DE LA SALLE UNIVERSITY COLLEGE OF LAW

Lasallian Commission on Bar Operations

TAXATION LAW
Justice Perlas-Bernabe Digests

 The Japanese Government extended a 40-million
yen loan to the Philippine Government for the
purpose of constructing the Calaca Thermal
Power Plant. In the Exchange of Notes, the PH
Gov’t undertook to assume all taxes imposed by
the PH on Japanese contractors engaged in the
Project
 Acting on behalf of the Gov’t, the National Power
Corporation contracted Mitsubishi (Japan) for
the construction of various power plant
equipment. Said contract indicated that NPC was
to pay any and all forms of taxes that are
imposable under the Contract.
 Mitsubishi filed its ITR for fiscal year 1998, which
included P44M as income tax due on the OECF-
funded portion of the project. It also filed its
monthly remittance return of income taxes
withheld and remitted P8.3M as BPRT for branch
profits remitted to head office in Japan out of the
income during the fiscal year.
 Mitsubishi then filed an administrative claim for
the refund of the P52+M paid above as
erroneously paid income tax and BPRT.
Thereafter, it also filed a judicial claim before the
CTA. It relied on a BIR Ruling, which held that
NPC was liable for taxes on Mitsubishi’s
contracts.
 CTA En Banc declared that Mitsubishi is not
entitled to a refund on the ground that the CIR
has no power to grant a refund absent any tax
exemption. As it was, the Exchange of Notes
could not be read as a tax exemption since it
lacked the Senate’s concurrence.
 Moreover, under RMC 42-99, Mitsubishi should
have recovered the subject taxes from NPC and
not from the CIR.
(i) Whether or not Mitsubishi is entitled to the
refund;
(ii) If in the affirmative, whether or not the CIR
had the power to grant the refund
(i) Yes. it is fairly apparent that the subject
taxes in the amount of P52.6M was
erroneously collected from petitioner,
considering that the obligation to pay the
same had already been assumed by the
Philippine Government by virtue of its
Exchange of Notes with the Japanese
Government. Case law explains that an
exchange of notes is considered as an
executive agreement, which is binding on
the State even without Senate concurrence.
(ii) Yes. Sections 204 and 229 of the NIRC vest
upon the CIR, being the head of the BIR, the
authority to credit or refund taxes, which
are erroneously collected by the
government. This specific statutory
mandate cannot be overridden by
interpretations of mere administrative
issuances, such as RMC No. 42-99, which
allegedly shifted to the NPC the power to
refund the subject taxes.
 AIA received from the CIR a Formal Letter of
Demand, containing an assessment for
deficiency value added tax (VAT) and excise tax.
 While the petition before the SC is pending, AIA
filed a Manifestation and Motion with Leave of
the Honorable Court to Defer or Suspend
Further Proceedings on the ground that it
availed of the Tax Amnesty Program under RA
9480 and submitted to the Court a Certification
of Qualification issued by the BIR.
 CIR contends that under Section 8 (a) of RA 9480
(Tax Amnesty Act of 2007), it is disqualified from
availing the Tax Amnesty Program because it is a
withholding agent for the deficiency tax
liabilities.
Whether or not AIA is disqualified to claim tax
amnesty under Section 8(a) of RA 9480
 No. A tax amnesty, much like a tax exemption, is
never favored or presumed in law. It must be construed
strictly against the taxpayer. However, CIR did not assess
AIA as a withholding agent that failed to withhold or remit
the deficiency taxes to the BIR.
The deficiency VAT and excise tax cannot be "deemed" as
withholding taxes merely because they constitute indirect
taxes. In indirect taxes, the incidence of taxation falls on
one person, but the burden can be shifted or passed on to
another. In withholding taxes, the incidence and burden of
taxation fall on the same entity, the statutory taxpayer. The
burden of taxation is not shifted to the withholding agent
who merely collects the tax due from income payments to
entities and remits the same to the government.
 All the preferred shares of Goodyear-PH were
solely and exclusively subscribed by GTRC, a
foreign company organized under the laws of
Ohio, USA and is unregistered in the PH
 Goodyear-PH’s BOD authorized the redemption
of some of its preferred shares issued to GTRC
 Filed an application for relief from double
taxation to confirm that the redemption was not
subject to PH income tax pursuant to the RP-US
Treaty
 Notwithstanding, Goodyear-PH still withheld
and remitted to BIR 15% FWT.
 Goodyear filed an administrative claim with the
