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TAXATION II

CASE DIGEST COMPILATION



(FINALS SY 2019-2020)

Submitted by:
Epibelle M. Eder
JD-3

Submitted to:
Atty. Kim Aranas
No. 32, arming the Decision dated April 28, 2004 and
Resolution dated September 10, 2004 of the CTA Division in
DOCUMENTARY STAMP TAX C.T.A. Case No. 6392, is REVERSED and SET ASIDE.
Respondent Traders Royal Bank is ORDERED to pay the
deficiency Documentary Stamp Taxes on its Trust Indenture
Agreements for the taxable years 1996 and 1997, in the
amounts of P1,064,064.38 and P104,595.00, respectively,
1. CIR v. Traders Royal Bank, G.R. No. 167134, March 18, plus 20% delinquency interest from February 14, 2002 until
2015 full payment thereof.”

Facts:
BIR issued an assessment against Traders Royal
Bank (TRB) for deficiency of Document Stamp Tax (DST) for
1996 and 1997. The deficiency was found to be on its
declaration, among others, on its Trust Indenture 2. CIR vs. The Insular Life Assurance Co. Ltd., G.R. No.
Agreements. TRB opines that such Trust Indenture 197192, June 4, 2014
Agreements are not subject to documentary stamp tax for
the reason that the relationship established between parties FACTS: 
is that of the trustor and trustee, wherein the funds and/or
properties of the trustor are given to the Trustee Bank not as Petitioner Commissioner of Internal Revenue is the
a deposit but under a Common Trust Fund maintained and to official duly authorized to assess and collect internal revenue
be managed by the Trustee. taxes, as well as the power to decide disputed assessments,
subject to the exclusive appellate jurisdiction of this Court.
CIR denied the protest of TRB on the ground that Respondent the Insular Life Assurance, Co., Ltd. is a
the Trust Indenture Agreements were but a form of deposit, corporation duly organized and existing under and by virtue
hence subject to DST. of the laws of the Republic of the Philippines, with principal
The CTA Division, however, concurred with TRB office located at IL Corporate Center, Insular Life Drive,
that the Trust Indenture Agreements were different from a Filinvest Corporate City, Alabang, Muntinlupa City. It is
certificate of deposit. It reasoned that the basic characteristic registered as a non-stock mutual life insurer with the
of trust, other fiduciary and investment management Securities and Exchange Commission.
relationship is the absolute non-existence of debtor-creditor On October 7, 2004, respondent received an
relationship. Assessment Notice with Formal Letter of Demand both dated
July 29, 2004, assessing respondent for deficiency DST on
CTA en banc affirmed the cancellation of the its premiums on direct business/sums assured for calendar
assessments against TRB for DST on its Trust Indenture year 2002. Thereafter, respondent filed its Protest Letter on
Agreements. Hence, this present case. November 4, 2004, which was subsequently denied by
petitioner in a Final Decision, on Disputed Assessment dated
Issue: Whether or not Trust Indenture Agreements April 15, 2005 for lack of factual and legal bases. Apparently,
constituted a deposit thereby subject to Documentary Stamp respondent received the aforesaid Final Decision on
Tax? Disputed Assessment only on June 23, 2005.
Respondent’s Contention: That respondent
Ruling: sufficiently established that it is a cooperative company and
SC is of the opinion that the conduct of the banks of therefore, it is exempt from the DST on the insurance
trusts and other fiduciary business can only be determined policies it grants to its members.
through a scrutiny of the terms and conditions embodied in Petitioner’s Contention: Since the respondent is not
the said agreements. registered with the Cooperative Development Authority
However, TRB was not able to present a Trust (CDA), it should not be considered as a cooperative
Indenture Agreements. Failing to dispose of such burden is company that is entitled to the exemption.
fatal to TRB as the agreements were not only in its
possession, but more importantly, because its protest against ISSUE:
the DST assessments was entirely grounded on the
allegation that the Agreements were trusts. Without the Whether the CTA En Banc erred in ruling that
actual Trust Indenture Agreements, there would be no factual respondent is a cooperative and is thus exempt from
basis for concluding that the same were trusts, as such not Documentary Stamp Tax.
subject to DST.
For failing to present Trust Indenture Agreements RULING:
and present proof of error in the tax assessments of the BIR,
the SC affirmed the assessments of the BIR. It disposed of The Court has pronounced in Republic of the
the case as to wit: Philippines v. Sunlife Assurance Company of Canada that
"[u]nder the Tax Code although respondent is a cooperative,
“WHEREFORE, premises considered, the instant Petition for registration with the CDA is not necessary inorder for it to be
Review on Certiorari is GRANTED. The assailed Decision exempt from the payment of both percentage taxes on
dated February 14, 2005 of the CTA e n b a n c in C.T.A. EB insurance premiums, under Section 121; and documentary
stamp taxes on policies of insurance or annuities it grants, for a cooperative to benefit from the DST exemption under
under Section 199.” this particular section. 

Sec. 199. Documents and Papers Not Subject to Second, the provisions of the Cooperative Code of
Stamp Tax. — The provisions of Section 173 to the contrary the Philippines do not apply. The history of the Cooperative
notwithstanding, the following instruments, documents and Code was amply discussed in Sunlife where it was noted
papers shall be exempt from the documentary stamp tax: that cooperatives under the old law, Presidential Decree
(a) Policies of insurance or annuities made or granted by a (P.D.) No. 175 referred only to an organization composed
fraternal or beneficiary society, order, association or primarily of small producers and consumers who voluntarily
cooperative company, operated on the lodge system or local joined to form a business enterprise that they themselves
cooperation plan and organized and conducted solely by the owned, controlled, and patronized.
members thereof for the exclusive benefit of each member
and not for profit. When the Cooperative Code was enacted years
As regards the applicability of Sunlife to the case at later, all cooperatives that were registered under PD 175 and
bar, the CTA, through records, has established the following previous laws were also deemed registered with the CDA.
similarities between the two which call for the application of Since respondent was not required to be registered under
the doctrine of stare decisis: the old law on cooperatives, it followed that it was not
1. Sunlife Assurance Company of Canada and the required to be registered even under the new law. 
respondent are both engaged in mutual life insurance
business in the Philippines; "The distinguishing feature of a cooperative
2. The structures of both corporations were converted from enterprise is the mutuality of cooperation among its member-
stock life insurance corporation to non-stock mutual life policyholders united for that purpose. So long as respondent
insurance for the benefit of its policyholders pursuant to meets this essential feature, it does not even have to use
Section 266, Title 17 of the Insurance Code of 1978 and they and carry the name of a cooperative to operate its mutual life
were made prior to the effectivity of Republic Act (R.A.) No. insurance business. Gratia argumenti that registration is
6938, otherwise known as the "Cooperative Code of the mandatory, it cannot deprive respondent of its tax exemption
Philippines"; privilege merely because it failed to register. The nature of its
3. Both corporations claim to be a purely cooperative operations is clear; its purpose welldefined.Exemption when
corporation duly licensed to engage in mutual life insurance granted cannot prevail over administrative convenience."
business;
4. Both corporations claim exemption from payment of the Third, the Insurance Code does not require
documentary stamp taxes (DST) under Section 199 (1) of registration with the CDA. "The provisions of this Code
the Tax Code (now Section 199 [a] of the NIRC of 1997, as primarily govern insurance contracts; only if a particular
amended); and matter in question is not specifically provided for shall the
5. Petitioner CIR requires registration with the CDA before it provisions of the Civil Code on contracts and special laws
grants tax exemptions under the Tax Code. govern."

The CTA observed that the factual circumstances CONCLUSION: The Court holds that the
obtaining in Sunlife and the present case are substantially respondent, being a cooperative company not mandated by
the same. The NIRC of 1997 defined a cooperative company law to be registered with the CDA, cannot be required under
or association as "conducted by the members thereof with RMC No. 48-91, a mere circular, to be registered prior to
the money collected from among themselves and solely for availing of DST exemption.
their own protection and not for profit.Consequently, as long
as these requisites are satisfied, a company or association is
deemed a cooperative insofar as taxation is concerned. In
this case, the respondent has sufficiently established that it
conforms with the elements of a cooperative as defined in
the NIRC of 1997 in that it is managed by members,
operated with money collected from the members and has 3. CIR vs. Pilipinas Shell Petroleum Corporation, G.R.
for its main purpose the mutual protection of members for No. 192398, September 29, 2014
profit.
FACTS:
The Court presented three justifications in Sunlife
why registration with the CDA is not necessary for Petitioner is the duly appointed Commissioner of Internal
cooperatives to claim exemption from DST.  Revenue who holds office at the Bureau of Internal Revenue
(BIR) National Office located at Agham Road, Diliman,
First, the NIRC of 1997 does not require registration Quezon City. Respondent Pilipinas Shell Petroleum
with the CDA. No tax provision requires a mutual life Corporation (PSPC) is a corporation organized and existing
insurance company to register with that agency in order to under the laws of the Philippines and was incorporated to
enjoy exemption from both percentage and DST. This construct, operate and maintain petroleum refineries, works,
absence of the registration requirement under Section 199 plant machinery, equipment dock and harbor facilities and
clearly manifests the intention of the Legislative branch of auxiliary works and other facilities of all kinds and used in or
the government to do away with registration before the CDA in connection with the manufacture of products of all kinds
which are wholly or partly derived from crude oil. On April 27,
1999, respondent entered into a Plan of Merger with its transfer of real property in order to be subject to
affiliate, Shell Philippine Petroleum Corporation (SPPC), a documentary stamp tax. Petitioner adds that it is enough that
corporation organized and existing under the laws of the a conveyance of real property has been effected since
Philippines. In the Plan of Merger, it was provided that the documentary stamp tax is imposed not on the document
entire assets and liabilities of SPPC will be transferred to, alone but on the transaction. Petitioner avers that the merger
and absorbed by, respondent as the surviving entity. The between SPPC and respondent, while constituting a single
Securities and Exchange Commission approved the merger transaction, gave rise to several tax incidents which,for tax
on July 1, 1999. On August 10, 1999, respondent paid to the purposes, should be treated individually and apart from the
BIR documentary stamp taxes amounting to P524,316.00 on merger as a whole.
the original issuance of shares of stock of respondent issued
in exchange for the surrendered SPPC shares pursuant to Lastly, petitioner argues that the enactment of Republic Act
Section 175 of NIRC. Confirming the tax-free nature of the No. 9243 which specifically exempts the transfers of real
merger between respondent and SPPC, the BIR ruled, property in merger or consolidation from documentary stamp
among others, that no gain or loss shall be recognized by the tax only supports further the conclusion that prior to RA
stockholders of SPPC on the exchange of their shares of 9243, such transfers are subject to documentary stamp tax.
stock of SPPC solely for shares of stock of respondent Otherwise, there would have been no reason to specifically
pursuant to the Plan of Merger. exempt such transfers from documentary stamp taxes.
THE BIR, HOWEVER, STATED IN SAID RULING THAT
3. The issuance by PSPC of its own shares of stock to the RESPONDENT’S CONTENTION:
shareholders of SPPC in exchange for the surrendered 1. Respondent claims that petitioner's interpretation that a
certificates of stock of SPPC shall be subject to the mere grant, assignment, transfer or conveyance of real
documentary stamp tax (DST) at the rate of Two Pesos property is subject to documentary stamp tax under Section
(P2.00) on each Two Hundred Pesos (P200.00), or fractional 196 is erroneous since petitioner disregarded the qualifying
part thereof, based on the total par value of the PSPC word "sold" which describes the kind of transfer that is
shares of stock issued pursuant to Section 175 of the Tax contemplated as subject to documentary stamp tax.
Code of 1997.  Respondent also points out that the fact that Section 196
xxx refers to the words "sold", "purchaser" and "consideration"
6. The exchange of land and improvements by SPPC to undoubtedly leads to the conclusion that only sales of real
PSPC for the latter's shares of stock shall be subject to property are contemplated. That contrary to petitioner's
documentary stamp tax imposed under Section 196 of the claim, documentary stamp tax is not levied on the privilege to
Tax Code of 1997, based on the consideration contracted to convey real properties regardless of the manner of
be paid for such realty or its fair market value determined in conveyance.
accordance with Section 6(E) of the said Code, whichever is
higher.  2. Respondent emphasizes that the transaction between
On May 10, 2000, respondent paid to the BIR the amount of respondent and SPPC was not one whereby SPPC
P22,101,407.64 representing documentary stamp tax on the transferred its real properties to respondent in exchange for
transfer of real property from SPPC to respondent. Believing the latter's shares of stock. SPPC and respondent did not
that it erroneously paid documentary stamp tax on its enter into some Deed of Assignment or a Deed of Exchange
absorption of real property owned by SPPC, respondent filed whereby SPPC assigned or conveyed its real properties to
with petitioner on September 18, 2000, a formal claim for respondent either for cash or in exchange for some property
refund or tax credit of the documentary stamp tax in the like shares of stock. Rather, the transaction that SPPC and
amount of P22,101,407.64. respondent entered into was a merger and the transfer of the
There being no action by petitioner, respondent filed on May real properties of SPPC to respondent was merely a legal
8, 2002, a petition for review with the Court of Tax Appeals consequence of the merger of SPPC with respondent.
(CTA) in order to suspend the running of the two-year Respondent, therefore, posits that since the absorption by
prescriptive period. respondent of SPPC's real properties as a consequence of
the merger is without consideration in money or money's
PETITIONER’S CONTENTION: worth, the same is not subject to documentary stamp tax.
Petitioner insists that the transfer of SPPC's real properties 3. Furthermore, respondent maintains that in a statutory
to respondent in exchange for the latter's shares of stock is merger or consolidation, real property of the absorbed
subject to documentary stamp tax. Petitioner contends that corporation is transferred to and automatically vested in the
Section 196 of the Tax Code covers all transfers of real surviving corporation purely and strictly by operation of law
property for a valuable consideration and does not only refer and not by voluntary act of the parties to the merger.
to sale of realty since it speaks of real property being
"granted, assigned, transferred or otherwise conveyed." ISSUES:
Petitioner also claims that the subject transfer was not
entirely by operation of law since the merger agreement Whether the transfer of SPPC’s real properties to respondent
between respondent and SPPC involves the voluntary act of is subject to Documentary Stamp Tax under Section 196 of
the parties. Petitioner avers that it is wrong to say that no Tax Code.
documentary stamp tax is imposable allegedly because the Whether respondent is entitled to the refund/tax credit in the
transfer to respondent of SPPC's real properties was not amount of P22,101,407.64 representing documentary stamp
effected by means of any deed, instrument or writing.  tax paid for the taxable year 2000 in connection with the
Petitioner contends that Section 196 of the Tax Code does transfer of real properties from SPPC to respondent.
not require that a particular document be executed for the
RULING: It should be emphasized that in the instant case, the transfer
of SPPC's real property to respondent was pursuant to their
We now proceed to the primordial issue of whether the approved plan of merger. In a merger of two existing
transfer of SPPC's real properties to respondent is subject to corporations, one of the corporations survives and continues
documentary stamp tax under Section 196 of the Tax Code. the business, while the other is dissolved, and all its rights,
The pertinent provision states, to wit: properties, and liabilities are acquired by the surviving
corporation. Although there is a dissolution of the absorbed
SEC. 196. Stamp Tax on Deeds of Sale and Conveyance of or merged corporations, there is no winding up of their affairs
Real Property. — On all conveyances, deeds, or liquidation of their assets because the surviving
instruments, or writings, other than grants, patents, or corporation automatically acquires all their rights, privileges,
original certificates of adjudication issued by the and powers, as well as their liabilities. Here, SPPC ceased
Government, whereby any land, tenement or other realty to have any legal personality and respondent PSPC
sold shall be granted, assigned, transferred or otherwise stepped into everything that was SPPC's, pursuant to
conveyed to the purchaser, or purchasers, or to any the law and the terms of their Plan of Merger.
other person or persons designated by such purchaser
or purchasers, there shall be collected a documentary In a merger, the real properties are not deemed "sold" to the
stamp tax, at the rates herein below prescribed based on surviving corporation and the latter could not be considered
the consideration contracted to be paid for such realty or on as "purchaser" of realty since the real properties subject of
its fair market value determined in accordance with Section the merger were merely absorbed by the surviving
6(E) of this Code, whichever is higher: Provided, That when corporation by operation of law and these properties are
one of the contracting parties is the Government, the tax deemed automatically transferred to and vested in the
herein imposed shall be based on the actual consideration. surviving corporation without further act or deed. Therefore,
the transfer of real properties to the surviving
As can be gleaned from the aforequoted provision, corporation in pursuance of a merger is not subject to
documentary stamp tax is imposed on all conveyances, documentary stamp tax. As stated at the outset,
deeds, instruments or writings whereby land or realty sold documentary stamp tax is imposed only on all conveyances,
shall be conveyed to the purchaser or purchasers. Here, we deeds, instruments or writing where realty sold shall be
do not find merit in petitioner's contention that Section 196 conveyed to a purchaser or purchasers. The transfer of
covers all transfers and conveyances of real property for a SPPC's real property to respondent was neither a sale nor
valuable consideration. A perusal of the subject provision was it a conveyance of real property for a consideration
would clearly show it pertains only to sale transactions contracted to be paid as contemplated under Section 196 of
where real property is conveyed to a purchaser for a the Tax Code. Hence, Section 196 of the Tax Code is
consideration. The phrase "granted, assigned, transferred inapplicable and respondent is not liable for documentary
or otherwise conveyed" is qualified by the word "sold" which stamp tax. Furthermore, it should be noted that a
means that documentary stamp tax under Section 196 is documentary stamp tax is in the nature of an excise tax
imposed on the transfer of realty by way of sale and because it is imposed upon the privilege, opportunity or
does not apply to all conveyances of real property. facility offered at exchanges for the transaction of the
Indeed, as correctly noted by the respondent, the fact that business. Documentary stamp tax is a tax on documents,
Section 196 refers to words "sold", "purchaser" and instruments, loan agreements, and papers evidencing the
"consideration" undoubtedly leads to the conclusion that acceptance, assignment, or transfer of an obligation, right or
only sales of real property are contemplated therein. property incident thereto.

Thus, petitioner obviously erred when it relied on the phrase Documentary stamp tax is thus imposed on the exercise of
"granted, assigned, transferred or otherwise conveyed" in these privileges through the execution of specific
claiming that all conveyances of real property regardless of instruments, independently of the legal status of the
the manner of transfer are subject to documentary stamp tax transactions giving rise thereto.Based on the foregoing, the
under Section 196. It is not proper to construe the meaning transfer of real properties from SPPC to respondent is not
of a statute on the basis of one part. Section 196 should be subject to documentary stamp tax considering that the same
read as a whole and not phrase by phrase. The phrase was not conveyed to or vested in respondent by means
granted, assigned, transferred or otherwise conveyed clearly of any specific deed, instrument or writing. There was no
refers to the phrase whereby any land, tenement or other deed of assignment and transfer separately executed by
realty is sold. This clearly shows that the legislature the parties for the conveyance of the real properties. The
intended Section 196 to refer to a transfer of realty by virtue conveyance of real properties not being embodied in a
of sale. This is further bolstered by the fact that the property separate instrument but is incorporated in the merger plan,
is granted, assigned, transferred or otherwise conveyed to thus, respondent is not liable to pay documentary stamp tax.
the purchaser, or purchasers, or to any other person or
persons designated by such purchaser or purchasers. In
addition, the basis of the stamp tax is the consideration
agreed upon by the parties or the property's fair market
value. Taking all of these into consideration, it is beyond
doubt that . . . Section 196 pertains to a transfer of realty
by way of sale.
The question of whether pawnshop transactions
4. H. Tambunting Pawnshop, Inc. v. CIR, G.R. No. 173373, evidenced by pawn tickets are subject to documentary
July 29, 2013 stamp taxes has been answered in the affirmative in
Michel J. Lhuillier Pawnshop, Inc. v. Commissioner of
FACTS: Internal Revenue. There the Court held:

The case stemmed from a Pre-Assessment Notice issued by Section 195 of the National Internal Revenue Code (NIRC)
the Commissioner of Internal Revenue (CIR) against H. imposes a DST on every pledge regardless of whether the
Tambunting Pawnshop, Inc. (Tambunting) for, among others, same is a conventional pledge governed by the Civil Code or
deficiency documentary stamp tax (DST) of P50,910. one that is governed by the provisions of P.D. No. 114. All
Thereafter, the CIR issued an assessment notice with the pledges are subject to DST, unless there is a law exempting
corresponding demand letters for the payment of the DST them in clear and categorical language. . . .
and the corresponding compromise penalty for taxable year
1997. . . . No law on legal hermeneutics could change the fact that
Tambunting filed its written protest to the assessment notice the entries contained in a pawnshop ticket spell out a
alleging that it was not subject to documentary stamp tax contract of pledge and that the exercise of the privilege to
under Section 195 of the National Internal Revenue Code conclude such a contract is taxable under Section 195 of the
(NIRC) because documentary stamp taxes were applicable NIRC. 
only to pledge contracts, and the pawnshop business did not
involve contracts of pledge. Even so, we note that the present case was filed with the
Supreme Court before September 11, 2006, when the Court
ISSUE: WON Tambunting is liable for documentary stamp resolved for the first time the matter of surcharges and
taxes based on the pawn tickets that it issued. interest for failure to pay documentary stamp taxes on
pledge transactions in Michel J. Lhuillier Pawnshop, Inc. v.
Commissioner of Internal Revenue. Hence, as in the said
RULING:
case, we can still ascribe good faith to petitioner.
Consequently, the imposition of surcharges and interest in
YES. NIRC provides: the present case must also deleted.
SEC. 173. Stamp Taxes Upon Documents, Loan
Agreements, Instruments and Papers. — Upon documents, 5. Fort Bonifacio Development Corporation v. CIR, G.R.
instruments, loan agreements and papers, and upon No. 173425, January 22, 2013
acceptances, assignments, sales and transfers of the
obligation, right or property incident thereto, there shall Taxation; Transitional input tax credit; Prior payment of taxes
be levied, collected and paid for, and in respect of the is not a prerequisite before a taxpayer could avail of the
transaction so had or accomplished, the corresponding transitional input tax credit. To reiterate, prior payment of
documentary stamp taxes prescribed in the following taxes is not necessary before a taxpayer could avail of the
Sections . . . (Emphasis supplied.) 8% transitional input tax credit. This position is solidly
supported by law and jurisprudence, viz: 
SEC. 195. Stamp Tax on Mortgages, Pledges and Deeds of
Trust. — On every mortgage or pledge of lands, estate, or
property, real or personal, heritable or movable, whatsoever, First. Section 105 of the old National Internal Revenue Code
where the same shall be made as a security for the payment (NIRC) clearly provides that for a taxpayer to avail of the 8%
of any definite and certain sum of money lent at the time or transitional input tax credit, all that is required from the
previously due and owing or forborne to be paid, being taxpayer is to file a beginning inventory with the Bureau of
payable, and on any conveyance of land, estate, or property Internal Revenue (BIR). It was never mentioned in Section
whatsoever, in trust or to be sold, or otherwise converted into 105 that prior payment of taxes is a requirement. 
money which shall be and intended only as security, either
by express stipulation or otherwise, there shall be collected a Second. Since the law (Section 105 of the NIRC) does not
documentary stamp tax at the following rates: provide for prior payment of taxes, to require it now would be
tantamount to judicial legislation which, to state the obvious,
(a) When the amount secured does not exceed Five is not allowed. 
thousand pesos (P5,000), Twenty pesos (P20.00).
Third. A transitional input tax credit is not a tax refund per se
(b) On each Five thousand pesos (P5,000), or fractional part but a tax credit. Logically, prior payment of taxes is not
thereof in excess of Five thousand pesos (P5,000), an required before a taxpayer could avail of transitional input
additional tax of Ten pesos (P10.00). (Emphasis supplied.) tax credit. As we have declared in our September 4, 2012
Decision, “[t]ax credit is not synonymous to tax refund. Tax
The law imposes DST on documents issued in respect of refund is defined as the money that a taxpayer overpaid and
the specified transactions, such as pledge, and not only is thus returned by the taxing authority. Tax credit, on the
on papers evidencing indebtedness. Therefore, a pawn other hand, is an amount subtracted directly from one’s total
ticket, being issued in respect of a pledge transaction, is tax liability. It is any amount given to a taxpayer as a subsidy,
subject to documentary stamp tax. a refund, or an incentive to encourage investment.” 
FACTS: Petitioner was a real estate developer that bought 1993. Philacor's Finance Manager, Leticia Pangan,
from the national government a parcel of land that used to contested the tentative computations of deficiency taxes.
be the Fort Bonifacio military reservation. At the time of the 3. Philacor then received Pre-Assessment Notices (PANs),
said sale there was as yet no VAT imposed so Petitioner did all dated July 18, 1996, covering the alleged deficiency
not pay any VAT on its purchase. Subsequently, Petitioner income, percentage and DSTs, including increments.
sold two parcels of land to Metro Pacifi c Corp. In reporting 4. On March 4, 1998, Philacor protested the PANs, with a
the said sale for VAT purposes (because the VAT had request for reconsideration and reinvestigation.
already been imposed in the interim), Petitioner claimed 5. The CTA Division rendered its decision after examining
transitional input VAT corresponding to its inventory of land. the documents submitted by the parties, it concluded that
The BIR disallowed the claim of presumptive input VAT and Philacor failed to declare part of its income, making it
thereby assessed Petitioner for defi ciency VAT.  liable for deficiency income tax and percentage tax. The
CTA also ruled that Philacor is liable for the DST on the
ISSUE: Is Petitioner entitled to claim the transitional input issuance of the promissory notes and their subsequent
VAT on its sale of real properties given its nature as a real transfer or assignment.
estate dealer and if so (i) is the transitional input VAT applied 6. Afterwards, the CTA partially granted Philacor's motion in
only to the improvements on the real property or is it applied the resolution wherein it cancelled the assessment for
on the value of the entire real property and (ii) should there deficiency income tax and deficiency percentage tax .
have been a previous tax payment for the transitional input These assessments were withdrawn because the CTA
VAT to be creditable?  found that Philacor had correctly declared its income.
Nevertheless, the CTA Division sustained the assessment
for deficiency DST.
RULING: YES. Petitioner is entitled to claim transitional
input VAT based on the value of not only the improvements
ISSUE: Whether Philacor is liable for deficiency DST.
but on the value of the entire real property and regardless of
whether there was in fact actual payment on the purchase of
RULING: We fi nd the petition meritorious. Philacor is not
the real property or not. 
liable for the DST on the issuance of the promissory notes.

The amendments to the VAT law do not show any intention 7. Section 173 of the 1997 National Internal Revenue
to make those in the real estate business subject to a Code (1997 NIRC) names those who are primarily
different treatment from those engaged in the sale of other liable for the DST and those who would be
goods or properties or in any other commercial trade or secondarily liable: The persons primarily liable for the
business. On the scope of the basis for determining the payment of the DST are the person (1) making; (2)
available transitional input VAT, the CIR has no power to limit signing; (3) issuing; (4) accepting; or (5) transferring
the meaning and coverage of the term "goods" in Section the taxable documents, instruments or papers. Should
105 of the Tax Code without statutory authority or basis. The these parties be exempted from paying tax, the other
transitional input tax credit operates to benefit newly VAT- party who is not exempt would then be liable. Philacor
registered persons, whether or not they previously paid did not make, sign, issue, accept or transfer the
taxes in the acquisition of their beginning inventory of goods, promissory notes. The acts of making, signing, issuing
materials and supplies. and transferring are unambiguous. The buyers of the
appliances made, signed and issued the documents
subject to tax, while the appliance dealer transferred
these documents to Philacor which likewise
indisputably received or "accepted" them.
"Acceptance," however, is an act that is not even
6. PHILACOR Credit Corporation v. CIR, G.R. No. 169899, applicable to promissory notes, but only to bills of
February 6, 2013 exchange.
8. Revenue Regulations No. 9-2000 26 interprets the
FACTS: law more widely so that all parties to a transaction are
primarily liable for the DST, and not only the person
1. Philacor is a domestic corporation organized under making, signing, issuing, accepting or transferring the
Philippine laws and is engaged in the business of retail same becomes liable as the law provides. But even
financing. Through retail financing, a prospective buyer of under these terms, the liability of Philacor is not a
a home appliance — with neither cash nor any credit card foregone conclusion as from the face of the
— may purchase appliances on installment basis from an promissory note itself, Philacor is not a party to the
appliance dealer. After Philacor conducts a credit issuance of the promissory notes, but merely to their
investigation and approves the buyer's application, the assignment. On the face of the documents, the parties
buyer executes a unilateral promissory note in favor of to the issuance of the promissory notes would be the
the appliance dealer. The same promissory note is buyer of the appliance, as the maker, and the
subsequently assigned by the appliance dealer to appliance dealer, as the payee.
Philacor.
2. Pursuant to Letter of Authority revenue Officer examined WHEREFORE, premises considered, we GRANT the
Philacor's books of accounts and other accounting petition.
records for the fiscal year August 1, 1992 to July 31,
The CTA En Banc dismissed petitioner's Petition for Review
NIRC REMEDIES on the ground of lack of jurisdiction as the lapse of the
statutory period to appeal rendered the subject deficiency
taxes final, executory and demandable.

RULING:
1. Misnet, Inc. vs. Commissioner of Internal Revenue,
G.R. No. 210604, June 3, 2019
 The petition was granted.

TOPIC: NIRC remedies Rule:

FACTS: SEC. 228. Protesting of Assessment.

Misnet is a reseller engaged in the buying and selling of If the protest is denied in whole or in part, or is not acted
Microsoft products. Misnet bought from a non-resident upon within one hundred eighty (180) days from submission
foreign corporation software application where it withheld of documents, the taxpayer adversely affected by the
VAT on royalty payments. In November 2006, Misnet was decision or inaction may appeal to the Court of Tax Appeals
issued a Preliminary Assessment Notice (PAN) for deficiency within (30) days from receipt of the said decision, or from the
taxes for the expanded withholding tax (EWT) and final lapse of the one hundred eighty (180)-day period; otherwise,
withholding VAT. They received a Formal Notice of the decision shall become final, executory and demandable.
Assessment (FAN) in January 2007 which they protested by (Emphasis supplied)
filing a request for reconsideration.
Application:
While the protest was pending, the CIR issued an Amended
Assessment Notice, finding Misnet liable for additional The Supreme Court held that while the perfection of an
deficiency taxes. Misnet received the Final Decision on appeal within the statutory period is a jurisdictional
Disputed Assessment (FDDA) on March 28, 2011. Misnet requirement, it relaxed this strict requirement in the interest
filed a letter-reply to the CIR but was advised that they of justice  and in the exercise of its equity jurisdiction.
availed of the wrong remedy. Thus, it filed a petition for
In the instant case, petitioner allegedly failed to observe the
review with the Court of Tax Appeals on July 26, 2011.
30-day period within which to appeal the final decision of the
However, this was dismissed by the CTA En Banc on the
CIR to the CTA. Petitioner admittedly received the FDDA on
ground of lack of jurisdiction as the lapse of the statutory
March 28, 2011. Reckoned from this date of receipt, it has
period to appeal rendered the subject deficiency taxes final,
until April 27, 2011, within which to appeal with the CTA.
executory and demandable. Petitioner filed a Motion for
However, petitioner filed its appeal (Petition for Review) only
Reconsideration but the said Motion was denied in a
on July 26, 2011 or after the lapse of ninety-three (93) days
Resolution, thus the instant petition.
from its receipt of the FDDA. It appears that petitioner's filing
a. Misnet (Petitioner’s) Arguments – (Won) of an appeal with the CTA was beyond the statutory period to
appeal.
Petitioner averred that after receiving the Amended
Assessment Notice and the FDDA of the CIR on March 28, With petitioner's pending protest with the Regional Director
2011, it filed a letter protesting the Amended Assessment on the amended EWT, then technically speaking, there was
Notice, with Regional Director Mr. Jaime B. Santiago, of yet no final decision that was issued by the CIR that is
RDO No. 049, Makati City. This letter of protest was filed by appealable to the CTA. It is still incumbent for the Regional
petitioner on April 11, 2011 or within the statutory period Director to act upon the protest on the amended EWT —
within which to appeal. Apparently, petitioner was merely whether to grant or to deny it. Only when the CIR settled
relying on the statement in the said Amended Assessment (deny/grant) the protest on the deficiency EWT could there
Notice. be a final decision on petitioner's liabilities. And only when
there is a final decision of the CIR, would the prescriptive
b. CIR (Respondent’s) Arguments – (Lost) period to appeal with the CTA begin to run.

The CIR filed a motion to dismiss the petition on the ground Hence, petitioner's belated filing of an appeal with the CTA is
of lack of jurisdiction — arguing that the assessment against not without strong, compelling reason. We could say that
petitioner has become final, executory and demandable for petitioner was merely exhausting all administrative remedies
its failure to file an appeal within the prescribed period of available before seeking recourse to the judicial courts.
thirty (30) days. While the rule is that a taxpayer has 30 days to appeal to the
CTA from the final decision of the CIR, the said rule could not
ISSUE: be applied if the Assessment Notice itself clearly states that
the taxpayer must file a protest with the CIR or the Regional
Whether or not the CTA En Banc correctly dismissed
Director within 30 days from receipt of the Assessment
petitioner's Petition for Review on the ground of lack of
Notice. Under the circumstances obtaining in this case, we
jurisdiction.
opted not to apply the statutory period within which to appeal
FINDINGS OF THE Lower Court: with the CTA considering that no final decision yet was
issued by the CIR on petitioner's protest. The subsequent
CTA 1st Division granted CIR's Motion to Dismiss. appeal taken by petitioner is from the inaction of the CIR on
its protest.
FINDINGS OF THE CTA:
If petitioner's right to appeal would be curtailed by the mere CIR on a disputed assessment. Claiming that V.Y. Domingo's
expediency of holding that it had belatedly filed its appeal, petition was anchored on its receipt of the PCL, which it
then this Court as the final arbiter of justice would be treated as a denial of its Request for Re-evaluation/Re-
deserting its avowed objective, that is to dispense justice investigation and Reconsideration, the CIR further argued
based on the merits of the case and not on a mere that there was no disputed assessment to speak of, and that
technicality. t h e C TA h a d n o j u r i s d i c t i o n t o e n t e r t a i n t h e
saidPetitionforReview.CTA First Division:granted the CIR's
Conclusion: motion and dismissed V.Y. Domingo's Petition forReview. It
held that it was without jurisdiction to entertain the petition,
The 30-day period to appeal the decision of the CIR to the
as the rule is that for the CTA to acquire jurisdiction, as
CTA is jurisdictional, except when there are compelling
assessment must first be disputed by the taxpayer and either
reasons based on equity and substantial justice to relax
ruled upon by the CIR to warrant a decision, or denied by the
these strict rules.
CIR through inaction.

CTA En Banc granted V.Y. Domingo's Petition for


Review, reversing and setting aside the January 29, 2014
and April 23, 2014 Resolutions of the CTA First Division. It
4. CIR vs. V.Y. Domingo Jewellers, Inc., G.R. No. 221780,
remanded the case to the CTA First Division for further
March 25, 2019
proceedings to afford the CIR full opportunity to present her
evidence. It held —
Facts:
Petitioner's case did not fall
Bureau of Internal Revenue (BIR) issued a within the usual procedure in the
Preliminary Assessment Notice (PAN) against V.Y.Domingo, issuance of an assessment as
a corporation primarily engaged in manufacturing and selling respondent failed to serve or send the
emblematic jewelry,assessing the latter the total amount of FAN to petitioner. Section 228 of the
P2,781,844.21 representing deficiency income tax and NIRC of 1997, as amended, and
value-added tax, inclusive of interest, for the taxable year Section 3 of Revenue Regulations
2006. V.Y. Domingo filed aRequest for Re-evaluation/Re- No. 12-99 are silent as to the
procedure to be followed in case the
investigation and Reconsideration with the Regional Director
taxpayer did not receive the FAN but
ofBIR - Revenue Region No. 6, requesting a "thorough re-
instead receives a preliminary
evaluation and re-investigation to verify the accuracy of the collection letter or a warrant of
computation as well as the accounts included in the distraint/levy or similar
PreliminaryAssessment Notice." V.Y. Domingo then received communications, informing the
a Preliminary Collection Letter(PCL) RDONo. 28 - taxpayer of the existence of a FAN for
Novaliches, informing it of the existence of Assessment the first time. Understandably, this
Notice No. 32-06-IT-0242and Assessment Notice No. 32-06- would cause some confusion as to
VT-0243, both dated November 18, 2010, for collection of its what the next step it. Hence,
tax liabilities. The PCL likewise stated - If you want to know petitioner cannot be faulted for not
filing an administrative protest before
the details and/or settle this assessment, may we invite you
filing a petition for review before the
to come to this office, within 10 days from receipt of this
Court in Division since it did not
notice. However, if payment had already been made, please receive the FAN and the language of
send or bring us copies of the receipts of payment together the PCL shows that the respondent is
with this letter to be our basis for canceling/closing your already demanding payment from
liability/ies.V.Y. Domingo sent a letter to the BIR RDO No. 28 petitioner presupposing that the
in Quezon City, requesting certified true copies of assessment has become final.
Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243.
Upon receipt of the requested copies of the notices on Issue:
September 15, 2011, V.Y. Domingo filed on September
16,2011 a Petition for Reviewwith the CTA in Division, under WON the First Division of the CTA has jurisdiction to
Section 7(1) of RA No. 1125 andSection 4, Rule 8 of the entertain V.Y. Domingo's petition for review.
Revised Rules of the Court of Tax Appeals (RRCTA), praying
thatAssessment Notice Nos. 32-06-IT-0242 and 32-06-
VT-0243 dated November 18, 2010 andthe PCL dated Ruling:
August 10, 2011 be declared null and void, cancelled,
withdrawn, and with no force and effect, for allegedly having The Supreme Court rule for the petitioner.
been issued beyond the prescriptive period for assessment
and collection of internal revenue taxes.  At the outset, it bears emphasis that the CTA, being
a court of special jurisdiction, can take cognizance only of
CIR filed her Motion to Dismiss the petition for lack matters that are clearly within its jurisdiction. Section 7 of
of jurisdiction. She argued that under R.A.No. 1125 ("An Act R.A. No. 1125, as amended by R.A. No. 9282, specifically
Creating the Court of Tax Appeals"), as amended, and the provides:
RR CTA, it is neither the assessment nor the formal letter of SEC. 7. Jurisdiction. — The CTA
demand that is appealable to the CTA but the decision of the shall exercise:
and automatically applied the
(a) Exclusive appellate jurisdiction same amount claimed against the
to review by appeal, as herein estimated tax liabilities for the
provided: taxable quarter or quarters of the
succeeding taxable year; or
(1) Decisions of the Commissioner
of Internal Revenue in cases (d) When the excise tax due on
involving disputed assessments, excisable articles has not been
refunds of internal revenue taxes, paid; or
fees or other charges, penalties in
relation thereto, or other matters (e) When an article locally
arising under the National Internal purchased or imported by an
Revenue Code or other laws, exempt person, such as, but not
administered by the Bureau of limited to, vehicles, capital
Internal Revenue; equipment, machineries and
spare parts, has been sold,
(2) Inaction by the Commissioner of traded or transferred to non-
Internal. Revenue in cases exempt persons.
involving disputed assessments, The taxpayers shall be informed
refunds of internal revenue taxes, in writing of the law and the facts
fees or other charges, penalties in on which the assessment is
relation thereto, or other matters made; otherwise, the assessment
arising under the National Internal shall be void.
Revenue Code or other laws
administered by the Bureau of Within a period to be prescribed by implementing
Internal Revenue, where the rules and regulations, the taxpayer shall be required to
National Internal Revenue Code respond to said notice.
provides a specific period of action,
in which case the inaction shall be If the taxpayer fails to respond, the Commissioner
deemed a denial; or his duly authorized representative shall issue an
assessment based on his findings.
In relation thereto, Section 228 of R.A. No. 8424 or
The Tax Reform Act of 1997, as amended, implemented by Such assessment may be protested
Revenue Regulations No. 12-99, provides for the procedure administratively by filing a request for reconsideration
to be followed in issuing tax assessments and in protesting or reinvestigation within thirty (30) days from receipt of
the same. Thus: the assessment in such form and manner as may be
Section 228. Protesting of prescribed by implementing rules and regulations.
Assessment. — When the
Commissioner or his duly Within sixty (60) days from filing of the protest,
authorized representative finds all relevant, supporting documents shall have been
that proper taxes should be submitted; otherwise, the assessment shall become
assessed, he shall first notify the final.
taxpayer of his findings: Provided,
however, That a pre-assessment If the protest is denied in whole or in part, or is not
notice shall not be required in the acted upon within one hundred eighty (180) days from
following cases: submission of documents, the taxpayer adversely affected by
(a) When the finding for any the decision or inaction may appeal to the Court of Tax
deficiency tax is the result of Appeals within thirty (30) days from receipt of the said
mathematical error in the decision, or from the lapse of one hundred eighty (180)-day
computation of the tax as period; otherwise, the decision shall become final., executory
appearing on the face of the and demandable.
return; or
In this case, records show that on August 11, 2011,
(b) When a discrepancy has been V.Y. Domingo received the PCL issued by petitioner CIR
determined between the tax informing it of Assessment Notice Nos. 32-06-IT-0242 and
withheld and the amount actually 32-06-VT-0243 dated November 18, 2010. On September
remitted by the withholding agent; 12, 2011, the former sent a letter request to the BIR
or requesting for certified true copies of the said Assessment
Notices.
(c) When a taxpayer who opted to
claim a refund or tax credit of However, instead of filing an administrative protest
excess creditable withholding tax against the assessment notice within thirty (30) days from its
for a taxable period was receipt of the requested copies of the Assessment Notices
determined to have carried over on September 15, 2011, V.Y. Domingo elected to file its
petition for review before the CTA First Division on However, on January 2010, respondent then received a Final
September 16, 2011, ratiocinating that the issuance of the Demand Letter/Final Assessment Notice for the deficiencies
PCL and the alleged finality of the terms used for demanding for the year 2005. Respondent protested the assessment but
payment therein proved that its Request for Re-evaluation/ the CIR instead issued a Final Decision on Disputed
Re-investigation and Reconsideration had been denied by Assessment.
the CIR.
CTA Division: The assessments were made beyond the
Admitting for the sake of argument the claim of V.Y. prescriptive period, thus are invalid. On the other hand, it
Domingo in its Comment — that its case does not involve an also found the waivers invalid as it failed to state the nature
appeal from a decision of the CIR on a disputed assessment and amount of the tax to be assessed.
since in the first place, there is no disputed assessment to
speak of — admits the veracity of petitioner CIR's claim: CTA En Banc: Affirmed the division’s pronouncement on the
there being no disputed assessment to speak of when V.Y. nullity of the waiver and that the assessment was made
Domingo filed its petition for review before the CTA First beyond the prescriptive period.
Division, the latter had no jurisdiction to entertain the same.
Thus, the latter's dismissal of the petition for review was On appeal, the CIR alleges that the assessments were not
proper. covered by prescriptive period under Section 203 of the
NIRC as the amount to be collected is not a the tax but
Evidently, V.Y. Domingo's immediate recourse to the rather a penalty. 
CTA First Division was in violation of the doctrine of
exhaustion of administrative remedies. Issue: a) Whether the duty to remit the withholding taxes
were in the nature of a penalty; b) Whether the waiver was
Under the doctrine of exhaustion of administrative valid.
remedies, before a party is allowed to seek the intervention
of the court, he or she should have availed himself or herself Ruling:
of all the means of administrative processes afforded him or
her. a. Withholding taxes are internal revenue taxes
What is evident in the instant case is that covered by Section 203 of the NIRC.
Assessment Notice Nos. 32-06-IT-0242 and 32-06-VT-0243
dated November 18, 2010 have not been disputed by V.Y. The Court disagreed with the CIR’s analogy of withholding
Domingo at the administrative level without any valid basis tax assessments to the imposition of civil penalties imposed
therefor, in violation of the doctrine of exhaustion of on tax deficiencies. The association of "penalty" with
administrative remedies. To reiterate, what is appealable to Expanded Withholding Tax and Withholding Tax on
the CTA are decisions of the CIR on the protest of the Compensation  underscores the dynamics in the withholding
taxpayer against the assessments. There being no protest tax system and that it is the income of the payee being
ruling by the CIR when V.Y. Domingo's petition for review subjected to tax and not of the withholding agent. It was
was filed, the dismissal of the same by the CTA First Division never meant to mean that withholding taxes do not fall within
was proper. As correctly put by Associate Justice Roman G. the definition of internal revenue taxes. Withholding taxes do
Del Rosario in his Dissenting Opinion, "Clearly, petitioner did not cease to become income taxes just because it is
not exhaust the administrative remedy provided under collected and paid by the withholding agent. If the
Section 228 of the MRC of 1997, as amended, and RR No. withholding agent does not pay the VAT due he is liable for
12-99 which is fatal to its cause. Consequently, the non-filing deficiency tax and other assessments as penalty. As such,
of the protest against the FLD let to the finality of the the Court pronounced that EWT and WTC are deficiency
assessment." internal revenue taxes whose aim are to collect unpaid
income taxes and not merely to impose a penalty on the
withholding agent for its failure to comply with its statutory
duty.||| 

5. CIR vs. La Flor De La Isabela, Inc., G.R. No. 211289, b.) Waiver was invalid
January 14, 2019 

The Court held that the waiver executed by respondent
Facts: Respondent La Flor dela Isabela fi led its monthly suffered from material irregularity as it failed to indicate the
returns for the Expanded Withholding Tax and Withholding specific tax involved and the exact amount of the tax to be
Tax on Compensation for the year 2005 and executed a assessed or collected. As such, the Court also declared the
waiver of the statute of limitations in connection with its waiver invalid.
internal revenue liabilities ending December 31, 2005.
Subsequently, respondent executed a  waiver further 6. CIR vs. BPI, G.R. No. 224327. June 11, 2018
extending the prescriptive period to assess until December
31, 2009.  Facts: Citytrust Banking Corporation (CBC) filed its Annual
Income Tax Returns. Thereafter, CBC executed Waivers of
On November 2009, La Flor received Pre-liminary the Statute of Limitations under the National Internal
Assessment Notice (PAN) for deficiency tax for the year Revenue Code (NIRC). CIR issued a PAN against CBC for
2005 and again executed a waiver on December 2009. deficiency for taxable year 1986. CBC protested. 6 MAY
1991, CIR then issued a Letter with Assessment Notices,
demanding payment within 30 days. 27 MAY 1991 and 17
FEB 1992, CBC filed two separate protests respectively. All
within the 30-day period. Letter was issued again on 5 FEB
1992. Issues on compromise settlement followed which was 7. Macario Lim Gaw vs. CIR, G.R. No. 222837, July 23,
futile.  2018


4 OCT 1996, the Securities and Exchange Commission


approved the Articles of Merger between respondent BPI Facts:
and CBC, with BPI as the surviving corporation. CIR issued Petitioner, Gaw, acquired 10 parcels of land from Nov 2007
request for payment of the tax deficiency, and then issued a to June 2008. Petitioner entered into an Agreement to
Warrant of Distraint and/or Levy against BPI. BPI then Sell  with Azure Corporation for the sale and transfer of real
requested for Review in the CTA. CTA granted petition, properties to a joint venture company, which at the time was
stating among others that the no notice was received by BPI, still to be formed and incorporated. Then on July 11, 2008,
and the waiver it executed was not valid as to form and petitioner conveyed the 10 parcels of land to Eagle I
substance. CIR filed MR to CTA En Banc which was then Landholdings, Inc. (Eagle I), the joint venture company
denied.  CIR argues that CTA did not acquire jurisdiction referred to in the Agreement to Sell.
because CBC failed to contest the assessments within the
prescribed period under the law. Two years later, Commissioner of Internal Revenue
(respondent) opined that petitioner was not liable for the 6%
Issue: Whether BPI contested the assessments within the capital gains tax but for the 32% regular income tax and 12%
prescribed period. value added tax, on the theory that the properties petitioner
sold were ordinary assets and not capital assets. Further,
R u l i n g : Ye s . A n a s s e s s m e n t m a y b e p r o t e s t e d CIR found petitioner to have misdeclared his income,
administratively by fi ling a request for reconsideration or misclassified the properties and used multiple tax
reinvestigation in such form and manner as may be identification numbers to avoid being assessed the correct
prescribed by implementing regulations within thirty (30) amount of taxes.
days from receipt of the assessment; otherwise, the
assessment shall become fi nal and unappealable. If the Thus, on August 25, 2010, respondent issued a Letter of
protest is denied in whole and in part, the individual, Authority  to commence investigation on petitioner's tax
association or corporation adversely affected by the decision account. The next day, respondent filed before the
on the protest may appeal to the CTA within thirty (30) days Department of Justice (DOJ) a Joint Complaint Affidavit  for
from receipt of the said decision; otherwise, the decision tax evasion against petitioner for violation of Sections
shall become fi nal, executory and demandable. 254 and 255 of the National Internal Revenue Code (NIRC).

Here, CIR contends that it mailed the assessment on 5 FEB The DOJ then filed two criminal informations for tax evasion
1992 which she insists to be the reckoning point to protest. against petitioner. At the time the informations were filed, the
BPI denies receiving the AN, and the CIR was unable to respondent has not issued a final decision on the deficiency
present substantial evidence that the AN was mailed or sent assessment against petitioner. Halfway through the trial, the
before the BIR’s right to assess had prescribed and that said respondent issued a Final Decision on Disputed Assessment
notice was received by BPI. As a matter of fact, there was an (FDDA)  against petitioner, assessing him of deficiency
express admission on the part of the CIR that there was no income tax and VAT covering taxable years 2007 and 2008.

proof that indeed the alleged FAN was ever sent to or 

received by BPI, as stated in the Transcript of stenographic With respect to the deficiency assessment against petitioner
Notes on the court hearing. Thus, the assessment notice for the year 2007, petitioner filed a petition for review with the
dated May 6, 1991 should be deemed as the final decision of CTA. The clerk of court of the CTA assessed petitioner for
the CIR on the matter, in which BPI timely protested on May filing fees which the latter promptly paid.
27, 1991.
With respect to the deficiency assessment against petitioner
On estoppel: for the year 2008 which involves the same tax liabilities

 being recovered in the pending criminal cases, the petitioner
Moreover, petitioner cannot implore the doctrine of estoppel was confused as to whether he has to separately file an
on the fact that BPI executed a Waiver for the extension of appeal with the CTA and pay the corresponding filing fees
the assessment. A waiver of the statute of limitations, being a considering that the civil action for recovery of the civil
derogation of the taxpayer’s right to security against liability for taxes and penalties was deemed instituted in the
prolonged and unscrupulous investigations, must be criminal case. Thus, petitioner filed before the CTA a motion
carefully and strictly construed. Applying the said ruling in the to clarify as to whether petitioner has to file a separate
case at bench, BPI is not estopped from raising the invalidity petition to question the deficiency assessment for the year
of the subject Waivers as the BIR in this case caused the 2008. The CTA issued a Resolution  granting petitioner's
defects thereof. As such, the invalid Waivers did not operate motion and held that the recovery of the civil liabilities for the
to toll or extend the period of prescription. taxable year 2008 was deemed instituted with the
consolidated criminal cases, without prejudice to the right of
the petitioner to avail of whatever additional legal remedy he
may have, to prevent the said FDDA from becoming final and glaringly apparent. As such, the Petition for Review  Ad
executory for taxable year 2008. Cautelam is not deemed instituted with the criminal case for
tax evasion.
However, as a caution, petitioner still filed a Petition for
Review  Ad Cautelam. Upon filing of the said petition, the 2.Yes. While it is true that the Petition for Review  Ad
clerk of court of the CTA assessed petitioner with "zero filing Cautelam  is not deemed instituted with the criminal case,
fees." We hold that the CTA  En Banc  still erred in affirming the
dismissal of the case. Basic is the rule that the payment of
The CTA later acquitted petitioner in Criminal Case Nos. docket and other legal fees is both mandatory and
O-206 and O-207 and directed the litigation of the civil jurisdictional. The court acquires jurisdiction over the case
aspect in CTA Case No. 8503. only upon the payment of the prescribed fees.


Respondent filed a Motion to Dismiss  the Petition for However, the mere failure to pay the docket fees at the time
Review  Ad Cautelam  on the ground that the CTA First of the filing of the complaint, or in this case the Petition for
Division lacks jurisdiction to resolve the case due to Review  Ad Cautelam,  does not necessarily cause the
petitioner's non-payment of the filing fees, which was dismissal of the case.
granted. Hence, this review.
In this case, records reveal that petitioner has no intention to
defraud the government in not paying the docket fees. In
Issue: fact, when he appealed the FDDA insofar as the taxable year
2007 was concerned, he promptly paid the docket fees when
1.Whether the civil action to question the FDDA is deemed he filed his Petition for Review.
instituted with the criminal case of tax evasion.
2.Whether the CTA erred in dismissing CTA Case No. 8503 Petitioner merely relied on good faith on the
for failure of the petitioner to pay docket fees. pronouncements of the CTA First Division that he is no
3.In the event that the CTA erred in dismissing the case, longer required to pay the docket fees. As such, the CTA
whether this Court can rule on the merits of the case. cannot just simply dismiss the case on the ground of
nonpayment of docket fees. The CTA should have instead
Held: directed the clerk of court to assess the correct docket fees
and ordered the petitioner to pay the same within a
1.No. The civil action filed by the petitioner to question reasonable period. It should be borne in mind that technical
the FDDA is not deemed instituted with the criminal rules of procedure must sometimes give way, in order to
case for tax evasion. resolve the case on the merits and prevent a miscarriage of
justice.
Petitioner claimed that by virtue of the above provision, the
civil aspect of the criminal case, which is the Petition for 3.No. The court will not however rule on the merits of the
Review Ad Cautelam, is deemed instituted upon the filing of CTA Case No. 8503.
the criminal action. Thus, the CTA had long acquired
jurisdiction over the civil aspect of the consolidated criminal Rule 4, Section 3(a), paragraph 1 of the RRCTA provides
cases. Therefore, the CTA erred in dismissing the case that the CTA First Division has exclusive appellate
jurisdiction over decisions of the Commissioner of Internal
The Court does not agree.   What is deemed instituted with Revenue on disputed assessments, refunds of internal
the criminal action is only the action to recover civil liability revenue taxes, fees or other charges, penalties in relation
arising from the crime. Civil liability arising from a different thereto, or other matters arising under the NIRC or other
source of obligation, such as when the obligation is created laws administered by the BIR.
by law, such civil liability is not deemed instituted with the
criminal action. It is well-settled that the taxpayer's obligation The above provision means that the CTA exercises exclusive
to pay the tax is an obligation that is created by law and does appellate jurisdiction to resolve decisions of the
not arise from the offense of tax evasion, as such, the same commissioner of internal revenue. There is no other court
is not deemed instituted in the criminal case. that can exercise such jurisdiction.  Under Rule 16, Section
1  of the RRCTA, this Court's review of the decision of the
While the tax evasion case is pending, the BIR is not CTA En Banc is limited in determining whether there is grave
precluded from issuing a final decision on a disputed abuse of discretion on the part of the CTA in resolving the
assessment, such as what happened in this case. In order to case.
prevent the assessment from becoming final, executory and
demandable, Section 9 of R.A. No. 9282 allows the taxpayer Considering the foregoing disquisitions, the proper remedy is
to file with the CTA, a Petition for Review within 30 days from to remand the case to the CTA First Division and to order the
receipt of the decision or the inaction of the respondent.
 Clerk of Court to assess the correct docket fees for the

 Petition for Review Ad Cautelam and for petitioner to pay the
The tax evasion case filed by the government against the same within ten (10) days from receipt of the correct
erring taxpayer has, for its purpose, the imposition of criminal assessment of the clerk of court.
liability on the latter. While the Petition for Review filed by the
petitioner was aimed to question the FDDA and to prevent it
from becoming final. The stark difference between them is
RDAO 01-05 indicates that the proper preparation of the
8. Asian Transmission Corp. v. CIR, G.R. No. 230861, waiver was primarily the responsibility of the taxpayer or its
September 19, 2018 authorized representative signing the waiver. Such
responsibility did not pertain to the BIR as the receiving
Facts:  party. Consequently, ATC was not correct in insisting that the
act or omission giving rise to the defects of the waivers
1. ATC i s a ma n u fa ctu re r o f mo to r ve h i cl e should be ascribed solely to the respondent CIR and her
transmission component parts and engines of Mitsubishi
vehicles. subordinates.

2. On January 3, 2003 and March 3, 2003, ATC filed its Moreover, the principle of estoppel was applicable. The
Annual Information Return of Income Taxes Withheld on execution of the waivers was to the advantage of ATC
Compensation and Final Withholding Taxes and Annual
Information Return of Creditable Income Taxed Withheld because the waivers would provide to ATC the sufficient time
(Expanded)/Income Payments Exempt from Withholding to gather and produce voluminous records for the audit. It
Tax, respectively. would really be unfair, therefore, were ATC to be permitted to
3. On August 11, 2004, ATC received Letter of Authority  assail the waivers only after the final assessment proved to
where the CIR informed ATC that its revenue officers be adverse.
from the Large Taxpayers Audit and Investigation Division
II shall examine its books of accounts and other
accounting records for the taxable year 2002. Thus, the CTA En Banc did not err in ruling that ATC, after
having benefitted from the defective waivers, should not be
4. Thereafter, the CIR issued a Preliminary Assessment allowed to assail them. In short, the CTA En Banc properly
Notice (PAN) to ATC. Consequently, on various dates, applied the equitable principles of in pari delicto, unclean
ATC, through its Vice President for Personnel and Legal
Affairs, Mr. Roderick M. Tan, executed several documents hands, and estoppel as enunciated in Commissioner of
denominated as "Waiver of the Defense of Prescription Internal Revenue v. Next Mobile case.
Under the Statute of Limitations of the National Internal 

Revenue Code".
NOTES: Petition for review on certiorari DENIED
5. Meanwhile, on February 28, 2008, ATC availed of the Tax
Amnesty Program under Republic Act No. 9480.

6. On July 15, 2008, ATC received a Formal Letter of


Demand from the CIR for deficiency in the amount of
P62,977,798.02, [EWT] in the amount of P6,916,910.51,
in the amount of P501,077.72. On August 14, 2008, ATC
filed its Protest Letter in regard thereto. 9. San Roque Power Corporation v. CIR, G.R. No. 203249.
July 23, 2018
7. Accordingly, on April 14, 2009, ATC received the Final
Decision on Disputed Assessment where the CIR found Facts: San Roque Power Corporation is a VAT-registered
ATC liable to pay deficiency tax in the amount of
P75,696,616.75. Thus, on May 14, 2009, ATC filed an taxpayer which was granted by the BIR a zero-rating on its
appeal letter/request for reconsideration with the CIR. sales of electricity to National Power Corporation (NPC). On
22 December 2005 and 27 February 2006, the petitioner
8. On April 10, 2012, ATC received the Decision of the CIR fi led two separate administrative claims for refund of its
dated November 15, 2011, denying its request for
reconsideration. alleged unutilized input tax for the period 1 January 2004 up
to 31 March 2004, and 1 April 2004 up to 31 December
Issue: WON the waivers executed by ATC are valid 2004, respectively.

Ruling: YES. In this case, the CTA in Division Due to the inaction of respondent CIR, the petitioner filed
noted that the eight waivers of ATC contained the following petitions for review before the CTA: (1) on 30 March 2006,
defects, to wit:  for its unutilized input VAT for the period 1 January 2004 to
• 1. The notarization of the Waivers 31 March 2004, amounting to ₱17,017,648.31; and (2) on 20
was not in accordance with the June 2006, for the unutilized input VAT for the period 1 April
2004 Rules on Notarial Practice;  2004 to 31 December 2004, amounting to ₱14,959,061.57.
• 2. Several waivers clearly failed to
indicate the date of acceptance by CTA Division partially granted the refund claim of the
the Bureau of Internal Revenue;  petitioner in the total amount of ₱29,931,505.18.
• 3. The Waivers were not signed by
The CIR moved for reconsideration but to no avail. Thus,
the proper revenue officer; and 
• 4. The Waivers failed to specify the
CIR filed a petition for review with the CTA En Banc.
type of tax and the amount of tax The CTA En Banc sided with the CIR in ruling that the judicial
due. claims of the petitioner were prematurely filed in violation of
the 120-day and 30- day periods prescribed in Section 112
The court agrees with the holding of the CTA En Banc that (D) of the NIRC. The court held that by reason of prematurity
ATC's case was similar to the case of the taxpayer involved of its petitions for review, San Roque Power Corporation
in Commissioner of Internal Revenue v. Next Mobile Inc. The failed to exhaust administrative remedies which is fatal to its
foregoing defects noted in the waivers of ATC were not solely invocation of the court's power of review. 
attributable to the CIR. Indeed, although RDAO 01-05 stated
that the waiver should not be accepted by the concerned BIR Hence, this present petition for review.
office or official unless duly notarized, a careful reading of
Issue: Were the judicial claims fi led prematurely? quarter of 2004, and for the second to fourth quarters of the
same year, on 22 December 2005 and 27 February 2006,
Ruling: respectively, or within the two-year prescriptive period.
Counted from such dates of submission of the claims (with
1. No retroactive application of the Aichi ruling
supporting documents), the CIR had 120 days, or until 13
At the outset, it bears stressing that while Aichi was already April 2006, with respect to the first administrative claim, and
firmly established at the time the CTA En Banc promulgated until 27 June 2006, on the second administrative claim, to
the assailed decision, nowhere do we find in such assailed decide.
decision, however, that the court a quo cited or mentioned
However, the petitioner, without waiting for the full expiration
the Aichi case as basis for dismissing the subject petitions
of the 120-day periods and without any decision by the CIR,
for review. As we see it, the CTA En Banc merely relied on
immediately filed its petitions for review with the CT A on 30
Section 112 (D) of the NIRC.
March 2006, or a mere ninety-eight (98) days for the first
Be that as it may, the petitioner cannot find solace in the administrative claim; and on 20 June 2006, or only one
various CTA decisions that allegedly dispense with the hundred thirteen (113) days for the second administrative
timeliness of the judicial claim for as long as it is within the claim, from the submission of the said claims. In other words,
two-year prescriptive period. Such legal posturing has the judicial claims of the petitioner were prematurely filed as
already been passed upon. correctly found by the CTA En Banc.

