Pals Bar Ops 2017 (Tax)

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



GENERAL PRINCIPLES OF TAXATION R.A. 9504 (TAX EXEMPTION OF MINIMUM WAGE EARNERS AND INCREASING PERSONAL/ADDITIONAL EXEMPTIONS / CHANGE IN Optional Standard Deduction) must be liberally construed. We are mindful of the strict construction rule when it comes to the interpretation of tax exemption laws. The canon, however, is tempered by several exceptions, one of which is when the taxpayer falls within the purview of the exemption by clear legislative intent. In this situation, the rule of liberal interpretation applies in favor of the grantee and against the government. In this case, there is a clear legislative intent to exempt the minimum wage received by an MWE who earns additional income on top of the minimum wage. As previously discussed, this intent can be seen from both the law and the deliberations. Accordingly, we see no reason why we should not liberally interpret R.A. 9504 in favor of the taxpayers. (JAIME N. SORIANO VS. SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY 24, 2017, C.J. SERENO) It must be borne in mind that tax exemptions, which respondents obviously want or desire to avail of in this case, are strictissimi juris. Indeed, taxation is the rule and tax exemption the exception. Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain to be misunderstood, We hold that in this case respondents have utterly failed to make out even a prima facie for tax exemption in their favor. (BUREAU OF INTERNAL REVENUE VS. MANILA HOME TEXTILE, INC., GR 203057, JUNE 6, 2016, J. DEL CASTILLO) In matters of taxation, the government cannot be estopped by the mistakes, errors or omissions of its agents for upon it depends the ability of the government to serve the people for whose benefit taxes are collected. (COMMISSIONER OF INTERNAL REVENUE VS. NIPPON EXPRESS (PHILS.) CORPORATION, G.R. NO. 212920, SEPTEMBER 16, 2015) It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer. MERALCO has failed to present herein any express grant of exemption from real property tax of its transformers, electric posts, transmission lines, insulators, and electric meters that is valid and binding even under the Local Government Code. (MANILA ELECTRIC COMPANY VS. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY G.R. NO. 166102, AUGUST 5, 2015) San Roque, held that BIR Ruling No. DA-489-03 was a general interpretative rule because it was a response to a query made, not by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits. Thus, it applies to all taxpayers alike, and not only to one particular taxpayer. (COMMISSIONER OF INTERNAL REVENUE VS. AIR LIQUIDE PHILIPPINES, INC., G.R. NO. 210646, JULY 29, 2015) The claim of a taxpayer under a tax amnesty shall be allowed when the liability involves the deficiency in payment of income tax. However, it must be disallowed when the taxpayer is assessed on his capacity as a withholding tax agent because the person who earned the taxable income was another person other than the withholding agent. (LG ELECTRONICS PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 165451, DECEMBER 03, 2014, J. LEONEN)

Page 1 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



The Court has consolidated these 3 petitions as they involve the same parties, similar facts and common questions of law. This is not the first time that Fort Bonifacio Development Corporation (FBDC) has come to this Court about these issues against the very same respondents (CIR), and the Court En Banc has resolved them in two separate, recent cases that are applicable here. It is of course axiomatic that a rule or regulation must bear upon, and be consistent with, the provisions of the enabling statute if such rule or regulation is to be valid. In case of conflict between a statute and an administrative order, the former must prevail. To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law. An implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule that is not consistent with the statute itself is null and void. To recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as basis of transitional input tax credit under Section 105 is a nullity. (FORT BONIFACIO DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE AND REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG AND PATEROS, BUREAU OF INTERNAL REVENUE, G.R. NO. 175707, NOVEMBER 19, 2014, J. LEONARDO-DE CASTRO) For Double taxation to take place, the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind or character. Because Section 21 of the Revenue Code of Manila imposed the tax on a person who sold goods and services in the course of trade or business based on a certain percentage of his gross sales or receipts in the preceding calendar year, while Section 15 and Section 17 likewise imposed the tax on a person who sold goods and services in the course of trade or business but only identified such person with particularity, namely, the wholesaler, distributor or dealer (Section 15), and the retailer (Section 17), all the taxes – being imposed on the privilege of doing business in the City of Manila in order to make the taxpayers contribute to the city’s revenues – were imposed on the same subject matter and for the same purpose. (NURSERY CARE CORPORATION; SHOEMART, INC.; STAR APPLIANCE CENTER, INC.; H&B, INC.; SUPPLIES STATION, INC.; and HARDWARE WORKSHOP, INC. vs. ANTHONY ACEVEDO, in his CAPACITY AS THE TREASURER OF MANILA; AND THE CITY OF MANILA, G.R. NO. 180651, JULY 30, 2014, J. BERSAMIN) "Time and again, the Court has held that it is a necessary judicial practice that when a court has laid down a principle of law as applicable to a certain facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. Stare decisis et non quieta movere, stand by the decisions and disturb not what is settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It proceeds from the first principle of justice that, absent any powerful countervailing considerations, like cases ought to be decided alike. Thus, where the same questions relating to the same event have been put forward by the parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue." The Court has pronounced in Republic of the Philippines v. Sunlife Assurance Company of Canada " that under the Tax Code although respondent is a cooperative, registration with the CDA is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on policies of insurance or annuities it grants, under Section 199." The CTA observed that the factual circumstances obtaining in Sunlife and the present case are substantially the same. Hence, the CTA based its assailed decision on the doctrine enunciated by the Court in the

Page 2 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



said case. (COMMISSIONER OF INTERNAL REVENUE VS. THE INSULAR LIFE ASSURANCE CO. LTD., G.R. NO. 197192, JUNE 4, 2014, J. REYES) An opportunity must be given the internal revenue branch of the government to investigate and confirm the veracity of the claims of the taxpayer. The absolute freedom that petitioner seeks to automatically credit tax payments against tax liabilities for a succeeding taxable year, can easily give rise to confusion and abuse, depriving the government of authority and control over the manner by which the taxpayers credit and offset their tax liabilities, not to mention the resultant loss of revenue to the government under such a scheme. (COCA-COLA BOTTLERS PHILIPPINES, INC., vs. CITY OF MANILA; LIBERTY M. TOLEDO, in her capacity as Officer-in-Charge (OIC), Treasurer of the CITY OF MANILA; JOSEPH SANTIAGO, IN HIS CAPACITY AS OIC, CHIEF LICENSE DIVISION OF THE CITY OF MANILA; REYNALDO MONTALBO, IN HIS CAPACITY AS CITY AUDITOR OF THE CITY OF MANILA, G.R. NO. 197561, APRIL 7, 2014, J. PERALTA) Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the identified special projects, which includes “cell sites” or telecommunications towers, the fees imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily revenue-raising. While the fees may contribute to the revenues of the Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes. (SMART COMMUNICATIONS INC., vs. MUNICIPALITY OF MALVAR, BATANGAS, G.R. No. 204429, FEBRUARY 18, 2014, J. CARPIO) INCOME TAXATION Thus, this Court held in the above-cited PAL consolidated cases: However, upon the amendment of the 1997 NIRC, Section 22 of R.A. 9337 abolished the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter. It bears to note that the repealing clause of RA 9337 enumerated the laws or provisions of laws which it repeals. However, there is nothing in the repealing clause, nor in any other provisions of the said law, which makes specific mention of PD 1590 as one of the acts intended to be repealed. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NO. 215705-07 FEBRUARY 22, 2017, J. PERALTA) A careful review of the pleadings reveals that there is no countervailing consideration for the Court to revisit its aforequoted ruling in G.R. Nos. 195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.). Thus, under the doctrine of stare decisis, which states that "[o]nce a case has been decided in one way, any other case involving exactly the same point at issue x x x should be decided in the same manner," the Court finds that SLMC is subject to l0% income tax insofar as its revenues from paying patients are concerned. To be clear, for an institution to be completely exempt from income tax, Section 30(E) and (G) of the 1997 NIRC requires said institution to operate exclusively for charitable or social welfare purpose. But in case an exempt institution under Section 30(E) or (G) of the said Code earns income from its for-profit activities, it will not lose its tax exemption. However, its income from for-profit activities will be subject to income tax at the

Page 3 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



preferential 10% rate pursuant to Section 27(B) thereof. (COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO) As to whether SLMC is liable for compromise penalty under Section 248(A) of the 1997 NIRC for its alleged failure to file its quarterly income tax returns, this has also been resolved in G.R Nos. 195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.), where the imposition of surcharges and interest under Sections 248 and 249 of the 1997 NIRC were deleted on the basis of good faith and honest belief on the part of SLMC that it is not subject to tax. Thus, following the ruling of the Court in the said case, SLMC is not liable to pay compromise penalty under Section 248(A) of the 1997 NIRC. (COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO) While the Court agrees with the CIR that the payment confirmation from the BIR presented by SLMC is not a competent proof of payment as it does not indicate the specific taxable period the said payment covers, the Court finds that the Certification issued by the Large Taxpayers Service of the BIR dated May 27, 2013, and the letter from the BIR dated November 26, 2013 with attached Certification of Payment and application for abatement are sufficient to prove payment especially since CIR never questioned the authenticity of these documents. In fact, in a related case, G.R. No. 200688, entitled Commissioner of Internal Revenue v. St. Luke's Medical Center, lnc., the Court dismissed the petition based on a letter issued by CIR confirming SLMC's payment of taxes, which is the same letter submitted by SLMC in the instant case. (COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO) In sum, R.A. 9504, like R.A. 7167 in Umali, was a piece of social legislation clearly intended to afford immediate tax relief to individual taxpayers, particularly low-income compensation earners. Indeed, if R.A. 9504 was to take effect beginning taxable year 2009 or half of the year 2008 only, then the intent of Congress to address the increase in the cost of living in 2008 would have been negated. Therefore, following Umali, the test is whether the new set of personal and additional exemptions was available at the time of the filing of the income tax return. In other words, while the status of the individual taxpayers is determined at the close of the taxable year, their personal and additional exemptions - and consequently the computation of their taxable income - are reckoned when the tax becomes due, and not while the income is being earned or received. The NIRC is clear on these matters. The taxable income of an individual taxpayer shall be computed on the basis of the calendar year. The taxpayer is required to file an income tax return on the 15th of April of each year covering income of the preceding taxable year. The tax due thereon shall be paid at the time the return is filed. It stands to reason that the new set of personal and additional exemptions, adjusted as a form of social legislation to address the prevailing poverty threshold, should be given effect at the most opportune time as the Court ruled in Umali. (JAIME N. SORIANO VS. SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY 24, 2017, C.J. SERENO.) A clarification is proper at this point. Our ruling that the MWE exemption is available for the entire taxable year 2008 is premised on the fact of one's status as an MWE; that is, whether the employee during the entire year of 2008 was an MWE as defined by R.A. 9504. When the wages received exceed the minimum wage anytime during the taxable year, the employee necessarily loses the MWE qualification. Therefore, wages become taxable as the employee ceased to be an MWE. But the exemption of the employee from tax on the income previously earned as an MWE remains. As the

Page 4 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



exemption is based on the employee's status as an MWE, the operative phrase is when the employee ceases to be an MWE. Even beyond 2008, it is therefore possible for one employee to be exempt early in the year for being an MWE for that period, and subsequently become taxable in the middle of the same year with respect to the compensation income, as when the pay is increased higher than the minimum wage. The improvement of one's lot, however, cannot justly operate to make the employee liable for tax on the income earned as an MWE. Additionally, on the question of whether one who ceases to be an MWE may still be entitled to the personal and additional exemptions, the answer must necessarily be yes. The MWE exemption is separate and distinct from the personal and additional exemptions. One's status as an MWE does not preclude enjoyment of the personal and additional exemptions. Thus, when one is an MWE during a part of the year and later earns higher than the minimum wage and becomes a non-MWE, only earnings for that period when one is a non-MWE is subject to tax. It also necessarily follows that such an employee is entitled to the personal and additional exemptions that any individual taxpayer with taxable gross income is entitled. A different interpretation will actually render the MWE exemption a totally oppressive legislation. It would be a total absurdity to disqualify an MWE from enjoying as much as P150,000 in personal and additional exemptions just because sometime in the year, he or she ceases to be an MWE by earning a little more in wages. Laws cannot be interpreted with such absurd and unjust outcome. It is axiomatic that the legislature is assumed to intend right and equity in the laws it passes. Critical, therefore, is how an employee ceases to become an MWE and thus ceases to be entitled to an MWE's exemption. In sum, the proper interpretation of R.A. 9504 is that it imposes taxes only on the taxable income received in excess of the minimum wage, but the MWEs will not lose their exemption as such. Workers who receive the statutory minimum wage their basic pay remain MWEs. The receipt of any other income during the year does not disqualify them as MWEs. They remain MWEs, entitled to exemption as such, but the taxable income they receive other than as MWEs may be subjected to appropriate taxes. (JAIME N. SORIANO VS. SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY 24, 2017, C.J. SERENO) Section 1 of R.A. No. 9337, amending Section 27(c) of R.A. No. 8424, by excluding petitioner from the enumeration of GOCCs exempted from corporate income tax, is valid and constitutional. In addition, we hold that: 1)Petitioner’s tax privilege of paying five percent (5%) franchise tax in lieu of all other taxes with respect to its income from gaming operations, pursuant to P.D. 1869, as amended, is not repealed or amended by Section 1(c) of R.A. No. 9337; 2)Petitioner’s income from gaming operations is subject to the five percent (5%) franchise tax only; and 3)Petitioner’s income from other related services is subject to corporate income tax only. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION VS. THE BUREAU OF INTERNAL REVENUE, G.R. NO. 215427, DECEMBER 10, 2014, J. PERALTA) DOCUMENTARY STAMP TAX/ CAPITAL GAINS TAX The maturity of PNB's interbank call loans was irrelevant in determining its DST liability for taxable year 1997, relation to which the applicable law was the National Internal Revenue Code of 1977 (1977 NIRC), as amended by Presidential Decree No. 195916 and Republic Act No. 7660. Section 180 of the 1977 NIRC provides that the DST of P0.30 on each P200.00, or fractional part thereof, shall only be imposed on the face value of: (1) loan agreements; (2) bills of exchange; (3) drafts; (4) instruments and securities issued by the Government or any of its instrumentalities; (5) certificates of deposits drawing interest; (6) orders for the payment of any sum of money otherwise than at sight or on demand; and (7) promissory notes, whether negotiable or non-negotiable, except bank notes

Page 5 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



issued for circulation, and on each renewal of any such note. Interbank call loans, although not considered as deposit substitutes, are not expressly included among the taxable instruments listed in Section 180; hence, they may not be held as taxable. The five-day maturity of interbank call loans came to be introduced only by Section 22(y) of the National Internal Revenue Code of 1997 (1997 NIRC). The provisions of the 1997 NIRC cannot be given retrospective effect to the prejudice of PNB. This is because tax laws are prospective in application, unless their retroactive application is expressly provided. (COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE NATIONAL BANK, G.R. No. 195147, JULY 11, 2016, J. BERSAMIN) The payment of the DST and the filing of the DST Declaration Return upon loading/reloading of the DS metering machine must not be considered as the "date of payment" when the prescriptive period to file a claim for a refund/credit must commence. For DS metering machine users, the payment of the DST upon loading/reloading is merely an advance payment for future application. The liability for the payment of the DST falls due only upon the occurrence of a taxable transaction. Therefore, it is only then that payment may be considered for the purpose of filing a claim for a refund or tax credit. Since actual payment was already made upon loading/reloading of the DS metering machine and the filing of the DST Declaration Return, the date of imprinting the documentary stamp on the taxable document must be considered as the date of payment contemplated under Section 229 of the NIRC. (PHILIPPINE BANK OF COMMUNICATIONS VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 194065, JUNE 20, 2016, C.J. SERENO) A perusal of the subject provision would clearly show it pertains only to sale transactions where real property is conveyed to a purchaser for a consideration. The phrase “granted, assigned, transferred or otherwise conveyed” is qualified by the word “sold” which means that documentary stamp tax under Section 196 is imposed on the transfer of realty by way of sale and does not apply to all conveyances of real property. Indeed, as correctly noted by the respondent, the fact that Section 196 refers to words “sold”, “purchaser” and “consideration” undoubtedly leads to the conclusion that only sales of real property are contemplated therein. (COMMISSIONER OF INTERNAL REVENUE VS. LA TONDENA DISTILLERS, INC. (LTDI) [NOW GINEBRA SAN MIGUEL], G.R. NO. 175188, JULY 15, 2015) Capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax. As a general rule, therefore, any of the parties to a transaction shall be liable for the full amount of the documentary stamp tax due, unless they agree among themselves on who shall be liable for the same. In this case, with respect to the capital gains tax, we find merit in petitioner’s posture that pursuant to Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC), capital gains tax due on the sale of real property is a liability for the account of the seller. It has been held that since capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax. Also, there is no agreement as to the party liable for the documentary stamp tax due on the sale of the land to be expropriated. But while DPWH rejects any liability for the same, this Court must take note of petitioner’s Citizen’s Charter, which functions as a guide for the procedure to be taken by the DPWH in acquiring real property through expropriation under RA 8974. The Citizen’s Charter, issued by DPWH itself on December 4, 2013, explicitly provides that the documentary stamp tax, transfer tax, and registration fee due on the transfer of the title of land in the name of the Republic shall be shouldered by the implementing agency of the DPWH, while the capital gains tax shall be paid by the affected property owner. (REPUBLIC OF THE

Page 6 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS VS. ARLENE R. SORIANO, G.R. NO. 211666, FEBRUARY 25, 2015, J. PERALTA) It should be noted that a DST is in the nature of an excise tax because it is imposed upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. DST is a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, or transfer of an obligation, right or property incident thereto. DST is thus imposed on the exercise of these privileges through the execution of specific instruments, independently of the legal status of the transactions giving rise thereto. The transfer of real properties from SPPC to PSPC is not subject to DST considering that the same was not conveyed to or vested in PSPC by means of any specific deed, instrument or writing. There was no deed of assignment and transfer separately executed by the parties for the conveyance of the real properties. The conveyance of real properties not being embodied in a separate instrument but is incorporated in the merger plan, thus, PSPC is not liable to pay DST. Notably, R.A. No. 9243, entitled “An Act Rationalizing the Provisions of the Documentary Stamp Tax of the National Internal Revenue Code of 1997” was enacted and took effect on April 27, 2004, which exempts the transfer of real property of a corporation, which is a party to the merger or consolidation, to another corporation, which is also a party to the merger or consolidation, from the payment of DST. (COMMISSIONER OF INTERNAL REVENUE VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 192398, SEPTEMBER 29, 2014, J. VILLARAMA, JR.) HSBC issued SWIFT messages to its clients containing instructions about their accounts. HSBC paid DST on the said messages. However, later on, HSBC filed for tax refund for the DST it paid. CIR denied their claim. On review with the Supreme Court, it held that an electronic message containing instructions to debit their respective local or foreign currency accounts in the Philippines and pay a certain named recipient also residing in the Philippines is not transaction contemplated under Section 181 of the Tax Code. They are also not bills of exchange due to their non-negotiability. Hence, they are not subject to DST. (THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCHES VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 166018 & 167728, JUNE 4, 2014, J. LEONARDO-DE CASTRO) FRANCHISE TAX The amendment of the 1997 NIRC, in connection with Section 22 of R.A. 9337 abolished the franchise tax on domestic airlines and subjected PAL and similar entities to corporate income tax and valueadded tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter. In this case, the CTA found that PAL had paid basic corporate income tax for fiscal year ending 31 March 2006. Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due on all importations of its commissary and catering supplies, provided it shows that 1) such articles or supplies or materials are imported for use in its transport and nontransport operations and other activities incidental thereto; and 2) they are not locally available in reasonable quantity, quality, or price. (REPUBLIC OF THE PHILIPPINES, REP. BY THE COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC. (PAL) / COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE AIRLINES, INC. (PAL), G.R. NO. 209353-54/G.R. NOS. 211733-34, JULY 6, 2015)

