18. Philippine Journalists, Inc. vs.

Commissioner of Internal Revenue

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.

HELD

NO.

The waiver document is incomplete and defective and thus the three-year prescriptive period was not tolled or
extended and continued to run. Consequently, the Assessment/Demand was invalid because it was issued
beyond the three (3) year period. 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.

The NIRC, under Sections 203 and 222, provides for a statute of limitations on the assessment and collection of
internal revenue taxes in order to safeguard the interest of the taxpayer against unreasonable investigation.
Unreasonable investigation contemplates cases where the period for assessment extends indefinitely because
this deprives the taxpayer of the assurance that it will no longer be subjected to further investigation for taxes
after the expiration of a reasonable period of time.

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. xxx Thus, the law on prescription, being a remedial measure, should be liberally construed in order
to afford such protection.

The waiver is also defective from the government side because it was signed only by a revenue district officer,
not the Commissioner, as mandated by the NIRC and RMO No. 20-90. The waiver is not a unilateral act by the
taxpayer or the BIR, but is a bilateral agreement between two parties to extend the period to a date certain. The
conformity of the BIR must be made by either the Commissioner or the Revenue District Officer. This case
involves taxes amounting to more than One Million Pesos (P1,000,000.00) and executed almost seven months
before the expiration of the three-year prescription period. For this, RMO No. 20-90 requires the Commissioner
of Internal Revenue to sign for the BIR.
19. Commissioner of Internal Revenue vs. Kudos Metal Corp.

FACTS

The CTA En Banc ruled for canceling the assessment notices issued against respondent for having been issued
beyond the prescriptive period. It found the first Waiver of the Statute of Limitations incomplete and defective
for failure to comply with the provisions of Revenue Memorandum Order (RMO) No. 20-90. Thus: the waiver
failed to indicate the date of acceptance. Such date of acceptance is necessary to determine whether the
acceptance was made within the prescriptive period; And, the fact of receipt by the taxpayer of his file copy was
not indicated on the original copy. The requirement to furnish the taxpayer with a copy of the waiver is not only
to give notice of the existence of the document but also of the acceptance by the BIR and the perfection of the
agreement. The subject waiver is therefore incomplete and defective. As such, the three-year prescriptive period
was not tolled or extended and continued to run.

Petitioner argues that the government’s right to assess taxes is not barred by prescription as the two waivers
executed by respondent, through its accountant, effectively tolled or extended the period within which the
assessment can be made. In disputing the conclusion of the CTA that the waivers are invalid, petitioner claims
that respondent is estopped from adopting a position contrary to what it has previously taken. Petitioner insists
that by acquiescing to the audit during the period specified in the waivers, respondent led the government to
believe that the “delay” in the process would not be utilized against it. Thus, respondent may no longer
repudiate the validity of the waivers and raise the issue of prescription. Respondent maintains that prescription
had set in due to the invalidity of the waivers executed by Pasco, who executed the same without any written
authority from it, in clear violation of RDAO No. 5-01.

ISSUE

Whether the belated assessment of the CIR is still valid and effective on the ground that respondent is already in
estoppel.

HELD

NO.

Section 203 of the National Internal Revenue Code of 1997 (NIRC) mandates the government to assess internal
revenue taxes within three years from the last day prescribed by law for the filing of the tax return or the actual
date of filing of such return, whichever comes later. Hence, an assessment notice issued after the three-year
prescriptive period is no longer valid and effective. Exceptions however are provided under Section 222 of the
NIRC.

Section 222 (b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer executed before the expiration of the three-year period.
RMO 20-90 issued on April 4, 1990 and RDAO 05-01 issued on August 2, 2001 lay down the procedure for the
proper execution of the waiver

Due to the defects in the waivers, the period to assess or collect taxes was not extended. Consequently, the
assessments were issued by the BIR beyond the three-year period and are void.
20. Commissioner of Internal Revenue vs. Next Mobile, Inc.

PRINCIPLE: Section 203 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within 3 years
from the last day prescribed by law for the filing of the tax return or the actual date of filing of such return,
whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period is not valid
and effective. Exceptions to this rule are provided under Section 222 of the NIRC.

FACTS: After submission of its returns for the year 2001, NM received a copy of the LOA given by the BIR to
Revenue Officer (RO) NLC, covering January to December of 2001. 5 waivers were signed by NM's finance
director to extend the prescriptive period of assessment.

In 2005, BIR sent NM a Preliminary Assessment Notice (PAN) to which the latter replied. Later, NM received
a Formal Letter of Demand (FLD) to pay various tax deficiencies amounting to 313 million pesos.

On November 23, 2005, NM filed its protest against the FLD and requested the reinvestigation. BIR denied the
protest. NM filed a Petition for Review before the CTA.

In the CTA, NM argued that the CIR's right to assess NM's deficiency taxes had already prescribed, invoking
the lack of authority on the part of the person who signed the waviers. The CTA ruled in favor of NM and said
that the 5 waivers of the statute of limitations were not valid and binding; thus, the three-year period of
limitation within which to assess deficiency taxes was not extended. It also held that the records belie the
allegation that respondent filed false and fraudulent tax returns; thus, the extension of the period of limitation
from 3 to 10 years does not apply.

ISSUE #1: Had the CIR's right to assess respondent's deficiency taxes already prescribed?

No, the CIR's right to assess NM's deficiency taxes had NOT yet prescribed.

Section 222(b) of the NIRC provides that the period to assess and collect taxes may only be extended upon a
written agreement between the CIR and the taxpayer executed before the expiration of the three-year period.
This is a waiver.

RMO No. 20-90 and RDAO 05-01 must be strictly complied with in order for such a waver to be valid. Thus, a
waiver of assessment period is invalid if, for example:

[1] It does not specify a definite agreed date between the BIR and the taxpayer within which the former may
assess and collect revenue taxes;
[2] It has been signed only by a revenue district officer, not the Commissioner;
[3] It has no date of acceptance;
[4] The taxpayer was not furnished a copy of the BIR-accepted waiver;
[5] The person who executed the waivers had no notarized written board authority to sign the waivers in behalf
of the corporation; or
[6] The fact of receipt by the taxpayer of its file copy was not indicated in the original copies of the waivers.

In this case, both are at fault because NM deliberately executed defective waivers and raised the same problem
to avoid its tax liability. On the other hand, the BIR's negligence or failure to comply with the abovementioned
regulations is so gross that it amounts to malice and bad faith.

