JDTAX2 | DONOR’S TAX |Cases | 1

VALUE-ADDED TAX
1. CIR v. Toshiba Information Equipment (Phils.), Inc., 503 Phil. 823
(2005)

https://lawphil.net/judjuris/juri2005/aug2005/gr_150154_2005.html

FACTS: Toshiba was claiming a refund for the input tax it paid on
unutilized capital goods purchased.

However, the CIR said that it cannot because the capital goods and
services it purchased are considered not used in VAT taxable business
and therefore, it is not entitled to refund of input taxes.

Toshiba, on the other hand, contended that it is PEZA-registered and

located within the ecozone and therefore for, VAT-exempt entity.

ISSUE: WON Toshiba is entitled to refund for the input tax it paid on
unutilized capital goods purchased considering that it is registered with
PEZA and located within the ecozone.

RULING:

Yes. CIR failed to differentiate between VAT-exempt transactions from

VAT-exempt entities.

An exempt transactions are transactions specifically listed in and

expressly exempted from VAT under the Tax Code without regard to the
tax status, VAT-exempt or not, of the taxpayer.

An exempt party, on the other hand, is a person or entity granted VAT-

exemption under the Tax Code, special law or an international
agreement to which the Philippines is a signatory and by virtue of which
its taxable transactions become exempt from VAT.

Toshiba, a PEZA-registered and located within a ecozone is a VAT-

exempt entity because of Sec 8 of Ta 7916 which establishes the fiction
that ecozones are foreign territory. Therefore, a supplier from the
custom territory cannot pass on output VAT to an ecozone enterprise,
like Toshiba, since it is exempt

CIR vs. TOSHIBA INFORMATION EQUIPMENT (PHILS.), INC.
Chico-Nazario, J.
FACTS: Toshiba registered with the PEZA as an ECOZONE Export
Enterprise and it registered with the BIR as a VAT taxpayer and a
withholding agent.
Toshiba filed its VAT returns for the first and second quarters of taxable
year 1996, reporting input VAT in the amount of P13,118,542.00 and
P5,128,761.94, respectively, or a total of P18,247,303.94. It alleged that
the said input VAT was from its purchases of capital goods and services
which remained unutilized since it had not yet engaged in any business
activity or transaction for which it may be liable for any output VAT.
Toshiba filed with DOF applications for tax credit/refund of its unutilized
input VAT. To toll the running of the two-year prescriptive period for
judicially claiming a tax credit/refund Toshiba, filed with the CTA a
Petition for Review.
CTA ordered CIR to refund, or in the alternative, to issue a tax credit
certificate to Toshiba in the amount of P16,188,045.44. CA AFFIRMED.
ISSUE: WON Toshiba is entitled to the tax credit/refund of its input VAT
on its purchases of capital goods and services.
HELD: YES. An ECOZONE enterprise is a VAT-exempt entity. Sales of
goods, properties, and services by persons from the Customs Territory
to ECOZONE enterprises shall be subject to VAT at zero percent (0%).
It would seem that CIR failed to differentiate between VAT-exempt
transactions from VAT-exempt entities.
An exempt transaction, on the one hand, involves goods or services
which, by their nature, are specifically listed in and expressly exempted
from the VAT under the Tax Code, without regard to the tax status –
VAT-exempt or not – of the party to the transaction…
An exempt party, on the other hand, is a person or entity granted VAT
exemption under the Tax Code, a special law or an international
agreement to which the Philippines is a signatory, and by virtue of which
its taxable transactions become exempt from VAT…
CIR, bases its argument on VAT-exempt transactions. Since such
transactions are not subject to VAT, the sellers cannot pass on any
output VAT to the purchasers of goods, properties, or services, and they
may not claim tax credit/refund of the input VAT they had paid thereon.
This cannot apply to transactions of Toshiba because although the
transactions covered by special laws may be exempt from VAT, those
falling under Presidential Decree No. 66 (EPZA) are not.
This Court agrees, however, that PEZA-registered enterprises, which
would necessarily be located within ECOZONES, are VAT-exempt
entities because ECOZONES are foreign territory. As a result, sales
made by a supplier in the Customs Territory to a purchaser in the
ECOZONE shall be treated as an exportation from the Customs
Territory. Conversely, sales made by a supplier from the ECOZONE to a
purchaser in the Customs Territory shall be considered as an
importation into the Customs Territory.
The Philippine VAT system adheres to the Cross Border Doctrine,
according to which, no VAT shall be imposed to form part of the cost of
goods destined for consumption outside of the territorial border of the
JDTAX2 | DONOR’S TAX |Cases | 2
taxing authority. Hence, actual export of goods and services from the
Philippines to a foreign country must be free of VAT; while, those
destined for use or consumption within the Philippines shall be imposed
with ten percent (10%) VAT.
NO OUTPUT VAT may be passed on to an ECOZONE enterprise since
it is a VAT-exempt entity. The VAT treatment of sales to it, however,
varies depending on whether the supplier from the Customs Territory is
VAT-registered or not.
Sales of goods, properties and services by a VAT-registered supplier
from the Customs Territory to an ECOZONE enterprise shall be treated
as export sales. If such sales are made by a VAT-registered supplier,
they shall be subject to VAT at zero percent (0%). In zero-rated
transactions, the VAT-registered supplier shall not pass on any output
VAT to the ECOZONE enterprise, and at the same time, shall be entitled
to claim tax credit/refund of its input VAT attributable to such sales.
Zero-rating of export sales primarily intends to benefit the exporter (i.e.,
the supplier from the Customs Territory), who is directly and legally
liable for the VAT, making it internationally competitive by allowing it to
credit/refund the input VAT attributable to its export sales.
Meanwhile, sales to an ECOZONE enterprise made by a non-VAT or
unregistered supplier would only be exempt from VAT and the supplier
shall not be able to claim credit/refund of its input VAT.
Even conceding, however, that respondent Toshiba, as a PEZA-
registered enterprise, is a VAT-exempt entity that could not have
engaged in a VAT-taxable business, this Court still believes, given the
particular circumstances of the present case, that it is entitled to a
credit/refund of its input VAT.
The sale of capital goods by suppliers from the Customs Territory to
Toshiba took place way before the issuance of RMC No. 74-99, and
when the old rule was accepted and implemented by no less than the
BIR itself. Since Toshiba opted to avail itself of the income tax holiday
under Exec. Order No. 226, as amended, then it was deemed subject to
the ten percent (10%) VAT. It was very likely therefore that suppliers
from the Customs Territory had passed on output VAT to Toshiba, and
the latter, thus, incurred input VAT. Accordingly, this Court gives due
respect to and adopts herein the CTA’s findings that the suppliers of
capital goods from the Customs Territory did pass on output VAT to
Toshiba and the amount of input VAT which Toshiba could claim as
credit/refund.
RULING: WHEREFORE, based on the foregoing, this Court AFFIRMS
the decision of the Court of Appeals in CA-G.R. SP. No. 59106, and the
order of the CTA in CTA Case No. 5593, ordering said petitioner CIR to
refund or, in the alternative, to issue a tax credit certificate to respondent
Toshiba, in the amount of P16,188,045.44, representing unutilized input
VAT for the first and second quarters of 1996.
 JDTAX2 | DONOR’S TAX |Cases | 3

