Taxation Law - Leonen Case Digests

LEONEN CASES
TAXATION LAW CASE DIGESTS

SAN BEDA COLLEGE – ALABANG SCHOOL OF LAW
CENTRALIZED BAR OPERATIONS 2020
ACADEMICS TEAM
Jose Rio E. Sanchez

Chairperson for Academics
Heddrik C. Gonzales Chelsi Maine T. Laxamana

Deputy Deputy
John Leymar C. Magalang
Deputy
Lady Joyce A. Bernardez

Chairperson for Electronic Data Processing
#ParaKayCarlo
SUBJECT HEADS
Carlo Diamond S. Antipuesto Ma. Isabella A. Soriano

Political Law Labor Law
Ezekiel Japhet C. Esguerra Joanna Marie L. Barrozo

Civil Law Taxation Law
Christian Miguel C. Candelaria Natasha Felicia M. Francia

Commercial Law Criminal Law
Ma. Rosalia Emmanuel S. Ladignon Antonio Luis C. Duran

Remedial Law Legal Ethics
ADMINISTRATION
Dr. Ulpiano P. Sarmiento III

Dean
Atty. Anna Marie Melanie B. Trinidad

Vice Dean
Atty. Carlo D. Busmente

Prefect
Atty. Roben B. Cadugo Jr.

Administrative Officer
TAXATION LAW TEAM
Joanna Marie L. Barrozo

Subject Head
Keziah G. Espiritu
Assistant Subject Head
Rohanne Karolle D. Ablang

Erika Sophia T. Acampado
Mary Jasmin Zennaia M. Balasolla
Allyson Cai B. Batalla
Muammar M. Cabugatan
Mary Clare Therese I. Cumpio
Angelica Mae T. Destajo
Mark Augustus S. Eleda
Exequiela Gonzales
Aira Alexis P. Pacoma
Fatima Mae D. Tumbali
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SAN BEDA COLLEGE ALABANG SCHOOL OF LAW
SAN BEDA COLLEGE ALABANG SCHOOL OF LAW CENTRALIZED BAR OPERATIONS 2020-2021
All Rights Reserved by the Authors.
TABLE OF CONTENTS
DOCTRINES
GENERAL PRINCIPLES 1
NATIONAL TAXATION 1
LOCAL TAXATION 4
JUDICIAL REMEDIES 5
OTHER PENAL PROVISIONS IN THE NIRC 6
GENERAL PRINCIPLES
DOUBLE TAXATION
LA SUERTE CIGAR AND CIGARETTE FACTORY V. COURT OF APPEALS 7
TAX AMNESTY
ING BANK V. COMMISSIONER OF INTERNAL REVENUE 7
LG ELECTRONICS PHILIPPINES, INC. V. COMMISSIONER OF INTERNAL REVENUE 8
COMMISSIONER OF INTERNAL REVENUE V. APO CEMENT CORP. 9
NATIONAL TAXATION
INCOME TAX
COMMISSIONER OF INTERNAL REVENUE V. J.P. MORGAN CHASE BANK 10
SMI-ED PHIL. TECHNOLOGY, INC. V. COMMISSIONER OF INTERNAL REVENUE 11
BANCO DE ORO V. REPUBLIC 12
AIR CANADA V. COMMISSIONER OF INTERNAL REVENUE 14
LG ELECTRONICS PHILIPPINES, INC. V. COMMISSIONER OF INTERNAL REVENUE 15
PHILIPPINES AIRLINES, INC. V. COMMISSIONER OF INTERNAL REVENUE 16
COMMISSIONER OF INTERNAL REVENUE V. PHILIPPINE NATIONAL BANK 17
VALUE-ADDED TAX
STAG STATE POWER INC. V. COMMISSIONER OF INTERNAL REVENUE 18
CE LUZON GEOTHERMAL POWER CO., INC. V. COMMISSIONER OF INTERNAL REVENUE 19
CBK POWER CO., LTD V. COMMISSIONER OF INTERNAL REVENUE 20
CE CASECNAN WATER AND ENERGY COMPANY, INC. V. COMMISSIONER OF INTERNAL REVENUE 21
TEAM ENERGY CORP. V. COMMISSIONER OF INTERNAL REVENUE 22
EXCISE TAX
LA SUERTE CIGAR AND CIGARETTE FACTORY V. COURT OF APPEALS 23
COMMISSIONER OF INTERNAL REVENUE V. SAN MIGUEL CORP. 25
DOCUMENTARY TAX
TAX REMEDIES
COMMISSIONER OF INTERNAL REVENUE V. AVON PRODUCTS MANUFACTURING INC. 27
REPUBLIC V. GMCC UNITED DEVELOPMENT CORP. 30
COMMISSIONER OF INTERNAL REVENUE V. FITNESS BY DESIGN, INC. 30
COOMMISSIONER OF INTERNAL REVENUE V. TRANSITIONS OPTICAL PHILIPPINES 31
LOCAL TAXATION
LOCAL GOVERNMENT TAXATION

NATIONAL POWER CORP. V. PROVINCIAL GOVERNMENT OF BATAAN 33
PELIZLOY REALTY CORP. V. PROVINCE OF BENGUET 34
AALA V. UY 35
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. V. CITY OF MANILA 36
NATIONAL POWER CORP. V. CITY OF CABANATUAN 37
REAL PROPERTY TAXATION
DEMAALA V. COMMISSION ON AUDIT 38
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR V. FILIPINAS PALM OIL PLANTATION, INC. 39
METROPOLITAN WATERMARKS SEWERAGE SYSTEM V. LOCAL GOVERNMENT OF QUEZON CITY 40
CITY OF LAPU-LAPU V. PHILIPPINE ECONOMIC ZONE AUTHORITY 41
JUDICIAL REMEDIES
JURISDICTION OF THE CTA

CITY OF LAPU-LAPU V. PHILIPPINE ECONOMIC ZONE AUTHORITY 41
NATIONAL POWER CORP. V. PROVINCIAL GOVERNMENT OF BATAAN 43
BANCO DE ORO V. REPUBLIC 43
PHILIPPINE PORTS AUTHORITY V. CITY OF DAVAO 45
OTHERS
OTHER PENAL PROVISION IN THE NIRC

LIHAYLIHAY V. TAN 46
I. GENERAL PRINCIPLES
DOUBLE TAXATION
1. For double taxation in the objectionable or prohibited sense to exist, both taxes must be imposed on the
same property or subject matter, for the same purpose, by the same taxing authority, within the same
jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of
tax. (La Suerte Cigar and Cigarette Factory v. Court of Appeals, G.R. Nos. 125346, 136328-29, 144942,
148605, 158197 & 165499, November 11, 2014.)
TAX AMNESTY
2. Taxpayers with pending tax cases may avail themselves of the tax amnesty program under R.A. No. 9480
(2007 Tax Amnesty Act). (ING Bank N.V. v. Commissioner of Internal Revenue, G.R. No. 167679, July 22,
2015.)
3. A qualified taxpayer may immediately avail of the immunities and privileges upon submission of the
required documents. Only cases that involve final and executory judgments are excluded from the tax amnesty
program. (LG Electronics Philippines, Inc v. Commissioner of Internal Revenue, G.R. No. 165451, December
3, 2014.)
4. The submission of the documentary requirements and payment of the amnesty tax is considered full
compliance with R.A. No. 9480 and the taxpayer can immediately enjoy the immunities and privileges
enumerated in Section 6 of the law. (Commissioner of Internal Revenue v. Apo Cement Corp., G.R. No.
193381, February 8, 2017.)
II. NATIONAL TAXATION

INCOME TAX
1. Only income actually gained or received by the Ecozone Enterprise related to the conduct of its registered
business activity is covered by the tax exemption. Any income earned outside its registered activities with
PEZA is subject to regular corporate income tax. (Commissioner of Internal Revenue v. J.P. Morgan Chase
Bank, N.A.-Philippine Customer Care Center, G.R. No. 210528, November 28, 2018.)
2. A PEZA-registered corporation that has never commenced operations may not avail the tax incentives and
preferential rates given to PEZA-registered enterprises. Such corporation is subject to ordinary tax rates under
the NIRC. (SMI-ED Phil. Technology, Inc. v. Commissioner of Internal Revenue, G.R. No. 175410, November
12, 2014.)
3. For corporations, the National Internal Revenue Code (NIRC) treats the sale of land and buildings, and the
sale of machineries and equipment differently. Only the sale of land and buildings are subject to 6% capital
gains tax. The income from the sale of petitioner’s machineries and equipment is subject to the provisions on
normal corporate income tax. (SMI-ED Phil. Technology, Inc. v. Commissioner of Internal Revenue, G.R. No.
175410, November 12, 2014.)
4. A debt instrument is considered a deposit substitute, the interest of which shall be subject to 20% FWT, if
the borrowing is made from 20 or more lenders “at any one time.” The phrase "at any one time" includes both
the primary and secondary market. (Banco De Oro v. Republic, G.R. No. 198756, January 13, 2015)
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5. An offline international air carrier selling passage tickets in the Philippines, through a general sales agent,
is a resident foreign corporation doing business in the Philippines. As such, it is taxable under Section 28(A)(1),
and not Section 28(A)(3) of the 1997 NIRC, subject to any applicable tax treaty. (Air Canada vs. Commissioner
of Internal Revenue, G.R. No. 169507. January 11, 2016.)
6. Income tax is different from withholding tax. A withholding tax is merely a method of collecting income
tax in advance. (LG Electronics Philippines, Inc v. Commissioner of Internal Revenue, G.R. No. 165451,
December 3, 2014.)
7. The obligation of the payor/employer to deduct and withhold the related withholding tax arises at the time
the income was paid or accrued or recorded as an expense in the payor's/employer's books, whichever comes
first. (ING Bank N.V. v. Commissioner of Internal Revenue, G.R. No. 167679, July 22, 2015.)
8. Proof of actual remittance is not necessary for claiming refunds. It is the responsibility of the withholding
agent and not of the taxpayer-refund claimant. To claim a refund on unutilized tax credits, the taxpayer needs
only to prove that taxes were withheld. (Philippine Airlines, Inc. v. Commissioner of Internal Revenue, G.R.
Nos. 206079-80 & 206309, January 17, 2018.)
9. 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. Proof
of actual remittance is not a condition to claim for a refund of unutilized tax credits. (Commissioner of Internal
Revenue vs. Philippine National Bank, G.R. No. 180290. September 29, 2014.)
VALUE-ADDED TAX
10. Section 112 of the Tax Code1 reveals that a taxpayer may appeal the Commissioner's denial or inaction
only within 30 days when the decision that denies the claim is received, or when the 120-day period given to
the Commissioner to decide on the claim expires. Under the same section, only the administrative claim for
refund of input VAT must be filed within the two (2)-year prescriptive period, the judicial claim need not be.
(Steag State Power Inc. v. CIR G.R. No. 205282. January 14, 2019)
11. The 120-day and 30-day reglementary periods under Section 112(C) of the NIRC are both mandatory and
jurisdictional. Non-compliance with these periods renders a judicial claim for refund of creditable input tax
premature. (CE Luzon Geothermal Power Co., Inc v. Commissioner of Internal Revenue, G.R No. 197526 &
199676-77, July 26, 2017)
12. As an exception to the mandatory 120 + 30 day period, a judicial claim for VAT refund which was filed
with the Court of Tax Appeals (CTA) before the lapse of the 120--day period is considered to have been timely
made if such filing occurred on or after Dec. 10, 2003 (date of issuance of Bureau of Internal Revenue (BIR)
Ruling No. DA--489--03) but before Oct. 6, 2010 (date of promulgation of Aichi case). (CE Luzon Geothermal
1 Republic Act No. 10963 (TRAIN), effective January 1, 2018, has shorten the period within which the BIR shall grant a refund of the excess unutilized input VAT from 120 days to
90 days. Sec. 112(C), as amended by Section 36 of R.A. 10963 provides that: “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. xxx In case of full or 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”.
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Power Co., Inc v. Commissioner of Internal Revenue, G.R No. 197526 & 199676-77, July 26, 2017; CBK
Power Co., Ltd. v. CIR, G.R. Nos. 202066 & 205353. September 30, 2014)
13. BIR Ruling No. DA-489-03 contemplates premature filing and not late fling. Late filing, or beyond the 30-
day period, is absolutely prohibited, even when BIR Ruling No. DA-489-03 was in force. (Steag State Power
Inc. v. CIR G.R. No. 205282. January 14, 2019)
14. The thirty (30)-day period provided in Section 112 of the NIRC to appeal the decision of the Commissioner
of Internal Revenue (CIR) or its inaction is statutorily provided. Failure to comply is a jurisdictional error. The
window of exemption created in CIR v. San Roque Power Corporation is limited to premature filing of the
judicial remedy. It does not cure lack of jurisdiction due to late filing. (CE Casecnan Water and Energy
Company, Inc. v. Commissioner of Internal Revenue, G.R. No. 203928, July 22, 2015)
15. For a judicial claim for VAT refund to prosper, the claim must not only be filed within the mandatory
120+30-day periods. The taxpayer must also prove the factual basis of its claim and comply with the 1997
NIRC invoicing requirements and other appropriate revenue regulations. Input VAT payments on local
purchases of goods or services must be substantiated with VAT invoices or official receipts, respectively. (Team
Energy Corp. v. Commissioner of Internal Revenue, G.R. Nos. 197663 & 197770. March 14, 2018.)
EXCISE TAX
16. While a stemmed leaf tobacco, being a partially prepared tobacco, is subject to excise tax; stemmed leaf
tobacco transferred in bulk between cigarette manufacturers are exempt from excise tax. The importation of
stemmed leaf tobacco is not included in the exemption. (La Suerte Cigar and Cigarette Factory v. Court of
Appeals, G.R. Nos. 125346, 136328-29, 144942, 148605, 158197 & 165499. November 11, 2014.)
17. A 'variant of brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name
of the brand and/or a different brand which carries the same logo or design of the existing brand. 'New brand'
shall mean a brand registered after the date of effectivity of R.A. No. 8240. (Commissioner of Internal Revenue
v. San Miguel Corp. G.R. Nos. 205045 & 205723. January 25, 2017.)
18. Any reclassification of fermented liquor products should be by act of Congress to deter the potential for
abuse if the power to reclassify is delegated and much discretion is given to the Department of Finance and
BIR. (Commissioner of Internal Revenue v. San Miguel Corp. G.R. Nos. 205045 & 205723. January 25, 2017.)
DOCUMENTARY STAMP TAX

19. A documentary stamp tax is a tax on documents, instruments, loan agreements, and papers evidencing
the acceptance, assignment, sale, or transfer of an obligation, right, or property levied on the exercise by
persons of certain privileges conferred by law for the creation, revision, or termination of specific legal
relationships through the execution of such specific instruments. The law taxes the document because of the
transaction and all parties to the transaction are primarily liable for the documentary stamp tax. (ING Bank
N.V. v. Commissioner of Internal Revenue, G.R. No. 167679 (Resolution), April 20, 2016.)
TAX REMEDIES
20. Tax assessments issued in violation of the due process rights of a taxpayer are null and void. The NIRC
and revenue regulations allow a taxpayer to file a reply or otherwise to submit comments or arguments with
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supporting documents at each stage in the assessment process. Due process requires the BIR to consider the
defenses and evidence submitted by the taxpayer and to render a decision based on these submissions. Failure
to adhere to these requirements constitutes a denial of due process and taints the administrative proceedings
with invalidity. (Commissioner of Internal Revenue v. Avon Products Manufacturing, Inc., G.R. Nos. 201398-
99 & 201418-19, October 3, 2018.)
21. The BIR has three (3) years from the last day prescribed by law for the filing of a return to make an
assessment. If the return is filed beyond the last day prescribed by law for filing, the three-year period shall
run from the actual date of filing. (SMI-ED Phil. Technology, Inc. v. Commissioner of Internal Revenue, G.R.
No. 175410, November 12, 2014)
22. For the 10-year period under Section 222(a) to apply, it is not enough that fraud is alleged in the
complaint; it must be established by clear and convincing evidence. Error in recording a tax liability in the
wrong year, which stemmed from a wrong application of the law, is not an indication of intent to evade
payment. There is no fraud in such a case. (Republic v. GMCC United Development Corp., G.R. No. 191856,
December 7, 2016.)
23. To avail of the extraordinary period of assessment in Section 222 (a) of the NIRC, the CIR should show
that the facts upon which the fraud is based is communicated to the taxpayer. The burden of proving that the
facts exist in any subsequent proceeding is with the Commissioner. Furthermore, the Final Assessment Notice
is not valid if it does not contain a definite due date for payment by the taxpayer. (Commissioner of Internal
Revenue v. Fitness by Design, Inc., G.R. No. 215957, November 9, 2016.)
24. Estoppel applies against a taxpayer who did not only raise at the earliest opportunity its representative's
lack of authority to execute two (2) waivers of defense of prescription, but was also accorded, through these
waivers, more time to comply with the audit requirements of the BIR. Nonetheless, a tax assessment served
beyond the extended period is void. (Commissioner of Internal Revenue v. Transitions Optical Philippines,
Inc., G.R. No. 227544, November 22, 2017.)
III. LOCAL TAXATION
LOCAL GOVERNMENT TAXATION

