CS GARMENT, INC., v.

COMMISSIONER OF INTERNAL REVENUE

G.R. No. 182399, March 12, 2014
SERENO, CJ:

Facts: Petitioner [CS Garment] is a domestic corporation duly organized and existing under and
by virtue of the laws of the Philippines with principal office at Road A, Cavite Ecozone, Rosario,
Cavite. On the other hand, respondent is the duly appointed Commissioner of Internal Revenue
of the Philippines authorized under law to perform the duties of said office, including, inter alia,
the power to assess taxpayers for [alleged] deficiency internal revenue tax liabilities and to act
upon administrative protests or requests for reconsideration/reinvestigation of such
assessments.

Petitioner [CS Garment] received from respondent [CIR] Letter of Authority, authorizing the
examination of petitioner’s books of accounts and other accounting records for all internal
revenue taxes covering the period January 1, 1998 to December 31, 1998. Thereafter received
five (5) formal demand letters with accompanying Assessment Notices from respondent to pay
the alleged deficiency VAT, Income, DST and withholding tax assessments for taxable year
1998 in the aggregate amount of P2,046,580.10; in return, within the 30-day period prescribed
under Section 228 of the Tax Code, as amended, petitioner filed a formal written protest with
the respondent assailing the above assessments and also additional documents in support of its
protest.

The CTA en banc affirmed the Decision and Resolution of the CTA Second Division. As regards
the first issue, the banc ruled that the CIR had duly apprised CS Garment of the factual and
legal bases for assessing the latter’s liability for deficiency income tax, as shown in the attached
Schedule of Discrepancies provided to petitioner; and in the subsequent reference of the CIR to
Rule XX, Section 2 of the Rules and Regulations of R.A. 7916

CS Garment filed the present Petition for Review assailing the Decision of the CTA en banc.
However, on 26 September 2008, while the instant case was pending before this Court,
petitioner filed a Manifestation and Motion stating that it had availed itself of the government’s
tax amnesty program under the 2007 Tax Amnesty Law. It thus prays that we take note of its
availment of the tax amnesty and confirm that it is entitled to all the immunities and privileges
under the law. It has submitted to this Court the following documents, which have allegedly
been filed with Equitable PCI Bank–Cavite EPZA Branch, a supposed authorized agent-bank of
the BIR: 1. Notice of Availment of Tax Amnesty under R.A. 9480, 2. Statement of Assets,
Liabilities, and Net worth (SALN), 3. Tax Amnesty Return (BIR Form No. 2116), 4. Tax Amnesty
Payment Form (Acceptance of Payment Form or BIR Form No. 0617), 5. Equitable PCI Bank’s
BIR Payment Form indicating that CS Garment deposited the amount of P250,000 to the
account of the Bureau of Treasury–BIR.

Issue: Whether or not CS Garment is already immune from paying the deficiency taxes stated
in the 1998 tax assessments of the CIR, as modified by the CTA.

Held: Yes, Considering the completion of the aforementioned requirements, we find that
petitioner has successfully availed itself of the tax amnesty benefits granted under the Tax
Amnesty Law. Therefore, we no longer see any need to further discuss the issue of the
deficiency tax assessments. CS Garment is now deemed to have been absolved of its
obligations and is already immune from the payment of taxes – including the assessed
deficiency in the payment of VAT, DST, and income tax as affirmed by the CTA en banc – as
well as of the additions thereto (e.g., interests and surcharges). Furthermore, the tax amnesty
benefits include immunity from "the appurtenant civil, criminal, or administrative penalties
under the NIRC of 1997, as amended, arising from the failure to pay any and all internal
revenue taxes for taxable year 2005 and prior years. “Tax amnesty refers to the
articulation of the absolute waiver by a sovereign of its right to collect taxes and
power to impose penalties on persons or entities guilty of violating a tax law. Tax
amnesty aims to grant a general reprieve to tax evaders who wish to come clean by
giving them an opportunity to straighten out their records. In 2007, Congress
enacted R.A. 9480, which granted a tax amnesty covering" all national internal revenue
taxes for the taxable year 2005 and prior years, with or without assessments duly issued
therefor, that have remained unpaid as of December 31, 2005." These national internal revenue
taxes include (a) income tax; (b) VAT; (c) estate tax; (d) excise tax; (e) donor’s tax; (f)
documentary stamp tax; (g) capital gains tax; and (h) other percentage taxes.

