TAX LAW REVIEWER
1 SAINT LOUIS UNIVERSITY BAR OPERATIONS
Subject Matter: Criminal Action; Tax Assessment
CIR V PASCOR REALTY & DEVT CORP et. al.
(GR No. 128315, June 29, 1999)
Facts:
The CIR authorized certain BIR officers to examine
the books of accounts and other accounting records of Pascor
Realty and Development Corp. (PRDC) for 1986, 1987 and
1988. The examination resulted in recommendation for the
issuance of an assessment of P7,498,434.65 and
P3,015,236.35 for 1986 and 1987, respectively.
On March 1, 1995, Commissioner filed a criminal
complaint for tax evasion against PRDC, its president and
treasurer before the DOJ. Private respondents filed immediately
an urgent request for reconsideration on reinvestigation
disputing the tax assessment and tax liability.
On March 23, 1995, private respondents received a
subpoena from the DOJ in connection with the criminal
complaint. In a letter dated, May 17, 1995, the Commissioner
denied private respondents request for reconsideration
(reinvestigation on the ground that no formal assessment has
been issued which the latter elevated to the CTA on a petition
for review. The Commissioners motion to dismiss on the ground
of the CTAs lack of jurisdiction inasmuch as no formal
assessment was issued against private respondent was denied
by CTA and ordered the Commissioner to file an answer but did
not instead filed a petition with the CA alleging grave abuse of
discretion and lack of jurisdiction on the part of CTA for
considering the affidavit/report of the revenue officers and the
endorsement of said report as assessment which may be
appealed to he CTA. The CA sustained the CTA decision and
dismissed the petition.
Issues:
1. Whether or not the criminal complaint for tax evasion
can be construed as an assessment.
2. Whether or not an assessment is necessary before
criminal charges for tax evasion may be instituted.
Held:
The filing of the criminal complaint with the DOJ
cannot be construed as a formal assessment. Neither the Tax
Code nor the revenue regulations governing the protest
assessments provide a specific definition or form of an
assessment.
An assessment must be sent to and received by the
taxpayer, and must demand payment of the taxes described
therein within a specific period. The revenue officers affidavit
merely contained a computation of respondents tax liability. It
did not state a demand or period for payment. It was addressed
to the Secretary of Justice not to the taxpayer. They joint
affidavit was meant to support the criminal complaint for tax
evasion; it was not meant to be a notice of tax due and a
demand to private respondents for the payment thereof. The
fact that the complaint was sent to the DOJ, and not to private
respondent, shows that commissioner intended to file a criminal
complaint for tax evasion, not to issue an assessment.
An assessment is not necessary before criminal
charges can be filed. A criminal charge need not only be
supported by a prima facie showing of failure to file a required
return. The CIR had, in such tax evasion cases, discretion on
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
whether to issue an assessment, or to file a criminal case
against the taxpayer, or to do both.
Subject Matter: Criminal Action
CIR V CA
G.R. No. 119322, June 4, 1996
Facts:
A task force was created on June 1, 1993 to
investigate tax liabilities of manufacturers engaged in tax
evasion schemes. On July 1, 1993, the CIR issued Rev. Memo
Circ. No. 37-93 which reclassified certain cigarette brands
manufactured by private respondent Fortune Tobacco Corp.
(Fortune) as foreign brands subject to a higher tax rate. On
August 3, 1993, Fortune questioned the validity of said
reclassification as being violative of the right to due process and
equal protection of laws. The CTA, on September 8, 1993
resolved that said reclassification was of doubtful legality and
enjoined its enforcement.
In the meantime, on August 3, 1993, Fortune was
assessed deficiency income, ad valorem and VAT for 1992 with
payment due within 30 days from receipt. On September 12,
1993, private respondent moved for reconsideration of said
assessment. Meanwhile on September 7, 1993, the
Commissioner filed a complaint with the DOJ against private
respondent Fortune, its corporate officers and 9 other
corporations and their respective corporate officers for alleged
fraudulent tax evasion for non-payment of the correct income,
ad valorem and VAT for 1992. The complaint was referred to the
DOJ Task Force on revenue cases which found sufficient basis
to further investigate the charges against Fortune.
A subpoena was issued on September 8, 1993
directing private respondent to submit their counter-affidavits.
But it filed a verified motion to dismiss or alternatively, a motion
to suspend but was denied and thus treated as their counter-
affidavit. All motions filed thereafter were denied.
January 4, 1994, private respondents filed a petition
for certiorari and prohibition with prayer for preliminary injunction
praying the CIRs complaint and prosecutors orders be
dismissed/set aside or alternatively, that the preliminary
investigation be suspended pending determination by CIR of
Fortunes motion for reconsideration/reinvestigation of the
August 13, 1993 assessment of taxes due.
The trial court granted the petition for a writ of
preliminary injunction to enjoin the preliminary investigation on
the complaint for tax evasion pending before the DOJ, ruling
that the tax liability of private respondents first be settled before
any complaint for fraudulent tax evasion can be initiated.
Issue:
Whether the basis of private respondents tax liability
first be settled before any complaint for fraudulent tax evasion
can be initiated.
Held:
Fraud cannot be presumed. If there was fraud on
willful attempt to evade payment of ad valorem taxes by private
respondent through the manipulation of the registered wholesale
price of the cigarettes, it must have been with the connivance of
cooperation of certain BIR officials and employees who
supervised and monitored Fortunes production activities to see
to it that the correct taxes were paid. But there is no allegation,
much less evidence, of BIR personnels malfeasance at the very
least, there is the presumption that BIR personnel performed

2 SAINT LOUIS UNIVERSITY BAR OPERATIONS
their duties in the regular course in ensuring that the correct
taxes were paid by Fortune.
Before the tax liabilities of Fortune are finally
determined, it cannot be correctly asserted that private
respondents have willfully attempted to evade or defeat any tax
under Secs. 254 and 256, 1997 NIRC, the fact that a tax is due
must first be proved.
Subject Matter: Prescription of Government Rights to assess
Taxes
CIR V B.F. GOODRICH PHIL., INC., ET AL
GR No. 104171, February 24, 1999
Facts:
Private respondent BF Goodrich Philippines Inc. was
an American corporation prior to July 3, 1974. As a condition for
approving the manufacture of tires and other rubber products,
private respondent was required by the Central Bank to develop
a rubber plantation. In compliance therewith, private respondent
bought from the government certain parcels of land in
Tumajubong Basilan, in 1961 under the Public Land Act and the
Parity Amendment to the 1935 constitution, and there developed
a rubber plantation.
On August 2, 1973, the Justice Secretary rendered an
opinion that ownership rights of Americans over Public
agricultural lands, including the right to dispose or sell their real
estate, would be lost upon expiration on July 3, 1974 of the
Parity Amendment. Thus, private respondent sold its Basilan
land holding to Siltown Realty Phil. Inc., (Siltown) for P500,000
on January 21, 1974. Under the terms of the sale, Siltown would
lease the property to private respondent for 25 years with an
extension of 25 years at the option of private respondent.
Private respondent books of accounts were examined
by BIR for purposes of determining its tax liability for 1974. This
examination resulted in the April 23, 1975 assessment of private
respondent for deficiency income tax which it duly paid.
Siltowns books of accounts were also examined, and on the
basis thereof, on October 10, 1980, the Collector of Internal
Revenue assessed deficiency donors tax of P1,020,850 in
relation to said sale of the Basilan landholdings.
Private respondent contested this assessment on
November 24, 1980. Another assessment dated March 16,
1981, increasing the amount demanded for the alleged
deficiency donors tax, surcharge, interest and compromise
penalty and was received by private respondent on April 9,
1981. On appeal, CTA upheld the assessment. On review, CA
reversed the decision of the court finding that the assessment
was made beyond the 5-year prescriptive period in Section 331
of the Tax Code.
Issue:
Whether or not petitioners right to assess has
prescribed.
Held:
Applying then Sec. 331, NIRC (now Sec. 203, 1997
NIRC which provides a 3-year prescriptive period for making
assessments), it is clean that the October 16, 1980 and March
16, 1981 assessments were issued by the BIR beyond the 5-
year statute of limitations. The court thoroughly studied the
records of this case and found no basis to disregard the 5-year
period of prescription, expressly set under Sec. 331 of the Tax
Code, the law then in force.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
For the purpose of safeguarding taxpayers from any
unreasonable examination, investigation or assessment, our tax
law provides a statute of limitations in the collection of taxes.
Thus, the law or prescription, being a remedial measure, should
be liberally construed in order to afford such protection. As a
corollary, the exceptions to the law on prescription should
perforce be strictly construed.
Subject Matter: Tax Assessment
TUPAZ V ULEP
GR No. 127777, Oct 1, 1999
Facts:
June 8, 1990, an information against accused
Petronila C. Tupaz and her late husband Jose J. Tupaz, Jr., as
corporate officers of El Oro Engravers Corp., was field for non-
payment of deficiency corporate in come tax for the year 1979 in
violation of Sec. 51(b) in relation to Sec. 73 of the 1977 Tax
Code. The information was dismissed for the lack of jurisdiction
by the MeTC of Q.C.
January 10, 1991, 2 information were filed before the
RTC of Q.C. against spouses for the same alleged non-payment
of deficiency corporate income tax for the year 1979.
