CHAPTER XXX – PRESCRIPTION

216. Republic vs. Ablaza (671)

Facts: The Collector of Internal Revenue assessed income taxes for the years 1945, 1946,1947 and 1948 on the income
tax returns of defendant-appellee to a total P5,254.70.Respondent requested a reinvestigation of tax liability which was
granted by the Collector of Internal Revenue. Final assessment was fixed at P2,066.56. Respondent protested
theassessment contending that the income taxes are no longer collectible for the reason thatthey have already prescribed.
As the Collector did not agree to the alleged claim of prescription, action was instituted for the recovery of the amount
assessed. The Court of First Instance upheld the contention of Ablaza that the action to collect the said incometaxes had
prescribed. Thus this appeal.

Issue: Whether or not the claim of prescription by the respondent is valid

Ruling: Judgment of the lower court dismissing the action is affirmed. The law prescribing a limitation of actions for the
collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax
officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period
of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to
inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to
molest peaceful, law-abiding citizens. Without such legal defense tax payers would furthermore be under obligation to
always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. The law on
prescription being a remedial measure should be interpreted liberally in a way conducive to bringing about the beneficial
purpose of affording protection to the taxpayers.

217. Guagua Electric Light vs. CTA

Facts: P reported its gross income and paid thereon a franchise tax computed at 5%. Believing that it should pay a lower
franchise tax as provided by its franchises, it filed a claim for refund on 25 March 1957 for overpayment. The
Commissioner denied the refund of franchise tax for the period prior to the 4th quarter of 1951 on the ground that the right
to refund has prescribed. The Commissioner allowed the refund of P16,593.87. Later however, due to the holding in Hoa
Hin Co. vs. David, the Commissioner assessed against the company deficiency franchise tax subject to a 25% surcharge,
and thereby including the amount previously allowed by the Commissioner to be refunded.

Issue: Whether the tax “refunded erroneously” should be imposed against the company, or if the right to recover has
prescribed.

Ruling: Guagua Electric would be paying the same deficiency tax for the period of 1 January to 30 November 1956 if it is
required to pay P16,593.87 in addition to the sum of P19,938.12, the difference between the tax computed at 5% pursuant
to Section 259 of the Tax Code and the franchise tax paid at 1% and 2% under the franchise. Further, by insisting on the
payment of P16,593.87 (September 1951 to November 1956), the Commissioner is trying to collect the same deficiency
tax where the right to assess the same, according to him, has been lost by prescription. The demand on the taxpayer to pay
the sum of P16,593.87 is in effecct an assessment of deficiency franchise tax. The right to assess, thus, and to collect is
governed by Section 331 of the Tax Code rather than by Article 1145 of the Civil Code, as a special law prevails over a
general law. Guagua Electric is absolved from the payment of P16,593.87.

Book. The Tax Code, a special law, shall prevail over the Civil Code, a general law. Thus, in an interesting case, the Court
ruled that since the demand the taxpayer to pay the tax is in effect an assessment for deficiency franchise tax, the right to
assess or collect the same is governed by Section 331 of the Tax Code, rather than by Article 1145(2), in relation to
Articles 1154 and 1155, of the Civil Code, which allows 6 years from the date of refund within which to file an action.

218. Republic vs. Arache

Facts: Republic of the Philippines filed an action against Joseph Arcache (principal) and the Globe Assurance Company,
Inc. (surety) for the forfeiture of the surety bond executed by them to secure payment representing Arcache's income tax
for the year 1946 and surcharge, plus 1% monthly interest on the income tax.

Arcache interposed the defense of prescription. He alleged that he was "compelled against his will" to execute the surety
bond sought to be forfeited, because the BIR refused to issue him a tax clearance unless he executed said bond to secure
the payment of his alleged tax obligation.

The Lower Court ordered Arcache to pay whatever may be adjudged against Globe Assurance. Further, it ordered
Archache and Globe Assurance to pay the BIR. Arcache appealed claiming that the lower court erred in not sustaining his
defense of prescription

Issue: Whether the lower court erred in not sustaining Arcache’s defense of prescription

Ruling: No. In a suit brought by the government for the forfeiture of the bond put up for unpaid taxes, the taxpayer is
barred from invoking the defense of prescription by the following circumstances: (1) the delay was due to his repeated
requests for reinvestigation and for extensions of time to pay; (2) he admitted in writing his tax obligation, made repeated
promises to pay the same, and actually made two partial payments; (3) the action on the bond is on a written contractual
obligation for which the prescriptive period is 10 years and said period had not yet elapsed when the action was filed; and
(4) the giving of the bond amounts to a renewal of the tax obligation and a waiver of the defense of prescription.
Book: However, when the Government proceeds by court action to forfeit a bond, the action is for the enforcement of a
contractual obligation, the prescriptive period for which is ten years under Art. 1144(1) of the Civil Code.

219. Commissioner v BF Goodrich

Facts: Private respondent books of accounts were examined by BIR for purposes of determining its tax liability for 1974.
This examination resulted in the April 23, 1975 assessment of private respondent for deficiency income tax which it duly
paid. Siltown’s books of accounts were also examined, and on the basis thereof, the CIR assessed deficiency donor’s tax
in relation to said sale of the Basilan landholdings.

Private respondent contested this assessment. Another assessment, increasing the amount demanded for the alleged
deficiency donor’s tax, surcharge, interest and compromise penalty and was received by private respondent. On appeal,
CTA upheld the assessment. On review, CA reversed the decision of the court finding that the assessment was made
beyond the 5-year prescriptive period in Section 331 of the Tax Code.

Issue: Whether or not petitioner’s right to assess has prescribed.

Ruling: Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive period for
making assessments), it is clean that the October 16, 1980 and March 16, 1981 assessments were issued by the BIR
beyond the 5-year statute of limitations. The court thoroughly studied the records of this case and found no basis to
disregard the 5-year period of prescription, expressly set under Sec. 331 of the Tax Code, the law then in force.

For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law
provides a statute of limitations in the collection of taxes. Thus, the law or prescription, being a remedial measure, should
be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should
perforce be strictly construed.

220. Commissioner v Procter and Gamble (673)

Facts: Procter and Gamble Philippines declared dividends payable to its parent company and sole stockholder, P&G
USA. P&G Phil paid a 35% dividend withholding tax to the BIR. It subsequently filed a claim with the Commissioner of
Internal Revenue for a refund or tax credit, claiming that pursuant to Section 24(b)(1) of the National Internal Revenue
Code, as amended by Presidential Decree No. 369, the applicable rate of withholding tax on the dividends remitted was
only 15%.

Issue: Whether or not P&G Philippines is entitled to the refund or tax credit.

Ruling:YES. P&G Philippines is entitled.Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied
to dividend remittances to non-resident corporate stockholders of a Philippine corporation. This rate goes down to 15%
ONLY IF he country of domicile of the foreign stockholder corporation “shall allow” such foreign corporation a tax
credit for “taxes deemed paid in the Philippines,” applicable against the tax payable to the domiciliary country by the
foreign stockholder corporation.

However, such tax credit for “taxes deemed paid in the Philippines” MUST, as a minimum, reach an amount equivalent to
20 percentage points which represents the difference between the regular 35% dividend tax rate and the reduced 15% tax
rate. Thus, the test is if USA “shall allow” P&G USA a tax credit for ”taxes deemed paid in the Philippines” applicable
against the US taxes of P&G USA, and such tax credit must reach at least 20 percentage points. Requirements were met.

Book: BIR should not be allowed to defeat an otherwise valid claim for refnd by raising th question of the withholding
agent’s alleged incapacity to file the claim for refund for the first time on appeal. The Government must follow the same
rules of procedure which bind private parties.

221. Commissioner vs. Ayala Securities

Facts: Ayala Securities Corp. failed to file returns of their accumulated surplus. It was then charged with 25% surtax by
the CIR. The CTA however reversed the Commissioner’s decision and held that the assessment made against Ayala was
beyond the 5-year prescriptive period as provided in Sec. 331 of the NIRC. The Commissioner now files a MR of this
decision. Respondent on the other hand invokes the defense of prescription against the right of the Commissioner to assess
the surtax.

Issue: Whether the right to assess and collect the 25% surtax has prescribed?

Ruling: No. There is no such time limit on the right of the Commissioner to assess the 25% surtax since there is no
express statutory provision limiting such right or providing for its prescription. Hence, the collection of surtax is
imprescriptible. The underlying purpose of the surtax is to avoid a situation where the corporation unduly retains its
surplus earnings instead of declaring and paying dividends to its shareholders.

222. Phil. Journalist vs. CIR

Facts: Revenue Officer de Vera examined petitioner’s books of account and other accounting records for internal revenue
taxes. RDO Concepcion then invited petitioner to send a representative to an informal conference for an opportunity to
object and present documentary evidence relative to the proposed assessment. Petitioner’s Comptroller, Tolentino,
executed a “Waiver of the Statute of Limitation under the NIRC”. However, records show that (1) the petitioner was not
furnished a copy of the waiver and (2) the waiver was signed only by the RDO.

Issue: Whether the waiver is valid?

Ruling: No. The waiver document is incomplete and defective and thus the 3-year prescriptive period was not tolled or
extended and continued to run.

In the same manner, Warrant of Distraint and/or Levy which petitioner received thereafter is also null and void for having
been issued pursuant to an invalid assessment. A waiver of the statute of limitations under the NIRC, to a certain extent, is
a derogation of the taxpayers’ right to security against prolonged and unscrupulous investigations and must therefore be
carefully and strictly construed. Thus, the law on prescription, being a remedial measure, should be liberally construed in
order to afford such protection.

223. Tan Guan vs. Nable

Facts: Tan Guan and Padua are the cashier and president of Imperial Partnership, respectively. The partnership was
dissolved in 1951 due to their failure to secure the requisite municipal license for the manufacture of cigarettes.

Imperial had purchased from Mabuhay Cigarette Factory and Seng Kee & Co. 860 and 300 bobbins of cigarette papers,
respectively. On July 30, 1951, subsequent investigations by agents of the Commissioner led them to the conclusion that
this alleged transaction is fictitious. Hence, the Commissioner demanded from Imperial, through Padua, the payment of
tax on the quantity of cigarettes that can be manufactured with the said 300 bobbins of cigarette paper.

A civil action for the recovery of sum of money was filed. Tan Guan interposed the defense of prescription as the case was
filed after 5 years. A criminal action for violation of the Tax Code was filed against Padua, in the CFI of Manila, which
was dismissed later on the ground of prescription.

Issue: Whether the action is already barred by prescription?

Ruling: No. It is incumbent upon the taxpayer, who wants to avail of the benefits of Sec. 332 of the Tax Code by setting
up prescription as an affirmative defense, to prove he submitted a return. If he fails to do so, the conclusion should be that
no such return was filed, in which case, the government has 10 years within which to mak

224. Republic vs. Lim de Yu

Facts: Lim de Yu filed her yearly income tax returns from 1948 through 1953. The BIR assessed respondent for
deficiency income tax in the amount of P22,450.50. She protested the assessments and requested a reinvestigation.
Thereafter, the BIR issued to her income tax assessment notices for the years 1948 to 1953, totalling P35,379.63. This last
assessment, like the one issued in 1956, covered not only the basic deficiency income taxes, but also 50% thereof as
surcharge. Upon respondent’s failure to pay, an action for collection was filed against her in the CFI of Cotabato. After
trial the suit was dismissed, and the Government appealed to the CA.

The CIR maintains that (1) the returns are false or fraudulent because the yearly net incomes reported in the respondent’s
returns are much less than that computed by the BIR and (2) it has 10 years from the date of the discovery of the fraud or
falsity within which to assess the taxes or to file a suit for collection without assessment.

Issue: Whether the returns filed by respondent for the years 1948 to 1953 are false and fraudulent?

Ruling: No. While fraud is alleged in the complaint, the same has not been established. For the 10-year limitation of
assessment of taxes to apply, it is not enough that fraud is alleged in the complaint, it must be established and proved by
clear and convincing proof.

225. Gutierrez vs. Collector

Facts: Gutierrez was primarily engaged in the business of leasing real property for which he paid real estate broker’s
privilege tax. The Collector assessed against Gutierrez deficiency income tax amounting to P11,841.00. The deficiency
tax came about by the disallowance of deductions from gross income representing depreciation expenses Gutierrez
allegedly incurred in carrying on his business.

Invoking prescription, Gutierrez claims that the counting of the 5-year period to collect income tax should start from the
time the income tax returns were filed. On the other hand, the Commissioner argues that the running of the prescriptive
period to collect commences from the time of assessment.

Issue: When does the 5-year prescriptive period within which to collect the assessed tax start to run?

Ruling: The CIR is correct. Any internal revenue tax which has been assessed within the period of limitation may be
collected by restraint or levy or by a proceeding in court within 5 years from the date of assessment. The period of
limitation to collect is counted from the assessment of the tax, not from the time the income tax return was filed.

226. Republic vs. Razon and Jai-Alai Corporation

Facts: Jai-Alai Corporation, represented by its VP Razon, entered into a contract with Assadourian, as manager of Jai-
Alai Corporation, whereby the latter, in consideration of the amount of P200,000.00, acknowledged full payment of the
latter's claim for management percentage fees earned for the years 1946 to 1950 and any or all future claims against the
Jai-Alai Corporation. Under the terms of the indenture, the sum of P200,000.00 was to be paid by the Jai-Alai Corporation
in instalments.

The CIR wrote a letter to Jai-Alai Corporation, demanding the payment of taxes corresponding to 12% of the amount of
P200,000.00 which it allegedly paid to Assadourian and which it should have withheld. Jai-Alai Corporation argued that
the right to collect the tax has already prescribed.

Issue: Whether the cause of action of the Republic to recover the withholding taxes has already prescribed?

Ruling: No. The record shows that Jai-Alai Corporation failed to file a withholding tax return for the amount of
P80,000.00 paid to Haig Assadourian. For its omission to file a withholding tax return, Sec. 332 (c) of the Tax Code,
which provides that “a proceeding in court for the collection of such tax may be begun without assessment, at any time
within 10 years after the discovery of the omission”, should be applied.

227. Collector vs. Pineda

Facts: Atanasio Pineda died on May 23, 1945. He was survived by his widow, Felicisima Pineda and 15 children. The
petitioner assessed and demanded estate dealer’s fixed tax and sent to the estate of the deceased, through respondent,
income tax assessment notice in the sum of P2,223.51, plus P555.88 as 25% surcharge and P20.00 as compromise, for the
year 1947.

Subsequently, respondent filed on behalf of the estate of the deceased, its ITRs. Internal Revenue Examiner Espinosa
investigated the income tax liability and found that no income tax return for 1946 and 1947 had been filed on behalf of his
estate. Respondent denied such tax delinquency.

Upon reinvestigation made, the income tax assessment notices were cancelled and new income tax assessment notices
were issued. Respondent appealed the matter to the Conference Staff of the BIR, which upheld the latest assessments
made by petitioner.

Issue: Whether the revised assessment was valid?

Ruling: Yes. The fact that court action for the collection of real estate dealer’s fixed tax was instituted more than 5 years
after the period to which it refers, does not affect either the validity of any revised assessment made or the right to enforce
it by court proceedings, where no return for the said tax had been filed, and, accordingly, “a proceeding in court for the
collection of such tax may be begun without assessment at any time within 10 years after discovery of the omission” to
file said return, pursuant to Sec. 332 (a) of the Tax Code.

228. Escudero Electric Service vs. Domingo

Facts: Petitioner filed his ITR. However, he failed to include certain items. The CIR argued that the non-inclusion was a
wilful omission amounting to fraud and is thus tantamount to an omission to file the required tax return.

Issue: Whether the contentions of the CIR are proper?

Ruling: No. To be considered as a tax return, it is not always required that the prescribed BIR forms be used and filed by
the taxpayer. A document containing all necessary information that would allow the BIR to compute and to assess the tax
liability of the taxpayer is considered as a tax return. There was no omission to file a tax return on the part of the taxpayer
where it failed to include certain items and the non-inclusion of these items is not due to any wilful omission or fraud.

There are 2 types of tax returns: (1) original return; and (2) amended return. In filing an amended return properly
described as such, a copy of the original return is attached thereto.

229. Alca vs. Commissioner

Facts: The Commissioner assessed Alca, as owner and operator of the Pacific Industrial Manufacturing of the sum of
P43,359.40, by way of specific tax on the rubbing alcohol produced in and removed from the factory. The taxpayer
protested against the assessment on the ground of prescription. When the protest was denied by the Commissioner, she
filed a petition in the CTA claiming that the specially denatured alcohol used in the manufacture of rubbing alcohol is
exempt from specific tax under Sec. 128 of the NIRC. The CTA sustained the decision of the Commissioner. The
petitioner now argues that the transcript sheets submitted to the Deputy Provincial Treasurer should be considered as
returns.

Issue: Whether the contentions of the petitioner are correct?

Ruling: No. Transcript sheets are not returns because they do not contain the information necessary and required to permit
the computation and assessment of taxes like the specific tax.

230. Butuan Sawmill vs. CTA 123 Phil 84 (maling citation ang nalagay ni mamalateo. kaloka maghanap)
FACTS: Petitioner sold logs to Japanese firms and the payments were effected by means of letters of credit in favor of
petitioner and payable through the PNB. Upon investigation by the BIR, it was ascertained that no sales tax return was
filed by the petitioner. Petitioner avers that the filing of its income tax returns, wherein the proceeds of the disputed sales
were declared, is substantial compliance with the requirement of filing a sales tax return.

ISSUE: Is petitioner’s contention correct?

RULING: No. The court held that an income tax return cannot be considered as a return for compensating tax and that the
taxpayer must file a return for the particular tax required by law. otherwise, if he does not file a return, an assessment may
be made within 10 years from and after the discovery of the omission to file the return. Even if a wrong return had been
filed, still this would not take the place of the correct return which for the purpose of tax in question should actually be the
percentage tax return.

CHAPTER XXIX – ASSESSMENT AND PROTEST

231. Bisaya Land Transportation v Collector

Between June 1945 and January 15, 1957, petitioner Bisaya Land Transportation Co. acquired equipment from the United
States Commercial Co. which it used in the operation of its buses, without paying the corresponding compensating and
specific taxes. On investigation of its books by revenue agents, it was discovered that its gross receipts of the
transportation business from 1946 to 1951 were not declared for taxation. It was also found that from 1945 to 1952, the
petitioner issued freight receipts but the corresponding documentary stamps were not affixed thereto. A deficiency
additional residence tax was also determined.

After a seri s of exchange of communications between the petitioner and the respondent CIR, the latter assessed the
petitioner and demanded the total amount of P4,949.91, consisting of (1) compensating tax; (2) common carrier's
percentage tax; (3) documentary stamp tax; and (4) additional residence tax.

On January 11, 1955, the present petition for review was filed with the Court of Tax Appeals, which rendered a decision
upholding the assessment, as to the deficiency common carrier's percentage tax for 1946 and the first quarter of 1947 and
the additional residence tax for 1947, the collection of which was held to be barred by the statute of limitations.

In its brief, the petitioner company alleged that the Court of Tax Appeals erred (1) in not holding that the claim for
compensating tax and residence tax has already prescribed and (2) that the Compensating tax, documentary stamp tax and
common carrier's percentage tax are not chargeable. The Government has also appealed.

Issue: Whether the petitioner’s contentions are correct

Book: When there is no provision in the law requiring the filing of a return but the tax is such that its amount cannot be
ascertained without the data that is pertinent thereto, the Commissioner may, by appropriate regulations, require the filing
of the necessary returns. In any event, with or without such regulations, it is to the interest of the taxpayer to file said
return if he wishes to avail himself of the benefits of the three-year prescriptive period. If this notwithstanding, he does
not file a return at all, then an assessment may be made at any time within the ten year prescriptive period.

Held: Petitioner's pretense that the period of prescription, in relation to the first assignment of error, should be computed
from the filing of its income tax returns, is without merit. To begin with, said income tax returns have not been introduced
in evidence and therefore, there was no means to determine what data were included in said return to apprise the Bureau
of Internal Revenue that the company should pay the compensating tax.

Secondly, income tax returns contain a statement of the taxpayer's income for a given year. The taxpayer is not supposed
to declare in said returns that he has purchased or received "from without the Philippines", commodities or merchandise
that are subject to the compensating tax. Generally, such purchases are not "income," and, hence, have no place in income
tax returns.

(2) Under its second assignment of error, the company maintains that the equipment and materials it purchased from
agencies of the U. S. Government are not subject to compensating tax because they were acquired, not for business
purposes but "in furtherance of the war efforts". Suffice it to note that the acquisition of said effects took place between
June, 1945 and January, 1947 while the hostilities in Japan and Europe ended in 1945.
Notwithstanding the immunity of the Government from taxes, the principle is also well recognized that the Government
may tax itself. There is no constitutional limitation on the power of the Congress to tax the Armed Forces of the
Philippines if it wishes to do so.

