SCHOOL OF LAW AND GOVERNANCE

Department of Law

CASE BRIEF
TAXATION 2

Submitted to:
Atty. Kim Aranas

Submitted by:
Block 408

2022
ESTATE TAX
Case Title Case Principle Summary of Facts
1. Estate of the Notice must be sent to the administrator Philtrust manages the business affairs of Vda. De
Late Juliana Diez vda. of an estate when an estate is under Gabriel during her lifetime. Two days after her
De Gabriel v. CIR, G.R. administration, as representative of death, Philtrust filed her Income Tax Return for
No. 155541, January such, who has the legal obligation to pay 1978. BIR was not informed that she has died. A
27, 2004. and discharge all debts of the estate and petition for appointment as Special Administrator
to perform all orders of the court. was filed by Philtrust but RTC denied it. In the
meantime, the BIR found a deficiency income tax
for the year 1977. It sent by mail a demand letter
and Assessment Notice to the decedent through
PhilTrust. No response was made by Philtrust. The
BIR Commissioner issued warrants of distraint and
levy to enforce collection of the deficient income tax
liability, served upon her heir, Francisco Gabriel.
This was opposed by the heir on the ground that
there was no proper service of the assessment. The
BIR insists that the notice given to Philtrust served
as sufficient notice
2. CIR v. Pineda, G.R. Being an heir and a holder-transferee of Atanasio Pineda died and was survived by his wife
No. L-22734, the property belonging to the estate, an and 15 children who divided the estate among
September 15, 1967 heir is liable for the tax assessment to the them. Respondent Manuel Pineda’s share
extent of the amount of the property in amounted to about P2,500.00. After the estate
his possession proceedings, the BIR investigated the income tax
liability of the estate for the period 1945 to 1948 and
found that income tax returns were not filed. The
Commissioner held Pineda liable for the payment of
all the taxes due from the estate in the amount of
P760.28 and not for the taxes corresponding to his
share in the estate
3. CIR v. Prieto, G.R. Inheritance Tax should be based on the The Collector, in its examination to the estate of the
No. L-11976, August value of the inheritance and should also deceased, yielded a higher assessment than what
29, 1961 consider the proper deductions made. the heirs had originally assessed and have paid.
The higher assessment onto the inheritance of the
respondent heirs resulted in a higher inheritance tax
liability. The heirs paid in protest and have
Issue/s
Whether or not the notice of
the assessment is binding on
the Estate of Juliana Vda. De
Gabriel
Whether or not Pineda is liable
to pay the full amount of the
taxes assesse
Whether or not there was
overpayment of the estate and
inheritance ta
Ruling
No, the assessment is not binding on the Estate
for lack of proper notice. When an estate is
under administration, notice must be sent to the
administrator of the estate, since it is the said
administrator, as representative of the estate,
who has the legal obligation to pay and
discharge all debts of the estate and to perform
all orders of the court. Philtrust was never
appointed as the administrator of the estate of
the decedent. The relationship between the
decedent and Philtrust is one of agency which
was terminated upon the death of the
decedent. None of Philtrust’s acts or omissions
could bind the estate of the Taxpayer. In this
case, the assessment was served not even on
an heir of the Estate, but on a completely
disinterested third party. This improper service
was clearly not binding on the petitioner.
Yes, Pineda is liable for the assessment as an
heir and as a holder-transferee of property
belonging to the estate. As an heir, he is
individually liable to the portion of the tax
proportionate to his share from the inheritance.
His liability cannot exceed the amount of his
share. As a holder of property belonging to the
estate, Pineda is liable for the tax up to the
amount of the property in his possession. The
government has a lien on the P2,500.00 he
received from the estate as his share in the
inheritance. By virtue of such lien, the
government has the right to subject the
property in Pineda's possession to satisfy the
unpaid income taxes for which said estate is
liable in the sum of P760.28 pursuant to the
Section 315 of the Tax Cod
Yes, there was overpayment. The inheritance
consisted of several real properties which
cannot be divided equally in accordance to the
will of the testator. The 3 respondents remedied
this by taking higher share then pay in cash the
difference to the other heirs in accordance with
 contested this findings of the Collector. The Court
of Tax Appeals sided with the heirs.
4. CIR vs. Court of Expenses must be essential to the Pedro Pajonar, a soldier, was part of the Bataan
Appeals, et al., G.R. proper settlement of the estate in order Death March which made him insane. His sis
No. 123206, March 22, to be deductible - expenses otherwise became the guardian over his person while PNB the
2000 incurred are not deductible guardian over his property (via guardianship
proceedings wherein attorney’s fees were
incurred). He died. PNB instead of filing an estate
tax return, advised the heirs to execute an
extrajudicial settlement (notarial fees incurred) and
to pay the taxes on his estate. BIR asserts that the
notarial fees and attorney’s fees are not deductible
from the gross estate. Only judicial expenses of the
testamentary or intestate proceedings are allowed
to be deducted
5. Pablo Lorenzo vs. Estate tax accrues upon transmission of Thomas Hanley died, leaving a will and a
Juan Posadas, Jr., the property made effective by his death. considerable amount of real and personal
G.R. No. 43082, June properties. Proceedings for the probate of his will
18, 1937. and the settlement and distribution of his estate
were begun in the CFI of Zamboanga. The will was
admitted to probate. The CFI considered it proper
for the best interests of the estate to appoint a
trustee to administer the real properties which,
under the will, were to pass to his nephew ten years
after the two executors named in the will were
appointed trustees. Moore acted as trustee until he
resigned and the plaintiff Lorenzo was appointed in
his stead. Lorenzo, in his capacity as trustee of the
estate of Thomas Hanley, brought an action against
the Collector of Internal Revenue Posadas for the
refund of P2,052.74 inheritance taxes.
Whether or not notarial fee
may be allowed as deductions
from the gross estate of
deceden
Whether or not there had
been delinquency in the
payment of inheritance tax
and Whether or not the
inheritance tax be computed
based on the value of the
estate at the time of the
testator's death
the project of partition among the heirs. The
collector cannot use the partition as basis for
assessing the inheritance tax (resulting in the
first 3 heirs paying higher tax for receiving
higher net inheritance) without regarding the
cash payments paid to equal the share
received among the heirs. What is controlling is
the receipt of shares in accordance with the
will’s sharing scheme. Further, in all reality,
despite the receipt of higher inheritance, the
receiving heirs paid cash in difference to equal
what they received. The deduction of the cash
payment to the other heirs should be called for.
Hence, there was overpayment
Yes, notarial fee may be deducted from gross
estate. Judicial expenses are expenses of
administration. Administration expenses shall
include all expenses “essential to the collection
of the assets, payment of debts or the
distribution of the property to the persons
entitled to it. In other words, expenses must be
essential to the proper settlement of the estate.
Expenses for the sole benefit of the heirs,
devisees or legatees are not deductible. In the
case at ar, notarial fees incurred in the
extrajudicial settlement is deductible since it
resulted in a distribution of the estate to lawful
heirs
The accrual of the inheritance tax (estate tax)
is distinct from the obligation to pay the same.
Section 1536 of the Administrative Code,
imposes the tax upon "every transmission by
virtue of inheritance, devise, bequest, gift
mortis causa, or advance in anticipation of
inheritance, devise, or bequest." The tax
therefore is upon transmission or transfer of
property of a decedent, made effective by his
death. It must be computed at the time of the
decedent's death. In this case, it was ruled that
the mere fact that the estate of the deceased
was placed in trust did not remove it from the
operation of our inheritance tax laws nor
exempt it from the punimayment of the
inheritance tax. The corresponding inheritance
tax should have been paid on or before March
10, 1924, to escape the penalties of the laws.

6. Carlos Moran Sison Expenses incurred by an executor or by
vs. Narcisa F. an administrator in order to produce a
Teodoro, G.R. No. L- bond is not a proper charge against the
9271, March 29, 1957. estate. Further, the ability to give bond is
in the nature of a qualification for office.
The execution and the approval of the
bond constitute a condition precedent to
acceptance of the responsibilities of the
trust.
7. CIR vs. Court of All expenses incurred in relation to the
Appeals, et al., G.R. estate of the deceased will be deductible
No. 123206, March 22, for estate tax purposes provided these
2000. are necessary and ordinary expenses for
"Carlos Moran Sison was appointed, without
compensation, as a judicial administrator of the
estate of Margarita David. He filed a bond of
P5,000, the premium of which as well as the
renewal fee he charged as disbursement items in
his accounting. After entering into his duties as
administrator, he filed an accounting of his
administration which included items as an expense
of administration the premiums he paid on his bond.
Narcisa F. Teodoro, one of the heirs, objected to the
approval of the above-quoted items on the grounds
that they are not necessary expenses of
administration and should not be charged against
the estate.
The court approved the report of the administrator
but disallowed the items objected to on the ground
that they cannot be considered as expenses of
administration. The administrator filed a motion for
reconsideration and when the same was denied, he
took the present appeal.
" executor or administrator with all the incident
"Pedro Pajonar, a member of the Philippine Scout,
Bataan Contingent, during the second World War,
was a part of the infamous Death March by reason
of which he suffered shock and became insane.
"Whether a judicial
administrator,
serving without compensation,
is entitled to charge as an
expense of administration the
premiums paid on his bond.
" approval of the bond constitute a condition
Whether the notarial fee paid
for the extrajudicial settlement
and the attorney's fees in the
guardianship proceedings
(2) Yes, the inheritance tax should be
computed based on the value of the estate at
the time of the death of the testator. Succession
takes place and the right of the estate to tax
vests instantly, the tax should be measured by
the value of the estate as it stood at the time of
the decedent’s death, regardless of any
subsequent contingency value of any
subsequent increase or decrease in value of
the property transmitted at that time regardless
of its appreciation or depreciation.
"No. The Court ruled that the expense incurred
by an executor or administrator to produce a
bond is not a proper charge against the estate.
The Court further commented in that case that
the ability to give bond is in the nature of
qualification for office. The execution and the
precedent to acceptance of the responsibilities
of the trust.
It is also intimated therein that ""If an individual
does not desire to assume the position of
executor or administrator, he may refuse to do
so,"" and it is far-fetched to conclude that the
giving of a bond by an administrator is an
necessary expense in the care, management
and settlement of the estate within the meaning
of the law, because these expenses are
incurred ""after the executor or administrator
has met the requirement of the law and has
entered upon the performance of his duties.""
Of course, a person may accept the position of
appertaining thereto having in mind the
compensation which the law allows for the
purpose, but he may waive this compensation
in the same manner as he may refuse to serve
without it. Appellant having waived
compensation, he cannot now be heard to
complain of the expenses incident to his
qualification."
"Yes.This Court adopts the view under
American jurisprudence that expenses incurred
in the extrajudicial settlement of the estate
should be allowed as a deduction from the
 administration of the settlement of the
estate.
However, deduction is limited to such
administration expenses as are actually
and necessarily incurred in the collection
of the assets of the estate, payment of
the debts, and distribution of the
remainder among those entitled thereto.
Such expenses may include executor's
or administrator's fees, attorney's fees,
court fees and charges, appraiser's fees,
clerk hire, costs of preserving and
distributing the estate and storing or
maintaining it, brokerage fees or
commissions for selling or disposing of
the estate, and the like. Deductible
attorney's fees are those incurred by the
executor or administrator in the
settlement of the estate or in defending
or prosecuting claims against or due the
estate.
8. Ferdinand R. The nature of the process of estate tax
Marcos II vs. Court of collection has been described as follows:
Appeals, et al., G.R. "Strictly speaking, the assessment of a
No. 120880, June 5, inheritance tax does not directly involve
1997 the administration of a decedent's estate,
His sister Josefina Pajonar became the guardian
over his person, while his property was placed
under the guardianship of PNB.
The decedent’s sister, Josefina Pajonar, filed a
petition with the Court of Tax Appeals (CTA)
praying for a refund of the erroneously paid estate
tax. CTA ordered the CIR to refund the amount
representing the erroneously paid estate tax.
Among the deductions from the gross estate
allowed by the CTA were attorney’s fees incurred in
the case of a special proceeding for guardianship
and a notarial fee for the extrajudicial settlement.
The CIR questioned the CTA Order, assailing that
attorney’s fees and the notarial fee are not
deductible expenses, as said fees were not
expenses of testamentary or intestate
proceedings."
Following the death of former President Marcos in
1989, a Special Tax Audit Team was created on
June 27, 1990 to conduct investigations and
examinations of tax liabilities of the late president,
his family, associates and cronies. The
may be allowed as deductions
from the gross estate of
decedent
Whether the properties can be
levied despite the pendency of
proceedings on probate of a
will.
gross estate. ""There is no requirement of
formal administration. It is sufficient that the
expense be a necessary contribution toward
the settlement of the case.""
Judicial expenses are expenses of
administration. Administration expenses, as an
allowable deduction from the gross estate of
the decedent for purposes of arriving at the
value of the net estate, have been construed to
include all expenses ""essential to the
collection of the assets, payment of debts or the
distribution of the property to the persons
entitled to it.""
Although the Tax Code specifies ""judicial
expenses of the testamentary or intestate
proceedings,"" there is no reason why
expenses incurred in the administration and
settlement of an estate in extrajudicial
proceedings should not be allowed. However,
deduction is limited to such administration
expenses as are actually and necessarily
incurred in the collection of the assets of the
estate, payment of the debts, and distribution of
the remainder among those entitled thereto
In the case at bar, the notarial fee paid for the
extrajudicial settlement is clearly a deductible
expense since such settlement effected a
distribution of Pedro Pajonar's estate to his
lawful heirs. Similarly, the attorney's fees paid
to PNB for acting as the guardian of Pedro
Pajonar's property during his lifetime should
also be considered as a deductible
administration expense. PNB provided a
detailed accounting of decedent's property and
gave advice as to the proper settlement of the
latter's estate, acts which contributed towards
the collection of decedent's assets and the
subsequent settlement of the estate."
Yes. The court recognized the liberal treatment
of claims for taxes charged against the estate
of the decedent. Such taxes, we said, were
exempted from the application of the statute of
nonclaims, and this is justified by the necessity
 although it may be viewed as an incident
to the complete settlement of an estate,
and, under some statutes, it is made the
duty of the probate court to make the
amount of the inheritance tax a part of
the final decree of distribution of the
estate. It is not against the property of
decedent, nor is it a claim against the
estate as such, but it is against the
interest or property right which the heir
legatee, devisee, etc., has in the
property formerly held by decedent.
Further, under some statutes, it has
been held that it is not a suit or
controversy
between the parties, nor it is an
adversary proceeding between the state
and the person who owes the tax on the
inheritance. However, under other
statutes it has been held that the hearing
and determination of the cash value of
the assets and the determination of the
tax are adversary proceedings. The
proceeding has been held to be
necessary a proceeding in rem. In the
Philippine experience, the enforcement
and collection of estate tax, is executive
in character, as the legislature has seen
it fit to ascribe this task to the Bureau of
Internal Revenue.
9. Dizon v. CIR, G.R. the estate as such, but it is against the
No. 140944, 30 June interest or property right which the heir
2008. legatee, devisee, etc., has in the
property formerly held by decedent.
Further, under some statutes, it has
been held that it is not a suit or
controversy
investigation said that the family failed to file a
written notice of his death.
The CIR then caused the filing of the Estate Tax
return of the late president. The deficiency estate
tax amounted to 23,293,607,638.
The deficiency tax assessments were not protested
administratively, by Imelda Marcos and the other
heirs of the late president, within 30 days
from service of said assessments.
Further, there was levying on the property already,
but his son contested such levying by saying that
the subject properties are under the pendency of
proceedings on probate of a will,
making it under custodia legis.
Petitioner filed a petition for certiorari and
prohibition with an application for TRO before the
CA to annul and set aside the notices of levy as well
as the notice of sale and to enjoin the BIR from
proceeding with the auction. The CA dismissed the
petition ruling that the deficiency assessments for
the estate and income taxes have already become
final and unappealable and may thus be enforced
by summary remedy of levying upon the real
property.
Jose P. Fernandez (Jose) died. Thereafter, a
petition for the probate of his will was filed.
The probate court then appointed retired SC Justice
Dizon and petitioner Aty. Dizon as Special and
Assistant Special Administrator, respectively of the
estate of Fernandez.
Atty. Gonzales wrote a letter addressed to the BIR
Regional Director and filed the estate tax return with
the same BIR Regional Office, showing therein a
NIL estate tax liability. Consequently, BIR Regional
Director issued Certification stating that the taxes
due on the transfer of real and personal properties
of Jose had been fully paid and said properties may
be transferred to his heirs.
Whether the actual claims of
the creditors may be fully
allowed as deductions from
the gross estate of Jose
despite the fact that the said
claims were reduced or
condoned through
compromise agreements
entered into by the Estate with
its creditors
of government funding, immortalized in the
maxim that taxes are the lifeblood of the
government. Vectigalia nervi sunt rei publicae
— taxes are the sinews of the state.
Such liberal treatment of internal revenue taxes
in the probate proceedings extends so far, even
to allowing the enforcement of tax obligations
against the heirs of the decedent, even after
distribution of the estate's properties.
From the foregoing, it is discernible that the
approval of the court, sitting in probate, or as a
settlement tribunal over the deceased is not a
mandatory requirement in the collection of
estate taxes. It cannot therefore be argued that
the Tax Bureau erred in proceeding with the
levying and sale of the properties allegedly
owned by the late President, on the ground that
it was required to
seek first the probate court's sanction. There is
nothing in the Tax Code, and in the pertinent
remedial laws that implies the necessity of the
probate or estate settlement court's approval of
the state's claim for estate taxes, before the
same can be enforced and collected.
Yes. It is admitted that the claims of the Estate's
aforementioned creditors have been condoned
- mode of extinguishing an obligation. It may be
fully allowed as deductions following the Date-
of-Death Valuation Rule.
There is no law, nor do we discern any
legislative intent in our tax laws, which
disregard the date-of-death valuation principle
and particularly provide that post-death
developments must be considered in
determining the net value of the estate. It bears
emphasis that tax burdens are not to be
imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports,

10. CIR v. Fisher, G.R. Section 122 of the National Internal
No. L-11622, January Revenue Code exempts payment of both
28, 1961. estate and inheritance taxes on
intangible personal properties if the laws
of the foreign country of which the
decedent was a resident at the time of
his death allow a similar exemption from
transfer taxes or death taxes of every
character in respect of intangible
personal property owned by citizens of
the Philippines not resident of that
foreign country. On the other hand ,
Section 13851 of the California Law
exempts the payments of inheritance tax
if the laws of the country in which the
decedent resided allow a similar
exemption from legacy, succession, or
death taxes of every character. It is clear
from these provisions that the reciprocity
must be total, that is, with respect to
transfer or death taxes of any and every
character, in the case of the Philippines
law, and to legacy, succession, or death
tax of any and every character, in the
case of the California law. Therefore, if
any of the two states collects or imposes
and does not exempt any transfer, death,
legacy, or succession tax of any
Petitioner requested the probate court's authority to
sell several properties forming part of the Estate, for
the purpose of paying its creditors. However, the
Assistant Commissioner for Collection of the BIR,
issued Estate Tax Assessment Notice demanding
the payment of P66,973,985.40 as deficiency
estate tax.
"The decedent is a British subject born in the
Philippines. He was married in Manila to Beatrice,
another British subject. He died in 1951 in California
where he and his wife moved to. Among the
properties acquired by the spouses in the
Philippines were 210,000 shares of stock of
Mindanao Mother Lode Mines, Inc.
Ian Murrat Statt (Statt), the appointed ancillary
administrator of his estate and an estate and
inheritance tax return. He made a preliminary return
to secure the waiver of the CIR on the inheritance
of the Mines shares of stock.
Beatric assigned all her rights and interests in the
estate to the spouses Fisher. Statt filed amended
return filed by the ancillary administrator, an
exemption pertaining to the above-stated shares
was claimed to amount to Php4,000.00.
CFI ruled that 1/2 share of Beatrice should be
deducted from the net estate of Walter, (b) the
intangible personal property belonging to the estate
of Walter is exempt from inheritance tax pursuant to
the reciprocity proviso in NIRC.
" the estate tax, we do not thereby entitle a
tax statutes being construed strictissimi juris
against the government. Any doubt on whether
a person, article or activity is taxable is
generally resolved against taxation.
Further, such construction finds relevance and
consistency in our Rules on Special
Proceedings wherein the term "claims"
required to be presented against a decedent's
estate is generally construed to mean debts or
demands of a pecuniary nature which could
have been enforced against the deceased in
his lifetime, or liability contracted by the
deceased before his death.
Hence, the claims existing at the time of death
are significant to, and should be made the basis
of, the determination of allowable deductions.
Whether the estate of No. In the Philippines, upon the death of any
Stevenson can avail itself of citizen or resident, or non-resident with
the reciprocity proviso properties therein, there are imposed upon his
embodied in Section 122 of estate and its settlement, both an estate and an
the NIRC. inheritance tax. Under the laws of California,
only inheritance tax is imposed. On the other
hand, the Federal Internal Revenue Code
imposes an estate tax on non-residents not
citizens of the United States, but does not
provide for any exemption on the basis of
reciprocity. Applying these laws in the manner
the Court of Tax Appeals did in the instant case,
we will have a situation where a Californian,
who is non-resident in the Philippines but has
intangible personal properties here, will be
subject to the payment of an estate tax,
although exempt from the payment of the
inheritance tax. This being the case, will a
Filipino, non-resident of California, but with
intangible personal properties there, be entitled
to the exemption clause of the California law,
since the Californian has not been exempted
from every character of legacy, succession, or
death tax because he is, under our law, under
obligation to pay an estate tax? Upon the other
hand, if we exempt the Californian from paying
Filipino to be exempt from a similar estate tax
 character, the reciprocity does not work.
This is the underlying principle of the
reciprocity clauses in both laws. Since in
the Philippines two taxes are collectible
from the decedent’s estate (inheritance
and estate taxes) and in California, only
inheritance tax, reciprocal exemption of
the inheritance tax in both countries,
leaving payable the estate tax in the
Philippines, will not work as that would
violate the California law that authorizes
exemption only when there is in the other
country an exemption from legacy,
succession or death taxes of every
character. Held: There could not be
partial reciprocity. It would have to be
total or none at all.
DONOR’S TAX
Case Title Case Principle
1. Republic v. AFP The processes of the State should not be
Retirement and trifled with. The failure of a party to avail
Separation Benefits of the proper remedy to acquire or
System, G.R. No. perfect one’s title to land cannot justify a
180463, January 16, resort to other remedies which are
2013. otherwise improper and do not provide
for the full oppot1unity to prove his title,
but instead require him to concede it
before availment.
Summary of Facts
Lots X, Y-1 and Y-2 were lands of the public domain
pursuant to Proclamation No. 168 (Proc. 168). In
1983, Proclamation No. 2273 (Proc. 2273) was
issued which removed and segregated Lots Y-1
and Y-2 from the reservation and declaring them
open for disposition to qualified applicants. As a
result, only Lot X which consists of 15,020 square
meters remained part of the reservation now known
as Magsaysay Park.The record discloses that the
heirs of CabaloKusop and Atty. Flaviano petitioned
the President to have Lots Y-1 and Y-2 taken out of
the reservation for the reason that through their
predecessor CabaloKusop (Kusop), they have
acquired vested private rights over these lots. This
campaign resulted in Proc. 2273, which re-
classified and returned Lots Y-1 and Y-2 to their
original alienable and disposable state.
In 1997, the heirs and Flaviano filed applications for
the issuance of individual miscellaneous sales
patents over the whole of Lot X. Consequently, 16
original certificates of title (OCTs) covering Lot X
were issued in the names of the heirs, Flaviano and
Issue/s
Did the CA err in ruling that the
lands in question are alienable
and disposable lands?
in California because under the Federal Law,
which is equally enforceable in California, he is
bound to pay the same, there being no
reciprocity recognized in respect thereto. In
both instances, the Filipino citizen is always at
a disadvantage. We do not believe that our
legislature has intended such an unfair
situation to the detriment of our own
government and people. We, therefore, find
and declare that the lower court erred in
exempting the estate in question from payment
of the inheritance tax.
Ruling
From the wording of Proc. 168, the land it comprises is subject to
thus alienable and disposable. However, this alienable and disp
land covered by the proclamation was subsequently withdrawn
classified by then President Macapagal to pave the way for the e
reservation, subject only to previously acquired private rights. Th
the exclusion of certain portions of the reservation which they
allegedly acquired by their predecessor Kusop through pre
successful, for in 1983, then President Marcos issued Proc. 227
segregated Lots Y-1 and Y-2 from the coverage of Proc. 168.
declared Lots Y-1 and Y-2 open for distribution to qualified bene
the heirs. However, Lot X was retained as part of the reservation
The heirs and Flavianos actions betray their claim of ownership
168 was issued, they did not institute action to question its vali
action their claimed ownership and title over the land. The same i
came out. They did not file suit to invalidate it because it con
ownership over Lot X. They simply sat and waited for the good gra
to fall on their laps. They simply waited for the State to declare th
land.

2. Republic of the "Three essential elements of a donation:
Philippines v. David 1. Reduction in the patrimony of the
Rey Guzman, G.R. No. donor 2. Increase in the patrimony of the
132964, February 18, donee 3. Intent to do an act of liberality
2000. or nimus donandi
It is also required that the donation be
made in a public document and that its
acceptance be made in the same deed
of donation or in a separate public
document, which has to be recorded as
well."
several others. These 16 titles were simultaneously
conveyed to respondent AFP-Retirement and
Separation Benefits System (AFP-RSBS).
David Rey Guzman, a natural-born American
citizen, is the son of the spouses Simeon Guzman
(naturalized American) and Helen Meyers Guzman
(American citizen). In 1968, Simeon died leaving to
his heirs, Helen and David, an estate consisting of
several parcels of land in Bulacan.
In 1970, Helen and David executed a Deed of
Extrajudicial Settlement of the Estate, dividing and
adjudicating to themselves all of the property, and
registered it to the RD a year after.
In 1981, Helen executed a Deed of Quitclaim,
assigning, transferring and conveying her ½ share
of the properties to David. But since it was not
registered, she executed another Deed of
Quitclaim to confirm the first.
In 1994, Atty. Batongbacal wrote the OSG
andfurnished it with documents showing that
David’s ownership of ½ of the estate was defective.
He argued that Art. XII of the Constitution only
allows Filipinos to acquire private lands in the
country. The only instances when a foreigner may
acquire private property are by hereditary
succession and if he was formerly a natural-born
citizen who lost his Filipino citizenship. Moreover, it
contends that the Deeds of Quitclaim executed by
Helen were really donations inter vivos.
Whether or not there was a Not all the elements of a donation are present.
donation inter vivos The transfer of the properties by virtue of a
Deed of Quitclaim resulted in the (1) reduction
of her patrimony as donor and the (2)
consequent increase in the patrimony of
David as donee. However, Helen’s (3)
intention to perform an act of liberality in favor
of David was not sufficiently established. The
2 Quitclaims reveal that Helen intended to
convey to her son certain parcels of land and
to re-affirm it, she executed a waiver and
renunciation of her rights over these
properties. It is clear that Helen merely
contemplated a waiver of her rights, title,
interest over the lands in favor of David, not a
donation. She was also aware that donation
was not possible.
Moreover, the essential element of
acceptance in the proper form and registration
to make the donation valid is lacking. The SPA
executed by David in favor of Atty. Abela was
not his acceptance, but an acknowledgment
that David owns the property referred to and
that he authorizes Atty. Abela to sell the same
in his name. Further, there was nothing in the
SPA to show that he indeed accept the
donation.
However, the inexistence of a donation does
not make the repudiation of Helen in favor
David valid. There is NO valid repudiation of
inheritance as Helen had already accepted
her share of the inheritance when she,
together with David, executed a Deed of
Extrajudicial Settlement of the Estate, dividing
and adjudicating between them all the
properties. By virtue of that settlement, the
properties were registered in their names and
for 11 years, they possessed the land in the
concept of owner. Thus, the 2 Quitclaims
have no legal force and effect. Helen still owns
½ of the property.
3. Manuel G. Abello, et Donative intent is a creature of the mind.
al. v. CIR, G.R. No. It cannot be perceived except by the
120721. February 23, material and tangible acts which
2005. manifest its presence. This being the
case, donative intent is presumed
present when one gives a part of ones
patrimony to another without
consideration. Donative intent is not
negated when the person donating has
other intentions, motives or purposes
which do not contradict donative intent
4. Lydia Sumipat, et al. Title to immovable property does not
vs. Brigido Banga, et pass from the donor to the donee by
al., G.R. No. 155810, virtue of a deed of donation until and
August 13, 2004. unless it has been accepted in a public
instrument and the donor duly notified
thereof.
During the 1987 national elections, petitioners, who
are partners in the ACCRA law firm, contributed
P882,661.31 each to the campaign funds of
Senator Edgardo Angara, then running for the
Senate. The BIR then assessed each of the
petitioners P263,032.66 for their contributions.
Petitioners questioned the assessment claiming
that political or electoral contributions are not
considered gifts under NIRC therefore, not liable for
donors tax. The claim for exemption was denied by
the Commissioner.
The BIR denied their motion. They then filed a
petition with the CTA, which was granted.
On appeal, the CA again held in favor of the BIR.
Lauro Sumipat executed a document denominated
“DEED OF ABSOLUTE TRANSFER AND/OR
QUIT-CLAIM OVER REAL PROPERTIES” (the
assailed document) in favor of defendants-
appellees covering the three parcels of land (the
properties). On the document appears the
signature of his wife Placida indicating her marital
consent thereto.
It appears that when the assailed document was
executed, Lauro Sumipat was already very sick and
bedridden; that upon defendant-appellee Lydia’s
Whether the contributions are
liable for donor's tax.
Whether the questioned deed
by its terms or under the
surrounding circumstances
has validly transferred title to
the disputed properties to the
petitioners?
Yes. The NIRC does not define transfer of
property by gift. However, the Civil Code, by
reference, considers such as donations. The
present case falls squarely within the
definition of a donation. There was intent to do
an act of liberality or animus donandi was
present since each of the petitioners gave
their contributions without any consideration.
Taken together with the Civil Code definition
of donation, Section 91 of the NIRC is clear
and unambiguous, thereby leaving no room
for construction.
Petitioners contribution of money without any
material consideration evinces animus
donandi. The fact that their purpose for
donating was to aid in the election of the
donee does not negate the presence of
donative intent.
Petitioners raise the fact that since 1939 when
the first Tax Code was enacted, up to 1988
the BIR never attempted to subject political
contributions to donors tax.
This Court holds that the BIR is not precluded
from making a new interpretation of the law,
especially when the old interpretation was
flawed. It is a well-entrenched rule that
NO. A perusal of the deed reveals that it is
actually a gratuitous disposition of property —
a donation — although Lauro Sumipat
imposed upon the petitioners the condition
that he and his wife, Placida, shall be entitled
to one-half (1/2) of all the fruits or produce of
the parcels of land for their subsistence and
support.
Title to immovable property does not pass
from the donor to the donee by virtue of a
deed of donation until and unless it has been
 request, their neighbor Benjamin Rivera lifted the
body of Lauro Sumipat whereupon Lydia guided his
(Lauro Sumipat’s) hand in affixing his signature on
the assailed document which she had brought; that
Lydia thereafter left but later returned on the same
day and requested Lauro’s unlettered wife Placida
to sign on the assailed document, as she did in
haste, even without the latter getting a responsive
answer to her query on what it was all about.
After Lauro Sumipat’s death, his wife Placida,
hereinafter referred to as plaintiff-appellant, and
defendants-appellees jointly administered the
properties 50% of the produce of which went to
plaintiff-appellant.
As plaintiff-appellant’s share in the produce of the
properties dwindled until she no longer received
any and learning that the titles to the properties in
question were already transferred/made in favor of
the defendants-appellees, she filed a complaint for
declaration of nullity of titles, contracts, partition,
recovery of ownership now the subject of the
present appeal.
5. Sps. Gestopa v. CA, In ascertaining the intention of the donor, Spouses Danlag own six parcels of land. To four
G.R. No. 111904, 5 all of the deed’s provisions parcels of land, they executed a donation mortis
October 2000. must be read together. causa in favor of respondent Mercedes Danlag-
Pilapil, reserving donor's rights to amend, cancel,
or revoke the donation and to sell or encumber
such properties. Years later, they executed another
donation, this time inter vivos, to six parcels of land
in favor of respondents, reserving their rights to the
fruits of the land during their lifetime and for
prohibiting the donee to sell or dispose the
properties donated. Subsequently, the spouses
sold 2 parcels to herein petitioners, spouses
Gestopa, and eventually revoking the donation.
Respondent filed a petition to quiet title, stating that
she had already become the owner of the parcels
of land. Trial Court ruled in favor of petitioners, but
CA reversed.
accepted in a public instrument and the donor
duly notified thereof. The acceptance may be
made in the very same instrument of
donation. If the acceptance does not appear
in the same document, it must be made in
another. Where the deed of donation fails to
show the acceptance, or where the formal
notice of the acceptance, made in a separate
instrument, is either not given to the donor or
else not noted in the deed of donation and in
the separate acceptance, the donation is null
and void.
In this case, the donees’ acceptance of the
donation is not manifested either in the deed
itself or in a separate document. Hence, the
deed as an instrument of donation is patently
void.
Neither can we give effect to the deed as a
sale, barter or any other onerous conveyance,
in the absence of valid cause or consideration
and consent competently and validly given.
Whether the (second) It was donation inter vivos. The spouses were
donation was inter vivos or aware of the difference between the two
mortis causa donations, and that they needed to execute
another deed of donation inter vivos, since it
has a different application to a donation mortis
causa. Also, the court stated four reasons to
the matter: (1) that the spouses donated the
parcels of land out of love and affection, a
clear indication of a donation inter vivos; (2)
the reservation of a lifetime usufruct; (3)
reservation of sufficient properties for
maintenance that shows the intention to part
with their six lot; and (4) respondent's
acceptance, contained in the deed of
donation. Once a deed of donation has been
accepted, it cannot be revoked, except for

6. Rev/Atty. Tayoto v. The Bureau of Internal Revenue should
Heirs of Cabalo Kusop be given, in instances like the case at
et. Al., G.R. No. 74203, bar, the necessary discretion to avail
April 17, 1990. itself of the most expeditious way to
collect the tax as may be envisioned in
the particular provision of the Tax Code
above quoted, because taxes are the
lifeblood of Government and their
prompt and certain availability is an
imperious need.
On 1945, Atanasio Pineda died, leaving his wife
and 15 children his estate. One of the children,
Manuel B. Pineda, had a share that amounted to
about P2,500.00. After the estate proceedings
were closed, the BIR investigated the income
tax liability of the estate for the years 1945, 1946,
1947 and 1948 to which amounted to a total of
P760.28 (the whole tax on the estate). Manuel B.
Pineda opposes on the ground that as an heir he is
liable for unpaid income tax due the estate only up
to the extent of and in proportion to any share he
received. He relies on Government of the Philippine
Islands vs. Pamintuan, where We held that "after
the partition of an estate, heirs and distributees are
liable individually for the payment of all lawful
outstanding claims against the estate in proportion
to the amount or value of the property they have
respectively received from the estate.
officiousness or ingratitude, which the
spouses failed to invoke
whether or not the The Government can require Manuel B.
government can require Pineda to pay the full amount of the taxes
manuel pineda to pay the full assessed.
amount of taxes assessed Liability of Heir for Tax Due the Estate Pineda
is liable for the assessment as an heir and as
a holder- transferee of property belonging to
the estate/taxpayer. As an heir he is
individually answerable for the part of the tax
proportionate to the share he received from
the inheritance. His liability however cannot
exceed the amount of his share. As a holder
of property belonging to the estate, Pineda is
liable for the tax up to the amount of the
property in his possession. The reason is that
the Government has a lien on the P2,500.00
received by him from the estate as his share
in the inheritance, for unpaid income taxes for
which said estate is liable, pursuant to the last
paragraph of Section 315 of the Tax Code. By
virtue of such lien, the Government has the
right to subject the property in Pineda's
possession, i.e., the P2,500.00, to satisfy the
income tax assessment in the sum of
P760.28. After such payment, Pineda will
have a right of contribution from his co-heirs,
to achieve an adjustment of the proper share
of each heir in the distributable estate.
The Government has two ways of collecting
the taxes in question. One, by going after all
the heirs and collecting from each one of them
the amount of the tax proportionate to the
inheritance received. Another, pursuant to the
lien
created by Section 315 of the Tax Code upon
all property and rights to property belonging to
the taxpayer for unpaid income tax, is by
subjecting said property of the estate which is
in the hands of an heir or transferee to the
payment

VALUE ADDED TAX
Case Title Case Principle
1. CIR v. Deutsche Even though the Petitioner was able to
Knowledge Services present the SEC Certifications of Non-
Pte. Ltd., G.R. No. registration of its clientele, the absence
234445, July 15, 2020 of the Articles of Association/Certificates
of Incorporation of some of its clients
proving that the affiliate/client is not doing
business here in the Philippines was fatal
to its claim for credit or refund of excess
input VAT attributable to zero-rated
sales.
2. CIR v. Filminera Sales made to a BOI-registered buyer
Resources are export sales subject to the zero
Corporation, G.R. No. percent rate if the following conditions
236325, September 16, are met: (I) the buyer is a BOI-registered
2020. manufacturer/producer; (2) the buyer's
Summary of Facts
Petitioner is a licensed branch to operate as a
regional operating headquarter (ROHQ) that
provides general administration and planning,
sourcing, logistics services, personnel
management, and other related services
(“qualifying services”) to its foreign affiliates/related
parties. Petitioner filed an administrative claim for
refund of unutilized input VAT for its zero-rated
sales to foreign affiliates-clients.
The Petitioner is of the position that its sale of
services was subject to zero-rated VAT pursuant to
Section 112 of the NIRC. In order to support its
claim for zero-rated VAT, Petitioner presented the
SEC Certification of Non-registration of Company
and Authenticated Articles of Association and/or
Certificates of Registration/Good
Standing/Incorporation in order to establish the
Non-resident Foreign Corporation (NRFC) status of
some of its clientele.
Company C, a domestic corporation registered with
the Board of Investments (BOI), entered into a
Sales and Purchase Agreement with Company D.
For the third and fourth quarters of the FY ending
June 30, 2010, Company D 's sales were all made
Issue/s
Is the Petitioner entitled to a
claim for refund or issuance of
tax credit certificate for its
unutilized input VAT?
Is the BOI Certification
presented a sufficient
document to prove that sales
were exported?
of the tax due the estate. This second remedy
is the very avenue the Government took in this
case to collect the tax. The Bureau of Internal
Revenue should be given, in instances like
the case at bar, the necessary discretion to
avail itself of the most expeditious way to
collect the tax as may be envisioned in the
particular provision of the Tax Code above
quoted, because taxes are the lifeblood of
Government and their prompt and certain
availability is an imperious need.
Ruling
No. It was declared that Petitioner is not
entitled to a tax refund/credit by reason of its
failure to prove that all their clients were
indeed foreign corporations doing business
outside the Philippines pursuant to Section
4.112-1(a) of RR No. 16-05 in relation to
Section 112 of
the NIRC.
Even though the Petitioner was able to
present the SEC Certifications of Non-
registration of its clientele, the absence of the
Articles of Association/Certificates of
Incorporation of some of its clients proving that
the affiliate/client is not doing business here in
the Philippines was fatal to its claim for credit
or refund of excess input VAT attributable to
zero-rated sales.
The Petitioner in this case was only able to
prove the NRFC status of 11 foreign
affiliates/clients out of the initial 34 entities it
claimed.
No, a BOI Certification presented was not a
sufficient document to prove that sales were
exported.
Sales made to a BOI-registered buyer are
 products are 100% exported; and (3) the
BOI certified that the buyer exported
100% of its products. For this purpose,
the BOI Certification is vital for the seller-
taxpayer to avail of the benefits of zero-
rating. The certification is evidence that
the buyer exported its entire products
and shall serve as authority for the seller
to claim for refund or tax credit.
3. CIR v. Philex Mining The law does not require that subsidiary
Corporation, G.R. No. journals where the sales and purchases
230016, November 23, (and the output taxes and their
2020. corresponding input taxes) were
recorded, are also kept. Indeed, courts
may not, in the guise of interpretation,
enlarge the scope of a statute and
include therein situations not provided
nor intended by the lawmakers. To do so
would be to do violence to the language
to Company C. On March 30, 2012 and June 29,
2012, Company D filed administrative claims for
refund or issuance of Tax Credit Certificates of its
unutilized input VAT attributable to its zero-rated
sales for the third and fourth quarters. Thereafter,
on August 16, 2012 and November 23, 2012,
Company D filed separate petitions for review
before the CTA.
The CTA Division initially denied Company D’s
petition on the ground of insufficiency of evidence.
In seeking reconsideration, Company D submitted
a certified true copy of a BOI Certification to
establish that Company C was a BOI-registered
enterprise that exported its total sales volume from
July 1, 2009 to June 30, 2010. The CTA Division
amended its decision and granted the refund to
Company D. The CTA En Banc adopted the CTA
Division’s decision.
Company P filed its claims for refund on the excess
input tax arising from its zero-rated sales with the
Department of Finance (DOF)’s One-Stop Shop
Center (OSS). Petitioner CIR alleged that
Company P did not submit to the DOF-OSS the
required checklist of documents, and Company P
failed to comply with the accounting requirements,
specifically the keeping of subsidiary sales journal
and subsidiary purchase journal, and the filing of
monthly VAT declarations as required by RR No.
16-2005. The CTA in Division, as affirmed by the
Are tax declarations and
subsidiary journals part of the
requirements of the law for the
grant
of tax credit or refund, and is it
the obligation of respondent
to prove compliance thereto?
export sales subject to the zero percent rate if
the following conditions are met: (I) the buyer
is a BOI-registered manufacturer/producer;
(2) the buyer's products are 100% exported;
and (3) the BOI certified that the buyer
exported 100% of its products. For this
purpose, the BOI Certification is vital for the
seller-taxpayer to avail of the benefits of zero-
rating. The certification is evidence that the
buyer exported its entire products and shall
serve as authority for the seller to claim for
refund or tax credit.
A plain reading of the certification shows that
Company C exported 100% of its total sales
volume/value, from January 1 to December
31, 2009. However, nothing in the certification
shows that Company C similarly exported its
entire products for the third and fourth quarters
of FY 2010, or from January 1 to June 30,
2010. The validity period of the BOI
certification (January 01 to December 31,
2010) should not be confused with the period
identified in the certification when the buyer
actually exported 100% of its products.
In order for the sales made to Company C
during the third and fourth quarters of FY 2010
qualify as zero-rated sales, the BOI must still
certify that Company C actually exported its
entire product from January 1 to December
31, 2010. The BOI Certification failed to
ascertain this fact.
No. There was nothing in the Tax Code or in
RR No. 16-2005 that would suggest that the
subsidiary journals and monthly VAT
declarations are part of the substantiation
requirements that must be complied with to
support a claim for tax refund or credit. The
language used in Section 110 of the Tax Code
is plain, clear, and unambiguous. To be
creditable, the input taxes must be evidenced
by validly issued invoices and/ or official
receipts containing the information
 of the law and to invade the legislative
sphere.
4. CIR v. Federation of Membership fees, assessment dues,
Golf Clubs of the and the like are neither income nor part
Philippines, Inc., G.R. of gross receipts of recreational clubs;
No. 226449, July 28, hence, they are not taxable insofar as
2020 income tax and VAT are concerned.
CTA En Banc, ruled that Company P timely filed its
administrative and judicial claims for refund and
that properly it attached the required documents to
support its claims.
Federation of Golf Clubs of the Philippines, Inc.
(FEDGOLF) questioned the validity of Revenue
Memorandum Circular (RMC) No. 35-2012 issued
by the Commissioner of Internal Revenue (CIR)
before the Regional Trial Court (RTC).
RMC No. 35-2012 clarifies the taxability of clubs
that are organized and operated exclusively for
pleasure, recreation, and other non-profit purposes
(recreational clubs), and provides that the income
of such clubs from whatever source, including
membership fees, assessment dues, rental
income, and service fees are subject to income tax,
and that the recreational club’s gross receipts
including membership fees, assessment dues,
rental income and service fees are subject to value-
added tax (VAT).
The CIR argues that a recreational club’s income
from whatever source is subject to income tax.
Moreover, the CIR maintained that the Tax Code
provides that non-stock, non-profit organizations
are subject to VAT on their sale of goods and
services.
The RTC declared RMC No. 35-2012 invalid and
the CIR appealed to the Supreme Court.
enumerated in Sections 113 and 237. The law
does not require that subsidiary journals
where the sales and purchases (and the
output taxes and their corresponding input
taxes) were recorded, are also kept. Indeed,
courts may not, in the guise of interpretation,
enlarge the scope of a statute and include
therein situations not provided nor intended by
the lawmakers. To do so would be to do
violence to the language of the law and to
invade the legislative sphere. In all, Company
P’s failure to maintain subsidiary sales and
purchase journals or to file the monthly VAT
declarations should not result in the outright
denial of its claim for refund or credit of
unutilized input VAT attributable to its zero.
Is the issuance of RMC No. No, RMC No. 35-2012 is invalid. The
35-2012 valid? interpretation under RMC No. 35-2012 is
erroneous as it effectively eradicated the
distinction between “income” and “capital”
when it classified membership dues,
assessment fees, and the like as “income”
which are subject to income tax.
Income is the “amount of money coming to a
person or corporation within a specified time,
whether as payment for services, interest or
profit from investment” while capital is the
“fund” or “wealth.”
Membership fees and the like are considered
as “capital” as they are intended for the
upkeep of the facilities and operations of
recreational clubs, and not to generate
revenue. Only the recreational club’s income
is subject to income tax.
RMC No. 35-2012 also erroneously included
the membership dues and the like as part of
gross receipts of recreational clubs which are
subject to VAT. In collecting such fees from
members, recreational clubs are not selling
any kind of service, in the same way that
members are not procuring services from
them. Thus, there could be no “sale, barter, or

5. CIR v. Chevron RMO No. 53-98 is not a benchmark in
Holdings, Inc. G.R. No. determining whether the documents
233301, February 17, submitted by a taxpayer are actually
2020. complete to support a claim for tax credit
or refund of excess unutilized input VAT.
RMO No. 53-98 assumes relevance only
on matters pertinent to an audit of tax
liabilities, not for a claim of refund of input
tax. The law allows the taxpayer to file an
administrative claim for refund with the
BIR within 2 years after the close of the
taxable quarter when the purchase was
made (for the input tax paid on capital
goods) or after the close of the taxable
quarter when the zero-rated or effectively
zero-rated sale was made (for input tax
attributable to zero-rated sale)
Respondent Chevron is a corporation duly
organized and existing under the laws of the State
of Delaware, USA. It is licensed by the SEC to
transact business in the Philippines as regional
operating headquarters (ROHQ) and duly
registered with the BIR as a Value-Added Tax
(VAT) taxpayer. As ROHQ, it established a shared
services center in the Philippines that provides
finance, information technology, human resource,
procurement and customer interaction services to
its affiliates, subsidiaries or branches in the Asia
Pacific and North America Regions.
On November 2, 2010, Chevron filed with the BIR
an Application for Tax Credits/Refunds (BIR Form
1914) of its excess and unutilized input VAT credits
for the four taxable quarters of 2009.
Upon CIR’s failure to act on the refund claim,
Chevron filed a Petition for Review before the Court
of Tax Appeals (CTA) in Division on March 23,
2011. The CTA in Division partially granted the
refund claim. Both Chevron and the CIR filed their
petitions before the CTA En Banc which affirmed
the decision of the CTA in Division. The CIR moved
for reconsideration but the same was denied.
Hence, this Petition for Review before the Supreme
Court (SC).
(1) Is the failure of the
taxpayer to submit all the
documents enumerated in
Revenue Memorandum Order
(RMO) No. 53-98 fatal to its
judicial claim for VAT refund?
(2) Did Chevron timely file the
application for tax credit or
refund of excess unutilized
input VAT?
exchange of goods or services” that is subject
to VAT.
(1) No. RMO No. 53-98 is addressed to
internal revenue officers and employees, for
purposes of equity and uniformity, to guide
them as to what documents they may require
taxpayers to present upon audit of their tax
liabilities. Nothing stated in the issuance would
show that it was intended to be a benchmark
in determining whether the documents
submitted by a taxpayer are actually complete
to support a claim for tax credit or refund of
excess unutilized input VAT.
Further, RMO No. 53-98 assumes relevance
only on matters pertinent to an audit of tax
liabilities. Thus, it finds no application in the
present case since Chevron’s claim is one for
refund of its input tax. Chevron submitted all
documents it deemed necessary for the grant
of its refund claim and the CIR did not notify
Chevron of the document it failed to submit, if
any.
(2) Yes. Section 112 (A) and (C) of the Tax
Code supplies the periods relative to the filing
of a claim for VAT refunds.
As such, the law allows the taxpayer to file an
administrative claim for refund with the BIR
within 2 years after the close of the taxable
quarter when the purchase was made (for the
input tax paid on capital goods) or after the
close of the taxable quarter when the zero-
rated or effectively zero-rated sale was made
(for input tax attributable to zero-rated sale).
The CIR must then act on the claim within 120
days from the submission of complete
documents in support of the application. In the
event of an adverse decision, the taxpayer
may elevate the matter to the CTA by way of
a petition for review within 30 days from the
receipt of the CIR’s decision. If, on the other
hand, the 120-day period lapse without any
 action from the CIR, the taxpayer may validly
treat the inaction as denial and file a petition
for review before the CTA within 30 days from
the expiration of the 120-day period. An
appeal taken prior to the expiration of the 120-
day period without a decision or action of the
CIR is premature, without a cause of action,
and therefore, dismissible on the ground of
lack of jurisdiction.

6. CIR v. First E-Bank Condominium association dues, fees, The First E-Bank Tower Condominium Corp. (First
Tower Condominium and other charges are not subject to E-Bank) filed a petition to declare as invalid BIR
Corp., G.R. No. income tax, VAT, and withholding tax. Revenue Memorandum Circular No. 65-2012
215801.218924, (RMC No. 65-2012). In its petition alleging that:
January 15, 2020. 1. It is a non-stock non-profit condominium
corporation; RMC No. 65-2012 burdened the
owners of the condominium units with income tax
and Value-Added Tax (VAT) on their own money
which they exclusively used for the maintenance
and preservation of the building and its premises;
2. RMC No. 65-2012 was oppressive and
confiscatory because it required condominium unit
owners to produce additional amounts for the thirty-
two percent (32%) income tax and twelve percent
(12%) VAT.
Whether or not the No. Association dues, membership fees, and
condominium dues and other assessments/charges collected by a
membership fees collected by condominium corporation are not subject to
a condominium corporation income tax, VAT, and withholding tax. The
are taxable? expenditures incurred by the condominium
corporation on behalf of the condominium
owners are not intended to generate revenue
nor equate to the cost of doing business. The
association dues, fees, and other charges are
collected purely for the benefit of the
condominium owners and are incidental to
condominium corporation’s responsibility to
oversee, maintain, or even improve the
common areas of the condominium as well as
its governance.

7. CIR v. Bases Sale proceeds of certain properties Bases Conversion & Development Authority, a
Conversion & which are deemed appropriated by government-owned and controlled corporation
Development Congress to specific recipients are (GOCC), sold real properties in Bonifacio Global
Authority, G.R. No. exempt from all kinds of fees and taxes. City to a joint venture (JV). After the GOCC failed
217898, January 6, to obtain a certificate of tax exemption for the sale,
2020 the JV withheld taxes and remitted the same to the
BIR. Due to the Commissioner of Internal
Revenue’s (CIR) inaction on the claim for refund
filed by the GOCC, the claim was elevated to the
Court of Tax Appeals (CTA). The CTA, both in
Division and En Banc, affirmed the claim for refund
of creditable withholding taxes (CWT) in
connection with the sale of the aforementioned real
properties.
Whether or not Bases
Conversion & Development
Authority is exempt from
Creditable Withholding Tax
on the sale of its Global City
properties.
Yes. The Court ruled that the GOCC is exempt
from CWT on the sale of the real properties in
Bonifacio Global City. Such exemption is
found on Section 8 of the Bases Conversion
and Development Act. Under the said
provision of the law, the sale proceeds of
certain properties are deemed appropriated
by Congress to specific recipients.
Consequently, the sale proceeds are not the
income of the GOCC but public funds subject
to the distribution scheme and purposes
provided in the law itself.Further, the said
provision expressly enjoins that the proceeds
of the sale shall not be diminished by any item
or circumstance, including all forms of taxes
and fees.
In addition, Section 27 of the Tax Code, as
amended, did not repeal the tax exemption

8. Power Sector Asset Sale of the power plants by a GOCC not The Power Sector Assets and Liabilities
and Liabilities “in the course of trade or business” as Management Corporation (PSALM), a assets (power plants) by
Management contemplated by the Tax Code is not government-owned and controlled corporation
Corporation v. CIR, subject to VAT. created under the Electric Power Industry Reform
G.R. No. 226556, July Act of 2001 (or EPIRA Law), is mandated to
3, 2019. manage the orderly sale, disposition, and
privatization of the National Power Corporation’s
(NPC’s) generation assets, real estate and other
disposable assets, and Independent Power
Producer contracts with the objective of liquidating
all NPC financial obligations and stranded contract
costs in an optimal manner.
The BIR assessed PSALM for deficiency VAT for
the year 2008, alleging that PSALM’s sales of
generating assets (power plants), lease of the
Naga Complex, collection of income and
receivables should be subject to the 12% VAT.
PSALM filed its protest, arguing that the
privatization of the NPC’s assets is an original
mandate of PSALM and hence, the above
transactions are not subject to VAT.
Upon denial of the protest, PSALM appealed to the
CTA, which ruled that the sale of generating assets
of PSALM is subject to VAT since this was done in
the course of PSALM’s trade or business, and that
the Tax Code, as amended by Republic Act No.
9337, placed the electric power industry under the
VAT system.
Are the sales of generating
PSALM subject to VAT?
under Section 8 of the Bases Conversion and
Development Act. The former is a general law
while the latter is a special law. As a rule, a
general law cannot impliedly repeal a special
law.
No, the sales are not subject to VAT.
This issue has been passed upon in the 2017
case of PSALM vs. Commissioner of Internal
Revenue, where the Court ruled that the BIR’s
position is anchored on the wrong premise
that PSALM is a successor-in-interest of the
NPC.
Under its charter, the NPC is mandated to
“undertake the development of hydroelectric
generation of power and the production of
electricity from nuclear, geothermal and other
sources, as well as the transmission of electric
power on a nationwide basis.” Under the
EPIRA Law, which restructured the electric
power industry into generation, transmission,
distribution, and supply sectors, the NPC is
now primarily mandated to perform missionary
electrification functions. PSALM, on the other
hand, was created to liquidate all of the NPC’s
financial obligations.
PSALM is not a successor-in-interest of the
NPC and therefore, the repeal of the NPC’s
VAT exemption does not affect PSALM.
Even if PSALM is deemed a successor-in-
interest of the NPC, still the sale of the power
plants is not “in the course of trade or
business” as contemplated by the Tax Code
and, is therefore, not subject to VAT.
The sale of the power plants is not in pursuit
of a commercial or economic activity, but of a
governmental function mandated by law to
privatize NPC generation assets. The sale of
the power plants is clearly not the same as the
sale of electricity by generation, transmission,
and distribution companies, which is subject to
VAT under the Tax Code.
This is similar to the 2006 case of Magsaysay
 Lines where the Court ruled that the sale of
vessels of the National Development
Company to Magsaysay Lines is not subject to
VAT since it was not made in the course of
trade or business, as it was involuntary and
made pursuant to the government’s policy of
privatization.
PSALM is also not liable to pay VAT on the
following activities: a) lease of the Naga
Complex; b) collection of income from
participation fees, site visit fees, plant CDs,
photocopying charges and data room access
fees; and c) collection of receivables from
employees for the excess utilization of allowed
mobile phone services, inventory variance
receivables from the custodian, refunds from
a successor-generation company of the
insurance premiums paid by PSALM and
interest from mandatory dollar deposits.
Under the EPIRA Law, PSALM, as the
conservator of NPC assets, operated and
maintained NPC assets and manages its
liabilities in trust for the national government
until the NPC assets could be sold or disposed
of. Thus, during its corporate life, PSALM has
powers relating to the management of its
personnel and leasing of its properties as may
be necessary to discharge its mandate.
Since the lease of the NAGA Complex and the
collection of income and receivables are within
PSALM’s powers, which are necessary to
discharge its mandate under the law, and
likewise undertaken in the exercise of
PSALM’s governmental function, these
activities are not subject to VAT.

9. CIR v. Team Energy Requirements for special law must be Respondent is VAT registered taxpayer principally (1) WON the respondent’s (1) NO. Requirements of the EPIRA must be
Corporation (formerly complied only if the claim for refund is engaged in the business of power generation and failure to submit a Certificate complied with only if the claim for refund is
Mirant Pagbilao based on that special law. A written the subsequent sale to the National Power of Compliance required under based on EPIRA. However, respondents
Corporation), G.R. No. notice requiring the respondent to submit Corporation (NPC). Respondent filed for Effective Electric Power Industry anchored its claim for tax refund or tax credit
230412. March 27, additional documents is indispensable in ZeroRate for the supply of electricity to the NPC for Reform Act issued by the under Section 108(B)(3) of the Tax Code.
2019. computing the 120+30 day period. the period January 1, 2005, to December 31, 2005, Energy Regulatory Section 108(B)(3) of the Tax Code in relation
which was subsequently approved. Subsequently, Commission disqualifies it to Section 13 of the NPC Charter, clearly
 the respondent filed an administrative claim for a
cash refund or issuance of a tax credit certificate
corresponding to the input VAT reported in its
Quarterly VAT Returns for the first three quarters of
2005 and Monthly VAT Declaration for October
2005 in the amount of P80,136,251.60. Due to the
petitioner's inaction on its claim, the respondent
filed a Petition for Review before the Court in
Division. On July 13, 2010, the Court in Division
issued a decision partially granting the
respondent's petition in the amount of
P79,185,617.33. However, upon petitioner's
Motion for Reconsideration, it reversed and set
aside the Decision and dismissed the Petition for
Review for having been filed prematurely.
Respondent filed a "Petition for Review" before the
Court En Banc however it was denied due course
for lack of merit. Eventually, the case was elevated
to the Supreme Court which issued a decision
granting respondent's Petition for Review on
Certiorari, reversing and setting aside the decision
of CTA en banc and remanding the case to the CTA
En Banc for the proper determination of the
refundable amount. The CTA En Banc reinstated
the July 13, 2010 CTA Decision and ruled that the
judicial claim was not prematurely filed and the
failure of the respondent to present its Certificate of
Compliance (COC) is not fatal to its claim for refund
of unutilized input VAT.
10. CIR v. Negros While the sale of raw sugar, by express Negros Consolidated Farmers Multi-Purpose
Consolidated Farmers provision of law, is exempt from VAT, the Cooperative (COFA) is a multi-purpose agricultural
Multi-Purpose sale of refined sugar, on the other hand, cooperative organized under RA 6938 which
Cooperative, G.R. No. is not exempted as refined sugar already delivers sugarcane produce to be milled and
from claiming a tax refund or
tax credit. (2) WON the
judicial claim was prematurely
filed for its failure to exhaust
administrative remedies when
it failed to submit complete
supporting documents for its
administrative claim.
WON COFA is VAT- exempt,
at the time of the subject
transactions (May 12, 2009 to
July 22, 2009) and therefore
provides that the sale of electricity to NPC is
effectively zero-rated for VAT purposes. Thus,
it cannot be required to comply with the
requirements under the EPIRA before its sale
of generated power to NPC should qualify for
VAT zero-rating. (2) NO. There is no showing
that the CIR sent a written notice requiring the
respondent to submit additional documents —
a process that is indispensable in computing
the 120+30day period. The Rule is that from
the date an administrative claim for excess
unutilized VAT is filed, a taxpayer has thirty
(30) days within which to submit the
documentary requirements sufficient to
support his claim unless given a further
extension by the CIR. Then, upon filing by the
taxpayer of his complete documents to
support his application, or expiration of the
period given, the CIR has 120 days within
which to decide the claim for tax credit or
refund. Should the taxpayer, on the date of his
filing, manifest that he no longer wishes to
submit any other additional documents to
complete his administrative claim, the 120 day
period allowed to the CIR begins to run from
the date of filing. However, CIR, upon a written
request, is not precluded from requiring
additional documents necessary to decide the
claim, or even denying the claim if the
taxpayer fails to submit the additional
documents requested. Thus, the petitioner
could no longer validly argue that the judicial
claim was premature on account of alleged
nonsubmission of complete documents as it is
the petitioner himself who fails to inform the
respondent about the need to submit
additional documents at the administrative
level.
YES. COFA is a VAT-exempt agricultural
cooperative. Exemption from the payment of
VAT on sales made by the agricultural
cooperatives to members or to non-members
212735, December 5, underwent several refining processes
2018. and as such, is no longer considered to
be in its original state. However, if the
sale of the sugar, whether raw or refined,
was made by an agricultural cooperative
to its members or non-members, such
transaction is still VAT-exempt.
processed with the sugar mill/refinery. COFA's
farmer-members deliver the sugarcane produce to
be milled and processed in COFA's name with the
sugar mill/refinery. Before the refined sugar is
released by the sugar mill, however, an
Authorization Allowing the Release of Refined
Sugar (AARRS) from the Bureau of Internal
Revenue (BIR) is required from COFA. The BIR
has always issued the AARRS without requiring
COFA to pay advance VAT pursuant to COFA's tax
exemption under RA 6938. However, in February
2009, the BIR required as a condition for the
issuance of the AARRS the payment of "advance
VAT" on the premise that COFA, as an agricultural
cooperative, does not fall under the term
"producer." COFA filed with the CIR a claim for
refund of the advance VAT it paid. The CIR then
raised COFA’s alleged failure to comply with the
requisite of a prior claim for refund or credit with the
CIR and present a quedan of raw sugar as fatal to
the refund claim.
entitled to a tax refund for the
advance VAT it paid.
necessarily includes exemption from the
payment of "advance VAT" upon the
withdrawal of the refined sugar from the sugar
mill. VAT is a tax on transactions, imposed at
every stage of the distribution process on the
sale, barter, exchange of goods or property,
and on the performance of services, even in
the absence of profit attributable thereto, so
much so that even a non-stock, non-profit
organization or government entity, is liable to
pay VAT on the sale of goods or services.
There are, however, certain transactions
exempt from VAT such as the sale of
agricultural products in their original state,
including those which underwent simple
processes of preparation or preservation for
the market, such as raw cane sugar. While the
sale of raw sugar, by express provision of law,
is exempt from VAT, the sale of refined sugar,
on the other hand, is not so exempted as
refined sugar already underwent several
refining processes and as such, is no longer
considered to be in its original state. However,
if the sale of the sugar, whether raw or refined,
was made by an agricultural cooperative to its
members or non-members, such transaction
is still VAT-exempt. However, withdrawal of
refined sugar is exempted from advance VAT
upon the concurrence of a two-pronged
criteria: First, the seller must be an agricultural
cooperative duly registered with the CDA. An
agricultural cooperative is "duly registered"
when it has been issued a certificate of
registration by the CDA. This certificate is
conclusive evidence of its registration.
Second, the cooperative must sell either: 1)
exclusively to its members; or 2) to both
members and non-members, its produce,
whether in its original state or processed form.
Having established that COFA is a
cooperative in good standing and duly
registered with the CDA and the producer of
the sugar, its sale of refined sugar whether

11. San Roque Power As a general rule, a taxpayer can file a
Corporation v. CIR, judicial claim only within thirty (30) days
G.R. No. 203249, July from the expiration of the 120-day period
23, 2018 if the Commissioner does not act within
the 120-day period. This requirement is
mandatory and jurisdictional. By way of
an exception, however, judicial claims
filed during the window period from 10
December 2003 to 6 October 2010, need
not wait for the exhaustion of the 120-day
period pursuant to BIR Ruling No. DA-
489-03.
San Roque Power Corporation (SPC) is a VAT-
registered taxpayer which was granted by the BIR
a zero-rating on its sales of electricity to NPC. In
2005 and 2006, SPC filed two separate
administrative claims for refund of its alleged
unutilized input tax for specific months in 2004. Due
to the inaction of respondent CIR, the petitioner
filed petitions for review before the CTA in Mar.
2006 and in June 2006, respectively. The CTA
Division granted the petitioner's petition but this
was overturned by the CTA En Banc ruling that the
judicial claims of the petitioner were prematurely
filed in violation of the 120-day and 30-day periods
prescribed in Section 112 (D) of the NIRC. The
CTA bank held that by reason of prematurity of its
petitions for review, San Roque Power Corporation
failed to exhaust administrative remedies which is
fatal to its invocation of the court's power of review.
WON the CTA En Banc was
correct in ruling that the Court
did not have jurisdiction over
the case on the ground of the
premature filing of the same.
sold to members or non-members, following
the express provisions of Section 109(L) of RA
8424, as amended, is exempt from VAT. As a
logical and necessary consequence then of its
established VAT exemption, COFA is likewise
exempted from the payment of advance VAT
As regards the CIR's contention that COFA
failed to submit complete documentary
requirements fatal to its claim for a tax refund,
suffice it to say, that COFA was a recipient and
holder of certificates of tax exemption issued
by the BIR which presupposes that the
cooperative submitted to the BIR the complete
documentary requirements.
NO. The Court had jurisdiction over the case
pursuant to the BIR Ruling No. DA-489- 03
which is an exception to the mandatory and
jurisdictional nature of the 120-day and 30-
day periods. BIR Ruling No. DA-489-03, which
provides that a taxpayer-claimant need not
wait for the lapse of the 120- day period before
it could seek judicial relief with the CTA, can
be relied on by the taxpayers from the time of
its issuance on Dec. 10, 2003 until Oct. 6,
2010 which is the promulgation of the Aichi
case (mandating for dismissal due to
premature filing). This is pursuant to the
principle of equitable estoppel enshrined in
Sec. 246 of the NIRC which decrees that a BIR
regulation or ruling cannot adversely prejudice
a taxpayer who in good faith relied on the BIR
regulation or ruling prior to its reversal. In
effect, the 120+30-day period to seek judicial
relief by the CTA is generally mandatory and
jurisdictional from the effectivity of the 1997
NIRC on 1 January 1998, up to the present.
By way of an exception, however, judicial
claims filed during the window period from 10
December 2003 to 6 October 2010, need not
wait for the exhaustion of the 120-day period.
In this case, the two judicial claims filed by the

12. Nippon Express A VAT invoice and a VAT receipt are
(Philippines) Corp. v. different. A VAT invoice is necessary for
CIR, G.R. No. 191495, every sale, barter or exchange of goods
July 23, 2018. or properties while a VAT official receipt
properly pertains to every lease of goods
or properties, and for every sale, barter
or exchange of services Hence, in a
claim for refund under Section 112 of the
National Internal Revenue Code (NIRC),
the claimant must show that: (1) it is
engaged in zero-rated sales of goods or
services; and (2) it paid input VAT that
are attributable to such zero-rated sales.
Otherwise stated, the claimant must
prove that it made a purchase of taxable
goods or services for which it paid VAT
(input), and later on engaged in the sale
of goods or services subject to VAT
(output) but at zero rate. There is a
refundable sum when the amount of
input (VAT (attributable to zero-rated
sale) is higher than the claimant's output
VAT during one taxable period (quarter).
Petitioner Nippon Express is a domestic
corporation registered with the Large Taxpayer
District Officeis as a VAT Taxpayer. As a claim for
refund, Nippon applied for a tax credit certificate
(TCC) of its excess input tax from its zero-rated
sales for all four taxable quarters of 2004, under
Sec 112 of the NIRC. As BIR did nothing, Nippon
filed a Petition for Review with the CTA. The CIR
countered that Nippon’s excess input VAT was not
fully substantiated by proper documents. The CTA
denied Nippon’s claim on the ground of failure to
submit VAT official receipts as proof of zero-rated
sales, as required by Sec 113 of the NIRC as
amended for businesses that provide services. The
CTA En Banc Ruling affirmed the CTA. Nippon
argued that the laws do not expressly limit the
acceptable evidence of sale of goods or properties
to be supported only by sales invoices, or the sale
of services by official receipts only, thus sales
invoices and documents other than official receipts
should be accepted.
WON sales invoices and
documents other than official
receipts are proper in
substantiating zero-rated
sales of services for the
purpose of tax refund.
petitioner fell within the window period, thus,
the CTA can take cognizance over them.
NO. For sales of services, invoices other than
official receipts are not proper. A VAT invoice
and a VAT receipt are different. A VAT invoice
is necessary for every sale, barter or
exchange of goods or properties while a VAT
official receipt properly pertains to every lease
of goods or properties, and for every sale,
barter or exchange of services. A taxpayer
claimant who seeks a refund his excess or
unutilized creditable input VAT has the burden
to prove (1) payment of input VAT to suppliers;
and (2) zero-rated sales to purchasers and (3)
the Input VAT is attributable to his zero-rated
sales. The CTA En Banc held the view that
while Sections 113 and 237 used the
disjunctive term "or," it must not be interpreted
as giving a taxpayer an unconfined choice to
select between issuing an invoice or an official
receipt. To the court a quo, sales invoices
must support sales of goods or properties
while official receipts must support sales of
services. Irrefutably, when a VAT-taxpayer
claims to have zero-rated sales of services, it
must substantiate the same through valid VAT
official receipts, not any other document, not
even a sales invoice that properly pertains to
a sale of goods or properties. In this case, the
documentary proofs presented by Nippon
Express to substantiate its zero-rated sales of
services consisted of sales invoices and other
secondary evidence like transfer slips, credit
memos, cargo manifests, and credit notes. It
is very clear that these are inadequate to
support the petitioner's sales of services.
Consequently, the CTA, albeit without
jurisdiction, correctly ruled that Nippon
Express is not entitled to its claim. The CTA
did not acquire jurisdiction over Nippon
Express' judicial claim considering that its
petition was filed beyond the mandatory 30-
 day period of appeal. Logically, there is no
reason to allow the petitioner to submit further
evidence by way of official receipts to
substantiate its zero-rated sales of services.
Likewise, there is no need to pass upon the
issue on whether sales invoices or documents
other than official receipts can support a sale
of service considering the CTA's lack of
jurisdiction. The mandatory and jurisdictional
period to appeal to the CTA from the CIR is 30
days counted from the receipt of the decision
or inaction by the CIR. The CIR has 120 days
to decide, counted from the submission of
documents for the tax refund or tax credit. An
application for a cash refund or issuance of
TCC for excess and unutilized creditable input
VAT attributable to zero-rated sales can be
filed within two (2) years after the close of the
taxable quarter when the sales were made. In
sum, VAT official receipts are indispensable to
prove sales of services by a VAT-registered
taxpayer. Consequently, the petitioner is not
entitled to the claimed refund or TCC.

13. CIR v. Euro- Failure to comply with invoicing Euro-Phil (respondent) is an exclusive passenger
Philippine Airline requirements, non-imprintment of the sales agent of British Airways, PLC, an off-line
Services Inc., G.R. No. word "zero-rated," as mandated by law international airline in the Philippines to service the
222436, July 23, 2018. does not deem the transaction subject to latter's passengers in the Philippines. In this case,
12% VAT. Euro-Phil received a Formal Assessment Notice
from petitioner CIR consisting of deficiency
assessment of VAT for services rendered as
passenger sales agent of British Airways PLC.
Euro-Phil filed a final protest arguing that the
receipts that are supposedly subject to 12% VAT
actually pertained to "services rendered to persons
engaged exclusively in international air transport"
hence, zero-rated. On the other hand, CIR said that
the presentation of VAT official receipts with the
words "zero-rated" imprinted in it is indispensable
to cancel the VAT assessment against Euro-Phil.
WON the transaction sale
made by Euro-Phil is entitled
to the benefit of zero-rated
VAT despite its failure to
comply with invoicing
requirements as mandated by
law.
YES. Services rendered by Euro-Phil were to
a person engaged in international air-
transport operations. Thus, by application,
Section 108 of the NIRC subjects the services
of Euro-Phil to British Airways PLC, to the rate
of zero percent VAT. Also, Section 113 of the
NIRC nowhere states a presumption created
by law that the non-imprintment of the word
"zero-rated" deems the transaction subject to
12% VAT. In addition, Section 4.113-4 of
Revenue Regulations 16-2005, also do not
state that the non-imprintment of the word
"zero-rated" deems the transaction subject to
12% VAT. Thus, failure to comply with
invoicing requirements as mandated by law
does not deem the transaction subject to 12%
VAT.