Concerning the 120-day period in Section 112 (D) of the II. Ordinarily, a prematurely filed appeal is to be dismissed for
NIRC, there was no jurisprudential rule prior to Aichi lack of jurisdiction in line with our ruling in Aichi. But, as
interpreting such provision as permitting the premature filing stated in the premises, we shall accord to the CTA
of a judicial claim before the expiration of the 120-day period. jurisdiction over the claims in this case due to our ruling in
The alleged CTA decisions that entertained the judicial San Roque.
claims despite their prematurity are not to be relied upon
2. BIR Ruling No. DA-489-03 constitutes an
because they are not final decisions of the Supreme Court
exception to the mandatory and jurisdictional
worthy of according binding precedence. That Aichi was yet
nature of the 120+30-day period.
to be promulgated at that time did not mean that the
premature filing of a petition for review before the CTA was a In the consolidated cases of San Roque, the Court en bane
permissible act. recognized an exception to the mandatory and jurisdictional
nature of the 120+30-day period. It was noted that BIR
It was only in Aichi that this Court directly tackled the 120-
Ruling No. DA-489-03, which expressly stated-
day period in Section 112 (D) of the NIRC and declared it to
be mandatory and jurisdictional. In particular, Aichi brushed [A] taxpayer-claimant need not wait for the lapse of the 120-
aside the contention that the nonobservance of the 120-day day period before it could seek judicial relief with the CTA by
period is not fatal to the filing of a judicial claim as long as way of Petition for Review.
both the administrative and judicial claims are filed within the
two-year prescriptive period provided in Section 112 (A) of - is a general interpretative rule issued by the CIR pursuant
the NIRC. to its power under Section 4 of the NIRC, hence, applicable
to all taxpayers. Thus, taxpayers can rely on this ruling from
The mandatory and jurisdictional nature of the 120-day the time of its issuance on 10 December 2003. The
period first expressed in Aichi, however, is not a new rule of conclusion is impelled by the principle of equitable estoppel
procedure to be followed in pursuit of a refund claim of enshrined in Section 246 of the NIRC which decrees that a
unutilized creditable input VAT attributable to zero-rated BIR regulation or ruling cannot adversely prejudice a
sales. As suggested above, the pronouncement in Aichi taxpayer who in good faith relied on the BIR regulation or
regarding the mandatory and jurisdictional nature of the 120- ruling prior to its reversal.
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 Then, in Taganito Mining Corporation v. CIR, the Court
laid the rule of procedure for maintaining a refund claim of further clarified the doctrines in Aichi and San Roque
unutilized creditable input VAT attributable to zero-rated explaining that during the window period from 10 December
sales. In said provision, the Commissioner has 120 days to 2003, upon the issuance of BIR Ruling No. DA-489-03 up to
act on an administrative claim. 6 October 2010, or date of promulgation of Aichi, taxpayers
need not observe the stringent 120-day period.
Hence, from the effectivity of the 1997 NIRC on 1 January
1998, the procedure has always been definite: the 120-day In other words, the 120+ 30-day period is generally
period is mandatory and jurisdictional. Accordingly, a mandatory and jurisdictional from the effectivity of the 1997
taxpayer can file a judicial claim (1) only within thirty days NIRC on 1 January 1998, up to the present. By way of an
after the Commissioner partially or fully denies the claim exception, judicial claims filed during the window period from
within the 120-day period, or (2) only within thirty days from 10 December 2003 to 6 October 2010, need not wait for the
the expiration of the 120- day period if the Commissioner exhaustion of the 120-day period. The exception in San
does not act within such period. 13 This is the rule of Roque has been applied consistently in numerous decisions
procedure beginning 1 January 1998 as interpreted in Aichi. of this Court.

In this case, the petitioner timely filed its administrative


claims for refund/credit of its unutilized input VAT for the first
In this case, the two judicial claims filed by the petitioner fell
within the window period, thus, the CTA can take cognizance
over them.

What this means is that the CTA can validly take cognizance
over the two judicial claims filed in this case. The CTA 10. Rhombus Energy, Inc. v. Commissioner of Internal
Division, in fact, did this, which eventually led to the partial Revenue, G.R. No. 206362, August 1, 2018
grant of the refund claims in favor of the petitioner. In
reversing the CTA Division for lack of jurisdiction, the CTA En
FACTS:
Banc failed to consider BIR Ruling No. DA-489-03.
On April 17, 2006, Rhombus filed its Annual Income Tax
III. It is imperative, however, to point out that the petitioner Return ("ITR") for taxable year 200 In said Annual ITR for
did not actually invoke BIR Ruling No. DA-489-03 in all its taxable year 2005, Rhombus indicated that its excess
pleadings to justify the timeliness of its judicial claims with creditable withholding tax ("CWT") for the year 2005 was "To
the CTA. To recall, the petitioner vociferously insisted on the be refunded".
propriety of its judicial claims in view of the prevailing
interpretations of the CTA prior to Aichi that allowed On May 29, 2006, Rhombus filed its Quarterly Income Tax
premature filing of petitions for review before the CTA. This Return for the first quarter of taxable year 2006 showing prior
apparently also explains the silence on the end of the CTA year's excess credits of P1,500.653.00.
En Banc regarding such BIR ruling in disposing of the matter
on jurisdiction. On August 25, 2006, Rhombus filed its Quarterly Income Tax
Return for the second quarter of taxable year 2006 showing
Hence, whether the petitioner can benefit from BIR Ruling prior year's excess credits of P1,500,653.00.
DA-489- 03 even if it did not invoke it is a question worthy of
consideration.
On November 27, 2006, Rhombus filed its Quarterly Income
The beneficiaries of BIR Ruling No. DA-489-03 include Tax Return for the third quarter of taxable year 2006 showing
those who did not specifically invoke it. prior year's excess credits of P1,500,653.00.

BIR Ruling No. DA-489-03 is a general interpretative rule. On December 29, 2006, Rhombus filed with the Revenue
Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 Region No. 8 an administrative claim for refund of its alleged
from the time of its issuance on 10 December 2003 up to its excess/unutilized CWT for the year 2005 in the amount of
reversal by this Court in Aichi on 6 October 2010, where this P1,500,653.00.
Court held that the 120+30-day periods are mandatory and
jurisdictional.
On April 2, 2007, Rhombus filed its Annual Income Tax
As previously stated, San Roque has been consistently Return for taxable year 2006 showing prior year's excess
applied in a long line of cases that recognized the exception credits of P0.00.
to the mandatory and jurisdictional nature of the 120+30-day
period. To limit the application of BIR Ruling No. DA-489-03
only to those who invoked it specifically would unduly strain On December 7, 2007, pending CIR’s action on Rhombus's
t h e p r o n o u n c e m e n t s i n S a n R o q u e . To p r o v i d e claim for refund or issuance of a tax credit certificate of its
jurisprudential stability, it is best to apply the benefit of BIR excess/unutilized CWT for the year 2005 and before the
Ruling No. DA-489-03 to all taxpayers who filed their judicial lapse of the period for filing an appeal, Rhombus filed a
claims within the window period from 10 December 2003 Petition for Review to the CTA, whose First Division granted
until 6 October 2010. such petition.

All told, the CTA has jurisdiction over the judicial claims filed CTA en banc reversed.
by the petitioner in this case. The CTA En Banc, thus, erred
in setting aside the decision of the CT A Division on the ISSUES:
ground of lack of jurisdiction. Consequently, the decision of
the CTA Division partially granting the claim for refund/credit 1. WoN Rhombus has proved its entitlement to the
in favor of the petitioner must be reinstated. refund

WHEREFORE, the petition is GRANTED. 1. YES. The CTA En Banc thereby misappreciated the
fact that Rhombus had already exercised the option
SO ORDERED.
for its unutilized creditable withholding tax for the year
2005 to be refunded when it filed its annual ITR for
the taxable year ending December 31, 2005. The
irrevocability rule took effect when the option was
exercised. In the case of Rhombus, therefore, its
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 8. RTC rendered the assailed judgment against BIR
option to be refunded exercised in its 2005 annual permanently enjoining it from proceeding with the
ITR. As such, the CTA En Banc erred in applying the implementation and enforcement of Sections 108 and
irrevocability rule against Rhombus. 184 of the NIRC until the Congress shall have enacted
and passed into law House Bill 3235. 
NOTES: The SC REINSTATES the CA First Division
9. Petitioner moved for reconsideration of the judgment but
decision, and DIRECTS the Commissioner of the Bureau of
RTC denied the motion for reconsideration. Hence, the
Internal Revenue to refund to or to issue a tax credit
petitioner has appealed directly to the Court.
certifi cate in favor of petitioner Rhombus Energy, Inc. in the
amount of P1,500,653.00 representing excess creditable Issue:
withholding tax for the year 2005.
WON RTC has jurisdiction in an action for declaratory
relief.
Ruling:
No. RTC should have dismissed the petition for lack of
jurisdiction. Taxes, being the lifeblood of the Government,
11. CIR v. Standard Insurance Co., Inc., G.R. No. 219340. should be collected promptly and without hindrance or delay.
November 7, 2018 Section 218 of the  NIRC  expressly provides that  "no court
shall have the authority to grant an injunction to restrain the
Facts: collection of any national internal revenue tax, fee or charge
imposed by the [NIRC]." 
1. Respondent received from BIR a PAN regarding its
liability amounting to P377,038,679.55 arising from a Also, pursuant to Section 11 of R.A. No. 1125, as amended,
deficiency in the payment of DST for taxable year 2011. It the decisions or rulings of the CIR, among others, assessing
contested the PAN through its letter but the CIR any tax, or levying, or distraining, or selling any property of
nonetheless sent to it a formal letter of demand.  taxpayers for the satisfaction of their tax liabilities are
immediately executory, and their enforcement is not to be
2. The respondent requested reconsideration but it still suspended by any appeals thereof to the CTA unless "in the
received the Final Decision on Disputed Assessment opinion of the CTA the collection by the BIR or the
(FDDA), declaring its liability for the DST deficiency, Commissioner of Customs may jeopardize the interest of the
including interest and compromise penalty, totaling Government and/or the taxpayer," in which case the CTA "at
P418,830,567.46.  any stage of the proceeding may suspend the said collection
3. It sought reconsideration of the FDDA, and objected to and require the taxpayer either to deposit the amount
the tax imposed pursuant to Section 184 of the NIRC as claimed or to file a surety bond for not more than double the
violative of the constitutional limitations on taxation. amount."

4. Meanwhile, the respondent also received a demand for In this case, RTC not only grossly erred in giving due course
the payment of its deficiency income tax, value-added to the petition but even worse acted without jurisdiction.
tax, premium tax, DST, expanded withholding tax, and Assuming arguendo that RTC had jurisdiction, the
fringe benefit tax for taxable year 2012,  and deficiency action for declaratory relief was procedurally improper
DST for taxable year 2013. as a remedy.
5. The respondent commenced a civil case in the RTC (with An action for declaratory relief is governed by Section 1,
prayer for issuance of a TRO or of a writ of preliminary Rule 63 of the  Rules of Court which has the following
injunction) for the judicial determination of the requisites: (1) the subject matter of the controversy must be
constitutionality of Section 108 and Section 184 of a deed, will, contract or other written instrument, statute,
the NIRC with respect to the taxes to be paid by non-life executive order or regulation, or ordinance; (2) the terms of
insurance companies.  said documents and the validity thereof are doubtful and
6. It contended that the facts of the case must be require judicial construction; (3) there must have been no
appreciated in light of the effectivity of RA No. 10001, An breach of the documents in question; (4) there must be an
Act Reducing the Taxes on Life Insurance Policies, where actual justiciable controversy or the "ripening seeds" of one
the tax rate for life insurance premiums was reduced from between persons whose interests are adverse; (5) the issue
5% to 2%; and the pendency of deliberations on House must be ripe for judicial determination; and (6) adequate
Bill (H.B.) No. 3235,  An Act Rationalizing the Taxes relief is not available through other means or other forms of
Imposed on Non-Life Insurance Policies, where an equal action or proceeding. 
treatment for both life and non-life companies was being The third, fourth, fifth and sixth requisites were patently
sought. wanting. The third requisite was not met due to the subject of
7. RTC issued the TRO and enjoined BIR from the action having been infringed or transgressed prior to the
implementing the provisions of the NIRC  with respect to institution of the action.  Internal revenue taxes, being self-
the FDDA and to the pending assessments for taxable assessing, required no further assessment to give rise to the
years 2012 and 2013. It later on issued the writ of liability of the taxpayer. Section 184 of the  NIRC as regards
preliminary injunction. assessments for DST deficiencies states:
Section 184.  Stamp Tax on Policies of Insurance upon detect tax leaks through the matching of data available in the
Property. — On all policies of insurance or other instruments Integrated Tax Systems (ITS) with the information gathered
by whatever name the same may be called, by which from third party sources. On the basis of the consolidation
insurance shall be made or renewed upon property of any and cross-referencing of third party information, discrepancy
description, including rents or profits, against peril by sea or reports on sales and purchases were generated to uncover
on inland waters, or by fire or lightning, there shall be under-declared income and over-claimed purchases (goods
collected a documentary stamp tax of Fifty centavos (P0.50) and services). 
on each Four pesos (P4.00), or fractional part thereof, of the  
amount of premium charged:  Provided, however, That no PDI was invited to reconcile deficiencies, to which it
documentary stamp tax shall be collected on reinsurance submitted reconciliation reports. Furthermore, it executed a
contracts or on any instrument by which cession or Waiver of the Statute of Limitation consenting to the
acceptance of insurance risks under any reinsurance assessment and/or collection of taxes for the year 2004
agreement is effected or recorded. which may be found due after the investigation. In a
Preliminary Assessment Notice (PAN),  PDI was assessed
What was being thereby taxed was the privilege of issuing
for alleged deficiency income tax and VAT for taxable year
insurance policies; hence, the taxes accrued at the time the
2004. 
insurance policies were issued. Verily, the violation of
PDI sought reconsideration of the PAN and expressed its
Section 184 of the NIRC occurred upon the taxpayer's failure
willingness to execute another Waiver (Third Waiver), which
or refusal to pay the correct DST due at the time of issuing
it did on the same date, thus extending BIR's right to assess
the non-life insurance policies.
and/or collect from it until 30 April 2008.
Respondent's contention that said tax provisions are invalid
and unconstitutional for their unequal treatment of life and PDI received a Formal Letter of Demand dated 11 March
non-life insurance policies citing R.A. No. 10001 and House 2008 and an Audit Result/Assessment Notice from the BIR,
Bill No. 3235 could be said to be based on a contingency demanding for the payment of alleged deficiency VAT and
that might or might not occur. Congress has not yet income tax
addressed the difference in tax treatment of the life and non- On 16 May 2008, PDI filed its protest. On 12 December
life insurance policies. Under the circumstances, the 2008, PDI filed a Petition for Review against the
respondent would not be entitled to declaratory relief Commissioner of Internal Revenue (CIR) alleging that the
because its right — still dependent upon contingent 180-day period within which the BIR should act on its protest
legislation — was still inchoate. had already lapsed.

Lastly, the respondent's adequate remedy upon receipt of  


the FDDA for the DST deficiency for taxable year 2011 The CIR alleges that PDI filed a false or fraudulent return. As
should be an appeal taken in due course to the CTA. It, such, Section 222 of the NIRC should apply to this case and
however, resorted to the RTC to seek and obtain declaratory the applicable prescriptive period is 10 years from the
relief. By choosing the wrong remedy, it rendered the discovery of the falsity of the return. The CIR argues that the
assessment final as a consequence. As such, the petition for ten-year period starts from the time of the issuance of its
declaratory relief became mooted by the finality of the Letter Notice on 10 August 2006. As such, the assessment
assessment. made through the Formal Letter of Demand dated 11 March

 2008 is within the prescriptive period. 
Petition for review on  certiorari is GRANTED and the court  
ANNULS  the decision rendered by the RTC in civil case Issue: 
and  DISMISSES  civil case on the ground of lack of Whether or not the CTA En Banc erred in ruling that
jurisdiction. respondent is not estopped from raising the defense of
prescription.
 
 
Ruling:
YES. Under Section 203 of the NIRC, the prescriptive period
12. CIR v. Philippine Daily Inquirer, Inc., G.R. No. 213943. to assess is set at three years. This rule is subject to the
March 22, 2017 exceptions provided under Section 222 of the NIRC. The CIR
invokes Section 222 (a) which provides: 
Facts: SEC. 222. Exceptions as to Period of Limitation of
Assessment and Collection of Taxes. — 
PDI is a corporation engaged in the business of newspaper a. In the case of a false or fraudulent return with intent to
publication. On 15 April 2005, it filed its Annual Income Tax evade tax or of failure to file a return, the tax may be
Return for taxable year 2004. On 10 August 2006, PDI assessed, or a proceeding in court for the collection of
received a letter dated 30 June 2006, BIR alleged that there such tax may be filed without assessment, at any time
was an underdeclaration of domestic purchases from its within ten (10) years after the discovery of the falsity,
suppliers amounting to P317,705,610.52. The income and fraud or omission: Provided, That in a fraud
value-added tax liabilities were generated through the assessment which has become final and executory,
Reconciliation of Listing for Enforcement (RELIEF) system- the fact of fraud shall be judicially taken cognizance of
Summary List of Sales and Purchases (SLSP) and Third in the civil or criminal action for the collection thereof. 
Party Matching. Through the system, respondent was able to
In a case previously decided by the SC, it was ruled that 1. Whether the case call for an exception of the three
fraud is never imputed. The Court stated that it will not year period to be assessed
sustain findings of fraud upon circumstances which, at most, 2. Whether the petitioner failed to substantiate with a
create only suspicion. The Court added that the mere clear and convincing evidence its claim that Asalus
understatement of a tax is not itself proof of fraud for the filed a false return.
purpose of tax evasion. Thus, while the filing of a fraudulent 3. Whether the ordinary prescriptive period of 3 years
return necessarily implies that the act of the taxpayer was should be applied in this case because there was no
intentional and done with intent to evade the taxes due, the mention in the FAN or the FDDA that what would
filing of a false return can be intentional or due to honest apply was the extraordinary prescriptive period and
mistake. that the CIR did not present any evidence to support
In this case, we do not find enough evidence to prove fraud its claim of false returns.
or intentional falsity on the part of PDI Since the case does
not fall under the exceptions, Section 203 of the NIRC
should apply. Waiver was not a unilateral act of the taxpayer; 1. Yes, non-applicability of the three year period is
hence, the BIR must act on it, either by conforming to or by allowed in this case.
disagreeing with the extension. A waiver of the statute of Generally, internal revenue taxes shall be
limitations, whether on assessment or collection, should not assessed within three (3) years after the last day
be construed as a waiver of the right to invoke the defense of prescribed by law for the filing of the return, or
prescription but, rather, an agreement between the taxpayer where the return is filed beyond the period, from the
and the BIR to extend the period to a date certain, within day the return was actually filed. 19 Section 222 of
which the latter could still assess or collect taxes due. The the NIRC, however, provides for exceptions to the
waiver does not imply that the taxpayer relinquishes the right general rule. It states that in the case of a false or
to invoke prescription unequivocally. fraudulent return with intent to evade tax or of
failure to file a return, the assessment may be made
within ten (10) years from the discovery of the
Since the three Waivers in this case are defective, they do falsity, fraud or omission. In addition, a mere
not produce any effect and did not suspend the three-year showing that the returns filed by the taxpayer were
prescriptive period under Section 203 of the NIRC. false, notwithstanding the absence of intent to
defraud, is sufficient to warrant the application of
the ten year prescriptive period under Section 222
of the NIRC.

2. No, the law only requires a prima facie evidence of


a false return.
13. CIR v. Asalus Corporation, G.R. No. 221590. February
Under Section 248 (B) of the NIRC, there
22, 2017
is a prima facie evidence of a false return if there is
a substantial underdeclaration of taxable sales,
Facts: Respondent Asalus Corporation (Asalus) receipt or income. The failure to report sales,
received a Notice of Informal Conference from Revenue receipts or income in an amount exceeding 30%
Disctrict Offi ce of the BIR regarding the investigation what is declared in the returns constitute substantial
conducted by a revenue offi cer on the VAT transactions of underdeclaration. A prima facie evidence is one
Asalus for the taxable year 2007. Asalus fi led it’s letter-reply which that will establish a fact or sustain a judgment
questioning the basis of Banares computation for its VAT unless contradictory evidence is produced. 
liability. On January 10,2011, petitioner CIR issued a PAN
fi nding Asalus liable for defi ency VAT for 2007 on which In other words, when there is a showing
Asalus fi led its protest but was denied by the CIR. On that a taxpayer has substantially underdeclared its
August 26,2011, ASALUS received a FAN stating that it as sales, receipt or income, there is a presumption that
liable for defi ency VAT for 2001. Consequently, it fi led its it has filed a false return. As such, the CIR need not
protest against the FAN. Thereafter, Asalus fi led a immediately present evidence to support the falsity
supplemental protest stating that the defi eciency VAT of the return, unless the taxpayer fails to overcome
assessment had prescribed.  Asalus received the Final the presumption against it.
Decision on Disputed Assessment (FDDA) showing VAT
defi ciency for 2007. As a result, it fi led a petition for review Applied in this case, the audit investigation
before the CTA Division. revealed that there were undeclared VATable sales
more than 30% of that declared in Asalus' VAT
CTA granted the decision. It ruled that the VAT returns. Moreover, Asalus' lone witness testified that
assessment issued had prescribed and consequently not all membership fees, particularly those
deemed valid. It pointed out that there was nothing in the pertaining to medical practitioners and hospitals,
FAN and the FDDA that would indivate the non-application of were reported in Asalus' VAT returns. The testimony
the three year prescriptive period. CTA En Banc sustained of its witness, in trying to justify why not all of its
the assailed decision and dismissed the petition for review sales were included in the gross receipts reflected
filed by the CIR.  in the VAT returns, supported the presumption that
the return filed was indeed false precisely because
Issues: 
not all the sales of Asalus were included in the VAT Preliminary Assessment Notice (PAN) dated November
returns.  11, 2008, assessing Transitions Optical for its deficiency
taxes for taxable year 2004. Transitions Optical filed a written
Hence, the CIR need not present further protest on November 26, 2008.
evidence as the presumption of falsity of the returns
was not overcome. Asalus was bound to refute the The Commissioner of Internal Revenue, again through
presumption of the falsity of the return and to prove Director Santiago, subsequently issued against Transitions
that it had filed accurate returns.  Optical a Final Assessment Notice (FAN) and a Formal
Letter of Demand (FLD) dated November 28, 2008 for
3. No, substantial compliance with the requirement deficiency income tax, value-added tax, expanded
suffice. withholding tax, and final tax for taxable year 2004
amounting to P19, 701,849.68.
What is important is that the taxpayer has been sufficiently
informed of the factual and legal bases of the assessment so In its Protest Letter dated December 8, 2008 against the
that it may file an effective protest against the assessment. In FAN, Transitions Optical alleged that the demand for
the case at bench, Asalus was sufficiently informed that with deficiency taxes had already prescribed at the time the
respect to its tax liability, the extraordinary period laid down FAN was mailed on December 2, 2008.
in Section 222 of the NIRC would apply. This was
categorically stated in the PAN and all subsequent ISSUES:
communications from the CIR made reference to the PAN. 1. WON the two (2) Waivers of the Defense of Prescription
Asalus was eventually able to file a protest addressing the entered into by the parties on October 9, 2007 and June 2,
issue on prescription, although it was done only in its 2008 were valid. YES.
supplemental protest to the FAN. 2. WON the assessment of deficiency taxes against
respondent Transitions Optical Philippines, Inc. for taxable
year 2004 had prescribed. YES.

RULING:
1. As a general rule, petitioner has three (3) years to assess
taxpayers from the filing of the return. An exception to the
14. CIR v. Transitions Optical Philippines, Inc., G.R. No. rule of prescription is found in Section 222(b) and (d) of this
227544, November 22, 2017 Code, viz:

DOCTRINE: Section 222. Exceptions as to Period of Limitation of


Estoppel applies against a taxpayer who did not only raise at Assessment and Collection of Taxes-
the earliest opportunity its representative's lack of authority ....
to execute two (2) waivers of defense of prescription, but (b) If before the expiration of the time prescribed in Section
was also accorded, through these waivers, more time to 203 for the assessment of the tax, both the Commissioner
comply with the audit requirements of the Bureau of Internal and the taxpayer have agreed in writing to its assessment
Revenue. Nonetheless, a tax assessment served beyond the after such time, the tax may be assessed within the period
extended period is void. agreed upon. The period so agreed upon may be extended
FACTS: by subsequent written agreement made before the expiration
On April 28, 2006, Transitions Optical received Letter of of the period previously agreed upon.
Authority No. 00098746 dated March 23, 2006 from ....
Revenue Region No. 9, San Pablo City, of the Bureau of (d) Any intemal revenue tax, which has been assessed within
Internal Revenue. It was signed by then Officer-in-Charge- the period agreed upon as provided in paragraph (b)
Regional Director Corazon C. Pangcog and it authorized hereinabove, may be collected by distraint or levy or by a
Revenue Officers Jocelyn Santos and Levi Visaya to proceeding in court within the period agreed upon in writing
examine Transition Optical's books of accounts for intenul before the expiration of the five (5) year period. The period
revenue tax purposes for taxable year 2004. On October 9, so agreed upon may be extended by subsequent written
2007, the parties allegedly executed a Waiver of the Defense agreements made before the expiration of the period
of Prescription (First Waiver). In this supposed First Waiver, previously agreed upon.
the prescriptive period for the assessment of Transition
Optical 's internal revenue taxes for the year 2004 was Thus, the period to assess and collect taxes may be
extended to June 20, 2008. The document was signed by extended upon the Commissioner of Internal Revenue
Transitions Optical 's Finance Manager, Pamela Theresa D. and the taxpayer's written agreement, executed before
Abad, and by Bureau of Internal Revenue's Revenue District the expiration of the three (3) year period.
Officer, Myrna S. Leonida. In this case, two (2) waivers were supposedly executed by
the parties extending the prescriptive periods for assessment
This was followed by another supposed Waiver of the of income tax, value-added tax, and expanded and final
Defense of Prescription (Second Waiver) dated June 2, withholding taxes to June 20, 2008, and then to November
2008. This time, the prescriptive period was supposedly 30, 2008.
extended to November 30, 2008. Thereafter, the
Commissioner of Internal Revenue, through Regional Estoppel applies in this case.
Director Jaime B. Santiago (Director Santiago), issued a
Indeed, the Bureau of Internal Revenue was at fault when it Otherwise, the Commissioner of Internal Revenue will
accepted respondent's Waivers despite their non-compliance finalize an assessment and issue a FAN.
with the requirements of RMO No. 20-90 and RDAO No. The PAN is a part of due process. It gives both the taxpayer
05-01. and the Commissioner of Internal Revenue the opportunity to
Nonetheless, respondent's acts also show its implied settle the case at the earliest possible time without the need
admission of the validity of the waivers. for the issuance of a FAN.
First, respondent never raised the invalidity of the Waivers at On the other hand, a FAN contains not only a computation of
the earliest opportunity, either in its Protest to the PAN, tax liabilities but also a demand for payment within a
Protest to the FAN, or Supplemental Protest to the FAN. It prescribed period. As soon as it is served, an obligation
thereby impliedly recognized these Waivers' validity and its arises on the part of the taxpayer concerned to pay the
representatives' authority to execute them. Respondent only amount assessed and demanded. It also signals the time
raised the issue of these Waivers' validity in its Petition for when penalties and interests begin to accrue against the
Review filed with the Court of Tax Appeals. taxpayer. Failure to file an administrative protest within 30
days from receipt of the FAN will render the assessment
Second, respondent does not dispute petitioner's assertion final, executory, and demandable.
that respondent repeatedly failed to comply with petitioner's
notices, directing it to submit its books of accounts and
related records for examination by the Bureau of Internal
Revenue. Respondent also ignored the Bureau of Internal
Revenue's request for an Informal Conference to discuss
other "discrepancies" found in the partial documents 15. Edison (Bataan) Cogeneration Corporation v. CIR,
submitted. The Waivers were necessary to give respondent G.R. No. 210665, 30 August 2017
time to fully comply with the Bureau of Internal Revenue
notices for audit examination and to respond to its Informal FACTS:
Conference request to discuss the discrepancies. Thus, February 2, 2004- Edison (Bataan) Cogeneration
having benefitted from the Waivers executed at its instance, Corporation [EBCC] received from the Commissioner of
respondent is estopped from claiming that they were invalid Internal Revenue (CIR) a Formal Letter of Demand and Final
and that prescription had set in. Assessment Notice dated January 23, 2004 assessing
EBCC of deficiency income tax, Value Added Tax (VAT),
2. But, even as respondent is estopped from questioning the withholding tax on compensation, Expanded Withholding Tax
validity of the Waivers, the assessment is nonetheless void (EWT) and Final Withholding Tax (FWT) for taxable year
because it was served beyond the supposedly extended 2000 in the total amount of P84,868,390.16.
period.
The First Division of the Court of Tax Appeals found that "the March 3, 2004- EBCC filed with the CIR a letter-protest
date indicated in the envelope/mail matter containing the dated March 2, 2004 and furnished the CIR with the required
FAN and the FLD is December 4, 2008, which is considered documents.
as the date of their mailing. Since the validity period of the
second Waiver is only until November 30, 2008, Due to the inaction of the CIR, EBCC elevated the matter to
prescription had already set in at the time the FAN and the CTA via a Petition for Review.
the FLD were actually mailed on December 4, 2008.
While the case was pending, EBCC availed itself of the Tax
For lack of adequate supporting evidence, the Court of Tax Amnesty Program under Republic Act (RA) No. 9480. Thus,
Appeals rejected petitioner's claim that the FAN and the FLD in a November 7, 2008 Resolution, the CTA Second Division
were already delivered to the post office for mailing on deemed the Petition partially withdrawn and the case closed
November 28, 2008 but were actually processed by the post and terminated with regard to EBCC's deficiency income tax
office on December 2, 2008, since December 1, 2008 was and VAT for the year 2000.
declared a Special Holiday.
This Court finds no clear and convincing reason to overturn March 18, 2009- CTA Second Division issued a Resolution
these factual findings of the Court of Tax Appeals. setting aside the assessments against EBCC for deficiency
income tax and VAT for the taxable year 2000 in view of its
WHEREFORE, the Petition is DENIED. availment of the Tax Amnesty Program.

NOTE:
Considering the functions and effects of a PAN vis a vis a
FAN, it is clear that the assessment contemplated in Ruling of the Court of Tax Appeals Former Second Division
Sections 203 and 222 of the National Intenial Revenue Code
refors to the service of the FAN upon the taxpayer.
On November 30, 2010, the CTA Former Second Division
A PAN merely informs the taxpayer of the initial findings of
rendered a Decision partly granting the Petition. The CTA
the Bureau of Internal Revenue. It contains the proposed
Former Second Division agreed with EBCC that it was not
assessment, and the facts, law, rules, and regulations or
liable for the deficiency FWT assessment of P7,707,504.96
jurisprudence on which the proposed assessment is based.
on interest payments on loan agreements with Ogden Power
It does not contain a demand for payment but usually
International Holdings, Inc. (Ogden) for taxable year 2000
requires the taxpayer to reply within 15 days from receipt.
since its liability for interest payment became due and Moreover, considering that EBCC filed the Petition for
demandable only on June 1, 2002. Review before the CTA to question the deficiency tax
assessment issued by the CIR, it was incumbent upon
Both parties (CIR and EBCC) filed for MR which were both EBCC to prove that the deficiency tax assessment bad no
denied by CTA second Division. Both parties appealed to legal or factual basis or that it had already paid or remitted
CTA En Banc. the deficiency tax assessment as it is the taxpayer that has
the burden of proof to impugn the validity and correctness of
Ruling of the Court of Tax Appeals En Banc the disputed deficiency tax assessment.  In addition, it is a
basic rule in evidence that the person who alleges payment
It sustained the findings of the CTA Former Second Division has the burden of proving that payment has indeed been
that the assessment over EBCC's FWT on interest payments made.  More so, in cases filed before the CTA, which are
arising from its loan from Ogden was without basis as EBCC litigated  de novo, party-litigants must prove every minute
had no obligation to withhold any taxes on the interest aspect of their case.
payment for the year 2000.

ISSUE:

Whether the CTA  En Banc  erred in not recognizing [the


CIR's] judicial admission that she reduced her assessment 16. Medicard Philippines, Inc. v. CIR, G.R. No. 222743.
f o r d e fi c i e n c y F W T f o r t a x a b l e y e a r 2 0 0 0 f r o m April 5,2017
[P]10,227,622[.]72 to [P]7,384,922.52.
Facts:
EBCC's Arguments MEDICARD is a health maintenance organization
EBCC insists that it was not liable for any deficiency taxes (HMO) that provides prepaid health and medical insurance
for the year 2000 since it had already remitted the amount of coverage to its clients. Individuals enrolled in its health care
P2,842,630.20 as payment for its FWT for 2000, and that no programs pay an annual membership fee and are entitled to
proof of such payment was necessary considering the CIR's various preventive, diagnostic and curative medical services
admission in her Memorandum that the original assessment provided by duly licensed physicians, specialists, and other
of P10,227,622.72 was reduced to P7,384,992.52. professional technical staff participating in the group practice
health delivery system at a hospital or clinic owned, operated
The CIR's Arguments or accredited by it.
The CIR, however, denies that she made any judicial MEDICARD filed it first, second, and third quarterly
admission of payment and maintains that in the absence of VAT Returns through Electronic Filing and Payment System
evidence of payment, EBCC was liable to pay the deficiency (EFPS) on April 20, July 25, and October 25, 2006,
assessment as the party who alleges payment bears the respectively, and its fourth quarterly VAT Return on January
burden of proving the same.  Moreover, the CIR claims that 25, 2007.
the issue raised by EBCC is a question of fact, which is not Upon finding some discrepancies between
allowed in a Petition for Review on Certiorari under Rule 45 MEDICARD’s Income Tax Returns (ITR) and VAT Returns,
of the Rules of Court the CIR issued a Letter Notice (LN) dated September 20,
2007. Subsequently, the CIR also issued a Preliminary
Ruling: Assessment Notice (PAN) against MEDICARD for deficiency
The CIR made no judicial admission that EBCC remitted the VAT. MEDICARD received CIR’s FAN dated December 10,
amount of P2,842,630.20 as payment for its FWT for the 2007 for allegedly deficiency VAT for taxable year 2006
year 2000. In this case, EBCC claims that the CTA  En including penalties. 
Banc erred in failing to consider the judicial admission made MEDICARD filed a protest arguing, among others,
by the CIR in her Memorandum that EBCC remitted FWT in that that the services it render is not limited merely to
the amount of P2,842,630.20. We do not agree. arranging for the provision of medical and/or hospitalization
A careful reading of the Memorandum reveals that the services but include actual and direct rendition of medical
alleged remittance of the amount of P2,842,630.20 was and laboratory services. On June 19, 2009, MEDICARD
based on a Memorandum Report prepared by the revenue received CIR’s Final Decision denying its protest. The
officers recommending the denial of EBCC's protest, which petitioner MEDICARD proceeded to file a petition for review
was issued prior to EBCC's filing of its Petition for Review before the CTA. 
before the CTA. In fact, there was no mention of such The CTA Division held that the determination of
remittance in the Joint Stipulations of Facts and Issues by deficiency VAT is not limited to the issuance of Letter of
the parties and in the Answer filed by the CIR. Thus, we find Authority (LOA) alone and that in lieu of an LOA, an LN was
no error on the part of the CTA  En Banc  in not considering issued to MEDICARD informing it if the discrepancies
such statement as a judicial admission. between its ITRs and VAT Returns and this procedure is
“As heretofore discussed, out of P2,520,117.76 deficiency authorized under Revenue Memorandum Order (RMO) No.
FWT assessment on Interest Paid on Syndicated Loan in US 30-2003 and 42-2003. Also, the amounts that MEDICARD
Dollars, [EBCC] was able to substantiate FWT remittance in earmarked and eventually paid to doctors, hospitals and
the total amount of P734,400.23 only. Thus, we found clinics cannot be excluded from the computation of its gross
[EBCC] liable to pay basic deficiency FWT for the year 2000 receipts because the act of earmarking or allocation is by
in the amount of P1,785,717.53.” itself an act of ownership and management over the funds by
MEDICARD which is beyond the contemplation of RR No.
4-2007. Furthermore, MEDICARD’s earnings from its clinics
and laboratory facilities cannot be excluded from its gross No. The VAT is a tax on the value added by the
receipts because the operation of these clinics and performance of the service by the taxpayer. It is, thus, this
laboratory is merely an incident to MEDICARD’s line of service and the value charged thereof by the taxpayer that is
business as an HMO. taxable under the NLRC.
MEDICARD filed a Motion for Reconsideration but it The CTA EB overlooked that the definition of gross
was denied. Petitioner elevated the matter to the CTA en receipts under RR No. 16-2005 merely presumed that the
banc.  amount received by an HMO as membership fee is the
CTA en banc partially granted the petition only HMO's compensation for their services. As a mere
insofar as 10% VAT rate for January 2006 is concerned but presumption, an HMO is, thus, allowed to establish that a
sustained the findings of the CTA Division.  portion of the amount it received as membership fee does
NOT actually compensate it but some other person, which in
this case are the medical service providers themselves. It is
Issues: a well-settled principle of legal hermeneutics that words of a
A. Is the absence of the Letter of Authority fatal? statute will be interpreted in their natural, plain and ordinary
B. Should the amounts that MEDICARD earmarked and acceptation and signification, unless it is evident that the
eventually paid to the medical service providers still legislature intended a technical or special legal meaning to
form part of its gross receipts for VAT purposes? those words. The Court cannot read the word "presumed" in
any other way.
Ruling:
The CTA's ruling and CIR's Comment have not
The absence of an LOA violated MEDICARD's pointed to any portion of Section 108 of the NIRC that would
right to due process extend the definition of gross receipts even to amounts that
do not only pertain to the services to be performed by
The absence of the LOA violated MEDICARD’s right another person, other than the taxpayer, but even to
to due process. An LOA is the authority given to the amounts that were indisputably utilized not by MEDICARD
appropriate revenue officer assigned to perform assessment itself but by the medical service providers.
functions. Under the NLRC, unless authorized by the CIR
himself or by his duly authorized representative, through an
LOA, an examination of the taxpayer cannot ordinarily be
undertaken. An LOA is premised on the fact that the
examination of a taxpayer who has already filed his tax
returns is a power that statutorily belongs only to the CIR 17. CIR v. Systems Technology Institute, Inc., G.R. No.
himself or his duly authorized representatives. In this case, 220835, 26 July 2017
there is no dispute that no LOA was issued prior to the
issuance of a PAN and FAN against MEDICARD. Therefore, Facts:
no LOA was also served on MEDICARD.
In this case, there is no dispute that no LOA was STI filed its Amended Annual Income Tax Return for fiscal
issued prior to the issuance of a PAN and FAN against year 2003 on August 15, 2003; its Quarterly VAT Returns on
MEDICARD. Therefore no LOA was also served on July 23, 2002, October 25, 2002, January 24, 2003, and May
MEDICARD. The LN that was issued earlier was also not 23, 2003; and its Bureau of Internal Revenue (BIR) Form
converted into an LOA.  1601E for EWT from May 10, 2002 to April 15, 2003. On May
The following differences between an LOA and LN 23, 2006, STI signed a waiver of prescription under the
are crucial. First, an LOA addressed to a revenue officer is statute of limitations of the NIRC. In the first waiver, it is
specifically required under the NIRC before an examination indicated that such assessment and collection of the taxes of
of a taxpayer may be had while an LN is not found in the fiscal year 2003 shall come not later than Dec. 31, 2006. On
NIRC and is only for the purpose of notifying the taxpayer Dec. 12, 2006, another waiver was executed and extended
that a discrepancy is found based on the BIR's RELIEF the period to assess and collect taxes to March 31, 2007.
System. Second, an LOA is valid only for 30 days from date Another waiver was executed (3rd waiver) was executed
of issue while an LN has no such limitation. Third, an LOA further extending the period to June 30, 2007. 
gives the revenue officer only a period of 120 days from
receipt of LOA to conduct his examination of the taxpayer STI then subsequently received a FAN from the CIR
whereas an LN does not contain such a limitation. Simply assessing deficiency income tax, VAT and EWT for fiscal
put, LN is entirely different and serves a different purpose year 2003. STI then filed a petition for reinvestigation/
than an LOA. Due process demands, as recognized under reconsideration. Out of such, STI received the FDDA from
RMO No. 32-2005, that after an LN has serve its purpose, the CIR assessing a deficiency lower in amount than that
the revenue officer should have properly secured an LOA previously assessed. STI appealed the FDDA to the CTA via
before proceeding with the further examination and a petition for review. This was heard by the CTA second
assessment of the petitioner. Unfortunately, this was not division. The said division denied the assessment on the
done in this case. ground of prescription. It found that the waivers executed by
STI were defective for failing to strictly comply with the
The amounts earmarked and eventually paid by requirements of RMO no. 20-90 and Revenue Delegation
MEDICARD to the medical service providers do not form Authority Order (RDAO 05-01). The periods for the CIR to
part of gross receipts for VAT purposes. assess or collect internal revenue taxes were never
extended and the deficiencies that were issued by the CIR
went beyond the three-year prescriptive period. CIR filed for
a motion for reconsideration but was denied so they went to 18. CIR v. Lancaster Philippines, Inc., G.R. No. 183408,
the CTA en banc. The CTA en banc affirmed the division July 12, 2017
ruling stating that the requirements for a waiver must be
strictly complied with; otherwise, the waiver is defective and The CIR issued letters of authority (LOA) to revenue officers
the period to assess or collect is not extended.  to examine Lancaster's books for FY 1997-1998. Later, the
CIR issued deficiency income tax assessment (DITA) against
Issue:  Lancaster for FY 1998-1999. Moreover, the CIR flagged
Lancaster's alleged deviation from generally accepted
Whether or not prescription has set in against the accounting principles in using a "cropping year" not in line
assessments that were issued by the CIR.  with its FY. Finally, Lancaster applied for deductions for the
taxable year in which the tobaccos crops were realized not in
Ruling: the FY in which the expenses were incurred. The CIR
disallowed these deductions.

Yes. Sec. 203 of the NIRC provides that the period to collect 

and assess internal revenue taxes is 3 years counted from On appeal, the CTA resolved that there was excess of
the last day prescribed by law for the filing of the return or authority on the part of the CIR and its revenue officers,
from the day the return was filed, whichever comes later. In citing the disparity in coverage between the LOA and the
this regard, the CTA Division found that the last day for the DITA. However, this issue was never raised by Lancaster.

CIR to issue an assessment on STI's income tax for fiscal 

year ending March 31, 2003 was on August 15, 2006; while ISSUES:

the latest date for the CIR to assess STI of EWT for the fiscal [1] Does the CTA have power to rule upon the CIR's
year ending March 31, 2003 was on April 17, 2006; and the or revenue officers' scope of authority?

latest date for the CIR to assess STI of deficiency VAT for [2] Did the CTA err in resolving the issue on the revenue
the four quarters of the same fiscal year was on May 25, officers' acts in excess of authority although never raised by
2006. Clearly, on the basis of these dates, the final Lancaster?

assessment notice dated June 16, 2007, 38 assessing STI [3] Did the revenue officers exceed their authority in
for deficiency income tax, VAT and EWT for fiscal year 2003, examining Lancaster's books for FY 1 April 1997 to 31 March
in the aggregate amount of P161,835,737.98, which STI 1998 but issuing DITA for FY 1 April 1998 to 31 March 1999?

received on June 28, 2007, 39 was issued beyond the three- [4] Did Lancaster deviate from GAAP by adopting a method
year prescriptive period. by which its incomes and deductions within a "cropping year"
are included in its return for the following year, considering
The requirements and procedure laid down in Sec. 222 of that these years do not coincide?

the NIRC as well as RMO 20-90 and RDAO 05-01 to have a [5] Was Lancaster wrong in applying for deductions for the
valid waiver must be strictly complied with. The requirements taxable year in which the gross income on tobacco crops
crucial to this case are: (2) the waiver must be signed by the was realized and not in the FY in which they were incurred?
taxpayer himself or his duly authorized representative. In the HELD:

case of a corporation, the waiver must be signed by any of [1] Yes, the CTA has jurisdiction to rule upon  other matters
its responsible officials. In case the authority is delegated by arising under the National Internal Revenue Code or other
the taxpayer to a representative, such delegation should be law or part of law administered by the BIR.

in writing and duly notarized, and (5) Both the date of 

execution by the taxpayer and date of acceptance by the Since it is the power of the CIR to examine and assess
Bureau should be before the expiration of the period of taxpayers, and it is pursuant to such power that the CIR
prescription or before the lapse of the period agreed upon in authorized its revenue offi cers to conduct an examination of
case a subsequent agreement is executed.  the books of account and accounting records of Lancaster,
and eventually issue a defi ciency assessment against it,
The court observed that the waivers executed by STI are such power being one granted by the Tax Code, the CTA has
defective, Firstly, at the time when the first waiver took effect, power to judge this issue.
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. Secondly, STI's [2] No the CTA did not err. Under the Revised Rules of the
signatory to the three waivers had no notarized written Court of Tax Appeals, "In deciding the case, the Court may
authority from the corporation's board of directors. Lastly, the not limit itself to the issues stipulated by the parties but may
waivers in this case did not specify the kind of tax and the also rule upon related issues necessary to achieve an
amount of tax due. orderly disposition of the case."


[3] Yes, the revenue officers exceeded their authority in
doing so.


The audit process normally commences with the issuance by
the CIR of a Letter of Authority. 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 expense is related to be realized in the same year that it is
scrutinize a taxpayer's books and records, in relation to paid or incurred. As noted by the CTA, the crop method is an
internal revenue tax liabilities for a particular period. The unusual method of accounting, unlike other recognized
DITA should be based on the FY covered by the LOA. accounting methods that, by mandate of Sec. 45 of the

 NIRC, strictly require expenses be taken in the same taxable

 year when the income is 'paid or incurred, ' or 'paid or
Under  Revenue Memorandum Order (RMO) No. 43-90,  the accrued, ' depending upon the method of accounting
LOA shall cover a taxable period not exceeding one taxable employed by the taxpayer.
year. Therefore, although in this case the LOA states,
"taxable year 1998 to [blank]," it is presumed that the 19. Procter & Gamble Asia PTE LTD. v. CIR, G.R. No.
authority is for one taxable year only. Hence, when the DITA 205652, 6 September 2017
for the following year was issued, there was excess of
authority.
 FACTS:

 • P&G is a foreign corporation duly organized and
[4] No, Lancaster did not.  In the present case, we find it existing under the laws of Singapore and is
wholly justifiable for Lancaster, as a business engaged in the maintaining a Regional Operating Headquarter in the
production and marketing of tobacco, to adopt the crop Philippines. It provides management, marketing,
method of accounting.
 technical and financial advisory, and other qualified

 services to related companies as specified by its
An accounting method is a "set of rules for determining when Certificate of Registration and License issued by the
and how to report income and deductions."The Tax Code SEC. It is a VAT-registered taxpayer and is covered
recognizes the following methods: (1) Cash basis method; by BIR Certificate of Registration.
(2) Accrual method; (3) Installment method; (4) Percentage • On March 22, 2007 and May 2, 2007, P&G filed
of completion method; and (5) Other accounting methods.
 applications and letters addressed to the BIR RDO

 No. 49, requesting the refund or issuance of tax
Any of the foregoing methods may be employed by any credit certificates (TCCs) of its input VAT attributable
taxpayer so long as it reflects its income properly and such to its zero-rated sales covering the taxable periods of
method is used regularly. The peculiarities of the business or January 2005 to March 2005, and April 2005 to June
occupation engaged in by a taxpayer would largely 2005.
determine how it would report incomes and expenses in its • On March 28, 2007, P&G filed a petition for review
accounting books or records. The NIRC does not prescribe a with the CTA seeking the refund or issuance of TCC
uniform, or even specific, method of accounting.
 in the amount of P23,090,729.17 representing input

 VAT paid on goods or services attributable to its
An example of such method not expressly mentioned in the zero-rated sales for the first quarter of taxable year
NIRC, but duly approved by the CIR, is the 'crop method of 2005.
accounting' authorized under RAM No. 2-95. The pertinent • On June 8, 2007, P&G filed with the CTA another
provision reads: Crop Year Basis is a method applicable only judicial claim for refund or issuance of TCC in the
to farmers engaged in the production of crops which take amount of P19,006,753.58 representing its unutilized
more than a year from the time of planting to the process of input VAT paid on goods and services attributable to
gathering and disposal. Expenses paid or incurred are its zero-rated sales for the second quarter of taxable
deductible in the year the gross income from the sale of the year 2005.
crops are realized.
 • While P&G's claim for refund or tax credit was

 pending before the CTA Division, SC promulgated
The crop method recognizes that the harvesting and selling CIR v. Aichi Forging Company of Asia, Inc. (Aichi). In
of crops do not fall within the same year that they are planted that case, the Court held that compliance with the
or grown. This method is especially relevant to farmers, or 120-day period granted to the CIR, within which to
those engaged in the business of producing crops who, act on an administrative claim for refund or credit of
pursuant to RAM No. 2-95, would then be able to compute unutilized input VAT, as provided under Section
their taxable income on the basis of their crop year. On when 112(C) of the NIRC, as amended, is mandatory and
to recognize expenses as deductions against income, the jurisdictional in filing an appeal with the CTA.
governing rule is found in the second sentence of Subsection • CTA dismissed petition for having been prematurely
F cited above. The rule enjoins the recognition of the filed.
expense (or the deduction of the cost) of crop production in
the year that the crops are sold (when income is realized).
 ISSUE:

 Whether the CTA En Banc erred in dismissing P&G's judicial
[5] No, there was no error in Lancaster doing so.
 claims for refund on the ground of prematurity

A reading of RAM No. 2-95, however, clearly evinces that it RULING:
conforms with the concept that the expenses paid or incurred
be deducted in the year in which gross income from the sale YES. Based on the plain language of Section 112 of the
of the crops is realized. Put in another way, the expenses are NIRC, the CIR is given 120 days within which to grant or
matched with the related incomes which are eventually deny a claim for refund. Upon receipt of CIR's decision or
earned. Nothing from the provision is it strictly required that ruling denying the said claim, or upon the expiration of the
for the expense to be deductible, the income to which such 120-day period without action from the CIR, the taxpayer has
30 days within which to fi le a petition for review with the years ending June 30, 1996 and 1998; and that on June 29,
CTA. 2007, it paid the basic taxes in the amounts of
P4,187,683.27 and P6,097,825.03 for the said fiscal years,
In Aichi, the Court ruled that compliance with the 120+30-day respectively. Asiatrust also claimed that on March 6, 2008, it
periods is mandatory and jurisdictional and is fatal to the availed of the provisions of Republic Act (RA) No. 9480,
filing of a judicial claim with the CTA. Subsequently, however, otherwise known as the Tax Amnesty Law of 2007.
in San Roque, while the Court reiterated the mandatory and
jurisdictional nature of the 120+30-day periods, it recognized The CTA Division rendered a Decision partially granting the
as an exception BIR Ruling No. DA-489-03, issued prior to Petition and declared void the tax assessments for fiscal
the promulgation of Aichi, where the BIR expressly allowed year ending June 30, 1996 for having been issued beyond
the filing of judicial claims with the CTA even before the lapse the three-year prescriptive period. However, due to the
of the 120-day period. failure of Asiatrust to present documentary and testimonial
evidence to prove its availment of the Tax Abatement
BIR Ruling No. DA-489-03 furnishes a valid basis to hold the Program and the Tax Amnesty Law, the CTA Division
CIR in estoppel because the CIR had misled taxpayers into affirmed the deficiency DST- Special Savings Account (SSA)
filing judicial claims with the CTA even before the lapse of the assessments for the fiscal years ending June 30, 1997 and
120-day period. 1998 and the deficiency DST - Interbank Call Loans (IBCL)
and deficiency final withholding tax - trust assessments for
In this case, records show that P&G filed its judicial claims fiscal year ending June 30, 1998, in the total amount of
for refund on March 28, 2007 and June 8, 2007, respectively, ₱142,777,785.91.
or after the issuance of BIR Ruling No. DA-489-03, but
before the date when Aichi was promulgated. Thus, even However, Asiatrust's deficiency documentary stamp tax -
though P&G filed its judicial claim without waiting for the Special Savings Account assessments for the fiscal years
expiration of the 120-day mandatory period, the CTA may still ended June 30, 1997 & 1998, and deficiency documentary
take cognizance of the case because the claim was filed stamp tax - IBCL and deficiency final withholding tax - trust
within the excepted period stated in San Roque. In other assessments for the fiscal year ended June 30, 1998, in the
words, P&G's judicial claims were deemed timely filed and aggregate amount of P142,777,785.91 are hereby affirmed.
should not have been dismissed by the CTA.
Asiatrust filed a Motion for Reconsideration attaching
photocopies of its Application for Abatement Program, BIR
Payment Form, BIR Tax Payment Deposit Slip, Improved
Voluntary Assessment Program Application Forms, Tax
Amnesty Return, Tax Amnesty Payment Form, Notice of
20. Asiatrust Development Bank, Inc. v. CIR, G.R. No. Availment of Tax Amnesty and Statement of Assets and
201530. April 19, 2017 Liabilities and Networth (SALN). The CIR, on the other hand,
filed a Motion for Partial Reconsideration of the assessments
Asiatrust Development Bank, Inc. (Asiatrust), on separate assailing the CTA Division's finding of prescription and
dates in February 2000, received from the Commissioner of cancellation of assessment notices for deficiency income,
Internal Revenue (CIR) three Formal Letters of Demand DST - regular, DST - trust, and fringe benefit tax for fiscal
(FLD) with Assessment Notices for deficiency internal years ending June 30, 1997 and 1998. The CTA Division
revenue taxes in the amounts of P131,909,161.85, issued a Resolution denying the motion of the CIR while
P83,012,265.78, and ₱l44,012,918.42 for fiscal years ending partially granting the motion of Asiatrust.
June 30, 1996, 1997, and 1998, respectively.
The CIR appealed the Decision and the Resolution before
Asiatrust timely protested the assessment notices. Due to the CTA En Banc via a Petition for Review. The CTA En Banc
the inaction of the CIR on the protest, Asiatrust filed before however dismissed the Petition for being premature
the CTA a Petition for Review praying for the cancellation of considering that the proceedings before the CTA Division
the tax assessments for deficiency income tax, documentary was still pending.
stamp tax (DST) - regular, DST - industry issue, final
withholding tax, expanded withholding tax, and fringe Asiatrust filed a Manifestation informing the CTA Division that
benefits tax issued against it by the CIR. the BIR issued a Certification that Asiatrust paid the amounts
of ₱4,187,683.27 and ₱6,097,825.03 at the DBP in
The CIR issued against Asiatrust new Assessment Notices connection with the One-Time Administrative Abatement.
for deficiency taxes in the amounts of ₱l 12,816,258.73,
₱53,314,512.72, and ₱133,013,458.73, covering the fiscal The CTA Division rendered an Amended Decision finding
years ending June 30, 1996, 1997, and 1998, respectively that Asiatrust is entitled to the immunities and privileges
and Asiatrust partially paid said deficiency tax assessments granted in the Tax Amnesty Law.
thus leaving some balances.
Asiatrust moved for partial reconsideration insisting that the
The CIR approved Asiatrust's Offer of Compromise of DST - Certification issued by the BIR is sufficient proof of its
regular assessments for the fiscal years ending June 30, availment of the Tax Abatement Program considering that the
1996, 1997, and 1998. During the trial, Asiatrust manifested CIR has not yet issued a termination letter. The CTA Division
that it availed of the Tax Abatement Program for its issued a Resolution denying Asiatrust's motion. The CTA
deficiency final withholding tax - trust assessments for fiscal Division maintained that it cannot consider Asiatrust's
availment of the Tax Abatement Program in the absence of a mandatory, and not merely directory. In this case, the CIR's
termination letter from the BIR. Both parties appealed to CTA failure to move for a reconsideration of the Amended
En Banc. The CTA En Banc denied both appeals. It denied Decision of the CTA Division is a ground for the dismissal of
the CIR's appeal for failure to file a prior motion for its Petition for Review before the CTA En Banc. Thus, the
reconsideration of the Amended Decision, while it denied CTA En Banc did not err in denying the CIR's appeal on
Asiatrust's appeal for lack of merit. The CTA En Banc procedural grounds.
sustained the ruling of the CTA Division that in the absence
of a termination letter, it cannot be established that Asiatrust
validly availed of the Tax Abatement Program.

The CTA En Banc denied the motions for partial


reconsideration of the CIR and Asiatrust. Hence, the instant 21. CIR v. Liquigaz Philippines, G.R. Nos. 215534 &
consolidated Petitions under Rule 45 of the Rules of Court. 215557, April 18, 2016

ISSUE/S: Facts: Liquigaz Philippines Corporation is a corporation duly


1. WON Asiatrust’s application for tax abatement is deemed organized and exiting under Philippine Laws. It received a
approved. copy of Letter of Authority authorizing the investigation of all
2. WON the CTA En Banc committed error when it dismissed internal revenue taxes for taxable year 2005. Afterwards, it
CIR’s petition for review on the received a Notice of Informal Conference as well as detailed
ground that it failed to timely file a motion for reconsideration computation of its supposed tax liability. It then received a
or new trial with the division. preliminary Assessment Notice together with the attached
detailed discrepancies for the said year with respect to the
HELD: expanded withholding tax, withholding tax on compensation
1. NO. Based on the guidelines, the last step in the tax and fringe benefi ts tax. It then received a Formal letter of
abatement process is the issuance of the termination letter. Demand or Formal assessment notice. Liquigaz fi led its
The presentation of the termination letter is essential as it protest against FLD/FAN. Then it received a copy of FDDA
proves that the taxpayer's application for tax abatement has covering the tax audit for the year 2005 amounting to
been approved. Thus, without a termination letter, a tax Php22,380,025.19 
assessment cannot be considered closed and terminated.
CTA Division Ruling: Only granted Liquigaz petition
In this case, Asiatrust failed to present a termination letter cancelling the EWT and FBT assessments because the
from the BIR. Instead, it presented a Certification issued by FDDA relating to these two assessments was void for it did
the BIR to prove that it availed of the Tax Abatement not provide details. Liquigaz has no way of knowing what
Program and paid the basic tax. It also attached copies of its items were considered by the CIR in arriving at the
BIR Tax Payment Deposit Slips and a Jetter issued by RDO deficiency assessments. Although the legal bases for EWT
Nacar. These documents, however, do not prove that and FBT assessments were stated in the FDDA, the
Asiatrust's application for tax abatement has been approved. taxpayer was not notified of the factual bases thereof.
If at all, these documents only prove Asiatrust's payment of
As to WTC, it was upheld because the factual bases used in
basic taxes, which is not a ground to consider its deficiency
the FLD and FDDA with regard thereto were the same. 
tax assessment closed and terminated. Since no termination
letter has been issued by the BIR, there is no reason for the CTA En Banc: Affirmed CTA Division
Court to consider as closed and terminated the tax
assessment on Asiatrust's final withholding tax for fiscal year Issue: Whether or not the CTA erred in partially upholding
ending June 30, 1998.  the validity of the assessment as to the WTC but declaring
  the assessment on EWT and FBT as invalid.
2. NO. An appeal to the CTA En Banc must be preceded by
the filing of a timely motion for reconsideration or new trial Under Section 228 of the NIRC, a taxpayer shall be informed
with the CTA Division. in writing of the law and the facts on which the assessment is
made, otherwise, the assessment shall be void. In
Section 1, Rule 8 of the Revised Rules of the CTA states:  implementing Section 228 of the NIRC, RR No. 12-99
reiterates the requirement that a taxpayer must be informed
SECTION 1. Review of cases in the Court en banc. - in writing of the law and the facts on which his tax liability
In cases falling under the exclusive appellate jurisdiction of was based, to wit: 
the Court en banc, the petition for review of a decision or SECTION 3. Due Process Requirement in the Issuance of a
resolution of the Court in Division must be preceded by the Deficiency Tax
filing of a timely motion for reconsideration or new trial with
the Division. Assessment. —

Thus, in order for the CTA En Banc to take cognizance of an 3.1.4 Formal Letter of Demand and Assessment Notice. —
appeal via a petition for review, a timely motion for The formal letter of demand and assessment notice shall be
reconsideration or new trial must first be filed with the CTA issued by the Commissioner or his duly authorized
Division that issued the assailed decision or resolution. representative. The letter of demand calling for payment of
Failure to do so is a ground for the dismissal of the appeal as the taxpayer's deficiency tax or taxes shall state the facts,
the word "must" indicates that the filing of a prior motion is the law, rules and regulations, or jurisprudence on which the
assessment is based, otherwise, the formal letter of demand
and assessment notice shall be void…

3.1.6 Administrative Decision on a Disputed Assessment. — 22. Sps. Pacquiao v. CTA, G.R. No. 213394, [April 6, 2016]
The decision of the Commissioner or his duly authorized
representative shall (a) state the facts, the applicable law, Facts: Pacquiao fi led his 2008 income tax return on April 15,
rules and regulations, or jurisprudence on which such 2009 reporting his Philippine-sourced income. It was
decision is based, otherwise, the decision shall be void (see subsequently amended to include his US-sourced income.
illustration in ANNEX C hereof), in which case, the same
shall not be considered a decision on a disputed On March 25, 2010, Pacquiao received a Letter of Authority
assessment; and (b) that the same is his final decision. (March LA) from the Regional District Office No. 43 (RDO) of
the Bureau of Internal Revenue (BIR) for the examination of
The use of the word "shall" in Section 228 of the NIRC and in his books of accounts and other accounting records for the
RR No. 12-99 indicates that the requirement of informing the period covering January 1, 2008 to December 31, 2008.
taxpayer of the legal and factual bases of the assessment
and the decision made against him is mandatory. The On April 15, 2010, Pacquiao filed his 2009 income tax return,
requirement of providing the taxpayer with written notice of which although reflecting his Philippines-sourced income,
the factual and legal bases applies both to the FLD/FAN and failed to include his income derived from his earnings in the
the FDDA. US. He also failed to file his Value Added Tax (VAT) returns
for the years 2008 and 2009.
However, it should be noted that a void FDDA does not ipso
facto result in the nullification of the assessment. In resolving CIR issued another Letter of Authority, dated July 27, 2010
the issue on the effects of a void FDDA, it is necessary to (July LA), authorizing the BIR's National Investigation
differentiate an "assessment" from a "decision." it is clear Division (NID) to examine the books of accounts and other
that what is appealable to the CTA is the "decision" of the accounting records of both Pacquiao and Jinkee for the last
CIR on disputed assessment and not the assessment itself. 15 years, from 1995 to 2009. On September 21, 2010 and
An assessment becomes a disputed assessment after a September 22, 2010, the CIR replaced the July LA by issuing
taxpayer has filed its protest to the assessment in the to both Pacquiao and Jinkee separate electronic versions of
administrative level. Thereafter, the CIR either issues a the July LA pursuant to Revenue Memorandum Circular
decision on the disputed assessment or fails to act on it and (RMC) No. 56-2010.
is, therefore, considered denied. The taxpayer may then
appeal the decision on the disputed assessment or the Petitioners, through counsel, wrote a letter questioning the
inaction of the CIR. As such, the FDDA is not the only means propriety of the CIR investigation. According to the
that the final tax liability of a taxpayer is fixed, which may petitioners, they were already subjected to an earlier
then be appealed by the taxpayer. Under the law, inaction on investigation by the BIR for the years prior to 2007, and no
the part of the CIR may likewise result in the finality of a fraud was ever found to have been committed. They added
taxpayer's tax liability as it is deemed a denial of the protest that pursuant to the March LA issued by the RDO, they were
filed by the latter, which may also be appealed before the already being investigated for the year 2008.
CTA.
Clearly, a decision of the CIR on a disputed assessment After conducting its own investigation, the CIR made its initial
differs from the assessment itself.  assessment finding that the petitioners were unable to fully
settle their tax liabilities. Thus, the CIR issued its Notice of
Hence, the invalidity of one does not necessarily result to the Initial Assessment-Informal Conference (NIC), dated January
invalidity of the other — unless the law or regulations 31, 2012, directly addressed to the petitioners, informing
otherwise provide. Section 228 of the NIRC provides that an them that based on the best evidence obtainable, they were
assessment shall be void if the taxpayer is not informed in liable for deficiency income taxes in the amount of
writing of the law and the facts on which it is based. It is, P714,061,116.30 for 2008 and P1,446,245,864.33 for 2009,
however, silent with regards to a decision on a disputed inclusive of interests and surcharges. After being informed of
assessment by the CIR which fails to state the law and facts this development, the counsel for the petitioners sought to
on which it is based. This void is filed by RR No. 12-99 have the conference reset but he never received a response.
where it is stated that failure of the FDDA to reflect the facts
and law on which it is based will make the decision void. It, Then, on "February 20, 2012, the CIR issued the Preliminary
however, does not extend to the nullification of the entire Assessment Notice (PAN), informing the petitioners that
assessment. The reason for requiring that taxpayers be based on third-party information allowed under Section 5(B)
informed in writing of the facts and law on which the [24] and 6 of the National Internal Revenue Code (NIRC),
assessment is made is the constitutional guarantee that no [25] they found the petitioners liable not only for deficiency
person shall be deprived of his property without due process income taxes in the amount of P714,061,116.30 for 2008 and
of law. P1,446;245,864.33 for 2009, but also for their non-payment
of their VAT liabilities in the amount P4,104,360.01 for 2008
and P 24,901,276.77 for 2009.