Amnesty taxpayers may immediately enjoy the privileges and immunities under the 2007 Tax
Amnesty Law, as soon as they fulfill the suspensive conditions imposed therein

While tax amnesty, similar to a tax exemption, must be construed strictly against the taxpayer
and liberally in favor of the taxing authority, it is also a well-settled doctrine that the rule-
making power of administrative agencies cannot be extended to amend or expand statutory
requirements or to embrace matters not originally encompassed by the law. 1âwphi1 

.
 COMMISSIONER OF INTERNAL REVENUE v. TEAM [PHILIPPINES] OPERATIONS
CORPORATION [formerly MIRANT (PHILS) OPERATIONS CORPORATION]
G.R. No. 179260, April 2, 2014
PEREZ, J.:

Facts: Petitioner is the duly appointed Commissioner of Internal Revenue, charged with the duty of
enforcing the provisions of the National Internal Revenue Code (NIRC), including the power to
decide and approve administrative claims for refund. Respondent, on the other hand, is a
corporation duly organized and existing under and virtue of the laws with its principal office at Bo.
Ibabang Pulo, Pagbilao Grande Island, Pagbilao, Quezon Province. It is primarily engaged in the
business of designing, constructing, erecting, assembling, commissioning, operating, maintaining,
rehabilitating and managing gas turbine and other power generating plants and related facilities for
the conversion into electricity of coal, distillate and other fuels provided by and under contract with
the Government of the Republic of the Philippines, or any subdivision, instrumentality or agency
thereof, or any government owned or controlled corporations or other entity engaged in the
development, supply or distribution of energy. Respondent is claiming for refund in the amount
of P69,562,412.00 representing unutilized tax credits for taxable period ending 31 December 2001.

Respondent filed with the BIR, a letter requesting for the refund or issuance of a tax credit
certificate corresponding to its reported unutilized creditable withholding taxes for taxable year 2001
in the amount ofP69,562,412.00. Thereafter, on 27 March 2003, respondent filed a Petition for
Review before the CTA, in order to toll the running of the two-year prescriptive period, thereafter
CTA granted and ordered petitioner to refund or issue a tax credit certificate in favor of the former
the entire amount which based its ruling on the numerous documentary evidence presented by
respondent during the proceedings, such as its Income Tax Returns (ITRs) for taxable years 2001
and 2002, various Certificates of Creditable Tax Withheld at Source for taxable year 2001 duly
issued to it by its withholding agents, and Report of the Commissioned Independent Certified Public
Accountant dated 15 March 2004, among others. The court a quo reasoned that respondent has
indeed established its entitlement to a refund/tax credit of its excess creditable withholding taxes in
compliance with the following basic requirements: (1) that the claim for refund (or issuance of a tax
credit certificate) was filed within the two-year prescriptive period prescribed under Section 204(C),
in relation to Section 229 of the NIRC of 1997, as amended; (2) that the fact of withholding is
established by a copy of a statement duly issued by the payor (withholding agent) to the payee,
showing the amount paid and the amount of tax withheld therefrom; and (3) that the income upon
which the taxes were withheld was included in the return of the recipient.

Subsequently, petitioner herein filed for reconsideration but was then denied, then appealed by filing
a Petition for Review pursuant to Section 18 of Republic Act (RA) No. 1125.

Issue: Whether or not respondent has established its entitlement for the refund or issuance of a tax
credit certificate in its favor the entire amount of P69,562,412.00 representing its unutilized tax
credits for taxable year ended 31 December 2001, pursuant to the applicable provisions of the NIRC
of 1997?

