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PILMICO-MAURI FOODS CORPORATION VS.

COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 175651, November 17, 2016

Facts:
Pilmico-Mauri Foods Corporation (PMFC) is a corporation, organized and
existing under the laws of the Philippines, with principal place of business in Cebu. The
books of accounts were examined by the CIR for deficiency income, VAT, and
withholding tax liabilities. As a result of the investigation, assessment notices were
issued for deficiency withholding taxes for the year 1996 in the sum of P384, 925.05,
deficiency value-added tax in the sum of P5, 017,778.01 and deficiency income tax for
the year 1996 in the sum of P4, 359,046.96. On December 29, 1998, PMFC filed a protest
letter against the aforementioned deficiency tax assessments through the Regional
Director in Cebu City.

PMFC filed its Petition for Review. The ‘Joint Stipulation of Facts’ was filed on March 7,
2001. After trial, the CTA in Division rendered the assailed Decision affirming the
assessments in the reduced amount. PMFC filed a Motion for Reconsideration but the
same was denied. PMFC then filed a Petition for Review before the CTA en banc, which
adopted the CTA’s First Division ruling and ratiocinations.

PMFC moved for reconsideration. Pending its resolution, the CIR issued Revenue
Regulation (RR) No. 15-2006, the abatement program of which was availed by PMFC on
October 27, 2006. Out of the total amount of P2, 804,920.36 assessed as income, VAT
and withholding tax deficiencies, plus surcharges and deficiency interests, PMFC paid
the CIR P1,101,539.63 as basic deficiency tax. The PMFC awaits the CIR's approval of
the abatement, which can render moot the resolution of the instant petition. Meanwhile,
the CTA en banc denied the motion for reconsideration of PMFC.

Issue:
Whether or not the CTA First Division deprived PMFC of due process of law and
the CTA assumed an executive function when it submitted a legal basis other than that
stated in the assessment and pleading of the CIR, contrary to law

Held:
Due process was not violated. In CIR v. Puregold Duty Free, Inc., the Court is
emphatic that it is well settled that matters that were neither alleged in the pleadings
nor raised during the proceedings below cannot be ventilated for the first time on
appeal and are barred by estoppel. To allow the contrary would constitute a violation of
the other party's right to due process, and is contrary to the principle of fair play. PMFC
was at the outset aware that the lack or inadequacy of supporting documents to justify
the deductions claimed from the gross income was among the issues raised for
resolution before the CTA. With PMFC's acquiescence to the Joint Stipulation of Facts
filed before the CTA and thenceforth, the former's participation in the proceedings with
all opportunities it was afforded to ventilate its claims, the alleged deprivation of due
process is bereft of basis.

PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. FILIPINAS PALM OIL


PLANTATION, INC.
G.R. No. 183416, October 5, 2016

Facts:
Filipinas Palm Oil Plantation, Inc. (Filipinas) is a private organization engaged in
palm oil plantation with a total land area of more than 7,000 hectares of National
Development Company (NDC) lands in Agusan del Sur.

After the Comprehensive Agrarian Reform Law was passed, NDC lands were transferred
to Comprehensive Agrarian Reform Law beneficiaries who formed themselves as the
merged NDC-Guthrie Plantations, Inc. -NDC-Guthrie Estates, Inc. (NGPI-NGEI)
Cooperatives Filipinas entered into a lease contract agreement with NGPI-NGEI. The
provincial Assessor of Agusan del Sur (Provincial Assessor) assessed Filipinas’
properties within the plantation area, which Filipinas assailed before the Local Board of
Assessment Appeals (LBAA). The LBAA found that the P207.00 market value declared
in the assessment by the Provincial Assessor was unreasonable; it found that the
market value should not have been more than P85.00 per oil palm tree. The LBAA found
that roads of any kind, as well as all their improvements, should not be taxed since
these roads were intermittently used by the public. Filipinas appealed before the CBAA.
The CBAA denied the Motion for Reconsideration filed by the Provincial Assessor. The
Provincial Assessor filed a Petition for Review before the Court of Appeals, which, in
turn, sustained the CBAA's Decision. The Court of Appeals held that the land owned by
NGPI-NGEI, which Filipinas has been leasing, cannot be subjected to real property tax
since these are owned by cooperatives that are tax-exempt. The Court of Appeals
agreed with the CBAA that the roads constructed by Filipinas had become permanent
improvements on the land owned by NGPI-NGEI.

Issue:
Whether the exemption privilege of NGPI-NGEI from payment of real property
tax extends to respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of
land owned by cooperatives and whether respondent's road equipment and mini
haulers are movable properties and have not been immobilized by destination for real
property taxation.

Held:
Under Section 133(n) of the Local Government Code, the taxing power of local
government units shall not extend to the levy of taxes, fees, or charges on duly
registered cooperatives under the Cooperative Code.

NGPI-NGEI, as the owner of the land being leased by respondent, falls within the
purview of the law. Section 234 of the Local Government Code exempts all real property
owned by cooperatives without distinction. Nothing in the law suggests that the real
property tax exemption only applies when the property is used by the cooperative
itself. Similarly, the instance that the real property is leased to either an individual or
corporation is not a ground for withdrawal of tax exemption. Therefore, NGPI-NGEI, as
owner of the roads that permanently became part of the land being leased by
respondent, shall be liable for real property taxes, if any. However, by express provision
of the Local Government Code, NGPI-NGEI is exempted from payment of real property
tax.

The road equipment and mini haulers shall be considered as real property, subject to
real property tax. Petitioner is correct in claiming that the phrase pertaining to physical
facilities for production is comprehensive enough to include the road equipment and
mini haulers as actually, directly, and exclusively used by respondent to meet the needs
of its operations in palm oil production.

COMMISSIONER OF INTERNAL REVENUE VS. DEUTSCHE KNOWLEDGE SERVICES,


PTE. LTD.
G.R. No. 211072, November 7, 2016

Facts:
Deutsche Knowledge Services (DKS) is the Philippine branch of a multinational
company organized and existing under and by the virtue of the laws of Singapore. It is
licensed to do business as a regional operating headquarters in the Philippines. On July
25, 2007, DKS filed its original Quarterly Value Added Tax (VAT) Return for the 2nd
quarter of CY 2007 with the Bureau of Internal Revenue (BIR).

On June 18, 2009, DKS filed with the BIR-Revenue District Office No. 47 an Application
for Tax Credits/Refunds (BIR Form No. 1914) of its excess and unutilized input VAT for
the 2nd quarter of CY 2007 in the amount of PS,767,719.30. Even before any action by
the CIR on its administrative claim, DKS filed a Petition for Review with the CTA.

Trial commenced and DKS filed its Formal Offer of Evidence which was admitted by the
CTA First Division in a Resolution. Meanwhile, on October 6, 2010, while DKS's claim for
refund or tax credit was pending before the CTA First Division, this Court promulgated
Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. The Court held
that compliance with the 120-day period granted to the CIR, within which to act on an
administrative claim for refund or credit of unutilized input VAT, as provided under
Section 112(C) of the National Internal Revenue Code (NIRC) of 1997, as amended, is
mandatory and jurisdictional in filing an appeal with the CTA.

CIR filed a Motion to Dismiss, stating that the CTA First Division lacked jurisdiction
because respondent's Petition for Review was prematurely filed. CTA First Division
dismissed respondent's judicial claim and explained that pursuant to Section 112(C) of
the NIRC and the jurisprudence laid down in Aichi, it is a mandatory requirement to
wait for the lapse of the 120-day period granted to petitioner to act on the application
for refund or issuance of tax credit, before a judicial claim may be filed with the CTA.

DKS moved for reconsideration, but the same was denied by the CTA First Division in its
Resolution. Aggrieved, DKS elevated the matter to the CTA En Banc which affirmed the
decision of the CTA First Division. DKS moved for reconsideration. The CTA En Banc
found merit in said motion. The CIR filed a Motion for Reconsideration but the motion
was denied for lack of merit by the CTA En Banc. Hence, this petition.

Issue:
Whether the CTA En Banc erred in taking cognizance of the case and holding that
DKS's petition for review was not prematurely filed with the CTA First Division

Held:
The Petition lacks merit. Based on the plain language of the foregoing provision,
a VAT-registered taxpayer claiming for a refund or tax credit of its excess and unutilized
input VAT must file an administrative claim within two (2) years from the close of the
taxable quarter when the sales are made. After that, the CIR is given 120 days, from the
submission of complete documents in support of said administrative claim, within
which to grant or deny said claim. Upon receipt of CIR's decision, denying the claim in
full or partially, or upon the expiration of the 120 day period without action from the
CIR, the taxpayer has 30 days within which to file a petition for review with the CTA.
Following San Roque, the Court, in a catena of cases, has consistently adopted the rule
that the 120-day waiting period does not apply to claims for refund that were
prematurely filed during the period from the issuance of BIR Ruling No. DA-489-03 on
December 10, 2003, until October 6, 2010, when the Aichi was promulgated; but before
and after said period, the observance of the 120-day period is mandatory and
jurisdictional.

In this case, records show that DKS filed its administrative and judicial claim for refund
on June 18, 2009 and June 30, 2009, respectively, or after the issuance of BIR Ruling No.
DA-489-03, but before the date when Aichi was promulgated. Thus, even though DKS
filed its judicial claim without waiting for the expiration of the 120-day mandatory
period, the CTA may still take cognizance of the case because the claim was filed within
the excepted period stated in San Roque. Verily, the CTA En Banc did not err in
reversing the dismissal of DKS's judicial claim and remanding the case to the CTA First
Division for the resolution of the case on the merits.

HARTE-HANKS PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE


G.R. No. 205721, September 14, 2016

Facts:
Harte-Hanks Philippines, Inc. (HHPI) is a domestic corporation engaged in the
business of providing outsourcing customer relationship management solutions
through inbound and outbound call services to its customers. On April 25, 2008, HHPI
filed its original Quarterly VAT Return with the BIR but was later on amended because
HHPI had no output VAT liability for the first quarter of CY 2008. On March 23, 2010,
HHPI filed a claim for refund of its unutilized input VAT of P 3,167, 402.34 before the
BIR.

On May 25, 2010, the CIR sought the dismissal of HHPI’s claim for refund due to
prematurity of the appeal. According to the CIR, the 120-day period under Section
112(C) of the National Internal Revenue Code (NIRC) of 1997 for the CIR to act on the
matter had not yet lapsed. Therefore HHPI failed to exhaust administrative remedies
before it appealed to the CTA. HHPI filed a petition for review before the CTA en banc
which, however, denied the same, and accordingly, affirmed the resolution of the CTA
Third Division. HHPI sought for reconsideration but the same was denied. Hence, this
petition.