Prior to this, petitioner was charged with nonpayment
of deficiency corporate income tax for the year 1979, which tax
return was filed in April 1980. On July 16, 1984, the BIR issued
a notice of assessment. Petitioner contends that the July 16,
1984 assessment was made out of time.
Petitioner avers that while Sec. 318 and 319 of the
1977 NIRC provide a 5-year period of limitation for the
assessment and collection of internal revenue taxes, BP700,
enacted on February 22, 1984, amended the 2 sections and
reduced the period to 3 years to assess the tax liability, counted
from the last day of filing the return or from the date the return is
filed, whichever comes later. Since the tax return was filed in
April 1980, the assessment made on July 16, 1984 was beyond
the 3-year prescriptive period.
Issue:
Whether the governments right to assess has
prescribed.
Held:
The shortened period of 3 years prescribed under
BP700 is not applicable to petitioner. BP700, effective April 5,
1984, specifically states that the shortened period of 3 years
shall apply to assessments and collections of internal revenue
taxes beginning taxable year 1984. Assessments made on or
after April 5, 1984 are governed by the 5-year period if the taxes
assessed cover taxable years prior to January 1, 1984. The
deficiency income tax under consideration is for taxable year
1979. Thus, the period of assessment is still 5 years, under the
old law. The income tax return was filed in April 1980. Hence,
the July 16, 1984 tax assessment was issued within the
prescribed period of 5 years, from the last day of filing the
return, or from the date the return is filed, whichever comes
later.
At the outset, it must be stressed that internal
revenue taxes are self-assessing and no further assessment by
the government is required to create the tax liability. An
assessment, however, is not altogether inconsequential; it is
relevant in the proper pursuit of judicial and extrajudicial
remedies to enforce taxpayer liabilities and certain matters that

3 SAINT LOUIS UNIVERSITY BAR OPERATIONS
relate to it, such as the imposition of surcharges and interest,
and in the application of statute of limitations and in the
establishment with tax liens.
Subject Matter: Tax Assessment
CYANAMID PHIL., INC. V CA
GR No. 108067, January 20, 2000
Facts:
Petitioner, Cyanamid Philippines, Inc., a corporation
organized under Philippine laws, is a wholly owned subsidiary of
American Cyanamid Co. based in Maine, USA. It is engaged in
the manufacture of pharmaceutical products and chemicals, a
wholesaler of imported finished goods, and an importer/indenter.
February 7, 1985, the CIR sent an assessment letter
to petitioner and demanded the payment of deficiency in come
tax of P119,817 for taxable year 1981 which the petitioner on
March 4, 1985, protested particularly (1) 25% surtax
assessment of P3,774,867.50; (2) 1981 deficiency income tax
assessment of P119,817; (3) 1981 deficiency percentage
assessment of P3,346.72. CIR refused to allow the cancellation
of the assessment notices.
During the pendency of the case on appeal to the
CTA, both parties agreed to compromise the 1981 deficiency
income assessment of P119,817 and reduced to P26,577 as
compromise settlement. But the surtax on improperly
accumulated profits remained unresolved. Petitioner claimed
that the assessment representing the 25% surtax had no legal
basis for the following reasons: (a) petitioner accumulated its
earnings and profits for reasonable business requirements to
meet working capital needs and retirement of indebtedness, (b)
petitioner is wholly owned subsidiary of American Cyanamid
Co., a corporation organized under the laws of the State of
Maine, in the USA, whose shares of stock are listed and traded
in New York Stock Exchange. This being the case, no individual
shareholder of petitioner could have evaded or prevented the
imposition of individual income taxes by petitioners
accumulation of earnings and profits, instead contribution of the
same.
CTA denied said petition.
Issue:
Whether petitioner is liable for the accumulated
earnings tax for the year 1981.
Held:
The amendatory provision of Sec. 25 of the 1977
NIRC, which was PD1739, enumerated the corporations exempt
from the imposition of improperly accumulated tax: (a) banks,
(b) non-bank financial intermediaries; (c) insurance companies;
and (d) corporations organized primarily and authorized by the
Central Bank to hold shares of stocks of banks. Petitioner does
not fall among those exempt classes. Besides, the laws granting
exemption form tax are construed strictissimi juris against the
taxpayer and liberally in favor of the taxing power. Taxation is
the rule and exemption is the exception. The burden of proof
rests upon the party claiming the exemption to prove that it is, in
fact, covered by the exemption so claimed; a burden which
petitioner here has failed to discharge.
Unless rebutted, all presumptions generally are
indulged in favor of the correctness of the CIRs assessment
against the taxpayer. With petitioners failure to prove the CIR
incorrect, clearly and conclusively, this court is constrained to
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
uphold the correctness of tax courts ruling as affirmed by the
CA.
Subject Matter: Tax refund, 2-year prescriptive period for
overpaid quarterly income tax.
CIR V CA
January 21, 1999
Facts:
Petitioner Bank of the Philippine Islands (BPI) is a
bank and trust corp. duly organized and existing under
Philippine Laws. It acts as the liquidator of Paramount
Acceptance Corporation after its dissolution on March 31, 1986.
On April 2, 1986, Paramount Acceptance Corp.
(Paramount) filed its Corporate Annual Income Tax Return, for
calendar year ending December 31, 1985, declaring a Net
Income of P3,324,802.00. The income tax due thereon is
P1,153,681.00. However, Paramount paid the BIR its quarterly
income tax in the amount of P1,218,940.00
After deducting Paramounts total quarterly income tax
payments of P1,218,940.00 from its income tax of
P1,153,681.00, the return shored a refundable amount of
P65,259.00
On April 14, 1988, petitioner BPI, as liquidator of
Paramount, through counsel filed a letter dated April 12, 1988
reiterating its claim for refund of P65,259.00 as overpaid income
tax for the calendar year 1985. The following day or on April 15,
1988, BPI filed the instant petition with this court in order to toll
the running of the prescriptive period for filing a claim for refund
of overpaid income taxes.
The CTA rendered decision ordering the CIR to give
the refund to the petitioner. On appeal, the decision was
affirmed by the CA.
Issue:
Whether of not the 2-year period of prescription for
filing a claim for refund is to be counted from the actual filing of
the income tax return.
Held:
The two-year period for prescription should be
counted from the date of payment of the tax, which for actions
for refund of corporate income tax should be computed from the
time of actual filing of the adjustment return or annual income
tax return. This is so because at that point, it can already be
determined whether there ahs been an overpayment by the
taxpayer. Moreover, under Sec. 49 (a) by the NIRC (now Sec.
56(a), 1997 NIRC), payment is made at the time the return is
filed.
There is some likelihood that the above rule could
apply also to individuals who are self employed (i.e., in business
and professional practice) as well as estates and trusts, which
are likewise required to file quarterly returns.
Subject Matter: Tax Refund
CIR V TOKYO SHIPPING CO., LTD.
May 26, 1995
Facts:

4 SAINT LOUIS UNIVERSITY BAR OPERATIONS
Private respondent is a foreign corporation
represented in the Philippines by Soriamont Steamship
Agencies, Inc. It owns and operates tramper vessel M/V
Gardenia. In December 1980, NASUTRA chartered M/V
Gardenia to load 16,500 metric tons of raw sugar in the
Philippines. On December 23, 1980 Mr. Edilberto Lising, the
operations supervisor of Soriamont Agency, paid the required
income and common carriers taxes in the sum total of
P107,142.75 based on the expected gross receipts of the
vessel. Upon arriving, however, at Guimaras Port of Iloilo, the
vessel found no sugar for loading. On January 10, 1981,
NASUTRA and private respondents agent mutually agreed to
have the vessel sail for Japan without any cargo.
Claiming the pre-payment of income and common
carriers taxes as erroneous since no receipt was realized from
the charter agreement private respondent instituted a claim for
tax credit or refund of the sum of P107,142,75 before petitioner
commissioner of Internal Revenue on March 23, 1981.
Petitioner failed to act promptly on the claim, hence, on May 14,
1981, private respondent filed a petition for review before public
respondent CTA.
Petitioner contested the petition. As special and
affirmative defenses, it alleged the following: that taxes are
presumed to have been collected in accordance with law; that in
an action for refund, the burden of proof is upon the taxpayer to
show that taxes are erroneously or illegally collected and the
taxpayers failure to sustain said burden is fatal to the action for
refund; and that claims for refund are construed strictly against
tax claimants.
After trial, respondent tax court decided in favor of the
private respondent.
Issue:
Whether or not tax claimants has the burden of proof
to support its claim of refund.
Held:
A claim for refund is in the nature of a claim for
exemption and should be construed in strictissimi juris against
the taxpayer. Likewise, there can be no disagreement with
petitioners stance that private respondent has the burden of
proof to establish the factual basis of its claim for tax refund.
Subject Matter: Tax Refund
CITIBANK, N.A. V CA
October 10, 1997
Facts:
Citibank N.A. Philippine Branch (CITIBANK) is a
foreign corporation doing business in the Philippines. In 1979
and 1980, its tenants withheld and paid to the Bureau of Internal
Revenue the taxes on rents due to Citibank, pursuant to Section
1(c) of the Expanded Withholding Tax Regulations.
