TAXATION LAW REVIEW
Dean Lily K. Gruba
Case Matrix from Guides and Notes on General Principles of Taxation
CASE TITLE & QUICK FACTS
Jurisdiction, Power, and Functions of the Commissioner of Internal Revenue
Power to Assess
Meralco Securities Corp. v. Savellano (1982)
Maniago submitted (CIR) a confidential denunciation
against the Meralco Securities Corporation for tax
evasion. Maniago claimed that Meralco Securities paid
income tax only on 25% of the dividends it received from
Meralco, thereby shortchanging the government's
income tax due from 75% of said dividends.
The CIR investigated and held that no deficiency
corporate income tax was due from Meralco Securities
for the dividends received since under the law then
prevailing provides that “in case of dividends received
by a resident corporation...only 25% shall be returnable
for the purposes of the tax imposed under this section”,
and so denied Maniago’s allegations.
Maniago filed a petition for mandamus in the CFI of
Manila against the CIR and Meralco Securities to
compel the CIR to impose the alleged deficiency tax
assessment on Meralco Securities and for the CIR to
award to him the informer’s award.
The respondent judge granted the writ of mandamus
and ordered the CIR to assess and collect from Meralco
Securities the alleged deficiency corporate income tax
and to pay Maniago an informer’s reward.
Power to Interpret Tax Laws
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ISSUE AND DOCTRINE/S NOTES
Issue: W/N mandamus was proper to compel the CIR to collect deficiency
corporate income tax on Meralco securities? NO.
Doctrine: Mandamus may not lie against the Commissioner, who is
charged with the administration of revenue laws, to compel him to impose
a tax assessment not found by him to be due or proper for that would be
tantamount to a usurpation of executive functions.
Application: Mandamus only lies to enforce the performance of a
ministerial act or duty and not to control the performance of a discretionary
power. Purely administrative and discretionary functions may not be
interfered with by the courts. Discretion means the power or right conferred
upon the office by law of acting officially under certain circumstances
according to the dictates of his own judgment and conscience and not
controlled by the judgment or conscience of others.
Thus, after the Commissioner who is specifically charged by law with the
task of enforcing and implementing the tax laws and the collection of taxes
had after a mature and thorough study rendered his decision or ruling that
no tax is due or collectible, and his decision is sustained by the Secretary,
now Minister of Finance (whose act is that of the President unless
reprobated), such decision or ruling is a valid exercise of discretion in the
performance of official duty and cannot be controlled much less reversed
by mandamus. A contrary view, whereby any stranger or informer would be
allowed to usurp and control the official functions of the Commissioner of
Internal Revenue would create disorder and confusion, if not chaos and total
disruption of the operations of the government.
Thus, since no taxes are to be collected, no informer's reward is due to
Maniego. Informer's reward is contingent upon the payment and collection
of unpaid or deficiency taxes.
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 Asia International Auctioneers v. Parayno (2007)
Asia International Auctioneers, Inc. (AIAI) and Subic Bay
Motors Association (SBMC) are engaged in the
importation of mainly secondhand motor vehicles and
heavy transportation equipment which they sold through
public auction. AIA filed a complaint praying for the
nullification of Revenue Memorandum Circular No. 31-
2003 RMC 31-2003) setting the “Uniform Guidelines on
the Taxation of Imported Vehicles through the Subic
Free Port Zone and Other Freeport Zones that are Sold
at Public Auction. The said RMC was challenged to be
unconstitutional and an ultra vires act committed by CIR
Guillermo Parayno, Jr. An amended complaint was sent
for the nullification of other Revenue Memorandum
Circulars and Revenue Regulations on the tax
incentives enjoyed by businesses or enterprises within
special economic zones.
AIA further contends that the jurisdiction of the case
pertains to the regular courts as it is an action to declare
as unconstitutional, void, and against 7227 the RMCs
issued by the CIR. They are not challenging the rate,
structure or figures of the imposed taxes, rather they
challenge the authority of the CIR to impose and collect
said taxes.
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Issue: Does the CIR have the power to issue administrative rulings by virtue
of their power to interpret tax laws? YES.
Doctrine: Revenue issuances are administrative rulings which are issued
from time to time by the CIR; by virtue of its power to interpret tax laws, the
administrative rulings by the CIR are valid. CIR has the power to issue
administrative rules as Section 4 of the 1997 Tax Code provides that:
The power to interpret the provisions of the Code and other tax
laws shall be under the exclusive and original jurisdiction of the
Commissioner, subject to the review of the Secretary of Finance.