Issue:
Whether or not taxpayers who filed their judicial claims after the issuance of BIR
Ruling No. DA-489-03 but before Aichi cannot be faulted for filing claims prematurely

Held:
The petition is bereft of merit. The petition for review was filed before the CTA
on March 30, 2010, or merely seven days after the administrative claim for refund was
filed before the BIR on March 23, 2010. In the case of CIR vs. San Roque Power
Corporation, the compliance with the 120-day waiting period is mandatory and
jurisdictional. The waiting period was extended to 120 days effective January 1, 1998
under Republic Act No. 8424 or the Tax Reform Act of 1997. Evidently, HHPI failed to
wait for the lapse of the 120-day period which is expressly provided for by law for the
CIR to grant or deny the application for refund. A taxpayer’s failure to comply with the
prescribed 120-day waiting period would render the petition premature and violative
of the principle on exhaustion of remedies. Accordingly, the CTA does not acquire
jurisdiction over the same.
In this case, the petition for review is considered premature because the 120-day
mandatory period was not observed before an appeal was elevated to the CTA. Either
the CTA or this Court could also legitimize such procedural infirmity because it would
run counter to Article 5 of the Civil Code unless a law exists that would authorize the
validity of such petition.

NATIONAL POWER CORPORATION VS. THE PROVINCIAL TREASURER OF


BENGUET, THE PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL
TREASURER OF ITOGON, BENGUET and THE MUNICIPAL ASSESSOR OF ITOGON,
BENGUET
G.R. No. 209303, November 25, 2016

Facts:
National Power Corporation (NPC) is a government-owned and controlled
corporation created and existing under and by virtue of Republic Act (R.A.) No. 6395. In
May 2000, the Municipal Assessor of Itogon, Benguet, assessed NPC for real property
tax for properties located at Binga Hydro-Electric Power Plant. NPC received a letter
dated February 16, 2006 from OIC-Provincial Treasurer of Benguet demanding the
payment of real property tax delinquency in the amount of P62,645,668.80. NPC
challenged before the Local Board of Assessment Appeals (LBAA) the legality of the
assessment and the authority of the respondents to assess and collect real property
taxes from it when its properties are exempt pursuant to Section 234 (b) and (c) of
Republic Act (R.A.) No. 7160, otherwise known as the Local Government Code (LGC) of
1991. Respondents alleged that NPC's properties were not exempt from tax since the
properties were classified in their tax declarations as "industrial," "for industrial use,"
or "machineries” and "equipment." Respondents also alleged that the appeal to the
LBAA was filed out of time.

NPC filed a petition for review before the Central Board of Assessment Appeals (CBAA)
claiming that payment under protest was not required before it could challenge the
authority of respondents to assess tax on tax exempt properties before the LBAA. The
CBAA dismissed the appeal for being filed out of time. NPC appealed to the CTA En Banc
by filing a Petition for Review. The CTA En Banc denied the same for lack of merit.

Issue:
Whether or not the CTA erred in dismissing the petition based on prescription as
said issue was never raised in the LBAA

Held:
The petition is bereft of merit. Considering that the LBAA has not resolved the
merits of the case, the CBAA cannot rule on the very issue of real property tax
exemption of some of NPC' s properties as it has yet to acquire jurisdiction. This Court,
in compliance with the procedural steps prescribed in the law, cannot delve on the issue
of NPC'S alleged non-taxability on the ground of exemption. As such, this Court's role in
addressing NPC's concerns and the interests at stake is not all-encompassing. This
Court cannot tackle the feared far-reaching implication of the decision on the other
properties of NPC similarly situated as the subject properties. The LBAA has yet to
decide on the merits of the case. We can only resolve the current controversy through a
reading and interpretation of the law.

PILIPINAS SHELL PETROLEUM CORPORATION VS. COMMISSIONER OF CUSTOMS


G.R. No. 195876, December 5, 2016

FACTS:
On 16 April 1996, Republic Act (R.A.) No. 81804 otherwise known as the
"Downstream Oil Industry Deregulation Act of 1996" took effect. It provides, among
others, for the reduction of the tariff duty on imported crude oil from ten percent (10%)
to three percent (3%). Prior to its effectivity, Shell's importation of 1,979,674.85 U.S.
barrels of Arab Light Crude Oil, thru the Ex MT Lanistels, arrived on 7 April 1996 or
nine (9) days earlier than the effectivity of the liberalization provision. Within a period
of three days thereafter, or specifically on 10 April 1996, said shipment was unloaded
from the carrying vessels docked at a wharf owned and operated by Shell, to its oil
tanks located at Batangas City. Subsequently, petitioner filed the Import Entry and
Internal Revenue Declaration and paid the import duty of said shipment. More than
four (4) years later, Shell received a demand letter from the Bureau of Customs (BOC),
through the District Collector of Batangas, assessing it to pay representing the
difference between the amount allegedly due (at the old rate of ten percent (10%) or
before the effectivity of R.A. No. 8180 and the actual amount of duties paid by petitioner
(on the rate of 3%). Shell protested the assessment and appealed the decision of the
District Collector of the BOC to the respondent and requested for the cancellation of the
assessment for the same customs duties. Five years after petitioner paid the allegedly
deficient import duty it received by telefax from the respondent a demand letter for the
payment of the amount of P936,899,885.90, representing the dutiable value of its 1996
crude oil importation which had been allegedly abandoned in favor of the government
by operation of law.

The BOC filed a civil case for collection of sum of money against petitioner, together
with Caltex Philippines, Inc. as co-party therein. Petitioner filed with the Court of Tax
Appeals (CTA) a Petition for Review, raffled to the Former First Division (CTA in
Division), and docketed as C.T.A Case No. 6485, upon consideration that the civil
complaint filed in the RTC of Manila was the final decision of the BOC on its protest. The
CTA in Division ruled to dismiss the Petition for Review on C.T.A. Case No. 6485 for lack
of merit and accordingly ordered petitioner to pay the entire amount of
P936,899,883.90 representing the total dutiable value of the subject shipment of Arab
Light Crude Oil on the ground of implied abandonment pursuant to Sections 1801 and
1802 of the TCCP. The CTA in Division denied petitioner's Motion for Reconsideration
for lack of merit citing Section 5(b), 28 Rule 6 of the 2005 Revised Rules of the CTA.
Aggrieved, petitioner appealed to the CTA Former En Banc by filing a Petition for
Review.

The CTA Former En Banc affirmed the CTA in Division's ruling pertaining to the implied
abandonment caused by petitioner's failure to file the Import Entry and Internal
Revenue Declaration within the 30-day period, and transfer of ownership by operation
of law to the government of the subject shipment in accordance with Sections 1801 and
1802, in relation to Section 1301, of the TCCP, and with the pronouncements made in
the Chevron case.

Issues:
1) Whether the CTA former En Banc erred when it held in the questioned
decision that petitioner PSPC is deemed to have impliedly abandoned the subject
shipment and, thus, liable for the entire value of the subject shipment, plus interest,
despite the fact such claim if any at all, has already prescribed, especially because
petitioner PSPC did not commit any fraud

2) Whether the claim of respondent Commissioner of Customs against petitioner


has already prescribed

Held:
1) When an importer after due notice fails to file an Import Entry and Internal
Revenue Declaration within an unextendible period of thirty (30) days from the
discharge of the last package, the imported article is deemed abandoned in favor of the
government. According to petitioner, the shipments should not be considered impliedly
abandoned because none of its overt acts (filing of the IEDs and paying advance duties)
revealed any intention to abandon the importations. Unfortunately for petitioner, it was
the law itself which considered the importation abandoned when it failed to file the
IEIRDs within the allotted time.

In the case at bench, a perusal of the records reveals that there is neither any iota of
evidence nor concrete proof offered and admitted to clearly establish that petitioner
committed any fraudulent acts. The CTA in Division relied solely on the Memorandum
dated 2 February 2001 issued by the CIIS-IPD of the BOC in ruling the existence of fraud
committed by petitioner. However, there is no showing that• such document was ever
presented, identified, and testified to or offered in evidence by either party before the
trial court.

2) The claim of respondent COC has already prescribed. There being no evidence
to prove that petitioner committed fraud in belatedly filing its Import Entry and
Internal Revenue Declaration within the 30-day period prescribed under Section 1301
of the TCCP, as amended, respondents’ rights to question the propriety thereof and to
collect the amount of the alleged deficiency custom duties, more so the entire value of
the subject shipment, have already prescribed. Simply put, in the absence of fraud, the
entry and corresponding payment of duties made by petitioner becomes final and
conclusive upon all parties after one (1) year from the date of the payment of duties in
accordance with Section 1603 of the TCCP, as amended.

In the present case, the failure on the part of respondent to timely question the
propriety of the entry and settlement of duties by petitioner involving the subject
shipment renders such entry and settlement of duties final and conclusive against both
parties. Hence, respondent cannot any longer have any claim from petitioner.

TAKENAKA CORPORATION-PHILIPPINE BRANCH VS. COMMISSIONER OF


INTERNAL REVENUE
G.R. No. 193321, October 19, 2016

Facts:
Takenaka, as a subcontractor, entered into an On-Shore Construction Contract
with Philippine Air Terminal Co., Inc. (PIATCO) for the purpose of constructing the
Ninoy Aquino Terminal III (NAIA-IPT3). PIATCO is a corporation duly organized and
existing under the laws of the Philippines and was duly registered with the Philippine
Economic Zone Authority (PEZA), as an Ecozone Developer/ Operator RA 7916.

Takenaka filed its Quarterly VAT Returns for the four quarters of taxable year 2002 on
April 24, 2002, July 22, 2002, October 22, 2002 and January 22, 2003, respectively.
Subsequently, Takenaka amended its quarterly VAT returns several times.

On January 13, 2003, the BIR issued VAT Ruling No. 011-03 which states that the sales
of goods and services rendered by Takenaka to PIATCO are subject to zero-percent
(0%) VAT and requires no prior approval for zero rating based on Revenue
Memorandum Circular 74-99. Takenaka filed its claim for tax refund. For failure of the
BIR to act on its claim, Takenaka filed a Petition for Review with the CTA. After trial, the
Former First Division ordered the CIR to refund the reduced amount to Takenaka. Not
satisfied, Takenaka filed a “Motion for Reconsideration”, which was granted by the
Former First Division. Consequently. Takenaka filed a petition for review in the CTA En
Banc to seek the reversal of the March 16, 2009 decision and the June 29, 2009
resolution of the CTA Former First Division. Later on, through the resolution dated
August 12, 2010, the CTA En Banc denied the petitioner’s motion for reconsideration.
Hence, this petition for review on certiorari.