1. Without a franchise, a local government unit cannot impose franchise tax. Under the EPIRA, companies
engaging in power generation and supply of electricity are no longer required to secure a national franchise,
hence cannot be subjected to franchise tax. (National Power Corp. v. Provincial Government of Bataan, G.R.
No. 180654 (Resolution), March 6, 2017.)
2. Provinces are not authorized to impose amusement taxes on admission fees to resorts, swimming pools,
bath houses, hot springs, and tourist spots, since they are not among those places expressly mentioned by
Section 140 of the LGC as being subject to amusement taxes. (Pelizloy Realty Corp. v. Province of Benguet,
G.R. No. 183137, April 10, 2013.)
3. Under the LGC, aggrieved taxpayers who question the validity or legality of a tax ordinance are required
to file an appeal before the Secretary of Justice before they seek intervention from the regular courts. (Aala v.
Uy, G.R. No. 202781, January 10, 2017)
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4. If a party can prove that the resort to an administrative remedy would be an idle ceremony such that it will
be absurd and unjust for it to continue seeking relief that evidently will not be granted to it, then the doctrine
of exhaustion of administrative remedies will not apply. (International Container Terminal Services, Inc. v. City
of Manila, G.R. No. 185622, October 17, 2018.)
5. The statutory penalty of 25% surcharge is applied on the amount of the tax due and unpaid for each year.
It is not a yearly charge from the due date until full payment. To impose a penalty for non-payment of tax
greater than what the law provides would amount to a deprivation of property without due process of law.
(National Power Corp. v. City of Cabanatuan, G.R. No. 177332, [October 1, 2014], 744 PHIL 642-664)
REAL PROPERTY TAXATION

6. Local governments are allowed to collect, on top of the basic annual real property tax, an additional levy
which shall exclusively accrue to the special education fund. The option given to a local government unit
extends not only to the matter of whether to collect but also to the rate at which collection is to be made.
(Demaala v. Commission on Audit, G.R. No. 199752, February 17, 2015.)
7. The exemption from real property taxes given to cooperatives applies regardless of whether or not the land
owned is leased. This exemption benefits the cooperative's lessee. The characterization of machinery as real
property is governed by the LGC and not the Civil Code. (Provincial Assessor of Agusan Del Sur v. Filipinas
Palm Oil Plantation, Inc., G.R. No. 183416, October 5, 2016.)
8. A government instrumentality exercising corporate powers is not liable for the payment of real property
taxes on its properties unless it is alleged and proven that the beneficial use of its properties has been extended
to a taxable person. (Metropolitan Waterworks Sewerage System v. Local Government of Quezon City G.R
No. 194388. November 07, 2018.)
9. The Philippine Economic Zone Authority, being an instrumentality of the national government, is exempt
from payment of real property taxes. (City of Lapu-Lapu v. Phil. Economic Zone Authority, G.R. Nos. 184203
& 187583, November 26, 2014.)
10. A petition for declaratory relief is not the proper remedy against a notice of assessment issued. For
erroneous assessments, the taxpayer must exhaust the administrative remedies provided under the LGC. For
illegal assessments, the taxpayer may directly resort to judicial action. (City of Lapu-Lapu v. Phil. Economic
Zone Authority, G.R. Nos. 184203 & 187583, November 26, 2014.)
IV. JUDICIAL REMEDIES
JURISDICTION OF THE CTA

1. The CTA has the exclusive appellate jurisdiction over local tax cases decided by RTC. (City of Lapu-Lapu
v. Phil. Economic Zone Authority, G.R. Nos. 184203 & 187583, November 26, 2014; National Power Corp.
v. Provincial Government of Bataan, G.R. No. 180654 (Resolution), March 6, 2017)
2. The CTA has exclusive jurisdiction to determine the constitutionality or validity of tax laws, rules and
regulations, and other administrative issuances of the CIR, subject to prior review by the Secretary of Finance.
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In exceptional cases, however, the Supreme Court entertained direct recourse to it when dictated by public
welfare and the advancement of public policy, or demanded by the broader interest of justice, or the orders
complained of were found to be patent nullities, or the appeal was considered as clearly an inappropriate
remedy. (Banco De Oro v. Republic, G.R. No. 198756, January 13, 2015; Banco De Oro v. Republic, G.R.
No. 198756 (Resolution), August 16, 2016)
3. In an action for the refund of taxes allegedly erroneously paid, the CTA may determine whether there are
taxes that should have been paid in lieu of the taxes paid. Determining the proper category of tax that should
have been paid is not an assessment. It is incidental to determining whether there should be a refund. (SMI-
ED Phil. Technology, Inc. v. Commissioner of Internal Revenue, G.R. No. 175410, November 12, 2014)
4. When a tax case is pending on appeal with the CTA, the CTA has the exclusive jurisdiction to enjoin the
levy of taxes and the auction of a taxpayer's properties in relation to that case. (Philippine Ports Authority v.
City of Davao, G.R. No. 190324, June 6, 2018.)
OTHER PENAL PROVISIONS IN THE NIRC2

1. The grant of an informer's reward for the discovery, conviction, and punishment of tax offenses is a
discretionary quasi-judicial matter that cannot be the subject of a writ of mandamus. It is not a legally
mandated ministerial duty. This reward cannot be given to a person who only makes sweeping averments
about undisclosed wealth, rather than specific tax offenses, and who fails to show that the information which
he or she supplied was the undiscovered pivotal cause for the revelation of a tax offense, the conviction and/or
punishment of the persons liable, and an actual recovery made by the State. (Lihaylihay vs. Tan, G.R. No.
192223. July 23, 2018.)
2 Not in the syllabus
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LA SUERTE CIGAR AND CIGARETTE FACTORY v. COURT OF APPEALS
G.R. Nos. 125346, 136328-2, 144942, 148605, 158197 & 165499 | November 11, 2014.
General Principles: General Concepts in Taxation: Double Taxation
DOCTRINE
For double taxation in the objectionable or prohibited sense to exist, both taxes must be imposed on the
same property or subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction
or taxing district, during the same taxing period, and they must be the same kind or character of tax.
FACTS
La Suerte Cigar & Cigarette Factory (La Suerte), Fortune Tobacco Corporation (Fortune), and Sterling
Tobacco Corporation (Sterling) are domestic corporations engaged in the production and manufacture of cigars
and cigarettes. These companies import leaf tobacco from foreign sources and purchase locally produced leaf
tobacco to be used in the manufacture of cigars and cigarettes. The cigarette manufacturers contend that they are
doubly taxed because they are paying the specific tax on the raw material and on the finished product in which
the raw material was a part of.
ISSUE
Does the imposition of excise tax on stemmed leaf tobacco under Section 141 (now Section 144) of the
1986 Tax Code constitute double taxation?
HELD
NO. At all events, there is no constitutional prohibition against double taxation in the Philippines. For
double taxation in the objectionable or prohibited sense to exist, both taxes must be imposed on the same property
or subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction or taxing district,
during the same taxing period, and they must be the same kind or character of tax.
Excise taxes are essentially taxes on property because they are levied on certain specified goods or articles
manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and
on goods imported. In this case, there is no double taxation in the prohibited sense because the specific tax is
imposed by explicit provisions of the Tax Code on two different articles or products: (1) on the stemmed leaf
tobacco; and (2) on cigar or cigarette.
ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 167679 | July 22, 2015
General Principles: General Concepts in Taxation: Tax amnesty
DOCTRINE
Taxpayers with pending tax cases may avail themselves of the tax amnesty program under Republic Act
(R.A.) No. 9480 (2007 Tax Amnesty Act).
FACTS
ING Bank is a foreign banking corporation duly authorized by the Bangko Sentral ng Pilipinas to operate
as a branch in the Philippines. ING Bank received a Final Assessment Notice from the BIR and thereafter filed a
Petition for Review before the CTA to seek the cancellation and withdrawal of such deficiency tax assessments.
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The CTA Second Division rendered its decision upholding some of the assessments and cancelling the others. The
CIR and ING Bank led their respective Motions for Reconsideration which were both denied. ING Bank’s appeal
before the CTA En Banc was also dismissed. Thus, this Petition for Review appealing CTA En Bank’s decision.
Pending this petition, the ING Bank filed a Manifestation and Motion informing CTA En Banc that it had availed
itself of the tax amnesty authorized and granted under R.A. No. 9480 which covers all national internal revenue
taxes for the taxable year 2005 and prior years, with or without assessments duly issued therefore, that have
remained unpaid as of December 31, 2005. CIR asserts that BIR Revenue Memorandum Circular No. 19-2008
specifically excludes "cases which were ruled by any court (even without finality) in favor of the BIR prior to
amnesty availment of the taxpayer" from the coverage of the tax amnesty under R.A. No. 9480.
ISSUE
Is ING Bank entitled to the immunities and privileges under R.A. No. 9480?
HELD
YES. ING Bank is entitled to the immunities and privileges under R.A. No. 9480 during the pendency of
its appeal. R.A. No. 9480 (2007 Tax Amnesty Act) provides a general grant of tax amnesty subject only to the cases
specifically excepted by it. The Act clearly exempts tax cases subject to final and executory judgment by the courts.
Therefore, taxpayers with pending tax cases may avail themselves of the tax amnesty program. A tax amnesty
partakes of an absolute waiver by the Government of its right to collect what otherwise would be due it. The effect
of a qualified taxpayer's submission of the required documents and payment of the prescribed amnesty tax was
immunity from payment of all national internal revenue taxes as well as all administrative, civil, and criminal
liabilities founded upon or arising from non-payment of national internal revenue taxes for taxable year 2005 and
prior taxable years. Moreover, the Court has previously ruled in CS Garment, Inc. vs. CIR that the exception under
BIR Circular No. 19-2008 is invalid for going beyond the scope of the provisions of the 2007 Tax Amnesty Law.
Here, when ING Bank showed that it complied with the requirements under said law, CIR never questioned or
rebutted the fact that ING Bank fully complied with the requirements for tax amnesty. Therefore, ING Bank is fully
entitled to the immunities and privileges mentioned under Section 6 of R.A. No. 9480.
LG ELECTRONICS PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 165451| December 3, 2014.
DOCTRINE
A qualified taxpayer may immediately avail of the immunities and privileges upon submission of the
required documents. Only cases that involve final and executory judgments are excluded from the tax amnesty
program.
FACTS
LG Electronics Philippines, Inc. (LG), a corporation duly organized and existing under the laws of the
Philippines, received a Formal Assessment Notice and Demand Letter from the BIR. When LG was assessed
deficiency income tax, it filed an administrative protest with the BIR against the tax assessment. Without waiting
for the CIR's resolution on the protest, LG filed a Petition for Review before the CTA. The CTA ruled that LG was
liable on the income tax. LG Electronics then filed a Petition for Review on Certiorari. Subsequently, LG filed a
Manifestation stating that it availed itself of the tax amnesty provided under R.A. No. 9480. In addition, the BIR,
through Assistant Commissioner James Roldan, issued a ruling which held that LG complied with the provisions
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of R.A. No. 9480. Thus, LG is entitled to the immunities and privileges provided under the law. The following
documents were attached to LG's manifestation: (1) Notice of Availment of Tax Amnesty; (2) Tax Amnesty Return
(BIR Form No. 2116); (3) Tax Amnesty Payment Form (BIR Form No. 0617); (4) Statement of Assets, Liabilities and
Net Worth (SALN); and (5) BTR-BIR deposit slip. In its comment, the CIR averred that LG cannot claim the tax
amnesty provided under R.A. No. 9480 since cases that have already been favorably ruled upon by the trial court
or appellate courts prior to the availment of tax amnesty are not covered by the law.
ISSUE
Is LG Electronics entitled to immunities and privileges granted under the Tax Amnesty Act
HELD
YES. LG has properly availed itself of the tax amnesty granted under R.A. No. 9480. Under R.A. No. 9480
and BIR Revenue Memorandum Circular No. 55- 2007, the qualified taxpayer may immediately avail of the
immunities and privileges upon submission of the required documents. In this case, LG showed that it complied
with the requirements laid down in R.A No. 9480. Pertinent documents were submitted to the BIR and attached
to the records of this case. LG’s compliance was also admitted by the BIR in its ruling dated January 25, 2008.
Therefore, LG is entitled to the immunities and privileges granted under Section 6 of R.A. No. 9480 which stated
that the completion of these requirements shall be deemed full compliance with the provisions of R.A. No. 9480.
Moreover, only cases that involve final and executory judgments are excluded from the tax amnesty program.
COMMISSIONER OF INTERNAL REVENUE v. APO CEMENT CORPORATION

G.R. No. 193381| February 8, 2017
DOCTRINE
The submission of the documentary requirements and payment of the amnesty tax is considered full
compliance with R.A. No. 9480 by which the taxpayer can immediately enjoy the immunities and privileges
enumerated in Section 6 of the law.
FACTS
The BIR sent Apo Cement Corporation (Apo Cement) a Final Assessment Notice (FAN) for their deficiency
taxes for the taxable year 1999. Apo Cement protested the FAN which the BIR denied through the issuance of a
Final Decision on Disputed Assessment (FDDA). Thereafter, Apo Cement filed a Petition for Review with the CTA.
In its answer, the CIR admitted that Apo Cement had already paid the deficiency assessments reflected in the
FDDA, except for the documentary stamp taxes. Thereafter, Apo Cement availed of the tax amnesty under R.A.
No. 9480, particularly on its 1999 deficiency documentary stamp taxes. The CTA (Second Division) granted Apo
Cement's Motion to Cancel Tax Assessment. It found Apo Cement a qualified tax amnesty applicant under R.A.
No. 9480 and fully compliant with the requirements of the law. The BIR filed a Motion for Reconsideration which
the CTA denied for lack of merit. Thus, the Commissioner appealed to the En Banc. The CTA En Banc denied the
appeal and ruled that (a) Apo Cement is qualified to avail of the tax amnesty; (b) it submitted the required
documents to the court; (c) the Commissioner is not the proper party to challenge the SALN; d) the one-year
prescriptive period already lapsed; and (e) in another tax case involving the same parties, it was already adjudged
that Apo Cement complied with the requirements of Tax Amnesty.
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ISSUE
Has Apo Cement Corporation fully complied with all the requirements to avail of the tax amnesty granted
under R.A. No. 9480?
HELD
YES. The submission of the documentary requirements and payment of the amnesty tax is considered full
compliance with R.A. No. 9480 by which the taxpayer can immediately enjoy the immunities and privileges
enumerated in Section 6 of the law. Here, it is undisputed that Apo Cement had submitted all the documentary
requirements. Section 4 of R.A. No. 9480 provides that the SALN is presumed correct unless there is under-
declaration of net worth by 30% where the under-declaration is established in proceedings initiated by parties
other than the BIR, and the proceedings were initiated within one (1) year from the filing of the tax amnesty. In
this case, the CIR is not the proper party to question the veracity of Apo Cement’s SALN. Moreover, Apo Cement
filed its Tax Amnesty documents on January 25, 2008. Since then, there had been no proceeding initiated to
question its declared amount of net worth. Indeed, the CIR first raised the possibility of under-declaration of assets
only in its Opposition to respondent's Motion to Cancel Tax Assessment. Thus, the lapse of the one-year period
effectively closed the window to question Apo Cement’s 2005 SALN.
CIR v. J.P MORGAN CHASE BANK, N.A.- PHILIPPINE CUSTOMER CARE CENTER
G.R No. 210528 | November 28, 2018
National Taxation: Income Tax: Income tax on corporations: Domestic corporations
DOCTRINE
Only income actually gained or received by the Ecozone Enterprise related to the conduct of its registered
business activity is covered by the tax exemption. Any income earned outside its registered activities with PEZA is
subject to regular corporate income tax.
FACTS
J.P. Morgan Philippines (J.P. Morgan) entered into the Master Service Provider Agreement (Agreement)
with PeopleSupport Philippines, Inc. (PeopleSupport), a PEZA-registered Economic Zone IT Export Enterprise,
which enjoys an income tax holiday period from May to July 2007. Under the Agreement, PeopleSupport would
provide and lease transmission facilities to J.P. Morgan for a fee. J.P. Morgan reimbursed PeopleSupport the tax
withheld after having realized that it had erroneously withheld taxes on its payments to PeopleSupport, as the
latter enjoys the income tax holiday (ITH). Thus, J.P. Morgan filed before the BIR an application for refund.
However, due to the latter's inaction, it later filed a Petition for Review before the CTA. The CTA denied J.P.
Morgan’s' claim but later reversed its decision and granted the claim for refund. It ruled that under the Agreement,
PeopleSupport would supply the whole package of infrastructure and information technology support services to
J.P. Morgan, which includes the lease of its transmission facilities. Consequently, the lease of transmission facilities
was an activity related to PeopleSupport's registered activities hence, the rental income from this lease was exempt
from withholding tax.
ISSUE
Is J.P. Morgan's lease of physical plant space, infrastructure, and other transmission facilities related to the
PEZA–registered activities of PeopleSupport, and thus exempt from withholding taxes?
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HELD
NO. Rule XIII, Section 5 of the Implementing Rules and Regulations of R.A. No. 7916 (the Special
Economic Zone Act of 1995) specifies that PEZA-granted incentives shall apply only to registered operations of
the Ecozone Enterprise and only during its registration with PEZA. In other words, tax incentives to which an
Ecozone Enterprise is entitled do not necessarily include all kinds of income received during the period of
entitlement. Only income actually gained or received by the Ecozone Enterprise related to the conduct of its
registered business activity is covered by fiscal incentives. Considering that JP Morgan failed to establish that
PeopleSupport is registered with PEZA as a facility provider and that the latter's income from the lease of physical
plant space, infrastructure and other transmission facilities is entitled to ITH incentive, the income is subject to
regular corporate income tax imposed under Section 27(A) of the 1997 NIRC, as amended. PeopleSupport is
registered with PEZA as an Economic Zone Information Technology (Export) Enterprise, not an Information
Technology Facilities Provider/Enterprise. PeopleSupport's leasing services to J.P. Morgan are within the scope of
the activity of a facilities provider/enterprise. Tax incentives that may be granted to an information technology
service enterprise are different from tax incentives granted to an information technology facilities
provider/enterprise. Tax incentives partake of the nature of tax exemptions. They are a privilege to which the rule
that tax exemptions must be strictly construed against the taxpayer apply. One who seeks an exemption must
justify it by words "too plain to be mistaken and too categorical to be misinterpreted."
SMI-ED PHIL. TECHNOLOGY, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. NO. 175410 | November 12, 2014
National Taxation: Income Tax: Income tax on corporations: Domestic corporations
DOCTRINES
A PEZA-registered corporation that has never commenced operations may not avail the tax incentives and
preferential rates given to PEZA-registered enterprises. Such corporation is subject to ordinary tax rates under the
NIRC.
For corporations, the NIRC treats the sale of land and buildings, and the sale of machineries and
equipment differently. Only the sale of land and buildings are subject to 6% capital gains tax. The income from
the sale of petitioner’s machineries and equipment is subject to the provisions on normal corporate income tax.
FACTS
SMI-Ed is a PEZA-registered corporation authorized to engage in the business of manufacturing ultra-high-
density microprocessor unit package. After its registration, it constructed buildings and purchased machineries
and equipment. However, it failed to commence operations. It sold its buildings, machineries, and equipment to
another PEZA-registered enterprise and was thereafter dissolved. SMI-Ed filed its quarterly income tax return and
subjected the gross sales of its properties to 5% final tax on PEZA-registered corporations. After requesting the
cancellation of its PEZA registration, SMI-Ed filed an administrative claim for refund for taxes erroneously paid.
The BIR did not act on the claim, so SMI-Ed filed a petition for review before the CTA. The CTA denied the claim
for refund. It found that the sale of the properties made by SMI-Ed are subject to capital gains tax of 6% because
they were capital assets under Section 39(A)(1) of the NIRC of 1997. Therefore, SMI-Ed must pay the balance of
its deficiency tax.
FIRST ISSUE
Is SMI-Ed entitled to the benefit given to PEZA-registered enterprises?
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HELD
NO. SMI-Ed is not entitled to the benefits given to PEZA-registered enterprises, including the 5%
preferential rate under R.A. 7916 or the Special Economic Zone Act of 1995, because it never began its operation.
The fiscal incentives and the 5% preferential tax rate are available only to businesses operating within the Ecozone.
A business is considered in operation when it starts entering into commercial transactions that are not merely
incidental to but are related to the purposes of the business. Therefore, SMI-Ed is subject to ordinary tax rates under
the NIRC.
SECOND ISSUE
Are the properties involved in this case capital assets?
HELD
YES. Based on the definition of capital assets under Section 39 of the NIRC3, the properties involved in
this case include SMI-Ed’s buildings, equipment, and machineries. They are not among the exclusions enumerated
under Section 39(A)(1) of the NIRC. None of the properties were used in SMI-Ed’s trade or ordinary course of
business because it never commenced operations. They were not part of the inventory. None of them were stocks
in trade.
THIRD ISSUE
Is SMI-Ed’s sale of properties subject to capital gains tax?
HELD
Only the sale of land and buildings are subject to 6% capital gains tax. The income from the sale of SMI-
Ed’s machineries and equipment is subject to the provisions on normal corporate income tax under Section
27(D)(5) of the NIRC.
BANCO DE ORO v. REPUBLIC