The power to decide on matters arising under the Code or other
laws or portions thereof administered by the BIR is vested in the
Commissioner, subject to the exclusive appellate jurisdiction of the
CTA.
Application: The assailed revenue regulations and revenue memorandum
circulars are rulings or opinions of the CIR on the tax treatment of motor
vehicles sold at public auction within the SSEZ with regard to the
implementation of Section 12 of RA 7227 which provides that the
exportation or removal of goods from the territory SSEZ to other parts of the
Philippine territory shall be subject to customs duties and taxes under the
Customs and Tariff Code and other relevant laws of the Philippines.
The said regulations and circulars were validly issued pursuant to the CIR’s
power to interpret tax laws and to decide tax cases based on Section 4 of
the 1997 Tax Code. However, petitioners point out that the CA based its
decision on Section 7 of R.A. No. 1125 that the CTA "shall exercise
exclusive appellate jurisdiction to review by appeal' "decisions of the CIR.”
They argue that in the instant case, there is no decision of the respondent
CIR on any disputed assessment to speak of as what is being questioned
is purely the authority of the CIR to impose and collect value-added and
excise taxes.
Petitioners' failure to ask the CIR for a reconsideration of the assailed
revenue regulations and RMCs is another reason why the instant case
should be dismissed. It is settled that the premature invocation of the
court's intervention is fatal to one's cause of action. If a remedy within the
administrative machinery can still be resorted to by giving the
administrative officer every opportunity to decide on a matter that comes
within his jurisdiction, then such remedy must first be exhausted before the
court's power of judicial review can be sought. The party with an
administrative remedy must not only initiate the prescribed administrative
procedure to obtain relief but also pursue it to its appropriate conclusion
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CIR v. Fortune Tobacco Corp. (2013)
Fortune is a manufacturer and producer of some
cigarette brands. Before 1997, excise taxes payable by
cigarette manufacturers were in the form of ad valorem
taxes pursuant to the 1977 Tax Code. However,
beginning 1997, the new tax code took effect and a shift
from ad valorem to specific taxes was made, resulting to
an increase of 12%.
To implement the increase, the CIR pursuant to its rule
making powers, issued a revenue regulation (RR 17-99)
saying that the new rates of Specific Tax to be levied,
assessed and collected are specified in the Regulations
shall be increased by 12%, provided, that the new
specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines
and fermented liquor will not be lower than the Excise
Tax that is actually being paid prior to January 1, 2000.
Fortune filed an administrative claim for tax refund with
the CIR for erroneously collecting taxes. Specifically,
fortune assails the provision in RR 17-99 that requires
the payment of the excise tax “actually being paid prior
to Jan 1, 2000”, if this amount is higher than the new
specific tax rate. It claimed that by including such
provision, the CIR went beyond the language of the law
and usurped Congress’ power.
Non-Retroactivity of Rulings; Exceptions
BIR v. Filinvest Development Corp. (2011)
Filinvest Dev't Corp (FDC) extended advances in favour
of its affiliates, namely Filinvest Association Inc, Filinvest
Land Inc, Davao Sugar Central Corp, Filinvest capital
Inc. These advances were evidenced by instructional
letters as well as cash and journal vouchers, amounting
to around 2.5B in 1996 and 3.3B in 1997. BIR sent
assessments to FDC for documentary stamp taxes and
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before seeking judicial intervention in order to give the administrative
agency an opportunity to decide the matter itself correctly and prevent
unnecessary and premature resort to the court.
Issue: Is the administrative issuance or RR 17-99 valid? NO.
Doctrine: The administrative issuances of the CIR must not go beyond the
wording of the implementing law. Otherwise, it is void.
Application: The CIR effectively imposes a tax which is the higher amount
between the ad valorem tax being paid at the end of the three year transition
period and the specific tax, as increased by 12%. This situation is not
supported by the plain wording of the tax code.
The Supreme Court held that the administrative issuance was invalid for not
being compliant with the 1997 Tax Code, as amended. Section 1 of RR 17-
99 clearly went beyond the terms of the law it was supposed to implement,
and therefore entitles Fortune Tobacco to claim a refund of the overpaid
excise taxes.
Issue: WON the “office memos” amount to a loan that is subject to DST. Exceptions to the rule on
YES. non-retroactivity of
rulings:
Doctrine: The effect of every BIR Ruling is valid only if the facts claimed by
the taxpayers are correct. Hence, rulings are applicable only to the set of 1. Where the taxpayer
facts as presented. deliberately misstates or
omits material facts from
Application: his return or any
CA erred in utilizing BIR Ruling No. 116-98 which could have only been document required of him
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 deficiency income for 1996 and 1997.