On April 15, 1980, Citibank field its corporate income
tax returns for the year and ended December 31, 1979 showing
a net loss of P74,854,916.00 and its tax credits totaled
P6,257,780.00, even without including the amounts withheld on
rental income under the Expanded Withholding Tax System, the
same not having been utilized or applied for the reason that the
years operation resulted in a loss. The taxes thus withheld by
the tenants from rentals paid to Citibank in 1979 were not
included as tax credits although a rental income amounting to
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
P7,796,811.00 was included in its income declared for the year
ended December 31, 1979.
For the year ended December 31, 1980, Citibanks
corporate income tax returns, filed on April 15, 1981, showed a
net loss P77,071,790.00 for income tax purposes. Its available
tax credit at the end of 1980 amounting to P11,532,855.00 was
not utilized or applied. The said available tax credits did not
include the amounts withheld by Citibanks tenants from rental
payment sin 1980 but the rental payments for that year were
declared as part of its gross income included in its annual
income tax returns.
On October 31, 1981, Citibank submitted its claim for
refund of the aforesaid amounts of P270,160.56 and
P298,829.29, respectively or a total of P568,989.85; and on
October 12, 1981 filed a petition for review with the Court of Tax
Appeals concerning subject claim for tax refund.
On August 30, 1981, the CTA adjudged Citibanks
entitlement to the tax refund sought for, representing the 5% tax
withheld and paid on Citibanks rental income for 1979 and
1980. The Court of Tax Appeals, rejected Respondent CIRs
argument that the claim was not seasonably filed. Not satisfied
the Commissioner appealed to the Court of Appeals, CA ruled
that Citibank N.A. Philippine branch, entitled to a tax
refund/credit in the amount of P569,989.85, representing the 5%
withheld tax in Citibanks rental income for the years 1979 and
1980 is REVERSED. Motion for Reconsideration of the
petitioner bank was denied. Hence, this petition.
Issue:
Whether or not income taxes remitted partially on a
periodic or quarterly basis should be credited or refunded to the
taxpayer on the basis of the taxpayers final adjusted returns.
Held:
In several cases, we have already ruled that income
taxes remitted partially on a periodic or quarterly basis should
be credited or refunded to the taxpayer on the basis of the
taxpayers final adjusted returns, not on such periodic or
quarterly basis. When applied to taxpayers filing income tax
returns on a quarterly basis, the date of payment mentioned in
Sec. 230 must be deemed to be qualified by Sec. 68 and 69 of
the present. Tax Code. It may be observed that although
quarterly taxes due are required to be paid within 60 days from
the close of each quarter, the fact that the amount shall be
deducted from the tax due for the succeeding quarter shows
that until a final adjustment return shall have been filed, the
taxes paid in the preceding quarters are merely partial taxes due
from a corporation. Neither amount can serve as the final figure
to quantify what is due the government nor what should be
refunded to be corporation. This interpretation may be gleaned
from the last paragraph of Sec. 69 of the Tax Code which
provides that the refundable amount, in case a refund is due a
corporation, is that amount which is shown on its final
adjustment return and not on its quarterly returns.
COMMISSIONER OF INTERNAL REVENUE
vs.
COURT OF APPEALS, COURT OF TAX APPEALS and
YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE
PHILIPPINES, INC
G.R. No. 124043 October 14, 1998
FACTS:

5 SAINT LOUIS UNIVERSITY BAR OPERATIONS
Private Respondent YMCA is a non-stock, non-profit
institution, which conducts various programs and activities that
are beneficial to the public, especially the young people,
pursuant to its religious, educational and charitable objectives.
In 1980, private respondent earned an income from leasing out
a portion of its premises and in addition from parking fees
collected from non-members. The commissioner of internal
revenue (CIR) issued an assessment to private respondent
including surcharge and interest, for deficiency income tax,
deficiency expanded withholding taxes on rentals and
professional fees and deficiency withholding tax on wages.
Private respondent formally protested the assessment. In reply,
the CIR denied the claims of YMCA.
YMCA then filed a petition for review at the Court of Tax
Appeals (CTA). The CTA issued this ruling in favor of the YMCA
allowing the YMCA to claim tax exemption on the latter's income
from the lease of its real property. Said decision was also
affirmed by the CA, hence, this recourse.
ISSUE:
Whether or not CA departed from the findings of fact
of the CTA and therefore violated the doctrine that findings of
fact of the CTA is not reviewable.
DECISION:
Indeed, it is a basic rule in taxation that the factual
findings of the CTA, when supported by substantial evidence,
will be disturbed on appeal unless it is shown that the said court
committed gross error in the appreciation of facts. In the present
case, the CA did not deviate from this rule. The latter merely
applied the law to the facts as found by the CTA and ruled on
the issue raised by the CIR.
The distinction between a question of law and a
question of fact is clear-cut. It has been held that there is a
question of law in a given case when the doubt or difference
arises as to what the law is on a certain state of facts; there is a
question of fact when the doubt or difference arises as to the
truth or falsehood of alleged facts.
COMMISSIONER OF INTERNAL REVENUE
vs.
COURT OF APPEALS and ATLAS CONSOLIDATED MINING
AND DEVELOPMENT CORPORATION
G.R. No. 106913 May 10, 1994
FACTS:
Petitioner is a mining corporation, organized and
existing under and by virtue of the laws of the Philippines,
operates a concession in Toledo City, Cebu. It actually used
and/or consumed tax paid extra gasoline and diesel fuel for the
mining operation purchased from Mobil Oil Philippines.
Sometime in 1978 petitioner filed with the
Commissioner of Internal Revenue a written claim for tax credit.
It claimed 25% of the specific taxes paid on said fuel oils
pursuant to Sec. 5 of Republic Act No. 1435 in relation to Sec.
142 and 145 of the Tax Code
There being no action taken on its claim for refund,
petitioner filed before the CTA a judicial claim for refund. The
CTA granted the claim for refund and ordered the CIR to refund
and/or credit amount
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
The CIR then appealed to the CA. Petitioner that Atlas
is not entitled to the tax refund because no additional tax was
imposed on it under any city or municipal ordinance as provided
under Section 4 of R.A. No. 1435. The CA affirmed the decision
of the CTA. Its Motion for reconsideration having failed hence,
this recourse.
ISSUE:
Whether or not in the instant case, the petitioner may
raise a new issue for the first time on appeal.
DECISION:
The Supreme Court may review such matters as may
be necessary to serve the interest of justice. It has ample
authority to review and resolve matters not specifically raised or
assigned as error by the parties if it finds that the consideration
and determination of the same is necessary in arriving at a just
resolution of a case. Where the issues already raised also rest
on other issues not specifically presented, as long as the latter
issues bear relevance and close relation to the former and as
long as they arise from matters on record, the Court has the
authority to include them in its discussion of the controversy as
well as to pass upon them. Wherefore, the petition is
GRANTED.
COMMISSIONER OF INTERNAL REVENUE,
vs.
PROCTER & GAMBLE PHILIPPINE MANUFACTURING
CORPORATION and THE COURT OF TAX APPEALS
G.R. No. L-66838 December 2, 1991
FACTS:
Procter and Gamble Philippine Manufacturing
Corporation declared dividends payable to its parent company
and sole stockholder, Procter and Gamble Co., Inc. (USA) from
which dividends the thirty-five percent (35%) withholding tax at
source was deducted.
In 1977, private respondent filed with petitioner
Commissioner of Internal Revenue a claim for refund or tax
credit.There being no responsive action on the part of the
Commissioner, it filed a petition for review with CTA. In 1984,
the CTA rendered a decision ordering petitioner Commissioner
to refund or grant the tax credit.
On appeal by the Commissioner, the Court reversed
the decision of the CTA. Thus, this petition
ISSUE:
Whether or not the issue on whether a withholding
agent in the Philippines is legally entitled to refund may be
raised for the first time on appeal by the Government.
HELD:
The BIR should not be allowed to defeat an otherwise
valid claim for refund by raising this question of alleged
incapacity for the first time on appeal before this Court. This is
clearly a matter of procedure. Petitioner does not pretend that
P&G-Phil., should it succeed in the claim for refund, is likely to
run away, as it were, with the refund instead of transmitting such
refund or tax credit to its parent and sole stockholder. It is
commonplace that in the absence of explicit statutory provisions
to the contrary, the government must follow the same rules of
procedure which bind private parties. It is, for instance, clear
that the government is held to compliance with the provisions of
Circular No. 1-88 of this Court in exactly the same way that

6 SAINT LOUIS UNIVERSITY BAR OPERATIONS
private litigants are held to such compliance, save only in
respect of the matter of filing fees from which the Republic of the
Philippines is exempt by the Rules of Court.
COMMISSIONER OF INTERNAL REVENUE
vs.
UNION SHIPPING CORPORATION and THE COURT OF TAX
APPEALS
G.R. No. L-66160 May 21, 1990
FACTS:
In a letter dated December 27, 1974 petitioner
assessed against Yee Fong Hong, Ltd. and/or herein private
respondent Union Shipping Corporation for deficiency income
taxes due for the years 1971 and 1972. Private respondent
protested the assessment.
Petitioner, without ruling on the protest, issued a
Warrant of Distraint and Levy. In a letter, private respondent
reiterated its request for reinvestigation. Petitioner, again,
without acting on the request for reinvestigation and
reconsideration of the Warrant of Distraint and Levy, filed a
collection suit against private respondent.