14. Power Sector The power plants, which were previously PSALM is a GOCC with a purpose under RA 9136 WON the sale of the power NO, PSALM is not liable to pay the deficiency
Asset and Liabilities owned by NPC were transferred to to manage the orderly sale, disposition, and plants or PSALM’s VAT. SEC 105. Persons Liable. - Any person
Management PSALM for the specific purpose of
Corporation v. CIR, privatizing such assets. The sale of the
G.R. No. 198146, power plants cannot be considered as an
August 8, incidental transaction made in the course
2017 of NPC's or PSALM's business.
Therefore, the sale of the power plants
should not be subject to VAT. Sec 108 of
NIRC is inapplicable to this case.
15. Medicard For purposes of determining the VAT
Philippines, Inc. v. liability of an HMO, the amounts
privatization of the National Power Corporation
(NPC) generation assets, real estate, and other
disposable assets, and Independent Power
Producer contracts with the objective of liquidating
all NPC financial obligations and stranded contract
costs in an optimal manner. PSALM conducted
public biddings for the privatization of the
Pantabangan-Masiway Hydroelectric Power Plant,
which First Gen Hydropower Corporation with its
$129 Million bid, and SN Aboitiz Power Corporation
with its $530 Million bid won respectively. NPC
received a letter on Aug. 17, 2007 from BIR
demanding immediate payment of P3,813,080,472
deficiency of VAT for the Plants. BIR, NPC, and
PSALM executed a Memorandum of Agreement. In
compliance with the MOA, PSALM remitted the
P3,813,080,472 under protest to the BIR,
representing the total basic VAT due. On
September 21, PSALM filed with the DOJ a petition
for the adjudication of the dispute with the BIR to
resolve the issue of whether the sale of the power
plants should be subject to VAT, which the DOJ
ruled in favor of PSALM. BIR filed for a MR alleging
that the DOJ had no jurisdiction because the
dispute involved tax laws administered by the BIR
and thus within the jurisdiction of the Court of Tax
Appeals. Further, the sale of the Plants by PSALM
to private entities is in the course of trade or
business contemplated under Section 105 of the
NIRC of 1997, which covers incidental
transactions. Hence, the sale is subject to VAT.
Petitioner MEDICARD is a Health Maintenance
Organization (HMO) that provides prepaid health
privatization of activities is
subject to VAT.
Whether or not the amounts
that medicard earmarked and
who, in the course of trade or business, sells,
barters, exchanges, leases goods or
properties, renders services, and any person
who imports goods shall be subject to the
value-added tax (VAT) imposed in Sections
106 to 108 of this Code. xxx In the course of
trade or business means the regular conduct
or pursuit of commercial or economic activity,
including transactions incidental thereto, by
any person regardless of whether or not the
person engaged therein is a nonstock,
nonprofit private organization (irrespective of
the disposition of its net income and whether
or not it sells exclusively to members or their
guests), or government entity. Even if PSALM
is deemed a successor-in-interest of NPC, still
the sale of the power plants is not "in the
course of trade or business" as contemplated
under Section 105 of the NIRC, and thus, not
subject to VAT. The sale of the power plants
is not in pursuit of a commercial or economic
activity but a governmental function mandated
by law to privatize NPC generation assets.
PSALM owned the power plants which were
sold. PSALM's ownership of the NPC assets
is clearly stated under Sections 49, 51, and 55
of the EPIRA law. Under the EPIRA law, the
ownership of the generation assets, real
estate, IPP contracts, and other disposable
assets of the NPC was transferred to PSALM.
Clearly, PSALM is not a mere trustee of the
NPC assets but is the owner thereof.
Precisely, PSALM, as the owner of the NPC
assets, is the government entity tasked under
the EPIRA law to privatize such NPC assets.
The sale of the power plants cannot be
considered as an incidental transaction made
in the course of NPC's or PSALM's business.
Therefore, the sale of the power plants should
not be subject to VAT.
The Court rules that for purposes of
determining the VAT liability of an HMO, the
CIR, G.R. No. 222743, earmarked and actually spent for medical
April 5, 2017 utilization of its members should not be
included in the computation of its gross
receipts.
and medical insurance coverage to its clients.
MEDICARD filed its First, Second, and Third
Quarterly VAT Returns through Electronic Filing
and Payment System (EFPS) on April 20, 2006,
July 25, 2006 And October 20, 2006, respectively,
and its Fourth Quarterly VAT Return on January 25,
2007. Upon finding some discrepancies between
MEDICARD's Income Tax Returns (ITR) and VAT
Returns, the CIR informed MEDICARD and issued
a Letter Notice (LN). Subsequently, the CIR also
issued a Preliminary Assessment Notice (PAN)
against MEDICARD for deficiency VAT. A
Memorandum dated December 10, 2007 was
likewise issued recommending the issuance of a
Formal Assessment Notice (FAN) against
MEDICARD.
On January 4, 2008, MEDICARD received CIR's
FAN dated December 10, 2007 for alleged
deficiency VAT for taxable year 2006 in the total
amount of P196,614,476.69, inclusive of penalties.
According to the CIR, the taxable base of HMOs for
VAT purposes is its gross receipts without any
deduction under Section 4.108.3 (k) of Revenue
Regulations (RR) No. 16-2005. Citing
Commissioner of Internal Revenue v. Philippine
Health Care Providers, Inc., the CIR argued that
since MEDICARD does not actually provide
medical and/or hospital services, but merely
arranges for the same, its services are not VAT
exempt.
On February 14, 2008, the CIR issued a Tax
Verification Notice authorizing Revenue Officer
Romualdo Plocios to verify the supporting
documents of MEDICARD's Protest. MEDICARD
also submitted additional supporting documentary
evidence in aid of its Protest through a letter dated
March 18, 2008. 15 On June 19, 2009, MEDICARD
received CIR's Final Decision on Disputed
Assessment dated May 15, 2009, denying
MEDICARD's protest
The CTA Division held that: (1) the determination
of deficiency VAT is not limited to the issuance of
Letter of Authority (LOA) alone as the CIR is
eventually paid to the medical
service providers should still
form part of its gross receipts
for vat purposes.
amounts earmarked and actually spent for
medical utilization of its members should not
be included in the computation of its gross
receipts.
Since an HMO like MEDICARD is primarily
engaged in arranging for coverage or
designated managed care services that are
needed by plan holders/members for fixed
prepaid membership fees and for a specified
period of time, then MEDICARD is principally
engaged in the sale of services. Its VAT base
and corresponding liability is, thus, determined
under Section 108 (A) of the Tax Code, as
amended by Republic Act No. 9337. Prior to
RR No. 16-2005, an HMO, like a pre-need
company, is treated for VAT purposes as a
dealer in securities whose gross receipts is the
amount actually received as contract price
without allowing any deduction from the gross
receipts.
The CTA en banc overlooked that the
definition of gross receipts under RR No. 16-
2005 merely presumed that the amount
received by an HMO as membership fee is the
HMO's compensation for their services. As a
mere presumption, an HMO is, thus, allowed
to establish that a portion of the amount it
received as membership fee does NOT
actually compensate it but some other person,
which in this case are the medical service
providers themselves. Absent a statutory
definition, this Court has construed the term
gross receipts in its plain and ordinary
meaning, that is, gross receipts is understood
as comprising the entire receipts without any
deduction.
As an HMO, MEDICARD primarily acts as an
intermediary between the purchaser of
healthcare services (its members) and the
healthcare providers (the doctors, hospitals
and clinics) for a fee. By enrolling membership
with MEDICARD, its members will be able to
avail of the pre-arranged medical services
granted vast powers to perform examination and
assessment functions; (2) in lieu of an LOA, an LN
was issued to MEDICARD informing it of the
discrepancies between its ITRs and VAT Returns
and this procedure is authorized under Revenue
Memorandum Order (RMO) No. 30-2003 and 42-
2003; (3) MEDICARD is estopped from questioning
the validity of the assessment on the ground of lack
of LOA since the assessment issued against
MEDICARD contained the requisite legal and
factual bases that put MEDICARD on notice of the
deficiencies and it in fact availed of the remedies
provided by law without questioning the nullity of
the assessment; (4) the amounts that MEDICARD
earmarked and eventually paid to doctors,
hospitals and clinics cannot be excluded from the
computation of its gross receipts under the
provisions of RR No. 4-2007 because the act of
earmarking or allocation is by itself an act of
ownership and management over the funds by
MEDICARD which is beyond the contemplation of
RR No. 4-2007; (5) MEDICARD's earnings from its
clinics and laboratory facilities cannot be excluded
from its gross receipts because the operation of
these clinics and laboratory is merely an incident to
MEDICARD's main line of business as an HMO
and there is no evidence that MEDICARD
segregated the amounts pertaining to this at the
time it received the premium from its members; and
(6) MEDICARD was not able to substantiate the
amount pertaining to its January 2006 income and
therefore has no basis to impose a 10% VAT rate.
MEDICARD filed a Motion for Reconsideration but
it was denied. Hence, MEDICARD elevated the
matter to the CTA en banc. In a Decision 21 dated
September 2, 2015, the CTA en banc partially
granted the petition only insofar as the 10% VAT
rate for January 2006 is concerned but sustained
the findings of the CTA Division in all other matters.
Disagreeing with the CTA en banc's decision,
MEDICARD filed a motion for reconsideration but it
was denied. Hence, this petition.
from its accredited healthcare providers
without the necessary protocol of posting cash
bonds or deposits prior to being attended to or
admitted to hospitals or clinics, especially
during emergencies, at any given time. Apart
from this, MEDICARD may also directly
provide medical, hospital and laboratory
services, which depends upon its member's
choice. Thus, in the course of its business as
such, MEDICARD members can either avail of
medical services from MEDICARD's
accredited healthcare providers or directly
from MEDICARD. In the former, MEDICARD
members obviously knew that beyond the
agreement to pre-arrange the healthcare
needs of its members, MEDICARD would not
actually be providing the actual healthcare
service. Thus, based on industry practice,
MEDICARD informs its would-be members
beforehand that 80% of the amount would be
earmarked for medical utilization and only the
remaining 20% comprises its service fee. In
the latter case, MEDICARD's sale of its
services is exempt from VAT under Section
109 (G).
The CTA's ruling and CIR's Comment have
not pointed to any portion of Section 108 of the
NIRC that would extend the definition of gross
receipts even to amounts that do not only
pertain to the services to be performed by
another person, other than the taxpayer, but
even to amounts that were indisputably
utilized not by MEDICARD itself but by the
medical service providers.
For this Court to subject the entire amount of
MEDICARD's gross receipts without
exclusion, the authority should have been
reasonably founded from the language of the
statute. In the scheme of judicial tax
administration, the need for certainty and
predictability in the implementation of tax laws
is crucial. The CIR's interpretation of gross
receipts in the present case is patently
erroneous for lack of both textual and
nontextual support. As to the CIR's argument
that the act of earmarking or allocation is by
itself an act of ownership and management
over the funds, the Court does not agree. On
the contrary, it is MEDICARD's act of
earmarking or allocating 80% of the amount it
received as membership fee at the time of
payment that weakens the ownership imputed
to it. By earmarking or allocating 80% of the
amount, MEDICARD unequivocally
recognizes that its possession of the funds is
not in the concept of owner but as a mere
administrator of the same. For this reason, at
most, MEDICARD's right in relation to these
amounts is a mere inchoate owner which
would ripen into actual ownership if, and only
if, there is underutilization of the membership
fees at the end of the fiscal year. Prior to that,
MEDICARD is bound to pay from the amounts
it had allocated as an administrator once its
members avail of the medical services of
MEDICARD's healthcare providers. Before
the Court, the parties were one in submitting
the legal issue of whether the amounts
MEDICARD earmarked, corresponding to
80% of its enrollment fees, and paid to the
medical service providers should form part of
its gross receipt for VAT purposes, after
having paid the VAT on the amount
comprising the 20%.
It is significant to note in this regard that
MEDICARD established that upon receipt of
payment of membership fee it actually issued
two official receipts, one pertaining to the
VATable portion, representing compensation
for its services, and the other represents the
non-vatable portion pertaining to the amount
earmarked for medical utilization. Therefore,
the absence of an actual and physical
segregation of the amounts pertaining to two
different kinds of fees cannot arbitrarily
disqualify MEDICARD from rebutting the

16. Aichi Forging Asia An appeal outside the 2-year period is
v. CTA, G.R. No. not legally infirm for as long as it is taken
193625. August 30, within 30 days from the decision or
2017 inaction on the administrative claim that
must have been initiated within the 2-
year prescriptive period. The appeal to
the CTA is always initiated within 30 days
from decision or inaction regardless
whether the date of its filing is within or
outside the 2-year period of limitation.
Petitioner AICHI is a domestic corporation duly
organized and existing under the laws of the
Philippines. It is duly registered with the Bureau of
Internal Revenue (BIR) as a VAT taxpayer and with
the Board of Investments (BOI) as an expanding
producer of closed impression die steel forgings.
On 26 September 2002, AICHI filed with the BIR
District Office in San Pedro, Laguna, a written claim
for refund and/or tax credit of its unutilized input
VAT credits for the third and fourth quarters of 2000
and the four taxable quarters of 2001. AICHI
sought the tax refund/credit of input VAT for the
said taxable quarters representing VAT payments
on importation of capital goods and domestic
purchases of goods and services. As respondent
CIR failed to act on the refund claim a petition for
Review was filed before the CTA.
After finding that both the administrative and
judicial claims were filed within the statutory two-
year prescriptive period, the CTA Division partially
granted the refund claim of AICHI. The CTA
Division denied AICHI's refund claim with respect
to its purchase of capital goods for the period 1 July
2000 to 31 December 2001 because of the latter's
failure to show that the goods purchased formed
part of its Property, Plant and Equipment Account
and that they were subjected to depreciation
allowance.
The CIR questioned the partial grant of the refund
claim in favor of AICHI. It claimed that the court did
not acquire jurisdiction over the refund claim in view
of AICHI's failure to observe the 30-day period to
claim refund/tax credit as specified in Sec. 112 of
the Tax Code, i.e., appeal to the CTA may be filed
within 30 days from receipt of the decision denying
the claim or after expiration of 120 days (denial by
inaction). With the filing of the administrative claim
Whether or not AICHI availed
of the correct remedy and can
question the CTA ruling.
presumption under the law and from proving
that indeed services were rendered by its
healthcare providers for which it paid the
amount it sought to be excluded from its gross
receipts.
No. On the judicial claim for refund or tax credit
of AICHI, the CTA did not validly acquire
jurisdiction over such judicial claim because
the appeal before the court was made
prematurely. When the CTA acts without
jurisdiction, its decision is void. Consequently,
the answer to the second issue, i.e., whether
AICHI can still question the CTA ruling,
becomes irrelevant.
From the submission of the complete
documents to support the claim, the CIR has
a period of one hundred twenty (120) days to
decide on the claim. If the CIR decides within
the 120-day period, the taxpayer may initiate
a judicial claim by filing within 30 days an
appeal before the CTA. If there is no decision
within the 120-day period, the CIR's inaction
shall be deemed a denial of the application. In
the latter case, the taxpayer may institute the
judicial claim, also by an appeal, within 30
days before the CTA.
It is not disputed that AICHI had timely filed its
administrative claim for refund or tax credit
before the BIR. The records show that the
claim for refund/tax credit of input taxes
covering the six separate taxable periods from
the 3rd Quarter of 2000 up to the 4th Quarter
of 2001 was made on 26 September 2002.
Both the CTA Division and CTA En Banc
correctly ruled that it fell within the two-year
statute of limitations. However, its judicial
claim was filed a mere four days later on 30
September 2002, or before the window period
when the taxpayers need not observe the 120-
day mandatory and jurisdictional period.
All that is required under the law is that the
appeal to the CTA is brought within 30 days
 on 26 September 2002, the CIR had until 20
January 2003 to act on the matter; and if it failed to
do so, AICHI had the right to elevate the case
before the CTA within 30 days from 20 January
2003, or on or before 20 February 2003. However,
AICHI filed its Petition for Review on 30 September
2002, or before the 30-day period of appeal had
commenced. According to the CIR, this period is
jurisdictional, thus, AICHI's failure to observe it
resulted in the CTA not acquiring jurisdiction over
its appeal. The CTA En Banc was not persuaded.
The court ruled that the law does not prohibit the
simultaneous filing of the administrative and judicial
claims for refund. It further declared that what is
controlling is that both claims for refund are filed
within the two-year prescriptive period.
Citing Section 1, Rule 15 of A.M. No. 05-11-07-CTA
or the Revised Rules of the Court of Tax Appeals
(Revised CTA Rules), AICHI claims that it has
fifteen (15) days from receipt of the questioned
decision of the CTA En Banc within which to file a
motion for reconsideration. Considering that it
received the 18 February 2010 Decision of the CTA
En Banc on 25 February 2010, and that it filed the
Motion for Reconsideration on 12 March 2010,
AICHI asserts that the filing of the said motion was
made within the prescriptive period provided in the
law. Hence, this petition.
17. CIR v. PAGCOR, A special law must be interpreted to Respondent Philippine Amusement and Gaming
G.R. No. 177387. constitute an exception to the general Corporation (PAGCOR) has operated under a
November 9, 2016. law in the absence of special legislative franchise granted by Presidential
circumstances warranting a contrary Decree No. 1869 (P.D. No. 1869), its Charter,
conclusion. whose Section 13 (2) provides that: (2) Income and
other Taxes — (a) Franchise Holder: No tax of any
kind or form, income or otherwise, as well as fees,
charges or levies of whatever nature, whether
from either decision or inaction. Under the
foregoing interpretation, there may be two
possible scenarios when an appeal to the CTA
is considered fatally defective even when
initiated within the two-year prescriptive
period: first, when there is no decision and the
appeal is taken prior to the lapse of the 120-
day mandatory period, 45 except only the
appeal within the window period from 10
December 2003 to 6 October 2010; 46
second, the appeal is taken beyond 30 days
from either decision or inaction "deemed a
denial."In contrast, an appeal outside the 2-
year period is not legally infirm for as long as
it is taken within 30 days from the decision or
inaction on the administrative claim that must
have been initiated within the 2-year
prescriptive period. In other words, the appeal
to the CTA is always initiated within 30 days
from decision or inaction regardless whether
the date of its filing is within or outside the 2-
year period of limitation.
Considering our holding that the CTA did not
acquire jurisdiction over the appeal of AICHI,
the decision partially granting the refund claim
must therefore be set aside as a void
judgment. The rule is that where there is want
of jurisdiction over a subject matter, the
judgment is rendered null and void. A void
judgment is in legal effect no judgment, by
which no rights are divested, from which no
right can be obtained, which neither binds nor
bars anyone, and under which all acts
performed and all claims flowing out are void.
Whether or not PAGCOR is Yes. The CIR insists that under VAT Ruling
exempt from VAT. No. 04-96 (dated May 14, 1996), VAT Ruling
No. 030-99 (dated March 18, 1999), and VAT
Ruling No. 067-01 (dated October 8, 2001),
R.A. No. 7716 has expressly repealed,
amended, or withdrawn the 5% franchise tax
provision in PAGCOR's Charter; hence,
PAGCOR was liable for the 10% VAT. The
National or Local, shall be assessed and collected
under this Franchise from the Corporation; nor
shall any form of tax or charge attach in any way to
the earnings of the Corporation, except a Franchise
Tax of five percent (5%) of the gross revenue or
earnings derived by the Corporation from its
operation under this Franchise.
Notwithstanding the aforesaid 5% franchise tax
imposed, the Bureau of Internal Revenue (BIR)
issued several assessments against PAGCOR for
alleged deficiency value-added tax (VAT).
On December 18, 2002, PAGCOR filed a letter-
protest with the BIR against Assessment Notice
No. 33-1996/1997/1998 and Assessment Notice
No. 33-99. On March 31, 2003, PAGCOR filed a
letter-protest against Assessment Notice No. 33-
2000, in which it reiterated the assertions made in
its December 18, 2002 letter-protest. In reply to
both letters-protest, the BIR requested PAGCOR to
submit additional documents to enable the conduct
of the reinvestigation. The CIR did not act on
PAGCOR's letter-protest against Assessment
Notice No. 33-1996/1997/1998 and Assessment
Notice No. 33-99 within the 180-day period from
the latter's submission of additional documents.
Hence, PAGCOR filed an appeal with the
Secretary of Justice on January 5, 2004 relative to
Assessment Notice No. 33-1996/1997/1998 and
Assessment Notice No. 33-99. Meanwhile, in
response to PAGCOR's letter-protest dated March
31, 2003, BIR Regional Director Teodorica Arcega
issued a letter dated December 15, 2003 reiterating
the assessment for deficiency VAT for taxable year
2000.
However, the BIR only recomputed the deficiency
final withholding tax on fringe benefits and
expanded withholding tax, and reduced the
assessments to P12,212,199.85 and
P6,959,525.10, respectively. PAGCOR elevated its
protest against Assessment Notice No. 33-2000 to
the CIR, but the 180-day period prescribed by law
also lapsed without any action on the part of the
CIR. Consequently, on August 4, 2004, PAGCOR
relevant provisions of R.A. No. 7716 on which
the insistence has been anchored are the
following: Section 102 of the National Internal
Revenue Code, as amended, is hereby further
amended to read as follows: "SEC. 102.
Value-added tax on sale of services and use
or lease of properties. — (a) Rate and base of
tax. — There shall be levied, assessed and
collected, a value-added tax equivalent to
10% of gross receipts derived from the sale or
exchange of services, including the use or
lease of properties. "The phrase 'sale or
exchange of services' means the performance
of all kinds of service in the Philippines for
others for a fee, remuneration or
consideration, including x x x service of
franchise grantees of telephone and
telegraph, radio and television broadcasting
and all other franchise grantees except those
under Section 117 of this Code;"
Section 117 of the National Internal Revenue
Code, as amended, is hereby further
amended further to read as follows: "SEC.
117. Tax on Franchises. — Any provision of
general or special law to the contrary
notwithstanding, there shall be levied,
assessed and collected in respect to all
franchises on electric, gas and water utilities a
tax of two percent (2%) on the gross receipts
derived from the business covered by the law
granting the franchise. x x x" SEC. 20.
Repealing Clauses. — The provisions of any
special law relative to the rate of franchise
taxes are hereby expressly repealed. x x x
The CIR argues that PAGCOR's gambling
operations are embraced under the phrase
sale or exchange of services, including the
use or lease of properties; that such
operations are not among those expressly
exempted from the 10% VAT under Section 3
of R.A. No. 7716; and that the legislative
purpose to withdraw PAGCOR's 5% franchise
tax was manifested by the language used in
brought another appeal to the Secretary of Justice
covering Assessment Notice No. 33-2000. The
Secretary of Justice consolidated PAGCOR's two
appeals. After the parties traded pleadings, the
Secretary of Justice summoned them to a
preliminary conference to discuss, inter alia, any
possible settlement or compromise. When no
amicable settlement was reached, the consolidated
appeals were considered submitted for resolution.
On December 22, 2006, Secretary of Justice Raul
M. Gonzales rendered the first assailed resolution
declaring PAGCOR exempt from the payment of all
taxes except the 5% franchise tax provided in its
Charter. On March 12, 2007, Secretary Gonzales
issued the second assailed resolution denying the
CIR's motion for reconsideration. Hence, this
petition.
Section 20 of R.A. No. 7716.
The CIR's arguments lack merit. Firstly, a
basic rule in statutory construction is that a
special law cannot be repealed or modified by
a subsequently enacted general law in the
absence of any express provision in the latter
law to that effect. A special law must be
interpreted to constitute an exception to the
general law in the absence of special
circumstances warranting a contrary
conclusion. R.A. No. 7716, a general law, did
not provide for the express repeal of
PAGCOR's Charter, which is a special law;
hence, the general repealing clause under
Section 20 of R.A. No. 7716 must pertain only
to franchises of electric, gas, and water
utilities, while the term other franchises in
Section 102 of the NIRC should refer only to
transport, communications and utilities,
exclusive of PAGCOR's casino operations.
Secondly, R.A. No. 7716 indicates that
Congress has not intended to repeal
PAGCOR's privilege to enjoy the 5% franchise
tax in lieu of all other taxes. A contrary
construction would be unwarranted and
myopic nitpicking. In this regard, we should
follow the following apt reminder uttered in
Fort Bonifacio Development Corporation v.
Commissioner of Internal Revenue: A law
must not be read in truncated parts; its
provisions must be read in relation to the
whole law. Every part of the statute must be
interpreted with reference to the context, i.e.,
that every part of the statute must be
considered together with other parts of the
statute and kept subservient to the general
intent of the whole enactment. In construing a
statute, courts have to take the thought
conveyed by the statute as a whole. Although
Section 3 of R.A. No. 7716 imposes 10% VAT
on the sale or exchange of services, including
the use or lease of properties, the provision
also considers transactions that are subject to
0% VAT. On the other hand, Section 4 of R.A.
No. 7716 enumerates the transactions exempt
from VAT, viz.: SEC. 4. Section 103 of the
National Internal Revenue Code, as
amended, is hereby further amended to read
as follows: "SEC. 103. Exempt transactions.
— The following shall be exempt from the
value-added tax: xxx xxx xxx "(q) Transactions
which are exempt under special laws, except
those granted under Presidential Decree Nos.
66, 529, 972, 1491, and 1590, and nonelectric
cooperatives under republic Act No. 6938, or
international agreements to which the
Philippines is a signatory; xxx xxx xxx"
R.A. No. 7716 does not specifically exclude
PAGCOR's exemption under P.D. No. 1869
from the grant of exemptions from VAT;
hence, the petitioner's contention that R.A.
No. 7716 expressly amended PAGCOR's
franchise has no leg to stand on. Moreover,
PAGCOR's exemption from VAT, whether
under R.A. No. 7716 or its amendments, has
been settled in Philippine Amusement and
Gaming Corporation (PAGCOR) v. The
Bureau of Internal Revenue, whereby the
Court, citing Commissioner of Internal
Revenue v. Acesite (Philippines) Hotel
Corporation, has declared: Petitioner is
exempt from the payment of VAT, because
PAGCORs charter, P.D. No. 1869, is a special
law that grants petitioner exemption from
taxes.
The assessments for deficiency VAT issued
against PAGCOR should be canceled for lack
of legal basis. The Court also deems it
warranted to cancel the assessments for
deficiency withholding VAT pertaining to the
payments made by PAGCOR to its catering
service contractor. In two separate letters
dated December 12, 2003 41 and December
15, 2003, the BIR conceded that the
unmonetized meal allowances of PAGCOR's
employees were not subject to fringe benefits

18. Silicon Philippines The 120/30-day prescriptive periods
v. CIR, G.R. No. under the NIRC are mandatory and
173241, March 25, jurisdictional, and the matter of
2015 jurisdiction cannot be waived because it
is conferred by law and is not dependent
on the consent or objection or the acts or
omissions of the parties or any one of
them.
Petitioner SPI, formerly known as Intel Philippines
Manufacturing, Inc., is a corporation duly organized
and existing under Philippine laws. It is registered
with the BIR as a VAT taxpayer. SPI filed on May
6, 1999 with the One-Stop Shop Inter-Agency Tax
Credit and Duty Drawback Center of the
Department of Finance an Application for Tax
Credit/Refund of Value-Added Tax Paid covering
the Third Quarter of 1998. SPI sought the tax
credit/refund of input VAT for the said tax period in
the sum of P25,531,312.83,
When the Respondent Commissioner of Internal
Revenue (CIR) failed to act upon its Application for
Tax Credit/Refund, SPI filed on September 29,
Whether or not the petition
before the CTA was timely
filed and thus granted it
jurisdiction over the petition of
Petitioner.
tax (FBT).
However, the BIR held PAGCOR liable for
expanded withholding VAT for the payments
made to its catering service contractor who
provided the meals for its employees. The
payments made by PAGCOR to its catering
service contractor are subject to zero-rated
(0%) VAT in accordance with Section 13 (2) of
P.D. No. 1869 in relation to Section 3 of R.A.
No. 7716. SEC. 3. Section 102 of the National
Internal Revenue Code, as amended, is
hereby further amended to read as follows:
"SEC. 102. Value-added tax on sale of service
and use or lease of properties. — x x x "(b)
Transaction subject to zero-rate. — The
following services performed in the Philippines
by VAT-registered persons shall be subject to
0%: "xxx xxx xxx "(3) Services rendered to
persons or entities whose exemptions under
special laws or international agreements to
which the Philippines is a signatory effectively
subjects the supply of such services to zero
rate. As such, the catering service contractor,
who is presumably a VAT-registered person,
shall impose a zero rate (0%) output tax on its
sale or lease of goods, services or properties
to PAGCOR. Consequently, no withholding
tax is due on such a transaction.
No. In San Roque: Section 112(C) expressly
grants the Commissioner 120 days within
which to decide the taxpayer's claim. The law
is clear, plain, and unequivocal: ". . . the
Commissioner shall grant a refund or issue the
tax credit certificate for creditable input taxes
within one hundred twenty (120) days from the
date of submission of complete
documents."Section 112(C) also expressly
grants the taxpayer a 30-day period to appeal
to the CTA the decision or inaction of the
Commissioner, thus: . . . the taxpayer affected
may, within thirty (30) days from the receipt of
the decision denying the claim or after the
2000 a Petition for Review before the CTA Division.
The CTA Division rendered a Decision on
November 24, 2003 partially granting the claim of
SPI for tax credit/refund. The CTA Division
disallowed the claim of SPI for tax credit/refund of
input VAT in the amount of P23,105,548.83 for
failure of SPI to properly substantiate the zero-
rated sales to which it attributed said taxes. The
CTA Division particularly pointed out the failure of
SPI to comply with invoicing requirements under
Sections 113, 237, and 238 of the National Internal
Revenue Code of 1997 (1997 Tax Code) and
Section 4.108-1 of Revenue Regulations No. 7-95,
i.e., registration of receipts or sales or commercial
invoices with the BIR; securing an authority to print
receipts or sales or commercial invoices from the
BIR; and imprinting the words "zero-rated" on the
invoices covering zero-rated sales. As for the claim
of SPI for tax credit/refund of input VAT on its
purchases of capital goods in the amount of
P2,425,764.00, the CTA Division held that Section
112 (B) of the 1997 Tax Code did not require that
such a claim be attributable to zero-rated sales;
and that SPI was able to comply with all the
requirements under said provision.
SPI filed a Motion for Partial Reconsideration and
Supplemental Motion for Partial Reconsideration of
the foregoing Decision dated November 24, 2003
of the CTA Division. In a Resolution dated August
10, 2004, the CTA Division additionally noted that
the claim of SPI covered the period of July 1, 1998
to September 30, 1998 and it was issued a permit
to generate computerized sales invoices and
official receipts only on August 31, 2002.
SPI sought recourse from the CTA en banc by filing
a Petition for Review assailing the Decision dated
November 24, 2003 and Resolution dated August
10, 2004 of the CTA Division. In its Decision dated
January 27, 2006, the CTA en banc found no
cogent justification to disturb the conclusion spelled
out in the assailed Decision dated November 24,
2003 and Resolution dated August 10, 2004 of the
CTA Division.
expiration of the one hundred twenty day-
period, appeal the decision or the unacted
claim with the Court of Tax Appeals.
The taxpayer can file an appeal in one of two
ways: (1) file the judicial claim within thirty
days after the Commissioner denies the claim
within the 120-day period, or (2) file the judicial
claim within thirty days from the expiration of
the 120-day period if the Commissioner does
not act within the 120-day period. The 30-day
period always applies, whether there is a
denial or inaction on the part of the CIR. As a
general rule, the 30-day period to appeal is
both mandatory and jurisdictional. (Aichi and
San Roque) As an exception to the general
rule, premature filing is allowed only if filed
between 10 December 2003 and 5 October
2010, when BIR Ruling No. DA-489-03 was
still in force. (San Roque)Late filing is
absolutely prohibited, even during the time
when BIR Ruling No. DA-489-03 was in force.
(San Roque)
SPI filed on May 6, 1999 its administrative
claim for tax credit/refund of the input VAT
attributable to its zero-rated sales and on its
purchases of capital goods for the Third
Quarter of 1998. The two-year prescriptive
period for filing an administrative claim,
reckoned from the close of the taxable quarter,
prescribed on September 30, 2000.
Therefore, the herein administrative claim of
SPI was timely filed. Evidently, SPI belatedly
filed its judicial claim. It filed its Petition for
Review with the CTA 391 days after the lapse
of the 120-day period without the CIR acting
on its application for tax credit/refund, way
beyond the 30-day period under Section 112
of the 1997 Tax Code.
The inaction of the Commissioner on Philex's
claim during the 120-day period is, by express
provision of law, "deemed a denial" of Philex's
claim. Philex had 30 days from the expiration
 SPI filed a Motion for Reconsideration but said of the 120-day period to file its judicial claim
Motion was denied for lack of merit by the CTA en with the CTA. Philex's failure to do so
banc in a Resolution dated June 26, 2006. Hence, rendered the "deemed a denial" decision of
this petition. the Commissioner final and unappealable.
Because the 30-day period for filing its judicial
claim had already prescribed by the time SPI
filed its Petition for Review with the CTA
Division, the CTA Division never acquired
jurisdiction over the said Petition. The CTA
Division had absolutely no jurisdiction to act
upon, take cognizance of, and render
judgment upon the Petition for Review of SPI
in CTA Case No. 6170, regardless of the merit
of the claim of SPI. The Court stresses that the
120/30-day prescriptive periods are
mandatory and jurisdictional, and are not mere
technical requirements. The Court should not
establish the precedent that noncompliance
with mandatory and jurisdictional conditions
can be excused if the claim is otherwise
meritorious, particularly in claims for tax
refunds or credit. Such precedent will render
meaningless compliance with mandatory and
jurisdictional requirements.
It is not lost upon the Court that the
prescription of the judicial claim has not been
raised as an issue by any of the parties
whether before the CTA Division, CTA en
banc, or this Court. Nonetheless, the 120/30-
day prescriptive periods are mandatory and
jurisdictional, and the matter of jurisdiction
cannot be waived because it is conferred by
law and is not dependent on the consent or
objection or the acts or omissions of the
parties or any one of them. More importantly,
courts have the power to motu proprio dismiss
an action that already prescribed. According to
Rule 9, Section 1 of the Revised Rules of
Court.

19. Fort Bonifacio Act No. 7716 clarifies that it is the real This case revolves around three consolidated 1.) Whether or not the 1.) No. There is nothing in Section 105 of the
Development properties "held primarily for sale to petitions between Petitioner Fort Bonifacio transitional/presumptive input Old NIRC that prohibits the inclusion of real
Corporation v. CIR, et. customers or held for lease in the Development Corporation (FBDC) and the tax credit under Section 105 properties, together with the improvements
al., consolidated ordinary course of trade or business" that Respondent Commissioner of Internal Revenue.
cases of G.R. No. are subject to the VAT, and not when the The parties entered into a Stipulation of Facts,
175707, G.R. NO. real estate transactions are engaged in Documents, and Issue before the CTA for each
18003, G.R. No. by persons who do not sell or lease case. It was established before the CTA that the
181092, November 19, properties in the ordinary course of trade petitioner is engaged in the development and sale
2014 or business. Prior payment of taxes is of real property. It is the owner of, and is developing
not required for a taxpayer to avail of the and selling, parcels of land within a "newtown"
8% transitional input tax credit provided development area known as the Fort Bonifacio
in Section 105 of the old NIRC Global City (the Global City), located within the
former military camp known as Fort Bonifacio,
Taguig, Metro Manila. The National Government,
by virtue of Republic Act No. 7227 and Executive
Order No. 40, was the one that conveyed to
petitioner these parcels of land on February 8,
1995.
In May 1996, petitioner commenced developing the
Global City, and since October 1996, had been
selling lots to interested buyers. At the time of
acquisition, value-added tax (VAT) was not yet
imposed on the sale of real properties. Republic
Act No. 7716 (the Expanded Value-Added Tax [E-
VAT] Law), which took effect on January 1, 1996,
restructured the VAT system by further amending
pertinent provisions of the National Internal
Revenue Code (NIRC). Section 100 of the old
NIRC was amended by including "real properties"
in the definition of the term "goods or properties,"
thereby subjecting the sale of "real properties" to
VAT.
While prior to Republic Act No. 7716, real estate
transactions were not subject to VAT, they became
subject to VAT upon the effectivity of said law.
Thus, the sale of the parcels of land by petitioner
became subject to a 10% VAT, and this was later
increased to 12%, pursuant to Republic Act No.
9337. Petitioner afterwards became a VAT-
registered taxpayer. On September 19, 1996, in
accordance with Revenue Regulations No. 7- 95
(Consolidated VAT Regulations), petitioner
submitted to respondent BIR, an inventory list of its
properties as of February 29, 1996. The total book
value of the petitioner's land inventory amounted to
P71,227,503,200.00. On the basis of Section 105
of the NIRC may be claimed
only on the "improvements"
on real properties. 2.)
Whether or not there must
have been previous payment
of sales tax or value-added
tax by petitioner on its land
before petitioner may claim
the input tax credit granted by
Section 105 (now Section 111
[A]) of the NIRC.
thereon, in the beginning inventory of goods,
materials and supplies, based on which
inventory the transitional input tax credit is
computed. It can be conceded that when it
was drafted Section 105 could not have
possibly contemplated concerns specific to
real properties, as real estate transactions
were not originally subject to VAT. At the same
time, when transactions on real properties
were finally made subject to VAT beginning
with Rep. Act No. 7716, no corresponding
amendment was adopted as regards Section
105 to provide for a differentiated treatment in
the application of the transitional input tax
credit with respect to real properties or real
estate dealers. It was Section 100 of the Old
NIRC, as amended by Rep. Act No. 7716,
which made real estate transactions subject to
VAT for the first time. Prior to the amendment,
Section 100 had imposed the VAT "on every
sale, barter or exchange of goods", without
however specifying the kind of properties that
fall within or under the generic class "goods"
subject to the tax.
Rep. Act No. 7716, which significantly is also
known as the Expanded Value-Added Tax
(EVAT) law, expanded the coverage of the
VAT by amending Section 100 of the Old
NIRC in several respects, some of which we
will enumerate. First, it made every sale,
barter or exchange of "goods or properties"
subject to VAT. Second, it generally defined
"goods or properties" as "all tangible and
intangible objects which are capable of
pecuniary estimation." Third, it included a
nonexclusive enumeration of various objects
that fall under the class "goods or properties"
subject to VAT, including "[r]eal properties
held primarily for sale to customers or held for
lease in the ordinary course of trade or
business." From these amendments to
Section 100, is there any differentiated VAT
treatment on real properties or real estate
of the NIRC, petitioner claims a transitional or
presumptive input tax credit of 8% of
P71,227,503,200.00, the total value of the real
properties listed in its inventory, or a total input tax
credit of P5,698,200,256.00. After the value of the
real properties was reduced due to a reconveyance
by petitioner to BCDA of a parcel of land, petitioner
claims that it is entitled to input tax credit in the
reduced amount of P4,250,475,000.48. What
petitioner seeks to be refunded are the actual VAT
payments made by it in cash, which it claims were
either erroneously paid by or illegally collected from
it. Each Claim for Refund is based on petitioner's
position that it is entitled to a transitional input tax
credit under Section 105 of the old NIRC, which
more than offsets the aforesaid VAT payments.
Hence, this petition.
In G.R. No. 175707 is an appeal by certiorari
pursuant to Rule 45 of the 1997 Rules of Civil
Procedure from (a) the Decision dated April 22,
2003 of the Court of Appeals in CA-G.R. SP No.
61516 dismissing FBDC's Petition for Review with
regard to the Decision of the Court of Tax Appeals
(CTA) dated October 13, 2000 in CTA Case No.
5885, and from (b) the Court of Appeals Resolution
dated November 30, 2006 denying its Motion for
Reconsideration.
In G.R. No. 180035 an appeal by certiorari
pursuant to Rule 45 was filed by Petitioner from (a)
the Court of Appeals Decision dated April 30, 2007
in CA-G.R. SP No. 76540 denying FBDC's Petition
for Review with respect to the CTA Resolution
dated March 28, 2003 in CTA Case No. 6021, and
from (b) the Court of Appeals Resolution dated
October 8, 2007 denying its Motion for
Reconsideration.
In G.R. No. 181092 an appeal by certiorari was filed
by Petitioner pursuant to Rule 45 from the Court of
Appeals Decision dated December 28, 2007 inCA-
G.R. SP No. 61158 dismissing FBDC's petition for
review with respect to the CTA Decision dated
September 29, 2000 in CTA Case No. 5694. The
aforesaid CTA Decision, which the Court of
dealers that would justify the suggested
limitations on the application of the transitional
input tax on them? We see none. Rep. Act No.
7716 clarifies that it is the real properties "held
primarily for sale to customers or held for
lease in the ordinary course of trade or
business" that are subject to the VAT, and not
when the real estate transactions are engaged
in by persons who do not sell or lease
properties in the ordinary course of trade or
business.
2.) No. Section 105 states that the transitional
input tax credits become available either to (1)
a person who becomes liable to VAT; or (2)
any person who elects to be VATregistered.
The clear language of the law entitles new
trades or businesses to avail of the tax credit
once they become VATregistered. The
transitional input tax credit, whether under the
Old NIRC or the New NIRC, may be claimed
by a newly-VAT registered person such as
when a business as it commences
operations. . . . [I]t is not always true that the
acquisition of such goods, materials and
supplies entail the payment of taxes on the
part of the new business. In fact, this could
occur as a matter of course by virtue of the
operation of various provisions of the NIRC,
and not only on account of a specially
legislated exemption.
The interpretation proffered by the CTA would
exclude goods and properties which are
acquired through sale not in the ordinary
course of trade or business, donation or
through succession, from the beginning
inventory on which the transitional input tax
credit is based. Nothing in the Old NIRC (or
even the New NIRC) speaks of such a
possibility or qualifies the previous payment of
VAT or any other taxes on the goods,
materials and supplies as a pre-requisite for
inclusion in the beginning inventory. It is
apparent that the transitional input tax credit
Appeals affirmed, denied petitioner's Claim for
Refund in the amount of P269,340,469.45,
representing "VAT erroneously paid by or illegally
collected from petitioner for the fourth quarter of
1996." Hence, this petition.
operates to benefit newly VAT-registered
persons, whether or not they previously paid
taxes in the acquisition of their beginning
inventory of foods, materials and supplies.
During that period of transition from non-VAT
to VAT status, the transitional input tax credit
serves to alleviate the impact of the VAT on
the taxpayer. At the very beginning, the VAT-
registered taxpayer is obliged to remit a
significant portion of the income it derived from
its sales as output VAT. The transitional input
tax credit mitigates this initial diminution of the
taxpayer's income by affording the opportunity
to offset the losses incurred through the
remittance of the output VAT at a stage when
the person is yet unable to credit input VAT
payments.
Under Section 105 of the Old NIRC, the rate
of the transitional input tax credit is "8% of the
value of such inventory or the actual value-
added tax paid on such goods, materials and
supplies, whichever is higher." If indeed the
transitional input tax credit is premised on the
previous payment of VAT, then it does not
make sense to afford the taxpayer the benefit
of such credit based on "8% of the value of
such inventory" should the same prove higher
than the actual VAT paid. This intent that the
CTA alluded to could have been implemented
with ease had the legislature shared such
intent by providing the actual VAT paid as the
sole basis for the rate of the transitional input
tax credit.
The common standard for the application of
the transitional input tax credit, as enacted by
E.O. No. 273 and all subsequent tax laws
which reinforced or reintegrated the tax credit,
is simply that the taxpayer in question has
become liable to VAT or has elected to be a
VAT-registered person. E. O. No. 273 and the
subsequent tax laws are all decidedly neutral
and accommodating in ascertaining who
should be entitled to the tax credit, and it

20. CIR vs. Team Sual Failure to comply with the 120-day On November 26, 1999, the petitioner CIR granted
Corporation (Formerly mandatory period under Section 112 (C) respondent TSC's application for zero rating from
Mirant Sual of the NIRC renders its petition for review its sale of power generation services to NPC for the
Corporation), G.R. No. with the CTA is void because the 120- taxable year 2000. As a VAT-registered entity, TSC
194105. February 5, day mandatory period under the NIRC is filed its VAT returns for the first, second, third, and
2014 mandatory and jurisdictional. fourth quarters of taxable year 2000 on April 24,
2000, July 25, 2000, October 25, 2000, and
January 25, 2001, respectively.
On March 11, 2002, TSC filed with the BIR an
administrative claim for refund, claiming that it is
entitled to the unutilized input VAT in the amount of
P179,314,926.56 arising from its zero-rated sales
to NPC for the taxable year 2000. On April 1, 2002,
without waiting for the CIR's resolution of its
administrative claim for refund/tax credit, TSC filed
a petition for review with the CTA seeking the
refund or the issuance of a tax credit certificate in
the amount of P179,314,926.56 for its unutilized
input VAT for the taxable year 2000.
The CIR claimed that TSC's claim for refund/tax
credit should be denied, on the ground that TSC
failed to comply with the conditions precedent for
claiming refund/tax credit of unutilized input VAT.
The CIR pointed out that TSC failed to submit
complete documents in support of its application for
refund/tax credit contrary to Section 112 (C) of the
NIRC.
On January 26, 2009, the CTA First Division
rendered a Decision, which granted TSC's claim
for refund/tax credit of input VAT. Nevertheless, the
CTA First Division found that, from the total
unutilized input VAT of P179,314,926.56 that it
Whether or not the CTA en
banc erred in holding that
TSC's petition for review with
the CTA was not prematurely
filed.
behooves the CIR and the CTA to adopt a
similarly judicious perspective.
The Court has thus categorically ruled that
prior payment of taxes is not required for a
taxpayer to avail of the 8% transitional input
tax credit provided in Section 105 of the old
NIRC and that petitioner is entitled to it,
despite the fact that petitioner acquired the
Global City property under a tax-free
transaction.
Yes. Any unutilized input VAT attributable to
zero-rated or effectively zero rated sales may
be claimed as a refund/tax credit. Initially,
claims for refund/tax credit for unutilized input
VAT should be filed with the BIR, together with
the complete documents in support of the
claim. Pursuant to Section 112 (A) of the
NIRC, the administrative claim for refund/tax
credit must be filed with the BIR within two
years after the close of the taxable quarter
when the sales were made. Under Section
112 (C) of the NIRC, the CIR is given 120 days
from the submission of complete documents
in support of the application for refund/tax
credit within which to either grant or deny the
claim. In case of (1) full or partial denial of the
claim or (2) the failure of the CIR to act on the
claim within 120 days from the submission of
complete documents, the taxpayer-claimant
may, within 30 days from receipt of the CIR
decision denying the claim or after the lapse of
the 120-day period, file a petition for review
with the CTA.
In Commissioner of Internal Revenue v. San
Roque Power Corporation, the Court
emphasized that the 120-day period that is
given to the CIR within which to decide claims
for refund/tax credit of unutilized input VAT is
mandatory and jurisdictional. The Court
categorically held that the taxpayer-claimant
must wait for the 120-day period to lapse,
should there be no decision fully or partially
claimed, TSC was only able to substantiate the
amount of P173,265,261.30.
The CIR sought a reconsideration of the CTA First
Division maintaining that TSC is not entitled to a
refund/tax credit of its unutilized input VAT for the
taxable year 2000 since it failed to submit all the
necessary and relevant documents in support of its
administrative claim. The CIR further claimed that
TSC's petition for review was prematurely filed,
alleging that under Section 112 (C) of the NIRC, the
CIR is given 120 days from the submission of
complete documents within which to either grant or
deny TSC's application for refund/tax credit of its
unutilized input VAT. The CIR pointed out that TSC
filed its petition for review with the CTA sans any
decision on its claim and without waiting for the
120-day period to lapse.
On June 19, 2009, the CTA First Division issued a
Resolution, which denied the CIR's motion for
reconsideration. The CTA First Division found that
TSC's petition for review was not prematurely filed
notwithstanding that the 120-day period given to
the CIR under Section 112 (C) of the NIRC had not
yet lapsed. It ruled that, pursuant to Section 112 (A)
of the NIRC, claims for refund/tax credit of
unutilized input VAT should be filed within two
years after the close of the taxable quarter when
the sales were made; that the 120-day period
under Section 112 (C) of the NIRC is also covered
by the two year prescriptive period within which to
claim the refund/tax credit of unutilized input VAT.
Aggrieved by the foregoing disquisition of the CTA
First Division, the CIR filed a Petition for Review
with the CTA en banc. The CTA en banc ruled that,
pursuant to Section 112 (A) of the NIRC, both the
administrative and judicial remedies under Section
112 (C) of the NIRC must be undertaken within the
two-year period from the close of the taxable
quarter when the relevant sales were made.
Hence, this petition.
denying the claim, before a petition for review
may be filed with the CTA. Otherwise, the
petition would be rendered premature and
without a cause of action. Consequently, the
CTA does not have the jurisdiction to take
cognizance of a petition for review filed by the
taxpayer-claimant should there be no decision
by the CIR on the claim for refund/tax credit or
the 120-day period had not yet lapsed.
The two-year prescriptive period within which
to file a claim for refund/tax credit of unutilized
input VAT under Section 112 (A) of the NIRC
is about to lapse is inconsequential and would
not justify the immediate filing of a petition for
review with the CTA sans compliance with the
120-day mandatory period. To stress, under
Section 112 (C) of the NIRC, a taxpayer may
only file a petition for review with the CTA
within 30 days from either: (1) the receipt of
the decision of the CIR denying, in full or in
part, the claim for refund/tax credit; or (2) the
lapse of the 120-day period given to the CIR
to decide the claim for refund/tax credit. The
120-day mandatory period may extend
beyond the two-year prescriptive period for
filing a claim for refund/tax credit under
Section 112 (A) of the NIRC.
TSC's failure to comply with the 120-day
mandatory period under Section 112 (C) of the
NIRC renders its petition for review with the
CTA void. It is a mere scrap of paper from
which TSC cannot derive or acquire any right
notwithstanding the supposed failure on the
part of the CIR to raise the issue of TSC's non-
compliance with the 120-day period in the
proceedings before the CTA First Division.
However, BIR Ruling No. DA-489-03 provided
that the taxpayer-claimant may already file a
judicial claim for refund/tax credit with the CTA
notwithstanding that the 120-day mandatory
period under Section 112 (C) of the NIRC had
not yet lapsed. Being a general interpretative
rule, the CIR is barred from questioning the

21. CBK Power Section 112 (D) further provides that the
Company Limited vs. CIR has to decide on an administrative
CIR, G.R. No. 198729- claim within one hundred twenty (120)
30, January 15, 2014. days from the date of submission of
complete documents in support thereof.
Bearing in mind that the burden to prove
entitlement to a tax refund is on the
taxpayer, it is presumed that in order to
discharge its burden, petitioner had
attached complete supporting
documents necessary to prove its
entitlement to a refund in its application,
absent any evidence to the contrary.
Thereafter, the taxpayer affected by the
CIR's decision or inaction may appeal to
the CTA within 30 days from the receipt
of the decision or from the expiration of
the 120-day period within which the claim
has not been acted upon.
Petitioner is engaged, among others, in the
operation, maintenance, and management of the
Kalayaan II pumped-storage hydroelectric power
plant, the new Caliraya Spillway, Caliraya,
Botocan; and the Kalayaan I hydroelectric power
plants and their related facilities located in the
Province of Laguna.
On 29 December 2004, petitioner filed an
Application for VAT Zero-Rate with the Bureau of
Internal Revenue (BIR) in accordance with Section
108 (B) (3) of the National Internal Revenue Code
(NIRC) of 1997, as amended. The application was
duly approved by the BIR. Thus, petitioner's sale of
electricity to the NPC from 1 January 2005 to 31
October 2005 was declared to be entitled to the
benefit of effectively zero-rated value added tax
(VAT).
Petitioner filed its administrative claims for the
issuance of tax credit certificates for its alleged
unutilized input taxes on its purchase of capital
goods and alleged unutilized input taxes on its local
purchases and/or importation of goods and
Whether the petitioner’s claim
for refund of unutilized input
VAT for the first to third
quarters of 2005.
CTA's assumption of jurisdiction on the
ground that the 120-day mandatory period
under Section 112 (C) of the NIRC had not yet
lapsed since estoppel under Section 246 24 of
the NIRC had already set in. Nevertheless, the
Court clarified that taxpayers can only rely on
BIR Ruling No. DA-489-03 from the time of its
issuance on December 10, 2003 up to its
reversal by this Court in Aichi on October 6,
2010, where it was held that the 120-day
period under Section 112 (C) of the NIRC is
mandatory and jurisdictional.
TSC filed its judicial claim for refund/tax credit
of its unutilized input VAT with the CTA on
April 1, 2002 — more than a year before the
issuance of BIR Ruling No. DA-489-03.
Accordingly, TSC cannot benefit from the
declaration laid down in BIR Ruling No. DA-
489-03.
It must be emphasized that this is not a case
of premature filing of a judicial claim. Although
petitioner did not file its judicial claim with the
CTA prior to the expiration of the 120-day
waiting period, it failed to observe the 30-day
prescriptive period to appeal to the CTA
counted from the lapse of the 120-day period.
As this Court enunciated in San Roque,
petitioner cannot rely on Atlas either, since the
latter case was promulgated only on 8 June
2007. Moreover, the doctrine in Atlas which
reckons the two-year period from the date of
filing of the return and payment of the tax,
does not interpret — expressly or impliedly —
the 120+30 day periods. Simply stated, Atlas
referred only to the reckoning of the
prescriptive period for filing an administrative
claim.
For failure of petitioner to comply with the
120+30 day mandatory and jurisdictional
period, petitioner lost its right to claim a refund

22. CIR vs. Mindanao II It is only the administrative claim that
Geothermal must be filed within the two-year
Partnership, G.R. No. prescriptive period; the judicial claim
191498, January 15, need not fall within the two-year
2014 prescriptive period.
Having disposed of this question, we
proceed to the date for reckoning the
prescriptive period under Section 112
(A).
services, other than capital goods, pursuant to
Section 112 (A) and (B) of the NIRC of 1997, as
amended, with BIR Revenue District Office (RDO)
Laguna.
There was alleged no action on the part of the CIR,
thus the p Petition for Review with the CTA.
Accordingly, petitioner timely filed its administrative
claims for the three quarters of 2005. However,
considering that the judicial claim was filed on 18
April 2007, the CTA Division denied the claim for
the first quarter of 2005 for having been filed out of
time. The CTA 2nd division granted the claim and
ordered the issuance of a tax credit certificate in
favor of petitioner in the reduced amount of
P27,170,123.36.
The CTA En Banc ruled that the judicial claims for
the first, second, and third quarter of 2005 were
belatedly filed.
Mindanao II is a partnership registered with the
Securities and Exchange Commission. It is
engaged in the business of power generation and
sale of electricity to the National Power Corporation
(NAPOCOR) and is accredited by the Department
of Energy.
Mindanao II filed its Quarterly VAT Returns for the
second, third and fourth quarters of taxable year
2004.
On 6 October 2005, Mindanao II filed with the
Bureau of Internal Revenue (BIR) an application for
the refund or credit of accumulated unutilized
creditable input taxes. In support of the
administrative claim for refund or credit, Mindanao
II alleged, among others, that it is registered with
the BIR as a value-added taxpayer and all its sales
are zero-rated under the EPIRA law. It further
stated that for the second, third, and fourth quarters
of taxable year 2004, it paid input VAT in the
aggregate amount of P7,167,005.84, which were
directly attributable to the zero-rated sales. The
input taxes had not been applied against output
The resolution of this case
hinges on the question of
compliance with the following
time requirements for the
grant of a claim for refund or
credit of unutilized input VAT:
(1) the two-year prescriptive
period for filing an application
for refund or credit of
unutilized input VAT; and (2)
the 120+30 day period for
filing an appeal with the CTA.
or credit of its alleged excess input VAT.
With regard to petitioner's argument that Aichi
should not be applied retroactively, we
reiterate that even without that ruling, the law
is explicit on the mandatory and jurisdictional
nature of the 120+30 day period.
The lessons of this case may be summed up
as follows:
A. Two-Year Prescriptive Period
1. It is only the administrative claim that must
be filed within the two-year prescriptive period.
(Aichi)
2. The proper reckoning date for the two-year
prescriptive period is the close of the taxable
quarter when the relevant sales were made.
(San Roque) CHDAEc
3. The only other rule is the Atlas ruling, which
applied only from 8 June 2007 to 12
September 2008. Atlas states that the two-
year prescriptive period for filing a claim for tax
refund or credit of unutilized input VAT
payments should be counted from the date of
filing of the VAT return and payment of the tax.
(San Roque)
B. 120+30 Day Period
1. The taxpayer can file an appeal in one of
two ways: (1) file the judicial claim within thirty
days after the Commissioner denies the claim
within the 120-day period, or (2) file the judicial
tax.
Pursuant to Section 112 (D) of the 1997 Tax Code,
the Commissioner of Internal Revenue (CIR) had a
period of 120 days, or until 3 February 2006, to act
on the claim. The administrative claim, however,
remained unresolved on 3 February 2006.
Under the same provision, Mindanao II could treat
the inaction of the CIR as a denial of its claim, in
which case, the former would have 30 days to file
an appeal to the CTA, that is, on 5 March 2006.
Mindanao II, however, did not file an appeal within
the 30-day period.
Apparently, Mindanao II believed that a judicial
claim must be filed within the two-year prescriptive
period provided under Section 112 (A) and that
such time frame was to be reckoned from the filing
of its Quarterly VAT Returns for the second, third,
and fourth quarters of taxable year 2004, that is,
from 26 July 2004, 22 October 2004, and 25
January 2005, respectively. Thus, on 21 July 2006,
Mindanao II, claiming inaction on the part of the
CIR and that the two-year prescriptive period was
about to expire, filed a Petition for Review with the
CTA docketed as CTA.
claim within thirty days from the expiration of
the 120-day period if the Commissioner does
not act within the 120-day period.
2. The 30-day period always applies, whether
there is a denial or inaction on the part of the
CIR.
3. As a general rule, the 30-day period to
appeal is both mandatory and jurisdictional.
(Aichi and San Roque)
4. As an exception to the general rule,
premature filing is allowed only if filed between
10 December 2003 and 5 October 2010, when
BIR Ruling No. DA-489-03 was still in force.
(San Roque)
5. Late filing is absolutely prohibited, even
during the time when BIR Ruling No. DA-489-
03 was in force. (San Roque)

The CTA 2nd division rendered a Decision

ordering the CIR to grant a refund or a tax credit
certificate, but only in the reduced amount of
P6,791,845.24, representing unutilized input VAT
incurred for the second, third and fourth quarters of
taxable year 2004.

In support of its ruling, the CTA Second Division

held that Mindanao II complied with the twin
requisites for VAT zero-rating under the EPIRA
law: first, it is a generation company, and second,
it derived sales from power generation. It also ruled
that Mindanao II satisfied the requirements for the
grant of a refund/credit under Section 112 of the
Tax Code: (1) there must be zero-rated or
effectively zero-rated sales; (2) input taxes must
have been incurred or paid; (3) the creditable input
tax due or paid must be attributable to zero-rated

23. Team Energy The theory that the 30-day period must
Corporation (formerly fall within the two-year prescriptive
Mirant Pagbilao Corp.) period adds a condition that is not found
vs. CIR, G.R. No. in the law. It results in truncating 120
190928, January 13, days from the 730 days that the law
2014. grants the taxpayer for filing his
administrative claim with the
Commissioner. This Court cannot
interpret a law to defeat, wholly or even
partly, a remedy that the law expressly
grants in clear, plain and unequivocal
language. Section 112 (A) and (C) must
be interpreted according to its clear, plain
and unequivocal language. The taxpayer
can file his administrative claim for refund
or credit at any time within the two-year
prescriptive period. If he files his claim on
the last day of the two-year prescriptive
period, his claim is still filed on time. The
Commissioner will have 120 days from
such filing to decide the claim. If the
Commissioner decides the claim on the
120th day, or does not decide it on that
day, the taxpayer still has 30 days to file
his judicial claim with the CTA. This is not
only the plain meaning but also the only
logical interpretation of Section 112 (A)
and (C).
sales or effectively zero-rated sales; (4) the input
VAT payments must not have been applied against
any output liability; and (5) the claim must be filed
within the two-year prescriptive period.
As to the second requisite, however, the input tax
claim to the extent of P375,160.60 corresponding
to purchases of services from Mitsubishi
Corporation was disallowed, since it was not
substantiated by official receipts.
Petitioner filed with the Bureau of Internal Revenue
(BIR) its first to fourth quarterly value-added tax
(VAT) returns for the calendar year 2002.
Subsequently, on December 22, 2003, petitioner
filed an administrative claim for refund of unutilized
input VAT with RDO No. 60, Lucena City, in the
total amount of P79,918,002.95 for calendar year
2002. Due to the CIR’s inaction, petitioner elevated
its claim before the CTA 1st division wherein the
appellate court partially granted the refund of the
tax credit but reduced the amount to P69, 618,
971.19.
Not satisfied, respondent filed his Motion for Partial
Reconsideration against said decision, which the
CTA First Division denied in a Resolution dated
September 8, 2008.
The CTA En Banc affirmed the CTA First Division’s
decision with the modification that the refundable
amount be reduced to ₱51,134,951.40.
Hence, the present petition wherein petitioner
raises the following issues for our resolution:
The CTA En Banc committed grave abuse of
discretion amounting to lack or excess of
jurisdiction when it disallowed petitioner’s input
VAT for the first quarter amounting to
₱18,484,019.79 based on prescription because:
petitioner filed its judicial claim for refund well within
the two-year prescriptive period reckoned from the
date of filing of the quarterly VAT.
Sole issue for our resolution is
whether the petitioner timely
filed its judicial claim for
refund of input VAT for the
first quarter of 2002.
Yes. There are three compelling reasons why
the 30-day period need not necessarily fall
within the two-year prescriptive period, as long
as the administrative claim is filed within the
two-year prescriptive period.
First, Section 112 (A) clearly, plainly and
unequivocally provides that the taxpayer
"may, within two (2) years after the close of the
taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate
or refund of the creditable input tax due or paid
to such sales." In short, the law states that the
taxpayer may apply with the Commissioner for
a refund or credit "within two (2) years," which
means at anytime within two years. Thus, the
application for refund or credit may be filed by
the taxpayer with the Commissioner on the
last day of the two-year prescriptive period
and it will still strictly comply with the law. The
two-year prescriptive period is a grace period
in favor of the taxpayer and he can avail of the
full period before his right to apply for a tax
refund or credit is barred by prescription.
Second, Section 112 (C) provides that the
Commissioner shall decide the application for
refund or credit "within one hundred twenty
(120) days from the date of submission of
complete documents in support of the
application filed in accordance with
Subsection (A)." The reference in Section 112
(C) of the submission of documents "in
support of the application filed in accordance
with Subsection (A)" means that the
application in Section 112 (A) is the
administrative claim that the Commissioner
must decide within the 120-day period. In
short, the two-year prescriptive period in
Section 112 (A) refers to the period within
which the taxpayer can file an administrative
claim for tax refund or credit. Stated otherwise,
the two-year prescriptive period does not refer
to the filing of the judicial claim with the CTA
but to the filing of the administrative claim with
the Commissioner. As held in Aichi, the
"phrase ‘within two years x x x apply for the
issuance of a tax credit or refund" refers to
applications for refund/credit with the CIR and
not to appeals made to the CTA."

Third, if the 30-day period, or any part of it, is

required to fall within the two-year prescriptive
period (equivalent to 730 days), then the
taxpayer must file his administrative claim for
refund or credit within the first 610 days of the
two-year prescriptive period. Otherwise, the
filing of the administrative claim beyond the
first 610 days will result in the appeal to the
CTA being filed beyond the two-year
prescriptive period. Thus, if the taxpayer files
his administrative claim on the 611th day, the
Commissioner, with his 120-day period, will
have until the 731st day to decide the claim. If
the Commissioner decides only on the 731st
day, or does not decide at all, the taxpayer can
no longer file his judicial claim with the CTA
because the two-year prescriptive period
(equivalent to 730 days) has lapsed. The 30-
day period granted by law to the taxpayer to
file an appeal before the CTA becomes utterly
useless, even if the taxpayer complied with the
law by filing his administrative claim within the
two-year prescriptive period.
Based on the aforequoted discussions, we
therefore disagree with the CTA En Banc’s

24. Fort Bonifacio The law is clear: a transitional input tax,
Development which is merely an assumed payment of
Corporation v. CIR, et. tax and not an actual payment of tax,
al., G.R. No. 173425, cannot give rise to a cash refund, or even
January 22, 2013. to a tax credit where the taxpayer has no
output tax. The reason is plain common
sense. A taxpayer who has not actually
paid a tax cannot ask for its refund or
credit. Likewise, a taxpayer who has no
output tax to offset a tax credit arising
from an assumed tax payment cannot
ask the government for a cash refund or
credit, for to do so will require the
government to actually pay out public
funds for a private purpose.
Petitioner Fort Bonifacio Development Corporation
(FBDC) is a duly registered domestic corporation
engaged in the development and sale of real
property. The Bases Conversion Development
Authority (BCDA), a wholly owned government
corporation created under Republic Act (RA) No.
7227, owns 45% of petitioner's issued and
outstanding capital stock; while the Bonifacio Land
Corporation, a consortium of private domestic
corporations, owns the remaining 55%. On
February 8, 1995, by virtue of RA 7227 and
Executive Order No. 40, dated December 8, 1992,
petitioner purchased from the national government
a portion of the Fort Bonifacio reservation, now
known as the Fort Bonifacio Global City (Global
City). On January 1, 1996, RA 7716 restructured
the Value-Added Tax (VAT) system by amending
certain provisions of the old National Internal
Revenue Code (NIRC). RA 7716 extended the
coverage of VAT to real properties held primarily
for sale to customers or held for lease in the
ordinary course of trade or business. On
September 19, 1996, petitioner submitted to the
Bureau of Internal Revenue (BIR) Revenue District,
an inventory of all its real properties, the book value
of which aggregated P71,227,503,200. 10 Based
on this value, petitioner claimed that it is entitled to
a transitional input tax credit of P5,698,200,256,
pursuant to Section 105 of the old NIRC. In
October 1996, petitioner started selling Global City
lots to interested buyers. For the first quarter of
1997, petitioner generated a total amount of
P3,685,356,539.50 from its sales and lease of lots,
on which the output VAT payable was
P368,535,653.95. Petitioner paid the output VAT
by making cash payments to the BIR totalling
P359,652,009.47 and crediting its unutilized input
tax credit on purchases of goods and services of
P8,883,644.48. Realizing that its transitional input
tax credit was not applied in computing its output
Whether petitioner is not
entitled to any refund of input
[Value-added tax] VAT, since
the sale by the national
government of the Global City
land to petitioner was not
subject to any input VAT
finding that petitioner’s judicial claim for the
first quarter of 2002 was not timely filed.
Yes. Section 112 of the Tax Code does not
prohibit cash refund or tax credit of transitional
input tax in the case of zero-rated or effectively
zero-rated VAT registered taxpayers, who do
not have any output VAT. The phrase "except
transitional input tax" in Section 112 of the Tax
Code was inserted to distinguish creditable
input tax from transitional input tax credit.
Transitional input tax credits are input taxes on
a taxpayer's beginning inventory of goods,
materials, and supplies equivalent to 8% (then
2%) or the actual VAT paid on such goods,
materials and supplies, whichever is higher. It
may only be availed of once by first-time VAT
taxpayers. Creditable input taxes, on the other
hand, are input taxes of VAT taxpayers in the
course of their trade or business, which should
be applied within two years after the close of
the taxable quarter when the sales were
made. The transitional input tax is a tax
assumed to have been paid, whether actually
paid or not. The Tax Code always requires
substantiation for any refund or credit of a tax,
that is, the taxpayer must prove that he
actually paid the tax. The only exception is the
transitional input tax, which is assumed to
have been paid, whether actually paid or not.
The transitional input tax is credited against
output tax in the concept of a reduction of tax
liability, 2 either to minimize the tax burden or
as a tax incentive. However, the transitional
input tax cannot be refunded in cash because
such cash refund will be a use of public funds
for a private purpose. If the taxpayer has no
output tax, the taxpayer cannot ask a tax credit
for the unused transitional input tax because
the transitional input tax merely serves to
reduce the output tax, if there is any. Thus, the
Tax Code expressly prohibits any cash refund
or tax credit of transitional input tax in the case

25. Accenture, Inc. vs. A taxpayer claiming a tax credit or refund
CIR, G.R. No. 190102, has the burden of proof to establish the
July 11, 2012 factual basis of that claim. Tax refunds,
like tax exemptions, are construed strictly
against the taxpayer.
VAT for the first quarter of 1997, petitioner on
November 17, 1998 filed with the BIR a claim for
refund of the amount of P359,652,009.47
erroneously paid as output VAT for the said period.
The CTA denied petitioner's claim for refund.
According to the CTA, "the benefit of transitional
input tax credit comes with the condition that
business taxes should have been paid first." 19 In
this case, since petitioner acquired the Global City
property under a VAT-free sale transaction, it
cannot avail of the transitional input tax credit. The
CA affirmed the decision of the CTA. The CA
agreed that petitioner is not entitled to the 8%
transitional input tax credit since it did not pay any
VAT when it purchased the Global City property.
The CA opined that transitional input tax credit is
allowed only when business taxes have been paid
and passed-on as part of the purchase price.
Accenture, Inc. (Accenture) is a corporation
engaged in the business of providing management
consulting, business strategies development, and
selling and/or licensing of software. It is duly
registered with the Bureau of Internal Revenue
(BIR) as a Value Added Tax (VAT) taxpayer or
enterprise in accordance with Section 236 of the
NIRC. Accenture filed its Monthly VAT Returns.
These VAT returns were ammended. The monthly
and quarterly VAT returns of Accenture show that,
notwithstanding its application of the input VAT
credits earned from its zero-rated transactions
against its output VAT liabilities, it still had excess
or unutilized input VAT credits. These VAT credits
Whether Accenture was
entitled to a refund or an
issuance of a TCC in the
amount of P35,178,844.21
because its sales of goods
and services are zero-rated
for VAT purposes under
Section 108(B)(2)(3) of the
1997 Tax Code
of zero-rated or effectively zero-rated VAT
registered taxpayers, who do not have any
output VAT. Section 112 (A) of the Tax Code:
SEC. 112. Refunds or Tax Credits of Input
Tax. ” (A) Zero-rated or Effectively Zero-rated
Sales. ” Any VAT-registered person, whose
sales are zero-rated or effectively zero-rated
may, within two (2) years after the close of the
taxable quarter when the sales were made,
apply for the issuance of a tax credit certificate
or refund of creditable input tax due or paid
attributable to such sales, except transitional
input tax, to the extent that such input tax has
not been applied against output tax: . . . .
(Emphasis supplied) The law is clear: a
transitional input tax, which is merely an
assumed payment of tax and not an actual
payment of tax, cannot give rise to a cash
refund, or even to a tax credit where the
taxpayer has no output tax. The reason is
plain common sense. A taxpayer who has not
actually paid a tax cannot ask for its refund or
credit. Likewise, a taxpayer who has no output
tax to offset a tax credit arising from an
assumed tax payment cannot ask the
government for a cash refund or credit, for to
do so will require the government to actually
pay out public funds for a private purpose.
No. The Court ruled that the recipient of the
service must be doing business outside the
Philippines for the transaction to qualify for
zero-rating under Section 108 (B) of the Tax
Code. Accenture claims that these
documentary pieces of evidence are
supported by the Report of Emmanuel
Mendoza, the Court-commissioned
Independent Certified Public Accountant. He
ascertained that Accenture's gross billings
pertaining to zero-rated sales were all
supported by zero-rated Official Receipts and
Billing Statements. These documents show
that these zero-rated sales were paid in
are in the amounts of P9,355,809.80 for the 1st
period and P27,682,459.38 for the 2nd period, or a
total of P37,038,269.18. Out of the
P37,038,269.18, only P35,178,844.21 pertained to
the allocated input VAT on Accenture's "domestic
purchases of taxable goods which cannot be
directly attributed to its zero-rated sale of services."
This allocated input VAT was broken down to
P8,811,301.66 for the 1st period and
P26,367,542.55 for the 2nd period. The excess
input VAT was not applied to any output VAT that
Accenture was liable for in the same quarter when
the amount was earned — or to any of the
succeeding quarters. Instead, it was carried
forward to petitioner's 2nd Quarterly VAT Return for
2003. Accenture filed with the Department of
Finance (DoF) an administrative claim for the
refund or the issuance of a Tax Credit Certificate
(TCC). The DoF did not act on the claim of
Accenture. Hence, Accenture filed a Petition for
Review with the First Division of the Court of Tax
Appeals (Division), praying for the issuance of a
TCC in its favor in the amount of P35,178,844.21.
foreign exchange currency and duly
accounted for in the rules and regulations of
the BSP. In the CTA's opinion, however, the
documents presented by Accenture merely
substantiate the existence of the sales, receipt
of foreign currency payments, and inward
remittance of the proceeds of these sales duly
accounted for in accordance with BSP rules.
Petitioner presented no evidence whatsoever
that these clients were doing business outside
the Philippines. Accenture insists, however,
that it was able to establish that it had
rendered services to foreign corporations
doing business outside the Philippines, unlike
in Burmeister, which allegedly involved a
foreign corporation doing business in the
Philippines. A taxpayer claiming a tax credit
or refund has the burden of proof to establish
the factual basis of that claim. Tax refunds,
like tax exemptions, are construed strictly
against the taxpayer. Accenture failed to
discharge this burden. It alleged and
presented evidence to prove only that its
clients were foreign entities. However, as
found by both the CTA Division and the CTA
En Banc, no evidence was presented by
Accenture to prove the fact that the foreign
clients to whom petitioner rendered its
services were clients doing business outside
the Philippines. As ruled by the CTA En Banc,
the Official Receipts, Intercompany Payment
Requests, Billing Statements, Memo Invoices-
Receivable, Memo Invoices-Payable, and
Bank Statements presented by Accenture
merely substantiated the existence of sales,
receipt of foreign currency payments, and
inward remittance of the proceeds of such
sales duly accounted for in accordance with
BSP rules, all of these were devoid of any
evidence that the clients were doing business
outside of the Philippines. In view of the

26. Western Mindanao Under the NIRC, a creditable input tax
Power Corp. vs. CIR, should be evidenced by a VAT invoice or
G.R. No. 181136, June official receipt, 17 which may only be
13, 2012 considered as such when it complies with
the requirements of R 7-95, particularly
Section 4.108-1. This section requires,
among others, that "(i)f the sale is subject
to zero percent (0%) value-added tax,
the term 'zero-rated sale' shall be written
or printed prominently on the invoice or
receipt."
Petitioner WMPC is a domestic corporation
engaged in the production and sale of electricity. It
is registered with the Bureau of Internal Revenue
(BIR) as a VAT taxpayer. Petitioner alleges that it
sells electricity solely to the National Power
Corporation (NPC), which is in turn exempt from
the payment of all forms of taxes, duties, fees and
imposts, pursuant to Section 13 of Republic Act
(R.A.) No. 6395 (An Act Revising the Charter of the
National Power Corporation). In view thereof and
pursuant to Section 108 (B) (3) of the National
Internal Revenue Code (NIRC), petitioner's power
generation services to NPC is zero-rated. Under
Section 112 (A) of the NIRC, 4 a VAT-registered
taxpayer may, within two years after the close of
the taxable quarter, apply for the issuance of a tax
credit or refund of creditable input tax due or paid
and attributable to zero-rated or effectively zero-
rated sales. Hence, on 20 June 2000 and 13 June
2001, WMPC filed with the Commissioner of
Internal Revenue (CIR) applications for a tax credit
certificate of its input VAT covering the taxable 3rd
and 4th quarters of 1999 (amounting to
P3,675,026.67) 5 and all the taxable quarters of
2000 (amounting to P5,649,256.81). Noting that
the CIR was not acting on its application, and
fearing that its claim would soon be barred by
prescription, WMPC on 28 September 2001 filed
with the Court of Tax Appeals (CTA) in Division a
Petition for Review docketed, seeking refund/tax
credit certificates for the total amount of
P9,324,283.30. The CIR filed its Comment on the
CTA Petition, arguing that WMPC was not entitled
to the latter's claim for a tax refund in view of its
failure to comply with the invoicing requirements
under Section 113 of the NIRC in relation to
invoicing requirments. On 1 September 2006, the
CTA Second Division dismissed ° the Petition. It
held that while petitioner submitted in evidence its
Quarterly VAT Returns for the periods applied for,
Whether the CTA En Banc
seriously erred in dismissing
the claim of petitioner for a
refund or tax credit on input
tax on the ground that the
latter's Official Receipts do
not contain the phrase "zero-
rated
foregoing, the Court denied Accenture's
Petition for a tax refund.
No. Being a derogation of the sovereign
authority, a statute granting tax exemption is
strictly construed against the person or entity
claiming the exemption. When based on such
statute, a claim for tax refund partakes of the
nature of an exemption. Hence, the same rule
of strict interpretation against the taxpayer-
claimant applies to the claim. 14 In the present
case, petitioner's claim for a refund or tax
credit of input VAT is anchored on Section 112
(A) of the NIRC, viz.: Section 112 .Refunds or
Tax Credits of Input Tax. — (A) Zero-rated or
Effectively Zero-rated Sales. — any VAT-
registered person, whose sales are zero-rated
or effectively zero-rated may, within two (2)
years after the close of the taxable quarter
when the sales were made, apply for the
issuance of a tax credit certificate or refund of
creditable input tax due or paid attributable to
such sales, except transitional input tax, to the
extent that such input tax has not been applied
against output tax: Provided, however, That in
the case of zero-rated sales under Section
106(A)(2)(a)(1), (2) and (B) and Section 108
(B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly
accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas
(BSP): Provided, further, That where the
taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable
or exempt sale of goods of properties or
services, and the amount of creditable input
tax due or paid cannot be directly and entirely
attributed to any one of the transactions, it
shall be allocated proportionately on the basis
of the volume of sales. A taxpayer engaged in
zero-rated or effectively zero-rated sale may
apply for the issuance of a tax credit
certificate, or refund of creditable input tax due
 "the same do not reflect any zero-rated or
effectively zero-rated sales allegedly incurred
during said periods. The spaces provided for such
amounts were left blank, which only shows that
there existed no zero- rated or effectively zero-
rated sales for the 3rd and 4th quarters of 1999 and
the four quarters of 2000." Moreover, it found that
petitioner's VAT Invoices and Official Receipts did
not contain on their face the phrase "zero-rated,"
contrary to Section 4.108-1 of RR 7-95.
27. Silicon Phil., Inc. The burden of proving entitlement to a Silicon is engaged in the business of exporting
vs. CIR, G.R. No. refund lies with the claimant since it is integrated circuit (IC’s) components.
172378, January 17, akin to an exemption from taxes.
2011 It filed an application for credit/refund of unutilized
input VAT in the amount of P31,902,507.50.
However, BIR argues that Silicon’s failure to
indicate their ATP and the words “zero-rated” in its
export sales invoices is fatal to its cause.
CTA only allowed the deduction of P9,898,867.00
because training, office supplies and other similar
items were not considered as input VAT on capital
goods
WON it is required to indicate
an Authority to Print and the
word “zerorated” in export
sales invoices in order to
claim for refund for unutilized
input VAT
or paid, attributable to the sale. In a claim for
tax refund or tax credit, the applicant must
prove not only entitlement to the grant of the
claim under substantive law. It must also show
satisfaction of all the documentary and
evidentiary requirements for an administrative
claim for a refund or tax credit. Hence. the
mere fact that petitioner'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 claiming the refund must
further comply with the invoicing and
accounting requirements mandated by the
NIRC, as well as by revenue regulations
implementing them. Under the NIRC, 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 R 7-95, particularly
Section 4.108-1. This section requires, among
others, that "(i)f the sale is subject to zero
percent (0%) value-added tax, the term 'zero-
rated sale' shall be written or printed
prominently on the invoice or receipt.”
Yes, an Authority to Print and the word “zero-
rated” must be indicated.
There are two kinds of input VAT credits: one
is a credit of input VAT attributable to zero-
rated sales, and the other is a credit of input
VAT on capital goods.
While it is not required to indicate the ATP on
the invoices or receipts, securing an ATP prior
to printing said invoices or receipts is required
under the NIRC. Thus, it is required for a
claimant of unutilized input VAT on zero-rated
sales to present proof that it has secured an
ATP from the BIR - failure to do so would be
fatal. In this case, there was non-presentation
of the ATP.

28. Renato V. Diaz, et Tollway operators are franchise grantees
al. vs. Secretary of and they do not belong to exceptions (the
Finance, et al., G.R. low-income radio and/or television
No. 193007, July 19, broadcasting companies with gross
2011 annual incomes of less than P10 million
and gas and water utilities) that Section
119 spares from the payment of VAT.
The word “franchise” broadly covers
government grants of a special right to do
an act or series of acts of public concern.
29. KEPCO Phils. V. For a VAT-registered taxpayer to claim a
CIR, G.R. No. 179961, refund for unutilized input VAT for zero-
31 January 2011 rated sales, it must duly prove its
compliance to the requirements for tax
exemption. One of these requirements is
Renato Diaz and Aurora Timbol filed a petition for
declaratory relief assailing the validity of value-
added tax (VAT) on the collections of tollway
operators. Petitioners hold the view that Congress
did not, when it enacted the NIRC, intend to include
toll fees within the meaning of sale of services that
are subject to VAT; that a toll fee is a users tax, not
a sale of services; that to impose VAT on toll fees
would amount to a tax on public service; and that,
since VAT was never factored into the formula for
computing toll fees, its imposition would violate the
non-impairment clause of the constitution. The
government avers that the NIRC imposes VAT on
all kinds of services of franchise grantees, including
tollway operations, except where the law provides
otherwise.
KEPCO is a domestic corporation, and a VAT-
registered taxpayer, engaged in the production and
sale of electricity as an independent power
producer. It sells electricity to the NPC. It filed an
application for effective zero-rating of its sales of
electricty to the NPC at the CIR, claiming that it was
WON the government is
unlawfully expanding VAT
coverage by including tollway
operators and tollway
operations in the terms
franchise grantees and sale of
services
WON KEPCO’s failure to
imprint the words "zero-rated"
on its official receipts issued
to NPC justifies an outright
Failure to print the word “zero-rated” on the
sales invoices is fatal to a claim for refund as
it is required by RR 7-95.
Credit of input VAT on capital goods refers
only to properties with estimated useful life
greater than one year and which are treated
as depreciable assets, used directly or
indirectly in the production or sale of taxable
goods or services. It is clearly apparent that
training materials, office supplies and other
similar items are not capital goods.
No, the government is not unlawfully
expanding VAT.
Tollway operators are franchise grantees and
they do not belong to exceptions that Section
119 spares from the payment of value added
tax (VAT); The word “franchise” broadly
covers government grants of a special right to
do an act or series of acts of public concern.—
And not only do tollway operators come under
the broad term “all kinds of services,” they also
come under the specific class described in
Section 108 as “all other franchise grantees”
who are subject to VAT, “except those under
Section 119 of this Code.” Tollway operators
are franchise grantees and they do not belong
to exceptions (the low-income radio and/or
television broadcasting companies with gross
annual incomes of less than P10 million and
gas and water utilities) that Section 119
spares from the payment of VAT. The word
“franchise” broadly covers government grants
of a special right to do an act or series of acts
of public concern.
No, KEPCO is not entitled to the refund.
Based on the Sec. 108 (b)(3) of the NIRC in
relation to Sec. 13 of the Revised NPC
Charter, there is no doubt that NPC is an entity
with a special charter and exempt from
 the imprinting of the words "zerorated" in
every invoice issued with each sale.
30. CIR vs. Sony Phil., There must be a grant of authority before
Inc., G.R. No. 178697, any revenue officer can conduct an
November 17, 2010 examination or assessment.
entitled to refund of P10,527,202.54 for its reported
unutilized input VAT for the four quarters of 1999.
The CTA denied the claim for refund for KEPCO’s
failure to properly substantiate its effectively zero-
rated sales by noncompliance with the invoicing
requirements.
On November 1998, the CIR issued Letter of
Authority No. 000019734 (LOA 19734) authorizing
certain revenue officers to examine Sony’s books
of accounts and other accounting records
regarding revenue taxes for ―the period 1997 and
unverified prior years. On December 1999, a
preliminary assessment for 1997 deficiency taxes
and penalties was issued by the CIR which
Sony protested. Thereafter, acting on the protest,
the CIR issued final assessment notices, the formal
letter of demand and the details of discrepancies,
with a total of Php 15,895,632.65. Sony asked for
re-evaluation of the aforementioned assessment
on February 2000, and submitted relevant
documents in support of its protest On October
2000, within 30 days after the lapse of 180 days
from submission of the said supporting documents
to the CIR, Sony filed a petition for review before
the CTA.
denial of its claim for refund of payment of all forms of taxes, including VAT.
unutilized input tax credits As such, services rendered by any VAT-
registered person/entity, like KEPCO, to NPC
are effectively subject to 0% rate. However, for
effective zero rating, the VAT-registered
taxpayer must comply with invoicing
requirements under Secs. 113 and 237 of the
NIRC. Such provisions provide that a VAT-
registered person shall for every sale issue an
invoice or receipt wherein the word "zero-
rated" is imprinted therein.
Well-settled in this jurisdiction is the fact that
actions for tax refund are in the nature of a
claim for exemption and the law is construed
in strictissimi juris against the taxpayer. The
pieces of evidence presented entitling a
taxpayer to an exemption are also strictissimi
scrutinized and must be duly proven.
WON Sony is liable for The Court finds no merit in the petition, and
deficiency VAT therefore the petition was denied.
The CIR insists that LOA 19734, although it
states ―the period 1997 and unverified\ prior
years, should be understood to mean the
fiscal year ending in March 31, 1998. The
Court cannot agree.
Based on Section 13 of the Tax Code, a Letter
of Authority or LOA is the authority given to the
appropriate revenue officer assigned to
perform assessment functions. There must be
a grant of authority before any revenue officer
can conduct an examination or assessment.
Equally important is that the revenue officer so
authorized must not go beyond the authority
given. In the absence of such an authority, the
assessment or examination is a nullity.
The phrase ―and unverified prior years,‖
violated Section C of Revenue Memorandum
Order No. 43-90 dated September 20, 1990,

31. Panasonic A taxpayer has to be VAT-registered and Panasonic is a registered value-added tax (VAT)
Communications must comply with invoicing requirements enterprise.
Imaging Corp. of the otherwise its claim for tax credit/refund of
Phil. vs. CIR, G.R. No. VAT on its purchases shall be denied Believing its export sales were zerorated for VAT
178090, February 8, under Section 106(A)(2)(a)(1) of the 1997 NIRC,
2010 Panasonic paid input VAT attributable to its zero-
rated sales and later asked for a refund or tax credit
of what it paid which they believed were in excess
or unapplied. When the BIR did not act on the
same, Panasonic filed a petition for review with the
CTA, averring the inaction of the respondent CIR.
CTA’s First Division denied the petition and said
that while petitioner Panasonic’s export sales were
subject to 0% VAT the same did not qualify for
zero-rating because the word "zerorated" was not
printed on its export invoices which violates the
invoicing requirements of Section 4.108-1 of
Revenue Regulations (RR) 7-95.
Petitioner Panasonic points out, however, that in
requiring the printing on its sales invoices of the
word "zerorated," the Secretary of Finance unduly
expanded, amended, and modified by a mere
regulation (Section 4.108-1 of RR 7-95) the letter
and spirit of Sections 113 and 237 of the 1997
NIRC, prior to their amendment by R.A. 9337
WON the CTA en banc
correctly denied petitioner
Panasonic’s claim for refund
of the VAT it paid as a
zerorated taxpayer on the
ground that its sales invoices
did not state on their faces
that its sales were "zero-
rated."
the pertinent portion of which reads:
3. A Letter of Authority should cover a taxable
period not exceeding one taxable year. The
practice of issuing L/As covering audit
of ―unverified prior years is hereby
prohibited. If the audit of a taxpayer shall
include more than one taxable period, the
other periods or years shall be specifically
indicated in the L/A. Page 54 of 68.
Yes, it was denied correctly.
The VAT is a tax on consumption, an indirect
tax that the provider of goods or services may
pass on to his customers. Under the VAT
method of taxation, which is invoice-based, an
entity can subtract from the VAT charged on
its sales or outputs the VAT it paid on its
purchases, inputs and imports.The difference
in tax shown on invoices passed and invoices
received is the tax paid to the government. In
case the tax on invoices received exceeds that
on invoices passed, a tax refund may be
claimed.
For the effective zero rating of such
transactions, however, the taxpayer has to be
VAT-registered and must comply with
invoicing requirements otherwise its claim for
tax credit/refund of VAT on its purchases shall
be denied considering that the invoice it is
issuing to its customers does not depict its
being a VAT-registered taxpayer whose sales
are classified as zero-rated sales.
Section 4.108-1 of RR 7-95 proceeds from the
rule-making authority granted to the Secretary
of Finance under Section 245 of the 1977
NIRC (Presidential Decree 1158) for the
efficient enforcement of the tax code and of
course its amendments.The requirement is
reasonable and is in accord with the efficient

32. CIR v. SM Prime Operators of cinemas and theater The BIR sent a Preliminary Assessment Notice to
Holdings, Inc., G.R. houses are not subject to VAT but the respondents for VAT deficiency on cinema
No. 183505, 26 subject to local amusement tax imposed ticket sales in the amount of P119M for taxable
February 2010 by the LGU. year 2000. After protest and appeal, the CTA First
Division however ruled that the activity of showing
cinematographic films is not a service covered by
VAT under the NIRC of 4. 1997, but an activity
subject to amusement tax under RA 7160.
CTA En Banc also had a different interpretation
and decided that Sec. 108 of the NIRC actually had
set forth an exhaustive enumeration of what
services are intended to be subject to VAT and
therefore should subject the cinema-relative
activities of SM Prime to VAT.
33. Tambunting Pawnshops, being The Commissioner issued anv assessment for
Pawnshop, Inc. v. CIR, non-bank financial deficiency VAT against H. Tambunting Pawnshop
G.R. No. 179085, 21 intermediaries, are for the year 1999.
January 2010 exempted from VAT but liable to 0%-5%
percentage tax on grossvreceipts as the Petitioner protested the assessment. As the protest
case mayvbe. merited no response, it filed a Petition for Review
with the Court of Tax Appeals (CTA) pursuant to
Section 228 of the National Internal Revenue
Code, raising the argumentthat Pawnshops are not
subject to Value Added Tax pursuant to Section
108 of the National Internal Revenue
Code.
WON SM Prime is subject to
VAT
WON pawnshops are liable to
pay VAT.
collection of VAT from the covered sales of
goods and services.
No, It is not subject to VAT.
Section 108 of the Tax Code provides that
subject to VAT is the “sale or exchange of
services including lessors or distributors of
cinematographic films and other similar
services does not include cinema”. However,
in this case, the Supreme Court noted that the
words, “including” and “similar services”
merely indicate that the enumeration is by way
of example only.
What Section 108 contemplates is not the
same as the showing or exhibition of motion
picture films because “exhibition” means to
show or display while “lease” is defined as a
“contract by which the owner grants another
the right to possess, use, and enjoy it in a
specified period of time in exchange for a
stipulated price”.
In the case, SM Prime was merely exhibiting
and not leasing cinematographic films. It was
not legislative intent to impose VAT on
operators of cinemas, as it had become their
intent to transfer the power to impose
amusement tax exclusively to the local
government.
NO. R.A. No. 9238 (2004) finally classified
pawnshops as Other Non-bank Financial
Intermediaries. The Court finds that pawn
shops should have been treated as non-bank
financial intermediaries from the very
beginning, subject to the appropriate taxes
provided by law.
Since petitioner is a non-bank financial
intermediary, it is subject to 10% VAT for the
tax years 1996 to 2002; however, with the
levy, assessment and collection of VAT from
 non-bank financial intermediaries being
The CTA ruled that the petitioner is liable for the specifically deferred by law, then petitioner is
deficiency VAT. The petitioner asserted that a not liable for VAT during these tax years.
pawnshop is not enumerated as one of those But with the full implementation of the VAT
engaged in "sale or exchange of services" in system on non-bank financial intermediaries
Section 108 starting January 1, 2003, petitioner is liable for
of the NIRC and cited the case of Commissioner of 10% VAT for said tax year.
Internal Revenue v. Michel J. Lhuillier Pawnshops,
Inc. And beginning 2004 up to the present, by
virtue of R.A. No. 9238, petitioner is no longer
liable for VAT but it is subject to percentage
tax on gross receipts from 0% to 5%, as
the case may be.