CIR for tax credit/refund.
 Just 13 days after, Goodyear filed a judicial claim
with the CTA Division.
o CIR: Goodyear’s claim must be denied
for non-exhaustion of administrative
remedies.
 CTA Division granted Goodyear’s claim. En Banc
affirmed.
 BIR argued that while the payment of the original
subscription price could not be taxed as it
represented a return of capital, the additional
amount, however, or the component of the
redemption price should not be treated as a
mere premium and part of the subscription
price, but as accumulated dividend in arrears,
subject to FWT.
Whether or not the gain derived by GTRC is subject
to 15% FWT on dividends
No. Since GTRC is a non-resident foreign
corporation, the RP-US Treaty must govern the tax
implications of the transaction between Goodyear-PH and
GTRC.
Under the RP-US Treaty, applying the law of the State in
which the corporation making the distribution is a resident
(i.e., PH), the term ‘dividends’ means any distribution made
by a corporation to its shareholders out of its earnings or
profits. In light of the foregoing, the Court holds that the
redemption price received by GTRC could not be treated
as accumulated dividends in arrears that could be subject
to 15% FWT. The Court noted that Goodyear-PH did not
have unrestricted retained earnings, and in fact, operated
from a position of deficit. Thus, absent the availability of
unrestricted retained earnings, the BOD of Goodyear-PH
had no power to issue dividends.
 Metrobank acquired Solidbank, thus the former
assumed the rights and obligations of the latter.
This included the loan extended to Luzon Hydro
Corporation (LHC). Pursuant to the loan
agreement, LHC is bound to shoulder all the
corresponding internal revenue taxes required
by law to be deducted or withheld on the said
loan as well as the filing of tax returns and
remittance of the taxes withheld to the BIR.
 LHC paid Metrobank and the former withheld
and remitted to the BIR the 10% final tax on the
interest portions of the aforesaid payments.
 Metrobank filed a letter to the BIR on December
27, 2002 requesting for the refund alleging that it
mistakenly remitted the same final tax to the BIR
when they were inadvertently included in its
own Monthly Remittance Returns of Final
Income Taxes Withheld. Because of the CIR’s
inaction, Metrobank filed its judicial claim before
the CTA for refund on September 10, 2003.
  CTA ruled that the refund has already prescribed
because the judicial claim was already beyond
the 2 year prescriptive period.
 Metrobank insisted that the filing of its
administrative and judicial claims on December
27, 2002 and September 10, 2003, respectively,
where well-within the 2year prescriptive period
because the prescriptive period should be
reckoned not from April 25, 2001 when it
remitted the tax to the BIR, but rather, from the
time it filed its Final Adjustment Return or
Annual Income Tax Return for the taxable year of
2001, or in April 2002, as it was only at that time
when its right to a refund was ascertained.
Whether or not the prescriptive period should be
reckoned from the time of the filing of the Final
Adjustment Return
No. Unlike income tax, final withholding taxes
are considered as full and final payment of the income tax
due, and thus, are not subject to any adjustments. Thus,
the two (2)-year prescriptive period commences to run
from the time the refund is ascertained, i.e., the date such
tax was paid, and not upon the discovery by the taxpayer
of the erroneous or excessive payment of taxes.
 JRA PH filed four tax refunds before the CIR for
the unutilized input VAT attributable to its zero-
rated export sales it had paid for CY 1999.
Because the CIR did not act upon the same, JRA
filed a petition for review before the CTA.
 The CTA denied the claim because said
unutilized input VAT had not been properly
documented, and export sales failed the
invoicing requirements under Section 113(A) of
the NIRC. Its export sales invoices (i) have no BIR
Permit to Print, (ii) did not contain its TIN, and
(iii) did not have the word “zero-rated” printed
thereon.
 JRA PH contests that sales invoices are not the
sole basis to prove export sales, and that bills of
lading, airway bills, and export documents ma
substantiate these, which are the best evidence
to prove actual exportation of the goods.
Whether or not documentary requirements were
met to substantiate claim for VAT refund.
No. Jurisprudence provides that in a claim for tax
refund/credit, the applicant must prove not only
entitlement to the claim but also compliance with
documentary and evidentiary requirements. Section
