CE LUZON GEOTHERMAL POWER COMPANY, INC.

vs 
COMMISSIONER OF INTERNAL REVENUE
GR No. 197526, July 26, 2017

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE BUREAU OF INTERNAL

REVENUE  
vs  
CE LUZON GEOTHERMAL POWER COMPANY, INC.
GR No. 199676-77, July 26, 2017

Facts:

CE Luzon is a domestic corporation duly organized and existing under Philippine laws
engaged in the business of power generation.

It filed its quarterly VAT returns for the year 2005 on April 25, 2005, July 25, 2005,
October 25, 2005, and January 25, 2006, which reflected an overpayment of P20, 546,004.87.
CE Luzon maintained that its overpayment was due to its domestic purchases of non-capital
goods and services, services rendered by non-residents, and importation of non-capital goods.

On November 30, 2006, CE Luzon filed an administrative claim for refund of its
unutilized input VAT in the amount of P20, 546,004.87 before the BIR. Thereafter, or on January
3, 2007, it filed a judicial claim for refund, by way of a petition for review, before the CTA,
docketed as CTA Case No. 7558.

The CTA Division partially granted CE Luzon's claim for tax refund, and thereby ordered
the CIR to issue a tax credit certificate in the reduced amount of P14,879,312.65, representing
its unutilized input VAT which was attributable to its VAT zero-rated sales for the year 2005.It
found that while CE Luzon timely filed its administrative and judicial claims within the two (2)-year
prescriptive period, it, however, failed to duly substantiate the remainder of its claim for
unutilized input VAT, resulting in the partial denial thereof.

Dissatisfied, both parties moved for partial reconsideration. In an Amended Decision, the
CTA Division partially granted CE Luzon's motion for reconsideration, and consequently directed
the CIR to issue a tax credit certificate in the reduced amount of P17, 277,938.47, finding that
CE Luzon has sufficiently proven that it is entitled to an additional input VAT in the amount of
P2, 398,625.82.On the other hand, the CTA Division denied the CIR's motion for
reconsideration for lack of merit.

CE Luzon and the CIR respectively appealed to the CTA En Banc, docketed as CTA EB
No. 591and CTA EB No. 628, which were ordered consolidated in a Resolution.

The CTA En Banc set aside the CTA Division's findings, holding that CE Luzon's
premature filing of its claim divested the CTA of jurisdiction. It ruled that the 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. It noted that
CE Luzon's petition was filed on January 3, 2007, or only after the lapse of 34 days from the
time it filed its administrative claim with the BIR on November 30, 2006.
 Petitioner filed before the BIR an administrative claim for the refund of its unutilized
creditable input tax. Without waiting for the CIR to act on its claim, or for the expiration of 12
days, petitioner instituted before the CTA a judicial claim for refund.

Issue:

Whether or not the petitioner may institute a judicial claim without waiting for the decision
of the CIR or before the expiration of the 120-day period.

Ruling:

No. the 120-day period and 30-day reglementary periods under Section 112 (C) of the
NIRC are both mandatory and jurisdictional. Non-compliance with these periods renders a
judicial claim for refund of creditable input tax premature.
 COMMISSIONER OF INTERNAL REVENUE
vs.
LANCASTER PHILIPPINES, INC.
GR No. 183408, July 12, 2017

Facts:

Lancaster Philippines, Inc is a domestic corporation engages in the production,

processing and marketing tobacco. BIR issues a Letter of Authority, authorizing its revenue
officers to examine Lancaster’s books of accounts and other accounting records for all internal
revenue taxes due from taxable year 1998 to an unspecified date.

After the conduct of an examination pursuant to the LOA, the BIR issued a Preliminary
Assessment Notice which cited Lancaster for; 1. overstatement of its purchases for the fiscal
year April 1998 to March1999; 2. noncompliance with the generally accepted accounting
principle of proper matching cost and revenue; and 3. disallowance of purchases of tobacco
from farmers for the months of February and March 1998 as deductions against income for the
fiscal year April 1998 to march 1999.

Lancaster replied to the PAN contending that it had used an entire “tobacco cropping
season” to determine its total purchases covering a one-year period from October 1 to
September 3O of the following year; that it has been adopting the 6-month timing difference to
conform to the matching concept; and that has long been installed as part of the company’s
system and consistently applied in its accounting books. It also argued that the February and
March 1998 purchases should not have been disallowed. It concluded that they correctly posted
the subject purchases in the fiscal year ending March 1999 as it was the only in this year that
the gross income from the crop was realized.

Subsequently, Lancaster received from the BIR a final assessment notice which
assessed Lancaster’s deficiency income tax amounting to Php 11, 496, 770.18, as a
consequence of the disallowance of purchases claimed for the taxable year ending March 31,
1999.

Lancaster filed a petition for the review before CTA Division.

CTA Division granted the petition filed by Lancaster.

CTA En Banc affirmed the cancellation of assessment against Lancaster.

