TAX 2 Case Digest

CITY OF MANILA AND OFFICE OF THE CITY TREASURER OF MANILA, Petitioners, v. COSMOS BOTTLING
CORPORATION, Respondent

G.R. No. 196681, June 27, 2018

Facts: For the first quarter of 2007, the City of Manila assessed [Cosmos] local business taxes and
regulatory fees in the total amount of P1,226,781.05, as contained in the Statement of Account dated
January 15, 2007. [Cosmos] protested the assessment through a letter dated January 18, 2007, arguing
that Tax Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), have been
declared null and void. [Cosmos] also argued that the collection of local business tax under Section 21 of
the RCM in addition to Section 14 of the same code constitutes double taxation.

[Cosmos] also tendered payment of only P131,994.23 which they posit is the correct computation of
their local business tax for the first quarter of 2007. This payment was refused by the City Treasurer.
[Cosmos] also received a letter from the City Treasurer denying their protest.

The petition for review was raffled to the CTA Division

The CTA Division essentially ruled that the collection by the City Treasurer of Manila of local business tax
under the Revenue Code of Manila constituted double taxation. It also ruled that the City Treasurer
cannot validly assess local business tax based on the increased rates under Tax Ordinance Nos. 7988 and
8011 after the same have been declared null and void. Finally, the court held that Cosmos Bottling
Corporation's (Cosmos) local business tax liability for the calendar year 2007 shall be computed based
on the gross sales or receipts for the year 2006.

Instead of filing a motion for reconsideration or new trial, the petitioners directly filed with the CTA En
Banc a petition for review praying that the decision of the CTA Division be reversed or set aside.

In its Resolution of 16 February 2011, the CTA En Banc ruled that the direct resort to it without a prior
motion for reconsideration or new trial before the CTA Division violated Section 18 of Republic Act (R.A.)
No. 1125,10 as amended by R.A. No. 9282 and R.A. No. 9503, and Section 1, Rule 8 of the Revised Rules
of the CTA (CTA Rules).11

The petitioners sought reconsideration, but their motion was denied by the CTA En Banc.

ISSUES: 1.Whether the CTA En Banc correctly dismissed the petition for review before it for failure of
the petitioners to file a motion for reconsideration or new trial with the CTA Division.

RULING: 1.Yes,The filing of a motion for reconsideration or new trial before the CTA Division is an
indispensable requirement for filing an appeal before the CTA En Banc.

The CTA En Banc was correct in interpreting Section 18 of R.A. No. 1125, as amended by R.A. 9282 and
R.A. No. 9503, which states –
Section 18. Appeal to the Court of Tax Appeals En Banc. – No civil proceeding involving matter arising
under the National Internal Revenue Code, the Tariff and Customs Code or the Local Government Code
shall be maintained, except as herein provided, until and unless an appeal has been previously filed with
the CTA and disposed of this Act.

A party adversely affected by a resolution of a Division of the CTA on motion for reconsideration or new
trial, may file a petition for review with the CTA en banc. (underlining supplied)

as requiring a prior motion for reconsideration or new trial before the same division of the CTA that
rendered the assailed decision before filing a petition for review with the CTA En Banc. Failure to file
such motion for reconsideration or new trial is cause for dismissal of the appeal before the CTA En Banc.

Corollarily, Section 1, Rule 8 of the CTA Rules provides:

Section 1. Review of cases in the Court en banc. — In cases falling under the exclusive appellate
jurisdiction of the Court en banc, the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for reconsideration or new trial with the
Division. (emphasis supplied)

Clear it is from the cited rule that the filing of a motion for reconsideration or new trial is mandatory –
not merely directory – as indicated by the word "must."