FDC filed a petition for cancellation and annulment of
these assessments - alleging, among others, that the
instructional letters as well as the cash and journal
vouchers evidencing the advances are not Promissory
Notes, hence, not subject to documentary stamp taxes
(DST).
CIR justified its imposition of DST on the strength of Sec
180 of the NIRC and Revenue Regulations No. 9-94
which provide that loan transactions are subject to said
tax irrespective of w/n they are evidenced by a formal
agreement or a mere office memo.
CA, using BIR Ruling No. 116-98, ruled that the
instructional letters or office memos are not deemed
loan agreements subject to DST under Sec 180 of the
NIRC.
ABS-CBN Broadcasting Corp. v. CTA
Petitioner was engaged in the business of telecasting
local and foreign films acquired from foreign
corporations not engaged in business within the
Philippine. In order to broadcast the foreign films,
petitioner had to pay rentals after withholding income
tax.
The income tax with respect to non-resident
corporations was governed Sec. 24(b) of the NIRC. In
the implementation of the said provision, the CIR issued
General Circular V334. Pursuant to such circular,
petitioner withheld and turned over to the BIR the
amount of 30% of 1/2 of the film rentals paid by petitioner
to the foreign corporations.
RA 5431 was enacted which amended Sec. 24(b)
increasing the tax rate from 30% to 35%. Because of
that, the CIR issued Revenue Memorandum Circular
No. 4-71 revoking General Circular V334. Pursuant to
the new circular, CIR issued against petitioner an
assessment and demand requiring petitioner to pay their
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invoked by ASB Development Corporation, the taxpayer in that ruling, who by the BIR;
is not in any way a party to this case. In said ruling, CIR opined that 2. Where the facts
documents like the inter-office memo covering the advances granted by subsequently gathered by
FDC are NOT subject to documentary stamp tax (DST), being for the BIR are materially
"accounting purposes only." different from the facts on
which the ruling was
In its appeal before the CA, the CIR argued that the ruling used by the CA based; or
(BIR Ruling No. 116-98) was later modified by a subsequent ruling, BIR 3. Where the taxpayer
Ruling No. 108- 99, which said that inter-office memos evidencing landings acted in bad faith.
or borrowings extended by a corporation to its affiliation are like Promissory
Notes, hence, subject to DST.
CTA brushed aside the said argument, invoking Sec. 246 of the NIRC which
provides the settled principle that rulings, circulars, rules, and regulations
promulgated by the BIR have no retroactive application if to apply them
would be prejudicial to taxpayers. HOWEVER, this rule admits exceptions
when (among 2 others) a) the facts subsequently gathered by the BIR are
materially different from the facts on which the ruling is based. Not being
the taxpayer (in the first instance) who sought a ruling from the CIR, FDC
cannot invoke the foregoing principle on non-retroactivity of BIR rulings.
Issue: WON General Circular 4-71 (the later circular) applies retroactively.
NO.
Doctrine: Generally, the NIRC has no retroactive application except when:
1. where the taxpayer deliberately misstates or omits material facts
from his return or in any document required of him by the Bureau of
Internal Revenue;
2. where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling
is based, or
3. where the taxpayer acted in bad faith.
Application:
The prejudice to petitioner of the retroactive application of Memorandum
Circular No. 4-71 is beyond question. It was issued only in 1971, or three
years after 1968, the last year that petitioner had withheld taxes under
General Circular No. V-334. The assessment and demand on petitioner to
pay deficiency withholding income tax was also made three years after 1968
for a period of time commencing in 1965. Petitioner was no longer in a
position to withhold taxes due from foreign corporations because it had
already remitted all film rentals and no longer had any control over them
when the new Circular was issued. And in so far as the enumerated
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 deficiency tax and film royalties for the years during
when the older circular was still in effect. Petitioner filed
for reconsideration and withdrawal of assessment.
However, without acting on such motion filed by
petitioner, respondent issued a warrant of distraint and
levy on petitioner’s properties.
Petitioner went to the CTA for relief. However, the latter
affirmed the BIRs assessment and dismissed petitioners
appeal. Hence, this action.
CIR v. Burroughs Ltd. (1986)
Burroughs Limited is foreign corporation engaged in
trade through a branch office in Makati City. It applied
with the Central Bank for authority to remit to its parent
company abroad their branch profit of around Php 7.6M.