In 1979, private respondent filed with respondent
court a Petition for Review. The CTA ruled in favor of private
respondent. Hence, this is a petition for review on certiorari
ISSUE:
Whether or not the issuance of a warrant of distraint
and levy is proof of the finality of an assessment and is
tantamount to an outright denial of a motion for reconsideration
of an assessment.
HELD:
The Supreme Court had already laid down the dictum
that the Commissioner should always indicate to the taxpayer in
clear and unequivocal language what constitutes his final
determination of the disputed assessment.
There appears to be no dispute that petitioner did not
rule on private respondent's motion for reconsideration but
contrary to the above ruling of this Court, left private respondent
in the dark as to which action of the Commissioner is the
decision appealable to the Court of Tax Appeals. Had he
categorically stated that he denies private respondent's motion
for reconsideration and that his action constitutes his final
determination on the disputed assessment, private respondent
without needless difficulty would have been able to determine
when his right to appeal accrues and the resulting confusion
would have been avoided.
Subject Matter: Tax Refund
SAN CARLOS MILLING CO., INC. V CIR
November 23, 1993
Facts:
Petitioner domestic corp. had for the taxable year
1982 a total income tax overpayment of P781,393,00 reflected
on a creditable income tax in its annual final adjustment return.
The application of the amount for the 1983 tax liabilities
remained unutilized in view of petitioners net loss for the year
and still yet had a credible income tax of P4,470.00 representing
the 3% of 15% withholding tax on the storage credits.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
Accordingly the final adjustment income tax return for the
taxable year 1983 reflected the amount of P781,393.00 carried
over as tax credit and P4,470.00 creditable income tax.
In May 17, 1984 letter to the respondent, petitioner
signified its intention to apply the total creditable amount of
785,869.00 against its 1984 tax dues consistent with the
provision of Sec. 86 coupled with a comforting alternative
request for a refund or tax credit of the same.
Respondent disallowed the proffered automatic credit
scheme but treated the request as an ordinary claim for
refund/tax credit under Sec. 292 in relation to Sec. 295 of the
Tax Code and accordingly subjected the same for
verification/investigation.
No sooner than the respondent could act on the claim
petitioner filed a petition for review on July 18, 1984 and before
this Court could formally hear the case, petitioner filed a
supplemental petition on March 11, 1986, after having
unilaterally effected a set-off of its creditable income tax vis--
vis income tax liabilities, earlier denied by the respondent.
On February 28, 1990, the CTA dismissed the petition
and held that prior investigation by and authority from the CIR
were necessary before a taxpayer could avail of the provisions
of Sec. 69 of the Tax Code. A motion for reconsideration was
then filed but was denied thereafter, petitioner appealed the
adverse decision of the CTA to the CA. On December 23, 1991,
respondent court dismissed the appeal. Hence, this recourse.
Issue:
Whether or not the option for either a refund or
automatic tax credit scheme does not ipso facto confer on the
taxpayer the right to avail the same.
Held:
As for corporations and partnerships taxable as
corporations, no automatic crediting of the overpaid income tax
against taxes due in the succeeding quarters of the following
year is allowed.
Once a taxpayer opts for either a refund or the
automatic tax credit scheme, and signified his option in
accordance with the regulation, this does not ipso facto confer
on him the right to avail of the same immediately. An
investigation as a matter of procedure, is necessary to enable
the Commissioner to determine the correctness of the
petitioners returns, and the tax amount to be credited.
It seems however that automatic crediting of excess
tax payment against the quarterly income taxes due for the
succeeding year of individuals, estates and trusts is allowed. As
regards automatic crediting, Revenue Reg. No. 7-93 provides
that should there still be payment after crediting is made against
the quarterly income taxes due for the entire succeeding taxable
year, then such excess payment may be claimed as a refund.
Subject Matter: Legal capacity of withholding agents to claim
tax refund
CIR V CA
January 20, 1999
Facts:
Sometime in the 1930s, Don Andres Soriano, a
citizen and resident of the United States, formed the corporation
A. Soriano Y Cia, predecessor of ANSCOR with a
1,000,000.00 capitalization divided into 10,000 common shares
at a par value of P100/share. ANSCOR is wholly owned and
controlled by the family of Don Andres, who are all non-resident
aliens. In 1937, Don Andres subscribed to 4,963 shares of the
5,000 shares originally issued.

7 SAINT LOUIS UNIVERSITY BAR OPERATIONS
On September 12, 1945, ANSCORs authorized
capital stock was increased to P2,500,000.00 divided into
25,000 common shares with the same par value. Of the
additional 15,000 shares, only 10,000 was issued which were all
subscribed by Don Andres, after the other stockholders waived
in favor of the former their pre-emptive rights to subscribe to the
new issues. This increased his subscription to 14,963 common
shares. A month later, Don Andres transferred 1,250 shares
each to his two sons, Jose and Andres Jr., as their initial
investments in ANSCOR. Both sons are foreigners.
By 1947, ANSCOR declared stock dividends. Other
stock dividend declarations were made between 1949 and
December 20, 1963. On December 30, 1964 Don Andres died.
As of that date, the records revealed that he has a total
shareholdings of 185,154 shares. 50,495 of which are original
issues and the balance of 134,659 shares as stock dividend
declarations. Correspondingly, one-half of that shareholdings or
92,577 shares were transferred to his wife, Doa Carmen
Soriano, as her conjugal share. The offer half formed part of his
estate.
A day after Don Andres died, ANSCOR increased its
capital stock to P20M and in 1966 further increased it to P30M.
In the same year (December 1966), stock dividends worth
46,290 and 46,287 shares were respectively received by the
Don Andres estate and Doa Carmen from ANSCOR. Hence,
increasing their accumulated shareholdings to 138,867 and
138,864 common shares each.
On December 28, 1967, Doa Carmen requested a
ruling from the United States Internal Revenue Service (IRS),
inquiring if an exchange of common with preferred shares may
be considered as a tax avoidance scheme. By January 2, 1968,
ANSCOR reclassified its existing 300,000 common shares into
150,000 common and 150,000 preferred shares.
In a letter-reply dated February 1968, the IRS opined
that the exchange is only a recapitalization scheme and not tax
avoidance. Consequently, on March 31, 1968 Doa Carmen
exchanged her whole 138,864 common shares for 138,860 of
the preferred shares. The estate of Don Andres in turn
exchanged 11,140 of its common shares for the remaining
11,140 preferred shares.
In 1973, after examining ANSCORs books of account
and record Revenue examiners issued a report proposing that
ANSCOR be assessed for deficiency withholding tax-at-source,
for the year 1968 and the 2 nd quarter of 1969 based on the
transaction of exchange and redemption of stocks. BIR made
the corresponding assessments. ANSCORs subsequent protest
on the assessments was denied in 1983 by petitioner. ANSCOR
filed a petition for review with the CTA, the Tax Court reversed
petitioners ruling. CA affirmed the ruling of the CTA. Hence this
position.
Issue:
Whether or not a person assessed for deficiency
withholding tax under Sec. 53 and 54 of the Tax Code is being
held liable in its capacity as a withholding agent.
Held:
An income taxpayer covers all persons who derive
taxable income. ANSCOR was assessed by petitioner for
deficiency withholding tax, as such, it is being held liable in its
capacity as a withholding agent and not in its personality as
taxpayer. A withholding agent, A. Soriano Corp. in this case,
cannot be deemed a taxpayer for it to avail of a tax amnesty
under a Presidential decree that condones the collection of all
internal revenue taxes including the increments or penalties on
account of non-payment as well as all civil, criminal, or
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
administrative liabilities arising from or incident to voluntary
disclosures under the NIRC of previously untaxed income
and/or wealth realized here or abroad by any taxpayer, natural
or juridical. The Court explains: The withholding agent is not a
taxpayer, he is a mere tax collector. Under the withholding
system, however, the agent-payer becomes a payee by fiction of
law. His liability is direct and independent from the taxpayer,
because the income tax is still imposed and due from the latter.
The agent is not liable for the tax as no wealth flowed into him,
he earned no income.
Subject Matter: Distinction between tax refund and tax credit
PHIL. BANK OF COMMUNICATIONS V CIR
January 28, 1999
Facts:
Petitioner Philippine Bank of Communications
(PBCom), a commercial banking corp. duly organized under
Philippine Laws, filed its quarterly income tax returns for the 1 st
and 2nd quarters of 1985, reported profits, and paid the total
income tax of P5,016,954.00. The taxes due were settled by
applying PBComs tax credit memos and accordingly, the BIR
issued tax Debit Memo.
Subsequently, however, PBCom suffered losses so
that when it filed its Annual Income Tax Returns for the year-
ended December 31, 1985, it declared a net loss of
P25,317,228.00, thereby showing no income tax liability. For the
succeeding year, ending December 31, 1986, it likewise
declared no tax payable for the year.
But during these two years, PBCom earned rental
income from leased properties. The lessees withheld and
remitted to the BIR withholding creditable taxes in 1985 and
1986.
On August 7, 1987, petitioner requested the CIR,
among others, for a tax credit of P5,016,954.00 representing the
overpayment of taxes in the 1st and 2nd quarters of 1985.
Thereafter on July 25, 1988, petitioner filed on claim
for refund of creditable taxes withheld by their lessees from
property rentals in 1985 for P282,795.50 and in 1986 for
234,077.69.
Pending the investigation of the respondent CIR,
petitioner instituted a Petition for Review on November 18, 1988
before the CTA.
