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TAXATION CASES FOR 2020 BAR EXAMINATIONS

IN THE MATTER OF DECLARATORY RELIEF ON THE VALIDITY OF BIR REVENUE MEMORANDUM
CIRCULAR NO. 65-2012 “CLARIFYING THE TAXABILITY OF ASSOCIATION DUES, MEMBERSHIP
FEES AND OTHER ASSESSMENTS/CHARGES COLLECTED BY CONDOMINIUM CORPORATIONS”
G.R. No. 215801, 15 January 2020, FIRST DIVISION (Lazaro-Javier, J.)

DOCTRINE OF THE CASE Page | 1

RMC No. 65-2012 is invalid. In fine, the collection of association dues, membership fees, and other
assessments/charges is purely for the benefit of the condominium owners. It is a necessary incident to
the purpose to effectively oversee, maintain, or even improve the common areas of the condominium as
well as its governance.

Membership fees, assessment dues, and other fees of similar nature only constitute contributions
to and/or replenishment of the funds for the maintenance and operations of the facilities offered by
recreational clubs to their exclusive members. They represent funds "held in trust" by these clubs to
defray their operating and general costs and hence, only constitute infusion of capital.

COMMISSIONER OF INTERNAL REVENUE v. DEUTSCHE KNOWLEDGE SERVICES PTE. LTD.G.R. No.

234445, 15 July 2020, SECOND DIVISION (Inting, J.)

DOCTRINE OF THE CASE

A claimant's entitlement to a tax refund or credit of excess input VAT attributable to zero-rated sales
hinges upon certain requisites which include that the taxpayer must be engaged in sales which are zero-
rated or effectively zero-rated. Conversely, one of the requisites for a zero-rated sale is that the services
are rendered to a person engaged in business conducted outside the Philippines or to a nonresident
person not engaged in business who is outside the Philippines when the services are performed.

In this case, DKS is entitled to tax refund or credit of excess input VAT attributable to zero-rated sales
only to the extent of the sales proven to be derived from foreign affiliates-clients. To be considered as
foreign affiliates-clients, each entity must be supported, at the very least, by both SEC certificate of
non-registration of corporation/partnership and certificate/articles of foreign
incorporation/association.

MANILA ELECTRIC COMPANY v. CITY OF MUNTINLUPA and NELIA A. BARLISG.R. No. 198529, 09
February 2021, EN BANC (Hernando J.)

DOCTRINE OF THE CASE

The case of Legaspi v. City of Cebu explains the two tests in determining the validity of an ordinance, i.e.,
the Formal Test and the Substantive Test. 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
pursuant to the procedure laid down by law. The Substantive Test primarily assesses the
reasonableness and fairness of the ordinance and significantly its compliance with the Constitution
and existing statutes.

The Court held that 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, the same section deviated from the express provision of R.A. No. 7160 as it was
evidently passed beyond the powers of a municipality. MO 93-35 was passed by the Sangguniang Bayan
of the Municipality of Muntinlupa and took effect on January 01, 1994. This is plainly ultra vires
considering the clear and categorical provisions of Section 142 in relation to Sections 134, 137, and
151 of R.A. No. 7160 vesting to the provinces and cities the power to impose, levy, and collect a franchise
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tax. Muntinlupa being then a municipality had no power or authority to enact the subject franchise tax
ordinance.

AGUSAN WOOD INDUSTRIES, INC. v. SECRETARY OF THEDEPARTMENT OF ENVIRONMENT AND

NATURAL RESOURCES G.R. No. 234531, 10 July 2019, SECOND DIVISION (J.C. Reyes, Jr., J.)
Page | 2
DOCTRINE OF THE CASE

With the amendments introduced by E.O. No. 273, the responsibility of collecting forest charges,
as well as the invoicing thereof, was transferred from the BIR to the Forest Management Bureau. Also,
references to the CIR and the Department of Finance now refer to the Director of the Forest Management
Bureau and the Secretary of Environment and Natural Resources, respectively. This transfer of
responsibility was further echoed in Republic Act No. 7161. Thus, while considered as internal
revenue taxes, the jurisdiction as regards collection and invoicing of forest charges is vested upon the
Forest Management Bureau under the DENR. This is supported by E.O. No. 273 itself as it was stated
that the transfer was implemented for tax administration purposes only, particularly tax collection.
Alternatively put, the reforms introduced are for tax administration only, deputizing certain agencies to
collect certain taxes. Subsequent amendment to the 1977 NIRC, which is the 1997 NIRC, retained this
transfer. Verily, the transfer of the entire chapter on charges on forest products to the Revised
Forestry Code, as well as the duties and responsibilities of the BIR to the DENR did not, in any way,
change the nature of forest charges as internal revenue taxes.

CITY OF DAVAO and BELLA LINDA N. TANJILI, in her official capacity as City Treasurer of Davao
City v. RANDY ALLIED VENTURES, INC.G.R. No. 241697, 29 July 2019, SECOND DIVISION (Perlas-
Bernabe, J.)

DOCTRINE OF THE CASE

Local business taxes are taxes imposed by local government units on the privilege of doing business
within their jurisdictions. To be sure, the phrase "doing business" means some "trade or commercial
activity regularly engaged in as a means of livelihood or with a view to profit ." Particularly, the
LBT imposed pursuant to Section 143 (t) is premised on the fact that the persons made liable for such tax
are banks or other financial institutions by virtue of their being engaged in the business as such. In this
case, it is clear that RAVI is neither a bank nor other financial institution. In order to be considered as an
NBFI under the National Internal Revenue Code, banking laws, and pertinent regulations, the following
must concur: (a) the person or entity is authorized by the BSP to perform quasi-banking functions; (b)
the principal functions of said person or entity include the lending, investing or placement of
funds or evidence of indebtedness or equity deposited to them, acquired by them, or otherwise coursed
through them, either for their own account of for the account of others; and (c) the person or entity must
perform the activities enumerated in the Bangko Sentral ng Pilipinas Manual of Regulations for Non-
Bank Financial Institutions on a regular and recurring, not on an isolated basis.

COMMISIONER OF INTERNAL REVENUE v. INTERPUBLIC GROUP OF COMPANIES, INC. G.R. No.

207039, 14 August 2019, SECOND DIVISION (J.C. Reyes, Jr., J.)

DOCTRINE OF THE CASE

The objective of RMO No. 1-2000 in requiring the application for treaty relief with the ITAD before a
party's availment of the preferential rate under a tax treaty is to avert the consequences of any
erroneous interpretation and/or application of treaty provisions, such as claims for refund/credit
for overpayment of taxes, or deficiency tax liabilities for underpayment. This apparent conflict between
which should prevail was settled in the case of Deutsche Bank AG Manila Branch v. Commissioner
of Internal Revenue.
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Since the RP-US Tax Treaty does not provide for any other prerequisite for the availment of the benefits
under the said treaty, to impose additional requirements would negate the availment of the reliefs
provided for under international agreements.

CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCEMENT OF GOVERNMENT

EMPLOYEES, ET AL., VS. COMMISSIONER, BUREAU OF INTERNAL REVENUE AND THE
SECRETARY, DEPARTMENT OF FINANCE G.R. NO. 213446, JULY 03, 2018 EN BANC CAGUIOA J.
Page | 3
Issue No. 1: Whether RMO No. 23-2014, RMO NO. 23-2014, subjecting to withholding taxes the non-
taxable allowances, bonuses, and benefits received by government employees should be nullified because
it a) violates the equal protection clause as it discriminates against government employee, b) violates the
fiscal autonomy enjoyed by government agencies, and c) results in diminution of benefits of government
employees.

