1.

Equitable Recoupment

COLLECTOR vs. UST; 10 Phil. 1062

FACTS: The CTA modified the CIR’s decision denying UST’s claim for refund on the
erroneously paid tax stating that it is barred from prescription, while its deficiency tax
assessment is deemed paid by way of recoupment.

ISSUE: Whether or Not the CTA erred in applying the doctrine of equitable recoupment
in the case. --- YES.

HELD: The Equitable recoupment is allowed ONLY in common law countries, but not in
the Philippines.

This doctrine is pertinent only to taxes arising from the SAME transaction on which an
overpayment is made and underpayment is due.

Reason: If allowed, both the collecting agency and the taxpayer might be tempted to
delay and neglect the pursuit of their respective claims which the period prescribed by
law.

2. Tax Assumption
MITSUBISHI CORPORATION v. CIR; G.R. No. 175772; 05 June 2017

FACTS: The CTA En Banc reversed the Decision granting Mitsubishi Corporation’s
claim for tax refund contending that the Exchange of Notes Agreement is an invalid
treaty because it grants tax exemption without the concurrence of the Congress.

ISSUE: Whether or Not this is a tax assumption case. --- YES.

HELD: Mitsubishi Corporation is entitled to claim refunds from the BIR based on the tax
assumption provision in the Exchange of Notes.

Given that this is a case of tax assumption and not an exemption, the BIR can properly
collect the subject taxes from the NPC as the proper party that assumed Mitsubishi
Corporation's tax liability.

To "assume" means "to take on, become bound as another is bound, or put oneself in
place of another as to an obligation or liability." This means that the obligation or liability
remains, although the same is merely passed on to a different person.