Taxation Cases For Bar 2018

TAXATION CASE DIGESTS
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San Beda College Alabang School of Law
2018 Centralized Bar Operations
EXECUTIVE COMMITTEE 2018 - 2019

CHAIRPERSON Catriona Janelle Gayatin
VICE CHAIRPERSON FOR ACADEMICS Jerekko Cadorna
VICE CHAIRPERSON FOR ACADEMIC OPERATIONS Rodel Cadorniga Jr.
VICE CHAIRPERSON FOR HOTEL OPERATIONS Emmanuel Josef Jovellanos
EXECUTIVE OFFICER FOR HOTEL OPERATIONS Christian Boy Benedict Tiangco
VICE CHAIRPERSON FOR FINANCE Katreena Frances Monje
VICE CHAIRPERSON FOR SECRETARIAT Odette Marie Jumao-as
VICE CHAIRPERSON FOR COMMUNICATIONS Maryll Ann Ragpala
VICE CHAIRPERSON FOR RECRUITMENT AND MEMBERSHIP Giulia Ingrid Calub
VICE CHAIRPERSON FOR ELECTRONIC DATA PROCESSING John Eli Zuriel Bitong
San Beda College Alabang School of Law Administration

Dr. Ulpiano P. Sarmiento III
Dean and Adviser
ATTY. Anna Marie Melanie B. Trinidad

Vice Dean
ATTY. Carlo D. Busmente

Prefect of Student Affairs
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TAXATION TEAM
Subject Head Philip Ebersole