The petitioners filed their protest against the PAN.


After denying the protest, the BIR issued its Formal Letter
Demand[27] (FLD), dated May 2, 2012, finding the
petitioners liable for deficiency income tax and VAT of warrants of distraint and/or levy and warrants
amounting to P766,899,530.62 for taxable years 2008 and of garnishment.
P1,433,421,214.61 for 2009, inclusive of interests and
surcharges. Again, the petitioners questioned the findings of The BIR-ARMD informed the petitioners that they
the CIR.[28] were denying their request to defer the collection
enforcement action for lack of legal basis. The
On May 14, 2013, the BIR issued its Final Decision on same letter also informed the petitioners that
Disputed Assessment (FDDA),[29] addressed to Pacquiao despite their initial payment, the amount to be
only, informing him that the CIR found him liable for collected from both of them still amounted to
deficiency income tax and VAT for taxable years 2008 and P3,259,643,792.24, for deficiency income tax for
2009 which, inclusive of interests and surcharges, amounted taxable years 2008 and 2009, and P46,920,235.74
to a total of P2,261,217,439.92. for deficiency VAT for the same period. A warrant of
distraint and/or levy against Pacquiao and Jinkee
Seeking to collect the total outstanding tax liabilities of the was included in the letter.
petitioners, the Accounts Receivable Monitoring Division of
the BIR (BIR-ARMD), issued the Preliminary Collection Aggrieved, the petitioners filed the subject Urgent
Letter (PCL),[30] dated July 19, 2013, demanding that both Motion for the CTA to lift the warrants of distraint,
Pacquiao and Jinkee pay the amount of P2,261,217,439.92, levy and garnishments issued by the CIR against
inclusive of interests and surcharges. their assets and to enjoin the CIR from collecting
the assessed deficiency taxes pending the
Then, on August 7, 2013, the BIR-ARMD sent Pacquiao and resolution of their appeal. As for- the cash deposit
Jinkee the Final Notice Before Seizure (FNBS),[31] informing and bond requirement under Section 11 of Republic
the petitioners of their last opportunity to make the necessary Act (R.A.) No. 1125, the petitioners question the
settlement of deficiency income and VAT liabilities before the necessity thereof, arguing that the CIR's
bureau would proceed against their property. assessment of their tax liabilities was highly
questionable. At the same time, the petitioners
Although they no longer questioned the BIR's assessment of manifested that they were willing to file a bond for
their deficiency VAT liability, the petitioners requested that such reasonable amount to be fixed by the tax
they be allowed to pay the same in four (4) quarterly court.
installments. Eventually, through a series of installments,
Pacquiao and Jinkee paid a total P32,196,534.40 in
satisfaction of their liability for deficiency VAT. Issues: 
Whether or not pending appeal, the warrants of levy and
garnishment are to be given effect
Petitioner’s arguments at the CTA: Whether or not the FDDA and other notices were valid, and
1. Aggrieved that they were being made liable for thus preclude the need for a bond to suspend collection
deficiency income taxes for the years 2008 and
2009, the petitioners sought redress and filed a Ruling: The petition is PARTIALLY GRANTED. 
petition for review with the CTA. Before the CTA, the
petitioners contended that the assessment of the The April 22, 2014 and July 11, 2014 Resolutions of the CTA,
CIR was defective because it was predicated on its in so far as it required the petitioners to deposit first a cash
mere allegation that they were guilty of fraud. bond in the amount of P3,298,514,894.35 or post a bond of
P4,947,772,341.53, should be further enjoined until the
They also questioned the validity of the attempt by issues aforementioned are settled in a preliminary hearing to
the CIR to collect deficiency taxes from Jinkee, be conducted by it. Thereafter, it should make a
arguing that she was denied due process. determination if the posting of a bond would still be required
According to the petitioners, as all previous and, if so, compute it taking into account the CTA En Banc
communications and notices from the CIR were Resolution, which was approved by the Court in A.M. No.
addressed to both petitioners, the FDDA was void 15-02-01-CTA, and the claimed payment of P32,196,534.40,
because it was only addressed to Pacquiao. among others.
Moreover, considering that the PCL and FNBS were
based on the FDDA, the same should likewise be
declared void. a. On Sec. 11 of RA No. 1125

The petitioners added that the CIR assessment, General rule:


which was not based on actual transaction
documents but simply on "best possible sources," An appeal to the CTA from the decision of the CIR
was not sanctioned by the Tax Code. They also will not suspend the payment, levy, distraint,
argue that the assessment failed to consider not and/or sale of any property of the taxpayer for
only the taxes paid by Pacquiao to the US the satisfaction of his tax liability as provided by
authorities for his fights, but also the deductions existing law. 
claimed by him for his expenses.
2. Pending the resolution by the CTA of their appeal, the Exception:
petitioners sought the suspension of the issuance
When, in the view of the CTA, the collection may For the Court to make any finding of fact on this
jeopardize the interest of the Government and/or point would be premature. As stated earlier, there is
the taxpayer, it may suspend the said collection and no evidentiary basis. All the arguments are mere
require the taxpayer either to deposit the amount allegations from both sides. Moreover, any finding
claimed or to file a surety bond. by the Court would pre-empt the CTA from properly
exercising its jurisdiction and settle the main issues
The application of the exception is the issue. presented before it, that is, whether the petitioners
According to the petitioners, there is grave abuse of were afforded due process; whether the CIR has
discretion on the part of the CTA when it issued the valid basis for its assessment; and whether the
subject resolutions requiring them to deposit-the petitioners should be held liable for the deficiency
amount of P3,298,514,894.35 or post a bond in the taxe
amount of P4,947,772,341.53 as a condition for its
order enjoining the CIR from collecting the taxes b. To resolve the issue of whether the petitioners
from them.  should be required to post the security bond under
Section 11 of R.A. No. 1125, and, if so, in what,
The petitioners anchor their contention on the amount, the CTA must take into account, among
premise that the assessment and collection others, the following:
processes employed by the CIR in exacting their
tax liabilities were in patent violation of their First. Whether the requirement of a Notice of
constitutional right to due process of law. They, Informal Conference was complied with - As with
thus, posit that pursuant to Avelino and Zulueta, the the other notices required under the regulation, the
tax court should have not only ordered the CIR to purpose of sending a NIC is but part of the "due
suspend the collection efforts it was pursuing in process requirement in the issuance of a
satisfaction of their tax liability, but also dispensed deficiency tax assessment," the absence of which
with the requirement of depositing a cash or filing a renders nugatory any assessment made by the
surety bond. tax authorities.

Reviewing jurisprudence, the Court concluded that Second. Whether the 15-year period subject of
the authority of the courts to issue injunctive writs to the CIR's investigation is arbitrary and
restrain the collection of tax and to dispense with excessive. - Section 203[63] of the Tax Code
the deposit of the amount claimed or the filing of the provides a 3-year limit for the assessment. of
required bond is not simply confined to cases internal revenue taxes. While the prescriptive period
where prescription has set in. As explained by to assess deficiency taxes may be extended to 10
the Court in those cases, whenever it is years in cases where there is false, fraudulent, or
determined by the courts that the method non-filing of a tax return - the fraud contemplated
employed by the Collector of Internal Revenue by law must be actual. It must be intentional,
in the collection of tax is not sanctioned by law, consisting of deception willfully and deliberately
the bond requirement under Section 11 of R.A. No. done or resorted to in order to induce another to
1125 should be dispensed with. The purpose of give up some right.
the rule is not only to prevent jeopardizing the
interest of the taxpayer, but more importantly, to Third. Whether fraud was duly established. - In
prevent the absurd situation wherein the court its letter, dated December 13, 2010, the NID had
would declare "that the collection by the summary been conducting a fraud investigation against the
methods of distraint and levy was violative of law, petitioners under its RATE program and that it found
and then, in the same breath require the petitioner that "fraud had been established in the instant case
to deposit or file a bond as a prerequisite for the as determined by the Commissioner." Under
issuance of a writ of injunction." Revenue Memorandum Order (RMO) No. 27-10, it
is required that a preliminary investigation must
The Court finds no reason to exempt petitioners first be conducted before a LA is issued.
from depositing a cash bond or filing a surety
bond before a suspension order may be Fourth. Whether the FLD issued against the
effected. THis is because the assailed resolution petitioners was irregular. - The FLD issued
was made without stating facts and law and to against the petitioners allegedly stated that the
determine whether methods employed to collect tax amounts therein were "estimates based on best
were illegal requires evidence. The CTA should possible sources." A taxpayer should be informed
have conducted a preliminary hearing and received in writing of the law and the facts on which the
evidence so it could have properly determined assessment is made, otherwise, the assessment
whether the requirement of providing the required is void. An assessment, in order to stand judicial
security under Section 11, R.A. No. 1125 could be scrutiny, must be based on facts. The presumption
reduced or dispensed with pendente lite. The of the correctness of an assessment, being a mere
remand of the case to the CTA on this question presumption, cannot be made to rest on another
is, therefore, more sensible and proper. presumption. Thus, there is a need for the CTA to
conduct a preliminary hearing.
Fifth. Whether the FDDA, the PCL, the FNBS, and
the Warrants of Distraint and/or Levy were
validly issued. In its hearing, the CTA must also
determine if the following allegations of the
petitioners have merit:
23. CIR v. Standard Chartered Bank, G.R. No. 192173,
a. The FDDA and PCL were issued July 29, 2015
against petitioner Pacquiao only. The
Warrant of Distraint and/or Levy/ FACTS: SCB received a Formal Letter of Demand dated
Garnishment issued by the CIR, June 24, 2004 for defi ciency taxes and increments for the
however, were made against the taxable year 1998, amounting to P33.3M. On August 12,
assets of both petitioners; 2004, SCB protested against said assessment and
b. The warrants of garnishment had requested the CIR that it be withdrawn and cancelled. CIR
been served on the banks of both had not rendered a decision, prompting SCB to fi le a Petition
petitioners even before the petitioners for Review before the CTA in division.
received the FDDA and PCL; The CTA in division granted the petition of SCB,
c. The Warrant of Distraint and/or Levy/ canceled and set aside the FLD and Assessment Notices on
Garnishment against the petitioners the ground that CIR’s right to assess was already barred by
was allegedly made prior to the prescription. CIR presented copies of Waivers of Statute of
expiration of the period allowed for the Limitations executed by both parties. CTA in division,
petitioners to pay the assessed however, noted that these waivers did not strictly comply with
deficiency taxes; Revenue Memorandum Order No. 20-90. CIR filed for
d. The Warrant of Distraint and/or Levy/ MRecon, but it was denied.
Garnishment against petitioners failed CIR appealed with the CTA En Banc, but if affirmed
to take into consideration that the in toto the decision of CTA in division. Upon denial of CIR’s
deficiency VAT was already paid in full; Motion for Reconsideration, it filed the instant Petition for
and Review on Certiorari.
e. Petitioners were not given a copy of ISSUE: W/N petitioner’s right to assess respondent for
the Warrants. Sections 207[68] and defi ciency taxes for 1998 has already prescribed
208[69] of the Tax Code require the RULING: YES.
Warrant of Distraint and/or Levy/ The period for petitioner to assess and collect an
Garnishment be served upon the internal revenue tax is limited only to three years by Section
taxpayer. 203 of the NIRC of 1997. This mandate is primarily to
safeguard the interests of taxpayers from unreasonable
c. In case the CTA finds that the petitioners should investigation by not indefinitely extending the period of
provide the necessary security under Section 11 of assessment and depriving the taxpayer of the assurance that
R.A. 1125, a recomputation of the amount thereof is it will no longer be subjected to further investigation for taxes
in order. in A.M. No. 15-92-01-CTA, resolved to after the expiration of reasonable period of time.
approve the CTA En Banc Resolution No. 02-2015, As an exception, Section 222 authorizes the
where the phrase "amount claimed" stated in extension of the original three-year prescriptive period by the
Section 11 of R.A. No. 1125 was construed to refer execution of a valid waiver. RMO No. 20-90 outlines the
to the principal amount of the deficiency taxes, procedure for the proper execution of a waiver and failure to
excluding penalties, interests and surcharges. comply with any of the requisites renders a waiver defective
Moreover, the CTA should.also consider the claim of and ineffectual. The waivers executed by CIR and SCB were
the petitioners that they already paid a total of in violation of RMO 20-90:
P32,196,534.40 deficiency VAT assessed against' 1. the CIR did not sign (assessment was more than P1M)
them.. Despite said payment, the CIR still assessed 2. date of acceptance and the amount and kind of tax due
them the total amount of P3,298,514,894.35, were not indicated
including the amount assessed as VAT deficiency, 3. the waiver speaks of request to extend the period to file
plus surcharges, penalties and interest. If so, these additional documents, not the request for recon or
should also be deducted from the.amount of the reinvestigation as required by RMO 20-90.
bond to be computed and required. The period to assess the tax liabilities of respondent
for taxable year 1998 was never extended. Consequently,
when the succeeding waivers of Statute of Limitations were
subsequently executed covering the same tax liabilities of
respondent, and there being no assessment having been
issued as of that time, prescription has already set in.
[Although respondent paid the deficiency WTC and
FWT assessments, it did not waive the defense of
prescription as regards the remaining tax deficiencies, it
being on record that respondent continued to raise the issue
of prescription. Doctrine of estoppel not applicable.]
The Formal Letter of Demand and Assessment
Notices are void. Petition is denied.
1989 is the reckoning date, the BIR had three years to
24. China Banking Corporation v. CIR, G.R. No. 172509, collect the assessed DST. However, the records of this case
February 4, 2015 show that there was neither a warrant of distraint or levy
served on CBC's properties nor a collection case filed in
FACTS: court by the BIR within the three-year period.
China Banking Corporation was engaged in transactions
involving sales of foreign exchange to the Central Bank of The demand was made almost thirteen years from the date
the Philippines, commonly known as SWAP transactions. from which the prescriptive period is to be reckoned. Thus,
Petitioner did not file tax returns or pay tax on the SWAP the attempt to collect the tax was made way beyond the
transactions for the years 1982 to 1986. three-year prescriptive period.

On 19 April 1989, petitioner CBC received an assessment 2. The running of the statute of limitations was not
from the BIR finding CBC liable for deficiency DST on the suspended by the request for reinvestigation.
sales of foreign bills of exchange to the Central Bank. A request for reinvestigation alone will not suspend the
statute of limitations. Two things must concur:
CBC filed a protest under the following grounds: (1) there must be a request for reinvestigation and
1. double taxation, as the bank had previously paid the (2) the CIR must have granted it.
DST on all its transactions. In the present case, there is no showing from the records
2. absence of liability, as the liability falls on the buyer. that the CIR ever granted the request for reinvestigation filed
3. due process violation, as the bank’s records were by CBC. That being the case, it cannot be said that the
never formally examined. running of the three-year prescriptive period was effectively
4. validity of the assessment, as it did not include the suspended.
factual basis therefore.
5. exemption, as neither the tax-exempt entity nor the
other party was liable for the payment of DST.

In the protest, the taxpayer requested a reinvestigation so as


to substantiate its assertions. On 6 December 2001, more 25. CIR v. CBK Power Company Limited, G.R. Nos.
than 12 years after the filing of the protest, the CIR rendered 193383-84, January 14, 2015
a decision reiterating the deficiency DST assessment and
ordered the payment thereof plus increments within 30 days DOCTRINES:
from receipt of the Decision.
· Application for tax treaty relief with the ITAD
Appeal was taken to the CTA but it was denied, including the merely operates to confirm the entitlement of the
appeal to CTA en banc. taxpayer to the relief.
· Section 229 of the NIRC, as worded, only requires
The taxpayer appealed to the Supreme Court reiterating the that an administrative claim be priorly filed. In no
arguments it raised at the CTA level and invoking for the first wise does the law implies that the CIR first act
time the argument of prescription. Petitioner CBC states that upon the taxpayer’s claim, and that the taxpayer
the government has three years from 19 April 1989, the date shall not go to court before he is notified of the
the former received the assessment of the CIR, to collect the CIR’s action. The claim with the CIR was intended
tax. However, neither a warrant of distraint or levy was primarily as a notice of warning.
issued, nor a collection case filed in court.
FACTS:
ISSUES: • CBK Power is a limited partnership organized under
1. Whether the right of the BIR to collect the assessed Philippine law and primarily engaged in the development
DST from CBC is barred by prescription. and operation of the Caliraya, Botocan, and Kalayaan
2. Whether the request for reinvestigation tolled the hydroelectric power generating plants in Laguna (CBK
running of the statute of limitations. Project).

RULING: • To finance the CBK Project, CBK Power obtained a


1. Prescription has set in. syndicated loan from several foreign banks: Industrial
The applicable law in this case is Section 319(c) of the 1977 Bank of Japan, Fortis-Netherlands, Raiffesen Bank, Fortis
NIRC. In that provision, the time limit for the government to Belgium, and Mizuho Bank for which it remitted interest
collect the assessed tax is set at three years, to be reckoned payments from May 2001 to May 2003. It withheld final
from the date when the BIR mails/releases/sends the taxes from said payments and paid the same to the
assessment notice to the taxpayer. Further, Section 319(c) RDO: 15% for Fortis Belgium, Fortis-Netherlands, and
states that the assessed tax must be collected by distraint or Raiffesen Bank; and 20% for Industrial Bank of Japan
levy and/or court proceeding within the three-year period. and Mizuho Bank.
The records do not show when the assessment notice was
mailed, released or sent to CBC. Nevertheless, the latest • However, according to CBK Power, under the relevant
possible date that the BIR could have released, mailed or tax treaties, the interest income derived by the
sent the assessment notice was on the same date that CBC aforementioned banks are subject only to a preferential
received it, 19 April 1989. Assuming therefore that 19 April tax rate of 10%. Accordingly, it filed a claim for refund of
its excess FWT allegedly erroneously withheld and
collected for the years 2001 and 2002 on April 14, 2003. • Sections 204 and 229 of the NIRC pertain to the
The claim for refund of excess FWT in 2003 was filed on refund of erroneously or illegally collected
March 4, 2005. taxes. Section 204 applies to administrative claims
for refund, while Section 229 to judicial claims for
• The CIR’s inaction on said claims prompted CBK Power refund. In both instances, the taxpayer's claim
to file petitions for review before the CTA. must be filed within two (2) years from the date
of payment of the tax or penalty. However,
• CTA First Division ordered the refund, finding that the Section 229 of the NIRC further states the
relevant tax treaties were applicable. Upon MR, CTA First condition that a judicial claim for refund may
Division amended its earlier decision by reducing the not be maintained until a claim for refund or
amount of the refund on the ground that CBK Power c r e d i t h a s b e e n d u l y fi l e d w i t h t h e
failed to obtain an ITAD (International Tax Affairs Division) Commissioner.
ruling with respect to transactions with Fortis-
Netherlands. It cited Mirant where the SC ruled that an
ITAD ruling must be obtained prior to availing of the When When L a s t When When
preferential tax rate. final remitta day of administ petition
• CTA En Banc affirmed CTA First Division, holding that a income n c e the 2- rative f o r
prior application with the ITAD is indeed required by RMO taxes return y e a r claim review
1-2000. It also declared that the Mirant case is without w e r e w a s prescrip w a s was
any binding effect on CBK Power, having been resolved
thru a Minute Resolution. Lastly, it held that the petitions withhel filed t i v e filed filed
were filed within the prescriptive period. d period
ISSUES: Februar M a r c h M a r c h M a r c h M a r c h
Whether the BIR may add a requirement – prior application
for an ITAD ruling – that is not found in the income tax
y 2003 1 0 , 1 0 , 4, 2005 9, 2005
treaties signed by the Philippines before a taxpayer can avail 2003 2005
of preferential tax rate under said treaties
M a y J u n e June 10, M a r c h M a r c h
HELD: 2003 1 0 , 2005 4, 2005 9, 2005
• The obligation to comply with a tax treaty must take 2003
precedence over the objective of RMO 1-2000. The
period of application for the availment of tax treaty relief • Indubitably, CBK Power's administrative and
as required by the RMO should not operate to divest judicial claims for refund of its excess final
entitlement to the relief as it would constitute a violation withholding taxes covering taxable year 2003 were
of the duty required by good faith in complying with a tax filed within the two-year prescriptive period.
treaty. At most, the application for a tax treaty relief from
the BIR should merely operate to confirm the • With respect to the remittance filed on March 10,
entitlement of the taxpayer to the relief. 2003 - Had CBK Power awaited the action of
the Commissioner on its claim for refund prior to
• The objective of RMO 1-2000 in requiring a prior
taking court action knowing fully well that the
application with the ITAD is to avert the consequences of prescriptive period was about to end, it would
any erroneous interpretation and/or application of treaty have lost not only its right to seek judicial
provisions. However, the underlying principle becomes recourse but its right to recover the final
moot in refund cases where the very basis of the claim withholding taxes it erroneously paid to the
is erroneous or there is excessive payment arising from government thereby suffering irreparable damage.
the non-availment of a tax treaty relief at the first
instance. • Also, while it may be argued that, for the
remittance filed on June 10, 2003 that was to
• Not only is the requirement illogical, but it is also an
prescribe on June 10, 2005, CBK Power could
imposition that is not found at all in the applicable tax have waited for, at the most, three (3) months from
treaties. BIR should not impose additional requirements the filing, if only to give the BIR at the
that would negate the availment of the reliefs provided for administrative level an opportunity to act on said
under international agreements. claim, the Court cannot, on that basis alone, deny
a legitimate claim that was, for all intents and
• 2) Whether CBK Power is not entitled to refund for the
purposes, timely filed.
period covering taxable year 2003 as it allegedly failed to
exhaust administrative remedies before seeking judicial • There was no violation of Section 229 since the
redress law, as worded, only requires that an
administrative claim be priorly filed. In Kiener,
HELD:
the SC held that in no wise does the law, i.e., the succeeding taxable years has been made, such option
Section 306 of the old Tax Code (now, Section 229 shall be considered irrevocable for that taxable period.
of the NIRC), imply that the Collector of Internal
Revenue first act upon the taxpayer's claim, The two options are mutually exclusive. This is to ease tax
and that the taxpayer shall not go to court administration, particularly the self-assessment and
before he is notified of the Collector's action. collection aspects. A corporation must signify its intention –
The Court went on to say that the claim with the whether to request a tax refund or claim a tax credit– by
Collector of Internal Revenue was intended marking the corresponding option box provide.
primarily as a notice of warning that unless the
tax or penalty alleged to have been collected Consequently, the only issue that remains is whether the
erroneously or illegally is refunded, court action respondent was entitled to the refund of excess withholding
will follow. tax.

The requirements for a refund or the issuance of TCC


involving excess withholding taxes are as follows:

1. That the claim for refund was filed within the two-year
26. CIR v. Team (Phils.) Energy Corporation, G.R. No. reglementary period;
188016, January 14, 2015 2. When it is shown on the ITR that the income payment
received is being declared part of the taxpayer’s gross
Facts: income; and
Mirant filed its annual income tax return (ITR) for calendar 3. When the fact of withholding is established by a copy of
years 2002 and 2003 on April 15, 2003 and April 15, 2004, the withholding tax statement, duly issued by the payor to
respectively, reflecting overpaid income taxes or excess the payee, showing the amount paid and income tax
creditable withholding taxes in the amounts of ₱6,232,003.00 withheld from that amount.
and ₱10,134,410.00 for taxable years 2002 and 2003,
respectively. It indicated in the ITRs its option for the refund The first requirement is complied with and undisputed. The
of the tax overpayments for both years. second requirement was factually determined and verified by
the CTA.
3/22/2005 – Mirant filed an administrative claim for refund or
issuance of tax credit certificate (TCC) with the BIR in the With respect to the third requirement, the respondent had
total amount of ₱16,366,413.00, representing the overpaid proven it by presenting the 10 certificates of creditable taxes
income tax or the excess creditable withholding tax for withheld at source.
calendar years 2002 and 2003.
The argument that the respondent should have submitted
4/14/2005 – filed judicial claim with CTA. the quarterly returns of the respondent to show that it did not
carry-over the excess withholding tax to the succeeding
Issue: quarter is untenable.
Whether Mirant is entitled to refund
BIR did not present rebuttal evidence when the respondent
Ruling: was able to establish prima facie its right to the refund by
The petition is without merit. testimonial and object evidence. BIR ought to have its own
copies of the respondent’s quarterly returns on file, on the
Section 76 provides that every corporation liable to tax shall basis of which it could rebut the respondent's claim that it did
file a final adjustment return covering the total taxable not carry over its unutilized and excess creditable
income for the preceding calendar of fiscal year. If quarterly withholding taxes for the immediately succeeding quarters.
tax payments made is not equal to the total tax due, the BIR's failure to present such vital document during the trial
corporation shall have the ff. options: was fatal.

(A) Pay the balance of the tax still due; or


(B) Carry over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as
the case may be.

In case the corporation is entitled to a tax credit or refund of


the excess estimated quarterly income taxes paid, the
excess amount shown on its final adjustment return may be
carried over and credited against the estimated quarterly
income tax liabilities for the taxable quarters of the
succeeding taxable years.

Once the option to carry over and apply the excess quarterly
income tax against income tax due for the taxable years of
• Petitioners filed before the SC on the same day,
27. Banco De Oro et. al. v. CIR, G.R. No. 198756, January Petition for Certiorari, Prohibition, and/or
13, 2015 Mandamus (with urgent application for a
temporary restraining order and/or writ of
DOCTRINE: preliminary injunction).
• Respondents questioned the propriety of
· Interpretative rulings of the NIRC are reviewable petitioners' direct resort to this Court. They argued
by the Secretary of Finance otherwise the case is that petitioners should have challenged first the
dismissible for failure to exhaust administrative 2011 Bureau of Internal Revenue rulings before
remedies, except if the issue involved is purely a the Secretary of Finance, consistent with the
legal question and when there are circumstances doctrine on exhaustion of administrative remedies.
indicating the urgency of judicial intervention. Even assuming without admitting that the
Government Bonds are deposit substitutes,
· Jurisdiction to review the rulings of the petitioners argue that the collection of the final tax
Commissioner of Internal Revenue pertains to the was barred by prescription.
CTA, not to the RTC. As an exception, the court
entertains direct recourse to it when dictated by ISSUES:
public welfare and the advancement of public a. Non-observance of the doctrine of exhaustion of
policy. administrative remedies and of hierarchy of courts.
b. Prescription of the assessment
· The three (3)-year prescriptive period under
Section 203 of the 1997 National Internal Revenue RULING:
Code to assess and collect internal revenue taxes
is extended to 10 years in cases of (1) fraudulent A. PROCEDURAL ISSUES NON- EXHAUSTION OF
returns; (2) false returns with intent to evade tax; ADMINISTRATIVE REMEDIES PROPER
and (3) failure to file a return, to be computed from
the time of discovery of the falsity, fraud, or General Rule: Under Section 4 of the 1997 National
omission. Internal Revenue Code, interpretative rulings are reviewable
by the Secretary of Finance. The remedy within the
administrative machinery must be resorted to first and
FACTS: pursued to its appropriate conclusion before the court’s
• Should there have been a simultaneous sale to 20 judicial power can be sought.
or more lenders/investors, the PEACe Bonds
issued by the BTrwould be deemed deposit Exceptions: The doctrine of exhaustion of administrative
substitutes within the meaning of Section 22(Y) of remedies is disregarded:
the 1997 NIRC and RCBC Capital/CODE-NGO 1) when there is a violation of due process,
would have been obliged to withhold the 20% final 2) when the issue involved is purely a legal question,
withholding tax on the interest or discount from the 3) when the administrative action is patently illegal
PEACe Bonds. amounting to lack or excess of jurisdiction
• In 2001, the Bureau of Treasury (BTr) announced 4) when there is estoppel on the part of the
that P30 billion worth of 10 year Zero Coupon administrative agency concerned
Bonds would be auctioned and stated that the 5) when there is irreparable injury
issue will be limited to 19 lenders and while 6) when the respondent is a department secretary
taxable shall not be subject to the 20% FWT. At whose acts as an alter ego of the President bears
the auction, RCBC along with Caucus of the implied and assumed approval of the latter
Development NGO Networks (CODE-NGO) and 7) when to require exhaustion of administrative
won the bid. RCBC became the underwriter for the remedies would be unreasonable
offering of the PEACe Bonds. RCBC Capital, 8) when it would amount to a nullification of a claim
thereafter, sold and distributed the Government 9) when the subject matter is a private land in land
Bonds to Banco De Oro, et al. (Petitioners) on case proceedings
different dates. 10) when the rule does not provide a plain, speedy and
• Barely 11 days before maturity of the PEACe adequate remedy
Bonds, the Commissioner of Internal Revenue 11) when there are circumstances indicating the
issued BIR Ruling No. 370-2011 declaring that the urgency of judicial intervention
PEACe Bonds, being deposit substitutes, were
subject to 20% final withholding tax. Under this The exceptions under (2) and (11) are present in this case.
ruling, Secretary of Finance directed the BTr to The question involved is purely legal, namely: (a) the
withhold a 20% final tax from the face value of the interpretation of the 20-lender rule in the definition of the
PEACe Bonds upon their payment at maturity. BIR terms public and deposit substitutes under the 1997 National
Ruling No. 370-2011 clarified that the FWT due on Internal Revenue Code; and (b) whether the imposition of
the discount or interest earned on the PEACe the 20% final withholding tax on the PEACe Bonds upon
Bonds shall be imposed on RCBC/CODE-NGO maturity violates the constitutional provisions on non-
and on all subsequent holders of the Bonds. impairment of contracts and due process. Judicial
intervention is likewise urgent with the impending maturity of
the PEACe Bonds on October 18, 2011.

The rule on exhaustion of administrative remedies also finds 28. Winebrenner & Iñigo Insurance Brokers, Inc. v. CIR,
no application when the exhaustion will result in an exercise G.R. No. 206526, January 28, 2015
in futility as when the SOF adopts the opinions of the CIR as
his own. DOCTRINE:
What Section 76 requires, just like in all civil cases, is to
Doctrine on hierarchy of courts prove the prima facie entitlement to a claim, including the
SC agrees with respondents that the jurisdiction to review fact of not having carried over the excess credits to the
the rulings of the Commissioner of Internal Revenue pertains subsequent quarters or taxable year. It does not say that to
to the Court of Tax Appeals. The questioned BIR Ruling Nos. prove such a fact, succeeding quarterly ITRs are absolutely
370-2011 and DA 378-2011 were issued in connection with needed.
the implementation of the 1997 National Internal Revenue
Code on the taxability of the interest income from zero- FACTS:
coupon bonds issued by the government. On April 15, 2004, petitioner filed its Annual Income Tax
Return for CY 2003.
Such rulings of the Commissioner of Internal Revenue are
appealable to that court by any party adversely affected by a About two years thereafter or on April 7, 2006, petitioner
decision, ruling or inaction of the CIR within 30 days after the applied for the administrative tax credit/refund claiming
receipt of such decision or ruling or after the expiration of the entitlement to the refund of its excess or unutilized CWT for
period fixed by law for action (Sec.11). CY 2003, by filing BIR Form No. 1914 with the Revenue
District Office No. 50 of the Bureau of Internal Revenue
In exceptional cases, however, this court entertained direct (BIR).
recourse to it when:
a. dictated by public welfare and the advancement of A petition for review was filed by petitioner before the CTA
public policy where the CTA Division granted petitioner’s claim for refund
b. demanded by the broader interest of justice of excess and unutilized CWT for CY 2003 in the reduced
c. the orders complained of were found to be patent amount of P2,737,903.34.
nullities
d. the appeal was considered as clearly an inappropriate Petitioner filed a Motion for Partial Reconsideration with
remedy. Leave to Submit Supplemental Evidence praying that an
amended decision be issued granting the entirety of its claim
Here, the nature and importance of the issues raised to the for refund, or in the alternative, that it be allowed to submit
investment and banking industry with regard to a definitive and offer relevant documents as supplemental evidence.
declaration of whether government debt instruments are Respondent Commissioner of Internal Revenue (CIR), on
deposit substitutes under existing laws, and the novelty the other hand, also moved for reconsideration, praying for
thereof, constitute exceptional and compelling circumstances the denial of the entire amount of refund because petitioner
to justify resort to this court in the first instance. failed to present the quarterly Income Tax Returns (ITRs) for
CY 2004.
B. COLLECTION OF TAX IS NOT BARRED BY
PRESCRIPTION CTA Division reversed itself and denied the entire claim of
The three (3)-year prescriptive period under Section 203 of petitioner. CTA En Banc likewise affirmed the Amended
the 1997 National Internal Revenue Code to assess and Decision of the CTA Division. It stated that before a cash
collect internal revenue taxes is extended to 10 years in refund or an issuance of tax credit certificate for unutilized
cases of (1) fraudulent returns; (2) false returns with intent to excess tax credits could be granted, it was essential for
evade tax; and (3) failure to file a return, to be computed petitioner to establish and prove, by presenting the quarterly
from the time of discovery of the falsity, fraud, or omission. ITRs of the succeeding years, that the excess CWT was not
carried over to the succeeding taxable quarters considering
Thus, should it be found that RCBC Capital/CODE-NGO sold that the option to carry over in the succeeding taxable
the PEACe Bonds to 20 or more lenders/investors, the quarters could not be modified in the final adjustment returns
Bureau of Internal Revenue may still collect the unpaid tax (FAR).
from RCBC Capital/CODE-NGO within 10 years after the Hence, this petition.
discovery of the omission.
ISSUE:
Whether or not the submission and presentation of the
quarterly ITRs of the succeeding quarters of a taxable year is
indispensable in a claim for refund.

RULING:

NO. Proving that no carry-over has been made does not


absolutely require the presentation of the quarterly ITRs.
• What Section 76 of the Tax Code requires, just like in all Thereafter, it filed with the BIR an administrative claim for
civil cases, is to prove the prima facie entitlement to a refund, claiming that it is entitled to the unutilized input VAT
claim, including the fact of not having carried over the in the amount of ₱179,314,926.56 arising from its zero-rated
excess credits to the subsequent quarters or taxable sales to NPC for the taxable year 2000. However, without
year. It does not say that to prove such a fact, succeeding awaiting the CIR's resolution of its administrative claim for
quarterly ITRs are absolutely needed. C refund/tax credit, TSC filed a petition for review with the CT A
• This simply underscores the rule that any document, seeking the refund or the issuance of a tax credit certificate
other than quarterly ITRs may be used to establish that for its unutilized input VAT for the taxable year 2000.
indeed the non-carry over clause has been complied
with, provided that such is competent, relevant and part In his Answer, the CIR claimed that TSC's claim for refund/
of the records. tax credit should be denied, asserting that TSC failed to
• A taxpayer who seeks a refund of excess and unutilized comply with the conditions precedent for claiming refund/tax
CWT must: credit of unutilized input VAT. The CIR pointed out that TSC
1. File the claim with the CIR within the two year period failed to submit complete documents in support of its
from the date of payment of the tax; application for refund/tax credit contrary to Section 112(C) of
2. Show on the return that the income received was the National Internal Revenue Code (NIRC). The CTA First
declared as part of the gross income; and] Division rendered a Decision in favor of TSC, but the CTA
3. Establish the fact of withholding by a copy of a First Division found that, from the total unutilized input VAT of
statement duly issued by the payor to the payee ₱179,314,926.56 that it claimed, TSC was only able to
showing the amount paid and the amount of tax substantiate the amount of ₱173,265,261.30.
withheld. CIR sought a reconsideration maintaining that TSC is not
entitled to a refund/tax credit of its unutilized input VAT for
• In the present case, although petitioner did not submit its the taxable year 2000 since it failed to submit all the
quarterly ITRs for the year 2004, it did offer its Annual necessary and relevant documents in support of its
ITR/Final Adjustment Return for the taxable year 2004. administrative claim. It further claimed that TSC's petition for
• An annual ITR contains the total taxable income earned review was prematurely filed, alleging that under Section
for the four (4) quarters of a taxable year, as well as 112( C) of the NIRC, the CIR is given 120 days from the
deductions and tax credits previously reported or carried submission of complete documents within which to either
over in the quarterly income tax returns for the subject grant or deny TSC's application for refund/tax credit of its
period. It goes without saying that the annual ITR unutilized input VAT. The CIR pointed out that TSC filed its
(including any other proof that may be su cient to the petition for review with the CTA sans any decision on its
Court) can sufficiently reveal whether carry over has claim and without waiting for the 120-day period to lapse.
been made in subsequent quarters even if the petitioner
has chosen the option of tax credit or refund in the CTA denied the said motion on the ground that the petition
immediately 2003 annual ITR. for review was not prematurely filed notwithstanding that the
• The Court does not, and cannot, however, grant the 120-day period given to the CIR under Section 112(C) of the
entire claimed amount as it finds no error in the original NIRC had not yet lapsed. It ruled that, pursuant to Section
decision of the CTA Division granting refund to the 112(A) of the NIRC, claims for refund/tax credit of unutilized
reduced amount of P2,737,903.34. This finding of fact is input VAT should be filed within two years after the close of
given respect, if not finality, as the CTA, which by the very the taxable quarter when the sales were made and that the
nature of its functions of dedicating itself exclusively to 120-day period under Section 112(C) of the NIRC is also
the consideration of the tax problems has necessarily covered by the two-year prescriptive period within which to
developed an expertise on the subject. It being the case, claim the refund/tax credit of unutilized input VAT. Admittedly,
the Court partly grants this petition to the extent of Section 112(C) provides for a one hundred twenty (120)-day
reinstating the April 23, 2010 original decision of the period from the submission of the complete documents
CTA Division. within which respondent may grant or deny the taxpayer's
application for refund or issuance of tax credit certificate. And
the said 120-day period is covered by the two-year
prescriptive period to file a claim for refund or tax credit.
Furthermore, it has been consistently held that the
administrative claim and the subsequent appeal to this Court
29. CIR vs. Team Sual Corporation (Formerly Mirant Sual must be filed within the two-year period. Accordingly, as long
Corporation), G.R. No. 194105. February 5, 2014 as an administrative claim is filed prior to the filing of a
judicial case, both within the two-year prescriptive period,
FACTS: this Court has jurisdiction to take cognizance of the claim.
TSC is principally engaged in the business of power
generation and the subsequent sale thereof solely to Aggrieved, the CIR filed a Petition for Review with the CTA
National Power Corporation (NPC). It is registered with the en banc. The CTA en banc rendered the herein assailed
Bureau of Internal Revenue (BIR) as a VAT taxpayer. TSC’s Decision which affirmed the Decision CTA First Division.
application for zero-rating arising from its sale of power
generation services to NPC for the taxable year 2000 was It ruled that, pursuant to Section 112(A) of the NIRC, both the
granted by the BIR. administrative and judicial remedies under Section 112(C) of
the NIRC must be undertaken within the two-year period
from the close of the taxable quarter when the relevant sales
were made. Thus, the taxpayer-claimant may seek judicial Court categorically held that the taxpayer-claimant must wait
redress for refund on excess or unutilized input VAT for the 120-day period to lapse, should there be no decision
attributable to zero-rated sales or effectively zero-rated sales fully or partially denying the claim, before a petition for
with the Court of Tax Appeals either within thirty (30) days review may be filed with the CTA. Otherwise, the petition
from receipt of the denial of its claim for refund/tax credit, or would be rendered premature and without a cause of action.
after the lapse of the one hundred twenty (120)-day period in Consequently, the CTA does not have the jurisdiction to take
the event of inaction by the Commissioner, provided that cognizance of a petition for review filed by the taxpayer-
both administrative and judicial remedies must be claimant should there be no decision by the CIR on the claim
undertaken within the two (2)-year period from the close of for refund/tax credit or the 120-day period had not yet
the taxable quarter when the relevant sales were made. If lapsed.
the two-year period is about to lapse, but the BIR has not yet
acted on the application for refund, the taxpayer should file a That the two-year prescriptive period within which to file a
Petition for Review with this Court within the two-year period. claim for refund/tax credit of unutilized input VAT under
Otherwise, the refund claim for unutilized input value added Section 112(A) of the NIRC is about to lapse is
tax attributable to zero-rated sales or effectively zero-rated inconsequential and would not justify the immediate filing of
sales is time-barred. a petition for review with the CTA sans compliance with the
The CIR sought a reconsideration but it was denied hence 120-day mandatory period. To stress, under Section 112(C)
this petition. of the NIRC, a taxpayer-claimant may only file a petition for
review with the CT A within 30 days from either: (1) the
ISSUE: receipt of the decision of the CIR denying, in full or in part,
Whether or not the CTA en banc erred in holding that TSC's the claim for refund/tax credit; or (2) the lapse of the 120-day
petition for review with the CTA was not prematurely filed. period given to the CIR to decide the claim for refund/tax
credit.
RULING:
Yes, the CTA First Division and the CTA en banc erred in The 120-day mandatory period may even extend beyond the
ruling that the petition was not prematurely filed. In CIR vs two-year prescriptive period for filing a claim for refund/tax
Aichi Forging Company of Asia, Inc., we ruled that Section credit under Section 112(A) of the NIRC. Consequently, the
112(C) of the NIRC clearly provides that the CIR has 120 30-day period given to the taxpayer-claimant likewise need
days, from the date of the submission of the complete not fall under the two-year prescriptive period. What matters
documents in support of the application for tax refund/credit, is that the administrative claim for refund/tax credit of
within which to grant or deny the claim. In case of full or unutilized input VAT is filed with the BIR within the two-year
partial denial by the CIR, the taxpayer's recourse is to file an prescriptive period.
appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the Here, TSC filed its administrative claim for refund/tax credit
CIR fails to act on the application for tax refund/credit, the with the BIR within the two-year prescriptive period under
remedy of the taxpayer is to appeal the inaction of the CIR to Section 112(A) of the NIRC. However, without waiting for the
CTA within 30 days. CIR decision or the lapse of the 120-day period from the time
it submitted its complete documents in support of its claim,
The phrase in Section 112 (A) "within two (2) years x x x TSC filed a petition for review with the CTA 21 days after it
apply for the issuance of a tax credit certificate or refund" filed its administrative claim with the BIR. Clearly, TSC's
refers to applications for refund/credit filed with the CIR and petition for review with the CTA was prematurely filed and
not to appeals made to the CTA. This is apparent in the first that the CTA had no jurisdiction to take cognizance of TSC's
paragraph of subsection (C) of the same provision, which petition since there was no decision as yet by the CIR
states that the CIR has "120 days from the submission of denying TSC's claim, fully or partially, and the 120-day period
complete documents in support of the application filed in under Section 112(C) of the NIRC had not yet lapsed. Thus,
accordance with Subsections (A) and (B)" within which to TSC's failure to comply with the 120-day mandatory period
decide on the claim. under Section 112(C) of the NIRC renders its petition for
review with the CT A void.
In fact, applying the two-year period to judicial claims would
render nugatory Section 112(C) of the NIRC, which already Lastly, on TSC’s argument that the 120-day period is not
provides for a specific period within which a taxpayer should mandatory and jurisdictional. It had been ruled that the 120-
appeal the decision or inaction of the CIR. The second day period is mandatory and jurisdictional, and that the CTA
paragraph of Section 112(C) of the NIRC envisions two does not acquire jurisdiction over a judicial claim that is filed
scenarios: (1) when a decision is issued by the CIR before before the expiration of the 120-day period. There are,
the lapse of the 120-day period; and (2) when no decision is however, two exceptions to this rule. The first exception is if
made after the 120-day period. In both instances, the the Commissioner, through a specific ruling, misleads a
taxpayer has 30 days within which to file an appeal with the particular taxpayer to prematurely file a judicial claim with the
CT A. As we see it then, the 120-day period is crucial in filing CT A. Such specific ruling is applicable only to such
an appeal with the CTA. particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued
Further, in CIR vs. San Roque Power Corporation, we under Section 4 of the Tax Code, misleads all taxpayers into
emphasized that the 120-day period that is given to the CIR filing prematurely judicial claims with the CTA. In these
within which to decide claims for refund/tax credit of cases, the Commissioner cannot be allowed to later on
unutilized input VAT is mandatory and jurisdictional. The question the CTA's assumption of jurisdiction over such
claim since equitable estoppel has set in as expressly 3. Whether or not petitioner’s right to collect the
authorized under Section 246 of the Tax Code. creditable withholding tax and expanded withholding
tax for taxable year 1992 has already prescribed

RULING:
I. No. it is clear that for evidence to be considered, the same
must be formally offered. The mere fact that a particular
30. CIR vs. United Salvage and Towage (Phils), Inc., G.R. document is identified and marked as an exhibit does not
No. 197515, July 2, 2014 mean that it has already been offered as part of the evidence
of a party. Evidence not formally offered to be admitted can
DOCTRINE: be considered by the trial court provided the following
• A taxpayer must be informed in writing of the legal requirements are present, viz.: first, the same must have
and factual bases of the tax assessment made been duly identified by testimony duly recorded and, second,
against him. The use of the word "shall" in these the same must have been incorporated in the records of the
legal provisions indicates the mandatory nature of case.
the requirements laid down therein.
• The act of requesting a reinvestigation alone does Petitioner categorically admitted that it failed to formally offer
not suspend the period. The request should first be the PANs as evidence and failed to advance justifiable
granted, in order to effect suspension. reason for such fatal omission. Instead, it merely alleged that
the existence and due execution of the PANs were duly
FACTS: tackled by petitioner’s witnesses. Such is not sufficient to
Respondent is engaged in the business of sub-contracting seek exception from the general rule requiring a formal offer
work for service contractors engaged in petroleum of evidence, since no evidence of positive identification of
operations in the Philippines. During the taxable years in such PANs by petitioner’s witnesses was presented.
question, it had entered into various contracts and/or sub-
contracts with several petroleum service contractor for the While we concur with petitioner that the CTA is not governed
supply of service vessels. strictly by technical rules of evidence, the presentation of
In the course of respondent’s operations, petitioner found PANs as evidence of the taxpayer’s liability is not mere
respondent liable for deficiency income tax, withholding tax, procedural technicality. It is a means by which a taxpayer is
value-added tax (VAT) and documentary stamp tax (DST) for informed of his liability for deficiency taxes. It serves as basis
taxable years 1992,1994, 1997 and 1998. Petitioner, issued for the taxpayer to answer the notices, present his case and
demand letters with attached assessment notices for adduce supporting evidence. More so, the same is the only
withholding tax on compensation (WTC) and expanded means by which the CTA may ascertain and verify the truth
withholding tax (EWT) for taxable years 1992, 1994 and of respondent's claims.
1998.
II. Yes. In order to determine whether the requirement for a
USTP filed administrative protests against the 1994 and valid assessment is duly complied with, it is important to
1998 EWT assessments, respectively. It also appealed to the ascertain the governing law, rules and regulations and
CTA special first division alleging that the Notices of jurisprudence at the time the assessment was issued. In the
Assessment are bereft of any facts, law, rules and instant case, the PANs and FANs pertaining to the deficiency
regulations or jurisprudence; thus, the assessments are void EWT for taxable years 1994 and 1998, respectively, were
and the right of the government to assess and collect issued on January 19, 1998, when the Tax Code was already
deficiency taxes from it has prescribed on account of the in effect. The date of issuance of the notice of assessment
failure to issue a valid notice of assessment within the determines which law applies- the 1997 NIRC or the old Tax
applicable period. Code.

During the pendency of the proceedings, USTP moved to In the instant case, the 1997 NIRC covers the 1994 and
withdraw the aforesaid Petition because it availed of the 1998 EWT FANs because there were issued on January 19,
benefits of the Tax Amnesty Program under Republic Act 1998 and September 21, 2001, respectively, at the time of
(R.A.) No. 9480 which was partially granted by the CTA and the effectivity of the 1997 NIRC. With that, Section 228 of the
declared the issues on income tax, VAT and DST Tax Code provides that the taxpayer shall be informed in
deficiencies closed and terminated. Consequently, the case writing of the law and the facts on which the assessment is
was submitted for decision covering the remaining issue on made. Otherwise, the assessment is void. The use of the
deficiency EWT and WTC, respectively, for taxable years word "shall" in these legal provisions indicates the mandatory
1992, 1994 and 1998. nature of the requirements laid down.

ISSUES: The FAN for the deficiency EWT for taxable year 1994 will
1. Whether or not the Court of Tax Appeals is governed show that other than a tabulation of the alleged deficiency
strictly by the technical rules of evidence; taxes due, no further detail regarding the assessment was
2. Whether or not the Expanded Withholding Tax provided by petitioner. Only the resulting interest, surcharge
Assessments issued by petitioner against the and penalty were anchored with legal basis. Petitioner
respondent for taxable year 1994 was without any should have at least attached a detailed notice of
factual and legal basis; and discrepancy or stated an explanation why the amount of is
collectible against respondent and how the same was arrived
at. Any short-cuts to the prescribed content of the
assessment or the process thereof should not be
countenanced. Hence it did not provide legal and factual
basis of the assessment and as a result the formal letter of
demand and notice of assessment are void.

There is also no basis in petitioner’s claim that Revenue 31. CIR vs. PNB, G.R. No. 180920, September 29, 2014
Regulation No. 12-99 is not applicable at the time the PAN
and FAN for the deficiency EWT for taxable year 1994 were DOCTRINE:
issued. Considering that such regulation merely implements The certificate of creditable tax withheld at source is the
the law, and does not create or take away vested rights, the competent proof to establish the fact that taxes are withheld.
same may be applied retroactively and the disputed It is not necessary for the person who executed and
assessments for taxable year 1994 should have already prepared the certificate of creditable tax withheld at source to
complied with the requirements laid down under Revenue be presented and to testify personally to prove the
Regulation No. 12-99. Having failed so, the same produces authenticity of the certificates.
no legal effect.
FACTS:
The deficiency EWT for taxable year 1998 however, is valid On November 11, 2002, PNB filed a claim for refund or the
since it complies with Section 228 of the Tax Code as well as issuance of a tax credit certificate in the amount of
Revenue Regulation No. 12-99. P26,466,735.40 for the taxable year 2000 with the BIR
representing unutilized excess creditable withholding taxes
III. Yes. The petitioner has three (3) years from the date of for taxable year 2000.
actual filing of the tax return to assess a national internal Due to BIR's inaction on its administrative claim, PNB
revenue tax or to commence court proceedings for the appealed before the Court of Tax Appeals by way of a
collection thereof without an assessment. However, when it Petition for Review on April 11, 2003. On January 30, 2007,
validly issues an assessment within the three (3)-year the Court of Tax Appeals First Division rendered a decision in
period, it has another three (3) years within which to collect favor of respondent granting respondent a tax refund or
the tax due by distraint, levy, or court proceeding. The credit in the amount of PhP23,762,347.83. On appeal, the
assessment of the tax is deemed made and the three (3)- Court of Tax Appeals En Banc sustained the First Division's
year period for collection of the assessed tax begins to run ruling.
on the date the assessment notice had been released,
mailed or sent to the taxpayer. ISSUE:
Whether or not PNB is entitled to a tax refund or credit
No evidence was formally offered to prove when respondent because of its failure to prove the fact that taxes are withheld
filed its returns and paid the corresponding EWT and WTC and its failure to present as witnesses the withholding
for taxable year 1992. The Preliminary Collection Letter for agents.
deficiency taxes for taxable year 1992 was only issued on
February 21, 2002, despite the fact that the FANs for the RULING:
deficiency EWT and WTC for taxable year 1992 was issued YES. The Court of Tax Appeals First Division and En Banc
as early as January 9, 1996. Clearly, five (5) long years had uniformly found that respondent has established its claim for
already lapsed, beyond the three (3)-year prescriptive refund or issuance of a tax credit certificate for unutilized
period, before collection was pursued by petitioner. excess creditable withholding taxes for the taxable year 2000
in the amount of PhP23,762,347.83. The Court of Tax
Further, while the request for reinvestigation was made on Appeals First Division thoroughly passed upon the evidence
March 14, 1997, the same was only acted upon by petitioner presented by respondent and the report of the court-
on January22, 2001, also beyond the three (3) year statute commissioned auditing firm.
of limitations reckoned from January 9, 1996,
notwithstanding the lack of impediment to rule upon such The certificate of creditable tax withheld at source is the
issue. competent proof to establish the fact that taxes are withheld.
It is not necessary for the person who executed and
Petitioner had ample time to make a factually and legally prepared the certificate of creditable tax withheld at source to
well-founded assessment and implement collection pursuant be presented and to testify personally to prove the
thereto. Whatever examination that petitioner may have authenticity of the certificates.
conducted cannot possibly outlast the entire three (3)-year Moreover, as correctly held by the Court of Tax Appeals En
prescriptive period provided by law to collect the assessed Banc, the figures appearing in the withholding tax certificates
tax. Thus, there is no reason to suspend the running of the can be taken at face value since these documents were
statute of limitations in this case. Moreover, the request for executed under the penalties of perjury, pursuant to Section
reinvestigation should be granted or at least acted upon in 267 of the 1997 National Internal Revenue Code, as
due course before the suspension of the statute of limitations amended, which reads:
may set in. SEC. 267. Declaration under Penalties of Perjury. — Any
declaration, return and other statements required under this
Code, shall, in lieu of an oath, contain a written statement
that they are made under the penalties of perjury. Any person
who willfully files a declaration, return or statement
containing information which is not true and correct as to
every material matter shall, upon conviction, be subject to On March 5, 2004, the BIR issued a First Notice Before
the penalties prescribed for perjury under the Revised Penal Issuance of Warrant of Distraint and Levy, which was sent to
Code. the residence of one of respondent's directors.

Thus, upon presentation of a withholding tax certificate On March 19, 2004, respondent filed a protest letter citing
complete in its relevant details and with a written statement lack of due process and prescription as grounds. On April 16,
that it was made under the penalties of perjury, the burden of 2004, respondent filed a supplemental letter of protest.
evidence then shifts to the Commissioner of Internal Subsequently, on June 14, 2004, respondent submitted a
Revenue to prove that (1) the certificate is not complete; (2) letter wherein it attached documents to prove the defenses
it is false; or (3) it was not issued regularly. raised in its protest letters.
On January 10, 2005, after 180 days had lapsed without
Petitioner's posture that respondent is required to establish action on the part of petitioner on respondent's protest, the
actual remittance to the Bureau of Internal Revenue latter filed a Petition for Review with the CTA. On February
deserves scant consideration. Proof of actual remittance is 17, 2010, the CTA Special First Division promulgated its
not a condition to claim for a refund of unutilized tax credits. Decision granting the said petition. On June 16, 2011, the
Under Sections 57 and 58 of the 1997 National Internal CTA En Banc held that petitioner's right to assess
Revenue Code, as amended, it is the payor-withholding respondent for deficiency taxes for the taxable year 1999
agent, and not the payee-refund claimant such as has already prescribed and that the FAN issued to
respondent, who is vested with the responsibility of respondent never attained finality because respondent did
withholding and remitting income taxes. not receive it.
Hence, the present petition.

