Professional Documents
Culture Documents
Facts: Petitioner Lascona Land Co., Inc. was assessed for alleged deficiency
income tax in the amount of P753,266.56 for the taxable year 1993. Petitioner
filed a protest with the respondent Commissioner of the Internal Revenue (CIR),
but it was denied on the ground that it has become final, executory and
demandable as is it was not elevated to the Court of Tax Appeals (CTA) as
required in the last paragraph of Section 228 of the Tax Code. Petitioner
appealed before the CTA alleging that the CIR erred in ruling that the failure to
appeal to the CTA within 30 days from the lapse of the 180-day period rendered
the assessment final and executory. However, the CIR maintained its argument
that petitioner’s failure to file an appeal after the lapse of the 180-day
reglementary period required by law resulted to the finality of the assessment.
Issue: Whether or not the subject assessment has become final and executory.
Ruling: No.
When the law provided for the remedy to appeal the inaction of the CIR, it did not
intend to limit it to a single remedy of filing an appeal after the lapse of the 180-
day prescribed period. Precisely, when a taxpayer protested an assessment, he
naturally expects the CIR to decide either positively or negatively. A taxpayer
cannot be prejudiced if he chooses to wait for the final decision of the CIR on the
protested assessment. More so, because the law and jurisprudence have always
contemplated a scenario where the CIR will decide on the protested assessment.
It must be emphasized, however, that in case of the inaction of the CIR on the
protested assessment, the taxpayer has two options, either: (1) file a petition for
review with the CTA within 30 days after the expiration of the 180-day period; or
(2) await the final decision of the Commissioner on the disputed assessment and
appeal such final decision to the CTA within 30 days after the receipt of a copy of
such decision, these options are mutually exclusive and resort to one bars the
application of the other.
In the case at bar, petitioner opted to await the final decision of the
Commissioner on the protested assessment, it then has the right to appeal such
final decision to the Court by filing a petition for review within 30 days after
receipt of a copy of such decision or ruling, even after the expiration of the 180-
day period fixed by law for the Commissioner of Internal Revenue to act on the
disputed assessments.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 174759 September 7, 2011
The CTA denied the motion for reconsideration, explaining that the jurisdiction
conferred by Section 7(a)(3) of Republic Act No. 9282 referred to appeals from
the decisions, orders, or resolutions of the RTCs in local tax cases and did not
include real property tax, an ad valorem tax, the refund of excess payment of
which Surfield was claiming. Accordingly, the CTA First Division ruled that the
jurisdiction of the CTA concerning real property tax cases fell under a different
section of the same law and under a separate book of Republic Act No. 7160.
Issue: Whether or not the CTA has jurisdiction over the case.
Ruling: No.
Section 7(a)(3) covers only appeals from the decisions, orders or resolutions of
the Regional Trial Courts in local tax cases originally decided or resolved by them
in the exercise of their original or appellate jurisdiction. The provision is clearly
limited to local tax disputes decided by the Regional Trial Courts. In contrast,
Section 7(a)(5) grants the CTA cognizance of appeals from the decisions of the
Central Board of Assessment Appeals in the exercise of its appellate jurisdiction
over cases involving the assessment and taxation of real property originally
decided by the provincial or city board of assessment appeals.
Therefore, as the CTA First Division forthrightly explained and contrary to the
petitioners’ contention, Section 7(a)(3) is not applicable because real property
tax, being an ad valorem tax, cannot be treated as a local tax.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 180173 April 6, 2011
Petitioner filed an administrative claim for tax credit of VAT input taxes in the
amount of P11,449,814.99 attributable to its zero-rated sales. Due to the Bureau
of Internal Revenue’s (BIR) inaction, petitioner filed a petition for review before
the Court of Tax Appeals (CTA), which denied the claim for tax credit of VAT input
taxes. The CTA explained that petitioner failed to comply with the invoicing
requirements of Sections 113 and 237 of the National Internal Revenue Code
(NIRC) as well as Section 4.108-1 of Revenue Regulations No. 7-95 (RR 7-95).
The CTA stated that petitioner’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 the petitioner is entitled to a refund of VAT input taxes.
Ruling: No.
It was ruled in several cases that the printing of the word "zero-rated" is required
to be placed on VAT invoices or receipts covering zero-rated sales in order to be
entitled to claim for tax credit or refund. In Panasonic v. Commissioner of Internal
Revenue, it was held that the appearance of the word "zero-rated" on the face of
invoices covering zero-rated sales prevents buyers from falsely claiming input
VAT from their purchases when no VAT is actually paid. Absent such word, the
government may be refunding taxes it did not collect. In the case at bar, both the
CTA Second Division and CTA En Banc found that Microsoft's receipts did not
indicate the word "zero-rated" on its official receipts.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 172378 January 17, 2011
Issues:
1. Whether or not petitioner can claim credit/refund of input VAT attributable to its
zero-rated sales.
2. Whether or not the petitioner can claim input VAT paid on capital goods.
Ruling:
1. No.
Under Section 112(A) of the NIRC, a claimant must be engaged in sales which
are zero-rated or effectively zero-rated. To prove this, duly registered invoices or
receipts evidencing zero-rated sales must be presented. However, since the ATP
is not indicated in the invoices or receipts, the only way to verify whether the
invoices or receipts are duly registered is by requiring the claimant to present its
C a s e D i g e s t s – T a x a ti o n I I Page 36
ATP from the BIR. Without this proof, the invoices or receipts would have no
probative value for the purpose of refund. In the case of Intel, we emphasized
that “It is not specifically required that the BIR authority to print be reflected or
indicated therein. Indeed, what is important with respect to the BIR authority to
print is that it has been secured or obtained by the taxpayer, and that invoices or
receipts are duly registered.”
The non-presentation of the ATP and the failure to indicate the word "zero-rated"
in the invoices or receipts are fatal to a claim for credit/refund of input VAT on
zero-rated sales. The failure to indicate the ATP in the sales invoices or receipts,
on the other hand, is not. In this case, petitioner failed to present its ATP and to
print the word "zero-rated" on its export sales invoices. Thus, the CTA ruled
correctly.