Although it is true that waivers of this kind must be carefully and strictly construed because they are in
derogation of the taxpayer's right to security against prolonged and unscrupulous investigations, there are 5
reasons why the CTA's decision should be reversed.
[1] The parties in this case are in pari delicto or "in equal fault." In pari delicto connotes that the two parties to a
controversy are equally culpable or guilty and they shall have no action against each other.
[2] To uphold the validity of the waivers parties must come to court with clean hands would be consistent with
the public policy embodied in the principle that taxes are the lifeblood of the government.
[3] Parties must come to court with clean hands. NM should not be allowed to benefit from the defects in its
own waivers.
[4] NM is estopped from questioning the validity of its own waivers. It allowed the government to rely on the
defective waivers without raising them as soon as possible. In fact, in its protest, it did not mention this.
[5] Finally, this is a highly suspicious situation. The BIR miserably failed to exact from NM compliance with its
own rules while NM raised the same invalidity it caused to avoid its tax liability. Such a situation is dangerous
and open to abuse by unscrupulous taxpayers who intend to escape their responsibility to pay taxes by mere
expedient of hiding behind technicalities.

ISSUE #2: Is the 10-year period of limitation for assessments of false and fraudulent returns applicable in this
case?

No, the longer 10-year period is not applicable. Applicable is the normal 3-year period.

Records failed to establish, even by prima facie evidence, that NM filed false and fraudulent returns on the
ground of substantial under-declaration of income in respondent Next Mobile's Annual ITR for taxable year
ending December 31, 2001.

SUMMARY: Next Mobile (NM) lost the case. The CIR succeeded in convincing the Supreme Court that the
CTA was wrong in invalidating the waivers.
21. Commissioner of Internal Revenue vs. Aichi Forging Company

FACTS

Respondent Aichi filed a claim for refund/credit of input VAT for the period July 1, 2002 to September 30,
2002, with the petitioner Commissioner of Internal Revenue (CIR), through the Department of Finance (DOF)
One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center. On even date, respondent filed a Petition
for Review with the CTA for the refund/credit of the same input VAT. The CTA partially granted the petition.
In a Motion for Reconsideration, petitioner argued that the simultaneous filing of the administrative and the
judicial claims contravenes Sections 112 and 229 of the NIRC and a prior filing of an administrative claim is a
“condition precedent” before a judicial claim can be filed. The CTA En Banc affirmed the division ruling.

ISSUE

Whether the respondent’s judicial and administrative claims for tax refund/credit were filed within the two-year
prescriptive period as provided in Sections 112(A) and 229 of the NIRC.

HELD

NO.

The two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30, 2002
expired on September 30, 2004. Hence, respondent’s administrative claim was timely filed. The filing of the
judicial claim was premature. However, notwithstanding the timely filing of the administrative claim, [the
Supreme Court is] constrained to deny respondent’s claim for tax refund/credit for having been filed in violation
of Section 112(D). Section 112(D) of the NIRC clearly provides that the CIR has “120 days, from the date of
the submission of the complete documents in support of the application [for tax refund/credit],” within which to
grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer’s recourse is to file an appeal
before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the
CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of
the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature. The premature filing of respondent’s
claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was
acquired by the CTA.
22. Commissioner of Internal Revenue vs. San Roque Power Corporation

FACTS: San Roque Power Corporation, Taganito Mining Corporation, and Philex Mining Corporation are all
domestic corporations having their respective line of business.

The petition stemmed from the separate claims of the parties before the CIR for tax refund and/or credit. The
respective petitions were decided on the basis of their filing of such within the periods prescribed by the law.

Thus, after review, the CTA En Banc rendered the following judgments:

With respect to San Roque Corporation, the CTA En Banc denied CIRs petition holding that San Roque's
judicial claim was not prematurely filed.

As regards to Taganito Mining Corporation, the CTA En Banc granted the CIRs petition on the ground that
Taganito’s judicial claim was prematurely filed.

As to Philex Mining Corporation, the CTA En Banc denied Philex’s petition on the ground that its judicial
claim was filed long after the expiration of the 120-day period.

ISSUE: Whether or not the judicial claims for tax refund or credit were filed within the mandatory period
prescribed by law?

HELD: Records show that a mere 13 days after it filed its amended administrative claim with the Commissioner
on 28 March 2003, San Roque filed a Petition for Review with the CTA docketed as CTA Case No. 6647.

Clearly, San Roque failed to comply with the 120-day waiting period, the time expressly given by law to the
Commissioner to decide whether to grant or deny San Roque's application for tax refund or credit. It is
indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The waiting
period, originally fixed at 60 days only, was part of the provisions of the first VAT law, Executive Order No.
273, which took effect on 1 January 1988. The waiting period was extended to 120 days effective 1 January
1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting period has been in the statute books for
more than fifteen (15) years before San Roque filed its judicial claim.

Failure to comply with the 120-day waiting period violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and renders the petition premature and thus without a cause of
action, with the effect that the CTA does not acquire jurisdiction over the taxpayer’s petition. Philippine
jurisprudence is replete with cases upholding and reiterating these doctrinal principles.

San Roque's failure to comply with the 120-day mandatory period renders its petition for review with the CTA
void. San Roque's void petition for review cannot be legitimized by the CTA or this Court because Article 5 of
the Civil Code states that such void petition cannot be legitimized except when the law itself authorizes its
validity. There is no law authorizing the petition’s validity.

For violating a mandatory provision of law in filing its petition with the CTA, San Roque cannot claim any right
arising from such void petition. Thus, San Roque's petition with the CTA is a mere scrap of paper.

The mere fact that a taxpayer has undisputed excess input VAT, or that the tax was admittedly illegally,
erroneously or excessively collected from him, does not entitle him as a matter of right to a tax refund or credit.
Strict compliance with the mandatory and jurisdictional conditions prescribed by law to claim such tax refund
or credit is essential and necessary for such claim to prosper. Well settled is the rule that tax refunds or credits,
just like tax exemptions, are strictly construed against the taxpayer. The burden is on the taxpayer to show that
he has strictly complied with the conditions for the grant of the tax refund or credit.
This Court cannot disregard mandatory and jurisdictional conditions mandated by law simply because the
Commissioner chose not to contest the numerical correctness of the claim for tax refund or credit of the
taxpayer. Non-compliance with mandatory periods, non-observance of prescriptive periods, and non-adherence
to exhaustion of administrative remedies bar a taxpayer’s claim for tax refund or credit, whether or not the
Commissioner questions the numerical correctness of the claim of the taxpayer. The 120-day period may extend
beyond the two-year prescriptive period, as long as the administrative claim is filed within the two-year
prescriptive period. However, San Roque's fatal mistake is that it did not wait for the Commissioner to decide
within the 120-day mandatory period. At the time San Roque filed its petition for review with the CTA, the
120+30 day mandatory periods were already in the law. Section 112(C) expressly grants the Commissioner 120
days within which to decide the taxpayers claim.