ISSUE:
W/N the period to assess respondent for deficiency tax had
already prescribed
32. CIR vs. BASF Coating + Inks Philippines, Inc. G.R.
No. 198677, November 26, 2014 RULING:
Yes, the three (3) year period to assess had already
DOCTRINE: prescribed.
For there to be valid assessment, notice must be properly One of the requirements of a valid assessment notice is that
addressed to the taxpayer as required by due process. In the letter or notice must be properly addressed. It is not
case of change of address, the taxpayer is required to give a enough that the notice is sent by registered mail. An invalid
written notice thereof to the RDO or the district having assessment bears no valid fruit for violating the taxpayer’s
jurisdiction over his former legal residence and/or place of right to due process.
business. Where the taxpayer cannot be located in the
address given in the return, the running of the Statute of As provided by Section 203 of the NIRC, “Except as
Limitations shall be suspended. provided in Section 222, internal revenue taxes shall be
assessed within three (3) years after the last day prescribed
FACTS: by law for the filing of the return, and no proceeding in court
Respondent is a corporation organized under Philippine without assessment for the collection of such taxes shall be
laws. On 19 March 2001, its Board of Directors “BOD” and begun after the expiration of such period.”
its stockholders representing two-thirds of its of the entire
subscribed and outstanding capital stock of herein Under the Tax Code, the running of the Statute of Limitations
respondent corporation, resolved to dissolve the corporation shall be suspended when the taxpayer cannot be located in
by shortening its corporate term to March 31, 2001. the address given in the return filed upon which a tax is
Subsequently, respondent moved from its address in Las being assessed or collected. In addition, Section 11 of RR
Pinas City to Laguna. 12-85 states that, in case of change of address, the taxpayer
is required to give a written notice thereof to the RDO or the
On 26 June 2001, respondent submitted two (2) letters to the district having jurisdiction over his former legal residence
BIR: The first letter dated April 26, 2001 was a notice of its and/or place of business. However, the aforementioned is
dissolution and the second letter dated June 22, 2001 was a only applicable where the CIR is unaware of the location of
manifestation indicating the submission of documents the taxpayer.
supporting the dissolution.
The CTA found that BIR officers, at various times prior to the
A Formal Assessment Notice “FAN” dated January 17, 2003 issuance of the subject FAN, conducted examination and
was issued wherein respondent was assessed with the investigation of respondent's tax liabilities for 1999 at the
aggregate amount of ₱18,671,343.14 representing latter's new address in Laguna. Hence, despite the absence
deficiencies in income tax, value added tax, withholding tax of a formal written notice of respondent's change of address,
on compensation, expanded withholding tax and the fact remains that petitioner became aware of
documentary stamp tax, including increments, for the taxable respondent's new address as shown by the various
year 1999.6 The FAN was sent by registered mail on documents presented.
January 24, 2003 to respondent's former address in Las In the instant case, the FAN was sent to the wrong address.
Piñas City. Thus, the CTA is correct in holding that the FAN never
attained finality because respondent never received it, either CTA En banc ruled that
actually or constructively. Petitioner's issuance of the First 1. SAMELCO-I is exempted in the payment of the
Notice Before Issuance of Warrant of Distraint and Levy Minimum Corporate Income Tax (MCIT);
violated respondent's right to due process because no valid 2. that due process was observed in the issuance of
notice of assessment was sent to it. Respondent has not the assessments in accordance with Section 228 of
properly been informed of the basis of its tax liabilities. the Tax Code; and
Without complying with the unequivocal mandate of first 3. that the 1997 and 1998 assessments on deficiency
informing the taxpayer of the government’s claim, there can withholding tax on compensation have not
be no deprivation of property, because no effective protest prescribed.
can be made. As a consequence, the running of the three-
year period to assess respondent was not suspended and ISSUE/S:
has already prescribed. 1. WON the subject 1997 and 1998 withholding tax
assessments on compensation were issued beyond
the prescriptive period of three years.
2. WON CIR observed due process notwithstanding the
missing Annex “A-1” that was meant to show Details
of Discrepancies.
33. Samar-I Electric Cooperative vs. CIR, G.R. No.
193100 December 10, 2014 RULING:
(1) NO. While petitioner is correct that Section 203 sets the
DOCTRINE: three-year prescriptive period to assess, the following
Substantial underdeclaration of withholding taxes constitutes exceptions are provided under Section 222 of the NIRC of
“falsity” that warrants extension of the prescriptive period to 1997: (a) In the case of a false or fraudulent return with
assess to 10 years from the discovery of such falsity. intent to evade tax or of failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of such
FACTS: tax may be filed without assessment, at any time within ten
Samar-I was adjudged by the CTA liable for deficiency (10) years after the discovery of the falsity, fraud or omission
withholding tax on compensation in the aggregate amount of xxxx.
P2,690,850.91, plus 20% interest starting September 30,
2002, until fully paid, pursuant to Section 249(c) of the NIRC. A careful examination of the evidence on record yields to no
other conclusion but that petitioner failed to withhold taxes
On November 13, 2000, CIR issued a duly signed Letter of from its employees’ 13th month pay and other benefits in
Authority (LOA) for income and withholding taxes for the excess of thirty thousand pesos (P30,000.00) amounting to
period 1997 to 1999. The LOA was received by petitioner the P2,690,850.91 for the taxable years 1997 to 1999 – resulting
next day. to its filing of the subject false returns. Petitioner failed to
refute this finding, both in fact and in law, before the courts a
On October 19, 2001, CIR sent a Notice for Informal quo.
Conference which was received by petitioner in November In the case at bar, petitioner failed to proffer convincing
indicating the alleged income and withholding tax liabilities of argument and evidence that would persuade us to disturb
petitioner for 1997 to 1999. the factual findings of the CTA First Division, as affirmed by
On December 13, petitioner executed a Waiver of the the CTA EB. As such, we cannot but affirm the finding of
Defense of Prescription under the Statute of Limitations, petitioner’s substantial underdeclaration of withholding taxes
good until March 29, 2002. in the amount of P2,690,850.91 which constituted the
“falsity” in the subject returns.
On February 28, 2002, CIR issued a Preliminary Assessment
Notice (PAN) which was received by petitioner on April 9 and (2) YES. Both Section 228 of the NIRC of 1997 and Section
protested on April 18. On July 8, the CIR dismissed the 3.1.4 of RR No. 12-99 clearly require the written details on
protest and recommended issuance of a FAN. the nature, factual and legal bases of the subject deficiency
tax assessments.
Thus, on September 15, petitioner received a demand letter
and FANs for the alleged 1997, 1998, and 1999 deficiency In CIR v. Enron Subic Power Corporation, it was held that the
withholding tax in the amount of [P]3,760,225.69, as well as law requires that the legal and factual bases of the
deficiency income tax covering the years 1998 to 1999 in the assessment be stated in the formal letter of demand and
amount of [P]440,545.71, or in the aggregate amount of assessment notice, and that the alleged “factual bases” in
[P]4,200,771.40. the advice, preliminary letter and “audit working papers” did
Petitioner filed its protest and Supplemental Protest to the not suffice.
FANs on October 14 and November 4, respectively. But on
the Final Decision on Disputed Assessment (FDDA) issued In this case, we agree with the respondent that petitioner
on April 10, 2003, petitioner was still held liable for the was sufficiently apprised of the nature, factual and legal
alleged tax liabilities. bases, as well as how the deficiency taxes being assessed
against it were computed. Records reveal that on October
On May 29, petitioner filed an appeal with the CTA in 19, 2001, prior to the conduct of an informal conference,
Division. On May 27, 2008, the petition was partially granted. petitioner was already informed of the results and findings of
Both appealed to the CTA En Banc. the investigations made by the respondent, and was duly
furnished with a copy of the summary of the report submitted against Daza’s illegal assessment when it filed its
by the Revenue Officer. Said summary report contained an petition for certiorari before the RTC.
explanation of Findings of Investigation stating the legal and
factual bases for the deficiency assessment. Ruling:

On April 9, 2002, petitioner received the PAN dated February A taxpayer dissatisfied with a local treasurer’s denial of or
28, 2002 which contained the computations of its deficiency inaction on his protest over an assessment has thirty (30)
income and withholding taxes. Attached to the PAN was the days within which to appeal to the court of competent
detailed explanation of the particular provision of law and jurisdiction. Under the law, said period is to be reckoned from
revenue regulation violated. Although the FAN and demand the taxpayer’s receipt of the denial of his protest or the lapse
letter issued to petitioner were not accompanied by a written of the sixty (60) day period within which the local treasurer is
explanation of the legal and factual bases of the deficiency required to decide the protest, from the moment of its filing.
taxes assessed against the petitioner, the records showed This much is clear from Section 195 of the Local
that respondent in its letter dated April 10, 2003 responded Government Code which provides as follows:
to petitioner’s October 14, 2002 letter-protest, explaining at
length the factual and legal bases of the deficiency tax SEC. 195. Protest of Assessment. - When the local treasurer
assessments and denying the protest. or his duly authorized representative finds that correct taxes,
fees, or charges have not been paid, he shall issue a notice
Considering the foregoing exchange of correspondence and of assessment stating the nature of the tax, fee or charge,
documents between the parties, we find that the requirement the amount of deficiency, the surcharges, interests and
of Section 228 was substantially complied with. Petitioner’s penalties. Within sixty (60) days from the receipt of the notice
right to due process was thus not violated. of assessment, the taxpayer may file a written protest with
the local treasurer contesting the assessment; otherwise, the
assessment shall become final and executory. The local
treasurer shall decide the protest within sixty (60) days from
the time of its filing. If the local treasurer finds the protest to
be wholly or partly meritorious, he shall issue a notice
34. Team Pacific Corporation vs. Daza as Municipal canceling wholly or partially the assessment. However, if the
Treasurer of Taguig, G.R. No. 167732, July 11, 2012. local treasurer finds the assessment to be wholly or partly
correct, he shall deny the protest wholly or partly with notice
Facts: to the taxpayer. The taxpayer shall have thirty (30) days from
TPC was assessed in the sum of P208,109.77 by the receipt of the denial of the protest or from the lapse of
respondent Josephine Daza, in her capacity as then the sixty (60) day period prescribed herein within which to
Municipal Treasurer of Taguig, by applying the full value of appeal with the court of competent jurisdiction otherwise the
the rates provided under Section 75 of the Taguig Revenue assessment becomes conclusive and unappealable.
Code, instead of the one-half (1/2) rate provided under
paragraph (c) of the same provision. Absent any showing of the formal denial of the protest, we
find that TPC’s filing of its petition before the RTC on 19 April
On 19 January 2004, TPC filed on the same day a written 2004 still timely.
protest with Daza.
Reckoned from the filing of the letter protest on 19 January
On 15 April 2004, TPC filed its Rule 65 petition for certiorari 2004, Daza had sixty (60) days or until 19 March 2004 within
before the RTC alleging that no formal action was taken which to resolve the same in view of the fact that 2004 was a
regarding its protest on or before 19 March 2004 or within leap year. From the lapse of said period, TPC, in turn, had
the period of sixty (60) days from the filing thereof as thirty (30) days or until 18 April 2004 within which to file its
prescribed under Article 195 of the Local Government Code. appeal to the RTC. Since the latter date fell on a Sunday, the
RTC correctly ruled that TPC’s filing of its petition on 19 April
While finding that the absence of proof of denial of TPC’s 2004 was still within the period prescribed under the above
letter-protest meant that the latter had thirty (30) days from quoted provision.
the lapse of the sixty (60) days prescribed under Article 195
of the Local Government Code within which to perfect its Rule 65 petition for certiorari was not the appropriate remedy
appeal, the RTC ruled that, rather than the special civil action from Daza’s inaction.
of certiorari provided under Rule 65 of the 1997 Rules of
Civil Procedure, an ordinary appeal would have been the TPC erroneously availed of the wrong remedy in filing a Rule
proper remedy from the assessment complained against. 65 petition for certiorari to question Daza’s inaction on its
Without moving for the reconsideration of the foregoing letter-protest. The rule is settled that, as a special civil action,
order, TPC filed the petition under Rule 45 before the SC on certiorari is available only if the following essential requisites
28 April 2005, on pure questions of law. concur: (1) it must be directed against a tribunal, board, or
officer exercising judicial or quasi-judicial functions; (2) the
Issue: tribunal, board, or officer must have acted without or in
1. Whether or not the Petition for Certiorari before the excess of jurisdiction or with grave abuse of discretion
RTC was filed on time. amounting to lack or excess of jurisdiction; and, (3) there is
no appeal nor any plain, speedy, and adequate remedy in
2. Whether or not TPC availed of the correct remedy the ordinary course of law.
Judicial function entails the power to determine what the law 35. Lucas G. Adamson, et al. vs. CA, et al., G.R. Nos.
is and what the legal rights of the parties are, and then 120935 & 124557, May 21, 2009
undertakes to determine these questions and adjudicate
upon the rights of the parties. Quasi-judicial function, on the DOCTRINE:
other hand, refers to the action and discretion of public When fraudulent tax returns are involved, a proceeding in
administrative officers or bodies, which are required to court after the collection of such tax may be begun without
investigate facts or ascertain the existence ofof facts, hold assessment.
hearings, and draw conclusions from them as a basis for
their official action and to exercise discretion of a judicial FACTS:
nature. • Lucas Adamson and AMC sold 131,897 common
shares of stock in Adamson and Adamson, Inc. (AAI)
Gauged from the foregoing definitions, Daza cannot be said to APAC Holding Limited (APAC). The shares were
to be performing a judicial or quasi-judicial function in valued at P7,789,995.00.[1] On June 22, 1990,
assessing TPC’s business tax and/or effectively denying its P159,363.21 was paid as capital gains tax for the
protest as then Municipal Treasurer of Taguig. For this transaction.
reason, Daza’s actions are not the proper subjects of a Rule • AMC sold to APAC Philippines, Inc. another 229,870
65 petition for certiorari which is the appropriate remedy in common shares of stock in AAI for P17,718,360.00.
cases where a the tribunal, board, or officer exercising AMC paid the capital gains tax of P352,242.96.
judicial or quasi-judicial functions acted without or in grave • The Commissioner issued a “Notice of Taxpayer” to
abuse of discretion amounting to lack or excess of AMC, Lucas G. Adamson, Therese June D.
jurisdiction and there is no appeal or any plain, speedy, and Adamson and Sara S. de los Reyes, informing them
adequate remedy in law. of deficiencies on their payment of capital gains tax
and Value Added Tax (VAT). The notice contained a
TPC’s availment of the wrong mode of appeal from the schedule for preliminary conference.
RTC’s assailed 5 April 2005 Order has, moreover, clearly
rendered the same final and executory. Granted that a Rule G.R. No. 120935
45 petition for review on certiorari is the proper mode of o Lucas G. Adamson, Therese June D.
appeal when the issues raised are purely questions of law, Adamson and Sara S. de los Reyes were
TPC lost sight of the fact that, as amended by RA No. charged before the Regional Trial Court
9282,24 paragraph c (2) [a], Section 725 of RA No. 112526 (RTC) of Makati, Branch 150 in Criminal
has vested the Court of Tax Appeals (CTA) with the exclusive Case Nos. 94-1842 to 94-1846. They filed
appellate jurisdiction over, among others, appeals from the a Motion to Dismiss or Suspend the
judgments, resolutions or orders of the RTC in tax collection Proceedings. They invoked the grounds
cases originally decided by them in their respective territorial that there was yet no final assessment of
jurisdiction. As amended by Section 9 of RA No. 9282,27 their tax liability, and there were still pending
Section 11 of RA No. 1125 likewise requires that the appeal relevant Supreme Court and CTA cases.
be perfected within thirty (30) days after receipt of the o Initially, the trial court denied the motion. A
decision and shall be made by filing a petition for review Motion for Reconsideration was however
under a procedure analogous to that provided for under Rule filed, this time assailing the trial court’s lack
42 of the 1997 Rules of Civil Procedure. of jurisdiction over the nature of the subject
cases.
TPC’s erroneous availment of the wrong mode of appeal and o On August 8, 1994, the trial court granted
direct resort to this Court instead of the CTA both warrant the the Motion. It ruled that the complaints for
dismissal of the petition at bench. The rule is settled that the tax evasion filed by the Commissioner
perfection of an appeal in the manner and within the period should be regarded as a decision of the
fixed by law is not only mandatory but jurisdictional and non- Commissioner regarding the tax liabilities of
compliance with these legal requirements is fatal to a party’s Lucas G. Adamson, Therese June D.
cause. Adamson and Sara S. de los Reyes, and
appealable to the CTA. It further held that
WHEREFORE, premises considered, the petition is DENIED the said cases cannot proceed
for lack of merit and being the wrong mode of appeal. independently of the assessment case
pending before the CTA, which has
jurisdiction to determine the civil and
criminal tax liability of the respondents
therein.
o Court of Appeals reversed the trial court’s
decision and reinstated the criminal
complaints.
▪ The appellate court held that, in a
criminal prosecution for tax
evasion, assessment of tax
deficiency is not required because
the offense of tax evasion is
complete or consummated when tax returns filed and the audit findings of
the offender has knowingly and the revenue examiner.
willfully filed a fraudulent return
with intent to evade the tax. o The Court of Appeals sustained the CTA’s
▪ It ruled that private respondents denial of the Commissioner’s Motion to
filed false and fraudulent returns Dismiss. Hence, this petition.
with intent to evade taxes, and
acting thereupon, petitioner filed ISSUES:
an Affidavit of Complaint with the (1) Did the CIR issue an assessment?
Department of Justice, without an (2) Must a criminal prosecution for tax evasion be preceded
accompanying assessment of the by a deficiency tax assessment?
t a x d e fi c i e n c y o f p r i v a t e (3) Does the CTA have jurisdiction on the case?
respondents, in order to
commence criminal action against HELD:
the latter for tax evasion. (1) NO. The recommendation letter of the Commissioner
cannot be considered a formal assessment as (a) it was not
G.R. No. 124557 addressed to the taxpayers; (b) there was no demand made
o AMC, Lucas G. Adamson, Therese June D. on the taxpayers to pay the tax liability, nor a period for
Adamson and Sara S. de los Reyes filed a payment set therein; (c) the letter was never mailed or sent
letter request for re-investigation with the to the taxpayers by the Commissioner. It was only an
Commissioner of the “Examiner’s Findings” affidavit of the computation of the alleged liabilities and thus
earlier issued by the Bureau of Internal merely served as prima facie basis for filing criminal
Revenue (BIR), which pointed out the tax informations.
deficiencies.
(2) YES. When fraudulent tax returns are involved as in the
o On March 15, 1994 before the cases at bar, a proceeding in court after the collection of
Commissioner could act on their letter- such tax may be begun without assessment considering that
request, AMC, Lucas G. Adamson, upon investigation of the examiners of the BIR, there was a
Therese June D. Adamson and Sara S. de preliminary finding of gross discrepancy in the computation
los Reyes filed a Petition for Review with of the capital gains taxes due from the transactions. The Tax
t h e C TA . They assailed the Code is clear that the remedies may proceed simultaneously.
Commissioner’s finding of tax evasion
against them. (3) NO. While the laws governing the CTA have expanded
the jurisdiction of the Court, they did not change the
o The Commissioner moved to dismiss the jurisdiction of the CTA to entertain an appeal only from a final
petition, on the ground that it was decision of the Commissioner, or in cases of inaction within
premature, as she had not yet issued a the prescribed period. Since in the cases at bar, the
formal assessment of the tax liability of Commissioner has not issued an assessment of the tax
therein petitioners. liability of the Petitioners, the CTA has no jurisdiction.

o On September 19, 1994, the CTA denied


the Motion to Dismiss. It considered the
c r i m i n a l c o m p l a i n t fi l e d b y t h e
Commissioner with the DOJ as an implied
formal assessment, and the filing of the 36. RCBC vs. CIR, G.R. No. 168498, April 24, 2007
criminal informations with the RTC as a
denial of petitioners’ protest regarding the
tax deficiency. FACTS:
1. In 2001, petitioner RCBC received a Formal Letter of
o The Commissioner repaired to the Court of Demand the respondent CIR for its deficiency taxes
Appeals on the ground that the CTA acted for the year 1997.
with grave abuse of discretion. She 2. Petitioner filed a protest and requested for
contended that, with regard to the protest reinvestigation which was not acted upon by the
provided under Section 229 of the NIRC, respondent.
there must first be a formal assessment 3. Petitioner then filed in 2002 a petition for review with
issued by the Commissioner, and it must the CTA for the cancellation of the assessments
be in accord with Section 6 of Revenue which was dismissed because it was filed beyond
Regulation No. 12-85. She maintained that the 30-day period following the lapse of 180 days
she had not yet issued a formal from petitioner’s submission of documents in support
assessment of tax liability, and the tax of its protest.
deficiency amounts mentioned in her 4. Petitioner did not file a motion for reconsideration or
criminal complaint with the DOJ were given an appeal to the CTA from the dismissal of its petition
only to show the difference between the for review. Consequently, the September 10, 2003
Resolution became final and executory.
ISSUE: Whether the period for protesting of assessment has In the meantime, Capitol Steel requested the Technical
prescribed. Committee on Real Property Valuation (TCRPV) of the
Bureau of Internal Revenue (BIR), by letter of March 27,
RULING: Yes. Sec. 228 of the NIRC provides that an 2001, for a revaluation of its properties By letter of November
assessment may be protested administratively by fi ling a 21, 2003, PHIVIDEC informed Capitol Steel that it would file
request for reconsideration or reinvestigation within 30 days anew an expropriation case and that it had deposited the
from receipt of the assessment. amount of P116,563,500 in the name of Capitol Steel,
Within 60 days from filing of the protest, all relevant P51,818,641 of which was deposited at the Landbank of the
supporting documents shall have been submitted; otherwise, Philippines (Landbank) and P64,744,859 at the Development
the assessment shall become final. If the protest is denied in Bank of the Philippines (DBP). PHIVIDEC further informed
whole or in part, or is not acted upon within one hundred Capitol Steel that the total amount deposited represents the
eighty (180) days from submission of documents, the zonal value of the properties, and may be withdrawn at any
taxpayer adversely affected by the decision or inaction may time. The total amount deposited represents one hundred
appeal to the Court of Tax Appeals within 30 days from percent (100%) of the value of the properties based on the
receipt of the said decision, or from the lapse of the 180-day schedule of zonal valuation for real properties under
period; otherwise the decision shall become final, executory Department Order No. 40-97 (D.O. 40-97) fixing the zonal
and demandable. valuation of the properties at Sugbongcogon and Casinglot
In this case, from July 20, 2001, that is, the date of at P300 and P500 per square meter, respectively. Capitol
petitioner’s filing of protest, it had until September 18, 2001 Steel opposed the application of D.O. 40-97, claiming
to submit relevant documents and from September 18, 2001, instead that under the TCRPV Resolution, the properties
the Commissioner had until March 17, 2002 to issue his have been revalued at P700 per square meter.
decision. As admitted by petitioner, the protest remained
unacted by the CIR. Therefore, it had until April 16, 2002 Claiming that the RTC acted without or in excess of
within which to elevate the case to this court. Thus, when jurisdiction and with grave abuse of discretion in issuing its
petitioner filed its Petition for Review on April 30, 2002, the Orders dated February 3, 2004 and April 24, 2004,
same is outside the 30-day period. As provided in Sec. 228, PHIVIDEC filed before the appellate court a petition for
the failure of a taxpayer to appeal from an assessment on certiorari with a prayer for the issuance of a writ of
time rendered the assessment final, executory and preliminary mandatory injunction. The appellate court, by
demandable. Consequently, petitioner is precluded from Decision of February 7, 2005, holding that the zonal
disputing the correctness of the assessment valuation established under D.O. 40-97 should be the basis
in computing the provisional value of the properties, and that
the valuation made by the TCRPV was neither binding nor
effective for failure to comply with the guidelines relative to
the establishment of zonal values of real properties under
Revenue Memorandum Order No. 56-89, as amended by
37. Capitol Steel Corp. vs. Phividec Industrial Authority, Revenue Memorandum Order No. 56-94, granted
G.R. No. 169453, December 6, 2006 PHIVIDEC's petition and accordingly directed the RTC to
issue a writ of possession in favor of PHIVIDEC.
FACTS:
Capitol Steel Corporation (Capitol Steel) challenges the Capitol Steel filed a motion for reconsideration of the
Court of Appeals Decision of February 7, 2005 in CA-G.R. appellate court's February 7, 2005 decision, claiming that
SP No. 84067 as well as its Resolution dated August 24, Revenue Memorandum Order No. 56-89, as amended by
2005 ordering the Presiding Judge of Branch 20, Regional Revenue Memorandum Order No. 56-94, applies only when
Trial Court (RTC) of Misamis Oriental to issue a writ of all the properties in a province or a city are revalued, not
possession in favor of Phividec Industrial Authority when the properties of a single taxpayer are revalued. Acting
(PHIVIDEC). Petitioner, Capitol Steel, is a domestic on Capitol Steel's motion for reconsideration, the appellate
corporation which owns 65 parcels of land with a total land court conducted a hearing following which it ordered the
area of 337,733 square meters (the properties) located in the parties to submit their respective memoranda and position
barrios of Sugbongcogon and Casinglot, Municipality of papers. In the meantime, the RTC, by Order of June 6, 2005,
Tagoloan, Province of Misamis Oriental. Respondent, granted the supplemental motion for execution of Capitol
PHIVIDEC, is a government-owned and controlled Steel and allowed it to withdraw from the Landbank and the
corporation organized and existing under Presidential DBP the total amount of P116,563,500.
Decree No. 538, as amended, which is vested with
governmental and proprietary functions including the power ISSUE:
of eminent domain for the purpose of acquiring rights of way Whether the appellate court erred in ordering the RTC to
or any property for the establishment or expansion of the issue a writ of possession in favor of respondent.
Phividec Industrial Areas. On September 1, 1999, Branch 38
of the Misamis Oriental RTC issued a writ of possession in RULING:
favor of PHIVIDEC. Due, however, to the unauthorized Significantly, after a writ of possession was issued in favor of
engagement by PHIVIDEC of the legal services of a private respondent on September 1, 1999 in the first expropriation
lawyer, the expropriation case was dismissed, without case-Civil Case No. 99-477, respondent commenced the
prejudice to the filing of a similar petition through a proper construction of infrastructure buildings and container port
legal officer or counsel. terminals. Possession of the properties has since remained
with respondent, with the MICTP now complete and fully viz: The Court is of the sound observation that the propriety
operational. When the second expropriation case was re- of the granting of the writ of possession will greatly depend
filed, R.A. 8974, which provides for substantive requirements on the just compensation mandated by Republic Act No.
before a writ of possession is issued, was already in force 8974, hence, it will follow that any deposit to be made
and in effect. therein, in compliance with said law, should be the prevailing
fair market value on the basis of the zonal valuation within
SECTION 4. Guidelines for Expropriation Proceedings. — the locality and virtually agreed upon by both parties. This
Whenever it is necessary to acquire real property for the Court, therefore, opted to rule and so holds that considering
right-of-way, site or location for any national government the conflicting zonal valuation, a judicial interpretation must
infrastructure project through expropriation, the appropriate first be held to determine the prevailing market value on the
implementing agency shall initiate the expropriation basis of the zonal valuation approved by the government
proceedings before the proper court under the following agency tasked to fix the same.
guidelines: (a) Upon the filing of the complaint, and after due
notice to the defendant, the implementing agency shall
immediately pay the owner of the property the amount
equivalent to the sum of one hundred percent (100%) of the
value of the property based on the current relevant zonal
valuation of the Bureau of Internal Revenue (BIR); and (2) 38. CIR vs. Sony Phil., Inc., G.R. No. 178697, November
the value of the improvements and/or structures as 17, 2010
determined under Section 7 hereof;
Facts:
Upon compliance with the guidelines abovementioned, the 1. CIR issued Letter of Authority, in order to examine
court shall immediately issue to the implementing agency an Sony's books of accounts and other accounting
order to take possession of the property and start the records regarding revenue taxes for "the period
implementation of the project. Before the court can issue a 1997 and unverified prior years."
Writ of Possession, the implementing agency shall present to 2. A preliminary assessment for 1997 deficiency taxes
the court a certificate of availability of funds from the proper and penalties was issued by the CIR which Sony
official concerned. In the event that the owner of the property protested.
contests the implementing agency's proffered value, the 3. Sony filed a petition for review before the CTA.
court shall determine the just compensation to be paid the 4. After trial, the CTA-First Division disallowed the
owner within sixty (60) days from the date of filing of the d e fi c i e n c y VAT a s s e s s m e n t b e c a u s e t h e
expropriation case. When the decision of the court becomes subsidized advertising expense paid by Sony
final and executory, the implementing agency shall pay the which was duly covered by a VAT invoice resulted
owner the difference between the amount already paid and in an input VAT credit.
the just compensation as determined by the court. 5. CTA-First Division partly granted Sony's petition by
cancelling the deficiency VAT assessment
Under R.A. 8974, the requirements for authorizing immediate 6. CIR argues before the Supreme Court that Sony is
entry in expropriation proceedings involving real property liable for the deficiency VAT due to the following:
are: (1) the filing of a complaint for expropriation sufficient in a. Sony's advertising expense could not be
form and substance; (2) due notice to the defendant; (3) considered as an input VAT credit because
payment of an amount equivalent to 100% of the value of the the same was eventually reimbursed by
property based on the current relevant zonal valuation of the Sony International Singapore. (SIS). Since
BIR including payment of the value of the improvements and/ Sony's advertising expense was
or structures if any, or if no such valuation is available and in reimbursed by SIS, the former never
cases of utmost urgency, the payment of the proffered value incurred any advertising expense. As a
of the property to be seized; and (4) presentation to the court result, Sony is not entitled to a tax credit.
of a certificate of availability of funds from the proper
officials. Issue: Whether or not Sony is liable for the defi ciency VAT

Upon compliance with the requirements, a petitioner in an Ruling: NO!


expropriation case, in this case respondent, is entitled to a • Sony Philippines did in fact incur expenses
writ of possession as a matter of right and it becomes the supported by valid VAT invoices when it paid for
ministerial duty of the trial court to forthwith issue the writ of certain advertising costs. This is sufficient to accord it
possession. No hearing is required and the court neither the benefit of input VAT credits and where the money
exercises its discretion or judgment in determining the came from to satisfy said advertising billings is
amount of the provisional value of the properties to be another matter but does not alter the VAT effect.
expropriated as the legislature has fixed the amount under • In the same way, Sony Philippines cannot be
Section 4 of R.A. 8974. There is no need for the deemed to have received the reimbursement as a
determination with reasonable certainty of the final amount of fee for a VAT-taxable activity. The reimbursement
just compensation before the writ of possession may be was couched as an aid for Sony Philippines by SIS
issued. in view of the company’s “dire or adverse economic
conditions”.
The trial court, however, failed to distinguish the "provisional • More importantly, the absence of a sale, barter or
value of the property" from "just compensation" when it ruled, exchange of goods or properties supports the non-
VAT nature of the reimbursement. This was 10.CTA ruled that the criminal complaint for tax evasion
distinguished from the COMASERCO case where is the assessment issued.
even if there was similarly a reimbursement-on-cost 11. CA affirmed the CTA ruling
arrangement between affiliates, there was in fact an
underlying service. Here, the advertising services ISSUE:
were rendered in favor of Sony Philippines not SIS 1. Whether or not the criminal complaint for tax
• Sony did not render any service to SIS at all. The evasion can be construed as an assessment?
services rendered by the advertising companies, (NO)
paid for by Sony using SIS dole-out, were for Sony 2. Whether or not an assessment is necessary
and not SIS. SIS just gave assistance to Sony in the before criminal charges for tax evasion may be
amount equivalent to the latter's advertising instituted? (NO)
expense, however, it never received any goods,
properties or service from Sony. RULING:
· T H E C R I M I N A L C O M P L A I N T F O R TA X
EVASION CANNOT BE CONSTRUED AS AN
ASSESSMENT
The NIRC defines the specific functions and effects of an
assessment. To consider the affidavit attached to the
39. CIR vs. Pascor Realty and Devt. Corp., et al., G.R. No. Complaint as a proper assessment is to subvert the nature of
128315, June 29, 1999 an assessment and to set a bad precedent that will prejudice
innocent taxpayers.
FACTS: True, as pointed out by the private respondents, an
1. By virtue of Letter of Authority No. 001198, then BIR assessment informs the taxpayer that he or she has tax
Commissioner Jose U. Ong authorized Revenue O liabilities. But not all documents coming from the BIR
cers Thomas T. Que, Sonia T. Estorco and containing a computation of the tax liability can be deemed
Emmanuel M. Savellano to examine the books of assessments.
accounts and other accounting records of Pascor
Realty and Development Corporation, (PRDC) for To start with, an assessment must be sent to and received
the years ending 1986, 1987 and 1988 by a taxpayer, and must demand payment of the taxes
2. The said examination resulted in a recommendation described therein within a specific period. Thus, the NIRC
for the issuance of an assessment in the amounts of imposes a 25 percent penalty, in addition to the tax due, in
P7,498,434.65 and P3,015,236.35 for the years case the taxpayer fails to pay the deficiency tax within the
1986 and 1987, respectively. time prescribed for its payment in the notice of assessment.
3. "On March 1, 1995, the Commissioner of Internal Likewise, an interest of 20 percent per annum, or such
Revenue filed a criminal complaint before the higher rate as may be prescribed by rules and regulations, is
Department of Justice against the PRDC, its to be collected from the date prescribed for its payment until
President Rogelio A. Dio, and its Treasurer Virginia the full payment.
S. Dio, alleging evasion of taxes in the total amount
of P10,513,671.00. The issuance of an assessment is vital in determining
4. Private respondents PRDC, et al., filed an Urgent the period of limitation regarding its proper issuance
Request for Reconsideration/Reinvestigation and the period within which to protest it.
disputing the tax assessment and tax liability. Section 203 of the NIRC provides that internal revenue
5. "In a letter dated May 17, 1995, the CIR denied the taxes must be assessed within three years from the last day
urgent request for reconsideration/reinvestigation of within which to le the return. Section 222, on the other hand,
the private respondents on the ground that no formal specifies a period of ten years in case a fraudulent return
assessment has as yet been issued by the with intent to evade was submitted or in case of failure to le a
Commissioner. return. Also, Section 228 of the same law states that said
6. "On March 23, 1995, private respondents received a assessment may be protested only within thirty days from
subpoena from the DOJ in connection with the receipt thereof.
criminal complaint led by the Commissioner of Necessarily, the taxpayer must be certain that a specific
Internal Revenue (BIR) against them. document constitutes an assessment. Otherwise, confusion
7. "Private respondents then elevated the Decision of would arise regarding the period within which to make an
the CIR dated May 17, 1995 to the Court of Tax assessment or to protest the same, or whether interest and
Appeals on a petition for review docketed as CTA penalty may accrue thereon.
Case No. 5271 on July 21, 1995.
8. On September 6, 1995, the CIR filed a Motion to It should also be stressed that the said document is a notice
Dismiss the petition on the ground that the CTA has duly sent to the taxpayer. Indeed, an assessment is deemed
no jurisdiction over the subject matter of the petition, made only when the collector of internal revenue releases,
as there was no formal assessment issued against mails or sends such notice to the taxpayer.
the petitioners.
9. The CTA denied the said motion to dismiss in a In the present case, the revenue o cers' A davit merely
Resolution dated January 25, 1996 and ordered the contained a computation of respondents' tax liability. It did
CIR to le an answer within thirty (30) days from not state a demand or a period for payment. Worse, it was
receipt of said resolution. addressed to the justice secretary, not to the taxpayers.
of which amount P37,355.00 was the deficiency and
ASSESSMENT NOT NECESSARY BEFORE FILING A P18,677.60 was the 50% surcharge.
CRIMINAL COMPLAINT 5) The Collector of Internal Revenue wrote a letter, dated
Section 222 of the NIRC specifically states that in cases February 29, 1956, to Mrs. Lourdes de la Rama-
where a false or fraudulent return is submitted or in cases of Osmeña informing her of the deficiency income tax and
failure to file a return such as this case, proceedings in court asking payment thereof.
may be commenced without an assessment. Furthermore, 6) On March 13, 1956, the latter's counsel wrote to the
Section 205 of the same Code clearly mandates that the civil Collector acknowledging receipt of the assessment, but
and criminal aspects of the case may be pursued contended that Lourdes de la Rama-Osmeña had no
simultaneously. authority to represent the estate, and that the
assessment should be sent to Leonor de la Rama who
In Ungab v. Cusi, petitioner therein sought the dismissal of was pointed to by said counsel as the administratrix of
the criminal Complaints for being premature, since his the estate of her late father.
protest to the CTA had not yet been resolved. The Court held 7) On the basis of this information the Deputy Collector of
that such protests could not stop or suspend the criminal Internal Revenue, on November 22, 1956, sent a letter
action which was independent of the resolution of the protest to Leonor de la Rama as administratrix of the estate,
in the CTA. This was because the commissioner of internal asking payment.
revenue had, in such tax evasion cases, discretion on 8) The tax, as assessed, not having been paid, the deputy
whether to issue an assessment or to file a criminal case Commissioner of Internal Revenue, on September 7,
against the taxpayer or to do both. 1959, wrote another letter to Mrs. Lourdes de la Rama-
Osmeña demanding, through her, upon the heirs, the
The issuance of an assessment must be distinguished from payment of the deficiency income tax within the period
the filing of a complaint. of thirty days from receipt thereof.
9) The counsel of Lourdes de la Rama-Osmeña, in a letter
Before an assessment is issued, there is, by practice, a pre- dated September 25, 1959, insisted that the letter
assessment notice sent to the taxpayer. The taxpayer is then should be sent to Leonor de la Rama. The Deputy
given a chance to submit position papers and documents to Commissioner of Internal Revenue wrote to Leonor de
prove that the assessment is unwarranted. If the la Rama another letter, dated February 11, 1960,
commissioner is unsatisfied, an assessment signed by him demanding, through her as administratrix, upon the
or her is then sent to the taxpayer informing the latter heirs of Esteban de la Rama, the payment of the sum of
specifically and clearly that an assessment has been made P56,032.50, as deficiency income tax including the 50%
against him or her. surcharge, to the City Treasurer of Pasay City within
In contrast, the criminal charge need not go through all thirty days from receipt thereof.
these. The criminal charge is led directly with the DOJ. 10) The deficiency income tax not having been paid, the
Thereafter, the taxpayer is notified that a criminal case had Republic of the Philippines filed on March 6, 1961 with
been led against him, not that the commissioner has issued the Court of First Instance of Manila a complaint against
an assessment. It must be stressed that a criminal complaint the heirs of Esteban de la Rama, seeking to collect from
is instituted not to demand payment, but to penalize the each heir his/her proportionate share in the income tax
taxpayer for violation of the Tax Code. liability of the estate.
11) Defenses made by the defendants-appellee: (1) that no
cash dividends of P86,800.00 had been paid to the
estate; (2) that the administration of the estate had
been extended by the probate court precisely for the
40. Republic of the Phils. vs. Leonor de la Rama, et al., purpose of collecting said dividends; (3) that Leonor de
G.R. No. L-21108, November 29, 1966 la Rama had never been administratrix of the estate; (4)
that the executor of the estate, Eliseo Hervas, had
Facts: never been given notice of the assessment, and
1) The estate of Esteban De la Rama was subject of a consequently the assessment had never become final.
special proceeding in the Court of First Instance of 12) From the evidence presented, the lower court found out
Iloilo. that the dividends declared by the De la Rama
2) On March 12, 1951, income tax returns of the estate Steamship, Co. in favor of the late Esteban De la Rama
was filed by the executor-administrator, Eliseo Hervas, was applied to the obligation of the estate to the
for the taxable year of 1950 declaring a net income of company declaring the dividends; that Leonor De la
Php. 22, 796.50. On the basis of such declaration, Php. Rama was not the administratrix of the estate, but it
3,919.00 was assessed and paid as income tax. was Eliseo Hervas who was the executor-administrator;
3) The Bureau of Internal Revenue subsequently found that the administration of the estate was extended for
out that there had been a received by the estate in 1950 the purpose of recovering for the estate said dividends
from the De la Rama Steamship Company, Inc. cash from the De la Rama Steamship Co., Inc.; and that the
dividends amounting to Php. 86,800.00 which amount question of whether the deceased Esteban De la Rama
was not declared in the income tax return of the estate was a debtor to the entity known as the Hijos de. I. de la
for the year 1950. Rama, which was also indebted to the De la Rama
4) On March 7, 1956, made an assessment as deficiency Steamship Co., Inc., was not a settled one.
income tax against the estate in the sum of P56,032.50,
13) The lower court dismissed the complaint of the Republic 2. NO. The assessment did not attain finality as
of the Philippines which prompted to the appeal of the against the estate or the heirs despite the absence
said decision to the Court of Appeals. of contest or dispute by way of appeal within thirty
14) The appeal was then certified to the Supreme Court days from the receipt thereof to the CTA. The lower
because only questions of law are involved. court found out that Leonor De la Rama was not
the administratrix of the estate of the deceased.
As to the Republic’s contention: The letter of notice for assessment was first sent to
a. The dividends (credited in the books of the Leonor De la Rama. During this time, the estate
company) was constructively received by the estate was still under administration in a special
of the late Esteban De la Rama or his heirs as such proceeding before the Court of First Instance of
was an income and was, therefore, taxable. Iloilo. In other words, the estate was still under the
b. The assessment involved in the case had long administration of Eliseo Hervas as regards the
become final. collection of said dividends. It was Eliseo Hervas
c. That the service of the notice of assessment on that was charged to pay the debts and charges
Lourdes De la Rama-Osmena and Leonor De la against the estate and to perform all orders of the
Rama was proper and valid. court and pay taxes and assessment due to the
d. That the lower court had no jurisdiction to take Government. It is him, as the administrator, who is
cognizance of appellees’ defense that the under obligation to pay such claim. THE NOTICE
assessment in question was erroneous. OF ASSESSMENT SHOULD HAVE BEEN SENT
Issues: TO ELISEO HERVAS. When the notices were sent
1. WON the dividends applied to the to Leonor De la Rama and Lourdes De la Rama-
standing obligations of the estate Osmena, assessment was not deemed made for
constitutes as constructive receipt by the neither of them had authority to represent the
estate or by the heirs considered as estate. The notice was not sent to the taxpayer for
income and taxable. the purpose of giving effect to the assessment, and
2. WON the service of the Notice of said notice could not produce any effect. The
Assessment to Lourdes De la Rama- person liable for the payment of the tax did not
Osmena and Leonor De la Rama proper receive the assessment, the assessment,
and valid; and if it had long become final. therefore, could not become final and executory.
3. WON the lower court had jurisdiction to
take cognizance of the appellees’ “Assessment is deemed made when the notice to
defense. this effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to said
Ruling: assessment. (Bautista and Tan v. CIR, L-12259,
1. NO. First, the debt was contested by the executor- May 27, 1959)”
administrator of the estate. No claim was even filed
by the De la Rama Steamship Co., Inc. against the 3. YES. According to R.A. 1125, the CTA has
estate with respect to the indebtedness. Existence exclusive jurisdiction to review by appeal decisions
and validity of the debt is in dispute and no proof of the CIR in cases involving disputed
was adduced to show its existence and validity. assessments, and the disputed assessment must
Second, Hijos de. I de la Rama, Inc., alleged be appealed by the person adversely affected by
debtor was an entity separate and distinct from the the decision within thirty days after the receipt of
deceased. Its debts could not be charged against such decision. In the instant case, the person
the deceased, even if the deceased was the adversely affected would have been the
principal owner thereof, in the absence of proof of administrator of the estate, and notice of
substitution of debtor. No evidence was presented assessment should have been sent to him. Not
that the late Esteban De la Rama substituted Hijos having receipt of such notice, he could not appeal
de I. de la Rama as debtor to the De la Rama the assessment to the CTA within 30 days from
Steamship Co., Inc., nor was there evidence that said notice. Hence, the assessment did not fall
the estate of the deceased owned Hijos de I. de la within the exclusive jurisdiction of the CTA.
Rama, Inc.

Under the NIRC, income tax is assessed on


income that has been received. Section 21 of the
Code requires that the income must be received
by an individual before a tax can be levied
thereon.

If no income was received, no income tax can be


assessed thereon. As the income was not
received either by the estate, or by the heirs,
neither the estate nor the heirs can be liable for
the payment of income tax therefor.
juris against the taxpayer and liberally in favor of the
41. CIR vs. Rosemarie Acosta, G.R. No. 154068, August government.
3, 2007
2. The 1997 NIRC cannot be applied
DOCTRINE: A party seeking an administrative remedy must retroactively.
not merely initiate the prescribed administrative procedure to
obtain relief, but also pursue it to its appropriate conclusion Respondent argued that the 1997 NIRC should apply since
before seeking judicial intervention in order to give the the petition was filed with the CTA on April 15, 1999 when
administrative agency an opportunity to decide the matter new Tax Code was already in effect. The argument cannot
itself correctly and prevent unnecessary and premature be countenanced. Tax laws are prospective in operation,
resort to court action. unless the language of the statute clearly provides
otherwise.
FACTS:
Respondent Acosta filed a Petition for Review before the Moreover, a party seeking an administrative remedy must
Court of Tax Appeals (CTA) alleging overpayment of income not merely initiate the prescribed administrative procedure to
tax for the year 1996. Prior to filing, she filed an amended obtain relief, but also pursue it to its appropriate conclusion
return before the BIR indicating an overpayment of before seeking judicial intervention in order to give the
P358,274.63. Respondent Commissioner of Internal administrative agency an opportunity to decide the matter
Revenue (CIR) move to dismiss the case for failure to file a itself correctly and prevent unnecessary and premature
mandatory written claim for refund before the CIR. CTA resort to court action. This the respondent did not follow
dismissed the case. However, upon review, CA reversed the through.
CTA and ruled that Acosta’s filing of an amended return
indicating overpayment was sufficient compliance with the Furthermore, as the CTA stressed, even the date of filing of
requirement of a written claim for refund. the Final Adjustment Return was omitted, inadvertently or
otherwise, by respondent in her Petition for Review. This
Argument of CIR: amended return showing an overpayment omission was fatal to respondent's claim, for it deprived the
does not constitute the written claim for refund required CTA of its jurisdiction over the subject matter of the case.
under Section 230 of the 1993 NIRC (old Tax Code). He
claims that an actual written claim for refund is necessary PETITION IS GRANTED.
before a suit for its recovery may proceed in any court.

Argument of Acosta: filing of an amended return indicating


an overpayment of P358,274.63 constitutes a written claim
for refund pursuant to the clear proviso stated in the last
sentence of Section 204(c) of the 1997 NIRC (new Tax code) 42. CIR vs. The Estate of Benigno P. Toda, Jr., et al., G.R.
No. 147188, September 14, 2004
ISSUE/S:
1. WON an amended return filed by Acosta DOCTRINE: The prescriptive period to assess the correct
indicating an overpayment constitutes the written taxes in case of false returns is ten years from the discovery
claim for refund required by law. NO of the falsity.

2. WON the 1997 NIRC be applied retroactively. NO FACTS:


Cibeles Insurance Corporation (CIC) authorized Benigno
RULING: Toda, president and owner of its issued and outstanding
1. A written claim for refund, categorically capital stock, to sell the Cibeles Building and the 2 parcels of
demanding recovery of overpaid taxes must land on which the building stands for an amount of not less
be first filed before the CIR. than 90 mil. It was purportedly sold to Rafael Altonaga, who
in turn, sold it to Royal Match (RMI) on the same day.
The applicable law on refund of taxes pertaining to the 1996
compensation income is Section 230 of the old Tax Code, The 2 transactions were evidenced by Deeds of absolute
which was the law then in effect, and not Section 204(c) of sale notarized on the same day by the same notary public.
the new Tax Code, which was effective starting only on For the sale of property to RMI, Altonaga paid capital gains
January 1, 1998. tax. CIC then filed its corporate annual income tax return,
declaring among other things, its gain from the sale of the
Under the old Tax Code, a claimant must first file a written real property. It paid its tax after crediting the withholding
claim for refund, categorically demanding recovery of taxes.
overpaid taxes with the CIR, before resorting to an action in
court. This obviously is intended, first, to afford the CIR an Toda then sold his entire share of stocks in CIC to Le Hun
opportunity to correct the action of subordinate officers; and Choa as evidenced by a deed of sale of shares of stocks. 3
second, to notify the government that such taxes have been and a half years later, Toda died. The BIR sent an
questioned, and the notice should then be borne in mind in assessment notice and demand letter for deficiency income
estimating the revenue available for expenditure. Entrenched tax. The new CIC asked for reconsideration that the
in our jurisprudence is the principle that tax refunds are in assessment should be directed against the old CIC and not
the nature of tax exemptions which are construed strictissimi against the new CIC, which is owned by an entirely different
set of stockholders. So the estate of Benigno Toda,
represented by special co-administrators, received a notice Thus, the BIR was amply informed of the transactions even
of assessment from the CIR for the deficiency income tax. prior to the execution of the necessary documents to effect
The estate filed a protest which was dismissed by the the transfer. Subsequently, the two sales were openly made
Commissioner, stating that a fraudulent scheme was with the execution of public documents and the declaration
deliberately perpetuated by the CIC wholly owned and of taxes for 1989. However, these circumstances do not
controlled by Toda by covering up the additional gain of P100 negate the existence of fraud. As earlier discussed those two
million (the difference of the first simulated sale to Altonaga transactions were tainted with fraud. And even assuming
and the second simulated sale to RMI), which resulted in the arguendo that there was no fraud, we find that the income
change in the income structure of the proceeds of the sale of tax return filed by CIC for the year 1989 was false. It did not
the two parcels of land and the building thereon to an reflect the true or actual amount gained from the sale of the
individual capital gains, thus evading the higher corporate Cibeles property. Obviously, such was done with intent to
income tax rate of 35%. evade or reduce tax liability.

Thus the income tax return filed by CIC with intent to evade As stated above, the prescriptive period to assess the
payment of taxes was thus false and fraudulent. Since such correct taxes in case of false returns is ten years from the
falsity or fraud was discovered by the BIR only on 8 March discovery of the falsity. The false return was filed on 15 April
1991, the assessment issued on 9 January 1995 was well 1990, and the falsity thereof was claimed to have been
within the prescriptive period prescribed by Section 223 (a) discovered only on 8 March 1991. The assessment for the
of the National Internal Revenue Code of 1986, which 1989 deficiency income tax of CIC was issued on 9 January
provides that tax may be assessed within 10 years from the 1995. Clearly, the issuance of the correct assessment for
discovery of the falsity or fraud. The Estate filed a petition for deficiency income tax was well within the prescriptive period.
review.

It ruled that there being no proof of fraudulent transaction,


the applicable period for the BIR to assess CIC is that
prescribed in Section 203 of the NIRC of 198, which is 3
years after the last day prescribed by law for the filing of the
return. Thus, the governments right to assess CIC prescribed 43. CIR vs. Metro Star Superama, Inc., G.R. No. 185371,
on 15 April 1993. The assessment issued on 9 January 1995 December 8, 2010
was, therefore, no longer valid.
DOCTRINE: If the taxpayer denies ever having received an
The CTA also ruled that the mere ownership by Toda of assessment from the BIR, it is incumbent upon the latter to
99.991% of the capital stock of CIC was not in itself sufficient prove by competent evidence that such notice was indeed
ground for piercing the separate corporate personality of received by the addressee. The onus probandi was shifted to
CIC. Hence, the CTA declared that the Estate is not liable for respondent to prove by contrary evidence that the Petitioner
deficiency income tax of P79,099,999.22 and, accordingly, received the assessment in the due course of mail.
cancelled and set aside the assessment issued by the
Commissioner on 9 January 1995. The CTA denied the The sending of a PAN to taxpayer to inform him of the
motion for reconsideration and CA affirmed this decision. assessment made is but part of the "due process
requirement in the issuance of a deficiency tax assessment,"
ISSUE: the absence of which renders nugatory any assessment
Whether or not the period to assess has prescribed? made by the tax authorities.

RULING: NO. FACTS:

Section 269 of the NIRC of 1986 (now Section 222 of the Tax Metro Star Superama is a domestic corporation duly
Reform Act of 1997) read: Sec. 269. Exceptions as to period organized under Philippine Law.
of limitation of assessment and collection of taxes.-(a) In the
case of a false or fraudulent return with intent to evade tax or On January 26, 2001, the Regional Director of Revenue
of failure to file a return, the tax may be assessed, or a Region No. 10 (RD), Legazpi City, issued Letter of
proceeding in court after the collection of such tax may be Authority for Revenue Officer Daisy G. Justiniana to
begun without assessment, at any time within ten years after examine Metro Star’s books of accounts and other
the discovery of the falsity, fraud or omission: Provided, That accounting records for income tax and other internal revenue
in a fraud assessment which has become final and taxes for the taxable year 1999. Said Letter of Authority was
executory, the fact of fraud shall be judicially taken revalidated on August 10, 2001 by the RD.
cognizance of in the civil or criminal action for collection
thereof. Put differently, in cases of (1) fraudulent returns; (2) For Metro Star’s failure to comply with several requests for
false returns with intent to evade tax; and (3) failure to file a the presentation of records and Subpoena Duces Tecum, the
return, the period within which to assess tax is ten years OIC of BIR Legal Division issued an Indorsement dated
from discovery of the fraud, falsification or omission, as the September 26, 2001 informing Revenue District Officer of
case may be. It is true that in a query dated 24 August 1989, Revenue Region No. 67 (RDO), Legazpi City to proceed
Altonaga, through his counsel, asked the Opinion of the BIR with the investigation based on the best evidence
on the tax consequence of the two sale transactions. obtainable preparatory to the issuance of assessment notice.
Jurisprudence is replete with cases holding that if the
On November 8, 2001, RDO Ramos-Lafuente issued a taxpayer denies ever having received an assessment from
Preliminary 15-day Letter, which Metro Star received on the BIR, it is incumbent upon the latter to prove by
November 9, 2001. The said letter stated that a post audit competent evidence that such notice was indeed received by
review was held and it was ascertained that there was the addressee. The onus probandi was shifted to respondent
deficiency value-added and withholding taxes due from to prove by contrary evidence that the Petitioner received the
petitioner in the amount of ₱ 292,874.16. assessment in the due course of mail.

On April 11, 2002, Metro Star received a Formal Letter of The facts to be proved to raise this presumption are (a) that
Demand dated April 3, 2002 assessing petitioner the amount the letter was properly addressed with postage prepaid, and
of ₱292,874.16 for deficiency value-added and withholding (b) that it was mailed. Once these facts are proved, the
taxes for the taxable year 1999. presumption is that the letter was received by the addressee
as soon as it could have been transmitted to him in the
Subsequently, Revenue District Office No. 67 sent a copy of ordinary course of the mail. But if one of the said facts fails to
the Final Notice of Seizure dated May 12, 2003, which appear, the presumption does not lie.
Metro Star received on May 15, 2003, giving the latter last
opportunity to settle its deficiency tax liabilities within ten (10) In the case at bar, the Court agrees with the CTA that the
[days] from receipt thereof, otherwise respondent BIR shall CIR failed to discharge its duty and present any evidence to
be constrained to serve and execute the Warrants of show that Metro Star indeed received the PAN dated
Distraint and/or Levy and Garnishment to enforce collection. January 16, 2002. It could have simply presented the registry
receipt or the certification from the postmaster that it mailed
On February 6, 2004, petitioner received from Revenue the PAN, but failed. Neither did it offer any explanation on
District Office No. 67 a Warrant of Distraint and/or Levy why it failed to comply with the requirement of service of the
No. 67-0029-23 dated May 12, 2003 demanding payment of PAN. It merely accepted the letter of Metro Star’s chairman
deficiency value-added tax and withholding tax payment in dated April 29, 2002, that stated that he had received the
the amount of ₱292,874.16. FAN dated April 3, 2002, but not the PAN; that he was willing
to pay the tax as computed by the CIR; and that he just
On July 30, 2004, petitioner filed with the Office of wanted to clarify some matters with the hope of lessening its
respondent Commissioner a Motion for Reconsideration tax liability.
which was denied on February 8, 2005, through its
authorized representative, Revenue Regional Director of Moreover, Section 228 of the Tax Code clearly requires that
Revenue Region 10, Legaspi City. the taxpayer must first be informed that he is liable for
deficiency taxes through the sending of a PAN. He must be
Metro Star claimed that it was not accorded due process informed of the facts and the law upon which the
because it denied having received a Preliminary Assessment assessment is made. The law imposes a substantive, not
Notice. Hence, the Petition to the CTA. merely a formal, requirement. To proceed heedlessly with tax
collection without first establishing a valid assessment is
The CTA-Second Division opined that "[w]hile there [is] a evidently violative of the cardinal principle in administrative
disputable presumption that a mailed letter [is] deemed investigations - that taxpayers should be able to present their
received by the addressee in the ordinary course of mail, a case and adduce supporting evidence.
direct denial of the receipt of mail shifts the burden upon the
party favored by the presumption to prove that the mailed It is clear that the sending of a PAN to taxpayer to inform him
letter was indeed received by the addressee." It also found of the assessment made is but part of the "due process
that there was no clear showing that Metro Star actually requirement in the issuance of a deficiency tax assessment,"
received the alleged PAN, dated January 16, 2002. It, the absence of which renders nugatory any assessment
accordingly, ruled that the Formal Letter of Demand dated made by the tax authorities. The use of the word "shall" in
April 3, 2002, as well as the Warrant of Distraint and/or Levy subsection 3.1.2 describes the mandatory nature of the
dated May 12, 2003 were void, as Metro Star was denied service of a PAN. The persuasiveness of the right to due
due process. process reaches both substantial and procedural rights and
the failure of the CIR to strictly comply with the requirements
The CIR insists that Metro Star received the PAN, dated laid down by law and its own rules is a denial of Metro Star’s
January 16, 2002, and that due process was served right to due process. Thus, for its failure to send the PAN
nonetheless because the latter received the Final stating the facts and the law on which the assessment was
Assessment Notice (FAN). made as required by Section 228 of R.A. No. 8424, the
assessment made by the CIR is void.
Hence, this Petition.
Lastly, the Court need not belabor to discuss the matter of
ISSUE: Metro Star’s failure to file its protest, for it is well-settled that
Whether or not Metro Star was denied due process for not a void assessment bears no fruit.
having received a Preliminary Assessment Notice (PAN)

RULING: YES.
were not valid substitutes for the mandatory notice in writing
of the legal and factual bases of the assessment. These
44. CIR vs. Enron Subic Power Corp., G.R. No. 166387, steps were mere perfunctory discharges of the CIR's duties
January 19, 2009 in correctly assessing a taxpayer.

FACTS: The law requires that the legal and factual bases of the
Enron, a domestic corporation registered with the Subic Bay assessment be stated in the formal letter of demand and
Metropolitan Authority as a freeport enterprise filed its annual assessment notice. Thus, such cannot be presumed. This
income tax return wherein it indicated a net loss of P7, 684, requirement is in keeping with the constitutional principle that
948. The BIR informed it of a proposed assessment for no person shall be deprived of property without due process.
deficiency income tax in the amount of P2,880,817.25. In view of the absence of a fair opportunity for Enron to be
Enron, through its first protest letter, disputed the proposed informed of the legal and factual bases of the assessment
assessment. against it, the assessment in question was void.
Although taxes are the lifeblood of the Government and
Enron received from the CIR a formal assessment notice, should be collected without unnecessary hindrance, such
thus prompting it to protest this deficiency tax assessment. collection should be made in accordance with law.
Such protest was not resolved within the 180-day period.
Enron filed a petition for review in the CTA, questioning the
substantive validity of the assessment and arguing that it did
not provide sufficient factual and legal bases.

The CTA granted the petition and ordered the cancellation of 45. CIR vs. Isabela Cultural Corp., G.R. No. 135210, July
the deficiency assessment, reasoning that it failed to comply 11, 2001
with the requirement of a valid written notice. CIR’s motion
for reconsideration of the CTA decision was denied. The CIR FACTS:
argues that Enron was informed of the legal and factual Isabela Cultural Corporation’s 1986 books were investigated,
bases of the deficiency assessment. Hence, this petition for and it was ascertained that there was an income tax
review. deficiency of P9,985,392.15. Isabela protested the said PAN
and was reduced to P325,869.44.
ISSUE: Whether or not the assessment is valid
2/23/1990 – Isabela received assessment later dated
RULING: No. 2/9/1990 demanding payment of P333,196.86 and
Section 228 of the NIRC provides that the taxpayer shall be P4,897.19 for 1986.
informed in writing of the law and the facts on which the
assessment is made. Otherwise, the assessment is void. To 3/23/1990 – In a letter dated, 3/22/1990, Isabela requested
implement the provisions of Section 228 of the NIRC, RR for a reconsideration with CIR.
No. 12-99 was enacted. Section 3.1.4 of the revenue
regulation reads: 4/18/1990 – In a letter dated, 4/2/1990, supporting
documents were attached as well as a Waiver of the Statute
3.1.4. Formal Letter of Demand and Assessment Notice. - of Limitations dated 4/17/1990, where it was indicated that
The letter of demand calling for payment of the CIR would only have until 4/5/1991 to assess and collect the
taxpayer's deficiency tax or taxes shall state the facts, taxes CIR may have found from the reinvestigation.
the law, rules and regulations, or jurisprudence on
which the assessment is based, otherwise, the formal 2/9/1995 – Isabela received Final Notice before Seizure
letter of demand and assessment notice shall be void. dated 12/22/1994. CIR demanded payment within 10 days
The same shall be sent to the taxpayer only by registered from receipt thereof. Otherwise, CIR would be constrained to
mail or by personal delivery. collect the assessment through summary remedies.