2. No.
To claim a refund of input VAT on capital goods, Section 112 (B) of the NIRC
requires that: (1) The claimant must be a VAT registered person; (2) The input
taxes claimed must have been paid on capital goods; (3) The input taxes must
not have been applied against any output tax liability; and (4) The administrative
claim for refund must have been filed within two years after the close of the
taxable quarter when the importation or purchase was made. Section 4.106-1(b)
of RR No. 7-95 defines capital goods as “goods or properties with estimated
useful life greater that one year and which are treated as depreciable assets
under Section 29 (f), used directly or indirectly in the production or sale of taxable
goods or services.” Based on this definition, the Supreme Court affirmed the
findings of the CTA that training materials, office supplies, posters, banners, T-
shirts, books, and the other similar items reflected in petitioner’s Summary of
Importation of Goods are not capital goods. The reduction in the refundable input
VAT on capital goods from P15,170,082.00 to P9,898,867.00 is proper.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 179961 January 31, 2011
Issue: Whether or not petitioner’s failure to imprint the words "zero-rated" on its
official receipts issued to NPC justifies an outright denial of its claim for refund of
unutilized input tax credits.
Ruling: Yes.
Further, the printing of the word "zero-rated" on the invoice helps segregate sales
that are subject to 10% (now 12%) VAT from those sales that are zero-rated.
Unable to submit the proper invoices, petitioner Panasonic has been unable to
substantiate its claim for refund. Well-settled in this jurisdiction is the fact that
actions for tax refund, as in this case, are in the nature of a claim for exemption
and the law is construed in strictissimi juris against the taxpayer. The pieces of
evidence presented entitling a taxpayer to an exemption are also scrutinized and
must be duly proven.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 179632 October 19, 2011
Issue: Whether or not the word “zero-rated” must be reflected on the official
receipts for the petitioner to be entitled to a tax credit of unutilized VAT input on
its zero-rated transactions.
Ruling: No.
NIRC Section 110 (A.1) provides that the input tax subject of tax refund is to be
evidenced by a VAT invoice "or" official receipt issued in accordance with Section
113. Section 113 does not distinguish between an invoice and a receipt when
used as evidence of a zero-rated transaction. Consequently, the CTA should
have accepted either or both of these documents as evidence of petitioner’s
zero-rated transactions. Section 237 of the NIRC also makes no distinction
between receipts and invoices as evidence of a commercial transaction. The
Court held in Seaoil Petroleum Corporation v. Autocorp Group that business
forms like sales invoices are recognized in the commercial world as valid
between the parties and serve as memorials of their business transactions.
The Supreme Court also ruled that petitioner’s failure to indicate its zero-rated
sales in its VAT returns is not sufficient reason to deny it its claim for tax credit or
refund when there are other documents from which the CTA can determine the
veracity of SPP’s claim. Although such failure partakes of a criminal act under
Section 255 of the NIRC could warrant the criminal prosecution of the
responsible person/s, the omission does not furnish ground for the outright denial
of the claim for tax credit or refund if such claim is in fact justified.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 193007 July 19, 2011
Facts: Petitioners Renato Diaz and Aurora Ma. F. Timbol filed a petition for
declaratory relief assailing the validity of the impending imposition of value-added
tax (VAT) by the Bureau of Internal Revenue (BIR) on the collections of tollway
operators. They alleged that the Congress when it enacted the NIRC did not
intend to include toll fees within the meaning of "sale of services" that are subject
to VAT; that a toll fee is a "user’s tax," not a sale of services; that to impose VAT
on toll fees would amount to a tax on public service; and that, since VAT was
never factored into the formula for computing toll fees, its imposition would
violate the non-impairment clause of the constitution. The government averred
that the NIRC imposes VAT on all kinds of services of franchise grantees,
including tollway operations, except where the law provides otherwise; that the
Court should seek the meaning and intent of the law from the words used in the
statute; and that the imposition of VAT on tollway operations has been the subject
as early as 2003 of several BIR rulings and circulars.
Issue: Whether or not toll fees collected by tollway operators may be subjected
to value- added tax.
Ruling: Yes.
If the legislative intent was to exempt tollway operations from VAT, as petitioners
so strongly allege, then it would have been well for the law to clearly say so. Tax
exemptions must be justified by clear statutory grant and based on language in
the law too plain to be mistaken. The operation by the government of a tollway
does not change the character of the road as one for public use. Someone must
pay for the maintenance of the road, either the public indirectly through the taxes
they pay the government, or only those among the public who actually use the
road through the toll fees they pay upon using the road. The tollway system is
even a more efficient and equitable manner of taxing the public for the
maintenance of public roads.
The charging of fees to the public does not determine the character of the
property whether it is for public dominion or not. Article 420 of the Civil Code
defines property of public dominion as "one intended for public use." Even if the
government collects toll fees, the road is still "intended for public use" if anyone
can use the road under the same terms and conditions as the rest of the
public. The charging of fees, the limitation on the kind of vehicles that can use
the road, the speed restrictions and other conditions for the use of the road do
not affect the public character of the road.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 178090 February 8, 2010
Issue: Whether or not the words "zero-rated" must appear in the sales invoice so
that a claim for refund of unutilized input VAT on zero-rated sales will be proper.
Ruling: Yes.
Zero-rated transactions generally refer to the export sale of goods and services.
When applied to the tax base or the selling price of the goods or services sold,
such zero rate results in no tax chargeable against the foreign buyer or customer.
But, although the seller in such transactions charges no output tax, he can claim
a refund of the VAT that his suppliers charged him. The seller thus enjoys
automatic zero rating, which allows him to recover the input taxes he paid
relating to the export sales, making him internationally competitive. For the
effective zero rating of such transactions, however, the taxpayer has to be VAT-
registered and must comply with invoicing requirements. Interpreting these
requirements, respondent CIR ruled that under Revenue Memorandum Circular
(RMC) 42-2003, the taxpayer’s failure to comply with invoicing requirements will
result in the disallowance of his claim for refund.
If the claim for refund is based on the existence of zero-rated sales by the
taxpayer but it fails to comply with the invoicing requirements in the issuance of
sales invoices, its claim for tax credit/refund of VAT on its purchases shall be
denied considering that the invoice it is issuing to its customers does not depict
its being a VAT-registered taxpayer whose sales are classified as zero-rated
sales. Nonetheless, this treatment is without prejudice to the right of the taxpayer
to charge the input taxes to the appropriate expense account or asset account
subject to depreciation, whichever is applicable. Moreover, the case shall be
referred by the processing office to the concerned BIR office for verification of
other tax liabilities of the taxpayer.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 182722 January 22, 2010
Ruling: No.