110(A)(1) provides that creditable input taxes must be
evidenced by a VAT invoice/receipt. Such VAT
invoices/receipts must in turn comply with Sections 237,
238 of NIRC and RR-95, which require, among others, that
the invoice reflect: (i) the BIR Permit to Print, (ii) the TIN-
V of the purchaser, and (iii) the word “zero-rated”
imprinted thereon. In this case, all three requisites were
not complied with. Compliance with all the VAT invoicing
requirements is required to be able to file a claim for input
taxes attributable to zero-rated sales.
 28 Dec 2005: Taganito filed an administrative
claim for VAT refund/credit with the BIR.
 31 Mar 2006: Fearing that the period for filing a
judicial claim for refund was about to expire,
Taganito proceeded to file a petition for review
before the CTA Division, which partially granted
the claim.
 Taganito did not appeal the partial denial of its
claim, which lapsed into finality.
 CTA En Banc reversed and set aside Division’s
Decision and dismissed Taganito’s claim totally
for being prematurely filed. MR denied.
Whether or not the CTA En Banc correctly
dismissed Taganito’s judicial claim for refund for being
prematurely filed.
No. Under Sec. 112 of the Tax Code, any VAT-
registered person whose sales are zero-rated or effectively
zero-rated may apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid
attributable to such sales within 2 years after the close of
the quarter when the sales were made.
In Aichi, the SC has ruled that the observance of the 120+30
period is mandatory and jurisdictional. However, the SC
also recognized certain exceptions to the observance of
the said period in San Roque, where it was held that the
taxpayer need not wait for the lapse of the 120 days before
it could seek judicial relief—by virtue of DA-489-03.
Reconciling the pronouncements in the Aichi and San
Roque cases, the rule must therefore be that during the
period 10 Dec 2003 (when DA-489-03 was issued) to 6 Oct
2010 (when the Aichi case was promulgated), taxpayers-
claimants need not observe the 120-day period before it
could file a judicial claim for refund of excess input VAT
before the CTA. Before and after the aforementioned
period (10 Dec 2003 to 6 Oct 2010), the observance of the
120-day period is mandatory and jurisdictional to the filing
of such claim.
Here, records show that Taganito filed both its
administrative and judicial claim well within the period
when DA-489-03 was in place. However, Taganito did not
appeal the CTA Division’s partial denial of its claim. Thus,
Taganito is only entitled to the partial refund originally
granted to it by the CTA Division.
 CBK Power, a VAT zero-rated entity, filed its VAT
returns for CY 2003 which reflected unutilized
input VAT in the amount of P238M
 On March 29, 2005, CBK Power filed wan
administrative claim with the BIR for such
unutilized input VAT on its purchases of capital
goods.
 On April 18, 2005 or less than a month later, it
filed a judicial claim for tax refund/credit before
the CTA.
 The CTA en banc denied the claim on the ground
that it filed the judicial claim only 20 days after
the administrative claim, failing to observe the
mandatory and jurisdictional 120-day period
provided under NIRC 112 (D).
Whether or not the claim of CBK Power should be
denied for being prematurely filed
No. CBK Power filed its administrative and
judicial claims on March 29, 2005 and April 18, 2005,
respectively or during the period when BIR Ruling No. DA-
489-03 was in place. As such, it need not wait for the
expiration of the 120-day period before filing its judicial
claim before the CTA, which was filed within the two-year
prescriptive period..
 28 Dec 2009: Petitioner filed an administrative
claim for VAT refund/credit of its unapplied and
unutilized input VAT for the year 2008 with the
BIR.
 30 Mar 2010: Judicial claim for excess input VAT
for 1Q of 2008 was filed with the CTA Division.
 27 May 2010: Another judicial claim filed,
covering 2Q to 4Q of 2008.
 The two judicial claims were consolidated.
 CIR moved to dismiss the claims for lack of
jurisdiction, following the ruling in CIR vs. Aichi.
 CTA Division dismissed the judicial claim. MR
denied. CTA En Banc affirmed.
Whether or not the CTA En Banc correctly
dismissed the petitioner’s judicial claim for refund for
being prematurely filed.
 No. Under Sec. 112 of the Tax Code, any VAT-
registered person whose sales are zero-rated or effectively
zero-rated may apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid
attributable to such sales within 2 years after the close of
the quarter when the sales were made.