While a zero rating and exemption are computationally the same, they
actually differ in several aspects, to wit:
2. CIR v. Cebu Toyo Corporation, 491 Phil. 625, 637-638 (2005).
A) A zero-rated sale is a taxable transaction but does not result
FACTS: Cebu Toyo Corp. (Cebu) is a domestic subsidiary of Toyo Lens in an output tax while an exempted transaction is not subject to the
Corporation Japan, engaged in the manufacture of lenses and various output tax;
optical components used in TV set, cameras, CDs, etc. Its principal
office is located at the Mactan Export Processing Zone (MEPZ) as a B) The input VAt on the purchases of VAT-registered person
zone export enterprise registered with the PEZA. It is also registered with zero-rated sales may be allowed as tax credits or refunded
with the BIR as a VAT taxpayer. Cebu sells 80% of its products to its while the seller in an exempt transaction is not entitled to any output
mother corporation, pursuant to an Agreement of Offsetting. The rest are tax on his purchases despite the issuance of a VAT invoice or
sold to various enterprises doing business in the MEPZ. receipt;

On March 30, 1998, it filed an application for tax credit/refund of VAT C) Persons engaged in transactions which are zero-rated, being
paid for the period April 1996 to December 1997 amounting to about subject to VAt, are required to register while registration is optional
P4.4 million representing excess VAT input payments. Cebu argues that for VAt-exempt persons.
as a VAT-registered exporter of goods, it is subject to VAT at the rate of
0% on its export sales that do not result in any output tax. Hence, the
unutilized VAT input taxes on its purchases of goods and services
Since Cebu did not have any output tax against which said input tax may
related to such zero-rated activities are available as tax credits or
be offset, it had the option to file a claim for tax refund/credit of its
refund.
unutilized input taxes.
The BIR opposed this on the following grounds: It failed to show that the
tax was erroneously or illegally collected; the taxes paid and collected
are presumed to have been made in accordance with law; and that
claims for refund are strictly construed against the claimant.

The CTA ruled that not the entire amount claimed for refund by Toyo
were actually offset against its related accounts. It determined that the
refund/credit amounted only to P2.1M. The same was affirmed by the
CA.

ISSUE: Entitled to refund representing unutilized input VAT on goods

and services.

RULING: YES. Cebu is entitled to the P2.1M tax refund/credit.

Petitioner’s contention that respondent is not entitled to refund for being
exempt form VAT is untenable. This argument turns a blind eye to the
fiscal incentives given to PEZA registered enterprises under RA 7916.
Under this statute, Cebu has two options with respect to its tax burden.

1. It could avail of an income tax holiday pursuant to EO 226,

thus exempting it from income taxes for a number of years (in
this case, 4 years) but not from other internal revenue taxes
such as VAT; or

2. it could avail of the tax exemption on all taxes, including VAT

under PD 66 and pay only the preferential rate of 5% under
RA 7916.

Thus, availing of the first option, respondent is not exempt from VAT and
it correctly registered itself as a VAT taxpayer. In fine, it is engaged in a
taxable rather than exempt transactions. In taxable transactions, the
seller (Cebu) shall be entitled to tax credit for the VAT paid on
purchases and leases of goods properties or services.

Under the VAT system, a zero-rate sale by a VAT-registered person,

which is a taxable transaction for VAT purposes, shall not result in any
output tax. However, input tax on his purchase of goods, properties or
services related to such zero-related sale shall be available as a tax
credit or refund.
 JDTAX2 | DONOR’S TAX |Cases | 4

taxpayer, subject to adjustment at the proper time when the actual tax
liability can be fully and finally determined.

3. CIR v. Ironcon Builders and Development Corporation, G.R. No.
180042, 8 February 2010
https://lawphil.net/judjuris/juri2010/feb2010/gr_180042_2010.html
FACTS: Respondent Ironcon Builders and Development Corporation
(Ironcon) sought the refund by the Bureau of Internal Revenue (BIR) of
its income tax overpayment and excess creditable VAT.
The CIR continued not to act on its claims which made Ironcon to bring it
up to CTA for review.
CTA 2nd Division held that taxpayers have the option to either carry over
the excess credit or ask for a refund, as regards with the overpayment.
Apparently, the Ironcon filed two income tax returns for the year 2000,
an original and an amended one. Although Ironcon’s amended return
indicated a preference for “refund” of the overpaid tax, the CTA ruled
that respondent’s original choice is regarded as irrevocable, pursuant to
Sec.76 of R.A. No. 8424, and moreover found out that Ironcon actually
carried over the credit from the overpayment and applied it to the tax
due for 2001, and hence, denied Ironcon’s claim for the refund.
Even if the law does not expressly state that Ironcon’s excess creditable
VAT withheld is refundable, it may be the subject of a claim for refund as
an erroneously collected tax under Sections 204(C) and 229. Even if the
law does not expressly state that Ironcon’s excess creditable VAT
withheld is refundable, it may be the subject of a claim for refund as an
erroneously collected tax under Sections 204(C) and 229. The rule is
that before a refund may be granted, respondent Ironcon must show that
it had not used the creditable amount or carried it over to succeeding
taxable quarters.
Substantial justice dictates that the government should not keep money
that does not belong to it at the expense of citizens. Since he ought to
know the tax records of all taxpayers, petitioner CIR could have easily
disproved the claimant’s allegations.That he chose not to amounts to a
waiver of that right. Also, the CIR failed in this case to make a timely
objection to or comment on respondent Ironcon’s offer of the documents
in question despite an opportunity to do so.11 Taking all these
circumstances together, it was sufficiently proved that Ironcon’s excess
creditable VAT withheld was not carried over to succeeding taxable
quarters.

As to the claim for VAT refund, CTA found that by the end of 2000,
respondent had excess tax credit carried over from 1999, an allowable
input tax and a 6% creditable VAT, withheld and remitted by its clients,
The ruling in Citibank N.A. v. Court of Appeals, while dealing with
which are deductible from Ironcon’s total output VAT liability of P20+M.
excessive income taxes withheld, is also applicable to this case:
The CTA ruled that respondent had no more output VAT against which
"Consequently and clearly, the tax withheld during the course of the
the excess creditable VAT withheld may be applied or credited, the VAT
taxable year, while collected legally under the aforesaid revenue
withheld had been excessively paid. Because Ironcon did not present its
regulation, became untenable and took on the nature of erroneously
VAT returns for the succeeding quarters of 2001, 2 nd Division denied the
collected taxes at the end of the taxable year."
refund. Upon MR of Ironcon, now attaching the required VAT returns,
CTA then granted the application having found that Ironcon sufficiently
proved that its excess creditable VAT withheld was not carried over or
applied to any input VAT for 2001. CIR filed its own MR for the amended
decision, which CTA denied, and CTA en banc denied.

Petitioner CIR’s main contention is that, since these amounts were

withheld in accordance with what the law provides, they CANNOT be
regarded as erroneously or illegally collected as contemplated in
Sections 204(C) and 229 of the NIRC. Petitioner CIR also points out that
since the NIRC does not specifically grant taxpayers the option to refund
excess creditable VAT withheld, it follows that such refund cannot be
allowed. Excess creditable VAT withheld is much unlike excess income
taxes withheld.