The BIR declared in BIR Ruling No. 551-888 that cooperatives are not required
to withhold taxes on interest from savings and time deposits of their members.
The legislative intent to give cooperatives a preferential tax treatment is apparent
in Articles 61 of RA 6938, which read: “ART. 61. Tax Treatment of Cooperatives.
— Duly registered cooperatives under this Code which do not transact any
business with non-members or the general public shall not be subject to any
government taxes and fees imposed under the Internal Revenue Laws and other
tax laws. Cooperatives not falling under this article shall be governed by the
succeeding section.” This exemption extends to members of cooperatives. It
must be emphasized that cooperatives exist for the benefit of their members. In
fact, the primary objective of every cooperative is to provide goods and services
to its members to enable them to attain increased income, savings, investments,
and productivity. Therefore, limiting the application of the tax exemption to
cooperatives would go against the very purpose of a credit cooperative.
Extending the exemption to members of cooperatives, on the other hand, would
be consistent with the intent of the legislature. Thus, although the tax exemption
only mentions cooperatives, this should be construed to include the members.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 179085 January 21, 2010
Ruling:
On the issue of whether pawnshops are liable to pay VAT, the Court finds that
pawnshops should have been treated as non-bank financial intermediaries from
the very beginning, subject to the appropriate taxes provided by law, thus —
Under the National Internal Revenue Code of 1977, pawnshops should have
been levied the 5% percentage tax on gross receipts imposed on bank and non-
bank financial intermediaries under Section 119 (now Section 121 of the Tax
Code of 1997);
With the imposition of the VAT under R.A. No. 7716 or the EVAT Law,
pawnshops should have been subjected to the 10% VAT imposed on banks and
non-bank financial intermediaries and financial institutions under Section 102 of
the Tax Code of 1977 (now Section 108 of the Tax Code of 1997);
This was restated by R.A. No. 8241, which amended R.A. No. 7716, although
the levy, collection and assessment of the 10% VAT on services rendered by
banks, non-bank financial intermediaries, finance companies, and other financial
intermediaries not performing quasi-banking functions, were made effective
January 1, 1998;
R.A. No. 8424 or the Tax Reform Act of 1997 likewise imposed a 10% VAT
under Section 108 but the levy, collection and assessment thereof were again
deferred until December 31, 1999;
C a s e D i g e s t s – T a x a ti o n I I Page 36
The levy, collection and assessment of the 10% VAT was further deferred by
R.A. No. 8761 until December 31, 2000, and by R.A. No. 9010, until December
31, 2002;
With no further deferments given by law, the levy, collection and assessment
of the 10% VAT on banks, non-bank financial intermediaries, finance companies,
and other financial intermediaries not performing quasi-banking functions were
finally made effective beginning January 1, 2003;
Finally, with the enactment of R.A. No. 9238 in 2004, the services of banks,
non-bank financial intermediaries, finance companies, and other financial
intermediaries not performing quasi-banking functions were specifically
exempted from VAT, 28 and the 0% to 5% percentage tax on gross receipts on
other non-bank financial intermediaries was re-imposed under Section 122 of the
Tax Code of 1997.
At the time of the disputed assessment, that is, for the year 2000, pawnshops
were not subject to 10% VAT under the general provision on "sale or exchange of
services" as defined under Section 108 (A) of the Tax Code of 1997, which
states: "'sale or exchange of services' means the performance of all kinds of
services in the Philippines for others for a fee, remuneration or consideration."
Instead, due to the specific nature of its business, pawnshops were then subject
to 10% VAT under the category of non-bank financial intermediaries.
In dodging liability for documentary stamp tax on its pawn tickets, petitioner
argues that such tickets are neither securities nor printed evidence of
indebtedness. The argument fails. True, the law does not consider said ticket as
an evidence of security or indebtedness. However, for purposes of taxation, the
same pawn ticket is proof of an exercise of a taxable privilege of concluding a
contract of pledge. There is therefore no basis in petitioner's assertion that a DST
is literally a tax on a document and that no tax may be imposed on a pawn ticket.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 180356 February 16, 2010
For the taxable year 2000, petitioner filed separate quarterly and annual income
tax returns for its off-line flights. On 2003, petitioner filed with the Bureau of
Internal Revenue a claim for the refund of the amount of P1,727,766.38 as
erroneously paid tax on Gross Philippine Billings (GPB) for the taxable year
2000. Such claim was unheeded. Thus petitioner filed a petition for Review with
the CTA for the refund of the abovementioned amount.
Ruling: Yes.
Sec. 28 (A) (1) of the 1997 NIRC is a general rule that resident foreign
corporations are liable for 32% tax on all income from sources within the
Philippines. Sec. 28 (A) (3) is an exception to this general rule. In the instant
case, the general rule is that resident foreign corporations shall be liable for a
32% income tax on their income from within the Philippines, except for resident
foreign corporations that are international carriers that derive income "from
carriage of persons, excess baggage, cargo and mail originating from the
Philippines" which shall be taxed at 2 1/2% of their Gross Philippine Billings.
Petitioner, being an international carrier with no flights originating from the
Philippines, does not fall under the exception. As such, petitioner must fall under
the general rule. This principle is embodied in the Latin maxim, exception firmat
regulam in casibus non exceptis, which means, a thing not being excepted must
be regarded as coming within the purview of the general rule.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 160756 March 9, 2010
Petitioner also asserts 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.
Ruling: No.
MCIT is not violative of due process. Taxes are the lifeblood of the government.
Without taxes, the government can neither exist nor endure. The exercise of
taxing power derives its source from the very existence of the State whose social
contract with its citizens obliges it to promote public interest and the common
good. Under the MCIT scheme, a corporation, beginning on its fourth year of
operation, is assessed an MCIT of 2% of its gross income when such MCIT is
greater than the normal corporate income tax imposed under Section 27 (A). If
the regular income tax is higher than the MCIT, the corporation does not pay the
MCIT. Any excess of the MCIT over the normal tax shall be carried forward and
credited against the normal income tax for the three immediately succeeding
taxable years.
Petitioner is correct in saying that income is distinct from capital. Income means
all the wealth which flows into the taxpayer other than a mere return on capital.
