FORT BONIFACIO DEVELOPMENT CORPORATION vs.

COMMISSIONER OF INTERNAL REVENUE- Transitional Input Value Added Tax

FACTS: Petitioner was a real estate developer that bought from the national government a parcel of land that used to be the Fort Bonifacio military reservation. At the time of the said sale there was as yet no VAT imposed so Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold two parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes (because the VAT had already been imposed in the interim), Petitioner claimed transitional input VAT corresponding to its inventory of land. The BIR disallowed the claim of presumptive input VAT and thereby assessed Petitioner for deficiency VAT.

ISSUE: Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its nature as a real estate dealer and if so (i) is the transitional input VAT applied only to the improvements on the real property or is it applied on the value of the entire real property and (ii) should there have been a previous tax payment for the transitional input VAT to be creditable?

HELD: YES. Petitioner is entitled to claim transitional input VAT based on the value of not only the improvements but on the value of the entire real property and regardless of whether there was in fact actual payment on the purchase of the real property or not.

The amendments to the VAT law do not show any intention to make those in the real estate business subject to a different treatment from those engaged in the sale of other goods or properties or in any other commercial trade or business. On the scope of the basis for determining the available transitional input VAT, the CIR has no power to limit the meaning and coverage of the term "goods" in Section 105 of the Tax Code without statutory authority or basis. The transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisition of their beginning inventory of goods, materials and supplies.

Almeda vs Bathala Facts: In May 1997, respondent Bathala Marketing Industries, Inc. (lessee) entered into a contract of lease with petitioners (lessors). Provisions of the contract of lease include:

6th - Lessee shall pay an increased rent if there is any new tax imposed on the property

7th - In case of supervening extraordinary inflation or devaluation of the PHP, the value of PHP at the time of the establishment of the obligation shall be the basis of payment

Petitioners later demanded payment of VAT and 73% adjusted rentals pursuant to the foregoing provisions. Respondent refused and filed an action for declaratory relief. Petitioners filed an action for ejectment.

Issue: Whether or not declaratory relief is proper.

Held: YES. Petitioners insist that respondent was already in breach of the contract when the petition was filed, thus, respondent is barred from filing an action for declaratory relief. However, after petitioners demanded payment of adjusted rentals and in the months that followed, respondent complied with the terms and conditions set forth in their contract of lease by paying the rentals stipulated therein. Respondent religiously fulfilled its obligations to petitioners even during the pendency of the present suit. There is no showing that respondent committed an act constituting a breach of the subject contract of lease. Thus, respondent is not barred from instituting before the trial court the petition for declaratory relief.

Petitioners further claim that the instant petition is not proper because a separate action for rescission, ejectment and damages had been commenced before another court; thus, the construction of the subject contractual provisions should be ventilated in the same forum.

As a rule, the petition for declaratory relief should be dismissed in view of the pendency of a separate action for unlawful detainer. In this case, however, the trial court had not yet resolved the rescission/ejectment case during the pendency of the declaratory relief petition. In fact, the trial court, where the rescission case was on appeal, initiated the suspension of the proceedings pending the resolution of the action for declaratory relief. COMMISSIONER OF INTERNAL REVENUE VS. AQUAFRESH SEAFOODS, INC. - Fair Market Value

the BIR has no discretion as regards its classification and/or valuation. FORT BONIFACIO DEVELOPMENT CORPORATION (Corp. TAGUIG and PATEROS. If a determination has already been made. 2009 which granted the consolidated petitions of petitioner Fort Bonifacio Development Corporation (Corp.413. 10-2-2009. the amount of P28. BUREAU OF INTERNAL REVENUE.FACTS: Aquafresh Seafoods sold two parcels of located at Barrio Banica in Roxas City and paid the corresponding CGT and DST due on the sale. REGIONAL DIRECTOR. and (2) directed to refund to the Corp.) v. REVENUE REGION NO. (Sec. BIR & FORT BONIFACIO DEVELOPMENT CORPORATION v. 158885 & G. COMMISSIONER OF INTERNAL REVENUE. for the said quarter. No.783. 8. 170680. or to issue a tax credit corresponding to such amount. Aquafresh Seafood’s defense was that there was already a pre-defined zonal value for the said lots and thus the BIR could not reclassify the same to be commercial lots. 44. ASSESSMENT DIVISION.00 representing the transitional input tax credit due it for the fourth quarter of 1996. It was likewise added that the application of the rule of assigning zonal values based on the ‘predominant use of property’ only applies when the property is located in an area or zone where the properties are not yet classified and their zonal values are not yet determined. REVENUE DISTRICT OFFICER. J. The BIR’s position that the requirement of consultation with appraisers is mandatory only when formulating or making changes in the schedule of zonal values is wrong. No. 8. ISSUE: Is the requirement (under Section 6 of the Tax Code) of consultation with competent appraisers both from the public and private sectors in determining fair market value applicable in this case? HELD: YES. The Court held that the BIR’s act of classifying the subject properties involved a re-classification and revision of the prescribed zonal values. However.) where the C CIR was (1) restrained from collecting from the Corp.74 paid as output VAT for the third quarter of 1997 in light of the persisting transitional input tax credit available to the Corp.R. REVENUE REGION NO. EN BANC. REVENUE DISTRICT NO. the BIR assessed Aquafresh Seafoods based on its conclusion that the lots were classified as commercial and not residential as claimed by the taxpayer.: ONE LINE: Administrative rule or regulation cannot contravene the law on which it is based.R.695.105-1 of RR 7-95 is an “administrative rule and regulation implementing an existing law” – Term used in Tanada v Tuvera) NATURE: Motion for Reconsideration of SC’s Decision dated April 2. 4. the amount of P347. LEONARDO-DE CASTRO.741. . COMMISSIONER OF INTERNAL REVENUE (CIR). G. and CHIEF.

regarding transitional input tax credit. – xxx. materials and supplies. Transitional/Presumptive Input Tax Credits. materials and supplies equivalent for 8% of the value of such inventory or the actual value-added tax paid on such goods. WON CIR Revenue Regulations 7-95 validly repealed Section 105 as amended by EO 273. no repealing cause does not mean a lack of intent to repeal. 273 [1987] – contains first VAT law. + EO No. (1) The term ‘goods or properties’ shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: (A) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business. Section 105 as amended by EO 273. – (A) Transitional Input Tax Credits. be allowed input tax on his beginning inventory of goods. materials and supplies equivalent to 8% of the value of such inventory or the actual value-added tax paid on such goods. upon recommendation of the Commissioner. Transitional Input Tax Credits. NO. It amended several provisions of the Internal Revenue Code of 1986 (Old NIRC).105-1 of RR 7-95 for being in conflict with the law. The amendment basically states that a 10% VAT shall be imposed upon “goods or properties” among others.FACTS: In the April 2. All of it must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole. admin rule and reg less than statutes 2. This has been explained in the prior Decision. + RA 7716 [1996] .amended Sec. subject to the filing of an inventory according to rules and regulations prescribed by the Secretary of finance.statutory definition of the term "goods or properties" leaves no room for doubt. Rule applied .National Internal Revenue Code of 1997 (New NIRC) however amended Sec. Sec. WON CIR Revenue Regulations # 6-97 repealed CIR Revenue Regulations # 7-95 HELD: 1. . ISSUES: 1. . YES. RA 7716 did not amend the provisions of SEC 105 of the Old NIRC. In anticipation of the probable burdens of the shift to the VAT system it allowed newly VAT-registered persons to avail of a transitional input tax credit as provided for in Section 105 of the Old NIRC. 100.+” Rule on statutory construction – sections of the law cannot be interpreted apart from each other. whichever is higher. 111(A) of the New NIRC The provisions on the transitional input tax credit are now embodied in Section 111(A) of the New NIRC. Value-added tax on sale of goods or properties." The term "goods" as used in Section 105 of the same code could not have a different meaning. + RA 8424 (1997) . 2. xxx. which shall be creditable against the output tax. Sec 100 of the Old NIRC defined the term "goods or properties" by the unambiguous terms "real properties held primarily for sale to costumers or held for lease in the ordinary course of business. 2009 Decision. 105 specifically by Sec. This it did when it restricted the application of Section 105 in the case of real estate dealers only to improvements on the real property belonging to their beginning inventory. *Emphasis SC’s. which shall be creditable against the output tax. 1. subject to the filing of an inventory as prescribed by regulations. – (a) Rate and base of tax. whichever is higher. It held that the CIR had no power to limit the meaning and coverage of the term "goods" in Section 105 of the Old NIRC sans statutory authority or basis and justification to make such limitation. which is what CIR wants to be reconsidered in this case. the Court struck down Section 4. Sec. which reads: “Section 111.A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall. be allowed input tax on his beginning inventory of goods. — A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall. 100 of Old NIRC by imposing for the first time value-added-tax on sale of real properties. xxx However. 105. It clarified that the term “goods and properties” shall mean all tangible and intangible objects which are capable of pecuniary estimation and shall include: (A) Real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business. materials and supplies.

