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G.R. No.

L-16544

March 30, 1921

LEONARDO OSORIO, plaintiff-appellee,
vs.
TOMASA OSORIO, administratrix of the estate of Petrona Reyes, and THE
YNCHAUSTI STEAMSHIP CO.,defendants-appellants.
Fernandez and Ansaldo for appellants.
Carlos Ledesma for appellee.
VILLAMOR, J.:
The plaintiff seeks to recover 610 shares of stock of "Ynchausti Steamship Co." and the
dividends corresponding to them, which were included in the inventory of the properties of
the deceased Da. Maria Petrona Reyes, whose estate is administered by the defendant. The
facts of this case are:
D. Antonio Osorio had formed with Ynchausti & Co., a joint account association for the
exploitation of the shipping business, he being the owner of the one-third of the company's
capital. This capital amounted to P500,000, of which P166,666.66, that is, one-third
belonged to D. Antonio Osorio. Upon his death, his heirs agreed to authorize the defendant
Da. Tomasa Osorio, then administratrix of the estate of the deceased, to present a project of
partition, and said administratix inserted in the project with the consent of all the heirs,
among the properties which belonged to the widow Da. Petrona Reyes, the sum of P94,000
as her part in the "share of the estate in the shipping business of Ynchausti & Co.," that is, a
little over P166,666.66, which was the share in said business of the deceased Osorio during
his lifetime. The project of partition was approved on May 10, 1915, with the consent of the
heirs, by the Court of First Instance of Cavite, which had cognizance of the testamentary and
administration proceedings of the state of the deceased Osorio.
On February 28, 1914, the widow of D. Antonio Osorio, Da. Petrona Reyes, now also
deceased, executed before the notary D. Florencio Gonzales Diez a document of gift in favor
of her son D. Leonardo Osorio, the plaintiff, giving to him one-half of her share in the onethird part which belonged to her husband in the shipping business of Ynchausti & Co., a
donation which was duly accepted by the donee D. Leonardo Osorio, who signed said
document with the plaintiff. On that date, February 28, 1914, the estate of D. Antonio Osorio
was not yet distributed among his heirs, and the donor Da. Petrona Reyes in order to correct
the error in said document, wherein it was stated that said half was adjudicated to her as
part of her conjugal property, when the partition was yet being effected, executed another
document dated July 3, 1915, maintaining said donation in effect in the sense that she
ceded and donated to her son D. Leonardo Osorio, for the same reasons stated in the
document of February 28, 1914, al interest or participation in said shipping business of
Ynchausti & Co., which was adjudicated to her in the division of the estate of D. Antonio
Osorio, which division was approved by the Court of First Instance of Cavite on May 10,
1915.
After the death of D. Antonio Osorio and before the distribution of the estate, Ynchausti &
Co. purchased the steamer Governor Forbes and recognized the heirs of D. Antonio Osorio as

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having an interest to the extent of one-third in the ownership and business of said steamer.
It was agreed upon by all the interested parties that the share of Da. Petrona Reyes, widow
of Osorio, in the vessel Governor Forbes, at the time of the incorporation of "The Ynchausti
Steamship Co." was P61,000, equivalent to 610 shares of stock of said corporation. Said sum
was deposited with the Steamship Co. until the final settlement of the question that had
arisen between the heirs of Da. Petrona Reyes as to the ownership thereof for, while the
plaintiff alleges that, by virtue of the donation made in his favor by Da. Petrona Reyes, he is
the owner of said shares and of their value which is P61,000; the defendant on the other
hand contends that said shares are not included in the donation in question and belong to
the heirs of Da. Petrona Reyes. Such as the facts which gave rise to this litigation.
The trial court rendered judgment in the case, declaring that the 610 shares of stock in
dispute and their dividends belong to the plaintiff, and ordered the defendant Da. Tomasa
Osorio, administratrix of the estate of Da. Petrona Reyes, to exclude them from the inventory
and her accounts, and the other defendant "The Ynchausti Steamship Co." to inscribe them
in the name of the plaintiff D. Leonardo Osorio, delivering to him the dividends
corresponding thereto, and denied the counterclaim for the sum of P45,000, on the ground
that said sum represents the dividends corresponding to the P94,000 adjudicated to Da.
Petrona Reyes, in the partition of the estate of D. Antonio Osorio, and donated by her to the
defendant in the counterclaim.
The case having been appealed to this court, counsel for the defendant and appellant, in
summing up their arguments in support of the errors assigned in their brief, maintain the
two following propositions:
1. The donation made by Da. Petrona Reyes in favor of the plaintiff was of no value
and effect; and
2. That, supposing said donation valid, the 610 shares of stock, the value of which is
P61,000, cannot be considered as included among them.
The document of donation dated February 28, 1914, attacked by the appellant, is as follows:
Know all me by these presents: That I, Petrona Reyes, of age, widow of D. Antonio
Osorio and resident of the Province of Cavite, Philippine Islands, being in possession
of all my senses, freely and voluntarily state:
1. That my husband, the deceased D. Antonio Osorio, was a shareholder to the extent
of one-third in the joint account association "Ynchausti & Co." of this place, which is
engaged in the business of buying vessels and in the exploitation of six steam
vessels acquired from the Compañia Maritima, the article of association of said joint
account association having been executed in the city of Manila on July 3, 1906,
before the notary public D. Florencio Gonzales Diez.
2. That upon the death of my husband D. Antonio Osorio and upon the partition of his
estate, there was adjudicated to me as conjugal property, one-half of said one-third
part in the business referred to, the other half thereof going to our four surviving
children, such being the present condition of our interest in said company.

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3. That in consideration of the continuous services and attention received by me from
my son D. Leonardo Osorio, of age, married and a resident of Cavite also, and
because of the affection he has always shown and still shows me, as well as because
of the number of children that he has, I make a free and expressed donation to my
said son D. Leonardo Osorio of all my interest and participation in said company
"Ynchausti and Co." which is neither transferred nor burdened in any manner
whatever.
4. I also declare that the present donation does not in any way prejudice the right
which may accrue to my other children with respect to inheriting my property and
that therefore I can effect this donation, with all liberty, as I reserve for myself what is
sufficient for me to live on in the manner which corresponds to my social position and
needs.
5. In turn, I, Leonardo Osorio, of age, married and a resident of the Province of Cavite,
state my conformity and acceptance of said donation which my dear mother makes
to me, for which I am greatly thankful to her.
In witness whereof we sign the present document in triplicate at Manila, Philippine
Islands, this twenty-eighth day of February, nineteen hundred and fourteen.
(Sgd.) PETRONA REYES.
LEONARDO OSORIO.
Signed in the presence of:
(Sgd.) EUSEBIO ALBA.
SALVADOR BARRIOS.
Acknowledged before the notary public D. Florencio Gonzales Diez on February 28, 1914.
The document rectifying the ratifying the preceding is literally as follows:
Know all men by these presents: That I, Petrona Reyes, of age, widow of D. Antonio Osorio
and resident of the Province of Cavite, Philippine Islands, being in the full possession of my
senses, freely and voluntarily declare:
1. That on February 28, 1914, before the notary public of Manila, D. Florencio
Gonzales Diez, I executed a document of donation in favor of my son D. Leonardo
Osorio, of one-half of the one-third part which my deceased husband had in certain
shipping business of the association "Ynchausti & Co."
2. That in said document I stated, through error, that said half of one-third part of the
business referred to was adjudicated to me as my part of the conjugal property in the
partition of the properties left by my deceased husband, when the truth was that said
partition had not yet been put in proper form or finished.

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because he cannot dispose of them at the moment of making the donation. such as the share in the business of the deceased 4 . by): PETRONA REYES. They are those of which the donor cannot dispose at the time of making the donation. there can be properties which may latter belong to the donor. The bare owner of said vineyard may donate his right of course. on May 10. Article 635 refers to the properties of third persons but it may be said that id does so in relation to a time to come. In support of the first proposition. and approved by the Court of First Instance of Cavite. 1915. the appellant invokes as the legal provision violated. because they are not at present his properties. By future property is understood that of which the donor can not dispose at the time of making the donation. In witness whereof I sign the present document in triplicate of Cavite on July 3. are merged in reality in the subject which we examine and which gives assurance to their application.) CARLOS LEDESMA. article 635 of the Civil Code. which was adjudicated to me in the partition of the estate of my deceased husband. This definition in reality includes all properties which belong to others at the time of the donation.3. but these properties cannot be donated. but he may also donate the usufruct which corresponds to the time that it will go back to him. (Sgd. declaring however in any event that I make said donation subsisting in the sense that I cede and donate to my side son D. thus connecting two ideas which. 1914. Commenting on article 635 of the Civil Code. 1915. Manresa says. although they may or may not later belong to the donor. It is alleged that the donation made by Da. Petrona Reyes is void because she donated on February 28. ISAURO GABALDON. because the case refers to a vested right of which he may dispose at the time of the donation. among other things: To close these fundamental ideas which the spirit of articles 634 and 635 develops we must fix our attention to the definition which the Code gives of future properties. although lacking apparently in relation. Leonardo Osorio. which says: A donation can not include future property. in consideration of the same causes mentioned in said document of February 28. 1914. a future property. I so state. Signed in the presence of: (Sgd. The usufructuary for life or for a determined number of years of a vineyard may donate said usufruct to the whole extent that it belongs to him but never the property itself. all interest or share in said shipping business of Ynchausti & Co. That in order to correct said error.

are those belonging to other. 177. his heirs acquired a right to succeed him from the moment of his death. but this is not an obstacle. but the properties of an existing inheritance as those of the case at bar. which is no longer future from the moment of death of the predecessor.. as she had done. With respect to the point that Da. which. Petrona Reyes. cannot be considered as another's property with relation to the heirs who through a fiction of law continue the personality of the owner. 1912. Petrona Reyes did not have in 1914 any right to all or part of the share of her deceased husband in the shipping business of Ynchausti and Co. The testator institutes as his only and universal heirs his said children and granddaugther. for the acquisition of said property retroacts in any event to the moment of death. 827. inasmuch as for its efficacy the concurrence of two wills is required. ibi est eadem legis dispositio. 5 . as such. and because in 1914 she did not have the right to all or part of the share which her deceased husband had in the shipping business of Ynchausti & Co. betterment. cannot be the object of the disposal by the donor.Osorio. Nor do they have the character of future property because the died before 1912. Furthermore the Civil Code does not prohibit absolutely that future inheritance should be the object of agreement. and it may be deduced that an inheritance already existing. we believe that the future properties. More of less time may elapse before the heirs enter into the possession of the hereditary property. which was adjudicated to her on May 10. Maria Petrona Reyes. Ubi eadem est ratio. may legally be the object of contract. for there are certain cases (arts. on February 28. and could legally dispose of her right through an act of liberality. because of the principle announced in article 657 and applied by article 661 of the Civil Code. according to which the heirs succeed the deceased by the mere fact of his death. 1915. Tomasa. Carefully examining said article 635 of the Civil Code. 831. and legacy. her children Feliza. the donation of which is prohibited by said article. and 1331) in which agreements may be made as to them. We conclude that the donor Da. in relation to the worthy opinion of the commentator Manresa. A donation being of a contractual nature. and Leonardo and her granddaugther Soledad Encarnacion Osorio y San Agustin are at present all living and are the only heirs of the deceased. designates the parts which each of them must receive as legitime. beside that indicated in article 1271. according to article 989 of the Civil Code. leaves to the disposition of his widow and amount equivalent to that set aside by him in payment of one-half part of the conjugal property and orders that the remainder should be equally distributed among his heirs. we believe that which may be the object of contract may also be the object of a donation. The testator declares that all property left by him was acquired during his marriage with Petrona Reyes. that of the donor and the donee. it must be observed that in the project of partition of the property of D. The right is acquired although subject to the adjudication of the corresponding hereditary portion. Antonio Osorio the following appears: The widow of the testator.

is one of the fact and must be resolved in view of the evidence adduced at the trial. states that theForbes was purchased with money which the shipping business of Unchaisti & Co. The acceptance is necessary because nobody is obliged to receive a benefit against his will. as a mode of transferring ownership. Antonio Osorio. secretary and accountant of the firm Ynchausti. ratifying and correcting the document of donation. 1914. The question whether the streamer Governor Forbes was or was not purchased with money furnished by Ynchausti and the heirs of Osorio. cannot be considered as included in the donation made by Da. She did not make a new donation. Petrona Reyes in favor of the plaintiff. 1915.000. Leonardo Osorio. the donor only tried to correct what she believed to be an error in the first. in order that the donation may produce legal effect. D. wherein it is stated that in the partition of the property of her husband there was adjudicated to her the part of the interest in the shipping business of Ynchausti & Co. The wills of the donor and of the donee having concurred. is void. according to article 623 of the Civil Code. It is the duty of the donee. Antonio Osorio but supposing that he had left no property but the share which he had in the shipping business of Ynchausti & Co. and makes it unnecessary for us to enter into another discussion in order to deduce that Da. The appellant herself admits that his vessel took part in the general shipping 6 . witness for the defendant. After its approval by the Court of First Instance of Cavite. to accept to the donation and notify the donor thereof. which she donated to her son Leonardo. and (2) that the plaintiff appellee has recognized that the capital used in the steamer Forbes is distinct from the money used in the purchase of other vessels in which the deceased Osorio had an interest. Antonio Osorio and that said share amounts to P94. And all this was complied with in the document of 1914. the donation. The allegation that the document of July 3. the donor executed the document of 1915. which was adjudicated to her in the partition of the property of D. that is. We will not pass to the second proposition of the appellant. which are the subject matter of the suit. This admission of the defendant is conclusive. because it does not show the acceptance of the donee. is of no importance.. as she did. Maria Petrona Reyes did not donate to the plaintiff more that her share in the shipping business of the firm Ynchausti & Co. In the second document. becomes perfect.We do not have before us the will of D. The defendant in her answer says: That Da. when in fact said partition was yet pending. can it be denied that the donor by law had the right to half of said share as her part of the conjugal property? Clearly not. with money borrowed and furnished by the heirs individually and not by the estate. to her son D. supposing that said donation was valied.. because of the conclusion we have reached in discussing the document of donation of February 28. Julio Gonzales. indepedently of that former partnership in which the deceased Osorio had an interest. The reasons alleged by the appellant are: (1) That the steam vessel Governor Forbes was purchased after the death of D. She executed a personal act which did not require the concurrence of the donee. had. Petrona Reyes had in 1914 a right to a certain part of the interest of the deceased Osorio in the shipping business of the firm Ynchausti & Co. and could donate it. that the 610 shares.

33 and to the widow Da. besides said guaranty.000 should be deposited with Ynchausti & Co. The other reason alleged by the appellant in support of her contention is that the plaintiff has recognized in his letter addressed to the defendant corporation. or the corresponding shares of the new corporation "The Ynchausti Steamship Co. donating it to her son D." are included in said donation. when Unchausti & Co. except Da. and therefore belong to the plaintiff-appellee. And this sum being part of the one-half of one-third of the shipping business of Ynchausti & Co. and that the heirs of D. (2) because. that is to say. agreed with the heirs of Osorio in that his share in the steamer Forbes was P108. which is the object of this suit. but signed jointly with Ynchausti & Co. with the others. to be distributed with its accumulated dividends. the Ynchausti firm did not bring in any new capital. it clearly results. in our opinion.. stating that when the steamer Forbes was acquired in 1912. there accruing to the widow. after its acquisition the Ynchausti firm accounted to the estate of D. were mortgage. We have carefully read the letter in question and what appears is that said plaintiff agreed that the P61. Antonio Osorio for the profits obtained and the dividends to be distributed and no separate account was made of the earnings of the vessel. according to the result of the present suit.. D. the guaranty which the bank required. the sum of P61. including Da. the other vessels of the joint account association of Osorio and Ynchausti & Co. in which D. Soledad Osorio who did not sign the guaranty. and.business of Ynchausti & Co. but obtained money for its purchase by mortgaging the vessel itself and other vesseles of the company. In our opinion the evidence shows conclusively that the vessel Governor Forbes forms part of the shipping business of Ynchausti & Co. as trustee. There is nothing in said letter which indicates how the Governor Forbes was acquired.. Antonio Osorio did not bring in any new capital for the purchase of the vessel. which one-half part accrued to the widow in the distribution of the properties of Osorio. Florencio Gonzales Diez. but only a general account. Antonio Osorio and his estate had an interest. Leonardo Osorio. by agreement of the parties and with the approval of the court. Petrona Reyes having disposed of this half. Petrona Reyes P61. Joaquin Elizalde.33. All of the above shows that the estate of Osorio had a one-third part of the steamer Forbes represented by the capital which was distributed among the heirs. when the question between the heirs of Da. manager of the firm Ynchausti & Co. made a deposition before the notary public D. the accruing to each P11. and inserted in the answer presented by the latter that the Forbeswas acquired with money different from that of the joint account association theretofore mentioned. 7 .000. by agreement of the interested parties.333. the guaranty required by the bank where the money used in the purchase of the Forbes was taken: (1) Because the guaranty is for the purpose only for securing the payment of the amount indebted and not for excluding the estate of Osorio from the result of that banking operation. 833. and the widow Da. this sum was distributed among said heirs.000.000. Petrona Reyes had already been terminated. Soledad Osorio. and the heirs of Osorio for the purchase of the vessel Forbes. including the profits obtained in the shipping business. that the sum of 61. in which the Governor Forbes was but one of several vessels. and (4) because. It is no argument against this conclusion that the heirs of Osorio signed with Ynchausti & Co. for no new partnership was constituted for the purchase thereof. (3) because no new partnership was formed between Ynchausti & Co.

.R. 1932 LUIS W. JR.56 which it was alleged is a balance still due and unpaid on account of said tax. affirmed. G.. The plaintiff replied to the counterdemand with a general denial. Collector of Internal Revenue. (Art. with costs against the appellant. concur. upon the principle of law that ownership of property gives right by accession to all that it produces. Jr. from his father before his death by a deed of gift inter vivos which was duly accepted and registered before the death of his father. Both sides appealed to 8 . naturally or artificially. No. and as such profits they belong to the latter.91.609. Street and Malcolm.With respect to the counterclaim of P45. in a suit filed by the plaintiffs.245.. which is the basis of the tax. Marcelino Aguas for plaintiff-appellant. Dison. JJ. defendant-appellant. Araullo. Collector of Internal Revenue.: This is an appeal from the decision of the Court of First Instance of Pampanga in favor of the defendant Juan Posadas. as it is hereby. The petitioner alleged in his complaint that the tax is illegal because he received the property. C. the judgment appealed from should be.) In view of what has been said. The defendant answered with a general denial and with a counterdemand for the sum of P1. or is united or incorporated thereto. Attorney-General Jaranilla for defendant-appellant.808. JUAN POSADAS. we are of the opinion that the evidence justifies the conclusion of the trial court that they are the profits or dividends accruing to the P94.J. Petrona Reyes in the distribution of the estate of the deceased Osorio and which were donated by her to the plaintiff. 353 of the Civil Code. The courta quo held that the cause of action set up in the counterdemand was not proven and dismissed the same. for the recovery of an inheritance tax in the sum of P2. BUTTE.000. plaintiff-appellant. DISON. Luis W.73 paid under protest. J. which were adjudicated to the widow Da. L-36770 November 4. vs. So ordered. Mapa..

The theory of the plaintiff-appellant is that he received and holds the property mentioned by a consummated gift and that Act No. That Don Luis W. on April 17. In this case the scanty facts before us may not warrant the inference that the conveyance. devises. formally accepted said gift by an instrument in writing which he acknowledged before a notary public on April 20. That Don Felix Dison. 2601 (Chapter 40 of the Administrative Code) being the inheritance tax statute. in our opinion. The provision directly here involved is section 1540 of the Administrative Code which reads as follows: Additions of Gifts and Advances. Dison. do warrant the inference that the transfer was an advancement upon the 9 . 2. made a gift inter vivos in favor of the plaintiff Luis W. The question to be resolved may be stated thus: Does section 1540 of the Administrative Code subject the plaintiff-appellant to the payment of an inheritance tax? The appellant argues that there is no evidence in this case to support a finding that the gift was simulated and that it was an artifice for evading the payment of the inheritance tax. on motion of the Attorney-General. legatees.net The only evidence introduced at the trial of this cause was the proof of payment of the tax under protest. 1928. was fraudulently made for the purpose of evading the inheritance tax. Luis W. 1928. shall prove to be his heirs. But the facts. Dison was the legitimate and only child of Don Felix Dison. This deed of gift transferred twentytwo tracts of land to the donee. We see no reason why the court may not go behind the language in which the transaction is masked in order to ascertain its true character and purpose. reserving to the donor for his life the usufruct of three tracts. does not tax gifts. as is intimated in the decision of the court below and the brief of the Attorney-General. or donees mortis causa. acknowledged by the donor five days before his death and accepted by the donee one day before the donor's death. 1932. That the plaintiff did not receive property of any kind of Don Felix Dison upon the death of the latter. there shall be added to the resulting amount the value of all gifts or advances made by the predecessor to any of those who. before his death. At the trial the parties agreed to and filed the following ingenious stipulation of fact: 1. — After the aforementioned deductions have been made. That Don Felix Dison died on April 21.this court. This deed was acknowledged by the donor before a notary public on April 16. Dison. 4. in favor of his sons Luis W. It is inferred from Exhibit D that Felix Dison was a widower at the time of his death.1awphil. and the deed of gift executed by Felix Dison on April 9. the plaintiff-appellant. as stated. 3. 1928. Dison of all his property according to a deed of gift (Exhibit D) which includes all the property of Don Felix Dizon. after his death. 1928. 1928. but the cross-complaint and appeal of the Collector of Internal Revenue were dismissed by this court on March 17.