Members Christian Adrienne Arbiol
John Cedric Comon
Jerekko Cadorna
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CASE DIGESTS & DOCTRINES
An application for tax abatement is deemed approved only upon the issuance of a
termination letter by the Bureau of Internal Revenue. (Asia Trust Development Bank Inc. vs CIR /
CIR vs Asia Trust Development Inc., GR Nos. 201530, 201680-81; April 19, 2017)
A non-profit hospital is liable for 10% preferential rate income tax insofar as its revenues
from paying patients are concerned. (CIR vs St. Luke’s Medical Center, GR No. 203514; February
13, 2017)
The transfer of real property to a surviving corporation pursuant to a merger is not subject
to Documentary Stamp Tax. (CIR vs La Tondena Distillers Inc., GR No. 175188, July 15, 2015)
The Court of Tax Appeals has exclusive jurisdiction over a special civil action for certiorari
assailing an interlocutory order issued by the RTC in a local tax case. (CE Casecnan Water &
Energy Co. vs Province of Nueva Ecija, GR. No. 196278, July 17, 2015)
When the amount of money that a taxpayer spends during a given year exceeds his
reported or declared income and the source of such money is unexplained, it may be inferred
that such expenditures represent unreported or undeclared income. Underdeclaration of more
than 30% of a taxpayer’s reported or declared income constitutes as prima facie evidence of
false or fraudulent return. (BIR vs Court of Appeals, GR No. 197590, November 24, 2014)
The 20% senior citizen discount and tax deduction scheme under RA 9257 is valid and
constitutional as an exercise of the police power of the State. (Manila Memorial Park vs
Secretary of Social Welfare and Development, GR No. 175356, December 3, 2013)
Tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption
must point to a specific provision of law conferring on the taxpayer in clear and plain terms,
exemption from a common burden. Any doubt whether a tax exemption exists is resolved
against the taxpayer. (Digital Telecommunications Philippines vs Cantos, GR No. 180200,
November 25, 2013)
Prior payment of taxes is not necessary before a taxpayer could avail of the 8%
transitional input tax. While a tax liability is essential to the availment or use of any tax credit, prior
tax payments are not. Tax liability is important for availment or use, not for the existence or grant
of a tax credit. (Fort Bonifacio Develoment Corp. vs CIR, GR No. 173425, January 22, 2013)
Sec. 105 of the old tax code provides that for a taxpayer to avail of the 8% TIT, all that is
required is to file a beginning inventory with the BIR. There is nothing in the said section which
provides that prior payment of taxes is a requirement. (Fort Bonifacio Develoment Corp. vs CIR,
GR No. 173425, September 4, 2012)
The twenty percent (20%) sales discounts granted to senior citizens on their purchase of
medicines should be treated as a tax credit only if the taxpayer can show that its gross sales to senior
citizens were declared as part of its taxable income. (Central Luzon Drug Corp. vs CIR, GR. No.
181371, March 2, 2011)
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Once an option to carry-over excess income tax payments to the succeeding years has been
made, it becomes irrevocable. (Belle Corp. vs CIR, GR No. 181298, March 2, 2011)
Non-presentation of the ATP and the failure to indicate the word zero-rated in the invoices or
receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. (Silicon Phils. Vs CIR, GR
No. 172378, January 17, 2011)
Once an option to carry-over excess income tax payments to the succeeding years has been
made, it becomes irrevocable. (Belle Corp. vs CIR, GR No. 181298, January 10, 2011)
Failure on the part of petitioner to indicate the word zero-rated is fatal to its application for a tax
refund/credit, since the said requirement as required by Section 4.108-1 of RR 7-95, proceeds from the
rule-making 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.
(JRA Phils vs CIR, GR No. 177127, October 11, 2010)
Credit/refund of unutilized input VAT should be reckoned from the close of the taxable quarter
where the sales were made, regardless of whether said tax was paid or not. Also, (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 we see it then, the 120-day period is crucial in filing an appeal with the
CTA. (CIR vs Aichi Forging, GR No. 184823, GR No. October 6, 2010)
A withholding agent has the legal personality to claim for a refund over payments it
erroneously made with the BIR. (CIR v. Smart Communication Inc. G.R. No. 179045-046, August
25, 2010)
The prohibition on the issuance of a writ of injunction to enjoin the collection of taxes
applies only to national internal revenue taxes, and not to local taxes. (Angeles City vs Angeles
Electric Corp. GR No. 166134 June 29, 2010)
The requirements for a valid waiver as laid down in RMO 20-90 and RDAO No. 5-01 are
mandatory to give effect to Section 222 of the Tax Code. (CIR vs Kudos Metal Corp., GR No.
178087, May 5, 2010)
Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax
years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT
during these tax years. (TFS Inc. vs CIR, GR No. 166829, April 19, 2010)
Since no income was reported, it follows that no tax was withheld. It is incumbent upon
the taxpayer to reflect in his return the income upon which any creditable tax is required to be
withheld at the source. (CIR vs Far East Bank, GR No. 173854, March 15, 2010)
The amendments to the VAT law have been consistent that those subject to amusement
tax is no liable under VAT. Only lessors or distributors of cinematographic films are included in the
coverage of VAT. (CIR vs SM Prime Holdings, GR No. 183505, February 26, 2010)
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A FAN is not appealable with the CTA unless the wordings of the FAN issued by the CIR
made it appear that the FAN is actually the CIR’s final decision. (Allied Banking Corp. vs CIR, GR
No. 175097, February 5, 2010)
The members’ deposits with the cooperatives are not currency bank deposits nor deposit
substitutes therefore, these are exempt from withholding tax. (Dumaguete Cathedral Credit
Cooperative vs CIR, GR No. 182722, January 22, 2010)
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Asia Trust Development Bank Inc. vs CIR / CIR vs Asia Trust Development Inc.
GR Nos. 201530, 201680-81; April 19, 2017
Doctrine: An application for tax abatement is deemed approved only upon the issuance of a
termination letter by the Bureau of Internal Revenue. Also, 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.
Facts: Asiatrust was assessed by the CIR for deficiency internal revenue taxes wherein the former
timely protested the assessment notices. Later on, the CIR approved Asiatrust’s Offer of
Compromise of DST through the latter’s availment of the Tax Abatement Program. Asiatrust also
claimed it availed the Tax Amnesty Law. Due to the failure of Asiatrust to present documentary
and testimonial evidence to prove its availment of the Tax Abatement Program and Tax
Amnesty Law, the CTA affirmed the deficiency DST assessments. Asiatrust contended that the
Certification issued by the BIR is sufficient proof of its availment of the Tax Abatement Program
despite the absence of a termination letter from the CIR.
Issue: W/N Asiatrust has availed the tax abatement program?
Held: No, according to the NIRC, the CIR is empowered to abate or cancel a tax liability. Based
on the guidelines issued by the CIR, the last step in the tax abatement process is the issuance of
the termination letter. An application for tax abatement is deemed approved only upon the
issuance of a termination letter by the BIR. Its presentation is essential as its proves that the
taxpayer’s application for tax abatement has been approved. Thus, without a termination letter,
a tax assessment cannot be considered closed and terminated. The presentation of the BIR
Certification does not prove that the application for tax abatement has been approved. If at all,
the document only proves the payment of basic taxes, which is not a ground to consider its
deficiency tax assessment closed and terminated.
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CIR vs St. Luke’s Medical Center Inc.
GR No. 203514; February 13, 2017
Doctrine: A non-profit hospital is liable for 10% preferential rate income tax insofar as its revenues
from paying patients are concerned.
Facts: St. Luke’s received an assessment from the CIR for deficiency income tax under Section 27
(B) of the NIRC. St. Luke’s filed a protest claiming that as a non-stock, non-profit charitable and
social welfare organization, it is exempt from paying income tax. In another decision while the
case was pending, the Court ruled that St. Luke’s is not entitled to income tax exemption as it
does not operate exclusively for charitable or social welfare purposes insofar as its revenues from
paying patients are concerned. St Luke’s posited that the Court should revisit its former decision
and restore its withdrawn tax exempt privilege. Likewise, it claims that the income it derives from
operating a hospital is not income from activities conducted for profit.
Issue: W/N St. Luke’s is liable for income tax?
Held: Yes, according to the NIRC, Section 27 (B) does not remove the income tax exemption of
proprietary non-profit hospitals. It merely imposes a 10% preferential income tax rate instead of
the ordinary corporate rate for profits earned by the hospital for activities conducted for profits.
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 it from paying taxes. Only profits from activities
operated exclusively for charitable purposes are exempt from the payment of income tax. The
payment of medical fees of patients cannot be considered as charitable, hence such activity is
conducted by St. Luke’s for the purpose of earning profits.
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CIR vs La Tondena Distillers Inc.
GR No. 175188, July 15, 2015
Doctrine: The transfer of real property to a surviving corporation pursuant to a merger is not
subject to Documentary Stamp Tax.
Facts: Respondent entered into a merger with SBC, SMCJI, and MBWC wherein the assets and
liabilities of the absorbed corporations were transferred to respondent, the surviving corporation.
The BIR issued a ruling stating that no gain or loss shall be recognized by the absorbed
corporations as transferors of all assets and liabilities. However, the transfer of assets, such as real
properties, shall be subject to DST. Claiming to be exempt from DST after payment under protest,
respondent filed an administrative claim for refund with the CIR and on the same day filed a
Petition for Review with the CTA. The CTA rendered a decision stating respondent is not liable to
DST.
Issue: W/N respondent is liable for DST?
Held: No, under the NIRC, DST for transfer of real property from one corporation to another
pursuant to a merger is not included under Section 196. The provision clearly states that it only
pertains to sale transactions where real property is conveyed for a consideration, qualified by
the word “sold”. DST will not apply to all conveyances of property. In a merger, the real
properties are not deemed sold to the surviving corporation and the latter could not be
considered as a purchaser of realty since the real properties subject to the merger are merely
absorbed by the surviving corporation under operation of law and are deemed automatically
transferred without further act or deed.
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CE Casecnan Water and Energy Company vs The Province of Nueva Ecija
GR. No. 196278, July 17, 2015
Doctrine: The CTA has exclusive jurisdiction over a special civil action for certiorari assailing an
interlocutory order issued by the RTC in a local tax case.
Facts: Petitioner and the National Irrigation Administration (NIA) entered into a build-operate-
transfer (BOT) for the construction and development of the Casecnan Project. The contract
stipulated that NIA must reimburse petitioner for real property taxes (RPT) provided the same was
paid upon NIA’s directive and with the concurrence of the Department of Finance. Petitioner
received a Notice of Assessment of Real Property from the Provincial Assessor, wherein it also
assailed the same with the Local Board of Assessment Appeals. Upon dismissal, petitioner filed a
Notice of Appeal with the Central Board of Assessment Appeals. Upon reassessment, the
petitioner filed with the RTC a complaint for injunction and damages with application for TRO,
emphasizing that it was not the one required to pay taxes but NIA. When the RTC denied
petitioner’s application for writ of preliminary injunction, petitioner filed with the CA a Petition for
Certiorari seeking to annul and set aside the RTC order. The CA ruled that the jurisdiction over
the case lies with the CTA. Petitioner as a result filed this petition to the SC.
Issue: W/N the CTA is the proper court that has jurisdiction over the case?
Held: Yes, the jurisdiction of the CTA includes its exclusive appellate jurisdiction to review by
appeal the decisions, orders, or resolutions of the RTC in local tax cases originally decided or
resolved by the RTC in the exercise of its original or appellate jurisdiction. It has the jurisdiction to
issue writs of certiorari or to determine whether there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on part of the RTC in issuing an interlocutory order in
cases falling within the CTA’s exclusive appellate jurisdiction. If a case may be appealed to a
particular court or judicial tribunal, then said court or tribunal has the jurisdiction to issue the
extraordinary writs in aid of its appellate jurisdiction. Since the RTC injunction case is a local tax
case as in praying to restrain the collection of the RPT, petitioner also impliedly questions the
propriety of the assessment of the RPT. A ruling as to whether to restrain the collection must first
necessarily rule on the propriety of the assessment.
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BIR vs CA, Spouses Manly
GR No. 197590, November 24, 2014
Doctrine: When the amount of money that a taxpayer spends during a given year exceeds his
reported or declared income and the source of such money is unexplained, it may be inferred
that such expenditures represent unreported or undeclared income. Underdeclaration of more
than 30% of a taxpayer’s reported or declared income constitutes as prima facie evidence of
false or fraudulent return.
Facts: The BIR issued a letter to respondent spouses requiring them to submit documentary
evidence requiring them to substantiate the source of their cash purchase of a log cabin in
Tagaytay City, wherein the latter failed to comply. Upon investigation, the revenue officers
declared that despite their modest income, the spouses were able to purchase in cash a
luxurious vacation home and 2 expensive vehicles. Since the spouses failed to show the source
of their cash purchases, the officers concluded that the ITRs were underdeclared, and since it
exceeded 30% of the reported or declared income, it is a prima facie evidence of fraud with
intent to evade the payment of proper taxes due to the government. The spouses denied the
allegations and contended that they used their accumulated savings from their earnings for the
past 24 years in purchasing the properties. They also contended that the criminal complaint for
tax evasion against them be dismissed for failure of petitioner to issue a deficiency assessment
against them.
Issue: W/N respondent spouses are liable for tax evasion?
Held: Yes, tax evasion is deemed complete when the violator has knowingly and wilfully filed a
fraudulent return with the intent to evade and defeat a part or all of the tax. Corollary, an
assessment of the tax deficiency is not required for the criminal prosecution for tax evasion.
Although a deficiency assessment is not necessary, the fact that a tax is due must first be proved
before one can be prosecuted for tax evasion. The government is allowed to resort to all
evidence or resources available to determine the taxpayer’s income and to use methods to
reconstruct his income. When the amount of money that a taxpayer spends during a given year
exceeds his reported or declared income and the source of such money is unexplained, it may
be inferred that such expenditures represent unreported or undeclared income.
Underdeclaration of more than 30% of a taxpayer’s reported or declared income constitutes as
prima facie evidence of false or fraudulent return. The CA committed grave abuse of discretion
amounting to lack of jurisdiction when it declared there was no probable cause against the
respondents. The amount of the tax due was specifically alleged in the complaint, as well as the
computation and method to determine the tax liability. It was likewise shown that the under
declaration exceeded 30% of the reported or declared income.
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Manila Memorial Park Inc. vs Secretary of DSWD

