1.

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the deceased
JOSE P. FERNANDEZ, petitioner,
vs.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents.

G.R. No. 140944, April 30, 2008, NACHURA, J.

Facts:

Jose P. Fernandez (Jose) died in November 7, 1987. Thereafter, a petition for the probate of his
will was filed with RTC of Manila. The probate court then appointed retired Supreme Court Justice
Arsenio P. Dizon (Justice Dizon) and Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant
Special Administrator, respectively, of the Estate of Jose (Estate). An estate tax return was filed later on
which showed ZERO estate tax liability. BIR thereafter issued a deficiency estate tax assessment,
demanding payment of P66.97 million as deficiency estate tax. This was subsequently reduced by CTA to
P37.42 million. The CA affirmed the CTA’s ruling.

The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of
the gross estate, no estate tax was due. On the other hand, respondents argue that since the claims of
the Estate’s creditors have been condoned, such claims may no longer be deducted from the gross
estate of the decedent.

Issue:

Whether or not the actual claims of creditors may be fully allowed as deductions from the gross
estate of Jose despite the fact that the said claims were reduced or condoned through compromise
agreements entered into by the Estate with its creditors

Held:
YES. Following the US Supreme Court’s ruling in Ithaca Trust Co. v. United States, the Court held that
post-death developments are not material in determining the amount of deduction. This is because
estate tax is a tax imposed on the act of transferring property by will or intestacy and, because the act
on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the
property transferred should be ascertained, as nearly as possible, as of the that time. This is the date-of-
death valuation rule.

The Court, in adopting the date-of-death valuation principle, explained that: First. There is no law, nor
do we discern any legislative intent in our tax laws, which disregard the date-of-death valuation
principle and particularly provide that post-death developments must be considered in determining the
net value of the estate. It bears emphasis that tax burdens are not to be imposed or presumed to be
imposed, beyond what the statute expressly and clearly imports, tax statutes being construed
strictissimijuris against the government. Second. Such construction finds relevance and consistency in
our Rules on Special Proceedings wherein the term "claims" required to be presented against a
decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could
have been enforced against the deceased in his lifetime, or liability contracted by the deceased before
his death. Therefore, the claims existing at the time of death are significant to, and should be made the
basis of, the determination of allowable deductions

2.

G.R. No. 209651 November 26, 2014

MARCELO INVESTMENT AND MANAGEMENT CORPORATION,Et. Al. vs. JOSE T. MARCELO, JR.

FACTS:

Decedent Jose, Sr. died intestate. He was survived by his four compulsory heirs: (1) Edward, (2) George,
(3) Helen and (4) respondent Jose, Jr.petitioner Marcelo Investment and Management Corporation
(MIMCO) filed a Petition for the issuance of Letters of Administration of the estate of Jose, Sr. At first,
Helen, along with her brother, Jose, Jr. separately opposed MIMCO’s petition; the two prayed for their
respective appointment as administrator. Edward opposed Helen’s and Jose, Jr.’s respective petitions
for issuance of Letters of Administration in their favor and Edward himself prayed for his appointment as
regular administrator.
Pending the issuance, Jose was appointed as special administrator. Eventually, Edward was appointed as
the regular administrator of the estate.

The RTC approved the project partition of the heirs. The court deferred the distribution until the
payment of the estate tax.

When Edward died Jose revived the intestate proceeding and moved for his appointment as
administrator.

RTC appointed Jose for the reason that there is still a necessity to appoint on since taxes due to the
government remained to be unpaid.

ISSUE:

Is the appoint of a new administrator still necessary?

HELD:

YES. No distribution shall be allowed until payment of the obligations above mentioned has been made
or provided for, unless the distributees, or any of them, give a bond, in a sum tobe fixed by the court,
conditioned for the payment of said obligations.

All the parties are definitely aware, the RTC archived the intestate proceedings pending the payment of
estate taxes. It is apparent that the intestate proceedings involving Jose, Sr.’s estate still requires a
regular administrator to finally settle the estate and distribute remaining assets
#3 Marcos Heirs vs CA.
273 SCRA 47
GR No. 120880, June 5, 1997

FACTS:

Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to
levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the
period of his exile in the US. The Marcos family was assessed by the BIR after it failed to file estate tax
returns. However the assessment were not protested administratively by Mrs. Marcos and the heirs of
the late president so that they became final and unappealable after the period for filing of opposition
has prescribed. Marcos contends that the properties could not be levied to cover the tax dues because
they are still pending probate with the court, and settlement of tax deficiencies could not be had, unless
there is an order by the probate court or until the probate proceedings are terminated.

Petitioner also pointed out that applying Memorandum Circular No. 38-68, the BIR's Notices of Levy on
the Marcos properties were issued beyond the allowed period, and are therefore null and void.

ISSUE:

Are the contentions of Bongbong Marcos correct?

HELD:

No. The deficiency income tax assessments and estate tax assessment are already final and
unappealable and the subsequent levy of real properties is a tax remedy resorted to by the government,
sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy is
distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions),
and is not affected or precluded by the pendency of any other tax remedies instituted by the
government.

The approval of the court, sitting in probate, or as a settlement tribunal over the deceased's estate is not
a mandatory requirement in the collection of estate taxes. On the contrary, under Section 87 of the
NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial
administrator of the decedent's estate to deliver any distributive share to any party interested in the
estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxes
have been paid. This provision disproves the petitioner's contention that it is the probate court which
approves the assessment and collection of the estate tax.

On the issue of prescription, the omission to file an estate tax return, and the subsequent failure to
contest or appeal the assessment made by the BIR is fatal to the petitioner's cause, as under Sec.223 of
the NIRC, in case of failure to file a return, the tax may be assessed at anytime within 10 years after the
omission, and any tax so assessed may be collected by levy upon real property within 3 years (now 5
years) following the assessment of the tax. Since the estate tax assessment had become final and
unappealable by the petitioner's default as regards protesting the validity of the said assessment, there
is no reason why the BIR cannot continue with the collection of the said tax.
4. G.R. No. 208293 December 10, 2014

PHILIPPINE NATIONAL BANK vs. CARMELITA S. SANTOS, REYME L. SANTOS, ANGEL L. SANTOS, NONENG
S. DIANCO, et. al.,

G.R. No. 208295 December 10, 2014

LINA B. AGUILAR vs. CARMELITA S. SANTOS, REYME L. SANTOS, ANGEL L. SANTOS, BUENVENIDO L.
SANTOS et. al.,

FACTS: This is a consolidated case.

Respondents filed before the RTC of Marikina City a complaint for sum of money and damages against
PNB and Lina Aguilar. They questioned the release of the deposit amount to Manimbo who had no
authority from them to withdraw their father’s deposit and who failed to present to PNB all the
requirements for such withdrawal.

PNB and Aguilar denied that Angel C. Santos had two separate accounts. They alleged that Angel’s
deposit account was originally a time deposit account that was subsequently converted into a premium
savings account. They also alleged that Aguilar did not know about Angel’s death in 1991 because she
only assumed office in 1996.

The trial court found that Angel C. Santos had only one account with PNB, which was originally a time
deposit and converted into a premium savings account when it was not renewed on maturity. It held
that both PNB and Aguilar were negligent in releasing the deposit to Manimbo.

On appeal to the CA, the latter sustained the trial court’s decision. It also held that PNB and Aguilar were
negligent in handling the deposit. The deposit amount was released to Manimbo who did not present all
the requirements, particularly the BIR certification that estate taxes had already been paid.

ISSUE: WON PNB and Aguilar were negligent in releasing the proceeds of the savings deposit account to
Manimbo

RULING: YES

PNB and Aguilar’s treatment of Santos’ account is inconsistent with the high standard of diligence
required of banks. They accepted Manimbo’s representations despite knowledge of the existence of
circumstances that should have raised doubts on such representations. They have disregarded their own
requirements for the release of the deposit to persons claiming to be heirs of a deceased depositor.
They released the proceeds of the subject account without having presented the BIR-issued certificate
of payment of, or exception from, estate tax. Taxes are created primarily to generate revenues for the
maintenance of the government. However, this particular tax may also serve as guard against the
release of deposits to persons who have no sufficient and valid claim over the deposits. Based on the
assumption that only those with sufficient and valid claim to the deposit will pay the taxes for it,
requiring the certificate from the BIR increases the chance that the deposit will be released only to
them.

In their compulsory counterclaim,⁠petitioners PNB and Aguilar claimed that Manimbo presented a
certificate of payment of estate tax.⁠During trial, however, it turned out that this certificate was instead
an authority to accept payment, which is not the certificate required for the release of bank deposits.⁠It
appears that Manimbo was not even required to submit the BIR certificate⁠ . He, thus, failed to present
such certificate. Petitioners PNB and Aguilar provided no satisfactory explanation why Angel C. Santos’
deposit was released without it.
#5.1

THE ESTATE OF HILARIO M. RUIZ, EDMOND RUIZ, Executor vs. THE COURT OF APPEALS (Former Special
Sixth Division), MARIA PILAR RUIZ-MONTES, MARIA CATHRYN RUIZ, CANDICE ALBERTINE RUIZ, MARIA
ANGELINE RUIZ and THE PRESIDING JUDGE OF THE REGIONAL TRIAL COURT OF PASIG, BRANCH
156, [G.R. No. 118671. January 29, 1996] (Puno, J.)

FACTS: Hilario M. Ruiz executed a holographic will naming as his heirs his only son, Edmond Ruiz, his
adopted daughter, private respondent Maria Pilar Ruiz Montes, and his three granddaughters, private
respondents Maria Cathryn, Candice Albertine and Maria Angeline, all children of Edmond Ruiz. Hilario
Ruiz died. Edmond, the named executor, did not take any action for the probate of his father’s will. It
was only four years after the testator’s death that private respondent Maria Pilar Ruiz Montes filed for
the probate of the testator’s will.

The Valle Verde property which was bequeathed by the testator to his granddaughters was leased out
by Edmond to third persons. The probate court then ordered Edmond to deposit with the court the
rental deposit and payments of the said property. The probate court, upon motion, ordered the release
of the rent payments to the decedent’s three granddaughters and ordered the delivery of the titles to
and possession of the properties bequeathed to the three granddaughters and respondent Montes. The
CA affirmed.

ISSUE: Whether the probate court, after admitting the will to probate but before payment of the estates
debts and obligations, has the authority:

(1) to grant an allowance from the funds of the estate for the support of the testator’s grandchildren;

(2) to order the release of the titles to certain heirs; and

(3) to grant possession of all properties of the estate to the executor of the will.

HELD:

NO. Grandchildren are not entitled to provisional support from the funds of the decedent’s estate. The
law clearly limits the allowance to widow and children and does not extend it to the deceased’s
grandchildren, regardless of their minority or incapacity.

NO. In settlement of estate proceedings, the distribution of the estate properties can only be made: (1)
after all the debts, funeral charges, expenses of administration, allowance to the widow, and estate tax
have been paid; or (2) before payment of said obligations only if the distributees or any of them gives a
bond in a sum fixed by the court conditioned upon the payment of said obligations within such time as
the court directs, or when provision is made to meet those obligations.

In the case at bar, the probate court ordered the release of the titles to the Valle Verde property and
the Blue Ridge apartments to the private respondents after the lapse of six months from the date of first
publication of the notice to creditors. The questioned order speaks of notice to creditors, not payment
of debts and obligations. Hilario Ruiz allegedly left no debts when he died but the taxes on his estate had
not hitherto been paid, much less ascertained. The estate tax is one of those obligations that must be
paid before distribution of the estate. If not yet paid, the rule requires that the distributees post a bond
or make such provisions as to meet the said tax obligation in proportion to their respective shares in the
inheritance. Notably, at the time the order was issued the properties of the estate had not yet been
inventoried and appraised.