Issue:
Whether or not the sales invoices presented by the petitioner were sufficient as
evidence to prove its zero-rated sale of services to Philippine Air Terminal, Inc.
(PIATCO), thereby entitling it to claim the refund of its input VAT for taxable year 2002

Held:
The Court denied the petition for review on certiorari. In a claim for tax refund
or tax credit, the applicant must prove not only entitlement to the grant of the claim
under substantive law. It must also show satisfaction of all the documentary and
evidentiary requirements for an administrative claim for a refund or tax credit. Hence,
the mere fact that petitioner's application for zero-rating has been approved by the CIR
does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the
refund must further comply with the invoicing and accounting requirements mandated
by the NIRC, as well as by revenue regulations implementing them.

JACINTO-HENARES v. ST. PAUL COLLEGE OF MAKATI


G.R. No. 215383, 08 March 2017, Second Division (Carpio, J.)

A non-stock, non-profit educational institution is constitutionally exempt from tax


on all revenues derived in pursuance of its purposes. This constitutional exemption gives
the non-stock, non-profit educational institutions a distinct character. And for the
constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the doctrinal
rule that there are only two requisites: (1) The school must be non-stock and non-profit;
and (2) The income is actually, directly and exclusively used for educational purposes.
There are no other conditions and limitations.

TOPIC/S:

a. Basic Principles of Taxation

FACTS:

On 22 July 2013, Kim S. Jacinto-Henares, acting in her capacity as then


Commissioner of Internal Revenue, issued Revenue Memorandum Order (RMO) No. 20-
2013.

On 29 November 2013, St. Paul College of Makati (SPCM), a non-stock, non-profit


educational institution organized and existing under Philippine laws, filed before the
Regional Trial Court, Branch 143, Makati City (RTC) a Civil Action to Declare
Unconstitutional the said RMO with Prayer for Issuance of Temporary Restraining
Order (TRO) and Writ of Preliminary Injunction.
SPCM alleged that the said RMO imposes prerequisites to the enjoyment by non-
stock, non-profit educational institutions of the privilege of tax exemption under
Section 4 (3) of Article XIV of the Constitution by requiring the submission of an
application for tax exemption to the Bureau of Internal Revenue subject to approval by
CIR in the form of a Tax Exemption Ruling valid for a period of three (3) years and
subject to renewal.

In Resolutions dated 27 December 2013 and 22 January 2014, the RTC issued a
TRO and granted a writ of preliminary injunction, respectively, against the
implementation of the said RMO. Thereafter, the CIR file motion for reconsideration,
which the RTC denied.

On 29 April 2014, SPCM filed a Motion for Judgment on the Pleadings. In a


Decision dated 25 July 2014, the RTC ruled in favor of SPCM and declared RMO No. 20-
2013 unconstitutional. The RTC ruled that the said RMO imposes prerequisites and
serves as diminution of the constitutional privilege accorded to by non-stock, non-profit
educational institutions, which even Congress cannot diminish by legislation, and, thus,
more so by the CIR who merely exercises quasi-legislative function.

In a Joint Resolution dated 29 October 2014, the RTC denied the CIR's motion for
reconsideration. Hence, the CIR filed this petition for review before the Supreme Court.

ISSUE/S:

Whether or not the RMO No. 20-2013 is unconstitutional.

RULING:

N/A. The Supreme Court denied the petition on the ground of mootness. A moot
and academic case is one that ceases to present a justiciable controversy by virtue of
supervening events, so that an adjudication of the case or a declaration on the issue
would be of no practical value or use. Courts generally decline jurisdiction over such
case or dismiss it on the ground of mootness.

The Supreme Court took judicial notice that on 25 July 2016, the present CIR
Caesar R. Dulay already issued RMO No. 44-2016, which excluded non-stock, non-profit
educational institutions from the coverage of Revenue Memorandum Order No. 20-
2013. With the issuance of RMO No. 44-2016, a supervening event has transpired that
rendered this petition moot and academic, and subject to denial. Consequently, the RTC
Decision no longer stands, and there is no longer any practical value in resolving the
issues raised in such petition.
The Supreme Court, nonetheless, held that a non-stock, non-profit educational
institution is constitutionally exempt from tax on all revenues derived in pursuance of
its purposes. For the constitutional exemption to be enjoyed, there are only two
requisites: (1) The school must be non-stock and non-profit; and (2) The income is
actually, directly and exclusively used for educational purposes. There are no other
conditions and limitations. In this light, the said constitutional provision on tax
exemption should not be implemented or interpreted in such a manner that will defeat
or diminish the intent and language of the Constitution.

SOUTHER LUZON DRUG CORPORATION v. DEPARTMENT OF SOCIAL WELFARE


AND DEVELOPMENT, et al.
G.R. No. 199669, 25 April 2017, En Banc (Reyes, J.)

Republic Act Nos. 9257 and 9442 are akin to regulatory laws, the issuance of which
is within the ambit of police power. The 20% discount is a regulation affecting the ability
of private establishments to price their products and services relative to a special class of
individuals, senior citizens, for which the Constitution affords preferential concern. It is
within the bounds of the police power of the state to impose burden on private entities,
even if it may affect their profits, such as in the imposition of price control measures. There
is no compensable taking but only a recognition of the fact that they are subject to the
regulation of the State and that all personal or private interests must bow down to the
more paramount interest of the State.

TOPIC
a. Basic Principles of Taxation

FACTS

Petitioner filed a Petition for Prohibition with Application for TRO and/or Writ
of Preliminary Injunction with the Court of Appeals (CA), seeking to declare
unconstitutional (a) Section 4(a) of Republic Act No. 9257 or the Expanded Senior
Citizens Act of 2003, and (b) Section 32 of Republic Act No. 9442 or the amended Magna
Carta for Disabled Persons and Section 5.1 of its IRR insofar as the provisions only allow
tax deduction on the gross income based on the net cost of goods sold or services
rendered as compensation to private establishments for the 20% discount that they are
required to grant to senior citizens and PWDs.

The CA dismissed the petition. It reiterated the ruling of the Court in Carlos
Superdrug particularly that Section 4(a) of R.A. No. 9257 was a valid exercise of police
power. Moreover, the CA held that considering that the same question had been raised
by the parties similarly situated and was resolved in Carlos Superdrug, the rule of stare
decisis stood as a hindrance to any further attempt to relitigate the same issue. It further
noted that jurisdictional considerations compel the dismissal of the action as it has no
original or appellate jurisdiction to pass upon the constitutionality of the assailed laws,
the same pertaining to the Regional Trial Court. The Motion for Reconsideration filed by
the petitioner was likewise denied.

Hence, this present petition.

ISSUE

Whether or not Section 4(a) of R.A. 9257 and Section 32 of R.A. 9442 is
unconstitutional.

RULING

NO. Firstly, in Carlos Superdrug, the Court ruled that the change in the tax
treatment of the senior citizen discount from tax credit to being merely a deduction
from gross income was a valid exercise of police power.

Accordingly, the Senior Citizens Act was enacted primarily to maximize the
contribution of senior citizens to nation-building, and to grant benefits and privileges to
them for their improvement and well-being as the State considers them an integral part
of our society. The priority given to senior citizens finds its basis in Article XV, Section 4
of the Constitution – it is the duty of the family to take care of its elderly members while
the State may design programs of social security for them.

To implement this, the law grants a twenty percent (20%) discount to senior
citizens for medical and dental services, and diagnostics and laboratory fees; admission
fees charged by theaters, concert halls, circuses, carnivals, and other similar places of
culture, leisure and amusement; fares for domestic land, air, and sea travel; utilization
of services in hotels and similar lodging establishments, restaurants and recreation
centers; and purchases of medicines for their exclusive use or enjoyment. As a form of
reimbursement, the law provides that business establishments extending the 20%
discount to senior citizens may claim the discount as tax deduction.

This is a legitimate exercise of police power which, has general welfare for its
object. Police power is not capable of exact definition, but has been purposely veiled in
general terms to underscore its comprehensiveness to meet all the exigencies and
provide enough room for an efficient and flexible response to conditions and
circumstances, thus assuring the greatest benefits. For this reason, when the conditions
so demand as determined by the legislature, property rights must bow to the primacy of
police power because property rights, though sheltered by due process, must yield to
general welfare.
In the same way, providing aid for the disabled persons is an equally important
State responsibility. Thus, the State is obliged to give full support to the improvement of
the total well-being of disabled persons and their integration into the mainstream of
society.

The subjects of R.A. Nos. 9257 and 9442, i.e., senior citizens and PWDs, are
individuals whose well-being is a recognized public duty. As a public duty, the
responsibility for their care devolves upon the concerted efforts of the State, the family
and the community. The community, which includes the private sector is recognized as
an active partner of the State in pursuing greater causes. The private sector, being
recipients of the privilege to engage business in our land, utilize our goods as well as the
services of our people for proprietary purposes, it is only fitting to expect their support
in measures that contribute to common good.

Secondly, petitioner’s claim that the change in the tax treatment of the discount
is illegal as it constitutes taking without just compensation is untenable. The issue of
just compensation finds no relevance in the instant case as it had already been made
clear in Carlos Superdrug that the power being exercised by the State in the imposition
of senior citizen discount was its police power. Unlike in the exercise of eminent
domain, just compensation is not required in wielding police power. This is precisely
because there is no taking involved, but only an imposition of burden.

According to Republic of the Philippines v. Vda. de Castellvi, five circumstances


must be present in order to qualify “taking” as an exercise of eminent domain: (1) the
expropriator must enter a private property; (2) the entrance into private property must
be for more than a momentary period; (3) the entry into the property should be under
warrant or color of legal authority; (4) the property must be devoted to a public use or
otherwise informally appropriated or injuriously affected; and (5) the utilization of the
property for public use must be in such a way as to oust the owner and deprive him of
all beneficial enjoyment of the property.

The first requirement is lacking. There is no private property that is invaded or


appropriated by the State. The subject of what the petitioner supposed as taking was
not even earned profits but merely an expectation of profits, which may not even occur.
There cannot be taking of a contingency or of a mere possibility because it lacks
physical existence that is necessary before there could be any taking.

The supposed taking also lacked the characteristic of permanence and


consistency. The reason is that the impact on the establishments varies depending on
their response to the changes brought about by the subject provisions. The
establishments are not prevented from adjusting their prices to accommodate the
effects of the granting of the discount and retain their profitability while being
compliant to the laws.
There is also no ousting of the owner or deprivation of ownership.
Establishments are neither divested of ownership of any of their properties nor is
anything forcibly taken from them. They remain the owner of their goods and their
profit or loss still depends on the performance of their sales.

Apart from the foregoing, covered establishments are also provided with a
mechanism to recoup the amount of discounts they grant the senior citizens and PWDs.
It is provided in Section 4(a) of R.A. No. 9257 and Section 32 of R.A. No. 9442 that
establishments may claim the discounts as “tax deduction based on the net cost of the
goods sold or services rendered.” Basically, whatever amount was given as discount,
covered establishments may claim an equal amount as an expense or tax deduction. As
such, the loss of profits is not the inevitable result of the change in tax treatment of the
discounts; it is more appropriately a consequence of poor business decision.

