to the same family
group. In effect, the Delpher Trades Corporation is a business
conduit of the Pachecos. What they really did was to invest their
properties and change the nature of their ownership from
unincorporated to incorporated form by organizing Delpher Trades
Corporation to take control of their properties and at the same time
save on inheritance taxes.
The "Deed of Exchange" of property between the Pachecos and
Delpher Trades Corporation cannot be considered a contract of sale.
There was no transfer of actual ownership interests by the
Pachecos to a third party. The Pacheco family merely changed
their ownership from one form to another. The ownership remained in
the same hands. Hence, the private respondent has no basis for its
claim of a light of first refusal under the lease contract.
LLadoc v. CIR (14 SCRA 292)
A gift tax is not a property tax, but an excise tax imposed on the
transfer of property by way of gift inter vivos.
Facts: Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated
10,000.00 pesos in cash to Fr. Crispin Ruiz, the parish priest of
Victorias, Negros Occidental, and predecessor of Fr. Lladoc, for the
construction of a new Catholic church in the locality. The donated
amount
was
spent
for
such
purpose.
On March 3, 1958, the donor M.B. Estate filed the donor's gift tax
return. Under date of April 29, 1960. Commissioner of Internal
Revenue issued an assessment for the donee's gift tax against the
Catholic Parish of Victorias of which petitioner was the parish priest.
Issue: Whether or not the imposition of gift tax is valid despite the
fact that the Constitution provides an exemptions and that Fr. Lladoc

was

not

the

Parish

priest

at

the

time

of

donation.

Held: Yes, the imposition of the gift tax was valid. Section 22(3)
Article VI of the Constitution contemplates exemption only from
payment of taxes assessed on such properties as Property
taxes contra distinguished from Excise taxes. The imposition of the
gift tax on the property used for religious purpose is not a violation of
the Constitution. A gift tax is not a property by way of gift inter vivos,
the imposition of which on property used exclusively for religious
purposes, does not constitute an impairment of the Constitution. As
well observed by the learned respondent Court, the phrase "exempt
from taxation," as employed in the Constitution (supra) should not be
interpreted to mean exemption from all kinds of taxes. And there
being no clear, positive or express grant of such privilege by law, in
favor of petitioner, the exemption herein must be denied.
Pirovano v. CIR (14 SCRA 232)
Sec. 32[B] of the NIRC provides that Gifts, bequests and devises are
excluded from gross income liable to tax. Instead, such donations
are subject to estate or gift taxes. However, if the amount is received
on account of services rendered, whether constituting a demandable
debt or not (such as remuneratory donations under Civil Law), the
donation is considered taxable income.
Facts: De la Rama Steamship Co. insured the life of Enrico Pirovano
who was then its President and General Manager. The company
initially designated itself as the beneficiary of the policies but, after
Pirovanos death, it renounced all its rights, title and interest therein,
in favor of Pirovanos heirs.
The CIR subjected the donation to gift tax. Pirovanos heirs
contended that the grant was not subject to such donees tax
because it was not a simple donation, as it was made for a full and
adequate compensation for the valuable services by the late
Priovano (i.e. that it was remuneratory).
Issue: WON the donation is remuneratory and therefore not subject
to donees tax, but rather taxable as part of gross income.
Held: No. the donation is not remuneratory. There is nothing on
record to show that when the late Enrico Pirovano rendered services
as President and General Manager of the De la Rama Steamship
Co. and was largely responsible for the rapid and very successful
development of the activities of the company", he was not fully
compensated for such services. The fact that his services contributed
in a large measure to the success of the company did not give rise to
a recoverable debt, and the conveyances made by the company to
his heirs remain a gift or a donation. The companys gratitude was
the true consideration for the donation, and not the services
themselves.
De Luna v Abrigo
FACTS:

De Luna donated a portion of a 75 sq. m. lot to the Luzonian


University Foundation. The donation was embodied in a Deed of
Donation Intervivos and was subject to certain terms and conditions.
In case of violation or non-compliance, the property would
automatically revert to the donor. When the Foundation failed to
comply with the conditions, de Luna revived the said donation by
executing a Revival of Donation Intervivos with the following terms
and conditions:

It is true that under Article 764 of the New Civil Code, actions for the
revocation of a donation must be brought within four (4) years from
the non-compliance of the conditions of the donation. However, said
article does not apply to onerous donations in view of the specific
provision of Article 733 providing that onerous donations are
governed by the rules on contracts. The rules on prescription and not
the rules on donation applies in the case at bar.

1) The Donee shall construct on the land and at its expense a


Chapel, Nursery, and Kindergarten School to be named after St.
Veronica

003 SPS. AGRIPINO GESTOPA and ISABEL SILARIO


GESTOPA, petitioners, vs. COURT OF APPEALS and
MERCEDES DANLAG y PILAPIL, respondents.

2) Construction shall start immediately and must be at least 70%


completed three years from the date of the Deed unless the Donor
grants extensions

NOTES/F

G.R. No. 111904. October 5, 2000


QUISUMBING, J.

3) Automatic reversion in case of violation


The Foundation accepted and the donation was registered and
annotated in the TCT. By a Deed of Segregation, the foundation was
issued a TCT for area the lot donated while the remaining area was
retained by the De Luna.
The children and only heirs of the late De Luna (died after the
donation) filed a complaint with the RTC for the cancellation of the
donation on the ground that the terms were violated. The Foundation
defended itself by saying that it had partially and substantially
complied with the conditions and that the donor granted it an
indefinite extension of time to complete construction.
The RTC dismissed the petition on the ground of prescription (for
being filed after 4 years). The heirs did not file an MR and went
straight to the SC.
ISSUE:
Whether the action prescribes in 4 years (based on art. 764 NCCjudicial decree of revocation of the donation) or in 10 years (based on
art. 1144 enforcement of a written contract)
RULING: 10 years
The donation subject of this case is one with an onerous cause.
Under the old Civil Code, it is a settled rule that donations with an
onerous cause are governed not by the law on donations but by the
rules on contract. On the matter of prescription of actions for the
revocation of onerous donation, it was held that the general rules on
prescription apply. The same rules apply under the New Civil Code
as provided in Article 733 thereof which provides:
Donations with an onerous cause shall be governed by the rules on
contracts, and remuneratory donations by the provisions of the
present Title as regards that portion which exceeds the value of the
burden imposed.

FACTS:
1 Spouses Diego and Catalina Danlag were the owners of six parcels of unre
2 They executed three deeds of donation mortis causa, two of which are da
private respondent Mercedes Danlag-Pilapil:
a The first deed pertained to parcels 1 & 2.
b The second deed pertained to parcel 3.
c The last deed pertained to parcel 4.
d All deeds contained the reservation of the rights of the donors (1
(2) to sell, mortgage, or encumber the properties donated during
3 Jan 16, 1973 - Diego Danlag, with the consent of his wife, Catalina Danlag
plus two other parcels again in favor of private respondent Mercedes.
a This contained two conditions, that:
(1) the Danlag spouses shall continue to enjoy the fruits of th
(2) the donee can not sell or dispose of the land during
approval. Mercedes caused the transfer of the parcels' tax d
4 June 28, 1979 and Aug 21, 1979 - Diego and Catalina Danlag sold parcels
5 Sept 29 - the Danlags executed a deed of revocation recovering the six par
6 March 1, 1983 - Mercedes Pilapil (private respondent) filed with the RTC
title over the above parcels of land.
She alleged that she was an illegitimate daughter of Diego Danla
that she lived and rendered incalculable beneficial services to Die
In recognition of the services she rendered, Diego executed a
parcels of land.
She accepted the donation in the same instrument, openly and
and caused the transfer of the tax declarations to her name.
Through machination, intimidation and undue influence, Diego p
six parcels covered by the deed of donation.
Said donation inter vivos was coupled with conditions and, acco
them; that she had not been guilty of any act of ingratitude; and
that respondent Diego had no legal basis in revoking the subject
7 Gestopas and the Danlags averred - that the deed of donation dated Janua
through machinations and undue influence. Even assuming it was validly
death of the donor. Further, the donation was void for it left the donor, Diego
8 RTC - decision in favor of the defendants and against the plaintiff.
Donations declared revoked.
Diego Danlag- owner of the 6 parcels of land.
Deeds of sale valid and enforceable.
Ordering all tax declaration issued in the name of Mercedes Danlag Y
9 In rendering the above decision, the RTC found

that the reservation clause in all the deeds of donation indicated that Diegocomply
Danlag with
did not
themake
charges
any donation;
imposed in the donation, or ingratitude. The d
revocation.
The deed merely stated:
that the purchase by Mercedes of the two parcels of land covered by the Deed
of Donation
"WHEREAS,
the Mercedes
said donation
was a donation
that Mercedes failed to rebut the allegations of ingratitude she committed against Diego
Danlag; while
and that
committed
fraud andInter Vivos,
that
in
case
of
our
death,
the
above-described
properties will be
machination in preparing all the deeds of donation without explaining to Diego Danlag their contents.
said
intention
is
clearly
shown
in
paragraph
3
of
said donation to
10 CA - reversed the trial court.
donatedtoduring
our life-time,
and thatover
we are
one enjoying all
11 CA held that the reservation by the donor of lifetime usufruct indicated that he transferred
Mercedes
the ownership
thethe
donated
properties; that the right to sell belonged to the donee, and the donor's right
14 referred
Petitioners
to that
cited
of Mercedes'
merely giving
vehemence
consent; inthat
prohibiting
the donorthechanged
donor to gather co
his intention by donating inter vivos properties already donated mortis causais nothing on record, however, showing that private respondent prohibited
pertaining to the donated properties implied that the donation was inter vivos prevented the donor from gathering coconuts, this could hardly be consid
donated to her.
Article cover respondent's filing of the petition for quieting of title, where she
15 Finally, the records do not show that the donor-spouses instituted any acti
ISSUE: WON the donation was revoked.
Code. Consequently, the supposed revocation on September 29, 1979, had
HELD: NO.
DISPOSITIVE:
WHEREFORE, the instant petition for review is DENIED. The
RATIO:
AFFIRMED.
1 Before us, petitioners allege that the appellate court overlooked the fact that
the donor did not only reserve the right to enjoy the fruits of the
properties, but also prohibited the donee from selling or disposing the land without the consent and approval of the Danlag spouses.
implied that the donor still had control and ownership over the donated properties. Hence, the donation was
2 Crucial in resolving whether the donation was inter vivos or mortis causa
ownership over the properties upon the execution of the deed.
3 In ascertaining the intention of the donor, all of the deed's provisions mustCIR
be read
together.
V B.F.
GOODRICH PHIL., INC., ET AL GR No. 104171,
favor of Mercedes contained the following:
February 24, 1999
"That for and in consideration of the love and affection which the Donor inspires in the Donee and as an act of liberality and
generosity, the Donor hereby gives, donates, transfer and conveys by way of donation unto the herein Donee, her heirs, assigns and
Sunday, January 25, 2009 Posted by Coffeeholic Writes
successors, the above-described parcels of land;
Labels: Case Digests, Taxation
That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his lifetime and that of his
spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior consent and approval by the Donor and her
spouse during their lifetime.
xxx
Facts: Private respondent BF Goodrich Philippines Inc. was an
That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself sufficient properties in full
3, 1974.
As a condition for
ownership or in usufruct enough for his maintenance of a decent American
livelihood incorporation
consonanceprior
with to
his July
standing
in society.
That the Donee hereby accepts the donation and expresses her thanks
andthe
gratitude
for the of
kindness
generosity
of the Donor."
approving
manufacture
tires andand
other
rubber products,
private
4 Note first that the granting clause shows that Diego donated the properties out of love and affection for the donee.
respondent was required by the Central Bank to develop a rubber
donation inter vivos.
5 Second, the reservation of lifetime usufruct indicates that the donor intended to transfer the naked ownership over the properties.
plantation. In compliancetherewith, private respondent bought from
posed by the Court of Appeals, what was the need for such reservation if the donor and his spouse remained the owners of the properties?
6 Third, the donor reserved sufficient properties for his maintenance in accordance
with his standing
society,ofindicating
that the donorBasilan,
intended
the government
certain inparcels
land in Tumajubong
in
to part with the six parcels of land. Lastly, the donee accepted the donation.
under the Public
Land Act and theParity Amendment to the
acceptance clause is a mark that the donation is inter vivos. Acceptance1961
is a requirement
for donations
being in the form of a will, are not required to be accepted by the donees during the donors' lifetime.
1935 constitution, and there developed a rubber plantation.
7 Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged to the donee.
to give consent was merely intended to protect his usufructuary interests.
donors' lifetime implied that ownership had passed to the donees and donation was already effective during the donors' lifetime.
August 2, 1973,
theintent
Justice
rendered
that
8 The attending circumstances in the execution of the subject donation alsoOn
demonstrated
the real
of Secretary
the donor to
transferan
theopinion
ownership
over the subject properties upon its execution. Prior to the execution of donation
ownership rights of Americans over Public agricultural lands,
donations mortis causa.
9 As correctly observed by the Court of Appeals, the Danlag spouses wereincluding
aware ofthe
theright
difference
between
thetheir
two real
donations.
to dispose
or sell
estate, would be lost
intend to donate inter vivos, they would not again donate the four lots already donated
uponintention
expiration
of theisParity
Amendment.
proposition was erroneous because six years after, the spouses changed their
withon
theJuly
deed3,of 1974
revocation,
not only
disingeniousThus,
but
also fallacious. Petitioners cannot use the deed of revocation to show the spouses' intent because its validity is one of the issues in this case.
private respondent sold its Basilan land holding to Siltown
10 Petitioners aver that Mercedes' tax declarations in her name can not be a basis in determining the donor's intent.
get tax declarations from the government offices such that tax declarations
are Phil.
not considered
proofs
of ownership.
Realty
Inc., (Siltown)
for P500,000
on January 21, 1974. Under
otherwise, there is a presumption of regularity in the performance of official duties. We find that petitioners did not overcome this presumption of
terms
of the sale,
Siltown
the property
private
regularity in the issuance of the tax declarations. We also note that the the
Court
of Appeals
did not
refer would
to the lease
tax declarations
as to
proofs
of
ownership but only as evidence of the intent by the donor to transfer ownership.
respondent for 25 years with an extension of 25 years at the option of
11 Petitioners assert that since private respondent purchased two of the six parcels of land from the donor, she herself did not believe the donation
was inter vivos. As aptly noted by the CA, however, it was private respondent's
husband who purchased the two parcels of land.
private
respondent.
12 As a rule, a finding of fact by the CA, especially when it is supported by evidence on record, is binding on us. On the alleged purchase by her
husband of two parcels, it is reasonable to infer that the purchase was without private respondent's consent.
make the properties conjugal to her own disadvantage. That the purchase is against her self-interest, weighs strongly in her favor and gives
Private respondent books of accounts were examined by BIR for
credence to her claim that her husband was manipulated and unduly influenced to make the purchase, in the first place.
13 Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account of officiousness, failure by the donee to

purposes of determining its tax liability for 1974. This examination


resulted in the April 23, 1975 assessment of private respondent for
deficiency income tax which it duly paid. Siltowns books of accounts
were also examined, and on the basis thereof, on October 10, 1980,
the Collector of Internal Revenueassessed deficiency donors tax of
P1,020,850 in relation to said sale of the Basilan landholdings.

Private respondent contested this assessment on November 24,


1980. Another assessment dated March 16, 1981, increasing the
amount demanded for the alleged deficiency donors tax, surcharge,
interest and compromise penalty and was received by private
respondent on April 9, 1981. On appeal, CTA upheld the assessment.
On review, CA reversed the decision of the court finding that the
assessment was made beyond the 5-year prescriptive period in
Section

331

of

the

Tax

Code.

Issue: Whether or not petitioners right to assess has prescribed.