On May 20, 1993, the CTA denied the request of
petitioner for a tax refund or credit in the sum of P5,299,849.95
on the ground that it was field beyond the 2-year reglementary
period provided for by law. The petitioners claim for refund in
1986 amounting to P234,077.69 was likewise denied on the
assumption that it was automatically credited by PBCom against
its tax payment in the succeeding year.
Issue:
Whether or not the need to signify whether a taxpayer
intends to avail of a tax refund or a tax should be made on its
annual corporate adjustment return.
Held:
Sec. 69 of 1977 NIRC (now Sec. 76 of 1997 NIRC)
provides that any excess of the total quarterly payments over
the actual income tax computed in the adjustment or final
corporate income tax return, shall either:
a.) be refunded to the corporation, or

8 SAINT LOUIS UNIVERSITY BAR OPERATIONS
b.) may be credited against the estimated quarterly
income tax liabilities or the quarters of the
succeeding taxable year.
The corporation must signify in its annual corporate
adjustment return (by marking the option box provided in the
BIR form) its intention, whether to request for a refund or claim
for an automatic tax credit for the succeeding taxable year. To
ease the administration of tax collection, these remedies are in
the alternative, and the choice of one precludes the other.
Subject Matter: Necessity of proof for refund claims
CIR V SC JOHNSON INC.
June 25, 1999
Facts:
Respondent is a domestic corporation organized and
operating under the Philippine Laws, entered into a licensed
agreement with the SC Johnson and Son, USA, a non-resident
foreign corporation based in the USA pursuant to which the
respondent was granted the right to use the trademark, patents
and technology owned by the later including the right to
manufacture, package and distribute the products covered by
the Agreement and secure assistance in management,
marketing and production from SC Johnson and Son USA.
For the use of trademark or technology, respondent
was obliged to pay SC Johnson and Son, USA royalties based
on a percentage of net sales and subjected the same to 25%
withholding tax on royalty payments which respondent paid for
the period covering July 1992 to May 1993 in the total amount of
P1,603,443.00.
On October 29, 1993, respondent filed with the
International Tax Affairs Division (ITAD) of the BIR a claim for
refund of overpaid withholding tax on royalties arguing that, the
antecedent facts attending respondents case fall squarely within
the same circumstances under which said MacGeorge and
Gillette rulings were issued. Since the agreement was approved
by the Technology Transfer Board, the preferential tax rate of
10% should apply to the respondent. So, royalties paid by the
respondent to SC Johnson and Son, USA is only subject to 10%
withholding tax.
The Commissioner did not act on said claim for
refund. Private respondent SC Johnson & Son, Inc. then filed a
petition for review before the CTA, to claim a refund of the
overpaid withholding tax on royalty payments from July 1992 to
May 1993.
On May 7, 1996, the CTA rendered its decision in
favor of SC Johnson and ordered the CIR to issue a tax credit
certificate in the amount of P163,266.00 representing overpaid
withholding tax on royalty payments beginning July 1992 to May
1993.
The CIR thus filed a petition for review with the CA
which rendered the decision subject of this appeal on November
7, 1996 finding no merit in the petition and affirming in toto the
CTA ruling.
Issue:
Whether or not tax refunds are considered as tax
exemptions.
Held:
It bears stress that tax refunds are in the nature of tax
exemptions. As such they are registered as in derogation of
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
sovereign authority and to be construed strictissimi juris against
the person or entity claiming the exemption. The burden of proof
is upon him who claims the exemption in his favor and he must
be able to justify his claim by the clearest grant of organic or
statute law. Private respondent is claiming for a refund of the
alleged overpayment of tax on royalties; however there is
nothing on record to support a claim that the tax on royalties
under the RP-US Treaty is paid under similar circumstances as
the tax on royalties under the RP-West Germany Tax Treaty.
Subject Matter: Legal capacity of withholding agents to claim
tax refund
FILIPINAS SYNTHETIC FIBER CORP. V CA
Facts:
Filipinas Synthetic Fiber Corp., a domestic corporation
received on December 27, 1979 a letter of demand from the
Commissioner of Internal Revenue assessing it for deficiency
withholding tax at source in the total amount of P829,748.77
inclusive of interest and compromise penalties, for the period
from the fourth quarter of 1974 to the fourth quarter of 1975. The
assessment was seasonably protested by petitioner through its
auditor, SGV and Company. Respondent denied the protest on
May 14, 1985 on the following ground: For Philippine internal
revenue tax purposes, the liability to withhold and pay income
tax withheld at source from certain payments due to a foreign
corporation is at the time of accrual and not at the time of actual
payment or remittance thereof.
On June 28, 1985, petitioner brought a petition for
review before the Court of Tax Appeals, the said court came out
with its decision on June 15, 1993, which is against the
petitioner.
With the denial of its motion for reconsideration,
petitioner appealed the CTA disposition to the Count of Appeals,
which affirmed in toto the appealed decision. So, petitioner
found its way to this count via petition for review on certiorari.
Issue:
Whether the liability to withhold tax at source on
income payments to non-resident foreign corporation arises
upon remittance of the amounts due to the foreign creditors, or
upon accrual thereof
Held:
The Supreme Court held that since Sec. 53, NIRC
(now, Sec. 57 of 1997 NIRC) in relation to Sec. 54 (now Sec.
58) is silent as to when the duty to withhold arises, it is
necessary to look into the nature of the accrual method of
accounting, which was used by therein petitioner corporation.
Inasmuch as under the accrual basis, income is reportable when
all the events have occurred to fix taxpayers right to receive the
income and the amounts can be determined with reasonable
accuracy, hence, it is the right to receive income, and not the
actual receipt thereof, that determines when the amount is
includible in gross income. Thus, the duty of the withholding
agent to withhold the corresponding tax arises at the time of
such accrual. The withholding agent/corporation is then obliged
to remit the tax to the Government since it already and properly
belongs to the Government. If a withholding agent who is
personally liable for income tax withheld at source fails to pay
said withholding tax, an assessment for said deficiency
withholding tax would, therefore, be legal and proper.

9 SAINT LOUIS UNIVERSITY BAR OPERATIONS
Subject Matter: Effect of taxpayers failure to file an admin
protest or to appeal BIRs decision to the CTA.
MARCOS II V CA
Facts:
On September 29, 1989, former President Ferdinand
Marcos died in Honolulu, Hawaii, USA.
On June 27, 1990, a Special Tax Audit Team was
created to conduct investigations and examinations of the tax
liabilities and obligations of the late President, as well as that of
his family, associates and cronies. Said audit team conducted
its investigation with a Memorandum dated July 26, 1991. The
investigation disclosed that the Marcoses failed to file a written
notice of the death of the decedent, an estate tax returns, as
well as several income tax returns covering the years 1982 to
1986, all in violation of the NIRC.
Subsequently criminal charges were field against Mrs.
Imelda Marcos for violations of Sections 82, 83 and 84 of the
NIRC.
The Commissioner of Internal Revenue thereby
caused the preparation and filing of the Estate Tax Return for
the estate of the late president, for the years 1985 and 1986,
and the income tax returns of petitioner Ferdinand Bongbong
Marcos II for the years 1982 to 1985. The CIR avers that copies
of the deficiency estate and income tax assessments were all
personally and constructively served upon Imelda Marcos and
Ferdinand Bongbong Marcos II (through their caretakers) at
their last known address.
The deficiency tax assessments were not protested
administratively by Mrs. Marcos and the other heirs of the late
President within 30 days from service of said assessments.
On February 22, 1993, the BIR Commissioner issued
22 notices of levy on real property against certain parcels of
land owned by the Marcoses to satisfy the alleged estate tax
and deficiency income taxes on spouses Marcos.
On June 25, 1993, petitioner Ferdinand Bongbong
Marcos II field the instant petition for certiorari and prohibition
under Rule 65 of the Rules of Court.
Issues:
Whether or not in case of failure to contest or appeal
the assessment made by the BIR is fatal.
Held:
The omission to file an estate tax return and the
subsequent failure to contest or appeal the assessment made
by the BIR is fatal to the petitioners cause, as under Sec. 223 of
the NIRC, in case of failure to file a return, the tax may be
assessed at any time within 10 years after the omission, and
any tax so assessed may be collected by levy upon real
property within 3 years following the assessment of the tax.
Since the estate tax assessment had become final and
unappealable by the petitioners default as regards protesting
the validity of said assessment, there is now no reason why the
BIR cannot continue with the collection of the said tax. Any
objection against the assessment should have been pursued
following the avenue paved in Section 229 of the NIRC on
protests on assessments of internal revenue taxes (now Sec.
228, 1997 NIRC)
DAVAO GULF LUMBER CORPORATION V CIR
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
July 23, 1998
Facts:
Davao Gulf Lumber Corp. is a licensed forest
concessionaire possessing a Timber License Agreement
granted by the Ministry of Natural Resources (now Department
of Environment and Natural Resources). From July 1, 1980 to
January 31, 1982 petitioner purchased, from various oil
companies refined and manufactured mineral oils as well as
motor and diesel fuels, which it used exclusively for the
exploitation and operation of its forest concession. Said oil
companies paid the specific taxes imposed under 153 and 156
of the NIRC, on the sale of said products. Being included in the
purchase price of the oil products, the specific taxes paid by the
oil companies were eventually passed on to the user, the
petitioner in this case.