ISSUE: WON creditable VAT withheld from a taxpayer in excess of its

output VAT liability may be the subject of a tax refund in place of a tax
credit.

HELD: YES. In the latter case, Sections 76 and 58(D) of the NIRC
specifically make the option to seek a refund available to the taxpayer.
The CIR submits thus that the only option available to taxpayers in case
of excess creditable VAT withheld is to apply the excess credits to
succeeding quarters. But the amounts involved in this case are
creditable withholding taxes, not final taxes subject to withholding. As
the CTA correctly points out, taxes withheld on certain payments under
the creditable withholding tax system are but intended to approximate
the tax due from the payee. The withheld taxes remitted to the BIR are
treated as deposits or advances on the actual tax liability of the
 JDTAX2 | DONOR’S TAX |Cases | 5

4. AT&T Communications Services Philippines, Inc. v. CIR, G.R. No.

182364, 3 August 2010

https://lawphil.net/judjuris/juri2010/aug2010/gr_182364_2010.html

Doctrine: Section 113 of the Tax Code does not create a distinction
between a sales invoice and an official receipt.

FACTS: Petitioner filed with the respondent an application for tax refund
and/or tax credit of its excess/unutilized input VAT from zero-rated sales.
To prevent the running of the prescriptive period, petitioner subsequently
filed a petition for review with the CTA.

The CTA held that since petitioner is engaged in sale of services, VAT
Official Receipts should have been presented in order to substantiate its
claim of zero-rated sales, not VAT invoices which pertain to sale of
goods or properties.

ISSUE: Whether or not a Sales Invoice would suffice as a proof for

entitlement to a refund of unutilized input VAT from zero-rated sales,
even for seller of services

HELD: YES. Section 113 of the Tax Code does not create a distinction
between a sales invoice and an official receipt. Parenthetically, to
determine the validity of petitioner’s claim as to unutilized input VAT, an
invoice would suffice provided the requirements under Sections 113 and
237 of the Tax Code are met.

Sales invoices are recognized commercial documents to facilitate trade

or credit transactions. They are proofs that a business transaction has
been concluded, hence, should not be considered bereft of probative
value (Seaoil Petroleum Corporation v. Autocorp Group, G.R. No.
164326, October 17, 2008). Only the preponderance of evidence
threshold as applied in ordinary civil cases is needed to substantiate a
claim for tax refund proper (Commissioner of Internal Revenue v. Mirant
Pagbilao Corporation, G.R. No. 172129, September 12, 2008).

A taxpayer engaged in zero-rated transactions may apply for tax refund

or issuance of tax credit certificate for unutilized input VAT, subject to
the following requirements:

(1) the taxpayer is engaged in sales which are zero-rated

(i.e., export sales) or effectively zero-rated;

(2) the taxpayer is VAT-registered;

(3) the claim must be filed within two years after the close of
the taxable quarter when such sales were made;

(4) the creditable input tax due or paid must be attributable to

such sales, except the transitional input tax, to the extent that
such input tax has not been applied against the output tax;
and

(5) in case of zero-rated sales, the acceptable foreign

currency exchange proceeds thereof have been duly
accounted for in accordance with BSP rules and regulations.

5. Intel Technology Philippines, Inc. v. CIR, G.R. No. 166732, 27 April
2007
https://lawphil.net/judjuris/juri2007/apr2007/gr_166732_2007.html
INTEL TECHNOLOGY PHILIPPINES, INC., Petitioner,
vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
CALLEJO, SR., J.:
DOCTRINE: In a claim for refund or issuance of a tax credit certificate
attributable to zero-rated sales, what is to be closely scrutinized is the
documentary substantiation of the input VAT paid, as may be proven by
other export documents, rather than the supporting documents for the
zero-rated export sales.
FACTS: Petitioner is a domestic corporation engaged primarily in the
business of designing, developing, manufacturing and exporting
advanced and large- scale integrated circuit components (ICs). It is
REGISTERED with the BIR as a VAT entity and with PEZA as an
Ecozone export enterprise.
As a VAT-registered entity, Intel filed with the CIR its VAT Declarations
and VAT Return declaring zero-rated export sales of P2.5B and VAT
input taxes from domestic purchases of goods and services in the total
amount of P11M. Intel alleged that its zero-rated export sales were paid
for in acceptable foreign currency and were inwardly remitted in
accordance with the regulations of the BSP.
On May 18, 1999, Intel filed with the CIR, through its One-Stop Shop
Inter-Agency Tax Credit and Duty Drawback Center, a claim for tax
credit/refund (P11M) of VAT input taxes on its domestic purchases of
goods and services directly used in its commercial operations.
On June 30, 2000, when the two-year prescriptive period to file a refund
was about to lapse without any action by the CIR on its claim, petitioner
filed with the CTA a petition for review with the Commissioner of Internal
Revenue (Commissioner) as respondent.
INTEL alleged that being a VAT-registered entity, petitioner is
subject to the VAT imposed under Title IV of the Tax Code.
The export sales of the petitioner are not subject to 10%
value-added tax but are ZERO-RATED.
Hence, such zero-rated sales will NOT RESULT to any VAT
output tax pursuant to Sec. 106(A)(2)(a)(1) and Sec. 108(B)
(1) of the Tax Code.
Moreover, it generated zero-rated sales and paid VAT input
taxes in the course of its trade or business, which VAT input
taxes are attributable to the zero-rated sales and have not
been applied to any VAT output tax liability of Intel for said
period or any succeeding quarter or quarters nor has been
issued any tax credit certificate, it follows that Intel is entitled
to the issuance of a tax credit certificate for VAT input taxes.
CIR argued that Intel, being registered with PEZA is exempt from all
taxes, including VAT, pursuant to Section 24 of Republic Act No. 7916,
in relation to Section 103 of the Tax Code. Since its sales are not zero-
JDTAX2 | DONOR’S TAX |Cases | 6
rated but are exempt from VAT, Intel is NOT ENTITLED to refund of
input tax pursuant to sections of the Revenue Regulations No. 7-95.
The CTA commissioned the services of an independent auditor, Eliseo
Aurellado, to conduct an audit and evaluate petitioner’s claim. It
submitted a Report to the CTA, which stated that Intel has a valid CLAIM
for TAX CREDIT in the amount of P9.7M.
On April 21, 2003, the CTA rendered judgment DENYING Intel’s claim
for REFUND or issuance of a tax credit certificate. CTA ruled that Intel is
LEGALLY ENTITLED to a refund or issuance of a tax credit certificate of
its unutilized VAT input taxes on domestic purchases of goods and
service attributable to its zero-rated sales. However, the export invoices
adduced in evidence by Intel could not be considered as competent
evidence to prove its zero-rated sales of goods for VAT purposes and
for refund or issuance of a tax credit certificate because no BIR authority
to print said invoices was indicated thereon. The CTA also observed that
some of the INVOICES DO NOT CONTAIN the Taxpayer’s Identification
Number-VAT (TIN-VAT) of petitioner as required in Section 113, in
conjunction with Section 237, of the Tax Code. Intel filed an MR and a
supplemental MR but both got denied. It then filed before the CA a
petition for review and averred that Sections 113(A)(1) and 237 of the
1997 Tax Code, the following information is required to be indicated in
the invoice or receipt: (1) a statement that the seller is VAT-registered;
(2) the seller’s TIN; and (3) the name, business style, if any, and
address of the purchaser, customer or client.
Aggrieved, Intel filed before the CA a petition for review of the tax court’s
decision. The CA AFFIRMED the CTA’s ruling and held that while under
Section 106(A)(2)(a)(1) of the Tax Code, VAT-registered entities are
entitled to claim VAT refund on their input taxes if their export sales are
zero-rated, the claim is nevertheless subject to the invoicing and
accounting requirements of VAT-registered persons under Section 113
in relation to Section 237 of the Tax Code. It is therefore clear, that what
should be proven are not only the export sales but also compliance with
the requirements under the aforesaid sections of the Tax Code. It also
ruled that VAT-registered persons are directed to issue duly registered
invoices for every sale or lease of goods, properties or services,
containing the required information under the law.
ISSUES:
1.) Whether or not the absence of the BIR authority to print or the
absence of the TIN-V in petitioner’s export sales invoices operates to
forfeit its entitlement to a tax refund/credit of its unutilized input VAT
attributable to its zero-rated sales.
2.) Whether or not petitioner’s failure to indicate "TIN-V" in its sales
invoices automatically invalidates its claim for a tax credit certification.
HELD: Both NO. The Court held that since the issues are interrelated, it
delved into and resolved them simultaneously.
The pertinent provision of the Tax Code on VAT on the sale of goods or
properties, particularly with respect to export sales, is Section 106(A)(2)
(a)(1). Based on such provision, export sales, or sales outside the
Philippines, are subject to VAT at 0% rate if made by a VAT-registered
person. When applied to the tax base, the 0% rate obviously results in
no tax chargeable against the purchaser. The seller of such transactions
 JDTAX2 | DONOR’S TAX |Cases | 7