Held: Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC
which provides a 3-year prescriptive period for making assessments),
it is clean that the October 16, 1980 and March 16, 1981
assessments were issued by the BIR beyond the 5-year statute of
limitations. The court thoroughly studied the records of this case and
found no basis to disregard the 5-year period of prescription,
expressly set under Sec. 331 of the Tax Code, the law then in force.

For the purpose of safeguarding taxpayers from any unreasonable


examination, investigation or assessment, our tax law provides a

Facts: The CIR authorized certain BIR officers to examine the books
of accounts and otheraccounting records of Pascor Realty and
Development Corp. (PRDC) for 1986, 1987 and 1988. The
examination resulted in recommendation for the issuance of
an assessment of P7,498,434.65 and P3,015,236.35 for 1986 and
1987,
respectively.
The
Commissioner
filed
acriminal complaint for tax evasion against PRDC, its president and
treasurer before the DOJ. Private respondents filed immediately an
urgent request for reconsideration on reinvestigation disputing the tax
assessment and tax liability. The Commissioner denied private
respondents request for reconsideration/reinvestigation on the
ground that no formal assessment has been issued which the latter
elevated to the CTA on a petition for review. The
Commissioners motionto dismiss on the ground of the CTAs lack of
jurisdiction denied by CTA and ordered the Commissioner to file an
answer. Instead of complying with the order of CTA, Commissioner
filed a petition with the CA alleging grave abuse of discretion and lack
of jurisdiction on the part of CTA for considering the affidavit/report of
the revenue officers and the endorsement of said report as
assessment which may be appealed to the CTA. The CA sustained
the CTA decision and dismissed the petition.
Issues: (1) Whether or not the criminal complaint for tax evasion can
be construed as an assessment. (2) Whether or not an assessment
is necessary before criminal charges for tax evasion may be
instituted.
Held: The filing of the criminal complaint with the DOJ cannot be
construed as a formal assessment. Neither the Tax Code nor the
revenue regulations governing the protest assessments provide a
specific definition or form of an assessment.
An assessment must be sent to and received by the taxpayer, and
must demand payment of the taxes described therein within a
specific period. The revenue officers affidavit merely contained a
computation of respondents tax liability. It did not state a demand or
period for payment. It was addressed to the Secretary of Justice not
to the taxpayer. They joint affidavit was meant to support the criminal
complaint for tax evasion; it was not meant to be a notice of tax due
and a demand to private respondents for the payment thereof. The
fact that the complaint was sent to the DOJ, and not to private
respondent, shows that commissioner intended to file a criminal
complaint for tax evasion, not to issue an assessment.
An assessment is not necessary before criminal charges can be filed.
A criminal charge need not only be supported by a prima facie
showing of failure to file a required return. The CIR had, in such tax
evasion cases, discretion on whether to issue an assessment, or to
file a criminal caseagainst the taxpayer, or to do both.

statute of limitations in the collection of taxes. Thus, the law or


prescription, being a remedial measure, should be liberally construed
in order to afford such protection. As a corollary, the exceptions to the
law on prescription should perforce be strictly construed.

CIR V PASCOR REALTY & DEVT CORP et. al.


GR No. 128315, June 29, 1999

UNGAB vs. CUSI


UNGAB
vs.
CUSI
97
SCRA
877
GR
No.
L-41919-24
May
30,
1980
"An assessment of a deficiency is not necessary to a criminal
prosecution for wilful attempt to defeat and evade the income tax."
FACTS: The BIR filed six criminal charges against Quirico Ungab, a
banana saplings producer, for allegedly evading payment of taxes

and other violations of the NIRC. Ungab, subsequently filed a motion


to quash on the ground that (1) the information are null and void for
want of authority on the part of the State Prosecutor to initiate and
prosecute the said cases; and (2)that the trial court has no
jurisdiction to take cognizance of the case in view of his pending
protest against the assessment made by the BIR examiner. The trial
court denied the motion prompting the petitioner to file a petition for
certiorari and prohibition with preliminary injunction and restraining
order to annul and set aside the information filed.
ISSUE: Is the contention that the criminal prosecution is premature
since the CIR has not yet resolved the protest against the tax
assessment
tenable?
HELD: No. The contention is without merit. What is involved here is
not the collection of taxes where the assessment of the
Commissioner of Internal Revenue may be reviewed by the Court of
Tax Appeals, but a criminal prosecution for violations of the National
Internal Revenue Code which is within the cognizance of courts of
first instance. While there can be no civil action to enforce collection
before the assessment procedures provided in the Code have been
followed, there is no requirement for the precise computation and
assessment of the tax before there can be a criminal prosecution
under
the
Code.
An assessment of a deficiency is not necessary to a criminal
prosecution for wilful attempt to defeat and evade the income tax. A
crime is complete when the violator has knowingly and wilfully filed a
fraudulent return with intent to evade and defeat the tax. The
perpetration of the crime is grounded upon knowledge on the part of
the taxpayer that he has made an inaccurate return, and the
government's failure to discover the error and promptly to assess has
no connections with the commission of the crime.
20) Takenaka Corporation v. CIR

WON petitioner should be liable to pay both the 20% deficiency


interest and 20% delinquency interests.

RULING:
Yes, petitioner is liable to pay both interests.

There is no double imposition of interests as the law clearly


differentiates deficiency interest from delinquency interest. Deficiency
is defined as the amount still due and collectible from a taxpayer
upon audit or investigation; whereas delinquency is defined as the
failure of the taxpayer to pay the tax due on the date fixed by law or
indicated in the assessment notice or letter of demand.

These two (2) interests are different in nature. Deficiency interest is


imposed for the shortage of taxes paid, while delinquency interest is
imposed for the delay in payment of taxes. Hence, having different
nature for their existence, petitioner cannot assail double imposition
of interests as the law itself allows the simultaneous imposition of
these two kinds of interests.

First Lepanto Taisho Insurance Corporation vs. CIR [GR No. 197117,
April 10, 2013]
Post under case digests, Taxation at Thursday,
2016 Posted by Schizophrenic Mind

January

07,

FACTS: After submitting its corporate income tax return for taxable
FACTS:
Petitioner received a PAN from the BIR, and thereafter filed a protest
letter. Subsequently, petitioner received the FLD/AN, and also
submitted its formal protest. Petitioner availed of the tax amnesty
under RA No. 9480. Due to BIRs inaction, petitioner filed a petition
for review with the CTA, which ordered petitioner to pay the
deficiency tax plus 20% deficiency interest and 20% delinquency
interest on the unpaid amount. Petitioner filed a Motion for Partial
Reconsideration on the separate interests imposed on its alleged
deficiency tax, and paid the corresponding taxes based on its own
formula. The Motion for Partial Reconsideration was denied.
Petitioner appealed to the CTA EB.
ISSUE:

year ending December 31, 1997, petitioner received a Letter of


Authority, dated October 30, 1998, from respondent Commissioner of
Internal Revenue (CIR) to allow it to examine their books of account
and other accounting records for 1997 and other unverified prior
years.

On 29 December 1999, CIR issued internal revenue tax


assessments for deficiency income,

withholding, expanded

withholding, final withholding, value-added and documentary stamp


taxes for taxable year 1997. On 24 February 2000, petitioner
protested the said tax assessments.

in its 1997 final return that it wished the amount to be applied as


credit to next year.
ISSUE: Whether a stipulation between contending parties as to
correct withholding of taxes is sufficient evidence for deductibility of

On 15 April 1999, respondent filed its final adjustment return for the

expense

calendar year ending 31 December 1998, indicating a tax liability of


P5,799,056. Instead of applying to this amount its unused tax credit
carried over from 1997 (P4,736,188), respondent merely deducted

RULING: As to service/contractors and purchases, petitioner


contends that both parties already stipulated that it correctly withheld
the taxes due. Thus, petitioner is of the belief that it is no longer
required to present evidence to prove the correct payment of taxes

from its tax liability the taxes withheld at source for 1998 and paid the
balance of P5,581,877.
On 14 April 2000, respondent simultaneously filed with the BIR and
the Court of Tax Appeals (CTA) a claim for refund of its overpayment

withheld. As correctly ruled by the CTA Second Division and

in 1997 of P4,736,188. The CTA held that refund was proper because

En Banc, however, stipulations cannot defeat the right of the State

respondent complied with the requirements of timely filing of the

to collect correct taxes due on an individual or juridical person

claim and its substantiation.

because taxes are the lifeblood of our nation so its collection should
Petitioner sought reconsideration, contending that respondent is

be actively pursued without unnecessary impediment.

precluded from seeking a refund for its overpayment in 1997 after


respondent opted to carry-over and apply it to its future tax liability,
CIR VS. MIRANTO CHECK BATAS NATIN

following Section 76 of the 1997 NIRC. Petitioner claimed that

CD: Commissioner of Internal Revenue v. Mc.George Food


Industries, Inc.

Section 76 applies to respondent because by the time respondent


filed its final adjustment return for 1997 on 15 April 1998, the 1997
NIRC was already in force, having taken effect on 1 January 1998.

August 11, 2015 at 10:10 am (2010) (Case Digest, Taxation)


The CTA denied reconsideration, holding that the 1997 NIRC only
CIR

v.

G.R.

MC.GEORGE
No.

174157

FOOD

INDUSTRIES,

October

20,

INC.

covers transactions done after 1 January 1998.

2010

Carpio, J.

The Court of Appeals affirmed the CTA, ruling that the right to claim
for refund or tax credit must be governed by the law in effect at the

Doctrine:

time the excess credits were earned. Thus, the pertinent law

Pursuant to the general rule on the prospective application of laws,

applicable to the case at bar is Section 69 of the old Tax Code.

the 1997 NIRC operates to govern the conduct of corporate


taxpayers the moment it took effect on 1 January 1998.

Issue:
Whether or not the 1997 NIRC is the governing law

Facts:
On 15 April 1998, respondent filed with the BIR its final adjustment

Held:

income tax return for the calendar year ending 31 December 1997.

Yes. Section 76 of the 1997 NIRC controls.

The return indicated a net overpayment of P4,736,188. Exercising its


option to either seek a refund of this amount or carry it over to the

Section 76 should be applied following the general rule on the

succeeding year as tax credit, respondent chose the latter, indicating

prospective application of laws such that they operate to govern the

conduct of corporate taxpayers the moment the 1997 NIRC took


effect on 1 January 1998.
The lower courts grounded their contrary conclusion on the fact that
respondents overpayment in 1997 was based on transactions

ISSUE
Whether the subject assessment has become final, executory and
demandable due to the failure of petitioner to file an appeal before
the CTA within thirty (30) days from the lapse of the One Hundred
Eighty (180)-day period pursuant to Section 228 of the NIRC.

occurring before 1 January 1998. This analysis suffers from the twin
defects of missing the gist of the present controversy and
misconceiving the nature and purpose of Section 76. None of
respondents corporate transactions in 1997 is disputed here. Nor
can it be argued that Section 76 determines the taxability of
corporate transactions. To sustain the rulings below is to subscribe to
the untenable proposition that, had Congress in the 1997 NIRC
moved the deadline for the filing of final adjustment returns from 15
April to 15 March of each year, taxpayers filing returns after 15 March
1998 can excuse their tardiness by invoking the 1977 NIRC because
the transactions subject of the returns took place before 1 January
1998. A keener appreciation of the nature and purpose of the varied
provisions of the 1997 NIRC cautions against sanctioning this
reasoning.
Lascona Land Co. Inc. v. Commissioner of Internal Revenue, G.R.
No. 171251, 05 March 2012
24NOV
[PERALTA, J.]
FACTS
The Commissioner of Internal Revenue (CIR) issued an
assessment against Lascona Land Co., Inc. (Lascona) informing the
latter of its alleged deficiency income tax for the year 1993 in the
amount of P753,266.56. Consequently, on April 20, 1998, Lascona
filed a letter protest, but was denied by Norberto R. Odulio, Officer-inCharge (OIC), Regional Director, Bureau of Internal Revenue,
Revenue Region No. 8, Makati City. On April 12, 1999, Lascona
appealed the decision before the CTA. Lascona alleged that the
Regional Director erred in ruling that the failure to appeal to the CTA
within thirty (30) days from the lapse of the 180-day period rendered
the assessment final and executory. The CIR, however, maintained
that Lasconas failure to timely file an appeal with the CTA after the
lapse of the 180-day reglementary period provided under Section
228 of the National Internal Revenue Code (NIRC) resulted to the
finality of the assessment.

HELD
NO.
[T]he Court has held that in case the Commissioner failed to act on
the disputed assessment within the 180-day period from date of
submission of documents, a taxpayer can either: (1) file a petition for
review with the Court of Tax Appeals within 30 days after the
expiration of the 180-day period; or (2) await the final decision of the
Commissioner on the disputed assessments and appeal such final
decision to the Court of Tax Appeals within 30 days after receipt of a
copy of such decision. These options are mutually exclusive and
resort to one bars the application of the other.
Therefore, as in Section 228, when the law provided for the remedy
to appeal the inaction of the CIR, it did not intend to limit it to a single
remedy of filing of an appeal after the lapse of the 180-day
prescribed period. Precisely, when a taxpayer protested an
assessment, he naturally expects the CIR to decide either positively
or negatively. A taxpayer cannot be prejudiced if he chooses to wait
for the final decision of the CIR on the protested assessment. More
so, because the law and jurisprudence have always contemplated a
scenario where the CIR will decide on the protested assessment.
Meralco Securities v Savellano

Facts:
The late Juan G. Maniago (substituted in these proceedings by his
wife and children) submitted to petitioner Commissioner of Internal
Revenue confidential denunciation against the Meralco Securities
Corporation for tax evasion for having paid income tax only on 25 %
of the dividends it received from the Manila Electric Co, thereby
allegedly shortchanging the government of income tax due from 75%
of the said dividends.

Commissioner caused the investigation of the denunciation after


which he found and held that no deficiency corporate income tax was
due from the Meralco Securities Corporation since under the law
then prevailing (in the case of dividends received by a domestic or

foreign resident corporation liable to corporate income tax only 25%


shall be returnable for the purposes of the tax. The Commissioner
rejected Maniago's contention that the Meralco from whom the
dividends were received is not a domestic corporation liable to tax.

not controlled by the judgment or conscience of others. Mandamus


may not be resorted to so as to interfere with the manner in which the
discretion shall be exercised or to influence or coerce a particular
determination

In a letter, the Commissioner denied Maniago's claim for informer's


reward on a non-existent deficiency. This action of the Commissioner
was sustained by the Secretary of Finance. Maniago filed a petition
for mandamus to compel the Commissioner to impose the alleged
deficiency tax assessment on the Meralco Securities Corporation and
to award to him the corresponding informer's reward under the
provisions of R.A. 2338.

Moreover, since the office of the Commissioner of Internal Revenue


is charged with the administration of revenue laws, which is the
primary responsibility of the executive branch of the government,
mandamus may not be against the Commissioner to compel him to
impose a tax assessment not found by him to be due or proper for
that would be tantamount to a usurpation of executive functions.

The Commissioner filed a motion to dismiss, arguing that since in


matters of issuance and non-issuance of assessments, he is clothed
under the National Internal Revenue Code and existing rules and
regulations with discretionary power in evaluating the facts of a case
and since mandamus win not lie to compel the performance of a
discretionary power, he cannot be compelled to impose the alleged
tax deficiency assessment.

On the other hand, the Meralco Securities Corporation averred that


since no taxes have actually been recovered and/or collected,
Maniago has no right to recover the reward prayed for

The respondent judge rendered a decision granting the writ prayed


for and ordering the Commissioner to assess and collect from the
Meralco Securities Corporation the sum of P51,840,612.00 as
deficiency corporate income tax plus interests and surcharges due
thereon and to pay 25% to Maniago as informer's reward.

