2011 TAX CASES

CASE TITLE FACTS OF THE CASE ISSUE/S RULING

1. Belle Corporation vs CIR (G.R. No. Belle
181298 January 10, 2011)
(Agustin, Marilou)
Corporation is a domestic
corporation engaged in the real estate
and property business. Petitioner filed
with the BIR its ITR for the first quarter
of 1997, showing a gross income of
P741,607,495.00, a deduction of
P65,381,054.00, a net taxable income
of P676,226,441.00 and an income tax
due of P236,679,254.00. Petitioner filed
with the BIR its second quarter ITR,
declaring an overpayment income taxes
in the amount of P66,634,290.00. In
view of the overpayment, no taxes were
paid for the second and thirds quarters
of 1997.
Instead of claiming the amount as a tax
refund, petitioner decided to apply it as
a tax credit to the succeeding taxable
year by marking the tax credit option box
in its 1997 ITR. For the taxable year
1998, petitioner’s amended ITR showed
an overpayment . Petitioner filed with the
BIR an administrative claim for refund of
its unutilized excess income tax
payments for the taxable year 1997 in
the amount of P106,447,318.00.
Notwithstanding the filing of the
administrative claim for refund,
petitioner carried over the amount of
P106,447,318 to the taxable year
1999and applied a portion thereof to its
Whether or not petitioner is
entitled to a refund of its excess
income tax payments for the
taxable year 1997.
No. Both the CTA and CA erred in applying
Section 69 of the old NIRC. The law
applicable is Section 76 of the NIRC. Under
Section 69 of the old NIRC, in case of
overpayment of income taxes, a corporation
may either file a claim for refund or carry
over the excess payments to the taxable
year. Availment of one remedy, however,
precludes the other.
Thus, under Section 69 of the old NIRC,
unutilized tax credits maybe refunded as
long as the claim is filed within the two-year
prescriptive period. The option to carry over
excess income tax payments is irrevocable
under Section 76 of the 1997 NIRC. This
rule, however, no longer applies as: Section
76 of the 1997 NIRC now reads:Section 76.
Final Adjustment Return – Every
corporation liable to tax under Section 24
shall file a final adjustment return covering
the total net income for the preceding
calendar or fiscal year. If the sum of the
quarterly tax payments made during the
said taxable year is not equal to the total tax
due on the entire taxable net income of that
year the corporation shall either:a. Pay
excess tax still due; orb. Be refunded of the
excess amount paid, as the case may be
In case the corporation is entitled to a refund
of the excess estimated quarterly income

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 2011 TAX CASES
1999 Minimum Corporate Income Tax
(MCIT) liability.
CTA rendered a Decision denying
petitioner’s claim for refund.
It bears stressing that the
applicable provision in the case at bar is
Section 69of the old Tax Code and not
Section 76 of the 1997 Tax Code. Settled
is the rule that under Section 69 of the
Old Tax Code, the carrying forward of
any excess/overpaid income tax for a
given taxable year is limited only up to
the succeeding taxable year. However,
petitioner even went further to the
taxable year 1999 and applied the Prior
Year’s (1998) Excess Credit of
P106,447,318.00 to its income tax
liability.
True enough, upon verification of
Petitioner’s 1999 Corporate Annual
Income Tax Return, the Court found that
the whole amount of P106,447,318.00
representing its prior year’s excess
credit was carried forward to1999
income tax liability. It is elementary rule
in taxation that an automatic carry-over
of an excess income tax payment should
only be made for the succeeding year.
On appeal, CA denied the petition and
dismiss the decision of the CTA.
2
taxes paid, the refundable amount shown
on its final adjustment return may be
credited against the estimated quarterly
income tax liabilities for the taxable quarters
of the succeeding taxable years. Once the
option to carry over and apply the excess
quarterly income tax against income tax due
for the taxable quarters of the succeeding
years has been made, such option shall be
considered irrevocable for that taxable
period and no application for tax refund or
issuance of a tax credit certificate shall be
allowed therefor.
Under the new law, in case of overpayment
of income taxes, the remedies are still the
same; and the availment of one remedy still
precludes the other. But unlike Section 69 of
the old NIRC, the carry over of excess
income tax payments is no longer limited to
the taxable year. Unutilized excess income
tax payments may now be carried over to
the succeeding taxable years until fully
utilized. In addition, the option to carry over
excess income tax payments is now
irrevocable. Hence, unutilized excess
income tax payments may no longer be
refunded.
In the instant case, both the CTA and CA
applied Section 69 of the old NIRC in
denying the claim for refund. The SC found
however, that the applicable provision
should be Section 76 of the 1997 NIRC
 2011 TAX CASES
2. Silicon Philippines, Inc., (Formerly
Intel Philippines Manufacturing,
Inc.), vs CIR (G.R. No. 172378
January 17, 2011)
3
Whether or not the CTA En Banc
erred in denying petitioner’s
claim for credit/refund of input
VAT attributable to its zero-rated
sales.
because at the time filed its 1997 final ITR,
the old NIRC was no longer in force.
Section 76 and its companion provisions in
Title II, Chapter XII should be applied
following the general rule on the prospective
application of laws such that they operate to
govern the conduct of corporate taxpayers
the moment the 1997 NIRC took effect on 1
January 1998. There is no quarrel that at the
time respondent filed its final adjustment
return for 1997 on 15 April 1998, the
deadline under Section 77 (B) of the 1997
NIRC (formerly Section 70(b) of the 1977
NIRC), the 1997 NIRC was already in force,
having gone into effect a few months earlier
on 1 January 1998. Accordingly, Section 76
is controlling.
Accordingly, since petitioner already carried
over its 1997 excess income tax payments
to the succeeding taxable year 1998, it may
no longer file a claim for refund of unutilized
tax credit for taxable year 1997. To repeat,
under the new law, once the option to carry
over excess income tax payments to the
succeeding years has been made, it
becomes irrevocable. Thus, applications for
refund of unutilized excess income tax
payments may no longer be allowed.
No. In a claim for credit/refund of input VAT
attributable to zero-rated sales, Section 112
(A) of the NIRC lays down four requisites, to
wit:
1) the taxpayer must be VAT-registered;
 2011 TAX CASES
(Agustin, Marilou) 2) the taxpayer must be engaged in sales
which are zero-rated or effectively zero-
rated;
3) the claim must be filed within two years
after the close of the taxable quarter when
such sales were made; and
4) the creditable input tax due or paid must
be attributable to such sales, except the
transitional input tax, to the extent that such
input tax has not been applied against the
output tax.

To prove that it is engaged in zero-rated

sales, petitioner presented export sales
invoices, certifications of inward remittance,
export declarations, and airway bills of
lading for the fourth quarter of 1998. The
CTA Division, however, found the export
sales invoices of no probative value in
establishing petitioners zero-rated sales for
the purpose of claiming credit/refund of
input VAT because petitioner failed to show
that it has an ATP from the BIR and to
indicate the ATP and the word zero-rated in
its export sales invoices
Printing the ATP on the invoices or receipts
is not required. It has been settled in Intel
Technology Philippines, Inc. v.
Commissioner of Internal Revenue that the
ATP need not be reflected or indicated in the
invoices or receipts because there is no law
or regulation requiring it. Thus, in the
absence of such law or regulation, failure to
print the ATP on the invoices or receipts
should not result in the outright denial of a
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2011 TAX CASES
claim or the invalidation of the invoices or
receipts for purposes of claiming a refund.