Page 7 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



A corporation that has been ordered to pay franchise tax delinquency but which facilities, including its nationwide franchise, had been transferred to the National Transmission Corporation (TRANSCO) by operation of law during the time of the alleged delinquency, cannot be ordered to pay as it is not the proper party subject to the local franchise tax, the transferee being the one liable. (NATIONAL POWER CORPORATION VS. PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN) AND THE REGISTER OF DEEDS OF THE PROVINCE OF BATAAN, G.R. NO. 180654, APRIL 21, 2014, J. ABAD) EXCISE TAX Section 145(C) of the NIRC is clear that the excise tax on cigarettes packed by machine is imposed per pack. "Per pack" was not given a clear definition by the NIRC. However, a "pack" would normally refer to a number of individual components packaged as a unit. Under the same provision, cigarette manufacturers are permitted to bundle cigarettes packed by machine in the maximum number of 20 sticks and aside from 20's, the law also allows packaging combinations of not more than 20's -it can be 4 pouches of 5 cigarette sticks in a pack (4x5's), 2 pouches of 10 cigarette sticks in a pack (2xl0's), etc. Based on this maximum packaging and allowable combinations, the BIR, with RA 10351 as basis, issued RR 17-2012. The BIR also released RMC 90-2012, specifically Annex "D-1" on Cigarettes Packed by Machine, in accordance with RA 10351 and RR 17-2012, showing in tabular form the different brands of locally-manufactured cigarettes packed by machine with the brand names, content/unit (pack), net retail price, and the applicable excise tax rates effective 1 January 2013. The net retail price of some brand names was converted into individual packages of 5’s or 10’s pursuant to Section 11 of RR 17-2012. xxx From the above discussion, it can be gleaned that the lawmakers intended to impose the excise tax on every pack of cigarettes that come in 20 sticks. Individual pouches or packaging combinations of 5's and 10's for retail purposes are allowed and will be subjected to the same excise tax rate as long as they are bundled together by not more than 20 sticks. Thus, by issuing Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012, the BIR went beyond the express provisions of RA 10351. In this case, Section 11 of RR 172012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012 clearly contravened the provisions of RA 10351. It is a well-settled principle that a revenue regulation cannot amend the law it seeks to implement. In Commissioner of Internal Revenue v. Seagate Technology (Philippines), we held that a mere administrative issuance, like a BIR regulation, cannot amend the law; the former cannot purport to do any more than implement the latter. The courts will not countenance an administrative regulation that overrides the statute it seeks to implement. In the present case, a reading of Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 902012 reveals that they are not simply regulations to implement RA 10351. They are amendatory provisions which require cigarette manufacturers to be liable to pay for more tax than the law, RA 10351, allows. The BIR, in issuing these revenue regulations, created an additional tax liability for packaging combinations smaller than 20 cigarette sticks. In so doing, the BIR amended the law, an act beyond the power of the BIR to do. In sum, we agree with the ruling of the RTC that Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012 are null and void. Excise tax on cigarettes packed by machine shall be imposed on the packaging combination of 20 cigarette sticks as a whole and not to individual packaging combinations or pouches of 5's, 10's, etc. (SECRETARY OF FINANCE CESAR V. PURISIMA VS. PHILIPPINE TOBACCO INSTITUTE, INC., GR NO. 210251, APRIL 17, 2017, J. CARPIO)

Page 8 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Lastly, as in the abovecited cases, petitioners in the present petition again raise the issue regarding PAL's alleged failure to comply with the conditions set by Section 13 of PD 1590 for its imported tobacco and alcohol products to be exempt from excise tax. These conditions are: (1) such supplies are imported for the use of the franchisee in its transport/non-transport operations and other incidental activities; and (2) they are not locally available in reasonable quantity, quality and price. However, as this Court has previously held, the matter as to PAL's supposed noncompliance with the conditions set by Section 13 of P.D. 1590 for its imported supplies to be exempt from excise tax, are factual determinations that are best left to the CTA, which found that PAL had, in fact, complied with the above conditions. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NO. 215705-07 FEBRUARY 22, 2017, J. PERALTA) Whether the Bureau of Internal Revenue may issue notices of discrepancy that effectively changes "San Mig Light"'s classification from new brand to variant - the issues involve an application of Section 143 of the 1997 National Internal Revenue Code (Tax Code), as amended, on the definition of a variant, which is subject to a higher excise tax rate than a new brand. This case also applies the requirement in Rep. Act No. 9334 that reclassification of certain fermented liquor products introduced between January 1, 1997 and December 31, 2003 can only be done by an act of Congress. Excise taxes are imposed on the production, sale, or consumption of specific goods. Generally, excise taxes on domestic products are paid by the manufacturer or producer before removal of those products from the place of production. The excise tax based on weight, volume capacity, or any other physical unit of measurement is referred to as "specific tax." If based on selling price or other specified value, it is referred to as "ad valorem" tax. The excise tax on beer is a specific tax based on volume, or on a per liter basis. Before its amendment, Section 143 provided for three (3) layers of tax rates, depending on the net retail price per liter. How a new beer product is taxed depends on its classification, i.e. whether it is a variant of an existing brand or a new brand. Variants of a brand that were introduced in the market after January 1, 1997 are taxed under the highest tax classification of any variant of the brand. On the other hand, new brands are Initially classified and taxed according to their suggested net retail price, until a survey is conducted by the Bureau of Internal Revenue to determine their current net retail price in accordance with the specified procedure. Parenthetically, the Bureau of Internal Revenue's actions reflect its admission and confirmation that "San Mig Light" is a new brand. (COMMISSIONER OF INTERNAL REVENUE VS. SAN MIGUEL CORPORATION, G.R. NOS. 205045 & 205723, JANUARY 25, 2017, J. LEONEN) Any reclassification of fermented liquor products should be by act of Congress. Section 143 of the Tax Code, as amended by Rep. Act No. 9334, provides for this classification freeze referred to by the parties. In any event, petitioner's letters and Notices of Discrepancy, which effectively changed San Mig Light's brand's classification from "new brand to variant of existing brand," necessarily changes San Mig Light's tax bracket. Based on the legislative intent behind the classification freeze provision, petitioner has no power to do this. A reclassification of a fermented liquor brand introduced between January 1, 1997 and December 31, 2003, such as "San Mig Light," must be by act of Congress. There was none in this case. A variant under the Tax Code has a technical meaning. It is determined by the brand (name) or logo of the beer product. The variant contemplated under the tax Code has a technical meaning. A variant is determined by the brand (name) of the beer product, whether it was formed by prefixing or suffixing a modifier to the root name of the alleged parent brand, or whether it carries the same logo or design. The purpose behind the definition was to properly tax brands that

Page 9 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



were presumed to be riding on the popularity of previously registered brands by being marketed under an almost identical name with a prefix, suffix, or a variant. It seeks to address price differentials employed by a manufacturer on similar products differentiated only in brand or design. Specifically, the provision was meant to obviate any tax avoidance by manufacturing firms from the sale of lower priced variants of its existing beer brands, thus, falling in the lower tax bracket with lower excise tax rates. To favor government, a variant of a brand is taxed according to the highest rate of tax for that particular brand. "San Mig Light" and "Pale Pilsen" do not share a root word. Neither is there an existing brand in the list (Annexes C-1 and C-2 of the Tax Code) called "San Mig" to conclude that "Light" is a suffix rendering "San Mig Light" as its "variant." As discussed in the Court of Tax Appeals Decision, "San Mig Light" should be considered as one brand name. Respondent's statements describing San Mig Light as a low-calorie variant is not conclusive of its classification as a variant for excise tax purposes. Burdens are not to be imposed nor presumed to be imposed beyond the plain and express terms of the law. "The general rule of requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication." Furthermore, respondent's payment of the higher taxes starting January 30, 2004 after deficiency assessments were made cannot be considered as an admission that its San Mig Light is a variant. Section 130(A)(2) of the Tax Code requires payment of excise tax "before removal of domestic products from place of production." These payments were made in protest as respondent subsequently filed refund claims. Because the Bureau of Internal Revenue granted respondent's request in its October 27, 1999 letter and confirmed this grant in its subsequent letters, respondent cannot be faulted for relying on these actions by the Bureau of Internal Revenue. The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the mistakes or errors of its agents is conceded. However, this authority must be exercised reasonably, i.e., only when the action or ruling is patently erroneous or patently contrary to law. For the presumption lies in the regularity of performance of official duty, and reasonable care has been exercised by the revenue officer or agent in evaluating the facts before him or her prior to rendering his or her decision or ruling—in this case, prior to the approval of the registration of San Mig Light as a new brand for excise tax purposes. A contrary view will create disorder and confusion in the operations of the Bureau of Internal Revenue and open the administrative agency to inconsistencies in the administration and enforcement of tax laws. (COMMISSIONER OF INTERNAL REVENUE VS. SAN MIGUEL CORPORATION, G.R. NOS. 205045 & 205723, JANUARY 25, 2017, J. LEONEN) Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products. (CHEVRON PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE G.R. NO. 210836. SEPTEMBER 1, 2015) Stemmed leaf tobacco is subject to the specific tax under Section 141(b). It is a partially prepared tobacco. The removal of the stem or midrib from the leaf tobacco makes the resulting stemmed leaf tobacco a prepared or partially prepared tobacco. Since the Tax Code contained no definition of “partially prepared tobacco,” then the term should be construed in its general, ordinary, and comprehensive sense. However, importation of stemmed leaf tobacco is not included in the exemption under Section 137. The transaction contemplated in Section 137 does not include

Page 10 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



importation of stemmed leaf tobacco for the reason that the law uses the word “sold” to describe the transaction of transferring the raw materials from one manufacturer to another. Finally, excise taxes are essentially taxes on property because they are levied on certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and on goods imported. In this case, there is no double taxation in the prohibited sense despite the fact that they are paying the specific tax on the raw material and on the finished product in which the raw material was a part, because the specific tax is imposed by explicit provisions of the Tax Code on two different articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette. (LA SUERTE CIGAR & CIGARETTE FACTORY VS. COURT OF APPEALS AND COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 125346, G.R. NOS. 136328-29, G.R. NO. 144942, G.R. NO. 148605, G.R. NO. 158197, G.R. NO. 165499, NOVEMBER 11, 2014, J. LEONEN) Petitioner filed the instant petition assailing the decision of the CTA finding PAL exempt from payment of excise tax. Affirming the decision of the CTA the SC ruled that PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334. Such being the case, PAL is indeed exempt from payment of excise tax. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NOS. 212536-37, AUGUST 27, 2014, J. VELASCO, JR.) FINAL WITHHOLDING TAX Should there have been a simultaneous sale to 20 or more lenders/investors, the Poverty Eradication and Alleviation Certificates or the PEACe Bonds are deemed deposit substitutes within the meaning of Sec. 22(Y) of the 1997 NIRC and RCBC Capital would have been obliged to pay the 20% FWT on the interest or discount from the PEACe Bonds. Further, the obligation to withhold the 20% final tax on the corresponding interest from the PEACe Bonds would likewise be required of any lender/investor had the latter turned around and sold said PEACe Bonds, whether in whole or part, simultaneously to 20 or more lenders or investors. The Court notes, however, that under Section 24 of the 1997 NIRC, interest income received by individuals from long-term deposits or investments with a holding period of not less than five (5) years is exempt from the final tax. Thus, should the PEACe Bonds be found to be within the coverage of deposit substitutes, the proper procedure was for the Bureau of Treasury to pay the face value of the PEACe Bonds to the bondholders and for the BIR to collect the unpaid FWT directly from RCBC Capital, or any lender or investor if such be the case, as the withholding agents. (BANCO DE ORO, ET AL. VS. REPUBLIC OF THE PHILIPPINES, ET AL., G.R. NO. 198756, JANUARY 13, 2015, J. LEONEN) VALUE- ADDED TAX The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross receipts for VAT purposes. Since an HMO like MEDICARD is primarily engaged in arranging for coverage or designated managed care services that are needed by plan holders/members for fixed prepaid membership fees and for a specified period of time, then MEDICARD is principally engaged in the sale of services. Its VAT base and corresponding liability is, thus, determined under Section 108(A) of the Tax Code, as amended by Republic Act No. 9337. What applies to MEDICARD is the definition of gross receipts of an HMO under RR No. 16-2005 and not the modified definition of gross receipts in general under the RR No. 4-2007. Xxx In the proceedings

Page 11 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



below, the nature of MEDICARD's business and the extent of the services it rendered are not seriously disputed. As an HMO, MEDICARD primarily acts as an intermediary between the purchaser of healthcare services (its members) and the healthcare providers doctors, hospitals and clinics for a fee. By enrolling membership with MEDICARD, its members will be able to avail of the pre-arranged medical services from its accredited healthcare providers without the necessary protocol of posting cash bonds or deposits prior to being attended to or admitted to hospitals or clinics, especially during emergencies, at any given time. Apart from this, MEDICARD may also directly provide medical, hospital and laboratory services, which depends upon its member's choice. Thus, in the course of its business as such, MEDICARD members can either avail of medical services from MEDICARD's accredited healthcare providers or directly from MEDICARD. In the former, MEDICARD members obviously knew that beyond the agreement to pre-arrange the healthcare needs of its members, MEDICARD would not actually be providing the actual healthcare service. Thus, based on industry practice, MEDICARD informs its would-be member beforehand that 80% of the amount would be earmarked for medical utilization and only the remaining 20% comprises its service fee. In the latter case, MEDICARD's sale of its services is exempt from VAT under Section 109(G). The CTA's ruling and CIR's Comment have not pointed to any portion of Section 108 of the NIRC that would extend the definition of gross receipts even to amounts that do not only pertain to the services to be performed by another person, other than the taxpayer, but even to amounts that were indisputably utilized not by MEDICARD itself but by the medical service providers. In Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue, the Court adopted the principal object and purpose object in determining whether the MEDICARD therein is engaged in the business of insurance and therefore liable for documentary stamp tax. The Court held therein that an HMO engaged in preventive, diagnostic and curative medical services is not engaged in the business of an insurance. In sum, the Court said that the main difference between an HMO and an insurance company is that HMOs undertake to provide or arrange for the provision of medical services through participating physicians while insurance companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit. In the present case, the VAT is a tax on the value added by the performance of the service by the taxpayer. It is, thus, this service and the value charged thereof by the taxpayer that is taxable under the NIRC. For this Court to subject the entire amount of MEDICARD's gross receipts without exclusion, the authority should have been reasonably founded on the language of the statute. That language is wanting in this case. (MEDICARD. MEDICARD PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, GR NO. 222743, APRIL 5, 2017, J. REYES) In Visayas Geothermal Power Company v. Commissioner of Internal Revenue, the Court came up with an outline summarizing the pronouncements in San Roque, to wit: For clarity and guidance, the Court deems it proper to outline the rules laid down in San Roque with regard to claims for refund or tax credit of unutilized creditable input VAT. They are as follows: 1. When to file an administrative claim with the CIR: a. General rule (Section 112(A) and Mirant case) Within 2 years from the close of the taxable quarter when the sales were made. b. Exception

Page 12 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



(Atlas case) Within 2 years from the date of payment of the output VAT, if the administrative claim was filed from June 8, 2007 (promulgation of Atlas) to September 12, 2008 (promulgation of Mirant). 2. When to file a judicial claim with the CTA: a. General rule Section 112(D); not Section 229 i. Within 30 days from the full or partial denial of the administrative claim by the CIR; or ii. Within 30 days from the expiration of the 120-day period provided to the CIR to decide on the claim. This is mandatory and jurisdictional beginning January 1, 1998 (effectivity of 1997 NIRC). b. Exception BIR Ruling No. DA-489-03. The judicial claim need not await the expiration of the 120-day period, if such was filed from December 10, 2003(issuance of BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation of Aichi). (SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO. 201326, FEB 8, 2017, J. CAGUIOA) In Burmeister, the Court clarified that an essential condition to qualify for zero-rating under the aforequoted provision is that the service-recipient must be doing business outside the Philippines. Following Burmeister, the Court, in Accenture, Inc. v. Commissioner of Internal Revenue, (Accenture), emphasized that a taxpayer claiming for a VAT refund or credit under Section 108(B) has the burden to prove not only that the recipient of the service is a foreign corporation, but also that said corporation is doing business outside the Philippines. (SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO. 201326, FEB 8, 2017, J. CAGUIOA) The CTA Division also did not err when it denied the amount of P2,668,852.55, allegedly representing input taxes claimed on Sitel's domestic purchases of goods and services which are supported by invoices/receipts with pre-printed TIN-V. In Western Mindanao Power Corp. v. Commissioner of Internal Revenue, the Court ruled that in a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the claim under substantive law, he must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit and compliance with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. The NIRC requires that the creditable input VAT should be evidenced by a VAT invoice or official receipt, which may only be considered as such when the TIN-VAT is printed thereon, as required by Section 4.108-1 of RR 7-95. In the same vein, considering that the subject invoice/official receipts are not imprinted with the taxpayer's TIN followed by the word VAT, these would not be considered as VAT invoices/official receipts and would not give rise to any creditable input VAT in favor of Sitel. (SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO. 201326, FEB 8, 2017, J. CAGUIOA) For internal revenue purposes, the sale of raw cane sugar is exempt from VAT because it is considered to be in its original state. On the other hand, refined sugar is an agricultural product that can no longer

Page 13 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



be considered to be in its original state because it has undergone the refining process; its sale is thus subject to VAT. Although the sale of refined sugar is generally subject to VAT, such transaction may nevertheless qualify as a VAT-exempt transaction if the sale is made by a cooperative. Under Section 109(1) of the NIRC, sales by agricultural cooperatives are exempt from VAT provided the following conditions concur, viz: First, the seller must be an agricultural cooperative duly registered with the CDA. An agricultural cooperative is "duly registered" when it has been issued a certificate of registration by the CDA. This certificate is conclusive evidence of its registration. Second, the cooperative must sell either: 1) exclusively to its members; or 2) to both members and non-members, its produce, whether in its original state or processed form. UCSFA-MPC satisfies these two requisites. (COMMISSIONER OF INTERNAL REVENUE VS. UNITED CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE COOPERATIVE, G.R. NO. 209776, DECEMBER 7, 2016, J. BRION) Subsequent to the Aichi ruling and during the pendency of the case at bar, the Supreme Court En Banc resolved the consolidated cases involved in Commissioner of Internal Revenue vs. San Roque Power and stated that a judicial claim for refund of input VAT which was filed with the CTA before the lapse of the 120-day period under Section 112 of the NIRC is considered to have been timely made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of the Aichi doctrine which was promulgated on October 6, 2010. It is undisputed that the date of filing in the case at bar falls within the period following the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 but before the promulgation of the Aichi case on October 6, 2010. In accordance with the doctrine laid down in San Roque, we rule that petitioner's judicial claim had been timely filed and should be given due course and consideration by the CTA. (DEUTSCHE KNOWLEDGE SERVICES PTE. LTD. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 197980, DECEMBER 1, 2016, J. LEONARDO-DE CASTRO) The CTA did not err in denying the claim for refund on the ground that the petitioner had not established its zero-rated sales of services to PIATCO through the presentation of official receipts. In this regard, as evidence of an administrative claim for tax refund or tax credit, there is a certain distinction between a receipt and an invoice. Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter or exchange of goods or properties, while a VAT official receipt properly pertains to every lease of goods or properties; as well as to every sale, barter or exchange of services. A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the prices charged therefor or a list by whatever name it is known which is used in the ordinary course of business evidencing sale and transfer or agreement to sell or transfer goods and services. A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or other settlement between seller and buyer of goods, debtor or creditor, or person rendering services and client or customer. A VAT invoice is the seller's best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyer's best evidence of the payment of goods or services received from the seller. A VAT invoice and a VAT receipt should not be confused and made to refer to one and the same thing. Certainly, neither does the law intend the two to be used alternatively. The petitioner submitted sales invoices, not official receipts, to support its claim for refund. In light of the aforestated distinction between a receipt and an invoice, the submissions were