charges no output tax, but can claim a refund or tax credit certificate for
the VAT previously charged by suppliers.
Since Intel is a VAT-registered as well as PEZA-registered entity
engaged in the export of advanced and large-scale ICs and claiming a
tax credit for VAT input taxes it paid on its domestic purchases of goods
and services, Sec 112 applies. It further ruled that under Sections 106
(A)(2)(a)(1) in relation to 112(A) of the Tax Code, a taxpayer engaged in
zero-rated or effectively zero-rated transactions may apply for a refund
or issuance of a tax credit certificate for input taxes paid attributable to
such sales upon complying with the following requisites: (1) the taxpayer
is engaged in sales which are zero-rated (like export sales) or effectively
zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must be filed
within two years after the close of the taxable quarter when such sales
were made; (4) the creditable input tax due or paid must be attributable
to such sales, except the transitional input tax, to the extent that such
input tax has not been applied against the output tax; and (5) in case of
zero-rated sales under Section 106(A)(2)(a)(1) and (2), Section 106(B),
and Section 108(B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in accordance
with BSP rules and regulations. It is added that, "where the taxpayer is
engaged in zero-rated or effectively zero-rated sale and also in taxable
or exempt sale of goods or properties or services, and the amount of
creditable input tax due or paid cannot be directly or entirely attributed to
any one of the transactions, it shall be allocated proportionately on the
basis of the volume of the sales."
export sales, what the government reimburses or refunds to the claimant
is the input VAT paid – thus, the necessity for the input VAT paid to be
substantiated by purchase invoices or official receipts. These sales
invoices or receipts issued by the supplier are necessary to substantiate
the actual amount or quality of goods sold and their selling price, and,
taken collectively, are the best means to prove the input VAT payments
of the claimant.
In a claim for refund or issuance of a tax credit certificate attributable to
zero-rated sales, what is to be closely scrutinized is the
DOCUMENTARY SUBSTANTIATION of the input VAT paid, as may be
proven by other export documents, rather than the SUPPORTING
DOCUMENTS for the zero-rated export sales.
since PETITIONER has ESTABLISHED by SUFFICIENT EVIDENCE
that it is ENTITLED to a REFUND or issuance of a tax credit certificate,
in accordance with the requirements of Secs. 106 (A)(2)(a)(1) and
112(A) of the Tax Code, then its claim should not be denied,
notwithstanding its failure to state on the invoices the BIR authority to
print and the TIN-V.
Intel is entitled to tax credit but the case is remanded back to CTA for
proper determination and computation of its tax credit.

The documentary evidence submitted by Intel, e.g., summary of export

sales, sales invoices, official receipts, airway bills and export
declarations, proved that it is engaged in the "sale and actual shipment
of goods from the Philippines to a foreign country." In short, Intel is
considered engaged in export sales (a zero-rated transaction) if made
by a VAT-registered entity. Thus, Intel’s evidence sufficiently establish
that it is entitled to a claim for tax credit

There is NO LAW or BIR rule or regulation REQUIRING Intel’s authority

from the BIR to PRINT its SALES INVOICES (BIR authority to print) to
be reflected or indicated therein. While entities engaged in business are
required to secure from the BIR an authority to print receipts or invoices
and to issue duly registered receipts or invoices, it is not required that
the BIR authority to print be reflected or indicated therein. It should be
noted that Intel is engaged in export sales, such that the purchasers of
its goods are foreign entities, which are, logically, not VAT-registered in
our country or liable to pay VAT in our jurisdiction. Indeed, what is
important with respect to the BIR authority to print is that it has been
secured or obtained by the taxpayer, and that invoices or receipts are
duly registered.

To stress, petitioner, as a VAT-registered entity, is engaged in export

sales of advanced and large-scale ICs and, as such, under Section 106
(A)(2)(a)(1) of the Tax Code, its sales or transactions are subject to VAT
at 0% rate. Further, subject to the requirements stated in Section
112(A), it is entitled to claim refund or issuance of a tax credit certificate
for input VAT taxes attributable to its export sales. As the Court had the
occasion to explain since no output VAT was imposed on the zero-rated

