2019 Bar Examinations

Last Minute Pointers in Taxation

Based on Recent Jurisprudence including
Decisions Penned by Justice Estella Perlas-Bernanbe
Prepared by Attorney Victoria V. Loanzon
with the assistance of Atty. Gio Consunji

Q: Standard Insurance Co., Inc. contested the Bureau of Internal Revenue’s (BIR) Preliminary
Assessment Notice (PAN) regarding its liability amounting to P377,038,679.55 arising from a
deficiency in the payment of documentary stamp taxes (DST) for taxable year 2011. Although
Standard Insurance Co., Inc. requested reconsideration, it received the Final Decision on Disputed
Assessment (FDDA), declaring its liability for the DST deficiency, including interest and compromise
penalty, totaling P418,830,567.46
Meanwhile, Standard Insurance Co., Inc. also received a demand for the payment of its deficiency
income tax, value-added tax, premium tax, DST, expanded withholding tax, and fringe benefit tax for
taxable year 2012, and deficiency DST for taxable year 2013.
Standard Insurance Co., filed with the RTC for the judicial determination of the constitutionality of
Section 108 and Section 184 of the NIRC with respect to the taxes to be paid by non-life insurance
companies.
The RTC issued a TRO enjoining the BIR, its agents, representatives, assignees, or any persons acting
for and in its behalf from implementing the provisions of the NIRC adverted to with respect to the
FDDA for the respondent's taxable year 2011, and to the pending assessments for taxable years 2012
and 2013. The RTC eventually issued the writ of preliminary injunction.
Is injunctive relief available as a remedy to assail the collection of a tax?
A: No, taxes, being the lifeblood of the Government, should be collected promptly and without hindrance
or delay. Obeisance to this policy is unquestionably dictated by law itself. The Tax Code provides that  no
court shall have the authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by the Tax Code. Also, the decisions or rulings of the Commissioner
of Internal Revenue, among others, assessing any tax, or levying, or distraining, or selling any property of
taxpayers for the satisfaction of their tax liabilities are immediately executory, and their enforcement is
not to be suspended by any appeals thereof to the Court of Tax Appeals unless in the opinion of the Court
of Tax Appeals the collection by the Bureau of Internal Revenue or the Commissioner of Customs may
jeopardize the interest of the Government and/or the taxpayer, in which case the Court of Tax Appeals at
any stage of the proceeding may suspend the said collection and require the taxpayer either to deposit the
amount claimed or to file a surety bond for not more than double the amount." (Commissioner of Internal
Revenue v. Standard Insurance Co., Inc., G.R. No. 219340, [November 7, 2018])

Q: Enumerate three (3) reasons for the institution of the withholding tax system.
A: The withholding tax system was devised for three primary reasons, namely: (1) to provide the
taxpayer a convenient manner to meet his probable income tax liability; (2) to ensure the collection of
income tax which can otherwise be lost or substantially reduced through failure to file the
corresponding returns; and (3) to improve the government's cash flow. This results in administrative
savings, prompt and efficient collection of taxes, prevention of delinquencies and reduction of
governmental effort to collect taxes through more complicated means and remedies.
(Confederation for Unity, Recognition and Advancement of Government Employees v.
Commissioner, Bureau of Internal Revenue, G.R. Nos. 213446 & 213658 , [July 3, 2018])

Q: Give at least five (5) items which are exempt from withholding tax on compensation.
A: The following allowances, bonuses or benefits, excluded by the Tax Code, as amended, from the
employee's compensation income, are exempt from withholding tax on compensation:
1. Retirement benefits received under RA No. 7641 and those received by officials and
employees of private firms, under a reasonable private benefit plan maintained by the
employer subject to the requirements provided by the Code;
2. Any amount received by an official or employee or by his heirs from the employer
due to death, sickness or other physical disability or for any cause beyond the control of
the said official or employee, such as retrenchment, redundancy, or cessation of
business;

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 3. Social security benefits, retirement gratuities, pensions and other similar benefits
received by residents or non-resident citizens of the Philippines or aliens who come to
reside permanently in the Philippines from foreign government agencies and other
institutions private or public;
4. Payments of benefits due or to become due to any person residing in the Philippines
under the law of the United States administered by the United States Veterans
Administration;
5. Payments of benefits made under the Social Security System Act of 1954 as
amended;
6. Benefits received from the GSIS Act of 1937, as amended, and the retirement
gratuity received by government officials and employees;
7. Thirteenth (13th) month pay and other benefits received by officials and employees
of public and private entities not exceeding P82,000.00;
8. GSIS, SSS, Medicare and Pag-Ibig contributions, and union dues of individual
employees;
9. Remuneration paid for agricultural labor;
10. Remuneration for domestic services;
11. Remuneration for casual labor not in the course of an employer's trade or business;
12. Remuneration not more than the statutory minimum wage and the holiday pay,
overtime pay, night shift differential pay and hazard pay received by Minimum Wage
Earners;
13. Compensation for services by a citizen or resident of the Philippines for a foreign
government or an international organization;
14. Actual, moral, exemplary and nominal damages received by an employee or his
heirs pursuant to a final judgment or compromise agreement arising out of or related to
an employer-employee relationship;
15. The proceeds of life insurance policies paid to the heirs or beneficiaries upon the
death of the insured, whether in a single sum or otherwise, provided however, that
interest payments agreed under the policy for the amounts which are held by the
insured under such an agreement shall be included in the gross income;
16. The amount received by the insured, as a return of premium or premiums paid by
him under life insurance, endowment, or annuity contracts either during the term or at
the maturity of the term mentioned in the contract or upon surrender of the contract;
17. Amounts received through Accident or Health Insurance or under Workmen's
Compensation Acts, as compensation for personal injuries or sickness, plus the amount
of any damages received whether by suit or agreement on account of such injuries or
sickness;
18. Income of any kind to the extent required by any treaty obligation binding upon the
Government of the Philippines;
19. Fringe and De minimis Benefits; and
20. Other income received by employees which are exempt under special laws.
(Confederation for Unity, Recognition and Advancement of Government Employees v.
Commissioner, Bureau of Internal Revenue, G.R. Nos. 213446 & 213658 , [July 3,
2018])

Q: Are withholding taxes internal revenue taxes covered by Section 203 of the NIRC?
A: Yes, Section 203 of the NIRC provides for the ordinary prescriptive period for the assessment and
collection of taxes. On the other hand, Section 222 (a) of the NIRC provides for instances where the
ordinary prescriptive period of three years for the assessment and collection of taxes is extended to 10
years, i.e., false return, fraudulent returns, or failure to file a return.
Under the existing withholding tax system, the withholding agent retains a portion of the amount received
by the income earner. In turn, the said amount is credited to the total income tax payable in transactions
covered by the EWT. On the other hand, in cases of income payments subject to WTC and Final
Withholding Tax, the amount withheld is already the entire tax to be paid for the particular source of
income. Thus, it can readily be seen that the payee is the taxpayer, the person on whom the tax is
imposed, while the payor, a separate entity, acts as the government's agent for the collection of the tax in
order to ensure its payment.