This brings us to the question of whether a

claimant for unutilized input VAT on zero-
rated sales is required to present proof that
it has secured an ATP from the BIR prior to
the printing of its invoices or receipts.

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 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

bears reiterating that while the pertinent
provisions of the Tax Code and the rules
and regulations implementing them require
entities engaged in business to secure a
BIR authority to print invoices or receipts
and to issue duly registered invoices or
receipts, 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
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2011 TAX CASES
taxpayer, and that invoices or receipts are
duly registered.[

Failure to print the word zero-rated on the

sales invoices is fatal to a claim for refund
of input VAT. Similarly, failure to print the
word zero-rated on the sales invoices or
receipts is fatal to a claim for credit/refund
of input VAT on zero-rated sales.

To claim a refund of input VAT on capital

goods, Section 112 (B)[56] 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 (2) years after the
close of the taxable quarter when the
importation or purchase was made.

Corollarily, Section 4.106-1 (b) of RR No. 7-

95 defines capital goods as follows:

Capital goods or properties refer to goods or

properties with estimated useful life greater
that one year and which are treated as
depreciable assets under Section 29 (f),[57]
used directly or indirectly in the production
or sale of taxable goods or services.

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 2011 TAX CASES
3. Exxonmobil Petroleum And Petitioner Exxon is a foreign corporation
Chemical Holdings, Inc, Philippine duly organized and existing under the
Branch VS. CIR (GR NO. 180909, laws of the State of Delaware, United
JANUARY 19, 2011) States of America. It is authorized to do
business in the Philippines through its
Philippine Branch.
( Taguinod, Jelyne)
Exxon is engaged in the business of
selling petroleum products to domestic
and international carriers. In pursuit of its
business, Exxon purchased from Caltex
Philippines, Inc. (Caltex) and Petron
Corporation (Petron) Jet A-1 fuel and
other petroleum products, the excise
taxes on which were paid for and
remitted by both Caltex and Petron. Said
taxes, however, were passed on to
Exxon which ultimately shouldered the
excise taxes on the fuel and petroleum
products.
From November 2001 to June 2002,
Exxon sold a lot of Jet A1 fuel to
international carriers, free of excise
taxes. On various dates, it filed
7
Whether or not Exxonmobil is the
proper party to file the claim for
the refund of the excise taxes
passed-on by Caltex and Petron.
Based on the foregoing definition, we find
no reason to deviate from the findings of the
CTA that training materials, office supplies,
posters, banners, T-shirts, books, and the
other similar items reflected in petitioners
Summary of Importation of Goods are not
capital goods. A reduction in the refundable
input VAT on capital goods from
P15,170,082.00 to P9,898,867.00 is
therefore in order.
NO.As early as the 1960s, the Supreme
Court has ruled that the proper party to
question, or to seek a refund of, an indirect
tax, is the statutory taxpayer, or the person
on whom the tax is imposed by law and who
paid the same, even if he shifts the burden
thereof to another.
As provided under Section 130 (A) (1) :
SEC. 130. Filing of Return and Payment of
Excise Tax on Domestic Products. -
(A) Persons Liable to File a Return, Filing of
Return on Removal and Payment of Tax. -
(1) Persons Liable to File a Return. - Every
person liable to pay excise tax imposed
under this Title shall file a separate return
for each place of production setting forth,
among others the description and quantity
or volume of products to be removed, the
applicable tax base and the amount of tax
due thereon: Provided, however, That in the
case of indigenous petroleum, natural gas
or liquefied natural gas, the excise tax shall
be paid by the first buyer, purchaser or
transferee for local sale, barter or transfer,
 2011 TAX CASES
administrative claims for refund with the
Bureau of Internal Revenue.
On October 30, 2003, Exxon filed a
petition for review with the CTA claiming
a refund or tax credit in the amount of
Php105,093,536.47, representing the
amount of excise taxes paid on Jet A-1
fuel and other petroleum products it sold
to international carriers from November
2001 to June 2002.
During Exxons preparation of evidence,
the CIR filed a motion dated January 28,
2005 to first resolve the issue of whether
or not Exxon was the proper party to ask
for a refund. Exxon filed its opposition to
the motion on March 15, 2005. On July
27, 2005, the CTA First Division issued a
resolution sustaining the CIRs position
and dismissing Exxons claim for refund.
Exxon filed a motion for reconsideration,
but this was denied. Exxon filed a
petition for review with the CTA En Banc
which dismissed the petition for review,
and which affirmed the said ruling.
The CTA En Banc dismissed the petition
for review and affirmed the two
resolutions of the First Division dated
July 27, 2005 and July 27, 2006. Exxon
filed a motion for reconsideration, but it
was denied.
8
while the excise tax on exported products
shall be paid by the owner, lessee,
concessionaire or operator of the mining
claim.
Should domestic products be removed from
the place of production without the payment
of the tax, the owner or person having
possession thereof shall be liable for the tax
due thereon.
The proper party to 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 to another. Although the burden of
an indirect tax can be shifted to the
purchaser, the amount added or shifted
becomes part of the price. Thus, the
purchaser does not really pay the tax per se
but only the price of the commodity. Indirect
taxes were defined as those that are
demanded, in the first instance, from, or are
paid by, one person to someone else. When
the seller passes on the tax to the buyer he
in effect shifts only the tax burden and not
the liability to pay for it. Excise taxes are
imposed under Title VI of the NIRC. They
apply to specific goods manufactured or
produced in the Philippines for domestic
sale or consumption or for any other
disposition, and to those that are imported.
In effect, these taxes are imposed when two
conditions concur: first, that the articles
subject to tax belong to any of the
 2011 TAX CASES
The CTA stated that Section 130(A)(2)
makes the manufacturer or producer of
the petroleum products directly liable for
the payment of excise taxes. Therefore,
it follows that the manufacturer or
producer is the taxpayer. This
determination of the identity of the
taxpayer designated by law is pivotal as
the NIRC provides that it is only the
taxpayer who has the legal personality
to ask for a refund in case of erroneous
payment of taxes.
Further, the excise tax imposed on
manufacturers upon the removal of
petroleum products by oil companies is
an indirect tax, or a tax which is primarily
paid by persons who can shift the
burden upon someone else.
The CTA cited the cases of Philippine
Acetylene Co., Inc. v. Commissioner of
Internal Revenue,Contex Corporation v.
Commissioner of Internal Revenue, and
Commissioner of Internal Revenue v.
Philippine Long Distance Telephone
Company, and explained that with
indirect taxes, although the burden of an
indirect tax can be shifted or passed on
to the purchaser of the goods, the
liability for the indirect tax remains with
the manufacturer.
Moreover, the manufacturer has the
option whether or not to shift the burden
9
categories of goods enumerated in Title VI
of the NIRC; and second, that said articles
are for domestic sale or consumption,
excluding those that are actually exported.
There are certain exemptions to the
coverage of excise taxes, such as
petroleum products sold to international
carriers and exempt entities or agencies.
Section 135 of the NIRC provides:
SEC. 135. Petroleum Products Sold to
International Carriers and Exempt Entities
or Agencies. - Petroleum products sold to
the following are exempt from excise tax:
(a) International carriers of Philippine or
foreign registry on their use or consumption
outside the Philippines: Provided, That the
petroleum products sold to these
international carriers shall be stored in a
bonded storage tank and may be disposed
of only in accordance with the rules and
regulations to be prescribed by the
Secretary of Finance, upon
recommendation of the Commissioner;
(b) Exempt entities or agencies covered by
tax treaties, conventions and other
international agreements for their use of
consumption: Provided, however, That the
country of said foreign international carrier
or exempt entities or agencies exempts
from similar taxes petroleum products sold
to Philippine carriers, entities or agencies;
and
 2011 TAX CASES
of the tax to the purchaser. When
shifted, the amount added by the
manufacturer becomes a part of the
price, therefore, the purchaser does not
really pay the tax per se but only the
price of the commodity. The CTA
concluded that a refund of erroneously
paid or illegally received tax can only be
made in favor of the taxpayer, pursuant
to Section 204(C) of the NIRC.