Held: Yes, In order to be entitled to a refund claim or issuance of a tax credit certificate
representing any excess or unutilized creditable withholding tax, it must be shown that the claimant
has complied with the essential basic conditions set forth under pertinent provisions of law and
existing jurisprudential declarations. In Banco Filipino Savings and Mortgage Bank v. Court of
Appeals, this Court had previously articulated that there are three essential conditions for the
grant of a claim for refund of creditable withholding income tax, to wit: (1) the claim is filed
with the Commissioner of Internal Revenue within the two-year period from the date of payment of
the tax; (2) it is shown on the return of the recipient that the income payment received was
declared as part of the gross income; and (3) the fact of withholding is established by a copy of a
statement duly issued by the payor to the payee showing the amount paid and the amount of the
tax withheld therefrom.

All told, respondent complied with all the legal requirements and it is entitled, as it opted, to a
refund of its excess creditable withholding tax for the taxable year 2001 in the amount
of P69,562,412.00.

.
 DR. JOEL C. MENDEZ v. PEOPLE OF THE PHILIPPINES and COURT OF TAX APPEALS
G.R. No. 179962, June 11, 2014
BRION, J.:

Facts: The Bureau of Internal Revenue (BIR) filed a complaint-affidavit  with the Department of
4

Justice against the petitioner. The BIR alleged that the petitioner had been operating as a single
proprietor doing business and/or exercising his profession for taxable years 2001 to 2003, alleged
that petitioner failed to file his income tax returns for taxable years 2001 to 2003 and, consequently
evaded his obligation to pay the correct amount of taxes due the government.

In his defense, the petitioner admitted that he has been operating as a single proprietor under these
trade names in Quezon City, Makati, Dagupan and San Fernando. However, he countered that he
did not file his income tax returns in these places because his business establishments were
registered only in 2003 at the earliest; thus, these business establishments were not yet in existence
at the time of his alleged failure to file his income tax return.

After a preliminary investigation, State Prosecutor Juan Pedro Navera found probable cause against
petitioner for non-filing of income tax returns for taxable years 2001 and 2002 and for failure to
supply correct and accurate information as to his true income for taxable year 2003, in violation of
the National Internal Revenue Code. Under the National Internal Revenue Code (NIRC), a resident
citizen who is engaged in the practice of a profession within the Philippines is obligated to file in
duplicate an income tax return on his income from all sources, regardless of the amount of his gross
income.

Issue: Whether or not the petitioner fails to file his income tax return?

Held: Yes, In complying with this obligation, this type of taxpayer ought to keep only two basic
things in mind: first is where to file the return; and second is when to file the return. Under Section
51 B of the NIRC, the return should "be filed with an authorized agent bank, Revenue District
Officer, Collection Agent or duly authorized Treasurer of the city or municipality in which such
person has his legal residence or principal place of business in the Philippines."

On the other hand, under Section 51 C of the NIRC, the same taxpayer is required to file his income
tax return on or before the fifteenth (15th) day of April of each year covering income for the
preceding taxable year. Failure to comply with this requirement would result in a violation of Section
255 of the NIRC.

Since the petitioner operates as a sole proprietor from taxable years 2001 to 2003, the petitioner
should have filed a consolidated return in his principal place of business, regardless of the number
and location of his other branches. Consequently, we cannot but agree with the CTA that the
change and/or addition of the branches of the petitioner’s operation in the information does not
constitute substantial amendment because it does not change the prosecution’s theory that the
petitioner failed to file his income tax return.

Petitioner failed to file his income tax return for the taxable year 2001 did not change. The
prosecution’s cause for filing an information remained the same as the cause in the original and in
the amended information. For emphasis, the prosecution’s evidence during the preliminary
investigation of the case shows that petitioner did not file his income tax return in his place of legal
residence or principal place of business in Quezon City or with the Commissioner.
COMMISSIONER OF INTERNAL REVENUE v. MANILA ELECTRIC COMPANY (MERALCO)
G.R. No. 181459, June 9, 2014
PERALTA, J.:

Facts: Respondent Manila Electric Company (MERALCO) obtained a loan from Norddeutsche
Landesbank Girozentrale (NORD/LB) Singapore Branch in the amount of USD120,000,000.00 with
ING Barings South East Asia Limited (ING Barings) as the Arranger. On September 4, 2000,
respondent MERALCO executed another loan agreement with NORD/LB Singapore Branch for a loan
facility in the amount of USD100,000,000.00 with Citicorp International Limited as Agent.