GR NO. 175356, DECEMBER 3, 2013
Doctrine: The 20% senior citizen discount and tax deduction scheme under RA 9257 is valid and
constitutional as an exercise of the police power of the State.
Facts: RA 7432 was passed into law (amended by RA 9257), granting senior citizens 20% discount
on certain establishments. To implement the tax provisions of RA 9257, the Secretary of Finance
and the DSWD issued its own Rules and Regulations. Petitioners are not questioning the 20%
discount granted to senior citizens but are only assailing the constitutionality of the tax deduction
scheme prescribed under RA 9257 and the implementing rules and regulations issued by the
DSWD and the DOF. Petitioners posit that the tax deduction scheme contravenes Article III,
Section 9 of the Constitution, which provides that: "private property shall not be taken for public
use without just compensation. Respondents maintain that the tax deduction scheme is a
legitimate exercise of the State’s police power.
Issue: W/N the legally mandated 20% senior citizen discount is an exercise of police power or
eminent domain.
Held: The 20% senior citizen discount is an exercise of police power. It may not always be easy to
determine whether a challenged governmental act is an exercise of police power or eminent
domain. The judicious approach, therefore, is to look at the nature and effects of the
challenged governmental act and decide on the basis thereof. 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 illnesses and other disabilities, and, thus, in need of subsidy in purchasing basic
commodities. It serves to honor senior citizens who presumably spent their lives on contributing to
the development and progress of the nation. In turn, the subject regulation affects the pricing,
and, hence, the profitability of a private establishment. The subject regulation may be said to be
similar to, but with substantial distinctions from, price control or rate of return on investment
control laws which are traditionally regarded as police power measures. The subject regulation
differs there from in that (1) the discount does not prevent the establishments from adjusting the
level of prices of their goods and services, and (2) the discount does not apply to all customers
of a given establishment but only to the class of senior citizens. Nonetheless, to the degree
material to the resolution of this case, the 20% discount may be properly viewed as belonging to
the category of price regulatory measures which affect the profitability of establishments
subjected thereto. On its face, therefore, the subject regulation is a police power measure.
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Digital Telecommunications Philippines vs Cantos

GR NO. 180200, NOVEMBER 25, 2013
Doctrine: Tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption
must point to a specific provision of law conferring on the taxpayer in clear and plain terms,
exemption from a common burden. Any doubt whether a tax exemption exists is resolved
against the taxpayer.
Facts: By RA 7678, petitioner was granted a legislative franchise to install, operate and maintain
telecommunications systems throughout the Philippines. Upon seeking the renewal of its Mayor’s
Permit, petitioner was informed that its business operations shall be restrained should it fail to pay
assessed real property taxes. When petitioner failed to pay, its business was enjoined from further
operations. The RTC declared the cease and desist order null and void and such decision
became final and executory. Later on, respondent Cantos, in his capacity as Provincial Treasurer
of the Province of Batangas issued several Warrants of Levy certifying that several real properties
of petitioner are delinquent in the payment of RPT. Using the final decision on the former civil
case it was a party to, the petitioner contended that it is exempt from payment of RPT.
Issue: W/N petitioner is exempt from payment of RPT?
Held: No, under RA 7678, there is no provision that expressly or impliedly provide that petitioner’s
real properties that are actually, directly or exclusively used in telecommunications business are
exempt from payment of realty tax. On the contrary, its states that the franchisee shall pay the
same taxes on its real estate, buildings, and personal property exclusive of this franchise as other
persons or corporations are now or hereafter may be required by law to pay.
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Fort Bonifacio Development Corporation vs CIR
GR No. 173425, January 22, 2013
Doctrine: Prior payment of taxes is not necessary before a taxpayer could avail of the 8%
transitional input tax. While a tax liability is essential to the availment or use of any tax credit, prior
tax payments are not. Tax liability is important for availment or use, not for the existence or grant
of a tax credit.
Facts: The CIR filed a motion for reconsideration raising the following arguments: 1) Prior
payment of tax is inherent in the nature and payment of the 8% transitional input tax, 2) Revenue
Regulations No. 7-95 providing for 8% transitional input tax based on the value of real properties
is a valid legislative rule, 3) For failure to prove its entitlement to the transitional input tax credit,
petitioner’s claim for tax refund partakes that of the nature of a tax exemption which should be
construed strictissimi juris against the taxpayer.
Issue: W/N petitioner is entitled to avail transitional input tax credit?
Held: Yes, under the NIRC, prior payment of taxes is not necessary before a taxpayer could avail
of the 8% transitional input tax. All that is required from the taxpayer is to file his beginning
inventory with the BIR. Since the law does not provide for prior payment of taxes, to require it
now would be tantamount to judicial legislation, which is not allowed. The provisions of the NIRC,
tax treaties, and special laws clearly show without a doubt that prior payment of taxes is not
necessary for the availment of tax credit.
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Fort Bonifacio Development Co. v. Commissioner of Internal Revenue
G.R. No. 173425, September 4, 2012
Doctrine: Sec. 105 of the old tax code provides that for a taxpayer to avail of the 8% TIT, all that
is required is to file a beginning inventory with the BIR. There is nothing in the said section which
provides that prior payment of taxes is a requirement.
Facts: On February 8, 1995, petitioner purchased from the national government a portion of the
Fort Bonifacio Reservation.On September 19, 1996, petitioner submitted to the Bureau of Internal
Revenue (BIR) Revenue District No. 44, Taguig and Pateros, an inventory of all its real properties,
the book value of which aggregated ₱ 71,227,503,200. Based on this value, petitioner claimed
that it is entitled to a transitional input tax credit of ₱ 5,698,200,256, pursuant to Section 105 of the
old NIRC. Beginning October 1996, petitioner sold its real properties to various buyers. When it
submitted its return in 1997, petitioner’s transitional input tax (TIT) was not applied in computing its
output VAT for the first quarter of 1997 which prompted it to file an administrative claim for
refund of its excess output taxes.
On February 24, 1999, due to the inaction of the respondent, petitioner elevated the matter to
the CTA which eventually denied the petition. The Tax Court and eventually, the Court of
Appeals were on in saying that "the benefit of transitional input tax credit comes with the
condition that business taxes should have been paid first." In this case, since petitioner acquired
the Global City property under a VAT-free sale transaction, it cannot avail of the transitional
input tax credit. In this petition for review before the Supreme Court, petitioner argued that there
is nothing in Sec. 105 of the NIRC that requires a prior payment of business taxes before it could
avail of the transitional input tax credit. On the other hand, the respondent contends prior
payment of business taxes is inherent in the nature of a transitional input tax.
Issue: Whether or not petitioner is entitled to the transitional input tax credit.
Held: The court gave due course to the petition. Sec. 105 of the old tax code provides that for a
taxpayer to avail of the 8% TIT, all that is required is to file a beginning inventory with the BIR.
There is nothing in the said section which provides that prior payment of taxes is a requirement.
To require it now, as what the respondent contends, would be tantamount to judicial legislation.
Moreover, TIT is not a tax refund but a tax credit. Tax refund is defined as the money that a
taxpayer overpaid and is thus returned by the taxing authority. On the other hand, tax credit is
an amount subtracted directly from one’s total tax liability. It is any amount given to a taxpayer
as a subsidy, refund or an incentive to entice investments. The fact that the petitioner acquired
the properties it sold in the ordinary course of its trade or business under a tax free exchange
makes no difference as prior payment of taxes is not a requisite.
The Court further ruled that the provision on transitional input tax credit was enacted to benefit
first time VAT taxpayers by mitigating the impact of VAT on the taxpayer.During that period of
transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the
impact of the VAT on the taxpayer. At the very beginning, the VAT-registered taxpayer is obliged
to remit a significant portion of the income it derived from its sales as output VAT. The transitional
input tax credit mitigates this initial diminution of the taxpayer's income by affording the
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opportunity to offset the losses incurred through the remittance of the output VAT at a stage
when the person is yet unable to credit input VAT payments.
Central Luzon Drug Corporation v. Commissioner of Internal Revenue