G.R. No. 198756 | August 16, 2016.
National Taxation: Income Tax: Income tax on corporations: Taxation of passive income
DOCTRINE
A debt instrument is considered a deposit substitute, the interest of which shall be subject to 20% FWT, if
the borrowing is made from 20 or more lenders “at any one time.” The phrase "at any one time" includes both the
primary and secondary market.
FACTS
In 2001, Bureau of Treasury (BTr) issued 10-year Zero Coupon Bonds or the “Poverty Eradication and
Alleviation Certificates” (PEACe Bonds) to Rizal Commercial Banking Corporation (RCBC), on behalf of Caucus of
Development NGO Networks (CODE-NGO). BTr stated that the bonds shall not be subject to the 20% Final
Withholding Tax (FWT) since the issue is limited to 19 buyers/lenders. This was in reliance to the 2001 Rulings
3 Section 39, NIRC. Capital Assets - The term ‘capital assets’ means property held by the taxpayer (whether or not connected with his trade or business), but does not
include stock in trade of the taxpayer or other property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the
taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business, or property used in the trade or business,
of a character which is subject to the allowance for depreciation provided in Subsection (F) of Section 34; or real property used in trade or business of the taxpayer.
Thus, "capital assets" refers to taxpayer’s property that is NOT any of the following: 1. Stock in trade; 2. Property that should be included in the taxpayer’s inventory at
the close of the taxable year; 3. Property held for sale in the ordinary course of the taxpayer’s business; 4. Depreciable property used in the trade or business; and 5.
Real property used in the trade or business.
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issued by the BIR which pronounced that to be able to determine whether the Financial assets, i.e., debt
instruments and securities are deposit substitutes, the "20 or more individual or corporate lenders" rule must apply.
Moreover, the determination of the phrase "at any one time" for purposes of determining the "20 or more lenders"
is to be determined at the time of the original issuance. RCBC Capital, as the Issue Manager, sold and distributed
the government bonds to Banco De Oro (BDO), et al. Before maturity of the bonds, the BIR declared in BIR Ruling
No. 370-2011 that the PEACe Bonds, being deposit substitutes, were subject to 20% FWT, and directing the BTr
to withhold the tax. BIR also issued Ruling No. DA 378-2011 clarifying that the FWT due on the discount or
interest earned on the PEACe Bonds should be imposed and withheld not only on RCBC/CODE-NGO but also on
all subsequent holders of the bonds. BDO thus filed before the Supreme Court a Petition for Certiorari, Prohibition,
and/or Mandamus seeking to annul BIR Ruling No. 370-2011 and other rulings issued by BIR of similar tenor.
BDO insisted that the PEACe Bonds are not deposit substitutes under the Tax Code because there was only one
lender (RCBC) to whom the BTr issued the Bonds. They allege that the 2011 BIR Rulings erroneously interpreted
that the number of investors that participate in the 'secondary market' is the determining factor in reckoning the
existence or non-existence of twenty (20) or more individual or corporate lenders.
FIRST ISSUE
Are the PEACe Bonds “deposit substitutes” and thus subject to 20% final withholding tax?
HELD
Should there have been a simultaneous sale to 20 or more lenders/investors, the PEACe Bonds are deemed
deposit substitutes within the meaning of Section 22 (Y) of the Tax Code and RCBC Capital/CODE-NGO would
have been obliged to pay the 20% final withholding tax on the interest or discount from the PEACe Bonds. The
definition of deposit substitutes in Section 22 (Y) of the NIRC specifically defined “public” to mean “twenty or
more individual or corporate lenders at any one time.” The phrase "at any one time" for purposes of determining
the "20 or more lenders" would mean every transaction executed in the primary or secondary market in connection
with the purchase or sale of securities. Hence, if there are 20 or more lenders, the debt instrument is considered a
deposit substitute which is subject to the 20% FWT.
SECOND ISSUE
Assuming that the PEACe Bonds are deposit substitutes, may RCBC, RCBC Capital, and CODE-NGO be
held liable to pay the 20% FWT?
HELD
NO. The Court’s construction of the phrase "at any one time" should be prospective. The previous
interpretations given to an ambiguous law by the CIR, who is charged to carry out its provisions, are entitled to
great weight, and taxpayers who relied on the same should not be prejudiced in their rights. Otherwise, there will
be a violation of due process for failure to accord persons, especially the parties affected by it, fair notice of the
special burdens imposed on them
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AIR CANADA v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 169507 | January 11, 2016.
National Taxation: Income Tax: Income tax on corporations: Resident foreign corporations
DOCTRINE
An offline international air carrier selling passage tickets in the Philippines, through a general sales agent,
is a resident foreign corporation doing business in the Philippines. As such, it is taxable under Section 28(A)(1),
and not Section 28(A)(3) of the 1997 NIRC, subject to any applicable tax treaty.
FACTS
Air Canada is a foreign corporation organized and existing under the laws of Canada. As an off-line carrier,
Air Canada does not have flights originating from or coming to the Philippines and does not operate any airplane
in the Philippines. Air Canada engaged the services of Aerotel Ltd., Corp. (Aerotel) as its general sales agent in the
Philippines. Aerotel sells Air Canada's passage documents in the Philippines. Air Canada, through Aerotel, filed
its income tax returns and paid the income tax on Gross Philippine Billings. Subsequently, Air Canada filed a
written claim for refund of allegedly erroneously paid income taxes before the BIR. To prevent the running of the
prescriptive period, Air Canada filed a Petition for Review before the CTA. The CTA held that while Air Canada
was not liable for tax on its Gross Philippine Billings under Section 28 (A)(3) of the NIRC, it was nevertheless liable
to pay the 32% corporate income tax on income derived from the sale of airline tickets within the Philippines
pursuant to Section 28 (A)(1).
FIRST ISSUE
Is Air Canada is subject to the 2 1/2% tax on Gross Philippine Billings pursuant to Sec. 28 (A)(3)?
HELD
NO. Air Canada, as an offline international carrier with no landing rights in the Philippines, is not liable
to tax on Gross Philippine Billings. Under Section 28 (A) (3) of the 1997 NIRC, the tax attaches only when the
carriage of persons, excess baggage, cargo, and mail originated from the Philippines in a continuous and
uninterrupted flight, regardless of where the passage documents were sold. Not having flights to and from the
Philippines, Air Canada is clearly not liable for the Gross Philippine Billings tax.
SECOND ISSUE
Is Air Canada, an offline international carrier selling passage documents through a general sales agent in
the Philippines, a resident foreign corporation (RFC) within the meaning of Section 28 (A)(1) of the 1997 NIRC?
HELD
YES. “Doing business" in the Philippines includes “appointing representatives or distributors, operating
under full control of the foreign corporation, domiciled in the Philippines or who in any calendar year stay in the
country for a period or periods totalling 180 days or more.” Therefore, Air Canada, undoubtedly "doing business"
or "engaged in trade or business" in the Philippines. It is an RFC that is taxable on its income derived from sources
within the Philippines. Air Canada’s income from sale of airline tickets, through Aerotel, is income realized from
the pursuit of its business activities in the Philippines. However, the application of the regular 32% tax rate (now
30%) under Sec. 28(A)(1) of the 1997 NIRC must consider the existence of an effective tax treaty between the
Philippines and the home country of the foreign air carrier. Pursuant to Article 8 of the Philippines-Canada Tax
Treaty, Air Canada may only be imposed a maximum tax of 1 1/2 % of its gross revenues earned from the sale of
its tickets in the Philippines.
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LG ELECTRONICS PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 165451 | December 3, 2014.
National Taxation: Income Tax: Withholding tax
DOCTRINE
Income tax is different from withholding tax. A withholding tax is merely a method of collecting income
tax in advance.
FACTS
LG Electronics Philippines, Inc. (LG), a corporation duly organized and existing under the laws of the
Philippines, received a Formal Assessment Notice and Demand Letter from the BIR. LG was assessed deficiency
income tax. The deficiency was computed on the basis of (a) disallowed interest expenses for being unsupported;
(b) disallowed salary expenses for not being subjected to withholding tax on compensation; (c) imputation of
alleged undeclared sales; and (d) disallowed brokerage fees for not being subjected to expanded withholding tax.
LG filed an administrative protest with the BIR against the tax assessment. Without waiting for the resolution of
the CIR on the protest, LG filed a Petition for Review before the CTA. The CTA ruled that LG was liable on the
income tax. LG filed a Manifestation stating that it availed itself of the tax amnesty provided under R.A. No. 9480.
The BIR issued a ruling which held that LG complied with the provisions of R.A. No. 9480. Thus, LG is entitled to
the immunities and privileges provided for under the law. In its comment, the CIR averred that LG cannot claim
the tax amnesty provided under R.A. No. 9480 for the following reasons: (1) cases that have already been favorably
ruled upon by the trial court or appellate courts prior to the availment of tax amnesty are not covered; and (2) LG’s
case involves withholding taxes that are not covered by the Tax Amnesty Act.
ISSUE
Does LG Electronics’ case involve withholding taxes, and hence not covered by the Tax Amnesty Act?
HELD
NO. Income tax is different from withholding tax. Income tax is the tax on all yearly profits arising from
property, professions, trades or offices, or as a tax on a person’s income, emoluments, profits and the like. On the
other hand, withholding tax is a method of collecting income tax in advance. The cause of action for failure to
withhold taxes is different from the cause of action arising from non-payment of income taxes. In this case, LG
was assessed for its deficiency income taxes due to the disallowance of several items for deduction on its gross
income because of its failure to fully substantiate its claim of remittance through receipts or relevant documents.
LG was not assessed for its liability as a withholding agent. The two liabilities are distinct from and must not be
confused with each other.
ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 167679 | July 22, 2015
DOCTRINE
The obligation of the payor/employer to deduct and withhold the related withholding tax arises at the time
the income was paid or accrued or recorded as an expense in the payor's/employer's books, whichever comes
first.
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FACTS
as a branch in the Philippines. ING Bank received a Final Assessment Notice and thereafter filed a Petition for
Review before the CTA to seek the cancellation and withdrawal of such deficiency tax assessments. The CTA
Second Division rendered its decision upholding some of the assessments and cancelling the others. The CIR and
ING Bank led their respective Motions for Reconsideration which were both denied. ING Bank’s appeal before
the CTA En Banc was also dismissed. Thus this Petition for Review appealing the decision of the CTA En Banc.
ING Bank averred, among others, that they are not liable for the deficiency withholding tax on compensation for
the accrued bonuses in the taxable years 1996 and 1997 because these were not distributed to their employees
during those taxable years and therefore, were not yet subject to withholding tax.
ISSUE
Is ING Bank liable for deficiency withholding tax on accrued bonuses for the taxable years 1996 and
1997?
HELD
YES. Section 72 of the 1977 NIRC (Section 79 of the 1997 NIRC) provides that every employer making
payment of wages shall deduct and withhold upon such wages a tax determined in accordance with the law.
Moreover, Section 29(j) of the 1977 NIRC (Section 34(K) of the 1997 NIRC) expressly provides that the tax required
to be withheld on the amount paid or payable shall be shown to have been remitted to the BIR by the taxpayer
constituted as a withholding agent of the government in order to be allowed as a deduction. Reading the two
provisions together, the Supreme Court held that the obligation of the payor/employer to deduct and withhold the
related withholding tax arises at the time the income was paid or accrued or recorded as an expense in the
payor's/employer's books, whichever comes first. Since ING Bank accrued or recorded the bonuses as deductible
expenses in its books, its obligation to withhold the related withholding tax due from the deductions for accrued
bonuses therefore arose at the time of accrual and not at the time of actual payment. Taxes withheld are creditable
in nature. Thus, the employee is still required to file an income tax return to report the income, and/or pay the
difference between the tax withheld and the tax due on the income. In case of over withholding, the excess is
refunded to the employee. Here, ING Bank already recognized a definite liability on its part when it deducted as
business expense from its gross income the accrued bonuses due to its employees. Therefore, ING Bank is liable
for deficiency withholding tax on such accrued bonuses.
PHILIPPINE AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. Nos. 206079-80 & 206309 | January 17, 2018
DOCTRINE
Proof of actual remittance is not necessary for claiming refunds. It is the responsibility of the withholding
agent and not of the taxpayer-refund claimant. To claim a refund on unutilized tax credits, the taxpayer needs only
to prove that taxes were withheld.
FACTS
Philippine Airlines (PAL) asserts that it is entitled to a refund of the final taxes withheld on its interest
income from its peso and dollar deposits with China Banking Corporation (Chinabank), JP Morgan Chase Bank
(JPMorgan), Philippine Bank of Communications (PBCom), and Standard Chartered Bank (Standard Chartered)
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(collectively, Agent Banks) because it is exempted from paying the tax on interest income under its franchise,
Presidential Decree No. 1590. The CIR refused to grant the claim, arguing that PAL failed to provide proof of the
remittance of the withheld taxes to the BIR. The CTA (First Division) denied the refund of taxes withheld by the
Agent Banks, with the exception of JPMorgan, as the presented documents only showed the total amount of final
taxes withheld for all branches of these Agent Banks and could not be ascertained with particularity from the total
amount of withholding final taxes that were remitted to the BIR. PAL was able to prove the remittance of the taxes
withheld by JPMorgan. The CTA En Banc affirmed the First Division’s decisions. Both parties assailed the decisions
to the Supreme Court.
ISSUE
Is proof of remittance to the BIR of the final withholding tax necessary for PAL to claim a refund?
HELD
NO. Proof of actual remittance is not a condition to claim for a refund of unutilized tax credits. PAL is not
obliged to remit, nor prove the remittance of the taxes withheld. Section 2.58.3 (B) of Revenue Regulations No. 2-
98 clearly provides that the proof of remittance is the responsibility of the withholding agent and not of the
taxpayer-refund claimant. When a particular income is subject to a final withholding tax, it means that a
withholding agent will withhold the tax due from the income earned and remit it to the BIR. Thus, the liability for
remitting the tax is on the withholding agent. Here, the particular income is the interest income and PAL is the
income earner and the payee of the final withholding tax while the Agent Banks are the withholding agents who
are the payors responsible for the deduction and remittance of tax. Should the BIR find that the taxes were not
properly remitted, its action is against the withholding agent, and not the taxpayer. PAL is entitled to claim refund
on its final taxes since under PD No. 1590, PAL is not liable to pay the said taxes to the government and needs
only to prove that the final taxes were withheld by its Agent Banks. The Certificates of Final Taxes Withheld issued
by the Agent Banks are prima facie proof of actual payment by payee-refund claimant to the government through
its agent banks and is sufficient proof that final taxes were withheld.
COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE NATIONAL BANK