NO. The right of an executor or administrator to the possession and management of the real and
personal properties of the deceased is not absolute and can only be exercised so long as it is necessary
for the payment of the debts and expenses of administration. As executor, he is a mere trustee of his
father’s estate. The funds of the estate in his hands are trust funds and he is held to the duties and
responsibilities of a trustee of the highest order. He cannot unilaterally assign to himself and possess all
his parents’ properties and the fruits thereof without first submitting an inventory and appraisal of all
real and personal properties of the deceased, rendering a true account of his administration, the
expenses of administration, the amount of the obligations and estate tax, all of which are subject to a
determination by the court as to their veracity, propriety and justness.
#5.2

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, COURT OF TAX APPEALS and JOSEFINA
P. PAJONAR, as Administratrix of the Estate of Pedro P. Pajonar (G.R. No. 123206, March 22, 2000)
(GONZAGA-REYES, J.)

FACTS: Private respondent Josefina Pajonar was the guardian of the person of decedent Pedro
Pajonar. The property of the decedent was put by the RTC Dumaguete, under the guardianship of the
Philippine National Bank via special proceeding, wherein P50, 000 was spent therein for payment of
attorney's fees.

When the decedent died, instead of filing an estate tax return, PNB advised Josefina to extra-judicially
settle the estate of his brother. The decedent's estate was extra-judicially settled and the heirs paid an
amount of P60, 753 for the notarization of the deed of extra-judicial settlement of estate.

The private respondent paid the estate tax, however, they were subsequently assessed of deficiency
taxes because the amount paid in the special proceeding (P50, 000) and the notarization fee (P60, 753)
cannot be claimed as a deduction to the decedent's estate. Private respondent paid the said taxes under
protest. While the case is under review by the BIR, she filed a claim for refund in the CTA which was
granted.

ISSUE: WON the notarial fee paid for the extrajudicial settlement and the attorney's fees in the
guardianship proceedings may be allowed as deductions from the gross estate of decedent in order to
arrive at the value of the net estate.

HELD: YES. The notarial fee for the extrajudicial settlement and the attorney's fees in the guardianship
proceedings are allowable deductions from the gross estate of Pedro Pajonar.

Attorney's fees in order to be deductible from the gross estate must be essential to the collection of
assets, payment of debts or the distribution of the property to the persons entitled to it. The services for
which the fees are charged must relate to the proper settlement of the estate. In this case, the
guardianship proceeding was necessary for the distribution of the property of the late Pedro Pajonar to
his rightful heirs.
In this case, it is clear that the extrajudicial settlement was for the purpose of payment of taxes and the
distribution of the estate to the heirs. The execution of the extrajudicial settlement necessitated the
notarization of the same. It follows then that the notarial fee of P60, 753.00 was incurred primarily to
settle the estate of the deceased Pedro Pajonar. Said amount should then be considered an
administration expenses actually and necessarily incurred in the collection of the assets of the estate,
payment of debts and distribution of the remainder among those entitled thereto. Thus, the notarial fee
of P60, 753 incurred for the Extrajudicial Settlement should be allowed as a deduction from the gross
estate.

6.

G.R. No. 82027 March 29, 1990

ROMARICO G. VITUG, petitioner,

vs.
THE HONORABLE COURT OF APPEALS and ROWENA FAUSTINO-CORONA, respondents.

SARMIENTO, J.:

Petitioner Romerico Vitug, widower of the late Dolores Luchangco Vitug and the special administrator of
the latter’s estate, filed a motion to the probate court to grant him the authority to sell shares of stock
and real properties belonging to the estate as reimbursement for his advances, which were spent for the
payment of estate tax. Vitug claimed that the said advances were from his personal funds in a savings
account which he acquired through a survivorship agreement executed with his wife and Bank of
America. Respondent Rowena Faustino-Corono opposed the motion based on her allegation that there
is no ground for reimbursement since the said account is a conjugal partnership property and is
therefore part of the estate.

The trial court upheld the validity of the agreement and granted Vitug’s motion to sell some properties
for reimbursement of his alleged advances. The Court of Appeals however, ruled in favor of Faustino-
Corona and held that the survivorship agreement constitutes as a conveyance mortis cause which did
not comply with the formalities of a valid will. It further held that, assuming that it is a mere donation
inter vivos, it is a prohibited donation

ISSUE: Whether or not the account is part of the estate of the late Dolores Luchangco Vitug

HELD: No. The monies subject of the savings account were in the nature of conjugal funds. There is no
showing that the funds exclusively belonged to one party, and hence it must be presumed to be
conjugal, having been acquired during the existence of the marital relations.

The spouses are not prohibited by law to invest conjugal property, say, by way of a joint and several
bank account, more commonly denominated in banking parlance as an "and/or" account. In the case at
bar, when the spouses Vitug opened the savings account, they merely put what rightfully belonged to
them in a money-making venture. They did not dispose of it in favor of the other, which would have
arguably been sanctionable as a prohibited donation. And since the funds were conjugal, it cannot be
said that one spouse could have pressured the other in placing his or her deposits in the money pool.

The conveyance is not one of mortis causa. Neither is the survivorship agreement a donation inter
vivos, for obvious reasons, because it was to take effect after the death of one party. Secondly, it is not a
donation between the spouses because it involved no conveyance of a spouse's own properties to the
other.

Being the separate property of Romerico Vitug, it forms no more part of the estate of the deceased.

7.

DELPHER TRADES CORPORATION, et al. v. INTERMEDIATE APPELLATE COURT, et al.

G.R. No. L-69259, 26 January 1988, THIRD DIVISION, (Gutierrez, Jr., J.)

FACTS:
Delfin and Pelagia Pacheco (the other petitioners), siblings and co-owners of the Malinta estate,
executed a deed of exchange in favor of Delpher Trades Corporation (DTC), whereby the former
conveyed to the latter some lands of the estate for 2,500 shares of stock of DTC with the amount of P1.5
million.

Before the supposed transfer, one of the lots was leased by the Pachecos to Construction Components
International Inc. (CCII) with the proviso stating that “during the existence/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
latter has the priority to buy under the same conditions.” Later on, CCII assigned its rights and
obligations under the lease to Hydro Pipes Phils. Inc. (HPPI), the private respondent, with the Pachecos’
consent. The lease and assignment were annotated at the back of the title.

On the ground that it was not given the 1st option to buy the leased property, as stated in the contract,
HPPI filed a complaint for the lot’s reconveyance in its favor under similar conditions whereby DTC
acquired the same from the siblings. The Court of First Instance ruled in favor of HPPI, declaring its
preferential right/right of 1st refusal as regards the subject property. The Intermediate Appellate Court
affirmed. The Supreme Court initially denied DTC’s petition but upon the latter’s Motion for
Reconsideration, gave it due course.

ISSUE: (on taxation)

Is the “estate planning scheme” between DTC and the Pachecos valid?

RULING: YES. The scheme is a form of tax avoidance and not tax evasion.

DTC is a business conduit of the Pachecos. What they really did was to invest their properties and
change the nature of their ownership from unincorporated to incorporated form by organizing DTC to
take control of their properties and at the same time save on inheritance taxes.

Section 35 of the National Internal Revenue Code, under par. C-sub-par. (2) Exceptions, states that "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."
The benefits of the “estate planning scheme” of the Pachecos is that there is flexibility in using no par
value shares as the value is determined by the board of directors in increasing capitalization. The board
can fix the value of the shares equivalent to the capital requirements of the corporation. In the point of
view of taxation, there is also flexibility since a corporation does not die as it can continue to hold on to
the property indefinitely for a period of at least 50 years. On the other hand, if the property is held by
the spouse, the property will be tied up in succession proceedings and there would be consequential
payments of estate and inheritance taxes when an owner dies. The advantage in this continuity, in
relation to ownership by a particular person of certain properties in respect to taxation, is that the
property is not subjected to taxes on succession as the corporation does not die. This benefit is all about
the inheritance tax.

The records do not point to anything wrong/objectionable about this "estate planning" scheme resorted
to by the Pachecos. "The legal right of a taxpayer to decrease the amount of what otherwise could be his
taxes/altogether avoid them, by means which the law permits, cannot be doubted."

8. REV. FR. CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX
APPEALS

G.R. No. L-19201 June 16, 1965 PAREDES, J.

FACTS:

M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest
of Victorias, Negros Occidental, and predecessor of herein petitioner, for the construction of a new
Catholic Church in the locality. The total amount was actually spent for the purpose intended. The donor
M.B. Estate, Inc., filed the donor's gift tax return. CIR issued an assessment for donee's gift tax against
the Catholic Parish of Victorias, Negros Occidental, of which petitioner was the priest.

Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and
the MR presented to the CIR were denied. The petitioner appealed to the CTA and claimed that at the
time of the donation, he was not the parish priest in Victorias; that there is no legal entity or juridical
person known as the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the
donee's gift tax. It was also asserted that the assessment of the gift tax, even against the Roman Catholic
Church, would not be valid, for such would be a clear violation of the provisions of the Constitution.

CTA affirmed the decision of the CIR except with regard to the imposition of the compromise penalty in
the amount of P20.00; The above judgment is now before us on appeal.
ISSUE:

WON petitioner should be liable for the assessed donee's gift tax on the P10,000.00 donated for the
construction of the Victorias Parish Church.

RULING:

Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation
cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious purposes. The exemption is only from the payment of taxes
assessed on such properties enumerated, as property taxes, as contra distinguished from excise taxes. In
the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the
properties themselves. It did not rest up on general ownership; it was an excise upon the use made of
the properties, upon the exercise of the privilege of receiving the properties.

Manifestly, gift tax is not within the exempting provisions of the section just mentioned. A gift tax is not
a property tax, but an excise tax imposed on the transfer of property by way of giftinter vivos, the
imposition of which on property used exclusively for religious purposes, does not constitute an
impairment of the Constitution. As well observed by the learned respondent Court, the phrase "exempt
from taxation," as employed in the Constitution should not be interpreted to mean exemption from all
kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in favor of
petitioner, the exemption herein must be denied.

In finding that a tax liability exists, is, who should be called upon to pay the gift tax? Petitioner
postulates that he should not be liable, because at the time of the donation he was not the priest of
Victorias. We note the merit of the above claim, it appearing that the Head of such Diocese is the real
party in interest. The assessment at bar had been properly made and the imposition of the tax is not a
violation of the constitutional provision exempting churches, parsonages or convents, etc., the Head of
the Diocese, to which the parish Victorias Pertains, is liable for the payment thereof.

9.

MARIA CARLA PIROVANO, etc., et al.,vs.THE COMMISSIONER OF INTERNAL REVENUE

(This case is a sequel to the case of Pirovano vs. De la Rama Steamship Co., 96 Phil. 335.)

Facts: De la Rama Steamship Co. insured the life of Enrico Pirovano, its President and General Manager,
and the father of the herein petitioners-appellants. The company designated itself as the beneficiary of
the policies but after Pirovano’s death during the Japanese occupation, it renounced all its rights, title
and interest therein, in favor of Pirovano’s heirs.

The CIR subjected the donation to gift tax, to which Pirovano’s heirs contested and also made a claim for
refund of the donor's gift tax so collected.

The CTA ordered the payment of donees' gift taxes as assessed by respondent as well as the imposition
of surcharge and interest on the amount of donees' gift taxes.Petitioners stated that the grant was not
subject to such donee’s tax because it was not a simple donation, as it was made for a full and adequate
compensation for the valuable services by the late Priovano, thus it was remuneratory.

Issue: WON the donation is remuneratory and therefore not subject to donee’s tax, but rather taxable
as part of gross income.