34. CIR vs. Burmeister In order for services to be subjected to Burmeister and Wain Scandinavian Contractor WON BWSCMI should be NO. Section 102 of the NIRC (Now Section
and Wain 0% VAT it must meet the following Mindanao Inc. (BWSCMI), a domestic company, ubject to 0% VAT as it is 108) provides the requirements in order for
Scandinavian requirements: was subcontracted by the Consortium to operate performing services for a services subjected to 0% VAT. In order for
Contractor Mindanao, and maintain power barges awarded by the person/company doing services to be subjected to 0% VAT it must
Inc., G.R. No. 153205, 1. Services should be NAPOCOR. business outside of the meet the following requirements:
January 22, 2007 other than “processing, manufacturing or BWSCMI asked for a ruling from BIR to ensure the Philippines.
repacking of goods.” tax implications on the services it will perform in 1. Services should be other than “processing,
favor of the Consortium. It was able to secure two manufacturing or repacking of goods.”
2. Services are paid in acceptable foreign BIR rulings stating that it shall be subject to zero- 2. Services are paid in acceptable foreign
currency and are accounted for in rated VAT. However, BWSCMI mistakenly paid for currency and are accounted for in accordance
accordance with the VAT. with the Bangko Sentral ng
Bangko Sentral ng Pilipinas rules. Pilipinas rules.
On the strength of the two rulings BWSCMI filed a
3. Recipient of such claim for the issuance of a tax credit in its favor. To 3. Recipients of such service are doing
service is doing business outside the stop the prescriptive period of the tax credit business outside the Philippines. In this case,
Philippines. BWSCMI filed a petition for review with the CTA. the recipient of the services of BWSCMI is the
consortium. While the Consortium’s principal
BIR claimed that in order for BWSCMI to enjoy the members are nonresident foreign
zerorating for VAT the services it performs should corporations, the Consortium itself is doing
be destined to be consumed abroad as stated in business in the Philippines.
Sec. 102 of the NIRC.
The Consortium’s contract with NAPOCOR is
for a term of 15 years. Considering the length
of time that the Consortium will operate and
maintain the power barges it cannot be
classified as a single or isolated transaction.

35. CIR v. American As a general rule, the Respondent, a VAT taxpayer, is the Philippine WON AMEX Philippines is YES. Section 102 (now Section 108) (B) (2)
Express International, VAT system uses the Branch of AMEX USA entitled to a refund. of the Tax Code provides for the services or
destination principle. tasked with servicing a unit of AMEX-Hongkong transactions subject to a 0% rate.
Inc., G.R. No. 152609, Branch. It facilitates the collection of the latter’s
29 June 2005 However, our VAT law itself provides for receivables from card members situated in the As a general rule, the VAT system uses the
a clear Philippines and payment to service establishments destination principle as a basis for the
exception, under which the supply of in the Philippines. jurisdictional reach of the tax.
service shall be zero-rated when the
following requirements are met: It filed with BIR a letter request for the refund of its In the present case, the services rendered by
1997 excess input taxes, citing as basis Section the respondent are performed upon its
1. The service is 110B of the 1997 Tax Code. sending to its foreign client the credit card
performed in the drafts and bills it has gathered from service
Philippines; In addition, the respondent relied on VAT Ruling establishments here, and are, therefore,
2. The service falls No. 080-89. Petitioner CIR claimed, among others, services also consumed in the Philippines.
under any of the that the claim for refund should be construed strictly
categories provided against the claimant as they partake of the nature Under the destination principle, such service
in Section 102(b) of of tax exemption. is subject to 10% VAT. However, the law
the Tax Code; and clearly provides for an exception to the
3. It is paid for in destination principle --- that is 0% VAT rate for
acceptable foreign services that are performed in the Philippines,
currency that is “paid for in acceptable foreign currency and
accounted for in accounted for in accordance with the rules and
accordance with regulations of BSP.” The respondent meets
the regulations of requirements for exemption, and
the Bangko Sentral thus should be zero-rated.
ng Pilipinas.

If services meet these

requirements, they are
zero-rated.

36. Contex Corp. vs. Only VAT-Registered Contex is an SMBA-registered firm which exempts WON the CA is correct in YES. Petitioner’s claim to VAT exemption in
Commissioner of entities can claim Input it from local and finding that the VAT the instant case for its purchases of supplies
Internal Revenue, G.R. VAT Credit/Refund. national internal revenue taxes, except for the exemption embodied in Rep. and raw materials is founded mainly on
No. 151135, July 2, preferential tax provided for in sec. 12 of RA 7227. Act No. 7227 does not apply Section 12 (b) and (c) of Rep. Act No. 7227,
2004 Petitioner is registered to the petitioner as a which basically exempts them from all national
as a NON-VAT taxpayer Cortext Corp. also registered with the BIR as a non- purchaser. and local internal revenue taxes, including
and thus, is exempt from VAT taxpayer. Context now is claiming a tax credit VAT and Section 4 (A)(a) of BIR Revenue
VAT. As an exempt VAT for 10% VAT passed by its suppliers to Contex Regulations No. 1-95.
taxpayer, it is not when Contex purchased materials from the said
allowed any tax credit on suppliers. Petitioner’s claim, however, for exemption
VAT (input tax) from VAT for its purchases of supplies and raw
previously paid. BIR asked the CTA to apply the rule that claims for materials is incongruous with its claim that it is
refund are strictly VAT-Exempt, for only VAT-Registered entities
construed against the taxpayer. Since the can claim Input VAT Credit/Refund.
petitioner failed to establish both its right to a tax
 refund or tax credit and its compliance with the
rules on tax refund as provided for in Sections 204
and 229 of the Tax Code, its claim should be
denied.
CTA partially granted the refund and held that the
petitioner is exempt from the imposition of input
VAT on its purchases of supplies and materials. CA
then reversed CTA ruling and held that the
exemption from duties and taxes on the importation
of raw materials, capital, and equipment of SBFZ-
registered enterprises under Rep. Act No. 7227
and its implementing rules covers only “the VAT
imposable under Section 107 of the [Tax Code],
which is a direct liability of the importer, and in no
way includes the value-added tax of the seller
exporter the burden of which was passed on to.
DOCUMENTARY STAMP TAX
Case Title Case Principle Summary of Facts
1. CIR v. Traders Tax assessments by tax examiners are Traders Royal Bank (TRB) is a domestic
Royal Bank, G.R. No. presumed correct and made in good faith. corporation duly registered with the Securities and
167134, March 18, The taxpayer has the duty to prove Exchange Commission (SEC) and authorized by
2015. otherwise. the Bangko Sentral ng Pilipinas (BSP) to engage in
commercial
In the absence of proof of any banking.
irregularities in the
performance of duties, an assessment The BIR conducted an investigation concerning all
duly made by a Bureau of national internal revenue tax liabilities of TRB for
Internal Revenue examiner and taxable years 1996-1997. Following the
approved by his superior officers investigation, the BIR issued a Pre-Assessment
will not be disturbed. All presumptions are Notice and later on issued a Formal Letter of
in favor of the correctness of tax Demand and Assessment Notice against TRB for
assessments. deficiency Documentary Stamp Tax (DST) for 1996
and 1997, in the total amount of ₱28,867,296.90
from special savings deposit, trust fund, mega
savings deposit and surcharge.
TRB VP Navarro wrote a letter protesting the
While it is true that the petitioner should not
have been liable for the VAT inadvertently
passed on to it by its supplier since such is a
zero-rated sale on the part of the supplier, the
petitioner is not the proper party to claim such
VAT refund. Since the transaction is deemed
a zero-rated sale, the petitioner's supplier may
claim an Input VAT credit with no
corresponding Output VAT
liability.Congruently, no Output VAT may be
passed on to the petitioner.
Issue/s Rulinig
WON the Trust Indenture YES. The conduct by banks, such as TRB, of
Agreement of TRB can be trusts and other fiduciary business (in 1996
considered as deposits and
thus subject to DST and 1997) was governed by the 1993 MORB,
which enumerated the minimum documentary
requirements for trusts, including a written
agreement or indenture and a plan (i.e.,
written declaration of trust) for common trust
funds (CTF). The importance of the actual
Trust Indenture Agreements cannot be
gainsaid. The only way the Court can
determine the actual relationship between
TRB and its clients is through a scrutiny of the
terms and conditions embodied in the said
Agreements.
In this case, not a single copy of a Trust
Indenture Agreement and/or the Certificate of
Participation (issued to the client as evidence

2. CIR vs. The Insular A registration for CDA is not necessary
Life Assurance Co. for a cooperative to be exempted from the
payment of percentages.
assessments of the BIR on the following grounds:
(a) that the Special Savings Deposits being savings
deposit accounts are not subject to the DST, and
(b) the Trust Indenture Agreement[s] are not
subject to DST for the reason thatrelationship
established between parties is that of the trustor
and
trustee.
The CIR denied the protest of TRB and adopted the
position of the BIRexaminers that the Special
Savings Deposit should be deemed a time deposit
account subject to DST under Section 180 of the
Tax Code of 1977.
As for the Trust Indenture Agreements, the CIR
opined that they were but a form of deposit,
likewise subject to DST. In an earlier case, CIR
ruled that the essential features/characteristics of a
Trust
Agreement are as follows: a) The required
minimum deposit is ₱50,000.00; b) The shortest
maturity date is 30 days; c) It is not payable on sight
or demand, in case of pre-termination, prior written
notice is required; d) It is automatically renewed in
case the depositor fails to withdraw the deposit at
maturity date; e) The bank used confirmation of
participation to evidence the acceptance of the
funds from the trustor.
CTA ruled that the Special Savings Deposits, Mega
Savings Deposits are subject to DST. The ordinary
saving account passbook can be considered a
certificate of deposit and thus subject to DST. While
the Trust Indenture Agreements were not subject
to DST.
The CTA en banc affirmed the decision of the CTA
division.
Whether Insular Life is required to pay the DST
assailed by Facts: Respondent Insular Life
Assurance, a corporation duly organized and
of the trust) could be found in the records. The
burden fell upon TRB to produce the Trust
Indenture Agreements, not only because the
said Agreements were in its possession, but
more importantly, because its protest against
the DST assessments was entirely grounded
on the allegation that said Agreements were
trusts. Thus, TRB had the obligation of proving
this fact.
TRB made no attempt to explain why it did not
present the Trust Indenture Agreements, and
it also did not take the effort to establish that
any of the exceptional circumstances under
Rule 130, Section 9 of the ROC was extant in
this case. Moreover, Mr. Navarro’s testimony
consisted essentially of conclusions of law and
general descriptions of trusts using the very
same words and terms under Section X407 of
the 1993 MORB.
In contrast, records show that the BIR
examiners conducted a thorough audit and
investigation of the books of account of TRB.
Mr. Martinez, a BIR Revenue Officer, testified
that it took the BIR team of examiners more
than 1-year to conduct and complete the audit
and examination of the documents of TRB,
which consisted of approximately 20,000
pages.
Given the failure of TRB to present proof of
error in the tax assessments of the BIR, the
Court ordered TRB to pay the deficiency
Documentary Stamp Taxes on its Trust
Indenture Agreements for the taxable years
1996 and 1997 plus 20% delinquency interest
from February 14, 2002 until full payment
thereof.
Whether Insular Life is No. The Supreme Court, in reference to its
required to pay the DST pronouncement in Republic of the Philippines
assailed by the CIR v. Sunlife Assurance Company of Canada
Ltd., G.R. No. 197192, existing under and by virtue of laws of the
June 4, 2014. Philippines received an Assessment Notice with
Formal letter of Demand both dated July 29, 2004,
assessing respondent for deficiency DST on its
premiums on direct/business sums assured for
calendar 2002 amounting P93, 934,59.21. Hence,
Insular Life filed its Protest Letter on November 4,
2004 which was denied by the CIR for lack of
factual and legal bases as Insular life received the
Final Decision on Disputed Assessment (FDDA)
only on June 23, 2005.
On July 15, 2005, Insular Life filed a petition for
review before the Court of Tax Appeals (CTA). The
CTA rendered a Decision in favor of Insular Life as
it sufficiently established that it is a cooperative
company and therefore, it exempt from the DST on
the insurance policies it grants to its members. CIR
filed for a motion for reconsideration, but was
dismissed by the CTA. The subsequent Petition for
Review before the CTA en banc was also denied.
which states that “under the Tax Code
although respondent is a cooperative,
registration with the CDA is not necessary in
order for it to be exempt from the payment of
both percentage taxes on insurance
premiums, under Section 121, and
documentary stamp taxes on policies of
insurance annuities it grants, under Section
199. Applying the rule on stare decisis, the
CTA based on the doctrine enunciated in the
case of Sunlife as the factual circumstances of
both cases are substantially the same. The
Court ruled that Section 3 (e) of R.A. No. 6939
does not impose registration with the CDA as
a condition precedent to claiming DST
exemption. Even this law does not apply in this
case.
The Court presented three justifications in
Sunlife why registration with the CDA is not
necessary for cooperatives to claim exemption
from DST.
First, the NIRC of 1997 does not require
registration with the CDA. No tax provision
requires a mutual life insurance company to
register with that agency in order to enjoy
exemption from both percentage and DST.
Although a provision of Section 8 of the
Revenue Memorandum Circular (RMC) No.
48-91 requires the submission of the
Certificate of Registration with the CDA before
the issuance of a tax exemption certificate,
that provision cannot prevail over the clear
absence of an equivalent requirement under
the Tax Code
The respondent correctly pointed out that in
other provisions of the NIRC, registration with
the CDA is expressly required in order to avail
of certain tax exemptions or preferential tax
treatment 18 — a requirement which is
noticeably absent in Section 199 of the NIRC.
Quoted below are examples of cooperatives
which are expressly mandated by law to be
registered with the CDA before their
transactions could be considered as
exempted from value added tax. This absence
of the registration requirement under Section
199 clearly manifests the intention of the
Legislative branch of the government to do
away with registration before the CDA for a
cooperative to benefit from the DST
exemption under this particular section.

Second, the provisions of the Cooperative

Code of the Philippines do not apply. The
history of the Cooperative Code was amply
discussed in Sunlife where it was noted that
cooperatives under the old law, Presidential
Decree (P.D.) No. 175 20 "referred only to an
organization composed primarily of small
producers and consumers who voluntarily
joined to form a business enterprise that they
themselves owned, controlled, and
patronized. The Bureau of Cooperatives
Development — under the Department of
Local Government and Community
Development (later Ministry of Agriculture) —
had the authority to register, regulate and
supervise only the following cooperatives: (1)
barrio associations involved in the issuance of
certificates of land transfer; (2) local or primary
cooperatives composed of natural persons
and/or barrio associations; (3) federations
composed of cooperatives that may or may
not perform business activities; and (4) unions
of cooperatives that did not perform any
business activities. Respondent does not fall
under any of the abovementioned types of
cooperatives required to be registered under
[P.D. No.] 175." Thus, when the subsequent
law, R.A. No. 6939, concerning cooperatives
was enacted, the respondent was not covered
by said law and was not required to be
registered.

3. CIR vs. Pilipinas The imposition of DST does not apply to Respondent Pilipinas Shell Petroleum Corporation
Shell Petroleum all conveyances of real propery, but only (PSPC) was incorporated to construct, operate and
Corporation, G.R. No. sales of real property. maintain petroleum refineries, works, plant
192398, September machinery, equipment dock and harbor facilities
29, 2014. and auxiliary works and other facilities of all kinds
and used in or in connection with the manufacture
of products of all kinds which are wholly or partly
derived from crude oil. PSPC entered into a Plan of
Merger with its affiliate, Shell Philippine Petroleum
Corporation (SPPC). In the said Plan of Merger, it
was provided that the entire assets and liabilities of
SPPC will be transferred to, and absorbed by,
respondent as the surviving entity. The Securities
and Exchange Commission approved the merger
on July 1, 1999. Hence, on August 10, 1999,
respondent paid to the BIR documentary stamp
taxes amounting to P524,316.00 on the original
issuance of shares of stock of respondent issued in
exchange for the surrendered SPPC shares
pursuant to Section 175 of the National Internal
Revenue Code (NIRC).
The BIR confirmed that the merger between PSPC
and SPPC was tax-free in nature as there was no
gain nor loss shall be recognized, if, in pursuance
to a plan of merger or consolidation, a shareholder
exchanges stock in a corporation which is a party
to the merger or consolidation solely for the stock
of another corporation which is also a party to the
merger or consolidation. This ruling is pursuant to
Section 40 (C) (2) and (6) (b) of the NIRC. The BIR
Whether the respondent is
entitled to the refund of the
DST paid with the BIR
Third, the Insurance Code does not require
registration with the CDA. "The provisions of
this Code primarily govern insurance
contracts; only if a particular matter in question
is not specifically provided for shall the
provisions of the Civil Code on contracts and
special laws govern.
Following the above-stated reasoning, the
petition was denied.
Yes. PSPC is entitled for refund. The Court
found no merit in petitioner's contention that
Section 196 covers all transfers and
conveyances of real property for a valuable
consideration. A perusal of the subject
provision would clearly show it pertains only to
sale transactions where real property is
conveyed to a purchaser for a consideration.
The phrase "granted, assigned, transferred or
otherwise conveyed" is qualified by the word
"sold" which means that documentary stamp
tax under Section 196 is imposed on the
transfer of realty by way of sale and does not
apply to all conveyances of real property.
Indeed, as correctly noted by the respondent,
the fact that Section 196 refers to words
"sold", "purchaser" and "consideration"
undoubtedly leads to the conclusion that only
sales of real property are contemplated
therein. PSPC and SPPC entered into a
merger which might have a dissolution of the
absorbed or merged corporations, but there
was no winding up of their affairs or liquidation
of assets because the surviving corporation
automatically acquires all their rights,
privileges, and powers as well as their
liabilities. Here, SPPC ceased to have any
legal personality and respondent PSPC
stepped into everything that was SPPC's,
pursuant to the law and the terms of their Plan
of Merger.
ruled, among others, that no gain or loss shall be
recognized by the stockholders of SPPC on the
exchange of their shares of stock of SPPC solely
for shares of stock of respondent pursuant to the
Plan of Merger. However, the BIR stated that the
issuance by PSPC of its own shares of stock to the
shareholders of SPPC in exchange for the
surrendered certificates of stock of SPPC shall be
subject to the documentary stamp tax (DST). This
led to PSPC to pay the amount of P22,101,407.64
to the BIR representing DST on the transfer of real
property from SPPC to respondent.
PSPC believed that it erroneously paid DST on its
absorption of real property owned by SPPC, the
former filed a formal claim for refund or tax credit of
the DST it paid to BIR. No action was taken by the
BIR, thus, PSPC filed a petition for review before
the Court of Tax Appeals (CTA) in order to suspend
the running of the prescriptive period of two years.
Petitioner’s contention: PSPC is liable for the DST
pursuant to BIR Ruling No. 2-2001 dated February
2, 2001 which stated that, “tax-deferred exchange
of properties of a corporation, which is a party to a
merger or consolidation, solely for shares of stock
in a corporation, which is also a party to the merger
or consolidation, is subject to the DST under
Section 176 if the properties to be transferred are
shares of stock or even certificates of obligations,
and also to the documentary stamp tax under
Section 196, if the properties to be transferred are
real properties.”
Respondent’s contention: The DST on the second
transaction has been erroneously paid and it
sought to claim for a refund or tax credit on the
amount it paid the BIR as the petitioner, in
referencing the BIR ruling vis-à-vis Section 196,
disregarded the qualifying word “sold” which
described the kind of transfer contemplated as
subject to DST.
In a merger, the real properties are not
deemed "sold" to the surviving corporation
and the latter could not be considered as
"purchaser" of realty since the real properties
subject of the merger were merely absorbed
by the surviving corporation by operation of
law and these properties are deemed
automatically transferred to and vested in the
surviving corporation without further act or
deed. Therefore, the transfer of real properties
to the surviving corporation in pursuance of a
merger is not subject to documentary stamp
tax. As stated at the outset, documentary
stamp tax is imposed only on all conveyances,
deeds, instruments or writing where realty sold
shall be conveyed to a purchaser or
purchasers. The transfer of SPPC's real
property to respondent was neither a sale nor
was it a conveyance of real property for a
consideration contracted to be paid as
contemplated under Section 196 of the Tax
Code. Hence, Section 196 of the Tax Code is
inapplicable and respondent is not liable for
documentary stamp tax.

4. H. Tambunting In ruling for tax exemptions, strictissimi
Pawnshop, Inc. v. CIR, juris on claims of deduction should be
G.R. No. 173373, July applied such that a taxpayer should be
29, 2013. able to prove that he is entitled for
deduction under a specific provision of
the statute
Both the CTA and the Court of Appeals held the
respondent is entitled for refund.
H. Tambunting Pawnshop appealed the adverse
decision promulgated on April 24, 2006 whereby
the Court of Tax Appeals En Banc (CTA En Banc)
affirmed the decision of the CTA First Division
ordering the former to pay deficiency income taxes
amounting to P4,536,687.15 for the taxable year
1997, plus 20% delinquency interest computed
from August 29, 2000 until full payment, but
cancelling the compromise penalties for lack of
basis. The Bureau of Internal Revenue (BIR)
issued assessment notices and demand letters
assessing Tambunting for deficiency percentage
tax, income tax and compromise penalties for
taxable year 1997. Hence, Tambunting instituted
an administrative protest against the assessment
notices and demand letters with the Commissioner
of Internal Revenue (CIR). Due to the CIR’s
inaction within the 180-day period prescribed by
law, Tambunting brought a petition for review
before the CTA and En banc which denied it,
respectively.
Petitioner’s contention: The CTA should have
allowed the deductions because it had been able to
point out the provisions of law authorizing the
deductions; that it proved its entitlement to the
deductions through all the documentary and
testimonial evidence presented in court. the
provisions of Section 34 (A) (1) (b) of the 1997
NIRC, governing the types of evidence to prove a
claim for deduction of expenses, were applicable
because the law took effect during the pendency of
the case in the CTA. They also incurred losses in
its auction sales of which were shown in their
compliance of the requirements of Revenue
Regulations No. 12-77 on the deductibility of its
losses.
Whether Tambunting is No. Tambunting is not entitled to its claims of
entitled to its claim of deductions. The Court has agreed with the
deductions CTA En Banc that because this case involved
assessments relating to transactions incurred
by Tambunting prior to the effectivity of
Republic Act No. 8424, (1997 NIRC), the
provisions governing the propriety of the
deductions was Presidential Decree 1158
(1977 NIRC). Following the rule on strictissimi
juris on tax exemptions, when the taxpayer
claims a deduction, he must point to some
specific provision of the statute in which that
deduction is authorized and must be able to
prove that he is entitled to the deduction which
the law allows. An item of expenditure,
therefore, must fall squarely within the
language of the law in order to be deductible.
A mere averment that the taxpayer has
incurred a loss does not automatically warrant
a deduction from its gross income.
As the CTA En Banc held, Tambunting did not
properly prove that it had incurred losses. The
subasta books it presented were not the
proper evidence of such losses from the
auctions because they did not reflect the true
amounts of the proceeds of the auctions due
to certain items having been left unsold after
the auctions. The rematado books did not also
prove the amounts of capital because the
figures reflected therein were only the
amounts given to the pawnees. It is interesting
to note, too, that the amounts received by the
pawnees were not the actual values of the
pawned articles but were only fractions of the
real values. Tambunting did not discharge its
burden of substantiating its claim for
deductions due to the inadequacy of its
documentary support of its claim. Its reliance
on withholding tax returns, cash vouchers,
 lessor's certifications, and the contracts of
lease was futile because such documents had
scant probative value. As the CTA En Banc
succinctly put it, the law required Tambunting
to support its claim for deductions with the
corresponding official receipts issued by the
service providers concerned. Failing to
support with substantial evidence on its
claims, the petition was denied.

5. Fort Bonifacio The payment of taxes is not a condition This is a resolution for the motion for (1) Whether the prior payment No on both issues. On the first issue, the Court
Development precedent before a taxpayer can avail of reconsideration raised by the respondents on the of tax is necessary before a already settled the rule that prior payment of
Corporation v. CIR, the transitional input tax following arguments: 1) Prior payment of tax is taxpayer can avail of the 8% taxes is not necessary before a taxpayer could
G.R. No. 173425, inherent in the nature and payment of the 8% transitional input tax credit; (2) avail of the 8% transitional input tax credit.
January 22, 2013 transitional input tax; 2) For failure to clearly prove Whether or not the petitioner Section 105 of the NIRC provides that for a
its entitlement to the transitional input tax credit, is entitled to transitional input taxpayer to avail of the 8% transitional input
petitioner's claim for tax refund must fail in light of tax credits or tax refund tax credit, all that is required from the taxpayer
the basic doctrine that tax refund partakes of the is to file a beginning inventory with the Bureau
nature of a tax exemption which should be of Internal Revenue (BIR). It was never
construed strictissimi juris against the taxpayer. mentioned in Section 105 that prior payment
of taxes is a requirement. On the second
issue, A transitional input tax credit is not a tax
refund per se but a tax credit. Logically, prior
payment of taxes is not required before a
taxpayer could avail of transitional input tax
credit. As the Court has declared on its
decision, "[t]ax credit is not synonymous to tax
refund. Tax refund is defined as the money
that a taxpayer overpaid and is thus returned
by the taxing authority. Tax credit, on the other
hand, is an amount subtracted directly from
one's total tax liability. It is any amount given
to a taxpayer as a subsidy, a refund, or an
incentive to encourage investment." It also
emphasized that a transitional input tax credit
can be claimed even if there is no actual
payment of VAT in the underlying transaction.
In such cases, the tax base used shall be the
value of the beginning inventory of goods,
materials and supplies.

As regards Section 110, while the law only

provides for a tax credit, a taxpayer who

6. PHILACOR Credit The issuance and assignment of Philacor is engaged in the business of retail
Corporation v. CIR, promissory note will not be liable for the financing. It is a form of selling in which a
G.R. No. 169899, payment of DST prospective buyer of a home appliance with neither
February 6, 2013 cash nor any credit card may purchase appliances
on installment basis from an appliance dealer. After
Philacor conducts a credit investigation and
approves the buyer's application, the buyer
executes a unilateral promissory note in favor of
the appliance dealer. The same promissory note is
subsequently assigned by the appliance dealer to
Philacor. Pursuant to a Letter of Authority,
Philacor’s books of account and other accounting
record were examined by a Revenue Officer Mejia.
Philacor received tentative computations of
deficiency taxes. RO Mejia sent a letter to Philaco
revising the preliminary assessments. Philacor
then received Pre-Assessment Notices (PANs), all
dated July 18, 1996, covering the alleged
deficiency income, percentage and DSTs,
including increments. On February 3, 1998,
Philacor received demand letters and the
corresponding assessment notices, all dated
January 28, 1998 totaling to P17,442,231.61.
Philacor protested the PANs with request of
reconsideration and reinvestigation. It alleged that
the assessed deficiency income tax was
erroneously computed failing to consider the
reversing entries of the revenue re As for the
deficiency DST, Philacor claims that the accredited
appliance dealers were required by law to affix the
documentary stamps on all promissory notes
purchased until the enactment of Republic Act No.
Whether Philacor is liable for
the DST due on the issuance
and assignment of promissory
notes
erroneously or excessively pays his output tax
is still entitled to recover the payments he
made either as a tax credit or a tax refund. In
this case, since petitioner still has available
transitional input tax credit, it filed a claim for
refund to recover the output VAT it
erroneously or excessively paid for the 1st
quarter of 1997. Thus, there is no reason for
denying its claim for tax refund/credit. The
motion for reconsideration was denied.
No. Philacor is not liable for the DST on the
issuance of promissory notes. Section 173 of
the 1997 NIRC names those who are primarily
liable for the DST: the person (1) making; (2)
signing; (3) issuing; (4) accepting; or (5)
transferring the taxable documents,
instruments or papers. Should these parties
be exempted from paying tax, the other party
who is not exempt would then be liable.
Philacor did not make, sign, issue, accept or
transfer the promissory notes. The acts of
making, signing, issuing and transferring are
unambiguous. The buyers of the appliances
made, signed and issued the documents
subject to tax, while the appliance dealer
transferred these documents to Philacor which
likewise indisputably received or "accepted"
them. "Acceptance," however, is an act that is
not even applicable to promissory notes, but
only to bills of exchange. The Court clarified
that a party to a taxable transaction who
"accepts" any documents or instruments in the
plain and ordinary meaning of the act (such as
the shipper in the cited case) does not become
primarily liable for the tax.
In the same way, Philacor cannot be made
primarily liable for the DST on the issuance of
the subject promissory notes, just because it
had "accepted" the promissory notes in the
plain and ordinary meaning. In this regard,
Section 173 of the 1997 NIRC assumes

NIRC RMEDIES
Case Title Case Principle
1. CIR v. Yumex A company registered with the PEZA
Philippines and is under ITH is exempt from IAET. If
Corporation, G.R. No. the CIR issues an IAET assessment
222476, May 5, 2021. against it on the basis that only PEZA-
registered companies under the 5% tax
regime are exempt from IAET, the
company may protest the assessment.
Additionally, Section 228 of the Tax
Code clearly requires that the taxpayer
must first be informed that he is liable for
deficiency taxes through the sending of
a PAN.
He must be informed of the facts and the
law upon which the assessment is
made. The law imposes a substantive,
7660, otherwise known as An Act Rationalizing
Further the Structure and Administration of the
Documentary Stamp Tax, 9 which took effect on
January 15, 1994. In addition, Philacor filed, on the
following day, a supplemental protest, arguing that
the assessments were void for failure to state the
law and the facts on which they were based.
The CTA Division ruled that Philacor failed to
declare part of its income, making it liable for
deficiency income tax and percentage tax.
However, it also found that the Commissioner of
Internal Revenue (CIR) erred in his analysis of the
entries in Philacor's books thereby considerably
reducing Philacor's liability to a deficiency income
tax of P1,757,262.47 and a deficiency percentage
tax of P613,987.86. The CTA also ruled that
Philacor is liable for the DST on the issuance of the
promissory notes and their subsequent transfer or
assignment. It failed to prove that the DST on its
promissory notes had been paid for these two
transactions. Hence, the CTA held Philacor to be
liable for deficiency DST.
Summary of Facts
A Notice of Informal Conference was issued by the
Revenue District Officer (RDO) to Yumex informing
the latter that the investigation of its accounting
records for the taxable year 2007 resulted in a
preliminary assessment of income tax, value-
added tax, expanded withholding tax, fringe
benefits tax, IAET, and compromise penalty.
Yumex then claimed that it is PEZA registered and
should not be subject to IAET.
It was however just sent by mail and the BIR did not
offer any explanation for the verification of the
details of the post office. BIR said that sending such
mail already constitutes constructive notice for
Yumex. CIR said that, according to the law, if no
response is received from the taxpayer within the
Issue/s
Whether the CTA Division
can take cognizance of the
issue of the invalidity of the
assessment against
respondent for allegedly
having been issued in
violation of respondent's due
process considering that it
had paid deficiency taxes
which are uncontested.
materiality as it determines liability should the
parties who are primarily liable turn out to be
exempted from paying tax; the other party to
the transaction then becomes liable. In the
same way, Philacor is not liable for the
assignment of promissory notes as there are
no laws that specify such transfer and/or
assignment is to be taxed, there would be no
basis to recognize an imposition. The settled
rule is that in case of doubt, tax laws must be
construed strictly against the State and
liberally in favor of the taxpayer. The reason
for this ruling is not hard to grasp: taxes, as
burdens which must be endured by the
taxpayer, should not be presumed to go
beyond what the law expressly and clearly
declare. The petition was granted.
Ruling
YES. The payment by respondent of the other
items in the FLD/FAN, particularly, the basic
deficiency income and fringe benefits taxes
and compromise penalty, preclude it from
questioning the validity of the issuance of the
assessment notices.
The manner by which the assessment is
issued is a distinct matter in itself from the
contents of the assessment. Respondent's
voluntary payment, while it may be viewed as
an acknowledgment of its tax deficiencies for
some of the assessed items, is not necessarily
an outright waiver of its right to question the
impropriety of the issuance of the assessment
notices, especially in this case wherein
 not merely a formal, requirement. To
proceed heedlessly with tax collection
without first establishing a valid
assessment is evidently violative of the
cardinal principle in administrative
investigations — that taxpayers should
be able to present their case and
adduce supporting evidence.
2. CIR v. Philex Mining The submission of subsidiary sales
Corporation, G.R. No. journal and subsidiary purchase journal
218057, January 18, is not indispensable to support a claim
2021 for refund.
3. CIR v. T Shuttle Section 228 of the National Internal
Services, Inc. G.R. No. Revenue Code (NIRC) of 1997, as
240729, August 24, amended, requires the assessment to
2020 inform the taxpayer in writing of the law
and the facts on which the assessment
prescribed period, the same shall be considered
constructively received. It also added that because
Yumex was able to file a protest, then there is
already knowledge to them about the assessments.
Philex is a domestic corporation engaged in the
mining business. In January 2010, Philex filed its
original Quarterly VAT Return for the fourth quarter
of 2009. Subsequently, it filed an amended
Quarterly VAT Return for its total zero-rated sales
of, importation of goods, and purchases of services
along with their respective input taxes Philex filed
its claim for refund/tax credit with the One-Stop-
Shop (OSS) Center of the Department of Finance
in the amount of P27,115,507.10, on September
28, 2011. The CIR failed to act on Philex's
administrative claim for a refund which prompted
Philex to file a Petition for Review with the CTA.
CIR issued a Letter of Notice (LN) to T Shuttle
Services informing it of the discrepancy found after
comparing its tax returns. The LN was received and
signed by a certain Malou Bohol on July 24, 2009.
Due to T Shuttle Services inaction, the CIR issued
Whether CTA en banc erred
in granting the tax refund.
Whether the CTA erred in
declaring the assessments
void for failure of the CIR to
respondent consistently protested the IAET
assessment against it.
The fact that respondent's right to due process
was violated because it was denied the
opportunity to respond to the PAN remains
glaringly evident and cannot be deemed
erased or cured by respondent's volitional
payment of other assessed items.
No, the petition is denied. Records show that
Philex filed its application for a tax refund,
attaching therewith the necessary documents,
on September 28, 2011. As previously held, it
is Philex that determines the completeness of
the documents submitted for purposes of
counting the 120-day period. Within the period
of 120 days from September 28, 2011, the CIR
could have notified Philex, by way of a request,
to submit additional documents which he/she
deems necessary.
Considering that no notice was given by the
CIR or no other action was taken within the
said 120 days, Philex had 30 days from
January 26, 2012, the expiration of the 120-day
period, or until February 26, 2012, to appeal to
the CTA. Again, records show that Philex
properly and timely filed its judicial claim on
February 3, 2012.
There is thus no merit in the CIR's contention
that Philex's judicial claim was premature or
that its supporting documents were
incomplete. They may be utilized by the CIR as
vital sources of information for other purposes
such as making assessments but they are
indispensable requirements.
NO. In this case, the CTA En Banc ruled in the
negative; hence, it sustained the CTA
Division's finding that T Shuttle Services was
not accorded due process and declared void
the assessments made against respondent for
is made; otherwise, the assessment
shall be void.
an (1) LN for the examination of its book of
accounts and other accounting records and (2) a
Notice of Informal Conference (NIC).
The CIR then issued a Preliminary Assessment
Notice (PAN) with attached Details of
Discrepancies that found respondent liable for
deficiency income tax (IT) and value-added tax
(VAT) in the total amount of P6,485,579.49. On July
20, 2010, the CIR issued a Final Assessment
Notice (FAN), assessing respondent with
deficiency VAT in the amount of P3,720,488.73 and
deficiency IT in the amount of P5,305,486.50. On
November 28, 2012, the Revenue District Officer
(RDO) issued a Preliminary Collection Letter
requesting T Shuttle Services to pay the assessed
tax liability within 10 days from notice.
On January 23, 2013, the RDO issued a Final
Notice Before Seizure (FNBS) giving T Shuttle
Services the last opportunity to settle its tax liability
within 10 days from notice. On April 2, 2013, the
RDO denied the requested one-month grace
period. The CTA ruled in favor of T Shuttle
Services, holding that it was not accorded due
process in the issuance of the PAN and the FAN as
there was a failure to prove that the notices were
properly and duly served upon and received by
them. Hence, it declared void the assessments
made against T Shuttle Services for deficiency IT
and VAT.
prove service to T Shuttle deficiency IT and VAT for CY 2007. The Court
Services. recognizes that the CTA's findings can only be
disturbed on appeal if they are not supported
by substantial evidence, or there is a showing
of gross error or abuse on the part of the tax
court.
There is no such gross error or abuse in this
case. Section 228 of the National Internal
Revenue Code (NIRC) of 1997, as amended,
requires the assessment to inform the taxpayer
in writing of the law and the facts on which the
assessment is made; otherwise, the
assessment shall be void. As ruled by the CTA
En Banc, the CIR's mere presentation of
Registry Receipt Nos. 5187 and 2581 was
insufficient to prove respondent's receipt of the
PAN and the FAN.
It held that the witnesses for the CIR failed to
identify and authenticate the signatures
appearing on the registry receipts; thus, it
cannot be ascertained whether the signatures
appearing in the documents were those of
respondent's authorized representatives. It
further noted that Revenue Officer Joseph V.
Galicia (Galicia), the CIR's witness, had in fact
admitted during cross-examination that he was
uncertain whether the PAN and FAN were
actually received by respondent.
The Court sees no reason to set aside the
findings of the CTA En Banc. "It is doctrinal that
the Court will not lightly set aside the
conclusions reached by the CTA which, by the
very nature of its functions, has accordingly
developed exclusive expertise on the
resolution unless there has been an abuse or
improvident exercise of authority." In any
event, the Court finds significant the fairly
recent issuance by no less than the CIR
himself of Revenue Memorandum Order No.
(RMO) 40-2019 which prescribes the

4. CIR v. East Asia As the amendment in RR No. 11-2005
Utilities Corporation, now stands, the enumeration of
G.R. No. 225266, allowable deductions was only made by
November 16, 2020. way of example or illustration of the
nature and type of expenses that may
be deducted from a PEZA-registered
enterprise's gross income for purposes
of computing the 5% GIT. As such, the
maxim expressio unius est exclusio
alterius does not apply.
East Asia Utilities (EAU) is a domestic corporation
registered with the PEZA as an ECOZONE Utilities
Enterprise at the Mactan Economic Zone and West
Cebu Industrial Park-Special Economic Zone.
Under PEZA Certificate of Board Resolution, EAU
is entitled to the incentives under Sections 24 and
42 of (RA) No. 7916, as amended, such as
payment of the special five percent (5%) tax on
gross income in lieu of national and local taxes.
In 2009, EAU received a Preliminary Assessment
Notice (PAN) from the CIR assessing it for
deficiency tax consisting of (a) income tax and (b)
expanded withholding tax (EWT) for the calendar
year ending December 2006, plus interest to be
computed upon payment. After trial, the CTA
Division rendered its Decision finding East Asia
Utilities liable for deficiency income tax in the
reduced amount.
The CTA Division held that the amendment of
Revenue Regulations (RR) No. 2-2005 by RR No.
11-2005 rendered the enumeration of allowable
deductions from gross income of a PEZA-
registered enterprise, such as East Asia Utilities, no
Whether the enumeration of
direct costs deductible from
a PEZA-registered
enterprise's gross income in
RR No. 11-2005 is exclusive.
procedures for the proper service of
assessment notices.
Notably, among the details to be recorded by
the Chief of the Assessment Division or the
Head of the Reviewing Office are the "[n]ame
of [t]axpayer/[p]erson who received the
assessment notice" and, more importantly, the
"[p]osition/designation/relationship to the
taxpayer, if not served to the taxpayer named
in the assessment notice."
Hence, it is readily apparent that the CIR could
not have complied with the requirement of
noting the position/designation/relationship of
Mr. B. Benitez, the recipient, to respondent, the
taxpayer.
NO. Under Section 24 of RA No. 7916 53
(PEZA Law), a PEZA-registered enterprise,
such as East Asia Utilities, is entitled to the
special tax of 5% on gross income earned
within the ECOZONE in lieu of all national and
local taxes.
Gross income refers to "gross sales or gross
revenues derived from business activity within
the ECOZONE, net of sales discounts, sales
returns and allowances and minus costs of
sales or direct costs but before any deduction
is made for administrative expenses or
incidental losses during a given taxable
period.''
By using the phrase "shall consist only of the
following cost or expense item," RR No. 2-2005
restricted the allowable deductions from gross
income of a PEZA-registered enterprise to the
enumerated cost and expenses.
Later, the BIR issued RR No. 11-2005 56
revoking Section 7 of RR No. 2-2005 and
removing the exclusivity of the enumeration of
 longer exclusive. The criteria for determining the cost or expense that is allowed as a deduction
deductibility of an expense for computing the 5% from gross income. As the amendment in RR
Gross Income Tax (GIT) is the direct relation of the No. 11-2005 now stands, the enumeration of
item in the rendition of PEZA-registered services. allowable deductions was only made by way of
example or illustration of the nature and type of
East Asia Utilities and the CIR separately filed expenses that may be deducted from a PEZA-
motions for reconsideration but were denied by the registered enterprise's gross income for
CTA Division on August 6, 2014, for lack of merit. purposes of computing the 5% GIT.
The CTA Division held that the word "included" as
used in RR No. 11-2005 necessarily conveys the The maxim expressio unius est exclusio
idea of non-exclusivity of the enumeration of alterius does not apply. Besides, the BIR
allowable deductions and that the principle of should not have issued RR No. 11-2005 and
expressio unius est exclusio alterius does not deleted the phrase "shall consist only of the
apply. following cost or expense item" and changed it
to "the following direct costs are included in the
allowable deductions" if it did not intend to
remove the restriction on the expenses that
may be deducted.

The deletion of the restrictive word "only" is

also consistent with Section 24 of the PEZA
Law that costs and expenses directly related to
the enterprise's PEZA-registered activity and
are not administrative, marketing, selling,
and/or operating expenses or incidental losses
shall be allowed as a deduction from gross
income.

Accordingly, the CTA En Banc did not err in

examining the nature and type of each of the
expenses East Asia Utilities claimed as
deductions vis-à-vis their relation to East Asia
Utilities' PEZA-registered activities in
computing the correct amount of tax
deficiency.

5. Games & Klub is an organization whose members Klub is an organization whose members are Whether the RTC has NO. The case was correctly dismissed. The
Amusement Board/BIR are racehorse owners regularly racehorse owners regularly participating in horse jurisdiction to take issuance of an injunction against the collection
v. Klub Don Juan De participating in horse racing conducted racing conducted by different racing clubs. MJCI, cognizance of the complaint of internal revenue taxes is prohibited based
Manila et. al., G.R. No. by different racing clubs. MJCI, PRCI, PRCI, and MMTCI are grantees of legislative filed by Klub Don Juan. on the lifeblood theory. Whether the complaint
252189, November 3, and MMTCI are grantees of legislative franchises, allowing them to construct, maintain, filed by Klub Don Juan should be treated as an
2020 franchises, allowing them to construct, and operate horse racing tracks. Their legislative action for declaratory relief and not injunction
maintain, and operate horse racing franchises imposed upon the racing clubs the duty is of no moment.
tracks. Their legislative franchises
imposed upon the racing clubs the duty
to withhold and remit DST to the BIR.
Klub filed a complaint for Injunction
against BIR, GAB, and the racing clubs.
The three laws (RA 8407, RA 9753,
7978) granting franchise to the three
racing clubs imposed 10 centavos of
DST for every peso worth of horse
racing ticket and in case of
forecast/quinella and trifecta bets, 5
centavos for every peso worth of ticket.
However, the TRAIN Law increased the
DST to 20 centavos.
Klub alleged that there is a conflict
between the provisions of the franchises
of the racing clubs being a special law
and the provisions of the TRAIN Law.
Klub asserted that GAB and the BIR
should be restrained from enforcing the
TRAIN provision as the franchise rates
should continue to apply since it was not
specifically amended by the TRAIN Law.
GAB and BIR argued that the RTC
cannot restrain the collection of the DST
under the TRAIN Law as it is outside the
territorial jurisdiction of the RTC of
Mandaluyong City, Branch 213 because
horse race tickets may be purchased all
over the country and not just in Metro
Manila.
They added that Section 218 of the
NIRC prohibits the grant of injunction to
restrain the collection of national internal
revenue taxes including DST. The RTC
dismissed the case on the ground that it
has no jurisdiction to restrain the
collection of the DST under Section 218
of the NIRC. The CA treated the
complaint for injunction as one for
to withhold and remit DST to the BIR.
Since the issue, in this case, is the validity of
Klub filed a complaint for Injunction against BIR, the provision of the TRAIN Law on the higher
GAB, and the racing clubs. The three laws (RA DST rate, the RTC has no jurisdiction. No court
8407, RA 9753, 7978) granting franchise to the shall have the authority to grant an injunction
three racing clubs imposed 10 centavos of DST for to restrain the collection of any national internal
every peso worth of horse racing ticket and in case revenue tax, fee, or charge imposed by this
of forecast/quinella and trifecta bets, 5 centavos for Code.
every peso worth of ticket. However, the TRAIN
Law increased the DST to 20 centavos.
Klub alleged that there is a conflict between the
provisions of the franchises of the racing clubs
being a special law and the provisions of the TRAIN
Law. Klub asserted that GAB and the BIR should
be restrained from enforcing the TRAIN provision
as the franchise rates should continue to apply
since it was not specifically amended by the TRAIN
Law. GAB and BIR argued that the RTC cannot
restrain the collection of the DST under the TRAIN
Law as it is outside the territorial jurisdiction of the
RTC of Mandaluyong City, Branch 213 because
horse race tickets may be purchased all over the
country and not just in Metro Manila.
They added that Section 218 of the NIRC prohibits
the grant of injunction to restrain the collection of
national internal revenue taxes including DST. The
RTC dismissed the case on the ground that it has
no jurisdiction to restrain the collection of the DST
under Section 218 of the NIRC. The CA treated the
complaint for injunction as one for declaratory relief
as there has been no breach of the TRAIN law yet
and there is a ripening judicial controversy. The CA
declared the RTC dismissal was premature.
 declaratory relief as there has been no
breach of the TRAIN law yet and there
is a ripening judicial controversy. The
CA declared the RTC dismissal was
premature.
6. Philippine Dream Final notice before seizure is considered a
Company v. CIR, G.R. denial of protest and court has no
NO. 216044, August 27, jurisdiction on petitions belatedly filed.
2020
Petitioner Philippine Dream Company, Inc. filed a
Petition for Review seeking reversal of the earlier
decision of CTA dismissing the Petition for lack of
jurisdiction. Petitioner argued that the Final Notice
Before Seizure is not a final decision of Respondent
Commissioner of Internal Revenue (CIR) on its
protest, therefore, cannot be the basis of appeal to
the CTA. On the other hand, Respondent
countered that the Final Notice Before Seizure is
already a final decision denying the Petitioner’s
protest, and, as such, Petitioner had 30 days to
appeal from receipt thereof. In ruling, Section 228
of the 1997 Tax Code, as discussed in the case
Lascona Land Co., Inc. vs. CIR, provides that a
taxpayer has two (2) options in case of the inaction
of the CIR on the protested assessment. First, the
taxpayer has the option to file a Petition for Review
with the CTA within 30 days after the expiration of
the 180-day period. Second, the taxpayer may
await the final decision of the CIR on the disputed
assessment and appeal such final decision to the
CTA within 30 days after the receipt of a copy of
such decision.
Whether or not a Final
NoticeBefore Seizure sent
by the BIR to a taxpayer is
appealable to the CTA
The decision of the CIR that may be appealed
to the CTA may not always be in the form of a
Final Decision on Disputed Assessment. It may
also come in other forms, such as a Final
Notice Before Seizure.The determining factor
of whether the decision of the CIR may already
be appealed to the CTA depends on the
language used in, and tenor of, the CIR's
communication.
In this case, the BIR issued a Final Notice
Before Seizure while the taxpayer’s protest
against a tax assessment was pending review
by the BIR. The Supreme Court ruled that a
Final Notice Before Seizure is considered a
final decision of the Commissioner of Internal
Revenue (CIR) on a disputed assessment.
Accordingly, pursuant to Section 228 of the
Tax Code, the taxpayer must file an appeal to
question the Final Notice Before Seizure with
the CTA within 30 days from its receipt of the
same. Being a court of special jurisdiction, the
CTA can only take cognizance of matters
which are within its jurisdiction. While the right
to appeal a decision of the CIR to the CTA is a
statutory remedy, the requirement that the
appeal must be brought within the prescribed
30-day period is jurisdictional.
As ruled in CIR vs. Isabela Cultural
Corporation, the Final Notice Before Seizure
was considered as CIR’s denial of a protest. As
such, Petitioner should have disputed the final
decision on the assessment with the Court
within 30 days upon its receipt of the Final
Notice Before Seizure. In the instant case, the
Petition was filed after the lapse of the said 30-
day period. As held in the case RCBC vs. CIR,
the 30-day period within which to file an appeal
is jurisdictional and failure to comply therewith

7. CIR v. HSBC- Goodwill is essentially characterized as The Hong Kong Shanghai Banking Corporation
Philippine Branch, G.R. an intangible asset derived from the (HSBC) entered into the following two transactions:
No. 227121, December conduct of business and cannot (a) The transfer of its Point of Sales (POS)
9, 2020. therefore be allocated and transferred Terminals, other information technology assets,
separately and independently from the and Merchant Agreements of its Merchant
business as a whole. Acquiring Business (MAB) in the Philippines, in
exchange for shares in Global Payments Asia
Pacific-Phils., Inc. (GPAP PH). This occurred in
2008. Accordingly, GPAP PH was incorporated,
and HSBC subscribed into shares in GPAP PH in
exchange for the fair market value of certain assets
of HSBC and the transfer of its MAB to GPAP PH.
(b) The subsequent sale or assignment by HSBC
of its GPAP PH shares to Global Payments Asia
Pacific (Singapore Holdings) (GPAP Singapore).
To implement this, HSBC and GPAP Singapore
entered into a Share Sale and Purchase
Agreement on July 24, 2008, for the transfer by
HSBC of its GPAP PH shares. On September 28,
2008, HSBC and GPAP Singapore executed a
Deed of Assignment, wherein HSBC assigned its
GPAP PH shares to the GPAP Singapore.
For the first transaction, HSBC filed an Application
and Joint Certification with the Bureau of Internal
Revenue (BIR) on September 22, 2008, to secure
a ruling on tax-free exchange under Section
40(C)(2) of the National Internal Revenue Code, as
amended (Tax Code), regarding the transfer of
HSBC’s assets in exchange for the issuance to it of
GPAP PH shares. HSBC secured a Certification
Ruling certifying that the asset transfer in exchange
for GPAP PH shares is a tax-free exchange that is
not subject to tax pursuant to Section 40(C)(2) of
the Tax Code. For the second transaction, which
involves the assignment or transfer by HSBC of the
GPAP PH shares to GPAP Singapore, the CGT
and DST were paid. The BIR assessed HSBC for
deficiency income tax on the alleged sale of
goodwill arising from the transfer of HSBC’s MAB
to GPAP PH (which is under the first transaction).
Whether or not the “sale of
goodwill” resulting from the
sale of shares is separately
subject to income tax in
addition to the capital gains
tax due from the sale of
shares
would bar the appeal and deprive the CTA of
its jurisdiction to entertain and determine the
correctness of the assessments. Thus, the
Petition was DENIED and the earlier decisions
of the CTA were AFFIRMED.
The Supreme Court upheld the decision of the
CTA En Banc in cancelling the deficiency
income tax assessment against taxpayer,
HSBC on the alleged sale of “goodwill” of its
Merchant Acquiring Business (MAB). It ruled
that goodwill is essentially characterized as an
intangible asset derived from the conduct of
business and cannot therefore be allocated
and transferred separately and independently
from the business as a whole.
Here, when HSBC transferred its MAB in the
Philippines, inclusive of POS terminals, other
information technology assets and merchant
agreements, to GPAP-Phils. Inc. in exchange
for shares, the goodwill of the business was
also transferred to GPAP-Phils. Inc., being the
new owner of the MAB and its assets. When
HSBC subsequently assigned its GPAP-Phils
inc. shares to GPAP-Singapore, the goodwill of
MAB remains with GPAP-Phils. Inc. GPAP-
Singapore merely steps into the shoes of
HSBC as the majority stockholder of GPAP-
Phils. Consequently, the subsequent sale of
shares acquired by HSBC through a tax-fee
exchange shall be subject to capital gains tax
pursuant to Section 7(D)(2) of the 1997 NIRC,
and not regular corporate income tax.
Both the CTA and the Supreme Court ruled
that HSBC is not liable for the deficiency
income taxes and stated that the second
transaction (i.e., sale by HSBC of GPAP PH
shares) is covered by CGT and not RCIT. The
Supreme Court ruled that goodwill is an
intangible asset derived from the conduct of
business and cannot therefore be allocated
and transferred separately and independently
from the business as a whole. Thus, when
HSBC transferred its MAB in the Philippines to
GPAP PH in exchange for shares (as part of

8. AFP General The failure to revalidate the LOA after Taxpayer argues that the LOA issued by the BIR is
Insurance Corp. v. CIR, 120 days merely renders the same invalid for failure of the concerned revenue officer
G.R. No. 222133, unenforceable. to have the same revalidated after 120 days,
November 4, 2020 pursuant to RMO No. 28-88, as reiterated by RMC
No. 40-2006.
9. CIR v. Lucio Co et. No prior confirmatory ruling from the The respondents filed a claim for tax refund
al., G.R. No. 241424, Bureau of Internal Revenue (“BIR”) is pursuant to an exchange of stocks entered into
February 26, 2020, G.R. needed before a taxpayer can file a where their stockholdings in Puregold Price Club,
No. 241424, February claim for tax exemption or refund. Inc. increased from 66.5720% to 75.8329%,
26, 2020. alleging that the transaction was a tax-free
exchange under the National Internal Revenue
Code (“NIRC”).
While the Supreme Court ultimately ruled that the
transaction was a tax-free exchange under Section
40(C)(2) of the NIRC, the Commissioner of Internal
Revenue (“CIR”) insisted that the tax refund claim
filed by respondents should be denied because
they failed to secure a prior confirmatory ruling that
the subject transaction qualifies as a tax-free
exchange. According to the CIR, the certification or
ruling is important to confirm that the transaction
satisfies the conditions set by law, and the authority
to do so is vested upon the BIR.
Whether or not the failure to
revalidate the LOA after 120
days render the same invalid
or merely unenforceable
Whether or not a taxpayer is
required to first secure a prior
confirmatory ruling before
the transaction may be
considered as a tax-free
exchange
the first transaction), the goodwill of the
business was also transferred to GPAP PH.
When HSBC subsequently assigned its GPAP
PH shares to GPAP Singapore, the goodwill of
the MAB remains with GPAP PH. GPAP
Singapore merely stepped into the shoes of
HSBC as the majority stockholder of GPAP
PH.
In ruling against the taxpayer, the Court held
that failure to revalidate the LOA after 120 days
does not void the LOA ab initio. The expiration
of the 120-day period merely renders an LOA
unenforceable, inasmuch as the revenue
officer must seek ratification of his expired
authority to audit to be able to validly continue
investigation beyond the first 120 days.
In this case, the taxpayer did not contest the
LOA upon receipt when they could have
refused service of the LOA it believed was
defective due to lack of revalidation. Its failure
to exercise its right to refuse the service of an
allegedly defective LOA shows that they had
acquiesced to the tax authorities' investigation.
The Supreme Court, however, ruled that the
CIR was mistaken as “there is nothing in
Section 40(C)(2) of the NIRC of 1997, as
amended, which requires the taxpayer to first
secure a prior confirmatory ruling before the
transaction may be considered as a tax-free
exchange. The BIR should not impose
additional requirements not provided by law,
which would negate the availment of the tax
exemption. Instead of resorting to formalities
and technicalities, the BIR should have made
its own determination of the merits of
respondents’ claim for exemption in
respondents’ administrative application for
refund.”
10. Qatar Airways LLC A. For late filing of Tax Returns with Tax
v. CIR, G.R. No. 238914, Due to be paid, the following penalties
June 8, 2020. will be imposed upon filing, in addition to
the tax due:
1. Surcharge
NIRC SEC. 248. - Civil Penalties.
(A) There shall be imposed, in addition
to the tax required to be paid, a penalty
equivalent to twenty-five percent (25%)
of the amount due, in the following
cases:
(1) Failure to file any return and pay the
tax due thereon as required under the
provisions of this Code or rules and
regulations on the date prescribed; or
(2) Unless otherwise authorized by the
Commissioner, filing a return with an
internal revenue officer other than those
with whom the return is required to be
filed; or
(3) Failure to pay the deficiency tax
within the time prescribed for its
payment in the notice of assessment; or
(4) Failure to pay the full or part of the
amount of tax shown on any return
required to be filed under the provisions
of this Code or rules and regulations, or
the full amount of tax due for which no
return is required to be filed, on or before
the date prescribed for its payment.
On November 30, 2011, Qatar Airways Company Whether or not the CTA NO. In the present case, the Court finds no
with Limited Liability (petitioner) filed, through the committed an abuse of abuse of authority on the part of the CTA. The
Electronic Filing and Payment System (eFPS) of authority in not abetting or Court agrees that the surcharge imposed upon
the Bureau of Internal Revenue its 2nd Quarterly canceling the petitioner was not unjust or excessive pursuant
Income Tax Return (ITR) for the Fiscal Year ending surcharge of Qatar Airways to Section 248 of the 1997 NIRC which
March 31, 2012 and paid the corresponding tax due amounting to Php provides for the imposition of a penalty
thereon in the amount of P29,540,836.00. The said 7,385,209.00 for being equivalent to 25% of the amount due for failure
filing though was one day late. Thus, petitioner sent unjust and to timely file any return and pay the tax due
a Letter addressed to respondent Commissioner of excessive and for just a one thereon.
Internal Revenue (CIR) requesting for the day late in filing for the
abatement of surcharge. reason beyond its control Further, the findings of the CTA, supported as
they are by logic and law, carry great weight in
However, BIR issued Assessment Notice informing the proper interpretation of what constitutes
petitioner of the following charges/fees: "circumstances beyond control." Undeniably, a
a) 25% surcharge in the amount of P7,385,209.00; TECHNICAL MALFUNCTION is not a situation
b) interest amounting to P16,186.76 for late too bleak so as to render petitioner completely
payment; and without recourse. As correctly observed by the
c) compromise penalty of P50,000.00. CTA, petitioner would not incur delay in the
filing of its ITR if only it filed the same before
On July 3, 2012, via the Electronic Filing and the deadline and not at the 11th hour or on the
Payment System (eFPs), petitioner paid the last day of filing. Hence affirmed the decision
compromise penalty and the interest for late of the CTA En Banc.
payment. As for the P7,385,209.00 surcharge,
petitioner sent Letters to the CIR requesting for its
abatement or cancellation on the ground that its
imposition was unjust and excessive considering
that:
1) petitioner paid the tax due just one day after the
deadline;
2) such belated filing was due to circumstances
beyond petitioner's control; and
3) petitioner acted in good faith. The BIR informed
petitioner that its application for abatement has
been denied and that its payment shall be deemed
as partial payment of the total amount due for the
surcharge.
The BIR also requested that the balance for the
surcharge be paid within 10 days from receipt of the
letter. Petitioner sought reconsideration, but the
BIR denied due course thereon and reiterated the
request for payment of the balance within 10 days.
Petitioner appealed for another reconsideration,
but was again denied, hence, petitioner filed a
Petition for Review before the CTA unfortunately, it
was denied for lack of jurisdiction. Petitioner filed a
 Motion for Reconsideration, but the same was not
granted as well. Upon appeal, the CTA En Banc
ruled that while the petition for review was
seasonably filed, the surcharge imposed by the BIR
was not unjust nor excessive pursuant to the
National Intemal Revenue Code(NIRC).
WHEREFORE, the Petition for Review filed by
[petitioner] is hereby DENIED, for lack of merit. The
Motion for Reconsideration filed by petitioner was
denied by the CTA En Banc. Hence, this petition.
11. Kepco Philippines The compromise agreement is the law On September 8, 2009 , Kepco received
Corp. v. CIR, G.R. No. between the parties Preliminary Assessment Notice for alleged
225750-51, July 28, deficiency income tax, value-added tax (VAT),
2020. expanded withholding tax, and final withholding tax
(FWT) for taxable year 2006. On October 30, 2009,
Kepco received Final Letter of Demand (FLD) for
deficiency VAT in the amount of P159,640,750.79
and for deficiency FWT in the amount of
P124,286,821.11. Kepco filed its protest to the FLD
on November 26, 2009.
Subsequently, on June 25, 2010, Kepco filed its
petition before the CTA Division (docketed as CTA
Case No. 8112). The Commissioner of Internal
Revenue (CIR) filed his Answer on September 29,
2010. 9 In due course, after trial, both parties
submitted their respective memorandum and the
case was submitted for Decision. On December 6,
2013, the CTA Division partly granted Kepco's
petition and cancelled the deficiency FWT
assessment and the compromise penalties. Kepco
was ordered to pay deficiency VAT plus interest
and surcharges. Kepco and the CIR filed motions
for reconsideration but were denied for lack of
merit.
Not satisfied, on May 5, 2014, Kepco elevated the
case to the CTA En Banc; 13 while the CIR filed his
Petition for Review on May 22, 2014. 14 After
consolidation and the filing by the parties of their
comments and memorandum, 15 the CTA En Banc
rendered its Decision on November 26, 2015,
dismissing Kepco's petition in CTA Case No. 8112
for being filed out of time, and granting the CIR's
Whether the Compromise
Agreement entered into by
Kepco with the CIR is valid
There is no dispute that Kepco entered into a
compromise agreement with the CIR on its
deficiency taxes for TY 2006, and the CIR
issued Certificate of Availment on December
11, 2017. On this basis, the deficiency tax
assessment subject of the Petition can now be
considered closed and terminated. However,
the OSG opposed the motion and questioned
the validity of the compromise alleging
irregularity in the procedure that led to its
approval. cEaSHC
We grant the motion and rule in favor of the
compromise.
The power of the CIR to enter into compromise
agreements for deficiency taxes is explicit in
Section 204 (A) 37 of the 1997 National
Internal Revenue Code, 38 as amended (1997
NIRC). The CIR may compromise an
assessment when a reasonable doubt as to the
validity of the claim against the taxpayer exists,
or the financial position of the taxpayer
demonstrates a clear inability to pay the tax.
Kepco's case falls under paragraph e — the
assessment became final because Kepco
failed to appeal the inaction or "deemed denial"
of the CIR to the CTA within 30 days after the
expiration of the 180-day period and there is
reason to believe that the assessment is
lacking in legal and/or factual basis.
It must be noted that when Kepco filed its
protest to the FLD on November 26, 2009, the
petition. The dispositive portion of the Decision
reads: WHEREFORE, foregoing premises
considered:
Thus, Kepco filed the instant petition 18 on August
3, 2016. The CIR, through the Office of the Solicitor
General (OSG), filed his Comment 19 on May 29,
2017, and Kepco, its Reply 20 on June 14, 2017.
Meantime, on December 28, 2017, Kepco filed a
Manifestation 21 that it entered into a compromise
agreement with the CIR on its tax assessments for
the years 2006, 2007 and 2009. For TY 2006,
which is the subject of the instant petition, Kepco
paid a total of P134,193,534.12. 22 As proof, Kepco
attached the Certificate of Availment 23 issued by
the CIR on December 11, 2017 certifying that the
National Evaluation Board (NEB) approved
Kepco's application for compromise settlement for
deficiency taxes for TYs 2006, 2007 and 2009.
Thus, Kepco moved that the case be declared
closed and terminated.
In compliance with this Court's Resolution 24 dated
February 14, 2018, the OSG filed its Comment 25
on July 20, 2018 opposing Kepco's manifestation
and motion. DHITCc
The OSG avers that the compromise agreement is
not valid because first, it failed to allege and prove
any of the grounds for a valid compromise under
Section 3 26 of Revenue Regulations (RR) No. 30-
2002; 27 second, the CTA did not yet issue any
adverse Decision against Kepco, hence, there is no
"doubtful validity" to speak of as a ground for a valid
compromise pursuant to Section 2 28 of RR No. 8-
2004; 29 and third, Kepco did not pay in full the
compromise amount upon filing of the application in
violation of Section 2 30 of RR No. 9-2013. 31 The
OSG posits that the CIR improperly arrogated unto
himself the power of the NEB to decide on the offer
of compromise when the CIR accepted Kepco's
additional payment of P16,661,759.20 before the
CIR had 180 days or until May 25, 2010 to act
on the protest. 39 Thereafter, Kepco may
elevate its protest to the CTA within 30 days
from the lapse of the 180-day period, 40 or until
June 24, 2010. Section 7 (a) (2) 41 of RA No.
9282 42 provides that the "inaction" of the CIR
or his failure to decide a disputed assessment
within the 180-day period is "deemed a denial"
of the protest. 43 Section 3 (a) (2), 44 Rule 4 of
the Revised Rules of the CTA further clarifies
that "that in case of disputed assessments, the
inaction of the [CIR] within the [180]-day period
n under [Section] 228 of the [1997 NIRC] shall
be deemed a denial for purposes of allowing
the taxpayer to appeal his case to the [CTA]."
Clearly, the inaction is deemed an adverse
decision of the CIR on the administrative
protest. Thus, for purposes of determining
whether taxpayers may already appeal to the
CTA, the inaction of the CIR within 180 days
shall be deemed denial or an adverse decision
of the CIR. Since Kepco failed to appeal the
inaction or deemed denial or adverse decision
of the CIR on June 24, 2010, the assessment
for deficiency VAT and FWT for TY 2006
became final, executory and demandable.
NEB could approve or reject Kepco's original
application.

Further, the OSG manifests that it is entitled to

collect 5% success fee in case of government
approved compromise agreements, pursuant to
Section 11 (i) 32 of Republic Act (RA) No. 9417,
otherwise known as "An Act to Strengthen the
Office of the Solicitor General by Expanding and
Streamlining its Bureaucracy, Upgrading Employee
Skills and Augmenting Benefits, and Appropriating
Funds Therefor and for Other Purposes."
Accordingly, the OSG prays that Kepco be ordered
to pay the balance of P343,248,516.65 plus
additional interest, fees, or surcharges as a
consequence of its void tax compromise settlement
with the CIR, and that the OSG be awarded the sum
of P17,162,425.83 or 5% of the P343,248,516.65
balance. 33

In its Reply, 34 Kepco insists that there exists

doubtful validity on the assessment for TY 2006
which prompted the CIR to consider and accept
Kepco's compromise offer. Contrary to the OSG's
claim, Kepco paid 40% of the basic tax assessed
for TYs 2006, 2007 and 2009 in the amount of
P143,891,831.90. In compliance with the
recommendation of the Technical Working Group
(TWG) of the Bureau of Internal Revenue (BIR) to
increase the compromise offer, Kepco paid
additional amounts and finalized the compromise
offer to P260,848,425.80. This amount was
approved by the NEB on December 11, 2017.

Meanwhile, the CIR filed his own Reply 35 to the

OSG's Comment. The CIR asserts that Kepco paid
the full 40% of the basic tax assessed for TYs 2006,
2007 and 2009 when it applied for compromise. In
consonance with Revenue Memorandum Order
(RMO) No. 20-2007, 36 the application was
evaluated and processed, the LT Enforcement
Collection Division recommended the approval of
Kepco's application and thereafter, forwarded the
 favorable recommendation to Large Taxpayers
Service (LTS)-Evaluation Board. After various
proposals from the LTS-Evaluation Board to
increase the compromise amount and the
immediate compliance of Kepco by paying the
proposed increase, the LTS-Evaluation Board
recommended the approval of the application to the
NEB based on doubtful validity. Eventually, the
NEB approved Kepco's application and the CIR
issued Certificate of Availment in its favor.
12. CIR v. BPI, G.R. No. Waivers by the CIR of the statute of Through a letter dated May 6, 1991, the CIR sent
227049, September 16, limitations shall conform to statutory Assessment Notices 6 to Citytrust Banking
2020. limitations Corporation (Citytrust) in connection with its
deficiency internal revenue taxes for the year 1986
in the aggregate amount of P20,865,320.29 7:
The assessments came after Citytrust's execution
of three Waivers of the Statute of Limitations
(Waivers) under the National Internal Revenue
Code (NIRC) dated August 11, 1989, July 12, 1990,
and November 8, 1990 extending the prescriptive
period for the CIR to issue an assessment. 10
Citytrust protested the assessments on May 30,
1991 and, again, on February 17, 1992. 11 In the
interim, through the Bureau of Internal Revenue
(BIR) Office of the Accounting Receivable/Billing
Section letter dated February 5, 1992, the CIR
demanded the payment of the subject deficiency
taxes within 10 days from receipt thereof. 12
At this juncture, two portions of the total
assessment (P20,865,320.29) became the subject
of separate proceedings: first, the compromise and
collection of the deficiency IT portion that led to
another Supreme Court case of the same title,
docketed as G.R. No. 224327 — the case was
decided on November 16, 2018 (2018 Case); and
second, the collection of deficiency EWT, WTD,
The Court shall resolve three
issues:
(1) Did the CTA have
jurisdiction over BPI's
Second CTA Petition?
(2) Did the CIR timely issue
assessments against
Citytrust for deficiency EWT,
WTD, DFT, and WTC
pertaining to the taxable year
1986?
(3) May the CIR still collect
the unpaid taxes?
The petition lacks merit.
The CTA properly exercised its
jurisdiction over BPI's petition for
review.
The OSG relies heavily on the letter dated
February 5, 1992 — that it was a "final
decision" denying Citytrust's protest. 34
Citytrust's failure to appeal the "final decision"
within 30 days from receipt thereof 35 rendered
the tax assessment final, executory, and
unappealable. 36 Thus, BPI's Second CTA
petition in 2011 was filed out of time, over
which the court below did not acquire
jurisdiction.
Petitioner's reasoning is specious and
misplaced.
First, this was the CIR's same argument in the
2018 Case. To recall, the Court did not give
evidentiary weight to the letter dated February
5, 1992 due to the CIR's failure to prove
Citytrust's receipt thereof. In the present case,
not only is there still no proof of receipt. The
CIR did not even attach a copy of the letter
relied upon to the present petition. Notably,
failure to append ''material portions of the
DFT, and WTC portion is the subject of the present
petition.
A) Deficiency IT and G.R. No. 224327
1. Compromise
The deficiency IT portion of the assessment
became the subject of a compromise settlement,
pursuant to Revenue Memorandum Order No.
(RMO) 45-93. 13 However, the parties tailed to
reach an agreement. The CIR, which initially
agreed to a settlement amount of P8,607,517.00,
eventually denied Citytrust's application for
compromise settlement. On July 27, 1995, Citytrust
requested reconsideration.
On October 4, 1996, Citytrust and BPI entered into
a merger agreement, wherein the latter emerged as
the surviving corporation. 14
Subsequently, the CIR issued a Notice of Denial
dated May 26, 2011 addressed to BPI and
requested for the payment of Citytrust's deficiency
IT for 1986 amounting to P19,202,589.97. CIR
reiterated the request on July 28, 2011 in another
letter.
2. Collection
The CIR sought to collect the above-mentioned
amount and issued a Warrant of Distraint and/or
Levy on September 21, 2011 (September 21, 2011
Warrant) against BPI.
BPI questioned the warrant before the CTA (First
CTA Petition). The CTA Special Third Division
cancelled and set aside the September 21, 2011
Warrant (CTA Case No. 8350) which the CTA En
Banc affirmed (CTA EB No. 1173). The CIR
appealed the case to the Court (G.R. No. 224327).
15
record as would support the petition" is a
ground for dismissal thereof. 37
Second, the aforementioned letter is irrelevant
in ascertaining whether or not the tax court
properly took cognizance of BPI's Second CTA
Petition. As the CTA correctly pointed out, BPI
did not come to question any final decision
issued in connection with Citytrust's
assessments. They went before the CTA
primarily to assail the November 2011
Warrant's issuance and implementation. To be
sure, the issue for the CTA to resolve was the
propriety not of any assessment but of a tax
collection measure implemented against BPI.
Accordingly, the CTA's disposition 38 was
distinctly for the cancellation of the warrant and
nothing else.
The law expressly vests the CTA the authority
to take cognizance of "other matters" arising
from the 1977 Tax Code and other laws
administered by the BIR 39 which necessarily
includes rules, regulations, and measures on
the collection of tax. Tax collection is part and
parcel of the CIR's power to make
assessments and prescribe additional
requirements for tax administration and
enforcement. 40
Thus, the CTA properly exercised jurisdiction
over BPI's Second Petition.
The CIR's right to assess has already
prescribed.
The OSG insists that the CIR's right to assess
the subject taxes did not prescribe because the
waivers of the statute of limitations were valid
and binding. BPI is estopped from assailing the
documents' validity because they did not do so
in the administrative level. 41
In the 2018 Case, the CIR argued as follows: first, On the other hand, both the CTA Division and
the letter dated February 5, 1992 was a "final CTA EB carefully reviewed and examined the
decision" on the assessment. Under the law, records (i.e., tax returns for each tax type,
Citytrust had 30 days from the time of the letter's waivers of the statutes of limitations, etc.) to
issuance to appeal it to the CTA. However, BPI only precisely ascertain whether the period to
went to the CTA on October 7, 2011. Having been assess each tax type has prescribed. The court
filed out of time, CTA did not acquire jurisdiction a quo ultimately invalidated the waivers of the
over BPI's petition in CTA Case No. 8350. Second, statutes of limitations due to the absence of the
BPI's allegations on the waivers' defects were also CIR's signature and found that only the
made belatedly. Thus, they are estopped from assessments for EWT 42 and DFT have not
invoking the defense of prescription (i.e., CIR's right prescribed.
to assess) on the basis of these flaws. 16
The Court shall no longer disturb the afore-
However, in the Decision dated November 16, cited findings.
2018, the Court upheld the September 21, 2011
Warrant's cancellation. The Court explained that:
first, the CIR did not offer proof that Citytrust
received the letter dated February 5, 1992. This
failure "lead[s] to the conclusion that no
assessment was issued." 17 Second, estoppel
does not lie against BPI. It was the tax authorities
who had caused the aforementioned defects. The
flawed waivers did not extend the prescriptive
periods for assessment. 18 Thus, CIR's right to
assess Citytrust/BPI "already prescribed and [BPI]
is not liable to pay the deficiency tax assessment."
19

B) Collection of Deficiency EWT,

WTD, DFT, and WTC, and the
present petition

Meanwhile, on November 4, 2011, BPI received a

separate Warrant of Distraint and/or Levy
(November 2011 Warrant), 20 this time in relation
to Citytrust's deficiency EWT, WTD, DFT, and WTC
assessments amounting to P1,624,930.32. 21

Similarly, BPI assailed the November 2011 Warrant

before the CTA through a petition for review
(Second CTA Petition) asking the tax court to
suspend the collection of the alleged deficiency
taxes, cancel the November 2011 Warrant, and
enjoin the CIR from further implementing it. It also
prayed for the CTA to declare the assessments as
prescribed and to cancel the assessments related
thereto.

Ruling of the CTA Division

In the Decision 22 dated April 16, 2014, the CTA

Division cancelled and set aside the subject
Warrant of Distraint and/or Levy. 23 It ruled as
follows:

First, the CTA can take cognizance of BPI's

petition. The questions surrounding the CIR's right
to assess and collect deficiency taxes which
stemmed from the CIR's issuance of the warrant of
distraint and/or levy falls within the CTA's exclusive
appellate jurisdiction to review by appeal "other
matters arising under the [NIRC] or other laws
administered by the [BIR]." 24

Second, the CIR's issuance of the above-

mentioned Assessment Notices on May 6, 1991
was beyond the three-year prescriptive period to
assess deficiency EWT, WTD, and WTC against
Citytrust, pursuant to the National Internal Revenue
Code of 1977 (1977 Tax Code) and relevant tax
regulations. 25 On the other hand, the assessment
for deficiency DFT was issued within the 10-year
prescriptive period to assess taxes for which no
return was filed. 26

Third, there was no showing that Citytrust's request

for reinvestigation/reconsideration was ever
granted by the CIR. Thus, the prescriptive periods
to assess and collect the alleged deficiency taxes
were not suspended. 27

Fourth, RMO No. 20-90 dated April 4, 1990

prescribed a specific form by which all waivers of
the statutes of limitations shall be executed. In turn,
Citytrust executed three waivers dated August 11,
1989, July 12, 1990, and November 8, 1990,
respectively. However, only the first waiver was
valid and extended the period for assessment to
August 31, 1990. The later waivers were executed
during the effectivity of RMO 20-90. Since the other
waivers did not conform with the RMO's formal
requirements, they were invalid and did not extend
the prescriptive period. 28

Fifth, the CIR issued the Assessment Notices

against Citytrust on May 6, 1991. However, it
issued the subject warrant of distraint and/or levy to
collect the taxes so assessed only in 2011, which
was beyond the three-year prescriptive period to
collect assessed taxes. 29

The CTA Division also denied the CIR's

subsequent motion for reconsideration. This
prompted the CIR to elevate the case to the CTA
EB.

Ruling of the CTA EB

In the assailed Decision, the CTA EB affirmed the

CTA Division's ruling.

In upholding the tax court's jurisdiction over the

Second CTA Petition, the court a quo added that
BPI did not initiate an action before the CTA to
assail a final decision rendered by the CIR on the
subject assessments. BPI's petition primarily
questioned the CIR's right to assess and collect, an
issue cognizable by the CTA in the exercise of its
appellate jurisdiction over "other matters'' arising
from tax laws. 30

The court a quo then proceeded to invalidate all

three waivers discussed above. It found that the
waiver dated August 11, 1989 was not an
agreement between the CIR and the taxpayer, as
contemplated under the 1977 Tax Code, 31
because the CIR did not sign it. It could not have
validly extended the prescriptive period for tax
assessment.
 Further, the CTA EB echoed the CTA Division's
ruling that the CIR's letter dated May 6, 1991 and
the accompanying assessment notices were
issued past the general three-year prescriptive
period to assess Citytrust for deficiency EWT,
WTC, and WTD. However, it explained that, by
exception, the 10-year prescriptive period for
assessment shall apply not only to the subject
deficiency DFT, but also to deficiency EWT
pertaining to selected months, 32 for which BPI
likewise failed to present the corresponding returns
to establish the fact of filing. 33

Nevertheless, just as the CTA Division did, the

court a quo ruled that the CIR could no longer
enforce payment for the aforementioned deficiency
DFT and EWT, despite having issued the
corresponding assessments within the 10-year
period. By the time the subject distraint and/or levy
was issued in 2011, the CIR's right to collect any of
these taxes had already prescribed.