6. Silicon Philippines, Inc. v. CIR, G.R. No. 173241, March 25, 2015
https://lawphil.net/judjuris/juri2015/mar2015/gr_173241_2015.html
SILICON PHILIPPINES, INC. (formerly INTEL PHILIPPINES
MANUFACTURING, INC.), Petitioner,
vs. CIR, Respondent.
LEONARDO-DE CASTRO, J.
Before the Court is a Petition for Review on Certiorari filed by petitioner
Silicon Philippines, Inc. (SPI) seeking the reversal and setting aside of
the following: (1) the Decision1 dated January 27, 2006 of the Court of
Tax Appeals (CTA) en banc in CTA EB Case No. 24, which affirmed the
Decision2 dated November 24, 2003 and Resolution3 dated August 10,
2004 of the CTA Division in CTA Case No. 6170; and (2)
Resolution4 dated June 26, 2006 of the CTA en banc also in CTA EB
Case No. 24, which denied the Motion for Reconsideration of SPI. The
CTA Division only granted the claim of SPI for tax credit/refund of input
Value- Added Tax (VAT) on its purchases of capital goods, but not the
input VAT attributable to its zero-rated sales.
SPI, formerly known as Intel Philippines Manufacturing, Inc., is a
corporation duly organized and existing under Philippine laws, and
engaged in the business of designing, developing, manufacturing, and
exporting advance and large-scale integrated circuit components,
commonly referred to in the industry as Integrated Circuits or "ICs." It is
registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer
and with the Board of Investments as a preferred pioneer enterprise
enjoying a six-year income holiday, in accordance with the provisions of
the Omnibus Investments Code.
SPI filed on May 6, 1999 with the One-Stop Shop Inter-Agency Tax
Credit and Duty Drawback Center of the Department of Finance an
Application for Tax Credit/Refund of Value-Added Tax Paid covering the
Third Quarter of 1998.5 SPI sought the tax credit/refund of input VAT for
the said tax period in the sum of P25,531,312.83, broken down as
follows:
Amount
Tax paid on Imported/Locally Purchased Capital
Equipment P 2,425,764.00
Total VAT Paid on Purchases per Invoices Received
During the Period for which this Application
is Filed 23,105,548.83
Amount of Tax Credit/Refund Applied For P 25,531,312.83
When respondent CIR failed to act upon its aforesaid Application for Tax
Credit/Refund, SPI filed on September 29, 2000 a Petition for Review
before the CTA Division, which was docketed as CTA Case No. 6170.
The CTA Division rendered a Decision on November 24, 2003 only
partially granting the claim of SPI for tax credit/refund. The CTA Division
JDTAX2 | DONOR’S TAX |Cases | 8
DISALLOWED the claim of SPI for tax credit/refund of input VAT in the
amount of P23,105,548.83 for FAILURE of SPI to properly
SUBSTANTIATE the ZERO-RATED SALES to which it attributed said
taxes. The CTA Division particularly pointed out the failure of SPI to
comply with INVOICING REQUIREMENTS under Sections 113, 237,
and 238 of the National Internal Revenue Code of 1997 (1997 Tax
Code) and Section 4.108-1 of Revenue Regulations No. 7-95, i.e.,
registration of receipts or sales or commercial invoices with the BIR;
securing an authority to print receipts or sales or commercial invoices
from the BIR; and imprinting the words "zero-rated" on the invoices
covering zero-rated sales. As for the claim of SPI for tax credit/refund of
input VAT on its purchases of capital goods in the amount of
P2,425,764.00, the CTA Division held that Section 112(B) of the 1997
Tax Code did not require that such a claim be attributable to zero-rated
sales; and that SPI was able to comply with all the requirements under
said provision. The CTA Division decreed in the end:
WHEREFORE, in view of the foregoing, the instant petition for review
is hereby PARTIALLY GRANTED. [CIR] is ORDERED to ISSUE A TAX
CREDIT CERTIFICATE in favor of SPI in the amount of P2,425,764.00
representing input VAT on importation of capital goods. However, the
claim for refund of input VAT attributable to [SPI’s] alleged zero-rated
sales in the amount of P23,105,548.83 is hereby DENIED for lack of
merit.6
SPI filed a Motion for Partial Reconsideration and Supplemental Motion
for Partial Reconsideration of the foregoing Decision dated November
24, 2003 of the CTA Division. In a Resolution dated August 10, 2004,
the CTA Division additionally noted that the claim of SPI covered the
period of July 1, 1998 to September 30, 1998 and it was issued a permit
to generate computerized sales invoices and official receipts only on
August 31, 2002. Hence, the CTA Division resolved:
WHEREFORE, the instant motion of [SPI] is hereby DENIED for lack of
merit. The pronouncement in the assailed decision is REITERATED.7
SPI sought recourse from the CTA en banc by filing a Petition for
Review assailing the Decision dated November 24, 2003 and Resolution
dated August 10, 2004 of the CTA Division. The Petition was docketed
as CTA EB Case No. 24.
In its Decision dated January 27, 2006, the CTA en banc found no
cogent justification to disturb the conclusion spelled out in the assailed
Decision dated November 24, 2003 and Resolution dated August 10,
2004 of the CTA Division. The dispositive portion of the CTA en
banc judgment reads:
WHEREFORE, the instant Petition is hereby DENIED DUE
COURSE and DISMISSED for lack of merit.8
SPI filed a Motion for Reconsideration but said Motion was denied for
lack of merit by the CTA en banc in a Resolution dated June 26, 2006.
SPI now comes before this Court via the instant Petition for Review,
assigning three errors on the part of the CTA en banc, to wit:
I
THE HONORABLE COURT OF TAX APPEALS EN BANC ERRED IN
DENYING [SPI’S] CLAIM FOR REFUND ON THE GROUNDS THAT
[SPI] FAILED TO IMPRINT [CIR’S] BUREAU’S PERMIT TO PRINT
NUMBER AND THE WORDS "ZERO-RATED" ON ITS SALES

INVOICES THAT WERE PRESENTED AND FORMALLY OFFERED IN
EVIDENCE[.]
II
THE HONORABLE COURT OF TAX APPEALS EN BANC ERRED IN
DISREGARDING THE ENTIRE EVIDENCE OF [SPI] IN PROVING ITS
CLAIM FOR TAX CREDIT/REFUND[.]
III
THE HONORABLE COURT OF TAX APPEALS EN BANC ERRED IN
NOT GRANTING THE WHOLE CLAIM OF [SPI] FOR REFUND OF ITS
EXCESS AND UNUTILIZED INPUT VAT FOR THE PERIOD JULY 1,
1998 TO SEPTEMBER 30, 1998 IN THE TOTAL AMOUNT OF
PhP25,531,312.83 BY DENYING ITS CLAIM ATTRIBUTABLE TO
ZERO-RATED EXPORT SALES IN THE AMOUNT OF
PHP23,105,548.83[.]9
During the pendency of the present Petition, this Court en
banc promulgated on February 12, 2013 its Decision in the consolidated
cases of Commissioner of Internal Revenue v. San Roque Power
Corporation, Taganito Mining Corporation v. Commissioner of Internal
Revenue, and Philex Mining Corporation v. Commissioner of Internal
Revenue10 (hereinafter collectively referred to as San Roque). In San
Roque, the Court settled the rules on the prescriptive periods for
claiming credit/refund of input VAT under Section 112 of the 1997 Tax
Code.
The pertinent provisions of the 1997 Tax Code11 provided:
SEC. 110. Tax Credits. –
xxxx
(B) Excess Output or Input Tax.  – If at the end of any taxable quarter the
output tax exceeds the input tax, the excess shall be paid by the VAT-
registered person. If the input tax exceeds the output tax, the excess
shall be carried over to the succeeding quarter or quarters. Any input tax
attributable to the purchase of capital goods or to zero-rated sales by a
VAT-registered person may at his option be refunded or credited against
other internal revenue taxes, subject to the provisions of Section 112.
SEC. 112. Refunds or Tax Credits of Input Tax. –
(A) Zero-Rated or Effectively Zero-Rated Sales.  – Any VAT- registered
person, whose sales are zero-rated or effectively zero-rated 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
creditable input tax due or paid attributable to such sales, except
transitional input tax, to the extent that such input tax has not been
applied against output tax: Provided, however, That in the case of zero-
rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section
108(B)(1) and (2), the acceptable foreign currency exchange proceeds
thereof had been duly accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further,
That where the taxpayer is engaged in zero-rated or effectively zero-
rated sale and also in taxable or exempt sale of goods or properties or
services, and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales.
(B) Capital Goods. – A VAT-registered person may apply for the
issuance of a tax credit certificate or refund of input taxes paid on capital
JDTAX2 | DONOR’S TAX |Cases | 9
goods imported or locally purchased, to the extent that such input taxes
have not been applied against output taxes. The application may be
made only within two (2) years after the close of the taxable quarter
when the importation or purchase was made.
xxxx
(D) Period Within Which Refund or Tax Credit of Input Taxes Shall be
Made. – In proper cases, the Commissioner shall grant a refund or issue
the tax credit certificate for creditable input taxes within one hundred
twenty (120) days from the date of submission of complete documents in
support of the application filed in accordance with Subsections (A) and
(B) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or
the FAILURE on the part of the Commissioner TO ACT on the
application within the period prescribed above, the taxpayer affected
may, WITHIN 30 days from the receipt of the decision denying the claim
OR AFTER the expiration of the 120-period , appeal the decision or the
unacted claim with the CTA. (Emphases supplied.)
The Court interpreted the aforequoted provisions, as well as the
seemingly conflicting jurisprudence and administrative rulings on the
same provisions, in San Roque, thus:
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
taxpayer’s claim. The law is clear, plain, and unequivocal: "x x x the
Commissioner shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty (120) days from the
date of submission of complete documents." Following the verba legis
doctrine, this law must be applied exactly as worded since it is clear,
plain, and unequivocal. The taxpayer cannot simply file a petition with
the CTA without waiting for the Commissioner’s 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, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt
of the decision denying the claim or after the expiration of the one
hundred twenty day- period, appeal the decision or the unacted claim
with the Court of Tax Appeals.
This law is clear, plain, and unequivocal. Following the well-settled verba
legis doctrine, this law should be applied exactly as worded since it is
clear, plain, and unequivocal. 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 Commissioner’s decision, or if the
Commissioner does not act on the taxpayer’s claim within the 120-day
period, the taxpayer may appeal to the CTA within 30 days from the
expiration of the 120-day period.
xxxx