The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioners decision within
the 120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no
decision or deemed a denial decision of the Commissioner for the CTA to review. In San Roque's case, it filed
its petition with the CTA a mere 13 days after it filed its administrative claim with the Commissioner.
Indisputably, San Roque knowingly violated the mandatory 120-day period, and it cannot blame anyone but
itself.

Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction
of the Commissioner. As this law states, the taxpayer may, if he wishes, appeal the decision of the
Commissioner to the CTA within 30 days from receipt of the Commissioners decision, or if the Commissioner
does not act on the taxpayers claim within the 120-day period, the taxpayer may appeal to the CTA within 30
days from the expiration of the 120-day period.

As to Taganito, it also filed its petition for review with the CTA without waiting for the 120-day period to lapse.
Taganito filed a Petition for Review on 14 February 2007 with the CTA. Taganito is similarly situated as San
Roque - both cannot claim being misled, misguided, or confused by the Atlas doctrine.

However, Taganito can invoke BIR Ruling No. DA-489-03 dated 10 December 2003, which expressly ruled
that the taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief
with the CTA by way of Petition for Review. Thus, Taganito is deemed to have filed its judicial claim with the
CTA on time.

With respect to Philex, it timely filed its administrative claim on 20 March 2006, within the two-year
prescriptive period. Even if the two-year prescriptive period is computed from the date of payment of the output
VAT under Section 229, Philex still filed its administrative claim on time. The Commissioner had until 17 July
2006, the last day of the 120-day period, to decide Philexs claim. Since the Commissioner did not act on
Philex’s claim on or before 17 July 2006, Philex had until 17 August 2006, the last day of the 30-day period, to
file its judicial claim. The CTA EB held that 17 August 2006 was indeed the last day for Philex to file its
judicial claim. However, Philex filed its Petition for Review with the CTA only on 17 October 2007, or four
hundred twenty-six (426) days after the last day of filing. In short, Philex was late by one year and 61 days in
filing its judicial claim.

Philex did not file any petition with the CTA within the 120-day period. Philex did not also file any petition
with the CTA within 30 days after the expiration of the 120-day period. Philex filed its judicial claim long after
the expiration of the 120-day period, in fact 426 days after the lapse of the 120-day period. The inaction of the
Commissioner on Philex’s claim during the 120-day period is, by express provision of law, deemed a denial of
Philex’s claim. Philex had 30 days from the expiration of the 120-day period to file its judicial claim with the
CTA. Philex’s failure to do so rendered the deemed a denial decision of the Commissioner final and
inappealable. The right to appeal to the CTA from a decision or deemed a denial decision of the Commissioner
is merely a statutory privilege, not a constitutional right. The exercise of such statutory privilege requires strict
compliance with the conditions attached by the statute for its exercise.

xxx

There are three compelling reasons why the 30-day period need not necessarily fall within the two-year
prescriptive period, as long as the administrative claim is filed within the two-year prescriptive period.

First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer may, within two (2) years
after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate
or refund of the creditable input tax due or paid to such sales.

In short, the law states that the taxpayer may apply with the Commissioner for a refund or credit within two (2)
years, which means at any time within two years. Thus, the application for refund or credit may be filed by the
taxpayer with the Commissioner on the last day of the two-year prescriptive period and it will still strictly
comply with the law. The two-year prescriptive period is a grace period in favor of the taxpayer and he can
avail of the full period before his right to apply for a tax refund or credit is barred by prescription.

Second, Section 112(C) provides that the Commissioner shall decide the application for refund or credit within
one hundred twenty (120) days from the date of submission of complete documents in support of the application
filed in accordance with Subsection (A). The reference in Section 112(C) of the submission of documents in
support of the application filed in accordance with Subsection A means that the application in Section 112(A) is
the administrative claim that the Commissioner must decide within the 120-day period. Thus, the two-year
prescriptive period does not refer to the filing of the judicial claim with the CTA but to the filing of the
administrative claim with the Commissioner.

Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive period
(equivalent to 730 days), then the taxpayer must file his administrative claim for refund or credit within the first
610 days of the two-year prescriptive period. Otherwise, the filing of the administrative claim beyond the first
610 days will result in the appeal to the CTA being filed beyond the two-year prescriptive period.

Thus, section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for refund or credit at anytime within the two-year prescriptive period.
If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on time. The
Commissioner will have 120 days from such filing to decide the claim. If the Commissioner decides the claim
on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with
the CTA. This is not only the plain meaning but also the only logical interpretation of Section 112(A) and (C).

***

The input VAT is not excessively collected as understood under Section 229 because at the time the input VAT
is collected the amount paid is correct and proper. The input VAT is a tax liability of, and legally paid by, a
VAT-registered seller of goods, properties or services used as input by another VAT-registered person in the
sale of his own goods, properties, or services. The second VAT-registered person, who is not legally liable for
the input VAT, is the one who applies the input VAT as credit for his own output VAT. If the input VAT is in
fact excessively collected as understood under Section 229, then it is the first VAT-registered person - the
taxpayer who is legally liable and who is deemed to have legally paid for the input VAT - who can ask for a tax
refund or credit under Section 229 as an ordinary refund or credit outside of the VAT System. In such event, the
second VAT-registered taxpayer will have no input VAT to offset against his own output VAT.

In a claim for refund or credit of excess input VAT under Section 110(B) and Section 112(A), the input VAT is
not excessively collected as understood under Section 229. At the time of payment of the input VAT the amount
paid is the correct and proper amount. Under the VAT System, there is no claim or issue that the input VAT is
excessively collected, that is, that the input VAT paid is more than what is legally due. The person legally liable
for the input VAT cannot claim that he overpaid the input VAT by the mere existence of an excess input VAT.
The term excess input VAT simply means that the input VAT available as credit exceeds the output VAT, not
that the input VAT is excessively collected because it is more than what is legally due. Thus, the taxpayer who
legally paid the input VAT cannot claim for refund or credit of the input VAT as excessively collected under
Section 229.

Under Section 229, the prescriptive period for filing a judicial claim for refund is two years reckoned from the
date the person liable for the tax pays the tax. Thus, if the input VAT is in fact excessively collected, that is, the
person liable for the tax actually pays more than what is legally due, the taxpayer must file a judicial claim for
refund within two years from his date of payment. Only the person legally liable to pay the tax can file the
judicial claim for refund. The person to whom the tax is passed on as part of the purchase price has no
personality to file the judicial claim under Section 229.

Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for excess input
VAT is two years from the close of the taxable quarter when the sale was made by the person legally liable to
pay the output VAT. This prescriptive period has no relation to the date of payment of the excess inputVAT.
The excess input VAT may have been paid for more than two years but this does not bar the filing of a judicial
claim for excess VAT under Section 112(A), which has a different reckoning period from Section 229.
Moreover, the person claiming therefund or credit of the input VAT is not the person who legally paid the input
VAT. Such person seeking the VAT refund or credit does not claim that the input VAT was excessively
collected from him, or that he paid an input VAT that is more than what is legally due. He is not the taxpayer
who legally paid the input VAT.

Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The only exception is
when the taxpayer is expressly zero-rated or effectively zero-rated under the law, like companies generating
power through renewable sources of energy. Thus, a non zerorated VAT-registered taxpayer who has no output
VAT because he has no sales cannot claim a tax refund or credit of his unused input VAT under the VAT
System. Even if the taxpayer has sales but his input VAT exceeds his output VAT, he cannot seek a tax refund
or credit of his excess input VAT under the VAT System. He can only carry-over and apply his excess input
VAT against his future output VAT. If such excess input VAT is an excessively collected tax, the taxpayer
should be able to seek a refund or credit for such excess input VAT whether or not he has output VAT.

The VAT System does not allow such refund or credit. Such excess input VAT is not an excessively collected
tax under Section 229. The excess input VAT is a correctly and properly collected tax. However, such excess
input VAT can be applied against the output VAT because the VAT is a tax imposed only on the value added
by the taxpayer. If the input VAT is in fact excessively collected under Section 229, then it is the person legally
liable to pay the input VAT, not the person to whom the tax was passed on as part of the purchase price and
claiming credit for the input VAT under the VAT System, who can file the judicial claim under Section 229.
Thus, it is clear that there must be a wrongful payment because what is paid, or part of it, is not legally due.

***

There is nothing in RMC 49-03 that states, expressly or impliedly, that the taxpayer need not wait for the 120-
day period to expire before filing a judicial claim with the CTA. RMC 49-03 merely authorizes the BIR to
continue processing the administrative claim even after the taxpayer has filed its judicial claim, without saying
that the taxpayer can file its judicial claim before the expiration of the 120-day period.

Thus, if the taxpayer files its judicial claim before the expiration of the 120-day period, the BIR will
nevertheless continue to act on the administrative claim because such premature filing cannot divest the
Commissioner of his statutory power and jurisdiction to decide the administrative claim within the 120-day
period.

On the other hand, if the taxpayer files its judicial claim after the 120- day period, the Commissioner can still
continue to evaluate the administrative claim. There is nothing new in this because even after the expiration of
the 120-day period, the Commissioner should still evaluate internally the administrative claim for purposes of
opposing the taxpayers judicial claim, or even for purposes of determining if the BIR should actually concede to
the taxpayers judicial claim. The internal administrative evaluation of the taxpayers claim must necessarily
continue to enable the BIR to oppose intelligently the judicial claim or, if the facts and the law warrant
otherwise, for the BIR to concede to the judicial claim, resulting in the termination of the judicial proceedings.

What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer of a judicial
claim with the CTA before the expiration of the 120-day period cannot operate to divest the Commissioner of
his jurisdiction to decide an administrative claim within the 120-day mandatory period,unless the Commissioner
has clearly given cause for equitable estoppel to apply as expressly recognized in Section 246 of the Tax Code.

***

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made by a
government agency tasked with processing tax refunds and credits, the One Stop Shop Inter-Agency Tax Credit
and Drawback Center of the Department of Finance. This government agency is also the addressee, or the entity
responded to, in BIR Ruling No. DA-489-03.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling
No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6
October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional.

However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for four reasons: first, it is admittedly
an erroneous interpretation of the law; second, prior to its issuance, the BIR held that the 120-day period was
mandatory and jurisdictional, which is the correct interpretation of the law; third, prior to its issuance, no
taxpayer can claim that it was misled by the BIR into filing a judicial claim prematurely; and fourth, a claim for
tax refund or credit, like a claim for tax exemption, is strictly construed against the taxpayer.

San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim
prematurely on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03 on 10 December 2003. To
repeat, San Roque cannot claim that it was misled by the BIR into filing its judicial claim prematurely because
BIR Ruling No. DA-489-03 was issued only after San Roque filed its judicial claim. At the time San Roque
filed its judicial claim, the law as applied and administered by the BIR was that the Commissioner had 120 days
to act on administrative claims.

This was in fact the position of the BIR prior to the issuance of BIR Ruling No. DA-489-03. Indeed, San Roque
never claimed the benefit of BIR Ruling No. DA- 489-03 or RMC 49-03, whether in this Court, the CTA, or
before the Commissioner.

With respect to Taganito, it filed its judicial claim after the issuance of BIR Ruling No. DA-489-03 on 10
December 2003. Truly, Taganito can claim that in filing its judicial claim prematurely without waiting for the
120-day period to expire, it was misled by BIR Ruling No. DA-489-03. Thus, Taganito can claim the benefit of
BIR Ruling No. DA-489-03, which shields the filing of its judicial claim from the vice of prematurity.

Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial claim
prematurely but filed it long after the lapse of the 30-day period following the expiration of the 120-day period.
***

Section 4.106-2(c) of Revenue Regulations No. 7-95, by its own express terms, applies only if the taxpayer files
the judicial claim after the lapse of the 60-day period, a period with which San Roque failed to comply.

Under Section 4.106-2(c), the 60-day period is still mandatory and jurisdictional.

There can be no dispute that under Section 106(d) of the 1977 Tax

Code, as amended by RA 7716, the Commissioner has a 60-day period to act on the administrative claim.This
60-day period is mandatory and jurisdictional.

Section 4.106-2(c) did not change Section 106(d) as amended by RA

7716, but merely implemented it, for two reasons. First, Section 4.106-2(c) still expressly requires compliance
with the 60-day period. This cannot be disputed.

Second, under the novel amendment introduced by RA 7716, mere inaction by the Commissioner during the 60-
day period is deemed a denial of the claim. Thus, Section 4.106-2(c) states that if no action on the claim for tax
refund/credit has been taken by the Commissioner after the sixty (60) day period, the taxpayer may already file
the judicial claim even long before the lapse of the two-year prescriptive period. Prior to the amendment by RA
7716, the taxpayer had to wait until the two-year prescriptive period was about to expire if the Commissioner
did not act on the claim. With the amendment by RA 7716, the taxpayer need not wait until the two-year
prescriptive period is about to expire before filing the judicial claim because mere inaction by the
Commissioner during the 60-day period is deemed a denial of the claim. This is the meaning of the phrase but
before the lapse of the two (2) year period in Section 4.106-2(c). As Section 4.106- 2(c) reiterates that the
judicial claim can be filed only after the sixty (60) day period, this period remains mandatory and jurisdictional.
Clearly,

Section 4.106-2(c) did not amend Section 106(d) but merely faithfully implemented it.

