Submitted to:

Atty. Kim Aranas, CPA

Professor

Submitted by:

Class EH406
S.Y. 2020-2021

CASE TITLE
1. Estate of the Late Juliana
Diez Vda. De Gabriel v. CIR,
G.R. No. 155541, January
27, 2004.
CASE PRINCIPLE
Death of the agent or
principal automatically
terminates the agency. The
acts and/or omissions of
the agent could no longer
bind the estate after the
taxpayer’s or decedent’s
death.
ESTATE TAX
SUMMARY OF FACTS
During the lifetime of the decedent,
Juliana Vda. De Gabriel, her business
affairs were managed by the
Philippine Trust Company (Philtrust).
The decedent died on April 3, 1979.
Two days after her death, Philtrust,
through its Trust Officer, Atty.
Antonio M. Nuyles, filed her Income
Tax Return for 1978. The return did
not indicate that the decedent had
died. Philtrust filed for a verified
petition for appointment as Special
Administrator but it was denied.
In the meantime, the Bureau of
Internal Revenue conducted an
administrative investigation on the
decedent’s tax liability and found a
deficiency income tax for the year
1977. Thus, the BIR sent by registered
mail a demand letter and an
Assessment addressed to the
decedent "c/o Philippine Trust
Company, Sta. Cruz, Manila" which
was the address stated in her 1978
Income Tax Return. No response was
made by Philtrust and the BIR was not
informed that the decedent had
actually passed away.
The Commissioner of Internal
Revenue then issued warrants of
distraint and levy to enforce
collection of the decedent’s
1
ISSUE/S
Whether the service of deficiency
tax assessment against Juliana
Diez Vda. de Gabriel through the
Philippine Trust Company was a
valid service in order to bind the
Estate.
RULING
NO. The relationship between the
decedent and Philtrust was one of agency,
which is a personal relationship between
agent and principal. Under Article 1919 (3)
of the Civil Code, death of the agent or
principal automatically terminates the
agency. In this instance, the death of the
decedent on April 3, 1979 automatically
severed the legal relationship between
her and Philtrust, and such could not be
revived by the mere fact that Philtrust
continued to act as her agent when, on
April 5, 1979, it filed her Income Tax
Return for the year 1978.
Since the relationship between Philtrust
and the decedent was automatically
severed at the moment of the Taxpayer’s
death, none of Philtrust’s acts or
omissions could bind the estate of the
Taxpayer. Service on Philtrust of the
demand letter and Assessment Notice
was improperly done.
It must be noted that Philtrust was never
appointed as the administrator of the
Estate of the decedent, and that the court
rejected Philtrust’s motion to be thus
appointed. As of November 18, 1982, the
date of the demand letter and Assessment
Notice, the legal relationship between the
decedent and Philtrust had already been
non-existent for three years.
 deficiency income tax liability, which
were served upon her heir, Francisco
Gabriel. CIR filed a "Motion for
Allowance of Claim and for an Order
of Payment of Taxes" with the court a
quo.

The Estate of the decedent, through

Mr. Ambrosio, filed a formal
opposition to the BIR’s Motion for
Allowance of Claim based on the
ground that there was no proper
service of the assessment and that the
filing of the aforesaid claim had
already prescribed.

2. CIR v. Pineda, G.R. No. L- An heir is liable for the Atanasio Pineda died, survived by his Whether respondent Pineda is YES. Pineda is liable for the assessment as
22734, September 15, assessment against the wife and 15 children, the eldest of liable to pay the full amount of an heir and as a holder-transferee of
1967. estate as an heir and as a whom is Manuel B. Pineda, the the taxes assessed. property belonging to the
holder-transferee of respondent. The estate was divided estate/taxpayer. As an heir he is
property belonging to the among and awarded to the heirs and individually answerable for the part of the
estate/taxpayer. As a holder respondent Pineda's share amounted tax proportionate to the share he received
of the property belonging to about P2,500.00. from the inheritance. His liability however
to the estate, he is liable for cannot exceed the amount of his share.
the tax up to the amount of After the estate proceedings were
the property in his closed, the Bureau of Internal As a holder of property belonging to the
possession. Revenue investigated the income tax estate, Pineda is liable for the tax up to the
liability of the estate for the years amount of the property in his possession.
1945 to 1948 and found that the The reason is that the Government has a
corresponding income tax returns lien on the P2,500.00 received by him
were not filed. from the estate as his share in the
inheritance, for unpaid income taxes for
The Commissioner of Internal which said estate is liable, pursuant to the
Revenue held respondent Pineda last paragraph of Section 315 of the Tax
liable for the payment of all the taxes Code.
found by the Tax Court to be due
from the estate in the total amount of
2

3. CIR v. Prieto, G.R. No. L- Inheritance tax is paid on
11976, August 29, 1961. the basis of the value of the
properties inherited by an
heir. It appearing that the
taxes paid by the
respondent heirs were
based on an amount which
included what they had
paid to their coheirs to
compensate the latter for
the difference in value
existing between the
properties allotted to them
(respondents), on the one
hand, and those allotted to
the other heirs, on the
other, said respondents are
entitled to the refund of the
excess payment, with legal
interest.
P760.28 instead of only for the
amount of taxes corresponding to his
share in the estate.
Dona Paz died disposing her estate to
14 heirs in excess of 5 specific legacies
in a last will and testament. Due to the
impossibility to divide the properties
equally, it was agreed that to equalize
the shares of all heirs, respondents
Prietos, who received a larger portion
of the property, would reimburse
their co-heirs in cash the resulting
difference in value of the properties.
Petitioner CIR made several tax
assessments. When respondents paid
the estate tax, another assessment
was made lowering the amount due.
Thus, there was an overpayment
which the parties agreed to credit the
same to respondents’ inheritance tax
liabilities. In totality, respondents are
claiming that the amounts collected
from them were in excess of the taxes
and penalties lawfully due them. Their
3
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.
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.
1. Whether the respondents 1. NO, since they were only asking for a
Prieto should have impleaded refund of the inheritance taxes. The
the other co-heirs. Supreme Court said that while the other
heirs and the executrix could have been
2. Whether there has been an impleaded to accord a complete relief,
overpayment in connection with they were not indispensable parties
respondents' respective because even without them, the court was
inheritance tax liability. in a position to render a final
determination of the inheritance tax
liability of the Prietos.
2. YES. The respondents herein made the
cash payments for the purpose of making
equal the share of each one of the
fourteen heirs instituted in the last will of
the deceased Doña Paz. Petitioner
contends that the individual share of each
heir in the net estate is what appears in
the project of partition, and that the cash
payments made by respondents are
immaterial in the determination of their

4. CIR v. Court of Appeals, Judicial Expenses on
et al., G.R. No. 123206, extrajudicial settlement of
March 22, 2000. the estate are allowed as
deductions. They come
within the meaning of
administration expenses.
claim for refund was likewise denied
but on appeal, the CTA reversed the
CIR.
Private respondent Josefina Pajonar
was the sister and guardian of Pedro
Pajonar who was insane and later
died. The property of the decedent
was put by the RTC- Dumaguete,
under the guardianship of the
Philippine National Bank via special
proceeding, wherein 50,000 was
spent therein for payment of
attorney's fees.
When the decedent died, instead of
filing a estate tax return, PNB advised
Josefina to extra-judicially settle the
estate of his brother. The decedent's
4
Whether the notarial fee paid for
the extrajudicial settlement in
the amount of P60,753 and the
attorney's fees in the
guardianship proceedings in the
amount of P50,000 may be
allowed as deductions from the
gross estate of decedent in order
to arrive at the value of the net
estate.
respective inheritance tax because the
money paid did not form part of the
estate of the decedent. However, while
inheritance tax should be paid on the
basis of the value of the properties
inherited by an heir, in this case, it is clear
in this case that what each of the
respondents really and actually received
as his share in the inheritance is the value
of the properties allotted to them minus
what they had to pay to their co-heirs to
compensate the latter for the difference in
value existing between the properties
allotted to respondents, on the one hand,
and those allotted to the other heirs, on
the other. To claim otherwise would be
closing one's eyes to the realities of the
case. The resulting amount, therefore, is
the just and fair basis for the
determination of the tax liability of
respondents.
YES. SC ruled that these were judicial
expenses of administration which is an
allowable deduction from the gross estate
of the decedent for purposes of arriving at
the value of the net estate since these are
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, the expenses must be
essential to the proper settlement of the
estate.
Thus, the decision of the Court of Appeals
was affirmed.
 estate was extra-judicially settled and
the heirs paid an amount of 60,753 for
the notarization of the deed of
extrajudicial settlement of estate.

The private paid the estate tax,

however, they were subsequently
assessed of deficiency taxes because
the amount paid in the special
proceeding (P50,000) and the
notarization fee (P60,753) cannot be
claimed as a deduction to the
decedent's estate. Private respondent
paid the said taxes under protest.

While the case is under review by the

BIR, she filed a claim for refund in the
CTA which was granted. Among the
deductions from the gross estate
allowed by the CTA were the notarial
fee for the Extrajudicial Settlement
and attorney's fees for guardianship
proceedings. CIR filed with the CA a
petition for review which was denied
Hence, the present appeal.

5. Pablo Lorenzo v. Juan A transmission by
Posadas, Jr., G.R. No. inheritance is taxable at the
43082, June 18, 1937. time of the predecessor's
death, notwithstanding the
postponement of the actual
possession or enjoyment of
the estate by the
beneficiary, and the tax
measured by the value of
the property transmitted at
that time regardless of its
When Thomas Hanley died, he
provided in his will that ten (10) years
after his death, his nephew Matthew
Hanley would become the owner of
his (Thomas’) properties.
5
Whether the inheritance [estate] YES. The inheritance [estate] tax should
tax be computed at Thomas be computed at Thomas Hanley’s death
Hanley’s death or ten (10) years and not ten (10) years later.
later.
The accrual of the inheritance tax is
distinct from the obligation to pay the
same. If death is the generating source
from which the power of the state to
impose inheritance taxes its being and if,
upon the death of the decedent,
succession takes place and the right of the

6. Carlos Moran Sison v.
Narcisa F. Teodoro, G.R.
No. L-9271, March 29,
1957.
7. Ferdinand R. Marcos II v.
Court of Appeals, et al.,
G.R. No. 120880, June 5,
1997.
appreciation or
depreciation.
Section 7 Rule 86 of the
Rules of Court does not
authorize the executor or
administrator to charge
against the estate the
money paid for premium.
Nothing in the Tax Code,
and in the pertinent
remedial laws that implies
the necessity of the probate
Sison was appointed administrator of
an estate, without compensation,
after filing a bond in the amount of
P5,000.
Later, Sison filed an accounting of his
administration, charging to the estate
as an expense of administration the
premium aids on his bond.
After the death of the late dictator
Ferdinand Marcos, a Special Tax Audit
Team was created to conduct an
assessment on his tax liabilities and
6
Whether a judicial administrator,
serving without compensation, is
entitled to charge as an expense
of administration the premiums
aid on his bond.
Whether the BIR had authority to
collect by summary remedy of
levy and sale of real properties of
decedent, estate tax deficiencies,
state 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 affecting value or any
subsequent increase or decrease in value.
NO. Expenses or premiums paid or
incurred by an executor or administrator
serving without compensation to procure
a bond is not a proper charge against the
estate.
The position of an executor or
administrator is one of trust; that it is
proper for the law to safeguard the
estates of deceased persons by requiring
the administrator to give a suitable bond,
and that the ability to give this bond is
in the nature of a qualification for the
office.
A person may accept the position of
administrator with all the incidents
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. 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
or estate settlement court's
approval of the state's claim
for estate taxes, before the
same can be enforced and
collected.
SEC. 94. Payment Before
Delivery by Executor or
Administrator. - No judge
shall authorize the executor
or judicial administrator to
deliver a distributive share
to any party interested in
the estate unless a assessment.
certification from the
Commissioner that the
estate tax has been paid is
shown.
obligations. The audit team without the cognition and claim for estate taxes, before the same can
investigation disclosed that Marcoses authority of the probate court. be enforced and collected. On the
failed to file written notice of the contrary, under Sec. 87 of the NIRC (Now,
death of decedent and failed to file Sec. 94), it is the probate or settlement
estate tax return. court which is bidden not to authorize the
executor or judicial administrator of the
BIR issued a deficiency estate tax decedent's estate to deliver any
assessment against the estate of the distributive share to any party interested
late dictator in the amount of in the estate, unless it is shown a
P23,293,697,628.00. The deficiency Certification by the Commissioner of
tax assessment was not protested by Internal Revenue that the estate taxes
any of the heirs of the late dictator have been paid. This provision disproves
within 30 days from service of said the petitioner's contention that it is the
probate court which approves the
assessment and collection of the estate
Thereafter, the BIR Commissioner tax.
issued several notices of levy on real
property against parcels of land In Vera vs. Fernandez, the Court
owned by Marcoses to satisfy the recognized the liberal treatment of claims
estate tax and deficiency income for taxes charged against the estate of the
taxes of Spouses Marcos. Notice of decedent. Such taxes were exempted
sale at public auction was posted and from the application of the statute of non-
public auction for the sale of parcels claims, and this is justified by the necessity
of land took place and there being no of government funding, immortalized in
bidder, the lots were declared the maxim that taxes are the lifeblood of
forfeited in favor of the government. the government. Approval of the probate
court is not a mandatory requirement in
Petitioner Bongbong Marcos then collection of estate taxes.
filed a petition before the CA assailing
the actions of the CIR in assessing and Apart from failing to file the required
collecting through the summary estate tax return within the time required
remedy of Levy on Real Properties, for the fling of the same, petitioner, and
estate and income tax delinquencies the other heirs never questioned the
upon the estate of his father, despite assessments served upon them, allowing
pendency of probate proceedings of the same to lapse into finality, and
the will of the late dictator. CA prompting the BIR to collect the said taxes
dismissed petition. by levying upon the properties left by
7

8. Dizon v. CIR, G.R. No. The claims existing at the
140944, 30 June 2008. time of death are significant
to, and should be made the
basis of, the determination
of allowable deductions.
9. CIR v. Fisher, G.R. No. L- Reciprocity must be total, Stevenson (a British national) died in Whether the estate can avail NO. Reciprocity must be total. If any of
11622, January 28, 1961. that is, with respect to 1951 in California, and he instituted itself of the reciprocity proviso in the two states collects or imposes or does
A petition for the probate of Mr.
Fernandez’s will was filed where the
probate court appointed retired
Justice Dizon and petitioner, Atty.
Dizon, as Special and Assistant
Special Administrator. Atty. Gonzales,
authorized by Justice Dizon, wrote a
letter to the BIR and filed the estate
tax return showing therein a NIL
estate tax liability. Petitioner
requested the probate court's
authority to sell several properties
forming part of the Estate, for the
purpose of paying its creditors.
However, BIR issued Estate Tax
Assessment Notice demanding
payment for deficiency estate tax.
Hence, the petitioner filed a Petition
for Review before the CTA which in
turn was denied. Petitioner filed a
petition for review with the CA
claiming that inasmuch as the valid
claims of creditors against the Estate
are in excess of the gross estate, no
estate tax was due. CA then Affirmed
CTA’s decision, hence the instant
petition.
8
Whether the actual claims of the
aforementioned creditors may
be fully allowed as deductions
from the gross estate of Mr.
Fernandez despite the fact that
the said claims were reduced or
condoned through compromise
agreements entered into by the
Estate with its creditors.
President Marcos. In case of failure to file
a return, the tax may be assessed at any
time within ten years after the omission,
and any tax so assessed may be collected
by levy upon real property within three
years following the assessment of the tax.
YES. It may be fully allowed as deductions
following the Date-of-death Valuation
Rule. First, there is no law, nor do we
discern any legislative intent in our tax
laws, which disregards the date-of-death
valuation principle and particularly
provides that post-death developments
must be considered in determining the
net value of the estate. Second, 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. Therefore, the claims
existing at the time of death are
significant to, and should be made the
basis of, the determination of allowable
deductions. Hence, the petition is
granted.
 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 character, the
reciprocity does not work.
This is the underlying
principle of the reciprocity
clauses in both laws.
10. CIR v. McGrath, G.R. No. For a non-resident alien to
L-12710, February 28, 1961. avail of the exemption
under the reciprocity rule,
the reciprocity must be
total, that is, with respect to
transfer or death taxes of
any and every character, for
both the Philippine laws
and that of the state of
origin.
his wife, Beatrice (another British the NIRC granting exemption
subject) as his sole heiress to certain from the payment of taxes for
real and personal properties, among the Mines shares of stock.
which are 210,000 shares of stocks in
Mindanao Mother Statt, the
appointed ancillary administrator of
his estate filed 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.
In 1952, Beatrice assigned all her
rights and interests in the estate to
the spouses Fisher. Statt filed an
amended estate and inheritance tax
return claiming additional
exemptions, one of which is the estate
and inheritance tax on the Mines’
shares of stock pursuant to a
reciprocity proviso in the NIRC, hence,
warranting a refund from what he
initially paid. The collector denied the
claim. He then filed in the CFI of
Manila for the said amount.
The Collector of Internal Revenue
(CIR) assessed deficiency tax, interest
and surcharges against the estate of
Dora Wood, of which McGrath is the
administratrix. One of the assessed
deficiencies is the estate tax on
Wood’s intangible properties having
situs in the Philippines.
9
Whether the exemption under
the reciprocity rule is applicable
to the intangible properties of
Wood.
not exempt any transfer, death, legacy or
succession tax of any character, the
reciprocity does not work.
In the Philippines, upon the death of any
citizen or resident, or non-resident with
properties, there are imposed upon his
estate, both an estate and an inheritance
tax.
But, under the laws of California, only
inheritance tax is imposed. Also, although
the Federal Internal Revenue Code
imposes an estate tax, it does not grant
exemption on the basis of reciprocity.
Thus, a Filipino citizen shall always be at a
disadvantage. This is not what the
legislators intended.
NO, reciprocity can be extended in the
case of the estate of Dora Anna Wood
because the law of California does not
grant full exemption from the estate and
inheritance taxes to Filipino residents in
that state.
Under the Philippine jurisdiction, the
reciprocity must be total, that is, with
respect to transfer or death taxes of any
and every character, in the case of the
According to McGrath, the intangible
properties are exempted from estate
tax under the reciprocity rule.
The CIR insisted that there is no
reciprocity between the California
and Philippine laws on the matter of
the death tax on intangible personal
property.
10
Philippine 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 character, the reciprocity does not
work. This is the underlying principle of
the reciprocity clauses in both laws.
 DONOR’S TAX
CASE TITLE CASE PRINCIPLE SUMMARY OF FACTS
1. Republic v. AFP There are three essential Lots X, Y-1 and Y-2 lands of the public
Retirement and Separation elements of donations: [1] domain located in General Santos
Benefits System, G.R. No. the reduction of the were reserved for recreation and
180463, January 16, 2013. 
 patrimony of the donor, [2] health purposes by virtue of Proc.
the increase in the 168, which was issued in 1963. In
patrimony of the donee, 1983, Proc. 2273 was issued
and [3] the intent to do an amending Proc. 168, and removing
act of liberality (animus and segregating Lots Y-1 and Y-2
donandi). from the reservation and declaring
them open for disposition to qualified
applicants. As a result, only Lot X
remained part of the reservation now
known as Magsaysay Park. The record
discloses that respondents-
intervenors waged a campaign to
have Lots Y-1 and Y-2 taken out of the
reservation for the reason that
through their predecessor 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, respondents-intervenors
filed applications for the issuance of
individual miscellaneous sales patents
over the whole of Lot X with the DENR
regional office in General Santos City,
which approved them. Consequently,
16 original certificates of title (OCTs)
covering Lot X were issued in the
names of respondents-intervenors
and several others. In September
11
ISSUE/S RULING
Whether respondent- NO. Under the law, respondents-
intervenors have acquired title intervenors are charged with knowledge
over Lot X allegedly acquired by of the law; they cannot feign ignorance. In
their predecessor Kusop through fact, they could not claim to be unaware
prescription. of Proc. 168, for precisely they hid under
its protective mantle to seek the
invalidation of a donation claimed to have
been made by them to one Jose Tayoto.
Thus, in Tayoto v. Heirs of Kusop, an
alleged donee (Tayoto) of property
located within Lots X, Y-1, and Y-2 filed a
case for quieting of title against the
donors — herein respondents-intervenors
— to protect the property which they
allegedly donated to him, which was then
in danger of being lost for the reason that
respondents-intervenors supposedly
reneged on the donation. Respondents-
intervenors filed an urgent motion to
dismiss the Complaint claiming, among
others, the "invalidity of the donation as
the subject thereof had not yet been
excluded from the Magsaysay Park." In
disposing of the case, the Court made the
following pronouncement:
“Be that as it may, the donation is void.
There are three essential elements of
donations: [1] the reduction of the
patrimony of the donor, [2] the
increase in the patrimony of the
donee, and [3] the intent to do an act
of liberality (animus donandi).
Granting that there is an animus
1997, these 16 titles were
simultaneously conveyed to herein
respondent AFP-Retirement and
Separation Benefits System (AFP-
RSBS), resulting in the issuance of 16
new titles (the AFP-RSBS titles).
On September 11, 1998, herein
petitioner Republic of the Philippines
instituted Civil Case No. 6419, which
is a Complaint for reversion,
cancellation and annulment of the
AFP-RSBS titles, on the thesis that
they were issued over a public park
which is classified as inalienable and
non-disposable public land.
Respondents-intervenors intervened
in Civil Case No. 6419, and, together
with the defendant AFP-RSBS, argued
that their predecessor-in-interest
Kusop had acquired vested interests
over Lot X even before Proc. 168 was
issued, having occupied the same for
more than 30 years.
12
donandi, we find that the alleged
donation lacks the first two elements
which presuppose the donor's
ownership rights over the subject of
the donation which he transmits to the
donee thereby enlarging the donee's
estate. This is in consonance with the
rule that a donor cannot lawfully
convey what is not his property. In
other words, a donation of a parcel of
land the dominical rights of which do
not belong to the donor at the time of
the donation, is void. This holds true
even if the subject of the donation is
not the land itself but the possessory
and proprietary rights over said land.”
“In this case, although they allegedly
declared Magsaysay Park as their own
for taxation purposes, the heirs of
Cabalo Kusop did not have any
transmissible proprietary rights over
the donated property at the time of
the donation. In fact, with respect to
Lot Y-2, they still had to file a free
patents application to obtain an
original certificate of title thereon. This
is because Proclamation No. 2273
declaring as 'open to disposition
under the provisions of the Public
Land Act' some portions of the
Magsaysay Park, is not an operative
law which automatically vests rights of
ownership on the heirs of Cabalo
Kusop over their claimed parcels of
land.”
 The import of said quoted proviso in a
presidential proclamation is discussed in
the aforecited Republic v. Court of Appeals
case which dealt with the validity of a
donation by a sales awardee of a parcel of
land which was later reserved by
presidential proclamation for medical
center site purposes. We held therein that
where the land is withdrawn from the
public domain and declared as disposable
by the Director of Lands under the Public
Land Act, the Sales Award covering the
same confers on a sales awardee only a
possessory and not proprietary right over
the land applied, for. The disposition of
the land by the Director is merely
provisional as the applicant still has to
comply with the requirements of the law
before any patent is issued. It is only after
the compliance with such requirements
that the patent is issued and the land
applied for considered 'permanently
disposed of by the Government.'

The interpretation of said proviso should

even be more stringent in this case
considering that with respect to Lot Y-1,
the heirs of Cabalo Kusop do not appear
to have taken even the initial steps
mandated by the Public Land Act for
claimants of the land excluded from the
public domain. The alleged donation was
therefore no more than an exercise in
futility.

2. Republic of the There are 3 essential David Rey Guzman is a natural-born Whether there was a donation NO, there was no donation inter vivos.
Philippines v. David Rey elements of a donation: American citizen, son of the spouses inter vivos.
13
Guzman, G.R. No. 132964, Simeon Guzman and Helen Meyers There are 3 essential elements of a
February 18, 2000. a. the reduction of the Guzman. Simeon died leaving to his donation:
patrimony of the sole heirs, Helen and David, an estate
donor; consisting of several parcels of land in a. the reduction of the patrimony of
b. the increase in the Bulacan. the donor;
patrimony of the b. the increase in the patrimony of the
donee; and, Helen and David executed a Deed of donee; and,
c. the intent to do an act Extrajudicial Settlement of the Estate c. the intent to do an act of liberality
of liberality or animus of Simeon which was registered in the or animus donandi.
donandi. Office of the Register of Deeds. The
taxes due were paid and the parcels Donation of an immovable property
Donation of an immovable of land were registered in their names requires that the donation be made in a
property requires that the in undivided equal shares. public document and that there should be
donation be made in a an acceptance thereof made in the same
public document and that Helen executed a Deed of Quitclaim deed of donation or in a separate public
there should be an assigning, transferring and conveying document. In cases where the acceptance
acceptance thereof made in to her son David her undivided 1/2 is made in a separate instrument, it is
the same deed of donation interest on all the parcels of land and mandated that the donor should be
or in a separate public all her other property in the notified thereof in an authentic form, to
document. In cases where Philippines. be noted in both instruments.
the acceptance is made in a
separate instrument, it is David executed a Special Power of In this case, the element of animus
mandated that the donor Attorney (SPA) where he donandi was missing. The language of the
should be notified thereof acknowledged that he became the deeds of quitclaim is clear that Helen
in an authentic form, to be owner of the lots and empowering merely contemplated a waiver of her
noted in both instruments. Atty. Abela to sell or otherwise rights, title and interest over the lands in
In the absence of such, no dispose of the lots subject of the favor of David, and not a donation.
acceptance is considered by Deed of Quitclaim. Donor’s taxes
the law, hence, no donation were paid to facilitate the registry of Moreover, the acceptance was not in the
inter vivos. the parcels of land in the name of proper form required by law to make the
David. donation valid. The SPA merely
acknowledges that David owns the
The Republic of the Philippines filed property and the authority he gave to
before the Bulacan RTC a Petition for Atty. Abela. There is no intimation,
Escheat praying that 1/2 of David's expressly or impliedly, that David's
interest in each of the subject parcels acquisition of the parcels of land is by
of land be forfeited in its favor, on the virtue of Helen's possible donation to him.
14

3. Manuel G. Abello, et al. v. For internal revenue
CIR, G.R. No. 120721. purposes, political
February 23, 2005. 
 contributions in the
Philippines are considered
taxable gifts rather than
taxable income. This is so,
because a political
contribution is indubitably
not intended by the giver or
contributor as a return of
value or made because of
any intent to repay another
what is his due, but
bestowed only because of
motives of philanthropy or
charity. His purpose is to
give and to bolster the
morals, the winning chance
of the candidate and/or his
party, and not to employ or
buy. On the other hand, the
recipient-donee does not
contention that the only instances If the acceptance was made in a separate
when a foreigner can acquire private public writing the notice of the
lands in the Philippines are by acceptance must be noted not only in the
hereditary succession and if he was document containing the acceptance but
formerly a natural-born Filipino also in the deed of donation.
citizen who lost his Philippine
citizenship. And since in this case, In this case, the acceptance by David does
David acquired the land by way of not appear in the deeds, nor in the SPA.
quitclaim, which are in reality There was no other instrument that
donations inter vivos, the escheat is evidences such acceptance and notice
necessary. thereof to the donor in an authentic
manner. Therefore, there was no effective
conveyance of the parcels of land by way
of donation inter vivos.
During the 1987 national elections, Whether political contributions YES. The NIRC does not define transfer of
petitioners, who are partners in the are subject to donor’s tax. property by gift. However, the Civil Code,
Angara, Abello, Concepcion, Regala by reference, considers the same, as
and Cruz (ACCRA) law firm, donations.
contributed P882,661.31 each to the
campaign funds of Senator Edgardo Donation has the following elements: (a)
Angara, then running for the Senate. the reduction of the patrimony of the
The Bureau of Internal Revenue (BIR) donor; (b) the increase in the patrimony of
assessed each of the petitioners the donee; and, (c) the intent to do an act
P263,032.66 for their contributions. of liberality or animus donandi.
Petitioners questioned the The present case falls squarely within the
assessment claiming that political or definition of a donation. Petitioners each
electoral contributions are not gave P882,661.31 to the campaign funds
considered gifts under the National of Senator Edgardo Angara, without any
Internal Revenue Code (NIRC) material consideration. All three elements
therefore, not liable for donor’s tax. of a donation are present. The patrimony
The claim for exemption was denied of the four petitioners were reduced by
by the Commissioner. P882,661.31 each. Senator Edgardo
Angara’s patrimony correspondingly
Petitioners filed a Petition for Review increased by P3,530,645.24. There was
with the CTA, which was decided on intent to do an act of liberality or animus
in favor of the petitioners. As donandi was present since each of the
15

4. Lydia Sumipat, et al. v.
Brigido Banga, et al., G.R.
No. 155810, August 13,
2004.
regard himself as
exchanging his services or
his product for the money
contributed. But more
importantly he receives
financial advantages
gratuitously.
1. 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 accepted in a
public instrument and the
donor duly notified thereof.
aforestated, the CTA ordered the
Commissioner to desist from
collecting donor's taxes from the
petitioners.
On appeal, the Court of Appeals
reversed and set aside the CTA
decision and ordered the petitioners
to pay donor's tax amounting to
P263,032.66 each.
The spouses Placida Tabo-tabo and
Lauro Sumipat, who contracted
marriage on July 20, 1939, acquired
three parcels of land two of which
were covered by Original Certificate
of Title and Transfer Certificate of
Title. The couple was childless. Lauro
Sumipat, however, sired five
illegitimate children out of an
extramarital affair with Pedra Dacola,
16
Whether the questioned deed by
its terms or under the
surrounding circumstances has
validly transferred title to the
disputed properties to the
petitioners.
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. Also, the
fact that petitioners will somehow in the
future benefit from the election of the
candidate to whom they contribute, in no
way amounts to a valuable material
consideration so as to remove political
contributions from the purview of a
donation.
The Court reiterates that donative intent is
not negated by the presence of other
intentions, motives or purposes which do
not contradict donative intent.
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.
2. 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.
namely: herein defendants-appellees
Lydia, Laurito, Alicia, Alejandro and
Lirafe.
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. On the
document appears the signature of
his wife Placida which indicates that
she gave 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 request, their
neighbor Benjamin Rivera lifted the
body of Lauro Sumipat whereupon
Lydia guided his (Lauro Sumipat’s)
hand in asking 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 on
January 30, 1984, his wife Placida,
hereinafter referred to as plaintiff-
appellant, and defendants-appellees
17
The deed covers three (3) parcels of land.
Being a donation of immovable property,
the requirements for validity set forth in
Article 749 of the Civil Code should have
been followed.
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 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.
We also note the absence of any proof of
filing of the necessary return, payment of
donor’s taxes on the transfer, or
exemption from payment thereof. Under
the National Internal Revenue Code of
1977, the tax code in force at the time of
the execution of the deed, an individual
who makes any transfer by gift shall make

5. Sps. Gestopa v. CA, G.R. An acceptance clause is a
No. 111904, 5 October mark that the donation is
2000. inter vivos. Acceptance is a
requirement for donations
inter vivos. Donations
mortis causa, being in the
form of a will, are not
required to be accepted by
the donees during the
donors' lifetime.
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.
Spouses Diego and Catalina Danlag Whether the second donation of
were the owners of six parcels of Spouses Diego to Mercedes is a
unregistered lands. They executed donation inter vivos.
three (3) deeds of donation mortis
causa in favor of private respondent
Merecedes Danlag-Pilapil. All deeds
contained the reservation of the
rights of the donors to amend, cancel
or revoke the donation during their
lifetime, and to sell, mortgage, or
encumber the properties donated
during the donor’s lifetime, if deemed
necessary.
Years later, Diego Danlag, with the
consent of his wife, Catalina Danlag,
executed another deed of donation
inter vivos covering the
18
a return and file the same within 30 days
after the date the gift is made with the
Revenue District Officer, Collection Agent
or duly authorized Treasurer of the
municipality in which the donor was
domiciled at the time of the transfer.
The filing of the return and payment of
donor’s taxes are mandatory. In fact, the
registrar of deeds is mandated not to
register in the registry of property any
document transferring real property by
way of gifts inter vivos unless a
certification that the taxes fixed and
actually due on the transfer had been paid
or that the transaction is tax exempt from
the Commissioner of Internal Revenue, in
either case, is presented.
YES. The second donation of Spouses
Diego to Mercedes is a donation inter
vivos.
The court stated four reasons to the
matter, as may be aptly analyzed form the
provisions of the deed, (1) the granting
clause shows that Diego donated the
properties out of love and affection for
the donee which is a mark of donation
inter vivos; (2) the reservation of lifetime
usufruct indicates that the donor intended
to transfer the naked ownership over the
properties; (3) donor reserved sufficient
properties for his maintenance in
accordance with his standing in society,
indicating that the donor intended to part
with the 6 parcels; (4) donee accepted the
 aforementioned parcels of land and
two others in favor of Mercedes
containing the two conditions, that
the Danlag spouses shall continue to
enjoy the fruits of the land during
their lifetime, and that the donee can
not sell or dispose of the land during
the lifetime of the said spouses,
without their prior consent and
approval. Thereafter, Mercedes
caused the transfer of the parcels’ tax
declarations to her name and paid the
taxes on them.
Subsequently, Spouses Danlag sold 2
parcels to petitioners Spouses
Gestopa and executed a deed of
revocation on the donation inter vivos
covering the six parcels of land given
to private respondent Mercedes.
donation in which in the case of Alejandro
v. Geraldez, it is said that acceptance
clause is a mark that a donation is a
donation inter vivos because a donation
mortis causa being in the form of a will
does not require an acceptance from the
donee during the donor’s lifetime. CA was
right that the right to dispose of the
properties belonged to the donee and the
donor’s right to give consent was merely
intended to protect his usufructuary
rights.
The attending circumstances in the
execution of the donation in this case
demonstrated the real intent of the donor
to transfer ownership over the parcels of
land upon execution of the deed. It is to
be noted that prior to the execution of
donation inter vivos, Spouses Danlag
already executed 3 donation mortis causa
which means that they were aware of the
difference of the 2 types of donations. If
they did not intend to donate inter vivos,
they would not again donate the lots
already donated mortis causa.

6. Rev/Atty. Tayoto v. Heirs There are three essential
of Cabalo Kusop et. al., G.R. elements of donations: (1)
No. 74203, April 17, 1990. the reduction of the
patrimony of the donor, (2)
the increase in the
patrimony of the donee,
and (3) the intent to do an
act of liberality (animus
donandi).
On October 2, 1963, then President Whether the donation is valid. NO. The donation is void. There are three
Diosdado Macapagal issued essential elements of donations: (1) the
Proclamation No. 168 withdrawing reduction of the patrimony of the donor,
from sale or settlement and reserving (2) the increase in the patrimony of the
for recreational and health resort site donee, and (3) the intent to do an act of
purposes the property known as the liberality (animus donandi).
Magsaysay Park.
Granting that there is an animus donandi,
According to said presidential the Court finds that the alleged donation
proclamation, the park would be lacks the first two elements which
19
under the administration of the
Municipality of General Santos
"subject to private rights, if any there
be." General Santos became a city by
virtue of Republic Act No. 5412 which
took effect on June 15, 1968. Under
Section 98 of said law, the national
government ceded to General Santos
City "the ownership and possession
to all lands of the public domain
within the city."
Herein private respondents who are
Moslem Filipinos and residents of
Polomolok, South Cotabato, claiming
ownership over the entire 52,678-
square meter Magsaysay Park,
donated one-half of the western side
thereof to the John F. Kennedy
Memorial Lyceum (Far East), Inc., a
non- stock private corporation,
represented by Atty. Jose T. Tayoto.
The heirs of Cabalo Kusop filed an
urgent motion to dismiss the
complaint on the following grounds:
(a) invalidity of the donation as the
subject thereof had not yet been
excluded from the Magsaysay Park;
(b) nullity of the donation as it
contravened Article 1491, paragraph
5 of the Civil Code; (c) the donor did
not in fact execute the deed of
donation; and (d) the complaint did
not state a cause of action.
20
presuppose the donor's ownership rights
over the subject of the donation which he
transmits to the donee thereby enlarging
the donee's estate. This is in consonance
with the rule that a donor cannot lawfully
convey what is not his property. In other
words, a donation of a parcel of land the
dominical rights of which do not belong
to the donor at the time of the donation,
is void. This holds true even if the subject
of the donation is not the land itself but
the possessory and proprietary rights over
said land.
In this case, although they allegedly
declared Magsaysay Park as their own for
taxation purposes, the heirs of Cabalo
Kusop did not have any transmissible
proprietary rights over the donated
property at the time of the donation.
In the case of Republic v. Court of Appeals
held therein that where the land is
withdrawn from the public domain and
declared as disposable by the Director of
Lands under the Public Land Act, the Sales
Award covering the same confers on a
sales awardee only a possessory and not
proprietary right over the land applied for.
The deed of donation itself and
subsequent acts of Tayoto reveal that the
donee is the John F. Kennedy Memorial
Lyceum (Far East), Inc. and not the herein
petitioner. The undisputable fact is that
Tayoto affixed his signature on the deed
of donation and accepted the donation in
 his capacity as "President/Director &
Founder" of the Lyceum and not in his
personal capacity. The deed itself
acknowledges the fact that the Lyceum is
"a duly organized non-stock private
corporation." Hence, legally, it is a
separate corporate entity with a
personality distinct from that of its
representative in the donation, petitioner
herein.

The disposition of the land by the Director

is merely provisional as the applicant still
has to comply with the requirements of
the law before any patent is issued. It is
only after the compliance with such
requirements that the patent is issued and
the land applied for considered
"permanently disposed of by the
Government."

21

CASE TITLE CASE PRINCIPLE
1. CIR v. Chevron Holdings, The law allows the taxpayer
Inc., G.R. No. 233301, to file an administrative
February 17, 2020. 
 claim for refund with the
BIR within two 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 lapses 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
VALUE ADDED TAX
SUMMARY OF FACTS
Chevron is a corporation duly
organized and existing under the laws
of the State of Delaware, United
States of America. It is licensed by the
Securities and Exchange Commission
(SEC) to transact business in the
Philippines as regional operating
headquarters (ROHQ) and duly
registered with the Bureau of Internal
Revenue (BIR) as a Value-Added Tax
(VAT) taxpayer. Chevron filed with the
BIR an Application for Tax
Credits/Refunds of its excess and
unutilized input VAT credits for the
four taxable quarters of 2009 in the
total sum of P51,198,943.08. The CIR,
however, failed to act on the refund
claim prompting Chevron to file a
Petition for Review before the CTA.
The CTA Division partially granted
Chevron's petition and ordered the
CIR "to refund or to issue a tax credit
certificate in the reduced amount of
P4,623,001.60 to Chevron,
representing its excess and unutilized
input VAT for the four taxable
quarters of 2009 attributable to its
zero-rated sales for the same period.
The CTA Division did not treat all of
Chevron's alleged zero rated sales as
transactions subject to 0% VAT for
failure to prove that the entities to
whom it rendered services are all
non-resident foreign corporations
22
ISSUE/S
1. Whether Chevron’s petition
with the CTA was filed
prematurely as the 120-period
for the CIR to decide the claim
had not commenced to run.
2. Whether Chevron failed to
comply with the invoicing and
accounting requirements for
VAT-registered persons.
RULING
1. NO. Chevron’s petition was timely filed,
and the 120-period has already
commenced to run.
Sec. 112 of the NIRC, provides:
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 xxx
(C) Period within which Refund or Tax
Credit of Input Taxes shall be Made. —
In proper cases, the Commissioner
shall grant a refund or issue the tax
credit certificate for creditable input
taxes within one hundred twenty (120)
days from the date of submission of
complete documents in support of the
application filed in accordance with
Subsection (A) hereof. xxx
In case of full or partial denial of the
claim for tax refund or tax credit, or the
failure on the part of the
Commissioner to act on the
application within the period
prescribed above, the taxpayer
affected may, within thirty (30) days
 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.1
With respect to the
complete documents
required, RMO No. 53-98
assumes relevance only on
matters pertinent to an
audit of tax liabilities. Thus,
it finds no application in
claims for refund of its input
tax.
doing business outside the from the receipt of the decision
Philippines. It declared that only the denying the claim or after the
amount of P409,127,980.26 can be expiration of the one hundred twenty
considered as Chevron's valid zero- day-period, appeal the decision or the
rated sales. Moreover, it held that out unacted claim with the Court of Tax
of the total input VAT claim of Appeals.
P55,273,888.13, only the amount of
P44,296,472.84 was duly Preliminarily, the law allows the taxpayer
substantiated and therefore allowed. to file an administrative claim for refund
with the BIR within two years after the
Chevron filed a Motion for Partial close of the taxable quarter when the
Reconsideration. The CTA Division purchase was made (for the input tax paid
partially granted Chevron's Motion on capital goods) or after the close of the
for Partial Reconsideration, which taxable quarter when the zero-rated or
ordered CIR to refund or to issue a tax effectively zero-rated sale was made (for
credit certificate in favor of Chevron input tax attributable to zero-rated sale).
in the reduced amount of The CIR must then act on the claim within
P6,785,362.73, representing and 120 days from the submission of
excess input VAT attributable to its complete documents in support of the
zero-rated sales of services to its application. In the event of an adverse
affiliate companies for the four decision, the taxpayer may elevate the
quarters of 2009. The CTA En Banc matter to the CTA by way of a petition for
affirmed the decision. review within 30 days from the receipt of
the CIR's decision. If, on the other hand,
The CIR maintains that Chevron's the 120-day period lapses without any
petition with the CTA Division was action from the CIR, the taxpayer may
prematurely filed since the 120-day validly treat the inaction as denial and file
period (for the CIR to decide the a petition for review before the CTA within
administrative claim for refund) did 30 days from the expiration of the 120-

1
Section 112 (C) of the NIRC as amended by TRAIN Law now provides:

“Period within which Refund of Input Taxes shall be Made. — In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts
or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the
Commissioner must state in writing the legal and factual basis for the denial.

In case of partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided
however, that failure on the part of any official, agent, or employee of the BIR to act on the application within ninety (90)-day period shall be punishable under Section 269 of this Code.”
23
not even commence to run for failure
of Chevron to submit complete
documents to support its claim. The
CIR also avers that Chevron failed to
comply with the invoicing and
accounting requirements for VAT-
registered persons.
Chevron, on the other hand, argues
that the CIR did not notify it of the
need to submit additional supporting
documents to substantiate its claim
and stresses that absent such
notification, the documents it
submitted are deemed complete and
sufficient. It also asseverates that it
has satisfied the invoicing and
accounting requirements under the
law as enunciated by the CTA Division
in its original decision.
24
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.
Chevron filed an administrative claim for
refund with the BIR on November 2, 2010,
which was well within the two-year
prescriptive period provided by law. Upon
Chevron's submission of its supporting
documents, the CIR had 120 days or until
March 2, 2011 to decide whether to grant
or deny the application. But the 120-day
period expired without the CIR having
acted on the claim. At this juncture,
Chevron had 30 days from the lapse of the
120-day period or until April 1, 2011 to file
its judicial claim. Thus, when Chevron filed
its petition for review with the CTA on
March 23, 2011, it was properly made
within the period prescribed by law.
Settled is the rule that it is only upon the
submission of complete documents in
support of the application for tax
credit/refund that the 120-day period
would begin to run. But the CIR is of the
belief that Chevron's judicial claim was
prematurely filed because the 120-day
period has not yet commenced on
account of the taxpayer's submission of
incomplete supporting documents under
Revenue Memorandum Order (RMO) No.
53-98. However, 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.

Here, Chevron submitted all documents it

deemed necessary for the grant of its
refund claim. It even authorized the
examination of the voluminous
supporting documents kept in its office
and grant revenue officers’ access thereto.
The CIR did not notify the Chevron of the
document it failed to submit, if any. The
CIR should have taken a positive step in
apprising Chevron of the completeness
and adequacy of its supporting
documents considering their particular
relevance in reckoning the 120-day
period.

2. NO. Chevron complied with the

invoicing and accounting requirements
for VAT-registered persons.

The CIR asserts that Chevron did not

imprint the word "zero-rated" on its
invoices and receipts in violation of
Section 113 (B) of the NIRC.

The CTA Division explicitly stated that

Chevron presented various invoices,
official receipts and other documents to
substantiate its reported input VAT, all of
which were examined by a Court-
commissioned Independent Certified
Public Accountant (CPA). 11 It sustained
the findings of the CPA and disallowed the
P10,977,415.30 of Chevron's claimed
25
 input VAT for failure to comply with the
substantiation and invoicing requirement
as prescribed under Section 110 (A) and
Section 113 (A) and (B) of the NIRC. It is
thus clear that the invoices and receipts
which were not compliant with the
invoicing and accounting requirements
were already excluded by the CTA Division
when it rendered its Decision partially
granting Chevron' refund claim. Suffice it
to say that Chevron has duly established
its claim for refund or tax credit in the
amount of P4,623,001.60 in accordance
with the statutory requirement for the
grant of a tax credit certificate/refund.

2. CIR v. First E-Bank Tower Association dues, The First E-Bank Tower filed a petition Whether the association dues, NO. Association dues, membership fees
Condominium Corp., G.R. membership fees and other for declaratory relief seeking to membership fees and other and other assessments/charges do not
No. 215801, 218924, assessments/charges are declare as invalid RMC 65-2012 which assessments/charges collected arise from transactions involving the sale,
January 15, 2020. not subject to VAT as they imposed VAT on association dues, by a condominium corporation barter or exchange of goods or property.
do not arise from membership fees and other subject to VAT. Nor are they generated by performance of
transactions involving the assessments/charges collected by a services. As such, they are not subject to
sale, barter or exchange of condominium corporation. RMC 65- VAT. Both under RA 8424 and the TRAIN
goods and property or 2012 imposed VAT on said collections Law, there is no mention of association
rendering of services. as they constitute income payment or dues, membership fees and other
compensation for the beneficial assessments/charges collected by a
services it provides to its members condominium corporation being subject
and tenants. to VAT. For when a condominium
corporation manages, maintains and
preserves the common areas in the
building, it does so for the benefit of the
condominium owners. It cannot be said to
be engaged in trade or business, thus, the
collection of association dues,
membership fees and other
assessments/charges is not a result of the
regular conduct or pursuit of a
26
 commercial or an economic activity, or
any transactions incidental thereto.

Neither can it be said that a condominium

corporation is rendering services to the
unit owners for a fee, remuneration or
consideration. Association dues,
membership fees and other
assessments/charges form part of a pool
from which a condominium corporation
must draw funds in order to bear the costs
for maintenance, repair, improvement,
reconstruction expenses and other
administrative expenses.

3. CIR v. Bases Conversion The NIRC is a general law
& Development Authority, and thus cannot implicitly
G.R. No. 217898, January 6, repeal a special law.
2020.
Bases Conversion and Development Whether the BCDA is exempt YES. Section 8 of RA 7227 provides that
Authority (BCDA) owned four real from creditable withholding tax. proceeds of the sale of certain parts in
properties in Taguig City, which it sold Fort Bonifacio and Villamor Air Base are
to the Net Group, an unincorporated deemed appropriated by Congress to
joint venture. The Net Group waited certain recipients and for the purposes
for BCDA to present a certification of specified in the same law.
tax exemption until June 9, 2008, but
since the latter failed to do so, the Net The same provision also provides that the
Group deducted more than Php100 proceeds of such sales shall be exempt
million as Creditable Withholding Tax from all forms of taxes and fees.
(CWT) which it then remitted to the
BIR. Being a general law, the NIRC cannot
implicitly repeal RA 7227, which is a
BCDA claimed that it was tax exempt special law.
under RA 7227, but the BIR insisted
that the NIRC superseded the said
law.

4. Power Sector Asset and VAT is ultimately a tax on PSALM, a GOCC created under RA Whether PSALM’s privatization NO. The sale of the power plants is not in
Liabilities Management consumption, and it is 9136 (Electric Power Industry Reform activities are subject to Value pursuit of a commercial or economic
Corporation v. CIR, G.R. No. levied only on the sale, Act of 2001/EPIRA) is mandated to Added Tax. activity, but a governmental function
226556, July 
3, 2019. 
 barter or exchange of manage the orderly sale, disposition, mandated by law to privatize NPC
27
 goods or services by
persons who engage in
such activities, in the course
or trade of business.
5. CIR v. Team Energy The requirements for
Corporation (formerly special law must be
Mirant Pagbilao complied only if the claim
Corporation), G.R. No. for refund is based on that
230412. 
March 27, 2019. special law.
A written notice requiring
respondent to submit
additional documents is
indispensable in computing
the 120+30 day period.
and privatization of the National generation assets. PSALM was created
Power Corporation (NPC) generation primarily to liquidate all NPC financial
assets, real estate and other obligations and stranded contract costs in
disposable assets, and Independent an optimal manner.
Power Producer contracts with the
objective of liquidating all NPC Thus, it is very clear that the sale of the
financial obligations and stranded power plants was an exercise of
contract costs in a optimal manner. governmental function mandated by law
BIR issued a Final Assessment Notice for the primary purpose of privatizing
alleging that for the taxable year NPC assets in accordance with the
ending 31 Dec 2008, PSALM is liable guidelines imposed by the EPIRA law.
to pay a deficiency VAT amounting to
PHP 10,103,158,715.06, inclusive of Since the lease of Naga Complex and
penalties and interests. The CIR held collection of income and receivables are
that the sale of electricity is subject to within PSALM’s powers necessary to
VAT under RA 9337 and the real discharge its mandate under the law and
properties sold are regarded as real likewise undertaken in the exercise of
properties used in trade or business. PSALM’s governmental function, we do
not find these activities subject to VAT. To
reiterate, VAT is ultimately a tax on
consumption, and it is levied only on the
sale, barter or exchange of goods or
services by persons who engage in such
activities, in the course or trade of
business.
Respondent is VAT registered 1. Whether the respondent’s 1. NO. The requirements of the EPIRA
taxpayer principally engaged in the failure to submit a Certificate of must be complied with only if the claim
business of power generation and the Compliance required under for refund is based on EPIRA. However,
subsequent sale to the National Electric Power Industry Reform respondents anchored its claim for tax
Power Corporation (NPC). Act issued by the Energy refund or tax credit under Section
Regulatory Commission 108(B)(3) of the Tax Code. Section
Respondent filed for Effective Zero- disqualifies it from claiming a tax 108(B)(3) of the Tax Code in relation to
Rate for the supply of electricity to the refund or tax credit. Section 13 of the NPC Charter, clearly
NPC for the period January 1, 2005 to provides that sale of electricity to NPC is
December 31, 2005, which was 2. Whether the judicial claim was effectively zero-rated for VAT purposes.
subsequently approved. prematurely filed for its failure to
28
 exhaust administrative remedies Thus, it cannot be required to comply with
Subsequently, respondent filed an when it failed to submit the requirements under the EPIRA before
administrative claim for cash refund complete supporting documents its sale of generated power to NPC should
or issuance of tax credit certificate for its administrative claim. qualify for VAT zero-rating.
corresponding to the input VAT
reported in its Quarterly VAT Returns 2. NO. There is no showing that the CIR
for the first three quarters of 2005 and sent a written notice requiring respondent
Monthly VAT Declaration for October to submit additional documents — a
2005 in the amount of process that is indispensable in
P80,136,251.60. computing the 120+30-day period.2

Due to petitioner's inaction on its
claim, respondent filed a Petition for
Review before the Court in Division.
On July 13, 2010, the Court in Division
issued a decision partially granting
respondent's petition in the amount
of P79,185,617.33. However, upon
petitioner's Motion
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
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 further extension by
the CIR. Then, upon filing by the taxpayer
of his complete documents to support his
for 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.

2
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
29

6. Steag State Power Inc. v. A claim for unutilized input
CIR, G.R. No. 205282. value-added tax is in the
January 14, 2019. 
 nature of a tax exemption.
Thus, strict adherence to
the conditions prescribed
by the law is required of the
taxpayer. Refunds need to
be proven and their
application raised in the
right manner as required by
law.
3
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
decision of CTA En Banc and Thus, petitioner could no longer validly
remanding the case to the CTA En argue that the judicial claim was
Banc for the proper determination of premature on account of alleged non-
the refundable amount. submission of complete documents as it
is petitioner himself who fails to inform
The CTA En Banc reinstated the July respondent about the need to submit
13, 2010 CTA Decision and ruled that additional documents in the
the judicial claim was not prematurely administrative level.
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.
Petitioner filed administrative claims Whether the judicial claims were NO. The judicial claims were not timely
for refund of its allegedly unutilized timely filed. filed.
input value-added tax payments on
capital goods. First, a plain reading of this Sec. 112 (D) of
the NIRC reveals that a taxpayer may
Due to the inaction on the claims, it appeal the Commissioner's denial or
filed a Petition for Review on inaction only within 30 days when the
Certiorari and another petition for decision that denies the claim is received,
refund for the taxable year 2005 or when the 120-day period given to the
before the Court of Tax Appeals Commissioner to decide on the claim
(CTA). expires.3
In 2010, the CTA First Division Second, the phrase "within two (2) years .
dismissed the consolidated cases for . . apply for the issuance of a tax credit
lack of jurisdiction. This was affirmed certificate or refund" in Sec. 112 (A) has
by the CTA En Banc. been interpreted as referring to
administrative claims for refund or credit
Petitioner elevated the matter to the filed with the CIR, not to appeals made
Supreme Court. Although the claims before the CTA.
were filed beyond the 120+30-day
periods under Section 112 of the
30
 NIRC, petitioner argues that they
were nonetheless filed within the 2-
year period under Section 229. It
contends that the timing was in
accordance with R.R. No. 7-95.
Reading together Subsections (A) and (D),
the 30-day period does not have to fall
within the 2-year prescriptive period, as
long as the administrative claim is filed
within the 2-year prescriptive period.