C a s e D i g e s t s – T a x a ti o n I I Page 36
Capital is a fund or property existing at one distinct point in time while income
denotes a flow of wealth during a definite period of time. Income is gain derived
and severed from capital.
In sum, petitioner failed to support, by any factual or legal basis, its allegation
that the MCIT is arbitrary and confiscatory. The Court cannot strike down a law
as unconstitutional simply because of its yokes. Taxation is necessarily
burdensome because, by its nature, it adversely affects property rights. The party
alleging the law's unconstitutionality has the burden to demonstrate the
supposed violations in understandable terms.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 178087 May 5, 2010
Facts: On April 15, 1999, respondent Kudos Metal Corporation filed its Annual
Income Tax Return for the taxable year 1998. A review and audit of respondent’s
records ensued after petitioner Bureau of Internal Revenue (BIR) served
respondent with a subpoena duces tecum for its documents. On December 10,
2001, Nelia Pasco, respondent’s accountant, executed a Waiver of the Defense
of Prescription, which was notarized on January 22, 2002, received by the BIR
Tax Fraud Division on February 4, 2002. This was followed by a second Waiver
of Defense of Prescription executed by Pasco on February 18, 2003, notarized
on February 19, 2003, received by the BIR Tax Fraud Division on February 28,
2003. On August 25, 2003, the BIR issued a Preliminary Assessment Notice for
the taxable year 1998 against the respondent. This was followed by a Formal
Letter of Demand with Assessment Notices for taxable year 1998, dated
September 26, 2003. Respondent challenged the assessments by filing its
protest on the assessment.
The BIR rendered a final decision on the matter, requesting the immediate
payment of tax liabilities amounting to P25,624,048.76. Believing that the
government’s right to assess taxes had prescribed, respondent filed a Petition for
Review with the CTA. The CTA Second Division issued a Resolution canceling
the assessment notices issued against respondent for having been issued
beyond the prescriptive period. It found the first Waiver of the Statute of
Limitations incomplete and defective for failure to comply with the provisions of
Revenue Memorandum Order (RMO) No. 20-90. Petitioner moved for
reconsideration but the CTA Second Division denied such motion. On appeal, the
CTA En Banc affirmed the cancellation of the assessment notices. Petitioner
sought reconsideration but the same was unavailing.
Issue: Whether or not the waivers of prescriptive period to assess are valid.
Ruling: No.
The waivers executed by respondent’s accountant did not extend the period
within which the assessment can be made. Section 222 (b) of the NIRC provides
that the period to assess and collect taxes may only be extended upon a written
agreement between the CIR and the taxpayer executed before the expiration of
the three-year period. RMO 20-9017 and RDAO 05-0118 lay down the procedure
for the proper execution of the waiver, to wit: (1) The waiver must be in the
proper form prescribed by RMO 20-90. The phrase "but not after ______ 19
___", which indicates the expiry date of the period agreed upon to assess/collect
the tax after the regular three-year period of prescription, should be filled up; (2)
The waiver must be signed by the taxpayer himself or his duly authorized
representative. In the case of a corporation, the waiver must be signed by any of
its responsible officials. In case the authority is delegated by the taxpayer to a
representative, such delegation should be in writing and duly notarized; (3) The
C a s e D i g e s t s – T a x a ti o n I I Page 36
waiver should be duly notarized; (4) The CIR or the revenue official authorized by
him must sign the waiver indicating that the BIR has accepted and agreed to the
waiver. The date of such acceptance by the BIR should be indicated. However,
before signing the waiver, the CIR or the revenue official authorized by him must
make sure that the waiver is in the prescribed form, duly notarized, and executed
by the taxpayer or his duly authorized representative; (5) Both the date of
execution by the taxpayer and date of acceptance by the Bureau should be
before the expiration of the period of prescription or before the lapse of the period
agreed upon in case a subsequent agreement is executed; and (6) The waiver
must be executed in three copies, the original copy to be attached to the docket
of the case, the second copy for the taxpayer and the third copy for the Office
accepting the waiver. The fact of receipt by the taxpayer of his/her file copy must
be indicated in the original copy to show that the taxpayer was notified of the
acceptance of the BIR and the perfection of the agreement.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 166134 June 29, 2010
Facts: Respondent Angeles City Electric Corporation (AEC), which was granted
a legislative franchise to generate and distribute electricity in Angeles City,
Pampanga, pays a franchise tax of two percent (2%) of its gross receipts to the
BIR. When the Local Government Code (LGC) of 1991 was passed into law, the
Sangguniang Panlungsod of Angeles City enacted a tax ordinance known as the
Revised Revenue Code of Angeles City (RRCAC) which imposed a local
franchise tax upon AEC. Metro Angeles Chamber of Commerce and Industry Inc.
(MACCI) of which AEC is a member filed a petition seeking the reduction of the
tax rates and a review of the provisions of the RRCAC was filed by, claiming that
the ordinance is oppressive. The petition was referred to the Bureau of Local
Government Finance (BLGF) and an indorsement was issued to the City
Treasurer of Angeles City, instructing the latter to make representations with the
Sanggunian for the appropriate amendment of the RRCAC.
On 2004, the City Treasurer issued a Notice of Assessment to AEC for payment
of business tax, license fee and other charges for the period 1993 to 2004
amounting to P94,861,194.10. AEC protested the assessment but the City
Treasurer denied the protest. AEC appealed to the RTC of Angeles City via a
Petition for Declaratory Relief. The City Treasurer however levied on the real
properties of AEC and a Notice of Auction Sale was published announcing that a
public auction of the levied properties would be held. This prompted AEC to file
with the RTC an Urgent Motion for Issuance of Temporary Restraining Order
(TRO) and/or Writ of Preliminary Injunction. After due notice and hearing, the
RTC issued a TRO and a Writ of Preliminary Injunction. Angeles City filed a
motion for dissolution of preliminary injunction, contending that the RTC cannot
enjoin the collection of taxes pursuant to the LGC, but the RTC denied such
motion.
Issue: Whether or not the RTC can enjoin the collection of local taxes.
Ruling: No.