Ruling: No. There is nothing on record to show that when the late Enrico Pirovano rendered services as
President and General Manager of the De la Rama Steamship Co. he was not fully compensated for such
services, or that, because they were "largely responsible for the rapid and very successful development
of the activities of the company." Pirovano expected or was promised further compensation over and in
addition to his regular emoluments as President and General Manager. The fact that his services
contributed in a large measure to the success of the company did not give rise to a recoverable debt,
and the conveyances made by the company to his heirs remain a gift or donation. That the tax court
regarded the conveyance as a simple donation, instead of a remuneratory one as it was declared to be
in our previous decision, is but an innocuous error; whether remuneratory or simple, the conveyance
remained a gift, taxable under the Internal Revenue Code.

10.

De luna vs. judge abrigo

FACTS:

De Luna donated a portion of a 75 sq. m. lot to the Luzonian University Foundation. The donation was
embodied in a Deed of Donation Intervivos and was subject to certain terms and conditions. In case of
violation or non-compliance, the property would automatically revert to the donor. When the
Foundation failed to comply with the conditions, de Luna “revived” the said donation by executing a
Revival of Donation Intervivos with the following terms and conditions:

1) The Donee shall construct on the land and at its expense a Chapel, Nursery, and Kindergarten School
to be named after St. Veronica
2) Construction shall start immediately and must be at least 70% completed three years from the date of
the Deed unless the Donor grants extensions
3) Automatic reversion in case of violation

The Foundation accepted and the donation was registered and annotated in the TCT. By a Deed of
Segregation, the foundation was issued a TCT for area the lot donated while the remaining area was
retained by the De Luna.

The children and only heirs of the late De Luna (died after the donation) filed a complaint with the RTC
for the cancellation of the donation on the ground that the terms were violated. The Foundation
defended itself by saying that it had partially and substantially complied with the conditions and that the
donor granted it an indefinite extension of time to complete construction.

The RTC dismissed the petition on the ground of prescription (for being filed after 4 years). The heirs did
not file an MR and went straight to the SC.

ISSUE:

Whether the action prescribes in 4 years (based on art. 764 NCC-judicial decree of revocation of the
donation) or in 10 years (based on art. 1144 –enforcement of a written contract)

RULING: 10 years

The donation subject of this case is one with an onerous cause.

The same rules apply under the New Civil Code as provided in Article 733 thereof which provides:
Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory
donations by the provisions of the present Title as regards that portion which exceeds the value of the
burden imposed.

It is true that under Article 764 of the New Civil Code, actions for the revocation of a donation must be
brought within four (4) years from the non-compliance of the conditions of the donation. However, said
article does not apply to onerous donations in view of the specific provision of Article 733 providing that
onerous donations are governed by the rules on contracts. The rules on prescription and not the rules
on donation applies in the case at bar.

11.

SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners, vs.

COURT OF APPEALS and MERCEDES DANLAG y PILAPIL, respondents.

G.R. No. 111904 October 5, 2000

Facts:

Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They executed
three deeds of donation mortis causa, in favor of private respondent Mercedes Danlag-Pilapil with
conditions that they reserve the right to amend, cancel or revoke the donation during their lifetime and
to sell, mortgage, or encumber the properties donated during the donors' lifetime, if deemed necessary.
Subsequently, the spouses again executed a deed of donation covering the said parcels of land plus two
other parcels in favor of Mercedes with some conditions contained therein that the Danlag spouses shall
continue to enjoy the fruits of the land during their lifetime and the donee cannot sell or dispose of the
land during the lifetime of the said spouses, without their prior consent and approval. Mercedes caused
the transfer of the parcels' tax declaration to her name and paid the taxes on them.

Thereafter, Diego and Catalina Danlag sold parcels 3 and 4 to petitioners, Mr. and Mrs. AgripinoGestopa
and subsequently they executed a deed of revocationrecovering the six parcels of land subject of the
aforecited deed of donation inter vivos.

Mercedes filed with RTC a petition against the Gestopas and Danlags for quieting of title over the parcels
of land contending that Diego Danlag persuaded her husband to buy the 2 of the six parcels of land
covered by the donation inter vivos with compliance with the conditions imposed on it and that Diego
had no legal basis inrevoking the subject donation and then in selling the two parcels of land to the
Gestopas. The RTC ordered the cancellation of the tax declarations in the name of Mercedes Danlag-
Pilapil.

The CA reversed the ruling of the RTC. Hence, this petition.

ISSUE: Whether or not the tax declarations made by Mercedes can be considered as evidence of the
intent of the donors’ to transfer ownership.

RULING: YES

The granting clause shows that Diego donated the properties out of love and affection for the donee.
This is a mark of a donation inter vivos. Second, the reservation of lifetime usufruct indicates that the
donor intended to transfer the naked ownership over the properties. Third, the donor reserved
sufficient properties for his maintenance in accordance with his standing in society, indicating that the
donor intended to part with the six parcels of land.Lastly, the donee accepted the donation. In the case
ofAlejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the
donation isinter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa,
being in the form of a will, are not required to be accepted by the donees during the donors' lifetime.
Here, the donation that was made was a donation inter vivos.

Petitioners aver that Mercedes' tax declarations in her name cannot be a basis in determining the
donor's intent. They claim that it is easy to get tax declarations from the government offices such that
tax declarations are not considered proofs of ownership. However, unless proven otherwise, there is a
presumption of regularity in the performance of official duties.We find that petitioners did not
overcome this presumption of regularity in the issuance of the tax declarations. We also note that the
Court of Appeals did not refer to the tax declarations as proofs of ownership but only as evidence of the
intent by the donor to transfer ownership.

12.

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
B.F. GOODRICH PHILS., INC. (now SIME DARBY INTERNATIONAL TIRE CO., INC.) and THE COURT OF
APPEALS, respondents.

FACTS:

CIR appealed from the decision of CA reversing the decision of the CTA upholding the BIR’s assessment
beyond the five year statute of limitation.

In 1980, CIR assessed Goodrich Phils. For deficiency in donor’s tax for the alleged sale for insufficient
consideration of Goodrich’s land to Siltown Realty Philippines, Inc. in 1974. In a letter dated November
24, 1980, Goodrich contested this assessment. On April 9, 1981, it received another assessment dated
March 16, 1981, which increased to P 1,092,949 the amount demanded for the alleged deficiency
donor's tax, surcharge, interest and compromise penalty.

Goodrich appealed the correctness and the legality of these last two assessments to the CTA which in
turn upheld with modification the questioned assessment. On appeal to the CA1, the latter reversed the
decision of CTA.

ISSUE:

1) Whether or not petitioner's right to assess herein deficiency donor's tax has indeed prescribed as
ruled by public respondent Court of Appeals;

2) Whether or not the herein deficiency donor's tax assessment for 1974 is valid and in accordance with
law.

RULING:

1) YES.

1What is involved here is not a first assessment; nor is it one within the 5-year period stated in Section 331 above. Since what is involved
in this case is a multiple assessment beyond the five-year period, the assessment must be based on the grounds provided in Section 337,
and not on Section 15 of the 1974 Tax Code. Section 337 utilizes the very specific terms "fraud, irregularity, and mistake". "Falsity does
not appear to be included in this enumeration. Falsity suffices for an assessment, which is afirst assessment made within the five-year
period. When it is a subsequent assessment made beyond the five-year period, then, it may be validly justified only by "fraud, irregularity
and mistake" on the part of the
taxpayer.
Applying this provision of law2 to the facts at hand, it is clear that the October 16, 1980 and the March
1981 assessments were issued by the BIR beyond the five-year statute of limitations.As succinctly
pronounced by the Court of Appeals:

The subsequent assessment made by the respondent Commissioner on October 40, 1980, modified by
that of March 16, 1981, violates the law. Involved in this petition is the income of the petitioner for the
year 1974, the returns for which were required to be filed on or before April 15 of the succeeding year.
The returns for the year 1974 were duly filed by the petitioner, and assessment of taxes due for such
year — including that on the transfer of properties on June 21, 1974 — was made on April 13, 1975 and
acknowledged by Letter of Confirmation No. 101155 terminating the examination on this subject. The
subsequent assessment of October 10, 1980 modified, by that of March 16, 1981, was made beyond the
period expressly set in Section 331 of the National Internal Revenue Code . . . .

2) NO.

The fact that private respondent sold its real property for a price less than its declared fair market value
did not by itself justify a finding of false return. Indeed, private respondent declared the sale in its 1974
return submitted to the BIR. Within the five-year prescriptive period, the BIR could have issued the
questioned assessment, because the declared fair market value of said property was of public record.
This it did not do, however, during all those five years. Moreover, the BIR failed to prove that
respondent's 1974 return had been filed fraudulently. Equally significant was its failure to prove
respondent's intent to evade the payment of the correct amount of tax.

Moreover, even though a donor's tax, which is defined as "a tax on the privilege of transmitting one's
property or property rights to another or others without adequate and full valuable consideration," 16 is
different from capital gains tax, a tax on the gain from the sale of the taxpayer's property forming part
of capital assets, 17 the tax return filed by private respondent to report its income for the year 1974 was
sufficient compliance with the legal requirement to file a return. In other words, the fact that the sale
transaction may have partly resulted in a donation does not change the fact that private respondent
already reported its income for 1974 by filing an income tax return.

WHEREFORE, the Petition for Review is DENIED and the assailed Decision of the Court of Appeals is
AFFIRMED.

2Sec.331(NIRC).Period of limitation upon assessment and collection. — Except as provided in the succeeding section, internal-revenue
taxes shall be assessed within five years after the return was filed, and no proceeding in court without assessment for the collection of
such taxes shall be begun after expiration of such period. For the purposes of this section, a return filed before the last day prescribed by
law for the filing thereof shall be considered as filed on such last day: Provided, That this limitation shall not apply to cases already
investigated prior to the approval of this Code.
13.

COMMISSIONER OF INTERNAL REVENUE vs. PASCOR REALTY AND DEVELOPMENT CORPORATION

G.R. No. 128315. June 29, 1999, PANGANIBAN, J.

An assessment contains not only a computation of tax liabilities, but also a demand for payment within a
prescribed period. It also signals the time when penalties and interests begin to accrue against the
taxpayer. To enable the taxpayer to determine his remedies thereon, due process requires that it must
be served on and received by the taxpayer. Accordingly, an affidavit, which was executed by revenue
officers stating the tax liabilities of a taxpayer and attached to a criminal complaint for tax evasion,
cannot be deemed an assessment that can be questioned before the Court of Tax Appeals.

Facts:

It appears that by virtue of Letter of Authority No. 001198, then BIR Commissioner Ong authorized
Revenue Officers Que, Estorco and Savellano to examine the books of accounts and other accounting
records of Pascor Realty and Development Corporation. (PRDC) for the years ending 1986, 1987 and
1988. The said examination resulted in a recommendation for the issuance of an assessment in the
amounts of P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively.

The CIR filed a criminal complaint before the DOJ against the PRDC, its President Rogelio A. Dio, and its
Treasurer Virginia S. Dio, alleging evasion of taxes in the total amount of P10,513,671.00. Private
respondents PRDC, et. al. filed an Urgent Request for Reconsideration/Reinvestigation disputing the tax
assessment and tax liability but was denied on the ground that no formal assessment has as yet been
issued by the Commissioner. Eventually, private respondents received a subpoena from the DOJ in
connection with the criminal complaint filed by the Commissioner of Internal Revenue (BIR) against
them.

Private respondents then elevated the Decision of the CIR dated May 17, 1995 to the Court of Tax
Appeals on a petition for review. The CIR filed a Motion to Dismiss the petition on the ground that the
CTA has no jurisdiction over the subject matter of the petition, as there was no formal assessment
issued against the petitioners. The CTA denied the said motion to dismiss and ordered the CIR to file an
answer within thirty (30) days from receipt of said resolution. The CIR received the resolution on January
31, 1996 but did not file an answer nor did she move to reconsider the resolution. Instead, the CIR filed
this petition, alleging as grounds that: Respondent Court of Tax Appeals acted with grave abuse of
discretion and without jurisdiction in considering the affidavit/report of the revenue officer and the
indorsement of said report to the secretary of justice as assessment which may be appealed to the Court
of Tax Appeals and in considering the denial by petitioner of private respondents Motion for
Reconsideration as [a] final decision which may be appealed to the Court of Tax Appeals.

