2011 TAX CASES
CASE TITLE FACTS OF THE CASE
1. Belle Corporation vs CIR (G.R. Belle Corporation is a domestic
No. 181298 January 10, 2011) corporation engaged in the real estate
and property business. Petitioner filed
(Agustin, Marilou) 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
1
ISSUE/S
Whether or not petitioner is
entitled to a refund of its excess
income tax payments for the
taxable year 1997.
RULING
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
 2011 TAX CASES
to its 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
refund of the excess estimated quarterly
income 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
3
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.
Whether or not the CTA En No. In a claim for credit/refund of input VAT
Banc erred in denying attributable to zero-rated sales, Section
petitioner’s claim for 112 (A) of the NIRC lays down four
 2011 TAX CASES
January 17, 2011)
(Agustin, Marilou)
4
credit/refund of input VAT requisites, to wit:
attributable to its zero-rated 1) the taxpayer must be VAT-registered;
sales. 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,
2011 TAX CASES
failure to print the ATP on the invoices or
receipts should not result in the outright
denial of a 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
5
2011 TAX CASES
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.[

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),
6
 2011 TAX CASES
[57] used directly or indirectly in the
production or sale of taxable goods or
services.

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.
3. Exxonmobil Petroleum And Petitioner Exxon is a foreign Whether or not Exxonmobil is NO.As early as the 1960s, the Supreme
Chemical Holdings, Inc, Philippine corporation duly organized and existing the proper party to file the claim Court has ruled that the proper party to
Branch VS. CIR (GR NO. 180909, under the laws of the State of for the refund of the excise question, or to seek a refund of, an indirect
JANUARY 19, 2011) Delaware, United States of America. It taxes passed-on by Caltex and tax, is the statutory taxpayer, or the person
is authorized to do business in the Petron. on whom the tax is imposed by law and
Philippines through its Philippine who paid the same, even if he shifts the
( Taguinod, Jelyne) Branch. burden thereof to another.

Exxon is engaged in the business of As provided under Section 130 (A) (1) :
selling petroleum products to domestic SEC. 130. Filing of Return and Payment of
and international carriers. In pursuit of Excise Tax on Domestic Products. -
its business, Exxon purchased from (A) Persons Liable to File a Return, Filing
Caltex Philippines, Inc. (Caltex) and of Return on Removal and Payment of Tax.
Petron Corporation (Petron) Jet A-1 fuel -
and other petroleum products, the (1) Persons Liable to File a Return. - Every
excise taxes on which were paid for person liable to pay excise tax imposed
and remitted by both Caltex and Petron. under this Title shall file a separate return
Said taxes, however, were passed on to for each place of production setting forth,
Exxon which ultimately shouldered the among others the description and quantity
excise taxes on the fuel and petroleum or volume of products to be removed, the
products. applicable tax base and the amount of tax
7
 2011 TAX CASES
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
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
8
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, 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
 2011 TAX CASES
resolutions of the First Division dated
July 27, 2005 and July 27, 2006. Exxon
filed a motion for reconsideration, but it
was denied.
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
9
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
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
 2011 TAX CASES
liability for the indirect tax remains with
the manufacturer.
Moreover, the manufacturer has the
option whether or not to shift the burden
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.
10
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
(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
 2011 TAX CASES
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) 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
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, 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