The CIR moved to reconsider the Decision, but the

court a quo denied it.

Hence, the CIR, represented by the Office of the

Solicitor General (OSG), filed the present petition.

13. Imelda Sze et. al. v. Prescriptive Period for filing of suit for The respondent Bureau of Internal Revenue (BIR)
CIR, G.R. No. 210238, violations of the Tax Code shall be made issued Revenue Regulations 8-2001 or the
January 6, 2020 within 5 years Voluntary Assessment Program (VAP), granting
taxpayers the privilege of last priority in the audit
and investigation of all internal revenue taxes for
the taxable year December 31, 2000, and all prior
years under certain conditions. Chiat Sing
Cardboard Corporation (Chiat Corp.) availed of the
VAP and was issued a certificate of qualification for
1999 and 2000. The BIR clarified that availment of
the VAP should not be construed to cover up any
fraud or illegal acts that the taxpayer may commit
as it is a mere privilege. 1
Whether or not the CA erred
in finding probable cause for
violation of the NIRC.||| (Sze
v. Bureau of Internal
Revenue, G.R. No. 210238,
[January 6, 2020])
While this petition is pending, the petitioners
manifested to the Court that pursuant to the
May 31, 2012 CA Decision, an Amended
Information in Criminal Case Nos. O-385 to O-
392 were filed against them in the Court of Tax
Appeals (CTA).They moved to quash the
Amended Information due to prescription and
double jeopardy. On July 8, 2015, the CTA
issued a resolution dismissing all the cases on
the ground of prescription. The CTA resolution
became final and executory, and an entry of
judgment was later issued. The petitioners
aver that with this development, the issues in

On March 25, 2003, the BIR issued a Letter of
Authority (LOA) for the examination of accounting
books and records of Chiat Corp. for all internal
revenue taxes for 1999 and 2000. Chiat Corp.'s
Master Payroll, Beth Tugade (Tugade) received the
LOA, but the required documents were not
presented. On May 5, 2003, Tugade received the
BIR's second notice and final notice, and still the
records were not presented. 2
Due to Chiat Corp's. refusal to present its
accounting records, the BIR conducted an
investigation and discovered that Chiat Corp.:(1)
underdeclared its sales amounting to
P160,588,321.63 and P113,578,182.69; (2)
underdeclared its income amounting to
P10,663,130.96 and P5,678,909.13 for 1999 and
2000, respectively; (3) derived income from
undeclared importation of raw materials; (4) the
underdeclared sales and income should have been
subjected to VAT and income tax; (5) deliberately
and wilfully misdeclared its taxable base to evade
payment of correct internal revenue liabilities; (6)
failed to withhold taxes on labor cost it claimed
amounting to P427,010,000.00; (7) failed to rectify
its income, value-added and withholding tax
returns, which should reflect the actual and correct
taxable base; and (8) understated the payment of
its correct tax liabilities by more than 30%.3
Thereafter, the BIR issued a Notice of Informal
Conference (NIC),Preliminary Assessment Notice
(PAN),Formal Letter of Demand (FLD),and Final
Assessment Notice (FAN).Despite these notices,
Chiat Corp. failed to interpose any protest; thus, the
BIR's assessment for deficiency taxes for 1999 and
2000 amounting to P33,847,574.18 became final,
executory and demandable. 4
On May 19, 2005, the BIR charged the officers of
Chiat Corp., petitioners Imelda T. Sze (Sze), Sze
Kou For (For), and Teresita A. Ng (Ng), with tax
their petition have become moot and
academic. 14
The BIR confirmed in its Manifestation and
Comment, that the DOJ complied with the CA's
decision and filed criminal Information against
Sze, For, and Ng. On July 8, 2015, the CTA
promulgated a resolution dismissing Criminal
Case Nos. O-385 to O-392 due to prescription.
15
In its Reply, the petitioners reiterated that the
propriety of the CA's decision in finding
probable cause was rendered moot and
academic by the CTA decision dismissing the
Amended Information against them. 16
Section 281 of the Tax Reform Act of 1997 17
states that the prescriptive period for violation
of the law is five years.
SEC. 281. Prescription for Violations of any
Provision of this Code. — All violations of any
provision of this Code shall prescribe after five
(5) years.
Prescription shall begin to run from the day of
the commission of the violation of the law, and
if the same be not known at the time, from the
discovery thereof and the institution of judicial
proceedings for its investigation and
punishment.
The prescription shall be interrupted when
proceedings are instituted against the guilty
persons and shall begin to run again if the
proceedings are dismissed for reasons not
constituting jeopardy.
xxx xxx xxx
The CTA explained that Revenue
Memorandum Circular 101-90 provides that an
evasion and/or tax fraud for violation of Sections 27
(A), 31, 32, 56 (A) (1), 79 (A) (B), 80 (A), 81, 106,
114 (A) (B), in relation to Sections 251, 253 (d),
254, 255, and 256 of the National Internal Revenue
Code of 1997 (NIRC). 5
Petitioners Sze, For, and Ng denied the
accusations against them and claimed, among
other allegations, that: (1) there was no factual and
legal basis for the charges; (2) the filing was
premature and violated their rights to due process;
(3) they did not receive the notices; (4) they were
not responsible for any underdeclaration,
misdeclaration or importation; (5) they were not
responsible for the preparation and filing of tax
returns; (6) Chiat Corp. has no assets to satisfy the
assessed taxes; (7) Chiat Corp. notified the BIR of
the termination of business as of December 2004;
and (8) the BIR presumed that Chiat Corp.
manufactured the raw materials into final products
and sold them. 6
The State Prosecutor dismissed the complaint on
July 12, 2006. The BIR moved for reconsideration,
which was denied on November 29, 2006. The BIR
filed a petition for review before the Department of
Justice (DOJ),which denied the same in a
resolution dated April 27, 2007. The DOJ also
denied the BIR's motion for reconsideration on
June 17, 2010. The BIR elevated the case before
the Court of Appeals (CA) through a petition for
certiorari.7
The CA Decision
In its May 31, 2012 Decision, 8 the CA gave due
course to the petition after finding that the records
showed sufficient evidence of probable cause for
tax evasion and violation of the NIRC. Chiat Corp.
failed to present countervailing evidence to refute
the documents and other importation records from
different government agencies. 9
offense under the Tax Code is considered
discovered only after the manner of
commission and the nature and extent of fraud
has been definitely ascertained. This occurs
when the BIR renders its final decision and
requires the taxpayer to pay the deficiency tax.
18
The CTA determined that the FLD and the FAN
for taxable years 1999 and 2000 were served
on Chiat Corp. on February 7, 2005. Chiat
Corp. did not file a protest, resulting in the
finality, demandability, and executory nature of
the assessment for deficiency taxes. Counting
30 days from the service of the FLD and the
FAN, the violations were considered
discovered on March 9, 2005. The BIR's
revenue officers filed their joint affidavit in the
DOJ for preliminary investigation on May 26,
2005. However, the original Information was
only filed in court on April 23, 2014, which
exceeded the five-year prescriptive period.
Therefore, the action had prescribed. 19
The Court observed that the Public Prosecutor
did not appeal or move for reconsideration of
the CTA's decision; thus rendering it final and
executory.
The Court dismisses the petition for being moot
and academic.
In Peñafrancia Sugar Mill, Inc. v. Sugar
Regulatory Administration,20 the Court defined
moot and academic as:
A case or issue is considered moot and
academic when it ceases to present a
justiciable controversy by virtue of supervening
events, so that an adjudication of the case or a
declaration on the issue would be of no
practical value or use. In such instance, there
is no actual substantial relief which a petitioner
 The CA held that the DOJ abused its discretion
when it failed to consider various documents from
the Department of Trade and Industry's Bureau of
Import Services, the BIR's Audit Information Tax
Exemption Incentive Division, and the Bureau of
Custom's Management Information System
Technology Group. 10
The CA observed that Chiat Corp. filed an
application for retirement of business after applying
for VAP. The CA found this move as suspicious, if
not an indication of bad faith. 11
The CA resolved that probable cause was
sufficiently established, and ordered the DOJ to file
the corresponding Information with the proper
court. 12
Chiat Corp. moved for reconsideration, which the
CA denied in its November 26, 2013 Resolution. 13
Undeterred, petitioners Sze, For, and Ng filed this
petition for review on certiorari before the Court.
||| (Sze v. Bureau of Internal Revenue, G.R. No.
210238, [January 6, 2020])
14. Misnet, Inc. vs. The filing of Relief of Judgement has On February 9, 2007, petitioner paid the amount of
Commissioner of stopped the running of the period to P2,152.41 for certain undisputed assessments. 5
Internal Revenue, G.R. appeal and may constitute excusable On the same day, petitioner administratively
No. 210604, June 3, delay protested the FAN by filing a request for
2019. reconsideration. 6 The CIR acknowledged receipt
of the payment and the protest letter and informed
the petitioner that its tax docket had been
forwarded to Revenue District Officer (RDO) No.
049, North Makati. 7 On May 28, 2007, the CIR
informed petitioner that Revenue Officer (RO)
Josephine L. Paralejas has been authorized to
verify the documents relative to its request for
reinvestigation and reiterated the previous
assessment of petitioner's deficiency taxes for
taxable year 2003 in the amount of
P11,580,749.31. 8 On June 1, 2007, petitioner sent
a letter to RO Josephine L. Paralejas reiterating its
whether or not the CTA En
Banc correctly dismissed
petitioner's Petition for
Review on the ground of lack
of jurisdiction.||| (Misnet, Inc.
v. Commissioner of Internal
Revenue, G.R. No. 210604,
[June 3, 2019])
would be entitled to, and which would be
negated by the dismissal of the petition. Courts
generally decline jurisdiction over such case or
dismiss it on the ground of mootness. This is
because the judgment will not serve any useful
purpose or have any practical legal effect
because, in the nature of things, it cannot be
enforced. (Citation omitted)
Here, the dismissal of the criminal cases on the
ground of prescription rendered the issue on
the propriety of the CA's decision in finding
probable cause as moot and academic. Thus,
the Court finds it appropriate to abstain from
passing upon the merits of this petition where
legal relief is neither needed nor called for.
WHEREFORE,the petition is DISMISSED for
being moot and academic.
Section 228 of the 1997 National Internal
Revenue Code of the Philippines (NIRC) which
provides for the remedies of a taxpayer in case
of an adverse final decision by the CIR on
Disputed Assessment, thus:
SEC. 228. Protesting of Assessment.— When
the Commissioner or his duly authorized
representative finds that proper taxes should
be assessed, he shall first notify the taxpayer
of his findings: Within a period to be prescribed
by implementing rules and regulations, the
taxpayer shall be required to respond to said
notice. If the taxpayer fails to respond, the
Commissioner or his duly authorized
representative shall issue an assessment
based on his findings.
protest to the PAN and the FAN.
On April 28, 2008, the CIR again wrote a letter to
petitioner informing it that it found additional
deficiency taxes due. 9 On May 8, 2008, petitioner
protested this letter.
On March 28, 2011, petitioner received an
Amended Assessment Notice reflecting an
amended deficiency EWT after reinvestigation. On
the same date, petitioner received a Final Decision
on Disputed Assessment (FDDA) stating that after
reinvestigation, there was still due from petitioner
the amount of P14,564,323.34, representing
deficiency taxes:
This FDDA was received by petitioner on March 28,
2011. 10
On April 8, 2011, petitioner filed a letter-reply 11 to
the Amended Assessment Notice and FDDA, which
was received by the CIR on April 11, 2011. On May
9, 2011, the CIR sent a letter 12 to petitioner which
states in part that petitioner's letter-reply dated April
8, 2011 produced no legal effect since it availed of
the improper remedy. 13 It should have appealed
the final decision of the CIR to the Court of Tax
Appeals within thirty (30) days from the date of
receipt of the said Decision, otherwise, the
assessment became final, executory and
demandable. 14
On May 27, 2011, petitioner filed a Petition for
Relief from Judgment 15 with respondent
Commissioner arguing that it was not able to file its
proper appeal of the FDDA due to its mistake and
excusable negligence as it was not assisted by
counsel. On June 29, 2011, petitioner received a
Preliminary Collection Letter 16 dated June 22,
2011, which is deemed a denial of petitioner's
Petition for Relief. 17
On July 26, 2011, petitioner filed a Petition for
Such assessment may be protested
administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in
such form and manner as may be prescribed
by implementing rules and regulations.
Within sixty (60) days from filing of the protest,
all relevant supporting documents shall have
been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty (180)
days from submission of documents, the
taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax
Appeals within (30) days from receipt of the
said decision,or from the lapse of the one
hundred eighty (180)-day period; otherwise,
the decision shall become final, executory and
demandable. (Emphasis supplied)
It bears to stress that the perfection of an
appeal within the statutory period is a
jurisdictional requirement and failure to do so
renders the questioned decision or decree final
and executory and no longer subject to review.
25
In the instant case, petitioner allegedly failed to
observe the 30-day period within which to
appeal the final decision of the CIR to the CTA.
As records would show, petitioner admittedly
received the FDDA on March 28, 2011.
Reckoned from this date of receipt, it has until
April 27, 2011, within which to appeal with the
CTA. However, petitioner filed its appeal
(Petition for Review) only on July 26, 2011 or
after the lapse of ninety-three (93) days from
its receipt of the FDDA. It appears that
petitioner's filing of an appeal with the CTA was
Review 18 docketed as CTA Case No. 8313, with
the Court of Tax Appeals which was raffled to the
First Division. Meanwhile, the CIR filed a Motion to
Dismiss the petition on the ground of lack of
jurisdiction — arguing that the assessment against
petitioner has become final, executory and
demandable for its failure to file an appeal within
the prescribed period of thirty (30) days.
In a Resolution dated March 27, 2012, 19 the CTA
1st Division granted CIR's Motion to Dismiss.
Petitioner filed a Motion for Reconsideration 20 of
the March 27, 2012 Resolution. On June 27, 2012,
petitioner received from CTA 1st Division a
Resolution dated June 22, 2012 21 denying its
Motion for Reconsideration.
On July 12, 2012, petitioner filed a Petition for
Review (CTA EB Case No. 915) with the CTA En
Banc.
In a Decision dated July 15, 2013, the CTA En Banc
dismissed petitioner's Petition for Review on the
ground of lack of jurisdiction as the lapse of the
statutory period to appeal rendered the subject
deficiency taxes final, executory and demandable.
22 On August 6, 2013, petitioner filed a Motion for
Reconsideration but the said Motion was denied in
a Resolution dated December 9, 2013.
||| (Misnet, Inc. v. Commissioner of Internal
Revenue, G.R. No. 210604, [June 3, 2019])
beyond the statutory period to appeal.
Nonetheless, this Court has on several
occasions relaxed this strict requirement. We
have on several instances allowed the filing of
an appeal outside the period prescribed by law
in the interest of justice, and in the exercise of
its equity jurisdiction. 26 Thus:
x x x [F]or a party to seek exception for its
failure to comply strictly with the statutory
requirements for perfecting its appeal, strong
compelling reasons such as serving the ends
of justice and preventing a grave miscarriage
thereof must be shown, in order to warrant the
Court's suspension of the rules. Indeed, the
Court is confronted with the need to balance
stringent application of technical rules vis-a-vis
strong policy considerations of substantial
significance to relax said rules based on equity
and justice. 27 (Emphasis supplied; citation
omitted)
Petitioner averred that after receiving the
Amended Assessment Notice and the FDDA of
the CIR on March 28, 2011, it filed, without the
assistance of a counsel, a letter protesting the
Amended Assessment Notice, with Regional
Director Mr. Jaime B. Santiago, of RDO No.
049, Makati City. This letter of protest was filed
by petitioner on April 11, 2011 28 or within the
statutory period within which to appeal.
Apparently, petitioner was merely relying on
the statement in the said Amended
Assessment Notice, which reads:
IF YOU DISAGREE WITH THIS
ASSESSMENT, FILE YOUR PROTEST IN
WRITING INDICATING YOUR REASONS
WITH THE COMMISSIONER OF INTERNAL
REVENUE, BIR DILIMAN, QUEZON CITY OR
THE REGIONAL DIRECTOR WITHIN 30
DAYS FROM RECEIPT HEREOF: x x x 29
Thus, petitioner opted to file the protest with the
Regional Director. On May 12, 2011, petitioner
received a letter informing it that its filing of a
letter of protest was an improper remedy. 30
Therefore, petitioner, on May 27, 2011, filed a
Petition for Relief from Judgment on the
ground of mistake in good faith for relying on
the statement provided in the Amended
Assessment Notice. Petitioner contends that
the CTA En Banc should have taken into
consideration that the filing of the Petition for
Relief from Judgment has stopped the running
of the period to appeal. Petitioner insists that
all of these incidents constitute excusable
delay that justified its belated filing of an appeal
with the CTA.

We sustain petitioner's argument.

When petitioner sent a letter-reply 31 dated

April 8, 2011 to the Regional Director, it was
actually protesting both the Amended
Assessment Notice and the FDDA. The
Amended Assessment Notice 32 reflects the
amended deficiency EWT of petitioner after
reinvestigation while the FDDA 33 reflects the
Final Decision on: (a) petitioner's deficiency
EWT; (b) Final Withholding of VAT; and (c)
Compromise Penalty. Since the deficiency
EWT is a mere component of the aggregate tax
due as reflected in the FDDA, then the FDDA
cannot be considered as the final decision of
the CIR as one of its components — the
amended deficiency EWT — is still under
protest.

Petitioner was correct when it protested with

the Regional Director the deficiency EWT as
per the Amended Assessment Notice sent by
the BIR. However, instead of resolving the
protest, the Regional Director informed the
petitioner that it was an improper remedy. A
ruling totally inconsistent with the statement
reflected in the Amended Assessment Notice,
which states that protest must be filed with the
CIR or the Regional Director within 30 days
from receipt thereof. 34 Apparently, the
Regional Director has hastily presumed that
petitioner was already protesting the FDDA,
which incidentally was received by petitioner
on the same date as that of the Amended
Assessment Notice.

With petitioner's pending protest with the

Regional Director on the amended EWT, then
technically speaking, there was yet no final
decision that was issued by the CIR that is
appealable to the CTA. It is still incumbent for
the Regional Director to act upon the protest on
the amended EWT — whether to grant or to
deny it. Only when the CIR settled (deny/grant)
the protest on the deficiency EWT could there
be a final decision on petitioner's liabilities. And
only when there is a final decision of the CIR,
would the prescriptive period to appeal with the
CTA begin to run.

Hence, petitioner's belated filing of an appeal

with the CTA is not without strong, compelling
reason. We could say that petitioner was
merely exhausting all administrative remedies
available before seeking recourse to the
judicial courts. While the rule is that a taxpayer
has 30 days to appeal to the CTA from the final
decision of the CIR, the said rule could not be
applied if the Assessment Notice itself clearly
states that the taxpayer must file a protest with
the CIR or the Regional Director within 30 days
from receipt of the Assessment Notice. Under
the circumstances obtaining in this case, we
opted not to apply the statutory period within
which to appeal with the CTA considering that
no final decision yet was issued by the CIR on
petitioner's protest. The subsequent appeal
taken by petitioner is from the inaction of the
CIR on its protest.

In this case, petitioner's appeal with the CTA

was basically anchored on two points of
contention, to wit: (a) the BIR's assessment of
EWT which has no basis in fact and in law.
Petitioner argues that it is not a top 10,000
Corporation, hence, not all its purchases are
subject to the 1% and 2% EWT; and (b) the
withholding of the VAT on royalty payments for
the software application it purchased from a
non-resident foreign corporation. Petitioner
argues that it is only a reseller (engaged in the
buy and sell) of Microsoft products and not a
licensor. Thus, the income payments made to
Microsoft do not constitute royalty income
subject to withholding VAT but merely a
business income. It maintained that even
Revenue Memorandum Circular (RMC) No.
44-2005 issued by the Bureau of Internal
Revenue (BIR) on September 7, 2005 does not
consider payments for computer software as
royalties but business income. And lastly,
petitioner argues that RMC No. 7-2003 issued
on November 18, 2003, which was relied upon
by the BIR in assessing it with deficiency
withholding tax on VAT on royalties, does not
expressly state when it would take effect. Thus,
petitioner opined that it cannot be given
retroactive effect (to cover its case), otherwise,
it will impose liabilities not existing at the time
of its passage.

If petitioner's right to appeal would be curtailed

by the mere expediency of holding that it had
belatedly filed its appeal, then this Court as the
final arbiter of justice would be deserting its
avowed objective, that is to dispense justice
based on the merits of the case and not on a
mere technicality. 35

Since the CTA First Division has the exclusive

appellate jurisdiction over decisions of the

15. CIR vs. V.Y. The Doctrine of exhaustion of This is petition for review on certiorari under Rule
Domingo Jewellers, administrative remedies must be 45 seeking to reverse and set aside the Court of
Inc., G.R. No. 221780, adhered to Tax Appeals (CTA) En Banc Decision 1 dated July
March 25, 2019 1, 2015 in CTA EB Case No. 1170, which granted
respondent V.Y. Domingo Jewellers, Inc.'s (V.Y.
Domingo) petition for review, and ordered the
remand of the case to the CTA First Division for
further proceedings; and the Resolution 2 dated
December 3, 2015 which denied petitioner
Commissioner of Internal Revenue's (CIR) motion
for reconsideration.
The facts are as follows:
On September 9, 2009, the Bureau of Internal
Revenue (BIR) issued a Preliminary Assessment
Notice 3 (PAN) against V.Y. Domingo, a
corporation primarily engaged in manufacturing
and selling emblematic jewelry, assessing the latter
whether the First Division of
the CTA has jurisdiction to
entertain V.Y. Domingo's
petition for review.|||
(Commissioner of Internal
Revenue v. V.Y. Domingo
Jewellers, Inc., G.R. No.
221780, [March 25, 2019])
Commissioner of Internal Revenue on disputed
assessment, 36 it is just proper to remand the
case to it in order to determine whether
petitioner is indeed liable to pay the deficiency
withholding tax on VAT on royalties. It should
be noted that the CTA has developed an
expertise on the subject of taxation because it
is a specialized court dedicated exclusively to
the study and resolution of tax problems. 37
Thus, this Court has no jurisdiction to review
tax cases at the first instance without first
letting the CTA study and resolve the same. 38
WHEREFORE,the instant petition is
GRANTED.The case is REMANDED to the
Court of Tax Appeals 1st Division which is
DIRECTED to reinstate petitioner's Petition for
Review (appeal),in CTA Case No. 8313 and to
resolve the same on the merits with reasonable
dispatch.
SO ORDERED.
The taxpayers shall be informed in writing of
the law and the facts on which the assessment
is made; otherwise, the assessment shall be
void.
Within a period to be prescribed by
implementing rules and regulations, the
taxpayer shall be required to respond to said
notice.
If the taxpayer fails to respond, the
Commissioner or his duly authorized
representative shall issue an assessment
based on his findings.
Such assessment may be protested
administratively by filing a request for
reconsideration or reinvestigation within thirty
(30) days from receipt of the assessment in
the total amount of P2,781,844.21 representing
deficiency income tax and value-added tax,
inclusive of interest, for the taxable year 2006.
V.Y. Domingo filed a Request for Re-
evaluation/Re-investigation and Reconsideration 4
dated September 17, 2009 with the Regional
Director of BIR-Revenue Region No. 6, requesting
a "thorough re-evaluation and re-investigation to
verify the accuracy of the computation as well as
the accounts included in the Preliminary
Assessment Notice."
V.Y. Domingo then received a Preliminary
Collection Letter 5 (PCL) dated August 10, 2011
from the Revenue District Office (RDO) No. 28-
Novaliches, informing it of the existence of
Assessment Notice No. 32-06-IT-0242 and
Assessment Notice No. 32-06-VT-0243, both dated
November 18, 2010, for collection of its tax
liabilities in the amounts of P1,798,889.80 and
P1,365,727.63, respectively, for a total amount of
P3,164,617.43. The PCL likewise stated:
If you want to know the details and/or settle this
assessment, may we invite you to come to this
office, within ten (10) days from receipt of this
notice. However, if payment had already been
made, please send or bring us copies of the
receipts of payment together with this letter to be
our basis for canceling/closing your liability/ies.
We will highly appreciate if you can give this matter
your preferential attention, otherwise we shall be
constrained to enforce the collection thereof thru
Administrative Summary Remedies provided for by
the law, without further notice. 6 cDSAEI
On September 12, 2011, V.Y. Domingo sent a letter
to the BIR Revenue District Office No. 28 in Quezon
City, requesting certified true copies of Assessment
Notice Nos. 32-06-IT-0242 and 32-06-VT-0243.
Upon receipt of the requested copies of the notices
such form and manner as may be prescribed
by implementing rules and regulations.
Within sixty (60) days from filing of the protest,
all relevant supporting documents shall have
been submitted; otherwise, the assessment
shall become final.
If the protest is denied in whole or in part, or is
not acted upon within one hundred eighty (180)
days from submission of documents, the
taxpayer adversely affected by the decision or
inaction may appeal to the Court of Tax
Appeals within thirty (30) days from receipt of
the said decision, or from the lapse of one
hundred eighty (180)-day period; otherwise,
the decision shall become final, executory and
demandable. 21
On the other hand, Section 3.1.5 of Revenue
Regulations No. 12-99, 22 implementing
Section 228 above, provides:
3.1.5. Disputed Assessment. — The taxpayer
or his duly authorized representative may
protest administratively against the aforesaid
formal letter of demand and assessment notice
within thirty (30) days from date of receipt
thereof . . .
xxx xxx xxx
If the taxpayer fails to file a valid protest against
the formal letter of demand and assessment
notice within thirty (30) days from date of
receipt thereof, the assessment shall become
final, executory and demandable.
If the protest is denied, in whole or in part, by
the Commissioner, the taxpayer may appeal to
the Court of Tax Appeals within thirty (30) days
from the date of receipt of the said decision,
otherwise, the assessment shall become final,
on September 15, 2011, V.Y. Domingo filed on
September 16, 2011 a Petition for Review 7 with
the CTA in Division, under Section 7 (1) of RA No.
1125 and Section 4, Rule 8 of the Revised Rules of
the Court of Tax Appeals (RRCTA), praying that
Assessment Notice Nos. 32-06-IT-0242 and 32-06-
VT-0243 dated November 18, 2010 and the PCL
dated August 10, 2011 be declared null and void,
cancelled, withdrawn, and with no force and effect,
for allegedly having been issued beyond the
prescriptive period for assessment and collection of
internal revenue taxes.
During trial, the CIR filed her Motion to Dismiss 8
the petition for lack of jurisdiction. She argued that
under Republic Act (R.A.) No. 1125 ("An Act
Creating the Court of Tax Appeals"), as amended,
and the RRCTA, it is neither the assessment nor
the formal letter of demand that is appealable to the
CTA but the decision of the CIR on a disputed
assessment. Claiming that V.Y. Domingo's petition
was anchored on its receipt of the PCL, which it
treated as a denial of its Request for Re-
evaluation/Re-investigation and Reconsideration,
the CIR further argued that there was no disputed
assessment to speak of, and that the CTA had no
jurisdiction to entertain the said Petition for Review.
In a Resolution 9 dated January 29, 2014, the CTA
First Division granted the CIR's motion and
dismissed V.Y. Domingo's Petition for Review. It
held that it was without jurisdiction to entertain the
petition, as the rule is that for the CTA to acquire
jurisdiction, as assessment must first be disputed
by the taxpayer and either ruled upon by the CIR to
warrant a decision, or denied by the CIR through
inaction. The CTA First Division ruled that what
were appealed to it were the subject assessments,
not a decision or the CIR's denial of its protest; thus,
the said assessments had attained finality, and the
CTA in Division was without jurisdiction to entertain
the appeal.
executory and demandable.
In general, if the protest is denied, in whole or
in part, by the Commissioner or his duly
authorized representative, the taxpayer may
appeal to the Court of Tax Appeals within thirty
(30) days from date of receipt of the said
decision, otherwise, the assessment shall
become final executory and demandable:
Provided, however, that if the taxpayer
elevates his protest to the Commissioner within
thirty (30) days from date of receipt of the final
decision of the Commissioner's duly
authorized representative, the latter's decision
shall not be considered final, executory and
demandable, in which case, the protest shall
be decided by the Commissioner. CDHaET
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. (Emphasis ours)
It is clear from the said provisions of the law
that a protesting taxpayer like V.Y. Domingo
has only three options to dispute an
assessment:
1. If the protest is wholly or partially denied by
the CIR or his authorized representative, then
the taxpayer may appeal to the CTA within 30
days from receipt of the whole or partial denial
of the protest;
2. If the protest is wholly or partially denied by
the CIR's authorized representative, then the
taxpayer may appeal to the CIR within 30 days
V.Y. Domingo's motion for reconsideration having
been denied in a Resolution dated April 23, 2014, it
filed on May 30, 2014 a petition for review before
the CTA En Banc. It argued that the CTA First
Division erred when it upheld the CIR's position that
V.Y. Domingo should have administratively
protested the Assessment Notices first before filing
its Petition for Review. Furthermore, V.Y. Domingo
claimed that it was denied due process when the
CIR failed to send the Notice of Final Assessment
to it.
In its Decision dated July 1, 2015, the CTA En Banc
granted V.Y. Domingo's Petition for Review,
reversing and setting aside the January 29, 2014
and April 23, 2014 Resolutions of the CTA First
Division. It remanded the case to the CTA First
Division for further proceedings to afford the CIR
full opportunity to present her evidence. It held —
Petitioner's case did not fall within the usual
procedure in the issuance of an assessment as
respondent failed to serve or send the FAN to
petitioner. Section 228 of the NIRC of 1997, as
amended, and Section 3 of Revenue Regulations
No. 12-99 are silent as to the procedure to be
followed in case the taxpayer did not receive the
FAN but instead receives a preliminary collection
letter or a warrant of distraint/levy or similar
communications, informing the taxpayer of the
existence of a FAN for the first time.
Understandably, this would cause some confusion
as to what the next step it. Hence, petitioner cannot
be faulted for not filing an administrative protest
before filing a petition for review before the Court in
Division since it did not receive the FAN and the
language of the PCL shows that the respondent is
already demanding payment from petitioner
presupposing that the assessment has become
final.
The CIR argues that assessment notices are not
appealable to the CTA as the power to decide
from receipt of the whole or partial denial of the
protest;
3. If the CIR or his authorized representative
failed to act upon the protest within 180 days
from submission of the required supporting
documents, then the taxpayer may appeal to
the CTA within 30 days from the lapse of the
180-day period. 23
In this case, records show that on August 11,
2011, V.Y. Domingo received the PCL issued
by petitioner CIR informing it of Assessment
Notice Nos. 32-06-IT-0242 and 32-06-VT-0243
dated November 18, 2010. On September 12,
2011, the former sent a letter request to the
BIR requesting for certified true copies of the
said Assessment Notices.
However, instead of filing an administrative
protest against the assessment notice within
thirty (30) days from its receipt of the requested
copies of the Assessment Notices on
September 15, 2011, V.Y. Domingo elected to
file its petition for review before the CTA First
Division on September 16, 2011, ratiocinating
that the issuance of the PCL and the alleged
finality of the terms used for demanding
payment therein proved that its Request for
Re-evaluation/Re-investigation and
Reconsideration had been denied by the CIR.
That V.Y. Domingo believed that the PCL
"undeniably shows" the intention of the CIR to
make it as its final "decision" did not give it
cause of action to disregard the procedure set
forth by the law in protesting tax assessments
and act prematurely by filing a petition for
review before the courts. The word "decisions"
in the aforementioned provision of R.A. No.
9282 has been interpreted to mean the
decisions of the CIR on the protest of the
taxpayer against the assessments. 24
disputed assessments is vested in the CIR, subject
only to the exclusive appellate jurisdiction of the
CTA. The CIR adds that a thorough review of V.Y.
Domingo's petition for review before the CTA First
Division would readily show that it was an original
protest on the assessment made by the petitioner,
a matter that, under R.A. No. 1125, is not within the
jurisdiction of the CTA. SIcCTD
The CIR likewise claims that a close scrutiny of V.Y.
Domingo's petition for review before the CTA would
reveal that it was anchored on its receipt of the PCL
issued by the BIR, which V.Y. Domingo mistakenly
treated as a denial of its motion for reinvestigation
of the PAN. 11 Before V.Y. Domingo filed its
petition for review before the CTA First Division on
September 16, 2011, it had already received copies
of Assessment Notice Nos. 32-06-IT-0242 and 32-
06-VT-0243 and the Formal Letter of Demand
(FLD) dated September 9, 2010. However, instead
of challenging the contents of the said assessment
notices by filing the appropriate protest or motion
for reinvestigation within thirty (30) days from
September 15, 2011, the date it received the copies
of the notices, the CIR laments that V.Y. Domingo
opted to immediately institute a petition for review
on the basis of the PCL. 12 This, argues the CIR, is
in clear violation of the doctrine of exhaustion of
administrative remedies.
This Court, through a Resolution 13 dated March 7,
2016, required respondent V.Y. Domingo to
comment on the Petition for Review.
In its Comment, 14 V.Y. Domingo contends that
contrary to the CIR's allegation, the CTA has
jurisdiction to take cognizance of its Petition for
Review. Citing Section 7 of R.A. No. 1125, as
amended, V.Y. Domingo suggests that the CIR
may have disregarded the fact that the jurisdiction
of the CTA is not limited to review of decisions of
the CIR in cases involving disputed assessments
only, but also includes "other matters arising under
Definitely, said word does not signify the
assessment itself. 25 Where a taxpayer
questions an assessment and asks the
Collector to reconsider or cancel the same
because he (the taxpayer) believes he is not
liable therefor, the assessment becomes a
"disputed assessment" that the Collector must
decide, and the taxpayer can appeal to the
CTA only upon receipt of the decision of the
Collector on the disputed assessment. 26
Admitting for the sake of argument the claim of
V.Y. Domingo in its Comment — that its case
does not involve an appeal from a decision of
the CIR on a disputed assessment since in the
first place, there is no "'disputed' assessment
to speak of" — admits the veracity of petitioner
CIR's claim: there being no disputed
assessment to speak of when V.Y. Domingo
filed its petition for review before the CTA First
Division, the latter had no jurisdiction to
entertain the same. Thus, the latter's dismissal
of the petition for review was proper.
Evidently, V.Y. Domingo's immediate recourse
to the CTA First Division was in violation of the
doctrine of exhaustion of administrative
remedies.
Under the doctrine of exhaustion of
administrative remedies, before a party is
allowed to seek the intervention of the court, he
or she should have availed himself or herself of
all the means of administrative processes
afforded him or her. 27 Section 228 of the Tax
Code requires taxpayers to exhaust
administrative remedies by filing a request for
reconsideration or reinvestigation within 30
days from receipt of the assessment. 28
Exhaustion of administrative remedies is
required prior to resort to the CTA precisely to
give the Commissioner the opportunity to "re-
examine its findings and conclusions" and to
the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue."
15 V.Y. Domingo reiterates that its case does not
involve an appeal from a decision of the CIR on a
disputed assessment since in the first place, there
is no "disputed" assessment to speak of. 16
Furthermore, V.Y. Domingo also claims that the
tenor of the PCL forecloses any opportunity for it to
file its administrative protest as a reading of the
same will show that the CIR had already decided to
deny any protest as regards the assessment made
against the respondent taxpayer.
decide the issues raised within her
competence. 29 HASDcC
V.Y. Domingo posits that its case is an
exception to the rule on exhaustion of
administrative remedies and the rule on
primary jurisdiction as it cannot be expected to
be able to file an administrative protest to the
Assessment Notices which it never received.
30 It expressly admitted that it did not file an
administrative protest, based on its alleged
non-receipt of the same. 31 Citing the case of
Allied Banking Corporation v. CIR, 32 wherein
this Court ruled that the filing of therein
petitioner of a petition for review with the CTA
without first contesting the FAN issued against
it was an exception to the rule on exhaustion of
administrative remedies, V.Y. Domingo
maintains that in its case, the CIR was similarly
estopped from claiming that the filing of the
petition for review was premature.
However, as previously mentioned, the records
of the case show that V.Y. Domingo did receive
the certified true copies of the Assessment
Notices it requested on September 15, 2011,
the day before it filed its petition for review
before the CTA First Division. V.Y. Domingo
cannot now assert that its recourse to the court
was based on its non-receipt of the
Assessment Notices that it requested.
Likewise, this Court cannot apply the ruling in
Allied Banking Corporation v. CIR, 33 wherein
the demand letter sent by the CIR was worded
as follows:
It is requested that the above deficiency tax be
paid immediately upon receipt hereof, inclusive
of penalties incident to delinquency. This is our
final decision based on investigation. If you
disagree, you may appeal the final decision
within thirty (30) days from receipt hereof,
otherwise said deficiency tax assessment shall
become final, executory and demandable. 34

The ruling of this Court in the said case was

grounded on the language used and the tenor
of the demand letter, which indicate that it was
the final decision of the CIR on the matter. The
words used, specifically the words "final
decision" and "appeal," taken together led
therein petitioner to believe that the Formal
Letter of Demand with Assessment Notices
was, in fact, the final decision of the CIR on the
letter-protest it filed and that the available
remedy was to appeal the same to the CTA. 35

Comparing the wording of the above-quoted

demand letter with that sent by the CIR to V.Y.
Domingo in the instant case, it becomes
apparent that the latter's invocation of the
ruling in the Allied Banking Corporation case is
misguided as the foregoing statements and
terms are not present in the subject PCL dated
August 10, 2011.

What is evident in the instant case is that

Assessment Notice Nos. 32-06-IT-0242 and
32-06-VT-0243 dated November 18, 2010
have not been disputed by V.Y. Domingo at the
administrative level without any valid basis
therefor, in violation of the doctrine of
exhaustion of administrative remedies. To
reiterate, what is appealable to the CTA are
decisions of the CIR on the protest of the
taxpayer against the assessments. There
being no protest ruling by the CIR when V.Y.
Domingo's petition for review was filed, the
dismissal of the same by the CTA First Division
was proper. As correctly put by Associate
Justice Roman G. Del Rosario in his
Dissenting Opinion, "(C)learly, petitioner did
not exhaust the administrative remedy
provided under Section 228 of the NIRC of
1997, as amended, and RR No. 12-99 which is

16. CIR vs. La Flor De Section 53 (c) of the NIRC, the
La Isabela, Inc., G.R. withholding agent who is “required to
No. 211289, January deduct and withhold any tax” is made
14, 2019 “personally liable for such tax” and
indeed is indemnified against any
claims and demands which the
stockholder might wish to make in
questioning the amount of payments
effected by the withholding agent in
accordance with the provisions of the
NIRC.
Respondent La Flor dela Isabela, Inc. (La Flor) is
a domestic corporation. It filed monthly returns for
the Expanded Withholding Tax (EWT) and
Withholding Tax on Compensation (WTC) for
calendar year 2005.
On September 3, 2008, La Flor executed a Waiver
of the Statute of Limitations (Waiver) in connection
with its internal revenue liabilities for the calendar
year ending December 31, 2005. On February 16,
2009, it executed another Waiverto extend the
period of assessment until December 31, 2009.
On November 20, 2009, La Flor received a copy
of the Preliminary Assessment Notice for
deficiency taxes for the taxable year 2005.
Meanwhile, on December 2, 2009, it executed
another Waiver.
On January 7, 2010, La Flor received Formal
Letter of Demand and Final Assessment Notice for
late filing and payment of WTCs and EWTs. The
above-mentioned assessment notices were all
dated December 17, 2009 and covered the
deficiency taxes for the taxable year 2005.
La Flor filed its Letter of Protest contesting the
assessment notices. The Commissioner of
Internal Revenue (CIR) issued the Final Decision
. Whether the prescriptive
period under Section 203 of
the NIRC do not apply to
EWT and WTC
assessments because they
are not considered as
internal revenue taxes but
“penalties”
fatal to its cause. Consequently, the non-filing
of the protest against the FLD led to the finality
of the assessment." 36
WHEREFORE, in view of the foregoing, the
Court GRANTS the petition for review on
certiorari. The assailed July 1, 2015 Decision
and December 3, 2015 Resolution of the Court
of Tax Appeals En Banc are hereby
REVERSED and SET ASIDE, and the January
29, 2014 and April 23, 2014 Resolutions of the
First Division of the Court of Tax Appeals are
REINSTATED
Held: No
It is true that withholding tax is a method of
collecting tax in advanceand that a
withholding tax on income necessarily implies
that the amount of tax withheld comes from
the income earned by the
taxpayer/payee.Nonetheless, the Court does
not agree with the CIR that withholding tax
assessments are merely an imposition of a
penalty on the withholding agent, and thus,
outside the coverage of Section 203 of the
NIRC.
The liability of the withholding agent is distinct
and separate from the tax liability of the
income earner. It is premised on its duty to
withhold the taxes paid to the payee. Should
the withholding agent fail to deduct the
required amount from its payment to the
payee, it is liable for deficiency taxes and
applicable penalties. In Commissioner of
Internal Revenue v. Procter & Gamble
Philippine Manufacturing Corporation the
Court explained:
It thus becomes important to note that under
Section 53 (c) of the NIRC, the withholding
on Disputed Assessment (FDDA) involving the
alleged deficiency withholding taxes in the
aggregate amount of P6,835,994.76. Aggrieved,
La Flor filed a petition for review before the CTA
Division.
The CTA Division ruled in favor of La Flor and
cancelled the deficiency tax assessments against
it. It noted that based on the dates La Flor had
filed its returns for EWT and WTC, the CIR had
until February 15, 2008 to March 1, 2009 to issue
an assessment pursuant to the three-year
prescriptive period under Section 203 of the
National Internal Revenue Code (NIRC). The CTA
Division pointed out that the assessment was
issued beyond the prescriptive period considering
that the CIR issued the FANs only on December
17, 2009.
The CTA Division ruled further that the Waivers
entered into by the CIR and La Flor did not
effectively extend the prescriptive period for the
issuance of the tax assessments. It pointed out
that the Waivers dated September 3, 2008 and
December 2, 2009 were never presented or
offered in evidence, while the Waiver dated
February 16, 2009 did not comply with the
provisions of Revenue Memorandum Order
(RMO) No. 20-90 because it failed to state the
nature and amount of the tax to be assessed.
The CIR moved for reconsideration but it was
denied by the CTA Division. Undeterred, it filed a
Petition for Reviewbefore the CTA En Banc.
The CTA En Banc affirmed the Decision of the
CTA Division. Thus, the CIR filed a petition for
review on certiorari under Rule 45 of the Rules of
Court.
The CIR argued that the prescriptive period under
Section 203 of the NIRC does not apply to
withholding agents such as La Flor. It explained
agent who is “required to deduct and withhold
any tax” is made “personally liable for such
tax” and indeed is indemnified against any
claims and demands which the stockholder
might wish to make in questioning the amount
of payments effected by the withholding agent
in accordance with the provisions of the NIRC.
The withholding agent, P&G-Phil., is directly
and independently liable for the correct
amount of the tax that should be withheld from
the dividend remittances. The withholding
agent is, moreover, subject to and liable for
deficiency assessments, surcharges and
penalties should the amount of the tax
withheld be finally found to be less than the
amount that should have been withheld under
law.
A “person liable for tax” has been held to be a
“person subject to tax” and properly
considered a “taxpayer.” The terms “liable for
tax” and “subject to tax” both connote legal
obligation or duty to pay a tax. It is very
difficult, indeed conceptually impossible, to
consider a person who is statutorily made
“liable for tax” as not “subject to tax.” By any
reasonable standard, such a person should
be regarded as a party in interest, or as a
person having sufficient legal interest, to bring
a suit for refund of taxes he believes were
illegally collected from him.
Thus, withholding tax assessments such as
EWT and WTC clearly contemplate deficiency
internal revenue taxes. Their aim is to collect
unpaid income taxes and not merely to
impose a penalty on the withholding agent for
its failure to comply with its statutory duty.

17. CIR vs. BPI, G.R. An assessment becomes final and
No. 224327. June 11, unappealable if within thirty (30) days
2018. from receipt of the assessment, the
taxpayer fails to file his or her protest
requesting for reconsideration or
reinvestigation as provided in Section
229 of the NIRC.
that the amount collected from them is not the tax
itself but rather a penalty. The CIR pointed out that
the provision of Section 203 of the NIRC only
mentions assessment of taxes as distinguished
from assessment of penalties. It highlighted that
La Flor was made liable for EWT and WTC
deficiencies in its capacity as a withholding agent
and not in its personality as a taxpayer.
On the other hand, the CIR maintained that even
applying the periods set in Section 203 of the
NIRC, the EWT and WTC assessment of La Flor
had not yet prescribed. It pointed out that La Flor
had executed three Waivers extending the
prescriptive period under the NIRC. The CIR
lamented that the CTA erred in disregarding them
because evidence not formally offered may be
considered if they form part of the records. It noted
that in the Answer it filed before the CTA Division,
the subject Waivers were included as annexes. In
addition, the CIR assailed that failure to comply
with RMO No. 20-90 does not invalidate the
Waivers.
In its Comment, other than challenging the merits
of the CIR’s petition, La Flor believes that the
former’s petition for review on certiorari should be
dismissed outright on procedural grounds. It points
out that failure to include the date of issue of the
MCLE compliance number of a counsel in a
pleading is a ground for dismissal. Further, La Flor
highlights that the paragraphs in the CIR’s petition
for review on certiorari were not numbered.
Citytrust Banking Corporation (CBC) filed its Was there a valid notice of An assessment becomes final and
Annual Income Tax Returns for its Regular Banking assessment made by the unappealable if within thirty (30) days from
Unit, and Foreign Currency Deposit Unit for taxable CIR to BPI? receipt of the assessment, the taxpayer fails to
year 1986 on April 15, 1987. Thereafter, on August file his or her protest requesting for
11, 1989, July 12, 1990 and November 8, 1990, reconsideration or reinvestigation as provided
CBC executed Waivers of the Statute of Limitations in Section 229 of the NIRC.
under the National Internal Revenue Code (NIRC).
The CTA was correct in ruling that petitioner
On March 7, 1991, petitioner CIR issued a Pre- failed to prove that it sent a notice of
Assessment Notice (PAN) against CBC for
deficiency taxes, among which is for deficiency
Income Tax for taxable year 1986. Petitioner, on
May 6, 1991, issued a Letter, with attached
Assessment Notices. The counsel for CBC filed its
Protest against the assessments on May 27, 1991
and another Protest on February 17, 1992.
The counsel for CBC issued a Letter addressed to
petitioner offering a compromise settlement on its
deficiency Income Tax assessment for Taxable
year 1986. The petitioner, CIR, approved the first
compromise settlement. However, after the request
for final reconsideration of compromise settlement
made by the CBC, the CIR disapproved the
application of such compromise and ordered CBC
to pay its tax deficiency liabilities and also issued a
Warrant of Distraint and/or Levy against
respondent BPI (Securities and Exchange
Commission approved the Articles of Merger
between respondent BPI and CBC, with BPI as the
surviving corporation).
Respondent BPI filed a Petition for Review with the
CTA, and the CTA ruled that the Assessment
Notices, being issued only on May 6, 1991, were
already issued beyond the three-year period to
assess, counting from April 15, 1987, when CBC
filed its Annual Income Tax Returns for the taxable
year 1986. The same Court also held that the
Waivers of Statute of Limitations executed on July
12, 1990 and November 8, 1990 were not in
accordance with the proper form of a valid waiver
pursuant to RMO No. 20-90, thus, the waivers
failed to extend the period given to petitioner to
assess.
assessment and that it was received by
respondent. The assessment notice dated May
6, 1991 should be deemed as the final decision
of the CIR on the matter, in which BPI timely
protested on May 27, 1991. While a mailed
letter is deemed received by the addressee in
the ordinary course of mail, this is still merely a
disputable presumption subject to
controversion, and a direct denial of the receipt
thereof shifts the burden upon the party
favored by the presumption to prove that the
mailed letter was indeed received by the
addressee. In the instant case, BPI denies
receiving the assessment notice, and the CIR
was unable to present substantial evidence
that such notice was, indeed, mailed or sent
before the BIR's right to assess had prescribed
and that said notice was received by BPI. As a
matter of fact, there was an express admission
on the part of the CIR that there was no proof
that indeed the alleged Final Assessment
Notice was ever sent to or received by BPI.
Thus, the failure of petitioner to prove the
receipt of the assessment by respondent would
necessarily lead to the conclusion that no
assessment was issued.
18. Macario Lim Gaw It is well-settled that the taxpayer's
vs. CIR, G.R. No. obligation to pay the tax is an obligation
222837, July 23, 2018 that is created by law and does not
arise from the offense of tax evasion, as
such, the same is not deemed instituted
in the criminal case.
FACTS: On July 11, 2008, petitioner conveyed the
10 parcels of land to Eagle I Landholdings, Inc.
(Eagle I), via an Agreement to Sell.
In compliance with Revenue Memorandum Order
No. 15-2003, petitioner requested the BIR-RDO to
compute the tax liabilities due on the sale of the
10 parcels of land to Eagle I.
In accordance with the One Time Transactions
(ONETT) Computation sheets, petitioner paid
Capital Gains Tax amounting to P505,177,213.81
and Documentary Stamp Tax amounting to
P330,390.00.
On July 23, 2008, the BIR-RDO No. 52 issued the
corresponding Certificates Authorizing
Registration and Tax Clearance Certificates.
Two years later, the CIR said petitioner is liable
NOT for the 6% capital gains tax but for the 32%
regular income tax and 12% value added tax, on
the theory that the properties petitioner sold were
ordinary assets and not capital assets. Further,
respondent found petitioner to have misdeclared
his income, misclassified the properties and used
multiple tax identification numbers to avoid being
assessed the correct amount of taxes.
CIR issued a Letter of Authority to commence
investigation on petitioner's tax account.
The next day, CIR filed with the DOJ a Joint
Complaint Affidavit for tax evasion against
petitioner.
The DOJ then filed two criminal informations for
tax evasion against petitioner in the CTA. At the
time the Informations were filed, CIR had not yet
issued a final decision on the deficiency
assessment against petitioner.
Halfway through the trial, the respondent issued a
ISSUES:
[1] Is the civil action filed by
petitioner to question the
FDDA deemed instituted in
the criminal case for tax
evasion?
HELD.NO
Under the Revised Rules of the Court of Tax
Appeals (RRCTA), the civil action filed by the
petitioner to question the FDDA is not deemed
instituted with the criminal case for tax
evasion. Civil liability arising from a different
source of obligation, such as when the
obligation is created by law, such civil liability
is not deemed instituted with the criminal
action.
It is well-settled that the taxpayer's obligation
to pay the tax is an obligation that is created
by law and does not arise from the offense of
tax evasion, as such, the same is not deemed
instituted in the criminal case.
Civil liability to pay taxes arises from the fact
that one has engaged himself in business,
and not because of any criminal act
committed by him. The acquittal in the said
criminal cases cannot operate to discharge
the taxpayer from the duty of paying the taxes
which the law requires to be paid, since that
duty is imposed by statute prior to and
independently of any attempts by the taxpayer
to evade payment.
Final Decision on Disputed Assessment (FDDA)
against petitioner, assessing him of deficiency
income tax and VAT covering taxable years 2007
and 2008.

With respect to the deficiency assessment against

petitioner for the year 2007, petitioner filed a
petition for review with the CTA, docketed as CTA
Case No. 8502. The clerk of court of the CTA
assessed petitioner for filing fees which the latter
promptly paid.

However, with respect to the deficiency

assessment against petitioner for the year 2008,
the same involves the same tax liabilities being
recovered in the pending criminal cases. Thus,
petitioner filed before the CTA a motion to clarify
as to whether petitioner has to file a separate
petition to question the deficiency assessment for
the year 2008.

On June 6, 2012, the CTA issued a Resolution

granting petitioner's motion and held that the
recovery of the civil liabilities for the taxable year
2008 was deemed instituted with the consolidated
criminal cases.

However, as a caution, petitioner still filed a

Petition for Review Ad Cautelam (with Motion for
Consolidation with CTA Criminal Case Nos. O-206
and O-207). Upon filing of the said petition, the
clerk of court of the CTA assessed petitioner with
"zero filing fees."

Petitioner was acquitted in Criminal Case Nos. O-

206 and O-207 and the CTA directed the litigation
of the civil aspect in CTA Case No. 8503.

Thereafter, CIR filed a Motion to Dismiss the

Petition for Review Ad Cautelam on the ground
that the CTA First Division lacks jurisdiction to
resolve the case due to petitioner's non-payment
of the filing fees.
CTA First Division granted the Motion to Dismiss.
Petitioner elevated the case to the CTA En Banc.
Dismissal affirmed.
19. Asian As a general rule a waiver that did not
Transmission Corp. v. comply with the requisites for validity as
CIR, G.R. No. 230861, specified in RMO No. 20-90 and RDAO
September 19, 2018 01- 05 is considered invalid and
ineffective to extend the prescriptive
period to assess the deficiency taxes.
Notwithstanding the non-compliance,
the Supreme Court treated the case as
an exception to the rule and considered
the waivers as valid for the following
reasons, viz: (a) Parties are in pari
delicto or "in equal fault"; (b) Parties
who do not come to court with clean
hands cannot be allowed to benefit from
their own wrongdoing. Following the
foregoing principle, respondent should
not be allowed to benefit from the flaws
in its own Waivers and successfully
insist on their invalidity in order to evade
its responsibility to pay taxes; (c) One of
the parties is estopped from questioning
the validity of its Waivers; and (d)
Negligence in the execution of the
waiver
[ATC] is a corporation duly organized and existing
under Philippine Laws and with business address
at Carmelray Industrial Park, Canlubang, Calamba
City, Laguna. ATC is a manufacturer of motor
vehicle transmission component parts and
engines of Mitsubishi vehicles
On August 11, 2004, ATC received Letter of
Authority [(LOA)] No. 200000003557 where [the
CIR] informed ATC that its revenue officers from
the Large Taxpayers Audit and Investigation
Division II shall examine its books of accounts and
other accounting records for the taxable year
2002.
Thereafter, [the CIR] issued a Preliminary
Assessment Notice (PAN) to ATC. Consequently,
on various dates, ATC, through its Vice President
for Personnel and Legal Affairs, Mr. Roderick M.
Tan, executed several documents denominated as
"Waiver of the Defense of Prescription Under the
Statute of Limitations of the National Internal
Revenue Code" (Waiver)
Meanwhile, on February 28, 2008, ATC availed of
the Tax Amnesty [P]rogram under Republic Act
No. 9480. On July 15, 2008, ATC received a
Formal Letter of Demand from [the] CIR for
deficiency [WTC] in the amount of
P[hp]62,977,798.02, [EWT] in the amount of
P[hp]6,916,910.51, [FWT] in the amount of
P[hp]501,077.72. On August 14, 2008, ATC filed
its Protest Letter in regard thereto. Accordingly, on
April 14, 2009, ATC received the Final Decision on
Disputed Assessment where [the] CIR found ATC
liable to pay deficiency tax in the amount of
P[hp]75,696,616.75. Thus, on May 14, 2009, ATC
filed an appeal letter/request for reconsideration
with [the] CIR.
In this appeal, ATC insists
that the CTA En Banc acted
in excess of jurisdiction or
with grave abuse of
discretion amounting to lack
or excess of jurisdiction in
applying the ruling in
Commissioner of Internal
Revenue v. Next Mobile
Inc.[11] as well as the
equitable principles of in pari
delicto, unclean hands, and
estoppel.
The appeal has no merit.
Principles:
In this case, the CTA in Division noted that the
eight waivers of ATC contained the following
defects, to wit: The notarization of the Waivers
was not in accordance with the 2004 Rules on
Notarial Practice;Several waivers clearly failed
to indicate the date of acceptance by the
Bureau of Internal Revenue; The Waivers
were not signed by the proper revenue officer;
and The Waivers failed to specify the type of
tax and the amount of tax due.[14] We agree
with the holding of the CTA En Banc that
ATC's case was similar to the case of the
taxpayer involved in Commissioner of Internal
Revenue v. Next Mobile Inc. The foregoing
defects noted in the waivers of ATC were not
solely attributable to the CIR. Indeed,
although RDAO 01-05 stated that the waiver
should not be accepted by the concerned BIR
office or official unless duly notarized, a
careful reading of RDAO 01-05 indicates that
the proper preparation of the waiver was
primarily the responsibility of the taxpayer or
its authorized representative signing the
waiver. Such responsibility did not pertain to
the BIR as the receiving party. Consequently,
ATC was not correct in insisting that the act or
omission giving rise to the defects of the
waivers should be ascribed solely to the
respondent CIR and her subordinates.
Moreover, the principle of estoppel was
applicable. The execution of the waivers was
to the advantage of ATC because the waivers
would provide to ATC the sufficient time to
gather and produce voluminous records for
the audit. It would really be unfair, therefore,
were ATC to be permitted to assail the
waivers only after the final assessment proved
to be adverse. Indeed, the Court observed in

On November 28, 2014, the CTA in Division
rendered its decision granting the petition for
review of ATC. It held that ATC was not estopped
from raising the invalidity of the waivers inasmuch
as the Bureau of Internal Revenue (BIR) had itself
caused the defects thereof, namely: (a) the
waivers were notarized by its own employee
despite not being validly commissioned to perform
notarial acts; (b) the BIR did not indicate the date
of its acceptance; (c) the BIR did not specify the
amounts of and the particular taxes involved; and
(d) respondent CIR did not sign the waivers
despite the clear mandate of RMO 20-90 to that
effect. It ruled that the waivers, being invalid, did
not operate to toll or extend the three-year period
of prescription.[4]
On August 9, 2016, the CTA En Banc
promulgated the assailed decision reversing and
setting aside the decision of the CTA in Division,
and holding that the waivers were valid
Commissioner of Internal Revenue v. Next
Mobile Inc. that: In this case, respondent, after
deliberately executing defective waivers,
raised the very same deficiencies it caused to
avoid the tax liability determined by the BIR
during the extended assessment period. It
must be remembered that by virtue of these
Waivers, respondent was given the
opportunity to gather and submit documents
to substantiate its claims before the CIR
during investigation. It was able to postpone
the payment of taxes, as well as contest and
negotiate the assessment against it. Yet, after
enjoying these benefits, respondent
challenged the validity of the Waivers when
the consequences thereof were not in its
favor. In other words, respondent's act of
impugning these Waivers after benefiting
therefrom and allowing petitioner to rely on
the same is an act of bad faith.[15] Thus, the
CTA En Banc did not err in ruling that ATC,
after having benefitted from the defective
waivers, should not be allowed to assail them.
In short, the CTA En Banc properly applied
the equitable principles of in pari delicto,
unclean hands, and estoppel as enunciated in
Commissioner of Internal Revenue v. Next
Mobile case. WHEREFORE, the Court
DENIES the petition for review on certiorari
20. San Roque Power The 120-day and 30-day
Corporation v. CIR, periods, as held in the
G.R. No. 203249. July case of Aichi, are
23, 2018 mandatory and
jurisdictional.Thus,
noncompliance with the
mandatory 120+30-day
period renders the
petition before the CTA
void. The ruling in said
case as to the
mandatory and
jurisdictional character of
said periods was
reiterated in San Roque
and a host of succeeding
similar cases.
However, this rule does
not apply from Dec. 10,
2003 until Oct. 6, 2010
pursuant to BIR Ruling
No. DA-489-03. Thus,
claimants may file a
judicial action even
before the lapse of the
said period as a BIR
regulation or ruling
cannot adversely
prejudice a taxpayer who
in good faith relied on
the BIR regulation or
ruling prior to its
reversal.
San Roque Power Corporation is a
VAT-registered taxpayer which was
granted by the BIR a zero-rating on
its sales of electricity to National
Power Corporation (NPC) effective
14 January 2004, up to 31 December
2004. The said corporation filed two
separate administrative claims for
refund of its alleged unutilized input
tax. However, due to the inaction of
the CIR, petitioners filed petitions for
review before the CTA on Mar. 30,
2006 and on June 20, 2006,
respectively. The CTA Division
granted the petitioner's petition but
this was overturned by the CTA En
Banc. The latter argued that the case
should have been dismissed due to
lack of jurisdiction because the
petitioner did not exhaust the
available remedies, particularly Sec.
112(D) of the NIRC. Furthermore,
CIR cited the Aichi case wherein the
Supreme Court ruled that the
120-day and 30-day periods were
mandatory and jurisdictional.
WON the CTA En Banc was
correct in ruling that the
Court
did not have jurisdiction over
the case and should be
dismissed.
NO. The Court was able to acquire jurisdiction
pursuant to the BIR Ruling No. DA-489- 03
which is an exception to the mandatory and
jurisdictional nature of the 120-day and 30-
day periods. BIR Ruling No. DA-489-03,
which
provides that a taxpayer-claimant need not
wait for the lapse of the 120- day period
before
it could seek judicial relief with the CTA, can
be relied by the taxpayers from the time of its
issuance on Dec. 10, 2003 until Oct. 6, 2010
which is the promulgation of the Aichi case.
This is pursuant to the principle of equitable
estoppel enshrined in Sec. 246 of the NIRC
which decrees that a BIR regulation or ruling
cannot adversely prejudice a taxpayer who in
good faith relied on the BIR regulation or
ruling
prior to its reversal.
21. Rhombus Energy, Once the option to carry
Inc. v. CIR, G.R. No. over and apply the
206362, August 1, excess quarterly income
2018 tax against income tax
due for the taxable years
of the succeeding
taxable years has been
made, such option shall
be considered
irrevocable for that
taxable period and no
application for cash
refund or issuance of a
tax credit certificate shall
be allowed therefor.
The irrevocability rule
takes effect when the
option is exercised.
In its Annual ITR for 2005, which was
filed on April 17, 2006, Rhombus
Energy, Inc. reported a tax
overpayment of Php1,500,623.00,
attributable to its excess creditable
withholding taxes. In the same return,
it indicated its option “To be
refunded.”
Subsequent quarterly returns,
however, presented the Php1.50
million as “prior year’s excess credit.”
Said manner of presentation was
consistent among the first three
quarterly income tax returns for 2006.
In the 2006 Annual Income Tax
Return, the line item Prior Year’s
excess credits was zero. The return
was filed on April 2, 2007.
Whether or not Rhombus
Energy, Inc. is
barred by the irrevocability
rule in claiming for the
refund
of its excess/or unutilized
creditable withholding tax.
NO. The CTA En Banc misappreciated the
fact
that Rhombus had already exercised the
option for its unutilized creditable withholding
tax for the year 2005 to be refunded when it
filed its annual ITR for the taxable year ending
December 31, 2005.
Based on the disquisition in Republic v. Team
(Phils.) Energy Corporation, supra, the
irrevocability rule took effect when the option
was exercised. In the case of Rhombus,
therefore, its marking of the box "To be
refunded" in its 2005 annual ITR constituted
its
exercise of the option, and from then onwards
Rhombus became precluded from
carrying-over the excess creditable
withholding tax. The fact that the prior year's
excess credits were reported in its 2006
quarterly ITRs did not reverse the option to be
refunded exercised in its 2005 annual ITR. As
such, the CTA En Banc erred in applying the
irrevocability rule against Rhombus.
22. CIR v. Standard No court shall have the
Insurance Co., Inc., authority to grant an
G.R. No. 219340. injunction to restrain the
November 7, 2018 collection of any national
internal revenue tax, fee
or charge imposed by
the NIRC.
Assessing any tax, or
levying, or distraining, or
selling any property of
taxpayers for the
satisfaction of their tax
liabilities are immediately
executory, and their
enforcement is not to be
suspended by any
appeals thereof to the
CTA unless the CTA, in
its opinion, the collection
may jeopardize the
interest of the
Government and/or the
taxpayer.
Respondent received from the BIR a
Preliminary Assessment Notice
(PAN) regarding its liability arising
from a deficiency in the payment of
documentary stamp taxes, VAT,
income tax, EWT and FBT. The
respondent contested the PAN but
the Final Decision on Disputed
Assessment (FDDA) was issued.
Respondent commenced an action in
the RTC with prayer for issuance of a
TRO or of a writ of preliminary
injunction for the judicial
determination of the constitutionality
of Section 108 and Section 184 of
the NIRC with respect to the taxes to
be paid by non-life insurance
companies. In its petition, the
respondent contended that the facts
of the case must be appreciated in
light of the effectivity of RA 10001
(An Act Reducing the Taxes on Life
Insurance Policies) whereby the tax
rate for life insurance premiums was
reduced from 5% to 2%; and the
pendency of deliberations on House
Bill No. 3235, whereby an equal
treatment for both life and non-life
companies was being sought as a
response to the supposed inequality
generated by the enactment of R.A.
No. 10001.
The RTC issued the TRO prayed for
by enjoining the BIR, its agents,
representatives, assignees, or any
persons acting for and in its behalf
from implementing the provisions of
the NIRC adverted to with respect to
the FDDA for the respondent's
taxable year 2011, and to the
pending assessments for taxable
WON the injunctive relief is
available as a remedy to
assail the collection of a tax.
WON the action for
declaratory relief was
procedurally proper as a
remedy.
NO. Section 218 of the NIRC expressly
provides that "[n]o court shall have the
authority to grant an injunction to restrain the
collection of any national internal revenue tax,
fee or charge imposed by th[e] [NIRC]."
Also, pursuant to Section 11 of R.A. No. 1125,
as amended, the decisions or rulings of the
Commissioner of Internal Revenue, among
others, assessing any tax, or levying, or
distraining, or selling any property of
taxpayers
for the satisfaction of their tax liabilities are
immediately executory, and their enforcement
is not to be suspended by any appeals thereof
to the CTA unless "in the opinion of the CTA
the collection by the BIR or the Commissioner
of Customs may jeopardize the interest of the
Government and/or the taxpayer," in which
case the Court of Tax Appeals "at any stage
of
the proceeding may suspend the said
collection and require the taxpayer either to
deposit the amount claimed or to file a surety
bond for not more than double the amount."
As such, the RTC not only grossly erred in
giving due course to the petition for
declaratory relief, and in ultimately deciding to
permanently enjoin the enforcement of the
specified provisions of the NIRC against the
respondent, but even worse acted without
jurisdiction.
With regards to the action of declaratory relief,
the SC said that it was also IMPROPER.
An action for declaratory relief is governed by
Sec. 1, Rule 63 of the Rules of Court. It is
predicated on the attendance of several
requisites, specifically: (1) the subject matter
of the controversy must be a deed, will,
contract or other written instrument, statute,
executive order or regulation, or ordinance;
years 2012 and 2013.
In 2015, the RTC issued the writ of
preliminary injunction.
Then, the RTC rendered the assailed
judgment wherein it permanently
enjoined the respondent from
proceeding with the implementation
of Section 108 and 184 of the NIRC
against the petitioner until the
Congress shall have enacted House
Bill no. 3235.
Hence, this petition.
(2)
the terms of said documents and the validity
thereof are doubtful and require judicial
construction; (3) there must have been no
breach of the documents in question; (4) there
must be an actual justiciable controversy or
the "ripening seeds" of one between persons
whose interests are adverse; (5) the issue
must be ripe for judicial determination; and (6)
adequate relief is not available through other
means or other forms of action or proceeding.
The third, fourth, fifth and sixth requisites were
patently wanting.
Here, the taxes accrued at the time the
insurance policies were issued.
Actual controversy that was also not ripe for
judicial determination since congress has not
yet addressed the difference in tax treatment
of the life and non-life insurance policies. The
respondent would not be entitled to
declaratory relief because its right is still
dependent upon contingent legislation, thus
was still inchoate.
The adequate remedy upon receipt of the
FDDA was not the action for declaratory relief
but an appeal taken in due course to the CTA.
23. CIR v. Philippine A waiver of the statute of BIR alleged that based on the
Daily Inquirer, Inc., limitations is a computerized matching it conducted
G.R. No. 213943. derogation of the on the information and data provided
March 22, 2017 taxpayer's right to by third party sources against PDI's
security against declaration on its VAT Returns for
prolonged and taxable year 2004, there was an
unscrupulous under declaration of domestic
investigations and thus, purchases from its suppliers. PDI
it must be carefully and was assessed for alleged deficiency
strictly construed. income tax and VAT. PDI responded
by executing three Waivers of the
Statute of Limitation.
PDI filed a Petition for Review
against the Commissioner of Internal
Revenue (CIR) alleging that the
180-day period within which the BIR
should act on its protest had already
lapsed.
The CTA granted the petition
invoking section 203 of the NIRC
considering the three-year period of
limitation for the assessment of
internal revenue tax liabilities. CIR
filed a petition for review on certiorari
alleging that PDI filed a false or
fraudulent return. As such, Section
222 of the NIRC should apply to this
case and the applicable prescriptive
period is 10 years from the discovery
of the falsity of the return.
The CIR alleges that PDI filed a false
or fraudulent return. As such, Section
222 of the NIRC should apply to this
case and the applicable prescriptive
period is 10 years from the discovery
of the falsity of the return. The CIR
argues that the ten-year period starts
from the time of the issuance of its
Letter Notice on 10 August 2006. As
such, the assessment made through
the Formal Letter of Demand dated
WON the BIR’s assessment NO. Fraud was never imputed. The entry of
was made within the wrong information due to mistake,
prescriptive period. carelessness, or ignorance, without intent to
evade tax, does not constitute a false return.
Here, there is not enough evidence to prove
fraud or intentional falsity on the part of PDI.
Since the case does not fall under the
exceptions, Section 203 of the NIRC should
apply internal revenue taxes shall be
assessed within three (3) years after the last
day prescribed by law for the filing of the
return, and no proceeding in court without
assessment for the collection of such taxes
shall be begun after the expiration of such
period.
Section 222(b) of the NIRC provides that the
period to assess and collect taxes may only
be
extended upon a written agreement between
the CIR and the taxpayer executed before the
expiration of the three-year period
Here, the Waivers executed by the BIR and
PDI were meant to extend the three-year
prescriptive period, but the defects in the
Waivers resulted to the non-extension of the
period to assess or collect taxes, and made
the assessments issued by the BIR beyond
the three-year prescriptive period void.

