COMMISSIONER OF INTERNAL REVENUE, Petitioner, v.

 ASALUS
CORPORATION, Respondent.
G.R. No. 221590, February 22, 2017
SECOND DIVISION
MENDOZA, J.:

FACTS:
On December 16, 2010, respondent Asalus Corporation (Asalus) received a
Notice of Informal Conference from Revenue District Office No. 47 of the
Bureau of Internal Revenue (BIR). It was in connection with the investigation
conducted by Revenue Officer Fidel M. Bañares II on the Value-Added Tax
transactions of Asalus for the taxable year 2007. Asalus filed its Letter-Reply,
dated December 29, 2010, questioning the basis of Bañares' computation for
its VAT liability.

On January 10, 2011, petitioner Commissioner of Internal Revenue issued the

Preliminary Assessment Notice finding Asalus liable for deficiency VAT for
2007 in the aggregate amount of P413,378,058.11.

On August 26, 2011, Asalus received the Formal Assessment Notice stating
that it was liable for deficiency VAT for 2007 in the total amount of
P95,681,988.64, inclusive of surcharge and interest. Consequently, it filed its
protest against the FAN, dated September 6, 2011.

On October 16, 2012, Asalus received the Final Decision on Disputed

Assessment showing VAT deficiency for 2007 in the aggregate amount of
P106,761,025.17, inclusive of surcharge and interest and P25,000.00 as
compromise penalty. As a result, it filed a petition for review before the CTA
Division.

In its April 2, 2014 Decision, the CTA Division ruled that the VAT assessment
issued on August 26, 2011 had prescribed and consequently deemed invalid.

ISSUE:
Whether petitioner's right to assess respondent for its deficiency vat for
taxable year 2007 had already prescribed?

Whether or not the false return may be presumed?

HELD:
1.No, The statement given by the CTA were correct in a way, and it was given
due respect for they found it partly correct but, after a review of the records
and applicable laws and jurisprudence, the Court finds that the CTA erred in
concluding that the assessment against Asalus had prescribed. Internal
revenue taxes shall be assessed within three years after the last day
prescribed by law for the filing of the return, or where the return is filed beyond
the period, from the day the return was actually filed. Section 222 of the NIRC,
however, provides for exceptions to the general rule. It states that in the case
of a false or fraudulent return with intent to evade tax or of failure to file a
return, the assessment may be made within ten years from the discovery of
the falsity, fraud or omission.

Our stand that the law should be interpreted to mean a separation of the three
different situations of false return, fraudulent return with intent to evade tax,
and failure to file a return is strengthened immeasurably by the last portion of
the provision which seggregates the situations into three different classes,
namely "falsity", "fraud" and "omission." That there is a difference between
"false return" and "fraudulent return" cannot be denied. While the first merely
implies deviation from the truth, whether intentional or not, the second implies
intentional or deceitful entry with intent to evade the taxes due.

In the oft-cited Aznar v. CTA, the Court compared a false return to a

fraudulent return in relation to the applicable prescriptive periods for
assessments, to wit:

Petitioner argues that Sec. 332 of the NIRC does not apply because the
taxpayer did not file false and fraudulent returns with intent to evade tax, while
respondent Commissioner of Internal Revenue insists contrariwise, with
respondent Court of Tax Appeals concluding 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 Resolution of the Court of Tax Appeals En Banc are REVERSED and
SET ASIDE. The case is ordered REMANDED to the Court of Tax Appeals for
the determination of the Value Added Tax liabilities of the Asalus Corporation.

2. Yes, When there is showing that a taxpayer has substantially undeclared

its sales, receipts or income, there is a presumption that it has filed a false
return. As such, the CIR is not immediately present evidence to support the
falsity of the return, unless the presumption has been overcome.

COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF

CUSTOMS, Petitioners vs. PHILIPPINE AIRLINES, INC., Respondent
G.R. No. 215705-07 February 22, 2017
SECOND DIVISION
PERALTA, J.:

FACTS:
On September 5, 2008, PAL paid under protest. On March 5, 2009, PAL filed
an administrative claim for refund of the excise taxes it paid with the Bureau of
Internal Revenue (BIR) contending that it is entitled to tax privileges under
Section 13 of PD 1590. The CTA Second Division found that PAL was able to
sufficiently prove its exemption from the payment of excise taxes pertaining to
its importation of alcoholic products, and since, it already paid the disputed
excise taxes on the subject importation, and therefore, it is entitled to refund.
However, the tax court ruled that, with respect to its subject importation of
tobacco products, PAL failed to discharge its burden of proving that the said
product were not locally available in reasonable quantity, quality or price, in
accordance with the requirements of the law. Thus, it is not entitled to refund
for the excise taxes paid on such importation.

In the present petition, the petitioner argues that: Section 131 of the NIRC
revoked PAL's tax privilege under Section 13 of P.D No. 1590 with respect to
excise tax on its alcohol and tobacco importation. Assuming that it is still
entitled to the tax privilege, PAL failed to adequately prove that the conditions
under Section 13 of P.D. No. 1590 were met in this case.

The controversy in this case revolves around the interpretation of the

provisions of Presidential Decree No. 1590 (PD 1590), otherwise known as
"An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish,
Operate, and Maintain Air Transport Services in the Philippines and Other
Countries" vis-a-vis Republic Act No. 9334 (RA 9334), otherwise known as
"An Act Increasing the Excise Tax Rates Imposed on Alcohol and Tobacco
Products, Amending for the Purpose Sections 131, 141, 142, 145, and 228 of
the National Internal Revenue Code of 1997." PD 1590 was enacted on June
11, 1978, while RA 9334 took effect on January 1, 2005.

ISSUE:
Whether or not PAL's alcohol and tobacco importations for its commissary
supplies are subject to excise tax.

HELD:
No. It is a basic principle of statutory construction that a later law, general in
terms and not expressly repealing or amending a prior special law, will not
ordinarily affect the special provisions of such earlier statute.

Indeed, as things stand, PD 1590 has not been revoked by the NIRC of 1997,
as amended. Or to be more precise, the tax privilege of PAL provided in Sec.
13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as
amended by Sec. 6 of RA 9334. While it is true that Sec. 6 of RA 9334 as
previously quoted states that "the provisions of any special or general law to
the contrary notwithstanding," such phrase left alone cannot be considered as
an express repeal of the exemptions granted under PAL's franchise because
it fails to specifically identify PD 1590 as one of the acts intended to be
repealed.

Noteworthy is the fact that PD 1590 is a special law, which governs the
franchise of PAL. Between the provisions under PD 1590 as against the
provisions under the NIRC of 1997, as amended by 9334, which is a general
law, the former necessary prevails. This is in accordance with the rule that on
a specific matter, the special law shall prevail over the general law, which
shall be resorted only to supply deficiencies in the former. In addition, where
there are two statutes, the earlier special and the later general - the terms of
the general broad enough to include the matter provided for in the special -
the fact that one is special and other general creates a presumption that the
special is considered as remaining an exception to the general, one as a
general law of the land and the other as the law of a particular case.

The Court, on the "propriety of a tax refund is hinged on the kind of exemption
which forms its basis," declared in no uncertain terms that PAL has
"sufficiently prove[d]" its entitlement to a tax refund of the excise taxes and
that PAL's payment of either the franchise tax or basic corporate income tax in
the amount fixed thereat shall be in lieu of all other taxes or duties, and
inclusive of all taxes on all importations of commissary and catering supplies,
subject to the condition of their availability and eventual use. In other words,
the franchise of PAL remains the governing law on its exemption from taxes.

COMMISSIONER OF INTERNAL REVENUE, Petitioner vs. ST. LUKE’S

MEDICAL CENTER, INC., Respondent
G.R. No. 203514 February 13, 2017
FIRST DIVISION
DEL CASTILLO, J.:

FACTS:

The respondent St. Luke’s Medical Center, Inc. (SLMC) received from Large
Taxpayers Service-Documents Processing and Quality Assurance Division of
the Bureau of Internal Revenue Audit Result/Assessment Notice an
assessment from the on December 14, 2007 a deficiency income tax under
Section 27 (B) of the 1997 National Internal Revenue Code (NIRC), as
amended for the taxable year 2005 in the amount of P78, 617,434.54 and for
taxable year 2006 in the amount of P57, 119,867.33.