Q. What are the liabilities under the withholding tax system?

A. As a consequence of the withholding tax system, two distinct liabilities arise — one for the income
earner/payee and another for the withholding agent. Withholding tax is a method of collecting tax in

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advance and that a withholding tax on income necessarily implies that the amount of tax withheld comes
from the income earned by the taxpayer/payee. 
The liability of the withholding agent is distinct and separate from the tax liability of the income earner. It
is premised on its duty to withhold the taxes paid to the payee. Should the withholding agent fail to
deduct the required amount from its payment to the payee, it is liable for deficiency taxes and applicable
penalties.
Thus, withholding tax assessments such as EWT and WTC clearly contemplate deficiency internal
revenue taxes. Their aim is to collect unpaid income taxes and not merely to impose a penalty on the
withholding agent for its failure to comply with its statutory duty. (Commissioner of Internal Revenue v.
La Flor Dela Isabela, Inc., G.R. No. 211289, [January 14, 2019])

Q: Does the irrevocability rule under Section 76 of the Tax Code apply to both options of refund and
carry-over?
A: No, the irrevocability rule is limited only to the option of carry-over such that a taxpayer is still free
to change its choice after electing a refund of its excess tax credit. But once it opts to carry over such
excess creditable tax, after electing refund or issuance of tax credit certificate, the carry-over option
becomes irrevocable. Accordingly, the previous choice of a claim for refund, even if subsequently
pursued, may no longer be granted.

Q. What are the options available to a corporation whenever it overpays its income tax for the
taxable year?
A. Under Section 76 of the Tax Code, there are two options available to the corporation whenever it
overpays its income tax for the taxable year: (1) to carry over and apply the overpayment as tax credit
against the estimated quarterly income tax liabilities of the succeeding taxable years (also known as
automatic tax credit) until fully utilized (meaning, there is no prescriptive period); and (2) to apply for
a cash refund or issuance of a tax credit certificate within the prescribed period.  Such overpayment of
income tax is usually occasioned by the over-withholding of taxes on the income payments to the
corporate taxpayer.

Q. What is the limitation on the application of the irrevocable option?

A. The irrevocability rule is provided in the last sentence of Section 76. A perfunctory reading of the
law unmistakably discloses that the irrevocable option referred to is the carry-over option only. There
appears nothing therein from which to infer that the other choice, i.e., cash refund or tax credit
certificate, is also irrevocable. If the intention of the lawmakers was to make such option of cash refund
or tax credit certificate also irrevocable, then they would have clearly provided so.
In other words, the law does not prevent a taxpayer who originally opted for a refund or tax credit
certificate from shifting to the carry-over of the excess creditable taxes to the taxable quarters of the
succeeding taxable years. However, in case the taxpayer decides to shift its option to carry-over, it may
no longer revert to its original choice due to the irrevocability rule. As Section 76 unequivocally
provides, once the option to carry over has been made, it shall be irrevocable. Furthermore, the
provision seems to suggest that there are no qualifications or conditions attached to the rule on
irrevocability. (University Physicians Services, Inc.-Management, Inc. v. Commissioner of Internal
Revenue, G.R. No. 205955, [March 7, 2018])

Q: The BIR issued Collection Letters to Company A followed by Warrants of Garnishment and
Distraint and/or Levy. The BIR proceeded with the collection without a previous valid assessment.
Was the BIR correct?
A: No, in the normal course of tax administration and enforcement, the BIR must first make
an assessment then enforce the collection of the amounts so assessed. "An assessment is not an action
or proceeding for the collection of taxes. x x x It is a step preliminary, but essential to warrant distraint,
if still feasible, and, also, to establish a cause for judicial action."  The BIR may summarily enforce
collection only when it has accorded the taxpayer administrative due process, which vitally includes the
issuance of a valid assessment.  A valid assessment sufficiently informs the taxpayer in writing of the
legal and factual bases of the said assessment, thereby allowing the taxpayer to effectively protest the
assessment and adduce supporting evidence in its behalf. (Commissioner of Internal Revenue v.
Pilipinas Shell Petroleum Corp., G.R. Nos. 197945 & 204119, [July 9, 2018])

Q. What is the effect of issuance to BIR’s collection letters and the subsequent Warrants of
Garnishment and Distraint and/or Levy?
A. Absent a previously issued assessment supporting the Collection Letters, it is clear that the BIR’s
attempts to collect through said collection letters as well as the subsequent Warrants of Garnishment
and Distraint and/or Levy are void and ineffectual. If an invalid assessment bears no valid fruit, with

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more reason will no such fruit arise if there was no assessment in the first place. (Commissioner of
Internal Revenue v. Pilipinas Shell Petroleum Corp., G.R. Nos. 197945 & 204119, [July 9, 2018])

Q: The governments of Japan and the Philippines executed an Exchange of Notes, where the former
agreed to extend a loan to the latter for a project. Under the Exchange of Notes, the Philippine
Government, by itself or through its executing agency, undertook to assume all taxes imposed by the
Philippines on Japanese contractors engaged in therein. The National Power Corporation (NPC), as
the executing government agency, entered into a contract with Mitsubishi Corporation for the project.
Mitsubishi Corporation completed. It filed its Income Tax Return, which included income from the
project. It filed an administrative claim for refund, representing the erroneously paid amounts in
relation thereto. Is Mitsubishi Corporation entitled to a refund?
A: Yes, Mitsubishi Corporation is entitled to a refund. Under the NIRC, the CIR has the authority to
credit or refund taxes which are erroneously collected by the government. 
In this case, it is apparent that the subject tax was erroneously collected, considering that the obligation to
pay the same had already been assumed by the Philippine Government by virtue of its Exchange of Notes
with the Japanese Government. (Mitsubishi Corp. -Manila Branch v. Commissioner of Internal Revenue,
G.R. No. 175772, [June 5, 2017], 810 PHIL 16-30) *PERLAS--BERNABE, J.