Page 14 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



inadequate for the purpose thereby intended. The mere fact that an application for zero rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. (TAKENAKA CORPORATION – PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 193321, OCTOBER 19, 2016, J. BERSAMIN) The failure to indicate the words “zero-rated” on the invoices and receipts issued by a taxpayer would result in the denial of the claim for refund or tax credit. The Court has consistently ruled on the denial of a claim for refund or tax credit whenever the word “zero-rated” has been omitted on the invoices or sale receipts of the taxpayer-claimant. Furthermore, the CTA is a highly specialized court dedicated exclusively to the study and consideration of revenue-related problems, in which it has necessarily developed an expertise. Hence, its factual findings, when supported by substantial evidence, will not be disturbed on appeal. (EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 183531, MARCH 25, 2015, J. REYES) Cargill filed two claims for refund. However, the court ruled that the rule must therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 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 (i.e., December 10, 2003 to October 6, 2010), the observance of the 120-day period is mandatory and jurisdictional to the filing of such claim. (CARGILL PHILIPPINES, INC VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 203774, MARCH 11, 2015, J. PERLAS- BERNABE) This Court has consistently held as fatal the failure to print the word “zero-rated” on the VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337. As to the sufficiency of a Northern Mindanao’s company invoice to prove the sales of services to NPC, the Court finds that this claim is without sufficient legal basis. A VAT invoice is the seller’s best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyer’s best evidence of the payment of goods or services received from the seller. The requirement of imprinting the word “zero-rated” proceeds from the rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. A VAT-registered person whose sales are zero-rated or effectively zero-rated, Section 112(A) specifically provides for a two-year prescriptive period after the close of the taxable quarter when the sales were made within which such taxpayer may apply for the issuance of a tax credit certificate or refund of creditable input tax. (NORTHERN MINDANAO POWER CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 185115, FEBRUARY 18, 2015, CJ. SERENO) Section 112(C) of the 1997 Tax Code states the time requirements for filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for a refund or credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA. It is the 30-day period that is at issue in this case. (ROHM APOLLO SEMICONDUCTOR PHILIPPINES VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 168950, JANUARY 14, 2015, C.J. SERENO)

Page 15 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Its petition for review having been denied by the CTA for being prematurely filed, petitioner filed the instant petition arguing that since it filed its judicial claim after the issuance of BIR Ruling No. DA489-03, but before the adoption of the Aichi doctrine, it can invoke the said BIR Ruling. The SC ruled that the jurisdiction of the CTA over decisions or inaction of the CIR is only appellate in nature and, thus, necessarily requires the prior filing of an administrative case before the CIR under Section 112. A petition filed prior to the lapse of the 120-day period prescribed under said Section would be premature for violating the doctrine on the exhaustion of administrative remedies. There is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day period. The Court in San Roque noted that BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated that the "taxpayer-claimant 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." Hence, taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on December 10, 2003 up to its reversal by this Court in Aichi on October 6, 2010, where it was held that the 120+30 day period was mandatory and jurisdictional. (TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 201195, NOVEMBER 26, 2014, J. MENDOZA) CE Luzon filed an action for refund of the VAT. The court ruled that While both claims for refund were filed within the two (2)-year prescriptive period, CE Luzon failed to comply with the 120-day period as it filed its judicial claim in C.T.A. Case No. 6792 four (4) days after the filing of the administrative claim, while in C.T.A. Case No. 6837, the judicial claim was filed a day after the filing of the administrative claim. Proceeding from the aforementioned jurisprudence, only C.T.A. Case No. 6792 should be dismissed on the ground of lack of jurisdiction for being prematurely filed. In contrast, CE Luzon filed its administrative and judicial claims for refund in C.T.A. Case No. 6837 during the period, i.e., from December 10, 2003 to October 6, 2010, when BIR Ruling No. DA-489-03 was in place. As such, the aforementioned rule on equitable estoppel operates in its favor, thereby shielding it from any supposed jurisdictional defect which would have attended the filing of its judicial claim before the expiration of the 120-day period. (COMMISSIONER OF INTERNAL REVENUE VS. CE LUZON GEOTHERMAL POWER COMPANY, INC., G.R. NO. 190198, SEPTEMBER 17, 2014, J. PERLAS- BERNABE) Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his administrative claim for refund or credit at anytime within the two-year prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation of Section 112(A) and (C). (SAN ROQUE POWER CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 205543, JUNE 30, 2014, J. LEONARDO-DE CASTRO) The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims for a refund or tax credit for unutilized creditable input VAT. Section 229 pertains to the recovery of taxes erroneously, illegally, or excessively collected. San Roque stressed that “input VAT is not ‘excessively’ collected as understood under Section 229 because, at the time the input VAT is collected, the amount paid is correct and proper.” It is, therefore, Section 112 which applies specifically with regard to claiming a refund or tax credit for unutilized creditable input VAT.

Page 16 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



(VISAYAS GEOTHERMAL POWER COMPANY VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 197525, JUNE 4, 2014, J. MENDOZA) A claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+30 day periods as mandatory and jurisdictional. (MIRAMAR FISH COMPANY, INC., VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 185432, JUNE 4, 2014, J. PEREZ) LOCAL TAXATION Section 137 of Republic Act No. 7160 (the Local Government Code of 1991) is categorical in stating that franchise tax can only be imposed on businesses enjoying a franchise. This goes without saying that without a franchise, a local government unit cannot impose franchise tax. Indeed, the enactment of EPIRA separated the transmission and sub-transmission functions of the state-owned Napocor from its generation function, and transferred all its transmission assets to the then newly-created TRANSCO, which was wholly owned by PSALM Corporation at that time. Power generation is no longer considered a public utility operation, and companies which shall engage in power generation and supply of electricity are no longer required to secure a national franchise. This is expressly provided under Section 6 of EPIRA. EPIRA effectively removed power generation from the ambit of local franchise taxes. Hence, as regards Napocor's business of generating electricity, the franchise taxes sought to be collected by the Provincial Government of Bataan for the latter part of 2001 up to 2003 are devoid of any statutory basis. As regards Napocor's electric transmission function, under Section 8 of the same law, all transmission assets of Napocor were to be transferred to TRANSCO within six (6) months from the effectivity of EPIRA, or by December 26, 2001. Hence, until the transfer date of the transmission assets, which by express provision of EPIRA shall not be later than December 26, 2001, these assets, as well as the franchise, belong to and are operated by Napocor, and the latter is consequently subject to the local franchise tax. (NATIONAL POWER CORPORATION VS. PROVINCIAL GOVERNMENT OF BATAAN, GR 180654, MARCH 6, 2017, J. LEONEN) Under Section 187 of the Local Government Code of 1991, aggrieved taxpayers who question the validity or legality of a tax ordinance are required to file an appeal before the Secretary of Justice before they seek intervention from the regular courts. In Reyes v. Court of Appeals, this Court declared the mandatory nature of Section 187 of the Local Government Code of 1991. The doctrine of exhaustion of administrative remedies, like the doctrine on hierarchy of courts, is not an iron-clad rule. It admits of several well-defined exceptions. In Alta Vista Golf and Country Club v. City of Cebu, this Court excluded the case from the strict application of the principle on exhaustion of administrative remedies, particularly for non-compliance with Section 187 of the Local Government Code of 1991, on the ground that the issue raised in the Petition was purely legal. In this case, however, the issues involved are not purely legal. There are factual issues that need to be addressed for the proper disposition of the case. In other words, this case is still not ripe for adjudication. To question the validity of the ordinance, petitioners should have first filed an appeal before the Secretary of Justice. (CRISANTO M. AALA VS. HON. REY T. UY, G.R. NO. 202781, JANUARY 10, 2017, J. LEONEN)

Page 17 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Under Section 166 of the Local Government Code of 1991, local taxes "shall accrue on the first (1st) day of January of each year.” When the questioned ordinance was published in July 2012, the City Government of Tagum could not have immediately issued real property tax assessments. Hence, petitioners had ample time within which to question the validity of the tax ordinance. In cases where the validity or legality of a tax ordinance is questioned, the rule that real property taxes must first be paid before a protest is lodged does not apply. Taxpayers must first receive an assessment before this rule is triggered. In Jardine, this Court ruled that prior payment under protest is not required >> when the taxpayer is questioning the very authority of the assessor to impose taxes. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench, however, the petitioners are 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. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase. (CRISANTO M. AALA VS. HON. REY T. UY, G.R. NO. 202781, JANUARY 10, 2017, J. LEONEN) Settled is the rule that should the taxpayer/real property owner question the excessiveness or reasonableness of the assessment, Section 252 of the LGC of 1991 directs that the taxpayer should first pay the tax due before his protest can be entertained. There shall be annotated on the tax receipts the words "paid under protest." It is only after the taxpayer has paid the tax due that he may file a protest in writing within 30 days from payment of the tax to the Provincial, City or Municipal Treasurer, who shall decide the protest within sixty days from receipt. In no case is the local treasurer obliged to entertain the protest unless the tax due has been paid. Moreover, as settled in jurisprudence, a claim for exemption from the payment of real property taxes does not actually question the assessor's authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor. By providing that real property not declared and proved as tax-exempt shall be included in the assessment roll, this implies that the local assessor has the authority to assess the property for realty taxes, and any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the claim. Thus, if the property being taxed has not been dropped from the assessment roll, taxes must be paid under protest if the exemption from taxation is insisted upon. Finally, while it is evident in jurisprudence that the filing of motion for reconsideration before the LBAA is allowed, this Court finds that, inevitably, the filing of the appeal before the CBAA through registered mail on November 16, 2006 was already late. It is settled that the "fresh period rule" in the case of Domingo Neypes, et al. vs. Court of Appeals, et al. applies only to judicial appeals and not to administrative appeals. In the instant case, the subject appeal, i.e., appeal from a decision of the LBAA to the CBAA, is not judicial but administrative in nature. Thus, the "fresh period rule" in Neypes does not apply. (NATIONAL POWER CORPORATION VS. THE PROVINCIAL TREASURER OF BENGUET, THE PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL TREASURER OF ITOGON, BENGUET AND THE MUNICIPAL ASSESSOR OF ITOGON, BENGUET, G.R. NO. 209303, NOVEMBER 14, 2016, J. PERALTA) Indisputably, the power of LGUs to impose business taxes derives from Section 143 of the LGC. However, the same is subject to the explicit statutory impediment provided for under Section 133(h) of the same Code which prohibits LGUs from imposing “taxes, fees or charges on petroleum products.” It can, therefore, be deduced that although petroleum products are subject to excise tax, the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the

Page 18 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



LGC to impose business taxes. (BATANGAS CITY, MARIA TERESA GERON, IN HER CAPACITY AS CITY TREASURER OF BATANGAS CITY, ET AL. VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 187631, JULY 8, 2015) The collections made accrue to its socialized housing programs and projects. The (socialized housing) tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory purpose. The levy is primarily in the exercise of the police power for the general welfare of the entire city. As with the State, LGUs may be considered as having properly exercised their police power only if there is a lawful subject and a lawful method or, to be precise, if the following requisites are met: (1) the interests of the public generally, as distinguished from those of a particular class, require its exercise and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. (JOSE J. FERRER, JR. VS. CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY TREASURER OF QUEZON CITY AND CITY ASSESSOR OF QUEZON CITY, G.R. NO. 210551, JUNE 30, 2015) The garbage fee is not valid imposition being violative of the equal protection as the rates charged under the ordinance are unjust and equitable. A resident of a condominium unit or socialized housing pay twice the amount of a resident of a lot similar in size There is no substantial distinction between an occupant of a lot and an occupant of a condominium unit, socialized housing project or apartment as the garbage output produced by these types of occupants is uniform and does not vary to a large degree. A similar schedule of fee would have been just and equitable. The classification is not germane to the purpose of promoting shared responsibility. There is discrimination between occupant of a lot and occupant of a condo unit or socialized housing project. (JOSE J. FERRER, JR. VS. CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY TREASURER OF QUEZON CITY AND CITY ASSESSOR OF QUEZON CITY, G.R. NO. 210551. JUNE 30, 2015) In the case at bar, through the application and enforcement of Sec. 14 of R.A. 9167 which earmarks the income on amusement taxes imposed by LGUs in favor of FDCP and the producers of graded films, the income from the amusement taxes levied by the covered LGUs did not and will under no circumstance accrue to them, not even partially, despite being the taxing authority therefor. Congress therefore, clearly overstepped its plenary legislative power, the amendment being violative of the fundamental law’s guarantee on local autonomy as echoed in Sec. 130(d) of the LGC which provide that revenue collected pursuant to the said code shall inure to the benefit of the local government. (FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES VS. COLON HERITAGE REALTY CORPORATION, OPERATOR OF ORIENTE, OPERATOR OF ORIENTE GROUP THEATERS, REPRESENTED BY ISIDRO A. CANIZARES/FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES VS. CITY OF CEBU AND SM PRIME HOLDINGS, INC., G.R. NO. 203754/G.R. NO. 204418, JUNE 16, 2015) In this case the Supreme Court applied to MCIAA the findings and conclusions of the Court in the 2006 MIAA case, ruling: MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the

Page 19 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Republic is given to a taxable entity. (MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA) VS. CITY OF LAPU-LAPU, ET AL., G.R. NO. 181756, JUNE 15, 2015) Setting the rate of the additional levy for the special education fund at less than 1% is within the taxing power of local government units. It is consistent with the guiding constitutional principle of local autonomy. It was well within the power of the Sangguniang Panlalawigan of Palawan to enact an ordinance providing for additional levy on real property tax for the special education fund at the rate of 0.5% rather than at 1%. (LUCENA D. DEMAALA VS. COMMISSION ON AUDIT, REPRESENTED BY ITS CHAIRPERSON COMMISSIONER MA. GRACIA M. PULIDO TAN, G.R. NO. 199752, FEBRUARY 17, 2015, J. LEONEN) It is already well-settled that although the power to tax is inherent in the State, the same is not true for the LGUs to whom the power must be delegated by Congress and must be exercised within the guidelines and limitations that Congress may provide. In the case at bar, the sanggunian of the municipality or city cannot enact an ordinance imposing business tax on the gross receipts of transportation contractors, persons engaged in the transportation of passengers or freight by hire, and common carriers by air, land, or water, when said sanggunian was already specifically prohibited from doing so. Any exception to the express prohibition under Section 133(j) of the LGC should be just as specific and unambiguous. Section 21(B) of the Manila Revenue Code, as amended, is null and void for being beyond the power of the City of Manila and its public officials to enact, approve, and implement under the LGC.(CITY OF MANILA, HON. ALFREDO S. LIM, AS MAYOR OF THE CITY OF MANILA, ET AL. VS. HON. ANGEL VALERA COLET, AS PRESIDING JUDGE, REGIONAL TRIAL COURT OF MANILA (BR. 43), ET AL., G.R. NO. 120051, DECEMBER 10, 2014, J. LEONARDO-DE CASTRO) The City’s yearly imposition of the 25% surcharge, which was sustained by the trial court and the Court of Appeals, resulted in an aggregate penalty that is way higher than NAPOCOR’s basic tax liabilities. A surcharge regardless of how it is computed is already a deterrent. While it is true that imposing a higher amount may be a more effective deterrent, it cannot be done in violation of law and in such a way as to make it confiscatory. (NATIONAL CORPORATION POWER VS. CITY OF CABANATUAN REPRESENTED BY ITS CITY MAYOR, HON. HONORATO PEREZ, G.R. NO. 177332, OCTOBER 01, 2014, J. LEONEN) REAL PROPERTY TAX Under Section 133(n) of the Local Government Code, the taxing power of local government units shall not extend to the levy of taxes, fees, or charges on duly registered cooperatives under the Cooperative Code. Section 234(d) of the Local Government Code specifically provides for real property tax exemption to cooperatives. NGPI-NGEI, as the owner of the land being leased by respondent, falls within the purview of the law. Section 234 of the Local Government Code exempts all real property owned by cooperatives without distinction. Nothing in the law suggests that the real property tax exemption only applies when the property is used by the cooperative itself. Similarly, the instance that the real property is leased to either an individual or corporation is not a ground for withdrawal of tax exemption. This exemption benefits the cooperative's lessee. Moreover, the characterization of machinery as real property is governed by the Local Government Code and not the Civil Code. (PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. FILIPINAS PALM PLANTATION, G.R. NO. 183416, OCTOBER 5, 2016, J. LEONEN)

Page 20 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



In disputes involving real property taxation, the general rule is to require the taxpayer to first avail of administrative remedies and pay the tax under protest before allowing any resort to a judicial action, except when the assessment itself is alleged to be illegal or is made without legal authority. For example, prior resort to administrative action is required when among the issues raised is an allegedly erroneous assessment, like when the reasonableness of the amount is challenged, while direct court action is permitted when only the legality, power, validity or authority of the assessment itself is in question. Stated differently, the general rule of a prerequisite recourse to administrative remedies applies when questions of fact are raised, but the exception of direct court action is allowed only when purely questions of law are involved. (CAPITOL WIRELESS, INC. VS. PROVINCIAL TREASURER OF BATANGAS, GR 180110, MAY 30, 2016, PERALTA, J.) As far as local government units are concerned, the areas described are to be considered subsumed under the term “municipal waters” under the LGC. Although the term "municipal waters" appears in the Code in the context of the grant of quarrying and fisheries privileges for a fee by local governments, its inclusion in the Code's Book II which covers local taxation means that it may also apply as guide in determining the territorial extent of the local authorities' power to levy real property taxation. Thus, the jurisdiction or authority over such part of the subject submarine cable system lying within Philippines jurisdiction includes the authority to tax the same, for taxation is one (1) of the three (3) basic and necessary attributes of sovereignty, and such authority has been delegated by the national legislature to the local governments with respect to real property taxation. (CAPITOL WIRELESS, INC. VS. PROVINCIAL TREASURER OF BATANGAS, GR 180110, MAY 30, 2016, PERALTA, J.) The burden of proving exemption from local taxation is upon whom the subject real property is declared. Under the LGC, every person by whom or for whom real property is declared, who shall claim tax exemption for such property from real property taxation “shall file with the provincial, city, or municipal assessor within thirty (30) days from the date of the declaration of real property sufficient documentary evidence in support of such claim. (CAPITOL WIRELESS, INC. VS. PROVINCIAL TREASURER OF BATANGAS, GR 180110, MAY 30, 2016, PERALTA, J.) Being an instrumentality of the national government, the PEZA cannot be taxed by local government units. Although a body corporate vested with some corporate powers, the PEZA is not a governmentowned or controlled corporation taxable for real property taxes. The PEZA’s predecessor, the EPZA, was declared non-profit in character with all its revenues devoted for its development, improvement, and maintenance. Consistent with this non-profit character, the EPZA was explicitly declared exempt from real property taxes under its charter. Even the PEZA’s lands and buildings whose beneficial use have been granted to other persons may not be taxed with real property taxes. The PEZA may only lease its lands and buildings to PEZA-registered economic zone enterprises and entities. These PEZAregistered enterprises and entities, which operate within economic zones, are not subject to real property taxes. (CITY OF LAPU-LAPU VS. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATAAN VS. PHILIPPINE ECONOMIC ZONE AUTHORITY, G.R. NO. 184203, G.R. NO. 187583, NOVEMBER 26, 2014, J. LEONEN)