Under the foregoing loan agreements, the income received by NORD/LB, by way of respondent
MERALCO’s interest payments, shall be paid in full without deductions, as respondent MERALCO
shall bear the obligation of paying/remitting to the BIR the corresponding ten percent (10%) final
withholding tax. Pursuant thereto, respondent MERALCO paid/remitted to the Bureau of Internal
Revenue (BIR) the said withholding tax on its interest payments to NORD/LB Singapore Branch,
covering the period from January 1999 to September 2003 in the aggregate sum
of P264,120,181.44.

However, sometime in 2001, respondent MERALCO discovered that NORD/LB Singapore Branch is a
foreign government-owned financing institution of Germany. Respondent filed a request for a BIR
Ruling with Petitioner CIR with regard to the tax exempt status of NORD/LB Singapore Branch, in
accordance with Section 32(B)(7)(a) of the 1997 National Internal Revenue Code (Tax Code), as
amended. BIR issued a ruling that NORD/LB Singapore Branch are exempt from the ten percent
(10%) final withholding tax, since it is a financing institution owned and controlled by the foreign
government of Germany. Relying on the aforesaid BIR Ruling, respondent filed with petitioner a
claim for tax refund or issuance of tax credit certificate in the aggregate amount
of P264,120,181.44, representing the erroneously paid or overpaid final withholding tax on interest
payments made to NORD/LB but it was denied on the basis that it had already prescribed within the
period of two (2) years from the date of payment of tax to file a claim for refund before the BIR.

Issue: Whether or not respondent MERALCO is entitled to a tax refund/credit relative to its
payment of final withholding taxes on interest payments made to NORD/LB from January 1999 to
September 2003?

Held: No, In any case, no such suit or proceeding shall be filed after the expiration of two (2) years
from the date of payment of the tax or penalty regardless of any supervening cause that may arise
after payment: Provided, however, That the Commissioner may, even without a written claim
therefor, refund or credit any tax, where on the face of the return upon which payment was made,
such payment appears clearly to have been erroneously paid (Sec. 229, NIRC). As can be gleaned
from the foregoing, the prescriptive period provided is mandatory regardless of any supervening
cause that may arise after payment. It should be pointed out further that while the prescriptive
period of two (2) years commences to run from the time that the refund is ascertained, the
propriety thereof is determined by law (in this case, from the date of payment of tax), and not upon
the discovery by the taxpayer of the erroneous or excessive payment of taxes. Tax refunds are
based on the general premise that taxes have either been erroneously or excessively paid. Though
the Tax Code recognizes the right of taxpayers to request the return of such excess/erroneous
payments from the government, they must do so within a prescribed period. Further, "a taxpayer
must prove not only his entitlement to a refund, but also his compliance with the
procedural due process as non-observance of the prescriptive periods within which to
file the administrative and the judicial claims would result in the denial of his claim."
COMMISSIONER OF INTERNAL REVENUE v. MINDANAO II GEOTHERMAL PARTNERSHIP
G.R. No. 189440, June 18, 2014
VILLARAMA, JR., J.:

Facts: Respondent Mindanao II Geothermal Partnership filed with the Bureau of Internal Revenue
(BIR) its Quarterly VAT Returns for the four quarters of taxable year 2002. The respondent declared
zero-rated sales in the amount of P769,384,702.23 and input VAT of P7,427,965.37 on domestic
purchases of goods and services worth P74,279,653.78. Respondent filed with BIR its Quarterly VAT
Returns for the four quarters of taxable year 2002. The respondent declared zero-rated sales in the
amount of P769,384,702.23 and input VAT of P7,427,965.37 on domestic purchases of goods and
services worth P74,279,653.78.