232. A.L. Ammen v Collector CTA Case (Not Found)

Book: The prescriptive period for assessment starts to run from the filing of the original return, if the same is sufficiently
complete to enable the Commissioner to intelligently determine the proper amount of tax to be assessed. The fact that
amended returns were filed later neither starts anew the running of the statute of limitations nor extends the prescriptive
period.

233. Commisioner v Phoenix (1965)

Facts: Phoenix, a foreign insurance corporation organized under the laws of Great Britain, is licensed to do business in
the Philippines. Through its head office in London, it entered into worldwide reinsurance treaties with various foreign
insurance companies. It agreed to cede a portion of premiums received on original insurances underwritten by its head
office, subsidiaries, and branch offices throughout the world, in consideration for assumption by the foreign insurance
companies of an equivalent portion of the liability from such original insurances.

Phoenix ceded portions of the premiums it earned from its underwriting business in the Philippines in the years 1952-
1954. (1952 it ceded P316,526.75, 1953 - P246,082.04 and 1954 - P203,384.69). Upon which the CIR by letter assessed
the following withholding tax: For 1952 – 75,966.42 for 1953 – 59,059 and for 1954 48,812.32. The total amount of
P183,838.42.

On April 1, 1953, Phoenix Assurance Co., Ltd. filed its Philippine income tax return for 1952, declaring therein a
deduction from gross income of P35,912.25 as part of the head office expenses incurred for its Philippine business,
computed at 5% on its gross Philippine income.

On August 30, 1955 it amended its income tax return for 1952 by excluding from its gross income the amount of
P316,526.75 representing reinsurance premiums ceded to foreign reinsurers and further eliminating deductions
corresponding to the coded premiums. The amended return showed an income tax due in the amount of P2,502.00.

The CIR disallowed P15,826.35 of the claimed deduction for head office expenses and assessed a deficiency tax of
P5,667.00 on July 24, 1958. On August 1, 1958 the BIR released the following assessment for deficiency income tax for
the years 1952 and 1954 against Phoenix Assurance Co., Ltd. The assessment resulted from the disallowance of a portion
of the deduction claimed by Phoenix Assurance Co., Ltd. as head office expenses allocable to its business in the
Philippines fixed by the Commissioner at 5% of the net Philippine income instead of 5% of the gross Philippine
income as claimed in the returns.

Phoenix Assurance Co., Ltd. protested against the aforesaid assessments for withholding tax and deficiency income tax.
However, the CIR denied such protest. Subsequently, Phoenix Assurance Co., Ltd. appealed to the CTA. The CTA allowed
in full the decision claimed by Phoenix Assurance Co., Ltd. for 1950 as net addition to marine insurance reserve ;
determined the allowable head office expenses allocable to Philippine business to be 5% of the net income in the
Philippines; declared the right of the CIR to assess deficiency income tax for 1952 to have prescribed; absolved
Phoenix Assurance Co., Ltd. from payment of the statutory penalties for non-filing of withholding tax return . From
this, Phoenix appealed.
Issue:

(1) W/N the right of the CIR to assess deficiency income tax for the year 1952 against Phoenix Assurance Co., Ltd.,
has prescribed

(2) Whether the running of the prescriptive period commence from the filing of the original or amended return?

HELD: NO. Phoenix filed its income tax return for 1952 on April 1, 1953 showing a loss of P199,583.93. It amended
said return on August 30, 1955 reporting a tax liability of P2,502.00. On July 1958, after examination of the amended
return, the CIR assessed deficiency income tax in the sum of P5,667.00. The CTA found the right of the CIR barred by
prescription, the same having been exercised more than 5 yrs. from the date the original return was filed. On the other
hand, the CIR insists that his right to issue the assessment has not prescribed that it was availed of before the 5-year period
provided for in Sec. 331 of the Tax Code expired, counting the running of the period from August 30, 1955, the date
when the amended return was filed. Sec 331 limits the right of the CIR to assess income tax within 5 years from the
Filipino of the income tax return.

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

The CTA maintain that the prescriptive period should be counted from the filing of said original return. On the other hand,
the CIR maintains that the counting of the prescriptive period from the filing of the amended return.
"... the deficiency income tax in question could not possibly be determined, or assessed, on the basis of the
original return filed on April 1, 1953, for considering that the declared loss amounted to P199,583.93, the mere
disallowance of part of the head office expenses could not probably result in said loss being completely wiped out
and Phoenix being liable to deficiency tax. Not until the amended return was filed on August 30, 1955 could the
Commissioner assess the deficiency income tax in question."

The Court held that the Commissioner's view should be sustained. The changes and alterations embodied in the
amended income tax return consisted of the exclusion of reinsurance premiums received from domestic insurance
companies by Phoenix Assurance Co., Ltd.'s London head office, reinsurance premiums ceded to foreign reinsurers not
doing business in the Philippines and various items of deduction attributable to such excluded reinsurance premiums
thereby substantially modifying the original return. Furthermore, although the deduction for head office expenses
allocable to Philippine business, whose disallowance gave rise to the deficiency tax, was claimed also in the original
return, the Commissioner could not have possibly determined a deficiency tax thereunder because Phoenix Assurance Co.,
Ltd. declared a loss of P199,583.93 therein which would have more than offset such disallowance of P15,826.35.
Considering that the deficiency assessment was based on the amended return which, as aforestated, is substantially
different from the original return, the period of limitation of the right to issue the same should be counted from the filing
of the amended income tax return. From August 30, 1955, when the amended return was filed, to July 24, 1958, when the
deficiency assessment was issued, less than five years elapsed. The right of the Commissioner to assess the deficiency
tax on such amended return has not prescribed.
The Court believes to hold otherwise, would be paving the way for taxpayers to evade the payment of taxes by simply
reporting in their original return heavy losses and amending the same more than 5 yrs. later when the CIR has lost his
authority to assess the proper tax. The object of the Tax Code is to impose taxes for the needs of the Government, not
to enhance tax avoidance to its prejudice.

Book: Where the amended return is substantially different from the original return, the right of the bIR to assess the tax is
counted from the filing of the amended return. As pointed out by the court, if the assessment is counted from the filing of
the original return, this would permit taxpayers to evade taxes by simply reporting in their original return, heavy losses
and amending the same after the lapse of the prescriptive period when the Commissioner has already lost his authority to
assess the tax. In the original return, the taxpayer declared a net loss after the deducting head office expenses allocable to
the Philippines business. The objective of the Tax Code is to impose taxes, not to enhance tax avoidance to the prejudice
of the Government.

234. Aznar v Commissioner

Facts: : Petitioner, as administrator of the estate of the deceased, Matias H. Aznar, seeks a review and nullification of the
decision of the Court of Tax Appeals ordering the petitioner to pay the government deficiency income taxes for the years
1946 to 1951.
The findings of the CIR clearly indicated that the taxpayer did not declare correctly the income reported in his income tax
returns for the aforesaid years. (Increasing net worth every year)
Petitioner avers that according to the NIRC, the right of the CIR to assess deficiency income taxes of the late Aznar had
already prescribed at the time the assessment was made on November 28, 1952; there being a five year limitation upon
assessment and collection from the filing of the returns.
Meanwhile, respondents believe that the prescription period in the case at bar that is applicable in the case of a false or
fraudulent return with intent to evade tax or of a failure to file a return, the tax may be assessed, or a proceeding in court
for the collection of such tax may be begun without assessment, at any time within ten years after the discovery of the
falsity, fraud or omission.
Petitioner argues said provision does not apply because the taxpayer did not file false and fraudulent returns with intent to
evade tax.
Issue: Whether or not the deceased Aznar filed false or fraudulent income tax returns and subsequently, whether the
action has not prescribed.

Ruling: The petition is without merit. The respondent CTA concluded that the very "substantial under declarations of
income for six consecutive years eloquently demonstrate the falsity or fraudulence of the income tax returns with an intent
to evade the payment of tax." The ordinary period of prescription of 5 years within which to assess tax liabilities under
Sec. 331 of the NIRC should be applicable to normal circumstances, but whenever the government is placed at a
disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities due to false returns, fraudulent
return intended to evade payment of tax, or failure to file returns, the period of ten years from the time of the discovery of
the falsity, fraud or omission even seems to be inadequate. There being undoubtedly false tax returns in this case, We
affirm the conclusion of the respondent Court of Tax Appeals that Sec. 332 (a) of the NIRC should apply and that the
period of ten years within which to assess petitioner's tax liability had not expired at the time said assessment was made.

235. Ungab v Cusi (683)

Facts: The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer, for allegedly evading
payment of taxes and other violations of the NIRC. He was subjected to a tax audit and the tax examiner was convinced
that Ungab filed a fraudulent return. He was issued an assessment demanding payment of P104k in taxes.
Ungab, subsequently filed a motion to quash on the ground that the trial court has no jurisdiction to take cognizance of the
case in view of his pending protest against the assessment made by the BIR examiner. The trial court denied the motion
prompting the petitioner to file a petition for certiorari and prohibition with preliminary injunction and restraining order to
annul and set aside the information filed.
ISSUE: Whether the petitioner is guilty of tax evasion

RULING: Yes. There is prima facie evidence of a false or fraudulent return when the taxpayer has willfully and
knowingly filed it with the intent to evade a part or all of the tax legally due from him.

No. What is involved here is not the collection of taxes where the assessment of the Commissioner of Internal Revenue
may be reviewed by the Court of Tax Appeals, but a criminal prosecution for violations of the National Internal Revenue
Code (NIRC) which is within the cognizance of courts of first instance (regional trial courts). While there can be no civil
action to enforce collection before the assessment procedures provided in the NIRC have been followed, there is no
requirement for the precise computation and assessment of the tax before there can be a criminal prosecution under the
Code. In fact, there is not even a requirement that an assessment first be issued before a criminal case for violation of the
NIRC be filed.
236. Tayengco v Collector CTA Case No. 51 (not found)
Book: Simple statement that return filed was not fraudulent does not disprove existence of fraud – The income which was
reported by the taxpayer in his return was the income from the rents. Substantial income derived from other sources was
not included. The Court held that a simple statement in the letter that the reutrns were not fraudulent is not sufficient to
overthrow the findings of the Commissioner as to the reason for the omission. Hence, the tax may be assessed within ten
years from the discovery.

237. Perez v CTA

Facts: On September 3, 1952, respondent CIR Revenue assessed against the petitioner the sum of P369,708.27 as
deficiency income taxes and 50% surcharge from 1945 to 1950, but which amount was later reduced to P186,170.43, upon
petitioner's request for reconsideration. Subsequently, however, the said amount was increased to P197,179.85 in a letter
of the said respondent, dated November 6, 1953. Upon his (Collector of Internal Revenue) refusal to consider further
requests for reinvestigation and reexamination of the case, the petitioner appealed to the then Board of Tax Appeals by
filing a petition for review, as amended March 23, 1954. An answer to this petition was filed by the respondent Collector
of Internal Revenue on April 13, 1954. This case was later transferred to the Court of Tax Appeals by virtue of Republic
Act No. 1125.
In making the deficiency assessments, the Collector employed what is known as the "net worth" technique and started by
determining the opening net worth of petitioner at the start of the year 1947 which he fixed at P936.72
The Court of Tax Appeals declared the "net worth" method of deter raining understated income to have been validly and
properly applied; found that the consistent underdeclaration of income, unexplained acquisition of properties, and the fact
of petitioner's having claimed fictitious losses evidenced fraudulent intent, and ordered him to pay deficiency income
taxes and surcharges in the sum of P241,547.77, and to pay the costs. Against the decision of the Court of Tax Appeals,
the petitioner applied for a review by this Supreme Court, and his petition was given due course.

Issue: Whether the 50% surcharge imposed upon the appellant is legal and justified.
Ruling: YES. The last issue is the legality of the action taken by the Collector of Internal Revenue in imposing upon the
petitioner the 50% surcharge provided under section 72 of the National Internal Revenue Code. This section authorizes the
Collector to impose a surcharge of 50% of the amount of the tax or deficiency tax in a case of a false or fraudulent return.
Appellant contends that no fraud has been shown by the Government to warrant the surcharge. In sustaining the Collector,
the Court of Tax Appeals expressed the view; that the substantial under-declaration of income in the income tax
returns of the appellant for four consecutive years, coupled with his intentional overstatement of deductions, made
the imposition of the fraud penalty proper. Certainly, these findings of large;, unreported income of the petitioner as
found by the tax court, and as substantiated by the expenses and investments shown in the Amended Stipulation of Facts
(Rec. p. 225), together with appellant's declaration of substantial and Unspecified "losses" (none of which were explained,
since the appellant failed to testify more than suffices to sustain the findings of fraud, and do not warrant a reversal from
us. At any rate, we have already ruled that
Again, in the case of Lee vs. Commissioner, 227 F. 2d the same U.S. Federal Court of Appeals, in affirming the use of the
net worth method, has this to say on the fraud issue:
"We find ourselves in agreement with the Commissioner in these contentions. Of the fraud issue, we think it need only be
said that the Tax Court, in its unreported opinion, correctly placed the burden on the Commissioner, and, marshalling the
evidence and making findings in accordance therewith, correctly, we think, determined that that burden was carried. It is
settled law that where, as here. there is credible evidence supporting a charge that an understatement of income by
taxpayer was due to fraud with intent to evade tax, whether the charge has or has not been proved is a question of fact for
the Tax Court to determine. and its finding on this issue, just as any other issue of fact. is final unless shown to be clearly
erroneous." (Emphasis supplied)

The same rule applies to the case of the P30,000.00 loans allegedly made by Attorney Juan F. David to the appellant, and
which are claimed to be valid deductions from his net worth determination. Whether or not such loans were made as
claimed is essentially a question of fact: and the absence of any credible note or document evidencing the alleged loans
and their alleged partial repayment, leaves the entire issue dependent upon the testimony of the supposed creditor, whom
the Court of Tax Appeals refused credence. Considering that the creditor is an attorney at law of long practice and
established standing who must have been familiar with legal requirements and the notorious fallibility of debtor's
memories; the large amount allegedly loaned; the indetermination of their maturity, and his passivity at their non-payment,
we can not declare that the Tax Court's rejection of this item was not supported by substantial evidence or constituted an
abuse of discretion.
238. Tan Guan v Commissioner (not found)]

Book: Presence of fictitious expenses, with no evidence presented, proves existence of fraud – The Commissioner’s
determination based on the circumstances of the case that fraud is present stands if no evidence is presented by the
taxpayer to show that the return filed by him was not fraudulent. The SC upheld the Commissioner’s findings of fraud
brought about by the presence of fictitious expenses, which were claimed by the taxpayer as deductions from gross
income.

239. Jalandoni v Republic (case not found under this title instead Republic vs. Heirs of Jalandoni)
Republic vs. Heirs of Cesar Jalandoni, GR No. 18384, 15 SCRA 51, September 20, 1965

FACTS: Isabel Ledesma died intestate leaving real properties and personal properties consisting of shares of stock in
various domestic corporations. She left as heirs her husband Bernardino Jalandoni and three children, namely, Cesar,
Angeles and Delfin. Cesar Jalandoni, one of the heirs, filed an estate and inheritance tax return. On the basis of this return,
the BIR made two separate partial assessments calling for the payment deficiency estate and inheritance taxes. The BIR
then demanded payment from the heirs while stating that the same was still "to be considered partial pending investigation
of the return." These stated sums were unquestionably paid by the heirs.

When the BIR conducted another investigation, it found: (1) that the market value of the lands reported in the return
filed by Cesar Jalandoni were UNDERDECLARED; (2) that seven lots in the Talisay-Silay, Negros Occidental were
OMITTED from the return; and (3) the shares of stock owned by the deceased in the Victorias Milling Company,
Hawaiian-Philippine Company and Central Azucarera de la Carlota were also UNDERDECLARED. As such, the BIR
required the heirs to pay the amounts of P 29,995.30 and P 49,842.05 as deficiency estate and inheritance taxes.

Defendant Bernardino Jalandoni wrote a letter to the Collector of Internal Revenue setting up the defense of
PRESCRIPTION. He argued that the required deficiency in the estate and inheritance taxes payment can no longer be
collected since MORE THAN FIVE YEARS had already elapsed from the filing of the return pursuant to Section
331 of the NIRC. As a rejoinder, the Collector retorted claiming that such defense is not valid since the estate and
inheritance tax return filed by them contained OMISSIONS which amount to FRAUD INDICATIVE OF AN
INTENTION TO EVADE PAYMENT of the proper tax due the government. Hence, the Collector concluded that
THE TAXES COULD STILL BE DEMANDED within ten years from the discovery of the falsity or omission pursuant
to Section 332(a) of said Code.

When the lower court ordered the Collector to verify the allegation that the seven lots in Negros Occidental were in fact
included therein, the Collector designated Examiner Genaro Butas to conduct the examination. In his report, Examiner
Butas stated that of the seven lots that were previously reported not included in the return, TWO WERE
ACTUALLY DECLARED THEREIN, though he reaffirmed his previous finding as regards the other five lots and the
market value of the sugar lands and rice lands and the value of the shares of stock in several domestic corporations.

Nevertheless, the lower court found that that the return submitted by Cesar Jalandoni is FALSE AND FRAUDULENT on
the ground that the DIFFERENCES between the amounts appearing in the returns filed and the undeclared properties of
the estate of the deceased is a SUBSTANTIAL UNDERSTATEMENT OF THE TRUE VALUE OF THE ESTATE.
The lower court was not inclined to believe that the omission or understatements were due to mere inadvertence,
negligence, or honest statement of error, in fact, it believed that such circumstances are indicative of a willful intent to
defraud. Hence, it ordered the heirs to pay the Collector the sum of P 79,837.35 as estate and inheritance taxes. The heirs
appealed the case arguing that FRAUD CANNOT BE IMPUTED AGAINST THEM since there was NO EVIDENCE
ON RECORD SHOWING THAT SAID RETURN WAS FILED IN BAD FAITH.

ISSUE: Was there an intention on the part of the heirs to evade payment of the proper tax?

RULING: NO. The omission and under declaration of the properties was NOT DELIBERATE and DID NOT
AMOUNT TO FRAUD indicative of an intention to evade payment of the proper tax due the government. As regards to
the claim of the Government that the SEVEN LOTS were deliberately omitted from the tax returns filed by the
representative of the heirs: It appears, however, that three of the seven lots alleged to have been excluded were actually
INCLUDED in the returns; that one lot was not included because it BELONGED to one of the heirs; and that the
three remaining lots were ALREADY DECLARED in the return submitted by Bernardino Jalandoni as part of the
conjugal property for purposes of income tax.
As regards to the claim of the Government that the MARKET VALUE OF THE SUGAR LANDS were under declared
by the representative of the heirs, as it did not tally with the valuation made by the Collector: Any mistake made in the
valuation made by the representative can only be considered as HONEST MISTAKE or one based on an EXCUSABLE
INADVERTENCE, since HE NOT AN EXPERT IN APPRAISING REAL ESTATE. It is certainly an ERROR TO
IMPUTE FRAUD BASED ON AN HONEST DIFFERENCE OF OPINION.
As regards to the claim of the Government that the VALUE OF THE SHARES OF STOCK did not tally with their book
value: The fact that the value of the shares of stock given in the returns did not tally with their book value appearing in the
corporate books is NOT IN ITSELF INDICATIVE OF FRAUD especially when said BOOK VALUE ONLY
BECAME KNOWN SEVERAL MONTHS AFTER THE DEATH OF THE DECEASED. Moreover, stock securities
frequently fluctuate in value and a MERE DIFFERENCE OF OPINION in relation thereto CANNOT SERVE AS
PROPER BASIS for assessing AN INTENTION TO DEFRAUD the government.

240. Commissioner v BF Goodrich Phils

Facts: Private respondent BF Goodrich Philippines Inc. was an American corporation prior to July 3, 1974. As a condition
for approving the manufacture of tires and other rubber products, private respondent was required by the Central Bank to
develop a rubber plantation. In compliance therewith, private respondent bought from the government certain parcels of
land in Tumajubong Basilan, in 1961 under the Public Land Act and the Parity Amendment to the 1935 constitution, and
there developed a rubber plantation.

On August 2, 1973, the Justice Secretary rendered an opinion that ownership rights of Americans over Public agricultural
lands, including the right to dispose or sell their real estate, would be lost upon expiration on July 3, 1974 of the Parity
Amendment. Thus, private respondent sold its Basilan land holding to Siltown Realty Phil. Inc., (Siltown) for P500,000
on January 21, 1974. Under the terms of the sale, Siltown would lease the property to private respondent for 25 years with
an extension of 25 years at the option of private respondent.

Private respondent books of accounts were examined by BIR for purposes of determining its tax liability for 1974. This
examination resulted in the April 23, 1975 assessment of private respondent for deficiency income tax which it duly paid.
Siltown’s books of accounts were also examined, and on the basis thereof, on October 10, 1980, the Collector of Internal
Revenue assessed deficiency donor’s tax of P1,020,850 in relation to said sale of the Basilan landholdings.
Private respondent contested this assessment on November 24, 1980. Another assessment dated March 16, 1981,
increasing the amount demanded for the alleged deficiency donor’s tax, surcharge, interest and compromise penalty and
was received by private respondent on April 9, 1981. On appeal, CTA upheld the assessment. On review, CA reversed the
decision of the court finding that the assessment was made beyond the 5-year prescriptive period in Section 331 of the Tax
Code.