It bears emphasizing that the law does not place a cap on the amount of mark up
that covered establishments may impose on their items. This rests on the discretion of
the establishments which, of course, is expected to put in the price of the overhead
costs, expectation of profits and other considerations into the selling price of an item. As
such, it is not the law per se which occasioned the losses in the covered establishments
but bad business judgment. One of the main considerations in making business
decisions is the law because its effect is widespread and inevitable. It is therefore
incumbent upon business managers to cover this contingency and consider it in making
business strategies.

It is therefore unthinkable how the petitioner could have suffered losses due to
the mandated discounts in R.A. Nos. 9257 and 9442, when a fractional increase in the
prices of items could bring the business standing at a balance even with the
introduction of the subject laws. A level of adjustment in the pricing of items is a
reasonable business measure to take in order to adapt to the contingency.

Lastly, the equal protection clause is not infringed by legislation which applies
only to those persons falling within a specified class. If the groupings are classified by
substantial distinctions that make real differences, one class may be treated and
regulated differently from another. The Constitution itself considered the elderly as a
class of their own and deemed it a priority to address their needs. When the
Constitution declared its intention to prioritize the predicament of the underprivileged
sick, elderly, disabled, women, and children, it did not make any reservation as to
income, race, religion or any other personal circumstances.

Senior citizens are a class of their own, who are in need and should be entitled to
government support, and the fact that they may still be earning for their own
sustenance should not disqualify them from the privilege. PWDS are a class of their
own. They have special needs which, for most, last their entire lifetime. They constitute
a class of their own, equally deserving of government support as our elderlies.

The subject laws also address a continuing concern of the government for the
welfare of the senior citizens and PWDs. It is not some random predicament but an
actual, continuing and pressing concern that requires preferential attention.

The shift from tax credit to tax deduction is within the province of Congress to
do so in the exercise of its legislative power. It has the authority to choose the subject of
legislation, outline the effective measures to achieve its declared policies and even
impose penalties in case of non-compliance. It has the sole discretion to decide which
policies to pursue and devise means to achieve them, and courts often do not interfere
in this exercise for as long as it does not transcend constitutional limitations.

COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE’S MEDICAL CENTER


G.R. No. 203514, 13 February 2017, First Division, (Del Castillo, J.)

For an institution to be completely exempt from income tax, it is required that the
institution should operate exclusively for charitable or social welfare purpose. In case such
institution earns income from its for-profit activities, it will not lose its tax exemption.
However, its income from for profit activities will be subject to income tax at the
preferential 10% rate pursuant to Sec. 27(B) of the NIRC.

TOPIC/S:

a. Income Tax
b. Tax Remedies

FACTS:

St. Luke's Medical Center (SLMC) received from the Large Taxpayers Service-
Documents Processing and Quality Assurance Division of the Bureau of Internal
Revenue (BIR) an audit assessment assessing for deficiency income tax under Section
27 (B) of the NIRC.

SLMC filed with CIR an administrative protest assailing the assessments and claimed
that as a nonstock, nonprofit charitable and social welfare organization under Section
30 (E) and (G) of the NIRC, it is exempt from paying income tax. However, the same was
denied by the CIR.
Aggrieved, SLMC elevated the matter to the Court of Tax Appeals (CTA) and rendered a
decision finding that the respondent is not liable for deficiency income tax since it is
exempt from paying such.

The CTA En Banc affirmed the cancellation and setting aside of the audit assessment
issued against the respondent.

ISSUES:

1. Whether or not the respondent is liable to pay income tax under Section 27 (B)
of the NIRC insofar as its revenues from paying patients are concerned.
2. Whether or not the respondent is liable to pay compromise penalty under
Section 248 (A) of the NIRC for the alleged failure to file its quarterly income tax
returns.
HELD:

Anent the first issue:

YES, SLMC is subject to 10% income tax insofar as its revenues from paying patients are
concerned.

SLMC failed to meet the requirements under Section 30(E) and (G) of the NlRC to be
completely tax exempt from all its income. However, it remains a proprietary nonprofit
hospital under Section 27(B) of the NIRC as long as it does not distribute any of its
profits to its members and such profits are reinvested pursuant to its corporate
purposes. SLMC, as a proprietary nonprofit hospital, is entitled to the preferential tax
rate of 10% on its net income from its for-profit activities.

To be clear, for an institution to be completely exempt from income tax, Section 30(E)
and (G) of the 1997 NIRC requires said institution to operate exclusively for charitable
or social welfare purpose. But in case an exempt institution under Section 30(E) or (G)
of the said Code earns income from its for-profit activities, it will not lose its tax
exemption. However, its income from for profit activities will be subject to income tax
at the preferential 10% rate pursuant to Section 27(B) thereof.

Anent the second issue:

NO, the imposition of surcharges and interest under Sections 248 and 249 of the NIRC
were deleted on the basis of good faith and honest belief on the part of the respondent
that it is not subject to tax. Thus, following the ruling of the Court in the case of CIR v.
SLMC (G.R Nos. 195909 and 195960), the respondent is not liable to pay compromise
penalty under Section 248(A) of the NIRC.

AICHI FORGING COMPANY OF ASIA, INC. v. COURT OF TAX APPEALS - EN BANC


AND COMMISSIONER OF INTERNAL REVENUE

G.R. No. 193625, 30 August 2017, Third Division, (MARTIRES, J.)

The Commissioner of Internal Revenue (CIR) is given 120 days to decide an


administrative claim for refund/credit of unutilized or unapplied input Value Added Tax
(VAT) attributable to zero-rated sales. In case of a decision rendered or inaction after the
120-day period, the taxpayer may institute a judicial claim by filing an appeal before the
Court of Tax Appeals (CTA) within 30 days from the decision or inaction. Both 120- and
30-day periods are mandatory and jurisdictional. An appeal taken prior to the expiration
of the 120-day period without a decision or action of the Commissioner is premature and,
thus, without a cause of action.

The proper remedy to obtain a reversal of judgment on the merits, final order or
resolution is appeal. AICHI's resort to certiorari proceedings under Rule 65 is, therefore,
erroneous and it deserves nothing less than an outright dismissal.

TOPIC:

Tax Remedies

FACTS:

AICHI is duly registered with the Bureau of Internal Revenue (BIR) as a VAT
taxpayer and with the Board of Investments (BOI) as an expanding producer of closed
impression die steel forgings.

On 26 September 2002, AICHI filed with the BIR District Office in San Pedro,
Laguna, a written claim for refund and/or tax credit of its unutilized input Value Added
Tax (VAT) credits for the third and fourth quarters of 2000 and the four taxable
quarters of 2001. AICHI sought the tax refund/credit of input VAT for the said taxable
quarters in the total sum of P18,030,547.77 representing VAT payments on importation
of capital goods and domestic purchases of goods and services.
As respondent CIR failed to act on the refund claim, and in order to toll the
running of the prescriptive period provided under Sections 229 and 112 (D) of the
National Internal Revenue Code (Tax Code), AICHI filed, on 30 September 2002, a
Petition for Review before the CTA Division.

The CTA Division denied AICID's refund claim with respect to its purchase of
capital goods for the period 1 July 2000 to 31 December 2001 because of the latter's
failure to show that the goods purchased formed part of its Property, Plant and
Equipment Account and that they were subjected to depreciation allowance. As to the
claim for refund of input VAT attributable to zero-rated sales, the CTA only partially
granted the claim due to lack of evidence to substantiate the zero-rating of AICID's
sales. In particular, the CTA denied VAT zero-rating on the sales to BOI-registered
enterprises on account of non-submission of the required BOI Certification.

The CIR questioned the partial grant of the refund claim in favor of AICHI. It
claimed that the court did not acquire jurisdiction over the refund claim in view of
AICHI's failure to observe the 30-day period to claim refund/tax credit as specified in
Sec. 112 of the Tax Code, i.e., appeal to the CTA may be filed within 30 days from receipt
of the decision denying the claim or after expiration of 120 days (denial by inaction).
With the filing of the administrative claim on 26 September 2002, the CIR had until 20
January 2003 to act on the matter; and if it failed to do so, AICHI had the right to elevate
the case before the CTA within 30 days from 20 January 2003, or on or before 20
February 2003. However, AICHI filed its Petition for Review on 30 September 2002, or
before the 30-day period of appeal had commenced. According to the CIR, this period is
jurisdictional, thus, AICHI's failure to observe it resulted in the CTA not acquiring
jurisdiction over its appeal.

The CTA En Banc was not persuaded. The court ruled that the law does not
prohibit the simultaneous filing of the administrative and judicial claims for refund. It
further declared that what is controlling is that both claims for refund are filed within
the two-year prescriptive period. In sum, the CTA En Banc affirmed the assailed
decision and resolution of the CTA Division.
On 24 September 2010, or sixty days from receipt of the said resolution, AICHI,
through a new counsel, filed a Petition for Certiorari under Rule 65 alleging grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of the CTA En Banc
when it issued the assailed decision and resolution.

ISSUES:

1. Whether the CTA has jurisdiction over the claim;


2. Whether AICHI availed of the correct remedy; and
3. Whether AICHI sufficiently proved its entitlement to the refund or tax credit.

HELD:

Anent the first issue:

The CTA had no jurisdiction over the judicial claim. AICHI's judicial claim was
filed prematurely and, thus, without cause of action.

From the submission of the complete documents to support the claim, the CIR
has a period of one hundred twenty (120) days to decide on the claim. If the CIR decides
within the 120-day period, the taxpayer may initiate a judicial claim by filing within 30
days an appeal before the CTA. If there is no decision within the 120-day period, the
CIR's inaction shall be deemed a denial of the application. In the latter case, the
taxpayer may institute the judicial claim, also by an appeal, within 30 days before the
CTA.

Here, it is not disputed that AICHI had timely filed its administrative claim for
refund or tax credit before the BIR. The records show that the claim for refund/tax
credit of input taxes covering the six separate taxable periods from the 3rd Quarter of
2000 up to the 4th Quarter of 2001 was made on 26 September 2002. Both the CTA
Division and CTA En Banc correctly ruled that it fell within the two-year statute of
limitations. However, its judicial claim was filed a mere four days later on 30 September
2002.

The CTA, therefore, did not validly acquire jurisdiction over such judicial claim
because the appeal before the court was made prematurely. When the CTA acts without
jurisdiction, its decision is void.

Anent the second issue:


The petitioner adopted the wrong remedy in assailing the decision of the CTA En
Banc.

The filing of the present Petition for Certiorari under Rule 65 of the 1997 Rules
of Court is procedurally flawed. What the petitioner should have done to question the
decision of the CTA En Banc was to file before this Court a petition for review under
Rule 45 of the same Rules of Court.

A petition for certiorari under Rule 65 of the Rules of Court is a special civil action that
may be resorted to only in the absence of appeal or any plain, speedy and adequate
remedy in the ordinary course of law.