Q: Caltex sold 804,370 liters of imported Jet A-1 fuel to PAL for the latter's domestic
operations. Caltex electronically filed with the Bureau of Internal Revenue (BIR) its Excise Tax
Returns for Petroleum Products.
PAL received from Caltex an Aviation Billing Invoice for the purchased aviation fuel in the amount
of US$313,949.54, reflecting the amount of US$52,669.33 as the related excise taxes on the
transaction.
PAL sought a refund of the excise taxes passed on to it by Caltex. It hinged its tax refund claim on
its operating franchise, i.e., Presidential Decree No. 1590  issued on June 11, 1978, 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. Does PAL have
the legal personality to file a claim for refund of the passed on excise taxes?
A: Yes, jurisprudence states that indirect taxes are those which are demanded in the first instance from
one person with the expectation and intention that he can shift the economic burden to someone else. In
this regard, the statutory taxpayer can transfer to its customers the value of the excise taxes it paid or
would be liable to pay to the government by treating it as part of the cost of the goods and tacking it on
to the selling price. Notably, this shifting process, otherwise known as "passing on," is largely a
contractual affair between the parties. Meaning, even if the purchaser effectively pays the value of the
tax, the manufacturer/producer (in case of goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition) or the owner or importer (in case of
imported goods) are still regarded as the statutory taxpayers under the law. To this end, the purchaser
does not really pay the tax; rather, he only pays the seller more for the goods because of the latter's
obligation to the government as the statutory taxpayer. (Philippine Airlines, Inc. v. Commissioner of
Internal Revenue, G.R. No. 198759, [July 1, 2013], 713 PHIL 134-160) *PERLAS--BERNABE, J.

Q: What is the general on claim of refund?

A. 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, the Court has
consistently held that it is the statutory taxpayer who is entitled to claim a tax refund based thereon and
not the party who merely bears its economic burden. 
However, the abovementioned rule should not apply to instances where the law clearly grants the party
to which the economic burden of the 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 under the law.
In this case, PAL's franchise grants it an exemption from both direct and indirect taxes on its purchase
of petroleum products. (Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. No.
198759, [July 1, 2013], 713 PHIL 134-160) *PERLAS--BERNABE, J.

Q: PAL earned interest income from its deposits, and the Agent Banks deducted final withholding
taxes. Claiming that it was exempt from final withholding taxes under its franchise, Presidential
Decree No. 1590, PAL filed a written request for a tax refund of the withheld amounts of
P1,747,869.59 and US$65,877.07. The Commissioner failed to act on the request. Thus, PAL elevated
the case to the CTA. The CTA partially granted PAL's petition and ordered the Commissioner to
refund PAL P1,237,646.43, representing the final income tax withheld and remitted by JPMorgan. It

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denied the remaining claim for refund of P510,223.16 and US$65,877.07 representing the final
income tax withheld by Chinabank, PBCom, and Standard Chartered.
The CTA found that PAL was exempt from final withholding tax on interest on bank deposits.
However, it ruled that PAL failed to adequately substantiate its claim because it did not prove that the
Agent Banks, with the exception of JPMorgan, remitted the withheld amounts to the Bureau of
Internal Revenue. PAL only presented documents which showed the total amount of final taxes
withheld for all branches of the banks. As such, the amount of tax withheld from and to be refunded to
PAL could not be ascertained with particularity. It ruled that Certificates of Final Tax Withheld at
Source are not sufficient to prove remittance. Is the CTA correct?
A: No, in the case at bar, PAL is the income earner and the payee of the final withholding tax, and the
Agent Banks are the withholding agents who are the payors responsible for the deduction and
remittance of the tax. (Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. Nos.
206079-80 & 206309, [January 17, 2018])

Q. Explain the rule on claim of refund on taxes withhold based on loans contracted by a tax payer.
A. To claim a refund, this Court rules that PAL needs only to prove that taxes were withheld.
Taxes withheld by the withholding agent are deemed to be the full and final payment of the income tax
due from the income earner or payee. 
Certificates of Final Taxes Withheld issued by the Agent Banks are sufficient evidence to establish the
withholding of the taxes. (Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R. Nos.
206079-80 & 206309, [January 17, 2018])

Q: On January 3, 2003 and March 3, 2003, ATC filed its Annual Information Return of Income Taxes
Withheld on Compensation and Final Withholding Taxes and Annual Information Return of
Creditable Income Taxed Withheld (Expanded)/Income Payments Exempt from Withholding Tax,
respectively.
On August 11, 2004, ATC received Letter of Authority where the CIR informed ATC that its revenue
officers from the Large Taxpayers Audit and Investigation Division II shall examine its books of
accounts and other accounting records for the taxable year 2002. Thereafter, the CIR issued a
Preliminary Assessment Notice (PAN) to ATC.
Consequently, on various dates, ATC, through its Vice President executed several documents
denominated as "Waiver of the Defense of Prescription under the Statute of Limitations of the
National Internal Revenue Code"
On July 15, 2008, ATC received a Formal Letter of Demand from the CIR for deficiency WTC in the
amount of P62,977,798.02, EWT in the amount of P6,916,910.51, FWT in the amount of P501,077.72.
On August 14, 2008, ATC filed its Protest Letter in regard thereto.
ATC asserts that the waivers executed by its Vice President are invalid inasmuch as the Bureau of
Internal Revenue (BIR) had itself caused the defects thereof, namely: (a) the waivers were notarized
by its own employee despite not being validly commissioned to perform notarial acts; (b) the BIR did
not indicate the date of its acceptance; (c) the BIR did not specify the amounts of and the particular
taxes involved; and (d) respondent CIR did not sign the waivers. Is ATC Correct?
A: No, the assertion of ATC that the BIR was responsible for the following errors: (a) the waivers were
notarized by its own employee despite not being validly commissioned to perform notarial acts; (b)
the BIR did not indicate the date of its acceptance; (c) the BIR did not specify the amounts of and the
particular taxes involved; and (d) respondent CIR did not sign the waivers is not exactly correct.
The foregoing defects noted in the waivers of ATC were not solely attributable to the CIR. The proper
preparation of the waiver is primarily the responsibility of the taxpayer or its authorized representative
signing the waiver. Such responsibility did not pertain to the BIR as the receiving party. Consequently,
ATC is not correct in insisting that the act or omission giving rise to the defects of the waivers should
be ascribed solely to the respondent CIR and her subordinates. (Asian Transmission Corp. v.
Commissioner of Internal Revenue, G.R. No. 230861, [September 19, 2018])

Q: Euro-Philippines Airline Services, Inc. (Euro-Phil) is an exclusive passenger sales agent of

British Airways, PLC, an off-line international airline in the Philippines to service the latter's
passengers in the Philippines.
It received a Formal Assessment Notice (FAN) from the Commissioner of Internal Revenue (CIR) in
the aggregate amount of P4,271,228,20.00 consisting of assessment of Value Added Tax (VAT),
among others, for the taxable year ending March 31, 2007 with Details of Discrepancies.
Euro-Phil filed a final protest on CIR. Following the lapse of the 180-day period within which to
resolve the protest, Euro-Phil filed a petition for review before the CTA praying, among others, for
the cancellation of the FAN issued by CIR for deficiency VAT. Euro-Phil argued that the receipts