It is clear from the foregoing that a taxpayer must be 3/9/1995 – Isabela filed with CTA a petition for review
informed in writing of the legal and factual bases of the tax thinking that the Final Notice was considered a final decision.
assessment made against him. The use of the word 'shall' in
these legal provisions indicates the mandatory nature of the ISSUE:
requirements laid down therein. Whether the Final Notice before Seizure constitutes a final
decision appealable to the CTA.
Here, the CTA found that the CIR merely issued a formal
assessment and indicated therein the supposed tax, RULING:
surcharge, interest and compromise penalty due thereon. The Final Notice must be considered as the final decision
The CIR did not bother to explain how it arrived at such an disposing of the request for reconsideration.
assessment. More so, he failed to mention the specific
provision of the Tax Code or rules and regulations which There was no other notice received regarding the
were not complied with by Enron. reconsideration. The title stated that it was the FINAL notice,
and the content of the letter provided that this was the last
The advice of tax deficiency, given by the CIR to an opportunity for the taxpayer to pay the deficiency.
employee of Enron, as well as the preliminary five-day letter,
Regardless, Sec. 228 of the NIRC provides that a taxpayer In such cases, the ten-year period began to run only from the
may proceed directly to the CTA if there is inaction regarding date of discovery by the BIR of the falsity, fraud or omission.
the protest for 180 days from the submission of the If the BIR issued this assessment within the three-year or the
documents. Within 30 days, after the lapse of the 180-day ten-year period, whichever was applicable, the law provided
period can the taxpayer file with the CTA. Lastly, another three years after the assessment for the collection of
jurisprudence provides that a final demand letter for payment the tax due thereon through the administrative process of
of delinquent taxes may be considered a decision on a distraint and/or levy or through judicial proceedings. The
disputed assessment. three-year period of collection of the assessed tax began to
run on the date the assessment notice had been released,
What makes this case unique is that in the final notice, CIR mailed or sent by the BIR.
admits as a fact that it has received the request for
reconsideration. While the Notice may not have mentioned
categorically that this was a ruling as regards the request, it
can be implied that this was indeed a decision as it had
acknowledged receipt of the request, and despite such
request, CIR proceeded to deliver the Final Notice. Petition = 47. Fishwealth Canning Corp. v. CIR, G.R. No. 179343, 21
DENIED. January 2010

FACTS:
• On May 16, 2000, CIR ordered the examination of
the internal revenue taxes for the taxable year
1999 of petitioner Fishwealth Canning Corp. It
46. CIR vs. Phil. Global Communication, Inc., G.R. No. disclosed that petitioner was liable for income tax,
167146, October 31, 2006 VAT, withholding tax deficiencies and other
miscellaneous deficiencies. Petitioner settled
FACTS: these obligations on August 30, 2000.
• On August 25, 2000, CIR reinvestigated
Respondent was pre-assessed for a deficiency tax for the petitioner’s books covering the same period. It
year 1990. In 1994, final assessment was sent to respondent issued a subpoena duces tecum requiring
and through counsel, respondent sent protest letter to CIR. petitioner to submit its records and books of
In 2002, after 8 long years, respondent received from CIR a accounts.
final decision denying the respondent’s protest and affirming • Petitioner requested the cancellation of the
said assessment. CTA ruled on prescription and ordered CIR subpoena on account that the same set of
to withdraw and cancel assessment previously issued documents had previously been examined.
against petitioner. • Respondent sent, on August 6, 2003, petitioner a
FAN of income tax and VAT deficiencies. Petitioner
ISSUE: contested the assessment on September 23,
2000.
Whether or not CIR’s right to collect alleged deficiency tax is • Respondent issued an FDDA dated August 2,
barred by prescription 2005 denying its protest and apprising it of its
income tax and VAT liabilities for the taxable year
RULING: 1999. Petitioner received the FDDA on August 4,
2005.
Yes. The assessment, in this case, was presumably issued • Instead of appealing to the CTA, petitioner filed, on
on April 14, 1994 since the respondent did not dispute the September 1, 2005, a Letter of Reconsideration
CIR’s claim. Therefore, the BIR had until April 13, 1997. dated August 31, 2005. Still, CIR demanded
However, there was no Warrant of Distraint and/or Levy payment of petitioner’s tax liabilities thru a
served on the respondents nor any judicial proceedings Preliminary Collection Letter dated September 6,
initiated by the BIR, the earliest attempt of the BIR to collect 2005.
the tax due based on this assessment was when it filed its • Petitioner filed a Petition for Review before the
Answer, which was several years beyond the three-year CTA. CTA dismissed the petition.
prescriptive period. Thus, the CIR is now prescribed from • Petitioner filed a Motion for Reconsideration which
collecting the assessed tax. was also denied.
• Petitioner filed a petition for review before the CTA
The law prescribed a period of three years from the date the En Banc. CTA En Banc held that the petition
return was actually filed or from the last date prescribed by before the First Division, as well as that before,
law for the filing of such return, whichever came later, within was filed out of time.
which the BIR may assess a national revenue tax. However,
the law increased the prescriptive period to assess or to ISSUE:
begin a court proceeding for the collection without an WON CTA En Banc erred in holding that the petition
assessment to ten years when a false or fraudulent return petitioner ︎led before the CTA First Division as well as that
was fled with the intent of evading the tax or when no return filed before it (CTA En Banc) was filed out of time -- YES
was filed at all.
RULING:
Section 228 of the 1997 Tax Code provides that: • CA reversed the decision of the CTA. Thus, this
If the protest is denied in whole or in part, or is not acted petition by Lascona.
upon within one hundred eighty (180) days from submission
of documents, the taxpayer adversely affected by the ISSUE:
decision or inaction may appeal to the Court of Tax Appeals WON the taxpayer’s failure to appeal before the CTA within
within thirty (30) days from receipt of the said decision, or 30 days after the lapse of the 180-day period renders the
from the lapse of the one hundred eighty (180)-day period; assessment final and executory-- NO.
otherwise, the decision shall become final, executory and
demandable. RULING:
In the case at bar, petitioner's administrative protest was • In RCBC v. CIR, the Court held that where the
denied by an FDDA dated August 2, 2005 issued by Commissioner fails to act on the disputed
respondent and which petitioner received on August 4, 2005. assessment within the 180-day period from the date
Under Section 228 of the 1997 Tax Code, petitioner had 30 of submission of documents, a taxpayer can either:
days to appeal respondent's denial of its protest to the CTA. (1) file an appeal with the CTA within 30 days after
the expiration of the 180-day period; or (2) await the
Since petitioner received the denial of its administrative ︎final decision of the Commissioner on the disputed
protest on August 4, 2005, it had until September 3, 2005 to assessments and appeal such ︎final decision to the
file a petition for review before the CTA Division. It filed one, CTA within 30 days after receipt of a copy of such
however, on October 20, 2005, hence, it was filed out of decision. These options are mutually exclusive,
time. A motion for reconsideration of the denial of the such that resort to one bars the application of the
administrative protest does not toll the 30-day period to other.
appeal to the CTA. • This ruling of the court in RCBC is consistent with
Section 3A(2), Rule 4 of the Revised Rules of the
Court of Tax Appeals. To wit:
• In case of disputed assessments, the inaction of the
CIR within the 180-day period under Section 228
shall be deemed a denial for purposes of allowing
48. Lascona Land Co., Inc. vs. CIR, G.R. No. 171251, the taxpayer to appeal his case to the Court and
March 5, 2012 does not necessarily constitute a formal decision of
the CIR on the tax case; Provided, further, that
DOCTRINE: should the taxpayer opt to await the ︎final decision of
In cases where the Commissioner fails to act on the disputed the CIR on the disputed assessments beyond the
assessment within the 180-day period from the date of 180-day period, the taxpayer may appeal such fi︎︎nal
submission of documents, a taxpayer can either: (1) file an decision to the Court under Section 3(a), Rule 8 of
appeal with the CTA within 30 days after the expiration of the these Rules.
180-day period; or (2) await the ︎final decision of the • The term “decision” as quoted above should be
Commissioner on the disputed assessments and appeal interpreted to mean a decision on the protest of the
such ︎final decision to the CTA within 30 days after receipt of taxpayer, and not on the assessment itself.
a copy of such decision. These options are mutually • A taxpayer cannot be prejudiced if he chooses to
exclusive, such that resort to one bars the application of the wait for the ︎final decision of the CIR on the protested
other. assessment.
• Accordingly, considering that Lascona opted to await
FACTS: the final decision of the Commissioner on the
• The CIR assessed Lascona and found that it had a protested assessment, it then has the right to appeal
deficiency of income tax payment for the year 1993. such ︎final decision to the Court by ︎filing an appeal
• Lascona filed a letter protest but this was denied by
within thirty days after receipt of a copy of the CIR’s
the Regional Director of the BIR on the ground that decision. This is true even after the 180-day period
the assessment had already become final and fi︎xed by law has already expired.
executory when Lascona failed to appeal the case • Thus, Lascona, when it ︎filed an appeal on April 12,
with the CTA within 30 days after the lapse of the
1999 before the CTA, after its receipt of the Letter
180-day period mandated by Sec. 228 of the NIRC.
• Lascona appealed this decision with the CTA. It dated March 3, 1999 on March 12, 1999, the appeal
was timely made as it was filed within 30 days after
alleged that the Regional Director erred in its ruling.
• CTA ruled in favor of Lascona, and it nullified the receipt of the copy of the decision.
• The CIR should be reminded that taxpayers cannot
assessment. It held that in cases of inaction by the
be left in a quandary by its inaction on the protested
CIR on the protested assessment, Sec. 228 of the
assessment. It is imperative that the taxpayers are
NIRC provided two options to the taxpayer: (1)
informed of its action in order that the taxpayer
appeal to the CTA within 30 days from the lapse of
should then at least be able to take recourse to the
the 180-day period, or (2) wait until the
tax court at the opportune time.
Commissioner decides on his protest before he
elevates the case.
• CIR moved for reconsideration, but it was denied so
it elevated the case to the CA.
49. CIR vs. Primetown Property Group, Inc., G.R. No.
162155, August 28, 2007

CASE DOCTRINE:
The computation of legal periods is governed by the 50. CIR vs. Smart Communication, Inc., G.R. Nos.
Administrative Code of 1987, being the more recent law than 179045-46, August 25, 2010
the New Civil Code, such that the two-year prescriptive
period to claim for refund or credit shall consist of 24 DOCTRINE:
calendar months without regard to the number of days. A withholding agent is considered a proper party to file a
claim for refund with the withheld taxes of a foreign company.
FACTS: However, while the withholding agent has the right to recover
On 11 March 1999, Primetown Property Group, Inc. (PPGI) the taxes erroneously or illegally collected, he nevertheless
applied for the refund or credit of income tax respondent paid has the obligation to remit the same to the principal taxpayer.
in 1997 due to the slowdown of the real estate industry
where respondent suffered losses. It contended that it was FACTS:
not liable for income taxes. Nevertheless, respondent paid its Smart entered into three Agreements for Programming and
quarterly corporate income tax and remitted creditable Consultancy Services with Prism (Non-resident corporation),
withholding tax from real estate sales to the BIR therefore, wherein the latter was to provide programming and
respondent was entitled to tax refund or tax credit. consultancy services for the former. Prism billed Smart
$547,822.45. Thinking that these payments constitute
On 13 May 1999, revenue officer required respondent to royalties, Smart withheld 25% royalty tax under the RP-
submit additional documents to support its claim. Malaysia Tax Treaty, and filed its Monthly Remittance Return
Respondent complied but its claim was not acted upon. of Final Taxes Withheld. Within the two-year period to claim a
Thus, on 14 April 2000, it filed a petition for review with the refund, Smart filed with the BIR an administrative claim for
CTA. tax refund.

On 15 December 2000, the CTA dismissed the petition as it Due to the failure of CIR to act on the claim for refund, Smart
was filed beyond the two-year prescriptive period for filing a filed a Petition for Review with the CTA. Smart claimed that it
judicial claim for tax refund or tax credit, as provided under is entitled to a refund because the payments made to Prism
Section 229 of the NIRC as it found that respondent filed its are not royalties but “business profits,” pursuant to the
final adjusted return on 14 April 1998. Thus, its right to claim definition of royalties under the tax treaty, and such is taxable
a refund or credit commenced on that date. The rule is that in the Philippines only if attributable to a permanent
the two-year prescriptive period is reckoned from the filing of establishment in the Philippines. The payments made to
the final adjusted return. Prism, a non-resident foreign corporation with no permanent
establishment in the Philippines, should not be taxed.
ISSUE:
Which between the Civil Code and the Administrative Code CIR argued that Smart, as a withholding agent, is not a
should be used in computing the two-year prescriptive party-in-interest to file the claim for refund since it did not file
period? the claim on behalf of Prism. CIR argued that Smart has no
legal standing to claim for the refund, and to rule otherwise
RULING: would result to the unjust enrichment of the respondent, who
Both Article 13 of the Civil Code and Section 31, Chapter never shelled-out any amount to pay the royalty taxes. Smart
VIII, Book I of the Administrative Code of 1987 deal with the argued that it is the proper party to file a claim for refund as it
same subject matter on the computation of legal periods. has the statutory and primary responsibility and liability to
Under the Civil Code, a year is equivalent to 365 days withhold and remit the taxes to the BIR. It points out that
whether it be regular year or a leap year. Under the under the withholding tax system, the agent-payor becomes
Administrative Code of 1987, however, a year is composed a payee by fiction of law because the law makes the agent
of 12 calendar months. Hence, the number of days is personally liable for the tax arising from the breach of its duty
irrelevant under the Administrative Code of 1987. to withhold.

There obviously exists a manifest incompatibility in the ISSUE:


manner of computing legal periods under the Civil Code and
the Administrative Code of 1987. For this reason, we hold WON Smart has the right to file the claim for refund.
that Section 31, Chapter VIII, Book I of the Administrative
Code of 1987, being the more recent law, governs the RULING:
computation of legal periods. Lex posteriori derogat priori.
YES. Smart, as a withholding agent, may file a claim for
Applying this rule in the case at bar, respondent’s petition refund.
(filed on 14 April 2000) was filed on the last day of the 24th
calendar month from the day respondent filed its final Sec. 204 of the NIRC provides that no credit or refund of
adjusted return. Hence, it was filed within the reglementary taxes or penalties shall be allowed unless the taxpayer files
period. in writing with the Commissioner a claim for credit or refund
within two (2) years after the payment of the tax or penalty.
Furthermore, Sec. 229 of the same law provides that no suit to and has no bearing on the taxability of contracts of pledge
or proceeding shall be maintained in any court for the entered into by pawnshops. For purposes of Section 195,
recovery of any national internal revenue tax hereafter pawnshop tickets need not be an evidence of indebtedness
alleged to have been erroneously or illegally assessed or nor a debt instrument because it taxes the same as a pledge
collected, or of any penalty claimed to have been collected instrument. Neither should the definition of pawnshop ticket,
without authority, or of any sum alleged to have been as not a security, exempt it from the imposition of DST. It was
excessively or in any manner wrongfully collected, until a correctly defined as such because the ticket itself is not the
claim for refund or credit has been duly filed with the security but the pawn or the personal property pledged to the
Commissioner. pawnbroker.

Pursuant to the foregoing, the person entitled to claim a tax


refund is the taxpayer. However, in case the taxpayer does
not file a claim for refund, the withholding agent may file the
claim. A withholding agent is considered a proper party to file
a claim for refund with the withheld taxes of a foreign
company. However, while the withholding agent has the right
to recover the taxes erroneously or illegally collected, he
nevertheless has the obligation to remit the same to the
principal taxpayer. As an agent of the taxpayer, it is his duty
to return what he has recovered; otherwise, he would be
unjustly enriching himself at the expense of the principal
taxpayer from whom the taxes were withheld, and from
whom he derives his legal right to file a claim for refund.

51. Michel J. Lhuillier Pawnshop, Inc. vs. CIR, G.R. No.


166786, September 11, 2006

Facts:
Petitioner filed a motion for reconsideration of the May 3,
2006 decision of the Court holding that contracts of pledge
entered into by pawnshops are subject to DST. The Court
ruled therein that DST is essentially an excise tax; it is not an
imposition on the document itself but on the privilege to enter
into a taxable transaction of pledge.

Petitioner contends that before an exercise of a taxable


privilege may be subject to DST, it is indispensable that the
transaction must be embodied in and evidenced by a
document. Since a pawn ticket as defined in PD No. 114 or
the Pawnshop Regulation Act is merely the pawnbrokers'
receipt for a pawn and not a security nor a printed evidence
of indebtedness, it cannot be considered as among the
documents subject to DST.

Issue:
Whether or not pawn tickets are subject to DST

Held:
YES. Section 195 of the NIRC imposes a DST on every
pledge regardless of whether the same is a conventional
pledge governed by the Civil Code or one that is governed
by the provisions of PD No. 114. All pledges are subject to
DST, unless there is a law exempting them in clear and
categorical language.

It is the exercise of the privilege to enter into an accessory


contract of pledge, as distinguished from a contract of loan,
which gives rise to the
obligation to pay DST. It is for this reason why the definition
of pawnshop ticket, as not an evidence of indebtedness, is
inconsequential
TARIFF AND CUSTOMS CODE

2. Pilipinas Shell Petroleum Corp. vs. Commissioner of


Customs
1. Asaali vs. Commissioner of Customs, G.R. No. Principle: The proper remedy for review of cancellation of
L-24170, December 16, 1968 TCC issued by the "Center" is the regular courts and not the
Facts CTA
A customs patrol team intercepted 5 sailing vessels
in question on the high seas, between British North Borneo Facts:
and Sulu while they were heading towards Tawi-tawi, Sulu.
In 1997 and 1998, Shell settled its liabilities for customs
After ordering the vessels to stop, the customs duties and internal revenue taxes using tax credit certificates
officers boarded and found on board, cases of 'Herald' and (TCCs) that were transferred to it for value by several Board
'Camel' cigarettes, and some pieces of rattan chairs. The of Investment (BOI)-registered companies. The transfers of
sailing vessels are all of Philippine registry, owned and the TCCs to Shell were processed by the transferors-BOI-
manned by Filipino residents of Sulu, and of less than 30 registered companies and were eventually approved by the
tons burden. They came from Sandakan, British North One Stop Shop Inter-Agency Tax Credit and Duty Drawback
Borneo, but did not possess any permit from the Center (the Center).
Commissioner of Customs to engage in the importation
of merchandise into any port of the Sulu sea, as required In a letter dated November 3, 1999 (Center’s November 3
by Section 1363(a) of the Revised Administrative Code. Their letter), the Center, through the Secretary of the DOF,
cargoes were not covered by the required import license. informed Shell that it was cancelling the TCCs transferred to
and used as payment by the oil company, pursuant to its
The Collector of Customs of Jolo found cause for EXCOM Resolution No. 03-05-99. The Center claimed that
forfeiture under the law of the vessels and the cargo after conducting a post-audit investigation.
contained therein to which the Commissioner of Customs
affirmed. The same decision was also sustained by the Court Shell submitted its reply letter dated December 23, 1999.
of Tax Appeals. Shell maintained that the cancellation was improper since
this was done without affording the corporation its right to
Contention of the Petitioners due process. It further claimed that the existence of fraud in
That the vessels involved were apprehended and seized on the issuance and transfer of the TCCs, or even Shell’s
the high seas, beyond the territorial waters of the Philippines participation in the alleged fraud, had not been sufficiently
and as such, these vessels could not have touched any established.
place or port in the Philippines or could not have been
engaged in the importation of the articles laden therein into Three years later, through letters dated February 15,
any Philippine port or place, whether a port or place of entry February 20, and April 12, 2002 (respondent’s collection
or not, to have incurred the liability of forfeiture under Section letters), the respondent, through Atty. Gil Valera (Atty.
1363(a) of the Revised Administrative Code. Valera), Deputy Commissioner for Revenue Collections
Monitoring Group, formally demanded from Shell payment of
Issue the amounts corresponding to the listed TCCs that the
WON the Bureau of Customs had jurisdiction over the Center had previously cancelled.
seizure and forfeiture proceedings
On May 23, 2002, Shell filed with the CTA a Petition for
Held Review questioning the BOC collection efforts for lack of
Section 1363(a) of the Revised Administrative Code legal and factual basis.
should be applied to the case at bar.
The respondent filed a motion to dismiss Shell’s petition for
It has been established that the 5 vessels came review on the ground of prescription. The respondent
from Sandakan, British North Borneo, a foreign port, and claimed that Shell’s petition was filed beyond the 30-day
when intercepted, all of them were heading towards Tawi- period provided by law for appeals of decisions of the
tawi, a domestic port within the Sulu sea. Laden with foreign Commissioner of Customs to the CTA. The respondent also
manufactured cigarettes, they did not possess the import contended that this 30-day period should be counted from
license required nor did they carry a permit from the the time Shell received the respondent’s collection letters.
Commissioner of Customs to engage in importation into any
port in the Sulu sea. Their course announced loudly their Issue:
intention not merely to skirt along the territorial boundary of Is Shell's Petition for Review with the CTA proper and within
the Philippines but to come within our limits and land the prescriptive period?
somewhere in Tawi-tawi towards which their prows were
pointed. Ruling:
No. We resolve to DENY Shell’s petition; the present case
does not involve a tax protest case within the jurisdiction of
the CTA to resolve.
On August 13, 1990, District Collector of Customs Titus
The parties argue over which act serves as the decision of Villanueva issued the warrants of seizure and detention.
the respondent that, under the law, can be the subject of an
appeal before the CTA, and from which act the 30-day period On the same date, respondent Maglipon coordinated with
to appeal shall be reckoned. the local police substations to assist them in the execution of
the respective warrants of seizure and detention. Thereafter,
Section 7 of RA No. 1125, as amended, states: the team searched the two premises.

Sec. 7. Jurisdiction. – The CTA shall exercise: In Makati, they were barred from entering the place, but
some members of the team were able to force themselves
(a) Exclusive appellate jurisdiction to review by appeal xxx; inside. They were able to inspect the premises and noted
that some articles were present which were not included in
xxx xxx xxx the list contained in the warrant. Hence, on August 15, 1990,
amended warrants of seizure and detention were issued by
4. Decisions of the Commissioner of Customs in cases Villanueva.
involving liability for customs duties, fees or other money
charges, seizure, detention, or release or property affected, On August 25, 1990, customs personnel started hauling the
fines, forfeitures or other penalties in relation thereto, or articles pursuant to the amended warrants. This prompted
other matters arising under the Customs Law or other laws petitioners Narciso Jao and Bernardo Empeynado to file a
administered by the Bureau of Customs; case for Injunction and Damages, docketed as Civil Case
No. 90-2382 with prayer for Restraining Order and
These decisions of the respondent involving customs duties Preliminary Injunction before the Regional Trial Court of
specifically refer to his decisions on administrative tax Makati Branch 56 on August 27, 1990 against respondents.
protest cases, as stated in Section 2402 of the Tariff and
Customs Code of the Philippines On the same date, the trial court issued Temporary
Restraining Order.

In the present case, the facts reveal that Shell received three
On September 7, 1990, respondents filed a Motion to
sets of letters:
Dismiss on the ground that the Regional Trial Court has no
jurisdiction over the subject matter of the complaint, claiming
a. the Center’s November 3 letter, signed by the Secretary of
that it was the Bureau of Customs that had exclusive
Finance, informing it of the cancellation of the TCCs;
jurisdiction over it.
b. the respondent’s November 19 letter requiring it to replace
On November 20, 1990, the trial court denied respondents'
the amount equivalent to the amount of the cancelled TCCs
motion to dismiss and petitioners' application for preliminary
used by Shell; and
prohibitory and mandatory injunction was granted
conditioned upon the filing of a one million peso bond.
c. the respondent’s collection letters issued through Atty.
Valera, formally demanding the amount covered by the
cancelled TCCs. The Court also prohibited respondents from seizing,
detaining, transporting and selling at public auction
None of these letters, however, can be considered as a petitioners' vehicles, spare parts, accessories and other
liquidation or an assessment of Shell’s import tax liabilities properties located at No. 2663 Honduras St., San Isidro,
that can be the subject of an administrative tax protest Makati and at No. 240 Quirino Avenue, Tambo, Paranaque,
proceeding before the respondent whose decision is Metro Manila. Respondents were further prohibited from
appealable to the CTA. disturbing petitioners' constitutional and proprietary rights
over their properties located at the aforesaid premises.
Lastly, respondents were ordered to return the seized items
and to render an accounting and inventory thereof.
3. Jao v. CA, G.R. No. 104604, October 6, 1995
On December 13, 1990, respondents filed a motion for
Facts:
 reconsideration based on the following grounds:

a) the lower court having no jurisdiction over the subject


On August 10, 1990, the Office of the Director, Enforcement matter of the complaint, it has no recourse but to dismiss the
and Security Services (ESS), Bureau of Customs, received same; and
information regarding the presence of allegedly untaxed
vehicles and parts in the premises owned by a certain Pat (b) the lower court had no legal authority to issue an
Hao located along Quirino Avenue, Paranaque and injunction therein.
Honduras St., Makati. After conducting a surveillance of the
two places, respondent Major Jaime Maglipon, Chief of On January 3, 1991 the motion for reconsideration was
Operations and Intelligence of the ESS, recommended the denied. Respondents then went to the Court of Appeals on
issuance of warrants of seizure and detention against the the ground that the judge acted with grave abuse of
articles stored in the premises. discretion in denying their motion to dismiss and in granting
petitioners' application for preliminary injunction since such determine all questions touching on the seizure and
jurisdiction being exclusively vested in the Bureau of forfeiture of dutiable goods. The Regional Trial Courts are
Customs. precluded from assuming cognizance over such matters
even through petitions of certiorari, prohibition or
The Court of Appeals set aside the questioned orders of the mandamus.5
trial court and enjoined it from further proceeding with Civil
Case No. 90-2382. The appellate court also dismissed the Thus, actions of the Collector of Customs are appealable to
said civil case. the Commissioner of Customs, whose decision, in turn, is
subject to the exclusive appellate jurisdiction of the Court of
On May 2, 1992, petitioners filed a petition with this Court to Tax Appeals and from there to the Court of Appeals.
review the decision of the Court of Appeals docketed as G.R.
No. 104604. Even if the seizure by the Collector of Customs were illegal,
which has yet to be proven, we have said that such act does
As regards G.R. No. 111223, petitioners filed criminal not deprive the Bureau of Customs of jurisdiction thereon.
charges against respondents, other officers and employees
of the Bureau of Customs and members of the Makati Police
before the Office of the Ombudsman for Robbery, Violation
of Domicile and Violation of Republic Act No. 3019, docketed
as OMB Case No. 0-90-2027.
4. Mison v. Nativitad, G.R. No. 82586, 11 September 1992
Respondent Ombudsman issued a Resolution
recommending that the case be dismissed for lack of merit. Facts:

On May 17, 1993, petitioners moved for the reconsideration A certain Butch Martinez informed the Commissioner of
of said resolution, but the same was denied on July 8, 1993. Customs by letter that there 20 Toyota Lite Aces which were
assembled and disassembled in the compound of CVC
Petitioners claim that respondent Ombudsman gravely trading owned by Cesar Sonny Carlos in Pampanga. Then
abused his discretion in dismissing the case and in denying informant requested for investigation and prosecution for
petitioners' motion for reconsideration. violation of customs laws.

A team composed of the National Customs Police and the


Customs and Investigation Division (CIID) took possession
ISSUE: and control of the vehicles by cordoning off the enclosure.
They applied for a warrant of seizure and detention from the
Whether or not the Regional Trial Court has jurisdiction over Collector of Customs of the Subport of Clark Carlos Razo.
the subject matter. After determination in the seizure proceeding, Razo issued a
Warrant of Seizure and Detention. The warrant was served
upon Carlos by posting it on one of the subject vehicles
because he refused to receive the warrant. As the team was
RULING: about to haul away the Lite Aces, two RTC sheriffs showed
up with a TRO issued by RTC Judge Natividad in a civil case
No. The RTC has no jurisdiction over the subject matter. filed by Sonny Carlos against the Bureau of Customs. In the
civil case, Carlos alleges that he is the owner of the Lite
Aces and that he already paid the taxes and licenses
thereon. The BOC lawyers filed a Motion to Dismiss alleging
that the RTC has no jurisdiction over the subject vehicles
First and foremost, the Court will not interfere nor pass upon
because the exclusive jurisdiction over seizure and forfeiture
findings of public respondent Ombudsman to avoid its being
cases lies with the Collector of Customs and Carlos has not
hampered by innumerable petitions assailing the dismissal of
yet exhausted administrative remedies.
investigatory proceedings conducted by the Office of the
Ombudsman with regard to complaints filed before it, and
Carlos counters that the Warrant of Seizure and Detention
that it will not review the exercise of discretion on the part of
did not comply with the constitutional requirements for a valid
the fiscals or prosecuting attorneys each time they decide to
search warrant. Meanwhile, in the Seizure proceedings
file an information in court or dismiss a complaint by a
before the Collector of Customs, CVC Trading/ Carlos
private complainant. The dismissal by the Ombudsman of
refused to accept the Notice of Hearing mainly arguing that
petitioners' complaint, therefore, stands.
the Collector no longer has jurisdiction since the civil court
RTC assumed jurisdiction. On February 26, 1988, the
There is no question that Regional Trial Courts are devoid of
following conflicting decisions were rendered:
any competence to pass upon the validity or regularity of
seizure and forfeiture proceedings conducted by the Bureau
1. RTC ruled in favor of Carlos, denying BOC’s motion
of Customs and to enjoin or otherwise interfere with these
to dismiss and granting Carlos’ application of a writ of
proceedings. The Collector of Customs sitting in seizure and
preliminary injunction.
forfeiture proceedings has exclusive jurisdiction to hear and
2. Collector ordered that the 20 Lite Aces be forfeited
in favor of the government.

Issue: 5. Nestle Philippines, Inc. v. CA, GR No. 134114, 6 July


2001
WON the RTC has jurisdiction over the seized vehicles?
Facts:
Ruling:
Petitioner Nestle Philippines, Inc. transacted sixteen
The RTC has no jurisdiction over the res subject of the separate importations of milk and milk products from different
warrant of the seizure and detention, The respondent judge, countries between the period of July and November 1984. It
therefore acted arbitrarily and despotically in issuing the paid the corresponding customs duties and advance sales
temporary restraining order, granting the writ of preliminary taxes to the Collector of Customs of Manila for each
injunction and denying the motion to dismiss, thereby transaction based on the published Home Consumption
removing the res from the control of the Collector of Customs Value (HCV) as indicated in the Bureau of Customs Revision
and depriving him of his exclusive original jurisdiction over Orders, but it seasonably filed the corresponding protests
the controversy. before the said Collector of Customs. In the said protests,
petitioner claimed for the refund of the alleged overpaid
By express provision of law, amply supported by well-settled import duties and advance sales taxes. With regards to the
jurisprudence, the Collector of Customs has exclusive advance sales taxes, the Court of Tax Appeals eventually
jurisdiction over seizure and forfeiture proceedings and ruled in favor of the petitioner. However, the Collector of
regular courts cannot interfere with his exercise thereof or Customs failed to render a decision on the sixteen protest
stifle or put it to naught. cases for almost six years for the alleged overpaid customs
duties. In order to prevent the claims from becoming stale on
In the 1966 case of Pacis v. Averia, held that, it is more the ground of prescription, petitioner immediately filed a
reasonable to conclude that the legislators intended to divest petition for review with the Court of Tax Appeals (CTA). The
the Court of First Instance of the prerogative to replevin a CTA dismissed the said petition for want of jurisdiction. The
property which is a subject of a seizure and forfeiture issue was raised to the Court of Appeals by way of petition
proceedings for violation of the Tariff and Customs Code. for review, but it was also dismissed for failure to exhaust
Otherwise, actions for forfeiture of property for violation of administrative remedies.
Customs laws could easily be undermined by the simple
device of replevin. In De Joya v. Lantin, the court held that to Issues:
permit recourse to the Court of First Instance in cases of
seizure of imported goods would in effect render ineffective Whether or not the petitioner’s claims are governed by the
the power of the Customs authorities under the Tariff Code rule on quasi-contracts or solutio indebiti which prescribes in
and deprive the Court of Tax Appeals of one of its exclusive six (6) years under Article 1145 of the New Civil Code.
appellate jurisdictions.
NO
In this case, a warrant of seizure and detention having
already been issued, presumably in the regular course of Ruling w/ Doctrine:
official duty, the Regional Trial Court of Pampanga was
indisputably precluded from interfering in the said The Supreme Court ruled that the rule on quasi-contracts or
proceedings. That in his complaint in Civil Case No. 8109 solution indebiti is not applicable in this case. In order for the
private respondent alleges ownership over several vehicles rule on solution indebiti to apply, it is an essential condition
which are legally registered in his name, having paid all the that petitioner must first show that its payment of the
taxes and corresponding licenses incident thereto, neither customs duties was in excess of what was required by the
divests the Collector of Customs of such jurisdiction nor law at the time when the subject sixteen importations of milk
confers upon the said trial court regular jurisdiction over the and milk products were made. Unless shown otherwise, the
case. Ownership of goods or the legality of its acquisition disputable presumption of regularity of performance of duty
can be raised as defenses in a seizure proceeding; if this lies in favor of the Collector of Customs.
were not so, the procedure carefully delineated by law for
seizure and forfeiture cases may easily be thwarted and set In the present case, there is no factual showing that the
to naught by scheming parties. Even the illegality of the collection of the alleged overpaid customs duties was more
warrant of seizure and detention cannot justify the trial than what is required of the petitioner when it made the
court’s interference with the Collector’s jurisdiction. In the aforesaid separate importations. There is no factual finding
first place, there is a distinction between the existence of the yet by the government agency concerned that petitioner is
Collector’s power to issue it and the regularity of the indeed entitled to its claim of overpayment and, if true, for
proceeding taken under such power. In the second place, how much it is entitled. It bears stress that in determining
even if there be such an irregularity in the latter, the Regional whether or not petitioner is entitled to refund of alleged
Trial Court does not have the competence to review, modify overpayment of customs duties, it is necessary to determine
or reverse whatever conclusions may result therefrom. exactly how much the Government is entitled to collect as
customs duties on the importations. Thus, it would only be
just and fair that the petitioner-taxpayer and the Government
alike be given equal opportunities to avail of the remedies between the 10% and 3% tariff rates on the shipments.
under the law to contest or defeat each other's claim and to Petitioner objected to the using of the 10% duty rate and
determine all matters of dispute between them in one single insisted that the 3% tariff rate should instead be applied.
case. If the State expects its taxpayers to observe fairness Furthermore it raised the defense of prescription against the
and honesty in paying their taxes, so must it apply the same assessment pursuant to Section 1603 of the Tariff and
standard against itself in refunding excess payments, if truly Customs Code (TCC). Thus, it prayed that the assessment
proven, of such taxes. Indeed, the State must lead by its own for deficiency customs duties be cancelled and the notice of
example of honor, dignity and uprightness. demand be withdrawn.

Thus, the remand of this case to the CTA is warranted for the The Special Investigator found that there was an irregularity
proper verification and determination of the factual basis and in the filing and acceptance of the import entries beyond the
merits of the petition and in order that the ends of substantial 30-day non-extendible period prescribed under Section 1301
justice and fair play may be subserved. In the light of of the TCC and in the release of the shipments after the
Sections 2308 and 2309 of the Tariff and Customs Code, it same had already been deemed abandoned in favor of the
appeared that in all cases subject to protest, the claim for government. Petitioner was then ordered to pay
refund of customs duties may be foreclosed only when the P1,180,170,769.21 representing the total dutiable value of
interested party claiming refund fails to file a written protest the importations.
before the Collector of Customs. Accordingly, once a written
protest is seasonably filed with the Collector of Customs the The CTA en banc held that it was the filing of the IEIRDs that
failure or inaction of the latter to promptly perform his constituted entry under the TCC. Since these were filed
mandated duty under the Tariff and Customs Code should beyond the 30-day period, they were not seasonably
not be allowed to prejudice the right of the party adversely "entered" in accordance with Section 1301 in relation to
affected thereby. Technicalities and legalisms, however Section 205 of the TCC. Consequently, they were deemed
exalted, should not be misused by the government to keep abandoned under Sections 1801 and 1802 of the TCC. It
money not belonging to it, if any is proven, and thereby also ruled that the notice required under Customs
enrich itself at the expense of the taxpayers. Memorandum Order was not necessary in view of
petitioner's actual knowledge of the arrival of the shipments.
It likewise agreed with the CTA Division's finding that
petitioner committed fraud when it failed to file the IEIRD
within the 30-day period with the intent to "evade the higher
rate." Petitioner was ordered to pay respondent the total
6. Chevron Phils. Inc. v. CTA, G.R. No. 178759, 11 August dutiable value of the oil shipments amounting to
2008 P893,781,768.21.

FACTS: ISSUES:

Chevron Phils. Inc., is engaged in the business of importing, 1. Whether or not “entry” under Section 1301 in relation
distributing and marketing of petroleum products in the to Section 1801 of the TCC refers to the IED or the
Philippines. In 1996, the importations subject of this case IEIRD;
arrived and were covered by 8 bills of lading. The shipments 2. Whether or not "entry" under Section 1301 in relation
were unloaded from the carrying vessels onto petitioner’s oil to whether fraud was perpetrated by petitioner; and
tanks over a period of 3 days from the date of their arrival.
3. Whether or not the importations can be considered
Subsequently, the import entry declarations (IEDs) were filed
and 90% of the total customs duties were paid. The import abandoned under Section 1801.
entry and internal revenue declarations (IEIRDs) of the
shipments were thereafter filed. RULING:

The importations were appraised at a duty rate of 3% as 1. The position of petitioner, that the import entry
provided under RA 8180 and petitioner paid the import duties to be filed within the 30-day period refers to the
amounting to P316,499,021. Prior to the effectivity of RA IED and not the IEIRD, has no legal basis.
8180 on April 16, 1996, the rate of duty on imported crude oil Under the relevant provisions of the TCC, both
was 10%. the IED and IEIRD should be filed within 30
days from the date of discharge of the last
Three years later, then Finance Secretary received a letter package from the vessel or aircraft. The IED
denouncing the deliberate concealment, manipulation and serves as basis for the payment of advance
scheme employed by petitioner in the importation of crude duties on importations whereas the IEIRD
oil, thereby resulting in huge losses of revenue for the evidences the final payment of duties and
government. This letter was endorsed to the Bureau of taxes. The operative act that constitutes "entry"
Customs (BOC) for investigation. of the imported articles at the port of entry is
the filing and acceptance of the "specified entry
On August 1, 2000, petitioner received a demand letter from form" together with the other documents
the District Collector requiring the immediate settlement of required by law and regulations. The "specified
the amount of P73,535,830 representing the difference entry form" refers to the IEIRD. The word
"entry" refers to the regular consumption entry
(the IEIRD) and not the provisional entry (the
IED).

2. Evidence showed that petitioner bided its time 7. Republic vs. Unimex Micro-Electronics B, G.R. No.
to file the IEIRD so as to avail of a lower rate of 166309-10, 9 March 2007
duty. A clear indication of petitioner's deliberate
intention to defraud the government was its FACTS: Unimex shipped computer cartridges, duplicators,
non-disclosure of discrepancies on the duties expanders, remote controllers, parts, and accessories to
declared in the IEDs (10%) and IEIRDs (3%) Handyware Philippines. It was transported by Don Tim
covering the shipments. Shipping Corporation Evergreen Marine Corporation as
shipping agent. When the shipment arrived in the Port of
Due to the presence of fraud, the prescriptive Manila, the Bureau of Customs (BOC) agents discovered
period of the finality of liquidation under that it did not tally with the description appearing on the
Section 1603 was inapplicable. cargo manifest, so, the BOC instituted seizure proceedings
against Handyware and issued a warrant of seizure and
3. Petitioner's failure to file the required entries detention against shipment.
within a non-extendible period of thirty days
from date of discharge of the last package from The Collector of Customs issued a default order against
the carrying vessel constituted implied Handyware for failing to appear in the seizure proceedings
abandonment of its oil importations. This and after an ex parte hearing, the goods were then forfeited
means that from the precise moment that the in favor of the government. On their end, Unimex, as shipper
non-extendible thirty-day period lapsed, the and owner of the goods, filed a Motion to Intervene in the
abandoned shipments were deemed the seizure proceedings which the Collector of Customs granted,
property of the government. but later on, the latter declared the default order against
Handyware as final and executory, hence, affirming the
Therefore, when petitioner withdrew the oil shipments for goods’ forfeiture in favor of the government.
consumption, it appropriated for itself properties which
already belonged to the government. Accordingly, it became
Further, Unimex filed a Petition for Review against petitioner
liable for the total dutiable value of the shipments of imported
Commissioner of Customs in the Court of Tax Appeals
crude oil amounting to P1,210,280,789.21 reduced by the
(CTA).
total amount of duties paid amounting to P316,499,021.00
thereby leaving a balance of P893,781,768.21.
COURT OF TAX APPEALS
Due notice was not necessary in this case. The purpose of
posting an "urgent notice to file entry" is only to notify the The CTA reversed the forfeiture decree and ordered the
importer of the "arrival of its shipment" and the details of said release of the subject shipment to respondent, subject to the
shipment. Since it already had knowledge of such, notice payment of customs duties, however, Unimex’s counsel
was superfluous. It was thus incumbent upon it to know its failed to secure a Writ of Execution to enforce the CTA
obligation to file the IEIRD within the 30-day period decision and filed separate claims for damages against Don
prescribed by law. As a matter of fact, importers such as Tim Shipping Corporation and Evergreen Marine Corporation
petitioner can, under existing rules and regulations, file in which were unfortunately dismissed by the Court.
advance an import entry even before the arrival of the
shipment to expedite the release of the same. However, it Moreover, Unimex filed a Petition for Revival with the CTA
deliberately chose not to comply with its obligation under andt prayed for immediate release by the BOC of its
Section 1301. shipment of payment of the shipment’s value plus damages
but the BOC Commissioner failed to file his answer and was
Petition DENIED. Petitioner Chevron Philippines, Inc. is declared in default.
ORDERED to pay P893,781,768.21 plus six percent (6%)
legal interest per annum accruing from the date of The BOC then informed the Court that the subject shipment
promulgation of this decision until its finality. Upon finality of could no longer be found at its warehouses. The CTA
this decision, the sum so awarded shall bear interest at the declared that its previous decision could no longer be
rate of twelve percent (12%) per annum until its full executed because of the loss of shipment. So, it ordered the
satisfaction. BOC Commissioner to pay Unimex the commercial value of
the goods based on the prevailing exchange rate at the time
of their importation. With that, the BOC Commissioner filed a
Motion for Reconsideration (MR) arguing that that the CTA
altered its decision by converting it from an Action for
Specific Performance into a Money Judgment. Also, Unimex
contended that the exchange rate prevailing at the time of
actual payment should apply.

However, the CTA denied both MRs, hence, both parties filed
separate petitions with the Court of Appeals. (CA).
COURT OF APPEALS cannot be held liable for governmental acts (jus imperii), we
still hold that petitioner cannot escape its liability. The
The CA dismissed the BOC Commissioner’s appeal and circumstances of this case warrant its exclusion from the
granted Unimex’s. It declared that the BOC Commissioner purview of the state immunity doctrine.”
was liable for the value of the subject shipment as the same
was lost while in its custody and that the CTA erred in using As previously discussed, the SC cannot turn a blind eye to
as basis the prevailing peso-dollar exchange rate at the time BOC's ineptitude and gross negligence in the safekeeping of
of the importation instead of the prevailing rate at the time of respondent's goods. And that, they are not likewise unaware
actual payment pursuant to RA 4100. Additionally, Uni,ex is of its careless attitude in failing to provide a cogent
entitled to legal interest. The BOC Commissioner and explanation on the goods' disappearance, considering that
respondent again filed their MRs. The Commissioner insisted they were in its custody and that they were in fact the subject
that there was no liability and Unimex sought payment of the of litigation. This situation does not allow them to reject
goods value in euros not US dollars and demanded that the respondent's claim on the mere invocation of the Doctrine of
6% legal interest be reckoned from the date of judicial State Immunity. Concisely, the doctrine must be fairly
demand. observed and the State should not avail itself of this
prerogative to take undue advantage of parties that may
The CA denied the Commissioner’s MR but granted have legitimate claims against it.
Unimex’s. The Republic of the Philippines as represented by
BOC Commissioner petitioned to the Supreme Court (SC). Moreover, the Sc agreed with the Lower Courts’ directive
that, upon payment of the necessary customs duties by the
ISSUES: respondent, the petitioner’s "payment shall be taken from the
sale or sales of goods or properties seized or forfeited by the
1) Whether or not there was a modification of a final Bureau of Customs.”
and executory order?

2) Whether or not the government can be held liable


for actual damages?
8 Rieta vs People of the Philippines G.R. No. 147817, 12
RULING: August 2004

FIRST ISSUE Facts: Panfi lo Lacson, Chief of Police Intelligence Branch of


the MISG received information that certain syndicated
No. The petitioner contended that once a judgment becomes
groups were engaged in smuggling activities somewhere in
final and executory, it becomes immutable and unalterable.
So, the CTA erred in ordering the petitioner to instead pay Port Area, Manila; that the activities done at nighttime and
the value of the goods. the smuggled goods in a delivery panel and delivery truck
were being escorted by some police and military personnel.
The SC ruled that, the general rule is that, once a decision
He fi elded 3 surveillance stakeout teams the following night
becomes final and executory, it cannot be altered or
modified. However, this rule is not absolute. In some cases, along Roxas Boulevard and Bonifacio Drive whereby they
the SC ruled that where facts or events transpire after a were to watch out for a cargo truck bound for Malabon.
decision has become executory, which facts constitute a Nothing came out of it. On the basis of his investigation, the
supervening cause rendering the final judgment
unenforceable, said judgment may be modified. Also, a final truck was registered in the name of Teresita Estacio.
judgment may be altered when its execution becomes
impossible or unjust. 9 o’clock in the evening of Oct 14 1979: Lacson and his men
returned to the same area, Lacson posting himself where the
In the case at hand, the parties do not dispute the fact that
said cargo truck will come out from the premises of the 2nd
after the CTA decision became final and executory; the
respondent's goods were inexplicably lost while under the COSAC Detachment. At around 5 minutes before 4 o’clock
BOC's custody. Certainly, this fact presented a supervening that morning, a green cargo truck came out from the 2nd
event warranting the modification of the CTA decision. Even COSAC Detachment followed and escorted with 4 men on
if the CTA had maintained its original decision, still, the
board. Lacson ordered his men to intercept only the cargo
petitioner would have been unable to comply with it for the
obvious reason that there was nothing more to deliver to truck. The truck was intercepted. Lacson noticed that the
respondent. Toyota car following the cargo truck suddenly made a sharp
U-turn towards the North, unlike the cargo truck that was
SECOND ISSUE
going south. They chased the Toyota car, sounding their
Yes. The petitioner cannot escape from liability. The SC ruled siren. They made the car stop along Boni drive. Lacson and
that, “although it may be gainsaid that the satisfaction of his men searched the car and they found several firearms.
respondent's demand will ultimately fall on the government, He also discovered that Sgt. Miaco was the the driver and
and that, under the political doctrine of "state immunity," it
his companions inside were 3 sergeants, all belonging to the In the case adverted to earlier, Rimorin v. People, we held
2nd COSAC Detachment. They were found not to be thus:

equipped with mission orders. In his discussion of a similarly worded provision of Republic
Act No. 455, a criminal law authority explained thus:

When the cargo truck was searched, 305 cases of blue seal In order that a person may be deemed guilty of smuggling or
or untaxed cigarettes were found inside. The cargo truck illegal importation under the foregoing statute three
driver was able to escape while the other passengers or requisites must concur: (1) that the merchandise must have
riders of said truck were apprehended: all were police been fraudulently or knowingly imported contrary to law; (2)
officers (including petitioner Pat. Felicisimo Rieta), and one that the defendant, if he is not the importer himself, must
civilian. have received, concealed, bought, sold or in any manner
facilitated the transportation, concealment or sale of the
Lacsons’ men hauled the intercepted vehicles, the arrested merchandise; and (3) that the defendant must be shown to
men and confiscated goods to Camp Crame. All the 371 have knowledge that the merchandise had been illegally
cases of blue seal cigarettes were turned over to the BOC. imported. If the defendant, however, is shown to have had
Sgt. Balaba executed an Affidavit of Arrest together with possession of the illegally imported merchandise, without
Arnel Acuba. satisfactory explanation, such possession shall be deemed
sufficient to authorize conviction.
CA: affirmed RTC decision that while Rieta and his co-
accused had mainly raised questions of fact, they had In the present case, the explanation given by petitioner was
nonetheless failed to point out specific errors committed by found to be unacceptable and incredible by both the RTC
the TC in upholding the credibility of the prosecution and the CA, which said:
witnesses; that the non-presentation in court of the seized
blue seal cigarettes was not fatal to respondent’s cause, Now on the explanations of Police Sgt. Rimorin of Pasay City
since the crime had sufficiently been established by other Police Force and Pat. Rieta of Kawit Police Force, riders in
competent evidence; that it found no sufficient evidence the loaded cargo truck driven by Boy. Their claim that they
against the other co-accused who, unlike Rieta, had not did not have any knowledge about the cargo of blue seal
been found to be in possession of blue seal cigarettes. cigarettes is not given credence by the court. They tried to
show lack of knowledge by claiming that along the way, Boy
Issue: WON Rieta is guilty of smuggling the blue-seal and Gonzalo Vargas left them behind at a certain point for
cigarettes. snacks and picked them up later after the cargo had been
loaded. The Court cannot see its way through how two
Ruling: Yes.

policemen, joining Boy in the dead of the night, explicitly to
The fact that 305 cases of blue-seal cigarettes were found in
give him and his goods some protection, which service
the cargo truck, in which petitioner and his co-accused were
would be paid, yet would not know what they are out to
riding, was properly established. Nonetheless, he insists that
protect. And neither could the Court see reason in Boys
his presence there was not enough to convict him of
leaving them behind when he was going to pick up and load
smuggling, because the element of illegal possession had
the blue seal cigarettes. Boy knew the risks. He wanted them
not been duly proved. He adds that he had no knowledge
for protection, so why will he discard them? How so
that untaxed cigarettes were in the truck.

unnatural and so contrary to reason.

Petitioners contention is untenable. Persons found to be in Being contrary to human experience, his version of the facts
possession of smuggled items are presumed to be engaged is too pat and stereotyped to be accepted at face value.
in smuggling, pursuant to the last paragraph of Section 3601 Evidence, to be believed, not only must proceed from the
of the Tariff and Customs Code. The burden of proof is thus mouth of a credible witness; it must also be credible in itself,
shifted to them. To rebut this presumption, it is not enough as when it conforms to common experience and observation
for petitioner to claim good faith and lack of knowledge of the of humankind.
unlawful source of the cigarettes. He should have presented
evidence to support his claim and to convince the court of his The absence of any suspicious reaction on the part of
non-complicity. petitioner was not in accordance with human nature. The
involvement or participation he and his co-accused had in
the smuggling of the goods was confirmed by their lack of
proper and reasonable justification for the fact that they had CTA rendered a decision sustaining the forfeiture of
been found inside the cargo truck, seated in front, when it M/V Neptune Breeze.
was intercepted by the authorities. Despite his protestation, it
Issue
is obvious that petitioner was aware of the strange nature of WON M/V Neptune Breeze is qualified to be the subject of
the transaction, and that he was willing to do his part in the forfeiture under Sec. 2531 of the Tariff and Customs
furtherance thereof. The evidence presented by the Code

prosecution established his work of guarding and escorting Held


the contraband to facilitate its transportation from the Port The rice subject of the importation, as well as the vessel M/V
Area to Malabon, an act punishable under Section 3601 of Neptune Breeze used in importation are subject to forfeiture.
the Tax Code.
The penalty of forfeiture is imposed on any vessel engaged
in smuggling, provided that the following conditions are
present
1. The vessel is "used unlawfully in the importation or
exportation of articles into or from" the Philippines
9. El Greco Ship Manning and Management Corp. v.
2. The articles are imported to or exported from "any
Commissioner of Customs, G.R. No. 177188, 4
Philippine port or place, except a port of entry"; or
December 2008
3. If the vessel has a capacity of less than 30 tons and
is "used in the importation of articles into any
Facts
Philippine port or place other than a port of the Sulu
The vessel M/V Criston docked at the Port of
Tabaco, Albay, carrying a shipment of 35,000 bags of Sea, where importation in such vessel may be
imported rice, consigned to Antonio Chua, Jr. and Carlos authorized by the Commissioner, with the approval of
Carillo, payable upon its delivery to Albay. Glucer Shipping the department head."27
Company, Inc. is the operator of M/V Criston. Upon the
directive of Commissioner Titus Villanueva of the BOC, a There is no question that M/V Neptune Breeze,
Warrant of Seizure and Detention was issued on the ground then known as M/V Criston, was carrying 35,000 bags of
that it left the Port of Manila without the necessary clearance imported rice without the necessary papers. This gives rise
from the Philippine Coast Guard. to the presumption that such importation was illegal and as
such subject to forfeiture.
To protect their property rights over the cargo,
consignees Chua and Carillo filed before the RTC a Petition The burden is on El Greco, as the owner of M/V
for Prohibition with Prayer for the Issuance of Preliminary Neptune Breeze, to show that its conveyance of the rice was
Injunction and TRO assailing the authority of the Legaspi actually legal. Unfortunately, its claim that the cargo was not
District Collectors to issue the warrants. RTC then issued a of foreign origin but was merely loaded at Manila, was belied
TRO. Thereafter, Legaspi District Collector held in abeyance by the following evidence
the proceedings for the forfeiture of M/V Criston and its ● Incoming Journal of the Philippine Coast
cargo. Guard
● Certification issued by the DOTC Port State
In the meantime, while M/V Criston was berthing at
the Port of Tabaco under the custody of the BOC, the Control Center of Manila,
Province of Albay was hit by a typhoon. After the typhoon ● Letter issued by the Sub-Port of North
had passed, M/V Criston, however, failed to return to the Harbor Collector confirming that there was
Port of Tabaco and was nowhere to be found. no such loading of rice or calling of vessel
occurring at North Harbor, Manila.
BOC then received information that M/V Criston
was found in the waters of Bataan sporting the name of M/V It is, therefore, uncontroverted that the 35,000 bags
Neptune Breeze. For failure of M/V Neptune Breeze to of imported rice were smuggled into the Philippines using M/
present a clearance from its last port of call, a Warrant of V Neptune Breeze.
Seizure and Detention was issued against the vessel by the
BOC District Collector of the Port of Manila.

In the meantime, El Greco, the duly authorized local


agent of the registered owner of M/V Neptune Breeze filed a
Motion for Intervention and Motion to Quash Warrant of
Seizure Detention with Urgent Prayer for the Immediate
Release of M/V Neptune Breeze. El Greco claimed that M/V
Neptune Breeze was a foreign registered vessel owned by
Atlantic Pacific, and different from M/V Criston which had
been involved in smuggling activities.
10. Pilipinas Shell v. Republic of the Philippines, G.R. 11 . S o u t h e r n C r o s s C e m e n t C o r p . v. C e m e n t
No. 161953, 6 March 2008 Manufacturers Association of the Phils., G.R. No. 158540
(Resolution), August 3, 2005
Facts: The present controversy sprang from the cancellation
Facts:
of tax debit memos (TDMs) and the corresponding tax credit
certifi cates (TCCs) assigned to Shell by various entities.
Nowhere in the SMA does it state that the DTI Secretary may
Some of these TCCs were subsequently accepted as
impose general safeguard measures without a positive final
payment by the BOC for Shell’s taxes and import duties in
determination by the Tariff Commission, or that the DTI
1997 and 1998.
Secretary may reverse or even review the factual
determination made by the Tariff Commission. Congress has
However, the Dept. of Finance had to cancel the TDMs and the putative authority to abolish the Tariff Commission or the
TCCs because the same were alleged to have been DTI. It is similarly empowered to alter or expand its functions
fraudulently issued and transferred. Shell was then asked to through modalities which do not align with established norms
immediately pay the BOC and the BIR for the value of the in the bureaucratic structure. The Court is bound to
cancelled TCCs as well as the penalties, surcharges and recognize the legislative prerogative to prescribe such
interests. Respondent filed a collection case in the RTC modalities, no matter how atypical they may be, in
against Shell because in view of the invalidation of the TCCs, affirmation of the legislative power to restructure the
Shell still owed RP the amount of unpaid customs duties and executive branch of government.
taxes. Shell questioned the jurisdiction of the RTC arguing The case centers on the interpretation of the provisions of
that it acquires jurisdiction only if an assessment has Republic Act No. 8800, the Safeguard Measures Act
become final and incontestable. The matter was elevated to (“SMA”), which was one of the laws enacted by Congress
the CA but the appellate court denied the petition saying that soon after the Philippines ratified the General Agreement on
BOCs assessment had already become final. BOC’s demand Tariff and Trade (GATT) and the World Trade Organization
for payment was not an assessment that could still be (WTO) Agreement. The SMA provides for the structure and
protested under the Tariff and Customs Code. mechanics for the imposition of emergency measures,
including tariffs, to protect domestic industries and producers
Issue: WON the Respondent had a right to fi le a collection from increased imports which inflict or could inflict serious
suit. injury on them.
Philcemcor filed with the Department of Trade and Industry
Ruling: Yes. (DTI) a petition seeking for the imposition of safeguard
measures on Gray Portland cement, in accordance with the
AN assessment or liquidation by the BOC attains finality and SMA. After the DTI issued a provisional safeguard measure,
conclusiveness one year from the date of final payment of the application was referred to the Tariff Commission for a
duties except when: formal investigation pursuant to Section 9 of the SMA and its
Implementing Rules and Regulations, in order to determine
1. There was fraud whether or not to impose a definitive safeguard measure on
2. There is a pending protest; or imports of gray Portland cement. After public hearings and
3. The liquidation of import entry was merely conducting its own investigation, the Tariff Commission came
tentative. out with a negative finding. Notwithstanding such finding, the
DTI sought the opinion of the Secretary of Justice whether it
None of the foregoing exceptions is present in this case. could still impose a definitive safeguard measure. The
There was no fraud as petitioner claimed (and was Secretary of Justice opined that the DTI could not do so
presumed) to be in good faith. Respondent does not dispute under the SMA, and so the DTI Secretary then promulgated
this. Records show that petitioner paid those duties without a Decision wherein he expressed the DTI’s disagreement
protest using its TCCs. Finally, the liquidation was not with the conclusions of the Tariff Commission, but at the
tentative as the assessment had long become final and same time, ultimately denying Philcemcor’s application for
incontestable. Consequently, pursuant to Yabes v. Flojo and safeguard measures on the ground that the he was bound to
because of the cancellation of the TCCs, respondent had the do so in light of the Tariff Commission’s negative findings.
right to file a collection case. Philcemcor filed with the Court of Appeals a Petition for
Certiorari, Prohibition and Mandamus seeking to set aside
Note: Assessments inform taxpayers of their tax liabilities. the DTI Decision, as well as the Tariff Commission’s Report.
Under the Tariff and Customs Code, the assessment is in the Philcemcor argued that the DTI Secretary, vested as he is
form of al liquidation made on the face of the import entry under the law with the power of review, is not bound to adopt
return and approved by the Collector of Customs. Liquidation the recommendations of the Tariff Commission; and, that the
is the final computation and ascertainment by the Collector Report is void, as it is predicated on a flawed framework,
of Customs of the duties due on imported merchandise inconsistent inferences and erroneous methodology. The CA
based on official reports as to the quantity, character and held that the DTI Secretary was not bound by the factual
value thereof, and the Collector’s own findings as to the findings of the Tariff Commission since such findings are
applicable rate of duty. Liquidation is considered made when merely recommendatory and they fall within the ambit of the
the entry is officially stamped “liquidated. Secretary’s discretionary review. It determined that the
legislative intent is to grant the DTI Secretary the power to
make a final decision on the Tariff Commission’s
recommendation.
Southern Cross filed the present petition, arguing that the in increased quantities, whether absolute or relative to the
factual findings of the Tariff Commission on the existence or domestic production, as to be a substantial cause of serious
non-existence of conditions warranting the imposition of injury or threat thereof to the domestic industry; however, in
general safeguard measures are binding upon the DTI the case of non-agricultural products, the Secretary shall first
Secretary. establish that the application of such safeguard measures
will be in the public interest.
Issue: Section 5 of the SMA operates as a limitation validly imposed
by Congress on the presidential authority under the SMA to
Whether or not the factual findings of the Tariff Commission impose tariffs and imposts. The positive final determination
on the existence or nonexistence of conditions warranting by the Tariff Commission is plainly required by the law and so
the imposition of safeguard measures are binding upon the it must be strictly complied with. Philcemcor raised a
DTI Secretary question as to whether such requirement run counter to our
legal order since under the said provision, a body of relative
Held: junior competence as a Tariff Commission can bind an
administrative superior and cabinet officer such as the DTI
Petition is granted. Secretary. No provision in the SMA expressly authorizes the
The DTI Secretary is barred from imposing a general DTI Secretary to impose a general safeguard measure
safeguard measure absent a positive final determination despite the absence of a positive final recommendation of
rendered by the Tariff Commission. The required positive the Tariff Commission. On the other hand, Section 5
final determination of the Tariff Commission exists as a expressly states that the DTI Secretary “shall apply a general
properly enacted constitutional limitation imposed on the safeguard measure upon a positive final determination of the
delegation of the legislative power to impose tariffs and Tariff Commission.”
imposts to the President under Section 28(2), Article VI of Under the SMA, it is the Tariff Commission that conducts an
the Constitution. The provision states: “The Congress may, investigation as to whether the conditions exist to warrant the
by law, authorize the President to fix within specified limits, imposition of the safeguard measures. These conditions are
and subject to such limitations and restrictions as it may enumerated in Section 5, namely; that a product is being
impose, tariff rates, import and export quotas, tonnage and imported into the country in increased quantities, whether
wharfage dues, and other duties or imposts within the absolute or relative to the domestic production, as to be a
framework of the national development program of the substantial cause of serious injury or threat thereof to the
Government.” domestic industry. After the investigation of the Tariff
These impositions under Section 28(2), Article VI fall within Commission, it submits a report to the DTI Secretary, which
the realm of the power of taxation, a power which is within states whether the above-stated conditions for the imposition
the sole province of the legislature. But this provision is also of the general safeguard measures exist. Upon a positive
an exceptional grant of legislative power to the President final determination that these conditions are present, the
which is why the qualifiers mandated by the Constitution on Tariff Commission then is mandated to recommend what
this presidential authority attains primordial consideration. appropriate safeguard measures should be undertaken by
First, there must be a law, such as the SMA. Second, there the DTI Secretary.
must be specified limits, a detail which would be filled in by Section 13 of the SMA gives five specific options on the type
the law. And Third, Congress is further empowered to impose of safeguard measures the Tariff Commission recommends
limitations and restrictions on this presidential authority. The to the DTI Secretary.
authority delegated to the President may be exercised by At the same time, nothing in the SMA obliges the DTI
his/her alter egos, such as department secretaries. For Secretary to adopt the recommendations made by the Tariff
purposes of the President’s exercise of power to impose Commission. In fact, the SMA requires that the DTI
tariffs under the above provision, it is generally the Secretary Secretary establish that the application of such safeguard
of Finance who acts as the alter ego of the President. The measures is in the public interest, notwithstanding the Tariff
SMA provides an exceptional instance wherein it is the DTI Commission’s recommendation on the appropriate safeguard
or Agriculture Secretary who is tasked by Congress, in their measure upon its positive final determination. Thus, even if
capacities as alter egos of the President, to impose such the Tariff Commission makes a positive final determination,
measures. the DTI Secretary may opt not to impose a general
Both the Tariff Commission and the DTI Secretary may be safeguard measure, or choose a different type of safeguard
regarded as agents of Congress in the implementation of the measure other than that recommended by the Tariff
said law. Indeed, even the President may be considered as Commission.
an agent of Congress for the purpose of imposing safeguard It is evident from the text of Section 5 that there must be a
measures since it is Congress, not the President, which positive final determination by the Tariff Commission that a
possesses inherent powers to impose tariffs and imposts. product is being imported into the country in increased
The entire SMA provides for a limited framework under which quantities (whether absolute or relative to domestic
the President, through the DTI and Agriculture Secretaries, production), as to be a substantial cause of serious injury or
may impose safeguard measures in the form of tariffs and threat to the domestic industry. Any disputation to the
similar imposts. The limitation most relevant to this case is contrary is, at best, the product of wishful thinking.
contained in Section 5 of the SMA, captioned “Conditions for T h e Ta r i f f C o m m i s s i o n ’ s fi n d i n g i s n o t m e r e l y
the Application of General Safeguard Measures,” and recommendatory. Section 5 bluntly does require a positive
stating: “The Secretary shall apply a general safeguard final determination by the Tariff Commission before the DTI
measure upon a positive final determination of the [Tariff] Secretary may impose a general safeguard measure. This is
Commission that a product is being imported into the country a duty imposed on a public officer by the law itself which
must be given a controlling effect. In fact, the Department of Section 6 of the SMA. Considering that the power to impose
Justice (DOJ) Secretary himself rendered an Opinion with tariffs in the first place is not inherent in the President but
the same conclusion. arises only from congressional grant, we should affirm the
Another issue was raised as to whether the DTI Secretary, congressional prerogative to impose limitations and
acting either as alter ego of the President or in his capacity restrictions on such powers which do not normally belong to
as head of an executive department, may review, modify or the executive in the first place. Nowhere in the SMA does it
otherwise alter the final determination of the Tariff state that the DTI Secretary may impose general safeguard
Commission under the SMA. The Court answered in the measures without a positive final determination by the Tariff
negative. Congress in enacting the SMA and prescribing the Commission, or that the DTI Secretary may reverse or even
roles to be played therein by the Tariff Commission and the review the factual determination made by the Tariff
DTI Secretary did not envision that the President, or his/her Commission.
alter ego, could exercise supervisory powers over the Tariff Congress can enact additional tasks or responsibilities on
Commission. If Congress intended to allow the traditional either the Tariff Commission or the DTI Secretary, such as
“alter ego” principle to be established by the SMA, it would their respective roles on the imposition of general safeguard
have assigned the role now played by the DTI Secretary measures under the SMA. In doing so, the same Congress,
under the law instead to the National Economic and which has the putative authority to abolish the Tariff
Development Authority (NEDA). The Tariff Commission is an Commission or the DTI, is similarly empowered to alter or
attached agency of the NEDA, which in turn is the expand its functions through modalities which do not align
independent planning agency of the government. with established norms in the bureaucratic structure. The
Court is bound to recognize the legislative prerogative to
The Tariff Commission does not fall under the administrative prescribe such modalities, no matter how atypical they may
supervision of the DTI. On the other hand, the administrative be, in affirmation of the legislative power to restructure the
relationship between the NEDA and the Tariff Commission is executive branch of government.
established not only by the Administrative Code, but similarly Assuming administrative review were available, it is the
affirmed by the Tariff and Customs Code. At the same time, NEDA that may conduct such review following the principles
under the Tariff and Customs Code, no similar role or of administrative law, and the NEDA’s decision in turn is
influence is allocated to the DTI in the matter of imposing reviewable by the Office of the President. The decision of the
tariff duties. In fact, the long-standing tradition has been for Office of the President then effectively substitutes as the
the Tariff Commission and the DTI to proceed independently determination of the Tariff Commission, which now forms the
in the exercise of their respective functions. Only very basis of the DTI Secretary’s decision, which now would be
recently have our statutes directed any significant interplay ripe for judicial review by the CTA under Section 29 of the
between the Tariff Commission and the DTI, with the SMA. This is the only way that administrative review of the
enactment in 1999 of Republic Act No. 8751 on the Tariff Commission’s determination may be sustained without
imposition of countervailing duties and Republic Act No. violating the SMA and its constitutional restrictions and
8752 on the imposition of anti-dumping duties, and of course limitations, as well as administrative law.
the promulgation a year later of the SMA. In all these three In any event, even if we concede the possibility of
laws, the Tariff Commission is tasked, upon referral of the administrative review of the Tariff Commission’s final
matter by the DTI, to determine whether the factual determination by the NEDA, such would not deny merit to
conditions exist to warrant the imposition by the DTI of a the present petition. It does not change the fact that the
countervailing duty, an anti-dumping duty, or a general Court of Appeals erred in ruling that the DTI Secretary was
safeguard measure, respectively. In all three laws, the not bound by the negative final determination of the Tariff
determination by the Tariff Commission that these required Commission, or that the DTI Secretary acted without
factual conditions exist is necessary before the DTI jurisdiction when he imposed general safeguard measures
Secretary may impose the corresponding duty or safeguard despite the absence of the statutory positive final
measure. And in all three laws, there is no express provision determination of the Commission.
authorizing the DTI Secretary to reverse the factual
determination of the Tariff Commission.