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).
xxxx
The Atlas doctrine, which held that claims for refund or credit of input
VAT must comply with the two-year prescriptive period under Section
229, should be effective only from its promulgation on 8 June 2007 until
its abandonment on 12 September 2008 in Mirant. The Atlas doctrine
was limited to the reckoning of the two-year prescriptive period from the
date of payment of the output VAT. Prior to the Atlas doctrine, the two-
year prescriptive period for claiming refund or credit of input VAT should
be governed by Section 112(A) following the verba legis rule.
The Mirant ruling, which abandoned the Atlas doctrine, adopted the
verba legis rule, thus applying Section 112(A) in computing the two-year
prescriptive period in claiming refund or credit of input VAT.
xxxx
When Section 112(C) states that "the taxpayer affected may, within thirty
(30) days from receipt of the decision denying the claim or after the
expiration of the one hundred twenty-day period, appeal the decision or
the unacted claim with the Court of Tax Appeals," the law does not make
the 120+30 day periods optional just because the law uses the word
"may." The word "may" simply means that the taxpayer may or may not
appeal the decision of the Commissioner within 30 days from receipt of
the decision, or within 30 days from the expiration of the 120- day
period. x x x.
xxxx
To repeat, a claim for tax refund or credit, like a claim for tax exemption,
is construed strictly against the taxpayer. One of the conditions for a
judicial claim of refund or credit under the VAT System is compliance
with the 120+30 day mandatory and jurisdictional periods. Thus, strict
compliance with the 120+30 day periods is necessary for such a claim to
prosper, whether before, during, or after the effectivity of the Atlas
doctrine, except for the period from the issuance of BIR Ruling No. DA-
489-03 on 10 December 2003 to 6 October 2010 when the Aichi
doctrine was adopted, which again reinstated the 120+30 day periods as
mandatory and jurisdictional.
xxxx
BIR Ruling No. DA-489-03 does provide a valid claim for equitable
estoppel under Section 246 of the Tax Code. BIR Ruling No. DA-489-03
expressly states 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." Prior to this ruling, the BIR held, as shown
by its position in the Court of Appeals, that the expiration of the 120-day
period is mandatory and jurisdictional before a judicial claim can be filed.
xxxx
JDTAX2 | DONOR’S TAX |Cases | 10
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.12 (Emphasis supplied,
citations omitted.)
In the subsequent case of Commissioner of Internal Revenue v.
Mindanao II Geothermal Partnership,13 the Court summarized the rules
on prescriptive periods for claiming credit/refund of input VAT, to wit:
SUMMARY OF RULES ON PRESCRIPTIVE PERIODS FOR CLAIMING
REFUND OR CREDIT OF INPUT VAT
The lessons of this case may be summed up as follows:
A.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 to 12 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)
B.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)
The Court proceeds to apply the prescriptive periods set forth in Section
112 of the 1997 Tax Code, as construed by the Court in the
aforementioned cases.
SPI filed on May 6, 1999 its administrative claim for tax credit/refund of
the input VAT attributable to its zero-rated sales and on its purchases of
capital goods for the Third Quarter of 1998. The two-year prescriptive
period for filing an administrative claim, reckoned from the close of the
taxable quarter, prescribed on September 30, 2000. Therefore, the
herein administrative claim of SPI was timely filed. For the 120/30-day
prescriptive periods, the relevant dates are presented in table form
below:
 JDTAX2 | DONOR’S TAX |Cases | 11