G.R. No. 180290 | September 29, 2014
DOCTRINE
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. Proof of actual
remittance is not a condition to claim for a refund of unutilized tax credits.
FACTS
In several transactions including but not limited to the sale of real properties, lease and commissions,
Philippine National Bank (PNB) earned income and paid the corresponding income taxes due which were
collected and remitted by various payors as withholding agents to the BIR during the taxable year 2000. PNB filed
a claim for refund or the issuance of a tax credit certificate with BIR for its excess creditable withholding taxes for
taxable year 2000. Due to BIR’s inaction on its administrative claim, PNB appealed before the CTA by way of a
Petition for Review. The CTA granted the petition and ordered the BIR to refund or issue a tax credit petitioner to
PNB. The CIR questions the validity of PNB's certificates of creditable tax withheld at source (withholding tax
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certificates) and contends that even if the original certificates were offered in evidence, PNB failed to present the
various withholding agents to: (1) identify and testify on their contents; and (2) prove the subsequent remittance
of the withheld taxes to the BIR.
ISSUE
Is the presentation of the creditable withholding tax certificates by PNB sufficient to prove its claim for
refund or the issuance of a tax credit certificate on its excess creditable withholding taxes?
HELD
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. It is
complete in the relevant details which would aid the courts in the evaluation of any claim for refund of creditable
withholding taxes. Moreover, 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 NIRC.
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 CIR to prove that (1) the
certificate is not complete; (2) it is false; or (3) it was not issued regularly.
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 NIRC, as amended, it is the payor-withholding agent, and not the payee-refund claimant
such as PNB, who is vested with the responsibility of withholding and remitting income taxes. Proof of remittance
is the responsibility of the withholding agent and not of the taxpayer-refund claimant.
STEAG STATE POWER INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 205282 | January 14, 2019
National Taxation: Value-added Tax: Refund or tax credit of input tax
DOCTRINE
Section 112 of the Tax Code4 reveals that a taxpayer may appeal the Commissioner's denial or inaction
only within 30 days when the decision that denies the claim is received, or when the 120-day period given to the
Commissioner to decide on the claim expires. Under the same section, only the administrative claim for refund of
input VAT must be filed within the two (2)-year prescriptive period, the judicial claim need not be. BIR Ruling No.
DA-489-03 contemplates premature filing and not late fling. Late filing, or beyond the 30-day period, is absolutely
prohibited, even when BIR Ruling No. DA-489-03 was in force.
FACTS
From June 2005 to December 2005, Steag State Power Inc. (Steag) filed before the BIR administrative
claims for refund of its allegedly unutilized input VAT payments on capital goods. Due to BIR's inaction, Steag
filed a Petition for Review on Certiorari before the CTA, elevating its claim for refund for the taxable year 2004.
Thereafter, it sought judicial recourse involving its claim for refund for the taxable year 2005. The CTA denied the
petitions because the appeals for the administrative claims for refund of input taxes were untimely filed. Steag
4 Republic Act No. 10963 (TRAIN), effective January 1, 2018, has shorten the period within which the BIR shall grant a refund of the excess unutilized input VAT from 120 days to
90 days. Sec. 112(C), as amended by Section 36 of R.A. 10963 provides that: “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. xxx In case of full or 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”.
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insists that its claims were timely because although they were filed beyond the 120+30-day periods under Section
112 of the Tax Code, they were nonetheless filed within the two (2)-year period under Section 229 of the same
law. Steag further asserts that the window created in San Roque Power Corporation by BIR Ruling No. DA-489-
03, which excludes from the 120+30-day periods prematurely filed judicial claims from December 10, 2003 to
October 6, 2010 — when Aichi Forging Company of Asia, Inc. was promulgated — should also extend to claims
belatedly filed.
ISSUE
Were Steag State Power’s judicial claims timely filed?
HELD
NO. Section 112 of the Tax Code reveals that a taxpayer may appeal the Commissioner's denial or
inaction only within 30 days when the decision denying the claim is received, or when the 120-day period given
to the Commissioner to decide on the claim expires (inaction). Here, Steag's judicial claims were filed on April
20, 2006 and December 27, 2006 which is beyond the 30-day period to appeal. Hence, the CTA lost its
jurisdiction over the petitions. Claims for refund or tax credit of excess input tax are governed not by Section 229,
but by Section 112 of the Tax Code which states that only the administrative claim for refund of input VAT must
be filed within the two (2)-year prescriptive period, the judicial claim need not be. The phrase "within two (2)
years'' refers to administrative claims for refund or credit filed with the CIR, not to appeals made before the CTA.
Furthermore, while BIR Ruling No. DA-489-03 was in effect when it filed its claim, the rule nonetheless cannot
be properly invoked because it contemplates premature filing, not late filing. The Court further emphasized that
late filing, or beyond the 30-day period, is absolutely prohibited, even when BIR Ruling No. DA-489-03 was in
force.
CE LUZON GEOTHERMAL POWER CO., INC v. COMMISSIONER OF INTERAL REVENUE

G.R No. 197526 & 199676-77 | July 26, 2017
DOCTRINE
The 120-day and 30-day reglementary periods under Section 112(C) of the NIRC are both mandatory and
jurisdictional. Non-compliance with these periods renders a judicial claim for refund of creditable input tax
premature. As an exception, a judicial claim for VAT refund which was filed with the CTA before the lapse of the
120--day period is considered to have been timely made if such filing occurred on or after Dec. 10, 2003 (date of
issuance of BIR Ruling No. DA--489--03) but before Oct. 6, 2010 (date of promulgation of Aichi case).
FACTS
In the course of its operations, CE Luzon incurred unutilized creditable input tax for taxable year 2003.
CE Luzon filed before the BIR an administrative claim for refund of its unutilized creditable input tax for the four
taxable quarters in 2003. Without waiting for the CIR to act on its claim, or upon the expiration of 120 days, CE
Luzon instituted before the CTA a judicial claim for refund of its first quarter unutilized creditable input tax on
March 30, 2005. The CTA En Banc ruled that CE Luzon failed to observe the 120-day period under Section 112(C)
of the NIRC. Hence, it was barred from claiming a refund of its input VAT for taxable year 2003. The CTA En Banc
held that CE Luzon's judicial claims were prematurely filed. CE Luzon should have waited either for the CIR to
render a decision or for the 120-day period to expire before instituting its judicial claim for refund. In its first
Petition, CE Luzon asserts that its judicial claims for refund of input VAT attributable to its zero-rated sales were
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timely filed. Relying on Atlas Consolidated Mining and Development Corporation v. CIR, CE Luzon argues that
the two (2)-year prescriptive period under Section 229 of the NIRC governs both the administrative and judicial
claims for refund of creditable input tax. CE Luzon contends that creditable input tax attributable to zero-rated
sales is excessively collected tax.
ISSUE
Were CE Luzon's judicial claims for refund of input VAT for taxable year 2003 timely filed?
HELD
YES. Excess input tax or creditable input tax is not an erroneously, excessively, or illegally collected tax.
Hence, it is Section 112(C) and not Section 229 of the NIRC that governs claims for refund of creditable input tax.
Section 112(C) provides that taxpayers must await either for the decision of the CIR or for the lapse of 120 days
before filing their judicial claims with the CTA. Failure to observe the 120-day period renders the judicial claim
premature. However, despite its non-compliance with Section 112(C) of the NIRC, CE Luzon's judicial claims are
shielded from the vice of prematurity. It relied on the BIR Ruling DA-489-03, which expressly states 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." Taxpayers who have relied on the BIR Ruling DA-489-03, from its issuance
on December 10, 2003 until its reversal on October 6, 2010 by this Court in Aichi, are, therefore, shielded from
the vice of prematurity.
CBK POWER CO., LTD. v. COMMISSIONER OF INTERNAL REVENUE

G.R. Nos. 202066 & 205353 | September 30, 2014
DOCTRINE
As an exception to the mandatory 120 + 30 day period, a judicial claim for VAT refund which was filed
with the CTA before the lapse of the 120--day period is considered to have been timely made if such filing occurred
on or after Dec. 10, 2003 (date of issuance of BIR Ruling No. DA--489--03) but before Oct. 6, 2010 (date of
promulgation of Aichi case).
FACTS
CBK Power Company Limited (CBK) is a VAT-registered domestic partnership with the purpose of
financing, construction, commissioning, operation, maintenance, management, rehabilitation and ownership of
various hydroelectric power plants. In the first case, CBK filed an administrative claim on March 26, 2009 with
the BIR for the issuance of a tax credit certificate for the unutilized input taxes for the year 2007. On March 27,
2009, CBK filed a petition for review with the CTA since the CIR had not yet issued a final decision on its
administrative claim. The CTA Division granted CIR's motion and dismissed the petition.
In the second case, CBK filed an administrative claim on March 31, 2008 for the issuance of a tax credit
certificate for the unutilized input tax for the 1st Quarter of 2006. On April 23, 2008, CBK filed a petition for
review with the CTA for CIR’s inaction. On July 23, 2008, another administrative claim was filed with BIR for the
issuance of a tax credit certificate for the unutilized input tax for 2nd to 4th Quarter of 2006. On July 24, 2008 a
petition for review was filed with the CTA. The CTA consolidated these two petitions on judicial claims for
unutilized input tax for the taxable year of 2006. CTA dismissed the consolidated cases for having been
prematurely filed.
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ISSUE
Were CBK Power's judicial claims for the issuance of tax credit certificates timely filed?
HELD
YES. Section 112 (C) of the Tax Code, reveals that the taxpayer may appeal the denial or the inaction of
the CIR only within 30 days from receipt of the decision that denied the claim or the expiration of the 120-day
period given to the Commissioner to decide on the claim. In CIR v. San Roque Power Corporation, the Court held
that compliance with the 120-day and the 30-day periods under Section 112 of the Tax Code, save for those VAT
refund cases that were prematurely (i.e., before the lapse of the 120-day period) filed with the CTA between
December 10, 2003 (when the BIR Ruling No. DA-489-03 was issued) and October 6, 2010, is mandatory and
jurisdictional.
In the first case, CBK filed its judicial claim on March 27, 2009, only a day after it had filed its
administrative claim on March 26, 2009. In the second case, CBK filed its judicial claim on April 23, 2008 for the
1st taxable quarter of 2006, just 23 days after it had filed its administrative claim on March 31, 2008. CBK also
filed its judicial claim on July 24, 2008 for the 2nd to 4th taxable quarters of 2006, only a day after it had filed its
administrative claim on July 23, 2008. Clearly, CBK failed to comply with the 120-day waiting period, the time
expressly given by law to the CIR to decide whether to grant or deny its application for tax refund or credit.
Nevertheless, since the judicial claims were filed within the window created in the San Roque Case, the petitions
are exempted from the strict application of the 120-day mandatory period.
CE CASECNAN WATER AND ENERGY COMPANY, INC. v. COMMISSIONER OF INTERNAL

REVENUE
G.R No. 203928 | July 22, 2015
DOCTRINE
The 30-day period provided in Section 112 of NIRC to appeal the decision of the CIR or its inaction is
statutorily provided. Failure to comply is a jurisdictional error. The window of exemption created in CIR v. San
Roque Power Corporation is limited to premature filing of the judicial remedy. It does not cure lack of jurisdiction
due to late filing.
FACTS
For the first to fourth quarters of 2006, CE Casecnan had unutilized input VAT credits from its domestic
purchases of goods, services rendered by non-residents, and importation of non-capital goods. From the total
accumulated input VAT, only a partial amount was attributable to CE Casecnan's zero-rated sales of power
generation services to the National Irrigation Administration for the first to fourth quarters of 2006. On September
26, 2007, CE Casecnan filed before the BIR an administrative claim for refund or issuance of tax credit certificate
for the excess or unutilized input VAT. Due to the inaction of the CIR on its administrative claim, CE Casecnan
filed a Petition for Review with CTA on March 14, 2008, which was denied. The CTA ruled that the one hundred
twenty (120)- and thirty (30)-day periods under Section 112(c) of the Tax Code are mandatory, and noncompliance
is fatal to a judicial claim for refund. Hence this petition. CE Casecnan submits that the benefits of the BIR Ruling
No. DA-489-03 should also be extended to judicial claims filed beyond the thirty (30)-day period set forth in
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Section 112 of the Tax Code because the import of the BIR Ruling was that it was the two-year prescriptive period
under Section 229 that had jurisdictional significance.
ISSUE
Did the CTA err in denying CE Casecan’s claim for refund due to prescription?
HELD
NO. CE Casecnan's judicial claim was filed beyond the 30-day period required in Section 112(c) of the
Tax Code. The administrative claim for refund was filed on September 26, 2007. Thus, the 120-day period for the
BIR to act on the claim lapsed on January 24, 2008. CE Casecnan had until February 23, 2008 to file a petition
before the CTA, but it filed its appeal only on March 14, 2008. Hence, CE Casecnan was late by 19 days.
Reliance on administrative interpretation of an otherwise clear and plain provision of our tax statutes has
a tendency to encourage regulatory capture. In this case, there is even no rule, regulation, or doctrine to support
CE Casecnan’s stance. Clearly, the thirty (30)-day statutory period within which to file a petition for review is
jurisdictional. Non-compliance bars the CTA from taking cognizance of the appeal and determining the veracity
of the tax refund or credit claim.
TEAM ENERGY CORP. v. COMMISSIONER OF INTERNAL REVENUE

G.R. Nos. 197663 & 197770 | March 14, 2018
DOCTRINE
For a judicial claim for VAT refund to prosper, the claim must not only be filed within the mandatory 120
+ 30 day periods. The taxpayer must also prove the factual basis of its claim and comply with the 1997 NIRC
invoicing requirements and other appropriate revenue regulations. Input VAT payments on local purchases of
goods or services must be substantiated with VAT invoices or official receipts, respectively.
FACTS
Team Energy is a VAT-registered entity engaged in power generation and electricity sale to National Power
Corporation (NPC). It filed an “Application for Effective Zero-Rate of its supply of electricity to NPC”, which was
subsequently approved. On December 17, 2004, it filed with the BIR a claim for refund of unutilized input VAT
for the 1st to 4th quarters of the taxable year 2003. On April 22, 2005, Team Energy appealed before the CTA its
VAT claim for the 1st Quarter of 2003. The CIR opposed and averred that the amount claimed was not properly
documented and that NPC's exemption from taxes did not extend to its electricity supplier. On July 22, 2005 Team
Energy appealed its VAT refund claims for the 2nd to 4th quarters of 2003. The CTA partially granted Team Energy’s
petition. It held that Team Energy's judicial claim for refund for the 2nd to 4th quarters of 2003 was filed beyond
the 30-day period prescribed under Section 112 of the 1997 NIRC. Consequently, the claim for these quarters
must be denied for lack of jurisdiction. Furthermore, it reduced Team Energy’s amount of claim. The disallowance
was due to Team Energy’s failure to comply with the substantiation requirements.
FIRST ISSUE
Is the 120+30-day period in Section 112 a mandatory and jurisdictional condition?
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HELD
YES. A claim for input VAT refund or credit is construed strictly against the taxpayer. The 120+30 day
periods in Section 112 is not a mere procedural technicality that can be set aside if the claim is otherwise
meritorious. Team Energy's judicial claim was filed beyond the 30-day period. Since the administrative claim for
refund was filed on December 17, 2004, the BIR had 120 days or until April 16, 2005 to act on the claim. Team
Energy had until May 16, 2005 to file a petition with the CTA but filed its appeal only on July 22, 2005, or 67 days
later. Thus, the CTA correctly denied its claim for refund due to prescription.
SECOND ISSUE
Did the CTA err in failing to recognize the interchangeability of VAT invoices and VAT official receipts?
HELD
NO. Claimants of tax refunds have the burden to prove their entitlement to the claim. Section 113 on
invoicing requirements must be read in conjunction with Sections 106 and 108, which specifically sets forth sales
invoices for sales of goods and official receipts for sales of services. To claim a refund of unutilized or excess input
VAT, purchase of goods or properties must be supported by VAT invoices, while purchase of services must be
supported by VAT official receipts. Strict compliance with substantiation and invoicing requirements is necessary
considering VAT's nature and VAT system's tax credit method, where tax payments are based on output and input
taxes and where the seller's output tax becomes the buyer's input tax that is available as tax credit or refund in the
same transaction.
LA SUERTE CIGAR AND CIGARETTE FACTORY V. COURT OF APPEALS

