Prof. Dabu - Review Notes in Taxation

REVIEW NOTES IN TAXATION LAW- 2022
(BAR BULLETIN NO. 31.S.2022)

Prepared by: Atty. Carmencita Caluntad-Dabu
PART I – BASIC PRINCIPLES – under the Constitution
1. Limitations in the exercise of the power of taxation:

a. INHERENT LIMITATIONS – (PLITE)
P - Public purpose – Public funds shall only be appropriated for public purpose.
L - Legislative function-
Gen. Rule: The power of taxation can only be exercised by the legislative
branch of the government.
Exception:
a. Administrative and collection aspect of taxation may be delegated
b. The President of the Philippines under the Constitution has the power
to fix tariff rates and wharfage dues.
c. Local government units have the power to raise revenues, subject to
the limitations set forth by Congress (Art. 5, Sec. 10, Const.)
Non-Delegation of The Power to Tax:

Abacada Guro Party List vs. Ermita, 469 SCRA 1 –
While the power to tax cannot be delegated to executive agencies, details as
to the enforcement and administration of an exercise of such power may be left to
them, including the power to determine the existence of facts on which its operation
depends, the rationale being that the preliminary ascertainment of facts as basis for
the enactment of legislation is not of itself a legislative function but simply ancillary
to legislation.
I - international comity – Treaties, international agreements and covenants

where the Philippines is a signatory and international laws shall form part of
our tax laws.
T- Territoriality – The objects and subjects of taxation located within the territorial
jurisdiction of the taxing authority are subject to its taxing power.
E- Exemption of the government, its political subdivisions, government
instrumentalities from taxation. This applies only to real property tax.
Exception from the above rule:

Beneficial user principle – When the beneficial use of the above properties
are granted for consideration or otherwise to a taxable person/entity, such property
is not longer exempt from the real property tax. The beneficial owner shall be liable
for the said tax.
b. CONSTITUTIONAL LIMITATIONS – are constitutional provisions relating

to or affecting the exercise of the power to tax.
Question: What is the significance of the constitutional provisions in the exercise

of the power to tax?
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Review Notes in Taxation Law
Prof. Carmencita C. Dabu
Suggested Answer: They are limitations in the exercise of the power to tax. They
are not grants of the power to tax, taxation being an attribute of
sovereignty.
Important Constitutional Provisions:
1. Due Process clause - In the exercise of the power of taxation,the

requirements of due process - substantive and procedural - apply not only to
the national legislature but also to the legislative bodies of local government
units or the local Sanggunians.
Question: Is public hearing a requirement for the validity of a tax law?
Suggested Answer: The national legislature (Congress) has the discretion

whether or not to conduct public hearings before the enactment of tax laws.
However, prior to the enactment of tax ordinances and revenue measures,
the local legislative units are required to conduct public hearings
2. Equal protection clause – taxpayers of equal footing should be treated

alike, both as to privileges conferred and liabilities imposed.
Ormoc Sugar Central vs. CIR, 22 SCRA 603:

If the ordinance is intended to apply to a specific taxpayer and to no one else
regardless of whether or not other entities belonging to the same class are
established in the future, it is a violation of the equal protection clause; but if it is to
apply also to similar entities, which may be established in the future, then the tax
ordinance is valid even if in the meantime, it applies to only one entity or taxpayer
for the simple reason that there is so far only one member of the class subject to the
tax measure .
CREBA vs. The Hon. Executive Secretary Alberto Romulo,

G.R. NO. 160756, March 9, 2010:
The taxing power has authority to make reasonable classification for purposes of
taxation. Inequalities resulting from a singling out of one particular class for taxation or
exemption do not infringe any constitutional limitation. The real estate industry is, by itself,
a class and can be validly treated differently from other business enterprises.
3. The rule of taxation shall be uniform and equitable. Congress shall

evolve a progressive system of taxation. (Art. VI, Sec. 28, par. 1)
This requires that all subjects or objects of taxation, similarly situated or

belonging to the same class shall be treated alike or put on equal footing both as to
privileges and liabilities.
Requisites of a valid classification:

a) Standards used must be reasonable and substantial
b) Classification must germane to achieve the purpose of the legislation
c) It must apply to present and future conditions;
d) applies equally to all those belonging to the same class
4. Tax exemption laws requires concurrence of a majority of all the

members of Congress. (Art. VI, Sec. 28, par. 4)
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The above provision requires the concurrence of a majority of all the members of
the Congress, not majority of the attendees constituting a quorum.
5. Power of the President to veto any item in an appropriation, review or

tariff bill (Art. VI, Sec. 27, second par.)
6. The President has the power to fix tariff rates. (Art. VI, Sec. 28, parr. 2)
Question: May the delegated power of the President to fix tariff rates be exercised
by his department secretaries?
Suggested Answer:
The power delegated to the President under Sec.28 (2), Article VI may be
exercised in accordance with legislative sanction, by the alter egos of the
President, such as department secretaries – for purposes of the President’s
exercise of power to impose tariffs. Generally, the Sec. of Finance acts as his alter
ego. The President or the alter egos may be properly deemed as agents of
Congress to perform an act that inherently belongs as a matter of right to Congress.
(Southern Cross Cement Corp. Vs. Cement Manufacturers Association of the
Philippines, 465 SCRA 532)-
7. Exemption of real properties which are actually, directly and

exclusively used for charitable, religious or educational purposes- (Art.
VI, Sec. 28 (3),
a) The exemption applies only to real property taxes.

b) Exclusively” means “primarily not solely.
c) Actually and directly – refers to the use of the property not the ownership.
Thus, even if the land is owned by a religious entity, if the same is idle, or
used for other purposes, then it is not exempt from the real property tax.
Question: May Congress enact a law withdrawing a tax exemption?
Suggested Answer:
Flowing from the basic precept of constitutional law that no law is irreparable,
Congress, in the legitimate exercise of its lawmaking powers, can enact a law
withdrawing a tax exemption. (Republic vs. Caguiao, 536 SCRA 193).
Contractual Tax Exemption is agreed in contracts lawfully entered into by the

government and the taxpayer under enabling laws; not to be construed with tax
exemption under the franchise.
Tax exemption under a franchise is not a contract; hence, not within the purview
of the infringement clause of the constitution.
IMPORTANT DOCTRINES IN TAXATION:

1. TAXES ARE IMPRESCRIPTIBLE. - unless otherwise provided by the law
itself, taxes do not prescribe.
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Question: If taxes are imprescriptible, what is the signification of the statute of

limitations on the assessment and collection of taxes?
Suggested Answer: To safeguard taxpayers from any unreasonable examination

or investigation or assessment, our tax law provides statute of limitations on the
collection and enforcement of taxes. If there is no fixed period within which the
government can assess and collect taxes, then taxpayers would not have peace of
mind since at any time tax officials can collect taxes.
2. DOUBLE TAXATION- not being forbidden by our Constitution, it is not a

valid defense against the validity of a tax measure.
International Juridical Double Taxation – imposition of comparable taxes in two

or more states on the same taxpayer in respect of the same subject matter and for
identical periods. (CIR vs. SC Johnson and Son, Inc.. G.R. No. 127105, 25 June
1999, 309 SCRA 87)
3. POWER OF TAXATION AS AN IMPLEMENT OF POLICE POWER AND

EMINENT DOMAIN-
Taxation is no longer envisioned as a measure merely to raise revenue to support
the existence of the government. Taxes may be levied with a regulatory purpose to
provide means for the rehabilitation and stabilization of a threatened industry which
is affected with public interest as to be within the police power of the State.
(Planters Committee vs. Arroyo, G.R. No. 79310, 14 July 1989; Caltex Phil. Inc.
Vs. COA, G.R. No. 92385, 8 May 1992; CIR vs. Central Luzon Drug Corporation,
456 SCRA 414)
4. TAXPAYER’S SUIT – the case directly involves the illegal disbursement of public
funds derived from taxation.
Asia Pacific Planters vs. City of Urdaneta, 566 SCRA 219 --- A city acquires
ownership of the money loaned to it, making the money public funds.
Jumamil vs. Café, 470 SCRA 475 – A taxpayer need not be a party to the
contract to challenge its validity. Parties suing as taxpayer must prove
sufficient interest in preventing illegal expenditure of money raised by
taxation.
5. ESTOPPEL -
GENERAL RULE: The government is not estopped by the mistakes or errors of
its agents, erroneous application and enforcement of law by public officers do
not bar the subsequent correct application of statutes. (E. Rodriguez, Inc. vs.
Collector, L-23041, July 31, 1969; CIR vs. Manila Bankers Life Ins. Co., G.R.
No. 169103. March 16, 2011)
EXCEPTION: In the interest of justice and fair play, as when injustice

will result to the taxpayer.
6. INJUNCTION:
a. On internal revenue taxes:
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General Rule: The NIRC provides that Injunction does not lie against the
government in the enforcement and collection of internal revenue taxes.
Regular courts cannot issue injunction, because of the Lifeblood doctrine. The NIRC
provides that there shall be no delay in the collection and enforcement of internal
revenue taxes.
Exception: The Court of Tax Appeals may issue Injunction in the exercise of its
appellate jurisdiction, provided the taxpayer will suffer irreparable injury; and he
must comply with Rule 58 of the Rules of Court (posting of a bond)
b. On local and real property taxes:
The LGC does not contain the same provision. Therefore, regular courts may issue
injunction in the collection of local and real property taxes provided, taxpayer will
suffer irreparable injury and comply with Rule 58.
PART II - INCOME TAXATION

