I

TAXES ARE NOT SUBJECT TO SET-OFF; EXCEPTIONS

(CIR v. Toledo Power Co., 2015, Del Castillo, J.)

As a rule, taxes cannot be subject to compensation because the government and the taxpayer are not creditors and debtors
of each other. However, the SC allowed the offsetting of taxes under the following exceptional cases.

In Commissioner of Internal Revenue v. Court of Tax Appeals, the SC allowed offsetting of taxes in a tax refund case because
there was an existing deficiency income and business tax assessment against the taxpayer. “To award such refund despite
the existence of that deficiency assessment is an absurdity and a polarity in conceptual effects” and that “to grant the
refund without determination of the proper assessment and the tax due would inevitably result in multiplicity of
proceedings or suits.”

In South African Airways v. Commissioner of Internal Revenue, the SC permitted offsetting of taxes because the correctness of
the return filed by the taxpayer was put in issue.

In SMI-ED Philippines Technology, Inc. v. Commissioner of Internal Revenue, the SC also allowed offsetting because there was
a need for the court to determine if a taxpayer claiming refund of erroneously paid taxes is more properly liable for taxes
other than that paid. The SC explained that the determination of the proper category of tax that should have been paid is
not an assessment but is an incidental issue that must be resolved in order to determine whether there should be a refund.
However, xxx while offsetting may be allowed, the BIR can no longer assess the taxpayer for deficiency taxes in excess of
the amount claimed for refund if prescription has already set in.

In all these cases, the SC allowed offsetting of taxes only because the determination of the taxpayer’s liability is intertwined
with the resolution of the claim for tax refund of erroneously or illegally collected taxes under Section 229 of the NIRC.

II
AN OFFLINE INTERNATIONAL AIR CARRIER
SELLING PASSAGE TICKETS IN THE PHILIPPINES, THROUGH A GENERAL SALES AGENT,
IS A RESIDENT FOREIGN CORPORATION DOING BUSINESS IN THE PHILIPPINES
(Air Canada v. CIR, 2015)

Doing business includes appointing representatives or distributors operating under full control of the foreign corporation,
domiciled in the Philippines or who in any calendar year stay in the country for a period totaling 180 days or more.

Upon this point, an offline carrier, a foreign air carrier not certified by the Civil Aeronautics Board, that maintains office or
has designated or appointed agents or employees in the Philippines, through whom, it sells or offers for sale any air
transportation, or negotiates for, or holds itself out by solicitation, advertisement, or otherwise sells, provides, furnishes,
contracts, or arranges for such transportation, is undoubtedly “doing business” or “engaged in trade or business in the
Philippines.”

As such, it is taxable under Section 28(A)(l), and not Section 28(A)(3) of the 1997 Internal Revenue Code, subject to any
applicable tax treaty to which the Philippines is a signatory. Pursuant to Article 8 of the PH-Canada Tax Treaty, Air
Canada may only be imposed a maximum tax of 1 ½% of its gross revenues earned from the sale of its tickets in the
Philippines.

III
MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA) IS EXEMPT FROM REAL ESTATE TAX
(MCIAA v. City of Lapu-Lapu, 2015)

In the 2006 MIAA case, the SC held that MIAA’s airport lands and buildings are exempt from real estate tax imposed by
LGUs; that it is not a GOCC but an instrumentality of the national government, with its real properties being owned by the
Republic of the Philippines, and these are exempt from real estate tax. The SC declared that MCIAA is an instrumentality of
the national government.

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 IV
THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA)
IS AN INSTRUMENTALITY OF THE NATIONAL GOVERNMENT
EXEMPT FROM PAYMENT OF REAL PROPERTY TAXES
(City of Lapu-Lapu v. PEZA, 2014)

PEZA is an instrumentality of the national government. It is not integrated within the department framework but is an
agency attached to the DTI. It administers its own funds and operates autonomously with the PEZA Board as an
instrumentality of the national government. PEZA is vested with special functions or jurisdiction by law. Being an
instrument of the national government, the PEZ cannot be taxed by LGUs.

V
PAGCOR IS STILL EXEMPT FROM CORPORATE INCOME TAX
WITH RESPECT TO ITS INCOME FROM GAMING OPERATIONS
(PAGCOR v. BIR, 2017)

Under PD 1869, as amended, PAGCOR is subject to income tax only with respect to its operation of related services.
Accordingly, the income tax exemption ordained under Section 27 I of RA 8424 clearly pertains only to PAGCOR’s income
from operation of related services. Such income tax exemption could not have been applicable to PAGCOR’s income from
gaming operations as it is already exempt therefrom under PD 1869, as amended.