5. Philippine Amusement
Gaming Corporation (PAGCOR),
Petitioner,vs. The Bureau Of
Internal Revenue (BIR)
( G.R. No. 172087 ; March 15,
2011)
(Ferrer, Elena Marie)
2011 TAX CASES
And The Philippine Amusement and Gaming
Corporation (PAGCOR) was created by
P.D. No. 1067-A in 1977. It is a
government owned and controlled
corporation (GOCC). In 1998, R.A.
8424 or the National Internal Revenue
Code of 1997 (NIRC) became effective.
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
12
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 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
be subjected to income taxation. constitutional. 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
 2011 TAX CASES
GOCCs hence PAGCOR was subjected under the principle of equal protection:
to pay income taxation. In September 1) It must be based on substantial
2005, the Bureau of Internal Revenue distinctions.
issued the implementing rules and 2) It must be germane to the purposes of
regulations (IRR) for R.A. 9337. In the the law.
said IRR, it identified PAGCOR as 3) It must not be limited to existing
subject to a 10% value added tax (VAT) conditions only.
upon items covered by Section 108 of 4) It must apply equally to all members of
the NIRC (Sale of Services and Use or the class.
Lease of Properties).
When the Supreme Court looked into the
PAGCOR questions the constitutionality records of the deliberations of the
of Section 1 of R.A. 9337 as well as the lawmakers when R.A. 8424 was being
IRR. PAGCOR avers that the said drafted, the SC found out that PAGCOR’s
provision violates the equal protection exemption was not really based on
clause. PAGCOR argues that it is substantial distinctions. In fact, the
similarly situated with SSS, GSIS, lawmakers merely exempted PAGCOR
PCSO, and PHILHEALTH, hence it from income taxation upon the request of
should not be excluded from the PAGCOR itself. This was changed
exemption. 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.
6. Commissioner Of Internal Whether or not the respondent The Court granted the petition and the
13
 2011 TAX CASES
Revenue Vs Manila Bankers' Life Manila Banker’s Life Insurance earlier decision of the Court of Appeals is
Insurance Corporation (G.R. No. Corporation is liable to pay the set aside. The respondent Manila Banker’s
169103 assessed deficiency Life Insurance Corporation is ordered to
March 16, 2011) documentary stamp tax, plus pay petitioner CIR the deficiency
25% surcharge for the late documentary stamp tax, plus the
(Maramag, Jocelyn) payment and 20% annual delinquency penalties of 25% surcharge on
interest on their policy the amount due and 20% annual interest
premiums. until fully paid.

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
14
 2011 TAX CASES
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
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,
15
 2011 TAX CASES
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
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 Under Presidential Decree No. 464, or the
Development, Inc.,Vs.City of Pasig should continue paying its real “Real Property Tax Code, “the authority to
16
 2011 TAX CASES
, Respondent Municipality of property taxes to Cainta, as it collect real property taxes are vested in the
Cainta, Province of alleged to have always done, or locality where the property is situated. This
Rizal,Intervenor(G.R. No. 166838 to Pasig, as the location stated requisite was reiterated in Republic Act No.
June 15, 2011) in Sta. Lucia’s TCTs. 7160, or the Local Government Code.
Thus, while a local government unit is
( Guim, Amiel) authorized 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 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
17
2011 TAX CASES
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 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.

18
 2011 TAX CASES
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
Operations, Corporation (G.R. No. issuance of a tax credit period from July 1, 1999 to December 31,
171742 June 15, 2011) certificate and if it is, then what 1999 as it opted for carry over. Once
x - - - - - - - - - - - - - - - - - - - - - - -x is the amount to which it is exercised, the option to carry over is
Mirant Operations Corporation entitled. irrevocable.
Vs.Commissioner Of Internal Revenue
(G.R. No. 176165) Section 76 of the National Internal
Revenue Code (Presidential Decree No.
(Maramag, Jocelyn) 1158, as amended) provides:

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

19
2011 TAX CASES
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 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
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%
19, 2011) and 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
21
Whether or not FDC is liable for
theoretical interest on said
advances extended by it to its
affiliates.
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.
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
 2011 TAX CASES
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 foregoing deficiency taxes were
assessed on the taxable gain realized
by FDC on the taxable gain supposedly
gain realized by FDC from the Deed of
Exchange it executed with FAI and FLI,
on the dilution resulting from the
shareholder’s agreement FDC
executed with RHPL and with the
interest rate and DST imposable on the
advances executed by FDC. FAI also
received similar assessment on
deficiency income tax relating to the
Deed of exchange. Both FDC and FAI
protested and after having failed to act
on their protest they elevated their
case. Hence, this petition for review on
certiorari.
22
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.
Whether or not FDC met all the Yes, it was admitted in the stipulation of
requirements for non- facts.Requisites for the non-recognition of
recognition of taxable gain gain or loss under Sec. 34(c) (2) of the
under Sec. 34(c) (2) Now 1993 NIRC are as follows:
Sec. 40 (c) (2) of the NIRC and a. the transferee is a corporation;
therefore, is not taxable. b. the transferee exchanges its shares of
stock for properties of the transferor;
c. the transfer is made by a person, acting
alone or together with others, not
exceeding four persons; and
d.as a result of the exchange the
transferor, alone or together with others,
not exceeding four, gains control of the
transferee.
Since the term control is clearly defined as
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
2011 TAX CASES
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;
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
23
 2011 TAX CASES
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 on tax even if toll fess were deemed as a
Finance And The Commissioner Of for declaratory relief assailing the be subjected to value added tax “user’s tax” ; VAT is assessed against the
Internal Revenue validity of the impending imposition of (VAT). tollway operators gross receipt’s and not
GR. NO. 193007 JULY 19, 2011 VAT by the (BIR) on the collections of necessarily on the fees. Although the
tollway operators. Petitioners claim that, tollway operator may shift the VAT burden
since the VAT would result in increased to the tollway user, it will not make the
(Balubal, Eden) toll fees, they have an interest as latter directly liable for the VAT. The shifted
regular users of toll ways in stopping VAT burden simply becomes part of the
the BIR action. Petitioners allege that fees that one has to pay in order to use the
the BIR attempted during the tollway.
administration of President Gloria VAT on tollway operations is not
Macapagal-Arroyo to impose VAT on really a tax on the tollway user, but on the
toll fees. The imposition was deferred, tollway operator. Under Section 105 of the
however, in view of the consistent Code, VAT is imposed on any person who,
opposition of Diaz and other sectors to in the course of trade or business, sells or
such move. But, upon President renders services for a fee. In other words,
Benigno C. Aquino III's assumption of the seller of services, who in this case is
office in 2010, the BIR revived the idea the tollway operator, is the person liable for
and would impose the challenged tax VAT. The latter merely shifts the burden of
24