In this case, there is a plain, speedy and adequate remedy that is available appeal
by certiorari under Rule 45. Appeal is available because the 20 July 2010 Resolution of
the CTA En Banc was a final disposition as it denied AICHI's full claim for refund or tax
credit of creditable input taxes. The proper remedy to obtain a reversal of judgment on
the merits, final order or resolution is appeal. AICHI's resort to certiorari proceedings
under Rule 65 is, therefore, erroneous and it deserves nothing less than an outright
dismissal.

Anent the third issue,

The CTA has no jurisdiction over AICHI's judicial claim considering that its
Petition for Review was filed prematurely, or without cause of action for failure to
exhaust the administrative remedies provided under Section 112 (D) of the Tax Code, as
amended. In addition, AICHI availed of the wrong remedy. Likewise, the Court find no
need to pass upon the issue on whether petitioner AICHI had substantiated its claim for
refund or tax credit. Indisputably, we must deny AICHI's claim for refund.

COMMISSIONER OF INTERNAL REVENUE, Petitioner vs. APO CEMENT


CORPORATION, Respondent. (G.R. No. 193381; February 8, 2017)

DOCTRINE: Tax Amnesty: The Supreme Court (SC) has declared that submission of the
documentary requirements and payment of the amnesty tax is considered full compliance
with Republic Act (RA) No. 9480 and the taxpayer can immediately enjoy the immunities
and privileges enumerated in Section 6 of the law.

FACTS:
BIR sent Apo cement a Final Assessment Notice (FAN) for deficiency taxes for the
taxable year 1999, totalling to more than 144 million pesos. Apo Cement protested the
FAN. However, BIR denied the protest. A Final Decision on Disputed Assessment
(FDDA) was issued.

Apo Cement petitioned for review with the CTA. The CIR admiteed that Apo Cement had
already paid the deficieny assessment in the FDDA, except the documentary stamp
taxes (DST) based on several real property transactions.

In the meantime, Apo Cement availed of the tax amnesty under Republic Act No. 9480,
particularly affecting the 1999 deficiency. Hence, it filed a motion to cancel tax
assessment. The CTA granted the motion.

The CIR motioned for reconsideration and appealed but failed. One of the requirements
for tax amnesty under said law is the submission of SALN. The CIR wished to question
the correctness of Apo Cement's SALN.

ISSUES:

[1] Is Apo Cement entitled to tax amnesty under RA 9480?

[2] What is the effect of the CIR's act of questioning the correctness of Apo Cement's
SALN?

[3] Can the CIR question the correctness of Apo Cement's SALN?

[4] How can the correctness of SALN be questioned for purposes of disqualifying a
taxpayer from the amnesty benefit?

HELD:

[1] Yes, Apo Cement is entitled to tax amnesty. Submission of the documentary
requirements and payment of the amnesty tax is considered full compliance with
Republic Act No. 9480 and the taxpayer can immediately enjoy the immunities and
privileges enumerated in Section 6 of the law.

[2] Proceedings must be initiated to question the correctness of the Statement of Assets,
Liabilities, and Net Worth (SALN) within the one-year period stated in Section 4 of the
law. Here, no such action has been taken by the CIR. This one-year period referred to in
the law should be considered only as a prescriptive period within which third parties,
meaning 'parties other than the BIR or its agents,' can question the SALN - not as a
waiting period during which the BIR may contest the SALN and the taxpayer prevented
from enjoying the immunities and privileges under the law.

[3] No, the CIR cannot question the correctness of Apo Cement's SALN. Under Section 4
of the law, there is a presumption of correctness of the SALN and only parties other
than the Bureau of Internal Revenue or its agents may dispute the correctness of the
SALN. Even assuming that petitioner has the standing to question the SALN, Republic
Act No. 9480 provides that the proceeding to challenge the SALN must be initiated
within one year following the date of filing of the Tax Amnesty documents.

[4] The amnesty granted under the law is revoked once the taxpayer is proven to have
under-declared his assets in his SALN by 30% or more. Pursuant to Section 1060 of the
Tax Amnesty Law, amnesty taxpayers who willfully understate their net worth shall not
only be liable for perjury under the Revised Penal Code, but, upon conviction, also
subject to immediate tax fraud investigation in order to collect all taxes due and to
criminally prosecute for tax evasion. Here, the requisites to overturn the presumption
of correctness of respondent's 2005 SALN were not met.

COMMISSION ON INTERNAL REVENUE v. LANCASTER PHILIPPINES INC.


GR No. 183408, July 12, 2017, Second Division, (Martires, J.)

A Letter of Authority gives notice to the taxpayer that it is under investigation for possible
deficiency tax assessment; at the same time, it authorizes or empowers a designated
revenue officer to examine, verify, and scrutinize a taxpayer’s books and records, in
relation to internal revenue tax liabilities for a particular period.

TOPIC/S:
c. Tax Remedies

FACTS:

Lancaster Philippines, Inc. is a domestic corporation engaged in the production,


processing and marketing of tobacco. BIR issued a Letter of Authority (LOA) authorizing
its revenue officers to examine Lancaster’s books of accounts and other accounting
records for all internal revenue taxes due from taxable year 1998 to an unspecified
date. After the conduct of an examination pursuant to the LOA, the BIR issued a
Preliminary Assessment Notice (PAN) which cited Lancaster for: (1) overstatement of
its purchases for the fiscal year April 1998 to March 1999; (2) noncompliance with the
generally accepted accounting principle of proper matching of cost and revenue; and
(3) disallowance of purchases of tobacco from farmers for the months of February and
March 1998 as deductions against income for the fiscal year April 1998 to March 1999.
Lancaster replied to the PAN contending that it had used an entire “tobacco cropping
season” to determine its total purchases covering a one-year period from October 1 to
September 30 of the following year; that it has been adopting the 6-month timing
difference to conform to the matching concept; and that this has long been installed as
part of the company’s system and consistently applied in its accounting books. It also
argued that the February and March 1998 purchases should not have been disallowed.
It concluded that they correctly posted the subject purchases in the fiscal year ending
March 1999 as it was the only in this year that the gross income from the crop was
realized.

Subsequently, Lancaster received from the BIR a final assessment notice (FAN) which
assessed Lancaster’s deficiency income tax amounting to P11,496,770.18, as a
consequence of the disallowance of purchases claimed for the taxable year ending
March 31, 1999. Lancaster filed a petition for review before CTA Division. CTA Division
granted the petition filed by Lancaster. CTA En Banc affirmed the cancellation of
assessment against Lancaster

ISSUES:
1. Whether or not the CTA can rule on: 1) the issue of the scope of authority of the
revenue officers to conduct the examination of taxpayer's books of accounts and
accounting records; and 2) other issues which were not raised by the parties of
the case.

2. Whether or not the revenue officers exceeded their authority when they issued
an assessment which covers a taxable year outside the period specified in the
Letter of Authority (LOA).

HELD:

Anent the first issue:

YES. The CTA may review by appeal the decisions of the commissioner of internal
revenue (CIR) in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or “other matters”
arising under the National Internal Revenue Code of 1997, as amended (Tax Code), or
part of law administered by the Bureau of Internal Revenue (BIR).
Rule XIV, Section 1 of the Revised Rules of the Court of Tax Appeals further states that
the CTA is not bound by the issues specifically raised by the parties, but may also rule
upon related issues necessary to achieve an orderly disposition of the case. Thus, the
CTA is not limited only to cases which involve decisions or inaction on matters relating
to assessments or refunds, but also includes other cases arising from the Tax Code and
other related laws administered by the BIR, as well as issues not stipulated by the
parties of the case.

Anent the second issue:

NO. The Court agreed with the trial court when it ruled the LOA authorizing BIR
Revenue Officers to examine the books of account of Lancaster for the taxable year
1998 only or since Lancaster adopted a fiscal year for the period April 1, 1997 to March
31, 1998. However, the deficiency income tax assessment which the BIR eventually
issue against Lancaster was based on the disallowance of expenses reported in FY 1999,
or for the period April 1, 1998 to March 31, 1999. The CTA concluded that the revenue
examiners had exceeded their authority when they issued the assessment against
Lancaster and, consequently, declared such assessment to be without force and effect.

The LOA gives notice to the taxpayer that it is under investigation for possible
deficiency tax assessment; at the same time, it authorizes or empowers a designated
revenue officer to examine, verify, and scrutinize a taxpayer’s books and records, in
relation to internal revenue tax liabilities for a particular period.

The taxable year covered by the assessment being outside of the period specified in the
LOA in this case, the assessment issued against Lancaster is, therefore, void.

CIR v. SYSTEMS TECHNOLOGY INSTITUTE, GR No. 220835, 2017-07-26

Facts:

STI filed its Amended Annual Income Tax Return for fiscal year 2003 on August 15,
2003; its Quarterly VAT Returns on July 23, 2002, October 25, 2002, January 24, 2003,
and May 23, 2003; and its Bureau of Internal Revenue (BIR) Form 1601E for EWT from
May 10, 2002 to April 15, 2003.[5]On May 30, 2006, STI's Amiel C. Sangalang signed a
Waiver of the Defense of Prescription Under the Statute of Limitations of the National
Internal Revenue Code (NIRC), with the proviso that the assessment and collection of
taxes of fiscal year 2003 shall come "no later than December 31, 2006."[6] On June 2,
2006, the waiver was accepted by Virgilio R. Cembrano, Large Taxpayers District Officer
of Makati and was notarized on even date.[7]On December 12, 2006, another waiver
was executed extending the period to assess and collect the assessed taxes to March 31,
2007.[8] It was also signed by Sangalang and accepted by Cembrano and notarized on
the same date.[9]

A third waiver was executed by the same signatories extending further the period to
June 30, 2007.[10]On June 28, 2007, STI received a Formal Assessment Notice from the
CIR, assessing STI for deficiency income tax, VAT and EWT for fiscal year 2003, in the
aggregate amount of P161,835,737.98.[11]On July 25, 2007, STI filed a request for
reconsideration/reinvestigation dated July 23, 2007.[12]On September 11, 2009, STI
received from the CIR the Final Decision on Disputed Assessment (FDDA) dated August
17, 2009 finding STI liable for deficiency income tax, VAT and EWT in the lesser amount
of P124,257,764.20.[13]On October 12, 2009, STI appealed the FDDA by filing a petition
for review with the CTA.[14] The case was docketed as CTA Case No. 7984 and was
heard by the CTA Second Division.[15]On April 17, 2013, the CTA Second Division
promulgated its Decision denying the assessment on the ground of prescription, the
dispositive portion of which reads as follows:WHEREFORE, premises considered, the
instant Petition for Review is hereby GRANTED.