This appeal was originally assigned to a Division of five but referred to the court in banc by reason of the appellant's attack upon the constitutionality of section 1540. it violates that provision of section 3 of the organic Act of the Philippine Islands (39 Stat." We cannot give to the law an interpretation that would so vitiate its language. . it doubtless refers to gifts inter vivos. in any event. to include those who. after his death. L. Posadas 954 Phil.net When the law says all gifts. We construe the expression in section 1540 "any of those who. when the donee. This court said in the case of Tuason and Tuason vs. this appellant could not be deprived of his share of the inheritance because the Civil Code confers upon him the status of a forced heir. is so fallacious that the urging of it here casts a suspicion upon the appellants reason for completing the legal formalities of the transfer on the eve of the latter's death. which can only be made with the formalities of a will. as the sole and forced heir of the donor. and that subject shall be expressed in the title of the bill. Perhaps it is enough to say of this contention that section 1540 plainly does not tax gifts per se but only when those gifts are made to those who shall prove to be the heirs. shall prove to be his heirs". 289):lawphil. 2601 nor chapter 40 of the Administrative Code makes any reference to a tax on gifts. bequest. are given the status and rights of heirs. after his death. and it is to prevent this that it provides that they shall be added to the resulting amount. 545) which reads as follows: "That no bill which may be enacted into law shall embraced more than one subject. is the tenor of the language which refers to donations that took effect before the donor's death. . or gift mortis causa. Any other construction would virtually change this provision into: ". and not mortis causa. We do not know whether or not the father in this case left a will. Construing the conveyance here in question.. . we hold section 1540 to be applicable and the tax to have been properly assessed by the Collector of Internal Revenue. made by the predecessor to those who. This attack is based on the sole ground that insofar as section 1540 levies a tax upon gifts inter vivos." However much appellant's argument on this point may fit his preconceived notion that the transaction between him and his father was a consummated gift with no relation to the inheritance. devisees. regardless of the quantity of property they may receive as such heirs. Both the letter and the spirit of the law leave no room for any other interpretation. shall prove to be his . as an advance made by Felix Dison to his only child. and can only take effect after the donor's death. That the appellant in this case occupies the status of heir to his deceased father cannot be questioned. there shall be added to the resulting amount the value of all gifts mortis causa . we hold that there is not merit in this 10 . devisee or donee mortis causa. by our law." Neither the title of Act No. . . legatees or donees mortis causa of the donor. . for the purpose of evading the tax. donees mortis causa..inheritance which the donee. The argument advanced by the appellant that he is not an heir of his deceased father within the meaning of section 1540 of the Administrative Code because his father in his lifetime had given the appellant all his property and left no property to be inherited. Such. devise. clearly. The truth of the matter is that in this section (1540) the law presumes that such gifts have been made in anticipation of inheritance. and not to mortis causa donations. would be entitled to receive upon the death of the donor. after the death of the donor proves to be his heir. under the facts presented.

the facts of the case are summarized as follows: 11 . No. So ordered. Ostrand. Malcolm.500 shares of stock was actually a deed of sale which violated a right of first refusal under a lease contract. 1988 DELPHER TRADES CORPORATION. L-69259 January 26... Avanceña. vs. No other constitutional questions were raised in this case. petitioners. INC. concur.R. J.: The petitioners question the decision of the Intermediate Appellate Court which sustained the private respondent's contention that the deed of exchange whereby Delfin Pacheco and Pelagia Pacheco conveyed a parcel of land to Delpher Trades Corporation in exchange for 2. Street. Vickers and Imperial.J. The judgment below is affirmed with costs in this instance against the appellant.attack upon the constitutionality of section 1540 under our view of the facts.. JR. INTERMEDIATE APPELLATE COURT and HYDRO PIPES PHILIPPINES. and DELPHIN PACHECO. Abad Santos.. Briefly. respondents. G. JJ. GUTIERREZ. C.

. 1-2. T-4240 of the Bulacan land registry. Pelagia Pacheco. Inc. (Appendix I. for Lot 1095 whose area is 27. inclusive) (pp. Without pronouncement as to attorney's fees and costs. with the signed conformity and consent of lessors Delfin Pacheco and Pelagia Pacheco (Exhs.169 square meters only. 134. as per stipulation of the parties (Exhs. 1976. more or less. the said co-owners leased to Construction Components International Inc. Rollo) On the ground that it was not given the first option to buy the leased property pursuant to the proviso in the lease agreement. 1974. Rec. filed an amended complaint for reconveyance of Lot. No.00 (Exhs. a deed of exchange was executed between lessors Delfin and Pelagia Pacheco and defendant Delpher Trades Corporation whereby the former conveyed to the latter the leased property (TCT No. B to B-6 inclusive) The contract of lease. respondent Hydro Pipes Philippines.T-4240) together with another parcel of land also located in Malinta Estate. p. lessee Construction Components International. Delfin Pacheco and his sister. 1095 in its favor under conditions similar to those whereby Delpher Trades Corporation acquired the property from Pelagia Pacheco and Delphin Pacheco. 1095. 4273) for 2. 246. 1974. On April 3. No.169 square meters of real estate Identified as Lot.500 shares of stock of defendant corporation with a total value of P1. C to C-5. the judgment is hereby rendered declaring the valid existence of the plaintiffs preferential right to acquire the subject property (right of first refusal) and ordering the defendants and all persons deriving rights therefrom to convey the said property to plaintiff who may offer to acquire the same at the rate of P14. Inc. the same property and providing that during the existence or after the term of this lease the lessor should he decide to sell the property leased shall first offer the same to the lessee and the letter has the priority to buy under similar conditions (Exhibits A to A-5) On August 3. assigned its rights and obligations under the contract of lease in favor of Hydro Pipes Philippines. pp. 12 . The dispositive portion of the decision reads: ACCORDINGLY. (Appellant's Brief.00 per square meter. Rollo) The lower court's decision was affirmed on appeal by the Intermediate Appellate Court.247).. in the Municipality of Polo (now Valenzuela). Malinta Estate. 44-45. Province of Bulacan (now Metro Manila) which is covered by Transfer Certificate of Title No.In 1974. Valenzuela. Metro Manila (TCT No. pp. were the owners of 27. the Court of First Instance of Bulacan ruled in favor of the plaintiff. After trial.000. Inc. A to D-3 inclusive) On January 3. as well as the assignment of lease were annotated at he back of the title.500.

in that: 1. No.1 Million. that in exchange for these properties. Rollo) 13 . prejudiced the private respondent's right of first refusal over the leased property included in the "deed of exchange. meter or P8. were transferred to the corporation. 1095 which had been leased to Hydro Pipes Philippines. including Lot No. we set aside the resolution denying the petition and gave it due course.000 shares." (p. or a total of P380. Respondent Hydro Pipes Philippines." Eduardo Neria. he knew all about the contract of lease of Lot. 251-252. and that at the time of incorporation.The defendants-appellants. The petitioners allege that: The denial of the petition will work great injustice to the petitioners. Pelagia and Delfin acquired 2. 252. that the corporation was organized by the children of the two spouses (spouses Pelagia Pacheco and Benjamin Hernandez and spouses Delfin Pacheco and Pilar Angeles) who owned in common the parcel of land leased to Hydro Pipes Philippines in order to perpetuate their control over the property through the corporation and to avoid taxes. meter. that the leased property was transferred to the corporation by virtue of a deed of exchange of property. ("private respondent") will acquire from petitioners a parcel of industrial land consisting of 27.366. in effect. Assuming arguendo that there has been a transfer of actual ownership interests. filed a petition for certiorari to review the appellate court's decision. In the petitioners' motion for reconsideration. Rollo) The resolution of the case hinges on whether or not the "Deed of Exchange" of the properties executed by the Pachecos on the one hand and the Delpher Trades Corporation on the other was meant to be a contract of sale which. two pieces of real estate.169 square meters or 2.7 hectares (located right after the Valenzuela. that in order to accomplish this end. as provided in the same contractual provision invoked by private respondent. 2. 1095 to Hydro Pipes Philippines. We initially denied the petition but upon motion for reconsideration. although the prevailing value thereof is approximately P300/sq. Inc. a certified public accountant and son-in-law of the late Pelagia Pacheco testified that Delpher Trades Corporation is a family corporation. now the petitioners.500 unissued no par value shares of stock which are equivalent to a 55% majority in the corporation because the other owners only owned 2. they refer to this scheme as "estate planning. and 3. private respondent will acquire the land not under "similar conditions" by which it was transferred to petitioner Delpher Trades Corporation. Private respondent is allowed to exercise its right of first refusal even if there is no "sale" or transfer of actual ownership interests by petitioners to third parties. Bulacan exit of the toll expressway) for only P14/sq. (pp.

Rollo) On the other hand. In the case at bar. hence the corporation and the coowners should be deemed to be the same. such transfer is not within the letter. Thus.Under this factual backdrop. v." (pp. there was no transfer of actual ownership interests over the land when the same was transferred to petitioner corporation in exchange for the latter's shares of stock." (p.. 1468. cited in Agbayani. It maintains that there was actual transfer of ownership interests over the leased property when the same was transferred to Delpher Trades Corporation in exchange for the latter's shares of stock. The transfer of ownership. Vol. but instead is 14 . that petitioner Delfin Pacheco. one becomes a stockholder of a corporation by subscription or by purchasing stock directly from the corporation or from individual owners thereof (Salmon. 430) It is significant that the Pachecos took no par value shares in exchange for their properties. 649. as in the case of par value shares. if anything. the petitioners allege: "Considering that the beneficial ownership and control of petitioner corporation remained in the hands of the original co-owners. The holder of no-par shares may see from the certificate itself that he is only an aliquot sharer in the assets of the corporation. 1638. Dexter & Co. p. Thus." (Rohrlich 243. A no-par value share does not purport to represent any stated proportionate interest in the capital stock measured by value. but only an aliquot part of the whole number of such shares of the issuing corporation. After incorporation. In reality. having treated Delpher Trades Corporation as such a separate and distinct corporate entity. 254. 1980 Edition. there being in substance and in effect an Identity of interest. Civil Code).500 original unissued no par value shares of stocks of the Delpher Trades Corporation. is not a party who may allege that this separate corporate existence should be disregarded. formed or to be formed. Fulton [1912]. Civil Code) while there is a barter or exchange when one thing is given in consideration of another thing (Art. There is a sale when ownership is transferred for a price certain in money or its equivalent (Art. petitioner corporation is a mere alter ego or conduit of the Pacheco co-owners. But this character of proportionate interest is not hidden beneath a false appearance of a given sum in money. III. "Hence. 609). They argue that there was no sale and that they exchanged the land for shares of stocks in their own corporation. The capital stock of a corporation issuing only no-par value shares is not set forth by a stated amount of money. the Pachecos acquired 2. Unson. citing Bole v. in exchange for their properties. Rollo) The petitioners maintain that the Pachecos did not sell the property. or even spirit of the contract. the petitioners contend that there was actually no transfer of ownership of the subject parcel of land since the Pachecos remained in control of the property. the private respondent argues that Delpher Trades Corporation is a corporate entity separate and distinct from the Pachecos. 233 Pa. it contends that it cannot be said that Delpher Trades Corporation is the Pacheco's same alter ego or conduit. was merely in form but not in substance. the Pachecos became stockholders of the corporation by subscription "The essence of the stock subscription is an agreement to take and pay for original unissued shares of a corporation. 254-255. We rule for the petitioners. Consequently. Commentaries and Jurisprudence on the Commercial Laws of the Philippines. 47 Phil.

ATTY. no matter what value they may have. by removing the par value of shares. to the extent of 100/1. sir. This indicates that a shareholder of 100 such shares is an aliquot sharer in the assets of the corporation. LINSANGAN: Q (What do you mean by "point of view"?) What are these benefits to the spouses of this deed of exchange? 15 . from the point of view of taxation. LINSANGAN: Q Mr. 1.expressed to be divided into a stated number of shares. there was no attempt to state the true or current market value of the real estate. What they really did was to invest their properties and change the nature of their ownership from unincorporated to incorporated form by organizing Delpher Trades Corporation to take control of their properties and at the same time save on inheritance taxes.500 no par shares of stock. It is to be stressed that by their ownership of the 2. the Pachecos have control of the corporation. 1980 Edition. the Delpher Trades Corporation is a business conduit of the Pachecos. is there any benefit to the spouses Hernandez and Pacheco in connection with their execution of a deed of exchange on the properties for no par value shares of the defendant corporation? A Yes. Their equity capital is 55% as against 45% of the other stockholders. (Agbayani.000 or 1/10. As explained by Eduardo Neria: xxx xxx xxx ATTY. Neria. the attention of persons interested in the financial condition of a corporation is focused upon the value of assets and the amount of its debts. Moreover. Vol. p. who also belong to the same family group.00 a square meter. III.000 shares. such as. In effect.00 a square meter was turned over to the family's corporation for only P14. Commentaries and Jurisprudence on the Commercial Laws of the Philippines. 107). COURT: Q What do you mean by "point of view"? A To take advantage for both spouses and corporation in entering in the deed of exchange. Land valued at P300. Thus.

A Continuous control of the property. sir Q You also. Can you explain flexibility in connection with the ownership of the property in question? A There is flexibility in using no par value shares as the value is determined by the board of directors in increasing capitalization. (2) Exceptions regarding the provision which I quote: "No gain or loss shall also be recognized if a person exchanges his property for stock in a corporation of which as a result of such exchange said person alone or together with others not exceeding four persons gains control of said corporation. On the other hand. 16 . The board can fix the value of the shares equivalent to the capital requirements of the corporation. testified during the last hearing that the decision to have no par value share in the defendant corporation was for the purpose of flexibility. and other inherent benefits in a corporation. since a corporation does not die it can continue to hold on to the property indefinitely for a period of at least 50 years. they were able to execute the deed of exchange free from income tax and acquire a corporation. tax exemption benefits. Q What are these advantages to the said spouses from the point of view of taxation in entering in the deed of exchange? A Having fulfilled the conditions in the income tax law. is there any flexibility in the holding by the corporation of the property in question? A Yes. Q What provision in the income tax law are you referring to? A I refer to Section 35 of the National Internal Revenue Code under par. Q Now also from the point of taxation." Q Did you explain to the spouses this benefit at the time you executed the deed of exchange? A Yes. C-sub-par. if the property is held by the spouse the property will be tied up in succession proceedings and the consequential payments of estate and inheritance taxes when an owner dies. providing for tax free exchange of property.

sir. 293 U. WHEREFORE." (Liddell & Co. 17 . 1981) The records do not point to anything wrong or objectionable about this "estate planning" scheme resorted to by the Pachecos. v.Q Now what advantage is this continuity in relation to ownership by a particular person of certain properties in respect to taxation? A The property is not subjected to taxes on succession as the corporation does not die. Helvering. The ownership remained in the same hands. There was no transfer of actual ownership interests by the Pachecos to a third party.. the instant petition is hereby GRANTED. No costs. The "Deed of Exchange" of property between the Pachecos and Delpher Trades Corporation cannot be considered a contract of sale. (pp. 2 SCRA 632 citing Gregory v. December 15. The questioned decision and resolution of the then Intermediate Appellate Court are REVERSED and SET ASIDE. Hence. by means which the law permits. the private respondent has no basis for its claim of a light of first refusal under the lease contract. The Pacheco family merely changed their ownership from one form to another. 596). Q So the benefit you are talking about are inheritance taxes? A Yes. The amended complaint in Civil Case No. 885-V-79 of the then Court of First Instance of Bulacan is DISMISSED. 465.S. cannot be doubted. ed. The collector of Internal Revenue. "The legal right of a taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them. 7 L.. SO ORDERED. tsn. Inc. 3-5.

: Before us are three consolidated petitions for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure. as amended.96. 1999 reflecting. 94-048-02621. Case No. 2008 of the CTA En Banc denying the motions for reconsideration from the aforementioned assailed decisions. No.R. developing.184360 & 184361 February 19. INC.186. output VAT in the amount of P145. and zero-rated export sales in the sum of P929. 184384 COMMISSIONER OF INTERNAL REVENUE. Silicon seasonably filed its Quarterly VAT Return on April 22.) is a corporation duly organized and existing under the laws of the Republic of the Philippines.B.00.5 It is likewise registered with the Board of Investments (BOI) as a preferred pioneer enterprise. The facts as summarized by the CTA in Division and adopted by the CTA En Banc are as follows: Silicon Philippines. and (3) the two Resolutions 3 both dated September 2.. assailing (1) the Decision 1 dated February 18. JR. It is primarily engaged in the business of designing.R.. (2) the Decision 2 dated February 20.6 On the other hand. the Commissioner of Internal Revenue (CIR) is the government official vested with the power and authority to refund any internal revenue tax erroneously or illegally assessed or collected under the National Internal Revenue Code of 1997. Inc. No.(formerly Intel Philippines Manufacturing.888.41. DECISION VILLARAMA. input VAT on domestic purchases in the amount ofP20. Inc. among others. input VAT on importation of goods in the amount of P44. Petitioner. INC. as amended7 (hereafter NIRC or Tax Code). Petitioner.). vs. Respondent. J.91. No. 2014 SILICON PHILIPPINES.041.8 18 .).316.4 It is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT) taxpayer with Certificate of Registration bearing RDO Control No.. (formerly Intel Philippines Manufacturing. 219. Inc. 209.949.493. SILICON PHILIPPINES. x-----------------------x G.560. Inc. (formerly Intel Philippines Manufacturing. 2008 of the Court of Tax Appeals (CTA) En Banc in CTA E. For the 1st quarter of 1999.G. Respondent.B. 2008 of the CTA En Banc in CTA E. vs. COMMISSIONER OF INTERNAL REVENUE. manufacturing and exporting advance and large-scale integrated circuit components.

Silicon filed a second claim for tax credit or refund in the amount ofP20.571. through its One-Stop-Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (DOF). 2001.948.520. 1999.896. The CTA Second Division held that the export sales invoices have no probative value in establishing its zero-rated sales for VAT purposes as the same were not duly registered with the BIR and the required information.560. was likewise not indicated therein in violation of the provisions of Sections 113.411.73. 2000 to June 30. 2006. Silicon filed with the CIR.896.45 or for the amount ofP9. Hence. that Silicon’s claim for refund/tax credit in the amount ofP20. During the pendency of the case.07 for the period April 1. 20 23721 and 19 . on August 10. a claim for tax credit or refund of P64. 6493. To toll the running of the two-year prescriptive period. 6263.949.419. The CIR filed its Answer10 dated June 1. to toll the running of the two-year prescriptive period. the CTA Second Division rendered a Decision 19 in CTA Case No. Silicon filed a Petition for Review 9 with the CTA on March 30.45 representing the input VAT on its alleged domestic purchases of goods and services because it failed to substantiate its claimed zero-rated export sales. Silicon filed on June 28. 2000.419. 1999 to March 31.14 which was docketed as CTA Case No.00.On August 6.45 representing VAT input taxes on its domestic purchases of goods and services and importation of goods and capital equipment which are attributable to zero-rated sales for the period January 1. 6263 (Second Division) and 6493 (First Division) On March 6.411. 3-88. CTA Case Nos.457. the CTA Division limited its review on the amounts of P9.285. Silicon manifested that it was granted by the DOF a tax credit certificate equivalent to 50% of its total claimed input VAT on local purchases of P19.571. among others. as amended by Revenue Regulations No. 1999. and (2) that Silicon has not shown proof that the alleged domestic purchases of goods and services and importation of goods/capital equipment on which the VAT input taxes were paid are attributable to its export sales or have not yet been applied to the output tax for the period covered in its claim or any succeeding period and that the alleged total foreign exchange proceeds have been accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. 6263 denying Silicon’s claim for refund or issuance of tax credit certificate for the first quarter of 1999 in the amount of P9. 2000.571. Further. among others.13 Meanwhile. 2001 raising.07 was not duly substantiated and that said claim for refund is not subject to zero-percent (0%) rate of VAT under Sections 106(A)(2)(a)(1)16 and 108(B) (1)17 of the NIRC. Due to the inaction of the CIR. The CIR filed an Answer15 asserting. the following special and affirmative defenses: (1) that Silicon failed to show compliance with the substantiation requirements under the provisions of Section 16(c)(3)11 of Revenue Regulations No.4512 andP44. particularly the BIR authority to print. The petition was docketed as CTA Case No. 5-87. the claim for refund has already prescribed pursuant to Section 112(A) and (B)18 of the NIRC. 2002 with the CTA a Petition for Review.896.

export declarations. 20 . 2006 in CTA Case No.104-523 of Revenue Regulations No.752. Silicon cannot claim the amount of P11. 6493.00 representing Silicon’s input VAT paid on imported goods. 219 partially granting the petition for review and ordering the CIR to refund or issue a tax credit certificate in favor of Silicon Philippines in the reduced amount of P2.431. 209 and CTA E. No.139. 2000. i.560. No. and airway bills were likewise found to be insufficient to prove actual exportation of goods. 2000 to June 30. 2000. 7-95.B. the CTA First Division denied Silicon’s claim for refund or tax credit of P20.00 representing its unutilized input VAT attributable to its zero-rated sales for the period April 1. Neither did Silicon submit any evidence to prove that the subject imported capital equipment qualify as capital goods pursuant to Section 4. However.321.43 may be a valid claim for tax credit or refund which is composed of input VAT on local purchases of P11. because Silicon is a BOI-registered entity with 100% exports and sales of properties or services made by VAT-registered suppliers to Silicon are automatically zerorated. there is no VAT that has to be passed on to Silicon. 219.411.916.00. the CTA En Banc rendered the herein first assailed Decision in CTA E. After reviewing the records.949. 209 & 219) On February 18. properties or services. Silicon’s TIN-VAT number and the imprinted word "zero-rated. No. the CTA En Banc ruled that in the absence of any clear and convincing proof that Silicon’s local suppliers passed on or shifted the VAT on such domestic purchases to Silicon. Silicon’s motion for reconsideration was denied by the CTA First Division.07 for the second quarter of 2000 on the ground that its reported export sales did not qualify for zero-rating under Section 106(A)(2)(a)(1) of the NIRC since the sales invoices were not duly registered VAT sales invoices containing the required information.B. 2006. particularly the BIR authority to print.43 and input VAT on importations of P2.. With respect to the claim of P44. Silicon filed a motion for reconsideration from the aforementioned decision but the motion was denied in a Resolution25 dated June 22. Nos. The other evidence presented by Silicon.321.27 Silicon appealed the two decisions of the CTA in Division to the CTA En Banc as CTA E. 2006.B.B.431.43 as input tax credits on its domestic purchases for the period April 1.23822 of the NIRC. the same was not granted by the CTA Second Division since Silicon did not present duly machine-validated Import Entry and Revenue Declarations or Bureau of Customs official receipts or any other document proving actual payment of VAT on the imported goods as required under Section 4. Decision of the CTA En Banc (CTA E.777. the certification of inward remittance.e. Thus. Consequently. Likewise.106-1(b) 24 of Revenue Regulations No.419.777. the CTA En Banc stated that the amount of P13.139. 7-95. 2000 to June 30. Silicon would not gain input taxes on its purchases of goods. 2008." On October 5. in a Decision26 dated June 14.

