COMMISSIONER OF INTERNAL REVENUE v. NEXT MOBILE, INC.

G.R. No. 212825

December 07, 2015

Facts
On April 15, 2002, Next Mobile Inc. (NMI) filed with the BIR tax return for taxable year ending December
31, 2001. On September 25, 2003, NMI received a copy of the Letter of Authority for the examination of
NMI's books of accounts and other accounting records for income and withholding taxes for the period
covering January 1, 2001 to December 31, 2001.

Ma. Lida Sarmiento (Sarmiento), NMI's Director of Finance, executed 5 waivers of the statute of limitations
to extend the prescriptive period of assessment for taxes due.

On September 26, 2005, NMI received from the BIR a Preliminary Assessment Notice to which it filed a
Reply.

On October 25, 2005, NMI received a Formal Letter of Demand and Assessment Notices demanding
payment of deficiency tax. NMI filed its protest against the FLD but the BIR denied its protest. Thus, NMI
filed a Petition for Review before the CTA. The CTA First Division declared the FLD and Assessment Notices
cancelled and withdrawn for being issued beyond the three-year prescriptive period and the waivers
executed by Sarmiento did not validly extend the three-year prescriptive period to assess NMI for
deficiency tax. The waivers were not properly executed, thus, no binding effect.

BIR's Motion for Reconsideration was denied. So BIR filed a Petition for Review before the CTA En Banc
which affirmed the decision of CTA First Division. Then, CIR filed a Petition for Review to the Supreme
Court.

Issue
Whether the CIR's right to assess respondent's deficiency taxes had already prescribed notwithstanding
the Waiver of Statute of Limitations.

Ruling
[Under Section 222(b) of the NIRC, the period to assess and collect taxes may only be extended upon a
written agreement, known as Waiver of Statute of Limitations, between the CIR and the taxpayer executed
before the expiration of the three-year period.]

The general rule is that when a Waiver of Statute of Limitations does not comply with the requisites, it is
invalid and ineffective to extend the prescriptive period to assess taxes. However, this case is an exception
to the rule.

NMI, through Sarmiento, executed 5 waivers but her authority to sign these waivers was not presented
upon their submission to the BIR. This is a clear violation of RMO No. 20-90 which states that in case of a
corporate taxpayer, the waiver must be signed by its responsible officials and RDAO 01-05 which requires
the presentation of a written and notarized authority to the BIR. On the other hand, the BIR failed to verify
Sarmiento's authority to execute the waivers, demand the presentation of a notarized document
evidencing her authority, refuse acceptance of the waivers when no such document was presented, affix
the dates of its acceptance on each waiver.

The waivers are valid even if the waivers are defective for the following reasons:
First, even if the parties are in pari delicto, the Court may interfere where public policy requires its
intervention. To uphold the validity of the waivers would be consistent with the public policy embodied in
the principle that taxes are the lifeblood of the government.
Second, NMI should not be allowed to benefit from the flaws in its own waivers and insist on their
invalidity to evade its payment of taxes.
Third, NMI is estopped from questioning the validity of its waivers. The application of estoppel is
necessary to prevent the undue injury that the government would suffer because of the cancellation of
petitioner's assessment of respondent's tax liabilities.
Finally, the BIR's right to assess and collect taxes should not be jeopardized merely because of the
mistakes and lapses of its officers, especially in cases like this where the taxpayer is obviously in bad faith.
 ING BANK N.V., ENGAGED IN BANKING OPERATIONS IN THE PHILIPPINES AS ING BANK N.V. MANILA
BRANCH v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 167679
July 22, 2015

Facts
ING Bank received a Final Assessment which covers the deficiency tax assessments for taxable years 1996
and 1997. ING Bank paid some of the deficiency tax but protested on the remaining.