It further avers that noncompliance
with the periods is not a jurisdictional
defect, but only a case of a "lack of
cause of action”, which may be
subject to the equitable principle of
waiver.
Third, the right to appeal before the Court
of Tax Appeals, being a statutory right,
can be invoked only under the requisites
provided by law.
Here, since petitioner filed its judicial
claims way beyond the 30-day period to
appeal, the CTA lost its jurisdiction over
the petitions. Moreover, it "cannot be
waived . . . and is not dependent on the
consent or objection or the acts or
omissions "of any or both parties.

7. CIR v. Negros The sale itself by Negros Consolidated Farmers Multi- Whether COFA's sales are YES. Negros Consolidated Farmers Multi-
Consolidated Farmers agricultural cooperatives Purpose Cooperative (COFA) is a exempt from VAT and advance- Purpose Cooperative exempt from VAT
Multi-Purpose, duly registered with the multi-purpose agricultural VAT. and is entitled to refund.
Cooperative, G.R. No. CDA to their members as cooperative organized under
212735, 
December 5, well as the sale of their Republic Act (RA) No. 6938. While the sale of raw sugar, by express
2018. 
 produce, whether in its provision of law, is exempt from VAT, the
original state or processed COFA's farmer-members deliver the sale of refined sugar, on the other hand, is
form, to non-members are sugarcane produce to be milled and not so exempted as refined sugar already
exempt from VAT. (Section processed in COFA's name with the underwent several refining processes and
109 (L) of RA 8424, as sugar mill/refinery. Before the refined as such, is no longer considered to be in
amended by RA 9337, and sugar is released by the sugar mill, its original state. However, Section 7 of RA
Article 61 of RA 6938 as however, an Authorization Allowing 9337 amending Section 109 (L) of RA
amended by RA 9520) the Release of Refined Sugar (AARRS) 8424, the law applicable at the time
from the BIR is required from COFA. material to the claimed tax refund,
For several instances, upon COFA's provides that if the sale of the sugar,
application, the BIR issued the AARRS whether raw or refined, was made by an
without requiring COFA to pay agricultural cooperative to its members or
advance VAT pursuant to COFA's tax
31
exemption under Section 61 of RA
6938 and Section 109(r) (now under
Section 109[L]) of RA No. 8424, as
amended by RA No. 9337. As such,
COFA was issued Certificates of Tax
Exemption dated May 24, 1999 and
April 23, 2003 by the BIR.
However, from February 3, 2009, the
BIR, through the Regional Director of
Region 12-Bacolod City, 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 was thus constrained to pay
advance VAT under protest and to
seek the legal opinion of the BIR Legal
Division, as to whether COFA is
considered the producer of the sugar
product of its members. COFA then
filed with the CIR an administrative
claim for refund for the advance VAT
it paid.
32
non-members, such transaction is still
VAT-exempt.
Thus, by express provisions of the law
under Section 109 (L) of RA 8424, as
amended by RA 9337, and Article 61 of RA
6938 as amended by RA 9520, the sale
itself by agricultural cooperatives duly
registered with the CDA to their members
as well as the sale of their produce,
whether in its original state or processed
form, to non-members are exempt from
VAT.
Also, As provided under Section 4 of RR
No. 13-2008, for an agricultural
cooperative to be exempted from the
payment of advance VAT on refined
sugar, it must be (a) a cooperative in good
standing duly accredited and registered
with the CDA; and (b) the producer of the
sugar.
Having established that COFA is a
cooperative in good standing and duly
registered with the CDA and is the-
producer of the sugar, its sale then of
refined sugar whether 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 required under RR No. 13-
2008.

8. Kepco Ilijan Corporation A VAT-registered taxpayer
v. CIR, G.R. No. 205185, claiming a refund or tax
September 26, 2018. 
 credit of excess and
unutilized input VAT must
file the administrative claim
within two years from the
close of the taxable quarter
when the sales were made.
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 necessarily includes exemption
from the payment of "advance VAT" upon
the withdrawal of the refined sugar from
the sugar mill.
The petitioner, a duly registered Whether the claim for refund or YES. The claim was duly filed in time,
domestic corporation engaged in the issuance of tax credit certificate except for the claim made for the excess
production of electricity as an was filed in time. VAT paid for the first quarter of 2002.
independent power producer (IPP)
and in the sale of electricity solely to Under Sec. 112(A) of the NIRC as
the National Power Corporation amended by the TRAIN Law, any VAT-
(NPC), claimed the refund or issuance registered person, whose sales are zero-
of the tax credit certificate for rated or effectively zero-rated may, within
P74,658,461.68 for the VAT incurred two (2) years after the close of the taxable
in taxable year 2002. quarter when the sales were made, apply
for the issuance of a tax credit certificate
It appears that the petitioner filed its or refund of creditable input tax due or
quarterly VAT returns for the four paid attributable to such sales, except
quarters of taxable year 2002, thereby transitional input tax, to the extent that
showing the incurred expenses such input tax has not been applied
representing the importation and against output tax.
domestic purchases of goods and
services, including the input VAT Under the foregoing, a VAT-registered
thereon. On April 13, 2004, it brought taxpayer claiming a refund or tax credit of
its administrative claim for refund excess and unutilized input VAT must file
with Revenue District Office (RDO) the administrative claim within two years
No. 43 of the Bureau of Internal from the close of the taxable quarter when
Revenue (BIR), claiming excess input the sales were made.
VAT amounting to P74,658,481.68 for
taxable year 2002. The petitioner avers herein that when it
filed its administrative claim on April 13,
On April 22, 2004, nine days after 2004 it relied in good faith on the
filing the administrative claim, the prevailing rule that the two-year
33
petitioner filed its petition for review
(CTA Case No. 6966), which was
assigned to the Second Division of
the CTA (CTA in Division).
34
prescriptive period should be reckoned
from the filing of the return and payment
of the tax due; and that its reliance on the
controlling laws as affirmed in Atlas
ripened into a property right that neither
Mirant nor Aichi could simply take away.
The resolution of when to reckon the two-
year prescriptive period for the filing an
administrative claim for refund or credit of
unutilized input VAT in light of the
pronouncements in Atlas and Mirant was
extensively addressed and dealt with in
Commissioner of Internal Revenue v. San
Roque Corporation (San Roque).
To recall, the Court ruled in Atlas that "it is
more practical and reasonable to count
the two-year prescriptive period for filing
a claim for refund/credit of input VAT on
zero-rated sales from the date of filing of
the return and payment of the tax due
which, according to the law then existing,
should be made within 20 days from the
end of each quarter." On the other hand,
Mirant abandoned Atlas and announced
that "the reckoning frame would always
be the end of the quarter when the
pertinent sales or transaction was made,
regardless when the input VAT was paid,"
applying Section 112 (A) of the NIRC and
no other provisions that pertained to
erroneous tax payments.
In San Roque, promulgated on February
12, 2013, therefore, the Court clarified the
effectivity of the pronouncements in Atlas
 and Mirant on reckoning the two-year
prescriptive period, elucidating that:

(a) the Atlas pronouncement was effective

only from its promulgation on June 8,
2007 until its abandonment on
September 12, 2008 through Mirant; and
(b) prior to the promulgation of the ruling
in Atlas, Section 112 (A) should be applied
following the verba legis rule adopted in
Mirant.

The records show that the petitioner

herein filed its administrative claims for
refund for the first, second, third, and
fourth quarters of taxable year 2002 on
April 13, 2004. Such claims were covered
by Section 112 (A) of the NIRC that was
the rule applicable prior to Atlas and
Mirant. As such, the proper reckoning
date in this case, pursuant to Section 112
(A) of the NIRC, was the close of the
taxable quarter when the relevant sales
were made. 19 Specifically, the close of
the quarters of taxable year 2002 took
place on March 31, 2002, June 30, 2002,
September 30, 2002 and December 31,
2002, giving to the petitioner until March
31, 2004, June 30, 2004, September 30,
2004 and December 31, 2004 within which
to file its administrative claims for the first,
second, third and fourth quarters,
respectively. Under the circumstances, the
petitioner had belatedly filed its
administrative claim corresponding to the
first quarter of taxable year 2002, which
was thereby already barred. But the claims
35

9. San Roque Power Any VAT-registered person
Corporation v. CIR, G.R. No. whose sales are zero-rated
203249, July 23, 2018. 
 or effectively zero-rated is
to be granted, upon its
application made within 2
years after the close of the
taxable quarter when the
sales were made, by the
Commissioner a refund or
issue the tax credit
certificate for creditable
input taxes within 120 days
from the date of
submission of complete
documents in support of
the application filed. If
there was a denial of the
claim or failure of the
Commissioner to act on the
application within the
period prescribed above,
the taxpayer affected may
appeal it with the Court of
Tax Appeals within 30 days
from the receipt of the
decision denying the claim
or after the expiration of
the 120-day period.
4
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
for the refund of the input taxes
corresponding to the second, third and
fourth quarters were timely and not
barred.
San Roque Power Corporation is a1.1. Whether San Roque Power 1. YES. San Roque Power Corporation
VAT-registered taxpayer which was Corporation, which was granted which was granted by the BIR a zero-
granted by the BIR a zero-rating on its by the BIR a zero-rating on its rating on its sales of electricity is allowed
sales of electricity to National Power sales of electricity, allowed to to claim for refund of its alleged input tax.
Corporation (NPC). The petitioner claim for refund of its alleged
filed two separate administrative input tax. Under the tax code, any VAT-registered
claims for refund of its alleged person, whose sales are zero-rated or
unutilized input tax for certain 2. Whether the 120 plus 30-day effectively zero-rated may, within two (2)
periods. period should be exhausted first years after the close of the taxable quarter
before the filing of a petition for when the sales were made, apply for the
Due to the inaction of respondent review with the CTA. issuance of a tax credit certificate or
CIR, the petitioner filed petitions for refund of creditable input tax due or paid
review before the Court of Tax attributable to such sales, except
Appeals. The petitioner argues that at transitional input tax, to the extent that
the time it filed the petitions for such input tax has not been applied
review before the CTA, no ruling yet against output tax. In proper cases, the
was laid down by the Supreme Court Commissioner shall grant a refund or
concerning the 120-day and 30-day issue the tax credit certificate for
periods provided in Section 112 of creditable input taxes within one hundred
the NIRC. Instead, taxpayers such as twenty (120) days4 from the date of
the petitioner were guided only by submission of complete documents in
the rulings of the CTA which support of the application filed. In case of
consistently adopted the full or partial denial of the claim tor tax
interpretation that a claimant is not refund or tax credit, or the failure on the
bound by the 120-day and 30-day part of the Commissioner to act on the
periods but by the two-year application within the period prescribed
prescriptive period as provided in above, the taxpayer affected may, within
Section 112 (A) of the NIRC. thirty (30) days from the receipt of the
decision denying the claim or after the
expiration of the one hundred twenty-day
36
In Commissioner of Internal Revenue
v. Aichi Forging Company of Asia, Inc.
(Aichi), the Court held that the
premature filing of respondent's
claim for refund/credit before the
CTA warrants a dismissal inasmuch as
no jurisdiction was acquired by that
court. The Court, while upholding
Aichi, recognized an exception to the
mandatory and jurisdictional
character of the 120-day period:
taxpayers who relied on BIR Ruling
DA-489-03 which stated that "a
taxpayer-claimant need not wait for
the lapse of the 120-day period
before it could seek judicial relief with
the CTA by way of a Petition for
Review."
37
period, appeal the decision or the
unacted claim with the Court of Tax
Appeals.
2. NO. The 120 plus 30-day period need
not be exhausted first before the filing of
petition for review with the CTA.
In the consolidated cases of San Roque,
the Court En Banc recognized an
exception to the mandatory and
jurisdictional nature of the 120+30-day
period. It was noted that BIR Ruling No.
DA-489-03 is a general interpretative rule
issued by the CIR pursuant to its power
under Section 4 of the NIRC, hence,
applicable to all taxpayers. Thus,
taxpayers can rely on this ruling from the
time of its issuance on 10 December 2003.
The conclusion is impelled by the
principle of equitable estoppel enshrined
in Section 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 other words,
the 120+30-day period 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, judicial claims filed during the
window period need not wait for the
exhaustion of the 120-day period. The
exception in San Roque has been applied
consistently in numerous decisions of this
Court. In this case, the two judicial claims
filed by the petitioner fell within the

10. Nippon Express VAT invoice is necessary for
(Philippines) Corp. v. CIR, every sale, barter, or
G.R. No. 191495, July 23, exchange of goods or
2018. 
 properties while a VAT
official receipt properly
pertains to every lease of
goods or properties and for
every sale, barter or
exchange of service. VAT
invoice and VAT receipt
should not be confused as
referring to one and the
same thing
Nippon express is a domestic
corporation registered with the BIR as
a Value Added Tax (VAT) taxpayer. In
2005, it filed with the Large Taxpayer
District Office (LTDO) of the BIR an
application for tax credit of its
excess/unused input taxes
attributable to Zero-rated sales for
the taxable year 2004. By reason of
the inaction by the BIR, Nippon
Express filed a Petition for Review
before the CTA. In its answer,
respondent CIR interposed the
defense that the claim excess input
VAT paid for its domestic purchases
of goods and services attributable to
0-rated sales for the taxable year 2004
was not fully substantiated.
Both the CTA division and CTA En
Banc dismissed the petition of
petitioner for lack of merit. Both
courts held that the evidence
presented by Nippon Express
consisting of sales invoices and other
documents are insufficient to prove
petitioner’s zero-rated sales.
Moreover, the courts noted that
Nippon express is engaged in the
business of providing services, hence,
they should have submitted the
required VAT official receipts as proof
of zero-rated sales.
38
Whether the sales invoices and
documents other than the
official receipts are proper in
substantiating zero-rated sales
of services in connection with a
claim for refund under Section
112 of the NIRC.
window period, thus, the CTA can take
cognizance over them.
NO. While Sections 113 and 273 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.
It was in Kepco Philippines Corporation v
Commissioner (Kepco) whereby the court
declared for the first time that 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 service.
VAT invoice and VAT receipt should not
be confused as referring to one and the
same thing; the law did not intend the two
to be used alternatively.
Consequently, 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 which
properly pertains to a sale of goods or
properties.
In the case here, the documentary proofs
presented by Nippon Express to
substantiate its zero-rated sales of service
consisted of sales invoices and other
secondary evidence like transfer slips,
credit memos, cargo manifests, and credit
notes. Therefore, for failure of petitioner

11. CIR v. Euro-Philippine Failure to comply with
Airline Services Inc., G.R. invoicing requirements,
No. 222436, July 23, 2018. 
 non-imprintment of the
word "zero rated," as
mandated by law does not
deem the transaction
subject to 12% VAT.
12. Power Sector Asset and The sale of the power plants
Liabilities Management (made by PSALM) was an
Corporation v. CIR, G.R. No. exercise of a governmental
198146, 
August 8, 2017. function mandated by law
for the primary purpose of
privatizing NPC assets in
accordance with the
guidelines imposed by the
EPIRA law. Thus, not subject
to VAT. Sec 108 of NIRC is
inapplicable to this case.
Euro-Phil, a passenger sales agent in
the Philippines of an off-line
international airline British Airways,
PLC, received a Formal Assessment
Notice from petitioner CIR consisting
of assessment VAT. 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. CIR said
that the presentation of VAT official
receipts with the words "zero-rated"
imprinted in it is indispensable to
cancel the VAT assessment.
PSALM, a government-owned and Whether PSALM’S privatization
controlled corporation created under activities are subject to VAT.
RA 9136 or the Electric Power Industry
Reform Act of 2001 (EPIRA), is
mandated to manage the orderly sale,
disposition, and 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
39
Whether 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.
to substantiate its claim, Nippon Express
is not entitled to its claim.
YES. Services rendered by Euro-Phil was
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 does 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.
NO. PSALM is not liable to pay the
deficiency VAT. We do not agree with the
CIR's position, which is anchored on the
wrong premise that PSALM is a successor-
in-interest of NPC. PSALM is not a
successor-in interest of NPC. Since PSALM
is not a successor-in-interest of NPC, the
repeal by RA 9337 of NPC's VAT
exemption does not affect PSALM. The
sale of NPC assets by PSAML is not “in the
course of trade or business” but purely for
the specific purpose of privatizing NPC

13. Medicard Philippines, In determining the VAT
Inc. v. CIR, G.R. No. 222743, liability of an HMO, the
April 5, 2017. amounts earmarked and
actually spent for medical
utilization of its members
should not be included in
the computation of its gross
receipts.
obligations and stranded contract
costs in an optimal manner.
The BIR issued a Final Assessment
Notice (FAN) alleging that, for the
taxable year ending 31 December
2008, PSALM is liable to pay a
deficiency VAT amounting to
P10,103,158,715.06, inclusive of
penalties and interests.
PSALM filed its administrative protest
against the FAN, alleging that the
privatization of NPC assets is an
original mandate of PSALM and not
subject to VAT.
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.
CIR found some discrepancies
between MEDICARD's ITR and VAT
Returns. According to the CIR, the
taxable base of HMOs for VAT
40
Whether the amounts that
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%.
assets in order to liquidate all NPC
financial obligations. Thus, it is very clear
that the sale of the power plants was an
exercise of a governmental function
mandated by law for the primary purpose
of privatizing NPC assets in accordance
with the guidelines imposed by the EPIRA
law.
NO. Congress, under Section 108, limited
the scope of the term gross receipts for
VAT purposes only to the amount that the
taxpayer received for the services it
performed or to the amount it received as
advance payment for the services it will
render in the future for another person.
In the course of its business, MEDICARD
members can either avail of medical
services from MEDICARD's accredited
healthcare providers or directly from
MEDICARD. MEDICARD informs its
would-be member 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).
purposes is its gross receipts without
any deduction.
The Court of Tax Appeals En Banc
affirmed with modification the
Decision of the CTA Third Division,
ordering MEDICARD, to pay CIR the
VAT assessment in the aggregate
amount of P220,234,609.48, plus 20%
interest per annum starting January
25, 2007, until fully paid, pursuant to
Section 249 (c) of NIRC of 1997.
41
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. That language is
wanting in this case.
MEDICARD's act of earmarking or
allocating 80% of the amount it received
as membership fee at the time of payment
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.
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 portion subject to VAT,
representing compensation for its
services, and the other represents the
non-vatable portion pertaining to the
amount earmarked for medical utilization.

14. Aichi Forging Asia v. The Commissioner of
CTA, G.R. No. 193625. Internal Revenue (CIR) is
August 30, 2017. given 120 days to decide an
administrative claim for
refund/credit of unutilized
or unapplied input Value
Added Tax (VAT)
attributable to zero-rated
sales. Generally, the 120-
day waiting period is both
mandatory and
jurisdictional. The
exception: Judicial claims
filed from 10 December
2003 up to 6 October 2010.
AICHI is a domestic corporation duly
organized and existing under the laws
of the Philippines, and is principally
engaged in the manufacture,
production, and processing of all
kinds of steel and steel byproducts. It
is duly registered with the Bureau of
Internal Revenue (BIR) as a VAT
taxpayer.
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 in the total sum of
42
Whether AICHI was entitled to a
refund or issuance of a tax credit
certificate of unutilized input
VAT attributable to zero-rated
sales and unutilized input tax on
importation of capital goods for
the period 1 July 2000 to 31
December 2001 (or six
consecutive taxable quarters).
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 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.
The Court rules that for purposes of
determining the VAT liability of an HMO,
the amounts earmarked and actually
spent for medical utilization of its
members should not be included in the
computation of its gross receipts.
NO. The law contemplates two kinds of
refundable amounts: (1) unutilized input
tax paid on capital goods purchased, and
(2) unutilized input tax attributable to
zero-rated sales. The claim for tax refund
or credit is initially filed before the CIR
who is vested with the power and primary
with jurisdiction to decide on refunds of
taxes, fees or other charges, and penalties
imposed in relation thereto. In every case,
the filing of the administrative claim
should be done within two years.
However, the reckoning point of counting
such two-year period varies according to
the kind of input tax subject matter of the
claim. For the input tax paid on capital
goods, the counting of the two-year
period starts from the close of the taxable
quarter when the purchase was made;
 P18,030,547.77 representing VAT whereas, for input tax attributable to zero-
payments on importation of capital rated sale, from the close of the taxable
goods and domestic purchases of quarter when such zero-rated sale was
goods and services. made (not when the purchase was made).
As respondent CIR failed to act on the
refund claim, and in order to toll the From the submission of the complete
running of the prescriptive period documents to support the claim, the CIR
provided under Sections 229 and 112 has a period of one hundred twenty (120)
(D) of the National Internal Revenue days to decide on the claim.5 If the CIR
Code (Tax Code), AICHI filed, on 30 decides within the 120-day period, the
September 2002, a Petition for Review taxpayer may initiate a judicial claim by
before the CTA Division. fling within 30 days an appeal before the
CTA. If there is no decision within the 120-
The CTA Division partially granted the day period, the CIR's inaction shall be
refund claim of AICHI. It denied deemed a denial of the application. In the
AICHI's refund claim with respect to latter case, the taxpayer may institute the
its purchase of capital goods for the judicial claim, also by an appeal, within 30
period 1 July 2000 to 31 December days before the CTA.
2001 because of the latter's failure to
show that the goods purchased The Court had interpreted the 120-day
formed part of its Property, Plant and period as both mandatory and
Equipment Account and that they jurisdictional such that the taxpayer is
were subjected to depreciation forced to await the expiration of the
allowance. As to the claim for refund period before initiating an appeal before
of input VAT attributable to zero- the CTA. A premature invocation of the
rated sales, the CTA only partially court's jurisdiction is fatally defective and
granted the claim due to lack of is susceptible to dismissal for want of
evidence to substantiate the zero- jurisdiction.
rating of AICHI's sales. In particular,
the CTA denied VAT zero-rating on Nonetheless in a subsequent landmark
the sales to BOI-registered decision, the Court recognized an
enterprises on account of non- instance when a prematurely filed appeal
submission of the required BOI may be validly taken cognizance of by the
Certification. CTA. San Roque relaxed the strict
compliance with the 120-day mandatory

5
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
43
The CTA En Banc 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. It affirmed the assailed
decision and resolution of the CTA
Division.
44
and jurisdictional period, specifically for
Taganito Mining Corporation, in view of
BIR Ruling No. DA-489-03, dated 10
December 2003, which expressly declared
that the "taxpayer-claimant need not wait
for the lapse of the 120-day period before
it could seek judicial relief with the CTA by
way of petition for review." Pertinently,
the prematurely filed appeal of San Roque
Power Corporation before the CTA was
dismissed because it came before the
issuance of BIR Ruling No. DA-489-03. On
the other hand, Taganito Mining
Corporation's appeal was allowed
because it was taken after the issuance of
said BIR Ruling.
Here, 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. Consequently, the
general rule applies.
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, except only
the appeal within the window period from
10 December 2003 to 6 October 2010;
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.

The CTA did not acquire jurisdiction in

view of the mandatory and jurisdictional
nature of the 120-day waiting period.
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.

All told, the CTA has no jurisdiction over

AICHI's judicial claim considering that its
Petition for Review was filed prematurely.
Likewise, the Court finds no need to pass
upon the issue on whether petitioner
AICHI had substantiated its claim for

45
 refund or tax credit. Indisputably, AICHI's
claim for refund must be denied.

15. CIR v. PAGCOR, G.R. No. 1. A special law must be Respondent Philippine Amusement Whether respondent secretary of YES. Respondent Secretary of Justice
177387. November 9, 2016. interpreted to constitute an and Gaming Corporation (PAGCOR) justice acted without or in excess acted without or in excess of his

 exception to the general has operated under a legislative of his jurisdiction and gravely jurisdiction and gravely abused his
law in the absence of franchise granted by Presidential abused his discretion in holding discretion.
special circumstances Decree No. 1869 (P.O. No. 1869), itsthat R.A. No. 7716 (vat law) did
warranting a contrary Charter, whose Section 13(2) provides
not repeal P.D. No. 1869 (charter Firstly, a basic rule in statutory
conclusion. that: of PAGCOR); hence, PAGCOR has construction is that a special law cannot
not become liable for the be repealed or modified by a
2. PAGCOR’s charter, P.D. (2) Income and other Taxes - (a) payment of the 10% vat in lieu of subsequently enacted general law in the
No. 1869, is a special law Franchise Holder: the 5% franchise tax. absence of any express provision in the
that grants petitioner latter law to that effect. A special law must
exemption from taxes. No tax of any kind or form, income or be interpreted to constitute an exception
otherwise, as well as fees, charges or to the general law in the absence of
levies of whatever nature, whether special circumstances warranting a
National or Local, shall he assessed contrary conclusion. R.A. No. 7716, a
and collected under this Franchise general law, did not provide for the
from the Corporation; nor shall any express repeal of PAGCOR's Charter,
form of tax or charge attach in any which is a special law; hence, the general
way to the earnings of the repealing clause under Section 20 of R.A.
Corporation, except a Franchise Tax No. 7716 must pertain only to franchises
of five percent (S(X1) of the gross of electric, gas, and water utilities, while
revenue or earnings derived by the the term other franchises in Section 102 of
Corporation from its operation under the NIRC should refer only to transport,
this Franchise. Such tax shall be due communications and utilities, exclusive of
and payable quarterly to the National PAGCOR's casino operations.
Government and shall be in lieu of all
kinds of taxes, levies, fees or Secondly, R.A. No. 7716 indicates that
assessments of any kind, nature or Congress has not intended to repeal
description, levied, established or PAGCOR's privilege to enjoy the 5%
collected by any municipal, provincial franchise tax in lieu of all other taxes.
or national government authority. Although Section 3 of R.A. No. 7716
imposes 10% VAT on the sale or exchange
Notwithstanding the aforesaid 5% of services, including the use or lease of
franchise tax imposed, the Bureau of properties, the provision also considers
46

16. Silicon Philippines v. The taxpayer can file an
CIR, G.R. No. 173241, appeal in one of two ways:
March 25, 2015. (1) file the judicial claim
within thirty days after the
Commissioner denies the
claim within the 120-day
period, or (2) file the judicial
Internal Revenue (BIR) issued several
assessments against PAGCOR for
alleged deficiency value-added tax
(VAT) in the amount of
₱6,678,346,966.49.
The CIR insists that under VAT Ruling
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 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
Section 20 of R.A. No.7716.
SPI, formerly known as Intel
Philippines Manufacturing, Inc., is a
corporation duly organized and
existing under Philippine laws, and
engaged in the business of designing,
developing, manufacturing, and
exporting advance and large-scale
47
Whether the honorable Court Of
Tax Appeals En Banc erred in not
granting the whole claim of SPI
for refund of its excess and
unutilized input vat for the
period July 1, 1998 to September
30, 1998 in the total amount of
transactions that are subject to 0% VAT.
On the other hand, Section 4 of R.A. No.
7716 enumerates the transactions exempt
from VAT. Section 103 of the National
Internal Revenue Code(q) states that “(q)
Transactions which are exempt under
special laws, xxx.” As mentioned in
Philippine Amusement and Gaming
Corporation (PAGCOR) v. The Bureau of
Internal Revenue, PAGCOR 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 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. 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. 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.
NO. The CTA did not err in not granting
the whole claim of SPI for refund.
The petition is dismissed for being filed
out of time.
 claim within thirty days integrated circuit components, Php25,531,312.83 by denying its In its discussion, the Supreme Court
from the expiration of the commonly referred to in the industry claim attributable to zero-rated mentioned the doctrines laid out in the
120-day period if the as Integrated Circuits or “ICs.” It is export sales in the amount of cases of San Roque and Atlas.
Commissioner does not act registered with the Bureau of Internal Php23,105,548.83.
within the 120-day period. Revenue (BIR) as a VAT taxpayer and In the San Roque case, it was provided
with the Board of Investments as a therein that Section 112(C) expressly
The 30-day period always preferred pioneer enterprise enjoying grants the Commissioner 120 days within
applies, whether there is a a six-year income holiday, in which to decide the taxpayer's claim. The
denial or inaction on the accordance with the provisions of the law is clear, plain, and unequivocal: ". . .
part of the CIR. Omnibus Investments Code. the Commissioner shall grant a refund or
issue the tax credit certificate for
As a general rule, the 30- SPI filed on May 6, 1999 with the One- creditable input taxes within one hundred
day period to appeal is both Stop Shop Inter-Agency Tax Credit twenty (120) days from the date of
mandatory and and Duty Drawback Center of the submission of complete documents."6
jurisdictional. (Aichi and San Department of Finance an Application Following the verba legis doctrine, this law
Roque) for Tax Credit/Refund of Value-Added must be applied exactly as worded since it
Tax Paid covering the Third Quarter of is clear, plain, and unequivocal. The
As an exception to the 1998. SPI sought the tax taxpayer cannot simply file a petition with
general rule, premature credit/refund of input VAT for the said the CTA without waiting for the
filing is allowed only if filed tax period in the sum of Commissioner's decision within the 120-
between 10 December 2003 P25,531,312.83, P 2,425,764.00 of day mandatory and jurisdictional period.
and 5 October 2010, when which is the tax paid on The CTA will have no jurisdiction because
BIR Ruling No. DA-489-03 Imported/Locally Purchased Capital there will be no "decision" or "deemed a
was still in force. (San Equipment and P23,105,548.83 of denial" decision of the Commissioner for
Roque) which is the Total VAT Paid on the CTA to review.
Purchases per Invoices Received
Late filing is absolutely During the Period for which this Section 112(C) also expressly grants the
prohibited, even during the Application is Filed. taxpayer a 30-day period to appeal to the
time when BIR Ruling No. CTA the decision or inaction of the
DA-489-03 was in force. When respondent Commissioner of Commissioner, thus:
(San Roque) Internal Revenue (CIR) failed to act
upon its aforesaid Application for Tax As this law states, the taxpayer may, if he
Credit/Refund, SPI filed on wishes, appeal the decision of the
September 29, 2000 a Petition for Commissioner to the CTA within 30 days
Review before the CTA Division. The from receipt of the Commissioner's

6
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
48
CTA Division rendered a Decision on
November 24, 2003 only 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 as SPI failed to comply with
invoicing requirements set for in the
1997 Tax Code.
SPI filed a Motion for Partial
Reconsideration and Supplemental
Motion for Partial Reconsideration of
the 2003 decision but was likewise
denied. SPI sought recourse from the
CTA En Banc by filing a Petition for
Review, but it was again denied on
2006 for lack of merit. SPI now comes
before this Court via the instant
Petition for Review.
49
decision, or if the Commissioner does not
act on the taxpayer's claim within the 120-
day period, the taxpayer may appeal to
the CTA within 30 days from the
expiration of the 120-day period.
The Atlas Doctrine laid out that claims for
refund or credit of input VAT must comply
with the two-year prescriptive period
under Section 229, should be effective
only from its promulgation on 8 June 2007
until its abandonment on 12 September
2008 in Mirant. The Atlas doctrine was
limited to the reckoning of the two-year
prescriptive period from the date of
payment of the output VAT.
The court provided for a summary of rules
on prescriptive periods for claiming
refund or credit of input vat.
A. Two-Year Prescriptive Period
1. It is only the administrative claim that must
be filed within the two-year prescriptive
period. (Aichi)
2.
The proper reckoning date for the two-
year prescriptive period is the close of the
taxable quarter when the relevant sales
were made. (San Roque)
3.
The only other rule is the Atlas ruling,
which applied only from 8 June 2007 to 12
September 2008. Atlas states that the
two-year prescriptive period for filing a
claim for tax refund or credit of unutilized
input VAT payments should be counted
 from the date of filing of the VAT return
and payment of the tax. (San Roque)

B. 120+30 Day Period

1. The taxpayer can file an appeal in one of
two ways: (1) file the judicial claim within
thirty days after the Commissioner denies
the claim within the 120-day period, or (2)
file the judicial claim within thirty days
from the expiration of the 120-day period
if the Commissioner does not act within
the 120-day period.
2. The 30-day period always applies, whether
there is a denial or inaction on the part of
the CIR.

3. As a general rule, the 30-day period to

appeal is both mandatory and
jurisdictional. (Aichi and San Roque)
4.
As an exception to the general rule,
premature filing is allowed only if filed
between 10 December 2003 and 5
October 2010, when BIR Ruling No. DA-
489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even
during the time when BIR Ruling No. DA-
489-03 was in force. (San Roque)

In the case at bar, 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

50
 administrative claim, reckoned from the
close of the taxable quarter, prescribed.

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. SPI herein is in
exactly the same position as Philex Mining
in San Roque.

Since 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.

51
17. Cargill Philippines, Inc. 1. Unutilized creditable
v. CIR, G.R. No. 203774, input taxes attributable to
March 11, 2015. zero-rated sales can be
recovered through the
application for refund or tax
credit.
2. The observance of the
120-day period is
mandatory and
jurisdictional to the filing of
a judicial claim for refund of
excess input Vat. Its
exception is the period
between December 10,
2003 and October 6, 2010.
Cargill is a domestic corporation duly
organized and existing under
Philippine laws whose primary
purpose is to own, operate, run, and
manage plants and facilities for the
production, crushing, extracting, or
otherwise manufacturing and refining
of coconut oil, coconut meal,
vegetable oil, lard, margarine, edible
oil, and other articles of similar nature
and their by-products.
It is likewise VAT-registered. Upon
filing VAT returns, the same reflected
overpayments due to its export sales
of coconut oil, the proceeds of which
were paid for in acceptable foreign
currency and accounted for in
accordance with the rules and
regulations of the Bangko Sentral ng
Pilipinas and, thus, are zero-rated for
VAT purposes.
On June 27, 2003, Cargill filed an
administrative claim for refund of its
unutilized input VAT for the period of
April 1, 2001 to February 28, 2003
(first refund claim) before the Bureau
of Internal Revenue (BIR). Thereafter,
or on June 30, 2003, it filed a judicial
claim for refund.
On May 31, 2005, Cargill filed a
second administrative claim for
refund of its unutilized input VAT in
the amount for the period of March 1,
2003 to August 31, 2004 (second
52
1. Whether Cargill is entitled to a 1. YES. Unutilized creditable input taxes
refund claim for its unutilized attributable to zero-rated sales can be
input VAT. recovered through the application for
refund or tax credit.
2. Whether Cargill is entitled to
his first refund claim when it Allowing the refund or credit of unutilized
failed to comply with the 120- input VAT finds its genesis in Executive
day period. Order No. 273, series of 1987, which is
recognized as the "Original VAT Law."
3. Whether Cargill's second Thereafter, it was amended through the
refund claim should be granted. passage of Republic Act No. (RA) 7716, RA
8424, and, finally by RA 9337, which took
effect on November 1, 2005. Considering
that Cargill's claims for refund covered
periods before the effectivity of RA 9337,
Section 112 of the NIRC, as amended by
RA 8424, should, therefore, be the
governing law. Section 112 of such law
allows refund for zero-rated or effectively
zero-rated sales, to wit:
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.
refund claim) before the BIR. On even
date, it filed a petition for review
before the CTA.
The CTA division found out that some
part of the claims for refund were not
properly substantiated and such
resulted to a partial denial. Both the
CIR and Cargill opposed such
decision. Ultimately however, the
consolidated cases were dismissed
outright for being prematurely filed
to which the CTA En Bank affirmed.
53
2. NO. Reconciling the pronouncements
in the Aichi and San Roque cases, the rule
is that during the period December 10,
2003 (when BIR Ruling No. DA-489-03
was issued) to October 6, 2010 (when the
Aichi case was promulgated), taxpayers-
claimants need not observe the 120-day
period before it could file a judicial claim
for refund of excess input VAT before the
CTA. Before and after the aforementioned
period (i.e., December 10, 2003 to
October 6, 2010), the observance of the
120-day period is mandatory and
jurisdictional to the filing of such claim.
In this case, records disclose that anent
Cargill's first refund claim, it filed its
administrative claim with the BIR on June
27, 2003, and its judicial claim before the
CTA on June 30, 2003, or before the
period when BIR Ruling No. DA-489-03
was in effect, i.e., from December 10, 2003
to October 6, 2010. As such, it was
incumbent upon Cargill to wait for the
lapse of the 120-day period before
seeking relief with the CTA, and
considering that its judicial claim was filed
only after three (3) days later, the CTA En
Banc, thus, correctly dismissed Cargill's
petition in CTA Case No. 6714 for being
prematurely filed.
3. QUALIFIED YES. Records show that
with respect to Cargill's second refund
claim, its administrative and judicial claims
were both filed on May 31, 2005, or during
the period of effectivity of BIR Ruling No.

18. Rohm Apollo Semi- The 30-day period to
Conductor Philippines v. appeal is both mandatory
CIR, G.R. No. 168950, and jurisdictional. A claim
January 14, 2015. for tax refund or credit, like
a claim for tax exemption, is
construed strictly against
the taxpayer. One of the
conditions for a judicial
claim of refund or credit
under the VAT System is
with the 120+30 day
mandatory and
jurisdictional periods. Thus,
strict compliance with the
Petitioner Rohm Apollo is a domestic
corporation registered with the BIR as
a value-added taxpayer and is in the
business of manufacturing
semiconductor products.
Sometime in June 2000, Apollo
engaged the services of Shimizu
Philippine Contractors, Inc. for the
construction of a factory. Petitioner
made initial payments on 7 July 2000
and on 3 August 2000, which were
treated as capital goods purchases,
and filed with the BIR an
54
DA-489-03, and, thus, fell within the
exemption window period contemplated
in San Roque, i.e., when taxpayer-
claimants need not wait for the expiration
of the 120-day period before seeking
judicial relief. Verily, the CTA En Banc
erred when it dismissed outright the case
on the ground of prematurity.
This notwithstanding, the Court finds that
the amount in Cargill's second refund
claim which allegedly represented
unutilized input VAT covering the period
March 1, 2003 to August 31, 2004 should
not be instantly granted. This is because
the determination of Cargill's entitlement
to such claim, if any, would necessarily
involve factual issues and, thus, are
evidentiary in nature which are beyond
the pale of judicial review under a Rule 45
petition where only pure questions of law,
not of fact, may be resolved.
Whether the CTA acquired NO, the CTA did not acquire jurisdiction
jurisdiction over the claim for the over the claim because it was filed out of
refund or tax credit of unutilized time.
input VAT.
Section 112 (D) of the 1997 Tax Code
states the time requirements for filing a
judicial claim for the refund or tax credit
of input VAT. The legal provision speaks
of two periods: the period of 120 days,
which serves as a waiting period to give
time for the CIR to act on the
administrative claim for a refund or credit;
and the period of 30 days, which refers to
the period for filing a judicial claim with
 120+30 day periods is administrative claim for the refund or the CTA.8 It is the 30-day period that is at
necessary for such a claim credit of accumulated unutilized issue in this case.
to prosper7. creditable input taxes on 11
December 2000. It should be noted On 11 December 2000, petitioner filed
that Section 112 (B), in relation to with the BIR an application for the refund
Section 112 (A) of the 1997 Tax Code, or credit of accumulated unutilized
allows a taxpayer to file an creditable input taxes. Thus, the CIR had a
application for the refund or tax credit period of 120 days from 11 December
of unutilized input VAT when it comes 2000, or until 10 April 2001, to act on the
to the purchase of capital goods. claim. It failed to do so, however. Rohm
Apollo should then have treated the CIR's
Pursuant to Section 112 (D) of the inaction as a denial of its claim. Petitioner
1997 Tax Code, the CIR had a period would then have had 30 days, or until 10
of 120 days from the filing of the May 2001, to file a judicial claim with the
application for a refund or credit on CTA. But Rohm Apollo led a Petition for
11 December 2000, or until 10 April Review with the CTA only on 11
2001, to act on the claim. The waiting September 2002. The judicial claim was
period, however, lapsed without any thus filed late.
action by the CIR on the claim.
Rohm Apollo mistakenly believed that the
On September 11, 2002, Rohm Apollo only requirement is that the judicial claim
filed a Petition for Review with the must be filed within the two-year period
CTA. The CTA First Division rendered under Sections 112 (A) and (B) of the 1997
a Decision denying the judicial claim Tax Code. It erroneously thought that the
for a refund or tax credit. In support 30-day period does not apply to cases of
of its ruling, the It held that the the CIR's inaction after the lapse of the
petitioner must have at least 120-day waiting period, and that a judicial
submitted its VAT return for the third claim is seasonably fi led so long as it is
quarter of 2001, since it was in that done within the two year-period. Thus, it
period that it began its business filed the Petition for Review with the CTA
operations. only on 11 September 2002.

When the Motion for Reconsideration The landmark case of Commissioner of

it filed was denied, the petitioner Internal Revenue v. San Roque Power
elevated the case to the CTA En Banc Corporation has interpreted Section 112

7
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.

55

19. Fort Bonifacio
Development Corporation
v. CIR, et. al. consolidated
cases of G.R. No. 175707,
G.R. NO. 18003, G.R. No.
181092, November 19,
2014.
Section 105 of the old NIRC,
on the transitional input tax
credit, remained intact
despite the enactment of
Republic Act No. 7716.
Thus, what is subject to
transitional input tax credit
is not only the
improvements on the real
property but the entire real
property.
via a Petition for Review. The
appellate tax court held that the
failure to present the VAT returns for
the subsequent taxable year proved
to be fatal to the claim for a
refund/tax credit, considering that it
could not be determined whether the
claimed amount to be refunded
remained unutilized.
This is a consolidated case of 3
petitions having the same parties and
common question of law. Here, the
Petitioner is engaged into the
business of real estate development
that bought from the national
government a parcel of land that used
to be Fort Bonifacio military
reservation. At the time of the said
sale there was as yet no VAT imposed
so Petitioner did not pay any VAT on
its land to Metro Pacific Corp. The
petitioner claimed for Transitional
input VAT in reporting the said sale
because the VAT had already been
56
Whether in determining the 10%
value-added tax in Section 100
of the [Old NIRC] on the sale of
real properties by real estate
dealers, is the 8% transitional
input tax credit in Section 105
applied only to the
improvements on the real
property or is it applied on the
value of the entire real property.
(D). The Court held that the taxpayer can
file an appeal in one of two ways: (1) file
the judicial claim within 30 days after the
Commissioner denies the claim within the
120-day waiting period, or (2) file the
judicial claim within 30 days from the
expiration of the 120-day period if the
Commissioner does not act within that
period.
As a general rule, the 30-day period to
appeal is both mandatory and
jurisdictional. A claim for tax refund or
credit, like a claim for tax exemption, is
construed strictly against the taxpayer.
One of the conditions for a judicial claim
of refund or credit under the VAT System
is with the 120+30 day mandatory and
jurisdictional periods. Thus, strict
compliance with the 120+30 day periods
is necessary for such a claim to prosper.
NO. The Court conclusively held that
petitioner is entitled to the 8% transitional
input tax on its beginning inventory of
land, which is granted in Section 105 (now
Section 111 [A]) of the NIRC, and granted
the refund of the amounts petitioner had
paid as output VAT for the different tax
periods in question.
The Court held in the earlier consolidated
decision, G.R. Nos. 158885 and 170680,
as follows:
On its face, there is nothing in Section 105
of the Old NIRC that prohibits the
imposed in the interim. However, the
claim of presumptive input VAT and
thereby assessed Petitioner for
deficiency vat was disallowed by BIR.
Contention of the Petitioner
It is the contention of the Petitioner
that “the 10& value-added tax is
based on the gross selling price or
gross value in money of the ‘goods’
sold, bartered or exchanged.”
Moreover, it argues that based on the
meaning of “goods” it is limited to
“movable, tangible objects which are
appropriate or transferable” and that
the said term did not originally
include “real property.”. Petitioner
used the RR No. 5-87 which states
that:
p) "Goods" means any movable,
tangible objects which are
appropriable or transferrable.
Republic Act No. 7716 (E-VAT
Law, January 1, 1996) expanded
the coverage of the original VAT
Law (Executive Order No. 273),
specifically Section 100 of the
old NIRC. According to
petitioner, while under Executive
Order No. 273, the term "goods"
did not include real properties,
Republic Act No. 7716, in
amending Section 100, explicitly
included in the term "goods"
“real properties Ruling: primarily
for sale to customers or Ruling:
57
inclusion of real properties, together with
the improvements 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.
 for lease in the ordinary course
of trade or business."
Consequently, the sale, barter,
or exchange of real properties
was made subject to a VAT
equivalent to 10% (later
increased to 12%, pursuant to
Republic Act No. 9337) of the
gross selling price of real
properties.
Among the new provisions included
by Executive Order No. 273 in the
NIRC was the following:
SEC. 105. Transitional Input Tax
Credits. — A person who
becomes liable to value added
tax or any person who elects to
be a VAT registered person shall,
subject to the filing of an
inventory as prescribed by
regulations, be allowed input tax
on his beginning inventory of
goods, materials and supplies
equivalent to 8%of the value of
such inventory or the actual
value-added tax paid on such
goods, materials and supplies,
whichever is higher, which shall
be creditable against the output
tax.
Respondent’s Contentions
The petition should be denied due to
the following reasons, a ruled by CTA
and CA:
58
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
non-exclusive enumeration of various
objects that fall under the class "goods or
properties" subject to VAT, including "real
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 dealers
that would justify the suggested
limitations on the application of the
transitional input tax on them? We see
none.
R.A. 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. It is clear that those regularly
engaged in the real estate business are
accorded the same treatment as the
merchants of other goods or properties
available in the market. In the same way
that a milliner considers hats as his goods
and a rancher considers cattle as his
goods, a real estate dealer holds real

1. The 8% input tax credit
provided for in Section 105 of the
NIRC, in relation to Section 100
thereof, is based on the value of
the improvements on the land.
2. The taxpayer is entitled to the
input tax credit provided for in
Section 105 of the NIRC only if it
has previously paid VAT or sales
taxes on its inventory of land.
3. Section 4.105-1 of Revenue
Regulations No. 7-95 of the BIR is
valid, effective and has the force
and effect of law, which
implemented Section 105 of the
NIRC.
In November 2008, the respondents
commented that petitioner’s claim for
the 8% transitional/presumptive
input tax is inconsistent with the
purpose and intent of the law in
granting such tax refund or tax credit.
Respondents further argue that:
1. The transitional input tax
provided under Section 105 in
relation to Section 100 of the Tax
Code, as amended by EO No. 273
effective January 1, 1988, is
subject to certain conditions
which petitioner failed to meet.
59
property, whether or not it contains
improvements, as his goods. (Citations
omitted, emphasis added)
Under Section 105, the beginning
inventory of "goods" forms part of the
valuation of the transitional input tax
credit. Goods, as commonly understood
in the business sense, refers to the
product which the VAT-registered person
offers for sale to the public. With respect
to real estate dealers, it is the real
properties themselves which constitute
their "goods". Such real properties are the
operating assets of the real estate dealer.
Section 4.100-1 of RR No. 7-95 itself
includes in its enumeration of "goods
or properties" such "real properties held
primarily for sale to customers or held for
lease in the ordinary course of trade or
business." Said de9nition was taken from
the very statutory language of Section 100
of the Old NIRC. By limiting the definition
of goods to "improvements" in Section
4.105-1, the BIR not only contravened the
definition of "goods" as provided in the
Old NIRC, but also the definition which
the same revenue regulation itself has
provided.
The Court then emphasized in its
Resolution in G.R. No. 158885 and G.R.
No. 170680 that Section 105 of the old
NIRC, on the transitional input tax credit,
remained intact despite the enactment of
Republic Act No. 7716. Section 105 was
 2. The claim for petitioner for
transitional input tax is in the
nature of a tax exemption which
should be strictly construed
against it.
3. Revenue Regulations No. 7-95
is valid and consistent with
provisions of the NIRC.76
Moreover, respondents contend
that:
Petitioner is not legally entitled to any
transitional input tax credit, whether it
be the 8% presumptive input tax
credit or any actual input tax credit in
respect of its inventory of land
brought into the VAT regime
beginning January 1, 1996, in view of
the following:
1. VAT free acquisition of the raw
land petitioner purchased and
acquired, from the Government,
the aforesaid raw land under a
VAT free sale transaction. The
Government, as a vendor, was
tax- exempt and accordingly did
not pass on any VAT or sales tax
as part of the price paid therefor
by the petitioner.
2. No transitory input tax on
inventory of land is allowed.
Section 105 of the Code, as
amended by Republic Act No.
7716, and as implemented by
60
amended by Republic Act No. 8424, and
the provisions on the transitional input tax
credit are now embodied in Section 111
(A) of the new NIRC, which reads:
Section 111. Transitional/ Presumptive
Input Tax Credits. —
(A) Transitional Input Tax Credits. — A
person who becomes liable to value
added tax or any person who elects to
be a VAT-registered person shall,
subject to
the filing of an inventory according to
rules and regulations prescribed by
the Secretary of Finance, upon
recommendation of the
Commissioner, be allowed input tax
on his beginning inventory of goods,
materials and supplies equivalent for
8% of the value of such inventory or
the actual value-added tax paid on
such goods, materials and supplies,
whichever is higher, which shall be
creditable against the output tax.
 Section 4.105-1 of Revenue
Regulations No. 7-95, expressly
provides that no transitional input
tax credit shall be allowed to real
estate dealers in respect of their
beginning inventory of land
brought into the VAT regime
beginning January 1, 1996
(supra). Likewise, the Transitory
Provisions [(a) (iii)] of Revenue
Regulations No. 7-95
categorically states that "for real
estate dealers, the presumptive
input tax of 8% of the book value
of improvements constructed on
or after January 1, 1998
(effectivity of E.O. 273) shall be
allowed."

For purposes of subparagraphs (i), (ii)

and (iii) above, an inventory as of
December 31, 1995 of such goods or
properties and improvements
showing the quantity, description,
and amount should be filed with the
RDO not later than January 31, 1996.
It is admitted that petitioner filed its
inventory listing of real properties on
September 19, 1996 or almost nine (9)
months late in contravention [of] the
requirements in Revenue Regulations
No.7-95.

20. CIR vs. Team Sual The 120-day period that is TSC is a corporation that is principally
Corporation (Formerly given to the CIR within engaged in the business of power
Mirant Sual Corporation), which to decide claims for generation and the subsequent sale
refund/tax credit of thereof solely to National Power
61
Whether the imminent lapse of NO. That the two-year prescriptive period
the two-year period under within which to file a claim for refund/tax
Section 112(A) of the NIRC credit of unutilized input VAT under
justifies the filing of a judicial Section 112(A) of the NIRC is about to
 G.R. No. 194105. February unutilized input VAT is Corporation (NPC); it is registered claim with the CTA without lapse is inconsequential and would not
5, 2014. mandatory and with the Bureau of Internal Revenue awaiting the lapse of the 120- justify the immediate filing of a petition
jurisdictional. The Court (BIR) as a VAT taxpayer. CIR granted day period given to the CIR to for review with the CTA sans compliance
categorically held that the TSC's application for zero-rating decide the administrative claim with the 120-day mandatory period.
taxpayer-claimant must arising from its sale of power for refund/tax credit.
wait for the 120-day period generation services to NPC for the Section 112(C) of the NIRC clearly
to lapse, should there be no taxable year 2000. provides that the CIR has "120 days, from
decision fully or partially the date of the submission of the
denying the claim, before a On March 11, 2002, TSC filed with the complete documents in support of the
petition for review may be BIR an administrative claim for refund, application [for tax refund/credit]," within
filed with the CTA. claiming that it is entitled to the which to grant or deny the claim. 9 In case
Otherwise, it violates the unutilized input VAT arising from its of full or partial denial by the CIR, the
doctrine of exhaustion of zero-rated sales to NPC for the taxpayer's recourse is to file an appeal
administrative remedies taxable year 2000. On April 1, 2002, before the CTA within 30 days from
and the petition would be without awaiting the CIR's resolution receipt of the decision of the CIR.
rendered premature and of its administrative claim for However, if after the 120-day period the
without a cause of action. refund/tax credit, TSC filed a petition CIR fails to act on the application for tax
Consequently, the CTA for review with the CTA seeking the refund/credit, the remedy of the taxpayer
does not have the refund or the issuance of a tax credit is to appeal the inaction of the CIR to CTA
jurisdiction to take certificate for its unutilized input VAT within 30 days.
cognizance of a petition for for the taxable year 2000.
review filed by the Subsection (A) of the said provision states
taxpayer-claimant should that "any VAT-registered person, whose
there be no decision by the sales are zero-rated or effectively zero-
CIR on the claim for rated may, within two years after the close
refund/tax credit or the of the taxable quarter when the sales were
120-day period had not yet made, apply for the issuance of a tax
lapsed. 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

9
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
62
 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.