The CTA also emphasized that tax
refunds are in the nature of tax
exemptions and are, thus, regarded as
in derogation of sovereign authority and
construed strictissimi juris against the
person or entity claiming the exemption.
Finally, the CTA disregarded Exxons
argument that in effectively holding that
only petroleum products purchased
directly from the manufacturers or
producers are exempt from excise
taxes, the First Division of [the CTA]
sanctioned a universal amendment of
existing bilateral agreements which the
Philippines have with other countries, in
violation of the basic principle of pacta
sunt servanda.
The CTA explained that the findings of
fact of the First Division (that when
Exxon sold the Jet A-1 fuel to
international carriers, it did so free of tax)
10
(c) Entities which are by law exempt from
direct and indirect taxes.
Thus, under Section 135, petroleum
products sold to international carriers of
foreign registry on their use or consumption
outside the Philippines are exempt from
excise tax, provided that the petroleum
products sold to such international carriers
shall be stored in a bonded storage tank and
may be disposed of only in accordance with
the rules and regulations to be prescribed
by the Secretary of Finance, upon
recommendation of the Commissioner.
The confusion here stems from the fact that
excise taxes are of the nature of indirect
taxes, the liability for payment of which may
fall on a person other than he who actually
bears the burden of the tax.
In Commissioner of Internal Revenue v.
Philippine Long Distance Telephone
Company, the Court discussed the nature of
indirect taxes as follows:
[I]ndirect taxes are those that are
demanded, in the first instance, from, or are
paid by, one person to someone else.
Stated elsewise, indirect taxes are taxes
wherein the liability for the payment of the
tax falls on one person but the burden
thereof can be shifted or passed on to
another person, such as when the tax is
imposed upon goods before reaching the
consumer who ultimately pays for it. When
the seller passes on the tax to his buyer, he,
 2011 TAX CASES
negated any violation of the exemption
from excise tax of the petroleum
products sold to international carriers.
Second, the right of international carriers
to invoke the exemption granted under
Section 135(a) of the NIRC was neither
affected nor restricted in any way by the
ruling of the First Division.
At the point of sale, the international
carriers were free to invoke the
exemption from excise taxes of the
petroleum products sold to them. Lastly,
the lawmaking body was presumed to
have enacted a later law with the
knowledge of all other laws involving the
same subject matter.
4. Atlas consolidated mining and
Development
CorporationVs.Commissioner of
Internal Revenue( G.R. No. 159471
January 26, 2011)
(Guim, Amiel)
11
Whether or not the petitioner
corporation sufficiently establish
the factual bases for its
applications for refund/credit of
input VAT
in effect, shifts the tax burden, not the
liability to pay it, to the purchaser, as part of
the goods sold or services rendered.
Accordingly, the party liable for the tax can
shift the burden to another, as part of the
purchase price of the goods or services.
Although the manufacturer/seller is the one
who is statutorily liable for the tax, it is the
buyer who actually shoulders or bears the
burden of the tax, albeit not in the nature of
a tax, but part of the purchase price or the
cost of the goods or services sold.
As petitioner is not the statutory taxpayer, it
is not entitled to claim a refund of excise
taxes paid.
Although the Court agreed with the
petitioner corporation that the two-year
prescriptive period for the filing of claims for
refund/credit of input VAT must be counted
from the date of filing of the quarterly VAT
return, and that sales to PASAR and
PHILPOS inside the EPZA are taxed as
exports because these export processing
zones are to be managed as a separate
customs territory from the rest of the
Philippines, and thus, for tax purposes, are
effectively considered as foreign territory, it
still denies the claims of petitioner
corporation for refund of its input VAT on its
purchases of capital goods and effectively
zero-rated sales during the period claimed
for not being established and substantiated
 2011 TAX CASES
5. Philippine Amusement And Gaming The Philippine Amusement and Gaming
Corporation (PAGCOR), Corporation (PAGCOR) was created by
Petitioner,vs. The Bureau Of P.D. No. 1067-A in 1977. It is a
Internal Revenue (BIR) government owned and controlled
( G.R. No. 172087 ; March 15, corporation (GOCC). In 1998, R.A. 8424
2011) or the National Internal Revenue Code
of 1997 (NIRC) became effective.
(Ferrer, Elena Marie) Section 27 thereof provides that
GOCC’s are NOT EXEMPT from paying
income taxation but it exempted the
following GOCCs: GSIS, SSS,
PHILHEALTH, PCSO, PAGCOR.
But in May 2005, R.A. 9337, a law
amending certain provisions of R.A.
8424, was passed. Section 1 thereof
excluded PAGCOR from the exempt
GOCCs hence PAGCOR was subjected
to pay income taxation. In September
2005, the Bureau of Internal Revenue
issued the implementing rules and
regulations (IRR) for R.A. 9337. In the
said IRR, it identified PAGCOR as
12
by appropriate and sufficient evidence(
purchase invoices or official receipts).
Tax refunds are in the nature of tax
exemptions. It is regarded as in derogation
of the sovereign authority, and should be
construed in strictissimi juris against the
person or entity claiming the exemption.
The taxpayer who claims for exemption
must justify his claim by the clearest grant
of organic or statute law and should not be
permitted to stand on vague implications.
Whether or not PAGCOR should Yes. Section 1 of R.A. 9337 is constitutional.
be subjected to income taxation. It was the express intent of Congress to
exclude PAGCOR from the exempt GOCCs
hence PAGCOR is now subject to income
taxation. PAGCOR’s contention that the law
violated the constitution is not tenable. The
equal protection clause provides that all
persons or things similarly situated should
be treated alike, both as to rights conferred
and responsibilities imposed.
The general rule is, ALL GOCC’s are
subject to income taxation. However,
certain classes of GOCC’s may be exempt
from income taxation based on the following
requisites for a valid classification under the
principle of equal protection:
1) It must be based on substantial
distinctions.
2) It must be germane to the purposes of the
law.
3) It must not be limited to existing
conditions only.
 2011 TAX CASES
subject to a 10% value added tax (VAT)
upon items covered by Section 108 of
the NIRC (Sale of Services and Use or
Lease of Properties).
PAGCOR questions the constitutionality
of Section 1 of R.A. 9337 as well as the
IRR. PAGCOR avers that the said
provision violates the equal protection
clause. PAGCOR argues that it is
similarly situated with SSS, GSIS,
PCSO, and PHILHEALTH, hence it
should not be excluded from the
exemption.
6. Commissioner Of Internal Revenue
Vs Manila Bankers' Life Insurance
Corporation (G.R. No. 169103
March 16, 2011)
(Maramag, Jocelyn)
13
Whether or not the respondent
Manila Banker’s Life Insurance
Corporation is liable to pay the
assessed deficiency
documentary stamp tax, plus
25% surcharge for the late
payment and 20% annual
interest on their policy premiums.
4) It must apply equally to all members of
the class.
When the Supreme Court looked into the
records of the deliberations of the
lawmakers when R.A. 8424 was being
drafted, the SC found out that PAGCOR’s
exemption was not really based on
substantial distinctions. In fact, the
lawmakers merely exempted PAGCOR
from income taxation upon the request of
PAGCOR itself. This was changed however
when R.A. 9337 was passed and now
PAGCOR is already subject to income
taxation.
Anent the issue of the imposition of the 10%
VAT against PAGCOR, the BIR had
overstepped its authority. Nowhere in R.A.
9337 does it state that PAGCOR is subject
to VAT. Therefore, that portion of the IRR
issued by the BIR is void. In fact, Section
109 of R.A. 9337 expressly exempts
PAGCOR from VAT. Further, PAGCOR’s
charter exempts it from VAT. To recapitulate,
PAGCOR is subject to income taxation but
not to VAT.
The Court granted the petition and the
earlier decision of the Court of Appeals is
set aside. The respondent Manila Banker’s
Life Insurance Corporation is ordered to pay
petitioner CIR the deficiency documentary
stamp tax, plus the delinquency penalties of
25% surcharge on the amount due and 20%
annual interest until fully paid.
2011 TAX CASES
Section 198. Stamp Tax on Assignments
and Renewals of Certain Instruments. –
Upon each and every assignment or
transfer of any mortgage, lease or policy of
insurance, or the renewal or continuance of
any agreement, contract, charter, or any
evidence of obligation or indebtedness by
altering or otherwise, there shall be levied,
collected and paid a documentary stamp
tax, at the same rate as that imposed on the
original instrument.
Section 198. Speaks of assignments and
renewals. In the case of insurance policies,
this section applies only when such policy
was assigned or transferred. The provision
which specifically applies to renewals of life
insurance policies is Section 183:

Section 183. Stamp Tax on Life Insurance

Policies. — On all policies of insurance or
other instruments by whatever name the
same may be called, whereby any
insurance shall be made or renewed upon
any life or lives, there shall be collected a
documentary stamp tax of fifty centavos on
each two hundred pesos or fractional part
thereof, of the amount insured by any such
policy.

Section 183. Is a substantial reproduction of

the earlier documentary stamp tax
provision, Section 1449(j) of the
Administrative Code of 1917. Regulations
No. 26, or The Revised Documentary
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 2011 TAX CASES
Stamp Tax Regulations, provided the
implementing rules to the provisions on
documentary stamp tax under the
Administrative Code of 1917. Section 54 of
the Regulations, in reference to what is now
Section 183, explicitly stated that the
documentary stamp tax imposed under that
section is also collectible upon renewals of
life insurance policies.

Section 54. Tax also due on renewals. – The

tax under this section is collectible not only
on the original policy or contract of
insurance but also upon the renewal of the
policy or contract of insurance.

It is clear that the availment of the option in

the guaranteed continuity clause will
effectively renew the Money Plus Plan
policy, which is indisputably subject to the
imposition of documentary stamp tax under
Section 183 as an insurance renewed upon
the life of the insured.
7. CIR vsPL Management Whether or not the decision of The SC reversed the decision of the CA to
International Philippines(GR. NO. CA suspending the running the extent that it orders the petitioner to
160949 April 4, 2011) period set by Section 29 of the refund to respondent the unutilized
NIRC on the ground of equity is creditable withholding tax in the year 1997,
proper. but permit the respondent to apply the
(Augustin, Marilou) amount as tax credit in succeeding taxable
years until fully exhausted.

Any tax income that is paid in excess of the

amount due the government may be
refunded, provided that the taxpayer
properly applies for the refund. One cannot
15
 2011 TAX CASES
get a tax refund and a tax credit at the same
time for the same income taxes paid.
The amount being claimed as a refund
would remain in the account of the taxpayer
until utilized in taxable years, as provided in
Section 76 of the NIRC of 1997.

It is worthy to note that unlike the option

refund of excess income tax, which
prescribes after 2 years from filing of the
Final Adjustment Return , for there is no
prescriptive period for the carrying over the
same.

In this regard, prescription did not bar it from

applying the amount as tax credit
considering that there was no prescriptive
period for carrying over the amount as tax
credit in subsequent taxable years.

SC ruled that PL Management may still use

the creditable withholding tax as tax credit
in succeeding taxable years until fully
exhausted.
8. Sta. Lucia Realty and Whether or not Sta. Lucia should Under Presidential Decree No. 464, or the
Development, Inc.,Vs.City of Pasig continue paying its real property “Real Property Tax Code, “the authority to
, Respondent Municipality of taxes to Cainta, as it alleged to collect real property taxes are vested in the
Cainta, Province of have always done, or to Pasig, locality where the property is situated. This
Rizal,Intervenor(G.R. No. 166838 as the location stated in Sta. requisite was reiterated in Republic Act No.
June 15, 2011) Lucia’s TCTs. 7160, or the Local Government Code. Thus,
while a local government unit is authorized
( Guim, Amiel) under several laws to collect real estate tax
on properties falling under its territorial
jurisdiction, it is imperative to first show that
these properties are unquestionably within
16
2011 TAX CASES
its geographical boundaries. The Court
cited the case of Mariano, Jr. v Commission
on Elections which stated that “the
importance of drawing with precise strokes
the territorial boundaries of a local unit of
government cannot be overemphasized.

The boundaries must be clear to define the

limits of the territorial jurisdiction of a local
government unit. It can legitimately exercise
powers of government only within the limits
of its territorial jurisdiction. Beyond these
limits, its acts are ultra vires.” Clearly
therefore, the local government unit
entitled to collect real property taxes from
Sta. Lucia must undoubtedly show that the
subject properties are situated within its
territorial jurisdiction; otherwise, It would be
acting beyond the powers vested to it by
law. We hold that the Pasig RTC
should have held in abeyance the
proceedings in Civil Case No. 65420, in
view of the fact that the outcome of the
boundary dispute case before the Antipolo
RTC will undeniably affect both Pasig’s and
Cainta’s rights. In fact, the only reason
Pasig had to file a tax collection case
against Sta. Lucia was not that Sta. Lucia
refused to pay, but that Sta. Lucia had
already paid, albeit to another local
government unit.