A. POWER AND AUTHORITY OF COMMISSIONER
Question: May the Commissioner delegate his powers under the Tax Code?
Suggested Answer: Yes, except the following:

a) to recommend rules and regulations to the Sec. of Finance
b) to issue rulings of first impression or revoke or revise any existing ruling
c) to compromise or abate tax liabilities: however, assessments made by regional
offices where the basic deficiency tax due is P500,000 or less and minor criminal
offenses – may be delegated to the Regional Evaluation Board
d) to assign or reassign internal revenue officers to establishments where
articles subject to excise tax are produced or kept.
Question: How will you describe the income tax situs of the Philippines?
Suggested Answer: The income tax situs of the Philippines is comprehensive

since we have practically employed/adopted all the possible criteria in imposing tax
on income: a) nationality of taxpayer; b) residence of taxpayer; c) source of
income.
B. RECOGNITION OF INCOME
Constructive receipt of income is recognized (Sec. 51, RR-2)

-provided: i) income is credited or set aside for the taxpayer; or
ii) income can be withdrawn by the taxpayer during the taxable year.
Requisites for income to be taxable:

(1) there is income, gain or profit;
(2) the income, gain or profit is received or realized during the taxable year; and,
(3) The income, gain or profit is not exempt from income tax.
Tests to determine whether income is earned for tax purposes:
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1. REALIZATION/SEVERANCE TEST – There is no taxable income until there

is a separation from capital of something of exchangeable value, thereby
supplying the realization or transmutation which would result in the receipt of
income.
Revenue is generally recognized when the following conditions are met:

(1) the earning process is complete or virtually complete; and,
(2) an exchange has taken place.
This principle requires that revenue must be earned before it is recorded. The fact
of recognition is not the actual receipt of certain income; but the right to receive
which must be unconditional
2. ECONOMIC BENEFIT TEST – Any economic benefit to the employee that

increases his net worth, whatever may have been the mode by which it is
effected, is taxable.
3. CLAIM OF RIGHT DOCTRINE – a taxable gain is conditioned upon the

presence of a claim of right to the alleged gain and the absence of a definite
unconditional obligation to return or repay that which would otherwise
constitute a gain.
C. ELEVEN (11) CATEGORIES OF INCOME –SEC. 32 (A)
a. COMPENSATION INCOME – remuneration for services rendered on account of

employer-employee relationship; whatever form- cash or in kind. (RR-2-
98;)
1) Compensation income earners:

Taxable income is - gross compensation income less non-taxable income/benefits:
(RR-8-2018 dated Jan. 25, 2018)
Non-taxable income/benefits:
1) 13th month pay and others not exceeding Php90,000.00;

2) de minimis benefits
3) employee’s share in the SSS, GSIS, PHIC, PAG-IBIG contributions
and union dues.
2. Minimum wage earners (MWE) – worker in the private sector who are paid
the statutory minimum wage or to an employee in the public sector with
compensation income of not more than the statutory minimum wage in the
non-agricultural sector where he is assigned.
Tax- exempt income/benefits of MWE:

a) compensation income (Statutory Minimum Wage);
b) holiday pay; overtime pay, hazard pay; night differential pay
c) de minimis benefit not exceeding the amount fixed by law
d) 13th month pay and other benefits not exceeding P90,000.00
Taxable income of MWE:

a) other income received as commissions or honoraria
b) fringe benefits, other taxable income in excess of P90,000.00
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c) Income from trade, business or practice of profession
De minimis benefits not exceeding the amount fixed by law:

a) exempt from income tax and withholding tax on compensation income
of both managerial and rank and file employees:
b) not subject to fringe benefit tax if granted to managerial/supervisory
employee
Fringe Benefits – (Sec. 33) –

benefits granted to managerial or supervisory employee
Tax base – grossed up monetary value of benefit
Tax Rate - 35% - final tax; ( effective Jan 2018-TRAIN LAW)
withheld at source by the employer
Tax-exempt Fringe Benefit granted to managerial/supervisory employee:
a) benefit is required by the nature of, or necessary to the trade,

business or profession of the employer; or
b) benefit is for the convenience of the employer
c) authorized and exempted by special laws;
d) contributions of the employer in the retirement, insurance
and hospitalization benefit of employees
e) benefit given to rank and file whether under CBA or not;
f) de minimis benefits as defined under RR-10-2004
b. INCOME FROM TRADE, BUSINESS OR PRACTICE OF PROFESSION
E. COMPUTATION OF THE INCOME TAX: (RR-8-2018 dtd Jan. 25, 2018)

A. INDIVIDUAL CITIZENS AND RESIDENT ALIEN:
Self-Employed Individual – kinds of income:

a) professional income - income from practice of profession
b) business income – from trade or business
c) investment income – income from investment
a) Self-employed earning purely income from business or profession:
1. gross sales/receipts does not exceed VAT Threshold of P3M – may avail:
a) graduated rate; or
b) 8% on gross sales/receipts in excess of Php250,000;
provided he signified his intention to avail of this rate and gross
receipts does not exceed Vat threshold of P3M.
2. Election is irrevocable for the taxable year.
3. Option of 8% Income Tax Rate Not Available to:
a. Vat registered taxpayer regardless of gross sales/receipts;
b. Taxpayer subject to other percentage tax under Title V of the Tax Code;
c. Partners in General Professional Partnership on their distributive share;
d. Gross Income exceeds the Vat Threshold of Php3M.
Question: What if the taxpayer opted to avail of the 8% rate, but at the end of the
taxable year his gross sales/receipts and other income exceeded the P3M VAT
Threshold, how will his income be computed.? What will happen to the payments he
made for the 1st to 3rd quarters of the year at the rate of 8%?
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Suggested Answer: His total income, including his income for the 1st to 3rd
quarters shall be computed based on the graduated rate. The income payments he
made at the rate of 8% for the 1st to 3rd quarters shall be deducted from the ttotal
income tax due for the said taxable year.
b. Individuals Earning Mixed Income –

---- compensation income and from self-employment (business or practice
of profession
Computation of income tax:

a. compute compensation income less P250,000.00 - use the graduated rate;
b. compute the self-employment income –
(i) not exceed VAT Threshold of Php3M - option to avail of:8% income tax rate
or graduated rate (plus percentage tax under Sec. 116)
(ii) exceeds Php3M Vat Threshold –graduated rate
c. The P250,000.00 non-taxable amount can only be availed once;
c. INCOME FROM DEALINGS IN PROPERTY
Rules on Gain or Loss:
a. General Rule: Upon the sale or exchange of property, the entire amount of the
gain or loss, as the case may be, shall be recognized.
Gain is taxable and loss is deductible. [Sec. 40 (C)(3)]
Exception: No gain or loss shall be recognized in tax free exchanges.
b. Presumptive gain – the law declares that when one sells his real property
classified as capital asset, there is a gain derived there from, any cost will not be
recognized, any loss will not be recognized.
d. Capital Gains on real property located in the Phils.