G.R. No. 181371, March 2, 2011
Doctrine: The twenty percent (20%) sales discounts granted to senior citizens on their purchase of
medicines should be treated as a tax credit only if the taxpayer can show that its gross sales to senior
citizens were declared as part of its taxable income.
Facts: On April 13, 2005, petitioner filed with respondent Commissioner of Internal Revenue (CIR) a
request for the issuance of a tax credit certificate in the amount of P32,170,409, representing the 20%
sales discounts allegedly granted to senior citizens for the year 2002. On April 14, 2005, petitioner filed
with the Court of Tax Appeals (CTA) a Petition for Review. The tax court denied the petition due to
insufficiency of evidence. When it sought reconsideration, the motion for reconsideration was denied
due to lack of compliance with the requirement of certification of non-forum shopping. Thus, prompting
petitioner to file this petition for review under Rule 45 of the Rules of Court. However, instead of filing a
reply to the comments filed by the Office of the Solicitor General, petitioner opted to withdraw the
petition since the amount of tax credit being claimed for 2002 would just be included in its future claims
for issuance of a tax credit certificate since the said amount was carried over to its 2003 Income Tax
Return (ITR).
Issue: Whether or not the petitioner is entitled to a tax credit covering its sales to senior citizens?
Held: The Supreme Court agreed with the OSG that the dismissal of the instant case should be with
prejudice. By withdrawing the appeal, petitioner is deemed to have accepted the decision of the CTA.
And since the CTA had already denied petitioners request for the issuance of a tax credit certificate in
the amount of P32,170,409 for insufficiency of evidence, it may no longer be included in petitioner’s
future claims. Petitioner cannot be allowed to circumvent the denial of its request for a tax credit by
abandoning its appeal and filing a new claim. To reiterate, an appellant who withdraws his appeal x x x
must face the consequence of his withdrawal, such as the decision of the court a quobecoming final
and executory.
The Tax Court on the other hand as cited by the Court ruled that: “Under petitioners Annual ITR and
audited financial statements, it had gross sales amounting to P674,877,125.00. However, the Court
cannot ascertain from the documents submitted by petitioner such as Schedule of Sales (net), Schedule
of Prepaid Tax-OSCA, and Special Record Books for the year 2002, whether its gross sales
of P674,877,125.00 included its gross sales to senior citizens of P26,681,354.59. The Schedule of Prepaid Tax-
OSCA, taken from the Special Record Books, showed its daily sales to qualified senior citizens and the
corresponding twenty percent (20%) discount granted by each of the twenty-two branches of
petitioner. Meanwhile, the Schedule of Sales showed only its total monthly sales without indicating which
portion therein were sales to senior citizens. Petitioner should have presented its daily net sales as
reflected in the general ledger, cash receipt books, sales book or any other document whereby the
Court can trace or verify that petitioners gross sales of P674,877,125.00 for the year 2002 included its gross
sales to senior citizens for the same year.
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In sum, though the twenty percent (20%) sales discounts granted to senior citizens on their purchase of
medicines should be treated as a tax credit and petitioner was able to substantiate the same, the instant
petition will not prosper for petitioner’s failure to show that its gross sales to senior citizens were declared as
part of its taxable income.
Belle Corporation v. Commissioner of Internal Revenue

G.R. No. 181298, January 10, 2011
Doctrine: Once an option to carry-over excess income tax payments to the succeeding years has been
made, it becomes irrevocable.
Facts: Petitioner filed its Income Tax Returns (ITR) for the first quarter of taxable year of 1997. When it filed its
ITR for the second quarter of the same taxable year, it claimed an overpayment of income taxes during
the previous quarter. In view of the alleged overpayment, no taxes were paid for the second and third
quarters of 1997 and instead of claiming said overpaid amount as refund, petitioner decided to apply
the same as tax credit to the succeeding taxable year. On April 12, 2000, petitioner filed an administrative
claim for refund of its unutilized excess income tax for the year of 1997 in the amount of
P106,447,318.00before the BIR. Notwithstanding such application, petitioner carried over the said amount
to the taxable year of 1999 and applied a portion thereof on its Minimum Corporate Income Tax (MCIT).
Due to the inaction of the respondent, petitioner filed the petition before the Court of Tax Appeals (CTA)
but it was subsequently denied the same by invoking Sec. 69 of the Old tax code wherein the said law
only allowed such carryover only for the succeeding taxable year where the alleged overpayment was
incurred.
In its petition for review, the Court of Appeals denied the same because Sec. 69 provides that not only
that the carryover of the alleged overpayment is limited only to the succeeding year where the alleged
overpayment was incurred, but when the taxpayer opted to carryover the same for the succeeding
year it can no longer be allowed to file a claim for refund.
Issue: Whether or not petitioner is entitled to a refund of its excess income tax payments for the taxable
year 1997 in the amount of P106,447,318.00?
Held: The Court held that the CA and CTA’s reliance upon Sec. 69 erroneous for it is a settled doctrine
that the 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. And at the time of the filing of
petitioner’s ITR, the old tax code is no longer in force. Accordingly, it is Sec. 76 of the present NIRC and
not Sec. 69 of the old NIRC that is now the law in force. Under Sec. 76 of the NIRC, which is the law in
force at the time of the filing of the ITR, provides that “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 tax refund or issuance of a tax credit certificate shall be allowed therefor.”
Accordingly, since petitioner already carried over its 1997 excess income tax payments to the
succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable
year 1997.To repeat, under the new law, once the option to carry-over excess income tax payments to
17
the succeeding years has been made, it becomes irrevocable. Thus, applications for refund of the
unutilized excess income tax payments may no longer be allowed.
Silicon Philippines Inc. v. Commissioner of Internal Revenue
G.R. No. 172738, January 17, 2011
Doctrine: Non-presentation of the ATP and the failure to indicate the word zero-rated in the invoices or
receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales.
Facts: Petitioner filed with the public respondent an application for refund/credit of its unutilized input
VAT. Due to the inaction of the respondent, petitioner filed a petition for review with the CTA Division
wherein it alleged that it incurred during the 4th quarter of 1998, zero-rated and export sales wherein
petitioner was paid for in an acceptable foreign currency and accounted for in accordance with the
rules of Banko Sentral ng Pilipinas, by which it incurred input VAT which said amount was not applied to
any output VAT. The CTA Division denied the petition because petitioner failed to present its Authority to
Print (ATP) from the BIR, neither did it print on its export sales invoices the ATP and the word zero-rated.
Thereafter, petitioner sought recourse with the CTA En Banc which court upheld the decision of its
division. Petitioner contends in this petition that the CTA En Banc erred in requiring the printing of ATP and
the indication of “zero-rated” on its export sales invoices on its receipts as it has no legal basis.
Respondent, on the other hand, contends that the printing of ATP on its export invoices are required,
inasmuch as the ATP serves as a control mechanism for the BIR as required by the NIRC.
Issue: Whether or not the petitioner is entitled to its claim for refund/credit?
Held: It has been settled that the ATP need not be reflected or indicated in the invoices or receipts
because there is no law or regulation requiring it. Thus, in the absence of such law or regulation, failure
to print the ATP on the invoices or receipts should not result in the outright denial of a claim or the
invalidation of the invoices or receipts for purposes of claiming a refund. But while there is no law
requiring the ATP to be printed on the invoices or receipts, Section 238 of the NIRC expressly requires
persons engaged in business to secure an ATP from the BIR prior to printing invoices or receipts. Failure to
do so makes the person liable under Section 264 of the NIRC. Indeed, to emphasize, what is important
with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and
that invoices or receipts are duly registered.
However, failure on the part of petitioner to print the word zero-rated on its sales invoices or
receipts is fatal to its claim.
All told, the non-presentation of the ATP and the failure to indicate the word zero-rated in the invoices or
receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. The failure to indicate the
ATP in the sales invoices or receipts, on the other hand, is not. In this case, petitioner failed to present its
ATP and to print the word zero-rated on its export sales invoices. Thus, we find no error on the part of the
CTA in denying outright petitioners claim for credit/refund of input VAT attributable to its zero-rated sales.
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Belle Corporation v. Commissioner of Internal Revenue