The Court of Appeals held that the tax court committed no grave abuse of discretion in ruling that the
Criminal Complaint for tax evasion filed by the Commissioner of Internal Revenue with the Department
of Justice constituted an assessment of the tax due, and that the said assessment could be the subject of
a protest. By definition, an assessment is simply the statement of the details and the amount of tax due
from a taxpayer. Based on this definition, the details of the tax contained in the BIR examiners Joint
Affidavit, which was attached to the criminal Complaint, constituted an assessment. Since the assailed
Order of the CTA was merely interlocutory and devoid of grave abuse of discretion, a petition
for certiorari did not lie.

Issue:

Whether or not the criminal complaint for tax evasion can be construed as an assessment.

Contentions:

Petitioner argues that the filing of the criminal complaint with the Department of Justice cannot in any
way be construed as a formal assessment of private respondents tax liabilities. This position is based on
Section 205 of the National Internal Revenue Code(NIRC), which provides that remedies for the
collection of deficient taxes may be by either civil or criminal action. Likewise, petitioner cites Section
223(a) of the same Code, which states that in case of failure to file a return, the tax may be assessed or a
proceeding in court may be begun without assessment.

Respondents, on the other hand, maintain that an assessment is not an action or proceeding for the
collection of taxes, but merely a notice that the amount stated therein is due as tax and that the
taxpayer is required to pay the same. Thus, qualifying as an assessment was the BIR examiners Joint
Affidavit, which contained the details of the supposed taxes due from respondent for taxable years
ending 1987 and 1988, and which was attached to the tax evasion Complaint filed with the
DOJ. Consequently, the denial by the BIR of private respondents request for reinvestigation of the
disputed assessment is properly appealable to the CTA.

Ruling:
We agree with petitioner. Neither the NIRC nor the revenue regulations governing the protest of
assessments provide a specific definition or form of an assessment. However, the NIRC defines the
specific functions and effects of an assessment. To consider the affidavit attached to the Complaint as a
proper assessment is to subvert the nature of an assessment and to set a bad precedent that will
prejudice innocent taxpayers.

An assessment must be sent to and received by a taxpayer, and must demand payment of the taxes
described therein within a specific period. Thus, the NIRC imposes a 25 percent penalty, in addition to
the tax due, in case the taxpayer fails to pay the deficiency tax within the time prescribed for its
payment in the notice of assessment. Likewise, an interest of 20 percent per annum, or such higher rate
as may be prescribed by rules and regulations, is to be collected from the date prescribed for its
payment until the full payment.

The issuance of an assessment is vital in determining the period of limitation regarding its proper
issuance and the period within which to protest it. Section 203 of the NIRC provides that internal
revenue taxes must be assessed within three years from the last day within which to file the
return. Section 222, on the other hand, specifies a period of ten years in case a fraudulent return with
intent to evade was submitted or in case of failure to file a return. Also, Section 228 of the same law
states that said assessment may be protested only within thirty days from receipt thereof. Necessarily,
the taxpayer must be certain that a specific document constitutes an assessment. Otherwise, confusion
would arise regarding the period within which to make an assessment or to protest the same, or
whether interest and penalty may accrue thereon. It should also be stressed that the said document is a
notice duly sent to the taxpayer. Indeed, an assessment is deemed made only when the collector of
internal revenue releases, mails or sends such notice to the taxpayer.

In the present case, the revenue officers Affidavit merely contained a computation of respondents tax
liability. It did not state a demand or a period for payment. Worse, it was addressed to the justice
secretary, not to the taxpayers.

The BIR examiners Joint Affidavit attached to the Criminal Complaint contained some details of the tax
liabilities of private respondents does not ipso facto make it an assessment. The purpose of the Joint
Affidavit was merely to support and substantiate the Criminal Complaint for tax evasion. Clearly, it was
not meant to be a notice of the tax due and a demand to the private respondents for payment thereof.
The fact that the Complaint itself was specifically directed and sent to the Department of Justice and not
to private respondents shows that the intent of the commissioner was to file a criminal complaint for tax
evasion, not to issue an assessment. Although the revenue officers recommended the issuance of an
assessment, the commissioner opted instead to file a criminal case for tax evasion. What private
respondents received was a notice from the DOJ that a criminal case for tax evasion had been filed
against them, not a notice that the Bureau of Internal Revenue had made an assessment.

(Addl. Info) Also, Assessment Not Necessary Before Filing of Criminal Complaint. The issuance of an
assessment must be distinguished from the filing of a complaint. Before an assessment is issued, there
is, by practice, a pre-assessment notice sent to the taxpayer. The taxpayer is then given a chance to
submit position papers and documents to prove that the assessment is unwarranted. If the
commissioner is unsatisfied, an assessment signed by him or her is then sent to the taxpayer informing
the latter specifically and clearly that an assessment has been made against him or her. In contrast, the
criminal charge need not go through all these. The criminal charge is filed directly with the
DOJ. Thereafter, the taxpayer is notified that a criminal case had been filed against him, not that the
commissioner has issued an assessment. It must be stressed that a criminal complaint is instituted not to
demand payment, but to penalize the taxpayer for violation of the Tax Code.

14.

QUIRICO P. UNGAB, petitioner,vs.HON. VICENTE N. CUSI, JR., in his capacity as Judge of the Court of First
Instance, Branch 1, 16THJudicial District, Davao City, THE COMMISSIONER OF INTERNAL REVENUE, and
JESUS N. ACEBES, in hiscapacity as State Prosecutor, respondents.

Facts:

In July 1974, Quirico Ungab filed his income tax return. He was subjected to a tax audit and the tax
examiner was convinced that Ungab filed a fraudulent return. He was issued an assessment demanding
payment of P104k in taxes. At the same time, the tax examiner recommended the filing of criminal cases
of tax evasion against Ungab. Meanwhile, Ungab filed a protest with the Commissioner
of Internal Revenue (CIR).

Acting on the recommendation of the tax examiner, a state prosecutor filed 6 informations against
Ungab for various violations of the National Internal Revenue Code. The informations were filed with
Court of First Instance of Davao presided by Judge Vicente Cusi, Jr. Ungab filed a motion to quash the
informations on the ground that his pending protest with the CIR has not yet been acted upon hence the
assessment is not yet final and executory and therefore the trial court has no jurisdiction yet over the
criminal cases
Isuue:

WON Ungab may be charged for tax evasion even when there is a pending protest with the BIR

Ruling: yes.

What is involved here is not the collection of taxes where the assessment of the Commissioner of
Internal Revenue may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations
of the National Internal Revenue Code which is within the cognizance of courts of first instance. While
there can be no civil action to enforce collection before the assessment procedures provided in the Code
have been followed, there is no requirement for the precise computation and assessment of the tax
before there can be a criminal prosecution under the Code. The crime is complete when the violator
has, as in this case, knowingly and willfully filed fraudulent returns with intent to evade and defeat a
part or all of the tax

An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to defeat and
evade the income tax. A crime is complete when the violator has knowingly and willfuly filed a
fraudulent return with intent to evade and defeat the tax. The perpetration of the crime is grounded
upon knowledge on the part of the taxpayer that he has made an inaccurate return, and the
government's failure to discover the error and promptly to assess has no connections with the
commission of the crime

15

16

17.

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs.TEAM [PHILIPPINES] OPERATIONS CORPORATION

[formerly MIRANT (PHILS) OPERATIONS CORPORATION], Respondent.

Facts: Respondent entered into Operating and Management Agreements with Mirant Pagbilao
Corporation (MPC) and Mirant Sual Corporation (MSC). Payments received by respondent from MPC and
MSC relative to the said agreements were allegedly subjected to creditable withholding tax.
On April 15, 2002, respondent filed its 2001 income tax return with the BIR, reporting an income tax
overpayment in the amount of P69,562,412.00 arising from unutilized creditable taxes withheld during
the year. Respondent marked the appropriate box manifesting its intent to have theoverpayment
refunded.

The CTA division reasoned that respondent has indeed established its entitlement to a refund/tax credit
of its excess creditable withholding taxes in compliance with the following basic requirements:(1) the
claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of
payment of the tax; (2) it is shown on the return of the recipient that the income payment received was
declared as part of the gross income; and (3) the fact of withholding is established by a copy of a
statement duly issued by the payor to the payee showing the amount paid and the amount of the tax
withheld therefrom. Petitioner CIR appealed but CTA En Banc affirmed.

Issue: Whether or not respondent has established its entitlement for the refund or issuance of a tax
credit certificate in its favor the entire amount of P69,562,412.00 representing its unutilized tax credits
for taxable year ended 31 December 2001.

Ruling: In order to be entitled to a refund claim or issuance of a tax credit certificate representing any
excess or unutilized creditable withholding tax, it must be shown that the claimant has complied with
the essential basic conditions set forth under pertinent provisions of law and existing jurisprudential
declarations. (refer to the basic requirements stated above). First condition is pursuant to Sections
204(C) and 229 of the NIRC of 1997,The second and third conditions are anchored on Section 2.58.3(B)
of Revenue Regulations No. 2-98.

Here, it is undisputed that the claim for refund was filed within the two-year prescriptive period
prescribed under Section 229 of the NIRC of 1997, as amended. Respondent filed its income tax return
for taxable year 2001 on 15 April 2002. Counting from said date, it indeed had until 14 April 2004within
which to file its claim for refund or issuance of tax credit certificate in its favor both administratively and
judicially. Thus, petitioner’s administrative claim and petition for review filed on 19 March 2003 and 27
March 2003, respectively, fell within the prescriptive period.

Likewise, respondent was able to present various certificates of creditable tax withheld at source from
its payors, MPC and MSC, for taxable year 2001, showing creditable withholding taxes in the aggregate
amount of P70,805,771.42 (although the refund claim was only P69,562,412.00).Moreover, as
determined by the CTA in Division, respondent declared the income related to the claimed creditable
withholding taxes of P69,562,412.00 on its return.

Lastly, in compliance with Section 76 of the NIRC of 1997, as amended, respondent opted to be
refunded of its unutilized tax credit (as evidenced by the "x" mark in the appropriate box of its 2001
income tax return), and the same was not carried over in its 2002 income tax return; therefore, the
entire amount of P69,562,412.00 may be a proper subject of a claim for refund/tax credit certificate.

It is apt to restate here the hornbook doctrine that the findings and conclusions of the CTA are accorded
the highest respect and will not be lightly set aside. The Court finds no abusive or improvident exercise
of authority on the part of the CT A in Division. Since there is no showing of gross error or abuse on the
part of the CT A in Division, and its findings are supported by substantial evidence which were
thoroughly considered during the trial, there is no cogent reason to disturb its findings and conclusions.
Petition denied.

18.

Commissioner of Internal Revenue vs McGeorge Food Industries, Inc.

G.R. No. 174157, October 20, 2010

CARPIO, J.:

FACTS:

Respondent McGeorge Food Industries, Inc. filed with the Bureau of Internal Revenue (BIR) its final
adjustment income tax return for the calendar year ending 31 December 1997. The return indicated a
tax liability of P5,393,988 against a total payment of P10,130,176 for the first three quarters, resulting in
a net overpayment of P4,736,188. Respondent chose to carry it over to the succeeding year as tax
credit, indicating in its 1997 final return that it wished the amount to be applied as credit to next year.
Respondent then filed its final adjustment return for the calendar year ending 31 December 1998,
indicating a tax liability of P5,799,056. Instead of applying to this amount its unused tax credit carried
over from 1997 (P4,736,188), as it was supposed to do, respondent merely deducted from its tax liability
the taxes withheld at source for 1998 (P217,179) and paid the balance of P5,581,877. Respondent
simultaneously filed with the BIR and the Court of Tax Appeals (CTA) a claim for refund of its
overpayment in 1997 of P4,736,188. Petitioner Commissioner of Internal Revenue (petitioner) opposed
the suit at the CTA. The CTA ruled for respondent and ordered petitioner to refund the reduced amount
of P4,598,716.98 to account for two tax payments allegedly withheld at source which respondent failed
to substantiate. The Court of Appeals affirmed the CTA and uphold the applicability of Section 69 of the
1977 NIRC. Hence, this petition.