Tax Date of End of 120- End of Date of No. of period to file its judicial claim with the CTA. Philex’s failure to do so
Period Filing of Day Period 30-day Actual Days: rendered the "deemed a denial" decision of the Commissioner final and
1998 Administrative for Period to Filing of End of 120- inappealable. The right to appeal to the CTA from a decision or "deemed
Claim CIR to File Judicial day a denial" decision of the Commissioner is merely a statutory privilege,
Decide Appeal Claim Period to not a constitutional right. The exercise of such statutory privilege
with Filing requires strict compliance with the conditions attached by the statute for
CTA of Judicial
its exercise. Philex failed to comply with the statutory conditions and
Claim
must thus bear the consequences.15 (Emphases supplied, citations
omitted.)
Third May 6, 1999 September October September 391
Quarter 3, 4, 29, days2000 Because the 30-day period for filing its judicial claim had already
1999 199914 2000 prescribed by the time SPI filed its Petition for Review with the CTA
Division, the CTA Division never acquired jurisdiction over the said
Petition. The CTA Division had absolutely no jurisdiction to act upon,
Evidently, SPI belatedly filed its judicial claim. It filed its Petition for take cognizance of, and render judgment upon the Petition for Review of
Review with the CTA 391 days after the lapse of the 120-day period SPI in CTA Case No. 6170, regardless of the merit of the claim of SPI.
without the CIR acting on its application for tax credit/refund, way The Court stresses that the 120/30-day prescriptive periods are
beyond the 30-day period under Section 112 of the 1997 Tax Code . SPI mandatory and jurisdictional, and are not mere technical requirements.
herein is in exactly the same position as Philex Mining in San Roque. The Court should not establish the precedent that noncompliance with
Thus, the declarations of the Court on the judicial claim of Philex Mining mandatory and jurisdictional conditions can be excused if the claim is
in San Roque are just as applicable to that of SPI: otherwise meritorious, particularly in claims for tax refunds or credit.
Such precedent will render meaningless compliance with mandatory and
Philex timely filed its administrative claim on 20 March 2006, within the jurisdictional requirements.16
two-year prescriptive period. Even if the two-year prescriptive period is
computed from the date of payment of the output VAT under Section The Court reiterates its pronouncements in a previously decided case
229, Philex still filed its administrative claim on time. Thus, the Atlas which also involved SPI and similar claims for tax credit/refund but for
doctrine is immaterial in this case. The Commissioner had until 17 July different tax periods:
2006, the last day of the 120-day period, to decide Philex’s claim. Since Courts are bound by prior decisions. Thus, once a case has been
the Commissioner did not act on Philex’s claim on or before 17 July decided one way, courts have no choice but to resolve subsequent
2006, Philex had until 17 August 2006, the last day of the 30-day period, cases involving the same issue in the same manner.
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 As this Court has repeatedly emphasized, a tax credit or refund, like tax
filed its Petition for Review with the CTA only on 17 October 2007, or exemption, is strictly construed against the taxpayer. The taxpayer
four hundred twenty-six (426) days after the last day of filing. In short, claiming the tax credit or refund has the burden of proving that he is
Philex was late by one year and 61 days in filing its judicial claim. As the entitled to the refund by showing that he has strictly complied with the
CTA EB correctly found: conditions for the grant of the tax refund or credit. Strict compliance with
the mandatory and jurisdictional conditions prescribed by law to claim
Evidently, the Petition for Review in C.T.A. Case No. 7687 was filed 426 such tax refund or credit is essential and necessary for such claim to
days late. Thus, the Petition for Review in C.T.A. Case No. 7687 should prosper. Noncompliance with the mandatory periods, nonobservance of
have been dismissed on the ground that the Petition for Review was the prescriptive periods, and nonadherence to exhaustion of
filed way beyond the 30-day prescribed period; thus, no jurisdiction was administrative remedies bar a taxpayer’s claim for tax refund or credit,
acquired by the CTA Division; x x x. whether or not the CIR questions the numerical correctness of the claim
Unlike San Roque and Taganito, Philex’s case is not one of premature of the taxpayer. For failure of Silicon to comply with the provisions of
filing but of late filing. Philex did not file any petition with the CTA within Section 112(C) of the NIRC, its judicial claims for tax refund or credit
the 120-day period. Philex did not also file any petition with the CTA should have been dismissed by the CTA for lack of
within 30 days after the expiration of the 120- day period. Philex filed its jurisdiction.17 (Citations omitted.)
judicial claim long after the expiration of the 120-day period, in fact 426 It is not lost upon the Court that the prescription of the judicial claim has
days after the lapse of the 120-day period. In any event, whether not been raised as an issue by any of the parties whether before the
governed by jurisprudence before, during, or after the Atlas case, CTA Division, CTA en banc, or this Court. Nonetheless, the 120/30-day
Philex’s judicial claim will have to be rejected because of late prescriptive periods are mandatory and jurisdictional, and the matter of
filing. Whether the two-year prescriptive period is counted from the date jurisdiction cannot be waived because it is conferred by law and is not
of payment of the output VAT following the Atlas doctrine, or from the dependent on the consent or objection or the acts or omissions of the
close of the taxable quarter when the sales attributable to the input VAT parties or any one of them.18 In addition, when a case is on appeal, the
were made following the Mirant and Aichi doctrines, Philex’s judicial Court has the authority to review matters not specifically raised or
claim was indisputably filed late assigned as error if their consideration is necessary in reaching a just
The Atlas doctrine cannot save Philex from the late filing of its judicial conclusion of the case.19 More importantly, courts have the power
claim. The inaction of the Commissioner on Philex’s claim during the to motu proprio dismiss an action that already prescribed. According to
120-day period is, by express provision of law, "deemed a denial" of Rule 9, Section 1 of the Revised Rules of Court:
Philex’s claim. Philex had 30 days from the expiration of the 120-day
 JDTAX2 | DONOR’S TAX |Cases | 12

SECTION 1. Defenses and objections not pleaded - Defenses and

objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties
for the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim.

The second sentence of the foregoing provision does not only supply
exceptions to the rule that defenses not pleaded either in a motion to
dismiss or in the answer are deemed waived, it also allows courts to
dismiss cases motu proprio on any of the enumerated grounds - (1) lack
of jurisdiction over the subject matter; (2) litis pendentia; (3) res judicata;
and (4) prescription - provided that the ground for dismissal is apparent
from the pleadings or the evidence on record.20

WHEREFORE, premises considered, the Decision dated January 27,

2006 and Resolution dated June 26, 2006 of the Court of Tax Appeals
en bane in CTA EB Case No. 24, which affirmed the Decision dated
November 24, 2003 and Resolution dated August 10, 2004 of the Court
of Tax Appeals Division in CTA Case No. 6170,
are REVERSED and SET ASIDE. The Petition for Review of Silicon
Philippines, Inc. seeking tax credit/refund of the input Value-Added Tax
attributable to its zero-rated sales and on its purchases of capital goods
for the Third Quarter of 1998, docketed as CTA Case No. 61 70 before
the Court of Tax Appeals Division, is DISMISSED for being filed out of
time.

SO ORDERED.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

WE CONCUR:

MARIA LOURDES P. A. SERENO

Chief Justice
Chairperson

LUCAS P. BERSAMIN JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court's
Division.