In response SLMC filed with the petitioner Commission on Internal Revenue

(CIR) an administrative protest assailing the assessments. The SLMC alleged
that they are exempted from paying the income tax since SLMC is a non-
stock, non-profit, charitable and social welfare organization under Section 30
(E) and (G) of the 1997 NIRC as amended.

However, on April 25, 2008, SLMC received the petitioner CIR’s Final
Decision on the Disputed Assessment dated April 9, 2008 increasing the
deficiency income from P78, 617, 434.54 to P82,419,522.21 for taxable year
2005 and from P57,119,867.33 to P60, 259,885.94 for taxable year 2006.

The aggrieved SLMC elevated the matter to Court of Tax Appeal (CTA)
finding the decision that SLMC is not liable for the deficiency income tax
under Section 27 (B) of the 1997 NIRC, as amended and exempt from paying
the income under Section 30 (E) and (G) of the same code.

Moreover, the CIR filed an instant petition contending that the CTA erred in
exempting SLMC from payment of income tax, where the CIR petition is partly
granted. SLMC ordered to pay the deficiency income tax in 1998 based on the
10% preferential income tax. The CIR argues that under the doctrine of Stare
Decisis SLMC is subject to 10% income tax under Section 27 (B) of the 1997
NIRC, and liable to pay the compromise penalty. SLMC argues that the
income derives from operating a hospital is not income from activities
conducted for profit. And the case should be dismissed since payment to BIR
for the basic taxes due for taxable years 1998, 2000-2002 and 2004-2007 has
been made.

ISSUES:

1. Whether or not SLMC is liable for income tax under Section 27 (B) of the
1997 NIRC and not exempt therefrom. ?

2. Whether or not the petition is rendered moot by payment made by SLMC

on April 30, 2013.

HELD:

1. Yes. Supreme holds that Section 27 (B) of the NIRC imposes 10%
preferential tax rate on the income of (1) proprietary non-profit educational
institutions and (2) proprietary non-profit hospitals. The only qualifications for
hospitals are they must be proprietary and non-profit. Proprietary means
private, following the definition of a proprietary educational institution, as any
other private school maintained and administered by private individuals or
groups with government permit. While non-profit means no net income or
asset accrues to or benefits any member or specific person with all the net
income or asset devoted to the institution’s purposes and all its activities
conducted not for profit.

There is no dispute that St. Luke's is organized as a non-stock and non-profit

charitable institution. However, this does not automatically exempt St. Luke's
from paying taxes. This only refers to the organization of St. Luke's. Even if
St. Luke's meets the test of charity, a charitable institution is not ipso facto tax
exempt. To be exempt from real property taxes, Section 28(3), Article VI of
the Constitution requires that a charitable institution use the property 'actually,
directly and exclusively' for charitable purposes. To be exempt from income
taxes, Section 30(E) of the NIRC requires that a charitable institution must be
'organized and operated exclusively' for charitable purposes. Likewise, to be
exempt from income taxes, Section 30(G) of the NIRC requires that the
institution be 'operated exclusively' for social welfare.

There is no dispute that St. Luke's is organized as a non-stock and non-profit

charitable institution. However, this does not automatically exempt St. Luke's
from paying taxes. This only refers to the organization of St. Luke's. Even if
St. Luke's meets the test of charity, a charitable institution is not ipso facto tax
exempt. To be exempt from real property taxes, Section 28(3), Article VI of
the Constitution requires that a charitable institution use the property 'actually,
directly and exclusively' for charitable purposes. To be exempt from income
taxes, Section 30(E) of the NIRC requires that a charitable institution must be
'organized and operated exclusively' for charitable purposes. Likewise, to be
exempt from income taxes, Section 30(G) of the NIRC requires that the
institution be 'operated exclusively' for social welfare.