Subsequently, respondents claim for refund or issuance of a TCC of its unutilized input VAT
attributable to its zero-rated sales for the taxable year 2002 in the amount of P7,427,965.37.
However, the petitioner failed to act on the claim. Thus, on March 31, 2004, the respondent filed a
Petition for Review with the CTA First Division. Petitioner, herein, issued to respondent in the
amount of P6,251,065.74. The issuance of this TCC belatedly and partially granted the claim of the
respondent. For this reason, the respondent filed a Motion for Leave of Court to File Attached
Supplemental Petition for Review which was granted by the CTA First Division. Upon petition for
review filed before the CTA which partially grant their claim, the respondent (CIR) is hereby ordered
to issue a tax credit certificate in favor of petitioner in the reduced amount of P689,313.37,
representing unutilized input VAT incurred by petitioner in connection with its zero-rated sales for
taxable year 2002. Petitioner (CIR) moved to reconsider the grant given, which was denied. The
CTA En Banc held, Record shows that petitioner CIR’s argument that respondent Mindanao II failed
to file its judicial claim, within 30 days after the lapse of the 120-day period provided under Section
112 (D) of the NIRC of 1997, as amended, was raised for the first time by petitioner CIR in its
present Motion for Reconsideration before this Court En Banc. Said issue was never raised in
petitioner CIR’s Answer and Amended Answer filed before the Court in Division. Neither was it raised
by petitioner CIR in his present Petition for Review before this Court En Banc.

Issue: Whether or not the court of tax appeals en banc decided a question of substance which is
not in accord with the law and prevailing jurisprudence that CIR is estopped of its judicial claim?

Held: In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. , this Court
clarified the mandatory and jurisdictional nature of the 120+30 day period provided
under Section 112(C) of the NIRC. We clarified that the two-year prescriptive period under
Section 112(A)  of the NIRC refers only to the filing of an administrative claim with the BIR.
19

Meanwhile, the judicial claim under Section 112(C) of the NIRC must be filed within a mandatory
and jurisdictional period of 30 days from the date of receipt of the decision denying the claim, or
within 30 days from the expiration of the 120-day period for deciding the claim. Thus, we mandated
strict compliance with this"120+30" day period:

Section 112(D) [now Section 112(C)] of the NIRC clearly provides that the CIR has "120 days, from
the date of the submission of the complete documents in support of the application [for tax
refund/credit]," within which to grant or deny the claim. In case of full or partial denial by the CIR,
the taxpayer’s recourse is to file an appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for
tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30
days. In the present case, the respondent filed its administrative claim on May 30, 2003.

The petitioner CIR therefore had only until September 27, 2003 to decide the claim, and following
the petitioner’s inaction, the respondent had until October 27, 2003, the last day of the 30-day
period to file its judicial claim. However, the respondent filed its judicial claim with the CTA only on
March 31, 2004 or 155 days late. Clearly, the respondent's judicial claim has prescribed and the CTA
did not acquire jurisdiction over the claim. Well to remember, the right to appeal to the CTA from a
decision or "deemed a denial" decision of the CIR is merely a statutory privilege, not a constitutional
right. The exercise of such statutory privilege requires strict compliance with the conditions attached
by the statute for its exercise.  The respondent failed to comply with the statutory conditions and
22

must thus bear the consequences. Further, well settled is the rule that tax refunds or credits, just
like tax exemptions, are strictly construed against the taxpayer.  The burden is on the taxpayer to
23

show that he has strictly complied with the conditions for the grant of the tax refund or credit.

Wherefore, the petition for review on certiorari is granted. The decision dated May 29, 2009 and
Resolution dated September 4, 2009 of the CTA en banc are set aside. CTA case no. 6909 is
dismissed for being filed out of time.

Consequently, the amount of 116,251,065.74 previously issued to MINDANAO II GEOTHERMAL

PARTNERSHIP is hereby revoked/ cancelled.