G.R. Nos. 125346, 136328-29, 144942, 148605, 158197 & 165499 | November 11, 2014
National Taxation: Excise Tax: Concept and Nature
DOCTRINE
While a stemmed leaf tobacco, being a partially prepared tobacco, is subject to excise tax; stemmed leaf
tobacco transferred in bulk between cigarette manufacturers are exempt from excise tax. The importation of
stemmed leaf tobacco is not included in the exemption.
FACTS
La Suerte Cigar & Cigarette Factory (La Suerte) received a letter from the BIR demanding the payment of
deficiency excise tax on La Suerte's entire importation and local purchase of stemmed leaf tobacco. La Suerte
protested the excise tax deficiency assessment, stressing that the tax assessment was based solely on Section
141(b)5 of the Tax Code without, however, applying Section 137 thereof, the more specific provision, which
expressly allows the sale of stemmed leaf tobacco as raw material by one manufacturer directly to another without
payment of the excise tax. However, BIR denied La Suerte's protest, insisting that stemmed leaf tobacco is subject
to excise tax "unless there is an express grant of exemption from the payment of tax." The CTA cancelled the
assessment of alleged deficiency specific tax. On appeal, the Court of Appeals ruled against La Suerte and found
that Revenue Regulations (RR) No. V-39 limits the tax exemption on transfers of stemmed leaf tobacco to transfers
between two L-76 permittees.
5 Sections 137 (Removal of tobacco products without prepayment of tax) and 141 (Tobacco Products) under the 1986 Tax Code, as amended by Executive Order No.
273 are renumbered as Sections 140 and 144 under the National Internal Revenue Code of 1997, as amended by the TRAIN Law.
6 L-7, the Official Register Book on record of raw materials for manufacturers of any class of tobacco products
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FIRST ISSUE
Is stemmed leaf tobacco subject to excise tax under Section 141 of the 1986 Tax Code?
HELD
YES. It is evident that when tobacco is harvested and processed either by hand or by machine, all its
products become subject to excise tax. Section 141 reveals the legislative policy to tax all forms of manufactured
tobacco — in contrast to raw tobacco leaves — including tobacco refuse or all other tobacco which has been cut,
split, twisted, or pressed and is capable of being smoked without further industrial processing. Stemmed leaf
tobacco is subject to the excise tax under Section 141(b) since it is a partially prepared tobacco. The removal of
the stem or midrib from the leaf tobacco makes the resulting stemmed leaf tobacco a prepared or partially prepared
tobacco.
SECOND ISSUE
Does Section 137 of the 1986 Tax Code exempt an L-7 manufacturer from paying said tax on its purchase
of stemmed leaf tobacco from other manufacturers who are not classified as L-7 permittees?
HELD
YES. Stemmed leaf tobacco transferred in bulk between cigarette manufacturers are exempt from excise
tax under Section 137 of the 1986 Tax Code vis-a-vis RR Nos. V-39 and 17-67. Section 137 authorizes a tax
exemption subject to the following: (1) that the stemmed leaf tobacco is sold in bulk as raw material by one
manufacturer directly to another; and (2) that the sale or transfer has complied with the conditions prescribed by
the Department of Finance. Under RR No. V-39, the conditions under which stemmed leaf tobacco may be
transferred from one factory to another without prepayment of specific tax are as follows: (a) The transfer shall be
under an official L-7 invoice on which shall be entered the exact weight of the tobacco at the time of its removal;
(b) Entry shall be made in the L-7 register in the place provided on the page for removals; and (c) Corresponding
debit entry shall be made in the L-7 register book of the factory receiving the tobacco under the heading, "Refuse,
etc., received from the other factory," showing the date of receipt, assessment and invoice numbers, name and
address of the consignor, form in which received, and the weight of the tobacco. Under Section 3 (h) of RR No.
17-67, entities that were issued by the BIR with an L-7 permit refer to "manufacturers of tobacco products." Hence,
the transferor and transferee of the stemmed leaf tobacco must be an L-7 tobacco manufacturer. La Campaña
explained that the reason behind the tax exemption of stemmed leaf tobacco transferred between two L-7
manufacturers is that the same had already been previously taxed when acquired by the L-7 manufacturer from
dealers of tobacco. There is no new product when stemmed leaf tobacco is transferred between two L-7 permit
holders. Thus, there can be no excise tax that will attach.
THIRD ISSUE
May the possessor or owner of stemmed leaf tobacco be held liable for the payment of specific tax if such
tobacco product is removed from the place of production without payment of said tax?
HELD
YES. The importation of stemmed leaf tobacco is not included in the exemption under Section 137. The
transaction contemplated in Section 137 does not include importation of stemmed leaf tobacco for the reason that
the law uses the word "sold" to describe the transaction of transferring the raw materials from one manufacturer to
another. The Tax Code treats an importer and a manufacturer differently.
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COMMISSIONER OF INTERNAL REVENUE v. SAN MIGUEL CORP.
G.R. Nos. 205045 & 205723 | January 25, 2017
National Taxation: Excise Tax: Concept and Nature
DOCTRINES
A 'variant of brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name
of the brand and/or a different brand which carries the same logo or design of the existing brand. 'New brand'
shall mean a brand registered after the date of effectivity of R.A. No. 8240.
Any reclassification of fermented liquor products should be by act of Congress to deter the potential for
abuse if the power to reclassify is delegated and much discretion is given to the Department of Finance and BIR.
FACTS
In 1999, San Miguel Corporation (SMC) requested for the registration of and authority to manufacture "San
Mig Light," to be taxed at P12.15 per liter. This was granted. Thereafter, SMC requested information on the tax
rate and classification of "San Mig Light" and another beer product "Gold Eagle King." The BIR confirmed that SMC
was allowed to register, manufacture, and sell "San Mig Light" as a new brand, had been paying its excise tax, and
the tax classification and rate of "San Mig Light" as a new brand were in order.
However, the BIR issued a Notice of Discrepancy stating that "San Mig Light" was a variant of its existing
beer products and must be subjected to the higher excise tax rate for variants. It also demanded payments of
deficiency excise tax for years 1999 to April 2002. SMC requested the withdrawal of the Notice of Discrepancy.
A Preliminary Assessment Notice (PAN) was issued for deficiency excise tax from 1999 to January 7, 2004.
Accordingly, the BIR issued a PAN representing deficiency excise tax from January 8, 2004 to January 29, 2004.
Two Formal Letters of Demand with the accompanying Final Assessment Notice (FAN) were issued. SMC filed a
Protest/Request for Reconsideration but the same was denied for lack of legal and factual basis.
FIRST ISSUE
Is “San Mig Light” a new brand and not a variant of “San Miguel Pale Pilsen”?
HELD
YES. The excise tax on beer is a specific tax based on volume, or on a per liter basis.7 Before the
amendment, Section 143 provided for three layers of tax rates, depending on the net retail price per liter. How a
new beer product is taxed depends on its classification, i.e., whether it is a variant of an existing brand or a new
brand. Variants of a brand that were introduced in the market after January 1, 1997 are taxed under the highest
tax classification of any variant of the brand. On the other hand, new brands are initially classified and taxed
according to their suggested net retail price, until a survey is conducted by the BIR to determine their current net
retail price in accordance with the specified procedure.
A 'variant of brand' shall refer to a brand on which a modifier is prefixed and/or suffixed to the root name of
the brand and/or a different brand which carries the same logo or design of the existing brand. 'New brand'
shall mean a brand registered after the date of effectivity of R.A. No. 8240.
7 On December 19, 2012, Rep. Act No. 10351, otherwise known as the Sin Tax Law, was promulgated to further amend certain provisions on excise taxes on alcohol and
tobacco products.
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A variant under the Tax Code has a technical meaning. It is determined by the brand (name) or logo of the
beer product. A variant is determined by the brand of the beer product, whether it was formed by prefixing or
suffixing a modifier to the root name of the alleged parent brand, or whether it carries the same logo or design.
The purpose behind the definition was to properly tax brands that were presumed to be riding on the popularity
of previously registered brands by being marketed under an almost identical name with a prefix, suffix, or a
variant. "San Mig Light" and "Pale Pilsen" do not share a root word. Neither is there an existing brand in the
list called "San Mig" to conclude that "Light" is a suffix rendering "San Mig Light" as its "variant." Thus, the
deficiency excise tax assessments issued by the BIR are not valid. SMC’s payment of the higher taxes after
deficiency assessments were made cannot be considered as an admission that its San Mig Light is a variant.
These payments were made in protest as SMC subsequently filed refund claims.
SECOND ISSUE
Can BIR validly reclassify brands?
HELD
NO. Any reclassification of fermented liquor products should be by act of Congress. The legislative intent
behind the classification freeze is to deter the potential for abuse if the power to reclassify is delegated and much
discretion is given to the Department of Finance and BIR. SMC's letters and Notices of Discrepancy, which
effectively changed San Mig Light's brand's classification from "new brand to variant of existing brand," necessarily
changes San Mig Light's tax bracket. A reclassification of a fermented liquor brand introduced between January 1,
1997 and December 31, 2003, such as "San Mig Light," must be by act of Congress. There was none in this case.
THIRD ISSUE
Is the government estopped from correcting previous errors by its agents?
HELD
YES. While estoppel generally does not apply against government, especially when the case involves the
collection of taxes, an exception can be made when the application of the rule will cause injustice against an
innocent party. SMC had already acquired a vested right on the tax classification of its San Mig Light as a new
brand. To allow BIR to change its position will result in deficiency assessments in substantial amounts against SMC
to the latter's prejudice. The authority of the BIR to overrule, correct, or reverse the mistakes or errors of its agents
is conceded. However, this authority must be exercised reasonably, i.e., only when the action or ruling is patently
erroneous or patently contrary to law.
ING BANK v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 167679 | April 20, 2016.
National Taxation: Documentary Stamp Tax: Concept and Nature
DOCTRINE
A documentary stamp tax is a tax on documents, instruments, loan agreements, and papers evidencing
the acceptance, assignment, sale, or transfer of an obligation, right, or property levied on the exercise by persons
of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships
through the execution of such specific instruments. The law taxes the document because of the transaction and all
parties to the transaction are primarily liable for the documentary stamp tax.
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FACTS
as a branch in the Philippines. ING Bank received a Final Assessment Notice and thereafter filed a Petition for
Review before the CTA to seek the cancellation and withdrawal of such deficiency tax assessments. The CTA
Second Division rendered its decision upholding some of the assessments and cancelling the others. The CIR and
ING Bank led their respective Motions for Reconsideration which were both denied. ING Bank’s appeal before
the CTA En Banc was also dismissed. ING Bank filed a Petition for Review appealing the decision of the CTA En
Banc. The Supreme Court set aside the assessments for deficiency documentary stamp taxes on ING Bank's special
savings accounts for the taxable years 1996 and 1997 in view of its availment of the tax amnesty program under
Republic Act No. 9480. CIR filed a Motion for Partial Reconsideration arguing that the documentary stamp taxes
in question are not covered by the tax amnesty law pursuant to Revenue Memorandum Circular Nos. 69-2007
and 19-2008 for being taxes passed-on and collected from customers for remittance to the BIR.
ISSUE
Are documentary stamp taxes passed-on taxes, and hence, excluded from the tax amnesty granted by
Republic Act No. 9480?
HELD
NO. Documentary stamp taxes are not excluded from the tax amnesty granted by Republic Act No. 9480.
Documentary stamp taxes on special savings accounts are direct liabilities of ING Bank and not simply taxes
passed-on and collected from customers for remittance to the BIR. A documentary stamp tax is a tax on documents,
instruments, loan agreements, and papers evidencing the acceptance, assignment, sale, or transfer of an obligation,
right, or property levied on the exercise by persons of certain privileges conferred by law for the creation, revision,
or termination of specific legal relationships through the execution of such specific instruments. The law taxes the
document because of the transaction and all parties to the transaction are primarily liable for the documentary
stamp tax. Therefore, Documentary stamp taxes are one of the taxes covered by the Tax Amnesty Law of 2007.
COMMISSIONER OF INTERNAL REVENUE v. AVON PRODUCTS MANUFACTURING, INC.

G.R. Nos. 201398-99 & 201418-19 | October 3, 2018
National Taxation: Tax Remedies under the NIRC: Procedural due process in tax assessments
DOCTRINE
Tax assessments issued in violation of the due process rights of a taxpayer are null and void. The NIRC
and revenue regulations allow a taxpayer to file a reply or otherwise to submit comments or arguments with
supporting documents at each stage in the assessment process. Due process requires the BIR to consider the
defenses and evidence submitted by the taxpayer and to render a decision based on these submissions. Failure to
adhere to these requirements constitutes a denial of due process and taints the administrative proceedings with
invalidity.
FACTS
Avon filed its VAT Returns and Monthly Remittance Returns of Income Tax Withheld for the taxable year
1999. Subsequently, Avon signed two (2) Waivers of the Defense of Prescription. On July 14, 2004, Avon was
served a Collection Letter. These deficiency assessments were the same deficiency taxes covered by the
Preliminary Assessment Notice (PAN) received by Avon. Avon filed a protest against the PAN. Without ruling on
it, the CIR prepared the Formal Letter of Demand and Final Assessment Notices (FAN). Avon protested the FAN
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by re-submitting its protest to the PAN and adopted the same as its protest to the FAN. A conference was allegedly
held where Avon informed revenue officers that all the documents necessary to support its defenses had been
submitted. During these meetings, the revenue officers allegedly expressed that they would cancel the assessments
resulting from the alleged discrepancy in sales if Avon would pay part of the assessments. Thus, Avon paid the
portions of FAN. However, the BIR enforced the collection of the assessments on the sole justification that Avon
failed to submit supporting documents within the 60-day period as required under Section 228 of the Tax Code.
Avon requested the reconsideration, but BIR did not act on it. Thus, Avon was constrained to treat the Collection
Letter as denial of its protest. On August 13, 2004, Avon filed a Petition for Review before the CTA, which partially
granted it. CTA also made a pronouncement that there was no deprivation of due process in the issuance by the
CIR of the assessment, which was affirmed by CTA En Banc.
FIRST ISSUE
Are the assessments of BIR void for failure to observe administrative due process?
HELD
YES. The BIR is the primary agency tasked to assess and collect proper taxes, and to administer and enforce
the Tax Code. However, these powers must "be exercised reasonably and under the prescribed procedure." The
Commissioner and revenue officers must strictly comply with the requirements of the law, with the BIR's own
rules, and with due regard to taxpayers' constitutional rights. In this case, CIR ignored all of its protests and
submissions to contest the deficiency tax assessments. CIR issued identical PAN, FAN, and Collection Letters
without considering Avon's submissions or its partial payment of the assessments. Thus, Avon was not accorded
a real opportunity to be heard, making all of the assessments null and void.
SECOND ISSUE
Has Avon's right to appeal its protest before the CTA prescribed?
HELD
NO. Sec 228 of NIRC provides that “If the protest is denied in whole or in part, or is not acted upon within
one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or
inaction may appeal to the CTA within thirty (30) days from receipt of the said decision, or from the lapse of the
one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable.”
CIR asserts that since Avon filed its protest on May 9, 2003, it only had 30 days from November 5, 2003, i.e., the
end of the 180 days, or until December 5, 2003 within which to appeal to the CTA. As Avon only filed its appeal
on August 13, 2004, its right to appeal has prescribed. However, Section 228 of the Tax Code should be read in
conjunction with Rule 4, Section 3 of the Revised Rules of the CTA. In other words, the taxpayer has the option to
either elevate the case to the CTA if the Commissioner does not act on his or her protest, or to wait for the
Commissioner to decide on his or her protest before he or she elevates the case to the CTA. In this case, Avon
opted to wait for the final decision of the Commissioner on its protest filed on May 9, 2003. Since Avon received
the Collection Letter on July 14, 2004, its Petition for Review was timely filed on August 13, 2004.
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G.R. No. 175410 | November 12, 2014
National Taxation: Tax Remedies under the NIRC: Prescriptive period for assessment
DOCTRINE
The BIR has three (3) years from the last day prescribed by law for the filing of a return to make an
assessment. If the return is filed beyond the last day prescribed by law for filing, the three-year period shall run
from the actual date of filing.
FACTS
another PEZA-registered enterprise and was thereafter dissolved. SMI-Ed filed its quarterly income tax return in the
year 2000 and subjected the gross sales of its properties to 5% final tax on PEZA-registered corporations. After
requesting the cancellation of its PEZA registration, in 2001, SMI-Ed filed an administrative claim for refund for
taxes erroneously paid. The BIR did not act on the claim, so SMI-Ed filed a petition for review before the CTA in
2002. The CTA denied the claim for refund. It found that the sale of the properties made by SMI-Ed are subject to
capital gains tax of 6% because they were capital assets. Therefore, SMI-Ed must pay the balance of its deficiency
tax. The BIR, however, did not initiate any assessment for deficiency capital gains tax.
ISSUE
Is SMI-Ed entitled to the refund claimed?
HELD
YES. The BIR is ordered to refund SMI-Ed the amount of 5% final tax paid to the BIR, less the 6% capital
gains tax on the sale of SMI-Ed’s land and building. However, in view of the lapse of the prescriptive period for
assessment, any capital gains tax accrued from the sale of its land and building that is in excess of the 5% final tax
paid to the BIR may no longer be recovered from SMI-Ed.
SECOND ISSUE
Can BIR still assess SMI-Ed for the deficiency capital gains tax?
NO. BIR can no longer assess SMI-Ed for deficient capital gains tax since more than a decade have already
lapsed from the filing of SMI-Ed's return since this case was decided in 2014 and SMI-Ed filed its return in 2001.
SMI-Ed can longer be held liable if it is later found to have capital gains tax liabilities in excess of the amount
claimed for refund. Section 203 of the NIRC provides that as a general rule, the BIR has three (3) years from the
last day prescribed by law for the filing of a return to make an assessment. If the return is filed beyond the last day
prescribed by law for filing, the three-year period shall run from the actual date of filing.
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REPUBLIC v. GMCC UNITED DEVELOPMENT CORP.
G.R No. 191856 | December 7, 2016
DOCTRINE
For the 10-year period under Section 222(a) to apply, it is not enough that fraud is alleged in the complaint;
it must be established by clear and convincing evidence. Error in recording a tax liability in the wrong year, which
stemmed from a wrong application of the law, is not an indication of intent to evade payment. There is no fraud
in such a case.
FACTS
In 1998, an investigation by the BIR revealed that GMCC executed two dacion en pago agreements to
pay for the obligations of its sister companies. GMCC allegedly failed to declare the income it earned from these
agreements for taxation purposes in 1998. Moreover, these transactions constituted a donation in favor of GMCC's
sister companies for which GMCC failed to pay the corresponding donor's tax. The BIR also assessed the VAT over
the said transactions. In 1999, it was also discovered that GMCC sold condominium units and did not declare the
income it earned from these transactions. Thus, the BIR issued a Notice to Taxpayer to GMCC, which GMCC
ignored. BIR issued a Preliminary Assessment Notice (PAN), but it was only when the BIR issued the Final
Assessment Notice (FAN) that GMCC responded. In a Letter dated 2004, GMCC protested the issuance of FAN
citing that the period to assess and collect the tax had already prescribed. BIR denied its protest.
ISSUE
What is the applicable prescriptive period for the tax assessment – 3-year period or 10-year period?
HELD
It is the 3-year prescriptive period that applies. For the 10-year period under Section 222(a) to apply, it is
not enough that fraud is alleged in the complaint; it must be established by clear and convincing evidence. BIR,
having failed to discharge the burden of proving fraud, cannot invoke the said provision. In GMCC's case, the last
day prescribed by law for filing its 1998 tax return was April 15, 1999. Thus, BIR had three years or until 2002 to
make an assessment. Since the Preliminary Assessment was made only on December 8, 2003, the period to assess
the tax had already prescribed. BIR claims that the tax return in this case is fraudulent and thus, it is the 10-year
period, and not the 3-year period that will apply. However, there was no clear showing that there was deliberate
intent on the part of the GMCC to evade payment of the taxes. Both the State Prosecutor and the CTA emphasized
that if respondents really intended to evade payment, they would have omitted the assailed transactions completely
in all their financial statements. Thus, it is the 3-year period that applies.
COMMISSIONER OF INTERNAL REVENUE v. FITNESS BY DESIGN, INC.