Section 112(D) of the 1997 Tax Code is clear, unequivocal, and categorical that the Commissioner has 120 days
to act on an administrative claim. The taxpayer can file the judicial claim (1) only within thirty days after the
Commissioner partially or fully denies the claim within the 120- day period, or (2) only within thirty days from
the expiration of the 120- day period if the Commissioner does not act within the 120-day period. There can be
no dispute that upon effectivity of the 1997 Tax Code on 1 January 1998, or more than five years before San
Roque filed its administrative claim on 28 March 2003, the law has been clear: the 120- day period is
mandatory and jurisdictional. San Roques claim, having been filed administratively on 28 March 2003, is
governed by the 1997 Tax Code, not the 1977 Tax Code. Since San Roque filed its judicial claim before the
expiration of the 120-day mandatory and jurisdictional period, San Roques claim cannot prosper.

San Roque cannot also invoke Section 4.106-2(c), which expressly provides that the taxpayer can only file the
judicial claim after the lapse of the 60-day period from the filing of the administrative claim.

Even if, contrary to all principles of statutory construction as well as plain common sense, we gratuitously apply
now Section 4.106-2(c) of Revenue Regulations No. 7-95, still San Roque cannot recover any refund or credit
because San Roque did not wait for the 60-day period to lapse, contrary to the express requirement in Section
4.106-2(c). In short, San Roque does not even comply with Section 4.106-2(c). A claim for tax refund or credit
is strictly construed against the taxpayer, who must prove that his claim clearly complies with all the conditions
for granting the tax refund or credit. San Roque did not comply with the express condition for such statutory
grant.
23. Commissioner of Internal Revenue vs. Mindanao II Geothermal Partnership

Facts:
Mindanao II is a registered taxpayer whose sales to NAPOCOR are all zero-rated pursuant to the EPIRA Law.  On
Oct 6 2005, it filed with the BIR an application for the refund or credit of accumulated unutilized creditable input taxes
for the second, third, and fourth taxable quarters of the taxable year 2004. The administrative claim was not acted upon
until Feb 3 2006, or 120 days after Oct 6 2005. Believing that a judicial claim must be filed within the 2-year prescriptive
period provided under Sec 112 (A) and that it must be reckoned from the date of filing of its VAT returns, Mindanao filed
on July 26 2006 a petition for review before the CTA claiming inaction on the part of the CIR.
On Aug 12 2008, the CTA Division granted Mindanao II’s claim for refund/credit and held that its judicial claim
was timely filed within the 2-year prescriptive period. The CIR opposed the rulings claiming that prescription had already
set in when Mindanao II filed its judicial claim beyond the 30-day period fixed in Section 112 (C).

Issue 1: W/N Mindanao II’s administrative claim for refund/credit was timely filed

Yes. Pursuant to Section 112 (A) of the 1997 Tax Code, it is only the administrative claim which is to be filed within the
two-year prescriptive period, and the two-year prescriptive period begins to run from the close of the taxable quarter
when the sales were made. Here, Mindanao II filed its claim for refund/credit for the second, third, and fourth quarters
of 2004 on Oct 6 2005. Such date is well within the two-year prescriptive period which runs from June 30 2004 (2nd
Quarter), Sept 30 2004 (3rd Quarter) and Dec 31 2004 (4th Quarter).
[The Atlas and Mirant rulings are simply not applicable in this case because Mindanao II’s application for refund/credit
on Oct 6 2005 was filed before their promulgation. The Atlas ruling is held to be applicable only on cases filed from June
8 2007, the date of its promulgation, and up to Sept 12 2008, the date when the Mirant case was promulgated.
In Atlas, the court laid down a rule that the 2-year prescriptive period is reckoned from the date of filing of the return and
payment of taxes. In Mirant, such rule was abandoned. Following the verba legis doctrine, Mirant held that in
administrative claims for refund/credit of unutilized input VAT, the 2-year prescriptive period begins to run from the close
of taxable quarter when the relevant sales were made. This rule, which is obviously consistent with the plain wordings of
Section 112 (A), was also affirmed in the recent case of San Roque.]

Issue 2: W/N Mindanao II’s judicial claim for refund/credit was timely filed

No. Under Section 112 (C), the judicial claim must be filed by the taxpayer within 30 days after the 120-day waiting
period if its administrative claim was not acted upon by CIR. Here, Mindanao II filed its application for refund on Oct 6
2005. When it was not acted upon, it filed a judicial claim but only on July 21 2006, or 138 days after the lapse of the 30-
day period on 5 March 2006.  Its petition for review before the CTA was therefore filed late.
Contrary to the erroneous contentions of the CTA En Banc, the correct interpretation of Section 112, as held in San
Roque, is that the 30-day period applies not only to instances of actual denial by the CIR of the claim for refund or tax
credit, but to cases of inaction by the CIR as well. Also, following the verba legis doctrine, the 30-day period to appeal is
both mandatory and jurisdictional. Section 112 (C) is clear, plain and unequivocal in expressly providing that the
taxpayer has a 30-day period to appeal the decision or inaction of the Commissioner.
***When reading the full text of this case, please note the difference in letterings of Section 112 particularly Section 112
(C) and (D) of the NIRC as amended by RA 9337 of 2005. In this digested version, Section 112 (C) is used to refer to
Section 112 (D) of the old NIRC. ***
Summary of Rules on Prescriptive Periods for Claiming Refund or Credit of Input Tax
Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year prescriptive period. (Aichi)

2. The proper reckoning date for the two-year prescriptive period is the close of the taxable quarter when the
relevant sales were made. (San Roque)

3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to12 September 2008. Atlas states
that the two-year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT payments
should be counted from the date of filing of the VAT return and payment of the tax. (San Roque)
120 + 30 Day Period
1. The taxpayer can file an appeal in one of two ways:

(1) file the judicial claim within thirty days after the Commissioner denies the claim within the 120-day period, or
(2) file the judicial claim within thirty days from the expiration of the 120-day period if the Commissioner does not act
within the 120-day period.
2. The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.