that under RR 6-97. constructed on or after the effectivity of EO 273 (January 1. therefore. Par 3. insofar as the definition of real properties as goods is concerned . RR 6-97 was basically a reiteration of the same Section 4. but in conformity with. Any rule that is not consistent with the statute itself is null and void. 1997. expand. 1988). but also the definition which the same revenue regulation itself has provided. 273 (January 1. insofar as it restricts the definition of "goods" as basis of transitional input tax credit under Section 105 is a nullity. Admin rules should not be in contradiction to. and other similar structures. Section 4. roads. 1988). St. It is clear. in the case of real estate dealers.105-1 of RR no. the allowable transitional input tax credit is not limited to improvements on real properties. not contradict. RR 6-97 was issued by the Commissioner of Internal Revenue. Commissioner of Internal Revenue vs. such as buildings.R. G. However. the basis of the presumptive input tax shall be the improvements. 7 of NCC. 195909 September 26. Thus. roads. the basis of the presumptive input tax shall be the improvements. Inc. 7-95 is an Administrative Rule and Regulation based upon the existing statutes Old and New NIRC. No. 2012 In a nutshell: .105-1 of RR 7-95. drainage systems. 195909. states that an administrative rule or regulation cannot contravene the law on which it is based. Art. The fact that the aforequoted paragraph was deleted created an irreconcilable inconsistency and repugnancy between the provisions of RR 6-97 and RR 7-95. RULE: In order to be valid. 7-95 however limited this definition to "improvements" .ADMINISTRATIVE RULE IN ISSUE: RR No. except that the RR 6-97 deleted the following paragraph. Luke's Medical Center. September 26. RR 7-95. This is already a legislative act that is beyond the authority of the CIR and the Secretary of Finance more so when the law which the administrative rule is contravening is also the law which it is based upon.. an administrative rule or regulation must conform. 2012 Commissioner of Internal Revenue vs. Section 4.105-1 of RR 7-95 restricted the definition of "goods". in the case of real estate dealers.BIR thus not only contravened the definition of "goods" as provided in the Old NIRC. Luke's Medical Center. Inc. On January 1. constructed on or after the effectivity of E. the standards prescribed by law. RR 7-95 is inconsistent with Section 105 insofar as the definition of the term "goods" is concerned.100-1 of which made by the BIR which includes in its enumeration of "goods or properties" such "real properties held primarily for sale to customers or held for lease in the ordinary course of trade or business.R. the provisions of the enabling law. Section 4. and other similar structures. drainage systems. St. The failure to add a specific repealing clause would not necessarily indicate that there was no intent to repeal RR 7-95." Said definition was taken from the very statutory language of Section 100 of the Old NIRC. such as buildings. 2. The particular provision of RR 7-95 has effectively been repealed by RR 6-97 which is now in consonance with Section 100 of the NIRC. or subtract from the law it is intended to implement. viz: However. An implementing rule or regulation cannot modify.O. G. No.

(Emphasis supplied) In comparison. Culture and Sports (DECS). officer or any specific person. . Accepting paying patients does not destroy the exemption of St. 30 of the NIRC. or cultural purposes. as the case may be. Inc. or the Technical Education and Skills Development Authority (TESDA). Luke’s activities conducted for profit? With respect to its paying patients. Proprietary educational institutions and hospitals which are non-profit shall pay a tax of ten percent (10%) on their taxable income except those covered by Subsection (D) hereof: Provided. (St. organizer. – The following organizations shall not be taxed under this Title in respect to income received by them as such: xxxx (E) Nonstock corporation or association organized and operated exclusively for religious. What is the income tax rate to be applied to St. shall be subject to tax imposed under this Code. athletic. (Emphasis supplied) CASE DIGEST Facts: St. Luke’s is subject to the 10% preferential tax rate of proprietary non -profit hospitals under Section 27(B). 30 of the NIRC provides that St. A ‘proprietary educational institution’ is any private school maintained and administered by private individuals or groups with an issued permit to operate from the Department of Education. real or personal. the last paragraph of Sec. Luke’s is exempted from income tax pursuant to Sec. 30. Luke’s Medical Center. the term ‘unrelated trade. St. Relevant Sections: Before discussing the case.St. Luke’s activities conducted for profit. or the Commission on Higher Education (CHED). Exemptions from Tax on Corporations. in accordance with existing laws and regulations. charitable. Luke’s) is a hospital organized as a non -stock and non-profit corporation. the conduct of which is not subst antially related to the exercise or performance by such educational institution or hospital of its primary purpose or function. Section 30(E) and Section 30(G) state: Sec. business or other activity’ means any trade. Section 27(B) of the National Internal Revenue Code (NIRC) states: (B) roprietary Educational Institutions and ospitals. regardless of the disposition of such income. the tax prescribed in Subsection (A) hereof shall be imposed on the entire taxable income. or for the rehabilitation of veterans. That if the gross income from unrelated trade. 30 (E) and (G) of the NIRC for being a non-stock corporation or organization operated exclusively for charitable or social welfare purposes. scientific. let us take a look at the relevant sections of the law in question. For purposes of this Subsection. shall be subject to tax imposed under this Code. Luke’s accepts both paying and non-paying patients. Instead. the income of whatever kind and character of the foregoing organizations from any of their properties. xxxx (G) Civic League or organization not organized for profit but operated exclusively for the promotion of social welfare xxxx Notwithstanding the provisions in the preceding paragraphs. Luke’s under Sec. no part of its net income or asset shall belong to or inure to the benefit of any member. business or other activity exceeds fifty percent (50%) of the total gross income derived by such educational institutions or hospitals from all sources. or from any of their activities conducted for profit regardless of the disposition of such income. (St. With respect to its non-paying patients. business or other activity. Inc. St. Luke’s Medical Center. St. Luke’s) is a hospital organized as a non-stock and non-profit corporation.