24. CIR v. Asalus Generally, internal revenue taxes shall
Corporation, G.R. No. be assessed within 3 years after the last
221590. February 22, day prescribed by law for the filing of
2017 the return or where the return is filed
beyond the period, from the day the
return was actually filed. However, in
the case of false or fraudulent return
with intent to evade tax or failure to file
a return, the assessment may be made
11 March 2008 is within the
prescriptive period
Asalus Corporation was issued a Preliminary
Assessment Notice (PAN) finding it liable for
deficiency VAT for 2007 in the aggregate
amount of ₱413, 378, 058.11, inclusive of
surcharge and interest, and subsequently, the
amount of ₱95,681,988.64. After protest, Asalus
received the Final Decision on Disputed
Assessment8 (FDDA) showing VAT deficiency for
2007 in the aggregate amount of
₱106,761,025.17, inclusive of surcharge and
Did the CTA err in ruling that
the assessment against
Asalus had prescribed?
YES, the failure to report sales, receipts or
incomein an amount exceeding 30% what is
declared in the returns constitute prima facie
evidence of substantial underdeclaration.
The Court ruled that when there is a
showing that a taxpayer has substantially
underdeclared its sales, receipt or income,
there is a presumption that it has filed a
false return. As such, the CIR need not
 within 10 years from the discovery of
the falsity, fraud or omission.
25. CIR v. Transitions A PAN merely informs the taxpayer of
Optical Philippines, the initial findings of the Bureau of
Inc., G.R. No. 227544, InternalRevenue. It contains the
November 22, 2017 proposed assessment, and the facts,
law, rules, andregulations or
jurisprudence on which the proposed
assessment is based. It does notcontain
a demand for payment but usually
requires the taxpayer to reply within
15days from receipt. Otherwise, the
interest and ₱25,000.00 as compromise penalty.
As a result, it filed a petition for review before the
CTA Division.
The petition was granted and the VAT assessment
and its accompanying penalty cancelled and
withdrawn on the ground that the VAT assessment
had prescribed and was consequentlydeemed
invalid since the ten (10)-year prescriptive period
under Section 222 of the NIRC was inapplicable
as neither the FAN nor the FDDA indicated that
Asalus had filed a false VAT return warranting the
application of the ten (10)-year prescriptive period.
Hence, the assessment had prescribed because it
was made beyond the three (3)-year period as
provided in Section 203 of the NIRC. The CTA En
Banc sustained this ruling.
The CIR however claims that the finding of the
CTA must be set aside since they were not
supported with substantial evidence or if there
was a showing of gross error or abuse. It
repeated that there was presumption of falsity
in light of the 30% underdeclaration of sales.
It further insisted that Asalus was sufficiently
informed of its assessment based on the
prescriptive period under Section 222 of the NIRC
as early as when the PAN was issued.
This a Petition for Review on Certiorari which
seeks to nullify and set aside the June7, 2016
Decision 2 and September 26, 2016 Resolution 3
of the Court of Tax Appeals En Banc in CTA EB
No. 1251.
Transition Optical received a LOA from the BIR.
Parties allegedly executed a Waiver of the
Defense of Prescription (First Waiver). A Second
Waiver was executed. The PAN was issued on
Nov. 11, 2008. CIR issued a FAN and FLD dated
Nov. 28, 2008 for deficiency income tax, value-
Whether the two (2)
Waivers of the Defense of
Prescription entered into by
the parties on October 9,
2007 and June 2, 2008 were
valid
immediately present evidence to support the
falsity of the return, unless the taxpayer fails
to overcome the presumption against it.
Applied in this case, the audit investigation
revealed that there were undeclared VA Table
sales more than 30% of that declared in
Asalus' VAT returns. Moreover, Asalus' lone
witness testified that not all membership
fees, particularly those pertaining to
medical practitioners and hospitals, were
reported in Asalus' VAT returns. The
testimony of its witness, in trying to justify why
not all of its sales were included in the gross
receipts reflected in the VAT returns,
supported the presumption that the return filed
was indeed false precisely because notall the
sales of Asalus were included in the VAT
returns.
Thus, substantial compliance with the
requirement as laid down under Section 228
of the NIRC suffices, for what is important is
that the taxpayer has been sufficiently
informed of the factual and legal bases of the
assessment so that it may file an effective
protest against the assessment.
Considering the existing circumstances, the
assessment was timely made because the
applicable prescriptive period was the ten
(10)-year prescriptive period under Section
222 of the NIRC.
SC said that although the waivers were valid,
the period to assess has already prescribed
since the waivers merely extended the
assessment period to Nov. 28. Since the FAN
was sent on Dec. 2, the same is
alreadybeyond the extended period. The
Court said that considering the functions
andeffects of a PAN vis à vis a FAN, it is clear
that the assessment contemplated in Sections
203 and 222 of the National Internal Revenue
 Commissioner of Internal Revenue will
finalize anassessment and issue a FAN
26. Edison (Bataan) Section 4 of Rule 129 of the Rules of
Cogeneration Court states:
Corporation v. CIR,
G.R. No. 210665, 30 SEC. 4. Judicial Admissions. - An
August 2017 admission, verbal or written, made by a
party in the course of the proceedings in
the same case, does not require proof.
The admission may be contradicted
only by showing that it was made
through palpable mistake or that no
such admission was made.
Section 2.57.4 of Revenue Regulations
No. 2-98 provides:
SEC. 2.57.4. Time of Withholding. - The
obligation of the payor to deduct and
withhold the tax under Section 2.57 of
these regulations arises at the time an
income is paid or payable, whichever
comes first, the term 'payable' refers to
the date the obligation becomes due,
demandable or legally enforceable.
added tax, expanded withholding tax, and final tax
for taxable year 2004 amounting to
P19,701,849.68. A protest letter was submitted by
the respondent alleging that the demand for
deficiency taxes had already prescribed at the
time the FAN was mailed on December 2, 2008
Petitioner received from CIR a final assessment
notice on deficiency income tax, VAT, withholding
tax on compensation, EWT, and FWT for taxable
year 2000, for a total of P85Million. On March 3,
2004, EBCC filed with the CIR a letter-protest
dated March 2, 2004 and furnished the CIR with
therequired documents. Due to the inaction of the
CIR, EBCC elevated the matter to the CTA via a
Petition for Review raffled to CTA second division.
While the case was pending, EBCC availed itself
of the Tax Amnesty Program under Republic Act
(RA) No. 9480.7Thus, in a November 7, 2008
Resolution, the CTA Second Division deemed the
Petition partially withdrawn and the case
closed and terminated with regard to EBCC's
deficiency income tax and VAT for the year 2000.
The CTA Second Division partially granted
thepetition of EBCC. It cancelled the deficiency on
the EWT and WT on compensation, and on the
loan interests. However it was made liable as to
the FWT to a reduced amount of P2.2Miliion. Both
parties appealed to the CTA En Banc.CTA En
banc denied both appeals and affirmed the
decision of CTA Second Division.
EBCC insists that it was not liable for any
deficiency taxes for the year 2000 since it had
already remitted the amount of P2842630.20 as
payment for its FWT for 2000, and that no
proof of such payment was necessary
considering the CIR' s admission in her
Memorandum that the original assessment
ofPl0,227,622.72 was reduced to P7,384,992.52.
EBCC argued that it was not required to pay FWT
at the end of the taxable year 2000 as the
1.Whether or not EBCC is
liable for deficiency FWT for
the year 2000;
2.Whether or no RR. No. 12-
01 should be applied in this
case
Code refers to the service of the FAN upon
the taxpayer.
The SC ruled that the petition lacks merit.
1.No, EBCC is not liable for deficiency FWT
for the year 2000. Considering that under RR
No. 02-98, the obligation of EBCC to
deduct or withhold tax arises at the time
an income is paid or payable, whichever
comes first, and considering further that under
the said RR, the term "payable" refers to the
date the obligation becomes due, demandable
or legally enforceable, SC finds no error on
the part of the CTA En Banc in ruling that
EBCC had no obligation to withhold any taxes
on the interest payment for the year 2000 as
the obligation to withhold only commenced on
June 1, 2002, and thus cancelling
theassessment for deficiency FWT on interest
payments arising from EBCC's loan from
Ogden.
2.Neither do we find any reason for the
retroactive application of RR No. 12-01, which
provides that the withholding of final tax
commences "at the time an income payment
is paid or payable, or the income payment is
accrued or recorded as an expense or
asset, whichever is applicable in the
payor's book, whichever comes first." To
begin with, this issue was never raised before
the CTA. Thus, we cannot rule on this matter
now. It is a settled rule that issues not raised
below cannot be pleaded for the first time on
appeal because a party is not allowed to
change his theory on appeal; to do so would

27. Medicard An LOA is the authority given to the
Philippines, Inc. v. appropriate revenue officer assigned to
CIR, G.R. No. 222743. perform assessment functions. In the
April 5,2017 absence of such an authority, the
assessment or examination is a nullity.
interest payment became due on 2002.
EBCC alleges that the retroactive application of
Revenue Regulation No. 12-01 is in clear violation
of its constitutional right to due process.
The CIR, however, denies that she made any
judicial admission of payment and maintains that
in the absence of evidence of payment, EBCC is
liable to pay the deficiency assessment as the
party who alleges payment have the burden of
proving the same. CIR deems EBSS liable for
payment of FWT.
MEDICARD is a health maintenance organization
(HMO) that provides prepaid health and medical
insurance coverage to its clients. Individuals
enrolled in its health care programs pay an annual
membership fee and are entitled to various
preventive, diagnostic and curative medical
services provided by duly licensed physicians,
specialists, and other professional technical staff
participating in the group practice health delivery
system at a hospital or clinic owned, operated or
accredited by it.
MEDICARD filed it first, second, and third
quarterly VAT Returns through Electronic Filing
and Payment System (EFPS) on April 20, July 25,
and October 25, 2006, respectively, and its fourth
quarterly VAT Return on January 25, 2007.
Upon finding some discrepancies between
MEDICARD’s Income Tax Returns (ITR) and VAT
Returns, the CIR issued a Letter Notice (LN) dated
September 20, 2007. Subsequently, the CIR also
issued a Preliminary Assessment Notice (PAN)
against MEDICARD for deficiency VAT.
MEDICARD received CIR’s FAN dated December
10, 2007 for allegedly deficiency VAT for taxable
year 2006 including penalties.
be unfair to the other party and offensive to
rules of fair play, justice and due process.
In any case, even if the first payment was due
on January 4, 2001 as claimed by the CIR,
EBCC would still not be liable, as the tax
assessment pertained to taxable year 2000
and not 2001. All told, we find no reason to
reverse the January30, 2012 Decision and the
April 17, 2012 Resolution of the CTA in CTA
EB Case Nos. 766 and 769
1. Is the absence of 1. Yes.
the Letter of The absence of the LOA violated
Authority fatal? MEDICARD’s right to due process. An
2. Should the amounts LOA is the authority given to the
that MEDICARD appropriate revenue officer assigned
earmarked and to perform assessment functions.
eventually paid to Under the NLRC, unless authorized
the medical service by the CIR himself or by his duly
providers still form authorized representative, through an
part of its gross LOA, an examination of the taxpayer
receipts for VAT cannot ordinarily be undertaken. An
purposes? LOA is premised on the fact that the
examination of a taxpayer who has
already filed his tax returns is a power
that statutorily belongs only to the CIR
himself or his duly authorized
representatives. In this case, there is
no dispute that no LOA was issued
prior to the issuance of a PAN and
FAN against MEDICARD. Therefore,
no LOA was also served on
MEDICARD.
The LN cannot replace the LOA
required under the law even if the
same was issued by the CIR himself.
Under RR No. 12-2002, LN is issued
MEDICARD filed a protest arguing, among others,
that that the services it render is not limited merely
to arranging for the provision of medical and/or
hospitalization services but include actual and
direct rendition of medical and laboratory services.
On June 19, 2009, MEDICARD received CIR’s
Final Decision denying its protest. The petitioner
MEDICARD proceeded to file a petition for review
before the CTA.
The CTA Division held that the determination of
deficiency VAT is not limited to the issuance of
Letter of Authority (LOA) alone and that in lieu of
an LOA, an LN was issued to MEDICARD
informing it if the discrepancies between its ITRs
and VAT Returns and this procedure is authorized
under Revenue Memorandum Order (RMO) No.
30-2003 and 42-2003. Also, the amounts that
MEDICARD earmarked and eventually paid to
doctors, hospitals and clinics cannot be excluded
from the computation of its gross receipts because
the act of earmarking or allocation is by itself an
act of ownership and management over the funds
by MEDICARD which is beyond the contemplation
of RR No. 4-2007. Furthermore, MEDICARD’s
earnings from its clinics and laboratory facilities
cannot be excluded from its gross receipts
because the operation of these clinics and
laboratory is merely an incident to MEDICARD’s
line of business as an HMO.
MEDICARD filed a Motion for Reconsideration but
it was denied. Petitioner elevated the matter to the
CTA en banc.
CTA en banc partially granted the petition only
insofar as 10% VAT rate for January 2006 is
concerned but sustained the findings of the CTA
Division.
to a person found to have
underreported sales/receipts per data
generated under the RELIEF system.
Upon receipt of the LN, a taxpayer
may avail of the BIR’s Voluntary
Assessment and Abatement Program.
If a taxpayer fails or refuses to avail of
the said program, the BIR may avail
of administrative and criminal
remedies, particularly closure,
criminal action, or audit and
investigation. Since the law
specifically requires an LOA and
RMO No. 32-2005 requires the
conversion of the previously issued
LN to an LOA, the absence thereof
cannot be simply swept under the rug,
as the CIR would have it. In fact,
Revenue Memorandum Circular No.
40-2003 considers an LN as a notice
of audit or investigation only for the
purpose of disqualifying the taxpayer
from amending his returns. The
revenue officers not having authority
to examine MEDICARD in the first
place, the assessment issued by the
CIR is inescapably void.
2. No.
The VAT is a tax on the value added
by the performance of the service by
the taxpayer. It is, thus, this service
and the value charged thereof by the
taxpayer that is taxable under the
NLRC.
28. CIR v. Systems DEFECTIVE WAIVER OF STATUTE
Technology Institute, OF LIMITATIONS DOES NOT EXTEND
Inc., G.R. No. 220835, THE PERIOD TO ASSESS OR
26 July 2017 COLLECT ALLEGED DEFICIENCY
TAXES
Section 203 of the NIRC of 1997 states
that assessments issued after the
expiration of three (3) years counted
from the last day prescribed by law for
the filing of the return or from the day
the return was filed are no longer valid
and effective.
Before the Court is a petition for review on
certiorari under Rule 45 of the ROC filed by
petitioner CIR, assailing the Decision of the
CTA En Banc which affirmed the Decision
CTA 2nd Division, granting the petition for
review filed by respondent Systems Technology
Institute, Inc. (STI).
STI's Amiel Sangalang signed a Waiver of the
Defense of Prescription under the Statute of
Limitations of the NIRC, with the proviso that the
assessment and collection of taxes of fiscal year
2003 shall come "no later than December 31,
2006." Another waiver was executed extending
the period to assess and collect the assessed
taxes to March 31, 2007. Both waivers were
signed by Sangalang and accepted by
Cembrano, Large Taxpayers District Officer. A
third waiver was executed by the same signatories
extending further the period to June 30, 2007.
STI received a Formal Assessment Notice from
the CIR, assessing STI for deficiency income tax,
VAT and EWT for fiscal year 2003. STI filed a
request for reconsideration/reinvestigation. STI
received from the CIR the Final Decision on
Disputed Assessment (FDDA) dated finding STI
liable for deficiency income tax, VAT and EWT but
in a lesser amount. STI appealed the FDDA by
filing a petition for review with the CTA. The CTA
2nd Division promulgated its decision denying the
assessment on the ground of prescription. The
CTA Division found the waivers executed by
STI defective for failing to strictly comply with
the requirements provided by Revenue
Memorandum Order (RMO) No. 20-90 and
Revenue Delegation Authority Order (RDAO)
No. 05-01. consequently, the periods for the CIR
to assess or collect internal revenue taxes were
never extended; and the subject assessment for
deficiency income tax, VAT and EWT against STI,
which the CIR issued beyond the three-year
prescriptive period provided by law, was already
barred by prescription. The CIR appealed to the
Whether or not the right
of the government to
assess or collect the
alleged deficiency taxes is
already barred by
prescription.
Yes. The right of the government to
assess or collect the alleged deficiency
taxes is already barred by prescription. The
Waivers of Statute of Limitations, being
defective and invalid, did not extend the CIR's
period to issue the subject assessments.
Section 203 of the NIRC of 1997, as
amended, limits the CIR's period to assess
and collect internal revenue taxes to three (3)
years counted from the last day prescribed by
law for the filing of the return or from the day
the return was filed, whichever comes
later. Thus, assessments issued after the
expiration of such period are no longer
valid and effective. Clearly, the final
assessment notice dated June 16, 2007,
assessing STI for deficiency income tax, VAT
and EWT for fiscal year 2003, which STI
received on June 28, 2007, was issued
beyond the three-year prescriptive period.
However, the CIR maintains that
prescription had not set in because the
parties validly executed a waiver of statute
of limitations under Section 222(b) of the
NIRC.
To implement the said provision, the BIR
issued RMO 20-90 and RDAO 05-01,
outlining the procedures for the proper
execution of a valid waiver which are required
and mandatory.Tested against the
requirements of RMO 20-90 and relevant
jurisprudence, the Court cannot but agree with
the CTA's finding that the waivers subject of
this case suffer from the following defects: (1)
That at the time when the first waiver took
effect, the period for the CIR to assess STI for
deficiency EWT and deficiency VAT for fiscal
year ending March 31, 2003, had already
prescribed; (2) STI's signatory to the three
waivers had no notarized written authority
from the corporation's board of directors; and
CTA En Banc. The CTA En Banc denied the CIR's
petition for lack of merit and affirmed the Decision
CTA Division. Hence, this petition for review on
certiorari.
(3) the waivers did not specify the kind of tax
and the amount of tax due.
Verily, considering the foregoing defects in the
waivers executed by STI, the periods for the
CIR to assess or collect the alleged deficiency
income tax, deficiency EWT and deficiency
VAT were not extended. The assessments
subject of this case, which were issued by the
BIR beyond the three-year prescriptive, are
therefore considered void and of no legal
effect.
29. CIR v. Lancaster Even though the date after the words
Philippines, Inc., G.R. "taxable year 1998 to" is unstated, it is
No. 183408, July 12, not at all difficult to discern that the
2017 period of examination is the whole
taxable year 1998. It could not have
contemplated a longer period. The
examination for the full taxable year
1998 only is consistent with the
guideline in Revenue Memorandum
Order (RMO) No. 43-90, that the LOA
shall cover a taxable period not
exceeding one taxable year.
Petitioner Commissioner of Internal Revenue
(CIR) is authorized by law, among others, to
investigate or examine and, if necessary, issue
assessments for deficiency taxes. On the other
hand, respondent Lancaster Philippines, Inc.
(Lancaster) is a domestic corporation established
in 1963 and is engaged in the production,
processing, and marketing of tobacco.
In 1999, the Bureau of Internal Revenue (BIR)
issued Letter of Authority (LOA) No. 00012289
authorizing its revenue officers to examine
Lancaster's books of accounts and other
accounting records for all internal revenue taxes
due from taxable year 1998 to an unspecified
date. After the conduct of an examination pursuant
to the LOA, the BIR issued a Preliminary
Assessment Notice (PAN) which cited Lancaster
for: 1) overstatement of its purchases for the fiscal
year April 1998 to March1999; and 2)
noncompliance with the generally accepted
accounting principle of proper matching of cost
and revenue. More concretely, the BIR disallowed
the purchases of tobacco from farmers covered by
Purchase Invoice Vouchers (PIVs) for the months
of February and March 1998 as deductions
against income for the fiscal year April 1998 to
March 1999.
In its petition before the CTA Division, Lancaster
essentially reiterated its arguments in the protest
against the assessment, maintaining that the
tobacco purchases in February and March 1998
are deductible in its fiscal year ending 31 March
1999. After trial, the CTA Division granted the
petition of Lancaster. The CIR move but failed to
obtain reconsideration of the CTA Division ruling.
Aggrieved, the CIR sought recourse from the CTA
En Banc, however, the CTA En Banc found no
reversible error in the CTA Division's ruling, thus,
it affirmed the cancellation of the assessment
against Lancaster. Hence, this petition.
I. The Court of Tax Appeals
En Banc erred in holding
that petitioner's revenue
officers exceeded their
authority to investigate the
period not covered by their
letter of authority.
II. The court of Tax Appeals
En Banc erred in ordering
petitioner to cancel and
withdraw the deficiency
assessment issued against
respondent.
We deny the petition.
I. The CTA En Banc did not err when it ruled
that the BIR revenue officers had exceeded
their authority.
A. The Jurisdiction of the CTA
The jurisdiction of the CTA is not limited only
to cases which involve decisions or inactions
of the CIR on matters relating to assessments
or refunds but also includes other cases
arising from the NIRC or related laws
administered by the BIR. The jurisdiction of
the CTA on such other matters arising under
the NIRC was retained under the
amendments introduced by R.A No. 9282.
Sec. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by
appeal, as herein provided:
1. Decisions of the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue
taxes, fees or other charges, penalties in
relation thereto, or other matters arising under
the National Internal Revenue or other laws
administered by the Bureau of Internal
Revenue;
2. Inaction by the Commissioner of Internal
Revenue in cases involving disputed
assessments, refunds of internal revenue
taxes, fees or other charges, penalties in
relation thereto, or other matters arising under
the National Internal Revenue Code or other
laws administered by the Bureau of Internal
Revenue, where the National Internal
Revenue Code provides a specific period of
action. in which case the inaction shall be
deemed a denial;
It must be stressed that the assessment of
internal revenue taxes is one of the duties of
the BIR. Section 2 of the NIRC states:

Sec. 2. Powers and Duties of the Bureau of

Internal Revenue. - The Bureau of Internal
Revenue shall be under the supervision and
control of the Department of Finance and its
powers: and duties shall comprehend the
assessment and collection of all national
internal revenue taxes, fees, and charges,
and the enforcement of all forfeitures,
penalties, and fines connected therewith,
including the execution of judgments in all
cases decided in its favor by the Court of Tax
Appeals and the ordinary courts.

In connection therewith, the CIR may

authorize the examination of any taxpayer and
correspondingly make an assessment
whenever necessary. The powers granted by
law to the CIR are intended, among other
things, to determine the liability of any person
for any national internal revenue tax. It is
pursuant to such pertinent provisions of the
NIRC conferring the powers to the CIR that
the petitioner (CIR) had, in this case,
authorized its revenue officers to conduct an
examination of the books of account and
accounting records of Lancaster, and
eventually issue a deficiency assessment
against it.

On whether the CTA can resolve an issue

which was not raised by the parties, we rule in
the affirmative.

Under Section 1, Rule 14 of A.M. No. 05-11-

07-CTA, or the Revised Rules of the Court of
Tax Appeals, the CTA is not bound by the
issues specifically raised by the parties but
may also rule upon related issues necessary
to achieve an orderly disposition of the case.
On the basis thereof, the CTA Division was,
therefore, well within its authority to consider
in its decision the question on the scope of
authority of the revenue officers who were
named in the LOA even though the parties
had not raised the same in their pleadings or
memoranda. The CTA En Banc was likewise
correct in sustaining the CTA Division's view
concerning such matter.

B. The Scope of the Authority of the

Examining Officers

The audit process normally commences with

the issuance by the CIR of a Letter of
Authority. The LOA gives notice to the
taxpayer that it is under investigation for
possible deficiency tax assessment; at the
same time it authorizes or empowers a
designated revenue officer to examine, verify,
and scrutinize a taxpayer's books and
records, in relation to internal revenue tax
liabilities for a particular period.

Even though the date after the words "taxable

year 1998 to" is unstated, it is not at all difficult
to discern that the period of examination is the
whole taxable year 1998. This means that the
examination of Lancaster must cover the FY
period from 1 April1997 to 31 March1998. It
could not have contemplated a longer period.
The examination for the full taxable year 1998
only is consistent with the guideline in
Revenue Memorandum Order (RMO) No. 43-
90, that the LOA shall cover a taxable period
not exceeding one taxable year. In other
words, absent any other valid cause, the LOA
issued in this case is valid in all respects.

Nonetheless, a valid LOA does not

necessarily clothe validity to an assessment
issued on it, as when the revenue officers
designated in the LOA act in excess or
outside of the authority granted them under
said LOA. The taxable year covered by the
assessment being outside of the period
specified in the LOA in this case, the
assessment issued against Lancaster is,
therefore, void.

This point alone would have sufficed to

invalidate the subject deficiency income tax
assessment, thus, obviating any further
necessity to resolve the issue on whether
Lancaster erroneously claimed the February
and March 1998 expenses as deductions
against income for FY 1999.

II. The CTA En Banc correctly sustained the

order cancelling and withdrawing the
deficiency tax assessment.

The issue essentially boils down to the proper

timing when Lancaster should recognize its
purchases in computing its taxable income.
Such issue directly correlates to the fact that
Lancaster's 'crop year ' does not exactly
coincide with its fiscal year for tax purposes.

In the present case, we find it wholly justifiable

for Lancaster, as a business engaged in the
production and marketing of tobacco, to adopt
the crop method of accounting. A taxpayer is
authorized to employ what it finds suitable for
its purpose so long as it consistently does so,
and in this case, Lancaster does appear to
have utilized the method regularly for many
decades already. Considering that the crop
year of Lancaster starts from October up to
September of the following year, it follows that
all of its expenses in the crop production
made within the crop year starting from
October 1997 to September 1998, including
the February and March 1998 purchases
covered by purchase invoice vouchers, are
rightfully deductible for income tax purposes
in the year when the gross income from the
crops are realized. Pertinently, nothing from
the pleadings or memoranda of the parties, or
even from their testimonies before the CTA,
would support a finding that the gross income
from the crops (to which the subject expenses
refer) was actually realized by the end of
March 1998, or the closing of Lancaster's
fiscal year for 1998. Instead, the records show
that the February and March 1998 purchases
were recorded by Lancaster as advances and
later taken up as purchases by the close of
the crop year in September 1998, or as stated
very clearly above, within the fiscal year 1999.

Evident from the foregoing, the crop year

basis is one unusual method of accounting
wherein the entire cost of producing the crops
(including purchases) must be taken as a
deduction in the year in which the gross
income from the crop is realized. Since the
petitioner's crop year starts in October and
ends in September of the following year, the
same does not coincide with petitioner's fiscal
year which starts in April and ends in March of
the following year. However, the law and
regulations consider this peculiar situation and
allow the costs to be taken up at the time the
gross income from the crop is realized, as in
the instant case.

The matching principle

In essence, the matching concept, which is

one of the generally accepted accounting
principles, directs that the expenses are to be
reported in the same period that related
revenues are earned. It attempts to match
revenue with expenses that helped earn it.
The expenses are matched with the related
incomes which are eventually earned. Nothing
from the provision is it strictly required that for
the expense to be deductible, the income to
which such expense is related to be realized
in the same year that it is paid or incurred. As
noted by the CTA, the crop method is an
unusual method of accounting, unlike other
recognized accounting methods that, by
mandate of Sec. 45 of the NIRC, strictly
require expenses be taken in the same
taxable year when the income is 'paid or
incurred, ' or 'paid or accrued, ' depending
upon the method of accounting employed by
the taxpayer.

Provisions of the Tax Code Shall Prevail

All returns required to be filed by the Tax

Code shall be prepared always in conformity
with the provisions of the Tax Code, and the
rules and regulations implementing said Tax
Code. Taxability of income and deductibility of
expenses shall be determined strictly in
accordance with the provisions of the Tax
Code and the rules and regulations issued
implementing said Tax Code. In case of
difference between the provisions of the Tax
Code and the rules and regulations
implementing the Tax Code, on one hand,
and the general(v accepted accounting
principles (GAAP) and the generally accepted
accounting standards (GAAS), on the other
hand, the provisions of the Tax Code and the
rules and regulations issued implementing
said Tax Code shall prevail.

RAM No. 2-95 is clear-cut on the rule on when

to recognize deductions for taxpayers using
the crop method of accounting. The rule
prevails over any GAAP, including the
matching concept as applied in financial or
business accounting.

In sum, and considering the foregoing

premises, we find that the assessment is void
for being issued without valid authority.
Furthermore, there is no legal justification for
the disallowance of Lancaster's expenses for
the purchase of tobacco in February and
March 1998.
30. Procter & Gamble There is no dispute that the 120-day
Asia PTE LTD. v. CIR, period is mandatory and jurisdictional,
G.R. No. 205652, 6 and that the CTA does not acquire
September 2017 jurisdiction over a judicial claim that is
filed before the expiration of the 120-
day period. There are, however, two
exceptions to this rule.
The first exception is 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.
The second exception is 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. In these cases, 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.
P&G is a foreign corporation duly organized and
existing under the laws of Singapore and is
maintaining a Regional Operating Headquarter in
the Philippines. It provides management,
marketing, technical and financial advisory, and
other qualified services to related companies as
specified by its Certificate of Registration and
License issued by the Securities and Exchange
Commission. It is a VAT-registered taxpayer and
is covered by Bureau of Internal Revenue (BIR).
On March 22, 2007 and May 2, 2007, P&G filed
applications and letters addressed to the BIR
Revenue District Office (RDO) No. 49, requesting
the refund or issuance of tax credit certificates
(TCCs) of its input VAT attributable to its zero-
rated sales covering the taxable periods of
January 2005 to March 2005, and April 2005 to
June 2005.
On March 28, 2007, P&G filed a petition for review
with the CTA seeking the refund or issuance of
TCC in the amount of P23,090,729.17
representing input VAT paid on goods or services
attributable to its zero-rated sales for the first
quarter of taxable year 2005. On June 8, 2007,
P&G filed with the CTA another judicial claim for
refund or issuance of TCC in the amount of
P19,006,753.58 representing its unutilized input
VAT paid on goods and services attributable to its
zero-rated sales for the second quarter of taxable
year 2005. The case was docketed as CTA Case
No. 7639. On July 30, 2007, the CTA Division
granted P&G's Motion to Consolidate.
The CTA Division dismissed P&G's judicial claim,
for having been prematurely filed. Citing Aichi, the
CTA Division held that the CIR is granted by law a
period of 120 days to act on the administrative
claim for refund. Upon denial of the claim, or after
the expiration of the 120-day period without action
by the CIR, only then may the taxpayer-claimant
seek judicial recourse to appeal the CIR's action
Whether the CTA En Banc
erred in dismissing P&G's
judicial claims for refund on
the ground of prematurity.
The Court finds the petition meritorious.
Exception to the mandatory and jurisdictional
120+30-day periods under Section 112(C) of
the NIRC
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. There are, however,
two exceptions to this rule.
The first exception is 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.
The second exception is 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.
In these cases, 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.
xxxx
Clearly, BIR Ruling No. DA-489-03 is a
general interpretative rule. Thus, all taxpayers
can rely on BIR Ruling No. DA-489-03 from
the time of its issuance on 10 December 2003
up to its reversal by this Court in Aichi on 6
October 2010, where this Court held that the
120+30 day periods are mandatory and
jurisdictional.
Application and validity of BIR Ruling No. DA-

31. Asiatrust In order for the CTA En Banc to take
Development Bank, cognizance of an appeal via a petition
Inc. v. CIR, G.R. No. for review, a timely motion for
201530. April 19, 2017 reconsideration or new trial must first be
filed with the CTA Division that issued
the assailed decision or resolution.
Failure to do so is a ground for the
dismissal of the appeal as the word
"must" indicates that the filing of a prior
or inaction on a refund/tax credit claim, within a
period of 30 days. According to the CTA Division,
P&G failed to observe the 120-day period granted
to the CIR. Its judicial claims were prematurely
filed with the CTA only six (6) days and thirty-
seven (37) days, respectively, from the filing of the
applications at the administrative level. Thus, the
CTA Division ruled that inasmuch as P&G's
petitions were prematurely filed, it did not acquire
jurisdiction over the same.
P&G moved for reconsideration but this was
denied by the CTA Division. Aggrieved, P&G
elevated the matter to the CTA En Banc. The CTA
En Banc rendered the assailed Decision affirming
in toto the CTA Division's Decision and
Resolution. It agreed with the CTA Division in
applying the ruling in Aichi which warranted the
dismissal of P&G's judicial claim for refund on the
ground of prematurity.
P&G filed the present petition.
On separate dates in February 2000, Asiatrust
Development Bank, Inc. (Asiatrust) received from
the Commissioner of Internal Revenue (CIR) three
Formal Letters of Demand (FLD) with Assessment
Notices for deficiency internal revenue taxes in the
amounts of P131,909,161.85, P83,012,265.78,
and ₱l44,012,918.42 for fiscal years ending June
30, 1996, 1997, and 1998, respectively. On March
17, 2000, Asiatrust timely protested the
assessment notices.
GR NO. 201530
Whether the [CTA] En Banc
erred in finding that
[Asiatrust] is liable for
deficiency final withholding
tax for fiscal year ending
June 30, 1998.
II.
489-03
In Commissioner of Internal Revenue v.
Deutsche Knowledge Services, Pte. Ltd., the
Court reiterated that all taxpayers may rely
upon BIR Ruling No. DA-489-03, as a general
interpretative rule, from the time of its
issuance on December 10, 2003 until its
effective reversal by the Court in Aichi. The
Court further held that while RR 16-2005 may
have re-established the necessity of the 120-
day period, taxpayers cannot be faulted for
still relying on BIR Ruling No. DA-489-03 even
after the issuance of RR 16-2005 because the
issue on the mandatory compliance of the
120-day period was only brought before the
Court and resolved with finality in Aichi.38
Accordingly, in consonance with the doctrine
laid down in San Roque, the Court finds that
P&G's judicial claims were timely filed and
should be given due course and consideration
by the CTA.
The Petitions lack merit.
G.R. No. 201530
An application for tax abatement is considered
approved only upon the issuance of a
termination letter.
The last step in the tax abatement process is
the issuance of the termination letter. The
motion is mandatory, and not merely
directory.
Due to the inaction of the CIR on the protest,
Asiatrust filed before the CTA a Petition for
Review praying for the cancellation of the tax
assessments for deficiency income tax,
documentary stamp tax (DST) - regular, DST -
industry issue, final withholding tax, expanded
withholding tax, and fringe benefits tax issued
against it by the CIR. On December 28, 2001, the
CIR issued against Asiatrust new Assessment
Notices for deficiency taxes in the amounts of ₱l
12,816,258.73, ₱53,314,512.72, and
₱133,013,458.73, covering the fiscal years ending
June 30, 1996, 1997, and 1998, respectively. On
the same day, Asiatrust partially paid said
deficiency tax assessments
On April 19, 2005, the CIR approved Asiatrust's
Offer of Compromise of DST - regular
assessments for the fiscal years ending June 30,
1996, 1997, and 1998. During the trial, Asiatrust
manifested that it availed of the Tax Abatement
Program for its deficiency final withholding tax -
trust assessments for fiscal years ending June 30,
1996 and 1998; and that on June 29, 2007, it paid
the basic taxes in the amounts of P4,187,683.27
and P6,097,825.03 for the said fiscal years,
respectively. Asiatrust also claimed that on March
6, 2008, it availed of the provisions of Republic Act
(RA) No. 9480, otherwise known as the Tax
Amnesty Law of 2007.
Ruling of the Court of Tax Appeals Division
The CTA Division rendered a Decision partially
granting the Petition. The CTA Division declared
void the tax assessments for fiscal year ending
June 30, 1996 for having been issued beyond the
three-year prescriptive period. However, due to
the failure of Asiatrust to present documentary and
testimonial evidence to prove its availment of the
Tax Abatement Program and the Tax Amnesty
Law, the CTA Division affirmed the deficiency
Whether the order of the
[CTA] En Banc for petitioner
to pay again the final
withholding tax for fiscal
year ending June 30, 1998
would amount to double
taxation.
III.
Whether xx x the [CTA] En
Banc erred in resolving the
issue of alleged deficiency
final wri1ffiolding tax for
fiscal year ending June 30,
1998 based on mere
technicalities.
G.R. NOS. 201680-81
I.
Whether xx x the [CTA] En
Banc committed reversible
error when it dismissed [the
CIR’s] petition for review on
the ground that the latter
allegedly failed to comply
with section 1, rule 8 of the
revised rules of the [CTA].
II.
Whether the [CTA] En Banc
committed reversible error
when it sustained the
amended decision dated 16
march 2010 of the first
division declaring closed and
terminated respondent's
liability for deficiency
documentary stamp tax for
taxable years 1997 and
1998.
presentation of the termination letter is
essential as it proves that the taxpayer's
application for tax abatement has been
approved. Thus, without a termination letter, a
tax assessment cannot be considered closed
and terminated.
In this case, Asiatrust failed to present a
termination letter from the BIR. Instead, it
presented a Certification issued by the BIR to
prove that it availed of the Tax Abatement
Program and paid the basic tax. It also
attached copies of its BIR Tax Payment
Deposit Slips and a letter issued by RDO
Nacar. These documents, however, do not
prove that Asiatrust's application for tax
abatement has been approved. If at all, these
documents only prove Asiatrust's payment of
basic taxes, which is not a ground to consider
its deficiency tax assessment closed and
terminated.
Since no termination letter has been issued by
the BIR, there is no reason for the Court to
consider as closed and terminated the tax
assessment on Asiatrust's final withholding
tax for fiscal year ending June 30, 1998.
Asiatrust's application for tax abatement will
be deemed approved only upon the issuance
of a termination letter, and only then will the
deficiency tax assessment be considered
closed and terminated. However, in case
Asiatrust's application for tax abatement is
denied, any payment made by it would be
applied to its outstanding tax liability. Thus,
the Court finds no error on the part of the CTA
En Banc in affirming the said tax assessment.
G.R. Nos. 201680-81
An appeal to the CTA En Banc must be
preceded by the filing of a timely motion for
reconsideration or new trial with the CTA
DST- Special Savings Account (SSA)
assessments for the fiscal years ending June 30,
1997 and 1998 and the deficiency DST - Interbank
Call Loans (IBCL) and deficiency final withholding
tax - trust assessments for fiscal year ending June
30, 1998, in the total amount of ₱142,777,785.91.
Both parties appealed to CTA En Banc. The CTA
En Banc denied the motions for partial
reconsideration of the CIR and Asiatrust.45.
Hence, the instant consolidated Petitions under
Rule 45 of the Rules of Court.
Division.
In order for the CTA En Banc to take
cognizance of an appeal via a petition for
review, a timely motion for reconsideration or
new trial must first be filed with the CTA
Division that issued the assailed decision or
resolution. Failure to do so is a ground for the
dismissal of the appeal as the word "must"
indicates that the filing of a prior motion is
mandatory, and not merely directory.
The same is true in the case of an amended
decision. Section 3, Rule 14 of the same rules
defines an amended decision as "[a]ny action
modifying or reversing a decision of the Court
En Banc or in Division." As explained in CE
Luzon Geothermal Power Company, Inc. v.
Commissioner of Internal Revenue, an
amended decision is a different decision, and
thus, is a· proper subject of a motion for
reconsideration.
In this case, the CIR's failure to move for a
reconsideration of the Amended Decision of
the CTA Division is a ground for the dismissal
of its Petition for Review before the CTA En
Banc. Thus, the CTA En .Banc did not err in
denying the CIR's appeal on procedural
grounds.
Due to this procedural lapse, the Amended
Decision has attained finality insofar as the
CIR is concerned. The CIR, therefore, may no
longer question the merits of the case before
this Court. Accordingly, there is no reason for
the Court to discuss the other issues raised by
the CIR.
As the Court has often held, procedural rules
exist to be followed, not to be trifled with, and
thus, may be relaxed only for the most

32. CIR v. Liquigaz Section 228 of the NIRC declares that
Philippines, G.R. Nos. an assessment is void if the taxpayer is
215534 & 215557, not notified in writing of the facts and
April 18, 2016 law on which it is made. Again, Section
3.1.4 of RR No. 12-99 requires that the
FLD must state the facts and law on
which it is based, otherwise, the
FLD/FAN itself shall be void.
Meanwhile, Section 3.1.6 of RR No. 12-
99 specifically requires that the decision
of the CIR or his duly authorized
representative on a disputed
assessment shall state the facts, law
and rules and regulations, or
jurisprudence on which the decision is
based. Failure to do so would invalidate
the FDDA.
-----
A "decision" differs from an
"assessment" and failure of the FDDA
to state the facts and law on which it is
based renders the decision void—but
not necessarily the assessment. Tax
laws may not be extended by
implication beyond the clear import of
their language, nor their operation
enlarged so as to embrace matters not
specifically provided.
Liquigaz Philippines Corporation (Liquigaz) is a
corporation duly organized and existing under
Philippine laws. On July 11, 2006, it received a
copy of Letter of Authority (LOA) No. 00067824,
dated July 4, 2006, issued by the Commissioner of
Internal Revenue (CIR), authorizing the
investigation of all internal revenue taxes for
taxable year 2005. Liquigaz received an undated
letter purporting to be a Notice of Informal
Conference (NIC), as well as the detailed
computation of its supposed tax liability. It also
received a copy of the Preliminary Assessment
Notice (PAN), together with the attached details of
discrepancies for the calendar year ending
December 31, 2005. Upon investigation, Liquigaz
was initially assessed with deficiency withholding
tax liabilities, inclusive of interest, in the aggregate
amount of P23,931,708.72,
Thereafter, it received a Formal Letter of Demand
(FLD)/Formal Assessment Notice (FAN), together
with its attached details of discrepancies, for the
calendar year ending December 31, 2005. The
total deficiency withholding tax liabilities, inclusive
of interest, under the FLD was P24,332,347.20.
Liquigaz filed its protest against the FLD/FAN and
subsequently submitted its supporting documents.
It received a copy of the FDDA covering the tax
audit under LOA No. 00067824 for the calendar
year ending December 31, 2005. As reflected in
the FDDA, the CIR still found Liquigaz liable for
deficiency withholding tax liabilities, inclusive of
interest, in the aggregate amount of
P22,380,025.19. Liquigaz filed its Petition for
Review before the CTA Division assailing the
validity of the FDDA issued by the CIR. The CTA
Whether the Court of Tax
Appeals En Banc erred in
partially upholding the
validity of the assessment as
to the withholding tax on
compensation but declaring
invalid the assessment on
expanded withholding tax
and fringe benefits tax
persuasive reasons. WHEREFORE, the
Petitions are hereby DENIED.
The importance of providing the taxpayer of
adequate written notice of his tax liability is
undeniable. Section 228 of the NIRC declares
that an assessment is void if the taxpayer is
not notified in writing of the facts and law on
which it is made. Again, Section 3.1.4 of RR
No. 12-99 requires that the FLD must state
the facts and law on which it is based,
otherwise, the FLD/FAN itself shall be void.
Meanwhile, Section 3.1.6 of RR No. 12-99
specifically requires that the decision of the
CIR or his duly authorized representative on a
disputed assessment shall state the facts, law
and rules and regulations, or jurisprudence on
which the decision is based. Failure to do so
would invalidate the FDDA.
The use of the word "shall" in Section 228 of
the NIRC and in RR No. 12-99 indicates that
the requirement of informing the taxpayer of
the legal and factual bases of the assessment
and the decision made against him is
mandatory. The requirement of providing the
taxpayer with written notice of the factual and
legal bases applies both to the FLD/FAN and
the FDDA.
To rule otherwise would tolerate abuse and
prejudice. Taxpayers will be unable to file an
intelligent appeal before the CTA as they
would be unaware on how the CIR or his'
authorized representative appreciated the
defense raised in connection with the
assessment. On the other hand, it raises the
possibility that the amounts reflected in the
FDDA were arbitrarily made if the factual and
Division partially granted Liquigaz's petition
cancelling the EWT and FBT assessments but
affirmed with modification the WTC assessment.
On the other hand, it upheld the WTC assessment
against Liquigaz. It noted that the factual bases
used in the FLD and the FDDA with regard thereto
were the same as the difference in the amount
merely resulted from the use of a different tax rate.
Both the CIR and Liquigaz moved for
reconsideration, but their respective motions were
denied by the CTA Division. Aggrieved, they filed
their respective petitions for review before the
CTA En Banc. The CTA En Banc affirmed the
assailed decision of the CTA Division. The CTA
En Banc sustained Liquigaz' WTC assessment. It
observed that the basis for the assessment was
the same for the FLD and the FDDA, which was a
comparison of the salaries declared in the Income
Tax Return (ITR) and the Alpha list that resulted in
a discrepancy of P9,318,255.84. The CTA En
Banc highlighted that the change in the amount of
assessed WTC deficiency simply arose from the
revision of the tax rate used—from 32% to the
effective tax rate of 25.40% suggested by
Liquigaz.
Both parties filed their respective petitions for
review.
legal bases thereof are not shown.
A void FDDA does not ipso facto render the
assessment void
In resolving the issue on the effects of a void
FDDA, it is necessary to differentiate an
"assessment" from a "decision."
An assessment becomes a disputed
assessment after a taxpayer has filed its
protest to the assessment in the
administrative level. Thereafter, the CIR either
issues a decision on the disputed assessment
or fails to act on it and is, therefore,
considered denied. The taxpayer may then
appeal the decision on the disputed
assessment or the inaction of the CIR. As
such, the FDDA is not the only means that the
final tax liability of a taxpayer is fixed, which
may then be appealed by the taxpayer. Under
the law, inaction on the part of the CIR may
likewise result in the finality of a taxpayer's tax
liability as it is deemed a denial of the protest
filed by the latter, which may also be appealed
before the CTA.
Clearly, a decision of the CIR on a disputed
assessment differs from the assessment itself.
Hence, the invalidity of one does not
necessarily result to the invalidity of the
other—unless the law or regulations otherwise
provide.
Section 228 of the NIRC provides that an
assessment shall be void if the taxpayer is not
informed in writing of the law and the facts on
which it is based. It is, however, silent with
regards to a decision on a disputed
assessment by the CIR which fails to state the
law and facts on which it is based. This void is
filled by RR No. 12-99 where it is stated that
failure of the FDDA to reflect the facts and law
on which it is based will make the decision
void. It, however, does not extend to the
nullification of the entire assessment.

The FDDA must state the facts and law on

which it is based to provide the taxpayer the
opportunity to file an intelligent appeal

The reason for requiring that taxpayers be

informed in writing of the facts and law on
which the assessment is made is the
constitutional guarantee that no person shall
be deprived of his property without due
process of law. Merely notifying the taxpayer
of its tax liabilities without elaborating on its
details is insufficient.

In the instant case, respondent has not been

informed of the basis of the estate tax liability.
Without complying with the unequivocal
mandate of first informing the taxpayer of the
government's claim, there can be no
deprivation of property, because no effective
protest can be made. The haphazard shot at
slapping an assessment, supposedly based
on estate taxation's general provisions that
are expected to be known by the taxpayer, is
utter chicanery.

Even a cursory review of the preliminary

assessment notice, as well as the demand
letter sent, reveals the lack of basis for — not
to mention the insufficiency of — the gross
figures and details of the itemized deductions
indicated in the notice and the letter. This
Court cannot countenance an assessment
based on estimates that appear to have been
arbitrarily or capriciously arrived at. Although
taxes are the lifeblood of the government,
their assessment .and collection "should be
made in accordance with law as any
arbitrariness will negate the very reason for
government itself."
In the present case, a mere perusal of the
FAN for the deficiency EWT for taxable year
1994 will show that other than a tabulation of
the alleged deficiency taxes due, no further
detail regarding the assessment was provided
by petitioner. Only the resulting interest,
surcharge and penalty were anchored with
legal basis. Petitioner should have at least
attached a detailed notice of discrepancy or
stated an explanation why the amount of
P48,461.76 is collectible against respondent
and how the same was arrived at.
The law requires that the legal and factual
bases of the assessment be stated in the
formal letter of demand and assessment
notice. Thus, such cannot be presumed.
Otherwise, the express provisions of Article
228 of the NIRC and RR No. 12-99 would be
rendered nugatory. The alleged "factual
bases" in the advice, preliminary letter and
"audit working papers" did not suffice. There
was no going around the mandate of the law
that the legal and factual bases of the
assessment be stated in writing in the formal
letter of demand accompanying the
assessment notice.

We note that the old law merely required that

the taxpayer be notified of the assessment
made by the CIR. This was changed in 1998
and the taxpayer must now be informed not
only of the law but also of the facts on which
the assessment is made. Such amendment is
in keeping with the constitutional principle that
no ' person shall be deprived of property
without due process. In view of the absence of
a fair opportunity for Enron to be informed of
the legal and factual bases of the assessment
against it, the assessment in question was
void.....

Nevertheless, the requirement of providing the

taxpayer with written notice of the facts and
law used as basis for the assessment is not to
be mechanically. applied. Emphasis on the
purpose of the written notice is important. The
requirement should be in place so that the
taxpayer could be adequately informed of the
basis of the assessment enabling him to
prepare an intelligent protest or appeal of the
assessment or decision.

Considering the foregoing exchange of

correspondence and documents between the
parties, we find that the requirement of
Section 228 was substantially complied with.
Respondent had fully informed petitioner in
writing of the factual and legal bases of the
deficiency taxes assessment, which enabled
the latter to file an "effective" protest, much
unlike the taxpayer's situation in Enron.
Petitioner's right to due process was thus not
violated.

Thus, substantial compliance with the

requirement under Section 228 of the NIRC is
permissible, provided that the taxpayer would
be eventually apprised in writing of the factual
and legal bases of the assessment to allow
him to file an effective protest against.

Guided by the foregoing, the Court now turns

to the FDDA in issue.

It is undisputed that the FDDA merely showed

Liquigaz' tax liabilities without any details on
the specific transactions which gave rise to its
supposed tax deficiencies. While it provided
for the legal bases of the assessment, it fell
short of informing Liquigaz of the factual
bases thereof. Thus, the FDDA as regards the
EWT and FBT tax deficiency did not comply
with the requirement in Section 3.1.6 of RR
No. 12-99, as amended, for failure to inform
Liquigaz of the factual basis thereof.
The CIR erred in claiming that Liquigaz was
informed of the factual bases of the
assessment because the FDDA made
reference to the PAN and FAN/FLD, which
were accompanied by details of the alleged
discrepancies. Failure to do so would deprive
Liquigaz adequate opportunity to prepare an
intelligent appeal. It would have no way of
determining what were considered by the CIR
in the: defenses it had raised in the protest to
the FLD. Further, without the details of the
assessment, it would open the possibility that
the reduction of the assessment could have
been arbitrarily or capriciously arrived at.

The Court, however, finds that the CTA erred

in concluding that the assessment on EWT
and FBT deficiency was void because the
FDDA covering the same was void. The
assessment remains valid notwithstanding the
nullity of the FDDA because as discussed
above, the assessment itself differs from a
decision on the disputed assessment.

As established, an FDDA that does not inform

the taxpayer in writing of the facts and law on
which it is based renders the decision void.
Therefore, it is as if there was no decision
rendered by the CIR. It is tantamount to a
denial by inaction by the CIR, which may still
be appealed before the CTA and the
assessment evaluated on the basis of the
available evidence and documents. The
merits of the EWT and FBT assessment
should have been discussed and not merely
brushed aside on account of the void FDDA.

On the other hand, the Court agrees that the

FDDA substantially informed Liquigaz of its
tax liabilities with regard to its WTC
assessment.

To recapitulate, a "decision" differs from an


33. Sps. Pacquiao v. Section 11 of Republic Act No. 1125 is
CTA, G.R. No. 213394, therefore premised on the assumption
April 6, 2016 that the collection by summary
proceedings is by itself in accordance
with existing laws; and then what is
suspended is the act of collecting,
whereas, in the case at bar what the
respondent Court suspended was the
use of the method employed to verify
the collection which was evidently illegal
The genesis of the foregoing controversy began a
few years before the petitioners became elected
officials in their own right. Prior to their election as
public officers, the petitioners relied heavily on
Pacquiao's claim to fame as a world-class
professional boxer. Due to his success, Pacquiao
was able to amass income from both the
Philippines and the United States of America (US).
His income from the US came primarily from the
purses he received for the boxing matches he took
Respondent Court acted
with grave abuse of
discretion amounting to lack
or excess of jurisdiction
when it required the
Petitioners to post a bond
even if the tax collection
processes employed by
Respondent Commissioner
against Petitioners was
"assessment" and failure of the FDDA to state
the facts and law on which it is based renders
the decision void—but not necessarily the
assessment. Tax laws may not be extended
by implication beyond the clear import of their
language, nor their operation enlarged so as
to embrace matters not specifically provided
Appeal will not suspend the collection of tax;
Exception
The Court went on to explain the reason for
empowering the courts to issue such
injunctive writs. It wrote:
"Section 11 of Republic Act No. 1125 is
therefore premised on the assumption that the
collection by summary proceedings is by itself
after the lapse of the three-year
limitation period. The respondent Court
issued the injunction in question on the
basis of its findings that the means
intended to be used by petitioner in the
collection of the alleged deficiency
taxes were in violation of law. It would
certainly be an absurdity on the part of
the Court of Tax Appeals to declare that
the collection by the summary methods
of distraint and levy was violative of the
law, and then, on the same breath
require the petitioner to deposit or file a
bond as a prerequisite of the issuance
of a writ of injunction.
part under Top Rank, Inc. On the other hand, his
income from the Philippines consisted of talent
fees received from various Philippine corporations
for product endorsements, advertising
commercials and television appearances.
In compliance with his duty to his home country,
Pacquiao filed his 2008 income tax return on April
15, 2009 reporting his Philippine-sourced income.
It was subsequently amended to include his US-
sourced income. The controversy began on March
25, 2010, when Pacquiao received a Letter of
Authority (March LA) from the Regional District
Office No. 43 (RDO) of the Bureau of Internal
Revenue (BIR) for the examination of his books of
accounts and other accounting records for the
period covering January 1, 2008 to December 31,
2008.
On April 15, 2010, Pacquiao filed his 2009 income
tax return, which although reflecting his
Philippines-sourced income, failed to include his
income derived from his earnings in the US. He
also failed to file his Value Added Tax (VAT)
returns for the years 2008 and 2009.
Finding the need to directly conduct the
investigation and determine the tax liabilities of the
petitioners, respondent Commissioner on Internal
Revenue (CIR) issued another Letter of Authority,
dated July 27, 2010 (July LA), authorizing the
BIR's National Investigation Division (NID) to
examine the books of accounts and other
accounting records of both Pacquiao and Jinkee
for the last 15 years, from 1995 to 2009. On
September 21, 2010 and September 22, 2010, the
CIR replaced the July LA by issuing to both
Pacquiao and Jinkee separate electronic versions
of the July LA pursuant to Revenue Memorandum
Circular (RMC) No. 56-2010.
Due to these developments, the petitioners,
through counsel, wrote a letter questioning the
patently in violation of law
thereby blatantly breaching
Petitioners' constitutional
right to due process
in accordance with existing laws; and then
what is suspended is the act of collecting,
whereas, in the case at bar what the
respondent Court suspended was the use of
the method employed to verify the collection
which was evidently illegal after the lapse of
the three-year limitation period. The
respondent Court issued the injunction in
question on the basis of its findings that the
means intended to be used by petitioner in the
collection of the alleged deficiency taxes were
in violation of law. It would certainly be an
absurdity on the part of the Court of Tax
Appeals to declare that the collection by the
summary methods of distraint and levy was
violative of the law, and then, on the same
breath require the petitioner to deposit or file a
bond as a prerequisite of the issuance of a
writ of injunction. Let us suppose, for the sake
of argument, that the Court a quo would have
required the petitioner to post the bond in
question and that the taxpayer would refuse
or fail to furnish said bond, would the Court a
quo be obliged to authorize or allow the
Collector of Internal Revenue to proceed with
the collection from the petitioner of the taxes
due by a means it previously declared to be
contrary to law?"
Thus, despite the amendments to the law, the
Court still holds that the CTA has ample
authority to issue injunctive writs to restrain
the collection of tax and to even dispense with
the deposit of the amount claimed or the filing
of the required bond, whenever the method
employed by the CIR in the collection of tax
jeopardizes the interests of a taxpayer for
being patently in violation of the law. Such
authority emanates from the jurisdiction
conferred to it not only by Section 11 of R.A.
No. 1125, but also by Section 7 of the same
law.
propriety of the CIR investigation. According to the
petitioners, they were already subjected to an
earlier investigation by the BIR for the years prior
to 2007, and no fraud was ever found to have
been committed. They added that pursuant to the
March LA issued by the RDO, they were already
being investigated for the year 2008.
The CIR informed the petitioners that its
reinvestigation of years prior to 2007 was justified
because the assessment thereof was pursuant to
a "fraud investigation" against the petitioners
under the "Run After Tax Evaders" (RATE)
program of the BIR.
On January 5 and 21, 2011, the petitioners
submitted various income tax related documents
for the years 2007-2009. As for the years 1995 to
2006, the petitioners explained that they could not
furnish the bureau with the books of accounts and
other, tax related documents as they had already
been disposed in accordance with Section 235 of
the Tax Code. They added that even if they
wanted to, they could no longer find copies of the
documents because during those years, their
accounting records were then managed by
previous counsels, who had since passed away.
Finally, the petitioners pointed out that their tax
liabilities for the said years had already been fully
settled with then CIR Jose Mario Buñag, who after
a review, found no fraud against them.
On June 21; 2011, on the same day that the
petitioners made their last compliance in
submitting their tax-related documents, the CIR
issued a subpoena duces tecum requiring the
petitioners to submit additional income tax and
VAT-related documents for the years 1995-2009.
After conducting its own- investigation, the CIR
made its initial assessment finding that the
petitioners were unable to fully settle their tax
liabilities. Thus, the CIR issued its Notice of Initial
From all the foregoing, it is clear that the
authority of the courts to issue injunctive writs
to restrain the collection of tax and to
dispense with the deposit of the amount
claimed or the filing of the required bond is not
simply confined to cases where prescription
has set in. As explained by the Court in those
cases, whenever it is determined by the
courts that the method employed by the
Collector of Internal Revenue in the collection
of tax is not sanctioned by law, the bond
requirement under Section 11 of R.A. No.
1125 should be dispensed with. The purpose
of the rule is not only to prevent jeopardizing
the interest of the taxpayer, but more
importantly, to prevent the absurd situation
wherein the court would declare "that the
collection by the summary methods of
distraint and levy was violative of law, and
then, in the same breath require the petitioner
to deposit or file a bond as a prerequisite for
the issuance of a writ of injunction."
The determination of whether the petitioners.'
case falls within the exception provided under
Section 11, R.A No. 1125 cannot be
determined at this point
In this case, the alleged illegality of the
methods employed by respondent to effect
the collection of tax is not at all patent or
evident as in the foregoing cases. 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.
Though it may be true that it would have been
Assessment-Informal Conference (NIC), , directly
addressed to the petitioners, informing them that
based on the best evidence obtainable, they were
liable for deficiency income taxes in the amount of
P714,061,116.30 for 2008 and P1,446,245,864.33
for 2009, inclusive of interests and surcharges.
premature for the CTA to immediately
determine whether the assessment made
against the petitioners was valid or whether
the warrants were properly issued and served,
still, it behooved upon the CTA to properly
determine, at least preliminarily, whether the
CIR, in its assessment of the tax liability of the
petitioners, and its effort of collecting the
same, complied with the law and the pertinent
issuances of the BIR itself. The CTA should
have conducted a preliminary hearing and
received evidence so it could have properly
determined whether the requirement of
providing the required security under Section
11, R.A. No. 1125 could be reduced or
dispensed with pendente lite.
The Court cannot make a preliminary
determination on whether the CIR used
methods not sanctioned by law
Absent any evidence and preliminary
determination by the CTA, the Court cannot
make any factual finding and settle the issue
of whether the petitioners should comply with
the security requirement under Section 11,
R.A. No. 1125. The determination of whether
the methods, employed by the CIR in its
assessment, jeopardized the interests of a
taxpayer for being patently in violation of the
law is a question of fact that calls for the
reception of evidence which would serve as
basis. In this regard, the CTA is in a better
position to initiate this given its time and
resources. The remand of the "case to the
CTA on this question is, therefore, more
sensible and proper.
As stated earlier, there is no evidentiary basis.
All the arguments are mere allegations from
both sides. Moreover, any finding by the Court
would pre-empt the CTA from properly
exercising its jurisdiction and settle the main
issues presented before it, that is, whether the
petitioners were afforded due process;
whether the CIR has valid basis for its
assessment; and whether the petitioners
should be held liable for the deficiency taxes.

Petition to be remanded to the CTA; CTA to

conduct preliminary hearing

As the CTA is in a better, position to make

such a preliminary determination, a remand to
the CTA is in order.

In case the CTA finds that the petitioners

should provide the necessary security under
Section 11 of R.A. 1125, a recomputation of
the amount thereof is in order.- If there would
be a need for a bond or to reduce the same,
the CTA should take note that the Court, in
A.M. No. 15-92-01-CTA, resolved to approve
the CTA En Banc Resolution No. 02-2015,
where the phrase "amount claimed" stated in
Section 11 of R.A. No. 1125 was construed to
refer to the principal amount of the deficiency
taxes, excluding penalties, interests and
surcharges.

Moreover, the CTA should also consider the

claim of the petitioners that they already paid
a total of P32,196,534.40 deficiency VAT
assessed against' them.. Despite said
payment, the CIR still assessed them the total
amount of P3,298,514,894.35, including the
amount assessed as VAT deficiency, plus
surcharges, penalties and interest. If so, these
should also be deducted from the amount of
the bond to be computed and required.

In the conduct of its preliminary hearing, the

CTA must balance the scale between the
inherent power of the State to tax and its right
to prosecute perceived transgressors of the
law, on one side; and the constitutional rights

34. CIR v. Standard Generally, the period for CIR to assess
Chartered Bank, G.R. and collect internal revenue taxes is
No. 192173, July 29, only up to 3 years after the last day
2015. prescribed by law. One of the
exceptions, this can be extended by a
written agreement between the parties
provided the same is executed before
the 3-yr prescription period. Provided
further that there must be proper and
valid execution of a waiver of the
Statute of Limitations.
On July 14, 2004 CIR sent a Formal Demand
Letter to the respondent bank for deficiency in
income tax, final income tax, withholding tax on
compensation, final withholding tax for the taxable
year of 1998. In the middle of the ligation, the
bank paid for WTC and FWT. Nonetheless, both
CTA in Division and CTA En Banc ruled that the
Formal Letter of Demand and Assessment Notices
are void for having been issued beyond the 3year
prescriptive period. Their findings are grounded on
the fact that waiver of extension were defective
and found to have failed to abide by the strict
provisions of the RMO. CIR contested that
respondent is estopped from questioning the
validity of the waivers of the Statute of Limitations
executed by its representatives in view of the
partial payments it made on the deficiency taxes
sought to be collected.
Whether or not CIR’s right to
assess respondent bank for
deficiencies has already
prescribed for failure to
comply with the
requirements set forth in
RMO.
of petitioners to due process of law and the
equal protection of the laws, on the other. In
case of doubt, the tax court must remember
that as in all tax cases, such scale should
favor the taxpayer, for a citizen's right to due
process and equal protection of the law is
amply protected by the Bill of Rights under the
Constitution.
YES. CIR only had three years, counted from
the date of actual filing of the return or from
the last date prescribed by law for the filing of
such return, whichever comes later, to assess
a national internal revenue tax or to begin a
court proceeding for the collection thereof
without an assessment. However, the law
authorizes the extension of the original 3-year
prescriptive period by the execution of a valid
waiver, where the taxpayer and the CIR may
stipulate to extend the period of assessment
by a written agreement executed prior to the
lapse of the period prescribed by law, and by
subsequent written agreements before the
expiration of the period previously agreed
upon. However, the execution of a Waiver of
Statute of Limitations must be executed in
accordance with pre-set guidelines and
procedural requirements. Otherwise, it does
not serve its purpose, and the taxpayer has all
the right to invoke its nullity. In this case, the
RMO No. 20-90 implements the provisions of
the NIRC relating to the period of prescription
for the assessment and collection of taxes,
which are mandatory in nature.
The waivers were void due to the defects and
the supposed suspensions of the prescriptive
periods within which to issue the assessments
were not legally effected. Also, the facts of
this case do not call for the application of the
doctrine of estoppel.
35. China Banking The time limit for the government to
Corporation v. CIR, collect the assessed tax is set at three
G.R. No. 172509, years, to be reckoned from the date
February 4, 2015. when the BIR mails/releases/sends the
assessment notice to the taxpayer and
the assessed tax must be collected by
distraint or levy and/or court proceeding
within the three-year period.
China Banking Corporation (CBC) was engaged in
transactions involving sales of foreign exchange to
the Central Bank of the Philippines (now the BSP),
which was commonly known as SWAP
transactions.
CBC did not file tax returns or pay tax on the
SWAP transactions and was found by the BIR
liable for deficiency DST on the sales of foreign
bills of exchange to the Central Bank.
More than 12 years after the filing of CBC’s
protest, the CIR rendered a decision reiterating
the deficiency DST assessment and ordered for its
payment plus increments within 30 days from the
receipt of such decision.
CBC invoked the argument of prescription and
stated that the government has three years from
the date the former received the assessment of
the CIR to collect the tax, but that within such time
frame, neither a warrant of distraint or levy was
issued, nor a collection case filed in court.
Whether or not the right of
the BIR to collect the
assessed DST from CBC is
barred by prescription.
YES. When the BIR issued the assessment
for deficiency DST, the applicable rule was
Section 319 (c) 10 of the NIRC. Under such
provision, the time limit for the government to
collect the assessed tax is set at three years,
to be reckoned from the date when the BIR
mails/releases/sends the assessment notice
to the taxpayer and the assessed tax must be
collected by distraint or levy and/or court
proceeding within the three-year period.
However, the records did not show when the
assessment notice was mailed, released or
sent to CBC, nor was a warrant of distraint or
levy served on CBC’s properties nor a
collection case filed in court by the BIR within
the three-year period.
The demand was made almost thirteen years
from the date from which the prescriptive
period was to be reckoned, the claim of the
CIR for deficiency DST from petitioner was
already barred by prescription.
36. CIR v. CBK Power The obligation to comply with a tax
Company Limited, treaty must take precedence over the
G.R. Nos. 193383-84, objective of RMO No. 12000. Logically,
January 14, 2015. noncompliance with tax treaties has
negative implications on international
relations, and unduly discourages
foreign investors. While the
consequences sought to be prevented
by RMO No. 12000 involve an
administrative procedure, these may be
remedied through other system
management processes, e.g., the
imposition of a fine or penalty. But we
cannot totally deprive those who are
entitled to the benefit of a treaty for
failure to strictly comply with an
administrative issuance requiring prior
application for tax treaty relief.
CBK Power is a limited partnership duly organized
and existing under the laws of the Philippines, and
primarily engaged in the development and
operation of hydroelectric power generating plants
in Laguna. It is registered with the Board of
Investments (BOI) as engaged in a preferred
pioneer area of investment under the Omnibus
Investment Code of 1987. In February 2001, CBK
Power borrowed money from Industrial Bank of
Japan, Fortis-Netherlands, Raiffesen Bank, Fortis-
Belgium, and Mizuho Bank for which it remitted
interest payments from May 2001 to May 2003. It
allegedly withheld final taxes from said payments
based on the following rates, and paid the same to
the Revenue District Office No. 55 of the Bureau
of Internal Revenue (BIR): (a) fifteen percent
(15%) for Fortis-Belgium, Fortis-Netherlands, and
Raiffesen Bank; and (b) twenty percent (20%) for
Industrial Bank of Japan and Mizuho Bank.
However, according to CBK Power, under the
relevant tax treaties between the Philippines and
the respective countries in which each of the
banks is a resident, the interest income derived by
the aforementioned banks are subject only to a
preferential tax rate of 10%. Accordingly, on April
14, 2003, CBK Power filed a claim for refund of its
excess final withholding taxes allegedly
erroneously withheld and collected for the years
2001 and 2002 with the BIR Revenue Region No.
9. The claim for refund of excess final withholding
taxes in 2003 was subsequently filed on March 4,
2005. The Commissioner of Internal Revenue’s
(Commissioner) inaction on said claims prompted
CBK Power to file petitions for review before the
CTA.
The CTA First Division granted the petitions and
ordered the refund of the amount of
P15,672,958.42 upon a finding that the relevant
tax treaties were applicable to the case. The CTA
First Division categorically declared in the August
28, 2008 Decision that the required International
Whether or not the BIR may
add a requirement – prior
application for an ITAD
ruling – that is not found in
the income tax treaties
signed by the Philippines
before a taxpayer can avail
of preferential tax rates
under said treaties.
YES. The Philippine Constitution provides for
adherence to the general principles of
international law as part of the law of the land.
The time-honored international principle of
pacta sunt servanda demands the
performance in good faith of treaty obligations
on the part of the states that enter into the
agreement. In this jurisdiction, treaties have
the force and effect of law.
Bearing in mind the rationale of tax treaties,
the period of application for the availment of
tax treaty relief as required by RMO No. 1-
2000 should not operate to divest entitlement
to the relief as it would constitute a violation of
the duty required by good faith in complying
with a tax treaty. The denial of the availment
of tax relief for the failure of a taxpayer to
apply within the prescribed period under the
administrative issuance would impair the
value of the tax treaty. At most, the application
for a tax treaty relief from the BIR should
merely operate to confirm the entitlement of
the taxpayer to the relief. The obligation to
comply with a tax treaty must take
precedence over the objective of RMO No. 1-
2000. Logically, noncompliance with tax
treaties has negative implications on
international relations, and unduly
discourages foreign investors. While the
consequences sought to be prevented by
RMO No. 1-2000 involve an administrative
procedure, these may be remedied through
other system management processes, e.g.,
the imposition of a fine or penalty. But we
cannot totally deprive those who are entitled
to the benefit of a treaty for failure to strictly
comply with an administrative issuance
requiring prior application for tax treaty relief.
It bears reiterating that the application for a
tax treaty relief from the BIR should merely
operate to confirm the entitlement of the
Tax Affairs Division (ITAD) ruling was not a
condition sine qua non for the entitlement of the
tax relief sought by CBK Power. However, upon
motion for reconsideration filed by the
Commissioner, the CTA First Division amended its
earlier decision by reducing the amount of the
refund from P15,672,958.42 to P14,835,720.39 on
the ground that CBK Power failed to obtain an
ITAD ruling with respect to its transactions with
Fortis-Netherlands. CBK Power elevated the
matter to the CTA En Banc on petition for review.
The CTA En Banc affirmed the ruling of the CTA
First Division that a prior application with the ITAD
is indeed required by Revenue Memorandum
Order (RMO) 1-2000, which administrative
issuance has the force and effect of law and is just
as binding as a tax treaty.
taxpayer to the relief. Since CBK Power had
requested for confirmation from the ITAD on
June 8, 2001 and October 28, 2002 before it
filed on April 14, 2003 its administrative claim
for refund of its excess final withholding taxes,
the same should be deemed substantial
compliance with RMO No. 12000, as in
Deutsche Bank. To rule otherwise would
defeat the purpose of Section 229 of the NIRC
in providing the taxpayer a remedy for
erroneously paid tax solely on the ground of
failure to make prior application for tax treaty
relief. As the Court exhorted in Republic v.
GST Philippines, Inc., while the taxpayer has
an obligation to honestly pay the right taxes,
the government has a corollary duty to
implement tax laws in good faith; to discharge
its duty to collect what is due to it; and to justly
return what has been erroneously and
excessively given to it.
In view of the foregoing, the Court holds that
the CTA En Banc committed reversible error
in affirming the reduction of the amount of
refund to CBK Power from P15,672,958.42 to
P14,835,720.39 to exclude its transactions
with FortisNetherlands for which no ITAD
ruling was obtained. CBK Power’s petition in
G.R. Nos. 193383-84 is therefore granted.
37. CIR v. Team Every corporation liable to tax under
(Phils.) Energy Section 27 shall file a final adjustment
Corporation, G.R. No. return covering the total taxable income
188016, January 14, for the preceding calendar of fiscal year.
2015. If the sum of the quarterly tax payments
made during the said taxable year is not
equal to the total tax due on the entire
taxable income of that year, the
corporation shall either: (A) Pay the
balance of the tax still due; or (B) Carry
over the excess credit; or (C) Be
credited or refunded with the excess
amount paid, as the case may be.
Respondent Mirant (Philippines) Energy
Corporation is a domestic corporation primarily
engaged in the business of power generating
plants and related facilities for conversion into
electricity, coal, distillate and other fuel.
The respondent filed its annual income tax return
(ITR) for calendar years 2002 and 2003 on April
15, 2003 and April 15, 2004, respectively,
reflecting overpaid income taxes or excess
creditable withholding taxes in the amounts of
₱6,232,003.00 and ₱10,134,410.00 for taxable
years 2002 and 2003, respectively . It indicated in
the ITRs its option for the refund of the tax
overpayments for calendar years 2002 and 2003.
On March 22, 2005, the respondent filed an
administrative claim for refund or issuance of tax
credit certificate with the Bureau of Internal
Revenue (BIR) in the total amount of
₱16,366,413.00, representing the overpaid
income tax or the excess creditable withholding
tax of the respondent for calendar years 2002 and
2003.
Due to the inaction of the BIR and in order to toll
the running of the twoyear prescriptive period for
claiming a refund under Section 229 of the
National Internal Revenue Code (NIRC) of 1997,
the respondent filed a petition for review in the
Court of Tax Appeals (CTA) on April 14, 2005.
On May 15, 2008, the CTA in Division rendered its
decision in favor of the respondent.
Aggrieved, the petitioner has brought this appeal
Whether or not the YES. Section 76 of the NIRC outlines the
respondent proved its mechanisms and remedies that a corporate
entitlement to the refund taxpayer may opt to exercise, viz:
Section 76. Final Adjusted Return.Every
corporation liable to tax under Section 27 shall
file a final adjustment return covering the total
taxable income for the preceding calendar of
fiscal year. If the sum of the quarterly tax
payments made during the said taxable year
is not equal to the total tax due on the entire
taxable income of that year, the corporation
shall either: (A) Pay the balance of the tax still
due; or
(B) Carry over the excess credit; or
(C) Be credited or refunded withthe excess
amount paid, as the case may be.
In case the corporation is entitled to a tax
credit or refund of the excess estimated
quarterly income taxes paid, the excess
amount shown on its final adjustment return
may be carried over and credited against the
estimated quarterly income tax liabilities for
the taxable quarters of the succeeding taxable
years. Once the option to carry over and apply
the excess quarterly income tax against
income tax due for the taxable years of the
succeeding taxable years has been made,
such option shall be considered irrevocable
for that taxable period and no application for
cash refund or issuance of a tax credit
certificate shall be allowed therefor. The two
options are alternative and not cumulative in
nature, that is, the choice of one precludes the
other.
The requirements for entitlement of a
corporate taxpayer for a refund or the
issuance of tax credit certificate involving
excess withholding taxes are as follows:

1. That the claim for refund was filed within

the two-year reglementary period pursuant to
Section 22918 of the NIRC;

2. When it is shown on the ITR that the

income payment received is being declared
part of the taxpayer’s gross income; and

3. When the fact of withholding is established

by a copy of the withholding tax statement,
duly issued by the payor to the payee,
showing the amount paid and income tax
withheld from that amount.

The first requirement has been complied with

because even the petitioner does not contest
that the respondent filed its administrative and
judicial claim for refund within the statutory
period.

The second requirement has been factually

determined and verified by the CTA and it is
fundamental that the findings of fact by the
CTA in Divisionare not to be disturbed without
any showing of grave abuse of discretion.

With respect to the third requirement, the

respondent proved that it had met the
requirement by presenting the 10 certificates
of creditable taxes withheld at source. The
petitioner did not challenge he respondent’s
compliance with the requirement.

We are likewise unmoved by the assertion of

the petitioner that the respondent should have
submitted the quarterly returns of the
respondent to show that it did not carry-over
the excess withholding tax to the succeeding
quarter. When the respondent was able to
establish prima facie its right to the refund by
testimonial and object evidence, the petitioner
should have presented rebuttal evidence to
shift the burden of evidence back to the
respondent. Indeed, the petitioner ought to
have its own copies of the respondent’s
quarterly returns on file, on the basis of which
it could rebut the respondent's claim that it did
not carry over its unutilized and excess
creditable withholding taxes for the
immediately succeeding quarters. The BIR's
failure to present such vital document during
the trial in order to bolster the petitioner's
contention against the respondent's claim for
the tax refund was fatal.
38. Banco De Oro et. Petitions for writs of certiorari against In 2001, the Bureau of Treasury issued P35 billion
al. v. CIR, G.R. No. the acts and omissions of the applicable pesos worth of 10 -year treasury bonds at an
198756, January 13, quasi-judicial agencies regarding tax auction.
2015. cases should, thus, be filed before the
Court of Tax Appeals. In 2011, or ten years after, The Commissioner of
Internal Revenue issued BIR Ruling No. 370-2011
declaring therein that PEACe bonds, which are
thus treated as deposit substitutes, are subject to
a 20% Final Withholding Tax. The ruling was
given 11 days prior to the maturity of said bonds.
Pursuant to the ruling, the Secretary of Finance
directed the Bureau of Treasury to withhold 20%
Final Withholding Tax from the face value of the
PEACe bonds upon their payment at maturity on
October 2011.
Banco de Oro filed with the Supreme court a
petition for Certiorari, prohibition and/or
mandamus with an urgent application for a
temporary restraining order.
The court issued a temporary restraining order
enjoining the application of the BIR Ruling subject
to the condition that the 20% final withholding tax
on interest income shall be withheld and placed in
escrow pending the resolution of the petition.
The CIR questions the direct resort to the
Supreme Court made by the petitioners. They
argue that the petitioners should have challenged
first the rulings before the Secretary of Finance
which is consistent with the doctrine on exhaustion
of administrative remedies.
Whether or not the doctrine
of the hierarchy of courts
was violated.
YES. The case should have been filed with
the Court of Tax Appeals.
According to jurisprudence, Court of Tax
Appeals has exclusive jurisdiction to
determine the constitutionality or validity of tax
laws, rules and regulations, and other
administrative issuances of the Commissioner
of Internal Revenue. It thus has the authority
to issue writs of certiorari since it is inherent in
the exercise of its appellate jurisdiction.
Judicial power likewise authorizes lower
courts to determine the constitutionality or
validity of a law or regulation in the first
instance.
Republic Act no. 1125 created the Court of
Tax Appeals and Republic Act no. 9282
expanded the jurisdiction of the Court of Tax
appeals and elevated its rank to a level similar
to a collegiate court with special jurisdiction. It
thus possesses all the inherent powers of a
Court of Justice.
Court of Tax Appeals may likewise take
cognizance of cases directly challenging the
constitutionality or validity of a tax law or
regulation or administrative issuance (revenue
orders, revenue memorandum circulars,
rulings).
Thus, petitions for writs of certiorari against
the acts and omissions of the applicable
quasi-judicial agencies should, thus, be filed
before the Court of Tax Appeals.
Since the case was filed at the first instance
with the Supreme Court, it violated the
doctrine of hierarchy of courts.
39. Winebrenner & the presentation of the annual ITR On April 15, 2004, petitioner filed its Annual
Iñigo Insurance would suffice in proving that prior year’s Income Tax Return for CY 2003.
Brokers, Inc. v. CIR, excess credits were not utilized for the
G.R. No. 206526, taxable year in order to make a final About two years thereafter or on April 7, 2006,
January 28, 2015 determination of the total tax due. petitioner applied for the administrative tax
credit/refund claiming entitlement to the refund of
its excess or unutilized CWT for CY 2003, by filing
BIR Form No. 1914 with the Revenue District
Office No. 50 of the Bureau of Internal Revenue
(BIR). There being no action taken on the said
claim, a petition for review was filed by petitioner
before the CTA on April 11, 2006. The case was
docketed as CTA Case No. 7440 and was raffled
to the Special First Division (CTA Division). On
April 13, 2010, CTA Division partially granted
petitioner’s claim for refund of excess and
unutilized CWT for CY 2003 in the reduced
amount of ₱2,737,903.34 in its April 13, 2010
Decision (original decision). The dispositive
portion of the decision reads:
In view of the foregoing, the Petition for Review is
hereby PARTIALLY GRANTED. Accordingly,
respondent is hereby ORDERED to REFUND or
ISSUE A TAX CREDIT CERTIFICATE in favor of
the petitioner in the reduced amount of
₱2,737,903.34 representing its excess/unutilized
creditable withholding taxes for the year 2003.
SO ORDERED.
Petitioner filed a Motion for Partial
Reconsideration with Leave to Submit
Supplemental Evidence. It prayed that an
amended decision be issued granting the entirety
of its claim for refund, or in the alternative, that it
be allowed to submit and offer relevant documents
as supplemental evidence. Respondent
Commissioner of Internal Revenue (CIR) also
moved for reconsideration, praying for the denial
of the entire amount of refund because petitioner
failed to present the quarterly Income Tax Returns
(ITRs) for CY 2004. To the CIR, the presentation
WHETHER OR NOT THE NO. Requiring that the ITR or the FAR of the
PRESENTATION OF succeeding year be presented to the BIR in
QUARTERLY ITR OF THE requesting a tax refund has no basis in law
SUCCEEDING PERIOD IS and jurisprudence.
INDISPENSABLE.
First, Section 76 of the Tax Code does not
mandate it. The law merely requires the filing
of the FAR for the preceding – not the
succeeding – taxable year. Indeed, any
refundable amount indicated in the FAR of the
preceding taxable year may be credited
against the estimated income tax liabilities for
the taxable quarters of the succeeding taxable
year. However, nowhere is there even a tinge
of a hint in any provisions of the [NIRC] that
the FAR of the taxable year following the
period to which the tax credits are originally
being applied should also be presented to the
BIR.
Second, Section 5 of RR 12-94, amending
Section 10(a) of RR 6-85, merely provides
that claims for refund of income taxes
deducted and withheld from income payments
shall be given due course only (1) when it is
shown on the ITR that the income payment
received is being declared part of the
taxpayer’s gross income; and (2) when the
fact of withholding is established by a copy of
the withholding tax statement, duly issued by
the payor to the payee, showing the amount
paid and the income tax withheld from that
amount.
It has been submitted that Philam cannot be
cited as a precedent to hold that the
presentation of the quarterly income tax return
is not indispensable as it appears that the
quarterly returns for the succeeding year were
presented when the petitioner therein filed an
administrative claim for the refund of its
excess taxes withheld in 1997.
of the 2004 quarterly ITRs was indispensable in
proving petitioner’s entitlement to the claimed
amount because it would prove that no carry-over
of unutilized and excess CWT for the four (4)
quarters of CY 2003 to the succeeding four (4)
quarters of CY 2004 was made. In the absence of
said ITRs, no refund could be granted. In the
CIR’s view, this was in accordance with the
irrevocability rule under Section 76 of the NIRC
which reads:
SEC. 76. Final Adjustment Return. – Every
corporation liable to tax under Section 27 shall file
an adjustment return covering the total taxable
income for the preceding calendar or fiscal year. If
the sum of the quarterly tax payments made
during the said taxable year is not equal to the
total tax due on the entire taxable income of that
year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credits; or
(C) Be credited or refunded with the excess
amount paid, as the case may be.
In case the corporation is entitled to a tax credit or
refund of the excess estimated quarterly income
taxes paid, the excess amount shown on its final
adjustment return may be carried over and
credited against the estimated quarterly income
tax liabilities for the taxable quarters of the
succeeding taxable years. Once the option to
carry-over and apply the excess quarterly income
tax against income tax due for the taxable
quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable
for that taxable period and no application for cash
refund or issuance of a tax credit certificate shall
be allowed therefor.
On July 27, 2011, the CTA-Division reversed itself.
It appears however that there is
misunderstanding in the ruling of the Court in
Philam. That factual distinction does not
negate the proposition that subsequent
quarterly ITRs are not indispensable. The
logic in not requiring quarterly ITRs of the
succeeding taxable years to be presented
remains true to this day. What Section 76
requires, just like in all civil cases, is to prove
the prima facie entitlement to a claim,
including the fact of not having carried over
the excess credits to the subsequent quarters
or taxable year. It does not say that to prove
such a fact, succeeding quarterly ITRs are
absolutely needed.
This simply underscores the rulethat any
document, other than quarterly ITRs may be
used to establish that indeed the non-carry
over clause has been complied with, provided
that such is competent, relevant and part of
the records. The Court is thusnot prepared to
make a pronouncement as to the
indispensability of the quarterly ITRs in a
claim for refund for no court can limit a party
to the means of proving a fact for as long as
they are consistent with the rules of evidence
and fair play. The means of ascertainment of
a fact is best left to the party that alleges the
same. The Court’s power is limited only to the
appreciation of that means pursuant to the
prevailing rules of evidence. To stress, what
the NIRC merely requires is to sufficiently
prove the existence of the non-carry over of
excess CWT in a claim for refund.
It goes without saying that the annual ITR
(including any other proof that may be
sufficient to the Court)can sufficiently reveal
whether carry over has been made in
subsequent quarters even if the petitioner has
chosen the option of tax credit or refund inthe
immediately 2003 annual ITR. Section 76 of

40. CIR vs. Team Sual a person committing a void act contrary
Corporation, G.R. No. to a mandatory provision of law cannot
194105. February 5, claim or acquire any right from his void
2014 act. A right cannot spring in favor of a
person from his own void or illegal act.
This doctrine is repeated in Article 2254
of the
Civil Code, which states, "No vested or
acquired right can arise from acts or
In an Amended Decision, it denied the entire claim
of petitioner. It reasoned out that petitioner should
have presented as evidence its first, second and
third quarterly ITRs for the year 2004 to prove that
the unutilized CWT being claimed had not been
carried over to the succeeding quarters. Thus:
WHEREFORE,in view of the foregoing,
petitioner’s Motion for Partial Reconsideration is
hereby DENIED while respondent’s Motion for
Reconsideration is hereby GRANTED.
Accordingly, the Decision dated April 13, 2010
granting petitioner’s claim in the reduced amount
of ₱2,737,903.34 is hereby REVERSED AND SET
ASIDE. Consequently, the instant Petition for
Review is hereby DENIEDdue to insufficiency of
evidence.
Team Sual Corporation (TSC) filed its VAT returns
for the first, second, third, and fourth quarters of
the taxable year 2000 on April 24, 2000, July 25,
2000, October 25, 2000, and January 25, 2001,
respectively. On March 11, 2002, TSC filed with
the BIR an administrative claim for refund claiming
that it is entitled to the unutilized input VAT arising
from its zero-rated sales to NPC for the taxable
year 2000.
Whether or not the
taxpayer’s petition for review
was prematurely filed.
the NIRC requires a corporation to file a Final
Adjustment Return (or Annual ITR) covering
the total taxable income for the preceding
calendar or fiscal year. The total taxable
income contains the combined income for the
four quarters of the taxable year, as well as
the deductions and excess tax credits carried
over in the quarterly income tax returns for the
same period.If the excess tax credits of the
preceding year were deducted, whether in
whole or in part, from the estimated income
tax liabilities of any of the taxable quarters of
the succeeding taxable year, the total amount
of the tax credits deducted for the entire
taxable year should appear in the Annual ITR
under the item “Prior Year’s Excess Credits.”
Otherwise, or if the tax credits were carried
over to the succeeding quarters and the
corporation did not report it in the annual ITR,
there would be a discrepancy in the amounts
of combined income and tax credits carried
over for all quarters and the corporation would
end up shouldering a bigger tax payable. It
must be remembered that taxes computed in
the quarterly returns are mere estimates. It is
the annual ITR which shows the aggregate
amounts of income, deductions, and credits
for all quarters of the taxable year. It is the
final adjustment return which shows whether a
corporation incurred a loss or gained a profit
during the taxable quarter.
Petition Granted. Under Section 112(C) of the
NIRC, the CIR is given 120 days from the
submission of
complete documents in support of the
application for refund/tax credit within which to
either grant
or deny the claim. In case of (1) full or partial
denial of the claim or (2) the failure of the CIR
to act on
the claim within 120 days from the submission
omissions which are against the law or
which infringe upon the rights of others.
Without awaiting for CIR’s decision, on April 1,
2002, TSC filed a petition for review with the CTA
seeking the refund or the issuance of a tax credit
certificate for its unutilized input VAT. On January
26, 2009, the CTA Division rendered a Decision in
favor of TSC. The CIR filed a motion for
reconsideration and claimed that TSC's petition for
review was prematurely filed, alleging that under
Section 112( C) of the NIRC, the CIR is given 120
days from the submission of complete documents
within which to either grant or deny TSC's
application for refund/tax credit of its unutilized
input
VAT. CIR pointed out that TSC filed its petition for
review with the CTA without any decision on its
claim and without waiting for the 120-day period to
lapse.
Subsequently, the CTA Division rendered a
decision denying CIR’s motion. It ruled that,
pursuant to
Section 112(A) of the NIRC, claims for refund/tax
credit of unutilized input VAT should be filed within
two years after the close of the taxable quarter
when the sales were made; that the 120-day
period
under Section 112(C) of the NIRC is also covered
by the two-year prescriptive period within which
to claim the refund/tax credit of unutilized input
VAT. The CIR filed a Petition for Review with the
CTA En Banc, which was denied. Hence, the
petition
of complete documents, the taxpayer-claimant
may,
within 30 days from receipt of the CIR
decision denying the claim or after the lapse
of the 120-day
period, file a petition for review with the CTA.
The pivotal question of whether the imminent
lapse of the two-year period under Section
112(A) of
the NIRC justifies the filing of a judicial claim
with the CTA without awaiting the lapse of the
120- day
period given to the CIR to decide the
administrative claim for refund/tax credit had
already been
settled by the Court. In Commissioner of
Internal Revenue v. Aichi Forging Company of
Asia, Inc., the
Court held that: 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.
41. CIR vs. United The requirement for issuing a
Salvage and Towage preliminary or final notice, as the case
(Phils), Inc., G.R. No. may be, informing a taxpayer of the
197515, July 2, 2014. existence of a deficiency tax
assessment is markedly different from
the requirement of what such notice
must contain. Just because the CIR
issued an advice, a preliminary letter
during the pre-assessment stage and a
final notice, in the order required by law,
does not necessarily mean that Enron
was informed of the law and facts on
which the deficiency tax assessment
was made.
Respondent (USTP) is engaged in the business of
sub-contracting work for service
contractorsengaged in petroleum operations in the
Philippines.In the course of respondent’s
operations,petitioner found respondent liable for
deficiency income tax, withholding tax, value-
added taxand documentary stamp tax (DST)
for taxable years 1992,1994, 1997 and
1998. Petitioner,through BIR officials, issued
demand letters with attached assessment notices
for withholdingtax on compensation (WTC) and
expanded withholding tax (EWT) for taxable years
1992, 1994and 1998.USTP filed administrative
protests against the 1994 and 1998 EWT
assessments, respectively. In2003, the USTP
appealed by way of Petition for Review before the
CTA, but moved to withdrawthe same during the
pendency of the proceedings because it availed of
the benefits of the TaxAmnesty Program. Having
complied with all the requirements therefor, the
CTA-Special FirstDivision partially granted the
Motion to Withdraw and declared the issues on
income tax, VATand DST deficiencies closed and
terminatedThe CTA-Special First Division
held that the Preliminary Assessment
Notices (PANs) fordeficiency EWT for taxable
years 1994 and 1998 were not formally offered;
hence, pursuant toSection 34, Rule 132 of the
Revised Rules of Court, the Court shall neither
consider the same asevidence nor rule on their
validity. As regards the Final Assessment Notices
(FANs) for deficiency EWT for taxable years 1994
and1998, the CTA-Special First Division held that
the same do not show the law and the facts
onwhich the assessments were based. Said
assessments were, therefore, declared void for
failure tocomply with Section 228 of the 1997 Tax
Code. From the foregoing, the only remaining
validassessment is for taxable year
1992.Nevertheless, the CTA-Special First Division
declared that the right of petitioner to collect
thedeficiency EWT and WTC, respectively, for
taxable year 1992 had already lapsed pursuant
Whether or not the EWT NO. In order to determine whether the
assessment issued against requirement for a valid assessment is duly
the respondent for taxable complied with,it is important to ascertain the
year 1994 werevalid. governing law, rules and regulations and
jurisprudence at the timethe assessment was
issued. In the instant case, the PANs and
FANs pertaining to the deficiencyEWT for
taxable years 1994 and 1998, respectively,
were issued on January 19, 1998, when
theTax Code was already in effect, as
correctly found by the CTA En Banc. The date
of issuance ofthe notice of assessment
determines which law applies- the 1997 NIRC
or the old Tax Code. In the instant case, the
1997 NIRC covers the 1994 and 1998 EWT
FANs because there wereissued on January
19, 1998 and September 21, 2001,
respectively, at the time of the effectivity ofthe
1997 NIRC. Clearly, the assessments are
governed by the law. Indeed, Section 228 of
theTax Code provides that the taxpayer shall
be informed in writing of the law and the facts
onwhich the assessment is made. Otherwise,
the assessment is void. To implement the
aforesaidprovision, Revenue Regulation No.
12-99was enacted by the BIR, of which
Section 3.1.4 thereofreads: 3.1.4. Formal
Letter of Demand and Assessment
Notice. –The formal letter of demand
andassessment notice shall be issued by the
Commissioner or his duly authorized
representative. Theletter of demand calling for
payment of the taxpayer’s deficiency tax or
taxes shall state the facts,the law, rules and
regulations, or jurisprudence on which the
assessment is based, otherwise, theformal
letter of demand and assessment notice shall
be void. The same shall be sent to
thetaxpayer only by registered mail or by
personal delivery.The law requires that the
legal and factual bases of the assessment be
stated in the formal letterof demand and
assessment and notice. Such cannot be
toSection 203 of the Tax Code. Thus, in assumed. The alleged “factual bases” inthe
ruling for USTP, the CTA-Special First advice, preliminary letter and “audit working
Divisioncancelled Assessment Notices both dated papers” did not suffice. There was no
January 9, 1996 and covering the period of 1992. goingaround the mandate of the law that the
Petitioner moved to reconsider the aforesaid ruling legal and factual bases of the assessment be
however it was denied the same for lack ofmerit. stated inwriting in the formal letter of demand
Upon appeal, the CTA En Banc affirmed with accompanying the assessment notice.
modification the of the CTA-Special FirstDivision.
The CTA En Banc upheld the 1998 EWT
assessment. In addition to the basic
EWTdeficiency of ₱14,496.79, USTP is ordered
to pay surcharge, annual deficiency interest,
andannual delinquency interest from the date due
until full payment pursuant to Section 249 of
the1997 NIRC.
42. CIR vs. PNB, G.R. In several transactions including but not limited to
No. 180920, the sale of real properties, lease and
September 29, 2014. commissions, [respondent] allegedly earned
income and paid the corresponding income taxes
due which were collected and remitted by various
payors as withholding agents to the Bureau of
Internal Revenue ("BIR") during the taxable year
2000.
On April 18, 2001, [respondent] filed its tentative
income tax return for taxable year 2000 which [it]
subsequently amended on July 25, 2001.
Respondent] filed again an amended income tax
return for taxable year 2000 on June 20, 2002,
declaring no income tax liability . . . as it incurred a
net loss in the amount of P11,318,957,602.00 and
a gross loss of P745,713,454.00 from its Regular
Banking Unit ("RBU") transactions. However,
[respondent] had a 10% final income tax liability of
P210,364,280.00 on taxable income of
P1,959,931,182.00 earned from its Foreign
Currency Deposit Unit ("FCDU") transactions for
the same year. Likewise, in the [same] return,
[respondent] reported a total amount of
P245,888,507.00 final and creditable withholding
taxes which was applied against the final income
tax due of P210,364,280.00 leaving an
overpayment of P35,524,227.00. In its second
amended return, [respondent's] income tax
overpayment of P35,524,227.00 consisted of the
balance of the prior year's (1999) excess credits of
P9,057,492.00 to be carried-over as tax credit to
the succeeding quarter/year and excess creditable
withholding taxes for taxable year 2000 in the
amount of P26,466,735.00 which [respondent]
opted to be refunded. On November 11, 2002,
[respondent] . . . filed a claim for refund or the
issuance of a tax credit certificate in the amount of
P26,466,735.40 for the taxable year 2000 with the
[BIR]. Due to [BIR's] inaction on its administrative
claim, [respondent] appealed before [the Court of
Tax Appeals] by way of a Petition for Review on
April 11, 2003. (Citation omitted) On January 30,
whether respondent's claim
for refund of unutilized
excess creditable
withholding taxes amounting
to P23,762,347.83 were duly
supported by valid
certificates of creditable tax
withheld at source
These issues require a review, examination,
evaluation, or weighing of the probative value
of evidence presented, especially the
withholding tax certificates, which this court
does not have the jurisdiction to do, barring
the presence of any exceptional...
circumstance, as it is not a trier of facts.
Besides, as pointed out by respondent,
petitioner did not object to the admissibility of
the 622 withholding tax certificates when
these were formally offered by respondent
before the tax court. Hence, petitioner is
deemed to have admitted the... validity of
these documents. Petitioner's "failure to
object to the offered evidence renders it
admissible, and the court cannot, on its own,
disregard such evidence.
At any rate, the Court of Tax Appeals First
Division and En Banc uniformly found that
respondent has established its claim for
refund or issuance of a tax credit certificate for
unutilized excess creditable withholding taxes
for the taxable year 2000 in the amount of
P23,762,347.83. The Court of Tax Appeals
First Division thoroughly passed upon the
evidence presented by respondent and the
report of the court-commissioned auditing
firm, SGV & Co. This court accords respect to
the conclusion reached by the Court of Tax
Appeals and will not presumptuously set it
aside absent any showing of gross error or
abuse on its part.
The certificate of creditable tax withheld at
source is the competent proof to establish the
fact that taxes are withheld. It is not
necessary for the person who executed and
prepared the certificate of creditable tax...
withheld at source to be presented and to
testify personally to prove the authenticity of
the certificates.
2007, the Court of Tax Appeals First Division
rendered a decision in favor of respondent
Petitioner's motion for reconsideration was
subsequently denied for lack of merit.
On appeal, the Court of Tax Appeals En Banc
sustained the First Division's ruling. It held that the
fact of withholding and the amount of taxes
withheld from the income payments received by
respondent were sufficiently established by the
creditable withholding tax certificates, and there
was no need to present the testimonies of the
various payors or withholding agents who issued
the certificates and made the entries therein. It
also held that respondent need not prove actual
remittance of the withheld taxes to the Bureau of
Internal Revenue because the functions of
withholding and remittance of income taxes are
vested in the payors who are considered the
agents of petitioner.
The Court of Tax Appeals En Banc also denied
petitioner's motion for reconsideration. Hence, this
instant petition was filed.
Finally, petitioner's allegation that the
submission of the certificates of withholding
taxes before the Court of Tax Appeals was
late is untenable. The samples of the
withholding tax certificates attached to
respondent's comment bore the receiving
stamp of the Bureau of
Internal Revenue's Large Taxpayers
Document Processing and Quality Assurance
Division. As observed by the Court of Tax
Appeals En Banc, "[t]he Commissioner is in
no position to assail the authenticity of the
CWT certificates due to PNB's alleged...
failure to submit the same before the
administrative level since he could have easily
directed the claimant to furnish copies of
these documents, if the refund applied for
casts him any doubt." Indeed, petitioner's
inaction prompted respondent to... elevate its
claim for refund to the tax court.
More importantly, the Court of Tax Appeals is
not precluded from accepting respondent's
evidence assuming these were not presented
at the administrative level. Cases filed in the
Court of Tax Appeals are litigated de novo.
Thus,... respondent "should prove every
minute aspect of its case by presenting,
formally offering and submitting . . . to the
Court of Tax Appeals [all evidence] . . .
required for the successful prosecution of [its]
administrative claim."
43. CIR vs. BASF Prescription in the assessment and in
Coating + Inks the collection of taxes is provided by the
Philippines, Inc. G.R. Legislature for the benefit of both the
No. 198677, Government and the taxpayer; for the
November 26, 2014. Government for the purpose of
expediting the collection of taxes, so
that the agency charged with the
assessment and collection may not
tarry too long or indefinitely to the
prejudice of the interests of the
Government, which needs taxes to run
it; and for the taxpayer so that within a
reasonable time after filing his return,
he may know the amount of the
assessment he is required to pay,
whether or not such assessment is well
founded and reasonable so that he may
either pay the amount of the
assessment or contest its validity in
court.
2/3 of Basf Coating's (BC) board members and
stockholders voted to dissolve the corporation, so
cutting its 50-year life beginning in 1990 only until
March 31, 2001. Following that, BC relocated from
Las Pias City to Carmelray Industrial Park in
Canlubang, Calamba, Laguna.
BC sent two letters to BIR on June 26, 2001. The
first was a dissolution notification. The
transmission was accompanied by documentation
supporting the dissolution, such as BIR Form
1905, which relates to a change of information
included in the company's tax registration.
Following that, a FAN was sent to BC's previous
address in Las Piñas City. For the taxable year
1999, the FAN reported a total of 18 million pesos
in income tax, VAT, WTC, EWT, and DST.On
March 5, 2004, BIR's RDO No. 39, South Quezon
City, issued a First Notice Before Issuance of
Warrant of Distraint and Levy (FNB), which was
sent to one of BC's directors' residence.
BC submitted a complaint letter on March 19,
2004, alleging lack of due process and
prescription as grounds. After 180 days passed
with no action from the CIR, BC filed a petition for
review with the CTA. A trial was held. The CTA 1D
ruled that because the CIR was aware of BC's
new address, the error in mailing should not be
held against BC. According to the CTA 1D,
because no legitimate notifications were provided
to BC, the following assessments against it are
void. The CIR filed a Motion of Reconsideration,
which was denied. As a result, it was referred to
CTA en banc. The CTA En Banc ruled that CIR's
power to assess respondent for deficient taxes for
the taxable year 1999 had already been
mandated, and that the FAN issued to respondent
never became final since BC did not receive it.
CIR filed a Motion for Reconsideration, which was
denied.
Whether or not the running
of the 3-year prescriptive
period to assess suspended
when Basf Coating failed to
notify the CIR of its change
of address?
No, even if BC failed to notify about its change
of residence, the 3-year prescriptive time to
assess was not suspended in favor of the
CIR.
It is true that, according to the Tax Code, the
running of the Statute of Limitations is
suspended when the taxpayer cannot be
found at the location specified in the return on
which a tax is assessed or collected.
Furthermore, Section 11 of RR 12-85 requires
the taxpayer to provide written notification of a
change of address to the RDO or district
having jurisdiction over his previous legal
residence and/or place of business.
However, the Supreme Court determined that
the above-mentioned restrictions on the
postponement of the 3-year assessment
period apply only if the CIR is unaware of the
taxpayer's location.
The CIR in this matter, by all accounts, was
well aware that BC had relocated to its new
address in Calamba, Laguna, as evidenced
by the documentation that comprised part of
respondent's BIR records.
Furthermore, before to sending the FAN to
BC's old address, the RDO gave BC a letter
outlining the findings of its inquiry as well as
an invitation to an information conference.
This would not have been possible if BC's
new address had not been known. Finally,
before sending the FAN, the PAN was
"returned to sender."
Thus, notwithstanding the lack of a formal
written notification of Bc's change of address,
the fact remains that petitioner became aware
of respondent's new address as evidenced by
papers abundant in its archives. As a result,
the three-year term for assessing respondents
was not suspended and has already begun.