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that are supposedly subject to 12% VAT actually pertained to "services rendered to persons engaged
exclusively in international air transport" hence, zero-rated. Is Euro-Phil’s contention correct?
A: Yes, Euro-Phil’s is contention correct. The Tax Code imposes zero percent (0%) value-added tax on
services performed in the Philippines by VAT-registered persons to persons engaged in international air
transport operations.
Under the foregoing facts, the services rendered by Euro-Phil were to a person engaged in international
air-transport operations. Thus, by application, Section 108 of the Tax Code subjects the services of
Euro-Phil to British Airways PLC, to the rate of zero percent VAT. (Commissioner of Internal Revenue
v. Euro-Philippines Airline Services, Inc., G.R. No. 222436, [July 23, 2018])

Q: In CIR v. Aichi Forging Company of Asia, Inc. (Aichi), the Court held that the observance of the
120-day period is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund
before the CTA. Consequently, its non-observance would lead to the dismissal of the judicial claim on
the ground of lack of jurisdiction. Aichi also clarified that the two (2)-year prescriptive period applies
only to administrative claims and not to judicial claims.  Succinctly put, once the administrative claim
is filed within the two (2)-year prescriptive period, the claimant must wait for the 120-day period to end
and, thereafter, he is given a 30-day period to file his judicial claim before the CTA, even if said 120-
day and 30-day periods would exceed the aforementioned two (2)-year prescriptive period.
However, in CIR v. San Roque Power Corporation (San Roque), the Court categorically recognized an
exception to the mandatory and jurisdictional nature of the 120-day period. It ruled that BIR Ruling
No. DA-489-03 dated December 10, 2003 provided a valid claim for equitable estoppel under Section
246 of the NIRC. In essence, the aforesaid BIR Ruling stated that "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."
How would you reconcile the rulings in Aichi and San Roque cases?
A: During the period December 10, 2003 to October 6, 2010 (when the Aichi case was
promulgated), taxpayers-claimants need not observe the 120-day period before it could file a judicial
claim for refund of excess input VAT before the CTA. Before and after the aforementioned period, the
observance of the 120-day period is mandatory and jurisdictional to the filing of such claim.
(Commissioner of Internal Revenue v. CE Luzon Geothermal Power Co., Inc., G.R. No. 190198,
[September 17, 2014], 743 PHIL 302-312) *PERLAS--BERNABE, J.

Q: JRA Philippines, Inc. filed for tax refund. When the same was not acted upon, it filed a petition for
review before the CTA.
The CTA denied JRA Philippines, Inc.'s claim for input VAT refund on the ground that all of its
export sales invoices: (a) have no Bureau of Internal Revenue (BIR) Permit to Print; (b) did not
contain its Taxpayer's Identification Number-VAT (TIN-V); and (c) the word "zero-rated" was not
imprinted thereon. Was the denial proper?
A: Case law dictates that in a claim for tax refund or tax credit, the applicant must prove not only
entitlement to the claim but also compliance with all the documentary and evidentiary requirements
therefor.  The NIRC provides that creditable input taxes must be evidenced by a VAT invoice or official
receipt. An invoice must reflect: (a) the BIR Permit to Print; (b) the TIN-V of the purchaser; and (c) the
word "zero-rated" imprinted thereon. Failure to comply with the invoicing requirements is sufficient
ground to deny a claim for tax refund or tax credit.
In this case, the invoices presented not only lack the word "zero-rated" but also failed to reflect its BIR
Permit to Print as well as its TIN-V. Thus, it failed to comply with the invoicing requirements. (J.R.A.
Philippines Inc. v. Commissioner of Internal Revenue, G.R. No. 171307 (Resolution), [August 28, 2013],
716 PHIL 566-574) *PERLAS--BERNABE, J.

Q: In its application for VAT refund, Nippon presented sales invoices and other secondary evidence
like transfer slips, credit memos, cargo manifests, and credit notes to substantiate its zero-rated sales
of services. Should the refund be granted?
A: No, when a VAT-taxpayer claims to have zero-rated sales of services, it must substantiate the same
through valid VAT official receipts, not any other document, not even a sales invoice which properly
pertains to a sale of goods or properties.
A VAT invoice is necessary for every sale, barter or exchange of goods or properties while a VAT
official receipt properly pertains to every lease of goods or properties, and for every sale, barter or
exchange of services. (Nippon Express (Philippines) Corp. v. Commissioner of Internal Revenue, G.R.
No. 191495, [July 23, 2018])

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Q: Metrobank mistakenly remitted withholding taxes to the BIR as they were inadvertently included in
its Monthly Remittance Returns of Final Income Taxes Withheld for the months of March 2001 and
October 2001.
On December 27, 2002, Metrobank filed a letter to the BIR requesting for the refund thereof. In view
of the Commissioner of Internal Revenue's (CIR) inaction, Metrobank filed its judicial claim for
refund via a petition for review filed before the CTA on September 10, 2003.
The CTA Division denied Metrobank's claims for refund for lack of merit. It ruled that Metrobank's
claim relative to the March 2001 final tax was filed beyond the two (2)-year prescriptive period. It
pointed out that since Metrobank remitted such payment on April 25, 2001, the latter only had until
April 25, 2003 to file its administrative and judicial claim for refunds. While Metrobank filed its
administrative claim well within the aforesaid period, or on December 27, 2002, the judicial claim was
filed only on September 10, 2003. Hence, the right to claim for such refund has prescribed. The CTA
Division also denied Metrobank's claim for refund relative to the October 2001 tax payment for
insufficiency of evidence.
Has Metrobank's claim for refund relative to its March 2001 final tax already prescribed?
A: Yes, a claimant for refund must first file an administrative claim for refund before the CIR, prior to
filing a judicial claim before the CTA. Notably, both the administrative and judicial claims for refund
should be filed within the two (2)-year prescriptive period indicated therein, and that the claimant is
allowed to file the latter even without waiting for the resolution of the former in order to prevent the
forfeiture of its claim through prescription. (Metropolitan Bank & Trust Co. v. Commissioner of Internal
Revenue, G.R. No. 182582, [April 17, 2017], 808 PHIL 575-585) *PERLAS--BERNABE, J.

Q: What is a franchise tax? What are the requisites to be liable for local franchise tax?
A: A franchise tax is a tax on the privilege of transacting business in the state and exercising corporate
franchises granted by the state. It is not levied on the corporation simply for existing as a corporation,
upon its property or its income, but on its exercise of the rights or privileges granted to it by the
government.
To be liable for local franchise tax, the following requisites should concur: (1) that one has a "franchise"
in the sense of a secondary or special franchise; and (2) that it is exercising its rights or privileges under
this franchise within the territory of the pertinent local government unit. (City of Iriga v. Camarines Sur
III Electric Cooperative, Inc., G.R. No. 192945, [September 5, 2012], 694 PHIL 378-392) *PERLAS--
BERNABE, J.