21 . In G. whether the CTA En Banc erred in denying Silicon’s claim for refund on the ground that Silicon failed to prove its input VAT derived from its importation of capital goods and equipment and in not considering the recommendation and findings of the Court-commissioned Independent Certified Public Accountant that Silicon has substantially supported its export sales. No.73.431.411. 1999 to March 31. Silicon and the CIR assail the Decision dated February 18. while the parties never raised as an issue the timeliness of Silicon’s judicial claims.139.139. 2008 of the CTA En Banc in CTA E.285.07) representing its unutilized excess input VAT on domestic purchases of goods and services and importation of goods/capital equipment attributable to its zero-rated sales for the period April 1. 2000.00 representing Silicon’s unutilized input VAT attributable to its zero-rated sales for the period April 1. 209. No. 219 which ordered the CIR to refund. the CTA En Banc found that Silicon’s valid input VAT for refund was only P9. And two. Silicon discussed two important issues.R. importation of capital goods/equipment and its input VAT on local purchases.00 (from the original claim of P20. 184360. One.635. After it reviewed and examined the invoices and other documentary evidence of Silicon for the first quarter of 1999. petitioner Silicon assails the Decision dated February 20. we deem it proper to look into whether the petitions for review filed by Silicon before the CTA were filed within the prescribed period provided under the Tax Code in order to determine whether the CTA validly acquired jurisdiction over the petitions filed by Silicon. The issues raised in the three petitions boil down to (1) whether the CTA En Banc correctly denied Silicon’s claim for refund or issuance of a tax credit certificate for its input VAT for its domestic purchases of goods and services and importation of goods/capital equipment attributable to zero-rated sales for the period January 1. we emphasize that when a case is on appeal. and (2) whether the CTA En Banc correctly ordered the CIR to refund or issue a tax credit certificate in favor of Silicon for the reduced amount of P2.419.B.R. whether the CTA En Banc erred in denying its claim for refund of input VAT derived from domestic purchases of goods and services attributable to its zero-rated sales on the ground of failure to imprint the words "TIN-VAT" and "ZERO-RATED" on its export sales invoices. 2000 to June 30. 184384 & 184361. Notwithstanding the above issues. 209 denying the petition for review for lack of merit. The Consolidated Petitions before this Court In G.69. or issue a tax credit certificate to Silicon for the amount of P2. 28 In the present case. this Court has the authority to review matters not specifically raised or assigned as error if their consideration is necessary in reaching a just conclusion of the case. Nos.948. Case No. 1999.531. the CTA En Banc also rendered the second assailed Decision in CTA E. 2000. 2008. No.B. the CTA En Banc held that Silicon is no longer entitled to refund or issuance of a tax credit certificate for its input tax for the first quarter of 1999. But since the DOF had already granted Silicon a tax credit certificate on January 24. 2008 and the Resolution dated September 2. 2000 to June 30.431.B. 2002 in the amount of P9. 2008 and the Resolution dated September 2.On February 20. In its Memorandum. 2008 of the CTA En Banc in CTA E.

or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue.A. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments. Section 112(C) (formerly subparagraph D)29 of the NIRC reads: SEC. refunds of internal revenue taxes. 2. Republic Act (R. the taxpayer affected may. penalties in relation thereto. the charter of the CTA. 112. fees or other charges. Jurisdiction. in which case the inaction shall be deemed a denial.) The CTA has exclusive appellate jurisdiction to review on appeal decisions of the CIR in cases involving refunds of internal revenue taxes. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments.) No. if the CIR fails to decide within the 120-day period provided by law. or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue. fees or other charges. In case of full or partial denial of the claim for tax refund or tax credit. (Emphasis supplied. x x x x (Emphasis supplied. Meanwhile.The pertinent provision. – The CTA shall exercise: a. the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. the taxpayer is granted a 30-day period to appeal to the CTA the decision or inaction of the CIR after the 120-day period. as amended. where the National Internal Revenue Code provides a specific period of action. Exclusive appellate jurisdiction to review by appeal. provides: Section 7. refunds of internal revenue taxes. within (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period. appeal the decision or the unacted claim with the Court of Tax Appeals. San Roque Power Corporation. penalties in relation thereto. In addition. In the recently decided consolidated cases of Commissioner of Internal Revenue v. – xxxx (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. or the failure on the part of the Commissioner to act on the application within the period prescribed above. as herein provided: 1. Moreover.) The above-mentioned provision expressly grants the CIR 120 days within which to decide the taxpayer’s claim for refund or tax credit. – In proper cases.30 (San Roque for brevity) this Court stressed the mandatory and 22 . Refunds or Tax Credits of Input Tax. 1125. such inaction shall be deemed a denial of the application for tax refund which the taxpayer can elevate to the CTA through a petition for review.

cannot apply because that rule was adopted before the enactment of the 30-day period. or within 30 days from the expiration of the 120-day period. 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. whether before. and unambiguous. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted. Such doctrine is basic and elementary. so that under the VAT System the taxpayer will always have 30 days to file the judicial claim even if the Commissioner acts only on the 120th day. When Section 112(C) states that "the taxpayer affected may. is construed strictly against the taxpayer. Thus. The Court explained: 23 . like a claim for tax exemption. strict compliance with the 120+30 day periods is necessary for such a claim to prosper. or after the effectivity of the Atlas doctrine. appeal the decision or the unacted claim with the Court of Tax Appeals. Therein. With the 30-day period always available to the taxpayer. Commissioner of Internal Revenue. allowing the taxpayer to file a judicial claim one day after filing the administrative claim with the Commissioner. a claim for tax refund or credit. When Section 112(C) states that "the Commissioner shall grant a refund or issue the tax credit within one hundred twenty (120) days from the date of submission of complete documents. 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. To repeat. within thirty (30) days from receipt of the decision denying the claim or after the expiration of the one hundred twentyday period.jurisdictional nature of the 120+30 day period provided under Section 112(C) of the NIRC. except for the period from the issuance of BIR Ruling No. clear. The 30-day period was adopted precisely to do away with the old rule. this Court denied Philex’s claim for refund since its petition for review was filed with the CTA beyond the 120+30 day period." The word "may" simply means that the taxpayer may or may not appeal the decision of the Commissioner within 30 days from receipt of the decision." the law does not make the 120+30 day periods optional just because the law uses the word "may. or does not act at all during the 120-day period. Certainly. we ruled that x x x The application of the 120+30 day periods was first raised in Aichi. during.31 In the case of Philex Mining Corporation v. Resort to the courts prior to the expiration of the 120-day period is a patent violation of the doctrine of exhaustion of administrative remedies. a ground for dismissing the judicial suit due to prematurity. Philippine jurisprudence is awash with cases affirming and reiterating the doctrine of exhaustion of administrative remedies." the law clearly gives the Commissioner 120 days within which to decide the taxpayer’s claim. The language of Section 112(C) is plain. which adopted the verba legis rule in holding that the 120+30 day periods are mandatory and jurisdictional. The old rule that the taxpayer may file the judicial claim. by no stretch of the imagination can the word "may" be construed as making the 120+30 day periods optional. which again reinstated the 120+30 day periods as mandatory and jurisdictional. without waiting for the Commissioner’s decision if the two-year prescriptive period is about to expire. which was consolidated with the case of San Roque.

we find that Silicon’s judicial claims were filed late and way beyond the prescriptive period. not a constitutional right. or after the Atlas case. or from the close of the taxable quarter when the sales attributable to the input VAT were made following the Mirant and Aichi doctrines. The Atlas doctrine cannot save Philex from the late filing of its judicial claim. the Court took into account the issuance by the Bureau of Internal Revenue (BIR) of BIR Ruling No. 2003 (the issuance of the erroneous BIR ruling) to October 6. 24 . 1999. Philex filed its judicial claim long after the expiration of the 120-day period. Philex’s failure to do so rendered the "deemed a denial" decision of the Commissioner final and inappealable. The exercise of such statutory privilege requires strict compliance with the conditions attached by the statute for its exercise.. during. Philex’s judicial claim will have to be rejected because of late filing. the CIR had until December 4. "deemed a denial" of Philex’s claim. 32 Also. Philex had 30 days from the expiration of the 120day period to file its judicial claim with the CTA. Even though observance of the periods in Section 112 is compulsory and failure to do so will deprive the CTA of jurisdiction to hear the case. during which taxpayers need not wait for the lapse of the 120+30-day period before filing their judicial claim for refund. DA-489-03 which misled taxpayers by explicitly stating that taxpayers may file a petition for review with the CTA even before the expiration of the 120-day period given to the CIR to decide the administrative claim for refund. in fact 426 days after the lapse of the 120-day period. Nonetheless. such a strict application will be made from the effectivity of the Tax Reform Act of 1997 on January 1. by express provision of law. Philex failed to comply with the statutory conditions and must thus bear the consequences. where the Court En Banc settled the controversy surrounding the application of the 120+30-day period provided for in Section 112 of the NIRC and reiterated the Aichi doctrine that the 120+30-day period is mandatory and jurisdictional.33 this Court likewise denied the claim for tax refund for having been filed late or after the expiration of the 30-day period from the denial by the CIR or failure of the CIR to make a decision within 120 days from the submission of the documents in support of its administrative claim. Dash Engineering Philippines. Silicon filed its Quarterly VAT Return for the 1st quarter of 1999 on April 22. Philex’s judicial claim was indisputably filed late. as affirmed in this Court’s ruling in San Roque. We held: Petitioner is entirely correct in its assertion that compliance with the periods provided for in the abovequoted provision is indeed mandatory and jurisdictional. From August 6. 1999 and subsequently filed on August 6. except for the period from December 10. 1998 until the present. The right to appeal to the CTA from a decision or "deemed a denial" decision of the Commissioner is merely a statutory privilege. 2010 (the promulgation of Aichi). in the recent case of Commissioner of Internal Revenue v. Philex’s case is not one of premature filing but of late filing. The inaction of the Commissioner on Philex’s claim during the 120-day period is.1âwphi1 Philex did not file any petition with the CTA within the 120-day period. whether governed by jurisprudence before. 1999 a claim for tax credit or refund of its input VAT taxes for the same period. Philex did not also file any petition with the CTA within 30 days after the expiration of the 120-day period. In any event. Silicon’s claims do not fall under the exception mentioned above. Whether the two-year prescriptive period is counted from the date of payment of the output VAT following the Atlas doctrine. Inc.Unlike San Roque and Taganito.34 After a careful perusal of the records in the instant case.

2001 which was 451 days late. Courts are bound by prior decisions. 25 . is strictly construed against the taxpayer. once a case has been decided one way. 2000. 2002 or 536 days late. 209 are REVERSED and SET ASIDE. WHEREFORE. whether or not the CIR questions the numerical correctness of the claim of the taxpayer. However. its judicial claims for tax refund or credit should have been dismissed by the CT A for lack of jurisdiction. 37 Noncompliance with the mandatory periods. 2000 to file its petition for review with the CTA. 2008 Resolution of the Court of Tax Appeals En Banc in CTA E. Silicon again failed to comply with the 120+30 day period provided under Section 112(C) since it filed its judicial claim only on June 28. Silicon’s judicial claim for tax credit or refund should have been dismissed for having been filed late. and it only filed its petition for review with the CTA on March 30. the last day of the 30-day period to file its judicial claim. The CTA did not acquire jurisdiction over the petition for review filed by Silicon. 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. Thus. the last day of the 120-day period. and nonadherence to exhaustion of administrative remedies bar a taxpayer’s claim for tax refund or credit. Similarly. we deem it unnecessary to rule upon the other issues raised by the parties in the three consolidated petitions.B. Records show that Silicon filed its claim for tax credit or refund on August 10. The CIR then had 120 days or until December 8. 2000. 2008 Decision and September 2. like tax exemption. 38For failure of Silicon comply with the provisions of Section 112(C) of the NIRC. to decide Silicon’s claim for tax refund. 6263 and 6493 filed with the Court of Tax Appeals are hereby DISMISSED for having been filed out of time. No pronouncement as to costs. Silicon had until January 7. in consonance with our ruling in Philex in the San Roque ponencia. which was belatedly filed. But since the CIR did not act on Silicon’s claim on or before the said date. Thus. However. 219 and the assailed February 20. Silicon failed to file an appeal within 30 days from the lapse of the 120-day period. nonobservance of the prescriptive periods. No. Considering the foregoing disquisition. Silicon had until January 3.36 The taxpayer claiming the tax credit or refund has the burden of proving that he is entitled to the refund by showing that he has strictly complied with the conditions for the grant of the tax refund or credit.35 As this Court has repeatedly emphasized. 2000 to grant or deny the claim. the assailed February 18. 2008 Decision and September 2. a tax credit or refund. Thus.B. 2001 or 30 days from December 8. 2008 Resolution of the Court of Tax Appeals En Banc in CTA E. With the inaction of the CIR to decide on the claim which was deemed a denial of the claim for tax credit or refund. No. Silicon's judicial claims for refund for the 1st quarter of 1999 and the 2nd quarter of 2000 through its petitions for review docketed as CT A Case Nos. Silicon’s claim for tax refund for the second quarter of 2000 should have been dismissed for having been filed out of time. the petition for review.1999. should have been dismissed by the CTA which acquired no jurisdiction to act on the petition. courts have no choice but to resolve subsequent cases involving the same issue in the same manner.

and Resolution2 dated July 18. 003-883-626-VAT and BIR Certificate of Registration bearing RDO Control No. J. Cebu. TOLEDO POWER. as narrated by the CT A First Division.. The pertinent facts. Inc.: This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the Court of Tax Appeals (CTA) En Banc Decision 1 dated May 7. Inc. No. 26 . Cebu Electric Cooperative III (CEBECO). DECISION PERALTA. 2008. 94-083-000300. INC.SO ORDERED. vs. with principal office at Sangi.) is a general partnership duly organized and existing under Philippine laws. 2014 COMMISSIONER OF INTERNAL REVENUE. Respondent. Atlas Consolidated Mining and Development Corporation. 2008. are as follows: Petitioner (herein respondent Toledo Power. It is principally engaged in the business of power generation and subsequent sale thereof to the National Power Corporation (NPC). Petitioner. 183880 January 20.. G. Atlas Fertilizer Corporation and Cebu Industrial Park Development.R. Toledo City. and is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax taxpayer in accordance with Section 236 of the National Internal Revenue Code (NIRC) with Tax Identification No.

petitioner filed an application with the Energy Regulatory Commission (ERC) for the issuance of a Certificate of Compliance pursuant to the Implementing Rules and Regulations of R.58 Excess Input Tax & Overpayment P 5.909. the following: Zero-rated Sales/Receipts Taxable Sales-Sale of Scrap/Others Output Tax P 143. for the third quarter of 2001.032. 2001.89 Less: Input Tax On Domestic Purchases 4.099.912.422. 2002. Province of Cebu. CEBECO.250. among others. On January 25. Inc.588.909. The amended return shows unutilized input VAT credits of P5.944.89 Less: Input Tax On Domestic Purchases 4. Atlas Consolidated Mining and Development Corporation.651.37 378. 2001.37 378.765.74 34. petitioner allegedly has unutilized input VAT in the total amount ofP5.718.225. which purchases and importations are all attributable to its zero-rated sale of power generation services to NPC. Province of Cebu. its Quarterly VAT Return for the third quarter of 2001.96 on its domestic purchase of taxable goods and services and importation of goods. petitioner filed with the BIR Revenue District Office (RDO) No.588.74 34.On June 20. an amended Quarterly VAT Return for the same quarter of 2001was filed on November 22. Said input VAT of P5.00 Total Available Input Tax 6.651.000. otherwise known as the "Electric Power Industry Reform Act of 2007" (EPIRA).85 On Importation of Goods 1.69 However.792.909.588.909. 83 at Toledo City.96 paid by petitioner on its domestic purchase of goods and services for the third quarter of 2001 allegedly remained unutilized against output VAT liability in said period or even in subsequent matters. its Quarterly VAT Return for the fourth quarter of 2001 declaring.58 On Importation of Goods 1.008.85 Excess Input Tax & Overpayment P 5.827. 2002.588.032.973.000. Atlas Fertilizer Corporation and Cebu Industrial Park Development.A.011.00 Total Available Input Tax 5.422. petitioner filed with the BIR RDO No. 9136.96 arising from petitioner’s taxable purchases for the third quarter of 2001 and the following other information: Zero-rated Sales/Receipts Taxable Sales-Sale of Scrap/Others Output Tax P 143. On October 25.458.242. 83 at Toledo City. declaring among others.96 Thus. the following: 27 .

The said Motion was granted in open court on February 27. petitioner allegedly had an excess input VAT credits of P3.697.27. in the total amount ofP9.781. Atlas Consolidated Mining and Development Corporation.608.588.106-2(c) of Revenue Regulations No.588. For the third and fourth quarters of 2001. or the aggregate amount of P9.781. Atlas Fertilizer Corporation and Cebu Industrial Park Development Inc.27.219. 6805 and.31 Thus.31. pursuant to the procedure prescribed in Revenue Regulations No. On October 24.259. since these cases involve the same parties.129. 28 . as amended. docketed as CTA Case No.781.370. 795. which are all attributable to its zero-rated sales of power generation services to NPC. petitioner filed a Petition for Review to suspend the running of the two-year prescriptive period under Section 112(D) of the 1997 NIRC and Section 4.96 and P3. petitioner incurred and accumulated input VAT from its domestic purchase of goods and services. same facts and issues.219.44 309.219.909.Zero-rated Sales/Receipts Taxable Sales-Sale of Scrap/Others Output Tax P 127. as amended.781.154.33 Less: Input Tax On Domestic Purchases 1.370.00 Total Available Input Tax 3. petitioner filed with the BIR RDO No.909. both for its unutilized input VAT paid by petitioner on its domestic purchases of goods and services and importation of goods attributable to zerorated sales. 2003.247. 6851. On September 30. docketed as CTA Case No. 2004. On January 30.219. 2004. 2004 and confirmed in a Resolution dated March 8.129.374.720. 2004.873. Respondent (herein petitioner Commissioner of Internal Revenue) has not ruled upon petitioner’s administrative claim and in order to preserve its right to file a judicial claim for the refund or issuance of a tax credit certificate of its unutilized input VAT. CEBECO. an administrative claim for refund or unutilized input VAT for the third and fourth quarter of 2001 in the amounts of P5. petitioner filed a Motion for Consolidation CTA Case Nos. respectively.96 for the third quarter of 2001. 83.31 for the fourth quarter of 2001 which remained unutilized against output VAT liability in said period or even in the subsequent quarters.64 On Importation of Goods 1.327. filed another Petition for Review for the refund or issuance of tax credit certificate in the amount of P3. 2003.64 Excess Input Tax & Overpayment P 3. petitioner filed a Petition for Review for the refund or issuance of a tax credit certificate in the amount of P5.31 for the fourth quarter of 2001. 7-95.. 6805 and 6851.50 28. on January 22.935. Said excess and unutilized input VAT was allegedly not utilized against any output VAT liability in the subsequent quarters nor carried over to the succeeding taxable quarters.

3 Acting on the petition.947.553.22 P 8.680.858. On March 24.050. petitioner formally offered its evidence on February 16.4 The Commissioner of Internal Revenue (CIR).xxxx After presenting its testimonial and documentary evidence. filed a Motion for Reconsideration against said Decision.102.34+P52. he challenged the jurisdiction of the CTA First Division to entertain respondent’s 29 . Inc.363.259.553. the same was denied in a Resolution dated October 15. this consolidated case was ordered submitted for decision with only petitioner’s Memorandum.553. thereafter. the CTA First Division issued a Decision dated May 17. 2006.02 Total zero-rated sales 270. In addition.49 350. Respondent.48 P 8.207.’s (TPI) refund claim or issuance of tax credit certificate. On appeal to the CTA En Banc. SO ORDERED. as respondent failed to file one within the period given by the Court. However.01 62.50) Substantiated available input VAT Less: Output VAT Substantiated Unutilized Input VAT P 9.44 IN VIEW OF THE FOREGOING.79 Multiply by the ratio of substantiated zero-rated sales to the total zero-rated sales Substantiated zero-rated sales 263. the Petition for Review is PARTIALLY GRANTED. Respondent is hereby ORDERED to refund or to issue a tax credit certificate in favor of petitioner in the reduced amount ofP8.44 representing the substantiated unutilized input VAT for the third and fourth quarters of 2001. 2007 partially granting Toledo Power.696. Pertinent portions of the Decision read: In sum.779. 2007.300. 2006. In a Resolution dated July 6. on the other hand. this Court promulgated a Resolution admitting all the exhibits offered by petitioner.050.191.44 computed as follows: Total Available Input VAT Less: Disallowed Input VAT (P20.81 Refundable Input VAT P 8.64+P277.841.752.050. 2006. petitioner was able to show its entitlement to the refund or issuance of tax credit certificate in the amount of P8.577. failed to adduce any evidence. the CIR argued that TPI failed to comply with the invoicing requirements to prove entitlement to the refund or issuance of tax credit certificate.267.