The SMA indubitably establishes that the Tariff Commission


is no mere flunky of the DTI Secretary when it mandates that
the positive final recommendation of the former be
indispensable to the latter’s imposition of a general
safeguard measure. What the law indicates instead is a
relationship of interdependence between two bodies
independent of each other under the Administrative Code
and the SMA alike. Indeed, even the ability of the DTI
S e c r e t a r y t o d i s r e g a r d t h e Ta r i ff C o m m i s s i o n ’s
recommendations as to the particular safeguard measures to
be imposed evinces the independence from each other of
these two bodies. This is properly so for two reasons – the
DTI and the Tariff Commission are independent of each other
under the Administrative Code; and impropriety is avoided in
cases wherein the DTI itself is the one seeking the
imposition of the general safeguard measures, pursuant to
What does the phrase national internal revenue
comprise of?
LOCAL GOVERNMENT TAXATION

It comprises of the taxes enumerated in Sec. 21 of the NIRC,
as amended by RA No. 8424, to wit:

1. Congressman Mandanas, et. al. vs. Exec. Sec. Ochoa, Sec. 21. Sources of Revenue. xxx xxx xxx deemed
Jr., et. al., GR No. 199802, April 10, 2019 to be national internal revenue taxes:

Facts: (a) Income tax;


On July 3, 2018, the SC promulgated a decision which (b) Estate and donor’s taxes;
provided the computation of the just share of local (c) Value-added tax;
government units in the national taxes. Such decision (d) Other percentage taxes;
included: an order to the Secretary of Finance, the Secretary (e) Excise taxes;
of Budget and Management, the Commissioner of Internal (f) Documentary stamp taxes; and
Revenue, the Commissioner of Customs, and the National (g) Such other taxes as are or hereafter may
Treasurer to include all collections of national taxes in be imposed and collected by the Bureau of
the computation of the base of the just share of Local Internal Revenue.
Government Units according to the ratio provided in the
modified Sec. 284 of RA 7160 (Local Government Code), The provision of RA7160 effectively deprived the LGUs of
except those accruing to special purpose funds and special their just share from other national taxes, such as custom
allotments for the utilization and development of national duties.
wealth.
Are custom duties taxes?
The Office of the Solicitor General (OSG), representing all Yes, they are also taxes because they are exactions whose
the respondents, filed a motion for reconsideration to such proceeds become public funds.
decision, contending the following:
According to Garcia vs. Executive Secretary, customs
1. The affected provisions of the Local Government duties is the nomenclature given to taxes imposed on the
Code are not contrary to Sec. 6, Article X of the importation and exportation of commodities and
Constitution, under which the plenary power of merchandise to or from a foreign country. Although customs
Congress extends not only to the determination of duties have either or both the generation of revenue and the
the just share of local government units but also the regulation of economic/social activity as their purposes, it is
determination of which national taxes serve as base difficult to say which of the two is the more principal
for the computation of such just share. objective.

2. The OSG premises its contention on the fact that the (2)
article “the” immediate precedes the phrase “national
taxes” in Section 6, thereby manifesting the intent to Whether or not the Congress can manipulate, by law, the
give Congress the discretion to determine which of base of the allocation of the just share in the national
the national taxes the just share will be based on. taxes of the LGUs.

Issues & Ruling: No.

(1) Although Congress may have the primary discretion to


determine and fix the just share of the LGUs in the national
Has Congress infringed the Constitution when it taxes, it cannot disobey the mandate of the Constitution that
provided in Sec. 284 of RA 7160 that the share of the the just share of the LGUs has to be derived from national
LGUs shall be taken from the national internal revenue taxes.
taxes while Sec. 6, Art. X of the Constitution mentions
national taxes as the source of their just share? It must also be noted that between two possible
interpretations of a law, the one which will be free from
Yes. constitutional infirmity and the other tainted by such grave
defect, the former is to be preferred.
Although the power of Congress to make laws is plenary in
nature, congressional lawmaking remains subject to the
limitations stated in the Constitution. The phrase national
internal revenue taxes engrafted in Sec. 284 is undoubtedly
more restrictive than the term national taxes written in the
Constitution. As such, Congress has actually departed
from the letter of the Constitution which states that
national taxes should be the base from which the just share
of the LGU comes.
UP’s tax exemption is upon compliance of the condition
that UP’s revenues and assets must be used for
educational purposes or in support thereof. There is no
longer any need to determine the tax status of the
possessor or of the beneficial user to ascertain whether
UP’s revenues or assets is exempt from tax. There is an
2. University of the Philippines vs. City Treasurer of implied repeal over the inconsistencies of the two laws.
Quezon City, G.R. No. 214044. June 19, 2019 Before the passage of RA 9500, there was a need to
determine who had beneficial use of UP’s property
Facts: The University of the Philippines (UP) is the before the property may be subjected to real property
registered owner of a parcel of land located in Quezon City. tax. After the passage of RA 9500, there is now a need to
In 2006, UP entered into a Contract of Lease with determine whether UP’s property is used for educational
Development Obligations with Ayala Land Inc. (ALI). In 2012, purposes or in support thereof before the property may
a Notice of Assessment was issued to ALI informing them be subjected to real property tax.
that the subject property had been reclassifi ed and assessed
fro taxation purposes effective 2009. The Quezon City City
Assessor informed Up that the Notice of Assessment was
served upon ALI as the entity liable for Real Property Tax on
the subject property pursuant to Sec. 205 of R.A. No. 7160
or the Local Government Code of 1991 (LGC).
3. National Power Corporation v. Province of
A few months later, a Statement of Delinquency was Pangasinan, G.R. No. 210191, March 4, 2019
addressed to the UP North Property Holdings, Inc. The City
Treasurer demanded the payment of real property tax on the Facts: Petitioner National Power Corporation (NPC) is a
subject property. In 2013, a Notice of Delinquency was government-owned and controlled corporation,. created and
subsequently sent to UP. In 2014, the City Treasurer sent a existing under Republic Act (R.A.) No. 6395, as amended.
Notice of Delinquency to UP without any prior Notice of Pursuant to its mandate, on May 20, 1994, NPC entered into
Assessment. It was here where the City Treasurer an Energy Conversion Agreement 4 (ECA) with CEPA
demanded that UP pay the corresponding real property taxes Pangasinan Electric Limited (CEPA), a private corporation,
on the subject property. for the construction, operation, and maintenance of the Sual
Coal-Fired Thermal Power Plant. CEPA subsequently
Upon UP’s failure to heed the demand, the City Treasurer became Mirant Sual Corporation (Mirant) and now also
issued a Notice of Delinquency to UP for the years known as Team Energy Power Holdings Corporation (Team
2009-2013. In his letter to the City Treasurer, UP President Energy). For purposes of this case, we shall use "Mirant" to
Pascual requested the postponement of any proceeding refer to CEPA, Mirant, or Team Energy as the company was
related to the aforementioned Statement of Delinquency. called "Mirant" when this case started with the Local Board of
Assessment Appeals (LBAA). Among the obligations
Finally, UP received the Final Notice of Delinquency from the undertaken by the NPC under the ECA was the assumption
Office of the City Treasurer demanding the payment of real of all real property taxes.Subsequently, a Memorandum of
property tax on the subject property in the updated amount Agreement(MOA) was entered into by Pangasinan Electric
of P7,182,700.00 for the years 2009-2013 and the first three Corporation (PEC) (Mirant's predecessor-in-interest) with
quarters of 2014.UP then filed the present case before the NPC, the Province of Pangasinan, the Municipality of Sual,
Supreme Court within 60 days from receipt of the Final and the Barangay of Pangascasan. PEC started operating
Notice of Delinquency. the power plant sometime in 1998.

Issue: Whether or not UP, as a chartered academic NPC religiously paid real property taxes from 1998 up to the
institution with specifi c legislated tax exemptions, is legally first quarter of 2003 for the land, buildings, machinery, and
liable for the real property tax on the land leased to ALI equipment pertaining to the power plant.On the second
under the LGC. quarter of 2003, NPC stopped paying said taxes, purportedly
pursuant to the provisions of R.A. No. 7160, which grants
Held: NO. UP is Exempt under Republic Act No. 9500. certain exemptions from real property tax liabilities.This
prompted the Office of the Municipal Treasurer of Sual,
RA 9500, which took effect in 2008, was not yet enacted Pangasinan to issue a Notice of Assessment for the payment
when UP and ALI entered into their lease contract in 2006. of real property taxes thereon.
However, Republic Act No. 9500 was already operative when
the City Treasurer issued the Statement of Delinquency and NPC then filed a petition for exemption with the LBAA, then
Final Notice of Delinquency to UP in 2014. Republic Act No. with the Central Board of Assessment Appeals (CBAA), then
9500 was also operative when the City Assessor issued a with the Court of Tax Appeals (CTA) which all denied NPC’s
Notice of Assessment to ALI in 2012, a Statement of petition for exemption stating that since the ownership and
Delinquency to UP North Property Holdings, Inc. in 2012, actual use of the subject facilities are with Mirant, a non-
and a Statement of Delinquency to UP North Property exempt entity, NPC may not rightfully claim that it has the
Holdings, Inc. in 2013. requisite legal interest to question the assessment and
assert tax exemptions under Sections 234( c) and (e) ofR.A.
No. 7160, as well as the privilege under Section 225 thereof.
Issue: Whether NPC has legal personality and interest to
claim for such exemptions and privileges.

Held: NO. the Court has concluded in many prior cases that
the tax exemptions and privileges claimed by NPC in cases
such as these cannot be recognized since it is not the actual, 4. City of Davao v. Randy Allied Ventures, Inc., G.R. No.
direct, and exclusive user of the facilities, machinery and 241697, July 29, 2019
equipment subject of the cases.

Indeed, real property tax liability rests on the owner of the Facts:
property or on the person with the beneficial use thereof
such as taxes on government property leased to private RAVI is one of the Coconut Industry Investment Fund (CIIF)
persons or when tax assessment is made on the basis of the holding companies established to own and hold the shares
actual use of the property. 29 In either case, the unpaid of stock of San Miguel Corporation (SMC). On January 24,
realty tax attaches to the property but is directly chargeable 2012, the Supreme Court rendered its decision in Philippine
against the taxable person who has actual and beneficial use Coconut Producers Federation, Inc. v. Republic (CClCOt~D),
and possession of the property regardless of whether or not docketed as G.R. Nos. 177857-58 and 178793. declaring the
that person is the owner. 30 NPC was, therefore, corre~t in CllF companies, including RA VI, and the CIIF block of SMC
arguing that a beneficial user may also be legally burdened shares as "public funds necessarily owned by the
with the obligation to pay for the tax imposed on a property Govemment."4 On January 17, 2013, RA VI filed with the
and as such, has legal interest therein and the personality to Regional Trial Court (R TC), a claim for refund or credit of
protest an assessment or claim exemption from tax liability. erroneously and illegally collected LBT for the taxable year
2010.
In this case, however, NPC is neither the owner nor the
possessor or beneficial user of the subject facilities. Hence, it RA VI claimed that petitioners erroneously and illegally
cannot be considered to have any legal interest in the collected LBT in the amount of P503,346.00, corresponding
subject property to clothe it with the personality to question to its dividends from its SMC preferred shares, on the
the assessment and claim for exemptions and mistaken assumption that it is a non-bank financial
privileges.There is nothing in the ECA which expressly intermediary (NBFI)
grants the NPC the right or authority to use directly or
indirectly the power plant and the facilities therein during the In a Decision dated June 22, 2015, the RTC denied the claim
cooperation period. Thus, it is crystal clear that the NPC for refund or credit. It held that RA VI' s dividends and
cannot claim for the exemptions it so desires. interests are not merely incidental to its business but are its
principal sources of income, in line with the primary purpose
To conclude,it must be pointed out that protracted and stated in its Amended AOL Being a financial inti~rmediary,
circuitous litigation has seriously resulted in the local RA VI's income from dividends and interests is subject to
governments' deprivation of revenues. The power to tax is LBT under Section 143 (f) of. Republic Act (RA) No. 7160, or
the most potent instrument to raise the needed revenues to the Local Government Code of 1991 (LGC).
finance and support myriad activities of local government
units for the delivery of basic services. Thus, the right of local CTA reversed.
government units to collect taxes due must always be upheld
to avoid severe tax erosion. This consideration is consistent Issue: The issue for the Court's resolution is whether or not
with the State policy to guarantee the autonomy of local the CTA EB erred in fi nding that RA VI is not an NBFI subject
governments and the objective of the Local Government to LBT under Section 143 (f) of the LGC?
Code that they enjoy genuine and meaningful local
autonomy to empower them to achieve their fullest Ruling: The petition is without merit. This case involves a
development as self-reliant communities and make them refund of erroneously paid LBT.
effective partners in the attainment of national goals.
Essentially, LBT are taxes imposed by local government
Thus, petition is DENIED. units on the privilege of doing business within their
jurisdictions. To be sure, the phrase "doing business" means
some "trade or commercial activity regularly engaged in as a
means of livelihood or with a view to profit." Particularly, the
LBT imposed pursuant to Section 143 (t) is premised on the
fact that the persons made liable for such tax are banks or
other financial institutions by virtue of their being engaged in
the business as such. This is why the LBT are imposed on
their gross receipts from "interest, commissions and
discounts from lending activities, income from financial
leasing, dividends, rentals on property and profit from
exchange or sale of property, insurance premium." In this
case, it is clear that RA VI is neither a bank nor other
financial institution, i.e. 1 an NBFI.
consistency with the prevailing laws. Otherwise, it shall be
Indeed, there is a stark distinction between a holding void.
company and a financial intermediary as contemplated under
the LGC, in relation to other laws. A "'holding company' is It is not disputed that at the time the ordinance in question
'organized' and is basically conducting its business by was enacted in 1992, the local government of Pasig, then a
investing substantially in the equity securities of another municipality, had no authority to levy franchise tax. Article 5
company for the purpose of controlling their policies (as of the Civil Code explicitly provides, "acts executed against
opposed to directly engaging in operating activities) and the provisions of mandatory or prohibitory
'holding' them in a conglomerate or umbrella structure along laws shall be void, except when the law itself authorizes their
with other subsidiaries." validity." Section 32 of Municipal Ordinance No. 25 is, thus,
void for being in direct contravention with Section 142 of the
LGC.

Being void, it cannot be given any legal effect. An


assessment and collection pursuant to the said ordinance is,
5. City of Pasig v. Manila Electric Co., G.R. No. 181710, perforce, legally infirm.
March 7, 2018

FACTS:

1992: The Sangguniang Bayan of the Municipality of Pasig


enacted Ordinance No. 25, which imposed a franchise tax on 6. Herarc Realty Corporation vs The Provincial Treasurer
all business venture operations carried out through a of Batangas
franchise within the municipality.
Facts: Upon acquisition via execution sale in August 2004,
1995: The Municipality of Pasig was converted into a highly thirteen (13) parcels of land located in Sta. Ana, Calatagan,
urbanized city by virtue of R.A. 7829. Batangas are registered since 2006 in the name of petitioner
Herarc Realty Corporation under Transfer Certicate of Title
2001: The Treasurer’s Office of the City Government of (TCT) Nos. T105907 to T-105919 (subject property) . From
Pasig informed MERALCO, a grantee of a legislative March 2, 2006 up to August 12, 2009, the Subject Property
franchise, that it is liable to pay taxes for the period 1996 to had been in actual possession of private respondents Dr.
1999, pursuant to Municipal Ordinance No. 25. Rafael A. Manalo, Grace Oliva, and Freida Rivera Yap in
The city, thereafter, on two separate occasions, demanded their capacity as assignees in an involuntary insolvency
payment of the said tax exclusive of penalties. proceeding against the Spouses Rosario and Saturnino
Baladjay pending before the Muntinlupa City RTC Br. 204. It
MERALCO protested the validity of the demand and was only on August 13, 2009 that petitioner was able to take
subsequently instituted an action before the RTC for the full possession and control of the subject property by virtue
annulment of the said demand with prayer for a temporary of the July 31, 2009 Order of the Makati City RTC. Provincial
restraining order and a writ of preliminary injunction. Treasurer of Batangas sent to petitioner a Statement of Real
Property Tax (RPT) Liabilities to collect the amount of
RTC: ruled in favor of the City of Pasig. Upon appeal, CA P8,093,256.89, which included the unpaid RPT on the
reversed the RTC ruling. Hence, this instant appeal. subject property for 2007, 2008, and January to August 2009
(covered period). The demand was reiterated in letters. The
Issue: Whether or not Section 32 of Municipal Ordinance assessment was paid under protest on November 20, 2012.
No. 25 is void for being in direct contravention with Section Less than a month after, petitioner led a petition for
142 of the LGC (prohibitory law). YES. prohibition and mandamus against respondents.

Ruling: For petitioner, the RPT assessment is illegal and erroneous,


W/N the Municipality of Pasig can impose franchise because the subject property was not in its possession
taxes. No. during the covered period. Citing Testate Estate of Concordia
T. Lim v. City o f Manila and Government Service Insurance
Unlike a city, a municipality is bereft of authority to levy System v. City Treasurer and City Assessor of the City of
franchise tax, thus, the Manila, which ruled that unpaid tax is chargeable against the
ordinance enacted for that purpose is void. The conversion taxable person who had actual or benecial use and
of the municipality into a city does not lend validity to the void possession of it regardless of whether or not he is the owner,
ordinance. Neither does it authorize the collection of the tax it contended that private respondents should be the one
under said ordinance. charged therefor as they had its actual or beneficial use and
possession at the time
The LGC further provides that the power to impose a tax,
fee, or charge or to generate revenue shall be exercised by RTC denied the petition
the Sanggunian of the local government unit concerned
through an appropriate ordinance. However, an ordinance
must pass the test of constitutionality and the test of
When its motion for reconsideration was denied on January such beneficial or actual use at the time of the accrual of
7, 2014, petitioner directly filed before the Supreme Court on the tax. Beneficial use means that the person or entity
Rule 45 petition. has the use and possession of the property. Actual use
refers to the purpose for which the property is principally
Issue: 1.) Whether it was proper to fi le Rule 45 directly to or predominantly utilized by the person in possession
the Supreme Court? thereof. Real properties are subject to the RPT since the
LGC has withdrawn exemptions from real property taxes
2.) Whether the petition is liable for the payment of the real of all persons, whether natural or juridical. Entities may
property tax? be exempt from payment of the RPT if their charters,
which were enacted or reenacted after the effectivity of
Ruling: the LGC, exempt them payment of the RPT. Section 234
enumerates the persons and real property exempt
1.) We deny. Petitioner's direct recourse to the RTC is therefrom. The tax exemption of real property owned by
warranted since the issue of the legality or validity of the the Republic, its political subdivisions, agencies or
assessment is a question of law. However, as a instrumentalities carries, however, ceases if the
taxpayer not satisfied with the RTC decision, it should beneficial use of the real property has been granted, for
have led a petition for review before the Court of Tax a consideration or otherwise, to a taxable person. In
Appeals (CTA). The decision, ruling or resolution of the such case, the corresponding liability for the payment of
CTA, sitting as Division, may further be reviewed by the the RPT devolves on the taxable beneficial user. The
CTA En Banc. It is only after this procedure has been taxpayer that was being assessed with the unpaid RPT
exhausted that the case may be elevated to this Court. was neither the registered owner nor the possessor of
Under Section 7 (a) (3) of Republic Act (R.A.) No. 9282, the subject property when the tax became due and
the appellate jurisdiction of the CTA over decisions, demandable. In contrast, petitioner herein, an entity that
orders, or resolutions of the RTC becomes operative is not tax exempt under the law, is the registered owner
when the latter has ruled on a local tax case, i.e., one of the real property. Therefore, it is personally liable for
which is in the nature of a tax case or which primarily the RPT at the time it accrued
involves a tax issue. Local tax cases include those
involving RPT, which is governed by Book II, Title II of
R.A. No. 7160, or Local Government Code (LGC) of
1991. Among the possible issues are the legality or
validity of the RPT assessment; protests of
assessments; disputed assessments, surcharges, or
penalties; legality or validity of a tax ordinance; claims 7. Mactan Cebu International Airport Authority (MCIAA)
for tax refund/credit; claims for tax exemption; actions to v. City of Lapu-Lapu, G.R. No. 181756, June 15, 2015
collect the tax due; and even prescription of Facts:
assessments. 19 19 Evidently, petitioner erred in its Petitioner Mactan-Cebu International Airport Authority
appeal. If the taxpayer fails to appeal in due course, the (MCIAA) was created by Congress under Republic Act No.
right of the local government to collect the taxes due 6958. Upon its creation, it enjoyed exemption from realty
with respect to the property becomes absolute upon the taxes imposed by the National Government or any of its
expiration of the period to appeal. The assessment political subdivision. However, upon the effectivity of the
becomes final, executory and demandable, precluding Local Government Code (LGC), the Supreme Court
the taxpayer from assailing the legality/validity (or rendered a decision that the petitioner is no longer exempt
reasonableness/correctness) of the assessment. from realty estate taxes.
perfection of an appeal in the manner and within the
period permitted by law is mandatory and jurisdictional Respondent City of Lapu-lapu issued to petitioner a
such that failure to do so renders the judgment of the Statement of Real Estate Tax assessing the lots comprising
court final and executory. The right to appeal is a the Mactan International Airport which included the airfield,
statutory right, not a natural nor a constitutional right. runway, taxi way and the lots on which these are built.
The party who intends to appeal must comply with the Petitioner contends that these lots, and the lots to which they
procedures and rules governing appeals; otherwise, the are built, are utilized solely and exclusively for public
right of appeal may be lost or squandered. purposes and are exempt from real property tax. Petitioner
based its claim for exemption on DOJ Opinion No. 50.
2.) RTC correctly opined, in real estate taxation, the
unpaid tax attaches to the property. The personal liability Respondent issued notices of levy on 18 sets of real
for the tax delinquency is generally on whoever is the properties of petitioners. Petitioner filed a petition for
owner of the real property at the time the tax accrues. Prohibition, TRO, and a writ of preliminary injunction with
This is a necessary consequence that proceeds from RTC Lapulapu which sought to enjoin respondent City from
the fact of ownership. Nonetheless, where the tax issuing the warrant of levy against petitioner’s properties
liability is imposed on the beneficial use of the real from selling them at public auction for delinquency in realty
property, such as those owned but leased to private tax obligations.
persons or entities by the government, or when the
assessment is made on the basis of the actual use Petitioner claimed before the RTC that it had discovered that
thereof, the personal liability is on any person who has respondent City did not pass any ordinance authorizing the
collection of real property tax, a tax for the special education
fund (SEF), and a penalty interest for its nonpayment. The Supreme Court thus declared void all the real property
Petitioner argued that without the corresponding tax tax assessments, including the additional tax for the special
ordinances, respondent City could not impose and collect education fund and the penalty interest, as well as the final
real property tax, an additional tax for the SEF, and penalty notices of real property tax delinquencies, issued by the City
interest from petitioner. of Lapu-Lapu on petitioner’s properties, except the
assessment covering the portions that petitioner has leased
The RTC granted the writ of preliminary which was later on to private parties. It has also declared null and void the sale
lifted upon motion by the respondents. in public auction of 27 of petitioner’s properties and the
eventual forfeiture and purchase of the said properties by
The Court of Appeals held that petitioner’s airport terminal respondent City of Lapu-Lapu and the corresponding
building, airfield, runway, taxiway, and the lots on which Certificates of Sale of Delinquent Property issued to
they are situated are not exempt from real estate tax, respondent City of Lapu-Lapu.
reasoning as follows: Under the LGC, enacted pursuant to
the constitutional mandate of local autonomy, all natural
and juridical persons, including government-owned or
controlled corporations (GOCCs), instrumentalities and
agencies, are no longer exempt from local taxes even if 8. Smart Communications, Inc. v. Municipality of Malvar,
previously granted an exemption. The only exemptions Batangas
from local taxes are those specifically provided under the
Code itself, or those enacted through subsequent legislation. Smart constructed a telecommunications tower within the
territorial jurisdiction of Malvar, Batangas (Municipality) for
Issue: the purpose of receiving and transmitting cellular
Can the City of Lapu-lapu impose real estate tax on communications within the covered area.
properties owned by the MCIAA?
The Municipality passed Ordinance No. 18 entitled “An
Ruling: ordinance regulating the establishment of Special Projects”.
It cannot. MIAA is not a government-owned or controlled Later, Smart received an assessment letter with a schedule
corporation under Section 2(13) of the Introductory of payment for the total amount of P389, 950.00 for Smart’s
Provisions of the Administrative Code because it is not telecommunications tower. Due to alleged arrears in the
organized as a stock or non-stock corporation. Neither is payment of the assessment, the municipality caused the
MIAA a government-owned or controlled corporation under posting of a closure notice on the telecommunications tower.
Section 16, Article XII of the 1987 Constitution because
MIAA is not required to meet the test of economic viability. Smart challenged the validity of Ordinance No. 18 on which
MIAA is a government instrumentality vested with the assessment is based and also claimed lack of due
corporate powers and performing essential public process in the issuance of the assessment and closure
services pursuant to Section 2(10) of the Introductory notice.
Provisions of the Administrative Code.
The trial court rendered a decision holding that the
As a government instrumentality, MIAA is not subject to assessment covering the period from 2001 to 2003 was void
any kind of tax by local governments under Section since the Ordinance was approved only on July 2003.
133(o) of the Local Government Code. The exception to However it declared valid the assessment starting October
the exemption in Section 234(a) does not apply to MIAA 2003 citing Article 4 of the Civil Code of the Philippines in
because MIAA is not a taxable entity under the Local relation to the provisions of Ordinance No. 18 and Sec 166
Government Code. Such exception applies only if the of the Local Government Code (LGC).
benefi cial use of real property owned by the Republic is
given to a taxable entity. Smart filed a petition for review to the CTA First division
which was denied. Subsequently, it filed a petition for review
Finally, the Airport Lands and Buildings of MIAA are with the CTA en banc which affirmed the CTA first division’s
properties devoted to public use and thus are properties decision and resolution.
of public dominion. Properties of public dominion are
owned by the State or the Republic. As properties of public CTA En Banc dismissed the petition for lack of jurisdiction. It
dominion owned by the Republic, there is no doubt declared that it is a court of special jurisdiction and as such,
whatsoever that the Airport Lands and Buildings are it can take cognizance only of such matters as are clearly
expressly exempt from real estate tax under Section 234(a) within its jurisdiction. CTA en banc held that CTA has
of the Local Government Code. The Supreme Court has exclusive appellate jurisdiction for review on appeal,
also repeatedly ruled that properties of public dominion decisions, orders or resolutions of the RTC in local tax cases
are not subject to execution or foreclosure sale. originally resolved by them in the exercise of their original or
appellate jurisdiction. CTA was not conferred jurisdiction to
Petitioner’s properties that are actually, solely and resolve cases where the constitutionality of a law or rule is
exclusively used for public purpose, consisting of the challenged.
airport terminal building, airfield, runway, taxiway and
the lots on which they are situated, EXEMPT from real ISSUE:
property tax imposed by the City of Lapu-Lapu.
1. WoN CTA has Jurisdiction over the case towers.

2. WoN Ordinance No. 18 is valid and constitutional 

Since the main purpose of Ordinance No. 18 is to
regulate certain construction activities of the identi︎ed
RULING: special projects, which included "cell sites" or
telecommunications towers, the fees imposed in
1. No.
 Ordinance No. 18 are primarily regulatory in nature,

 and not primarily revenue-raising. While the fees
The present issue in this case on jurisdiction may contribute to the revenues of the Municipality,
depends ultimately on whether the fees imposed this effect is merely incidental. Thus, the fees
under Ordinance No. 18 are in fact, taxes.
 imposed in Ordinance No. 18 are not taxes.


 

SC Ruled that the fees imposed under Ordinance In Progressive Development Corporation v. Quezon
No. 18 are not taxes.
 City, the Court declared that "if the generating of

 revenue is the primary purpose and regulation is
Section 5, Article X of the 1987 Constitution merely incidental, the imposition is a tax; but if
provides that “eaach local government unit shall regulation is the primary purpose, the fact that
have the power to create its own sources of incidentally revenue is also obtained does not make
revenues and to levy taxes, fees, and charges the imposition a tax."

subject to such guidelines and limitations as the 

Congress may provide, consistent with the basic Considering that the fees in Ordinance No. 18 are
policy of local autonomy. Such taxes, fees, and not in the nature of local taxes, and Smart is
charges shall accrue exclusively to the local questioning the constitutionality of the ordinance, the
government." Consistent with this constitutional CTA correctly dismissed the petition for lack of
mandate, the LGC grants the taxing powers to each jurisdiction.

LGU.


 2. YES

Specifi︎cally, Section 142 of the LGC grants As discussed, the fees in Ordinance No. 18 are not
municipalities the power to levy taxes, fees, and taxes. Logically, the imposition does not appear in
charges not otherwise levied by provinces. Section the enumeration of taxes under Sec. 143 of the LGC.
143 of the LGC provides for the scale of taxes on Moreover, even if the fees do not appear in Sec. 143
business that may be imposed by municipalities or any other provision of the LGC, the Municipality is
while Section 147 of the same law provides for the empowered to impose taxes, fees and charges not
fees and charges that may be imposed by specifically enumerated under the LGC or the Tax
municipalities on business and occupation.
 code or any other applicable law. Sec. 186 of the

 LGC grants local government units wide latitude in
The LGC de︎nes the term "charges" as referring to imposing fees, to wit:

pecuniary liability, as rents or fees against persons or 

property, while the term "fee" means "a charge ︎xed Section 186. Power to Levy Other Taxes, Fees or
by law or ordinance for the regulation or inspection of Charges. — Local government units may exercise
a business or activity."
 the power to levy taxes, fees or charges on any base

 or subject not otherwise speci︎cally enumerated
The LGC de︎nes the term "charges" as referring to herein or taxed under the provisions of the National
pecuniary liability, as rents or fees against persons or Internal Revenue Code, as amended, or other
property, while the term "fee" means "a charge ︎xed applicable laws: Provided, That the taxes, fees, or
charges shall not be unjust, excessive, oppressive,
by law or ordinance for the regulation or inspection of
con︎scatory or contrary to declared national policy:
a business or activity."


 Provided, further; That the ordinance levying such
The Municipality issued Ordinance No. 18, which is taxes, fees or charges shall not be enacted without
entitled "An Ordinance Regulating the Establishment any prior public hearing conducted for the purpose.

of Special Projects," to regulate the "placing, 

stringing, attaching, installing, repair and Smart further argues that the Municipality is
construction of all gas mains, electric, telegraph and encroaching on the regulatory powers of the National
telephone wires, conduits, meters and other Telecommunications Commission (NTC) citing Sec.
apparatus, and provide for the correction, 5(g) of RA 7925 which provides that the NTC, in the
condemnation or removal of the same when found to exercise of its regulatory powers, shall impose such
be dangerous, defective or otherwise hazardous to fees and charges as may be necessary to cover
the welfare of the inhabitant[s]." 20 It was also reasonable costs and expenses for the regulation
envisioned to address the foreseen "environmental and supervision of the operations of
depredation" to be brought about by these "special telecommunications entities.

projects" to the Municipality. Pursuant to these 

objectives, the Municipality imposed fees on various To repeat, Ordinance No. 18 aims to regulate the
structures, which included telecommunications "placing, stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph and
telephone wires, conduits, meters and other petition for certiorari holding that it has no jurisdiction over
apparatus" within the Municipality. The fees are not the said petition. The CA ruled that since appellate
imposed to regulate the administrative, technical, jurisdiction over private respondents’ complaint for tax
︎ fi n a n c i a l , o r m a r k e t i n g o p e r a t i o n s o f refund, which was filed with the RTC, is vested in the Court
telecommunications entities. The regulation of the of Tax Appeals (CTA), pursuant to its expanded jurisdiction
installation and maintenance of such physical under Republic Act No. 9282 (RA 9282), it follows that a
structures is an exercise of the police power of the petition for certiorari seeking nullification of an interlocutory
Municipality. Clearly, the Municipality does not order issued in the said case should, likewise, be filed with
encroach on NTC's regulatory powers.
 the CTA. Petitioners filed a Motion for Reconsideration, but

 the CA denied it in its Resolution hence, this petition
The Court likewise rejects Smart's contention that
the power to ︎x the fees for the issuance of ISSUE: Whether the CTA has jurisdiction over a special civil
development permits and locational clearances is action for certiorari assailing an interlocutory order issued by
exercised by the Housing and Land Use Regulatory the RTC in a local tax case.
Board (HLURB). Su︎face it to state that the HLURB
itself recognizes the local government units' power to RULING: The CTA has jurisdiction over a special civil action
collect fees related to land use and development. for certiorari assailing an interlocutory order issued by the
Significantly, the HLURB issued locational guidelines RTC in a local tax case. In order for any appellate court to
governing telecommunications infrastructure.
 effectively exercise its appellate jurisdiction, it must have the

 authority to issue, among others, a writ of certiorari. In
Moreover, an ordinance carries with it the transferring exclusive jurisdiction over appealed tax cases to
presumption of validity. Without any argument or the CTA, it can reasonably be assumed that the law intended
evidence to support its plea, Smart failed to cite any to transfer also such power as is deemed necessary, if not
constitutional provision allegedly violated by the indispensable, in aid of such appellate jurisdiction. There is
Municipality. no perceivable reason why the transfer should only be
considered as partial, not total. Consistent with the above
pronouncement, the Court has held as early as the case of
J.M. Tuason & Co., Inc. v. Jaramillo, et al. [118 Phil. 1022
(1963)] that “if a case may be appealed to a particular court
or judicial tribunal or body, then said court or judicial tribunal
or body has jurisdiction
9. The City of Manila, etc. et al. v. Hon. Caridad H. Grecia-
to issue the extraordinary writ of certiorari, in aid of its
Cuerdo etc., et al, G.R. No. 175723. February 4, 2014.
appellate jurisdiction.” This principle was affirmed in De
Jesus v. Court of Appeals (G.R. No. 101630, August 24,
Taxation; The CTA has jurisdiction over a special civil action
1992) where the Court stated that “a court may issue a writ
for certiorari assailing an interlocutory order issued by the
of certiorari in aid of its appellate jurisdiction if said court has
RTC in a local tax case. In order for any appellate court to
jurisdiction to review, by appeal or writ of error, the final
effectively exercise its appellate jurisdiction, it must have the
orders or decisions of the lower court.
authority to issue, among others, a writ of certiorari. In
transferring exclusive jurisdiction over appealed tax cases to
the CTA, it can reasonably be assumed that the law intended
to transfer also such power as is deemed necessary, if not
indispensable, in aid of such appellate jurisdiction. There is
no perceivable reason why the transfer 10. Coca-Cola Bottlers Philippines vs City of Manila, G.R.
should only be considered as partial, not total. No. 197561. April 7, 2014

FACTS: Petitioner City of Manila, through its treasurer, Facts: RTC Manila granted petitioner’s request for tax
petitioner Liberty Toledo, assessed taxes for the taxable refund or credit assessed under Section 21 of the Revenue
period from January to December 2002 against the private Code of Manila, upon fi nding that there was double taxation
respondents. In addition to the taxes purportedly due from in the imposition of local business taxes. In its dispositive
private respondents pursuant to Section 14, 15, 16, 17 of the portion, the court said that defendants City of Manila, etc. are
Revised Revenue Code of Manila (RRCM), said assessment enjoined from collecting the tax from plaintiff (herein
covered the local business taxes. private respondents were petitioner) Coca-Cola Bottlers Phils.
constrained to pay the P19,316,458.77 assessment under The decision later became final and executory.
protest. On January 24, 2004, private respondents filed
before the RTC of Pasay City the complaint denominated as Petitioner Coca-Cola Bottlers filed with the RTC-Manila a
one for “Refund or Recovery of Illegally and/or Erroneously– Motion for Execution for the enforcement of the decision and
Collected Local Business Tax, Prohibition with Prayer to the issuance of a corresponding writ of execution. RTC-
Issue TRO and Writ of Preliminary Injunction. The RTC Manila issued an Order granting petitioner's Motion for
granted private respondents’ application for a writ of Execution and directed the Branch Clerk of Court to issue
preliminary injunction. the corresponding writ of execution to satisfy the judgment.
Petitioners filed a Motion for Reconsideration4 but the RTC
denied. Petitioners then filed a special civil action for Aggrieved, respondents filed a Motion to Quash Writ for
certiorari with the CA but the CA dismissed petitioners’ Execution. RTC-Manila issued an order granting the Motion
to Quash Writ of Execution finding that said motion is or portion of the tax protested shall be refunded to the
prejudicial to the defendants if implemented, and considering protestant, or applied as tax credit against his existing or
that the projects of the City will be hampered, the same is future tax liability." It was not necessary for petitioner to
hereby granted. move for the issuance of the writ of execution because
the remedy has already been provided by law.
Petitioner filed a Motion for Reconsideration, but the same Under Article 286 of AO No 270 prescribing rules and
was denied by the RTC-Manila , reasoning that both tax regulations implementing the Local Government Code
refund and tax credit involve public funds. Thus, pursuant to provides that the tax credit granted a taxpayer shall be
SC Administrative Circular No. 10-2000, 15 the enforcement applied to future tax obligations of the same taxpayer for
or satisfaction of the assailed decision may still be pursued the same business, to wit:
in accordance with the rules and procedures laid down in A RT I C L E 2 8 6 . C l a i m f o r
Presidential Decree (P.D.) No. 1445, otherwise known as the Refund or Tax Credit. — All taxpayers
Government Auditing Code of the Philippines. entitled to a refund or tax credit
provided in this Rule shall file with
Petitioner’s Contention: the local treasurer a claim in writing
(1) Writ of execution issued by the Branch Clerk of duly supported by evidence of
Court does not involve the levy or garnishment of funds payment (e.g., official receipts, tax
and property used or being used for public purpose clearance, and such other proof
(2) RTC-Manila seriously erred when it failed to evidencing overpayment) within two
consider that the respondents have been issuing tax (2) years from payment of the tax, fee,
credit certificates to other taxpayers for illegally collected or charge. No case or proceeding shall
taxes even without any appropriate measure be entertained in any court without this
(3) Reason cited in the Order quashing the Writ of claim in writing, and after the expiration
Execution is not one of the grounds laid down by law of two (2) years from the date of
(4) Assailed decision of the RTC-Manila granting the payment of such tax, fee, or charge, or
Motion to Quash the Writ of Execution has, in effect, from the date the taxpayer is entitled to
reversed the judgment in the instant case a refund or tax credit.
The tax credit granted a
Issue: WON the enforcement of the writ of execution issued taxpayer shall not be refundable in
by RTC-Manila was proper cash but shall only be applied to
future tax obligations of the same
Ruling: We fi nd that the issuance of the Writ of Execution taxpayer for the same business. If a
was superfluous, given the clear directive of the RTC- taxpayer has paid in full the tax due for
Manila in its Decision. the entire year and he shall have no
other tax obligation payable to the LGU
In its decision, RTC-Manila directs respondents to either concerned during the year, his tax
refund or credit the tax under Section 21 of the Revenue credits, if any, shall be applied in full
Code of Manila, which was improperly assessed but during the first quarter of the next
nevertheless paid for by petitioner on the first quarter of year calendar year on the tax due from him
2000 in the amount of P3,036,887.33. The judgment does for the same business of said calendar
not actually involve a monetary award or a settlement of year.
claim against the government. Any unapplied balance of the
tax credit shall be refunded in cash in
Under the first option, any tax on income that is paid in the event that he terminates operation of
excess of the amount due the government may be the business involved within the locality.
refunded, provided that a taxpayer properly applies for the
refund. On the other hand, the second option works by Accordingly, while we find merit in petitioner's contention
applying the refundable amount against the tax liabilities that there are two (2) ways by which respondents may
of the petitioner in the succeeding taxable years. satisfy the judgment of the RTC-Manila: (1) to pay the
petitioner the amount of Php3,036,887.33 as tax refund; or
Hence, instead of moving for the issuance of a writ of (2) to issue a tax credit certificate in the same amount
execution relative to the aforesaid Decision, petitioner which may be credited by petitioner from its future tax
should have merely requested for the approval of the liabilities due to the respondent City of Manila, the issuance
City of Manila in implementing the tax refund or tax of the Writ of Execution relative thereto was superfluous,
credit, whichever is appropriate. In other words, no writ because the judgment of the RTC-Manila can neither be
was necessary to cause the execution thereof, since the considered a judgment for a specific sum of money
implementation of the tax refund will effectively be a susceptible of execution by levy or garnishment nor a
return of funds by the City of Manila in favor of petitioner special judgment.
while a tax credit will merely serve as a deduction of
petitioner's tax liabilities in the future. It could not have been the intention of the law to burden the
taxpayer with going through the process of execution under
In fact, Section 252 (c) of the Local Government Code of the Rules of Civil Procedure before it may be allowed to avail
the Philippines is very clear that "[i]n the event that the its tax credit as affirmed by a court judgment. If at all, the
protest is finally decided in favor of the taxpayer, the amount City of Manila Local Treasury may be allowed to verify
documents and information relative to the grant of the tax and; (3) whether its real properties are exempt from
refund or tax credit (i.e., determine the correctness of the warrants of levy and from tax sale for non-payment of
petitioner's returns, and the tax amount to be credited). real property taxes.

This Court has already ruled upon the validity of the tax Ruling:
refund or the tax credit due to the petitioner and has
rendered the same final and executory. The lower court, GSIS is Exempt from Real Property Taxes Pursuant to
therefore, has not effectively reversed the judgment in favor the Latest Law; If It is Liable for Any Real Property Tax, It
of petitioner. The court a quo's reason for quashing the Writ is from the Year 1992-1996 Following the Chronological
of Execution was to allow the parties to enforce the judgment Order of Laws
by complying first with the rules and procedures of P.D. No.
1445 and Administrative Circular No. 10-2000. ● In 1977, PD 1146 otherwise known as the Revised
Government Service Insurance Act of 1977, was issued,
Decision: Petition is GRANTED. Petitioner Coca-Cola providing for an expanded insurance system for
Bottlers, Inc. is entitled to a tax refund or tax credit without government employees. Sec. 33 of PD 1146 provided for
need for a writ of execution, provided that petitioner complies a new tax treatment for GSIS.
with the requirements set by law for a tax refund or tax ● RA 7160 enacted in 1991 lifted the GSIS tax exemption
credit, whichever is applicable. under Section 193 and 234.
● In 1991, the Republic Act sought to remove the tax
exemption given to GSIS insofar as the realty tax was
concerned.
● However, full tax exemption was later reenacted through
11. Government Service Insurance System vs. City RA 8291 in 1997.
Treasurer and City Assessor of the City of Manila, G.R. ● The following conclusions may be assumed from the
No. 186242, December 23, 2009 chronology:
● According to Sec. 33 of PD 1146, GSIS enjoyed tax
Facts: exemption from real estate taxes, among other tax
burdens, until January 1, 1992 when the LGC took effect
● GSIS owns or used to own two parcels of land which and withdrew exemptions from payment of real estate
are both in Manila. The title from the Concepcion- taxes privileges granted under PD 1146
Arroceros property was transferred to the Supreme Court ● RA 8291 restored in 1997 the tax exempt status of
in 2005. GSIS by reenacting under its Sec. 39 what was once
● Both GSIS and METC occupy the Concepcion- Sec. 33 of P.D. 1146.
Arroceros property while the other one was under ● If any real estate tax is due to the City of Manila, it is, only
lease. for the interim period, or from 1992 to 1996, to be
● The issue began when the City Treasurer of Manila precise.
addressed a letter to GSIS President and General ● Furthermore, GSIS like MIAA (Manila International
Manager Winston F. Garcia, informing him of unpaid Airport Authority) is considered an instrumentality of
real property taxes for the years 1992-2002. The letter the National Government, so it cannot be taxed by
threatened to have it sold in a public auction if they the local government.
remained unsettled before October 30, 2002. ● The subject properties are owned by the government
● On September 16, the City Treasurer of Manila issued since GSIS is considered merely as a trustee of such
separate Notices of Realty Tax Delinquency for subject properties.
properties with the warning of seizure/sale.
● GSIS stated that it was exempt from all taxes under RA The Property Leased Shall Be Taxable Pursuant to the
8291. Beneficial Use Doctrine under Sec. 234(a) LGC
● GSIS later filed a petition for certiorari and prohibition
with prayer for a restraining and injunctive relief ● Sec. 234 (a), quoted below, exempts from real estate
before Manila RTC, praying for nullification of taxes real property owned by the Republic, unless the
assessments made and that the respondents be beneficial use of the property is, for consideration,
permanently enjoined from proceeding against the transferred to a taxable person.
properties. ● The provisions allow the Republic to grant the
● It amended the petition by stating additional facts, beneficial use of its property to an agency or
namely: that the Katigbak property was leased to instrumentality of the national government. Such grant
Manila Hotel Corporation and the other property was does not necessarily result in the loss of the tax
partly owned by METC Manila. exemption.
● (RTC RULING) RTC dismissed GSIS’ petition for lack of ● Tax exemption is only stripped away once the
merit. Motion for reconsideration was denied. Thus, the beneficial use over the property has transferred from
instant petition for review was made to the SC. a non-taxable entity (GSIS) to a taxable entity
according to Sec. 234(a) LGC.
Issue: (1) whether petitioner is exempt from real ● GSIS lost that tax exemption provided under law over
property taxes; (2) whether petitioner is exempt from the property when it leased such to Manila Hotel
payment of real property taxes leased to a taxable entity, Corporation.
● Thus, the real estate tax assessment covering 1992-2002 remedy of ordinary appeal provided under Article 195 of the
is valid insofar as the Katigbak property is concerned. Local Government Code.
● Manila Hotel Corporation is liable to pay such realty
taxes. Held: Yes. A taxpayer dissatisfi ed with a local treasurer s
denial of or inaction on his protest over an assessment has
GSIS Properties are Exempt from Levy thirty (30) days within which to appeal to the court of
competent jurisdiction. Under the law, said period is to be
● A valid tax levy presupposes a corresponding tax liability. reckoned from the taxpayer s receipt of the denial of his
● Nonetheless, it will not be remiss to note that it is protest or the lapse of the sixty (60) day period within which
without doubt that the subject GSIS properties are the local treasurer is required to decide the protest, from the
exempt from any attachment, garnishment, moment of its fi ling. This much is clear from Section 195 of
execution, levy, or other legal processes. the Local Government Code which states that a taxpayer
● Even assuming arguendo that subject properties were has 60 days from written notice to protest the assessment as
subject to real property taxes, it still cannot be levied well as 30 days from denial or the lapse of the 60 day period
since the enforced law at the time is RA 8291 which in which the local treasurer must decide on the matter to
prohibits levy on public property. appeal to a court of competent jurisdiction, otherwise, the
● Such proscription applies even to the Katigbak property, assessment becomes fi nal and unappealable.
notwithstanding the beneficial use doctrine.
Absent any showing of the formal denial of the protest by
Atty. Miranda, then Chief of the Taguig Business Permit and
Licensing Office, we find that TPC s filing of its petition
before the RTC on 19 April 2004 still timely. Whether or not a
12. Team Pacific Corporation v. Daza, G.R. No. 167732. Rule 65 Petition for Certiorari was the appropriate remedy
July 11, 2012. from Daza s inaction on TPC s letter-protest is, however, an
entirely different issue which we are now called upon to
Facts: resolve, considering the RTC s ruling that it should have filed
Team Pacific Corporation (TPC), a domestic corporation an ordinary appeal instead. As correctly observed by TPC,
engaged in the business of assembling and exporting after all, Section 195 of the Local Government Code does
semiconductor devices, conducts its business at the FTI not elaborate on how an appeal is to be made from the
Complex in the then Municipality of Taguig. It appears that denial by a local treasurer of a protest on assessment made
since the start of its operations in 1999, TPC had been by a taxpayer.
paying local business taxes assessed at 1/2 rate pursuant to
Section 75 (c) of the Taguig Revenue Code (TRC). Significantly, the Local Government Code, or any other
statute for that matter, does not expressly confer appellate
When it renewed its business license in 2004, however, jurisdiction on the part of regional trial courts from the denial
TPC’s business tax for the first quarter of the same year was of a tax protest by a local treasurer. On the other hand,
computed by Josephine Daza, in her capacity as then Section 22 of B.P. 129 expressly delineates the appellate
Municipal Treasurer of Taguig, by applying the full value of jurisdiction of the Regional Trial Courts, confining as it does
the rates provided under Section 75 of the TRC, instead of said appellate jurisdiction to cases decided by Metropolitan,
the 1/2 rate provided under paragraph (c) because, Municipal, and Municipal Circuit Trial Courts. Unlike in the
according to her, Section 75 (c) of the TRC applies only to case of the Court of Appeals, B.P. 129 does not confer
exporters of essential commodities – e.g., (1) rice and corn; appellate jurisdiction on Regional Trial Courts over rulings
(2) wheat or cassava flour, meat, dairy products, locally made by non-judicial entities.
manufactured, processed or preserved food, sugar, salt and
other agricultural, marine, and fresh water products, whether From these premises, it is evident that the stance of the City
in their original state or not; (3) cooking oil and cooking gas; Treasurer is correct as a matter of law, and that the proper
(4) laundry soap, detergents, and medicine; (5) agricultural remedy of the Corporation from the RTC judgment is an
implements, equipment and post- harvest facilities, fertilizers, ordinary appeal under Rule 41 to the Court of Appeals.
pesticides, insecticides, herbicides and other farm inputs; (6) However, we make this pronouncement subject to two
poultry feeds and other animal feeds; (7) school supplies; important qualifications. First, in this particular case there are
and (8) cement. nonetheless significant reasons for the Court to overlook the
procedural error and ultimately uphold the adjudication of the
Constrained to pay the assessed business tax on January jurisdiction exercised by the Court of Appeals in this case.
19, 2004 in view of its being a precondition for the renewal of Second, the doctrinal weight of the pronouncement is
its business permit, TPC filed on the same day a written confined to cases and controversies that emerged prior to
protest with Daza, insisting on the 1/2 rate on which its the enactment of Republic Act No. 9282, the law which
business tax was previously assessed. Subsequent to its expanded the jurisdiction of the Court of Tax Appeals (CTA).
demand for the refund and/or issuance of a tax credit for the Thus, even if, in the interest of substantial justice, we were to
sum of P104,054.88 which it considered as an overpayment consider its petition for certiorari as an appeal from Daza s
of its business taxes for the same year, TPC filed s Rule 65 denial of its protest, because the remedy pursued by TPC
petition for certiorari before a Regional Trial Court (RTC). was the wrong one, the decision of the City Treasurer has
now become final and unappealable. To our mind, TPC s
Issue: Whether or not the RTC correctly dismissed TPC s erroneous availment of the wrong mode of appeal and direct
petition for certiorari in view of its failure to avail of the proper resort to this Court instead of the CTA both warrant the
dismissal of the petition at bench. The rule is settled that the RTC: Dismissed PRA’s petition in its decision, ruling that
perfection of an appeal in the manner and within the period PRA was not exempt from payment of real property taxes
fixed by law is not only mandatory but jurisdictional and non- because:
compliance with these legal requirements is fatal to a party s
cause. ● It was a GOCC under Section 3 of P.D. No. 1084
Although appeal is an essential part of our judicial process, it ● It was organized as a stock corporation because it
has been held, time and again, that the right thereto is not a
had an authorized capital stock divided into no par
natural right or a part of due process but is merely a statutory
value shares
privilege. Thus, the perfection of an appeal in the manner
and within the period prescribed by law is not only ● PRA admitted its corporate personality and that said
mandatory but also jurisdictional and failure of a party to properties were registered in its name as shown by
conform to the rules regarding appeal will render the the certificates of title.
judgment final and executory. Once a decision attains finality, ● Hence, as a GOCC, local tax exemption is withdrawn
it becomes the law of the case irrespective of whether the by virtue of Section 193 of R.A. No. 7160 Local
decision is erroneous or not and no court not even the
Government Code (LGC) which was the prevailing
Supreme Court has the power to revise, review, change or
alter the same. law in 2001 and 2002 with respect to real property
taxation
● The tax exemption claimed by PRA under E.O. No.
654 had already been expressly repealed by R.A.
No. 7160
13. Republic of the Philippines represented by the
● PRA failed to comply with the procedural
Philippine Reclamation Authority vs. City of Paranaque,
G.R. No. 191109, July 18, 2012 requirements in Section 206 thereof.

CASE: This is a petition for review on certiorari under Rule ISSUES:


45 of the 1997 Rules of Civil Procedure, on pure q questions
of law, assailing the Order of the RTC of Parañaque City, 1. Whether or not petitioner PRA is a GOCC; therefore, not
which ruled that petitioner Philippine Reclamation Authority exempt from payment of real property tax on the subject
(PRA) is a government-owned and controlled corporation reclaimed lands.
(GOCC), a taxable entity, and, therefore, not exempt from
payment of real property taxes. 2. Whether or not reclaimed lands are exempt from real
property tax for being part of the public domain.
FACTS: The Public Estates Authority (PEA) is a government
corporation created by virtue of P.D. No. 1084, which took Contentions:
effect on 1977 to provide a coordinated, economical and
effi cient reclamation of lands, and the administration and PRA:
operation of lands belonging to, managed and/or operated
by, the government with the object of maximizing their ● It is not a GOCC under Section 2(13) of the
utilization and hastening their development consistent with Introductory Provisions of the Administrative Code.
public interest.

On 1979, by virtue of E.O. No. 525 issued by then President


Ferdinand Marcos, PEA was designated as the agency
● Neither is it a GOCC under Section 16, Article XII of
primarily responsible for integrating, directing and
coordinating all reclamation projects for and on behalf of the the 1987 Constitution because it is not required to
National Government. meet the test of economic viability.
● It is a government instrumentality vested with
On 2004, then President Gloria Macapagal-Arroyo issued corporate powers and performing an essential
E.O. No. 380 transforming PEA into PRA, which shall public service pursuant to Section 2(10) of the
perform all the powers and functions of the PEA relating to Introductory Provisions of the Administrative Code.
reclamation activities.
● Although it has a capital stock divided into shares, it
is not authorized to distribute dividends and
By virtue of its mandate, PRA reclaimed several portions of
the foreshore and offshore areas of Manila Bay, including allotment of surplus and profits to its stockholders.
those located in Parañaque City. However, on 2003, then ● Therefore, it may not be classified as a stock
Parañaque City Treasurer Liberato M. Carabeo (Carabeo) corporation because it lacks the second requisite
issued Warrants of Levy on PRA’s reclaimed properties of a stock corporation which is the distribution of
located in Parañaque City based on the assessment for dividends and allotment of surplus and profits to the
delinquent real property taxes made by then Parañaque
stockholders.
City Assessor Soledad Medina Cue for tax years 2001 and
2002. ● It may not be classified as a non-stock
corporation because it has no members and it is
not organized for charitable, religious, educational,
professional, cultural, recreational, fraternal, literary, RULING:
scientific, social, civil service, or similar purposes,
like trade, industry, agriculture and like chambers as The Court GRANTED the petition and REVERSED and SET
provided in Section 88 of the Corporation Code. ASIDE the Order of the RTC. All reclaimed properties owned
by the PRA are declared EXEMPT from real estate taxes.
● It was not created to compete in the market place
All real estate tax assessments, including the final notices of
as there was no competing reclamation company real estate tax delinquencies, issued by the City of
operated by the private sector. Parañaque on the subject reclaimed properties; the assailed
● While it is vested with corporate powers under P.D. auction sale; and the Certificates of Sale subsequently
No. 1084, such circumstance does not make it a issued by the Parañaque City Treasurer in favor of the City
corporation but merely an incorporated of Parañaque, are all declared VOID.
instrumentality and that the mere fact that an
1.
incorporated instrumentality of the National
Government holds title to real property does not
● Based on Section 2(13) and Section 2(10) of the
make said instrumentality a GOCC.
Introductory Provisions of the Administrative Code of
● As an incorporated instrumentality of the National
1987, it is clear that a GOCC must be "organized as
Government, it is exempt from payment of real
a stock or non-stock corporation" while an
property tax except when the beneficial use of the
instrumentality is vested by law with corporate
real property is granted to a taxable person.
powers.
● Claims that based on Section 133(o) of the LGC,
● When the law makes a government instrumentality
local governments cannot tax the national
operationally autonomous, the instrumentality
government which delegate to local governments the
remains part of the National Government machinery
power to tax.
although not integrated with the department
● Reclaimed lands are part of the public domain,
framework.
owned by the State, thus, exempt from the
● When the law vests in a government instrumentality
payment of real estate taxes. Reclaimed lands
corporate powers, the instrumentality does not
retain their inherent potential as areas for public use
necessarily become a corporation. Unless the
or public service.
government instrumentality is organized as a stock
● Hence, the assessment of real property taxes made
or non-stock corporation, it remains a government
on said lands, as well as the levy thereon, and the
instrumentality exercising not only governmental but
public sale thereof, including the issuance of the
also corporate powers.
certificates of sale in favor of the respondent
● Many government instrumentalities are vested with
Parañaque City, are invalid and of no force and
corporate powers but they do not become stock or
effect.
non-stock corporations, which is a necessary
condition before an agency or instrumentality is
City of Parañaque (respondent):
deemed a GOCC, such as MIAA, PPA, UP, and
BSP.
● PRA since its creation consistently represented itself
to be a GOCC.
Two requisites must concur before one may be classified
● PRA’s very own charter (P.D. No. 1084) declared it to
as a stock corporation, namely:
be a GOCC and that it has entered into several
thousands of contracts where it represented itself to (1) that it has capital stock divided into shares; and
be a GOCC.
● PRA admitted in its original and amended petitions (2) that it is authorized to distribute dividends and
and pre-trial brief filed with the RTC of Parañaque a l l o t m e n t s o f s u r p l u s a n d p r o fit s t o i t s
City that it was a GOCC. stockholders.
● PRA is a stock corporation with an authorized capital
stock divided into 3 million no par value shares, out If only one requisite is present, it cannot be properly
classified as a stock corporation.
of which 2 million shares have been subscribed and
fully paid up. As for non-stock corporations, they must have members
● Section 193 of the LGC of 1991 has withdrawn tax and must not distribute any part of their income to said
exemption privileges granted to or presently enjoyed members.
by all persons, whether natural or juridical, including
GOCCs. In the case at bench, PRA is not a GOCC because it is
● PRA is a GOCC, it is not exempt from the payment neither a stock nor a non-stock corporation.
of real property tax.
● It cannot be considered as a stock corporation ● The State is obligated to render essential public
because although it has a capital stock divided into services regardless of the economic viability of
no par value shares as provided in Section 7 of P.D. providing such service.
No. 1084, it is not authorized to distribute ● The non-economic viability of rendering such
dividends, surplus allotments or profits to essential public service does not excuse the State
stockholders. from withholding such essential services from the
● PRA cannot be considered a non-stock corporation public.
either because it does not have members.
● It was not organized for any of the purposes However, government-owned or controlled corporations
mentioned in Section 88 of the Corporation Code with special charters, organized essentially for economic or
and it was created to manage all government commercial objectives, must meet the test of economic
viability. These are the government-owned or controlled
reclamation projects.
corporations that are usually organized under their special
charters as stock corporations, like the Land Bank of the
Furthermore, there is another reason why the PRA cannot be Philippines and the Development Bank of the Philippines.
classified as a GOCC. Section 16, Article XII of the 1987
Constitution authorizes Congress to create GOCCs through Clearly, respondent has no valid or legal basis in taxing
special charters on two conditions: the subject reclaimed lands managed by PRA.

1) the GOCC must be established for the common 2.


good; and
It is clear from Section 234 that real property owned by the
2) the GOCC must meet the test of economic viability Republic of the Philippines (the Republic) is exempt from
real property tax unless the beneficial use thereof has been
In this case, PRA may have passed the first condition of granted to a taxable person.
common good but failed the second one - economic
viability. ● There is no proof that PRA granted the beneficial use
of the subject reclaimed lands to a taxable entity.
● The purpose behind the creation of PRA was not for
● There is no showing on record either that PRA
economic or commercial activities.
leased the subject reclaimed properties to a private
● Neither was it created to compete in the market
taxable entity.
place considering that there were no other
competing reclamation companies being operated by
This exemption should be read in relation to Section 133(o)
the private sector. of the same Code, which prohibits local governments
from imposing "taxes, fees or charges of any kind on the
PRA was created essentially to perform a public service National Government, its agencies and instrumentalities
considering that it was primarily responsible for a x x x." The Administrative Code allows real property owned
coordinated, economical and effi cient reclamation, by the Republic to be titled in the name of agencies or
administration and operation of lands belonging to the instrumentalities of the national government. Such real
government with the object of maximizing their utilization and properties remain owned by the Republic and continue
hastening their development consistent with the public to be exempt from real estate tax.
interest.
When local governments invoke the power to tax on national
The Constitution imposes no limitation when the legislature government instrumentalities, such power is construed
creates government instrumentalities vested with corporate strictly against local governments. The rule is that a tax is
powers but performing essential governmental or public never presumed and there must be clear language in the law
functions. Congress has plenary authority to create imposing the tax. Any doubt whether a person, article or
government instrumentalities vested with corporate powers activity is taxable is resolved against taxation. This rule
provided these instrumentalities perform essential applies with greater force when local governments seek to
government functions or public services. However, when the tax national government instrumentalities.
legislature creates through special charters corporations that
perform economic or commercial activities, such entities — There is, moreover, no point in national and local
known as "government-owned or controlled corporations" — governments taxing each other, unless a sound and
must meet the test of economic viability because they compelling policy requires such transfer of public funds from
compete in the market place. one government pocket to another.