Ruling: NO.

ON EQUAL PROTECTION: The constitutional guarantee of equal protection is not violated by an executive
issuance which was issued to simply reinforce existing taxes applicable to both the private and public
sector. The withholding tax system embraces not only private individuals, organizations and corporations,
but also covers organizations exempt from income tax, including the Government of the Philippines, its
agencies, instrumentalities, and political subdivisions.

ON FISCAL AUTONOMY: The fiscal autonomy enjoyed by the Judiciary, Ombudsman, and Constitutional
Commissions, as envisioned in the Constitution, does not grant immunity or exemption from the common
burden of paying taxes imposed by law. To borrow former Chief Justice Corona's words in his Separate
Opinion in Francisco, Jr. v. House of Representatives, “fiscal autonomy entails freedom from outside
control and limitations, other than those provided by law. It is the freedom to allocate and utilize funds
granted by law, in accordance with law and pursuant to the wisdom and dispatch its needs may require
from time to time."

ON DIMINUTION OF BENEFITS: It bears to emphasize the Court's ruling in Nitafan v Commissioner of

Internal Revenue that the imposition of taxes on salaries of Judges does not result in diminution of
benefits. This applies to all government employees because the intent of the framers of the Organic Law
and of the people adopting it is "that all citizens should bear their aliquot part of the cost of maintaining
the government and should share the burden of general income taxation equitably

Issue No. 2: Whether the CIR may be compelled through a writ of mandamus to increase the tax-exempt
ceiling for 13th month pay and other benefits.

Ruling: MOOT AND ACADEMIC

ON MANDAMUS

With the enactment of RA No. 10653 and RA 10963 (TRAIN Law), which not only increased the tax
exemption ceiling for 13th month pay and other benefits (from P30,000.00 to P90,000.00) but also
conferred upon the President the power to adjust said amount, a supervening event has transpired that
rendered the resolution of the issue on whether mandamus lies against respondents, of no practical
value. Accordingly, the petition for mandamus should be dismissed for being moot and academic.

OTHER JURISPRUDENCE

NATIONAL TAXATION
REMEDIES

 The taxpayer may then appeal the decision on the disputed assessment or the inaction of the CIR. As
such, the Final Decision on Disputed Assessment (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
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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 Page | 4
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. (Commissioner of Internal Revenue
vs. Liquigaz Philippines Corporation, G.R. Nos. 215534 & 215557, April 18, 2016)

 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 could not
become final and executory. (Republic of the Phils. vs. Leonor de la Rama, et al.)

 A copy of the notice may also be sent through reputable professional courier service. If no registry or
reputable professional courier service is available in the locality of the addressee, service may be done
by ordinary mail. The server shall accomplish the bottom portion of the notice. He shall also make a
written report under oath before a Notary Public or any person authorized to administer oath under
Section 14 of the NIRC, as amended, setting forth the manner, place and date of service, the name of
the person/barangay official/professional courier service company who received the same and such
other relevant information.

The registry receipt issued by the post office or the official receipt issued by the professional
courier company containing sufficiently identifiable details of the transaction shall constitute
sufficient proof of mailing and shall be attached to the case docket. Service to the tax
agent/practitioner, who is appointed by the taxpayer under circumstances prescribed in the
pertinent regulations on accreditation of tax agents, shall be deemed service to the taxpayer."
(See Revenue Regulations 18-2013, November 28, 2013)

 In Commissioner of Internal Revenue v. Villa, the Court held that the Court of Tax Appeals'
jurisdiction was over the Commissioner of Internal Revenue's decision on the protest against
an assessment, and not the assessment itself. Thus, the period to invoke judicial review must
be cournted from receipt of the Commissioner's decision on the disputed assessment.
(Commissioner of Internal Revenue vs. Court of Tax Appeals, G.R. No. 239464, May 10, 2021)

 What are the requisites of a valid waiver in extending the original 3-year prescriptive period on the
assessment of taxes?

The requisites of a valid waiver in extending the original 3-year prescriptive period on the assessment
of taxes are as follows:
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(1) the waiver must be in writing;

(2) the waiver must be signed by the taxpayer and the Commissioner of Internal Revenue; and
(3) the waiver must be executed within the 3-year prescriptive period.

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What are the procedures of a valid waiver in extending the 3-year prescriptive period on the assessment
of taxes?

Under RMO No. 20-90, which implements Sections 203 and 222 (b), the following procedures should
be followed:

(1) the waiver must be in the prescribed form;

(2) the waiver shall be signed by the taxpayer himself or his duly authorized representative. In
the case of a corporation, the waiver must be signed by any of its responsible officials. Soon after the
waiver is signed the taxpayer, the Commissioner of Internal Revenue or the revenue official authorized
by him, as hereinafter provided, shall sign the waiver indicating that the Bureau has accepted and
agreed to the waiver. The date of such acceptance by the Bureau should be indicated. Both the date
of execution by the taxpayer and date of acceptance by the Bureau should be before the expiration of
the period of prescription or before the lapse of the period agreed upon in case a subsequent
agreement is executed;

(3) the following revenue officials are authorized to sign the waiver: the Commissioner for tax
cases involving more than P1M, and the Revenue District Officer with respect to tax cases still
pending investigation and the period to assess is about to prescribe regardless of amount; and

(4) the waiver must be in three (3) copies, the original copy to be attached to the docket of the case,
the second copy for the taxpayer and the third copy for the Office accepting the waiver. The fact of
receipt by the taxpayer of his/her file copy shall be indicated in the original copy.

Why is it necessary for the government to assess internal revenue taxes on time?

The government must assess internal revenue taxes on time so as not to extend indefinitely
the period of assessment and deprive the taxpayer of the assurance that it will no longer be
subjected to further investigation for taxes after the expiration of reasonable period of time.
(See Commissioner of Internal Revenue vs. FMF Development Corporation, G.R. No. 167765, June 30,
2008)

 In Commissioner of Internal Revenue v. The Stanley Works Sales (Phils.), Inc., the Court nullified the
waivers because the following requisites were absent:

(1) conformity of either the CIR or a duly authorized representative;

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(2) date of acceptance showing that both parties had agreed on the waiver before the expiration
of the prescriptive period; and
(3) proof that the taxpayer was furnished a copy of the waiver.

The Court also invalidated the waivers executed by the taxpayer in the case of Commissioner of
Internal Revenue v. Standard Chartered Bank, because:
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(1) they were signed by Assistant Commissioner-Large Taxpayers Service and not by the CIR;
(2) the date of acceptance was not shown;
(3) they did not specify the kind and amount of the tax due; and
(4) the waivers speak of a request for extension of time within which to present additional
documents and not for reinvestigation and/or reconsideration of the pending internal revenue
case as required under RMO No. 20-90.