Q: Upon acquisition via execution sale, thirteen (13) parcels of land located in Sta. Ana, Calatagan,
Batangas have been registered since 2006 in the name of Herarc Realty Corporation. From March 2,
2006 up to August 12, 2009, the properties had been in actual possession of Manalo, Oliva, and Yap.
It was only on August 13, 2009 that Herarc Realty Corporation was able to take full possession and
control of the properties by virtue of a court order.
In a letter dated October 9, 2012, the Provincial Treasurer of Batangas sent a Statement of Real
Property Tax (RPT) Liabilities to Herarc Realty Corporation
The assessment was paid under protest on November 20, 2012. Less than a month after, petitioner
filed a petition to declare as null and void the assessments for unpaid real property taxes made against
Herarc over the properties for the years 2007, 2008 until 12 August 2009.
The RTC denied the petition. Is the RTC correct?
A: Yes, the dismissal of the case by RTC is correct. In real estate taxation, the unpaid tax attaches to the
property. The personal liability for the tax delinquency is generally on whoever is the owner of the real
property at the time the tax accrues. In this case, Herarc Realty Corporation is the registered owner of the
real property. Therefore, it is personally liable for the RPT at the time it accrued. (Herarc Realty Corp. v.
Provincial Treasurer of Batangas, G.R. No. 210736, [September 5, 2018])

Q: What are the two remedies provided the Local Government Code (LGC) in relation to real property
tax assessments or tax ordinances?
A: The two remedies provided the Local Government Code (LGC) in relation to real property tax
assessments or tax ordinances are:
(1) Sections 226 and 252 which allow a taxpayer to question the reasonableness of the amount assessed
before the city treasurer then appeal to the Local Board of Assessment Appeals; and
(2) Section 187 which allows an aggrieved taxpayer to question the validity or legality of a tax ordinance
by duly filing an appeal before the Secretary of Justice before seeking judicial intervention. (Alliance of
Quezon City Homeowners' Association, Inc. v. Quezon City Government, G.R. No. 230651, [September
18, 2018]) *PERLAS--BERNABE, J.

7|Page
Q: Sections 195 (Protest of Assessment) and 196 (Claim for Refund of Tax Credit) of the Local
Government Code govern the remedies of a taxpayer for taxes collected by local government units,
except for real property taxes. Distinguish the two remedies.
A: The first remedy provides the procedure for contesting an assessment issued by the local treasurer;
whereas, the second remedy provides the procedure for the recovery of an erroneously paid or illegally
collected tax, fee or charge.

Q. Explain the distinction between the two remedies under the Local Government Code.
Both Sections 195 and 196 mention an administrative remedy that the taxpayer should first exhaust before
bringing the appropriate action in court. In Section 195, it is the written protest with the local treasurer
that constitutes the administrative remedy; while in Section 196, it is the written claim for refund or credit
with the same office. As to form, the law does not particularly provide any for a protest or refund claim to
be considered valid. It suffices that the written protest or refund is addressed to the local treasurer
expressing in substance its desired relief.
The application of Section 195 is triggered by an assessment made by the local treasurer or his duly
authorized representative for nonpayment of the correct taxes, fees or charges. Should the taxpayer find
the assessment to be erroneous or excessive, he may contest it by filing a written protest before the local
treasurer within the reglementary period of sixty (60) days from receipt of the notice; otherwise, the
assessment shall become conclusive. The local treasurer has sixty (60) days to decide said protest. In case
of denial of the protest or inaction by the local treasurer, the taxpayer may appeal with the court of
competent jurisdiction; otherwise, the assessment becomes conclusive and unappealable.
On the other hand, Section 196 may be invoked by a taxpayer who claims to have erroneously paid a tax,
fee or charge, or that such tax, fee or charge had been illegally collected from him. The provision requires
the taxpayer to first file a written claim for refund before bringing a suit in court which must be initiated
within two years from the date of payment. By necessary implication, the administrative remedy of claim
for refund with the local treasurer must be initiated also within such two-year prescriptive period but
before the judicial action.
Unlike Section 195, however, Section 196 does not expressly provide a specific period within which the
local treasurer must decide the written claim for refund or credit. It is, therefore, possible for a taxpayer to
submit an administrative claim for refund very early in the two-year period and initiate the judicial claim
already near the end of such two-year period due to an extended inaction by the local treasurer. In this
instance, the taxpayer cannot be required to await the decision of the local treasurer any longer, otherwise,
his judicial action shall be barred by prescription.
Additionally, Section 196 does not expressly mention an assessment made by the local treasurer. This
simply means that its applicability does not depend upon the existence of an assessment notice. By
consequence, a taxpayer may proceed to the remedy of refund of taxes even without a prior protest
against an assessment that was not issued in the first place. This is not to say that an application for refund
can never be precipitated by a previously issued assessment, for it is entirely possible that  the taxpayer,
who had received a notice of assessment, paid the assessed tax, fee or charge believing it to be erroneous
or illegal. Thus, under such circumstance, the taxpayer may subsequently direct his claim pursuant to
Section 196 of the LGC. (International Container Terminal Services, Inc. v. City of Manila, G.R. No.
185622, [October 17, 2018])

Q: Discuss the processes involved under Sections 195 (Protest of Assessment) and 196 (Claim for
Refund of Tax Credit) of the Local Government Code.
A: If the taxpayer receives an assessment and does not pay the tax, its remedy is strictly confined
to Section 195 of the Local Government Code. Thus, it must file a written protest with the local treasurer
within 60 days from the receipt of the assessment. If the protest is denied, or if the local treasurer fails to
act on it, then the taxpayer must appeal the assessment before a court of competent jurisdiction within 30
days from receipt of the denial, or the lapse of the 60-day period within which the local treasurer must act
on the protest.
If the taxpayer opts to pay the assessed tax, fee, or charge, it must still file the written protest within the
60-day period, and then bring the case to court within 30 days from either the decision or inaction of the
local treasurer. In its court action, the taxpayer may, at the same time, question the validity and
correctness of the assessment and seek a refund of the taxes it paid. Once the assessment is set aside by
the court, it follows as a matter of course that all taxes paid under the erroneous or invalid assessment are
refunded to the taxpayer.
On the other hand, if no assessment notice is issued by the local treasurer, and the taxpayer claims that it
erroneously paid a tax, fee, or charge, or that the tax, fee, or charge has been illegally collected from him,
then Section 196 applies.
To be entitled to a refund under Section 196 of the Local Government Code, the taxpayer must comply
with the following procedural requirements: first, file a written claim for refund or credit with the local

8|Page
treasurer; and second, file a judicial case for refund within two (2) years from the payment of the tax, fee,
or charge, or from the date when the taxpayer is entitled to a refund or credit. (International Container
Terminal Services, Inc. v. City of Manila, G.R. No. 185622, [October 17, 2018])

