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Taxation 2 claim or after the expiration of the 120-day period, appeal the decision or

2016 Bar Exam Questions and Suggested Answers the unacted claim with the CTA. The 120-day period is mandatory and
jurisdictional, and that the CTA does not acquire jurisdiction over a judicial
VIII claim that is filed before the expiration of the 120-day period.

In 2011, Solar Computer Corporation (Solar) purchased a proprietary B) File a written claim with CIR within two years from date of payment of
membership share covered by Membership Certificate No. 8 from the the tax or penalty. Appeal to CTA within 30 days from denial of claim and
Mabuhay Golf Club, Inc. for P500,000.00. On December 27, 2012, it within the 2-year prescriptive period, or upon inaction by CIR and two years
transferred the same to David, its American consultant, to enable him is about to expire. The 120-day period for CIR to decide is not required.
to avail of the facilities of the Club. David executed a Deed of
Declaration of Trust and Assignment of Shares wherein he XI
acknowledged the absolute ownership of Solar over the share; that
the assignment was without any consideration; and that the share Soaring Eagle paid its excise tax liabilities with Tax Credit Certificates
was placed in his name because the Club required it to be done. In (TCCs) which it purchased through the One Stop Shop Inter-Agency
2013, the value of the share increased to P800,000.00. Tax Credit Center (Center) of the Department of Finance. The Center
is a composite body of the DOF, BIR, BOC and the BOI. The TCCs
Is the said assignment a "gift" and, therefore, subject to gift tax? ~ere accepted by the BIR as payments. A year after, the BIR
Explain. (5%) demanded the payment of alleged deficiency excise taxes on the
ground that Soaring Eagle is not a qualified transferee of the TCCs it
ANS: No. The assignment is merely a continuation and confirmation of title purchased from other BOI-registered companies. The BIR argued that
in favor of the trustor, the ultimate beneficiary of the shares. Furthermore, the TCCs are subject to post-audit as a suspensive condition. On the
there is lack of donative intent. (De Leon - annotation under Sec. 98, citing other hand, Soaring Eagle countered that it is a buyer in good faith
a BIR Ruling in Feb., 2008) Thus, not a gift subject to tax. and for value who merely relied on the Center's representation of the
genuineness and validity of the TCCs. If it is ordered to pay the
IX deficiency, Soaring Eagle claims the same is confiscatory and a
violation of due process. Is the assessment against Soaring Eagle
[a] Explain the procedure for claiming refunds or tax credits of input valid? Explain. (5%)
Value Added Tax (VAT) for zero-rated or effectively zero-rated sales
under Sec. 112 of the National Internal Revenue Code (NIRC) from the ANS: No.
filing of an application with the CIR up to the CTA. (2.5%)
The holding of the presence of a suspensive condition is untenable as the
[b] Explain the procedure for claiming refunds of tax erroneously or subject TCCs duly issued by the Center are immediately effective and
illegally collected under Sec. 229 of the NIRC from the filing of the valid. TCC is an undertaking by the government through the BIR or DOF,
claim for refunds with the CIR up to the CTA. (2.5%) acknowledging that a taxpayer is entitled to a certain amount of tax. As
such, tax credit is transferable in accordance with pertinent laws, rules, and
ANS: regulations.

A) An administrative claim for refund must be filed with CIR within 2 years The re-assessment of tax liabilities previously paid through TCCs by a
from the close of taxable quarter where the sale was made. The taxpayer transferee in good faith and for value is utterly confiscatory. The transferee
affected, may, within 30 days from the receipt of the decision denying the in good faith and for value may not be unjustly prejudiced by the fraud
committed by the claimant or transferor in the procurement or issuance of
the TCC from the Center. It is not only unjust but well-nigh violative of the effective on January 1, 1998. For the CIR, the 120- day period is
constitutional right not to be deprived of ones property without due process mandatory and jurisdictional so that any suit filed before its
of law. (Pilipinas Shell vs CIR) expiration is premature and, therefore, dismissible.

XIII API, on the other hand, invokes BIR Ruling No. DA-489-03 issued by
the CIR on December 10, 2003 in answer to a query posed by the
Pursuant to Sec. 11 of the "Host Agreement" between the United Department of Finance regarding the propriety of the actions taken
Nations and the Philippine government, it was provided that the by Lazi Bay Resources Development, Inc., which filed an
World Health Organization (WHO), "its assets, income and other administrative claim for refund with the CIR and, before the lapse of
properties shall be : a) exempt from all direct and indirect taxes." the 120-day period from its filing, filed a judicial claim with the CTA.
Precision Construction Corporation (PCC) was hired to construct the BIR Ruling No. DA-489-03 stated that the taxpayer-claimant need not
WHO Medical Center in Manila. Upon completion of the building, the wait for the lapse of the 120-day period before it could seek judicial
BIR assessed a 12% VAT on the gross receipts of PCC derived from relief with the CTA.
the construction of the WHO building. The BIR contends that the 12%
VAT is not a direct nor an indirect tax on the WHO but a tax that is Will API's Petition for Review prosper? Decide with reasons. (5%)
primarily due from the contractor and is therefore not covered by the
Host Agreement. The WHO argues that the VAT is deemed an indirect ANS: Yes. BIR Ruling No. DA-489-03 was a general interpretative rule.
tax as PCC can shift the tax burden to it. Is the BIR correct? Explain. Thus, all taxpayers can rely on the said BIR ruling from the time of its
(5%) issuance on December 10, 2003 up to its reversal by this Court in Aichi on
October 6, 2010, where it was held that the 120+30-day periods are
ANS: No. The contractor's tax is payable by the contractor but in the last mandatory and jurisdictional. In other words, the Aichi ruling was
analysis it is the owner of the building that shoulders the burden of the tax prospective in application. (CIR vs Aire)
because the same is shifted by the contractor to the owner as a matter of
self-preservation. Thus, it is an indirect tax. And it is an indirect tax on the XVII
WHO because, although it is payable by PCC, the latter can shift its burden
on the WHO. (CIR vs Gotamco) The requisites for a valid waiver of the three-year (3-year) prescriptive
period for the BIR to assess taxes due in the taxable year are
XVI prescribed by Revenue Memorandum Order (RMO) No. 20-90:

Amor Powers, Inc. (API) is a domestic corporation registered with the 1. The waiver must be in the proper form prescribed by RMO
BIR as a value-added taxpayer. API incurred excess input VAT in the 20-90.
amount of P500,000,000.00 on August 3, 2008. Hence, it filed with the
BIR an administrative claim for the refund or credit of these input 2. The waiver must be signed by the taxpayer himself or his
taxes on August 15, 2010. Without waiting for the CIR to act on its duly authorized representative. In the case of a corporation,
claim, API filed a Petition for Review with the CT A on September 15, the waiver must be signed by any of its responsible officials.
2010 before the lapse of two years after the close of the taxable In case the authority is delegated by the taxpayer to a
quarter concerned. representative, such delegation should be in writing and duly
notarized.
In its Comment on the Petition, the CIR argues that API's Petition
should be dismissed as it was filed before the lapse of the 120-day 3. The waiver should be duly notarized.
period given to the CIR by Sec. 112(D) of the NIRC, which became
4. The CIR or the revenue official authorized by him must sign The RMO is not merely directory. Being a waiver of the statute of limitations
the waiver indicating that the BIR has accepted and agreed to under the NIRC, it is, to a certain extent, a derogation of the taxpayer’s
the waiver. The date of such acceptance by the BIR should be right to security against prolonged and unscrupulous investigations.
indicated. However, before signing the waiver, the CIR or the Therefore, it must be carefully and strictly construed. (CIR vs FMF, 2008)
revenue official authorized by him must make sure that the
waiver is in the prescribed form, duly notarized, and executed A waiver of the statute of limitations is not a waiver of the right to invoke
by the taxpayer or his duly authorized representative. the defense of prescription but rather an agreement between the taxpayer
and the BIR that the period to issue an assessment and collect the taxes
5. Both the date of execution by the taxpayer and date of due is extended to a date certain. It is not a unilateral act by the taxpayer r
acceptance by the Bureau should be before the expiration of the BIR but is a bilateral agreement between two parties. (CIR vs Next
the period of prescription or before the lapse of the period Mobile, 2015)
agreed upon in case a subsequent agreement is executed.
BIR cannot rely on its invocation of the rule that the government cannot be
6. The waiver must be executed in three copies, the original estopped by the mistakes of its revenue officers in the enforcement of RMO
copy to be attached to the docket of the case, the second copy No. 20-90 because the law on prescription should be interpreted in a way
for the taxpayer and the third copy for the Office accepting the conducive to bringing about the beneficent purpose of affording protection
waiver. The fact of receipt by the taxpayer of his/her file copy to the taxpayer within the contemplation of the Commission which
must be indicated in the original copy to show that the recommended the approval of the law. (CIR vs FMF, 2008)
taxpayer was notified of the acceptance of the BIR and the
perfection of the agreement. ALTERNATIVE ANSWER:

After being assessed by the BIR with alleged deficiency income Yes. VVV may be held liable.
taxes, VVV Corporation (VVV) through Enrique, its President,
executed a waiver of the prescriptive period. The waiver was signed First, VVV allowed BIR to rely on the validity of the waiver and did not raise
by Revenue District Officer (RDO) Alfredo. However, the waiver did any objection against its validity until the latter assessed taxes and
not state the date of execution by the taxpayer and date of acceptance penalties against it. The application of estoppel is necessary to prevent the
by the BIR. Enrique was also not furnished a copy of the waiver by undue injury that the government would suffer because of the cancellation
the BIR. of petitioner's assessment of respondent's tax liabilities. (CIR vs Next)

VVV claims that the waiver is void due to non-compliance with RMO Second, it is not true that only the CIR can sign the waiver because RMO
20-90. Hence, the period for assessment had already prescribed. 20-90 provides:
Moreover, since the assessment involves P2 million, the waiver
should have been signed by the CIR and instead of a mere RDO. On “The following revenue officials are authorized to sign the waiver.
the other hand, the BIR contends that the requirements ofRMO No.
20-90 are merely directory; that the execution of the waiver by VVV xxxx
was a renunciation of its right to invoke prescription and that the
government cannot be estopped by the mistakes committed by its The Revenue District Officer with respect to tax cases still pending
revenue officers. Is VVV liable? Explain. (5%) investigation and the period to assess is about to prescribe regardless of
amount.” (RMO 20-90)
ANS: No. VVV is not liable.