Dennis Jay A.

Paras
Taxation Law Review- B
Atty. Sannie Diangca

80. CIR v. SM Prime Holdings, Inc.

G.R. No. 183505 26 February 2010

Doctrine: The power of taxation is sometimes called also the power to destroy.
Therefore, it should be exercised with caution to minimize injury to the proprietary rights
of a taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kill
the "hen that lays the golden egg." And, in order to maintain the general public's trust
and confidence in the Government this power must be used justly and not
treacherously.

Facts:
On September 26, 2003, the Bureau of Internal Revenue (BIR for brevity) sent herein
respondent SM Prime a Preliminary Assessment Notice for VAT deficiency on cinema
ticket sales in the amount of PHP 119, 276,047.40 for taxable year 2000. In response,
SM Prime filed a letter-protest dated December 15, 2003. A formal letter of demand was
sent by BIR to SM Prime for the alleged VAT deficiency, which the latter protested in
January 2004, but the same was denied by BIR. The Commissioner of Internal Revenue
(CIR) argues that such gross receipts should be subject to VAT. SM Prime Holdings,
Inc. and First Asia Realty Development Corporation contend that they are not subject to
VAT. The CTA ruled in favor of SM Prime, stating that the showing of motion pictures is
not a service covered by VAT under the NIRC, but an activity that is covered by
amusement tax instead. Aggrieved, the CIR filed an appeal, which was also ruled in
favor of respondent. Hence, this petition.

Issue:
Whether or not the gross receipts derived by operators or proprietors of cinema/theater
houses from admission tickets are subject to VAT.

Ruling:
No. The enumeration of services subject to VAT in Section 108 of the National Internal
Revenue Code is not exhaustive. The activity of showing motion pictures by
cinema/theater operators or proprietors is not included in the enumeration. The Court
considered the resolution of the House of Representatives, which stated that there
should only be one business tax applicable to theaters and movie houses, which is the
30% amusement tax imposed by cities and provinces. These reveal the legislative intent
not to impose VAT on persons already covered by the amusement tax.
This holds true even in the case of cinema/theater operators taxed under the LGC of
1991 precisely because the VAT law was intended to replace the percentage tax on
certain services. The mere fact that they are taxed by the local government unit and not
by the national government is immaterial. The Local Tax Code, in transferring the power
to tax gross receipts derived by cinema/theater operators or proprietor from admission
tickets to the local government, did not intend to treat cinema/theater houses as a
separate class. No distinction must, therefore, be made between the places of
amusement taxed by the national government and those taxed by the local government.
Therefore, the gross receipts derived from admission tickets for motion pictures are not
subject to VAT.
Dennis Jay A. Paras
Taxation Law Review- B
Atty. Sannie Diangca

81. Commissioner on Internal Revenue vs. Philippine Long Distance Telephone

Co.
G.R. No. 140230 December 15, 2005

Doctrine: It cannot be over-emphasized that tax exemption represents a loss of

revenue to the government and must, therefore, not rest on vague inference. When
claimed, it must be strictly construed against the taxpayer who must prove that he falls
under the exception. And, if an exemption is found to exist, it must not be enlarged by
construction, since the reasonable presumption is that the state has granted in express
terms all it intended to grant at all, and that, unless the privilege is limited to the very
terms of the statute the favor would be extended beyond dispute in ordinary cases.

Facts:
PLDT imported equipment, machineries, and spare parts for its business and paid a
total of P164,510,953.00 for compensating tax, advance sales tax, and other internal
revenue taxes to the Bureau of Internal Revenue (BIR). PLDT sought a confirmatory
ruling from the BIR on its tax exemption privilege under its franchise. The BIR ruled that
PLDT is exempt from VAT on its importation of equipment. PLDT filed a claim for tax
credit/refund of the VAT, compensating taxes, advance sales taxes, and other taxes it
had paid for its importations.
The claim was not acted upon by the BIR, so PLDT filed a petition for review with the
Court of Tax Appeals (CTA). The CTA granted PLDT's petition and ordered the BIR to
refund or issue a tax credit certificate in the amount of P223,265,276.00. The BIR filed a
motion for reconsideration, which was denied by the CTA. The BIR appealed to the
Court of Appeals (CA), but the CA dismissed the appeal and affirmed the CTA's
decision.