Sale or exchange by citizens and aliens – include other dispositions of real
property pacto de retro sale, conditional sales (include those made by estates and
trusts)
*** capital assets – 6% capital gains tax – higher of –(Selling Price; Zonal Vslue
Or Fair Market Value
d. Interest income – Tax -20% final tax –citizens and NRA-ETB
Note: If interest income is derived from sources outside the Phi. – not passive
income; Included in the gross income subject to regular income tax.
e. Dividend income – passive income – 10% final tax

**** not passive income – included in the computation of the gross income.
f. Rental Income– from property located in the Phil.; of from any

Interest in property –included in the gross income;
g. Royalty – not from sources within the Phil. – final tax of 20%
e. Annuities and proceeds from life insurance or other types of insurance

**** annuities – which are not exempt from tax –included in the computation
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of gross; but if it fails to the requirement of tax-exempt

annuity, included in the gross income;
f. Prizes and Winnings –included in the computation of gross income if:

a) not passive income ; and
b) not exempt as exclusions (Sec. 32(B)(7)(c) and (d)
Exempt – a) not over P10,000

b) recognition prize, provided:
i) recipient was selected w/o any action on his part to enter
the contest or proceeding; and
ii) not required to render future services as a requirement
c) if granted to athletes –sanctioned by national sports association
TRAIN LAW – PCSO and Lotto winnings in excess of P10,000 –20% FIT
g. Pension: forms part of gross income if not exempt
Terminal leave pay- (commutable) converted to cash-

** government employee – given at the time of retirement – exempt.
EO# 291 – if given annually exempt
*** private sector - if paid upon retirement – exempt
- if given annually: sick leave – taxable
vacation leave- 10 days exempt; excess taxable
h. Partner’s share from the net income of Gen. Professional Partnership
1) GPP – exempt; partners are taxable on their distributive share from the
Income of the GPP
- may avail of itemized deductions or Optional Standard DedUction (OSD)
but if GPP availed of itemized or OSD – partner can no longer claim any
deduction on his distributive share from the GPP
C. ASSESSMENT AND COLLECTION OF INTERNAL REVENUE TAXES
I. Two Concepts of Assessment:
****a process of ascertaining the correct taxes payable by the taxpayer at a given
taxable year;
****a notice sent to the taxpayer informing him of his tax liabilities, penalties,
interests and charges, with a demand to pay on or before the date specified
therein.
II. Important Principles Governing Tax Assessment

1. Tax assessment is prima facie presumed correct and made in good faith.
2. It must be directed to the right party.
3. The revenue officer who will conduct the examination must be armed with a
valid Letter of Authority.
4. Tax assessment must state the facts and the law upon which it is based; and
must contain a demand to pay
5. The power to assess a taxpayer is discretionary on the part of CIR. Mandamus
will not lie against CIR to compel him to assess a taxpayer...
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III. Requisites of valid Letter of Authority:

- dated and signed by the CIR or his duly authorized representative:
- specify the taxable year. (“and prior years” not valid)
- state the name of authorized BIR Examiner
- period to assess has not expired
THE ASSESSMENT PROCESS:

a Filing of return – as regards self-assessing taxes (Ex. income tax)
The taxpayer computes his tax liability and pays the tax due thereon at time
the return is filed under the Pay-as-you-file system.
b. issuance of Letter of Authority (LOA)

LOA - the authority of a revenue officer assigned to perform
examination and assessment functions.
Question: Why is a LOA necessary before a revenue examiner can examine the
books of accounts of the taxpayer?
Suggested Answer:
The power to examine was not statutorily given to Rev. Officer; but to the
Commissioner of Internal Revenue (Sec. 6(A), NIRC), and for the Rev. Officer to
exercise such power, authority must be given by the CIR or his duly Authorized
Representative. (Nanox Phil, Inc. v. CIR –CTA EB No. 1629, April 15, 2019)
c. Issuance of Notice of Discrepancy (ND) - sent to the taxpayer to fully afford the
taxpayer an opportunity to present and explain his side on the discrepancies found.
(RR 22-2020). The time and date of the Discussion of Discrepancy shall be
indicated in the notice. The Discrepancy discussion shall not extend beyond thirty
(30) days from receipt of the ND. If the taxpayer disagrees with ND, he must
present documents to prove his position within the period said 30-day period.
Effect of non-appearance - deemed waiver to contest the discrepancy and
admits the discrepancy. The revenue officer, will indorse the issuance of a PAN.
d. issuance of Preliminary Assessment Notice (PAN) - taxpayer has 15 days to

file reply to PAN.
(i) after said period and no reply - issuance of Formal Letter of Demand and
Final Assessment Notice (FLD/FAN);
(ii) if taxpayer replies within 15 days- CIR has 15 days from receipt of said reply to
issue FLD/FAN;
FAN becomes FINAL AND EXECUTORY if not protested or disputed within 30 days
from receipt by the taxpayer. If disputed or protested timely, the FAN becomes a
DISPUTED ASSESSMENT which is appealable to the CTA
PAN VS. FAN

1. as a rule, issued before FAN 1. Issued with or without reply to PAN
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2. will not become final and 2. Final and executory if not disputed
executory or protested within 30 days from receipt
3. cannot be converted disputed 3. can be converted to disputed
assessment assessment if protested timely
4. not appealable to CTA 4. appealable to CTA
Grounds For Suspension of Statute of Limitations

1. taxpayer is out of the country
2. government is legally prevented to assess or collect
3. taxpayer files a motion for reinvestigation coupled with a valid waiver of the
statute of limitations
4. taxpayer cannot be located (except if he informs CIR of change of address)
5. warrant of distraint/levy was served although it did not materialize
REQUIREMENTS OF VALID WAIVER OF STATUTE OF LIMITATIONS: Under

RMO No. 14-2016 dated April 4, 2016-
1. waiver not necessarily be in the form prescribed by RMO 20-90 or RDAO 05-01;
2. executed before the expiration of the period to assess or to collect taxes;
3. signed by the taxpayer himself, his duly authorized representative, or by any of
the responsible officials for corporations
4. the expiry date of the period agreed upon to assess or collect the tax is
indicated.
5. need not specify the taxes to be assessed nor the amount thereof;
---except in cases of waiver for collection of taxes
6. taxpayer has the burden to ensure that the waiver is validly executed by its
authorized representative. (He cannot thereafter be invalidated on the ground that
the taxpayer’s representative who participated in the conduct of the audit is not
authorized to sign the waiver.)
7. notarization of the waiver – optional
8. can be accepted by the Commissioner’s authorized representative as prescribed
in existing regulations, the revenue district officer, or the group supervisor
designated in the Letter of Authority for the audit.
9. To be valid, there are only two dates that need to be present on the waiver:
(a) the date of execution, and
(b) the expiry date of the period the taxpayer waives the statute of limitations.
CIR V. NEXT MOBILE, GR 212825 Dec 7, 2015- A taxpayer who is in bad faith
cannot impugn the validity of the waiver.
QUESTION: HOW IS THE LAW ON STATUTE OF LIMITATIONS ON THE

ENFORCEMENT AND COLLECTION OF TAXES CONSTRUED?
BPI v. CIR, G.R. No. 139736, Oct. 17, 2005 (Case No. 5): In order to provide
even better protection to the taxpayer against unreasonable investigation, the Tax
Code of 1977, as amended, identifies specifically the circumstances when the
prescriptive periods for assessing and collecting taxes could be suspended or
interrupted. To give effect to the legislative intent, these provisions on the
statute of limitations on assessment and collection of taxes shall be
construed and applied liberally in favor of the taxpayer and strictly against the
Government.
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REMEDIES OF THE TAXPAYER:
1. PAYMENT OF THE TAX ON ITS DUE DATE

2. COMPROMISE – by the Commissioner
Grounds for compromise by Commissioner:

a) Doubtful validity of assessment
- applies to delinquent account or disputed assessment-
- minimum compromise rate – 40% of the basic tax assessed
b) Financial Incapacity of the taxpayer-
1) minimum compromise rate is 20% of the basic tax assessed for:
(i) Dissolved corporations
(ii) Non-operating companies for less than 3 years
(iii) Earnings deficit resulting to impairment in original capital by at least 50%
2) other taxpayers – 10% of the basic tax assessed
3. PROTEST THE FAN – The taxpayer must state in the protest the nature of the
protest whether by reconsideration or reinvestigation.
1. by way of reconsideration – no new issue or evidence is presented’

Procedure
a) file written protest within 30 days from receipt of FLD/FAN to CIR/AR
b) CIR/AR has 180 to decide;
c) If denied by Authorized Representative (AR); file motion for
reconsideration with CIR within 30 days from receipt of AR’s decision
2. by way of reinvestigation – new issue/evidence is presented to support the

the protest-
Procedure:
a) file written protest within 30 days from receipt of FDL/FAN with CIR
b) Submit documents –within 60 days from filing of protest
c) CIR/AR has 180 days from receipt of documents within which to decide
d) If denied by AR or no action after 180 days:
Options of TP- file Petition for Review with CTA – within 30 days;
or wait for decision of AR and file MRecon with CIR within 30 days
from receipt of AR’s decision.
If CIR denies MRecon or CIR denies protest- file petition for review with
CTA division within 30 days;
(Please read Lascona case, Case No. 1)
e) 15 days from receipt of CTA (division) decision- File MRecon