In the case, after the Commissioner who is specifically charged by


law with the task of enforcing and implementing the tax laws and the
collection of taxes had after a mature and thorough study rendered
his decision or ruling that no tax is due or collectible, and his decision
is sustained by the Secretary, such decision or ruling is a valid
exercise of discretion in the performance of official duty and cannot
be controlled much less reversed by mandamus.

No deficiency taxes may therefore be assessed and collected against


the said corporation. Since no taxes are to be collected, no informer's
reward is due to private respondents as the informer's heirs. Since no
assessment, much less any collection, has been made in the instant
case, respondent judge's writ for the Commissioner to pay
respondents 25% informer's reward is gross error and without factual
nor legal basis.

*Respondent judge has no jurisdiction to take cognizance of the case


because the subject matter thereof clearly falls within the scope of
cases now exclusively within the jurisdiction of the Court of Tax
Appeals.

Issue:
Whether or not mandamus is proper in this case

Held:

No. It is furthermore a well-recognized rule that mandamus only lies


to enforce the performance of a ministerial act or duty and not to
control the performance of a discretionary power. Purely
administrative and discretionary functions may not be interfered with
by the courts. Discretion means the power or right conferred upon
the office by law of acting officially under certain circumstances
according to the dictates of his own judgment and conscience and

*The determination of the correctness or incorrectness of a tax


assessment to which the taxpayer is not agreeable, falls within the
jurisdiction of the Court of Tax Appeals and not of the Court of First
Instance.

Notes:

Informer's reward is contingent upon the payment and collection of


unpaid or deficiency taxes. informer is entitled by way of reward only
to a percentage of the taxes actually assessed and collected.

imposed only on the 4th taxable year immediately following the year
in which the corporation commenced its operations.
Chamber of Real Estate and Builders Associations, Inc., v. The Hon.
Executive Secretary Alberto Romulo, et al
G.R. No. 160756. March 9, 2010
Facts: Petitioner Chamber of Real Estate and Builders Associations,
Inc. (CREBA), an association of real estate developers and builders
in the Philippines, questioned the validity of Section 27(E) of the Tax
Code which imposes the minimum corporate income tax (MCIT) on
corporations.
Under the Tax Code, a corporation can become subject to the MCIT
at the rate of 2% of gross income, beginning on the 4th taxable year
immediately following the year in which it commenced its business
operations, when such MCIT is greater than the normal corporate
income tax. If the regular income tax is higher than the MCIT, the
corporation does not pay the MCIT.
CREBA argued, among others, that the use of gross income as MCIT
base amounts to a confiscation of capital because gross income,
unlike net income, is not realized gain.
CREBA also sought to invalidate the provisions of RR No. 2-98, as
amended, otherwise known as the Consolidated Withholding Tax
Regulations, which prescribe the rules and procedures for the
collection of CWT on sales of real properties classified as ordinary
assets, on the grounds that these regulations:
Use gross selling price (GSP) or fair market value (FMV) as basis for
determining
the income tax on the sale of real estate classified as ordinary
assets, instead of the entitys net taxable income as provided for
under the Tax Code;
Mandate the collection of income tax on a per transaction basis,
contrary to the Tax Code provision which imposes income tax on net
income at the end of the taxable period;
Go against the due process clause because the government collects
income tax even when the net income has not yet been determined;
gain is never assured by mere receipt of the selling price; and
Contravene the equal protection clause because the CWT is being
charged upon real estate enterprises, but not on other business
enterprises, more particularly, those in the manufacturing sector,
which do business similar to that of a real estate enterprise.
Issues: (1) Is the imposition of MCIT constitutional? (2) Is the
imposition of CWT on income from sales of real properties classified
as ordinary assets constitutional?
Held: (1) Yes. The imposition of the MCIT is constitutional. An
income tax is arbitrary and confiscatory if it taxes capital, because it
is income, and not capital, which is subject to income tax. However,
MCIT is imposed on gross income which is computed by deducting
from gross sales the capital spent by a corporation in the sale of its
goods, i.e., the cost of goods and other direct expenses from gross
sales. Clearly, the capital is not being taxed.

Secondly, the law allows the carry-forward of any excess of the MCIT
paid over the normal income tax which shall be credited against the
normal income tax for the three immediately succeeding years.
Thirdly, since certain businesses may be incurring genuine repeated
losses, the law authorizes the Secretary of Finance to suspend the
imposition of MCIT if a corporation suffers losses due to prolonged
labor dispute, force majeure and legitimate business reverses.
(2) Yes. Despite the imposition of CWT on GSP or FMV, the income
tax base for sales of real property classified as ordinary assets
remains as the entitys net taxable income as provided in the Tax
Code, i.e., gross income less allowable costs and deductions. The
seller shall file its income tax return and credit the taxes withheld by
the withholding agent-buyer against its tax due. If the tax due is
greater than the tax withheld, then the taxpayer shall pay the
difference. If, on the other hand, the tax due is less than the tax
withheld, the taxpayer will be entitled to a refund or tax credit.
The use of the GSP or FMV as basis to determine the CWT is for
purposes of practicality and convenience. The knowledge of the
withholding agent-buyer is limited to the particular transaction in
which he is a party. Hence, his basis can only be the GSP or FMV
which figures are reasonably known to him.
Also, the collection of income tax via the CWT on a per transaction
basis, i.e., upon consummation of the sale, is not contrary to the Tax
Code which calls for the payment of the net income at the end of the
taxable period. The taxes withheld are in the nature of advance tax
payments by a taxpayer in order to cancel its possible future tax
obligation. They are installments on the annual tax which may be due
at the end of the taxable year. The withholding agent-buyers act of
collecting the tax at the time of the transaction, by withholding the tax
due from the income payable, is the very essence of the withholding
tax method of tax collection.
On the alleged violation of the equal protection clause, the taxing
power has the authority to make reasonable classifications for
purposes of taxation. Inequalities which result from singling out a
particular class for taxation, or exemption, infringe no constitutional
limitation. The real estate industry is, by itself, a class and can be
validly treated differently from other business enterprises.
What distinguishes the real estate business from other manufacturing
enterprises, for purposes of the imposition of the CWT, is not their
production processes but the prices of their goods sold and the
number of transactions involved. The income from the sale of a real
property is bigger and its frequency of transaction limited, making it
less cumbersome for the parties to comply with the withholding tax
scheme. On the other hand, each manufacturing enterprise may
have tens of thousands of transactions with several thousand
customers every month involving both minimal and substantial
amounts.

Various safeguards were incorporated into the law imposing MCIT.


Firstly, recognizing the birth pangs of businesses and the reality of
the need to recoup initial major capital expenditures, the MCIT is

PAGCOR V. BIR GR NO. 172087 MARCH 15, 2011


FACTS:

PAGCOR was created pursuant to PD No. 1067-A2 on


January 1, 1977.

invested within 6 months from the date the dividend income is


received in the following:

Simultaneous to its creation, P.D. No. 1067-B3 was issued


exempting PAGCOR from the payment

o operation of the casino(s) or investments in any affiliate


activity that will ultimately redound to

of any type of tax, except a franchise tax of 5% of the gross


revenue.

the benefit of the Corporation; or any other corporation with


whom the Corporation has any

P.D. No. 1399 was later issued expanding the scope of


PAGCOR's exemption.

existing arrangements in connection with or related to the


operations of the casino(s);

To consolidate the laws pertaining to the franchise and


powers of PAGCOR, P.D. No. 18696

(b) Government bonds, securities,


government debentures; or

Sec. 13. Exemptions. x x x

(c) BOI-registered or export-oriented corporation(s).7

(1) Customs Duties, taxes and other imposts on importations.

PAGCOR's tax exemption was removed through P.D. No.


1931, but it was later restored by Letter

(2) Income and other taxes.


(a) Franchise Holder:
tax of any kind or form, income or otherwise, as well as fees,
charges, or levies of whatever

treasury

notes,

or

of Instruction No. 1430


R.A. No. 8424 took effect. Section 27 (c) of R.A. No. 8424
provides that GOCCs shall pay

nature

corporate income tax, except petitioner PAGCOR, GSIS, SSS,


PHIC, and PCSO

tax or charge attach in any way to the earnings of the


Corporation, except a Franchise Tax of

With the enactment of R.A. No. certain sections of the NIRC


were amended. The particular amendment

5%of the gross revenue or earnings derived by the Corporation


from its operation under this

that is at issue in this case is Section 1 of R.A. No. 9337, which


amended Section 27 (c) of NIRC by

Franchise.

excluding PAGCOR from the enumeration of GOCCs that are


exempt from payment of corporate

(b) Others:
earnings derived from the operations conducted under the
franchise
charges, fees or levies, shall inure to the benefit of and
extend to corporation(s), association(s),

income tax
Different groups came to this SC via petitions for certiorari
and prohibition assailing the validity
and constitutionality of R.A. No. 9337, in particular:

agency(ies), or individual(s) with whom the Corporation or


operator has any contractual

1. Section 4, which imposes a 10% Value Added Tax (VAT) on


sale of goods and properties;

relationship in connection with the operations of the casino(s)

Section 5, which imposes a 10% VAT on importation of goods;


and

The fee or remuneration of foreign entertainers contracted by


the Corporation or operator in
pursuance of this provision

Section 6, which imposes a 10% VAT on sale of services and use


or lease of properties, all contain

(3) Dividend Income.

a uniform proviso authorizing the President, upon the


recommendation of the Secretary of Finance,

provided that such dividend income shall be totally


exempted from income or other form of taxes if

to raise the VAT rate to 12%.

The said provisions were alleged to be violative of Section 28


(2), Article VI of the

Under Section 1 of R.A. No. 9337, amending Section 27 (c) of


the NIRC of 1977, petitioner is no longer

Constitution, which section vests in Congress the exclusive


authority to fix the rate of taxes,

exempt from corporate income tax as it has been effectively


omitted from the list of GOCCs that are

and of Section 1, Article III of the Constitution on due process,


as well as of Section 26 (2), Article

exempt from it. PAGCOR argues that such omission is


unconstitutional, as it is violative of its right to equal

VI of the Constitution, which section provides for the "no


amendment rule" upon the last reading

protection of the laws under Section 1, Article III of the


Constitution:

of a bill;

Legislative bodies are allowed to classify the subjects of


legislation. If the classification is reasonable, the

2. Sections 8 and 12 were alleged to be violative of Section 1,


Article III of the Constitution, or the
guarantee of equal protection of the laws, and Section 28 (1),
Article VI of the Constitution; and
3. other technical aspects of the passage of the law, questioning
the manner it was passed.
Court dismissed all the petitions and upheld the
constitutionality of R.A. No. 9337.12
BIR issued RR No. 16-2005,13 specifically identifying
PAGCOR as one of the franchisees subject
to 10% VAT imposed under Section 108 of the National Internal
Revenue Code of 1997, as
amended by R.A. No. 9337.

law may operate only on some and not all of the people without
violating the equal protection clause. The
classification must, as an indispensable requisite, not be
arbitrary. To be valid, it must conform to the
following requirements:
1. It must be based on substantial distinctions.
2. It must be germane to the purposes of the law.
3. It must not be limited to existing conditions only.
4. It must apply equally to all members of the class.18
It is not contested that before the enactment of R.A. No. 9337,
petitioner was one of the five

ISSUE

GOCCs exempted from payment of corporate income tax as


shown in R.A. No. 8424, Section 27

whether or not PAGCOR is still exempt from corporate income


tax and VAT with the

(c) of which, reads:

enactment of R.A. No. 9337.

under R.A. No. 8424, the exemption of PAGCOR from paying


corporate income tax was not based on a

RULING
petition is PARTLY GRANTED.

classification showing substantial distinctions which make for


real differences, but the exemption was

Section 1 of Republic Act No. 9337, amending Section 27 (c)


of the National Internal Revenue Code of

granted upon the request of PAGCOR that it be exempt from the


payment of corporate income tax.

1997, by excluding petitioner PAGCOR from the enumeration of


government-owned and controlled

With the subsequent enactment of R.A. No. 9337, amending


R.A. No. 8424, PAGCOR has been excluded

corporations exempted from corporate income tax is valid and


constitutional,

from the enumeration of GOCCs that are exempt from paying


corporate income tax. The records of the

while RR No. 16-2005 insofar as it subjects PAGCOR to 10%


VAT is null and void for being contrary to the

Bicameral Conference Meeting dated April 18, 2005, of the


Committee on the Disagreeing Provisions of

NIRC, as amended by Republic Act No. 9337.

Senate Bill No. 1950 and House Bill No. 3555, show that it is the
legislative intent that PAGCOR be subject

to the payment of corporate income tax.


PAGCOR failed to prove that it is still exempt from the
payment of corporate income tax,
considering that Section 1 of R.A. No. 9337 amended Section 27
(c) of the National Internal
Revenue Code of 1997 by omitting PAGCOR from the
exemption.
The legislative intent, as shown by the discussions in the
Bicameral Conference Meeting, is to require
PAGCOR to pay corporate income tax; hence, the omission or
removal of PAGCOR from exemption from
the payment of corporate income tax.
the express mention of the GOCCs exempted from payment
of corporate income tax excludes all
others. Not being excepted, petitioner PAGCOR must be
regarded as coming within the purview

exemption of PAGCOR from corporate income tax, which may


affect any benefits to PAGCORs
transactions with private parties, is not violative of the nonimpairment clause of the Constitution.
Anent the validity of RR No. 16-2005, the Court holds that the
provision subjecting PAGCOR to
10% VAT is invalid for being contrary to R.A. No. 9337. Nowhere
in R.A. No. 9337 is it provided
that petitioner can be subjected to VAT. R.A. No. 9337 is clear
only as to the removal of
petitioner's exemption from the payment of corporate income
tax, which was already addressed
above by this Court.
Petitioner contends that the tax exemption under NIRC refers
only to PAGCOR's direct tax liability and not
to indirect taxes, like the VAT. SC disagree.

of the general rule that GOCCs shall pay corporate income tax,
expressed in the maxim: exceptio

no distinction on whether the taxes are direct or indirect;


PAGCOR is also exempt from indirect taxes, like

firmat regulam in casibus non exceptis.28

VAT, as follows:

Petitioner further contends that Section 1 (c) of R.A. No. 9337


is null and void ab initio for violating the non-

The manner of charging VAT does not make PAGCOR liable


to said tax.

As regards franchises, Section 11, Article XII of the


Constitution31 provides that no franchise or

It is settled rule that in case of discrepancy between the


basic law and a rule or regulation issued

right shall be granted except under the condition that it shall be


subject to amendment, alteration,

to implement said law, the basic law prevails, because the said
rule or regulation cannot go

or repeal by the Congress when the common good so requires.

beyond the terms and provisions of the basic law.

In this case, PAGCOR was granted a franchise to operate and


maintain gambling casinos, clubs

RR No. 16-2005, therefore, cannot go beyond the provisions


of R.A. No. 9337. Since PAGCOR is

and other recreation or amusement places, sports, gaming


pools, i.e., basketball, football,

exempt from VAT under R.A. No. 9337, the BIR exceeded its
authority in subjecting PAGCOR to

lotteries, etc.

10% VAT under RR No. 16-2005; hence, the said regulatory


provision is hereby nullified.

Under Section 11, Article XII of the Constitution, PAGCORs


franchise is subject to amendment, alteration
or repeal by Congress such as the amendment under Section 1
of R.A. No. 9377. Hence, the provision in

TOSHIBA VS. CIR

Section 1 of R.A. No. 9337, amending Section 27 (c) of R.A. No.


8424 by withdrawing the
FACTS

Toshiba is a domestic corporation registered with the Philippine


Economic Zone Authority (PEZA) as an Economic Zone (ECOZONE)
export enterprise.It filed two separate applications for tax
credit/refund of its unutilized input VAT payments. The CIR denied
the application. On appeal, the CTA ruled that Toshiba is entitled to
the credit/refund of the input VAT paid on its purchases of goods and
services relative to such zero-rated export sales. The Court of
Appeals reversed the decision of the CTA in the petition for review
stating that Toshiba is a tax exempt entity under R.A. No. 7916 thus
not entitled to refund the VAT payments made in the domestic
purchase of goods and services.
ISSUE
Is Toshiba entitled to VAT refund?