G.R. No. 215957 | November 09, 2016
DOCTRINE
To avail of the extraordinary period of assessment in Section 222(a) of the NIRC, the CIR should show that
the facts upon which the fraud is based is communicated to the taxpayer. The burden of proving that the facts exist
in any subsequent proceeding is with the Commissioner. Furthermore, the Final Assessment Notice (FAN) is not
valid if it does not contain a definite due date for payment by the taxpayer.
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FACTS
On April 11, 1996, Fitness by Design, Inc. (Fitness) filed its Annual Income Tax Return for the taxable year
1995. According to Fitness, it was still in its pre-operating stage during the covered period. On June 9, 2004,
Fitness received a copy of the FAN dated March 17, 2004 from the BIR. Fitness filed a protest to the FAN
contending that the CIR’s period to assess had already prescribed and that the assessment was without basis as the
company was only incorporated in 1995. The CIR proceeded to issue a Warrant of Distraint and/or Levy to Fitness.
Fitness filed before the CTA a Petition for Review with Motion to Suspend Collection of taxes and penalties. The
CIR claimed that its right to assess had not yet prescribed, claiming that the 1995 Income Tax Return was false
and fraudulent for Fitness’s alleged intentional failure to reflect its true sales, hence can be assessed within 10
years from discovery of fraud or omission.
ISSUE
Did the CIR’s right to assess already prescribe?
HELD
YES. It was only in 2004 or after more than three years from the time Fitness filed its 1995 annual income
tax return in 1996 that BIR issued a FAN to Fitness. The prescriptive period in making an assessment depends upon
whether a tax return was filed or whether the tax return filed was either false or fraudulent. In case of a false or
fraudulent return with intent to evade tax, Section 222(a) provides that the tax may be assessed within ten (10)
years after the discovery of the falsity, fraud or omission. Fraud is a question of fact that should be alleged, duly
proven and cannot be presumed. Failing to prove the existence of fraud, the general rule found on Section 203 of
the NIRC which provides that the prescriptive period shall be three (3) years, reckoned from the date of actual
filing or from the last day prescribed by law for filing should be followed.
SECOND ISSUE
Was the FAN issued against Fitness valid?
HELD
NO. The FAN is incomplete. First, it lacks the definite amount of tax liability for which respondent is
accountable. It does not purport to be a demand for payment of tax due, which a FAN should supposedly be. It
only provides that the tax due is still subject to modification, depending on the date of payment. Second, there are
no due dates in the FAN. This negates the BIR's demand for payment. The notice, therefore, did not contain a
definite and actual demand to pay, which it should, to be considered a valid assessment. Compliance with Section
228 of the NIRC is a substantive requirement and is not a mere formality. Tax collection should be premised on a
valid assessment, which would allow the taxpayer to present his or her case and produce evidence for
substantiation.
COMMISSIONER OF INTERNAL REVENUE v. TRANSITIONS OPTICAL PHILIPPINES

G.R. No. 227544 | November 22, 2017
DOCTRINE
Estoppel applies against a taxpayer who did not only raise at the earliest opportunity its representative's
lack of authority to execute two (2) waivers of defense of prescription, but was also accorded, through these
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waivers, more time to comply with the audit requirements of the BIR. Nonetheless, a tax assessment served beyond
the extended period is void.
FACTS
Transitions Optical Philippines (TOP) received a Letter of Authority for the taxable year 2004. The parties
allegedly executed a Waiver of the Defense of Prescription (First Waiver) extending the prescriptive period for
assessment to June 20, 2008. Another waiver (Second Waiver) dated June 2, 2008, extended the deadline to
November 30, 2008. Thereafter, the CIR issued a Preliminary Assessment Notice (PAN) dated November 11, 2008,
assessing TOP for its deficiency taxes for taxable year 2004. Transitions Optical filed a written protest and the CIR
subsequently issued the Final Assessment Notice (FAN) and a Formal Letter of Demand (FLD) dated November
28, 2008. TOP in its Protest Letter to the FAN alleged that the period to assess for the CIR had already prescribed
as the FAN was mailed on December 2, 2008. The CIR issued a Final Decision on the Disputed Assessment
(FDDA) in 2012. TOP filed a Petition for Review before the First Division of the CTA. The First Division ruled in
favor of TOP deciding that the First and Second Waivers were defective and void for non-compliance with the
requirements for the proper execution of a waiver as provided in RMO No. 20-90 and RDAO No. 05-01,
specifically that these waivers were not accompanied by a notarized written authority from TOP. Likewise, neither
the BIR’s acceptance date nor TOP’s receipt of BIR’s acceptance was indicated in either document. The First
Division decided further that for the sake of argument, even if the waivers were valid, the CIR issued the FAN and
FLD outside of the 2nd extension date thus void. The CTA En Banc affirmed the decision of the First Division. CIR
argues that the assessment required to be issued within the three (3)-year period provided in Sections 203 and 222
of the NIRC refer to CIR's actual issuance of the notice of assessment to the taxpayer or what is usually known as
PAN, and not the FAN issued in case the taxpayer files a protest.
ISSUE
Were the two (2) Waivers of the Defense of Prescription valid?
HELD
YES. The waivers are valid because estoppel applies in this case. While BIR was at fault when it accepted
TOP’s waivers despite their non-compliance with the requirements of RMO No. 20-90 and RDAO No. 05-01,
TOP’s acts also show its implied admission of the validity of the waivers. First, TOP never raised the invalidity of
the waivers at the earliest opportunity, either in the Protest to the PAN or FAN. TOP only raised the issue of validity
of the waivers in the Petition for Review filed at the First Division of the CTA. It thereby impliedly recognized the
waivers’ validity. Second, TOP, having benefited from the waivers by gaining more time to comply with the audit
requirements by the BIR, is estopped from claiming that they were invalid.
SECOND ISSUE
Is the assessment for deficiency taxes against TOP for taxable year 2004 voided by prescription?
HELD
YES. While 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 three (3)-year period, the assessment is nonetheless void because
it was served beyond the supposedly extended period. 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.
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THIRD ISSUE
Is the assessment required to be issued within the three (3)-year period or extended period provided in
Sections 203 and 222 of the NIRC referring to the PAN?
HELD
NO. Considering the functions and effects of a PAN in relation to a FAN, the assessment contemplated in
Sections 203 and 222 of the NIRC refers to the service of the FAN to the taxpayer. A PAN merely informs the
taxpayer of the initial findings of the BIR. 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 CIR will finalize an
assessment and issue a FAN. The PAN is a part of due process. It gives both the taxpayer and the CIR the
opportunity to settle the case at the earliest possible time without the need for the issuance of 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.
NATIONAL POWER CORP. v. PROVINCIAL GOVENRMENT OF BATAAN

G.R. No. 180654 | March 6, 2017
Local Taxation: Local Government Taxation: Specific taxing power of local government units
DOCTRINE
Without a franchise, a local government unit cannot impose franchise tax. Under the EPIRA, companies
engaging in power generation and supply of electricity are no longer required to secure a national franchise, hence
cannot be subjected to franchise tax.
FACTS
National Power Corporation (NPC) received a notice of franchise tax delinquency from the Provincial
Government of Bataan (Province) covering the years 2001 to 2003. The assessment was based on NPC’s sale of
electricity that it generated from its power plants in Bataan. NPC replied that it ceased to be liable for the payment
of the tax after the Congress enacted RA No. 9136 (Electric Power Industry Reform Act or EPIRA) which modified
R.A. No. 7160 (Local Government Code of 1991), the law authorizing the collection of local franchise tax. NPC
further assailed that EPIRA removed power generation from public utility operations requiring a franchise, hence,
it is not taxable. However, despite NPC’s view, the Province issued a “warrant of levy” on various real properties
owned by NPC and caused their sale at a public auction with itself as the winning bidder. NPC filed with the RTC
a petition for declaration of nullity of the foreclosure sale with prayer for Preliminary Mandatory Injunction against
the Province, the Provincial Treasurer and the Sangguniang Panlalawigan.
ISSUE
Was the foreclosure sale valid?
HELD
NO. Section 137 of the LGC of 1991 states that “Notwithstanding any exemption granted by any law or
other special law, the province may impose a tax on businesses enjoying a franchise, at a rate not exceeding fifty
percent (50%) of one percent (1%) of the gross annual receipts for the preceding calendar year based on the
incoming receipt, or realized, within its territorial jurisdiction.” Said provision is categorical in stating that franchise
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tax can only be imposed on businesses enjoying a franchise. This goes without saying that without a franchise, a
local government unit cannot impose franchise tax. Section 6 of EPIRA expressly provides that power generation
is no longer considered a public utility operation, and companies engaging in power generation and supply of
electricity are no longer required to secure a national franchise. The enactment of EPIRA separated the transmission
and sub-transmission functions of the state-owned NPC from its generation function, and transferred all its
transmission assets to the then newly-created TRANSCO. As regards NPC's business of generating electricity, the
franchise taxes sought to be collected by the Province for the latter part of 2001 up to 2003 are devoid of any
statutory basis. However, as regards NPC's electric transmission function, under Section 8 of the same law, all
transmission assets of NPC were to be transferred to TRANSCO within six (6) months from the effectivity of EPIRA.
Pending the transfer date of the transmission assets, these assets, as well as the franchise, belonged to and were
operated by NPC by which the latter is consequently subject to local franchise tax. Even so, it is quite apparent
that at the time of the levy and auction of the properties, the properties, by virtue of EPIRA, were already owned
by TRANSCO. Hence, the foreclosure sale is void.
PELIZLOY REALTY CORP v. PROVINCE OF BENGUET

G.R. No. 183137 | April 10, 2013
Local Taxation: Local Government Taxation: Common limitations on the taxing powers of local government units
DOCTRINE
Provinces are not authorized to impose amusement taxes on admission fees to resorts, swimming pools,
bath houses, hot springs, and tourist spots, since they are not among those places expressly mentioned by Section
140 of the LGC as being subject to amusement taxes.
FACTS
Pelizloy Realty Corporation (Pelizloy) owns Palm Grove Resort, which is designed for recreation and has
facilities like swimming pools, function halls, and a spa. The Province of Benguet approved the Benguet Revenue
Code of 2005 wherein Section 59 levies a 10% amusement tax on gross receipts from admissions to “resorts,
swimming pools, bath houses, hot springs and tourist spots.” Pelizloy filed a Petition for Declaratory Relief and
Injunction with the RTC seeking to declare Section 59, Article X as null and void on the ground that it imposed a
percentage tax in violation of the limitation on the taxing powers of the Local Government Units (LGUs) under
Section 133(i) of the LGC. The Province of Benguet argued that the phrase 'other places of amusement' in Section
140(a) of the LGC encompasses resorts, swimming pools, bath houses, hot springs, and tourist spots since "Article
220 (b)" of the LGC defines "amusement" as "pleasurable diversion and entertainment” which is synonymous to
“relaxation, avocation, pastime, or fun." The RTC dismissed the petition as well as the Motion for Reconsideration
filed by Pelizloy. Pelizloy filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that
the RTC decision be reversed and set aside and a new one issued.
ISSUE
Are provinces authorized to impose amusement taxes on admission fees to resorts, swimming pools, bath
houses, hot springs, and tourist spots for being "amusement places" under the LGC?
HELD
NO. Generally, the levying of percentage taxes by LGUs is prohibited "except as otherwise provided" by
the LGC under Section 133(i). As an exception, Section 140 expressly allows for the imposition by provinces of
amusement taxes on "the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing
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stadia, and “other places of amusement." Section 131(c) of the LGC already provides a clear definition:
"Amusement Places" include theaters, cinemas, concert halls, circuses and other places of amusement where one
seeks admission to entertain oneself by seeing or viewing the show or performances. Hence, it is clear that resorts,
swimming pools, bath houses, hot springs and tourist spots cannot be considered venues primarily "where one
seeks admission to entertain oneself by seeing or viewing the show or performances". The LGC governs local
taxation and fiscal matters. The power to tax when granted to a province is to be construed in strictissimi juris. Any
doubt or ambiguity arising out of the term used in granting that power must be resolved against the province.
Inferences, implications, and deductions have no place in the interpretation of the taxing power of a province.
AALA v. UY
G.R. No. 202781 | January 10, 2017
Local Taxation: Local Government Taxation: Taxpayer's remedies: Action before the Secretary of Justice
DOCTRINE
Under the LGC, aggrieved taxpayers who question the validity or legality of a tax ordinance are required
to file an appeal before the Secretary of Justice before they seek intervention from the regular courts.
FACTS
The Sangguniang Panlungsod of Tagum City passed City Ordinance No. 516, s-2011, entitled An
Ordinance Approving the New Schedule of Market Values, its Classification, and Assessment Level of Real
Properties in the City of Tagum. Crisanto Aala, et al (Aala), filed a petition for Certiorari, Prohibition, and
Mandamus before the Supreme Court (SC) seeking to nullify the said ordinance on the ground that the proposed
ordinance classified and valued those properties located in a predominantly commercial area as commercial,
regardless of the purpose to which they were devoted. According to them, this was erroneous because real property
should be classified, valued, and assessed not according to its location but on the basis of actual use. In reply,
Mayor Rey Uy, et al (Uy), argued that in directly filing their Petition for Certiorari before the SC, Aala violated the
doctrine on hierarchy of courts and doctrine of exhaustion of administrative remedies. Aala argued that this case
is exempt from the application of the doctrine on hierarchy of courts. They anchor their claim on the ground that
the redress they desire cannot be obtained in the appropriate courts. Furthermore, Aala asserts that the issue they
have raised is purely legal and that the case involves paramount public interest, which warrants the relaxation of
the rule on exhaustion of administrative remedies.
ISSUE
Did Aala correctly avail themselves of the extraordinary remedies of certiorari, prohibition, and
mandamus?
HELD
NO. Parties are generally precluded from immediately seeking the intervention of courts when the law
provides for remedies against the action of an administrative board, body, or officer. The practical purpose behind
the principle of exhaustion of administrative remedies is to provide an orderly procedure by giving the
administrative agency an "opportunity to decide the matter by itself correctly and prevent unnecessary and
premature resort to the courts." Under Section 187 of the LGC, aggrieved taxpayers who question the validity or
legality of a tax ordinance are required to file an appeal before the Secretary of Justice before they seek intervention
from the regular courts. Furthermore, the doctrine on hierarchy of courts is designed to restrain parties from directly
resorting to the SC when relief may be obtained before the lower courts. Nonetheless, these doctrines are not
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definite rules and admit of several well-defined exceptions. Unfortunately, none of these exceptions are present
in this case. Had Aala immediately filed an appeal, the Secretary of Justice would have had enough time to render
a decision. Section 187 of the LGC of 1991 gives the Secretary of Justice 60 days to act on the appeal. Within 30
days from receipt of an unfavorable decision or upon inaction by the Secretary of Justice within the time prescribed,
aggrieved taxpayers may opt to lodge the appropriate proceeding before the regular courts.
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. v. CITY OF MANILA