Then, ING Bank filed a Petition for Review before the Court of Tax Appeals to seek the cancellation and
withdrawal of the deficiency tax assessments for the years 1996 and 1997. The Court of Tax Appeals
Second Division ruled that the assessments for 1996 and 1997 deficiency withholding tax on
compensation, 1996 deficiency onshore tax and 1996 and 1997 deficiency documentary stamp tax on
special savings accounts are UPHELD and the other assessments are CANCELLED and WITHDRAWN.

The CIR's Motion for Partial Reconsideration and ING Bank's Motion for Reconsideration are DENIED for lack
of merit. ING Bank filed its appeal before the Court of Tax Appeals En Banc but it dismissed the same for
lack of merit.

Hence, ING Bank filed a Petition for Review before the Supreme Court. ING Bank asserts that it had availed
itself of the tax amnesty authorized and granted under Republic Act No. 9480 covering all national internal
revenue taxes for the taxable year 2005 and prior years that have remained unpaid as of December 31,
2005. However, CIR claims that ING Bank is not qualified to avail itself of the tax amnesty because the
Court of Tax Appeals confirmed the liability of ING Bank for deficiency documentary stamp taxes, onshore
taxes, and withholding taxes. CIR asserts that BIR Revenue Memorandum Circular No. 19-2008 specifically
excludes cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty
availment of the taxpayer from the coverage of the tax amnesty under Republic Act No. 9480. Thus, ING
Bank's availment of the tax amnesty is still subject to its evaluation.

ING Bank claims that it is not liable for withholding taxes on bonuses accruing to its officers and employees
during taxable years 1996 and 1997 because the liability of the employer to withhold the tax does not
arise until such bonus is actually distributed.

Issues
(1) Whether ING Bank is not liable for deficiency documentary stamp taxes and onshore taxes since it
validly avail itself of the tax amnesty granted by Republic Act No. 9480.
(2) Whether ING Bank is liable for deficiency withholding tax on accrued bonuses for the taxable years
1996 and 1997.

Ruling
(1) [The authority of CIR under Republic Act No. 9480 is limited to determining whether (a) the taxpayer is
qualified to avail oneself of the tax amnesty; (b) all the requirements for availment under the law were
complied with; and (c) the correct amount of amnesty tax was paid within the period prescribed by law.]
There is nothing in Republic Act No. 9480 which can be construed as authority for CIR to introduce
exceptions and/or conditions to the coverage of the law.

Republic Act No. 9480 provides a general grant of tax amnesty which partakes of an absolute waiver by
the Government of its right to collect. The effect of a qualified taxpayer's submission of the required
documents and the payment of the prescribed amnesty tax was immunity from payment of all national
internal revenue taxes as well as all administrative, civil, and criminal liabilities arising from non-payment
of national internal revenue taxes for taxable year 2005 and prior taxable years. ING Bank's tax amnesty
availment means that it has no liability for deficiency documentary stamp taxes on its special savings
accounts for 1996 and 1997 and deficiency tax on onshore interest income for 1996.

(2) ING Bank is liable for the withholding tax on the bonuses since it claimed the same as expenses in the
year they were accrued.

Section 29(j) of the 1977 National Internal Revenue Code expressly requires, as a condition for deductibility
of an expense, that the tax required to be withheld on the amount paid or payable is shown to have been
remitted to the BIR by the taxpayer constituted as a withholding agent of the government.
[Section 29(j). Any amount paid or payable which is otherwise deductible from, or taken into account in
computing gross income for which depreciation or amortization may be allowed under this section, shall be
allowed as a deduction only if it is shown that the tax required to be deducted and withheld therefrom has
been paid to the Bureau of Internal Revenue]

When ING Bank accrued or recorded the bonuses as deductible expense in its books, its obligation to
withhold the related withholding tax due from the deductions for accrued bonuses arose at the time of
accrual and not at the time of actual payment. The obligation of the payor/employer to deduct and
withhold the related withholding tax arises at the time the income was paid or accrued or recorded as an
expense in the payor's/employer's books, whichever comes first.