On December 13, 1982, petitioner filed before
Respondent Commissioner of Internal Revenue (CIR) a claimed
for refund in the amount of P120,825.11, representing 25% of
the specific taxes actually paid on the abovementioned fuels
and oils that were used by petitioner in its operations as forest
concessionaire.
Petitioner complied with the procedure for refund,
including the submission of proof of the actual use of the
aforementioned oils in its forest concession as required by the
above-quoted law. Petitioner, in support of its claim for refund,
submitted to the CIR the affidavits of its general manager, the
president of the Philippine Wood Products Association, and 3
disinterested persons, all attesting that the manufactured diesel
and fuel oils were actually used in the exploitation and operation
of its forest.
On January 20, 1983, petitioner filed at the CTA a
petition for review. On June 21, 1994, the CTA rendered
decision finding petitioner entitled to a partial refund of specific
taxes the latter had paid in the reduced amount of P2,923.15.
Insisting that the basis for computing the refund
should be the increased rates prescribed by Secs. 153 and 156
of the NIRC, petitioner elevated the matter to the CA. CA
affirmed the decision of the CTA. Hence, this petition.
Issue:
Whether or not the petitioner is entitled to the tax
refund under the increased rates prescribed by Secs. 153 and
156 of the NIRC.
Held:
At the outset, it must be stressed that the petitioner is
entitled to a partial refund under Sec. 5 of RA 1435, which was
enacted to provide means for increasing the Highway Special
Fund. The gasoline and fuel purchased by mining and lumber
concessionaires are used within their compounds and roads,
and their vehicles seldom used the National Highways, they do
not directly benefit from the Fund and its use. The Highway
Special Fund was abolished in 1985, but since petitioner
purchased the subject manufactured diesel and fuel oils from
July 1, 1980 to January 31, 1982, it is entitled to claim the
refund under Sec. 5 of RA 1435.
A tax cannot be imposed unless it is supported by the
clear and express language of a statute; on the other hand,
once the tax is unquestionably imposed, a claim of exemption
from tax payments must be clearly shown and based on
language in the law too plain to be mistaken. Since the partial
refund authorized under Sec. 5 RA 1435, is in the nature of a tax
exemption, it must be construed strictissimi juris against the
grantee. Hence, petitioners claim of refund on the basis of the

10
specific taxes it actually paid must expressly be granted in a
statute stated in a language too clear to be mistaken.
COMMISSIONER OF INTERNAL REVENUE V CA
February 1, 1999
Facts:
The Court motu proprio consolidates two (2) cases as
the issues raised are similar.
1.) During the period from July 1, 1980 to June
30, 1982, private respondent CDCP Mining Corp. purchased
from Mobil Oil Philippines, Inc. and Caltex Philippines Inc.
quantities of manufactured mineral oil, motor fuel, diesel and
fuel oil, which private respondents used exclusively in the
exploitation and operation of its mining concession.
On September 6, 1982, private respondent filed with
the CIR, a claim for refund in the amount of P9,962,299.71,
representing 25% of the specific taxes collected on refined and
manufactured mineral oil, motor fuel, and diesel fuel that private
respondent utilized in its operations as mining concessionaire,
totaling P39,849,198.47.
As there was no immediate action on the claim, to toll
the prescriptive period, on October 9, 1982, private respondent
filed with the CTA, a petition for review of the presumed decision
of the Commissioner denying such claim. CTA rendered a
decision granting private respondents claim for refund only in
the amount of P38,461.86, without interest. Private respondent
filed a petition for review before the CA, which on November 9,
1994, rendered a decision modifying that of the CTA, ordering
the CIR to refund to petitioner CDCP the amount of
P1,598,675.25, without interest, equivalent to 25% refund of
specific taxes paid on its purchases during the period
September 23, 1980 to June 30, 1982 of manufactured oil and
other diesel oils.
Both parties field their respective motions for
reconsideration when the CA denied both motions, petitioner
filed a petition for review on certiorari.
2.) During the period beginning July 1, 1980 to
May 31, 1981, petitioner Sirawai Plywood and Lumber Co. Inc.,
purchased from various oil companies refined and manufactured
mineral oils, motor fuels and diesel fuel oils which petitioner
actually and exclusively used in connection with the exploitation
and operation of its forest concession; that the said oil
companies paid and passed on to the petitioner the specific
taxes imposed under sections 153 and 156 of the NIRC on
refined and manufactured oils, motor and diesel fuel oils that
said company sold to the petitioner.
Petitioner filed with the CIR on November 8, 1982 a
claim for refund in the amount of P99,226.17 representing 35%
of the specific taxes collected on the refined and manufactured
oils. On December 13, 1982, the petitioner filed with the CTA a
petition for review of the decision dated December 1, 1982 to
prevent the lapse of the 2-year prescriptive period.
On August 2, 1994, the CTA rendered a decision
ordering CIR to refund the sum of P1,101.15 in favor of Sirawai
Plywood. On appeal, the CA denied the same for lack of merit.
Hence, this petition for review on certiorari.
Issue:
Whether or not the mining concessionaires are
entitled for refund which is equivalent to 25% partial refund of
specific taxes in pursuant to Sec. 5 of Ra 1435.
Held:
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
A partial refund under Sec. 5 of RA 1435 is in the
nature of tax exemption, and therefore, must be construed in
strictissimi juris against the grantee. There is nothing in Sec. 5
RA 1435 which authorizes a tax refund based on higher rates
under Sec. 153 and 156 of NIRC.
When the law itself does not explicitly provide that a
refund under RA 1435 may be based on higher rates which
were non-existent at the time of its enactment, this court cannot
presume otherwise. A legislative lacuna cannot be filled by
judicial fiat.
The grant of refund to the mining concessionaires is
proper.
Subject Matter: Tax Liens, Preferential Liens
CIR V NLRC
GR No. 74965, November 3, 1994
Facts:
On January 12, 1984, the CIR demanded payment
from private respondent Maritime Company of the Philippines of
deficiency common carriers tax, fixed tax, 6% commercial
brokers tax, documentary stamp tax, income tax and
withholding tax totaling P17,284,882.45. The assessment
became final and executory, and with private respondents
failure to pay the tax liabilities, the CIR issued warrants of
distraint of personal property and levy of real property which
were duly served on January 23, 1985. On April 16, 1985, a
receipt of goods, articles and things was executed covering,
among others, 6 barges as proof of constructive distraint of
property but the same was not signed by any representative of
private respondent because of the refusal of the persons
actually in possession of the barges.
It appeared that 4 of the barges constructively
distrained were also levied upon by a deputy sheriff of Manila on
July 20, 1985 and sold at public auction to satisfy a judgment for
unpaid wages and other benefits of employees of private
respondent.
Issue:
Who has a preferential lien over the barges, the
Government or the companys employees?
Held:
The court held that it is the government which has
preferential lien over the barges under Articles 2241 and 2247 of
the Civil Code. Accordingly, the preferential lien of employees
for unpaid wages under Article 110 of the Labor Code applies
only to bankruptcy cases where the employer is under
liquidation due to bankruptcy.
The NIRC provides for the collection of delinquent
taxes by any of the following remedies: a) distraint of personal
property or levy of real property of the delinquent taxpayer; b)
civil or criminal action.
The court upheld the validity of distraint of the barges
against the levy on execution and the claim of the Government
predicated on a tax lien is superior to the claim of a private
litigant predicated on a judgment. The tax lien attaches not only
from the service of the warrant of distraint of personal property
but from the time the tax became due and payable. Besides, the
distraint on the subject properties of Maritime Company of the
Philippines as well as the notice of their seizure were made by
petitioner, through the CIR, a long before the writ of execution
was issued by RTC-Manila, Branch 31. There is no question

11
then that at the time the writ of execution was issued, the two (2)
barges, MCP-1 and MCP-4, were no longer properties of the
Maritime Company of the Philippines. The power of the court in
execution of judgment extends only to properties unquestionably
belonging to the judgment debtor. Execution sales affect the
rights of the judgment debtor only, and the purchaser in auction
sale requires only such rights as the judgment debtor had tat the
time of the sale. It is also well settled that the sheriff is not
authorized to attach or levy on property not belonging to the
judgment debtor.
Subject Matter: Collection in cases where the assessment is
final and unappealable
MARCOS II V CA
GR No. 120880, June 5, 1997
Facts:
Following the death of former President Marcos in
1989, a Special Tax Audit Team was created on June 27, 1990
to conduct investigations and examinations of tax liabilities of
the late president, his family, associates and cronies. The
investigation disclosed that the Marcoses failed to file a written
notice of death of the decedent estate tax return and income tax
returns for the years 1982 to 1986, all in violation of the Tax
Code. Criminal charges were field against Mrs. Marcos for
violation of Secs. 82, 83 and 84, NIRC.
The CIR thereby caused the preparation of the estate
tax return for the estate of the late president, the income returns
of the Marcos spouses for 1985 and 1986 and the income tax
returns of petitioner Marcos II for 1982 to 1985. On July 26,
1991, the BIR issued deficiency estate tax assessments and the
corresponding deficiency income tax assessments. Copies of
deficiency estate and income tax assessments were served
personally and constructively on August 26, 1991 and
September 12, 1991 upon Mrs. Marcos. Likewise, copies of the
deficiency income tax assessments against petitioner Marcos
were personally and constructively served. Formal assessment
notices were served upon Mrs. Marcos on October 20, 1992.