The rules are clear. Before the CTA En Banc could take cognizance of the petition for review concerning
a case falling under its exclusive appellate jurisdiction, the litigant must sufficiently show that it sought
prior reconsideration or moved for a new trial with the concerned CTA division. Procedural rules are not
to be trifled with or be excused simply because their noncompliance may have resulted in prejudicing a
party's substantive rights. Rules are meant to be followed. They may be relaxed only for very exigent
and persuasive reasons to relieve a litigant of an injustice not commensurate to his careless non-
observance of the prescribed rules.
BASES CONVERSION AND DEVELOPMENT AUTHORITY, Petitioner, v. COMMISSIONER OF INTERNAL
REVENUE, Respondent.

G.R. No. 205925, June 20, 2018

Facts: On October 8, 2010, BCDA filed a petition for review with the CTA in order to preserve its right to
pursue its claim for refund of the Creditable Withholding Tax (CWT) in the amount of
Php122,079,442.53, which was paid under protest from March 19, 2008 to October 8, 2008. The CWT
which BCDA paid under protest was in connection with its sale of the BCDA-allocated units as its share in
the Serendra Project pursuant to the Joint Development Agreement with Ayala Land, Inc.

The petition for review was filed with a Request for Exemption from the Payment of Filing Fees in the
amount of Php1,209,457.90.

On October 20, 2010, the CTA First Division denied BCDA's Request for Exemption and ordered it to pay
the filing fees within five days from notice.

BCDA moved for reconsideration which was denied by the CTA First Division on February 8, 2011. BCDA
was once again ordered to pay the filing fees within five days from notice, otherwise, the petition for
review will be dismissed.

BCDA filed a petition for review with the CTA En Banc on February 25, 2011, which petition was returned
and not deemed filed without the payment of the correct legal fees. BCDA once again emphasized its
position that it is exempt from the payment of such fees.

On March 28, 2011, the petition before the CTA First Division was dismissed. BCDA attempted to tile its
Motion for Reconsideration, however, the Officer-In-Charge of the First Division refused to receive the
checks for the payment of the filing fees, and the Motion for Reconsideration. BCDA then filed its
Motion for Reconsideration by registered mail.

On May 17, 2011, BCDA moved for reconsideration of the Resolution dated April 26, 2011 and prayed
that it be allowed to pay the prescribed docket fees of Php1,209,457.90 without qualification. On June 9,
2011, the CTA First Division denied both motions for reconsideration.

On June 28, 2011, BCDA filed a petition for review with the CTA En Banc but the same was dismissed. In
its assailed Decision dated August 29, 2012, it adopted and affirmed the findings of the First Division

BCDA filed a Motion for Reconsideration but was likewise denied by the CTA En Banc in the assailed
Resolution dated February 12, 2013.

ISSUES: 1.WOR THE CTA EN BANC ERRED IN AFFIRMING THE CTA FIRST DIVISION'S RULING THAT BCDA IS
NOT A GOVERNMENT INSTRUMENTALITY, HENCE, NOT EXEMPT FROM PAYMENT OF LEGAL FEES.

RULING: Based on the foregoing, it is clear that BCDA has an authorized capital of Php100 Billion,
however, it is not divided into shares of stock. BCDA has no voting shares. There is likewise no provision
which authorizes the distribution of dividends and allotments of surplus and profits to BCDA's
stockholders. Hence, BCDA is not a stock corporation.

BCDA also does not qualify as a non-stock corporation because it is not organized for any of the
purposes mentioned under Section 88 of the Corporation Code, to wit:

Sec. 88. Purposes. – Non-stock corporations may be formed or organized tor charitable, religious,
educational, professional, cultural, fraternal, literary, scientific, social, civic service, or similar purposes,
like trade industry, agricultural and like chambers, or any combination thereof: subject to the special
provisions of this Title governing particular classes of non-stock corporations.

From the foregoing, it is clear that BCDA is neither a stock nor a non-stock corporation. BCDA is a
government instrumentality vested with corporate powers. Under Section 21,22 Rule 141 of the Rules of
Court, agencies and instrumentalities of the Republic of the Philippines are exempt from paying legal or
docket fees. Hence, BCDA is exempt from the payment of docket fees

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. CEBU HOLDINGS, INC., Respondent.