It paid 15% branch profit remittance tax (equal to Php
1.1M) and remitted Php 6.5. It claimed that, based from
a 1980 BIR ruling that “tax base upon which the 15%
branch profit remittance tax...is the profit actually
remitted abroad and not on the total branch profits out
of which the remittance is to be made”, profit remittance
tax should have been computed on the basis of the
amount actually remitted (Php 6.5M) and not on the
amount before profit remittance tax (Php 7.6M). It filed a
written claim for refund (Php 172k) for the overpaid
branch profit remittance tax.
The CIR conceded that Burroughs Ltd was entitled to
the tax credit in accordance with a BIR ruling which
interpreted Sec 24(b)(2)(ii) of NIRC that that is the profit
actually remitted abroad. But the CIR reversed itself,
arguing that a subsequent Memorandum had revoked
and/or repealed the BIR ruling.
CIR v. CA, 267 SCRA 557
Private respondent Alhambra Industries, Inc is a
domestic corporation engaged in the manufacture and
sale of cigar and cigarette products. On 7 May 1991
private respondent received a letter dated 26 April 1991
from the Commissioner of Internal Revenue assessing
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exceptions are concerned, admittedly, petitioner does not fall under any of
them.
Issue: WON Burroughs Limited is legally entitled to a refund or tax credit.
YES.
Doctrine: Generally, the NIRC has no retroactive application except when:
1. where the taxpayer deliberately misstates or omits material facts
from his return or in any document required of him by the Bureau of
Internal Revenue;
2. where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling
is based, or
3. where the taxpayer acted in bad faith.
Application: The Court held that the BIR ruling still prevails because
Burroughs Ltd paid the tax on March 14, 1979 and the Memorandum cannot
be given retroactive effect in accordance with Sec. 327 of NIRC.
What is applicable in this case is still the Revenue Ruling of January 21,
1980 because private respondent Burroughs Limited paid the branch profit
remittance tax in question on March 14, 1979. Memorandum Circular No.
8-82 dated March 17, 1982 cannot be given retroactive effect in the light of
NIRC’s mandate that no retroactive application where to apply them would
be prejudicial to the taxpayer.
Issue: WON BIR Ruling 017-91 should be enacted retroactively, thus
making Alhambra liable for deficiency excise taxes. NO.
Doctrine: Generally, the NIRC has no retroactive application except when:
1. where the taxpayer deliberately misstates or omits material facts
from his return or in any document required of him by the Bureau of
Internal Revenue;
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 its deficiency Ad Valorem Tax (AVT) in the total amount
of P488, 396.62.
Private respondent thru counsel filed a protest against
the proposed assessment with a request that the same
be withdrawn and cancelled. The subject deficiency
excise tax assessment resulted from private
respondent's use of the computation mandated by BIR
Ruling 473-88 dated 4 October 1988 as basis for
computing the fifteen percent (15%) ad valorem tax due
on its removals of cigarettes from 2 November 1990 to
22 January 1991.
BIR Circular 473-88 was issued by Deputy
Commissioner Eufracio D. Santos to Insular-Yebana
Tobacco Corporation allowing the latter to exclude the
value-added tax (VAT) in the determination of the gross
selling price for purposes of computing the ad valorem
tax of its cigar and cigarette products in accordance with
Sec. 127 of the Tax Code.
Thereafter, on 11 February 1991, petitioner issued BIR
Ruling 017-91 to Insular-Yebana Tobacco Corporation
revoking BIR Ruling 473-88 for being violative of Sec.
142 of the Tax Code. It included back the VAT to the
gross selling price in determining the tax base for
computing the ad valorem tax on cigarettes.
CIR v. Benguet Corp., 495 SCRA 61
Benguet Corporation is a domestic corporation engaged
in the exploration, development, operation of mineral
resources, including the sale or marketing thereof to
various entities. It is a VAT registered entity. The
relevant law in effect at the time was Sec. 99 of the
NIRC, as amended by E.O. 273 that stated that “any
person who, in the course of trade or business, sells,
barters or exchanges goods, renders services, or
engages in similar transactions and any person who
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2. where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling
is based, or
3. where the taxpayer acted in bad faith.
Application:
The deficiency tax assessment issued by petitioner against private
respondent is without legal basis because of the prohibition against the
retroactive application of the revocation of BIR rulings in the absence of bad
faith on the part of private respondent.
Private respondent did not question the correctness of the above BIR ruling.
In fact, upon knowledge of the effectivity of BIR Ruling No. 017-91, private
respondent immediately implemented the method of computation mandated
therein by restoring the VAT in computing the tax base for purposes of the
15% ad valorem tax. However, well-entrenched is the rule that rulings and
circulars, rules and regulations promulgated by the Commissioner of
Internal Revenue would have no retroactive application if to so apply them
would be prejudicial to the taxpayers. Without doubt, private respondent
would be prejudiced by the retroactive application of the revocation as it
would be assessed deficiency excise tax.