In Aichi, the SC has ruled that the observance of the 120+30

period is mandatory and jurisdictional. However, the SC
also recognized certain exceptions to the observance of
the said period in the case of CIR vs. San Roque, where it
was held that the taxpayer need not wait for the lapse of
the 120 days before it could seek judicial relief—by virtue of
DA-489-03.

In Taganito, reconciling the pronouncements in the Aichi

and San Roque cases, the SC held that the rule must
therefore be that during the period 10 Dec 2003 (when DA-
489-03 was issued) to 6 Oct 2010 (when the Aichi case was
promulgated), taxpayers-claimants need not observe the
120-day period before it could file a judicial claim for
refund of excess input VAT before the CTA. Before and
after the aforementioned period, the observance of the
120-day period is mandatory and jurisdictional to the filing
of such claim.
 Petitioner Panay filed its 2003 Fourth Quarter
VAT Return in January 2004. In January 2005 and
January 2006, it filed two amendments to reflect
a total unutilized input VAT of P14M. Said input
VAT pertains to purchases of capital goods and
services, which have yet to be utilized against
any output VAT for Fourth Quarter of 2003 and
to subsequent quarters.

Here, records show that the petitioner filed both its
administrative and judicial claim well within the period
when DA-489-03 was in place. Therefore, the CTA En Banc
erred in dismissing petitioner’s claim on the ground
prematurity/lack of jurisdiction.
 On December 29, 2005, Petitioner Panay
thereafter filed an administrative claim for
refund/credit. A judicial claim was filed after a
mere 22 days, or on January 20, 2006.
 CTA Division and CTA En Banc dismissed the
judicial claim on the ground of prematurity and
lack of jurisdiction, as petitioner should have
waited for the lapse of 120 days from the
administrative claim before it filed its judicial
claim, pursuant to the doctrine laid down in CIR
v. Aichi.