G.R. No. 189792, June 20, 2018

Facts: Respondent is a registered real estate developer. On 15 April 2003, respondent filed with the
Bureau of Internal Revenue (BIR) its Income Tax Return (ITR) for the year ending 31 December 2002

Respondent indicated in its ITR that it is opting to be issued a tax credit certificate for the alleged
overpayment of P18,992,055.00.

Subsequently, respondent filed an amended ITR for taxable year 2002

Total Tax Credits/Payments 49,142,822

Tax Payable (Overpayment) (35,186,163)

Respondent likewise indicated in its amended ITR that it is opting to be issued a tax credit certificate for
the alleged overpayment of P18,992,055.00.

On 4 March 2005, respondent filed with the BIR a written claim for a tax credit certificate in the amount
of P18,992,055.00. When petitioner failed to act upon respondent's claim, respondent filed a Petition
for Review with the CTA First Division on 15 April 2005.

On 6 June 2006, the CTA First Division granted respondent's request for the appointment of an
Independent Certified Public Accountant (CPA) under Rule 13 of the Revised Rules of the Court of Tax
Appeals. The Court commissioned Independent CPA filed his Final and Consolidated Report on 3 August
2006.
ISSUE: Whether respondent is liable for deficiency income tax for taxable year 2003

RULING: The ruling of the CTA First Division and the CTA En Banc clearly affects respondent's income tax
liability for taxable year 2003 precisely because respondent carried over the amount of P16,194,108.00
as prior year's excess credits, to which it is not entitled. Respondent is once again trying to evade the
adverse effect of the ruling of the CTA First Division that respondent (petitioner therein) failed to
substantiate almost all of its claimed prior year's excess credits, especially since respondent already
carried over and applied the amount of P16,194,108.00 as prior year's excess creditable tax against the
income tax due for the succeeding taxable year 2003. To reiterate, the CTA First Division already ruled
that respondent (petitioner therein) failed to substantiate its prior year's excess credits of
P30,150,767.00 except for the amount of P288,076.04, which can be applied against respondent's
income tax liability for taxable year 2002. Thus, since respondent's prior year's excess credits have
already been fully applied against its 2002 income tax liability, the P16,194,108.00 unsubstantiated tax
credits in taxable year 2002 could no longer be carried over and applied against its income tax liability
for taxable year 2003.

Nevertheless, it is incumbent upon petitioner to issue a final assessment notice and demand letter for
the payment of respondent's deficiency tax liability for taxable year 2003. Section 228 of the National
Internal Revenue Code provides that:

Section 228. Protesting Assessment. – When the Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the taxpayers of his findings: Provided,
however, That a pre-assessment notice shall not be required in the following cases:

(a) When the finding for any deficiency tax is the result of mathematical error in the computation of the
tax as appearing on the face of the return; or

(b) When a discrepancy has been determined between the tax withheld and the amount actually
remitted by the withholding agent; or

(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding tax for a
taxable period was determined to have carried over and automatically applied the same amount
claimed against the estimated tax liabilities for the taxable quarter or quarters of the succeeding taxable
year; or

(d) When the excise tax due on excisable articles has not been paid; or

(e) When an article locally purchased or imported by an exempt person, such as, but not limited to,
vehicles, capital equipment, machineries and spare parts, has been sold, traded or transferred to non
exempt persons.

The taxpayers shall be informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be required
to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly authorized
representative shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or

reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may
be prescribed by implementing rules and regulations. Within sixty (60) days from filing of the protest, all
relevant supporting documents shall have been submitted; otherwise, the assessment shall become
final.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days
from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal
to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of
the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and
demandable. (Emphasis supplied)

In this case, no pre-assessment notice is required since respondent taxpayer carried over to taxable year
2003 the prior year's excess credits which have already been fully applied against its income tax liability
for taxable year 2002.