The LGC does not specifically prohibit an injunction enjoining the collection of
taxes. A principle deeply embedded in our jurisprudence is that taxes being the
lifeblood of the government should be collected promptly, without unnecessary
hindrance or delay. In line with this principle, the National Internal Revenue Code
of 1997 (NIRC) expressly provides that no court shall have the authority to grant
an injunction to restrain the collection of any national internal revenue tax, fee or
charge imposed by the code. The situation, however, is different in the case of
the collection of local taxes as there is no express provision in the LGC
prohibiting courts from issuing an injunction to restrain local governments from
collecting taxes. Unlike the National Internal Revenue Code, the Local Tax Code
does not contain any specific provision prohibiting courts from enjoining the
C a s e D i g e s t s – T a x a ti o n I I Page 36
collection of local taxes. Nevertheless, it must be emphasized that although there
is no express prohibition in the LGC, injunctions enjoining the collection of local
taxes are frowned upon. Courts therefore should exercise extreme caution in
issuing such injunctions.
No grave abuse of discretion was committed by the RTC in the issuance of the
writ of preliminary injunction because the two requisites to warrant the issuance
of such, which are the existence of a clear and unmistakable right that must be
protected and an urgent and paramount necessity for the writ to prevent serious
damage, have been satisfied. The Court then had no other recourse but to grant
the prayer for the issuance of a writ of preliminary injunction considering that if
the respondent will not be restrained from doing the acts complained of, it will
preempt the Court from properly adjudicating on the merits the various issues
between the parties, and will render moot and academic the proceedings before
the court. The petition was dismissed.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. Nos. 172045-46 June 16, 2009
Ruling: Yes.
According to Section 175 of the Tax Code, DST is imposed on the original issue
of shares of stock. DST attaches upon acceptance of the stockholder’s
subscription in the corporation’s capital stock regardless of actual or constructive
delivery of the certificates of stock. Sections 175 and 176 of the Tax Code
contemplate a subscription agreement in order for a taxpayer to be liable to pay
the DST. A stock subscription is a contract by which the subscriber agrees to take
a certain number of shares of the capital stock of a corporation, paying for the
same or expressly or impliedly promising to pay for the same. Based on the
testimony of respondent’s auditor and respondent’s financial statements as of
1998, there was no agreement to subscribe to the unissued shares. Here, the
deposit on stock subscription refers to an amount of money received by the
corporation as a deposit with the possibility of applying the same as payment for
the future issuance of capital stock, an event which may or may not happen. The
person making a deposit on stock subscription does not have the standing of a
stockholder and he is not entitled to dividends, voting rights or other prerogatives
and attributes of a stockholder. In Commissioner of Internal Revenue v.
Construction Resources of Asia, Inc., the Supreme Court held that those
certificates of stocks temporarily subject to suspensive conditions shall be liable
for DST only when released from said conditions, for then and only then shall
they truly acquire any practical value for their owners. Hence, respondent is not
liable for the payment of DST on its deposit on subscription for the reason that
there is yet no subscription that creates rights and obligations between the
C a s e D i g e s t s – T a x a ti o n I I Page 36
subscriber and the corporation. The petition was denied and the CTA en banc’s
decision was affirmed.
Ruling: Yes.
To claim refund or tax credit petitioner must comply with the following criteria: (1)
the taxpayer is VAT registered; (2) the taxpayer is engaged in effectively zero-
rated or zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes
are not transitional input taxes; (5) the input taxes have not been applied against
output taxes during and in the succeeding quarters; (6) the input taxes claimed
are attributable to zero-rated or effectively zero-rated sales; (7) for zero-rated
sales under Section 106 (A) (2) (1) and (2); 106 (B); and 108 (B) (1) and (2), the
acceptable foreign currency exchange proceeds have been duly accounted for in
accordance with BSP rules and regulations; (8) where there are both zero-rated
or effectively zero-rated sales and taxable or exempt sales, and the input taxes
cannot be directly and entirely attributable to any of these sales, the input taxes
shall be proportionately allocated on the basis of sales volume; and (9) the claim
is filed within two years after the close of the taxable quarter when such sales
were made.
C a s e D i g e s t s – T a x a ti o n I I Page 36
person legally liable to pay the tax, in this case the petitioner, but to relieve
certain exempt entities, such as the NPC, from the burden of indirect tax so as to
encourage the development of particular industries.
G.R. No. 173594 February 6, 2008
Facts: Petitioner, Silkair (Singapore) Pte. Ltd., a corporation organized under the
laws of Singapore which has a Philippine representative office, is an online
international air carrier operating domestic routes. Petitioner filed with the Bureau
of Internal Revenue (BIR) a refund worth P 4,000,000.00 for excise taxes it
claimed to have paid on its purchases of jet fuel from Petron Corporation
(Petron). The Second Division of the CTA, however, denied the petition on the
ground that the excise tax was imposed on Petron as manufacturer and that
should any claim arise, it should be filed by the latter and that where the burden
of tax is shifted to the purchaser (petitioner in this case), the amount passed on
to it is no longer a tax but an added cost to the goods purchased.
Issue: Whether or not petitioner Silkair is the proper party to claim for refund or
tax credit.
Ruling: No.
The proper party to question, or seek a refund of an indirect tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same
even if he shifts the burden thereof to another. Section 130 (A) (2) of the NIRC
provides that "unless otherwise specifically allowed, the return shall be filed and
the excise tax paid by the manufacturer or producer before removal of domestic
products from place of production." Thus, Petron Corporation, not Silkair, is the
statutory taxpayer which is entitled to claim a refund based on Section 135 of the
NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and
Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the
additional amount billed to Silkair for jet fuel is not a tax but part of the price
which Silkair had to pay as a purchaser.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 166134 January 22, 2007
For 1996, Burmeister filed VAT Returns reflecting a total zero-rated sales of
P147,000,000 with VAT input taxes of P3,300,000. The next year, it availed of the
Voluntary Assessment Program (VAP) of the BIR, allegedly misrepresented
certain regulations to be applicable to its case. Burmeister in 1999 secured a
ruling from the VAT Committee that services provided by the former is VAT-free
who then filed a claim for a tax credit certificate for the erroneously paid output
VAT in 1996.
Issue: Whether or not respondent is entitled to the refund of the erroneously paid
output VAT for the year 1996.
Ruling: No.
Court declares that the denial of the instant petition is not on the ground that
respondent’s services are subject to 0% VAT. Rather, it is based on the non-
retroactivity of the prejudicial revocation of BIR Ruling No. 023-95 and VAT
Ruling No. 003-99, which held that respondent’s services are subject to 0% VAT
and which respondent invoked in applying for refund of the output VAT.