Issue: Whether the sale of property made by petitioner for a price less than is fair market value constitutes false return

Ruling: No. Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive period for
making assessments), it is clean that the October 16, 1980 and March 16, 1981 assessments were issued by the BIR
beyond the 5-year statute of limitations. The court thoroughly studied the records of this case and found no basis to
disregard the 5-year period of prescription, expressly set under Sec. 331 of the Tax Code, the law then in force.

For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law
provides a statute of limitations in the collection of taxes. Thus, the law or prescription, being a remedial measure, should
be liberally construed in order to afford such protection. As a corollary, the exceptions to the law on prescription should
perforce be strictly construed.

Book: Sale of real property for a price less than its fair market value is not necessarily a false return – The fact that
PR’s property was sold for a price less than its declared air market value alone did not by itself justify a finding of false
return which contains wrong information due to mistake, carelessness or ignorance. The Court reasoned out that “it is
possible that real property may be sold for less than adequate consideration for a bona fide business purpose; in such
event, the sale remains an arm’s length transaction’.” PR declared the sale in its 1974 return submitted to the BIR.

241. Commissioner v Ayala Securities

Ayala failed to file returns of their accumulated surplus so Ayala was charged with 25% surtax by the CIR. CTA reversed
the Commissioner’s decision and held that the assessment made against Ayala was beyond the 5-yr prescriptive period as
provided in SEC 331 of the NIRC. Commissioner now files a motion for reconsideration of this decision. Ayala invokes
the defense of prescription against the right of the Commissioner to assess the surtax. On the other hand, the
Commissioner alleges for the first time before the SC that Ayala committed fraud in not filing their ITRs.

Before which court should the fact of fraudulent intent be proven?

BOOK: Fraud is a question of fact and the circumstances constituting fraud must be alleged and proved in the trial court.
The finding of the trial court as to its non-existence is final and cannot be reviewed, unless clearly shown to be erroneous.
Fraud is never lightly to be presumed because it is a serious charge.

242. Commissioner v Javier (686)

This is the so called million-dollar case. Javier erroneously received $1million from the US, and a case was filed against
them to return the money. When they filed an Income Tax Return, CIR wanted to assess 50% penalty for fraud for not
reporting such income. CTA removed the penalty.

Whether there was fraudulent intent on the part of taxpayer?

There was a footnote which basically showed that Javier spouses did not intend to defraud the government; the footnote
which states that “the taxpayer was the recipient of some money from abroad which he presumed to be a gift but turned
out to be an error and is now subject of litigation, and that Javier had literally laid his cards on the table.” Fraud is never
imputed and the courts never sustain findings of fraud upon circumstances which, at most create only suspicion and that
the mere understatement of a tax is not itself proof of fraud for the purpose of tax evasion. A “fraudulent return” is always
an attempt to evade a tax but a merely “false return” may not be.

243. Republic v Lim de Yu

Facts: Lim de Yu filed her ITRs. BIR assessed her for income tax deficiency. She protested and requested an
reinvestigation. She signed a “waiver on the statute of limitations in the NIRC”. BIR assessed her for the third time for tax
deficiency which included a 50% surcharge for the same tax periods. Upon her failure to pay for the taxes due, BIR filed a
collection case against her. Respondent alleges that BIR’s action to assess and collect has already prescribed as the 5 year
period has lapsed. BIR contends that it has 10 years from discovery of fraud to collect from Yu de Lim as her return were
fraudulent, as there was a great disparity from BIR’s assessment from the returns filed.
Issue: Whether there was fraudulent intent on the part of the taxpayer
Held:No. While fraud is alleged, it has not been established by BIR. It is one thing to say that the correctness of
respondent’s assessment can no longer be challenged on the same technical grounds just stated by BIR and another to say
that respondent committed a deliberate fraud in her returns.
BOOK: The presence of fraud was held quite unlikely in an assessment where the BIR itself appeared “not too sure” as to
the real amount of the taxpayer’s income, as where the BIR had on three different occasions arrived at three highly
different computations.
244. Aznar v CTA
Facts: An investigation by the CIR ascertained the assets and liabilities of the taxpayer and it was discovered that his net
worth had increased every year, which increases in net worth was very much more than the income reported during said
years. The findings clearly indicated that the taxpayer did not declare correctly the income reported in his income tax
returns for the aforesaid years. Petitioner avers that according to the NIRC, the right of the CIR to assess deficiency
income taxes of the late Aznar had already prescribed at the time the assessment was made on; there being a five year
limitation upon assessment and collection from the filing of the returns. Meanwhile, respondents believe that the
prescription period in the case at bar that is applicable is under Sec. 332 of the NIRC. Petitioner argues said provision
does not apply because the taxpayer did not file false and fraudulent returns with intent to evade tax.
Issue: Whether a mere mistake can be considered as fraudulent intent
Held: No. Mere mistake cannot be considered as fraudulent intent, and if both petitioner and respondent committed
mistakes in making entries in the returns and assessments, it would be unfair to treat the mistake of the petitioner as
tainted with fraud and those of the respondent as made in good faith.

245. Commissioner v Gonzales

Matias Yusay died leaving behind two heirs, namely, Jose Yusay and Lilia Yusay Gonzales. Jose was appointed as
administrator. He filed an estate and inheritance tax return. CIR issued a final assessment notice (FAN) against the
entire estate. Gonzales questioned the validity of the FAN issued averring that it was issued way beyond the prescriptive
period of 5 years (under the old tax code).
Whether CFI is the proper tribunal to pass upon the defense of prescription
BOOK: No, CFI as a settlement court is not the proper tribunal to pass upon the defense of prescription; therefore, it
would be but futile to raise the defense of prescription therein. Moreover, the Tax Code does not bar the right to contest
the legality of the tax after a taxpayers pays it. Under Section 306, he can pay the tax and claim a refund therefore, A
fortiori, his willingness to pay the tax is no waiver to raise defenses against the tax legality.

246. Yutivo Sons Hardware v CTA

As importer, General Motors paid sales tax on the basis of its selling price to Yutivo. Yutivo paid no further sales tax on its
sales to the public.. CIR made an assessment and charged Yutivo 1.8M as deficiency tax plus surcharge since Yutivo acted
with fraud since after the incorporation of SM and until the withdrawal of GM from Phil, the cars and trucks were
purchased by Yutivo from GM then sold by Yutivo to Sm and then SM sold these to the public
What is the consequence of failure to prove fraud
BOOK: The Commissioner’s failure to prove fraud can be fatal to the assessment as when a tax liability is assessed
beyond the usual three-year prescriptive period. The fact that the Commissioner did not include the fraud penalty in his
deficiency assessment which was issued after the filing of the taxpayer’s return is an indication that the Commissioner
himself does not believe that there was fraud. There was no fraud if the Commissioner merely relied upon an alleged
substantial under-declaration of income tax resulting from his own computation of the cost basis and had explained the
nature of the improvements introduced on the lands. The mere understatement of income in itself does not prove fraud.
247. CIR vs. Estate of Benigno Toda, Jr.
Facts: The BIR sent an assessment notice and demand letter to Cibeles Insurance Corp. (CIC) for deficiency income tax
of P79,099,999.22. The BIR sent the same to the estate of Toda, Jr. to which the administrator then filed a protest which
was dismissed, the CIR ruled that there was a fraudulent sale to evade the 35% corporate income tax, hence the
prescription period is 10 years from the discovery of the falsity or fraud
Issue: Whether there is falsity or fraud resulting to tax evasion so the period for assessment has not prescribed?

Ruling: Yes. “Tax avoidance” is the tax saving device within the means sanctioned by law; this method should be used by
the taxpayer in good faith and at arm’s length. “Tax evasion”, on the other hand, is a scheme used outside of those lawful
means and when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities.
248. Cargill Philippines vs. CIR (Case Not found)
Doctrine: Considering that the PAN and FAN and Final Decision on Disputed Assessment (FDDA) for deficiency VAT
were only issued 4 years after, the deficiency VAT are already barred by prescription.

249. Central Cement vs. Commissioner, CTA Case 5024

Facts: Petitioner filed its annual income tax return for fiscal year ending June 30, 1989. Thereafter, petitioner executed
Waiver of the Defense of Prescription on Aug. 17, 1992. Petitioner then received Assessment Notice from the respondent
for alleged deficiency income tax. On July 15, 1993, petitioner filed a protest which was denied on the ground that the
petitioner failed to raise the issue of prescription in its letter protest. Hence, this instant Petition for Review was filed.
Petitioner also filed a Motion to Allow to Adduce Rebuttal Evidence to prove that the assessment notice dated June 15,
1993 has been issued beyond the three-year limitation.

Issue: Whether the petitioner’s failure to raise the issue in its protest precludes it from invoking the same in its appeal
before the CTA

Ruling: No.

Book: The contention of the respondent that failure of the petitioner to raise the issue of prescription in its letter-protest,
precluded it from invoking the same for the first time before this Court is untenable. In the first place, the petitioner
cannot raise the issue of prescription in its letter-protest filed on July 15, 1993 because of its prior execution of a
supposedly valid “waiver of the defense of prescription” on Aug. 17, 1992. It was only after a careful perusal of the
records of the BIR that the petitioner discovered the invalidity of the waiver signed by its representative. Such knowledge
prompted the petitioner to file a Motion to Allow Petitioner to Adduce Additional Rebuttal Evidence where it invoked the
defense of prescription.

250. Guagua Electric vs. Collector

Facts: P is a grantee of municipal franchises by the Municipal Councils of Pampanga. It paid franchise tax computed at
5% in accordance with the Tax Code. Believing that it should pay a lower franchise tax as provided by its franchises, it
filed a claim for refund. The Commissioner denied the refund of franchise tax for the period on the ground that the right to
refund has prescribed. The Commissioner allowed the refund of P16,593 however due to Hoa Hin Co. vs. David, the
Commissioner assessed against the company deficiency franchise tax subject to a 25% surcharge, and thereby including
the amount previously allowed by the Commissioner to be refunded.

Issue: Whether the tax “refunded erroneously” should be imposed against the company, or if the right to recover has
prescribed.

Ruling: Yes. When the taxpayer assailed the right of the government to assess and collect, alleged the facts constituting
prescription, supported by annexes (in its petition for review), and the government admitted the allegation in its answer,
there was no need for the taxpayer to present further evidence on point. The demand on the taxpayer to pay the amount
erroneously refunded is in effect an assessment for deficiency franchise tax. And being so, the right the right to assess or
collect the same is governed by Section 331 of the Tax Code, rather than by Article 1145 of the Civil Code.

251. Visayan Electric Co vs Commissioner

Facts: Respondent commissioner assessed and demanded from petitioner a deficiency franchise Tax. Petitioner protested
to such assessment but the same was denied. Before the CA, petitioner interposed the defense of prescription for the first
time.
Issue: Whether the defense of prescription will prosper
Ruling. No. well settled is the rule that prescription as a defense is waived if not seasonably interposed.

252. Mambulao Lumber v Republic

Facts: Sometime in 1957 Agent Nestor Banzuela of the Bureau of Internal Revenue, Regional District No. 6, Bicol
Region, Naga City, conducted an examination of the books of accounts of herein petitioner Mambulao number Company
for the purpose of determining said taxpayer's forest charges and percentage tax liabilities. Thereafter, On August 29,
1958 an assessment and demand letter was addressed to the petitioner. For failure of petitioner to comply with the above
letter-request and/or to pay its tax liability despite demands for the payment thereof, respondent Commissioner of Internal
Revenue filed. a complaint for collection in the Court of First Instance of Manila on August 25, 1961
Issue: whether or not the right of plaintiff (respondent herein) to file a judicial action for the collection of aforest charges
and surcharges due from the petitioner Mambulao Lumber Company for the year 1949 has already prescribed.
Ruling: No, Where the taxpayer did not contest the deficiency income tax assessed against him, the same became final
and properly collectible by means of an ordinary court action. The taxpayer cannot dispute an assessment which is being
enforced by judicial action, He should have disputed it before it was brought to court.
The plea of prescription is also deemed waived by the failure to allege it in the answer.
 253. Sy Chiuco v Collector

Facts: For the periods January, 1947 to August, 1950, petitioner declared in his return only the following gross receipts:
receipts from gate admissions at P0.10 each, P59,160.40; receipts from restaurant sales, P5,339.90; receipts from bar
sales, P47,459.10, and paid thereon a 10 per cent amusement tax in the amount of P11,197.40. Having failed to declare for
tax purposes the P0.20 dance fee payable to the "bailarinas" which petitioner collected as part of his business, respondent
assessed against him a deficiency amusement tax, including 50 per cent surcharge, in the amount of P17,616.05.
Respondent also assessed against petitioner the further sum of P300.00 as penalty in settlement of his violation of Section
260 of the Tax Code and the Bookkeeping Regulations. Court of Tax rendered decision holding petitioner liable to pay the
sum of P17,616.05 as deficiency amusement tax and surcharge for the period from January, 1947 to August, 1950.
However, the Court of Tax Appeals rejected the imposition of the penalty in the sum of P300.00 alleging lack of power or
authority to order the payment of such penalty. In due time, petitioner filed the present petition for review. The petitioner
also contends before the SC that the collection of the tax in question has already prescribed

Issue: Whether the collection of the tax in question has already prescribed?

Ruling: As regards the contention that the collection of the tax in question has already prescribed, it appears that this
question was not raised as an issue in the petition for review filed by petitioner in the Court of Tax Appeals. It was not
even touched by him in the memorandum he submitted. There is, therefore, enough reason to believe that petitioner has
waived this defense and so it cannot now be entertained. To hold otherwise would be to deprive respondent of his right to
show the contrary, this matter being evidentiary in nature.

254. Sambrano v CTA

Facts: Sambrano, the owner and operator of a fleet of passenger and freight trucks with lines between Manila and the
northern provinces of Luzon, received from the Collector of Internal Revenue a demand for the payment of his income tax
liabilities. Petitioner's tax liabilities were reassessed on April 28, 1951 and the assessment of taxes accrued from 1939-
1941. As early as January 29, 1951, petitioner already signified his intention to file a surety bond to guarantee the payment
of his tax liability and May 3,1951, executed a chattel mortgage on 67 of his TPU buses in favor of the Government. Said
mortgage was duly approved by the Public Service Commission as required by law and registered with the Register of
Deeds of Manila on November 7, 1951. On account of petitioner's failure to comply with the terms and conditions of the
mortgage, the respondent Collector of Internal Revenue issued on September 27, 1952, warrants of distraint and levy
covering the taxpayer's properties. Petitioner, assisted by a new counsel, promptly filed a petition for certiorari before the
Court of Tax Appeals on December 23, 1954, praying that the respondent Collector of Internal Revenue be enjoined from
proceeding with the contemplated public sale of his properties on the ground of prescription.

Issue: Whether the respondent collector is already barred from collecting the tax liabilities of the petitioner on the ground
of prescription

Ruling: It is to be noted, however, that petitioner's tax liabilities were reassessed only on April 28, 1951 and the
assessment of taxes accrued from 1939-1941 was clearly beyond the 5-year prescriptive period provided for by said
section 331 of the Tax Code. However, by virtue of chattel mortgage executed by the petitioner in favor of the
government, petitioner in fact acknowledged the existence of the tax liabilities. He is now estopped from the raising the
defense of prescription.

255. Republic v Lim de Yu

Facts: Appellee Rita Lim de Yu filed her yearly income tax returns from 1948 through 1953. The Bureau of Internal
Revenue assessed the taxes due on each return, and appellee paid them accordingly. On July 17, 1956 the Bureau issued to
appellee deficiency income tax assessments for the years 1945 to 1953 in the total amount of P22,450.50. She protested
the assessments and requested a reinvestigation. On August 30, 1956 she signed a "waiver" of the statute of limitations
under the Tax Code as condition to the reinvestigation requested. Thereafter, or on July 18, 1958, the Bureau issued to her
income tax assessment notices for the years 1948 to 1953 totalling P35,379.63. This last assessment, like the one issued in
1956, covered not only the basic deficiency income taxes, but also 50% thereof as surcharge. Upon appellee's failure to
pay, an action for collection was filed against her in the Court of First Instance of Cotabato on May 11, 1959. After trial
the suit was dismissed, and the Government appealed to the Court of Appeals, which forwarded the case to this Court.

Issue: Whether the lower court erred in dismissing the case on the ground that the right of appellant to collect the
deficiency income tax assessment had already prescribed.

Ruling. Yes. Settled is the rule that voluntary renunciation of the benefit of prescription already obtained is considered as
waiver of the defense of prescription.However, The waiver validly covers only the tax years with respect to which the
five-year period had not yet elapsed when the said waiver was executed.

256. Phil Journalist v Commissioner

Facts: The Revenue District Office of the Bureau of Internal Revenue (BIR) issued Letter of Authority for Revenue
Officer Federico de Vera, Jr. and Group Supervisor Vivencio Gapasin to examine petitioner’s books of account and other
accounting records for internal revenue taxes. Revenue District Officer Jaime Concepcion invited petitioner to send a
representative to an informal conference for an opportunity to object and present documentary evidence relative to the
proposed assessment. Petitioner’s Comptroller, LorenzaTolentino, executed a “Waiver of the Statute of Limitation Under
the National Internal Revenue Code (NIRC)”. Records show that, it did not bear the date of acceptance, that petitioner
was not furnished a copy of the waiver, and the waiver was signed only by the Revenue District Officer. The tax liability
exceeds One Million Pesos (P1,000,000.00).

Issue: Whether the waiver is in accordance with RMO No. 20-90 to validly extend the three-year prescriptive period
under the NIRC.

Ruling: No. A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers
right to security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed.
[23]
The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously
held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an assessment
and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer relinquishes the right
to invoke prescription unequivocally particularly where the language of the document is equivocal. For the purpose of
safeguarding taxpayers from any unreasonable examination, investigation or assessment, our tax law provides a statute of
limitations in the collection of taxes. Thus, the law on prescription, being a remedial measure, should be liberally
construed in order to afford such protection to the taxpayer.
257. Pfizer v Commissioner, CTA case No.6135( Full text cannot be found)

MP: A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers right to
security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. [23]
The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously
held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an
assessment and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer
relinquishes the right to invoke prescription unequivocally particularly where the language of the document is
equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or
assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being
a remedial measure, should be liberally construed in order to afford such protection to the taxpayer

258. FMF Dev Corp v Commissioner, CTA Case No.6153 (Still, full text cannot be found)

MP: A waiver of the statute of limitations under the NIRC, to a certain extent, is a derogation of the taxpayers right to
security against prolonged and unscrupulous investigations and must therefore be carefully and strictly construed. [23]
The waiver of the statute of limitations is not a waiver of the right to invoke the defense of prescription as erroneously
held by the Court of Appeals. It is an agreement between the taxpayer and the BIR that the period to issue an
assessment and collect the taxes due is extended to a date certain. The waiver does not mean that the taxpayer
relinquishes the right to invoke prescription unequivocally particularly where the language of the document is
equivocal. For the purpose of safeguarding taxpayers from any unreasonable examination, investigation or
assessment, our tax law provides a statute of limitations in the collection of taxes. Thus, the law on prescription, being
a remedial measure, should be liberally construed in order to afford such protection to the taxpayer

259. Union Cement v CIR (case cannot be found)

260. Collector of Internal Revenue vs. Pineda, 2 SCRA 401, No. L-14522 May 31, 1961

FACTS: Atanasio Pineda died on May 23, 1945 and was survived by his widow, Mrs. Felicisima Pineda, and 15 children,
one of whom is herein respondents, Manuel B. Pineda. On August 30, 1945, proceedings for the settlement of the estate of
the deceased were commenced in the CFI of Manila, in which Mrs. Pineda was appointed administratrix of the estate.
Over 2 years and a half later, Internal Revenue examiner E. Z. Espinosa investigated the income tax liability of some heirs
of the deceased and allegedly found that no income tax return for the years 1945, 1946, 1947 and 1948 had been filed on
behalf of his estate. On August 1, 1951, income tax assessment notices for the years 1945 and 1946, were sent to said
estate "c/o Manuel B. Pineda", who received said notices on September 8, 1951. 4 days later, he submitted to petitioner
herein a "statement" contesting the accuracy of said assessment notices and alleging that the income of the estate had been
included in income tax returns filed by Mrs. Pineda. Moreover, after another reinvestigation, on August 12, 1954,
petitioner demanded from respondent the payment of P14.50, as basic and additional residence tax for 1945 and P207.50
as real estate dealer’s tax for the fourth quarter of 1946 and the whole year of 1947, as well as payment of the sums due as
income tax for 1945, 1946 and 1947, according to said assessment notices of October 19, 1953.