In Commissioner of Internal Revenue v. Kudos Metal Corporation, the doctrine of estoppel

cannot be applied as an exception to the statute of limitations on the assessment of taxes
considering that there' is a detailed procedure for the proper execution of the waiver, which
the BIR must strictly follow. The BIR cannot hide behind the doctrine of estoppel to cover its
failure to comply with RMO 20-90 and RDAO 05-01, which the BIR itself had issued. Having
caused the defects in the waivers, the BIR must bear the consequence. It cannot simply shift
the blame to the taxpayer. (Commissioner of Internal Revenue vs. Systems Technology Institute,
G.R. No. 220835, July 26, 2017)

 The FAN was finally received by SEC on September 24, 2002, and protested by it in a letter dated
October 14, 2002 which reiterated in lengthy arguments its earlier interpretation of the laws and
regulations upon which the assessments were based. Although the FAN and demand letter issued to
SEC were not accompanied by a written explanation of the legal and factual bases of the deficiency
taxes assessed against SEC, the records showed that CIR in its letter dated April 10, 2003 responded
to SECS October 14, 2002 letter protest, explaining at length the factual and legal bases of the
deficiency tax assessments and denying the protest. Considering the foregoing exchange of
correspondence and documents between the parties, the requirement of Section 228 was
substantially complied with. CIR had fully informed SEC 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. SEC's right to due process was thus not
violated. (Samar-I Electric Cooperative vs. Commissioner of Internal Revenue, G.R. No. 193100,
December 10, 2014)

 In the context of Section 222(A), there is fraud in the filing of a false and deceitful entry with
intent to evade the taxes due. The act of filing a fraudulent return must be intentional and not
attributable to "mistake, carelessness, or ignorance." Thus, for petitioner to invoke the 10-year
prescriptive period, it must prove the following with clear and convincing evidence:

(1) respondents received taxable income;

(2) they underdeclared or did not declare the taxable income in their tax returns; and
(3) they intended to evade payment of correct taxes due. (Commissioner of Internal Revenue vs.
Spouses Magaan, G.R. No. 232663, May 3, 2021)

 True, TSW filed a Protest and asked for a reconsideration and cancellation of the assessment on May
19, 1993; however, it is uncontested that the CIR failed to act on that Protest until November 29,
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2001, when the latter required the submission of other supporting documents. In fact, the Protest
was denied only on March 22, 2004. CIR's reliance on CIR v. Suyoc (Suyoc) is likewise misplaced.

In Suyoc, the BIR was induced to extend the collection of tax through repeated requests for extension
to pay and for reinvestigation, which were all denied by the Collector. Contrarily, TSW filed only one
Protest over the assessment, and the CIR denied it 10 years after. The subsequent letters of TSW
cannot be construed as inducements to extend the period of limitation, since the letters were Page | 7
intended to urge the CIR to act on the Protest, and not to persuade the latter to delay the actual
collection. The statute of limitations imposed by the Tax Code precisely intends to protect the
taxpayer from prolonged and unreasonable assessment and investigation by the BIR. Even
assuming arguendo that the Waiver executed by TSW on November 16, 1993 is valid, the right
of the CIR to collect the deficiency income tax for the year 1989 would have already prescribed
by 2001 when the latter first acted upon the protest, more so in 2004 when it finally denied
the reconsideration. Records show that the Waiver extends only for the period ending June 30,
1994, and that there were no further extensions or waivers executed by TSW. Again, a waiver is not
a unilateral act of the taxpayer or the BIR, but is a bilateral agreement between two parties to
extend the period to a date certain. Since the Waiver in this case is defective and therefore
invalid, it produces no effect; thus, the prescriptive period for collecting deficiency income tax
for taxable year 1989 was never suspended or tolled. Consequently, the right to enforce
collection based on Assessment Notice has already prescribed. (Commissioner of Internal
Revenue vs. The Stanley Works Sales, Incorporated, G.R. No. 187589, December 3, 2014)

 What are the instances where a Pre-Assessment Notice is not required?

Under Section 228 of the Tax Code, when the Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided,
however, That a pre- assessment notice shall not be required in the following cases:

(i) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or

(ii) When a discrepancy has been determined between the tax withheld and the amount actually
remitted by the withholding agent; or

(iii) When a taxpayer who opted to claim a refund or tax credit of excess creditable withholding
tax for a taxable period was determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the taxable quarter or quarters of
the succeeding taxable year; or

(iv) When the excise tax due on excisable articles has not been paid; or

(v) When an article locally purchased or imported by an exempt person, such as, but not
limited to, vehicles, capital equipment, machineries and spare parts, has been sold, traded or
transferred to non-exempt persons. (Commissioner of Internal Revenue vs. First Express Pawnshop
Company, Inc., G.R. Nos. 172045-46, June 16, 2009)

 A Letter of Authority (LOA) is the authority given to the appropriate revenue officer assigned
to perform assessment functions. It empowers or enables said revenue officer to examine the
books of account and other accounting records of a taxpayer for the purpose of collecting the
correct amount of tax. A 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. (Medicard Philippines, Inc. vs. Commissioner of Internal Revenue, G.R.
No. 222743, April 5, 2017)
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 The following differences between a LOA and LN are crucial.

First, an LOA addressed to a revenue officer is specifically required under the NIRC before an
examination of a taxpayer may be had while an LN is not found in the NIRC and is only for the
purpose of notifying the taxpayer that a discrepancy is based on the BIR's Reconciliation of Listing for
Enforcement System (RELIEF System).
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Second, a LOA is valid only for 30 days from date of issue while an LN has no such limitation.
Third, a LOA gives the revenue officer only a period of 120 days from receipt of LOA to conduct his
examination of the taxpayer whereas an LN does not contain such a limitation.

Simply put, LN is entirely different and serves a different purpose than a LOA. Due process
demands, as recognized under RMO No. 32-2005, that after an LN has serve its purpose, the
revenue officer should have properly secured a LOA before proceeding with the further
examination and assessment of the taxpayer: (Medicard Philippines, Inc. vs. Commissioner of
Internal Revenue, G.R. No. 222743, April 5, 2017)

 The "no-contact-audit approach" includes the process of computerized matching of sales and
purchases data contained in the Schedules of Sales and Domestic and Schedule of Importation
submitted by VAT taxpayers under the RELIEF System pursuant to RR No. 7-95, as amended
by RR Nos. 13-97, 7-99 and 8-2002.

This may also include the matching of data from other information or returns filed by the taxpayers
with the BIR such as Alphalist of Payees subject to Final or Creditable Withholding Taxes.

Under this policy, even without conducting a detailed examination of taxpayer's books and records, if
the computerized/manual matching of sales and purchases/expenses appears to reveal
discrepancies, the same shall be communicated to the concerned taxpayer through the issuance of
LN. The LN shall serve as a discrepancy notice to taxpayer similar to a Notice for Informal Conference
to the concerned taxpayer.

Thus, under the RELIEF System, a revenue officer may begin an examination of the taxpayer
even prior to the issuance of an LN or even in the absence of a LOA the aid of a
computerized/manual matching of taxpayers' documents/records. Accordingly, under the
RELIEF System, the presumption that the tax returns are in accordance with law and are
presumed correct since these are filed under the penalty of perjury are easily rebutted and the
taxpayer becomes instantly burdened to explain a purported discrepancy. (Medicard Philippines,
Inc. vs. Commissioner of Internal Revenue, G.R. No. 222743, April 5, 2017)

 To comply with due process in the audit or investigation by the BIR, the taxpayer needs to be
informed that the revenue officer knocking at his or her door has the proper authority to
examine his books of accounts. The only way for the taxpayer to verify the existence of that
authority is when, upon reading the LOA, there is a link between the said LOA and the revenue
officer who will conduct the examination and assessment; and the only way to make that link
is by looking at the names of the revenue officers who are authorized in the said LOA.

If any revenue officer other than those named in the LOA conducted the examination and
assessment, taxpayers would be in a situation where they cannot verify the existence of the authority
of the revenue officer to conduct the examination and assessment.