Issue:
Whether PLDT, given the tax component of its franchise, is exempt from paying VAT,
compensating taxes, advance sales taxes, and internal revenue taxes on its
importations.

Ruling:
The court ruled in favor of PLDT and ordered the Commissioner of Internal Revenue to
issue a tax credit certificate or refund for advance sales tax and compensating tax
erroneously collected. The court disagreed with the BIR's interpretation that the "in lieu
of all taxes" clause in PLDT's franchise covers only direct taxes and does not include
indirect taxes. The court held that the clause does not encompass indirect taxes, which
are those that can be shifted or passed on to another person.
The court emphasized that the liability for the payment of indirect taxes lies with the
seller of the goods or services, not the buyer. Therefore, PLDT cannot invoke its
exemption privilege to avoid the shifting of the VAT to it by the manufacturers/suppliers
of the goods it purchased. The court concluded that the assessments were erroneous
tax payments and would theoretically be refundable. However, the court clarified that
the importations were already subject to VAT, so PLDT is entitled to a refund of the
advance sales tax and compensating tax, subject to the condition that it presents proof
of payment of the corresponding VAT on said transactions.
Dennis Jay A. Paras
Taxation Law Review- B
Atty. Sannie Diangca

82. ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION vs.

COMMISSIONER OF INTERNAL REVENUE
G.R. No. 159471 January 26, 2011

Doctrine: Any VAT-registered person, whose sales are zero-rated, may, within two (2)
years after the close of the taxable quarter when the sales were made, apply for the
issuance of a tax credit certificate or refund creditable input tax due or paid attributable
to such sales, except transitional input tax, to the extent that such input tax has not
been applied against output tax: Provided, however, That in case of zero-rated sales
under Section 100 (a) (2) (A) (I), (ii) and (b) and Section 102 (b) (1) and (2), the
acceptable foreign currency exchange proceeds thereof have been duly accounted for
in accordance with the regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale
and also in taxable or exempt sale of goods or properties or services, and the amount of
creditable input tax due or paid cannot be directly and entirely attributed to any one of
the transactions, it shall be allocated proportionately on the basis of the volume of sales.

Facts:
Herein petitioner Atlas Consolidated is a zero-rated VAT person for being an exporter of
copper concentrates. On January 25, 1996, it applied for a tax refund or a tax credit
certificate for the excess VAT credit of ₱842,336,291.60 with respondent Commissioner
of Internal Revenue (CIR). On the same date, petitioner filed the same claim for refund
with the Court of Tax Appeals (CTA), claiming that the two-year prescriptive period
provided for under Section 230 of the Tax Code for claiming a refund was about to
expire. The CIR failed to file his answer with the CTA; thus, the former declared the
latter in default. On August 24, 1998, the CTA rendered its Decision 3 denying petitioner's
claim for refund due to petitioner's failure to comply with the documentary requirements
prescribed under Section 16 of Revenue Regulations No. 5-87.

Issues:
Whether the petitioner's claim for refund has prescribed.

Ruling:
The court held that the petitioner failed to comply with the documentary requirements
prescribed under Section 16 of the Tax Code and failed to present sufficient evidence to
support its claim for refund. The formal offer of evidence of the petitioner failed to
include photocopy of its export documents, as required. There is no way therefore, in
determining the kind of goods and actual amount of export sales it allegedly made
during the quarter involved. This finding is very crucial when we try to relate it with the
requirement of the aforementioned regulations that the input tax being claimed for
refund or tax credit must be shown to be entirely attributable to the zero-rated
transaction, in this case, export sales of goods. Without the export documents, the
purchase invoice/receipts submitted by the petitioner as proof of its input taxes cannot
be verified as being directly attributable to the goods so exported.
Lastly, We cannot grant petitioner's claim for credit or refund of input taxes due to its
failure to show convincingly that the same has not been applied to any of its output tax
liability as provided under Section 106 (a) of the Tax Code. There is no evidence to
Dennis Jay A. Paras
Taxation Law Review- B
Atty. Sannie Diangca

show that the amount herein claimed for refund when applied for on January 25, 1996
has not been priorly or thereafter applied to its output tax liability.

