FULGENCIO M. DEL CASTILLO vs.

RUFINO MADRILENA, as administrator of the estate of J. Pablo

Garcia, deceased.
G.R. No. L-24788 December 17, 1926
EN BANC, JOHNSON, J.

COMMISSIONER OF INTERNAL REVENUE, vs. FIREMAN'S FUND

INSURANCE COMPANY and the COURT OF TAX APPEALS.
G.R. No. L-30644 March 9, 1987
SECOND DIVISION

PARAS, J.

COMMISSIONER OF INTERNAL REVENUE, vs. FIREMAN'S FUND

INSURANCE COMPANY and the COURT OF TAX APPEALS.
G.R. No. L-30644 March 9, 1987
SECOND DIVISION PARAS, J

COMMISSIONER OF INTERNAL REVENUE, vs.

CONSTRUCTION RESOURCES OF ASIA, INC., and THE COURT OF TAX
APPEAL.
G.R. No. L-68230 November 25, 1986
SECOND DIVISION GUTIERREZ, JR., J.:

COMMISSIONER OF INTERNAL REVENUE, vs. HEALD LUMBER

COMPANY.
G.R. No. L-16340

February 29, 1964

EN BANC REGALA, J.:

SYLLABUS

1. TAXATION; DOCUMENTARY STAMP TAX ON CERTIFICATES OF NO PAR VALUE SHARES; CAPITALIZATION

OF SURPLUS NOT SUBJECT TO ADDITIONAL TAX. A mere transfer of surplus to capital and an increase in
the stated value of the outstanding no par value shares of a corporation does not constitute an issuance of
shares and consequently no additional stamp tax is due on such increase.
2. ID.; ID.; BASIS IS THE ACTUAL CONSIDERATION RECEIVED AT THE TIME OF THE ORIGINAL ISSUE.
Under Section 212 in relation to Section 210 of the Tax Code, the basis for the documentary stamp tax on
certificates of shares without par value shall be only the actual consideration received by the corporation at
the time of the original issuance of the certificates, and any additional consideration which may be received
therefor in the future are of no consequence.
3. ID.; ID.; NATURE OF AN EXCISE TAX; COLLECTED ONLY ONCE. A documentary stamp tax is in the
nature of an excise tax imposed not on the business transacted but upon the privilege, opportunity or facility
offered at exchanges for the transaction of the business. Consequently, such tax on certificates of stock may
be collected only once, when the certificates are first or originally issued.

INTERNATIONAL EXCHANGE BANK, vs. COMMISSIONER OF INTERNAL

REVENUE.
G.R. No. 171266

April 4, 2007

SECOND DIVISION CARPIO MORALES, J.

BANK OF THE PHILIPPINE ISLANDS, vs. COMMISSIONER OF INTERNAL

REVENUE.
G.R. No. 181836

July 9, 2014

SECOND DIVISION CARPIO, J.

Petitioner BPI, sold $500,000 in 1985 to the Central Bank for the total
amount of $1,000,000.On October 1989, the BIR assessed BPI for tax
deficiency of documentary tax on its aforementioned sales of foreign bills
of exchange. BPI filed and protested the assessment on1989 through its
counsel. BPI did not receive any immediate reply to its protest. On 1992BIR
issued a warrant of Distraint and/or Levy against the petitioner. The warrant
was served on 1992 but never heard anything from the BIR until the 1997
when the reconsideration was denied.
BPI filed a petition for Review with the CTA and raised prescription as a
defense. It alleged that the right to collect must be done within 3 years only,
but the BIR waited more than 7years to deny the protest. BIR reiterated its
position and remained silent as regards the issue on prescription.