Indeed, the grant of tax exemption or the withdrawal thereof assumes that the person or entity involved is subject to tax.
This is the most sound and logical interpretation because PAGCOR could not have been exempted from paying taxes which
it was not liable to pay in the first place. This is clear from the wordings of PD 1869, as amended, imposing a franchise tax
of five percent (5%) on its gross revenue or earnings derived by PAGCOR from its operation under the Franchise in lieu of
all taxes of any kind or form, as well as fees, charges or levies of whatever nature, which necessarily include corporate
income tax.

VI
P82,000 GROSS 13TH MONTH PAY AND OTHER BENEFITS
SHALL BE EXCLUDED FROM GROSS INCOME AND SHALL BE EXEMPT FROM INCOME TAXATION
(RA 10653)

1. The gross 13th month pay and other benefits received by officials and employees of public and private entities in
the total amount not to exceed P82,000 shall be excluded from gross income and shall be exempt from income
taxation.

2. Every 3 years after the effectivity of RA 10653, the President of the Philippines shall adjust the amount of P82,000
to its present value using the Consumer Price Index, as published by the NSO (now, PSA per RA 10625).

3. The Secretary of Finance shall promulgate the necessary rules and regulations for the faithful and effective
implementation of RA 10653, provided that the failure of the SOF to promulgate the said rules and regulations
shall not prevent the implementation of RA 10653 upon effectivity.

VII
NEW DE MINIMIS BENEFITS
(Revenue Regulations No. 1-2015)

Benefits received by an employee by virtue of a CBA and productivity incentive schemes provided that the total annual
monetary value received from both CBA and productivity incentive schemes combined do not exceed P10,000 per
employee per taxable year.

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 VIII
THE 20% SENIOR CITIZEN DISCOUNT IS AN EXERCISE OF POLICE POWER
(Manila Memorial Park, Inc. v. DSWD Secretary, 2013, Del Castillo, J.)

The 20% discount is intended to improve the welfare of senior citizens who, at their age, are less likely to be gainfully
employed, more prone to illness and other disabilities, and, thus, in need of subsidy in purchasing basic commodities. The
20% senior citizen discount may be properly viewed as belonging to the category of price regulatory measures which
affect the profitability of establishments subjected thereto. Ergo, the subject regulation is police power measure.

IX
THE SOCIALIZED HOUSING TAX (SHT) IS LEVIED
IN THE EXERCISE OF THE POLICE POWER OF THE STATE
(Ferrer, Jr. v. Bautista, 2015)

The SHT is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory purpose. The levy is
primarily in the exercise of the police power for the general welfare of the entire city. It is greatly imbued with public
interest. Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless constituents but
advantageous to the real property owners as well. The situation will improve the value of the their property investments,
fully enjoying the same in view of an orderly, secure, and safe community, and will enhance the quality of life of the poor,
making them law-abiding constituents and better consumers of business products.

X
NATURE OF COCONUT LEVY FUNDS AND BUILDING PERMIT

The coconut levy funds partake of the nature of taxes and can only be used for public purpose, and importantly, for the
purpose for which it was exacted, i.e., the development, rehabilitation and stabilization of the coconut industry. They
cannot be used to benefit – whether directly or indirectly – private individuals, be it by way of a commission, or as the
subject Agreement interestingly words it, compensation (Cojuangco, Jr. v. Republic, 2012).

A building permit is a regulatory imposition. For one, in processing an application for a building permit, the Building
Official shall see to it that the applicant satisfies and conforms with approved standard requirements on zoning and land
use, lines and grades, structural design, sanitary and sewerage, environmental health, electrical and mechanical safety. For
another, clearances from various government authorities exercising and enforcing regulatory functions affecting
buildings/structures, like local government units, may be further required before a building permit may be issued (Angeles
University Foundation v. City of Angeles, 2012).

XI
TAX TREATMENT OF INCOME DERIVED FROM THE PEACE BONDS
(BDO v. Republic, 2015)

The transactions executed for the sales of the PEACe Bonds are:
1. The issuance of the 35 billion Bonds by the Bureau of Treasury to RCBC/ CODE-NGO at 10.2 billion; and

2. The sale and distribution by RCBC Capital (underwriter) on behalf of CODE-NGO of the PEACe Bonds to
undisclosed investors at P11.996 billion.