Page 21 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Here, petitioner Genato was found delinquent in the payment of his real property taxes. However, as he duly pointed out, a simple mathematical application would show that if the assessed values in the 2nd and 3rd tax declarations were added, P4,866,350.00 and P3,831,520.00, the same would amount to P8,697,870.00, the assessed value of the property as indicated in the original tax declaration. Therefore, if all the tax declarations issued by respondent Pulmano refer to one and the same property of petitioner, and the latter fully paid all its realty taxes due on the same, then it would follow that the finding of delinquency did not have any basis. (GENATO INVESTMENTS, INC. VS. HON. JUDGE OSCAR P. BARRIENTOS, IN HIS CAPACITY AS THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, OF CALOOCAN CITY, BRANCH 123, EMILY P. DIZON, IN HER CAPACITY AS THE BRANCH CLERK OF COURT OF THE REGIONAL TRIAL COURT OF CALOOCAN CITY, BRANCH 123, JIMMY T. SORO, COURT PROCESS SERVER OF THE REGIONAL TRIAL COURT OF . CALOOCAN, BRANCH 123, EVELINA M. GARMA, CITY TREASURER OF CALOOCAN CITY, PHILLIP L. YAM, OFFICER-IN-CHARGE, REAL PROPERTY TAX DIVISION OF THE CALOOCAN CITY TREASURER'S OFFICE, ANTHONY B. PULMANO, OFFICER-IN-CHARGE, CITY ASSESSOR OF CALOOCAN CITY, AND LAVERNE REALTY & DEVELOPMENT CORPORATION, G.R NO. 207443, JULY 23, 2014, J. PEREZ) The transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO may qualify as “machinery” under the Local Government Code subject to real property tax. MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts, transmission lines, insulators, and electric meters constitute the physical facilities through which MERALCO delivers electricity to its consumers. Each may be considered as one or more of the following: a “machine,” “equipment,” “contrivance,” “instrument,” “appliance,” “apparatus,” or “installation.” The Court highlights that under Section 199(o) of the Local Government Code, machinery, to be deemed real property subject to real property tax, need no longer be annexed to the land or building as these “may or may not be attached, permanently or temporarily to the real property,” and in fact, such machinery may even be “mobile.” The same provision though requires that to be machinery subject to real property tax, the physical facilities for production, installations, and appurtenant service facilities, those which are mobile, self-powered or self-propelled, or not permanently attached to the real property (a) must be actually, directly, and exclusively used to meet the needs of the particular industry, business, or activity; and (2) by their very nature and purpose, are designed for, or necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes. (MANILA ELECTRIC COMPANY VS. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY G.R. NO. 166102. AUGUST 5, 2015) CUSTOMS MODERNIZATION AND TARIFF ACT *NOTE: Republic Act (RA) No. 10863, otherwise known as the Customs Modernization and Tariff Act (CMTA), was signed into law just recently on 30 May 2016. The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file the entry which we have already ruled pertains to both the IED and IEIRD. Thus under Section 1801 in relation to Section 1301, when the importer fails to file the entry within the said period, he "shall be deemed to have renounced all his interests and property rights" to the importations and these shall

Page 22 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



be considered impliedly abandoned in favor of the government. It was the law itself which considered the importation abandoned when it failed to file the IEIRDs within the allotted time. RA 7651 no longer requires that there be other acts or omissions where an intent to abandon can be inferred. It is enough that the importer fails to file the required import entries within the reglementary period. Abandonment of such shipment (imported article) constitutes renouncement of all his interests and property rights therein. With regard to the assessments, however, there being no evidence to prove that petitioner committed fraud in belatedly filing its Import Entry and Internal Revenue Declaration within the 30-day period prescribed under Section 1301 of the TCCP, as amended, respondent's rights to question the propriety thereof and to collect the amount of the alleged deficiency customs duties, more so the entire value of the subject shipment, have already prescribed. Simply put, in the absence of fraud, the entry and corresponding payment of duties made by petitioner becomes final and conclusive upon all parties after one (1) year from the date of the payment of duties in accordance with Section 1603 of the TCCP, as amended. (PILIPINAS SHELL PETROLEUM CORPORATION VS. COMMISSIONER OF CUSTOMS, G.R. NO. 195876, DECEMBER 5, 2016, J. PEREZ) With the cancellation of the TCCs, the tax liabilities of PSPC under the original assessments were considered unpaid, hence BOC’s demand letters and the action for collection in the RTC. To repeat, these assessed customs duties and taxes were previously assessed and paid by the taxpayer, only that the TCCs turned out to be spurious and hence worthless certificates that did not extinguish PSPC’s tax liabilities. (REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE BUREAU OF CUSTOMS VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 209324. DECEMBER 9, 2015) In unlawful importation, also known as outright smuggling, goods and articles of commerce are brought into the country without the required importation documents, or are disposed of in the local market without having been cleared by the BOC or other authorized government agencies, to evade the payment of correct taxes, duties and other charges. Such goods and articles do not undergo the processing and clearing procedures at the BOC, and are not declared through submission of import documents, such as the import entry and internal revenue declaration. In various fraudulent practices against customs revenue, also known as technical smuggling, on the other hand, the goods and articles are brought into the country through fraudulent, falsified or erroneous declarations, to substantially reduce, if not totally avoid, the payment of correct taxes, duties and other charges. Such goods and articles pass through the BOC, but the processing and clearing procedures are attended by fraudulent acts in order to evade the payment of correct taxes, duties, and other charges. Often committed by means of misclassification of the nature, quality or value of goods and articles, undervaluation in terms of their price, quality or weight, and misdeclaration of their kind, such form of smuggling is made possible through the involvement of the importers, the brokers and even some customs officials and personnel. (BUREAU OF CUSTOMS VS. THE HONORABLE AGNES VST DEVANADERA, ET AL. G.R. NO. 193253. SEPTEMBER 8, 2015) The penalty of forfeiture could be imposed on any vessel engaged in smuggling, provided that the following conditions were present, to wit: (1) The vessel is "used unlawfully in the importation or exportation of articles into or from" the Philippines; (2) The articles are imported to or exported from "any Philippine port or place, except a port of entry"; or (3) If the vessel has a capacity of less than 30 tons and is "used in the importation of articles into any Philippine port or place other than a port of the Sulu Sea, where importation in such vessel may be authorized by the Commissioner, with the

Page 23 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



approval of the department head." With the absence of the first and second conditions, the M/V Don Martin must be released. (M/V "DON MARTIN" VOY 047 AND CARGOES OF 6500 SACKS OF IMPORTED RICE, ET AL. VS. HON. SECRETARY OF FINANCE, BUREAU OF CUSTOMS, AND THE DISTRICT COLLECTOR OF CAGAYAN DE ORO CITY, G.R. NO. 160206. JULY 15, 2015) NFSC, Japan-based company, sells raw sugar. However, NFSC was charged by violation of the Joint Order by the Commissioner Customs. The court ruled that NFSC did not violate the order and such was in good faith. The Court ruled that the onus probandi to establish the existence of fraud is lodged with the Bureau of Customs which ordered the forfeiture of the imported goods. Fraud is never presumed. It must be proved. Failure of proof of fraud is a bar to forfeiture. The reason is that forfeitures are not favored in law and equity. The fraud contemplated by law must be intentional fraud, consisting of deception willfully and deliberately done or resorted to in order to induce another to give up some right. Absent fraud, the Bureau of Customs cannot forfeit the shipment in its favor. (THE COMMISSIONER OF CUSTOMS & THE DISTRICT COLLECTOR OF CUSTOMS FOR THE PORT OF ILOILO VS. NEW FRONTIER SUGAR CORPORATION, G.R. NO. 163055, JUNE 11, 2014, J. PEREZ) TAX REMEDIES Taxpayers who availed themselves of the tax amnesty program are entitled to the immunities and privileges under Section 6 of the law. This Court has declared that submission of the documentary requirements and payment of the amnesty tax is considered full compliance with Republic Act No. 9480 and the taxpayer can immediately enjoy the immunities and privileges enumerated in Section 6 of the law. The plain and straightforward conditions were obviously meant to encourage taxpayers to avail of the amnesty program, thereby enhancing revenue administration and collection. The Court explained that the documentary requirements and payment of the amnesty tax operate as a suspensive condition, such that completion of these requirements entitles the taxpayer-applicant to immediately enjoy the immunities and privileges under Republic Act No. 9480. However, the Court further stated that Section 6 of the law contains a resolutory condition. Immunities and privileges will cease to apply to taxpayers who, in their SALN, were proven to have understated their net worth by 30% or more. Thus, the amnesty granted under the law is revoked once the taxpayer is proven to have under-declared his assets in his SALN by 30% or more. Pursuant to Section 10 of the Tax Amnesty Law, amnesty taxpayers who wilfully understate their net worth shall not only be liable for perjury under the Revised Penal Code, but, upon conviction, also subject to immediate tax fraud investigation in order to collect all taxes due and to criminally prosecute for tax evasion. (COMMISSIONER OF INTERNAL REVENUE VS. APO CEMENT CORPORATION G.R. NO.193381, FEBRUARY 8, 2017, LEONEN, J.) Unlike the power to compromise or abate a taxpayer’s liability under Section 204 of the 1997 National Internal Revenue Code that is within the discretion of respondent Commissioner of Internal Revenue, its authority under Republic Act No. 9480 is limited to determining whether (a) the taxpayer is qualified to avail oneself of the tax amnesty; (b) all the requirements for availment under the law were complied with; and (c) the correct amount of amnesty tax was paid within the period prescribed by law. There is nothing in Republic Act No. 9480 which can be construed as authority for respondent Commissioner of Internal Revenue to introduce exceptions and/or conditions to the coverage of the law nor to disregard its provisions and substitute his own personal judgment. (ING BANK N.V. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 167679. JULY 22, 2015)

Page 24 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Qualified taxpayers with pending tax cases may still avail themselves of the tax amnesty program under Republic Act No. 9480, otherwise known as the 2007 Tax Amnesty Act. Thus, the provision in BIR Revenue Memorandum Circular No. 19-2008 excepting "issues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer" from the benefits of the law is illegal, invalid, and null and void. The duty to withhold the tax on compensation arises upon its accrual. (ING BANK N.V., ENGAGED IN BANKING OPERATIONS IN THE PHILIPPINES AS ING BANK N.V. MANILA BRANCH VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 167679, JULY 22, 2015, J. LEONEN) The parties agreed to amicably settle all cases between them involving claims for tax refund/credit, including the instant case. A review of the whereas clauses of the Universal Compromise Agreement reveals the various court cases filed by petitioners, including this case, for the refund and/or issuance of tax credit covering the local business taxes payments they paid to respondent City of Manila pursuant to Section 21 of the latter’s Revenue Code. In this relation, it is observed that the present case would have been rendered moot and academic had the parties informed the Court of the UCA’s supervening execution. Be that as it may, and considering that: (a) the UCA appears to have been executed in accordance with the requirements of a valid compromise agreement; (b) the UCA was executed more than a year prior to the promulgation of the subject Decision; and (c) the result of both the UCA and the subject Decision are practically identical, i.e., that petitioners are not entitled to any tax refund/credit, the Court herein resolves to approve and adopt the pertinent terms and conditions of the UCA insofar as they govern the settlement of the present dispute. (METRO MANILA SHOPPING MECCA CORP., SHOEMART, INC., SM PRIME HOLDINGS, INC., STAR APPLIANCES CENTER, SUPER VALUE, INC., ACE HARDWARE PHILIPPINES, INC., HEAL TH AND BEAUTY, INC., JOLLIMART PHILS. CORP., AND SURPLUS MARKETING CORPORATION VS. MS. LIBERTY M. TOLEDO, IN HER OFFICIAL CAPACITY AS THE CITY TREASURER OF MANILA, AND THE CITY OF MANILA, G.R. NO. 190818. NOVEMBER 10, 2014, J. PERLAS-BERNABE) ASSESSMENT The absence of an LOA violated MEDICARD's right to due process. An LOA is the authority given to the appropriate revenue officer assigned to perform assessment functions. It empowers or enables said revenue officer to examine the books of account and other accounting records of a taxpayer for the purpose of collecting the correct amount of tax. 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 himself or his duly authorized representatives. Based on Section 6 of the NIRC, it is clear that unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. The circumstances contemplated under Section 6 where the taxpayer may be assessed through best-evidence obtainable, inventory-taking, or surveillance among others has nothing to do with the LOA. These are simply methods of examining the taxpayer in order to arrive at the correct amount of taxes. Hence, unless undertaken by the CIR himself or his duly authorized representatives, other tax agents may not validly conduct any of these kinds of examinations without prior authority. In this case, there is no dispute that no LOA was issued prior to the issuance of a PAN and FAN against MEDICARD. Therefore no LOA was also served on (MEDICARD PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, GR NO. 222743, APRIL 5, 2017, REYES, J.)

Page 25 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



As stated by the CTA, the BIR cannot shift the blame to the taxpayer for issuing defective waivers. The Court has ruled that the BIR cannot hide behind the doctrine of estoppel to cover its failure to comply with RMO 20-90 and RDAO 05-01 which were issued by the BIR itself. A waiver of the statute of limitations is a derogation of the taxpayer's right to security against prolonged and unscrupulous investigations and thus, it must be carefully and strictly construed. Since the three Waivers in this case are defective, they do not produce any effect and did not suspend the three-year prescriptive period under Section 203 of the NIRC. (CIR VS. PHILIPPINE DAILY INQUIRER, GR NO. 213943, MARCH 22, 2017, CARPIO, J.) Tax assessments should first go through appropriate tax proceedings prescribed by law. The present case is neither the proper venue nor the forum to determine the validity of these alleged pending tax assessments or to declare its inclusion in the computation of just compensation inasmuch as these were not presented before the lower courts. (REPUBLIC OF THE PHILIPPINES VS. HON. JESUS MUPAS, G.R. NO. 181892, APRIL 19, 2016, J. BRION) A notice of assessment fixes and determines the tax liabilty of a taxpayer and is a notice to the effect that the amount stated therein is due as tax and a demand to pay thereof. A notice of assessment as provided for in the Real Property Tax Code should effectively inform the taxpayer of the value of a specific property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties. Nowhere does the resolution state that the tax declarations can be considered as notices of assessment. (ROMEO PUCYUTAN, FOR AND IN BEHALF OF THE CITY OF MUNTINLUPA, METRO MANILA AS ITS TREASURER VS. MANILA ELECTRIC COMPANY, G.R. NO. 197136, APRIL 18, 2016, J. PERALTA) A "decision" differs from an "assessment" and failure of the FDDA to state the facts and law on which it is based renders the decision void - but not necessarily the assessment. RR No. 12-99 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 does not extend to the nullification of the entire assessment. Tax laws may not be extended by implication beyond the clear import of their language, nor their operation enlarged so as to embrace matters not specifically provided. (COMMISSIONER OF INTERNAL REVENUE VS. LIQUIGAZ PHILIPPINES CORPORATION, G.R. NO. 215534 AND G.R. NO. 215557, APRIL 18, 2016, J. MENDOZA) Nevertheless, the appraisal and assessment of the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO as machinery under Tax Declaration Nos. 019-6500 and 019-7394 were not in accordance with the Local Government Code and in violation of the right to due process of MERALCO and, therefore, null and void. It appears that the City Assessor of Lucena simply lumped together all the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City under Tax Declaration Nos. 019-6500 and 019-7394, contrary to the specificity demanded under Sections 224 and 225 of the Local Government Code for appraisal and assessment of machinery. It is apparent from these two provisions that every machinery must be individually appraised and assessed depending on its acquisition cost, remaining economic life, estimated economic life, replacement or reproduction cost, and depreciation. The City Assessor and the City Treasurer of Lucena did not even provide the most basic information such as the number of transformers, electric posts, insulators,

Page 26 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



and electric meters or the length of the transmission lines appraised and assessed under Tax Declaration Nos. 019-6500 and 019-7394. There is utter lack of factual basis for the assessment of the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO. It is true that tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise. In this case, MERALCO was able to overcome the presumption. (MANILA ELECTRIC COMPANY VS. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY G.R. NO. 166102. AUGUST 5, 2015) The notice requirement under Section 228 of the NIRC is substantially complied with whenever the taxpayer had been fully informed in writing of the factual and legal bases of the deficiency taxes assessment, which enabled the latter to file an effective protest. (SAMAR-I ELECTRIC COOPERATIVE VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 193100, DECEMBER 10, 2014, J. VILLARAMA, JR.) Spouses Manly were charged with tax evasion due to their under declaration of income in their ITR. The investigation of the revenue officers shows that the under declaration exceeded 30% of the declared income of the spouses. The Spouses Manly opposed the said complaint due to the lack of deficiency tax assessment. In this case, the Court ruled that tax evasion is deemed complete when the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the tax. Corollarily, an assessment of the tax deficiency is not required in a criminal prosecution for tax evasion. However, in Commissioner of Internal Revenue v. Court of Appeals, we clarified that although a deficiency assessment is not necessary, the fact that a tax is due must first be proved before one can be prosecuted for tax evasion. (BUREAU OF INTERNAL REVENUE, AS REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE VS. COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY, AND RUBY ONG MANLY, G.R. NO. 197590, NOVEMBER 24, 2014, J. DEL CASTILLO) PRESCRIPTIVE PERIOD OF ASSESSMENT Section 203 of the NIRC, the prescriptive period to assess is set at three years. This rule is subject to the exceptions provided under Section 222 of the NIRC. In Commissioner of Internal Revenue v. Javier, this Court ruled that fraud is never imputed. The Court stated that it will not sustain findings of fraud upon circumstances which, at most, create only suspicion. The Court added that the mere understatement of a tax is not itself proof of fraud for the purpose of tax evasion. Thus, while the filing of a fraudulent return necessarily implies that the act of the taxpayer was intentional and done with intent to evade the taxes due, the filing of a false return can be intentional or due to honest mistake. In CIR v. B.F. Goodrich Phils., Inc., the Court stated that the entry of wrong information due to mistake, carelessness, or ignorance, without intent to evade tax, does not constitute a false return. In this case, we do not find enough evidence to prove fraud or intentional falsity on the part of PDI. Indeed, the Waivers executed by the BIR and PDI were meant to extend the three-year prescriptive period, and would have extended such period were it not for the defects found by the CTA. This further shows that at the outset, the BIR did not find any ground that would make the assessment fall under the exceptions. Clearly, the defects in the Waivers resulted to the non-extension of the period to assess or collect taxes, and made the assessments issued by the BIR beyond the three-year prescriptive period void. (CIR VS. PHILIPPINE DAILY INQUIRER, GR NO. 213943, MARCH 22, 2017, CARPIO, J.)