577.64+P277.680.191.752.01 Less: Output VAT Substantiated Unutilized Input VAT 62.petition for review for failure on its part to comply with the provisions of Section 112 (C) of the Tax Code.07) only for the third and fourth quarters of taxable year 2001.989. It held – x x x after re-examination of the records of this case. the CTA En Banc denied the CIR’s motion for reconsideration. SO ORDERED. and (2) whether TPI sufficiently complied with the invoicing requirements under the Tax Code.07 WHEREFORE.79 Multiply by the ratio of substantiated zero-rated sales to the total zero-rated sales Substantiated zero-rated sales 248.87 is fully substantiated. 6 In essence. 2008.696.151.48 P 8. 2007 and Resolution dated October 15.088. only the amount of P248.207.102.5 In a Resolution dated July 18.259.752.841.267. respondent is entitled to the refund or issuance of tax credit certificate in the amount of P8.947.989. premises considered.81 Refundable Input VAT P 8.87 Total zero-rated sales 270. out of the alleged Zero-rated sales amounting toP270.07 computed as follows: Total Available Input VAT P 9. Undaunted by the adverse ruling of the CTA. In a Decision dated May 7.088.34+P52. the CIR now seeks recourse to this Court on the following ground: THE COURT OF TAX APPEALS EN BANC ERRED IN RULING THAT THE GOVERNMENT IS LIABLE TO REFUND PETITIONER FOR ALLEGED OVERPAYMENT OF VAT.259.363.088.191.151. the Decision dated May 17. 2008.191. 2007 are AFFIRMED with MODIFICATION. Accordingly. two issues must be addressed to determine whether TPI is indeed entitled to its claim for refund or issuance of tax credit certificate: (1) whether TPI complied with the 120+30 day rule under Section 112 (C) of the Tax Code. Therefore.151.779.50) Substantiated available input VAT 350. Petitioner is hereby ORDERED TO REFUND to respondent the sum of EIGHT MILLION EIGHTY-EIGHT THOUSAND ONE HUNDRED FIFTY-ONE PESOS AND SEVEN CENTAVOS (P8. the Petition for Review En Banc is DENIED for lack of merit.49 Less: Disallowed Input VAT (P20.22 P 8. 30 .81. the CTA En Banc affirmed with modification the First Division’s assailed decision.

finally. appeal the decision or the unacted claim with the Court of Tax Appeals. it shall be allocated proportionately on the basis of the volume of sales: Provided. the Court confirmed the mandatory and jurisdictional nature of the 120+30 day rule. – Any VAT-registered person. the taxpayer may. From the date of submission of complete documents in support of its application. San Roque Power Corporation. whose sales are zero-rated or effectively zero-rated may. In case of full or partial denial of the claim for tax refund or tax credit. it must be emphasized that to validly claim a refund or tax credit of input tax. (2) and (b) and Section 108(B)(1) and (2). to the extent that such input tax has not been applied against output tax: Provided. Section 112 decrees that a VAT-registered person. – In proper cases. the CIR has 120 days to decide whether or not to grant the claim for refund or issuance of tax credit certificate. compliance with the 120+30 day rule under Section 112 of the Tax Code is mandatory. within two (2) years after the close of the taxable quarter when the sales were made. except transitional input tax. – (A) Zero-rated or Effectively Zero-Rated Sales. whose sales are zero-rated or effectively zero-rated.8 (San Roque). may apply for the issuance of a tax credit or refund creditable input tax due or paid attributable to such sales within two years after the close of the taxable quarter when the sales were made. Pertinent portions of Section 112 of the Tax Code. Recently. within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period.7 state: SEC. In case of full or partial denial of the claim for tax refund or tax credit. the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. First. appeal with the CTA the decision or inaction of the CIR. the taxpayer may. apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. Refunds or Tax Credits of Input Tax. as amended by Republic Act No. however. 112. xxxx (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. further. 9337. That for a person making sales that are zero-rated under Section 108(B)(6). or the failure on the part of the Commissioner to act on the application within the period prescribed above. within 30 days from receipt of the decision denying the claim or after the expiration of the 120-day period.Let us discuss the issues in seriatim. the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided. It ratiocinated as follows: 31 . That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services. in the consolidated cases of Commissioner of Internal Revenue v. the input taxes shall be allocated ratably between his zero-rated and non-zerorated sales. That in the case of zero-rated sales under Section 106(A)(2)(a)(1). or the failure on the part of the CIR to act on the application within the given period. and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions.

" The word "may" simply means that the taxpayer may or may not appeal the decision of the Commissioner within 30 days from receipt of the decision." the law does not make the 120+30 day periods optional just because the law uses the word "may. a claim for tax refund or credit. within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one-hundred twenty day-period." Following the verba legis doctrine. plain and unequivocal. without waiting for the Commissioner’s decision if the two-year prescriptive period is about to expire. appeal the decision or the unacted claim with the Court of Tax Appeals. and unequivocal. xxxx When Section 112 (C) states that "the taxpayer affected may. or does not act at all during the 120-day period. plain. appeal the decision or the unacted claim with the Court of Tax Appeals. In San Roque’s case. 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. To repeat. and it cannot blame anyone but itself.) This law is clear. As this law states. Thus. The CTA will have no jurisdiction because there will be no "decision" or "deemed a denial" decision of the Commissioner for the CTA to review. the taxpayer may. like a claim for tax exemption. or if the Commissioner does not act on the taxpayer’s claim within the 120-day period. it filed its petition with the CTA a mere 13 days after it filed its administrative claim with the Commissioner. the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period. 32 . The old rule that the taxpayer may file the judicial claim. The 30-day period was adopted precisely to do away with the old rule. this law should be applied exactly as worded since it is clear. so that under the VAT System the taxpayer will always have 30 days to file the judicial claim even if the Commissioner acts only on the 120th day. if he wishes. plain and unequivocal. Indisputably. Certainly by no stretch of the imagination can the word "may" be construed as making the 120+30 day periods optional. thus: x x x the taxpayer affected may. appeal the decision of the Commissioner to the CTA within 30 days from receipt of the Commissioner’s decision. Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner. 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. The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioner’s decision within the 120-day mandatory and jurisdictional period. is construed strictly against the taxpayer. strict compliance with the 120+30 day periods is necessary for such a claim to prosper.At the time San Roque filed its petition for review with the CTA. cannot apply because that rule was adopted before the enactment of the 30-day period. Section 112 (C) expressly grants the Commissioner 120 days within which to decide the taxpayer’s claim. San Roque knowingly violated the mandatory 120-day period. or within 30 days from the expiration of the 120-day period.1avvphi1 Following the well-settled verba legis doctrine. With the 30-day period always available to the taxpayer. plain and unequivocal: "x x x the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents. The law is clear. allowing the taxpayer to file a judicial claim one day after filing the administrative claim with the Commissioner. within thirty (30) days from receipt of the decision denying the claim or after the expiration of the one hundred twentyday period. this law must be applied exactly as worded since it is clear. the 120+30 day mandatory periods were already in the law. (Emphasis supplied.

2002. 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. although TPI’s judicial claim for the fourth quarter of 2001 has been filed prematurely. where TPI may elevate its claim with the CTA within 30 days. (4) All taxpayers. If the 120-day period expires without any decision from the CIR. as provided in Section 112 of the Tax Code. are as follows: (1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. As held in the San Roque ponencia. 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. except for the period from the issuance of BIR Ruling No. as an exception to the mandatory and jurisdictional 120+30 day periods. (3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision denying the administrative claim or from the expiration of the 120-day period without any action from the CIR. 33 . within which to decide on its claim. Thus. 2003 and January 22. strict compliance with the 120+30 day mandatory and jurisdictional periods is not necessary when the judicial claims are filed between December 10. respectively. 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 (issuance of BIR Ruling No. the most recent pronouncements of the Court provide for a window wherein the same may be entertained. Clearly. then the administrative claim may be considered to be denied by inaction. while its refund claim of unutilized input VAT for the fourth quarter of 2001 may be entertained since it falls within the exception provided in the Court’s most recent rulings. which again reinstated the 120+30 day periods as mandatory and jurisdictional. however. 2004. 2001 and January 25. 10 Here. TPI filed its third and fourth quarterly VAT returns for 2001 on October 25. 2010 (promulgation of the Aichi doctrine). DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted. In the present case. after the submission of TPI’s administrative claim and complete documents in support of its application. 2003. It then filed an administrative claim for refund of its unutilized input VAT for the third and fourth quarters of 2001 on September 30.whether before. the rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized input VAT. (2) 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. however. if there is inaction on the part of the CIR. TPI’s refund claim of unutilized input VAT for the third quarter of 2001 was denied for being prematurely filed with the CTA.9 In a nutshell. Then. or after the effectivity of the Atlas doctrine. However. it is only after the expiration of the 120-day period. The 120-day period may extend beyond the two-year period from the filing of the administrative claim if the claim is filed in the later part of the two-year period. during. 2004. therefore. can rely on BIR Ruling No. respectively. the CIR had 120 days or until January 28.

00) or more. the word "zero-rated" imprinted on the invoice covering zero-rated sales. receipts or invoices shall be issued which shall show the name. business style. however. we now resolve the issue of whether TPI sufficiently complied with the invoicing requirements under the Tax Code with respect to the fourth quarter of 2001.1âwphi1 In addition to the information shall be indicated in the invoice or receipt: (1) A statement that the seller is a VAT-registered person.With that settled. in addition to the information herein required. 237. 5. the name. and address of the purchaser. That where the purchaser is a VAT-registered person. in relation to Section 237 of the Tax Code. 4. – (A) Invoicing Requirements. issue an invoice or receipt. where the sale or transfer is made by a person liable to value-added tax to another person also liable to value-added tax. customer or client. or where the receipt is issued to cover payment made as rentals. TIN and address of seller. or regardless of the amount. – Issuance of Receipts or Sales of Commercial Invoices. further. 2. receipts or transfers in the amount of One hundred pesos (P100. Section 4. – All persons subject to an internal revenue tax shall. Invoicing Requirements – All VAT-registered persons shall. issue duly registered receipts or sales or commercial invoices. for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25. TIN. That in the case of sales. unit cost and description of merchandise or nature of service.11 34 . followed by his taxpayer’s identification number (TIN). and (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes value-added tax. 7-95 states: Section 4. for every sale or lease of goods or properties or services. for every sale.00) or more. date of transaction. if any. showing the date of transaction. Section 113 (A). – A VAT-registered person shall. issue duly registered receipts or sales or commercial invoices which must show: 1. the invoice or receipts shall further show the Taxpayer Identification Number (TIN) of the purchaser. compensations or fees. prepared at least in duplicate. business style. Invoicing and Accounting Requirements for VAT-Registered Persons. provides: SEC. unit cost and description of merchandise or nature of service: Provided. quantity.108-1. and 6. quantity. xxxx SEC.108-1 of Revenue Regulations No. commissions. 113. and address of the VAT-registered purchaser. the invoice value or consideration. customer or client: Provided. 3. if any. the name.

has accordingly developed an expertise on the subject. vs. the instant petition is PARTIALLY GRANTED. it is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which. Petitioner. Inc. Inc. 2014 CBK POWER COMPANY LIMITED. Commissioner of Internal Revenue. DECISION SERENO. CJ: 35 . 198729-30 January 15. COMMISSIONER OF INTERNAL REVENUE. G. those that are subject to 0% VAT (zero-rated) and exempt sales. Respondent. In the absence of any clear and convincing proof to the contrary. It ruled that factual findings made by the CTA can only be disturbed on appeal if they are supported by substantial evidence or there is a showing of gross error or abuse on the part of the Tax Court. SO ORDERED.12 In Barcelon. 13 the Court held that it accords the findings of fact by the CTA with the highest respect. by the very nature of its function of being dedicated exclusively to the resolution of tax problems. Roxas Securities. This case is hereby REMANDED to the Court of Tax Appeals for the proper computation of the refundable amount representing unutilized input VAT for the fourth quarter of 2001. Moreover.In the present case. v. since the imprinting of the word "zero-rated" was required merely to distinguish sales subject to 10% VAT. unless there has been an abuse or improvident exercise of authority. to enable the Bureau of Internal Revenue to properly implement and enforce the other VAT provisions of the Tax Code. 14 WHEREFORE. premises considered. Although the same was merely stamped and not pre-printed. Nos. we agree with the CTA’s findings that the words "zero-rated" appeared on the VAT invoices/official receipts presented by the TPI in support of its refund claim. only for the fourth quarter of 2001.R. The Commissioner of Internal Revenue is hereby ORDERED to refund or issue tax credit certificate in favor of Toledo Power. this Court must presume that the CTA rendered a decision which is valid in every respect. the same is sufficient compliance with the law.

other than capital goods. the new Caliraya Spillway.9 the court a quo ruled that petitioner had until the following dates within which to file both administrative and judicial claims: Taxable Quarter Last Day to 36 . 7621.T. Applying Commissioner of Internal Revenue v. maintenance. Mirant Pagbilao Corporation (Mirant). petitioner filed an Application for VAT Zero-Rate with the Bureau of Internal Revenue (BIR) in accordance with Section 108(B)(3) of the National Internal Revenue Code (NIRC) of 1997. as amended. Caliraya. Botocan. 55 of Laguna. Thus. among others. EB Nos. The Facts Petitioner is engaged. the CTA Special Second Division rendered a Decision on 3 March 2010. and the Kalayaan I hydroelectric power plants and their related facilities located in the Province of Laguna. petitioner filed a Petition for Review with the CTA on 18 April 2007. petitioner ’s sale of electr icity to the NPC from 1 January 2005 to 31 October 2005 was declared to be entitled to the benefit of effectively zero-rated value added tax (VAT). THE CTA SPECIAL SECOND DIVISION RULING After trial on the merits. The Petition assails the Decision 2 dated 27 June 2011 and Resolution3 dated 16 September 2011 of the Court of Tax Appeals En Banc (CTA En Banc in C. in the operation. as follows: 8 Period Covered Date Of Filing 1st quarter of 2005 30-Jun-05 2nd quarter of 2005 15-Sep-05 3rd quarter of 2005 28-Oct-05 Alleging inaction of the Commissioner of Internal Revenue (CIR). and management of the Kalayaan II pumped-storage hydroelectric power plant. with BIR Revenue District Office (RDO) No. Case No.This is a Petition for Review on Certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure filed by CBK Power Company Limited (petitioner). The application was duly approved by the BIR.T. which partly granted the claim of petitioner for the issuance of a tax credit certificate representing the latter's alleged unutilized input taxes on local purchases of goods and services attributable to effectively zero-rated sales to National Power Corporation (NPC) for the second and third quarters of 2005. 7 Petitioner filed its administrative claims for the issuance of tax credit certificates for its alleged unutilized input taxes on its purchase of capital goods and alleged unutilized input taxes on its local purchases and/or importation of goods and services.A. pursuant to Sections 112(A) and (B) of the NIRC of 1997. 658 and 659. The assailed Decision and Resolution reversed and set aside the Decision4 dated 3 March 2010 and Resolution5 dated 6 July 2010 rendered by the CTA Special Second Division in C.6 On 29 December 2004.A. as amended.

and third quarters of 2005 were belatedly filed. Hence. the CTA Division denied the claim for the first quarter of 2005 for having been filed out of time.10 the CTA En Banc ruled that petitioner’s judicial claim for the first. After an evaluation of petitioner’s claim for the second and third quarters of 2005. the court a quo partly granted the claim and ordered the issuance of a tax credit certificate in favor of petitioner in the reduced amount ofP27. considering that the judicial claim was filed on 18 April 2007.(2) and (B) and Section 108 (B)(1) and (2). which were both denied by the CTA Division. whose sales are zero-rated or effectively zero-rated may.ISSUE Petitioner’s assigned errors boil down to the principal issue of the applicable prescriptive period on its claim for refund of unutilized input VAT for the first to third quarters of 2005. petitioner timely filed its administrative claims for the three quarters of 2005.2005 Close of the quarter File Claim for Refund 1st quarter 31-Mar-05 31-Mar-07 2nd quarter 30-Jun-05 30-Jun-07 3rd quarter 30-Sep-05 30-Sep-07 Accordingly. except transitional input tax.123. However. second. That where the taxpayer is engaged in zero-rated or effectively 37 . – (A) Zero-rated or Effectively Zero-rated Sales. to the extent that such input tax has not been applied against output tax: Provided.170. this Petition. the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided. THE CTA EN BANC RULING On appeal. 7621 was dismissed. further. Aichi Forging Company of Asia. apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.Any VAT-registered person.36. That in the case of zero-rated sales under Section 106(A)(2)(a)(1). Inc. The CTA Special Second Division Decision and Resolution were reversed and set aside. 112. The parties filed their respective Motions for Partial Reconsideration. and the Petition for Review filed in CTA Case No. Petitioner’s Motion for Reconsideration was likewise denied for lack of merit. (Aichi). Refunds or Tax Credits of Input Tax. 11 THE COURT’S RULING The pertinent provision of the NIRC at the time when petitioner filed its claim for refund provides: SEC. relying on Commissioner of Internal Revenue v. within two (2) years after the close of the taxable quarter when the sales were made. however. .

petitioner’s sales to NPC are effectively subject to zero percent (0%) VAT. within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period. however. as amended. Commissioner of Internal Revenue 14 (hereby collectively referred as San Roque). The crux of the controversy arose from the proper application of the prescriptive periods set forth in Section 112 of the NIRC of 1997. and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions. with the finality of the Court’s pronouncement on the consolidated tax cases Commissioner of Internal Revenue v. Taganito Mining Corporation v. In Panasonic Communications Imaging Corporation of the Philippines v. San Roque Power Corporation. including VAT. xxxx (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. Commissioner of Internal Revenue. filed by petitioner for its sales to NPC covering January to October 2005. the BIR itself approved the application for zero-rating on 29 December 2004.13 this Court ruled: Under the 1997 NIRC. In fact.In proper cases. the taxpayer affected may. Should the input taxes result from zero-rated or effectively zero-rated transactions or from the acquisition of capital goods. Petitioner’s sales to NPC are effectively zero-rated As aptly ruled by the CTA Special Second Division. no payment is required of him. If the input taxes exceed the output taxes. the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof. and the interpretation of the applicable jurisprudence. and Philex Mining Corporation v. Although the ponente in this case expressed a different view on the mandatory application of the 120+30 day period as prescribed in Section 112. any excess over the output taxes shall instead be refunded to the taxpayer. Commissioner of Internal Revenue. . petitioner claims for the refund of the alleged excess input tax attributable to its effectively zero-rated sales to NPC. it shall be allocated proportionately on the basis of the volume of sales. Thus. 12 As a consequence. 38 . which categorically exempts it from the payment of any tax. the excess payment shall be carried over to the succeeding quarter or quarters.zero-rated sale and also in taxable or exempt sale of goods or properties or services. services rendered to NPC by a VAT-registered entity are effectively zero-rated. It is when his output taxes exceed his input taxes that he has to pay the excess to the BIR. whether direct or indirect. appeal the decision or the unacted claim with the Court of Tax Appeals. we are constrained to apply the dispositions therein to the facts herein which are similar. if at the end of a taxable quarter the seller charges output taxes equal to the input taxes that his suppliers passed on to him. The NPC is an entity with a special charter. or the failure on the part of the Commissioner to act on the application within the period prescribed above. In case of full or partial denial of the claim for tax refund or tax credit.

39 . Section 112 is the governing law. and that is attributable to zero-rated or effectively zero-rated sales. 15 Section 112(A) is clear that for VAT-registered persons whose sales are zero-rated or effectively zero-rated. Our VAT Law provides for a mechanism that would allow VAT-registered persons to recover the excess input taxes over the output taxes they had paid in relation to their sales. The reckoning frame would always be the end of the quarter when the pertinent sale or transactions were made. It must be emphasized that the Court merely clarified in Mirant that Sections 204 and 229. thus. Input tax is neither an erroneously paid nor an illegally collected internal revenue tax. specifically for the refund or credit of that tax only. petitioner’s administrative claims were filed well within the twoyear period from the close of the taxable quarter when the effectively zero-rated sales were made. to wit: Period Covered Close of the Taxable Quarter Last day to File Administrative Claim Date of Filing 1st quarter 2005 31-Mar-05 31-Mar-07 30-Jun-05 2nd quarter 2005 30-Jun-05 30-Jun-07 15-Sep-05 3rd quarter 2005 30-Sep-05 30-Sep-07 28-Oct-05 Judicial Claim Section 112(D) further provides that the CIR has to decide on an administrative claim within one hundred twenty (120) days from the date of submission of complete documents in support thereof. which prescribed a different starting point for the two-year prescriptive limit for filing a claim for a refund or credit of excess input tax. must be filed within two years after the close of the taxable quarter when such sales were made. the law under Section 112 (A) provides for a different reckoning point for the two-year prescriptive period. regardless of when the input VAT was paid. there is a two-year prescriptive period within which a VAT-registered person whose sales are zero-rated or effectively zero-rated may apply for the issuance of a tax credit certificate or refund of creditable input tax. 16 Pursuant to Section 112(A). a claim for the refund or credit of creditable input tax that is due or paid. the fact remains that Section 112 is the controlling provision for the refund or credit of input tax during the time that petitioner filed its claim with which they ought to comply.Administrative Claim Section 112(A) provides that after the close of the taxable quarter when the sales were made. However. it should not retroactively be applied to the instant case. were not applicable. We agree with petitioner that Mirant was not yet in existence when their administrative claim was filed in 2005. Given the distinctive nature of creditable input tax. For the refund or credit of excess or unutilized input tax.

the reversal by this Court of a general interpretative rule issued by the Commissioner. compliance with both periods is jurisdictional. the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. the Court in San Roque recognized that BIR Ruling No. DA-489-03 and its effect on taxpayers. Thus. particularly on a difficult question of law. Absent fraud. in BIR Ruling No. Inc. The period of 120 days is a prerequisite for the commencement of the 30-day period to appeal to the CTA. but by a government agency asked with processing tax refunds and credits. bad faith or misrepresentation. (Emphasis supplied) 40 . thus: Taxpayers should not be prejudiced by an erroneous interpretation by the Commissioner. xxxx Thus. like the reversal of a specific BIR ruling under Section 246. or the entity responded to. where this Court held that the 120+30 day periods are mandatory and jurisdictional. where the taxpayer did not wait for the lapse of the 120-day period. The abandonment of the Atlas doctrine did not result in Atlas.. Clearly.Bearing in mind that the burden to prove entitlement to a tax refund is on the taxpayer. should also apply prospectively. 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 within which the claim has not been acted upon. Prescinding from San Roque in the consolidated case Mindanao II Geothermal Partnership v. absent any evidence to the contrary. DA-489-03 expressly states 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. DA-489-03 constitutes equitable estoppel in favor of taxpayers. This Court is applying Mirant and Aichi prospectively. BIR Ruling No. Considering further that the 30-day period to appeal to the CTA is dependent on the 120-day period. DA-489-03 is a general interpretative rule. x x x. This government agency is also the addressee.. DA-489-03 is a general interpretative rule applicable to all taxpayers or a specific ruling applicable only to a particular taxpayer. the only issue is whether BIR Ruling No." This Court discussed BIR Ruling No. that is. DA-489-03 is a general interpretative rule because it was a response to a query made. not by a particular taxpayer. all taxpayers can rely on BIR Ruling No. petitioner had attached complete supporting documents necessary to prove its entitlement to a refund in its application. DA-489-03. while this government agency mentions in its query to the Commissioner the administrative claim of Lazi Bay Resources Development. Commissioner of Internal Revenue and Mindanao I Geothermal Partnership v. 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. BIR Ruling No. Thereafter. being made to return the tax refund or credit they received or could have received under Atlas prior to its abandonment.1âwphi1 Thus.17 this Court has ruled thus: Notwithstanding a strict construction of any claim for tax exemption or refund. BIR Ruling No. or other taxpayers similarly situated. The abandonment of the Atlas doctrine by Mirant and Aichi is proof that the reckoning of the prescriptive periods for input VAT tax refund or credit is a difficult question of law. Inc. it is presumed that in order to discharge its burden. the agency was in fact asking the Commissioner what to do in cases like the tax claim of Lazi Bay Resources Development. Commissioner of Internal Revenue.