The second paragraph of Section 112(C)

of the NIRC envisions two scenarios: (1)
when a decision is issued by the CIR
before the lapse of the 120-day period;
and (2) when no decision is made after the
120-day period. In both instances, the
taxpayer has 30 days within which to file
an appeal with the CTA. As we see it then,
the 120-day period is crucial in filing an
appeal with the CTA.

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 denying the claim, before a
petition for review may be filed with the
CTA. Otherwise, it violates the doctrine of
exhaustion of administrative remedies
and 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

63
 the CIR on the claim for refund/tax credit
or the 120-day period had not yet lapsed.

The charter of the CTA expressly provides

that its jurisdiction is to review on appeal
"decisions of the Commissioner of
Internal Revenue in cases involving x x x
refunds of internal revenue taxes." When
a taxpayer prematurely files a judicial
claim for tax refund or credit with the CTA
without waiting for the decision of the
Commissioner, there is no "decision" of
the Commissioner to review and thus the
CTA as a court of special jurisdiction has
no jurisdiction over the appeal. The
charter of the CTA also expressly provides
that if the Commissioner fails to decide
within "a specific period" required by law,
such "inaction shall be deemed a denial"
of the application for tax refund or credit.
It is the Commissioner's decision, or
inaction "deemed a denial," that the
taxpayer can take to the CTA for review.
Without a decision or an "inaction x x x
deemed a denial" of the Commissioner,
the CTA has no jurisdiction over a petition
for review.

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.
Consequently, the 30-day period given to
the taxpayer-claimant likewise need not
fall under the two-year prescriptive
period. What matters is that the
administrative claim for refund/tax credit
64

21. CIR v. Toledo, Power, The 120+30 days rule in
Inc., G.R. No. 183880, Section 112 is mandatory
January 20, 2014. 
 and jurisdictional; except
during the window period
from December 10, 2003 to
October 6, 2010.
of unutilized input VAT is filed with the BIR
within the two-year prescriptive period.
It is undisputed that TSC filed its
administrative claim for refund/tax credit
with the BIR on March 11, 2002, which is
still within the two-year prescriptive
period under Section 112(A) of the NIRC.
However, without waiting for the CIR
decision or the lapse of the 120-day
period from the time it submitted its
complete documents in support of its
claim, TSC filed a petition for review with
the CTA on April 1, 2002 - a mere 21 days
after it filed its administrative claim with
the BIR. Clearly, TSC's petition for review
with the CTA was prematurely filed; the
CTA had no jurisdiction to take
cognizance of TSC's petition since there
was no decision as yet by the CIR denying
TSC's claim, fully or partially, and the 120-
day period under Section 112(C) of the
NIRC had not yet lapsed.
Toledo Power Corporation (TPC) is a 1. Whether the administrative 1. YES. Pursuant to Section 112 (A) 42 and
general partnership principally and the judicial claims for tax
(D) 43 of the NIRC, a taxpayer has two (2)
engaged in the business of power refund or credit were timely and
years from the close of the taxable quarter
generation and sale of electricity to validly filed. when the zero-rated sales were made
the National Power Corporation within which to file with the CIR an
(NPC), Cebu Electric Cooperative III 2. Whether the TPC is entitled to administrative claim for refund or credit of
(CEBECO), Atlas Consolidated Mining the full amount of its claim for unutilized input VAT attributable to such
and Development Corporation tax refund or credit. sales. The CIR, on the other hand, has 120
(ACMDC), and Atlas Fertilizer days from receipt of the complete
Corporation (AFC). documents within which to act on the
administrative claim. Upon receipt of the
On December 22, 2003, TPC filed with decision, a taxpayer has 30 days within
the Bureau of Internal Revenue (BIR) which to appeal the decision to the CTA.
65
 Regional District Office (RDO) No. 83 However, if the 120-day period expires
an administrative claim for refund or without any decision from the CIR, the
credit of its unutilized input Value taxpayer may appeal the inaction to the
Added Tax (VAT) for the taxable year CTA within 30 days from the expiration of
2002 in the total amount of the 120-day period.10
P14,254,013.27 under Republic Act
No. 9136 or the Electric Power TPC applied for a claim for refund or credit
Industry Reform Act of 2001 (EPIRA) of its unutilized input VAT for the taxable
and the National Internal Revenue year 2002 on December 22, 2003. Since
Code of 1997 (NIRC). 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.

2. NO. Section 6 of the EPIRA provides

that the sale of generated power by
generation companies shall be zero-rated.
Section 4 (x) of the same law states that a
generation company "refers to any person
or entity authorized by the ERC to operate
facilities used in the generation of
electricity." Corollarily, 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.

In this case, when the EPIRA took effect in

2001, TPC was an existing generation
facility. And at the time the sales of

10
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
66
 electricity to CEBECO, ACMDC, and AFC
were made in 2002, TPC was not yet a
generation company under EPIRA.
Although it filed an application for a COC
on June 20, 2002, it did not automatically
become a generation company. 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.

Therefore, as ruled by the CTA En Banc,

TPC’s sales of electricity to CEBECO,
ACMDC, and AFC for taxable year 2002
are invalid zero-rated sales, and that claim
for refund or credit of unutilized input
VAT attributable to the said sales of
electricity should not be granted.

22. CBK Power Company 1.) NPC is an entity with a On December 29, 2004, petitioner 1. 1. Whether the petitioner’s sales 1. YES, the NPC is an entity with a special
Limited v. CIR, G.R. No. special charter, which which operated, maintained and to NPC are effectively zero-rated. charter, which categorically exempts it
198729-30, January 15, categorically exempts it managed Kalayaan I and II from the payment of any tax, whether
2014. 
 from the payment of any hydroelectric power plants filed an 2. Whether the administrative direct or indirect, including VAT. Thus,
tax, whether direct or Application for VAT Zero-Rate with claims were filed within the services rendered to NPC by a VAT-
indirect, including VAT. the Bureau of Internal Revenue (BIR), prescriptive period. registered entity are effectively zero-
Thus, services rendered to in accordance with Section 108 (B) (3) rated. In fact, the BIR itself approved the
NPC by a VAT-registered of the National Internal Revenue application for zero-rating on 29
entity are effectively zero- Code (NIRC) of 1997, as amended. December 2004, filed by petitioner for its
rated. sales to NPC covering January to October
BIR approved the application. Thus, 2005. As a consequence, petitioner claims
2.) Claims for refund or credit petitioner’s sale of electricity to the for the refund of the alleged excess input
of zero-rated sales for VAT- NPC from 1 January 2005 to 31 tax attributable to its effectively zero-
registered persons must be October 2005 was declared to be rated sales to NPC.
filed within 2 years after the

67
 close of the taxable quarter entitled to the benefit of effectively
when such sales were made. zero-rated value added tax (VAT).
The reckoning frame would
always be the end of the Petitioner filed its administrative
quarter when the pertinent claims for the issuance of tax credit
sale or transactions were certificates for its alleged unutilized
made, regardless of when input taxes on its purchase of capital
the input VAT was paid goods and alleged unutilized input
taxes on its local purchases and/or
importation of goods and 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) No. 55 of
Laguna, which covered the first 3
quarters of 2005.
23. CIR vs. Mindanao II Two-Year Prescriptive Mindanao II is engaged in the
Geothermal Partnership, Period business of power generation and
G.R. No. 191498, January sale of electricity to NAPOCOR. On 6
15, 2014. 
 1. It is only the October 2005, it applied for the
administrative claim that administrative refund or credit of
must be filed within the accumulated unutilized creditable
two- year prescriptive input taxes for the second, third, and
period. fourth quarters of taxable year 2004,
claiming that it is VAT-registered and
2. The proper reckoning that all its sales are zero-rated under
date for the two-year the EPIRA law.
prescriptive period is the
68
2. YES, Section 112 (A) provides that after
the close of the taxable quarter when the
sales were made, there is a two-year
prescriptive period within which a VAT-
registered person whose sales are zero-
rated or effectively zero-rated may apply
for the issuance of a tax credit certificate
or refund of creditable input tax.
Section 112 (A) is clear that for VAT-
registered persons whose sales are zero-
rated or effectively zero-rated, a claim for
the refund or credit of creditable input tax
that is due or paid, and that is attributable
to zero-rated or effectively zero-rated
sales, must be filed within two years after
the close of the taxable quarter when such
sales were made. The reckoning frame
would always be the end of the quarter
when the pertinent sale or transactions
were made, regardless of when the input
VAT was paid. Pursuant to Section 112 (A),
petitioner’s administrative claims were
filed well within the two-year period.
1. Whether the two-year 1. NO, the 2-yr prescriptive period has not
prescriptive period for filing an set in. The 2-year prescriptive period
application for refund or credit begins to run from the close of the taxable
of unutilized input VAT has set quarter when the relevant sales were
in. made.
2. Whether the 120+30 day 2. YES, the 30-day period to appeal is
period for filing an appeal with both mandatory and jurisdictional. When
the CTA is mandatory and Section 112(C) states that "the taxpayer
jurisdictional. affected may, within thirty (30) days from
receipt of the decision denying the claim
or after the expiration of the one hundred
 close of the taxable quarter CIR did not act on its claims after 120 twenty-day period, appeal the decision or
when the relevant sales days. Thus, on 21 July 2006 Mindanao the unacted claim with the Court of Tax
were made. II filed a Petition for Review with the Appeals". The law does not make the
CTA. CIR, relying on Section 112 (D) of 120+30-day periods optional just because
3. The only other rule is the the Tax Code, argued that the the law uses the word "may." The word
Atlas ruling, which applied prescription had already set in, since "may" simply means that the taxpayer
only from 8 June 2007 to 12 it was way beyond the last day to may or may not appeal the decision of the
September 2008, which appeal to CTA - 5 March 2006. Commissioner within 30 days from receipt
states that the two-year of the decision, or within 30 days from the
prescriptive period for filing expiration of the 120-day period.
a claim for tax refund or
credit of unutilized input The three administrative claims for the
VAT payments should be refund or credit of unutilized input VAT
counted from the date of were all timely filed, while the
filing of the VAT return and corresponding judicial claims were
payment of the tax. belatedly filed. CTA lost jurisdiction over
Mindanao II's claims for refund or credit.
120+30 Day Period [90+30
under TRAIN] 11

1. The taxpayer can file an

appeal in one of two
ways: (1) file the judicial
claim within thirty days
after the Commissioner
denies the claim within
the 120-day period, or
(2) file the judicial claim
within thirty days from
the expiration of the
120-day period if the
Commissioner does not
act within the 120-day
period.

11
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
69
 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
5. Late filing is absolutely
prohibited.

24. Team Energy The Commissioner has 120
Corporation (formerly days from the filing of an
Mirant Pagbilao Corp.) vs. administrative claim for
CIR, G.R. No. 190928, 
 refund or issuance of tax
January 13, 2014. credit certificate to decide.
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.
Petitioner filed an administrative
claim for refund of unutilized input
VAT in the total amount of
P79,918,002.95 for calendar year
2002. However, because of the
inaction of the CIR, petitioner
elevated its claim before the CTA First
Division in 2004.
The CTA First Division ordered the CIR
to refund or issue a tax credit
certificate to the petitioner in the
reduced amount of P69,618,971.19.
However, the CTA En Banc reduced
the claim to P51,134,951.40 on the
ground that the petitioner's judicial
Whether petitioner timely filed
its judicial claim for refund of
input VAT for the first quarter of
2002.
YES. Based on Section 112(C) of the Tax
Codeand jurisprudence, a taxpayer is only
required to file his judicial claim within
thirty (30) days after denial of his claim by
the CIR or after the expiration of the 120-
day period within which the CIR can
decide on its claim. 12
Since the administrative claim was filed
within the two-year prescriptive period
and the judicial claim was filed on the first
day after the expiration of the 120-day
period granted to the CIR to decide on
such claim, which falls within the thirty
(30)-day period provided under the law to
file for the claim, the SC ruled that the

12
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
70

25. Fort Bonifacio Tax credit is not
Development Corporation synonymous to tax refund.
v. CIR, et. al., G.R. No. Tax refund is defined as the
173425, January 22, 2013. 
 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.
Thus, unlike a tax refund,
prior payment of taxes is
not a prerequisite to avail of
a tax credit.
claim for the first quarter of 2002 was
filed beyond the two-year period
prescribed under Section 112(A) of
the Tax Code.
In 1995, Fort Bonifacio Development Whether the Tax Code allows YES. First, a careful reading of Section 112
Corporation purchased from the either a cash refund or a tax of the Tax Code shows that it does not
national government a portion of the credit for input VAT
Fort Bonifacio reservation. On January
1, 1996, the enactment of 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.
Thus, FBDC sought to register by
submitting to BIR an inventory of all
its real properties, the book value of
which aggregated to about P71 B.
In October 1996, FBDC started selling
Global City lots to interested buyers.
For the first quarter of 1997, it paid
the output VAT by making cash
payments to the BIR and credited its
unutilized input tax credit on
purchases of goods and services.
Realizing that its 8% transitional input
tax credit was not applied in
computing its output VAT for the first
quarter of 1997, FBDC filed with the
BIR a claim for refund of the amount
erroneously paid as output VAT for
the said period.
71
petitioner’s claim for refund for the first
quarter of 2002 should be granted. Thus,
the SC affirmed the decision of the CTA
First Division that the petitioner’s total
refundable amount should be
P69,618,971.19.
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. As regards Section 110,
while the law only provides for a tax credit,
a taxpayer who 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.
 The CTA denied refund on the ground
that “the benefit of transitional input Here, since FBDC still has available
tax credit comes with the condition transitional input tax credit, it filed a claim
that business taxes should have been for refund to recover the output VAT it
paid first.” It contends that since FBDC erroneously or excessively paid for the 1st
acquired the Global City property quarter of 1997. Thus, there is no reason
under a VAT-free sale transaction, it for denying its claim for tax refund/credit.
cannot avail of the transitional input
tax credit. The CTA likewise pointed
out that under RR 7-95, implementing
Section 105 of the old NIRC, the 8%
transitional input tax credit should be
based on the value of the
improvements on land such as
buildings, roads, drainage system and
other similar structures, constructed
on or after January 1, 1998, and not
on the book value of the real
property.

26. CIR v. San Roque, G.R. The taxpayer can file the San Roque is a domestic corporation Whether San Roque is entitled to NO. Section 112(D) of the 1997 Tax Code
No. 187485, February 12, judicial claim (1) only within duly organized and existing under a tax refund. is clear, unequivocal, and categorical that
2013. thirty days after the and by virtue of the laws of the the Commissioner has 120 days to act on
Commissioner partially or Philippines with principal office at an administrative claim. The taxpayer can
fully denies the claim within Barangay San Roque, San Manuel, file the judicial claim (1) only within
the 120- day period, or (2) Pangasinan. As a seller of services, thirty days after the Commissioner
only within thirty days from San Roque is duly registered with the partially or fully denies the claim within
the expiration of the 120- BIR with TIN/VAT No. 005-017-501. the 120- day period, or (2) only within
day period if the thirty days from the expiration of the
Commissioner does not act On October 11, 1997, San Roque 120-day period if the Commissioner does
within the 120-day period. entered into a Power Purchase not act within the 120-day period.13
Agreement ("PPA") with the National
Note: This period has Power Corporation ("NPC") to There can be no dispute that upon
already been amended by develop hydro-potential of the Lower effectivity of the 1997 Tax Code on 1
TRAIN Law. Agno River and generate additional January 1998, or more than five years

13
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
72
power and energy for the Luzon
Power Grid, by building the San
Roque Multi-Purpose Project located
in San Manuel, Pangasinan.
On the construction and
development of the San Roque Multi-
Purpose Project which comprises of
the dam, spillway and power plant,
[San Roque] allegedly incurred,
excess input VAT in the amount of
₱559,709,337.54 for taxable year
2001 which it declared in its Quarterly
VAT Returns filed for the same year.
[San Roque] duly filed with the BIR
separate claims for refund, in the total
amount of ₱559,709,337.54,
representing unutilized input taxes as
declared in its VAT returns for taxable
year 2001.
However, on March 28, 2003, [San
Roque] filed amended Quarterly VAT
Returns for the year 2001 since it
increased its unutilized input VAT to
the amount of ₱560,200,283.14.
Consequently, [San Roque] filed with
the BIR on even date, separate
amended claims for refund in the
aggregate amount of
₱560,200,283.14.
CIR's inaction on the subject claims
led to the filing by San Roque of the
Petition for Review with the Court of
Tax Appeals in Division on April 10,
2003.
73
before San Roque filed its administrative
claim on 28 March 2003, the law has been
clear: the 120- day period is mandatory
and jurisdictional. San Roque’s claim,
having been filed administratively on 28
March 2003, is governed by the 1997 Tax
Code, not the 1977 Tax Code. Since San
Roque filed its judicial claim before the
expiration of the 120-day mandatory and
jurisdictional period, San Roque’s claim
cannot prosper.
San Roque cannot also invoke Section
4.106-2(c), which expressly provides that
the taxpayer can only file the judicial claim
"after" the lapse of the 60-day period
from the filing of the administrative claim.
San Roque filed its judicial claim just 13
days after filing its administrative claim.
To recall, San Roque filed its judicial claim
on 10 April 2003, a mere 13 days after it
filed its administrative claim.
Even if, contrary to all principles of
statutory construction as well as plain
common sense, we gratuitously apply now
Section 4.106-2(c) of Revenue Regulations
No. 7-95, still San Roque cannot recover
any refund or credit because San Roque
did not wait for the 60-day period to
lapse, contrary to the express requirement
in Section 4.106-2(c). In short, San Roque
does not even comply with Section 4.106-
2(c). A claim for tax refund or credit is
strictly construed against the taxpayer,
who must prove that his claim clearly
complies with all the conditions for
 granting the tax refund or credit. San
CIR alleged that the claim by San Roque did not comply with the express
Roque was prematurely filed with the condition for such statutory grant.
CTA.

27. CIR v. Dash So long as the Dash Engineering is a VAT-registered Whether the claim was filed out YES. The claim was filed too late.
Engineering, G.R. No. administrative claim is filed company engaged in the export sales of time.
184145, December 11, with the CIR within the two- of computer-aided engineering and Jurisprudence so holds that the two year
2013. 
 year prescriptive period, the design. prescriptive period under Section 229 of
30-day period given to the the NIRC applies only to an administrative
taxpayer to file a judicial Dash Engineering filed its monthly claim with the CIR and, when read
claim with the court need and quarterly VAT returns for the together with Section 112 of the NIRC
not fall in the same two- period of January 1, 2003 to June 30, means, that an administrative claim must
year period. 2003. It thus filed a claim for tax credit be filed with the CIR within the two year
or refund representing the unused prescriptive period. The petitioner’s filing
VAT input attributable to its zero- within that two-year prescriptive period
rated sales. starts the running of the 120+30 day
period mandated under Section 112 of
The CIR failed to act on the said claim. the NIRC.14 In other words, as long as the
Dash Engineering sought recourse administrative claim is filed with the CIR
with the Court of Tax Appeals by filing within the two-year prescriptive period,
a petition for review on May 5, 2005. the 30-day period given to the taxpayer to
The CTA issued its decision partially file a judicial claim with the court need not
granting the petition of Dash fall in the same two-year period.
Engineering. It ratiocinated that the
claims for refund for the first and In this case, although Dash Engineering
second quarters of 2003 were filed seasonably filed its administrative claim
within the two-year prescriptive with the CIR within the two year
period counted from the date of filing prescriptive period as prescribed under
of the return and payment of the tax Sec 229, on August 9, 2004, it nevertheless
due. did not comply with the 120+30 day
prescriptive period under Sec 112 since
As held by the CTA, Dash Engineering the judicial claim was filed only on May 5,
was correct in anchoring said petition 2005. Almost four months after the period
on Sec. 229 of the NIRC which states

14
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.
74
 that the prescriptive period for filing a provided for by law. The claim is thus
refund is two years. Because both barred.
were filed on July 24, 2004, it had until
July 24, 2006 to file a judicial claim.

The CIR argues on appeal that Sec

112 of the NIRC was the applicable
statute wherein it states that the CIR
shall have 120 days to act on the said
petition and in case of inaction, the
petitioner is granted 30 days to
elevate the case with the CTA.
Following Sec 112, the claim was filed
out of time. The CIR argues that
judicial recourse within 30 days after
the lapse of the 120 - day period is
mandatory and jurisdictional.

28. Accenture, Inc. vs. CIR, Recipient of services must Accenture, Inc. (Accenture), a Whether petitioner’s sale of
G.R. No. 190102, July 11, be doing business outside registered Value Added Tax (VAT) goods and services are subjected
2012. the Philippines in order for taxpayer, is engaged in providing to 0% VAT.
the transactions to qualify management consultancy, business
as zero-rated. strategies development, and selling
and/or licensing of software.
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 so Accenture
filed a Petition for Review with the
Court of Tax Appeals (Division).
The Commissioner of Internal
Revenue (CIR) argued that the sale by
Accenture of goods and services to its
clients are not zero-rated transactions
75
NO. The petitioner’s sale of goods and
services are not subjected to 0% VAT for
failure to prove such fact.
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.
The recipient of the service must be doing
business outside the Philippines for the
transaction to qualify for zero-rating
under the Section 108(B) of the 1997 Tax
Code. Because Section 108(B) of the 1997
Tax Code is a verbatim copy of Section
102(b) of the 1977 Tax Code, any
interpretation of the latter holds true for
the former.

29. Western Mindanao In a claim of tax refund or
Power Corp. vs. CIR, G.R. tax credit, one must present
No. 181136, June 13, 2012. evidence to support such
claim in the form of a VAT
invoice or official receipt.
and that the claims for refund are
construed strictly against the
claimant, and Accenture has failed to
prove that it is entitled to a refund,
because its claim has not been fully
substantiated or documented.
The Division denied the petition for
failing to prove that the latter’s sale of
services to the alleged foreign clients
qualified for zero percent VAT.
Western Mindanao Power Corp.
(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 and its power
generation services to National Power
Corporation is zero-rated pursuant to
Section 108(B) (3) of the National
Internal Revenue Code (NIRC).
76
Whether WMPC is entitled to its
claim of tax refund pursuant to
Section 112 of the NIRC in
relation to Sections 113 and
4.108-1 of RR 7-95.
In Commissioner of Internal Revenue v.
Burmeister and Wain Scandanavian
Contractor Mindanao, Inc., 515 SCRA 124,
the Court ruled that another essential
condition for qualification for zero-rating
under Section 102(b)(2) of the 1977 Tax
Code is that the recipient of the services
should be doing business outside the
Philippines. In the case of Amex, it was
ruled that although the place of the
consumption of services does not affect
the entitlement of a transaction to zero-
rating, the place where the recipient
conducts its business does.
Accenture failed to establish that the
recipients of its services do business
outside the Philippines. The evidence
presented may have established that its
clients are foreign, but this does not
automatically mean that these clients
were doing business outside the
Philippines.
NO. 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, but 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 the
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

30. Silicon Phil., Inc. vs. CIR, A tax credit or refund, like
G.R. No. 172378, January tax exemption is strictly
17, 2011. construed against the
taxpayer. Noncompliance
with the mandatory
periods, non-observance of
the prescriptive periods,
and non-adherence to the
exhaustion of
administrative remedies bar
a taxpayer’s claim for
refund or credit whether or
not the CIR questions the
numerical correctness of
the claim of the taxpayer.
Petitioner claims that Under Section
112(A) of the NIRC, 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 and that
the invoicing and accounting
requirements laid down in Revenue
Regulation (RR) 7-95 were merely
“compliance requirements,” which
were not indispensable to establish
the claim for refund of excess and
unutilized input VAT. Respondent
argues 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 Section
4.108-1 of RR 7-95.
Silicon Philippines, Inc. is a VAT- Whether the CTA have
registered entity engaged in the jurisdiction over SPI's petitions
business of designing, developing, for review.
manufacturing and exporting
advance and large-scale integrated
circuit components. On August 6,
1999, Silicon filed with the CIR a claim
for tax credit or refund of
representing VAT input taxes on its
domestic purchases of goods and
services and importation of goods
and capital equipment which are
attributable to zero-rated sales. Due
77
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 RR 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.”
NO, the CTA did not acquire jurisdiction
over SP's petitions.
Periods for appeal in tax cases are
jurisdictional in nature. Any claim filed in
a period less than or beyond the 120-day
period or the 30-day period provided by
the Tax Code is outside the jurisdiction of
the CTA.
In this case, SP's 3 petitions were 502 days,
261 days and 332 days late.
Because the 30-day period for filing its
judicial claim had already prescribed by
 to the inaction of the CIR15, Silicon the time SPI filed its Petition for Review
filed a Petition for Review with the with the CTA Division, the CTA Division
CTA to toll the running of the two- never acquired jurisdiction over the said
year prescriptive period. Petition. The CTA Division had absolutely
no jurisdiction to act upon, take
The CTA Division rendered a Decision cognizance of, and render judgment upon
only partially granting the claim of SPI the Petition for Review of SPI, regardless
for tax credit/refund. The CTA of the merit of the claim of SPI. The Court
Division disallowed the claim of SPI stresses that the 120/30-day prescriptive
for tax credit/refund of input VAT for periods16 are mandatory and jurisdictional
failure of SPI to properly substantiate and are not mere technical requirements.
the zero-rated sales to which it
attributed said taxes. The CTA The Court should not establish the
Division particularly pointed out the precedent that noncompliance with
failure of SPI to comply with invoicing mandatory and jurisdictional conditions
requirements under Sections 113, can be excused if the claim is otherwise
237, and 238 of the National Internal meritorious, particularly in claims for tax
Revenue Code of 1997 (1997 Tax refunds or credit. Such precedent will
Code) and Section 4.108-1 of render meaningless compliance with
Revenue Regulations No. 7-95, i.e., mandatory and jurisdictional
registration of receipts or sales or requirements.
commercial invoices with the BIR;
securing an authority to print receipts As this Court has repeatedly emphasized,
or sales or commercial invoices from a tax credit or refund, like tax exemption,
the BIR; and imprinting the words is strictly construed against the taxpayer.
"zero-rated" on the invoices covering The taxpayer claiming the tax credit or
zero-rated sales. refund has the burden of proving that he
is entitled to the refund by showing that
Silicon then filed for a Petition for he has strictly complied with the
Review after the denial of their conditions for the grant of the tax refund
Motion for Reconsideration and the or credit. Strict compliance with the
mandatory and jurisdictional conditions

15
Under Revenue Regulation No. 26-2018, inaction is no longer deemed denial as BIR officials are mandated to state in writing the legal and factual basis for the denial, and failure to take action within 90 days shall be
punishable under the tax code.

16
Section 112(C) of the NIRC, as amended by TRAIN Law (R.A. No. 10963), reduced the 120-day period within which the CIR shall decide the claim for tax credit or refund of input taxes to 90 days. Supra note at 1.

78

31. Renato V. Diaz, et al. vs.
Secretary of Finance, et al.,
G.R. No. 193007, July 19,
2011.
VAT on tollway operations
cannot be a tax on tax even
if toll fees were deemed as
a "user's tax." VAT is
assessed against the
tollway operator's gross
receipts and not necessarily
on the toll fees. Although
the tollway operator may
shift the VAT burden to the
tollway user, it will not make
the latter directly liable for
the VAT. The shifted VAT
burden simply becomes
part of the toll fees that one
has to pay in order to use
the tollways.
dismissal from the CTA En banc for
lack of merit.
Petitioners Renato V. Diaz and Aurora
Ma. F. Timbol filed a petition for
declaratory relief assailing the validity
of the impending imposition of value-
added tax (VAT) by the Bureau of
Internal Revenue (BIR) on the
collections of tollway operators.
79
1. Whether the government is
unlawfully expanding VAT
coverage by including tollway
operators and tollway
operations in the terms
"franchise grantees" and "sale of
services" under Section 108 of
the Code.
2. Whether the imposition of
VAT on tollway operators a)
amounts to a tax on tax and not
a tax on services; b) will impair
the tollway operators' right to a
reasonable return of investment
under their TOAs; and c) is not
administratively feasible and Essentially, tollway operators construct,
cannot be implemented.
prescribed by law to claim such tax refund
or credit is essential and necessary for
such claim to prosper. Noncompliance
with the mandatory periods,
nonobservance of the prescriptive
periods, and nonadherence to exhaustion
of administrative remedies bar a
taxpayer’s claim for tax refund or credit,
whether or not the CIR questions the
numerical correctness of the claim of the
taxpayer.
For failure of Silicon to comply with the
provisions of Section 112(C) of the NIRC,
its judicial claims for tax refund or credit
should have been dismissed by the CTA
for lack of jurisdiction.
1. NO. The law imposes VAT on "all kinds
of services" rendered in the Philippines for
a fee. The enumeration of affected
services is not exclusive. By qualifying
"services" with the words "all kinds,"
Congress has given the term "services" an
all-encompassing meaning. The listing of
specific services is intended to illustrate
how pervasive and broad the VAT's reach
is rather than establish concrete limits to
its application. Thus, every activity that
can be imagined as a form of "service"
rendered for a fee should be deemed
included unless some provision of law
especially excludes it.
maintain, and operate expressways, also
called tollways, at the operators' expense.
 Tollways serve as alternatives to regular
public highways that meander through
populated areas and branch out to local
roads.

When a tollway operator takes a toll fee

from a motorist, the fee is in effect for the
latter's use of the tollway facilities over
which the operator enjoys private
proprietary rights that its contract and the
law recognize. In this sense, the tollway
operator is no different from the service
providers under Section 108.

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.

Tollway operators are, owing to the nature

and object of their business, "franchise
grantees." The construction, operation,
and maintenance of toll facilities on public
80
 improvements are activities of public
consequence that necessarily require a
special grant of authority from the state.

2. NO. In sum, fees paid by the public to

tollway operators for use of the tollways,
are not taxes in any sense. A tax is
imposed under the taxing power of the
government principally for the purpose of
raising revenues to fund public
expenditures.

Parenthetically, VAT on tollway operations

cannot be deemed a tax on tax due to the
nature of VAT as an indirect tax. In indirect
taxation, a distinction is made between
the liability for the tax and burden of the
tax. The seller who is liable for the VAT
may shift or pass on the amount of VAT it
paid on goods, properties or services to
the buyer. In such a case, what is
transferred is not the seller's liability but
merely the burden of the VAT.

Consequently, VAT on tollway operations

is not really a tax on the tollway user, but
on the tollway operator. Under Section
105 of the Code, VAT is imposed on any
person who, in the course of trade or
business, sells or renders services for a fee.
In other words, the seller of services, who
in this case is the tollway operator, is the
person liable for VAT. The latter merely
shifts the burden of VAT to the tollway
user as part of the toll fees.

81

32. KEPCO Phils. V. CIR, Actions for tax refund, as in
G.R. No. 179961, 31 this case, are in the nature
January 2011. of a claim for exemption
and the law is construed in
strictissimi juris against the
taxpayer. Thus, failure to
comply with the invoicing
requirements, the purpose
of which is to segregate
sales subject to 12% from
those that are zero-rated,
results in a denial of a claim
for refund.
Kepco is a domestic corporation
engaging in the sale of electricity to
NPC, a tax-exempt entity, with a
special charter under R.A. 6395.
Kepco is claiming for a refund
corresponding to its reported
unutilized input VAT for the four
quarters of 1999. However, the CTA
denied Kepco’s claim for failure to
properly substantiate its effectively
zero-rated sales. It held that Kepco
failed to comply with the invoicing
requirements in clear violation of
Section 4.108-1 of Revenue
Regulations.
It is Kepco’s position that (1) it is not
mandatory to imprint the words
“zero-rated”; (2) there is no law or
regulation which imposes an
automatic denial of a refund claim.
82
1. Whether petitioner’s failure to
imprint the words “zero-rated”
on its vat official receipts issued
to NPC is fatal to its claim for
refund of unutilized input tax
credits.
2. Whether Section 4.801-1
expanded Section 113 of the
NIRC
For this reason, VAT on tollway operations
cannot be a tax on tax even if toll fees
were deemed as a "user's tax." VAT is
assessed against the tollway operator's
gross receipts and not necessarily on the
toll fees. Although the tollway operator
may shift the VAT burden to the tollway
user, it will not make the latter directly
liable for the VAT. The shifted VAT burden
simply becomes part of the toll fees that
one has to pay in order to use the
tollways.
1. YES. Well-settled in this jurisdiction is
the fact that actions for tax refund, as in
this case, 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. It is incumbent upon Kepco, for
the effective zero-rating of such services
to comply with the invoicing
requirements. Section 4.108-1
implementing Sections 113 and 237 of the
NIRC provides that the word “zero-rated”
must be imprinted on the invoice covering
zero-rated sales.
2. NO. Said section 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

33. CIR vs. Sony Phil., Inc., For a seller to be subject to
G.R. No. 178697, Value-Added Tax (VAT),
November 17, 2010. there must be sale, barter or
exchange of goods or
properties or render of
service in the course of
trade or business. Hence,
when no services were
provided nor sales, barter
or exchange of goods or
properties, the
reimbursement of cost shall
not be subject to VAT.
with the efficient collection of VAT from
the covered sales of goods and services.
The appearance of the word “zero-rated”
on the face of invoices covering zero-
rated sales prevents buyers from falsely
claiming input VAT from their purchases
when no VAT was actually paid. If, absent
such word, a successful claim for input
VAT is made, the government would be
refunding money it did not collect.
Further, the printing of the word “zero-
rated” on the invoice helps segregate
sales that are subject to 10% (now 12%)
VAT from those sales that are zero-rated.
A final assessment for 1997 deficiency Whether the subsidy received by NO. SC agrees that the subsidy may be
taxes and penalties was issued by the Sony Corporation can be subject considered as income and, therefore,
Commissioner of Internal Revenue to VAT. subject to income tax. However, the Court
(CIR) which Sony Philippines, Inc. does not agree that the same subsidy
(Sony) protested. Due to inaction, should be subject to the VAT. To begin
Sony filed a petition for review before with, the said subsidy termed by the CIR
the Court of Tax Appeal (CTA). The as reimbursement was not even
CTA-First Division cancelled the exclusively earmarked for Sony’s
deficiency VAT assessment because advertising expense for it was but an
the subsidized advertising expense assistance or aid in view of Sony’s dire or
paid by Sony which was duly covered adverse economic conditions, and was
by a VAT invoice resulted in an input only equivalent to the latter’s (Sony’s)
VAT credit. advertising expenses.
The transaction involved was from Pursuant to Sec. 106 of the Tax Code,
Sony International Singapore (SIS) there must be a sale, barter or exchange
who granted to Sony a subsidy of goods or properties before any VAT
equivalent to the latter’s advertising may be levied. Certainly, there was no
expenses, due to adverse economic such sale, barter or exchange in the
conditions. The CIR argued that subsidy given by SIS to Sony. It was but a
Sony’s advertising expense could not dole out by SIS and not in payment for
be considered as an input VAT credit goods or properties sold, bartered, or
83

34. Panasonic If the appearance of the
Communications Imaging word “zero-rated” on the
Corp. of the Phil. vs. CIR, face of invoices covering
G.R. No. 178090, February 
 zero-rated sales is absent,
8, 2010. such failure will result in the
disallowance of the
taxpayer’s claim for refund.
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. As
a result, Sony is not entitled to a tax
credit. The CIR further argued that
Sony itself admitted that the
reimbursement from SIS was income
and, thus, taxable.
Panasonic, a VAT registered
enterprise, produces and exports
copiers and its parts. Panasonic
believed that its export sales were
zero-rated for VAT, so they paid input
VAT attributable to its zero-rated
sales. Panasonic claimed that the
input VAT it paid remained unutilized
hence they applied for refund or tax
credit of what it paid.
Panasonic’s petition was denied for
while Panasonic’s export sales were
subject to 0% VAT, the same did not
qualify for zero-rating because the
word “zero-rated” was not printed on
Panasonic’s export invoices.
84
Whether the CTA En Banc
correctly denied Panasonic’s
claim for refund of the VAT it
paid as a zero-rated taxpayer on
the ground that its sales invoices
did not state on their faces that
its sales were “zero-rated.”
exchanged by Sony. Sony did not render
any service to SIS at all.
YES. Panasonic’s claim for refund was
correctly denied for failure to comply with
invoicing requirements.
The requirement is reasonable and is in
accord with the efficient collection of VAT
from the covered sales of goods and
services. As aptly explained by the CTA's
First Division, the appearance of the word
"zero-rated" on the face of invoices
covering zero-rated sales prevents buyers
from falsely claiming input VAT from their
purchases when no VAT was actually paid.
If, absent such a word, a successful claim
for input VAT is made, the government
would be refunding money it did not
collect.
Further, the printing of the word "zero-
rated" on the invoice helps segregate
sales that are subject to 10% (now 12%)
VAT from those sales that are zero-rated.
Unable to submit the proper invoices,
petitioner Panasonic has been unable to
substantiate its claim for refund.

35. CIR v. SM Prime Theaters and movie houses
Holdings, Inc., G.R. No. are not included in the
183505, February 26, 2010. enumeration of taxable

 services in the VAT law.
Our tax laws, past and
present, did not adapt more
specific terms in defining
"sale or exchange of
services" to include the
showing of films in public
by the owners, operators, or
proprietors of movie or
cinema houses or theaters
as subject to value-added
tax.
SM Prime and First Asia are domestic
corporations duly organized and
existing under the laws of the
Philippines, both are engaged in the
business of operating cinema houses.
Both were assessed with VAT
deficiencies on cinema ticket sales by
the BIR and their protests were
denied.
85
Whether gross receipts derived
from admission tickets by
cinema/theater operators or
proprietors are subject to VAT.
Statutes that grant tax exemptions are
construed strictissimi juris against the
taxpayer and liberally in favor of the
taxing authority. Tax refunds in relation to
the VAT are in the nature of such
exemptions. The general rule is that
claimants of tax refunds bear the burden
of proving the factual basis of their claims.
Taxes are the lifeblood of the nation.
Therefore, statutes that allow exemptions
are construed strictly against the grantee
and liberally in favor of the government.
NO. A reading of Section 108 of the NIRC
of the 1997 clearly shows that the
enumeration of the "sale or exchange of
services" subject to VAT is not exhaustive.
The words, "including," "similar services,"
and "shall likewise include," indicate that
the enumeration is by way of example
only. Among those included in the
enumeration is the "lease of motion
picture films, films, tapes and discs." This,
however, is not the same as the showing
or exhibition of motion pictures or films.
The legislature never intended operators
or proprietors of cinema/theater houses
to be covered by VAT. The removal of the
prohibition under the Local Tax Code did
not grant nor restore to the national
government the power to impose
amusement tax on cinema/theater
operators or proprietors. Neither did it
expand the coverage of VAT. Since the
imposition of a tax is a burden on the

36. Tambunting Pawnshop, NIRC, Sec. 109 VAT Exempt
Inc. v. CIR, G.R. No. 179085, Transactions - (V) Services
January 21, 2010.
taxpayer, it cannot be presumed, nor can
it be extended by implication.
A law will not be construed as imposing a
tax unless it does so clearly, expressly, and
unambiguously. As it is, the power to
impose amusement tax on
cinema/theater operators or proprietors
remains with the local government.
Petitioner pawnshop protested an Whether pawnshops are liable to NO. In the case of First Planter s
assessment made by the CIR for pay VAT. Pawnshop, Inc. v. CIR, the Court already
of banks, non-bank deficiency on value-added tax for the held that since 2004, pawnshops are
financial intermediaries taxable year 1999 before the CTA, classified as Other Non-bank Financial
performing quasi-banking arguing that pawnshops are not Intermediaries subject to 0% to 5%
functions, and other non- subject to VAT pursuant to Sec. 108 of percentage tax on gross receipts by virtue
bank financial the NIRC which does not expressly of R.A. No. 9238. However, pawnshops
intermediaries; enumerate pawnshops as one of should have been treated as non-bank
those engaged in “sale or exchange of financial intermediaries from the very
NIRC, TITLE V - Other services”. He argued that the nature beginning subject to specific taxes
Percentage Taxes, Sec. 121 - of business of pawnshops does not provided by law. With the imposition of
Tax on Banks and Non-bank fall under “service”. CTA ruled that VAT under R.A. No. 7716, pawnshops
Financial Intermediaries petitioner is liable for VAT. Hence, should have been subjected to 10% VAT
Performing Quasi-Banking petitioner filed this petition before imposed on banks and non-bank financial
Functions. the SC. intermediaries. However, the levy,
collection, and assessment of the 10%
VAT imposed on banks and non-bank
financial intermediaries and other
financial intermediaries not performing
quasi-banking operations was deferred
for the tax years 1996-2002 by virtue of
several laws passed by Congress. Finally,
the levy, collection, and assessment of the
10% VAT was made effective beginning in
2003. However, with the enactment of R.A.
No. 9238 in 2004, the services of banks,
non-bank financial intermediaries, finance
86
 companies, and other financial
intermediaries not performing quasi-
banking functions were specifically
exempted from VAT and the 0% to 5%
percentage tax on gross receipts on other
non-bank financial intermediaries was
reimposed under Sec. 122 of the Tax Code
of 1997.

Since imposition of VAT on pawnshops,

which are non-bank financial
intermediaries, was deferred for the tax
years 1996-2002, petitioner is not liable
for VAT for the tax year 1999.

37. CIR vs. Burmeister and In order for services to be Burmeister and Wain Scandinavian Whether BWSCMI should be NO. Section 102 of the NIRC (Now Section
Wain Scandinavian subjected to 0% VAT it must Contractor Mindanao Inc. (BWSCMI), subject to 0% VAT as it is 108) provides the requirements in order
Contractor Mindanao, Inc., meet the following a domestic company, was performing services for a for services subjected to 0% VAT. In this
G.R. No. 153205, 
January requirements: subcontracted by the Consortium to person/company doing business case, the recipient of the services of
22, 2007. 1. Services should be operate and maintain power barges outside of the Philippines. BWSCMI is the consortium. While the
other than “processing, awarded by the NAPOCOR. BWSCMI Consortium’s principal members are non-
manufacturing or asked for a ruling from BIR to ensure resident foreign corporations, the
repacking of goods.” the tax implications on the services it Consortium itself is doing business in the
2. Services are paid in will perform in favor of the Philippines. The Consortium’s contract
acceptable foreign Consortium. It was able to secure two with NAPOCOR is for a term of 15 years.
currency and are BIR rulings stating that it shall be Considering the length of time that the
accounted for in subject to zero-rated VAT. However, Consortium will operate and maintain the
accordance with the BWSCMI mistakenly paid for VAT. On power barges it cannot be classified as a
Bangko Sentral ng the strength of the two rulings single or isolated transaction.
Pilipinas rules. BWSCMI filed a claim for the issuance
3. Recipient of such of a tax credit in its favor. To stop the
service is doing prescriptive period of the tax credit
business outside the BWSCMI filed a petition for review
Philippines. with the CTA. BIR claimed that in
order for BWSCMI to enjoy the zero-
rating for VAT the services it performs
should be destined to be consumed
87
 abroad as stated in Sec. 102 of the
NIRC.

38. CIR v. American Express As a general rule, the VAT
International, Inc., G.R. No. system uses the destination
152609, June 29, 2005. principle. However, our VAT
law itself provides for a
clear exception, under
which the supply of service
shall be zero-rated when
the following requirements
are met: (1) the service is
performed in the
Philippines; (2) the service
falls under any of the
categories provided in
Section 102(b) of the Tax
Code; and (3) it is paid for in
acceptable foreign currency
that is accounted for in
accordance with the
regulations of the Bangko
Sentral ng Pilipinas. If
services meet these
requirements, they are
zero-rated.
Respondent is a Ph branch of Whether AMEX Philippines is YES. Section 102 (now Section 108) (B) (2)
American Express International with entitled to a refund. of the Tax Code provides for the services
an office in the Ph. Respondent, a VAT
taxpayer, is tasked with servicing a
unit of AMEX-Hongkong Branch. It
facilitates the collection of the latter’s
receivables from card members
situated in the Philippines and
payment to service establishments in
the Philippines. It filed with BIR a
letter-request for the refund of its
1997 excess input taxes, citing as
basis Section 110B of the 1997 Tax
Code. In addition, respondent relied
on VAT Ruling No. 080-89 dated April
3, 1989. Petitioner CIR claimed,
among others, that the claim for
refund should be construed strictly
against the claimant as they partake
of the nature of tax exemption.
or transactions subject to 0% rate. As a
general rule, the VAT system uses the
destination principle as a basis for the
jurisdictional reach of the tax. In the
present case, the services rendered by
respondent are performed upon its
sending to its foreign client the credit card
drafts and bills it has gathered from
service establishments here, and are
therefore, services also consumed in the
Philippines
Under the destination principle, such
service is subject to 10% VAT. However,
the law clearly provides for an exception
to the destination principle--- that is 0%
VAT rate for services that are performed
in the Philippines, “paid for in acceptable
foreign currency and accounted for in
accordance with the rules and regulations
of BSP.” The respondent meets
requirements for exemption, and thus
should be zero-rated.

39. CIR v. Cebu Toyo Under the value-added tax Respondent Cebu Toyo Corporation Whether the respondent subject YES. In this case, it is undisputed that
Corporation, G.R. No. system, a zero-rated sale by is a zone export enterprise registered to 0% VAT can claim a refund for respondent is engaged in the export
149073, February 17, 2005. a VAT-registered person, with the Philippine Economic Zone the unutilized input VAT. business and is registered as a VAT

 which is a taxable Authority (PEZA) and is registered taxpayer per Certificate of Registration of
transaction for VAT with the Bureau of Internal Revenue the BIR. Further, the records show that the
purposes, shall not result in (BIR) as a VAT taxpayer. respondent is subject to VAT as it availed
any output tax. However, of the income tax holiday under E.O. No.
the input tax on his 226. Perforce, respondent is subject to
88
 purchase of goods,
properties or services
related to such zero-rated
sale shall be available as tax
credit or refund.
40. Contex Corp. vs. Only VAT-Registered
Commissioner of Internal entities can claim Input VAT
Revenue, G.R. No. 151135, Credit/Refund. Petitioner is
July 2, 2004. registered as a NON-VAT
taxpayer and thus, is
exempt from VAT. As an
exempt VAT taxpayer, it is
not allowed any tax credit
Inasmuch as its sales are considered
export sales subject to Value-Added
Tax (VAT) at 0% rate, respondent filed
its quarterly VAT returns showing
excess input VAT. With this,
respondent filed for tax credit/refund.
Both the CIR and the Office of the
Solicitor General argue that the
respondent, as a PEZA-registered
enterprise, is exempt from national
and local taxes, including VAT. Thus,
they contend that the respondent is
not entitled to any refund or credit on
input taxes it previously paid,
notwithstanding its registration as a
VAT taxpayer.
The respondent counters that it
availed of the income tax holiday
under E.O. No. 226 for four years from
August 7, 1995 making it exempt
from income tax but not from other
taxes such as VAT.
Petitioner is a domestic corporation
engaged in the business of
manufacturing hospital textiles and
garments and other hospital supplies
for export. Petitioner's place of
business is at the Subic Bay Freeport
Zone (SBFZ). It is duly registered with
the Subic Bay Metropolitan Authority
(SBMA) as a Subic Bay Freeport
89
Whether petitioner is entitled to
a tax refund on its purchases of
supplies and raw materials for
1997 and 1998.
VAT at 0% rate and is entitled to a refund
or credit of the unutilized input taxes.
While the zero rating and the exemption
are computationally the same, they differ
in several aspects, to wit:
(a) A zero-rated sale is a taxable
transaction but does not result in an
output tax while an exempted
transaction is not subject to the
output tax;
(b) The input VAT on the purchases
of a VAT-registered person with
zero-rated sales may be allowed as
tax credits or refunded while the
seller in an exempt transaction is not
entitled to any input tax on his
purchases despite the issuance of a
VAT invoice or receipt.
(c) Persons engaged in transactions
which are zero-rated, being subject
to VAT, are required to register while
registration is optional for VAT-
exempt persons.
NO. Under Zero-rating, all VAT is
removed from the zero-rated goods,
activity or firm. In contrast, exemption
only removes the VAT at the exempt
stage, and it will actually increase, rather
than reduce the total taxes paid by the
exempt firm's business or non-retail
customers. It is for this reason that a sharp
distinction must be made between zero-
on VAT (input tax) Enterprise, pursuant to the provisions
previously paid. of R.A. No. 7227. As an SBMA-
registered firm, petitioner is exempt
from all local and national internal
revenue taxes except for the
preferential tax provided for in
Section 12(c) of R.A. No. 7227.
Petitioner also registered with the
Bureau of Internal Revenue (BIR) as a
non-VAT taxpayer under Certificate of
Registration RDO Control No. 95-
180-000133.
From January 1, 1997 to December
31, 1998, petitioner purchased
various supplies and materials
necessary in the conduct of its
manufacturing business. The suppliers
of these goods shifted unto petitioner
the 10% VAT on the purchased items,
which led the petitioner to pay input
taxes in the amounts of P539,411.88
and P504,057.49 for 1997 and 1998,
respectively. Acting on the belief that
it was exempt from all national and
local taxes, including VAT, pursuant to
R.A. No. 7227, petitioner filed two
applications for tax refund or tax
credit of the VAT it paid. Mr. Carlos,
revenue district officer of BIR RDO No.
19, denied the first application letter,
dated December 29, 1998.
Petitioner on May 4, 1999, filed
another application for tax
refund/credit, this time directly with
Atty. Pagabao, the RD of BIR Revenue
90
rating and exemption in designating a
value-added tax.
The petitioner's claim to VAT exemption
in the instant case for its purchases of
supplies and raw materials is founded
mainly on Section 12(b) and (c) of Rep. Act
No. 7227, which basically exempts them
from all national and local internal
revenue taxes, including VAT and Section
4(A)(a) of BIR Revenue Regulations No. 1-
95. On this point, petitioner rightly claims
that it is indeed VAT-Exempt, and this fact
is not controverted by the respondent. In
fact, petitioner is registered as a NON-
VAT taxpayer per Certificate of
Registration issued by the BIR. As such, it
is exempt from VAT on all its sales and
importations of goods and services.
Petitioner's claim, however, for exemption
from VAT for its purchases of supplies and
raw materials is incongruous with its claim
that it is VAT-Exempt, for only VAT-
Registered entities can claim Input VAT
Credit/Refund. The point of contention
here is whether the petitioner may claim a
refund on the Input VAT erroneously
passed on to it by its suppliers. 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. It may not
be amiss to re-emphasize that the
petitioner is registered as a NON-VAT
taxpayer and thus, is exempt from VAT.