What is left to be resolved is petitioner's claim that private respondent falls
under the third exception in Sec. 246, i.e., that the taxpayer has acted in
bad faith. Bad faith imports a dishonest purpose or some moral obliquity
and conscious doing of wrong. It partakes of the nature of fraud; a breach
of a known duty through some motive of interest or ill will. 11 We find no
convincing evidence that private respondent's implementation of the
computation mandated by BIR Ruling 473-88 was ill-motivated or attended
with a dishonest purpose. To the contrary, as a sign of good faith, private
respondent immediately reverted to the computation mandated by BIR
Ruling 017-91 upon knowledge of its issuance on 11 February 1991.
Issue: WON VAT Ruling No. 008-92 can be applied retroactively. NO. Generally, the NIRC has
no retroactive application
Doctrine: Generally, the NIRC has no retroactive application except when: except when:
1. where the taxpayer deliberately misstates or omits material facts 1. where the
from his return or in any document required of him by the Bureau of taxpayer
Internal Revenue; deliberately
2. where the facts subsequently gathered by the Bureau of Internal misstates or
Revenue are materially different from the facts on which the ruling omits material
is based, or facts from his
3. where the taxpayer acted in bad faith. return or in any
document
6
 imports goods is liable for output VAT at rates of either Application: At the time the subject transactions were consummated, the required of him by
10% or 0% depending on the classification of the prevailing BIR regulations relied upon by Benguet ordained that gold sales the Bureau of
transaction. In January 1988, Benguet applied and was to the Central bank are zero-rated. Benguet should not be faulted for relying Internal Revenue;
granted by the BIR zero-rated status on its sale of gold on the BIR’s interpretation of the said laws and regulations. It is a well 2. where the facts
to Central Bank. entrenched rule that circulars, rules and regulations, promulgated by the subsequently
CIR would have no retroactive application if to so apply them would be gathered by the
On August 28, 1988, VAT Ruling No. 3788-88 was prejudicial to taxpayers. But, even if prejudicial to a taxpayer, retroactive Bureau of Internal
issued, declaring that the sale of gold to Central bank is application is still allowed where: Revenue are
considered as export sale subject to zero-rate pursuant a. a taxpayer deliberately misstates or omits material facts from his materially
to Section 100 of the Tax Code. It also relied on VAT return or any document required by the BIR different from the
Ruling RMC No. 59-88 issued on December 14, 1988, b. where subsequent facts gathered by the BIR are materially different facts on which the
which likewise declared the sale of gold to Central Bank from which ruling is based ruling is based, or
subject to zero-rated VAT. c. where the taxpayer acted in bad faith 3. where the
taxpayer acted in
Relying on these issuances, Benguet Corporation sold None of the above-mentioned situations that would warrant the application bad faith.
gold to the Central Bank during the period of January 1, of retroactivity were present in the case.
1988 to July 31, 1989. It also entered into transactions
that resulted in input VAT in relation to the subject sales If we were to apply the VAT ruling retroactively, how would Benguet
of gold. Corporation have been prejudiced?

Benguet Corporation then filed for applications for tax
refunds or credit corresponding to the input VAT.
However, such request was not granted due to VAT
Ruling No. 008-92 issued on January 23, 1992 which
provides that sales of gold to the Central Bank shall not
be considered as export sales and thus, shall be subject
to 10% VAT. This VAT ruling superseded all inconsistent
BIR issuances.
Benguet would suffer economic prejudice when its consummated sales of
gold to the Central Bank were taken out of the zero-rated category. The
change in VAT rating would result in the twin loss of its exemption from
payment of output VAT and its opportunity to recover input VAT, and at the
same time, be subjected to the 10% VAT.