Whether or not the judicial claim was filed

prematurely

No. While the general rule is that a taxpayer must

wait for the 120-day period to lapse before filing a judicial
claim, an exception was laid down in the case of CIR v. San
Roque, where the Court held that BIR Ruling No. DA-489-
03 would apply to cases filed from its issuance (December
10, 2003) up to the date when Aichi was promulgated
(October 6, 2010). The said ruling expressly provided that
taxpayer-claimants “need not wait for the lapse of the 120-
day period before it could seek judicial relief with the CTA
by way of Petition for Review.” Since the claim in this case
was filed within the said period, the CTA could validly take
cognizance of them. Case was remanded for further
proceedings.
  On June 27, 2003, Cargill filed an administrative
claim for refund of unutilized input VAT for the
period of April 1, 2001 to February 28, 2003 (first
refund claim).
 On June 30, 2003, it filed a judicial claim for
refund, by way of a petition for review, before the
CTA
 On May 31, 2005, Cargill filed a second
administrative claim for the period of March 1,
2003 to August 31, 2004 (second refund claim of
unutilized input VAT) before the BIR. On the
same day, it filed a petition for review before the
CTA
 CIR: Cargill’s claim must be denied since claims
were not properly documented
 CTA Division dismissed the cases stating that
under Section 112 (D) of the NIRC, the 120-day
period must be observed prior to the filing of a
judicial claim for tax refund.
 CTA En Banc affirmed. Cargill prematurely filed
its claims thus divesting CTA of jurisdiction.
Cargill’s first judicial claim was filed only three
days from the time it filed its administrative
claim while the second one was filed the same
day it filed its administrative claim.
Whether or not Cargill’s claims should be
dismissed for being prematurely filed.
The first claim was properly dismissed since it
was filed before the effectivity of BIR Ruling No. DA-489-
03. Cargill failed to wait for the lapse of the 120-day period
before filing its judicial claim before the CTA, thus the CTA
has no jurisdiction.
The second claim was improperly dismissed because it was
filed during the effectivity of BIR Ruling No. DA-489-03. As
such, Cargill need not wait for the lapse of the 120-day
period before filing its judicial claim. However, since this
was a petition for review under Rule 45 and only questions
of law are resolved, the Court remanded the case involving
the second claim to the CTA for resolution on the merits.
 On November 30, 2006, CE Luzon filed an
administrative claim for refund of its unutilized
input VAT before the BIR. On January 3, 2007, it
filed a judicial claim for refund, by way of a
petition for review, before the CTA,
 CIR: Cargill’s claim must be denied since its claim
was prematurely filed.
 CTA Division partially granted CE Luzon’s claim.
It timely filed its administrative and judicial
claims within the two (2)-year prescriptive
period
 CTA En Banc reversed CTA Division decision
holding that CE Luzon's premature filing of its
claim divested the CTA of jurisdiction. Filing of a
judicial claim must be made within thirty (30)
days to be computed from either: (a) the receipt
of the CIR's decision; or (b) after the expiration
of the 120-day period for the CIR to act. CE
Luzon filed its judicial claim only 34 days from
the time it filed its administrative claim
Whether or not CE Luzon’s claim should be
dismissed for being prematurely filed
No. CE Luzon's administrative and judicial claims
were filed during the period of effectivity of BIR Ruling No.
DA-489-03 and, thus, fell within the window period stated
in the San Roque case. The CTA En Banc erred when it
outrightly dismissed CE Luzon's petition on the ground of
prematurity. The case was remanded to the CTA En Banc
for resolution on the merits.
  Goodyear filed an administrative claim with the
CIR for tax credit/refund.
 Just 13 days after, Goodyear filed a judicial claim
with the CTA Division.
o CIR: Goodyear’s claim must be denied
for non-exhaustion of administrative
remedies.
 CTA Division granted Goodyear’s claim. En Banc
affirmed.
Whether or not Goodyear’s judicial claim should be
dismissed for non-exhaustion of administrative remedies.
No. Sec. 229 of the Tax Code states that judicial
claims for refund must be filed within 2 years from the date
of payment of the tax or penalty, providing further that the
same may not be maintained until a claim for refund or
credit has been duly filed with the CIR.
Sec. 229 does not mean that the taxpayer must await final
resolution of its administrative claim for refund, since
doing so would be tantamount to the taxpayer’s forfeiture
of its right to seek judicial recourse should the 2-year
prescriptive period expire without the appropriate judicial
claim being filed. Sec. 229 only requires that an
administrative claim should first be filed.
Here, records show that both administrative and judicial
claims were filed within the 2-year prescriptive period.
Goodyear correctly and timely sought judicial redress,
notwithstanding that its administrative and judicial claims
were filed only 13 days apart.
 CBK Power borrowed money from international
banks from which it allegedly withheld final taxes
at 15%/20%.
 According to CBK Power, under relevant tax
treaties between the Philippines and the
respective countries in which each of the banks
is a resident, the interest income derived by the
aforementioned banks are subject only to a
preferential tax rate of 10%.
 CBK Power filed a claim for refund of its excess
final withholding taxes allegedly erroneously
withheld and collected. Due to CIR’s inaction,
CBK Power appealed to CTA first division.
 CIR assailed that the failure on the part of CBK
Power to give him a reasonable time to act on
said claim is violative of the doctrines of
exhaustion of administrative remedies and of
primary jurisdiction.
Whether or not CBK Power failed to exhaust
administrative remedies before seeking judicial redress
NO. CBK power is justified for failing to exhaust
administrative remedies in this case. Had CBK Power
awaited the action of the Commissioner on its claim for
refund prior to taking court action knowing fully well that
the prescriptive period was about to end, it would have lost
not only its right to seek judicial recourse but its right to
recover the final withholding taxes it erroneously paid to
the government thereby suffering irreparable damage.
Nowhere does the law imply that the CIR must act upon
the claim, or that the taxpayer shall not go to court before
he is notified of the Collector’s action. Mere filing to the
CIR is sufficient and such filing of the claim is intended
primarily as a notice of warning that unless the tax or
penalty alleged to have been collected erroneously or
illegally is refunded, court action will follow.
  Caltex sold imported Jet A-1 fuel to PAL.
Consequently, Caltex electronically filed with
the BIR its Excise Tax Returns for Petroleum
Products.
 PAL received from Caltex an Aviation Billing
Invoice including the excise tax on the imported