MRecon denied- file appeal to CTA En Banc; MR 15 days; if denied
File Petition for Review on Certiorari with SC
NOTE: If CIR denies the protest by reinvestigation; DON’T FILE A MOTION

FOR RECONSIDERATION to the CIR; file appeal by petition for review
to CTA.
D. TAX REFUND/ TAX CREDIT
Gen. Rule : written claim must be filed with CIR within 2 years from payment;
Exception - no need for written claim– if on the face of the return upon
which payment was made, payment appears to have been
erroneously made.
1. Kinds of Tax Refund –
a. Tax Refund under Sec. 112 – refund of un-utilized input VAT on
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zero rated or effectively zero rated transactions

b. Tax Refund under Sec. 229 – refund of other internal revenue taxes,
interests and penalties.
a. TAX REFUND UNDER SEC. 229:
The administrative and judicial claims must be filed within 2 years from payment or
collection. (Please read – Metrobank case, Case No. 2)
b. TAX REFUND OF UN-UTILIZED INPUT VAT UNDER SEC. 112:

1) Administrative claim – within 2 years from the close of the quarter when VAT was
paid; filed with CIR; CIR has 90 days to decide
2). Judicial claim - if administrative claim is denied, or no action after 90 days (as
amended by TRAIN Law -RA 10963)
- file claim with competent court. within 30 days from receipt of denial of’
by CIR; or 30 days from lapse of 90 days
NOTE a. The administrative claim must be filed within 2 years from the close
of the quarter when VAT was paid.
b. The judicial claim may be filed even after two years, provided it is filed
within 30 days from receipt of the decision or expiration of
the 90 day- period for CIR to decide on the admin. claim.
c. The 90 and 30 days periods are mandatory and jurisdictional.
(Pls. read: CE Luzon Geothermal and Western Mindanao cases--Case 3 & 4 )
How is a judicial action for collection of the tax initiated?

A judicial action for the collection of a tax may be initiated by:
1) filing of a complaint with the proper regular trial court; or
2) where the assessment is appealed to the CTA, by filing an answer to the
taxpayer's petition for review wherein payment of the tax is prayed for.
(Philippine National Oil Company v. Court of Appeals, G.R. No. 109976, 26 April
2005
D. DONOR’S TAX
a. Tax base – total gifts for the calendar year less P250,000 = tax rate 6%
b. Taxpayer – donor;; due date – 30 days from date of donation
c. Sec. 99 of the Tax Code was amended, and the provision on “stranger” was
deleted.
d. Methods used in computing donor’s tax: cumulative or split method
e. Transfer in contemplation of death - sale, transfer or exchange of property
made in the ordinary course of business
(bona fide, at arm’s length, and free from donative intent) considered made in
full and adequate consideration in money or money’s worth.
f. Exemption of certain gifts made by residents
a. to national gov’t or agency not conducted for profit, or LGU
b. in favor of educational or charitable, religious, cultural, NGO, provided not
more than 30% thereof is used for admin. Purposes
Exemption of gifts made by NRA – same as (a) and (b)
Tax credit – pay in foreign country – donor is citizen or resident
Valuation if gift personal property – FMV
Real property – zonal Or FMV (higher)
THE COURT OF TAX APPEALS

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1. RA 1125 – created the Court of Tax Appeals - a specialized court

- Then composed only of 3 justices – 1 Presiding Justice
2 Associate Justices
The 3 justices hear and decide cases as a collegiate body.
The decisions, resolutions were appealable to the Court of Appeals
No exclusive original jurisdiction on civil and criminal cases involving taxes
2. RA 9282 (April 23, 2004)- amended RA 1125

– expanding the jurisdiction of the CTA
- with exclusive original jurisdiction on civil and criminal cases where the
principal Tax due is P1.0 M or more.
3. RA 9503 (July 5, 2008) –

a. Structure -enlarged –9 justices – 1 Presiding justice ;
8 Associate Justices
b. Sit En Banc or in Division –
3 divisions – with 2 members each;
chairman – most senior justice
Pres. Justice – chairman of 1 division
c. quorum – division – 2 members
En Banc – 5 members
d. Same level as the Court of Appeals; decision appealable to Supreme Co
e. CTA Justices have the same benefits, privileges and qualifications and
rank as CA Justices.
4. JURISDICTION OF THE CTA

In Division:
A. Exclusive original or appellate jurisdiction to review by appeal---
1. Decisions or inaction of the CIR on :
a) disputed assessments,
b) refunds of internal revenue taxes, fees and charges and penalties,
c) other matters under the NIRC
d) other laws administered by the BIR
2. RTC Decisions on local tax cases
3. Decisions of the Com. Of Customs on:
a) customs duties, fees, etc.
b) seizure, forfeiture
c) other matters under the TCCP and other laws administered by BOC;
4. Decisions of Sec. of Finance on customs cases elevated for automatic review
under Sec. 215 of TCCP, as amended by CMTA.
5. Decisions. Of the Sec. of Trade on non-agri, and the Sec. of Agriculture on agri-
products involving dumping and countervailing duties (Sec. 301 and 302) and
safeguard measures under RA 8800;
Exclusive jurisdiction on criminal offenses–

1. Original –all criminal offenses for violations of the NIRC, TCCP and other
laws administered by the BIR and BOC –principal amount of taxes and fees
involved in P1.0 M or more;
2. Appellate – appeals from judgments, resolutions or orders of the RTC (in
their original jurisdiction) –
a) principal amount - less than P1 M
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b) no specific amount claimed;

A. Exclusive jurisdiction – tax collection cases
1. Original – tax collection cases - principal amount is P1.0 M or more;
2. Appellate – appeals from judgments, resolution or orders of the RTC in tax
collection cases originally decided by them;
EN BANC JURISDICTION.
1. Decisions, resolutions on MRecon or new trial of a division (CTA) in the
exercise of its appellate jurisdiction;
a. from administrative agencies—BIR, BOC, Dept. of Finance Dept. of Trade,
Dept. of Agriculture;
b. Decisions, resolutions of RTC:
i) local tax cases
ii) tax collection cases involving final and executory assessments
iii) Decision orders on MRecon/New trial in the exercise of its exclusive
original Jurisdiction;
2. Decision on MRecon/New Trial of the court in division in the exercise of its
exclusive original jurisdiction – NIRC, TCCP (CMTA)
3. CTA (division) decision in the exercise of its exclusive appellate jurisdiction in
criminal cases mentioned above.
4. Decision of RTC in the exercise of their appellate jurisdiction over criminal
cases mentioned above
CASES:
1. LASCONA LAND CO., INC. v. COMM. , G.R. No. 171251, March 5, 2012
Facts: On March 27, 1998, the CIR issued an assessment notice against Lascona
Land Co., Inc. (Lascona) for deficiency income tax for the year 1993. The protest
filed on April 20, 1998 was denied by the CIR on March 3, 1999 on the ground that
the assessment had already become final and executory for failure to appeal to the
CTA within 30 days from the lapse of the 180 day period for CIR to decide on the
protest pursuant to Sec. 228 of the NIRC.
On appeal, the CTA nullified the subject assessment and held that: in cases
of inaction by the CIR on the protested assessment, Section 228 of the NIRC
provided two options for the taxpayer: (1) appeal to the CTA within thirty (30) days
from the lapse of the one hundred eighty (180)-day period, or (2) wait until the
Commissioner decides on his protest before he elevates the case.
The CIR moved for reconsideration and argued that subject assessment is
already final, executory and demandable pursuant to Section 3 (3.1.5) of Revenue
Regulations No. 12-99 dated September 6, 1999 which reads, thus:
If the Commissioner or his duly authorized representative fails