It may seem that there was only one lender – RCBC on behalf of CODE-NGO – to whom the PEACe Bonds were issued at the
time of origination. However, a reading of the underwriting agreement and RCBC term sheet reveals that the settlement
dates for the sale and distribution by RCBC Capital (as underwriter for CODE-NGO) of the PEACe Bonds to various
undisclosed investors at a purchase price of approximately P11.996 would fall on the same day, October 18, 2001, when
the PEACe Bonds were supposedly issued to CODE-NGO/ RCBC. In reality, therefore, the entire P10.2 billion borrowing
received by the Bureau of Treasury in exchange for the 35 billion worth of PEACe Bonds was sourced directly from the
undisclosed number of investors to whom RCBC Capital/ CODE-NGO distributed the PEACe Bonds – all at the time of
origination or issuance. At this point, however, the SC do not know as to how many investors the PEACe Bonds were sold to
by RCBC Capital.

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 XII
ST. LUKE’S MEDICAL CENTER, INC., ORGANIZED AS A
NON-STOCK AND NON-PROFIT CHARITABLE INSTITUTION
IS NOT IPSO FACTO ENTITLED TO TAX EXEMPTION
(CIR v. SLMC, Inc., 2012)

There is no dispute that St. Luke’s is organized as a non-stock and non-profit charitable institution. However, this does not
automatically exempt St. Luke’s from paying taxes. This only refers to the organization of St. Luke’s. Even if St. Luke’s meets
the test of charity, a charitable institution is not ipso facto tax exempt. To be exempt from real property taxes, Section
28(3), Article VI of the Constitution requires that a charitable institution use the property “actually, directly and
exclusively” for charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable
institution must be “organized and operated exclusively” for charitable purposes. Likewise, to be exempt from income
taxes, Section 30(G) of the NIRC requires that the institution be “operated exclusively” for social welfare.

XIII
NON-STOCK, NON-PROFIT EDUCATIONAL FOUNDATIONS ARE EXEMPT FROM INCOME TAX
(Angeles University Foundation v. City of Angeles, 2012)

RA 6055 granted tax exemptions to educational institutions like AUF which converted to non-stock, non-profit educational
foundations.

Section 8 of said law provides that the Foundation shall be exempt from the payment of all taxes, import duties,
assessments, and other charges imposed by the Government on all income derived from or property, real or personal, used
exclusively for the educational activities of the Foundation.

XIV
TAXPAYER’S SUIT REQUIRES ILLEGAL USE OF PUBLIC MONEY
(Dela Llana v. COA Chairperson, 2012)

A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds from
taxation have been disbursed in alleged contravention of the law or the Constitution. Petitioner claims that the issuance of
Circular No. 89-299 has led to the dissipation of public funds through numerous irregularities in government financial
transactions. These transactions have allegedly been left unchecked by the lifting of the pre-audit performed by COA,
which, petitioner argues, is its Constitutional duty. Thus, petitioner has standing to file this suit as a taxpayer, since he
would be adversely affected by the illegal use of public money.

XV
TAXPAYER’S SUIT DIFFERENTIATED FROM CITIZEN’S SUIT
(Beauchamp v. Silk)

In taxpayer’s suit, the plaintiff is affected by the expenditure of public funds.

In citizen’s suit, he is but the instrument of the public concern.

XVI
MINIMUM CORPORATE INCOME TAX (MCIT) IS A NOT A TAX ON CAPITAL
(Chamber of Real Estate and Builders’ Assn., Inc. v. Romulo, 2010)

The MCIT is imposed on gross income which is arrived at by deducting 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.

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 XVII
TOLL FEES COLLECTED BY TOLL OPERATIONS MAY BE SUBJECTED TO VALUE-ADDED TAX
(Diaz v. Finance Secretary, 2011)

Section 108(A) of the Code clearly states that services of all other franchise grantees are subject to VAT, except as may be
provided under Section 119 of the Code. Tollway operators are not among the franchise grantees subject to franchise tax
under the latter provision. Neither are their services among the VAT-exempt transactions under Section 109 of the Code.

The grant of tax exemption is a matter of legislative policy that is within the exclusive prerogative of Congress. The Courts
role is to merely uphold this legislative policy, as reflected first and foremost in the language of the tax statute. Thus, any
unwarranted burden that may be perceived to result from enforcing such policy must be properly referred to Congress.
The Court has no discretion on the matter but simply applies the law.