Accordingly, the assessments against petitioner for deficiency income tax, deficiency
expanded withholding tax, and deficiency value-added tax for fiscal year ending March
31, 2003 are hereby CANCELLED and SET ASIDE on the ground of prescription.[16]The
CTA Division found the waivers executed by STI defective for failing to strictly comply
with the requirements provided by Revenue Memorandum Order (RMO) No. 20-90
issued on April 4, 1990 and Revenue Delegation Authority Order (RDAO) No. 05-01
issued on August 2, 2001. Consequently, the periods for the CIR to assess or collect
internal revenue taxes were never extended; and the subject assessment for deficiency
income tax, VAT and EWT against STI, which the CIR issued beyond the three-year
prescriptive period provided by law, was already barred by prescription.[17]On May 9,
2013, the CIR filed a motion for reconsideration, but this was denied by the CTA
Division in its Resolution dated July 17, 2013.[18]Undaunted, the CIR appealed to the
CTA En Banc.[19]In the assailed Decision,[20] the CTA En Banc denied the CIR's petition
for lack of merit. The CTA En Banc affirmed the Decision and Resolution of the CTA
Division, reiterating that the requirements for the execution of a waiver must be strictly
complied with; otherwise, the waiver will be rendered defective and the period to
assess or collect taxes will not be extended. It further held that the execution of a waiver
did not bar STI from questioning the validity thereof or invoking the defense of
prescription.[21]On September 2, 2015, the CTA En Banc issued the assailed
Resolution[22] denying the CIR's motion for reconsideration for lack of merit.

The CIR asserts that prescription had not set in on the subject assessments because the
waivers executed by the parties are valid.[24] It also claims that STI's active
participation in the administrative investigation by filing a request for reinvestigation,
which resulted in a reduced assessment, amounts to estoppel that prescription can no
longer be invoked.[25]

To support its contention, the CIR cites the case of Rizal Commercial Banking
Corporation v. Commissioner of Internal Revenue,[26] where the Court considered the
taxpayer's partial payment of the revised assessment as an implied admission of the
validity of the waivers.[27]For its part, STI contends that the requisites under RMO No.
20-90 are mandatory and no less than this Court has affirmed that the failure to comply
therewith results in the nullity of the waiver and consequently, the assessments.[28]
Tested against these requisites and settled jurisprudence, the subject waivers are
defective and invalid and, thus, did not extend the period to assess.[29]STI further
claims, that contrary to the CIR's insistence, it is not estopped from invoking the
defense of prescription because: (1) STI did not admit the validity or correctness of the
deficiency assessments; (2) it did not receive or accept any benefit from the execution
of the waivers since it continued to dispute the assessment; and (3) STI did not, in any
way, lead the CIR to believe that the waivers were valid.[30]Finally, STI avers that the
doctrine in RCBC does not apply to this case because the estoppel upheld in said case
arose from the act of payment, which is not obtaining in the instant case.

Issues:

WHETHER OR NOT PRESCRIPTION HAD SET IN AGAINST THE ASSESSMENTS FOR


DEFICIENCY INCOME TAX, DEFICIENCY VAT AND DEFICIENCY EXPANDED
WITHHOLDING TAX.[23]

Ruling:
The petition lacks merit. The Waivers of Statute of Limitations, being defective and
invalid, did not extend the CIR's period to issue the subject assessments. Thus, the right
of the government to assess or collect the alleged deficiency taxes is already barred by
prescription.

Section 203 of the NIRC of 1997, as amended, limits the CIR's period to assess and
collect internal revenue taxes to three (3) years counted from the last day prescribed by
law for the filing of the return or from the day the return was filed, whichever comes
later.[32] Thus, assessments issued after the expiration of such period are no longer
valid and effective.[33]In SMI-Ed Philippines Technology, Inc. v. Commissioner of
Internal Revenue,[34] the Court explained the primary reason behind the prescriptive
period on the CIR's right to assess or collect internal revenue taxes: that is, to safeguard
the interests of taxpayers from unreasonable investigation.[35] Accordingly, the
government must assess internal revenue taxes on time so as not to extend indefinitely
the period of assessment and deprive the taxpayer of the assurance that it will no
longer be subjected to further investigation for taxes after the expiration of a
reasonable period of time.[36]

In this regard, the CTA Division found that the last day for the CIR to issue an
assessment on STI's income tax for fiscal year ending March 31, 2003 was on August 15,
2006; while the latest date for the CIR to assess STI of EWT for the fiscal year ending
March 31, 2003 was on April 17, 2006; and the latest date for the CIR to assess STI of
deficiency VAT for the four quarters of the same fiscal year was on May 25, 2006.[37]
Clearly, on the basis of these dates, the final assessment notice dated June 16, 2007,[38]
assessing STI for deficiency income tax, VAT and EWT for fiscal year 2003, in the
aggregate amount of P161,835,737.98, which STI received on June 28, 2007,[39] was
issued beyond the three-year prescriptive period.

However, the CIR maintains that prescription had not set in because the parties validly
executed a waiver of statute of limitations under Section 222(b) of the NIRC, as
amended.

in a number of cases, this Court did not hesitate to strike down waivers which failed to
strictly comply with the provisions of RMO 20-90 and RDAO 05-01.In Philippine
Journalists, Inc. v. Commissioner of Internal Revenue,[41] the Court declared the waiver
invalid because:

(1) it did not specify the date within which the BIR may assess and collect revenue
taxes, such that the waiver became unlimited in time;

(2) it was signed only by a revenue district officer, and not the CIR;

(3) there was no date of acceptance; and

(4) the taxpayer was not furnished a copy of the waiver.[42]

In Commissioner of Internal Revenue v. FMF Development Corporation,[43] the waiver


was found defective and thus did not validly extend the original three-year prescriptive
period because:

(1) it was not proven that the taxpayer was furnished a copy of the waiver;

(2) it was signed only by a revenue district officer, and not the CIR as mandated by law;
and

(3) it did not contain the date of acceptance by the CIR, which is necessary to determine
whether the waiver was validly accepted before the expiration of the original three-
year period.[44]

In another case,[45] the waivers executed by the taxpayer's accountant were found
defective for the following reasons: (1) the waivers were executed without the
notarized written authority of the taxpayer's representative to sign the waiver on its
behalf; (2) the waivers failed to indicate the date of acceptance; and (3) the fact of
receipt by the taxpayer of its file copy was not indicated in the original copies of the
waivers.[46]

In Commissioner of Internal Revenue v. The Stanley Works Sales (Phils.), Inc.,[47] the
Court nullified the waivers because the following requisites were absent: (1)
conformity of either the CIR or a duly authorized representative; (2) date of acceptance
showing that both parties had agreed on the waiver before the expiration of the
prescriptive period; and (3) proof that the taxpayer was furnished a copy of the
waiver.[48]The Court also invalidated the waivers executed by the taxpayer in the case
of Commissioner of Internal Revenue v. Standard Chartered Bank,[49] because: (1) they
were signed by Assistant Commissioner-Large Taxpayers Service and not by the CIR;
(2) the date of acceptance was not shown; (3) they did not specify the kind and amount
of the tax due; and (4) the waivers speak of a request for extension of time within which
to present additional documents and not for reinvestigation and/or reconsideration of
the pending internal revenue case as required under RMO No. 20-90.[50]

Tested against the requirements of RMO 20-90 and relevant jurisprudence, the Court
cannot but agree with the CTA's finding that the waivers subject of this case suffer from
the following defects:At the time when the first waiver took effect, on June 2, 2006, the
period for the CIR to assess STI for deficiency EWT and deficiency VAT for fiscal year
ending March 31, 2003, had already prescribed. To recall, the CIR only had until April
17, 2006 (for EWT) and May 25, 2006 (for VAT), to issue the subject assessments.

STI's signatory to the three waivers had no notarized written authority from the
corporation's board of directors. It bears to emphasize that RDAO No. 05-01 mandates
the authorized revenue official to ensure that the waiver is duly accomplished and
signed by the taxpayer or his authorized representative before affixing his signature to
signify acceptance of the same; and in case the authority is delegated by the taxpayer to
a representative, as in this case, the concerned revenue official shall see to it that such
delegation is in writing and duly notarized. The waiver should not be accepted by the
concerned BIR office and official unless notarized.[51]Similar to Standard Chartered
Bank, the waivers in this case did not specify the kind of tax and the amount of tax due.
It is established that a waiver of the statute of limitations is a bilateral agreement
between the taxpayer and the BIR to extend the period to assess or collect deficiency
taxes on a certain date.[52]

Logically, there can be no agreement if the kind and amount of the taxes to be assessed
or collected were not indicated. Hence, specific information in the waiver is necessary
for its validity.

Verily, considering the foregoing defects in the waivers executed by STI, the periods for
the CIR to assess or collect the alleged deficiency income tax, deficiency EWT and
deficiency VAT were not extended. The assessments subject of this case, which were
issued by the BIR beyond the three-year prescriptive, are therefore considered void and
of no legal effect. Hence, the CTA committed no reversible error in cancelling and
setting aside the subject assessments on the ground of prescription. STI is not estopped
from invoking the defense of prescription.

As regards the CIR's reliance on the case of RCBC and its insistence that STI's request
for reinvestigation, which resulted in a reduced assessment, bars STI from raising the
defense of prescription, the Court finds the same bereft of merit. As correctly stated by
the CTA, RCBC is not on all fours with the instant case. The estoppel upheld in the said
case arose from the taxpayer's act of payment and not on the reduction in the amount of
the assessed taxes. The Court explained that RCBC's partial payment of the revised
assessments effectively belied its insistence that the waivers are invalid and the
assessments were issued beyond the prescriptive period. Here, as no such payment was
made by STI, mere reduction of the amount of the assessment because of a request for
reinvestigation should not bar it from raising the defense of prescription.

At this juncture, the Court deems it important to reiterate its ruling in Commissioner of
Internal Revenue v. Kudos Metal Corporation,[53] that the doctrine of estoppel cannot
be applied as an exception to the statute of limitations on the assessment of taxes
considering that there is a detailed procedure for the proper execution of the waiver,
which the BIR must strictly follow. The BIR cannot hide behind the doctrine of estoppel
to cover its failure to comply with RMO 20-90 and RDAO 05-01, which the BIR itself had
issued. Having caused the defects in the waivers, the BIR must bear the consequence. It
cannot simply shift the blame to the taxpayer.[54]WHEREFORE, premises considered,
the instant petition for review is hereby DENIED.