G.R. No. 181298, March 2, 2011 (Motion for Reconsideration of the SC’s January 10, 2011 decision
involving the same parties)
Doctrine: Once an option to carry-over excess income tax payments to the succeeding years has been
made, it becomes irrevocable.
Facts: Petitioner filed its Income Tax Returns (ITR) for the first quarter of taxable year of 1997. When it filed its
ITR for the second quarter of the same taxable year, it claimed an overpayment of income taxes during
the previous quarter. In view of the alleged overpayment, no taxes were paid for the second and third
quarters of 1997 and instead of claiming said overpaid amount as refund, petitioner decided to apply
the same as tax credit to the succeeding taxable year. On April 12, 2000, petitioner filed an administrative
claim for refund of its unutilized excess income tax for the year of 1997 in the amount of
P106,447,318.00before the BIR. Notwithstanding such application, petitioner carried over the said amount
to the taxable year of 1999 and applied a portion thereof on its Minimum Corporate Income Tax (MCIT).
Due to the inaction of the respondent, petitioner filed the petition before the Court of Tax Appeals (CTA)
but it was subsequently denied the same by invoking Sec. 69 of the Old tax code wherein the said law
only allowed such carryover only for the succeeding taxable year where the alleged overpayment was
incurred.
In its petition for review, the Court of Appeals denied the same because Sec. 69 provides that not only
that the carryover of the alleged overpayment is limited only to the succeeding year where the alleged
overpayment was incurred, but when the taxpayer opted to carryover the same for the succeeding
year it can no longer be allowed to file a claim for refund.
The Court initially ruled against petitioner, it held that under Sec. 76 petitioner is no longer allowed to claim
for a refund because in the said section, the taxpayer can only choose between carrying over the
alleged overpaid amount of its income taxes and claiming for a refund over the same. Since petitioner
carried over the excess payments on its Income tax liability for the taxable year of 1998, it is no longer
allowed to claim for a refund.
Court’s Resolution
“In our Decision, we denied petitioner’s claim for refund because it has earlier opted to carry
over its 1997 excess income tax payments by marking the tax credit option box in its 1997
income tax return. We must clarify, however, that while petitioner may no longer file a claim for
refund, it properly carried over its 1997 excess income tax payments by applying portions thereof
to its 1998 and 1999 Minimum Corporate Income Tax in the amounts of ₱25,596,210.00 and
₱14,185,874.00, respectively. Pursuant to our ruling, petitioner may apply the unutilized excess
income tax payments as a tax credit to the succeeding taxable years until fully utilized. Thus, as
of the taxable year 1999, petitioner still has an unutilized excess income tax payments of
₱92,261,444.00 which may be carried over to the succeeding taxable years until fully utilized.”
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J.R.A. Philippines, Inc. v. Commissioner of Internal Revenue

G.R. No. 177127, October 11, 2010
Doctrine: Failure on the part of petitioner to indicate the word zero-rated is fatal to its application for a
tax refund/credit, since the said requirement as required by Section 4.108-1 of RR 7-95, proceeds from
the rule-making 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.
Facts: Petitioner filed with the Revenue District Office of Trece Martires, Cavite, applications for
tax credit/refund of unutilized input VAT on its zer-rated sales for the taxable quarters of 2000.
However, the claim was left unheeded by the respondent thus it filed a petition with the CTA.
Both the CTA Division and CTA En Banc denied petitioner’s claim for refund/credit due to the
failure of petitioner to indicate its Taxpayers Identification Number-VAT (TIN-V) and the word zero-rated
on its invoices.
In this petition, petitioner challenges the said decision by contending that the invoicing requirements
prescribed by the 1997 tax code and the requirement that the words zero-rated be imprinted on the
sales invoices/official receipts under revenue regulations no. 7-95 are not evidentiary rules and the
absence thereof is not fatal to a taxpayers claim for refund. While the respondent, on the other hand,
contends that since tax refunds are in the nature of tax exemptions, it behooves the petitioner to strictly
comply with the requirements of the law, particularly, the requirement that the word zero-rated be
imprinted on is invoices.
Issue: Whether or not the petitioner is entitled to claim for a tax credit/refund over its unutilized excess
input VAT.
Held: The Court held that consistent with the doctrine of Stare decisis et non quieta movere, once a
case has been decided one way, courts have no choice but to resolve subsequent cases involving the
same issue in the same manner. Failure on the part of petitioner to indicate the word zero-rated is fatal
to its application for a tax refund/credit, since the said requirement as required by Section 4.108-1 of RR
7-95, proceeds from the rule-making 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 zero-rated on the face of invoices covering zero-rated 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.
20
Commissioner of Internal Revenue v. Aichi Forging Company

G.R. No. 184823, October 6, 2010
Doctrine: Credit/refund of unutilized input VAT should be reckoned from the close of the taxable quarter
where the sales were made, regardless of whether said tax was paid or not. Also, (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 we see it then, the 120-day period is crucial in filing an appeal with the
CTA.
Facts: On September 30, 2004, respondent filed a claim for refund/credit of its excess input VAT with the
respondent. On even date, respondent filed a petition for review with the CTA for the refund/credit of
the same input VAT. The respondent countered the petition by stating that the filing with the CTA of the
said petition is still premature because the said application for the refund/credit is still subject to
administrative investigation and review by the bureau.
Trial ensued, and thereafter the CTA division partially ruled in favor of the respondent, where it held that
since the filing of both claims for refund/credit in the administrative level and with the CTA were done
within the prescriptive period of two (2) years, the said petition is not premature and it was timely filed.
Which decision was subsequently affirmed by the CTA En Banc where it held that since the law does
not prohibit the simultaneous filing of the administrative and judicial claims for refund. What is
controlling is that both claims for refund must be filed within the two-year prescriptive period.
Further, the reckoning period, according to the En Banc decision is from the payment of the tax.
In this petition for review, petitioner asserted that compliance with the 120-day period under Sec. 112 is
indispensable. Since both administrative and judicial claim for credit/refund were filed on the same day,
the said petition should be dismissed for being premature. Since no decision was made by the
petitioner, nor does the 120-day period has already expired without the petitioner acting on the
application.
On the other hand, respondent countered that compliance with the 120-day period is not mandatory
and is not fatal to its claim for credit/refund.
Issue: Whether or not the petition for claim/credit was filed within the two-year prescriptive period as
provided under Secs. 112(A) and 229 of the NIRC.
Held: The Court has ruled in favor of the petitioner. It held that it is Sec. 112(A) and not Sec. 229 that
should be followed with respect to claims for tax credit/refund of unutilized and excess input VAT. Since
the claim for such is not an erroneous payment or illegal collection of internal revenue taxes, which is
covered by Sec. 229. Therefore, the reckoning period for determining whether the petition for
credit/refund of unutilized input VAT should be reckoned from the close of the taxable quarter where
the sales were made, regardless of whether said tax was paid or not.
The CIR has "120 days from the submission of complete documents in support of the application
filed in accordance with Subsections (A) and (B)" within which to decide on the claim.
21
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. As we see it then, the 120-day period is crucial in filing an appeal with
the CTA.
Commissioner of Internal Revenue v. Smart Communication Inc.