CTA rendered the decision in favor BIR stating that the action has not
prescribed but the sale of foreign currency is not subject to documentary
stamp tax. Further the assessment was order for cancellation because the
transaction between BPI and the Central Bank was tax exempt.
The CA sustained the finding of the CTA that the action has not yet
prescribed, but it adopted the position of the BIR that the sale of foreign
currency was not tax exempt.
Issue:
Whether or not the right of the BIR to collect from BPI the alleged deficiency
ondocumentary stamp tax had prescribed?
Held:
The Supreme Court ruled that the action for collection had already
prescribed. The period to collect the deficiency is limited to 3 years as
provided by Section 203 of the Tax Code. The statute of limitation on
collection may be interrupted or suspended by a valid waiver executed in
accordance with paragraph (d) of Sections 223 and 224 of the Tax Code as
amended. The purpose of the limitation is to protect the taxpayer form the
prolonged and unreasonable assessment and investigation by the BIR

COMMISSIONER OF INTERNAL REVENUE, vs. PILIPINAS SHELL

PETROLEUM CORPORATION.
G.R. No. 188497
FIRST DIVISION

February 19, 2014

VILLARAMA, JR., J.

FACTS: Shell filed a claim for refund for excise taxes it paid on sales of gas
and fuel oils to various international carriers. The Court initially denied the
claims but the respondent filed a Motion for Reconsideration.

ISSUE: Whether or not Shell is entitled to refund for payment of the excise
taxes

RULING: Yes. Section 135 is concerned with the exemption of the article
itself and not the ostensible exemption of the international carrier-buyer. In

addition, the failure to grant exemption will cause adverse impact on the
domestic oil industry (similar to the practice of tankering) as well as result
to violations of international agreements on aviation. Thus, respondent, as
the statutory taxpayer who is directly liable to pay the excise tax, is entitled
to a refund or credit for taxes paid on products sold to international carriers.

THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITEDPHILIPPINE BRANCHES, vs. COMMISSIONER OF INTERNAL REVENUE.
G.R. No. 167728 & G.R. No. 166018

June 4, 2014

FIRST DIVISION LEONARDO-DE CASTRO, J.

NATURE: Petitions for review on certiorari assailing the Decision and

Resolution of the CA. The respective Decisions in the said cases similarly
reversed and set aside the decisions of the CTA and dismissed the petition of
Petitioner HSBC.
FACTS:
1. HSBC performs custodial services on behalf of its investor-clients with
respect to their passive investments in the Philippines, particularly
investments in shares of stocks in domestic corporations. As a
custodian bank, HSBC serves as the collection/payment agent.

2. HSBCs investor-clients maintain Philippine peso and/or foreign

currency accounts, which are managed by HSBC through instructions
given through electronic messages. The said instructions are standard
forms known in the banking industry as SWIFT, or "Society for
Worldwide Interbank Financial Telecommunication." In purchasing
shares of stock and other investment in securities, the investor-clients
would send electronic messages from abroad instructing HSBC to debit
their local or foreign currency accounts and to pay the purchase price
therefor upon receipt of the securities.

3. Pursuant to the electronic messages of its investor-clients, HSBC

purchased and paid Documentary Stamp Tax (DST) from September to
December 1997 and also from January to December 1998 amounting
to P19,572,992.10 and P32,904,437.30, respectively.

4. BIR, thru its then Commissioner, issued BIR Ruling to the effect that
instructions or advises from abroad on the management of funds
located in the Philippines which do not involve transfer of funds from
abroad are not subject to DST. A documentary stamp tax shall be
imposed on any bill of exchange or order for payment purporting to be
drawn in a foreign country but payable in the Philippines.