C a s e D i g e s t s – T a x a ti o n I I Page 36
(1) Processing, manufacturing or repacking goods for other persons doing
business outside the Philippines which goods are subsequently exported, where
the services are paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP);
(2) Services other than those mentioned in the preceding sub-paragraph, the
consideration for which is paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
Another essential condition for qualification to zero-rating under the tax code is
that the recipient of such services is doing business outside the Philippines.
Services other than processing, manufacturing, or repacking of goods must
likewise be performed for persons doing business outside the Philippines. If the
provider and recipient of the “other services” are both doing business in the
Philippines, the payment of foreign currency is irrelevant. Otherwise, those
subject to the regular VAT under Section 102(a) can avoid paying the VAT by
simply stipulating payment in foreign currency inwardly remitted by the recipient
of services.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 168129 April 24, 2007
Ruling: No.
The taxpayer is not subject to VAT for the years 1996 and 1997, relying on good
faith on VAT Ruling No. 231-88, June8, 1988, pursuant to Section 246 of the
NIRC on non-retroactivity of rulings prejudicial to the taxpayer. There is no
misrepresentation by the mere fact that the taxpayer failed to describe itself as
an HMO. Further, a health maintenance organization, which does not actually
provide medical and/or hospital services, but merely arranges for the same, is
not VAT-exempt under Sec. 103, NIRC.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 164365 June 8, 2007
Issue: Whether Placer is entitled to the refund as the revenues qualified as zero-
rated sales.
Ruling: Yes.
Section 102(b) Transactions Subject to Zero Percent (0%) Rate ─ The following
services performed in the Philippines by VAT-registered persons shall be subject
to zero percent (0%) rate:(1) Processing, manufacturing or repacking goods for
other persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in
the preceding subparagraph, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules and regulations
of the [BSP].
C a s e D i g e s t s – T a x a ti o n I I Page 36
It is Section 102(b)(2) which finds special relevance to this case. The VAT is a tax
on consumption "expressed as a percentage of the value added to goods
or services" purchased by the producer or taxpayer. As an indirect tax on
services, its main object is the transaction itself or, more concretely, the
performance of all kinds of services conducted in the course of trade or business
in the Philippines. These services must be regularly conducted in this country;
undertaken in "pursuit of a commercial or an economic activity;" for a valuable
consideration; and not exempt under the Tax Code, other special laws, or any
international agreement. Yet even as services may be subject to VAT, our tax
laws extend the benefit of zero-rating the VAT due on certain services. Under the
last paragraph of Section 102(b), services performed by VAT-registered persons
in the Philippines, when paid in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP, are zero-rated. Petitioner
invokes the "destination principle," citing that respondent’s services, while
rendered to a non-resident foreign corporation, are not destined to be consumed
abroad. Hence, the onus of taxation of the revenue arising there from is also
within the Philippines. The Court in American Express debunked this
argument. As a general rule, the VAT system uses the destination principle as a
basis for the jurisdictional reach of the tax. Goods and services are taxed only in
the country where they are consumed. Thus, exports are zero-rated, while
imports are taxed. Confusion in zero rating arises because petitioner equates the
performance of a particular type of service with the consumption of its output
abroad. The consumption contemplated by law does not imply that the service be
done abroad in order to be zero-rated. Consumption is the use of a thing in a way
that thereby exhausts it. Applied to services, the term means the performance or
successful completion of a contractual duty, usually resulting in the performer's
release from any past or future liability. Its services, having been performed in the
Philippines, are therefore also consumed in the Philippines. Unlike goods,
services cannot be physically used in or bound for a specific place when
their destination is determined. Instead, there can only be a predetermined end
of a course when determining the service location or position for legal purposes.
However, the law clearly provides for an exception to the destination principle;
that is, for a zero percent VAT rate for services that are performed in the
Philippines, paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the BSP.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 148380 December 9, 2005
Facts: On March 17, 1988, petitioner received from the Bureau of Internal
Revenue (BIR) deficiency tax assessments for the taxable year 1984 in the total
amount of P8,644,998.71. Petitioner filed its protest against the tax assessments
and requested a reconsideration or cancellation of the same in a letter to the BIR
Commissioner.
Acting in behalf of the BIR Commissioner, then Chief of the BIR Accounts
Receivable and Billing Division, Mr. Severino B. Buot, reiterated the tax
assessments while denying petitioner’s request for reinvestigation. Said letter
likewise requested petitioner to pay within 10 days from receipt thereof,
otherwise the case shall be referred to the Collection Enforcement Division of the
BIR National Office for the issuance of a warrant of distraint and levy without
further notice.
Upon petitioner’s failure to pay the subject tax assessments within the prescribed
period, the Assistant Commissioner for Collection, acting for the Commissioner of
Internal Revenue, issued the corresponding warrants of distraint and/or levy and
garnishment. Petitioner filed a Petition for Review with the Court of Tax Appeals
(CTA) to contest the issuance of the warrants to enforce the collection of the tax
assessments. The CTA dismissed the petition for lack of jurisdiction.
Petitioner filed a Motion for Reconsideration arguing that the demand letter
cannot be considered as the final decision of the Commissioner of Internal
Revenue on its protest because the same was signed by a mere subordinate and
not by the Commissioner himself. With the denial of its motion for
reconsideration, petitioner consequently filed a Petition for Review with the Court
of Appeals contending that there was no final decision to speak of because the
Commissioner had yet to make a personal determination as regards the merits of
petitioner’s case. The Court of Appeals denied the petition.
Issue: Whether the demand letter for tax deficiency issued and signed by a
subordinate officer who was acting in behalf of the CIR is deemed final and
executor and subject to an appeal to the CTA.
Ruling: Yes.
C a s e D i g e s t s – T a x a ti o n I I Page 36
supporting documents. The demand letter received by petitioner verily signified a
character of finality. Therefore, it was tantamount to a rejection of the request for
reconsideration.
This now brings us to the crux of the matter as to whether said demand letter
indeed attained finality despite the fact that it was issued and signed by the Chief
of the Accounts Receivable and Billing Division instead of the BIR Commissioner.
The general rule is that the Commissioner of Internal Revenue may delegate any
power vested upon him by law to Division Chiefs or to officials of higher rank. He
cannot, however, delegate the four powers granted to him under the National
Internal Revenue Code (NIRC).