fuel.
 PAL sought a refund with the CIR of the excise
taxes passed on to it by Caltex on account of its
tax exemption privileges under its legislative
franchise, which covers both direct and indirect
taxes.
 The CIR contends that PAL has no personality to
file for tax refund because it is not the statutory
taxpayer. It was Caltex who paid the excise taxes.
Whether or not PAL is entitled to refund
Yes. Generally, it is the statutory taxpayer, who
is required to file a claim for refund. However, PAL’s
franchise grants its exemption from both direct and
indirect taxes on its purchase of petroleum products. Also,
the Court noted that Caltex imported aviation fuel from
abroad and merely re-sold the same to PAL, tacking the
amount of excise taxes it paid or would be liable to pay to
the government on to the purchase price, thus, the
petroleum products are in the nature of “things imported.”
As such, considering the subsistence of PAL’s tax
exemption privileges over imported goods subject of this
case, PAL is allowed to claim a tax refund on the excise
taxes imposed and due thereon.
And since PAL’s claims for refund were filed within two (2)
years from the date of payment of the tax; it paid the lower
of the basic corporate income tax or the franchise tax as
provided for in its franchise; and the subject excise taxes
were duly declared and remitted to the BIR, PAL is entitled
to refund.
 CBK Power borrowed money from international
banks from which it allegedly withheld final taxes
at 15%/20%.
 According to CBK Power, under relevant tax
treaties between the Philippines and the
respective countries in which each of the banks
is a resident, the interest income derived by the
aforementioned banks are subject only to a
preferential tax rate of 10%.
 CBK Power filed a claim for refund of its excess
final withholding taxes allegedly erroneously
withheld and collected. Due to CIR’s inaction,
CBK Power appealed to CTA first division.
 CIR argued that CBK Power cannot claim for
refund with respect to the excess final
withholding taxes because CBK Power failed to
obtain an International Tax Affairs Division
(ITAD) ruling pursuant to RMO No. 1-2000 before
claiming a refund.
Whether or not ITAD ruling is a condition sine qua
non for the claim for refund of its erroneous payment of
final withholding taxes
NO. The obligation to comply with a tax treaty
must take precedence over the objective of RMO No. 1-
2000. The denial of the availment of tax relief for the
failure of a taxpayer to apply within the prescribed period
under the administrative issuance would impair the value
of the tax treaty. At most, the application for a tax treaty
relief from the BIR should merely operate to confirm the
entitlement of the taxpayer to the relief. BIR should not
impose additional requirements that would negate the
availment of the reliefs provided for under international
agreements, especially since said tax treaties do not
provide for any prerequisite at all for the availment of the
benefits under said agreements.
Since CBK Power had requested for confirmation from the
ITAD before it filed its administrative claim for refund of
its excess final withholding taxes, the same should be
deemed substantial compliance
  Metrobank acquired Solidbank, thus the former
assumed the rights and obligations of the latter.
This included the loan extended to Luzon Hydro
Corporation (LHC). Pursuant to the loan
agreement, LHC is bound to shoulder all the
corresponding internal revenue taxes required
by law to be deducted or withheld on the said
loan as well as the filing of tax returns and
remittance of the taxes withheld to the BIR.
 LHC paid Metrobank and the former withheld
and remitted to the BIR the 10% final tax on the
interest portions of the aforesaid payments.
 Metrobank filed a letter to the BIR on December
27, 2002 requesting for the refund alleging that it
mistakenly remitted the same final tax to the BIR
when they were inadvertently included in its
own Monthly Remittance Returns of Final
Income Taxes Withheld. Because of the CIR’s
inaction, Metrobank filed its judicial claim before
the CTA for refund on September 10, 2003.
 CTA ruled that the refund has already prescribed
because the judicial claim was already beyond
the 2year prescriptive period.
Whether or not Metrobank's claim for refund
relative to its March 2001 final tax had already prescribed
YES. A claimant for refund must first file an
administrative claim for refund before the CIR, prior to
filing a judicial claim before the CTA. Both the
administrative and judicial claims for refund should be
filed within the two (2)-year prescriptive period indicated
therein, and that the claimant is allowed to file the latter
even without waiting for the resolution of the former in
order to prevent the forfeiture of its claim through
prescription. Claimant does not need to wait for the final
resolution of its administrative claim for refund, since
doing so would be tantamount to the taxpayer's forfeiture
of its right to seek judicial recourse should the two (2)-year
prescriptive period expires without the appropriate
judicial claim being filed.
 Caltex sold imported Jet A-1 fuel to PAL.
Consequently, Caltex electronically filed with
the BIR its Excise Tax Returns for Petroleum
Products.
 PAL received from Caltex an Aviation Billing
Invoice including the excise tax on the imported
fuel.
 PAL sought a refund with the CIR of the excise
taxes passed on to it by Caltex on account of its
tax exemption privileges under its legislative
franchise, which covers both direct and indirect
taxes.
 The CIR contends that PAL has no personality to
file for tax refund because it is not the statutory
taxpayer. It was Caltex who paid the excise taxes.
Whether or not PAL has legal personality file a
claim for refund on the passed-on excise taxes
YES. Generally, the proper party to question, or
seek a refund of, an indirect tax is the statutory taxpayer
or the person on whom the tax is imposed by law and who
paid the same even if he shifts the burden thereof to
another. However, this does not apply, as in the instant
case where the law clearly grants the party to which the
economic burden of the tax is shifted an exemption from
both direct and indirect taxes. In which case, it must be
allowed to claim a tax refund even if it is not considered as
the statutory taxpayer under the law. PAL is exempt from
paying: (a) taxes directly due from or imposable upon it as
the purchaser of the subject petroleum products; and (b)
the cost of the taxes billed or passed on to it by the seller,
producer, manufacturer, or importer of the said products
either as part of the purchase price or by mutual
agreement or other arrangement.
  Diageo purchased raw alcohol from its supplier
for use in the manufacture of its beverage and
liquor products. Its supplier imported the raw
alcohol and paid the related excise taxes thereon
before the same were sold to Diageo. The
purchase price for the raw alcohol included,
among others, the excise taxes paid by the
supplier. Diageo subsequently exported its
locally manufactured liquor products.