Page 27 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Generally, internal revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the return, or where the return is filed beyond the period, from the day the return was actually filed. Section 222 of the NIRC, however, provides for exceptions to the general rule. It states that in the case of a false or 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 falsity, fraud or omission. Thus, a mere showing that the returns filed by the taxpayer were false, notwithstanding the absence of intent to defraud, is sufficient to warrant the application of the ten (10) year prescriptive period under Section 222 of the NIRC. Under Section 248(B) of the NIRC, there is a prima facie evidence of a false return if there is a substantial underdeclaration of taxable sales, receipt or income. The failure to report sales, receipts or income in an amount exceeding 30% what is declared in the returns constitute substantial underdeclaration. In other words, when there is a showing that a taxpayer has substantially underdeclared its sales, receipt or income, there is a presumption that it has filed a false return. As such, the CIR need not immediately present evidence to support the falsity of the return, unless the taxpayer fails to overcome the presumption against it. (COMMISSIONER OF INTERNAL REVENUE VS. ASALUS CORPORATION, G.R. NO. 221590, FEBRUARY 22, 2017, MENDOZA, J.) It is true that neither the FAN nor the FDDA explicitly stated that the applicable prescriptive period was the ten (10)-year period set in Section 222 of the NIRC. They, however, made reference to the PAN, which categorically stated that "[t]he running of the three-year statute of limitation as provided under Section 203 of the 1997 National Internal Revenue Code (NIRC) is not applicable xxx but rather to the ten (10) year prescriptive period pursuant to Section 222(A) of the tax code xxx." In Samar-I Electric Cooperative v. COMELEC, the Court ruled that it sufficed that the taxpayer was substantially informed of the legal and factual bases of the assessment enabling him to file an effective protest. Thus, substantial compliance with the requirement as laid down under Section 228 of the NIRC suffices, for what is important is that the taxpayer has been sufficiently informed of the factual and legal bases of the assessment so that it may file an effective protest against the assessment. (COMMISSIONER OF INTERNAL REVENUE VS. ASALUS CORPORATION, G.R. NO. 221590, FEBRUARY 22, 2017, MENDOZA, J.) The CIR has three (3) years from the date of the actual filing of the return or from the last day prescribed by law for the filing of the return, whichever is later, to assess internal revenue taxes. Here, GJM filed its Annual Income Tax Return for the taxable year 1999 on April 12, 2000. The three (3)-year prescriptive period, therefore, was only until April 15, 2003. The records reveal that the BIR sent the FAN through registered mail on April 14, 2003, well-within the required period. The Court has held that when an assessment is made within the prescriptive period, as in the case at bar, receipt by the taxpayer may or may not be within said period. But it must be clarified that the rule does not dispense with the requirement that the taxpayer should actually receive the assessment notice, even beyond the prescriptive period. GJM, however, denies ever having received any FAN. If the taxpayer denies having received an assessment from the BIR, it then becomes incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee. Here, the onus probandi has shifted to the BIR to show by contrary evidence that GJM indeed received the assessment in the due course of mail. It has been settled that while a mailed letter is deemed received by the addressee in the course of mail, this is merely a disputable presumption subject to controversion, the direct denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received by the addressee. (COMMISSIONER OF INTERNAL REVENUE VS. GJM PHILIPPINES MANUFACTURING, INC., GR. NO. 202695, FEBRUARY 29, 2016, J. PERALTA)

Page 28 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



The Court has held that when an assessment is made within the prescriptive period, as in the case at bar, receipt by the taxpayer may or may not be within said period. But it must be clarified that the rule does not dispense with the requirement that the taxpayer should actually receive the assessment notice, even beyond the prescriptive period. If the taxpayer denies having received an assessment from the BIR, it then becomes incumbent upon the latter to prove by competent evidence that such notice was indeed received by the addressee. Here, the onus probandi has shifted to the BIR to show by contrary evidence that GJM indeed received the assessment in the clue course of mail. It has been settled that while a mailed letter is deemed received by the addressee in the course of mail, this is merely a disputable presumption subject to controversion, the direct denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received by the addressee. To prove the fact of mailing, it is essential to present the registry receipt issued by the Bureau of Posts or the Registry return card which would have been signed by the taxpayer or its authorized representative. (COMMISSIONER OF INTERNAL REVENUE VS. GJM PHILIPPINES MANUFACTURING, INC., G.R. NO. 202695. FEBRUARY 29, 2016) The general rule is that when a waiver does not comply with the requisites for its validity specified under RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to assess taxes. However, due to its peculiar circumstances, we shall treat this case as an exception to this rule and find the Waivers valid for the reasons discussed below. First, the parties in this case are in pari delicto or “in equal fault.” As between the parties, it would be more equitable if petitioner’s lapses were allowed to pass and consequently uphold the Waivers in order to support this principle and public policy. Second, the Court has repeatedly pronounced that parties must come to court with clean hands. Following the foregoing principle, respondent should not be allowed to benefit from the flaws in its own Waivers and successfully insist on their invalidity in order to evade its responsibility to pay taxes. Finally, the Court cannot tolerate this highly suspicious situation. In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted on their invalidity by raising the very same defects it caused. (COMMISSIONER OF INTERNAL REVENUE VS. NEXT MOBILE, INC., G.R. NO. 212825. DECEMBER 7, 2015) A waiver is not automatically a renunciation of the right to invoke the defense of prescription. A waiver of the Statute of Limitations is nothing more than “an agreement between the taxpayer and the Bureau of Internal Revenue (BIR) that the period to issue an assessment and collect the taxes due is extended to a date certain.” It is a bilateral agreement, thus necessitating the very signatures of both the CIR and the taxpayer to give birth to a valid agreement. Furthermore, indicating in the waiver the date of acceptance by the BIR is necessary in order to determine whether the parties (the taxpayer and the government) had entered into a waiver “before the expiration of the time prescribed in Section 203 (the three-year prescriptive period) for the assessment of the tax.” When the period of prescription has expired, there will be no more need to execute a waiver as there will be nothing more to extend. Hence, no implied consent can be presumed, nor can it be contended that the concurrence to such waiver is a mere formality. (COMMISSIONER OF INTERNAL REVENUE VS. STANDARD CHARTERED BANK, G.R. NO. 192173. JULY 29, 2015) The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer. Thus, failure of the BIR to file a warrant of distraint or serve a levy on taxpayer's properties nor file collection case within the three-year period is fatal. Also, the attempt of the BIR to

Page 29 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



collect the tax through its Answer with a demand for the taxpayer to pay the assessed DST in the CTA is not deemed compliance with the Tax Code. (CHINA BANKING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 172509, FEBRUARY 04, 2015, C.J. SERENO) Section 203 of the NIRC sets the three-year prescriptive period to assess. However the exceptions are provided under Section 222 of the NIRC of 1997. In the case at bar, it was petitioner’s substantial under declaration of withholding taxes in the amount of P2,690,850.91 which constituted the “falsity” in the subject returns – giving respondent the benefit of the period under Section 222 of the NIRC of 1997 to assess the correct amount of tax “at any time within ten (10) years after the discovery of the falsity, fraud or omission. (SAMAR-I ELECTRIC COOPERATIVE VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 193100. DECEMBER 10, 2014, J. VILLARAMA JR.) It is clear that the assailed deficiency tax assessment for the EWT in 1994 disregarded the provisions of Section 228 of the [NIRC], as amended, as well as Section 3.1.4 of the Revenue Regulations No. 1299 by not providing the legal and factual bases of the assessment. Hence, the formal letter of demand and the notice of assessment issued relative thereto are void. The statute of limitations on assessment and collection of national internal taxes was shortened from five (5) years to three (3) years by virtue of Batas Pambansa Blg. 700. Thus, [Petitioner CIR] has three (3) years from the date of actual filing of the tax return to assess a national internal revenue tax or to commence court proceedings for the collection thereof without an assessment. However, when it validly issues an assessment within the three (3) year period, it has another three (3) years within which to collect the tax due by distraint, levy, or court proceeding. (COMMISSIONER OF INTERNAL REVENUE VS. UNITED SALVAGE AND TOWAGE (PHILS.), INC., G.R. NO. 197515, JULY 2, 2014, J. PERALTA) ASSESSMENT PROCESS In this case the issue was whether or not the Trust Indenture Agreements entered into by Traders Royal Bank and its clients constituted deposits or trusts. If it was a deposit then it will be subject to documentary stamp tax. The Supreme Court held that the only way to determine the relationship between the parties is to examine the terms and conditions provided under the actual indenture agreement. However TRB failed to produce the actual agreement. In contrast, the BIR examiners conducted a thorough audit and investigation of the books of account of TRB. The audit and investigation resulted in the issuance of Assessment Notices against TRB for DST tax liabilities for 1996 and 1997, which were duly received by TRB. The tax assessments by tax examiners are presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. Therefore the agreements were considered as deposits subject to DST. (COMMISSIONER OF INTERNAL REVENUE VS, TRADERS ROYAL BANK, G.R. NO. 167134. MARCH 18, 2015, J. LEONARDO-DE CASTRO) Petitioner questions the decision of the CTA holding that its right to assess respondent of its tax deficiencies for the taxable year 1999 has already prescribed for its failure to send the Formal Assessment Notice to respondent’s new address despite respondent’s failure to give petitioner a formal written notice of its change of address. The SC ruled that despite the absence of a formal written notice of respondent's change of address, the fact remains that petitioner became aware of respondent's new address as shown by the documents replete in its records. As a consequence, the running of the three-year period to assess respondent was not suspended and has already

Page 30 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



prescribed. (COMMISSIONER OF INTERNAL REVENUE VS. BASF COATING + INKS PHILS., INC., G.R. NO. 198677, NOVEMBER 26, 2014, J. PERALTA) COMMISSIONER’S ACTION EQUIVALENT TO DENIAL OF PROTEST Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to act on the application, the taxpayer affected may, within 30 days after the expiration of the 120-day period, appeal the unacted claim with the CTA. If the Commissioner fails to decide within “a specific period” required by law, such “inaction shall be deemed a denial” of the application for tax refund or credit. In this case, when TSC filed its administrative claim on 21 December 2005, the CIR had a period of 120 days, or until 20 April 2006, to act on the claim. However, the CIR failed to act on TSC’s claim within this 120-day period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or within 30 days after the expiration of the 120-day period. Hence, the judicial claim was not prematurely filed. (COMMISSIONER OF INTERNAL REVENUE VS. TEAM SUAL CORPORATION, G.R. NO. 205055, JULY 18, 2014, J. CARPIO) COLLECTION SUSPENSION OF COLLECTION OF TAXES The CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount. The surety bond amounting to P4,467,391,881.76 imposed by the CTA was within the parameters delineated in Section 11 of R.A. 1125, as amended. The Court holds, however, that the CTA in Division gravely abused its discretion under Section 11 because it fixed the amount of the bond at nearly five times the net worth of the petitioner without conducting a preliminary hearing to ascertain whether there were grounds to suspend the collection of the deficiency assessment on the ground that such collection would jeopardize the interests of the taxpayer. Moreover, Section 11 of R.A. 1125, as amended, indicates that the requirement of the bond as a condition precedent to suspension of the collection applies only in cases where the processes by which the collection sought to be made by means thereof are carried out in consonance with the law, not when the processes are in plain violation of the law that they have to be suspended for jeopardizing the interests of the taxpayer. (TRIDHARMA MARKETING CORPORATION vs. COURT OF TAX APPEALS, SECOND DIVISION, AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 215950, June 20, 2016, J. BERSAMIN) PRESCRIPTIVE PERIOD There is a distinction between a request for reconsideration and a request for reinvestigation. A reinvestigation which entails the reception and evaluation of additional evidence will take more time than a reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the reinvestigation can suspend the running of the statute of limitations on collection of the assessed tax, while the reconsideration cannot. Hence, the period for BIR to collect the deficiency DST already prescribed as the protest letter of BPI was a request for reconsideration, which did not suspend the running of the prescriptive period to collect. (BANK OF THE PHILIPPINE ISLANDS VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 181836, JULY 9, 2014, J. CARPIO) Page 31 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



TAX EXEMPTIONS We take judicial notice that on 25 July 2016, the present CIR Caesar R. Dulay issued RMO No. 442016. It is clear and unmistakable from the aforequoted constitutional provision that non-stock, nonprofit educational institutions are constitutionally exempt from tax on all revenues derived in pursuance of its purpose as an educational institution and used actually, directly and exclusively for educational purposes. This constitutional exemption gives the non-stock, non-profit educational institutions a distinct character. And for the constitutional exemption to be enjoyed, jurisprudence and tax rulings affirm the doctrinal rule that there are only two requisites: (1) The school must be non-stock and non-profit; and (2) The income is actually, directly and exclusively used for educational purposes. There are no other conditions and limitations. In this light, the constitutional conferral of tax exemption upon non-stock and non-profit educational institutions should not be implemented or interpreted in such a manner that will defeat or diminish the intent and language of the Constitution. (HON. KIM S. JACINTO-HENARES VS. ST. PAUL COLLEGE OF MAKATI, G.R. NO. 215383, MARCH 8, 2017, CARPIO, J.) Section 13 of PD No. 1869 evidently states that payment of the 5% franchise tax by PAGCOR and its contractees and licensees exempts them from payment of any other taxes, including corporate income tax. This provision providing for the said exemption was neither amended nor repealed by any subsequent laws (i.e. Section 1 of R.A. No. 9337 which amended Section 27(C) of the NIRC of 1997); thus, it is still in effect. Guided by the doctrinal teachings in resolving the case at bench, it is without a doubt that, like PAGCOR, its contractees and licensees remain exempted from the payment of corporate income tax and other taxes since the law is clear that said exemption inures to their benefit. As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings derived from the operations conducted under the franchise specifically from the payment of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the PAGCOR or operator has any contractual relationship in connection with the operations of the casino(s) authorized to be conducted under this Franchise, so it must be that all contractees and licensees of PAGCOR, upon payment of the 5% franchise tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos. Plainly, too, upon payment of the 5% franchise tax, petitioner's income from its gaming operations of gambling casinos, gaming clubs and other similar recreation or amusement places, and gaming pools, defined within the purview of the aforesaid section, is not subject to corporate income tax. (BLOOMBERRY RESORTS AND HOTELS, INC, v. BUREAU OF INTERNAL REVENUE, REPRESENTED BY COMMISSIONER KIM S. JACINTO-HENARES, G.R. No. 212530, August 10, 2016, J. PEREZ) TAX REFUND/CREDIT We have consistently ruled that claims for tax refunds, when based on statutes granting tax exemption, partake of the nature of an exemption. Tax refunds and exemptions are exceptions rather than the rule and for this reason are highly disfavored. Hence, in evaluating a claim for refund, the rule of strict interpretation applies. This rule requires the claimant to prove not only his entitlement to refund, but also his due observance of the reglementary periods within which he must file his administrative and judicial claims for refund. Non-compliance with these substantive and procedural Page 32 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



due process requirements results in the denial of the claim. (COMMISSIONER OF INTERNAL REVENUE VS. UNITED CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE COOPERATIVE, G.R. NO. 209776, DECEMBER 7, 2016, J. BRION) We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Sec.135(a) of the NIRC. (COMMISSIONER OF INTERNAL REVENUE VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 180402. FEBRUARY 10, 2016) Pursuant to Section 112 of the National Internal Revenue Code (NIRC) of 1997 the requisites for claiming unutilized/excess input VAT, except transitional input VAT, are as follows: 1)The taxpayerclaimant is VAT registered; 2)The taxpayer-claimant is engaged in zero-rated or effectively zerorated sales; 3)There are creditable input taxes due or paid attributable to the zero-rated or effectively zero-rated sales; 4)This input tax has not been applied against the output tax; and 5)The application and the claim for a refund have been filed within the prescribed period. (COMMISSIONER OF INTERNAL REVENUE VS. TOLEDO POWER COMPANY G.R. NOS. 195175 & 199645. AUGUST 10, 2015) In both C.T.A. Case Nos. 7233 and 7294, the administrative claim for the refund of unutilized input VAT attributable to the zero-rated or effectively zero-rated sales was timely filed on 23 December 2004, which was within two years from the close of the first and the second quarters of 2003 when the sales were made. Similarly, this case also falls within the exception period by virtue of BIR Ruling No. DA-489-03 as recognized in San Roque. In C.T.A. Case No. 7233, TPC filed its judicial claim on 22 April 2005. In theory, the CTA does not have jurisdiction over the Petition, since it was filed on the last day of the 120-day period for the CIR, or without waiting for the expiration of the aforesaid period. However, BIR Ruling No. DA-489-03 allows this premature filing. TPC may claim the benefits of that ruling in its Petition in C.T.A. Case No. 7233 for the refund of the unutilized input VAT attributable to zero-rated or effectively zero-rated sales for the first quarter of 2003. (COMMISSIONER OF INTERNAL REVENUE VS. TOLEDO POWER COMPANY G.R. NOS. 195175 & 199645. AUGUST 10, 2015) The burden of proving entitlement to a tax refund is on the taxpayer. It is logical to assume that in order to discharge this burden, the law intends the filing of an application for a refund to necessarily include the filing of complete supporting documents to prove entitlement for the refund. Otherwise, the mere filing of an application without any supporting document would be as good as filing a mere scrap of paper. Besides, the taxpayer was already given two (2) years to determine its refundable taxes and complete the documents necessary to prove its claim. The alleged completion of supporting documents after the filing of an application for an administrative claim − and worse, after the filing of a judicial claim − is tantamount to legal maneuvering. (HEDCOR, INC. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 207575. JULY 15, 2015) For a claim for refund to be granted, the manner in proving it must be in accordance with the prescribed rules of evidence. It would have been erroneous had the CTA En Banc relied on petitioner's own Excise Tax Refund Computation Summary or the unsatisfactory explanation of its lone witness to justify its claim for tax refund. As it has been said, time and again, that claims for tax refunds are in the nature of tax exemptions which result in loss of revenue for the government. Upon the person claiming an exemption from tax payments rests the burden of justifying the exemption by

