CIR V.

CENTRAL AZUCARERA DON PEDRO

G.R. NO. L-14015 MAY 31, 1960
FIRST DIVISION BARRERA, J.:

FACTS
Central Azucarera Don Pedro (respondent) is a domestic corporation,
authorized to operate a duly registered distillery plant. It manufactured 284,423
proof liters of denatured alcohol sold to the Pacific Products, Inc. and the
Pacific Industrial Manufacturing, which used the same in the manufacture of
rubbing alcohol compound and other products containing specially
denatured alcohol as ingredient. The preparation, sale, and withdrawal of said
denatured alcohol was with the permission and authority of petitioner through
his Denaturing Committee and, at the time of its sale to, and withdrawal by
said buyers, said committee never made any demand from respondent for the
payment of the specific tax in question. Respondent, on the other hand, paid
the corresponding sales tax on said denatured alcohol sold.
After the process of denaturization, but during the same day, said
committee accomplished denaturization certificates attesting to the chief
ingredients used, the denaturing agent mixed, the amount of proof liters
produced, and the percentage of their alcoholic contents. The resulting
denatured alcohol was correspondingly recorded in an official Register Book
and attested to by an Internal Revenue agent. The denaturization certificates
show that the denatured alcohol was exempted from payment of specific tax
by said Denaturing Committee. Later, however, CIR (petitioner) wrote a letter
assessing and demanding from respondent the sums of P199, 906.10 as specific
tax on said 284,423 proof liters of denatured alcohol and P10, 000.00 as
compromise penalty.

ISSUE
Whether respondent is liable for the payment of specific tax on the
denatured alcohol

DECISION
The specific tax is being levied not as a result of the manufacture or
production, or sale of the denatured alcohol, but as a consequence of its
conversion or manufacture, by the purchasers, into rubbing alcohol. the tax is
being imposed on the rubbing alcohol in accordance with Section 124, in
relation to Sections 127 and 133 of the National Internal Revenue Code, thus,
There is no question that the rubbing alcohol is a domestic product and a
medicinal and toilet preparation of which, excluding water, distilled spirits form
the chief ingredient.
Admittedly, the Pacific Products, Inc. and the Pacific Industrial
Manufacturing, and not Central Azucarera (respondent) are the
manufacturers, producers, and owners of the rubbing alcohol. It follows that
they, and not the respondent, are the parties liable to the payment of the
corresponding specific tax.
 ASIAWORLD PROPERTIES PHILIPPINE CORP. V. CIR
G.R. NO. 171766 JULY 19, 2010
SECOND DIVISION CARPIO, J.:

FACTS
Asiaworld Properties Philippine Corporation (petitioner) is a domestic
corporation engaged in the business of real estate development. It declared
a minimum corporate income tax (MCIT) due in the amount of P1, 222,066.00,
but with a refundable income tax payment in the sum of P6, 473,959.00
In its 2001 ITR, petitioner stated that the amount of P7,
468,061.00 representing Prior Years Excess Credits was net of year 1999 excess
creditable withholding tax to be refunded in the amount of P18, 477,144.00.
Petitioner also indicated in its 2001 ITR its option to carry-over as tax credit next
year/quarter the overpayment of P6, 473,959.00. On 9 April 2002, petitioner
filed a request for refund in the amount of P18, 477,144.00, allegedly
representing partial excess creditable tax withheld for the year 2001. Petitioner
claimed that it is entitled to the refund of its unapplied creditable withholding
taxes.
On 12 April 2002, before the BIR Revenue District Office could act on
petitioners claim for refund, petitioner filed a Petition for Review with the Court
of Tax Appeals to toll the running of the two-year prescriptive period.

ISSUE
Whether the exercise of the option to carry-over the excess income tax
credit, which shall be applied against the tax due in the succeeding taxable
years, prohibits a claim for refund in the subsequent taxable years for the
unused portion of the excess tax credits carried over.

DECISION
In case the corporation is entitled to a tax credit or refund of the excess
estimated quarterly income taxes paid, the excess amount shown on its final
adjustment return may be carried over and credited against the estimated
quarterly income tax liabilities for the taxable quarters of the succeeding
taxable years. Once the option to carry-over and apply the excess quarterly
income tax against income tax due for the taxable quarters of the succeeding
taxable years has been made, such option shall be considered irrevocable for
that taxable period and no application for cash refund or issuance of a tax
credit certificate shall be allowed therefore.
Thus, once the taxpayer opts to carry-over the excess income tax
against the taxes due for the succeeding taxable years, such option is
irrevocable for the whole amount of the excess income tax, thus, prohibiting
the taxpayer from applying for a refund for that same excess income tax in the
next succeeding taxable years. Hence, such option to carry-over is not limited
to the following taxable year, but should apply to the succeeding taxable
years until the whole amount of the creditable withholding tax would be fully
utilized.
 BPI SECURITIES CORP. V. CIR
CTA CASE NO. 6089 AUG. 22, 2002