HELD
YES.Such export sales took place before October 15, 1999, when
the old rule on the VAT treatment of PEZA-registered enterprises still
applied. Under this old rule, it was not only possible, but even
acceptable, for Toshiba, availing itself of the income tax holiday
option under Section 23 of Republic Act No. 7916, in relation to
Section 39 of the Omnibus Investments Code of 1987, to be subject
to VAT, both indirectly (as purchaser to whom the seller shifts the VAT
burden) and directly (as seller whose sales were subject to VAT,
either at ten percent [10%] or zero percent [0%])

Meanwhile, the Mirant case was promulgated, fixing the reckoning


date of the two-year prescriptive period at the close of the taxable
quarter when the relevant sales were made, as stated in Section
112(A).

The CTA Division denied the CIRs Motion for Partial


Reconsideration, standing by the Atlas doctrine. The CIR elevated
the matter to the CTA EB via a Petition for Review, contending that
the judicial claim of Mindanao II was filed beyond the 30-day period,
and that Mindanao II erroneously fixed Jul. 26, 2004, the date when
the return for the second quarter was filed, as the date from which to
reckon the two-year prescriptive period for filing an application for
refund or credit of unutilized input VAT. As the two-year prescriptive
period ended on Jun. 30, 2006, the Petition for Review of Mindanao
II was filed out of time on Jul. 21, 2006. The CIR invoked the recently
promulgated Mirant to support this theory.

The CTA EB denied the CIRs petition, holding that the CTA Division
correctly applied the Atlas ruling. It reasoned that Atlas remained to
be the controlling doctrine. Mirant was a new doctrine and, as such,
the latter should not apply retroactively to Mindanao II who had relied
on the old doctrine of Atlas and had acted on the faith thereof.

CIR v. Mindanao II Geothermal Partnership

The CTA EB also held that the 30-day period only applies when the
CIR actually denies the claim, but in cases of CIR inaction, the 30day period is not a mandatory requirement. The judicial claim is
seasonably filed as long as it is filed after the lapse of the 120-day
waiting period but within two years from the date of filing of the
return. The CIR filed a Motion for Partial Reconsideration, but was
denied for lack of merit.

FACTS:

ISSUE:

On Oct. 6, 2006, Mindanao II filed with the BIR an application for the
refund or credit of accumulated unutilized creditable input taxes. The
CIR failed to act on the request within a period of 120 days, or on
Feb. 3, 2006. Mindanao II did not file an appeal within the 30-day
period, or on Mar. 5, 2006, but filed a petition for review with the CTA
on Jul. 21, 2006. While the application for refund was pending with
the CTA, the Atlas case was promulgated, holding that the two-year
prescriptive period for the filing a claim is to be reckoned from the
date of filing of the corresponding quarterly VAT return and payment
of the tax. The CTA Division partially granted the claim for refund.
The CIR filed a Motion for Partial Reconsideration pointing out that
prescription had already set in, since the appeal to the CTA was filed
beyond the last day to appeal, invoking Section 112(D) of the NIRC.

WON Mindanao II is entitled to the claim for refund/credit.

RULING:
No, Mindanao II is not entitled to the claim for refund or credit
because its judicial claims were filed out of time, even if its
application for refund was filed on time.

The application for refund was filed on time


Aichi case: It is only the administrative claim that must be filed within
the two-year prescriptive period; the judicial claim need not fall within
the two-year prescriptive period. The reckoning date of the two-year
period follows the rule prior to the advent of either Atlas or Mirant.
Accordingly, the proper reckoning date, as provided by Section
112(A) of the NIRC, is the close of the taxable quarter when the
relevant sales were made.

The judicial claims were filed out of time


The 30-day period also applies to appeals from inaction. The San
Roque case pronounced that the taxpayer can file the 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.
Mindanao II filed its judicial claim on Jul. 21, 2006, 138 days after the
lapse of the 30-day period on Mar. 5, 2006. The San Roque case
declared that the 30-day period to appeal is both mandatory and
jurisdictional, but provided an exception: BIR Ruling No. DA-489-03
dated Dec. 10, 2003, which declares 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."

As mentioned above, Mindanao II filed its judicial claim after the


issuance of BIR Ruling No. DA-489-03, but before its reversal on
Oct. 5, 2010. However, while the BIR ruling was in effect when
Mindanao II filed its judicial claim, the rule cannot be properly
invoked since the BIR ruling contemplates premature filing, while
Mindanao IIs situation is one of late filing.

SUMMARY OF RULES:

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, applied from Jun. 8, 2007
Sept. 12, 2008. Atlas states that the two-year 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)

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 Dec. 10, 2003 Oct. 5, 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)

COMMISSIONER OF CUSTOMSvs. PHILIPPINE PHOSPHATE


FERTILIZER CORP (UNDIGESTED)
The financial planners of the State are often confounded by the
precarious balance between the need to provide a conducive
investment climate and the need to enhance revenue collections. In
the present Petition for Review, the Court is called upon to interpret
the provisions of a law designed to benefit investors with tax
exemptions. Tax exemptions are generally construed strictly against
the taxpayer; yet, when the purported ambiguities in the law are more
imagined than real, there should be no hesitation to rule for the
taxpayer.
The factual backdrop of the case is uncomplicated.
Respondent Philippine Phosphate Fertilizer Corporation (Philphos) is
a domestic corporation engaged in the manufacture and production
of fertilizers for domestic and international distribution. Its base of
operations is in the Leyte Industrial Development Estate, an export
processing zone.[1] It is also registered with the Export Processing
Zone Authority (EPZA), now known as the Philippine Export Zone
Authority (PEZA). [2]
The manufacture of fertilizers required Philphos to purchase fuel and
petroleum products for its machineries. These fuel supplies are
considered indispensable by Philphos, as they are used to run the
machines and equipment and in the transformation of raw materials
into fertilizer.[3] The fuel supplies are secured domestically from local
distributors, in this case, Petron Corporation (Petron), which imports
the same and pays the corresponding customs duties to the Bureau

of Customs; and, the ad valorem and specific taxes to the Bureau of


Internal Revenue. When the fuel and petroleum products are
delivered at Philphoss manufacturing plant inside the Leyte Industrial
Development Estate, Philphos is billed by Petron the corresponding
customs duties imposed on these products. Effectively thus,
Philphos reimburses Petron for the customs duties on the purchased
fuels and petroleum products which are passed on by the Petron as
part of the selling price.[4]
Under this arrangement, Philphos made several purchases from
Petron of fuels and other petroleum products used directly or
indirectly in the manufacture of fertilizers for the period of October
1991 until June 1992.[5] During the period in question, Philphos
indirectly paid as customs duties, the amount of Twenty Million One
Hundred Forty Nine Thousand Four Hundred Seventy Three Pesos
and Seventy Seven Centavos (P20,149,473.77).[6]
In a letter to the Bureau of Customs, dated 18 September 1992,
Philphos sought the refund of customs duties it had paid for the
period covering the months of October to December 1991, and
January to June, 1992.[7] It pointed out that Philphos, being an
enterprise registered with the export processing zone, is entitled to
tax incentives under Presidential Decree No. 66 (EPZA Law),
referring specifically to Section 17 thereof which exempts from
customs and internal revenue laws, supplies brought into the export
processing zone. Consequently, Philphos argued that the customs
duties billed by Petron on Philphos should be refunded.
The Bureau of Customs denied the claim for refund in a letter dated 4
January 1993.[8] Hence, a Petition for Review was filed with the Court
of Tax Appeals (CTA), assailing the denial of the refund. The CTA
ruled for Philphos in a Decision[9] dated 5 October 1995, ordering the
issuance of a Tax Credit Certificate in the amount of Twenty Million
One Hundred Forty Nine Thousand Four Hundred Seventy Three
Pesos and Seventy Seven Centavos (P20,149,473.77) in favor of
Philphos. The matter was elevated by the Commissioner of Customs
(Commissioner) to the Court of Appeals (CA), which eventually
affirmed the CTAs Decision in toto.[10]
Both the CTA and the CA relied upon Section 17(1) of the EPZA Law
to justify the conclusion that Philphos is entitled to the refund. Before
this Court, the Commissioner argues that since the importation of the
subject products, made by the seller Petron, had already been finally
terminated, all future claims for refund are thus barred. It likewise
insists that controlling in this case is Section 18(i) of the EPZA Law,
under which claims for refunds similar to Philphoss are precluded.
Finally, the Commissioner posits that since a refund on tax credit
partakes the nature of an exemption, the grant thereof must be
explicit.
There is no need to inquire into the factual basis for the amount
sought to be refunded.[11] Petitioner does not dispute the amount, but
only the legal basis for the exemption. Moreover, since the Court
itself is not a trier of facts it will respect primarily the findings of the
ultimate trier of facts, namely: the CA. In this case, however, there is
coalescence in the findings of the two courts below.
The EPZA Law, promulgated in 1972, has since been superseded by
Republic Act No. 7916, or The Special Economic Zone Act of 1995.
However, since the claim for exemption covers the years 1991 and
1992, or before the enactment of Republic Act No. 7916, the
provisions of the EPZA Law are applicable in the present petition.
Consideration of the general philosophy and thrust of the EPZA Law
cannot be evaded. The export processing zone is intended to be a
viable commercial, industrial and investment area. [12] The enunciated
policy of the EPZA Law is to encourage and promote foreign
commerce as a means of making the Philippines a center of
international trade; strengthening our export trade and foreign

exchange position; hastening industrialization; reducing domestic


unemployment; and accelerating the development of the country, by
establishing export processing zones in strategic locations in the
Philippines.[13]
As noted by the CTA, the basic policy in establishing export
processing zones is to attract enterprises, especially foreign
investors, who will be manufacturing products primarily for export and
be able to do so without their supplies and raw materials entering,
and the export products leaving, the Philippine territory within the
context of customs and revenue regulations. [14] From a macroperspective though, export processing zones are not intended to
solely benefit investors. These zones are scattered throughout the
country in remote areas and have the patent benefit of creating
employment opportunities within their localities. It is the presence of
tangible tax benefits attached to these zones which make them
viable as investment locations, areas which ordinarily would be
overlooked.
The incentives offered to enterprises duly registered with the PEZA
consist, among others, of tax exemptions. These benefits may, at first
blush, place the government at a disadvantage as they preclude the
collection of revenue. Still, the expectation is that the tax breaks
ultimately redound to the benefit of the national economy, enticing as
they do more enterprises to invest and do business within the zones;
thus creating more employment opportunities and infusing more
dynamism to the vibrant interplay of market forces.
Section 17 of the EPZA Law particularizes the tax benefits accorded
to duly registered enterprises. It states:
SEC. 17. Tax Treatment of Merchandize in the Zone. (1) Except as
otherwise provided in this Decree, foreign and domestic
merchandise,
raw
materials,supplies, articles,
equipment,
machineries, spare parts and wares of every description, except
those prohibited by law, brought into the Zone to be sold, stored,
broken up, repacked, assembled, installed, sorted, cleaned, graded,
or otherwise processed, manipulated, manufactured, mixed with
foreign or domestic merchandise or used whether directly or
indirectly in such activity, shall not be subject to customs and internal
revenue laws and regulations nor to local tax ordinances, the
following provisions of law to the contrary notwithstanding. (emphasis
supplied)
The cited provision certainly covers petroleum supplies used, directly
or indirectly, by Philphos to facilitate its production of fertilizers,
subject to the minimal requirement that these supplies are brought
into the zone. The supplies are not subject to customs and internal
revenue laws and regulations, nor to local tax ordinances. It is clear
that Section 17(1) considers such supplies exempt even if they are
used indirectly, as they had been in this case.
Since Section 17(1) treats these supplies for tax purposes as beyond
the ambit of customs laws and regulations, the arguments of the
Commissioner invoking the provisions of the Tariff and Customs
Code must fail. Particularly, his point that the importation of the
petroleum products by Petron was deemed terminated under Section
1202[15] of the Tariff and Customs Code, and that the termination
consequently barred any future claim for refund under Section
1603[16] of the same law is misplaced and inconsequential. Moreover,
the cited provisions of the Tariff and Customs Code if related to
Section 17(1) of the EPZA Law would significantly render the
argument strained and, if upheld, obviate many of the benefits
granted by Section 17(1), for the provision does not limit the tax
exemption only to direct taxes. Following the Commissioners
interpretation, any duly registered enterprise sought to be held liable
for the controverted customs duty because the importer had shifted
the duty to the buyer would forever be precluded from challenging

the duty, which it is not in the first place obliged to pay under the
law. Hand in hand with its patent noxiousness to the spirit of the
EPZA Law, the approach calls for the unwarranted application of the
Tariff and Customs Code to investors and players in the zones, which
under the EPZA Law are beyond the reach of domestic customs and
tax laws, as well as regulations.
Neither would the prescriptive periods or procedural requirements
provided under the Tariff and Customs Code serve as a bar for the
claim for refund. The holding of the CTA on this point is illuminating:
Contrary to the allegation of the Respondent that Section 17(1) does
not provide for duty and tax exemption privilege, this Court
disagrees. That phrase shall not be subject to customs and internal
revenue laws and regulations nor to local tax ordinances, the
provisions of law to the contrary notwithstanding cannot be
interpreted in any other manner than to mean that merchandise or
supplies brought into the zone are exempt from customs duties and
taxes. The incentive given under Section 17(1) is broader than a
mere tax exemption. The phrase is so broad to include not only the
exemption from customs duties and taxes but everything required in
the enforcement of the customs and internal revenue laws save on
the exceptions and conditions specified in the EPZA law
itself. Considering that the customs and internal revenue laws are
primarily enacted to impose duties and taxes, the phrase cannot be
interpreted to exclude these impositions. More so, the phrase will
also include exemption from other rules and regulations which are
normally followed in the discharge of importation such as the filing of
import entries, examinations and other requirements attendant to the
importation of goods into the country.[17]
Even our recent ruling in Nestle Philippines, Inc. v. Court of Appeals,
[18]
to the effect that the claim for refund of customs duties in
protestable cases may be foreclosed by the failure to file a written
protest, is not apropos in the case at bar because petitioner therein
was not a duly registered enterprise under the EPZA Law and thus
not entitled to the exemptions therein.[19]
This leads to another question well-worth resolving what is the
prescriptive period which a duly registered enterprise should
observe in applying for a refund to which it is entitled under the EPZA
Law? The EPZA Law itself is silent on the matter, and the prescriptive
periods under the Tariff and Customs Code and other revenue laws
are inapplicable, by specific mandate of Section 17(1) of the EPZA
Law. This does not mean though that prescription will not lie, as the
Civil Code provisions on solutio indebiti[20] may find application. The
Civil Code is not a customs and internal revenue law. The Court has
in the past sanctioned the application of the provisions on solutio
indebiti in cases when taxes were collected thru error or mistake.
[21]
Solutio indebiti is a quasi-contract, thus the claim for refund must
be commenced within six (6) years from date of payment pursuant to
Article 1145(2) of the New Civil Code.[22] Clearly then, Philphoss right
to refund has not yet prescribed.
Still, the Commissioner insists that it is Section 18(i) of the EPZA Law
that is applicable, and precludes Philphoss claim for refund. The
provision reads:
SEC. 18. Additional Incentives. A zone registered enterprise shall
also enjoy the following incentives:
xxx
(i)Tax credit. Every registered zone enterprise shall enjoy a tax
credit equivalent to the sales, compensating and specific taxes and
duties on supplies, raw materials and semi-manufactured products
used in the manufacture, processing or production of its export
products and forming part thereof; x x x. (emphasis supplied) [23]
Indubitably, Section 18 does not exclude or otherwise limit the broad
grant of benefits accorded by Section 17. These additional