ISSUE:

Whether or not respondent is entitled to a tax refund for overpayment in 1997 after it opted, but failed,
to credit such to its tax liability in 1998

CONTENTIONS:

CIR: Respondent is precluded from seeking a refund for its overpayment in 1997 after respondent opted
to carry-over and apply it to its future tax liability, following Section 76 of the 1997 NIRC. Section 76
applies to respondent because by the time respondent filed its final adjustment return for 1997 on 15
April 1998, the 1997 NIRC was already in force, having taken effect on 1 January 1998.

Taxpayer:The refund was proper because respondent complied with the requirements of timely filing of
the claim and its substantiation.

RULING:

The respondent is not entitled to a refund under Section 76 of the 1997 NIRC, the law in effect at the
time respondent made known to the BIR its preference to carry over and apply its overpayment in 1997
to its tax liability in 1998. In lieu of refund, respondent’s overpayment should be applied to its tax
liability for the taxable years following 1998 until it is fully credited. Once the taxpayer opts to carry-over
the excess income tax against the taxes due for the succeeding taxable years, such option is irrevocable
for the whole amount of the excess income tax, thus, prohibiting the taxpayer from applying for a
refund for that same excess income tax in the next succeeding taxable years. The unutilized excess tax
credits will remain in the taxpayer’s account and will be carried over and applied against the taxpayer’s
income tax liabilities in the succeeding taxable years until fully utilized.As respondent opted to carry-
over and credit its overpayment in 1997 to its tax liability in 1998, Section 76 makes respondent’s
exercise of such option irrevocable, barring it from later switching options to "[apply] for cash refund."
Instead, respondent’s overpayment in 1997 will be carried over to the succeeding taxable years until it
has been fully applied to respondent’s tax liabilities. Hence, under Section 76 of the 1997 NIRC,
respondent’s claim for refund is unavailing. However, respondent is entitled to apply its unused
creditable overpayment in 1997 to its tax liability arising after 1998 until such has been fully applied.
19.

Lascona Land Company, Inc. v. Commissioner of Internal Revenue

G.R. No. 171251; March 5, 2012: Justice Diosdado Peralta

Statement of Facts:

On March 27, 1998, the Commissioner on Internal Revenue (CIR) issued Assessment Notice
against Lascona Land Company, Inc. (Lascona) informing the latter of its alleged deficiency income tax
for the year 1993 in the amount of Php 753,266.56. Lascona initially appealed for the cancellation and
setting aside of the Assessment Notice issued. However, the Officer-in-Charge of the BIR Office in
Makati denied its request considering that the case was not elevated to the Court of Tax Appeals (CTA)
as mandated by Section 228 of the National Internal Revenue Code. (NIRC).

Statement of the Case:

On April 12, 1999, Lascona appealed the decision before the CTA. On January 4, 2000, the CTA
nullified the subject assessment. The CIR filed a motion for reconsideration, however, the same was
denied for lack of merit. Dissatisfied, the CIR filed an appeal before the Court of Appeals (CA). In the
disputed Decision, the CA granted the CIR’s petition and set aside the Decision of the CTA. Lascona
moved for reconsideration but was denied for lack of merit.

Issues:

For the Taxpayer: WON petitioner can still appeal the assessment made by the CIR regarding its alleged
deficiency income tax for the year 1993.

For the Government: WON the subject assessment has become final, executory and demandable due to
the failure of the petitioner to file an appeal.

Ruling:

The petition is meritorious.

Yes. Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of
the CIR on the protested assessment. The Supreme Court held that in case the CIR failed to act on the
disputed assessment within the 180-day period from the date of submission of documents, a taxpayer
can either: (a) file a petition for review with the CTA within 30 days after the expiration of the 180-day
period; or (b) await the final decision of the CIR on the disputed assessments and appeal such final
decision to the CTA within 30 days after receipt of a copy of such decision.

No. The subject assessment has not yet become final, executory and demandable. The CIR failed to
inform Lascona of its decision when the latter moved for the cancellation or setting aside of the
assessment notice. The Supreme Court held that taxpayers could not be left in quandary by its inaction
on the protested assessment. It is imperative that taxpayers are informed of its action in order that the
taxpayer should then at least be able to take recourse to the tax court at the opportune time.

20.

G.R. No. L-36181 October 23, 1982 TEEHANKEE, J.:

MERALCO SECURITIES CORPORATION (now FIRST PHILIPPINE HOLDINGS CORPORATION),petitioner,

vs.HON. VICTORINO SAVELLANO and ASUNCION BARON VDA. DE MANIAGO, et al., as heirs of the late
Juan G. Maniago, respondents.

FACTS:

The late Juan G. Maniago submitted to Commissioner of Internal Revenue confidential denunciation
against the Meralco Securities Corporation for tax evasion for having paid income tax only on 25 % of
the dividends it received from the Manila Electric Co. for the years 1962-1966, thereby allegedly
shortchanging the government of income tax due from 75% of the said dividends.

Commissioner of Internal Revenue caused the investigation and ruled that no deficiency corporate
income tax was due since under the prevailing law (Sec24(a), NIRC) "in the case of dividends received by
a domestic or foreign resident corporation liable to (corporate income) tax under this Chapter . . . .only
twenty-five per centum thereof shall be returnable for the purposes of the tax imposed under this
section.". He rejected Maniago's contention that Meralco is "not a domestic corporation liable to tax
under this Chapter.", and his claim for informer's reward on a non-existent deficiency. This action was
sustained by the Secretary of Finance.
Maniago filed a Petition for Mandamus before CFI Manila against Commissioner and Meralco to compel
the former to impose the alleged deficiency tax assessment and award him the informer’s award under
R.A. 2238.

Commisioner filed Motion to Dismiss, arguing that since in matters of issuance and non-issuance of
assessments, he is clothed under the NIRC and existing rules and regulations with discretionary power in
evaluating the facts of a case and since mandamus will not lie to compel the performance of a
discretionary power, he cannot be compelled to impose the alleged tax deficiency assessment against
the Meralco Securities Corporation. He further argued that mandamus may not lie against him for that
would be tantamount to a usurpation of executive powers, since the Office of the Commissioner of
Internal Revenue is undeniably under the control of the executive department.

Meralco Securities Corporation filed its answer, arguing that the petition states no cause of action, that
the action is premature, that mandamus will not lie to compel the Commissioner of Internal Revenue to
make an assessment and/or effect the collection of taxes upon a taxpayer, that since no taxes have
actually been recovered and/or collected, Maniago has no right to recover the reward prayed for, that
the action of petitioner had already prescribed and that respondent court has no jurisdiction over the
subject matter as set forth in the petition, the same being cognizable only by the Court of Tax Appeals

Judge Savellano granted the petition filed by Maniago and denied all motions for reconsideration filed
therafter by petitioners.

ISSUES:

Commissioner of Internal Revenue: CFI Manila Judge Savellano has no jurisdiction over the subject
matter and that the issuance of a deficiency assessment is his prerogative which is not reviewable by
Mandamus.

Meralco: Mandamus cannot compel the Commissioner and thet Maniago’s right to recover has already
prescribed.

Maniago: He should be awarded an Informer’s reward as compelled by the Mandamus granted by CFI
Judge Savellano.
HELD: PETITION GRANTED – MANDAMUS WILL NOT LIE AND SAVELLANO HAS NO JURISIDCTION

Judge Savellano has no jurisdiction to take cognizance of the case because the subject matter clearly
falls within the scope of cases now exclusively within the jurisdiction of the Court of Tax Appeals. Section
7 of Republic Act No. 1125, enacted June 16, 1954, granted to the Court of Tax Appeals exclusive
appellate jurisdiction to review by appeal, among others, decisions of the Commissioner of Internal
Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of law administered by the Bureau of Internal Revenue. The question
of whether or not to impose a deficiency tax assessment on Meralco Securities Corporation undoubtedly
comes within the purview of the words "disputed assessments" or of "other matters arising under the
National Internal Revenue Code”. The determination of the correctness or incorrectness of a tax
assessment to which the taxpayer is not agreeable, but falls within the jurisdiction of the Court of Tax
Appeals.

Mandamus is an improper remedy. It only lies to enforce the performance of a ministerial act or duty
and not to control the performance of a discretionary power. Purely administrative and discretionary
functions may not be interfered with by the courts.

Commissioner of Internal Revenue is charged with the administration of revenue laws, which is the
primary responsibility of the executive branch of the government, mandamus may not be issued against
the Commissioner to compel him to impose a tax assessment not found by him to be due or proper for
that would be tantamount to a usurpation of executive functions

Maniago should have appealed to the Court of Tax Appeals the ruling of Commissioner of Internal
Revenue within thirty (30) days from receipt thereof pursuant to Section 11 of Republic Act No.
1125. He failed to take such an appeal to the tax court. The ruling is clearly final and no longer subject
to review by the courts.

Since no taxes are to be collected, no informer's reward is due to private respondents as the informer's
heirs. Informer's reward is contingent upon the payment and collection of unpaid or deficiency taxes. An
informer is entitled by way of reward only to a percentage of the taxes actually assessed and collected.
Since no assessment, much less any collection, has been made in the instant case, respondent judge's
writ for the Commissioner to pay respondents 25% informer's reward is gross error and without factual
nor legal basis.
21.

CREBA, Inc. v. Hon. Sec. Romulo

G.R. No. 160756 | March 9, 2010

Facts:

Petitioner Chamber of Real Estate and Builders’ Associations, Inc. (CREBA, Inc.) is questioning the
constitutionality of Section 27 (E) of RA 8424and the revenue regulations (RRs) issued by the BIR to
implement said provision and those involving creditable withholding taxes.Petitioner also assailed the
validity of the imposition of minimum corporate income tax (MCIT) on corporations and creditable
withholding tax (CWT) on sales of real properties classified as ordinary assets.Petitioner argues that the
MCIT violates the due process clause because it levies income tax even if there is no realized gain.

Petitioner also seeks to nullifySections 2.57.2(J) (as amended by RR 6-2001) and 2.58.2 of RR 2-98, and
Section 4(a)(ii) and (c)(ii) of RR 7-2003, all of which prescribe the collection of CWT on the sale of real
properties categorized as ordinary assets. Petitioner contends that these revenue regulations are
contrary to law because: (a) they ignore the different treatment by RA 8424 of ordinary assets and
capital assets and (b) respondent Secretary of Finance has no authority to collect CWT and to base the
CWT on the gross selling price or fair market value of the real properties classified as ordinary
assets.Petitioner also asserted that the enumerated provisions of the subject revenue regulations
violate the due process clause because, like the MCIT, the government collects income tax even when
the net income has not yet been determined. They contravene the equal protection clause as well
because the CWT is being levied upon real estate enterprises but not on other business enterprises,
more particularly those in the manufacturing sector.

Issue/s:

(1) Whether or not the imposition of the MCIT on domestic corporations is unconstitutional

(2) Whether or not the imposition of CWT on income from sales of real properties classified as ordinary
assets under RRs 2-98, 6-2001 and 7-2003, is unconstitutional.

Held:
(1) NO. The SC held that MCIT is not violative of due process. Therefore, the imposition of such is not
unconstitutional.