The Court finds that St. Luke's is a corporation that is not 'operated
exclusively' for charitable or social welfare purposes insofar as its revenues
from paying patients are concerned. This ruling is based not only on a strict
interpretation of a provision granting tax exemption, but also on the clear and
plain text of Section 30(E) and (G). St. Luke's is therefore liable for deficiency
income tax in 1998 under Section 27(B) of the NIRC.

2. 3. Yes. The payment of basic taxes made by the SLMC has become moot
even the court agrees with the CIR that the payment confirmation from the
BIR is not competent proof as presented by SLMC due to no specific taxable
period for payments that it covers. However, the court finds sufficient proof of
payment based on the Certification of Payment issued by the Large
Taxpayers Service of the BIR since CIR never question for its documents
authenticity. The court dismissed the petition and lowered the basic taxes for
taxable year 2005 and 2006, in the amounts of P49, 919,496.40 and P41,
525,608.40.

COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. LIQUIGAZ

PHILIPPINES CORPORATION, Respondent.
G.R. No. 215534/ G.R. NO. 215557, April 18, 2016
SECOND DIVISION
MENDOZA, J.:

FACTS:
Liquigaz Philippines Corporation (Liquigaz) is a corporation duly organized
and existing under Philippine laws, received a copy of Letter of Authority (LOA
issued by the Commissioner of Internal Revenue (CIR), authorizing the
investigation of all internal revenue taxes for taxable year 2005. Consequently
received ndated letter purporting to be a Notice of Informal Conference (NIC)
and a copy of the Preliminary Assessment Notice (PAN), dated May 20, 2008,
together with the attached details of discrepancies. It also received a Formal
Letter of Demand (FLD)/Formal Assessment Notice (FAN) dated June 25,
2008 and on July 1, 2008 a Final Decision on Disputed Assessment (FDDA).

Liquigaz filed its Petition for Review before the CTA Division assailing the
validity of the FDDA issued by the CIR. CTA Ruled that while the decision
indicated the legal provision relied upon for the assessment but no the factual
bases thereof. The FFDA being void, the assessment was also declared void.
Reyes was not informed in writing of the law and the facts on which the
assessment of estate taxes had been made:. She was merely notified of the
findings by the CIR, who had simply relied upon the provisions of former
Section 229 prior to its amendment by Republic Act (RA) No. 8424, otherwise
known as the Tax Reform Act of 1997.

ISSUE:

Whether or not a Final Decision on Disputed Assessment (FDDA) be declared

void, and in the event that the FDD A is found void, what would be its effect
on the tax assessment?

HELD:

NO. 3.1.6 Administrative Decision on a Disputed Assessment. — The

decision of the Commissioner or his duly authorized representative shall (a)
state the facts, the applicable law, rules and regulations, or jurisprudence on
which such decision is based, otherwise, the decision shall be void . The
importance of providing the taxpayer of adequate written notice of his tax
liability is undeniable. Section 228 of the NIRC declares that an assessment is
void if the taxpayer is not notified in writing of the facts and law on which it is
made

An assessment becomes a disputed assessment after taxpayer has filed its

protest to the assessment in the administrative level. Thereafter, the CIR
either issues a decision on the disputed assessment or fails to act on it and is,
therefore, considered denied. The taxpayer may then appeal the decision on
the disputed assessment or the inaction of the CIR.

Clearly, a decision of the CIR on a disputed assessment differs from the

assessment itself. Hence, the invalidity of the one does not necessarily result
to the invalidity of the other-unless the law or regulation otherwise provide.

Section 228 of the NIRC provides that an assessment shall be void if the
taxpayer is not informed in writing of the law and the facts on which it is
based. It is, however, silent with regards to a decision on a disputed
assessment by the CIR which fails to state the law and facts on which it is
based. This void is filled by RR No. 12-99 where it is stated that failure of the
FDDA to reflect the facts and law on which it is based will make the decision
void. It, however, does not extend to the nullification of the entire assessment.