incentives under Section 18 are to be enjoyed in conjunction with


the incentives under Section 17. This is indicated by the use of the
words additional and shall also in the first paragraph of Section
18. Even the Commissioner admits the distinct character of Section
18.[24] The divergent natures of the benefits under Sections 17 and 18
become readily apparent upon examination of the additional
incentives enumerated under Section 18. They include allowance of
net-operating loss carry-over, accelerated depreciation, exemption
from export tax, foreign exchange assistance, financial assistance,
exemptions for local taxes and licenses, deductions for labor training
services, and deductions for organizational and pre-operating
expenses.[25] Section 18 does not serve the purpose of qualifying the
benefits provided under Section 17. Instead, it enumerates another
class of incentives also available to registered enterprises, in addition
to, and apart from, the general benefits accorded under Section 17.
There can be no doubt that the additional incentives under Section
18 are separate and distinct from those under the preceding section.
Still, the Commissioner argues that Section 18(i) of the EPZA Law
specifically controls the issuance of a tax credit equivalent to duties
on supplies purchased, and that the provision clearly states that such
supplies must form part of the export products, particularly fertilizer.
A plain reading of Section 18(i) unmistakably indicates that the tax
credit as an additional incentive avails only if the supplies actually
form part of the export products. There is an apparent distinction
between this provision and Section 17(1) which exempts from
taxation supplies used indirectly by the registered enterprise. It is
apparent that the petroleum supplies in question, which physically do
not form part of the exportable fertilizers, are exempt from taxation
under Section 17(1), but no tax credit could be claimed on them
under Section 18(i).
Still, this acknowledged distinction is not a cause for abject reversal
of the assailed decisions, as it does not affect the key
disposition. For Section 17(1) is determinative of the fundamental
question whether there is legal basis for the claim of exemption. On
the other hand, Section 18(i) does not impose limitations on the
exemptions granted in the preceding provisions, but would only
affect, if at all, the modality by which the exemption takes form.
Obviously, the relief sought for erroneously paid taxes would be a
return to the taxpayer of the amount paid to the government. The
Tax Reform Act of 1997 authorizes either a refund or credit as a
means of recovery of tax erroneously or illegally collected. [26] It may
be that there is no essential difference between a tax refund and a
tax credit since both are modes of recovering taxes erroneously or
illegally paid to the government. [27] Yet, there are unmistakable formal
and practical differences between the two modes. Formally, a tax
refund requires a physical return of the sum erroneously paid by the
taxpayer, while a tax credit involves the application of the
reimbursable amount against any sum that may be due and
collectible from the taxpayer.[28] On the practical side, the taxpayer to
whom the tax is refunded would have the option, among others, to
invest for profit the returned sum, an option not proximately available
if the taxpayer chooses instead to receive a tax credit.
It should be noted that in its initial letter to the Commissioner dated
18 September 1992, Philphos specifically requested the refund of
Twenty Million One Hundred Forty Nine Thousand Four Hundred
Seventy Three Pesos and Seventy Seven Centavos
(P20,149,473.77). However, in its Petition for Review before the CTA,
Philphos prayed for the issuance of corresponding tax credits in the
same amount. Still, there is no vehement insistence on the part of
Philphos that the return of the amount paid should come in the form
of a refund or a credit.[29]

The CTA, as affirmed by the CA, ordered the issuance of a Tax Credit
Certificate in favor of Philphos. No elaboration was made as to why
the relief granted was a tax credit and not a refund, but we can
deduce that such was the relief afforded as it was the relief prayed
for by Philphos in its Petition before the tax court. However, a slight
modification of the award is necessary so as not to render nugatory
the proscription under Section 18(i) that a tax credit avails only if the
supplies form part of the export product. Instead of awarding a Tax
Credit Certificate to Philphos, a refund of the same amount is
warranted under the circumstances.
The grant of exemption under Section 17(1) is clear and
unambiguous. There is neither logic nor need to cast a speck of
uncertainly on a doubt-free situation to resolve the resulting forced
question in favor of the government. The disposition arises not out of
a blind solicitude towards the concerns of business, but from the duty
to affirm and enforce a crystal-clear legislative policy and initiative
intent. Indeed, the revenue collectors of the government should be
cautious before attempting to gut away at concessions the State itself
has deemed worthy of award to deserving investors. It is unsound
practice and uncouth behaviour to invite over guests to dinner at
home, then charge them for the use of the silverware before allowing
them to dine.
WHEREFORE, the Petition for Review is DENIED. The
assailed Decisions of the Court of Appeals dated 4 August 2000 and
of the Court of Tax Appeals dated 5 October 1995 are AFFIRMED,
with modification that in lieu of the issuance of a Tax Credit
Certificate, the amount of Twenty Million One Hundred Forty Nine
Thousand Four Hundred Seventy Three Pesos and Seventy Seven
Centavos (P20,149,473.77) be refunded to respondent Philippine
Phosphate Fertilizer Corporation. No costs.
SO ORDERED.

contravenes Sections 112 and 229 of the NIRC. According to the


petitioner, a prior filing of an administrative claim is a "condition
precedent" before a judicial claim can be filed. The MPR was denied.
Petitioner elevated the case to the CTA EB, who affirmed the partial
tax refund/credit.

ISSUE:
WON respondent is entitled to the refund/credit.

RULING:
No, respondent is not entitled to the refund/credit for having been
filed in violation of Section 112(D) of the NIRC.

Reckoning point for the two-year prescriptive period for claiming input
VAT refund
Section 112(A) of the NIRC is the applicable provision which provides
that the unutilized input VAT must be claimed within 2 years after the
close of the taxable quarter when the sales were made. Hence, the
2-year period should be reckoned from the close of the taxable
quarter when the sales were made.

MICROSOFT PHILIPPINES VS. CIR- VAT Zero Rating - BATASnatin


Prescriptive period applies only to the administrative claims

CIR v. Aichi Forging Company

Aichi doctrine only applies to claims for refund or credit of excess


input VAT, and not erroneously/illegally collected taxes.

Section 112(D) of the NIRC clearly provides that the CIR has 120
days from the date of the submission of the complete documents in
support of the application for tax refund/credit within which to grant or
deny the claim. In case of full or partial denial by the CIR, the
taxpayers recourse is to file an appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the 120-day
period the CIR fails to act on the application for tax refund/credit, the
remedy of the taxpayer is to appeal the inaction of the CIR to CTA
within 30 days.

FACTS:
Respondent filed a claim for refund/credit of input VAT with the BIR
through the DOF One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center. Respondent also filed a petition for review with the
CTA. The CTA division partially granted the claim of respondent.
Petitioner filed a Motion for Partial Reconsideration insisting that the
administrative and the judicial claims were filed beyond the two-year
period to claim a tax refund/credit provided for under Sections 112(A)
and 229 of the NIRC. He reasoned that since the year 2004 was a
leap year, the filing of the claim for tax refund/credit on September
30, 2004 was beyond the two-year period, which expired on
September 29, 2004. In addition, petitioner argued that the
simultaneous filing of the administrative and the judicial claims

Applying the two-year period to judicial claims would render nugatory


Section 112(D) of the NIRC, which already provides for a specific
period within which a taxpayer should appeal the decision or inaction
of the CIR. The second paragraph of Section 112(D) of the NIRC
envisions two scenarios: (1) when a decision is issued by the CIR
before the lapse of the 120-day period; and (2) when no decision is
made after the 120-day period. In both instances, the taxpayer has
30 days within which to file an appeal with the CTA. Therefore, the
120-day period is crucial in filing an appeal with the CTA.

Mandatory nature of the 120-30 day rule


The observance of the 120-30 day rule is mandatory and
jurisdictional. In other words, the taxpayer may appeal to the CTA
within 30 days only in case there is a full or partial denial by the CIR
of the application for refund before the lapse of the 120-day period or
in case the period lapses without the action on the part of the CIR.

In this case, the administrative and the judicial claims were


simultaneously filed on September 30, 2004. Obviously, respondent
did not wait for the decision of the CIR or the lapse of the 120-day
period before filing the judicial claim with the CTA. Thus, the Court
ruled that the respondents filing of the judicial claim with the CTA
was premature as no jurisdiction was acquired by the CTA.

Respondent Silicon Philippines, Inc., on the other hand, is a


corporation duly organized and existing under and by virtue of the
laws of the Philippines, engaged primarily in the business of
designing, developing, manufacturing, and exporting advance and
largescale
integrated
circuits
components
(ICs).
On 6 May 1999, respondent filed with the OneStop Shop Inter
Agency Tax Credit and Duty Drawback Center of the Department of
Finance (DOF) an application for Tax Credit/Refund of VAT paid for
the second quarter of 1998 in the aggregate amount of
P29,559,050.44, representing its alleged unutilized input tax.
Thereafter, since no final action has been taken by petitioner on
respondents administrative claim for refund, respondent filed a
Petition for Review before the Court of Tax Appeals (CTA) on 30 June
2000 docketed as CTA Case No. 6129.
The Ruling of the CTA
In a Decision dated 26 May 2003, 4 the CTA partially granted
respondents Petition and ordered petitioner to issue a tax credit
certificate in favor of the former in the reduced amount of
P8,179,049.00 representing input VAT on importation of capital
goods, the dispositive portion of which are quoted hereunder as
follows:chanRoblesvirtualLawlibrary

SECOND DIVISION
G.R. No. 169778, March 12, 2014
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. SILICON
PHILIPPINES,
INC. (FORMERLY INTEL PHILIPPINES
MANUFACTURING, INC.), Respondent.
DECISION
PEREZ, J.:
To obviate the possibility that its decision may be rendered void, the
Court can, by its own initiative, rule on the question of jurisdiction,
although not raised by the parties. 1 As a corollary thereto, to inquire
into the existence of jurisdiction over the subject matter is the primary
concern of a court, for thereon would depend the validity of its entire
proceedings.2
Before the Court is a Petition for Review on Certiorari seeking to
reverse and set aside the 16 September 2005 Decision 3 of the Court
of Appeals (CA) in CAG.R. SP No. 80886 granting respondents
claim for refund of input Value Added Tax (VAT) on domestic
purchases of goods and services attributable to zerorated sales in
the amount of P21,338,910.44 for the period covering 1 April 1998 to
30 June 1998.
The Facts
The
factual
antecedents
of
follows:chanRoblesvirtualLawlibrary

the

case

are

as

Petitioner is the duly appointed Commissioner of Internal Revenue


empowered to perform the duties of said office including, among
others, the power to decide, approve and grant refunds or tax credits
of
erroneously
or
excessively
paid
taxes.

WHEREFORE, the instant petition is PARTIALLY GRANTED.


[Petitioner] is hereby ORDERED to ISSUE A TAX CREDIT
CERTIFICATE to [respondent] in the amount of P8,179,049.00
representing input VAT on importation of capital goods. However,
petitioners (respondents) claim for refund of input VAT in the sum of
P21,338,910.44
attributable
to
zerorated
sales
is
hereby DENIED for lack of merit.5
The CTA denied respondents claim for refund of input VAT on
domestic purchases of goods and services attributable to zerorated
sales on the ground that the export sales invoices presented in
support thereto do not have Bureau of Internal Revenue (BIR) permit
to print, while the sales invoices do not show that the sale was zero
rated, all in violation of Sections 1136 and 2387 of the National
Internal Revenue Code (NIRC) of 1997, as amended, and Section
4.1081 of Revenue Regulations (RR) No. 795. 8
As to respondents claim for refund of input VAT on capital goods, the
CTA looked into respondents compliance with the requirements set
forth in the case of Air Liquid Philippines v. Commissioner of Internal
Revenue and Commissioner of Customs, CTA Case No. 5652, 26
July 2000, and held that said claim be partially denied considering
that only the amount of P8,179,049.00 have been validly supported
by documentary evidence such as suppliers invoices, official
receipts, import declarations, import remittances and airway bills,
showing the actual payment of VAT on the importation of capital
goods as required by Section 4.1045(b) of RR No. 795. 9
Relevant thereto, the CTA likewise made a factual finding that both
the administrative and judicial claims of respondent were timely filed
within the twoyear prescriptive period required by the NIRC of 1997,
as amended, reckoned from the date of filing the original quarterly
VAT Return for the second quarter of taxable year 1998, or on 27
July
1998.10

On 4 November 2003, the CTA denied respondents Partial Motion


for Reconsideration (on the denial of its claim for tax credit or refund
of input VAT paid in the sum of P21,338,910.44) for lack of merit. 11
Aggrieved, respondent appealed to the CA by filing a Petition for
Review under Rule 43 of the Rules of Court on 10 December 2003,
docketed as CAG.R. SP No. 80886.
The Ruling of the CA
The CA found that respondents failure to secure a BIR authority or
permit to print invoices or receipts does not completely destroy the
integrity of its export sales invoices in support of its claim for refund,
since the BIR permit to print is not among those required to be stated
in the sales invoices or receipts to be issued by a taxpayer pursuant
to Sections 113 and 237 of the NIRC of 1997, as amended. In
addition, the BIR permit to print was only mentioned under Section
238 of the same code, which merely stated that the securement of
the BIR authority to print by all persons engaged in business is
necessary before a printer can print receipts or sales or commercial
invoices issued in the course of ones business. Clearly, it does not
state that the same must be shown in the receipts or invoices. Thus,
the omission to indicate the said BIR authority or permit to print does
not totally militate against the evidentiary weight of respondents
export sales invoices as to defeat its claim for refund.
Moreover, it was the CAs ruling that the omission to reflect the word
zerorated in its invoices is not fatal to respondents case
considering that the absence of the word zerorated in the invoices,
although truly helpful in facilitating the determination of whether the
sales are subject to the normal rate of ten percent (10%) tax or the
preferential rate at zero percent, does not necessarily mean that the
sales are not in fact zerorated. Sections 113 and 237 of the NIRC
of 1997, as amended, are silent on the requisite of printing the word
zerorated
in
the
invoices.
Accordingly, upon its findings of compliance with Section 112(A) of
the NIRC of 1997, as amended, the CA reversed and setaside the
CTA decision dated 26 May 2003, and granted respondents claim for
tax refund/credit in the total amount of P21,338,910.44 in its Decision
dated
16
September
2005.12
Consequently, this Petition for Review wherein petitioner seeks the
reversal of the aforementioned decision on the sole ground that the
CA gravely erred on a question of law when it ordered a refund of
respondents VAT Input taxes on the basis of unauthorized and
illegally printed receipts in violation of the provisions of the NIRC of
1997, as amended.13
The Issue
The core issue for the Courts resolution is whether or not respondent
is entitled to its claim for refund or issuance of a tax credit certificate
in its favor in the amount of P21,338,910.44 representing its
unutilized creditable input taxes for the period covering 1 April 1998
to 30 June 1998 (second quarter), pursuant to the applicable
provisions of the NIRC of 1997, as amended.
Our Ruling
At the outset, it bears emphasis that the determination of the issue
presented in this case requires a review of the factual findings of the

CTA,

and

of

the

CA.