The VAT on franchise grantees has been in the statute books since 1994 when RA 7716 or the Expanded Value-Added Tax
law was passed. It is only now, however, that the executive has earnestly pursued the VAT imposition against tollway
operators. The executive exercises exclusive discretion in matters pertaining to the implementation and execution of tax
laws. Consequently, the executive is more properly suited to deal with the immediate and practical consequences of the
VAT imposition.

XVIII
PRIOR PAYMENT OF VALUE-ADDED TAXES IS NOT
A PREREQUISITE BEFORE A TAXPAYER COULD
AVAIL OF THE TRANSITIONAL INPUT TAX CREDIT
(Fort Bonifacio Dev’t. Corp. v. CIR, 2014)

A transitional input tax credit is not a tax refund per se but a tax credit. Logically, prior payment of taxes is not required
before a taxpayer could avail of transitional input tax credit.

Tax credit is not synonymous to tax refund.

Tax refund is defined as the money that a taxpayer overpaid and is thus returned by the taxing authority.

Tax credit, on the other hand, is an amount subtracted directly from one’s total tax liability. It is any amount given to a
taxpayer as a subsidy, a refund, or an incentive to encourage investment.

XIX
REVENUE REGULATIONS 16-2011
INCREASE IN THE THRESHOLD AMOUNTS

2005 Adjusted Threshold

Amount
S 109 (P). Sale of residential lot 1,500,000 1,919,500
S 109 (P). Sale of house and lot 2,500,000 3,199,200
S 109 (Q). Lease of residential unit 10,000 12,800
S 109 (V). Sale or lease of goods or properties or performance of 1,500,000 1,919,500
services

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 XX
LGU IS DEVOID OF TAXING POWER OVER
THE MANUFACTURING AND DISTRIBUTION OF PETROLEUM PRODUCTS
(Batangas City v. Pilipinas Shell Petroleum Corp., 2015)

Strictly speaking, as long as the subject matter of the taxing powers of the LGUs is the petroleum products per se or even
the activity or privilege related to the petroleum products, such as manufacturing and distribution of said products, it is
covered by the said limitation and thus, no levy can be imposed.

On the contrary, Section 143 of the LGC defines the general power of LGUs to tax businesses within its jurisdiction. Thus,
the omnibus grant of power to LGUs under Section 143(h)of the LGC cannot overcome the specific exception or exemption
in Section 133(h) of the same Code. This is in accord with the rule on statutory construction that specific provisions must
prevail over general ones. A special and specific provision prevails over a general provision irrespective of their relative
positions in the statute. Generalia specialibus non derogant. Where there is in the same statute a particular enactment and
also a general one which in its most comprehensive sense would include what is embraced in the former, the particular
enactment must be operative, and the general enactment must be taken to affect only such cases within its general
language as are not within the provisions of the particular enactment.

XXI
FLEXIBLE CLAUSE
(Section 1608, RA 10863 [Customs Modernization and Tariff Act])

In the interest of the general welfare and national security, and, subject to the limitations prescribed under this Act, the
President, upon the recommendation of the NEDA, is hereby empowered to:

(1) Increase, reduce, or remove existing rates of import duty including any necessary change in classification. The existing
rates may be increased or decreased to any level, in one or several stages, but in no case shall the increased rate of import
duty be higher than a maximum of 100% ad valorem;

(2) Establish import quotas or ban imports of any commodity, as may be necessary; and

(3) Impose an additional duty on all imports not exceeding 10% ad valorem whenever necessary: Provided, That upon
periodic investigations by the Commission and recommendation of the NEDA, the President may cause a gradual reduction
of rates of import duty granted in Section 1611 of this Act, including those subsequently granted pursuant to this section.

XXII
ASSESSMENT IS A WRITTEN NOTICE AND DEMAND
(Adamson v. CA, 2009)

In the context in which it is used in the NIRC, an assessment is a written notice and demand made by the BIR on the
taxpayer for the settlement of a due tax liability that is there definitely set and fixed. A written communication containing a
computation by a revenue officer of the tax liability of a taxpayer and giving him an opportunity to contest or disprove the
BIR examiners findings is not an assessment since it is yet indefinite.

The recommendation letter of the Commissioner cannot be considered a formal assessment. Even a cursory perusal of the
said letter would reveal 3 key points:
1. It was not addressed to the taxpayers.