Principles:

Taxation Law

SEC. 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -x


x x x(b) If before the expiration of the time prescribed in Section 203 for the assessment
of the tax, both the Commissioner and the taxpayer have agreed in writing to its
assessment after such time, the tax may be assessed within the period agreed upon. The
period so agreed upon may be extended by subsequent written agreement made before
the expiration of the period previously agreed upon.x x x x

RMO 20-90 and RDAO 05-01, outlining the procedures for the proper execution of a
valid waiver, viz.:1. The waiver must be in the proper form prescribed by RMO 20-90.
The phrase "but not after ______ 19 ___",which indicates the expiry date of the period
agreed upon to assess/collect the tax after the regular three-year period of prescription,
should be filled up.2. The waiver must be signed by the taxpayer himself or his duly
authorized representative. In the case of a corporation, the waiver must be signed by
any of its responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized.3. The waiver
should be duly notarized.4. The CIR or the revenue official authorized by him must sign
the waiver indicating that the BIR has accepted and agreed to the waiver. The date of
such acceptance by the BIR should be indicated. However, before signing the waiver,
the CIR or the revenue official authorized by him must make sure that the waiver is in
the prescribed form, duly notarized, and executed by the taxpayer or his duly
authorized representative.5. Both the date of execution by the taxpayer and date of
acceptance by the Bureau should be before the expiration of the period of prescription
or before the lapse of the period agreed upon in case a subsequent agreement is
executed.6. The waiver must be executed in three copies, the original copy to be
attached to the docket of the case, the second copy for the taxpayer and the third copy
for the Office accepting the waiver. The fact of receipt by the taxpayer of his/her file
copy must be indicated in the original copy to show that the taxpayer was notified of
the acceptance of the BIR and the perfection of the agreement.

ALLIANCE OF QUEZON CITY HOMEOWNERS’ ASSOCIATION v. QUEZON CITY


GOVERNMENT

G.R. No. 230651, 18 September 2018, En Banc (Perlas-Bernabe, J.)

The rule on administrative exhaustion admits of exceptions, one of which is when


strong public interest is involved. Meanwhile, the hierarchy of courts doctrine prohibits
parties from directly resorting to this Court when relief may be obtained before the lower
courts. It also admits of exceptions such as when the case involves matters of
transcendental importance.

TOPIC:

Local Tax

FACTS:

Pursuant to Joint Memorandum Circular No. 2010-01 issued by the Department


of Finance, the QC Assessor created a revised schedule of Fair Market Values (FMVs)
which it submitted to the Sangguniang Panlungsod of QC. Such ordinance was approved
and was to take effect on January 1, 2017. Subsequently, the Alliance of QC
Homeowners’ Association filed a petition asking the Court to issue a TRO to restrain the
implementation of the ordinance and to declare it unconstitutional for violating Section
130 of the LGC and substantive due process. Alliance alleged that the new FMV values
imposed had no factual basis because it failed to explain how the values were
determined. Moreover, the ordinance was also unreasonable since it did not give the
taxpayers sufficient time to prepare to pay the exorbitant new taxes since its effectivity
date was barely a month after its enactment.

The Court issued the TRO and ordered the QC Government to comment. In its
defense, the QC Government contended, among others, that the petition of Alliance
should be dismissed since it failed to exhaust administrative remedies as provided in
the LGC and that it also violated the hierarchy of courts when it immediately filed a
petition before the SC.

ISSUE:

1. Whether or not Alliance’s petition should be dismissed on the ground of


failure to observe the doctrines of exhaustion of administrative remedies and
hierarchy of courts.

HELD:

NO. The LGC provides 2 remedies in relation to real property tax assessments or
tax ordinances. These are: (1) Sections 226 and 252 thereof which allow a taxpayer to
question the reasonableness of the amount assessed before the city treasurer then
appeal to the Local Board of Assessment Appeals; and (2) Section 187 thereof which
allows an aggrieved taxpayer to question the validity or legality of a tax ordinance by
duly filing an appeal before the Secretary of Justice before seeking judicial intervention.

Alliance admitted that these administrative remedies were not complied with,
and that the petition was immediately filed before the Court. However, the rule on
administrative exhaustion admits of exceptions, one of which is when strong public
interest is involved. While taxation is an inherent power of the State, the exercise of this
power should not be unjust, excessive, oppressive, or confiscatory as explicitly
prohibited under the LGC. As Alliance proffers, the alleged exorbitant increase in real
property taxes to be paid based on the assailed Ordinance triggers a strong public
interest against the imposition of excessive or confiscatory taxes.
Meanwhile, the hierarchy of courts doctrine prohibits parties from directly
resorting to this Court when relief may be obtained before the lower courts. It also
admits of exceptions such as when the case involves matters of transcendental
importance. In Ferrer, Jr. v. Bautista, the Court allowed the direct resort to it, noting that
the challenged ordinances m n "adversely affect the property interests of all paying
constituents of QC," and that it would serve as a test case for the guidance of other local
government units in crafting ordinances.

Commissioner of Internal Revenue v Standard Insurance Co., Inc.


G.R. No. 219340, November 7, 2018, First Division ( Bersamin, J. )

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 NIRC

Topic: Documentary Stamp Tax

Facts:
On December 4, 2014, Standard Insurance Co., Inc. (Standard) received a Final
Decision on Disputed Assessment (FDAA) from the Bureau of Internal Revenue (BIR)
declaring its liability for the Documentary Stamp Tax (DST) deficiency, including
interest and compromise penalty, totaling P 418,830,567.46.
On December 19, 2014, Standard commenced a petition with prayer for
preliminary injunction in the Regional Trial Court (RTC) contending that the facts of the
case must be appreciated in the light of the effectivity of R.A. No. 10001 entitled “An Act
Reducing the Taxes on Life Insurance Policies” and the pendency of deliberations on
House Bill No. 3235 entitled “An Act Rationalizing the Taxes Imposed on Non-Life
Insurance Policies”, whereby an equal treatment for both life and non-life companies
was being sought as a response to the supposed inequality generated by the enacted of
R.A. No. 10001.
The RTC issued the preliminary injunction, ruled in favor of Standard and held
that the exercise of the right to contest payment of tax liability was not considered a
breach of Section 184 of the NIRC as to deter the action for declaratory relief.

Issue/s:
1. Whether or not the RTC erred in granting preliminary injunction
2. Whether or not the RTC has jurisdiction over the petition of Standard
Held:

Anent the first issue:


YES. The Supreme Court held that injunctive relief is not available as a remedy to
assail the collection of a tax. Section 218 of 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 NIRC”

Anent the second issue:


NO. The Supreme Court held that RTC acted without jurisdiction. Pursuant to
Section 11 of R. A. No. 1125 entitled an Act creating the Court of Tax Appeals, as
amended, the decision of the Commissioner of Internal Revenue (CIR) assessing any tax
is immediately executory, and its enforcement is not to be suspended by any appeal
thereof to the Court of Tax Appeals (CTA) unless in the opinion of the CTA, the
collection by the BIR may jeopardize the interest of the government and/or the
taxpayer, in which case, the CTA at any stage of the proceeding may suspend the said
collection and require the taxpayer either to deposit the amount claimed or to file a
surety bond for not more than double the amount.

ASIAN TRANSMISSION CORPORATION v. COMMISSIONER OF INTERNAL REVENUE


G.R. No. 230861, 19 September 2018, First Division (Bersamin, J.)

As a general rule a waiver that did not comply with the requisites for validity
specified was invalid and ineffective to extend the prescriptive period to assess the
deficiency taxes. As an exception, the same is valid if the parties in are in pari delicto or "in
equal fault." In pari delicto connotes that the two parties to a controversy are equally
culpable or guilty and they shall have no action against each other.

TOPIC: Tax Remedies

FACTS:

On August 11, 2004, Asian Transmission Corporation (ATC) received Letter of


Authority informing that the Beaureu of Internal Revenue shall examine its books of
accounts and other accounting records for the taxable year 2002. The CIR issued a
Preliminary Assessment Notice (PAN) to ATC. Consequently, on various dates, ATC’s
Vice President for Personnel and Legal Affairs executed 8 documents denominated as
"Waiver of the Defense of Prescription Under the Statute of Limitations of the National
Internal Revenue Code" (Waiver). Meanwhile, on February 28, 2008, ATC availed of the
Tax Amnesty. On July 15, 2008, ATC received a Formal Letter of Demand for deficiency
[WTC] in the amount of Php 62,977,798.02, [EWT] in the amount of Php 6,916,910.51,
[FWT] in the amount of P[hp]501,077.72. On August 14, 2008, ATC filed its Protest
Letter in regard thereto. ATC received the Final Decision on Disputed Assessment
where the CIR found ATC liable to pay deficiency tax in the amount of Php
75,696,616.75. Thus, on ATC filed an appeal letter/request for reconsideration with the
CIR. CIR denied the request for reconsideration. As such, on April 23, 2012, ATC filed
the instant Petition for Review with Application for Preliminary Injunction and
Temporary Restraining Order.

The Court of Tax Appeals (CTA) in Division granted petition for review and held
that ATC was not estopped from raising the invalidity of the waivers inasmuch as the
BIR had itself caused the defects. It ruled that the waivers, being invalid, did not operate
to toll or extend the three-year period of prescription. CIR filed a petition for review in
the CTA En Banc which reversed and set aside the decision of the CTA in Division, and
holding that the waivers were valid and CIR's right to assess deficiency withholding
taxes for CY 2002 against ATC had not yet prescribed. ATC filed its motion for
reconsideration and supplemental motion for reconsideration, respectively, but the CTA
En Banc denied the motions for lack of merit.

ISSUE:

1. Whether or not the the waivers are valid.

HELD:

Yes. The principle of estoppel was applicable. The execution of the waivers was
to the advantage of ATC because the waivers would provide to ATC the sufficient time
to gather and produce voluminous records for the audit. It would really be unfair,
therefore, were ATC to be permitted to assail the waivers only after the final
assessment proved to be adverse. The CTA En Banc did not err in ruling that ATC, after
having benefitted from the defective waivers, should not e allowed to assail them. The
Court in Commissioner of Internal Revenue v. Next Mobile Inc., declared that as a
general rule a waiver that did not comply with the requisites for validity specified was a
and ineffective to extend the prescriptive period to assess the deficiency taxes. As an
exception, the same is valid if the parties in are in pari delicto or "in equal fault." In pari
delicto connotes that the two parties to a controversy are equally culpable or guilty and
they shall have no action against each other. However, although the parties are in pari
delicto, the Court may interfere and grant relief at the suit of one of them, where public
policy requires its intervention, even though the result may be that a benefit will be
derived by one party who is in equal guilt with the other.

In this case, the CTA in Division noted that the eight waivers of ATC contained
the following defects, to wit: The notarization of the Waivers was not in accordance
with the 2004 Rules on Notarial Practice; Several waivers clearly failed to indicate the
date of acceptance by the Bureau of Internal Revenue; The Waivers were not signed by
the proper revenue officer; and The Waivers failed to specify the type of tax and the
amount of tax due. The foregoing defects noted in the waivers of ATC were not solely
attributable to the CIR.

SAN ROQUE POWER CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 203249, 23 July 2018, Third Division (Martires, J.)