The MCIT is not a tax on capital.The MCIT is imposed on gross income which is arrived at by deducting
the capital spent by a corporation in the sale of its goods, i.e., the cost of goods and other direct
expenses from gross sales. Clearly, the capital is not being taxed.Furthermore, the MCIT is not an
additional tax imposition. It is imposed in lieu of the normal net income tax, and only if the normal
income tax is suspiciously low. The MCIT merely approximates the amount of net income tax due from a
corporation, pegging the rate at a very much reduced 2% and uses as the base the corporation’s gross
income.

(2) NO.

The CWT is creditable against the tax due from the seller of the property at the end of the taxable year.
The seller will be able to claim a tax refund if its net income is less than the taxes withheld. Nothing is
taken that is not due so there is no confiscation of property repugnant to the constitutional guarantee of
due process. More importantly, the due process requirement applies to the power to tax.The CWT does
not impose new taxes nor does it increase taxes. It relates entirely to the method and time of payment.

The taxing power has the authority to make reasonable classifications for purposes of
taxation. Inequalities which result from a singling out of one particular class for taxation, or exemption,
infringe no constitutional limitation.The real estate industry is, by itself, a class and can be validly
treated differently from other business enterprises.

Petitioner, in insisting that its industry should be treated similarly as manufacturing enterprises, fails to
realize that what distinguishes the real estate business from other manufacturing enterprises, for
purposes of the imposition of the CWT, is not their production processes but the prices of their goods
sold and the number of transactions involved. The income from the sale of a real property is bigger and
its frequency of transaction limited, making it less cumbersome for the parties to comply with the
withholding tax scheme.

22.

PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) vs. BUREAU OF INTERNAL REVENUE
(BIR)
FACTS:

PAGCOR was created pursuant to Presidential Decree (P.D.) No. 1067-A on January 1, 1977.
Simultaneous to its creation, P.D. No. 1067-B (supplementing P.D. No. 1067-A) was issued exempting
PAGCOR from the payment of any type of tax, except a franchise tax of five percent (5%) of the gross
revenue.

On January 1, 1998, R.A. No. 8424, otherwise known as the National Internal Revenue Code of 1997,
took effect. Section 27 (c) of R.A. No. 8424 provides that government-owned and controlled
corporations (GOCCs) shall pay corporate income tax, except petitioner PAGCOR, the Government
Service and Insurance Corporation, the Social Security System, the Philippine Health Insurance
Corporation, and the Philippine Charity Sweepstakes Office.

With the enactment of R.A. No. 9337 on May 24, 2005, certain sections of the National Internal Revenue
Code of 1997 were amended. Section 1 of R.A. No. 9337, which amended Section 27 (c) of the National
Internal Revenue Code of 1997 excluded PAGCOR from the enumeration of GOCCs that are exempt from
payment of corporate income tax.

On September 1, 2005, respondent BIR issued Revenue Regulations (RR) No. 16-2005, specifically
identifying PAGCOR as one of the franchisees subject to 10% VAT imposed under Section 108 of the
National Internal Revenue Code of 1997, as amended by R.A. No. 9337. Hence, the present petition for
certiorari.

issue

Whether or not PAGCOR is still exempt from corporate income tax and VAT with the enactment of R.A.
No. 9337.

HELD

In this case, PAGCOR failed to prove that it is still exempt from the payment of corporate income tax,
considering that Section 1 of R.A. No. 9337 amended Section 27 (c) of the National Internal Revenue
Code of 1997 by omitting PAGCOR from the exemption. The legislative intent, as shown by the
discussions in the Bicameral Conference Meeting, is to require PAGCOR to pay corporate income tax;
hence, the omission or removal of PAGCOR from exemption from the payment of corporate income tax.
It is a basic precept of statutory construction that the express mention of one person, thing, act, or
consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio
alterius. Thus, the express mention of the GOCCs exempted from payment of corporate income tax
excludes all others. Not being excepted, petitioner PAGCOR must be regarded as coming within the
purview of the general rule that GOCCs shall pay corporate income tax, expressed in the maxim:
exceptio firmat regulam in casibus non exceptis.

Petitioner's exemption from VAT under Section 108 (B) (3) of R.A. No. 8424 has been thoroughly and
extensively discussed in Commissioner of Internal Revenue v. Acesite (Philippines) Hotel Corporation.
The Court ruled that PAGCOR and Acesite were both exempt from paying VAT, thus:

PAGCOR is exempt from payment of indirect taxes. Under the above provision [Section 13 (2) (b) of P.D.
1869], the term "Corporation" or operator refers to PAGCOR. Although the law does not specifically
mention PAGCOR's exemption from indirect taxes, PAGCOR is undoubtedly exempt from such taxes
because the law exempts from taxes persons or entities contracting with PAGCOR in casino operations.
Although, differently worded, the provision clearly exempts PAGCOR from indirect taxes. In fact, it goes
one step further by granting tax exempt status to persons dealing with PAGCOR in casino operations.

Indeed, by extending the exemption to entities or individuals dealing with PAGCOR, the legislature
clearly granted exemption also from indirect taxes. It must be noted that the indirect tax of VAT, as in
the instant case, can be shifted or passed to the buyer, transferee, or lessee of the goods, properties, or
services subject to VAT. Thus, by extending the tax exemption to entities or individuals dealing with
PAGCOR in casino operations, it is exempting PAGCOR from being liable to indirect taxes.

23.

TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC. VS. CIR

FACTS:

Toshiba, a PEZA registered enterprise,filed a Petition for Review with the CTA and prayed for the
issuance of a Tax Credit Certificate for the amount representing unutilized input taxes paid on its
purchase of taxable goods and services for the 1st and 2nd quarters of 1997. The CIR opposed. Upon
advise from the CTA, Toshiba and the CIR stipulated, among others, that Toshiba is “a duly registered
VAT entity” subject to zero percent (0%) VAT on its export sales.
The CTA ruled in favor of Toshiba. The CIR belatedly raised in its MR that being a part of PEZA, Toshiba is
not subject to VAT (i.e. VAT-exempt), and its transaction is VAT-exempt. The MR was denied. The CA
later reversed the ruling of the CTA.

ISSUE:

Whether or not Toshiba isentitled to the credit/refund of its unutilized input VAT payments.

RULING:

Yes. Toshiba is entitled to the credit/ refund of its unutilized input VAT payments.

A VATexempt transactioninvolves goods or services which, by their nature, are specifically listed
in and expressly exempted from the VAT under the Tax Code, without regard to the tax status – VAT-
exempt or not – of the party to the transaction.

A VAT exempt party, on the other hand, is a person or entity granted VAT exemption under the Tax
Code, a special law or an international agreement to which the Philippines is a signatory, and by virtue
of which its taxable transactions become exempt from VAT.

At present,PEZA-registered enterprises (located within ECOZONES) are VAT-exempt entities(Sec. 8, RA

7916, as amended)because of the fiction that ECOZONES are foreign territory. The Cross Border
Doctrine also states that no VAT shall be imposed to form part of the cost of goods destined for
consumption outside of the territorial border of the taxing authority.

However, the rule which considers any sale by a supplier from the Customs Territory to a PEZA-
registered enterprise as export sale, which should not be burdened by output VAT, was only clearly
established on October 15, 1999, upon the issuance by the BIR of RMC No. 74-99. Prior to said date, the
old rule, whether a PEZA-registered enterprise was exempt or subject to VAT depended on the type of
fiscal incentives availed of.
“This old rule clearly did not take into consideration the Cross Border Doctrine essential to the VAT
system or the fiction of the ECOZONE as a foreign territory. x xxSuch distinction was abolished by RMC
No. 74-99 thus, affirming the nature of a PEZA-registered or an ECOZONE enterprise as a VAT-exempt
entity.”

Likewise, PEZA enterprises are not covered by VAT-exempt transactions under Sec. 103 (q) of the old Tax
code “because although the said section recognizes that transactions covered by special laws may be
exempt from VAT, the very same section provides that those falling under Presidential Decree No. 66
(precursor of PEZA) are not.”

Hence, Toshiba may rightfully exercise its option under the old rule since it is claiming refunds for its
export sales for the 1st and 2nd quarters of 1997 (before October 15, 1999). Consequently, a VAT-
registered seller of goods and/or services who made zero-rated sales can claim tax credit or refund of
the input VAT paid on its purchases of goods, properties, or services relative to such zero-rated sales, in
accordance with Section 4.102-2 of Revenue Regulations No. 7-95.

Other issues: (Civpro)

The CIR did not timely raise before the CTA the issues on the VAT-exemptions of Toshiba and its export
sales.

Rule 9, Sec. 1 of the Rules of Court provides: “SECTION 1. Defenses and objections not pleaded. –
Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived.
x xx”

The CIR did not point out in his Answer, Pre-Trial Brief, or evidences (he even waived the submission of a
memorandum) that Toshiba had no right to the credit/refund of its input VAT payments because the
latter was VAT-exempt and its export sales were VAT-exempt transactions.

The CIR judicially admitted that Toshiba was VAT-registered and its export sales were subject to VAT at
zero percent (0%) rate.
 Rule 18, Sec. 2 of the Rules of Court provides: “SECTION 2. Nature and purpose. – The pre-trial
is mandatory. The court shall consider: x xx (d) The possibility of obtaining stipulations or admissions of
facts and of documents to avoid unnecessary proof; x xx”

The arguments of the CIR that Toshiba was VAT-exempt and the latter’s export sales were VAT-
exempt transactions are inconsistent with the explicit admissions of the CIR in the Joint Stipulation of
Facts to the contrary. Pre-trial is an answer to the clarion call for the speedy disposition of cases. The
admission having been made in a stipulation of facts at pre-trial by the parties, it must be treated as a
judicial admission and requires no proof.

The CIR cannot escape the binding effect of his judicial admissions.

There was no allegation (or proof in support), either in the MR of the CTA nor in the Petition for
Review before the CA that the Revenue Attorney committed a mistake (much less a palpable mistake) in
signing the Joint Stipulation. There is presumption of regularity in the performance of duties of the
Revenue Attorney.

24.

COMMISSIONER OF INTERNAL REVENUE vs.

MINDANAO II GEOTHERMAL PARTNERSHIP

G.R. No. 191498, 15 January 2014; Sereno, CJ

FACTS:

Mindanao II, a partnership engaged in the business of power generation and sale of electricity to
NAPOCOR, filed its Quarterly VAT Returns for the second, third and fourth quarters of taxable year 2004
on the following dates respectively – 26 July 2004, 22 October 2004 and 25 January 2005. On 6 October
2005, Mindanao II filed with BIR an application for the refund or credit of accumulated unutilized
creditable input taxes.

Mindanao II believed that a judicial claim must be filed within the two-year prescriptive period provided
under Section 112(A) and that such time frame was to be reckoned from the filing of its Quarterly VAT
Returns for the second, third, and fourth quarters of taxable year 2004. Thus, on 21 July 2006, Mindanao
II, claiming inaction on the part of the CIR and that the two-year prescriptive period was about to expire,
filed a Petition for Review with the CTA.

CIR contends that pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal
Revenue (CIR) had a period of 120 days, or until 3 February 2006, to act on the claim. The administrative
claim, however, remained unresolved on 3 February 2006. Hence, the inaction of the CIR was a denial of
its claim, in which case, the former would have 30 days to file an appeal to the CTA, that is, on 5 March
2006. Mindanao II, however, did not file an appeal within the 30-day period.

Both the CTA Second Division and CTA En Banc ruled in favour of Mindanao II. Hence, CIR filed a petition
under Rule 45.

ISSUE(S):

1. Whether Mindanao II’s application for refund was within the two-year prescriptive period.

2. Whether the 120 + 30 day period is applicable.

RULING:

1. YES. It is only the administrative claim (filing of the refund to the CIR) that must be filed within the
two-year prescriptive period. The proper reckoning date for the two-year prescriptive period is the close
of the taxable quarter when the relevant sales were made.

The returns were filed on 26 July 2004, 22 October 2004 and 25 January 2005 with respective two-year
reckoning periods on 30 June 2004, 30 September 2004 and 31 December 2004.