Due process requires that taxpayers must have the right to know that the revenue officers are duly
authorized to conduct the examination and assessment, and this requires that the LOAS must
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contain the names of the authorized revenue officers. In other words, identifying the authorized
revenue officers in the LOA is a jurisdictional requirement of a valid audit or investigation by
the BIR, and therefore of a valid assessment. (Commissioner of Internal Revenue vs. McDonald's
Philippines Realty Corp., G.R. No. 242670, March 10, 2021)

 In this case, ADB failed to present a termination letter from the BIR. Instead, it presented a Page | 9
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.
These documents, however, do not prove that ADB's application for tax abatement has been
approved. If at all, these documents only prove ADB'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 ADB's final withholding tax for fiscal year ending June 30, 1998. ADB'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 ADB's application for tax abatement is denied, any payment made by it would be applied
to its outstanding tax liability. (Asiatrust Development Bank, Inc. vs. Commissioner of Internal
Revenue, G.R. Nos. 201530 & 201680-81, April 19, 2017)

 Thus, the mistake or negligence of government officials should not bind the state, lest it bring
harm to the government and ultimately the people, in whom sovereignty resides.

Republic v. Ker & Co. Ltd. involved a collection case for a final and executory assessment. The
taxpayer nevertheless raised the prescription of the right to assess the tax as a defense before the
Court of First Instance. The Republic, instead of objecting to the invocation of prescription as a
defense by the taxpayer, litigated on the issue and thereafter submitted it for resolution. The Supreme
Court ruled for the taxpayer, treating the actuations of the government as a waiver of the right to
invoke the defense of prescription. Ker effectively applied to the government the rule of estoppel.
Indeed, the no-estoppel rule is not absolute. The same ingredients in Ker- procedural matter and
injustice - obtain in this case. The procedural matter consists in the failure to raise the issue of
prescription at the trial court/administrative level, and injustice in the fact that the BIR has unduly
delayed the assessment and collection of the DST in this case. The fact is that it took more than
12 years for it to take steps to collect the assessed tax. The BIR definitely caused untold
prejudice to petitioner, keeping the latter in the dark for so long, as to whether it is liable for
DST and, if so, for how much. (China Banking Corporation vs. Commissioner of Internal Revenue,
G.R. No. 172509, February 4, 2015)

LOCAL GOVERNMENT TAXATION

REMEDIES

 Hence, CJHDC needs more than mere arguments and/or allegations contained in its pleadings to
establish and prove its exemption, making prior proceedings before the LBAA a necessity. With the
above-enumerated reasons, it is obvious that in order for a complete determination of petitioner's
alleged exemption from payment of real property tax under RA No. 7160 or the LGC of 1991, there are
factual issues needed to be confirmed.

Hence, being a question of fact, CJHDC cannot do without first resorting to the proper administrative
remedies, or as previously discussed, by paying under protest the tax assessed in compliance with
Section 252 thereof. Accordingly, the real property taxes should first be paid before any protest
thereon may be considered. It is without a doubt that such requirement of "payment under protest" is
a condition sine qua non before an appeal may be entertained. To reiterate, the restriction upon
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the power of courts to impeach tax assessment without a prior payment, under protest, of the
taxes assessed is consistent with the doctrine that taxes are the lifeblood of the nation and as
such their collection cannot be curtailed by injunction or any like action; otherwise, the state
or, in this case, the local government unit, shall be crippled in dispensing the needed services
to the people, and its machinery gravely disabled.

The right of local government units to collect taxes due must always be upheld to avoid severe Page | 10
erosion. This consideration is consistent with the State policy to guarantee the autonomy of local
governments and the objective of RA No. 7610 or the LGC of 1991 that they enjoy genuine and
meaningful local autonomy to empower them to achieve their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals. (Camp John Hay
Development Corporation Central Board of Assessment Appeals, et. al., G.R. No. 169324, October
2,2013)

 What are the procedural requirements for refund or credit of local taxes?

Under Section 196 of the Local Government Code, in order to be entitled to a refund or credit of local
taxes, the following procedural requirements must concur:

first, the taxpayer concerned must file a written claim for refund or credit with the local
treasurer; and second, the case or proceeding for refund has to be filed within two (2) years
from the date of the payment of the tax, fee, or charge or from the date the taxpayer is
entitled to a refund or credit (Metro Manila Shopping Mecca Corp., et. al. vs. Toledo, et al, G.R No.
190818, June 5, 2013)

 Sections 195 and 196 of the Local Government Code govern the remedies of a taxpayer for taxes
collected by local government units, except for real property taxes:

Section 195. Protest of Assessment. When the local treasurer or his duly authorized representative
finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment
stating the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and
penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may
file a written protest with the local treasurer contesting the assessment; otherwise, the
assessment shall become final and executory. The local treasurer shall decide the protest within
sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or
partly meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if
the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest
wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the
receipt of the denial of the protest or from the lapse of the sixty (60)-day period prescribed
herein within which to appeal with the court of competent jurisdiction otherwise the
assessment becomes conclusive and unappealable.

Section 196. Claim for Refund of Tax Credit. - No case or proceeding shall be maintained in any
court for the recovery of any tax, fee, or charge erroneously or illegally collected until a
written claim for refund or credit has been filed with the local treasurer. No case or proceeding
shall be entertained in any court after the expiration of two (2) years from the date of the
payment of such tax, fee, or charge, or from the date the taxpayer is entitled to a refund or
credit.

In City of Manila vs. Cosmos Bottling Corp., G.R. No. 196681, June 27, 2018, the Court distinguished
between these two (2) remedies:

The first provides the procedure for contesting an assessment issued by the local treasurer,
whereas, the second provides the procedure for the recovery of an erroneously paid or illegally
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collected tax, fee or charge. Both Sections 195 and 196 mention an administrative remedy
that the taxpayer should first exhaust before bringing the appropriate action in court. In
Section 195, it is the written protest with the local treasurer that constitutes the administrative
remedy; while in Section 196, it written claim for refund or credit with the same office. As to form, the
the law does not particularly provide any for a protest or refund claim to he considered valid. It
suffices that the written protest or refund is addressed to the local treasurer expressing in substance
its desired relief.m(International Container Terminal Services, Inc. vs. The City of Manila, et. al., G.R. Page | 11
No. 185622, October 17, 2018)

 The Court has settled that a taxpayer facing an assessment issued by the local treasurer may protest
it and alternatively:

(1) appeal the assessment in court, or

(2) pay the tax, and thereafter seek a refund.

A taxpayer who had protested and paid an assessment is not precluded from later on instituting an
action for refund or credit.

In this case, after PBP received the assessment on January 17, 2007, it protested such assessment
on January 19, 2007. After payment of the assessed taxes and charges, PBP wrote City of Manila
another letter asking for the refund and reiterating the grounds raised in the protest letter. Then, on
February 6, 2007, PBP received the letter denying its protest. Thus, on March 8, 2007, or exactly
thirty (30) days from its receipt of the denial, PBP brought the action before the RTC of Manila.
Hence, PBP was justified in filing a claim for refund after timely protesting and paying the
assessment.

Section 195 of the LGC provides that "When the local treasurer or his duly authorized representative
finds that correct taxes, fees, or charges have not paid, he shall issue a notice of assessment stating
the nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and
penalties." Thus, suffice it to say that the issuance of a notice of assessment is mandatory before the
treasurer may collect deficiency taxes from the taxpayer. The notice of assessment is not only a
requirement of due process but it also stands as the first instance the taxpayer is officially made
aware of the pending tax liability. The local treasurer cannot simply collect deficiency taxes for a
different taxing period by raining it as a defense in an action for refund of erroneously or illegally
collected taxes. To reiterate, PBP, after it had protested and paid the assessed tax, is permitted
by law to seek a refund having fully satisfied the twin conditions for prosecuting an action for
refund before the court. (City Treasurer of Manila vs. Philippine Beverage Partners, Inc., G.R. No.
233556, September 11, 2019)

REAL PROPERTY TAXATION

REMEDIES

 Discuss the procedure for enforcing local tax liability against a delinquent taxpayer's personal
properties under the Local Government Code (LGC).