It argued that the making of profit per se does not destroy its income tax exemption. either by bringing their minds and hearts under the influence of education or religion. an organization must meet the substantive test of charity in Lung Center. Luke’s deficiency taxes for 1998 comprised of deficiency income tax. Section 27(B) on one hand. Luke’s should be liable for income tax at a preferential rate of 10% as provided for by Section 27(B). the BIR claimed that St. value -added tax. Luke’s maintained that it is a non-stock and non-profit institution for charitable and social welfare purposes exempt from income tax under Section 30(E) and (G) of the NIRC. “Proprietary” means private. The loss of taxes by the government is compensated by its relief from doing public works which would have been funded by appropriations from the Treasury The Constitution exempts charitable institutions only from real property taxes. and withholding tax. de Cebu. which imposes a preferential tax rate of 10^ on the income of proprietary non-profit hospitals. can be construed together without the removal of such tax exemption. Congress decided to extend the exemption to income taxes. this Court considered as non-profit a sports club organized for recreation and entertainment of its stockholders and members. This is the rationale for the tax exemption of charitable institutions. to be applied consistently with existing laws. the government forgoes taxes which should have been spent to address public needs. by assisting them to establish themselves in life or [by] otherwise lessening the burden of government. Moreover. and Section 30(E) and (G) on the other hand. The Court defined “charity” in Lung Center of the Philippines v. Luke’s was actually operating for profit in 1998 because only 13% of its revenues came from charitable purposes. for the benefit of an indefinite number of persons. “Non-profit” does not necessarily mean “charitable. as a matter of efficiency. “Non-profit” means no net income or asset accrues to or benefits any member or specific person . The BIR claimed that St. charitable institutions provide for free goods and services to the public which would otherwise fall on the shoulders of government. St. following the definition of a “proprietary educational institution” as “any private school maintained and administered by private individuals or groups” with a government permit. any income such institution earns from activities conducted for profit is taxable. officers and employees directly benefit from its profits and assets. the hospital’s board of trustees. Issue: The sole issue is whether St. The issue in Lung Center concerns exemption from real property tax and not income tax. The club was primarily funded by membership fees and dues. The sports club in Club Filipino Inc. However. because certain private entities already assume a part of the burden. despite its being a tax exempt institution.” In Collector of Internal Revenue v. Thus. as expressly provided in the last paragraph of Sec. Club Filipino Inc. it provides for the test of charity in our jurisdiction. The only qualifications for hospitals are that they must be proprietary and non-profit. the way Congress crafted Section 30(E) of the NIRC is materially different from Section 28(3).The BIR assessed St. The club was non-profit because of its purpose and there was no evidence that it was engaged in a profit-making enterprise. Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1) proprietary non-profit educational institutions and (2) proprietary non-profit hospitals. however. Further. Luke’s is liable for deficiency income tax in 1998 under Section 27(B) of the NIRC. but it was not charitable. In other words. Charity is essentially a gift to an indefinite number of persons which lessens the burden of government. de Cebu may be non-profit. Quezon City as “a gift. Ruling: Section 27(B) of the NIRC does not remove the income tax exemption of proprietary non-profit hospitals under Section 30(E) and (G). with all the net income or asset devoted to the institution’s purposes and all its activities conducted not for profit. they were used for overhead expenses and improving its golf course. In the NIRC. On the other hand. If it had profits. However. Article VI of the Constitution. To be a charitable institution. 30.” owever. (Emphasis supplied) .

St. such activity is not tax exempt even as its not-for-profit activities remain tax exempt. which opined that St.” Prior to the introduction of Section 27(B). In Michael J. Likewise. or from any of their activities conducted for profit regardless of the disposition made of such income. to be exempt from income taxes. Section 30(G) of the NIRC requires that the institution be “operated exclusively” for social welfare. owever. is entitled to the preferential tax rate of 10% on its net income from its for-profit activities. Luke’s is “a corporation for purely charitable and social welfare purposes” and thus exempt from income tax. St. regardless of the disposition made of such income. (Emphasis supplied) In short. St. Section 30(E) and (G) of the NIRC requires that an institution be “operated exclusively” for charitable or social welfare purpose s to be completely exempt from income tax. real or personal. (Emphasis supplied) The Court finds that St. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit activities. However. With the introduction of Section 27(B). directly and exclusively” for charitable purposes. but requires that the institution “actually. Luke’s is a corporation that is not “operated exclusively” for charitable or social welfare purposes insofar as its revenues from paying patients are concerned. Lhuillier. but also on the clear and plain text of Section 30(E) and (G). On the other hand. previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B). Article VI of the Constitution requires that a charitable institution use the property “actually. (Emphasis supplied) To be exempt from income taxes. Luke’s is therefore liable for deficiency income tax in 1998 under Section 27(B) of the NIRC. Luke’s Medical Center.Section 30(E) of the NIRC defines the corporation or association that is exempt from income tax. This ruling is based not only on a strict interpretation of a provision granting tax exemption. the last paragraph of Section 30 provides that if a tax exempt charitable institution conducts “any” activity for profit. shall be subject to tax. even if the charitable institution must be “organized and operated exclusively” for charitable purposes. under the last paragraph of Section 30. St. Luke’s fails to meet the requirements under Section 30(E) and (G) of the NIRC to be completely tax exempt from all its income. The only consequence is that the “income of whatever kind and character” of a charitable institution “from any of its activities conducted for profit. Inc. However. Thus. Inc. is ORDERED TO PAY the deficiency income tax in 1998 based on the 10% preferential income tax rate under Section 27(8) of the National Internal Revenue Code. Section 28(3). the income of whatever kind and character of the foregoing organizations from any of their properties.” WHEREFORE. it is . the Court said that “good faith and honest belief that one is not subject to tax on the basis of previous interpretation of government agencies tasked to implement the tax law. the tax rate is now 10%. Luke’s. (Emphasis supplied) St. Luke’s has good reasons to rely on the letter dated 6 June 1990 by the BIR.(Emphasis supplied) To be exempt from real property taxes. the last paragraph of Section 30 of the NIRC qualifies the words “organized and operated exclusively” by providing that: Notwithstanding the provisions in the preceding paragraphs. Such income from for-profit activities. the tax rate on such income from for-profit activities was the ordinary corporate rate under Section 27(A). shall be subject to tax imposed under this Code. it is nevertheless allowed to engage in “activities conducted for profit” without losing its tax exempt status for its not-forprofit activities. as a proprietary non-profit hospital.(Emphasis supplied) owever. directly and exclusively” use the property for a charitable purpose. Section 28(3). are sufficient justification to delete the imposition of surcharges and interest. it remains a proprietary non-profit hospital under Section 27(B) of the NIRC as long as it does not distribute any of its profits to its members and such profits are reinvested pursuant to its corporate purposes. v. Commissioner of Internal Revenue. Article VI of the Constitution does not define a charitable institution. Section 30(E) of the NIRC requires that a charitable institution must be “organized and operated exclusively” forcharitable purposes. is merely subject to income tax.

it was filed more than 30 days after the lapse of the 180-day period.e. that it can still await the final decision of the Commissioner and thereafter appeal the same to the Court of Tax Appeals. In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents. petitioner can not successfully resort to the second option. the petition for review was filed out of time. a taxpayer can either: 1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period.. However. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same. it was dismissed by the CTA for late filing. . hence. the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. It alleges that the counsel’s secretary misplaced the Resolution hence the counsel was not aware of its issuance and that it had become final and executory. Petitioner did not file a motion for reconsideration or make an appeal. RIZAL COMMERCIAL BANKING CORPORATION vs. This legal maneuver cannot be countenanced. demandable and executory. ISSUE: When does the Inaction of the Commissioner to resolve an issue brought before its office. or within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments. hence. Consequently. demandable and executory. Based on the foregoing. Petitioner did not file a motion for reconsideration or make an appeal.not liable for surcharges and interest on such deficiency income tax under Sections 248 and 249 of the National Internal Revenue Code. i. Unfortunately. Consequently. the petition for review was filed out of time. Unfortunately.e. Now on the present petition. All other parts of the Decision and Resolution of the Court of Tax Appeals are AFFIRMED.. petitioner can not now claim that the disputed assessment is not yet final as it remained unacted upon by the Commissioner. the disputed assessment became final. awaiting the final decision of the Commissioner and appealing the same to the Court of Tax Appeals. This 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessments. COMMISSIONER OF INTERNAL REVENUE FACTS: For resolution is petitioner’s Motion for Reconsideration of our Decision affirming the Decision of the Court of Tax Appeals En Banc . petitioner opted to file a petition for review before the Court of Tax Appeals. RULING: The Court of Tax Appeals is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction. Thus. provided it is filed within 30 days after the receipt of such decision or ruling. Petitioner opted to file a petition for review before the CTA. the disputed assessment became final. In the instant case. etitioner reiterates its claim that its former counsel’s failure to file petition for review wi th the CTA within the period set by Section 228 of the NIRC was excusable. As founded by the CTA. i. It is clear that the jurisdiction of the Court of Tax Appeals has been expanded to include not only decisions or rulings but inaction as well of the Commissioner of Internal Revenue.e. rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax Appeals with jurisdiction to entertain the appeal.. The decisions. or 2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. denying petitioner’s etition for Relief from Judgment and Motion for Reconsideration. etitioner maintains that its counsel’s neglect in not filing the petition for review within the reglementary period was excusable. on the pretext that there is yet no final decision on the disputed assessment because of the Commissioner’s inaction. filing a petition for review which was however filed out of time. and resort to one bars the application of the other. i. After availing the first option. these options are mutually exclusive. it was filed more than 30 days after the lapse of the 180-day period. the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. it was dismissed by the Court of Tax Appeals for late filing. renders the allowance of a filing of a petition for review before the Court of tax Appeals.