Section 112 (D) of the NIRC, not the Aichi ruling, lays down the rule of procedure
governing refund claims of unutilized creditable input VAT attributable to zero-rated
sales; Aichi is merely an interpretation of an existing law; there is no vested right to speak
of respecting a wrong construction of the law.

BIR Ruling No. DA-489-03 may still be applied even though the taxpayer did not
specifically invoke the same.

TOPIC/S:

Value-Added Tax

FACTS:

On 22 December 2005 and 27 February 2006, San Roque Power Corporation


(San Roque) filed two separate administrative claims for refund of its alleged unutilized
input tax for the period 1 January 2004 up to 31 March 2004, and 1 April 2004 up to 31
December 2004, respectively. Due to the inaction of CIR, San Roque filed petitions for
review before the CTA Second Division: (1) on 30 March 2006, for its unutilized input
VAT for the period 1 January 2004 to 31 March 2004, amounting to P17,017,648.31;
and (2) on 20 June 2006,for the unutilized input VAT for the period 1 April 2004 to 31
December 2004, amounting to P14,959,061.57. The CTA Division partial granted the
refund claim in the total amount of P29,931,505. However, the CTA En Banc sided with
the CIR in ruling that the judicial claims of San Roque were prematurely filed in
violation of the 120-day and 30-day periods. In its Petition for Review, San Roque
argued, among others, that the CTA En Banc erred in applying retroactively the Aichi
ruling as regards the 120-day and 30-day periods as it laid down a new rule which
cannot be given a retroactive effect wihout imparing vested rights.

ISSUE/S:

1. Whether or not the Aichi ruling laid down a new rule of procedure which cannot
be given retroactive effect without impairing vested rights; and
2. Whether or not the ruling of the CTA En Banc is correct.

HELD:

Anent the first issue

NO. The pronouncement in Aichi regarding the mandatory and jurisdictional


nature of the 120-day period was the Court's interpretation of Section 112 (D) of the
NIRC. It is that law, Section 112 (D) of the NIRC that laid the rule of procedure for
maintaining a refund claim of unutilized creditable input VAT attributable to zero-rated
sales. In said provision, the Commissioner has 120 days to act on an administrative
claim. Hence, from the effectivity of the 1997 NIRC on 1 January 1998, the procedure
has always been definite: the 120-day period is mandatory and jurisdictional.
Accordingly, a taxpayer can file a judicial claim (1) only within thirty days after the
Commissioner partially or fully denies the claim within the 120-day period, or (2) only
within thirty days from the expiration of the 120- day period if the Commissioner does
not act within such period.13 This is the rule of procedure beginning 1 January 1998 as
interpreted in Aichi.

Anent the second issue

NO. The 120+30-day period is generally mandatory and jurisdictional from the
effectivity of the 1997 NIRC on 1 January 1998, up to the present. By way of an
exception, judicial claims filed during the window period from 10 December 2003 to 6
October 2010, need not wait for the exhaustion of the 120-day period. Also, in CIR v. Air
Liquide Philippines. Inc., one need not invoke BIR Ruling No. DA-489-03 to benefit from
such so long as the judicial claims were filed during the window period. What this
means is that the CTA can validly take cognizance over the two judicial claims filed in
this case. The CTA Division, in fact, did this, which eventually led to the partial grant of
the refund claims in favor of San Roque. In reversing the CTA Division for lack of
jurisdiction, the CTA En Banc failed to consider BIR Ruling No. DA-489-03.

RHOMBUS ENERGY, INC. v. CIR


G.R. No. 206362, 01 August 2018, Third Division (Bersamin, J.)

Once the option to carry over and apply the excess quarterly income tax against
income tax due for the taxable years of the succeeding taxable years has been made, such
option shall be considered irrevocable for that taxable period and no application for cash
refund or issuance of a tax credit certificate shall be allowed therefor. xxx The
irrevocability rule took effect when the option was exercised.

TOPIC: Income Tax

FACTS:

On April 17, 2006, Rhombus filed its Annual ITR for taxable year 2005. In said
Annual ITR, Rhombus indicated that its excess creditable withholding tax ("CWT") for
the year 2005 was "To be refunded”. On May 29, 2006, Rhombus filed its Quarterly ITR
for the first quarter of taxable year 2006 showing prior year's excess credits of
P1,500.653. On August 25, 2006, Rhombus filed its Quarterly ITR for the second quarter
of taxable year 2006 showing prior year's excess credits of P1,500,653. On November
27, 2006, Rhombus filed its Quarterly ITR for the third quarter of taxable year 2006
showing prior year's excess credits of P1,500,653. On December 29, 2006, Rhombus
filed an administrative claim for refund of its alleged excess/unutilized CWT for the
year 2005 in the amount of P1,500,653. On April 2, 2007, Rhombus filed its Annual ITR
for taxable year 2006 showing prior year's excess credits of P0.00. On December 7,
2007, pending CIR’s action on Rhombus's claim for refund or issuance of a tax credit
certificate of its excess/unutilized CWT for the year 2005 and before the lapse of the
period for filing an appeal, Rhombus filed a Petition for Review to the CTA. The First
Division granted such petition.

The CTA En Banc reversed, stating that considering that Rhombus opted to
carry-over its unutilized CWT of P1,500,653.00 for taxable year 2005 to the first,
second and third quarters of taxable year 2006 when it had actually carried-over said
excess CWT to the first, second and third quarters in its Quarterly ITRs for taxable year
2006, said option to carry-over becomes irrevocable. Rhombus’ act of reporting in its
Annual ITR for taxable year 2006 of prior year's excess credits other than MCIT as 0.00,
will not change the fact that Rhombus had already opted the carry-over option in its
first, second and third quarters Quarterly Income Tax Returns for taxable year 2006,
and said choice is irrevocable.

ISSUE:

2. Whether or not the taxpayer is barred by the irrevocability rule in claiming


for the refund of its excess and/or unutilized creditable withholding tax.

HELD:

NO. Rhombus’ petition is granted. The irrevocability rule is enunciated in Section


76 of the National Internal Revenue Code (NIRC) which states that: “Once the option to
carry over and apply the excess quarterly income tax against income tax due for the
taxable years of the succeeding taxable years has been made, such option shall be
considered irrevocable for that taxable period and no application for cash refund or
issuance of a tax credit certificate shall be allowed therefor.” The phrase "for that
taxable period" merely identifies the excess income tax, subject of the option, by
referring to the taxable period when it was acquired by the taxpayer (Republic v. Team
[Phils.] Energy Corporation citing CIR v. BPI). The CTA First Division found that the
evidence on record shows that Rhombus clearly signified its intention to be refunded of
its excess creditable tax withheld for calendar year 2005 in its Annual ITR for the said
year. Rhombus under Line 31 of the said ITR marked "x" on the box "To be refunded".
Moreover, Rhombus’ 2006 and 2007 Annual ITRs do not have any entries in Line 28A
"Prior Year's Excess Credits" which only prove that it did not carry-over its 2005
excess/unutilized CWT to the succeeding taxable years or quarters.

The irrevocability rule took effect when the option was exercised. In this case,
Rhombus’ marking of the box "To be refunded" in its 2005 annual ITR constituted its
exercise of the option, and from then onwards Rhombus became precluded from
carrying-over the excess creditable withholding tax. The fact that the prior year's excess
credits were reported in its 2006 quarterly ITRs did not reverse the option to be
refunded exercised in its 2005 annual ITR. As such, the CTA En Banc erred in applying
the irrevocability rule against Rhombus.
The requisites for entitlement to the refund (in Republic v. Team (Phils.) Energy
Corporation) are:

1. That the claim for refund was filed within the two-year reglementary period
pursuant to Section 229 of the NIRC;

2. When it is shown on the ITR that the income payment received is being declared
part of the taxpayer's gross income; and

3. When the fact of withholding is established by a copy of the withholding tax


statement, duly issued by the payor to the payee, showing the amount paid and
income tax withheld from that amount.

The CTA First Division found that Rhombus had satisfied the requirements
based foregoing requisites for its claim for refund of its CWT for the year 2005. Since
they were in the best position to examine the documents and make proper findings,
these are accorded weight and respect.

BASES CONVERSION AND DEVELOPMENT AUTHORITY v. COMMISSIONER OF


INTERNAL REVENUE

G.R. No. 205925, 20 June 2018, Second Division, (REYES, JR., J.)

BCDA is a government instrumentality vested with corporate powers. As such, it is


exempt from the payment of docket fees required under Section 21, Rule 141 of the Rules
or Court

TOPIC:

Tax Remedies, Jurisdiction, Payment of Docket Fees

FACTS:
Bases Conversion and Development Authority (BCDA) filed a petition for review
with the Court of Tax Appeals (CTA) in order to preserve its right to pursue its claim for
refund of the Creditable Withholding Tax (CWT) in the amount of Php122,079,442.53,
which was paid under protest from March 19, 2008 to October 8, 2008. The CWT which
BCDA paid under protest was in connection with its sale of the BCDA-allocated units as
its share in the Serendra Project pursuant to the Joint Development Agreement with
Ayala Land, Inc.

The petition for review was filed with a Request for Exemption from the Payment of
Filing Fees in the amount of Php1,209,457.90. CTA First Division denied the petition
and ordered BCDA to pay the filing fees within five days from notice. The Motion for
Reconsideration was also denied by the CTA First Division. BCDA was once again
ordered to pay the filing fees within five days from notice, otherwise, the petition for
review will be dismissed.

BCDA filed a petition for review with the CTA En Banc, which petition was
returned and not deemed filed without the payment of the correct legal fees. BCDA once
again emphasized its position that it is exempt from the payment of such fees.

ISSUE:

Whether or not the CTA En Banc erred in affirming the CTA First Division's ruling that
BCDA is not a government instrumentality, hence, not exempt from payment of legal
fees.

HELD:

The CTA En Banc is wrong, BCDA is a government instrumentality vested with


corporate powers. As such, it is exempt from the payment of docket fees.

The grant of these corporate powers is likewise stated in Section 3 of Republic


Act (R.A.) No. 7227; also known as The Bases Conversion and Development Act of 1992
which provides for BCDA's manner of creation, to wit:
Sec. 3. Creation of the Bases Conversion and Development Authority. - There is
hereby created a body corporate to be known as the Bases Conversion and
Development Authority, which shall have the attribute of perpetual succession
and shall be vested with the powers of a corporation. (Emphasis Ours)

BCDA is a government instrumentality vested with corporate powers. Under


Section 21, Rule 141 of the Rules of Court, agencies and instrumentalities of the
Republic of the Philippines are exempt from paying legal or docket fees. Hence, BCDA is
exempt from the payment of docket fees.

The Court remanded the case to the Court of Tax Appeals for further proceedings
regarding Bases conversion and Development Authority's claim for refund of the
Creditable Withholding Tax (CWT) in the amount of P122,079,442.53 which the latter
paid under protest from March 19, 2008 to October 8, 2008.