CIR v. Philippine Health Care Providers (2007) Issue: WON VAT Ruling No. 231-88 will have retroactive effect. NO. Generally, the NIRC has
no retroactive application
Philippine Healthcare Providers was exempted from Doctrine: Generally, the NIRC has no retroactive application except when: except when:
paying VAT coverage by virtue of VAT Ruling No. 231- 1. where the taxpayer deliberately misstates or omits material facts 1. where the
88. Later on, the New Tax Code took effect, which from his return or in any document required of him by the Bureau of taxpayer
imposed VAT on the business of Philippine Healthcare Internal Revenue; deliberately
Providers. CIR sent respondent a letter demanding 2. where the facts subsequently gathered by the Bureau of Internal misstates or
payment of deficiency VAT in the amount of Revenue are materially different from the facts on which the ruling omits material
P100,505,030.26 and DST in the amount of is based, or facts from his
P124,196,610.92, or a total of P224,702,641.18 for 3. where the taxpayer acted in bad faith. return or in any
taxable years 1996 and 1997. Attached to the demand document
letter were four (4) assessment notices. Application: required of him by
Phil Health Care filed a protest questioning the The Court held that Philhealth acted in good faith. The term health the Bureau of
assessment notices. maintenance organization was first recorded in the Philippine statute books Internal Revenue;
in 1995. It is apparent that when VAT Ruling No. 231-88 was issued in 2. where the facts
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 Philhealth's favor, the term health maintenance organization was unknown subsequently
and had no significance for taxation purposes. gathered by the
Bureau of Internal
Philhealth, therefore, believed in good faith that it was VAT exempt for the Revenue are
taxable years 1996 and 1997 on the basis of VAT Ruling No. 231- 88. The materially
rule is that the BIR rulings have no retroactive effect where a grossly unfair different from the
deal would result to the prejudice of the taxpayer. facts on which the
ruling is based, or
3. where the
taxpayer acted in
bad faith.

Supreme Transliner, Inc. v. BPI Family Savings Bank Issue: WON Supreme Transliner, as redemptioner of the property, must Generally, the NIRC has
(2011) shoulder the capital gains tax, DST, foreclosure and registration fee. NO. no retroactive application
except when:
Supreme Transliner obtained a loan from BPI secured Doctrine: Generally, the NIRC has no retroactive application except when: 1. where the
by a Real Estate Mortgage. Supreme Transliner failed 1. where the taxpayer deliberately misstates or omits material facts taxpayer
to pay the loan, thus the mortgage was extrajudicially from his return or in any document required of him by the Bureau of deliberately
foreclosed and sold to BPI as the highest bidder. Internal Revenue; misstates or
Supreme Transliner notified BPI of its intention to 2. where the facts subsequently gathered by the Bureau of Internal omits material
redeem the property before the expiration of the 1-year Revenue are materially different from the facts on which the ruling facts from his
redemption period. It also requested for the elimination is based, or return or in any
of certain expenses from the redemption price, including 3. where the taxpayer acted in bad faith. document
the capital gains tax, DST, foreclosure fee, and required of him by
registration fees. BPI refused such elimination of Application: BPI must return the amounts representing the capital gains the Bureau of
expenses, thus Supreme Transliner paid the entire sum. tax and DST. To arrive at this conclusion, the Supreme Court looked at the Internal Revenue;
provisions of RR 04- 99, which provided that the capital gains tax would only 2. where the facts
Supreme Transliner then filed a complaint against BPI be imposed after the redemption period had expired. Thus, considering that subsequently
to recover the supposed excess charges. The RTC Supreme Transliner exercised their right of redemption before the expiration gathered by the
denied Supreme Transliner’s complaint, ruling that such of the redemption period, BPI had no reason to pay any capital gains tax Bureau of Internal
charges were deemed part of the mortgage contract and due on the foreclosure. Given that BPI had no reason to pay the capital Revenue are
were agreed upon by Supreme Transliner and the BPI gains tax, the inclusion of the amount of the capital gains tax in the materially
in the negotiation process of the final redemption price redemption price paid by Supreme Transliner was unwarranted, thus such different from the
prior to the loan. amount must be returned to them. facts on which the
ruling is based, or
The CA partially reversed the ruling of the RTC, claiming Take note that the provisions of RR 04-99 were issued AFTER the 3. where the
that BPI must return certain amounts but only with foreclosure sale and redemption took place. As a general rule, Revenue taxpayer acted in
regard to attorney’s fees and liquidated damages. Regulations have no retroactive effect. However, the Supreme Court still bad faith.
allowed the retroactive application in favor of Supreme Transliner, on the
Supreme Transliner appealed to the SC, claiming that ground that it would be more consistent with the policy of aiding the exercise
the amount representing the capital gains tax must be of right of redemption (basically, to make redeeming property easier.
returned to it. Petitioner Supreme Transliner benefitted from this ruling, as RR 04-99 was
given retroactive application in their favor).