41. Atlas Consolidated Section 4.100.2 of Revenue
Mining v. CIR, G.R. No. Regulation 7-95 in relation
134467, November 17, to Section 102 (b) of the Tax
1999. Code shows that sales to an
export-oriented enterprise
whose export sales exceed
70 percent of its annual
production are to be zero-
rated, provided the seller
complies with other
requirements, like
Region No. 4. The second letter
sought a refund or issuance of a tax
credit certificate in the amount of
P1,108,307.72, representing
erroneously paid input VAT for the
period January 1, 1997 to November
30, 1998. When no response was
forthcoming from the BIR-RD,
petitioner then elevated the matter to
the CTA. Petitioner stressed that
Section 112(A) if read in relation to
Section 106(A)(2)(a) of the NIRC, as
amended and Section 12(b) and (c) of
R.A. No. 7227 would show that it was
not liable in any way for any value-
added tax. The petition is partially
granted by the CTA and ordered
respondents to refund or in the
alternative to issue a tax credit
certificate in favor of Petitioner
(683,061.90) However, appealed
decision is hereby reversed and set
aside. Contex's claim for refund of
erroneously paid taxes is denied.
Petitioner Atlas Consolidated and
Mining Corp. was engaged in the
business of mining, production and
sale of various mineral products. It is
duly registered with the BIR as a VAT
enterprise. The BIR also approved
petitioner's application for VAT zero-
rating for the sales of gold to the
Central Bank (CB), copper
concentrates to the Philippine
Smelting and Refining Corp. (PASAR)
and pyrite to Philippine Phosphate,
91
1. Whether the CA erred in
holding that zero-percent rating
of BOI registered enterprises
shall be set only in proportion to
the amount of its actual exports.
2. Whether Section 21 of
Revenue Regulations No. 5-87 is
invalid and contrary to law
insofar as it disallows input taxes
for purchases not covered by
VAT invoices? (Note: No facts
As an exempt VAT taxpayer, it is not
allowed any tax credit on VAT (input tax)
previously paid. In fine, even if we are to
assume that exemption from the burden
of VAT on petitioner's purchases did exist,
petitioner is still not entitled to any tax
credit or refund on the input tax
previously paid as petitioner is an exempt
VAT taxpayer. Rather, it is the petitioner's
suppliers who are the proper parties to
claim the tax credit and accordingly
refund the petitioner of the VAT
erroneously passed on to the latter.
1. YES. The totality, not only the
proportion, of sales to EPZA-registered
enterprises should be zero-rated.
The Joint Stipulation of Facts expressly
states that petitioner's sales of raw
materials have been approved for zero-
rating. Verily, the commissioner has
already conceded that PASAR and
Philphos qualify as export-oriented
enterprises whose export sales exceed 70
percent of their total annual production,
registration with the BOI Inc. (PHILPHOS). The BIR's approval of
and the EPZA; sales to CB and PASAR was dated
April 21, 1988 while zero-rating of
Section 21 of Revenue sales to PHILPHOS was approved
Regulation 5-87 simply effective June 1, 1988. PASAR and
prescribes the penalty for PHILPHOS are both Board of
failure to comply with the Investments (BOI) and Export
accounting and invoicing Processing Zone Authority (EPZA)
requirements laid down in registered as export-oriented
Section 108, a penalty enterprises located in an EPZA Zone.
similar to that found in
Sections 111 and 263. In On July 24, 1990, petitioner filed with
short, Section 108 provides respondent CIR a refund/credit of
the guidelines and VAT input taxes on its purchases of
necessary requirements for goods and services for the first
VAT invoices; Sections 111 quarter of 1990 in the total amount of
and 263 of the Tax Code P35,522,056.58, as amended.
provide penalties for
different types of violations CIR: Allowed only P12,101,569.11 as
of Section 108; and Section refundable/creditable tax.
21 of Revenue Regulation
5-87 specifies the penalty CA:
for a specific violation of ● Zero-percent rating of BOI
Section 108. registered enterprises shall be set
in proportion to the amount of its
actual exports and that EPZA and
BOI registration were by
themselves not enough for zero-
rating to apply.
● Information under Revenue
Regulation 5-87 is required to be
stated in VAT invoices and
receipts, as such information had
already been prescribed by
Sections 108 (a) and 238 of the
Tax Code.
92
related to this were mentioned, it and that petitioner's sales to them thus
was only encapsulated in the qualify for zero-rating.
petition and decided upon by the
CA)
Finding that the respondent
commissioner had indeed already
approved the zero-rating of petitioner's
past sales to PASAR and Philphos, the
totality, not only the proportion, of sales
to EPZA-registered enterprises should be
zero-rated.
Finally, an examination of Section 4.100.2
of Revenue Regulation 7-95 in relation to
Section 102 (b) of the Tax Code shows that
sales to an export-oriented enterprise
whose export sales exceed 70 percent of
its annual production are to be zero-
rated, provided the seller complies with
other requirements, like registration with
the BOI and the EPZA. The said Regulation
does not even hint, much less expressly
mention, that only a percentage of the
sales would be zero-rated.
2. NO, Section 21 of Revenue Regulations
No. 5-87 is not invalid nor contrary to law.
Section 21 of Revenue Regulation 5-87
states:
"Sec. 21. Invoicing Requirements. —
(a) Invoice and/or receipts. — All VAT-
registered persons who sell goods or
services shall, for every sale, issue an
invoice or receipt. The invoice should
contain the information prescribed in
Section 108(a) and 238. Only VAT-
 registered persons can print the VAT
registration number in their invoice
and receipt. Any invoice bearing the
VAT registration number of the seller
shall be considered as 'VAT Invoice.'
Value-Added Tax, whether indicated
as a separate item or not in the 'VAT
Invoice' shall be allowed as input tax
credits to those liable to the value-
added tax. All purchases covered by
invoices other than 'VAT Invoice' shall
not be entitled to input taxes."

Petitioner insists that while Section 108 of

the Tax Code lists the information
necessary for VAT Invoices, it is silent on
the withholding of input tax credits for
purchases that are not subject to VAT.

The Court disagrees. It is clear that a VAT

invoice can be used only for the sale of
goods and services that are subject to
VAT. The corresponding taxes thereon
shall be allowed as input tax credits for
those subject to VAT.

Section 21 of Revenue Regulation 5-87 is

not invalid, as it simply prescribes the
penalty for failure to comply with the
accounting and invoicing requirements
laid down in Section 108, a penalty similar
to that found in Sections 111 and 263. In
short, Section 108 provides the guidelines
and necessary requirements for VAT
invoices; Sections 111 and 263 of the Tax
Code provide penalties for different types
of violations of Section 108; and Section
93
 21 of Revenue Regulation 5-87 specifies
the penalty for a specific violation of
Section 10817.

17
Sec. 108 being referred to here is now Sec. 112, Sec. 111 is now Sec. 115, and Sec. 263 is now Sec. 264 under the NIRC as amended.
94

CASE TITLE CASE PRINCIPLE
1. CIR v. Traders Royal Tax assessments by tax
Bank, G.R. No. 167134, examiners are presumed
March 18, 2015. 
 correct and made in good
faith. The taxpayer has the
duty to prove otherwise. In
the absence of proof of any
irregularities in the
performance of duties, an
assessment duly made by a
Bureau of Internal Revenue
examiner and approved by
his superior officers will not
be disturbed. All
presumptions are in favor
of the correctness of tax
assessments.
DOCUMENTARY STAMP TAX
SUMMARY OF FACTS ISSUE/S
Traders Royal Bank (TRB) is a Whether the Trust Indenture
domestic corporation duly registered Agreement of TRB can be
with the Securities and Exchange considered as deposits and thus
Commission (SEC) and authorized by subject to DST.
the Bangko Sentral ng Pilipinas (BSP)
to engage in commercial banking.
The BIR conducted an investigation
concerning all national internal
revenue tax liabilities of TRB for
taxable years 1996-1997. Following
the investigation, the BIR issued a
Pre-Assessment Notice and later on
issued a Formal Letter of Demand and
Assessment Notice against TRB for
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 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 that
relationship established between
parties is that of the trustor and
trustee.
The CIR denied the protest of TRB and
adopted the position of the BIR
95
RULING
YES. The conduct by banks, such as TRB,
of trusts and other fiduciary business (in
1996 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 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
examiners 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.
96
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.
2. CIR vs. The Insular Life Under the Tax Code,
Assurance Co. Ltd., G.R. No. although respondent is a
197192, June 4, 2014. 
 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, and
documentary stamp taxes
on policies of insurance or
annuities it grants.
Petitioner Commissioner of Internal
Revenue is the official duly authorized
under Section 4 of the National
Internal Revenue Code (NIRC) of
1997, as amended, to assess and
collect internal revenue taxes, as well
as the power to decide disputed
assessments, subject to the exclusive
appellate jurisdiction of this Court.
Respondent The Insular Life
Assurance, Co., Ltd. is a corporation
duly organized and existing under
and by virtue of the laws of the
Republic of the Philippines, with
principal office located at IL
Corporate Center, Insular Life Drive,
Filinvest Corporate City, Alabang,
Muntinlupa City. It is registered as a
non-stock mutual life insurer with the
Securities and Exchange Commission.
Respondent received an Assessment
Notice with Formal Letter of Demand
assessing respondent for deficiency
DST on its premiums on direct
business/sums assured for calendar
year 2002, computed as follows:
Documentary Stamp Tax
Deficiency Documentary Stamp
₱70,732,389.83
Tax-Basic
Add: Increments (Interest and
Compromise Penalty) ₱23,201,969.38
Total Amount Due
₱93,934,359.21
97
Whether the CTA En Banc erred
in ruling that respondent is a
cooperative and is thus, exempt
from documentary stamp tax.
NO. The Court has pronounced in
Republic of the Philippines v. Sunlife
Assurance Company of Canada 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 or
annuities it grants, under Section 199."
Section 199 of the NIRC of 1997 provides:
Sec. 199. Documents and Papers Not
Subject to Stamp Tax. The provisions of
Section 173 to the contrary
notwithstanding, the following
instruments, documents and papers shall
be exempt from the documentary stamp
tax:
(a) Policies of insurance or annuities
made or granted by a fraternal or
beneficiary society, order, association
or cooperative company, operated on
the lodge system or local cooperation
plan and organized and conducted
solely by the members thereof for the
exclusive benefit of each member and
not for profit.
The NIRC of 1997 defined a cooperative
company or association as "conducted by
the members thereof with the money
collected from among themselves and
solely for their own protection and not for
profit." Consequently, as long as these
requisites are satisfied, a company or

Thereafter, respondent filed its
Protest Letter which was
subsequently denied by petitioner in
a Final Decision, on Disputed
Assessment for lack of factual and
legal bases. Apparently, respondent
received the aforesaid Final Decision
on Disputed Assessment only on June
23, 2005. Respondent filed a Petition
for Review before the CTA.
The former Second Division of the
CTA rendered a Decision in favor of
respondent, thus, granting the
Petition for Review and held, among
others, that respondent sufficiently
established that it is a cooperative
company and therefore, it is exempt
from the DST on the insurance
policies it grants to its members
98
association is deemed a cooperative
insofar as taxation is concerned.
In this case, the respondent has
sufficiently established that it conforms
with the elements of a cooperative as
defined in the NIRC of 1997 in that it is
managed by members, operated with
money collected from the members and
has for its main purpose the mutual
protection of members for profit.
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.
Second, the provisions of the Cooperative
Code of the Philippines do not apply.
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."
There being no cogent reason for the
Court to deviate from its ruling in Sunlife,

3. CIR vs. Pilipinas Shell The transfer of real Respondent Pilipinas Shell Petroleum
Petroleum Corporation, properties as a Corporation (PSPC) entered into a
G.R. No. 192398, consequence of merger or Plan of Merger with its affiliate, Shell
September 29, 2014. 
 consolidation is not subject Philippine Petroleum Corporation
to documentary stamp tax. (SPPC). In the Plan of Merger, it was
provided that the entire assets and
liabilities of SPPC will be transferred
to, and absorbed by, the respondent
as the surviving entity.
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 and the
amount of P22,101,407.64
representing documentary stamp tax
on the transfer of real property from
SPPC to respondent. Believing that it
erroneously paid documentary stamp
tax on its absorption of real property
owned by SPPC, respondent filed with
petitioner on September 18, 2000, a
formal claim for refund or tax credit of
the documentary stamp tax. No
action was made by the petitioner on
the said claim.
99
the Court holds that the respondent,
being a cooperative company not
mandated by law to be registered with the
CDA, cannot be required under RMC No.
48-91, a mere circular, to be registered
prior to availing of DST exemption.
Whether the transfer of SPPC's NO. The transfer of SPPC's real properties
real properties to respondent is to respondent is not subject to
subject to documentary stamp documentary stamp tax.
tax.
It should be noted that a documentary
stamp tax is in the nature of an excise tax
because it is imposed upon the privilege,
opportunity or facility offered at
exchanges for the transaction of the
business. Documentary stamp tax is a tax
on documents, instruments, loan
agreements, and papers evidencing the
acceptance, assignment, or transfer of an
obligation, right or property incident
thereto. Documentary stamp tax is thus
imposed on the exercise of these
privileges through the execution of
specific instruments, independently of the
legal status of the transactions giving rise
thereto. Based on the foregoing, the
transfer of real properties from SPPC to
respondent is not subject to documentary
stamp tax considering that the same was
not conveyed to or vested in respondent
by means of any specific deed, instrument
or writing. There was no deed of
assignment and transfer separately
executed by the parties for the
conveyance of the real properties. The
conveyance of real properties not being
 embodied in a separate instrument but is
incorporated in the merger plan, thus,
respondent is not liable to pay
documentary stamp tax.

Notably, RA 9243, entitled "An Act

Rationalizing the Provisions of the
Documentary Stamp Tax of the National
Internal Revenue Code of 1997" was
enacted and took effect on April 27, 2004
which exempts the transfer of real
property of a corporation, which is a party
to the merger or consolidation, to another
corporation, which is also a party to the
merger or consolidation, from the
payment of documentary stamp tax.

4. H. Tambunting Deductions for income tax H. Tambunting Pawnshop, Inc. is 1. a 1. Whether the CTA erred in 1. NO. The rule that tax deductions, being
Pawnshop, Inc. v. CIR, G.R. purposes partake of the domestic corporation duly licensed disallowing its deductions on the
in the nature of tax exemptions, are to be
No. 173373, July 29, 2013. 
 nature of tax exemptions and authorized to engage in the ground that it had not construed in strictissimi juris against the
and are strictly construed pawnshop business. on April 24, 2006, substantiated such deductions taxpayer is well settled. Corollary to this
against the taxpayer, who Tambunting appealed the adverse by sufficient evidence. rule is the principle that when a taxpayer
must prove by convincing decision promulgated by the Court of claims a deduction, he must point to some
evidence that he is entitled Tax Appeals En Banc wherein 2. it 2. Whether the submission of specific provision of the statute in which
to the deduction claimed. affirmed the decision of the CTA First cash vouchers is sufficient that deduction is authorized and must be
Division ordering it to pay defficiency evidence to prove expenses and able to prove that he is entitled to the
The proper substantiation income taxes in the amount of allow deductions. deduction which the law allows. An item
requirement for an expense P4,536,687.15 for taxable year 1997, of expenditure, therefore, must fall
to be allowed is the official plus 20% delinquency interest squarely within the language of the law in
receipt or invoice. computed from August 29, 2000 until order to be deductible. A mere averment
full payment, but cancelling the that the taxpayer has incurred a loss does
compromise penalties for lack of not automatically warrant a deduction
basis. from its gross income.

Tambunting instituted an As the CTA En Banc held, Tambunting did

administrative protest against the not properly prove that it had incurred
assessment notices and demand losses. The subasta books it presented
100
letters with the Commissioner of
Internal Revenue. Thereafter,
Tambunting brought a petition for
review in the CTA citing the inaction
of the Commissioner of Internal
Revenue on its protest within the 180-
day period prescribed by law.
The CTA En Banc also denied
Tambunting's motion for
reconsideration for its lack of merit.
Hence, this appeal by petition for
review on certiorari.
101
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.
The requisites for the deductibility of
ordinary and necessary trade or business
expenses, like those paid for security and
janitorial services, management and
professional fees, and rental expenses, are
that: (a) the expenses must be ordinary
and necessary; (b) they must have been
paid or incurred during the taxable year;
(c) they must have been paid or incurred
in carrying on the trade or business of the
taxpayer; and (d) they must be supported
by receipts, records or other pertinent
papers.
The proper substantiation requirement
for an expense to be allowed is the official
receipt or invoice. While the rental
payments were subjected to the
applicable expanded withholding taxes,
such returns are not the documents
required by law to substantiate the rental
expense. Petitioner should have
submitted official receipts to support its
claim.
2. NO. The trend then was to allow
deductions based on cash vouchers which

5. Fort Bonifacio Prior payment of taxes is
Development Corporation not necessary before a
v. CIR, G.R. No. 173425, taxpayer could avail of the
January 22, 2013. 8% transitional input tax
credit. Also, the Tax Code
allows either a cash refund
or a tax credit of transitional
input tax.
Petitioner Fort Bonifacio
Development Corporation (FBDC) is a
duly registered domestic corporation
engaged in the development and sale
of real property. By virtue of RA 7227
and Executive Order No. 40,
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 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. Petitioner started selling
Global City lots to interested buyers.
102
are signed by the payees. The cases cited
by petitioner are pronouncements by the
Court in 1980, 1982 and 1989. The latest
jurisprudence has deviated from such
interpretation of the law. In order that the
cash vouchers may be given probative
value, these must be validated with official
receipts.
Deductions for income tax purposes
partake of the nature of tax exemptions
and are strictly construed against the
taxpayer, who must prove by convincing
evidence that he is entitled to the
deduction claimed. 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.
Whether petitioner is entitled to YES. Prior payment of taxes is not
a refund of P359,652,009.47 necessary before a taxpayer could avail of
erroneously paid as output VAT the 8% transitional input tax credit.
for the first quarter of 1997.
Section 105 of the old National Internal
Revenue Code (NIRC) clearly provides that
for a taxpayer to avail of the 8%
transitional input tax credit, all that is
required from the taxpayer is to file a
beginning inventory with the Bureau of
Internal Revenue (BIR). Since the law
(Section 105 of the NIRC) does not
provide for prior payment of taxes, to
require it now would be tantamount to
judicial legislation which, to state the
obvious, is not allowed.
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 VAT
for the first quarter of 1997, petitioner
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. Due to BIR's inaction,
petitioner elevated the matter to the
CTA.
The CTA denied petitioner's claim for
refund, ruling that "the benefit of
transitional input tax credit comes
with the condition that business taxes
should have been paid first." 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
103
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. A tax 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.
The Court has already ruled in one case
that the law as framed contemplates a
situation where a transitional input tax
credit is claimed even if there was 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. In fact, in Commissioner of
Internal Revenue v. Central Luzon Drug
Corp., this Court had already declared that
prior payment of taxes is not required in
order to avail of a tax credit.
The Tax Code allows either a cash refund
or a tax credit of transitional input tax.
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
 transitional input tax credit is allowed creditable input tax from transitional
only when business taxes have been input tax credit. Transitional input tax
paid and passed-on as part of the credits are input taxes on a taxpayer's
purchase price. beginning inventory of goods, materials,
and supplies equivalent to 8% (then 2%)
Hence, the petition before the SC. 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.

As regards Section 110, while the law only

provides for a tax credit, a taxpayer who
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.

6. PHILACOR Credit The persons primarily liable Philacor is a domestic corporation 1. Whether Philacor is liable for 1. NO. Philacor did not make, sign, issue,
Corporation v. CIR, G.R. No. for the payment of the DST engaged in the business of retail the DST on the issuance of the accept or transfer the promissory notes.
169899, February 6, 2013. are the person (1) making; financing. Through retail financing, a promissory notes. The buyers of the appliances made,
(2) signing; (3) issuing; (4) prospective buyer may purchase signed and issued the documents subject
accepting; or (5) appliances on installment basis from to tax, while the appliance dealer
transferring the taxable an appliance dealer. After Philacor 2. Whether Philacor is liable for transferred these documents to Philacor
documents, instruments or conducts a credit investigation and the DST on the assignment of which likewise indisputably received or
papers. Should these approves the buyer's application, the promissory notes. "accepted" them. “Acceptance," however,
104
parties be exempted from buyer executes a unilateral is an act that is not even applicable to
paying tax, the other party promissory note in favor of the promissory notes, but only to bills of
who is not exempt would appliance dealer. The same exchange. Its object is to bind the drawee
then be liable. promissory note is subsequently of a bill and make him an actual and
assigned by the appliance dealer to bound party to the instrument. Philacor
Acceptance, under the DST Philacor. cannot be made primarily liable for the
provision, is not applicable DST on the issuance of the subject
to promissory notes but Philacor received Pre-Assessment promissory notes, just because it had
only to bills of exchange. Notices covering the alleged "accepted" the promissory notes in the
DST is not imposable on the deficiency income, percentage, and plain and ordinary meaning.
transfer and/or assignment DSTs, including increments.
of promissory notes. Where 2. NO. Philacor, as an assignee or
the law did not specify that transferee of the promissory notes, is not
such transfer and/or liable for the assignment or transfer of
assignment is to be taxed, promissory notes as this transaction is not
there would be no basis to taxed under the law. There are provisions
recognize an imposition. in the 1997 NIRC that specifically impose
the DST on the transfer and/or
assignment of documents evidencing
particular transactions (e.g. transfer of due
bill, certificate of obligation, shares or
certificate of stocks). The law has set a
pattern of expressly providing for the
imposition of DST on the transfer and/or
assignment of documents evidencing
certain transactions. SC said that it can
safely be concluded that where the law
did not specify that such transfer and/or
assignment is to be taxed, there would be
no basis to recognize an imposition.

105

CASE TITLE CASE PRINCIPLE
1. Misnet, Inc. vs. For a party to seek
Commissioner of Internal exception for its failure to
Revenue, G.R. No. 210604, comply strictly with the
June 3, 2019. 
 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.
NIRC REMEDIES
SUMMARY OF FACTS
Misnet, Inc. received a formal
assessment notice (FAN) for its
alleged deficiency in taxes for the year
2003. After paying the undisputed
assessments, Misnet administratively
protested the FAN by filing a request
for reconsideration.
The CIR acknowledged receipt and
forwarded the tax docket to the
Revenue District Officer. On March 28,
2011, Misnet received a Final Decision
on Disputed Assessment (FDDA) and
filed a letter-reply which was received
by CIR on April 11, 2011. Later, the CIR
sent a letter, informing Misnet that its
letter-reply did not have any legal
effect since it is an improper remedy.
The letter stated that if Misnet
disagrees with the assessment, it may
file its protest in writing either with
the CIR or the RDO. Misnet opted for
the latter.
Due to this, Misnet filed a Petition for
Relief from Judgment on May 27,
2011, arguing that it was not able to
file its proper appeal of the FDDA
because it was not assisted by
counsel. Meanwhile, the CIR filed a
Motion to Dismiss on the ground of
lack of jurisdiction, arguing that the
assessment against Misnet has
become final, executory, and
demandable.
106
ISSUE/S
Whether the CTA En Banc
correctly dismissed Misnet’s
Petition for Review on the
ground of lack of jurisdiction.
RULING
NO. Section 228 of the 1997 NIRC
provides that the perfection of 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. However, in some cases,
the Court had relaxed this strict
requirement for strong, compelling
reasons.
When Misnet sent the letter-reply to the
Regional Director, it was actually
protesting both the Amended
Assessment Notice and the FDDA.
However, instead of resolving the protest,
the RD informed the petitioner that it was
an improper remedy.
Because of the pending protest with the
Regional Director, there was yet no final
decision that was issued by the CIR that is
appealable to the CTA. The RD still has to
act upon it, whether to deny or grant it.
Hence, Misnet has a strong, compelling
reason. It was merely exhausting its
administrative remedies before seeking
recourse from the courts.

2. CIR vs. V.Y. Domingo Exhaustion of
Jewellers, Inc., G.R. No. administrative remedies is
221780, March 25, 2019. required prior to resort to
the CTA precisely to give
the Commissioner the
opportunity to "re-examine
its findings and
conclusions" and to decide
the issues raised within her
competence.
On July 12, 2012, Misnet filed a
Petition for Review with the CTA En
Banc, which the latter dismissed on
the ground of lack of jurisdiction
because of the lapse of the statutory
period to appeal.
BIR issued a preliminary assessment
notice against respondent, assessing
the amount of P2,781,844.21
representing deficiency tax and VAT,
inclusive of interest, for the taxable
year 2006 to which the respondent
filed a request for re-evaluation/re-
investigation and reconsideration
with the Regional Director.
Respondent then received a
Preliminary Collection Letter (PCL)
informing it of the existence of
multiple Assessment Notices, both
dated Nov. 10, 2010, for collection of
its tax liabilities in the amounts of
P1,789,889,80 and P1,365,727.63,
respectively, for a total of
P3,164,617.43.
Respondent then sent a letter to the
BIR RDO, requesting certified true
copies of the Assessment Notices.
Upon receipt of the requested copies,
it filed a petition for review with the
CTA praying that the Assessment
Notice and the PCL be declared null
and void, cancelled, withdrawn, and
with not force and effect, for allegedly
107
Whether the CTA has jurisdiction NO. It is clear from the provisions of the
to entertain the petition for law that a protesting taxpayer like
review, considering that Respondent has only three options to
respondent did not exhaust the dispute an assessment:
administrative remedies
available 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 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.
having been issued beyond the
prescriptive period for assessment
and collection of internal revenue
taxes.
During the trial, CIR filed a motion to
dismiss for lack of jurisdiction.
Arguing that 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
respondent’s petition was anchored
on its receipt of the PCL, there was no
disputed assessment to speak of, and
that the CTA had no jurisdiction to
entertain the said petition.
108
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, respondent 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.
It is evident that respondent’s immediate
recourse to the CTA First Division was in
violation of the doctrine of exhaustion of
administrative remedies.
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.
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 decide the issues
raised within her competence.
What is evident in the instant case is that
the Assessment Notices have not been
disputed by respondent 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 Respondent’s petition for review
was filed, the dismissal of the same by the
CTA First Division was proper.

3. CIR vs. La Flor De La Withholding taxes do not Respondent La Flor, a domestic 1. Whether the withholding taxes 1. NO. Withholding taxes are internal
Isabela, Inc., G.R. No. cease to become income corporation, filed monthly returns forare not internal revenue taxes revenue taxes covered by Section 203 of
211289, January 14, 2019. taxes just because it is the Expanded Withholding Tax (EWT) and thus, outside the coverage the NIRC.
collected and paid by the and Withholding Tax on of Section 203 of the NIRC.
withholding agent. Compensation (WTC) for calendar Section 203 of the NIRC provides that the
year 2005. 2. Whether the Waivers executed internal revenue taxes shall be assessed
Requirements for Waivers by La Flor effectively extend the within three (3) years after the last day
to extend the statutory La Flor, through its president, prescriptive period under EWT prescribed by law for the filing of the
prescriptive period are executed a Waiver of the Statute of and Section 203 of the NIRC. return.
mandatory. Limitations (Waiver) in connection
with its internal revenue liabilities for The Court held that withholding taxes do
the calendar year ending December not cease to become income taxes just
31, 2005. It executed another Waiver because it is collected and paid by the
to extend the period of assessment withholding agent. The liability of the
until December 31, 2009. withholding agent is distinct and separate
from the tax liability of the income earner.
On November 20, 2009, received a It is premised on its duty to withhold the
copy of the Preliminary Assessment taxes paid to the payee. Should the
Notice for deficiency taxes for the withholding agent fail to deduct the
taxable year 2005. Meanwhile, on required amount from its payment to the
December 2, 2009, it executed payee, it is liable for deficiency taxes and
another Waiver. applicable penalties.

Laflor received four Formal Letter of Under Section 53 (c) of the NIRC, the
Demand and Final Assessment withholding agent who is "required to
Notices (FANs) on January 7, 2010. deduct and withhold any tax" is made
"personally liable for such tax". A "person
liable for tax" has been held to be a
109
Eventually, La Flor filed its Letter of
Protest contesting the assessment
notices.
Petitioner CIR issued the Final
Decision on Disputed Assessment
(FDDA) involving the alleged
deficiency withholding taxes in the
aggregate amount of P6,835,994.76.
Aggrieved, it 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
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). Since, CIR issued the
FANs only on December 17, 2009,
then, the assessment was barred
already by prescription. On the other
hand, the CTA Division ruled 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.
The CTA En Banc also affirmed the
decision of the CTA Division.
110
"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. 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. Further, provisions
of the NIRC such as Section 247(b) and
Section 251, recognize that the tax
assessment for withholding tax deficiency
is different and independent from
possible penalties that may be imposed
for the failure of withholding agents to
withhold and remit taxes.
2. NO. The Waivers did not effectively
extend the prescriptive period under
Section 203 on account of their invalidity.
Waivers extending the prescriptive period
of tax assessments must be compliant
with RMO No. 20-90 and must indicate
the nature and amount of the tax due.
These requirements are mandatory and
must strictly be followed.
In the present case, the Waivers failed to
indicate the specific tax involved and the
exact amount of the tax to be assessed or
collected. These details are material as
there can be no true and valid agreement
between the taxpayer and the CIR absent
this information. Clearly, the Waivers did

4. CIR vs. BPI, G.R. No. The law imposes a In 1991, CIR issued a Pre-Assessment1. Whether CTA has jurisdiction 1. YES. CTA has jurisdiction over cases
224327. June 11, 2018. 
 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.
not effectively extend the prescriptive
period under Section 203 on account of
their invalidity.
Notice against Citytrust Banking over cases asking for the asking for the cancellation and withdrawal
Corporation (CBC) for deficiency cancellation and withdrawal of a of a warrant of distraint and/or levy.
taxes. warrant of distraint and/or levy.
Section 7 of R.A. No. 9282 provides that
CBC requested for a reconsideration 2. Whether CIR failed to prove CTA in its exclusive appellate jurisdiction
of the approved amount of the that it sent a notice of covers other matters arising under the
compromise settlement, but CIR assessment and that it was NIRC or other laws administered by the
disapproved. received by BPI. BIR.
In 1996, CBC and BPI merged, with the 3. Whether CIR can invoke the 2. YES. CIR failed to prove that it sent a
latter as the surviving corporation. principle of estoppel to notice of assessment and that it was
compensate for its failure to received by BPI.
In 2011, CIR issued a letter to BPI follow the proper procedures.
requesting for the payment of the In the instant case, BPI denies receiving
said deficiency taxes, plus all the the assessment notice, and the CIR was
increments incident to delinquency. It unable to present substantial evidence
then issued a Warrant of Distraint that such notice was, indeed, mailed or
and/or Levy against BPI, which sent before the BIR's right to assess had
prompted the latter to file a Petition prescribed and that said notice was
for Review with the CTA. received by BPI.
The CTA Special Third Division Thus, the failure of petitioner to prove the
granted the petition on the ground receipt of the assessment by respondent
that BPI can validly assail the said would necessarily lead to the conclusion
Warrant. The consequent motion for that no assessment was issued.
reconsideration of CIR was denied by
the CTA En Banc. 3. NO. CIR cannot invoke the principle of
estoppel to compensate for its failure to
follow the proper procedures.
BPI is not estopped from raising the
invalidity of the subject Waivers as the BIR
111

5. Macario Lim Gaw vs. CIR, •
G.R. No. 222837, July 23,
2018.
• Section 9 of R.A. No.
• Nonpayment of docket respondent issued a Final Decision on
in this case caused the defects thereof. As
such, the invalid Waivers did not operate
to toll or extend the period of
prescription.
As a result, the right of CIR to assess BPI
has already prescribed. Therefore, BPI is
not liable to pay the deficiency tax
assessment.
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.
Civil liability arising Respondent found petitioner to have 1. Whether the civil action filed 1. NO. Under the Revised Rules of the
from a different source misdeclared his income, misclassified by petitioner to question the Court of Tax Appeals (RRCTA), the civil
of obligation, such as the properties and used multiple tax FDDA deemed instituted in the action filed by the petitioner to question
when the obligation is identification numbers to avoid being criminal case for tax evasion? the FDDA is not deemed instituted with
created by law, such assessed the correct amount of taxes. the criminal case for tax evasion. Civil
civil liability is not CIR filed with the DOJ a Joint 2. Whether the Petition for liability arising from a different source of
deemed instituted with Complaint Affidavit for tax evasion Review Ad Cautelam filed by obligation, such as when the obligation is
the criminal action. against petitioner. petitioner deemed instituted in created by law, such civil liability is not
the civil action for recovery of deemed instituted with the criminal
The DOJ then filed two criminal taxes? action.
9282 allows the information for tax evasion against
taxpayer to file with the petitioner in the CTA. At the time the 3. Whether the CTA is correct in It is well-settled that the taxpayer's
CTA, a Petition for Information were filed, CIR had not dismissing the petition for failure obligation to pay the tax is an obligation
Review within 30 days yet issued a final decision on the by the petitioner to pay docket that is created by law and does not arise
from receipt of the deficiency assessment against fees? from the offense of tax evasion, as such,
decision or the inaction petitioner. the same is not deemed instituted in the
of the respondent. criminal case.
Halfway through the trial, the
2. NO. The civil action for the recovery of
fees at filing does not Disputed Assessment (FDDA) against civil liability for taxes and penalties is
automatically cause its petitioner, assessing him of deficiency deemed instituted with the criminal
112
dismissal so long as the income tax and VAT covering taxable
docket fees are paid years 2007 and 2008.
within a reasonable
period; and that the With respect to the deficiency
party had no intention assessment against petitioner for the
to defraud the year 2007, petitioner filed a petition
government. for review with the CTA. 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 granted
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."
113
action, not the Petition for Review Ad
Cautelam filed by petitioner.
Under Sections 254 and 255 of the NIRC,
the government can file a criminal case for
tax evasion against any taxpayer who
willfully attempts in any manner to evade
or defeat any tax imposed in the tax code
or the payment thereof. The crime of tax
evasion is committed by the mere fact
that the taxpayer knowingly and willfully
filed a fraudulent return with intent to
evade and defeat a part or all of the tax. It
is therefore not required that a tax
deficiency assessment must first be issued
for a criminal prosecution for tax evasion
to prosper.
While the tax evasion case is pending, the
BIR is not precluded from issuing a final
decision on a disputed assessment, such
as what happened in this case. In order to
prevent the assessment from becoming
final, executory and demandable, Section
9 of R.A. No. 9282 allows the taxpayer to
file with the CTA, a Petition for Review
within 30 days from receipt of the decision
or the inaction of the respondent.
What is deemed instituted with the
criminal action is only the government's
recovery of the taxes and penalties
relative to the criminal case. The remedy
of the taxpayer to appeal the disputed
assessment is not deemed instituted with
the criminal case. To rule otherwise would

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 filing fees.
114
be to render nugatory the procedure in
assailing the tax deficiency assessment.
3. NO. The CTA En Banc erred in affirming
the dismissal of the case for nonpayment
of docket fees.
Basic is the rule that the payment of
docket and other legal fees is both
mandatory and jurisdictional. The court
acquires jurisdiction over the case only
upon the payment of the prescribed fees.
However, while the court acquires
jurisdiction over any case only upon the
payment of the prescribed docket fees, its
nonpayment at filing does not
automatically cause its dismissal so long
as the docket fees are paid within a
reasonable period; and that the party had
no intention to defraud the government.
In this case, records reveal that petitioner
has no intention to defraud the
government in not paying the docket fees.
In fact, when he appealed the FDDA
insofar as the taxable year 2007 was
concerned, he promptly paid the docket
fees when he filed his Petition for Review.
Petitioner merely relied on good faith on
the pronouncements of the CTA First
Division that he is no longer required to
pay the docket fees. As such, the CTA
cannot just simply dismiss the case on the
ground of nonpayment of docket fees.
The CTA should have instead directed the
clerk of court to assess the correct docket

6. Asian Transmission Corp. The taxpayer has the
v. CIR, G.R. No. 230861, primary responsibility for
September 19, 2018. the proper preparation of
the waiver of the
prescriptive period for
assessing deficiency taxes.
Hence, the Commissioner
of Internal Revenue (CIR)
may not be blamed for any
defects in the execution of
the waiver.
fees and ordered the petitioner to pay the
same within a reasonable period. It should
be borne in mind that technical rules of
procedure must sometimes give way, in
order to resolve the case on the merits
and prevent a miscarriage of justice.
Asian Transmission Corporation (ATC) Whether the waivers are invalid NO. The SC ruled that the appeal had no
is a Philippine corporation which is a due to the fault of the CIR. merit. The ATC and the CIR were in pari
manufacturer of motor vehicle delicto regarding the validity of the
transmission component parts and waivers. The case at bar is similar with CIR
engines of Mitsubishi vehicles. On v. Next Mobile, Inc., where the SC ruled
January 3, 2003 and March 3, 2003, that as a general rule, a waiver that did not
ATC filed its Annual Information of comply with the proper requisites was
Income Taxes Withheld on invalid and ineffective to extend the
Compensation and Final Withholding prescriptive period to assess deficiency
Taxes and Annual Information Return taxes, the exemption to the rule being
of Creditable Income Taxed Withheld that a waiver would still be valid for the
(Expanded)/Income Payments following reasons:
Exempt from Withholding Tax,
respectively. (1) The parties are in pari delicto.
However, although the parties are in
On August 11, 2004, ATC received a pari delicto, the Court may
Letter of Authority where the CIR interfere and grant relief at the suit
informed ATC that its revenue officers of one of them, where public policy
from the Large Taxpayers Audit and requires its intervention, even
Investigation Division II shall examine though the result may be that a
its books of accounts and other benefit will be derived by one
accounting records for the taxable party who is in equal guilt with the
year 2002. Thereafter, ATC was issued other. Hence, to uphold the
a Preliminary Assessment Notice. validity of the Waivers would be
consistent with the public policy
Consequently, on various dates, ATC, embodied in the principle that taxes
through its Vice President for are the lifeblood of the government,
Personnel and Legal Affairs, Mr. and their prompt and certain
Roderick M. Tan, executed several availability is an imperious need.
documents denominated as "Waiver
115
of the Defense of Prescription under
the Statute of Limitations of the
National Internal Revenue Code"
(waivers) that served to extend the
investigation until the end of 2008.
Meanwhile, on February 28, 2008,
ATC availed of the Tax Amnesty
Program 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 P62,977,798.02, [EWT] in
the amount of P6,916,910.51, [FWT] in
the amount of P501,077.72. 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 P75,696,616.75.
Thus, on May 14, 2009, ATC filed an
appeal letter/request for
reconsideration with the CIR.
On April 10, 2012, ATC received the
Decision of the CIR dated November
15, 2011, denying its request for
reconsideration. As such, on April 23,
2012, ATC filed the instant Petition for
Review (with Application for
Preliminary Injunction and Temporary
Restraining Order).
116
(2) The Court has repeatedly
pronounced that parties must come
to court with clean hands. Parties
who do not come to court with clean
hands cannot be allowed to benefit
from their own wrongdoing.
(3) Estoppel. The one who executed
the waivers cannot question their
validity once they are assessed
taxes and penalties.
(4) Such a situation, if upheld, is
dangerous and open to abuse by
unscrupulous taxpayers who
intend to escape their responsibility
to pay taxes by mere expedient of
hiding behind technicalities.
There is a similarity in the case at bar and
the Next Mobile, Inc. case, hence the same
ruling is upheld by the SC. 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.
Thus, the CTA En Banc did not err in ruling
that ATC, after having benefited from the
defective waivers, should not be allowed
to assail them. In short, the CTA En Banc
properly applied the equitable principles
CTA Ruling (in Division)
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:
of in pari delicto, unclean hands, and
estoppel as enunciated in Commissioner
of Internal Revenue v. Next Mobile, Inc.
case.

(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.

CIR then filed a petition for review in

the CTA En Banc.

CTA En Banc Ruling

It reversed the division ruling. It held
that the waivers were valid. It
observed that the CIR's right to assess
deficiency withholding taxes for CY
2002 against ATC had not yet

117

7. San Roque Power The 120-day and 30-day
Corporation v. CIR, G.R. No. periods are mandatory and
203249. July 23, 2018. jurisdictional from the
effectivity of the 1997 NIRC
on 1 January 1998, up to the
present. Noncompliance
with the mandatory
120+30-day period renders
the petition before the CTA
void. By way of an
exception, BIR Ruling No.
DA-489-03 provides,
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. To
provide jurisprudential
stability, it is best to apply
the benefit of BIR Ruling
No. DA-489-03 to all
taxpayers who filed their
judicial claims within the
window period from 10
December 2003 until 6
October 2010.
prescribed. Hence, ATC appealed to
the SC.
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. On 22 December 2005
and 27 February 2006, the petitioner
filed two separate administrative
claims for refund of its alleged
unutilized input tax for the period
January 2004 up to March 2004, and
April 2004 up to December 2004,
respectively. Due to the inaction of
respondent CIR, the petitioner filed
petitions for review before the CTA.
The CTA Division partially granted the
refund claim of the petitioner. The CIR
moved for reconsideration but to no
avail. Thus, the CIR filed a petition for
review with the CTA En Banc, raising
among other issues, the claimant's
judicial recourse to the CTA as
inconsistent with the procedure
prescribed in Section 112 (D) of the
NIRC. The CIR asserted that the
petitions for review filed with the CTA
were premature, and thus, should be
dismissed.
118
1. Whether the Petition for 1. YES. Under the tax code, any VAT-
Review filed before the CTA was registered person whose sales are zero-
premature. rated or effectively zero-rated is to be
granted, upon its application, by the
2. Whether the beneficiaries of Commissioner a refund or issue the tax
BIR Ruling No. DA 489-03 credit certificate for creditable input taxes
include those who did not within 120 days from the date of
specifically invoke it. submission of complete documents in
support of the application filed. If there
was a denial of the claim or failure of the
Commissioner to act on the application
within the period prescribed above, the
taxpayer affected may appeal it with the
Court of Tax Appeals within 30 days from
the receipt of the decision denying the
claim or after the expiration of the 120-
day period. The said periods are
mandatory and jurisdictional that it would
render the petition void and the court
cannot validly acquire jurisdiction over it if
it was not complied with. It is clear that the
taxpayer cannot file a judicial claim prior
to the lapse of the 120-day period, unless
the CIR partially or wholly denies the claim
within such period.
In this case, the petitioner filed its
administrative claims for refund/credit of
its unutilized input VAT for the first
quarter of 2004, and for the second to
fourth quarters of the same year, on 22
December 2005 and 27 February 2006,
respectively, or within the two-year
prescriptive period. Counted from such
 dates of submission of the claims (with
supporting documents), the CIR had 120
days, or until 13 April 2006, with respect
to the first administrative claim, and until
27 June 2006, on the second
administrative claim, to decide. However,
the petitioner, without waiting for the full
expiration of the 120-day periods and
without any decision by the CIR,
immediately filed its petitions for review
with the CTA on 30 March 2006, or a mere
ninety-eight (98) days for the first
administrative claim; and on 20 June 2006,
or only one hundred thirteen (113) days
for the second administrative claim, from
the submission of the said claims. In other
words, the judicial claims of the petitioner
were prematurely filed as correctly found
by the CTA En Banc.

However, it is to be noted that BIR Ruling

No. DA-489-03 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 by way of
Petition for Review.

The conclusion is impelled by the

principle of equitable estoppel enshrined
in Section 24615 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
other words, the 120+30-day period is
generally mandatory and jurisdictional
from the effectivity of the 1997 NIRC on 1
119

8. Rhombus Energy, Inc. v. Once the option to carry In its Annual ITR for taxable year 2005,
CIR, G.R. No. 206362, over and apply the excess Rhombust Energy indicated that its
August 1, 2018. quarterly income tax excess creditable withholding tax for
against income tax due for the year 2005 was “to be refunded”.
the taxable years of the However, on its first, second and third
120
Whether Rhombust Energy is
barred by the irrevocability rule
in claiming for the refund of its
excess and/or unutilized
creditable withholding tax.
January 1998, up to the present. By way of
an exception, 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 petitioner fell within the window
period, thus, the CTA can take cognizance
over them.
2. YES, the beneficiaries of BIR Ruling No.
DA 489-03 include those who did not
specifically invoke it. It is to be noted that
the petitioner did not actually invoke BIR
Ruling No. DA-489-03 in all its pleadings
to justify the timeliness of its judicial
claims with the CTA. However, San Roque
has been consistently applied in a long
line of cases that recognized the
exception to the mandatory and
jurisdictional nature of the 120+30-day
period. To limit the application of BIR
Ruling No. DA-489-03 only to those who
invoked it specifically would unduly strain
the pronouncements in San Roque. To
provide jurisprudential stability, it is best
to apply the benefit of BIR Ruling No. DA-
489-03 to all taxpayers who filed their
judicial claims within the window period
from 10 December 2003 until 6 October
2010.
NO. The CTA En Banc erred in applying
the irrevocability rule against Rhombus.
The irrevocability rule is enunciated in
Section 76 of the NIRC, paragraph 2
thereof states that in case where the
succeeding taxable years
has been made, such option
shall be irrevocable for that
taxable period and no
application for cash refund
or issuance of a tax credit
certificate shall be allowed
thereof.
quarterly income tax return of the
year 2006, petitioner included the
prior year’s excess of credits. In
December 2006, respondent filed an
administrative claim for refund of its
alleged excess/unutilized CWT for the
year 2005.
Pending CIR’s action, petitioner filed
a petition for review to which the CTA
First Division granted. However, the
decision was later reversed by the
CTA En Banc applying the
irrevocability rule. They held that
considering the petitioner opted to
carry-over its unutilized creditable
withholding tax for the taxable year
2005 to the first, second, third
quarters of taxable year 2006 as
shown in its Quarterly Income Tax
Returns for taxable year 2006, the said
option to carry over becomes
irrevocable. Additionally, petitioner’s
act of reporting in its Annual Income
Tax Return for taxable year 2006 of
prior year’s excess credits will not
change the fact that petitioner had
already opted the carry-over option.
121
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 or be credited or refunded
with the excess amount paid, as the case
may be. And once the option to carry over
and apply the excess quarterly income tax
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 irrevocable for that
taxable period and no application for cash
refund or issuance of a tax credit
certificate shall be allowed thereof.
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, the irrevocability rule took
effect when the option was exercised. In
the case of Rhombus, its marking of the
box “To be refunded” in its 2005 annual
ITR constituted its exercise of the option
and from them onwards Rhombus
became precluded from carrying-over the
excess CWT. The fact that prior year’s
excess credits were reported in its 2006

9. CIR v. Standard Assessing any tax, or
Insurance Co., Inc., G.R. No. levying, or distraining, or
219340. November 7, 2018. selling any property of
taxpayers for the
satisfaction of their tax
liabilities are immediately
executory and cannot be
suspended, unless in the
opinion of the Court of Tax
Appeals, the collection may
jeopardize the interest of
the Government and/or the
taxpayer.
Respondent Standard Insurance
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
for declaratory relief with prayer of a
temporary restraining order 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. The RTC
granted the prayer thereafter
enjoining the BIR or any person acting
in its behalf from implementing the
provisions of the NIRC with respect to
the FDDA.
122
Whether RTC can enjoin the
enforcement or implementation
of the NIRC provisions through
an action for declaratory relief
with prayer of an injunctive relief.
quarterly ITRs did not reverse the option
to be refunded exercised in its 2005
annual ITR.
NO. The injunctive relief is not available as
a remedy to assail the collection of a tax
and not all the requisites for the remedy
of declaratory relief is present.
(1) The inflexible policy that taxes, being
the lifeblood of the Government, should
be collected promptly and without
hindrance or delay. Section 218 of the
NIRC expressly provides that no court
shall have the authority to grant an
injunction to restrain the collection of any
national internal revenue tax, fee or
charge imposed by the NIRC.
Assessing any tax, levying, or selling any
property of taxpayers for the satisfaction
of their tax liabilities are immediately
executory, and the enforcement is not to
be suspended by any appeals to the CTA
unless in the opinion of the CTA, the
collection may jeopardize the interest of
the Government and/or the taxpayer, in
which case, the CTA may suspend the
collection and require the taxpayer either
to deposit the amount claimed or to file a
surety bond for not more than double the
amount.
(2) As to the declaratory relief, the taxes
accrued at the time the insurance policies
were issued.

10. CIR v. Philippine Daily A waiver of the statute of
Inquirer, Inc., G.R. No. limitations is a derogation
213943. March 22, 2017. of the taxpayer's right to
security against prolonged
and unscrupulous
investigations and thus, it
must be carefully and
strictly construed.
BIR alleged that based on the Whether the BIR’s assessment
computerized matching it conducted was made within the prescriptive
on the information and data provided period.
by third party sources against PDI's
declaration on its VAT Returns, there
was an under-declaration of domestic
purchases from its suppliers.
PDI was assessed for alleged
deficiency income tax and VAT and
deliberately executed Waivers of the
Statute of Limitation. PDI filed a
Petition for Review against the (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
123
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 Court of Tax Appeals.
NO. Fraud was never imputed; thus the
case does not fall under the exceptions
under Section 222 of the NIRC instead
Section 203 should apply in which the
prescriptive period to assess is set at three
years. Moreover, the said law authorizes
the extension of the period to assess and
collect taxes only upon a written
agreement between the CIR and the
taxpayer executed before the expiration
of the three-year period.
Since the three Waivers in this case are
defective, they do not produce any effect
and did not suspend the three-year
prescriptive period. Waiver was not a
unilateral act of the taxpayer; hence, the
BIR must act on it, either by conforming to
or by disagreeing with the extension. The
waiver does not imply that the taxpayer
 filed a petition for review on certiorari relinquishes the right to invoke
alleging that PDI filed a false or prescription unequivocally.
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.

11. CIR v. Asalus Failure to refute the December 16, 2010, respondent Whether the petitioner's right to NO. Generally, internal revenue taxes shall
Corporation, G.R. No. presumption of falsity of Asalus received a Notice of Informal assess respondent for its be assessed within three (3) years after the
221590. February 22, 2017. the return will warrant the Conference regarding its VAT deficiency VAT for taxable year last day prescribed by law for the filing of

 application of the 10-year transactions for the taxable year 2007. 2007 had already prescribed the return, or where the return is filed
prescriptive period for tax Petitioner CIR issued the Preliminary beyond the period, from the day the
assessment under Sec 222 Assessment Notice (PAN) finding return was actually filed. Section 222 of
of the NIRC Asalus liable for VAT deficiency for the NIRC, however, provides for
taxable year 2007. exceptions to the general rule. It states
that in the case of a false or fraudulent
After receiving the Formal return with intent to evade tax or of failure
Assessment Notice (FAN), Asalus filed to file a return, the assessment may be
its protest. Thereafter, Asalus filed a made within ten (10) years from the
supplemental protest stating that the discovery of the falsity, fraud or omission.
deficiency VAT assessment had Under Section 248 (B) of the NIRC, there
prescribed pursuant to Section 203 of is a prima facie evidence of a false return
the NIRC. if there is a substantial under declaration
of taxable sales, receipt or income. The
Asalus received the Final Decision on failure to report sales, receipts or income
Disputed Assessment (FDDA) in an amount exceeding 30% what is
showing VAT deficiency for 2007 in declared in the returns constitute
the aggregate amount of substantial under declaration. Applied in
P106,761,025.17, inclusive of this case, the audit investigation revealed
surcharge and interest and that there were undeclared sales which
P25,000.00 as compromise penalty. are subjected to VAT and more than 30%
As a result, it filed a petition for review of that declared in Asalus' VAT returns.
before the CTA Division.
The CIR need not present further evidence
The CTA En Banc sustained the as the presumption of falsity of the
assailed decision of the CTA Division returns was not overcome. Asalus’ failure
124

12. CIR v. Transitions The assessment
Optical Philippines, Inc., contemplated in Sections
G.R. No. 227544, 203 and 222 of the National
November 22, 2017. Internal Revenue Code
refers to the service of the
FAN upon the taxpayer,
which contains not only a
computation of tax
liabilities but also a demand
for payment within a
prescribed period. Failure
and dismissed the petition for review
filed by the CIR.
Transitions Optical received a Letter
of Authority from Revenue Region
No. 9. Officer-in-Charge-Regional
Director authorized Revenue Officers
to examine Transition Optical's books
of accounts for internal revenue tax
purposes for taxable year 2004.
On October 9, 2007, the parties
allegedly executed a Waiver of the
Defense of Prescription (First Waiver),
125
Whether the assessment of
deficiency taxes against
respondent Transitions Optical
Philippines, Inc. for taxable year
2004 had prescribed.
to overcome the same warranted the
application of the ten (10)-year
prescriptive period for assessment under
Section 222 of the NIRC.
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. To reiterate,
there was prima facie showing that the
returns filed by Asalus were false, which it
failed to controvert. Also, it was
adequately informed that it was being
assessed within the extraordinary
prescriptive period.
YES. As a general rule, CIR has 3 years to
assess taxpayers from the filing of the
return. An exception to the rule is found
in Section 222 (b) and (d) of this Code,
which provides that the period to assess
and collect taxes may be extended upon
the CIR and the taxpayer's written
agreement, executed before the
expiration of the 3-year period.
to file an administrative
protest within 30 days from
receipt of the FAN will
render the assessment final,
executory and demandable.
where supposedly the prescriptive
period for the assessment of
Transition Optical's internal revenue
taxes for the year 2004 was extended
to June 20, 2008. This was followed by
another supposed Waiver (Second
Waiver) extending the prescriptive
period to November 30, 2008.
Thereafter, a Preliminary Assessment
Notice (PAN) dated November 11,
2008 was issued assessing Transitions
Optical for its deficiency taxes for
taxable year 2004. Transitions Optical
filed a written protest on November
26, 2008. The Commissioner of
Internal Revenue (CIR) issued against
Transitions Optical a Final Assessment
Notice (FAN) and a Formal Letter of
Demand (FLD) dated November 28,
2008 for deficiency income tax, value-
added tax, expanded withholding tax,
and final tax for taxable year 2004
amounting to P19,701,849.68.
In its Protest Letter against the FAN,
Transitions Optical alleged that the
demand for deficiency taxes had
already prescribed at the time the
FAN was mailed on December 2,
2008. In its Supplemental Protest,
Transitions Optical pointed out that
the FAN was void because the FAN
indicated 2006 as the return period,
but the assessment covered calendar
year 2004.
126
In this case, 2 waivers were supposedly
executed by the parties extending the
prescriptive periods for assessment of
income tax, value-added tax, and
expanded and final withholding taxes to
June 20, 2008, and then to November 30,
2008.
Estoppel applies in this case. Indeed, the
BIR was at fault when it accepted
respondent's Waivers despite their non-
compliance with the requirements.
Nonetheless, respondent's acts also show
its implied admission of the validity of the
waivers. Having benefitted from the
Waivers executed at its instance,
respondent is estopped from claiming
that they were invalid, and that
prescription had set in.
But, even as respondent is estopped from
questioning the validity of the Waivers,
the assessment is nonetheless void
because it was served beyond the
supposedly extended period. The First
Division of the Court of Tax Appeals found
that "the date indicated in the
envelope/mail matter containing the FAN
and the FLD is December 4, 2008, which is
considered as the date of their mailing."
Since the validity period of the second
Waiver is only until November 30, 2008,
prescription had already set in at the time
the FAN and the FLD were actually mailed
on December 4, 2008.
The CIR issued a Final Decision on the
Disputed Assessment holding
Transitions Optical liable for
deficiency taxes in the total amount of
P19,701,849.68 for taxable year 2004.
Transitions Optical filed a Petition for
Review before the Court of Tax
Appeals. In her Answer, CIR
interposed that Transitions Optical's
claim of prescription was
inappropriate because the executed
Waiver of the Defense of Prescription
extended the assessment period.
Court of Tax Appeals (First Division)
found the subject Waivers to be
defective and therefore void.
Nevertheless, granting arguendo that
the subject Waivers were validly
executed, for failure of respondent to
present adequate supporting
evidence to prove that it issued the
FAN and the FLD within the extended
period agreed upon in the 2nd
Waiver, the subject assessment must
be cancelled for being issued beyond
the prescriptive period provided by
law to assess. The Court of Tax
Appeals En Banc affirmed the First
Division Decision.
127
Petitioner's contention that the
assessment required to be issued within
the 3-year or extended period provided in
Sections 203 and 222 of the National
Internal Revenue Code refers to the PAN
is untenable.
Considering the functions and effects 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
Code refers to the service of the FAN upon
the taxpayer.
A PAN merely informs the taxpayer of the
initial findings of the Bureau of Internal
Revenue. It contains the proposed
assessment, and the facts, law, rules, and
regulations or jurisprudence on which the
proposed assessment is based. It does not
contain a demand for payment but usually
requires the taxpayer to reply within 15
days from receipt. Otherwise, the
Commissioner of Internal Revenue will
finalize an assessment and issue a FAN.
On the other hand, a FAN contains not
only a computation of tax liabilities but
also a demand for payment within a
prescribed period. As soon as it is served,
an obligation arises on the part of the
taxpayer concerned to pay the amount
assessed and demanded. It also signals
the time when penalties and interests
begin to accrue against the taxpayer.
Failure to file an administrative protest
within 30 days from receipt of the FAN will
 render the assessment final, executory,
and demandable.