Page 33 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



words too plain to be mistaken and too categorical to be misinterpreted; it is never presumed nor be allowed solely on the ground of equity. In addition, one who claims that he is entitled to a tax refund must not only claim that the transaction subject of tax is clearly and unequivocally not subject to tax -the amount of the claim must still be proven in the normal course, in accordance with the prescribed rules on evidence. (FORTUNE TOBACCO CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 192024. JULY 1, 2015) Those who claim for refund must not only prove its entitlement to the excess credits, but likewise must prove that no carry-over has been made in cases where refund is sought. However, proving that no carry-over has been made does not absolutely require the presentation of the quarterly ITRs. With Winebrenner & Inigo Insurance Brokers, Inc. having complied with the requirements for refund, and without the CIR showing contrary evidence other than its bare assertion of the absence of the quarterly ITRs, copies of which are easily verifiable by its very own records, the burden of proof of establishing the propriety of the claim for refund has been sufficiently discharged. Hence, the grant of refund is proper. (WINEBRENNER & IÑIGO INSURANCE BROKERS, INC. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 206526, JANUARY 28, 2015, J. MENDOZA) The requirements for entitlement of a corporate taxpayer for a refund or the issuance of tax credit certificate involving excess withholding taxes are as follows: 1) That the claim for refund was filed within the two-year reglementary period pursuant to Sec. 229 of the NIRC; 2) When it is shown on the ITR that the income payment received is being declared part of the taxpayer’s gross income; and 3) When the fact of withholding is established by a copy of the withholding tax statement, duly issued by the payor to the payee, showing the amount paid and income tax withheld from that amount. Relevant to the instant case is requirements numbers 2 and 3, which were duly proved by TPEC, as found by the courts a quo. With regard to the second requirement, it is fundamental that the findings of fact by the CTA in Division are not to be disturbed without any showing of grave abuse of discretion considering that the members of the Division are in the best position to analyze the documents presented by the parties. Consequently, the Court adopts the findings of the CTA in Division, which the CTA En Banc concurred with. (REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE VS. TEAM (PHILS.) ENERGY CORPORATION (FORMERLY MIRANT PHILS ENERGY CORPORATION), G.R. NO. 188016, JANUARY 14, 2015, J. BERSAMIN) In this case, Duty Free Philippines claimed that it was exempted from the expanded withholding tax under Revenue Regulation (R.R.) No. 6-94. The CTA Division ruled that Duty Free was not a taxexempt entity in the absence of an express grant of tax exemption. Duty Free then directly appealed to the Supreme Court under Rule 45. The Supreme Court said that Duty Free’s direct appeal to this Court is fatal to its claim. Under RA 9282 Section 18, “A party adversely affected by a resolution of a Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with the CTA en banc.” Clearly, the Supreme Court is without jurisdiction to review decisions rendered by a division of the CTA, exclusive appellate jurisdiction over which is vested in the CTA en banc. (DUTY FREE PHILIPPINES VS. BUREAU OF INTERNAL REVENUE, REPRESENTED BY HON. ANSELMO G. ADRIANO, ACTING REGIONAL DIRECTOR, REVENUE REGION NO. 8, MAKATI CITY, G.R NO. 197228, OCTOBER 8, 2014. SERENO.) The certificate of creditable tax withheld at source is the competent proof to establish the fact that taxes are withheld. It is not necessary for the person who executed and prepared the certificate of

Page 34 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



creditable tax withheld at source to be presented and to testify personally to prove the authenticity of the certificates. In Banco Filipino Savings and Mortgage Bank v. Court of Appeals, this court declared that a certificate is complete in the relevant details that would aid the courts in the evaluation of any claim for refund of excess creditable withholding taxes. In fine, the document which may be accepted as evidence of the third condition, that is, the fact of withholding, must emanate from the payor itself, and not merely from the payee, and must indicate the name of the payor, the income payment basis of the tax withheld, the amount of the tax withheld and the nature of the tax paid. (COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE NATIONAL BANK, G.R. NO. 180290 SEPTEMBER 29, 2014, J. LEONEN) Tax refunds are based on the general premise that taxes have either been erroneously or excessively paid. Though the Tax Code recognizes the right of taxpayers to request the return of such excess/erroneous payments from the government, they must do so within a prescribed period. Further, "a taxpayer must prove not only his entitlement to a refund, but also his compliance with the procedural due process as non-observance of the prescriptive periods within which to file the administrative and the judicial claims would result in the denial of his claim." In the case at bar, MERALCO had ample opportunity to verify on the tax-exempt status of NORD/LB for purposes of claiming tax refund. Nevertheless, it only filed its claim for tax refund ten (10) months from the issuance of the aforesaid Ruling. (COMMISSIONER OF INTERNAL REVENUE VS. MANILA ELECTRIC COMPANY (MERALCO), G.R. NO. 181459, JUNE 9, 2014, J. PERALTA) Under the first option, any tax on income that is paid in excess of the amount due the government may be refunded, provided that a taxpayer properly applies for the refund. On the other hand, the second option works by applying the refundable amount against the tax liabilities of the petitioner in the succeeding taxable years. Hence, instead of moving for the issuance of a writ of execution relative to the aforesaid decision, petitioner should have merely requested for the approval of the City of Manila in implementing the tax refund or tax credit, whichever is appropriate. In other words, no writ was necessary to cause the execution thereof, since the implementation of the tax refund will effectively be a return of funds by the City of Manila in favor of petitioner while a tax credit will merely serve as a deduction of petitioner’s tax liabilities in the future. Accordingly, while we find merit in petitioner’s contention that there are two (2) ways by which respondents may satisfy the judgment of the RTC-Manila: (1) to pay the petitioner the amount of Php3,036,887.33 as tax refund; or (2) to issue a tax credit certificate in the same amount which may be credited by petitioner from its future tax liabilities due to the respondent City of Manila, the issuance of the Writ of Execution relative thereto was superfluous, because the judgment of the RTC-Manila can neither be considered a judgment for a specific sum of money susceptible of execution by levy or garnishment under Section 9,Rule 39 of the Rules of Court nor a special judgment under Section 11, Rule 39 thereof. (COCACOLA BOTTLER’S PHILIPPINES, INC. VS. CITY OF MANILA, ET AL., G.R. NO. 197561, APRIL 7, 2014, J. PERALTA) There are three essential conditions for the grant of a claim for refund of creditable withholding income tax, to wit: (1) the claim is filed with the Commissioner of Internal Revenue within the twoyear period from the date of payment of the tax; (2) it is shown on the return of the recipient that the income payment received was declared as part of the gross income; and (3) the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom. (COMMISSIONER OF INTERNAL REVENUE VS.

Page 35 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



TEAM [PHILIPPINES] OPERATIONS CORPORATION [FORMERLY MIRANT (PHILS) OPERATIONS CORPORATION], G.R. NO. 179260, APRIL 2, 2014, J. PEREZ) In Banco Filipino Savings and Mortgage Bank v. Court of Appeals, the Supreme Court laid down the three essential conditions for the grant of a claim for refund of creditable withholding income tax, namely: (1) the claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of the tax; (2) it is shown on the return of the recipient that the income payment received was declared as part of the gross income; and (3) the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom. (COMMISSIONER OF INTERNAL REVENUE, VS. TEAM [PHILIPPINES] OPERATIONS CORPORATION [FORMERLY MIRANT (PHILS) OPERATIONS CORPORATION], G.R. NO. 179260, APRIL 2, 2014, J. PEREZ) Neither the law nor the implementing rules state that a court ruling that has not attained finality would preclude the availment of the benefits of the Tax Amnesty Law. While tax amnesty, similar to a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing authority, it is also a well-settled doctrine that the rule-making power of administrative agencies cannot be extended to amend or expand statutory requirements or to embrace matters not originally encompassed by the law. Administrative regulations should always be in accord with the provisions of the statute they seek to carry into effect, and any resulting inconsistency shall be resolved in favor of the basic law. (CS GARMENT, INC., VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 182399, MARCH 12, 2014, CJ. SERENO) A tax credit or refund is strictly construed against the taxpayer. Strict compliance with the mandatory and jurisdictional conditions prescribed by law to claim such tax refund or credit is essential and necessary for such claim to prosper. Noncompliance with the mandatory periods, nonobservance of the prescriptive periods, and nonadherence to exhaustion of administrative remedies bar a taxpayer’s claim for tax refund or credit, whether or not the CIR questions the numerical correctness of the claim of the taxpayer. (SILICON PHILIPPINES, INC., (FORMERLY INTEL PHILIPPINES MANUFACTURING INC.), VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184360 & 184361/COMMISSIONER OF INTERNAL REVENUE VS. SILICON PHILIPPINES, INC., (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) G.R. NO. 184384, FEBRUARY 19, 2014, J. VILLARAMA, JR.) Pilipinas Shell, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers, the latter having been granted exemption from the payment of said excise tax under Sec. 135 (a) of the NIRC. (COMMISSIONER OF INTERNAL REVENUE VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 188497, FEBRUARY 19, 2014, J. VILLARAMA JR.) STATUTORY BASIS FOR TAX REFUND UNDER THE TAX CODE Prescriptive Period for Recovery of Tax Section 204 of the National Internal Revenue Code, as amended, provides the CIR with, inter alia, the authority to grant tax refunds. In this relation, Section 229 of the same Code provides for the proper procedure in order to claim for such refunds. As may be gleaned from the foregoing provisions, a

Page 36 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



claimant for refund must first file an administrative claim for refund before the CIR, prior to filing a judicial claim before the CTA. Notably, 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. In this regard, case law states that "the primary purpose of filing an administrative claim [is] to serve as a notice of warning to the CIR that court action would follow unless the tax or penalty alleged to have been collected erroneously or illegally is refunded. To clarify, Section 229 of the Tax Code -then Section 306 of the old Tax Code -however does not mean that the taxpayer must await 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 expire without the appropriate judicial claim being filed." (METROBANK AND TRUST COMPANY vs. THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 182582, APRIL 17, 2017, PERLAS-BERNABE, J.) UCSFA-MPC's claim for refund -grounded as it is on payments of advance VAT alleged to have been illegally and erroneously collected from November 15, 2007 to February 13, 2009 -is governed by Sections 204(C) and 229 of the NIRC. These provisions are clear: within two years from the date of payment of tax, the claimant must first file an administrative claim with the CIR before filing its judicial claim with the courts of law. Both claims must be filed within a two-year reglementary period. Timeliness of the filing of the claim is mandatory and jurisdictional. The court cannot take cognizance of a judicial claim for refund filed either prematurely or out of time. In the present case, the court a quo found that while the judicial claim was filed merely five days after filing the administrative claim, both claims were filed within the two-year reglementary period. Thus, the CTA correctly exercised jurisdiction over the judicial claim filed by UCSFA-MPC. (COMMISSIONER OF INTERNAL REVENUE vs. UNITED CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE COOPERATIVE, G.R. NO. 209776, DECEMBER 7, 2016, J. BRION) Section 229 of the Tax Code states that judicial claims for refund must be filed within two (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 Commissioner of Internal Revenue (CIR). The primary purpose of filing an administrative claim was to serve as a notice of warning to the CIR that court action would follow unless the tax or penalty alleged to have been collected erroneously or illegally is refunded. To clarify, Section 229 of the Tax Code – [then Section 306 of the old Tax Code] – however does not mean that the taxpayer must await 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 expire without the appropriate judicial claim being filed. (COMMISSIONER OF INTERNAL REVENUE v. GOODYEAR PHILIPPINES, INC., G.R. No. 216130, AUGUST 03, 2016, J. PERLAS-BERNABE) The administrative claim of a VAT-registered person for the issuance by CIR of tax credit certificates or the refund of input taxes paid on zero-rated sales or capital goods imported may be made within two years after the close of the taxable quarter when the sale or importation/purchase was made. Upon the filing of an administrative claim, respondent is given a period of 120 days within which to (1) grant a refund or issue the tax credit certificate for creditable input taxes; or (2) make a full or partial denial of the claim for a tax refund or tax credit. Failure on the part of respondent to act on the application within the 120-day period shall be deemed a denial. The judicial claim shall be filed within a period of 30 days after the receipt of respondent's decision or ruling or after the expiration

Page 37 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



of the 120-day period, whichever is sooner. Aside from a specific exception to the mandatory and jurisdictional nature of the periods provided by the law, any claim filed in a period less than or beyond the 120+30 days provided by the NIRC is outside the jurisdiction of the CTA. (SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 182737, MARCH 02, 2016, CJ SERENO) Upon the filing of an administrative claim, respondent is given a period of 120 days within which to (1) grant a refund or issue the tax credit certificate for creditable input taxes; or (2) make a full or partial denial of the claim for a tax refund or tax credit. Failure on the part of respondent to act on the application within the 120-day period shall be deemed a denial. Note that the 120-day period begins to run from the date of submission of complete documents supporting the administrative claim. If there is no evidence showing that the taxpayer was required to submit -or actually submitted -additional documents after the filing of the administrative claim, it is presumed that the complete documents accompanied the claim when it was filed. Whether respondent rules in favor of or against the taxpayer -or does not act at all on the administrative claim -within the period of 120 days from the submission of complete documents, the taxpayer may resort to a judicial claim before the CTA. (SILICON PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 182737. MARCH 2, 2016) With the 30-day period always available to the taxpayer, the taxpayer can no longer file a judicial claim for refund or credit of input VAT without waiting for the Commissioner to decide until the expiration of the 120-day period. Clearly, MPC's failure to observe the mandatory 120-day period under the law was fatal to its immediate filing of a judicial claim before the CTA. It rendered the filing of the CTA petition premature, and barred the tax court from acquiring jurisdiction over the same. Thus, the dismissal of the petition is in order. (COMMISSIONER OF INTERNAL REVENUE vs. MIRANT PAGBILAO CORPORATION, G.R. No. 180434. JANUARY 20, 2016) The rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any other addition documents to complete his administrative claim, the 120 day period allowed to the CIR begins to run from the date of filing. (PILIPINAS TOTAL GAS, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 207112. DECEMBER 8, 2015) Pursuant to Section 112 (A)(4) 2 and (D)(4)3 of the NIRC, a taxpayer has two (2) years from the close of the taxable quarter when the zero-rated sales were made within which to file with the CIR an administrative claim for refund or credit of unutilized input VAT attributable to such sales. The CIR, on the other hand, has 120 days from receipt of the complete documents within which to act on the administrative claim. Upon receipt of the decision, a taxpayer has 30 days within which to appeal the decision to the CTA. However, if the 120-day period expires without any decision from the CIR, the taxpayer may appeal the inaction to the CTA within 30 days from the expiration of the 120-day period. (COMMISSIONER OF INTERNAL REVENUE vs. TOLEDO POWER COMPANY, G.R. No. 196415. DECEMBER 2, 2015)

Page 38 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



The Court has observed that based on the records, Nippon's administrative claim for the first taxable quarter of 2002 which closed on March 31, 2002 was already time-barred for being filed on April 22, 2004, or beyond the two (2)-year prescriptive period pursuant to Section 112(A) of the National Internal Revenue Code of 1997. Although prescription was not raised as an issue, it is well-settled that if the pleadings or the evidence on record show that the claim is barred by prescription, the Court may motu proprio order its dismissal on said ground. (COMMISSIONER OF INTERNAL REVENUE vs. NIPPON EXPRESS (PHILS.) CORPORATION, G.R. No. 212920. SEPTEMBER 16, 2015) The records show that CE Luzon’s administrative and judicial claims were filed on November 30, 2006 and January 3, 2007, respectively, or during the period of effectivity of BIR Ruling No. DA-48903 and, thus, fell within the window period stated in San Roque, i.e., when taxpayer-claimants need not wait for the expiration of the 120-day period before seeking judicial relief. Verily, the CTA En Banc erred when it outrightly dismissed CE Luzon’s petition on the ground of prematurity. (CE LUZON GEOTHERMAL POWER COMPANY, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 200841-42. AUGUST 26, 2015) In this case, since the filing of the administrative claim was done within the period where BIR Ruling No. DA-489-03 was recognized valid, TPC is not compelled to observe the 120-day waiting period. Nevertheless, it should have filed the Petition within 30 days after the expiration of the 120-day period. San Roque recognized BIR Ruling No. DA-489-03 which allowed the premature filing of a judicial claim as an exception to the mandatory observance of the 120-day period. By virtue of the doctrines laid down in San Roque, TPC should have filed its judicial claim from 23 December 2004 until 22 May 2005; however, it filed its Petition to the CTA only on 24 April 2006. TPC lost its right to claim a refund or credit of its alleged excess input VAT attributable to zero-rated or effectively zerorated sales for taxable year 2004 by virtue of its own failure to observe the prescriptive periods. (COMMISSIONER OF INTERNAL REVENUE vs. TOLEDO POWER COMPANY, G.R. Nos. 195175 & 199645. AUGUST 10, 2015) Pursuant to Section 112(C) of the NIRC, respondent had 120 days from the date of submission of complete documents in support of the application within which to decide on the administrative claim. Thereafter, the taxpayer affected by the CIR’s decision or inaction may appeal to the CTA within 30 days from the receipt of the decision or from the expiration of the 120-day period. Compliance with both periods is jurisdictional, considering that the 30-day period to appeal to the CTA is dependent on the 120-day period. The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal. Strict compliance with the 120+30 day period is necessary for a claim for a refund or credit of input VAT to prosper. An exception to that mandatory period was, however, recognized in San Roque during the period between 10 December 2003, when BIR Ruling No. DA489-03 was issued, and 6 October 2010, when the Court promulgated Aichi declaring the 120+30 day period mandatory and jurisdictional, thus reversing BIR Ruling No. DA-489-03. (HEDCOR, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 207575. JULY 15, 2015) For failure of Silicon to comply with the provisions of Section 112(C) of the NIRC, its judicial claims for tax refund or credit should have been dismissed by the CTA for lack of jurisdiction. The Court stresses that the 120/30-day prescriptive periods are mandatory and jurisdictional, and are not mere technical requirements. (SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 173241, MARCH 25, 2015, J. LEONARDO-DE CASTRO)

Page 39 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Gotesco’s relentless refusal to transfer registered ownership of the Ever Ortigas Commercial Complex to PNB constitutes proof enough that Gotesco will not do any act inconsistent with its claim of ownership over the foreclosed asset, including claiming the creditable tax imposed on the foreclosure sale as tax credit and utilizing such amount to offset its tax liabilities. To do such would run roughshod over Gotesco’s firm stance that PNB’s foreclosure on the mortgage was invalid and that it remained the owner of the subject property. While perhaps it may be necessary to prove that the taxpayer did not use the claimed creditable withholding tax to pay for his/its tax liabilities, there is no basis in law or jurisprudence to say that BIR Form No. 2307 is the only evidence that may be adduced to prove such non-use. (PHILIPPINE NATIONAL BANK vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 206019, MARCH 18, 2015, J. VELASCO JR.) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim within which to decide whether to grant a refund or issue a tax credit certificate. In case of failure on the part of the CIR to act on the application within the 120-day period prescribed by law, the taxpayer has only has 30 days after the expiration of the 120-day period to appeal the unacted claim with the CTA. Since petitioner’s judicial claim was filed before the CTA only way beyond the mandatory 120+30 days to seek judicial recourse, such non-compliance with the mandatory period of 30 days is fatal to its refund claim on the ground of prescription. Consequently, the CTA has no jurisdiction over its judicial appeal considering that its Petition for Review was filed out of time. Consequently, the claim for refund must be denied. (NIPPON EXPRESS (PHILIPPINES) CORP. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 185666, FEBRUARY 04, 2015, J. PEREZ) In Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 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 (i.e., December 10, 2003 to October 6, 2010), the observance of the 120-day period is mandatory and jurisdictional to the filing of such claim. (PANAY POWER CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 203351, JANUARY 21, 2015, J. PERLAS-BERNABE) A VAT-registered taxpayer need not wait for the lapse of the 120-day period to file a judicial claim for unutilized VAT inputs before the CTA when the claim was filed on December 10, 2003 up to October 6, 2010. If the claim is filed within those dates, the same shall not be considered prematurely filed. In this case, records disclose that petitioner filed its administrative and judicial claims for refund/credit of its input VAT in CTA Case No. 8082 on December 28, 2009 and March 30, 2010, respectively, or during the period when BIR Ruling No. DA-489-03 was in place, i.e., from December 10, 2003 to October 6, 2010. As such, it need not wait for the expiration of the 120-day period before filing its judicial claim before the CTA, and hence, is deemed timely filed. In view of the foregoing, both the CTA Division and the CTA En Banc erred in dismissing outright petitioner’s claim on the ground of prematurity. (MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 204745, DECEMBER 08, 2014, J. PERLAS-BERNABE) In 1993, the BIR issued against respondent assessment notice for deficiency income tax for 1989. A waiver of the defense of prescription was executed but it was not signed by the Commissioner or any