MARIA LOURDES P.A. SERENO

Chief Justice

Documentary Stamp Tax
7. CIR v. Filinvest Dev't Corp., G.R. No. 163653, 19 July 2011
https://lawphil.net/judjuris/juri2011/jul2011/gr_163653_2011.html
G.R. No. 163653               July 19, 2011
CIR, Petitioner,
vs. FILINVEST DEVELOPMENT CORPORATION, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 167689
CIR, Petitioner,
vs. FILINVEST DEVELOPMENT CORPORATION, Respondent.
PEREZ, J.:
FACTS: Filinvest Development Corp (FDC) is the OWNER of
outstanding shares of both Filinvest Alabang, Inc. (FAI) and Filinvest
Land, Inc. (FLI) with 80% and 67.42%, respectively.
In 1996, FilDev and Alabang entered into a Deed of Exchange with
LAND where both TRANSFERRED parcels of LAND IN EXCHANGE for
SHARES of STOCKS of FLI.
As a result, the ownership structure of LAND changed
whereby FilDev’s ownership decreased from 67.42% to
61.03% meanwhile Alabang now owned 9.96% of shares of
Land.
FLI then requested from the BIR a ruling to the effect that no gain or loss
should be recognized on said transfer and BIR issued Ruling No. S-34-
046-97 finding the exchange falling within Sec. 34 (c) (2) (now Sec. 40
(c)(2)) of the NIRC. Furthermore, FDC extended advances in favor of its
affiliates during 1996 and 1997 duly evidenced by instructional letters as
well as cash and journal vouchers. Moreover, FDC also entered into a
shareholder’s agreement with Reco-Herrera PTE ltd. (RHPL) for the
formation of a Singapore-based joint venture company called Filinvest
Asia Corp. (FAC). The equity participation of FDC was pegged at 60%
subscribing to P500.7M worth of shares of FAC.
On Jan 3, 2000, FDC received assessment notices for
deficiency income tax and deficiency stamp taxes. The foregoing
JDTAX2 | DONOR’S TAX |Cases | 13
deficiency taxes were assessed on the taxable gain realized by FDC on
the taxable gain supposedly realized by FDC from the Deed of
Exchange it executed with FAI and FLI, on the dilution resulting from the
shareholder’s agreement FDC executed with RHPL and with the interest
rate and documentary stamp taxes imposable on the advances
executed by FDC. FAI also received similar assessment on deficiency
income tax relating to the deed of exchange.
Both FDC and FAI protested and after having failed to act on their
protest they docketed their case with the CTA. They raised the issue
that pursuant to BIR Ruling No. S-34-046-97, no taxable gain should
have been assessed from the deed of exchange and that the BIR cannot
impute theoretical interests on the cash advances of FDC in the
absence of stipulation and that not being promissory notes such are not
subject to documentary stamp taxes.
CIR, for its part, raised that the said transfer of property resulted to a
diminution of ownership by FDC of FLI rather than gaining further control
and as such should not be tax free.
Furthermore, CIR invoked Sec. 43 (now Sec. 50) of NIRC as
implemented by RR No. 2, the CIR is given the "the power to allocate,
distribute or apportion income or deductions between or among such
organizations, trades or business in order to prevent evasion of taxes ."
Also the CIR justified the imposition of documentary stamp taxes on the
instructional letters citing Sec. 180 of the NIRC and RR No. 9-94 which
provide that loan transactions are subject to tax irrespective of whether
or not they are evidenced by a formal agreement or by mere office
memo. Lastly, it reiterated that there was dilution of its shares as a result
of its shareholder’s agreement with RHPL.
CTA decided in favor of FDC with the exception on the deficiency
income tax on the interest income from the income it supposedly
realized from the advances to its affiliates, the rest of the assessment
were cancelled. The CTA opined that CIR was justified in assessing
undeclared interests on the same cash advances pursuant to his
authority under Section 43 of the NIRC in order to forestall tax evasion.
Dissatisfied, FDC filed a petition for review with the Court of Appeals
claiming that the cash advances it extended to its affiliates were
INTEREST-FREE in the absence of express stipulation. Moreover, it
claimed that under Sec. 43 (now Sec. 50) the CIR’s authority does not
include the power to impute imaginary interests, directed only to
controlled corp and not to holding company and can be invoked only on
cases of understatement of taxable income or evident tax evasion. The
CA rendered a decision in favor of FDC cancelling said assessment.
The CIR filed a petition for review with the CA which subsequently
denied for lack of merit. The CA has the following conclusions:
1. The deed of exchange resulted in a combined control of
more than 51% of FLI , hance no taxable gain;
2. The instructional letters do not partake the nature of loan
agreements;
3. Although subsequently modified by BIR Ruling No. 108-99
to the effect that documentary stamp tax are now imposable
on interoffice memos, to give a retroactive application would
be prejudicial to the taxpayer.;
 JDTAX2 | DONOR’S TAX |Cases | 14

4. FDC’s alleged gain from the increase of its shareholding in taxpayer acted in bad faith. The principle of non-retroactivity of BIR
FAC are mere unrealized increase in capital unless converted rulings does not apply in favor of FDR because it is not the taxpayer who
thru sale are not taxable. in the first place, sought the said BIR ruling from the CIR.

Hence, this petition for review on certiorari.

ISSUE: (1) Whether or not FDC is liable for theoretical interest on said
advances extended by it to its affiliates. NO
(2) Whether or not FDC met all the requirements for non-recognition of
taxable gain under Sec. 34 (c) (2) (now Sec. 40 (C) (2) of the NIRC and
therefore, is not taxable. YES
(3) WON the letters of instructions or cash vouchers are deemed loan
agreements subject to documentary stamp tax. YES
4. NO. the CIR has no factual and legal basis in assessing income tax
on the increase in the value of FDC's shareholdings in FAC until the
same is actually sold at a profit. A mere increase or appreciation in the
value of said shares cannot be considered income for taxation purposes.
Besides, tax revenues should be strictly construed and that rulings of the
CTA should be accorded with respect and upheld by the Court absent
any reversible errors.

(4) WON the dilution as a result of increase of FDC’s shareholding in

FAC is taxable. NO

HELD:

1. NO. Sec. 43 (now Sec. 50) of the NIRC does not include the power to
impute theoretical interest to the CIR’s powers of distribution,
apportionment or allocation of gross income and deductions. There must
be proof of actual or probable receipt or realization by the controlled
taxpayer of the item of gross income sought to be distributed,
apportioned or allocated by the CIR. In the case at bar, records do not
show that there was evidence that the advances extended yielded
interests. Even if FDC deducted substantial interest expenses from its
gross income, there would still be no basis for the imputation of
theoretical interests on the subject advances. Under Art. 1956 of the
Civil Code, no interest shall be due unless it has been expressly
stipulated in writing. Moreover, taxes being burdens are not to be
presumed and that tax statutes must be construed strictly against the
government and liberally in favor of the taxpayer.

2. YES. It was admitted in the stipulation of facts that the following are
the requisites: (a) the transferee is a corporation; (b) the transferee
exchanges its shares of stock for property/ies of the transferor; (c) the
transfer is made by a person, acting alone or together with others, not
exceeding four persons; and, (d) as a result of the exchange the
transferor, alone or together with others, not exceeding four, gains
control of the transferee. Moreover, it is not taxable because the
exchange did not result to a decrease of the ownership of FDC in FLI
rather combining the interests of FDC and FAI result to 70.99% of FLI’s
outstanding shares. Since the term "control" is clearly defined as
"ownership of stocks in a corporation possessing at least fifty-one
percent (51%) of the total voting power of classes of stocks entitled to
one vote” then the said exchange clearly qualify as a tax-free
transaction. Therefore, both FDC and FAI cannot be held liable for
deficiency income tax on said transfer.

3. YES. The instructional letters as well as the journal and cash

vouchers evidencing the advances FDC extended to its affiliates in 1996
and 1997 qualified as loan agreements upon which documentary stamp
taxes may be imposed. apply them would be prejudicial to the
taxpayers. This rule does not apply: (a) where the taxpayer deliberately
misstates or omits material facts from his return or in any document
required of him by the Bureau of Internal Revenue; (b) where the facts
subsequently gathered by the Bureau of Internal Revenue are materially
different from the facts on which the ruling is based; or (c) where the
 JDTAX2 | DONOR’S TAX |Cases | 15

Tax remedies
8. CIR v. Pilipinas Shell Petroleum Corp./CIR v. Pilipinas Shell
Petroleum Corp. and Petron Corp., G.R. Nos. 197945 / 204119-20, 09
July 2018

ANDON NA SA TAX REMEDIES NA DOCX