2. There was no demand made on the taxpayers to pay the tax liability, nor a period for payment set therein.

3. The letter was never mailed or sent to the taxpayers by the Commissioner.

In fine, the said recommendation letter served merely as the prima facie basis for filing criminal informations that the
taxpayers had violated Section 45 (a) and (d), and 110, in relation to Section 100, as penalized under Section 255, and for
violation of Section 253, in relation to Section 252 9(b) and (d) of the Tax Code.
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 XXIII
LIQUIDATION UNDER THE TARIFF AND CUSTOMS CODE OF THE PHILIPPINES
IS AKIN TO AN ASSESSMENT UNDER THE NIRC
(Pilipinas Shell Petroleum Corp. v. Customs Commissioner, 2009)

A tax protest case, under the TCCP, involves a protest of the liquidation of import entries. A liquidation is the final
computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to the
quantity, character, and value thereof, and the collectors own finding as to the applicable rate of duty; it is akin to an
assessment of internal revenue taxes under the National Internal Revenue Code where the tax liability of the taxpayer is
definitely determined.

XXIV
THE SENDING OF A PRELIMINARY ASSESSMENT NOTICE (PAN)
TO TAXPAYER TO INFORM HIM OF THE ASSESSMENT MADE IS
BUT PART OF THE DUE PROCESS REQUIREMENT IN THE
ISSUANCE OF A DEFICIENCY TAX ASSESSMENT,
THE ABSENCE OF WHICH RENDERS NUGATORY ANY
ASSESSMENT MADE BY THE TAX AUTHORITIES
(CIR v. Metro Star Superama, 2010)

The use of the word “shall” in Subsection 3.1.2 of Revenue Regulations 12-99 (now, Subsection 3.1.1 of Revenue
Regulations 18-2013) describes the mandatory nature of the service of a PAN. The persuasiveness of the right to due
process reaches both substantial and procedural rights and the failure of the CIR to strictly comply with the requirements
laid down by law and its own rules is a denial of Metro Stars right to due process. Thus, for its failure to send the PAN
stating the facts and the law on which the assessment was made as required by Section 228 of RA 8424, the assessment
made by the CIR is void.

XXV
A MOTION FOR RECONSIDERATION OF THE DENIAL OF THE
ADMINISTRATIVE PROTEST DOES NOT TOLL THE 30-DAY PERIOD TO APPEAL TO THE CTA
(Fishwealth Canning Corp. v. CIR, 2009)

Petitioner’s administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by
respondent and which petitioner received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code,
petitioner had 30 days to appeal respondents denial of its protest to the CTA.

Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a
petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time.
Indeed, a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to
the CTA.

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 XXVI
AN APPEAL TO THE CTA EN BANC MUST BE PRECEDED BY
THE FILING OF A TIMELY MOTION FOR RECONSIDERATION
OR NEW TRIAL WITH THE CTA DIVISION
(Asia Trust Dev’t. Bank, Inc. v. CIR, 2017, Del Castillo, J.)

Section 1, Rule 8 of the Revised Rules of the CTA states:

SECTION 1. Review of cases in the Court en banc. – In cases falling under the exclusive appellate
jurisdiction of the Court en banc, the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for reconsideration or new trial with the
Division.

Thus, in order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely motion for
reconsideration or new trial must first be filed with the CTA Division that issued the assailed decision or resolution. Failure
to do so is a ground for the dismissal of the appeal as the word “must” indicates that the filing of a prior motion is
mandatory, and not merely directory.

The same is true in the case of an amended decision. Section 3, Rule 14 of the same rules defines an amended decision as
“[a]ny action modifying or reversing a decision of the Court en bane or in Division.” As explained in CE Luzon Geothermal
Power Company, Inc. v. Commissioner of Internal Revenue, an amended decision is a different decision, and thus, is a· proper
subject of a motion for reconsideration.

In this case, the CIR’s failure to move for a reconsideration of the Amended Decision of the CTA Division is a ground for the
dismissal of its Petition for Review before the CTA En Banc. Thus, the CTA En Banc did not err in denying the CIR’s appeal
on procedural grounds.

XXVII
A FORMAL LETTER OF DEMAND WITH ASSESSMENT NOTICES
STATING THAT IT IS BIR’S FINAL DECISION
BASED ON INVESTIGATION IS APPEALABLE TO THE CTA
(Allied Banking Corp. v. CIR, 2010, Del Castillo, J.)

Allied Banking Corporation received the Formal Letter of Demand with Assessment Notices, which partly reads:
It is requested that the above deficiency tax be paid immediately upon receipt hereof, inclusive of
penalties incident to delinquency. This is our final decision based on investigation. If you disagree, you
may appeal the final decision within thirty (30) days from receipt hereof, otherwise said deficiency tax
assessment shall become final, executory and demandable.

A careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with petitioner that the instant
case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative
agency concerned.

XXVIII
TAXPAYER HAS TWO OPTIONS IN CASE THE BIR COMMISSIONER
FAILED TO ACT ON THE DISPUTED ASSESSMENT WITHIN THE 180-DAY PERIOD
FROM THE DATE OF SUBMISSION OF RELEVANT SUPPORTING DOCUMENTS
(Lacsona Land Co., Inc. v. CIR, 2012)

In RCBC v. CIR, the SC 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.

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 XXIX
THE PROPER PARTY TO SEEK A REFUND OF INDIRECT TAX IS THE STATUTORY TAXPAYER
(Silkair (Singapore) Pte. Ltd. v. CIR, 2012)

Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic sale or consumption or for
any other disposition and to things imported into the Philippines, is basically an indirect tax. While the tax is directly levied
upon the manufacturer/ importer upon removal of the taxable goods from its place of production or from the customs
custody, the tax, in reality, is actually passed on to the end consumer as part of the transfer value or selling price of the
goods, sold, bartered or exchanged.

In early cases, the SC have ruled that for indirect taxes (such as valued-added tax or VAT), the proper party to question or
seek a refund of the tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same
even when he shifts the burden thereof to another. Thus, in Contex Corporation v. Commissioner of Internal Revenue, the SC
held that while it is true that petitioner corporation should not have been liable for the VAT inadvertently passed on to it by
its supplier since their transaction is a zero-rated sale on the part of the supplier, the petitioner is not the proper party to
claim such VAT refund. Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax credit and
accordingly refund the petitioner of the VAT erroneously passed on to the latter.

XXX
IN APPLYING THE TWO-YEAR PERIOD FOR CLAIM FOR TAX REFUND,
THE ADMINISTRATIVE CODE OF 1987 TAKES PRECEDENCE OVER THE CIVIL CODE
(CIR v. Primetown Property Group, Inc., 2007)

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, the SC holds 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.

XXXI
APPLICATION FOR THE ISSUANCE OF A TAX CREDIT CERTIFICATE
OR REFUND OF CREDITABLE INPUT TAX DUE OR PAID ATTRIBUTABLE TO ZERO-RATED SALES
MUST BE FILED WITH THE COMMISSIONER OF INTERNAL REVENUE
WITHIN 2 YEARS AFTER THE CLOSE OF THE TAXABLE QUARTER
(CIR v. AICHI Forging Co. of Asia, Inc., 2010, Del Castillo, J.)

Applying the two-year period to judicial claims would render nugatory Section 112(D) (now, Section 112(C)) 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(C) of the NIRC envisions 2 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. As the SC sees it then, the 120-day period is crucial in filing an appeal
with the CTA.

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 XXXII
REQUISITES FOR CLAIMING UNUTILIZED/ EXCESS IN INPUT TAX
(CIR v. Toledo Power Co., 2015)

Pursuant to Section 112 of the NIRC, the requisites for claiming unutilized/ excess input VAT, except transitional input
VAT, are as follows:
1. The taxpayer-claimant is VAT registered;

2. The taxpayer-claimant is engaged in zero-rated or effectively zero-rated sales;

3. There are creditable input taxes due or paid attributable to the zero-rated or effectively zero-rated sales;

4. This input tax has not been applied against the output tax; and

5. The application and the claim for a refund have been filed within the prescribed period.

XXXIII
COMPLIANCE WITH THE 120-DAY WAITING PERIOD IS MANDATORY AND JURISDICTIONAL
(CIR v. San Roque Power Corp., 2015)

Section 112(C) provides that the Commissioner shall decide the application for refund or credit “within 120 days from the
date of submission of complete documents in support of the application filed in accordance with Subsection (A).” The
reference in Section 112(C) of the submission of documents “in support of the application filed in accordance with
Subsection A” means that the application in Section 112(A) is the administrative claim that the Commissioner must decide
within the 120-day period. In short, the two-year prescriptive period in Section 112(A) refers to the period within which
the taxpayer can file an administrative claim for tax refund or credit. Stated otherwise, the 2-year prescriptive period does
not refer to the filing of the judicial claim with the CTA but to the filing of the administrative claim with the Commissioner.

XXXIV
EXCEPTIONS TO THE 120-DAY PERIOD
(Taganito Mining Corp. v. CIR, 2015)

The SC held that based on equitable estoppel, the 120-day period does not apply to
1. BIR specific ruling which misleads a particular taxpayer to prematurely file a judicial claim with the CTA; and

2. General interpretative rule such as BIR Ruling DA-489-03, which misleads all taxpayers into filing prematurely
judicial claims with the CTA.