12. Mercury Drug vs CIR
(G.R. No. 164050; July 20, 2011)
(Attaban, Anne Kenneth)
2011 TAX CASES
on toll fees beginning August 16, 2010 VAT to the tollway user as part of the toll
unless judicially enjoined. 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.
Petitioner Mercury Drug corporation Whether the claim for tax credit The court ruled that the cost of discount
grants a 20% sales discount to qualified should be based on the full should be computed on the actual amount
senior citizens in the purchase of amount of the 20% senior of the discount extended to senior citizens.
medicines pursuant to RA 7432. With citizens’ discount or the RA 7432, which grants, among others,
this, petitioner claims an amount acquisition cost of the sales discounts to senior citizens on the
representing the 20% sales discount as merchandise sold. purchase of medicines, imposes burden to
deductions from its gross income. private establishments amounting to taking
Realizing that RA 7432 allows tax credit of private property for public use with just
for the sales granted to senior citizens, compensation in the form of tax credit.
petitioner filed with CIR claims for However, said law does not provide how
refund for the years 1993 and 1994. the cost of the discount as tax credit be
Computation of its overpayment of computed. Thus, the court construed the
income tax was presented by petitioner. cost as referring to the amount of the 20%
When CIR failed to act on petitioner’s sales discount extended by establishments
claims, the latter filed petitioner for to senior citizens in the purchase of
review with the CTA. CTA ruled in favor medicines.
25
 2011 TAX CASES
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.
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.

Petitioner moved for partial

reconsideration which CTA modified its
ruling by increasing the taxable
creditable tax amount. still unsatisfied
with the decision, petitioner appealed
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
26
 2011 TAX CASES
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
September 28, 2011) any brand of cigarettes, respondent
Fortune Tobacco Corporation
(respondent) paid in advance its excise
(Abella, Khat) taxes for the year 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 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
27
Whether or not there was an The court ruled that this case presents
overpayment of excise tax same issue that has long been resolved in
which entitles respondent for a 2008, where Fortune Tobacco found an
tax refund. 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 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.
Whether or not the petitioner Section 143 of the Tax Reform Act of 1997
 2011 TAX CASES
Revenue Vs San Miguel committed an error in is clear and unambiguous. It provides for
Corporation( G.R. No. 184428 interpreting the provision in the two periods: the first is the 3-year transition
November 23, 2011) last paragraph of Section 1 of period beginning January 1, 1997, the date
Revenue Regulations No. 17-99 when R.A. No. 8240 took effect, until
in relation of Section 143 of the December 31, 1999; and the second is the
Tax Reform Act of 1997. 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 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
28
2011 TAX CASES
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
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
29