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8
 CIR v. CA, 267 SCRA 557 (1997) Issue: WON Alhambra’s reliance on a void BIR ruling conferred upon the Generally, the NIRC has
latter a vested right to apply the same in the computation of its ad valorem no retroactive application
Private respondent Alhambra Industries, Inc is a tax and claim for tax refund. YES. except when:
domestic corporation engaged in the manufacture and 1. where the
sale of cigar and cigarette products. On 7 May 1991 Doctrine: Generally, the NIRC has no retroactive application except when: taxpayer
private respondent received a letter dated 26 April 1991 1. where the taxpayer deliberately misstates or omits material facts deliberately
from the Commissioner of Internal Revenue assessing from his return or in any document required of him by the Bureau of misstates or
its deficiency Ad Valorem Tax (AVT) in the total amount Internal Revenue; omits material
of P488, 396.62. 2. where the facts subsequently gathered by the Bureau of Internal facts from his
Revenue are materially different from the facts on which the ruling return or in any
Private respondent thru counsel filed a protest against is based, or document
the proposed assessment with a request that the same 3. where the taxpayer acted in bad faith. required of him by
be withdrawn and cancelled. The subject deficiency the Bureau of
excise tax assessment resulted from private Application: The Supreme Court ruled that the taxpayer relied on the Internal Revenue;
respondent's use of the computation mandated by BIR previous BIR Ruling in good faith. It is to be noted that Section 127 (b) of 2. where the facts
Ruling 473-88 dated 4 October 1988 as basis for the Tax Code as amended applies in general to domestic products and subsequently
computing the fifteen percent (15%) ad valorem tax due excludes the value-added tax in the determination of the gross selling price, gathered by the
on its removals of cigarettes from 2 November 1990 to which is the tax base for purposes of the imposition of ad valorem tax. On Bureau of Internal
22 January 1991. the other hand, the last paragraph of Section 142 of the same Code which Revenue are
includes the value-added tax in the computation of the ad valorem tax, materially
BIR Circular 473-88 was issued by Deputy refers specifically to cigar and cigarettes only. It does not include/apply to different from the
Commissioner Eufracio D. Santos to Insular-Yebana any other articles or goods subject to the ad valorem tax. facts on which the
Tobacco Corporation allowing the latter to exclude the ruling is based, or
value-added tax (VAT) in the determination of the gross ALHAMBRA did not question the correctness of the above BIR ruling. In 3. where the
selling price for purposes of computing the ad valorem fact, upon knowledge of the effectivity of BIR Ruling No. 017-91, private taxpayer acted in
tax of its cigar and cigarette products in accordance with respondent immediately implemented the method of computation mandated bad faith.
Sec. 127 of the Tax Code. therein by restoring the VAT in computing the tax base for purposes of the
15% ad valorem tax. However, well-entrenched is the rule that rulings and
Thereafter, on 11 February 1991, petitioner issued BIR circulars, rules and regulations promulgated by the Commissioner of
Ruling 017-91 to Insular-Yebana Tobacco Corporation Internal Revenue would have no retroactive application if to so apply them
revoking BIR Ruling 473-88 for being violative of Sec. would be prejudicial to the taxpayers.
142 of the Tax Code. It included back the VAT to the
gross selling price in determining the tax base for What is left to be resolved is petitioners claim that private respondent falls
computing the ad valorem tax on cigarettes. under the third exception in Sec. 246, i.e., that the taxpayer has acted in
bad faith.

Bad faith imports a dishonest purpose or some moral obliquity and

conscious doing of wrong. It partakes of the nature of fraud; a breach of a
known duty through some motive of interest or ill will. We find no convincing
evidence that ALHAMBRA's implementation of the computation mandated
by BIR Ruling 473-88 was ill- motivated or attended with a dishonest
purpose. To the contrary, as a sign of good faith, ALHAMBRA immediately
reverted to the computation mandated by BIR Ruling 017-91 upon
knowledge of its issuance on 11 February 1991.
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Rule-Making Authority of Secretary of Finance
Philamlife v. DOF and CIR (2014)
Petitioner Philam Life owned shares in the Philam Care
Inc. Philam Life decided to sell its shares through
competitive bidding, and as a result, the shares were
sold to STI Investments Inc. After completion of the sale
and payment of the necessary DSTs and Capital Gains
Tax, Philam Life applied with the BIR for a certificate
authorizing the transfer of shares from Philam Life to
Philam Care Inc. However, the BIR denied the
application claiming that the Donors Tax Liability had yet
to be paid.
Philam Life claims that they are not subjected to Donors
Tax Liability, since:
1) there was no intention for a donation, as in fact
it was a sale that took place
2) the shares were sold at their fair market value,
and
3) assuming the consideration of the sale was
indeed less than the market value, it was still
done in the ordinary course of business thus
highlighting lack of intent to donate and being
subjected to donors tax.