44. Samar-I Electric There is a difference between “false
Cooperative vs. CIR, return” and “fraudulent return”. While
G.R. No. 193100 the first merely implies deviation from
December 10, 2014. the truth, whether intentional or not, the
second implies intentional or deceitful
entry with intent to evade the taxes due.
Samar-I Electric Cooperative, Inc. (Petitioner) is
an electric cooperative, with principal office at
Barangay Carayman, Calbayog City.
On July 13, 1999 and April 17, 2000 Petitioner
filed its 1998 and 1999 income tax returns,
respectively. Petitioner filed its 1997, 1998, and
1999 Annual Information Return of Income Tax
Withheld on Compensation, Expanded and Final
Withholding Taxes on February 17, 1998,
February 1, 1999, and February 4, 2000, in that
order.
On November 13, 2000 respondent issued a duly
signed Letter of Authority (LOA) No. 1998
00023803. Petitioner cooperated in the audit and
investigation conducted by the Special
Investigation Division of the BIR by submitting the
required documents on December 5, 2000.
Whether or not the 1997 and
1998 assessments on
withholding tax on
compensation were issued
within the prescriptive period
provided by law;
Subsection (A) of the said provision states
that "any VAT-registered person, whose sales
are
zero-rated or effectively zero-rated may,
within two years after the close of the taxable
quarter when the sales were made, apply for
the issuance of a tax credit certificate or
refund
of creditable input tax due or paid attributable
to such sales." The phrase "within two (2)
years x x x apply for the issuance of a tax
credit certificate or refund" refers to
applications
for refund/credit filed with the CIR and not to
appeals made to the CTA.
This is apparent in the first paragraph of
subsection (C) of the same provision, which
states
that the CIR has "120 days from the
submission of complete documents in support
of the
application filed in accordance with
Subsections (A) and (B)" within which to
decide on the
claim.
Yes. It was petitioner’s substantial
underdeclaration of withholding taxes in the
amount of P2,690,850.91 which constituted
the “falsity” in the subject returns – giving
respondent the benefit of the period under
Section 222 of the NIRC of 1997 to assess
the correct amount of tax “at any time within
ten (10) years after the discovery of the falsity,
fraud or omission.”
the proper and reasonable interpretation of
said provision should be that in the three
different cases of
(1) false return,
(2) fraudulent return with intent to evade tax,
(3) failure to file a return, the tax may be
assessed, or a proceeding in court for the
collection of such tax may be begun without

45. Team Pacific A taxpayer dissatisfied with a local
Corporation vs. Daza treasurer’s denial of or inaction on his
(Taguig Treasurer), protest over an assessment has thirty
G.R. No. 167732, July (30) days within which to appeal to the
11, 2012. court of competent jurisdiction. Under
the law, said period is to be reckoned
from the taxpayer’s receipt of the denial
of his protest or the lapse of the sixty
(60) day period within which the local
treasurer is required to decide the
protest, from the moment of its filing.
On October 19, 2001 respondent sent a Notice for
Informal Conference which was received by
petitioner in November 2001; indicating the
allegedly income and withholding tax liabilities of
petitioner for 1997 to 1999. In response, petitioner
sent a letter dated November 26, 2001 to
respondent maintaining its indifference to the
latter’s findings and requesting details of the
assessment.
On December 13, 2001 Petitioner executed a
Waiver of the Defense of Prescription under the
Statute of Limitations, good until March 29, 2002.
On February 28, 2002 Respondent issued a
Preliminary Assessment Notice (PAN). The PAN
was received by petitioner on April 9, 2002, which
was protested on April 18, 2002.
On July 8, 2002 Respondent dismissed
petitioner’s protest and recommended the
issuance of a Final Assessment Notice
On September 15, 2002 petitioner received a
demand letter and assessments notices (Final
Assessment Notices) for the alleged 1997, 1998,
and 1999 deficiency withholding tax in the amount
of [P]3,760,225.69, as well as deficiency income
tax covering the years 1998 to 1999 in the amount
of [P]440,545.71, or in the aggregate amount of
[P]4,200,771.40.
On April 10, 2003 the Final Decision on Disputed
Assessment, petitioner was still held liable for the
alleged tax liabilities
TPC is a domestic corporation which conducts its
business at the FTI Complex in the then
Municipality of Taguig. It appears that since the
start of its operations in 1999, TPC had been
paying local business taxes assessed at one-half
(1/2) rate pursuant to the Taguig Revenue Code.
When it renewed its business license in 2004,
however, TPC's business tax for the first quarter
of the same year was assessed in the sum of
P208,109.77(applying the full value of the tax
rates) by respondent Josephine Daza, in her
capacity as then Municipal Treasurer of Taguig.
Whether or not Petition for
Certiorari under Rule 65 the
proper remedy from the
denial of an assessment
protest by a local treasurer?
assessment, at any time within ten years after
the discovery of the (1) falsity,
(2) fraud,
(3) omission.
There is a difference between “false return”
and “fraudulent return”. While the first merely
implies deviation from the truth, whether
intentional or not, the second implies
intentional or deceitful entry with intent to
evade the taxes due.
The ordinary period of prescription of 5 years
within which to assess tax liabilities under
Sec. 331 of the NIRC should be applicable to
normal circumstances, but whenever the
government is placed at a disadvantage so as
to prevent its lawful agents from proper
assessment of tax liabilities due to false
returns, fraudulent return intended to evade
payment of tax or failure to file returns, the
period of ten years provided for in Sec. 332
(a) NIRC, from the time of the discovery of the
falsity, fraud or omission even seems to be
inadequate and should be the one enforced.
NO. A taxpayer dissatisfied with a local
treasurer’s denial of or inaction on his protest
over an assessment has thirty (30) days
within which to appeal to the court of
competent jurisdiction. Under the law, said
period is to be reckoned from the taxpayer’s
receipt of the denial of his protest or the lapse
of the sixty (60) day period within which the
local treasurer is required to decide the
protest, from the moment of its filing. This
much is clear from Section 195 of the Local
Government Code. The foregoing
Constrained to pay the assessed business tax on
19 January 2004 in view of its being a
precondition for the renewal of its business permit,
TPC filed on the same day a written protest with
Daza, insisting on the one-half (1/2) rate on which
its business tax was previously assessed.
Subsequent to its 13 April 2004 demand for the
refund and/or issuance of a tax credit for the sum
of P104,054.88 which it considered as an
overpayment of its business taxes for the same
year, TPC filed its 15 April 2004 Rule 65 petition
for certiorari which was docketed as SCA No.
2662 before the RTC.
RTC: Dismissed the petition for lack of merit.
While finding that the absence of proof of Atty.
Miranda's denial of TPC's letter-protest meant that
the latter had thirty (30) days from the lapse of the
sixty (60) days prescribed under Article 195 of the
Local Government Code within which to perfect its
appeal, the RTC ruled that, rather than the special
civil action of certiorari provided under Rule 65 of
the 1997 Rules of Civil Procedure, an ordinary
appeal would have been the proper remedy from
the assessment complained against. Without
moving for the reconsideration of the foregoing
order, TPC filed a petition for Certiorari Rule 65
before the SC, on pure questions of law.
pronouncements notwithstanding, we find that
TPC erroneously availed of the wrong remedy
in filing a Rule 65 petition for certiorari to
question Daza’s inaction on its letter-protest.
The rule is settled that, as a special civil
action, certiorari is available only if the
following essential requisites concur: (1) it
must be directed against a tribunal, board, or
officer exercising judicial or quasi-judicial
functions; (2) the tribunal, board, or officer
must have acted without or in excess of
jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction;
and, (3) there is no appeal nor any plain,
speedy, and adequate remedy in the ordinary
course of law. Judicial function entails the
power to determine what the law is and what
the legal rights of the parties are, and then
undertakes to determine these questions and
adjudicate upon the rights of the parties.
Quasi-judicial function, on the other hand,
refers to the action and discretion of public
administrative officers or bodies, which are
required to investigate facts or ascertain the
existence of facts, hold hearings, and draw
conclusions from them as a basis for their
official action and to exercise discretion of a
judicial nature.Gauged from the foregoing
definitions, Daza cannot be said to be
performing a judicial or quasi-judicial function
in assessing TPC’s business tax and/or
effectively denying its protest as then
Municipal Treasurer of Taguig. For this
reason, Daza’s actions are not the proper
subjects of a Rule 65 petition for certiorari
which is the appropriate remedy in cases
where the tribunal, board, or officer exercising
judicial or quasi-judicial functions acted
without or in grave abuse of discretion
amounting to lack or excess of jurisdiction and
there is no appeal or any plain, speedy, and
adequate remedy in law.
46. Lucas G. While the laws governing the CTA have
Adamson, et al. vs. expanded the jurisdiction of the Court,
CA, et al., G.R. Nos. they did not change the jurisdiction of
120935 & 124557, May the CTA to entertain an appeal only
21, 2009 from a final decision of the
Commissioner, or in cases of inaction
within the prescribed period.
A deficiency tax assessment was issued against
Petitioners relating to their payment of capital
gains tax and VAT on their sale of shares of stock
and parcels of land. Subsequent to the preliminary
conference, the CIR filed with the Department of
Justice her Affidavit of Complaint against
Petitioners. The Court of Appeals ultimately ruled
that, in a criminal prosecution for tax evasion,
assessment of tax deficiency is not required
because the offense of tax evasion is complete or
consummated when the offender has knowingly
and willfully filed a fraudulent return with intent to
evade the tax.
• Lucas Adamson and AMC sold 131,897 common
shares of stock in Adamson and Adamson, Inc.
(AAI) to APAC Holding Limited (APAC). The
shares were valued at P7,789,995.00.[1] On June
22, 1990, P159,363.21 was paid as capital gains
tax for the transaction.
• AMC sold to APAC Philippines, Inc. another
229,870 common shares of stock in AAI for
P17,718,360.00. AMC paid the capital gains tax
of P352,242.96.
• The Commissioner issued a “Notice of Taxpayer”
to AMC, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes, informing
them of deficiencies on their payment of capital
gains tax and Value Added Tax (VAT). The notice
contained a schedule for preliminary conference.
G.R. No. 120935
• Lucas G. Adamson, Therese June D. Adamson
and Sara S. de los Reyes were charged before
the Regional Trial Court (RTC) of Makati, Branch
150 in Criminal Case Nos. 94-1842 to 94-1846.
They filed a Motion to Dismiss or Suspend the
Proceedings. They invoked the grounds that there
was yet no final assessment of their tax liability,
and there were still pending relevant Supreme
Court and CTA cases.
• Initially, the trial court denied the motion. A
Motion for Reconsideration was however filed, this
(1) Does the CIR issue an
assessment?
(2) Must a criminal
prosecution for tax evasion
be preceded by a deficiency
tax assessment?
(3) Does the CTA have
jurisdiction on the case?
(1) NO. The recommendation letter of the
Commissioner cannot be considered a formal
assessment as (a) it was not addressed to the
taxpayers; (b) there was no demand made on
the taxpayers to pay the tax liability, nor a
period for payment set therein; (c) the letter
was never mailed or sent to the taxpayers by
the Commissioner. It was only an affidavit of
the computation of the alleged liabilities and
thus merely served as prima facie basis for
filing criminal informations.
(2) YES. When fraudulent tax returns are
involved as in the cases at bar, a proceeding
in court after the collection of such tax may be
begun without assessment considering that
upon investigation of the examiners of the
BIR, there was a preliminary finding of gross
discrepancy in the computation of the capital
gains taxes due from the transactions. The
Tax Code is clear that the remedies may
proceed simultaneously.
(3) NO. While the laws governing the CTA
have expanded the jurisdiction of the Court,
they did not change the jurisdiction of the CTA
to entertain an appeal only from a final
decision of the Commissioner, or in cases of
inaction within the prescribed period. Since in
the cases at bar, the Commissioner has not
issued an assessment of the tax liability of the
Petitioners, the CTA has no jurisdiction.
time assailing the trial court’s lack of jurisdiction
over the nature of the subject cases.
• On August 8, 1994, the trial court granted the
Motion. It ruled that the complaints for tax evasion
filed by the Commissioner should be regarded as
a decision of the Commissioner regarding the tax
liabilities of Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes, and
appealable to the CTA. It further held that the said
cases cannot proceed independently of the
assessment case pending before the CTA, which
has jurisdiction to determine the civil and criminal
tax liability of the respondents therein.
• Court of Appeals reversed the trial court’s
decision and reinstated the criminal complaints.
o The appellate court held that, in a criminal
prosecution for tax evasion, assessment of tax
deficiency is not required because the offense of
tax evasion is complete or consummated when
the offender has knowingly and willfully filed a
fraudulent return with intent to evade the tax.
o It ruled that private respondents filed false and
fraudulent returns with intent to evade taxes, and
acting thereupon, petitioner filed an Affidavit of
Complaint with the Department of Justice, without
an accompanying assessment of the tax
deficiency of private respondents, in order to
commence criminal action against the latter for tax
evasion.

G.R. No. 124557

• AMC, Lucas G. Adamson, Therese June D.
Adamson and Sara S. de los Reyes filed a letter
request for re-investigation with the Commissioner
of the “Examiner’s Findings” earlier issued by the
Bureau of Internal Revenue (BIR), which pointed
out the tax deficiencies.

• On March 15, 1994 before the Commissioner

could act on their letter-request, AMC, Lucas G.
Adamson, Therese June D. Adamson and Sara S.
de los Reyes filed a Petition for Review with the
CTA. They assailed the Commissioner’s finding of
 tax evasion against them.

• The Commissioner moved to dismiss the

petition, on the ground that it was premature, as
she had not yet issued a formal assessment of the
tax liability of therein petitioners.

• On September 19, 1994, the CTA denied the

Motion to Dismiss. It considered the criminal
complaint filed by the Commissioner with the DOJ
as an implied formal assessment, and the filing of
the criminal informations with the RTC as a denial
of petitioners’ protest regarding the tax deficiency.

• The Commissioner repaired to the Court of

Appeals on the ground that the CTA acted with
grave abuse of discretion. She contended that,
with regard to the protest provided under Section
229 of the NIRC, there must first be a formal
assessment issued by the Commissioner, and it
must be in accord with Section 6 of Revenue
Regulation No. 12-85. She maintained that she
had not yet issued a formal assessment of tax
liability, and the tax deficiency amounts mentioned
in her criminal complaint with the DOJ were given
only to show the difference between the tax
returns filed and the audit findings of the revenue
examiner.

• The Court of Appeals sustained the CTA’s denial

of the Commissioner’s Motion to Dismiss. Hence,
this petition.

47. RCBC vs. CIR,
G.R. No. 168498, April
24, 2007
The failure of the taxpayer to appeal
from an assessment on time rendered
the assessment final, executory and
demandable. RCBC is precluded from
disputing the correctness of the
assessment.
RCBC received a Formal Letter of Demand dated
May 25, 2001 from the respondent CIR for its tax
liabilities particularly for Gross Onshore Tax in the
amount of P53,998,428.29 and Documentary
Stamp Tax for its Special Savings Placements in
the amount of P46,717,952.76, for the taxable
year 1997.Petitioner filed a protest letter/request
for reconsideration/reinvestigation pursuant to
Section 228 of the NIRC. As the protest was not
acted upon by the respondent, petitioner filed a
Whether or not the taxpayer
may still appeal
No. As provided in Sec. 228, the failure of the
taxpayer to appeal from an assessment on
time rendered the assessment final, executory
and demandable. RCBC is precluded from
disputing the correctness of the assessment.
While the right to appeal a decision of the
Commissioner of CTA is merely a statutory
remedy, nevertheless the requirement that it
must be brought within 30 days is
jurisdictional. If a statutory remedy provides
petition for review with the CTA for the as a condition precedent that the action to
cancellation of the assessments. Respondent filed enforce it must be commenced within a
a motion to resolve first the issue of CTA’s prescribed time, such requirement is
jurisdiction, which was granted by the CTA in a jurisdictional and failure to comply therewith
Resolution dated September 10, 2003. The may be raised in a MTD.
petition for review was dismissed because it was
filed beyond the 30-day period following the lapse
of 180 days from petitioner’s submission of
documents in support of its protest, as provided
under Section 228 of the NIRC and Section 11 of
R.A. No. 1125, otherwise known as the Law
Creating the Court of Tax Appeals. Petitioner did
not file a motion for reconsideration or an appeal
to the CTA En Banc from the dismissal of its
petition for review. Consequently, the September
10, 2003 Resolution became final and executory
on October 1, 2003 and Entry of Judgment was
made on December 1, 2003.

Thereafter, respondent sent a Demand Letter to

petitioner for the payment of the deficiency tax
assessments. On February 20, 2004, petitioner
filed a Petition for Relief from Judgment on the
ground of excusable negligence of its counsel’s
secretary who allegedly misfiled and lost the
September 10, 2003 Resolution. The CTA Second
Division set the case for hearing on April 2, 2004
during which petitioner’s counsel was present.
Respondent filed an Opposition while petitioner
submitted its Manifestation and Counter-Motion.
On May 3, 2004, the CTA Second Division
rendered a Resolution denying petitioner’s Petition
for Relief from Judgment. Petitioner’s motion for
reconsideration was denied in a Resolution dated
November 5, 2004, hence it filed a petition for
review with the CTA En Banc, docketed as C.T.A.
EB No. 50, which affirmed the assailed
Resolutions of the CTA Second Division in a
Decision dated June 7, 2005.
48. Capitol Steel Public Hearing/Notice to the Public
Corp. vs. Phividec
Industrial Authority, 1. A public hearing shall be held with
G.R. No. 169453, the following in attendance: (a)
December 6, 2006 Revenue Regional Director, (b)
Chairman and members of the
STCRPV, (c) representatives of the
TCRPV, and (d) representatives of the
Secretariat of the TCRPV. The public
hearing shall be given wide publicity in
newspapers of general circulation,
radio, and television. The Revenue
District Officer concerned shall likewise
disseminate the information by
preparing notices of the hearing to be
posted in strategic places and letters of
invitation for local officials, associations
of realtors/appraisers and other civil
organizations.
2. Notice to the Public -
In the municipalities where a public
hearing is not feasible, notice to the
public regarding the recommended
zonal values shall instead be made
through the Municipal and Barangay
officials thereat, by posting the said
proposed zonal values in public places
within the municipality for thirty (30)
days and/or weekly publication in local
newspapers of general circulation for
three (3) consecutive weeks. If no
comment/objection is received within
the said period, the schedule of values
shall be forwarded to the TCRPV and
ECPPV and ECRPV and to the
Secretary of Finance for final approval.
Capitol Steel owns 65 parcels of land while
PHIVIDEC is a GOCC which is vested with
governmental and proprietary functions including
the power of eminent domain for the purpose of
acquiring rights of way or any property for the
establishment or expansion of the Phividec
Industrial Areas. The properties of Capitol Steel
were identified as the most ideal site for the
Mindanao International Container Terminal
Project. Phividec filed an expropriation case but
was later dismissed due to the unauthorized
engagement by PHIVIDEC of the legal services of
a private lawyer. In the meantime, Capitol Steel
requested the Technical Committee on Real
Property Valuation (TCRPV) of BIR. TCRPV
thereafter issued Resolution No. 36-2001 fixing
the "reasonable and realistic zonal valuation" of
the properties at P700 per square meter.
PHIVIDEC, refilled the case. PHIVIDEC filed an
Urgent Motion for the Issuance of a Writ of
Possession. The total amount deposited
represents 100% of the value of the properties
based on the schedule of zonal valuation for real
properties under Department Order No. 40-97
fixing the zonal valuation of the properties at
Sugbongcogon and Casinglot at P300 and P500
per square meter, respectively. Capitol Steel
opposed claiming instead that under the TCRPV
Resolution, the properties have been revalued at
P700 per square meter. RTC ruled in favor of
Capitol. CA reversed holding that the zonal
valuation established under D.O. 40-97 should be
the basis in computing the provisional value of the
properties, and that the valuation made by the
TCRPV was neither binding nor effective for
failure to comply with the guidelines relative to the
establishment of zonal values of real properties.
Whether or not RTC is No. When the second expropriation case was
correct in using the TCRPV re-filed, R.A. 8974, which provides for
valuation. substantive requirements before a writ of
possession is issued, was already in force
and in effect.
SECTION 4. Guidelines for Expropriation
Proceeding (a) Upon the filing of the
complaint, and after due notice to the
defendant, the implementing agency shall
immediately pay the owner of the property the
amount equivalent to the sum of one hundred
percent (100%) of the value of the property
based on the current relevant zonal valuation
of the Bureau of Internal Revenue (BIR) …
The "current relevant zonal valuation" under
Section 4 of R.A. 8974 pertains to the values
reflected in the schedule of zonal values
embodied in a Department Order issued
pursuant to Revenue Memorandum Order
(RMO) No. 56-89 issued by the Commissioner
of Internal Revenue. Court finds that the
determination of P300 and P500 per square
meter zonal values were, along with the zonal
values of other real properties located in all
municipalities under the jurisdiction of
Revenue District Office No. 98 was subject to
hearing.
The zonal values were approved by both the
TCRPV and the ECRPV and on even date,
the Secretary of Finance, upon the
recommendation of the BIR, issued D.O. 40-
97 to implement the schedule of zonal values.
In contrast, the P700 per square meter zonal
value provided for under TCRPV Resolution
was not approved by the ECRPV, was not
embodied in a Department Order, and did not
undergo the required public hearing and
publication required. To clarify, the payment of
the provisional value as a prerequisite to the
issuance of a writ of possession differs from
the payment of just compensation for the
expropriated property.
While the provisional value is based on the

49. CIR vs. Sony Phil., There must be a sale, barter or
Inc., G.R. No. 178697, exchange of goods or properties before
November 17, 2010 any VAT may be levied. Certainly, there
was no such sale, barter or exchange in
the subsidy given by SIS to Sony. It was
but a dole out by SIS and not in
payment for goods or properties sold,
bartered or exchanged by Sony.
The CIR, through a LOA (Letter of Authority)
examined Sony Philippines, Inc. (Sony)’s books of
accounts for the period 1997 and unverified prior
years. A preliminary assessment for 1997
deficiency taxes and penalties was issued by the
CIR which Sony protested. The CTA-First Division
partly granted Sony’s petition by cancelling the
deficiency VAT assessment but upheld a modified
deficiency EWT assessment as well as the
penalties.
Sony International Singapore (SIS) has granted to
Sony a subsidy equivalent to the latter’s
advertising expenses, due to adverse economic
conditions. The CIR argued that Sony’s
advertising expense could not be considered as
an input VAT credit because the same was
eventually reimbursed by SIS and that since
Sony’s advertising expense was reimbursed by
SIS, the former never incurred any advertising
expense. A sa result, Sony is not entitled to a tax
credit. At most, the CIR continues, the said
current relevant zonal valuation, just
compensation is based on the prevailing fair
market value of the property.
While the law grants to the CIR the power to
determine zonal values, including the
authority to delegate to the Assistant
Commissioner of the Assessment Service the
authority to approve and sign TCRPV
resolutions involving requests for revaluation
of established zonal values of real properties,
the same is for the purpose of computing
internal revenue taxes. The revaluation under
RDAO 4-2001 is, as correctly held by the
appellate court, "a specific rather than a zonal
valuation," and is "not a revaluation of the
schedule of zonal values [under D.O. 40-97]
but merely the fine tuning of the value of a
specific property of an individual taxpayer in
order to reflect fair market values."
Whether or not the subsidy NO. Insofar as the above-mentioned subsidy
received by Sony may be considered as income and, therefore,
Corporation can be subject subject to income tax, the Court agrees.
to 10% VAT However, the Court does not agree that the
same subsidy should be subject to the10%
VAT. To begin with, the said subsidy termed
by the CIR as reimbursement was not even
exclusively earmarked for Sony’s advertising
expense for it was but an assistance or aid in
view of Sony’s dire or adverse economic
conditions, and was only equivalent to the
latter’s advertising expenses.
Section 106 of the Tax Code explains when
VAT may be imposed or exacted. Thus:
SEC. 106. Value-added Tax on Sale of Goods
or Properties.
(A) Rate and Base of Tax. There shall be
levied, assessed and collected on every sale,
barter or exchange of goods or properties,
value-added tax equivalent to ten percent
(10%) of the gross selling price or gross value
in money of the goods or properties sold,
bartered or exchanged, such tax to be paid by
advertising expense should be for the account of
SIS, and not Sony.
the seller or transferor.
Thus, there must be a sale, barter or
exchange of goods or properties before any
VAT may be levied. Certainly, there was no
such sale, barter or exchange in the subsidy
given by SIS to Sony. It was but a dole out by
SIS and not in payment for goods or
properties sold, bartered or exchanged by
Sony
In the case of CIR v. Court of Appeals (CA),
the Court had the occasion to rule that
services rendered for a fee even on
reimbursement-on-cost basis only and without
realizing profit are also subject to VAT. The
case, however, is not applicable to the
present case. In that case, COMASERCO
rendered service to its affiliates and, in turn,
the affiliates paid the former reimbursement-
on-cost which means that it was paid the cost
or expense that it incurred although without
profit. This is not true in the present case.
Sony did not render any service to SIS at all.
The services rendered by the advertising
companies, paid for by Sony using SIS dole-
out, were for Sony and not SIS. SIS just gave
assistance to Sony in the amount equivalent
to the latter’s advertising expense but never
received any goods, properties or service
from Sony.
50. CIR vs. Pascor An assessment is not necessary before
Realty and Devt. criminal charges can be filed. A criminal
Corp., et al., G.R. No. charge need not only be supported by a
128315, June 29, 1999 prima facie showing of failure to file a
required return. The CIR had, in such
tax evasion cases, discretion on
whether to issue an assessment, or to
file a criminal case against the taxpayer,
or to do both.
The CIR authorized certain BIR officers to
examine the books of accounts and other
accounting records of Pascor Realty and
Development Corp. (PRDC) for 1986, 1987 and
1988. The examination resulted in
recommendation for the issuance of an
assessment of P7,498,434.65 and P3,015,236.35
for 1986 and 1987, respectively. On March 1,
1995, Commissioner filed a criminal complaint for
tax evasion against PRDC, its president and
treasurer before the DOJ. Private respondents
filed immediately an urgent request for
reconsideration on reinvestigation disputing the
tax assessment and tax liability.
On March 23, 1995, private respondents received
a subpoena from the DOJ in connection with the
criminal complaint. In a letter dated, May 17, 1995,
the Commissioner denied private respondent’s
request for reconsideration (reinvestigation on the
ground that no formal assessment has been
issued which the latter elevated to the CTA on a
petition for review. The Commissioner’s motion to
dismiss on the ground of the CTA’s lack of
jurisdiction inasmuch as no formal assessment
was issued against private respondent was denied
by CTA and ordered the Commissioner to file an
answer but did not instead filed a petition with the
CA alleging grave abuse of discretion and lack of
jurisdiction on the part of CTA for considering the
affidavit/report of the revenue officers and the
endorsement of said report as assessment which
may be appealed to he CTA. The CA sustained
the CTA decision and dismissed the petition.
1. Whether or not the
criminal complaint for tax
evasion can be construed as
an assessment
2. Whether or not an
assessment is necessary
before criminal charges for
tax evasion may be
instituted
1. No. The filing of the criminal complaint with
the DOJ cannot be construed as a formal
assessment. Neither the Tax Code nor the
revenue regulations governing the protest
assessments provide a specific definition or
form of an assessment.
An assessment must be sent to and received
by the taxpayer, and must demand payment
of the taxes described therein within a specific
period. The revenue officer’s affidavit merely
contained a computation of respondent’s tax
liability. It did not state a demand or period for
payment. It was addressed to the Secretary of
Justice not to the taxpayer. They joint affidavit
was meant to support the criminal complaint
for tax evasion; it was not meant to be a
notice of tax due and a demand to private
respondents for the payment thereof. The fact
that the complaint was sent to the DOJ, and
not to private respondent, shows that
commissioner intended to file a criminal
complaint for tax evasion, not to issue an
assessment.
2. No. An assessment is not necessary before
criminal charges can be filed. A criminal
charge need not only be supported by a prima
facie showing of failure to file a required
return. The CIR had, in such tax evasion
cases, discretion on whether to issue an
assessment, or to file a criminal case against
the taxpayer, or to do both.
51. Republic of the An assessment is deemed made when
Phils. vs. Leonor de the notice to that effect is released,
la Rama, et al., G.R. mailed or sent to the taxpayer for the
No. L-21108, purpose of giving effect to the
November 29, 1966 assessment. Where an estate is under
administration, the notice of
assessment must be sent to the
administrator. In the case at bar, notices
were sent to persons other than the
administrator; hence, they could not
produce any legal effect.
The estate of the late Esteban de la Rama was
the subject of Special Proceedings No. 401 of the
Court of First Instance of Iloilo. The executor-
administrator, Eliseo Hervas, filed on March 12,
1951, income tax returns of the estate
corresponding to the taxable year 1950, declaring
a net income of P22,796.59, on the basis of which
the amount of P3,919.00 was assessed and was
paid by the estate as income tax. The Bureau of
Internal Revenue later claimed that it had found
out that there had been received by the estate in
1950 from the De la Rama Steamship Company,
Inc. cash dividends amounting to P86,800.00
which amount was not declared in the income tax
return of the estate for the year 1950. The Bureau
of Internal Revenue then, on March 7, 1956, made
an assessment as deficiency income tax against
the estate in the sum of P56,032.50, of which
amount P37,355.00 was the deficiency and
P18,677.60 was the 50% surcharge.
The Collector of Internal Revenue wrote a letter,
dated February 29, 1956, to Mrs. Lourdes de la
Rama-Osmeña informing her of the deficiency
income tax and asking payment thereof. On March
13, 1956 the latter's counsel wrote to the Collector
acknowledging receipt of the assessment, but
contended that Lourdes de la Rama-Osmeña had
no authority to represent the estate, and that the
assessment should be sent to Leonor de la Rama
who was pointed to by said counsel as the
administratrix of the estate of her late father. On
the basis of this information the Deputy Collector
of Internal Revenue, on November 22, 1956, sent
a letter to Leonor de la Rama as administratrix of
the estate, asking payment. The tax, as assessed,
not having been paid, the deputy Commissioner of
Internal Revenue, on September 7, 1959, wrote
another letter to Mrs. Lourdes de la Rama-
Osmeña demanding, through her, upon the heirs,
the payment of the deficiency income tax within
the period of thirty days from receipt thereof. The
counsel of Lourdes de la Rama-Osmeña, in a
W/N the assessment
became final and executory.
(NO) The notice was not
sent to the taxpayer for the
purpose of giving effect to
the assessment, and said
notice could not produce any
effect. ... It appearing that
the person liable for the
payment of the tax did not
receive the assessment, the
assessment could not
become final and executory
The estate was still under the administration
of Eliseo Hervas as regards the collection of
said dividends. The administrator was the
representative of the estate, whose duty it
was to pay and discharge all debts and
charges on the estate and to perform all
orders of the court by him to be performed
(Rule 71, Section 1), and to pay the taxes and
assessments due to the Government or any
branch or subdivision thereof (Section 7, Rule
89, Old Rules of Court). The tax must be
collected from the estate of the deceased, and
it is the administrator who is under obligation
to pay such claim (Estate of Claude E.
Haygood, Collector of Internal Revenue vs.
Haygood, 65 Phil., 520). The notice of
assessment, therefore, should have been sent
to the administrator. In this case, notice was
first sent to Lourdes de la Rama-Osmeña on
February 29, 1956, and later to Leonor de la
Rama on November 27, 1956, neither of
whom had authority to represent the estate.
As the lower court said in its decision: "Leonor
de la Rama was not the administratrix of the
estate of the late Esteban de la Rama and as
such the demand unto her, Exh. Def. 8, p.
112, was not a correct demand before
November 27, 1956, because the real
administrator was the late Eliseo Hervas;.." (p.
45, Record on Appeal) The notice was not
sent to the taxpayer for the purpose of giving
effect to the assessment, and said notice
could not produce any effect. In the case of
Bautista and Corrales Tan vs. Collector of
Internal Revenue, L-12259, May 27, 1959,
this Court had occasion to state that "the
assessment is deemed made when the notice
to this effect is released, mailed or sent to the
taxpayer for the purpose of giving effect to
said assessment." It appearing that the
person liable for the payment of the tax did
not receive the assessment, the assessment
letter dated September 25, 1959, insisted that the could not become final and executory (R. A.
letter should be sent to Leonor de la Rama. The 1125, Section 11).
Deputy Commissioner of Internal Revenue wrote
to Leonor de la Rama another letter, dated
February 11, 1960, demanding, through her as
administratrix, upon the heirs of Esteban de la
Rama, the payment of the sum of P56,032.50, as
deficiency income tax including the 50%
surcharge, to the City Treasurer of Pasay City
within thirty days from receipt thereof.

The deficiency income tax not having been paid,

the Republic of the Philippines filed on March 6,
1961 with the Court of First Instance of Manila a
complaint against the heirs of Esteban de la
Rama, seeking to collect from each heir his/her
proportionate share in the income tax liability of
the estate.
52. CIR vs. Rosemarie The requirements under Section 230 for
Acosta, G.R. No. refund claims are as follows:
154068, August 3, a. A written claim for refund or tax credit
2007 must be filed by the taxpayer with the
Commissioner;
b. The claim for refund must be a
categorical demand for reimbursement;
c. The claim for refund or tax credit
must be filed, or the suit or proceeding
therefor must be commenced in court
within 2 years from date of payment of
the tax or penalty regardless of any
supervening cause.
It is intended to afford the CIR an
opportunity to correct the action of its
subordinate officers and to be notified.
Tax refunds are in the nature of tax
exemptions which are construed
strictissimi juris against the taxpayer
and liberally in favor of the government.
As tax refund involve a return of
revenue from the government, the
claimant must show the specific
provision of law as basis of her right.
Rosemary Acosta, an employee of Intel
Manufacturing Phils. Inc. assigned in a foreign
country filed on March 21, 1977 for a period of
January 1, 1996-December 31, 1996, a Joint
Individual Income Tax Return with her husband on
October 8, 1997, she filed an amended return
indicating an overpayment of P 358,274 due to the
income taxes withheld and paid by Intel.
April 15, 1999: She filed a petition for review with
the CTA who dismissed her petition for failing to
file a written claim for refund required under Sec.
230 of the old tax code. Also, the omission of the
date of filing the final adjustment return deprived
the court of its jurisdiction over the subject matter
of the case.
CA: reversed the CTA holding that the filing of an
amended return indicating an overpayment was
sufficient compliance with the requirement of a
written claim for refund.
Applying sec. 204 (c) of the 1997 NIRC, the CIR
sought reconsideration but was denied so it
elevated the matter with the SC.
1. W/N the amended return
is sufficient compliance of
written claim
2. W/N the 1997 tax reform
can be applied
retrospectively
1. NO. The requirements under Section 230
for refund claims are as follows
a. A written claim for refund or tax credit must
be filed by the taxpayer with the
Commissioner;
b. The claim for refund must be a categorical
demand for reimbursement;
c. The claim for refund or tax credit must be
filed, or the suit or proceeding therefor must
be commenced in court within 2 years from
date of payment of the tax or penalty
regardless of any supervening cause.
It is intended to afford the CIR an opportunity
to correct the action of its subordinate officers
and to be notified. Tax refunds are in the
nature of tax exemptions which are construed
strictissimi juris against the taxpayer and
liberally in favor of the government.
As tax refund involve a return of revenue from
the government, the claimant must show the
specific provision of law as basis of her right.
2. NO. Tax laws are prospective in
operation, unless the language of the statute
clearly provides otherwise. Moreover, a party
seeking an administrative remedy must not
merely initiate the prescribed administrative
procedure to obtain relief, but also pursue it to
its appropriate conclusion before seeking
judicial intervention in order to give the
administrative agency an opportunity to
decide the matter itself correctly and prevent
unnecessary and premature resort to court
action. Revenue statutes are substantive laws
and in no sense must their application be
equated with that of remedial laws which
must be faithfully and strictly implemented.
53. CIR vs. The Estate
of Benigno P. Toda,
Jr., et al., G.R. No.
147188, September
14, 2004
Tax evasion is a scheme not sanctioned
by law and when it is availed of, it
subjects the taxpayer to further or
additional civil or criminal liabilities. Tax
evasion connotes the integration of
three factors:
(1) the end to be achieved, i.e., the
payment of less than that known by the
taxpayer to be legally due, or the non-
payment of tax when it is shown that a
tax is due;
(2) an accompanying state of mind
which is described as being “evil,” in
“bad faith,” “willfull,” or “deliberate and
not accidental”; and
(3) a course of action or failure of action
which is unlawful.
Cibeles Insurance Corporation (CIC) authorized
Benigno P. Toda, Jr., President and owner of
99.991% of its issued and outstanding capital
stock, to sell a 16-storey commercial building
known as Cibeles Building and the two parcels of
land on which the building stands for an amount of
not less than P90 million.
Six months later, Toda purportedly sold the
property for P100 million to Rafael A. Altonaga,
who, in turn, sold the same property on the same
day to Royal Match Inc. (RMI) for P200 million.
These two transactions were evidenced by Deeds
of Absolute Sale notarized on the same day by the
same notary public. For the sale of the property to
RMI, Altonaga paid capital gains tax in the amount
of P10 million.
When CIC filed for corporate annual income tax
return for the year 1989, it declared its gain from
the sale of real property in the amount of
P75,728.021. After crediting withholding taxes of
P254,497.00, it paid P26,341,2078 for its net
taxable income of P75,987,725.
On 12 July 1990, Toda sold his entire shares of
stocks in CIC to Le Hun T. Choa for P12.5 million,
as evidenced by a Deed of Sale of Shares of
Stocks.Three and a half years later, Toda died.
1. Whether or not the tax
planning scheme adopted by
CIC constitutes tax evasion
that would justify an
assessment of deficiency
income tax.
2. Whether or not the Estate
is liable for the 1989
deficiency income tax of
Cibeles Insurance
Corporation.
1. Yes. Tax evasion is a scheme not
sanctioned by law and when it is availed of, it
subjects the taxpayer to further or additional
civil or criminal liabilities. Tax evasion
connotes the integration of three factors:
(1) the end to be achieved, i.e., the payment
of less than that known by the taxpayer to be
legally due, or the non-payment of tax when it
is shown that a tax is due;
(2) an accompanying state of mind which is
described as being “evil,” in “bad faith,”
“willfull,” or “deliberate and not accidental”;
and
(3) a course of action or failure of action which
is unlawful.
All these factors are present in the instant
case. It was proven that the real buyer of the
properties was RMI, and not the intermediary
Altonaga. The scheme resorted to by CIC in
making it appear that there were two sales of
the subject properties, i.e., from CIC to
Altonaga, and then from Altonaga to RMI,
thereby reducing the tax from 35% to 5%,
cannot be considered a legitimate tax
planning because it is tainted with fraud.
2. Yes. Toda agreed to hold himself
personally liable when he sold his shares of
stock to Le Hun T. Choa. In the Deed of Sale
of Shares of Stock Toda, Toda undertook and
agreed “to hold the BUYER and Cibeles free
from any all income tax liabilities of Cibeles for
the fiscal years 1987, 1988, and 1989.
It is important to note that a corporation has a
juridical personality distinct and separate from
the persons owning or composing it. Thus, the
owners or stockholders of a corporation may
not generally be made to answer for the
liabilities of a corporation and vice versa.
However, there are certain instances in which
personal liability may arise. Personal liability
of a corporate director, trustee, or officer
along with the corporation may validly attach
when:

54. CIR vs. Metro Star Section 228 of the Tax Code clearly
Superama, Inc., G.R. requires that the taxpayer must first be
No. 185371, informed that he is liable for deficiency
December 8, 2010 taxes through the sending of a PAN. He
must be informed of the facts and the
law upon which the assessment is
made. The law imposes a substantive,
not merely a formal, requirement. To
proceed heedlessly with tax collection
without first establishing a valid
assessment is evidently violative of the
cardinal principle in administrative
investigations — that taxpayers should
be able to present their case and
adduce supporting evidence.
The BIR through a Letter of Authority caused the
examination of respondent's books of accounts
and other accounting records for income tax and
other internal revenue taxes for the taxable year
1999. For the latter's failure to comply with several
requests of the presentation of records and
subpoena duces tecum, the BIR Legal Division
issued an Indorsement to proceed with the
investigation based on the best evidence
obtainable preparatory to the issuance of
assessment notice.
Respondent received a preliminary 15-day letter
on 09 November 2001 and a Formal Letter of
Demand on 11 April 2002 assessing it with
deficiency VAT and withholding tax for the taxable
year 1999.
Whether or not the failure to
strictly comply with notice
requirements prescribed
under Section 228 of the
NIRC of 1997 and R.R. No
12-99 is tantamount to a
denial of due process.
1. He assents to the (a) patently unlawful act
of the corporation, (b) bad faith or gross
negligence in directing its affairs, or (c) conflict
of interest, resulting in damages to the
corporation, its stockholders, or other
persons;
2. He consents to the issuance of watered
down stocks or, having knowledge thereof,
does not forthwith file with the corporate
secretary his written objection thereto;
3. He agrees to hold himself personally and
solidarily liable with the corporation; or
4. He is made, by specific provision of law, to
personally answer for his corporate action.
Yes. The sending of a PAN to taxpayer to
inform him of the assessment made is but part
of the "due process requirement in the
issuance of a degiciency tax assessment", the
absence of which renders nugatory any
assessment made by the tax authorities. The
pursuasiveness of the right to due process
reaches both substantial and procedural rights
and the failure of the CIR to strictly comply
with the requirements laid down by law and its
own rules is a denial of Metro Star's right to
due process. Thus, for its failure to send the
PAN stating the facts and the law on which
the assessment was made as required by
Section 228 of RA No. 8424, the assessment
made by the CIR is void.
55. CIR vs. Enron Section 228 of the NIRC provides that
Subic Power Corp., the taxpayer shall be informed in writing
G.R. No. 166387, of the law and the facts on which the
January 19, 2009 assessment is made. Otherwise, the
assessment is void. To implement the
provisions of Section 228 of the NIRC,
RR No. 12-99 was enacted. Section
3.1.4 of the revenue regulation reads:
3.1.4. Formal Letter of Demand and
Assessment Notice.— The formal letter
of demand and assessment notice shall
be issued by the Commissioner or his
duly authorized representative. The
letter of demand calling for payment of
the taxpayer's deficiency tax or taxes
shall state the facts, the law, rules and
regulations, or jurisprudence on which
the assessment is based, otherwise, the
formal letter of demand and
assessment notice shall be void.The
same shall be sent to the taxpayer only
by registered mail or by personal
delivery.
It is clear from the foregoing that a
taxpayer must be informed in writing of
the legal and factual bases of the tax
assessment made against him. The use
of the word "shall" in these legal
provisions indicates the mandatory
nature of the requirements laid down
therein.
During the pre-assessment stage of the
investigation of respondent for the year 1996,
petitioner advised Enron`s representative of the
latter`s tax deficiency, informed it of the proposed
tax deficiency through a preliminary five-day letter
and furnished Enron a copy of the audit working
paper allegedly showing in detail the legal and
factual bases of the assessment notice, itemizing
therein the deductions disallowed and imposing
the preferential rate of 5% on some items
respondent categorized as costs. The legal and
factual bases were, however, not indicated.
Whether or not the No. The advice of tax deficiency given bu the
assessment notice sent to CIR to an employess of Enron, as well as the
respondent is valid. prelimnary five-day letter were not valid
substitutes for the mandatory notice in writing
of the legal and factual bases of the
assessment. These steps were mere
perfunctory discharges of the CIR`s duties in
correctly assessing a taxpayer,
The requirementof issuinga preliminary or
final notice, as the case may be, informing a
taxpayer of the existence of adeficeincy tax
assessment is markedly different from the
requirement of what such notice must contain.
Just because the CIR issued an advice, a
preliminary letter during the pre-assessment
stage and a final notice, in the order required
by law, does not necessarily mean that Enron
was informed of the law and facts on which
the deficiency tax assessment was made.
56. CIR vs. Isabela Section 228 of the National Internal
Cultural Corp., G.R. Revenue Code states that a delinquent
No. 135210, July 11, taxpayer may nevertheless directly
2001 appeal a disputed assessment, if its
request for reconsideration remains
unacted upon 180 days after
submission thereof. In this case, the
said period of 180 days had already
lapsed when respondent filed its
request for reconsideration on March
23, 1990, without any action on the part
of the CIR. Lastly, jurisprudence
dictates that a final demand letter for
payment of delinquent taxes may be
considered a decision on a disputed or
protested assessment.
57. CIR vs. Phil. Taxes are the lifeblood of the
Global government and so should be collected
Communication, Inc., without unnecessary hindrance. On the
G.R. No. 167146, other hand, such collection should be
October 31, 2006 made in accordance with law as any
arbitrariness will negate the very reason
for government itself. It is therefore
necessary to reconcile the apparently
conflicting interest of the authorities and
the taxpayers so that the real purpose
of taxation, which is the promotion of
common good, may be achieved.
Thus, the three-year statute of
limitations on the collection of an
assessed tax provided under Section
269(c) of the Tax Code of 1977, a law
enacted to protect the interests of the
taxpayer, must be given effect. In
providing for exceptions to such rule in
Section 271, the law strictly limits the
suspension of the running of the
prescription period to, among other
instances, protests wherein the
taxpayer requests for a reinvestigation.
Respondent received an assessment letter dated
09 February 1990 stating that it had delinquent
taxes due. It subsequently filed its motion for
reconsideration on 23 March 1990. In support of
its request for reconsideration, it sent to the CIR
additional documents on 18 April 1990. The next
communication respondent received was already
the Final Notice Before Seizure dated 10
November 1994.
Respondent on 21 April 1994 received a
Preliminary Assessment Notice (PAN) dated 13
April 1994 for deficiency income tax. The following
day, it received a Formal Assessment Notice
(FAN). It protested against the FAN in two protest
letters dated 06 May and 23 May 1994. In both
letters, respondent requested for the cancellation
of the tax assessment, which they alleged was
invalid for lack of factual and legal basis.
On 16 October 2002, respondent received from
the CIR a Final Decision dated 08 October 2002
denying respondent's protest against the FAN and
affirming the same in toto.
Whether or not the Final
Notice Before Seizure
constitutes the final decision
of the CIR appealable to the
CTA.
Whether or not the
respondent's administratice
protest embodied in two
letters suspended the
running of the statute of
limitation.
Yes. The Final Notice Before Seizure cannot
but be considered as the CIR`s decision
disposing of the request for reconsideration
filed by the respondent, who received no other
response to its request. Not only was the
Notice the only regarding the request for
consideration. The very title expressly
indicated that it was a final notice prior to
seizure of property. The letter itself clearly
stated that respondent was being given "the
LAST OPPORTUNITY" to pay; otherwise, its
properties would be subjected to distraint and
levy.
No. Where the taxpayer merely filed two
protest letters requesting for a
reconsideration, and where the BIR could not
have conducted a reinvestigation because no
new or addistional evidence was submitted,
the running of statute of limitations cannot be
interrupted.
58. Fishwealth Section 228 of the 1997 Tax Code Petitioner in a letter protested against the Final Whether otr not a motion for No. Since the petitioner received the denial of
Canning Corp. v. CIR, provides that an assessment: Assessment Notice (FAN) issued against it for reconsideration of the FDDA its administrative protest on 04 August 2005, it
G.R. No. 179343, 21 deficiency income tax and VAT. Thereafter, it tolls the period to appeal to had 30 days or until 30 September 2005 to file
January 2010 . . . may be protested administratively received on 04 August 2005 respondents` Final the CTA. a petition for review before the CTA Division.
by filing a request for reconsideration or Decision on Disputed Assessment (FDDA) It filed one, however, on 20 October 2005,
reinvestigation within thirty (30) days denying the protest, apprising tpetitioner of its tax hence it was filed out of time. A motion for
from receipt of the assessment in such liabilities, and requesting the immediate payment reconsideration of the denial of the
form and manner as may be prescribed thereof. It filed a Letter of Reconsideration on 01 administrative protest does not toll the 30-day
by implementing rules and regulations. September 2005. period to appeal to the CTA.
Within sixty (60) days from filing of the
protest, all relevant supporting After respondent demanded payment of its tax
documents shall have been submitted; liabilities in a Preliminary Collection Letter,
otherwise, the assessment shall petittioner filed a petition for review before the
become final. CTA on 20 October 2005. CTA dismissed the
petiotion for being filed out of time.
If the protest is denied in whole or in
part, or is not acted upon within one
hundred eighty (180) days from
submission of documents, the taxpayer
adversely affected by the decision or
inaction may appeal to the Court of Tax
Appeals within thirty (30) days from
receipt of the said decision, or from the
lapse of the one hundred eighty (180)-
day period; otherwise, the decision shall
become final, executory and
demandable.

In the case at bar, petitioner's

administrative protest was denied by
Final Decision on Disputed Assessment
dated August 2, 2005 issued by
respondent and which petitioner
received on August 4, 2005. Under the
above-quoted Section 228 of the 1997
Tax Code, petitioner had 30 days to
appeal respondent's denial of its protest
to the CTA.
59. Lascona Land In case of the inaction of
Co., Inc. vs. CIR, G.R. the CIR on the protested
No. 171251, March 5, assessment, the
2012 taxpayer has two
options, either: (1) file a
petition for review with
the CTA within 30 days
after the expiration of the
180-day period; or (2)
await the final decision of
the Commissioner on the
disputed assessment
and appeal such final
decision to the CTA
within 30 days after the
receipt of a copy of such
decision. These options
are mutually exclusive
and resort to one bars
the application of the
other.
CIR issued an Assessment Notice
against Lascona for alleged
deficiency income tax. Lascona filed
a letter protest, however, it was
denied by the BIR O-I-C for the
reason being that said case was not
elevated to the Court of Tax Appeals
as mandated by the provisions of the
last paragraph of Section 228 of the
Tax Code and said assessment
notice has become final, executory,
and demandable. Lascona appealed
the decision before the CTA. The
CIR, however, maintained that
Lascona's failure to timely file an
appeal with the CTA after the lapse
of the 180-day reglementary period
provided under Section 228 of the
National Internal Revenue Code
(NIRC) resulted in the finality of the
assessment.
CTA, in its Decision, nullified the
subject assessment. It 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.
Whether or not the subject
assessment
has become final, executory,
and demandable due to the
failure of petitioner to file an
appeal before the CTA
within
thirty (30) days from the
lapse
of the One Hundred Eighty
(180)-day period pursuant to
Section 228 of the NIRC.
NO. In arguing that the assessment became
final and executory by the sole reason that
petitioner failed to appeal the inaction of the
Commissioner within 30 days after the
180-day reglementary period, respondent, in
effect, limited the remedy of Lascona, as a
taxpayer, under Section 228 of the NIRC to
just one, that is - to appeal the inaction of the
Commissioner on its protested assessment
after the lapse of the 180-day period. This is
incorrect.
In the case of CIR v. Villa, it was already
established that the word "decisions" in
paragraph 1, Section 7 of Republic Act No.
1125, has been interpreted to mean the
decisions of the Commissioner of Internal
Revenue on the protest of the taxpayer
against the assessments. Definitely, the said
word does not signify the assessment itself.
We quote what this Court said aptly in a
previous case:
“In the first place, we believe the respondent
court erred in holding that the assessment in
question is the respondent Collector's
decision
or ruling appealable to it and that
consequently, the period of thirty days
prescribed by section 11 of Republic Act No.
1125 within which petitioner should have
appealed to the respondent court must be
counted from its receipt of said assessment.
Where a taxpayer questions an assessment
and asks the Collector to reconsider or cancel
the same because he (the taxpayer) believe
he is not liable, therefore, the assessment
becomes a "disputed assessment" that the
Collector must decide, and the taxpayer can
appeal to the Court of Tax Appeals only upon
receipt of the decision of the Collector on the
disputed assessment, . . . "
Therefore, as in Section 228, 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. Precisely,
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. More so, because the law and
jurisprudence have always contemplated a
scenario where the CIR will decide on the
protested assessment.

It must be emphasized, however, that in case

of the inaction of the CIR on the protested
assessment, while we reiterate − the taxpayer
has two options, either: (1) file a petition for
review with the CTA within 30 days after the
expiration of the 180-day period; or (2) await
the final decision of the Commissioner on the
disputed assessment and appeal such final
decision to the CTA within 30 days after the
receipt of a copy of such decision, these
options are mutually exclusive and resort to
one bars the application of the other.

Accordingly, considering that Lascona opted

to
await the final decision of the Commissioner
on the protested assessment, it then has the
right to appeal such final decision to the Court
by filing a petition for review within thirty days
after receipt of a copy of such decision or
ruling, even after the expiration of the 180-day
period fixed by law for the Commissioner of
Internal Revenue to act on the disputed
assessments. Thus, Lascona, when it filed an
appeal on April 12, 1999 before the CTA, after
its receipt of the Letter dated March 3, 1999
on March 12, 1999, the appeal was timely

60. CIR vs. Primetown In computing for the On March 11, 1999, Gilbert Yap,
Property Group, Inc., prescriptive period, a vice-chair of respondent Primetown
G.R. No. 162155, year is composed of 12 Property Group, Inc., applied for the
August 28, 2007 calendar months and not refund or credit of income tax
365 days. respondent paid in 1997. In Yap's
letter to petitioner BIR revenue
district officer Arturo V. Parcero
explained that the increase in the
cost of labor and materials and
difficulty in obtaining financing for
Whether or not a petition
was filed
within the two-year period.
made as it was filed within 30 days after
receipt of the copy of the decision.
YES.
Sec. 229. Recovery of Taxes Erroneously or
Illegally Collected. —
xxxx
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
projects and collecting receivables
caused the real estate industry to
slow down. As a consequence, while
business was good during the first
quarter of 1997, respondent suffered
losses amounting to P71,879,228
that year.
Revenue officer Elizabeth Y. Santos
required the respondent to submit
additional documents to support its
claim. Respondent compiled but its
claim was not acted upon. Thus, on
April 14, 2000, it filed a petition for
review in the CTA.
The CTA found that respondent filed
its final adjusted return on April 14,
1998. Thus, its right to claim a refund
or credit commenced on that date.
The CTA dismissed the petition as it
was filed beyond the two-year
prescriptive period for filing a judicial
claim for tax refund or tax credit. It
invoked Section 229 of the NIRC
wherein it provided the two-year
prescriptive period for the filing of
judicial claims which was equivalent
to 730 days. The year 2000 was a
leap year, thus, the respondent’s
petition was filed after 731 days.
CA reversed the CTA’s decision. The
rule that a year has 365 days applies,
notwithstanding the fact that a
particular year is a leap year. Hence,
this petition.
the Commissioner may, even without a 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.
The respondent’s petition was filed on April
14, 2000, which is the last day of the 24
thcalendar month from the day the respondent
filed its final adjusted return on April 14, 1998.
The conclusion of the CA that respondent filed
its petition for review in the CTA within the
two-year prescriptive period provided in
Section 229 of the NIRC is correct. Its basis,
however, is not.
Article 13 of the Civil Code and Section 31,
Chapter VIII, Book I of the Administrative
Code of 1987 deal with the same subject
matter – computation of legal periods. Under
the Civil Code, a year is equivalent to 365
days, whether it is a leap year or not. Under
the Administrative Code of 1987, a year is
composed of 12 calendar months. Based on
the two (2) laws, there exists a manifest
incompatibility in the manner of computing
legal periods. For this reason, the Supreme
Court held that Section 31, Chapter VIII, Book
I of the Administrative Code of 1987 shall
govern the computation of legal periods, being
the more recent law.
Respondent’s petition, which was filed on
April
14, 2000, was filed on the last day of the 24
thcalendar month from the day the respondent
filed its final adjusted return. Hence, it was
filed within the 2-year period.
61. CIR vs. Smart The person entitled to On May 25, 2001, respondent, Smart
Communication, Inc., claim a tax refund is the Communications, Inc., entered into
G.R. Nos. 179045-46, taxpayer. However, in three Agreements for Programming
August 25, 2010 case the taxpayer does and Consultancy Services with Prism
not file a claim for a Transactive (M) Sdn. Bhd. (Prism), a
refund, the withholding non-resident corporation duly
agent may file the claim. organized and existing under the
laws of Malaysia.
Under the agreements, Prism was to
provide programming and
consultancy services for the
installation of the Service Download
Manager (SDM) and the Channel
Manager (CM), and for the
installation and implementation of
Smart Money and Mobile Banking
Service SIM Applications (SIM
Applications) and Private Text
Platform (SIM Application).
On June 25, 2001, Prism billed the
respondent in the amount of
$547,822.45. Thinking that these
payments constitute royalties,
respondent withheld the amount of
$136,955.61 or P7,008,840.43,
representing the 25% royalty tax
under the RP-Malaysia Tax Treaty
Whether or not the YES.
respondent has the First, he is considered a "taxpayer" under the
right to file the claim for NIRC as he is personally liable for the
refund. withholding tax as well as for deficiency
assessments, surcharges, and penalties,
should the amount of the tax withheld be
finally found to be less than the amount that
should have been withheld under law. Second,
as an agent of the taxpayer, his authority to file
the necessary income tax return and to remit
the tax withheld to the government impliedly
includes the authority to file a claim for refund
and to bring an action for recovery of such
claim.
In this connection, it is however significant to
add that while the withholding agent has the
right to recover the taxes erroneously or
illegally collected, he nevertheless has the
obligation to remit the same to the principal
taxpayer. As an agent of the taxpayer, it is his
duty to return what he has recovered;
otherwise, he would be unjustly enriching
himself at the expense of the principal
taxpayer from whom the taxes were withheld,
and from whom he derives his legal right to file
a claim for refund.
62. Michel J. Lhuillier Statutes granting tax Petitioner, a corporation engaged in Whether or not surcharges NO. Surcharges and interests should not be
Pawnshop, Inc. vs. exemptions must be the pawnshop business, received and interest imposed against the petitioner.
CIR, G.R. No. 166786, construed in strictissimi assessment notices for deficiency should be imposed against The settled rule is that good faith and honest
September 11, 2006 juris against the taxpayer VAT and DST. the belief that one is not subject to tax on the
and liberally in favor of petitioner. basis of previous interpretation of government
the taxing authority. The case was elevated to the agencies tasked to implement the tax law are
Supreme Court. The lone question to sufficient justification to delete the imposition
be resolved therein was whether of surcharges and interest.
petitioner's pawnshop transactions
are subject to DST. The Supreme
Court ruled in the affirmative.

Petitioner now files a motion for

reconsideration of the decision of the
Supreme Court.