15. LVM Construction Corporation vs
FT Sanchez/SOCOR/KIMWA
(JOINT VENTURE), FT Sanchez
Construction Corporation, Et. Al.,
( GR No. 181961, December 5,
2011)
(Azurin, Jastise)
2011 TAX CASES
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.
LVM Construction Corporation (LVM) is Whether or not respondents’ (No. The Supreme Court held that for lack
a duly licensed construction firm liability to pay value added tax of any stipulation regarding the same in the
primarily engaged in the construction of need not be stated in the sub- parties’ sub-contract agreement, that it
roads and bridges for DPWH contract agreement form part of, should not deduct its e-vat payments from
and are deemed incorporated the retention money demanded by the joint
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
couched in clear and plain language,
It sub-contracted 30% of the contract should be applied according to their literal
amount with the Joint Venture tenor. There was no agreement regarding
composed of respondents F.T. Sanchez the offsetting. The record shows that,
Corporation (FTSC), Socor except for deducting sums corresponding
Construction Corporation (SCC) and to the 10% retention agreed upon, 9% as
Kimwa Construction Development contingency on sub-contract, 1%
Corporation (KCDC). withholding tax and such other itemized
miscellaneous expenses, LVM settled the
LVM was the Contractor and the Joint Joint Venture’s Billing Nos. 1 to 26 without
Venture as Sub-Contractor any mention of 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 respondents had allegedly Sanchez Construction, Mr. Fortunato
work accomplished in the sub- issued receipts for services Sanchez, Sr. shall already be considered
contracted portion of the project at rendered. as payment of VAT. Said official receipts
awarded unit cost of the project less should, clearly, bar the belated exceptions
9%. The SUB-CONTRACTOR shall it now takes with respect thereto. “A party,
30
 2011 TAX CASES
issue a BIR registered receipt to the
CONTRACTOR.
10% retention to be deducted for every
billing of sub-contractor as prescribed
under the Tender Documents.
The payment to the SUB-
CONTRACTOR shall be made within
seven (7) days after the check issued
by DPWH to CONTRACTOR has
already been made good. For work
rendered in the premises, Joint Venture
sent LVM a total of 27 Billings LVM paid
the Joint Venture a partial sum claiming
that it had not yet been fully paid by the
DPWH.
Having completed the sub-contracted
works, the Joint Venture subsequently
demanded from LVM the settlement of
its unpaid claims as well as the release
of money retained by the latter in
accordance with the Sub-Contract
Agreement.
In a letter, LVM explained the Joint
Venture of the fact that its auditors have
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
31
having performed affirmative acts upon
which another person based his
subsequent actions, cannot thereafter
refute his acts or renege on the effects of
the same, to the prejudice of the latter.”
LVM, as contractor for the project, was
liable for the 8.5% vat which was withheld
by the DPWH from its payments, pursuant
to section 114 (c) of the NIRC. absent any
agreement to that effect, LVM cannot
deduct the amounts thus withheld from the
sums it still owed the joint venture which,
as sub-contractor of 30% of the project,
had its own liability for10% vat insofar as
the sums paid for the sub-contracted works
were concerned. Although the burden to
pay an indirect tax like VAT can, admittedly,
be passed on to the purchaser of the
goods or services, it bears emphasizing
that the liability to pay the same remains
with the manufacturer or seller like LVM
and the Joint Venture. In the same manner
that LVM is liable for the VAT due on the
payments made by the DPWH pursuant to
the contract on the Project, the Joint
Venture is, consequently, liable for the VAT
due on the payments made by LVM
pursuant to the parties’ Sub-Contract.
 2011 TAX CASES
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
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
32

16. MICROSOFT PHILS, INC. VS. CIR Petitioner is a vat registered taxpayer,
G.R. NO. 180173, April 6, 2011
(Ma. Esperanza F. Tayawa)
17.Prudential Bank vs. CIR
G.R, No. 180390, July 27, 2011
2011 TAX CASES
outstanding obligation representing the
liquidated damages it incurred as a
consequence of its delays in the
completion of the project.
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 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.
33
Whether or not petitioner is entitled to
NO, the invoicing requirements for a
a refund of VAT input taxes on VAT registered taxpayer as provided in
domestic purchases of goods and the NIRC and revenue regulations are
services attributable to zero rated sale
clear. A VAT registered taxpayer is
for the year 2001 even if the word zero
required to comply with all VAT
rated is not imprinted on Microsoft’s invoicing requirements to be able to
official receipts 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 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
2011 TAX CASES
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 Yes, because petitioner failed to show
denial of petitioners motion to withdraw that it was able to comply with the
is proper requirements of IVAP. To avail of the
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
34
2011 TAX CASES
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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