DA-489-03. Philex’s case is not one of premature filing but of late filing. The exercise of such statutory privilege requires strict compliance with the conditions attached by the statute for its exercise. or after the Atlas case. Again. by express provision of law. Philex failed to comply with the statutory conditions and must thus bear the consequences. which means non-exhaustion of the 120-day period for the Commissioner to act on an administrative claim. Petitioner is similarly situated as Philex in the same case.In applying the foregoing to the instant case. we consider the following pertinent dates: 1âwphi1 Period Covered Administrative Claim Filed Expiration of 120-days Last day to file Judicial Claim Judicial Claim Filed 1st quarter 2005 30-Jun-05 28-Oct-05 27-Nov-05 18-Apr-07 2nd quarter 2005 15-Sep-05 13-Jan-06 13-Feb-06 3rd quarter 2005 28-Oct-05 26-Feb-06 28-Mar-06 It must be emphasized that this is not a case of premature filing of a judicial claim. In any event. San Roque. Philex did not file any petition with the CTA within the 120-day period. but did so long after the lapse of the 30-day period following the expiration of the 120-day period. DA-489-03 allowed premature filing of a judicial claim.19 but not its late filing. The Atlas doctrine cannot save Philex from the late filing of its judicial claim. Whether the two-year prescriptive period is counted from the date of payment of the output VAT following the Atlas doctrine. Philex filed its judicial claim long after the expiration of the 120-day period. or from the close of the taxable quarter when the sales attributable to the input VAT were made following the Mirant and Aichi doctrines. Philex had 30 days from the expiration of the 120day period to file its judicial claim with the CTA. whether governed by jurisprudence before. it cannot claim the benefit of the exception period as it did not file its judicial claim prematurely. The inaction of the Commissioner on Philex’s claim during the 120-day period is. "deemed a denial" of Philex’s claim. not a constitutional right. Philex’s judicial claim was indisputably filed late. during. Philex’s failure to do so rendered the "deemed a denial" decision of the Commissioner final and inappealable. while petitioner filed its administrative and judicial claims during the period of applicability of BIR Ruling No. BIR Ruling No. The right to appeal to the CTA from a decision or "deemed a denial" decision of the Commissioner is merely a statutory privilege. it failed to observe the 30-day prescriptive period to appeal to the CTA counted from the lapse of the 120-day period. in fact 426 days after the lapse of the 120-day period. Philex did not also file any petition with the CTA within 30 days after the expiration of the 120-day period. Philex’s judicial claim will have to be rejected because of late filing. Although petitioner did not file its judicial claim with the CTA prior to the expiration of the 120-day waiting period. (Emphases in the original) Likewise. 41 . 18 in which this Court ruled: Unlike San Roque and Taganito.

and the person who received the payment. the amount paid was correct and proper. 27 WHEREFORE. According to this principle. SO ORDERED. the law is explicit on the mandatory and jurisdictional nature of the 120+30 day period. there exists a binding relation between petitioner and the CIR.24 Finally. petitioner cannot rely on Atlas either. First. Also devoid of merit is the applicability of the principle of solutio indebiti to the present case. 25 Section 112 is a positive rule that should preempt and prevail over all abstract arguments based only on equity. and it was unduly delivered through mistake. At the time of payment of the input VAT. statutory law or judicial rules of procedure. are strictly construed against the taxpayer.22 There is solutio indebiti when: (1) Payment is made when there exists no binding relation between the payor. 42 . Second. Atlas referred only to the reckoning of the prescriptive period for filing an administrative claim. the doctrine in Atlas which reckons the two-year period from the date of filing of the return and payment of the tax. since petitioner was legally obligated to pay for that liability. does not interpret − expressly or impliedly − the 120+30 day periods. The entitlement to a refund or credit of excess input tax is solely based on the distinctive nature of the VAT system. Moreover.23 Though the principle of solutio indebiti may be applicable to some instances of claims for a refund. 26 The burden is on the taxpayer to show strict compliance with the conditions for the grant of the tax refund or credit. since the latter case was promulgated only on 8 June 2007. For failure of petitioner to comply with the 120+30 day mandatory and jurisdictional period. who has no duty to pay. and the person who has no right to receive the payment becomes obligated to return it. and not through liberality or some other cause. the elements thereof are wanting in this case. the payment of input tax was not made through mistake. and (2) Payment is made through mistake. In that situation. the former being a taxpayer obligated to pay VAT. petitioner lost its right to claim a refund or credit of its alleged excess input VAT. With regard to petitioner’s argument that Aichi should not be applied retroactively. we reiterate that even without that ruling. just like tax exemptions. whereby the payor becomes the creditor who then has the right to demand the return of payment made by mistake. 21 The quasi-contract of solutio indebiti is based on the ancient principle that no one shall enrich oneself unjustly at the expense of another. which has been aptly described as "a justice outside legality. premises considered. Well-settled is the rule that tax refunds or credits. equity. and never against. the instant Petition is DENIED.As this Court enunciated in San Roque .20 Simply stated. a creditor-debtor relationship is created under a quasi-contract." is applied only in the absence of. if something is received when there is no right to demand it. the obligation to return it arises.

: Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court which seeks to reverse and set aside the Decision1 dated August 14.19 to P51 134 951. The facts follow. DECISION PERALTA. petitioner filed with the Bureau of Internal Revenue (BIR) its first to fourth quarterly value-added tax (VAT) returns for the calendar year 2002: 43 . J.G. 190928 January 13. On the following dates. vs. Respondent.40. 2009 and Resolution2 dated January 5 2010 of the Court of Tax Appeals CTA) En Banc in CTA EB No. No. Petitioner. 2008 of the CT A First Division insofar as it reduced the amount of refund granted from P69 618 971. COMMISSIONER OF INTERNAL REVENUE.). 2014 TEAM ENERGY CORPORATION (formerly MIRANT PAGBILAO CORP. 422 which modified the Decision3 dated May 16 2008 and Resolution4 dated September 8.R.

requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply. 2002 Second July 23. due to respondent’s inaction. as amended.107-1 (a) of Revenue Regulations No. That petitioner’s administrative and judicial claims for tax credit or refund of unutilized input tax (VAT) was filed within two (2) years after the close of 44 . However. Petitioner’s alleged claim for refund is subject to administrative investigation/examination by the respondent.918. viz.002. 2002 Third October 25. as well as the filing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the Tax Code. b. The invoicing and accounting requirements for VAT-registered persons.918. 2003 Subsequently. c. 7-95. To support its claim. Lucena City. 6. 53-98. 2004. 60. and Section 236 of the Tax Code.Quarter Date Filed First April 25. as amended.002. 2002 Fourth January 27.: a. 6-97 in relation to Section 4. d. petitioner filed an administrative claim for refund of unutilized input VAT with Revenue District Office No. 2003. petitioner’s failure to submit proof of compliance with the abovestated requirements warrants immediate dismissal of the petition for review. e. on December 22. The registration requirements of a value-added taxpayer in compliance with Section 6 (a) and (b) of Revenue Regulations No. otherwise there would be no sufficient compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code. In his Answer.95 for calendar year 2002. as amended. petitioner elevated its claim before the CTA First Division on April 22. That the input taxes of P79. and before the taxpayer could avail of judicial remedies as provided for in the law. in the total amount of P79. as amended. Hence.95 allegedly paid by the petitioner on its purchases of goods and services for the four (4) quarters of the year 2002 were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over in the succeeding taxable quarter or quarters. it is imperative for petitioner to prove the following. It is worthy of emphasis that Section 112 (D) of the Tax Code. respondent interposed the following special and affirmative defenses: 5. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund in pursuance to Revenue Memorandum Order No.

On October 10.104-2 of Revenue Regulations 7-95. 8. The fallo reads: WHEREFORE.5 After trial on the merits. the CTA First Division rendered judgment as follows: WHEREFORE.618. the petition is hereby PARTLY GRANTED. Accordingly. they are looked upon with disfavor. representing unutilized input value-added taxes paid by petitioner on its domestic purchases of goods and services and importation of goods attributable to its effectively zero-rated sales of power generation services to the National Power Corporation for the taxable year 2002. such as subsidiary purchase Journal. 2007. 7-95 (Re: Substantiation of Claims for Input Tax Credit). showing that it actually paid VAT in accordance with Sections 110 (A) (2) and 113 of the Tax Code as amended.19). Thus. 2008 are hereby AFFIRMED. Respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount of SIXTY NINE MILLION SIX HUNDRED EIGHTEEN THOUSAND NINE HUNDRED SEVENTY-ONE AND 19/100 PESOS (P69. as such. respondent filed his Motion for Partial Reconsideration against said decision. premises considered. the Commissioner of Internal Revenue is hereby ORDERED to REFUND or ISSUE a TAX CREDIT CERTIFICATE in favor of Team Energy Corporation the reduced amount of FIFTY-ONE MILLION ONE HUNDRED THIRTY.134. g. (Re: Persons who can avail of the Input Tax Credits).6 Not satisfied. SO ORDERED. as amended. with modification that onlyP51. 7. respondent filed a Petition for Review with the CTA En Banc. The requirements as enumerated under Section 4. 2008 and Resolution dated September 8. the instant Petition for Review is hereby PARTIALLY GRANTED. and in pursuance to Section 4.FOUR 45 . f.951. The assailed Decision dated May 16. the CTA En Banc affirmed the CTA First Division’s decision with the modification that the refundable amount be reduced to P51.134.the taxable quarter when the sales were made in accordance with Sections 112 (A) and (D) and 229 of the TAX Code. An exemption from common burden cannot be permitted to exist upon vague implications. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation and.971.40. which the CTA First Division denied in a Resolution dated September 8. properly supported by VAT invoices and/or official receipts and other documents.40 is the refundable amount to respondent for taxable year 2002.104-5 (a) & (b) of Revenue Regulations No. Furthermore. in an action for refund the burden of proof is on the taxpayer to establish its right to refund and failure to sustain the burden is fatal to the claim for refund/credit. In a Decision dated August 14. 2008. 2009. IN VIEW OF ALL THE FOREGOING. That petitioner’s domestic purchases of goods and services were made in the course of its trade and business.951. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law.

Hence.79 BASED ON PRESCRIPTION BECAUSE: A.484. (2) and (B) and Section 108 (B)(1) and (2).40). NOS. Provided. 141104 & [148763]. viz. COMMISSIONER OF INTERNAL REVENUE. ASSUMING. THAT THE MIRANT PAGBILAO CASE REVERSED THE DOCTRINE IN THE ATLAS CASE. 112. SO ORDERED. WHICH THE HONORABLE COURT EXPRESSLY RECOGNIZED IN ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION V. That in the case of zero-rated sales under Section 106 (A)(2)(a)(1). the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided. however. further. except transitional input tax. THE CTA EN BANC SHOULD NOT HAVE HASTILY RELIED ON THE CONTRARY RULING OF THE HONORABLE COURT IN COMMISSIONER OF INTERNAL REVENUE V. the sole issue for our resolution is whether or not petitioner timely filed its judicial claim for refund of input VAT for the first quarter of 2002.8 Simply. within two (2) years after the close of the taxable quarter when the sales were made. C. petitioner filed a motion for reconsideration against said Decision. SECTION 4 (3) OF THE CONSTITUTION.134. it is relevant to quote Sections 112 (A) and (C) of the Tax Code.: SEC. To appropriately address this issue. That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of good of properties or 46 . 172129. G. G. representing the latter’s excess and unutilized input VAT for the period covering calendar year 2002. – Any VAT-registered person. – (A) Zero-rated or Effectively Zero-rated Sales. 2007 ("ATLAS CASE").019. but the same was denied in a Resolution dated January 5. the present petition wherein petitioner raises the following issues for our resolution: THE CTA EN BANC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT DISALLOWED PETITIONER’S INPUT VAT FOR THE FIRST QUARTER AMOUNTING TO P18. 2010. to the extent that such input tax has not been applied against output tax. PETITIONER FILED ITS JUDICIAL CLAIM FOR REFUND WELL WITHIN THE TWOYEAR PRESCRIPTIVE PERIOD RECKONED FROM THE DATE OF FILING OF THE QUARTERLY VAT RETURN PURSUANT TO LONG STANDING JURISPRUDENCE. whose sales are zero-rated or effectively zero-rated may. 2008 ("MIRANT PAGBILAO CASE") AS THE HONORABLE COURT COULD NOT HAVE INTENDED TO REVERSE THE DOCTRINE IN THE ATLAS CASE IN THE LIGHT OF ARTICLE VIII.7 Unfazed. JUNE 8.THOUSAND NINE HUNDRED FIFTY-ONE AND 40/100 (P51. apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.R. THE SAME SHOULD BE APPLIED PROSPECTIVELY AND NOT RETROACTIVELY TO THE PREJUDICE OF PETITIONER WHO RELIED IN GOOD FAITH ON PREVAILING JURISPRUDENCE AT THE TIME OF FILING OF ITS JUDICIAL CLAIM FOR REFUND.951. SEPTEMBER 12. MIRANT PAGBILAO CORPORATION. Refund or Tax Credits of Input Tax.R. B. NO. BUT WITHOUT CONCEDING.

40 on the ground that petitioner’s judicial claim for the first quarter of 2002 was filed beyond the two-year period prescribed under Section 112 (A) of the Tax Code. the following are the pertinent dates relevant to petitioner’s claim for refund: Period (2002) Close of Taxable Quarter Last Day for Filing of The Claim 1st Quarter March 31. 2004. the Commissioner shall grant a refund or issue a tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. within two (2) years after the close of the taxable quarter when the sales were made.951. to wit: As regards the fifth requisite. as amended. 2003. as follows: xxxx Pursuant to the above ruling of the Supreme Court. 2002 June 30. it is clear that the two-year prescriptive period provided in Section 112 (A) of the NIRC of 1997. Section 112 (A) of the NIRC of 1997. while the judicial claim for refund was filed on April 22. In the recent case of Commissioner of Internal Revenue v. the Supreme Court definitely settled the issue on the reckoning of the prescriptive period on claims for refund of input VAT attributable to zero-rated or effectively zero-rated sales. Mirant Pagbilao (Formerly Southern Energy Quezon. but from the close of the taxable quarter when the sales were made.134. In case of full or partial denial of the claim for tax refund or tax credit. Since 47 . apply for refund or issuance of a TCC of its creditable input tax or paid attributable to such sales. 2002 September 30. the CTA En Banc reduced petitioner’s claim for refund of its excess or unutilized input VAT to P51. 2002 March 31. In its assailed decision. within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period. as amended. Pursuant to the above ruling of the Supreme Court. appeal the decision or the unacted claim with the Court of Tax Appeals. 565 SCRA 154 (hereafter referred to as the "Mirant Case"). the taxpayer affected may. xxxx (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. 2004 3rd Quarter September 30. and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions. it shall be allocated proportionately on the basis of the volume of sales. 2004 4th Quarter December 31. 2002 December 31. – In proper cases. or the failure on the part of the Commissioner to act on the application within the period prescribed above. 2004 2nd Quarter June 30.services. Inc. should be counted not from the payment of the tax. 2004 Record shows that respondent filed its administrative claim for refund or issuance of a TCC on December 22.). provides that a VAT-registered taxpayer whose sale is zero-rated or effectively zero-rated may.

134. plain and unequivocal. this law should be applied exactly as worded since it is clear. within thirty (30) days from receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period. xxxx In sum. the last day prescribed by the Mirant Case. San Roque Power Corporation10 (San Roque ponencia). x x x. plain and unequivocal language. The two-year prescriptive period is a grace period in favor of the taxpayer and he can avail of the full period before his right to apply for a tax refund or credit is barred by prescription. the application for refund or credit may be filed by the taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will still strictly comply with the law. If he files his claim on the last day of the two-year prescriptive period. the law states that the taxpayer may apply with the Commissioner for a refund or credit "within two (2) years.40 only. the Court En Banc finds that the total substantiated input tax filed within the twoyear prescriptive period of respondent TeaM Energy amounts to P51. xxxx There are three compelling reasons why the 30-day period need not necessarily fall within the two-year prescriptive period. plainly and unequivocally provides that the taxpayer "may. Thus. the Court expounded: Section 112 (C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner.618. his claim is still filed on time. or if the Commissioner does not act on the taxpayer’s claim within the 120-day period. we held that the taxpayer can file his administrative claim for refund or issuance of tax credit certificate anytime within the two-year prescriptive period. thus: x x x the taxpayer affected may. Thus." which means at anytime within two years. (Emphasis supplied) This law is clear. appeal the decision or the unacted claim with the Court of Tax Appeals. only on April 22. Therefore. the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period. 2004. The Commissioner will then have 120 days from such filing to decide the claim." In short. this Court emphasized that Section 112 (A) and (C) of the Tax Code must be interpreted according to its clear. Section 112 (A) clearly. 48 . If the Commissioner decides the claim on the 120th day or does not decide it on that day. within two (2) years after the close of the taxable quarter when the sales were made.respondent filed its judicial claim for refund for the four quarters of 2002. Following the well-settled verba legis doctrine. First. As this law states. apply for the issuance of a tax credit certificate or refund of the creditable input tax due or paid to such sales. the claim for refund granted by the First Division of this Court in the amount ofP69. respondent is barred from claiming refund of its unutilized input taxes for the first quarter of 2002.19 should be reduced by deducting the portion of the claim corresponding to the first quarter that had already prescribed. plain and unequivocal.951. as long as the administrative claim is filed within the twoyear prescriptive period. the taxpayer still has 30 days to file his judicial claim with the CTA.9 Recently. however.971. 2004. appeal the decision of the Commissioner to the CTA within 30 days from receipt of the Commissioner’s decision. In said case. if he wishes. twenty-two (22) days from March 31. the taxpayer may. in the consolidated cases of Commissioner of Internal Revenue v.

Here. even if the taxpayer complied with the law by filing his administrative claim within the two-year prescriptive period. his claim is still filed on time. plain and unequivocal language.11 (Emphasis supplied) Based on the aforequoted discussions.Second. If the Commissioner decides the claim on the 120th day. wholly or even partly. the Commissioner. will have until the 731st day to decide the claim." Third." The reference in Section 112 (C) of the submission of documents "in support of the application filed in accordance with Subsection (A)" means that the application in Section 112 (A) is the administrative claim that the Commissioner must decide within the 120-day period. The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that is not found in the law. the taxpayer can no longer file his judicial claim with the CTA because the two-year prescriptive period (equivalent to 730 days) has lapsed. Otherwise. a remedy that the law expressly grants in clear. if the taxpayer files his administrative claim on the 611th day. The Commissioner will have 120 days from such filing to decide the claim. if the 30-day period. Section 112 (C) provides that the Commissioner shall decide the application for refund or credit "within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A). This is not only the plain meaning but also the only logical interpretation of Section 112 (A) and (C). or any part of it. If the Commissioner decides only on the 731st day. Thus.1âwphi1 The taxpayer can file his administrative claim for refund or credit at any time within the two-year prescriptive period. with his 120-day period. Section 112 (A) and (C) must be interpreted according to its clear. This Court cannot interpret a law to defeat. the two-year prescriptive period does not refer to the filing of the judicial claim with the CTA but to the filing of the administrative claim with the Commissioner. However. since its administrative claim was filed within the two-year prescriptive period and its judicial claim was filed on the first day 49 . The 30-day period granted by law to the taxpayer to file an appeal before the CTA becomes utterly useless. It results in truncating 120 days from the 730 days that the law grants the taxpayer for filing his administrative claim with the Commissioner. plain and unequivocal language. As held in Aichi. there is no question that petitioner timely filed its administrative claim with the Bureau of Internal Revenue within the required period. the filing of the administrative claim beyond the first 610 days will result in the appeal to the CTA being filed beyond the two-year prescriptive period. Stated otherwise. the two-year prescriptive period in Section 112 (A) refers to the period within which the taxpayer can file an administrative claim for tax refund or credit. the "phrase ‘within two years x x x apply for the issuance of a tax credit or refund" refers to applications for refund/credit with the CIR and not to appeals made to the CTA. then the taxpayer must file his administrative claim for refund or credit within the first 610 days of the two-year prescriptive period. or does not decide at all. or does not decide it on that day. we therefore disagree with the CTA En Banc’s finding that petitioner’s judicial claim for the first quarter of 2002 was not timely filed. the taxpayer still has 30 days to file his judicial claim with the CTA. is required to fall within the two-year prescriptive period (equivalent to 730 days). In short. If he files his claim on the last day of the twoyear prescriptive period. The San Roque ponencia firmly enunciates that the taxpayer can file his administrative claim for refund or credit at any time within the two-year prescriptive period. What is only required of him is to file his judicial claim within thirty (30) days after denial of his claim by respondent or after the expiration of the 120-day period within which respondent can decide on its claim.

the Decision dated August 14.19.618. we rule that petitioner’s claim for refund for the first quarter of 2002 should be granted.618. 50 . All told. to decide on its claim. representing petitioner s unutilized input VAT paid on its domestic purchases of goods and services and importation of goods attributable to its effectively zerorated sales of power generation services to the National Power Corporation for the taxable year 2002.19.after the expiration of the 120-day period granted to respondent. we revert to the CTA First Division s finding that petitioner s total refundable amount should beP69. 422 are hereby AFFIRMED with MODIFICATION that petitioner s total refundable amount shall beP69. in view of the foregoing.971. in CTA EB No. SO ORDERED.971. 2010 of the Court of Tax Appeals En Banc. 2009 and Resolution dated January 5. WHEREFORE.