3. As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. (Aichi and San Roque)

4. As an exception to the general rule, premature filing is allowed only if filed between 10 December 2003 and 5
October 2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque)

5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force. (San
Roque)
24. ROHM Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue

FACTS: Petitioner (Rohm Apollo) is a domestic corporation registered with the Securities and Exchange
Commission. It is also registered with the Philippine Economic Zone Authority as an Ecozone Export On 11
December 2000, petitioner filed with the BIR an application for the refund or credit of accumulated
Enterprise. Petitioner is in the business of manufacturing semiconductor products, particularly microchip
unutilized creditable input taxes. Thus, the CIR had a period of 120 days from 11 December 2000, or until
transistors and tantalium capacitors. Further, it is registered with the Bureau of Internal Revenue (BIR) 10 April
2001, to act on the claim. It failed to do so, however. Rohm Apollo should then have treated the
as a value-added taxpayer. CIR’s inaction as a denial of its claim. Petitioner would then have had 30 days, or
until 10 May 2001, to
file a judicial claim with the CTA. But Rohm Apollo filed a Petition for Review with the CTA only on 11
Sometime in June 2000, prior to the commencement of its operations on 1 September 2001, Rohm Apollo
September 2002. The judicial claim was thus filed late.
engaged the services of Shimizu Philippine Contractors, Inc. (Shimizu) for the construction of a factory.
For services rendered by Shimizu, petitioner made initial payments of P198,551,884.28 on 7 July 2000 Justice
Carpio stated: “The old rule that the taxpayer may file the judicial claim, without waiting for the
and P132,367,923.58 on 3 August 2000. Commissioner's decision if the two-year prescriptive period is about to
expire, cannot apply because that
rule was adopted before the enactment of the 30-day period. The 30-day period was adopted precisely
Petitioner treated the payments as capital goods purchases and thus filed with the BIR an administrative to do
away with the old rule, so that under the VAT System the taxpayer will always have 30 days to file
claim for the refund or credit of accumulated unutilized creditable input taxes on 11 December 2000. As the
judicial claim even if the Commissioner acts only on the 120th day, or does not act at all during the
120-day period. With the 30-day period always available to the taxpayer, the taxpayer can no longer file On the
onshore issue, RCBC stated as defense that it was a borrower and a constituted as the withholding
a judicial claim for refund or credit of input VAT without waiting for the Commissioner to decide until the
agent that was primarily liable for remittance of said tax.
expiration of the 120-day period. The 30-day period to appeal is mandatory and jurisdictional.” CTA partially
grants. But ordered RCBC to pay Php171.8 million for the onshore tax. Also, it cannot assail
the validity of the waivers after it had paid the reduced amount of taxes.
On July 22, 2009, while on appeal to the Supreme Court, RCBC manifested that this case is now moot
As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. The only exception
and academic as it already paid the DST on Special Savings Account for the taxable years 1994 and
to the general rule is when BIR Ruling No. DA-489-03 was still in force, that is, between 10 December
1995 after BIR approved the tax abatement.
2003 and 5 October 2010, The BIR Ruling excused premature filing, declaring that the taxpayer-claimant
need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way

Issue: WON petitioner is estopped from assailing the validity of the waivers
of Petition for Review.

Held: YES. Article 1431 of the New Civil Code gives basis to the doctrine of estoppel. It states that an
Premature filing is allowed for cases falling during the time when BIR Ruling No. DA-489-03 was in force;
admission or representation is rendered conclusive upon the person making it, and cannot be denied or
nevertheless, late filing is absolutely prohibited even for cases falling within that period. The petitioner
disproved as against the person relying thereon. A party is precluded from denying his own acts,
filed its judicial claim with the CTA on 11 September 2002. This was before the issuance of BIR Ruling
admissions or representations to the prejudice of the other party in order to prevent fraud and falsehood.
No. DA-489-03 on 10 December 2003. Thus, Rohm Apollo could not have benefited from the BIR Ruling.
Such doctrine is applicable here as RCBC, through its partial payment of the revised assessments issued
Besides, its situation was not a case of premature filing of its judicial claim but one of late filing. To repeat,
within the extended period impliedly admitted the validity of the waivers.
its judicial claim was filed on 11 September 2002 – long after 10 May 2001, the last day of the 30-day As
evidence, RCBC even immediately paid the said deficiency tax upon receipt of the revised
period for appeal. The case thus falls under the general rule – the 30-day period is mandatory and assessments
on Dec. 6, 2000. Thus, RCBC is already estopped. Had RCBC truly believed that the
jurisdictional. waivers were invalid and that the assessments were issued beyond the prescriptive period, then it
shouldn’t have paid the reduced amount in the assessment.
Hence, the CTA lost jurisdiction over Rohm Apollo’s claim for a refund or credit.
25. CBK Power Company vs. Commissioner of Internal Revenue

FACTS:

CBK Power is a limited partnership duly organized and existing under the laws of the Philippines, and primarily
engaged in the development and operation of hydroelectric power generating plants in Laguna.

In February 2001, CBK Power borrowed money from Industrial Bank of Japan, Fortis-Netherlands, Raiffesen
Bank, Fortis-Belgium, and Mizuho Bank for which it remitted interest payments from May 2001 to May 2003.
It allegedly withheld final taxes from said payments based on the following rates: (a) fifteen percent (15%) for
Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty percent (20%) for Industrial Bank of
Japan and Mizuho Bank.

However, according to CBK Power, under the relevant tax treaties between the Philippines and the respective
countries in which each of the banks is a resident, the interest income derived by the aforementioned banks are
subject only to a preferential tax rate of 10%

Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final withholding taxes
allegedly erroneously withheld and collected.

Due to CIR’s inaction, CBK Power appealed to CTA Division. The latter partially granted the refund. One of
the refunds was disallowed because of failure on the part of CBK Power to obtain an ITAD ruling with respect
to its transactions with Fortis-Netherlands. CTA En Banc affirmed said decision.

ISSUE:

Whether or not the BIR may add a requirement– prior application for an ITAD ruling – that is not found in the
income tax treaties signed by the Philippines before a taxpayer can avail of preferential tax rates under said
treaties.

HELD:

NO. The Court held that the obligation to comply with a tax treaty must take precedence over the objective of
RMO No. 1-2000.

Bearing in mind the rationale of tax treaties, the period of application for the availment of tax treaty relief as
required by RMO No. 1-2000 should not operate to divest entitlement to the relief as it would constitute a
violation of the duty required by good faith in complying with a tax treaty. The denial of the availment of tax
relief for the failure of a taxpayer to apply within the prescribed period under the administrative issuance would
impair the value of the tax treaty. At most, the application for a tax treaty relief from the BIR should merely
operate to confirm the entitlement of the taxpayer to the relief.

Logically, noncompliance with tax treaties has negative implications on international relations, and unduly
discourages foreign investors. While the consequences sought to be prevented by RMO No. 1-2000 involve an
administrative procedure, these may be remedied through other system management processes, e.g., the
imposition of a fine or penalty. But we cannot totally deprive those who are entitled to the benefit of a treaty for
failure to strictly comply with an administrative issuance requiring prior application for tax treaty relief.
26. Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue

FACTS:

Total Gas filed its Amended Quarterly VAT Returns. Total claims that they incurred unused input VAT credits.