Evidently, had the territorial boundaries

of the contending local government units
herein been delineated with accuracy, and
17
 2011 TAX CASES
then there would be no controversy at all. In
the meantime, to avoid further animosity,
Sta. Lucia is directed to deposit the
succeeding real property taxes due on the
subject properties, in an escrow account
with the Land Bank of the Philippines.
WHEREFORE, the instant petition is
GRANTED .The June 30, 2004Decision
and the January 27, 2005 Resolution of the
Court of Appeals in CA-G.R. CV No. 69603
are SET ASIDE.

The City of Pasig and the Municipality of

Cainta are both directed to await the
judgment in their boundary dispute case
(Civil Case No. 94-3006), pending before
Branch 74 of the Regional Trial Court in
Antipolo City, to determine which local
government unit is entitled to exercise its
powers, including the collection of real
property taxes, on the properties subject of
the dispute.

In the meantime, Sta. Lucia Realty and

Development, Inc. is directed to deposit the
succeeding real property taxes due on the
lots and improvements covered by TCT
Nos. 532250, 598424,599131, 92869,
92870 and 38457 in an escrow account with
the Land Bank of the Philippines.
9. Commissioner Of Internal Whether or not petitioner is Mirant’s claim is denied on its fiscal year
RevenueVs.Mirant (Philippines) entitled to a tax refund or to the ended June 30, 1999 and the Interim period
Operations, Corporation (G.R. No. issuance of a tax credit certificate from July 1, 1999 to December 31, 1999 as
171742 June 15, 2011) and if it is, then what is the it opted for carry over. Once exercised, the
x - - - - - - - - - - - - - - - - - - - - - - -x amount to which it is entitled. option to carry over is irrevocable.
18
 2011 TAX CASES
Mirant Operations Corporation
Vs.Commissioner Of Internal Revenue Section 76 of the National Internal Revenue
(G.R. No. 176165) Code (Presidential Decree No. 1158, as
amended) provides:
(Maramag, Jocelyn)
SEC. 76. - Final Adjustment Return. - Every
corporation liable to tax under Section 27
shall file a final adjustment return covering
the total taxable income for the preceding
calendar or fiscal year. If the sum of the
quarterly tax payments made during the
said taxable year is not equal to the total tax
due on the entire taxable income of that
year, the corporation shall either:

(A) Pay the balance of tax still due; or

(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess
amount paid, as the case may be.

In case the corporation is entitled to a tax

credit or refund of the excess estimated
quarterly income taxes paid, the excess
amount shown on its final adjustment return
may be carried over and credited against
the estimated quarterly income tax liabilities
for the taxable quarters of the succeeding
taxable years. Once the option to carry-over
and apply the excess quarterly income tax
against income tax due for the taxable
quarters of the succeeding taxable years
has been made, such option shall be
considered irrevocable for that taxable
period and no application for cash refund or

19
2011 TAX CASES
issuance of a tax credit certificate shall be
allowed therefor.
The last sentence of Section 76 is clear in
its mandate.

Once a corporation exercises the option to

carry-over and apply the excess quarterly
income tax against the tax due for the
taxable quarters of the succeeding taxable
years, such option is irrevocable for that
taxable period. Having chosen to carry-over
the excess quarterly income tax, the
corporation cannot thereafter choose to
apply for a cash refund or for the issuance
of a tax credit certificate for the amount
representing such overpayment.Mirant is
entitled to the refund of its unutilized
creditable withholding taxes for the taxable
year 2000.

Therefore, as the CTA ruled, Mirant

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

The Court finds no abusive or improvident

exercise of authority on the part of the CTA.
Since there is no showing of gross error or
abuse on the part of the CTA, and its
findings are supported by substantial
evidence, there is no cogent reason to
disturb its findings and conclusions.

20
 2011 TAX CASES
10. CIR vs Filinvest Development FDC is the owner of the outstanding
Corporation(Gr. No 163653. July shares of both FAI and FLI with 80% and
19, 2011) 67.42% respectively. Sometimes in
1996, FDC and FAI entered into a Deed
CIR vs. Filinvest Development of exchange with FLI where both
Corporation (Gr. No. 167689. July transferred parcel of lands in exchange
19, 2011) for shares of stock of FLI. As a result, the
ownership structure of FLI changed
( Carodan, Jose Emmanuel) whereby FDC’s ownership decreased
from 67.42% to 61.03% meanwhile Fai
now owned 9.96% of shares of FLI. FLI
then requested from the BIR a ruling to
the effect that no gain or loss should be
recognized on said transfer and BIR
issued ruling no. S-34-046-97 finding the
exchange falling within Sec. 34(c) (2)
Now Sec. 40 (c) (2) of the NIRC.
Furthermore, FDC extended advances
in favour of its affiliates during 1996 and
1997 duly evidence by instructional
letters as well as cash and journal
vouchers. Moreover, FDC also entered
into shareholders agreement with Reco-
Herrera PTE Ltd (RHPL). For the
formation of a Singapore base joint
venture company called Filinvest Asia
Corp. (FAC). The equity participation of
FDC was pegged at 60% subscribing to
P500.7m worth of shares of FAC.
On Jan. 3, 2010, FDC received
assessment notice for deficiency income
tax and deficiency stamp taxes. The Whether or not FDC met all the Yes, it was admitted in the stipulation of
foregoing deficiency taxes were requirements for non-recognition facts.Requisites for the non-recognition of
assessed on the taxable gain realized by of taxable gain under Sec. 34(c)
21
Whether or not FDC is liable for
theoretical interest on said
advances extended by it to its
affiliates.
No. Sec. 34(c) (2) Now Sec. 40 (c) (2) of the
NIRC does not include the power to impute
theoretical interest to the CIR’s power of
distribution, allocation, apportionment or
allocation of gross income and deductions.
To accord precipitate credulity to the CIR’s
bare assertion that FDC had deducted
substantial interest expense from its gross
income, there would still be no factual basis
for the imputation of theoretical interest on
the subject advances and assess deficiency
income taxes. Under Art. 1956 of the New
Civil Code, no interest shall be due unless it
has been expressly stipulated in writing.
Considering that taxes, being burdens, are
not to be presumed beyond what the
applicable statute expressly and clearly
declares, the rule is likewise settled that tax
statutes must be construed strictly against
the government and liberally in favour of the
taxpayer. Accordingly, the general rule of
requiring adherence to the letter in
construing statutes applies with peculiar
strictness to tax law and the provision of a
taxing act are not to be extended by
implication. While it is true that taxes are the
lifeblood of the government, it has been held
that their assessment and collection should
be in accordance with law as any
arbitrariness will negate the very reason for
government itself.
 2011 TAX CASES
FDC on the taxable gain supposedly (2) Now Sec. 40 (c) (2) of the gain or loss under Sec. 34(c) (2) of the 1993
gain realized by FDC from the Deed of NIRC and therefore, is not NIRC are as follows:
Exchange it executed with FAI and FLI, taxable. a. the transferee is a corporation;
on the dilution resulting from the b. the transferee exchanges its shares of
shareholder’s agreement FDC executed stock for properties of the transferor;
with RHPL and with the interest rate and c. the transfer is made by a person, acting
DST imposable on the advances alone or together with others, not exceeding
executed by FDC. FAI also received four persons; and
similar assessment on deficiency d.as a result of the exchange the transferor,
income tax relating to the Deed of alone or together with others, not exceeding
exchange. Both FDC and FAI protested four, gains control of the transferee.
and after having failed to act on their
protest they elevated their case. Hence, Since the term control is clearly defined as
this petition for review on certiorari. ownership of stock in a corporation
possessing atleast 51% of the total voting
power of classes of stocks entitled to one
vote. Therefore, both FDC and FAI cannot
be held liable for deficiency income tax on
said transfer.
Whether or not the letter of Yes. The Instructional letters as well as the
instruction or cash vouchers are journal and cash vouchers evidencing the
deemed loan agreement subject advances FDC extended to its affiliates in
to DST. 1996 and 1997 qualified as lone agreement
upon which DST may be imposed.Under
Section 246 of the 1993 NIRC, rulings,
circulars, rules and regulation promulgated
by the BIR have no retroactive application if
to so apply them would be prejudicial to the
taxpayers; Exception to the rule:
a. where the taxpayer deliberately misstates
or omits material facts from his return or in
any documents require of him by the BIR;
b. where the facts subsequently gathered
by the BIR are materially different from the
facts on which the ruling is based;
22
 2011 TAX CASES
c. where the taxpayer acted in bad faith.
Not being the taxpayer who, in the first
instance, sought a ruling from the CIR,
however, FDC cannot invoke the foregoing
principle on non-retroactivity of BIR rulings.
Whether or not the dilution as a No. The dilution as a result increase is not
result of increase of FDC taxable. The rule is settled that the findings
shareholding in FAC is taxable. and conclusion of the CTA are accorded
great respect and are generally upheld by
the Court, unless there is a clear showing of
a reversible error or an improvident exercise
of authority. Absent showing of such error
here, the court find no strong and cogent
reasons to depart from said rule with
respect to the CTA’s finding that no
deficiency income tax can be assessed on
the gain on the supposed dilution or
increase in the value of FDC’s
shareholdings in FAC which the CIR, failed
to establish. It cannot be gainsaid, that a
mere increase or appreciation in the value
of said shares cannot be considered income
for taxation purposes. Since a ‘’mere
advance in the value of the property of a
person or corporation in no sense constitute
the income specified in the revenue law.