Issue/s

A. Whether CTA can resolve an issue on scope of authority of the revenue

examiners which was not raised by the parties.
B. Whether BIR revenue officers exceeded their authority.
Ruling/s:

Supreme Court denied the petition for review on certiorari filed by Commissioner of
Internal revenue.

A. Jurisdiction of the CTA

The jurisdiction of the CTA is not limited only to cases which involve decisions or
inactions of the CIR on matters relating to assessment of refunds but also includes other
cases arising from the NIRC or related laws administered by the BIR. This court has once
held that the question of whether or not to impose a deficiency tax assessment comes within
the purview of the words “other matters arising under the NIRC.” It must be stressed that the
assessment of internal taxes in one of the duties of the BIR. Thus, CIR may authorize the
examination of any taxpayer and correspondingly make an assessment whenever
necessary.

Authority of CTA to rule on issues not raised by the parties.

Under Section 1 of the revised rules of the Court of Tax Appeals, the Court (CTA) may
not limit itself to the issues stipulated by the parties but may also rule upon related issues
necessary to achieve an orderly disposition of the case. The CTA, therefore, was well within
the authority to consider in its decision the question on the scope of authority of the revenue
officers who were named in the LOA even though the parties had not raised the same in
their pleadings or memoranda.

B. Yes. The BIR revenue officers exceed the authority granted by LOA.

Supreme Court agreed with the trial court when it ruled the LOA authorizing BIR
Revenue officers to examine the books of the account of the Lancaster for the taxable year
1998 only or since Lancaster adopted a fiscal year for the period April 1, 1997 to March 31,
1998. However, the deficiency income tax assessment which the BIR eventually issue
against Lancaster was based on the disallowance of expenses reported in FY 1999, or for
the period April 1, 1998 to March 31, 1999. The CTA concluded that the revenue examiners
had exceeded their authority when they issued the assessment against Lancaster and,
consequently, declared such assessment to be without force and effect.

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

The taxable year covered by the assessment being outside of the period specified in the
LOA in this case, the assessment issues against Lancaster is, therefore, void.
 ASIATRUST DEVELOPMENT BANK, INC.
vs.
COMMISSIONER OF INTERNAL REVENUE
GR No. 201530, April 19, 2017

Facts:

Petitioner Asiatrust Development Bank, Inc, received 3 formal Letters of Demand with
Assessment Notices for deficiency revenue taxes in amounts of 131.9M, 83M and 144M for the
years 1996-1998 in 2000.

Asiatrust protested the assessment notices. Due to the inaction of the CIR on the
protest, Asiatrust filed before the CTA a Petition for Review docketed as CTA Case No. 6209
praying for the cancellation of the tax assessments for deficiency income tax, documentary
stamp tax (DST) regular, DST industry issue, final withholding tax, expanded withholding tax,
and fringe benefits tax issued against it by the CIR.

In 2001, new assessment notices for deficiency taxes in the amount of 112M, 53M,
133M covering the same years were issued, on the same day, Asiatrust partially paid said
deficiency tax assessment thus leaving the balances of 110M, 49M, 124M.

CIR approved Asiatrust’s offer of compromise of DST and manifested during trial, that
Asiatrust availed of a tax abatement program from its deficiency final withholding tax trust
assessment for fiscal years ending 1996 and 1998 and that is paid 4.1M and 6M for the fiscal
years respectively. It availed of the provisions of the Tax Amnesty Law of 2007.

CTA division partially granted the petition declaring void the 1996 assessment for having
been issued beyond the 3 year prescriptive period but affirmed the DST deficiency due to
Asiatrust to present evidence. Total tax deficiency remained at 142M. On MR, CTA Division
rendered an Amended Decision finding that Asiatrust is entitled to the immunities and privileges
granted in the Tax Amnesty Law. However, it reiterated its ruling that in the absence of
termination letter from the BIR, it cannot consider Asiatrust’s availment of the Tax Abatement
Program. Partial reconsideration and MR was denied. CTA En Banc denied appeal for failure to
file a prior MR.

Issue:

Whether or not Asiatrust correctly availed of the Tax Abatement?

Ruling:

No. the petition is denied.

 An application for the Tax Abatement is considered approved only upon the issuance of a
termination letter. RR No. 15-06 prescribes the guidelines on the implementation of the one-time
administrative abatement of all penalties/surcharges and interest on delinquent accounts and
assessments. Section 4 provides that the taxpayer may avail of the program by;

1. Paying 100% of the basic tax assessment with an accredited band or in its absence, the
revenue collection/ deputized treasurer of the RDO.
2. Penalties/ surcharges and interest shall be cancelled by the concerned BIR Office
following existing rules and procedures.
3. The docket of the case shall be forwarded to the Office of the Commissioner, thru the
Deputy Commissioner for Operations group for the issuance of a Termination letter.

Without a termination letter, a tax assessment cannot be considered closed and terminated.
Asiatrust failed to present such letter to the BIR.