G.R. No. 179045-046, August 25, 2010
Doctrine: A withholding agent has the legal personality to claim for a refund over payments it
erroneously made with the BIR.
Facts: On May 25, 2010, respondent entered into three agreements for Programming and
Consultancy services with Prism Transactive, the latter was to provide programming and
consultancy services for the installation of Service Download Manager (SDM) and the Channel
Manager (CM) and for the installation and implementation of Smart Money and Mobile Banking
Services and Private Text Platform. (SIM Applications) Upon payment for the services, respondent
withheld 25% of the compensation as royalty tax under the RP-Malaysia Tax Treaty. On
September 25, 2001 respondent filed its Monthly Remittance Return of Final Income Taxes Withheld
for the month of August and thereafter, on September 24, 2003, respondent filed with the petitioner a
claim for refund covering the amount withheld from the compensation it paid to Prism. Due to inaction
of petitioner, respondent filed with the CTA its claim for refund arguing that the payments it made to
Prism are not in the nature of royalties, but rather, business profits pursuant to the RP-Malaysia Tax Treaty.
Respondent further averred that since under Article 7 of the RP-Malaysia Tax Treaty, business profits are
taxable in the Philippines only if attributable to a permanent establishment in the Philippines, the
payments made to Prism, a Malaysian company with no permanent establishment in the
Philippines, should not be taxed. The petitioner refuted these arguments by stating that as a withholding
agent, respondent has no personality to institute the claim for refund, and even assuming arguendo,
there is no proper basis in showing that the payments were not in the nature of business profits and that
the ruling of the SC in Commissioner v. Procter & Gamble does not squarely apply since both
companies are not related parties in the agreement. Both the CTA Division and CTA En Banc ruled in
favor of the respondent granting a partial refund. Aggrieved, both parties filed this petition before the
Supreme Court.
Issues: Whether or not the respondent has the legal personality to bring this suit?
Held: Respondent is qualified to bring the suit. As a withholding agent, respondent has the legal
personality to claim for a refund over payments it erroneously made with the BIR. What is clear
according to the court is that a withholding agent has the legal personality to bring the suit since
it is a person subject to tax. Further, as an agent of the taxpayer, his authority to file the necessary
income tax return and to remit the tax withheld to the government impliedly includes the authority to file
a claim for refund and to bring an action for recovery of such claim.
In this connection, it is however significant to add that while the withholding agent has the right to
recover the taxes erroneously or illegally collected, he nevertheless has the obligation to remit the same
to the principal taxpayer. As an agent of the taxpayer, it is his duty to return what he has recovered;
22
otherwise, he would be unjustly enriching himself at the expense of the principal taxpayer from whom
the taxes were withheld, and from whom he derives his legal right to file a claim for refund.
ANGELES CITY V. ANGELES CITY ELECTRIC CORPORATION
GR No. 166134 June 29, 2010
Doctrine: The prohibition on the issuance of a writ of injunction to enjoin the collection of taxes
applies only to national internal revenue taxes, and not to local taxes.
Facts: Angeles Electric Corporation (AEC) was granted a legislative franchise under RA 4079 to
construct, maintain and operate an electric light, heat, and power system for the purpose of
generating and distributing electric light, heat and power for sale in Angeles City, Pampanga.
Then PD 551 reduced the franchise tax of electric franchise holders. Section 1 of PD 551 provided
that: “Any provision of law or local ordinance to the contrary notwithstanding, the franchise tax
payable by all grantees of franchises to generate, distribute and sell electric current for light,
heat and power shall be 2% of their gross receipts received from the sale of electric current and
from transactions incident to the generation, distribution and sale of electric current.” Such
franchise tax shall be payable to the CIR or his duly authorized representative. Thereafter the
LGC of 1991 was passed, conferring upon provinces and cities the power to impose tax on
businesses enjoying franchise. In accordance with the LGC, the Sangguniang Panlungsod of
Angeles City enacted the Revised Revenue Code of Angeles City (RRCAC).
Then a petition seeking the reduction of the tax rates and a review of the provisions of the
RRCAC was filed with the Sangguniang Panlungsod by Metro Angeles Chamber of Commerce
and Industry Inc. (MACCI) of which AEC is a member. There being no action taken MACCI
elevated the petition to the Department of Finance, which referred the same to the Bureau of
Local Government Finance (BLGF). In the petition, MACCI alleged that the RRCAC is oppressive,
excessive, unjust and confiscatory; that it was published only once and that no public hearings
were conducted prior to its enactment.
Issue: Whether the RTC gravely abused its discretion in issuing the writ of preliminary injunction
enjoining Angeles City and its City Treasurer from levying, selling, and disposing the properties of
AEC.
Held: No grave abuse of discretion was committed by the RTC.The LGC does not specifically
prohibit an injunction enjoining the collection of taxes. 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 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 CTA. The collection thereof may jeopardize the interest
of the government and/or the taxpayer.
Unlike the NIRC, 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
23
negate the procedural rules and requirements under Rule 58. Although there is no express
prohibition in the LGC, injunctions enjoining the collection of local taxes are frowned upon.
Courts therefore should exercise extreme caution in issuing such injunctions. Two requisites must
exist to warrant the issuance of a writ of preliminary injunction, namely: (1) the existence of a
clear and unmistakable right that must be protected; and (2) an urgent and paramount
necessity for the writ to prevent serious damage.
It appearing that the two essential requisites of an injunction have been satisfied, as there exists
a right on the part of Angeles City to be protected, its right[s] of ownership and possession of the
properties subject of the auction sale, and that the acts (conducting an auction sale) against
which the injunction is to be directed, are violative of the said rights of the Angeles City, the
Court has no other recourse but to grant the prayer for the issuance of a writ of preliminary
injunction.
COMMISSIONER OF INTERNAL REVENUE vs. KUDOS METAL CORPORATION

GR No. 178087, May 5, 2010
Doctrine: The requirements for a valid waiver as laid down in RMO 20-90 and RDAO No. 5-01 are
mandatory to give effect to Section 222 of the Tax Code.
FACTS:CIR assessed Kudos Metal Corporation for taxable year 1998. A Waiver of the Statute of
Limitations was executed on December 2001. The CTA issued a Resolution canceling the
assessment notices issued against Petitioner for having been issued beyond the prescriptive
period as the waiver purportedly failed to (a) have the valid officer execute the same (i.e., only
the Assistant Commissioner signed it and not the CIR); (b) the date of acceptance was not
indicated; (c) the fact ofreceipt by the taxpayer was not indicated in the original copy
ISSUE: Has the CIR’s right to assess prescribed?
HELD: The Supreme Court ruled in the affirmative. The requirements for a valid waiver as laid
down in RMO 20-90 and RDAO No. 5-01 are mandatory to give effect to Section 222 of the Tax
Code. Specifically, the flaws in the waiver executed by Kudos Metal were as follows: (a) there
was no notarized written authority in favor of the signatory for the company; (b) there is no
stated date of acceptance by the Commissioner or his representative; and (c) the fact of the
receipt of the copy was not indicated in the original waivers.
Neither can it be said that by merely executing the waiver the taxpayer is already estopped
from disputing an action by the CIR beyond the statutory 3-year period since the exception
under the Suyoc case (i.e., when the delays were due to taxpayer’s acts) does not apply.
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TFS, INCORPORATED vs. COMMISSIONER OF INTERNAL REVENUE
GR No. 166829, April 19, 2010
Doctrine: Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax
years 1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank
financial intermediaries being specifically deferred by law, then petitioner is not liable for VAT
during these tax years
FACTS: Petitioner TFS, Incorporated is a duly organized domestic corporation engaged in the
pawnshop business. Petitioner received a Preliminary Assessment Notice (PAN) for deficiency
value added tax (VAT), expanded withholding tax (EWT), and compromise penalty in the
amounts of P11,764,108.74, P183,898.02 and P25,000.00, respectively, for the taxable year 1998.
Insisting that there was no basis for the issuance of PAN, petitioner through a letter requested the
Bureau of Internal Revenue (BIR) to withdraw and set aside the assessments.
The CTA rendered a Decision upholding the assessment issued against petitioner pursuant to
Sections 248 and 249(B) of the National Internal Revenue Code of 1997 (NIRC). The CTA ruled
that pawnshops are subject to VAT under Section 108(A) of the NIRC as they are engaged in the
sale of services for a fee, remuneration or consideration.
ISSUES: 1. Whether the honorable court of tax appeals en banc should have given due course to
the petition for review and not strictly applied the technical rules of procedure to the detriment
of justice.
2. Whether or not petitioner is subject to the 10% vat.
HELD: Jurisdiction to review decisions or resolutions issued by the Divisions of the CTA is no longer
with the CA but with the CTA En Banc. This rule is embodied in Section 11 of RA 9282, which
provides that:
x x x A party adversely affected by a resolution of a Division of the CTA on a motion for