Hence, the CIR has no factual and legal

basis in assessing income tax on the
increase in the value of FDC’s shareholding
in FAC until the same is actually sold at a
profit.
11. Renato V. Diaz And Aurora Ma. F. Petitioners Renato V. Diaz and Aurora Whether or not the toll fees VAT on tollway operations cannot be a tax
Timbol Vs. The Secretary Of Ma. F. Timbol (petitioners) filed petition collected by toll way operators be on tax even if toll fess were deemed as a
for declaratory relief assailing the validity “user’s tax” ; VAT is assessed against the
23
 2011 TAX CASES
Finance And The Commissioner Of of the impending imposition of VAT by subjected to value added tax tollway operators gross receipt’s and not
Internal Revenue the (BIR) on the collections of tollway (VAT).
GR. NO. 193007 JULY 19, 2011 operators. Petitioners claim that, since
the VAT would result in increased toll
fees, they have an interest as regular
(Balubal, Eden) users of toll ways in stopping the BIR
action. Petitioners allege that the BIR
attempted during the administration of
President Gloria Macapagal-Arroyo to
impose VAT on toll fees. The imposition
was deferred, however, in view of the
consistent opposition of Diaz and other
sectors to such move. But, upon
President Benigno C. Aquino III's
assumption of office in 2010, the BIR
revived the idea and would impose the
challenged tax on toll fees beginning
August 16, 2010 unless judicially
enjoined.
necessarily on the fees. Although the
tollway operator may shift the VAT burden
to the tollway user, it will not make the latter
directly liable for the VAT. The shifted VAT
burden simply becomes part of the fees that
one has to pay in order to use the tollway.
VAT on tollway operations is not
really a tax on the tollway user, but on the
tollway operator. Under Section 105 of the
Code, VAT is imposed on any person who,
in the course of trade or business, sells or
renders services for a fee. In other words,
the seller of services, who in this case is the
tollway operator, is the person liable for VAT.
The latter merely shifts the burden of VAT to
the tollway user as part of the toll fees.

Petitioners hold the view that Congress

did not, when it enacted the NIRC,
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.
On August 13, 2010 the Court issued a
temporary restraining order (TRO),
enjoining the implementation of the VAT.
24

12. Mercury Drug vs CIR
(G.R. No. 164050; July 20, 2011)
(Attaban, Anne Kenneth)
2011 TAX CASES
Petitioner Mercury Drug corporation
grants a 20% sales discount to qualified
senior citizens in the purchase of
medicines pursuant to RA 7432. With
this, petitioner claims an amount
representing the 20% sales discount as
deductions from its gross income.
Realizing that RA 7432 allows tax credit
for the sales granted to senior citizens,
petitioner filed with CIR claims for refund
for the years 1993 and 1994.
Computation of its overpayment of
income tax was presented by petitioner.
When CIR failed to act on petitioner’s
claims, the latter filed petitioner for
review with the CTA. CTA ruled in favor
of petitioner and treated the 20% sales
discount as tax credit rather than a
deduction from the gross income.
However, the CTA did not grant the full
amount of claims because if found some
discrepancies and irregularities in the
cash slips submitted by petitioner. The
CTA stated that the tax credit must be
based on the actual cost of the medicine
and not the whole amount of the 20%
senior citizens discount, thus the
formula applied is: cost of sales/gross
sales x amount of 20% sales discount.
Petitioner moved for partial
reconsideration which CTA modified its
ruling by increasing the taxable
creditable tax amount. still unsatisfied
with the decision, petitioner appealed
25
Whether the claim for tax credit The court ruled that the cost of discount
should be based on the full should be computed on the actual amount
amount of the 20% senior of the discount extended to senior citizens.
citizens’ discount or the RA 7432, which grants, among others, sales
acquisition cost of the discounts to senior citizens on the purchase
merchandise sold. of medicines, imposes burden to private
establishments amounting to taking of
private property for public use with just
compensation in the form of tax credit.
However, said law does not provide how the
cost of the discount as tax credit be
computed. Thus, the court construed the
cost as referring to the amount of the 20%
sales discount extended by establishments
to senior citizens in the purchase of
medicines.
However, the Court gave full accord to the
factual findings of the Court of Tax Appeals
with respect to the actual amount of the 20%
sales discount. Thus the court held that
petitioner is entitled to a tax credit
equivalent to the actual amounts of the 20%
sales discount as determined by the Court
of Tax Appeals. A new computation for tax
was made in favor of petitioner in the
amounts of P2,289,381.71 and
P22,237,650.34.
 2011 TAX CASES
with CA seeking partial modification of
the CTA resolution raising a legal issue
on the basis of the computation of tax
credit.
Petitioner contended that the actual
discount granted to the senior citizens,
rather than the acquisition cost of the
item availed by senior citizens, should
be the basis for computation of tax
credit.