In these cases, the CIR cannot be allowed to later on question the CTA’s assumption of jurisdiction over such claim since
equitable estoppel has set in.

XXXV
THE 120-/ 30-DAY PRESCRIPTIVE PERIODS UNDER SECTION 112 OF THE NIRC
ARE MANDATORY AND JURISDICTIONAL, AND ARE NOT MERE TECHNICAL REQUIREMENTS.
(Silicon PHL, Inc. (formerly Intel PHL Manufacturing, Inc.) v. CIR, 2015)

Because the 30-day period for filing its judicial claim had already prescribed by the time SPI filed its Petition for Review
with the CTA Division, the CTA Division never acquired jurisdiction over the said Petition. The CTA Division had absolutely
no jurisdiction to act upon, take cognizance of, and render judgment upon the Petition for Review of SPI, regardless of the
merit of the claim. The Court stresses that the 120/30-day prescriptive periods are mandatory and jurisdictional, and are
not mere technical requirements. The Court should not establish the precedent that noncompliance with mandatory and
jurisdictional conditions can be excused if the claim is otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance with mandatory and jurisdictional requirements.

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 XXXVI
A TAX ORDINANCE MAY BE ASSAILED BEFORE THE SECRETARY OF JUSTICE
WITHIN 30 DAYS FROM EFFECTIVITY THEREOF
(Cagayan Electric Power & Light Co., Inc. v. City of CDO, 2012)

Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his
appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period
also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of
60 days, a party could already proceed to seek relief in court. These three separate periods are clearly given for compliance
as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as
enhance the orderly and speedy discharge of judicial functions. For this reason the courts construe these provisions of
statutes as mandatory.

XXXVII
THERE IS NO EXPRESS PROVISION IN THE LGC PROHIBITING COURTS
FROM ISSUING AN INJUNCTION TO RESTRAIN LGUS FROM COLLECTING TAXES
(Angeles City v. Angeles Electric Corp., 2010)

A principle deeply embedded in our jurisprudence is that taxes being the lifeblood of the government should be collected
promptly, without unnecessary hindrance or delay. In line with this principle, the National Internal Revenue Code of 1997
(NIRC) expressly provides that no court shall have the authority to grant an injunction to restrain the collection of any
national internal revenue tax, fee or charge imposed by the code. An exception to this rule obtains only when in the opinion
of the Court of Tax Appeals (CTA) the collection thereof may jeopardize the interest of the government and/or the
taxpayer.

Unlike the National Internal Revenue Code, the Local Tax Code does not contain any specific provision prohibiting courts
from enjoining the collection of local taxes. Such statutory lapse or intent, however it may be viewed, may have allowed
preliminary injunction where local taxes are involved but cannot negate the procedural rules and requirements under Rule
58.

XXXVIII
THE CTA HAS JURISDICTION OVER PETITIONS FOR CERTIORARI
(City of Manila v. Grecia-Cuerdo, 2014)

The CTA, by constitutional mandate, is vested with jurisdiction to issue writs of certiorari for reasons, to wit:
1. The judicial power of the CTA includes that of determining whether or not there has been grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in
cases falling within the exclusive appellate jurisdiction of the tax court.

2. In transferring exclusive jurisdiction over appealed tax cases to the CTA, it can reasonably be assumed that the law
intended to transfer also such power as is deemed necessary, if not indispensable, in aid of such appellate
jurisdiction.

3. The supervisory power or jurisdiction of the CTA to issue a writ of certiorari in aid of its appellate jurisdiction
should co-exist with, and be a complement to, its appellate jurisdiction to review, by appeal, the final orders and
decisions of the RTC, in order to have complete supervision over the acts of the latter.

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 XXXIX
TAXPAYER HAS 3 OPTIONS IN CASE OF CIR’S DENIAL OF HIS PROTEST OR INACTION
(PAGCOR v. BIR, 2016)

1. If the protest is wholly or partially denied by the CIR or his authorized representative, then the taxpayer may
appeal to the CTA within 30 days from receipt of the whole or partial denial of the protest.

2. If the protest is wholly or partially denied by the CIR’s authorized representative, then the taxpayer may appeal to
the CIR within 30 days from receipt of the whole or partial denial of the protest.

3. If the CIR or his authorized representative failed to act upon the protest within 180 days from submission of the
required supporting documents, then the taxpayer may appeal to the CTA within 30 days from the lapse of the
180-day period.