to act on the taxpayer's protest within one hundred eighty (180) days
from date of submission, by the taxpayer, of the required documents in
support of his protest, the taxpayer may appeal to the Court of Tax
Appeals within thirty (30) days from the lapse of the said 180-day
period; otherwise, the assessment shall become final, executory and
demandable.
CTA denied the CIR's motion for reconsideration and ruled that Revenue
Regulations No. 12-99 must conform to Section 228 of the NIRC. The CTA
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emphasized that in cases of discrepancy, Section 228 of the NIRC must prevail
over the revenue regulations. The CA dismissed the CIR’s appeal.
Issue: Whether the subject assessment has become final, executory and
demandable for failure of petitioner to file an appeal before the CTA within thirty
(30) days from the lapse of the 180)-day period pursuant to Section 228 of the
NIRC.
Ruling: NO, the assessment is not yet final and executory. Sec. 228 of the
NIRC provides that in case the Commissioner failed to act on the disputed
assessment within the 180-day period from date of submission of documents, a
taxpayer can either: (1) file a petition for review with the Court of Tax Appeals
within 30 days after the expiration of the 180-day period; or (2) await the final
decision of the Commissioner on the disputed assessments and appeal such final
decision to the Court of Tax Appeals within 30 days after receipt of a copy of such
decision,
When the law provided for the remedy to appeal the inaction of the CIR, it did
not intend to limit it to a single remedy of filing of an appeal after the lapse of the
180-day prescribed period. When a taxpayer protested an assessment, he naturally
expects the CIR to decide either positively or negatively. A taxpayer cannot be
prejudiced if he chooses to wait for the final decision of the CIR on the
protested assessment
Lascona opted to await the final decision of the Commissioner on the
protested assessment, it then has the right to appeal such final decision by
filing a petition for review within 30 days after receipt of a copy of such
decision or ruling, even after the expiration of the 180-day period.
DOCTRINES:
1. Sec. 228 of the NIRC provides a taxpayer two (2) options in case the
Commissioner failed to act on the disputed assessment within the 180-day period
from date of submission of documents:
(1) file a petition for review with the Court of Tax Appeals within 30 days
after the expiration of the 180-day period; OR
(2) await the final decision of the Commissioner on the disputed
assessments and appeal such final decision to the Court of
Tax Appeals within 30 days after receipt of a copy of such decision;
2. In case of conflict between the NIRC provisions and the revenue

regulations implementing such provision, the NIRC provision prevails.
3. When the law provided for the remedy to appeal the inaction of the
CIR, it did not intend to limit it to a single remedy of filing of an appeal after the
lapse of the 180-day prescribed period. When a taxpayer protested an assessment,
he naturally expects the CIR to decide either positively or negatively. A taxpayer
cannot be prejudiced if he chooses to wait for the final decision of the CIR on
the protested assessment
4. The CIR should be reminded that taxpayers cannot be left in quandary by
its inaction on the protested assessment. It is imperative that the taxpayers are
informed of its action in order that the taxpayer should then at least be able to take
recourse to the tax court at the opportune time.
5. Taxes are the lifeblood of the government and should be collected without
unnecessary hindrance. But such collection should be made in accordance with law
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as any arbitrariness will negate the very reason for government itself. It is a
requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure.
______________
2. Metrobank & Trust Company, v.CIR, G.R. No. 182582 APR 17 2017 _
Facts:
Soldibank Corporation extended to ‘Luzon Hydro Corporation (LHC) a foreign
currency denominated loan in the principal amount of US$123,780,000.00. In their
Agreement, LHC agreed to shoulder all the corresponding internal revenue taxes
required by law to be deducted or withheld on the said loan, the filing of tax returns
and remittance of the taxes withheld to the BIR. On September 1, 2000, Metrobank
acquired Solidbank, and assumed the latter's rights and obligations under the loan
Agreement.
LHC paid Metro bank and withheld the ten percent (10%) final tax on the
interest portions of the said payments and remitted the same to BIR in March and
October 2001. Metrobank claimed it mistakenly paid the said tax and included the
same in the Monthly returns for March and October 2001. On December 27, 2002,
Metrobanki filed a letter to the BIR requesting for the refund thereof.
In view of CIR’s inaction, Metrobank filed its judicial claim for refund via a
petition for review before the CTA on September 10, 2003. The CIR averred that:
(a) the claim for refund is subject to administrative investigation; ( b) Metro bank
must prove that there was double payment of the tax sought to be refunded; ( c)
such claim must be filed within the prescriptive period laid down by law; (d) the
burden of proof to establish the right to a refund is on the taxpayer; and ( e) claims
for tax refunds are in the nature of tax exemptions, and as such, should be
construed strictissimi juris against the taxpayer. CTA Division and En Banc denied
the claim for refund for March 2001 final tax on the ground of prescription.
Metrobank had until April 25, 2003 to file its administrative and judicial claim for
refund for March 2001 only on September 10. 2003. .
Issue: Whether or not the CTA En Banc correctly held that Metrobank's claim for
refund relative to its March 2001 final tax had already prescribed.
Ruling: YES, the claim for refund of the March 2001 final tax had already
prescribed. Sec. 204 (now Sec. 229) of the Tax Code, as amended, provides that
no credit or refund of taxes or penalties shall be allowed unless the taxpayer files in
writing with the Commissioner a claim for credit or refund within two (2) years after
the payment of the tax or penalty.
The two (2)-year prescriptive period commences to run from the time the
refund is ascertained, i.e., the date such tax was paid, and not upon the discovery
by the taxpayer of the erroneous or excessive payment of taxes. In the case at bar,
it is undisputed that Metrobank's final withholding tax liability in March 2001 was
remitted to the BIR on April 25, 2001. As such, it only had until April 25, 2003 to file
its administrative and judicial claims for refund, but the judicial claim for March 2001
was filed only on September 2003. A taxpayer must prove not only his entitlement
to a refund, but also his compliance with the procedural due process as
nonobservance of the prescriptive periods within which to file the administrative and
the judicial claims would result in the denial of his claim.
As regards the claim for refund for October 2001 tax payment for
insufficiency of evidence, the claim was denied. Metrobank’s motion for
reconsideration was partially granted and it was allowed to present further evidence
regarding its claim for refund for the October 2001 final tax
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DOCTRINES:
1. Sec. 229 refers to refund of illegally, excessively or erroneously collected

internal revenue taxes.
2. Both the administrative and judicial claims must be filed within two years
from the time the refund is ascertained – that is, from date of payment; not from the
discovery of the illegal, or erroneous or excessive payment..
____________
3. CE Luzon Geothermal Power Corp. v. CIR, GR No. 197526, July 26, 2017
Excess input tax or creditable input tax is not an erroneously, excessively, or

illegally collected tax. Hence, it is Section 112(C) and not Section 229 of the
National Internal Revenue Code that governs claims for refund of creditable input
tax. If the excess input tax is attributable to zero-rated or effectively zero-rated
transactions, the excess input tax can only be refunded to the taxpayer or credited
against the taxpayer's other national internal revenue tax. Availing any of the two (2)
options entail compliance with the procedure outlined in Section 112, not under
Section 229, of the National Internal Revenue Code.
The term "excess" input VAT simply means that the input VAT available
as credit exceeds the output VAT, not that the input VAT is excessively
collected because it is more than what is legally due. Thus, the taxpayer who
legally paid the input VAT cannot claim for refund or credit of the input VAT as
"excessively" collected under Section 229.
______
4. Western Mindanao Power Corp. v. CIR, G.R. No. 181138. June 13, 2012.
Facts:
WMPC, a domestic corporation engaged in the production and sale of
electricity is a VAT-registered taxpayer; and sells electricity solely to NAPOCOR.
On June 20, 2000 and June 13, 2001 it filed applications for tax credit
certificate of its INPUT VAT for the taxable 3rd and 4th quarters of 1999 and all the
taxable quarters of 2000, on the ground that since NAPOCOR is exempt from the
payment of all forms of taxes under Sec. 13 of RA 6395; hence WMPC’s power
generation to NAPOCOR is zero-rated. CIR failed to act on the said request,
WMPC’s petition was dismissed by CTA Second Division noting that the VAT
returns filed did not reflect any zero rated or effectively zero-rated sales and the
invoices and OR did not contain the phrase “zero-rated”. CTA En banc affirmed the
dismissal.
Issue: Whether the CTA En Banc was correct in dismissing the claim for a refund
or tax credit on Input VAT on the ground that WMPC’s official receipts do not
contain the phrase “zero-rated”.
Ruling: YES, the dismissal was correct. WMPC’S claim for refund or tax credit of
INPUT VAT is based on Sec. 112 (A) of the Tax Code. When the claim for refund is
based on a statute granting tax exemption, it partakes of the nature of a tax
exemption; hence, the rule that a statute granting tax exemption is strictly construed
against the person claiming it applies to the claim.
Therefore, the applicant for tax refund or tax credit must prove not only
entitlement to the grant of the claim under substantive law, but must show
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satisfaction of all documentary and evidentiary requirements for such claim. The
mere fact that WMPC’S application for zero-rating has been approved by the CIR
does not, by itself, justify the grant of a refund or tax credit. The taxpayer must
further comply with the invoicing and accounting requirements mandated by the Tax
Code and the revenue regulations implementing the Code
DOCTRINES:
1. When the claim for refund is based on a statute granting tax exemption, it
partakes of the nature of a tax exemption; hence, the rule that a statute granting tax
exemption is strictly construed against the person claiming it applies to the claim.
2. Under the NIRC (Sec. 10[A] (1)) , a creditable input tax should be evidenced
by a VAT invoice or official receipt, which may only be considered as such when it
complies with the requirements of Sec. 4.108-1 of RR 7-95.
3. RR 7-95 proceeds from the rule-making power of the Sec. of Finance granted
by the Tax Code for the efficient enforcement of its provisions and subsequent
amendments. In several cases, it has been held that the RR 7-95 is reasonable and
in accord with the efficient collection of VAT from covered sales of goods and
services
___________________
5. BPI v. CIR, G.R. No. 139736, Oct. 17, 2005 –