The procedure for enforcing local tax liability against a delinquent taxpayer's personal properties is
set forth in Secs. 175 and 195 of the LGC, to wit:

Section 175. Distraint of Personal Property. The remedy by distraint shall proceed as follows:

(a) Seizure- Upon failure of the person owing any local tax, fee, or charge to pay the same at the time
required, the local treasurer or his deputy may, upon written notice, seize or confiscate any personal
property belonging to that person or any personal property subject to the lien in sufficient quantity to
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satisfy the tax, fee, or charge in question, together with any increment thereto incident to delinquency
and the expenses of seizure. In such case, the local treasurer or his deputy shall issue a duly
authenticated certificate based upon the records of his office showing the fact of delinquency and the
amounts of the tax, fee, or charge and penalty due. Such certificate shall serve as sufficient warrant
for the distraint of personal property aforementioned, subject to the taxpayer's right to claim
exemption under the provisions of existing laws. Distrained personal property shall be sold at public
auction in the manner hereon provided for. Page | 12

Section 195. Protest of Assessment. - When the local treasurer or his duly authorized
representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of
assessment stating the nature of the tax fee, or charge, the amount of deficiency, the surcharges,
interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the
taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the
assessment shall become final and executory. The local treasurer shall decide the protest within sixty
(60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly
meritorious, he shall issue a notice cancelling wholly or partially the assessment. However, if the local
treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or
partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the
denial of the protest or from the lapse of the sixty (60) day period prescribed herein within which to
appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and
unappealable.

 Is the Court of Tax Appeal (CTA) Division vested with jurisdiction to review the decision of the
RTC which concerns a petition for declaratory relief involving real property taxes?

Yes. First, Section 7 of Republic Act (RA) No. 92827 explicitly enumerates the scope of the CTA's
jurisdiction over decisions, orders or resolutions of the RTC in local tax cases, to wit:

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 Code 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;

3. Decisions, orders or resolutions of the Regional Trial Courts in local tax cases originally
decided or resolved by them in the exercise of their original or appellate jurisdiction;

4. Decisions of the Commissioner of Customs in cases involving liability for customs duties, fees, or
other monetary charges, seizure, detention or release of property affected, fines, forfeitures or other
penalties in relation thereto, or other matters arising under the Customs Laws or other laws
administered by the Bureau of Customs;

5. Decisions of the Central Board of Assessment Appeals in the exercise of its appellate jurisdiction
over cases involving the assessment and taxation of real property originally decided by the provincial
or city board assessment appeals:
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6. Decisions of the Secretary of Finance on customs cases elevated to him automatically for review
from decisions of the Commissioner of Customs which are adverse to the Government under Section
2315 of the Tariff and Customs Code:

7. Decisions of the Secretary of Trade and Industry, in the case of nonagricultural product,
commodity or article, and the Secretary of Agriculture in the case of agricultural product, commodity
or article, involving dumping and countervailing duties under Section 301 and 302, respectively, of
the Tariff and Customs Code, and safeguard measures under Republic Act No. 8800, where either Page | 13
party may appeal the decision to impose or not to impose said duties;

Such authority is echoed in Section 3, Rule 4 of the Revised Rules of the CTA, which enumerates the
jurisdiction of the CTA, sitting as a Division, to wit:

Section 3. Cases Within the Jurisdiction of the Court In Division. – The Court Division shall exercise:

(a) Exclusive original or appellate jurisdiction to review by appeal the following:

(3) Decisions, resolutions or orders of the Regional Trial Courts in local tax cases decided or
resolved by them in the exercise of their original jurisdiction;

Indeed, the CTA, sitting as Division, has jurisdiction to review by appeal the decisions, rulings
and resolutions of the RTC over local tax cases, which includes real property taxes. This is
evident from a perusal of the Local Government Code (LGC) which includes the matter of Real
Property Taxation under one of its main chapters. Indubitably, the power to impose real property
tax is in line with the power vested in the local governments to create their own revenue sources,
within the limitations set forth by law. As such, the collection of real property taxes is conferred with
the local treasurer rather than the Bureau of Internal Revenue. The fact that a separate chapter is
devoted to the treatment of real property taxes, and a distinct appeal procedure is provided therefor
does not justify an inference that Section 7(a)(3) of R.A. 9282 pertains only to local taxes other than
real property taxes. Rather, the term "local taxes" in the aforementioned provision should be
considered in its general and comprehensive sense, which embraces real property tax assessments, in
line with the precept Generalia verba sunt generaliter inteligencia-what is generally spoken shall be
generally understood. Between the restricted sense and the general meaning of a word, the general
prevail unless it was clearly intended that the restricted sense was to be used. Here, the context in
which the word "local taxes" is employed does not clearly indicate that the limited or restricted view
was intended by the legislature. In addition, the specification of real property tax assessment under
Paragraph (a)(5) of Section 7 of R.A. 9282, in relation to the decisions of the CBAA, is only proper
given that the CBAA has no jurisdiction, either original or appellate, over cases involving local taxes
other than real property taxes. Based on the foregoing, the general meaning of "local taxes" should be
adopted in relation to Paragraph (a)(3) of Section 7 of RA. 9282, which necessarily includes real
property taxes.

Second, when the legality or validity of the assessment is in question, and not its reasonableness or
correctness, appeals to the LBAA, and subsequently to the CBAA, pursuant to Sections 226 and 229
of the LGC, are not necessary. Stated differently, in the event that the taxpayer questions the
authority and power of the assessor to impose the assessment, and of the treasurer to collect the real
property tax, resort to judicial action may prosper. This is in consonance with the ruling in Ty v.
Trampe. Here, a petition for prohibition with prayer for a restraining order and/or writ of preliminary
injunction was filed to declare null and void the new tax assessments and enjoin the collection of real
estate taxes based on said assessments. Despite the alleged non-exhaustion of administrative
remedies and non-payment of the real property tax, the Court gave due course to the case on
the ground that the controversy did not involve questions of fact but only of law. Thus:

"Respondents argue that this case is premature because petitioners neither appealed the questioned
assessments on their properties to the Board of Assessment Appeal, pursuant to Sec. 226, nor paid
the taxes under protest, per Sec. 252.
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We do not agree. Although as a rule, administrative remedies must first be exhausted before
resort to judicial action can prosper, there is a well-settled exception in cases where the
controversy does not involve questions of fact but only of law. In the present case, the parties,
even during the proceedings in the lower court on 11 April 1994, already agreed "that the
issues in the petition are legal", and thus, no evidence was presented in said court.

In laying down the powers of the Local Board of Assessment Appeals, R.A. 7160 provides in Sec. 229
(b) that "(t)he proceedings of the Board shall be conducted solely for the purpose of ascertaining the Page | 14
facts...." It follows that appeals to this Board may be fruitful only where questions of fact are involved
Again, the protest contemplated under Sec. 252 of RA. 7160 is needed where there is a question as to
the reasonableness of the amount assessed. Hence, if a taxpayer disputes the reasonableness of
an increase in a real estate tax assessment, he is required to "first pay the tax" under protest.
Otherwise, the city or municipal treasurer will not act on his protest In the case at bench,
however, the petitioners are questioning the very authority and power of the assessor, acting
solely and independently, to impose the assessment and of the treasurer to collect the tax.
These are not questions merely of amounts of the increase in the tax but attacks on the very
validity of any increase.