To further clarify the three options: A whole or partial denial by the CIR’s authorized representative may be appealed to
the CIR or the CTA. A whole or partial denial by the CIR may be appealed to the CTA. The CIR or the CIR’s authorized
representative’s failure to act may be appealed to the CTA. There is no mention of an appeal to the CIR from the failure
to act by the CIR’s authorized representative.

XL
THE CTA EN BANC HAS NO JURISDICTION OVER
PETITION FOR ANNULMENT OF JUDGMENT OF ITS DIVISION
(CIR v. Kepco Ilijan Corp, 2016)

The Revised Rules of the CTA provide for no instance of an annulment of judgment. The CTA En Banc may not reverse,
annul, or void a final decision of a division. Instead, what remained a remedy for the aggrieved party was to file a petition
for certiorari under Rule 65, which could have been filed as an original action before the Supreme Court and not before
the CTA En Banc.

XLI
THE CTA, NOT THE SECRETARY OF JUSTICE, HAS THE EXCLUSIVE APPELLATE JURISDICTION
OVER DECISIONS OF THE COMMISSIONER OF INTERNAL REVENUE
ON DISPUTED ASSESSMENT INVOLVING PAGCOR
(CIR v. Justice Secretary, 2016)

The Justice Secretary took cognizance of and resolved the PAGCOR’s appeals from the CIR’s decision on disputed
assessment. In light of the doctrinal ruling in PNOC v. CA, the Justice Secretary should have referred the case to the CTA
because judicial decisions applying or interpreting the law formed part of the legal system of the country, and are for that
reason to be held in obedience by all, including the Justice Secretary and his Department. Indeed, the doctrine of stare
decisis required him to adhere to the ruling of the Court, which by tradition and conformably with our system of judicial
administration speaks the last word on what the law is, and stands as the final arbiter of any justiciable controversy. In
other words, there is only one Supreme Court from whose decisions all other courts and everyone else should take their
bearings.

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 XLII
THE VALIDITY OF ADMINISTRATIVE ISSUANCES FALL WITHIN
THE EXCLUSIVE APPELLATE JURISDICTION OF THE CTA
(BDO v. Finance Secretary, 2016)

Administrative issuances (revenue orders, revenue memorandum circulars, or rulings) are issued by the Commissioner
under its power to make rulings or opinions in connection with the implementation of the provisions of internal revenue
laws.

Tax rulings, on the other hand, are official positions of the Bureau on inquiries of taxpayers who request clarification on
certain provisions of the National Internal Revenue Code, other tax laws, or their implementing regulations.

Hence, the determination of the validity of these issuances clearly falls within the exclusive appellate jurisdiction of the
Court of Tax Appeals under Section 7(1) of RA 1125, as amended, subject to prior review by the Finance Secretary, as
required under RA 8424.

XLIII
THE CTA MAY TAKE COGNIZANCE OF CASES DIRECTLY CHALLENGING
THE CONSTITUTIONALITY OR VALIDITY OF A TAX LAW OR REGULATION OR ADMINISTRATIVE ISSUANCE
(BDO v. Finance Secretary, 2016)

The Court of Tax Appeals has undoubted jurisdiction to pass upon the constitutionality or validity of a tax law or regulation
when raised by the taxpayer as a defense in disputing or contesting an assessment or claiming a refund. It is only in the
lawful exercise of its power to pass upon all maters brought before it, as sanctioned by Section 7 of RA 1125, as amended.

RA 9282, a special and later law than BP Blg. 129 provides an exception to the original jurisdiction of the Regional Trial
Courts over actions questioning the constitutionality or validity of tax laws or regulations. Except for local tax cases, actions
directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance may be filed
directly before the Court of Tax Appeals.

XLIV
BOND MAY BE DISPENSED WITH UNDER EXCEPTIONAL CASES
(Sps. Pacquiao v. CTA, 2016)

The recognized exceptions to the filing of the required bond are, to wit:
1. The method employed by the collector in the collection of the tax is not sanctioned by law; and

2. The order of the Collector of Internal Revenue to effect collection of the alleged income taxes through summary
administrative proceeding had been issued well beyond the 3-year period of limitation.

The purpose of the rule is not only to prevent jeopardizing the interest of the taxpayer, but more importantly, to prevent
the absurd situation wherein the court would declare that the collection by the summary methods of distraint and levy was
violative of law, and then, in the same breath require the petitioner to deposit or file a bond as a prerequisite for the
issuance of a writ of injunction.

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