 Within two years from the time the supplier paid

the subject excise taxes, Diageo filed with the BIR
Large Taxpayer’s Audit and Investigation
Division II applications for tax refund/issuance
of tax credit certificates corresponding to the
excise taxes which its Supplier paid but passed
on to Diageo as part of the purchase price of the
subject raw alcohol.

 Due to CIR’s inaction, Diageo filed a petition for

review with the CTA.

 CIR assailed Diageo’s lack of legal personality to

institute the claim for refund because it was not
the one that paid the alleged excise taxes but its
supplier.

Whether or not Diageo can claim refund for the

excise taxes passed on to it by its supplier

No. Unlike the law on value- added tax, the right

to claim a refund or be credited with the excise taxes
belongs to its supplier. The proper party to question, or
seek a refund of, an indirect tax is the statutory taxpayer
or the person on whom the tax is imposed by law and who
paid the same even if he shifts the burden thereof to
another. When the excise taxes paid by the supplier were
passed on to Diageo, what was shifted is not the tax per se
but an additional cost of the goods sold.

 CASURECO III is distributing electric power to
various end-users and consumers within the
City of Iriga and the other municipalities of
Camarines Sur known as the "Rinconada area."
 City of Iriga assessed and made a final demand
on CASURECO III to pay its deficiency franchise
taxes and real property taxes.
 CASURECO III refused to pay on the ground that
it is an electric cooperative provisionally
registered with the Cooperative Development
Authority (CDA) and therefore exempt from the
payment of local taxes. Assuming arguendo that
it is liable to pay franchise tax, it should be
limited to gross receipts received from the
supply of the electricity within the City of Iriga
and not those from the Rinconada area.
Whether or not the City of Iriga has the power to
impose local taxes
YES. The power of the local government units
(LGUs) to impose and collect taxes, consistent with the
local autonomy and decentralization of governance
subject to limitations, is derived from the Constitution
itself which grants them, the power to create its own
sources of revenues and to levy taxes, fees and charges,
subject to limitations. With this power, local government
units have the fiscal mechanisms to raise the funds needed
to deliver basic services to their constituents and break the
culture of dependence on the national government. Thus,
consistent with these objectives, the LGC was enacted
granting the LGUs, like petitioner, the power to impose
and collect franchise tax.
 CASURECO III is distributing electric power to
various end-users and consumers within the
City of Iriga and the other municipalities of
Camarines Sur known as the "Rinconada area."
 City of Iriga assessed and made a final demand
on CASURECO III to pay its deficiency local
franchise taxes (LFT) and real property taxes
(RPT).
 CASURECO III refused to pay on the ground that
assuming arguendo that it is liable to pay
franchise tax, it should be limited to gross
receipts received from the supply of the
electricity within the City of Iriga and not those
from the Rinconada area.
Whether or not CASURECO III is liable for the gross
receipts received from the Rinconada area
YES. Section 137 of the LGC provides that
franchise tax shall be based on gross receipts. Since it
partakes of the nature of an excise tax, the situs of taxation
is the place where the privilege is exercised (City of Iriga
where CASURECO III has its principal office) and from
where it operates, regardless of the place where its
services or products are delivered, which includes the
Rinconada area.
 and the law is construed in strictissimi juris against the one
claiming it and in favor of the taxing authority.
Consequently, as petitioners have failed to prove that they
have complied with the procedural requisites stated under
Section 196 of the LGC, their claim for local tax
refund/credit must be denied.

 Respondent, Manila City Treasurer Toledo

assessed Petitioners for their fourth quarter
local business taxes pursuant to the Manila
Revenue Code

 Petitioners paid the assessed taxes (P5M) under

protest as it assails the constitutionality of
Section 21 of the Manila Revenue Code. The
protest was however denied

 Petitioner assailed the constitutionality of

Section 21 of the Manila Revenue Code with the
RTC and sought for the refund of the taxes it paid

 Manila moved to dismiss on the ground that

Petitioner failed to make any written claim for
tax refund/credit with the local Treasurer
within 60 days as provided by Section 195 of the
Local Government Code. Thus, the assessment
became conclusive and unappealable. Moreover,
Petitioner’s letter to Respondent could not be
considered a written claim for refund but was a
mere protest letter.

 RTC held that the assessment is null and void

thereby warranting the issuance of a tax
refund/credit

 CTA Division reversed and set aside the RTC’s

ruling stating that petitioners failed to contest
the denial of their protest thus, the assessment
became conclusive and unappealable

 CTA EB upheld CTA Division

Whether or not Petitioner’s claim for tax

refund/credit should be granted

No. Under Section 196 of the Local Government

Code, the following procedural requirements must concur
before refund/credit of local taxes may be granted: (i) the
taxpayer must file a written claim for refund/credit with
the local treasurer, and (ii) the case or proceeding for
refund has to be filed within 2 years from the date of the
payment of the tax, fee, or charge or from the date the
taxpayer is entitled to a refund/credit. In this case, the
first requisite is lacking since they failed to prove that they
have filed a written claim for refund with the local
treasurer.