On May 15, 2008, Total filed an administrative claim for the refund. On August 28, 2008, Total submitted to
the BIR additional documents. On January 23, 2009, Total elevated the case to the CTA.

The CTA dismissed the case citing that the case was prematurely filed as the necessary documents were
incomplete; that the 120-day period allowed to the CIR to decide on the claim under Section 112 of the NRC
has not started to run.

With the CTA en banc, the case was again dismissed reiterating the decision of the Division. The en banc also
stated that the reckoning point of the 120-day period was on May 2008 thus the petition filed on January 2009
was considered belatedly filed.

ISSUE: Whether the claim has prescribed.

RULING:

NO.

The SC held that Total timely filed its judicial claim on January 2009.

The NIRC provides that the CIR has 120 days from the date of submission of complete documents to decide on
the claim for tax credits. Upon inaction of the BIR after 120 days, the taxpayer may, within 30 days, appeal on
the CTA.

The BIR did not give notice to Total with regard to the documents submitted on August 2008. Thus the
counting of the 120-day period should start from August 2008 or when Total made its submission of complete
documents to support its application. The BIR had until December 2008 to decide. Because of the BIR's
inaction, Total had until January 25, 2009 to file their judicial claim.
27. Silkair [Singapore] Pte. Ltd. vs. Commissioner of Internal Revenue

FACTS:

Petitioner is a corporation organized under the laws of Singapore which has a Philippine representative office, is
an online international air carrier.

Silkair filed with the Bureau of Internal Revenue (BIR) for the refund of excise taxes for their purchase of jet
fuel.

The CIR, in their reply, said that petitioner failed to prove that the sale of the fuel was directly made from a
domestic oil company to them. The excise tax on petroleum products is the direct liability of the
manufacturer/producer, and when added to the cost of the goods sold to the buyer, it is no longer a tax but part
of the price which the buyer has to pay to obtain the article.

The CTA denying Silkair’s petition stated that as the excise tax was imposed manufacturer of petroleum
products, any claim for refund should be filed by the latter; and where the burden of tax is shifted to the
purchaser, the amount passed on to it is no longer a tax but becomes an added cost of the goods purchased.

ISSUE: Whether Silkair PTE. Ltd. can claim for tax credit.

RULING:

No.

The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom
the tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Thus, Petron
Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135 of the
NIRC of 1997.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for
jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser.
28. Philippine Airlines vs. Commissioner of Internal Revenue

DOCTRINE: The law confers an exemption from both direct and indirect taxes, a claimant is entitled If to a tax
refund even if it only bears the economic burden of the applicable tax.

FACTS: Caltex Philippines, Inc. (“Caltex”) imported Jet A-1 fuel for which it paid excise taxes. Caltex sold the
fuel to Philippine Airlines, Inc. (PAL), for which Caltex issued a billing including the amount of excise tax paid
on the imported fuel. PAL filed a claim for refund with the BIR, seeking the refund of the excise taxes passed
on to it by Caltex. PAL hinged its claim on its franchise, PD No, 1590, which conferred upon it certain tax
exemption privileges on its purchase and/or importation of aviation gas, fuel and oil, including those which are
passed on to it by the seller and/or importer thereof. Due to BIR’s inaction, PAL filed a petition with the CTA.
Relying on the case of Silkair (Singapore) Pte. Ltd. vs. CIR, the CTA denied PAL’s petition on the ground that
only a statutory taxpayer (Caltex, in this case) may seek a refund of the excise tax it paid. Even if the tax burden
was shifted to PAL, the latter cannot be deemed the statutory taxpayer.

HELD: On appeal to the Supreme Court, the Court ruled that while the NIRC mandates the
manufacturer/producer of goods manufactured or produced in the Philippines and the importer and the
owner/importer of imported goods as the persons to pay the applicable excise taxes directly to the government,
they may, however, shift the economic burden of such payments to someone else – usually the purchaser of the
goods – since excise taxes are considered as a kind of indirect tax. Even if the purchaser effectively pays the
tax, the manufacturers/producers or the owners/importers are still regarded as the statutory taxpayers. Section
204(c) of the NIRC states that it is the statutory taxpayer which has the legal personality to file a claim for
refund.

Accordingly, in cases involving excise tax exemptions on petroleum products under Section 135 of the NIRC, it
is the statutory taxpayer who is entitled to claim a tax refund and not the party who merely bears its economic
burden. However, this rule does not apply to instances where the law clearly grants the party to which the
economic burden of tax is shifted an exemption from both direct and indirect taxes. In which case, the latter
must be allowed to claim a tax refund even if it is not considered as the statutory taxpayer. if the law confers an
exemption from both direct and indirect tax, a claimant is entitled to a refund even if it only bears the economic
burden of the applicable tax. On the other hand, if the exemption conferred by law applies to direct taxes, then
the statutory taxpayer is regarded as the proper party to file the refund claim.
29. Commissioner of Internal Revenue vs. Smart Communication, Inc.

FACTS:
Smart entered into an Agreement with Prism, a nonresident foreign corporation domiciled in Malaysia, whereby
Prism will provide programming and consultancy services to Smart. Thinking that the payments to Prism were
royalties, Smart withheld 25% under the RP-Malaysia Tax Treaty. Smart then filed a refund with the BIR
alleging that the payments were not subject to Philippine withholding taxes given that they constituted business
profits paid to an entity without a permanent establishment in the Philippines.

ISSUE:
Does Smart have the right to file the claim for refund?

HELD:
YES. The Court reiterated the ruling in Procter & Gamble stating that a person “liable for tax” has sufficient
legal interest to bring a suit for refund of taxes he believes were illegally collected from him. Since the
withholding agent is an agent of the beneficial owner of the payments (i.e., nonresident), the authority as agent
is held to include the filing of a claim for refund. The Silkair case was held inapplicable as it involved excise
taxes and not withholding taxes.

Smart was granted a refund given that only a portion of its payments represented royalties since it is only that
portion over which Prism maintained intellectual property rights and the rest involved full transfer of
proprietary rights to Smart and were thus treated as business profits of Prism.
30. Commissioner of Internal Revenue vs. Toledo Power Company

Facts:

Toledo Power Corporation (TPC) is a general partnership principally engaged in the business of power
generation and sale of electricity to the National Power Corporation (NPC), Cebu Electric Cooperative III
(CEBECO), Atlas Consolidated Mining and Development Corporation (ACMDC),... and Atlas Fertilizer
Corporation (AFC).