13. Edison (Bataan) The term "payable" refers to In February 2, 2004, Edison (Bataan) Whether Revenue Regulation No. RR No.02-98 provides that the term
Cogeneration Corporation the date the obligation Cogeneration Corporation [EBCC] No. 12-01 should be applied in payable refers to the date the obligation
v. CIR, G.R. No. 210665, 30 becomes due, demandable received from the Commissioner of this case. becomes due, demandable or legally
August 2017. or legally enforceable. Internal Revenue (CIR) a Formal Letter1. enforceable.
of Demand and Final Assessment
Notice dated January 23, 2004 In this case, the CIR insists that EBCC was
assessing EBCC of deficiency income liable to pay the interest from the date of
tax, Value Added Tax (VAT), the execution of the contract on January
withholding tax on compensation, 5, 2000, not from the date of the first
Expanded Withholding Tax (EWT) and payment on June 1, 2002.
Final Withholding Tax (FWT) for
taxable year 2000 in the total amount Clearly, EBCC's liability for interest
of P84,868,390.16. payment became due and demandable
While the case was pending, EBCC starting June 1, 2002. And considering
availed itself of the Tax Amnesty that under RR No. 02-98, the obligation of
Program under Republic Act (RA) No. EBCC to deduct or withhold tax arises at
9480. Thus, in a November 7, 2008 the time an income is paid or payable,
Resolution, the CTA Second Division whichever comes first, and considering
deemed the Petition partially further that under the said RR, the term
withdrawn and the case closed and "payable" refers to the date the obligation
terminated with regard to EBCC's becomes due, demandable or legally
deficiency income tax and VAT for the enforceable, we find no error on the part
year 2000. of the CTA En Banc in ruling that EBCC had
no obligation to withhold any taxes on the
Petitioner is ordered to pay deficiency interest payment for the year 2000 as the
interest at the rate of twenty percent obligation to withhold only commenced
(20%) per annum on the basic on June 1, 2002, and thus cancelling the
deficiency final withholding tax of assessment for deficiency FWT on interest
P1,785,717.53 computed from payments arising from EBCC's loan from
January 25, 2001 until full payment. Ogden.

The CIR contends that EBCC was liable Neither do we find any reason for the
to pay the interest from the date of retroactive application of RR No. 12-01,
the execution of the contract on which provides that the withholding of
128
January 5, 2000, not from the date of
the first payment on June 1, 2002, as
the loan agreement clearly indicated
that the interest was to be paid
separately from the principal.
In addition, the CIR calls 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," on the ground
that EBCC omitted a material fact and
acted in bad faith when it refused to
present documents on its interest
payments to show the exact date of
payment.
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.
Moreover, as aptly pointed out by EBCC,
whether it omitted to state a material fact
or acted in bad faith in failing to present
documents on its interest payments to
show the exact date of payment is a
factual issue, which is not allowed under
Rule 45.
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.

EBCC, on the other hand, asserts that

it was not required to withhold FWT
at the end of taxable year 2000 as the
interest payment became due and
demandable only on June 1, 2002.
And even if the first payment were
due on January 4, 2001, such fact
would not give rise to any liability for
FWT in the year 2000 under RR No.
02-98. As to the retroactive
application of RR No. 12-01, EBCC
contends that this is the first time that
such issue was brought up as it was
not raised before the CTA.

129
14. Medicard Philippines, An examination of a
Inc. v. CIR, G.R. No. 222743. taxpayer cannot be
April 5, 2017. undertaken without a Letter
of Authority.
VAT is a tax on the value
added by the performance
of the service by the
taxpayer. It is, thus, the
service and the value charged
thereof by the taxpayer that is
taxable under the NLRC.
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 1st, 2nd, 3rd
quarterly VAT Returns through
Electronic Filing and Payment System
(EFPS) on April 20, July 25, and
October 25, 2006, respectively, and its
4th 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.
130
1. Whether an examination of a 1. NO. An examination of a taxpayer
taxpayer can be undertaken cannot be undertaken without a Letter of
without a Letter of Authority. Authority.
2. Whether the amounts that
MEDICARD earmarked and
eventually paid to the medical
service providers still form part
of its gross receipts for VAT
purposes.
An 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. An 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. Section 6 of the NIRC
clearly provides as follows:
SEC. 6. Power of the Commissioner to
Make Assessments and Prescribe
Additional Requirements for Tax
Administration and Enforcement. –
(A) Examination of Return and
Determination of Tax Due.- After a
return has been filed as required under
the provisions of this Code, the
Commissioner or his duly authorized
representative may authorize the
examination of any taxpayer and the
assessment of the correct amount of
tax: Provided, however, That failure to
file a return shall not prevent the
Commissioner from authorizing the
examination of any taxpayer.
MEDICARD filed a protest arguing,
among others, that that the services it
renders 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.
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.
131
Based on the afore-quoted provision, it is
clear that unless authorized by the CIR
himself or by his duly authorized
representative, through an LOA, an
examination of the taxpayer cannot
ordinarily be undertaken. The
circumstances contemplated under
Section 6 where the taxpayer may be
assessed through best-evidence
obtainable, inventory-taking, or
surveillance among others has nothing to
do with the LOA. These are simply
methods of examining the taxpayer in
order to arrive at the correct amount of
taxes. Hence, unless undertaken by the
CIR himself or his duly authorized
representatives, other tax agents may not
validly conduct any of these kinds of
examinations without prior authority.
In this case, there is no dispute that no
LOA was issued prior to the issuance of a
PAN and FAN against MED ICARD.
Therefore, no LOA was also served on
MEDICARD. The LN that was issued earlier
was also not converted into an LOA
contrary to the above quoted provision.
Surprisingly, the CIR did not even dispute
the applicability of the above provision of
RMO 32-2005 in the present case which is
clear and unequivocal on the necessity of
an LOA for the· assessment proceeding to
be valid. Hence, the CTA's disregard of
MEDICARD's right to due process warrant
the reversal of the assailed decision and
resolution.
 In the case of Commissioner of Internal
Revenue v. Sony Philippines, Inc., the
Court said that:

Clearly, 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.

2. NO. The VAT is a tax on the value added

by the performance of the service by the
taxpayer. It is, thus, the service and the
value charged thereof by the taxpayer
that is taxable under the NLRC.

The definition of gross receipts under

Revenue Regulations Nos. 16-2005 and 4-
2007, in relation to Section 108 (A) of the
National Internal Revenue Code, as
amended by Republic Act No. 9337, for
purposes of determining its Value-Added
Tax liability, is hereby declared to
EXCLUDE the eighty percent (80%) of the
amount of the contract price earmarked
as fiduciary funds for the medical
utilization of its members.

Further, the Value-Added Tax deficiency

assessment issued against Medicard
Philippines, Inc. is hereby declared
unauthorized for having been issued
without a Letter of Authority by the

132
 Commissioner of Internal Revenue or his
duly authorized representatives.

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) 32 of the Tax Code, as amended
by Republic Act No. 9337.

Under RR No. 16-2005. Under this RR, an

HMO's gross receipts and gross receipts
in general were defined, thus:

Section 4.108-3. x x x
HMO's “gross receipts” shall be the total
amount of money or its equivalent
representing the SERVICE FEE actually or
constructively received during the taxable
period for the services performed or to be
performed for another person, excluding
the value-added tax.

[PRESUMPTION OF WHAT COMPOSES

THE SERVICE FEE] The compensation for
their services representing their service
fee, is PRESUMED to be the total amount
received as enrollment fee from their
members plus other charges received.
The CTA En Banc overlooked that the
definition of gross receipts under RR No.
16-2005 merely presumed that the
133
 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.

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.

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 member
beforehand that 80% of the amount
would be earmarked for medical
utilization and only the remaining 20%
comprises its service fee. In the LATTER
134

15. CIR v. Systems 1. The procedures for the
Technology Institute, Inc., proper execution of a valid
G.R. No. 220835, July 26, waiver of the Defense of
2017. Prescription under the
Statute of Limitations of the
National Internal Revenue
Code (NIRC) are mandatory
and must strictly be
followed. Assessments
made pursuant to a
defective waiver are
considered void and of no
legal effect.
2. 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.
STI filed its Amended Annual Income
Tax Return for fiscal year 2003 on
August 15, 2003; its Quarterly VAT
Returns on July 23, 2002, October 25,
2002, January 24, 2003, and May 23,
2003; and its Bureau of Internal
Revenue (BIR) Form 1601E for EWT
from May 10, 2002 to April 15, 2003.
On May 30, 2006, STI's Amiel C.
Sangalang signed a Waiver of the
Defense of Prescription under the
Statute of Limitations of the National
Internal Revenue Code (NIRC), with
the proviso that the assessment and
collection of taxes of fiscal year 2003
shall come "no later than December
31, 2006." On June 2, 2006, the waiver
was accepted by Virgilio R.
Cembrano, Large Taxpayers District
Officer of Makati and was notarized
on even date.
On December 12, 2006, another
waiver was executed extending the
period to assess and collect the
assessed taxes to March 31, 2007. It
was also signed by Sangalang and
accepted by Cembrano and notarized
on the same date. A third waiver was
executed by the same signatories
extending further the period to June
30, 2007.
135
1. Whether the right of the
government to assess or collect
the alleged deficiency taxes is
already barred by prescription.
2. Whether STI is estopped from
invoking the defense of To implement the relevant provisions of
prescription.
case, MEDICARD's sale of its services is
exempt from VAT under Section 109 (G).
1. YES. The primary reason behind the
prescriptive period on the CIR's right to
assess or collect internal revenue taxes is
to safeguard the interests of taxpayers
from unreasonable investigation.
the NIRC, the BIR issued RMO 20-90 and
RDAO 05- 01, outlining the procedures for
the proper execution of a valid waiver.
These are mandatory and must strictly be
followed.
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. At the time when the first waiver
took effect, on June 2, 2006, the
period for the CIR to assess STI for
deficiency EWT and deficiency VAT
for fiscal year ending March 31, 2003,
had already prescribed. To recall, the
CIR only had until April 17, 2006 (for
EWT) and May 25, 2006 (for VAT), to
issue the subject assessments.
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
On June 28, 2007, STI received a
Formal Assessment Notice from the
CIR, assessing STI for deficiency
income tax, VAT and EWT for fiscal
year 2003 to which STI filed a request
for reconsideration/reinvestigation.
Thereafter, STI received the Final
Decision on Disputed Assessment
(FDDA) dated August 17, 2009 finding
STI liable for the deficiency income
tax, VAT AND EWT.
136
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. Hence, the CTA
committed no reversible error in
cancelling and setting aside the
subject assessments on the ground
of prescription.
2. STI's signatory to the three waivers
had no notarized written authority
from the corporation's board of
directors. It bears to emphasize that
RDAO No. 05-01 mandates the
authorized revenue official to ensure
that the waiver is duly accomplished
and signed by the taxpayer or his
authorized representative before
affixing his signature to signify
acceptance of the same; and in case
the authority is delegated by the
taxpayer to a representative, as in
this case, the concerned revenue
official shall see to it that such
delegation is in writing and duly
notarized. The waiver should not be
accepted by the concerned BIR office
and official unless notarized.
3. The waivers in this case did not
specify the kind of tax and the
amount of tax due. It is established
that a waiver of the statute of
limitations is a bilateral agreement
between the taxpayer and the BIR to
 extend the period to assess or collect
deficiency taxes on a certain date.
Logically, there can be no agreement
if the kind and amount of the taxes
to be assessed or collected were not
indicated. Hence, specific
information in the waiver is
necessary for its validity. 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. Hence, the cancellation
and setting aside of the subject
assessments on the ground of
prescription may properly lie.

2. NO. 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.

137
16. CIR v. Lancaster A valid Letter of Authority
Philippines, Inc., G.R. No. (LOA) does not render an
183408, July 12, 2017. assessment valid if the
revenue officers designated
in the LOA act in excess or
outside of the authority
granted them under said
LOA.
The Bureau of Internal Revenue (BIR)
issued a Letter of Authority (LOA)
authorizing its revenue officers to
examine respondent Lancaster's
books of accounts and other
accounting records for all internal
revenue taxes due from taxable year
1998 to an unspecified date.
After examination, the BIR issued a
Preliminary Assessment Notice (PAN)
which cited Lancaster for
overstatement of its purchases for the
fiscal year April 1998 to March 1999.
Subsequently on 6 November 2002,
Lancaster received from the BIR a final
assessment notice (FAN), which
assessed Lancaster's deficiency
income tax, as a consequence of the
disallowance of purchases claimed for
the taxable year ending 31 March
1999.
Lancaster duly protested the FAN.
Because of the CIR’s inaction on its
protest, Lancaster filed a petition for
review before the CTA Division, which
was granted. The CIR sought a
reversal of the decision with the CTA,
but the latter affirmed the
cancellation of the assessment
against Lancaster. It ruled, among
others, that the LOA authorized the
BIR officers to examine the books of
account of Lancaster for the taxable
year 1998. However, the deficiency
income tax assessment which the BIR
138
Whether the CTA En Banc did not NO, the CTA En Banc did not err in ruling
err when it ruled that the BIR that the BIR revenue officers had
revenue officers had exceeded exceeded their authority.
their authority.
A perusal of the LOA shows that the
period of examination is the taxable year
1998. For better clarity, the pertinent
portion of the LOA is again reproduced,
thus:
“The bearer(s) hereof x x x is/are
authorized to examine your books of
accounts and other accounting
records for all internal revenue taxes
for the period from taxable year,
1998 to _____, 19___. x x x."
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 April 1997 to 31 March 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, dated 20 September 1990, 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

17. Procter & Gamble Asia As a rule, the expiration of
PTE LTD. v. CIR, G.R. No. the 120-day mandatory
205652, September 6, period must be observed
2017. 
 before a judicial claim may
be availed by the taxpayer –
this requirement is
jurisdictional.
However, cases that were
filed in CTA before the
promulgation of the case of
Aichi and followed the
doctrine enunciated in the
case of San Roque, where
the Court recognized BIR
Ruling No. DA-489-03 as an
exception to the mandatory
and jurisdictional nature of
the 120-day waiting period,
should be permitted.
eventually issued against Lancaster
was based on the disallowance of
expenses reported in FY 1999, or for
the period 1 April 1998 to 31 March
1999. The CTA concluded that the
revenue examiners had exceeded
their authority when they issued the
assessment against Lancaster and,
consequently, declared such
assessment to be without force and
effect.
P & G is a foreign corporation that is
duly organized and existing under the
laws of Singapore and is maintaining
a Regional Operating Headquarters in
the Philippines. As issued by SEC, P &
G provides management, marketing,
technical and financial advisory and
other qualified by its Certificate of
Registration and License. P & G is also
a VAT-Registered Taxpayer and at the
same time covered by the BIR
Certificate of Registration.
P & G filed applications and letters
addressed to the BIR RDO No. 49 on
March 22, 2007 and May 2007
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.
139
Whether CTA erred in dismissing
the P & G’s judicial claims for
refund on the ground of
prematurity by applying the case
of CIR V. Aichi which was
promulgated by the SC while this
case is pending in CTA.
revenue officers designated in the LOA act
in excess or outside of the authority
granted them under said LOA. The subject
LOA specified that the examination
should be for the taxable year 1998 only
but the subsequent assessment issued
against Lancaster involved disallowed
expenses covering the next fiscal year, or
the period ending 31 March 1999. 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.
YES. CTA erred in dismissing the P&G’s
judicial claims for refund.
Based on the plain language of Section
112 of the NIRC, the CIR is given 120 days
within which to grant or deny a claim for
refund. Upon receipt of CIR's decision or
ruling denying the said claim, or upon the
expiration of the 120-day period without
action from the CIR, the taxpayer has 30
days within which to file a petition for
review with the CTA.
In Aichi, the Court ruled that compliance
with the 120+30-day periods is
mandatory and jurisdictional and is fatal
to the filing of a judicial claim with the
CTA. Subsequently, however, in San
Roque, while the Court reiterated the
mandatory and jurisdictional nature of the
120+30-day periods, it recognized as an
exception BIR Ruling No. DA-489-03,

Moreover, P&G filed a petition for
review with the CTA on March 28,
2007. It seeks the refund or issuance
of TCC in the amount of
Php23,090,729.17 representing the
input VAT paid on goods or services
attributable to its zero-rated sales for
the first quarter of the taxable year
2005.
P&G filed again with the CTA another
judicial claim for refund or issuance of
TCC amounting to Php 19,006,753.58
on June 8, 2007. This amount
represents the P & G’s unutilized
input VAT paid on goods and services
attributable to its zero-rated sales for
the 2nd quarter of taxable year 2005.
While the case of P&G is pending in
CTA Division, SC has promulgated the
case of CIR V. Aichi which provides
the doctrine that compliance with the
120-day period granted to the CIR,
within which to act on an
administrative claim for refund or
credit of unutilized input VAT, as
provided under Section112(C) of the
NIRC, as amended, is mandatory and
jurisdictional in filing an appeal with
the CTA.
CTA dismissed petition for having
been prematurely filed.
140
issued prior to the promulgation of Aichi,
where the BIR expressly allowed the filing
of judicial claims with the CTA even before
the lapse of the 120-day period.
BIR Ruling No. DA-489-03 furnishes a
valid basis to hold the CIR in estoppel
because the CIR had misled taxpayers into
filing judicial claims with the CTA even
before the lapse of the 120-day period.
In this case, records show that P&G filed
its judicial claims for refund on March 28,
2007 and June 8, 2007, respectively, or
after the issuance of BIR Ruling No. DA-
489-03, but before the date when Aichi
was promulgated. Thus, even though P&G
filed its judicial claim without waiting for
the expiration of the 120- day mandatory
period, the CTA may still take cognizance
of the case because the claim was filed
within the excepted period stated in San
Roque. In other words, P&G's judicial
claims were deemed timely filed and
should not have been dismissed by the
CTA.
18. Asiatrust Development The presentation of the
Bank, Inc. v. CIR, G.R. No. termination letter is
201530. April 19, 2017. 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.
Asiatrust Development Bank, Inc. Whether a BIR certification is NO. An application for tax abatement is
(Asiatrust) received from the sufficient proof of availment of deemed approved only upon the issuance
Commissioner of Internal Revenue the Tax Abatement Program. of a termination letter by the Bureau of
(CIR) three Formal Letters of Demand Internal Revenue (BIR).
(FLD) with Assessment Notices for
deficiency internal revenue taxes. Section 204(B) of the 1997 National
Asiatrust timely protested the lnternal Revenue Code (NIRC) empowers
assessment notices. CIR issued the CIR to abate or cancel a tax liability.
against Asiatrust new Assessment
Notices for deficiency taxes. Asiatrust The BIR issued RR No. 15-06 prescribing
partially paid said deficiency tax the guidelines on the implementation of
assessments. Asiatrust manifested the one-time administrative abatement of
that it availed of the Tax Abatement all penalties/surcharges and interest on
Program for its deficiency final delinquent accounts and assessments
withholding tax - trust assessments; (preliminary or final, disputed or not) as of
and that it paid the basic taxes for the June 30, 2006. Section 4 of RR No. 15-06
said fiscal years. provides:
CTA Division refused to consider SECTION 4. Who May Avail, - Any person/
Asiatrust's availment of the Tax taxpayer, natural or juridical, may settle
Abatement Program due to its failure thru this abatement program any
to submit a termination letter from delinquent account or assessment which
the BIR. Asiatrust insisted that the has been released as of June 30, 2006, by
Certification issued by the BIR is paying an Amount equal to One Hundred
sufficient proof of its availment of the Percent (100%) of the Basic Tax assessed
Tax Abatement Program considering with the Accredited Agent Bank (AAB) of
that the CIR, despite Asiatrust's the Revenue District Office (RDO)/Large
request, has not yet issued a Taxpayers Service (LTS)/Large Taxpayers
termination letter. CTA En Banc District Office (LTDO) that has jurisdiction
sustained the ruling of the CTA over the taxpayer. In the absence of an
Division that in the absence of a AAB, payment may be made with the
termination letter, it cannot be Revenue Collection Officer/Deputized
established that Asiatrust validly Treasurer of the RDO that has jurisdiction
availed of the Tax Abatement over the taxpayer. After payment of the
Program. basic tax, the assessment for
penalties/surcharge and interest shall be
cancelled by the concerned BIR Office
141
 following existing rules and procedures.
Thereafter, the docket of the case shall be
forwarded to the Office of the
Commissioner, thru the Deputy
Commissioner for Operations Group, for
issuance of Termination Letter.

Based on the guidelines, the last step in

the tax abatement process is the issuance
of the termination letter. The 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
142

19. CIR v. Liquigaz A void FDDA does not ipso
Philippines, G.R. Nos. facto render the assessment
215534 & 215557, April 18, void. The invalidity of one
2016. does not necessarily result
in the invalidity of the other
— unless the law or
regulations otherwise
provide. The failure of the
FDDA to reflect the facts
and law on which it is based
will make the decision void
which does not extend to
the nullification of the
entire assessment.
Liquigaz Philippines Corporation Whether a void FDDA leads to a NO. An assessment becomes a disputed
(Liquigaz) is a corporation duly void assessment.
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.
On April 9, 2008, 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. On May 28,
2008, it received a copy of the
Preliminary Assessment Notice 5
(PAN), dated May 20, 2008, together
with the attached details of
discrepancies for the calendar year
ending December 31, 2005. 6 Upon
investigation, Liquigaz was initially
assessed with deficiency withholding
tax liabilities, inclusive of interest, in
143
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.
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 failed 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.
Under Section 228 of the NIRC, a taxpayer
shall be informed in writing of the law and
the facts on which the assessment is
made, otherwise the assessment shall be
void. The mandatory requirement
providing the taxpayer with written notice
of the factual and legal bases applies to
both the FLD/FAM and FDDA. However, it
should be noted that a void FDDA does
not ipso facto render the assessment void.

20. Sps. Pacquiao v. CTA, 1. The determination of
G.R. No. 213394, April 6, whether the methods,
2016. 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.
2. The CTA has the 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
collection of tax jeopardizes
the interests of the taxpayer
the aggregate amount of
P23,931,708.72.
Consequently, on July 29, 2010,
Liquigaz filed its Petition for Review
before the CTA Division assailing the
validity of the FDDA issued by the CIR
in which the CTA Division noted that
unlike the PAN and the FLD/FAN, the
FDDA issued did not provide the
details thereof, hence, Liquigaz had
no way of knowing what items were
considered by the CIR in arriving at
the deficiency assessments.
The case is a petition for review on1.
certiorari of the resolutions of the
Court of Tax Appeals (CTA). In 2010,
Pacquiao failed to include his US2.
earnings in his 2009 income tax return
as well as the filling of his VAT for
2008 – 2009. The Commissioner of
Internal Revenue (CIR) then
authorized the Bureau of Internal
Revenue’s (BIR) to examine the tax
documents of the petitioners from
1995 – 2009. Despite the petitioners’
complaints, the investigation was
justified as a “fraud investigation”
under the “Run After Tax Evaders”
program. After its investigation, the
CIR found the petitioners liable for
deficiency in income tax and non-
payment of VAT liabilities. The BIR
then issued the Final Decision on
Disputed Assessment (FDDA) and
eventually the Preliminary Collection
144
1. Whether the exception to 1. NO. Despite the petitioners claim that
Section11, RA No. 1125 is CTA committed a grave abuse of
appropriate to this case. discretion for not applying the exception
to Section 11 of RA No. 1125, the Court
2. Whether the CTA may issue found that it was not appropriate to the
injunctive writs to restrain the current case.
collection of tax?
Section 11 of RA No. 1125 justifies that an
appeal to the CTA from the decision of the
CIR will not suspend the collection of
payment for the sanction of one’s tax
liability. But, when the CTA sees that the
collection may jeopardize the interest of
the Government and/or taxpayer, it may
suspend the said collection and require
either to deposit the amount claimed or
file a surety bond. Citing the cases of
Avelino and Zuleta, the petitioners believe
that CTA has ample authority to issue
injunctive writ to restrain the collection of
tax and more importantly dispense with
the deposit of the amount claimed or the
for being patently in Letter (PCL) demanding the payment
violation of the law of P2,261,217,439.92.
A petition for review was filed with the
Court of Tax Appeals (CTA) arguing
against CIR’s allegations that the
petitioners were guilty of fraud,
collection of deficiency tax from
Jinkee, and CIR’s assessment based
on the “best possible source” instead
of actual transaction documents. In its
resolution, the CTA desisted the
collection of tax payment but instead
opined that the petitioners were still
required to deposit a payment of
P3,298,514, 894.35 or post a bond of
P4,917,772,341.53.The petitioners
then asked for partial reconsideration
for the reduction of the amount to be
paid which the CTA denied hence, this
petition.
145
filing of the required bond, whenever the
method employed by the CIR in collection
of tax jeopardizes the interests of the
taxpayers for being patently in violation of
the law.
In relation to the current case, the Court
found no sufficient basis to determine
whether the dispensation of the required
cash deposit or bond is appropriate. The
alleged illegality of the methods used by
the CTA is not clearly evident in the
current case. Though it may be true, the
determination whether the petitioners’
case falls within the exception of Section
11, RA No. 1125 cannot be determined at
this point. The CTA should have
conducted a preliminary hearing and
received evidence, which it did not, so it
could have properly determined if the
dispensation of the required cash deposit
or bond is appropriate to this case.
2. YES, the CTA has the 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
collection of tax jeopardizes the interests
of the taxpayer for being patently in
violation of the law. Such authority
emanates from the jurisdiction to it not
only by section 11 of RA 1125, but also by
section 7 of the same law which, as
amended provides that the CTA shall
exercise exclusive appellate jurisdiction to

21. CIR v. Standard Generally, the period for
Chartered Bank, G.R. No. CIR to assess and collect
192173, July 29, 2015. 
 internal revenue taxes is
only up to 3 years after the
last day 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 3-
year 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.
146
Whether CIR’s right to assess
respondent bank for deficiencies
has already prescribed for failure
to comply with the requirements
set forth in RMO.
review by appeal “other matters arising
under the NIRC or other laws
administered by the BIR.”
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.

22. China Banking The time limit for the
Corporation v. CIR, G.R. No. government to collect the
172509, February 4, 2015. 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.
China Banking Corporation (CBC) was Whether the right of the BIR to
engaged in transactions involving collect the assessed DST from
sales of foreign exchange to the CBC is barred by prescription.
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.
YES. When the BIR issued the assessment
for deficiency DST, the applicable rule was
Section 319 (c)18 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.

18
Section 319 (c) is now Section 222 (c) of the NIRC.
147
23. CIR v. CBK Power The obligation to comply
Company Limited, G.R. with a tax treaty must take
Nos. 193383-84, January precedence over the
14, 2015. 
 objective of RMO No. 1-
2000. Logically, non-
compliance 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.
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
148
Whether 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
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 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.
149
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 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. 1-
2000, 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

24. CIR v. Team (Phils.) Every corporation liable to
Energy Corporation, G.R. tax under Section 27 shall
No. 188016, January 14, file a final adjustment return
2015. 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 with the excess
amount paid, as the case
may be.
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.
Respondent Mirant (Philippines) Whether the respondent proved
Energy Corporation is a domestic its entitlement to the refund.
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
150
from P15,672,958.42 to P14,835,720.39 to
exclude its transactions with Fortis-
Netherlands for which no ITAD ruling was
obtained. CBK Power’s petition in G.R.
Nos. 193383-84 is therefore granted.
YES. Section 76 of the NIRC outlines the
mechanisms and remedies that a
corporate 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 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
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 two-
year 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
151
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 22918of
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 Division are
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
the 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
152

25. Banco De Oro et. al. v. Petitions for writs of
CIR, G.R. No. 198756, certiorari against the acts
January 13, 2015. and omissions of the
applicable quasi-judicial
agencies regarding tax
cases should, thus, be filed
before the Court of Tax
Appeals.
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.
In 2001, the Bureau of Treasury issued Whether the doctrine of the YES. The case should have been filed with
P35 billion pesos worth of 10 -year hierarchy of courts was violated. the Court of Tax Appeals.
treasury bonds at an auction.
According to jurisprudence, Court of Tax
In 2011, or ten years after, The Appeals has exclusive jurisdiction to
Commissioner of Internal Revenue determine the constitutionality or validity
issued BIR Ruling No. 370-2011 of tax laws, rules and regulations, and
declaring therein that PEACe bonds, other administrative issuances of the
which are thus treated as deposit Commissioner of Internal Revenue. It thus
substitutes, are subject to a 20% Final has the authority to issue writs of
Withholding Tax. The ruling was given certiorari since it is inherent in the exercise
11 days prior to the maturity of said of its appellate jurisdiction.
bonds. Pursuant to the ruling, the
Secretary of Finance directed the Judicial power likewise authorizes lower
Bureau of Treasury to withhold 20% courts to determine the constitutionality
Final Withholding Tax from the face or validity of a law or regulation in the first
value of the PEACe bonds upon their instance.
payment at maturity on October
2011. Republic Act no. 1125 created the Court
of Tax Appeals and Republic Act no. 9282
Banco de Oro filed with the Supreme expanded the jurisdiction of the Court of
court a petition for Certiorari, Tax appeals and elevated its rank to a level
prohibition and/or mandamus with similar to a collegiate court with special
an urgent application for a temporary jurisdiction. It thus possesses all the
restraining order. inherent powers of a Court of Justice.
The court issued a temporary Court of Tax Appeals may likewise take
restraining order enjoining the cognizance of cases directly challenging
application of the BIR Ruling subject the constitutionality or validity of a tax law
153

26. Winebrenner & Iñigo Any document may be used
Insurance Brokers, Inc. v. to establish that indeed the
CIR, G.R. No. 206526, non-carry-over clause had
January 28, 2015. been complied with,
provided that such
competent, relevant and
part of the records.
to the condition that the 20% final or regulation or administrative issuance
withholding tax on interest income (revenue orders, revenue memorandum
shall be withheld and placed in circulars, rulings).
escrow pending the resolution of the
petition. Thus, petitions for writs of certiorari
against the acts and omissions of the
The CIR questions the direct resort to applicable quasi-judicial agencies should,
the Supreme Court made by the thus, be filed before the Court of Tax
petitioners. They argue that the Appeals.
petitioners should have challenged
first the rulings before the Secretary Since the case was filed at the first
of Finance which is consistent with instance with the Supreme Court, it
the doctrine on exhaustion of violated the doctrine of hierarchy of
administrative remedies. courts.
Winebrenner (petitioner) filed its Whether submission and NO. Submission and presentation of the
Annual Income Tax Return (ITR) for presentation of the quarterly ITR quarterly ITR for the claim of tax refund or
Calendar Year (CY) 2003 on April 15, of the succeeding quarters of a credit is not indispensable. Any document
2004. taxable year is indispensable in a may be used to establish that indeed the
claim for refund. non-carry-over clause had been complied
On April 7, 2006, petitioner applied with, provided that such competent,
for tax credit or refund, by filing BIR relevant and part of the records.
Form 1914 with RDO 50, for the
excess or unutilized portion of the A taxpayer who seeks for a refund of
CWT for CY 2003. No action was taken excess and unutilized CWT must:
on said claim. On April 11, 2006,
petitioner then filed a petition for 1. File the claim with the CIR within
review before the CTA, which was the two-year period from the date
partially granted in the reduced of payment of the tax;
amount of P2,737,903.34. 2. Show on the return that the
income received was declared as
Both petitioner and the part of the gross income; and
Commissioner of Internal Revenue 3. Establish the fact of withholding
(CIR) filed a reconsideration. by a copy of a statement duly
Petitioner prayed that the entire issued by the payor to the payee,
amount claimed be refunded but the
CIR prayed for the denial of the entire
154
 amount for failure to present the showing the amount paid and the
quarterly ITR for 2004 in accordance amount of tax withheld.
with Section 76 of the National
Internal Revenue Code (NIRC). The irrevocability rule under Section 76 of
the NIRC means that once an option,
The CTA-Division reversed the either refund, tax credit or carry-over of
decision and denied the entire claim. CWT has been exercised, the same can no
The CTA En Banc affirmed the longer be modified in the succeeding
decision of the CTA-Division. taxable years. Section 76 only requires
that the entitlement to a claim must be
proved by prima facie evidence.

There is no question that those who claim

must not only prove its entitlement to the
excess credit, but likewise must prove that
no carry-over has been made in cases
where refund is sought. Proving that no
carry-over has been made does not
absolutely require the presentation of the
quarterly ITRs.

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 the
quarters of the taxable year. The annual
ITR 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.

27. CIR vs. Team Sual A taxpayer cannot Team Sual Corporation (TSC) is a Whether the filing of the petition YES. Section 112([C]) of the NIRC clearly
Corporation (Formerly simultaneously file an corporation principally engaged in for review with the CTA was provides that the CIR has "120 days, from
Mirant Sual Corporation), administrative and the the business of power generation and prematurely done pursuant to the date of the submission of the
G.R. No. 194105. 
February judicial claim. the subsequent sale thereof solely to Subsections A and C of Section complete documents in support of the
5, 2014. National Power Corporation (NPC); it 112 of the NIRC. application [for tax refund/credit]", within

155

For refund or tax credit of
input taxes, one can only
file an appeal after the lapse
of 120 days from the date of
submission of the official
receipts or invoices and
other documents in support
of the claim. Provided, there
is inaction. Provided further,
the appeal must be filed
within thirty (30) days from
the receipt of the decision
denying partially or totally
the claim
Note: It is now 90 days, not
120 days.
28. CIR vs. United Salvage The taxpayer shall be
and Towage (Phils), Inc., informed in writing of the
G.R. No. 197515, July 2, law and the facts on which
2014. 
 the assessment is made.
Otherwise, the assessment
is void.
is registered with the Bureau of
Internal Revenue (BIR) as a VAT
taxpayer and was granted a zero-
rating arising from its sale of power
generation services to NPC.
TSC filed with the BIR an
administrative claim for refund,
without awaiting 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.
United Salvage and Towage (Phils.),
Inc. (USTP) is engaged in the business
of sub-contracting work for service
contractors engaged in petroleum
operations in the Philippines. During
the taxable years in question, it had
entered into various contracts and/or
156
which to grant or deny the claim. In case
of full or partial denial by the CIR, the
taxpayer's recourse is to file an appeal
before the CTA within 30 days from
receipt of the decision of the CIR.
However, if after the 120-day period the
CIR fails to act on the application for tax
refund/credit, the remedy of the taxpayer
is to appeal the inaction of the CIR to CTA
within 30 days.
In this case, the administrative and the
judicial claims were simultaneously filed
on September 30, 2004. Obviously,
respondent did not wait for the decision
of the CIR or the lapse of the 120-day
period. For this reason, we find the filing
of the judicial claim with the CTA
premature.
Failure to comply with the 120-day
waiting period violates a mandatory
provision of law. It violates the doctrine of
exhaustion of administrative remedies
and renders the petition premature and
thus without a cause of action, with the
effect that the CTA does not acquire
jurisdiction over the taxpayer's petition.
Whether the Expanded YES, since the 1997 NIRC, which requires
Withholding Tax Assessments that the assessment be accompanied by
issued by the BIR against the factual and legal basis, was already in
respondent was without any effect.
factual and legal basis, rendering
it void In order to determine whether the
requirement for a valid assessment is duly
complied with, it is important to ascertain
sub-contracts with several petroleum
service contractors.
In the course of USTP’s operations,
petitioner found respondent liable for
deficiency income tax, withholding
tax, value-added tax (VAT) and
documentary stamp tax (DST) for
taxable years 1992, 1994, 1997 and
1998. Particularly, petitioner, through
BIR officials, issued demand letters
with attached assessment notices for
withholding tax on compensation
(WTC) and expanded withholding tax
(EWT) for taxable years 1992, 1994
and 1998.
USTP filed administrative protests
against the 1994 and 1998 EWT
assessments alleging, among others,
that the Notices of Assessment are
bereft of any facts, law, rules and
regulations or jurisprudence; thus, the
assessments are void and the right of
the government to assess and collect
deficiency taxes from it has
prescribed on account of the failure
to issue a valid notice of assessment
within the applicable period.
157
the governing law, rules and regulations
and jurisprudence at the time the
assessment was issued. In the instant case,
the Preliminary Assessment Notices
(PANs) and Final Assessment Notices
(FANs) pertaining to the deficiency EWT
for taxable years 1994 and 1998,
respectively, were issued on January 19,
1998, when the Tax Code was already in
effect.
The date of issuance of the notice of
assessment determines which law
applies- the 1997 NIRC or the old Tax
Code.
RA 8424 has already amended the
provision of Section 229 on protesting an
assessment. The old requirement of
merely notifying the taxpayer of the CIR's
findings was changed in 1998 to
informing the taxpayer of not only the
law, but also of the facts on which an
assessment would be made; otherwise,
the assessment itself would be invalid.
In the instant case, the 1997 NIRC covers
the 1994 and 1998 EWT FANs because
these were issued on January 19, 1998 and
September 21, 2001, respectively, at the
time of the effectivity of the 1997 NIRC.
Clearly, the assessments are governed by
the law.
Indeed, Section 228 of the Tax Code
provides that the taxpayer shall be
informed in writing of the law and the
 facts on which the assessment is made.
Otherwise, the assessment is void.

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.

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.

It is clear that the assailed deficiency tax

assessment for the EWT in 1994
disregarded the provisions of Section 228
of the Tax Code, as amended, as well as
Section 3.1.4 of Revenue Regulations No.
12-99 by not providing the legal and
factual bases of the assessment. Hence,
the formal letter of demand and the
notice of assessment issued relative
thereto are void.
158
29. CIR vs. PNB, G.R. No. The certificate of creditable
180920, September 29, tax withheld at source is the
2014. 
 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.
Respondent PNB filed its tentative
income tax return for taxable year
2000 which [it] subsequently
amended.
In its amended income tax return, it
declared no income tax liability as it
incurred a net loss from its Regular
Banking Unit ("RBU") transactions.
However, respondent PNB had a 10%
final income tax liability of
P210,364,280.00 on its taxable
income earned from its Foreign
Currency Deposit Unit ("FCDU")
transactions for the same year.
Likewise, it 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 PNB’s income tax
overpayment of P35,524,227.00
consisted of the balance of the prior
year's 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 it opted to be
refunded.
Respondent PNB filed a claim for
refund or the issuance of a tax credit
159
Whether respondent PNB is
entitled to a refund or issuance
of a Tax Credit Certificate
representing unutilized excess
creditable withholding taxes.
YES. 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.
A certificate is complete in the relevant
details that would aid the courts in the
evaluation of any claim for refund of
excess creditable withholding taxes.
Moreover, as correctly held by the Court
of Tax Appeals En Banc, the figures
appearing in the withholding tax
certificates can be taken at face value
since these documents were executed
under the penalties of perjury, pursuant to
Section 267 of the 1997 National Internal
Revenue Code, as amended.
Thus, upon presentation of a withholding
tax certificate complete in its relevant
details and with a written statement that
it was made under the penalties of
perjury, the burden of evidence then shifts
to the Commissioner of Internal Revenue
to prove that (1) the certificate is not
complete; (2) it is false; or (3) it was not
issued regularly.
Further, proof of actual remittance is not
a condition to claim for a refund of
unutilized tax credits. Under Sections 57
and 58 of the 1997 National Internal

30. CIR vs. BASF Coating + The legal provisions on
Inks Philippines, Inc., G.R. prescription should be
No. 198677, November 26, liberally construed to
2014. 
 protect taxpayers and that,
as a corollary, the
exceptions to the rule on
prescription should be
strictly construed.
certificate in the amount of Revenue Code, as amended, it is the
P26,466,735.40 for the taxable year payor-withholding agent, and not the
2000 with the BIR by presenting payee-refund claimant such as
certificates of creditable tax withheld respondent, who is vested with the
at source. responsibility of withholding and
remitting income taxes.
Due to BIR's inaction on its
administrative claim, respondent PNB
appealed before the Court of Tax
Appeals (CTA) by way of a Petition for
Review wherein the CTA rendered a
decision in favor of respondent.
Respondent herein moved to its new Whether the CTA erred in setting NO, it did not for lack of valid notices sent
address. It also sent letters and aside the assessment due to to respondent. While it is true that the
documents evidencing its new prescription. running of the Statute of Limitations is
address. However, Petitioner CIR suspended when the taxpayer cannot be
issued a Formal Assessment Notice located in the address given by him in the
on January 2003 which was sent by return filed upon which a tax is being
registered mail on respondent’s assessed or collected and that in such
former address. The latter filed a circumstance, it is incumbent upon the
protest arguing that the assessment respondent, under Section 11 of Revenue
has prescribed but, due to the Regulation No. 12-85 states that, to give a
inaction of the CIR, the matter was written notice thereof to the Revenue
elevated to the CTA via a petition for District Officer or the district having
review. The CTA cancelled and set jurisdiction over his former legal
aside the deficiency taxes since there residence and/or place of business, the
were no valid notices sent to same rule cannot be applied here as the
respondent thus rendering the petitioner was aware of the new address
assessments against it void. of the respondent evidenced by the
several letters and documents sent to it by
respondent. Moreover, the records also
revealed that when petitioner sent the
Preliminary Assessment Notice to
respondent’s old address, it was returned
to sender. This should have alerted
petitioner. Thus, despite the absence of a
160

31. Samar-I Electric In the case of a false or
Cooperative vs. CIR, G.R. fraudulent return with
No. 193100 December 10, intent to evade tax or of
2014. 
 failure to file a return, the
tax may be assessed, or a
proceeding in court for the
collection of such tax may
be filed without
assessment, at any time
within ten (10) years after
the discovery of the falsity,
fraud or omission.
Petitioner, an electric cooperative,
was issued a Letter of Authority (LOA)
covering the examination of
petitioner's books of account and
other accounting records for income
and withholding taxes for the period
1997 to 1999 conducted by the
Special Investigation Division of the
BIR.
Income and withholding tax liabilities
for 1997 to 1999 were assessed by the
BIR. On December 13, 2001,
petitioner executed a Waiver of the
Defense of Prescription under the
Statute of Limitations, good until
March 29, 2002.
Consequently, 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 and deficiency
income tax covering the years 1998 to
1999.
Protest was made on the assessment
notices issued which was later on
161
Whether the 1997 and 1998
assessments on withholding tax
on compensation were issued
within the prescriptive period
provided by law.
formal written notice of respondent's
change of address, the fact remains that
petitioner became aware of respondent's
new address as shown by documents
replete in its records. As a consequence,
the running of the three-year period to
assess respondent was not suspended
and has already prescribed.
YES. While petitioner is correct that
Section 203 of the Tax Code sets the
three-year prescriptive period to assess,
the following exceptions are provided
under Section 222 of the NIRC of 1997.
In the case at bar, it was petitioner's
substantial under-declaration 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."
A careful examination of the evidence on
record yields to no other conclusion but
that petitioner failed to withhold taxes
from its employees' 13th month pay and
other benefits in excess of thirty thousand
pesos (P30,000.00) amounting to
P2,690,850.91 for the taxable years 1997
to 1999 — resulting to its filing of the
subject false returns. Petitioner failed to
refute this finding, both in fact and in law.
 elevated to the Court of Tax Appeal
En Banc (CTA EB) which ruled that due
process was observed in the issuance
of the assessments in accordance
with Section 228 of the Tax Code and
that the 1997 and 1998 assessments
on deficiency withholding tax on
compensation have not prescribed.

Petitioner's moved for

reconsideration was denied.

Petitioner contends that the subject

1997 and 1998 withholding tax
assessments on compensation were
issued beyond the prescriptive period
of three years under Section 203 of
the Tax Code of 1997.

32. Team Pacific The proper remedy from
Corporation vs. Daza as the denial of an assessment
Municipal Treasurer of protest by a local treasurer
Taguig, G.R. No. 167732, is an ordinary appeal, and
July 
11, 2012. 
 not Rule 65 petition on
certiorari as the local
treasurer is not exercising
judicial or quasi- judicial
function in assessing one’s
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.
In 2004 upon renewal of its business
license, TPC was assessed by the
Municipal Treasurer the full value of
the rates instead of the 1⁄2 rate on
TPC’s assessment invoking that TPC is
not an exporter of essential
commodities. TPC then filed on the
same day a written protest with the
162
Whether a petition for certiorari
under Rule 65 is the proper
remedy to question the
municipal treasurer’s inaction on
its letter-protest.
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

33. Lucas G. Adamson, et al.
vs. CA, et al., G.R. Nos.
120935 & 124557, May 21,
2009.
19
Section 254 under the NIRC.
20
Section 253 under the NIRC..
1. An affidavit which was
executed by revenue
officers stating the tax
liabilities of a taxpayer and
attached to a criminal
complaint for tax evasion,
cannot be deemed an
assessment that can be
questioned before the
Court of Tax Appeals.
2. Sec. 222. Exceptions as to
period of limitation of
assessment and collection
of taxes. — (a) In the case of
a false or fraudulent return
with intent to evade tax or
of failure to file a return, the
tax may be assessed, or a
proceeding in court after
the collection of such tax
may be begun without
assessment, at any time
within ten years after the
discovery of the falsity,
fraud or omission..
(Under G.R. No. 124557) Meanwhile,
3. The CTA is to entertain an AMC and Adamson et al. requested
appeal only from a final for
decision or assessment of Commissioner of the "Examiner's
Municipal Treasurer. Her inaction led correction of errors of jurisdiction and not
TPC to file a petition for certiorari errors of judgment.
under Rule 65.
Adamson and AMC sold common 1. Whether the commissioner 1. NO. An assessment is a written notice
shares of stock in AAI to APAC and has already rendered an and demand made by the BIR on the
both paid capital gains tax for the assessment (formal or otherwise) taxpayer for the settlement of a due tax
sale. Later, AMC sold more common of the tax liability of AMC and liability that is there definitely set and
shares of stock in AAI to APAC, and Adamson et al. fixed. A written communication
then paid capital gains tax. containing a computation by a revenue
2. Whether filing of the criminal officer of the tax liability of a taxpayer and
The commissioner later issued a complaints by the DOJ is giving him an opportunity to contest or
"notice to taxpayer" to AMC and premature for lack of formal disprove the BIR examiner's findings is not
Adamson et al. informing them of assessment. an assessment since it is yet indefinite.
deficiencies on their payment of
capital gains tax and VAT. The notice 3. Whether the Court of Tax The recommendation letter of the
contained a schedule for a Appeals has jurisdiction to take Commissioner to the DOJ served merely
preliminary conference. cognizance of both the civil and as the prima facie basis for filing criminal
criminal aspects of the tax information that the taxpayers had made
(Under G.R. No. 120935) liability of AMC and Adamson et. violations.
Commissioner filed with DOJ an al.
affidavit of complaint against AMC 2. NO. The law is clear. When fraudulent
and Adamson et al. for several tax returns are involved as in the cases at
violations including attempt to evade bar, a proceeding in court after the
19
or defeat tax under Section 253 in collection of such tax may be begun
relation to Section 25220 of the NIRC. without assessment. Here, the gross
After preliminary investigation, the disparity in the taxes due and the amounts
State Prosecutor found probable actually declared by the private
cause. respondents constitutes badges of fraud.
3. NO. The laws have expanded the
jurisdiction of the CTA. However, they did
reinvestigation with the not change the jurisdiction of the CTA to
entertain an appeal only from a final
163
 the Commissioner, or in
cases where the
Commissioner has not
acted within the period
prescribed by the NIRC.
34. RCBC vs. CIR, G.R. No. Section 3(a), Rule 8 of the
168498, April 24, 2007. Revised Rules of the Court
of Tax Appeals - Who May
Appeal; Period to File
Petition. — (a) A party
adversely affected by a
decision, ruling or the
inaction of the
Commissioner of Internal
Revenue on disputed
assessments or claims for
refund of internal revenue
taxes, or by a decision or
ruling of the Commissioner
of Customs, the Secretary of
Finance, the Secretary of
Trade and Industry, the
Secretary of Agriculture, or
a Regional Trial Court in the
exercise of its original
jurisdiction may appeal to
the Court by petition for
review filed within thirty
days after receipt of a copy
of such decision or ruling,
or expiration of the period
fixed by law for the
Commissioner of Internal
Findings" earlier issued by the Bureau
of Internal Revenue (BIR), which
pointed out the tax deficiencies.
Before the Commissioner could act
on their letter-request, they filed a
Petition for Review with the CTA.
Petitioner filed a Motion for Whether the case should be NO. Petitioner's failure to file a petition
Reconsideration on the decision of reopened.
the SC affirming CTA En Banc’s
decision. CTA En Banc affirmed
resolutions of the CTA Second
Division denying petitioner’s Petition
for Relief from Judgment and Motion
for Reconsideration. Petitioner argues
that, in the interest of substantial
justice, the instant case should be
reopened considering that it was
allegedly not accorded its day in court
when the Court of Tax Appeals
dismissed its petition for review for
late filing. It claims that rules of
procedure are intended to help
secure, not override, substantial
justice.
164
decision or assessment of the
Commissioner, or in cases where the
Commissioner has not acted within the
period prescribed by the NIRC. In the
cases at bar, the Commissioner has not
issued an assessment of the tax liability of
private respondents.
for review with the Court of Tax Appeals
within the statutory period rendered the
disputed assessment final, executor and
demandable, thereby precluding it from
interposing the defenses of legality or
validity of the assessment and
prescription of the Government's right to
assess.
In the instant case, the CIR failed to act on
the disputed assessment within 180 days
from the date of submission of
documents. Thus, petitioner opted to file
a petition for review before the Court of
Tax Appeals. Unfortunately, the petition
for review was filed out of time, i.e., it was
filed more than 30 days after the lapse of
the 180-day period. Consequently, it was
dismissed by the Court of Tax Appeals for
late filing. Petitioner did not file a motion
for reconsideration or make an appeal;
hence, the disputed assessment became
final, demandable and executory.
In case the Commissioner failed to act on
the disputed assessment within the 180-
day period from date of submission of
documents, a taxpayer can either: 1) file a

35. Capitol Steel Corp. vs.
Phividec Industrial
Authority, G.R. No. 169453,
December 6, 2006.
Revenue to act on the
disputed assessments.
While the law grants to the
CIR the power to determine
zonal values, the same is for
the purpose of computing
internal revenue taxes.
Capitol Steel owns parcels of land. Whether a valuation which was
PHIVIDEC is a GOCC which is vested not publicly heard and published
with the power of eminent domain. can be used.
PHIVIDEC filed an expropriation case
for the properties of Capitol Steel for
the project of PHIVIDEC. Upon
request of Capitol, BIR(TCRPV)
thereafter issued a resolution fixing
the "reasonable and realistic zonal
valuation" at P700/sqm. PHIVDEC
said that under the schedule of zonal
valuation for real properties, this
provides for a lesser amount of
P300/sqm and P500/sqm.
165
petition for review with the Court of Tax
Appeals within 30 days after the
expiration of the 180-day period; or 2)
await the final decision of the
Commissioner on the disputed
assessments and appeal such final
decision to the Court of Tax Appeals
within 30 days after receipt of a copy of
such decision. However, these options are
mutually exclusive, and resort to one bars
the application of the other.
Hence, after availing the first option, i.e.,
filing a petition for review which was
however filed out of time, petitioner
cannot successfully resort to the second
option, i.e., awaiting the final decision of
the Commissioner and appealing the
same to the Court of Tax Appeals, on the
pretext that there is yet no final decision
on the disputed assessment because of
the Commissioner's inaction.
NO. Pursuant to RA 8974, 100% of the
value of the property based on the current
relevant zonal valuation of the BIR shall be
the amount paid to the owner of the
property. The "current relevant zonal
valuation" pertains to the values reflected
in the schedule of zonal values embodied
in a Department Order issued pursuant to
RMO No. 56-89 issued by the
Commissioner of Internal Revenue. The
determination of P300 and P500 per
square meter zonal values were approved
by both the TCRPV and the ECRPV and on
an even date. 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.