Facts: On Oct. 10, 1989, BIR issued a Final Assessment Notice against BPI for
deficiency DST on its sale of US dollars to Central Bank on June 14, 1985. It was
received by BPI on Oct. 20, 1989. On Nov. 16, 1989, BIR protested the
assessment. CIR did not respond to said protest. There was no showing that
petitioner BPI was informed or aware that its request for reconsideration was
granted or acted upon by the BIR.
On Nov. 15, 1992, BIR issued Warrant of Distraint a/or Levy which was
received by BPI on Nov. 23, 1992. On Sept. 11, 1997, BIR denied the protest. BPI
appealed to CTA.
Issues: 1. Whether the filing of the protest by BPI suspends the running of the
statutory period to collect said tax.
2. Whether the issuance of the warrant of distraint and/or levy suspends
the period to collect the subject DST
Ruling:
1. The protest filed by petitioner BPI did not constitute a request for
reinvestigation, granted by the respondent BIR Commissioner, nor a
reconsideration, but a protest based on question of law. The same protest letter
did not raise any question of fact; neither did it offer to present any new evidence. In
BIR’s letter to petitioner BPI, dated 10 September 1992, the BIR itself referred to the
protest of petitioner BPI as a request for reconsideration. These considerations
would lead the Court to deduce that the protest letter of petitioner BPI was in the
nature of a request for reconsideration, rather than a request for reinvestigation and,
consequently, Section 224 of the Tax Code of 1977, as amended, on the
suspension of the running of the statute of limitations should not apply.
Even if the said protest be considered a request for reinvestigation, the same
must be granted by the Commissioner to effect a suspension of the period. This is
very clear in Section 223 and as pronounced by the Court in the case of Republic
of the Philippines v. Gancayco, 120 Phil. 376 (1964) where taxpayer Gancayco
requested for a thorough reinvestigation of the assessment against him and
submitted all the evidence for such purpose; but, the Collector ignored the request,
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and the records and documents were not at all examined. The Court held in the said
case that:
“. . .The act of requesting a reinvestigation alone does not

suspend the period. The request should first be granted,
in order to effect suspension. xxx”
Since the CIR did not grant the BPI’s alleged request for reinvestigation, the same
did not suspend the running of the period to collect the tax assessed.
2. Existing jurisprudence establishes that distraint and levy proceedings

are validly begun or commenced by the issuance of the Warrant and service thereof
on the taxpayer. The Warrant of Distraint and/or Levy be, at the very least, served
upon the taxpayer in order to suspend the running of the prescriptive period for
collection of an assessed tax, because it may only be upon the service of the
Warrant that the taxpayer is informed of the denial by the BIR of any pending
protest of the said taxpayer, and the resolute intention of the BIR to collect the tax
assessed.
The service of the Warrant of Distraint and/or Levy on petitioner BPI on
23 October 1992 was already beyond the prescriptive period for collection of
the deficiency DST, which had expired on 19 October 1992.
DOCTRINE:
1. How is the waiver of the statute of limitations construed or interpreted?

The law prescribing a limitation of actions for the collection of the internal
revenue taxes is beneficial both to the Government and to its citizens; to the
Government because tax officers would be obliged to act promptly in the making of
assessment, and to citizens because after the lapse of the period of prescription
citizens would have a feeling of security against unscrupulous tax agents who will
always find an excuse to inspect the books of taxpayers, not to determine the
latter's real liability, but to take advantage of every opportunity to molest peaceful,
law-abiding citizens. Without such a legal defense taxpayers would furthermore be
under obligation to always keep their books and keep them open for inspection
subject to harassment by unscrupulous tax agents.
In order to provide even better protection to the taxpayer against
unreasonable investigation, the Tax Code of 1977, as amended, identifies
specifically the circumstances when the prescriptive periods for assessing and
collecting taxes could be suspended or interrupted. To give effect to the legislative
intent, these provisions on the statute of limitations on assessment and collection of
taxes shall be construed and applied liberally in favor of the taxpayer and
strictly against the Government.
2. The waiver of the statute of limitations, whether on assessment
or collection, should not be construed as a waiver of the right to invoke the
defense of prescription but, rather, an agreement between the taxpayer and
the BIR to extend the period to a date certain, within which the latter could
still assess or collect taxes due. The waiver does not mean that the taxpayer
relinquishes the right to invoke prescription unequivocally. [citing Republic v.
Ablaza, 108 Phi. 1105 (1960) ;
____________
6. Pacquiao v. CTA (First Division), G.R. 213394, April 6, 2016
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Facts:
This petition was filed on the following grounds:
a. The FDDA and PCL were issued against petitioner Pacquiao only; but
the Warrant of Distraint and/or Levy/Garnishment issued by the CIR,
however, were made against the assets of both petitioners.
b. The warrants of garnishment had been served on the banks of both

petitioners even before the petitioners received the FDDA and PCL;
c. The Warrant of Distraint and/or Levy/Garnishment against the

petitioners was allegedly made prior to the expiration of the period
allowed for the petitioners to pay the assessed deficiency taxes;
d. The Warrant of Distraint and/or Levy/Garnishment against petitioners

failed to take into consideration that the deficiency VAT was already
paid in full;
e. Petitioners were not given a copy of the Warrants. Sections 207 and
208 of the Tax Code require the Warrant of Distraint and/or
Levy/Garnishment be served upon the taxpayer.
Issue:
Whether or not there is need for the petitioners to comply with the
requirement of Sec. 11 of RA 1125.
Ruling: The Supreme Court ruled that inasmuch as this case involves a question
of fact, whether petitioners are exempt from the requirement of Sec. 11 of RA 1125
considering that means employed by the CIR in collecting the tax is not sanctioned
by law. The CTA should have set the case for preliminary hearing to ascertain
whether the petitioners are exempt from the said requirement; whether the CIR
employed legal and proper means to collect the subject taxes. In this regard, the
case was remanded to the CTA for further proceedings for the said purpose, and
pending said determination, the CIR was ordered to cease and desist from
implementing the said warrants. At this early stage of the proceedings, it is
premature for this Court to rule on the issues of whether or not the warrants were
defectively issued; or whether the service thereof was done in violation of the rules;
or whether or not respondent's assessments were valid. These matters are
evidentiary in nature, the resolution of which can only be made after a full-
blown trial.
DOCTRINES:
1. The appeal to the CTA does not suspend the collection of the tax assessed,
unless a TRO or injunction is issued by the CTA provided the taxpayer deposit with
the court the amount claimed or posts a surety bond, pursuant to Sec. 11 of RA
1125, the law creating the CTA.
2. The determination of whether the means employed by the government in the

assessment and collection of taxes are not sanctioned by law, is a question of fact.
which requires a ful- blown trial and the proper court to hear the same is the CTA
because the Supreme Court is not a trier of facts.
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3. In A.M. No. 15-92-01-CTA the Supreme Court approved the CTA En