Jose San Agustin died leaving his wife Dra. San Agustin as sole heir.432. To Commissioner persistence it issued an Assessment Notice again reiterating the demand in the pre.00.38 representing such charges within 10 days from receipt thereof. subject to the imposition of penalties and interests under Sections 248 and 249 of the NIRC. interest. . the CTA rendered its Decision. interest. and that the payment would have to come from the estate. and requiring full payment of P438. The request for reconsideration was not acted upon until January 21. because the decedent's widow does not have sufficient funds.38. VDA.50 as soon as the probate court approves withdrawal thereof. interests and other penalties from P438. including surcharge.549. 1993. interests and penalties charged by the Commissioner upon the estate of the decedent. in his capacity as Executor of the Estate of JOSE SAN AGUSTIN vs. alleging that the CTA's jurisdiction was not properly invoked inasmuch as no claim for a tax refund of the deficiency tax collected was filed with the BIR before the petition was filed. when the executor received a letter. When the probate court allowed the will. Thereafter. considering that the assessed deficiency arose only on account of the difference in zonal valuation used by the Estate and the BIR.assessment notice and requesting payment on or before 30 days upon receipt. etc. The executor requested a reconsideration of the assessment of P976.64.040. COMMISSIONER OF INTERNAL REVENUE FACTS: "Atty. but. the CA granted the petition of the CIR and held that the Court of Tax Appeals did not acquire jurisdiction over the subject matter and that. Moreover.040.462.74. FELISA L.MANUEL PROPER PARTY TO FILE A CLAIM FOR REFUND DR. stating that there is no legal justification for the waiver of the interests.540. respondent estate paid the amount of P438. which. FERIA.50. the executor submitted to the probate court an inventory of the estate with a motion for authority to withdraw funds for the payment of the estate tax. petitioner’s motion for reconsideration is DENIED. interest and penalties. in view of the foregoing.577. Later. An estate tax return reporting an estate tax due of P1. which was granted. A Petition for Review was filed by the executor with the CTA praying for a refund of the amount of P438.676.432.38 be waived.00 was filed on behalf of the estate.040. and that the estate tax due per return of P1. This was well within the 6 months extension period granted by the BIR. received a Pre-Assessment Notice from the BIR.38 to P13. and other penalties.676. The Commissioner opposed the said petition. surcharge and compromise penalty in this case. amounted to P976. Felisa L. the executor paid the estate tax in the amount of P1.DISPOSITIVE PORTION: WHEREFORE. Probate proceedings were instituted thus. DE SAN AGUSTIN. Thus. in violation of Sections 204 and 230 of the NIRC. for which reason the CTA ordered the reimbursement to the respondent estate the balance of P423. notice of decedent's death was sent to the CIR. The decision of the CTA was appealed by the CIR to the CA. the executor filed a letter with the petitioner expressing readiness to pay the basic deficiency estate tax of P538.509.040. with a request for an extension of 2 years for the payment of the tax. representing interest on the deficiency estate tax. in substitution of JOSE Y. Upholding its jurisdiction over the dispute. there is no statutory basis for the refund of the deficiency surcharges. SO ORDERED. Within the given period. requesting that the surcharge. showing a deficiency estate tax of P538. modifying the CIR's assessment for surcharge.00 and waiver of the surcharge. amounting to P438.040. its decision was null and void. However an extension of only 6 months was granted. the widow of the deceased.676.432 as reported in the Tax Return filed with the BIR.38 under protest. accordingly.509.00 was already paid in due time within the extension period.

one of which was that petitioner had failed to first file a written claim for refund. Then respondent Collector (now Commissioner) of Internal Revenue set up several defenses.090. DISPOSITIVE PORTION: WHEREFORE.) Nature: Petition for review on certiorari of a decision of the Court of Appeals DOCTRINE: ON VALIDITY OF REVENUE RULES AND REGULATIONS The contemporaneous construction of our tax laws by BIR authorities who are called upon to execute or administer such laws will have to be adopted. the Court of Tax Appeals dismissed the petition for lack of jurisdiction. surcharge and interest and. respondent Commissioner is hereby ordered to refund to the Estate of Jose San Agustin the overpaid amount of P289. fees or other charges. On appeal to this Court."5 The Court sees no cogent reason to abandon the above dictum and to require a useless formality that can serve the interest of neither the government nor the taxpayer. To hold that the taxpayer has now lost the right to appeal from the ruling on. 17-EC-00301-55 and 17-AC-600107-56 disallowing certain deductions claimed by him in his income tax returns for the years 1955 and 1956. penalties imposed in relation thereto.ISSUE: Whether or not the filing of a claim for refund is essential before the filing of the petition for review. and that the petitioner paid the disputed assessments under protest before filing his petition for review with the Court a quo. (T ANK ALL T AT IS OLY AND MIG TY that this guy is the ponente of the friggin’ case. Petitioner estate having since paid the sum of P438.040. creating the Court of Tax Appeals. RULING: The case has a striking resemblance to the controversy in Roman Catholic Archbishop of Cebu vs. for the Collector (now Commissioner) would cer1ainly disallow the claim for refund in the same way as he disallowed the protest against the assessment. would in effect require of him to go through a useless and needless ceremony that would only delay the ! disposition of the case.950. interest and penalties is modified and recomputed to be in the amount of P148. questioning the correctness and legality of such assessments. . The deficiency assessment for surcharge. or other matters arising under the National Internal Revenue Code or other law or part of the law administered by the Bureau of Internal Revenue allows an appeal from a decision of the Collector in cases involving' disputed assessments' as distinguished from cases involving' refunds of internal revenue taxes. SO ORDERED. the instant petition is partly GRANTED.SORO Commissioner of Internal Revenue vs Seagate Technology Philippines (11 February 2005) Ponente: Panganiban.38. the tax court's ruling was reversed.1125. in providing for appeals from '(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments.462.37 and interest of P13. pursuant to Section 306 of the Tax Code. Haaaaaay.52 by way of income tax. that the present action involves a disputed assessment'. he already protested and refused to pay the same. No costs. filed a petition for review before the Court of Tax Appeals. The tax court has aptly acted in taking cognizance of the taxpayer's appeal to it.38. should not be interpreted as to result in absurdities.201. 1957. the disputed assessment but must prosecute his appeal under section 306 of the Tax Code.74. which requires a taxpayer to file a claim for refund of the taxes paid as a condition precedent to his right to appeal. of the amounts paid. because from the time petitioner received assessments Nos. x x'.627.00 surcharge of P134. forthwith. Collector of Internal Revenue. the Court held: "We agree with petitioner that Section 7 of Republic Act No. Convinced that the lack of a written claim for refund was fatal to petitioner's recourse to it. The petitioner in that case paid under protest the sum of P5. The law. refunds of internal revenue taxes. fees or other charges. only to forestall the sale of his properties that had been placed under distraint by the respondent Collector since December 4. J.