TPC filed with the Bureau of Internal Revenue (BIR)... claim for refund... unutilized input Value Added Tax
(VAT)... due to the inaction of the Commissioner of Internal Revenue

TPC filed with the CTA a Petition for Review

Ruling of the CTA Division

CTA Division rendered a Decision partially granting TPC's claim in the reduced amount of P7,598,279.29.[9]
Since NPC is exempt from the payment of all taxes, including VAT, the CTA Division allowed TPC to... claim
a refund or credit of its unutilized input VAT attributable to its zero-rated sales of electricity to NPC for the
taxable year 2002

The CTA Division, however, denied the claim attributable to TPC's sales of electricity to CEBECO, ACMDC
and AFC... due to the failure of TPC to prove that it is a generation company under the EPIRA

The CTA Division did not consider the said sales as valid zero-rated sales because TPC did not submit a
Certificate of Compliance (COC) from the Energy Regulatory Commission (ERC). Although TPC filed an
application for a COC on June 20, 2002 with the ERC, the CTA Division found this insufficient to prove that
TPC is a generation company under the EPIRA.

CTA En Banc rendered a Decision

It sustained the findings of the CTA Division

Issue:

Whether the TPC is entitled to the full amount of its claim for tax refund or credit.

Ruling:

TPC is not entitled to a refund or credit of unutilized input VAT attributable to its sales of electricity to
CEBECO, ACMDC, and AFC.

TPC is not liable for deficiency VAT.

As a rule, taxes cannot be subject to compensation because the government and the taxpayer are not creditors
and debtors of each other. However, we are aware that in several cases, we have allowed the determination of a
taxpayer's liability in a refund... case, thereby allowing the offsetting of taxes.

In Commissioner of Internal Revenue v. Court of Tax Appeals, we allowed offsetting of taxes in a tax refund
case because there was an existing deficiency income and business tax assessment against the taxpayer.
Similarly, in South African Airways v. Commissioner of Internal Revenue, we permitted offsetting of taxes
because the correctness of the return filed by the taxpayer was put in issue

Similarly, in South African Airways v. Commissioner of Internal Revenue, we permitted offsetting of taxes
because the correctness of the return filed by the taxpayer was put in issue.

In the recent case of SMI-ED Philippines Technology, Inc. v. Commissioner of Internal Revenue, we also
allowed offsetting because there was a need for the court to determine if a taxpayer claiming refund of
erroneously paid taxes is more properly... liable for taxes other than that paid.

But in all these cases, we allowed offsetting of taxes only because the determination of the taxpayer's liability is
intertwined with the resolution of the claim for tax refund of erroneously or illegally collected taxes under
Section 229 of the NIRC. A... situation that is not present in the instant case.

In this case, TPC filed a claim for tax refund or credit under Section 112 of the NIRC, where the issue to be
resolved is whether TPC is entitled to a refund or credit of its unutilized input VAT for the taxable year 2002.
And since it is not a claim for refund under Section 229... of the NIRC, the correctness of TPC s VAT returns is
not an issue. Thus, there is no need for the court to determine whether TPC is liable for deficiency VAT

Besides, it would be unfair to allow the CIR to use a claim for refund under Section 112 of the NIRC as a means
to assess a taxpayer for any deficiency VAT, especially if the period to assess had already prescribed. As we
have said, the courts have no assessment powers, and... therefore, cannot issue assessments against taxpayers.
The courts can only review the assessments issued by the CIR, who under the law is vested with the powers to
assess and collect taxes and the duty to issue tax assessments within the prescribed... period.

WHEREFORE, the Petitions are hereby DENIED. The November 22, 2010 Decision and the April 6, 2011
Resolution of the Court of Tax Appeals in CTA EB Nos. 623 and 629 are hereby AFFIRMED.
31. Commissioner of Internal Revenue vs. PASCOR Realty and Development Corp.

FACTS: BIR Commissioner authorized revenue officers to examine the books of accounts and accounting
records of Pascor Realty (PRDC). Such examination resulted in a recommendation for the issuance of an
assessment amounting to P7,498,434.65 and P3,015,236.35 for the years 1986 and 1987, respectively.
Commissioner of Internal Revenue filed a criminal complaint before the Department of Justice against the
PRDC, its President Rogelio A. Dio, and its Treasurer Virginia S. Dio, alleging evasion of taxes in the total
amount of P10,513,671.00. Pascor filed a request for reconsideration/reinvestigation which the CIR denied
prompting the respondents to elevate the CIR’s decision to the CTA. CIR filed a Motion to Dismiss on the
ground that CTA has no jurisdiction over the subject matter since no formal assessment has been issued against
PRDC. The CTA denied the Motion stating that the criminal case for tax evasion is already an assessment. The
amount and kind of tax due and the covered period are sufficient details for an assessment. CA agreed with the
decision of the CTA.

ISSUE: Whether or not the criminal complaint for tax evasion can be construed as an assessment.

RULING: NO. Neither the NIRC nor the revenue regulations governing the protest of assessments provide a
specific definition or form of an assessment. However, the NIRC defines the specific functions and effects of an
assessment. To consider the affidavit attached to the Complaint as a proper assessment is to subvert the nature
of an assessment and to set a bad precedent that will prejudice innocent taxpayers.
32. Lucas Adamson vs. Court of Appeals

FACTS:
A deficiency tax assessment was issued against Petitioners relating to their payment of capital gains tax and
VAT on their sale of shares of stock and parcels of land. Subsequent to the preliminary conference, the CIR
filed with the Department of Justice her Affidavit of Complaint against Petitioners. The Court of Appeals
ultimately ruled that, in a criminal prosecution for tax evasion, assessment of tax deficiency is not required
because the offense of tax evasion is complete or consummated when the offender has knowingly and willfully
filed a fraudulent return with intent to evade the tax.

ISSUES:
(1) Did the CIR issue an assessment?
(2) Must a criminal prosecution for tax evasion be preceded by a deficiency tax assessment?
(3) Does the CTA have jurisdiction on the case?

HELD:
(1) NO. The recommendation letter of the Commissioner cannot be considered a formal assessment as (a) it was
not addressed to the taxpayers; (b) there was no demand made on the taxpayers to pay the tax liability, nor a
period for payment set therein; (c) the letter was never mailed or sent to the taxpayers by the Commissioner. It
was only an affidavit of the computation of the alleged liabilities and thus merely served as prima facie basis for
filing criminal informations.

(2) YES. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court after the
collection of such tax may be begun without assessment considering that upon investigation of the examiners of
the BIR, there was a preliminary finding of gross discrepancy in the computation of the capital gains taxes due
from the transactions. The Tax Code is clear that the remedies may proceed simultaneously.

(3) NO. While the laws governing the CTA have expanded the jurisdiction of the Court, they did not change the
jurisdiction of the CTA to entertain an appeal only from a final decision of the Commissioner, or in cases of
inaction within the prescribed period. Since in the cases at bar, the Commissioner has not issued an assessment
of the tax liability of the Petitioners, the CTA has no jurisdiction.