a. While the payor is residing outside the Philippines, he maintains

a local and foreign currency account in the Philippines from
where he will draw the money intended to pay a named
recipient. The instruction or order to pay shall be made through
an electronic message. Consequently, there is no negotiable
instrument to be made, signed or issued by the payee.
b. Such electronic instructions by the non-resident payor cannot be
considered as a transaction per se considering that the same do
not involve any transfer of funds from abroad or from the place
where the instruction originates. Insofar as the local bank is
concerned, such instruction could be considered only as a
memorandum and shall be entered as such in its books of
accounts. The actual debiting of the payors account, local or
foreign currency account in the Philippines, is the actual
transaction that should be properly entered as such. Under the
Documentary Stamp Tax Law, the mere withdrawal of money
from a bank deposit, local or foreign currency account, is not
subject to DST, unless the account so maintained is a current or
checking account, in which case, the issuance of the check or
bank drafts is subject to the documentary stamp tax.
c. Likewise, the receipt of funds from another bank in the
Philippines for deposit to the payees account and thereafter
upon instruction of the non-resident depositor-payor, through an
electronic message, the depository bank to debit his account and
pay a named recipient shall not be subject to documentary
stamp tax. It should be noted that the receipt of funds from
another local bank in the Philippines by a local depository bank
for the account of its client residing abroad is part of its regular
banking transaction which is not subject to documentary stamp
tax.

5. With the above BIR Ruling as its basis, HSBC filed on an administrative
claim for the refund of allegedly representing erroneously paid DST to
the BIR
6. As its claims for refund were not acted upon by the BIR, HSBC
subsequently brought the matter to the CTA, which favored HSBC and
ordered payment of refund or issuance of tax credit.
7. However, the CA reversed decisions of the CTA and ruled that the
electronic messages of HSBCs investor-clients are subject to DST.
a. DST is levied on the exercise by persons of certain privileges
conferred by law for the creation, revision, or termination of
specific legal relationships through the execution of specific
instruments, independently of the legal status of the transactions
giving rise thereto.
ISSUE: Whether or not the electronic messages are considered transactions
pertaining to negotiable instruments that warrant the payment of DST.
HELD: NO.

The Court agrees with the CTA that the DST under Section 181 of the Tax
Code is levied on the acceptance or payment of "a bill of exchange
purporting to be drawn in a foreign country but payable in the Philippines"
and that "a bill of exchange is an unconditional order in writing addressed by
one person to another, signed by the person giving it, requiring the person to
whom it is addressed to pay on demand or at a fixed or determinable future
time a sum certain in money to order or to bearer."

The Court further agrees with the CTA that the electronic messages of
HSBCs investor-clients containing instructions to debit their respective local
or foreign currency accounts in the Philippines and pay a certain named
recipient also residing in the Philippines is not the transaction contemplated
under Section 181 of the Tax Code as such instructions are "parallel to an
automatic bank transfer of local funds from a savings account to a checking
account maintained by a depositor in one bank." The Court favorably adopts
the finding of the CTA that the electronic messages "cannot be considered
negotiable instruments as they lack the feature of negotiability, which, is the
ability to be transferred" and that the said electronic messages are "mere
memoranda" of the transaction consisting of the "actual debiting of the
[investor-client-payors] local or foreign currency account in the Philippines"
and "entered as such in the books of account of the local bank," HSBC.

The instructions given through electronic messages that are subjected to

DST in these cases are not negotiable instruments as they do not comply
with the requisites of negotiability under Section 1 of the Negotiable
Instruments Law. The electronic messages are not signed by the investorclients as supposed drawers of a bill of exchange; they do not contain an
unconditional order to pay a sum certain in money as the payment is
supposed to come from a specific fund or account of the investor-clients;
and, they are not payable to order or bearer but to a specifically designated
third party. Thus, the electronic messages are not bills of exchange. As there
was no bill of exchange or order for the payment drawn abroad and made
payable here in the Philippines, there could have been no acceptance or
payment that will trigger the imposition of the DST under Section 181 of the
Tax Code.

In these cases, the electronic messages received by HSBC from its investorclients abroad instructing the former to debit the latter's local and foreign
currency accounts and to pay the purchase price of shares of stock or
investment in securities do not properly qualify as either presentment for
acceptance or presentment for payment. There being neither presentment
for acceptance nor presentment for payment, then there was no acceptance
or payment that could have been subjected to DST to speak of.