FACTS:  Seagate Technology Philippines is a resident foreign corporation duly registered with SEC to do business in the Philippines. Moreover. Such amount represented the unutilized but substantiated input VAT paid on capital goods purchased for the specified period. Respondent’s registration carries with it the presumption that. o Seagate must also show that they complied with provisions on filing a written claim for refund within two years from the payment of the tax. like a BIR regulation. then its business is not subject to VAT pursuant to Section 24 of Republic Act No. was denied. that Seagate is a Philippine Economic Zone Authority (PEZA) registered Ecozone Enterprise. To allow the additional requirement is to give unfettered discretion to those officials or agents who. Leniency in the implementation of the VAT in ecozones is an imperative. Brgy Cantao-an. 2. if made. Company is. An effectively zero-rated transaction does not and cannot become exempt simply because an application therefor was not made or. all the special laws we have tackled exempt respondent not only from internal revenue laws but also from the regulations issued pursuant thereto.  CA ruled to grant the claim for refund/issuance of tax credit certificate (TCC). it is also presumed that the law has been obeyed by both the administrative officials and the applicant. -Reasoning of the CA: Seagate availed itself of ONLY the incentives under EO 226. are bent on denying a valid application. The courts will not countenance one that overrides the statute it seeks to apply and implement. it filed its VAT returns for the period of 1 Apr 1998 to 30 June 1999  04 October 1999 Seagate filed an administrative claim for refund of VAT input taxes but it received no final action from the CIR regarding the claim for refund  CIR’s defences: o Seagate’s claim is subject to administrative routinary investigation. precisely to spur economic growth in the country and attain global competitiveness as envisioned in those laws. Grantia argumenti that such an application is required by law. ([RR])7-95. The scope of such regulations is not “within the statutory authority x x x granted by the legislature. an application for effective zero rating was also filed and approval thereof given. Other than the general registration of a taxpayer the VAT status of which is aptly determined. in the absence of contradictory evidence. 1. as amended. ([RA]) 7916 in relation to Section 103 of the Tax Code. An exemption from the common burden cannot be permitted to exist upon vague implications. and of input taxes on services pursuant to Section 4. Naga. o Seagate has burden of proof that the taxes sought to be refunded were erroneously/illegally collected. o Granting. the State can never be estopped by the omissions. Special Economic Zone. considered exempt only from the payment of income tax when it opted for the income tax holiday in lieu of the 5 percent preferential tax on gross income earned . Seagate is not entitled to refund of input taxes on such capital goods pursuant to Section 4. the capital goods and services it alleged to have purchased are considered not used in VAT taxable business. As Seagate’s business is not subject to VAT. without fluid consideration. cannot amend the law. Failure on the part of the [respondent] to prove the same is fatal to its claim for tax credit. Principal office address: Cebu Township One.  Seagate is registered on 6 June 1997 with the Phil Export Zone Authority (PEZA) to engage in manufacture of recording components used in computers for export  Seagate is a VAT-registered entity. without admitting. no provision under our VAT law requires an additional application to be made for such taxpayer’s transactions to be considered effectively zero-rated.106. therefore.103 of said regulations. there is still the presumption of regularity in the performance of official duty. He who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. As a VAT-registered .1 of Revenue Regulations No.The BIR regulations additionally requiring an approved prior application for effective zero rating cannot prevail over the clear VAT nature of respondent’s transactions. and not of PD 66 and RA 7916. the former cannot purport to do any more than interpret the latter. Cebu. Even though such an application was not made. A mere administrative issuance. mistakes or errors of its officials or agents. Besides. 3. o It is incumbent upon Seagate to prove that it is indeed entitled to the refund/credit sought.

at present. and real property taxes. installed. The Special Economic Zone Act of 1995. exchange or lease of goods or properties or on each rendition of services in the course of trade or business as they pass along the production and distribution chain. . local taxes and licenses. a selected area with highly-developed or which has the potential to be developed into. industrial. mixed or used directly or indirectly in such activities. advantages. the tax being limited only to the value added to such goods. duties. RATIO: Preferential Tax Treatment Under Special Laws If Seagate avails itself of: PD 66 – Seagate shall not be subject to internal revenue laws and regulations for raw materials. or exemptions under RA 7227 (Bases Conversion and Development Act of 1992) and RA 7844 (Export Development Act of 1994). Under this law. Nature of VAT and the Tax Credit Method VAT is a uniform tax ranging. it was still subject to the payment of other national internal revenue taxes. SEAGATE is entitled to the refund/issuance of Tax Credit Certificate. transferor or lessor. It is an indirect tax that may be shifted or passed on to the buyer. foreign exchange and financial assistance. broken up.entity. It shall enjoy a net-operating loss carry over. RA 7916. cleaned. or imposed on each sale. It is not subject to internal revenue laws and regulations. access to a bonded manufacturing warehouse system. and exemption from contractors’ taxes. wharfage dues. properties or services by the seller. repacked. tax credits on domestic capital equipment. As a PEZA-registered enterprise within a special economic zone (aka ECOZONE. imposts and fees. It should be understood not in the context of the person or entity that is primarily.). investment and financial centers. benefits. commercial. Seagate shall further be entitled to an income tax holiday. respondent is entitled to the fiscal incentives and benefits provided for by EITHER PD 66 (law creating the Export Processing Zone Authority. It can be seen from the following laws that Seagate (respondent) enjoys preferential tax treatment. export taxes. manufactured. accelerated depreciation. machineries.EPZA) or EO 226 (Omnibus Investments Code). manipulated. It shall also enjoy all the privileges. but in terms of its nature as a tax on consumption. agro-industrial. though. though. spare parts and wares. tourist-recreational. privileges for foreign nationals employed. and licenses. 1999. except those prohibited by law. Seagate also correctly filed its administrative claim for refund/TCC. equipment. supplies. the same conclusion is arrived at. simplification of customs procedure. transferee or lessee of the goods. and exemption from export taxes. EO 226 – Seagate shall be exempt from same internal revenue laws and regulations. In either case. assembled. directly and legally liable for its payment. and is even entitled to tax credits. sorted. like the VAT. 1998 to June 30. ISSUE/S: (As submitted by the petitioner) WoN Seagate is entitled to the refund or issuance of Tax Credit Certificate for the alleged unutilized input VAT paid on capital goods purchased for the period April 1. as well as for taxes and duties on raw materials. banking. from 0 percent to 10 percent levied on every importation of goods. brought into the zone to be stored. HELD: YES. graded or otherwise processed. taxes and duties on imported capital equipment and spare parts. local taxes. whether or not in the course of trade or business. articles. barter. additional deduction for labor expense. properties or services. unrestricted use of consigned equipment.

Exempt Transaction vs Exempt Party Object of exemption from VAT: either the TRANSACTION itself or the PARTIES to the transaction Exempt Transaction -involves goods or services which. because the purchaser is not allowed any tax refund/credit for input taxes paid. an entity can credit against or subtract from the VAT charged on its sales or outputs the VAT paid on its purchases. As applied to a tax base. -such party is also not subject to VAT. but may be allowed refund/credit. obviously resulting in no tax chargeable against the purchaser.Under the present method that relies on invoices. BUT when the OUTPUT taxes EXCEED the INPUT taxes. the excess has to be paid. Zero Rating and Exemption For VAT computation. NO PAYMENT IS REQUIRED. which when applied to the tax base. the rate does not yield any tax chargeable against the purchaser. Exports are zero-rated but imports are taxed) to the exportation of goods: Automatic zero-rating Effective zero-rating -intended to be enjoyed by the seller who -benefits the purchaser who is not directly is directly and legally liable for the VAT and legally liable for the payment of VAT -makes the seller internationally but will ultimately bear the burden of tax competitive by allowing the refund/credit shifted by the suppliers of input taxes attributable to export sales For both instances of zero-rating: TOTAL RELIEF for the purchaser from the burden of tax. If the INPUT taxes exceed the output taxes. the excess shall be carried over to the succeeding quarter/s. by their nature. zero rating and exemption are the same but the EXTENT of RELIEF is not the same. If at the end of a taxable quarter the OUTPUT taxes (charged by the seller) are equal to thw INPUT taxes (passed on by suppliers). Zero-rated transactions: refer generally to EXPORT SALE of goods and supply of service. a special law. but can claim a refund of/a tax credit certificate for the VAT previously charged by suppliers. inputs and imports. depending on its registration as a VAT or non-VAT taxpayer . For exemption: PARTIAL RELIEF only. Zero-Rated vs Effectively Zero-Rated Transactions Difference between ZERO-RATED TRANSACTIONS and EFFECTIVELY ZERO-RATED TRANSACTIONS: SOURCE. The seller charges NO OUTPUT TAX. or international agreement to which the Philippines is a signatory. are specifically listed as expressly exempted from VAT in the Tax Code -this is without regard to the tax status of the party to the transaction -transaction is not subject to VAT but the seller is not allowed any tax refund/credit for any input taxes paid Exempt Party/Entity -person/entity granted VAT exemption under the Tax Code. Effectively zero-rated transactions: sale of goods/supply of services to persons or entities whose exemption under special laws/international agreements to which the Philippines is a signatory effectively subjects such transactions to a zero rate. any excess over the output taxes shall instead be refunded to the taxpayer or credited against other internal revenue taxes. Tax rate is set at zero. and by virtue of which its taxable transactions become exempt from VAT. The seller who charges ZERO OUTPUT TAX on such transactions can also claim a refund of/ a tax credit certificate for the VAT previously charged by suppliers. If the input taxes result from zero-rated or effectively zero-rated transactions or from the acquisition of capital goods. Applying the destination principle (that goods and services are taxed only in the country where these are CONSUMED.