FACTS
Petitioner is a domestic corporation organized and existing under
Philippine laws. On April 14, 2000, petitioner filed its Annual Income Tax Return
for the calendar year ended December 31, 1999 showing a net loss of P2,
641,424.00 and nil tax liability. As stated in the return, petitioner intended to
refund its prior year's excess credit. To support its claim, petitioner submitted its
Corporate Quarterly Income Tax Returns for the first three quarters of 1997, its
Corporate Annual Income Tax Returns for the calendar years 1997, 1998 and
1999, a bank deposit slip for the amount of P6, 313,761.62, dated May 30, 1997,
with machine validation and a bank deposit slip for the amount of P235, 166.59,
dated August 29, 1997, with machine validation.
Respondent, on the other hand, presented in evidence the
memorandum-report of Revenue Officer Isidoro Guzman addressed to the
Revenue District Officer of RDO No. 47, East Makati, denying petitioner's claim
for refund and at the same time recommending the issuance of a preliminary
assessment notice in the total sum of P20,758,189.91.

ISSUE
WON the claim for refund is meritorious

DECISION
YES. Section 69 of the National Internal Revenue Code clearly provides,
that Final Adjustment Return- Every Corporation liable to tax under Section 24
shall file a final adjustment return covering the total net income for the
preceding calendar or fiscal year. If the sum of the quarterly tax payments
made during the said taxable year is not equal to the total tax due on the
entire taxable net income of that year the corporation shall either: (a.) Pay the
excess tax due; or (b.) Be refunded the excess amount paid, as the case may
be. In case the corporation is entitled to a refund of the excess estimated
quarterly income taxes paid, the refundable amount shown on its final
adjustment return may be credited against the estimated quarterly income tax
liabilities for the taxable quarters of the succeeding taxable year.
It is clear that if the sum of the quarterly income tax payments made
during the taxable year is not equal to the total tax due on the entire net
income of that year, the taxpayer is entitled to a refund of the excess amount
paid. In addition, the taxpayer may opt to credit the refundable amount
against the estimated quarterly income tax liabilities for the taxable quarter of
the succeeding taxable year.
 FNCB FINANCE V. CIR
CTA CASE NO. 3717 MAY 10, 1993

FACTS
FNCB Finance (petitioner) is a domestic corporation duly organized and
authorized to engage on financing business. For taxable year ended
December 3 1, 19 B 1, petitioners annual corporate income tax return filed on
April 5,1982 showed a refundable amount of P6,810, 2 54.09. An amended
return was subsequently filed on Nov. 12, 1982 to show its true income and
deductions including creditable income taxes for the taxable year in question.
The total amount refundable as adjusted is P2, 583, 901.28. Petitioner then,
through SGV and Co. filed a claim for tax credit for such amount.
The revenue examiners report on the other hand showed that after
investigation, FNCB has incurred on income tax deficiency for the year 1981 of
the alleged creditable income taxes withheld amounting to p2, 583, and
901.28, the amount of which has been applied against the deficiency income
tax due.

ISSUE
WON FNCB is entitled to a tax credit of P2, 583, 901.28

DECISION
In the investigation of petitioners claim for tax credit, an alleged
deficiency income tax was found which the petitioner automatically set off
against the amount claimed as excess creditable income tax. Thus, FNCB has
no longer any excess creditable income tax but a deficiency tax due.
However, the respondent cannot be allowed to apply the tax credit
claimed against the deficiency as there was no assessment made. An
assessment fixes and determines the tax liability of a taxpayer and without
such, there can be no debt and no obligation on the part of the taxpayer
which can be enforced in an action. Further, the government cannot
automatically set off alleged deficiency tax against a claim for tax credit.
On one hand, petitioner cannot refuse to pay a tax on the ground that
the government owes him an amount equal to or greater than the tax being
collected. Petitioners failure to present any evidence in support of the
previous years tax credits claimed amounting to P2, 113, 627.35 cannot be
claimed
 CONSOLIDATED CASES OF CIR V. SAN ROQUE PWEOR CORP., TAGANITO
MINING CORP., AND PHILEX MINING CORP.
G.R. NO. 187485 FEB. 12, 2013
EN BANC CARPIO, J.:

FACTS
G.R. No. 187485 is a petition for review assailing the decision and
resolution promulgated by the CTA EB affirming the decision and resolution of
CTA 2nd Division. The CTA 2nd Division ordered the CIR to refund or issue a tax
credit to San Roque Power Corporation (San Roque) for unutilized input value-
added tax (VAT) on purchases of capital goods and services for the taxable
year 2001.
G.R. No. 196113 is a petition for review assailing the Decision and the
Resolution promulgated by the CTA EB reversing the decision and resolution of
the CTA Second Division and granted the CIRs petition for review. The CTA EB
dismissed, for having been prematurely filed, Taganito Mining Corporations
(Taganito) judicial claim for tax refund or credit.
G.R. No. 197156 is a petition for review assailing the decision and
resolution promulgated by the CTA EB affirming the decision and resolution of
the CTA 2nd Division in denying, due to prescription, Philex Mining
Corporations (Philex) judicial claim for tax refund or credit.
SC resolved to consolidate G.R. No. 197156 with G.R. No. 196113 and with G.R.
No. 187485.

DECISION
San Roque Case: the claim for refund with the BIR and the subsequent
appeal to the Court of Tax Appeals must be filed within the two-year period.
The two-year prescriptive period for filing a claim for input tax is reckoned from
the date of the filing of the quarterly VAT return and payment of the tax due.
If the said period is about to expire but the BIR has not yet acted on the
application for refund, the taxpayer may interpose a petition for review with
this Court within the two year period.
Taganito Minong Corp Case: CTA EB declared that Section 112(A) and
(B) of the 1997 Tax Code both set forth the reckoning of the two-year
prescriptive period for filing a claim for tax refund or credit over input VAT to
be the close of the taxable quarter when the sales were made.
Philex Mining Corp Case: while there is no dispute that the administrative
claim for refund was filed within the two-year prescriptive period; however, as
to its judicial claim for refund/credit, records show that the Petition for Review
in CTA Case No. 7687 was filed 426 days late. Thus, dismissed.

Sec. 110. Tax Credits. (B) Excess Output or Input Tax. If at the end of any
taxable quarter the output tax exceeds the input tax, the excess shall be paid
by the VAT-registered person. If the input tax exceeds the output tax, the
excess shall be carried over to the succeeding quarter or quarters: Provided,
however, that any input tax attributable to zero-rated sales by a VAT-registered
person may at his option be refunded or credited against other internal
revenue taxes, subject to the provisions of Section 112.
 FRANCIA V. IAC
GR NO L-67649 JUNE 28, 1988
THIRD DIVISION GUTIERREZ, JR. J.:

FACTS
Engracio Francia was the owner of a 328 square meter land in Pasay
City. In October 1977, a portion of his land (125 square meter) was expropriated
by the government for P4, 116.00. The expropriation was made to give way to
the expansion of a nearby road. It also appears that Francia failed to pay his
real estate taxes since 1963 amounting to P2, 400.00. So in December 1977, the
remaining 203 square meters of his land was sold at a public auction (after due
notice was given him). The highest bidder was a certain Ho Fernandez who
paid the purchase price of P2, 400.00 (which was lesser than the price of the
portion of his land that was expropriated). Later, Francia filed a complaint to
annul the auction sale on the ground that the selling price was grossly
inadequate. He further argued that his land should have never been
auctioned because the P2, 400.00 he owed the government in taxes should
have been set-off by the debt the government owed him (legal
compensation). He alleged that he was not paid by the government for the
expropriated portion of his land because though he knew that the payment
therefor was deposited in the Philippine National Bank, he never withdrew it.

ISSUE
Whether or not the tax owed by Francia should be set-off by the debt
owed him by the government.

DECISION
No. As a rule, set-off of taxes is not allowed. There is no legal basis for the
contention. By legal compensation, obligations of persons, who in their own
right are reciprocally debtors and creditors of each other, are extinguished
(Art. 1278, Civil Code). This is not applicable in taxes. There can be no off-setting
of taxes against the claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on the ground that the
government owes him an amount equal to or greater than the tax being
collected. The collection of a tax cannot await the results of a lawsuit against
the government.
The Supreme Court emphasized: A claim for taxes is not such a debt,
demand, contract or judgment as is allowed to be set-off under the statutes of
set-off, which are construed uniformly, in the light of public policy, to exclude
the remedy in an action or any indebtedness of the state or municipality to
one who is liable to the state or municipality for taxes. Neither are they a proper
subject of recoupment since they do not arise out of the contract or
transaction sued on. Further, alleged gross inadequacy of price is not material
when the law gives the owner the right to redeem as when a sale is made at
public auction, upon the theory that the lesser the price, the easier it is for the
owner to effect redemption. If mere inadequacy of price is held to be a valid
objection to a sale for taxes, the collection of taxes in this manner would be
greatly embarrassed, if not rendered altogether impracticable. Where land is
sold for taxes, the inadequacy of the price given is not a valid objection to the
sale.