LOCAL GOVERNMENT TAXATION

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Manila Electric However, in order for an ordinance to be
Company v. City of valid, it must not only be within the LGU's
Muntinlupa, G.R. No. corporate powers to enact and passed
198529, February 9, according to the legal procedure, but it
2021 must also meet the following
requirements.
(1) not contrary to the Constitution or any
statute; (2) not unfair or oppressive;(3)
not partial or discriminatory; (4) not
prohibit but may regulate trade; (5)
general and consistent with public policy;
and (6) not unreasonable
Only provinces and localities have the
authority to collect a franchise tax.
Meralco has been granted a franchise to build,
operate, and maintain an energy distribution
system in the NCR's cities and municipalities. On
January 1, 1994, the Revenue Code was
amended. Mun. of Muntinlupa (MO 93-35) became
effective. Section 25 of the act levied a franchise
fee of 50% of 1% of the gross yearly receipts of the
prior calendar year on private persons or
businesses operating public utilities within its
territorial jurisdiction.
Muntinlupa City has been converted from a
municipality into a highly urbanized city by virtue of
RA 7926. Sec. 56 of it adopted all existing municipal
ordinances of the Municipality of Muntinlupa and
shall all continue to take effect within the City unless
its sangguniang panlungsod enacts an ordinance
providing otherwise. Barlis sent a letter to Meralco
demanding payment of the franchise tax it owed to
Muntinlupa City from 1992 to 1999.
WON Sec. 25 of MO 93-35 Ferrer, Jr. v. Bautista30 enumerates the
was cured by Sec. 56 of RA requirements for an ordinance to be valid,
7926. legally binding, and enforceable, to wit:
For an ordinance to be valid though, it must not
only be within the corporate powers of the LGU
to enact and must be passed according to the
procedure prescribed by law, it should also
conform to the following requirements: (1) not
contrary to the Constitution or any statute; (2)
not unfair or oppressive; (3) not partial or
discriminatory; (4) not prohibit but may regulate
trade; (5) general and consistent with public
policy; and (6) not unreasonable.31
Legaspi v. City of Cebu32 explains the two
tests in determining the validity of an
ordinance, i.e., the Formal Test and the
Substantive Test.33 The Formal Test requires
the determination of whether the ordinance
was enacted within the corporate powers of the
LGU, and whether the same was passed

Meralco likewise ignored the demand letters for
payment of the franchise tax on the premise that the
City of Muntinlupa, then a municipality, did not have
the power and authority to impose and collect a
franchise tax as the power and authority to impose
and collect a franchise tax lies with the provinces
and cities.
pursuant to the procedure laid down by law.
Meanwhile, the Substantive Test primarily
assesses the reasonableness and fairness of
the ordinance and significantly its compliance
with the Constitution and existing statutes.
As correctly ruled by the RTC and the CA, MO
93-35, particularly Section 25 thereof, has
failed to meet the requirements of a valid
ordinance. Applying the Formal Test, the
passage of the subject ordinance was beyond
the corporate powers of the then Municipality
of Muntinlupa, hence, ultra vires.
Based on the Substantive Test, Section 25 of
MO 93-35 deviated from the express provision
of RA 7160. While ordinances, just like other
laws and statutes, enjoy the presumption of
validity, they may be struck down and set aside
when their invalidity or unreasonableness is
evident on the face or has been established in
evidence.34 In this case, Section 25 of MO 93-
35 was evidently passed beyond the powers of
a municipality in clear contravention of RA
7160.
2. FDCP v. Colon When there is a clash WON there is a violation of YES. The Court struck down as invalid and
Heritage Realty between the inherent Congress passed R.A. 9167 creating the Film local fiscal autonomy unconstitutional Sections 13 and 14 of RA
Corp, City of Cebu, taxing power of the legislature and the Development Council of the Philippines (FDCP). 9167, essentially holding that these provisions
et. al. G.R. No. constitutionally-delegated power to tax Sections 13 and 14 thereof provide that the violated the principle of local fiscal autonomy
203754 (En Banc), local governments, the latter shall amusement tax on certain graded films which would because they authorized FDCP to earmark,
November 3, 2020. prevail. otherwise accrue to the cities and municipalities in and hence, effectively confiscate the
Metropolitan Manila and highly urbanized and amusement taxes which should have
independent component cities in the Philippines, otherwise inured to the benefit of the local
pursuant to Section 140 of R.A. 7160 or the LGC government units (LGUs).
during the period the graded film is exhibited,
should be deducted and withheld by the However, recognizing the existence of these
proprietors, operators, or lessees of cinemas and statutory provisions and the reliance of the
remitted to the FDCP. public thereto prior to their being declared
unconstitutional, the Court applied the doctrine
of operative fact and held, among others, that:
FDCP and the producers of graded films need
not return the amounts already received from
the LGUs because they merely complied with
the provisions of RA 9167 which were in effect
at that time; and
(2) any amounts retained by cinema
proprietors and operators due to FDCP at that
time should be remitted to the latter since
Sections 13 and 14 of RA 9167 produced legal
effects prior to their being declared
unconstitutional.
3. City of Makati v. nder local business tax, the rule on tax
Luzon Hydro Corp. allocation in relation to tax situs applies
et. al., G.R. No. when the business operates a branch,
225226, July 7, 2020 sales office outside its principal office,
but has a factory, project office or plant
situated in different localities, whether or
not sales are made.
Hence, a locality may have a claim on
the LBT of a company even if no sales
are made so long as the project office,
factory or plant is located within their area
or jurisdiction.
4. Philippine Heart
Center v. Quezon Real properties owned by the Republic,
City, G.R. No. whether it is in the name of the Republic
225409, March 11, itself or in the name of agencies or
2020 instrumentalities of the national
government, are exempt from real
property tax. In order to be classified as
a government instrumentality vested with
corporate powers, the following twin
requirements must be established:
Respondent Luzon Hydro Corp. (LHC) instituted
this interpleader case for the determination of the
rightful claims on LHC’s liability for local business
tax between Petitioner City of Makati, and
Respondent Municipality of Bakun and Alilem. LHC
operates a hydroelectric power plant harnessing
the Bakun River which passes through the
Provinces of Ilocos Sur and Benguet housing its
power station in Alilem, tunnels and weir in Bakun,
and an office in Makati City. After its 6 year tax
holiday, LHC proceeded to pay local business
taxes in these three political subdivision; dividing
the 70% portion of the local business tax (LBT)
equally between the three.
A resolution from Bakun questioned the sharing
scheme of the 70% portion of LBT and this was
submitted to the Bureau of Local Government and
Finance (BGLF) who was of the opinion that only
Bakun and Alilem should share in the LBT since
Makati office was a mere administrative office and
not a project office.
RTC held that LHC’s Makati office was a project
office entitling Makati to an equal share from their
70% LBT, albeit decreasing its share to 20%
instead as concession. This was reversed by the
CTA 1st Div. and En Banc holding that it is a mere
administrative office since none of their sales are
recorded and undertaken in Makati.
The Philippine Heart Center (PHC) was established
under P.D. 673 as a specialty hospital mandated to
provide cardiovascular care to the general public. It
exempted PHC from the payment of all taxes,
charges, fees imposed by the Government or any
political subdivision or instrumentality for ten years.
The government of Quezon City issued 3 final
Notices of Delinquency for the unpaid real property
taxes for the 11 properties of PHC in Quezon City.
The notices were unheeded. Thus, respondent
WON LHC’s Makati office
was a project office to
determine whether the City
of Makati had a right to the
70% of their local business
tax (LBT)
WON PHC is exempt from
paying real property taxes on
its properties in Quezon city
NO. The Makati office is a mere administrative
office. The City of Makati has no right to claim
from LHC’s LBT. A local business tax is a tax
on business imposed on gross sales recorded
hence, the consideration of the invoices and
records of sales are relevant. In this case,
LHC’s Makati office did not handle sales nor
does it operate any aspect or primary purpose
of LHC as provided in its Articles of
Incorporation. The rule on tax allocation in
relation to tax situs under R.A. 7160 come into
play when a business subject to it does not
operate a branch or sales office outside of its
principal office where all sales are recorded,
but has a factory, project office, plant or
plantation situated in different localities,
whether or not sales are made in these
localities.
Hence, even if no sales were recorded or
undertaken at LHC’s Makati office, Makati
would have been entitled to the share in the
portion if it could show that the Makati office
was a project office of LHC akin to a factory.
For failure to do so, it was concluded that it was
a mere administrative office since the office is
not directly involved in LHC’s production and
operations. Mere label of a project office does
not convert an administrative office into one
since the term, by its very nature, carries the
tax implications.
YES. The court held that PHC is a government
instrumentality with corporate powers exempt
from local taxes. Real properties owned by the
Republic, whether it is in the name of the
Republic itself or in the name of agencies or
instrumentalities of the national government,
are exempt from real property tax. Government
instrumentalities vested with corporate powers
or government corporate entities is recognized
as the third category of government agencies.
 a) it performs governmental functions, levied the PHC’s properties.
and
b) it enjoys operational autonomy. PHC and the Quezon City Government entered a
Memorandum of Agreement to settle PHC’s tax
liabilities. PHC was informed of the ruling in Manila
International Airport Authority v. Court of Appeals
where the court held that government entities are
exempt from taxes, fees, or charges of any kind
imposed by a local government unit. PHC then
withheld the efficacy of the MOA. Both parties then
forged a second MOA with the same stipulations.
However, PHC suspended its implementation and
reiterated its exemption from the payment of taxes.
The Quezon City Government stood firm on its
position that the PHC is still liable for real property
taxes since most of its properties were being leased
to private individuals.
It remains as a government instrumentality
because they are not integrated within the
department framework and are also vested
with special functions to carry out a policy of
the national government.
In order to be classified as a government
instrumentality vested with corporate powers,
the following twin requirements must be
established: a) it performs governmental
functions, and b) it enjoys operational
autonomy. In this case, PHC has satisfied both
requirements since it is under the supervision
of the DOH. The PHC’s functions are less
commercial than governmental. It is more for
public use and public welfare than for profit
oriented services.
The properties of PHC are properties of public
dominion devoted to public use and welfare.
Thus, it is exempt from real property taxes and
levy without prejudice to the liability of taxable
persons who benefit from the use of these
properties. The fact that PHC entered into
transactions regarding the said properties does
not detract the characterization of the
properties as that of the public dominion and
for public use.
However, citing various jurisprudence, the
court held that the respondents’ argument is
correct. The properties of PHC leased to
private individuals are no longer covered by tax
exemptions. However, it does not validate the
respondents’ acts of assessing, levying, and
selling the 11 properties of PHC. Respondents’
recourse is through judicial action for collection
of real property taxes against the private
individuals benefited
5. City of Davao v. AP Coconut Industry Investment Fund (CIIF)
Holdings Inc., G.R. companies, including APHI, are public
No. 245887, January assets owned by the Republic of the
22, 2020. Philippines. These companies are not
liable to pay local business taxes on its
dividend earnings. They cannot be
considered as a non-bank financial
intermediary since its investment and
placement of funds are not done in a
regular or recurring manner for the
purpose of earning profit.
The Coconut Industry Investment Fund (CIIF) is a
fund form part of the levy imposed on the initial sale
by coconut farmers and other coconut products.
Sometime in 1983, the CIIF bought shares of stock
from SMC. It then established 14 holding
companies, one of which is APHI, for the sole
purpose of owning and holding SMC shares. APHI
received cash and stock dividends from its SMC
preferred shares.
These dividends were deposited in a trust account
which earned interest from market placements. In
1986, APHI’s SMC shares were sequestered by the
PCGG.
Petitioner, through its City Treasurer, issued a
Business Tax Order of Payment directing APID to
pay 0.55 % local business tax. APHI paid the
assessment under protest. It filed an administrative
claim for refund or tax credit with the City Treasure.
RTC ruled that APHI's primary purpose resembles
the definition of a financial intermediary. CTA-
Division affirmed RTC’s decision. CTA En Banc
reversed and declared APHI entitled to a tax refund
or credit.
WON APHI is liable to pay
local business taxes on its
dividend earnings from its
SMC preferred shares, since
it is a CIIF holding company.
NO. In the recent case of City of Davao, et al.
v. Randy Allied Ventures, Inc. (RAVI), the
Court ordained that RAVI, a CIIF holding
company like APHI, was exclusively
established to own and hold SMC shares of
stock. As such, it is not liable to pay local
business taxes on the dividends earned from
its SMC preferred shares as the same shares
are government assets owned by the national
government for the benefit of the coconut
industry.
Therefore, CIIF companies, including APHI
itself, are public assets owned by the Republic
of the Philippines. Consequently, dividends
and any income from these shares are also
owned by the Republic. On this score, APHI
cannot be considered as a non-bank financial
intermediary since its investment and
placement of funds are not done in a regular or
recurring manner for the purpose of earning
profit. Rather, its management of dividends
from the SMC shares is only in furtherance of
its purpose as a CIIF company for the benefit
of the Republic.
6. Mactan Cebu Under Section 2(10) and (13) of the
International Airport Introductory Provisions of the
Authority (MCIAA) v. Administrative Code, MIAA is a
City of Lapu-Lapu, government instrumentality and not a
G.R. No. 181756, government-owned or controlled
15/06/2015 corporation. Under Section 133(o) of the
Local Government Code, MIAA as a
government instrumentality is not a
taxable person because it is not subject
to “[t]axes, fees or charges of any kind”
by local governments. The only
exception is when MIAA leases its real
property to a “taxable person” as
provided in Section 234(a) of the Local
Government Code, in which case the
specific real property leased becomes
subject to real estate tax. Thus, only
portions of the Airport Lands and
Buildings leased to taxable persons like
private parties are subject to real estate
tax.
7. Smart "If the generating of revenue is the
Communications, primary purpose and regulation is merely
Inc. v. Municipality of incidental, the imposition is a tax; but if
Malvar, Batangas, regulation is the primary purpose, the
G.R. No. 20442. fact that incidentally revenue is also
February 18, 2014 obtained does not make the imposition a
tax." Section 142 of the LGC grants
municipalities the power to levy taxes,
fees, and charges not otherwise levied
by provinces. Section 143 of the LGC
provides for the scale of taxes on
business that may be imposed by
municipalities while Section 147 of the
same law provides for the fees and
charges that may be imposed by
municipalities on business and
occupation.
Petitioner Mactan-Cebu International Airport
Authority (MCIAA) was created by Congress to
undertake the effective control and management
and supervision of the Mactan International Airport,
Lahug Airport, and other airports as may be
established by the Province of Cebu. MCIAA
enjoyed exemption from realty taxes as per RA
6958. However, the Supreme Court ruled in
another case that MCIAA was no longer exempt
from real estate taxes upon the effectivity of the
Local Government Code of 1991.
Smart constructed a telecommunications tower
within the territorial jurisdiction of the Municipality of
Malvar. The Municipality passed Ordinance No. 18,
series of 2003, entitled "An Ordinance Regulating
the Establishment of Special Projects." Smart
received an assessment letter with a schedule of
payment its telecommunications tower. Smart filed
a protest, claiming lack of due process in the
issuance of the assessment and closure notice. In
the same protest, Smart challenged the validity of
Ordinance No. 18 on which the assessment was
based.
Whether or not the petitioner
is a government
instrumentality exempt from
paying real property taxes.
Whether or not the fees
imposed under Ordinance
No. 18 are taxes.
YES. MIAA is not a government-owned or
controlled corporation under Section 2(13) of
the Introductory Provisions of the
Administrative Code because it is not
organized as a stock or non-stock corporation.
Neither is MIAA a government-owned or
controlled corporation under Section 16, Article
XII of the1987 Constitution because MIAA is
not required to meet the test of economic
viability. MIAA is a government instrumentality
vested with corporate powers and performing
essential public services pursuant to Section
2(10) of the Introductory Provisions of the
Administrative Code. As a government
instrumentality, MIAA is not subject to any kind
of tax by local governments under Section
133(o) of the Local Government Code. The
exception to the exemption in Section 234(a)
does not apply to MIAA because MIAA is not a
taxable entity under the Local Government
Code. Such exception applies only if the
beneficial use of real property owned by the
Republic is given to a taxable entity.
NO. The purpose of the assailed Ordinance is
to regulate the enumerated activities
particularly related to the construction and
maintenance of various structures. The fees in
Ordinance No. 18 are not impositions on the
building or structure itself; rather, they are
impositions on the activity subject of
government regulation, such as the installation
and construction of the structures.
Since the main purpose of Ordinance No. 18 is
to regulate certain construction activities of the
identified special projects, which included "cell
sites" or telecommunications towers, the fees
imposed in Ordinance No. 18 are primarily
regulatory in nature, and not primarily revenue-
raising. While the fees may contribute to the
revenues of the Municipality, this effect is

8. The City of Manila, While there is no express grant of such
etc. et al. v. Hon. power, with respect to the CTA, Section
Caridad H. Grecia- 1, Article VIII of the 1987 Constitution
Cuerdo etc., et al, provides, nonetheless, that judicial
G.R. No. 175723. power shall be vested in one Supreme
February 4, 2014. Court and in such lower courts as may be
established by law and that judicial
power includes the duty of the courts of
justice to settle actual controversies
involving rights which are legally
demandable and enforceable, and to
determine whether or not there has been
a grave abuse of discretion amounting to
lack or excess of jurisdiction on the part
of any branch or instrumentality of the
Government.
Private respondents filed with the Regional Trial
Court a complaint denominated as one for “Refund
or Recovery of Illegally and/or Erroneously-
Collected Local Business Tax, Prohibition with
Prayer to Issue TRO and Writ of Preliminary
Injunction” against City of Manila before public
respondent’s sala alleging that, in relation to
Section 21 thereof, Sections 14, 15, 16, 17, 18, 19
and 20 of the RRCM were violative of the limitations
and guidelines under Section 143 (h) of Republic
Act No. 7160[Local Government Code] on double
taxation. The CA dismissed petitioners’ petition for
certiorari holding that it has no jurisdiction over the
said petition since appellate jurisdiction over private
respondents’ complaint for tax refund, which was
filed with the RTC, is vested in the Court of Tax
Appeals (CTA), pursuant to its expanded
jurisdiction under Republic Act No. 9282 (RA 9282).
Whether or not the CTA has
jurisdiction over a special
civil action for certiorari
assailing an interlocutory
order issued by the RTC in a
local tax case.
merely incidental. Thus, the fees imposed in
Ordinance No. 18 are not taxes.
YES. While there is no express grant of such
power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides
that judicial power shall be vested in one
Supreme Court and in such lower courts as
may be established by law and that judicial
power includes the duty of the courts of justice
to settle actual controversies involving rights
which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the
Government.
Therefore, CTA can determine whether or not
there has been grave abuse of discretion
amounting to lack or excess of jurisdiction on
the part of the RTC in issuing an interlocutory
order in cases falling within the exclusive
appellate jurisdiction of the tax court. Thus,
CTA, by constitutional mandate, is vested with
jurisdiction to issue writs of certiorari in these
cases.
9. Coca-Cola Section 252 (c) of the Local Government
Bottlers Philippines, Code of the Philippines is very clear that
Inc. vs. City of Manila "[i]n the event that the protest is finally
et. al., G.R. No. decided in favor of the taxpayer, the
197561, April 7, 2014. amount or portion of the tax protested
shall be refunded to the protestant, or
applied as tax credit against his existing
or future tax liability." It was not
necessary for petitioner to move for the
issuance of the writ of execution because
the remedy has already been provided
by law.
10. Government Beneficial Use Doctrine: SEC. 234.
Service Insurance Exemptions from Real Property Tax. –
System vs. City The following are exempted from
Treasurer and City payment of the real property tax:
Assessor of the City
of Manila, G.R. No. (a) Real property owned by the Republic
186242, December of the Philippines or any of its political
23, 2009. subdivisions except when the beneficial
use thereof has been granted, for
consideration or otherwise, to a taxable
person.
This exemption, however, must be read
in relation with Sec. 133(o) of the LGC,
which prohibits LGUs from imposing
taxes or fees of any kind on the national
government, its agencies, and
instrumentalities.
In the case entitled Coca-Cola Bottlers Philippines,
Inc. v. City of Manila, et al., docketed as Civil Case
No. 00-97081, granting petitioner’s request for tax
refund or credit assessed under Section 213 of the
Revenue Code of Manila upon finding that there
was double taxation in the imposition of local
business taxes. Petitioner filed with the RTC-Manila
a Motion for Execution for the enforcement of the
Decision and the issuance of the corresponding writ
of execution. However, respondents filed a Motion
to Quash Writ of Execution and it was granted.
Hence, petitioner's appeal.
GSIS owns or used to own two (2) parcels of land
located at Katigbak, Manila (Katigbak property),
and the other, at Concepcion, Manila (Concepcion-
Arroceros property). Title to the Concepcion-
Arroceros property was transferred to this Court in
2005 pursuant to Proclamation No. 835 dated April
27, 2005. Both the GSIS and the Metropolitan Trial
Court (MeTC) of Manila occupy the Concepcion-
Arroceros property, while the Katigbak property
was under lease. the City Treasurer of Manila
issued separate Notices of Realty Tax Delinquency
for the subject properties, with the usual warning of
seizure and/or sale. On October 8, 2002, GSIS,
through its legal counsel, wrote back emphasizing
the GSIS’ exemption from all kinds of taxes,
including realty taxes, under Republic Act No. (RA)
8291.
Whether or not the issuance
of the writ of execution of the
judgment ordering
respondents either to refund
or credit the tax assessed
under Section 2118 of the
Revenue Code of Manila
was proper.
1. Whether GSIS under its
charter is exempt from real
property taxation. 2.
Assuming that it is so
exempt, whether GSIS is
liable for real property taxes
for its properties leased to a
taxable entity.
NO. The issuance of the Writ of Execution was
superfluous. Instead of moving for the
issuance of a writ of execution relative to the
aforesaid Decision, petitioner should have
merely requested for the approval of the City of
Manila in implementing the tax refund or tax
credit, whichever is appropriate. In other
words, no writ was necessary to cause the
execution thereof, since the implementation of
the tax refund will effectively be a return of
funds by the City of Manila in favor of petitioner
while a tax credit will merely serve as a
deduction of petitioner’s tax liabilities in the
future.
1. YES. RA 8291 restored in 1997 the tax
exempt status of GSIS by reenacting under its
Sec. 39 what was once Sec. 33 of P.D. 1146.
The subject properties under GSIS’s name are
likewise owned by the Republic. The GSIS is
but a mere trustee of the subject properties
which have either been ceded to it by the
Government or acquired for the enhancement
of the system.
2. YES. The Republic to grant the beneficial
use of its property to an agency or
instrumentality of the national government.
Such grant does not necessarily result in the
loss of the tax exemption. The tax exemption
the property of the Republic or its
instrumentality carries ceases only if, as stated
in Sec. 234(a) of the LGC of 1991, "beneficial
use thereof has been granted, for a
consideration or otherwise, to a taxable
person." GSIS, as a government
instrumentality, is not a taxable juridical person
under Sec. 133(o) of the LGC. GSIS, however,
lost in a sense that status with respect to the
Katigbak property when it contracted its
beneficial use to MHC, doubtless a taxable
person.
11. Team Pacific The proper remedy from the denial of an TPC is a DC engaged in the business of
Corporation vs. Daza assessment protest by a local treasurer assembling and exporting semiconductor devices.
as Municipal is an ordinary appeal, and not Rule 65 It had been paying local business taxes assessed
Treasurer of Taguig, petition on certiorari as the local at one-half (1/2) rate pursuant to Section 75 (c) of
G.R. No. 167732, July treasurer is not exercising judicial or the Taguig Revenue Code granted to exporters of
11, 2012 quasi- judicial function in assessing one’s essential commodities as enumerated therein.
taxes and/or denying its protest. TPC is a DC engaged in the business of
assembling and exporting semiconductor devices.
It had been paying local business taxes assessed
at one-half (1/2) rate pursuant to Section 75 (c) of
the Taguig Revenue Code granted to exporters of
essential commodities as enumerated therein.
12. Republic of the In the absence of a clear language of the The Public Estates Authority (PEA) is a government
Philippines law imposing tax, the local government corporation created by virtue of P.D. No. 1084. It
represented by the unit is prohibited from imposing tax was designated as the agency primarily
Philippine against the national government, its responsible for integrating, directing and
Reclamation agencies and instrumentalities. coordinating all reclamation projects for and on
Authority vs. City of behalf of the National Government by virtue of E.O.
Paranaque, G.R. No. No. 525. PEA was transformed into Philippine
191109, July 18, Reclamation Authority (PRA) by E.O. No. 380. By
2012. virtue of its mandate, PRA reclaimed several
portions of the foreshore and offshore areas of
Manila Bay, including those located in Parañaque
City. The Parañaque City Treasurer issued
Warrants of Levy on PRA's reclaimed properties
(Central Business Park and Barangay San
Dionisio) located in Parañaque City based on the
assessment for delinquent real property taxes for
tax years 2001 and 2002. PRA filed a Motion for
Leave to File and Admit Attached Supplemental
Petition which sought to declare as null and void the
assessment for real property taxes, the levy based
on the said assessment, the public auction sale
conducted on April 7, 2003, and the Certificates of
Sale issued pursuant to the auction sale. RTC
dismissed PRA's petition.
NO. It is well settled that certiorari is available
only when directed against an officer
exercising judicial or quasi-judicial function
who has acted with grave abuse of discretion
amounting to lack or excess of jurisdiction and
that there is no appeal nor any plain, speedy,
and adequate remedy in the ordinary course of
law. TPC erroneously availed of the wrong
remedy in filing a Rule 65 petition. The
Municipal Treasurer cannot be said to be
performing a judicial or quasi- judicial function
in assessing TPC's business tax and/or
effectively denying its protest. Such actions are
not the proper subjects of a Rule 65 petition for
certiorari which is an extraordinary remedy
designed for the correction of errors of
jurisdiction and not errors of judgment.
Whether or not the local NO. PRA is a government instrumentality
government of Parañaque vested with corporate powers and performing
City may impose Real an essential public service pursuant to Section
Property Tax against 2 (10) of the Introductory Provisions of the
Philippine Reclamation Administrative Code. Being an incorporated
Authority (PRA). government instrumentality, it is exempt from
payment of real property tax. Clearly,
respondent has no valid or legal basis in taxing
the subject reclaimed lands managed by PRA.
On the other hand, Section 234 (a) of the LGC,
in relation to its Section 133 (o), exempts PRA
from paying realty taxes and protects it from
the taxing powers of local government units. It
is clear from Section 234 that real property
owned by the Republic of the Philippines (the
Republic) is exempt from real property tax
unless the beneficial use thereof has been
granted to a taxable person. In this case, there
is no proof that PRA granted the beneficial use
of the subject reclaimed lands to a taxable
entity. There is no showing on record either
that PRA leased the subject reclaimed
properties to a private taxable entity. This
exemption should be read in relation to Section
133 (o) of the same Code, which prohibits local
governments from imposing "[t]axes, fees or
charges of any kind on the National
Government, its agencies and
instrumentalities . . . ." The Administrative
Code allows real property owned by the
Republic to be titled in the name of agencies or
instrumentalities of the national government.
Such real properties remain owned by the
Republic and continue to be exempt from real
estate tax. The rationale behind Section 133
(o) has also been explained in the case of the
Manila International Airport Authority, to wit:
Section 133(o) recognizes the basic principle
that local governments cannot tax the national
government, which historically merely
delegated to local governments the power to
tax. While the 1987 Constitution now includes
taxation as one of the powers of local
governments, local governments may only
exercise such power "subject to such
guidelines and limitations as the Congress may
provide." When local governments invoke the
power to tax on national government
instrumentalities, such power is construed
strictly against local governments. Another rule
is that a tax exemption is strictly construed
against the taxpayer claiming the exemption.
However, when Congress grants an exemption
to a national government instrumentality from
local taxation, such exemption is construed
liberally in favor of the national government
instrumentality. Section 133 of the Local
Government Code states that "unless
otherwise provided" in the Code, local
governments cannot tax national government
instrumentalities. This doctrine emanates from
the "supremacy" of the National Government
over local governments.
13. Sta. Lucia Realty The authority to collect real property
& Development, Inc. taxes is vested in the locality where the
vs. City of Pasig, property is situated. However, while a
G.R. No. 166838, local government unit is authorized under
June 15, 2011. several laws to collect real estate tax on
properties falling under its territorial
jurisdiction, it is imperative to first show
that these properties are unquestionably
within its geographical boundaries.
Petitioner Sta. Lucia is the registered owner of
several parcels of land with 3 TCTs, which were all
located in Barrio Tatlong Kawayan, Municipality of
Pasig. The parcel of land covered by TCT No.
39112 was consolidated with that covered by TCT
No. 518403, which was situated in Barrio Tatlong
Kawayan, Municipality of Cainta, Province of Rizal.
Secondly, TCT No. 39110 was also divided into two
lots, becoming TCT Nos. 92869 and 92870. Thirdly,
the lot covered by TCT No. 38457 was not
segregated, but a commercial building owned by
Sta. Lucia East Commercial Center, Inc., a
separate corporation, was built on it. Upon Pasig’s
petition to correct the location stated in TCT Nos.
532250, 598424, and 599131, the Land
Registration Court ordered the amendment of the
TCTs to read that the lots with respect to TCT No.
39112 were located in Barrio Tatlong Kawayan,
Pasig City. Cainta filed a petition for the settlement
of its land boundary dispute with Pasig before the
RTC Antipolo. Meanwhile, Pasig filed a Complaint
against Sta. Lucia for the collection of real estate
taxes, including penalties and interests, on the lots
covered by TCT Nos. 532250, 598424, 599131,
92869, 92870 and 38457, including the
improvements thereon. Sta. Lucia, in its Answer,
alleged that it had been religiously paying its real
estate taxes to Cainta, just like what its
predecessors-in-interest did, by virtue of the
demands and assessments made and the Tax
Declarations issued by Cainta on the claim that the
subject properties were within its territorial
jurisdiction. Sta. Lucia and Cainta thereafter moved
for the suspension of the proceedings, and claimed
that the pending petition in the Antipolo RTC, for the
settlement of boundary dispute between Cainta and
Pasig, presented a "prejudicial question" to the
resolution of the case. Pasig maintains that the
boundary dispute case before the Antipolo RTC is
independent of the complaint for collection of realty
taxes which was filed before the Pasig RTC. It
avers that the doctrine of "prejudicial question,"
Whether or not the YES. The resolution of the boundary dispute
settlement of boundary between Pasig and Cainta would determine
dispute between Cainta and which local government unit is entitled to
Pasig presented a collect realty taxes from Sta. Lucia. Under
"prejudicial question" to the Presidential Decree No. 464 or the "Real
resolution of the case for Property Tax Code," the authority to collect real
collection of real estate property taxes is vested in the locality where
taxes. the property is situated. However, while a local
government unit is authorized under several
laws to collect real estate tax on properties
falling under its territorial jurisdiction, it is
imperative to first show that these properties
are unquestionably within its geographical
boundaries. Clearly therefore, the local
government unit entitled to collect real property
taxes from Sta. Lucia must undoubtedly show
that the subject properties are situated within
its territorial jurisdiction; otherwise, it would be
acting beyond the powers vested to it by law.
Although it is true that "Pasig" is the locality
stated in the TCTs of the subject properties,
both Sta. Lucia and Cainta aver that the metes
and bounds of the subject properties, as they
are described in the TCTs, reveal that they are
within Cainta's boundaries. This only means
that there may be a conflict between the
location as stated and the location as
technically described in the TCTs. Mere
reliance therefore on the face of the TCTs will
not suffice as they can only be conclusive
evidence of the subject properties' locations if
both the stated and described locations point
to the same area. The Antipolo RTC, wherein
the boundary dispute case between Pasig and
Cainta is pending, would be able to best
determine once and for all the precise metes
and bounds of both Pasig's and Cainta's
respective territorial jurisdictions. The
resolution of this dispute would necessarily
ascertain the extent and reach of each local
government's authority, a prerequisite in the
 which has a definite meaning in law, cannot be proper exercise of their powers, one of which
invoked where the two cases involved are both civil. is the power of taxation.

14. Republic of the The denial by the RTC to issue an On 8 August 1997, the DOTC entered into a Whether or not it was YES. This case is, ultimately, between a local
Philippines injunction or TRO does not automatically Revised and Restated Agreement to Build, Lease premature for the RTC to government's power to tax and the natio
(Department of give respondent the liberty to proceed and Transfer a Light Rail System for EDSA (BLT) issue a writ of possession. government's privilege of tax examption. That
Transportation and with the actions sought to be enjoined with Metro Rail Transit Corporation Limited (Metro issue needs full hearing and deliberation, as
Communications) vs Rail), a foreign corporation. Under the BLT indeed, the issue pends before the RTC, at first
City of Agreement, Metro Rail shall be responsible for the instance. Such trial of facts and issues must
Mandaluyong, G.R. design, construction, equipping, completion, proceed. It shoud not be pr-empted by the
No. 184879, February testing, and commissioning of the Light Rail Transit present petition that deals with the
23, 2011. System-LRTS Phase I The DOTC shall operate the respondent's intended end result. A writ of
same but ownership of the EDSA MRT III shall possession is a mere incident in In the instant
remain with Metro Rail during the Revenue and case, it stemmed from the exercise of alleged
Construction periods. At the end of the Revenue ownership by respondent over EDSA MRT III
Period, Metro Rail shall transfer to DOTC its properties by virtue of a tax delinquency sale.
Petitioner Republic filed a case for Declaration of The issue of whether the auction sale should
Nullity of Real Property Tax Assessment and be enjoined is still pending before the Court of
Warrant of Levy with a prayer for a Temporary Appeals. the transfer of title. Pending
Restraining Order (TRO) and Writ of Preliminary determination, it is premature for respondent to
Injunction. On the same date, the City Treasurer have conducted the auction sale and caused
issued and served a Warrant of Levy upon MRTC the transfer of title over the real properties to its
with the corresponding Notices of Levy upon the name. The denial by the RTC to issue an
City Assessor and the Registrar of Deeds of injunction or TRO does not automatically give
Mandaluyong City. Petitioner Republic alleged that respondent the liberty to proceed with the
since Metro Rail had transferred to the DOTC the actions sought to be enjoined, especially so in
actual use, possession and operation of the EDSA this case where a certiorari petition assailing
MRT III System, Metro Rail or MRTC does not have the denial is still being deliberated in the Court
actual or beneficial use and possession of the of Appeals. All the more it is premature for the
EDSA MRT III properties as to subject it to payment RTC to issue a writ of possession where the
of real estate taxes. On the other hand, ownership of the subject properties is derived
notwithstanding the transfer to DOTC of the actual from an auction sale, the validity of which is still
use, possession and operation of the EDSA MRT being threshed out in the Court of Appeals. The
III, petitioner Republic is not liable because local RTC should have held in abeyance the
government units are legally proscribed from issuance of a writ of possession. At this
imposing taxes of any kind on it under Section juncture, the writ issued is premature and has
133(o) of Republic Act No. 7160. Likewise, under no force and effect.
Section 234 of the same law, petitioner is exempted
from payment of real property tax. On the same
date, the City Treasurer issued and served a
Warrant of Levy upon MRTC with the
corresponding Notices of Levy upon the City
Assessor and the Registrar of Deeds
Consequently, on 24 March 2006, a public auction
was conducted. For lack of bidders, the real
properties were forfeited in favor of the City of
Mandaluyong for the price of P1,483,700,100.18. of
Mandaluyong City. MRTC filed a complaint-in-
intervention and sought to declare the nullity of the
real property tax assessments. Meanwhile,
respondent manifested before the Court of Appeals
that due to the failure of MRTC to exercise the right
of redemption, the City Treasurer of Mandaluyong
executed a Final Deed of Sale in favor of the
purchaser in the auction sale. On 30 July 2008, the
RTC Branch 213, through Judge Carlos A.

15. Alejandro Ty v. The Municipal or City Assessor cannot
Hon. Trampe,et al., solely prepare schedules of market
G.R. No. 117577, values. There should be a meeting
December 1, 1995 between the Local Treasury and
Assessment District where different
assessors shall compare their individual
assessments, discuss and thereafter
jointly agree and produce a schedule of
values for their district, taking into
account the preamble of said P.D. that
they should evolve "a progressive
revenue raising program that will not
unduly burden the taxpayers". The
schedule jointly agreed upon by the
assessors shall then be published in a
newspaper of general circulation and
submitted to the Sanggunian concerned
for enactment by ordinance.
Valenzuela, granted the petition for the issuance of
a writ of possession.
Petitioner Alejandro B. Ty is a resident of and
registered owner of lands and buildings in the
Municipality (now City) of Pasig, while petitioner
MVR Picture Tube, Inc. is a corporation duly
organized and existing under Philippine laws and is
likewise a registered owner of lands and buildings
in the said Municipality. Respondent Assessor sent
a notice of assessment respecting certain real
properties of petitioners located in Pasig, Metro
Manila. In a letter dated 18 March 1994, petitioners
through counsel requested the Municipal Assessor
to reconsider the subject . assessments .
Petitioners filed with the RTC presided by
respondent Judge a Petition for Prohibition with
prayer for a restraining order and/or writ of
preliminary injunction to declare null and void the
new tax assessments and to enjoin the collection of
real estate taxes based on said assessments.
respondent Judge denied the petition "for lack of
merit". Their MR was also denied. Rebuffed by said
Decision and Order, petitioners filed this present
Petition for Review directly before this Court, raising
pure questions of law. The petitioners argue that
the assessment is void for failure to comply with PD
921 which provides for the preparation of schedule
of values within Metro Manila to be prepared jointly
by the City Assessors of the districts within said
area. However, respondents argue that PD 921
was impliedly repealed by the Local Government
Code of 1991 as the same vests the authority to
assess with the Municipal/City Assessors.
Wheher or not R.A. 7160,
otherwise known as the
Local Government Cod of
1991, repealed the
provisions of PD No. 921.
NO, Both laws can be harmonized.
Presidential Decree No. 921 was promulgated
on 12 April 1976, with the aim of, inter alia,
evolving "a progressive revenue raising
program that will not unduly burden the tax
payers . . . " in Metropolitan Manila. Hence, it
provided for the "administration of local
financial services in Metropolitan Manila" only,
and for this purpose, divided the area into four
Local Treasury and Assessment Districts,
regulated the duties and functions of the
treasurers and assessors in the cities and
municipalities in said area and spelled out the
process of assessing, imposing and
distributing the proceeds of real estate taxes
therein. Upon the other hand, Republic Act No.
7160, otherwise known and cited as the Local
Government Code of 1991 took effect on 01
January 1992. It declared "genuine and
meaningful local autonomy" as a policy of the
state. Such policy was meant to decentralize
government "powers, authority, responsibilities
and resources" from the national government
to the local government units "to enable them
to attain their fullest development as self-
reliant communities and make them more
effective partners in the attainment of national
goals." In the formulation and implementation
of policies and measures on local autonomy,
''local government units may group
themselves, consolidate or coordinate their
efforts, services and resources for purposes
commonly beneficial to them." From the above,
it is clear that the two laws are not co-extensive
and mutually inclusive in their scope and
purpose. While R.A. 7160 covers almost all
governmental functions delegated to local
government units all over the country, P.D. 921
embraces only the Metropolitan Manila area
and is limited to the administration of financial
services therein, especially the assessment
and collection of real estate (and some other
local) taxes. Coming down to specifics, Sec. 9
of P.D. 921 requires that the schedule of values
of real properties in the Metropolitan Manila
area shall be prepared jointly by the city
assessors in the districts created therein: while
Sec. 212 of R.A. 7160 states that the schedule
shall be prepared "by the provincial, city and
municipal assessors of the municipalities
within the Metropolitan Manila Area for the
different classes of real property situated in
their respective local government units for
enactment by ordinance of the Sanggunian
concerned. . . ." Harmony in these provisions is
not only possible, but in fact desirable,
necessary and consistent with the legislative
intent and policy. By reading together and
harmonizing these two provisions, we arrive at
the following steps in the preparation of the
said schedule, as follows: The assessor in
each municipality or city in the Metropolitan
Manila area shall prepare his/her proposed
schedule of values, in accordance with Sec.
212, R.A. 7160. Then, the Local Treasury and
Assessment District shall meet, per Sec. 9,
P.D. 921. In the instant case, that district shall
be composed of the assessors in Quezon City,
Pasig, Marikina, Mandaluyong and San Juan,
pursuant to Sec. 1 of said P.D. In this meeting,
the different assessors shall compare their
individual assessments, discuss and thereafter
jointly agree and produce a schedule of values
for their district, taking into account the
preamble of said P.D. that they should evolve
"a progressive revenue raising program that
 will not unduly burden the taxpayers". The
schedule jointly agreed upon by the assessors
shall then be published in a newspaper of
general circulation and submitted to the
Sanggunian concerned for enactment by
ordinance, per Sec. 212, R.A. 7160

16. Coca-Cola Procedural measure are needed to be The City Mayor of Manila approved Tax Ordinance Whether or not the Tax The Tax Ordinance No. 7988 has already been
Bottlers Phils. Inc. v. followed for the effectivity of and no. 7988 repealing Tax Ordinance no. 7794 Ordinance is null and void for declared by the DOJ Secretary, in its Order,
City of Manila, GR Ordinance. As mandated by Section 188 entitles, “Revenue Code of the City of Manila” Tax being published only once. dated 17 August 2000, as null and void and
No. 156252, June 27, of the Local Government Code of 1991, Ordinance no. 7988 amended certain sections of without legal effect due to respondents' failure
2006 the petitioners failed to publish Tax Tax Ordinance no. 7794 by increasing the rates to satisfy the requirement that said ordinance
Ordinance No. 7988 for three applicable to certain establishments operating be published for three consecutive days as
consecutive days in a newspaper of local within the territorial jurisdiction of the City of Manila, required by law and it had attained finality after
circulation. including herein petitioner Coca-Cola. Subject tax the lapse of the period to appeal.
ordinance was published only once. Aggrieved by
said tax ordinance, petitioner filed a Petition before The RTC of Manila reiterated the findings of the
the DOJ. On August 17, 2000, then DOJ Secretary DOJ Secretary that respondents failed to follow
issued a Resolution declaring the Tax Ordinance the procedure in the enactment of tax
no 7988 null and void and without legal effect. measures as mandated by Section 188 of the
Local Government Code of 1991, in that they
failed to publish Tax Ordinance No. 7988 for
three consecutive days in a newspaper of local
circulation. From the foregoing, it is evident
that Tax Ordinance No. 7988 is null and void
as said ordinance was published only for one
day in the 22 May 2000 issue of the Philippine
Post in contravention of the unmistakable
directive of the Local Government Code of
1991.

Despite the nullity of Tax Ordinance No. 7988,

the court a quo, in the assailed Order, dated 8
May 2002, went on to dismiss petitioner's case
on the force of the enactment of Tax Ordinance
No. 8011, amending Tax Ordinance No. 7988.
Significantly, said amending ordinance was
likewise declared null and void by the DOJ
Secretary in a Resolution, dated 5 July 2001,
elucidating that "[I]nstead of amending
Ordinance No. 7988, [herein] respondent
should have enacted another tax measure
which strictly complies with the requirements of
law, both procedural and substantive. The
passage of the assailed ordinance did not have
the effect of curing the defects of Ordinance
No. 7988 which, any way, does not legally
exist." Said Resolution of the DOJ Secretary
had, as well, attained finality by virtue of the
dismissal with finality by this Court of
respondents' Petition for Review on Certiorari
in G.R. No. 157490 assailing the dismissal by
the RTC of Manila, Branch 17, of its appeal due
to lack of jurisdiction in its Order, dated 11
August 2003.

Based on the foregoing, this Court must

reverse the Order of the RTC of Manila, Branch
21, dismissing petitioner's case as there is no
basis in law for such dismissal. The amending
law, having been declared as null and void, in
legal contemplation, therefore, does not exist.
Furthermore, even if Tax Ordinance No. 8011
was not declared null and void, the trial court
should not have dismissed the case on the
reason that said tax ordinance had already
amended Tax Ordinance No. 7988. As held by
this Court in the case of People v. Lim, if an
order or law sought to be amended is invalid,
then it does not legally exist, there should be
no occasion or need to amend it.
17. City of Manila v. Compliance with the reglementary period Respondent paid the local business tax only as a
Coca-Cola, G.R. No. for filing the petition. manufacturers as it was expressly exempted from
181845, August 12, the business tax under a different section and which
2009 applied to businesses subject to excise, VAT or
percentage tax under the Tax Code. The City of
Manila subsequently amended the ordinance by
deleting the provision exempting businesses under
the latter section if they have already paid taxes
under a different section in the ordinance. This
amending ordinance was later declared by the
Supreme Court null and void. Respondent then
filed a protest on the ground of double taxation.
RTC decided in favor of Respondent and the
decision was received by Petitioner on April 20,
2007. On May 4, 2007, Petitioner filed with the CTA
a Motion for Extension of Time to File Petition for
Review asking for a 15-day extension or until May
20, 2007 within which to file its Petition. A second
Motion for Extension was filed on May 18, 2007,
this time asking for a 10-day extension to file the
Petition. Petitioner finally filed the Petition on May
30, 2007 even if the CTA had earlier issued a
resolution dismissing the case for failure to timely
file the Petition.
1) Has Petitioner’s right to
appeal with the CTA lapsed?
2) Does the enforcement of
the succeeding section of the
tax ordinance constitute
double taxation?
1) NO. The petitioner complied with the
reglementary period for filing the petition. From
April 20, 2007, Petitioner had 30 days, or until
May 20, 2007, within which to file their Petition
for Review with the CTA. The Motion for
Extension filed by the petitioners on May 18,
2007, prior to the lapse of the 30-day period on
20 May 2007, in which they prayed for another
extended period of 10 days, or until 30 May
2007, to file their Petition for Review was, in
reality, only the first Motion for Extension of
petitioners. Thus, when Petitioner filed their
Petition via registered mail their Petition for
Review on 30 May 2007, they were able to
comply with the period for filing such a petition.
(2) YES. There is indeed double taxation if
respondent is subjected to the taxes under
both Sections 14 and 21 of the tax ordinance
since these are being imposed: (1) on the
same subject matter — the privilege of doing
business in the City of Manila; (2) for the same
purpose — to make persons conducting
business within the City of Manila contribute to
city revenues; (3) by the same taxing authority
— petitioner City of Manila; (4) within the same
taxing jurisdiction — within the territorial
jurisdiction of the City of Manila; (5) for the
same taxing periods — per calendar year; and
(6) of the same kind or character — a local
business tax imposed on gross sales or
receipts of the business.
18. Napocor v. City Although as a general rule, LGUs cannot
of Cabanatuan, G.R. impose taxes, fees, or charges of any
No. 149110, April 9, kind on the National Government, its
2003 agencies and instrumentalities, this rule
now admits an exception, i.e. when
specific provisions of the LGC authorize
the LGUs to impose taxes, fees, or
charges on the aforementioned entities.
19. Palma Devt. Sec 56.01 Imposition of Fees. There
Corp. v. Municipality shall be collected service fee for its use
of Malangas, G.R. of the municipal roads or streets leading
No. 152492, October to the wharf and to any point along the
16, 2003 shorelines within the jurisdiction of the
municipality and for police surveillance
on all goods and all equipment
harboured or sheltered in the premises of
the wharf and other within the jurisdiction
of the municipality
Pursuant to Sec. 37 of Ordinance No. 165-92, the
city government of Cabanatuan assessed NPC, a
GOCC tasked to undertake the development of
power plants, a franchise tax amounting to
P808,606.41, representing 75 percent of 1 percent
of the latter's gross receipts for the preceding year.
NPC refused to pay, arguing that the city
government did not have the authority to impose tax
on government entities, and that as a non-profit
organization, it is exempted from the payment of all
forms of taxes, charges, duties or fees in
accordance with Sec. 13 of RA No. 6395.
The city government, on the other hand, claimed
that NPC's exemption from payment of tax was
already repealed by Sec. 193 of the Local
Government Code.
Petitioner Palma Development Corporation is
engaged in milling and selling rice and corn to
wholesalers in Zamboanga City. It uses the
municipal port of Malangas, Zamboanga del Sur as
transshipment port for its goods. The port, as well
as the surrounding roads leading to it, belong to and
are maintained by the Municipality of Malangas,
Zamboanga del Sur. On January 16, 1994, the
municipality passed municipal revenue code no. 09
series of 1993, which was subsequently approved
by the Sangguniang Panlalawigan of Zamboanga
del Sur in resolution no. 1330 dated August 4,
1994.Accordingly, the service fees imposed by
section 56.01 of the ordinance was paid by
petitioner under protest. It contended that under
Republic Act No. 7160, otherwise known as the
local government code of 1991, municipal
governments did not have authority to tax goods
and vehicles that passed through their jurisdictions.
Thereafter, before the Regional Trial Court of
Pagadian City, petitioner filed against the
1) Is the NAPOCOR
excluded from the coverage
of the franchise tax simply
because its stocks are wholly
owned by the National
Government and its charter
characterized is as a ‘non-
profit organization’?
2) Is the NAPOCOR’s
exemption from all forms of
taxes repealed by the
provisions of the Local
Government Code (LGC)?
Whether or not the
imposition of service fee is
proper and valid.
1) NO. A franchise tax is imposed based not on
the ownership but on the exercise by the
corporation of a privilege to do business. The
taxable entity is the corporation which
exercises the franchise, and not the individual
stockholders. By virtue of its charter, petitioner
was created as a separate and distinct entity
from the National Government. It can sue and
be sued under its own name, and can exercise
all the powers of a corporation under the
Corporation Code.
2) YES. One of the most significant provisions
of the LGC is the removal of the blanket
exclusion of instrumentalities and agencies of
the National Government from the coverage of
local taxation. The LGC provided for an
express withdrawal of such exemptions or
privileges.
No. By the express language of section 153
and 155 RA 7160, local government units,
through their sanggunian, may prescribe the
terms and conditions for the imposition of toll
fees or charges for the use of any public road,
pier or wharf funded and constructed by them.
A service fee imposed on vehicles using
municipal roads leading to the wharf is thus
valid, however, section 133 (e) of RA 7160
prohibits the imposition, in the guise of
wharfage fees — as well as other taxes or
charges in any form whatsoever on goods or
merchandise. It is therefore irrelevant if the fee
imposed are actually for police surveillance on
the goods, because any other form of
imposition on goods passing through the
territorial jurisdiction of the municipality is
clearly prohibited by section 133 (e).
 Municipality of Malangas on November 29, 1995,
an action for declaratory relief assailing the validity
of section 56.01 of the municipal ordinance.
20. Smart Tax exemptions are never presumed and On February 18, 2002, Smart filed a special civil
Communications, are strictly construed against the action for declaratory relief, for the ascertainment of
Inc. v. City of Davao, taxpayer and liberally in favor of the its rights and obligations under the Tax Code of the
G.R. No. 155491, July taxing authority. They can only be given City of Davao. Smart contends that its telecenter in
21, 2009. force when the grant is clear and Davao City is exempt from payment of franchise tax
categorical. to the City because the power of the City of Davao
to impose a franchise tax is subject to statutory
limitations such as the “in lieu of all taxes” clause
found in Section 9 of R.A. No. 7294 (Smart’s
franchise). Respondents contested the tax
exemption claimed by Smart. They invoked the
power granted by the Constitution to local
government units to create their own sources of
revenue. On July 19, 2002, the RTC rendered its
Decision denying the petition. The trial court noted
that the ambiguity of the in “lieu of all taxes”
provision in R.A. No. 7294, on whether it covers
both national and local taxes, must be resolved
against the taxpayer.
Whether or not Smart is
liable to pay the franchise tax
imposed by the City of
Davao.
Yes. The SC find that there is no violation of
Article III, Section 10 of the 1987 Philippine
Constitution. Tax exemptions are never
presumed and are strictly construed against
the taxpayer and liberally in favor of the taxing
authority. They can only be given force when
the grant is clear and categorical. Moreover,
Smarts franchise was granted with the express
condition that it is subject to amendment,
alteration, or repeal. In this case since there is
doubt it must be resolved in favor of the City of
Davao. The “in lieu” of all taxes clause applies
only to national internal revenue taxes and not
to local taxes.
21. Mobil Phil. Inc. v. Business taxes imposed in the
City Treasurer of exercise of police
Makati, G.R. No. power for regulatory
154092, 14 July 2005 purposes are paid for the
privilege of carrying on a
business in the year the
tax was paid. It is paid at
the beginning of the year
as a fee to allow the
business to operate for
the rest of the year. It is
deemed a prerequisite to
the conduct of business.
Income tax, on the other
hand, is a tax on all
yearly profits arising from
property, professions,
trades or offices, or as a
tax on a person's
income, emoluments,
profits and the like. It is
tax on income, whether
net or gross realized in
one taxable year. It is
due on or before the
15th day of the 4th
month following the
close of the taxpayer's
taxable year and is
generally regarded as an
excise tax, levied upon
the right of a person or
entity to receive income
or profits.
Petitioner is a domestic corporation
engaged in the manufacturing,
importing, exporting and wholesaling
of petroleum products, while
respondents are the local
government officials of the City of
Makati charged with the
implementation of the Revenue
Code of the City of Makati, as well as
the collection and assessment of
business taxes, license fees and
permit fees within said city.
On August 20, 1998, petitioner filed
an application with the City Treasurer
of Makati for the retirement of its
business within the City of Makati as
it moved its principal place of
business to Pasig City.
Upon evaluation of petitioner's
application, the OIC of the License
Division issued to petitioner a billing
slip assessing business tax of
P1,898,106.967. Petitioner paid the
assessed amount under protest.
Petitioner then filed a claim for
P1,331,638.84 refund which was
denied on the ground that petitioner
was merely transferring and not
retiring its business, and that the
gross sales realized while petitioner
still maintained office in Makati from
January 1 to August 31, 1998 should
be taxed in the City of Makati.
Petitioner then filed a petition with
the RTC seeking the refund of business taxes
erroneously collected
by the City of Makati, but the trial
court ruled that the payments made
by the petitioner in 1998 were
Whether or not the business
taxes paid
by petitioner in 1998 were
business taxes for 1997 or
1998.
NO. The trial court erred when it said that the
payments made by petitioner in 1998 are
payments for business tax incurred in 1997
which only accrued in January 1998.
Business taxes imposed in the exercise of
police power for regulatory purposes are paid
for the privilege of carrying on a business in
the year the tax was paid. It is paid at the
beginning of the year as a fee to allow the
business to operate for the rest of the year. It
is deemed a prerequisite to the conduct of
business.
Income tax, on the other hand, is a tax on all
yearly profits arising from property,
professions, trades or offices, or as a tax on a
person's income, emoluments, profits and the
like. It is tax on income, whether net or gross
realized in one taxable year.15 It is due on or
before the 15th day of the 4th month following
the close of the taxpayer's taxable year and is
generally regarded as an excise tax, levied
upon the right of a person or entity to receive
income or profits.
Under the Makati Revenue Code, it appears
that the business tax, like income tax, is
computed based on the previous year's
figures. This is the reason for the confusion. A
newly-started business is already liable for
business taxes (i.e. license fees) at the start of
the quarter when it commences operations. In
computing the amount of tax due for the first
quarter of operations, the business' capital
investment is used as the basis. For the
subsequent quarters of the first year, the tax is
based on the gross sales/receipts for the
previous quarter. In the following year(s), the
business is then taxed based on the gross
sales or receipts of the previous year. The
business taxes paid in the year 1998 is for the
privilege of engaging in business for the same
payments for the business taxes in year, and not for having engaged in business
1997. for 1997.

The Makati Revenue Code also provides that

on the year an establishment retires or
terminates its business within the municipality,
it would be required to pay the difference in
the amount if the tax collected, based on the
previous year's gross sales or receipts, is less
than the actual tax due based on the current
year's gross sales or receipts.

For the year 1998, petitioner paid a total of

P2,262,122.48 to the City Treasurer of
Makati18 as business taxes for the year 1998.
The amount of tax as computed based on
petitioner's gross sales for 1998 is only
P1,331,638.84. Since the amount paid is more
than the amount computed based on
petitioner's actual gross sales for 1998,
petitioner upon its retirement is not liable for
additional taxes to the City of Makati. Thus, we
find that the respondent erroneously treated
the assessment and collection of business tax
as if it were income tax, by rendering an
additional assessment of P1,331,638.84 for
the revenue generated for the year 1998.
22. Yamane v. BA In the instant case, the assessment Respondent BA Lepanto Whether or not the City of NO. This is because a condominium
Lepanto Condo. appears to be based solely on the Condominium Corporation is a duly Makati may corporation’s existence is not intended for the
Corp., G.R. No. Corporation’s collection of assessments organized condominium corporation collect business taxes on incurrence of profit but to shoulder the
154993, October 25, from unit owners, such assessments constituted in accordance with the condominium corporations. expenses for the maintenance of the
2005 being utilized to defray the Condominium Act, which owns and Condominium project.
necessary expenses for the holds title to the common and limited
Condominium Project and the common common areas of the BA Lepanto Condominium Under Section 151 of the Local Government
areas. (the “Condominium”), Code, cities such as Makati are authorized to
situated in Paseo de Roxas, Makati levy the same taxes, fees, and charges as
There is no contemplation of business City. The Corporation is authorized, provinces and municipalities. It is in Article II,
and no orientation towards profit in this under Article V of its Amended Title II, Book II of the Local Government Code,
case. Hence, the assailed tax By-Laws, to collect regular governing municipal taxes, where the
assessment has no basis under the assessments from its members for provisions on business taxation relevant to this
Local Government Code or the Makati operating expenses, capital petition may be found. However, nowhere
Revenue Code, and the insistence of the expenditures on the common areas, therein is there any citation made by the City
city in its collection of the void tax and other special assessments as Treasurer of any provision of the Revenue
constitutes a attempt at deprivation of provided for in the Master Deed with Code which would serve as the legal authority
property without due process of law. Declaration of Restrictions of the for the collection of business taxes from
Condominium. condominiums in Makati.

On December 15, 1998, the In the instant case, the assessment appears to
Corporation received a Notice of be based solely on the Corporation’s collection
Assessment dated December 14, of assessments from unit owners, such
1998 signed by the City Treasurer. assessments being utilized to defray the
The Notice of Assessment stated necessary expenses for the Condominium
that the Corporation is “liable to pay Project and the common areas. There is no
the correct city business taxes, fees, contemplation of business and no orientation
and charges,” totaling Php towards profit in this case.
1,601,013.77 for the years 1995 to
1997. The Notice of Assessment Hence, the assailed tax assessment has no
was silent as to the statutory basis of basis under the Local Government Code or
the business taxes assessed. the Makati Revenue Code, and the insistence
of the city in its collection of the void tax
The Corporation responded with a constitutes an attempt at deprivation of
written tax protest dated February property without due process of law.
12, 1999, addressed to the City Hence, the collection of business taxes from
Treasurer. It asserted that there was condominiums in Makati is void.
no basis as the Corporation is not
liable for business taxes and
surcharges and interest thereon,
under the Makati [Revenue] Code or
even under the Local Government
Code.
From the denial of the protest, the
Corporation filed an Appeal with the
Regional Trial Court (RTC) of Makati.
Makati RTC Branch 57 rendered a
Decision dismissing the appeal for
lack of merit. Accepting the premise
laid by the City Treasurer, the RTC
concluded that the activities of the
Corporation fell squarely under the
definition of “business” under Section
13 (b) of the Local Government
Code, and thus subject to local
business taxation.

On June 7, 2002, the Court of

Appeals Special Sixteenth Division
rendered the Decision and reversed
the RTC decision and declared that
the Corporation was not liable to pay
business taxes to the City of Makati.
23. Ericsson The local business tax Ericsson Telecommunications, Inc., a
Telecoms Inc. v. City on contractors should be corporation engaged in the design,
of Pasig, G.R. No. based on gross receipts engineering, and marketing of
176667, November and not gross revenue. telecommunication facilities/systems.
22, 2007 In an Assessment Notice dated
October 25, 2000 issued by the City
Treasurer of Pasig City, petitioner
was assessed a business tax
deficiency for the years 1998 and
1999 amounting to P9,466,885.00
and P4,993,682.00, respectively,
based on its gross revenues as
reported in its audited financial
statements for the years 1997 and
1998. Ericsson filed a Protest
claiming that the computation of the
local business tax should be based
on gross receipts and not on gross
revenue. The City of Pasig issued
another Notice of Assessment to petitioner on
November 19, 2001,
this time based on business tax
deficiencies for the years 2000 and
2001, amounting to P4,665,775.51
and P4,710,242.93, respectively,
based on its gross revenues for the
years 1999 and 2000. Again,
Ericsson filed a Protest claiming that
the computation of the local business
tax should be based on gross
receipts and not on gross revenue.
Whether or not contractors YES. It should be based on gross receipts.
should be based Section 143 (e) of LGC covering local
on gross receipts and not business tax contractors and other
gross revenue. independent contractors, says: “The
municipality may impose taxes on the
following businesses: (e) On contractors and
other independent contractors, in accordance
with the following schedule: With gross
receipts for the preceding calendar year in the
amount of: Amount of Tax Per Annum”. The
provision specifically refers to gross receipts
which is defined under Section 131 of the
Local Government Code, as follows:
“(n) Gross Sales or Receipts include the total
amount of money or its equivalent
representing the contract price, compensation
or service fee, including the amount charged
or materials supplied with the services and the
deposits or advance payments actually or
constructively received during the taxable
quarter for the services performed or to be
performed for another person excluding
discounts if determinable at the time of sales,
sales return, excise tax, and value-added tax
(VAT);”
The law is clear, the provision specifically
states that the basis should be gross receipts.
Gross receipts include money or its equivalent
actually or constructively received in
consideration of services rendered or articles
sold, exchanged or leased, whether actual or
constructive. There is constructive receipt
when the consideration for the articles sold,
exchanged or leased, or the services rendered
has already been placed under the control of
the person who sold the goods or rendered
the services without any restriction by the
payor.
In contrast, gross revenue covers money or its
equivalent actually or constructively received,
including the value of services rendered or
articles sold, exchanged or leased, the
payment of which is yet to be received. This is
in consonance with the International Financial
Reporting Standards, which defines revenue
as the gross inflow of economic benefits
(cash, receivables, and other assets) arising
from the ordinary operating activities of an
enterprise (such as sales of goods, sales of
services, interest, royalties, and dividends),
which is measured at the fair value of the
consideration received or receivable.
In this case, its audited financial statements
reflect income or revenue which accrued to it
during the taxable period although not yet
actually or constructively received or paid,
because Ericsson uses the accrual method of
accounting, where income is reportable when
all the events have occurred that fix the
taxpayers right to receive the income, and the
amount can be determined with reasonable
accuracy; the right to receive income, and not
the actual receipt, determines when to include
the amount in gross income.

The imposition of local business tax based on

Ericsson’s gross revenue will inevitably result
in the constitutionally proscribed double
taxation taxing of the same person twice by
the same jurisdiction for the same thing
inasmuch as petitioners revenue or income for
a taxable year will definitely include its gross
receipts already reported during the previous
year and for which local business tax has
already been paid.

Thus, respondent committed a palpable error

when it assessed petitioner’s local business
tax based on its gross revenue as reported in
its audited financial statements, as Section
143 of the Local Government Code and
Section 22 (e) of the Pasig Revenue Code
clearly provide that the tax should be
computed based on gross receipts.
24. Allied Thread The power to levy an Municipality of Manila enacted an Whether or not the ordinance YES. The ordinance conformed with PD 426,
Co., Inc. v. Manila, excise upon the ordinance imposing on as and Local Tax Regulation which require that a
G.R. No. L-40296,21 performance of an act or manufacturers, importers or amended is valid and local tax ordinance intended to take effect on
Nov. 1984 the engaging in an producers, doing business in Manila, petitioner Allied thread is a July 1, 1974 should be enacted by the local
occupation does not business taxes based. Petitioner proper subject thereto. chief executive not later than June 15, 1974.
depend upon the Allied Thread ,engaged in the The subsequent amendments to the basic
domicile of the person business of manufacturing sewing ordinance did not invalidate it nor move te
subject to the excise, nor thread and yarn, filed a petition for date of its effectivity.
upon the physical declaratory relief contending that the
location of the property ordinance is not valid nor There was substantial compliance of the law
and in connection with enforceable as the same is contrary on publication. Finally, Petitioner admits that
the act or occupation to Section 54 of PD 426. Petitioners doing business in the City of Manila through a
taxed, but depends upon further claim that they are not broker or agent doing business in the City of
the place in which the covered by the said ordinance Manila is all that is required to fall within the
act is performed or because it does not maintain a coverage of the ordinance
occupation engaged in. branch office in Manila and its
principal office.

25. Province of A province may not On June 26, 1992, the Sangguniang Whether or not petitioner NO. They are still prohibited from imposing
Bulacan v. CA, G.R. ordinarily impose taxes Panlalawigan of Bulacan passed province has taxes on stones, sand, gravel, earth and other
No. 126232, on stones, sand, gravel, Provincial Ordinance No. 3, known the authority to impose taxes quarry resources extracted from private lands.
November 27, 1998 earth and other quarry as "An Ordinance Enacting the on stones, sand, gravel, Section 186 of the Local Government Code
resources, as the same Revenue Code of the Bulacan earth allows a province to levy taxes other than
are already taxed under Province," which was to take effect and other quarry resources those specifically enumerated under the Code,
the National Internal on July 1, 1992. extracted from private lands. subject to the conditions specified therein.
Revenue Code. More so, Section 21. Imposition of Tax. — The tax imposed by the Province of Bulacan is
as to stones, sand, There is hereby levied and collected an excise tax, being a tax upon the
gravel, earth and other a tax of 10% of the fair market value performance, carrying on, or exercise of an
quarry resources in the locality per cubic meter of activity.
extracted from private ordinary stones, sand, gravel, earth
land, because of the and other quarry resources, such, Based on Section 133 (h) of the Local
limitation provided by but not limited to marble, granite, Government Code, a province may not levy
Section 133 of the Code volcanic cinders, basalt, tuff and rock excise taxes on articles already taxed by the
in relation to Section 151 phosphate, extracted from public National Internal Revenue Code.
of the National Internal lands or from beds of seas, lakes, It is clearly apparent from Section 151 of the
Revenue Code. rivers, streams, creeks and other NIRC that the National Internal Revenue Code
public waters within its territorial levies a tax on all quarry resources, regardless
jurisdiction. of origin, whether extracted from public or
private land.
Pursuant thereto, the Provincial
Treasurer of Bulacan, assessed Thus, a province may not ordinarily impose
private respondent Republic Cement taxes on stones, sand, gravel, earth and other
 Corporation extracting limestone,
shale and silica from several parcels
of private land in the province during
the third quarter of 1992 until the
second quarter of 1993.
Believing that the province, on the
basis of above-said ordinance, had
no authority to impose taxes on
quarry resources extracted from
private lands, Republic Cement
formally contested the same.
The same was, however, denied by
the Provincial Treasurer.
26. Angeles City v. The prohibition on the issuance of a writ On June 18, 1964, AEC was granted a legislative
Angeles City Electric of injunction to enjoin the collection of franchise under Republic Act No. (RA) 4079 to
Corp., GR No. taxes applies only to national internal construct, maintain and operate an electric light,
166134, 29 June 2010 revenue taxes, and not to local taxes. heat, and power system for the purpose of
generating and distributing electric light, heat and
power for sale in Angeles City, Pampanga.
Pursuant to Section 3-A thereof, AEC’s payment of
franchise tax for gross earnings from electric
current sold was in lieu of all taxes, fees and
assessments.
On September 11, 1974, Presidential Decree No.
(PD) 551 reduced the franchise tax of electric
franchise holders. On January 1, 1992, RA 7160 or
the Local Government Code (LGC) of 1991 was
passed into law, conferring upon provinces and
cities the power, among others, to impose tax on
Being a special civil action
for certiorari, the issue in the
instant case is limited to the
determination of whether the
RTC gravely abused its
discretion in issuing the writ
of preliminary injunction
enjoining Angeles City and
its City Treasurer from
levying, selling, and
disposing the properties of
AEC. All other matters
pertaining to the validity of
the tax assessment and
AEC’s tax exemption must
therefore be left for the
determination of the RTC
quarry resources, as the same are already
taxed under the National Internal Revenue
Code.
The province can, however, impose a tax on
stones, sand, gravel, earth and other quarry
resources extracted from public land because
it is expressly empowered to do so under the
Local Government Code.
As to stones, sand, gravel, earth and other
quarry resources extracted from private land,
however, it may not do so, because of the
limitation provided by Section 133 of the Code
in relation to Section 151 of the National
Internal Revenue Code.
Given the above disquisition, petitioners
cannot claim that the appellate court unjustly
deprived them of the power to create their
sources of revenue, their assessment of taxes
against Republic Cement being ultra vires,
traversing as it does the limitations set by the
Local Government Code.
Petition is unmeritorious. The LGC does not
specifically prohibit an injunction enjoining the
collection of taxes. Unlike the National Internal
Revenue Code, the Local Tax Code does not
contain any specific provision prohibiting
courts from enjoining the collection of local
taxes. Such statutory lapse or intent, however
it may be viewed, may have allowed
preliminary injunction where local taxes are
involved but cannot negate the procedural
rules and requirements under Rule 58. A
principle deeply embedded in our
jurisprudence is that taxes being the lifeblood
of the government should be collected
promptly, without unnecessary hindrance or
delay. In line with this principle, the National
Internal Revenue Code of 1997 (NIRC)
businesses enjoying franchise. In accordance with where the main case is expressly provides that no court shall have the
the LGC, the Sangguniang Panlungsod of Angeles pending decision. authority to grant an injunction to restrain the
City enacted on December 23, 1993 Tax Ordinance collection of any national internal revenue tax,
No. 33, S-93, otherwise known as the Revised fee or charge imposed by the code. An
Revenue Code of Angeles City (RRCAC). On exception to this rule obtains only when in the
February 7, 1994, a petition seeking the reduction opinion of the Court of Tax Appeals (CTA) the
of the tax rates and a review of the provisions of the collection thereof may jeopardize the interest
RRCAC was filed with the Sangguniang of the government and/or the taxpayer.
Panlungsod by Metro Angeles Chamber of
Commerce and Industry Inc. (MACCI) of which The situation, however, is different in the case
AEC is a member. There being no action taken by of the collection of local taxes as there is no
the Sangguniang Panlungsod on the matter, express provision in the LGC prohibiting courts
MACCI elevated the petition to the Department of from issuing an injunction to restrain local
Finance, which referred the same to the Bureau of governments from collecting taxes.
Local Government Finance (BLGF). In the petition,
MACCI alleged that the RRCAC is oppressive,
excessive, unjust and confiscatory; that it was
published only once, simultaneously on January
22, 1994; and that no public hearings were
conducted prior to its enactment. Acting on the
petition, the BLGF issued a First Indorsement to the
City Treasurer of Angeles City, instructing the latter
to make representations with the Sangguniang
Panlungsod for the appropriate amendment of the
RRCAC in order to ensure compliance with the
provisions of the LGC, and to make a report on the
action taken within five days.

Thereafter, starting July 1995, AEC has been

paying the local franchise tax to the Office of the
City Treasurer on a quarterly basis, in addition to
the national franchise tax it pays every quarter to
the Bureau of Internal Revenue (BIR).
27. Pelizloy Realty A “place of amusement” as defined in the Pelizloy Realty Corp. owns Palm Grove Resort, a
Corp. v. The LGC covers only those places where one recreation facility located in Asin, Benguet, which
Province of Benguet, goes to view a show or performance. consists of swimming pools, a spa, and function
GR No. 183137, April Resorts, etc., are not places of halls. The Province of Benguet approved a Tax
10, 2013 amusement and thus cannot be subject Ordinance levying a 10% amusement tax on gross
to percentage tax. receipts from admissions to “resorts, swimming
pools, bath houses, hot springs, and tourist spots.”
Pelizloy assailed this ordinance with the argument
that it was ultra vires, following Sec. 133(i) of the
LGC which prohibits an LGU from levying
percentage taxes, albeit with exception. Benguet
argues that its tax ordinance falls under the
exception because Pelizloy is a “place of
amusement.”
Whether or not the tax
ordinance is ultra vires
Yes. The tax ordinance is ultra vires. An LGU’s
power of taxation is not inherent and is granted
only by law. An LGU’s authority to tax is
construed in strictissimi against it. LGUs may
impose percentage tax, if such falls within the
exception, such as if the institution taxed is a
place of amusement. Resorts, etc. are not
covered by the exception. They are not places
of “amusement,” which may be subjected to
percentage tax. Sec. 131(c) of the LGC which
defines a place of “amusement” as where one
goes to entertain oneself by viewing a show or
performance. By the principle of ejusdem
generis, resorts, etc. are not places of
amusement. Thus, the tax ordinance is ultra
vires.

REAL PROPERTY TAXATION

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Province of Nueva An assessment does not automatically
Vizcaya et. al. v. CE become null and void just because there
Casecnan Water and is no tax ordinance for that specific year.
Energy Company, The absence of current tax ordinances
Inc., G.R. No. for the purpose of updating its schedule
of fair market values and assessments
will not prevent the government from
levying real property tax.
CE Casecnan is under a Build Operate Transfer
(BOT) agreement with the National Irrigation
Administration whereby CE Casecnan is
responsible for the financing and construction of the
project and the transportation of the collected water
to the designated locations. In return, the NIA will
be responsible for all the fees paid to the
government. Because of NIA's lack of
communication towards CE Casecnan, the latter
was forced to pay under protest the assessment
made by the Provincial Assessor of Nueva Vizcaya.
The respondent alleged that no tax liability should
redound to CE Casecnan because there was no tax
ordinance on the years wherein the Provincial
Assessor based their assessment.
Whether or not there was a
valid assessment against
respondent despite the
absence of a tax ordinance
at the time of the assessment
Absence of a tax ordinance does not
automatically make an assessment invalid.
Local governments are vested with the power
to create their own sources of revenue. Article
X, Section 5 of the 1987 Constitution provides
that:
Section 5. Each local government unit shall
have the power to create its own sources of
revenues and to levy taxes, fees, and charges
subject to such guidelines and limitations as
the Congress may provide, consistent with the
basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to
the local governments.

One of the taxes which a local government unit

may levy is real property tax. The base of the
RPT, or the assessment level, is defined as the
"percentage applied to the fair market value of
the property to determine its taxable value." In
other words, to compute the assessed value or
the taxable value of a real property, the fair
market value should be multiplied to the
assessment level. The local government units
can legislate the assessment levels through an
ordinance but subject to the maximum levels
provided by Section 218 of the LGC.

Pursuant to the power of the local government

units to fix the assessment level and adopt a
schedule of fair market values, the Province of
Nueva Vizcaya enacted Tax Ordinance No. 99-
002 adopting the 1999 Schedule of Fair Market
Values for the different classes of real
properties in Nueva Vizcaya and Tax
Ordinance No. 2000-003 fixing the assessment
levels for the years 2000 to 2002. While the
said tax ordinances are specifically for the
years 2000 to 2002 only, the failure of the
Province to update its schedule of fair market
values and assessment levels will not prevent
it from levying RPT using as basis the existing
assessment levels and schedule of fair market
value.

The ruling of the CTA En Banc invalidating the

assessment of the RPT in the absence of an
ordinance fixing the assessment levels and fair
market values is dangerous and it is
tantamount to cmiailing the power of local
governments to levy RPT. The prescription
under Section 219 of the LGC for local
governments to undertake a general revision of
real property assessments within two years
after the effectivity of the LGC and every three
years thereafter is only to make sure that the
schedule of fair market values and assessment
levels capture the true economic realities in the
community where the property is located taking
into consideration inflation and other economic
indicators.

2. MWSS v. CBAA, Local governments cannot tax the MWSS was created "to insure an uninterrupted and
LBAA-Pasay, et. al., national government, which merely adequate supply and distribution of potable water
G.R. No. 215955, delegated to local governments the for domestic and other purposes and the proper
January 13, 2021. power to tax. operation and maintenance of sewerage
systems."5 It was vested with the power to exercise
supervision and control over all waterworks and
sewerage systems within Metro Manila, Rizal, and
a portion of Cavite. In 1997, "National Water Crisis
Act of 1995," MWSS entered into a concessionaire
agreement with Maynilad Water Services, Inc.
(Maynilad) to service the West Zone of the
Metropolitan Area that includes Pasay City. Under
the impression that the beneficial use of MWSS'
utilities have made its way to taxable persons, the
Pasay City Treasurer assessed Real Property Tax
Computations. The MWSS filed it's protest
regarding the assessment.
Hence, the assessment of RPT against CE
Casecnan was valid.
Whether or not MWSS MWSS is a government instrumentality with
should be liable for Real corporate powers, not liable to the local
Property Tax. government of Pasay City for real property
taxes.ℒαwρhi৷ The tax exemption that its
properties carries, however, ceases when their
beneficial use has been extended to a taxable
person. The liability to pay real property taxes
on government-owned properties, the
beneficial or actual use of which was granted
to a taxable entity, devolves on the taxable
beneficial user. In this case, there was an
allegation that the beneficial use of MWSS's
properties in Pasay were given to Maynilad by
virtue of a concession agreement. This factual
allegation, however, was not proved and
merely based on a sweeping conclusion that
when MWSS entered into a concession
agreement, all its properties were effectively
turned over to the concessionaires for their
operations. At this point, the Court cannot
make a judicious determination of such factual
matter due to the insufficiency of evidence on
records. At any rate, the tax-exempt status of a
government instrumentality is not lost when it
grants the beneficial use of its real property to
a taxable person; only the exemption of the real
property ceases in such case. The LGC also
leaves no room for interpretation on the
corresponding liability of the taxable beneficial
user for the payment of real property taxes on
a government instrumentality property. In sum,
we hold that MWSS is not liable to the local
government of Pasay City for real property
taxes. The tax exemption of its properties,
however, ceases when the beneficial or actual
use is alleged and proven to have been
extended to a taxable person. All the

3. Provincial Gov’t of One does not inherit the liability to pay CQM Management, the success of Philippine
Cavite et. al. v. CQM Real Property Tax especially when the Investment One (PI One) acquired from Rizal
Management, Inc., current owner of the property did not Commercial Banking Corporation (RCBC) two non-
G.R. No. 248033, July possess or have beneficial use of the performing loans - that of Maxon and Ultimate. Both
15, 2020. same property when it was assessed. loans were secured by a property mortgage. When
Maxon and Ultimate failed to pay during the three-
month redemption period, PI One managed to
acquire the properties. However, upon further
inquiry, it was revealed that both Maxon and
Ultimate had been delinquent on their real property
tax obligations for years. Furthermore, the
Provincial Treasurer of Cavite issued a tax
assessment and warrant of levy because of the
unpaid taxes.
Whether or not CQM
Management, the successor
of PI One, inherit the tax
liability from both Maxon and
Ultimate
assessments issued in the name of MWSS
should thus, be declared void. To be clear,
Pasay City is not precluded from availing of the
appropriate remedies under the law to assess
and collect real property taxes from the private
entities to whom MWSS may have granted the
beneficial use of its properties.
No. CQM, the successor of PI One, is not liable
for the said unpaid real property taxes. Citing
several jurisprudence, the Court ruled that
contractual assumption of the obligation to pay
real property tax, by itself, is insufficient to
make one liable for taxes. The contractual
assumption of tax liability must be
supplemented by an interest that the party
assuming the liability had on the property; the
person from whom payment is sought must
have also acquired the beneficial use of the
property taxed. In other words, he must have
the use and possession of the property. The
Court also explained that the liability for taxes
generally rests on the owner of the real
property at the time the tax accrues as a
necessary repercussion of exclusive dominion.
However, personal liability for real property
taxes may also expressly rest on the entity with
the beneficial use of the real property. In either
case, the unpaid tax attaches to the property
and is chargeable against the taxable person
who had actual or beneficial use and
possession of it regardless of whether or not he
is the owner. Here, as correctly pointed out by
the CA, respondent was not yet the owner or
entity with the actual or beneficial use of the
building which was previously owned by
Maxon (Maxon property) and the building
which was previously owned by Ultimate
(Ultimate property) during the years for which
petitioners sought to collect real property
taxes. Specifically, petitioners sought to collect
from respondent real property taxes due on the
Maxon property for the years 2000-2013 and
 on the Ultimate property for the years 1997-
2013. However, respondent became the owner
of the Maxon property and the Ultimate
property only in March 2014, and August 2014,
respectively. To impose the real property taxes
on respondent, which was neither the owner
nor the beneficial user of the property during
the designated periods would not only be
contrary to law but also unjust.

4. Light Rail Transit Having a GOCC status does not at once The LRTA received several Whether or not LRTA's NO. The LRTA is a government instrumentality
Authority v. Quezon disqualify one from real property tax Statements of Delinquency and Final properties are to exercising corporate powers. An agency is a
City, G.R. No. exemption. Having a GOCC status Notices of Tax Delinquency, this be subject to real property government instrumentality when: (a) it
221626, October 9, simply means that the GOCC must find a time, from respondent Quezon City. tax. performs governmental functions, and (b) it
2019. legal basis for claiming real property tax enjoys operational autonomy. It does not
exemption Invoking MIAA v. Court of Appeals, matter that the government instrumentality is
other than what was previously granted the LRTA asserted that it is a endowed with corporate powers.
to it under the old real property tax laws government instrumentality, hence,
which exempt from real property tax. Here, the LRTA bears the elemental
the Local Government Code has already characteristics of a government
repealed. Quezon City countered that the instrumentality vested with corporate
LRTA is not a government powers. Through EO 603, it is vested with
When local governments instrumentality but a corporate powers. LRTA performs
invoke the power to tax government-owned and controlled governmental functions: construction,
on national government corporation (GOCC). Its activities are operation, maintenance, and/or lease of light
instrumentalities, such proprietary in nature and not purely rail transit systems. It also enjoys operational
power is construed governmental. It is clothed with autonomy, as it exists by virtue of a Charter.
strictly against the local corporate status and powers, earns
government. profit, and operates as an ordinary When local governments invoke the power to
private corporation. EO 603 does not tax on national government instrumentalities,
exempt the LRTA from real property such power is construed strictly against local
taxes. The Local Government Code governments. There is also no reason for local
of 1991 has removed or withdrawn governments to tax national government
the tax exemptions of GOCCs. instrumentalities for rendering essential public
services to inhabitants of local governments.
The only exception is when the legislature
clearly intended to tax government
instrumentalities for sound and compelling
policy considerations

The LRTA operations and properties of

public dominion are devoted to public use
and public welfare, hence, are owned by

5. Mactan Cebu Property owned by the
International Airport State is exempt from real
Authority (MCIAA) v. property tax, except
City of Lapu-Lapu, when the beneficial use
G.R. No. 181756, thereof has been granted
to a taxable person.
Properties of MCIAA that
are actually, solely and
exclusively used for
public purpose,
consisting of the airport
terminal building, airfield,
runway, taxiway, and the
lots on which they are
situated, EXEMPT from
real property tax.
Mactan-Cebu International Airport
Authority (MCIAA) was created on
July 31, 1990 under Republic Act
No. 6958 for the “management and
supervision of the Mactan
International Airport in the Province
of Cebu and the Lahug Airport in
Cebu City x x x and such other
airports as may be established in the
Province of Cebu.”
Under its charter, Section 14 of RA
6958, MCIAA enjoyed exemption
from realty taxes “imposed by the
National Government or any of its
political subdivisions, agencies, and
instrumentalities”
On September 11, 1996, however,
the Supreme Court rendered a
decision in Mactan-Cebu
International Airport Authority v.
Marcos (the 1996 MCIAA case)
declaring that upon the effectivity of
Republic Act No. 7160 (The Local
Government Code of 1991 or
“LGC”), MCIAA was no longer
exempt from real estate taxes. Thus,
in January 1997, respondent City of
Lapu-Lapu issued to MCIAA a
Statement of Real Estate Tax
assessing the lots comprising the
Mactan International Airport.
The City Treasurer Elena Pacaldo
sent MCIAA a Statement of Real
Property Tax Balances up to the year
2002 reflecting the amount of
the Republic of the Philippines, and for
legal and socially significant reasons, are
exempt from real property taxes under
Section 234 (a) of the Local Government
Code.
Whether or not properties YES. Property owned by the State is exempt
owned by the from real property tax, except when the
State are exempt from Real beneficial use thereof has been granted to a
Property Taxes. taxable person.
The Court in the 2006 MIAA case that Section
234(a) of the Local Government Code
exempts from real estate tax any “real
property owned by the Republic of the
Philippines.” The Court emphasized, however,
that “portions of the Airport Lands and
Buildings that MIAA leases to private entities
are not exempt from real estate tax.” For
example, the land area occupied by hangars
that MIAA leases to private corporations is
subject to real estate tax. In such a case,
MIAA has granted the beneficial use of such
land area for a consideration to a taxable
person, and therefore such land area is
subject to real estate tax.
Like in MIAA, the airport lands and buildings of
MCIAA are properties of public dominion
because they are intended for public use. As
properties of public dominion, they
indisputably belong to the State or the
Republic of the Philippines and are outside the
commerce of man. This, unless MCIAA leases
its real property to a taxable person, the
specific property leased becomes subject to
real property tax; in which case, only those
portions of petitioner’s properties which are
leased to taxable persons like private parties
are subject to real property tax by the City of
Lapu-Lapu.
Hence, the properties of MCIAA that are
 P246,395,477.20. MCIAA claimed
that the statement again included the
lots utilized solely and exclusively for
a public purpose such as the airfield,
runway, and taxiway and the lots on
which these are built. Pacaldo then
issued Notices of Levy on 18 sets of
real properties of MCIAA.
6. Lung Center of the The tax exemption under Petitioner (Lung Center of the
Philippines v. Section 28(3), Article VI Philippines) is a non-stock, non-profit
Quezon City, GR No. of the 1987 Philippine entity which seeks exemption from
144104, June 29, Constitution covers real property taxes when the City
2004 property taxes only. Assessor issued Tax Declarations for
What is exempted is not the land and the hospital building.
the institution itself.
A big space on the ground floor is
Those exempted from being leased to private parties, for
real estate taxes are canteen and small store spaces, and
lands, buildings and to medical or professional
improvements actually practitioners who use the same as
directly and their private clinics for their patients
exclusively used for whom they charge for their
religious, charitable or professional services. Almost
educational purposes.” one-half of the entire area on the left
side of the building, while a big
portion on the right side is being
leased for commercial purposes to a
private enterprise known as the
Elliptical Orchids and Garden Center.
Petitioner predicted on its claim that
it is a charitable institution. The
request was denied, and a petition
was hereafter filed before the Local
Board of Assessment Appeals of
Quezon City (QC-LBAA) for reversal
of the resolution of the City
Assessor. Petitioner alleged that as a
charitable institution, it is exempted
from real property taxes under Sec
28(3) Art VI of the Constitution.
QC-LBAA dismissed the petition and
Whether or not the petitioner
is entirely
exempted from real property
taxes.
actually, solely and exclusively used for public
purpose, consisting of the airport terminal
building, airfield, runway, taxiway, and the lots
on which they are situated, EXEMPT from real
property tax imposed by the City of
Lapu-Lapu.
NO. Those portions of petitioner’s real
property that are leased to private entities are
not exempt from real property taxes as these
are not actually, directly, and exclusively used
for charitable purposes.
Section 2 of Presidential Decree No. 1823
provides that the petitioner shall enjoy the tax
exemptions and privileges: The Lung Center
of the Philippines shall be exempt from the
payment of taxes, charges, and fees imposed
by the Government or any political subdivision
or instrumentality thereof with respect to
equipment purchases made by, or for the Lung
Center.
Under the decree, the petitioner does not
enjoy any property tax exemption
privileges for its real properties as well as
the building constructed thereon. If the
intentions were otherwise, the same should
have been among the enumeration of
tax-exempt privileges under Section 2.
Section 28(3), Article VI of the 1987
Philippine Constitution provides, thus:
Charitable institutions, churches and
parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly
and exclusively used for religious, charitable
or educational purposes shall be exempt from
taxation.
The tax exemption under this constitutional
 the decision was likewise affirmed on provision covers property taxes only. What
appeal by the Central Board of is exempted is not the institution itself...; those
Assessment Appeals of Quezon City. exempted from real estate taxes are lands,
The Court of Appeals affirmed the buildings, and improvements actually,
judgment of the Central Board of directly and exclusively used for religious,
Assessment Appeals. charitable or educational purposes.”
What is meant by the actual, direct, and
exclusive use of the property for charitable
purposes is the direct and immediate and
actual application of the property itself to the
purposes for which the charitable institution is
organized. It is not the use of the income from
the real property that is determinative of
whether the property is used for tax-exempt
purposes.

7. Manila Real property owned by Petitioner Manila International Airport Whether or not the Airport YES. The Supreme Court ruled that the
International Airport the Republic is not Authority (MIAA) operates the Ninoy Lands and MIAA's Airport Lands and Buildings are
Authority v. CA, GR taxable. Aquino International Airport (NAIA) Buildings of MIAA are exempt from real estate tax imposed by local
No. 155650, July 20, Complex in Parañaque City under exempt governments for the following reasons:
2006, En banc, GR However, portions of the Executive Order No. 903, otherwise from real estate tax under 1. MIAA is not a government-owned or
No. 163072, April 2, (Airport) Lands and known as the Revised Charter of the existing laws. controlled corporation but an
2009 Buildings that the Manila International Airport Authority instrumentality of the National
Government ("MIAA Charter") which was issued Government and thus exempt from local
Instrumentality (MIAA) on 21 July 1983 by then President taxation.
leases to private entities Ferdinand E. Marcos. Subsequently, 2. Real properties of MIAA are owned by
are not exempt from real Executive Order Nos. 909 1 and 298 the Republic of the Philippines and thus
estate tax. 2 amended the MIAA Charter. exempt from real estate tax.

As the operator of the international MIAA is a government instrumentality

airport, MIAA administers the land, vested with corporate powers to perform
improvements, and equipment within efficiently its governmental functions. MIAA is
the NAIA Complex. The MIAA like any other government instrumentality, the
Charter transferred to MIAA only difference is that MIAA is vested with
approximately 600 hectares of land, corporate powers.
including the runways and buildings
("Airport Lands and Buildings") then Section 133 (o) of the Local Government Code
under the Bureau of Air recognizes the basic principle that local
Transportation. governments cannot tax the national
government, which historically merely
On 21 March 1997, the Office of the delegated to local governments the power to
Government Corporate Counsel tax.
(OGCC) issued Opinion No. 061
 which opined that the Local Section 234 (a) of the Local Government Code
Government Code of 1991 withdrew exempts from real estate tax any “real
the exemption from real estate tax property owned by the Republic of the
granted to MIAA under Section 21 of Philippines.
the MIAA Charter. Thus, MIAA This exemption should be read in relation with
negotiated with respondent City of Section 133 (o) of the same Code, which
Parañaque to pay the real estate tax prohibits local governments from imposing
imposed by the City. MIAA then paid "taxes, fees or charges of any kind on the
some of the real estate tax already National Government, its agencies and
due. MIAA received Final Notices of instrumentalities ..."
Real Estate Tax Delinquency from
the City of Parañaque for the taxable The real properties owned by the Republic are
years 1992 to 2001. titled either in the name of the Republic itself
or in the name of agencies or instrumentalities
The City of Parañaque, through its of the National Government.
City Treasurer, issued notices of levy
and warrants of levy on the Airport The Administrative Code allows real property
Lands and Buildings. The Mayor of owned by the Republic to be titled in the name
the City of Parañaque threatened to of agencies or instrumentalities of the national
sell at public auction the Airport government. Such real properties remain
Lands and Buildings should MIAA owned by the Republic and continue to be
fail to pay the real estate tax exempt from real estate tax.
delinquency.