no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Tax refunds are in the nature of such exemptions. This exemption puts the gov’t at an initial disadvantage but the reduced tax collection redounds to the national economy by enticing business investments and creating more job opportunities 4. the purchase transactions entered into by Seagate are NOT exempt.except specifically declared areas -. RA 7844. Sales by a PEZA-registered entity to a VAT-registered person in the customs territory are deemed imports from a foreign country. Tax Refund as Tax Exemption Tax exemptions are construed strictissimi juris against the taxpayer and liberally in favour of the taxing authority. Purchase transactions entered into are not VAT-exempt. even without being actually exported. then the same rule holds for such exports from the national territory -. More proof of express exemption of Seagate from taxes: 1. Considered as export sales. depending on application of destination principle. sales to the export processing zone. The claimants of such refunds bear the burden of proving the factual basis of their claims. such purchase transactions by respondent would indeed be subject to a zero rate. Its exemption under PD 66 and RA 7916 subjects transactions to zero rate. While the LIABILITY is imposed on one person. for which liability is imposed on one but the burden is passed on to another. all the cited legal provisions CLEARLY grant tax exemptions to Seagate. If a special law exempts a party as seller from its direct LIABILITY for VAT but does not relieve the same party as a PURCHASER from its INDIRECT burden of VAT as shifted by its VAT-registered suppliers. Export processing zone enterprises registered patently enjoy exemption from national internal revenue taxes on imported capital equipment needed 6. Tax credits granted by this law shall be continuously enjoyed by exporters within the ecozone. In this case. Tax Exemptions: Broad and Express Applying the special laws mentioned. since the ecozone within which it is registered is managed by PEZA as a SEPARATE CUSTOMS TERRITORY (there is a legal fiction of foreign territory). Applied to this case.to an ecozone. rate applied is zero. Since purchases of Seagate are not exempt from VAT. same prohibition applied except real property taxes. Such exemption covers BOTH INDIRECT and DIRECT taxes. Seagate is required to register. Sales transactions: zero-rated/taxed under 10%. Sales made by a VAT-registered person in the customs territory to a PEZA-registered entity are considered exports to a foreign country. Under the cross-border principle (which is not clearly defined by any law or administrative issuance SO I REALLY DON’T UNDERSTAND WHY THE COURT USED THIS). If exports of goods and services from the Philippines to a foreign country are free of the VAT. stemming from the nature of VAT as a tax on consumption. local and national. Special laws may exempt certain transactions from VAT but the Tax Code provides that those under PD 66 are not. If respondent is located in an export processing zone within that ecozone. RA 7227: exemptions from local and national taxes are ipso facto accorded to ecozones 7. Ecozone is considered foreign soil.VAT is a tax on consumption. Seagate is an exempt entity from internal revenue laws and regulations. 2. These are not subject to VAT. RA 7846 amended RA 7916. . shall be imposed on business establishments operating within the ecozone. Law does not exclude VAT from prohibition so it is deemed included. the PURCHASE TRANSACTION IS NOT EXEMPT. shall in fact be viewed as constructively exported under EO 226. RA 7916 states that no taxes. D 66 provides for same prohibition. Rules implementing the PEZA reiterate that merchandise shall not be subject to internal revenue laws and regulations 5. 3. the BURDEN may be passed on to another.

Indispensable to VAT Refund (NOTE: LOOK AT THIS PART CLOSELY BECAUSE THIS IS THE PART RELATED TO THE TOPIC ON PUR SYLLABUS. not by their nature. is sufficient for the effective zero rating of the transactions of a taxpayer. A mere administrative issuance. (RMC) 74-99. now clearly and correctly provides that any VATregistered supplier’s sale of goods. Policies of the law should prevail. as already clearly indicated in. its VAT registration papers and photocopied documents attached thereto.is legally entitled to a zero rate. PD 66. it is also presumed that the law has been obeyed by both the administrative officials and the applicant. cannot amend the law. EO 226. Not Application. 2. the former cannot purport to do any more than interpret the latter. Tax Refund or Credit in Order . AFTER ALL THE VAT SHIZZZZ. no provision under our VAT law requires an additional application to be made for such taxpayer’s transactions to be considered effectively zero-rated. an application for effective zero rating was also filed and approval thereof given. 1. ITO LANG TALAGA. YES. RA 7916. 3. property or services from the customs territory to any registered enterprise operating in the ecozone -. To allow the additional requirement is to give unfettered discretion to those officials or agents who. 3. as well as compliance with the invoicing requirements. is the same: IT IS NOT SUBJECT TO VAT. mistakes or errors of its officials or agents.Seagate is an exempt entity. their VAT exemption would be determined. Administrative convenience cannot thwart legislative mandate. Their prior tax issuances have held inconsistent positions brought about by their probable failure to comprehend and fully appreciate the nature of the VAT as a tax on consumption and the application of the destination principle. The contemporaneous construction of our tax laws by BIR authorities who are called upon to execute or administer such laws will have to be adopted. RA 8748. Besides. however. its transactions cannot be exempted by its mere failure to apply for their effective zero rating. for Effective Zero-rating.a result not at all contemplated. An effectively zero-rated transaction does not and cannot become exempt simply because an application therefor was not made or. Revenue Memorandum Circular No. Leniency in the implementation of the VAT in ecozones is an imperative. Moreover. Respondent’s registration carries with it the presumption that. A VAT-registered status. are bent on denying a valid application. The nature of its business and transactions can easily be perused from. like a BIR regulation. but its transactions are not exempt.) The BIR regulations additionally requiring an approved prior application for effective zero rating cannot prevail over the clear VAT nature of respondent’s transactions. VAT Registration. precisely to spur economic growth in the country and attain global competitiveness as envisioned in those laws. The courts will not countenance one that overrides the statute it seeks to apply and implement. RA 7227 RA 7844: The State is able to drive home the point that exporting is indeed the key to national survival and the means through which the economic goals of increased employment and enhanced incomes can most expeditiously be achieved. The scope of such regulations is not “within the statutory authority x x x granted by the legislature. but by the taxpayer’s neg ligence -. 2. there is still the presumption of regularity in the performance of official duty. without fluid consideration. The end result. all the special laws we have tackled exempt respondent not only from internal revenue laws but also from the regulations issued pursuant thereto. Other than the general registration of a taxpayer the VAT status of which is aptly determined. Hence. if made. in the absence of contradictory evidence. 1. Grantia argumenti that such an application is required by law. though. the State can never be estopped by the omissions. was denied. Otherwise.regardless of the class or type of the latter’s EZA registration -. Even though such an application was not made.