Page 40 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



of his authorized representatives and did not state the date of acceptance. The Court held that the Commissioner’s right to collect has prescribed. The period to assess and collect deficiency taxes may be extended only upon a written agreement between the Commissioner and the taxpayer prior to the expiration of the three-year prescribed period. The BIR cannot claim the benefits of extending the period when it was the BIR’s inaction which is the proximate cause of the defects of the waiver. (COMMISSIONER OF INTERNAL REVENUE vs. THE STANLEY WORKS SALES (PHILS.), INCORPORATED, G.R. No. 187589, DECEMBER 03, 2014, CJ. SERENO) CBK Power filed its judicial claim for refund/credit just 20 days after it filed its administrative claim. CTA En Banc dismissed the case for lack of jurisdiction as it failed to observe the mandatory and jurisdictional 120-day period provided under Section 112 (D) of the National Internal Revenue Code. The Court found that the CTA En Banc was incorrect. The Court recognized an exception in which the existing BIR Ruling applicable to this case in which it held that taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief. (CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 198928, DECEMBER 03, 2014, J. PERLASBERNABE) As an exception to the mandatory and jurisdictional nature of the 120+ 30 day period, judicial claims filed between December 10, 2003 or from the issuance of BIR Ruling No. DA-489-03, up to October 6, 2010 or the reversal of the ruling in Aichi, need not wait for the lapse of the 120+ 30 day period in consonance with the principle of equitable estoppel. In the present case, Taganito filed its judicial claim with the CTA on February 19, 2004, clearly within the period of exception of December I 0, 2003 to October 6, 20 I 0. Its judicial claim was, therefore, not prematurely filed and should not have been dismissed by the CTA En Banc. (TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 198076, NOVEMBER 19, 2014, J. MENDOZA) As a general rule, a taxpayer-claimant needs to wait for the expiration of the one hundred twenty (120)-day period before it may be considered as "inaction" on the part of the Commissioner of Internal Revenue (CIR). Thereafter, the taxpayer-claimant is given only a limited period of thirty (30) days from said expiration to file its corresponding judicial claim with the CTA. However, with the exception of claims made during the effectivity of BIR Ruling No. DA-489-03 (from 10 December 2003 to 5 October 2010), AT&T Communications has indeed properly and timely filed its judicial claim covering the Second, Third, and Fourth Quarters of taxable year 2003, within the bounds of the law and existing jurisprudence. The VAT invoice is the seller's best proof of the sale of the goods or services to the buyer while the VAT receipt is the buyer's best evidence of the payment of goods or services received from the seller. Thus, the High Court concluded that VAT invoice and VAT receipt should not be confused as referring to one and the same thing. Certainly, neither does the law intend the two to be used interchangeably. (AT&T COMMUNICATIONS SERVICES PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 185969, NOVEMBER 19, 2014, J. PEREZ) Aichi filed an application for tax credit/refund with the BIR on March 29, 2005. On 31 March 2005, respondent filed judicial claim before the CTA. BIR contends that Aichi failed to observe the 120-day reglementary period provided by NIRC for the CIR to act on the claim. In this issue the Supreme court ruled that the Court agree with petitioner that the judicial claim was prematurely filed on 31 March 2005, since respondent failed to observe the mandatory 120day waiting period to give the CIR an opportunity to act on the administrative claim. However, the Court ruled in San Roque that BIR Ruling No. DA-489-03 allowed the premature filing of a judicial claim, which means non-exhaustion

Page 41 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



of the 120-day period for the Commissioner to act on an administrative claim. All taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional. Therefore, respondent's filing of the judicial claim barely two days after the administrative claim is acceptable, as it fell within the period during which the Court recognized the validity of BIR Ruling No. DA-489-03. (COMMISSIONER OF INTERNAL REVENUE vs. AICHI FORGING COMPANY OF ASIA, INC., G.R. No. 183421, OCTOBER 22, 2014, CJ SERENO) Section 112 (D) (now renumbered as Section 112[C]) of RA 8424, which is explicit on the mandatory and jurisdictional nature of the 120+30-day period, was already effective on January 1, 1998. That being said, and notwithstanding the fact that respondent's administrative claim had been timely filed, the Court is nonetheless constrained to deny the averred tax refund or credit, as its judicial claim therefore was filed beyond the 120+30-day period, and, hence - as earlier stated - deemed to be filed out of time. As the records would show, the CIR had 120 days from the filing of the administrative claim on July 21, 1999, or until November 18, 1999, to decide on respondent's application. Since the CIR did not act at all, respondent had until December 18, 1999, the last day of the 30-day period, to file its judicial claim. Respondent filed its petition for review with the CTA only on January 9, 2001 and, thus, was one (1) year and 22 days late. (COMMISSIONER OF INTERNAL REVENUE vs. BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR MINDANAO, INC., G.R. No. 190021, OCTOBER 22, 2014, J. PERLAS-BERNABE) The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year prescriptive period under Sec. 229, should be effective only from its promulgation on June 8, 2007 until its abandonment on [September 12, 2008] in Mirant. The Atlas doctrine was limited to the reckoning of the two-year prescriptive period from the date of payment of the output VAT. The Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule, thus applying Sec. 112(A) in computing the two-year prescriptive period in claiming refund or credit of input VAT. Since July 23, 2008 falls within the window of effectivity of Atlas, CBK’s administrative claim for the second quarter of 2006 was filed on time considering that it filed the original VAT return for the second quarter on July 25, 2006. (CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 202066, SEPTEMBER 30, 2014, J. LEONEN) As a general rule, compliance with the 120-day period stated in Section 112(D) of NIRC is mandatory. However, a VAT-registered taxpayer claiming refund for input VAT may not wait for the lapse of the 120-day period when the claim is filed between December 10, 2003 (the time of promulgation of BIR Ruling No. DA-489-03) to October 6, 2010 (the time of promulgation of the Aichi case). (TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 197591, JUNE 18, 2014, J. PERLAS-BERNABE) When a taxpayer seeking refund or tax credit under VAT files a judicial claim beyond the 30-day period provided by the law, the same shall be dismissed for lack of jurisdiction. A taxpayer seeking refund or tax credit under VAT must strictly follow the “120+30” rule to be entitled thereof, otherwise, the claim shall be barred. In the present case, the respondent filed its administrative claim on May 30, 2003. The petitioner CIR therefore had only until September 27, 2003 to decide the claim, and following the petitioner’s inaction, the respondent had until October 27, 2003, the last day of the 30-day period to file its judicial claim. However, the respondent filed its judicial claim with the CTA only on March 31, 2004 or 155 days late. Clearly, the respondent's judicial claim has prescribed and

Page 42 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



the CTA did not acquire jurisdiction over the claim. (COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II GEOTHERMAL PARTNERSHIP, G.R. No. 189440, JUNE 18, 2014, J. VILLARAMA, JR.) The mandatory rule is that a judicial claim must be filed with the CTA within thirty (30) days from the receipt of the Commissioner’s decision denying the administrative claim or from the expiration of the 120–day period without any action from the Commissioner. Otherwise, said judicial claim shall be considered as filed out of time. (COMMISSIONER OF INTERNAL REVENUE, vs. SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.), G.R. No. 169778, March 12, 2014, J. PEREZ) What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer of a judicial claim with the CTA before the expiration of the 120-day period cannot operate to divest the Commissioner of his jurisdiction to decide an administrative claim within the 120-day mandatory period, unless the Commissioner has clearly given cause for equitable estoppel to apply as expressly recognized in Section 246 of the Tax Code. (COMMISSIONER OF INTERNAL REVENUE vs. TEAM SUAL CORPORATION (formerly MIRANT SUAL CORPORATION, G.R. No. 194105 February 5, 2014, J. REYES) Under Section 112(C) of the NIRC, a taxpayer-claimant may only file a petition for review with the CTA within 30 days from either: (1) the receipt of the decision of the CIR denying, in full or in part, the claim for refund/tax credit; or (2) the lapse of the 120-day period given to the CIR to decide the claim for refund/tax credit. The 120-day mandatory period may extend beyond the two-year prescriptive period for filing a claim for refund/tax credit under Section 112(A) of the NIRC. Consequently, the30-day period given to the taxpayer-claimant likewise need not fall under the twoyear prescriptive period. What matters is that the administrative claim for refund/tax credit of unutilized input VAT is filed with the BIR within the two-year prescriptive period. (COMMISSIONER OF INTERNAL REVENUE vs. TEAM SUAL CORPORATION (formerly MIRANT SUAL CORPORATION), G.R. No. 194105, FEBRUARY 5, 2014, J. REYES) TPI filed its third and fourth quarterly VAT returns for 2001 on October 25, 2001 and January 25, 2002, respectively. It then filed an administrative claim for refund of its unutilized input VAT for the third and fourth quarters of 2001 on September 30, 2003. Thus, the CIR had 120 days or until January 28, 2004, after the submission of TPI’s administrative claim and complete documents in support of its application, within which to decide on its claim. Then, it is only after the expiration of the 120-day period, if there is inaction on the part of the CIR, where TPI may elevate its claim with the CTA within 30 days. In the present case, however, it appears that TPI’s judicial claims for refund of its unutilized input VAT covering the third and fourth quarters of 2001 were prematurely filed on October 24, 2003 and January 22, 2004, respectively. However, although TPI’s judicial claim for the fourth quarter of 2001 has been filed prematurely, the most recent pronouncements of the Court provide for a window wherein the same may be entertained. As held in the San Roque ponencia, strict compliance with the 120+30 day mandatory and jurisdictional periods is not necessary when the judicial claims are filed between December 10, 2003 (issuance of BIR Ruling No. DA-489-03 which states that the taxpayer need not wait for the 120-day period to expire before it could seek judicial relief) to October 6, 2010 (promulgation of the Aichi doctrine). Clearly, therefore, TPI’s refund claim of unutilized input VAT for the third quarter of 2001 was denied for being prematurely filed with the CTA, while its refund claim of unutilized input VAT for the fourth quarter of 2001 may be entertained since it falls within

Page 43 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



the exception provided in the Court’s most recent rulings. (COMMISSIONER OF INTERNAL REVENUE vs. TOLEDO POWER, INC, G.R. No. 183880 JANUARY 20, 2014, J. PERALTA) The taxpayer can file the appeal in one of two ways: (1) file the judicial claim within thirty days after the Commissioner denies the claim within the 120-day period, or (2) file the judicial claim within thirty days from the expiration of the 120-day period if the Commissioner does not act within the 120-day period. Mindanao II filed its administrative claim for refund or credit for the second, third, and fourth quarters of 2004 on 6 October 2005. The CIR, therefore, had a period of 120 days, or until 3 February 2006, to act on the claim. The CIR, however, failed to do so. Mindanao II then could treat the inaction as a denial and appeal it to the CTA within 30 days from 3 February 2006, or until 5 March 2006. Mindanao II, however, filed a Petition for Review only on 21 July 2006, 138 days after the lapse of the 30-day period on 5 March 2006. The judicial claim was therefore filed late. The CTA therefore lost jurisdiction over Mindanao Il’s claims for refund or credit. (COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II GEOTHERMAL PARTNERSHIP G.R. No. 1914498 JANUARY 15, 2014, CJ. SERENO) While petitioner filed its administrative and judicial claims during the period of applicability of BIR Ruling No. DA-489-03, it cannot claim the benefit of the exception period as it did not file its judicial claim prematurely, but did so long after the lapse of the 30-day period following the expiration of the 120-day period. Again, BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim, which means non-exhaustion of the 120-day period for the Commissioner to act on an administrative claim, but not its late filing. For failure of petitioner to comply with the 120+30 day mandatory and jurisdictional period, petitioner lost its right to claim a refund or credit of its alleged excess input VAT. (CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE, G.R. Nos.198729-30 JANUARY 15, 2014, CJ. SERENO) In this case, petitioner filed its judicial claim for refund on April 18, 2007 or after the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 but before October 6, 2010, the date when the Aichi case was promulgated. BIR Ruling No. DA-489-03 which is a general interpretative rule, was issued in response to a query made, not by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. BIR ruling held that the taxpayer did not wait for the lapse of the 120-day period to file for a judicial claim for refund. In the Aichi case, the Court ruled that the 120-30-day period in Section 112 (C) of the NIRC is mandatory and its non-observance is fatal to the filing of a judicial claim with the CTA. In this case, the Court explained that if after the 120-day mandatory period, the Commissioner of Internal Revenue (CIR) fails to act on the application for tax refund or credit, the remedy of the taxpayer is to appeal the inaction of the CIR to the CTA within thirty (30) days. The judicial claim, therefore, need not be filed within the two-year prescriptive period but has to be filed within the required 30-day period after the expiration of the 120 days. Thus, even though petitioner’s judicial claim was prematurely filed without waiting for the expiration of the 120-day mandatory period, the CTA may still take cognizance of the instant case as it was filed within the period exempted from the 120-30-day mandatory period. (TEAM ENERGY CORPORATION (formerly MIRANT PAGBILAO CORP.) vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 190928 JANUARY 13, 2014, J. PERALTA) GOVERNMENT REMEDIES

Page 44 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



ADMINISTRATIVE REMEDIES Section 229 of Presidential Decree (P.D.) No. 1158, the law in effect at the time of the disputed assessment, stated that prior resort to the administrative remedies was necessary; otherwise, the assessment would attain finality. Section 230 of P.D. No. 1158 allowed Alcantara to file his claim for refund for the erroneously or illegally paid taxes. In this regard, such claim for refund was also a prerequisite before any resort to the courts could be made to recover the erroneously or illegally paid taxes. Yet, Alcantara immediately invoked the authority of the courts to protect his rights instead of first going to the Commissioner of Internal Revenue for redress of his concerns about the assessment and collection of taxes. His judicial recourse thus suffered from fatal prematurity because his doing so rendered the assessment final. (DEMETRIO R. ALCANTARA vs. REPUBLIC OF THE PHILIPPINES, G.R. No. 192536, March 15, 2017, BERSAMIN, J.) The Supreme Court has upheld the validity of the BIR ruling, because the power to interpret rules and regulations is not exclusive and may be delegated by the CIR to the Deputy Commissioner. (PROCTOR AND GAMBLE ASIA PTE. LTD. vs. COMMISSIONER OF INTERNAL REVENUE, GR 204277, May 30, 2016, BRION, J.) CBK Power raised the lone issue of whether or not an ITAD ruling is required before it can avail of the preferential tax rate. On the other hand, the Commissioner claimed that CBK Power failed to exhaust administrative remedies when it filed its petitions before the CTA First Division, and that said petitions were not filed within the two-year prescriptive period for initiating judicial claims for refund. The Court categorically held that the 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. Nowhere and in no wise does the law imply that the Collector of Internal Revenue must act upon the claim, or that the taxpayer shall not go to court before he is notified of the Collector’s action. (CBK POWER COMPANY LIMITED vs. COMMISSIONER INTERNAL REVENUE, G.R. Nos. 193383-84, JANUARY 14, 2015, J. PERLAS-BERNABE) The issues raised before the Panel of Voluntary Arbitrators are: (1) whether the cash conversion of the gasoline allowance shall be subject to fringe benefit tax or the graduated income tax rate on compensation; and (2) whether the company wrongfully withheld income tax on the converted gas allowance. The Voluntary Arbitrator has no competence to rule on the taxability of the gas allowance and on the propriety of the withholding of tax. These issues are clearly tax matters, and do not involve labor disputes. To be exact, they involve tax issues within a labor relations setting as they pertain to questions of law on the application of Section 33 (A) of the NIRC. They do not require the application of the Labor Code or the interpretation of the MOA and/or company personnel policies. Furthermore, the company and the union cannot agree or compromise on the taxability of the gas allowance. Taxation is the State’s inherent power; its imposition cannot be subject to the will of the parties. If the union disputes the withholding of tax and desires a refund of the withheld tax, it should have filed an administrative claim for refund with the CIR. Paragraph 2, Section 4 of the NIRC expressly vests the CIR original jurisdiction over refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other tax matters. (HONDA CARS PHILIPPINES, INC. vs. HONDA CARS TECHNICAL SPECIALIST AND SUPERVISORS UNION, G.R. No. 204142, NOVEMBER 19, 2014, J. BRION)

Page 45 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



There could be no presumption of the regularity of any administrative action which resulted in depriving a taxpayer of his property through a tax sale. This is an exception to the rule that administrative proceedings are presumed to be regular. This jurisprudential tenor clearly demonstrates that the burden to prove compliance with the validity of the proceedings leading up to the tax delinquency sale is incumbent upon the buyer or the winning bidder, which, in this case, is Agojo. This is premised on the rule that a sale of land for tax delinquency is in derogation of property and due process rights of the registered owner. In order to be valid, the steps required by law must be strictly followed. Agojo must be reminded that the requirements for a tax delinquency sale under the LGC are mandatory. Strict adherence to the statutes governing tax sales is imperative not only for the protection of the taxpayers, but also to allay any possible suspicion of collusion between the buyer and the public officials called upon to enforce the laws. (CORPORATE STRATEGIES DEVELOPMENT CORP. and RAFAEL R. PRIETO vs. NORMAN A. AGOJO, G.R. No. 208740, NOVEMBER 19, 2014, J. MENDOZA) Agriex Co. foreign corporation alleges that the Bureau of Customs exclusive original jurisdiction over actual and physical possession of foreign shipments and thus RTC has no jurisdiction over such. The court ruled that it is well settled that the Collector of Customs has exclusive jurisdiction over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise thereof or stifle or put it at naught. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. Regional trial courts are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin or otherwise interfere with these proceedings. Regional trial courts are precluded from assuming cognizance over such matters even through petitions for certiorari, prohibition or mandamus. (AGRIEX CO., LTD vs. HON. TITUS B. VILLANUEVA and HON. BILLY C. BIBIT G.R. No. 158150, SEPTEMBER 10, 2014, J. BERSAMIN) The CIR categorically admitted that it failed to formally offer the Preliminary Assessment Notices as evidence. Worse, it advanced no justifiable reason for such fatal omission. Instead, it merely alleged that the existence and due execution of the Preliminary Assessment Notices were duly tackled by CIR’s witnesses. We hold that such is not sufficient to seek exception from the general rule requiring a formal offer of evidence, since no evidence of positive identification of such Preliminary Assessment Notices by petitioner’s witnesses was presented. (COMMISSIONER OF INTERNAL REVENUE vs. UNITED SALVAGE AND TOWAGE (PHILS.), INC., G.R. No. 197515, JULY 2, 2014, J. PERALTA) JUDICIAL REMEDIES In order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely motion for reconsideration or new trial must first be filed with the CTA Division that issued the assailed decision or resolution. Failure to do so is a ground for the dismissal of the appeal as the word "must" indicates that the filing of a prior motion is mandatory, and not merely directory. The same is true in the case of an amended decision. Section 3, Rule 14 of the amended CTA rules defines an amended decision as any action modifying or reversing a decision of the Court en bane or in Division. As explained in CE Luzon Geothermal Power Company, Inc. v. Commissioner of Internal Revenue, an amended decision is a different decision, and thus, is a proper subject of a motion for reconsideration. In this case, the CIR's failure to move for a reconsideration of the Amended Decision of the CTA Division is a ground for the dismissal of its Petition for Review before the CTA En Banc. Thus, the CTA En Banc did not err in denying the CIR's appeal on procedural grounds. Due to this procedural lapse,