36. CIR vs. Sony Phil., Inc., There must be a grant of In 1998, a Letter of Authority (LOA) Whether the LOA issued by the NO. There must be a grant of authority
G.R. No. 178697, authority before any was issued by the CIR to inspect the CIR to inspect the books of Sony before any revenue officer can conduct an
November 17, 2010. revenue officer can conduct books of Sony for the period “1997 for the period “1997 and examination or assessment. A LOA is the
an examination or and unverified prior years”. In 1999, a unverified prior years” is valid. authority given to the appropriate
assessment. Equally preliminary assessment for 1997 revenue officer assigned to perform
important is that the deficiency taxes and penalties was assessment functions, empowering him to
revenue officer so issued by CIR which Sony protested. examine the records of a taxpayer and
authorized must not go Based on the inspection made, the collect the correct amount of tax. The very
beyond the authority given. BIR assessed the corporation for provision of the Tax Code and the CIR
In the absence of such an deficiency VAT because it disallowed relies on is unequivocal with regard to its
authority, the assessment the claim of input VAT of advertising power to grant authority to examine and
or examination is a nullity expense incurred by Sony, which was assess a taxpayer.
subsidized by Sony International
There must be a sale, barter Singapore (SIS). The disallowance was Here, the revenue officers went beyond
or exchange of goods or from the records from January to the scope of their authority because the
properties before any VAT March 1998. deficiency VAT assessment they arrived at
may be levied. was based on records from January to
March 1998.The Cir knew which period
should be covered by the investigation.
Thus, if CIR wanted or intended the
investigation to include the year 1998, it
should have done so by including it in the
LOA or issuing another LOA.

Finally, a LOA should cover a taxable

period not exceeding one taxable year.
The practice of issuing L/As covering audit
of "unverified prior years” is prohibited.

166
37. CIR vs. Pascor Realty Proceedings in court on
and Devt. Corp., et al., G.R. false or fraudulent returns
No. 128315, June 29, 1999. may
without assessment.
38. Republic of the Phils. vs.
Leonor de la Rama, et al.,
G.R. No. L-21108,
November 29, 1966.
On March 1995, the Commissioner of
Internal Revenue (CIR) filed a criminal
be commenced complaint before the Department of
Justice against respondents alleging
evasion of taxes.
A criminal complaint is
instituted not to demand The revenue officer’s affidavit
payment, but to penalize attached to the criminal complaint
the taxpayer for violation of
merely contained a computation of
the Tax Code. respondents' tax liability. It did not
state a demand or a period of
Revenue officer's affidavit payment. It was addressed to the
without demand or period justice secretary, not to the taxpayers.
of payment is not an
assessment. Private respondents then filed a
request for reconsideration and
reinvestigation. The CIR denied said
request on the ground that no formal
assessment has been issued. The
matter was elevated to the Court of
Tax Appeals (CTA). The CIR moved to
dismiss.
The CTA denied said motion to
dismiss and held that the criminal
complaint for tax evasion was already
an assessment. The Court of Appeals
affirmed the CTA’s denial.
The assessment is deemed The estate of the late Esteban de la Whether there has been proper NO. The estate was still under the
made when the notice to Rama was the subject of Special notice of tax assessment.
this effect is released, Proceedings no. 401 of the CFI-Iloilo.
mailed, or sent to the The executor-administrator, Eliseo
taxpayer for the purpose of Hervas, filed income tax returns of the
giving effect to said estate corresponding to the taxable
assessment. It appears that year 1950, declaring a net income of
the person liable for the P22,796.59, on the basis of which the
167
1. Whether revenue officer's 1. NO. In the present case, the revenue
affidavit without demand or officer’s Affidavit merely contained a
period of payment is considered computation of respondents' tax liability.
an assessment. It did not state a demand or a period for
payment. Worse, it was addressed to the
2. Whether the filing of a criminal Justice Secretary, not to the taxpayers.
complaint must be preceded by That the BIR examiners' Joint Affidavit
an assessment. attached to the Criminal Complaint
contained some details of the tax
liabilities of private respondents does not
ipso facto make it an assessment.
2. NO. Section 222 of the NLRC especially
states that in cases of failure to file a
return, proceedings in court may be
commenced without an assessment. A
criminal complaint is instituted not to
demand payment, but to penalize the
taxpayer for violation of the Tax Code.
Furthermore, Section 205 of the same
Code clearly mandates that the civil and
criminal aspects of the case may be
pursued simultaneously.
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,
payment of the tax did not amount of P3,919.00 was assessed
receive the assessment, the and was paid by the estate as income
assessment could not tax. The BIR later claimed that it had
become final and found out that there had been
executory. 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 BIR
then made an assessment as
deficiency income tax against the
estate. The CIR wrote a letter to Mrs.
Lourdes de la Rama-Osmeña
informing her of the deficiency
income tax and asking payment
thereof. 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
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
wrote another letter to Mrs. Lourdes
de la Rama-Osmeña demanding,
through her, upon the heirs, the
168
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;.." 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
payment of the deficiency income tax receive the assessment, the assessment
within the period of thirty days from could not become final and executory.
receipt thereof. The counsel of
Lourdes de la Rama-Osmeña, in a
letter insisted that the letter should
be sent to Leonor de la Rama. The
Deputy Commissioner of Internal
Revenue wrote to Leonor de la Rama
another letter 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 with the CFI-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. The defendants-appellees,
Lourdes de la Rama-Osmeña, Leonor
de la Rama, Estefania de la Rama-
Pirovano, Dolores de la Rama-Lopez,
Charles Miller, and Aniceta de la
Rama-Sian, thru counsel, filed their
respective answers, one of their
allegations is that the executor of the
estate, Eliseo Hervas, had never been
given notice of the assessment, and
consequently the assessment had
never become final.

169
 39. CIR vs. Rosemarie The requirements under
Acosta, G.R. No. 154068, Section 230 (old Tax Code)
August 3, 2007. for refund claims are as
follows:
1. A written claim for
refund or tax credit
must be filed by the
taxpayer with the
Commissioner;
2. The claim for refund
must be a categorical
demand for
reimbursement;
3. The claim for refund or
tax credit must be filed,
or the suit or
proceeding therefore
must be commenced in
court within two (2)
years from date of
payment of the tax or
penalty regardless of
any supervening cause.
As tax refunds involve a
return of revenue from the
government, strict
compliance with the
conditions imposed for the
In 1999, Acosta filed a Petition for
Review before the CTA alleging
overpayment of P340,918.92 income
tax for the year 1996. Prior to the
filing, she filed an amended return
before the BIR in 1997 indicating an
overpayment of P358,274.63.
Commissioner of Internal Revenue
(CIR) moved to dismiss the case for
failure to file a mandatory written
claim for refund before the CIR. The
latter contended that an amended
return showing an overpayment does
not constitute the written claim for
refund required under Section 230 of
the 1993 NIRC (old Tax Code) and
that an actual written claim for refund
is necessary before a suit for its
recovery may proceed in any court.
CTA dismissed the case. However,
upon review, CA ruled that Acosta’s
filing of an amended return indicating
overpayment was sufficient
compliance with the requirement of a
written claim for refund.
1. Whether an amended return
filed by Acosta indicating an
overpayment constitutes the
written claim for refund required
by law.
2. Whether the phrase “Provided,
however, That a return filed
showing an overpayment shall
be considered as a written claim
for credit or refund” found under
the 1997 NIRC (New Code) be
applied retroactively since the
petition for refund was filed Noteworthy, the requirements under
during the effectivity of such.
1. NO. A written claim for refund,
categorically demanding recovery of
overpaid taxes must be first filed before
the CIR.
The applicable law on refund of taxes
pertaining to the 1996 compensation
income is Section 230 of the old Tax Code,
which was the law then in effect, and not
Section 204(c) of the new Tax Code, which
was effective starting only on January 1,
1998.
Section 23021 for refund claims are as
follows:
1. A written claim for refund or tax
credit must be filed by the taxpayer
with the Commissioner;
2. The claim for refund must be a
categorical demand for
reimbursement;
3. The claim for refund or tax credit
must be filed, or the suit or
proceeding therefore must be
commenced in court within two (2)

21
This is amended under the 1997 Tax Code (still in effect today) – Section 229. Recovery of Tax Erroneously or Illegally Collected. – no suit or proceeding shall be maintained in any court for the recovery of any national
internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any
manner wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit
or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however,
That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.

170
 return of revenue collected
is a doctrine consistently
applied in this jurisdiction.
40. CIR vs. The Estate of To allow a taxpayer to deny
Benigno P. Toda, Jr., et al., tax liability on the ground
G.R. No. 147188, that the sale was made
September 14, 2004. through another and
distinct entity when it is
proved that the latter was
merely a conduit is to
sanction a circumvention of
our tax laws.
The case at bar stemmed from a
Notice of Assessment sent to CIC by
the Commissioner of Internal
Revenue for deficiency income tax
arising from an alleged simulated sale
of a 16-storey commercial building
known as Cibeles Building, situated 2. Whether the period of good faith and at arms length. Tax
on two parcels of land on Ayala
Avenue, Makati City.
Cibeles Insurance Corporation (CIC) the 1989 deficiency income tax taxpayer to further or additional civil or
authorized Benigno P. Toda, Jr.,
171
1. Whether the tax planning
scheme adopted by CIC the two most common ways used by
constitutes tax evasion that
would justify an assessment of avoidance is the tax saving device within
deficiency income tax.
assessment has prescribed.
3. Whether the Estate is liable for when availed of, usually subjects the
years from date of payment of the
tax or penalty regardless of any
supervening cause.
Further, entrenched in our jurisprudence
is the principle that tax refunds are in the
nature of tax exemptions which are
construed strictissimi juris against the
taxpayer and liberally in favor of the
government.
In this case, the SC did not agree that the
amended return filed by Acosta
constitutes the written claim for refund
required by the old Tax Code. Neither can
we apply the liberal interpretation of the
law as the taxpayer failed to present other
evidence to prove its claim.
2. NO, the 1997 Tax Code cannot be
applied retroactively. Tax laws are
prospective in operation, unless the
language of the statute clearly provides
otherwise.
1. YES. Tax avoidance and tax evasion are
taxpayers in escaping from taxation. Tax
the means sanctioned by law. This
method should be used by the taxpayer in
evasion, on the other hand, is a scheme
used outside of those lawful means and
criminal liabilities.
President and owner of 99.991% of its of Cibeles
issued and outstanding capital stock, Corporation.
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.
172
Insurance
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," "willful," 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 is significant to note that prior to
the purported sale of the Cibeles property
by CIC to Altonaga, CIC received ₱40
million from RMI, and not from Altonaga.
That ₱40 million was debited by RMI and
reflected in its trial balance as "other inv.
– Cibeles Bldg." Also, another ₱40 million
was debited and reflected in RMI’s trial
balance as "other inv. – Cibeles Bldg." This
would show 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. NO. Section 269 of the NIRC of 1986
(now Section 222 of the Tax Reform Act of
1997) provides that in cases of (1)
The Bureau of Internal Revenue (BIR)
sent an assessment notice and
demand letter to the CIC for
deficiency income tax for the year
1989 in the amount of
₱79,099,999.22.
The Estate thereafter filed a letter of
protest. The commissioner dismissed
the protest, stating that a fraudulent
scheme was deliberately perpetuated
by the CIC wholly owned and
controlled by Toda by covering up the
additional gain of P100 million, which
resulted in the change in the income
structure of the proceeds of the sale
of the two parcels of land and the
building thereon to an individual
capital gains, thus evading the higher
corporate income tax rate of 35%.
The estate filed a petition for review
with the CTA alleging that the
Commissioner erred in holding the
Estate liable for income tax deficiency;
that the inference of fraud of the sale
of the properties is unreasonable and
unsupported; and that the right of the
Commissioner to assess CIC had
already prescribed.
173
fraudulent returns; (2) false returns with
intent to evade tax; and (3) failure to file a
return, the period within which to assess
tax is ten years from discovery of the
fraud, falsification or omission, as the case
may be.
As stated above, the prescriptive period to
assess the correct taxes in case of false
returns is ten years from the discovery of
the falsity. The false return was filed on 15
April 1990, and the falsity thereof was
claimed to have been discovered only on
8 March 1991. The assessment for the
1989 deficiency income tax of CIC was
issued on 9 January 1995. Clearly, the
issuance of the correct assessment for
deficiency income tax was well within the
prescriptive period.
3. YES. 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. There are, however, certain
instances in which personal liability may
arise.
When the late 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, he thereby voluntarily held himself
personally liable therefor.

41. CIR vs. Metro Star If the taxpayer denies ever
Superama, Inc., G.R. No. having received an
185371, December 8, 2010. assessment from the BIR, it
is incumbent upon the
latter to prove by
competent evidence that
such notice was indeed
received by the addressee.
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, not merely a
formal, requirement.
Petitioner is a domestic corporation Whether Metro Star was denied YES. On the matter of service of a tax
duly organized and existing by virtue due process.
of the laws of the Republic of the
Philippines. The Regional Director of
Revenue Region No. 10, Legazpi City,
issued Letter of Authority for Revenue
Officer Daisy G. Justiniana to examine
petitioner's books of accounts and
other accounting records for income
tax and other internal revenue taxes
for the taxable year 1999. Said Letter
of Authority was revalidated by
Regional Director Leonardo Sacamos.
For petitioner's failure to comply with
several requests for the presentation
of records and Subpoena Duces
Tecum, the OIC of BIR Legal Division
issued an Indorsement informing
Revenue District Officer of Revenue
Region No. 67, Legazpi City to
proceed with the investigation based
on the best evidence obtainable
preparatory to the issuance of
assessment notice.
Revenue District Officer Socorro O.
Ramos-Lafuente issued a Preliminary
15-day Letter, which the petitioner
received on November 9, 2001. The
174
Respondent estate cannot, therefore,
deny liability for CICs deficiency income
tax for the year 1989 by invoking the
separate corporate personality of CIC,
since its obligation arose from Todas
contractual undertaking, as contained in
the Deed of Sale of Shares of Stock.
assessment, a perusal of the Supreme
Court’s ruling in Barcelon is instructive,
viz.:
Jurisprudence is replete with cases
holding that if the taxpayer denies
ever having received an assessment
from the BIR, it is incumbent upon
the latter to prove by competent
evidence that such notice was indeed
received by the addressee. The onus
probandi was shifted to respondent
to prove by contrary evidence that
the Petitioner received the
assessment in the due course of mail.
The Supreme Court has consistently
held that while a mailed letter is
deemed received by the addressee in
the course of mail, this is merely a
disputable presumption subject to
controversion and a direct denial
thereof shifts the burden to the party
favored by the presumption to prove
that the mailed letter was indeed
received by the addressee.
What is essential to prove the fact of
mailing is the registry receipt issued by
said letter stated that a post audit
review was held, and it was
ascertained that there was deficiency
value-added and withholding taxes
due from petitioner in the amount of
P 292,874.16. On April 11, 2002,
petitioner received a Formal Letter of
Demand dated April 3, 2002 from
Revenue District No. 67, Legazpi City,
assessing petitioner the amount of
P292,874.16 for deficiency value-
added and withholding taxes for the
taxable year 1999.
Subsequently, Revenue District Office
No. 67 sent a copy of the Final Notice
of Seizure dated May 12, 2003, which
petitioner received on May 15, 2003,
giving the latter last opportunity to
settle its deficiency tax liabilities
within ten (10) days from receipt
thereof, otherwise respondent BIR
shall be constrained to serve and
execute the Warrants of Distraint
and/or Levy and Garnishment to
enforce collection.
Denying that it received a Preliminary
Assessment Notice (PAN) and
claiming that it was not accorded due
process, Metro Star filed a petition for
review with the CTA.
The CTA-Second Division found merit
in the petition of Metro Star and,
GRANTED the Petition for Review.
175
the Bureau of Posts or the Registry return
card which would have been signed by
the Petitioner or its authorized
representative. And if said documents
cannot be located, respondent at the very
least, should have submitted to the Court
a certification issued by the Bureau of
Posts and any other pertinent document
which is executed with the intervention of
the Bureau of Posts.
The Court agrees with the CTA that the
CIR failed to discharge its duty and
present any evidence to show that Metro
Star indeed received the PAN dated
January 16, 2002. It merely accepted the
letter of Metro Star's chairman dated April
29, 2002, that stated that he had received
the FAN dated April 3, 2002, but not the
PAN; that he was willing to pay the tax as
computed by the CIR; and that he just
wanted to clarify some matters with the
hope of lessening its tax liability.
This now leads to the question:
Specifically, are the requirements of due
process satisfied if only the FAN stating the
computation of tax liabilities and a
demand to pay within the prescribed
period was sent to the taxpayer?
The answer to these questions requires an
examination of Section 228 of the Tax
Code which reads:
SEC. 228. Protesting of Assessment.
“When the Commissioner or his duly
The CIR sought reconsideration of the
decision of the CTA-Second Division,
but the motion was denied in the
latter's Resolution. Aggrieved, the CIR
filed a petition for review with the
CTA-En Banc, but the petition was
DISMISSED after a determination that
no new matters were raised.
The motion for reconsideration filed
by the CIR was likewise denied by the
CTA-En Banc in its Resolution. The
CIR, insisting that Metro Star received
the PAN, dated January 16, 2002, and
that due process was served
nonetheless because the latter
received the Final Assessment Notice
(FAN), comes now before this Court.
176
authorized representative finds that
proper taxes should be assessed, he
shall first notify the taxpayer of his
findings; xxx 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.”
Indeed, 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, 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.
This is confirmed under the provisions R.R.
No. 12-99 of the BIR which pertinently
provide:
SECTION 3. Due Process Requirement
in the Issuance of a Deficiency Tax
Assessment.
3.1 Mode of procedures in the
issuance of a deficiency tax
assessment:
3.1.2 Preliminary Assessment Notice
(PAN). If after review and evaluation
 by the Assessment Division or by the
Commissioner or his duly authorized
representative, as the case may be, it
is determined that there exists
sufficient basis to assess the taxpayer
for any deficiency tax or taxes, the
said Office shall issue to the taxpayer,
at least by registered mail, a
Preliminary Assessment Notice (PAN)
for the proposed assessment, showing
in detail, the facts and the law, rules
and regulations, or jurisprudence on
which the proposed assessment is
based.

From the provision quoted above, it is

clear that 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
deficiency tax assessment," the absence of
which renders nugatory any assessment
made by the tax authorities. The use of the
word "shall" in subsection 3.1.2 describes
the mandatory nature of the service of a
PAN. The persuasiveness 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 R.A. No. 8424,
the assessment made by the CIR is VOID.

177

42. CIR vs. Enron Subic The law requires that the
Power Corp., G.R. No. legal and factual bases of
166387, January 19, 2009. the assessment be stated in
the formal letter of demand
and assessment notice. It
cannot be substituted by
other notices or advisories
issued or delivered to the
taxpayer during the
preliminary stage.
43. CIR vs. Isabela Cultural Section 228 of the National
Corp., G.R. No. 135210, July Internal Revenue Code
11, 2001. states that a delinquent
taxpayer may nevertheless
directly appeal a disputed
assessment, if its request for
The Court need not belabor to discuss the
matter of Metro Star's failure to file its
protest, for it is well-settled that a void
assessment bears no fruit.
1997, Enron Subic Power Corporation Whether there is a valid final NO. The final assessment notice issued to
received a pre-assessment notice assessment notice issued to Enron was invalid.
from the Bureau of Internal Revenue Enron.
(BIR). Enron allegedly had a tax Section 228 of the NIRC provides that the
deficiency of P2.8 million for the year taxpayer shall be informed in writing of
1996. Enron filed a protest. In 1999, the law and the facts on which the
Enron received a final assessment assessment is made.
notice (FAN) from the BIR for the
same amount of tax deficiency. Enron The use of the word "shall" indicates the
however assailed the FAN because mandatory nature of the requirements.
according to him the FAN is not The law requires that the legal and factual
compliant with Section 228 of the bases of the assessment be stated in the
National Internal Revenue Code formal letter of demand and assessment
(NIRC) which provides that the legal notice. It cannot be substituted by other
and factual bases of the assessment notices or advisories issued or delivered
must be contained in the FAN. The to the taxpayer during the preliminary
FAN issued to Enron only contained stage.
the computation of its alleged tax
liability. This requirement 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.
An investigation was conducted on Whether the Final Notice Before YES. The revenue district officer sends the
the 1986 books of account of Seizure dated February 9, 1995 taxpayer a notice of delinquent taxes,
respondent. It was found that constitutes the final decision of indicating the period covered, the amount
respondent had incurred a total the CIR appealable to the CTA. due including interest, and the reason for
income tax deficiency of the delinquency. If the taxpayer disagrees
P9,985,392.15, inclusive of with or wishes to protest the assessment,
178
reconsideration remains
unacted upon 180 days
after submission thereof.
Jurisprudence dictates that
a final demand letter for
payment of delinquent
taxes may be considered a
decision on a disputed or
protested assessment.AC
increments. Upon protest by
respondent’s counsel, the said
preliminary assessment was reduced
to the amount of P325,869.44.
On February 23, 1990, respondent
received from petitioner an
assessment letter, dated February 9,
1990, demanding payment of the
amounts of P333,196.86 and
P4,897.79 as deficiency income tax
and expanded withholding tax
inclusive of surcharge and interest,
respectively, for the taxable period
from January 1, 1986 to December 31,
1986.
Respondent subsequently filed its
motion for reconsideration on March
23, 1990. In support of its request for
reconsideration, it sent to the CIR
additional documents. The next
communication respondent received
was already the Final Notice Before
Seizure dated November 10, 1994.
In said letter, petitioner demanded
payment of the subject assessment
within ten (10) days from receipt
thereof. Otherwise, failure on its part
would constrain petitioner to collect
the subject assessment through
summary remedies.
Respondent considered said final
notice of seizure as final decision.
179
it sends a letter to the BIR indicating its
protest, stating the reasons therefor, and
submitting such proof as may be
necessary. That letter is considered as the
taxpayer's request for reconsideration of
the delinquent assessment. After the
request is filed and received by the BIR,
the assessment becomes a disputed
assessment on which it must render a
decision. That decision is appealable to
the Court of Tax Appeals for review.
The Final Notice Before Seizure should be
considered as a denial of its request for
reconsideration of the disputed
assessment. The Notice should be
deemed as petitioner's last act, since
failure to comply with it would lead to the
distraint and levy of respondent's
properties, as indicated therein.
Not only was the Notice the only response
received; its 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 "this
LAST OPPORTUNITY" to pay; otherwise,
its properties would be subjected to
distraint and levy. How then could it have
been made to believe that its request for
reconsideration was still pending
determination, despite the actual threat of
seizure of its properties.
Furthermore, Section 228 of the National
Internal Revenue Code states that a
delinquent taxpayer may nevertheless
directly appeal a disputed assessment, if

44. CIR vs. Phil. Global A re-evaluation of existing
Communication, Inc., G.R. records which results from a
No. 167146, October 31, request for reconsideration
2006. does not toll the running of
the prescription period for
the collection of an
assessed tax. Section 271
distinctly limits the
suspension of the running
of the statute of limitations
to instances when
reinvestigation is requested
by a taxpayer and is granted
by the CIR, not a request for
reconsideration.
Respondent, a corporation engaged
in telecommunications, filed its
Annual Income Tax Return for taxable
year 1990 on 15 April 1991. On 13
April 1992, the Commissioner of
Internal Revenue (CIR) issued Letter of
Authority No. 0002307, authorizing
the appropriate Bureau of Internal
Revenue (BIR) officials to examine the
books of account and other
accounting records of respondent, in
connection with the investigation of
respondent's 1990 income tax
liability.
On 22 April 1992, the BIR sent a letter
to respondent requesting the latter to
180
its request for reconsideration remains
unacted upon 180 days after submission
thereof.
Here, 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. Jurisprudence dictates that a final
demand letter for payment of delinquent
taxes may be considered a decision on a
disputed or protested assessment.
In the instant case, the second notice
received by private respondent verily
indicated its nature — that it was final.
Unequivocally, therefore, it was
tantamount to a rejection of the request
for reconsideration.
Whether the CIR's right to collect YES. Section 269(c) of the Tax Code of
respondent's alleged deficiency 1977, which reads:
income tax is barred by
prescription under Section Section 269. Exceptions as to the
269(c) of the Tax Code of 1977. period of limitation of assessment and
collection of taxes. . .
xxx xxx xxx
c. Any internal revenue tax which has
been assessed within the period of
limitation above-prescribed may be
collected by distraint or levy or by a
proceeding in court within three years
following the assessment of the tax.
The law prescribed a period of three years
from the date the return was actually filed
 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. Where the
taxpayer merely filed two
protest letters requesting
for a reconsideration, and
where the BIR could not
have conducted a penalty, arising from deductions that
reinvestigation because no
new or additional evidence
was submitted, the running
of statute of limitations
cannot be interrupted.
22
Under the NIRC as amended, the period of collection is now within 5 years from the time of assessment (final assessment notice).
present for examination certain
records and documents, but
respondent failed to present any
document.
On 21 April 1994, respondent
received a Preliminary Assessment
Notice dated 13 April 1994 for
deficiency income tax in the amount
of P118,271,672.00, inclusive of
surcharge, interest, and compromise
were disallowed for failure to pay the
withholding tax and interest expenses
that were likewise disallowed. On the
following day, 22 April 1994,
respondent received a Formal
Assessment Notice with Assessment
Notice No. 000688-80-7333, dated 14
April 1994, for deficiency income tax
in the total amount of
P118,271,672.00.
On 6 May 1994, respondent filed 2
formal protest letters, one against
Assessment Notice No. 000688-80-
7333. 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, more than eight
years after the assessment was
presumably issued respondent
181
or from the last date prescribed by law for
the filing of such return, whichever came
later, within which the BIR may assess a
national internal revenue tax. However,
the law increased the prescriptive period
to assess or to begin a court proceeding
for the collection without an assessment
to ten years when a false or fraudulent
return was filed with the intent of evading
the tax or when no return was filed at all.
In such cases, the ten-year period began
to run only from the date of discovery by
the BIR of the falsity, fraud or omission. If
the BIR issued this assessment within the
three-year period or the ten-year period,
whichever was applicable, the law
provided another three years after the
assessment for the collection of the tax
due thereon through the administrative
process of distraint and/or levy or through
judicial proceedings. The three-year
period for collection of the assessed tax
began to run on the date the assessment
notice had been released, mailed or sent
by the BIR22.
The assessment, in this case, was
presumably issued on 14 April 1994 since
the respondent did not dispute the CIR's
claim. Therefore, the BIR had until 13 April
1997. However, as there was no Warrant
of Distraint and/or Levy served on the
respondents nor any judicial proceedings
initiated by the BIR, the earliest attempt of
the BIR to collect the tax due based on this
received from the CIR a Final Decision
dated 8 October 2002 denying the
respondent's protest against
Assessment Notice No. 000688-80-
7333 and affirming the said
assessment in toto.
Respondent elevated the case to the
CTA. The CTA rendered a Decision in
favor of respondent and ruled that
the protest letters filed by the
respondent cannot constitute a
request for reinvestigation, hence,
they cannot toll the running of the
prescriptive period to collect the
assessed deficiency income tax. Thus,
since more than three years had
lapsed from the time Assessment
Notice No. 000688-80-7333 was
issued in 1994, the CIR's right to
collect the same has prescribed in
conformity with Section 269 of the
National Internal Revenue Code of
1977 (Tax Code of 1977).
Hence, this petition before the SC.
182
assessment was when it filed its Answer in
CTA Case No. 6568 on 9 January 2003,
which was several years beyond the three-
year prescriptive period. Thus, the CIR is
now prescribed from collecting the
assessed tax.
The Tax Code of 1977, as amended,
provides instances when the running of
the statute of limitations on the
assessment and collection of national
internal revenue taxes could be
suspended, even in the absence of a
waiver, under Section 271 thereof. Among
the exceptions provided by the aforecited
section and invoked by the CIR as a
ground for this petition, is the instance
when the taxpayer requests for a
reinvestigation which is granted by the
Commissioner. However, this exception
does not apply to this case since the
respondent never requested for a
reinvestigation. More importantly, the CIR
could not have conducted a
reinvestigation where, as admitted by the
CIR in its Petition, the respondent refused
to submit any new evidence.
Revenue Regulations No. 12-85, the
Procedure Governing Administrative
Protests of Assessment of the Bureau of
Internal Revenue, issued on 27 November
1985, defines the two types of protest, the
request for reconsideration and the
request for reinvestigation. The main
difference between these two types of
protests lies in the records or evidence to
 be examined by internal revenue officers,
whether these are existing records or
newly discovered or additional evidence.
A re-evaluation of existing records which
results from a request for reconsideration
does not toll the running of the
prescription period for the collection of an
assessed tax. Section 271 distinctly limits
the suspension of the running of the
statute of limitations to instances when
reinvestigation is requested by a taxpayer
and is granted by the CIR, not a request
for reconsideration.

In the present case, the separate letters of

protest dated 6 May 1994 and 23 May
1994 are requests for reconsideration. The
CIR's allegation that there was a request
for reinvestigation is inconceivable since
respondent consistently and categorically
refused to submit new evidence and
cooperate in any reinvestigation
proceedings.

The distinction between a request for

reconsideration and a request for
reinvestigation is significant. It bears
repetition that a request for
reconsideration, unlike a request for
reinvestigation, cannot suspend the
statute of limitations on the collection of
an assessed tax. If both types of protest
can effectively interrupt the running of the
statute of limitations, an erroneous
assessment may never prescribe.

183

45. Fishwealth Canning A motion for
Corp. v. CIR, G.R. No. reconsideration of the
179343, January 21, 2010. denial of the administrative
protest does not toll the 30-
day period to appeal to the
CTA.
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. In this case,
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 additional evidence
was submitted, the running of statute of
limitations cannot be interrupted. The tax
which is the subject of the Decision issued
by the CIR on 8 October 2002 affirming
the Formal Assessment issued on 14 April
1994 can no longer be the subject of any
proceeding for its collection.
Consequently, the right of the
government to collect the alleged
deficiency tax is barred by prescription.
The CIR issued a LOA, ordering the Whether the petition for review NO. Petitioner's administrative protest
examination of internal revenue taxes before the CTA was filed on time. was denied by an FDDA dated August 2,
of petitioner for 1999. On August 25, 2005 issued by respondent and which
2000, the CIR reinvestigated petitioner received on August 4, 2005.
petitioner covering the same period Under Section 228 of the Tax Code,
and issued subpoena duces tecum to petitioner had 30 days to appeal
require submission of its records and respondent's denial of its protest to the
books of accounts. Petitioner did not CTA. Since petitioner received the denial
heed to the subpoena. of its administrative protest on August 4,
2005, it had until September 3, 2005 to file
184
 On 6 August 2003, CIR sent a FAN of a petition for review before the CTA
income tax and VAT deficiencies Division. It filed one, however, on October
totaling P67,597,336.75 for the 20, 2005. It was filed out of time because
taxable year 1999, which petitioner a motion for reconsideration of a denial of
contested. CIR, thereafter, issued an an administrative protest does not toll the
FDDA dated August 2, 2005, which 30-day period to appeal to the CTA.
petitioner received on August 4, 2005,
denying its letter of protest. Petitioner
filed, on September 1, 2005, a Letter
of Reconsideration dated August 31,
2005. CIR demanded payment of
petitioner's tax liabilities, drawing
petitioner to file on October 20, 2005
a Petition for Review before the CTA.

46. Lascona Land Co., Inc. A taxpayer has two options On March 27, 1998, Lascona Land Co., Whether the subject assessment NO. In case the Commissioner failed to
vs. CIR, G.R. No. 171251, in case the Commissioner Inc. (Lascona) was assessed by the CIRhas become final, executory and act on the disputed assessment within the
March 5, 2012. fails to act on a disputed of alleged deficiency of income tax for
demandable due to the failure of 180-day period from date of submission
assessment within the the year 1993. petitioner to file an appeal of documents, a taxpayer can either: (1)
required period. An before the CTA within 30 days File a petition for review with the Court of
assessment does not On April 20, 1998, Lascona filed a from the lapse of the 180-day Tax Appeals within 30 days after the
become final and executory letter protest, but it was denied in period pursuant to Section 228 expiration of the 180-day period; or (2)
if the taxpayer chooses to 1999 for the reason that the case was of the NIRC. await the final decision of the
await the final decision as not elevated to the Court of Tax Commissioner on the disputed
long as he or she appeals to Appeals as mandated by the assessments and appeal such final
the CTA within 30 days after provisions of the last paragraph of decision to the Court of Tax Appeals
the receipt of the copy of Section 228 of the Tax Code. within 30 days after receipt of a copy of
the decision. such decision.
Lascona appealed to the CTA on April
12, 1999, but the CIR maintained that These two options must be available to
Lascona’s failure to timely file an the taxpayer, and in arguing that the
appeal with the CTA after the lapse of assessment became final and executory
the 180-day reglementary period by the sole reason that petitioner failed to
provided by the NIRC resulted in the appeal the inaction of the Commissioner
finality of the assessment. within 30 days after the 180-day
reglementary period, respondent, in
effect, limited the remedy of Lascona, as a
185

47. CIR vs. Primetown As between Article 13 of the
Property Group, Inc., G.R. Civil Code and Section 31,
No. 162155, August 28, Chapter VIII, Book I of the
2007. Administrative Code of
1987, the latter being the
more recent law, governs
the computation of legal
periods. Lex posteriori
derogat priori.
taxpayer, under Section 228 of the NIRC
to just one.
On March 11, 1999, the Primetown Whether the CTA was correct in NO. In National Marketing Corporation v.
Property applied for the refund or applying Art. 13 of the Civil Code Tecson, we ruled that a year is equivalent
credit of its income tax paid in 1997. in computing the period to 365 days regardless of whether it is a
It explained to the revenue district regular year or a leap year.
officer of Makati that while the
business was doing well in the first Both Article 13 of the Civil Code and
quarter of 1997, it suffered losses Section 31, Chapter VIII, Book I of the
amounting to P71,879,228 that year. Administrative Code of 1987 deal with the
As such, it was not liable for income same subject matter — the computation
taxes. Nevertheless, it had paid its of legal periods. Under the Civil Code, a
quarterly income tax and remitted year is equivalent to 365 days whether it
CWT from real estate sales in the be a regular year or a leap year. Under the
amount of P26,318,319.32. Therefore, Administrative Code of 1987, however, a
was entitled to tax refund or tax year is composed of 12 calendar months.
credit. Needless to state, under the
Administrative Code of 1987, the number
On May 13, 1999, the revenue officer of days is irrelevant.
required Primetown to submit
additional documents to support its There obviously exists a manifest
claim to which it complied. But its incompatibility in the manner of
claim was not acted upon. Thus, on computing legal periods under the Civil
April 14, 2000, it filed a petition for Code and the Administrative Code of
review in the CTA. 1987. For this reason, we hold that Section
31, Chapter VIII, Book I of the
The CTA dismissed the petition as it Administrative Code of 1987, being the
was filed beyond the two-year more recent law, governs the
prescriptive period for filing a judicial computation of legal periods. Lex
claim for tax refund or tax credit. It posteriori derogat priori. The same
found that Primetown filed its provides:
adjusted return on April 14, 1998.
Thus its right to claim a refund or “Sec. 31. Legal Periods. — "Year"
credit commenced on that date. The shall be understood to be twelve
CTA applied Article 13 of the Civil calendar months; "month" of thirty
Code in computing the period. Thus, days, unless it refers to a specific
186
 the two-year prescriptive period was calendar month in which case it shall
equivalent to 730 days. Because the be computed according to the
year 2000 was a leap year, number of days the specific month
respondent’s petition, which was filed contains; "day", to a day of twenty-
731 days after it filed its final adjusted four hours and; "night" from sunrise
return, was beyond the reglementary to sunset.”
period.
We therefore hold that Primetown
Property’s petition (filed on April 14, 2000)
was filed on the last day of the 24th
calendar month from the day respondent
filed its final adjusted return. Hence, it was
filed within the reglementary period.

48. CIR vs. Smart Withholding agents are Respondent Smart, a corporation Whether Smart, as a withholding YES. Respondent Smart, as a withholding
Communication, Inc., G.R. considered taxpayers under organized and existing under agent, has the right to file the agent, may file a claim for refund.
Nos. 179045-46, August 25, NIRC, therefore, they have a Philippine law, entered into three claim for refund.
2010. legal right to file a claim for Agreements for Programming and In Commissioner of Internal Revenue v.
refund. Consultancy Services with Prism a Procter & Gamble Philippine
non-resident corporation duly Manufacturing Corporation, a withholding
organized and existing under the laws agent was considered a proper party to
of Malaysia. file a claim for refund of the withheld taxes
of its foreign parent company. The
On June 25, 2001, Prism billed decision states that under Section 53(c) of
respondent in the amount of the NIRC, the withholding agent who is
US$547,822.45. "required to deduct and withhold any tax"
is made "personally liable for such tax". A
Thinking that these payments "person liable for tax" has been held to be
constitute royalties, respondents a "person subject to tax" and properly
withheld an amount representing the considered a "taxpayer." The terms "liable
25% royalty tax under the RP- for tax" and "subject to tax" both connote
Malaysia Tax Treaty. legal obligation or duty to pay a tax.

Respondent filed its Monthly Therefore, a withholding agent has a legal

Remittance Return of Final Income right to file a claim for refund for two
Taxes Withheld for the month of reasons. First, he is considered a
August 2001. "taxpayer" under the NIRC as he is
187

49. Michel J. Lhuillier
Pawnshop, Inc. vs. CIR, G.R.
No. 166786, September 11,
2006.
Within the two-year period to claim a
refund, respondent filed with the
Bureau of Internal Revenue (BIR),
through the International Tax Affairs
Division (ITAD), an administrative
claim for refund.
Due to the failure of the petitioner
Commissioner of Internal Revenue
(CIR) to act on the claim for refund,
respondent filed a Petition for Review
with the CTA.
The CTA upheld the respondent's
right to claim a refund. It ruled
however that respondents are only
entitled to a partial refund as the
Service Download Manager
Agreement constitutes a royalty
subject to withholding tax.
The CTA En Banc rendered a Decision
affirming the partial refund granted
to respondent.
Statutes granting tax Petitioner, a corporation engaged in 1. Whether a pawnshop ticket is
exemptions must be pawnshop business, received subject to DST.
construed in strictissimi assessment notices for deficiency VAT
juris against the taxpayer and DST.
and liberally in favor of the
taxing authority. The case was elevated up to the against the petitioner.
Supreme Court. The lone question to
be resolved therein was whether
petitioner's pawnshop transactions
188
2. Whether surcharges and
interest should be imposed
personally liable for the 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.
However, 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.
1. YES. A pawnshop ticket is subject to
DST.
Section 195 of the NIRC imposes a DST on
every pledge regardless of whether the
same is a conventional pledge governed
by the Civil Code or one that is governed
by the provisions of P.D. No. 114. All
pledges are subject to DST, unless there is
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.
189
a law exempting them in clear and
categorical language.
Nothing in P.D. No. 114 exempts
pawnshops or pawnshop tickets from
DST. Since no such exemption appears in
the decree, the only logical conclusion is
that no such exemption is intended, and
that pawnshops or pawnshop tickets are
subject to DST.
2. NO. Surcharges and interest should not
be imposed against the petitioner.
The settled rule is that good faith and
honest belief that one is not subject to tax
on the basis of previous interpretation of
government agencies tasked to
implement the tax law, are sufficient
justification to delete the imposition of
surcharges and interest.

CASE TITLE CASE PRINCIPLE
1. Mactan Cebu Real property owned by the
International Airport Republic of the Philippines
Authority MCIAA v. City or any of its political
of Lapu-Lapu, G.R. No. subdivisions except when
181756, June 15, 2015.
 the beneficial use thereof
has been granted, for
consideration or otherwise,
to a taxable person is
exempt from Real Property
Tax. (Section 234(a) of the
Local Government Code)
LOCAL GOVERNMENT TAXATION
SUMMARY OF FACTS
Upon its creation, Petitioner Mactan- Whether MCIAA is subject to real
Cebu International Airport Authority property tax under the Local
(MCIAA) enjoyed exemption from Government Code.
realty taxes under Section 14 of
Republic Act No. 6958.
On January 7, 1997, respondent City
issued to petitioner a Statement of
Real Estate Tax assessing the lots
comprising the Mactan International
Airport in the amount of
P162,058,959.52. Petitioner
complained that there were
discrepancies in said Statement of
Real Estate Tax. Petitioner averred
that this amount covered real estate
taxes on the lots utilized solely and
exclusively for public or governmental
purposes such as the airfield, runway
and taxiway, and the lots on which
they are situated. Respondent
Pacaldo then issued Notices of Levy
on 18 sets of real properties of
petitioner.
Petitioner filed a petition for
prohibition RTC of Lapu-Lapu City
with prayer for the issuance of a
temporary restraining order (TRO)
and/or a writ of preliminary injunction
to enjoin respondent City from
issuing a warrant of levy against
petitioner’s properties and from
selling them at public auction for
delinquency in realty tax obligations.
190
ISSUE/S RULING
NO. To summarize, 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.
Finally, the Airport Lands and Buildings of
MIAA are properties devoted to public
use and thus are properties of public
dominion. Properties of public dominion
are owned by the State or the Republic.

2. Smart Communications, Sec. 5, Article X of the 1987
Inc. v. Municipality of Constitution provides that a
Malvar, Batangas, G.R. No. LGU shall have the power to
20442. February 18, 2014. create its own sources of
revenue and to levy taxes,
fees, and charges subject to
limitations set by Congress.
The petition likewise prayed for a As properties of public dominion owned
declaration that the airport terminal by the Republic, there is no doubt
building, the airfield, runway, taxiway whatsoever that the Airport Lands and
and the lots on which they are Buildings are expressly exempt from real
situated are exempted from real estate tax under Section 234(a) of the
estate taxes after due hearing. Local Government Code.
Petitioner based its claim of
exemption on DOJ Opinion No. 50.
Petitioner claimed before the RTC
that it had discovered that
respondent City did not pass any
ordinance authorizing the collection
of real property tax, a tax for the
special education fund (SEF), and a
penalty interest for its nonpayment.
Petitioner argued that without the
corresponding tax ordinances,
respondent City could not impose
and collect real property tax, an
additional tax for the SEF, and penalty
interest from petitioner.
In the course of its business, Smart Whether the Municipality had YES. The Court finds that the fees
constructed a telecommunications the authority to impose the fees imposed under Ordinance No. 18 are not
tower within the territorial jurisdiction under Ordinance No. 18. taxes. Sec. 5, Article X of the 1987
of the Municipality. The construction Constitution provides that a LGU shall
of the tower was for the purpose of have the power to create its own sources
receiving and transmitting cellular of revenue and to levy taxes, fees, and
communications within the covered charges subject to limitations set by
area. Congress. Consistent with this
constitutional mandate, the LGC grants
On 30 July 2003, the Municipality the taxing powers to each local
passed Ordinance No. 18, series of government unit. Specifically, Section 142
2003, entitled "An Ordinance of the LGC grants municipalities the
Regulating the Establishment of power to levy taxes, fees, and charges not
Special Projects." otherwise levied by provinces. Section 143
191

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.
On 17 November 2004, Smart filed
with the RTC of Tanauan City to assail
the validity of Ordinance No. 18. On 2
December 2008, the RTC only
resolved to declare the assessments
before the approval of the Ordinance
invalid without touching the issue of
the validity of the Ordinance itself. A
subsequent Motion for
Reconsideration was denied, so a
petition for review was filed with the
CTA First Division on 8 July 2009. The
192
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.
The LGC 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."
The assailed Ordinance No. 18 is an
ordinance set 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
inhabitants. As such, 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. So, 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

3. The City of Manila, etc. et The power of the CTA
al. v. Hon. Caridad H. includes that of
Grecia-Cuerdo etc., et al, determining whether or not
G.R. No. 175723. February there has been grave abuse
4, 2014. 
 of discretion amounting to
lack or excess of jurisdiction
petition was also denied along with a
subsequent Motion for
Reconsideration. Recourse to the CTA
En Banc was also unsuccessful, hence
the petition to the SC was filed.
City of Manila assessed taxes against
SM Mart, Inc., SM Prime Holdings,
Inc., Star Appliances Center,
Supervalue, Inc., Ace Hardware
Philippines, Inc., Watsons Personal
Care Stores Phils., Inc., Jollimart
193
Whether the CTA has jurisdiction
over a special civil action for
certiorari assailing an
interlocutory order issued by the
RTC in a local tax case.
imposed in Ordinance No. 18 are not
taxes.
The Ordinance is also not an act ultra vires
by the Municipality as against to the
argument that they have encroached the
powers of the NTC, for the reason that 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. The regulation of the installation
and maintenance of such physical
structures is an exercise of the police
power of the Municipality. Clearly, the
Municipality does not encroach on NTC's
regulatory powers.
The Court likewise rejects Smart's
contention that the power to fix the fees
for the issuance of development permits
and locational clearances is exercised by
the Housing and Land Use Regulatory
Board (HLURB). Suffice it to state that the
HLURB itself recognizes the local
government units' power to collect fees
related to land use and development.
YES, the CTA has jurisdiction over a
special civil action for certiorari assailing
RA 1125 is the law creating the CTA and
giving to the said court jurisdiction over
tax cases. Later, Republic Act No. 9282
amended RA 1125 by expanding the
on the part of the RTC in
issuing an interlocutory
order in cases falling within
the exclusive appellate
jurisdiction of the tax court.
Therefore, it follows that the
CTA, by constitutional
mandate, is vested with
jurisdiction to issue writs of
certiorari in these cases.
Philippines Corp., Surplus Marketing
Corp. and Signature Lines. In addition
to the taxes purportedly due from
private the said corporations
pursuant to certain sections 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, the
corporations were constrained to pay
the assessment under protest. They
filed a complaint for “Refund or
Recovery of Illegally and/or
Erroneously Collected Local Business
Tax, Prohibition with Prayer to Issue
TRO and Writ of Preliminary
Injunction” alleging that certain
sections of the RRCM were violative
of the limitations and guidelines
under the Local Government Code on
double taxation. The RTC granted
private respondents’ application for a
writ of preliminary injunction and
denied petitioner’s Motion for
Reconsideration. Petitioners then
filed a special civil action for certiorari
with the CA. The CA dismissed the
petition holding that it has no
jurisdiction over the said petition
since the appellate jurisdiction over
private respondents’ complaint for
tax refund, which was filed with the
194
jurisdiction of the CTA, enlarging its
membership and elevating its rank to the
level of a collegiate court with special
jurisdiction.
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. Therefore, it
follows that the CTA, by constitutional
mandate, is vested with jurisdiction to
issue writs of certiorari in these cases.
Based on the foregoing disquisitions, it
can be reasonably concluded that the
authority of the CTA to take cognizance of
petitions for certiorari questioning

4. Coca-Cola Bottlers A writ of execution is not
Philippines, Inc. vs. City of necessary for the
Manila et. al., G.R. No. implementation of the
197561, April 7, 2014. 
 judgement rendered by the
court regarding tax refund
against the Local
Government Units. A mere
request for the approval of
the City in implementing
the tax refund or tax credit
is sufficient.
RTC, is vested in the Court of Tax
Appeals (CTA).
RTC-Manila granted the petitioner's
request for tax refund or credit
assessed under Section 21 of the
Revenue Code of Manila upon finding
that there was double taxation in the
imposition of local business taxes.
Aggrieved by the decision,
respondents appealed to the CA, but
was dismissed. Thereafter, 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, to
which the court granted. However,
the decision granting such writ of
execution was later reversed by the
same court, ruling that both tax
refund and tax credit involve public
funds.
195
Whether the issuance of the writ
of execution of the judgement
ordering respondent either to
refund or credit the tax assessed
proper.
interlocutory orders issued by the RTC in
a local tax case is included in the powers
granted by the Constitution as well as
inherent in the exercise of its appellate
jurisdiction.
NO. The issuance of the Writ of Execution
was superfluous.
Section 252 (c) of the Local Government
Code of the Philippines is very clear that
in the event that the protest is finally
decided in favor of the taxpayer, the
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. Thus, instead of moving
for the issuance of a writ of execution, the
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 would merely serve as a deduction
of petitioner’s tax liabilities in the future.
Moreover, the issuance was superfluous
because the judgement of the RTC-Manila
can neither be considered a judgement
for a specific sum of money susceptible of
execution by levy or garnishment under
Section 9, Rule 39 of the Rules of Court
nor a special judgement under Section 11,
Rule 39 thereof.

5. Government Service Real property owned by the
Insurance System GSIS vs. Republic of the Philippines
City Treasurer and City or any of its political
Assessor of the City of subdivisions, except when
Manila, G.R. No. 186242, the beneficial use thereof
December 23, 2009. has been granted, for
consideration or otherwise,
to a taxable person.
GSIS owns or used to own two parcels
of land both located in Manila City.
The City treasurer of Manila sent a
letter to GSIS President and General
manager informing him of the unpaid
real property taxes due on the
aforementioned properties. GSIS
claims exemption from all kinds of
taxes, including realty taxes, under RA
8291.
GSIS prayed for the nullification of the
assessments thus made and that
respondents City of Manila officials
be permanently enjoined from
proceedings against GSIS' property.
GSIS included the fact that: (a) the
Katigbak property, in the name of
GSIS, has, since November 1991, been
leased to and occupied by the Manila
Hotel Corporation (MHC), which has
contractually bound itself to pay any
realty taxes that may be imposed on
the subject property; and (b) the
Concepcion-Arroceros property is
partly occupied by GSIS and partly
occupied by the MeTC of Manila.
196
Whether the beneficial use
doctrine is applicable to subject
the properties owned by GSIS, a
government instrumentality, to
real property tax.
Therefore, Petitioner Coca-Cola Bottlers,
Inc. is entitled to a tax refund or tax credit
without a need for a writ of execution
provided that petitioner complies with the
requirements set by law for a tax refund
or tax credit, whichever is applicable.
YES. Although the GSIS' tax exempt status
from real property taxes, withdrawn in
1992 by the LGC, it was restored in 1997
by RA 8291. This is in connection with the
fact that GSIS, as an instrumentality of the
national government, is itself not liable to
pay real estate taxes as there is a full tax
exemption privilege for real property
owned by the Republic of the Philippines
or any of its political subdivisions under
Sec. 234 (a) of the LGC., subject to the
beneficial use doctrine.
Following the "beneficial use" rule,
however, accrued real property taxes are
due from the Katigbak property, leased as
it is to a taxable entity. But the
corresponding liability for the payment
thereof devolves on the taxable beneficial
user.
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)

6. Team Pacific Corporation
vs. Daza as Municipal
Treasurer of Taguig, G.R.
No. 167732, July 
11, 2012.
The proper remedy from
the denial of an assessment
protest by a local treasurer
is an ordinary appeal, and
not Rule 65 petition on
certiorari as the local
treasurer is not exercising
judicial or quasi- judicial
function in assessing one’s
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.
In 2004 upon renewal of its business
license, TPC was assessed by the
Municipal Treasurer the full value of
the rates instead of the 1⁄2 rate on
TPC’s assessment invoking that TPC is
not an exporter of essential
commodities. TPC then filed on the
same day a written protest with the
Municipal Treasurer. Her inaction led
197
Whether petition for certiorari
under Rule 65 is the proper
remedy to question the
municipal treasurer’s inaction on
its letter-protest.
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.
Thus, the real estate tax assessment
covering 1992 to 2002 over the subject
Katigbak property is valid insofar as said
tax delinquency is concerned as assessed
over said property. MHC ought to pay.
The Supreme Court ruled that GSIS enjoys
under its charter full tax exemption.
Moreover, as an instrumentality of the
national government, it is itself not liable
to pay real estate taxes assessed by the
City of Manila against its properties,
subject to the beneficial use doctrine.
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

7. Republic of the In the absence of a clear
Philippines represented by language of the law
the Philippine Reclamation imposing tax, the local
Authority vs. City 
of government unit is
Paranaque, G.R. No. prohibited from imposing
191109, July 18, 2012. tax against the national
government, its agencies
and instrumentalities.
TPC to file a petition for certiorari
under Rule 65.
The Public Estates Authority (PEA) is a
government corporation created by
virtue of P.D. No. 1084. It was
designated as the agency primarily
responsible for integrating, directing
and coordinating all reclamation
projects for and on behalf of the
National Government by virtue of E.O.
No. 525. PEA was transformed into
Philippine Reclamation Authority
(PRA) by E.O. No. 380.
By 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
198
Whether the local government
of Parañaque City may impose
Real Property Tax against
Philippine Reclamation Authority
(PRA).
correction of errors of jurisdiction and not
errors of judgment.
NO. PRA is a government instrumentality
vested with corporate powers and
performing an essential public service
pursuant to Section 2 (10) of the
Introductory Provisions of the
Administrative Code. Being an
incorporated 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,
the Certificates of Sale issued
pursuant to the auction sale. RTC
dismissed PRA's petition.
199
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

8. Sta. Lucia Realty & The authority to collect real
Development, Inc. vs. City property taxes is vested in
of Pasig, G.R. No. 166838, the locality where the
June 15, 2011. 
 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.
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
200
Whether the settlement of
boundary dispute between
Cainta and Pasig presented a
"prejudicial question" to the
resolution of the case for
collection of real estate taxes.
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.
YES. The resolution of the boundary
dispute between Pasig and Cainta would
determine which local government unit is
entitled to collect realty taxes from Sta.
Lucia.
Under Presidential Decree No. 464 or the
"Real Property Tax Code," the authority to
collect real property taxes is vested in the
locality where 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,
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
201
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 proper exercise of their
powers, one of which is the power of
taxation.