Seagate’s purchase transactions are subject to a zero VAT rate. capital and equipment. The VAT payments made in excess of the zero rate that is imposable may certainly be refunded or credited. vs. It reads: The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within. Corona. capital and equipment. No pronouncement as to costs. not only to exempt investors in ecozones from national and local taxes. 2. 97-A for being violative of their right to equal protection. The VAT is a tax imposed on consumption. the transactions it enters into are not necessarily so. 7227 clearly limits the grant of tax incentives to the importation of raw materials. There was a very clear intent on the part of our legislators. Input taxes paid on capital goods of Seagate are duly supported by VAT invoices and have not been offset against any input taxes. the Petition is DENIED and the Decision is AFFIRMED. However. Concurring/Dissenting Opinions: None. The respondent moves to dismiss the petition on the ground of lack of legal standing and unreasonable delay in filing of the petition. Petitioners contend that the wording of Republic Act No. Inc. Sec 12 (b)]. 3. It opted for the income tax holiday regime instead of the 5% preferential tax regime. 1. Vote: Sandoval-Gutierrez. Coconut Oil Refiners Association. JJ. concur. capital and equipment only thereby violating the equal protection clause of the Constitution. 2011 Facts: This is a Petition to enjoin and prohibit the public respondent Ruben Torres in his capacity as Executive Secretary from allowing other private respondents to continue with the operation of tax and duty-free shops located at the Subic Special Economic Zone (SSEZ) and the Clark Special Economic Zone (CSEZ). Compliance with all the requisites for VAT Refund or Credit Seagate complied with all the requisites of claiming a VAT refund/credit. Ruben Torres (Case Digest) June 29. Although respondent as an entity is exempt. Garcia. The tax exemption under all special laws mentioned is broad enough to cover even the enforcement of internal revenue laws. Carpio-Morales. not on business. There is not question as to either the filing of such claims within the prescriptive period/validity of the VAT returns have been raised. tax refund/credit is in order. . exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Customs and Tariff Code and other relevant tax laws of thePhilippines [RA 7227. They asserted that private respondents operating inside the SSEZ are not different from the retail establishments located outside. into and exported out of the Subic Special Economic Zone. Seagate is a VAT registered entity. but also to grant them tax credits. He also assailed the constitutionality of Executive Order No.. 7227 as unconstitutional on the ground that it allowed only tax-free (and duty-free) importation of raw materials. Dispositive: WHEREFORE. The petitioner seeks to declare Republic Act No. as well as provide incentives such as tax and duty-free importations of raw materials.

does not apply when words are mentioned by way of example. brushes aside these technicalities and takes cognizance of the petition considering the importance to the public of the present case and in keeping with the duty to determine whether the other branches of the government have kept themselves within the limits of the Constitution CIR v Benguet Corporation Re: A petition for declaratory relief to Test the validity of Ordinance No. J. then. even assuming the existence of such defects. hardly any reasonable basis to extend to them the benefits and incentives accorded in R. (2) be germane to the purpose of the law. must (1) rest on substantial distinction.A. capital and equipment was merely cited as an example of incentives that may be given to entities operating within the zone. The guaranty of the equal protection of the laws is not violated by a legislation based which was based on reasonable classification. 3379 passed by the Municipal Board of the City of Manila on March 24. The petition with respect to declaration of unconstitutionality of Executive Order No. investors will be lured to establish and operate their industries in the so-called ‘secured area and the present business operators outside the area. being mere suppliers of the local retailers operating outside the special economic zones. do not stand to suffer direct injury in the enforcement of the issuances being assailed herein. Political Law. Public respondent SBMA correctly argued that the maxim expressio unius est exclusio alterius.: . (2) Political Law: Whether or not the case can be dismiss due to lack of the petitioners legal standing. the standing requirements may be relaxed and a suit may be allowed to prosper even where there is no direct injury to the party claiming the right of judicial review. 97-A cannot be. There is a substantial distinctions lying between the establishments inside and outside the zone. Held: (1) The SC ruled in the negative. Assuming this is true.Issues: (1) Statutory Construction. and (4) apply equally to all members of the same class. respondents argue that petitioners. Ponente: BAUTISTA ANGELO. There are substantial differences in a sense that. 7227. Taxation Law: Whether or not there is a violation of equal protection clause. (2) No. 1950. (3) No. this Court. this Court finds no violation of the right to equal protection of the laws. With respect to the other alleged procedural flaws. likewise. The phrase ‘tax and duty-free importations of raw materials. in the exercise of its discretion. this Court has nevertheless held that in cases of paramount importance where serious constitutional questions are involved. (3) not be limited to existing conditions only. to be valid. A classification. sustained. (3) Remedial Law: Whether or not the case can be dismissed due to unreasonable delay in filing of the petition. Anent the claim on lack of legal standing. There is. on which petitioners impliedly rely to support their restrictive interpretation. Applying the foregoing test to the present case.

273 s. 99 of NIRC as amended by E. sells. modified. The transactions in question occurred during the period between 1988 and 1991. Under Sec. development and operation of mineral resources." QUICK FACTS: The Association composed of all brokers and public service operators of motor vehicles in the City of Manila challenged the validity of Ordinance No. Benguet applied for and was granted by the BIR a zero-rated status on its sale of gold to Central Bank. However. or engages in similar transactions and any person who imports goods is liable for output VAT at rates of either 10% or 0% (zero-rated) depending on the classification of the transaction under Sec. 3788-88 was issued which declared that the sale of gold to Central Bank is considered as export sale subject to zero-rate pursuant to Section 100 of the Tax Code. privilege or act which is taxed…. renders services. . Relying on its zero-rated status and the above issuances. (BIR) VAT Ruling No. Benguet Corporation is a domestic corporation engaged in the exploration. and superseded all inconsistent BIR issuances. BIR VAT Ruling No. shall be subject to 10% VAT. enjoyment of a privilege. Benguet sold gold to the Central Bank during the period of 1 August 1989 to 31 July 1991 and entered into transactions that resulted in input VAT incurred in relation to the subject sales of gold. it does not become a property tax because it is proportioned in amount to the value of the property used in connection with the occupation. 100 of the NIRC. If it is really imposed upon the performance of an act. 99 of NIRC.O. In January of 1988. (2) said ordinance offends against the rule of uniformity of taxation. FACTS: Tax: 10% VAT on selling price of gold pursuant to Sec. and the sale or marketing thereof to various entities.DOCTRINE: While as a rule an ad valorem tax is a property tax. On 28 August 1988. it has been held that "If a tax is in its nature an excise. 3379 on the ground that (1) while it levies a so-called property tax it is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila. and (3) it constitutes double taxation. the rule should not be taken in its absolute sense if the nature and purpose of the tax as gathered from the context show that it is in effect an excise or a license tax. such request was not granted due to BIR VAT Ruling No. 008-92 withdrew. or the engaging in an occupation. Thus. 008-92 dated 23 January 1992 that was issued subsequent to the consummation of the subject sales of gold to the Central Bank which provides that sales of gold to the Central Bank shall not be considered as export sales and thus. in the course of trade or business. as amended by EO 273. any person who. It then filed applications for tax refunds/credits corresponding to input VAT. barters or exchanges goods. it will be considered an excise tax. 1987 then in effect. It is a value added tax (VAT) registered enterprise.

which mandates the non-retroactivity of rulings or circulars issued by the Commissioner of Internal Revenue that would operate to prejudice the taxpayer. 008-92 is valid only if it would not be prejudicial to the Benguet pursuant Sec. and it constitutes double taxation. Thus. (Similar to the ABS-CBN case). 246 of the NIRC. it is clear that Benguet suffered economic prejudice when its consummated sales of gold to the Central Bank were taken out of the zero-rated category. DECISION: No. with the total prejudice in money terms being equivalent to the 10% VAT levied on its sales of gold to the Central Bank. Hence the appeal. CFI of manila: Sustained validity of ordinance and dismissed the petition. While it is true. ISSUE: WON the new BIR ruling which changed the VAT categorization of respondent’s transactions with the Central Bank from zero-rated to 10% can be applied retroactively to Benguet’s sale of gold to the Central Bank . as CIR alleges. ? Contention: the so-called property tax is in reality a license tax which is beyond the power of the Municipal Board of the City of Manila. HELD: At the time when the subject transactions were consummated. a liability it previously could have recovered from the BIR in a zero-rated scenario or at least passed on to the Central Bank had it known it would have been taxed at a 10% rate. The change in the VAT rating of Benguet’s transactions with the Central Bank resulted in the twin loss of its exemption from payment of output VAT and its opportunity to recover input VAT. . Benguet should not be faulted for relying on the BIRs interpretation of the said laws and regulations. these principles must give way to exceptions based on and in keeping with the interest of justice and fair play. the said ordinance offends against the rule of uniformity of taxation.Both petitioner and Benguet agree that the retroactive application of VAT Ruling No. the prevailing BIR regulations relied upon by Benguet ordained that gold sales to the Central Bank were zero-rated. and at the same time subjected it to the 10% VAT sans the option to pass on this cost to the Central Bank. 246 of the NIRC. that government is not estopped from collecting taxes which remain unpaid on account of the errors or mistakes of its agents and/or officials and there could be no vested right arising from an erroneous interpretation of law. 008-92 would violate Sec. The adverse effect is that Benguet Corp became the unexpected and unwilling debtor to the BIR of the amount equivalent to the total VAT cost of its product. Benguet Corporation’s Contention: Retroactive application of BIR VAT Ruling No.