8. Quezon City Govt The grant of taxing BAYANTEL’s real properties within Whether or not BAYANTEL’s YES. Section 11 of BAYANTEL’s amended
v. BayanTel Corp., powers to local the territorial jurisdiction of Quezon properties franchise, which took effect after the effectivity
GR N0. 162015, government units under City were subjected to real property are exempt from real of the Local Government Code impliedly
March 6, 2006 the Constitution and the tax pursuant to the Quezon City property repealing the same provision in the franchise,
LGC does not affect the Revenue Code. BAYANTEL taxes. provides that “The grantee, its successors or
power of Congress to requested the City for the exclusion assigns shall be liable to pay the same taxes
grant exemptions to of its properties. on their real estate, buildings, and personal
certain persons, property, exclusive of this franchise”. In other
pursuant to a declared When it was denied by the City, words, real properties of BAYANTEL that are
national policy. The legal BAYANTEL interposed an appeal to actually, directly, and exclusively used in its
effect of the the Local Board of Assessments radio or telecommunication business, are
constitutional grant to (LBAA) without paying the taxes exempt from real property taxes.
local governments assessed upon it. Petitioner City
simply means that in then proceeded to levy the said The question now revolves around whether
interpreting statutory properties and prepare them for the City’s Revenue Code effectively revoked
provisions on municipal public auction. this tax exemption. In support of this, they rely
taxing powers, doubts on Section 232 of the LGC. The Court does
must be resolved in favor BAYANTEL, threatened by the not agree for as in the case of Mactan Cebu
imminent loss, withdrew its appeal International Airport Authority, the power to
 of municipal
corporations.
9. FELS Energy, Inc. Any owner or person
v. Province of having legal interest in
Batangas, G.R. No. the property who is not
168557, February 16, satisfied with the action
2007 of the provincial, city, or
municipal assessor in
the assessment of his
property may, within sixty
(60) days from the date
of receipt of the written
notice of assessment,
appeal to the Board of
Assessment Appeals of
the province or city by
filing a petition under
oath in the form
prescribed. The 60-day
period for making the
appeal to the LBAA runs
without interruption.
before the LBAA and applied for a
petition for prohibition with an urgent
application for a temporary
restraining order (TRO) and/or writ of
preliminary injunction before the RTC
of Quezon.
Accordingly, the RTC issued a TRO
on the eve of the public auction.
After their motion for reconsideration
was denied, City applied directly
before the Supreme Court on pure
question of law.
NPC entered into a lease contract
with Polar over diesel engine power
barges moored at Balayan Bay in
Calaca, Batangas. The contract
contained a provision that Polar may
be or become subject to real estate
taxes and assessments, rates, and
other charges in respect of the
power barges.
Subsequently, Polar assigned its
rights under the FELS. Later, FELS
received an assessment of real
property taxes on the power barges
from the Provincial Assessor, that
the owner or person having legal
interest may appeal the matter within
60 days from receipt to the Board of
Assessment Appeals of the province.
FELS referred the matter to NPC,
which sought reconsideration of the
Provincial Assessor’s decision to
tax, which also includes the power to exempt,
is still primarily vested in Congress.
Moreover, the LGC provides that a city or
municipality may levy annual ad valorem tax
on real property not hereinafter specifically
exempted. By virtue of the enactment of
RA7633, which amended the original franchise
after the effectivity of the LGC, operated as an
exemption “hereinafter specifically exempted”
under the Local Government Code.
To construe otherwise, would be absurd as it
would effectively reduce the meaning of such
phrase as mere jargon. The Court views this
subsequent piece of legislation as an express
and real intention on the part of Congress to
once again remove from the LGC's delegated
taxing power.
Whether or not the power NO. The power barges are real property and
barges are are thus subject to real property tax.
exempt from real property
tax. Article 415 (9) of the New Civil Code provides
that “docks and structures which, though
floating, are intended by their nature and
object to remain at a fixed place on a river,
lake, or coast” are considered immovable
property. Thus, power barges are categorized
as immovable property by destination, being in
the nature of machinery and other implements
intended by the owner for an industry or work
which may be carried on in a building or on a
piece of land and which tend directly to meet
the needs of said industry or work.
Petitioners maintain nevertheless that the
power barges are exempt from real estate tax
under Section 234 (c) of R.A. No. 7160
because they are actually, directly and
exclusively used by petitioner NPC, a
government-owned and controlled corporation
engaged in the supply, generation, and

10. NPC vs. Central To successfully claim exemption under
Board of Section 234 (c) of the LGC, the claimant
Assessment must prove two elements: a) the
Appeals, GR No. machineries and equipment are actually,
171470, January 30, directly, and exclusively used by local
2009 water districts and government-owned or
controlled corporations; and b) the local
water districts and government-owned
and controlled corporations claiming
exemption must be engaged in the
supply and distribution of water and/or
the generation and transmission of
electric power.
assess real property taxes on the
power barges. However, the motion
was denied and the Provincial
Assessor advised NPC to pay the
assessment. After sixty (60) days
from receipt of assessment from, the
NPC filed a petition with the Local
Board of Assessment Appeals
(LBAA) for the setting aside of the
assessment and the declaration of
the barges as non-taxable items; it
also prayed that should LBAA find
the barges to be taxable, the
Provincial Assessor be directed to
make the necessary corrections.
First Private Power Corporation (FPPC) entered
into a Build-Operate-Transfer (BOT) agreement
with NAPOCOR for the construction of Bauang
Diesel Power Plant and creation of Bauang Power
Plant Corporation (BPPC). The pertinent provisions
of the BOT agreement, include among others: “2.03
NAPOCOR xxx shall be responsible for the
payment of all real estate taxes and
assessments, rates, and other charges in
respect of the Site and the buildings and
improvements thereon.” The Municipal Assessor
of Bauang issued a Notice of Assessment and Tax
Bill to BPPC. NAPOCOR sought tax exemption on
the basis if Sec. 234(c) of R.A. No. 7160.
Under the terms of the BOT,
can the GOCC be deemed
the actual, direct, and
exclusive user of
machineries and equipment
for tax exemption purposes?
If not, can it pass on its tax-
exempt status to its BOT
partner, a private
corporation, through the
BOT agreement?
transmission of electric power. We affirm the
findings of the LBAA and CBAA that the owner
of the taxable properties is petitioner FELS,
which in fine, is the entity being taxed by the
local government.
It follows then that FELS cannot escape
liability from the payment of realty taxes by
invoking its exemption in Section 234 (c) of
R.A. No. 7160. Indeed, the law states that the
machinery must be actually, directly, and
exclusively used by the government-owned or
controlled corporation; nevertheless, petitioner
FELS still cannot find solace.
NO. Neither can NAPOCOR pass its tax–
exempt status to its BOT partner.
NAPOCOR’s basis for its claimed exemption –
Section 234(c) of the LGC – is clear and not at
all ambiguous in its terms. Exempt from real
property taxation are: (a) all machineries and
equipment; (b) [that are] actually, directly, and
exclusively used by; (c) [local water districts
and] government-owned or –controlled
corporations engaged in the [supply and
distribution of water and/or] generation and
transmission of electric power.
By [BOT’s] express terms, BPPC has complete
ownership – both legal and beneficial – of the
project, including the machineries and
equipment used, subject only to the transfer of
these properties without cost to NAPOCOR
after the lapse of the period agreed upon. As
agreed upon, BPPC provided the funds for the
construction of the power plant, including the
machineries and equipment needed for power
generation; thereafter, it actually operated and
still operates the power plant, uses its
machineries and equipment, and receives
payment for these activities and the electricity
generated under a defined compensation

11. NPC v. Quezon Legal interest is defined as interest in
Power, G.R. No. property or a claim cognizable at law,
171586, July 15, 2009 equivalent to that of a legal owner who
has legal title to the property. legal
interest should be an interest that is
actual and material, direct and
immediate, not simply contingent or
expectant.
NPC is a GOCC that entered into an Energy
Conversion Agreement (ECA) under a build-
operate-transfer (BOT) arrangement with Mirant
Pagbilao Corp. Under the agreement, Mirant will
build and finance a thermal power plant in Quezon,
and operate and maintain the same for 25 years,
after which, Mirant will transfer the power plant to
the Respondent without compensation. NPC also
undertook to pay all taxes that the government may
impose on Mirant. Quezon then assessed Mirant
real property taxes on the power plant and its
machineries.
scheme. Notably, BPPC – as owner-user – is
responsible for any defect in the machineries
and equipment.
Consistent with the BOT concept and as
implemented, BPPC – the owner-manager-
operator of the project – is the actual user of its
machineries and equipment. BPPC’s
ownership and use of the machineries and
equipment are actual, direct, and immediate,
while NAPOCOR’s is contingent and, at this
stage of the BOT Agreement, not sufficient to
support its claim for tax exemption. Since
neither of the requirements were satisfied,the
claim for exemption must fall.
Can Petitioner claim NO. To successfully claim exemption under
exemption from the RPT Section 234 (c) of the LGC, the claimant must
given the BOT arrangement prove two elements: a) the machineries and
with Mirant? equipment are actually, directly, and
exclusively used by local water districts and
government-owned or controlled corporations;
and b) the local water districts and
government-owned and controlled
corporations claiming exemption must be
engaged in the supply and distribution of water
and/or the generation and transmission of
electric power. Since neither the Petitioner nor
Mirant satisfies both requirements, the claim
for exemption must fall. NPC is neither the
owner nor the possessor/user of the subject
machineries even if it will acquire ownership of
the plant at the end of 25 years. The Court said
that legal interest should be an interest that is
actual and material, direct and immediate, not
simply contingent or expectant. While the
Petitioner does indeed assume responsibility
for the taxes due on the power plant and its
machineries, the tax liability referred to is the
liability arising from law that the local
government unit can rightfully and successfully
enforce, not the contractual liability that is
enforceable between the parties to a contract.
COURT OF TAX APPEALS

Case Title Case Principle Summary of Facts Issue/s Ruling

1. Global Medical This landmark case strengthened the
Center of Laguna v. substantive right to avail of arbitration
Ross Systems as an alternative mode of resolving
International, Inc., disputes.
G.R. No.
230112/230119, May Prior to this decision, the Construction
11, 2021. Industry Arbitration Commission (CIAC),
under Rule 43 of the Rules of Court, was
one of the quasi-judicial agencies the
decisions of which may be appealed to
the Court of Appeals (CA) with respect to
issues of fact or law, or both. Direct
recourse to the Supreme Court,
regarding arbitral awards issued by the
CIAC, could not be availed.
The inclusion of the CIAC under Rule 43
was said to have “weakened if not,
altogether destroyed the authoritative
autonomy of the CIAC, as well as eroded
if not totally obliterated its very nature as
the expedited, economical, independent
alternative dispute resolution to the
otherwise protracted and costly court
litigation.” Hence, this over-inclusion was
held to be invalid for overstepping the
positive limitation of the rule-making
power of the Supreme Court under
Section 5(5), Article VIII of the
Constitution on non-modification of
substantive rights.
The Supreme Court added that this new
precedent of carving out of the CIAC from
the enumeration under Rule 43, along
with the effective reversal of
Global Medical Center of Laguna, Inc. (GMCLI)
engaged the services of Ross Systems
International, Inc. (RSII) for a construction project
valued at PhP 248,500,000.00. Among the issues
raised are the inability of the parties to agree on the
percentage of completion, belated withholding of
taxes and disagreements on the amount of
progress billings to be paid.
Since the construction contract had an arbitration
clause, RSII commenced arbitration with the CIAC.
An arbitral tribunal formed under the auspices of the
CIAC then conducted the arbitration and issued an
arbitral award which denied, in part, the reliefs
sought by the parties. RSII appealed the award to
the Court of Appeals through a petition for review
under Rule 43 of the Rules of Court (which allows
an appellant to raise issues of fact or law or both on
appeal). The Court of Appeals issued a decision
partially granting RSII's petition.
Both GMCLI and RSII sought reconsideration of the
decision and both were denied. GMCLI and RSII
filed separate petitions with the Supreme Court,
questioning the decision of the Court of Appeals.
Whether or not the CA
misapplied its appellate
function when it delved into
settling the factual matters
and modified the
mathematical computation of
the CIAC.
YES. CA misapplied its appellate function
when it delved into settling the factual matters
and modified the mathematical computation of
the CIAC with respect to the presence or
absence of an outstanding balance payable to
RSII. This mathematical recomputation is an
error because the amounts reimbursable to
RSII were not specifically raised by the RSII as
an issue in its Rule 43 petition before the CA.
CIAC is a quasi-judicial agency at par with
other commercial tribunals. Courts therefore
must observe non-participation except on
narrowest of grounds.
To be clear, Supreme Court en banc clarified
that, for the avoidance of doubt, the Court now
holds that judicial review of CIAC arbitral
awards takes either of two remedial routes,
depending on the issue being raised:
1. If the appeal involves pure question/s of
law, it should be filed directly with the Supreme
Court through a petition for review on certiorari
under Rule 45 of the Rules of Court.
2. If the appeal involves factual issues, the
same should be brought to the Court of
Appeals through a petition for certiorari under
Rule 65 of the Rules of Court. The factual
issues shall be limited to: (a) a challenge on the
integrity of the composition of the tribunal; or
(b) an allegation that the arbitral tribunal
violated the Constitution or positive law in the
conduct of the arbitral process.
3. No other circumstances other than those
provided above will be available to appeal a
CIAC arbitral award.
The SC said the new guidelines with respect to
the modes of judicial review of the CIAC should
 jurisprudence, should be applied be applied prospectively and does not cover
prospectively cases that are pending with the CA.

2. Consolidated What sets apart BIR Rulings from other
cases of CIR v. CTA, issuances of the BIR is that it relates to a
Pilipinas Shell Corp., particular taxpayer's set of facts and
et. al.; COC v. circumstances and a consequent
Pilipinas Shell et. al., determination of taxability or tax
exemption, when applicable.
Within the judicial system, the law
intends the Court of Tax Appeals to have
exclusive jurisdiction to resolve all tax
Between May 2010 to August 2011, the BIR issued
twenty-one (21) Authorities to Release Imported
Goods (ATRIG) which all stated that alkylate
imported by the taxpayer was not subject to excise
tax considering that it is not among those articles
enumerated Tax Code.
On June 4, 2012, the Commissioner of Customs
requested an opinion to the BIR on whether it could
collect excise taxes on the taxpayer’s alkylate
Does the CTA have YES. It is apparent that the tenor and wording
jurisdiction over the subject of Document No. M-059-2012 qualify it as a
matter (Document No. M- BIR Ruling. BIR rulings "are the official
059-2012)? position of the Bureau to queries raised by
taxpayers and other stakeholders relative
to clarification and interpretation of tax
laws. Court of Tax Appeals may take
cognizance of cases directly challenging the
constitutionality or validity of a tax law or
regulation or administrative issuance (revenue
problems. The CTA Law, Republic Act
No. 9282, a special and later law than
Batas Pambansa Blg. 129 provides an
exception to the original jurisdiction of the
Regional Trial Courts over actions
questioning the constitutionality or
validity of tax laws or regulations. Except
for local tax cases, actions directly
challenging the constitutionality or
validity of a tax law or regulation or
administrative issuance (revenue orders,
revenue memorandum circulars, rulings)
may be filed directly before the Court of
Tax Appeals.
importation. The BIR then issued Document No. M-
059-2012 stating that alkylate importations are
subject to excise tax.
Aggrieved, the taxpayer filed a petition for review
with the CTA assailing Document No. M-059-2012
as an invalid BIR Ruling. The CIR and BOC
questioned the jurisdiction of the CTA since
Document No. M-059-2012 was neither a ruling nor
an adverse decision but a mere internal
communication.
orders, revenue memorandum circulars,
rulings) pursuant to the CTA Law. Petitions for
writs of certiorari against the acts and
omissions of the said quasi-judicial agencies
should, thus, be filed before the Court of Tax
Appeals.
Section 7 of Republic Act No. 1125, as
amended, is explicit that, appeals from the
decisions of quasi-judicial agencies
(Commissioner of Internal Revenue,
Commissioner of Customs, Secretary of
Finance, Central Board of Assessment
Appeals, Secretary of Trade and Industry) on
tax-related problems must be brought
exclusively to the Court of Tax Appeals.
Hence, although the query originated from the
Collector and not the taxpayer, in this case, the
clarificatory/ interpretative tenor of Document
No. M-059-2012 relative to the PSPC's excise
tax liability remains. As such, Document No. M-
059-2012 is effectively a BIR Ruling issued
against PSPC
3. CIR v. Air Supreme Court accords the findings and
Philippines conclusions of the CTA with the highest
Corporation, G.R. respect. As a specialized court dedicated
No. 243260, February exclusively to the resolution of tax
5, 2020. problems, the CTA has accordingly
developed an expertise on the subject of
taxation. Thus, its decisions are
presumed valid in every aspect and will
not be overturned on appeal, unless the
Court finds that the questioned decision
is not supported by substantial evidence
or there has been an abuse or
improvident exercise of authority on the
part of the tax court.
RA 8339, relation to Section 13 (PD) No. 1590,
granted the respondent Air Philippines (PAL) a tax
exemption from excise tax on its importations of
aviation turbo jet fuel for its domestic flight
operations. However, on January 29, 2003, BIR
Ruling discontinued PAL tax exemption on their
importations of petroleum products for domestic
operations, in the light of the Certification of the
Department of Energy dated December 20, 2002
that aviation gas, fuel and oil for use in domestic
operation of domestic airline companies are locally
available in reasonable quantity, quality, and price
-- there is now an absence of the second condition
required for the airlines to continue to enjoy tax
exemption.
BIR then assessed the respondent for specific
taxes on its importations of Jet A-1 aviation fuel
used for its domestic operations. Respondent made
importations and paid its corresponding specific
taxes under protest. The alleged inaction of the
petitioner on the written claims for refund prompted
the respondent to file four petitions for review
before the CTA.
The CTA Division ruled that one of the three
requirements for the respondent's tax exemption
under Section 13 of PD No. 1590 was not fulfilled.
To be specific, the third requisite is absent because
the imported Jet A-1 fuel was allegedly locally
available in reasonable quantity.
CTA en banc granted PAL exemption as DOE
Certification was considered irrelevant because it
was based on a 2002 report while the subject Jet
A-1 fuel refers to the supply for year 2008 and
based on the ICPA's Financial and Supplemental
Reports, the respondent was able to prove that the
subject Jet A-1 fuel is not locally available in
reasonable price, qualifying the respondent to the
tax exemption.
Whether or not the Yes. SC did not disturb the findings of CTA.
respondent is entitled to tax
exemption for its importation The petition only raised factual issues and
of the subject Jet A-1 fuel. arguments in their appeal, which had already
been fully passed upon by the CTA. CTA En
Banc found the absence of locally available
aviation fuel in reasonable quantity, quality or
price – entitling PAL to the exemption. In
essence, what the petitioner asks from this
Court is a re-evaluation of the certifications and
other relevant evidence already presented and
reviewed by the CTA. Clearly, this is a question
of fact which cannot be raised before this
Court, except for recognized exceptions.
This case clearly falls under none of the
recognized exception. In the instant case, the
assailed CTA Decision is supported by
substantial evidence, as can be gleaned from
the quantity and quality of the testimonial and
documentary evidence presented. There is
also no legal and factual basis to support the
allegation of CTA's abuse of authority.
With respect to the findings of specialized
courts, such as the CTA, the conclusions of
which are not lightly set aside because of the
very nature of its functions which is dedicated
exclusively to the resolution of tax problems
and has accordingly developed an expertise on
the subject. Thus, its decisions are presumed
valid in every aspect and will not be overturned
on appeal, unless the Court finds that the
questioned decision is not supported by
substantial evidence or there has been an
abuse or improvident exercise of authority on
the part of the tax court.
4. Duty Free No decision of the CTA division may be
Philippines vs. BIR, elevated to this Court under Rule 45 of
G.R. No 197228, the 1997 Rules of Civil Procedure without
October 8, 2014. passing through the CTA en banc.
It is worth emphasizing that an appeal is
neither a natural nor a constitutional
right, but is merely statutory. The
implication of its statutory character is
that the party who intends to appeal must
always comply with the procedures and
rules governing appeal, or else, the right
of appeal may be lost.
5. The City of Manila, In order for any appellate court to
etc. et al. v. Hon. effectively exercise its appellate
Caridad H. Grecia- jurisdiction, it must have the authority to
Cuerdo etc., et al, issue, among others, a writ of certiorari.
G.R. No. 175723. In transferring exclusive jurisdiction over
February 4, 2014. appealed tax cases to the CTA, it can
Duty Free is a merchandising system established
by Department of Tourism, pursuant EO 46 dated 4
September 1986. It sought a clarification of its
exemption from the expanded withholding tax,
alleging that as a tax-exempt establishment under
E.O. No. 46, it should not be subjected to the
1.1/2% expanded withholding taxes on certain
income payments that were withheld by credit card
companies in compliance with R.R. No. 6-94. In
relation thereto, petitioner also inquired on the
procedure for the refund of accumulated taxes
withheld by credit card companies amounting to
P1.8 million.
On its ruling, BIR opined that by EO 93 dated
December 17, 1986, it withdrew all the tax and duty
incentives granted to government and public
entities, including petitioner Duty Free. Hence,
respondent denied the request of petitioner for a
refund of the withholding tax on certain payments
made by credit card companies and remitted to the
BIR.
The ruling was elevated to DOF Secretary, CTA
First Division and CTA Division where all found that
petitioner was not a tax-exempt entity in the
absence of an express grant of tax exemption.
Petitioner directly appealed to this Court under Rule
45 of the 1997 Rules of Civil Procedure, assailing
the aforesaid Decision and Resolution of the CTA
Division.
The record shows that petitioner City of Manila,
through its treasurer, petitioner Liberty Toledo,
assessed taxes for the taxable period from January
to December 2002 against private. respondents SM
Mart, Inc., SM Prime Holdings, Inc., Star
Appliances Center, Supervalue, Inc., Ace
Whether or not the mode of
appeal of petitioner is proper
when it appeal by directly
before the Supreme Court
without first elevating the
case to the CTA en banc as
provided under Rule 16 of
the Revised Rules of the
CTA.
Whether or not the petition
for certiorari must be filed to
the Court of Tax Appeals and
not to the Court of Appeals
No. The Supreme Court has no jurisdiction to
review the Decision and Resolution rendered
by the Special First Division of the CTA. Thus,
the instant Petition must fail.
The enactment of R.A. No. 9282, elevated the
rank of the CTA to the level of a collegiate
court, making it a co-equal body of the Court of
Appeals. Section 19 thereof, provides that a
party adversely affected by a decision the CTA
en banc may file with the Supreme Court a
verified petition for review on certiorari
pursuant to Rule 45 .
In this case, petitioner filed with this Court on
29 July 2011 the instant Petition from the denial
of its Motion for Reconsideration by the Special
First Division of the CTA. At that time, R.A.
9282 was already in effect, and it evidently
provides that the CTA en banc shall have
exclusive jurisdiction over appeals from the
decision of its divisions. A party adversely
affected by the resolution of the CTA division
may, on motion for reconsideration, file a
petition for review with the CTA en banc.
Thereafter, the decision or ruling of the CTA en
banc may be elevated to Supreme Court.
Simply stated, no decision of the CTA
division may be elevated to this Court
under Rule 45 of the 1997 Rules of Civil
Procedure without passing through the
CTA en banc.
In light of the above findings, the Court finds no
need to further discuss the other issues raised
by the parties.
YES. A perusal of the above provisions would
show that, while it is clearly stated that the CTA
has exclusive appellate jurisdiction over
decisions, orders or resolutions of the RTCs in
local tax cases originally decided or resolved
by them in the exercise of their original or
reasonably be assumed that the law Hardware Philippines, Inc., Watsons Personal Care
intended to transfer also such power as Stores Phils., Inc., Jollimart Philippines Corp.,
is deemed necessary, if not Surplus Marketing Corp. and Signature Lines. In
indispensable, in aid of such appellate addition to the taxes purportedly due from private
jurisdiction. respondents pursuant to Sections 14, 15, 16, 17 of
the Revised Revenue Code of Manila (RRCM), said
assessment covered the local business taxes
petitioners were authorized to collect under Section
21 of the same Code. Because payment of the
taxes assessed was a precondition for the issuance
of their business permits, private respondents were
constrained to pay the P19,316,458.77 assessment
under protest.
On January 24, 2004, private respondents filed
[with the Regional Trial Court of Pasay City] the
complaint denominated as one for “Refund or
Recovery of Illegally and/or Erroneously-Collected
Local Business Tax, Prohibition with Prayer to
Issue TRO and Writ of Preliminary Injunction” which
was docketed as Civil Case No. 04-0019-CFM
before public respondent’s sala [at Branch 112]. In
the amended complaint they filed on February 16,
2004, private respondents alleged that, in relation
to Section 21 thereof, Sections 14, 15, 16, 17, 18,
19 and 20 of the RRCM were violative of the
limitations and guidelines under Section 143 (h) of
Republic Act No. 7160[Local Government Code] on
double taxation. They further averred that petitioner
city’s Ordinance No. 8011 which amended
pertinent portions of the RRCM had already been
declared to be illegal and unconstitutional by the
Department of Justice.
In its Order dated July 9, 2004, the RTC granted
private respondents’ application for a writ of
preliminary injunction. Petitioners filed a Motion for
Reconsideration but the RTC denied it in its Order
dated October 15, 2004. Petitioners then filed a
special civil action for certiorari with the CA
assailing the July 9, 2004 and October 15, 2004
Orders of the RTC.
appellate jurisdiction, there is no categorical
statement under RA 1125 as well as the
amendatory RA 9282, which provides that the
CTA has jurisdiction over petitions for certiorari
assailing interlocutory orders issued by the
RTC in local tax cases filed before it.
The prevailing doctrine is that the authority to
issue writs of certiorari involves the exercise of
original jurisdiction which must be expressly
conferred by the Constitution or by law and
cannot be implied from the mere existence of
appellate jurisdiction. Thus, in the cases of
Pimentel v. COMELEC, Garcia v. De Jesus,
Veloria v. COMELEC, Department of Agrarian
Reform Adjudication Board v. Lubrica, and
Garcia v. Sandiganbayan, this Court has ruled
against the jurisdiction of courts or tribunals
over petitions for certiorari on the ground that
there is no law which expressly gives these
tribunals such power. It must be observed,
however, that with the exception of Garcia v.
Sandiganbayan, these rulings pertain not to
regular courts but to tribunals exercising quasi-
judicial powers. With respect to the
Sandiganbayan, Republic Act No. 8249 now
provides that the special criminal court has
exclusive original jurisdiction over petitions for
the issuance of the writs of mandamus,
prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and
processes in aid of its appellate jurisdiction.
In the same manner, Section 5 (1), Article VIII
of the 1987 Constitution grants power to the
Supreme Court, in the exercise of its original
jurisdiction, to issue writs ofcertiorari,
prohibition and mandamus. With respect to the
Court of Appeals, Section 9 (1) of Batas
Pambansa Blg. 129 (BP 129) gives the
appellate court, also in the exercise of its
original jurisdiction, the power to issue, among
others, a writ of certiorari, whether or not in aid
In its Resolution promulgated on April 6, 2006, the
CA dismissed petitioners’ petition for certiorari
holding that it has no jurisdiction over the said
petition. The CA ruled that since appellate
jurisdiction over private respondents’ complaint for
tax refund, which was filed with the RTC, is vested
in the Court of Tax Appeals (CTA), pursuant to its
expanded jurisdiction under Republic Act No. 9282
(RA 9282), it follows that a petition for certiorari
seeking nullification of an interlocutory order issued
in the said case should, likewise, be filed with the
CTA.
of its appellate jurisdiction. As to Regional Trial
Courts, the power to issue a writ of certiorari, in
the exercise of their original jurisdiction, is
provided under Section 21 of BP 129.
The foregoing notwithstanding, while there is
no express grant of such power, with respect
to the CTA, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that
judicial power shall be vested in one Supreme
Court and in such lower courts as may be
established by law and that judicial power
includes the duty of the courts of justice to
settle actual controversies involving rights
which are legally demandable and
enforceable, and to determine whether or not
there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the
Government.
On the strength of the above constitutional
provisions, it can be fairly interpreted that the
power of the CTA includes that of determining
whether or not there has been grave abuse of
discretion amounting to lack or excess of
jurisdiction on the part of the RTC in issuing an
interlocutory order in cases falling within the
exclusive appellate jurisdiction of the tax court.
It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue
writs of certiorari in these cases.
Indeed, in order for any appellate court, to
effectively exercise its appellate jurisdiction, it
must have the authority to issue, among
others, a writ of certiorari. In transferring
exclusive jurisdiction over appealed tax cases
to the CTA, it can reasonably be assumed that
the law intended to transfer also such power as
is deemed necessary, if not indispensable, in
aid of such appellate jurisdiction. There is no
perceivable reason why the transfer should
only be considered as partial, not total.

Stated differently, it would be somewhat

incongruent with the pronounced judicial
abhorrence to split jurisdiction to conclude that
the intention of the law is to divide the authority
over a local tax case filed with the RTC by
giving to the CA or this Court jurisdiction to
issue a writ of certiorari against interlocutory
orders of the RTC but giving to the CTA the
jurisdiction over the appeal from the decision of
the trial court in the same case. It is more in
consonance with logic and legal soundness to
conclude that the grant of appellate jurisdiction
to the CTA over tax cases filed in and decided
by the RTC carries with it the power to issue a
writ of certiorari when necessary in aid of such
appellate jurisdiction. The supervisory power
or jurisdiction of the CTA to issue a writ of
certiorari in aid of its appellate jurisdiction
should co-exist with, and be a complement to,
its appellate jurisdiction to review, by appeal,
the final orders and decisions of the RTC, in
order to have complete supervision over the
acts of the latter.

A grant of appellate jurisdiction implies that

there is included in it the power necessary to
exercise it effectively, to make all orders that
will preserve the subject of the action, and to
give effect to the final determination of the
appeal. It carries with it the power to protect
that jurisdiction and to make the decisions of
the court thereunder effective. The court, in aid
of its appellate jurisdiction, has authority to
control all auxiliary and incidental matters
necessary to the efficient and proper exercise
of that jurisdiction. For this purpose, it may,
when necessary, prohibit or restrain the
performance of any act which might interfere
with the proper exercise of its rightful
jurisdiction in cases pending before it.
6. Smart Section 5, Article X of the 1987
Communications, Constitution provides that "[e]ach local
Inc. v. Municipality of government unit shall have the power to
Malvar, Batangas, create its own sources of revenues and
G.R. No. 20442. to levy taxes, fees, and charges subject
February 18, 2014 to such guidelines and limitations as the
Congress may provide, consistent with...
the basic policy of local autonomy. Such
taxes, fees, and charges shall accrue
exclusively to the local government." The
Local Government Code defines the term
"charges" as referring to pecuniary
liability, as rents or fees against persons
or property, while the term "fee" means
"a charge fixed by law or ordinance for
the regulation or inspection of a business
or activity."
Smart constructed a telecommunications tower
within the territorial jurisdiction of the Municipality.
The construction of the tower was for the purpose
of receiving and transmitting cellular
communications within the covered area.
On 30 July 2003, the Municipality passed
Ordinance No. 18, series of 2003, entitled "An
Ordinance Regulating the Establishment of Special
Projects."
On 24 August 2004, Smart received from the Permit
and Licensing Division of the Office of the Mayor of
the Municipality an assessment letter with a
schedule of payment for the total amount of
P389,950.00 for Smart’s telecommunications
tower. Due to the alleged arrears in the payment of
the assessment, the Municipality also caused the
posting of a closure notice on the
telecommunications tower.
On 9 September 2004, Smart filed a protest,
claiming lack of due process in the issuance of the
assessment and closure notice. In the same
protest, Smart challenged the validity of Ordinance
No. 18 on which the assessment was based.
In a letter dated 28 September 2004, the
Municipality denied Smart’s protest.
RTC partially granted Smart’s petition, but did not
rule on the legality of Ordinance No. 18. It declared
that Smart is only liable for fees starting October 1,
2003, and null and void insofar as the assessment
made from 2001 to 2003. MR denied. CTA denied.
CTA MR also denied. CTA en banc denied. CTA en
banc likewise denied.
SMART’s arguments:
CTA erred in refusing to take cognizance of the
case and for dismissing the case for lack of
jurisdiction considering the “unique” factual
circumstances involved.
1. Whether or not the fees
imposed are taxes
2. Whether or not the Court
of Tax Appeals should have
taken cognizance of the case
1. Since the main purpose of Ordinance No. 18
is to regulate certain construction activities of
the identified special projects, which included
"cell sites" or telecommunications towers, the
fees imposed in Ordinance No. 18 are primarily
regulatory in nature, and not primarily revenue-
raising. While the fees may contribute to the
revenues of the Municipality, this effect is
merely incidental. Thus, the fees imposed in
Ordinance No. 18 are not taxes.
2. Considering that the fees in Ordinance No.
18 are not in the nature of local taxes, and
Smart is questioning the constitutionality of the
ordinance, the CTA correctly dismissed the
petition for lack of jurisdiction. Likewise,
Section 187 of the LGC, which outlines the
procedure for questioning the constitutionality
of a tax ordinance, is inapplicable, rendering
unnecessary the resolution of the issue on
non-exhaustion of administrative remedies.
An ordinance carries with it the presumption of
validity. The question of reasonableness
though is open to judicial inquiry. Much should
be left thus to the discretion of municipal
authorities. Courts will go slow in writing off an
ordinance as unreasonable unless the amount
is so excessive as to be prohibitive, arbitrary,
unreasonable, oppressive, or confiscatory. A
rule which has gained acceptance is that
factors relevant to such an inquiry are the
municipal conditions as a whole and the nature
of the business made subject to imposition.
To justify the nullification of the law or its
implementation, there must be a clear and
unequivocal, not a doubtful, breach of the
Constitution. In case of doubt in the sufficiency
of proof establishing unconstitutionality, the
Court must sustain legislation because "to
invalidate [a law] based on xx x baseless
supposition is an affront to the wisdom not only
 of the legislature that passed it but also of the
The fees imposed in Ordinance No. 18 are actually executive which approved it." This presumption
taxes since they are not regulatory but rather, of constitutionality can be overcome only by
revenue-raising. the clearest showing that there was indeed an
infraction of the Constitution, and only when
Municipality is encroaching on the regulatory such a conclusion is reached by the required
powers of the National Telecommunications majority may the Court pronounce, in the
Commission (NTC). Smart cites Section 5(g) of discharge of the duty it cannot escape, that the
Republic Act No. 7925 which provides that the challenged act must be struck down.
NTC, in the exercise of its regulatory powers, shall
impose such fees and charges as may be
necessary to cover reasonable costs and expenses
for the regulation and supervision of the operations
of telecommunications entities. Thus, Smart
alleges that the regulation of telecommunications
entities and all aspects of its operations is
specifically lodged by law on the NTC.

Malvar’s arguments:
Said Ordinance is not a tax ordinance but a
regulatory fee imposed to regulate the “placing,
stringing, attaching, installing, repair and
construction of all gas mains, electric, telegraph
and telephone wires, conduits, meters and other
apparatus, and provide for the correction,
condemnation or removal of the same when found
to be dangerous, defective or otherwise hazardous
to the welfare of the inhabitant.

It was also envisioned to address the foreseen

"environmental depredation" to be brought about by
these "special projects" to the Municipality.
Pursuant to these objectives, the Municipality
imposed fees on various structures, which included
telecommunications towers.

The fees are not imposed to regulate the

administrative, technical, financial, or marketing
operations of telecommunications entities, such as
Smart’s; rather, to regulate the installation and
maintenance of physical structures – Smart’s cell
sites or telecommunications tower.
7. CIR v. Toledo, Tthe courts have no assessment powers,
Power, Inc., G.R. No. and therefore, cannot issue assessments
183880, January 20, against taxpayers. The courts can only
2014. review the assessments issued by the
CIR, who under the law is vested with the
powers to assess and collect taxes and
the duty to issue tax assessments within
the prescribed period.
Toledo Power Corporation (TPC) is a general
partnership principally engaged in the business of
power generation and sale of electricity to the
National Power Corporation (NPC), Cebu Electric
Cooperative III (CEBECO), Atlas Consolidated
Mining and Development Corporation (ACMDC),
and Atlas Fertilizer Corporation (AFC). TPC filed
with the Bureau of Internal Revenue (BIR) Regional
District Office (RDO) No. 83 an administrative claim
for refund or credit of its unutilized input Value
Added Tax (VAT) for the taxable year 2002 under
EPIRA law and NIRC.
Since NPC is exempt from the payment of all taxes,
including VAT, the CTA Division allowed TPC to
claim a refund or credit of its unutilized input VAT
attributable to its zero- rated sales of electricity to
NPC for the taxable year
2002. The CTA Division, however, denied the claim
attributable to TPC's sales of electricity to
CEBECO, ACMDC and AFC due to the failure of
TPC to prove that it is a generation company under
the EPIRA. The CTA also ruled that Toledo
Company fails to be under the EPIRA law; because
it was late with its COC application.
1. Whether the 1. Both the administrative and the judicial
administrative and the claims were timely and validly filed
judicial claims for tax refund
or credit were timely and In filing tax refund claims - taxpayer has two (2)
validly filed. years from the close of the taxable quarter
when the zero-rated sales were made within
2. Whether the TPC is which to file with the CIR an administrative
entitled to the full amount of claim for refund or credit of unutilized input VAT
its claim for tax refund or attributable to such sales.
credit.
In this case, TPC applied for a claim for refund
or credit of its unutilized input VAT for the
taxable year 2002 on December 22, 2003.
Since the CIR did not act on its application
within the 120- day period, TPC appealed the
inaction on April 22, 2004. Clearly, both the
administrative and the judicial claims were filed
within the prescribed period provided in
Section 112 of the NIRC.
To the validity of TPC's claim, there is no
question that TPC is entitled to a refund or
credit of its unutilized input VAT attributable to
its zero-rated sales of electricity to NPC for the
taxable year 2002 pursuant to Section 108 (B)
(3)49 of the NIRC, as amended, in relation to
Section 1350 of the Revised Charter of the
NPC, as amended.
2. TPC is not entitled to a refund or credit of
unutilized input VAT attributable to its sales of
electricity to CEBECO, ACMDC, and AFC.
To be entitled to a refund or credit of unutilized
input VAT attributable to the sale of electricity
under the EPIRA, a taxpayer must establish:
(1) that it is a generation company, and (2) that
it derived sales from power generation.
Under the EPIRA, all new generation
companies and existing generation facilities
are required to obtain a COC from the ERC.
New generation companies must show that

TARIFF AND CUSTOMS CODE
Case Title Case Principle
1. COC v. PTT Forum shopping exists when a party
Philippines Trading repeatedly avails himself of several
Corporation, G.R. judicial remedies in different courts,
No. 201138-40, either simultaneously or successively, all
February 15, 2021. of which are substantially founded on the
sarne fransactions and the same
essential facts and circumstances, and
all raising substantially the same issues
either pending in or already resolved
adversely by some other court.
Summary of Facts
A Special Audit Team (Audit Team) was formed
pursuant to Mission Order No. 018-2006 issued by
the Bureau of Customs (BOC) to conduct an audit
on the import shipments and inventory of all sale
transactions of PTTPTC.
In its Initial Audit Findings dated July 2, 2007, the
Audit Team declared PTTPTC to have mislabeled
some of its imported fuel to make it eligible to avail
of special tax benefits. The Audit Team found the
firm liable to pay P4,236,530,193.00 representing
assessed Customs Duties, Value Added Tax and
Penalties.
On July 31, 2007, then Com-missioner Napoleon
Morales (Commissioner Morales) of the BOC sent
a demand letter to PTTPTC to settle its
outstanding obligation within seven (7) days from
notice.
On August 3, 2007, PTTPTC, through counsel, sent
a letter to Commissioner Morales, asking for
reconsideration or reinvestigation of the Audit
they have complied with the requirements,
standards, and guidelines of the ERC before
they can operate.
There is nothing in the JSFI to show that the
parties agreed that TPC is a generation
company under the EPIRA.
It was only on June 23,2005, when the ERC
issued a COC in favor of TPC, that it became
a generation company under EPIRA.
Consequently, TPC's sales of electricity to
CEBECO, ACMDC, and AFC cannot qualify for
VAT zero-rating under the EPIRA
Issue/s Ruling
Whether or not the cases No. Petition is without merit.
filed by PTT Philippines
Trading Corp constitute an Assuming arguendo that the filing of the three
act of intentional forum Petitions for Review cannot be considered as
shopping. forum shopping, CTA Case Nos. 8002 and
8023 should still be dismissed for lack of
jurisdiction of the CTA to hear both cases.
Petitioner argues that CTA Case Nos. 8002
and 8023 were both filed beyond the 30-day
period to protest the November 7, 2007
demand letter.
Even if both cases are to be treated as claims
for refund of erroneously paid taxes and duties
instead of a protest of assessment, they
should be dismissed since the CTA has no
jurisdiction over actions questioning the ruling
of the Commissioner of Customs under RA
9262.
Forum shopping exists when a party
repeatedly avails himself of several judicial
remedies in different courts, either
Team's conclusion and recommendation. simultaneously or successively, all of which are
substantially founded on the same transactions
On October l , 2007, PTTPTC tendered, under and the same essential facts and
protest, to the BOC the amount of circumstances, and all raising substantially the
P117,681 ,394.00 as partial payment of its same issues either pending in or already
obligation. resolved adversely by some other court.

On November 7, 2007, a Demand Letter was sent
to PTTPTC to settle its discrepancy assessment of
basic duties and taxes amounting to and its
corresponding penalty in the amount of until
November 15, 2007.
On November 20, 2007, PTTPTC filed with the CTA
Second Division a Petition for Review il docketed
as CTA Case No. 7707 assailing, among others,
the validity of the assessment and the final demand
letter dated November 7, 2007.
It paid the BOC the amount of PI 76,522,091.50 on
November 29, 2007 and another PI December 18,
2007, with the total of both payments amounting to
its assessment balance.
In finding that there was no forum shopping,
the CTA-EB held that the causes of action of
the three petitions differ. In CTA Case No.
7707, PTTPTC questioned the legality of the
November 7, 2007 demand letter and prayed
that it be nullified. CTA Case Nos. 8002 and
8023 have similar causes of action as both
pray for the refund of the amount that PTTPTC
paid representing erroneously paid taxes and
custom duties. However, CTA Case Nos. 8002
and 8023 are mere supplemental petitions to
CTA Case No. 7707.

On September 30, 2009, it filed CTA Case No. 7981

praying for the refund of the P117,681,394 it paid
under protest.

On December 1, 2009, PTTPTC instituted CTA

Case No. 8002 before the C TA First Division
asking for the refund of the P176,522,091.50 it paid
on November 29, 2007.

On January 8, 2010, petitioner moved to dismiss

CTA Case No. 7707 on the ground of litis pendentia
citing the pendency of C TA Case Nos. 7981 and
8002.16

On January 13, 2010, PTTPTC commenced

another Petition for Review, docketed as C TA
Case No. 8023, praying for the refund of the
amount of P176,522,091.50 it paid on December
18, 2007. The same was raffled to the Third
 Division of the CTA.

On February 22, 2010, petitioner filed a Motion to

Dismiss CTA Case No. 8002 on the ground of lack
of jurisdiction. The Commissioner alleged that the
November 7, 2007 demand letter on which the
refund of the amount of PI 76,522,091.50 was
based already attained finality since the petition for
review was filed beyond 30-day period to file a
protest under Section 11 of Republic Act No. 1125
(RA 1125), as amended by RA 9282.

PTTPTC filed three separate petitions for review

before the CTA-EB docketed as CTA EB Case No.
711 (CTA Case No. 7707), CTA EB Case No. 714
(CTA Case No. 8002) and CTA EB Case No. 719
(CTA Case No. 8023). In a Resolution dated July
20, 2011, the three petitions were consolidated. In
a Resolution dated April 17, 2012, the CTA-EB
reversed the questioned resolutions of its three
divisions and reinstated CTA Case Nos. 7707,
8002 and 8023

2. COA, CIR v. Social The books of accounts of Pilipinas Shell
Justice Society, et. Petroleum Corporation, Caltex
al, G.R. No. 188760, Philippines, Inc., and Petron Corporation
June 30, 2020 may not be opened and examined by the
Commission on Audit (“COA”), Bureau of
Internal Revenue (“BIR”), and Bureau of
Customs (“BOC”) because said
companies are beyond the audit
jurisdiction of these three (3) agencies for
the purposes of enforcing the anti-cartel
provisions of the Downstream Oil
Industry Deregulation Act.
As to the COA, the Supreme Court noted
that said oil companies are not public
entities nor are they nongovernmental
entities receiving financial aid from the
government. With respect to the BIR, its
Commissioner is authorized to examine
books, papers, records, or other data of
Respondent political party, Social Justice Society
(SJS), file with the RTC of Manila a Petition for
Declaratory Relief against Shell, Caltex, and
Petron. SJS allege that the “Big 3” oil companies’
practice of increasing the prices of their petroleum
products whenever the price of crude oil in the
world market increases, despite having purchased
their inventories at a much lower price before the
increase, constitutes monopoly and combination in
restraint of trade, in violation of Article 186 of the
RPC and Section 11(a) of RA 8479 (Downstream
Oil Industry Deregulation Act of 1998).
The RTC directed the parties to refer the matter to
the Dept of Energy and DOJ pursuant to RA 8479,
and ordered the suspension of the proceedings. In
its report, the DOE-DOJ Join Task Force found no
clear evidence that the Big 3 violated the RPC or
RA 8479.
Whether the RTC is correct
in ordering COA, BIR, and
BOC to open and examine
the books of accounts of the
Big 3.
NO. RA 8479 vested to the DOE-DOJ Joint
Task Force the authority to determine the
issue, investigate and to order the prosecution
of cartelization. Section 13 provides for the
Remedies under which the filing of actions by
government prosecutors and the investigation
by the Task Force is provided.
Pursuant to Section 2, Article IX-D of the
Constitution and the Admin Code of 1987,
COA’s audit jurisdiction generally covers public
entities, but even non-governmental entities
insofar as the latter receives financial aid from
the government. Without a doubt, the case of
the Big 3 would not fall under the audit
jurisdiction of COA. They are neither public
entities nor they are receiving financial aid from
the government.
With respect to the BIR, its Commissioner is
taxpayers but only “to ascertain the
correctness of any return, or in making a
return when none was made, or in
determining the liability of any person for
any internal revenue tax, or in collecting
such liability, or evaluating the person’s
tax compliance.” The BOC, on the other
hand, is “authorized to audit or examine
all books, records, and documents of
importers necessary or relevant for the
purpose of collecting the proper duties
and taxes.” Since there are no taxes or
duties involved in this case, the BIR and
the BOC likewise have no power and
authority to open and examine the books
of accounts of the oil companies.
authorized to examine books, paper, record, or
other data of taxpayers but only to ascertain
the correctness of any return or in determining
a person’s tax liability, or in collecting such
liability, or evaluating the person’s tax
compliance.
The BOC, on the other hand, is authorized to
audit or examine all books, records, and
documents of importers necessary or relevant
for the purpose of collecting the proper duties
and taxes. Since there are no taxes or duties
involved in this case, the BIR and the BOC
likewise have no power and authority to open
and examine the books of account of the Big 3.
It is, therefore, the DOE-DOJ Joint Task Force
who has the sole power and authority to
monitor, investigate, and endorse the filing of
complaints, if necessary, against oil
companies. And in ordering the COA, BIR, and
BOC to open and examine the books of
accounts of the Big 3, the trial court divested
the DOE-DOJ Joint Task Force of its power
and authority and vested the same to the COA,
BIR, and BOC.
3. Kingson Any article or item, the importation of
International Trading which is effected on the strength of false
Corp. v. COC, G.R. declaration or affidavit, or false invoice or
No. 247768, July 13, other documents executed by the owner,
2020. importer, exporter or consignee shall be
forfeited in favor of the Government.
This is a Petition for Review on Certiorari filed by
petitioner Kingson International Trading
Corporation against the CTA En Banc, affirming the
CTA Division, which established that petitioner
misdeclared its shipment consisting of 2,406
bundles of steel products as to its value and tariff
classification which warranted the shipment's
forfeiture. Petitioner claimed that it merely restated
the description of the steel products, its quantity,
volume, weight and customs value found in the
commercial and shipping documents entirely
prepared and provided by its
supplier/shipper/exporter Tranjin Mai Jia Hua Trade
Co. Ltd. in China.
Whether or not forfeiture of YES. As provided under Section 2530 of the
petitioner’s shipment is TCCP, as amended, any article or item, the
warranted on the ground of importation of which is effected on the strength
willful misdeclaration, of false declaration or affidavit, or false invoice
misclassification and or other documents executed by the owner,
undervaluation of petitioner's importer, exporter or consignee shall be
shipment of steel products forfeited in favor of the Government. Also,
Section 2503 of the TCCP provides that: (1)
any misdeclared or underdeclared imported
articles/items found upon examination shall
ipso facto be forfeited in favor of the
Government; and (2) an undervaluation,
misdeclaration in weight, measurement or
quantity of more than thirty percent (30%)
between the value, weight, measurement or
quantity declared in the entry, and the actual
value, weight, quantity or measurement shall
constitute a prima facie evidence of fraud
penalized under Section 2530 of the TCCP.
Details in the counterpart export documents
from the General Customs of the People's
Republic of China, vis-à-vis petitioner's Import
Entry differed as to the consignee's name, the
description of the imported shipment and the
value of the imported articles. The actual value
of the shipment as reflected in the export
counterpart documents was intentionally
reduced by more than 30% to reduce the
amount of duty that petitioner should have paid
for subject shipment. Such misdeclaration as
to the actual value by more than 30% is prima
facie evidence of fraud as provided under
Section 2503.
4. Asaali vs. The findings of the CTA, if supported by
Commissioner of substantial evidence, is binding for only
Customs (COC), G.R. questions of law are to be resolved by the
No. L-24170, Supreme Court.
December 16, 1968
The Commissioner of Customs has
jurisdiction over the case despite the
expiration of RA No. 650 and to the
vessels seized since they are registered
in the Philippines. The Revised Penal
Code is applicable and enforceable not
only within the interior waters and
maritime zone of the Philippines, but
extends outside of its territorial
jurisdiction against those committing an
offense while on board a Philippine ship.
5. Pilipinas Shell A suit for the collection of internal
Petroleum Corp. vs. revenue taxes, where the assessment
Commissioner of has already become final and executory,
Customs, G.R. No. the action to collect is akin to an action to
176380, June 18, enforce the judgment. No inquiry can be
2009 made therein as to the merits of the
original case or the justness of the
judgment relied upon.
A customs patrol team intercepted 5 sailing vessels
on the high seas between British North Borneo and
Sulu while they were heading towards Tawi-tawi,
Sulu. The vessels were ordered to stop and the
customs officers found cases of imported cigarettes
and some pieces of rattan chairs. The vessels were
all registered in the Philippines, owned and manned
by Filipino residents of Sulu. Despite coming from
British North Borneo, they did not have any permit
from the Commissioner of Customs to engage in
importation as required by Section 1353(a) of the
Revised Administrative Code and their cargoes
were likewise not covered by the required import
license under Republic Act No. 426.
The Collector of Customs of Jolo found the case for
forfeiture and this was affirmed by the
Commissioner of Customs and was sustained by
the Court of Tax Appeals. Hence this petition,
The petitioners contended that the Commissioner
did not have jurisdiction as the vessels were
apprehended and seized on the high seas which
was beyond the territorial waters of the Philippines
and since it could not have touched any place or
port in the Philippines, they could not have been
engaged in the importation. They also alleged that
the absence of jurisdiction deprived them of their
right to due proves and that the liability that was
imposed on them was abated with the repeal of RA
No. 426.
Petitioner Pilipinas Shell Petroleum Corporation
(Shell) is a domestic corporation engaged in the
importation of petroleum and its by-products into
the country. In 1997 and 1998, Shell settled its
custom duties and internal revenue taxes using tax
credit certificates (TCC) transferred to it for value by
several Board of Investment (BOI) – registered
companies.
Whether or not the decision
of the Collector of Customs
was legal despite the
expiration of RA No. 650
Whether or not the
Commissioner of Customs
had jurisdiction to seize the
vessels and cargo
Whether or not the Petition
for Review was filed within
the 30-day reglementary
period
Despite being on the high seas, the offense of
smuggling was committed on board a
Philippine ship, thus is within the jurisdiction of
the Commissioner of Customs. The Revised
Penal Code’s applicability and enforceability is
not only within the Philippines, its interior
waters and maritime zone, but also outside of
its jurisdiction against those committing
offenses while on board a Philippine ship.
Also, it is a well settled doctrine of International
Law that a state has the right to protect itself
and its revenues and that this right is not limited
to its own territory but extends to the high seas.
As for the contention of the petitioners that the
repeal of RA No. 426 abated whatever liability
they could have incurred, this was correctly
held by the CTA as being devoid of any
persuasive force.
The Court held that that the expiration of RA
No. 650 could not have produced the effect of
declaring legal the importation of the cotton
counterpanes which were illegally imported
and of declaring the seizure and forfeiture
ordered by the Collector of Customs illegal or
null and void. It did not have the effect of
annulling or setting aside the decision of the
Collector of Customs since the same was
rendered while the law was in force and shall
stand until it is revoked by the appellate
tribunal.
The petition is denied.
The parties argued over which act serves as
the decision that can be the subject of an
appeal before the CTA and from which the 3-
day period to appeal shall be reckoned. Shell
insists it should be the filing of the collection
suits as this was indicative of the finality of the
respondent's action. The respondent, on the
other hand, claims, it should be the earlier act

This was approved and accepted as payment by
the One Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center (the Center) composed of
the DOF, BIR and the BOC. In a letter dated Nov.
3, 1999, the Center informed Shell that it was
cancelling the TCCs because they were apparently
fraudulently secured by the original grantees who
transferred them to Shell. Shell was then required
to pay the amount that had been settled by the
cancelled TCCs. Shell contended that the
cancellation was improper as this deprived him of
his right to due process.
After 3 years, 3 letters were sent to Shell dated
February 15, February 20 and April 12, 2002,
formally demanding payment. Before Shell could
respond, it received summons in one of the three
collection cases filed against him by the RTC. On
May 23, 2002, Shell filed with the CTA a Petition for
Review contending that the BOC lacked legal and
factual basis in its collection efforts.
The Commissioner of Customs filed a motion to
dismiss Shell’s petition on the ground of
prescription stating that it was filed beyond the 30-
day period provided by law for appeals of decisions
of the Commissioner of Customs to the CTA as this
was counted from the time Shell received the
collection letters. On the other hand, Shell
contended that the 30-day period should be
counted from the date it received the summons or
on April 23, 2002, the Petition for Review was thus
instituted within the period provided by law.
The CTA denied the motion to dismiss and
consequently declared that it is the filing of the
collection cases in court that should be considered
as the final decision of the respondent which is
when the 30-day period shall begin. The denial of
the motion for reconsideration led to the elevation
of the CTA decision to the CA by the
Commissioner.
of sending the collection letters where the
respondent finally indicated his resolve to
collect the duties due and demandable from
Shell.
A tax protest case, under the TCCP, involves a
protest of the liquidation of import entries. A
liquidation is the final computation and
ascertainment by the collector of the duties on
imported merchandise, based on official
reports as to the quantity, character, and value
thereof, and the collector's own finding as to
the applicable rate of duty; it is akin to an
assessment of internal revenue taxes under
the National Internal Revenue Code 15 where
the tax liability of the taxpayer is definitely
determined.
None of the three letters received by Shell can
be considered as a liquidation or an
assessment of Shell’s import tax liabilities
which can then be the subject of an
administrative tax proceeding before the
respondent whose decision is appealable to
the CTA. It is important to note that Shell’s
import tax liabilities had already been
computed and ascertained in the original
assessments and were already settled by Shell
using the TCCs.
The issues Shell raised to the CTA were all
related to the fact and efficacy of the payments
made and these were payment and collection
issues and not tax protest issues within the
CTA’s jurisdiction. Since the assessment has
already been final, the Court removes all
perceived hindrances to the continuation of the
collection suits.

6. Jao v. CA, G.R. No. It is the Collector of Customs who has
104604, October 6, exclusive jurisdiction to hear and
1995 determine all questions touching on the
seizure and forfeiture of dutiable goods.
Actions of the Collector of Customs are
appealable to the Commissioner of
Customs, whose decision, in turn, is
subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals
and from there to the Court of Appeals.
The CA annulled and set aside the CTA rulings
holding that the collection letters received by Shell
already indicated the Commissioner’s ruling on the
assessment and is therefore already appealable to
the CTA. CA denied Shel’s motion for
reconsideration hence this petition.
The Office of the Director, Enforcement and
Security Services (EES), Bureau of Customs,
received information regarding the presence of
allegedly untaxed vehicle and parts in the premises
owned by Pat Hao in 2 locations.After conducting
surveillance, warrants of seizure and detention
were issued and executed. Articles were hauled
pursuant to the warrants which prompted
Petitioners to file a case for Injunction and
Damages with prayer for Restraining Order and
Preliminary Injunction before the RTC of Makati.
Respondents filed a Motion to Dismiss on the
ground that the RTC has no jurisdiction over the
subject matter, the exclusive jurisdiction of which
belonging to the Bureau of Customs. This was
denied by the RTC and the application for
preliminary injunction was granted. The
Respondents were also prohibited from seizing,
detaining, transporting and selling petitioner’s
properties.
The Respondents filed a Motion for
Reconsideration which was also denied which led
them to file with the Court of Appeals on the ground
that the judge acted with grave abuse of discretion
in denying their motion to dismiss stating the same
ground of the RTC’s lack of jurisdiction.
The CA ruled in favor of the Respondents and set
aside the questioned orders. The Petitioners filed a
petition with this Court to review this decision of the
CA contending that the CA erred in not holding (1)
that the Collector of Customs could no longer order
the seizure for the second time of items previously
Whether or not the RTC had
jurisdiction on the subject
matter
The Court held that the RTC are devoid of any
competence to pass upon the validity or
regularity of seizure and forfeiture proceedings
conducted by the BOC and to enjoin or
otherwise interfere with these proceedings.
The Collector of Customs has exclusive
jurisdiction to hear and determine all questions
on the seizure and forfeiture of dutiable goods.
The actions of the Collector of Customs are
then appealable to the Commissioner of
Customs, whose decision, in turn, is subject to
the exclusive appellate jurisdiction of the Court
of Tax Appeals, and from there to the Court of
Appeals.
This rule is anchored upon the policy of placing
no unnecessary hindrance on the
government’s drive, not only to prevent
smuggling and other frauds upon Customs, but
more importantly, to render effective and
efficient the collection of import and export
duties due the State, which enables the
government to carry out the functions it has
been instituted to perform.
The Petition is dismissed for lack of merit
 seized and released after amnesty payments of
duties and taxes; (2) that the Bureau of Customs
has lost jurisdiction to order the seizure of the items
because the importation had ceased; (3) that the
seizure of the items deprived the petitioners of their
properties without due process of law; and (4) that
there is no need to exhaust administrative
remedies.

7. Mison v. Nativitad, The Collector of Customs has exclusive
G.R. No. 82586, 11 original jurisdiction over the res subject of
September 1992 the warrant of seizure and detention an
issuance of which precludes the RTC
from interfering in the said proceeding.
Even if the warrant be illegal, this does
not justify the RTC’s interference.
A man informed the Commissioner of Customs of
the existence of knocked-down vehicles,
particularly Toyota Lite Aces at the compound CVC
Trading which was owned by a Mr. Castro. An
investigation and prosecution was then conducted.
20 units of fully and partly assembled Toyota Lite
Ace vans were found in a fenced area and the team
took possession and control of these vehicles by
cordoning off the enclosure. Two members of the
team were then designated to secure a warrant of
seizure and detention from the Collector of
Customs of the Subport of Clark who instituted
seizure proceedings for the violation of Section
2350(f) and (1)-1&5. The Warrant of Seizure and
Detention was issued the next day and the receipt
was refused by the owner/claimant or any of his
representatives so it was served by substituted
service.
When the team was about to haul the cars away,
RTC sheriffs arrived with a TRO issued by the
respondent judge. The TRO was issued in
connection with a civil case filed by the private
respondent. He alleged that he owned several
vehicles which are legally registered in his name
and that he has paid all the taxes and
corresponding licenses therefor.
The lawyers of the BOC filed a Motion to Dismiss
the civil case alleging the lack of jurisdiction of the
RTC over the subject vehicles in view of the
exclusive jurisdiction of the Collector of Customs
over seizure and forfeiture cases as well as the
failure of the plaintiff to exhaust administrative
WON the RTC Judge has
jurisdiction to issue the writ of
preliminary injunction
The RTC Judge did not have jurisdiction over
the subject of the warrant of seizure and
detention since this was within the exclusive
and original jurisdiction of the Collector of
Customs. In issuing the TRO and granting the
writ of preliminary injunction as well as denying
the motion to dismiss, the RTC Judge deprived
the Collector of Customs of his original
jurisdiction, as the same is expressly provided
under the law.
A Warrant of Seizure and Detention was
already issued and this indisputably precluded
the RTC Judge from interfering in the said
proceedings. The allegations of the private
respondent as the owner of the vehicles and
that he has paid all the taxes and licenses
neither divests the Collector of Customs of his
jurisdiction nor does it confer upon the RTC
jurisdiction over the case. The ownership of
goods or the legality of its acquisition
procedure can be raised as defenses in the
seizure proceeding.
remedies.

The private respondent filed an

Opposition/Comment on the Motion to Dismiss
alleging that the warrant of seizure and detention
did not comply with the requirements for a valid
search warrant and that taxes for the vehicles have
been paid to the BIR.

In the meantime, the hearing of the Seizure case

was set but no appearance was entered for the
owner/claimant. The Collector of Customs
rendered a Decision declaring the vehicles forfeited
in favor of the Government to be disposed of in the
manner provided by law. The Motion to Dismiss the
civil case was denied and the writ of preliminary
injunction was granted on the same date.

Hence this petition.

8. Nestle Philippines, Under the Tariff and Customs Code, in all
Inc. v. CA, G.R. No. claims for refund of customs duties, the
134114, 6 July 2001 Collector to whom such customs duties
are paid and upon receipt of such claim
is mandated to verify the same by the
records of his Office.
The CTA's jurisdiction under the Tariff
and Customs Code is not concurrent with
that of the respondent Commissioner of
Customs due to the absence of any
certification from the Collector of
Customs
Petitioner transacted 16 separate importations of
milk and milk products from different countries thus
was assessed customs duties and advance sales
taxes by the Collector of Customs of Manila on the
basis of the published Home Consumption Value
(HCV) indicated in the Bureau of Customs Revision
Orders. Petitioner paid this but then filed
corresponding protests before the Collector of
Customs alleging that the latter erroneously applied
higher HCV, thus Petitioner claims for refund on the
alleged import duties and advance sales taxes.
A claim for refund of alleged overpaid advance
sales taxes was filed by the Petitioner with the BIR
and a Petition for Review was also filed with the
CTA just a day after. The CTA ruled in favor of the
Petitioner and ordered BIR to refund the overpaid
advance sales taxes.
The Collector of Customs failed to render his
decision on the 16 protest cases for refund of the
alleged overpaid customs duties after almost 6
years since Petitioner’s payment. The Petitioner
then filed a Petition for Review with the CTA despite
the absence of a ruling by the Collector of Customs
and the Commissioner of Customs. This was done
by the Petitioner in order to prevent the claims from
prescribing.
The CTA dismissed this for want of jurisdiction and
the motion for reconsideration was likewise denied
for lack of merit. The Petitioner appealed the
judgement to the CA but it was also dismissed for
lack of merit. The CA held, among others, that the
CTA’s jurisdiction is not concurrent with the
appellate jurisdiction of the Commissioner of
Customs since there was no decision or ruling yet
of the Collector of Customs of Manila on the matter.
Hence this petition.
Whether or not the claims for
refund of alleged
overpayment of customs
duties may be deemed
established from the findings
of the tax court in C.T.A.
Case No. 4114 on the
Advance Sales Tax.
The right to claim for refund of customs duties
is specifically governed by Section 1708 of the
Tariff and Customs Code. In all claims for
refund of customs duties, the Collector to
whom such customs duties are paid and upon
receipt of such claim is mandated to verify the
same by the records of his Office.
If such claim is found correct and in
accordance with law, the Collector shall certify
the same to the Commissioner with his
recommendation together with all the
necessary papers and documents. The CTA’s
jurisdiction is not concurrent with that of the
respondent Commissioner of Customs due to
the absence of any certification from the
Collector of Customs of Manila which is why
Petitioner was incorrect in alleging that t its
claims for refund of alleged overpayment of
customs duties may be deemed established
from the findings of the tax court in C.T.A. Case
No. 4114 on the Advance Sales Tax is not
necessarily correct in the light of the above-
cited provision of the Tariff and Customs Code.
The fact alone tthat the CTA has awarded in
favor of the petitioner the refund of overpaid
Advance Sales Tax involving the same sixteen
(16) importations does not in any way excuse
the petitioner from proving its claims for refund
of alleged overpayment of customs duties.
9. Chevron Phils. Inc. Tariff and customs duties are taxes
v. CTA, G.R. No. constituting a significant portion of the
178759, 11 August public
2008 revenue which enables the government
to carry
out the functions it has been ordained to
perform for the welfare of its constituents.
Hence,
their prompt and certain availability is an
imperative need and they must be
collected
without unnecessary hindrance.
Clearly, and perhaps for that reason
alone, the submission of
the IEIRD cannot be left to the exclusive
discretion or whim of the importer.
Chevron Phils. Inc., is engaged in the business of
importing, distributing and marketing of petroleum
products in the Philippines.
The importations subject of this case arrived in
1996 and were unloaded onto petitioner’s oil tanks
over a period of 3 days. The Import Entry
Declarations (IED) were then filed and the
petitioner paid 90% of the total customs duties.
Then Finance Secretary received a letter 3 years
ago denouncing the deliberate concealment,
manipulation, and scheme employed by petitioner
and Pilipinas Shell in the importation of crude oil,
thereby resulting in huge losses of revenue for the
government. This was the same year when the
Petitioner received a demand letter for the
immediate settlement of the difference between the
10% and 3% percent tariff rates on the shipments.
The Petitioner raised the defense of prescription
against the assessment pursuant to Section 1603
of the Tariff and Customs Code (TCC). Thus, it
prayed that the assessment for deficiency customs
duties be cancelled and the notice of demand be
withdrawn.
The Special Investigator found that there was an
irregularity in the filing and acceptance of the import
entries beyond the 30-day non-extendible period
prescribed under Section 1301 of the TCC and in
the release of the shipments after the same had
already been deemed abandoned in favor of the
government. Petitioner was then ordered to pay the
amount representing the total dutiable value of the
importations.
This prompted the Petitioner’s filing of a Petition for
Review to which ultimately led to the CTA en banc
holding that it was the filing of the IEIRDs that
constituted entry under the TCC. Since these were
filed beyond the 30-day period, they were not
Whether or not the "entry"
under Section 1301 in
relation to Section 1801 of
the TCC refers to the IEIRD
or the Import Entry and
Internal Revenue
Declaration
The term "entry" in customs law has a triple
meaning. It means: (1) the documents filed at
the customs house; (2) the submission and
acceptance of the documents; and (3) the
procedure of passing goods through the
customs house.
Petitioner’s position that the import entry
should be filed within the 30-day period refers
to the IED and not the IEIRD is devoid of merit.
Under the relevant provisions of the TCC, both
the IED and IEIRD should be filed within 30
days from the date of discharge of the last
package from the vessel or aircraft. The IED
serves as basis for the payment of advance
duties on importations whereas the IEIRD
evidences the final payment of duties and
taxes. The operative act that constitutes "entry"
of the imported articles at the port of entry is
the filing and acceptance of the "specified entry
form" together with the other documents
required by law and regulations. The "specified
entry form" refers to the IEIRD. The word
"entry" refers to the regular consumption entry
(the IEIRD) and not the provisional entry (the
IED).
There was evidence that showed that
Petitioner took its time to file the IEIRD to avail
of a lower rate which was a clear indication of
its intention to defraud the government. Due to
this, the prescriptive period of the finality of
liquidat6ion under Section 1603 was
inapplicable.
Petitioner's failure to file the required entries
within a non-extendible period of thirty days
from date of discharge of the last package from
the carrying vessel constituted implied
abandonment of its oil importations. This
means that from the precise moment that the
non-extendible thirty-day period lapsed, the

10. RP v. Unimex The government cannot be held liable for
Micro-Electronics B, damages brought about by governmental
G.R. No. 166309-10, 9 acts. However, the doctrine must be fairly
March 2007 observed and the State should not avail
itself of this prerogative to take undue
advantage of parties that may have
legitimate claims against it.
seasonably "entered" in accordance with Section
1301 in relation to Section 205 of the TCC.
Respondent, through Don Tim Shipping Corp.,
shipped computer parts and accessories to
Handyware Philippines, Inc. When the shipment
arrived in Manila, the Bureau of Customs(BOC)
agents discovered that it did not tally with the
description appearing on the cargo manifest.
Hence, BOC instituted seizure proceedings against
Handyware. Handyware's failure to attend the
hearing caused the forfeiture of the goods.
Respondent, as owner of the goods intervened.
However, the default order against Handyware
subsequently became final and executory. Upon
review, the CTA reversed the previous order but the
decision could no longer be executed due to the
loss of respondent's shipment so the BOC
Commissioner was ordered to pay the commercial
value of the goods instead.
abandoned shipments were deemed the
property of the government.
Whether or not legal interest 1. Interest may be paid only either as monetary
may be imposed for use of interest(compensation for the use
money or as compensatory of money) or as damages(compensatory
damages against the BOC interest). In this case, the petitioner was
never under monetary obligation to
Whether or not the respondent, no demand can be made either
government is liable for judicially or extrajudicially. Hence, there could
actual damages be no default. Neither can it be
considered as one involving interest based on
damages under the second situation.
The petitioner is therefore not liable for
payment of interest.
2. Petitioner is liable for damages. This case
warrants its exclusion from the purview
of the state immunity doctrine. BOC was
grossly negligent in the safekeeping of
respondent's goods. It cannot even provide a
cogent explanation on the goods'
disappearance. In this case, the doctrine must
be fairly observed and the
State should not avail itself of this prerogative
to take undue advantage of parties that
may have legitimate claims against it.
11. Rieta v. People of It is not incumbent upon the
the Philippines, G.R. prosecution to adduce positive
No. 147817, 12 evidence to support a negative
August 2004 averment the truth of which is
fairly indicated by established
circumstances and which, if
untrue, could readily be
disproved by the production of
documents or other evidence
within the defendant’s
knowledge or control.
Petitioner in this case sought to set aside the CA
affirmation with modification to the decision of the
RTC of Manila, finding him guilty for smuggling 305
cases of assorted brands of blue seal cigarettes,
valued at P513.663.47. These were found in his
possession and control, which the petitioner fully
well knew have not been properly declared and that
the duties and specific taxes thereon have not been
paid to the proper authorities in violation of the Tariff
and Customs Code. Among the other issues raised
by petitioner, he argues that the prosecution failed
to prove the nonpayment of the taxes and duties on
the confiscated cigarettes, thus not proving guilt
beyond reasonable doubt.
Among the other issues raised by petitioner, he
argues that the prosecution failed to prove the
nonpayment of the taxes and duties on the
confiscated cigarettes, thus not proving guilt
beyond reasonable doubt.
Whether or not it is
incumbent on the accused to
prove his innocence
(Generally no, this case
provides an exception)
"There is an exception to the general rule
requiring the prosecution to prove a criminal
charge predicated on a negative allegation, or
a negative averment constituting an essential
element of a crime. It has been held before that
it is not incumbent upon the prosecution to
adduce positive evidence to support a negative
averment the truth of which is fairly indicated
by established circumstances and which, if
untrue, could readily be disproved by the
production of documents or other evidence
within the defendant’s knowledge or control.
The truth of the negative averment that the
duties and specific taxes on the cigarettes
were not paid to the proper authorities is fairly
indicated and have been established by the
cargo truck, which carried the contraband
cigarettes and some passengers including
petitioner, immediately came from the 2nd
COSAC Detachment was intercepted at the
unholy hour of 4:00 a.m. Such truck fitted the
undisclosed informer’s earlier description of it
as one that was carrying contraband; and the
driver ran away. Hence, it was up to petitioner
to disprove these damning circumstances,
simply by presenting the receipts showing
payment of the taxes. But he did not do so; all
that he could offer was his bare and self-
serving denial."
12. El Greco Ship In administrative proceedings, such as The vessel M/V Criston was docked at a port in
Manning and those before the BOC, technical rules of Albay carrying 35,000 bags of imported rice. The
Management Corp. procedure and evidence are not strictly BOC issued a warrant of seizure and detention for
v. Commissioner of applied and administrative due process the bags of imported rice because it left the port of
Customs, G.R. No. cannot be fully equated with due process Manila without the necessary clearance from the
177188, 04/12/2008 in its strict judicial sense. Philippine coast guard. Subsequently, a seizure
and detention was issued for the M/V Criston as
well.
A typhoon hit Albay and the M/V Criston was
allowed to proceed to another anchorage area.
After the typhoon had passed, the M/V Criston no
longer returned. The Bureau of Customs and
Philippine Coastguard went to find the missing
vessel and later on discovered that it was sporting
the name of M/V Neptune Breeze.
It was later seized again. The petitioner El Greco
claimed that M/V Neptune breeze and M/V Criston
are 2 different ships and that the former was a
foreign ship and the latter was registered in the
Philippines. They did not submit any other
evidence.
The respondent found the chassis and engine
number to be that of the same and concluded the
ship was one and the same. CTA rendered a
decision in favor of the respondent.
1. Whether or not they
were denied the right to due
process
2. Whether or not the
forfeiture was subject under
section 2531 of the Tariff and
Customs Code
The Supreme Court ruled that findings of facts
of the CTA are binding on this court and can
only be disturbed upon appeal if not supported
by substantial evidence. The essence of due
process is simply an opportunity to be heard or,
as applied to administrative proceedings, an
opportunity to explain one's side or an
opportunity to seek reconsideration of the
action or ruling complained of.
The Supreme Court also held that the penalty
of forfeiture was properly imposed. Section
2531 provides that: The penalty of forfeiture is
imposed on any vessel engaged in smuggling,
provided that the following conditions are
present: 1) vessel used unlawfully the
importation or exportation of articles into or
from the Philippines, 2) the articles are
imported or exported from any Philippine port,
3) and other provided by law. The M/V Neptune
Breeze then known as M/V Criston was
carrying 35,000 bags of imported rice without
necessary papers showing that they were
entered lawfully through a Philippine port after
the payment of taxes and duties thereon. This
gives rise to a presumption that the importation
was illegal. El Greco as owner had the burden
of proof but did not show any documentation.
13. Pilipinas Shell v. Section 1204. Liability of Importer for
Republic of the Duties. — Unless relieved by laws or
Philippines, G.R. No. regulations, the liability for duties, taxes,
161953, 6 March fees and other charges attaching on
2008 158540, 3 importation constitutes a personal debt
August 2005 due from the importer to the
government which can be discharged
only by payment in full of all duties, taxes,
fees and other charges legally accruing.
It also constitutes a lien upon the articles
imported which may be enforced while
such articles are in the custody or subject
to the control of the government.
RA 1125, Sec. 7 - The CTA shall exercise
exclusive appellate jurisdiction to review
by appeal: (2) Decisions of the
Commissioner of Customs in cases
involving liability for customs duties, fees
or other money charges; seizure,
detention or release of property affected;
fines and forfeitures or other penalties
imposed in relation thereto; or other
matters arising under Customs Law or
other laws or part of law administered by
the Bureau of Customs; Judiciary
Reorganization Act, Sec. 19 - RTC shall
exercise exclusive original jurisdiction:
(6) In all cases not within the exclusive
jurisdiction of any court, tribunal, person
or body exercising judicial or QJA
functions,...
Department of Finance cancelled the tax debit
memos and tax credit certificates of Shell because
the same were alleged to be fraudulently issued
and transferred. Bureau of Customs (BOC)
demanded from petitioner the value of the
cancelled TCCs. BOC did not act on the formal
protest filed by petitioner.
Shell then filed a petition for review questioning the
legality of the cancellation of the TCCs in the CTA.
Respondent filed a collection case in the RTC
against Shell.
Petitioner contends that the RTC had no jurisdiction
over the collection case inasmuch as the CTA had
not yet decided the petition for review. The RTC
should have dismissed the collection case and
transferred it to CTA where it should be treated as
a counterclaim.
1. Whether or not the filing of
the collection case was a
proper remedy.
2. Whether or not the subject
matter falls within the
jurisdiction of the RTC.
1, YES. Under Sec. 1204 of the Tariff and
Customs Code, import duties constitute a
personal debt of the importer that must be paid
in full. The importer’s liability constitutes a lien
on the article which the government may
choose to enforce while the imported articles
are either in its custody or under its control.
When respondent released petitioner’s goods,
its (respondent’s) lien over the imported goods
was extinguished. Respondent could then only
enforce the payment of petitioner’s import
duties by filing a case for collection against
petitioner.
2. YES. Respondent filed its complaint for
collection on Apr. 3, 2002. The governing law
at that time was RA 1125 or the old CTA law.
The present case did not involve a decision of
the Commissioner of Customs in any of the
instances enumerated in Sec. 7(2) of RA 1125,
hence, CTA had no jurisdiction over the subject
matter. It was RTC that had jurisdiction under
Sec. 19 (6) of the Judiciary Reorganization Act
of 1980, as amended. Despite the pending
petition for review in the CTA, respondent
cannot and should not await the resolution of
that case before it collects petitioner’s
outstanding customs duties for such delay will
unduly restrain the performance of its
functions. Moreover, if the CTA case turns out
to be favorable to petitioner, the law affords it
adequate remedy of seeking a refund.
14. Southern Cross The positive final determination by the Philcemcor filed with the DTI an application for the
Cement Corp. v. Tariff Commission is an indispensable imposition of a definitive safeguard measure on the
Cement requisite to the imposition of general importation of Portland cements. They alleged that
Manufacturers safeguard measures. Portland cement was being imported in increased
Association of the quantities thus causing delay in domestic
Phils., et al., G.R. No. production. The application was opposed by
158540, 3 August Southern Cross.
2005
DTI conducted a preliminary investigation which
determined the existence of critical circumstances
which justified the imposition of provision
measures. The DTI referred the application to the
Tariff Commission which in turn made a negative
recommendation by stating that no definite general
safeguard measure be imposed on the importation
of Portland cement.
But the DTI Secretary and the DOJ disregarded the
conclusion of the Tariff Commission. This prompted
Philcemcor to file a petition for certiorari with the
CA. However, the CA refused to interfere with such
matters and respected the sound discretion of such
agencies.
Southern Cross filed a petition before the Supreme
Court alleging that the CA had no jurisdiction over
Philcemcor’s petition, as the proper remedy
conformable to RA 8800 was a petition for review
at the CTA. TC’s factual findings were binding upon
the DTI Secretary.
1. Whether or not decision of
DTI secretary denying the
imposition of a safeguard
measure is appealable to the
CTA;
2. Whether or not the DTI
secretary could impose a
general safeguard measure
only upon a positive final
determination by the Tariff
Commission.
1. Yes. SC held that the CTA had the
jurisdiction to review the DTI secretary’s
decision even if that decision did not impose
any safeguard measure. This based on the
following reasons: First, split jurisdiction is
abhorred. The power of the DTI secretary to
adopt or withhold safeguard measures
emanates from the same source. Second,
section 29 of the SMA reveals that the
Congress did not expressly bar the CTA from
reviewing a negative determination by the DTI
secretary or confer on the CA such review
authority. The law explicitly states that the CTA
is vested with jurisdiction to review the DTI
secretary’s rulings in connection with the
imposition of a safeguard measure. The
phrase “in connection with” not only qualifies
but clarifies the succeeding one-- the
imposition of a safeguard measure. Third,
when there is ambiguity, such interpretation
that will avoid inconvenience and absurdity is
to be adopted.
2. Yes. The DTI head could not impose a
safeguard measure without a positive final
determination by the Commission. The
conditions precedent that must be satisfied
before the DTI may impose a general
safeguard measure are as follows: First, there
must be a positive final determination by the
Tarriff Commission that a product is being
imported into the country in such increased
quantities as to be a substantial cause of
serious injury or threat to the domestic
industry; and Second, in the case of non-
agricultural products, the secretary must
establish that the application of a safeguard
measure is in the public interest.
The law explicitly authorizes the DTI secretary
to make a preliminary determination, and the
Tariff Commission to make the final one. These
functions are not interchangeable. In this
respect, the DTI head is bound by the TC’s
determination.

Legislative intent should be given full force and

effect as the executive power to impose
definitive safeguard measures is but a
delegated power, thus Congress has the
prerogative to impose limitations and
restrictions on the executive exercise of this
power. However, nothing in the SMA obliges
the DTI secretary to adopt the
recommendations made by the Tariff
Commission. The nonbinding force of the
Commission’s recommendations is congruent
with Sec 28(2) of the Article VI of the 1987
Constitution.

CA erred in remanding the case to the DTI

secretary with the instruction that the secretary
could impose a general safeguard measure,
even if there was no positive final
determination from the Tariff Commission.
More crucially that CA did not acquire
jurisdiction over the Philcemcor’s petition for
certiorari.