It is well settled that in a petition for review on certiorari under Rule


45 of the Rules of Court, only questions of law may be raised. 14 The
Court is not a trier of facts and does not normally undertake the re
examination of the evidence presented by the contending parties
during the trial of the case considering that the findings of facts of the
CA are conclusive and binding on the Court 15 and they carry even
more weight when the CA affirms the factual findings of the trial
court.16 However, the Court had recognized several exceptions to
this rule, to wit: (1) when the findings are grounded entirely on
speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of facts are
conflicting; (6) when in making its findings the CA went beyond the
issues of the case, or its findings are contrary to the admissions of
both the appellant and the appellee; (7) when the findings are
contrary to the trial court; (8) when the findings are conclusions
without citation of specific evidence on which they are based; (9)
when the facts set forth in the petition as well as in the petitioners
main and reply briefs are not disputed by the respondent; (10) when
the findings of fact are premised on the supposed absence of
evidence and contradicted by the evidence on record; and (11) when
the CA manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, would justify a
different
conclusion.17
Records of this case reveal that the CTA made a factual finding that
both the administrative and judicial claims of respondent were timely
filed within the twoyear prescriptive period required by the NIRC of
1997, as amended, reckoned from the date of filing the original
quarterly VAT Return for the second quarter of taxable year 1998, or
on 27 July 1998.18 This was the CTAs legal basis why it took
cognizance of the appeal, tried the case on the merits, and rendered
its judgment on 26 May 2003.19 Likewise, the same finding was
affirmed and adopted by the CA in the assailed 16 September 2005
decision20 by expressing that respondent filed the application for tax
refund or credit within the prescribed period of two (2) years after the
close of the taxable quarter when the sales were made 21 in
accordance with Section 112(A) of the NIRC of 1997, as amended.
However, upon an assiduous review of the said factual findings,
applicable provisions of the NIRC of 1997, as amended, and existing
jurisprudential pronouncements, this Court finds it apropos to
determine whether or not the CTA indeed properly acquired
jurisdiction over respondents instant claim taking into consideration
the timeliness of the filing of its judicial claim as provided under
Section 112 of the NIRC of 1997, as amended. Simply put, a
negative finding as to the timeliness of respondents judicial claim,
once properly considered, would definitely result in a different
conclusion,
being
jurisdictional
in
nature.
It should be recalled that the CTA is a court of special jurisdiction. As
such, it can only take cognizance of such matters as are clearly
within its jurisdiction.22 In view thereof, although the parties have not
raised the issue of jurisdiction, nevertheless, this Court may motu
proprio determine whether or not the CTA has jurisdiction over
respondents judicial claim for refund taking into consideration, the
factual and legal allegations contained in the pleadings filed by both
parties
and
found
by
the
court a
quo.

Section 7 of Republic Act (RA) No. 1125,23 which was thereafter


amended by RA No. 9282,24 defines the appellate jurisdiction of the
CTA. The said provision, in part, reads:chanRoblesvirtualLawlibrary
Section 7. Jurisdiction. The Court of Tax Appeals shall exercise
exclusive appellate jurisdiction to review by appeal, as herein
provided.
(1) Decisions of the Collector of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or
other matters arising under the National Internal Revenue Code or
other law or part of law administered by the Bureau of Internal
Revenue;
x x x x25 (Emphasis supplied)
Furthermore, Section 11 of the same law prescribes how the said
appeal should be taken, to wit:chanRoblesvirtualLawlibrary
Section 11. Who may appeal; effect of appeal. Any person,
association or corporation adversely affected by a decision or ruling
of the Collector of Internal Revenue, the Collector of Customs or any
provincial or city Board of Assessment Appeals may file an appeal
in the Court of Tax Appeals within thirty days after the receipt of
such
decision
or
ruling.
x x x x26 (Emphasis and underscoring supplied)
Pertinent to the instant case, it is worth mentioning that Section 112
of the NIRC of 1997, as amended, was already the applicable law at
the time that respondent filed its administrative and judicial claims,
which categorically provides as follows:chanRoblesvirtualLawlibrary
Section

112. Refunds

or

Tax

Credits

of

Input

Tax.

(A) Zerorated or Effectively Zerorated Sales. Any VATregistered


person, whose sales are zerorated or effectively zerorated
may, within two (2) years after the close of the taxable quarter
when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to
such sales, except transitional input tax, to the extent that such input
tax has not been applied against output tax: x x x
x

(D)27 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
Subsections
(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 twentyday period, appeal the decision or the unacted
claim
with
the
Court
of
Tax
Appeals.
x x x x (Emphasis and underscoring supplied)

Based on the foregoing provisions, prior to seeking judicial recourse


before the CTA, a VATregistered person may apply for the issuance
of a tax credit certificate or refund of creditable input tax attributable
to zerorated or effectively zerorated sales within two (2) years after
the close of taxable quarter when the sales or purchases were made.
Additionally, further reading of the provisions of Section 112 shows
that under paragraph (D) thereof, the Commissioner of Internal
Revenue is given a 120day period, from submission of complete
documents in support of the administrative claim within which to
act on claims for refund/applications for issuance of the tax credit
certificate. Upon denial of the claim or application, or upon
expiration of the 120day period, the taxpayer only has 30 days
within which to appeal said adverse decision or unacted claim
before
the
CTA.
In the consolidated cases of Commissioner of Internal Revenue v.
San Roque Power Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and Philex Mining Corporation v.
Commissioner of Internal Revenue (San Roque),28 the Court En Banc
finally settled the issue on the proper interpretation of Section 112 of
the NIRC of 1997, as amended, pertaining to the proper observance
of the prescriptive periods provided therein. The relevant portion of
the discussions pertinent to the focal issue in the present case are
quoted hereunder as follows:chanRoblesvirtualLawlibrary
Unlike San Roque and Taganito, Philexs case is not one of
premature filing but of late filing. Philex did not file any petition
with the CTA within the 120day period. Philex did not also file
any petition with the CTA within 30 days after the expiration of
the 120day period. Philex filed its judicial claim long after the
expiration of the 120day period, in fact 426 days after the lapse of
the 120day period. In any event, whether governed by
jurisprudence before, during, or after the Atlas case, Philexs
judicial claim will have to be rejected because of late filing.
Whether the twoyear prescriptive period is counted from the date of
payment of the output VAT following the Atlas doctrine, or from the
close of the taxable quarter when the sales attributable to the input
VAT were made following the Mirant and Aichi doctrines, Philexs
judicial
claim
was
indisputably
filed
late.
The Atlas doctrine cannot save Philex from the late filing of its judicial
claim. The inaction of the Commissioner on Philexs claim
during the 120day period is, by express provision of law,
deemed a denial of Philexs claim. Philex had 30 days from
the expiration of the 120day period to file its judicial claim with
the CTA. Philexs failure to do so rendered the deemed a
denial decision of the Commissioner final and unappealable.
The right to appeal to the CTA from a decision or deemed a denial
decision of the Commissioner is merely a statutory privilege, not a
constitutional right. The exercise of such statutory privilege requires
strict compliance with the conditions attached by the statute for its
exercise. Philex failed to comply with the statutory conditions and
must thus bear the consequences.29(Emphasis and italics supplied)
Undoubtedly, it becomes apparent from the foregoing jurisprudential
pronouncements and the applicable provisions of Section 112 of the
NIRC of 1997, as amended, that a taxpayerclaimant only had a
limited period of thirty (30) days from the expiration of the 120day
period of inaction of the Commissioner of Internal Revenue to file its
judicial claim with this Court. Failure to do so, the judicial claim shall

prescribe

or

be

considered

as

filed

out

of

time.

Applying the foregoing discussion in the case at bench, although


respondent has indeed complied with the required twoyear period
within which to file a refund/tax credit claim with the BIR by filing its
administrative claim on 6 May 1999 (within the period from the close
of the subject second quarter of taxable year 1998 when the relevant
sales or purchases were made), it appears however, that
respondents corresponding judicial claim filed with the CTA on 30
June 2000 was filed beyond the 30day period, detailed hereunder
as follows:chanRoblesvirtualLawlibrary

Taxable
year 1998

Last day of the


120day period
under
Section
Filing date of
112(C) from the
the
date of filing of
administrative
the
claim
administrative
claim in case of
inaction

2nd Quarter
(1
April
6 May 1999
1998 to 30
June 1998)

Last day
of the 30
day
period to
judicially
appeal
said
inaction

3
3
September
October
199930
1999

Filing
date of
the
Petition
for
Review

30 June
2000

Notably, Section 112(D) specifically states that in case of failure on


the part of the Commissioner of Internal Revenue to act on the
application within the 120day period prescribed by law, respondent
only has thirty (30) days after the expiration of the 120day period to
appeal the unacted claim with the CTA. Since respondents judicial
claim for the aforementioned quarter was filed before the CTA only on
30 June 2000,31 which was way beyond the mandatory 120+30 days
to seek judicial recourse, such noncompliance with the said
mandatory period of thirty (30) days is fatal to its refund claim on the
ground
of
prescription.
In the more recent consolidated cases of Mindanao II Geothermal
Partnership v. Commissioner of Internal Revenue, and Mindanao I
Geothermal Partnership v. Commissioner of Internal Revenue, 32the
Second Division of this Court, in applying therein the ruling in the San
Roque case, provided a Summary of Rules on Prescriptive Periods
Involving VAT as a guide for all parties concerned, to
wit:chanRoblesvirtualLawlibrary
We summarize the rules on the determination of the prescriptive
period for filing a tax refund or credit of unutilized input VAT as
provided in Section 112 of the 1997 Tax Code, as
follows:chanRoblesvirtualLawlibrary
(1) An administrative claim must be filed with the CIR within two
years after the close of the taxable quarter when the zerorated or
effectively
zerorated
sales
were
made.
(2) The CIR has 120 days from the date of submission of complete
documents in support of the administrative claim within which to
decide whether to grant a refund or issue a tax credit certificate. The
120day period may extend beyond the twoyear period from the
filing of the administrative claim if the claim is filed in the later part of
the twoyear period. If the 120day period expires without any
decision from the CIR, then the administrative claim may be

considered

to

be

denied

by

inaction.

(3) A judicial claim must be filed with the CTA within 30 days
from the receipt of the CIRs decision denying the administrative
claim or from the expiration of the 120day period without any
action
from
the
CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA48903
from the time of its issuance on 10 December 2003 up to its reversal
by this Court in Aichi on 6 October 2010, as an exception to the
mandatory and jurisdictional 120+30 day periods.33(Emphasis
supplied)
To recapitulate, the mandatory rule is that a judicial claim must be
filed with the CTA within thirty (30) days from the receipt of the
Commissioners decision denying the administrative claim or from the
expiration of the 120day period without any action from the
Commissioner. Otherwise, said judicial claim shall be considered as
filed
out
of
time.
This Court is mindful that when respondent filed its administrative
claim on 6 May 1999, and its corresponding judicial claim on 30 June
2000, the NIRC of 1997, as amended, was already in effect. Clearly
therefore, the strict observance in applying the provisions of Section
112 of the NIRC of 1997 is proper. Hence, failure of respondent to
observe the 30day period under said Section through its belated
filing of the Petition for Review before the CTA warrants a dismissal
with
prejudice
for
lack
of
jurisdiction.
Parenthetically, it must be emphasized that jurisdiction over the
subject matter or nature of an action is fundamental for a court to act
on a given controversy,34 and is conferred only by law and not by the
consent or waiver upon a court which, otherwise, would have no
jurisdiction over the subject matter or nature of an action. Lack of
jurisdiction of the court over an action or the subject matter of an
action cannot be cured by the silence, acquiescence, or even by
express consent of the parties.35 If the court has no jurisdiction over
the nature of an action, its only jurisdiction is to dismiss the case.
The court could not decide the case on the merits. 36
As regards the prints on the supporting receipts or invoices, it is
worth mentioning that the High Court already ruled on the
significance of imprinting the word zerorated for zerorated sales
covered by its receipts or invoices, pursuant to Section 4.1081 of
Revenue Regulations No. 795. 37
Thus, in Panasonic
Communications Imaging Corporation of the Philippines v.
Commissioner of Internal Revenue,38 the Second Division of this
Court enunciated:chanRoblesvirtualLawlibrary
But when petitioner Panasonic made the export sales subject of this
case, i.e., from April 1998 to March 1999, the rule that applied
was Section 4.1081 of RR 795, otherwise known as the
Consolidated ValueAdded Tax Regulations, which the
Secretary of Finance issued on 9 December 1995 and took effect
on 1 January 1996. It already required the printing of the word
zerorated on the invoices covering zerorated sales. When
R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made
this particular revenue regulation a part of the tax code. This
conversion from regulation to law did not diminish the binding force of
such regulation with respect to acts committed prior to the enactment
of
that
law.

Section 4.1081 of RR 795 proceeds from the rulemaking


authority granted to the Secretary of Finance under Section 245 of
the 1977 NIRC (Presidential Decree 1158) for the efficient
enforcement of the tax code and of course its amendments. The
requirement is reasonable and is in accord with the efficient collection
of VAT from the covered sales of goods and services. As aptly
explained by the CTAs First Division, the appearance of the word
zerorated on the face of invoices covering zerorated sales
prevents buyers from falsely claiming input VAT from their
purchases when no VAT was actually paid. If, absent such
word, a successful claim for input VAT is made, the government
would be refunding money it did not collect.

Carpio, (Chairperson), Brion, Del Castillo, and PerlasBernabe,


JJ., concur.

Further, the printing of the word zerorated on the invoice helps


segregate sales that are subject to 10% (now 12%) VAT from those
sales that are zerorated. Unable to submit the proper invoices,
petitioner Panasonic has been unable to substantiate its claim for
refund.

Facts:

This Court held that, since the BIR authority to print is not one of
the items required to be indicated on the invoices or receipts, the BIR
erred in denying the claim for refund. Here, however, the ground for
denial of petitioner Panasonics claim for tax refundthe
absence of the word zerorated on its invoicesis one which
is specifically and precisely included in the above enumeration.
Consequently, the BIR correctly denied Panasonics claim for
tax refund.39 (Emphasis supplied)
Clearly, the foregoing pronouncement affirms that absence or non
printing of the word zerorated in respondents invoices is fatal to its
claim for the refund and/or tax credit representing its unutilized input
VAT
attributable
to
its
zerorated
sales.
On the other hand, while this Court considers the importance of
imprinting the word zerorated in said invoices, the same does not
apply to the phrase BIR authority to print. In Intel Technology
Philippines, Inc. v. Commissioner of Internal Revenue, 40 the Court
ruled that there is no law or BIR rule or regulation requiring the
taxpayerclaimants authority from the BIR to print its sales invoices
(BIR authority to print) to be reflected or indicated therein. It stressed
that while entities engaged in business are required to secure from
the BIR an authority to print receipts or invoices and to issue duly
registered receipts or invoices, it is not required that the BIR
authority to print be reflected or indicated therein.41

NIPPON EXPRESS (PHILIPPINES) CORP., v. COMMISSIONER OF


INTERNAL REVENUE
G.R. No. 185666
February 4, 2015

Petitioner Corporation applied for a tax credit/refund based


on section 112 of the Tax Code in the amount of P24,826,667.61
representing the value of input VAT paid by the corporation in relation
to sales which are attributable to zero-rated sales. Petitioner
corporation filed the administrative claim with the with the One-Stop
Shop Inter-Agency Tax Credit and Duty Drawback Center of the
Department of Finance (OSSAC-DOF) on September 24, 2001.
Having no resolution from the OSSAC-DOF, petitioner corporation
filed a petition for review with the CTA on April 24, 2002. The CTA
denied the calim for tax credit/refund for petitioners failure to comply
with the receipt and invoicing requirements provided by the Tax Code
for refund based on zero-rated transactions.

Issues:
1
2

Ruling:
1

All told, the CTA has no jurisdiction over respondents judicial appeal
considering that its Petition for Review was filed beyond the
mandatory 30day period pursuant to Section 112(D) of the NIRC of
1997, as amended. Consequently, respondents instant claim for
refund
must
be
denied.
WHEREFORE, the petition is GRANTED. Accordingly, the 16
September 2005 Decision of the Court of Appeals in CAG.R. SP No.
80886 is hereby REVERSED and SET ASIDE. The Petition for
Review filed before the Court of Tax Appeals docketed as CTA Case
No. 6129 is DISMISSED for lack of jurisdiction. No costs.
SO

ORDERED.

Did the CTA acquire jurisdiction over the controversy?


Is there a difference between ainvoicing requirements and
receipt requirements in zero-rated transactions?