Q: May a taxpayer who had initially protested and paid the assessment may shift its remedy to one of
refund?
A: Yes, a taxpayer who had protested and paid an assessment is not precluded from later on instituting an
action for refund or credit.
When a taxpayer is assessed a deficiency local tax, fee or charge, he may protest it under Section 195
even without making payment of such assessed tax, fee or charge. This is because the law on local
government taxation, save in the case of real property tax, does not expressly require "payment under
protest" as a procedure prior to instituting the appropriate proceeding in court. This implies that the
success of a judicial action questioning the validity or correctness of the assessment is not necessarily
hinged on the previous payment of the tax under protest.
Needless to say, there is nothing to prevent the taxpayer from paying the tax under protest or
simultaneous to a protest. There are compelling reasons why a taxpayer would prefer to pay while
maintaining a protest against the assessment. For instance, a taxpayer who is engaged in business would
be hard-pressed to secure a business permit unless he pays an assessment for business tax and/or
regulatory fees. Also, a taxpayer may pay the assessment in order to avoid further penalties, or save his
properties from levy and distraint proceedings. (City of Manila v. Cosmos Bottling Corp., G.R. No.
196681, [June 27, 2018])

Q. Explain the process on how the taxpayer may shift its remedy from a protest made on an assessment
to a claim for refund.
A. A taxpayer facing an assessment may protest it and alternatively: (1) appeal the assessment in court,
or (2) pay the tax and thereafter seek a refund. 
Where an assessment is to be protested or disputed, the taxpayer may proceed (a) without payment,
or (b) with payment of the assessed tax, fee or charge. Whether there is payment of the assessed tax or
not, it is clear that the protest in writing must be made within sixty (60) days from receipt of the notice of
assessment; otherwise, the assessment shall become final and conclusive. Additionally, the subsequent
court action must be initiated within thirty (30) days from denial or inaction by the local
treasurer; otherwise, the assessment becomes conclusive and unappealable.
(a) Where no payment is made, the taxpayer's procedural remedy is governed strictly by Section 195.
That is, in case of whole or partial denial of the protest, or inaction by the local treasurer, the taxpayer's
only recourse is to appeal the assessment with the court of competent jurisdiction. The appeal before the
court does not seek a refund but only questions the validity or correctness of the assessment.
(b) Where payment was made, the taxpayer may thereafter maintain an action in court questioning the
validity and correctness of the assessment (Section 195, LGC) and at the same time seeking a refund of
the taxes. In truth, it would be illogical for the taxpayer to only seek a reversal of the assessment without
praying for the refund of taxes. Once the assessment is set aside by the court, it follows as a matter of
course that all taxes paid under the erroneous or invalid assessment are refunded to the taxpayer.
The same implication should ensue even if the taxpayer were to style his suit in court as an action for
refund or recovery of erroneously paid or illegally collected tax as pursued under Section 196 of the LGC.
In such a suit for refund, the taxpayer cannot successfully prosecute his theory of erroneous payment or
illegal collection of taxes without necessarily assailing the validity or correctness of the assessment he
had administratively protested.
It must be understood, however, that in such latter case, the suit for refund is conditioned on the prior
filing of a written claim for refund or credit with the local treasurer. (City of Manila v. Cosmos Bottling
Corp., G.R. No. 196681, [June 27, 2018])

Q. Is judicial action necessary in order to seek a refund after payment made under protest?
A. Equally important is the institution of the judicial action for refund within thirty (30) days from the
denial of or inaction on the letter-protest or claim, not any time later, even if within two (2) years from
the date of payment (as expressly stated in Section 196). Notice that the filing of such judicial claim for
refund after questioning the assessment is within the two-year prescriptive period specified in Section
196. Note too that the filing date of such judicial action necessarily falls on the beginning portion of the
two-year period from the date of payment. Even though the suit is seemingly grounded on Section
196, the taxpayer could not avail of the full extent of the two-year period within which to initiate the
action in court. (City of Manila v. Cosmos Bottling Corp., G.R. No. 196681, [June 27, 2018])

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Q. Explain the rationale why it is necessary to institute a judicial action to seek a refund after payment
made under protest.
A. The reason why it is necessary to institute a judicial action to seek a refund after payment made under
protest is obvious. This is because an assessment was made, and if not appealed in court within thirty (30)
days from decision or inaction on the protest, it becomes conclusive and unappealable. Even if the action
in court is one of claim for refund, the taxpayer cannot escape assailing the assessment, invalidity or
incorrectness, the very foundation of his theory that the taxes were paid erroneously or otherwise
collected from him illegally. Perforce, the subsequent judicial action, after the local treasurer's decision or
inaction, must be initiated within thirty (30) days later. It cannot be anytime thereafter because the lapse
of 30 days from decision or inaction results in the assessment becoming conclusive and unappealable. In
short, the scenario wherein the administrative claim for refund falls on the early stage of the two-year
period but the judicial claim on the last day or late stage of such two-year period does not apply in this
specific instance where an assessment is issued.
To stress, where an assessment is issued, the taxpayer cannot choose to pay the assessment and thereafter
seek a refund at any time within the full period of two years from the date of payment as Section 196 may
suggest. If refund is pursued, the taxpayer must administratively question the validity or correctness of the
assessment in the 'letter-claim for refund' within 60 days from receipt of the notice of assessment, and
thereafter bring suit in court within 30 days from either decision or inaction by the local treasurer. (City
of Manila v. Cosmos Bottling Corp., G.R. No. 196681, [June 27, 2018])

Q. What are the conditions to be satisfied in order to successfully prosecute an action for refund in
case the taxpayer had received an assessment?
A. There are two conditions that must be satisfied in order to successfully prosecute an action for refund
in case the taxpayer had received an assessment. One, pay the tax and administratively assail within 60
days the assessment before the local treasurer, whether in a letter-protest or in a claim for refund.  Two,
bring an action in court within thirty (30) days from decision or inaction by the local treasurer, whether
such action is denominated as an appeal from assessment and/or claim for refund of erroneously or
illegally collected tax. (City of Manila v. Cosmos Bottling Corp., G.R. No. 196681, [June 27, 2018])

Q: The National Power Corporation (NPC) received a letter from the Bureau of Internal Revenue
(BIR) demanding immediate payment of P3,813,080,472 deficiency value-added tax (VAT) for the sale
of the Pantabangan-Masiway Plant and Magat Plant. The NPC indorsed BIR's demand letter to
PSALM, who’s principal purpose is to manage the orderly sale, disposition, and privatization of the
NP) generation assets, real estate and other disposable assets
PSALM filed with the Department of Justice (DOJ) a petition for the adjudication of the dispute with
the BIR to resolve the issue of whether the sale of the power plants should be subject to VAT. The DOJ
ruled in favor of PSALM
The BIR alleges that the DOJ had no jurisdiction since the dispute involved tax laws administered by
the BIR and therefore within the jurisdiction of the Court of Tax Appeals. Is the BIR correct?
A: No, the BIR is not correct. The DOJ is vested by law with jurisdiction over this case. This case
involves a dispute between PSALM and NPC, which are both wholly government-owned
corporations, and the BIR, a government office, over the imposition of VAT on the sale of the two
power plants. There is no question that original jurisdiction is with the CIR, who issues the preliminary
and the final tax assessments. However, if the government entity disputes the tax assessment, the dispute
is already between the BIR (represented by the CIR) and another government entity, in this case,
PSALM. Under Presidential Decree No. 242, all disputes and claims solely between government
agencies and offices, including government-owned or controlled corporations, shall be
administratively settled or adjudicated by the Secretary of Justice, the Solicitor General, or the
Government Corporate Counsel, depending on the issues and government agencies involved.
(Power Sector Assets and Liabilities Management Corp. v. Commissioner of Internal Revenue, G.R. No.
198146, [August 8, 2017])