As amended by Republic Act No. 8424, Section 7 of the Code authorizes the BIR
Commissioner to delegate the powers vested in him under the pertinent
provisions of the Code to any subordinate official with the rank equivalent to a
division chief or higher, except the following:
(a) The power to recommend the promulgation of rules and regulations by the
Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify
any existing ruling of the Bureau;
(c) The power to compromise or abate under Section 204(A) and (B) of this
Code, any tax deficiency: Provided, however, that assessments issued by the
Regional Offices involving basic deficiency taxes of five hundred thousand pesos
(P500,000) or less, and minor criminal violations as may be determined by rules
and regulations to be promulgated by the Secretary of Finance, upon the
recommendation of the Commissioner, discovered by regional and district
officials, may be compromised by a regional evaluation board which shall be
composed of the Regional Director as Chairman, the Assistant Regional Director,
heads of the Legal, Assessment and Collection Divisions and the Revenue
District Officer having jurisdiction over the taxpayer, as members; and
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 168118 August 28, 2006
Facts: The Manila Banking Corp. was incorporated in 1961 and was engaged in
commercial banking industry until 1987. On May 22, 1987, Bangko Sentral ng
Pilipinas issued a resolution prohibiting the bank from engaging in business by
reason of insolvency. The bank ceased to operate. Meanwhile, Comprehensive
Tax Reform Act of 1987 became effective. One of the changes introduced by this
law is the imposition of Minimum Corporate Income Tax (MCIT). On 1999, the
bank was authorized by the BSP to operate as a thrift bank. Petitioner sent a
request letter to the BIR on whether it is entitled to the four (4)-year grace period
to pay its minimum corporate income tax as provided by the new law. The
following year, it filed with the BIR its income tax return for taxable year 1999.
The BIR then issued a ruling stating that the petitioner is entitled to the four (4)-
year grace period. Pursuant to the ruling, the bank filed with the BIR a claim for
refund of the sum it earlier paid. Due to inaction of the BIR, the bank filed with the
CTA a petition for review. The CTA denied the petition, finding that the bank’s
payment of corporate income tax is in order, contending that the bank is not a
new corporation. It is the same corporation registered with the SEC, there was
merely an interruption of business operations.
Issue: Whether the bank is entitled to a refund of its minimum corporate income
tax paid to the BIR for taxable year 1999.
C a s e D i g e s t s – T a x a ti o n I I Page 36
SEC or the date when the Certificate of Authority to Operate was issued to it by
the Monetary Board of the BSP, whichever comes later.
G.R. Nos. 139786 & 140857 September 27, 2006
On July 19, 1996, Citytrust, inspired by the above-mentioned CTA ruling, filed
with the Commissioner a written claim for the tax refund or credit in the amount
ofP326, 007.01. It alleged that its reported total gross receipts included the 20%
FWT on its passive income amounting to P32, 600,701.25. Thus, it sought to be
reimbursed of the 5% GRT it paid on the portion of 20% FWT or the amount
of P326, 007.01. On the same date, Citytrust filed a petition for review with the
CTA, which eventually granted its claim. On appeal by the Commissioner, the
Court of Appeals affirmed the CTA Decision, citing as main bases Commissioner
of Internal Revenue v. Tours Specialist Inc. and Commissioner of Internal
Revenue v. Manila Jockey Club holding that monies or receipts that do not
redound to the benefit of the taxpayer are not part of its gross receipts.
In G.R. No. 140857, for the taxable quarters ending June 30, 1994 to June 30,
1996, Asianbank filed and remitted to the Bureau of Internal Revenue (BIR) the
5% GRT on its total gross receipts. On the strength of the January 30, 1996 CTA
Decision in the ASIAN BANK case, Asianbank filed with the Commissioner a
claim for refund of the overpaid GRT amounting to P2,022,485.78. To toll the
running of the two-year prescriptive period for filing of claims, Asianbank also
filed a petition for review with the CTA. On February 3, 1999, the CTA allowed
refund in the reduced amount of P1, 345,743.01, the amount proven by
Asianbank. Unsatisfied, the Commissioner filed with the Court of Appeals a
petition for review. On November 22, 1999, the Court of Appeals reversed the
CTA Decision and ruled in favor of the Commissioner stating that: “It is true that
Revenue Regulation No. 12-80 provides that the gross receipts tax on banks and
other financial institutions should be based on all items of income actually
received. Actual receipt here is used in opposition to mere accrual. Accrued
income refers to income already earned but not yet received. (Rep. v.
Lim Tian Teng Sons & Co., 16 SCRA 584).”
Issue: Does the twenty percent (20%) final withholding tax (FWT) on a bank’s
passive income form part of the taxable gross receipts for the purpose of
computing the five percent (5%) gross receipts tax (GRT)?
C a s e D i g e s t s – T a x a ti o n I I Page 36
Ruling:
The issue of whether the 20% FWT on a bank’s interest income forms part of the
taxable gross receipts for the purpose of computing the 5% GRT is no longer
novel. As commonly understood, the term “gross receipts” means the entire
receipts without any deduction. Deducting any amount from the gross receipts
changes the result, and the meaning, to net receipts. Any deduction from gross
receipts is inconsistent with a law that mandates a tax on gross receipts, unless
the law itself makes an exception. This interpretation has remained unchanged
throughout the various re-enactments of the present Section 121 of the Tax
Code. On the presumption that the legislature is familiar with the
contemporaneous interpretation of a statute given by the administrative agency
tasked to enforce the statute, the reasonable conclusion is that the legislature
has adopted the BIR’s interpretation. In other words, the subsequent re-
enactments of the present Section 121, without changes in the term interpreted
by the BIR, confirm that its interpretation carries out the legislative purpose.
Actual receipt of interest income is not limited to physical receipt. Actual receipt
may either be physical receipt or constructive receipt. When the depositary bank
withholds the final tax to pay the tax liability of the lending bank, there is prior to
the withholding a constructive receipt by the lending bank of the amount
withheld. From the amount constructively received by the lending bank, the
depositary bank deducts the final withholding tax and remits it to the government
for the account of the lending bank. Thus, the interest income actually received
by the lending bank, both physically and constructively, is the net interest plus the
amount withheld as final tax.