Page 46 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



the Amended Decision has attained finality insofar as the CIR is concerned. The CIR, therefore, may no longer question the merits of the case before this Court. (ASIATRUST DEVELOPMENT BANK, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 201530, APRIL 19, 2017, DEL CASTILLO, J.) An application for tax abatement is considered approved only upon the issuance of a termination letter: Section 204(B) of the 1997 National lnternal Revenue Code empowers the CIR to abate or cancel a tax liability. Based on the guidelines, the last step in the tax abatement process is the issuance of the termination letter. The presentation of the termination letter is essential as it proves that the taxpayer's application for tax abatement has been approved. Thus, without a termination letter, a tax assessment cannot be considered closed and terminated. (ASIATRUST DEVELOPMENT BANK, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 201530, APRIL 19, 2017, DEL CASTILLO, J.) The complaint was brought to assail the assessment and collection made by the Commissioner of Internal Revenue. Based on Republic Act No. 1125, prior to its amendment by Republic Act No. 9282, the CTA had exclusive appellate jurisdiction over the appeal of the decisions of the Commissioner of Internal Revenue. Accordingly, the CA correctly dismissed Alcantara's appeal on the ground of lack of jurisdiction to entertain the same. The erroneous appeal deserved no fate but dismissal. Section 2, Rule 50 of the Rules of Court expressly states: "An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court but shall be dismissed outright." (DEMETRIO R. ALCANTARA vs. REPUBLIC OF THE PHILIPPINES, G.R. No. 192536 MARCH 15, 2017, BERSAMIN, J.) We deem it proper to clarify the last sentence in the decision that "[i]t did not matter where the RTC decision was appealed, whether before the C[ourt Of A[ppeals] or the C[ourt of T[ax] A[ppeals]." Republic Act No. 9282, which amended Republic Act No. 1125, took effect on April 23, 2004, and significantly expanded the extent and scope of the cases that the Court of Tax Appeals was tasked to hear and adjudicate. Under Section 7, paragraph (a)(3), the Court of Tax Appeals is vested with the exclusive appellate jurisdiction over, among others, appeals from the "decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction." The case a quo is a local tax case that is within the exclusive appellate jurisdiction of the Court of Tax Appeals. (NATIONAL POWER CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN, G.R. 180654, MARCH 6, 2017, LEONEN, J.) The CTA is a highly specialized body that reviews tax cases and conducts trial de novo. Thus, without any showing that the findings of the CTA are unsupported by substantial evidence, its findings are binding on the Court. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS vs. PHILIPPINE AIRLINES, G.R. No. 215705-07 FEBRUARY 22, 2017, PERALTA, J.) The Revised Rules of the CTA and even the Rules of Court which apply suppletorily thereto provide for no instance in which the en banc may reverse, annul or void a final decision of a division. Verily, the Revised Rules of the CTA provide(s) for no instance of an annulment of judgment at all. On the other hand, the Rules of Court, through Rule 47, provides, with certain conditions, for annulment of judgment done by a superior court, like the Court of Appeals, against the final judgment, decision or ruling of an inferior court, which is the Regional Trial Court, based on the grounds of extrinsic fraud and lack of jurisdiction. The Regional Trial Court, in turn, also is empowered to, upon a similar action,

Page 47 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



annul a judgment or ruling of the Metropolitan or Municipal Trial Courts within its territorial jurisdiction. But, again, the said Rules are silent as to whether a collegial court sitting en banc may annul a final judgment of its own division. As earlier explained, the silence of the Rules may be attributed to the need to preserve the principles that there can be no hierarchy within a collegial court between its divisions and the en banc, and that a court’s judgment, once final, is immutable. A direct petition for annulment of a judgment of the CTA to the Supreme Court, meanwhile, is likewise unavailing, for the same reason that there is no identical remedy with the High Court to annul a final and executory judgment of the Court of Appeals. RA No. 9282, Section 1 puts the CTA on the same level as the Court of Appeals, so that if the latter’s final judgments may not be annulled before the Supreme Court, then the CTA’s own decisions similarly may not be so annulled. And more importantly, it has been previously discussed that annulment of judgment is an original action, yet, it is not among the cases enumerated in the Constitution, Article VIII, Section 5, over which the Supreme Court exercises original jurisdiction. Annulment of judgment also often requires an adjudication of facts, a task that the Court loathes to perform, as it is not a trier of facts. Instead, what remained as a remedy for the petitioner was to file a petition for certiorari under Rule 65, which could have been filed as an original action before this Court and not before the CTA en banc. xxx In any event, petitioner’s failure to avail of this remedy and mistake in filing of the wrong action are fatal to its case and renders and leaves the CTA First Division’s decision as indeed final and executory. By the time the instant petition for review was filed by petitioner with this Court, more than sixty (60) days have passed since petitioner’s alleged discovery of its loss in the case as brought about by the alleged negligence or fraud of its counsel. (COMMISSIONER OF INTERNAL REVENUE vs. KEPCO ILIJAN CORPORATION G.R. No. 199422, JUNE 21, 2016, J. PERALTA, EN BANC) Despite the amendments to the law, the Court still holds that the CTA has ample authority to issue injunctive writs to restrain the collection of tax and to even dispense with the deposit of the amount claimed or the filing of the required bond, whenever the method employed by the CIR in the collection of tax jeopardizes the interests of a taxpayer for being patently in violation of the law. Such authority emanates from the jurisdiction conferred to it not only by Section 11 of R.A. No. 1125, but also by Section 7 of the same law. From all the foregoing, it is clear that the authority of the courts to issue injunctive writs to restrain the collection of tax and to dispense with the deposit of the amount claimed or the filing of the required bond is not simply confined to cases where prescription has set in. As explained by the Court, whenever it is determined by the courts that the method employed by the Collector of Internal Revenue in the collection of tax is not sanctioned by law, the bond requirement under Section 11 of R.A. No. 1125 should be dispensed with. The purpose of the rule is not only to prevent jeopardizing the interest of the taxpayer, but more importantly, to prevent the absurd situation wherein the court would declare “that the collection by the summary methods of distraint and levy was violative of law, and then, in the same breath require the petitioner to deposit or file a bond as a prerequisite for the issuance of a writ of injunction. (SPOUSES EMMANUEL PACQUIAO AND JINKEE PACQUIAO vs. COURT OF TAX APPEALS, G.R. NO. 213994, APRIL 16, 2016, J. MENDOZA) Under Section 112 of the NIRC, if the administrative claim for tax credit or refund of input taxes is not acted upon by the CIR within 120 days from the date of submission of complete documents in support of the application, the taxpayer affected may appeal the unacted claim with the CTA within 30 days from the expiration of the 120-day period. In Aichi, this Court ruled that observance of the 120- and 30-day periods is crucial in the filing of an appeal before the CTA. By "crucial," this Court meant that its observance is jurisdictional and mandatory, not merely permissive. Indeed, Aichi is the

Page 48 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



prevailing doctrine on the matter of mandatory compliance with the 120- and 30-day periods in the filing of judicial claims of tax credit or refund before the CTA. However, in the manner of most rules, the Aichi Doctrine is also subject to exceptions. In accordance with the equitable estoppel principle under Section 246 of the NIRC, we ruled in San Roque-Taganito that there are exceptions to the strict rule that compliance with the Aichi Doctrine is mandatory and jurisdictional, one of which is BIR Ruling No. DA-489-03. If the CIR issues a ruling, either a specific one applicable to a particular taxpayer or a general interpretative rule applicable to all taxpayers, and, as a result, misleads the taxpayers affected by the rule, into filing prematurely judicial claims with the CTA, the CIR cannot be allowed to later on question the CTA's assumption of jurisdiction over such claim. Since then, this Court has consistently adopted the ruling in San Roque-Taganito in holding that BIR Ruling No. DA489-03 is an exception to the Aichi Doctrine. We see no reason to disturb what is now a settled ruling. (PROCTOR AND GAMBLE ASIA PTE. LTD. vs. COMMISSIONER OF INTERNAL REVENUE, GR 204277, MAY 30, 2016, BRION, J.) Concededly, there is no clear statement under R.A. No. 1125, the amendatory R.A. No. 9282, let alone in the Constitution, that the CTA has original jurisdiction over a petition for certiorari. A petition before the CTA may only be made after a whole or partial denial of the protest by the CIR or the CIR's authorized representative. When PAGCOR filed its petition before the CTA on 11 March 2009, there was still no denial of PAGCOR's protest by either the RD or the CIR. PAGCOR has clearly failed to comply with the requisites in disputing an assessment as provided by Section 228 and Section 3.1.5. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION vs. BUREAU OF INTERNAL REVENUE, G.R. No. 208731. JANUARY 27, 2016) While it is true that the CTA Division has the prerogative to grant a motion to withdraw under the authority of the foregoing legal provisions, the attendant circumstances in this case should have incited it to act otherwise. The primary reason, however, that militates against the granting of the motion to withdraw is the fact that the CTA Division, in its August 10, 2011 Decision, had already determined that Nippon was only entitled to refund the reduced amount of P2,614,296.84 since it failed to prove that the recipients of its services were non-residents "doing business outside the Philippines"; hence, Nippon's purported sales therefrom could not qualify as zero-rated sales, necessitating the reduction in the amount of refund claimed. Markedly different from this is the BIR' s determination that Nippon should receive P21,675,128.91 as per the July 27, 2011 Tax Credit Certificate, which is, in all, P19,060,832.07 larger than the amount found due by the CTA Division. Therefore, as aptly pointed out by Associate Justice Teresita J. Leonardo-De Castro during the deliberations on this case, the massive discrepancy alone between the administrative and judicial determinations of the amount to be refunded to Nippon should have already raised a red flag to the CTA Division. Clearly, the interest of the government, and, more significantly, the public, will be greatly prejudiced by the erroneous grant of refund -at a substantial amount at that -in favor of Nippon. Hence, under these circumstances, the CTA Division should not have granted the motion to withdraw. (COMMISSIONER OF INTERNAL REVENUE vs. NIPPON EXPRESS (PHILS.) CORPORATION, G.R. No. 212920. SEPTEMBER 16, 2015) The Court thus declares that the CA's original jurisdiction over a petition for certiorari assailing the DOJ resolution in a preliminary investigation involving tax and tariff offenses was necessarily transferred to the CTA pursuant to Section 7 of R.A. No. 9282, and that such petition shall be governed by Rule 65 of the Rules of Court, as amended. Accordingly, it is the CTA, not the CA, which has jurisdiction over the petition for certiorari assailing the DOJ resolution of dismissal of the BOC's

Page 49 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



complaint-affidavit against private respondents for violation of the TCCP. (BUREAU OF CUSTOMS vs. THE HONORABLE AGNES DEVANADERA, et al.,G.R. No. 193253. SEPTEMBER 8, 2015) Under Section 3, Rule 14 of the Revised Rules of the Court of Tax Appeals, an amended decision is issued when there is any action modifying or reversing a decision of the CTA En Banc or in Division. Pursuant to these parameters, it is clear that the CIR’s motions for partial reconsideration – i.e., (a) motion for partial reconsideration of the June 24, 2009 Decision; and (b) motion for partial reconsideration of the January 19, 2010 Amended Decision – assailed separate and distinct decisions that were rendered by the CTA Division. Notably, its amended decision modified and increased CE Luzon’s entitlement to a refund or tax credit certificate in the amount of -17,277,938.47. Essentially, it was therefore a different decision and, hence, the proper subject of a motion for reconsideration anew on the part of the CIR. Thus, CE Luzon’s procedural objection must fail. (CE LUZON GEOTHERMAL POWER COMPANY, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 200841-42. AUGUST 26, 2015) It is within the CTA's sound judicial discretion to give party-litigants every opportunity to properly present their conflicting claims on the merits of the controversy without resorting to technicalities. It should always be predicated on the consideration that more than the mere convenience of the courts or of the parties of the case, the ends of justice and fairness would be served thereby. Courts should be liberal in setting aside orders of default, for default judgments are frowned upon, and unless it clearly appears that the reopening of the case is intended for delay, it is best that trial courts give both parties every chance to fight their case fairly and in the open, without resort to technicality. (COMMISSIONER OF INTERNAL REVENUE vs. COURT OF TAX APPEALS AND CB POWER COMPANY LIMITED, G.R. Nos. 203054-55. JULY 29, 2015) Petron admitted to not having filed a protest of the assessment before the customs collector and elevating a possible adverse ruling therein to the COC, reasoning that such a procedure would be costly and impractical, and would unjustly delay the resolution of the issues which, being purely legal in nature anyway, were also beyond the authority of the customs collector to resolve with finality. This admission is at once decisive of the issue of the CTA's jurisdiction over the petition. There being no protest ruling by the customs collector that was appealed to the COC, the filing of the petition before the CTA was premature as there was nothing yet to review. (COMMISSIONER OF INTERNAL REVENUE vs. COURT OF TAX APPEALS (2ND DIVISION) AND PETRON CORPORATION, G.R. No. 207843. JULY 15, 2015) Conformably with our ruling in BPI Leasing Corporation that the application of Section 244 of the NIRC is an exercise of quasi-legislative or rule-making powers of the Secretary of Finance, and since RR 2-2012 was issued by the Secretary of Finance based on Section 244 of the NIRC, such administrative issuance is therefore quasi-legislative in nature which is outside the scope of a petition for certiorari. (CLARK INVESTORS AND LOCATORS ASSOCIATION, INC. vs. SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL REVENUE, G.R. No. 200670. JULY 6, 2015) In praying to restrain the collection of RPT, petitioner also implicitly questions the propriety of the assessment of such RPT. This is because in ruling as to whether to restrain the collection, the RTC must first necessarily rule on the propriety of the assessment. A certiorari petition questioning an interlocutory order issued in a local tax case falls under the jurisdiction of the CTA. (CE CASECNAN

Page 50 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



WATER AND ENERGY COMPANY, INC. vs. THE PROVINCE OF NUEVA ECIJA, et al., G.R. No. 196278. JUNE 17, 2015) Section 7 of R.A. No. 1125 as well as Section 3, Rule 4 of the Revised Rules of the Court of Tax Appeals explicitly provide that the CTA has exclusive appellate jurisdiction over tax collection cases decided by the RTC. (MITSUBISHI MOTORS PHILIPPINES CORPORATION vs. BUREAU OF CUSTOMS, G.R. No. 209830, JUNE 17, 2015) In case of an illegal assessment where the assessment was issued without authority, exhaustion of administrative remedies is not necessary and the taxpayer may directly resort to judicial action. The taxpayer shall file a complaint for injunction before the Regional Trial Court to enjoin the local government unit from collecting real property taxes. The party unsatisfied with the decision of the Regional Trial Court shall file an appeal, not a petition for certiorari, before the Court of Tax Appeals, the complaint being a local tax case decided by the Regional Trial Court. The appeal shall be filed within fifteen (15) days from notice of the trial court’s decision. In this case, the petition for injunction filed before the Regional Trial Court of Pasay was a local tax case originally decided by the trial court in its original jurisdiction. Since the PEZA assailed a judgment, not an interlocutory order, of the Regional Trial Court, the PEZA’s proper remedy was an appeal to the Court of Tax Appeals. (CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATAAN vs. PHILIPPINE ECONOMIC ZONE AUTHORITY, G.R. No. 184203, G.R. NO. 187583, NOVEMBER 26, 2014, J. LEONEN) NAPOCOR filed a petition for declaratory relief based on the assessments of real property taxes the Municipality of Navotas imposed. It then questioned the legality of the tax imposition. On appeal, the CTA En Banc ruled that the RTC has jurisdiction over the case even though administrative remedies were not exhausted. The Court clarified that although there are instances were resort to judicial action is allowed, it is not so in the case at hand. The fact that a separate chapter is devoted to the treatment of real property taxes, and a distinct appeal procedure is provided therefor does not justify an inference that Section 7(a)(3) of R.A. 9282 pertains only to local taxes other than real property taxes. Rather, the term "local taxes" in the aforementioned provision should be considered in its general and comprehensive sense, which embraces real property tax assessments, in line with the precept Generalia verba sunt generaliter inteligencia—what is generally spoken shall be generally understood. Based on the foregoing, the general meaning of "local taxes" should be adopted in relation to Paragraph (a)(3) of Section 7 of R.A. 9282, which necessarily includes real property taxes. In fine, if a taxpayer is not satisfied with the decision of the CBAA or the RTC, as the case may be, the taxpayer may file, within thirty (30) days from receipt of the assailed decision, a petition for review with the CTA pursuant to Section 7(a) of R.A. 9282. In cases where the question involves the amount of the tax or the correctness thereof, the appeal will be pursuant to Section 7(a)(5) of R.A. 9282. When the appeal comes from a judicial remedy which questions the authority of the local government to impose the tax, Section 7(a)(3) of R.A. 9282 applies. Thereafter, such decision, ruling or resolution may be further reviewed by the CTA En Banc pursuant to Section 2, Rule 4 of the Revised Rules of the CTA. (NATIONAL POWER CORPORATION vs. MUNICIPAL GOVERNMENT OF NAVOTAS, SANGGUNIANG BAYAN OF NAVOTAS AND MANUEL T. ENRIQUEZ, G.R. No. 192300, NOVEMBER 24, 2014, J. PERALTA)

Page 51 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations



Philamlife sold its shares through a public bidding. However, the selling price was below the book value of the shares. Hence, the BIR imposed donor’s tax on the price difference. Philamlife appealed to the Secretary of Finance. Due to the adverse ruling, Philamlife appealed with the CA. CA alleged that it does not have jurisdiction for jurisdiction lies with the CTA. The Court ruled that, the CTA can now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said assessment is based. (THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs. SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, G.R. No. 210987, NOVEMBER 24, 2014, J. VELASCO, JR.) The respondents allege that the Court of Tax Appeals has no jurisdiction to make an assessment in cases of an administrative claim for tax refunds. The Supreme Court ruled that in an action for the refund of taxes allegedly erroneously paid, the Court of Tax Appeals may determine whether there are taxes that should have been paid in lieu of the taxes paid. Determining the proper category of tax that should have been paid is not an assessment. It is incidental to determining whether there should be a refund. (SMI-ED PHILIPPINES TECHNOLOGY, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 175410, NOVEMBER 12, 2014, J. LEONEN) The Commissioner of Customs contends that the CTA should not take cognizance of the case because of the lapse of the 30-day period within which to appeal, arguing that on November 25, 1998 URC had already received the BoC’s final assessment demanding payment of the amount due within 10 days, but filed the petition only on July 30, 1999. The Court ruled against the Commissioner of Customs. The reckoning date was on date that the Commissioner of Customs denied the protest of Oilink, July 12, 1999. The Commissioner of Customs posits that only when the ensuing decision of the Collector and then the adverse decision of the Commissioner of Customs would it be proper for Oilink to seek judicial relief from the CTA. The Court ruled that the principle of non-exhaustion of administrative remedies was not an iron-clad rule because there were instances in which the immediate resort to judicial action was proper. As the records indicate, the Commissioner of Customs already decided to deny the protest by Oilink and stressed then that the demand to pay was final. In that instance, the exhaustion of administrative remedies would have been an exercise in futility because it was already the Commissioner of Customs demanding the payment of the deficiency taxes and duties. (COMMISSIONER OF CUSTOMS vs. OILINK INTERNATIONAL CORPORATION, G.R. No. 161759, JULY 2, 2014, J. BERSAMIN) UPDATED BY PALS & ATENEO DE DAVAO UNIVERSITY FOR THE 2017 BAR OPERATIONS By: 4th year Law: Alona Suzell Ruyeras Hisham Nazz Biruar Maria Ayra Batacan Manuel P. Quibod –Dean College of Law

Page 52 of 53

Recent Jurisprudence (April 2014 – April 2017) Taxation A compilation continued by the Philippine Association of Law Schools (PALS) & Ateneo de Davao for the 2017 Bar Operations





Page 53 of 53