The CA affirms the CTA decision. It

interpreted the term "cost" as used in
Section 4(a) of Republic Act No. 7432 to
mean the acquisition cost of the
medicines sold to senior citizens.
Hence, comes this petition for review
before the SC.
13. CIR vs FORTUNE TOBACCO Pursuant to RA 8240 which amended
CORPORATION(GR # 180006 RA 8424 RE specific tax imposed on any
September 28, 2011) brand of cigarettes, respondent Fortune
Tobacco Corporation (respondent) paid
in advance its excise taxes for the year
(Abella, Khat) 2003 in the amount of PHP 11.15 billion
and for the period covering January 1 to
May 31, 2004 in the amount of PHP 4.90
billion.
Upon learning that the taxes paid were
erroneously and/or illegally collected in
the amount of PHP 491 million assailing
the proviso in Sec. 1 of RR 17-99 that
requires the payment of excise tax
actually being paid prior January 1, 2000
if the amount is higher than the new
26
Whether or not there was an
overpayment of excise tax which
entitles respondent for a tax
refund.
The court ruled that this case presents
same issue that has long been resolved in
2008, where Fortune Tobacco found an
invalid proviso in Sec. 1of RR 17-99 – in
which the court upheld its tax refund claim.
Applying the principle of stare decisis, the
proviso in Sec. 1 of RR 17-99 clearly went
beyond the terms of the law it was supposed
to implement and therefore entitles
respondent to claim a refund of the overpaid
excise taxes collected pursuant to this
provision.
Given is that RA 8240 was enacted to raise
government revenues but this is not the sole
and only objective of the law. The imposition
 2011 TAX CASES
specific tax rate, respondent filed an
administrative claim for tax refund with
the CIR. It claimed that by including the
proviso, the CIR went beyond the
language of the law and usurped
Congress power – without waiting for the
CIR’s action on its claim; respondent
filed a judicial claim for tax refund with
the CTA.The CTA First Division ruled in
favor of the respondent and granted its
tax refund claim. The same was upheld
on appeal filed by the CIR before the
CTA en banc. Hence, this petition.
14. Commissioner Of Internal Revenue
Vs San Miguel Corporation( G.R.
No. 184428
November 23, 2011)
27
Whether or not the petitioner
committed an error in
interpreting the provision in the
last paragraph of Section 1 of
Revenue Regulations No. 17-99
in relation of Section 143 of the
Tax Reform Act of 1997.
of specific taxes, which are based on the
volume of goods produced would prevent
price manipulation and also cure the
unequal tax treatment created by the
skewed valuation of similar goods.
Moreover, the Constitution requires that
taxation should be uniform and equitable.
Uniformity in taxation requires that all
subjects or objects of taxation similarly
situated are to be treated alike both in
privileges and liabilities – which in this case
is unwittingly violated when the proviso in
Sec. 1of RR 17-99 is applied in certain
cases.
Section 143 of the Tax Reform Act of 1997
is clear and unambiguous. It provides for
two periods: the first is the 3-year transition
period beginning January 1, 1997, the date
when R.A. No. 8240 took effect, until
December 31, 1999; and the second is the
period thereafter. During the 3-year
transition period, Section 143 provides that
"the excise tax from any brand of fermented
liquor…shall not be lower than the tax which
was due from each brand on October 1,
1996."
After the transitory period, Section 143
provides that the excise tax rate shall be the
figures provided under paragraphs (a), (b)
and (c) of Section 143 but increased by
12%, without regard to whether such rate is
lower or higher than the tax rate that is
actually being paid prior to January 1, 2000
and therefore, without regard to whether the
revenue collection starting January 1, 2000
2011 TAX CASES
may turn out to be lower than that collected
prior to said date. Revenue Regulations No.
17-99, however, created a new tax rate
when it added in the last paragraph of
Section 1 thereof, the qualification that the
tax due after the 12% increase becomes
effective "shall not be lower than the tax
actually paid prior to January 1, 2000."

As there is nothing in Section 143 of the Tax

Reform Act of 1997 which clothes the BIR
with the power or authority to rule that the
new specific tax rate should not be lower
than the excise tax that is actually being
paid prior to January 1, 2000, such
interpretation is clearly an invalid exercise
of the power of the Secretary of Finance to
interpret tax laws and to promulgate rules
and regulations necessary for the effective
enforcement of the Tax Reform Act of 1997.
Said qualification must, perforce, be struck
down as invalid and of no effect.

It bears reiterating that tax burdens are not

to be imposed, nor presumed to be imposed
beyond what the statute expressly and
clearly imports, tax statutes being construed
strictissimi juris against the government. In
case of discrepancy between the basic law
and a rule or regulation issued to implement
said law, the basic law prevails as said rule
or regulation cannot go beyond the terms
and provisions of the basic law. It must be
stressed that the objective of issuing BIR
Revenue Regulations is to establish
28
 2011 TAX CASES
parameters or guidelines within which our
tax laws should be implemented, and not to
amend or modify its substantive meaning
and import