The principle of “stare decisis et non quieta movere. Indeed. MICROSOFT PHILIPPINES. Then here comes the petition before the Supreme Court which was also denied but later in the motion for reconsideration it was at last granted. Verily.enjoins adherence to judicial precedents. By tradition and in our system of administration. all other courts should take their bearings from the decisions of this court. it prayed for refund or in the alternative the issuance of TCC amounting P3. FILINVEST vs CIR Facts: Filinvest Development Corporation filed a claim for refund or in the alternative the issuance of a tax credit certificate (TCC) with the Commissioner of Internal Revenue (CIR) representing excess creditable withholding taxes fortaxableyears 1994. as embodied in AR T 8 of the CIVIL CODE of the Philippines.868. CTA dismissed the petition for review. Issue: Whether or not decisions of the CTA are jurisprudential basis for coming up a decision. this remedy is not a feasible option for Benguet because the very reason why it was issued a deficiency tax assessment is that its input VAT was not enough to offset its retroactive output VAT. VS. Motion for review was filed before the Court of Appeals which was dismissed so as the motion for reconsideration. denied. this relief would only address Benguet’s overpayment of income tax but not the other burdens discussed above. the Supreme Court has the last word on what the law is.00.Even assuming that the right to recover Benguets excess payment of income tax has not yet prescribed. Eventually. It requires our courts to follow a rule already established in a final decision of the SC.236. 1995. The petitioner alleged among others that the CA erred in relying on CTA cases where they cited in its decision as jurisprudential basis to support its ruling.173. In the petition.The amount of P1. 1996.VAT Zero Rating FACTS: . Held: The SC ruled that the CA was wrong in relying decisions of the CTA as jurisprudential basis in resolving the case. the burden of having to go through an unnecessary and cumbersome refund process is prejudice enough.004. That decision becomes a judicial precedent to be followed in subsequent cases by all courts in the land. INC. COMMISSIONER OF INTERNAL REVENUE.00 representing excess/unutilized creditable withholding taxes for 1994 was no longer included as it wasalreadybarredbyprescription. The CIR did not resolve the claim for refund and the two-year prescriptive period was about to lapse which prompted the petitioner to file a petition for review before the Court of Tax Appeals (CTA). and that its decisions applying or interpreting the laws or the Constitution form part of the legal system of the country.

2M refund. where UMPC withheld P1. CIR v. The regulations in effect when the sales were made by Microsoft clearly indicate in the portion outlining the “Invoicing Requirements” that the word “zero-rated” must be imprinted in the invoice. Without such. In 1999. Microsoft filed a claim for refund for unutilized input VAT but the CTA denied the same on the basis that the official receipts issued did not bear the imprinted word “zero -rated” on its face and are thus not valid evidence of Microsoft’s sales. L already chose to carry over the excess. . in adding the last sentence to Section 76 of the NIRC of 1997. claim of refund is on April 14. the respondent filed with CIR a claim for the refund of the P1. If the sum of the quarterly tax payments made . In 1998 PL filed a lost for its 1997 earnings and signified that it had a creditable withholding tax of P1. and avoid confusion and complication as regards said taxpayer's excess tax credit.Microsoft renders marketing services to two affiliated nonresident foreign corporations with their services being paid for in foreign currency.2M.200. the invoice are not considered as VAT invoices and thus could not give rise to any input tax. Appeal with the CA was for PL. The irrevocability rule: Section 76. 2000. ISSUE: Whether the two-yr prescriptive period for tax claim is non-jurisdictional and can be suspended for equity HELD: No. beyond the two year allowed. The evident intent of the legislature. BPI case.7M so it was not able to claim the P1.Every corporation liable to tax under Section 27 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year.2M credit. refund can’t be availed of.000. which later denied claim of PL saying the refund claim was filed out of time. 2000. There is a misplaced application of the CIR v. On April 12. it filed for a loss of P2. the CA saying that the prescriptive period is not jurisdictional and might be suspended for reasons of equity. The Court added that the reason for enforcing this rule even if only based on regulation is that it prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid. The Court of Appeals mistakenly understood the phrase "for that taxable period" as a prescriptive period for the irrevocability rule. The interpretation of the Court of Appeals only delays the flip-flopping to the end of each succeeding taxable period. ISSUE: Is Microsoft entitled to a refund? HELD: NO. Tax payment on nApril 13. is to keep the taxpayer from flip-flopping on its options. Final Adjustment Return. PL Management FACTS: PL earned P24M in 1997 from UMPC.00 for 1997 to be as tax credit in 1998. 1998. CIR did not act so PL filed cases with CTA.

there is no prescriptive period for the carrying over of the same. 2) It must be shown on the return that the income received was declared as part of the gross income. 2. CIR v. Mirant complied with all the requirements for the refund of its unutilized creditable withholding taxes for taxable year 2000. such option is irrevocable for that taxable period. the corporation cannot thereafter choose to apply for a cash refund or for the issuance of a tax credit certificate for the amount representing such overpayment. It is worthy to note that unlike the option for refund of excess income tax. CTA 1st Division: Partially granted Mirant’s claim for refund but the amount was reduced to constitutes the duly substantiated unutilized creditable withholding taxes. Quezon. or (C) Be credited or refunded with the excess amount paid. refund can’t be availed. Inc.) to provide these companies with maintenance and management services in connection with the operation.00 representing overpaid income tax. On September 20. or (B) Carry over the excess credit. and Sual. as the case may be. 2001. as provided in Section 76 of the NIRC of 1997. Mirant (Philippines) Operations Group 15 June 2011 FACTS: Mirant entered into Operating and Management Agreements with Mirant Pagbilao Corporation (formerly Southern Energy Quezon. In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid. the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years. Mirant wrote the BIR a letter claiming a refund of ₱ 87. and . The amount being claimed as a refund would remain in the account of the taxpayer until utilized in succeeding taxable years.345. Inc.during the said taxable year is not equal to the total tax due on the entire taxable income of that year the corporation shall either: (A) Pay the balance of tax still due. The options are alternative. construction and commissioning of coal-fired power stations situated in Pagbilao. Once a corporation exercises the option to carry-over and apply the excess quarterly income tax against the tax due for the taxable quarters of the succeeding taxable years. The requisites for claiming a tax credit or a refund of creditable withholding tax: 1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax.) and Mirant Sual Corporation (formerly Southern Energy Pangasinan. Pangasinan respectively. Once the option to carry-over and apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years has been made. Ratio: 1. 38 million which ISSUE: WON Mirant is entitled to a tax refund or to the issuance of a tax credit certificate and. HELD: YES but it is limited to the substantiated claim. L already chose to carry over the excess tax paid. such option shall be considered irrevocable for that taxable period and no application for tax refund or issuance of a tax credit certificate shall be allowed therefor. if it is. then what is the amount to which it is entitled. which prescribes after two years from the filing of the FAR. Having chosen to carry-over the excess quarterly income tax.116.

3) The fact of withholding must be 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.620. as it opted.427.00. Mirant complied with all the legal requirements and it is entitled. to a refund of its excess creditable withholding tax for the taxable year 2000 in the amount of ₱38. .

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