 Based on the foregoing jurisprudence, it is evident that NPC's failure to comply with the
mandatory requirement of payment under protest in accordance with Section 252 of the LGC
was fatal to its appeal. It is not the first occasion where the Court ruled that the NPC, in claiming
tax exemption, questions the reasonableness or correctness of the assessment by the local assessor
and not the legality of the assessment or his authority to assess real property tax should have first
complied with Section 252. Its failure to prove that this requirement has been complied with renders
its administrative protest under Section 226 of the LGC without any effect. No protest shall be
entertained unless the taxpayer first pays the tax. (National Power Corporation vs. The Provincial
Treasurer of Benguet, et. al., G.R. No. 209303, November 14, 2016)

 Under Sections 176 and 178 of RA. No. 7610, it is incumbent upon the City Treasurer to
convey the notice of delinquency to the taxpayer. The strict adherence to the notice
requirement in tax sales is imperative not only for the protection of the taxpayers, but also to
allay any possible suspicion of collusion between the buyer and the public officials called upon
to enforce such laws.

In the present case, a perusal of the records would show that BRC was properly notified of its tax
delinquency and of the proceedings relative to the auction sale; hence, its right as a taxpayer and the
owner of the subject property was adequately protected. The records bear out that the statement of
delinquency was sent to BRC stating that the realty tax on the subject property had not been paid
from years 1997 to 2004 and including the computation of the amount of the taxes due and
penalties. BRC, in fact, acknowledged the receipt of this statement of delinquency in its opposition
before the RTC. It, however, contended that such statement was not the notice required by law. The
argument is not tenable. Though the statement of delinquency was not captioned as "Notice of
Delinquency," its contents nonetheless sufficiently informed BRC of its deficiency in real property
taxes and the penalty with a reminder to settle its tax obligation immediately in order to avoid legal
inconvenience. Furthermore, aside from this statement of delinquency, the City Treasurer sent to
BRC, through personal service, the Final Notice of Delinquency, dated July 28, 2005. In the said
notice, BRC was again reminded of its unpaid realty taxes and penalties and was informed that the
subject property was included in the list of delinquent real properties and was scheduled for auction
on September 15, 2005. This final notice was followed by the Warrant of Levy, both of which were
received by BRC (Gamilla vs. Burgundy Realty Corporation, G.R. No. 212246, June 22, П2015)
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 In this case, the Court of Tax Appeals had jurisdiction over PPA's appeal to resolve the
question of whether or not it was liable for real property tax. To recall, the real property tax
liability was the very reason for the acts which PPA wanted to have enjoined. It was, thus, the Court
of Tax Appeals, and not the Court of Appeals, that had the power to preserve the subject of the
appeal, to give effect to its final determination, and, when necessary, to control auxiliary and
incidental matters and to prohibit or restrain acts which might interfere with its exercise of
jurisdiction over PPA's appeal. Page | 15

Thus, the City of Davao and CBAA's acts carried out pursuant to the imposition of the real property
tax were also within the jurisdiction of the Court of Tax Appeals. (Philippine Ports Authority vs. The
City of Davao, et. al., G.R. No. 190324, June 6, 2018)

 Discuss the remedies available to a taxpayer or real property owner not satisfied with the
assessment of the real property tax sought to be collected. (memorize)

Remedies available to a taxpayer or real property owner who is not satisfied with the assessment or
reasonableness of the real property tax sought to be collected:

(1) Remedy before payment:

(a) Appeal to Local Board of Assessment Appeals within 60 days from receipt of the written
notice of assessment,

(b) Appeal the decision of Local Board of Assessment Appeals to the Central Board of
Assessment Appeals within 30 days from receipt,

(c) From Central Board of Assessment Appeals to the Court of Tax Appeals within 15 days
from receipt of the decision. (R.A. 9282)

(2) Remedy after payment:

(a) Payment under protest. The protest shall be in writing and filed within 30 days from
payment of the tax assessed. The Treasurer has a period of 60 days to act on the protest.
(b) In the event of denial or inaction, the proper appellate procedure is to file a verified
petition with the Local Board of Assessment Appeals within 60 days from denial of protest
or receipt of the notice of assessment (in case of inaction).
(c) In the event of denial, an appeal may be taken to the Central Board of Assessment
Appeals by filing a notice of appeal within 30 days from receipt thereof.
(d) From the Central Board of Assessment Appeals, the dispute may then be taken to the
Court of Tax Appeals. (R.A. 9282)

Tax Refund or Credit - Another remedy after payment, is for the taxpayer to file a written
claim for refund or credit for taxes and interests with the provincial or city treasurer within
two (2) years from the date the taxpayer is entitled to such reduction or adjustment. The
claim has to be decided within 60 days from receipt thereof. Any adverse decision or inaction
within the prescribed period is appealable within 30 days to the Regular Courts.

JUDICIAL REMEDIES
FROM CTA TO CTA-ENBANC TO SC

 Furthermore, the phraseology of Section 7, number (1), denotes an intent to view the CTA's
jurisdiction over disputed assessments and over "other matters" arising under the NIRC or
other laws administered by the BIR as separate and independent of each other. This runs
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counter to CIR'S theory that the latter is qualified by the status of the former, i.e., an "other matter"
must not be a final and unappealable tax assessment or, alternatively, must be a disputed
assessment. Likewise, the first paragraph of Section 11 of RA. No. 1125, as amended by RA. No.
9282, belies CIR's assertion as the provision is explicit that, for as long as a party is adversely
affected by any decision, ruling or inaction of the CIR, said party may file an appeal with the
CTA within 30 days from receipt of such decision or ruling. The wording of the provision does not
take into account the CIR's restrictive interpretation as it clearly provides that the mere existence of Page | 16
an adverse decision, ruling or inaction along with the timely filing of an appeal operates to validate
the exercise of jurisdiction by the CTA.
To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest
within the time allowed only means that the validity or correctness of the assessment may no longer
be questioned on appeal. However, the validity of the assessment itself is a separate and distinct
issue from the issue of whether the right of the CIR to collect the validly assessed tax has prescribed.
This issue of prescription, being a matter provided for by the NIRC, is well within the
jurisdiction of the CTA to decide. (Commissioner of Internal Revenue vs. Hambrecht & Quist
Philippines, Inc., G.R. No. 169225, November 17, 2010)

 The contentions of the Commissioner of Customs are not meritorious. The reckoning date for
Oilink's appeal was July 12, 1999, not July 2, 1999, because it was on the former date that the
Commissioner of Customs denied the protest of Oilink. Clearly, the filing of the petition on July
30, 1999 by Oilink was well within its reglementary period to appeal. The insistence by the
Commissioner of Customs on reckoning the reglementary period to appeal from November 25, 1998,
the date when URC received the final demand letter, is unwarranted. The November 25, 1998 final
demand letter of the BoC was addressed to URC, not to Oilink. As such, the final demand sent to
URC did not bind Oilink unless the separate identities of the corporations were disregarded in order
to consider them as one. (Commissioner of Customs vs. Oilink International Corporation, G.R. No.
161759, July 2, 2014)

 The Commissioner failed to comply with the mandatory provisions of Rule 8, Section 1 of the
Revised Rules of the Court of Tax Appeals requiring that "the petition for review of a decision
or resolution of the Court in Division must be preceded by the filing of a timely motion for
reconsideration or new trial with the Division." The word "must" clearly indicates the mandatory -
not merely directory - nature of a requirement."