ISSUE: Whether the right of the Commissioner of Internal Revenue to assess against and collect from the Estate of the
deceased Atanasio Pineda the taxes in question has already prescribed

RULING: NO. The only agreement that can suspend the running of the prescriptive period for the collection of taxes is
written agreement between the taxpayer and the Collector of Internal Revenue, entered into before the expiration of the
five-year prescriptive period, extending the period of limitation prescribed by law, (Section 332[c], N.I.R.C.) The rule is in
accord with the general law on prescription that requires a written acknowledgment of the debtor to renew the cause of
action or interrupt the running of the limitation period (Act 190, Sec. 50; New Civil Code, Art. 1155; Collector of Internal
Revenue vs. Solano, L-11475, July 31, 1958). For the reason just stated, the government is entitled to collect the residence
tax for 1945 within ten (10) years from discovery of the failure to pay it or to make the statement necessary therefor,
which in this case, took place on November 21, 1951 (p. 51, BIR rec.)Consequently, the plea of prescription as regards
said residence tax was erroneously sustained by the lower court.

261. Republic v Ker & Co

FACTS: Ker & Co., Ltd. contends that under Section 331 of the Tax Code the right of the Commissioner of Internal
Revenue to assess against it a deficiency income tax for the year 1947 has prescribed because the assessment was issued
on July 25, 1953 after a lapse of five years, three months and thirteen days from the date (April 12, 1948) it filed its
income tax return. On the other hand, the Republic of the Philippines insists that the taxpayer's income tax return was
fraudulent, therefore the Commissioner of Internal Revenue may assess the tax within ten years from discovery of the
fraud on October 31, 1951 pursuant to Section 322(a) of the Tax Code.
ISSUE: Did the right of the Commissioner of Internal Revenue to assess deficiency income tax for the year 1947
prescribe?

RULING: YES. The contention suffers from a flaw in that it fails to consider the well-settled principle that fraud is a
question of fact, which must be alleged and proved. Fraud is a serious charge and, to be sustained, it must be supported by
clear and convincing proof. Accordingly, fraud should have been alleged and proved in the lower court. On these
premises, we sustain the ruling of the lower court on the point of prescription. In this case however, Ker & Co., Ltd. raised
the defense of prescription in the proceedings below and the Republic of the Philippines, instead of questioning the right
of the defendant to raise such defense, litigated on it and submitted the issue for resolution of the court. By its actuation,
the Republic of the Philippines should be considered to have waived its right to object to the setting up of such defense.

262. Republic v Acebedo

FACTS: A suit for collection of deficiency tax was filed against herein respondent Felix Acebedo in the amount of P5,962
for the year 1948. A notice of assessment was issued on September 24, 1949. The respondent filed a motion to dismiss on
the ground of prescription. He claimed that the notice of levy/distraint was filed beyond the 5 year limitation from the
assessment. The motion was granted by the lower court and the same dismissed the case. Hence, the petitioner Republic
filed an appeal with this court, contending that the various requests for reinvestigation made by the respondent suspended
the 5 year period prescription period and that the waiver of statute of limitations duly executed in 1959 was sufficient to
further suspend period of prescription.

ISSUE: Whether or not a request for a reinvestigation suspends the running of the period for filing an action for
collection? Whether or not the waiver of limitations suspended the period?

RULING: NO. A waiver is ineffective if it is executed beyond the original period of prescription. When a taxpayer asks
for a reinvestigation of the tax assessment issued to him and such reinvestigation is made, on the basis of which the
Government makes another assessment, the five-year period with which an action for collection may be commenced
should be counted from this last assessment. In this case, even after the request for reinvestigation was made, the
petitioner did not act upon it, hence, the request for reinvestigation did not suspend the running of the period for filing an
action for collection. Moreover, up to October 4, 1955 the delay in collection could not be attributed to the defendant at
all. His requests in fact had been unheeded until then, and there was nothing to impede enforcement of the tax liability by
any of the means provided by law. By October 4, 1955, more than five years had elapsed since assessment in question was
made, making subsequent events in connection with the said assessment irrelevant. Even the written waiver of the statute
signed by the defendant on December 17, 1959 could no longer revive the right of action, for under the law such waiver
must be executed within the original five-year period within which suit could be commenced.

263. Pelican v Commissioner (case cannot be found) (Page 695)

264. Collector v Solano (case cannot be found) (Page 696)

265. Republic v Ret

FACTS: Damian Ret filed 2 false and fraudulent returns for 1948 and 1949 for which he was assessed by the BIR the
sums of P34,907.33 and P68,338.40 including 50% surcharge for found. Demand was made on January 3, 1951 for
payment. Ret refused to pay. On June 20, 1951, an assessment notice was issued but he still refused. Subsequently, Ret
was prosecuted in 2 criminal cases for filing false or fraudulent returns. He pleaded guilty thereto and was sentenced to
pay a fined of P300 in each case. After his conviction, on September 21, 1957, the Government filed a complaint for the
collection of Ret’s income taxes but the lower court dismissed the case on the ground that the government’s right to
collect by judicial action had prescribed as more than five (now three) years had elapsed from the date of the assessment
of Ret’s taxes. It is also averred that the period of prescription for the collection of tax was suspended because of the
written extrajudicial demand made by the Collector against the defendant-appellee.

ISSUE: Whether the period of prescription was suspended

RULING: NO. The only agreement that could have suspended the running of the prescriptive period was a written
agreement between the taxpayer and the Collector, entered before the expiration of the five (5) year prescriptive period,
extending the period of limitations prescribed by law which rule is in accord with the general law on prescription that
requires a written acknowledgment of the debtor to renew the cause of action or interrupt the running of the limitation
period (Act 190, sec. 50; new Civil Code, Art. 1155)." In the instant case, there is no such written agreement, and there
was nothing to agree about. The letter of demand by the Collector on January 13, 1951, was made prior to the issuance of
the assessment notice to the defendant-appellee, made on January 20, 1951, from which date, the 5-year period was to be
counted. The letter of demand could not suspend something that started to run only on January 20, 1951.

266. Republic v Xavier Gun Trading, 4 SCRA 1133, No. L-17325, No. L-16594 April 26, 1962

FACTS: The Bureau of Internal Revenue discovered that the "XAVIER Gun Trading" (Iligan and Malabang branches),
failed to declare certain amounts representing sales for 1948. Mrs. Estrella F. Javier, branch manager, acknowledged the
violation and promised to pay the corresponding tax delinquency in the amount of P712.20. Thereafter, Xavier Gun
Trading made partial payments until a balance of P312.70 still remained due and collectible. On June 5, 1952, in Manila,
Xavier Gun Trading, as principal and the Luzon Surety Co. Inc., as surety, executed an ordinary bond for payment of taxes
guaranteeing payment of the sum of P312.70 in favor of the Republic of the Philippines. In said bond, the said principal
and the Luzon Surety Co. bound themselves jointly and severally, to pay the aforesaid obligation P312.70 within six
months from date thereof.

ISSUE: Whether the execution of the bond suspend the prescriptive period

RULING: YES. Obligations contracted in a bond by a taxpayer constitute written acknowledgments of the debt and
interrupt the 5-year period of prescription for the payment of tax. Upon the execution of a bond to guarantee the payment
of an internal revenue tax, the taxpayer, as principal, and the bondsman, as surety, assumed an obligation entirely distinct
from the tax and became subject to an entirely different kind of liability. A bond being a written contract imposing rights
and liabilities, the government, pursuant to Article 1144 of the new Civil Code, has the right to take court action for its
forfeiture within 10 years from the accrual of the right of action.

267. Sambrano v CTA

FACTS: Respondent Collector of Internal Revenue served on petitioner Santiago Sambrano a revised assessment of his
alleged income, percentage and 'residence tax liabilities for the tax years 1945 to 1948. Sambrano executed a chattel
mortgage on 67 of his TPU buses to secure the payment of his tax obligations. Sambrano later on contended that the
assessment made by the CIR to him was made after the period in the law allowing assessments has expired.

ISSUE: Whether the assessments are void

RULING: NO. The filing of a chattel mortgage to secure the tax obligation is tantamount to a written waiver of the
statute of limitations

268. Republic v Lopez

FACTS: Lopez filed his ITR and was assessed by the BIR demanding payment of P200k++. Lopez requested for
reconsideration which resulted in a reduction of the assessment to P20k++. Without settling his liability, Lopez asked for
another reinvestigation. BIR assessed an additional P6k++ deficiency income tax. Again, Lopez did not pay and ask for
another reinvestigation. BIR acceded to his request provided he executed a waiver of statute of limitations. Lopez
executed an unconditional waiver imposing a deadline (Dec 1957) within which the government should finish its
reinvestigation. BIR ignored the deadline imposed and instead issued an assessment on March 1960. Due to non-payment,
BIR filed a collection suit before the CFI. Lopez filed a motion to dismiss on the ground of prescription. CFI granted the
motion to dismiss. The issue is whether or not the deadline is binding and operative, and ultimately, whether or not the
action to collect has already prescribed.
ISSUE: Whether the action to collect had prescribed

RULING: NO. It has not yet prescribed since under the NIRC the government has 5-year prescriptive period
within which it may sue to collect an assessed tax to be counted from the last revised assessment resulting from the
reinvestigation AND the time employed in reinvestigation should be deducted from the total period of limitation.
Regarding the December 1957 deadline, SC seriously doubts that the CIR could validly agree to reduce the prescriptive
period to less than what was granted by law to the detriment of the State, since it diminishes the opportunities of
collecting taxes due to the Republic.

269. Commissioner v Carnation

FACTS: Carnation Phils. Inc. filed its Corporation Annual Income Tax Return for taxable year ending September 30,
1981; and its Manufacturers/Producers Percentage Tax Return for the quarter ending September 30, 1981.
Carnation, through its Senior Vice President Jaime O. Lardizabal, signed three separate "waivers of the Statute of
Limitations Under the National Internal Revenue Code" wherein it waives the running of the prescriptive period provided
for in sections 318 and 319 and other related provisions of the National Internal Revenue Code and consents to the
assessment and collection of the taxes which may be found due after reinvestigation and reconsideration at any time
before or after the lapse of the period of limitations fixed by said sections 318 and 319 and other relevant provisions of the
National Internal Revenue Code, but not after (13 April 1987 for the earlier-executed waiver, or June 14, 1987 for the later
waiver, or July 30, 1987 for the subsequent waiver, as the case may be). However, the taxpayer (petitioner herein) does
not waive any prescription already accrued in its favor.
The waivers were not signed by the BIR Commissioner or any of his agents.

ISSUE: Whether the 3 waivers signed by private respondent are valid and binding as to toll the prescriptive period for
assessment
RULING: WAIVERS HAVE NO BINDING EFFECT FOR LACK OF CONSENT ON THE PART OF THE BIR
COMMISSIONER. Section 219 is clear and explicit that the waiver must be in writing and signed by both the CIR and
the taxpayer.
 270. RCBC v Commissioner

FACTS: RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001. As the protest was
not acted upon, it filed a Petition for Review with the Court of Tax Appeals (CTA) on April 30, 2002, or more than 30
days after the lapse of the 180-day period reckoned from the submission of complete documents. The CTA dismissed the
Petition for lack of jurisdiction since the appeal was filed out of time.

ISSUE: Whether the action to protest the assessment judicially prescribed?

RULING: YES. The assessment has become final. The jurisdiction of the CTA has been expanded to include not only
decision but also inactions and both are jurisdictional such that failure to observe either is fatal.
However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the CTA within 30 days from
the lapse of the 180-day period OR (2) await the final decision of the CIR and appeal such decision to the CTA within 30
days after receipt of the decision. These options are mutually exclusive and resort to one bars the application of the other.
Thus, if petitioner belatedly filed an action based on inaction, it can not subsequently file another petition once the
decision comes out.
271.Philippine Bank v Commissioner
FACTS: Petitioner received from the BIR assessment notices all issued on July 27, 1993 and demanding payment from
Petitioner for alleged deficiency income tax and onshore tax. Petitioner protested the aforesaid assessments and requested
that the same be reconsidered and/or withdraw, this was denied. Petitioner presented additional evidence consisting of
Waivers of the Defense of Prescription under the Statute of Limitations of the NIRC however, the Court denied the
admission of such.

ISSUE: Whether the Court erred in not admitting the waivers

RULING: NO. To be valid, the waivers must be signed by revenue official who is duly authorized which is not the case
herein

272.Luzon Packaging v Commissioner (CTA case can’t be found)

273.Solid Cement v Commissioner (700) ( CTA case can’t be found)

274.Afisco Insurance Corp v CA

Facts: AFISCO and 40 other non-life insurance companies entered into a Quota Share Reinsurance Treaties with
Munich, a non-resident foreign insurance corporation. The treaties required P to form a pool, to which others complied. It
was assessed by the commissioner of Internal Revenue deficiency corporate taxes. A protest was filed but denied by the
CIR.

P’s argue that the government’s right to assess and collect the subject Information Return was filed by the pool on April
14, 1976. On the basis of this return, the BIR telephoned petitioners on November 11, 1981 to give them notice of its letter
of assessment dated March 27, 1981. Thus, the P’s contend that the 5yr prescriptive period then provided in the NIRC had
already lapsed, and that the internal revenue commissioner was already barred by prescription from making an
assessment.

ISSUE: Whether the action has prescribed

Held: NO. The prescriptive period was totaled under the Section 333 of the NIRC, because the taxpayer cannot be located
at the address given in the information return filed and for which reason there was delay in sending the
assessment. Further, the law clearly states that the prescriptive period will be suspended only if the taxpayer informs the
CIR of any change in the address.

275. Palanca v CIR (Not found)

276. Advertising Associates v CA
Facts: P is being held liable for 3% Contractor’s percentage tax for rental income from the lease of neon signs and
billboards imposed by 1933 tax code on business agents and independent contractors. Petitioner relies on the Collector's
rulings dated September 12, 1960 and June 20, 1967 that it is neither an independent contractor nor a business agent.
As already stated, it considers itself a media company, like a newspaper or a radio broadcasting company, but not
an advertising agency in spite of the purpose stated in its articles of incorporation. It argues that its act of leasing its neon
signs and billboards does not make it a business agent or an independent contractor. It stresses that it is a mere lessor of
neon signs and billboards and does not perform advertising services. The Commissioner required Advertising Associates
to pay P297,927.06 and P84,773.10 as contractor's tax for 1967-1971 and 1972, respectively, including 25% surcharge
(the latter amount includes interest) on its income from billboards and neon signs.
Issue: Whether the pp should be suspended
Held: The Court allowed the suspension of prescriptive period since the enforcement of the warrant was not implemented
because of the pending protests of the taxpayer and its requests for withdrawal of the warrant.
277. Collector v Codinera
Facts: The Collector of Internal Revenue sent a warrant of distraint and levy against the properties of Restituto Codiñera
for collection of certain deficiency specific tax. However, it could not be effected in view of the attachment of the said
properties of the CFI-Manila of another case. After seven years, the Collector of Internal Revenue issued a warrant of
distraint and levy commanding the City Treasurer of Cebu City to distrain the goods, chattels, or effects and other
personal property of whatever character, and levy upon the real property and interest in or rights to real property of the
estate of the deceased. The heirs of the deceased filed the action with the CTA barring the government to collect said
deficiency on the ground of prescription therefore praying to declare null and void, and of no legal force and effect the
warrant of distraint and levy which the respondent issued on March 7, 1955.
Issue:Whether pp is suspended
Held: No. The pp to collect is not suspended during the period that the property of the taxpayer is in custodial egis
because it may still be distrained subject to the prior lien of the attachment creditor.

278. Cordero v Gonda (Not found)

279. Republic v Ret
Facts:On February 23, 1949, Ret filed with the Bureau of Internal Revenue his ITR for 1948, where he made it appear that
his net income was only P2,252.53 with no income tax liability at all. The BIR found out later that the return was
fraudulent since Ret's income, derived from his sales totaled P94,198.76. The BIR assessed him P34,907.33, as deficiency
income tax for 1948, inclusive of the 50% surcharge for rendering a false and/or fraudulent return.
Defendant Ret failed to file his Income Tax return for 1949. His income, as assessed for tax purposes, showed a
deficiency tax of P68,338.40 for 1949, inclusive of the 50% surcharge. On January 13, 1951, the Collector demanded for
payment but Ret failed and/or refused to pay said amounts. On January 20, 1951, the Collector issued income tax
assessment notices to Ret, urging him to pay the sums mentioned, but with the same result. Upon recommendation of the
Collector, Ret was prosecuted was sentenced to pay a fine. After his conviction, on September 21, 1957, the Republic filed
the present complaint for the recovery of Ret's deficiency taxes in the total sum of P103,245.73, plus 5% surcharge and
1% monthly interest. Ret presented a Motion to Dismiss on February 8, 1958, claiming that the "cause of action had
already prescribed".
Issue: Whether pp is suspended
Held: No. The pendency of a criminal case does not suspend the running of the pp to collect the tax assessed in the
absence of any court order prohibiting its collection. A criminal action for a tax violation is distinct from the civil action.

280. BPI v CIR (702)

Facts: Prior to its merger with petitioner, the Family Bank and Trust Co. (FBTC) earned income consisting of rentals from
its leased properties and interest from its treasury notes for the period January 1 to June 30, 1985. As required by the
Expanded Withholding Tax Regulation, the lessees of FBTC withheld 5 percent of the rental income, in the amount of
P118,609.17, while the Central Bank, from which the treasury notes were purchased by FBTC, withheld P55,456.60 from
the interest earned thereon. Creditable withholding taxes in the total amount of P174,065.77 were remitted to respondent
Commissioner of Internal Revenue.
FBTC, however, suffered a net loss of about P64,000,000.00 during the period in question. It also had an excess
credit of P2,146,072.57 from the previous year. Thus, upon its dissolution in 1985, FBTC had a refundable amount of
P2,320,138.34, representing that year’s tax credit of P174,065.77 and the previous year’s excess credit of P2,146,072.57.
As FBTC’s successor-in-interest, petitioner BPI claimed this amount as tax refund, but respondent refunded only
the amount of P2,146,072.57, leaving a balance of P174,065.77. Accordingly, petitioner filed a petition for review in the
Court of Tax Appeals on December 29, 1987, seeking the refund of the aforesaid amount. However, in its decision
rendered on July 19, 1994, the Court of Tax Appeals dismissed petitioner’s petition for review and denied its claim for
refund on the ground that the claim had already prescribed. In its resolution, dated August 4, 1995, the Court of Tax
Appeals denied petitioner’s motion for reconsideration.
Petitioner appealed to the Court of Appeals, but, in its decision rendered on April 14, 2000, the appeals court
affirmed the decision of the CTA. The appeals court subsequently denied petitioner’s motion for reconsideration. Hence
this petition.
Issue: Whether pp is suspended
Held: No. In order to effect suspension of the statute of limitations, the request for reinvestigation must first be granted by
the Commissioner. Such grant may be expressed in its communications with the taxpayer or implied from the action of the
CIR or his authorized representative in response to the request for reinvestigation.

281. Commissioner v Wyeth Suaco Laboratories

Facts: Respondent filed a request for reconsideration of the deficiency withholding tax assessment. After administrative
hearings, the original assessment of P150K was reduced to P75K and a modified assessment was thereafter issued.
Despite repeated demands, respondents failed and refused to pay the modified assessment. Consequently, BIR brought an
action for collection in the RTC. Respondents moved to dismiss the action on the ground that the government’s right to
collect the tax by judicial action has prescribed.
Issue:Whether the right of the government to collect has prescribed
Held:No. The filing of the request for reconsideration suspended the running of the pp and commenced to run again when
a decision on the protest was made. It must be noted that in all cases covered by an assessment, the period to collect shall
be five years from the date of the assessment but this period is suspended upon the filing of a request for reconsideration
which was acted upon by the Commissioner.