reconsideration or new trial, may file a petition for review with the CTA en banc. x x x
It is settled that an appeal must be perfected within the reglementary period provided by law;
otherwise, the decision becomes final and executory. However, as in all cases, there are
exceptions to the strict application of the rules for perfecting an appeal.
In fine, although strict compliance with the rules for perfecting an appeal is indispensable for the
prevention of needless delays and for the orderly and expeditious dispatch of judicial business,
strong compelling reasons such as serving the ends of justice and preventing a grave
miscarriage may nevertheless warrant the suspension of the rules. In the instant case, we are
constrained to disregard procedural rules because we cannot in conscience allow the
government to collect deficiency VAT from petitioner considering that the government has no
right at all to collect or to receive the same. Besides, dismissing this case on a mere technicality
would lead to the unjust enrichment of the government at the expense of petitioner, which we
cannot permit. Technicalities should never be used as a shield to perpetrate or commit an
injustice.
25
Since petitioner is a non-bank financial intermediary, it is subject to 10% VAT for the tax years
1996 to 2002; however, with the levy, assessment and collection of VAT from non-bank financial
intermediaries being specifically deferred by law, then petitioner is not liable for VAT during these
tax years.
Guided by the foregoing, petitioner is not liable for VAT for the year 1998. Consequently, the VAT
deficiency assessment issued by the BIR against petitioner has no legal basis and must therefore
be cancelled. In the same vein, the imposition of surcharge and interest must be deleted.
COMMISSIONER OF INTERNAL REVENUE v FAR EAST BANK TRUST COMPANY (2010)
GR No. 173854, March 15, 2010
Doctrine: Since no income was reported, it follows that no tax was withheld. It is incumbent upon
the taxpayer to reflect in his return the income upon which any creditable tax is required to be
withheld at the source.
Facts: On April 10, 1995, Far East Bank filed its Annual Income Tax Return for its Corporate Banking
Unit for the taxable year ending December 31, 1994, reflecting a refundable income tax
of P12,682,864.00.
The amount of P12,682,864.00 was carried over and applied against the Bank’s income tax
liability for the taxable year ending December 31, 1995. On April 15, 1996, the Bank filed its 1995
Annual Income Tax Return, which showed a total overpaid income tax in the amount
of P17,443,133.00.
Out of the P17,433,133.00 refundable income tax, only P13,645,109.00 was sought to be refunded
by the Bank. As to the remaining P3,798,024.00, the Bank opted to carry it over to the next
taxable year.
On May 17, 1996, Far East Bank filed a claim for tax refund of the amount of P13,645,109.00 with
the BIR. Due to the failure of petitioner Commissioner of Internal Revenue (CIR) to act on the
claim for refund, the Bank brought the matter to the CTA on April 8, 1997 via a Petition for
Review.
On October 4, 1999, the CTA rendered a Decision denying the Bank’s claim.On appeal, the CA
reversed the Decision of the CTA.
Issues: Whether the Bank was able to prove its entitlement to the refund.
Whether the inaction of the Commissioner automatically entitles the Bank to a refund.
Decision: The Supreme Court reversed the CA’s decision. It noted that while the Bank submitted
Certificates of Creditable Tax Withheld at Source and Monthly Remittance Returns of Income
Taxes Withheld, which pertain to rentals and sales of real property, a perusal of the Bank’s 1994
Annual Income Tax Return shows that the gross income was derived solely from sales of services.
In fact, the phrase "NOT APPLICABLE" was printed on the schedules pertaining to rent, sale of real
property, and trust income. Thus, the income derived from rentals and sales of real property
26
upon which the creditable taxes were withheld were not included in the Bank’s gross income as
reflected in its return.
Since no income was reported, it follows that no tax was withheld. It is incumbent upon the
taxpayer to reflect in his return the income upon which any creditable tax is required to be
withheld at the source.
The Supreme Court added that the fact that the Commissioner failed to present any evidence
or to refute the evidence presented by the Bank does not automatically entitle the Bank to a tax
refund. It is not the duty of the government to disprove a taxpayer’s claim for refund. Rather, the
burden of establishing the factual basis of a claim for a refund rests on the taxpayer. And while
the petitioner has the power to make an examination of the returns and to assess the correct
amount of tax, his failure to exercise such powers does not create a presumption in favor of the
correctness of the returns. The taxpayer must still present substantial evidence to prove his claim
for refund.
Hence, the Court concluded, for failing to prove its entitlement to a tax refund, the Bank’s claim
must be denied. Since tax refunds partake of the nature of tax exemptions, which are
construed strictissimi juris against the taxpayer, evidence in support of a claim must likewise
be strictissimi scrutinized and duly proven.
COMMISSIONER OF INTERNAL REVENUE vs SM PRIME HOLDINGS INC.
GR No. 183505, February 26, 2010
Doctrine: The amendments to the VAT law have been consistent that those subject to
amusement tax is no liable under VAT. Only lessors or distributors of cinematographic films are
included in the coverage of VAT.
FACTS: In a number of CTA cases, the BIR sent SM Prime and First Asia a Preliminary Assessment
Notice (PAN) for VAT deficiency on cinema ticket sales for taxable year 2000 (SM), 1999 (First
Asia), 2000 (First Asia), 2002 (First Asia), and 2003 (First Asia).
SM and First Asia filed for protest but the BIR just denied them and sent them a Letter of Demand
subsequently. All the PANs were subjected to a Petition for Review filed by SM and First Asia to
the CTA.
The CTA First Division ruled that there should only be one business tax applicable to theater and
movie houses, the 30% amusement tax. Hence, the CIR is wrong in collecting VAT from the ticket
sales. CIR appealed the case to the CTA En Banc. The CTA En Banc affirmed the ruling of the
CTA First Division.
ISSUE: Whether the cinema ticket sales are subject to VAT and thus included in the meaning of
“Sale or Exchange of Services”?
RULING: When VAT was enacted it replaced the tax on original and subsequent sales tax and
percentage tax on certain services. When the VAT law was implemented, it exempted persons
subject to amusement tax under the NIRC from the coverage of VAT. When the Local Tax Code
was repealed by the Local Government Code of 1991, the local government continued to
27
impose amusement tax on admission tax on ticket sales. The following amendments to the VAT
law have been consistent that those subject to amusement tax is no liable under VAT. Only
lessors or distributors of cinematographic films are included in the coverage of VAT.
It can be seen from the foregoing that the legislative intent was not to impose VAT on
persons already covered by the amusement tax. To hold otherwise would impose an
unreasonable burden on cinema/theater houses operators and proprietors, who would be
paying an additional 10% VAT on top of the 30% amusement tax.
Sec. 108 of the NIRCprovides that, there shall be levied, assessed and collected, a VAT
equivalent to 10% of gross receipts derived from the sale or exchange of services, including the
use or lease of properties. The phrase “sale or exchange of services” means the performance of
all kinds of services in the Philippines for others for a fee, remuneration or consideration, including
those…….lessors or distributors of cinematographic films……..and similar services regardless of
whether or not the performance thereof calls for the exercise or use of the physical or mental
faculties. The phrase “sale or exchange of services” shall likewise include: (7) lease of motion
picture films, films, tapes and discs.
A reading of the foregoing provision clearly shows that the enumeration of the “sale or
exchange of services” subject to VAT is not exhaustive. The words, “including,” “similar services,”
and “shall likewise include,” indicate that the enumeration is by way of example only .
Allied Banking Corporation vs Commissioner of Internal Revenue