2. YES. The taxpayer can file an appeal in one of two ways: (a) file the judicial claim within thirty days
after the Commissioner denies the claim within the 120-day period, or (b) file the judicial claim within
thirty days from the expiration of the 120-day period if the Commissioner does not act within the 120-
day period. The 30-day period always applies, whether there is a denial or inaction on the part of the
CIR. And, as a general rule, the 30-day period to appeal is both mandatory and jurisdictional.
Mindanao II’s judicial claim (filling of petition to the CTA) was filed on 21 July 2006 – long after 5 March
2006, the last day of the 30-day period for appeal. In fact, it filed its judicial claim 138 days after the
lapse of the 30-day period.

The three administrative claims for the refund or credit of unutilized input VAT were all timely filed,
while the corresponding judicial claims were belatedly filed. Hence, CTA lost jurisdiction over Mindanao
Il’s claims for refund or credit. It erred in granting the claims.

DISPOSITION:

WHEREFORE, we GRANT the Petition. The assailed Court of Tax Appeals En Banc Decision dated 11
November 2009 and Resolution dated 3 March 2010 of the in CTA EB Case No. 448 (CTA Case No. 7507)
are hereby REVERSED and SET ASIDE. A new ruling is entered DENYING respondent s claim for a tax
refund or credit ofP6,791,845.24. SO ORDERED.

25.

COMMISSIONER OF CUSTOMS, petitioner, vs. PHILIPPINE PHOSPHATE FERTILIZER

CORPORATION, respondent.

FACTS

Philphos is a domestic corporation registed with Philippine Export Zone Authority (PEZA) with its base of
operation in an export processing zone. It buys petroleum from Petron. Philphos reimburses Petron for
the customs duties on the purchased fuels and petroleum products which are passed on by the Petron
as part of the selling price. Philphos pointed that it being an enterprise registered with the export
processing zone, it is entitled to tax incentives which exempts from customs and internal revenue laws,
supplies brought into the export processing zone.

ISSUE

Whether or not Phiphos can claim for a refund for the tax which was passed on to it by Petron?

RULING
Yes. The incentives offered to enterprises duly registered with the PEZA consist, among others, of tax
exemptions. These benefits may, at first blush, place the government at a disadvantage as they preclude
the collection of revenue. Still, the expectation is that the tax breaks ultimately redound to the benefit
of the national economy, enticing as they do more enterprises to invest and do business within the
zones; thus creating more employment opportunities and infusing more dynamism to the vibrant
interplay of market forces.

Section 17 of the EPZA Law particularizes the tax benefits accorded to duly registered enterprises. It
states:

SEC. 17. Tax Treatment of Merchandize in the Zone. (1) Except as otherwise provided in this Decree,
foreign and domestic merchandise, raw materials, supplies, articles, equipment, machineries, spare
parts and wares of every description, except those prohibited by law, brought into the Zone to be sold,
stored, broken up, repacked, assembled, installed, sorted, cleaned, graded, or otherwise processed,
manipulated, manufactured, mixed with foreign or domestic merchandise or used whether directly or
indirectly in such activity, shall not be subject to customs and internal revenue laws and regulations nor
to local tax ordinances, the following provisions of law to the contrary notwithstanding.

The cited provision certainly covers petroleum supplies used, directly or indirectly, by Philphos to
facilitate its production of fertilizers, subject to the minimal requirement that these supplies are brought
into the zone. The supplies are not subject to customs and internal revenue laws and regulations, nor to
local tax ordinances. It is clear that Section 17(1) considers such supplies exempt even if they are used
indirectly, as they had been in this case.

26.

MICROSOFT PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

FACTS

Microsoft Philippines, Inc. (Microsoft) is a value-added tax (VAT) taxpayer. Microsoft renders marketing
services to affiliated non-resident foreign corporations. The services are paid for in acceptable foreign
currency and qualify as zero-rated sales for VAT purposes. Microsoft filed an administrative claim for tax
credit of VAT input taxes. Its claim for tax credit was denied on the ground that Microsoft's official
receipts do not bear the imprinted word zero-rated on its face, thus, the official receipts cannot be
considered as valid evidence to prove zero-rated sales for VAT purposes.

ISSUE

Whether or not Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes?

RULING

No. The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue
regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing
requirements to be able to file a claim for input taxes on domestic purchases for goods or services
attributable to zero-rated sales. All purchases covered by invoices other than a VAT invoice shall not give
rise to any input tax. Microsoft's invoice, lacking the word zero-rated, is not a VAT invoice, and thus
cannot give rise to any input tax.

27.

COMMISSIONER OF INTERNAL REVENUE v. AICHI FORGING COMPANY OF ASIA, INC.

FACTS

On September 30, 2004 Aichi Forging Company filed a claim for refund/credit of input VAT for the period
July 1, 2002 for its zero-rated sales with the CIR. On the same date, it filed a Petition for Review with the
CTA for the refund/credit of the same input VAT.

The CIR claims that the administrative and the judicial claims were filed beyond the two-year period to
claim a tax refund/credit. It reasoned that since the year 2004 was a leap year, the filing of the claim for
tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on September
29, 2004. It likewise puts in issue the fact that the administrative claim with the BIR and the judicial
claim with the CTA were filed on the same day. He opines that the simultaneous filing of the
administrative and the judicial claims contravenes Section 229 of the NIRC, which requires the prior
filing of an administrative claim. He insists that such procedural requirement is based on the doctrine of
exhaustion of administrative remedies and the fact that the CTA is an appellate body exercising judicial
review over administrative actions of the CIR.
Aichi Forging contends that the non-observance of the 120-day period given to the CIR to act on the
claim for tax refund/credit in Section 112(D) is not fatal because what is important is that both claims
are filed within the two-year prescriptive period. If, however, the CIR takes time in deciding the claim,
and the period of two years is about to end, the suit or proceeding must be started in the CTA before
the end of the two-year period without awaiting the decision of the CIR.

ISSUE

Whether or not the claim for refund/credit has already prescribed?

Whether or not the immediate filing of the Petition for review with the CA is fatal?

RULING

No. The reckoning period for the start of the counting of the prescriptive period is within two (2) years
after the close of the taxable quarter when the sales were made. Between the Civil Code, which
provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a
year is composed of 12 calendar months, it is the latter that must prevail following the legal maxim, Lex
posteriori derogat priori. Thus:

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987
deal with the same subject matter the computation of legal periods. Under the Civil Code, a year is
equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of
1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative
Code of 1987, the number of days is irrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal periods under the
Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal
periods. Lex posteriori derogat priori.

Yes. It did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason, we find
the filing of the judicial claim with the CTA premature. The CIR has 120 days from the submission of
complete documents in support of the application.
The NIRC, which already provides for a specific period within which a taxpayer should appeal the
decision or inaction of the CIR. The NIRC envisions two scenarios: (1) when a decision is issued by the CIR
before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In
both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then,
the 120-day period is crucial in filing an appeal with the CTA. the premature filing of respondents claim
for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was
acquired by the CTA.

28.

Commissioner of Internal Revenue v. Silicon Philippines Inc.

FACTS

On 6 May 1999, Silicon Philippine filed an application for Tax Credit/Refund of input VAT paid
attributable to zero-rated sales for the second quarter of 1998. since no final action has been taken
by the CIR on respondent’s administrative claim for refund, respondent filed a Petition for Review
before the CTA on 30 June 2000.

The issue of jurisdiction was not raised by any party but was discussed by the SC motu proprio.

ISSUE

Whether or not the CTA has acquired jurisdiction over the claim for refund?

RULING

No. The pertinent provisions of law provide:

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 case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the period prescribed above, the taxpayer affected
may, within thirty (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.

Failure of respondent to observe the 30-day period through its belated filing of the Petition for Review
before the CTA warrants a dismissal with prejudice for lack of jurisdiction

29.

NIPPON EXPRESS (PHILIPPINES) CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

FACTS

Nippon Express on April 24, 2003, it filed an administrative claim for refund representing excess input
tax attributable to its effectively zero-rated sales in 2001. Pending review by the BIR, on April 25, 2003,
petitioner filed a petition for review with the CTA, requesting for the issuance of a tax credit certificate.
The CIR failed to immediately express its objection to the premature filing of the petition for review
before the CTA.

In its the CTA En Banc held that the 120 day period under Section 112(D) of the NIRC, which granted the
CIR the opportunity to act on the claim for refund, was jurisdictional in nature such that petitioner’s
failure to observe the said period before resorting to judicial action warranted the dismissal of its
petition for review for having been prematurely filed.
ISSUE

Whether or not the CTA acquired jurisdiction of the Petition for Review?

RULING

No. The provision of law reveals that the taxpayer may appeal the denial or the inaction of the CIR only
within thirty (30) days from receipt of the decision denying the claim or the expiration of the 120day
period given to the CIR to decide the claim. Because the law is categorical in its language, there is no
need for further interpretation by the courts and noncompliance with the provision cannot be justified.

The 120+30day period is indeed mandatory and jurisdictional. Thus, failure to observe the said period
before filing a judicial claim with the CTA would not only make such petition premature, but would also
result in the non acquisition by the CTA of jurisdiction to hear the said case.

Because the 120+30 day period is jurisdictional, the issue of whether petitioner complied with the said
time frame may be broached at any stage, even on appeal. Well settled is the rule that the question of
jurisdiction over the subject matter can be raised at any time during the proceedings. Jurisdiction cannot
be waived because it is conferred by law and is not dependent on the consent or objection or the acts or
omissions of the parties or any one of them. Consequently, the fact that the CIR failed to immediately
express its objection to the premature filing of the petition for review before the CTA is of no moment.

30.

SMART COMMUNICATIONS, INC. v. MUNICIPALITY OF MALVAR, BATANGAS

FACTS

Smart constructed a telecommunications tower within the territorial jurisdiction of the Municipality.
The Municipality passed an Ordinance entitled "An Ordinance Regulating the Establishment of Special
Projects." The Municipality sent an assessment letter to Smart. Smart filed with Regional Trial Court an
action assailing the validity of the Ordinance. The trial court confined its resolution of the case to the
validity of the assessment, and did not rule on the legality of Ordinance.
Smart filed a petition for review with the CTA . The CTA En Banc declared that it is a court of special
jurisdiction and as such, it can take cognizance only of such matters as are clearly within its jurisdiction.
Citing Section 7(a), paragraph 3, of Republic Act No. 9282, the CTA En Banc held that the CTA has
exclusive appellate jurisdiction to review on appeal, decisions, orders or resolutions of the Regional Trial
Courts in local tax cases originally resolved by them in the exercise of their original or appellate
jurisdiction.

The question now is whether the trial court resolved a local tax case in order to fall within the ambit of
the CTA’s appellate jurisdiction This question, in turn, depends ultimately on whether the fees imposed
under the Ordinance are in fact taxes.

Smart argues that the "fees" in the Ordinance are actually taxes since they are not regulatory, but
revenue raising.

ISSUE

Whether or not the CTA has jurisdiction to decide over the case?

RULING

No. The primary purpose of the Ordinance is to regulate the "placing, stringing, attaching, installing,
repair and construction of all gas mains, electric, telegraph and telephone wires, conduits, meters and
other apparatus" listed therein, which included Smart’s telecommunications tower. Clearly, the purpose
of the assailed Ordinance is to regulate the enumerated activities particularly related to the construction
and maintenance of various structures.

Since the main purpose of the Ordinance is to regulate certain construction activities of the identified
special projects, which included "cell sites" or telecommunications towers, the fees imposed in the
Ordinance are primarily regulatory in nature, and not primarily revenue raising. While the fees may
contribute to the revenues of the Municipality, this effect is merely incidental. Thus, the fees imposed in
the Ordinance are not taxes.