WHEREFORE, the petitions are hereby GRANTED and the Decisions dated
May 2, 2002 in CTA Case No. 6009 and dated December 18, 2002 in CT A
Case No. 5951 of the Court of Tax Appeals are REINSTATED. SO ORDERED.

PHILIPPINE BANK OF COMMUNICATIONS, vs. COMMISSIONER OF

INTERNAL REVENUE, COURT OF TAX APPEALS and COURT OF
APPEALS.
G.R. No. 112024 January 28, 1999
SECOND DIVISION QUISUMBING, J.

FACTS:

Petitioner, Philippine Bank of Communications (PBCom), a commercial

banking corporation duly organized under Philippine laws, filed its quarterly
income tax returns for the first and second quarters of 1985, reported profits,
and paid the total income tax of P5,016,954.00 by applying PBCom's tax
credit memos for P3,401,701.00 and P1,615,253.00,
respectively. Subsequently, however, PBCom suffered net loss of
P25,317,228.00, thereby showing no income tax liability in its Annual Income
Tax Returns for the year-ended December 31, 1985. For the succeeding year,
ending December 31, 1986, the petitioner likewise reported a net loss of
P14,129,602.00, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from leased
properties. The lessees withheld and remitted to the BIR withholding
creditable taxes of P282,795.50 in 1985 and P234,077.69 in 1986. On August
7, 1987, petitioner requested the Commissioner of Internal Revenue, among
others, for a tax credit of P5,016,954.00 representing the overpayment of
taxes in the first and second quarters of 1985.

Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable
taxes withheld by their lessees from property rentals in 1985 for P282,795.50
and in 1986 for P234,077.69.

Pending the investigation of the respondent Commissioner of Internal

Revenue, petitioner instituted a Petition for Review on November 18, 1988
before the Court of Tax Appeals (CTA). The petition was docketed as CTA
Case No. 4309 entitled: "Philippine Bank of Communications vs.
Commissioner of Internal Revenue."
The CTA decided in favor of the BIR on the ground that the Petition was filed
out of time as the same was filed beyond the two-year reglementary period.
A motion for Reconsideration was denied and the appeal to Court of Appeals
was likewise denied. Thus, this appeal to Supreme Court.

Issues:

a) Whether or not Revenue Regulations No. 7-85 which alters the

reglementary period from two (2) years to ten (10) years is valid.
b) Whether or not the petition for tax refund had already prescribed.

Ruling:

a. RR 7-85 altering the 2-year prescriptive period imposed by law

to 10-year prescriptive period is invalid.

Administrative issuances are merely interpretations and not expansions of

the provisions of law, thus, in case of inconsistency, the law prevails over
them. Administrative agencies have no legislative power.

When the Acting Commissioner of Internal Revenue issued RMC 7-85,

changing the prescriptive period of two years to ten years on claims of
excess quarterly income tax payments, such circular created a clear
inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the
BIR did not simply interpret the law; rather it legislated guidelines contrary to
the statute passed by Congress.

It bears repeating that Revenue memorandum-circulars are considered

administrative rulings (in the sense of more specific and less general
interpretations of tax laws) which are issued from time to time by the
Commissioner of Internal Revenue. It is widely accepted that the
interpretation placed upon a statute by the executive officers, whose duty is
to enforce it, is entitled to great respect by the courts. Nevertheless, such
interpretation is not conclusive and will be ignored if judicially found to be
erroneous. Thus, courts will not countenance administrative issuances that
override, instead of remaining consistent and in harmony with, the law they
seek to apply and implement.

Further, fundamental is the rule that the State cannot be put in estoppel by
the mistakes or errors of its officials or agents. As pointed out by the
respondent courts, the nullification of RMC No. 7-85 issued by the Acting
Commissioner of Internal Revenue is an administrative interpretation which
is not in harmony with Sec. 230 of 1977 NIRC, for being contrary to the
express provision of a statute. Hence, his interpretation could not be given
weight for to do so would, in effect, amend the statute.

b. By implication of the above, claim for refund had already

prescribed.