NOTE: There is no double taxation because The GRT is a percentage tax under
Title V of the Tax Code ([Section 121], Other Percentage Taxes), while the FWT
is an income tax under Title II of the Code (Tax on Income). The two concepts
are different from each other. This Court defined that a percentage tax is a
national tax measured by a certain percentage of the gross selling price or gross
value in money of goods sold, bartered or imported; or of the gross receipts or
earnings derived by any person engaged in the sale of services. It is not
subject to withholding. An income tax, on the other hand, is a national tax
imposed on the net or the gross income realized in a taxable year. It is subject
to withholding. Thus, there can be no double taxation here as the Tax Code
imposes two different kinds of taxes.
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 159593 October 16, 2006
Ruling:
1. The SC prohibited the BIR from changing its theory on the case and raising a
new issue on appeal. As a rule, a party is never allowed to change its theory or
raise a totally new issue on appeal. On exceptional cases, the rules may be
relaxed allowing new issues on appeal but it is only done for good and sufficient
causes in order to pave way for justice. The BIR has not shown any good or
sufficient cause for relaxing the rules.
2. Input VAT on capital goods and services may be claimed as tax refund. The
BIR is erroneous in stating that a VAT exempt or zero rated VAT payer is not
allowed to claim tax credits. Pertinent provisions of the Tax Code allow that Input
VAT on capital goods be claimed as tax credit. Sec 106 (b) of the Tax Code of
1986 as amended by RA 7716 expressly states that “A VAT- registered person
may apply for the issued of a tax credit certificate or refund of input taxes paid on
capital goods imported or locally purchased, to the extent that such input taxes
have not been applied against output taxes.”
C a s e D i g e s t s – T a x a ti o n I I Page 36
G.R. No. 154126 October 11, 2005
Facts: The Quezon City government enacted City Ordinance No. 357, Series of
1995 Section 3 of which reads: “The City Assessor shall undertake a general
revision of real property assessments using as basis the newly approved
schedule specified in Sections 1 and 2 hereof. He shall apply the new
assessment level of 15% for residential and 40% for commercial and industrial
classification, respectively as prescribed in Section 8 (a) of the 1993 Quezon City
Revenue Code to determine the assessed value of the land. Provided; however,
that parcels of land sold, ceded, transferred and conveyed for remuneratory
consideration after the effectivity of this revision shall be subject to real estate tax
based on the actual amount reflected in the deed of conveyance or the current
approved zonal valuation of the Bureau of Internal Revenue prevailing at the time
of sale, cession, transfer and conveyance, whichever is higher, as evidenced by
the certificate of payment of the capital gains tax issued therefor.” Allied Banking
Corporation, a purchaser of a parcel of land, questioned its validity.
Issue: Whether section 3 can be the basis of collecting real property taxes?
Ruling: No.
C a s e D i g e s t s – T a x a ti o n I I Page 36
value of the property will dispense with the distinctions of actual use stated in the
Code and in the regulations.
G.R. No. 154993 October 25, 2005
Ruling: No.
With the definitions, the review taken by the RTC over the denial of the protest by
the local treasurer would fall within that court’s original jurisdiction. In short, the
review is the initial judicial cognizance of the matter. Moreover, labeling the said
review as an exercise of appellate jurisdiction is inappropriate, since the denial of
the protest is not the judgment or order of a lower court, but of a local
government official.
C a s e D i g e s t s – T a x a ti o n I I Page 36
for review under a procedure analogous to that provided for under Rule 42 of the
1997 Rules of Civil Procedure.”
Facts: In April 1991, respondent Philippine National Bank (PNB) issued to the
Bureau of Internal Revenue (BIR) PNB Cashier’s Check for P180,000,000.00.
The check represented PNB’s advance income tax payment for the bank’s 1991
operations and was remitted in response to then President Corazon C. Aquino’s
call to generate more revenues for national development. The BIR acknowledged
receipt of the amount by issuing Payment Order and BIR Confirmation Receipt.
Later, PNB requested the issuance of a tax credit certificate (TCC) to be utilized
against future tax obligations of the bank. For the first and second quarters of
1991, PNB also paid additional taxes amounting to P6,096,150.00 and
P26,854,505.80, respectively. Inclusive of the P180 Million aforementioned, PNB
paid and BIR received in 1991 the aggregate amount of P212, 950,656.79. This
final figure, if tacked to PNB’s prior year’s excess tax credit (P1,385,198.30) and
the creditable tax withheld for 1991 (P3,216,267.29), adds up to
P217,552,122.38. By the end of 1991, PNB’s annual income tax liability, per its
1992 annual income tax return, amounted to P144,253,229.78, which, when
compared to its claimed total credits and tax payments of P217,552,122.38,
resulted to a credit balance in its favor in the amount of P73,298,892.60. This
credit balance was carried-over to cover tax liability for the years 1992 to 1996,
but, as PNB alleged, was never applied owing to the bank’s negative tax position
for the said inclusive years, having incurred losses during the 4-year period. On
July 28, 1997, PNB wrote then BIR Commissioner to inform her about the above
developments and to reiterate its request for the issuance of a TCC, this time for
the “unutilized balance of its advance payment made in 1991 amounting to
P73,298,892.60”. Replying, the BIR Commissioner denied PNB’s claim for tax
credit on the reason, among others, that the same has already prescribed on the
ground that it was filed beyond the two (2) year prescriptive period.
Issue: Can PNB claim for the issuance of TCC even beyond the two-year
prescriptive period under Section 230(now Section 229) of the NIRC?
Ruling: Yes.
PNB’s request for issuance of a tax credit certificate on the balance of its
advance income tax payment cannot be treated as a simple case of excess
payment as to be automatically covered by the two (2)-year limitation in Section
230. Section 230 of the Tax Code, as couched, particularly its statute of
limitations component, is, in context, intended to apply to suits for the recovery of
internal revenue taxes or sums erroneously, excessively, illegally or wrongfully
collected. Considering the “special circumstance” that the tax credit PNB has
been seeking is to be sourced not from any tax erroneously or illegally collected
C a s e D i g e s t s – T a x a ti o n I I Page 36
but from advance income tax payment voluntarily made in response to then
President Aquino’s call to generate more revenues for the government, in no way
can the amount of P180 million advanced by PNB in 1991 be considered as
erroneously or illegally paid tax.
C a s e D i g e s t s – T a x a ti o n I I Page 36