282. Republic v Ker & Co

Facts: R filed its ITR’s for the years 1947- 1950. In 1953 the BIR examined and audited Ker & Co., Ltd.'s returns and
books of accounts and subsequently issued notices of assessment.
On March 15, 1962, the BIR demanded payment of the aforesaid assessments together with a surcharge of 5% for
late payment and interest at the rate of 1% monthly. Ker & Co., Ltd. refused to pay, instead in its letters dated March 28,
1962 and April 10, 1962 it set up the defense of prescription of the Commissioner's right to collect the tax. Subsequently,
the Republic of the Philippines filed on March 27, 1962 a complaint with the CFI seeking collection of the aforesaid
deficiency income tax for the years 1947-1950. The complaint did not allege fraud in the filing of any of the ITR’s for the
years involved, nor did it pray for the payment of the corresponding 50% surcharge, but it prayed for the payment of 5%
surcharge for late payment and interest of 1% per month without however specifying from what date interest started to
accrue.
On April 14, 1962 Ker & Co., moved for the dismissal of the complaint on the ground that the court did not
acquire jurisdiction over the person of the defendant and that plaintiff's cause of action has prescribed. This motion was
denied and defendant filed a motion for reconsideration. Resolution on said motion, however, was deferred until trial of
the case on the merits.
The CFI dismissed the claim for the collection of deficiency income taxes for 1947, but orders defendant taxpayer
to pay the deficiency income taxes for 1948, 1949 and 1950.
On February 20, 1963 the Republic of the Philippines filed an MR contending that the right of the CIR to collect the
deficiency assessment for 1947 has not prescribed by a lapse of merely five years and three months, because the
taxpayer's income tax return was fraudulent in which case prescription sets in ten years from October 31, 1951, the date of
discovery of the fraud, pursuant to Section 332 (a) of the Tax Codes and that the payment of delinquency interest of 1%
per month should commence from the date it fell due as indicated in the assessment notices instead of on the date the
complaint was filed.
On March 6, 1963 Ker & Co., Ltd. also filed a motion for reconsideration reiterating its assertion that the Court of
First Instance did not acquire jurisdiction over its person, and maintaining that since the complaint was filed nine years,
one month and eleven days after the deficiency assessments for 1948, 1949 and 1950 were made and since the filing of its
petition for review in the Court of Tax Appeals did not stop the running of the period of limitations, the right of the
Commissioner of Internal Revenue to collect the tax in question has prescribed.
Issue: Whether the pp was suspended
Held: Yes. Under Sec. 333 of the Tax Code, the running of the prescriptive period to collect deficiency taxes shall be
suspended for the period during which the BIR Commissioner is prohibited from beginning a distraint and levy or
instituting a proceeding in court, and for 60 days thereafter. In the case at bar, the pendency of the taxpayer’s appeal in
CTA and in SC had the effect of temporarily staying the hands of the Commissioner. If the taxpayer’s stand that the
pendency of the appeal did not stop the running of the period because the CTA did not have jurisdiction over the case is
upheld, taxpayers would be encouraged to delay the payment of taxes in the hope of ultimately avoiding the same. Under
the circumstances, the running of the prescriptive period was suspended.
CHAPTER XXX - PRESCRIPTION
3RD BATCH
283. Commissioner v Atlas Consolidated Mining & Development (not found)
284. Republic v Aquias

Facts: Bureau of Internal Revenue, assessed and demanded of the defendant the sum of P10,600.21, representing
deficiency percentage taxes for the years 1952-1953, inclusive of surcharge and penalty. The defendant thru counsel,
requested a reinvestigation which was granted by the plaintiff.

The plaintiff notified the defendant that the reinvestigation of his tax deficiencies will be conducted on October 15, 1956,
but neither the defendant nor his counsel appeared on the said date scheduled for the reinvestigation. (Pars. 1, 2 and 3
page two of Annex :"C" of plaintiff's complaint);
 Bureau of Internal Revenue issued a Warrant of Distraint and Levy in accordance with the provisions of section 316 of the
National Internal Revenue Code but was not executed due to the fact that the defendant's counsel requested that the same
be lifted on the ground that the plaintiff's right to collect taxes thru civil remedies either by distraint and levy or by judicial
action has prescribed and if not, a reinvestigation be conducted. The plaintiff, thru BIR, denied the defendant's request for
further reinvestigation and reiterated its demand for P10,600.21 as deficiency percentage taxes, inclusive of surcharge and
penalty.

The defendant did not contest the demand nor the final decision of the plaintiff both of the plaintiff's complaint, in the
Court of Tax Appeals the defendant did not pay the percentage tax deficiencies in the amount of P10,600.21 including
surcharge and penalties.

Issue: Whether or not the present action for collection of the deficiency taxes had prescribed when it was filed on May 2,
1962. The pertinent provisions of the National Internal Revenue Code

Held: No. The assessment of the deficiency taxes in question was made on June 12, 1954. From that date the said taxes
could be collected by a proceeding in court, and hence from that date the five-year period fixed for the purpose stated. The
time that had elapsed when the suit for collection was filed on May 2, 1962 was 7 years, 10 months and 20 days. From
this, however, should be deducted the period during which prescription was interrupted. The interruption began on
September 2, 1954, when the appellant's request for reinvestigation was granted, since the grant in effect tied the hands of
the appellee from filing the action.

285.BPI vs. Commissioner G.R NO. 139736, October 17, 2005 (DID NOT INCLUDE IN THE LIST OF CASES)
Facts: (BIR) issued a formal assessment notice (FAN) against the Bank of the Philippine Islands (BPI). The FAN
demanded BPI to pay P28k in taxes. In November 1989, BPI filed a protest however the protest did not specify if it was a
request for reconsideration or a reinvestigation. The BIR did not reply on the protest but on October 15, 1992 (four days
before the expiration of the period to collect – or 1095 days [3 years]after issuance of FAN on 10/20/1989), the
Commissioner of Internal Revenue (CIR) issued a warrant of distraint/levy against BPI for the satisfaction of the assessed
tax. The warrant was served to BPI on October 23, 1992 (four days after period has prescribed). In September 1997, the
CIR finally sent a letter to BPI advising the latter that its protest is denied.
ISSUE:
1. Whether or not the filing of the protest by BPI suspended the running of the prescriptive period.
Held :No. The protest did not indicate whether BPI was asking for a reconsideration or a reinvestigation but since BPI did
not adduce additional evidence, it should be treated as a request for reconsideration. Under the tax code, a request for
reconsideration does not suspend the running of the prescriptive period. Even assuming that the protest is a request for
reinvestigation, the same did not toll the running of the prescriptive period because the CIR failed to show proof that the
request has been granted and that a reinvestigation has been actually conducted. In fact, BPI never heard from the BIR not
until the CIR decided the protest in September 1997 – 5 years after the protest has been filed.
285. People v Duque
FACTS: Appellant Napoleon Duque was charged with and convicted of violating Section 38 in relation to Section 39 of P.D. No.
442, as amended, known as The Labor Code of the Philippines. The charge of illegal recruitment was set out in the information
where the accused well knowing that he is not licensed nor authorized by the proper government agency (POEA) to engage in
recruitment of workers abroad, exacted and actually received money from the victims, to their damage and prejudice. Duque
contends that the offense of illegal recruitment had accordingly prescribed by May 1990.
ISSUE: Whether or not the criminal offense for which appellant was convicted has already prescribed.
RULING: No. The recruitment of persons for overseas employment without the necessary recruiting permit or authority form
the POEA constitutes a crime penalized, not by the Revised Penal Code, but rather by a special law, i.e., Article 38 in relation to
Article 290 of the Labor Code. Article 290 of the Labor Code provides, in relevant part, that. Art. 290. Offenses penalized under
this Code and the rules and regulations issued pursuant thereto shall prescribe in three (3) years.
The Court agrees with the statement of the Solicitor General that Act No. 3326 supplied the applicable norm. Section 2 of Act
No. 3326, provides that “Prescription shall begin to run from the day of the commission of the violation of the law, and if the
same be not known at the time, from the discovery thereof and institution of judicial proceedings for its investigation and
punishment.”
The court holds that the applicable prescriptive period in the case at bar began to run from the time the recruitment activities of
appellant Duque were ascertained by the complainants and by the POEA to have been carried out without any license or
authority from the government. The discovery by the complainants and by the POEA was simultaneous in character and
occurred sometime in December 1989 when the complainants went to the POEA with the complaint for recovery of the
placement fees and expenses they had paid to appellant Duque, and the POEA, acting upon that complaint, discovered and
informed the private complainants that Duque had operated as a recruiter without the essential government license or authority.
Accordingly, the offense of illegal recruitment had not prescribed when the complaint was filed with the Provincial Prosecutor's
Office in April 1990 and when the information was filed in court in May 1990
286. Lim v CA
FACTS: Spouses Emilio Lim and Antonia Sun Lim were engaged in the dealership of various household appliances. On
October 5, 1959, a raid was conducted by virtue of a search warrant in their business address in Manila and another in their
address in Quezon City. Seized from the Lim couple were business and accounting records. The Bureau of Internal Revenue,
through the seized records, found that the income tax returns filed by petitioners for the years 1958 and 1959 were false or
fraudulent. The spouses claim that this finding was made on October 15, 1964 (as declared by the Court of Appeals in its
 decision later on). On April 7, 1965, the BIR informed the petitioners what was due from them and required them to pay. The
Lims requested for a reinvestigation which the BIR was willing to give subject to certain conditions. The Lim refused to
comply with the conditions and reiterated their request for reinvestigation. On October 10, 1967, the BIR rendered a final
decision holding that there was no cause for reversal of the finding of the assessment against petitioners, and on July 3, 1968,
the final notice and demand for payment was served on petitioners through their daughter‐ in‐law. Because the Lims still did
nott pay, four (4) separate criminal informations were filed against petitioners for violation of Sections 45 and 51 in relation to
Section 73 of the National Internal Revenue Code. Two criminal charges were filed against them involving their refusal to pay
the deficiency income taxes, and another two involving the filing of fraudulent consolidated income tax returns with intent to
evade the assessment decreed by law. The trial court found the Lim spouses guilty on all counts and required them to pay the
amounts corresponding to their deficiency income tax for the years 1958 and 1959 pursuant to Presidential Decree No. 69.
Issue: Whether or not the five‐year period should be counted from July 3, 1968.
Held: YES. Inasmuch as the final notice and demand for payment of the deficiency taxes was served on petitioners on July 3,
1968, it was only then that the cause of action on the part of the BIR accrued. This is so because prior to the receipt of the
letter‐ assessment, no violation has yet been committed by the taxpayers.
• The offense was committed only after receipt was coupled with the wilful refusal to pay the taxes due within
the alloted period.

• The two criminal informations, having been filed on June 23, 1970, are well‐within the five‐year prescriptive
period and are not time‐ barred.

DOCTRINE: It is a commonly accepted principle of law that the method prescribed by statute for the collection of taxes is
generally exclusive, and unless a contrary intent be gathered from the statute, it should be followed strictly.
287. Aguinaldo Industries v CIR
(The case does not talk about the main point as stated in the book. The case is about ordinary and necessary expenses and the
proper surcharges to be charged to Aguinaldo.)
Facts: An action for review of the decision and dissolution of the CTA holding the petitioner liable for deficiency tax for
1957, plus 5% surcharge and 1% monthly interest for late payment from December 15, 1957 until full payment.
Aguinaldo Industries Corporation is a domestic corporation engaged in two lines of business, namely: (a) the manufacture of
fishing nets, a tax-exempt industry, and the manufacture of furniture.
Previously, Aguinaldo Industries acquired a parcel of land in Muntinglupa, Rizal, as site of the fishing net factory. This
transaction was entered in the books of the Fish Nets Division of the Company. Later, when another parcel of land in
Marikina Heights was found supposedly more suitable for the needs of Aguinaldo Industries, it sold the Muntinglupa
property, Aguinaldo Industries derived profit from this sale in the amount of P244,416.70 which was entered in the books of
the Fish Nets Division as miscellaneous income to distinguish it from its tax-exempt income.
For the year 1957, Aguinaldo Industries filed two separate income tax returns one for its Fish Nets Division and another for
its Furniture Division. After investigation of these returns, the examiners of the BIR found that the Fish Nets Division
deducted from its gross income for that year the amount of 61,187.48 as additional remuneration paid to the officers of
Aguinaldo Industries. The examiner recommended the disallowance of the 61,187.48 deduction because he found that this
amount was taken from the net profit of an isolated transaction (sale of aforementioned land) not in the course of or carrying
on of Aguinaldo Industries 's trade or business. It appears from the books that such deduction was claimed as part of the
selling expenses of the land in Muntinglupa, Rizal. Aguinaldo Industries insists that said amount should be allowed as
deduction because it was paid to its officers as allowance or bonus pursuant to Section 3 of its by-laws.
From the net profits of the business of the Company shall be deducted for allowance of the President 3%, for the
first Vice President 1%, for the second Vice President for the members of the Board of Directors 10% they
divided equally among themselves, for the Secretary of the Board for the General Manager for two Assistant
General Managers
Issues:
1. Whether the profit derived from the sale of its Muntinglupa land is not taxable for it is tax-exempt income,
considering that its Fish Nets Division enjoys tax exemption as a new and necessary industry under Republic Act
901.

Held:It must be stressed however that at the administrative level, the petitioner implicitly admitted that the profit it derived
from the sale of its Muntinglupa land, a capital asset, was a taxable gain. In the instant case, up to the time the questioned
decision of the respondent Court was rendered, the petitioner had always implicitly admitted that the disputed capital gain was
taxable, although subject to the deduction of the bonus paid to its corporate officers. It was only after the said decision had
been rendered and on a motion for reconsideration thereof, that the issue of tax exemption was raised by the petitioner for the
first time. It was thus not one of the issues raised by petitioner in his petition and supporting memorandum in the Court of Tax
Appeals. We therefore hold that petitioners belated claim for tax exemption was properly rejected.
288. Tupaz v Ulep
Facts: In April 1980, Petronila Tupaz and her husband filed, in behalf of their corporation, an income tax return. On July
16, 1984, an assessment was issued against the spouses Tupaz demanding payment of P2.3 million in corporate tax
deficiency (note: prescriptive period to issue assessment then was 5 years). No protest was filed by Tupaz within the 30
day prescriptive period. In June 1989, a criminal complaint for violation of the tax code was filed by the Bureau of
Internal Revenue (BIR) against Tupaz with the Department of Justice (DOJ). Eventually, a special prosecutor filed an
information against Tupaz. Judge Benedicto Ulep heard the case. Tupaz opposed the said criminal complaint on the
ground that it was filed out of time. It was her theory that the crime alleged was committed in 1979 when they failed to
pay the correct corporate tax; that the prescriptive period for the government to file criminal proceedings for violation of
the tax code is 5 years, hence, the criminal proceeding filed in 1989 (ten years from 1979) is already filed out of time.
ISSUE: Whether or not the criminal case was filed out of time.
Held: No. It was filed within the prescriptive period. The prescriptive period to file a criminal case did not begin to run in
1979 or the time when Tupaz paid the deficient tax amount. It only begun to run when the assessment became final and
unappealable. The assessment was issued on July 16, 1984. Tupaz did not protest so on August 16, 1984, the assessment
became final and unappealable. The counting of the 5 year prescriptive period begun on August 16, 1984 and so the
criminal complaint filed with the DOJ in June 1989 is well within the 5 year prescriptive period. The rationale behind this
is that there is no crime to speak of in 1979 when Tupaz failed to pay the correct tax. The act only became criminal when
in 1984, despite demand, she willingly failed to pay the correct tax as assessed. Nonetheless, Tupaz got a favorable
judgment from the Supreme Court based on double jeopardy.

CHAPTER XXXI: TAX CREDIT OR REFUND

289. LISP-II LOCATORS VS. CIR
Facts: Petitioner is a non-stock and non-profit association duly organized and existing under Philippine laws created to
"advance and promote the commercial, economic, educational and social interests and well-being of the members of
LISP-II Industrial Park ('Science Park'). On April 13 , 2007, petitioner filed its ITR for calendar year 2006, reflecting no
income tax liability allegedly because its income was exempt from tax.4 It is petitioner's allegation that after an internal
audit, from late 2008 to early 2009, it learned that there were BIR Forms 2307 that were not used and/or reflected in the
2006 ITR. It noted that one of its member-locators erroneously withheld taxes from its revenues exempt from income tax.
Contending that it is exempt from income tax under Section 30(F) of the Tax Code, as amended, and that it is not subject
to withholding taxes as provided under Section 2.57.5 of Revenue Regulations (RR) No. 2-98, petitioner filed on March 4,
2009 an administrative claim for refund of the tax erroneously withheld and remitted on its behalf to the Bureau of
Internal Revenue for calendar year 2006 in the total amount ofP218,425.20, citing as its legal bases Section s 76, 204, and
229 of the Tax Code, as amended, and Section 2.58.3(B) of RR No. 2-98, as amended. Claiming inaction on respondent's
part and that the prescriptive period to seek judicial remedy was about to lapse, petitioner filed the instant Petition for
Review on April 13, 2009. In response to the summons 7 issued on April 14, 2009, respondent filed an Answer8 on May
28, 2009, praying for the dismissal of the Petition for Review for lack of merit.
ISSUE: Whether petitioner is entitled to a claim for refund in the amount of P218,425 .20 allegedly representing
excess/unutilized withholding taxes for calendar year ending 31 December 2006. NO.
RULING : The purported erroneously withheld creditable tax may instead be refunded under Sections 204(C) and 229 of
the NIRC, as amended, which provide:
"SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. - The Commissioner may -
XXX XXX XXX
(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of
internal revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or
change unused stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or
refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit
or refund within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or refund."
"SEC. 229. Recovery of Tax Erroneously or Illegally Collected. -No suit or proceeding shall be maintained in any court
for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or
collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid
under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided,
however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of
the return upon which payment was made, such payment appears clearly to have been erroneously paid."
It is settled in this jurisdiction that Sections 204(C) and 229 (previously Sections 306 and 309) were intended to govern all
kinds of refund of internal revenue taxes - those taxes imposed and collected pursuant to the NIRC.
Section 204(C) applies to administrative claims filed with the Commissioner of Internal Revenue; while Section 229
refers to judicial actions for the recovery of tax erroneously or illegally collected. However, both the claim for refund with
the BIR and the subsequent appeal to the Court of Tax Appeals must be filed within the two-year period from the date of
payment of the tax. Considering that the present claim pertains to creditable income tax alleged to have been erroneously
withheld, the reckoning of the two-year period prescribed under Sections 204(C) and 229 of the NIRC of 1997 must be
read in conjunction with Section 2.58 of Revenue Regulations No. 2-98, as amended by Section 5 of RR No. 17-2003, to
wit:
Based on the foregoing Regulations, the reckoning of the two-year prescriptive period would be from the date of
monthly remittance of the claimed creditable withholding taxes for January to December 2006. The last month covered by
the subject claim is December 2006, which under the afore-quoted RR No. 2-98, as amended, must be paid on or before
January 15, 2007 (or not later than January 20, 2007 in case of availment of the EFPS). Consequently, petitioner had until
January 15, 2009 (or January 20, 2009 when it availed of the EFPS) within which to file its claim for refund for the month
of December 2006 both in the administrative and judicial levels. Since the administrative claim for refund for the months
of January to December 2006 was filed on March 4, 2009 and the subsequent appeal before this Court was filed on April
13, 2009, petitioner's entire claim for the months of January to December 2006 in the total amount of P218,425 .20 had
already prescribed. WHEREFORE, the instant Petition for Review is hereby DISMISSED due to prescription.
290. CONTEX CORP. VS. CIR
1. Petitioner Contex Corporation: a domestic corporation engaged in the business of manufacturing hospital textiles
and garments and other hospital supplies for export.
- Place of business: Subic Bay Freeport Zone (SBFZ)
- Duly registered with the Subic Bay Metropolitan Authority (SBMA) as a Subic Bay Freeport Enterprise (RA
7227)
- As an SBMA-registered firm, petitioner is exempt from all local and national internal revenue taxes except
for the preferential tax (Section 12c of RA 7227)
- Registered with the BIR as a NON-VAT TAXPAYER (Certificate of Registration RDO)

2. Jan 1, 1997 to Dec 31, 1998: petitioner purchased various supplies and materials necessary in the conduct of its
manufacturing business The suppliers of these goods SHIFTED UNTO PETITIONER the 10% VAT on the
purchased items, which led the petitioner to pay input taxes (P539,411.88 and P504,057.49 for 1997 and 1998,
resp.) Acting on the belief that it was exempt from all national and local taxes, including VAT, petitioner filed two
applications for tax refund or tax credit of the VAT it paid Revenue District Officer of BIR RDO Mr. Carlos
denied the 1st application letter. Petitioner filed another application for tax refund/credit directly with Regional
Director of BIR Region IV Atty. Pagabao. They sought a refund or issuance of a tax credit certificate
(P1,108,307.72), representing erroneously paid input VAT (Jan 1, 1997 to Nov 30, 1998)
3. No response from BIR Regional Director Petitioner elevated the matter to CTA in a petition for review arguing
under Section 112(A) if read in relation to Section 106(A)(2)(a) of NIRC and Section 12(b) and (c) of RA 7227
would show that it was not liable in any way for any VAT
4. In opposing the claim for tax refund or tax credit, BIR asked CTA to apply the rule that claims for refund are
strictly construed against the taxpayers ince petitioner failed to establish both its right to a tax refund or tax credit
and its compliance with the rules on tax refund (Sections 204 and 229 of Tax Code), its claim should be denied

5. CTA: petition partially granted; respondent is hereby ordered to refund or in the alternative to issue a tax credit
certificate in favor of petitioner (P683,061.90) representing erroneously paid input VAT
- Petitioner misread Sections 106(A)(2)(a) and 112(A) of Tax Code  these provisions apply only to those
entities registered as VAT taxpayers whose sales are zero-rated
- Petitioner does not fall under this category, since it is a non-VAT taxpayer as evidenced by the Certificate of
Registration RDO
- Petitioner is exempt from the imposition of input VAT on its purchases of supplies and materials
- Petitioner is required to pay as a SBFZ-registered enterprise is a 5% preferential tax
- Disallowed all refunds of input VAT paid by petitioner prior to June 29, 1997 for being barred by the 2-yr
prescriptive period (Section 229, Tax Code)
- Also limited the refund only to the input VAT paid by the petitioner on supplies and materials directly used by
the petitioner in the manufacture of goods
- Struck down all claims for charges, and all materials and supplies shipped or delivered to the petitioner’s
Makati and Pasay City offices

6. CIR filed a petition for review of the CTA decision by the CA

- The exemption of Contex Corporation under RA 7227 was limited only to DIRECT TAXES and not to
indirect taxes such as the input component of the VAT
- VAT is a burden passed on by a VAT-registered person to the end users; hence, the direct liability for the tax
lies with the suppliers and not Contex

7. CA: reversed CTA’s decision; in favor of CIR; Contex’s claim for refund of erroneously paid taxes is denied
- The exemption from duties and taxes on the importation of raw materials, capital, and equipment of SBFZ-
registered enterprises under RA 7227 and its implementing rules covers only “the VAT imposable under
Section 107 of Tax Code, which is direct liability of the importer, and in no way includes the VAT of the
seller-exporter the burden of which was passed on to the importer as an additional costs of the goods
- Exemption granted by RA 7227 relates to the act of importation (Section 107 specifically imposes the VAT on
importations
- Exemption of SBFZ-registered enterprises from internal revenue taxes is qualified as pertaining only to those
for which they may be directly liable (direct tax, and only in connection with their importation of raw
materials, capital, and equipment as well as the sale of their goods and services)

8. Petitioner moved for reconsideration of CA decision; denied

9. Hence, this instant petition.

ISSUE: Whether or not petitioner may claim a refund on the Input VAT erroneously passed on to it by its suppliers.