● Clearly, the test of economic viability does not There is also no reason for local governments to tax national
apply to government entities vested with government instrumentalities for rendering essential public
corporate powers and performing essential services to inhabitants of local governments. The only
public services. exception is when the legislature clearly intended to tax
government instrumentalities for the delivery of essential
public services for sound and compelling policy 14. Sta. Lucia Realty & Development, Inc. vs. City of
considerations. There must be express language in the law Pasig, G.R. No. 166838, June 15, 2011
empowering local governments to tax national government
instrumentalities. Any doubt whether such power exists is Facts:
resolved against local governments. The local governments of Pasig and Cainta were in dispute
regarding the titles of the parcels of land owned by Petitioner
The Court agrees with PRA that the subject reclaimed Sta. Lucia Realty and Development, Inc. (Sta. Lucia). This
lands are still part of the public domain, owned by the has been after the TCT’s of their parcels of land located in
State and, therefore, exempt from payment of real estate Pasig were consolidated with the TCT that covers their land
taxes. situated in Cainta. The problem here is Sta Lucia has been
paying taxes to Cainta, but Pasig is the location stated in the
● The reclaimed lands being leased or sold by PEA are TCT’s. So while the case for settlement of land boundary
not private lands, in the same manner that DENR, dispute was pending in RTC Antipolo, Pasig filed a
Complaint against Sta. Lucia for the collection of real estate
when it disposes of other alienable lands, does not
taxes, including penalties and interests, on the lots covered
dispose of private lands but alienable lands of the by the titles in issue including the improvements thereon.
public domain. Sta. Lucia, in its Answer, alleged that it had been religiously
● Only when qualified private parties acquire these paying its real estate taxes to Cainta, just like what its
lands will the lands become private lands. In the predecessors-in-interest did, by virtue of the demands and
hands of the government agency tasked and assessments made and the Tax Declarations issued by
Cainta believing that the subject properties were within its
authorized to dispose of alienable of disposable
territorial jurisdiction. Sta. Lucia further argued that since
lands of the public domain, these lands are still
1913, the real estate taxes for the lots covered by the above
public, not private lands. TCTs had been paid to Cainta.
● PEA's charter expressly states that PEA "shall hold
lands of the public domain" as well as "any and all Cainta filed its own Answer-in-Intervention and averred that it
kinds of lands." had been collecting the real property taxes on the subject
● PEA can hold both lands of the public domain and properties even before Sta. Lucia acquired them. Cainta
further asseverated that the establishment of the boundary
private lands.
monuments would show that the subject properties are
● Thus, the mere fact that alienable lands of the public within its metes and bounds.
domain like the Freedom Islands are transferred to
PEA and issued land patents or certificates of title in Sta. Lucia and Cainta thereafter moved for the suspension of
PEA's name does not automatically make such lands the proceedings (for the collection of taxes), and claimed that
private. the pending petition in the Antipolo RTC, for the settlement of
● Reclaimed lands such as the subject lands in boundary dispute between Cainta and Pasig, presented a
“prejudicial question” to the resolution of the case. The RTC
issue are reserved lands for public use. They are
denied this lack of merit holding that the TCTs were
properties of public dominion. The ownership of such conclusive evidence as to its ownership and location, the
lands remains with the State unless they are RTC, rendered a Decision in favor of Pasig. Pasig then filed
withdrawn by law or presidential proclamation from a Motion for Execution Pending Appeal, to which both Sta.
public use. Lucia and Cainta filed several oppositions, on the assertion
that there were no good reasons to warrant the execution.
The mere reclamation of these areas by PEA does not
convert these inalienable natural resources of the State Issues:
into alienable or disposable lands of the public domain. 1. Whether the boundary dispute case between Pasig
There must be a law or presidential proclamation officially and Cainta is a prejudicial question to the (present)
classifying these reclaimed lands as alienable or disposable tax collection case.
and open to disposition or concession. Moreover, these 2. Whether Sta. Lucia should continue paying its real
reclaimed lands cannot be classified as alienable or property taxes to Cainta or to Pasig.
disposable if the law has reserved them for some public or
quasi-public use.
Held:
Yes. The resolution of the boundary dispute between Pasig
and Cainta would determine which local government unit
(Pasig or Cainta) is entitled to collect realty taxes from Sta.
Lucia.

Under Presidential Decree No. 464 or the “Real Property Tax


Code,” the authority to collect real property taxes is vested in
the locality where the property is situated. And under
Republic Act No. 7160, also known as the 1991 the Local
Government Code, we can import that, while a local
government unit is authorized under several laws to collect
real estate tax on properties falling under its territorial Metro Rail then assigned all its rights and
jurisdiction, it is imperative to first show that the properties obligations under the BLT Agreement to Metro Rail Transit
are unquestionably within its geographical boundaries. Corporation (MRTC), a domestic corporation. Subsequently,
Clearly therefore, the local government unit entitled to collect Metro Rail turned over the EDSA MRT III System to the
real property taxes from Sta. Lucia must undoubtedly show DOTC for its operation.
that the subject properties are situated within its territorial
jurisdiction; otherwise, it would be acting beyond the powers The City Treasurer of Mandaluyong then assessed
vested to it by law. MRTC for deficiency real property taxes. However, petitioner
Republic filed a case for Declaration of Nullity of Real
Although a certificate of title is conclusive as to its ownership Property Tax Assessment and Warrant of Levy.
and location, this does not preclude the filing of an action for
the very purpose of attacking the statements therein. Contention of the Petitioner
Although it is true that “Pasig” is the locality stated in the That since Metro Rail had transferred to the DOTC the actual
TCTs of the subject properties, both Sta. Lucia and Cainta use, possession and operation of the EDSA MRT III System,
aver that the metes and bounds of the subject properties, as Metro Rail or MRTC does not have actual or beneficial use
they are described in the TCTs, reveal that they are within and possession of the EDSA MRT III properties as to subject
Cainta’s boundaries. The Antipolo RTC, wherein the it to payment of real estate taxes. Likewise, under Section
boundary dispute case between Pasig and Cainta is 234 or RA No 7160 provides that the petitioner is exempted
pending, would be able to best determine once and for all from payment of real property tax.
the precise metes and bounds of both Pasig’s and Cainta’s
respective territorial jurisdictions. The resolution of this For failure to pay the assessed deficiency, the real
dispute would necessarily ascertain the extent and reach of properties were forfeited in favor of the City of Mandaluyong.
each local government’s authority, a prerequisite in the Thereafter, respondent filed an ex parte petition for the
proper exercise of their powers, one of which is the power of issuance of a writ of possession.
taxation.
Issue
It would be unfair to hold Sta. Lucia liable again for real WON the issuance of a writ of possession was proper
property taxes it already paid simply because Pasig cannot
wait for its boundary dispute with Cainta to be decided. Pasig Held
RTC should have held in abeyance the proceedings certainly The writ issued is premature and has no force and
because the outcome of the boundary dispute case before effect.
the Antipolo RTC will undeniably affect both Pasig’s and
Cainta’s rights. In fact, the only reason Pasig had to file a tax This case is, ultimately, between a local
collection case against Sta. Lucia was not that Sta. Lucia government’s power to tax and the national government’s
refused to pay, but that Sta. Lucia had already paid, albeit to privilege of tax exemption. That issue needs full hearing and
another local government unit. deliberation.

The City of Pasig and the Municipality of Cainta are both A writ of possession is a mere incident in the
directed to await the judgment in their boundary dispute case transfer of title. In the instant case, it stemmed from the
in RTC Antipolo to determine which local government unit is exercise of alleged ownership by respondent over EDSA
entitled to exercise its powers, including the collection of real MRT III properties by virtue of a tax delinquency sale. The
property taxes, on the properties subject of the dispute. In issue of whether the auction sale should be enjoined is
the meantime, Sta. Lucia is directed to deposit the still pending before the Court of Appeals. Pending
succeeding real property taxes due on the subject determination, it is premature for respondent to have
properties, in an escrow account with the Land Bank of the conducted the auction sale and caused the transfer of
Philippines. title over the real properties to its name.

The denial by the RTC to issue an injunction or


TRO does not automatically give respondent the liberty to
proceed with the actions sought to be enjoined, especially so
15. Republic of the Philippines (Department of in this case where a certiorari petition assailing the denial is
Transportation and Communications) vs City of still being deliberated in the Court of Appeals. All the more it
Mandaluyong, G.R. No. 184879, February 23, 2011 is premature for the RTC to issue a writ of possession where
the ownership of the subject properties is derived from an
Facts auction sale, the validity of which is still being threshed out in
The DOTC entered into an agreement to Build, the CA.
Lease and Transfer a Light Rail System for EDSA (BLT) with
Metro Rail Transit Corporation Limited, a foreign corporation. The RTC should have held in abeyance the
DOTC shall operate the same but ownership of the EDSA issuance of a writ of possession.
MRT III shall remain with Metro Rail during the Revenue and
Construction periods. At the end of the Revenue Period,
Metro Rail shall transfer to DOTC its title to and all of its
rights and interests therein, in exchange for US$1.00.
16. Alejandro Ty v. Hon. Trampe,et al., G.R. No. 117577, 17. Coca-Cola Bottlers Phils. Inc. v. City of Manila, GR
December 1, 1995 No. 156252, June 27, 2006

Principle: FACTS:
The Local Government Code's procedure on local
government tax assessment DOES NOT repeal the On Feb. 25, 2000, City Mayor of Manila approved
procedure of the Real Property Tax Code. The Municipal Tax Ordinance No. 7988, otherwise known as “Revised
Assessor can not SOLELY make an assessment. Revenue Code of the City of Manila”, repealing Tax
Ordinance No. 7794, the old revenue code of City of Manila.
Facts: It increase the tax rates applicable to certain establishments
On 06 January 1994, respondent Assessor sent a notice of operating within the City of Manila, including herein
assessment respecting certain real properties of petitioners petitioner.
located in Pasig, Metro Manila. In a letter dated 18 March
1994, petitioners through counsel "request(ed) the Municipal Petitioner filed before the DOJ against the City of
Assessor to reconsider the subject assessments"3 . Manila and its Sangguniang Panglungsod questioning the
constitutionality or legality of Sec. 21 of the said tax
Not satisfied, petitioners on 29 March 1994 filed with the ordinance. By virtue of the said provision, additional
Regional Trial Court of the National Capital Judicial Region, business tax will be imposed on businesses that are already
Branch 163, presided over by respondent Judge, a Petition subject to business tax under other sections of the said
for Prohibition with prayer for a restraining order and/or writ revenue code. Thus, it exceeds the limitation on the taxing
of preliminary injunction to declare null and void the new tax power of the City of Manila under Sec. 143 (h) of the LGC
assessments and to enjoin the collection of real estate taxes and manifests violation of the clear mandate of Art. X, Sec. 5
based on said assessments. In a Decision4 dated 14 July of the 1987 Constitution.
1994, respondent Judge denied the petition "for lack of
merit". The DOJ issued a Resolution declaring the said
ordinance null and void and without legal effect for the
In disposing of the above issues against petitioners, the reason that the respondents failed to comply with the
court a quo ruled that the schedule of market values and the mandatory publication requirement set forth by the law..
assessments based thereon prepared SOLELY by Such Resolution attained finality upon the lapse of the period
respondent assessor are valid and legal, they having been to appeal because the City of Manila failed to file the same.
prepared in accordance with the provisions of the Local
Government Code of 1991 (R.A. 7160). Atty. Aurelio then, in behalf of Singer Sewing
Machine Company wrote to BLGF asking whether the Offfice
Issue: of the City Treasurer of Manila has the right to enforce the
Did the LGC impliedly repeal PD 921? said Tax despite the Resolution of the DOJ. BLGF then
ordered the City Treasurer of Manila to cease and desist
Ruling: from enforcing Tax Ordinance No. 7988.
No. R.A. 7160 has a repealing provision (Section 534) and, if
the intention of the legislature was to abrogate P.D. 921, it Despite the said order, respondents continued to
would have included it in such repealing clause, as it did in assess petitioner business tax for year 2001 as prescribed
expressly rendering of no force and effect several other under the said ordinance. Hence petitioner filed a complaint
presidential decrees. Hence, any repeal or modification of with the RTC of Manila, which rendered a decision in favor of
P.D. 921 can only be possible under par. (f) of said Section the petitioner.
534, as follows:
During the pendency of the said case, the City
(f) All general and special laws, acts, city charter, decrees, Mayor of Manila approved Tax Ordinance No. 8011 which
executive orders, proclamations and administrative amended certain provisions of Ordinance No 7988. This was
regulations, part or parts thereof which are inconsistent with challenged by the petioner before the DOJ. DOJ rendered a
any of the provisions of the Code are hereby repealed or decision declaring the said ordinance null and void and
modified accordingly. legally not existing. Respondents filed a motion for
reconsideration, however this was denied by the DOJ. It
The foregoing partakes of the nature of a general repealing appealed before the RTC of Manila, but this was dismissed
provision. It is a basic rule of statutory construction that for lack of jurisdiction. The same was dismissed with the
repeals by implication are not favored. An implied repeal will Supreme Court when it appealed via Petition for Review on
not be allowed unless it is convincingly and unambiguously Certiorari for filing beyond the reglamentary period of 15
demonstrated that the two laws are so clearly repugnant and days. Its omnibud motion for reconsideration was also
patently inconsistent that they cannot co-exist. This is based denied.
on the rationale that the will of the legislature cannot be
overturned by the judicial function of construction and On the basis of the enactment of Tax Ordinance No.
interpretation. Courts cannot take the place of Congress in 8011, respondents filed a motion for reconsideration with the
repealing statutes. Their function is to try to harmonize, as RTC of Manila, court a quo, which the court granted. The
much as possible, seeming conflicts in the laws and resolve motion for reconsideration filed by the petitioner was denied.
doubts in favor of their validity and co-existence. Hence, the present case.
the City of Manila; and (2) Section 21, by deleting the proviso
ISSUE: WON Tax Ordinance No. 7988 is null and void and of found therein, which stated "that all registered businesses in
no legal effect the City of Manila that are already paying the
aforementioned tax shall be exempted from payment
HELD: thereof". Petitioner City of Manila approved only after a year,
on 22 February 2001, another tax ordinance, Tax Ordinance
YES. As required under Sec. 188, LGC and Art. No. 8011, amending Tax Ordinance No. 7988.
277, Rules and Regulations Implementing the LGC, tax
ordinances or revenue measures shall be published in full for Tax Ordinances No. 7988 and No. 8011 were later
3 consecutive days in a newspaper of local circulation. declared by the Court null and void in Coca-Cola Bottlers
However, in provinces, cities, and municipalities where there Philippines, Inc. v. City of Manila.
are no newspapers or local circulations the same may be
posted in at least 2 conspicuous and publicly accessible However, before the Court could declare Tax Ordinance
places. No. 7988 and Tax Ordinance No. 8011 null and void,
petitioner City of Manila assessed respondent on the basis of
ITCAB, Tax Ordinance No. 7988 has already been Section 21 of Tax Ordinance No. 7794 in the total amount of
declared by the DOJ as null and void and without legal effect P18,583,932.04
due to respondents’ failure to satisfy the requirement of
publication as required by law. Said order was never Respondent filed a protest with petitioner Toledo on the
appealed by the City of Manila, thus it had attained finality ground that the said assessment amounted to double
aster the lapse of the period to appeal. Such findings was taxation, as respondent was taxed twice, i.e., under Sections
reiterated by the RTC of Manila. 14 and 21 of Tax Ordinance No. 7794, as amended by Tax
Ordinances No. 7988 and No. 8011
Despite its nullity, the court a quo went on to
dismiss petitioner’s case on the force of the enactment of Issue:
Tax Ordinance No. 8011 which was likewise declared null 1. WON the Coca-Cola case is not doctrinal and cannot
and void by the DOJ Secretary in a Resolution, which ruled be considered as the law of the case.
that the passage of the assailed ordinance did not have the
effect of curing the defects of Ordinance No. 7988 which 2. WON that notwithstanding the declaration of nullity of
does not legally exist. Thus, such decision must be reversed Tax Ordinance No. 7988 and Tax Ordinance No.
for the amending law, having been declared as null and void, 8011, respondent could still be made liable for local
in legal contemplation, therefore, does not exist. business taxes under both Sections 14 and 21 of Tax
Ordinance No. 7794.
WHEREFORE, the petition is GRANTED.
SC Ruling:
1. Yes, Coca-Cola case is applicable to the instant case.

Tax Ordinance No. 7988 was declared by the Secretary


18. City of Manila v. Coca-Cola, G.R. No. 181845, August of the Department of Justice (DOJ) as null and void and
12, 2009 without legal effect due to the failure of herein petitioner City
of Manila to satisfy the requirement under the law that said
Doctrinal Pronouncement/One Liners: ordinance be published for three consecutive days.
Relevant Facts: Petitioner City of Manila never appealed said declaration of
Petitioner City of Manila is a public corporation the DOJ Secretary; thus, it attained finality after the lapse of
empowered to collect and assess business taxes, revenue the period for appeal of the same. The passage of Tax
fees, and permit fees, through its officers, petitioners Toledo Ordinance No. 8011, amending Tax Ordinance No. 7988, did
and Santiago, in their capacities as City Treasurer and Chief not cure the defects of the latter, which, in any way, did not
of the Licensing Division, respectively. legally exist.

Respondent Coca-Cola Bottlers Philippines, Inc. is 2. No, respondents can only be made liable for local
a corporation engaged in the business of manufacturing and business tax under Sec. 14 of Tax Ordinance No. 7794
selling beverages, and which maintains a sales office in the ONLY.
City of Manila.
Emphasis must be given to the fact that prior to the
Prior to 25 February 2000, respondent had been paying passage of Tax Ordinance No. 7988 and Tax Ordinance No.
the City of Manila local business tax only under Section 14 of 8011 by petitioner City of Manila, petitioners subjected and
Tax Ordinance No. 7794, being expressly exempted from the assessed respondent only for the local business tax under
business tax under Section 21 of the same tax ordinance. Sec. 14 of Tax Ordinance No. 7794, but never under Sec. 21
of the same. Sec. 21 of Tax Ordinance No. 7794 exempts
Petitioner City of Manila subsequently approved on 25 from payment of the local business tax imposed by said
February 2000, Tax Ordinance No. 7988, amending certain section, businesses that are already paying such tax under
sections of Tax Ordinance No. 7794, particularly: (1) Section other sections of the same tax ordinance. The said proviso,
14, by increasing the tax rates applicable to certain however, was deleted from Sec. 21 of the Tax Ordinance No.
establishments operating within the territorial jurisdiction of 7794 by Tax Ordinances No. 7988 and No. 8011.
NPC fulfills both requisites. To stress, a franchise
Yet, with the pronouncement by this Court in the tax is imposed based not on the ownership but on the
Coca-Cola case that Tax Ordinance No. 7988 and Tax exercise by the corporation of a privilege to do business. The
Ordinance No. 8011 were null and void and without legal taxable entity is the corporation which exercises the
effect, then Sec. 21 of Tax Ordinance No. 7794, as it has franchise, and not the individual stockholders. By virtue of its
been previously worded, with its exempting proviso, is back charter, petitioner was created as a separate and distinct
in effect. Accordingly, respondent should not have been entity from the National Government. It can sue and be sued
subjected to the local business tax under Sec. 21 of Tax under its own name, and can exercise all the powers of a
Ordinance No. 7794 for the third and fourth quarters of 2000, corporation under the Corporation Code.
given its exemption therefrom since it was already paying the
local business tax under Sec. 14 of the same ordinance. We also do not find merit in the petitioner's
contention that its tax exemptions under its charter subsist
despite the passage of the LGC.

As a rule, tax exemptions are construed strongly


19. Napocor v. City of Cabanatuan, G.R. No. 149110, April against the claimant. Exemptions must be shown to exist
9, 2003 clearly and categorically, and supported by clear legal
provisions. In the case at bar, the petitioner's sole refuge is
“LGU's Power of Taxation as an exception to Non-delegation section 13 of Rep. Act No. 6395 exempting from, among
of taxing power; Tax Exemptions - construed strongly against others, "all income taxes, franchise taxes and realty taxes to
the claimant” be paid to the National Government, its provinces, cities,
municipalities and other government agencies and
Facts:
 instrumentalities."
NPC, a GOCC, created under CA 120 as amended,
selling electric power, was assessed by the City of It is worth mentioning that section 192 of the LGC
Cabanatuan for franchise tax pursuant to sec. 37 of empowers the LGUs, through ordinances duly approved, to
Ordinance No. 165-92. NPC refused to pay the tax grant tax exemptions, initiatives or reliefs.77 But in enacting
assessment on the grounds that the City of Cabanatuan has section 37 of Ordinance No. 165-92 which imposes an
no authority to impose tax on government entities and also annual franchise tax "notwithstanding any exemption granted
that it is exempted as a non-profi t organization. For its part, by law or other special law," the respondent city government
the City government alleged that NPC’s exemption from local clearly did not intend to exempt the petitioner from the
taxes has been repealed by sec. 193 of RA 7160. coverage thereof.

Issue: Whether NPC is liable to pay an annual franchise tax Doubtless, the power to tax is the most effective
to the City government. instrument to raise needed revenues to finance and support
myriad activities of the local government units for the delivery
Held: One of the most signifi cant provisions of the LGC is of basic services essential to the promotion of the general
the removal of the blanket exclusion of instrumentalities and welfare and the enhancement of peace, progress, and
agencies of the national government from the coverage of prosperity of the people. As this Court observed in the
local taxation. Although as a general rule, LGUs cannot Mactan case, "the original reasons for the withdrawal of tax
impose taxes, fees or charges of any kind on the National exemption privileges granted to government-owned or
Government, its agencies and instrumentalities, this rule now controlled corporations and all other units of government
admits an exception, i.e., when specifi c provisions of the were that such privilege resulted in serious tax base erosion
LGC authorize the LGUs to impose taxes, fees or charges and distortions in the tax treatment of similarly situated
on the aforementioned entities. enterprises." With the added burden of devolution, it is even
more imperative for government entities to share in the
As commonly used, a franchise tax is "a tax on the requirements of development, fiscal or otherwise, by paying
privilege of transacting business in the state and exercising taxes or other charges due from them.
corporate franchises granted by the state." It is not levied on
the corporation simply for existing as a corporation, upon its "IN VIEW WHEREOF, the instant petition is
property or its income, but on its exercise of the rights or DENIED and the assailed Decision and Resolution of the
privileges granted to it by the government. Hence, a Court of Appeals dated March 12, 2001 and July 10, 2001,
corporation need not pay franchise tax from the time it respectively, are hereby AFFIRMED."
ceased to do business and exercise its franchise. It is within
this context that the phrase "tax on businesses enjoying a
franchise" in section 137 of the LGC should be interpreted
and understood. Verily, to determine whether the petitioner is
covered by the franchise tax in question, the following
requisites should concur: (1) that petitioner has a "franchise"
in the sense of a secondary or special franchise; and (2) that
it is exercising its rights or privileges under this franchise
within the territory of the respondent city government.
20. Palma Devt. Corp. v. Municipality of Malangas, G.R. law without a full-blown trial on the merits, CA could not
No. 152492, October 16, 2003 determine whether the facts of the case were within the
ambit of the stated sections of RA 7160. The appellate court
Doctrinal Pronouncements/one liners: rules that petitioner still had to adduce evidence to
Local government units, through their Sanggunian,  may substantiate its allegations that the assailed ordinance had
prescribe the terms and conditions for the imposition of toll imposed fees on the movement of goods within the
fees or charges for the use of any public road, pier or wharf municipality in the guise of a toll gee for the use of municipal
funded and constructed by them. However, RA No. 7160 roads and a service fee police surveillance. Thus, CA held
prohibits the imposition, in the guise of wharfage, of fees -- that the absence of such evidence necessitated the remand
as well as all other taxes or charges in any form whatsoever of the case to the trial court.
-- on goods or merchandise. 


 Issue:

 Whether Section 5G.01 of the Municipal Revenue Code
Relevant Facts: imposing services fees is proper and valid?
Petitioner, Palma Development Corporation is engaged in 

milling and selling of rice and corn to wholesalers in SC Ruling:
Zamboanga City. It uses the municipal port of Malangas, NO. By express language of Sections 153 and 155 of RA
Zamboanga del Sur as transshipment point for its goods. No. 7160, local government units, through their
The port, as well as the surrounding roads leading to it, Sanggunian, may prescribe the terms and conditions for the
belong to and are maintained by the Municipality of imposition of toll fees or charges for the  use  of any public
Malangas, Zamboanga del Sur. The municipality passed road, pier or wharf funded and constructed by them. A
Municipal Revenue Code No. 09, an ordinance imposing service fee imposed on vehicles using municipal roads
service fee for its use of the municipal roads or streets leading to the wharf is thus valid. However, Section 133(e) of
leading to the wharf and to any point along the shorelines RA No. 7160 prohibits the imposition, in the guise of
within the jurisdiction of the municipality and for police wharfage, of fees -- as well as all other taxes or charges in
surveillance on all goods and all equipment harbored or any form whatsoever -- on  goods  or merchandise. It is
sheltered in the premises of the wharf and others within the therefore irrelevant if the fees imposed are actually for police
jurisdiction of the municipality. surveillance on the goods, because any other form of
imposition on goods passing through the territorial
Section 56.01 of the ordinance reads as follows: jurisdiction of the municipality is clearly prohibited by Section
133(e).
Sec 56.01 Imposition of Fees. There shall be
collected service fee for its use of the municipal Under Section 131(y) of RA No. 7160, wharfage is defined
roads or streets leading to the wharf and to any as a fee assessed against the cargo of a vessel engaged in
point along the shorelines within the jurisdiction of foreign or domestic trade based on quantity, weight, or
the municipality and for police surveillance on all measure received and/or discharged by vessel. It is apparent
goods and all equipment harboured or sheltered in that a wharfage does not lose its basic character by being
the premises of the wharf and other within the labeled as a service fee for police surveillance on all goods.
jurisdiction of the municipality [xxx]
Unpersuasive is the contention of respondent that petitioner
Accordingly, the service fees imposed by Section 5G.01 of would unjustly be enriched at the formers expense. Though
the ordinance were paid by petitioner under protest. It the rules thereon apply equally well to the government, for
contended that under RA 7160, or the Local Government unjust enrichment to be deemed present, two conditions
Code of 1991, municipal governments did not have the must generally concur: (a) a person is unjustly benefited, and
authority to tax goods and vehicles that passed through their (b) such benefit is derived at another’s expense or damage.
jurisdiction. Thereafter, before the RTC of Pagadian City,
petitioner filed against the Municipality of Malangas an action In the instant case, the benefits from the use of the municipal
for declaratory relief assailing the validity of Section 5G.01 of roads and the wharf were not unjustly derived by petitioner.
the municipality ordinance on the premise that the case Those benefits resulted from the infrastructure that the
involved the validity of a municipal ordinance, the RTC municipality was mandated by law to provide.  There is no
directed respondent to secure the opinion of the Office of the unjust enrichment where the one receiving the benefit has a
Solicitor General as well as the opinions of the Department legal right or entitlement thereto, or when there is no causal
of Finance and Justice. As these opinions were still relation between ones enrichment and the others
unavailable, petitioner’s counsel filed without objection from impoverishment.
respondent, a Manifestation seeking the submission of the
case for the RTC’s decision on a pure question of law. The
trial court rendered its decision declaring the entire Municipal
Revenue Code No. 09 as ultra vires and hence, null and
void.

The CA held that local government units already had


revenue raising powers as provided for under Sec 153 and
155 of RA 7160. However, since both parties had submitted
the case to the trial court for decision on a pure question of
21. Smart Communications, Inc. v. City of Davao, G.R. petitioner paid under protest on September 1998. In 1999,
No. 155491, July 21, 2009 petitioner filed a claim for refund but was denied. The trial
Facts: On February 18, 2002, Smart fi led a special civil court rules that the payments made by the petitioner in 1998
action for declaratory relief, for the ascertainment of its rights are payments for the business taxes in 1997.
and obligations under the Tax Code of the City of Davao.
Smart contends that its telecenter in Davao City is exempt Issue: Are the business taxes paid by petitioner in 1998,
from payment of franchise tax to the City because the power business taxes for 1997 or 1998?
of the City of Davao to impose a franchise tax is subject to
statutory limitations such as the “in lieu of all taxes” clause Ruling:
found in Section 9 of R.A. No. 7294 (Smart’s franchise). 
Respondents contested the tax exemption claimed by Smart. The trial court erred when it said that the payments made by
They invoked the power granted by the Constitution to local petitioner in 1998 are payments for business tax incurred in
government units to create their own sources of revenue. On 1997 which only accrued in January 1998.
July 19, 2002, the RTC rendered its Decision denying the
petition. The trial court noted that the ambiguity of the in “lieu Business taxes imposed in the exercise of police
of all taxes” provision in R.A. No. 7294, on whether it covers power for regulatory purposes are paid for the privilege of
both national and local taxes, must be resolved against the carrying on a business in the year the tax was paid.  It is paid
taxpayer. at the beginning of the year as a fee to allow the business to
Issue: operate for the rest of the year.  It is deemed a prerequisite
Whether or not Smart is liable to pay the franchise tax to the conduct of business. 
imposed by the City of Davao.
Income tax, on the other hand, is a tax on all yearly
Held:   profits arising from property, professions, trades or offices, or
Yes.  The SC find that there is no violation of Article III, as a tax on a person’s income, emoluments, profits and the
Section 10 of the 1987 Philippine Constitution.  Tax like.  It is tax on income, whether net or gross realized in one
exemptions are never presumed and are strictly construed
taxable year. It is due on or before the 15th  day of the
against the taxpayer and liberally in favor of the taxing
authority. They can only be given force when the grant is 4th month following the close of the taxpayer’s taxable year .
clear and categorical. Moreover, Smarts franchise was
Under the Makati Revenue Code, it appears that
granted with the express condition that it is subject to
amendment, alteration, or repeal. In this case since there is the business tax, like income tax, is computed based on the
doubt it must be resolved in favor of the City of Davao. The previous year’s figures. In computing the amount of tax due
“in lieu” of all taxes clause applies only to national internal for the first quarter of operations, the business’ capital
revenue taxes and not to local taxes. investment is used as the basis.  For the subsequent
quarters of the first year, the tax is based on the gross sales/
receipts for the previous quarter.  The business taxes paid in
the year 1998 is for the privilege of engaging in business for
the same year, and not for having engaged in business for
22. Mobil Phil. Inc. v. City Treasurer of Makati, G.R. No.
1997.
154092, 14 July 2005
Under the same Code, on the year an
establishment retires or terminates its business within the
Facts: municipality, it would be required to pay the difference in the
Mobil Philippines Inc is a domestic corporation engaged in amount if the tax collected, based on the previous year’s
the manufacturing, importing, exporting and wholesaling of gross sales or receipts, is less than the actual tax due based
petroleum products, while respondents are the local on the current year’s gross sales or receipts.  For the year
government officials of the City of Makati charged with the 1998, petitioner paid a total of  P2,262,122.48 to the City
implementation of the Revenue Code of the City of Makati, Treasurer of Makati  as business taxes for the year 1998. 
as well as the collection and assessment of business taxes, The amount of tax as computed based on petitioner’s gross
license fees and permit fees within said city. Prior to sales for 1998 is only P1,331,638.84.  Since the amount paid
September 1998, petitioner’s principal office was in Makati is more than the amount computed based on petitioner’s
City.  On August 20, 1998, petitioner filed an application with actual gross sales for 1998, petitioner upon its retirement is
the City Treasurer of Makati for the retirement of its business not liable for additional taxes to the City of Makati.  Thus, the
within the City of Makati as it moved its principal place of Court ruled that the respondent erroneously treated the
business to Pasig City. assessment and collection of business tax as if it were
income tax, by rendering an additional assessment
The OIC of the License Division issued a billing slip of of  P1,331,638.84 for the revenue generated for the year
business taxes amounting to P  1,898,106.96 which the 1998.
Therefore, respondents City Treasurer and Chief of Ostensibly, the notice of assessment, which stands
the License Division of Makati City are ordered to refund to as the first instance the taxpayer is officially made aware of
the pending tax liability, should be sufficiently informative to
petitioner business taxes paid in the amount
apprise the taxpayer the legal basis of the tax
of P1,331,638.84.
Reference to the local tax ordinance is vital, for the
power of local government units to impose local taxes is
exercised through the appropriate ordinance enacted by
the  sanggunian, and not by the Local Government Code
alone. What determines tax liability is the tax ordinance, the
23. Yamane v. BA Lepanto Condo. Corp., G.R. No. Local Government Code being the enabling law for the local
154993, October 25, 2005
 legislative body.

 The court held that condominium corporations are
Doctrinal Pronouncements/one liners: generally exempt from local business taxation under the
Condominium corporations are generally exempt from local Local Government Code, irrespective of any local ordinance
business taxation under the Local Government Code, that seeks to declare otherwise.
irrespective of any local ordinance that seeks to declare
otherwise.
 It must be noted that even though the Condominium
Corporation is empowered to levy assessments or dues from
the unit owners, these amounts collected are not intended
Relevant Facts: Respondent BA-Lepanto Condominium for the incurrence of profit by the Corporation or its
Corporation is a duly organized condominium corporation members, but to shoulder the multitude of necessary
which owns and holds title to the common and limited expenses that arise from the maintenance of the
common areas of the BA-Lepanto Condominium situated in Condominium Project.
Paseo de Roxas, Makati City.
The assessment appears to be based solely on the
The Condominium Corporation received a Notice of Corporation’s collection of assessments from unit owners,
Assessment signed by the City Treasurer, which stated that such assessments being utilized to defray the necessary
the Corporation is "liable to pay the correct city business expenses for the Condominium Project and the common
taxes, fees and charges," computed as totaling areas. There is no contemplation of business, no orientation
₱1,601,013.77 for the years 1995 to 1997.3  The Notice of towards profit in this case.
Assessment was silent as to the statutory basis of the
business taxes assessed. Hence, in this case, the assailed tax assessment
has no legal basis under the Local Government Code or the
The Corporation responded with a written tax Makati Revenue Code.
protest, addressed to the City Treasurer. It was evident in the
protest that the Corporation was perplexed on the statutory
basis of the tax assessment.
The protest was rejected by the City Treasurer. She 24. Ericsson Telecoms Inc. v. City of Pasig, G.R. No.
insisted that the collection of dues from the unit owners was 176667, November 22, 2007
effected primarily for profit.
Corporation filed an Appeal with the Regional Trial FACTS:
Court (RTC) of Makati. RTC concluded that the activities of Ericsson Telecommunications, Inc., is engaged in
the Corporation fell squarely under the definition of the design, engineering, and marketing of telecommunication
"business", thus subject to local business taxation facilities/system. The City Treasurer of Pasig City assessed
Ericsson a business tax deficiency for the years 1998 and
Corporation filed a Petition for Review with the 1999 based on its gross revenues as reported in its audited
Court of Appeals. The appellate court declared that the financial statements for the years 1997 and 1998. Ericsson
Corporation was not liable to pay business taxes to the City filed a Protest claiming that the computation of the local
of Makati. business tax should be based on gross receipts and not on
gross revenue. The same issue happened for assessments
made for the year 2000 and 2001.
Issue: Whether the City of Makati may collect business
taxes on condominium corporations. ISSUE:
WON local business tax on contractors should be based on
gross receipts or gross revenue?
SC Ruling: NO. City of Makati may not collect taxes on City of pasig: it should be based on gross revenues, since
condominium corporations. gross receipts is synonymous with gross earnings/revenue,
which, in turn, includes uncollected earnings
At no point has the City Treasurer been candid Ericsson: it should be based on gross receipts, only the
enough to inform the Corporation, the RTC, the Court of portion of the revenues which were actually and
Appeals, or this Court for that matter, as to what exactly is constructively received should be considered in determining
the precise statutory basis under the Makati Revenue Code its tax base.
for the levying of the business tax on petitioner.
RULING:
Ericsson won, should be based on gross receipts Basis The imposition of local business tax based on
(law) Ericsson’s gross revenue will inevitably result in the
Section 143 (e) of LGC covering local business tax constitutionally proscribed double taxation taxing of the same
contractors and other independent contractors, says: “The person twice by the same jurisdiction for the same thing
municipality may impose taxes on the following businesses: inasmuch as petitioners revenue or income for a taxable
(e) On contractors and other independent contractors, in year will definitely include its gross receipts already reported
accordance with the following schedule: With gross receipts during the previous year and for which local business tax has
for the preceding calendar year in the amount of: Amount of already been paid.
Tax Per Annum”. The provision specifically refers to gross
receipts which is defined under Section 131 of the Local
Government Code, as follows: 


“(n) Gross Sales or Receipts include the total amount of 25. Allied Thread Co., Inc. v. Manila, G.R. No. L-40296,21
money or its equivalent representing the contract price, Nov. 1984
compensation or service fee, including the amount charged
or materials supplied with the services and the deposits or Doctrinal Pronouncements:
advance payments actually or constructively received during The power to levy an excise upon the performance
the taxable quarter for the services performed or to be of an act or the engaging in an occupation does not depend
performed for another person excluding discounts if upon the domicile of the person subject to the excise, nor
determinable at the time of sales, sales return, excise tax, upon the physical location of the property and in connection
and value-added tax (VAT);” 
 with the act or occupation taxed, but depends upon the place
in which the act is performed or occupation engaged in.
The law is clear, the provision specifically states that basis
should be gross receipts.
Relevant Facts:
Municipal Board of the City of Manila enacted
Gross receipt vs gross revenue (discussion by court) Ordinance No. 7516 imposing on manufacturers, importers
or producers, doing business in the City of Manila, business
Gross Receipts Gross Revenue taxes based on gross sales on a graduated basis. The
ordinance underwent series of amendments.
Include money or Covers money or its
its equivalent Equivalent actually or Allied Thread Co., Inc. is engaged in the business
of manufacturing sewing thread and yarn under duly
Actually or Constructively registered marks and labels. It operates its factory and
Constructively Received, including maintains an office in Pasig, Rizal. In order to sell its
Received in The value of products in Manila and in other parts of the Philippines,
petitioner Allied Thread Co., Inc. engaged the services of a
Consideration Services rendered sales broker, Ker & Company, Ltd., the latter deriving
Of services Or articles sold, commissions from every sale made for its principal.
Rendered or articles Exchanged or Having been affected by the aforementioned
Sold, exchanged Leased, the Ordinance, being manufacturers and sales brokers, on July
or leased, whether Payment of which 22, 1974, Allied Thread Co., Inc. and Ker & Co., Ltd. filed
with the Court of First Instance of Manila, a petition for
actual or Is yet to be Declaratory Relief, contending that Ordinance No. 7516, as
constructive, (what Received. (expected amended, is not valid nor enforceable as the same is
you really received, To be received) contrary to Section 54 of Presidential Decree No. 426, as
clarified by Local Tax Regulation No. 1-74 dated April 8, 1974
actual or of the Department of Finance.
constructive)
Allied Thread Co., assert that due to the series of
amendments to Ordinance No. 7516, the same Ordinance
Application to case
fell short of the deadline set by Sec. 54 of P.D. No. 426 that
In Ericssons’ case, its audited financial statements
"for an ordinance intended to take effect on July 1, 1974, it
reflect income or revenue which accrued to it during the
must be enacted on or before June 15, 1974." Necessarily,
taxable period although not yet actually or constructively
so it is asserted, the said Ordinance No. 7516 as amended,
received or paid, because Ericsson uses the accrual method
is not valid nor enforceable.
of accounting, where income is reportable when all the
events have occurred that fix the taxpayers right to receive
In addition it is also argued that, the questioned
the income, and the amount can be determined with
ordinance did not comply with the necessary publication
reasonable accuracy; the right to receive income, and not
requirement in a newspaper of general circulation as
the actual receipt, determines when to include the amount in
mandated by Sec. 43 of the Local Tax Code. Petitioner Allied
gross income.
Thread Co., Inc. also claims that it should not be subjected
to the said Ordinance No. 7516 as amended, because it
does not operate or maintain a branch office in Manila and the City of Manila, where the subject Ordinance only applies.
that its principal office and factory are located in Pasig, Rizal. This contention is devoid of merit. Allied Thread Co., Inc.
admits that it does business in the City of Manila through a
Issue: broker or agent, Ker & Company, Ltd. Doing business in the
1. Whether or not Ordinance No. 7516 was validly City of Manila is all that is required to fall within the coverage
enacted. of the Ordinance.

2. Whether or not the publication requirement was It should be noted that Ordinance No. 7516 as
complied with. amended imposes a business tax on manufacturers,
importers or producers doing business in the City of Manila.
3. Whether or not Allied Thread, Co. is subjected to The tax imposition here is upon the performance of an act,
the tax imposed on the ordinance. enjoyment of a privilege, or the engaging in an occupation,
and hence is in the nature of an excise tax.
Ruling:
The power to levy an excise upon the performance
1. YES of an act or the engaging in an occupation does not depend
Ordinance No. 7516 was validly enacted upon the domicile of the person subject to the excise, nor
upon the physical location of the property and in connection
There is no dispute that Ordinance No. 7516 was with the act or occupation taxed, but depends upon the place
enacted by the Municipal Board of Manila on June 12, 1974 in which the act is performed or occupation engaged in.
and approved by the City Mayor on June 15, 1974. Fifteen
(15) days thereafter, or on July 1, 1974, the said ordinance Thus, the gauge for taxability under the said
became effective pursuant to Sec. 42 of the Local Tax Code. Ordinance No. 7516 as amended does not depend on the
location of the office, but attaches upon the place where the
It is clear therefore that Ordinance No. 7516 has respective sale transaction(s) is perfected and
fully conformed with P.D. No. 426 and Local Tax Regulation consummated. Since Allied Thread Co., Inc. sells its
No. 1-74 which require that "a local tax ordinance intended to products in the City of Manila through its broker, Ker &
take effect on July 1, 1974 should be enacted by the Local Company, Ltd., it cannot escape the tax liability imposed by
Chief Executive not later than June 15, 1974". Ordinance No. 7516 as amended.

The subsequent amendments to the basic


ordinance did not in any way invalidate it nor move the date
of its effectivity. To hold otherwise would limit the power of
the defunct Municipal Board of Manila to amend an existing
ordinance as exigencies require. 26. Province of Bulacan v. CA, G.R. No. 126232,
November 27, 1998
2. YES
Publication was complied Doctrine: The Province is not authorized to levy excise tax
on articles already taxed by the NIRC.
Petitioners complain that they were not fully
apprised of the enactment of Ordinance No. 7516 for the FACTS:
same was not duly published in a newspaper of general The Sangguniang Panlalawigan passed provincial
circulation. Respondents argue however, that copies of ordinance no. 3 known as “Ordinance Enacting The Revenue
Ordinance No. 7516 and its amendments were posted in Code Of The Bulacan Province” which was to take effect on
public buildings, government offices, and public places in lieu July 1, 1992 Section 21 of the ordinance provides as follows:

of publication in newspaper of general circulation.
“Sec 21. Imposition of Tax – There is hereby levied and
There was substantial compliance of the law on collected a tax of 10% of the fair market value in the locality
publication. Section 43 of the Local Tax Code provides two per cubic meter of ordinary stores, sand, gravel, earth and
modes of apprising the public of a new ordinance, either, (a) other quarry resources, such but not limited to marble,
by means of publication in a newspaper of general granite, volcanic cinders, basalt, tuff and rock phosphate,
circulation or, (b) by means of posting of copies thereof in the extracted from public lands or from beds of seas, lakes,
local legislative hall or premises and two other conspicuous rivers, streams, creeks and other public waters within its
places within the territorial jurisdiction of the local territorial jurisdiction.”

government. Respondents, having complied with the second
mode of notice. Pursuant thereto, the provincial treasurer of
Bulacan, assessed private respondent Republic Cement
3. YES Corporation Php2,524,692.13 for extracting lime stones,
shale and silica from several parcels of private land in the
Allied Thread Co., is taxable under the ordinance province during the third quarter of 1992 until the second
quarter of 1993. Believing that the province, on the bases of
Finally, petitioner Allied Thread Co., Inc. claims the above-said ordinance, had no authority to impose taxes
exclusion from Ordinance No. 7515 as amended on the on quarry resources extracted from private lands, Republic
ground that it does not maintain an office or branch office in Cement formally contested the same on December 23, 1993.
The same was, however, denied by the provincial treasurer September 11, 1974, PD 551 reduced the franchise tax of
on January 17, 1994. Republic Cement, consequently filed a electric franchise holders.
petition for declaratory relief with the Regional Trial Court
(RTC) of Bulacan on February 14, 1993. The province filed a SECTION 1. Any provision of law or local ordinance
motion to dismiss Republic Cement’s petition which was to the contrary notwithstanding, the franchise tax
granted by the trial court on May 13, 1993, which ruled that payable by all grantees of franchises to generate,
declaratory relief was improper, allegedly because a breach distribute and sell electric current for light, heat and
of the ordinance had been committed by Republic Cement. power shall be two percent (2%) of their gross
receipts received from the sale of electric current
Issue:  and from transactions incident to the generation,
Whether or not provincial ordinance no. 3 is valid to distribution and sale of electric current.
allow the petitioner to impose taxes on ordinary stones, xxx
sand, gravel, earth, and other quarry resources.
On January 1, 1992, RA 7160 or the Local
Held:  Government Code (LGC) of 1991 was passed into law,
No. On the basis of section 134 of Republic Act No. conferring upon provinces and cities the power, among
7169, the local government code, ruled that a province was others, to impose tax on businesses enjoying franchise. In
empowered to impose taxes only on sand, gravel, and other accordance with the LGC, the Sangguniang Panlungsod of
quarry resources extracted from public lands, its authority to Angeles City enacted Tax Ordinance No. 33, S-93, otherwise
tax being limited to by said provision only to those taxes, known as the Revised Revenue Code of Angeles City
fees and charges provided in article 1, chapter 2, title I of (RRCAC). A petition seeking the reduction of the tax rates
Book II of the local government code. and a review of the provisions of the RRCAC was filed with
As correctly pointed out by petitioners, section 186 the Sangguniang Panlungsod by MACCI of which AEC is a
of the same code allows petitioners to levy taxes other than member.There being no action taken on the matter, MACCI
those specifically enumerated under the code, subject to the elevated the petition to the Department of Finance, which
conditions specified therein. referred the same to the Bureau of Local Government
The tax imposed by the province of Bulacan is an Finance (BLGF).
excise tax, being a tax upon the performance, carrying or an
excise of an activity. Under section 133 of the local In the petition, MACCI alleged that the RRCAC is
government code, a province may not, therefore, levy excise oppressive, excessive, unjust and confiscatory; that it
taxes on articles already taxed by the National Internal was published only once, simultaneously on January 22,
Revenue Code (NIRC). 1994; and that no public hearings were conducted prior to its
The NIRC levies a tax on all quarry resources, regardless of enactment. Acting on the petition, the BLGF issued a First
origin, whether extracted from public or private land. Thus, a Indorsement to the City Treasurer of Angeles City, instructing
province may not ordinarily impose taxes on stones, sand, the latter to make representations with the Sangguniang
gravel, earth and other quarry resources, as the same are Panlungsod for the appropriate amendment of the RRCAC in
already taxed under NIRC. The province can, however, order to ensure compliance with the provisions of the LGC,
impose a tax on stones, sand, gravel, earth and other quarry and to make a report on the action taken within five days.
resources extracted from public lands because it is expressly Thereafter, starting July 1995, AEC has been paying the
empowered to do so under the local government code. As to local franchise tax to the Office of the City Treasurer on a
stones, sand, gravel, earth and other quarry resources quarterly basis, in addition to the national franchise tax it
extracted from private land, however it may not do so, pays every quarter to the Bureau of Internal Revenue (BIR).
because of the limitation provided by section 133 of the code
in relation to section 151 of the NIRC The City Treasurer then issued a Notice of
Assessment to AEC for payment of business tax, license fee
and other charges for the period 1993 to 2004 in the total
amount of P94,861,194.10. On February 17, 2004, the City
Treasurer denied the protest for lack of merit and requested
27. Angeles City v. Angeles City Electric Corp., GR No. AEC to settle its tax liabilities. Aggrieved, AEC appealed the
166134, 29 June 2010 denial of its protest to the RTC. On April 5, 2004, the City
Treasurer levied on the real properties of AEC and a
Doctrinal Pronouncement: The prohibition on the issuance Notice of Auction Sale was published and posted
of a writ of injunction to enjoin the collection of taxes applies announcing that a public auction of the levie properties
only to national internal revenue taxes, and not to local of AEC would be held on May 7, 2004.This prompted AEC to
taxes. file a petition for declaratory relief pending the TRO/ WPI to
enjoin the city from levying, annotating the levy, seizing,
FACTS: confiscating, garnishing, selling and disposing at public
On June 18, 1964, AEC was granted a legislative auction the properties of AEC. RTC favored AEC conditioned
franchise under RA No. 4079 to construct, maintain and upon the filing of a bond in the amount of P10,000,000.00.
operate an electric light, heat, and power system for the
purpose of generating and distributing electric light, heat and ISSUE: WON the RTC gravely abused its discretion in
power for sale. Pursuant to thereof, AEC's payment of issuing the writ of preliminary injunction enjoining Angeles
franchise tax for gross earnings from electric current sold City and its City Treasurer from levying, selling, and
was in lieu of all taxes, fees and assessments. On disposing the properties of AEC.
cinemas, concert halls, circuses, and boxing stadia.
RULING: Consequently, they cannot be considered as among the
'other places of amusement' contemplated by Section 140 of
We find the petition bereft of merit. the LGC and which may properly be subject to amusement
taxes.
The LGC does not specifically prohibit an injunction
enjoining the collection of taxes. FACTS:
Petitioner Pelizloy owns Palm Grove Resort, which
Taxes being the lifeblood of the government should is designed for recreation and which has facilities like
be collected promptly, without unnecessary hindrance or swimming pools, a spa and function halls located at Asin,
delay. In line with this principle, the NIRC expressly provides Angalisan, Municipality of Tuba, Province of Benguet.
that no court shall have the authority to grant an injunction to
restrain the collection of any national internal revenue tax, In 2005, the Provincial Board of the Province of
fee or charge imposed by the code. An exception to this rule Benguet approved Provincial Tax Ordinance No. 05-107.
obtains only when in the opinion of the Court of Tax Appeals Section 59, Article X of the said ordinance levied a ten
(CTA) the collection thereof may jeopardize the interest of percent (10%) amusement tax on gross receipts from
the government and/or the taxpayer. admissions to "resorts, swimming pools, bath houses, hot
springs and tourist spots."
The situation, however, is different in the case of
the collection of local taxes as there is no express Pelizloy argued that the Tax Ordinance's imposition
provision in the LGC prohibiting courts from issuing an of a 10% amusement tax on gross receipts from admission
injunction to restrain local governments from collecting fees for resorts, swimming pools bath houses, hot springs,
taxes. and tourist spots is an ultra vires act on the part of the
Province of Benguet. Thus, it filed an appeal/petition before
The lower court's denial of the motion for the the Secretary of Justice in 2006, but the latter has failed to
issuance of a writ of preliminary injunction to enjoin the decide on its appeal/petition within the sixty (60) days
collection of the local tax is upheld not because courts are provided by Section 187 of the LGC. With such failure,
prohibited from granting such injunction, but because the Pelizloy treated the same as an implied denial of its appeal/
circumstances required for the issuance of writ of injunction petition. Thus, it filed a Petition for Declaratory Relief and
were not present. Nevertheless, it must be emphasized that Injunction before the RTC of La Trinidad, Benguet. Pelizloy
although there is no express prohibition in the LGC, argued that Section 59, Article X of the Tax Ordinance
injunctions enjoining the collection of local taxes are frowned imposed a percentage tax in violation of the limitation on the
upon. Courts therefore should exercise extreme caution in taxing powers of local government units (LGUs) under
issuing such injunctions. Section 133 (i) of the LGC. On the other hand, The Province
of Benguet assailed the Petition for Declaratory Relief and
No grave abuse of discretion was committed by Injunction. It argued that the phrase 'other places of
the RTC. As a rule, the issuance of a preliminary injunction amusement' in Section 140 (a) of the LGC encompasses
rests entirely within the discretion of the court taking resorts, swimming pools, bath houses, hot springs, and
cognizance of the case and will not be interfered with, except tourist spots since "Article 220 (b)” of the LGC defines
where there is grave abuse of discretion committed by the "amusement" as "pleasurable diversion and entertainment . .
court. Petitioner, who has the burden to prove grave abuse . synonymous to relaxation, avocation, pastime, or fun."
of discretion, failed to show that the RTC acted arbitrarily and
capriciously in granting the injunction. Neither was petitioner The RTC Trinidad, Benguet dismissed the Petition
able to prove that the injunction was issued without any for Declaratory Relief and Injunction for lack of merit. On the
factual or legal justifi cation. In assailing the injunction, validity of Section 59, Article X of the Tax Ordinance, the
petitioner primarily relied on the prohibition on the issuance RTC noted that, while Section 59, Article X imposes a
of a writ of injunction to restrain the collection of taxes. But percentage tax, Section 133 (i) of the LGC itself allowed for
as we have already said, there is no such prohibition in the exceptions. It noted that what the LGC prohibits is not the
case of local taxes. The writ of injunction was properly imposition by LGUs of percentage taxes in general but the
issued. "imposition and levy of percentage tax on sales, barters, etc.,
on goods and services only." It further gave credence to the
28. Pelizloy Realty Corp. v. The Province of Benguet, GR Province of Benguet's assertion that resorts, swimming
No. 183137, April 10, 2013 pools, bath houses, hot springs, and tourist spots are
encompassed by the phrase 'other places of amusement' in
DOCTRINAL PRONOUNCEMENT: Resorts, swimming Section 140 of the LGC.
pools, bath houses, hot springs and tourist spots cannot be
considered venues primarily "where one seeks admission to Hence, this petition. Pelizloy assails the legality of
entertain oneself by seeing or viewing the show or Section 59, Article X of the Tax Ordinance as being a
performances". While it is true that they may be venues (supposedly) prohibited percentage tax per Section 133 (i) of
where people are visually engaged, they are not primarily the LGC.
venues for their proprietors or operators to actively display,
stage or present shows and/or performances. Thus, resorts, ISSUE:
swimming pools, bath houses, hot springs and tourist spots Whether or not provinces are authorized to impose
do not belong to the same category or class as theaters, amusement taxes on admission fees to resorts, swimming
pools, bath houses, hot springs, and tourist spots for being Moreover, the second paragraph of Section 59, Article X of
"amusement places" under the Local Government Code. the Tax Ordinance is not limited to resorts, swimming pools,
bath houses, hot springs, and tourist spots but also covers
RULING: admission fees for boxing. As Section 140 of the LGC allows
for the imposition of amusement taxes on gross receipts
No. The NIRC, in Section 125, Title V, lists from admission fees to boxing stadia, Section 59, Article X of
amusement taxes as among the (other) percentage taxes the Tax Ordinance must be sustained with respect to
which are levied regardless of whether or not a taxpayer is admission fees from boxing stadia.
already liable to pay value-added tax (VAT). Amusement
taxes are percentage taxes as correctly argued by Pelizloy. WHEREFORE, the petition for review on certiorari
However, provinces are not barred from levying amusement is GRANTED.
taxes even if amusement taxes are a form of percentage 

taxes. Section 133 (i) of the LGC prohibits the levy of 

percentage taxes "except as otherwise provided" by the
LGC. Section 140 of the LGC carves a clear exception to the
general rule in Section 133 (i). Section 140 expressly allows
for the imposition by provinces of amusement taxes on "the
proprietors, lessees, or operators of theaters, cinemas,
concert halls, circuses, boxing stadia, and other places of
amusement." However, resorts, swimming pools, bath
houses, hot springs, and tourist spots are not among those
places expressly mentioned by Section 140 of the LGC as
being subject to amusement taxes. Thus, the determination
of whether amusement taxes may be levied on admissions
to resorts, swimming pools, bath houses, hot springs, and
tourist spots hinges on whether the phrase 'other places of
amusement' encompasses. resorts, swimming pools, bath
houses, hot springs, and tourist spots.

Under the principle of ejusdem generis, "where a


general word or phrase follows an enumeration of particular
and specifc words of the same class or where the latter
follow the former, the general word or phrase is to be
construed to include, or to be restricted to persons, things or
cases akin to, resembling, or of the same kind or class as
those specifically mentioned."

Indeed, theaters, cinemas, concert halls, circuses,


and boxing stadia are bound by a common typifying
characteristic in that they are all venues primarily for the
staging of spectacles or the holding of public shows,
exhibitions, performances, and other events meant to be
viewed by an audience. Accordingly, 'other places of
amusement' must be interpreted in light of the typifying
characteristic of being venues "where one seeks admission
to entertain oneself by seeing or viewing the show or
performances" or being venues primarily used to stage
spectacles or hold public shows, exhibitions, performances,
and other events meant to be viewed by an audience.

In the present case, it is clear that resorts,


swimming pools, bath houses, hot springs and tourist spots
cannot be considered venues primarily "where one seeks
admission to entertain oneself by seeing or viewing the show
or performances". While it is true that they may be venues
where people are visually engaged, they are not primarily
venues for their proprietors or operators to actively display,
stage or present shows and/or performances. Thus, resorts,
swimming pools, bath houses, hot springs and tourist spots
do not belong to the same category or class as theaters,
cinemas, concert halls, circuses, and boxing stadia. It follows
that they cannot be considered as among the 'other places of
amusement' contemplated by Section 140 of the LGC and
which may properly be subject to amusement taxes.
REAL PROPERTY TAXATION RULING:
MIAA is not a government-owned or controlled
corporation under Section 2(13) of the provisions of the
Administrative Code because it is not organized as a stock
1. Mactan Cebu International Airport Authority (MCIAA) or non-stock corporation. Neither is MIAA a government-
v. City of Lapu-Lapu, G.R. No. 181756, June 15, 2015 owned or controlled corporation under Section 16, Article XII
of the 1987 Constitution because MIAA is not required to
FACTS: meet the test of economic viability. MIAA is a government
Petitioner, Mactan-Cebu International Airport instrumentality vested with corporate powers and performing
Authority (MCIAA) was created by Congress under Republic essential public services pursuant to Section 2(10) of the
Act No. 6958. Upon its creation, petitioner enjoyed Introductory Provisions of the Administrative Code. As a
exemption from realty taxes imposed by the National government instrumentality, MIAA is not subject to any kind
Government or any of its political subdivision. However, of tax by local governments under Section 133(o) of the
upon the effectivity of the LGC the Supreme Court rendered Local Government Code. The exception to the exemption in
a decision that the petitioner is no longer exempt from realty Section 234(a) does not apply to MIAA because MIAA is not
estate taxes. a taxable entity under the Local Government Code. Such
exception applies only if the beneficial use of real property
Respondent City issued to petitioner a Statement of owned by the Republic is given to a taxable entity.
Real Estate Tax assessing the lots comprising the Mactan Finally, the Airport Lands and Buildings of MIAA are
International Airport which included the airfield, runway, taxi properties devoted to public use and thus are properties of
way and the lots on which these are built. Petitioner public dominion. Properties of public dominion are owned by
contends that these lots, and the lots to which they are built, the State or the Republic.
are utilized solely and exclusively for public purposes and
are exempt from real property tax. Petitioner based its claim As properties of public dominion owned by the
for exemption on DOJ Opinion No. 50. Republic, there is no doubt whatsoever that the Airport
Lands and Buildings are expressly exempt from real estate
Respondent issued notices of levy on 18 sets of tax under Section 234(a) of the Local Government Code.
real properties of petitioners. Petitioner filed a petition for This Court has also repeatedly ruled that properties of public
Prohibition, TRO, and a writ of preliminary injunction with dominion are not subject to execution or foreclosure sale.
RTC Lapulapu which sought to enjoin respondent City from
issuing the warrant of levy against petitioner’s properties Petitioner’s properties that are actually, solely and
from selling them at public auction for delinquency in realty exclusively used for public purpose, consisting of the airport
tax obligations. terminal building, airfield, runway, taxiway and the lots on
which they are situated, EXEMPT from real property tax
Petitioner claimed before the RTC that it imposed by the City of Lapu-Lapu.
had discovered that respondent City did not pass any
ordinance authorizing the collection of real property tax, a tax VOID all the real property tax assessments,
for the special education fund (SEF), and a penalty interest including the additional tax for the special education fund
for its nonpayment. Petitioner argued that without the and the penalty interest, as well as the final notices of real
corresponding tax ordinances, respondent City could not property tax delinquencies, issued by the City of Lapu-Lapu
impose and collect real property tax, an additional tax for the on petitioner’s properties, except the assessment covering
SEF, and penalty interest from petitioner. the portions that petitioner has leased to private parties.

RTC granted the writ of preliminary which NULL and VOID the sale in public auction of 27 of
was later on lifted upon motion by the respondents. petitioner’s properties and the eventual forfeiture and
purchase of the said properties by respondent City of Lapu-
Court of Appeals held that petitioner’s Lapu. We likewise declare VOID the corresponding
airport terminal building, airfield, runway, taxiway, and the Certificates of Sale of Delinquent Property issued to
lots on which they are situated are not exempt from real respondent City of Lapu-Lapu.
estate tax reasoning as follows: Under the Local
Government Code (LGC for brevity), enacted pursuant to the
constitutional mandate of local autonomy, all natural and
juridical persons, including government-owned or controlled
corporations (GOCCs), instrumentalities and agencies, are
no longer exempt from local taxes even if previously granted
an exemption. The only exemptions from local taxes are
those specifically provided under the Code itself, or those
enacted through subsequent legislation.