Banc Resolution No. 02-2015, where the phrase "amount claimed" as the basis
of the security deposit or surety bond required in Section 11 of R.A. No. 1125 was
construed to refer to the PRINCIPAL AMOUNT OF THE DEFICIENCY TAXES
ONLY, excluding penalties, interests and surcharges.
_______________
6. CIR v. GJM Phil. Mfg. Inc., G.R. No. 202695, Feb. 29, 2016, 785 SCRA 253
Facts:
GJM informed BIR that due to the bankruptcy of its parent company it will
cancel its registration in Makati City and will transfer to Rosario, Cavite. The said
request was confirmed by the BIR. GJM filed its income tax return for 1999 on April
12, 2000. BIR sent a Letter of Informal Conference to GJM relative to its income tax
deficiency for taxable year 1999. Thereafter, BIR issued a Preliminary Assessment
Notice and an undated Assessment Notice; and Final Notice before seizure; but the
latter claimed that it did not receive any assessment notice. A warrant of distraint
and levy was issued; hence GJMA filed a Letter of Protest with the BIR which was
denied; hence, GJM filed a petition for review with the CTA En Banc affirmed the
CTA Division decision granting the petition and cancelling the the assessment
notice and warrant of distraint and levy.
Issues:
1. Who has the burden to prove receipt of the assessment notice?
2. Whether or not the right of the government to assess had already
prescribe
Ruling:
1. If the taxpayer denies having received an assessment from the BIR, it
then becomes incumbent upon the latter to prove by competent evidence that such
notice was indeed received by the addressee. The onus probandi has shifted to the
BIR to show by contrary evidence that GJM indeed received the assessment in the
due course of mail. It has been settled that while a mailed letter is deemed received
by the addressee in the course of mail, this is merely a disputable presumption
subject to contravention, the direct denial of which shifts the burden to the sender to
prove that the mailed letter was, in fact, received by the addressee.
While it is true that an assessment is made when the notice is sent within the
prescribed period, the release, mailing, or sending of the same must still be clearly
and satisfactorily proved. Mere notations made without the taxpayer's intervention,
notice or control, and without adequate supporting evidence cannot suffice.
Otherwise, the defenseless taxpayer would be unreasonably placed at the mercy of
the revenue offices.
2. The BIR failed to prove with competent evidence GJM's receipt of the
assessment, leads to no other conclusion but that no assessment was issued.
Consequently, the government's right to issue an assessment for the said period
has already prescribed. The assessment for deficiency DST is cancelled.
DOCTRINES:
1. When the taxpayer denies having received any assessment notice, the
burden is shifted on the CIR to prove receipt by competent evidence. Failing which
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will lead to a conclusion that no assessment was issued. Thus, the right of the
government to asses had already prescribed.
2. The assessment notice must be sent at the laterst updated address of the
taxpayer. While a mailed letter is deemed received by the addressee in the course
of mail, this is merely a disputable presumption which can be controverted by
competent evidence..
_________
7.
8
9. SILKAIR (SINGAPORE) PTE. LTD., vs. CIR, GR. No. 166482, Jan 25, 2012,
664 SCRA 33 -
Facts:
SILKAIR, a foreign corporation duly licensed by the SEC to do business in
the Phil., is an on-line international carrier operating the Cebu-Singapore-Cebu and
Davao-Singapore Davao routes. SILKAIR purchased aviation fuel from Petron Corp.
from July 1, 1998 to December 1, 1998, and paid the excise taxes due thereon.
Payment was made by Singapore Airlines for the benefit of SILKAIR. On Oct. 20,
1999, SILKAIR filed an administrative claim for refund of excise taxes on jet
fuel from Petron on the ground of erroneous payment based on Sec. 135(a)
and (b) of the 1997 Tax Code and Article 4 (2) of the Air Transport Agreement
between the Phil. government and Singapore Government.
For failure of CIR to act on said claim SILKAIR appealed to the CTA. Both
CTA and CA dismissed the petition on the ground that while SILKAIR is exempt
from paying excise taxes on petroleum products purchased in the Philippines by
virtue of Sec. 135 (b), it is not the proper party to seek for the refund; but Petron
Corp.-
Issue: Who is the proper party to file the claim for refund.
Ruling: For indirect taxes (i.e. excise tax and valued-added tax or VAT), the
proper party to question or seek a refund of the tax is the STATUTORY
TAXPAYER --- the person on whom the tax is imposed by law and who paid the
same even when he shifts the burden thereof to another; and in this case, it is
Petron Corp.
Excise taxes on articles manufactured or produced in the Philippines for

domestic sale or consumption or for any other disposition and to things imported
into the Philippines is basically an indirect tax. While the tax is directly levied upon
the manufacturer/importer upon removal of the taxable goods from its place of
production or from the customs custody, the tax, in reality, is actually passed on to
the end consumer as part of the transfer value or selling price of the goods, sold,
bartered or exchanged.
_________________
10. Pacquiao v. CTA (First Division), G.R. 213394, April 6, 2016

Facts:
This petition was filed on the following grounds:
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a. The FDDA and PCL were issued against petitioner Pacquiao only; but
the Warrant of Distraint and/or Levy/Garnishment issued by the CIR,
however, were made against the assets of both petitioners.
b. The warrants of garnishment had been served on the banks of both

petitioners even before the petitioners received the FDDA and PCL;
c. The Warrant of Distraint and/or Levy/Garnishment against the

petitioners was allegedly made prior to the expiration of the period
allowed for the petitioners to pay the assessed deficiency taxes;
d. The Warrant of Distraint and/or Levy/Garnishment against petitioners

failed to take into consideration that the deficiency VAT was already
paid in full;
e. Petitioners were not given a copy of the Warrants. Sections 207 and
208 of the Tax Code require the Warrant of Distraint and/or
Levy/Garnishment be served upon the taxpayer.
Issue:
Whether or not there is need for the petitioners to comply with the
requirement of Sec. 11 of RA 1125.
Ruling:
The Supreme Court ruled that inasmuch as this case involves a question of
fact, whether petitioners are exempt from the requirement of Sec. 11 of RA 1125
considering that means employed by the CIR in collecting the tax is not sanctioned
by law. The CTA should have set the case for preliminary hearing to ascertain
whether the petitioners are exempt from the said requirement; whether the CIR
employed legal and proper means to collect the subject taxes. In this regard, the
case was remanded to the CTA for further proceedings for the said purpose, and
pending said determination, the CIR was ordered to cease and desist from
implementing the said warrants. At this early stage of the proceedings, it is
premature for this Court to rule on the issues of whether or not the warrants were
defectively issued; or whether the service thereof was done in violation of the rules;
or whether or not respondent's assessments were valid. These matters are
evidentiary in nature, the resolution of which can only be made after a full
blown trial.
DOCTRINES:
1. The appeal to the CTA does not suspend the collection of the tax assessed,
unless a TRO or injunction is issued by the CTA provided the taxpayer deposit with
the court the amount claimed or posts a surety bond, pursuant to Sec. 11 of RA
1125, the law creating the CTA.
2. The determination of whether the means employed by the government in the

assessment and collection of taxes are not sanctioned by law, is a question of fact.
which requires a ful- blown trial and the proper court to hear the same is the CTA
because the Supreme Court is not a trier of facts.
3. In A.M. No. 15-92-01-CTA the Supreme Court approved the CTA En

Banc Resolution No. 02-2015, where the phrase "amount claimed" as the basis
Page 24 of 27
PRE – WEEK REVIEW
of the security deposit or surety bond required in Section 11 of R.A. No. 1125 was
construed to refer to the PRINCIPAL AMOUNT OF THE DEFICIENCY TAXES
ONLY, excluding penalties, interests and surcharges.
_______________
11. Procter & Gamble Asia Pte Ltd., v. CIR, G.R. No. 205652, Sept. 7, 2017
Facts: P&G is a foreign (Singapore) corporation with a Regional Operating
Headquarter in the Philippines and a VAT-registered taxpayer.
On March 22, 2007 and May 2, 2007, P&G filed applications to BIR RDO
No. 49, for the refund or issuance of tax credit certificates (TCCs) of its input VAT
attributable to its zero-rated sales for the first and second quarters of 2005.
Pursuant to BIR Ruling No. DA-489-03 dated December 10, 2003, on