No, the CTA did not acquire jurisdiction over the


controversy. The Supreme Court stated that strict
compliance with the prescriptive periods in claiming for
refund of creditable input tax due or paid attributable to any
zero-rated or effectively zero-rates sales (Commissioner of
Internal Revenue v. San Roque Power Corporation,
Taganito Mining Corporation v. Commissioner of Internal
Revenue, and Philex Mining Corporation v. Commissioner
of Internal Revenue). Petitioner Corporation has failed to
comply with the 120+30 day period, which is mandatory
and jurisdictional, in filing its petition for review. The 120
day period for the administrative office to act ended on
September 22, 2001, thus petitioner should have filed its
petition for review thirty days thereafter or on or before April
24, 2002.
A VAT invoice is necessary for every sale, barter or
exchange of goods or properties while a VAT official
receipt properly pertains to every lease of goods or
properties, and every sale, barter or exchange of services.

In other words, the VAT invoice is the sellers best proof of


the sale of the goods or services to the buyer while the VAT
receipt is the buyers best evidence of the payment of
goods or services received from the seller.

Smart Communications, Inc. vs. Municipality of Malvar


February 18, 2014
Carpio, J.
Digest by Clark Uytico
SUMMARY
The Municipality of Malvar imposed an ordinance where it aims to
regulate the establishment of special projects. It assessed Smart an
amount of 389,950.00 for the telecommunications tower that the
latter constructed in Malvar. Smart contends that the same is a tax,
and is unduly oppressive and ultra vires. CTA dismissed the case for
lack of jurisdiction because the same is NOT a tax. Court agreed with
CTA, and held that LGUs have the power to impose fees

Municipality is encroaching on the regulatory powers of the National


Telecommunications Commission (NTC). Smart cites Section 5(g) of
Republic Act No. 7925 which provides that the NTC, in the exercise
of its regulatory powers, shall impose such fees and charges as may
be necessary to cover reasonable costs and expenses for the
regulation and supervision of the operations of telecommunications
entities. Thus, Smart alleges that the regulation of
telecommunications entities and all aspects of its operations is
specifically lodged by law on the NTC.
Malvars arguments:
Said Ordinance is not a tax ordinance but a regulatory fee imposed
to regulate the placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and telephone wires,
conduits, meters and other apparatus, and provide for the correction,
condemnation or removal of the same when found to be dangerous,
defective or otherwise hazardous to the welfare of the inhabitant.
It was also envisioned to address the foreseen "environmental
depredation" to be brought about by these "special projects" to the
Municipality. Pursuant to these objectives, the Municipality imposed
fees on various structures, which included telecommunications
towers.

FACTS
Smart constructed a telecommunications tower within the territorial
jurisdiction of the Municipality. The construction of the tower was for
the purpose of receiving and transmitting cellular communications
within the covered area.

The fees are not imposed to regulate the administrative, technical,


financial, or marketing operations of telecommunications entities,
such as Smarts; rather, to regulate the installation and maintenance
of physical structures Smarts cell sites or telecommunications
tower.

On 30 July 2003, the Municipality passed Ordinance No. 18, series of


2003, entitled "An Ordinance Regulating the Establishment of Special
Projects."

ISSUE
1. WON the fees are taxes.

On 24 August 2004, Smart received from the Permit and Licensing


Division of the Office of the Mayor of the Municipality an assessment
letter with a schedule of payment for the total amount of P389,950.00
for Smarts telecommunications tower. Due to the alleged arrears in
the payment of the assessment, the Municipality also caused the
posting of a closure notice on the telecommunications tower.
On 9 September 2004, Smart filed a protest, claiming lack of due
process in the issuance of the assessment and closure notice. In the
same protest, Smart challenged the validity of Ordinance No. 18 on
which the assessment was based.
In a letter dated 28 September 2004, the Municipality denied Smarts
protest.
RTC partially granted Smarts petition, but did not rule on the legality
of Ordinance No. 18. It declared that Smart is only liable for fees
starting October 1, 2003, and null and void insofar as the
assessment made from 2001 to 2003. MR denied. CTA denied. CTA
MR also denied. CTA en banc denied. CTA en banc likewise denied.

2. WON CTA should have take cognizance of the case.


HELD
1. NO. The fees are NOT taxes.
2. NO. CTA correctly refused to take cognizance of the case.
3. WON the fees are unjust and unreasonable.
Dispositive: WHEREFORE, the Court DENIES the petition.
SO ORDERED.
RATIO
Issue #1
Since the main purpose of Ordinance No. 18 is to regulate certain
construction activities of the identified special projects, which
included "cell sites" or telecommunications towers, the fees imposed
in Ordinance No. 18 are primarily regulatory in nature, and not
primarily revenue-raising. While the fees may contribute to the
revenues of the Municipality, this effect is merely incidental. Thus, the
fees imposed in Ordinance No. 18 are not taxes.

SMARTs arguments:
CTA erred in refusing to take cognizance of the case and for
dismissing the case for lack of jurisdiction considering the unique
factual circumstances involved.

Progressive Development Corporation v. Quezon City: 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.

The fees imposed in Ordinance No. 18 are actually taxes since they
are not regulatory but rather, revenue-raising.

Victorias Milling Co., Inc. v. Municipality of Victorias: 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.
Ordinance No. 18 expressly provides for the standards which Smart
must satisfy prior to the issuance of the specified permits, clearly
indicating that the fees are regulatory in nature.

ISSUE:
WON the petition for refund/credit was filed within the reglementary
period.

These requirements are as follows:


SECTION 5. Requirements and Procedures in Securing Preliminary
Development Permit.
The following documents shall be submitted to the SB Secretary in
triplicate:
a) zoning clearance
b) Vicinity Map
c) Site Plan
d) Evidence of ownership
e) Certificate true copy of NTC Provisional Authority in case of
Cellsites, telephone or telegraph line, ERB in case of gasoline
station, power plant, and other concerned national agencies
f) Conversion order from DAR is located within agricultural zone.
g) Radiation Protection Evaluation.
h) Written consent from subdivision association or the residence of
the area concerned if the special projects is located within the
residential zone.
i) Barangay Council Resolution endorsing the special projects.
SECTION 6. Requirement for Final Development Permit Upon the
expiration of 180 days and the proponents of special projects shall
apply for final [development permit] and they are require[d] to submit
the following:
a) evaluation from the committee where the Vice Mayor refers the
special project
b) Certification that all local fees have been paid.
CIR v. Primetown Property

FACTS:
Respondent applied for the refund or credit of income tax paid in
1997, alleging that their business suffered losses and was not liable
to pay income tax. The claim was not acted upon, prompting
respondent to file a petition for review with the CTA. The CTA
dismissed the petition for being filed beyond the two-year prescriptive
period for filing a judicial claim, invoking Section 229 of the NIRC.
Respondent filed its adjusted return on Apr. 14, 1998, and its petition
for review with the CTA on Apr. 14, 2000. According to the CTA, the
two-year prescriptive period was equivalent to 730 days. Because
the year 2000 was a leap year, respondent's petition, filed 731
days after respondent filed its final adjusted return, was filed beyond
the reglementary period. Respondent appealed to the CA, which
reversed the CTA decision, ruling that Article 13 of the Civil Code did
not distinguish between a regular year and a leap year. In other
words, even if the year 2000 was a leap year, the periods covered by
April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000
should still be counted as 365 days each or a total of 730 days.

RULING:
Yes, the petition was filed on time.

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I
of the Administrative Code of 1987 deal with the same subject matter
the computation of legal periods. Under the Civil Code, a year is
equivalent to 365 days whether it be a regular year or a leap year.
Under the Administrative Code of 1987, however, a year is composed
of 12 calendar months. Needless to state, under the Administrative
Code of 1987, the number of days is irrelevant.

There obviously exists a manifest incompatibility in the manner of


computing legal periods under the Civil Code and the Administrative
Code of 1987. For this reason, we hold that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987, being the more recent law,
governs the computation of legal periods. Lex posteriori derogat
priori.

We therefore hold that respondent's petition (filed on April 14, 2000)


was filed on the last day of the 24th calendar month from the day
respondent filed its final adjusted return. Hence, it was filed within the
reglementary period.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 190680

September 13, 2012

COMMISSIONER
OF
INTERNAL
REVENUE, Petitioner,
vs.
COURT OF TAX APPEALS and AYALA LAND, INC., Respondents.
RESOLUTION

REYES, J.:
Subject of this petition for certiorari under Rule 65 of the Rules of
Court is the Resolution1 dated October 30, 2009 of the Court of Tax
Appeals (CTA) en bane in CTA EB No. 402, which dismissed herein
petitioner Commissioner of Internal Revenue's (CIR) petition for relief
from judgment under Rule 38 of the Rules of Court.
The factual antecedents that led to the filing of this petition are as
follows: In 2005, private respondent Ayala Land, Inc. (ALI) filed with
the CTA a petition for review2 to question the CIRs assessment
against it for deficiency value-added tax (VAT) for the calendar year
2003. Before the tax court, the CIR and ALI filed their Joint
Stipulation of Facts and Issues, which was cited in the present
petition to read in part:
Petitioner (herein private respondent) is primarily engaged in the sale
and/or lease of real properties and, among others, likewise owns and
operates theatres or cinemas.
Petitioner received respondents (herein petitioner) Final Assessment
Notice (hereinafter referred to as the 2003 FAN) dated 29 October
2004 whereby respondent was assessing petitioner alleged
deficiency 10% value added tax (VAT) on its alleged income from
cinema operations for the taxable year 2003 in the aggregate amount
of One Hundred Three Million Three Hundred Forty-Six Thousand
Six Hundred Ninety-One and 40/100 Pesos (P 103,346,691.40)
inclusive of 20% interest.
On 10 December 2004, petitioner filed its protest with the office of
respondent contesting the factual and legal bases of the VAT
assessment.
On 28 April 2005, petitioner received respondents 25 April 2005
Decision denying petitioners protest, with a notation that the same
constitutes respondents Final Decision on the matter.
Petitioner received on 23 November 2004, respondents 19
November 2004 Letter of Authority No. 0002949 for the examination
of ALL INTERNAL REVENUE TAXES of petitioner from 1 January
2003 to 31 December 2003.

surprise to him when he received on June 17, 2009 a copy of the


CTA en bancs Resolution dated June 10, 2009 which provided that
the CTA Decision dated February 12, 2009 had become final and
executory. The CIR then filed on July 2, 2009 a Manifestation with the
Motion to Reconsider Resolution Ordering Entry of
Judgment,4 questioning the CTAs entry of judgment and seeking the
following reliefs: (1) for the CTA to withdraw its resolution ordering the
issuance of entry of judgment; (2) for the CTA to resolve the CIRs
motion for reconsideration filed on March 4, 2009; and (3) should
there be an existing resolution of the motion for reconsideration, for
the CTA to serve a copy thereof upon the CIR and his counsel. The
petitioner explained in his manifestation:
On 17 June 2009, he received Resolution dated 10 June 2009
holding that in the absence of an appeal, the Honorable Courts
Decision dated 12 February 2009 has become final and executory.
Thus, the Honorable Court ordered the issuance of an Entry of
Judgment in this case.
Respondent respectfully manifests that on 4 March 2009, he filed a
Motion for Reconsideration of the Honorable Courts Decision dated
12 February 2009, the same decision which the Honorable Court has
now deemed to be final and executory.
Further, a check with his records reveals that there is no Resolution
which has been issued by the Honorable Court denying his Motion
for Reconsideration. To double check, on three (3) occasions he has
inquired from his counsel the Office of the Solicitor General,
particularly State Solicitor Bernardo C. Villar, on whether he has
received any Resolution on the Motion for Reconsideration.
Respondent was informed that there was none.
Finally, he checked with the Honorable Court and was informed that
there is a Resolution dated 25 March 2009. In short, while petitioner
and his counsel were of the mind that the Motion for Reconsideration
still had to be resolved, it appears that it already was.

In order to protect its right, petitioner filed the Petition for Review
pursuant to Section 228 of the Tax Code.3

However, it is respectfully manifested that petitioner and his counsel


have not received the said Resolution and thus, such failure has
prevented petitioner from filing the necessary Petition for Review
before the Honorable Supreme Court. Such petition would have
barred the Decision dated 12 February 2009 from attaining finality
and eventual entry in the Book of Judgements.5 (Emphasis ours)

Proceedings ensued. On April 11, 2008, the CTA Second Division


rendered its Decision granting ALIs petition for review. The
assessment against ALI for deficiency VAT in the amount
of P 103,346,691.40 for the calendar year 2003 was ordered
cancelled and set aside. The CIRs motion for reconsideration was
denied, prompting him to file an appeal to the CTA en banc.

On July 29, 2009, the CTA en banc issued its Resolution denying the
motion. It reasoned that per its records, the CIR and OSG had
received on March 27, 2009 and March 30, 2009, respectively, a
copy of the resolution denying the motion for reconsideration. 6 The
CIR received its copy of said Resolution dated July 29, 2009 on
August 3, 2009.

On February 12, 2009, the CTA en banc rendered its Decision


affirming the decision of the CTA Second Division. Feeling aggrieved,
the CIR filed a motion for reconsideration, but this was denied by the
CTA en banc in its Resolution dated March 25, 2009.

The CIR then filed on October 2, 2009 with the CTA en banc a
petition for relief7 asking that the entry of judgment in the case be
recalled, and for the CIR and OSG to be served with copies of the
Resolution dated March 25, 2009. To show the timeliness of the
petition for relief, the CIR claimed that he knew of the Resolution
dated March 25, 2009 only on August 3, 2009, when he received a
copy of the Resolution dated July 29, 2009. He then claimed that the
sixty (60)-day period for the filing of the petition for relief should be