ISSUE:
WON Mactan Cebu International Airport Authority is
a government-owned or controlled corporation and is thus
not taxable.
respect to equipment purchases made by, or for the Lung
2. Lung Center of the Philippines v. Quezon City, GR No. Center.
144104, June 29, 2004
It is plain as day that under the decree, the
petitioner does not enjoy any property tax exemption
FACTS: privileges for its real properties as well as the building
1. The petitioner Lung Center is a non-stock and non-profit constructed thereon. If the intentions were otherwise, the
entity. same should have been among the enumeration of tax
exempt privileges under Section 2.
2. It is the registered owner of a parcel of land. Erected in
the middle lot is a hospital known as the Lung Center of Section 28(3), Article VI of the 1987 Philippine
the Philippines. A big space at the ground floor is being Constitution provides, thus:  Charitable institutions, churches
leased to private parties, for canteen and small store and parsonages or convents appurtenant thereto, mosques,
spaces, and to medical or professional practitioners who non-profit cemeteries, and all lands, buildings, and
use the same as their private clinics for their patients improvements, actually, directly and exclusively used for
whom they charge for their professional services. religious, charitable or educational purposes shall be exempt
from taxation.
3. Almost one-half of the entire area on the left side of the
building along Quezon Avenue is vacant and idle, while a The tax exemption under this constitutional
big portion on the right side, at the corner, is being leased provision covers property taxes only. What is exempted is
for commercial purposes to a private enterprise known as not the institution itself; those exempted from real estate
the Elliptical Orchids and Garden Center. taxes are lands, buildings and improvements actually,
directly and exclusively used for religious, charitable or
4. The petitioner accepts paying and non-paying patients. It educational purposes.”
also renders medical services to out-patients, both paying
and non-paying. Aside from its income from paying In light of the changes in the Constitution, the
patients, the petitioner receives annual subsidies from the petitioner cannot rely on our ruling in Herrera v. Quezon City
government. Board of Assessment Appeals which was promulgated on
September 30, 1961 before the 1973 and 1987 Constitutions
5. Both the land and the hospital building of the petitioner took effect.
were assessed for real property taxes in the amount of
P4,554,860 by the City Assessor of Quezon City. Under the 1973 and 1987 Constitutions and Rep.
Act No. 7160 in order to be entitled to the exemption, the
6. The petitioner filed a Claim for Exemption from real petitioner is burdened to prove, by clear and unequivocal
property taxes with the City Assessor, predicated on its proof, that (a) it is a charitable institution; and (b) its real
claim that it is a charitable institution. The petitioner’s properties are ACTUALLY, DIRECTLY and EXCLUSIVELY
request was denied. used for charitable purposes.
“Exclusive” is defined as possessed and enjoyed to the
ISSUE: exclusion of others; debarred from participation or
WON the real properties of the petitioner are enjoyment; and “exclusively” is defined, “in a manner to
exempt from real property taxes. exclude; as enjoying a privilege exclusively.” If real property

 is used for one or more commercial purposes, it is not
RULING: exclusively used for the exempted purposes but is subject to
The portions of the real property leased to private taxation.
entities are not exempt from real property taxes as these  
are not actually, directly and exclusively used for charitable The words “dominant use” or “principal use” cannot
purposes. be substituted for the words “used exclusively” without doing
violence to the Constitutions and the law.  Solely  is
The settled rule in this jurisdiction is that laws synonymous with exclusively.
granting exemption from tax are construed strictissimi juris
against the taxpayer and liberally in favor of the taxing What is meant by actual, direct and exclusive use of
power. Taxation is the rule and exemption is the exception. the property for charitable purposes is the  direct and
The effect of an exemption is equivalent to an appropriation. immediate and actual application of the property itself to
Hence, a claim for exemption from tax payments must be the purposes for which the charitable institution is
clearly shown and based on language in the law too plain to organized. It is not the use of the income from the real
be mistaken. property that is determinative of whether the property is used
for tax-exempt purposes.
Section 2 of Presidential Decree No. 1823, relied
upon by the petitioner, specifically provides that the petitioner Accordingly, the portions of the land leased to
shall enjoy the tax exemptions and privileges:  The Lung private entities as well as those parts of the hospital leased
Center of the Philippines shall be exempt from the payment to private individuals are not exempt from such taxes. On the
of taxes, charges and fees imposed by the Government or other hand, the portions of the land occupied by the hospital
any political subdivision or instrumentality thereof with and portions of the hospital used for its patients, whether
paying or non-paying, are exempt from real property taxes.
MIAA is not a government-owned or controlled
3. Manila International Airport Authority v. CA, GR No. corporation but an instrumentality of the National
155650, July 20, 2006, En banc, GR No. 163072, April 2, Government and thus exempt from local taxation.
2009
MIAA is not a stock corporation because it has no
FACTS: capital stock divided into shares. MIAA has no stockholders
or voting shares.
MIAA received Final Notices of Real Estate Tax
Delinquency from the City of Parañaque for the taxable MIAA is also not a non-stock corporation because it
years 1992 to 2001. MIAA’s real estate tax delinquency was has no members. A non-stock corporation must have
estimated at P624 million. members.

The City of Parañaque, through its City Treasurer, MIAA is a government instrumentality vested with
issued notices of levy and warrants of levy on the Airport corporate powers to perform efficiently its governmental
Lands and Buildings. The Mayor of the City of Parañaque functions. MIAA is like any other government instrumentality,
threatened to sell at public auction the Airport Lands and the only difference is that MIAA is vested with corporate
Buildings should MIAA fail to pay the real estate tax powers.
delinquency.
When the law vests in a government instrumentality
MIAA filed with the Court of Appeals an original corporate powers, the instrumentality does not become a
petition for prohibition and injunction, with prayer for corporation. Unless the government instrumentality is
preliminary injunction or temporary restraining order. The organized as a stock or non-stock corporation, it remains a
petition sought to restrain the City of Parañaque from government instrumentality exercising not only governmental
imposing real estate tax on, levying against, and auctioning but also corporate powers. Thus, MIAA exercises the
for public sale the Airport Lands and Buildings. governmental powers of eminent domain, police authority
and the levying of fees and charges. At the same time, MIAA
Paranaque’s argument: exercises “all the powers of a corporation under the
Corporation Law, insofar as these powers are not
Section 193 of the Local Government Code inconsistent with the provisions of this Executive Order.”
expressly withdrew the tax exemption privileges of
“government-owned and-controlled corporations” upon the 2. Airport Lands and Buildings of MIAA are Owned by the
effectivity of the Local Government Code. Respondents also Republic
argue that a basic rule of statutory construction is that the
express mention of one person, thing, or act excludes all a. Airport Lands and Buildings are of Public Dominion
others. An international airport is not among the exceptions
mentioned in Section 193 of the Local Government Code. The Airport Lands and Buildings of MIAA are
Thus, respondents assert that MIAA cannot claim that the property of public dominion and therefore owned by the
Airport Lands and Buildings are exempt from real estate tax. State or the Republic of the Philippines.

MIAA’s argument: No one can dispute that properties of public


dominion mentioned in Article 420 of the Civil Code, like
Airport Lands and Buildings are owned by the “roads, canals, rivers, torrents, ports and bridges constructed
Republic. The government cannot tax itself. The reason for by the State,” are owned by the State. The term “ports”
tax exemption of public property is that its taxation would not includes seaports and airports. The MIAA Airport Lands and
inure to any public advantage, since in such a case the tax Buildings constitute a “port” constructed by the State. Under
debtor is also the tax creditor. Article 420 of the Civil Code, the MIAA Airport Lands and
Buildings are properties of public dominion and thus owned
ISSUE: by the State or the Republic of the Philippines.

Whether Airport Lands and Buildings of MIAA are exempt The Airport Lands and Buildings are devoted to
from real estate tax under existing laws public use because they are used by the public for
international and domestic travel and transportation. The fact
RULING: that the MIAA collects terminal fees and other charges from

 the public does not remove the character of the Airport
Yes. Ergo, the real estate tax assessments issued Lands and Buildings as properties for public use.
by the City of Parañaque, and
all proceedings taken pursuant to such assessments, are The charging of fees to the public does not
void. determine the character of the property whether it is of public
dominion or not. Article 420 of the Civil Code defines
1. MIAA is Not a Government-Owned or Controlled property of public dominion as one “intended for public use.”
Corporation The terminal fees MIAA charges to passengers, as well as
the landing fees MIAA charges to airlines, constitute the bulk
of the income that maintains the operations of MIAA. The
collection of such fees does not change the character of
MIAA as an airport for public use. Such fees are often
termed user’s tax. This means taxing those among the public
who actually use a public facility instead of taxing all the
public including those who never use the particular public
facility.

b. Airport Lands and Buildings are Outside the Commerce of 4. Quezon City Govt v. BayanTel Corp., GR N0. 162015,
Man March 6, 2006

The Court has also ruled that property of public FACTS:


dominion, being outside the commerce of man, cannot be
the subject of an auction sale. Bayan Telecommunications, Inc. (Bayantel) is a
legislative franchise holder under Republic Act (Rep. Act) No.
Properties of public dominion, being for public use, 3259 to establish and operate radio stations for domestic
are not subject to levy, encumbrance or disposition through telecommunications, radiophone, broadcasting and
public or private sale. Any encumbrance, levy on execution telecasting.
or auction sale of any property of public dominion is void for
being contrary to public policy. Essential public services will Sec. 14, RA 9259 hereof grants the said entity an
stop if properties of public dominion are subject to exemption on its real estate, buildings and personal property
encumbrances, foreclosures and auction sale. This will which are directly and exclusively used to its franchise from
happen if the City of Parañaque can foreclose and compel real property tax.
the auction sale of the 600-hectare runway of the MIAA for
non-payment of real estate tax. However, Jan. 1, 1992, RA 7160 was passed
granting local government units within Metro Manila the
c. MIAA is a Mere Trustee of the Republic power to levy tax on real properties. Sec. 234 of the same
code, also withdrew any exemption from realty tax granted to
MIAA is merely holding title to the Airport Lands and or enjoyed by all persons, natural or juridical.
Buildings in trust for the Republic. Section 48, Chapter 12,
Book I of the Administrative Code allows instrumentalities But barely few months afer the LGC took effect,
like MIAA to hold title to real properties owned by the Congress enacted RA 7633 amending Bayantel’s original
Republic. n MIAA’s case, its status as a mere trustee of the franchise and restored its exemption.
Airport Lands and Buildings is clearer because even its
executive head cannot sign the deed of conveyance on 1993, the government of the Quezon City also
behalf of the Republic. Only the President of the Republic enacted its Quezon City Revenue Code, pursuant to the
can sign such deed of conveyance. taxing power vested on local government units and pursuant
to the withdrawal of exemption from real property tax under
d. Transfer to MIAA was Meant to Implement a the LGC it issued new tax declarations for Bayantel’s real
Reorganization properties in Quezon City by the City Assessor and were
received by Bayantel.
The transfer of the Airport Lands and Buildings from
the Bureau of Air Transportation to MIAA was not meant to The Quezon City Treasurer sent out notices of
transfer beneficial ownership of these assets from the delinquency for the total amount of 43M followed by the
Republic to MIAA. The purpose was merely to reorganize a issuance of several warrants of levy against Bayantel’s
division in the Bureau of Air Transportation into a separate properties preparatory to their sale at a public auction.
and autonomous body. The Republic remains the beneficial
owner of the Airport Lands and Buildings. MIAA itself is ISSUE:
owned solely by the Republic. No party claims any
ownership rights over MIAA’s assets adverse to the Whether or not Bayantel’s real properties in Quezon
Republic. City are still exempt from real property taxes under its
legislative franchise.
e. Real Property Owned by the Republic is Not Taxable

Sec 234 of the LGC provides that real property HELD:


owned by the Republic of the Philippines or any of its
political subdivisions except when the beneficial use thereof YES. It may be true that with the LGC taking effect,
has been granted, for consideration or otherwise, to a Bayantel’s exemption from real estate taxes for properties of
taxable person following are exempted from payment of the whatever kind located within the Metro manila area was, by
real property tax. force expressly withdrawn. But, it was not long thereafter,
that Congress passed another law, RA 7633 amending
However, portions of the Airport Lands and Buildings that Bayantel’s original franchise. The original franchise
MIAA leases to private entities are not exempt from real exemption which was repealed by the LGC was expressly
estate tax. For example, the land area occupied by hangars revived under RA 7633.
that MIAA leases to private corporations is subject to real
estate tax.
In concrete terms, the realty tax exemption enjoyed
by Bayantel under its original franchise, but subsequently A Notice of Levy and Warrant by Distraint (NLWD)
withdrawn by force of Sec. 234 of the LGC, has been was issued and served against FELS seeking to collect real
restored with the passage of RA 7633. property taxes amounting to 232 million pesos.


Although Quezon City passed its revenue code The CBAA lifted the order of levy and distraint
pursuant to the mandate of the LGC to subject to real before it issued a decision finding the power barges exempt
property tax all properties owned by persons, whether from real property tax. Ruling in favor of FELS and NPC, the
natural or juridical who were previously exempted, RA 7633 CBAA reasoned that the power barges belong to NPC.
was however enacted subsequent to the LGC which restored
Bayantel’s exemption. Hence with respect to its properties Province of Batangas wants to nullify the decision
which are actually, directly and exclusively used in the of CBAA for having no jurisdiction over the appeal due to
pursuit of its franchise, RA 7663 removed Bayantel from failure of FELS to file it within the period provided by law.
being subjected to LGU’s delegated taxing power.
ISSUES: 
1. Are the barges real property, thus, subject to real property
taxation?
2. Should the realty tax be paid by FELS despite agreement
5. FELS Energy, Inc. v. Province of Batangas, G.R. No. between NPC and FELS regarding responsibility in payment
168557, February 16, 2007 thereof?

One-liner: The mere undertaking of petitioner NPC under RULING:


Section 10.1 of the Agreement, that it shall be responsible for 

the payment of all real estate taxes and assessments, does 1. Yes, they are real property.
not justify the exemption. The privilege granted to petitioner
NPC cannot be extended to FELS. The covenant is between Article 415 (9) of the New Civil Code provides that [d]ocks
FELS and NPC and does not bind a third person not privy and structures which, though floating, are intended by their
thereto, in this case, the Province of Batangas. nature and object to remain at a fixed place on a river, lake,
or coast are considered immovable property. Thus, power
barges are categorized as immovable property by
FACTS:  destination, being in the nature of machinery and other
implements intended by the owner for an industry or work
NPC entered into a lease contract with Polar which may be carried on in a building or on a piece of land
Energy over power barges.  NPC agreed to be responsible and which tend directly to meet the needs of said industry or
for the payment of all taxes, fees, charges or levies to which work.
Polar may become subject to in relation to the performance 

of its obligations under the agreement. Later, Polar assigned 2. Yes, because the owner of the taxable properties is
its rights under the contract to FELS.
 FELS.

Province of Batangas sent FELS an assessment of It follows then that FELS cannot escape liability from the
real property taxes on the power barges, covering also those payment of realty taxes by invoking its exemption in Section
due for 1994, amounting to 56 million per annum. FELS told 234 (c) of R.A. No. 7160. The law states that, to be exempt,
NPC about the assessment and FELS gave NPC full power the machinery must be actually, directly and exclusively used
and authority to represent it in any conference regarding the by the GOCC.

real property assessment of the Provincial Assessor.
 


 The mere undertaking of petitioner NPC under Section 10.1
NPC sought reconsideration of the assessment. It of the Agreement, that it shall be responsible for the payment
was denied and NPC was advised to pay.  NPC filed a of all real estate taxes and assessments, does not justify the
petition with the Local Board of Assessment Appeals (LBAA) exemption. The privilege granted to petitioner NPC cannot
for the setting aside of the assessment and the declaration of be extended to FELS. The covenant is between FELS and
the barges as non-taxable items.
 NPC and does not bind a third person not privy thereto, in

 this case, the Province of Batangas.
The Department of Finance (DOF) rendered an
opinion that the power barges were not real property. Despite
this, the LBAA ruled that the power plant facilities are
considered real property for taxation purposes because they
are installed at a specific location with a character of
permanency.

Also, the LBAA said that NPC cannot extend its


exemption to FELS by mere agreement and FELS, a private
corporation that owns the barges, is being taxed, not the
NPC.  FELS went up to the Central Board of Assessment
Appeals (CBAA).
6. NPC vs. Central Board of Assessment Appeals, GR Agreement, not sufficient to support its claim for tax
No. 171470, January 30, 2009 exemption.

FACTS:

First Private Power Corporation (FPPC) entered into a build- 7. NPC v. Quezon Power, G.R. No. 171586, July 15, 2009
operate-Transfer (BOT) agreement with NAPOCOR for the
construction of Bauang Diesel Power Plant and creation of
Bauang Power Plant Corporation (BPPC). The pertinent Doctrinal Pronouncements/one liners:
provisions of the BOT agreement, include among others.
Who may appeal a real property tax assessment? –
2.03 NAPOCOR xxx shall be responsible for the payment of Those who have legal interest.
all real estate taxes and assessments, rates, and other Legal interest is defined as interest in property or a claim
charges in respect of the site and the buildings and cognizable at law, equivalent to that of a legal owner who
improvements thereon.’’. has legal title to the property. Given this definition, Napocor
is clearly not vested with the requisite interest to protest the
The Municipal assessor of Bauang issued a Notice of tax assessment, as it is not an entity having the legal title
Assessment and Tax bill to BPPC. over the machineries. It has no solid claim of ownership or
NAPOCOR sought tax exemption on the basis of Sec. 234 even of use and possession of the machineries.
(c) of R.A. No. 7160
Relevant Facts:
ISSUE:
Whether the GOCC under the terms of the BOT be deemed The Province of Quezon assessed Mirant Pagbilao
the actual, direct, and exclusive user of machineries and Corporation (Mirant) for unpaid real property taxes in the
equipment for tax exemption purposes? If not, can it pass on amount of ₱1.5 Billion for the machineries located in its
its tax-exempt status to its BOT partner, a private power plant in Pagbilao, Quezon. National Power
corporation, through the BOT agreement? Corporation (Napocor), which entered into a Build-Operate-
Transfer (BOT) Agreement (entitled Energy Conversion
HELD: Agreement) with Mirant, was furnished a copy of the tax
assessment.
No. Neither can NAPOCOR pass its tax exemption status to
its BOT partner. Napocor protested the assessment before the Local
NAPOCOR’s basis for its claimed exemption, Section 234(c) Board of Assessment Appeals (LBAA), claiming entitlement
of the LGC is clear and not at all ambiguous in its term. to the tax exemptions provided under Section 234 of the
Exempt from real property taxation are: Local Government Code (LGC), which states:
a. All machineries and equipment
Section 234. Exemptions from Real Property Tax. –
b. Actually, directly and exclusively used The following are exempted from payment of the
real property tax:
c. [Local water districts and) government-owned- or- (c) All machineries and equipment that are actually,
controlled corporations enagaged in the (supply and directly, and exclusively used by local water districts
and government-owned or –controlled corporations
distribution of water and/or] generation and
engaged in the supply and distribution of water and/
transmission of electric power or generation and transmission of electric power;
(e) Machinery and equipment used for pollution
By BOT’s express terms, BPPC has complete control and environmental protection.
ownership both legal and beneficial of the project, including
the machineries and equipment used, subject only to the However, assuming that it cannot claim the above
transfer of these properties without cost to NAPOCOR after tax exemptions, Napocor argued that it is entitled to certain
the lapsed of period agreed upon. As agreed upon, BPPC tax privileges, namely:
provided the funds for the construction of the power plant,
including the machineries and equipment needed for the (a) the lower assessment level of 10% under
power generation; thereafter, it actually operated and still Section 218(d) of the LGC for government-owned
operates the power plant, uses its machineries and and controlled corporations engaged in the
equipment, and received payment for these activities and the generation and transmission of electric power,
electricity generated under defined compensation scheme. instead of the 80% assessment level for
Notably, BPPC- as owner-user- is responsible for any defect commercial properties imposed in the assessment
in the machineries and equipment letter; and
(b) an allowance for depreciation of the subject
Consistent with the BOT concept and as implemented, machineries under Section 225 of the LGC.
BPPC, the owner-manager-operator of the project is the
actual user of its machineries and equipment. BPPC’s To prove that it had legal interest in the taxed machineries,
ownership and use of such are actual, direct, and immediate, Napocor relied on:
while NAPOCOR’s is contingent and at this stage of the BOT
(1) the stipulation in the BOT Agreement that authorized the
transfer of ownership to Napocor after 25 years;
(2) its authority to control and supervise the construction and
operation of the power plant; and
(3) its obligation to pay for all taxes that may be incurred, as
provided in the BOT Agreement

Issue:
(1) Can Petitioner file the protest against the real property
tax assessment?

(2) Can Petitioner claim exemption given the BOT
arrangement with Mirant?
(3) Is payment under protest required before an appeal to
the LBAA is made?

SC Ruling:

(1) NO. The two entities vested with personality to contest an


assessment are (a) the owner or (b) the person with legal
interest in the property. NPC is neither the owner nor the
possessor/user of the subject machineries even if it will
acquire ownership of the plant at the end of 25 years. The
Court said that legal interest should be an interest that is
actual and material, direct and immediate, not simply
contingent or expectant. While the Petitioner does indeed
assume responsibility for the taxes due on the power plant
and its machineries, the tax liability referred to is the liability
arising from law that the local government unit can rightfully
and successfully enforce, not the contractual liability that is
enforceable between the parties to a contract. The local
government units can neither be compelled to recognize the
protest of a tax assessment from the Petitioner, an entity
against whom it cannot enforce the tax liability.

(2) NO. To successfully claim exemption under Section 234


(c) of the LGC, the claimant must prove two elements: a) the
machineries and equipment are actually, directly, and
exclusively used by local water districts and government-
owned or controlled corporations; and b) the local water
districts and government-owned and controlled corporations
claiming exemption must be engaged in the supply and
distribution of water and/or the generation and transmission
of electric power. Since neither the Petitioner nor Mirant
satisfies both requirements, the claim for exemption must
fall. 


(3) YES. If a taxpayer disputes the reasonableness of an


increase in a real property tax assessment, he is required to
"first pay the tax" under protest. The case of Ty does not
apply as it involved a situation where the taxpayer was
questioning the very authority and power of the assessor,
acting solely and independently, to impose the assessment
and of the treasurer to collect the tax. A claim for tax
exemption, whether full or partial, does not question the
authority of local assessors to assess real property tax.
year period " refers to administrative claims for refund or
credit 7led with the Commissioner of Internal Revenue, not
COURT OF TAX APPEALS
to appeals made before the CTA.

ITC, the petitioner’s judicial claims were filed on


Apr. 20, 2006 and Dec. 27, 2006 which are way beyond the
1. Steag State Power, Inc. vs. CIR, G.R. No. 205282. 30-day period to appeal. Hence, the CTA lost its jurisdiction
January 14, 2019 over the petitions.

Doctrinal Pronouncements/one liners: A claim for unutilized input value-added tax is in the nature of
Observance of the 120+30-day period is crucial in filing an a tax exemption. Thus, strict adherence to the conditions
appeal before the CTA.
 prescribed by the law is required of the taxpayer. Refunds
need to be proven and their application raised in the right
Facts: manner as required by law. Here, noncompliance with the
Steag State Power, a domestic corporation primarily 120+30-day periods is fatal to the taxpayer's judicial claim.
engaged in power generation and sale of electricity to the Hence, the Court of Tax Appeals En Banc properly sustained
NPC is registered with the BIR as a VAT taxpayer. the Special First Division's dismissal of the Petition for lack of
SSP started building its power plant and during the jurisdiction.
construction, filed its quarterly VAT returns from the 1st to the
4th quarter of 2004. It later amended its VAT returns for the
taxable quarters and likewise filed the 2005 quarterly VAT
returns. 

2. Team Sual Corporation vs. CIR, G.R. No. 201225-26 /
SSP filed before the BIR administrative claims for refund of 201132 / 201133 April 18, 2018
its allegedly unutilized input VAT payments on capital goods
for 2004 and 2005 in the amount of P670,950,937.97. Doctrinal Pronouncements/one liner: Before a judicial
Due to the inaction of the CIR on the said admin claims, SSP claim for refund may be filed with the CTA either of the two
filed a Petition for Review on Certiorari before the CTA for its must happen: (1) the full or partial denial of the claim within
claims for refund for the taxable year 2004 and 2005. the 120-day period, or (2) the lapse of the 120-day period
However, the CTA denied the petitions due to insufficiency of without the CIR having acted on the claim. It is only from the
evidence and held that the claims were filed late and the happening of either one may a taxpayer-claimant file its
others were prematurely filed. The CTA also denied the 2nd judicial claim for refund or tax credit for unutilized input VAT.
judicial claim for failure to prove that its purchases and If not observed, the judicial claim is premature and CTA will
importations related to the claimed input tax payments were have no jurisdiction to act on it.
treated as capital goods in its books of accounts and were
subjected to depreciation. [Note: Don’t mind the values/amounts; I just included it for
better presentation of the claims. The important numbers are
The CTA Special 1st Division dismissed the consolidated the date of filing of claims for refund/tax credit and the time
cases for lack of jurisdiction and further denied the appeal for of filing of appeal to CTA on the counting of period when
having been filed late. filing is allowed.]
Petitioner insists that its claims are timely. That although filed
beyond the 120+30-day period, they were nonetheless filed Relevant Facts:
within the 2-year period. Team Sual Corp. (TSC) is a VAT-registered
domestic corporation (principal office at Brgy. Pangascasan,
Issue: WON SSP timely fi led its judicial claim for refund. Sual, Pangasinan) principally engaged in the business of
power generation and its sale to the National Power
Ruling: Corporation (NPC) under a Build, Operate, and Transfer
scheme. It was originally registered under a different name
No. Sec. 112 of the Tax Code provides that the but was 3 times until it became "Team Sual."
taxpayer may appeal the Commissioner’s denial or inaction
only within 30 days upon receipt of the denial of the claim, or TSC filed with the BIR RDO an application for zero-
when the 120-day period to decide on the claim expires. rating from its sale of power generation services to NPC for
the taxable year (TY) 2001. This was approved. VAT returns
Under the CTAs Charter, the Commissioner's were filed for the 4 quarters of taxable year 2001.
inaction on a claim for refund is considered a "denial" of the
claim, which may be appealed before the Court of Tax 1st quarter input VAT: P37,985,009.25; 2nd quarter
Appeals within 30 days from the expiration of the period fixed input VAT: P29,298,556.12; 3 rd quarter input VAT:
by law for action. P32,869,835.40; 4th quarter input VAT: P32,869,835.40; Total
excess input VAT: P166,720,367.79.
Furthermore, jurisprudence provides that
observance of the 120+30-day period is crucial in filing an March 20, 2003 – TSC filed a claim for refund or tax
appeal before the CTA and claims for refund of excess input credit with BIR (for the P166,720,367.79) for its unutilized
tax are governed by Sec. 112 and not by Sec. 229. The 2- input VAT for TY 2001
March 31, 2003 – without waiting for the resolution
of its claim, it filed with the CTA Division an appeal praying The petitions are bereft of merit.
for the refund or issuance of a tax credit certificate (TCC) for
its alleged unutilized input VAT for the 1st quarter of TY For the CTA to acquire jurisdiction over a judicial
2001. claim for refund or tax credit arising from unutilized input
VAT, the said claim must first comply with the mandatory
July 23, 2003 – another appeal was filed for refund 120+30-day waiting period. Any judicial claim for refund or
or issuance of a TCC for its alleged unutilized input VAT for tax credit filed in contravention of said period is rendered
t h e 2nd, 3rd, a n d 4th q u a r t e r s o f T Y 2 0 0 1 ( o f premature, depriving the CTA of jurisdiction to act on it.
P128,735,358.54). Pursuant to Section 112, Subsections (A) and (C) of
the National Internal Revenue Code (NIRC) of 1997, the
The CTA Division partially granted the claim and procedure in claiming a refund or tax credit of unutilized input
allowed refund of unutilized input VAT for the 1st, 3rd, and 4th VAT are as follows:
quarters of TY 2001, but disallowed refund for the 2nd 

quarter. It ruled that the claim for 2nd quarter did not fall Sec. 112.  Refunds or Tax Credits of Input Tax. —
within the 2-year prescriptive period. (A)  Zero-rated or Effectively Zero-rated Sales. — Any VAT-
Only P117,330,550.62 from Mirant Sual Corp was registered person, whose sales are zero-rated or effectively
allowed to be refunded or to have a TCC issued in its favor, zero-rated may, within two (2) years after the close of the
representing unutilized input VAT from its domestic taxable quarter when the sales were made, apply for the
purchases of goods and services and importation of goods issuance of a tax credit certificate or refund of creditable
attributable to its effectively zero-rated sales to the National input tax due or paid attributable to such sales, except
Power Corporation for the 1st, 3rd, and 4th quarters of TY transitional input tax, to the extent that such input tax has not
2001. been applied against output tax: Provided, however, That in
the case of zero-rated sales under Section 106(A)(2)(a)(1),
CIR fi led a Motion for Partial Reconsideration for (2) and (b) and Section 108 (B)(1) and (2), the acceptable
denial of the entire claim for refund. It argued that 1) TSC foreign currency exchange proceeds thereof had been duly
has not suffi ciently proven its entitlement to refund and 2) accounted for in accordance with the rules and regulations of
that the CTA had no jurisdiction to act on the judicial claim for the Bangko Sentral ng Pilipinas (BSP): Provided, further,
refund because the same was prematurely fi led. That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale
Motion for Partial Reconsideration by TSC prayed of goods of properties or services, and the amount of
that the CTA, in addition to the amount already granted, creditable input tax due or paid cannot be directly and
refund: (1) P29,298,556.12, the input VAT for the 2nd quarter entirely attributed to any one of the transactions, it shall be
of TY 2001, and (2) P12,761,224.50, input VAT on local allocated proportionately on the basis of the volume of sales.
purchases of goods and services for the same year. Provided, finally, that for a person making sales that are
zero-rated under Section 108(B) (6), the input taxes shall be
CTA Division partially granted TSC's additional allocated ratably between his zero-rated and non-zero-rated
claim for refund. It denied the claim for input VAT on local sales.
purchases of goods and services, but allowed the refund for (C)  Period within which Refund or Tax Credit of Input Taxes
input VAT for the 2nd quarter of TY 2001. (Grant was reduced shall be Made. — In proper cases, the Commissioner shall
from P29,298,556.12 to P27,233,561.57 for failure to grant a refund or issue the tax credit certificate for creditable
substantiate the difference.) input taxes within one hundred twenty (120) days from the
date of submission of complete documents in support of the
TSC appealed to the CTA En Banc saying that the application filed in accordance with Subsections (A) hereof.
CTA Division erred in disallowing the amount for input VAT
In case of full or partial denial of the claim for
on local purchases of goods and services on the mere fact
tax refund or tax credit, or the failure on the part
that the pertinent supporting documents were issued under
of the Commissioner to act on the application
TSC's former name. It argues that a corporation's change of
within the period prescribed above, the taxpayer
name does not affect its identity or rights. Thus, it should still
affected may, within thirty (30) days from the
be entitled to claim the said input VAT.
receipt of the decision denying the claim or
after the expiration of the one hundred twenty
CTA En Banc granted TSC’s claim for refund of
day-period, appeal the decision or the unacted
i n p u t VAT f o r t h e 2 n d , 3 r d , a n d 4 t h q u a r t e r s
claim with the Court of Tax Appeals.
(P123,110,001.68). It also ruled that the CTA did not
acquire jurisdiction over the claim for 1st quarter as it Any taxpayer seeking a refund/tax credit arising
had been filed prematurely. from unutilized input VAT from zero-rated or effectively

 zero-rated sales should first file an initial administrative
Issue: claim with the BIR. This claim must be filed within two
Did the CTA have jurisdiction over the claims for refund for years after the close of the taxable quarter when the sales
the 4 quarters of TY 2001? were made.

SC Ruling: CIR is then given a period of 120 days from the


There was no jurisdiction over the 1st quarter, submission of complete documents in support of the
but there was for the other 3 quarters. application to either grant or deny the claim.
If the claim is denied or it was not acted on within motion for partial reconsideration with the CTA Division
the 120-day period, the taxpayer-claimant is given a period dated July 3, 2009.
of 30 days to file a judicial claim via petition for review with
In any case, even if the CIR failed to raise the
the CTA.
issue of TSC's non-compliance with the 120-day waiting
As such, the law provides for two scenarios period at the first instance, such failure would not operate
before a judicial claim for refund may be filed with the CTA: to vest the CTA with jurisdiction over TSC's judicial claims
(1) the full or partial denial of the claim within the 120-day for refund. It has been settled that a judicial claim for
period, or (2) the lapse of the 120-day period without the refund which does not comply with the 120-day mandatory
CIR having acted on the claim. It is only from the waiting period renders the same void.
happening of either one may a taxpayer-claimant file its
No right can be claimed or acquired from it,
judicial claim for refund or tax credit for unutilized input
notwithstanding the failure of a party to raise it as a ground
VAT. If not observed, the judicial claim is premature and
for dismissal.
CTA will have no jurisdiction to act on it.
It is hornbook doctrine that a person
“Failure to comply with the 120-day waiting period
committing a void act contrary to a mandatory
violates a mandatory provision of law. It violates the
provision of law cannot claim or acquire any
doctrine of exhaustion of administrative remedies and
right from his void act. A right cannot spring
renders the petition premature and thus without a cause of
in favor of a person from his own void or
action, with the effect that the CTA does not acquire
illegal act.
jurisdiction over the taxpayer's petition.”
Being a mere scrap of paper, TSC's judicial claim
In the instant case, TSC filed its administrative
for refund filed on March 31, 2003 covering the 1st quarter
claim for refund for taxable year 2001 on March 20, 2003,
of TY 2001 cannot be the source of any rights.
well within the two-year period provided for by law.
SC agreed with the ruling of the CTA En Banc
TSC then filed two separate judicial claims for
which held that between the March 31 and the July 23
refund:
petitions for review filed by TSC, the CTA Division only
1st claim – March 31, 2003 for the 1st quarter of acquired jurisdiction over the latter.
2001
CTA’s factual findings, with respect to the amount
2nd claim – July 23, 2003 for the 2nd, 3rd, and 4th of duly substantiated excess input VAT for said periods, is
quarters of 2001 given full accord.
Administrative claim having been filed on March It is well settled that factual findings of the CTA
20, 2003, the CIR had 120 days or until July 18, 2003 to when supported by substantial evidence, will not be
act on it. Thus, the first judicial claim was premature disturbed on appeal. Due to the nature of its functions, the
because TSC filed it a mere 11 days after filing its tax court dedicates itself to the study and consideration of
administrative claim. tax problems and necessarily develops expertise thereon.
Unless there has been an abuse of discretion on its part,
The second judicial claim filed by TSC was filed
the Court accords the highest respect to the factual
on time because it was filed on July 23, 2003 or five days
findings of the CTA.
after the lapse of the 120-day period. This complied with
the mandatory waiting period of 120 days and was filed Tax refunds or tax credits, just like tax
within the prescriptive period of 30 days from the CIR's exemptions, are strictly construed against the taxpayer-
action or inaction. claimant. A claim for tax refund is a statutory privilege and
the mere existence of unutilized input VAT does not entitle
Therefore, the CTA division only acquired
the taxpayer, as a matter of right, to it. As such, the rules
jurisdiction over TSC's second judicial claim for refund
and procedure in claiming a tax refund should be faithfully
covering its second, third, and fourth quarters of taxable
complied with. Non-compliance with the pertinent laws
year 2001.Dc
should render any judicial claim fatally defective.
TSC insists that assuming arguendo that the 120-
day period was indeed mandatory and jurisdictional, the
issue of its non-compliance with said period, as a ground
to deny its claim, was already waived since the CIR did not
raise it in the proceedings before the CTA Division. It
claims that non-compliance with the 120-day period prior
to the filing of a judicial claim with the CTA merely results
in a lack of cause of action, a ground which may be
waived for failure to timely invoke the same.
However, it is apparent from the records that the
issue of TSC's non-compliance with the 120-day waiting
period has been raised by the CIR throughout the
pendency of the entire case. Records reveal that the CIR
raised it at the earliest possible opportunity, when it filed its

 forum shopping, as the petition raised the same facts and
3. Philippine Ports Authority v. The City of Davao, issues as in its appeal before the Court of Tax Appeals.
Sangguniang Panglungsod ng Davao City, City Mayor of Hence, CA upheld the authority of Davao City in taxing,
Davao City, City Treasurer of Davao City, City Assessor auctioning, and selling PPA’s properties to satisfy the latter’s
of Davao City, and Central Board of Assessment Appeals real property tax liabilities.
(CBAA)
[G.R. No. 190324, June 6, 2018]
Thus, PPA filed a petition for review under Rule 45
One-liner : Urgency does not remove the Central Board of before the SC, assailing CA’s decision.
Assessment Appeals’ decision from the exclusive appellate
jurisdiction of the Court of Tax Appeals.
Petitioner  argues that it did not commit  forum
shopping, asserting that the only element of forum shopping
Relevant Facts:
present as between the appeals fi led before the Court of Tax
Appeals and the Court of Appeals is identity of parties. Its
The Philippine Ports Authority received a letter from
arguments regarding the jurisdiction of the Court of Appeals
the City Assessor of Davao for the  assessment and
are inscrutable but appear to maintain that the Court of
collection of real property taxes  against its administered
Appeals has jurisdiction on the basis of urgency. It also avers
properties. It appealed the assessment to the Local Board of
that  the Court of Appeals erred when it “ruled, declared
Assessment Appeals. While the case was pending, the City
and upheld the authority” of respondent City of Davao to
of Davao posted a notice of sale of delinquent real
tax, auction, and sell its properties. It points out that the
properties, including the three (3) properties subject of
Supreme Court has held that as a government
this case (the quay, parcel of land and administrative
instrumentality, its properties cannot be taxed by local
building).
government.
The Local Board of Assessment Appeals dismissed
Respondents  insist that forum shopping exists,
the Philippine Ports Authority’s appeal for having been filed
considering that the elements of litis pendentia were present
out of time, and for its lack of jurisdiction on the latter’s tax
when the case was fi led with the Court of Appeals. On the
exemption. The Philippine Ports Authority appealed before
question of the propriety of the imposition of tax on
the Central Board of Assessment Appeals, but this appeal
petitioner’s properties, respondents claim that there was an
was denied. Thus, it filed an appeal with the Court of Tax
error in the Court of Tax Appeals Decision. Thus, while they
Appeals.
maintain that this case is not the proper case to rectify the
error of the Court of Tax Appeals, they ask that this Court lay
The Philippine Ports Authority claimed that it did not
down a jurisprudential pronouncement on the real property
receive any warrant of levy for the three (3) properties which
tax treatment of petitioner’s properties.
were sold to respondent City of Davao, or any notice that
they were going to be auctioned. It was informed that it had
ISSUES:
one (1) year from the date of registration of the sale within
which to redeem the properties by paying the taxes,
1. Whether or not the Court of Appeals had jurisdiction to
penalties, and incidental expenses, plus interest at the rate
issue the injunctive relief prayed for by PPA.
of 2% per month on the purchase price.


Thus, it filed a  petition for certiorari with the 2. Whether or not the PPA committed a violation of the rules
Court of Appeals, arguing that the City of Davao’s taxation against forum shopping when it filed the case to CA.
of its properties and their subsequent auction and sale to
satisfy the alleged tax liabilities were without or in excess of
HELD:
its jurisdiction and contrary to law. It argued that it had no
other speedy and adequate remedy except to file a petition
1. NO. CA had no jurisdiction to issue the injunctive
for certiorari with the Court of Appeals.
relief prayed for by PPA.
In real property tax cases such as this, the remedy
While the petition was pending with the Court of
of a taxpayer depends on the stage in which the local
Appeals, the Court of Tax Appeals promulgated a
government unit is enforcing its authority to impose real
decision, granting the Philippine Ports Authority’s
property taxes. Moreover, as jurisdiction is conferred by law,
appeal,  ordering that its properties and buildings in the site
reference must be made to the law when determining which
are EXEMPT from real estate tax imposed by Davao City,
court has jurisdiction over a case, in relation to its factual and
and voiding all the real estate tax assessments issued by
procedural antecedents.
Davao City on such properties.

Thereafter, the Court of Appeals dismissed the Petitioner has failed to cite any law supporting its
petition, and held that the Court of Tax Appeals had contention that the Court of Appeals has jurisdiction over this
exclusive jurisdiction to determine the matter  and said case. On the other hand,  Section 7, paragraph (a)(5) of
that the Philippine Ports Authority “should have applied for Republic Act No. 1125, as amended by Republic Act No.
the issuance of writ of injunction or prohibition before the 9282, provides that the Court of Tax Appeals has
Court of Tax Appeals.” It further found the petition dismissible exclusive appellate jurisdiction over: Decisions of the
on the ground that the Philippine Ports Authority committed Central Board of Assessment Appeals in the exercise of its
appellate jurisdiction over cases involving the assessment 

and taxation of real property originally decided by the 4. Duty Free Philippines vs. BIR, G.R. No 197228,
provincial or city board of assessment appeals October 8, 2014.

The Central Board of Assessment Appeals Decision FACTS:


assailed by PPA before the Court of Appeals was rendered in Petitioner is a merchandising system established
the exercise of its appellate jurisdiction over the real property by the Department of Tourism, pursuant to EO 46. Petitioner
tax assessment of its properties. Clearly, this falls within the sought a clarification of its exemption from the expanded
above-cited provision. Indeed, there is no dispute that this withholding tax under R.R.No. 6-94 by credit card
Central Board of Assessment Appeals decision companies. It argued that as a tax-exempt establishment, it
constitutes one of the cases covered by the Court of Tax should not be subjected to the 1/2% expanded withholding
Appeals’ exclusive jurisdiction. taxes on certain income payments that were withheld by
credit card companies. Petitioner also asked for the refund of
It is wrong for PPA to conclude that the CA could accumulated taxes withheld by credit card companies
have issued the relief prayed for despite the provisions of amounting to P1.8 million.
Republic Act No. 9282, considering its urgent need for
injunctive relief. Urgency does not remove the Central In response, BIR denied tax refund. It opined that
Board of Assessment Appeals decision from the EO No. 93 withdrew all the tax and duty incentives granted
exclusive appellate jurisdiction of the Court of Tax to government and public entities, including petitioner.
Appeals.  This is particularly true since, as properly Petitioner requested reconsideration, but respondent denied
recognized by the Court of Appeals, PPA could have, and the request. Petitioner filed an appeal with the Department of
should have, applied for injunctive relief with the Court of Tax Finance (DOF) which affirmed the BIR Ruling. Subsequent
Appeals, which has the power to issue the preliminary requests for reconsideration were likewise denied.
injunction prayed for.
Meanwhile, several assessment notices were sent
Even if the law had vested the Court of Appeals by respondent BIR to petitioner for deficiency income tax and
with jurisdiction to issue injunctive relief in real property tax VAT covering taxable years 1999 to 2002, which amounted
cases such as this, the Court of Appeals was still correct to P1,452,785,087.64. Petitioner filed its protest, but the
in dismissing the petition before it. Once a court protest was eventually denied by respondent. Thus, a
acquires jurisdiction over a case, it also has the power Petition for Review was filed with the CTA questioning the
to issue all auxiliary writs necessary to maintain and aforesaid assessments.
exercise its jurisdiction, to the exclusion of all other After trial, the CTA Special First Division rendered
courts. Thus, once the Court of Tax Appeals acquired the assailed Decision on 4 June 2010. The CTA Division
jurisdiction over petitioner’s appeal, the Court of found that petitioner was not a tax-exempt entity in the
Appeals would have been precluded from taking absence of an express grant of tax exemption, that petitioner
cognizance of the case. is liable to pay the aggregate amount of P1,036,956,477.90
representing income tax and VAT deficiencies, plus
2. YES. PPA committed forum shopping. deficiency and delinquency interests.
The rule against forum shopping is violated when a
party institutes more than one action based on the same Petitioner directly appealed to this Court under Rule
cause to increase its chances of obtaining a favorable 45 of the 1997 Rules of Civil Procedure, assailing the
outcome. Thus, when a party institutes a case while another aforesaid Decision and Resolution of the CTA Division. In its
case is pending, where there is an identity of parties and an Comment, respondent BIR raised the issue of the mode of
identity of rights asserted and relief prayed for such that appeal of petitioner, that petitioner chose the wrong mode of
judgment in one case amounts to res judicata in the other, it appeal by directly availing itself of the remedies before this
is guilty of forum shopping. Court without first elevating the case to the CTA en banc as
provided under Rule 16 of the Revised Rules of the CTA.
SC affirmed the Court of Appeals’ finding that the
rule against forum shopping was violated when petitioner ISSUE: Whether petitioner is correct in appealing directly to
filed its Petition for Certiorari despite its pending appeal the Supreme Court under Rule 45
before the Court of Tax Appeals
RULING: The Petition is fl awed with procedural infi rmity.
SC found that petitioner’s direct appeal to SC is fatal to its
claim.

The enactment of R.A. No. 9282,16 which took effect on 23


April 2004, elevated the rank of the CTA to the level of a
collegiate court, making it a co-equal body of the Court of
Appeals. The appeal of a CTA decision under Section 18 of
R.A. No. 1125 was also amended by R.A. No. 9282. Section
19 was added, and it reads as follows:

SEC. 18. Appeal to the Court of Tax Appeals En Banc. - No


civil proceeding involving matter arising under the National
Internal Revenue Code, the Tariff and Customs Code or the Petron led a petition for review before the CTA,
Local Government Code shall be maintained, except as contesting the allegedly erroneous classification of alkylate
herein provided, until and unless an appeal has been and the resultant imposition of excise tax arising from the
previously filed with the CTA and disposed of in accordance CIR's interpretation of Section 148 (e) of the NIRC.
with the provisions of this Act.
On February 13, 2013, the CTA issued the first
A party adversely affected by a resolution of a Division of the assailed Resolution, reversing its initial dismissal of Petron's
CTA on a motion for reconsideration or new trial, may file a petition for review and giving due course thereto. It explained
petition for review with the CTA en banc. that the controversy was not essentially about the
constitutionality or legality of CMC No. 164-2012 but a
SEC. 19. Review by Certiorari. - A party adversely affected question on the propriety of the interpretation of Section 148
by a decision or ruling of the CTA en banc may file with the (e) of the NIRC in reference to the tax treatment of Petron's
Supreme Court a verified petition for review on certiorari alkylate importation, which is within the CTA's jurisdiction to
pursuant to Rule 45 of the 1997 Rules of Civil Procedure. review. The CTA also held that the substantial and grave
(Emphasis supplied) damage and injury that would be suffered from the
threatened collection of excise tax warranted the non-
Furthermore, Section 2, Rule 4 of the Revised Rules of the exhaustion of administrative remedies and justified Petron's
CTA17 reiterates the exclusive appellate jurisdiction of the immediate resort to judicial action.
CTA en banc relative to the review of the court divisions’
decisions or resolutions on motion for reconsideration or new The CIR led a motion for reconsideration, which the
trial in cases arising from administrative agencies such as CTA denied in the second assailed Resolution dated May 8,
the BIR. 2013. Subsequently, the CIR elevated the matter to the Court
through a petition for certiorari, alleging that the CTA had no
Clearly, this Court is without jurisdiction to review decisions jurisdiction to take cognizance of a case involving the CIR's
rendered by a division of the CTA, exclusive appellate exercise of interpretative or quasi-legislative functions and
jurisdiction over which is vested in the CTA en banc. that there was yet no final decision by the COC that was
properly appealable to the CTA.
In this case, petitioner filed with this Court on 29
July 2011 the instant Petition from the denial of its Motion for In the July 15, 2015 Decision, the Court upheld the
Reconsideration by the Special First Division of the CTA. At CIR's position that the CTA could not take cognizance of the
that time, R.A. 9282 was already in effect, and it evidently case because the latter's jurisdiction to resolve tax disputes
provides that the CTA en banc shall have exclusive excluded the power to rule on the constitutionality or validity
jurisdiction over appeals from the decision of its divisions. A of a law, rule or regulation and that, in any case, it was
party adversely affected by the resolution of the CTA division premature to elevate a customs collector's assessment
may, on motion for reconsideration, file a petition for review without a prior protest and an appeal to the COC.
with the CTA en banc. Thereafter, the decision or ruling of Accordingly, the Court ordered the dismissal of Petron's
the CTA en banc may be elevated to this Court. Simply petition for review filed before the CTA. Dissatisfied, Petron
stated, no decision of the CTA division may be elevated to filed a motion for reconsideration dated October 5, 2015.
this Court under Rule 45 of the 1997 Rules of Civil
Procedure without passing through the CTA en banc. Issue:
Whether or not the Court's July 15, 2015 Decision,
In sum, this Court has no jurisdiction to review the which ordered the dismissal of Petron's petition for review
Decision and Resolution rendered by the Special First before the CTA on the grounds of lack of jurisdiction and
Division of the CTA. Thus, the instant Petition must fail. prematurity, should be reconsidered.

Ruling:
Yes, motion for reconsideration should be granted.

 Respondent Petron Corpotatio’s petition for review is hereby
5. CIR vs. CTA and Petron Corporation, G.R. No. 207843, declared to be within the jurisdiction of the CTA, which is
February 14, 2018 declared to resolve the case with dispatch.

Facts: It has been seemingly settled in the 2016 En Banc


On June 29, 2012, petitioner Commissioner of case of Banco De Oro v. Republic of the Philippines wherein
Internal Revenue (CIR) issued a Letter interpreting Section it was opined that: “Section 7 of Republic Act No. 1125, as
148 (e) of the (NIRC) and thereby, opining that "alkylate, amended, is explicit that, except for local taxes, appeals from
which is a product of distillation similar to naphtha, is subject the decisions of quasi-judicial agencies (Commissioner of
to tax." Internal Revenue, Commissioner of Customs, Secretary of
Finance, Central Board of Assessment Appeals, Secretary of
In implementation thereof, the Commissioner of Trade and Industry) on tax-related problems must be brought
Customs (COC) issued Customs Memorandum Circular exclusively to the Court of Tax Appeals.
(CMC) No. 164-2012 and in compliance assessed excise tax
on Petron's importation of alkylate. In other words, within the judicial system, the law
intends the Court of Tax Appeals to have exclusive
jurisdiction to resolve all tax problems. Petitions for writs of
certiorari against the acts and omissions of the said quasi-
judicial agencies should thus be filed before the Court of Tax RULING: YES
Appeals. - The law provides that the CTA has exclusive
appellate jurisdiction to review decisions, orders, or
Republic Act No. 9282, a special and later law than resolutions of the RTC in local tax cases originally
Batas Pambansa Blg. 129 provides an exception to the decided by them in their original or appellate
original jurisdiction of the Regional Trial Courts over actions jurisdiction. While there is no categorical statement
questioning the constitutionality or validity of tax laws or which provides that the CTA has jurisdiction over
regulations. Except for local tax cases, actions directly petitions for certiorari assailing interlocutory orders
challenging the constitutionality or validity of a tax law or issued by the RTC, Section 1, Art. 8 of the 1987
regulation or administrative issuance may be filed directly Constitution provides that lower courts have power to
before the Court of Tax Appeals. determine WON there has been a grave abuse of
discretion on the part of any branch or
Furthermore, with respect to administrative instrumentality of the Government.
issuances (revenue orders, revenue memorandum circulars, - In order for any appellate court to effectively exercise
or rulings), these are issued by the Commissioner under its its appellate jurisdiction, it must have the authority to
power to make rulings or opinions in connection with the issue, among others, a writ of certiorari. In
implementation of the provisions of internal revenue laws. transferring exclusive jurisdiction over appealed tax
Tax rulings, on the other hand, are official positions of the cases to the CTA, it can reasonable be assumed that
Bureau on inquiries of taxpayers who request clarification on the law intended to transfer also such power as is
certain provisions of the National Internal Revenue Code, deemed necessary, if not indispensable, in aid of
other tax laws, or their implementing regulations. Hence, the such appellate jurisdiction. There is no perceivable
determination of the validity of these issuances clearly falls reason why the transfer should only be considered
within the exclusive appellate jurisdiction of the Court of Tax as partial, not total.
Appeals under Section 7(1) of Republic Act No. 1125, as - SC already held in a case that “if a case may be
amended, subject to prior review by the Secretary of appealed to a particular court or judicial tribunal or
Finance, as required under Republic Act No. 8424. 27 body, then said court or judicial tribunal or body has
(Emphases supplied)” jurisdiction to issue the extraordinary writ of
certiorari, in aid of its appellate jurisdiction.”
- To rule otherwise would be confirming the exercise
by two judicial bodies, CA and the CTA, of jurisdiction
over basically the same subject matter — precisely
6. The City of Manila, etc. et al. v. Hon. Caridad H. Grecia- the split-jurisdiction situation which is anathema to
Cuerdo etc., et al, G.R. No. 175723. February 4, 2014. the orderly administration of justice.

ONE LINER: The CTA has jurisdiction over petitions for


certiorari in local tax cases decided by the RTC, in aid of its
appellate jurisdiction.
7. Smart Communications, Inc. v. Municipality of Malvar,
FACTS: Batangas, G.R. No. 20442. February 18, 2014.
- City of Manila through its Treasurer, Liberty Toledo,
assessed taxes against private respondent SM Mart SUMMARY:
Inc. et. al. Taxes due are pursuant to provisions of 

the Revised Revenue Code of Manila (RRCM) The Municipality of Malvar imposed an ordinance
- Because payment of taxes was a precondition for where it aims to regulate the establishment of special
their business permits, private respondents were projects. It assessed Smart an amount of 389,950.00 for the
constrained to pay the P 19,316,458.77 assessment telecommunications tower that the latter constructed in
under protest. Malvar. Smart contends that the same is a tax, and is unduly
- Respondents filed with the RTC the complaint oppressive and ultra vires. CTA dismissed the case for lack
“Refund or Recovery of Illegally and/or Erroneously of jurisdiction because the same is NOT a tax. Court agreed
Collected Local Business Tax, Prohibition with prayer with CTA, and held that LGUs have the power to impose
to issue TRO and writ of preliminary injunction” fees.
before Grecia’s sala alleging that the RRCM was
violative of limitations on double taxation. FACTS:
- RTC granted the application for writ of preliminary
injunction. MR having been denied, petitioners filed a Smart constructed a telecommunications tower
Special Civil Action for Certiorari under Rule 65. within the territorial jurisdiction of the Municipality. The
- CA dismissed the petition holding that the jurisdiction construction of the tower was for the purpose of receiving
is vested on the Court of Tax Appeals. (CTA). and transmitting cellular communications within the covered
area.
ISSUE:
Whether or not the CTA has jurisdiction over the On 30 July 2003, the Municipality passed
Special Civil Action for Certiorari assailing an interlocutory Ordinance No. 18, series of 2003, entitled "An Ordinance
order issued by the RTC in a local tax case. Regulating the Establishment of Special Projects."
regulate the installation and maintenance of physical
On 24 August 2004, Smart received from the Permit structures – Smart’s cell sites or telecommunications tower.
and Licensing Division of the Office of the Mayor of the
Municipality an assessment letter with a schedule of ISSUE:
payment for the total amount of P389,950.00 for Smart’s 1. WON the fees are taxes.
telecommunications tower. Due to the alleged arrears in the
payment of the assessment, the Municipality also caused the 2. WON CTA should have take cognizance of the case.
posting of a closure notice on the telecommunications tower.
HELD:
On 9 September 2004, Smart filed a protest, 1. NO. The fees are NOT taxes.
claiming lack of due process in the issuance of the 2. NO. CTA correctly refused to take cognizance of the case.
assessment and closure notice. In the same protest, Smart 3. WON the fees are unjust and unreasonable.
challenged the validity of Ordinance No. 18 on which the
assessment was based. Dispositive: WHEREFORE, the Court DENIES the petition.

In a letter dated 28 September 2004, the SO ORDERED.


Municipality denied Smart’s protest.
RATIO
RTC partially granted Smart’s petition, but did not Issue #1
rule on the legality of Ordinance No. 18. It declared that Since the main purpose of Ordinance No. 18 is to
Smart is only liable for fees starting October 1, 2003, and regulate certain construction activities of the identified
null and void insofar as the assessment made from 2001 to special projects, which included "cell sites" or
2003. MR denied. CTA denied. CTA MR also denied. CTA en telecommunications towers, the fees imposed in Ordinance
banc denied. CTA en banc likewise denied. No. 18 are primarily regulatory in nature, and not primarily
revenue-raising. While the fees may contribute to the
SMART’s arguments: revenues of the Municipality, this effect is merely incidental.
CTA erred in refusing to take cognizance of the Thus, the fees imposed in Ordinance No. 18 are not taxes.
case and for dismissing the case for lack of jurisdiction Progressive Development Corporation v. Quezon
considering the “unique” factual circumstances involved. City: if the generating of revenue is the primary purpose and
regulation is merely incidental, the imposition is a tax; but if
The fees imposed in Ordinance No. 18 are actually regulation is the primary purpose, the fact that incidentally
taxes since they are not regulatory but rather, revenue- revenue is also obtained does not make the imposition a tax.
raising. Victorias Milling Co., Inc. v. Municipality of Victorias:
Municipality is encroaching on the regulatory the purpose and effect of the imposition determine whether it
powers of the National Telecommunications Commission is a tax or a fee, and that the lack of any standards for such
(NTC). Smart cites Section 5(g) of Republic Act No. 7925 imposition gives the presumption that the same is a tax.
which provides that the NTC, in the exercise of its regulatory Ordinance No. 18 expressly provides for the
powers, shall impose such fees and charges as may be standards which Smart must satisfy prior to the issuance of
necessary to cover reasonable costs and expenses for the the specified permits, clearly indicating that the fees are
regulation and supervision of the operations of regulatory in nature.
telecommunications entities. Thus, Smart alleges that the
regulation of telecommunications entities and all aspects of These requirements are as follows:
its operations is specifically lodged by law on the NTC.
SECTION 5. Requirements and Procedures in Securing Preliminary
Malvar’s arguments: Development Permit.
Said Ordinance is not a tax ordinance but a The following documents shall be submitted to the SB Secretary in
regulatory fee imposed to regulate the “placing, stringing, triplicate:
a) zoning clearance
attaching, installing, repair and construction of all gas mains,
b) Vicinity Map
electric, telegraph and telephone wires, conduits, meters and
c) Site Plan
other apparatus, and provide for the correction, d) Evidence of ownership
condemnation or removal of the same when found to be e) Certificate true copy of NTC Provisional Authority in case of
dangerous, defective or otherwise hazardous to the welfare Cellsites, telephone or telegraph line, ERB in case of gasoline
of the inhabitant. station, power plant, and other concerned national agencies
f) Conversion order from DAR is located within agricultural zone.
It was also envisioned to address the foreseen g) Radiation Protection Evaluation.
"environmental depredation" to be brought about by these h) Written consent from subdivision association or the residence of
"special projects" to the Municipality. Pursuant to these the area concerned if the special projects is located within the
residential zone.
objectives, the Municipality imposed fees on various
i) Barangay Council Resolution endorsing the special projects.
structures, which included telecommunications towers.
SECTION 6. Requirement for Final Development Permit – Upon the
The fees are not imposed to regulate the expiration of 180 days and the proponents of special projects shall
administrative, technical, financial, or marketing operations apply for final [development permit] and they are require[d] to submit
of telecommunications entities, such as Smart’s; rather, to the following:
a) evaluation from the committee where the Vice Mayor refers the the BIR to refund TPI the amount of P8,088,151.07 only for
special project the 3rd and 4th quarters of 2001.
b) Certification that all local fees have been paid. Issues:
1. Whether the TPI complied with the 120+30 day
Even if the fees do not appear in Section 143 or any other
rule?
provision in the LGC, the Municipality is empowered to
impose taxes, fees and charges, not specifically enumerated
2. Whether TPI complied with the involving
in the LGC or taxed under the Tax Code or other applicable
law according to Section 186 of the LGC. Thus they don’t requirements?
encroach on NTC’s powers.
Ruling:
Issue #2 The Supreme Court ruled that, in a nutshell, the
Considering that the fees in Ordinance No. 18 are not in the rules on the determination of the prescriptive period for filing
nature of local taxes, and Smart is questioning the a tax refund or credit of unutilized input VAT, as provided in
constitutionality of the ordinance, the CTA correctly Sec. 112 of the Tax Code, are as follows:
dismissed the petition for lack of jurisdiction. Likewise,
Section 187 of the LGC, which outlines the procedure for 1. An administrative claim must be filed with the
questioning the constitutionality of a tax ordinance, is CIR within 2 years after the close of the taxable
inapplicable, rendering unnecessary the resolution of the quarter when the zero-rated or effectively zero-
issue on non-exhaustion of administrative remedies. rated sales were made.

Issue #3 2. The CIR has 120 days from the date of


An ordinance carries with it the presumption of validity. The submission of complete documents in support of
question of reasonableness though is open to judicial inquiry.
the administrative claim within which to decide
Much should be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an ordinance as whether to grant a refund or issue a tax credit
unreasonable unless the amount is so excessive as to be certificates. The 120-day period may extend
prohibitive, arbitrary, unreasonable, oppressive, or beyond the 2-year period from the filing of the
confiscatory. A rule which has gained acceptance is that administrative claim if the claim filed in the later
factors relevant to such an inquiry are the municipal part of the 20year period. If the 120-day expires
conditions as a whole and the nature of the business made
without any decision from the CIR, then the
subject to imposition.
administrative claim may be considered to be
To justify the nullification of the law or its implementation,
there must be a clear and unequivocal, not a doubtful, denied by inaction.
breach of the Constitution. In case of doubt in the sufficiency
of proof establishing unconstitutionality, the Court must 3. A judicial claim must be filed with the CTA within
sustain legislation because "to invalidate [a law] based on xx 30 days from the receipt of the CIR’s decision
x baseless supposition is an affront to the wisdom not only of denying such claim or from the expiration of the
the legislature that passed it but also of the executive which 120-day period by inaction.
approved it." This presumption of constitutionality can be
overcome only by the clearest showing that there was 4. All taxpayers, however, can rely on BIR Ruling
indeed an infraction of the Constitution, and only when such
No. DA-489-03 from time of its issuance on 10
a conclusion is reached by the required majority may the
Court pronounce, in the discharge of the duty it cannot Dec. 2003 up to its reversal by this Court in Aichi
escape, that the challenged act must be struck down. on Oct. 6, 2010, as an exception to the
mandatory and jurisdictional 120+30 day
periods.

The Supreme Court added: “Clearly, therefore,


TPI’s refund claim for unutilized input VAT for the 3rd quarter
8. CIR v. Toledo, Power, Inc., G.R. No. 183880, January was denied for being PREMATURELY FILED with the CTA,
20, 2014. while its refund claim of unutilized input VAT for the 4th
quarter of 2001 may be entertained since it falls within the
“A judicial claim must be filed with the CTA within 30 days exception provided in the Court’s most recent rulings.”
from the receipt of the CIR’s decision denying such claim or 

from the expiration of the 120-day period by inaction.” As to the invoicing requirements, the SC ruled that
Facts: the words “zero-rated” appeared on the VAT invoices/official
Toledo Power Inc. (TPI) seeks, from the Bureau of receipts presented by the TPI in support of its claims for
Internal Revenue (BIR), a refund or issuance of a tax credit refund. The BIR was ordered to refund or issue tax credit
certificate (TCC) for unutilized input value-added tax (VAT) certificate in favor of TPI only for the 4th quarter of 2001.
attributable to its zero-rated sales of power generation 

services to several entities. 

The BIR has not ruled upon said claim, hence TPI
went to the Court of Tax Appeals (CTA). The latter ordered