9. Republic of the The denial by the RTC to
Philippines Department of issue an injunction or TRO
Transportation and does not automatically give
Communications vs City 
 respondent the liberty to
of Mandaluyong, G.R. No. proceed with the actions
184879, February 23, 2011. sought to be enjoined.


filed before the Pasig RTC. It avers
that the doctrine of "prejudicial
question," which has a definite
meaning in law, cannot be invoked
where the two cases involved are
both civil.
On 8 August 1997, the DOTC entered Whether it was premature for the YES. This case is, ultimately, between a
into a Revised and Restated RTC to issue a writ of possession. local government's power to tax and the
Agreement to Build, Lease and national government's privilege of tax
Transfer a Light Rail System for EDSA exemption. That issue needs full hearing
(BLT) with Metro Rail Transit and deliberation, as indeed, the issue
Corporation Limited (Metro Rail), a pends before the RTC, at first
foreign corporation. Under the BLT instance. Such trial of facts and issues
Agreement, Metro Rail shall be must proceed. It should not be pre-
responsible for the design, empted by the present petition that deals
construction, equipping, completion, with precisely the herein respondent's
testing, and commissioning of the intended end result.
Light Rail Transit System-LRTS Phase I
(EDSA MRT III). A writ of possession is a mere incident in
the transfer of title. In the instant case, it
The DOTC shall operate the same but stemmed from the exercise of alleged
ownership of the EDSA MRT III shall ownership by respondent over EDSA MRT
remain with Metro Rail during the III properties by virtue of a tax
Revenue and Construction delinquency sale. The issue of whether
periods. At the end of the Revenue the auction sale should be enjoined is still
Period, Metro Rail shall transfer to pending before the Court of
DOTC its title to and all of its rights Appeals. Pending determination, it is
and interests therein, in exchange for premature for respondent to have
US$1.00. Metro Rail then assigned all conducted the auction sale and caused
its rights and obligations under the the transfer of title over the real properties
BLT Agreement to Metro Rail Transit to its name. The denial by the RTC to
Corporation (MRTC), a domestic issue an injunction or TRO does not
corporation. automatically give respondent the liberty
to proceed with the actions sought to be
On 4 June 2001, the Office of the City enjoined, especially so in this case where
Assessor of Mandaluyong issued Tax a certiorari petition assailing the denial is
202
Declaration No. D-013-06267 in the
name of MRTC, fixing the market
value of the railways, train cars, three
(3) stations and miscellaneous
expenses at P5,974,365,000.00 and
the assessed value at
P4,779,492,000.00. Subsequently on
18 June 2001, the said Office of the
City Assessor of Mandaluyong City
demanded payment of real property
taxes due under the aforesaid tax
declaration.
still being deliberated in the Court of
Appeals. All the more it is premature for
the RTC to issue a writ of possession
where the ownership of the subject
properties is derived from an auction sale,
the validity of which is still being threshed
out in the Court of Appeals. The RTC
should have held in abeyance the
issuance of a writ of possession. At this
juncture, the writ issued is premature and
has no force and effect.

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
of Mandaluyong City. Petitioner
Republic filed a case for Declaration
of Nullity of Real Property Tax
Assessment and Warrant of Levy with
a prayer for a Temporary Restraining
Order (TRO) and Writ of Preliminary
Injunction.

Petitioner Republic alleged that since

Metro Rail had transferred to the
DOTC the actual use, possession and
operation of the EDSA MRT III System,
Metro Rail or MRTC does not have
actual or beneficial use and
possession of the EDSA MRT III
properties as to subject it to payment
of real estate taxes.

203
On the other hand, notwithstanding
the transfer to DOTC of the actual use,
possession and operation of the
EDSA MRT III, petitioner Republic is
not liable because local government
units are legally proscribed from
imposing taxes of any kind on it under
Section 133(o) of Republic Act No.
7160. Likewise, under 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
of Mandaluyong City. 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.

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. Valenzuela,
204

10. Alejandro Ty v. Hon. The Municipal or City
Trampe, et.al., G.R. No. Assessor cannot solely
117577, December 1, 1995. prepare schedules of

 market values. There should
be a meeting 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
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 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
205
Whether Republic Act No. 7160,
otherwise known as the Local
Government Code of 1991,
repealed the provisions of
Presidential Decree 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
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.
206
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:

1. 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.

2.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".

3. 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.
207
11. Coca-Cola Bottlers 1. The enactment of a tax
Phils. Inc. v. City of Manila, measure shall comply with
GR No. 156252, June 27, the mandatory requirement
2006. of publication as provided
by the Local Government
Code and its Implementing
Rules and Regulations.
2. The essence of the
publication requirement is
to inform the people and
the entities who may likely
be affected by the existence
of the tax measure and to
safeguard against any
unjust and unreasonable
exercise of the taxing
powers.
The City Mayor of Manila approved
Tax Ordinance No. 7988, otherwise
known as "Revised Revenue Code of
the City of Manila" repealing Tax
Ordinance No. 7794 entitled,
"Revenue Code of the City of Manila."
Tax Ordinance No. 7988 amended
certain sections of Tax Ordinance No.
7794 by increasing the tax rates
applicable to certain establishments
operating within the territorial
jurisdiction of the City of Manila,
including herein petitioner. Petitioner
thereafter questioned its
constitutionality on the ground that
the deletion of a certain portion of the
amended ordinance would in effect
impose additional business tax on
businesses that are already subject to
business tax under the other sections
of the New revenue Code of the City
of Manila.
The petitioner likewise contended
that such imposition is beyond or
exceeds the limitation on the taxing
power of the City of Manila under Sec.
143(h) of the LGC of 1991 and that the
deletion is a manifest violation of the
Local Government Code of 1991 and
Article X, Sec. 5 of the 1987
Constitution.
Consequently, the DOJ secretary
issued a resolution declaring Tax
Ordinance 7988 null and void and
without legal effect on the ground
208
Whether the publication YES. It is clear from the above-quoted
requirement for a tax ordinance provisions of R.A. No. 7160 and its
is mandatory and non- implementing rules that the requirement
compliance of such would of publication is MANDATORY and leaves
render a tax ordinance a nullity. no choice. The use of the word "shall" in
both provisions is imperative, operating
to impose a duty that may be enforced.
Its essence is simply to inform the people
and the entities who may likely be
affected, of the existence of the tax
measure. It bears emphasis, that, strict
observance of the said procedural
requirement is the only safeguard against
any unjust and unreasonable exercise of
the taxing powers by ensuring that the
taxpayers are notified through publication
of the existence of the measure, and are
therefore able to voice out their views or
objections to the said measure. For, after
all, taxes are obligatory exactions or
enforced contributions corollary to taking
of property.
It is undisputed from the facts of the case
that Tax Ordinance No. 7988 has already
been declared by the DOJ Secretary, in its
Order, dated 17 August 2000, as null and
void and without legal effect due to
respondents' failure to satisfy the
requirement that said ordinance be
published for three consecutive days as
required by law. Neither is there quibbling
on the fact that the said Order of the DOJ
was never appealed by the City of Manila,
thus, it had attained finality after the lapse
of the period to appeal.

12. City of Manila v. Coca- Double taxation means
Cola, G.R. No. 181845, taxing the same property
August 12, 2009. twice when it should be
taxed only once; that is,
"taxing the same person
twice by the same
jurisdiction for the same
thing". Otherwise described
as "direct duplicate
taxation", the two taxes
must be imposed on the
same subject matter, for the
same purpose, by the same
taxing authority, within the
same jurisdiction, during
the same taxing period; and
that it failed to comply with the
publication requirement (must be
published for three consecutive days)
stated under Section 188 of the Local
Government Code of 1991 and Art.
277 of the Rules and Regulations
Implementing the Local Government
Code of 1991. Meanwhile, the City of
Manila failed to file a Motion for
Reconsideration nor lodge an appeal
of said Resolution, thus, said
Resolution of the DOJ Secretary
declaring Tax Ordinance No. 7988 null
and void has lapsed into finality.
Later on, the City Mayor of Manila
approved on 22 February 2001 Tax
Ordinance No. 8011 entitled, "An
Ordinance Amending Certain
Sections of Ordinance No. 7988."
Prior to 25 February 2000, respondent
Coca-Cola had been paying the City
of Manila local business tax only
under Section 14 of Tax Ordinance
No. 7794, being expressly exempted
from the business tax under Section
21 of the same tax ordinance.
Petitioner City of Manila subsequently
approved on 25 February 2000, Tax
Ordinance No. 7988, amending
certain sections of Tax Ordinance No.
7794, particularly: (1) Section 14, by
increasing the tax rates applicable to
certain establishments operating
within the territorial jurisdiction of the
209
As stated by the DOJ Secretary, "Instead
of amending Ordinance No. 7988,
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, anyway, does not legally
exist." Furthermore, 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.
Whether the enforcement of YES. The enforcement of Section 21 of the
Section 21 of the Tax Ordinance Tax Ordinance No. 7794, as amended,
No. 7794, as amended, constitutes double taxation.
constitutes double taxation.
Double taxation means taxing the same
property twice when it should be taxed
only once; that is, "taxing the same person
twice by the same jurisdiction for the
same thing". Otherwise described as
"direct duplicate taxation", the two taxes
must be imposed on the same subject
matter, for the same purpose, by the same
taxing authority, within the same
jurisdiction, during the same taxing
period; and the taxes must be of the same
kind or character.
the taxes must be of the City of Manila; and (2) Section 21, by
same kind or character. deleting the proviso found therein,
which stated "that all registered
businesses in the City of Manila that
are already paying the
aforementioned tax shall be
exempted from payment thereof". On
22 February 2001, the City of Manila
approved Tax Ordinance No. 8011,
amending Tax Ordinance No. 7988.
Tax Ordinances No. 7988 and No.
8011 were later declared by the Court
null and void in Coca-Cola Bottlers
Philippines, Inc. v. City of Manila
(Coca-Cola case) because Ordinance
No. 7988 was enacted in
contravention of the provisions of the
Local Government Code (LGC) of
1991 and its implementing rules and
regulations.
Before the Court could declare both
ordinances as null and void, petitioner
City of Manila assessed respondent
on the basis of Section 21 of Tax
Ordinance No. 7794, as amended by
the aforementioned tax ordinances,
for deficiency local business taxes,
penalties, and interest for the third
and fourth quarters of the year 2000.
Respondent filed a protest with
petitioner Toledo on the ground that
the said assessment amounted to
double taxation.
Consequently, respondent filed with
the Regional Trial Court (RTC) of
210
Using the aforementioned test, the Court
finds that there is indeed double taxation
if respondent is subjected to the taxes
under both Sections 14 and 21 of Tax
Ordinance No. 7794, 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.
Section 143 of the LGC is the very source
of the power of municipalities and cities
to impose a local business tax, and to
which any local business tax imposed by
petitioner City of Manila must conform. It
is apparent from a perusal thereof that
when a municipality or city has already
imposed a business tax on manufacturers,
etc. of liquors, distilled spirits, wines, and
any other article of commerce, pursuant
to Section 143 (a) of the LGC, said
municipality or city may no longer subject
the same manufacturers, etc. to a business
tax under Section 143 (h) of the same
Code. Section 143 (h) may be imposed
only on businesses that are subject to
excise tax, VAT, or percentage tax under

13. Napocor v. City of Although as a general rule,
Cabanatuan, G.R. No. LGUs cannot impose taxes,
149110, April 9, 2003. fees or charges of any kind
on the National
Government, its 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,
viz: "Section 133. Common
Limitations on the Taxing
Powers of the Local
Government Units — repealed by Sec. 193 of RA 7160 or
Unless otherwise provided
herein, the exercise of the
taxing powers of provinces,
cities, municipalities, and
barangays shall not extend
to the levy of the following:
. . . (o) Taxes, fees, or
charges of any kind on the
Manila, an action for the cancellation
of the assessment against respondent
for business taxes. It ruled that the
business taxes imposed upon the
respondent under Sections 14 and 21
of Tax Ordinance No. 7988, as
amended, were not of the same kind
or character; therefore, there was no
double taxation.
CA 120 as amended, created National
Power Corporation (NPC), a GOCC,
selling electric power, was assessed
by the City of Cabanatuan, a Local
Government Unit, for franchise tax
pursuant to Sec. 37 of Ordinance No.
165-92.
However, NPC refused to pay the tax
assessment on the grounds that the
City of Cabanatuan has no authority
to impose tax on government entities
and also that it is exempted as a non-
profit organization. However, the City
Government argued that NPC’s
exemption from local taxes has been
the Local Government Code Act of
1991.
211
the NIRC, and that are "not otherwise
specified in preceding paragraphs". In the
same way, businesses such as
respondent's, already subject to a local
business tax under Section 14 of Tax
Ordinance No. 7794, which is based on
Section 143 (a) of the LGC, can no longer
be made liable for local business tax
under Section 21 of the same Tax
Ordinance, which is based on Section 143
(h) of the LGC.
Whether National Power YES, it is still liable to pay franchise tax.
Corporation is liable to pay an
annual franchise tax to the City One of the most significant provisions of
Government even though the the LGC is the removal of the blanket
former is a GOCC. exclusion of instrumentalities and
agencies of the national government from
the coverage of local taxation. Although
as a general rule, LGUs cannot impose
taxes, fees or charges of any kind on the
National Government, its 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.
As commonly used, a franchise tax is “a tax
on the privilege of transacting business in
the state and exercising corporate
franchises granted by the state.” It is not
levied on the corporation simply for
existing as a corporation, upon its
property or its income, but on its exercise
of the rights or privileges granted to it by
the government. Hence, a corporation
National Government, its need not pay franchise tax from the time
agencies and it ceased to do business and exercise its
instrumentalities, and local franchise. It is within this context that the
government units." phrase “tax on businesses enjoying a
franchise” in section 137 of the LGC
should be interpreted and understood.

Verily, to determine whether the

petitioner is covered by the franchise tax
in question, the following requisites
should concur: (1) that petitioner has a
"franchise" in the sense of a secondary or
special franchise; and (2) that it is
exercising its rights or privileges under
this franchise within the territory of the
respondent city government. NPC fulfills
both requisites. To stress, 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.

We also do not find merit in the

petitioner's contention that its tax
exemptions under its charter subsist
despite the passage of the LGC. As a rule,
tax exemptions are construed strongly
against the claimant. Exemptions must be
212
 shown to exist clearly and categorically
and supported by clear legal provisions. In
the case at bar, the petitioner's sole refuge
is section of Rep. Act No. 6395 exempting
from, among others, "all income taxes,
franchise taxes and realty taxes to be paid
to the National Government, its provinces,
cities, municipalities and other
government agencies and
instrumentalities."

It is worth mentioning that section 192 of

the LGC empowers the LGUs, through
ordinances duly approved, to grant tax
exemptions, initiatives or reliefs. But in
enacting section of Ordinance No. 165-92
which imposes an annual franchise tax
"notwithstanding any exemption granted
by law or other special law," the
respondent city government clearly did
not intend to exempt the petitioner from
the coverage thereof.

Doubtless, the power to tax is the most

effective instrument to raise needed
revenues to finance and support myriad
activities of the local government units for
the delivery of basic services essential to
the promotion of the general welfare and
the enhancement of peace, progress, and
prosperity of the people. As this Court
observed in the Mactan case, "the original
reasons for the withdrawal of tax
exemption privileges granted to
government-owned or controlled
corporations and all other units of
government were that such.
213
14. Palma Devt. Corp. v. In accordance with the
Municipality of Malangas, Local Government Code of
G.R. No. 152492, October 1991, a municipal ordinance
16, 2003. imposing fees on goods
that pass through the
issuing municipality’s
territory is null and void. It is
immaterial whether the
service fee on the goods is
for police surveillance or
not.
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 point 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.
The municipality passed Municipal
Revenue Code No. 09, Series of 1993.
Section 5G.01 of the ordinance reads:
"Section 5G.01. Imposition of fees.
There shall be collected service fee for
its use of the municipal road[s] or
streets leading to the wharf and to
any point along the shorelines within
the jurisdiction of the municipality
and for police surveillance on all
goods and all equipment harbored or
sheltered in the premises of the wharf
and other within the jurisdiction of
this municipality.
Accordingly, the service fees imposed
by Section 5G.01 of the ordinance was
paid by petitioner under protest.
214
Whether the questioned YES. In accordance with the Local
municipal ordinance is contrary Government Code of 1991, a municipal
to the provisions of R.A. No. 7160 ordinance imposing fees on goods that
or the Local Government Code of pass through the issuing municipality’s
the Philippines. territory is null and void.
We note that Section 5G.01 imposes two
types of service fees: 1) one for the use of
the municipal roads and 2) another for
police surveillance on all goods and
equipment sheltered in the premises of
the wharf. The amount of service fees,
however, is based on the type of vehicle
that passes through the road and the type
of goods being transported.
By express language of Sections 153 and
155 of RA No. 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
No. 7160 prohibits the imposition, in the
guise of wharfage, of fees -- as well as all
other taxes or charges in any form
whatsoever -- on goods or merchandise.
It is therefore irrelevant if the fees
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).

15. Smart Communications, Tax exemptions are never
Inc. v. City of Davao, G.R. presumed and are strictly
No. 155491, July 21, 2009. 
 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. The
surrender of the power to
tax, when claimed, must be
clearly shown by a language
that will admit of no
reasonable construction
consistent with the
reservation of the power. If
the intention of the
legislature is open to doubt,
then the intention of the
legislature must be
resolved in favor of the
State.
On February 18, 2002, Smart filed a Whether Smart is liable to pay
special civil action for declaratory the franchise tax imposed by the
relief, for the ascertainment of its City of Davao.
rights and obligations under the Tax
Code of the City of Davao. Smart
contends that its telecenter in Davao
City is exempt from payment of
franchise tax 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,
215
Under Section 131(y) of RA No. 7160,
wharfage is defined as "a fee assessed
against the cargo of a vessel engaged in
foreign or domestic trade based on
quantity, weight, or measure received
and/or discharged by vessel." It is
apparent that a wharfage does not lose its
basic character by being labeled as a
service fee "for police surveillance on all
goods."
YES. The SC finds that there is no violation
of Article III, Section 10 of the 1987
Philippine Constitution. The uncertainty in
the “in lieu of all taxes” clause in RA No.
7294 on whether Smart is exempted from
both local and national franchise tax must
be construed strictly against Smart which
claims exemption.
Smart has the burden of proving that,
aside from the imposed 3% franchise tax,
Congress intended it to be exempt from
all kinds of franchise taxes. Tax
exemptions can only be given force when
the grant is clear and categorical. If
Congress intended Smart to be exempted
from municipal and provincial taxes, it
could have used the same language as the
Clavecilla’s franchise (R.A. No. 402) which
stated: “in lieu of any and all taxes of any
kind, nature or description levied,
established or collected by any authority
whatsoever, municipal, provincial or
national, from which the grantee is hereby
expressly exempted.” The interpretation

16. Mobil Phil. Inc. v. City Business taxes imposed in
Treasurer of Makati, G.R. the exercise of police power
No. 154092, July 14, 2005. 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.
must be resolved against the
taxpayer.
Petitioner’s office was located in
Makati City when it filed an
application with the City Treasurer for
retirement of business within Makati
as it moved its business to Pasig City,
on September 1998. After evaluation,
petitioner was assessed business tax
in the amount of P1,898,106.96.
Petitioner paid the tax under protest
and in 1999, claimed a refund
therefrom. RTC denied the petition
for refund ratiocinating that the
payments made by Mobil in 1998 are
payments for business tax for 1997
which occurred in January of 1998
216
Whether the business taxes paid
in 1998 by petitioner shall be
applied in business taxes for
1997?
of the franchise granted to Smart is that it
refers only to national and not to local
taxes.
The "in lieu of all taxes" clause in Smart's
franchise refers only to taxes, other than
income tax, imposed under the National
Internal Revenue Code and does not
apply to local taxes. The proviso in the first
paragraph of Section 9 of Smart's
franchise states that the grantee shall
"continue to be liable for income taxes
payable under Title II of the National
Internal Revenue Code." Thus, the
interpretation of the franchise granted to
Smart is that it refers only to national and
not to local taxes.
NO. The business taxes paid in the year
1998 is for the privilege of engaging in
business for the same year, and not for
having engaged in business for 1997.
Under the Makati Revenue Code, it
appears that the business tax, like income
tax, is computed based on the previous
year’s figures. 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 Makati revenue code 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 years
gross sales or receipts.

For the year 1998, Mobil paid a total of

P2,262,122.48 to the City Treasurer of
Makati as business taxes for the year 1998
based on its 1997 gross sales/receipts.
The amount of tax as computed based on
Mobil's gross sales for 1998 is only
P1,331,638.84. Since the amount paid is
more than the amount computed based
on Mobil's actual gross sales for 1998,
Mobil 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.

17. Yamane v. BA Lepanto The word "business" The City Treasurer of Makati assessed Whether the City of Makati may NO. A condominium corporation, while
Condo. Corp., G.R. No. defined under the Local the Condominium Corporation liable collect business taxes on enjoying such powers of ownership, is
154993, October 25, 2005. Government Code, as to pay the city business taxes, fees condominium corporations prohibited by law from transacting its
"trade or commercial and charges but was silent as to the properties for the purpose of gainful
activity regularly engaged statutory basis of the business taxes profit. Further, condominium
assessed. It argued that the corporations are generally exempt from
217
 in as a means of livelihood Condominium Corporation is local business taxation under the Local
or with a view to profit." engaged in business, for the dues Government Code, irrespective of any
collected from the different unit local ordinance that seeks to declare
owners is utilized towards the otherwise.
beautification and maintenance of
the Condominium, resulting in "full The City Treasurer failed to prove that the
appreciative living values" for the Corporation is engaged in business
condominium units which would activities beyond the statutory purposes
command better market prices of a condominium corporation. The
should they be sold in the future. assessment was based solely on the
Corporation's collection of assessments
The Condominium Corporation from unit owners, such assessments being
countered that the assessment lacks utilized to defray the necessary expenses
the exact legal basis for the tax, it is for the Condominium Project and the
not an owner or operator of any common areas. There is no contemplation
business in the contemplation of the of business, no orientation towards profit
Makati Revenue Code and even the in this case. The tax assessment has no
Local Government Code, it was basis under the Local Government Code
organized not for profit, but to hold or the Makati Revenue Code, and the
title over the common areas of the City’s collection of the void tax constitutes
Condominium, to manage the an attempt at deprivation of property
Condominium for the unit owners, without due process of law.
and to hold title to the parcels of land
on which the Condominium was
located, and that the collection of
fees from the unit owners were for
capital expenditures and operating
expenses.

18. Ericsson Telecoms Inc. The LGC, which authorizes Ericsson Telecommunications, Inc. Whether the local business tax YES. The imposition of local business tax
v. City of Pasig, G.R. No. the levy of business taxes by (Ericsson) was assessed a business tax on contractors should be based based on Ericsson's gross revenue will
176667, November 22, LGUs, provides that tax deficiencies for the years 1998 and on gross receipts. inevitably result in the constitutionally
2007. covering contractors and 199 and for the years 2000 and 20001 proscribed double taxation inasmuch as
other independent by the City Treasurer of Pasig City, petitioner's revenue or income for a
contractors should be based on its gross revenues as taxable year will definitely include its
computed based on gross reported in its audited financial gross receipts already reported during the
receipts. statements. Ericsson claimed that the
218

19. Allied Thread Co., Inc. v. Local Government Code Allied Thread Co. Inc. is engaged in Whether Allied Thread
Manila, G.R. No. L-40296, provides that Cities may the business of manufacturing sewing properly taxed in Manila.
November 21, 1984.
computation of the local business tax
should be based on the gross receipts
and not on gross revenue.
The City Treasurer argued that gross
receipts is synonymous with gross
earnings/revenue, which, in turn,
includes uncollected earnings.
Ericsson, however, contends that only
the portion of the revenues which
were actually and constructively
received should be considered in
determining its tax base.
is YES. Ordinance 7516, as amended,
properly levy taxes thread and yarn. It operates its factory
delegated to them by law. and maintains an office in Pasig, Rizal.
In order to sell its products in Manila
and in other parts of the Philippines,
it engaged the services of a sales
broker, Ker & Co. Ltd., the latter
deriving commissions from every sale
made for its principal. The City of
Manila enacted Ordinance 7516
imposing business taxes based on
gross sales on a graduated basis on
manufacturers, importers or
producers doing business in Manila.
Allied Thread and Ker & Co. alleged
219
previous year and for which local business
tax has already been paid.
Respondent is authorized to levy business
taxes under Section 143 in relation to
Section 151 of the Local Government
Code. Insofar as petitioner is concerned,
the applicable provision is Section 143 (e)
of the same Code covering contractors
and other independent contractors, which
specifically refers to gross receipts.
The City Treasurer committed error when
it assessed Ericsson'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.
imposes a business tax on manufacturers,
importers or producers doing business in
Manila. The tax imposition is upon the
performance of an act, enjoyment of a
privilege, or the engaging in an
occupation, and hence is in the nature of
an excise tax. The power to levy an excise
upon the performance of an act or the
engaging in an occupation does not
depend upon the domicile of the person
subject to the excise, nor upon the
physical location of the property and in
connection with the act or occupation
taxed, but depends upon the place in
which the act is performed or occupation
 that said ordinance is invalid for being
contrary to Section 54 of PD 426.
20. Province of Bulacan v. A province may not impose On June 26, 1992, the Sangguniang
CA, G.R. No. 126232, taxes if the same is already Panlalawigan of Bulacan passed
November 27, 1998. taxed under the NIRC. Provincial Ordinance No. 3, known as
"An Ordinance Enacting the Revenue
Code of the Bulacan Province." which
was to take effect on July 1, 1992.
Section 21 of the ordinance provides
as follows:
Sec. 21. Imposition of Tax. There
is hereby levied and collected a
tax of 10% of the fair market
value in the locality per cubic
meter of ordinary stones, sand,
gravel, earth and other quarry
resources, such, but not limited
to marble, granite, volcanic
cinders, basalt, tuff and rock
phosphate, extracted from
public lands or from beds of
seas, lakes, rivers, streams,
creeks and other public waters
within its territorial jurisdiction.
(Emphasis supplied)
Pursuant thereto, the Provincial
Treasurer of Bulacan, in a letter dated
November 11, 1993, assessed private
respondent Republic Cement
Corporation (hereafter Republic
Cement) P2,524,692.13 for extracting
220
engaged in. Thus, since Allied Thread sells
its products in the City of Manila through
its broker, Ker & Co., it cannot escape the
tax liability imposed by Ordinance 7516,
as amended.
Whether provincial Ordinance NO. The pertinent provisions of the Local
No. 3 is valid to allow the Government Code are as follows:
petitioner to impose taxes on
ordinary stones, sand, gravel, Sec. 134. Scope of Taxing Powers. —
earth, and other quarry Except as otherwise provided in this
resources. Code, the province may levy only the
taxes, fees, and charges as provided
in this Article.
Sec. 158. Tax on Sand, Gravel and
Other Quarry Resources. — The
province may levy and collect not
more than ten percent (10%) of fair
market value in the locality per cubic
meter of ordinary stones, sand,
gravel, earth, and other quarry
resources, as defined under the
National Internal Revenue Code, as
amended, extracted from public
lands or from the beds of seas, lakes,
rivers, streams, creeks, and other
public waters within its territorial
jurisdiction.
The Court of Appeals erred in ruling that
a province can impose only the taxes
specifically mentioned under the Local
Government Code. As correctly pointed
out by petitioners, Section 186 allows a
province to levy taxes other than those
specifically enumerated under the Code,
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 on December 23,
1993. The same was, however, denied
by the Provincial Treasurer on January
17, 1994. Republic Cement,
consequently filed a petition for
declaratory relief with the Regional
Trial Court of Bulacan on February 14,
1994. The province filed a motion to
dismiss Republic Cement's petition,
which was granted by the trial court
on May 13, 1993, which ruled that
declaratory relief was improper,
allegedly because a breach of the
ordinance had been committed by
Republic Cement.
221
subject to the conditions specified
therein.
This finding, nevertheless, affords cold
comfort to petitioners as they are still
prohibited from imposing taxes on
stones, sand, gravel, earth and other
quarry resources extracted from private
lands. The tax imposed by the Province of
Bulacan is an excise tax, being a tax upon
the performance, carrying on, or exercise
of an activity.
Sec. 151. — Mineral Products. —
(A) Rates of Tax. — There shall be
levied, assessed and collected on
minerals, mineral products and
quarry resources, excise tax as
follows:
xxx
(2) On all nonmetallic minerals and
quarry resources, a tax of two
percent (2%) based on the actual
market value of the gross output
thereof at the time of removal, in
case of those locally extracted or
produced; or the values used by the
Bureau of Customs in determining
tariff and customs duties, net of
excise tax and value-added tax, in the
case of importation.
xxx
(B) [Definition of Terms]. — for
purposes of this Section, the term-
xxx
(4) Quarry resources shall mean any
common stone or other common
 mineral substances as the Director of
the Bureau of Mines and Geo-
Sciences may declare to be quarry
resources such as, but not restricted
to, marl, marble, granite, volcanic
cinders, basalt, tuff and rock
phosphate; Provided, That they
contain no metal or metals or other
valuable minerals in economically
workable quantities.

It is clearly apparent from the above

provision that the National Internal
Revenue Code levies a tax on all quarry
resources, regardless of origin, whether
extracted from public or private land.
Thus, a province may not ordinarily
impose taxes on stones, sand, gravel,
earth and other 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.

21. Angeles City v. Angeles The Lifeblood doctrine does AEC was granted a legislative
City Electric Corp., GR No. not apply in cases for the franchise to construct, maintain and
166134, June 29, 2010. collection of local taxes operate an electrical light, heat and
since there is no prohibition power system for the purpose of
222
Whether the RTC can issue a writ YES. The RTC can issue a writ of
of preliminary injunction to preliminary injunction to enjoin the
enjoin the collection of taxes by collection of taxes by Angeles City.
Angeles City.
in the Local Government generating and distributing electric,
Code. light, heat and power for sale in
Angeles City. Pursuant to the
franchise, AEC’s payment of franchise
tax for gross earnings was in lieu of all
taxes, fees and assessments.
Furthermore, in 1974, P.D. 551 further
reduced the franchise tax of electric
franchise holders.
The Local Government Code was then
enacted. It granted the power of local
government units to impose tax on
businesses enjoying franchises.
The Sangguniang Panglungsod of
Angeles City thereafter enacted a Tax
Ordinance. The City Treasurer
forthwith issued a notice of
assessment to AEC for payment of
business tax, license fee and other
charges for the period of 1993 to
2004.
AEC protested stating that their
franchise exempts them from paying
such taxes. The City Treasurer denied
the same. AEC elevated the protest to
the RTC via a petition for declaratory
relief.
The City Treasurer started to levy the
real properties of AEC. The latter
supplementary filed with the RTC an
urgent motion for the issuance of a
Temporary Restraining Order and/or
a writ of preliminary injunction to
223
The Local Government Code does not
specifically prohibit an injunction
enjoining the collection of taxes.
It is a principle that taxes are the lifeblood
of the government and should be
collected promptly without hindrance nor
delay. The NIRC thus states that no court
has the authority to grant an injunction to
restrain the collection of any national
internal revenue tax, fee or charge
imposed by the code. The only exception
to this rule is only when the CTA opines
that the collection thereof may jeopardize
the interest of the government and/or the
taxpayer.
However, the rule does not apply in the
case of the collection of local taxes as
there is no express provision in the LGC
prohibiting courts from issuing an
injunction to restrain local governments
from collecting taxes.
However, these are frowned upon. The
courts should thus exercise extreme
caution.

22. Pelizloy Realty Corp. v.
The Province of Benguet,
GR No. 183137, April 10,
2013.
The power to tax is an
attribute of the sovereignty,
and as such, inheres in the
State. Such, however, is not
true for provinces, cities,
municipalities and
barangays as they are not
the sovereign; rather, they
are mere territorial and
political subdivisions of the
Philippines. The power of
the province to tax is
limited to the extent that
such power is delegated to
it either by the Constitution
of by a statute.
stop the City Treasurer from levying
the properties.
The RTC issued a TRO and upon
posting of AEC’s bond, issued a Writ
of preliminary injunction. Angeles City
filed a motion for dissolution of
preliminary injunction arguing that
the RTC cannot enjoin the collection
of taxes by the City of Angeles.
Pelizloy Realty Corporation (Pelizloy)
owns Palm Grove Resort, which has
facilities like swimming pools, spa,
and function halls, located in
Benguet.
Section 59, Article X of the Benguet
Revenue Code of 2005 (Tax
Ordinance), levied a 10% amusement
tax on gross receipts from admissions
to “resort, swimming pools, bath
houses, hot springs, and tourist
spots.”
Pelizloy filed a petition/appeal before
the Secretary of Justice alleging that
the imposition of the 10%
amusement tax is an ultra vires act on
the part of the Province of Benguet.
Since the Secretary of Justice failed to
act upon the petition, Pelizloy filed a
Petition for Declaratory Relief and
Injunction before the RTC arguing
that the imposition of the percentage
tax was null and void for being
contrary to the limitation on the
224
1. Whether amusement tax is a 1. YES. Amusement taxes are percentage
percentage tax. tax because percentage tax is a tax
measured by a certain percentage of the
2. Whether the province is gross selling price or gross value in money
authorized to impose of goods sold, bartered or imported; or of
amusement tax. the gross receipts or earning derived by
any person engaged in the sale of
services. Amusement taxes are fixed at a
certain percentage of the gross receipts
incurred by certain specified
establishments.
2. NO. Section 133 of the Local
Government Code (LGC) imposes
limitations on the taxing power of the
LGU. Specifically, Section 133 (i) prohibits
the levy by LGUs of percentage or value-
added tax (VAT) on sales, barters or
exchanges, or similar transactions on
goods or services except as otherwise
provided by the LGC.
Section 140(a) of the LGC provides “the
province may levy an amusement tax to
be collected from the proprietors, lessees,
or operators of theaters, cinemas, concert
taxing powers of the
Government Unit (LGU).
RTC dismissed the petition for lack of
merit and denied the Motion for
Reconsideration
225
Local halls, circuses, boxing stadia, and other
places of amusement at a rate of not more
than thirty percent of the gross receipts
from admission fees.”
Resorts, swimming pools, bath houses,
hot springs and tourist spots do not
belong to the same category or classes as
theaters, cinemas, concert halls, circuses,
and boxing stadia. It follows that it cannot
be considered as among the other places
of amusement as contemplated by
Section 140 of the LGC.
 REAL PROPERTY TAXATION 

CASE TITLE CASE PRINCIPLE SUMMARY OF FACTS
1. Mactan Cebu Government Petitioner Mactan-Cebu International Whether the MCIAA is liable to NO. The Court of Appeals erred in
International Airport Instrumentalities are Airport Authority (MCIAA) was pay for the Real Estate Tax.
Authority (MCIAA) v. City exempt from Real Estate created by Congress on July 31, 1990
of Lapu-Lapu, G.R. No. Tax. Provided, the under Republic Act No. 6958 (R.A.
181756, June 15, 2015. properties are actually, 6958) to undertake the economical,
solely and exclusively used efficient and effective control,
for public purpose. management and supervision of the
airports as may be established in the
Province of Cebu.
On September 11, 1996, however, this
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 - (LGC)
petitioner was no longer exempt from
real estate taxes. The Court held:
Since the last paragraph of Section
234 unequivocally withdrew, upon
the effectivity of the LGC, exemptions
from payment of real property taxes
granted to natural or juridical
persons, including government-
owned or controlled corporations
(GOCC), except as provided in the
said section, and the petitioner is,
undoubtedly, a government-owned
corporation, it necessarily follows that
its exemption from such tax granted
it in Section 14 of its Charter, R.A.
6958, has been withdrawn.
226
ISSUE/S RULING
declaring that the 1996 MCIAA case still
controls and that petitioner is a GOCC.
The 2006 MIAA case governs.
In the 2006 MIAA case, Supreme Court
held that MIAA’s airport lands and
buildings are exempt from real estate tax
imposed by local governments; that it is
not a GOCC but an instrumentality of the
national government, with its real
properties being owned by the Republic
of the Philippines, and these are exempt
from real estate tax.
MIAA is neither a stock nor a non-stock
corporation, MIAA does not qualify as a
GOCC. MIAA is a government
instrumentality vested with corporate
powers to perform efficiently its
governmental functions. MIAA is like any
other government instrumentality, the
only difference is that MIAA is vested with
corporate powers.
Under Section 133(o) of the LGC, 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 LGC, in which case the
specific real property leased becomes
subject to real estate tax. Thus, only

2. Lung Center of the
Philippines v. Quezon City,
GR No. 144104, June 29,
2004.
Charitable Institutions, in
general, are exempt from
real property taxes, except
when such real property or
portions thereof are not
actually, directly and
exclusively used for
charitable purposes.
On January 7, 1997, respondent City
issued to petitioner a Statement of
Real Estate Tax assessing the lots
comprising the Mactan International
Airport.
The Petitioner is a non-stock, non-
profit entity which owns a parcel of
land in Quezon City. Erected in the
middle of the aforesaid lot is a
hospital known as the Lung Center of
the Philippines. The ground floor is
being leased to a canteen, medical
professionals who use the same as
their private clinics, as well as to other
private parties. The right portion of
the lot is being leased for commercial
purposes to the Elliptical Orchids and
Garden Center. The petitioner
accepts paying and non-paying
patients. It also renders medical
services to out-patients, both paying
and non-paying. Aside from its
income from paying patients, the
petitioner receives annual subsidies
from the government.
227
Whether the Petitioner is entitled
to exemption from realty taxes
notwithstanding the fact that it
admits paying clients and leases
out a portion of its property for
commercial purposes.
portions of the Airport Lands and
Buildings leased to taxable persons like
private parties are subject to real estate
tax by the City of Parañaque.
Under Article 420 of the Civil Code, the
Airport Lands and Buildings of MIAA,
being devoted to public use, are
properties of public dominion and thus
owned by the State or the Republic of the
Philippines. As properties of public
dominion owned by the Republic, the
Airport Lands and Buildings are expressly
exempt from real estate tax under Section
234(a) of the LGC.
NO. Portions of real property that are not
actually, directly and exclusively used for
charitable purposes, are not entitled to
exemption from realty taxes.
The Court held that the petitioner is
indeed a charitable institution based on
its charter and articles of incorporation.
As a general principle, a charitable
institution does not lose its character as
such and its exemption from taxes simply
because it derives income from paying
patients, whether out-patient or confined
in the hospital, or receives subsidies from
the government, so long as the money
received is devoted or used altogether to
the charitable object which it is intended
to achieve; and no money inures to the
private benefit of the persons managing
or operating the institution.

3. Manila International
Airport Authority v. CA, GR
No. 155650, July 20, 2006,
En banc, GR 
No. 163072,
April 2, 2009.
When local governments
invoke the power to tax on
national government
instrumentalities, such
power is construed strictly
against local governments.
The rule is that a tax is never
presumed and there must
be clear language in the law
imposing the tax. Any
doubt whether a person,
article or activity is taxable
is resolved against taxation.
This rule applies with
greater force when local
Petitioner filed a Claim for Exemption
from realty taxes amounting to about
Php4.5 million, predicating its claim
as a charitable institution. The city
assessor denied the Claim. When
appealed to the QC-Local Board of
Assessment, the same was dismissed.
The decision of the QC-LBAA was
affirmed by the Central Board of
Assessment Appeals, despite the
Petitioners claim that 60% of its
hospital beds are used exclusively for
charity.
The Manila International Airport
Authority (MIAA) operates the Ninoy
Aquino International Airport (NAIA)
Complex in Parañaque City under
Executive Order No. 903 (MIAA
Charter), as amended. As such, it
administers the land, improvements
and equipment within the NAIA
Complex.
In March 1997, the Office of the
Government Corporate Counsel
(OGCC) issued Opinion No. 061 to the
effect that the Local Government
Code of 1991 (LGC) withdrew the
228
Whether the Airport Lands and
Buildings of MIAA are exempt
from real estate tax under
existing laws.
Despite this, the Court held that the
portions of 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 (strictissimi juris).
Moreover, P.D. No. 1823 only speaks of
tax exemptions as regards to: income and
gift taxes for all donations, contributions,
endowments and equipment and supplies
to be imported by authorized entities or
persons and by the Board of Trustees of
the Lung Center of the Philippines for the
actual use and benefit of the Lung Center;
and taxes, charges and fees imposed by
the Government or any political
subdivision or instrumentality thereof
with respect to equipment purchases
(expression unius est exclusion
alterius/expressium facit cessare tacitum).
YES. MIAA is not a government-owned or
controlled corporation but an
instrumentality of the National
Government and thus exempt from local
taxation.
MIAA is a government instrumentality
vested with corporate powers to perform
efficiently its governmental functions.
MIAA is like any other government
instrumentality, the only difference is that
MIAA is vested with corporate powers.
When the law vests in a government
instrumentality corporate powers, the
governments seek to tax exemption from real estate tax
national government granted to MIAA under Section 21 of
instrumentalities. its Charter. Therefore, MIAA was held
to be delinquent in paying its taxes.
Thus, MIAA paid some of the real
estate tax already due. In June 2001, it
received Final Notices of Real Estate
Tax Delinquency from the City of
Parañaque for the taxable years 1992
to 2001. The City Treasurer
subsequently issued notices of levy
and warrants of levy on the airport
lands and buildings.
Hence, MIAA filed this petition for
review, pointing out that it is exempt
from real estate tax under Sec. 21 of
its Charter and Sec. 234 of the Local
Government Code. It invokes the
principle that the government cannot
tax itself as a justification for
exemption, since the airport lands
and buildings, being devoted to
public use and public service, are
owned by the Republic of the
Philippines.
229
instrumentality does not become a
corporation. Unless the government
instrumentality is organized as a stock or
non-stock corporation, it remains a
government instrumentality exercising
not only governmental but also corporate
powers. Thus, MIAA exercises the
governmental powers of eminent domain,
police authority and the levying of fees
and charges. At the same time, MIAA
exercises "all the powers of a corporation
under the Corporation Law, insofar as
these powers are not inconsistent with the
provisions of this Executive Order."
A government instrumentality like MIAA
falls under Section 133(o) of the Local
Government Code. 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."
Moreover, the Airport Lands and Buildings
of MIAA are property of public dominion
and therefore owned by the State or the
Republic of the Philippines.
The Airport Lands and Buildings are
devoted to public use because they are
used by the public for international and
domestic travel and transportation. The
 fact that the MIAA collects terminal fees
and other charges from the public does
not remove the character of the Airport
Lands and Buildings as properties for
public use.

Section 234(a) of the Local Government

Code exempts from real estate tax any
real property owned by the Republic of
the Philippines.

This exemption should be read in relation

with 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
real properties owned by the Republic are
titled either in the name of the Republic
itself or in the name of agencies or
instrumentalities of the National
Government. 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.

However, portions of the Airport Lands

and Buildings that MIAA leases to private
entities are not exempt from real estate
tax.

230
4. Quezon City Govt v. The grant of taxing powers
BayanTel Corp., GR N0. to local government units
162015, March 6, 2006. under the Constitution and
the LGC does not affect the
power of Congress to grant
exemptions to certain
persons, pursuant to a
declared national policy.
The legal effect of the
constitutional grant to local
governments simply means
that in interpreting
statutory provisions on
municipal taxing powers,
doubts must be resolved in
favor of municipal
corporations.
BAYANTEL’s real properties within the
territorial jurisdiction of Quezon City
were subjected to real property tax
pursuant to the Quezon City Revenue
Code. BAYANTEL requested the City
for the exclusion of its properties.
When it was denied by the City,
BAYANTEL interposed an appeal to
the Local Board of Assessments
(LBAA) without paying the taxes
assessed upon it. Petitioner City then
proceeded to levy the said properties
and prepare them for public auction.
BAYANTEL, threatened by the
imminent loss, withdrew its appeal
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.
231
1. Whether BAYANTEL is 1. NO. One of the grounds in a petition
required to exhaust for prohibition under Rule 65 is when
administrative remedies. there is no other plain, speedy, and
adequate remedy in the ordinary course
2. Whether BAYANTEL’s of law. The Court took note of the
properties are exempt from real impending sale of BAYANTEL’s real
property taxes. properties and the fact that the appeal to
the LBAA would require BAYANTEL to pay
a huge amount of money; a figure difficult
to raise in light of the Asian Financial
Crisis. Moreover, this case falls among one
of the recognized exceptions of the
doctrine of exhaustion of administrative
remedies: that it merely involves pure
questions of law.
2. YES. Section 11 of BAYANTEL’s
amended franchise, which took effect
after the effectivity of the Local
Government Code impliedly repealing the
same provision in the franchise, provides
that “The grantee, its successors or
assigns shall be liable to pay the same
taxes on their real estate, buildings and
personal property, exclusive of this
franchise”. In other words, real properties
of BAYANTEL that are actually, directly,
and exclusively used in its radio or
telecommunication business, are exempt
from real property taxes.
The question now revolves on whether
the City’s Revenue Code effectively
revoked this tax exemption. In support of
this they rely on Section 232 of the LGC.
The Court does not agree for as in the
case of Mactan Cebu International Airport

5. FELS Energy, Inc. v. Any owner or person
Province of Batangas, G.R. having legal interest in the
No. 168557, February 16, property who is not
2007. satisfied with the action 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
National Power Corporation (NPC)
entered into a lease contract with
Polar Energy, Inc. (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 Agreement to FELS
Energy, Inc. (FELS). Later, FELS
received an assessment of real
property taxes on the power barges
from the Provincial Assessor, that the
232
Whether NPC’s appeal to LBAA
may prosper considering that
the timely filing of Motion for
Reconsideration with the
Provincial Assessor tolled the
running of the reglementary
period.
Authority, the power to tax, which also
includes the power to exempt, is still
primarily vested in the 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.
NO. Section 226 of R.A. No. 7160,
otherwise known as the Local
Government Code of 1991, provides:
“SECTION 226. Local Board of Assessment
Appeals. – Any owner or person having
legal interest in the property who is not
satisfied with the action 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 for the
purpose, together with copies of the tax
declarations and such affidavits or
documents submitted in support of the
 appeal to the LBAA runs owner or person having legal interest appeal.” Instead of appealing to the Board
without interruption. may appeal the matter within 60 days of Assessment Appeals (as stated in the
from receipt to the Board of notice), NPC opted to file a motion for
Assessment Appeals of the province. reconsideration of the Provincial
Assessor’s decision, a remedy not
FELS referred the matter to NPC, sanctioned by law.
which sought reconsideration of the
Provincial Assessor’s decision to Citing the case of Callanta v. Office of the
assess real property taxes on the Ombudsman, where [the Supreme Court]
power barges. However, the motion ruled that under Section 226 of R.A. No
was denied and the Provincial 7160, the last action of the local assessor
Assessor advised NPC to pay the on a particular assessment shall be the
assessment. After sixty (60) days from notice of assessment; it is this last action
receipt of assessment from, the NPC which gives the owner of the property the
filed a petition with the Local Board of right to appeal to the LBAA. The
Assessment Appeals (LBAA) for the procedure likewise does not permit the
setting aside of the assessment and property owner the remedy of filing a
the declaration of the barges as non- motion for reconsideration before the
taxable items; it also prayed that local assessor. It follows ineluctably that
should LBAA find the barges to be the 60-day period for making the appeal
taxable, the Provincial Assessor be to the LBAA runs without interruption.
directed to make the necessary
corrections.

6. NPC vs. Central Board of Exempt from real property The FPPC entered into a Build- Whether the machineries and NO. We could not recognize the tax
Assessment Appeals, GR taxation are: Operate-Transfer (BOT) Agreement equipment used in a project exemption claimed by NPC because NPC
No. 171470, January 30, with NPC for the construction of a covered by a BOT agreement, to was not the actual, direct and exclusive
2009. a. all machineries and power plant in La Union. The BOT which NPC is a party, should be user of the barge as required by Sec. 234
equipment; Agreement provided for the creation accorded the tax-exempt status (c) of the Local Government Code.
b. that are actually, of the BPPC that will own, manage, it enjoys.
directly, and exclusively and operate the power plant. The records show that NPC, no less,
used by; admits BPPC's ownership of the
c. local water districts and Initially, the machineries and machineries and equipment in the power
government-owned or equipment of BPPC were declared as plant. Likewise, the provisions of the BOT
–controlled tax-exempt by the issuance of a agreement cited above clearly show
corporations engaged Declaration of Real Property. BPPC's ownership. Thus, ownership is not
in the supply and However, such exemption was later a disputed issue.
233
 distribution of water cancelled and were subjected to real
and/or generation and property tax. BPPC was then assessed Consistent with the BOT concept and as
transmission of electric real property tax. implemented, BPPC — the owner-
power. [Sec. 234(c) of manager-operator of the project — is the
LGC] NPC then filed a petition to exempt actual user of its machineries and
the machineries from real property equipment. BPPC's ownership and use of
tax. However, this petition was denied the machineries and equipment are
for NPC does not own and does not actual, direct, and immediate, while NPC's
even actually and directly use the is contingent and, at this stage of the BOT
machineries. It is the BPPC, a non- Agreement, not sufficient to support its
government entity, which owns, claim for tax exemption. Thus, the CTA
maintains, and operates the committed no reversible error in denying
machineries and equipment; using NPC's claim for tax exemption.
these, it generates electricity and then
sells this to NPC.