Since the petition had been filed beyond the prescriptive period, the same
has already prescribed. The fact that the final adjusted return show an
excess tax credit does not automatically entitle taxpayer claim for refund
without any express intent.

WHEREFORE, the petition is hereby DENIED. The decision of the Court of

Appeals appealed from is AFFIRMED, with COSTS against the petitioner.

Facts:
Petitioner reported a net loss in 1986 and thus declared no tax payable. On
1987, petitioner requested the respondent, among others, for a tax credit
representing the overpayment of taxes in the first and second quarters of
1985.
Thereafter, petitioner filed a claim for refund of creditable taxes withheld by
their lessees from property rentals in 1985 and in 1986. Pending
investigation, petitioner instituted a Petition for Review before the Court of
Tax Appeals (CTA).
CTA denied the request of petitioner for a tax refund or credit for 1985 on the
ground that it was filed beyond the two-year reglementary period provided
for by law. The petitioners claim for refund in 1986 was likewise denied on
the assumption that it was automatically credited by PBCom against its tax
payment in the succeeding year. MR was denied.
CA affirmed the decision in toto hence this petition.
Petitioner argues that the government is barred from asserting a position
contrary to its declared circular if it would result to injustice to taxpayers.
Citing ABS CBN Broadcasting Corporation vs. Court of Tax Appeals (1981),
petitioner claims that rulings or circulars promulgated by the Commissioner
of Internal Revenue have no retroactive effect if it would be prejudicial to
taxpayers.
Respondent argues that the two-year prescriptive period for filing tax cases
in court concerning income tax payments of Corporations is reckoned from
the date of filing the Final Adjusted Income Tax Return, which is generally

done on April 15 following the close of the calendar year. Further, respondent
Commissioner stresses that when the petitioner filed the case before the CTA
on November 18, 1988, the same was filed beyond the time fixed by law,
and such failure is fatal to petitioners cause of action.
Issue:
Whether or not the Court of Appeals erred in denying the plea for tax refund
or tax credits on the ground of prescription
Held:
No. The rule states that the taxpayer may file a claim for refund or credit
with the Commissioner of Internal Revenue, within two (2) years after
payment of tax, before any suit in CTA is commenced. The two-year
prescriptive period provided, should be computed from the time of filing the
Adjustment Return and final payment of the tax for the year.
Basic is the principle that taxes are the lifeblood of the nation. Due process
of law under the Constitution does not require judicial proceedings in tax
cases. This must necessarily be so because it is upon taxation that the
government chiefly relies to obtain the means to carry on its operations and
it is of utmost importance that the modes adopted to enforce the collection
of taxes levied should be summary and interfered with as little as possible.
From the same perspective, claims for refund or tax credit should be
exercised within the time fixed by law because the BIR being an
administrative body enforced to collect taxes, its functions should not be
unduly delayed or hampered by incidental matters.
Any excess of the total quarterly payments over the actual income tax
computed in the adjustment or final corporate income tax return, shall either
(a) be refunded to the corporation, or (b) may be credited against the
estimated quarterly income tax liabilities for the quarters of the succeeding
taxable year.
The corporation must signify in its annual corporate adjustment return (by
marking the option box provided in the BIR form) its intention, whether to
request for a refund or claim for an automatic tax credit for the succeeding
taxable year. To ease the administration of tax collection, these remedies are
in the alternative, and the choice of one precludes the other.
A memorandum-circular of a bureau head could not operate to vest a
taxpayer with shield against judicial action. For there are no vested rights to
speak of respecting a wrong construction of the law by the administrative
officials and such wrong interpretation could not place the Government in
estoppel to correct or overrule the same [Tan Guan vs. Court of Tax Appeals,
19 SCRA 903 (1967)].