The deficiency tax assessments were not
administratively protested by the Marcoses within 30 days from
service thereof. Subsequently, the CIR issued a total of 30
notices to levy on real property against certain parcels of land
and other real property owned by Marcoses.
Notices of sale at public auction were duly posted at
the Tacloban City Hall and the public auction for the sale of 11
parcels of land took place on July 5, 1993. There being no
bidder, the lots were declared forfeited in favor of the
government.
Petitioner filed a petition for certiorari and prohibition
with an application for TRO before the CA to annul and set aside
the notices of levy as well as the notice of sale and to enjoin the
BIR from proceeding with the auction. The CA dismissed the
petition ruling that the deficiency assessments for the estate and
income taxes have already become final and unappealable and
may thus be enforced by summary remedy of levying upon the
real property.
Issues:
Whether or not the proper avenue of assessment and
collection was taken by respondent bureau.
Held:
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
Apart from failing to file the required estate tax return
within the time required for filing the same, petitioner and other
Marcos heirs never questioned the assessment served upon
them, allowing the same to lapse into finality, and prompting the
BIR to collect said taxes by levying upon the properties left by
the late President Marcos.
The Notice of Levy upon real property were issued
within the prescriptive period and in accordance with Sec. 222 of
the Tax Code. The deficiency tax assessment, having become
final, executory and demandable, the same can now be
collected through the summary remedy of distraint and levy
pursuant to Sec. 205 of the Tax Code.
Subject Matter: Civil Actions
REP V HIZON
320 SCRA
Facts:
On July 18, 1986, the BIR issued to respondent Salud
V. Hizon a deficiency income tax assessment of P1,113,359.68
covering the fiscal year 1981-1982. Respondent not having
contested the assessment, petitioner, on January 12, 1989,
served warrants of distraint and levy to collect the tax deficiency.
However, for reasons not known, it did not proceed to dispose of
the attached properties.
More than three years later, or on November 3, 1992,
respondent wrote the BIR requesting a reconsideration of her
tax deficiency assessment. The BIR, in a letter dated August 11,
1994, denied the request. On January 1, 1997, it filed a case
with the RTC Branch 44, San Fernando, Pampanga to collect
the tax deficiency. The complaint was signed by Norberto Salud,
Chief of the Legal Division, BIR Region 4, and verified by
Amancio Saga, the Bureaus Regional Driector in Pampanga.
Issues:
1.) Whether or not the institution of the civil action case
for collection of taxes was without the approval of the
Commissioner in violation of Section 221 of the NIRC.
2.) Whether or not the action for collection of taxes filed
against respondent had already been barred by the statute of
limitations.
Held:
1.) Revenue Adm. Order No. 10-95 specifically authorizes
the Litigation and Prosecution section of the Legal Division of
regional district offices to institute the necessary civil and
criminal actions for tax collection. As the complaint filed in this
case was signed by the BIRs Chief of Legal Division for Region
4 and verified by the Regional Director, there was, therefore,
compliance with the law.
Sec. 7 of NIRC, authorizes the BIR Commissioner to
delegate the powers vested in him under the pertinent provision
of the Code to any subordinate official with the rank equivalent
to a division chief or higher.
2.) Sec. 229 of the NIRC mandates that a request for
reconsideration must be made within 30 days from the
taxpayers receipt of the tax deficiency assessment, otherwise
the assessment becomes final, unappealable and demandable.
The notice of assessment for respondents tax deficiency was
issued by petitioner on July 18, 1986. On the other hand,
respondent made her request for reconsideration thereof only
on November 3, 1992, without stating when she received the
notice of tax assessment. She explained that she was

12
constrained to ask for a reconsideration in order to avoid the
harassment of BIR collectors. In all likelihood, she must have
been referring to the distraint and levy of her properties by
petitioners agents which took place on January 12, 1989. Even
assuming that she first learned of the deficiency assessment on
this date, her request for reconsideration was nonetheless filed
late since she made it more than 30 days thereafter. Hence, her
request for reconsideration did not suspend the running of the
prescriptive period provided under Sec. 223 of NIRC.
The timely service of warrant of distraint or levy
suspends the running of the period to collect the tax deficiency
in the sense that the disposition of the attached properties might
well take time to accomplish, extending even after the lapse of
the statutory period for collection. In those cases, the BIR did
not file any collection case but merely relied on the summary
remedy of distraint and levy to collect the tax deficiency.
Subject Matter: Collection thru application of a disputed tax
against a refundable tax
CIR V CEBU PORTLAND CEMENT CO., ET.AL.
L-29059, December 15, 1987
Facts:
By virtue of a decision of the CTA rendered on June
21, 1961, as modified on appeal by the SC on February 27,
1965, the CIR was ordered to refund to the Cebu Portland
Cement Co. the amount of P359,408.92, representing
overpayments of ad valorem taxes on cement produced and
sold by it after October 1957.
On March 28, 1968, following denial of motions for
reconsideration filed by both the petitioner and the private
respondent, the latter moved for writ of execution to enforce the
said judgment.
The motion was opposed by the petitioner on the
ground that the private respondent had an outstanding sales tax
liability to which the judgment debt had already been credited. In
fact, it was stressed, there was still a balance owing on the
sales taxes in the amount of P4,789,278.85 plus 28%
surcharge.
On April 22, 1968, CTA granted the motion, holding
that the alleged sales tax liability of the private respondent was
still being questioned and therefore could not be set-off against
the refund.
In his petition to review the said resolution, the CIR
claims that the refund should be charged against the deficiency
of the private respondent on the sales of cement under Sec. 186
of the Tax Code, which is a manufactured and not a mineral
product and therefore not exempt from sales ax. The petitioner
also denies that the sale tax assessments have already
prescribed because the prescriptive period should be counted
from the filing of the sales tax returns, which had not yet been
done by the private respondent.
Issue:
Whether or not the claims for refund could be set-off
against the deficiency sales tax of private respondent.
Held:
It has been ruled that even if a tax being collected by
the CIR is being contested by the taxpayer, the same can be
enforced by the set-off or by applying it against the refundable
tax that may be due the taxpayer. Of course, it is assumed here
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
that both the collection and the right to the refund of taxes has
not yet prescribed and that the refund claim has already been
approved.
The set-off is justified because taxes must be
collected inasmuch as they are the lifeblood of the government
and that it is a settled principle that the government is not duty
bound to resolve a pending tax protest before it can collect the
unpaid tax liability. Besides, if payment of taxes could be
postponed by simply questioning their validity, government
functions would be paralyzed.
Subject Matter: Importation
CARRARA MARBLE PHILIPPINES, INC. V COMMISSIONER
OF CUSTOMS
September 1, 1999
Facts:
During a public auction sale of various abandoned
articles conducted by the collector of customs, a marble
processing and grinding machine was awarded to Engr.
Policarpio, the highest bidder. After delivery to him of said
machines, he noticed that some parts of the machines were
missing and immediately informed the collector of customs. The
missing machines were found installed in the compound of
petitioner Carrara Marble Phil. Inc.
Said machineries were seized pursuant to a warrant of
seizure and detention for the non-payment of duties and taxes
and illegal removal of articles from the customs warehouse in
violation of the tariff and customs code.
It sustained the CTAs decision, relying on the contract
of sale between the BoC and Engr. Policarpio, which allows
refund in case of loss or short-delivery. In case of refund, it is as
if the duties, taxes and charges are unpaid, the importation is
deemed terminated and the collector of customs would still be
authorized to seize the articles.
Issue:
Whether or not the importation has terminated.
Held:
Importation is deemed terminated upon payment of
duties, taxes and other charges due to secured to be paid upon
the articles at a point of entry, and upon the grant of a legal
permit for withdrawal; or in case said articles are free of duties,
taxes and other charges, until they have legally left the
jurisdiction of the customs.
The forfeiture of the subject machineries, is not
dependent on whether or not the importation was terminated;
rather, it is premised on the illegal withdrawal of goods from
customs custody.
Thus, regardless of the termination of importation,
customs authorities may validly seize goods which, for all intents
and purposes, still belong to the government.
Subject Matter: Valuation of Goods
CALTEX, INC. V CA
July 10, 1998
Facts:

13
Petitioner imported light/medium mix special oil and
heavy crude oil on various dates and was accordingly assessed
ad valorem duties. The assessment was based on a
memorandum issued by the acting commissioner of customs
which provided that duties and taxes in the importation of crude
oil shall be based on the gross actual receipt without deducting
the basic sediment and water (BSW) content.
The assessment was timely protested by Caltex on
the ground that BSW content should have been deducting
before imposing assessable ad valorem taxes.
Issue:
What is the basis of the taxes imposed?
Held:
The axiomatic null is that the dutiable value of an
imported article subject to ad valorem is based on its home
consumption value or price freely offered for sale in wholesale
quantities in the ordinary course of business or trade in the
principal market of the country from where exported on the date
of exportation to the Philippines. The home consumption value
is the price declared in the consular, commercial, trade on sales
invoice.
Subject Matter: Seizure and forfeiture of goods
TRANSGLOBE INTERNATIONAL, INC. V CA
January 25, 1999
Facts:
A shipment from Hong Kong arrived at the port of
Manila, aboard the S/S Seadragon. Its inward foreign manifest
indicated that it contained various hand tools. Acting on an
information that the shipment violated provisions of tariff and
customs code, the Economic Intelligence and Investigation
Bureau (EIIB) agents seized the shipment while in transit to the
container yard. The EIIB recommended seizure of the shipment,
and for which a warrant of seizure and distraint was issued by
the District Collector.