RULING: NO. Petitioner’s claim, however, for exemption from VAT for its purchases of supplies and raw materials is
incongruous with its claim that it is VAT-exempt, for only VAT-registered entities can claim Input VAT Credit/Refund.
 While it is true that the petitioner should not have been liable for the VAT inadvertently passed on to it by its supplier
since such is a zero-rated sale on the part of the supplier, the petitioner is not the proper party to claim such VAT
 refund. Since the transaction is deemed a zero-rated sale, petitioner’s supplier may claim an Input VAT credit with no
corresponding Output VAT liability. Congruently, no Output VAT may be passed on to the petitioner.
 As an exempt VAT taxpayer, it is not allowed any tax credit on VAT (input tax) previously paid.
 Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax credit and accordingly refund the
petitioner of the VAT erroneously passed on to the latter.

291. Silkair v CIR

FACTS: Silkair filed an administrative claim for refund representing excise taxes on the purchase of jet fuel from Petron,
which it alleged to have been erroneously paid

Silkair contends - it is the proper party to file the claim for refund, being the entity granted the tax exemption under the
Air Transport Agreement between RP and Singapore. It disagrees with CIR’s reasoning that since excise tax is an indirect
tax it is the direct liability of the manufacturer, Petron, and not Silkair, because this puts to naught whatever exemption
was granted to Silkair by Article 4 of the Air Transport Agreement.

CIR contends - Being the buyer, Silkair is not the person required by law nor the person statutorily liable to pay the
excise tax but the seller, following the provision of Section 130 (A) (1) (2).

ISSUE: Whether or not Silkair has the legal personality to file an administrative claim for refund of excise taxes
alleged to have been erroneously paid to its supplier of aviation fuel here in the Philippines.

RULING: No. Petron has the legal personality. Excise taxes, which apply to articles manufactured or produced in the
Philippines for domestic sale or consumption or for any other disposition and to things imported into the Philippines, is
basically an indirect tax. While the tax is directly levied upon the manufacturer/importer upon removal of the taxable
goods from its place of production or from the customs custody, the tax, in reality, is actually passed on to the end
consumer as part of the transfer value or selling price of the goods, sold, bartered or exchanged. In early cases, we have
ruled that for indirect taxes (such as valued-added tax or VAT), the proper party to question or seek a refund of the tax is
the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the
burden thereof to another.

292. Comissioner v CA and Citytrust Banking Corp

FACTS: Respondent filed a refund of overpaid taxes with the BIR by which the latter denied on the ground of
prescription. Citytrust filed a petition before the CTA. The case was submitted for decision based solely on the pleadings
and evidence submitted by the respondent because the CIR could not present any evidence by reason of the repeated
failure of the Tax Credit/Refud Division of the BIR to transmit the records of the case, as well as the investigation report
thereon, to the Solicitor General. CTA rendered the decision ordering BIR to grant the respondent's request for tax refund
amounting to P 13.3 million.

ISSUE: Failure of the CIR to present evidence to support the case of the government, should the respondent's claim be
granted?

RULING: Not yet. It is a long and firmly settled rule of law that the Government is not bound by the errors committed by
its agents. In the performance of its governmental functions, the State cannot be estopped by the neglect of its agent and
officers.

293. CIR v Petron Corp

DOCTRINE:
The CTA has no jurisdiction to determine the validity of a ruling issued by the CIR or the COC in the exercise of their
quasi-legislative powers to interpret tax laws. The phrase "other matters arising under this Code," as stated in the second
paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters directly related to the preceding
phrase "disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation
thereto". It cannot extend to evaluating the soundness of the interpretation of tax laws by the CIR.

FACTS: CIR issued assessment to Petron for deficiency tax. Petron filed before the CTA a petition raising the issue of
whether its importation of alkylate is subject to excise tax. CTA ruled in favor of Petron, stating that (a) the controversy
was not essentially for the determination of the constitutionality, legality or validity of a law, rule or regulation but a
question on the propriety or soundness of the CIR's interpretation of Section 148 (e) of the NIRC which falls within the
exclusive jurisdiction of the CTA under Section 4 thereof, particularly under the phrase "other matters arising under [the
NIRC]";

ISSUE/S: WON CTA had jurisdiction - NO

RULING: NO. The case does not fall within the jurisdiction of the CTA because the phrase "other matters arising under
this Code," as stated in the second paragraph of Section 4 of the NIRC, should be understood as pertaining to those
matters directly related to the preceding phrase "disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties imposed in relation thereto". It cannot extend to evaluating the soundness of the interpretation of
tax laws by the CIR.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed
in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the
Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court
of Tax Appeals. Conversely, [the CTA] has no jurisdiction to determine the validity of a ruling issued by the CIR or
the COC in the exercise of their quasilegislative powers to interpret tax laws.

294. CIR v Pilipinas Shell Petroleum

Facts: Respondent filed several formal claims. Since no action was taken by the petitioner on its claims, respondent filed
petitions for review before the CTA.
CTA ruled that respondent is entitled to the refund of excise taxes in the reduced amount. Petitioner’s MR with CTA
likewise denied. Hence, this petition.
Respondent claims it is entitled to a tax refund because those petroleum products it sold to international carriers are not
subject to excise tax, hence the excise taxes it paid upon withdrawal of those products were erroneously or illegally
collected and should not have been paid in the first place. Since the excise tax exemption attached to the petroleum
products themselves, the manufacturer or producer is under no duty to pay the excise tax thereon.

Issue: whether respondent as manufacturer or producer of petroleum products is exempt from the payment of excise tax
on such petroleum products it sold to international carriers?
RULING: NO. The claims for tax refund or credit filed by respondent are DENIED for lack of basis.
Respondent’s locally manufactured petroleum products are clearly subject to excise tax under Sec. 148. Hence, its claim
for tax refund may not be predicated on Sec. 229 of the NIRC allowing a refund of erroneous or excess payment of tax.
Respondent’s claim is premised on what it determined as a tax exemption “attaching to the goods themselves,” which
must be based on a statute granting tax exemption, or “the result of legislative grace.” Such a claim is to be
construed strictissimi juris against the taxpayer, meaning that the claim cannot be made to rest on vague inference. Where
the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes of the nature of an
exemption, the claimant must show that he clearly falls under the exempting statute.

295. Commissioner v Central Luzon Drug

Facts: Respondent filed with petitioner a claim for tax refund/credit allegedly arising from the 20% sales discount.
Unable to obtain affirmative response from petitioner, respondent elevated its claim to the Court of Tax Appeals. The
court dismissed the same but upon reconsideration, the latter reversed its earlier ruling and ordered petitioner to issue a
Tax Credit Certificate in favor of respondent citing that Sec. 229 of RA 7432 deals exclusively with illegally collected or
erroneously paid taxes but that there are other situations which may warrant a tax credit/refund.

CA affirmed Court of Tax Appeal's decision reasoning that RA 7432 required neither a tax liability nor a payment of taxes
by private establishments prior to the availment of a tax credit. Moreover, such credit is not tantamount to an unintended
benefit from the law, but rather a just compensation for the taking of private property for public use.

Issue: Whether or not respondent, despite incurring a net loss, may still claim the 20% sales discount as a tax credit.
Ruling: Yes, it is clear that Sec. 4a of RA 7432 grants to senior citizens the privilege of obtaining a 20% discount on their
purchase of medicine from any private establishment in the country. The latter may then claim the cost of the discount as a
tax credit. Such credit can be claimed even if the establishment operates at a loss.

296. Commissioner v Bicolandia Drug Corp

FACTS: Bicolandia Drug Corporation granted the 20% sales discount to qualified senior citizens purchasing their
medicines in compliance with R.A. No. 7432. It then alleged error that they should have tax credit so it claimed for
refund. CTA: Rev. Reg. No. 2-94 is null and void for being inconsistent with Sec. 4 of RA 7432 that states the discount is
claimed as credit. But, it computed the tax credit as cost of sales / gross income x 20%. It also excluded those sales
without pre-marked cash slips. Both CIR and petitioner appealed. CTA modified its decision to issue a certificate of tax
credit to petitioner.

ISSUE: 1. W/N the discount granted is based on the acquisition cost rather than actual discount granted . 2. W/N petitioner
can claim its refund

RULING: Petition is hereby DENIED Yes. Cost refers to the amount extended to senior citizens. It shall be applied as
tax credit and may be deducted from tax liability. If no current tax due or nnet loss for the period, the credit may be
carried over to the succeeding taxable year. No. The words of statute are clear and free from ambiguity. It must be given
literal meaning. Thus, can only claim as tax credit.

297. CIR v Petron Corp

SUPRA NO. 293.

298. Calamba Steel v Commissioner

FACTS -Petitioner filed an administrative claim for the refund, which allegedly several of its clients withheld taxes from
their income payments to petitioner and remitted to the BIR for the year 1995. It was unable to use the excess tax paid for
and in its behalf by the withholding agents due to its income/loss positions for the three quarters of 1996.
-BIR’s Answer: ‘1) Petitioner has no cause of action; ‘2) Petitioner failed to comply with the procedural requirements set
out in Section 5 of Revenue Regulations No. [(RR)] 12-94; ‘3) It is incumbent upon [p]etitioner to prove by competent
and sufficient evidence that the tax refund or tax credit being sought is allowed under the National Internal Revenue Code
and its implementing rules and regulations; and 4) Claims for tax refund or tax credit are construed strictly against the
taxpayer as they partake the nature of tax exemption.
-Petitioner presented documentary and testimonial evidence. BIR presented the revenue officer who conducted the
examination of petitioner’s claim and found that petitioner liable for deficiency VAT
-CTA: DENIED REFUND:.
-CA: Affirmed
ISSUE WON excess income taxes paid in 1995 that could not be applied to taxes due in 1996 be refunded in 1997
RULING YES.
A tax refund may be claimed even beyond the taxable year following that in which the tax credit arises. Hence, excess
income taxes paid in 1995 that have not been applied to or used in 1996 may still be the subject of a tax refund in 1997,
provided that the claim for such refund is filed with the internal revenue commissioner within two years after payment of
said taxes.
299. Commissioner vs Cebu Holdings-NOT FOUND

300.United International Pictures, AB Vs. Commissioner of Internal Revenue

FACTS: UIP opted to carry-over as tax credit to the succeeding taxable year the overpayments of its income taxes by
putting an "x" mark on the corresponding box. Later, UIP filed its Corporation Annual Income Tax Return for the calendar
year ended December 31, 1999 wherein it reported, with an excess income tax payment. On the face of the 1999 return,
UIP indicated its option by putting an "x" mark on the box "To be refunded." UIP filed with the BIR an administrative
claim for refund. As CIR did not act on UIP’ claim, the latter filed a Petition for review that reached the Supreme Court.
ISSUE: Whether UIP is perpetually barred to refund its tax overpayment for taxable year 1998 since it opted to carry-over
its excess tax.
HELD: Yes, It is clear that once a corporation exercises the option to carry- over, 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. To
avoid confusion, the Court has defined the phrase “ for that taxable year ” as merely identifying the excess income tax,
subject of the option, by referring to the “taxable period when it was acquired by the taxpayer.”
301. CIR v. McGEORGE FOOD INDUSTRIES, INC.
FACTS: R filed its final adjustment return for the calendar year 1998, indicating a tax liability. Instead of applying to the
amount its unused tax credit carried over from 1997, as it was supposed to do, respondent merely deducted from its tax
liability the taxes withheld at source for 1998 and paid the balance. On 14 April 2000, respondent simultaneously filed
with the BIR and CTA a claim for refund of its overpayment in 1997. Petitioner opposed the suit at the CTA, alleging that
the action preempted his own resolution of respondents parallel claim for refund, and, at any rate, respondent has to prove
its entitlement to refund.
ISSUE: Whether or not respondent is entitled to a tax refund for overpayment in 1997 after it opted, but failed, to credit
such to its tax liability in 1998.
HELD: NO. In lieu of refund, respondents overpayment should be applied to its tax liability for the taxable years
following 1998 until it is fully credited. Section 76 of the 1997 NIRC Controls. As respondent opted to carry-over and
credit its overpayment in 1997 to its tax liability in 1998, Section 76 makes respondents exercise of such option
irrevocable, barring it from later switching options to "[apply] for cash refund." Instead, respondents
overpayment in 1997 will be carried over to the succeeding taxable years until it has been fully applied to
respondents tax liabilities.

302. COMMISSIONER VS PHIL AMERICAN LIFE

FACTS: R filed with the (BIR) its (ITR) for the taxable year 1997, [6] declaring a net loss of P165,701,508.
Subsequently, respondent filed with the BIR-Appellate Division a claim for refund, representing a portion of its
accumulated creditable withholding tax. When the BIR-Appellate Division failed to act on respondent's claim, respondent
filed with the CTA a petition for review. CTA denied respondent's claim for refund for lack of merit due to respondent's
failure to present its 1998 ITR.
ISSUE: whether respondent is entitled to a refund of its excess income tax credit in the taxable year 1997 even if it had
already opted to carry-over the excess income tax credit against the tax due in the succeeding taxable years.
HELD: YES. In this case, it is undisputed that respondent indicated in its 1997 ITR its option to carry-over as tax credit
for the next year its tax overpayment. In its 1998 ITR, respondent again indicated its preference to carry-over the excess
income tax credit against the tax liabilities for the succeeding taxable years. Clearly, respondent chose to carry-over and
apply the overpaid tax against the income tax due in the succeeding taxable years.
Under Section 76 of the NIRC of 1997, once the taxpayer exercises the option to carry-over and apply the excess
creditable tax against the income tax due for the succeeding taxable years, such option is irrevocable. [13] Thus, respondent
can no longer claim a refund of its excess income tax credit in the taxable year 1997 because it has already opted to
carry-over the excess income tax credit against the tax due in the succeeding taxable years.

303. Belle Corporation v. CIR

Facts: Instead of claiming the overpayment of income taxes as a tax refund, Belle 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, Belle’s amended
ITR showed an overpayment of P106,447,318.00. On April 12, 2000, Belle 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.
ISSUE: Whether Belle. is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of
P106,447,318.00

Held: YES. In the instant case, both the CTA and the CA applied Section 69 of the old NIRC in denying the claim for
refund. We find, however, that the applicable provision should be Section 76 of the 1997 NIRC because at the time
petitioner filed its 1997 final ITR, the old NIRC was no longer in force. In Commissioner of Internal Revenue v.
McGeorge Food Industries, Inc., we explained that: 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.

304. PASEO REALTY AND DEVELOPMENT CORP. vs. CA

Facts: Petitioner filed with respondent CTA for a refund of excess creditable taxes withholding (CTW) and income taxes
for the years 1989 and 1990. Respondent filed an Answer stating some defenses. The Court rendered decision in favor of
the petitioner. However, CIR filed a Motion for Reconsideration (MFR) alleging that the amount sought to be refunded
“has already been included in the 172, 447 which the petitioner applied as tax credit for the succeeding taxable year 1990.
The appellate court held that petitioner is not entitled to a refund because it appears that the latter did not specify the
amount to be refunded and the amount to be applied as tax credit to the succeeding taxable year, but only marked an “X”
to the box indicating “to be applied as tax credit to the succeeding taxable year” when the latter filed its income tax return
for the year 1989.
Issue: Whether petitioner should be refunded.
Ruling: No. The grant of refund is founded on the assumption that the tax return is valid. Without the tax return, it is error
to grant a refund since it would be impossible to determine whether the proper taxes have been assessed and paid. In this
case, petitioner did not present evidence to prove that its claimed refund had already been automatically credited against
its 1990 tax liability. The burden of proof to establish the factual basis of claim for tax credit or refund lies on the
claimant. Tax refunds are construed strictly against the taxpayer.
Under the provision, the taxpayer is allowed three (3) options if the sum of its quarterly tax payments made during the
taxable year is not equal to the total tax due for that year:
• pay the balance of the tax still due;
• carry-over the excess credit; or
be credited or refunded the amount period.

305. COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS. PL MANAGEMENT INTERNATIONAL

PHILIPPINES, INC., RESPONDENT.
FACTS: The inaction of petitioner on the respondent's written claim for tax refund or tax credit impelled the latter to
commence judicial action for that purpose in the CTA. However, the CTA denied the claim for being brought
beyond two years from the accrual of the claim. (CA) reversed the CTA's denial and directed the petitioner to refund the
unutilized creditable withholding tax to the respondent, hence, the petitioner appeals. It was denied by the CTA because of
prescription. Aggrieved, the respondent appealed to the CA, assailing the correctness of the CTA's denial of its judicial
claim for refund on the ground of bar by prescription. The CA partly granted the petition. The CA rejected the petitioner's
motion for reconsideration
ISSUES:WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE TWO-YEAR
PRESCRIPTIVE PERIOD UNDER SECTION 229 OF THE TAX CODE IS NOT JURISDICTIONAL,THUS THE
CLAIM FOR REFUND OF RESPONDENT IS SUSPENDED FOR REASONS OF EQUITY.
Held: We reverse and set aside the decision of the CA to the extent that it orders the petitioner to refund to the respondent
the P1,200,000.00 representing the unutilized creditable withholding tax in taxable year 1997, but permit the respondent
to apply that amount as tax credit in succeeding taxable years until fully exhausted. The respondent became barred from
claiming the refund. However, in view of it irrevocable choice, the respondent remained entitled to utilize that
amount of P1,200,000.00 as tax credit in succeeding taxable years until fully exhausted. In this regard, prescription
did not bar it from applying the amount as tax credit considering that there was no prescriptive period for the
carrying over of the amount as tax credit in subsequent taxable years.

306. Raytheon Ebasco Vs Commissioner –NOT FOUND

CHAPTER XXXI – TAX CREDIT OR REFUND

307. Far East Bank vs. Commissioner (720)

Facts: Petitioner reinvested retirement funds in various money market placements, bank deposits, etc. which earned
interest income. Petitioner then claimed for refund on the tax withheld and paid to the CIR for the 4 quarters of 1993 on
the interest income on the ground that employees’ trusts are exempted from income taxation. The claims for refund were
denied. By this time, petitioner already had a pending petition before the CTA involving the same legal issue but a
previous taxable period. Petitioner then filed another petition for review on its claim for refund for 1993 which was denied
due to prescription.

Issue: Whether the period for filing an action for tax refund has prescribed?

Ruling: Yes. The Court ruled that the income from employees’ trusts is exempted from income tax. However, period for
filing an action for tax refund had prescribed.

Book: While income from employees trust funds were exempt from income taxes, the claims for refund had already
prescribed insofar as they covered the first, second, and third quarters of 1993 as well as for October 1 to 8, 1993. The
claim for refund for October 9 to December 31, 1993 was also denied, the evidence being insufficient to establish the fact
that the money or assets of the trust funds were used or placed in money market placements, bank deposits, other deposit
substitute instruments and government securities. The burden of proving the claim for refund necessarily falls on the
taxpayer and petitioner failed to discharge the necessary burden of proof.

308. Commissioner vs. United International Pictures (721) (CA G.R. SP No. 65211 – CA Case)

SUPRA CASE NO. 300

Book: It is necessary for the CIR to act unfavourably on the claim for refund before the CTA may acquire jurisdiction,
because of the positive requirement of Sec. 230 of the Tax Code and the doctrine that delay of the Commissioner in
rendering decision does not extend the peremptory period fixed by the statute. The claim for refund should be filed with
the Commissioner as a pre-requisite before court action on tax refund cases can be commenced and that the suit for refund
must be filed within 2 years from date of payment of tax. When the 2-year period is about to prescribe and the claim for
refund with the Commissioner had not been acted upon, the taxpayer should file a petition for review with the CTA within
the 2-year period; otherwise, if the Commissioner’s decision is adverse, the taxpayer could no longer appeal to the CTA.