GR No. 175097, February 5, 2010
Doctrine: A FAN is not appealable with the CTA unless the wordings of the FAN issued by the CIR
made it appear that the FAN is actually the CIR’s final decision.
FACTS: On April 2004, the Bureau of Internal Revenue (BIR) issued a preliminary assessment notice
(PAN) to Allied Banking Corporation (ABC) demanding payment of P50 million in taxes. ABC then
filed a protest in May 2004. In July 2004, the BIR issued a formal assessment notice (FAN). The FAN
included a formal demand as well as this phrase:
xxx
This is our final decision based on investigation. If you disagree, you may appeal this final
decision within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall
become final, executory and demandable.
ABC then appealed the FAN with the Court of Tax Appeals (CTA). The Commissioner of
Internal Revenue (CIR) then filed a motion to dismiss on the ground that ABC did not exhaust all
administrative remedies for failing to file a protest against the FAN.
ISSUE: Whether or not the CIR is correct.
HELD: No. It is true that a FAN is not appealable with the CTA. However, this case holds an
exception. The wordings of the FAN issued by the CIR made it appear that the FAN is actually
the CIR’s final decision. It even advised ABC to file an appeal instead of filing a protest. ABC
cannot therefore be faulted for filing an appeal with the CTA instead of filing a protest with the
CIR. The CIR as well as his duly authorized representative must indicate clearly and
unequivocally to the taxpayer whether an action constitutes a final determination on a disputed
28
assessment. Words must be carefully chosen in order to avoid any confusion that could
adversely affect the rights and interest of the taxpayer.
Dumaguete Cathedral Credit Cooperative v Commissioner of Internal Revenue
GR No. 182722, January 22, 2010
Doctrine: The members’ deposits with the cooperatives are not currency bank deposits nor
deposit substitutes therefore, these are exempt from withholding tax.
FACTS: Dumaguete Cathedral Credit Cooperative (DCCCO) is a credit cooperative with the
following objectives and purposes: (1) to increase the income and purchasing power of the
members; (2) to pool the resources of the members by encouraging savings and promoting thrift
to mobilize capital formation for development activities; and (3) to extend loans to members for
provident and productive purposes.(BIR) Operations Group Deputy Commissioner, issued Letters
of Authority authorizing BIR Officers to examine petitioner’s books of accounts and other
accounting records for all internal revenue taxes for the taxable years 1999 and 2000.
On 2002, DCCCO received Pre-Assessment Notices for deficiency withholding taxes for
taxable years 1999 and 2000. DCCCO informed BIR that it would ONLY pay the deficiency
withholding taxes corresponding to the honorarium of the Board of Directors, security and
janitorial services, legal and professional fees for the year 1999 and 2000, EXCLUDING penalties
and interest.DCCO's contention:
Under Sec. 24. Income Tax Rates. — x x x x (B) Rate of Tax on Certain Passive Income: —
(1) Interests, Royalties, Prizes, and Other Winnings. — A final tax at the rate of twenty percent
(20%) is hereby imposed upon the amount of interest from any currency bank deposit and yield
or any other monetary benefit from deposit substitutes and from trust funds and similar
arrangements; x x x applies only to banks and not to cooperatives, since the phrase "similar
arrangements" is preceded by terms referring to banking transactions that have deposit
peculiarities. Therefore, the savings and time deposits of members of cooperatives are not
included in the enumeration, and thus not subject to the 20% final tax. Also, pursuant to Article
XII, Section 15 of the Constitution 25 and Article 2 of Republic Act No. 6938 (RA 6938) or the
Cooperative Code of the Philippines, cooperatives enjoy a preferential tax treatment which
exempts their members from the application of Section 24(B)(1) of the NIRC.
ISSUE: Whether or not DCCCO is liable to pay the deficiency withholding taxes on interest from
savings and time deposits of its members for the taxable years 1999 and 2000, as well as the
delinquency interest of 20% per annum?
HELD: DCCCO is not liable. The NIRC states that a "final tax at the rate of twenty percent (20%) is
hereby imposed upon the amount of interest on currency bank deposit and yield or any other
monetary benefit from the deposit substitutes and from trust funds and similar arrangement x x x"
for individuals under Section 24(B)(1) and for domestic corporations under Section 27(D)(1).
Considering the members’ deposits with the cooperatives are not currency bank deposits nor
deposit substitutes, Section 24(B)(1) and Section 27(D)(1), therefore, do not apply to members of
cooperatives and to deposits of primaries with federations, respectively.
29
ART. 62. Tax and Other Exemptions. — Cooperatives transacting business with both members
and nonmembers shall not be subject to tax on their transactions to members. Notwithstanding
the provision of any law or regulation to the contrary, such cooperatives dealing with
nonmembers shall enjoy the following tax exemptions; x x x.
This exemption extends to members of cooperatives. It must be emphasized that cooperatives

exist for the benefit of their members. In fact, the primary objective of every cooperative is to
provide goods and services to its members to enable them to attain increased income, savings,
investments, and productivity. 30 Therefore, limiting the application of the tax exemption to
cooperatives would go against the very purpose of a credit cooperative. Extending the
exemption to members of cooperatives, on the other hand, would be consistent with the intent
of the legislature. Thus, although the tax exemption only mentions cooperatives, this should be
construed to include the members.
30

Taxation Cases For Bar 2018

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TAXATION CASE DIGESTS

EXECUTIVE COMMITTEE 2018 - 2019

VICE CHAIRPERSON FOR ACADEMICS Jerekko Cadorna

VICE CHAIRPERSON FOR ACADEMIC OPERATIONS Rodel Cadorniga Jr.

VICE CHAIRPERSON FOR HOTEL OPERATIONS Emmanuel Josef Jovellanos

EXECUTIVE OFFICER FOR HOTEL OPERATIONS Christian Boy Benedict Tiangco

VICE CHAIRPERSON FOR FINANCE Katreena Frances Monje

VICE CHAIRPERSON FOR SECRETARIAT Odette Marie Jumao-as

VICE CHAIRPERSON FOR COMMUNICATIONS Maryll Ann Ragpala

VICE CHAIRPERSON FOR RECRUITMENT AND MEMBERSHIP Giulia Ingrid Calub

San Beda College Alabang School of Law Administration

ATTY. Anna Marie Melanie B. Trinidad

ATTY. Carlo D. Busmente

Subject Head Philip Ebersole

John Cedric Comon

CASE DIGESTS & DOCTRINES

GR Nos. 201530, 201680-81; April 19, 2017

Issue: W/N Asiatrust has availed the tax abatement program?

CIR vs St. Luke’s Medical Center Inc.

GR No. 203514; February 13, 2017

Issue: W/N St. Luke’s is liable for income tax?

CIR vs La Tondena Distillers Inc.

GR No. 175188, July 15, 2015

Issue: W/N respondent is liable for DST?

CE Casecnan Water and Energy Company vs The Province of Nueva Ecija

GR. No. 196278, July 17, 2015

BIR vs CA, Spouses Manly

GR No. 197590, November 24, 2014

Issue: W/N respondent spouses are liable for tax evasion?

Manila Memorial Park Inc. vs Secretary of DSWD

Digital Telecommunications Philippines vs Cantos

Issue: W/N petitioner is exempt from payment of RPT?

Fort Bonifacio Development Corporation vs CIR

GR No. 173425, January 22, 2013

Issue: W/N petitioner is entitled to avail transitional input tax credit?

Fort Bonifacio Development Co. v. Commissioner of Internal Revenue

G.R. No. 173425, September 4, 2012

Central Luzon Drug Corporation v. Commissioner of Internal Revenue

Belle Corporation v. Commissioner of Internal Revenue

Belle Corporation v. Commissioner of Internal Revenue

J.R.A. Philippines, Inc. v. Commissioner of Internal Revenue

Commissioner of Internal Revenue v. Aichi Forging Company

Commissioner of Internal Revenue v. Smart Communication Inc.

ANGELES CITY V. ANGELES CITY ELECTRIC CORPORATION

GR No. 166134 June 29, 2010

COMMISSIONER OF INTERNAL REVENUE vs. KUDOS METAL CORPORATION

ISSUE: Has the CIR’s right to assess prescribed?

TFS, INCORPORATED vs. COMMISSIONER OF INTERNAL REVENUE

GR No. 166829, April 19, 2010

2. Whether or not petitioner is subject to the 10% vat.

x x x A party adversely affected by a resolution of a Division of the CTA on a motion for

COMMISSIONER OF INTERNAL REVENUE v FAR EAST BANK TRUST COMPANY (2010)

GR No. 173854, March 15, 2010

COMMISSIONER OF INTERNAL REVENUE vs SM PRIME HOLDINGS INC.

GR No. 183505, February 26, 2010

Allied Banking Corporation vs Commissioner of Internal Revenue

GR No. 182722, January 22, 2010

This exemption extends to members of cooperatives. It must be emphasized that cooperatives

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