March 28, 2007 and June 8, 2007, P&G filed two separate petitions for review with
the CTA for the refund or issuance of TCC for the said input VAT, which were
consolidated. BIR Ruling No. DA-489-03 allows taxpayer to file their judicial
claims for refund even before the lapse of the 120-day for the CIR to decide.
P&G presented its evidence to prove its claims for VAT refund; while the CIR,
submitted the cases for decision based on the pleadings, as the claim for refund
was still pending before the BIR RDO No. 49. The CIR, on the other hand,
contended that the plain language of Section 112(C) of the NIRC, as amended,
demands mandatory compliance with the 120+30-day rule; and P&G cannot claim
reliance in good faith with BIR Ruling No. DA-489-03 to shield the filing of its judicial
claims from the vice of prematurity.
On October 6, 2010, while these cases were pending before the CTA
Division, the Supreme Court promulgated CIR v. Aichi Forging Company of Asia,
Inc. (Aichi) where it was held that compliance with the 120-day period granted
to the CIR, within which to act on an administrative claim for refund or credit
of unutilized input VAT under Section 112(C) of the Tax Code, as amended, is
mandatory and jurisdictional.
In the meantime, on February 12, 2013, the Supreme Court decided the
consolidated cases of CIR v. San Roque Power Corporation, etc. (San Roque),
where BIR Ruling No. DA-489-03 was recognized as an exception to the
mandatory and jurisdictional nature of the 120-day period.
Issues:
1. Whether the judicial claims filed by P&G were prematurely filed for non-
compliance with the 120-day period for CIR to decide on the claims for
refund under Sec. 112 (C).
2. Which of the two decisions should be applied in this case – Aichi or San
Roque?
3. Whether estoppel lie against the BIR in the issuance of BIR Ruling Nol. DA-189-
03 dated December 10, 2003?
Ruling:
NO, P&G’s judicial claims for refund filed on March 28, 2007 and June 8,
2007, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before
the date when Aichi was promulgated were deemed timely filed and should not
Page 25 of 27
PRE – WEEK REVIEW
have been dismissed by the CTA. These cases were considered as exception to
the said 120 day mandatory requirement.
The Court held that BIR Ruling No. DA-489-03 dated December 10, 2003
furnishes a valid basis to hold the CIR in ESTOPPEL because the CIR had
misled taxpayers into filing judicial claims with the CTA even before the lapse
of the 120-day period. There is no dispute that the 120-day period is mandatory
and jurisdictional, and that the CTA does not acquire jurisdiction over a judicial
claim that is filed before the expiration of the 120-day period.
The Commissioner cannot be allowed to later on question the CTA's

assumption of jurisdiction over such claim since equitable estoppel has set in
as expressly authorized under Section 246 of the Tax Code.
DOCTRINES:
1. Reconciliation of the Aichi and San Roque rulings:
Section 112 of the NIRC, as amended, provides for the rules on claiming
refunds or tax credits of unutilized input VAT. The CIR is given 120 days within
which to grant or deny a claim for refund. Upon receipt of CIR's decision or ruling
denying the said claim, or upon the expiration of the 120-day period without action
from the CIR, the taxpayer has 30 days within which to file a petition for review with
the CTA. Aichi reiterated the rule that the 120-day period for the CIR to decide on
the claim for refund is mandatory and jurisdictional.
Judicial claims for refund of unutilized input VAT attributable to zero dated or
effectively zero-dated transactions filed when BIR Ruling No. DA-489-03 dated
December 10, 2003 was issued up to October 6, 2010, when San Roque was
decided, the taxpayer need not wait for the 120-days for the CIR to decide,
provided, the same is filed within two years from the close of the quarter.
This means that claims for refund of unutilized input VAT attributable to
zero-rated or effectively zero-rated transactions for the period December 10, 2003
to October 6, 2010, the taxpayer need not wait for the 120-day period for the CIR to
decide to file a petition for review with the CTA. Both the administrative and judicial
claims should be filed within the two-year statute of limitations for December 10,
2003 up to October 6, 2010.
2. There are, however, two exceptions to the mandatory requirement of 120

days for the CIR to decide and 30 days to appeal to CTA
a) if the Commissioner, through a specific ruling, misleads a particular

taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such particular taxpayer.
b) where the Commissioner, through a general interpretative rule issued

under Section 4 of the Tax Code, misleads all taxpayers into filing prematurely
judicial claims with the CTA.
3. BIR Ruling No. DA-489-03 is a valid basis to hold the CIR in ESTOPPEL
because the CIR had misled taxpayers into filing judicial claims with the CTA even
Page 26 of 27
PRE – WEEK REVIEW
before the lapse of the 120-day period. The Commissioner cannot be allowed to
later on question the CTA's assumption of jurisdiction over such claim since
equitable estoppel has set in as expressly authorized under Section 246 of the
Tax Code,
4. BIR Ruling No. DA-489-03 is general interpretative rule. It is a response to a

query made, not by a particular taxpayer, but by a government agency tasked with
processing tax refunds and credits (the One Stop Shop Inter-Agency Tax Credit and
Drawback Center of the Department of Finance). While this government agency
mentions in its query to the Commissioner the administrative claim of Lazi Bay
Resources Development, Inc., the agency was in fact asking the Commissioner
what to do in cases like the tax claim of Lazi Bay Resources Development,
Inc., where the taxpayer did not wait for the lapse of the 120-day period. The
CIR mislead the taxpayers to rely on the said ruling and did not wait for the lapse of
the 120-day period for CiR to decide on the administrative claim for refund of un-
unitilized input tax attributable to zero-rated and effectively zero-rated transactions.
_____________
Page 27 of 27

Prof. Dabu - Review Notes in Taxation

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Prof. Dabu - Review Notes in Taxation

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REVIEW NOTES IN TAXATION LAW- 2022

(BAR BULLETIN NO. 31.S.2022)

PART I – BASIC PRINCIPLES – under the Constitution

1. Limitations in the exercise of the power of taxation:

Non-Delegation of The Power to Tax:

I - international comity – Treaties, international agreements and covenants

Exception from the above rule:

b. CONSTITUTIONAL LIMITATIONS – are constitutional provisions relating

Question: What is the significance of the constitutional provisions in the exercise

Important Constitutional Provisions:

1. Due Process clause - In the exercise of the power of taxation,the

Question: Is public hearing a requirement for the validity of a tax law?

Suggested Answer: The national legislature (Congress) has the discretion

2. Equal protection clause – taxpayers of equal footing should be treated

Ormoc Sugar Central vs. CIR, 22 SCRA 603:

CREBA vs. The Hon. Executive Secretary Alberto Romulo,

3. The rule of taxation shall be uniform and equitable. Congress shall

This requires that all subjects or objects of taxation, similarly situated or

Requisites of a valid classification:

4. Tax exemption laws requires concurrence of a majority of all the

5. Power of the President to veto any item in an appropriation, review or

7. Exemption of real properties which are actually, directly and

a) The exemption applies only to real property taxes.

Question: May Congress enact a law withdrawing a tax exemption?

Contractual Tax Exemption is agreed in contracts lawfully entered into by the

IMPORTANT DOCTRINES IN TAXATION:

Question: If taxes are imprescriptible, what is the signification of the statute of

Suggested Answer: To safeguard taxpayers from any unreasonable examination

2. DOUBLE TAXATION- not being forbidden by our Constitution, it is not a

International Juridical Double Taxation – imposition of comparable taxes in two

3. POWER OF TAXATION AS AN IMPLEMENT OF POLICE POWER AND

EXCEPTION: In the interest of justice and fair play, as when injustice

a. On internal revenue taxes:

b. On local and real property taxes:

PART II - INCOME TAXATION

Suggested Answer: Yes, except the following:

Suggested Answer: The income tax situs of the Philippines is comprehensive

Constructive receipt of income is recognized (Sec. 51, RR-2)

Requisites for income to be taxable:

Tests to determine whether income is earned for tax purposes:

1. REALIZATION/SEVERANCE TEST – There is no taxable income until there

Revenue is generally recognized when the following conditions are met:

2. ECONOMIC BENEFIT TEST – Any economic benefit to the employee that

3. CLAIM OF RIGHT DOCTRINE – a taxable gain is conditioned upon the

C. ELEVEN (11) CATEGORIES OF INCOME –SEC. 32 (A)

a. COMPENSATION INCOME – remuneration for services rendered on account of

1) Compensation income earners:

1) 13th month pay and others not exceeding Php90,000.00;

Tax- exempt income/benefits of MWE:

Taxable income of MWE:

c) Income from trade, business or practice of profession

De minimis benefits not exceeding the amount fixed by law:

Fringe Benefits – (Sec. 33) –

Tax-exempt Fringe Benefit granted to managerial/supervisory employee:

a) benefit is required by the nature of, or necessary to the trade,

b. INCOME FROM TRADE, BUSINESS OR PRACTICE OF PROFESSION

E. COMPUTATION OF THE INCOME TAX: (RR-8-2018 dtd Jan. 25, 2018)

Self-Employed Individual – kinds of income:

a) Self-employed earning purely income from business or profession:

b. Individuals Earning Mixed Income –

Computation of income tax:

c. INCOME FROM DEALINGS IN PROPERTY

Rules on Gain or Loss:

Exception: No gain or loss shall be recognized in tax free exchanges.