309. Compagnie Financiere Sucres vs. Commissioner (721)

Facts: By Deed of Sale and Assignment of Subscriptions and rights of Subscriptions, P assigned 8% equity interest in
Makati-Shangrila (which consists of definite no. of shares, deposit on stock subscriptions, and right of subscription) to
Kerry Holdings Ltd. Correspondingly, the Documentary Stamp Tax (DST) and Capital Gains Tax (CGT) were paid; but
under protest. Petitioner alleged that there are overpayments of those taxes. For the petitioner, transfer of
deposit on stock subscriptions is not subject to DST and CGT; there is no gain to speak of, since it is not
considered as sales or assignment of stocks. CIR did not act on the said refund; the CTA ruled against the petitioner
stating that tax exemption or refund must be strictly construed against the petitioner. The CA affirmed the CTA’s ruling.

Issue: Whether the CA erred in affirming the CA’s ruling?

Ruling: No.

Book: He who claims a refund or exemption from taxes has the burden of justifying the exemption by words too plain to
be mistaken and too categorical to be misinterpreted.

310. CIR vs. PL Management Int’l Phils. (722)

Facts: PL filed with the CIR a written claim for the refund of the P1,200,000.00 unutilized creditable
withholding tax for taxable year 1997. However, the CIR did not act on the claim.

Due to the CIR’s inaction, PL filed a petition for review in the CTA.

CTA: Denied PL’s claim on the ground of prescription. It says that PL filed its Annual ITR on April 13, 1998 and
filed its judicial claim for refund only on April 14, 2000 which is beyond the 2-year period earlier discussed.
The aforequoted Secs. 204 (C) and 229 of the Tax Code mandates that both the administrative and judicial claims
for refund must be filed within the 2-year period, otherwise the taxpayer's cause of action shall be barred by
prescription. Unfortunately, this lapse on the part of Petitioner proved fatal to its claim.

CA: The 2-year prescriptive period, which was not jurisdictional, might be suspended for reasons of equity. The petition
of PL is partly GRANTED and the assailed CTA Decision is partly ANNULLED. The CIR is hereby ordered to
refund to PL Management International Phils., Inc., the amount of P1,200,000.00 representing its unutilized
creditable withholding tax in taxable year 1997.

Issue: Whether PL is entitled to the refund of the unutilized creditable withholding tax of
P1,200,000?

Ruling: No based on Sec. 76, NIRC. However, the SC permits PL to apply the amount as tax credit in the succeeding
taxable years until fully exhausted.

Book: The carry-over of excess income tax payments is no longer limited to the succeeding 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.

311. Bermejo vs. CIR

Facts: The CIR informed Bermejo that for sales of nipa shingles and charcoal, the latter owed the Government the sum of
P1,083.75. He objected to the assessment, contending mainly that the products were agricultural, and as such, free from
taxation; but after the exchange of some correspondence he at last proposed to pay the tax by instalments. However, after
paying the first installment, he sued for recovery.

Issue: Whether Bermejo can recover the taxes paid?

Ruling: No. The conditions required by the Tax Code before the CIR can authorize the refund or credit of taxes
erroneously or illegally received are: (1) a written claim for refund is filed by the taxpayer with the CIR, (2) the claim for
refund must be a categorical demand for reimbursement, and (3) the claim for refund or tax credit must be filed with the
Commissioner, or the suit or proceeding therefore must be commenced in court within 2 years from date of payment of
the tax or penalty, regardless of any supervening cause.

312. Commissioner vs. Wander Philippines

Facts: Wander Philippines had been remitting 35% of its earnings to the BIR when it claimed a tax refund, stating that it
was only liable for 15% withholding tax in accordance with Sec. 24 (b) (1) of the Tax Code.

Issue: Whether a withholding agent, Wander Philippines, is allowed to claim for tax refund?

Ruling: Yes. A withholding agent should be allowed to claim for tax refund, because under the law, said agent is the one
who is held liable for any violation of the withholding tax law should such violation occur.

313. Commissioner vs. Procter & Gamble, Philippines

Facts: P&G Phils. declared dividends payable to its parent company and sole stockholder. P&G Phils. paid a 35%
dividend withholding tax to the BIR which amounted to P8.3M. It subsequently filed a claim with the CIR for a refund or
tax credit, claiming that pursuant to Sec. 24 (b) (1) of the NIRC, the applicable rate of withholding tax on the dividends
remitted was only 15%.

Issue: Whether a withholding agent, P&G Phils. is allowed to claim for tax refund?

Ruling: Yes. Since the withholding agent is made personally liable to deduct and withhold any tax under Sec. 53 (C) of
the Tax Code, it is imperative that he be considered the taxpayer for all legal intents and purposes. Thus, by any
reasonable standard, such person should be regarded as a party-in-interest to bring suit for refund of taxes.

314. Marubeni vs. Commissioner

Facts: When the profits on Marubeni Corporation’s investments in Atlantic Gulf and Pacific Co. of Manila were declared,
a 10% final dividend tax was withheld from it and another 15% profit remittance tax based on the remittable amount after
the final 10% withholding tax were paid to the BIR. Marubeni Corporation now claims for a refund or tax credit for the
amount which it has allegedly overpaid the BIR.

Issue: Whether Marubeni Corporation is entitled to refund or tax credit?

Ruling: No. The remittance tax should be computed on the amount actually remitted. Hence, Marubeni Corporation did
not overpay its remittance taxes and thus cannot claim for refund or tax credit.

315. Bagatsing vs. Ramirez

Facts: Ramirez contends that the market stall fees imposed by City Ordinance No. 7522, which regulates public markets
and prescribes fees for rentals of stalls, are diverted to the exclusive private use of Asiatic Integrated Corporation, since
the collection of said fees had been let by the City of Manila to the said corporation in a Management and Operating
Contract, hence violative of the principle of taxation that taxes are imposed for public purposes.

Issue: Whether the delegation of the collection of taxes defeats its public purpose?

Ruling: No. The fees collected do not go direct to the private coffers of the corporation.

The taxpayer who feels aggrieved by actions taken by tax authorities may not seek redress in the courts of justice without
first exhausting available administrative remedies, except for certain well-recognized exceptions.

316. Tapales vs. President and the Board of Regents of UP

Facts: The President of UP promulgated a Resolution regarding the limitation of the terms of office and the
recommendation for reappointment of all deans of colleges and directors. Tapales, not having been recommended for re-
appointment as the Acting Director of the Conservatory of Music, presented to the CFI a petition asking that the
Resolution of the Board of Regents be declared unconstitutional. Respondents contend that petitioner failed to exhaust
administrative remedies.

Issue: Whether the respondents are correct?

Ruling: No. The principle of exhaustion of administrative remedies is not applicable where the question in dispute is
purely a legal one.

317. Mangubat vs. Osmeña

Facts: Mangubat and Mundo’s employment as detectives of the Police Department of Cebu City were terminated by the
City Mayor for lack of trust and confidence. Having failed to secure reinstatement, petitioners filed petitions for quo
waranto and mandamus. The respondent questioned the failure of petitioners to exhaust administrative remedies.

Issue: Whether the petitioners failed to exhaust administrative remedies?

Ruling: No. When the City Mayor’s act is (1) clearly and obviously devoid of any color of authority or (2) where the
controverted act is patently illegal or was performed without justification or in excess of jurisdiction as in the case at bar,
the employee adversely affected may forthwith seek the protection of the judicial department.

318. Marinduque Iron Mines vs. Secretary of Public Works

Facts: The petitioner made certain constructions near the mouth of Calat-an Creek in Negros Occidental. The Secretary of
Public Works and Communications, after a report, conducted an investigation and rendered a decision ordering the
petitioner to remove the causeway illegally constructed at the mouth of the creek and restore the bed of said creek to its
original condition.

Without appealing the decision of the respondent to the Office of the President (OP), the petitioner filed with the SC a
Petition for Certiorari seeking that the decision of respondent be annulled.

Issue: Whether it is necessary to appeal a decision of the department head to the OP before seeking judicial intervention?

Ruling: No, the assumption is that the action of the secretary bears the implied action of the President, unless the same is
disapproved by the latter.

319. Gonzales vs. Hechanova

Facts: Respondent executive secretary authorized the importation of 67,000 tons of foreign rice to be purchased from
private sources. Petitioner filed a petition and averred that such act is violative of R.A. 2207 since the said law prohibits
the importation of rice and corn by the Rice and Corn Administration or any government agency.

Issue: Whether an international agreement, such as in the case at bar, may be invalidated by our courts?

Ruling: A judicial declaration of illegality of the proposed importation would not compel our government to default in the
performance of such obligations as it may have contracted with the sellers of rice in question because aside from the fact
that said obligations may be complied without importing the said commodity into the Philippines, the proposed
importation may still be legalized by complying with the provisions of the aforementioned law.

Where there are circumstances indicating the urgency of judicial intervention, it may then be resorted to.
320. Muller & Phipps vs. Collector

Facts: Petitioner imported raw materials and paid the advance sales taxes for the same upon their withdrawal from
customs custody. Because of the lack of packaging materials, petitioner was not able to use all of said raw materials. It
shipped back to its supplier in the United States the unused materials to prevent their deterioration.

Petitioner filed with the CIR a claim for the refund of the advance sales taxes paid on said goods. The Collector denied it.
In the CTA, the Collector moved to dismiss petitioner’s petition for review on the ground that it was filed beyond the 2
year prescriptive period.

Issue: Whether the 2 year limitation period applies in this case?

Ruling: No. Said period of limitation cannot apply to cases where the taxes so assessed, collected, and paid were
legitimately due and were not wrongfully or erroneously collected, but, by reason of some supervening circumstances, the
taxpayer became entitled to a partial refund of the taxes previously paid.

While the Tax Code authorizes a taxpayer to claim for the refund or credit of any taxes alleged to have been erroneously
or illegally collected from him, nowhere and in no wise does the law imply that the Commissioner on the claim for refund
must be construed as a reaffirmation of the original action taken by him and an implied denial of the claim for refund or
credit.

321. Gibbs vs. Collector

Facts: Respondent issued against the petitioners a Deficiency Income Tax Assessment. Allison, signing as attorney-in-fact
for Finley, his brother, questioned the disallowance of the items which gave rise to the deficiency assessment and
requested for a correction of it. It was denied.

In the CTA, petitioners filed a "Petition for Review and Refund of Income Tax with Motion for Suspension of Collection
of Additional Taxes." The CTA sustained the objection and claimed that the causes of action asserted by the petitioner
were barred by prescription.

Issue: Whether the petitioners’ action is barred by prescription?

Ruling: Yes. If no decision is received from the Commissioner on the claim for refund or credit and the 2 year period for
instituting court action is about to expire, the taxpayer must file the court action without waiting for the action of the
Commissioner on the administrative claim, if he is not to lose the right to judicial remedy, since the written claim for
refund does not toll the statutory limitation of 2 years.

322. Koppel Corporation vs. Collector

Facts: The petitioner sustained losses arising from the occupation of the Japanese Military in the Philippines.

The petitioner paid under protest with the BIR the assessments made by the CIR.

Petitioner repeatedly sought from respondent a reconsideration and a refund of the amount of P34,636.21 later reduced to
P30,726.21. This was however repeatedly denied.

The petitioner then filed a petition for review with the Board of Tax Appeals (BTA) praying that the respondent be ordered
to refund to the petitioner the sum of P30,726.53. The BTA ruled that it was already filed out of time.

Issue: Whether the right to claim for refund has already prescribed?

Ruling: Yes. The petitioner is estopped by laches.

The time for an action for refund of income tax is fixed by statute and is not extended by the delay of the Commissioner in
giving notice of the rejection of such claim.

323. COMMISSIONER OF INTERNAL REVENUE VS. TMX SALES, INC. AND COURT OF TAX APPEALS

Facts: TMX filed its Annual Income Tax Return for the year ended in December 31, 1981. It declared a net loss of
P6,156,525. It filed with the BIR a petition for refund in the amount of P247,010 representing overpaid income tax. His
claim was not acted upon by the CIR; TMX Sales filed a petition for review before the CTA. The CIR averred that TMX
is already barred for claiming the refund since more than 2 years has elapsed between the payment (May 15, 1981) and
the filing of the claim in court (March 14, 1984).

Issue: Whether TMX Sales Inc. is entitled to a refund considering that the 2 years gap already elapsed since the payment
of the tax?

Ruling: Yes. The most reasonable and logical application of the law would be to compute the 2-year prescriptive period at
the time of the filing of the Final Adjustment Return or the Annual Income Tax Return, where it can finally be ascertained
if the tax payer has still to pay additional income tax or if he is entitled to a refund of overpaid income tax. Since TMX
filed the suit on March 14, 1984, it is within the 2-year prescriptive period starting from April 15, 1982 when they filed
their Annual Income Tax Return.
324. COMMISSIONER OF INTERNAL REVENUE VS. CARLOS PALANCA

Facts: The BIR assessed against the respondent the sum of P191,591.62 as estate and inheritance taxes. The respondent
filed an amended ITR, claiming a deduction in the amount P60,581.80; hence, his new income tax due is only P428. He
attached a letter requesting the refund of P20,624.01. However, the said request for refund was denied by the BIR, it being
filed out of time.

Issue: Whether the respondent’s claim for refund has prescribed?

Ruling: No. Considering that it is the interest paid on this latter-assessed estate and inheritance tax that respondent is
claiming for refund, then the 30-day period for prescription under R.A. 1125 should be computed from the receipt of the
final denial by the BIR of the said claim.

Inasmuch as the said account was paid by him by installment, then the computation of the 2-year prescriptive period,
under Sec. 306 of the NIRC, should be from the date of the last installment.

Respondent paid the last installment on his 1955 income tax account on August 14, 1956. His claim for refund was filed
on August 13, 1958. It was, therefore, still timely instituted.

325. COMMISSIONER OF INTERNAL REVENUE VS. THE PHILIPPINE AMERICAN LIFE INSURANCE
CO., THE COURT OF TAX APPEALS, AND THE COURT OF APPEALS

Facts: On 1983, Philamlife declared a net taxable income and a tax due. After crediting the amount of P3,899,525 as tax
credit, it declared a refundable amount of P3,158,061.

On 1984, Philamlife filed a claim for its 1982 income tax refund of P133,084. On the same year, it filed a petition for
review with the CTA with respect to its 1982 claim for refund.

On 1985, it filed another claim for refund. On 1986, Philamlife filed a petition for review with the CTA regarding its 1983
and 1984 claims for refund.

Later, it amended its petition by limiting its claim for refund to only P3,858,757.

The CIR contends that the refund was already filed out of time.

Issue: Whether the running of the prescriptive period commences from the remittance/payment at the end of the 1 st quarter
of the tax withheld instead of from the filing of the Final Adjustment Return?

Ruling: The latter. The prescriptive period of 2 years should commence to run only from the time that the refund is
ascertained, which can only be determined after a Final Adjustment Return is accomplished. In the present case, this date
is April 16, 1984, and 2 years from this date would be April 16, 1986. The record shows that the claim for refund was filed
on December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within
the 2-year reglementary period.

Moreover, even if the two-year period had already lapsed, the same is not jurisdictional and may be suspended for reasons
of equity and other special circumstances.

326. HPCO AGRIDEV CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

Facts: On April 20, 2001, Agridev submitted to the Commissioner its Quarterly VAT Returns for the 1 st to 4th quarters of
taxable year 1997, and the Monthly Remittance Returns of Income Taxes Withheld for the months of January to
December 1997.

As of October 17, 2001, the Commissioner had not yet resolved Agridev’s protest. To prevent the assessment notices from
becoming final and executory, Agridev filed this petition before the CTA on November 16, 2001.

Issue: Whether the assessment notices are already became final and executory?

Ruling: Yes. Both the assessment notice and demand letter were mailed only on January 16, 2001. Apparently, the
assessments made on January 16, 2001 for deficiency VAT covering the taxable year 1997 had already prescribed with
respect to the 1st, 2nd, and 3rd quarters thereof.

As to the deficiency expanded withholding tax, the 3-year period shall be counted from the last day required by law for
filing a monthly remittance return (which is 10 days after the end of each month from January to November, and 25 days
after the end of December). Consequently, the assessment notice received by the petitioner on January 24, 2001 for
deficiency expanded withholding tax had already prescribed for the months of January to November of 1997.

327. CONTINENTAL MICRONESIA, INC. – PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL

REVENUE

Facts: On September 10, 1998, petitioner received a PAN for the deficiency in withholding tax on compensation and on
the expanded withholding tax. Micronesia objected on October 15, 1998, which resulted to the reinvestigation of the case.
On December 29, 1999, another assessment notice was issued based on the report of reinvestigation reiterating the said
deficiency taxes in the respective amounts of P2,501,523.64 and P93,193.66. This was received by Micronesia on January
5, 2000.

On February 4, 2000, Micronesia filed an administrative protest due to prescription and lack of factual and legal bases.
Within 30 days from the lapse of 180 days from the submission of supporting documents, Micronesia filed for petition for
review before the CTA.

Issue: Whether the assessments are barred by prescription?

Ruling: Yes. Micronesia points out that under Sec. 5 of Revenue Regulations No. 6-85, the filing of the annual return of
income tax withheld at source shall be made on or before the 1 st day of March of the following year in which the payments
were made. However, Micronesia filed its annual information returns of income tax withheld on compensation and
expanded withholding taxes paid for the year 1995 on earlier dates of January 30, 1996 and February 26, 1966. Hence, the
counting of the 3-year period commences on the last day prescribed by law for the filing of return, that is, March 1, 1996,
because in this case the said returns were filed before the last day prescribed by law for its payment.

Hence, the Commissioner had until March 1, 1999 to assess the 1995 tax liability of Micronesia. Since the assessments
were received by Micronesia on January 5, 2000, they were made and issued beyond the prescriptive period.

328. COMMISSIONER OF INTERNAL REVENUE VS. COURT OF APPEALS, COURT OF TAX APPEALS,
AND A. SORIANO CORPORATION

Facts: ANSCOR is a corporation wholly owned and controlled by the family of Don Andres Soriano. The BIR assessed
ANSCOR for deficiency withholding tax-at-source, pursuant to Secs. 53 and 54 of the 1939 Revenue Code based on the
transactions of exchange and redemption of stocks.

ANSCOR claims that it availed of the tax amnesty under P.D. 23 as amended by P.D.’s 67 and 157. However, the
Commissioner ruled that the invoked decrees do not cover Secs. 53 and 54 in relation to Art. 83 (b) of the 1939 Revenue
Act under which ANSCOR was assessed.

Issue: Whether a withholding agent, A. Soriano Corp., can be deemed a taxpayer for it to avail of tax amnesty?

Ruling: No. A. Soriano Corp. cannot be deemed a taxpayer for it to avail of a tax amnesty under a Presidential decree
that condones “the collection of all internal revenue taxes including the increments or penalties on account of non-
payment as well as all civil, criminal, or administrative liabilities arising from or incident to voluntary disclosures under
the NIRC of previously untaxed income and/or wealth realized here or abroad by any taxpayer, natural or juridical”.

The withholding agent is not a taxpayer, he is a mere tax collector. Under the withholding system, however, the agent-
payer becomes a payee by fiction of law. His liability is direct and independent from the taxpayer, because the income tax
is still imposed and due from the latter. The agent is not liable for the tax as no wealth flowed into him, he earned no
income.

329. ATLAS CONSOLIDATED MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

Facts: Atlas filed with the BIR the application for the refund/credit of its input VAT on its purchases of capital goods and
on its zero-rated sales. When its application for refund/credit remained unresolved by the BIR, Atlas filed a petition for
review with the CTA. The CTA denied the claims on the ground that for zero-rating to apply, (1) 70% of the company’s
sales must consist of exports, (2) that the same were not filed within the 2-year prescriptive period (the claim for 1992
quarterly returns were judicially filed only on April 20, 1994), and (3) that Atlas failed to submit substantial evidence to
support its claim for refund/credit.

Issue: Whether the claims were filed within the 2-year prescriptive period?

Ruling: Yes. The filing of a quarterly income tax returns required in Sec. 85 and implemented per BIR Form 1702-Q and
payment of quarterly income tax should only be considered mere installments of the annual tax due.

These quarterly tax payments which are computed based on the cumulative figures of gross receipts and deductions in
order to arrive at a net taxable income, should be treated as advances or portions of the annual income tax due, to be
adjusted at the end of the calendar or fiscal year. This is reinforced by Sec. 87 which provides for the filing of adjustment
returns and final payment of income tax.

Consequently, the 2-year prescriptive period should be computed from the time of filing the Adjustment Return or Annual
Income Tax Return and final payment of income tax.

330. SANTIAGO M. BERMEJO VS. COLLECTOR OF INTERNAL REVENUE

Facts: On June 25, 1946, the CIR determined and so informed Bermejo, that for sales of nipa shingles and charcoal, the
latter owed the Government the sum of P1,083.75. He objected to the assessment at first, but later on proposed to pay the
tax by installments. His request was granted. After paying the first installment, he sued for recovery.
The Collector filed for a motion to dismiss the complaint on the ground that Bermejo had not complied with Sec. 306 of
the Internal Revenue Law, inasmuch as Bermejo had not before suing, filed a claim with the Collector of the amount he
had delivered.