83. International Container Terminal Services Inc. vs. City of Manila

G.R. No. 185622 October 17, 2018

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

Facts:
International Container, renewed its business license for 1999. It was assessed for two
(2) business taxes: one for which it was already paying, and another for which it was
newly assessed. It was already paying a local annual business tax equivalent to 75% of
1% of its gross receipts for the preceding calendar year pursuant to Manila Ordinance
7794. On top of that, it was also assessed with a business tax worth 50% of 1% of its
gross receipts for the preceding calendar year pursuant to the same ordinance.
International Container paid the additional assessment, but filed a protest letter before
the City Treasurer of Manila.

When the City Treasurer failed to decide International Container's protest within 60 days
from the protest, International Container filed before the Regional Trial Court of Manila
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
Second Division found that the City of Manila committed direct double taxation by
imposing a local business tax on International Container. The Second Division ordered
a partial refund of P6,224,250.00 for the erroneously paid business taxes for the third
quarter of 1999. However, the Second Division did not order the City of Manila to refund
the business taxes paid by International Container subsequent to the first three quarters
of 1999. International Container appealed the decision to the Court of Tax Appeals En
Banc. The Court of Tax Appeals En Banc affirmed the decision of the Second Division.

Issue:
Whether International Container is entitled to a refund of the business taxes paid to the
City of Manila.

Ruling:
Yes. The Court held that International Container complied with the requirements of
Section 196 of the Local Government Code, which provides for a claim for refund of tax
credit. The Court justified the failure to file separate written claims for refund for the
subsequent tax payments. This means that International Container did not have to file
separate claims for each tax payment because the issue raised was purely legal and did
not involve any questions about the reasonableness of the amount assessed. The Court
ordered the City of Manila to refund the business taxes paid by International Container.
Dennis Jay A. Paras
Taxation Law Review- B
Atty. Sannie Diangca

84. CIR v. Pilipinas Shell Petroleum Corporation

G.R. No. 188497 25 April 2012

Doctrine: A tax is not excise where it does not subject directly the produce or goods to
tax but indirectly as an incident to, or in connection with, the business to be taxed.

Facts:
The company filed claims for refund or tax credit for excise taxes paid on sales and
deliveries of gas and fuel oils to various international carriers. The claims were based
on the exemption provided under Section 135(a) of the National Internal Revenue Code
(NIRC) for petroleum products sold to international carriers for their use or consumption
outside the Philippines. The Commissioner of Internal Revenue did not take any action
on the claims, prompting the respondent to file petitions for review before the Court of
Tax Appeals (CTA). The CTA's First Division ruled in favor of the respondent, granting
the claim for refund of excise taxes.
The CTA relied on a previous ruling by the CTA En Banc in a similar case involving the
same tax exemption for petroleum products sold to international carriers. The petitioner
filed a motion for reconsideration, which was denied by the CTA First Division. The case
was then elevated to the CTA En Banc, which upheld the ruling of the First Division.

Issue:
Whether the respondent, as the manufacturer or producer of petroleum products, is
exempt from the payment of excise tax on the goods sold to international carriers.

Ruling:
The Supreme Court ruled in favor of the petitioner, denying the claim for tax refund. The
excise tax on petroleum products attaches to the goods as soon as they are in
existence as such. The tax exemption under Section 135(a) of the NIRC is conferred on
international carriers who purchase the petroleum products for their use or consumption
outside the Philippines. The excise tax is the direct liability of the manufacturer or
producer, and the tax exemption enjoyed by the buyer cannot be the basis for a claim
for tax exemption by the manufacturer or seller. Tax refunds are in the nature of tax
exemptions and must be strictly construed against the taxpayer.