The rules are clear. Before the CTA En Banc could take cognizance of the petition for review
concerning a case falling under its exclusive appellate jurisdiction, the litigant must
sufficiently show that it sought prior reconsideration or moved for a new trial with the
concerned CTA division. Procedural rules are not to be trifled with or be excused simply because
their non-compliance may have resulted in prejudicing a party's substantive rights (Systra
Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 176290, September 21, 2007). Rules
are meant to be followed. They may be relaxed only for very exigent and persuasive reasons to relieve
a litigant of an injustice not commensurate to his careless non-observance of the prescribed rules.
(Commissioner of Customs vs. Marina Sales, Inc., G.R. No. 183868, November 22, 2010)

 In this case, the Court is of the view that the CTA gave enough opportunity for XX, Inc. to present its
rebuttal evidence. Records reveal that when XX, Inc. requested for resetting on September 5, 2005
and October 26, 2005, its motions were granted by the CTA. As a matter of fact, by January 16, 2006,
XX, Inc. was already able to partially present its rebuttal evidence. Thus, when the CTA called on XX,
Inc. to continue its presentation of rebuttal evidence on February 27, 2006, it should have been
prepared to do so. It cannot be said that the CTA arbitrarily denied XX, Inc.'s supposed simple
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request of resetting because it had already given the latter several months to prepare and gather its
rebuttal evidence.

Verily, XX, Inc. tried to reason out that if only the CIR gave an advance notice that it would be
waiving its right to cross-examine its witness, then it could have "rushed the collation and sorting of
its rebuttal documentary exhibits." However, as stated XX, Inc. was given more than ample time to
collate and gather its evidence. It should have been prepared for the continuance of the trial. True, Page | 17
the incident on said date was for the cross-examination of XX, Inc.'s witness but it could be short; it
could be lengthy. XX, Inc. should have prepared for any eventuality. It is discretionary on the part of
the court to allow a piece- meal presentation of evidence. If it decides not to allow it, it cannot be
considered an abuse of discretion. "As defined, discretion is a faculty of a court or an official by which
he may decide a question either way, and still be right." Accordingly, XX, Inc.'s right to due process
was not transgressed. The Court has consistently reminded litigants that due process is simply
an opportunity to be heard. The requirement of due process is satisfactorily met as long as the
parties are given the opportunity to present their side. In the case at bar, XX, Inc. was
precisely given the right and the opportunity to present its side. It was able to present its
evidence-in-chief and had its opportunity to present rebuttal evidence. (Milwaukee Industries
Corporation vs. Court of Tax Appeals, et. al., G.R. No. 173815, November 24, 2010)

 While it is true that the Court may deviate from the foregoing rule, this is true only if the
appeal is meritorious on its face. The Court has not hesitated to relax the procedural rules in
order to serve and achieve substantial justice. "In the circumstances obtaining in this case
however, the occasion does not warrant the desired relaxation."

PNB has not offered any meritorious legal to justify the suspension of the rules in its favor The CTA
Division has taken into consideration all of the evidence submitted by the PNB, and actually allowed
it a refund of P1,428,661.66, in addition to the P4,154,353.42 the BIR already gave. The CTA Division
explained why it disallowed the remaining balance of P445,578.92 in its Decision dated August 11,
2005. When PNB moved to reconsider this decision, it did not offer the CTA any other evidence or
explanation aside from the ones the CTA Division had already evaluated. Nevertheless, the CTA
carefully considered and deliberated anew PNB's grounds, albeit they found them lacking in merit.
Thus, it be said that PNB was deprived of its day in court, as in fact, it was given all the time it had
asked for. While PNB may believe that it has a meritorious legal defense, this must be weighed
against the need to halt an abuse of the flexibility of procedural rules. It is well established that
faithful compliance with the Rules of Court is essential for the prevention and avoidance of
unnecessary delays and for the organized and efficient dispatch of judicial business. (Philippine
National Bank vs. Commissioner of Internal Revenue, G.R. No. 172458, December 14, 2011)

 The mere declaration of exempt sales in the VAT returns, whether based on Section 103 of the Tax
Code or some other special law, should have prompted the CA to apply Section 104(A) of the Tax Code
to XX, Inc.'s claim. It was thus erroneous for the appellate court to rule that the declaration of exempt
sales in XX, Inc.'s VAT return, which may correspond to exempt transactions under Section 103, does
not indicate that Eastern was also involved in non-VAT transactions. Finally, another exemption from
the rule against raising new issues on appeal is when the question involves matters of public
importance.

The power of taxation is an inherent attribute of sovereignty, the government chiefly relies on taxation
to obtain the means to carry on its operations. Taxes are essential to its very existence; hence, the
dictum that "taxes are the lifeblood of the government." For this reason, the right of taxation cannot
easily be surrendered; statutes granting tax exemptions are considered as a derogation of the
sovereign authority and are strictly construed against the person or entity claiming the
exemption. Claims for tax refunds, when based on statutes granting tax exemption or tax
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refund, partake of the nature of an exemption; thus, the rule of strict interpretation against
the taxpayer-claimant similarly applies. The taxpayer is charged with the heavy burden of
proving that he has complied with and satisfied all the statutory and administrative
requirements to be entitled to the tax refund. This burden cannot be offset by the non-
observance of procedural technicalities by the government's tax agents when the non-
observance of the remedial measure addressing it does not in any manner prejudice the
taxpayer's due process rights, as in the present case. (Commissioner of Internal Revenue vs. Page | 18
Eastern Telecommunications Philippines, Inc., G.R. No. 163835, July 7, 12010)

 In Anderson v. Ho, G.R. No. 172590, January 7, 2013, the Court held that the invocation of
substantial justice is not a magic wand that would readily dispel the application of procedural rules.
Finally, in view of BoC's availment of a wrong mode of appeal via notice of appeal stating that it was
elevating the case to the CA instead of appealing by way of a petition for review to the CTA within
thirty (30) days from receipt of a copy of the RTC's August 3, 2012 Order, as required by Section 11 of
RA 1125, as amended by Section 9 of RA 9282 the Court is constrained to deem the RTC's dismissal
of BoC's collection case against MMPC final and executory.

It is settled that the perfection of an appeal in the manner and within the period set by law is
not only mandatory, but jurisdictional as well, and that failure to perfect an appeal within the
period fixed by law renders the judgment appealed from final and executory. Although appeal is
an essential part of our judicial process, it has been held, time and again, that the right thereto is not
a natural right or a part of due process but is merely a statutory privilege. Thus, the perfection of an
appeal in the manner and within the period prescribed by law is not only mandatory but also
jurisdictional and failure of a party to conform to the rules regarding appeal will render the judgment
final and executory. Once a decision attains finality, it becomes the law of the case irrespective
of whether the decision is erroneous or not and no court - not even the Supreme Court - has
the power to revise, review, change or alter the same. The basic rule of finality of judgment is
grounded on the fundamental principle of public policy and sound practice that, at the risk of
occasional error, the judgment of courts and the award of quasi-judicial agencies must become
final at some definite date fixed by law. (Mitsubishi Motors Philippines Corporation vs. Bureau of
Customs, G.R. No. 209830, June 17, 2015)

 What is the best legal argument to support a taxpayer's suit?