Issue: Whether it was proper for Bermejo to have automatically resorted to judicial action by suing for recovery?

Ruling: No. The law clearly stipulates that after paying the tax, the citizen must submit a claim for refund before resorting
to the courts.

Previous objections to the tax may not take place of that claim for refund, because there may be reason to believe that, in
paying, the tax payer has finally come to realize the validity of assessment.

331 – Case cannot be found

332. Commissioner vs. Primetown Property Group

FACTS: Gilbert Yap, the Vice President of Primetown applied for refund of the income tax which they have paid on 1997.
According to Yap, the company accrued losses which enabled them to be exempt from paying income tax. Respondent
filed its final adjusted return and was therefore claiming a refund. Respondents submitted requirements but the petitioners
ignored their claim. As such, this prompted respondent to filed a review in the Court of Tax Appeals. The said Court,
however, denied the petition stating that the petition was filed beyond the 2-year prescriptive period for filing judicial
claim for tax refund.

ISSUE: Is the claim for refund barred by prescription?

RULING: NO. The prescriptive period of 2years should commence to run only from the time that the refund is
ascertained, which can only be determined after a final adjustment return is accomplished, regardless of any supervening
cause that may arise thereafter.

333. Philippine Bank of Communications vs. Commissioner

FACTS: PBCom filed its income tax returns, reported profits, and paid the total income tax. Subsequently, however,
PBCom suffered net loss for the next two years, thereby showing no income tax liability in its Annual Income Tax
Returns. But during these two years, PBCom earned rental income from leased properties. The lessees withheld and
remitted to the BIR. Thereafter, petitioner filed its final adjusted return and a claim for refund of creditable taxes withheld
by their lessees from property rentals. Pending the investigation of the Commissioner, petitioner instituted a Petition for
Review (CTA). The CTA decided in favor of the BIR on the ground that the Petition was filed out of time as the same was
filed beyond the two-year reglementary period.

ISSUE: Whether or not the petition for tax refund had already prescribed.

RULING: Since the petition had been filed beyond the prescriptive period, the same has already prescribed. The Tax code
provides that all suits or proceedings shall be filed before the expiration of 2 years from the date of payment of the tax or
penalty, regardless of any supervening event that may arise after payment. This means that the 2 year prescriptive period
is reckoned from the filing of the final adjusted return.

334. Aguila vs. CFI (not related sa Tax.)

Doctrine: Equity is available only in the absence of law and not as its replacement.

335. Tamio vs. Ticson(not related sa tax.)

Doctrine: Equity as the complement of legal jurisdiction seeks to reach and do complete justice where courts of law,
through the inflexibility of their rules and want of power to adopt their judgments to the special circumstances of cases are
incompetent to do.

336. Repulic vs. Limaco & De Guzman

FACTS: Respondent is engaged in the importation of cigarettes. The company filed with the BOC entry papers covering
shipment of 2M “spud” cigarettes it had imported from New York. CIR assessed it for deficiency taxes. It remained
unpaid. Respondent sent a letter informing the CIR that it was tendering payment of the sum of 3000. Petitioner filed a
claim in the CFi for forfeiture of bonds and payment of deficiency tax. Respondent seeks the refund of the 3000 it had
previously paid

ISSUE: Can respondent claim the 3000 it had previously paid?

RULING: No. A taxpayer must first file "a claim for refund or tax credit with the Collector of Internal Revenue", before
maintaining a suit or proceeding in any court for the recovery of any internal revenue tax alleged to have been erroneously
or illegally assessed or collected. This provision is mandatory and a condition precedent to the prosecution of a suit for the
recovery of taxes said to have been erroneously or illegally collected, the non-compliance of which bars the action, nay, it
subjects the claim to dismissal, for lack of cause of action.
337. MERALCO vs. Commissioner CTA case- can’t be found

Doctrine: The return of erroneously paid is founded on the principle of solution indebiti, a basic postulate that no one
should be unjustly enrich himself at the expense of another. The caveat against unjust enrichment covers the government.
And as decisional law teaches, a claim for tax refund necessitates only the preponderance of evidence threshold.

338. Gonzales vs. CTA can’t be found (CTA case)

Doctrine: The filing of an administrative claim for refund is necessary in order to afford the Commissioner an opportunity
to consider the claim and to have a chance to correct the errors of subordinate officers.

339. Bermejo vs. Collector

FACTS: Bermejo owed the gov’t the sum of 1,083 for the sales of nipa shingles and charcoal. He objected to the
assessment, contending mainly that the products were agricultural, and as such, free from taxation; but after the exchange
of some correspondence he at last proposed to pay the tax by instalments. After paying the first installment, he sued for
recovery. The Collector submitted a motion for dismissal of the complaint on the ground that Bermejo did not file a claim
for refund.

ISSUE: Is the filing of an administrative claim for refund with the BIR necessary?

RULING: YES. The law clearly stipulates that after paying the tax, the citizen must submit a claim for refund before
resorting to the courts. The idea probably is, first, to afford the collector an opportunity to correct the action of subordinate
officers; and second, to notify the Government that such taxes have been questioned, and the notice should then be borne
in mind in estimating the revenue available for expenditure.

340. RCBC vs. Commissioner

FACTS: RCBC received Letter of Authority by the CIR authorizing a special audit team to examine the books of
accounts. RCBC executed two Waivers of the Defense of Prescription covering the internal revenue taxes due for the
years 1994 and 1995. Subsequently, RCBC received a Formal Letter of Demand together with Assessment Notices from
the BIR for the following deficiency tax assessments. CIR amended the assessment. RCBC filed a protest and later
submitted the relevant documentary evidence to support it. Much later, it filed a petition for review before the CTA.
RCBC now argued that the waivers of the Statute of Limitations which it executed were not valid because the same were
not signed or conformed to by the CIR as required under Section 222(b) of the Tax Code.

ISSUE: Whether a taxpayer is estopped from questioning the validity of the said waiver (on the basis that the CIR did not
sign it)?
RULING: Yes. RCBC impliedly admitted the validity of the waivers. Had petitioners believed that the waivers were
invalid, then it should have paid the reduced amount of taxes in the revised assessment. To hold otherwise would run
counter to the principle of equity.

341. Roman Catholic Archbishop of Cebu v Collector (735)

Facts: Petitioner paid under protest the sum of P5,201.52 by way of income tax, surcharge and interest and, forthwith,
filed a petition for review before the CTA. Then respondent CIR set up several defences, one of which was the petitioner
had failed to first file a written claim for refund, pursuant to section 306 (now 229) of the tax code, of the amounts paid.
Convinced that the lack of a written claim for refund was fatal to petitioner’s recourse to it, the CTA dismissed the petition
for lack of jurisdiction.

Issue: W/N TP needs to file a separate claim for refund to forestall WDL

Ruling: No. On appeal to this court, the Court held:

We agree with petitioner that Section 7 of Republic Act No. 1125, creating the Court of Tax Appeals, in providing for
appeals from -

(1) Decisions of the Collector of Internal Revenue in cases involving disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law or part of the law administered by the Bureau of Internal Revenue allows an appeal from a
decision of the Collector in cases involving `disputed assessments’ as distinguished from cases involving `refunds of
internal revenue taxes, fees or other charges, x x x’; that the present action involves a disputed assessment’; because from
the time petitioner received assessments Nos. 17-EC-00301-55 and 17-AC-600107-56 disallowing certain deductions
claimed by him in his income tax returns for the years 1955 and 1956, he already protested and refused to pay the same,
questioning the correctness and legality of such assessments; and that the petitioner paid the disputed assessments
under protest before filing his petition for review with the Court a quo, only to forestall the sale of his properties that
had been placed under distraint by the respondent Collector since December 4, 1957. To hold that the taxpayer has
now lost the right to appeal from the ruling on the disputed assessment but must prosecute his appeal under section
306 of the Tax Code, which requires a taxpayer to file a claim for refund of the taxes paid as a condition precedent to
his right to appeal, would in effect require of him to go through a useless and needless ceremony that would only delay
the disposition of the case, for the Collector (now Commissioner) would certainly disallow the claim for refund in the
same way as he disallowed the protest against the assessment. The law, should not be interpreted as to result in
absurdities.”
The Court sees no cogent reason to abandon the above dictum and to require a useless formality that can serve the
interest of neither the government nor the taxpayer. The tax court has aptly acted in taking cognizance of the
taxpayer’s appeal to it.

342. Tang Ho v Collector

CANNOT BE FOUND

BOOK: APPEAL OF FINAL DECISION OF COMMISSIONER TO SECRETARY OF FINANCE DID NOT

INTERRUPT RUNNING OF PERIOD TO MAKE AN APPEAL TO CTA.
An appeal to the final decision of the Commissioner to the Secretary of Finance will not interrupt the running of the
period for appeal to the CTA since the Secretary of finance is not the officer designated by law to pass upon the merits
of motions for reconsideration or protests of disputed assessments.

343. Western Minolco Mining Corporation v Plana

Nature of the case:

Petition for review on certiorari of the Court of Tax Appeals’ decision denying petitioner’s claim for refund of P1.3M
representing money market transaction taxes which the petitioner paid.

Facts:
In 1972, petitioner [a domestic corporation engaged in mining] was granted with a Certificate of Qualification for Tax
Exemption by the Bureau of Mines. In 1977, pursuant to the authority granted by SEC authorizing it to borrow money and
issue commercial papers, petitioner borrowed funds from several financial institutions and paid the corresponding 35%
transaction tax due [P1.3M] thereon pursuant to Section 210 (b) of the 1977 NIRC.

However in 1978, petitioner applied for refund of said amount alleging that it was not liable to pay under its Certificate of
Qualification for Tax Exemption, the The Mining Act, and Mineral Resources Development Decree of 1974. In 1979, the
CIR denied the claim holding, among others, that the 35% transaction tax is a tax on the interest earnings of the lender
who is actually the taxpayer on whose income, the tax is imposed, and that the 35% transaction tax is levied on
transactions pertaining to commercial papers issued in the primary money market as principal instruments, thus not a
business tax.

Petitioner went to CTA via petition for review, which in turn, dismissed the petition in 1982 for lack of merit. Hence, the
petition. Petitioner argues that the 35% transaction tax is a business tax because the Revenue Code itself classifies it as
"Business Tax" under Title V; and that PD No 1154 provides that the transaction tax shall be allowed as a deductible item
for purposes of determining the borrower’s taxable income. Since it is not an income tax, but a business tax, petitioner is
exempt from the 35% transaction tax.

When is there a business tax? - [Clearly, the transaction tax of P1,317,801.03 paid by the petitioner was not actually
imposed upon it in the conduct of its mining business or in the importation of machinery, spare parts and/or equipment
listed in the stamped "ANNEX I" of its certificate of qualification for tax exemption and which are indispensable in the
operation and used exclusively on petitioner’s mineral land.]

Issue:

Who is the proper person to claim refund or credit?

Whether the 35% transaction tax is a business tax to which petitioner is exempt under the mining law. [NO]

RULING/ Book:

1. The proper person to claim refund or tax credit is the person on whom the tax is imposed by the statue.

2. The 35% transaction tax is imposed on interest income from commercial papers issued in the primary money
market. Being a tax on interest, it is a tax on income.

Taxation; the 35% transactions tax is a tax on the interest income of the lender and, therefore, a mining company
who borrowed money, and withheld and paid said tax on interest paid to the lender cannot claim exemption
therefrom even if it has a tax exemption certificate - as a mining company
“The 35% transaction tax is an income tax on interest earnings to the lenders or placers. The latter are actually the
taxpayers. Therefore, the tax cannot be a tax imposed upon the petitioner. In other words, the petitioner who borrowed
funds from several financial institutions by issuing commercial papers merely withheld the 35% transaction tax before
paying to the financial institutions the interests earned by them and later remitted the same to the respondent
Commissioner of Internal Revenue. The tax could have been collected by a different procedure but the statute chose this
method. Whatever collecting procedure is adopted does not change the nature of the tax.”

Deductibility or non-deductibility from gross income does not determine the nature of the tax. [chanrobles]
“Whether or not certain taxes are on income is not necessarily determined by their deductibility or non-deductibility from
gross income. As correctly observed by the Solicitor General, income in the form of dividends, capital gains on real
property pursuant to Batas Pambansa Blg. 37, shares of stock pursuant to Presidential Decree 1739, and interests on
savings in bank accounts, for instance, are incomes, yet they are not includible in the gross income when income taxes are
paid because these are subject to final withholding taxes.

The location of the 35% tax in the Tax Code does not necessarily determine its nature. A tax is a tax on income
even if located on the Code’s provisions on business taxes.

344. Commissioner v Procter & Gamble

FACTS:
Procter and Gamble Philippines declared dividends payable to its parent company and sole stockholder, P&G USA. Such
dividends amounted to Php 24.1M. P&G Phil paid a 35% dividend withholding tax to the BIR which amounted to Php
8.3M It subsequently filed a claim with the Commissioner of Internal Revenue for a refund or tax credit, claiming that
pursuant to Section 24(b)(1) of the NIRC, as amended by PD. 369, the applicable rate of withholding tax on the dividends
remitted was only 15%.

MAIN ISSUE:
Whether or not P&G Philippines is entitled to the refund or tax credit.

RULING:
YES. P&G Philippines is entitled. Sec 24 (b) (1) of the NIRC states that an ordinary 35% tax rate will be applied to
dividend remittances to non-resident corporate stockholders of a Philippine corporation. This rate goes down to 15%
ONLY IF he country of domicile of the foreign stockholder corporation “shall allow” such foreign corporation a tax credit
for “taxes deemed paid in the Philippines,” applicable against the tax payable to the domiciliary country by the foreign
stockholder corporation. However, such tax credit for “taxes deemed paid in the Philippines” MUST, as a minimum, reach
an amount equivalent to 20 percentage points which represents the difference between the regular 35% dividend tax rate
and the reduced 15% tax rate. Thus, the test is if USA “shall allow” P&G USA a tax credit for ”taxes deemed paid in the
Philippines” applicable against the US taxes of P&G USA, and such tax credit must reach at least 20 percentage points.
Requirements were met.

345. Phil Acetylene v CIR

DOCTRINE: The tax imposed on the manufacturer or producer is not a tax on the purchaser.

FACTS: Philippine Acetylene Co made various sales to the NPC and to VOA (Voice of America) which the CIR assessed
a deficiency sales tax that Philippine Acetylene denied liability for payment on the ground that both the NPC and VOA are
exempt from taxation.

ISSUE: WON Philippine Acetylene is exempt from paying tax on sales it made to NPC and VOA because both are
exempt from taxation.

Ruling: No, Philippine Acetylene is not exempt. The tax imposed by section 186 of the National Internal Revenue
Code is a tax on the manufacturer or producer and not a tax on the purchaser except probably in a very remote
and inconsequential sense. Accordingly its levy on the sales made to tax-exempt entities like the NPC is permissible.
The sales to the VOA are subject to the payment of percentage taxes under section 186 of the Code. Only sales made "for
exclusive use in the construction, maintenance, operation or defense of the bases," in a word, only sales to the
quartermaster, are exempt under article V from taxation. Sales of goods to any other party even if it be an agency of the
United States, such as the VOA, or even to the quartermaster but for a different purpose, are not free from the payment of
the tax.

In the long run a sales tax is probably shifted to the consumer, but during the period when supply is being adjusted to
changes in demand, it must be in part absorbed. In practice the businessman will treat the levy as an added cost of
operation and distribute it over his sales as he would any other cost, increasing by more than the amount of the tax prices
of goods demand for which will be least affected and leaving other prices unchanged.

346. CIR v Wander Phils

FACTS: Private respondents Wander Philippines, Inc. (wander) is a domestic corporation organized under Philippine
laws. It is wholly-owned subsidiary of the Glaro S.A. Ltd. (Glaro), a Swiss corporation not engaged in trade for business
in the Philippines.

Wander filed it's witholding tax return for 1975 and 1976 and remitted to its parent company Glaro dividends from which
35% withholding tax was withheld and paid to the BIR.

In 1977, Wander filed with the Appellate Division of the Internal Revenue a claim for reimbursement, contending that it is
liable only to 15% withholding tax in accordance with sec. 24 (b) (1) of the Tax code, as amended by PD nos. 369 and
778, and not on the basis of 35% which was withheld ad paid to and collected by the government. petitioner failed to act
on the said claim for refund, hence Wander filed a petition with Court of Tax Appeals who in turn ordered to grant a
refund and/or tax credit. CIR's petition for reconsideration was denied hence the instant petition to the Supreme Court.
ISSUE: Whether or not Wander is entitled to the preferential rate of 15% withholding tax on dividends declared and to
remitted to its parent corporation.

Ruling: The dividends received from a domestic corporation liable to tax, the tax shall be 15% of the dividends received,
subject to the condition that the country in which the non-resident foreign corporation is domiciled shall allow a credit
against the tax due from the non-resident foreign corporation taxes deemed to have been paid in the Philippines equivalent
to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) on dividends.

While it may be true that claims for refund construed strictly against the claimant, nevertheless, the fact that
Switzerland did not impose any tax on the dividends received by Glaro from the Philippines should be considered
as a full satisfaction if the given condition. For, as aptly stated by respondent Court, to deny private respondent the
privilege to withhold only 15% tax provided for under PD No. 369 amending section 24 (b) (1) of the Tax Code,
would run counter to the very spirit and intent of said law and definitely will adversely affect foreign corporations
interest here and discourage them for investing capital in our country
Book: The withholding agent of the non-resident foreign corp, is entitled to claim the refund of excess withholding tax
paid on the income of said corporation in the Phils. Being a withholding agent, it is the one held liable for any violation of
the withholding tax law should such a violation occur. In the same vein, it should be allowed to claim a refund in case of
over-withholding.

347. Acosta v Commissioner

CANNOT BE FOUND

BOOK: PROCEDURAL AWS CAN BE APPLIED RETROACTIVELY

Laws prescribing the method of obtaining a tax refund or credit and the requirements for entitlement to said remedy are
procedural laws, and, therefore, can be applied retrospectively to actions still pending and undetermined at the time of
their passage. Hence, the provisions under the 1997 TC that the filling of an amended individual oncome tax return or
credit for an overpayment on Oct 8 1997, if the petition for review was instituted at the time when the 1007 TC is already
in effect.

348. Alhambra Cigar v Collector

Facts: The Alhambra Cigar and Cigarette Manufacturing Co. filed its income tax returns for the years 1949, 1950, 1951,
1952 and 1953, and paid the income taxes computed in accordance with said returns. Upon subsequent verification
thereof, on November 27, 1954, the CIR assessed and demanded from the company, by way of deficiency taxes for said
years, the sums of P26,369.04, P42,653.00, P61,308.00, P58,404.00 and P51,826.00, respectively, or the aggregate sum of
P240.560.04, plus 5 per cent surcharge and 1 per cent monthly interest from January 15, 1955. The Company appealed
through the CTA and rendered a decision reducing the deficiency income taxes to P14,458.05, P20,176.00, P27,010.00,
P21,759.00 and P20,201.00, respectively, or a total of P103,604.05.

Issue: Whether or not the expenses claimed by the company are allowable deductions

Ruling: Under section 30 of the Tax Code, whenever a controversy arises on the deductibility, for purposes of income tax,
of certain items for alleged compensation of officers of the taxpayer, two questions become material, namely: (a) Have
"personal services" been "actually rendered" by said officers? (b) In the affirmative case, what is the "reasonable
allowance" therefor? When the Collector disallowed the fees, bonuses and commissions aforementioned, and the company
appealed there from, it became necessary for the lower court to determine whether said officer had correctly applied
section 30 of the Tax Code, and this, in turn, required the consideration of the two questions already adverted to. In the
circumstances surrounding the case, the lower court has correctly construed and applied said provision. Decision affirmed.

Book: Failure to file timely appeal to CTA; answer of Commissioner to taxpayer’s petition for review is equivalent
to judicial action for collection of tax.

349. Republic v Limaco & De Guzman supra no. 336

FACTS: Respondent is engaged in the importation of cigarettes. The company filed with the BOC entry papers covering
shipment of 2M “spud” cigarettes it had imported from New York. CIR assessed it for deficiency taxes.
It remained unpaid. Respondent sent a letter informing the CIR that it was tendering payment of the sum of 3000.
Petitioner filed a claim in the CFI for forfeiture of bonds and payment of deficiency tax. Respondent seeks the refund of
the 3000 it had previously paid. Defendant-surety claimed that the sum of Php3,000.00 was illegally or erroneously
collected and payment thereof was involuntary having been allegedly made under duress.

Issue: Whether there is a vitiation of consent as to the payment of deficiency taxes?

Ruling: NO.
Threat to enforce one’s legal claim thru competent authority does not vitiate consent. Having been made by the DS
to preserve its credit and enable it to carry on its business with the BIR, the said payment cannot be considered
involuntary.