665 . 3 Relative to its sale to NPC. The CTA 2nd Division denied the claim on May 2.1The CT A En Banc denied the petitioner's motion for reconsideration. 2009. has been registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer under Taxpayer Identification No. 2000. namely: Northern Mini Hydro Corporation.: This case involves a claim for refund or tax credit to cover petitioner Luzon Hydro Corporation's unutilized Input Value-Added Tax (VAT) worth 1 2. the petitioner appeals the decision of the CTA En Banc. Petitioner.5 and that it had declared the input VAT of P9.795. Ever Electrical Manufacturing.89 on its domestic purchases of goods and services used in its generation and sales of electricity to NPC in the four quarters of 2001. Inc.16 corresponding to the four quarters of taxable year 2001. and from January 2. and Pacific Hydro Limited.903. No. 2001-269).051. February 1.443. and affirmed the decision of the CTA 2nd Division through its decision dated May 5. 2001 1st quarter – 2001 1. 2001 2nd quarter – 2001 2. 2000 to December 31. Respondent.G. 6669). vs.427. Antecedents The petitioner.89 in its amended VAT returns for the four quarters on 2001. 2008 on the ground that the petitioner did not prove that it had zero-rated sales for the four quarters of 2001. It was formed as a consortium of several corporations. COMMISSIONER OF INTERNAL REVENUE. The Case The petitioner brought this action in the Court of Tax Appeals (CTA) after the Commissioner of Internal Revenue (respondent) did not act on the claim (CTA Case No. 2013 LUZON HYDRO CORPORATION. 2001 to December 31.920. J.96 I July 23.795. Inc. 2000 to December 31. 004-266-526.4 The petitioner alleged herein that it had incurred input VAT in the amount of P9.427.96 51 .166. the petitioner was granted by the BIR a certificate for Zero Rate for VAT purposes in the periods from January 1. as follows: 6 Exhibit Date Filed Period Covered Input VAT (P) F May 25. DECISION BERSAMIN. Pursuant to the Power Purchase Agreement entered into with the National Power Corporation (NPC). a corporation duly organized under the laws of the Philippines. Aboitiz Equity Ventures.2 Hence. 188260 November 13. 2000 (Certificate No..R. 2001 (Certificate No. the electricity produced by the petitioner from its operation of the Bakun Hydroelectric Power Plant was to be sold exclusively to NPC. Z-162-2000).

vs. to wit: xxxx 7. 31 SCRA 95) and as such they are looked upon [with] disfavor (Western Minolco Corp.127.12 xxxx On October 30.7 Subsequently. on April 14.38. 10. Whether or not the input value added tax being claimed by petitioner is supported by sufficient documentary evidence. 2003. Taxes paid and collected are presumed to have been made in accordance with the law and regulations. hence. praying for the refund or tax credit certificate (TCC) corresponding to the unutilized input VAT paid for the four quarters of 2001 totalling P9. The petitioner has failed to demonstrate that the taxes sought to be refunded were erroneously or illegally collected.449.56.482. 2003.598. the parties submitted a Joint Stipulation of Facts and Issues. 2003.L July 23. through Revenue Examiner Felicidad Mangabat of Revenue District Office No. G.39 O July 24. 8.8 The BIR. Ledesma. Commissioner of Internal Revenue. and failure to sustain the same is fatal to the action for tax refund.795.89 On November 26. the petitioner filed a written claim for refund or tax credit relative to its unutilized input VAT for the period from October 1999 to October 2001 aggregating P14.557.609.11 the Commissioner denied the claim. it amended the claim for refund or tax credit to cover the period from October 1999 to May 2002 forP20. and made a recommendation in its report dated August 19. 9. In an action for tax refund. 2001. The issues to be resolved were consequently the following: 1. 2 in Vigan City.427.9 Respondent Commissioner of Internal Revenue (Commissioner) did not ultimately act on the petitioner’s claim despite the favorable recommendation. 2002 favorable to the petitioner’s claim for the period from January 1.R. Hence.004. 1970.58 Total 9. on July 24. 11. the burden is upon the taxpayer to prove that he is entitled thereto. concluded an investigation. both of the National Internal Revenue Code. 2002 4th quarter – 2001 4.10 Answering on May 29. It is incumbent upon petitioner to show compliance with the provisions of Section 112 and Section 229. not refundable. 52 . L-13509. No.047. 2003.427. 2001 to December 31.88. and raised the following special and affirmative defenses. the petitioner filed its petition for review in the CTA. 2002 3rd quarter –2001 1. 13 which the CTA in Division approved on November 10. as amended. 2001. 124 SCRA 121).795. Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. January 30. 2002.

viz: In petitioner’s VAT returns for the four quarters of 2001. no amount of zero-rated sales was declared. It is clear under Section 112 (A) of the NIRC of 1997 that the 53 . through the Assistant Commissioner for Assessment Services.16) allegedly attributable thereto cannot be refunded. 00002618). This Court cannot give credence to the said letter as it refers to taxable year 2000. while the instant case refers to taxable year 2001.88 (including the present claim of PhP2.14 While the case was pending hearing.665. informed the petitioner by the letter dated March 3.16.874.2. 4. 2003 as the Commissioner’s answer to the Amended Petition for Review.16 When no supplemental answer was filed within the period thus allowed.795. Whether or not the claim filed by the petitioner was filed within the reglementary period provided by law. it had annual gross receipts of PhP187.920. Whether petitioner has excess and unutilized input VAT from its purchases of domestic goods and services. Likewise.15 On May 3.874.665.Whether or not the operation of the Bakun Hydroelectric Power Plant is directly connected and attributable to the generation and sale of electricity to NPC. net of disallowances of P2. the petitioner presented testimonial and documentary evidence to support its claim. including capital goods in the amount of P9.19 Ruling of the CTA in Division The CTA in Division promulgated its decision in favor of the respondent denying the petition for review.427. and admitted the Amended Petition for Review. 2005. The only proof submitted by petitioner is a letter from Regional Director Rene Q.795. 2005 that its claim had been granted in the amount of P6. petitioner did not submit any VAT official receipt of payments for services rendered to NPC. 3. 2005. 1. the petitioner filed a Motion for Leave of Court to Amend Petition for Review in consideration of the partial grant of the claim through TCC No.00. Accompanying the letter was the TCC forP6. the Commissioner submitted the case for decision based on the pleadings.88.524. Whether or not the input VAT being claimed by petitioner is attributable to its zerorated sale of electricity to the NPC.17 Thereafter.16.665.427.920. and 5. Revenue Region No.18 On May 2. Aguas. The CTA in Division also directed the respondent to file a supplemental answer within ten days from notice.72 (TCC No. the CTA in Division treated the answer filed on May 16. 2007.762.992. the Commissioner. stating that the financial statements and annual income tax return constitute sufficient secondary proof of effectively zero-rated and that based on their examination and evaluation of the financial statements and annual income tax return of petitioner for taxable year 2000. the input VAT payments of PhP9. The CTA in Division granted the motion on May 11. the sole business of petitioner. Without zero-rated sales for the four quarters of 2001. 00002618.920.762.72. whereby the petitioner sought the refund or tax credit in the reduced amount of P2. the case was submitted for decision without the memorandum of the Commissioner. On the other hand.

665. petitioner is.B No. 2008. 2009. Considering that there are no zero-rated sales to speak of for taxable year 2001. like tax exemptions. petitioner’s claim must therefore. cannot be given credence.920. the petitioner filed a petition for review in the CTA En Banc (CTA E. On May 5. Even assuming for the sake of argument that the financial statements.665. 420). 2008. 2008. hence. As found by the Court a quo. the same could not be taken plainly as it is because there is still a need to produce the supporting documents proving the existence of such zero-rated sales. not entitled to a refund of PhP2. the instant Petition for Review is hereby DENIED for lack of merit. WHEREFORE. Aguas that the statements and the return are considered sufficient to establish that it generated zerorated sale of electricity is bereft of merit. posing the main issue whether or not the CTA in Division erred in denying its claim for refund or tax credit upon a finding that it had not established its having effectively zerorated sales for the four quarters of 2001. WHEREFORE. the return and the letter opinion relates to 2001. the CTA En Banc also denied the petitioner’s motion for reconsideration.20 On May 21. the CTA En Banc promulgated the assailed decision affirming the Division. the CTA in Division denied the petitioner’s motion for reconsideration on September 5. the letter opinion refers to taxable year 2000. 2009. the instant Petition for Review is hereby DENIED for lack of merit. are construed strictly against the taxpayer and that the claimant has the burden of proof to establish the factual basis of its claim for tax credit or refund. therefore.23 On June 10. and denying the claim for refund or tax credit. while the instant case covers taxable year 2001. fail. xxxx For petitioner’s non-compliance with the first requisite of proving that it had effectively zerorated sales for the four quarters of 2001. 24 54 . the petitioner moved to reconsider the decision of the CTA in Division.22 Decision of the CTA En Banc On October 17. SO ORDERED. Failure in this regard. stating: The other argument of petitioner that even if the tax credit certificate will not be used as evidence.920. the claimed unutilized input VAT payments of PhP2.16 cannot be granted. it was able to prove that it has zero-rated sale as shown in its financial statements and income tax returns quoting the letter opinion of Regional Director Rene Q.21 However. It is settled that tax refunds. SO ORDERED.16 input tax allegedly attributable thereto since it is basic requirement under Section 112 (A) of the NIRC that there should exists a zero-rated sales in order to be entitled to a refund of unutilized input tax. which is wanting in this case.refund/tax credit of unutilized input VAT is premised on the existence of zero-rated or effectively zero-rated sales.

2001 to December 31. (4) The CTA En Banc manifestly overlooked evidence not disputed by the parties and which. but had been found only after the CTA En Banc has already affirmed the decision of the CTA in Division. the petitioner has appealed. inasmuch as that would constitute an encroachment on the powers granted to an administrative agency having expertise on the matter. Section 112 of the National Internal Revenue Code 1997 provides: SEC. Evidence of sale of electricity to NPC other than official receipts could prove zero-rated sales. if properly considered.25 the petitioner has argued as follows: (1) Its sale of electricity to NPC was automatically zero-rated pursuant to Republic Act No. and for the remand of the case to the CTA for the reception of its VAT official receipts as newly discovered evidence. In the alternative.16. would justify a different conclusion. 112. 7-95. it has asked that the Commissioner allow the claim for refund or tax credit ofP2. (2) The TCC. 2001 by the presentation of VAT official receipts that would contain all the necessary information required under Section 113 of the National Internal Revenue Code of 1997. In its August 3. 26 The petitioner has prayed for the reversal of the decision of the CTA En Banc. (3) The CTA En Banc was devoid of any authority to determine the existence of the petitioner’s zero-rated sales.27 the Commissioner has insisted that the petitioner’s claim cannot be granted because it did not incur any zero-rated sale. 9136 (EPIRA Law). 2009 petition for review.108-1 of Revenue Regulations No. Ruling of the Court The petition is without merit. and that it should be allowed to present the official receipts in a new trial. hence. 2009. that its failure to comply with the invoicing requirements on the documents supporting the sale of services to NPC resulted in the disallowance of its claim for the input tax.920.— 55 . urging as the lone issue: – WHETHER THE CTA EN BANC COMMITTED A REVERSIBLE ERROR IN AFFIRMING THE DECISION OF THE CTA.28 the petitioner reiterated its contention that it had established its claim for refund or tax credit. In the comment submitted on December 3. it need not prove that it had zero-rated sales in the period from January 1. and the claim should also be denied for not being substantiated by appropriate and sufficient evidence. once issued. its former Finance and Accounting Manager. constituted an administrative opinion that deserved consideration and respect by the CTA En Banc. Refunds or Tax Credits of Input Tax. In its reply filed on February 4. 2010.Issue Aggrieved.665. as implemented by Section 4. It has supported the latter relief prayed for by representing that the VAT official receipts had been misplaced by Edwin Tapay.

it shall be allocated proportionately on the basis of the volume of sales. and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions.(A) Zero-rated or Effectively Zero-rated Sales--Any VAT-registered person. except transitional input tax. xxxx A claim for refund or tax credit for unutilized input VAT may be allowed only if the following requisites concur. the CTA En Banc rejected the insistence because. (g) for zero-rated sales under Section 106(A)(2)(1) and (2). further. the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided. and 108(B)(1) and (2). To recall. Had there been zero-rated sales. apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales. 106(B). the input taxes shall be proportionately allocated on the basis of sales volume. (e) the input taxes have not been applied against output taxes during and in the succeeding quarters. Indeed. (d) the input taxes are not transitional input taxes. and. and the input taxes cannot be directly and entirely attributable to any of these sales. however.1avvphi1 We agree with the CTA En Banc that the petitioner did not produce evidence showing that it had zero-rated sales for the four quarters of taxable year 2001. It ought to be reminded that it could not be permitted to substitute such vital and material documents with secondary evidence like financial statements. even assuming for the sake of 56 . or in the de novo litigation before the CTA in Division. (h) where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales. which indicated that it had not made any sale of electricity. (b) the taxpayer is engaged in zero-rated or effectively zero-rated sales.30 Although the petitioner has correctly contended here that the sale of electricity by a power generation company like it should be subject to zero-rated VAT under Republic Act No. (f) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales.31 its assertion that it need not prove its having actually made zero-rated sales of electricity by presenting the VAT official receipts and VAT returns cannot be upheld. namely: (a) the taxpayer is VAT-registered. As the CTA En Banc precisely found. Aguas to the effect that its financial statements and its return were sufficient to establish that it had generated zero-rated sale of electricity. within two (2) years after the close of the taxable quarter when the sales were made. and (i) the claim is filed within two years after the close of the taxable quarter when such sales were made. it would have reported them in the returns. the petitioner did not reflect any zero-rated sales from its power generation in its four quarterly VAT returns. That in the case of zero-rated sales under Section 106(A)(2)(a)(1). to the extent that such input tax has not been applied against output tax: Provided. 9136. whose sales are zero-rated or effectively zero-rated may. the letter opinion referred to taxable year 2000 but this case related to taxable year 2001. We further find to be lacking in substance and bereft of merit the petitioner’s insistence that the CTA En Banc should not have disregarded the letter opinion by BIR Regional Director Rene Q. the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. 29 The petitioner did not competently establish its claim for refund or tax credit. secondly. firstly. (c) the input taxes are due or paid. That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services. (2) and (B) and Section 108(B)(1) and (2). it carried the burden not only that it was entitled under the substantive law to the allowance of its claim for refund or tax credit but also that it met all the requirements for evidentiary substantiation of its claim before the administrative official concerned.

which did not happen here. the Court DENIES the petition for review on certiorari for its lack of merit. The absence of a specific rule on newly discovered evidence at this late stage of the proceedings is not without reason. had they truly existed. Verily. the CTA En Banc properly disregarded the letter opinion as irrelevant to the present claim of the petitioner. In order that newly discovered evidence may be a ground for allowing a new trial. the return and the letter opinion had related to taxable year 2001. and ORDERS the petitioner to pay the costs of suit. the receipts. Commissioner of Internal Revenue32 that a judicial claim for tax refund or tax credit brought to the CTA is by no means an original action but an appeal by way of a petition for review of the taxpayer’s unsuccessful administrative claim. the misplaced receipts were forgotten evidence. (c) such evidence is material. indeed. not merely cumulative. We further see no reason to grant the prayer of the petitioner for the remand of this case to enable it to present before the CTA newly discovered evidence consisting in VAT official receipts. Seldom is the concept appropriate when the litigation is already on appeal. the concept of newly discovered evidence is applicable to litigations in which a litigant seeks a new trial or the re-opening of the case in the trial court. could have been sooner discovered and easily produced at the trial with the exercise of reasonable diligence. they still could not be taken at face value for the purpose of approving the claim for refund or tax credit due to the need to produce the supporting documents proving the existence of the zero-rated sales. If that was true. hence. corroborative. And. To start with. and to do so the taxpayer should prove every minute aspect of its case by presenting. (b) such evidence could not have been discovered and produced at the trial even with the exercise of reasonable diligence. The Court cannot accept its tender of such receipts and return now. particularly in this Court. or impeaching. the Court has emphasized in Atlas Consolidated Mining and Development Corporation v. an act that the Court could not do by virtue of its not being a trier of facts. the proposed evidence was plainly not newly discovered considering the petitioner s admission that its former Finance and Accounting Manager had misplaced the VAT official receipts. In that respect. 57 . and (d) such evidence is of such weight that it would probably change the judgment if admitted. we still hold that the concept of newly discovered evidence may not apply herein. including whatever was required for the successful prosecution of the administrative claim as the means of demonstrating to the CTA that its administrative claim should have been granted in the first place. as it goes against the sound business practice of safekeeping relevant documents precisely to ensure their future use to support an eventual substantial claim for refund or tax credit. for.argument that the financial statements. 2009 of the Court of Tax Appeals En Bane. But the petitioner made no convincing demonstration that it had exercised reasonable diligence. WHEREFORE. AFFIRMS the decision dated May 5. Nonetheless. Ordinarily. The propriety of remanding the case for the purpose of enabling the CTA to receive newly discovered evidence would undo the decision already on appeal and require the examination of the pieces of newly discovered evidence. the taxpayer has to convince the CTA that the quasi-judicial agency a quo should not have denied the claim. it must be fairly shown that: (a) the evidence is discovered after the trial. formally offering and submitting its evidence to the CTA. the non-production of documents as vital and material as such receipts and return were to the success of its claim for refund or tax credit was improbable. on the proposition that we may relax the stringent rules of procedure for the sake of rendering justice.33 The first two requisites are not attendant. secondly.

CJ. from which the petitioner was able to generate export sales amounting to P114.577. 184266. 2000 to December 31. The aforestated export sales which transpired from April 1. Petitioner alleged that from September 1998 to December 31. 2000 were “zero-rated” sales.SO ORDERED.24. as a pure buy-sell trader. these imported food ingredients were exported between the periods of April 1. 2000. v.R. Commissioner of Internal Revenue. pursuant to 58 . Inc. 11 November 2013 2 [SERENO. No.937. 2000. 2000 to December 31. Applied Food Ingredients Company.Subsequently. it paid an aggregate sum of input taxes for its importation of food ingredients. G.] FACTS Petitioner is a Value-Added Tax (VAT) taxpayer engaged in the importation and exportation business.

the CIR had until 24 July 2002 within which to decide on the claim of petitioner for an input VAT refund attributable to the its zero-rated sales for the period April to September 2000. 7-95. when the 120+30 day mandatory periods were already in the law and BIR Ruling No. inasmuch as no jurisdiction was acquired by the CTA. On March 26. or for the period covering October to December 2000.On appeal.108-1 of Revenue Regulations No. 59 . 6513. in view of respondent’s inaction. 2002 and June 28. Case No.T. petitioner filed two separate applications for the issuance of tax creditcertificates.A. 2000 have not been applied against any output tax. the premature filing of its claim for refund/credit of input VAT before the CTA warranted a dismissal. petitioner does not have an excuse for not observing the 120+ 30 day period.On July 24. 1998 to December 31. It denied petitioner’s claim for failure to comply with the invoicing requirements prescribed under Section 113 in relation to Section 237 of the National Internal Revenue Code (NIRC) of 1997 and Section 4. 2002.On the other hand. the CIR had until 26 October 2002 within which to decide on petitioner’s claim for refund filed on 28 June 2002. DA-489-03 had not yet been issued. docketed as C. In this case. ISSUE Is the petitioner is entitled to the issuance of a tax certificate or refund representing creditable input taxes attributable to zero-rated sales? HELD NO. Petitioner clearly failed to observe the mandatory 120-day waiting period.Counting 120 days from 26 March 2002. The Commissioner of Internal Revenue (CIR) had one hundred twenty (120) days from the date of submission of complete documents in support of the application within which to decide on the administrative claim. Failure of petitioner to observe the mandatory 120-day period is fatal to its claim and rendered the CT A devoid of jurisdiction over the judicial claim. In accordance with the ruling in San Roque and considering that petitioner’s judicial claim was filed on 24 July 2002. Consequently.Section 106(A (2)(a)(1) of the NIRC of 1997.Petitioner alleged that the accumulated input taxes for the period of September 1. 2002.Trial ensued and the CTA First Division rendered a Decision on 13 June 2007. petitioner elevated the case before this Court by way of a Petition for Review. the CTA En Banc likewise denied the claim of petitioner citing violation of the invoicing requirements. the judicial claim of petitioner was filed on 24 July 2002.

however. Hence. the Court ruled that the appearance of the word “zerorated” on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. No. If. – Stare decisis et non quieta movere. In that case. PHILIPPINES. the claim for tax credit/refund was denied for noncompliance with Section 4. v. INC. courts have no choice but to resolve subsequent cases involving the same issue in the same manner. The claim for credit/refund. remained unacted by the respondent. Thus. The absence of the word “zero rated” on the invoices/receipts is fatal to a claim for credit/refund of input VAT. once a case has been decided one way.108-1 of Revenue Regulations No. COMMISSIONER OF INTERNAL REVENUE G.R. Commissioner of Internal Revenue (G. No. 7-95. Issue: Whether or not the failure to print the word “zero-rated” on the invoices/receipts is fatal to a claim for credit/ refund of input VAT on zero-rated sales Held: Yes. absent such 60 . which requires the word “zero rated” to be printed on the invoices/receipts covering zero-rated sales. 612 SCRA 28.J. petitioner was constrained to file a petition before the CTA. a PEZA Corporation. 2010). J. February 8. This has been squarely resolved in Panasonic Communications Imaging Corporation of the Philippines (formerly Matsushita Business Machine Corporation of the Philippines) v. The CTA eventually denied the petition for lack of the word “zero-rated” on the invoices/receipts.R. 178090. Courts are bound by prior decisions. Facts: Petitioner. filed applications for tax credit/refund of unutilized input VAT on its zero-rated sales for the taxable quarters of 2000. 177127 October 11. 2010 Del Castillo.A. Doctrine: – The absence of the word “zero rated” on the invoices/receipts is fatal to a claim for credit/refund of input VAT. From the abovementioned decision.R.