Q: Metropolitan Cebu Water District received a Preliminary Assessment Notice from the BIR for
alleged tax deficiencies for the year 2000 in the total amount of P70,660,389.00, representing alleged
deficiency income, franchise and value added taxes with surcharge and interest, as well as compromise
penalties.
It filed a formal protest with the Regional Director, BIR Revenue Region No. 13. The CIR however
failed to act on the protest within 180 days from submission of the supporting documents. Thus,
respondent filed a Petition for Review before the Court of Tax Appeals (CTA). The CIR however
opposed the said petition on the ground that the Secretary of Justice (SOJ) has jurisdiction over the
dispute considering that respondent is a government-owned or controlled corporation (GOCC). Does
the Secretary of Justice have jurisdiction to decide the case?

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A: Yes, the Secretary of Justice have jurisdiction to decide the case.
Under the Administrative Code of 1987 all disputes, claims and controversies, solely between or among
the departments, bureaus, offices, agencies and instrumentalities of the National Government, including
government-owned or controlled corporations, such as those arising from the interpretation and
application of statutes, contracts or agreements, shall be submitted to and settled or adjudicated by the
Secretary of Justice as Attorney-General of the National Government and as ex officio legal adviser of all
government-owned or controlled corporations. His ruling or decision thereon shall be conclusive and
binding on all the parties concerned.
Since this case is a dispute between the CIR and respondent, a local water district, which is a GOCC
pursuant to P.D. No. 198, also known as the Provincial Water Utilities Act of 1973, clearly, the SOJ has
jurisdiction to decide over the case. (Commissioner of Internal Revenue v. Secretary of Justice, G.R. No.
209289, [July 9, 2018])

Q: The Philippine Ports Authority received a letter from the City Assessor of Davao for the assessment
and collection of real property taxes against its administered properties located at Sasa Port. It
appealed the assessment via registered mail to the Local Board of Assessment Appeals through the
Office of the City Treasurer of Davao on August 2, 2004. The Office of the City Treasurer of Davao
received the appeal on August 11, 2004, and forwarded it to the Chairman of the Local Board of
Assessment Appeals, who received it on September 6, 2004.
The Local Board of Assessment Appeals dismissed the Philippine Ports Authority's appeal for having
been filed out of time, and for its lack of jurisdiction on the latter's tax exemption in its January 25,
2005 Order. The Philippine Ports Authority appealed before the Central Board of Assessment Appeals,
but this appeal was denied in the Central Board of Assessment Appeals April 7, 2005 Decision. Thus, it
filed an appeal with the Court of Tax Appeals.
The Philippine Ports Authority claimed that it did not receive any warrant of levy for the three (3)
properties which were sold to respondent City of Davao, or any notice that they were going to be
auctioned. Thus, it filed a petition for certiorari with the Court of Appeals.
The Court of Appeals dismissed the petition. It held that the Court of Tax Appeals had exclusive
jurisdiction to determine the matter and said that the Philippine Ports Authority should have applied
for the issuance of writ of injunction or prohibition before the Court of Tax Appeals. 
Does the Court of Appeals have jurisdiction to issue the injunctive relief prayed for by the Philippine
Ports Authority?
A: No, the Court of Appeals does not have jurisdiction to issue the injunctive relief prayed for by the
Philippine Ports Authority. Section 7, paragraph (a) (5) of Republic Act No. 1125, as amended by
Republic Act No. 9282, provides that the Court of Tax Appeals has exclusive appellate jurisdiction over
decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction over
cases involving the assessment and taxation of real property originally decided by the provincial or city
board of assessment appeals.
The Central Board of Assessment Appeals April 7, 2005 Decision assailed by petitioner before the Court
of Appeals was rendered in the exercise of its appellate jurisdiction over the real property tax assessment
of its properties. Clearly, this falls within the above-cited provision. Indeed, there is no dispute that this
Central Board of Assessment Appeals decision constitutes one of the cases covered by the Court of Tax
Appeals' exclusive jurisdiction. (Philippine Ports Authority v. City of Davao, G.R. No. 190324 , [June 6,
2018])

Q: Nippon Express (Phils.) Corporation's (Nippon) filed its quarterly VAT returns for the year 2002
on April 25, 2002, July 25, 2002, October 25, 2002, and January 27, 2003, respectively.  It maintained
that during the said period it incurred input VAT attributable to its zero-rated sales in the amount of
P28,405,167.60, from which only P3,760,660.74 was applied as tax credit, thus, reflecting refundable
excess input VAT in the amount of P24,644,506.86.
On April 22, 2004, Nippon filed an administrative claim for refund of its unutilized input VAT in the
amount of P24,644,506.86 for the year 2002 before the Bureau of Internal Revenue (BIR). A day later,
it filed a judicial claim for tax refund before the CTA.
In a Decision dated August 10, 2011, the CTA Division partially granted Nippon's claim for tax
refund, and thereby ordered the CIR to issue a tax credit certificate in the reduced amount of
P2,614,296.84, representing its unutilized input VAT which was attributable to its zero-rated sales. 
Before its receipt of the August 10, 2011 Decision, or on August 12, 2011, Nippon filed a motion to
withdraw considering that the BIR, acting on its administrative claim, already issued a tax credit
certificate in the amount of P21,675,128.91 on July 27, 2011.
The CTA Division granted Nippon's motion to withdraw and, thus, considered the case closed and
terminated. Was the CTA Division correct in granting the motion to withdraw?
A: No, the CTA Division was not correct in granting the motion to withdraw.