7. NPC v. Quezon Power, To successfully claim NPC is a government-owned and Whether the NPC, as a NO. A person legally burdened with the
G.R. No. 171586, July 15, exemption under Section controlled corporation mandated by government-owned and obligation to pay for the tax imposed on
2009. 234 (c) of the LGC, the law to undertake, among others, the controlled corporation, can claim a property has legal interest in the
claimant must prove two production of electricity from nuclear, tax exemption under Section 234 property and the personality to protest a
elements: geothermal, and other sources, and of the Local Government Code tax assessment on the property. The
the transmission of electric power on (LGC) for the taxes due from the unpaid realty tax attaches to the property
a. the machineries and a nationwide basis. NPC entered into Mirant, whose tax liabilities the but is directly chargeable against the
equipment are actually, an Energy Conversion Agreement NPC has contractually assumed. taxable person who has actual and
directly, and exclusively (ECA) with Mirant, the ECA provided a beneficial use and possession of the
used by local water build to operate arrangement property regardless of whether or not that
districts and between the two. person is the owner. In the present case,
government-owned or the NPC, contrary to its claims, is neither
controlled corporations; Mirant will build and finance a coal- the owner nor the possessor/user of the
and fired thermal power plant on the lots subject machineries.
b. the local water districts owned by the NPC for the purpose of
and government- converting fuel into electricity, and By law, the tax liability rests on Mirant
owned and controlled thereafter, operate and maintain the based on its ownership, use, and
corporations claiming power plant for a period of 25 years. possession of the plant and its
exemption must be NPC, in turn, will supply the necessary machineries. NPC's contractual liability
engaged in the supply fuel to be converted by Mirant into alone cannot be the basis for the
and distribution of electric power, take the power enforcement of tax liabilities against it by
234
water and/or the generated, and use it to supply the
generation and electric power needs of the country.
transmission of electric At the end of the 25-year term, Mirant
power. will transfer the power plant to the
NPC without compensation. Further,
NPC, in this contract, assumed
responsibility for payment of taxes,
including real estate taxes and
assessments.
In a letter dated March 2, 2000, the
Municipality of Pagbilao assessed
Mirant's real property taxes on the
power plant and its machineries, also
furnishing a copy thereof to NPC.
NPC objected to the assessment
against Mirant, that it is entitled to the
tax exemptions from real property tax
as provided in the LGC.
235
the local government unit. NPC is neither
the owner, nor the possessor or user of
the property taxed. No interest on its part
thus justifies any tax liability on its part
other than its voluntary contractual
undertaking. Under this legal situation,
only Mirant as the contractual obligor, not
the LGU, can enforce the tax liability that
the NPC contractually assumed; NPC does
not have the "legal interest" that the law
and jurisprudence require to give it
personality to protest the tax imposed by
law on Mirant. The stipulation is entirely
between the NPC and Mirant, and does
not bind third persons who are not privy
to the contract between
these parties.
As to tax exemption, the government-
owned or controlled corporation claiming
exemption must be the entity actually,
directly, and exclusively using the real
properties, and the use must be devoted
to the generation and transmission of
electric power. Neither the NPC nor
Mirant satisfies both requirements.
Although the plant's machineries are
devoted to the generation of electric
power, by the NPC's own admission and
as previously pointed out, Mirant — a
private corporation — uses and operates
them. That Mirant operates the
machineries solely in compliance with the
will of the NPC only underscores the fact
that NPC does not actually, directly, and
exclusively use them. The machineries
must be actually, directly, and exclusively
 used by the government-owned or
controlled corporation for the exemption
under Section 234 (c) to apply.

236

CASE TITLE CASE PRINCIPLE
1. Duty Free Philippines vs. R.A. No. 1125, as amended
BIR, G.R. No 197228, by R.A. 9282, Sec. 18.
October 8, 2014. Appeal to the Court of Tax
Appeals En Banc. - xxxA
party adversely affected by
a resolution of a Division of
the CTA on a motion for
reconsideration or new trial,
may file a petition for
review with the CTA en
banc.
Sec. 19. Review by
Certiorari. — A party
adversely affected by a
decision or ruling of the
CTA En Banc may file with
the Supreme Court a
verified petition for review
on certiorari pursuant to
Rule 45 of the 1997 Rules of
Civil Procedure.
Section 2, Rule 4 of the
Revised Rules of the CTA
reiterates the exclusive
appellate jurisdiction of the
CTA En Banc relative to the
review of the court
divisions' decisions or
resolutions on motion for
reconsideration or new trial
in cases arising from
administrative agencies
such as the BIR.

COURT OF TAX APPEALS
SUMMARY OF FACTS ISSUE/S
Several assessment notices were sent Whether the direct appeal
by respondent to petitioner for before the SC was proper.
deficiency income tax and VAT
covering taxable years 1999 to 2002.
Petitioner filed its protest letters, but
the protest was eventually denied by
respondent. Hence, petitioner filed a
Petition for Review before the CTA
questioning the assessments. The
CTA Special First Division rendered
decision in favor of respondent. The
CTA Special First Division likewise
issued a resolution denying the
Motion for Reconsideration of
petitioner. Thereafter, petitioner filed
an appeal directly to the Supreme
Court assailing the decision and
resolution of the CTA Special First
Division.
237
RULING
NO. In this case, petitioner filed with the
SC 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 expressly 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 this
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.
2. The City of Manila, etc. et The CTA has jurisdiction
al. v. Hon. Caridad H. over a special civil action for
Grecia-Cuerdo etc., et al, certiorari assailing an
G.R. No. 175723. 
February interlocutory order issued
4, 2014. 
 by the RTC in a local tax
case
Petitioner City of Manila, through its
treasurer, petitioner Liberty Toledo,
assessed taxes for the taxable period
from January to December 2002
against the private respondents.In
addition to the taxes purportedly due
from private respondents pursuant to
Section 14, 15, 16, 17 of the Revised
Revenue Code of Manila (RRCM), said
assessment covered the local
business taxes. private respondents
were constrained to pay the P
19,316,458.77 assessment under
protest.
On January 24, 2004, private
respondents filed before the RTC 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.
The RTC granted private respondents’
application for a writ of preliminary
injunction.
Petitioners filed a Motion for
Reconsideration4 but the RTC denied.
Petitioners then filed a special civil
action for certiorari with the CA but
the CA dismissed petitioners’ petition
for certiorari holding that it has no
jurisdiction over the said petition. The
238
Whether the CTA has jurisdiction
over a special civil action for
certiorari assailing an
interlocutory order issued by the
RTC in a local tax case.
YES. The CTA has jurisdiction over a
special civil action for certiorari assailing
an interlocutory order issued by the RTC
in a local tax case. 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.
Consistent with the above
pronouncement, the Court has held as
early as the case of J.M. Tuason & Co., Inc.
v. Jaramillo, et al. [118 Phil. 1022 (1963)]
that “if a case may be appealed to a
particular court or judicial tribunal or
body, then said court or judicial tribunal
or body has jurisdiction to issue the
extraordinary writ of certiorari, in aid of its
appellate jurisdiction.” This principle was
affirmed in De Jesus v. Court of Appeals
(G.R. No. 101630, August 24, 1992) where
the Court stated that “a court may issue a
writ of certiorari in aid of its appellate
jurisdiction if said court has jurisdiction to
review, by appeal or writ of error, the final
orders or decisions of the lower court.
 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.

Petitioners filed a Motion for

Reconsideration, but the CA denied it
in its Resolution hence, this petition.

3. Smart Communications, A withholding agent is
Inc. v. Municipality of considered a proper party
Malvar, Batangas, G.R. No. to file a claim for refund
20442. 
February 18, 2014. with the withheld taxes of a

 foreign company. However,
while the withholding agent
has the right to recover the
taxes illegally collected, he
nevertheless has the
obligation to remit the
same to the principal
taxpayer.
If, as pointed out in
Philippine Guaranty, the
withholding agent is also an
agent of the beneficial
owner of the dividends with
respect to the filing of the
necessary income tax return
Smart entered into agreements with Whether Smart has the right to YES. Smart, as a withholding agent, may
Prism (Non-resident corporation), file the claim for refund.
wherein the latter was to provide
programming and consultancy
services. Prism billed Smart, thinking
that these payments constitute
royalties, Smart withheld 25% royalty
tax under a Tax Treaty.
Within the period to claim a refund,
Smart filed with the BIR a claim for
refund, claiming that it is entitled to a
refund because the payments made
to Prism are not royalties but
“business profits,” and such is taxable
only if attributable to a permanent
establishment in the Philippines
CIR argued that Smart is not a party-
in-interest to file the claim. Smart
239
file a claim for refund. In case the taxpayer
does not file a claim, the withholding
agent may file the claim.
A withholding agent is considered a
proper party to file a claim for refund with
the withheld taxes of a foreign company.
However, 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.
 and with respect to actual argued that it has the statutory and
payment of the tax to the primary responsibility to withhold
government, such authority and remit the taxes to the BIR.
may reasonably be held to
include the authority to file
a claim for refund and to
bring an action for recovery
of such claim. This implied
authority is especially
warranted where, as in the
instant case, the
withholding agent is the
wholly owned subsidiary of
the parent-stockholder and
therefore, at all times, under
the effective control of such
parent-stockholder.

4. CIR v. Toledo, Power, To validly claim a refund or
Inc., G.R. No. 183880, tax credit of input tax, the
January 20, 2014. mandatory compliance with
the 120+30 day rule under
Section 112 of the Tax Code
can be dispensed with if the
claims are filed between
December 10, 2003
(issuance of BIR Ruling No.
DA-489-03 which states
that the taxpayer need not
wait for the 120-day period
to expire before it could
seek judicial relief) to
October 6, 2010
(promulgation of the Aichi
doctrine).
On October 25, 2001, petitioner filed
its Quarterly VAT Return for the third
quarter of 2001. However, an
amended Quarterly VAT Return for
the same quarter of 2001 was filed on
November 22, 2001. The amended
return shows unutilized input VAT
credits arising from petitioner's
taxable purchases for the third
quarter of 2001. On January 25, 2002,
petitioner filed its Quarterly VAT
Return for the fourth quarter of 2001.
For the third and fourth quarters of
2001, petitioner incurred and
accumulated input VAT from its
domestic purchase of goods and
services, which are all attributable to
its zero-rated sales of power
240
1. Whether or not TPI complied 1. TPI's refund claim of unutilized input
with the 120+30 day rule under VAT for the third quarter of 2001 was
Section 112 (C) of the Tax Code. denied for being prematurely filed with
the CTA, while its refund claim of
unutilized input VAT for the fourth quarter
2. Whether or not TPI sufficiently of 2001 may be entertained since it falls
complied with the invoicing within the exception provided in the
requirements under the Tax Court's most recent rulings.
Code
As held in the San Roque ponencia, strict
compliance with the 120+30 day
mandatory and jurisdictional periods is
not necessary when the judicial claims are
filed between December 10, 2003
(issuance of BIR Ruling No. DA-489-03
which states that the taxpayer need not
wait for the 120-day period to expire
before it could seek judicial relief) to
Even if it is not “printed”,
the word “zero rated”
stamped on the invoice is
considered sufficient
compliance with the law.
generation services. Said excess and
unutilized input VAT was allegedly
not utilized against any output VAT
liability in the subsequent quarters
nor carried over to the succeeding
taxable quarters.
On September 30, 2003, petitioner
filed an administrative claim for
refund of unutilized input VAT for the
third and fourth quarter of 2001.
The Commissioner of Internal
Revenue has not ruled upon
petitioner's administrative claim and
in order to preserve its right to file a
judicial claim for the refund or
issuance of a tax credit certificate of
its unutilized input VAT, petitioner
filed a Petition for Review to suspend
the running of the two-year
prescriptive period under Section
112(D) of the 1997 NIRC and Section
4.106-2(c) of Revenue Regulations
No. 7-95, as amended.
On October 24, 2003, petitioner filed
a Petition for Review for the refund or
issuance of a tax credit certificate.
The CIR argued that TPI failed to
comply with the invoicing
requirements to prove entitlement to
the refund or issuance of tax credit
certificate.
241
October 6, 2010 (promulgation of the
Aichi doctrine).
Section 112 decrees that a VAT-registered
person, whose sales are zero-rated or
effectively zero-rated, may apply for the
issuance of a tax credit or refund
creditable input tax due or paid
attributable to such sales within two years
after the close of the taxable quarter when
the sales were made. From the date of
submission of complete documents in
support of its application, the CIR has 120
days to decide whether or not to grant the
claim for refund or issuance of tax credit
certificate. In case of full or partial denial
of the claim for tax refund or tax credit, or
the failure on the part of the CIR to act on
the application within the given period,
the taxpayer may, within 30 days from
receipt of the decision denying the claim
or after the expiration of the 120-day
period, appeal with the CTA the decision
or inaction of the CIR.
2. YES. The words "zero-rated" appeared
on the VAT invoices/official receipts
presented by the TPI in support of its
refund claim. Although the same was
merely stamped and not pre-printed, the
same is sufficient compliance with the law,
since the imprinting of the word "zero-
rated" was required merely to distinguish
sales subject to 10% VAT, those that are
subject to 0% VAT (zero-rated) and
exempt sales, to enable the Bureau of
Internal Revenue to properly implement
 and enforce the other VAT provisions of
the Tax Code.

242

CASE TITLE CASE PRINCIPLE
1. Asaali vs. Commissioner A state has the right to
of Customs (COC), G.R. No. protect itself and its
L-24170, December 16, revenues, a right not limited
1968. to its own territory but
extending to the high seas.

TARIFF AND CUSTOMS CODE
SUMMARY OF FACTS ISSUE/S
On September 10, 1950, at about Whether the interception and
noon time, a customs patrol team on seizure by customs officials of
board Patrol Boat ST-23 intercepted the vessels valid in the
the 5 sailing vessels in question on contention that seizure was
the high seas, between British North effected outside the territorial
Borneo and Sulu while they were waters.
heading towards Tawi-tawi, Sulu.
RULING
YES. From the apprehension and seizure
of the vessels in question on the high seas
beyond the territorial waters of the
Philippines, the absence of jurisdiction of
Commissioner of Customs is predicated.
Such contention of petitioners-appellants
is without merit.

After ordering the vessels to stop, the It is unquestioned that all vessels seized
customs officers boarded and found are of Philippine registry. The Revised
on board, 181 cases of Herald' Penal Code leaves no doubt as to its
cigarettes, 9 cases of 'Camel' applicability and enforceability not only
cigarettes, and some pieces of rattan within the Philippines, its interior waters
chairs. The sailing vessels are all of and maritime zone, but also outside of its
Philippine registry, owned and jurisdiction against those committing
manned by Filipino residents of Sulu, offense while on a Philippine ship. The
and of less than thirty (30) tons principle of law that sustains the validity
burden. They came from Sandakan, of such a provision equally supplies a firm
British North Borneo, but did not foundation for the seizure of the five
possess any permit from the sailing vessels found thereafter to have
Commissioner of Customs to engage violated the applicable provisions of the
in the importation of merchandise Revised Administrative Code.
into any Port of the Sulu sea, as
required by Section 1363(a) of the Moreover, it is a well settled doctrine of
Revised Administrative Code. Their International Law that goes back to Chief
cargoes were not covered by the Justice Marshall's opinion in Church v.
required import license under Hubbart, an 1804 decision, that a state
Republic Act No. 426, otherwise has the right to protect itself and its
known as the Import Control Law. revenues, a right not limited to its own
territory but extending to the high seas. In
The Custom Patrol Team then seized the language of Chief Justice Marshall:
the goods even if they were in the "The authority of a nation within its own
high seas. Petitioners claim that the territory is absolute and exclusive. The
interception and seizure of the items seizure of a vessel within the range of its
were illegal because they were cannon by a foreign force is an invasion of
243

2. Pilipinas Shell Petroleum
Corp. vs. Commissioner of
Customs, G.R. No. 176380,
June 18, 2009.
Section 7 of RA No. 1125
vests the CTA with exclusive
appellate jurisdiction to
review by appeal decisions
of the Commissioner of
Customs in cases involving
liability for customs duties.
These decisions specifically
refer to his decisions on
administrative tax protest
cases.
A tax protest case 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
intercepted outside the territory of
the Philippines. Also, the petitioners
contend that they could not have
been engaged to the importation of
the above-mentioned items to incur
the forfeiture under Section 1363 of
the Revised Administrative Code. The
Court of Tax Appeals held that
Section 1363 should be applied
because all the vessels were all
headed to Tawi-tawi. No import
license and permit were carried
violating RA 426.
Shell is a domestic corporation
engaged, among others, in the
importation of petroleum and its by-
products into the country. For these
importations, Shell was assessed and
required to pay customs duties and
internal revenue taxes.
In 1997 and 1998, Shell settled its
liabilities for customs duties and
internal revenue taxes using tax credit
certificates (TCCs) that were
transferred to it for value by several
BOI-registered companies. The BIR
and the BOC accepted and allowed
Shell to use them to pay and settle its
tax liabilities.
In 1999, the TCCs were cancelled by
the One Stop Shop Inter-Agency Tax
Credit and Duty Drawback Center (the
Center) because it was discovered
that they were fraudulently secured
244
Whether this case involves an
appealable decision of the
Commissioner of Customs to the
CTA.
that territory, and is a hostile act which it
is its duty to repel. But its power to secure
itself from injury may certainly be
exercised beyond the limits of its
territory."
The question asked in the brief of
petitioners-appellants as to whether the
seizure of the vessels in question and the
cargoes on the high seas and thus beyond
the territorial waters of the Philippines
was legal must be answered in the
affirmative.
NO, the case shall be dismissed because
the present case does not involve a tax
protest case within the jurisdiction of the
CTA to resolve.
Section 7 of RA No. 1125 vests the CTA
with exclusive appellate jurisdiction to
review by appeal decisions of the
Commissioner of Customs in cases
involving liability for customs duties.
These decisions specifically refer to his
decisions on administrative tax protest
cases.
A tax protest case 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
the applicable rate of duty;
it is akin to an assessment
of internal revenue taxes
under the NIRC where the
tax liability of the taxpayer
is definitely determined.
by the original grantees who
thereafter transferred them to Shell.
In view of the cancellation, the Center
required Shell to pay the BIR and BOC
the amounts corresponding to the
TCCs they had used to settle its
liabilities.
Three years later, the Deputy
Commissioner for Revenue
Collections Monitoring Group
formally demanded from Shell
payment of the amounts
corresponding to the listed TCCs that
the Center had previously cancelled.
A case was filed by the respondent
against Shell in the RTC of Manila.
After which, Shell filed with the CTA a
Petition for Review questioning the
BOC collection efforts for lack of legal
and factual basis.
245
assessment of internal revenue taxes
under the NIRC where the tax liability of
the taxpayer is definitely determined.
In the present case, the facts reveal that
Shell received 3 sets of letters
(cancellation, requiring to replace the
amount equivalent to the cancelled TCCs,
and formal demand). None of these
letters, however, can be considered as a
liquidation or an assessment of Shell's
import tax liabilities that can be the
subject of an administrative tax protest.
Shell's import tax liabilities had long been
computed and ascertained in the original
assessments, and Shell paid these
liabilities using the TCCs transferred to it
as payment.
The letters merely reissued the original
assessments that were previously settled
by Shell with the use of the TCCs which
were later on cancelled; hence, what the
respondent is laying down here are
payment and collection issues, not tax
protest issues within the CTA's jurisdiction
to rule upon.
To be very precise, Shell's petition before
the CTA principally questioned the validity
of the cancellation of the TCCs — a
decision that was made not by the
respondent, but by the Center. As the CTA
has no jurisdiction over decisions of the
Center, Shell's remedy against the
cancellation should have been a certiorari
petition before the regular courts, not a

3. Jao v. CA, G.R. No. The Collector of Customs The Office of the Director,
104604, October 6, 1995. sitting in seizure and Enforcement and Security Services
forfeiture proceedings has (ESS), Bureau of Customs, received
exclusive jurisdiction to information regarding the presence
hear and determine all of allegedly untaxed vehicles and
questions touching on the parts in the premises owned by a
seizure and forfeiture of certain Pat Hao located along Quirino
dutiable goods. The Avenue, Paranaque and Honduras St.,
Regional Trial Courts are Makati. After conducting a proceedings has exclusive jurisdiction to
precluded from assuming surveillance of the places, respondent
cognizance over such Major Jaime Maglipon, Chief of
matters even through Operations and Intelligence of the
petitions of certiorari, ESS, recommended the issuance of
prohibition or mandamus. warrants of seizure and detention
against the articles stored in the
premises.
The warrants of seizure and detention
were subsequently issued by the
District Collector of Customs Titus
Villanueva.
In Makati, they were barred from
entering the place, but some
members of the team were able to
force themselves inside. They were
able to inspect the premises and
noted that some articles were present
which were not included in the list
contained in the warrant. Hence,
246
Whether the RTC has jurisdiction
over seizure and forfeiture
proceedings conducted by the
Bureau of Customs.
tax protest case before the CTA.
Alternatively, the appropriate forum for
Shell under the circumstances of this case
should be at the collection cases before
the RTC where Shell can put up the fact of
its payment as a defense.
NO. There is no question that Regional
Trial Courts are devoid of any competence
to pass upon the validity or regularity of
seizure and forfeiture proceedings
conducted by the Bureau of Customs and
to enjoin or otherwise interfere with these
proceedings. The Collector of Customs
sitting in seizure and forfeiture
hear and determine all questions
touching on the seizure and forfeiture of
dutiable goods. The Regional Trial Courts
are precluded from assuming cognizance
over such matters even through petitions
of certiorari, prohibition or mandamus.
It is likewise well-settled that the
provisions of the Tariff and Customs Code
and that of Republic Act No. 1125, as
amended, otherwise known as "An Act
Creating the Court of Tax Appeals,"
specify the proper fora and procedure for
the ventilation of any legal objections or
issues raised concerning these
proceedings. Thus, 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.
amended warrants of seizure and
detention were issued by Villanueva.
The customs personnel started
hauling the articles pursuant to the
amended warrants. This prompted
petitioners Narciso Jao and Bernardo
Empeynado to file a case for
Injunction and Damages with prayer
for Restraining Order and Preliminary
Injunction before the RTC of Makati
against respondents. On the same
date, the trial court issued a
Temporary Restraining Order.
The rule that Regional Trial Courts have no
review powers over such proceedings 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.

Petitioners' application for

preliminary prohibitory and
mandatory injunction was granted
conditioned upon the filing of a one-
million-peso bond.

The Court prohibited respondents

from seizing, detaining, transporting
and selling at public auction
petitioners' vehicles, spare parts,
accessories and other properties.

Respondents were further prohibited

from disturbing petitioners'
constitutional and proprietary rights
over their properties located at the
aforesaid premises. Lastly,
respondents were ordered to return
the seized items and to render an
accounting and inventory thereof.
The Court of Appeals set aside the
questioned orders of the trial court
247

4. Mison v. Nativitad, G.R. The Collector of Customs
No. 82586, 11 September has exclusive jurisdiction
1992. over seizure and forfeiture
proceedings and regular
courts cannot interfere with
his exercise thereof or stifle
or put it to naught.
and enjoined it from further
proceeding the civil case and
dismissed the same.
Hence, petitioners filed a petition with
this Court to review the decision of
the Court of Appeals.
In a sworn letter addressed to the
Commissioner of Customs, one Butch
Martinez informed the former of the
existence of both "assembled and
disassembled" knocked-down
vehicles, particularly Toyota Lite Aces,
at the compound CVC Trading, which
is owned by a certain Mr. Castro and
located at St. Jude Avenue, St. Jude
Village, San Fernando, Pampanga.
Martinez requested for an immediate
investigation thereon and
prosecution for the violation of
customs laws.
On the basis thereof, Gen. Benjamin
C. Cruz, Acting Director of the
National Customs Police, formed a
team composed of National Customs
Police and Customs Intelligence and
Investigation Division members,
issuing the same Mission Order. Upon
arrival at the place pinpointed by Mr.
Martinez at around 11:00 p.m., the
team found a fenced area containing
twenty (20) units of fully and partly
assembled Toyota Lite Ace vans. It
immediately took possession and
248
Whether the order of
respondent Judge in denying the
motion to dismiss and granting
the application for writ of
preliminary injunction is issued
without jurisdiction or with grave
abuse of discretion
YES. The Court a quo has no jurisdiction
over the res subject of the warrant of
seizure and detention. The respondent
Judge, therefore, acted arbitrarily and
despotically in issuing the temporary
restraining order, granting the writ of
preliminary injunction and denying the
motion to dismiss, thereby removing the
res from the control of the Collector of
Customs and depriving him of his
exclusive original jurisdiction over the
controversy. By express provision of law,
amply supported by well-settled
jurisprudence, the Collector of Customs
has exclusive jurisdiction over seizure and
forfeiture proceedings and regular courts
cannot interfere with his exercise thereof
or stifle or put it to naught.
In the 1966 case of Pacis vs. Averia, this
Court, speaking through Mr. Justice J.P.
Bengzon, held that:
The Tariff and Customs Code, in Section
2530 thereof, lists the kinds of property
subject to forfeiture. At the same time, in
Part 2 of Title VI thereof, it provides for the
procedure in seizure and forfeiture cases
and vests in the Collector of Customs the
control of the motor vehicles by
cordoning off the enclosure.
Thereafter, two (2) members of the
team were designated to secure a
warrant of seizure and detention from
the Collector of Customs of the
Subport of Clark, herein petitioner
Carlos L. Razo. The latter instituted
seizure proceedings against the
above-mentioned vehicles for the
violation of "Section 2530 (f) and (1)-
1 & 5" of the Tariff and Customs
Code, in relation to Central Bank
regulations. Accordingly, he issued a
Warrant of Seizure and Detention.
Since receipt of the warrant was
refused by the owner/claimant or any
of his representatives, the same was
served by substituted service through
the posting of a copy thereof on one
of the subject motor vehicles found
near the gate of the stockyard. An
inventory of the vehicles was
conducted and a copy thereof was
attached to the return of the warrant
made to the issuing authority.
When the team was about to haul the
motor vehicles away, two (2) Regional
Trial Court sheriffs arrived with a
temporary restraining order issued on
that date by the respondent Judge, as
Executive Judge of the Regional Trial
Court of San Fernando, Pampanga;
the order was issued in connection
249
authority to hear and decide said cases.
The Collector's decision is appealable to
the Commissioner of Customs Section
2313, R.A. 1937] whose decision is in turn
appealable to the Court of Tax Appeals.
An aggrieved party may appeal from a
judgment of the Court of Tax Appeals
directly to this Court.
On the other hand, Section 44(c) of the
Judiciary Act of 1948 [As amended by R.A.
3828] lodges in the Court of First Instance
original jurisdiction in all cases in which
the value of the property in controversy
amounts to more than ten thousand
pesos. This original jurisdiction of the
Court of First Instance, when exercised in
an action for recovery of personal
property which is a subject of a forfeiture
proceeding in the Bureau of Customs,
tends to encroach upon, and to render
futile, the jurisdiction of the Collector of
Customs in seizure and forfeiture
proceedings.
Should Section 44(c) of the Judiciary Act of
1948 give way to the provisions of the
Tariff and Customs Code, or vice versa? In
Our opinion, in this particular case, the
Court of First Instance should yield to the
jurisdiction of the Collector of Customs.
The jurisdiction of the Collector of
Customs is provided for in Republic Act
1937 which took effect on July 1, 1957,
much later than the Judiciary Act of 1948.
It is axiomatic that a later law prevails over
a prior statute.
with Civil Case No. 8109, entitled
"Sonny Carlos, plaintiff, versus Bureau
of Customs and/or Customs Police.
By virtue of the restraining order, the
physical transfer of the vehicles was
deferred. Lawyers of the Bureau of
Customs filed a Motion to Dismiss
Civil Case No. 8109 alleging therein
(a) the lack of jurisdiction of the
Regional Trial Court over the subject
vehicles in view of the exclusive
jurisdiction of the Collector of
Customs over seizure and forfeiture
cases, and (b) the failure of the
plaintiff to exhaust administrative
remedies.
Petitioner Collector of Customs
rendered a Decision in the said
seizure proceedings, the dispositive
portion of which reads: xxx it is hereby
ordered that the Twenty (20) Units
Toyota Lite Ace covered by this seizure
case be, as they are hereby, declared
forfeited in favor of the Government to
be disposed of in the manner provided
for by law.
On the same date, the respondent
Judge issued a Resolution in Civil
Case No. 8109 denying the motion to
dismiss and granting the application
for a writ of preliminary injunction.
250
A warrant of seizure and detention having
already been issued, presumably in the
regular course of official duty, the
Regional Trial Court of Pampanga was
indisputably precluded from interfering in
the said proceedings. That in his
complaint in Civil Case No. 8109 private
respondent alleges ownership over
several vehicles which are legally
registered in his name, having paid all the
taxes and corresponding licenses incident
thereto, neither divests the Collector of
Customs of such jurisdiction nor confers
upon the said trial court regular
jurisdiction over the case. Ownership of
goods or the legality of its acquisition can
be raised as defenses in a seizure
proceeding; if this were not so, the
procedure carefully delineated by law for
seizure and forfeiture cases may easily be
thwarted and set to naught by scheming
parties. Even the illegality of the warrant
of seizure and detention cannot justify the
trial court's interference with the
Collector's jurisdiction. In the first place,
there is a distinction between the
existence of the Collector's power to issue
it and the regularity of the proceeding
taken under such power. In the second
place, even if there be such an irregularity
in the latter, the Regional Trial Court does
not have the competence to review,
modify or reverse whatever conclusions
may result therefrom.
5. Nestle Philippines, Inc. v. It is clear from Section 1708
CA, G.R. No. 134114, July 6, of the Tariff and Customs
2001. Code that 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.
Petitioner Nestle Philippines, Inc.
transacted sixteen separate
importations of milk and milk
products from different countries
between the period of July and
November 1984. It paid the
corresponding customs duties and
advance sales taxes to the Collector of
Customs of Manila for each
transaction based on the published
Home Consumption Value (HCV) as
indicated in the Bureau of Customs
Revision Orders, but it seasonably
filed the corresponding protests
before the said Collector of Customs.
In the said protests, petitioner
claimed for the refund of the alleged
overpaid import duties and advance
sales taxes.
251
Whether 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.
NO. It is clear from the foregoing
provision of the Tariff and Customs Code
that 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. This is
precisely one of the reasons why the Court
of Appeals upheld the dismissal of the
case on the ground that 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 of Manila.
Accordingly, petitioner's contention that
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.
Customs duties" is 'the name given to
taxes on the importation and exportation
of commodities, the tariff or tax assessed
upon merchandise imported from, or
exported to, a foreign country.' Any claim
for refund of customs duties, therefore,
take the nature of tax exemptions that
must be construed strictissimi juris

6. Chevron Phils. Inc. v. Imported articles must be Petitioner Chevron Philippines, Inc. is
CTA, G.R. No. 178759, entered within a non- engaged in the business of importing,
August 11, 2008. extendible period of 30 distributing and marketing of
days from the date of petroleum products in the
discharge of the last Philippines.
package from a vessel.
Otherwise, the BOC will The importations subject to this case
deem the imported goods arrived and were covered by eight
impliedly abandoned under bills of lading which were unloaded
Section 1801. from the carrying vessels onto the
petitioner's oil tanks over a period of
three days from the date of their
arrival.
Prior to the effectivity of R.A. 8180 on
April 16, 1996, the rate of duty on
imported crude oil was 10%.
Three years later, then Finance
Secretary Edgardo Espiritu received a
letter dated June 10, 1999 from a
certain Alfonso A. Orioste
denouncing the deliberate
concealment, manipulation and
scheme employed by petitioner and
Pilipinas Shell in the importation of
252
against the claimants and liberally in favor
of the taxing authority. This power of
taxation being a high prerogative of
sovereignty, its relinquishment is never
presumed. Any reduction or diminution
thereof with respect to its mode or its rate
must be strictly construed, and the same
must be couched in clear and
unmistakable terms in order that it may be
applied.
1. Whether "entry" under Section1. YES. Under Section 1301 of the TCC,
1301 in relation to Section 1801imported articles must be entered within
of the TCC refers to the IED or a non-extendible period of 30 days from
the IEIRD. the date of discharge of the last package
from a vessel. Otherwise, the BOC will
2. Whether the importations can deem the imported goods impliedly
be considered abandoned under abandoned under Section 1801.
Section 1801.
The term "entry" in customs law has a
3. Whether the importations triple meaning. It means (1) the
could not be deemed impliedly documents filed at the customs house; (2)
abandoned because respondent the submission and acceptance of the
did not give it any notice. documents and (3) the procedure of
passing goods through the customs
house.
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. There is no dispute that the
"specified entry form" refers to the IEIRD.
Section 205 defines the precise moment
when the imported articles are deemed
"entered".
crude oil, thereby resulting in huge
losses of revenue for the government.
On August 1, 2000, petitioner
received from the District Collector of
Customs of the Port of Batangas a
demand letter requiring the
immediate settlement of the amount
of P73,535,830 representing the
difference between the 10% and 3%
tariff rates on the shipments.
Petitioner objected to the demand for
payment of customs duties using the
10% duty rate and reiterated its
position that the 3% tariff rate should
instead be applied. It likewise raised
the defense of prescription against
the assessment pursuant to Section
1603 of the Tariff and Customs Code
(TCC).
The IPD-CIIS issued a finding dated
February 2, 2001 that the import
entries were filed beyond the 30-day
non-extendible period prescribed
under Section 1301 of the TCC. They
concluded that the importations were
already considered abandoned in
favor of the government.
This prompted petitioner to file a
petition for review in the CTA First
Division asking for the reversal of the
decision of respondent.
The CTA En Banc held that it was the
filing of the IEIRDs that constituted
253
The filing of the IEIRDs has several
important purposes: to ascertain the value
of the imported articles, collect the correct
and final amount of customs duties and
avoid smuggling of goods into the
country. Petitioner's interpretation would
have an absurd implication: the 30-day
period applies only to the IED while no
deadline is specified for the submission of
the IEIRD.
Taxes are the lifeblood of the nation. Tariff
and customs duties are taxes constituting
a significant portion of the public 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.
2. YES. The law is clear and explicit. It
gives a non-extendible period of 30 days
for the importer to file the entry which we
have already ruled pertains to both the
IED and IEIRD. Thus, under Section 1801 in
relation to Section 1301, when the
importer fails to file the entry within the
said period, he "shall be deemed to have
renounced all his interests and property
rights" to the importations and these shall
be considered impliedly abandoned in
favor of the government.
entry under the TCC. Since these were
filed beyond the 30- day period, they
were not seasonably "entered" in
accordance with Section 1301 in
relation to Section 205 of the TCC.
Consequently, they were deemed
abandoned under Sections 1801 and
1802 of the TCC.
254
It was the law itself which considered the
importation abandoned when it failed to
file the IEIRDs within the allotted time.
Before it was amended, Section 1801 was
worded as follows:
Sec. 1801. Abandonment, Kinds and
Effect of. Abandonment is express
when it is made direct to the Collector
by the interested party in writing and
it is implied when, from the action or
omission of the interested party, an
intention to abandon can be clearly
inferred. The failure of any interested
party to file the import entry within
fifteen days or any extension thereof
from the discharge of the vessel or
aircraft, shall be implied
abandonment. An implied
abandonment shall not be effective
until the article is declared by the
Collector to have been abandoned
after notice thereof is given to the
interested party as in seizure cases.
xxx
After it was amended by R.A. 7651,
there was an indubitable shift in
language as to what could be
considered implied abandonment:
Section 1801. Abandonment, Kinds
and Effect of. xxx
xxx
b. When the owner, importer,
consignee or interested party after
due notice, fails to file an entry within
 thirty (30) days, which shall not be
extendible, from the date of discharge
of the last package from the vessel or
aircraft . . .

From the wording of the amendment, R.A.

7651 no longer requires that there be
other acts or omissions where an intent to
abandon can be inferred. It is enough that
the importer fails to file the required
import entries within the reglementary
period.

3. NO. Under the peculiar facts and

circumstances of this case, due notice was
not necessary.

Respondent discovered the fraud which

attended the importations and their
subsequent release from the BOC's
custody only in 1999. Obviously, the
situation here was not an ordinary case of
abandonment wherein the importer
merely decided not to claim its
importations. Fraud was established
against petitioner; it colluded with the
former District Collector. Because of this,
the scheme was concealed from
respondent.

Furthermore, notice to petitioner was

unnecessary because it was fully aware
that its shipments had in fact arrived in the
Port of Batangas. The oil shipments were
discharged from the carriers docked in its
private pier or wharf, into its shore tanks.
From then on, petitioner had actual
255

7. RP v. Unimex Micro- The Bureau of Customs is
Electronics B, G.R. No. liable to pay the value of the
166309-10, March 9, 2007. lost shipment, upon
payment of the necessary
custom dues, with no
interest. The payment shall
be taken from the sale of
good or properties seized
or forfeited by the Bureau
of Customs.
Respondent Unimex Micro-
Electronics GmBH (Unimex) shipped a
40-foot container and 171 cartons of
Atari game computer cartridges,
duplicators, expanders, remote
controllers, parts and accessories to
Handyware Phils., Inc. (Handyware).
After the shipment arrived in the Port
of Manila, the Bureau of Customs
(BOC) agents discovered that it did
not tally with the description
appearing on the cargo manifest. As a
result, BOC instituted seizure
proceedings against Handyware and
later issued a warrant of seizure and
detention against the shipment. The
Collector of Customs then issued a
default order against Handyware for
failing to appear in the seizure
proceedings. After an ex parte
hearing, the Collector of Customs
forfeited the goods in favor of the
government.
256
Whether the Republic of the
Philippines, represented by the
BOC Commissioner, is liable to
pay respondent the value of the
subject shipment.
physical possession of its oil importations.
It was thus incumbent upon it to know its
obligation to le the IEIRD within the 30-
day period prescribed by law.
The purpose of posting an "urgent notice
to file entry" pursuant to Section B.2.1 of
CMO 15-94 is only to notify the importer
of the "arrival of its shipment" and the
details of said shipment. Since it already
had knowledge of such, notice was
superfluous.
YES. The circumstances of this case
warrant its exclusion from the purview of
the state immunity doctrine.
The Court cannot turn a blind eye to
BOC's ineptitude and gross negligence in
the safekeeping of respondent's goods.
We are not likewise unaware of its
lackadaisical attitude in failing to provide
a cogent explanation on the goods'
disappearance, considering that they
were in its custody and that they were in
fact the subject of litigation. The situation
does not allow us to reject respondent's
claim on the mere invocation of the
doctrine of state immunity. Succinctly, 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.
This Court, as the staunch guardian of the
people's rights and welfare, cannot
Subsequently, respondent Unimex
filed a motion to intervene in the
seizure proceedings. The Collector of
Customs granted the motion but later
on declared the default order against
Handyware as final and executory,
thus affirming the goods' forfeiture in
favor of the government.
Respondent filed a petition for review
against petitioner Commissioner of
Customs (BOC Commissioner) in the
CTA. The CTA reversed the forfeiture
decree and ordered the release of the
subject shipment to respondent
subject to the payment of customs
duties. The CTA decision became final
and executory on July 20, 1992.
However, respondent's counsel failed
to secure a writ of execution to
enforce the CTA decision. Instead, it
filed separate claims for damages
against Don Tim Shipping
Corporation and Evergreen Marine
Corporation but both cases were
dismissed.
Respondent filed in the CTA a petition
for the revival of its June 15, 1992
decision. It prayed for the immediate
release by BOC of its shipment or, in
the alternative, payment of the
shipment's value plus damages.
During the ex parte presentation of
respondent's evidence, BOC informed
the court that the subject shipment
could no longer be found at its
257
sanction an injustice so patent in its face,
and allow itself to be an instrument in the
perpetration thereof. Over time, courts
have recognized with almost pedantic
adherence that what is inconvenient and
contrary to reason is not allowed in law.
31 Justice and equity now demand that
the State's cloak of invincibility against
suit and liability be shredded.
Accordingly, we agree with the lower
courts' directive that, upon payment of
the necessary customs duties by
respondent, petitioner's payment shall be
taken from the sale or sales of goods or
properties seized or forfeited by the
Bureau of Customs.
However, no interest may be imposed.
Interest may be paid only either as
compensation for the use of money
(monetary interest) or as damages
(compensatory interest). The present case
does not fall within the first situation.
Neither can it be considered as one
involving interest based on damages
under the second situation. More
importantly, interest is not chargeable
against petitioner except when it has
expressly stipulated to pay it or when
interest is allowed by the legislature or in
eminent domain cases where damages
sustained by the owner take the form of
interest at the legal rate. Consequently,
the CA's imposition of the 12% p.a. legal
interest upon the finality of the decision
of this case until the value of the goods is
warehouses. The CTA declared that its fully paid (as forbearance of credit) is
June 15, 1992 decision could no likewise bereft of any legal anchor.
longer be executed due to the loss of
respondent's shipment so it ordered
the BOC Commissioner to pay
respondent the commercial value of
the goods based on the prevailing
exchange rate at the time of their
importation.

The BOC Commissioner and the

respondent then filed separate
petitions in the CA. The CA held that
the BOC Commissioner was liable for
the value of the subject shipment as
the same was lost while in its custody.
It also ruled that the CTA erred in
using as basis the prevailing peso-
dollar exchange rate at the time of the
importation instead of the prevailing
rate at the time of actual payment
pursuant to RA 4100. It added that
respondent was also entitled to legal
interest.

The BOC Commissioner and

respondent again filed their
respective MRs of the above decision.
Respondent's MR sought payment of
the goods' value in euros, not in US
dollars. It also demanded that the 6%
legal interest be reckoned from the
date of its judicial demand. The CA
denied the BOC Commissioner's MR
and granted respondent's motion.

258
 Petitioner, through BOC
Commissioner, then elevated the case
to the SC.

8. Rieta v. People of the In order that a person may A cargo truck suspected to be Whether Rieta is guilty of YES. The fact that 305 cases of blue-seal
Philippines, G.R. No. be deemed guilty of transporting smuggled goods was smuggling the blue-seal cigarettes were found in the cargo truck,
147817, August 12, 2004. smuggling or illegal intercepted. When the cargo truck cigarettes. in which petitioner and his co-accused
importation, three was searched, 305 cases of blue seal were riding, was properly established.
requisites must concur: (1) or untaxed cigarettes were found Persons found to be in possession of
that the merchandise must inside. The cargo truck driver was able smuggled items are presumed to be
have been fraudulently or to escape while the other passengers engaged in smuggling, pursuant to the
knowingly imported or riders of said truck were last paragraph of Section 3601 of the
contrary to law; (2) that the apprehended: all were police officers Tariff and Customs Code.
defendant, if he is not the including petitioner Pat. Felicisimo
importer himself, must have Rieta, and one civilian. All cases of The involvement or participation he and
received, concealed, blue seal cigarettes were turned over his co-accused had in the smuggling of
bought, sold or in any to the BOC. the goods was confirmed by their lack of
manner facilitated the proper and reasonable justification for the
transportation, fact that they had been found inside the
concealment or sale of the cargo truck, seated in front, when it was
merchandise; and (3) that intercepted by the authorities. The
the defendant must be evidence presented by the prosecution
shown to have knowledge established his work of guarding and
that the merchandise had escorting the contraband to facilitate its
been illegally imported. transportation from the Port Area to
Malabon, an act punishable under Section
If the defendant, however, 3601 of the Tariff and Customs Code.
is shown to have had
possession of the illegally
imported merchandise,
without satisfactory
explanation, such
possession shall be deemed
sufficient to authorize
conviction.

259
9. El Greco Ship Manning In any seizure proceedings,,
and Management Corp. v. in case the BOC
Commissioner of Customs, Commissioner fails to
G.R. No. 
177188, decide on the automatic
December 4, 2008. appeal of the Collector’s
decision within 30 days
from receipt of the records
thereof, the case is deemed
automatically appealed to
the Secretary of Finance.
A Warrant of Seizure and Detention 1. Whether the order of 1. YES. There is no question that M/V
was issued against M/V Criston on the forfeiture of M/V Neptune Neptune Breeze, then known as M/V
ground that it left the Port of ManilaBreeze is valid. Criston, was carrying 35,000 bags of
without the necessary clearance from imported rice without the necessary
the Philippine Coast Guard. It was 2. Whether the order of the papers showing that they were entered
carrying 35,000 bags of imported rice.Manila District Collector finding lawfully through a Philippine port after the
no probable cause that M/V payment of appropriate taxes and duties
While it was berthing in the Port of Neptune Breeze is the same as thereon. This gives rise to the
Tabaco under the custody of the BOC, M/V Criston has already become presumption that such importation was
Albay was hit by Typhoon Manang, final and executory. illegal.
necessitating the transfer of M/V
Criston to another port. However, it Consequently, the rice subject of the
failed to return. importation, as well as the vessel M/V
Neptune Breeze used in importation are
Later on, it was found assuming the subject to forfeiture.
name M/V Neptune Breeze. Thus, a
Warrant of Seizure and Detention was Under Section 2530 of the Tariff and
also filed against Neptune Breeze. It Customs Code, any vessel used unlawfully
was insisted that the two ships were in the importation or exportation of
different, so the Manila District articles or in conveying and/or
Collector issued an order quashing transporting contraband or smuggled
the Warrant of Seizure on March 11, articles in commercial quantities into or
2002. from any Philippine port or place is
subject to forfeiture.
However, it was later found that they
were indeed one and the same. Thus, The penalty of forfeiture is imposed on
the CTA Second Division sustained any vessel engaged in smuggling,
the forfeiture of M/V Neptune Breeze provided that the following conditions are
on October 17, 2005. present:
(a) The vessel is "used unlawfully in
the importation or exportation of
articles into or from" the Philippines;
(b) The articles are imported to or
exported from "any Philippine port
or place, except a port of entry"; or
260

10. Pilipinas Shell v.
Republic of the Philippines,
G.R. No. 161953, March 6,
2008.
(c) If the vessel has a capacity of less
than 30 tons and is "used in the
importation of articles into any
Philippine port or place other than a
port of the Sulu Sea, where
importation in such vessel may be
authorized by the Commissioner,
with the approval of the department
head.”
2. NO. Section 2313 of the Tariff and
Customs Code provides that in case the
BOC Commissioner fails to decide on the
automatic appeal of the Collector’s
decision within 30 days from receipt of the
records thereof, the case is deemed
automatically appealed to the Secretary of
Finance. Hence, the order did not become
final and executory.
An assessment or Secretary of the DOF informed Whether the filing of the YES. Assessments inform taxpayers of
liquidation by the BOC petitioner that its Tax Debit Memos collection case in the RTC was their tax liabilities. Under the TCCP, the
attains finality and (TDMs) and Tax Credit Certificates proper assessment is in the form of a liquidation
conclusiveness one year (TCCs) were fraudulently issued and made on the face of the import entry
from the date of final transferred and had to be cancelled. return and approved by the Collector of
payment of duties except Petitioner was asked to immediately Customs. Liquidation is the final
when: (1) there was fraud; pay the BOC and the BIR the value of computation and ascertainment by the
(2) there is a pending the canceled TCCs as well as the Collector of Customs of the duties due on
protest; or (3) the related penalties, surcharges and imported merchandise based on official
liquidation of import entry interests. reports as to the quantity, character and
was merely tentative. value thereof, and the Collector of
Petitioner assailed the action of the Customs' own finding as to the applicable
DOF, asserting that there was no legal rate of duty. A liquidation is considered to
and factual basis to invalidate the have been made when the entry is
TCCs and that was an assignee in officially stamped "liquidated".
good faith so the TCCs were authentic
261
 and genuine as far as it was An assessment or liquidation by the BOC
concerned. attains finality and conclusiveness one
year from the date of final payment of
Despite petitioner’s objections, the duties except when: (1) there was fraud;
BOC demanded the amount of (2) there is a pending protest; or (3) the
P209,129,141. Thus, petitioner filed a liquidation of import entry was merely
formal protest. However, the BOC did tentative.
not act on this protest. Consequently,
petitioner filed a petition for review in None of the foregoing exceptions is
the CTA. present in this case. There was no fraud as
petitioner claimed to be in good faith.
Meanwhile, respondent filed a Respondent does not dispute this.
complaint for collection in the RTC. It Records show that petitioner paid those
alleged that the TCCs were purchased duties without protest using its TCCs.
from Filipino Way Industries Finally, the liquidation was not tentative as
amounting to P10,088,912 were the assessment had long become final
spurious and were used by petitioner and incontestable.
to pay customs duties and taxes on its
importations in 1997. Thus, in view of When respondent released petitioner's
the invalidation, petitioner still owed goods, its (respondent's) lien over the
respondent the amount of imported goods was extinguished.
P10,088,912 in unpaid customs duties Consequently, respondent could only
and taxes. enforce the payment of petitioner's
import duties in full by filing a case for
Petitioner moved to dismiss the collection against petitioner.
collection case saying that the RTC
had no jurisdiction as it was
prematurely filed in view of the
pending petition for review in the
CTA.

11. Southern Cross Cement There must be a positive Republic Act No. 8800 known as the Whether the DTI Secretary was YES. The DTI Secretary was barred from
Corp. v. Cement final determination by the Safeguard Measures Act ("SMA"), was barred from imposing a general imposing a general safeguard measure
Manufacturers Association Tariff Commission that a one of the laws enacted by Congress safeguard measure absent a absent a positive final determination
of the Phils., et al., 
G.R. product is being imported after the Philippines ratified the positive final determination rendered by the Tariff Commission.
No. 158540, August 3, into the country in General Agreement on Tariff and rendered by the Tariff
2005. increased quantities Trade (GATT) and the World Trade Commission.
262
(whether absolute or Organization (WTO) Agreement. The
relative to domestic SMA provides the structure and
production), for it to be a mechanics for the imposition of
substantial cause of serious emergency measures, including
injury or threat to the tariffs, to protect domestic industries
domestic industry. and producers from increased
imports which inflict or could inflict
serious injury on them.
Respondent Philcemcor, an
association of at least eighteen (18)
domestic cement manufacturers filed
with the DTI a petition seeking the
imposition of safeguard measures on
gray Portland cement in accordance
with the SMA.
After the DTI issued a provisional
safeguard measure, the application
was referred to the Tariff Commission
for a formal investigation in order to
determine whether or not to impose
a definitive safeguard measure on
imports of gray Portland cement.
The Report resulted with a negative
finding of the Tariff Commission.
The DTI Secretary then promulgated
a Decision wherein he expressed the
DTI’s disagreement with the
conclusions of the Tariff Commission,
but at the same time, ultimately
denying Philcemcor’s application for
safeguard measures on the ground
that the he was bound to do so in
263
The entire SMA provides for a limited
framework under which the President,
through the DTI and Agriculture
Secretaries, may impose safeguard
measures in the form of tariffs and similar
imposts. The limitation most relevant to
this case is contained in Section 5 of the
SMA, captioned "Conditions for the
Application of General Safeguard
Measures," and stating:
“The Secretary shall apply a general
safeguard measure upon a positive
final determination of the [Tariff]
Commission that a product is being
imported into the country in
increased quantities, whether
absolute or relative to the domestic
production, as to be a substantial
cause of serious injury or threat
thereof to the domestic industry;
however, in the case of non-
agricultural products, the Secretary
shall first establish that the
application of such safeguard
measures will be in the public
interest.”
Certainly, no provision in the SMA
expressly authorizes the DTI Secretary to
impose a general safeguard measure
despite the absence of a positive final
recommendation of the Tariff
Commission. On the other hand, Section 5
expressly states that the DTI Secretary
"shall apply a general safeguard measure
upon a positive final determination of the
light of the Tariff Commission’s
negative findings.
Philcemcor challenged this Decision
of the DTI Secretary by filing with the
Court of Appeals a Petition for
Certiorari, Prohibition and Mandamus
seeking to set aside the DTI Decision,
as well as the Tariff Commission’s
Report.
The appellate court refused to annul
the findings of the Tariff Commission
however it also held that the DTI
Secretary was not bound by the
factual findings of the Tariff
Commission since such findings are
merely recommendatory and they fall
within the ambit of the Secretary’s
discretionary review.
Southern Cross filed the present
petition, arguing that the Court of
Appeals has no jurisdiction over
Philcemcor’s petition, as the proper
remedy is a petition for review with
the CTA conformably with the SMA,
and; that the factual findings of the
Tariff Commission on the existence or
non-existence of conditions
warranting the imposition of general
safeguard measures are binding upon
the DTI Secretary.
[Tariff] Commission." The causal
connection in Section 5 between the
imposition by the DTI Secretary of the
general safeguard measure and the
positive final determination of the Tariff
Commission is patent, and even
respondents do not dispute such
connection.
Moreover, nothing in Rule 13.2 of the
Implementing Rules, even though
captioned "Final Determination by the
Secretary," authorizes the DTI Secretary to
impose a general safeguard measure in
the absence of a positive final
determination by the Tariff Commission. If
there is indeed a provision in the
Implementing Rules that allows the DTI
Secretary to impose a general safeguard
measure even without the positive final
determination by the Tariff Commission,
said rule is void as it cannot supplant the
express language of the legislature.

In light of the appellate court’s

Decision, DTI Secretary issued a
determination that, contrary to the
264
findings of the Tariff Commission, the
local cement industry had suffered
serious injury as a result of the import
surges. Accordingly, he imposed a
definitive safeguard measure on the
importation of gray Portland cement,
in the form of a definitive safeguard
duty in the amount of ₱20.60/40 kg.
bag for three years on imported gray
Portland Cement.

Southern Cross filed a TRO

application in SC to seeking to enjoin
the DTI Secretary from enforcing his
Decision. It also filed with the CTA a
Petition for Review.

The SC’s 2nd division promulgated a

unanimous Decision granting
Southern Cross’s Petition.

Upon motion of respondents, the

Court En Banc resolved to accept the
petition and resolve the Motions for
Reconsideration.

265
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