In response. ADELINA A. TANO. L-37 remanding the case to the Local Board of Assessment Appeals (LBAA) of Baguio City for further proceedings. vs. particularly as to requirement of payment under protest. The facts The factual antecedents of the case as found by the CTA En Banc areas follows: In a letter dated 21 March 2002. a successful claim for input VAT is made. Before the Court is a Petition for Review on Certiorari seeking tore verse and set aside the 27 July 2005 Decision1of the Court of Tax Appeals(CTA) En Banc in C. IN HER CAPACITY AS THE CITY ASSESSOR OF THE CITY OF BAGUIO. TABANGIN. 2013 CAMP JOHN HAY DEVELOPMENT CORPORATION. The City Assessor replied in a letter dated 11 April 2002 that the subject ARPs (with an additional ARP on another building bringing the total number of ARPs to thirty-seven [37]) against the buildings of petitioner located within the JHSEZ were 61 . is mandatory. E. does not deal with the authority of local assessor to assess real property tax. petitioner questioned the assessments in a letter dated 3April 2002 for lack of legal basis due to the City Assessor’s failure to identify the specific properties and its corresponding assessed values. REPRESENTED BY ITS CHAIRMAN HON. CENTRAL BOARD OF ASSESSMENT APPEALS. DECISION PEREZ. Petitioner. IN HER CAPACITY AS CHAIRMAN OF THE BOARD OF TAX (ASSESSMENT) APPEALS OF BAGUIO CITY. ESTRELLA B. which were leased out to petitioner. respondent City Assessor of Baguio City notified petitioner Camp John Hay Development Corporation about the issuance against it of thirty-six (36) Owner’s Copy of Assessment of Real Property (ARP).B. whether full or partial. No. with ARP Nos. J. Such claim questions the correctness of the assessment and compliance with the Q applicable provisions of Republic Act (RA) No. 01-07040-008887 to 0107040-008922covering various buildings of petitioner and two (2) parcels of land owned by the Bases Conversion Development Authority (BCDA) in the John Hay Special Economic Zone (JHSEZ). 48 which affirmed the Resolutions dated 23 May 2003 and 8 September 2004 issued by the Central Board of Assessment Appeals (CBAA) in CBAA Case No.T. CESAR S. GUTIERREZ. the government would be refunding money it did not collect. Baguio City. No. AND HON. 7160 or the Local Government Code (LGC) of 1991. 169234 October 2.A.: A claim for tax exemption. Respondents.word. G.R.

and raised the following issues for its consideration: (1) whether or not respondent City 62 . 9282.issued on the basis of the approved building permits obtained from the City Engineer’s Office of Baguio City and pursuant to Sections 201 to 206 of RA No. in no case. 1125. On 8 September 2004. as to the issue raised pertaining to the propriety of the subject assessments issued against petitioner. Subsequently. Consequently. The governing provision in this case is Section 231. petitioner appealed to the CTA En Banc by filing a Petition for Review under Section 11 of RA No.4 the BTAA cited Section 7. on 24 November 2004. The appeal was docketed as Tax Appeal Case No.5 Rule V of the Rules of Procedure Before the LBAA. otherwise known as the Bases Conversion and Development Act of 1992. either in cash or in bond. petitioner elevated the case before the CBAA through a Memorandum on Appeal docketed as CBAA Case No. 7227. including real property taxes. suspend the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor. 7160 which provides that "appeal on assessments of real property made under the provisions of this Code shall. Petitioner claimed that there was no legal basis for the issuance of the assessments because it was allegedly exempted from paying taxes. the BTAA dismissed petitioner’s Motion for Reconsideration in the 20 September 2002 Resolution6 for lack of merit. 48.3 The Ruling of the BTAA In a Resolution dated 12 July 2002. 8 the CBAA explained that the deferment of hearings by the LBAA was merely in compliance with the mandate of the law. 2002-003.A. not Section 226. pursuant to RA No. of RA No. The Ruling of the CBAA The CBAA denied petitioner’s appeal in a Resolution dated 23 May 2003. without prejudice to subsequent adjustment depending upon the final outcome of the appeal. and remanded the case to the LBAA of Baguio City for further proceedings subject to a full and up-to-date payment of the realty taxes on subject properties as assessed by the respondent City Assessor of Baguio City. particularly as to the payment under protest of the subject real property taxes before the hearing of its appeal. as amended by Section 9 of RA No. 7 set aside the BTAA’s order of deferment of hearing. and enjoined petitioner to first comply therewith. 7160 or the LGC of 1991. L-37. national and local." In addition. petitioner filed with the Board of Tax Assessment Appeals (BTAA) of Baguio City an appeal under Section 2262 of the LGC of 1991 challenging the validity and propriety of the issuances of the City Assessor. EB No. allegedly claimed to be a tax-exemptentity. the CBAA denied petitioner’s Motion for Reconsideration for lack of merit. Citing various cases it previously decided. Aggrieved. the CBAA expressed that it has yet to acquire jurisdiction over it since the same has not been resolved by the LBAA. on 23 May 2002. docketed as C.T.9 Undaunted by the pronouncements in the abovementioned Resolutions.

7160or the LGC of 1991. the tax should have been paid first without prejudice to subsequent adjustment depending upon the final outcome of the appeal and that the tax or portion thereof paid under protest. on the subject properties assessed by the City Assessor of Baguio City. the court a quo ruled that it could not resolve the issue on whether petitioner is liable to pay real property tax or whether it is indeed a taxexempt entity considering that the LBAA has not decided the case on the merits. Hence. petitioner is not liable for the payment of the real property taxes subject of this petition. 7160 or the LGC of 1991 does not apply when the person assessed is a tax-exemptentity. in cash or bond. this Petition for Review wherein petitioner on the ground of lack of legal basis seeks to set aside the 27 July 2005 Decision. adopting the CBAA’s position. has legal basis to order the remand of the case to the LBAA of Baguio City for further proceedings subject to a full and up-to. Section 252 of RA No. To do otherwise would not only be procedurally wrong but legally wrong. In support of the present petition. of the realty taxes on the subject properties as assessed by the City Assessor of the City of Baguio. and to nullify the assessments of real property tax issued against it by respondent City Assessor of Baguio City.A. EB No. 12 The Issue The Issue before the Court is whether or not respondent CTA En Banc erred in dismissing for lack of merit the petition in C. or land owned by the BCDA under lease to the petitioner. and (2)whether or not the CBAA.11 the CTA En Banc found that petitioner has indeed failed to comply with Section 252 of RA No. in relation to Section 7. also known as the LGC of 1991 14. petitioner posits the following grounds: (a) Section 225 (should be Section 252) of RA No. categorically provides: 63 .date payment. and accordingly affirmed the order of the CBAA to remand the case to the LBAA of Baguio City for further proceedings subject to a full and up-to-date payment of realty taxes. in its Resolutions dated 23 May 2003 and 8September 2004. 01-07040-008887 to 01-07040-008922for real property taxation of the buildings of the petitioner. 48. Moreover. shall be held in trust by the treasurer concerned. It therefore concluded that before a protest may be entertained. Consequently. 7160.Assessor of the City of Baguio has legal basis to issue against petitioner the subject assessments with serial nos. Rule V of the Rules of Procedure before the LBAA. 13 Our Ruling The Court finds the petition unmeritorious and therefore rules against petitioner.T. a tax-exemptentity.10 The Ruling of the CTA En Banc In the assailed Decision dated 27 July 2005. either in cash or in bond. and (b) Under the doctrine of operative fact. it dismissed the petition and affirmed the subject Resolutions of the CBAA which remanded the case to the LBAA for further proceedings subject to compliance with said Section.

and issue subpoena and subpoena duces tecum. after hearing. The owner of the property or the person having legal interest therein or the assessor 64 . city treasurer or municipal treasurer. the tax payer may avail of the remedies as provided for in Chapter 3. 229. the amount or portion of the tax protested shall be refunded to the protestant. – (a)The Board shall decide the appeal within one hundred twenty (120) days from the date of receipt of such appeal. within sixty (60) days from the date of receipt of the written notice of assessment. 7160 or the LGC of 1991 are those provided for under Sections 226 to 231. or applied as tax credit against his existing or future tax liability. Significant provisions pertaining to the procedural and substantive aspects of appeal before the LBAA and CBAA. (Emphasis and underlining supplied) Relevant thereto. The proceedings of the Board shall be conducted solely for the purpose of ascertaining the facts without necessarily adhering to technical rules applicable in judicial proceedings. (c) The secretary of the Board shall furnish the owner of the property or the person having legal interest therein and the provincial or city assessor with a copy of the decision of the Board. the Board shall have the powers to summon witnesses. the remedies referred to under Chapter 3. Payment Under Protest. SEC. There shall be annotated on the tax receipts the words "paid under protest. shall beheld in trust by the treasurer concerned. shall render its decision based on substantial evidence or such relevant evidence on record as a reasonable mind might accept as adequate to support the conclusion. 252. In case the provincial or city assessor concurs in the revision or the assessment. Local Board of Assessment Appeals. The Board. city or municipal assessor in the assessment of his property may. – Any owner or person having legal interest in the property who is not satisfied with the action of the provincial. Action by the Local Board of Assessment Appeals. 226. including its effect on the payment of real property taxes. administer oaths. follow: SEC. conduct ocular inspection. Book II of this Code. appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose. Book II of RA No. in the case of a municipality within Metropolitan Manila Area." The protest in writing must be filed within thirty (30) days from payment of the tax to the provincial. who shall decide the protest within sixty (60) days from receipt. – (a) No protest shall be entertained unless the taxpayer first pays the tax. (c) In the event that the protest is finally decided in favor of the taxpayer.SEC. together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. (d) In the event that the protest is denied or upon the lapse of the sixty-day period prescribed in subparagraph (a). it shall be his duty to notify the owner of the property or the person having legal interest therein of such fact using the form prescribed for the purpose. (b) The tax or a portion thereof paid under protest. Title Two. (b) In the exercise of its appellate jurisdiction. Title Two. take depositions.

who is not satisfied with the decision of the Board may, within thirty (30) days after
receipt of the decision of said Board, appeal to the Central Board of Assessment
Appeals, as here in provided. The decision of the Central Board shall be final and
executory.
SEC. 231. Effect of Appeal on the Payment of Real Property Tax. – Appeal on assessments of
real property made under the provisions of this Code shall, in no case, suspend the
collection of the corresponding realty taxes on the property involved as assessed by the
provincial or city assessor, without prejudice to subsequent adjustment depending upon the
final outcome of the appeal. (Emphasis supplied)
The above-quoted provisions of RA No. 7160 or the LGC of 1991,clearly sets forth the
administrative remedies available to a taxpayer or real property owner who does not agree
with the assessment of the real property tax sought to be collected.
The language of the law is clear. No interpretation is needed. The elementary rule in
statutory construction is that if a statute is clear, plain and free from ambiguity, it must be
given its literal meaning and applied without attempted interpretation. Verba legis non est
recedendum. From the words of a statute there should be no departure. 15
To begin with, Section 252 emphatically directs that the taxpayer/real property owner
questioning the assessment should first pay the tax due before his protest can be
entertained. As a matter of fact, the words "paid under protest" shall be annotated on the
tax receipts. Consequently, only after such payment has been made by the taxpayer may he
file a protest in writing (within thirty (30) days from said payment of tax) to the provincial,
city, or municipal treasurer, who shall decide the protest within sixty (60)days from its
receipt. In no case is the local treasurer obliged to entertain the protest unless the tax due
has been paid.
Secondly, within the period prescribed by law, any owner or person having legal interest in
the property not satisfied with the action of the provincial, city, or municipal assessor in the
assessment of his property may file an appeal with the LBAA of the province or city
concerned, as provided in Section 226 of RA No. 7160 or the LGC of 1991. Thereafter, within
thirty (30) days from receipt, he may elevate, by filing a notice of appeal, the adverse
decision of the LBAA with the CBAA, which exercises exclusive jurisdiction to hear and
decide all appeals from the decisions, orders, and resolutions of the Local Boards involving
contested assessments of real properties, claims for tax refund and/or tax credits, or
overpayments of taxes.16
Significantly, in Dr. Olivares v. Mayor Marquez, 17 this Court had the occasion to extensively
discuss the subject provisions of RA No. 7160 or the LGC of 1991, in relation to the
impropriety of the direct recourse before the courts on issue of the correctness of
assessment of real estate taxes. The pertinent articulations follow:
x x x A perusal of the petition before the RTC plainly shows that what is actually being
assailed is the correctness of the assessments made by the local assessor of Parañaque on
petitioners’ properties. The allegations in the said petition purportedly questioning the
assessor’s authority to assess and collect the taxes were obviously made in order to justify

65

the filing of the petition with the RTC. In fact, there is nothing in the said petition that
supports their claim regarding the assessor’s alleged lack of authority. What petitioners raise
are the following:
(1) some of the taxes being collected have already prescribed and may no longer be
collected as provided in Section 194 of the Local Government Code of 1991; (2) some
properties have been doubly taxed/assessed; (3) some properties being taxed are no
longer existent;
(4)some properties are exempt from taxation as they are being used exclusively for
educational purposes; and (5) some errors are made in the assessment and collection
of taxes due on petitioners’ properties, and that respondents committed grave abuse
of discretion in making the "improper, excessive and unlawful the collection of taxes
against the petitioners."
Moreover, these arguments essentially involve questions of fact. Hence, the petition should
have been brought, at the very first instance, to the LBAA.
Under the doctrine of primacy of administrative remedies, an error in the assessment must
be administratively pursued to the exclusion of ordinary courts whose decisions would be
void for lack of jurisdiction. But an appeal shall not suspend the collection of the tax
assessed without prejudice to a later adjustment pending the outcome of the appeal.
Even assuming that the assessor’s authority is indeed an issue, it must be pointed out that
in order for the court a quo to resolve the petition, the issues of the correctness of the tax
assessment and collection must also necessarily be dealt with.
xxxx
In the present case, the authority of the assessor is not being questioned. Despite
petitioners’ protestations, the petition filed before the court a quo primarily involves the
correctness of the assessments, which are questions of fact, that are not allowed in a
petition for certiorari, prohibition and mandamus. The court a quo is therefore precluded
from entertaining the petition, and it appropriately dismissed the petition. 18 (Emphasis and
underlining supplied)
By analogy, the rationale of the mandatory compliance with the requirement of "payment
under protest" similarly provided under Section 64of the Real Property Tax Code (RPTC) 19 was
earlier emphasized in Meralcov. Barlis,20wherein the Court held:
We find the petitioner’s arguments to be without merit. The trial court has no jurisdiction to
entertain a Petition for Prohibition absent petitioner’s payment under protest, of the tax
assessed as required by Sec.64 of the RPTC. Payment of the tax assessed under protest, is a
condition sine qua non before the trial court could assume jurisdiction over the petition and
failure to do so, the RTC has no jurisdiction to entertain it.
The restriction upon the power of courts to impeach tax assessment without a prior
payment, under protest, of the taxes assessed is consistent with the doctrine that taxes are

66

the lifeblood of the nation and as such their collection cannot be curtailed by injunction or
any like action; otherwise, the state or, in this case, the local government unit, shall be
crippled in dispensing the needed services to the people, and its machinery gravely
disabled.
xxxx
There is no merit in petitioner’s argument that the trial court could take cognizance of the
petition as it only questions the validity of the issuance of the warrants of garnishment on its
bank deposits and not the tax assessment. Petitioner MERALCO in filing the Petition for
Prohibition before the RTC was in truth assailing the validity of the tax assessment and
collection. To resolve the petition, it would not only be the question of validity of the
warrants of garnishments that would have to be tackled, but in addition the issues of tax
assessment and collection would necessarily have to be dealt with too. As the warrants of
garnishment were issued to collect back taxes from petitioner, the petition for prohibition
would be for no other reason than to forestall the collection of back taxes on the basis of tax
assessment arguments. This, petitioner cannot do without first resorting to the proper
administrative remedies, or as previously discussed, by paying under protest the tax
assessed, to allow the court to assume jurisdiction over the petition.
xxxx
It cannot be gainsaid that petitioner should have addressed its arguments to respondent at
the first opportunity - upon receipt of the3 September 1986 notices of assessment signed by
Municipal Treasurer Norberto A. San Mateo. Thereafter, it should have availed of the proper
administrative remedies in protesting an erroneous tax assessment, i.e., to question the
correctness of the assessments before the Local Board of Assessment Appeals (LBAA), and
later, invoke the appellate jurisdiction of the Central Board of Assessment Appeals(CBAA).
Under the doctrine of primacy of administrative remedies, an error in the assessment must
be administratively pursued to the exclusion of ordinary courts whose decisions would be
void for lack of jurisdiction. But an appeal shall not suspend the collection of the tax
assessed without prejudice to a later adjustment pending the outcome of the appeal. The
failure to appeal within the statutory period shall render the assessment final and
unappealable.
Petitioner having failed to exhaust the administrative remedies available to it, the
assessment attained finality and collection would be in order. (Emphasis and underscoring
supplied)
From the foregoing jurisprudential pronouncements, it is clear that the requirement of
"payment under protest" is a condition sine qua non before a protest or an appeal
questioning the correctness of an assessment of real property tax may be entertained.
Moreover, a claim for exemption from 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, a question of fact

67

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 including corporate charters. certifications and mortgage deeds. In the case at bench. (Emphasis supplied) In other words. However. it is evident that petitioner’s failure to comply with the mandatory requirement of payment under protest in accordance with Section 252 of the LGC of 1991 was fatal to its appeal. the above-quoted provision implies that the local assessor has the authority to assess the property for realty taxes. the BTAA simply recognized the importance of the requirement of "payment under protest" before an appeal may be entertained. 206. and in relation with Section231 of the same Code as to non-suspension of collection of the realty tax pending appeal.21 Therefore. taxes must be paid under protest if the exemption from taxation is insisted upon. If the required evidence is not submitted within the period herein prescribed. contracts. who shall claim tax exemption for such property under this Title shall file with the provincial. including copies of ARPs (with ARP Nos. it filed its protest through a letter dated 3 April 2002seeking clarification as to the legal basis of said assessments. by the LBAA. bylaws. Clearly from the foregoing factual backdrop. if the property being taxed has not been dropped from the assessment roll. 68 . without payment of the assessed real property taxes. as provided for under Section 7. Proof of Exemption of Real Property from Taxation. the property shall be listed as taxable in the assessment roll. applying the above-cited jurisprudence in the present case. and any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the claim. pursuant to Section 252. Afterwards. affidavits. petitioner then filed before the BTAA its appeal questioning the validity and propriety of the subject ARPs. the same shall be dropped from the assessment roll. Rule V of the Rules of Procedure Before the LBAA. articles of incorporation. title of ownership. respondent City Assessor replied thereto in a letter dated 11 April 2002 which explained the legal basis of the subject assessments and even included an additional ARP against another real property of petitioner. However. at the very first instance. 01-07040008887 to 01-07040-008922) attached thereto.which should be resolved. and similar documents. petitioner considered the11 April 2002 letter as the "action" referred to in Section 226 which speaks of the local assessor’s act of denying the protest filed pursuant to Section252. by providing that real property not declared and proved as tax-exempt shall be included in the assessment roll. This may be inferred from Section 206 of RA No. if the property shall be proven to be tax exempt. – Every person by or for whom real property is declared. Subsequently. Notwithstanding such failure to comply therewith. 7160 or the LGC of 1991which states that: SEC. Hence. the BTAA elected not to immediately dismiss the case but instead took cognizance of petitioner’s appeal subject to the condition that payment of the real property tax should first be made before proceeding with the hearing of its appeal. records reveal that when petitioner received the letter dated 21 March 2002 issued by respondent City Assessor.