11 | P a g e
While it is true that the CTA Division has the prerogative to grant a motion to withdraw under authority
of some legal provisions, the attendant circumstances in this case should have incited it to act otherwise.
It should be pointed out that the August 10, 2011 Decision was rendered by the CTA Division after a full-
blown hearing in which the parties had already ventilated their claims. Thus, the findings contained
therein were the results of an exhaustive study of the pleadings and a judicious evaluation of the evidence
submitted by the parties, as well as the report of the commissioned certified public accountant.
The primary reason, however, that militates against the granting of the motion to withdraw is the fact that
the CTA Division, in its August 10, 2011 Decision, had already determined that Nippon was only entitled
to refund the reduced amount of P2,614,296.84 since it failed to prove that the recipients of its services
were non-residents "doing business outside the Philippines"; hence, Nippon's purported sales therefrom
could not qualify as zero-rated sales, necessitating the reduction in the amount of refund claimed.
Markedly different from this is the BIR's determination that Nippon should receive P21,675,128.91 as per
the July 27, 2011 Tax Credit Certificate, which is, in all, P19,060,832.07 larger than the amount found
due by the CTA Division.
Finally, the Court has observed that based on the records, Nippon's administrative claim for the first
taxable quarter of 2002 which closed on March 31, 2002 was already time-barred for being filed on April
22, 2004, or beyond the two (2)-year prescriptive period. Although prescription was not raised as an
issue, it is well-settled that if the pleadings or the evidence on record show that the claim is barred by
prescription, the Court may motu proprio order its dismissal on said ground. (Commissioner of Internal
Revenue v. Nippon Express (Phils.) Corp., G.R. No. 212920, [September 16, 2015], 769 PHIL 861-871)
*PERLAS--BERNABE, J.

Q: The Commissioner of Internal Revenue (CIR) issued a Letter interpreting Section 148 (e) of
the NIRC and thereby, opining that "alkylate, which is a product of distillation similar to naphtha, is
subject to tax." In implementation thereof, the Commissioner of Customs (COC) issued Customs
Memorandum Circular (CMC) No. 164-2012. Not long after, and in compliance with CMC No. 164-
2012, the Collector of Customs assessed excise tax on Petron's importation of alkylate.
Petron filed a petition for review before the CTA, contesting the allegedly erroneous classification
of alkylate and the resultant imposition of excise tax arising from the CIR's interpretation of Section
148 (e) of the NIRC.
The CIR contended that the CTA could not take cognizance of the case because the latter's jurisdiction
to resolve tax disputes excluded the power to rule on the constitutionality or validity of a law, rule or
regulation. It the CIR correct?
A: No, the Commissioner on Internal Revenue is not correct. In the Banco De Oro v. Republic of the
Philippines the Supreme Court ruled that under Section 7 of Republic Act No. 1125, as amended, is
explicit that, except for local taxes, appeals from the decisions of quasi-judicial agencies (Commissioner
of Internal Revenue, Commissioner of Customs, Secretary of Finance, Central Board of Assessment
Appeals, Secretary of Trade and Industry) on tax-related problems must be brought exclusively to the
Court of Tax Appeals. In other words, within the judicial system, the law intends the Court of Tax
Appeals to have exclusive jurisdiction to resolve all tax problems. Petitions for writs
of certiorari against the acts and omissions of the said quasi-judicial agencies should thus be filed before
the Court of Tax Appeals. (Commissioner of Internal Revenue v. Court of Tax Appeals, G.R. No. 207843
(Resolution), [February 14, 2018]) *PERLAS--BERNABE, J.

Q: The Bureau of Customs (BOC) filed a collection suit for unpaid taxes and customs duties in the
aggregate amount of P46,844,385.00 against Mitsubishi Motors Philippines Corporation before the
Regional Trial Court of Manila, Branch 17 (RTC).
The RTC dismissed the collection case on the ground of insufficiency of evidence. The BOC moved for
reconsideration, which was denied. It appealed to the C
The CA referred the records of the collection case to the CTA for proper disposition of the appeal
taken by respondent. It admitted that it had no jurisdiction to take cognizance of respondent's appeal,
as jurisdiction is properly lodged with the CTA. Did the CA correctly refer the records of the collection
case to the CTA?
A: The CTA has exclusive appellate jurisdiction over tax collection cases originally decided by the RTC.
The CA has no jurisdiction over the BOC’s appeal; hence, it cannot perform any action on the same
except to order its dismissal. (Mitsubishi Motors Phils. Corp. v. Bureau of Customs, G.R. No. 209830,
[June 17, 2015], 760 PHIL 954-964) *PERLAS--BERNABE, J.

Q: Teresa filed before the RTC a Complaint for Annulment of Warrant of Levy, Public Auction Sale,
Sheriff's Certificate of Sale, Recovery of Ownership and Possession, and Damages against the Office
of the City Treasurer of Quezon City, Victor B. Endriga, the Office of the City Assessor of Quezon

12 | P a g e
City, the Registrar of Deeds of Quezon City, and Atty. Felixberto F. Abad, and Spouses Alejandro
Ramon and Racquel Dimalanta.
Teresa alleged that she is the registered co-owner of a real property covered by Transfer Certificate of
Title (TCT) No. 60125 which public respondents, with malice and bad faith, sold at a public auction in
2009 to Sps. Dimalanta without notice of the levy and auction sale proceedings, thereby depriving her
of said property without due process of law. 
The RTC dismissed with prejudice the Annulment Complaint on the ground of res judicata.
Public respondents argue that the RTC Resolution dismissing with prejudice the Annulment Case on
the ground of res judicata has already become final, maintaining that Teresa should have elevated the
case to the CTA and not to the CA,  pursuant to Section 7 (a) (3) of Republic Act No. 9282, which
provides that the CTA shall exercise exclusive appellate jurisdiction to review by appeal decisions,
orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by
them in the exercise of their original or appellate jurisdiction. Is public respondents’ contention
correct?
A. No, the public respondents’ contention is not correct. The CTA's appellate jurisdiction over decisions,
orders, or resolutions of the RTC becomes operative only when the RTC has ruled on a local tax case.
Thus, before the case can be raised on appeal to the CTA, the action before the RTC must be in the nature
of a tax case, or one which primarily involves a tax issue.
Thus, cases decided by the RTC which involve issues relating to the power of the local government to
impose real property taxes are considered as local tax cases, which fall under the appellate jurisdiction of
the CTA. To note, these issues may, inter alia, involve the legality or validity of the real property tax
assessment; protests of assessments; disputed assessments, surcharges, or penalties; legality or validity of
a tax ordinance; claims for tax refund/credit; claims for tax exemption; actions to collect the tax due; and
even prescription of assessments.
In this case, the Annulment Complaint shows that Teresa's action before the RTC-Br. 85 is essentially one
for recovery of ownership and possession of the property, with damages, which is not anchored on a tax
issue, but on due process considerations. In other words, the Annulment Complaint's allegations do not
contest the tax assessment on the property, as Teresa only bewails the alleged lack of due process which
deprived her of the opportunity to participate in the delinquency sale proceedings. As such, the RTC-Br.
85's ruling thereon could not be characterized as a local tax case over which the CTA could have properly
assumed jurisdiction on appeal. In fine, the case was correctly elevated to the CA. (Ignacio v. Office of
the City Treasurer of Quezon City, G.R. No. 221620, [September 11, 2017]) *PERLAS--BERNABE, J.

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