31.
COMMISSIONER OF INTERNAL REVENUE v. PRIMETOWN PROPERTY

FACTS

Primetown Property applied for the refund or credit of income tax respondent paid in 1997. It explained
that the increase in the cost of labor and materials and difficulty in obtaining financing for projects and
collecting receivables caused the real estate industry to slowdown. As a consequence, while business
was good during the first quarter of 1997, respondent suffered losses. because respondent suffered
losses, it was not liable for income taxes. Nevertheless, respondent paid its quarterly corporate income
tax and remitted creditable withholding tax from real estate sales to the BIR. A revenue officer required
respondent to submit additional documents to support its claim. Respondent complied but its claim was
not acted upon. Thus, on April 14, 2000, it filed a petition for review in the CTA.

The CTA dismissed the petition as it was filed beyond the two year prescriptive period for filing a judicial
claim for tax refund or tax credit. The CTA found that respondent filed its final adjusted return on April
14, 1998. Thus, its right to claim a refund or credit commenced on that date.

The tax court applied Article 13 of the Civil Code which states:

Art. 13. When the law speaks of years, months, days or nights, it shall be understood that years are of
three hundred sixty five days each

Thus, according to the CTA, the two year prescriptive period under Section 229 of the NIRC for the filing
of judicial claims was equivalent to 730 days. Because the year 2000 was a leap year, respondent's
petition, which was filed 731 days after respondent filed its final adjusted return, was filed beyond the
reglementary period.

ISSUE

Whether or not the claim for refund has already prescribed?

RULING

No. the Administrative Code of 1987 was enacted. Section 31, Chapter VIII, Book I thereof provides:
Sec. 31. Legal Periods. Year shall be understood to be twelve calendar months; month of thirty days,
unless it refers to a specific calendar month in which case it shall be computed according to the number
of days the specific month contains; day. A calendar month is a month designated in the calendar
without regard to the number of days it may contain.

Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987
deal with the same subject matter the computation of legal periods. Under the Civil Code, a year is
equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of
1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative
Code of 1987, the number of days is irrelevant.

There obviously exists a manifest incompatibility in the manner of computing legal periods under the
Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII,
Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal
periods. Lex posteriori derogat priori.

Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two year
prescriptive period (reckoned from the time respondent filed its final adjusted return on April 14, 1998)
consisted of 24 calendar months respondent's petition (filed on April 14, 2000) was filed on the last day
of the 24th calendar month from the day respondent filed its final adjusted return.

32.

COMMISSIONER OF INTERNAL REVENUE v. COURT OF TAX APPEALS and AYALA LAND, INC.

FACTS

Ayala Land Inc. (ALI) received the CIR's Final Assessment Notice whereby it was assessing ALI for alleged
deficiency value added tax (VAT) on its alleged income from cinema operations for the taxable year
2003. ALI filed its protest but was denied by the CIR which led it to file a Petition for Review with the
CTA. The CTA Second Division rendered its Decision granting ALI’s petition for review. The assessment
against ALI for deficiency VAT for the calendar year 2003 was ordered cancelled and set aside. The CIR’s
motion for reconsideration was denied, prompting him to file an appeal to the CTA en banc. The CTA en
banc rendered its Decision affirming the decision of the CTA Second Division. Feeling aggrieved, the CIR
filed a motion for reconsideration, but this was denied by the CTA en banc in its Resolution dated March
25, 2009.

The CIR claims that neither he nor his statutory counsel, the Office of the Solicitor General (OSG),
received a copy of the CTA en banc’s resolution denying his motion for reconsideration. It then came as
a surprise to him when he received a copy of the CTA en banc’s Resolution 2009 which provided that the
CTA Decision had become final and executory. The CIR then filed a Manifestation with the Motion to
Reconsider Resolution Ordering Entry of Judgment, questioning the CTA’s entry of judgment.

The CIR then filed on October 2, 2009 with the CTA en banc a petition for relief asking that the entry of
judgment in the case be recalled. The CTA en banc dismissed the petition for relief for having been filed
out time

Without filing a motion for reconsideration with the CTA en banc, the CIR filed a petition for certiorari.

ISSUE

Whether or not the CTA committed grave abuse of discretion?

RULING

No. At the outset, a dismissal of the petition is warranted in view of the petitioner’s failure to file before
the CTA en banc a motion for reconsideration of the assailed resolution. The settled rule is that a motion
for reconsideration is a condition sine qua non for the filing of a petition for certiorari. While the rule is
not absolute and admits of settled exceptions, none of the exceptions attend the present petition.

Section 3, Rule 38 of the Rules of Court provides:

Sec. 3. Time for filing petition; contents and verification. – A petition provided for in either of the
preceding sections of this Rule must be verified, filed within sixty (60) days after the petitioner learns of
the judgment, final order, or other proceeding to be set aside, and not more than six (6) months after
such judgment or final order was entered, or such proceeding was taken; and must be accompanied
with affidavits showing the fraud, accident, mistake, or excusable negligence relied upon, and the facts
constituting the petitioner’s good and substantial cause of action or defense, as the case may be.
By the CIR’s own evidence and admissions, particularly in the narration of facts in the petition for relief,
the OSG’s letter and the affidavit of merit attached thereto, it is evident that both the CIR and the OSG
had known of the CTA’s Resolution dated March 25, 2009 long before August 3, 2009.

33.

COMMISSIONER OF INTERNAL REVENUE v. METRO STAR SUPERAMA, INC.

FACTS

The CIR assessed Metro Star for deficiency value-added tax and withholding tax for the taxable year
1999. Metro Star denied ever having received the Preliminary Assessment Notice (PAN), thus it was
denied due process but the CIR argues that Metro Star, nonetheless received the Final Assessment
Notice (FAN) which complied with due process.

ISSUE

Whether or not the receipt of only the FAN complied with due process?

RULING

No. CIR failed to discharge its duty and present any evidence to show that Metro Star indeed received
the PAN.

When the Commissioner or his duly authorized representative finds that proper taxes should be
assessed, he shall first notify the taxpayer of his findings. The taxpayers shall be informed in writing of
the law and the facts on which the assessment is made; otherwise, the assessment shall be void.

The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax
collection without first establishing a valid assessment is evidently violative of the cardinal principle in
administrative investigations - that taxpayers should be able to present their case and adduce
supporting evidence.
It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but part of
the due process requirement in the issuance of a deficiency tax assessment, the absence of which
renders nugatory any assessment made by the tax authorities. The use of the word shall in describes the
mandatory nature of the service of a PAN. The persuasiveness of the right to due process reaches both
substantial and procedural rights and the failure of the CIR to strictly comply with the requirements laid
down by law and its own rules is a denial of Metro Stars right to due process. Thus, for its failure to send
the PAN stating the facts and the law on which the assessment was made as required by Section 228 of
R.A. No. 8424, the assessment made by the CIR is void.

34.

COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE GLOBAL COMMUNICATION, INC.

FACTS

Respondent filed its Annual Income Tax Return for taxable year 1990 on 15 April 1991. On 22 April 1992,
the BIR sent a letter to respondent requesting the latter to present for examination certain records and
documents, but respondent failed to present any document. On 21 April 1994, respondent received a
Preliminary Assessment Notice dated 13 April 1994 for deficiency income tax. On the following day, 22
April 1994, respondent received a Formal Assessment Notice dated 14 April 1994, for deficiency income
tax.

On 6 May 1994, respondent filed a formal protest letter against the Assessment Notice. Respondent
filed another protest letter on 23 May 1994. In both letters, respondent requested for the cancellation
of the tax assessment, which they alleged was invalid for lack of factual and legal basis.

On 16 October 2002, more than eight years after the assessment was presumably issued, respondent
received from the CIR a Final Decision dated 8 October 2002 denying the respondent’s protest against
Assessment Notice, and affirming the said assessment in toto.

The CIR contends that the 2 letters of protest are by nature request for reinvestigation and thus tolled
the running of the 3 year prescriptive period.
ISSUE

Whether or not the 2 letters of protest are to be considered as a request for reinvestigation?

RULING

No. The taxpayer may protest administratively an assessment by filing a written request for
reconsideration or reinvestigation specifying the following particulars:

For the purpose of protest herein—

(a) Request for reconsideration-- refers to a plea for a re-evaluation of an assessment on the basis of
existing records without need of additional evidence. It may involve both a question of fact or of law or
both.

(b) Request for reinvestigation—refers to a plea for re-evaluation of an assessment on the basis of
newly-discovered evidence or additional evidence that a taxpayer intends to present in the
investigation. It may also involve a question of fact or law or both.

The main difference between these two types of protests lies in the records or evidence to be examined
by internal revenue officers, whether these are existing records or newly discovered or additional
evidence. A re-evaluation of existing records which results from a request for reconsideration does not
toll the running of the prescription period for the collection of an assessed tax.

The CIR’s allegation that there was a request for reinvestigation is inconceivable since respondent
consistently and categorically refused to submit new evidence and cooperate in any reinvestigation
proceedings.

NOTE

The law prescribed a period of three years from the date the return was actually filed or from the last
date prescribed by law for the filing of such return, whichever came later, within which the BIR may
assess a national internal revenue tax. However, the law increased the prescriptive period to assess or to
begin a court proceeding for the collection without an assessment to ten years when a false or
fraudulent return was filed with the intent of evading the tax or when no return was filed at all. In such
cases, the ten-year period began to run only from the date of discovery by the BIR of the falsity, fraud or
omission.

If the BIR issued this assessment within the three-year period or the ten-year period, whichever was
applicable, the law provided another three years after the assessment for the collection of the tax due
thereon through the administrative process of distraint and/or levy or through judicial proceedings. The
three-year period for collection of the assessed tax began to run on the date the assessment notice had
been released, mailed or sent by the BIR.

The running of the statute of limitation on the making of assessments and the beginning of distraint or
levy or a proceeding in court for collection in respect of any deficiency, shall be suspended for the
period during which the Commissioner is prohibited from making the assessment or beginning distraint
or levy or a proceeding in court and for sixty days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is being assessed or collected

35.

COLLECTOR OF INTERNAL REVENUE v. J.C. YUSECO and The COURT OF TAX APPEALS

FACTS

JC Yuseco did not file income tax returns for the calendar years 1945 and 1946. The CIR assessed JC
Yuseco and demanded alleged income taxes and corresponding surcharges. For failure to pay upon
demand, the CIR issued a warrant of distraint and levy upon JC Yuseco's properties. JC Yuseco filed a
petition for prohibition with the CTA which was granted by the respondent court.

The CIR contends that JC Yuseco cannot bring to the CTA an independent special civil action for
prohibition without taking to said Court an appeal from the decision or ruling of the Collector of Internal
Revenue.

ISSUE
Whether or not the CTA has jurisdiction to issue the said writ of prohibition?

RULING

No. Nowhere does the law expressly vest in the Court of Tax Appeals original jurisdiction to issue writs
of prohibition and injunction independently of, and apart from, an appealed case. The writ of
prohibition or injunction that it may issue under the provisions of section 11, Republic Act No. 1125, to
suspend the collection of taxes, is merely ancillary to and in furtherance of its appellate jurisdiction in
the cases mentioned in section 7 of the Act. The power to issue the writ exists only in cases appealed to
it.

The intention of Congress was to vest the Court of Tax Appeals with jurisdiction to issue writs of
prohibition and injunction only in aid of its appellate jurisdiction in cases appealed to it and not to clothe
it with original jurisdiction to issue them. Taxes being the chief source of revenue for the Government to
keep it running must be paid immediately and without delay. A taxpayer who feels aggrieved by the
decision or ruling handed down by a revenue officer and appeals from his decision or ruling to the Court
of Tax Appeals must pay the tax assessed, except that, if in the opinion of the Court the collection would
jeopardize the interest of the Government and/or the taxpayer, it could suspend the collection and
require the taxpayer either to deposit the amount claimed or to file a surety bond for not more than
double the amount of the tax assessed.