The CIR claims that neither he nor his statutory counsel, the Office of
the Solicitor General (OSG), received a copy of the CTA en bancs
resolution denying his motion for reconsideration. It then came as a

reckoned from August 3, 2009, giving him until October 2, 2009 to file
it. Further, CIRs counsel Atty. Felix Paul R. Velasco III (Atty. Velasco)
tried to explain the CIRs and OSGs alleged failure to receive the
CTAs Resolution dated March 25, 2009, notwithstanding the CTAs
records showing the contrary, by alleging in his Affidavit of
Merit8 attached to the petition for relief that:
14. I noted that, as stated by the Honorable CTA in its 29 July 2009
Resolution, there were rubber stamps of both petitioner and the OSG
signifying receipt of the resolution. But given the fact that both
petitioner and the OSG did not have copies of this Resolution, the
only logical explanation is that the front notice page was indeed
correct and stamped by both offices but the received enclosed order
of the Honorable Court probably contained a different one. This error
has happened to petitioner in other cases but these were
subsequently and timely noticed and no detrimental effects
occurred.9
On October 30, 2009, the CTA en banc dismissed the petition for
relief for having been filed out time, via the assailed resolution which
reads in part:
The Supreme Court has ruled that "a party filing a petition for relief
from judgment must strictly comply with two reglementary periods;
first, the petition must be filed within sixty (60) days from knowledge
of the judgment, order or other proceeding to be set aside; and
second, within a fixed period of six (6) months from entry of such
judgment, order or other proceeding. Strict compliance with these
periods is required because a petition for relief from judgment is a
final act of liberality on the part of the State, which remedy cannot be
allowed to erode any further the fundamental principle that a
judgment, order or proceeding must, at some definite time, attain
finality in order to put at last an end to litigation."
xxxx
In this case, petitioner seeks relief from judgment of the Court En
Bancs Resolution dated March 25, 2009. Records show that
petitioner learned of the Resolution dated March 25, 2009 when he
received on June 17, 2009, the Resolution of the Court En Banc
dated June 10, 2009 ordering the Entry of Judgment. This was in fact
stated in petitioners "Manifestation with Motion to Reconsider
Resolution Ordering Entry of Judgment" which petitioner filed on July
2, 2009. Hence, the 60 days should be counted from June 17, 2009
and the 60th day fell on August 16, 2009 which was a Sunday.
Hence, the last day for the filing of the petition for relief was on
August 17, 2009. Even if the 60-day period is counted from
petitioners receipt of the Entry of Judgment on July 1, 2009, with the
60th day falling on August 30, 2009, the petition for relief filed on
October 2, 2009 will still be filed beyond the 60-day
period.10 (Emphasis ours)
Without filing a motion for reconsideration with the CTA en banc, the
CIR filed the present petition for certiorari. The CIR argues that his
60-day period under Rule 38 should have been counted from August
3, 2009, when he received a copy of the Resolution dated July 29,
2009 and claimed to have first learned about the Resolution dated
March 25, 2009 denying his motion for reconsideration. 11
The issue then for this Courts resolution is: Whether or not the CTA
committed grave abuse of discretion amounting to lack or excess of

jurisdiction in ruling that the petition for relief of the CIR was filed
beyond the 60-day reglementary period under Rule 38.
At the outset, this Court holds that a dismissal of the petition is
warranted in view of the petitioners failure to file before the CTA en
banc a motion for reconsideration of the assailed resolution. The
settled rule is that a motion for reconsideration is a condition sine qua
non for the filing of a petition for certiorari. Its purpose is to grant an
opportunity for the court to correct any actual or perceived error
attributed to it by the re-examination of the legal and factual
circumstances of the case. The rationale of the rule rests upon the
presumption that the court or administrative body which issued the
assailed order or resolution may amend the same, if given the
chance to correct its mistake or error. The "plain speedy, and
adequate remedy" referred to in Section 1, Rule 65 of the Rules of
Court is a motion for reconsideration of the questioned order or
resolution.12 While the rule is not absolute and admits of settled
exceptions, none of the exceptions attend the present petition.
Even if we set aside this procedural infirmity, the petition is
dismissible. In resolving the substantive issue, it is crucial to
determine the date when the petitioner learned of the CTA en bancs
Resolution dated March 25, 2009, as Section 3, Rule 38 of the Rules
of Court provides:
Sec. 3. Time for filing petition; contents and verification. A petition
provided for in either of the preceding sections of this Rule must be
verified, filed within sixty (60) days after the petitioner learns of the
judgment, final order, or other proceeding to be set aside, and not
more than six (6) months after such judgment or final order was
entered, or such proceeding was taken; and must be accompanied
with affidavits showing the fraud, accident, mistake, or excusable
negligence relied upon, and the facts constituting the petitioners
good and substantial cause of action or defense, as the case may
be. (Emphasis ours)
By the CIRs own evidence and admissions, particularly in the
narration of facts in the petition for relief, the OSGs letter and the
affidavit of merit attached thereto, it is evident that both the CIR and
the OSG had known of the CTAs Resolution dated March 25, 2009
long before August 3,
2009. Granting that we give credence to the CIRs argument that he
could not have known of the Resolution dated March 25, 2009 by his
receipt on June 17, 2009 of the Resolution dated June 10, 2009, the
CIRs petition for relief was still filed out of time.
The CIRs claim that it was only on August 3, 2009 that he learned of
the CTAs denial of his motion for reconsideration is belied by records
showing that as of June 22, 2009, he already knew of such fact. The
information was relayed by the CTA to the CIR, when the latter
inquired from the court about the status of the case and the courts
action on his motion for reconsideration. It was precisely because of
such knowledge that he filed on July 2, 2009 the manifestation and
motion pertaining to the CTAs order of entry of judgment. Pertinent
portions of his petition for relief read:
On 17 June 2009, he received a Resolution of the Honorable Court
dated 10 June 2009 ordering the issuance of the Entry of Judgment
in the present case, x x x:

xxxx
Petitioners handling counsel was surprised that the above
emphasized decision dated 12 February 2009 had become final
considering that he had filed a timely Motion for Reconsideration on 4
March 2009.
Investigating further, he called the Honorable Court and was
informed that his Motion for Reconsideration filed by registered mail
on 4 March 2009 was received by the Honorable Court on 11 March
2009. He was also informed that the last document on file there was
a Resolution dated 25 March 2009. He then searched his records
and found no such Resolution. Petitioner then tried to confirm the
same from petitioners official counsel, the Office of the Solicitor
General (OSG) through the assigned Solicitor, Atty. Bernardo C.
Villar. He was then informed that, same as handling counsel, the
latter was also waiting for the resolution of the Motion for
Reconsideration filed on 4 March 2009 and likewise, did not receive
any copy of any resolution for that matter. The OSG then formalized
this information through a letter dated 24 June 2009. x x
x.13 (Emphasis ours)
In the letter14 dated June 24, 2009 attached to the petition for relief as
Annex "A", State Solicitor Bernardo C. Villar mentioned that on June
22, 2009, he and Atty. Velasco had discussed the CTAs prior
issuance of a resolution denying their motion for reconsideration,
thus:
This pertains to the CTA Notice of Resolution dated June 10, 2009
(directing entry of judgment), a copy of which was received by the
OSG on June 17, 2009, and further to our telephone discussion on
Monday, June 22, 2009.
As we have discussed, the OSG has not previously received any
resolution on the motion for reconsideration which you filed with the
CTA. However, you pointed out that CTA records tend to show that
there had been such a resolution and that BIR was already notified of
the same sometime in March 2009.15 (Emphasis ours)
The CIR then can no longer validly dispute that he had known of the
CTAs Resolution dated March 25, 2009 on June 22, 2009. Even as
we reckon the 60-day period under Section 3, Rule 38 from said
date, the petitioner only had until August 21, 2009 within which to file
a petition for relief. Since August 21, 2009, a Friday, was a nonworking holiday, the petitioner should have filed the petition at the
latest on August 24, 2009. The CIRs filing with the CTA of the
petition for relief on October 2, 2009 then did not conform to the 60day requirement.
Significantly, the OSG also opined, and had so advised the CIR, that
the petition for relief was indeed filed out of time. Attached to the
petitioners Compliance16 with this Courts Resolution17 dated May 30,
2011 is the OSGs letter18 dated September 22, 2009, addressed to
the BIR and which reads:

We regret to inform you that we cannot be of help to you in filing a


petition for relief since you are the ones on record representing the
BIR before the Court of Tax Appeals. As you well know, our
participation in these matters are limited to filing an appeal with the
Supreme Court in due time. This is precisely what we meant in our
previous letters as the kind of assistance that we can provide you.
Furthermore, as far as we are concerned, there is doubt in the
propriety of filing a petition for relief at this time. Please note that
from your receipt on June 17, 2009 of the entry of judgment, you filed
a "Manifestation and Motion to Reconsider Resolution Ordering Entry
of Judgment" dated July 1, 2009 instead of a petition for relief. In the
meantime, the 60 days period (from actual knowledge) under Section
3, Rule 38 within which to file the edition for relief continued to run
and has expired already.19 (Emphasis ours)
Given the foregoing, this Court finds no cogent reason to grant
petitioner's plea for the issuance of a writ of certiorari. An act of a
court or tribunal may only be considered as committed in grave
abuse of discretion when the same is performed in a capricious or
whimsical exercise of judgment, which is equivalent to lack of
jurisdiction. The abuse of discretion must be so patent and gross as
to amount to an evasion of positive duty or to a vi1iual refusal to
perform a duty enjoined by law or to act at all in contemplation of law,
as where the power is exercised in an arbitrary and despotic manner
by reason of passion or personal hostility. 20 There was no such grave
abuse of discretion in this case because the CIR's petition for relief
was indeed filed out of time.
WHEREFORE, premises considered, the petition is DISMISSED.
SO ORDERED.
BIENVENIDO
Associate Justice

L.

REYES

WE CONCUR:
MARIA
Chief
Chairperson

LOURDES

P.

A.

SERENO
Justice

TERESITA J. LEONARDOLUCAS
P.
BERSAMIN
DE
CASTRO
Associate Justice
Associate Justice
MARTIN
Associate Justice

S.

VILLARAMA,

JR.

C E RT I F I CAT I O N
Pursuant to Section 13, Article VIII of the Constitution, I certify that
the conclusions in the above Resolution had been reached in
consultation before the case was assigned to the writer of the opinion
of the Court's Division.
MARIA
Chief Justice

LOURDES

P.

A.

SERENO

CIR vs. METRO STAR SUPERAMA, INC.- Pre-Assessment Notice

CIR vs. Philippine Global Communication Inc. [G.R. No. 167146


October 31, 2006]
Facts: Philippine Global (respondent) is a corporation engaged in
telecommunications, filed its Annual Income Tax Return for taxable
year 1990 on 15 April 1991. On 13 April 1992, the Commissioner of
Internal Revenue (CIR) issued Letter of Authority No. 0002307,
authorizing the appropriate Bureau of Internal Revenue (BIR) officials
to examine the books of account and other accounting records of
respondent, in connection with the investigation of respondents 1990
income tax liability. BIR sent a letter to respondent requesting the
latter to present for examination certain records and documents, but
respondent failed to present any document. Respondent received a
Preliminary Assessment Notice dated 13 April 1994 for deficiency
income tax inclusive of surcharge, interest, and compromise penalty,
arising from deductions that were disallowed for failure to pay the
withholding tax and interest expenses that were likewise disallowed.
On the following day, 22 April 1994, respondent received a Formal
Assessment Notice with Assessment Notice No. 000688-80-7333,
dated 14 April 1994, for deficiency income tax.

If the BIR issued this assessment within the three-year period or the
ten-year period, whichever was applicable, the law provided another
three years after the assessment for the collection of the tax due
thereon through the administrative process of distraint and/or levy or
through judicial proceedings. The three-year period for collection of
the assessed tax began to run on the date the assessment notice
had been released, mailed or sent by the BIR.
The assessment, in this case, was presumably issued on 14 April
1994 since the respondent did not dispute the CIRs claim. Therefore,
the BIR had until 13 April 1997. However, as there was no Warrant of
Distraint and/or Levy served on the respondents nor any judicial
proceedings initiated by the BIR, the earliest attempt of the BIR to
collect the tax due based on this assessment was when it filed its
Answer in CTA Case No. 6568 on 9 January 2003, which was several
years beyond the three-year prescriptive period. Thus, the CIR is
now prescribed from collecting the assessed tax.

Phil Global filed two letters of protests, in both letters, respondent


requested for the cancellation of the tax assessment. More than eight
years after the assessment was presumably issued, respondent
received from the CIR a Final Decision dated 8 October 2002
denying the respondents protest against Assessment Notice No.
000688-80-7333, and affirming the said assessment in toto.

Court has also clarified that the statute of limitations on the collection
of taxes should benefit both the Government and the taxpayers
further illustrated the harmful effects that the delay in the assessment
and collection of taxes inflicts upon taxpayers, that is for the purpose
of expediting the collection of taxes, so that the agency charged with
the assessment and collection may not tarry too long or indefinitely to
the prejudice of the interests of the Government, which needs taxes
to run it; and for the taxpayer so that within a reasonable time after
filing his return, he may know the amount of the assessment he is
required to pay, whether or not such assessment is well founded and
reasonable so that he may either pay the amount of the assessment
or contest its validity in court.

CTA rendered a Decision in favor of respondent on 9 June 2004. It


decided that the protest letters filed by the respondent cannot
constitute a request for reinvestigation, hence, they cannot toll the
running of the prescriptive period to collect the assessed deficiency
income tax. Thus, since more than three years had lapsed from the
time Assessment Notice No. 000688-80-7333 was issued, the CIRs
right to collect the same has prescribed in conformity with Section
269 of the National Internal Revenue Code of 1977.

The Tax Code of 1977, as amended, provides instances when the


running of the statute of limitations on the assessment and collection
of national internal revenue taxes could be suspended, even in the
absence of a waiver, Among the exceptions, and invoked by the CIR
as a ground for this petition, is the instance when the taxpayer
requests for a reinvestigation which is granted by the Commissioner.
However, this exception does not apply to this case since the
respondent never requested for a reinvestigation.

Issues:
(1) Whether or not CIRs right to collect respondents alleged
deficiency income tax is barred by prescription under Section 269(c)
of the Tax Code of 1977

Revenue Regulations No. 12-85, the Procedure Governing


Administrative Protests of Assessment of the Bureau of Internal
Revenue, issued on 27 November 1985, defines the two types of
protest, the request for reconsideration and the request for
reinvestigation.

(2) Whether or not the prescription on assessment was suspended


by virtue of the alleged request of reinvestigation by Phil Global
Held: Petition was denied.
The law prescribed a period of three years from the date the return
was actually filed or from the last date prescribed by law for the filing
of such return, whichever came later, within which the BIR may
assess a national internal revenue tax. However, the law increased
the prescriptive period to assess or to begin a court proceeding for
the collection without an assessment to ten years when a false or
fraudulent return was filed with the intent of evading the tax or when
no return was filed at all. In such cases, the ten-year period began to
run only from the date of discovery by the BIR of the falsity, fraud or
omission.

Section 6. Protest. - The taxpayer may protest administratively an


assessment by filing a written request for reconsideration or
reinvestigation specifying the following particulars:
xxxx
For the purpose of protest herein
(a) Request for reconsideration-- refers to a plea for a re-evaluation
of an assessment on the basis of existing records without need of
additional evidence. It may involve both a question of fact or of law or
both.
(b) Request for reinvestigationrefers to a plea for re-evaluation of
an assessment on the basis of newly-discovered evidence or

additional evidence that a taxpayer intends to present in the


investigation. It may also involve a question of fact or law or both.
The main difference between these two types of protests lies in the
records or evidence to be examined by internal revenue officers,
whether these are existing records or newly discovered or additional
evidence. A re-evaluation of existing records which results from a
request for reconsideration does not toll the running of the
prescription period for the collection of an assessed tax. Section 271
distinctly limits the suspension of the running of the statute of
limitations to instances when reinvestigation is requested by a
taxpayer and is granted by the CIR.
In the present case, the separate letters of protest dated 6 May 1994
and 23 May 1994 are requests for reconsideration. The CIRs
allegation that there was a request for reinvestigation is
inconceivable since respondent consistently and categorically
refused to submit new evidence and cooperate in any reinvestigation
proceedings.
The distinction between a request for reconsideration and a request
for reinvestigation is significant. It bears repetition that a request for
reconsideration, unlike a request for reinvestigation, cannot suspend
the statute of limitations on the collection of an assessed tax. If both
types of protest can effectively interrupt the running of the statute of
limitations, an erroneous assessment may never prescribe. If the
taxpayer fails to file a protest, then the erroneous assessment would
become final and unappealable. On the other hand, if the taxpayer
does file the protest on a patently erroneous assessment, the statute
of limitations would automatically be suspended and the tax thereon
may be collected long after it was assessed. Meanwhile the interest
on the deficiencies and the surcharges continue to accumulate. And
for an unrestricted number of years, the taxpayers remain uncertain
and are burdened with the costs of preserving their books and
records. This is the predicament that the law on the statute of
limitations seeks to prevent.
COMMISSIONER OF INTERNAL REVENUE V. YUSECO
3 SCRA 313
FACTS:
It was found out that for two years, Yuseco failed to file his income
tax returns. This prompted the tax authorities to assess and hold
Yuseco liable for the deficiency in payment. Yuseco asked for a
report on how the amount was derived but this request was denied.
He asked for reconsideration which was also denied. This prompted
BIR to ask still for payment. Yuseco then filed a petition for
prohibition with the CTA, which the latter granted and now is being
questioned by the Commissioner.
HELD:
Nowhere does the law expressly vest in the Court of Tax Appeals
original jurisdiction to issue writs of prohibition and injunction
independently of, and apart from, an appealed case. The writ of
prohibition or injunction that it may issue under the provisions of
section 11, Republic Act No. 1125, to suspend the collection of taxes,
is merely ancillary to and in furtherance of its appellate jurisdiction in

the cases mentioned in section 7 of the Act. The power to issue the
writ exists only in cases appealed to it.