In the case of taxpayers' suits, the party suing as a taxpayer must prove that he has sufficient
interest in preventing the illegal expenditure of money raised by taxation. Thus, taxpayers have been
allowed to sue where there is a claim that public funds are illegally disbursed or that public money is
being deflected to any improper purpose, or that public funds are wasted through the enforcement of
an invalid or unconstitutional law. More particularly, the taxpayer must establish that he has a
personal and substantial interest in the case and that he has sustained or will sustain direct
injury as a result of its enforcement or that he stands to be benefited or injured by the
judgment in the case, or is entitled to the avails of the suit. (Public InterestCenter, Inc., et. al. vs.
Roxas, et al, G.R. No. 125509, January 31, 2007; Lozano, et. al. vs. Nograles, G.R. No. 187883, June
16, 2009)

 Generally, a party will be allowed to litigate only when:

(1) he can show that he has personally suffered some actual or threatened injury because of the
allegedly illegal conduct of the government;
(2) the injury is fairly traceable to the challenged action; and
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(3) the injury is likely to be redressed by a favorable action (Tolentino v. COMELEC, 465 Phil.
385, 402 [2004]).

The question on standing is whether such parties have "alleged such a personal stake in the outcome
of the controversy as to assure that concrete adverseness which sharpens the presentation of issues
upon which the court so largely depends for illumination of difficult constitutional questions"
(Kilosbayan, Incorporated v. Morato, G.R. No. 118910, July 17, 1995). Page | 19

 Locus standi, however, is merely a matter of procedure and it has been recognized that in some cases,
suits are not brought by parties who have been personally injured by the operation of a law or any
other government act but by concerned citizens, taxpayers or voters who actually sue in the public
interest. Consequently, the Court, in a catena of cases has invariably adopted a liberal stance on
locus standi, including those cases involving taxpayers. The prevailing doctrine in taxpayer's suits is
to allow taxpayers to question contracts entered into by the national government or government-
owned or controlled corporations allegedly in contravention of law. A taxpayer is allowed to sue
where there is a claim that public funds are illegally disbursed, or that public money is being
deflected to any improper purpose, or that there is a wastage of public funds through the
enforcement of an invalid or unconstitutional law. Significantly, a taxpayer need not be a party
to the contract to challenge its validity. (Abaya, et. al. vs. Sec. Ebdane, et. al., G.R No. 167919,
February 14, 2007)

 A taxpayer is allowed to sue where there is a claim that public funds are illegally disbursed, or
that the public money is being deflected to any improper purpose, or that there is wastage of
public funds through the enforcement of an invalid or unconstitutional law (Constantino, Jr. v.
Cuisia, G.R. No. 106064, October 13, 2005). A person suing as a taxpayer, however, must show that
the act complained of directly involves the illegal disbursement of public funds derived from taxation
(Bayan-Bagong Alyansang Makabayan v. Zamora, 396 Phil. 623 [2000]). He must also prove that he
has sufficient interest in preventing the illegal expenditure of money raised by taxation and that he
will sustain a direct injury because of the enforcement of the questioned statute or contract (Bugnay
Construction and Development Corporation v. Judge Laron, 257 Phil. 245 [1989]).

In other words, for a taxpayer's suit to prosper, two requisites must be met:

(1) public funds derived from taxation are disbursed by a political subdivision or
instrumentality and in doing so, a law is violated or some irregularity is committed and
(2) the petitioner is directly affected by the alleged act

(Bagatsing v. San Juan, 329 Phil. 8 [1996]). In light of the foregoing, a taxpayer need not be a party to
the contract to challenge its validity. As long as taxes are involved, people have a right to question
(Abaya v. Ebdane, Jr.,G.R. No. 167919, February 14, 2007) contracts entered into by the govemment.

 In this case, although the construction of the town center would be primarily sourced from the
proceeds of the bonds, a government support in the amount of P187 million (3%) would still be
spent for paying the interest of the bonds. Clearly, the first requisite has been met. As to the
second requisite, the court, in recent cases, has relaxed the stringent "direct injury test"
bearing in mind that locus standi is a procedural technicality (Garcillano v House of
Representatives Committees on Public Information, Public Order and Safety, et. al., G.R. Nos.
1708338 & 179275, December 23, 2008).

By invoking "transcendental importance", "paramount public interest", or "far-reaching

implications", ordinary citizens and taxpayers were allowed to sue even if they failed to show
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direct injury (David v. Macapagal-Arroyo, G.R. Nos. 171396, 171409, 171485, 171483, 171400,
171489 & 171424, May 3, 2006). In cases where serious legal issues were raised or where public
expenditures of millions of pesos were involved, the court did not hesitate to give standing to
taxpayers (See Constantino, Jr. v. Cuisia; Abaya v. Ebdane, Jr.; Province of North Cotabato v.
Government of the Republic of the Philippines Peace Panel on Ancestral Domain (GRP), G.R. Nos.
183591, 183752, 183893, 183951 & 183962, October 14, 2008; Garcillano v. House of
Representatives Committees on Public Information, Public Order and Safety, et. al.) Page | 20

 A political question is a question of policy, which is to be decided by the people in their

sovereign capacity or by the legislative or the executive branch of the government to which
full discretionary authority has been delegated (Association of Small Landowners in the
Philippines, Inc. Secretary of Agrarian Reform, G.R. Nos. 78742, 79310, 79744 & 79777, July 14,
1989).

In filing the instant case before the RTC, X, Y and Z seek to restrain Gov. A, et. al. from implementing
the bond flotation and to declare null and void all contracts related to the bond flotation and
construction of the town center. X, Y and Z alleged grave abuse of discretion and clear violations of
law. They put in issue the overpriced construction of the town center, the grossly disadvantageous
bond flotation; the irrevocable assignment of the provincial government's annual regular income,
including the IRA, to cover and secure the payment of the bonds floated, and the lack of consultation
and discussion with the community regarding the proposed project, as well as a proper and legitimate
bidding for the construction of the town center. Obviously, the issues raised in the petition do not
refer to the wisdom but to the legality of the acts complained of. Thus, the instant controversy was
within the ambit of judicial review. Besides, even if the issues were political in nature, it would
still come within the Court's powers of review under the expanded jurisdiction conferred upon
by Section 1, Article VIII of the Constitution, which includes the authority to determine
whether grave abuse of discretion amounting to excess or lack of jurisdiction has been
committed by any branch or instrumentality of the government. (Mamba, et. al. vs. Lara, et al.,
G.R. No. 165109, December 14, 2009)

 Parties suing as taxpayers must specifically prove sufficient interest in preventing the illegal
expenditure of money raised by taxation (Francisco, Jr. v. Nagmamalasakit na mga Manggagawang
Pilipino, Inc., G.R. No. 160261, November 10, 2003). The expenditure of public funds by an officer of
the State for the purpose of executing an unconstitutional act constitutes a misapplication of such
funds (Gonzales v. Hon. Narvasa, 392 Phil. 518, 526 [2000]). The resolution being assailed was
appropriation ordinance. In not a few cases, the Court has liberalized the locus standi
requirement when a petition raises an issue of transcendental significance or paramount
importance to the people. Objections to a taxpayer's suit for lack of sufficient personality,
standing or interest are procedural matters. Considering the importance to the public of a suit
assailing the constitutionality of a tax law, and in keeping with the Court's duty, specially explicated
in the 1987 Constitution, to determine whether or not the other branches of the Government have
kept themselves within the limits of the Constitution and the laws and that they have not abused the
discretion given to them, the Supreme Court may brush aside technicalities of procedure and take
cognizance of the suit. There being no doctrinal definition of transcendental importance, the
following determinants formulated by former Supreme Court Justice Florentino P. Feliciano
are instructive:

(1) the character of the funds or other assets involved in the case;
(2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the
public respondent agency or instrumentality of the government; and
(3) the lack of any other party with a more direct and specific interest in raising the questions
being raised. (Jumamil vs. Café, et al., G.R. No. 144570, September 21, 2005)
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