The rule in the interpretation of tax laws is

that a statute will not be construed as
imposing a tax unless it does so clearly,
expressly, and unambiguously. A tax cannot
be imposed without clear and express
words for that purpose. Accordingly, the
general rule of requiring adherence to the
letter in construing statutes applies with
peculiar strictness to tax laws and the
provisions of a taxing act are not to be
extended by implication. As burdens, taxes
should not be unduly exacted nor assumed
beyond the plain meaning of the tax laws.
15. LVM Construction Corporation vs LVM Construction Corporation (LVM) is Whether or not respondents’ (No. The Supreme Court held that for lack
FT Sanchez/SOCOR/KIMWA a duly licensed construction firm liability to pay value added tax of any stipulation regarding the same in the
(JOINT VENTURE), FT Sanchez primarily engaged in the construction of need not be stated in the sub- parties’ sub-contract agreement, that it
Construction Corporation, Et. Al., ( roads and bridges for DPWH contract agreement form part of, should not deduct its e-vat payments from
GR No. 181961, December 5, and are deemed incorporated the retention money demanded by the joint
2011) LVM was awarded the construction of and read into said agreement. venture. A contract constitutes the law
the Arterial Road Link Development between the parties who are, therefore,
Project in Southern Leyte (the Project), bound by its stipulations which, when
(Azurin, Jastise) couched in clear and plain language, should
It sub-contracted 30% of the contract be applied according to their literal tenor.
amount with the Joint Venture There was no agreement regarding the
composed of respondents F.T. Sanchez offsetting. The record shows that, except for
Corporation (FTSC), Socor Construction deducting sums corresponding to the 10%
Corporation (SCC) and Kimwa retention agreed upon, 9% as contingency
Construction Development Corporation on sub-contract, 1% withholding tax and
(KCDC). such other itemized miscellaneous
expenses, LVM settled the Joint Venture’s
29
 2011 TAX CASES
LVM was the Contractor and the Joint Billing Nos. 1 to 26 without any mention of
Venture as Sub-Contractor deductions for the E-VAT payments it claims
to have advanced.
The Sub-Contract Agreement executed
by the parties provided that: Whether or not respondents are Yes. The SC held that the unqualified
deemed to have already paid acceptance of LVM accepted the BIR
The payment to the SUB- value added tax merely because registered receipts by the owner of F.
CONTRACTOR shall be on item of work respondents had allegedly Sanchez Construction, Mr. Fortunato
accomplished in the sub-contracted issued receipts for services Sanchez, Sr. shall already be considered as
portion of the project at awarded unit rendered. payment of VAT. Said official receipts
cost of the project less 9%. The SUB- should, clearly, bar the belated exceptions it
CONTRACTOR shall issue a BIR now takes with respect thereto. “A party,
registered receipt to the having performed affirmative acts upon
CONTRACTOR. which another person based his
subsequent actions, cannot thereafter
refute his acts or renege on the effects of
10% retention to be deducted for every the same, to the prejudice of the latter.”
billing of sub-contractor as prescribed LVM, as contractor for the project, was liable
under the Tender Documents. for the 8.5% vat which was withheld by the
DPWH from its payments, pursuant to
The payment to the SUB- section 114 (c) of the NIRC. absent any
CONTRACTOR shall be made within agreement to that effect, LVM cannot
seven (7) days after the check issued by deduct the amounts thus withheld from the
DPWH to CONTRACTOR has already sums it still owed the joint venture which, as
been made good. For work rendered in sub-contractor of 30% of the project, had its
the premises, Joint Venture sent LVM a own liability for10% vat insofar as the sums
total of 27 Billings LVM paid the Joint paid for the sub-contracted works were
Venture a partial sum claiming that it had concerned. Although the burden to pay an
not yet been fully paid by the DPWH. indirect tax like VAT can, admittedly, be
passed on to the purchaser of the goods or
Having completed the sub-contracted services, it bears emphasizing that the
works, the Joint Venture subsequently liability to pay the same remains with the
demanded from LVM the settlement of manufacturer or seller like LVM and the
its unpaid claims as well as the release Joint Venture. In the same manner that LVM
of money retained by the latter in is liable for the VAT due on the payments
30
 2011 TAX CASES
accordance with the Sub-Contract made by the DPWH pursuant to the contract
Agreement. on the Project, the Joint Venture is,
consequently, liable for the VAT due on the
In a letter, LVM explained the Joint payments made by LVM pursuant to the
Venture of the fact that its auditors have parties’ Sub-Contract.
belatedly discovered that no deductions
for E-VAT had been made from its
payments on Billing Nos. 1 to 26 and that
it was, as a consequence, going to
deduct the 8.5% payments for said tax
from the amount still due in the
premises. The Joint Venture claimed
that, having issued Official Receipts for
every payment it received, it was liable
to pay 10% VAT thereon and that LVM
can, in turn, claim therefrom an
equivalent input tax of 10%.

With its claims still unpaid despite the

lapse of more than 4 years from the
completion of the sub-contracted works,
the Joint Venture, thru its Managing
Director, Fortunato O. Sanchez, Jr., filed
against LVM complaint for sum of money
and damages which was docketed
before the Construction Industry
Arbitration Commission Having
submitted a Bill of Particulars in
response to LVM’s motion, Joint Venture
went on to file an Amended Complaint
claiming amounts of unpaid balances
and interests as well as attorneys fees

LVM maintained that it did not release

the 10% retention for the 26 Billing on
31
 2011 TAX CASES
the ground that it had yet to make the
corresponding 8.5% deductions for E-
VAT which the Joint Venture should have
paid to the BIR and as a consequence,
there was a need to offset the sums
corresponding thereto from the retention
money still in its possession. Moreover,
LVM alleged that the Joint Venture’s
claims failed to take into consideration
its own outstanding obligation
representing the liquidated damages it
incurred as a consequence of its delays
in the completion of the project.

16. MICROSOFT PHILS, INC. VS. CIR Petitioner is a vat registered taxpayer,
G.R. NO. 180173, April 6, 2011
(Ma. Esperanza F. Tayawa)
renders marketing to Microsoft
Operations PTE, Ltd and Micro
Licensing Inc, both affiliated non-
resident foreign corporations. The
services are paid for in acceptable
foreign currency and qualify as zero
rated sales for the tax credit of VAT
input taxes in the amount of 11.4M
attributable to its zero rated sale..Due
to the BIR in action, petitioner filed a
Petition for Review before the CTA
which denied the claim for the tax credit
of VAT input taxes. The CTA explained
that the petitioner failed to comply with
the invoicing requirements of Sections
113 and 237 of the NIRC as well as Sec
4, 108.1 of the Revenue Regulations
No. 7-95. I t also states that petitioner
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Whether or not petitioner is entitled to a
refund of VAT input taxes on domestic
purchases of goods and services
attributable to zero rated sale for the
year 2001 even if the word zero rated
is not imprinted on Microsoft’s official
receipts
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 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. A “VAT
invoice” is an invoice that meets the
requirements of Section 108.1 of RR 7-
95. 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. It was also held in one
case wherein it as held that the
appearance of the word “zero rated” on
 2011 TAX CASES
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.
17.Prudential Bank vs. CIR
G.R, No. 180390, July 27, 2011
33
the face f the invoices covering the
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.
Whether or not petitioners SAP with a Yes, it is subject to DST as it is
higher interest is subject to essentially the same as the
Documentary Stamp Tax Special/Super Savings Deposit
Account which are considered
certificate of deposit drawing interests.
Similarly in this case, although the
money deposited in a SAP is payable
anytime, the withdrawal of the money
before the expiration of 30 days results
in the reduction of the interest rate. In
the same way, a time deposit withdrawn
before its maturity results to a lower
interest rate and payment of bank
charges or penalties. The fact that SAP
is evidenced by a passbook and not a
certificate of deposit, hence still subject
to DST. For a document to be
considered a certificate of deposit it
need not be in a specific form, thus a
passbook issued by the bank qualifies
as a certificate of deposit drawing
interest because it is considered a
written acknowledgment by a bank that
is has accepted a deposit of a sum of
money from a depositor.
Whether or not the CTA Enbancs denial Yes, because petitioner failed to show
of petitioners motion to withdraw is that it was able to comply with the
proper requirements of IVAP. To avail of the
2011 TAX CASES
IVAP, a taxpayer must pay the 100%
basic tax of the original assessment of
the BIR or the CTA Decision, whichever
is higher and submit the letter of
termination and authority to cancel
assessment signed by the respondent.
In this case, respondent failed to submit
the letter of termination and authority to
cancel assessment as respondent
found the payment of more than 5M not
in accordance with RMC No. 66-2006.
Petitioners payment of more than 5M
without the supporting documents
cannot be deemed substantial
compliance as tax amnesty must be
construed strictly against the taxpayer
and liberally in favor of the taxing
authority. Nevertheless the payment of
petitioner’s more than 5M to BIR must
be considered as partial payments of its
tax liability.

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