G.R. No. 185622 | October 17, 2018.
Local Taxation: Local Government Taxation: Taxpayer's remedies: Refund
DOCTRINE
If a party can prove that the resort to an administrative remedy would be an idle ceremony such that it
will be absurd and unjust for it to continue seeking relief that evidently will not be granted to it, the doctrine of
exhaustion of administrative remedies will not apply.
FACTS
International Container (IC) was assessed for two (2) business taxes by the City of Manila. It was already
paying a local annual business tax for contractors equivalent to 75% of 1% of its gross receipts for the preceding
calendar year pursuant to Section 18 of Manila Ordinance No. 7794. The newly assessed business tax was
computed at 50% of 1% of its gross receipts for the previous calendar year, pursuant to Section 21(A) of Manila
Ordinance No. 7794, as amended by Section 1(G) of Manila Ordinance No. 7807. It paid the additional
assessment, but filed a protest letter before the City Treasurer of Manila. When the City Treasurer failed to decide
the protest within 60 days, IC filed before the RTC its Petition for Certiorari and Prohibition with Prayer for the
Issuance of a Temporary Restraining Order against the City Treasurer and Resident Auditor of Manila. The RTC
dismissed the petition. IC appealed to the Court of Appeals (CA), which in turn remanded the case to the RTC.
While the case was ongoing, the City of Manila continued to impose the business tax. IC sent a letter addressed
to the City Treasurer of Manila, reiterating its protest and requesting a refund of its payment in accordance with
Sec. 196 of the LGC. IC continuously paid under protest and amended its prayer to include the business taxes paid
after the first three quarters of 1999. RTC dismissed the petition. IC filed a Petition for Review with the CTA. The
CTA ordered a partial refund, which did not include the business taxes paid by IC subsequent to the first three
quarters of 1999 for failure to comply with Sec. 195 of the LGC.
ISSUE
Which provision should govern IC’s claim for refunds – Section 195 or Section 196 of the Local
Government Code?
HELD
Section 196 of the LGC. Sections 195 and 196 of the LGC govern the remedies of a taxpayer for taxes
collected by local government units, except for real property taxes. What determines the appropriate remedy is
the local government's basis for the collection of the tax. It is explicitly stated in Section 195 that it is a remedy
against a notice of assessment issued by the local treasurer, upon a finding that the correct taxes, fees, or charges
have not been paid. The notice of assessment must state "the nature of the tax, fee, or charge, the amount of
deficiency, the surcharges, interests and Penalties." No such precondition is necessary for a claim for refund
pursuant to Sec. 196. Here, no notice of assessment for deficiency taxes was issued by the City Treasurer to IC for
the taxes collected.
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SECOND ISSUE
Is IC entitled for refund?
HELD
YES. To be entitled to a refund under Section 196 of the LGC, the taxpayer must comply with the following
procedural requirements: first, file a written claim for refund or credit with the local treasurer; and second, file a
judicial case for refund within two (2) years from the payment of the tax, fee, or charge, or from the date when the
taxpayer is entitled to a refund or credit. As to the first requirement, the records show that written letters claiming
for refund were made by IC to the City Treasurer for taxes paid from 1999 to 2006. However, no written claims
for refund were made for the taxes paid thereafter. If the party can prove that the resort to the administrative remedy
would be an idle ceremony such that it will be absurd and unjust for it to continue seeking relief that evidently
will not be granted to it, then the doctrine would not apply. As correctly pointed out by IC, the filing of written
claims with the City Treasurer for every collection of tax would have yielded the same result every time. Further,
the issue at the core of IC's claims for refund, the validity of Section 21 (A) of Manila Ordinance No. 7794, as
amended by Section 1(G) of Manila Ordinance No. 7807, is a question of law. When the issue raised by the
taxpayer is purely legal and there is no question concerning the reasonableness of the amount assessed, then there
is no need to exhaust administrative remedies. Thus, IC's failure to file written claims of refund for all of the taxes
under Section 21(A) with the City Treasurer is warranted under the circumstances. Similarly, IC complied with the
second requirement under Section 196 of the LGC that it must file its judicial action for refund within two (2) years
from the date of payment, or the date that the taxpayer is entitled to the refund or credit.
NATIONAL POWER CORP. v. CITY OF CABANATUAN

G.R. No. 177332 | October 1, 2014
Local Taxation: Local Government Taxation: Assessment and collection of local taxes
DOCTRINE
The statutory penalty of 25% surcharge is applied on the amount of the tax due and unpaid for each year.
It is not a yearly charge from the due date until full payment. To impose a penalty for non-payment of tax greater
than what the law provides would amount to a deprivation of property without due process of law.
FACTS
In its April 2003 decision, the Supreme Court (SC) affirmed the Court of Appeals’ (CA) decision that the
National Power Corporation (NPC) is liable for the tax assessed by the City of Cabanatuan (City). The CA’s decision
ordered NPC to pay the City, among others, a surcharge of 25% of the tax due and unpaid in all cases. After the
decision became final, the City filed with the RTC a motion for execution to collect the tax liability, inclusive of
the 25% surcharge. NPC prayed that the motion be denied and/or suspended pending final resolution of its protest
with the City Treasurer on the computation of the surcharge. The RTC sustained the City’s computation of the
surcharge based on the total unpaid tax for each year, which, in effect, resulted in the imposition of the 25%
surcharge every year of default in payment. The RTC held that since the tax due is computed yearly, the 25%
surcharge should also be computed yearly based on the tax unpaid. Through a petition for certiorari, NPC assailed
RTC’s order. NPC insists that there should only be a one-time application of the 25% surcharge based on the total
franchise tax due and unpaid. However, the CA dismissed the petition, upholding the computation of the City. In
its petition for review, NPC asserted that the RTC and CA disregarded the provisions of Section 168 of the LGC to
wit, “the sanggunian may impose a surcharge not exceeding 25% of the amount of taxes, fees, or charges not paid
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on time, and an interest at the rate not exceeding 2% per month of the unpaid taxes, fees or charges including
surcharges, until such amount is fully paid but in no case shall the total interest on the unpaid amount or portion
thereof exceed 36 months.”
ISSUE
What did the CA mean when it ordered NPC to pay a surcharge of 25% of the tax due and unpaid in all
cases?
HELD
The City's computation of the surcharge, as sustained by the RTC and CA contravenes Section 168 of the
LGC. There is nothing in the CA's decision that would justify the interpretation that the statutory penalty of 25%
surcharge should be charged yearly from the due date until full payment. The phrase "tax due and unpaid," simply
means tax owing or owed or "tax due that was not paid." Hence, when the taxpayer does not pay its tax due for a
particular year, then a surcharge is applied on the full amount of the tax due. However, when the taxpayer makes
a partial payment of the tax due, the surcharge is applied only on the balance or the part of the tax due that remains
unpaid. Section 168 of the LGC categorically provides for the imposition of a surcharge not exceeding 25% and
2% per month interest. Both are imposable upon failure of the taxpayer to pay the tax on the date fixed in the law
for its payment. The surcharge is a civil penalty imposed once for late payment of a tax; meanwhile, an interest is
imposable at the rate not exceeding 2% per month of the unpaid taxes until fully paid. The fact that the interest
charge is made proportionate to the period of delay, whereas the surcharge is not, clearly reveals the legislative
intent for the different modes in their application.
DEMAALA v. COMMISSION ON AUDIT

G.R. NO. 199752 | February 17, 2015
Local Taxation: Real Property Taxation: Imposition: Power to levy
DOCTRINE
Local governments are allowed to collect, on top of the basic annual real property tax, an additional levy
which shall exclusively accrue to the special education fund. The option given to a local government unit extends
not only to the matter of whether to collect but also to the rate at which collection is to be made.
FACTS
The Sangguniang Panlalawigan of Palawan enacted Provincial Ordinance No. 332-A, entitled “An
Ordinance Approving and Adopting the Code Governing the Revision of Assessments, Classification and Valuation
of Real Properties in the Province of Palawan.” Section 48 of which provides for an additional levy on real property
tax for the special education fund at the rate 0.5%. Thereafter, the Municipality of Narra, Palawan, with Demaala
as mayor, collected the tax from owners of real properties located within its territory. On post-audit by the
Commission on Audit (COA), a memorandum was issued in which it was noted that there were deficiencies in the
special education fund collected by the Municipality of Narra. COA questioned the levy of the special education
fund at the rate of only 0.5% rather than at 1%, the rate stated in Section 235 of R.A. No. 7160, otherwise known
as the Local Government Code.
ISSUE
Can a municipality, city, or province have an additional levy on real property for the special education
fund at the rate of less than 1%?
38 of 47
HELD
YES. Setting the rate of the additional levy for the special education fund at less than 1% is within the
taxing power of the local government units. It is consistent with the guiding constitutional principle of local
autonomy. Section 235 of the Local Government Code provides that a province or city, or a municipality within
the Metropolitan Area, may levy and collect an annual tax of 1% on the assessed value of the real property which
shall be in addition to the basic real property tax. The proceeds thereof shall exclusively accrue to the Special
Education Fund (SEF). The operative phrase in Section 235’s grant to municipalities in Metro Manila, cities, and
provinces of the power to impose an additional levy for the special education fund is prefixed with “may,” thus,
“may levy and collect an annual tax of one percent (1%).” The option given to a local government unit extends
not only to the matter of whether to collect but also to the rate at which collection is to be made.
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR v. FILIPINAS PALM OIL PLANTATION, INC.
G.R. No. 183416 | October 5, 2016
Local Taxation: Real Property Taxation: Imposition: Exemption from real property tax
DOCTRINE
The exemption from real property taxes given to cooperatives applies regardless of whether or not the
land owned is leased. This exemption benefits the cooperative's lessee. The characterization of machinery as real
property is governed by the LGC and not the Civil Code.
FACTS
Filipinas Palm Oil Plantation, Inc. (Filipinas) is a private organization engaged in palm oil plantation. After
the Comprehensive Agrarian Reform Law was passed, National Development Company (NDC) lands were
transferred to Comprehensive Agrarian Reform Law beneficiaries who formed themselves as the merged NDC-
Guthrie Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-NGEI) Cooperatives. Filipinas entered into a lease
contract agreement with NGPI-NGEI. The Provincial Assessor of Agusan del Sur (Provincial Assessor) assessed
Filipinas' properties found within the plantation area, which Filipinas assailed before the Local Board of
Assessment Appeals (LBAA). Upon appeal, the Court of Appeals (CA) held that the land owned by NGPI-NGEI,
which Filipinas has been leasing, cannot be subjected to real property tax since these are owned by cooperatives
that are tax-exempt and also held that the roads constructed by Filipinas, which were built primarily for Filipinas'
benefit should be tax-exempt since these roads were also being used by the cooperatives and the public. On the
road equipment and mini haulers as real properties subject to tax, the CA affirmed the Central Board of Assessment
Appeals’ Decision that these are only movables.
ISSUE
Does the exemption privilege of NGPI-NGEI from payment of real property tax extend to Filipinas as
lessee of the parcel of land owned by cooperatives?
HELD
YES. Under Section 133 (n) of the LGC, all real property owned by duly registered cooperatives are
exempted from payment of the real property tax. NGPI-NGEI, a duly registered cooperative, is the owner of the
land being leased by Filipinas. Section 234 of the LGC exempts all real property owned by cooperatives without
distinction. Nothing in the law suggests that the real property tax exemption only applies when the property is
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used by the cooperative itself. Similarly, the instance that the real property is leased to either an individual or
corporation is not a ground for withdrawal of tax exemption.
ISSUE
Should the roads constructed within the leased area be assessed with real property taxes?
HELD
NO. The roads that Filipinas constructed became permanent improvements on the land owned by the
NGPI-NGEI by right of accession under the Civil Code and became subject to real property tax. Therefore, NGPI-
NGEI, as owner of the roads that permanently became part of the land being leased by respondent, shall be liable
for real property taxes, if any. However, by express provision of the LGC, NGPI-NGEI is exempted from payment
of real property tax.
ISSUE
Are Filipinas’ road equipment and mini haulers subject to real property tax?
HELD
YES. The road equipment and mini haulers shall be considered as real property subject to real property
tax. The Court reiterates that the machinery subject to real property tax under the LGC "may or may not be
attached, permanently or temporarily to the real property"; and those which are mobile, self-powered or self-
propelled, or are not permanently attached must (a) be actually, directly, and exclusively used to meet the needs
of the particular industry, business, or activity; and (b) by their very nature and purpose, be designed for, or
necessary for manufacturing, mining, logging, commercial, industrial, or agricultural purposes. The
indispensability of the road equipment and mini haulers in transportation makes it actually, directly, and
exclusively used in the operation of Filipinas' business.
METROPOLITAN WATERWORKS SEWERAGE SYSTEM v. LOCAL GOVERNMENT OF QUEZON

CITY
G.R No. 194388 | November 07, 2018
DOCTRINE
A government instrumentality exercising corporate powers is not liable for the payment of real property
taxes on its properties unless it is alleged and proven that the beneficial use of its properties has been extended to
a taxable person.
FACTS
In 1971, the Congress enacted R.A. No. 6234, creating the Metropolitan Waterworks and Sewerage
System (MWSS) which was mandated "to insure an uninterrupted and adequate supply and distribution of potable
water for domestic and other purposes and the proper operation and maintenance of sewerage systems." MWSS
received several Final Notices of Real Property Tax Delinquency from the Local Government of Quezon City,
covering various taxable years, on the real properties owned by MWSS in Quezon City. The Local Government of
Quezon City warned it that failure to pay would result in the issuance of warrants of levy against its properties.
MWSS filed before the Court of Appeals (CA) a Petition for Certiorari and Prohibition including the Issuance of a
Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction. It argued that its real properties in
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Quezon City were exclusively devoted to public use, and thus, were exempt from real property tax. The CA found
that since MWSS was not a municipal corporation, it could not invoke the immunity granted in Section 133(o) of
the LGC. It found that even if MWSS was an instrumentality of the government, it was not performing a purely
governmental function. As such, it cannot invoke immunity from real property taxation. Thereafter, Warrants of
Levy were issued by the Quezon City Treasurer over MWSS’ properties. Thus, MWSS filed a petition before the
Supreme Court.
ISSUE
Is MWSS exempt from real property taxes?
HELD
YES. According to the parameters set by Manila International Airport Authority, a government
instrumentality is exempt from the local government unit's levy of real property tax. The government
instrumentality must not have been organized as a stock or non-stock corporation, even though it exercises
corporate powers, administers special funds, and enjoys operational autonomy, usually through its charter. Its
properties are exempt from real property tax because they are properties of the public dominion: held in trust for
the Republic, intended for public use, and cannot be the subject of levy, encumbrance, or disposition. A
government-owned and controlled corporation, on the other hand, is not exempt from real property taxes due to
the passage of the LGC. In the case at bar, both E.O. No. 596 and R.A. No. 10149 or the GOCC Governance Act
of 2011, have categorized MWSS as a Government Instrumentality with Corporate Powers/Government Corporate
Entity like the Manila International Airport Authority. Privileges enjoyed by these Government Instrumentalities
with Corporate Powers/Government Corporate Entities should necessarily also extend to MWSS. Hence, MWSS'
real property tax exemption under R.A. No. 6234 is still valid as the proviso of Section 234 of the LGC withdrawing
tax exemption is only applicable to GOCCs. Thus, MWSS is not liable to respondent Local Government of Quezon
City for real property taxes, except if the beneficial use of its properties has been extended to a taxable person.
CITY OF LAPU-LAPU v. PHIL. ECONOMIC ZONE AUTHORITY