Indeed, it is hornbook principle that a claim for a tax

refund/credit is in the nature of a claim for an exemption

 CASURECO III is distributing electric power to
various end-users and consumers within the
City of Iriga and the other municipalities of
Camarines Sur known as the "Rinconada area."
 City of Iriga assessed and made a final demand
on CASURECO III to pay its deficiency franchise
taxes and real property taxes. CASURECO III
refused to pay.
 CASURECO III filed an appeal with the Court of
Appeals when the RTC ruled that the former was
liable for deficiency franchise tax.
Whether or not CTA has jurisdiction
YES. RA 9282, which took effect on April 23, 2004,
expanded the jurisdiction of the CTA to include, among
others, the power to review by appeal decisions, orders or
resolutions of the RTC in local tax cases originally decided
or resolved by them in the exercise of their original or
appellate jurisdiction.
Considering that RA 9282 was already in effect when the
RTC rendered its decision, CASURECO III should have filed
its appeal, not with the CA, but with the CTA Division. CA
decision is null and void for want of jurisdiction over the
subject matter.
 21 July 1999: Respondent Burmeister & Wain
Scandinavian Contractor Mindanao filed an
administrative claim for VAT refund/credit for
the period July to Dec 1998.
o CIR failed to act on the claim.
 9 Jan 2001: Respondent filed a judicial claim with
the CTA Division, which was denied due to
insufficiency of evidence. MR also denied.
 CA: Remanded the case to the CTA for reception
of evidence consisting of VAT invoices and
receipts, which had not been submitted earlier,
but were already attached to its MR of the denial
of the CTA petition.
 CTA Division: Ordered CIR to refund/issue tax
credit certificate in favor of respondent.
 CTA En Banc: Denied CIR’s petition for review.
o Issue of prescription of filing the
judicial claim cannot be raised for the
first time on appeal.
Whether or not the issue of prescription may be
raised for the first time on appeal.
Yes. The prescriptive period to file
administrative and judicial claims (120+30) is mandatory
and jurisdictional. Thus, the issue of whether the taxpayer
complied with the said time frame may be broached at any
stage, even on appeal. Well-settled is the rule that the
question of jurisdiction over the subject matter can be
raised at any time during the proceedings.
The two-year prescriptive period in Section 112(A) refers to
the period within which the taxpayer can file an
administrative claim for tax refund or credit. The taxpayer
can file its administrative claim for refund or credit at any
time within the two-year prescriptive period. If it files its
claim on the last day of said period, it is still filed on time.
The CIR will have 120 days from such filing to decide the
claim. If the CIR decides the claim on the 120th day, or does
not decide it on that day, the taxpayer still has 30 days to
file its judicial claim with the CTA; otherwise, the judicial
claim would be, properly speaking, dismissed for being
filed out of time
  Mitsubishi Motors Philippines Corporation was
able to secure tax credit certificates (TCCs) and
utilized said TCCs for the payment of various
customs duties and taxes. BIR allowed.

 A post-audit investigation of the Department of

Finance revealed that the TCCs were
fraudulently secured with the use of fake
commercial and bank documents. BOC filed a
collection suit for unpaid taxes and customs
duties before the RTC.

 Mitsubishi contended that it acquired the TCCs

from their original holders in good faith and that
they were authentic, thus their remittance
should be considered as proper settlement of the
taxes and customs duties.

 RTC opined that fraud is never presumed and

must be established by clear and convincing
evidence, which petitioner failed to do, thus
dismissing the complaint.

 On appeal, CA opted to relax procedural rules in

not dismissing the appeal outright and referred
the records of the collection case to the CTA for
lack of jurisdiction.

Whether or not CA was correct in referring the

case to the CTA, instead of an outright dismissal

NO. The CTA has exclusive appellate jurisdiction

over tax collection cases originally decided by the RTC.
The act of the CA in referring the wrongful appeal to the
CTA under the guise of furthering the interests of
substantial justice is blatantly erroneous. The CA has no
jurisdiction over BOC's appeal; thus it cannot perform any
action on the same except to order its dismissal. In view
of respondent’s availment of a wrong mode of appeal via
notice of appeal, instead of appealing by way of a petition
for review to the CTA within thirty (30) days from receipt
of a copy of the RTC Order, the dismissal of respondent's
collection case against petitioner became final and
executory.