In this wise. Baguio City. and thus could not be deemed a "taxpayer" within the meaning of the law. Section 206 of RA No. it expressly admitted ownership of the various buildings subject of the assessment and thereafter focused on the argument of its exemption under RA No. the duty to declare the true value of real property for taxation purposes is imposed upon the owner.25 about the subject ARPs covering various buildings owned by petitioner and parcels of land (leased out to petitioner) all located within the JHSEZ. petitioner contends that the requirement of paying the tax under protest is not applicable when the person being assessed is a tax-exempt entity. 420.23 This Court is not persuaded. who shall claim exemption from payment of real property taxes imposed against said property. thus. shall file with the provincial. records show that respondent City Assessor of Baguio City notified petitioner. In the present case. 7227. It is an accepted principle in taxation that taxes are paid by the person obliged to declare the same for taxation purposes. The subject letters expressed that the assessments were based on the approved building permits obtained from the City Engineer’s Office of Baguio City and pursuant to Sections 201 to 206 of RA No. and therefore considered as the person with the obligation to shoulder tax liability thereof. the burden of proving exemption from local taxation is upon whom the subject real property is declared. the provincial or city assessor shall declare the property in the name of the defaulting owner and assess the property for taxation. or defaulting authorized representative. As discussed above. since petitioner herein is 69 .22 as stated in and confirmed by the lease agreement it entered into with the BCDA. Noticeably. 7160 or the LGC of 1991 which pertains to whom the subject real properties were declared. the taxpayer assumes the character of a defaulting owner. Hence. the City Assessor acted in accordance with her mandate and in the regular performance of her official function when the subject ARPs were issued against petitioner herein. For that reason. petitioner alleges that it is exempted from paying taxes. as quoted earlier. First. these factual allegations were neither contested nor denied by petitioner. said property shall be listed as taxable in the assessment roll. or defaulting administrator. In support thereto. But petitioner did not present any documentary evidence to establish that the subject properties being tax exempt have already been dropped from the assessment roll. Consequently. in its feeble attempt to justify non-compliance with the provision of Section 252. including real property taxes. when these persons fail or refuse to make a declaration of the true value of their real property within the prescribed period. As a matter of fact. if any. 7160 or the LGC of 1991. or administrator. being the owner of the buildings. in accordance with Section 206. 7227 and Presidential Proclamation No. said person shall be considered by law as the taxpayer thereof. or their duly authorized representatives. They are thus considered the taxpayers.Notably. Series of 1994. as contemplated by law. Clearly. city or municipal assessor sufficient documentary evidence in support of such claim. liable to pay back taxes. in the letters dated 21 March 200224 and 11April 2002. since it is entitled to the tax incentives and exemptions under the provisions of RA No. Failure to do so. categorically provides that every person by or for whom real property is declared.

and not a constitutional right. or as previously discussed.27 Article XVI of the Lease Agreement dated 19 October 1996 it entered with the BCDA. i. and thus. RA No. petitioner is mandated by law to comply with the requirement of payment under protest of the tax assessed. 7160 or the LGC of 1991. particularly Section 252 of RA No. at the very instance. and (d) at any rate. However. 7227 and Presidential Proclamation No. and accordingly. Unfortunately. the issue on whether or not it is entitled to exemption from paying taxes. this Court holds that petitioner is considered a taxable entity in this case. the Supreme Court has stated that taxation is the rule and exemption is the exception. considering that petitioner is deemed a taxpayer within the meaning of law. petitioner should have first paid and remitted 5% of the gross income earned by it within ninety (90) days from the close of the calendar year through the JPDC. 7227 are exclusive only to the Subic Special Economic and Free Port Zone. is a matter which would be better resolved. petitioner cannot do without first resorting to the proper administrative remedies. natural or inherent. the extension of the same to the JHSEZ (as provided in the second sentence of Section 3 of Presidential Proclamation No. (c) the right to appeal is a privilege of statutory origin. there are factual issues needed to be confirmed. Second. it appears from the records that said Lease Agreement has yet to be presented nor formally offered before any administrative or judicial body for scrutiny. and the rule that doubts should be resolved in favor of provincial corporations. petitioner has neither established nor presented any evidence to show that it has indeed paid and remitted 5% of said gross income tax. 70 . 7160 or the LGC of 1991. meaning a right granted only by the law. it is therefore presumed to be the person with the obligation to shoulder the burden of paying the subject tax in the present case. was allegedly confirmed by Section 18. 7160 or the LGC of 1991.the declared owner of the subject buildings being assessed for real property tax. before the LBAA. Therefore. it is obvious that in order for a complete determination of petitioner’s alleged exemption from payment of real property tax under RA No. for the following grounds: (a) petitioner’s reliance on its entitlement for exemption under the provisions of RA No.e. it follows that petitioner may avail of such opportunity only upon strict compliance with the procedures and rules prescribed by the law itself.26 Thus applying the rule of strict construction of laws granting tax exemptions. petitioner needs more than mere arguments and/or allegations contained in its pleadings to establish and prove its exemption. making prior proceedings before the LBAA a necessity. Time and again. by paying under protest the tax assessed in compliance with Section 252 thereof. in questioning the reasonableness or correctness of the assessment of real property tax. petitioner’s position of exemption is weakened by its own admission and recognition of this Court’s previous ruling that the tax incentives granted in RA No. With the above-enumerated reasons. 420)28finds no support therein and therefore declared null and void and of no legal force and effect. Hence. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted.29 Hence. 420. national and local. (b) the subject provision of the Lease Agreement declared a condition that in order to be allegedly exempted from the payment of taxes. being a question of fact. including real property taxes.

under protest. It is without a doubt that such requirement of "payment under protest" is a condition sine qua non before an appeal may be entertained. This is in compliance with the procedural steps prescribed in the law. the CBAA and the CTA En Banc correctly ruled that real property taxes should first be paid before any protest thereon may be considered.A. of realty tax on the subject properties was proper. 48 is AFFIRMED. SO ORDERED. of the taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as such their collection cannot be curtailed by injunction or any like action. To reiterate. EB No. that is. The CTA En Bane was correct in dismissing the petition in C. 48. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of RA No.T. No costs. and its machinery gravely disabled. shall be crippled in dispensing the needed services to the people. otherwise. EB No. the local government unit. the state or. whether full or partial.31 All told. remanding the case to the LBAA for further proceedings subject to a full and up-to-date payment. Such argument which may involve a question of fact should be resolved at the first instance by the LBAA. The case is remanded to the Local Board of Assessment Appeals of Baguio City for further proceedings.A. the restriction upon the power of courts to impeach tax assessment without a prior payment. G. 188500 July 24. WHEREFORE. No. either in cash or surety. We go back to what was at the outset stated.30 The right of local government units to collect taxes due must always be upheld to avoid severe erosion. that a claim for tax exemption. Thus. in this case. and affirming the CBAA's position that it cannot delve on the issue of petitioner's alleged non-taxability on the ground of exemption since the LBAA has not decided the case on the merits. 7160 or the LGC of 1991 that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals.R. does not question the authority of local assessor to assess real property tax. but merely raises a question of the reasonableness or correctness of such assessment. 2013 71 . The Decision of the Court of Tax Appeals En Bane in C. which requires compliance with Section 252 of the LGC of 1991.Accordingly. the petition is DENIED for lack of merit.T.

The Facts On September 14.PROVINCE OF CAGAYAN. Casauay to tender and deposit the amount of P51. Cagayan (Permit Area) and extract and dispose of sand. petitioners assail the RTC's June 30. authorizing him to conduct quarrying operations in a twentyhectare area situated in Barangay Centro. J. Later that day. This prompted Atty. through a petition for review on certiorari 2 under Rule 45 of the Rules of Court. Lara’s counsel.00 with the Treasurer’s Office corresponding to the said extraction fee and other related fees.6 On January 11. Lara’s representative. raising a pure question of law. JOSEPH LASAM LARA. Cagayan.7 Consequently. Casauay (Atty. ALVARO T. Environmental and Natural Resources Officer. Branch 5 (RTC). Despite various pleas from Balisi and Atty. represented by HON. Lara received a Stoppage Order 9 dated March 13. Respondent. Lara obtained an Environmental Compliance Certificate4(ECC) from the DENR Environmental Management Bureau (EMB).5 On January 3. gravel. on March 17. and ROBERT ADAP. ANTONIO. 2009 Decision in Civil Case No. Antonio). Antonio (Gov. Governor. vs. (RA) 7942. However. the latter refused to issue an Order of Payment. Lara obtained an Industrial Sand and Gravel Permit 3 (ISAG Permit) from the Mines and Geosciences Bureau (MGB) of the Department of Environment and Natural Resources (DENR). Casauay). RESOLUTION PERLAS-BERNABE. when Balisi went to ENRO Adap.500.: This is a direct recourse to the Court from the Decision1 of the Regional Trial Court of Tuguegarao City. 10 otherwise known as the "Philippine Mining Act of 1995. against the said officials. For the same purpose. In particular. a total of four trucks loaded with sand and gravel extracted from the Permit Area were stopped and impounded by several local officials. Muncipality of Peñablanca (Peñablanca). 2008. directing him to stop his quarrying operations for the following reasons: (a) the ISAG Permit was not in accordance with Republic Act No. Lara filed an action for injunction with prayer for the issuance of a writ of preliminary injunction. a writ of preliminary injunction was issued enabling Lara to restart his business. docketed as Civil Case No. and other unconsolidated materials from the Permit Area. seeking to enjoin the stoppage of his quarrying operations. however. 2007. 2008. 2008 (Stoppage Order) this time from Cagayan Governor Alvaro T. petitioner Robert Adap (ENRO Adap). went to the Cagayan Provincial Treasurer’s Office (Treasurer’s Office) to pay the extraction fee and other fees for Lara’s quarrying operations but she was directed to first secure an Order of Payment from the Environmental and Natural Resources Officer. 7049. Lara commenced his quarrying operations. Jovy Balisi (Balisi).8 Nonetheless. (b) Lara’s failure to pay 72 . enjoining them from disturbing the quarrying operations of respondent Joseph Lasam Lara (Lara)." and its implementing rules and regulations. Victorio N. ENRO Adap remained adamant with his refusal. Petitioners. After due proceedings. 7077. 2008.

in good faith. as evidenced by the ISAG Permit and ECC issued by the MGB and the EMB.500. given that it is the main issue in another case. which can be treated as Lara’s payment of the pertinent fees. In their Answer dated June 10. tendered and deposited the amount of P51.00 with the Treasurer’s Office. 2008. the proper recourse would have been to bring the matter to the attention of the MGB and not to issue a Stoppage Order. Antonio was merely performing his duty to enforce all laws and ordinances relative to the governance of the Province of Cagayan pursuant to the provisions of RA 7160.sand and gravel fee under Provincial Ordinance No.17 The RTC Ruling In a Decision18 dated June 30. enjoined petitioners from stopping or disturbing Lara’s quarrying operations. 2008. 22 Aggrieved. Civil Case No. Antonio perceived any defect in Lara’s ISAG Permit. the RTC found no need to touch on the necessity of securing a mayor’s permit before starting his quarrying operations.21 Finally. and (c) Lara’s failure to secure all necessary permits or clearances from the local government unit concerned as required by the ECC. the parties stipulated on the following facts: (a) that Lara was able to secure an ISAG Permit from the MGB and an ECC from the DENR-EMB.11 Hence.16 During the pre-trial. Antonio issued a Stoppage Order directing Lara to stop the quarrying operations in the Permit Area. In this relation. The parties also determined that the submission of documentary evidence would be sufficient to reach a decision and as such. the RTC directed them to simultaneously file their respective memoranda. and (c) Gov. It held that Lara legally acquired the right to operate his quarrying business. respectively. Petitioners filed a motion for reconsideration 15 which was.500. docketed as Civil Case No. the RTC made permanent the writ of preliminary injunction and thus. 12 otherwise known as the "Local Government Code of 1991. 2008. 73 .20 It further noted that Lara could not pay the extraction and other related fees only because ENRO Adap adamantly refused to issue an Order of Payment. the RTC concluded that there was substantial compliance with the requirements since Lara. (b) Lara has neither secured all the necessary permits nor paid the local fees and taxes.19 In this regard. however denied on September 26. 7049. and (c) that Gov. (b) that Lara deposited the amount of P51. Lara filed the present action for injunction and damages with an urgent and ex-parte motion for the issuance of a temporary restraining order and/or preliminary injunction before the RTC.00 with the Treasurer’s Office for the extraction and other related fees. pending before the same court. 7077."13 In an Order14 dated August 11. 2009. the RTC granted Lara’s application for a writ of preliminary injunction based on a prima facie finding that he is authorized to extract gravel and sand from the Permit Area. petitioners sought direct recourse to the Court via the instant petition. the RTC observed that if Gov. which are the government agencies tasked to grant or deny any application for quarrying of industrial sand and gravel. petitioners raised the following defenses: (a) the mere issuance of the ISAG Permit does not give Lara the right to commence his quarrying operations as he still had to comply with the terms and conditions stated therein. 2005-07.

gravel and other quarry resources shall be issued exclusively by the provincial governor. – x x x. (Emphasis and underscoring supplied) xxxx In connection thereto. Article H. Tax on Sand. Particularly.The Issue Before the Court The primordial issue raised for the Court’s resolution is whether the RTC properly issued the permanent injunction subject of this case. and (b) acts which are violative of the said right.25 In order for an entity to legally undertake a quarrying business. Section 2H. It is well-settled that a writ of injunction would issue upon the satisfaction of two (2) requisites. viz: SECTION 138. the issuance of the injunctive relief constitutes grave abuse of discretion. remains to be proscribed from conducting any quarrying operations. The possibility of irreparable damage without proof of actual existing right is not a ground for an injunction. Injunction is not designed to protect contingent or future rights. the Sangguniang Panlalawigan of Cagayan promulgated Provincial Ordinance No. 2005-07. he contends that the only reason why he failed to secure such permits was because the local government officials deliberately refused to process his applications without any legitimate reason whatsoever.24 The Court’s Ruling The petition is meritorious. Section 138(2) of RA 716026 requires that such entity must first secure a governor’s permit prior to the start of his quarrying operations. The permit to extract sand.04 of which provides: 74 . Lara has yet to comply with its terms and conditions – as he has yet to secure the necessary permits and clearances from the local government unit concerned – and hence. thereby dispensing with the need to secure any permit from the local government. he must first comply with all the requirements imposed not only by the national government. petitioners argue that despite the issuance of the ISAG Permit. as evidenced by the ISAG Permit and ECC. In the absence of a clear legal right. but also by the local government unit where his business is situated. Lara maintains that the MGB and DENR-EMB had already authorized him to extract sand and gravel from the Permit Area. Where the complainant’s right is doubtful or disputed.23 On the other hand. pursuant to the ordinance of the sangguniang panlalawigan. In any case. injunction is not proper. Among others. Gravel and Other Quarry Resources. namely: (a) the existence of a right to be protected.

gravel. Consequently. hence. he has no right to conduct his quarrying operations within the Permit Area. Branch 5 in Civil Case No. Records. the Court need not delve into the issue respecting the necessity of securing a mayor’s permit. – No person shall extract ordinary stones. the June 30. earth. boulders and quarry resources from public lands or from the beds of seas. Cagayan.SECTION 2H. Permit for Gravel and Sand Extraction and Quarrying. SO ORDERED. 2009 Decision of the Regional Trial Court of Tuguegarao City. the petition is GRANTED. (Emphasis and underscoring supplied) A plain reading of the afore-cited provisions clearly shows that a governor’s permit is a prerequisite before one can engage in a quarrying business in Cagayan. rivers. especially since it is the main issue in another case. 7077 is hereby REVERSED and SET ASIDE. streams. however. which remains pending before the court a quo.04. creeks or other public waters unless a permit has been issued by the Governor (or his deputy as provided herein) x x x. reveal that Lara admittedly failed to secure the same. Accordingly. 7049. 75 . In view of the foregoing. WHEREFORE. Civil Case No. he is not entitled to any injunction.

SM Prime Holdings. Corp. contrary to the submission of respondents. and public order.. avoid a litigation or put an end to one already commenced. confirmed the authenticity and due execution of the UCA. Inc. Its validity is dependent upon the fulfillment of the requisites and principles of contracts dictated by law. Inc. including this case. Star Appliances Center. it is entered as a determination of a controversy and has the force and effect of a judgment. The nonfulfillment of its terms and conditions justifies the issuance of a writ of execution. in her capacity as Treasurer of the City of Manila (respondents). and its terms and conditions must not be contrary to law. 190818. execution becomes a ministerial duty of the court.G. 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. Ace Hardware Philippines.. They.. to end it because of the uncertainty of the result. submitted that the UCA had no effect on the subject Decision since the taxes paid subject of the instant case was not included in the agreement. A compromise agreement is a contract whereby the parties. It contemplates mutual concessions and mutual gains to avoid the expenses of litigation. Inc. “respondent City of Manila and Liberty Toledo. Having been sanctioned by the court. in such an instance. the local business taxes subject of the instant case is clearly covered by the UCA since they were also paid in accordance with the same provision of the Revenue Code of Manila... public policy.” On the other hand. a compromise agreement becomes more than a contract binding upon the parties. Inc. 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.. except for vices of consent or forgery. Health and Beauty.” “A review of the whereas clauses of the UCA reveals the various court cases filed by petitioners. “In this relation. sought “the approval of the terms and conditions of the parties’ Universal Compromise Agreement dated 1 June 2012 (the “UCA”) in lieu of the Court’s Decision dated 05 June 2013 denying the petitioners claim for tax refund/credit of their local business taxes paid to respondent City of Manila. or when litigation has already begun. Jollimart Phils. Super Value. however. When given judicial approval.R. and Surplus Marketing Corporation. Be that as 76 . Shoemart. No. It is immediately executory and not appealable.” HELD: The Universal Compromise Agreement was approved and adopted. by making reciprocal concessions. 10 November 2014 Petitioners Metro Manila Shopping Mecca Corp. Inc. Thus. good customs.. morals.

Benguet.: Petitioner Pelizloy Realty Corporation owns Palm Grove Resort in Tuba. bath houses. 10 April 2013. 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." Pelizloy's posits that amusement tax is an ultra vires act. No. (b) the UCA was executed more than a year prior to the promulgation of the subject Decision. J.e.. Thus.R. 183137. vs. which has facilities like swimming pools. and 77 . THE PROVINCE OF BENGUET. and (c) the result of both the UCA and the subject Decision are practically identical. GREGORY K. i. which provides that the exercise of the taxing powers of provinces. Pelizloy argued that the imposition was in violation of the limitation on the taxing powers of local government units under Section 133 (i) of the Local Government Code. Respondent. cities. Upon the Secretary’s failure to decide on the appeal within sixty days. swimming pools. municipalities. Petitioner. and considering that: (a) the UCA appears to have been executed in accordance with the requirements of a valid compromise agreement. Pelizloy filed a Petition for Declaratory Relief and Injunction before the RTC. Section 59.” PELIZLOY REALTY CORPORATION. and barangays shall not extend to the levy of percentage or value-added tax (VAT) on sales. LOY. G. represented herein by its President. swimming pools. barters or exchanges or similar transactions on goods or services except as otherwise provided. bath houses. a spa and function halls. it filed an appeal/petition before the Secretary of Justice. In 2005. hot springs and tourist spots. hot springs. The Province of Benguet assailed the that the phrase ‘other places of amusement’ in Section 140 (a) of the LGC encompasses resorts. LEONEN. the Provincial Board of Benguet approved its Revenue Code of 2005.it may. the tax ordinance levied a 10% amusement tax on gross receipts from admissions to "resorts. that petitioners are not entitled to any tax refund/credit.

However.tourist spots since Article 131 (b) of the LGC defines "amusement" as "pleasurable diversion and entertainment synonymous to relaxation. hot springs. "where a general word or phrase follows an enumeration of particular and specific words of the same class or where the latter follow the former. and tourist spots are not among those places expressly mentioned by Section 140 of the LGC as being subject to amusement taxes. and tourist spots. RULING: NO. Section 140 expressly allows for the imposition by provinces of amusement taxes on "the proprietors. and other places of amusement. swimming pools. hot springs. bath houses. or to be restricted to persons. hot springs. hot springs. Amusement taxes are percentage taxes. ISSUE: W/N provinces are authorized to impose amusement taxes on admission fees to resorts. the determination of whether amusement taxes may be levied on admissions to these places hinges on whether the phrase ‘other places of amusement’ encompasses resorts." However. avocation. or operators of theaters. provinces are not barred from levying amusement taxes even if amusement taxes are a form of percentage taxes. cinemas. it gave credence to the Province of Benguet's assertion that resorts. swimming pools. However. Procedurally." 78 . bath houses. concert halls. and tourist spots are encompassed by the phrase ‘other places of amusement’ in Section 140 of the LGC. The levying of percentage taxes is prohibited "except as otherwise provided" by the LGC. lessees. pastime. resembling. the RTC ruled that Declaratory Relief was a proper remedy. and tourist spots for being "amusement places" under the LGC. or fun. Thus. the general word or phrase is to be construed to include. Under the principle of ejusdem generis. Section 140 provides such exception. resorts. swimming pools." RTC rendered a Decision assailed Decision dismissing the Petition for Declaratory Relief and Injunction for lack of merit. things or cases akin to. bath houses. circuses. swimming pools. or of the same kind or class as those specifically mentioned. bath houses. boxing stadia.

a concert. the ordinary definitions of the words ‘show’ and ‘performance’ denote not only visual engagement (i. staging or presenting) such that actions are manifested to. While it is true that they may be venues where people are visually engaged. it is clear that resorts. displaying. and (correspondingly) perceived by an audience.e. As defined in The New Oxford American Dictionary.. ‘show’ means "a spectacle or display of something. circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances. concert halls.g. the seeing or viewing of things) but also active doing (e. or other form of entertainment. bath houses.Section 131 (c) of the LGC already provides a clear definition: "Amusement Places" include theaters. while ‘performance’ means "an act of staging or presenting a play. typically an impressive one". stage or present shows and/or performances." As such. they are not primarily venues for their proprietors or operators to actively display. cinemas.. 79 . hot springs and tourist spots cannot be considered venues primarily "where one seeks admission to entertain oneself by seeing or viewing the show or performances". swimming pools. Considering these.