CIR still denied Philam Life’s application, as a result,
Philam Life filed with the CA a petition for review under
Rule 43. But, the CA denied such petition on the ground
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As regards petitioner's argument that private respondent should have made
consultations with it before private respondent used the computation
mandated by BIR Ruling 473-88, suffice it to state that the aforesaid BIR
Ruling was clear and categorical thus leaving no room for interpretation.
The failure of private respondent to consult petitioner does not imply bad
faith on the part of the former.
Admittedly the government is not estopped from collecting taxes legally due
because of mistakes or errors of its agents. But like other principles of law,
this admits of exceptions in the interest of justice and fair play, as where
injustice will result to the taxpayer.
Issue: WON Philam Life properly availed of the remedy of Review under
Rule 43 of the Rules of Court? NO.
Doctrine: RA 1125 provides that the CTA has exclusive appellate
jurisdiction over decisions of the CIR in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the 1997 Tax
Code.
Application:Given that Philam Life is questioning the authority of the CIR
to rule that the sale of shares is a taxable donation under section 100 of the
Tax Code, such petition by Philam Life falls under jurisdiction of the CTA
regarding “other matters concerning the Tax Code”.
Citing the case of City of Manila v. Grecia-Cuerdo, it is within the power of
the CTA, through its power of certiorari, to rule on the validity of a particular
administrative rule or regulation so long as it is within its appellate
jurisdiction. Hence, CTA can now rule not only on the propriety of an
assessment or tax treatment of a certain transaction, but also on the validity
of the revenue regulation or revenue memorandum circular on which the
said assessment is based.
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 of lack of jurisdiction, claiming that it is the CTA that
should take cognizance of the case.
BDO v. Republic (2015)
The Caucus of Development NGO Networks (CODE-
NGO), with the assistance of its financial advisors,
RCBC, CAPEX, and SEED requested an approval from
the DOF for the issuance by the Bureau of Treasury of
10-yr zero-coupon T-notes. These will be PEACE bonds
and the net proceeds from the sale of the PEACE will be
used to endow a permanent fund to finance NGO
throughout the country.
In 2001, the BIR issued a BIR Ruling as to the tax
treatment of the proposed PEACE Bonds stating that it
would not be classified as deposit substitutes and would
not be subject to withholding tax. These bonds were
eventually sold to BDO on different dates.
In 2011, upon the request of the Department of Finance,
the BIR issued another BIR Ruling stating that the
earnings from the PEACE bonds will now be subject to
a final withholding tax. Subsequent holders of such
bonds will also be liable for this tax, such as BDO.
Thus, BDO filed a Petition for Certiorari, Prohibition,
Mandamus with Temporary Restraining Order to the SC
enjoining the implementation of the ruling subjecting
them to pay 20% final withholding tax. They argue that
it violates the non-retroactivity of the 1997 NIRC and
contract law.
Respondents argue that the 2011 BIR Ruling was an
interpretative rule and merely restates previous BIR
Ruling. They also argue that petition for certiorari is
improper because they had the basic remedy of claiming
refund and that they did not bring the case to the proper
court, CTA nor asked the DOF for review.
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Issue: Was the filing of Petition for Certiorari before the SC proper and
valid? YES.
Doctrine: The general rule is the jurisdiction to review the rulings of the BIR
pertains to the CTA. However, there are also exceptional cases wherein the
SC has entertained direct recourse when dictated by public welfare.
Application: Although the NIRC states the DOF is the one who will review
the interpretative rulings of the BIR, jurisprudence allows for certain
exemptions: 1) when the issue involved is a purely legal question and 2)
when there are circumstances indicating the urgency of judicial intervention.
In this case, both exemptions are present as the issue involved is purely
legal as it refers to the interpretation of the rulings and there is impending
maturity of the PEACE Bonds. It is also to be noted that an appeal to the
DOF Sec will be futile as it was the DOF who requested the 2011 BIR
Ruling.
As to the proper court who will hear the case, the petition filed by BDO was
certiorari. This case is considered as an exception as the nature and
importance of the issues raised to the investment and banking industry with
regard to a definitive declaration of whether government debt instruments
are deposit substitutes under existing laws, and the novelty thereof,
constitute exceptional and compelling circumstances to justify resort to this
court in the first instance.
The tax provision on deposit substitutes affects not only the PEACE Bonds
but also any other financial instrument or product that may be issued and
traded in the market. Due to the changing positions of the Bureau of Internal
Revenue on this issue, there is a need for a final ruling from this court to
stabilize the expectations in the financial market.
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