G.R. Nos. 184203 & 187583 | November 26, 2014
DOCTRINES
The Philippine Economic Zone Authority, being an instrumentality of the national government, is exempt
from payment of real property taxes.
A petition for declaratory relief is not the proper remedy against a notice of assessment issued. For
erroneous assessments, the taxpayer must exhaust the administrative remedies provided under the LGC. For illegal
assessments, the taxpayer may directly resort to judicial action.
The CTA has the exclusive appellate jurisdiction over local tax cases decided by RTC.
FACTS
In 1995, the PEZA was created by virtue of R.A. No. 7916 or "the Special Economic Zone Act of 1995"
which granted it the power to register, regulate, and supervise the enterprises located in the economic zones.
Through this, the export processing zone in Mariveles, Bataan became the Bataan Economic Zone and the Mactan
Export Processing Zone in Cebu, the Mactan Economic Zone. In 1998, the City of Lapu-Lapu demanded from
41 of 47
PEZA real property taxes from 1992 to 1998 on the PEZA's properties located in the Mactan Economic Zone. It
cited Sections 193 and 234 of the Local Government Code of 1991 (LGC) that withdrew the real property tax
exemptions previously granted to or presently enjoyed by all persons. Thereafter, the Province of Bataan followed
suit. Arguing that the PEZA is a developer of economic zones, the Province claimed that the PEZA is liable for real
property taxes under Section 24 of the Special Economic Zone Act of 1995.
FIRST ISSUE
Is PEZA exempt from payment of real property taxes?
HELD
YES. Under Section 234 (a) of the LGC, real properties owned by the Republic of the Philippines are
exempt from real property taxes. Article 420 of the Civil Code of the Philippines enumerates the properties of
public dominion which include properties located within the Mactan Economic Zone, a site reserved by President
Marcos under Proclamation No. 1811, and the Bataan Economic Zone, classified as a port under R.A. No. 5490.
Moreover, local government units have no power to levy taxes of any kind on the national government, its agencies
and instrumentalities and local government units as provided under Section 133(o) of the LGC. Being an
instrumentality of the national government vested with the special function to administer special economic zones
in the Philippines, the PEZA cannot be taxed by local government units.
SECOND ISSUE
Does the RTC of Pasay have jurisdiction to hear, try, and decide the City of Lapu-Lapu's petition for
declaratory relief?
HELD
NO. The trial court should have dismissed the PEZA's petition for declaratory relief for lack of
jurisdiction. Once the assessor issues an assessment, the proper remedy of a taxpayer depends on whether the
assessment was erroneous or illegal. If erroneous, the taxpayer must exhaust the administrative remedies
provided under the LGC before resorting to judicial action. If illegal, the taxpayer may directly resort to judicial
action without paying under protest the assessed tax and filing an appeal with the Local and Central Board of
Assessment Appeals. Here, the PEZA did not avail itself of any of the remedies against a notice of assessment. A
petition for declaratory relief is not the proper remedy once a notice of assessment was already issued. Instead,
the PEZA should have directly resorted to a judicial action and filed a complaint for injunction, the "appropriate
ordinary civil action" to enjoin the City from enforcing its demand and collecting the assessed taxes from the
PEZA.
THIRD ISSUE
Is the petition for injunction filed before the RTC of Pasay a local tax case appealable to the CTA?
HELD
YES. The CTA has the exclusive appellate jurisdiction over local tax cases decided by RTCs under Sec.
7 of R.A. No. 1125, as amended by R.A. No. 9282. These local tax cases involve RPTs which are governed by
the LGC. Here, the petition for injunction filed before the RTC of Pasay was a local tax case originally decided
by the trial court in its original jurisdiction. Since the PEZA assailed a judgment, not an interlocutory order, of
the RTC, the PEZA's proper remedy was an appeal to the CTA.
42 of 47
NATIONAL POWER CORP. v. PROVINCIAL GOVERNMENT OF BATAAN
G.R. No. 180654 | March 6, 2017
Judicial Remedies: Jurisdiction of the CTA
DOCTRINE
The CTA has the exclusive appellate jurisdiction over local tax cases decided by RTC.
FACTS
National Power Corporation (NPC) received a notice of franchise tax delinquency from the Provincial
Government of Bataan (Province) covering the years 2001 to 2003. For the settlement of said tax liability, the
Province issued a “warrant of levy” on various real properties of NPC, and subsequently caused a sale at a public
auction with the Province as the winning bidder. NPC asked the RTC to issue a preliminary injunction, enjoining
the transfer of title and sale of the foreclosed lands. Upon RTC’s dismissal, NPC appealed to the Court of Appeals
(CA). The appellate court dismissed the case, stating that, although the suit is denominated as a declaration of
nullity of the foreclosure sale, it is essentially a local tax case of questioning the validity of the Province’s imposition
of the local franchise tax. Hence, any appeal should be filed with the CTA. NPC filed a Petition for Review on
Certiorari before the Supreme Court (SC). In its decision, the SC granted the petition and set aside the resolution
of the CA. It ruled that with the transfer of NPC's power transmission and generation functions, and their associated
facilities by operation of the Electric Power Industry Reform Act (EPIRA) in June 2001, NPC was not the proper
party subject to the local franchise tax. It also opined that it did not matter where the RTC decision was appealed,
whether before the CA or the CTA, and remanded the case to the RTC. Hence, this Motion for Reconsideration.
ISSUE
Was the dismissal of NPC’s appeal by the CA proper?
HELD
YES. Under Sec. 7, par. (a)(3) of RA No. 9282, the CTA is vested with the exclusive appellate jurisdiction
over, among others, appeals from the "decisions, orders or resolutions of the Regional Trial Courts in local tax
cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction." The case a
quo is a local tax case that is within the exclusive appellate jurisdiction of the CTA. Although the complaint filed
with the trial court is a Petition for declaration of nullity of foreclosure sale with prayer for preliminary mandatory
injunction, a reading of the petition shows that it essentially assails the correctness of the local franchise tax
assessments by the Provincial Government of Bataan. Therefore, the dismissal of NPC's appeal by the CA was in
order.
BANCO DE ORO v. REPUBLIC

G.R. No. 198756 | August 16, 2016
DOCTRINE
The CTA has exclusive jurisdiction to determine the constitutionality or validity of tax laws, rules and
regulations, and other administrative issuances of the CIR, subject to prior review by the Secretary of Finance. In
exceptional cases, however, the Supreme Court (SC) entertained direct recourse to it when dictated by public
43 of 47
welfare and the advancement of public policy, or demanded by the broader interest of justice, or the orders
complained of were found to be patent nullities, or the appeal was considered as clearly an inappropriate remedy.
FACTS
In 2001, Bureau of Treasury (BTr) issued 10-year Zero Coupon Bonds or the “Poverty Eradication and
Alleviation Certificates” (PEACe Bonds) to Rizal Commercial Banking Corporation (RCBC), on behalf of Caucus of
Development NGO Networks (CODE-NGO). BTr stated that the bonds shall not be subject to the 20% Final
Withholding Tax (FWT) since the issue is limited to 19 buyers/lenders. RCBC Capital, as the Issue Manager, sold
and distributed the government bonds to BDO et al (BDO). Before maturity of the bonds, the BIR declared in BIR
Ruling No. 370-2011 that the PEACe Bonds, being deposit substitutes, were subject to 20% FWT, and directing
the BTr to withhold the tax. BIR also issued Ruling No. DA 378-2011 clarifying that the FWT due on the discount
or interest earned on the PEACe Bonds should be imposed and withheld not only on RCBC/ CODE-NGO but also
on all subsequent holders of the bonds. BDO thus filed before the SC a Petition for Certiorari, Prohibition, and/or
Mandamus seeking to annul BIR Ruling No. 370-2011 and other rulings issued by BIR of similar tenor for being
unconstitutional and for having been issued without jurisdiction or with grave abuse of discretion amounting to
lack or excess of jurisdiction. The CIR et al (CIR) questioned the propriety of BDO’s' direct resort to SC arguing
that BDO should have challenged first the 2011 BIR rulings before the Secretary of Finance, consistent with the
doctrine on exhaustion of administrative remedies. It also argued that the jurisdiction to review the rulings of the
CIR pertains to the CTA.
ISSUE
Is BDO’s direct resort to the SC, contrary to the doctrine of hierarchy of courts and exhaustion of
administrative remedies, proper?
HELD
YES. While the BIR Rulings are reviewable by the Secretary of Finance under Section 4 of the NIRC, there
was no need for petitioner banks to exhaust all administrative remedies before seeking judicial relief because of
the special circumstances availing in this case, namely: the question involved is purely legal; the urgency of
judicial intervention given the impending maturity of the PEACe Bonds; and the futility of an appeal to the Secretary
of Finance as the latter appeared to have adopted the challenged BIR rulings. As to the hierarchy of courts, the
CTA has exclusive jurisdiction to determine the constitutionality or validity of tax laws, rules and regulations, and
other administrative issuances of the CIR. In exceptional cases, however, the SC entertained direct recourse to it
when dictated by public welfare and the advancement of public policy, or demanded by the broader interest of
justice, or the orders complained of were found to be patent nullities, or the appeal was considered as clearly an
inappropriate remedy. Here, 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 SC
in the first instance.
44 of 47
G.R. No. 175410 | November 12, 2014.
DOCTRINE
In an action for the refund of taxes allegedly erroneously paid, the CTA may determine whether there are
taxes that should have been paid in lieu of the taxes paid. Determining the proper category of tax that should have
been paid is not an assessment. It is incidental to determining whether there should be a refund.
FACTS
another PEZA-registered enterprise and was thereafter dissolved. SMI-Ed filed its quarterly income tax return and
subjected the gross sales of its properties to 5% final tax on PEZA-registered corporations. After requesting the
cancellation of its PEZA registration, SMI-Ed filed an administrative claim for refund for taxes erroneously paid.
The BIR did not act on the claim, so SMI-Ed filed a petition for review before the CTA. The CTA denied the claim
for refund. The CTA found that the sale of the properties made by SMI-Ed are subject to capital gains tax of 6%
because they were capital assets. Therefore, SMI-Ed must pay the balance of its deficiency tax. SMI-ED argued that
the CTA has no jurisdiction to make an assessment since its jurisdiction, with respect to the decisions of
respondent, is merely appellate.
ISSUE
Was the CTA making an assessment when it determined that SMI-Ed is liable for capital gains tax?
HELD
NO. The CTA was not making an assessment. The CTA is merely determining the proper category of tax
that SMI-Ed should have paid. The CTA has no power to make an assessment at the first instance. On matters such
as tax collection, tax refund, and others related to the national internal revenue taxes, the CTA’ jurisdiction is
appellate in nature. The determination of the proper category of tax that SMI-Ed should have paid is an incidental
matter necessary for the resolution of the principal issue, which is whether SMI-Ed was entitled to a refund.
PHILIPPINE PORTS AUTHOIRTY v. CITY OF DAVAO

G.R. No. 190324 | June 6, 2018
DOCTRINE
When a tax case is pending on appeal with the CTA, the CTA has the exclusive jurisdiction to enjoin the
levy of taxes and the auction of a taxpayer's properties in relation to that case.
FACTS
Philippine Ports Authority (PPA) received a letter from the City Assessor of Davao City for the assessment
and collection of real property taxes against its administered properties located at Sasa Port. PPA filed an appeal
with the Local Board of Assessment Appeals (LBAA) and while said appeal was pending, the Office of the City
45 of 47
Treasurer of Davao City posted a notice of sale of delinquent real properties. LBAA dismissed PPA’s appeal for
having filed out of time and for its lack of jurisdiction on the latter’s tax exemption. Hence, a subsequent appeal
to the Central Board of Assessment and Appeal (CBAA) was filed by PPA. The appeal with the CBAA was denied,
thus, it filed another appeal with the CTA. While its appeal with the CTA was pending, PPA also filed a petition
for certiorari with the Court of Appeals (CA) arguing that it did not receive any warrant of levy for the properties
which were sold to Davao City, or any notice that they were going to be auctioned. It was informed that it had
one (1) year from the date of registration of the sale within which to redeem the properties by paying the taxes,
penalties, and incidental expenses, plus interest. The CTA granted PPA’s appeal, resolving in its favor the issue of
its liability of real estate tax. However, CA dismissed PPA’s petition, saying that the CTA had exclusive jurisdiction
to determine the matter, and that PPA should have applied for a writ of injunction or prohibition with the CTA. It
further found the petition dismissible on the grounds that PPA committed forum shopping. PPA argued that it did
not commit forum shopping, asserting that the CA has jurisdiction on the basis of urgency.
ISSUE
Did the CA acquire jurisdiction over the injunctive relief prayed for by PPA?
HELD
NO. PPA’s contention that the CA could have issued the relief prayed for lacks legal basis. PPA has failed
to cite any law supporting its contention that the CA has jurisdiction over this case. On the other hand, Sec. 7,
par. (a)(5) of RA 9282 states that the CTA has exercise exclusive appellate jurisdiction to review by appeal the
decisions of CBAA in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of
real property originally decided by the provincial or city board of assessment appeals. Urgency does not remove
the CBAA’s decision from the exclusive appellate jurisdiction of the CTA. PPA could have, and should have,
applied for injunctive relief with the CTA, which has the power to issue the preliminary injunction prayed for. In
this case, the CTA had jurisdiction over PPA's appeal to resolve the question of whether or not it was liable for
real property tax. Thus, the CTA and not the CA that had the power to preserve the subject of the appeal, to give
effect to its final determination, and, when necessary, to control auxiliary and incidental matters and to prohibit
or restrain acts which might interfere with its exercise of jurisdiction over PPA's appeal.
LIHAYLIHAY v. TAN
G.R. No. 192223 | July 23, 2018
Other Penal Provisions in the NIRC
DOCTRINE
The grant of an informer's reward for the discovery, conviction, and punishment of tax offenses is a
discretionary quasi-judicial matter that cannot be the subject of a writ of mandamus. It is not a legally mandated
ministerial duty. This reward cannot be given to a person who only makes sweeping averments about undisclosed
wealth, rather than specific tax offenses, and who fails to show that the information which he or she supplied was
the undiscovered pivotal cause for the revelation of a tax offense, the conviction and/or punishment of the persons
liable, and an actual recovery made by the State.
FACTS
Danilo A. Lihaylihay filed a Petition for Mandamus and Damages, with a Prayer for a Writ of Garnishment,
praying that former Treasurer of the Philippines Roberto C. Tan, former Secretary of Finance Margarito B. Teves,
the Governor of Bangko Sentral ng Pilipinas, and the Secretary of the Department of Environment and Natural
46 of 47
Resources (collectively, respondents) be ordered to deliver to Lihaylihay the proceeds and properties representing
25% informer's rewards owing to Lihaylihay's alleged instrumental role in the recovery of ill-gotten wealth from
former President Ferdinand E. Marcos, his family, and their cronies. In his Petition, Lihaylihay identified himself
as a Confidential Informant of the State and particularly recalled sending two (2) letters to Atty. Eliseo Pitargue, the
former head of the BIR-Presidential Commission on Good Government Task Force, concerning information on
former President Marcos' ill-gotten wealth.
ISSUE
Is Lihaylihay entitled to a writ of mandamus to compel respondents to deliver him proceeds and properties
representing 25% (now 10%) informer’s reward?
HELD
NO. Lihaylihay's entitlement to an informer's reward is not a ministerial matter. Its determination is a
discretionary, quasi-judicial function, demanding an exercise of independent judgment on the part of certain
public officers. Under Section 282 of the NIRC of 1997, as amended, an information given by an informer shall
merit a reward only when it satisfies certain formal and qualitative parameters. As a matter of form and procedure,
that information must be voluntarily given, definite, and sworn to. Qualitatively, that information must be novel
and, subsequently, prove itself effective. Information is novel when it is "not yet in the possession of the BIR" and
"not referring to a case already pending or previously investigated or examined." Information has shown itself to
be effective not only when it leads "to the discovery of frauds upon the internal revenue laws or violations of any
of its provisions," but also when that discovery in turn enables "the recovery of revenues, surcharges and fees
and/or the conviction of the guilty party and/or the imposition of any of the fine or penalty." Information is also
effective when the discovery of tax offenses leads the offender to offer "to compromise the violation." Regardless
of whether a compromise or conviction ensues, actual recovery is indispensable. In the case at bar, Lihaylihay’s
letters to Atty. Pitargue make broad claims about the Marcos family’s ill-gotten wealth, and impress the need for
the government to recover them. However, he makes no specific averments about specific acts of tax fraud,
violations of internal revenue and customs laws, and/or smuggling. He also failed to show that the information
which he supplied was the undiscovered pivotal cause for the revelation of a tax offense, the conviction and/or
punishment of the persons liable, and an actual recovery made by the State.
47 of 47

Taxation Law - Leonen Case Digests

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Taxation Law - Leonen Case Digests

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LEONEN CASES

TAXATION LAW CASE DIGESTS

Jose Rio E. Sanchez

Heddrik C. Gonzales Chelsi Maine T. Laxamana

Lady Joyce A. Bernardez

Carlo Diamond S. Antipuesto Ma. Isabella A. Soriano

Ezekiel Japhet C. Esguerra Joanna Marie L. Barrozo

Christian Miguel C. Candelaria Natasha Felicia M. Francia

Ma. Rosalia Emmanuel S. Ladignon Antonio Luis C. Duran

Dr. Ulpiano P. Sarmiento III

Atty. Anna Marie Melanie B. Trinidad

Atty. Carlo D. Busmente

Atty. Roben B. Cadugo Jr.

Joanna Marie L. Barrozo

Rohanne Karolle D. Ablang

This work is the intellectual property of SAN BEDA COLLEGE

It is intended solely for the use of the individuals to which it is

The following may give consent:

LOCAL GOVERNMENT TAXATION

JURISDICTION OF THE CTA

OTHER PENAL PROVISION IN THE NIRC

II. NATIONAL TAXATION

DOCUMENTARY STAMP TAX

III. LOCAL TAXATION

LOCAL GOVERNMENT TAXATION

REAL PROPERTY TAXATION

IV. JUDICIAL REMEDIES

JURISDICTION OF THE CTA

OTHER PENAL PROVISIONS IN THE NIRC2

2 Not in the syllabus

ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE

LG ELECTRONICS PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

COMMISSIONER OF INTERNAL REVENUE v. APO CEMENT CORPORATION

SMI-ED PHIL. TECHNOLOGY, INC. v. COMMISSIONER OF INTERNAL REVENUE

BANCO DE ORO v. REPUBLIC

ING BANK N.V. v. COMMISSIONER OF INTERNAL REVENUE

PHILIPPINE AIRLINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

COMMISSIONER OF INTERNAL REVENUE v. PHILIPPINE NATIONAL BANK

STEAG STATE POWER INC. v. COMMISSIONER OF INTERNAL REVENUE

CE LUZON GEOTHERMAL POWER CO., INC v. COMMISSIONER OF INTERAL REVENUE

CBK POWER CO., LTD. v. COMMISSIONER OF INTERNAL REVENUE

CE CASECNAN WATER AND ENERGY COMPANY, INC. v. COMMISSIONER OF INTERNAL

TEAM ENERGY CORP. v. COMMISSIONER OF INTERNAL REVENUE

LA SUERTE CIGAR AND CIGARETTE FACTORY V. COURT OF APPEALS

ING BANK v. COMMISSIONER OF INTERNAL REVENUE

COMMISSIONER OF INTERNAL REVENUE v. AVON PRODUCTS MANUFACTURING, INC.

COMMISSIONER OF INTERNAL REVENUE v. FITNESS BY DESIGN, INC.

COMMISSIONER OF INTERNAL REVENUE v. TRANSITIONS OPTICAL PHILIPPINES

NATIONAL POWER CORP. v. PROVINCIAL GOVENRMENT OF BATAAN

PELIZLOY REALTY CORP v. PROVINCE OF BENGUET

INTERNATIONAL CONTAINER TERMINAL SERVICES, INC. v. CITY OF MANILA

NATIONAL POWER CORP. v. CITY OF CABANATUAN

DEMAALA v. COMMISSION ON AUDIT

METROPOLITAN WATERWORKS SEWERAGE SYSTEM v. LOCAL GOVERNMENT OF QUEZON

CITY OF LAPU-LAPU v. PHIL. ECONOMIC ZONE AUTHORITY

BANCO DE ORO v. REPUBLIC

PHILIPPINE PORTS AUTHOIRTY v. CITY OF DAVAO

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