For failure of petitioner, to appear during the hearing
despite due notice, collector decreed the forfeiture of the
shipment in favor of the government.
Issue:
Whether or not Transglobe is allowed to redeem the
forfeited shipments.
Held:
As a means of settlement under Sec. 2307, TCC,
redemption of forfeited property is unavailing in 3 instances:
1. Where there is fraud;
2. Where the importation is absolutely
prohibited;
3. Where the release of the property is
contrary to law.
The fraud contemplated by law must be actual and not
constructive. It must be intentional, consisting of deception
willfully and deliberately done or resorted to in order to induce
another to give up same right.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
Subject Matter: Seizure and forfeiture of goods
UY, ET AL V BIR
October 20, 2000
Facts:
Rodrigo Abas, claiming to be a former employee of
Unifish stated in his affidavit that he has personal knowledge of
the activities of petitioner in violation of the tax code. On the
basis thereof, the BIR Special Investigation branch applied for
search warrants.
Search warrants were issued in connection with the
crime of attempt to evade or defeat the tax, both enumerated
the items to be searched.
Petitioners filed motion to quash the subject search
warrants which was denied with their subsequent motion for
reconsideration. Hence, this petition for certiorari.
Issue:
Whether or not the search warrants are valid.
Held:
A search warrant must conform strictly with the strictly
with the requirements of the constitution. The absence of such
requirements will cause the downright nullification of the search
warrants. The proceedings upon search warrants must be
absolutely legal, for there is not a description of process known
to the law; the execution of which is more distressing to the
citizen. Perhaps there is none which excites such intense feeling
in consequence of its humiliating and degrading effect. The
warrants will always be construed strictly without, however,
going the full length of requiring technical accuracy. No
presumptions of regularity are to be invoked in aid of the
process when an officer undertakes to justify under it.
Subject Matter: Primary jurisdiction of the Bureau of customs
JAO V CA
October 6, 1995
Facts:
The Bureau of Customs received information
regarding the presence of allegedly untaxed vehicles and parts
in the premises owned by a certain Pat Hao in Paraaque and
Makati. After conducting surveillance, a recommendation of the
issuance of warrants of seizure and detention articles was
made.
On the strength of the amended warrants; customs
personnel started hauling the articles and this prompted
petitioners to file a case of injunction before the Makati RTC,
which issued the TRO.
Upon review, CA set aside orders of the trial court and
dismissed the civil case. Hence, this petition.
Issue:
Whether or not the trial court has jurisdiction over the
case.
Held:
There is no question that RTCs are devoid of any
competence to pass upon the validity/regularity of seizure and
forfeiture proceedings conducted by the Bureau of customs and
to enjoin an otherwise interfere with these proceedings.

14
The collector of customs sitting in seizure and
forfeiture proceedings has exclusive jurisdiction to hear and
determine all questions touching on the seizure and forfeiture of
dutiable goods. The regional trial courts are precluded from
assuming cognizance over such matters even through
petitioners for certiorari, prohibition and mandamus.
Subject Matter: Prescription of Governments right to collect tax
CIR V CA
303 SCRA 614 (February 25, 1999)
Facts:
Carnation Philippines field its annual income and
percentage tax returns for the fiscal year ending September 30,
1981 on January 15, 1982 and November 20, 1981,
respectively. Later, the corporation thru its vice president
executed waivers of the statute of limitation, waiving the running
of the prescriptive period provided for in Sections 318 and 319
of the NIRC. On July 29, 1987, the BIR assessed the
corporation for deficiency taxes. The company seasonably
protested but the BIR denied. On appeal, the CTA ruled against
the BIR declaring that the assessment is null and void for having
been issued beyond the five-year prescriptive period provided
by law. It noted that the companys 1981 income and sales
taxes should have been validly assessed only until January 14,
1987 and November 19, 1986, respectively. However,
Carnations income and sales taxes were assessed on July 29,
1987, which is beyond the five-year prescriptive period.
The CIR claims that the waivers signed by Carnation
were valid although not signed by the Commissioner because
(a) when the BIR agents/examiners extended the period to audit
and investigate the tax returns, the BIR gave it implied consent
to such waivers; (b) the signature of the commissioner is a mere
formality and the lack of it does not vitiate the binding effect of
the waivers; and (c) that a waiver is not a contract but a
unilateral act of renouncing ones right to avail of the defense of
prescription and remains binding in accordance with the terms
and conditions set forth in the waiver. In effect, the assessment
is valid.
Held:
CIR is wrong. Sec. 319 of the Tax Code clearly and
explicitly provides that waiver of the five-year prescriptive period
must be in writing and signed by both the CIR and the taxpayer.
Subject waivers signed by Carnation do not bear the written
consent of the BIR commissioner as required by law, therefore it
is invalid. Indeed, the questioned assessments are null and void
for having been issued beyond the five-year prescriptive period.
Subject Matter: Interruption of prescriptive period.
CIR V WYETH SUACO LABORATORIES, INC.
202 SCRA 125 (September 30, 1991)
Facts:
On December 19, 1974, Wyeth Suaco received notice
of assessment from the BIR for its failure to remit withholding
tax at source for the 4th quarter of 1973 on accrued royalties,
remuneration for technical services paid abroad and cash
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
dividends, including the deduction of non-deductible raw
materials from its reports. The company, thru its tax consultant,
SVG & co., sent BIR two letters dated January 17, 1975 and
February 8, 1975 protesting the assessment and requesting
their cancellation or withdrawal on the ground that said
assessments lacked factual or legal basis. Also, there were
letters from the company to the BIR to such effect. On
September 12, 1975, the CIR offered to compromise but only
resulted to a slight reduction of the tax as per the acting
Commissioners decision on December 10, 1979. On January
18, 1980, Wyeth Suaco filed petition for review with the CTA,
praying that CIR be enjoined from enforcing the assessments by
reason of prescription and that assessments be declared null
and void for lack of legal and factual basis. The CTA decided
against the CIR holding that while the assessments for the
deficiency taxes were made within the five-year period of
limitation, the right of CIR to collect the same has already
prescribed, in accordance with Sec. 319(c) of the NIRC.
Held:
CTA is wrong. The letters of Wyeth Suaco interrupted
the running of the five-year perspective period to collect the
deficiency taxes. Settled is the rule that the prescriptive period
provided by law to make a collection by distraint or levy or by a
proceeding in court is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment. Wyeth
Suaco admitted that it was seeking reconsideration of the tax
assessments as shown in a letter of its president and General
Manager. Further, although the protest letters prepared by SGV
& Co. did not categorically state or use the words
reinvestigation and reconsideration, the same are to be
treated as letters of reinvestigation and reconsideration.
As to Wyeth Suacos argument that withholding tax at
source should only be remitted to the BIR once the incomes
subject to withholding tax at source have actually been paid, the
SC cited the lifeblood doctrine, the express provision of the law
which requires the filing of monthly return and payment of taxes
withheld at source within 10 days after the end of each month.
Further, the company uses accrual method of accounting and
therefore the effect of transactions and other events on assets
and liabilities are recognized and reported in the time periods to
which they relate rather than only when cash is received or paid.
Subject Matter: Interruption of prescriptive period
AFISCO INSURANCE CORP. V CA
302 SCRA 1 (January 25, 1999)
Facts:
AFISCO and 40 other non-life insurance companies
entered into a Quota Share Reinsurance Treaties with Munich, a
non-resident foreign insurance corporation, to cover for All Risk
Insurance Policies over machinery erection, breakdown and
boiler explosion. The treaties required petitioners to form a pool,
to which AFISCO and the others complied. On April 14, 1976,
the pool of machinery insurers submitted a financial statement
and filed an Information Return of Organization Exempt from
Income Tax for the year ending 1975, on the basis of which, it
was assessed by the commissioner of Internal Revenue
deficiency corporate taxes. A protest was filed but denied by the
CIR.
Petitioners contend that they cannot be taxed as a
corporation, because (a) the reinsurance policies were written
by them individually and separately, (b) their liability was limited

15
to the extent of their allocated share in the original risks insured
and not solidary, (c) there was no common fund, (d) the
executive board of the pool did not exercise control and
management of its funds, unlike the board of a corporation, (e)
the pool or clearing house was not and could not possibly have
engaged in the business of reinsurance from which it could have
derived income for itself. They further contend that remittances
to Munich are not dividends and to subject it to tax would be
tantamount to an illegal double taxation, as it would result to
taxing the same premium income twice in the hands of the same
taxpayer. Finally, petitioners argue that the governments right to
assess and collect the subject Information Return was filed by
the pool on April 14, 1976. On the basis of this return, the BIR
telephoned petitioners on November 11, 1981 to give them
notice of its letter of assessment dated March 27, 1981. Thus,
the petitioners contend that the five-year prescriptive period then
provided in the NIRC had already lapsed, and that the internal
revenue commissioner was already barred by prescription from
making an assessment.
Held:
A pool is considered a corporation for taxation
purposes. Citing the case of Evangelista v. CIR, the court held
that Sec. 24 of the NIRC covered these unregistered
partnerships and even associations or joint accounts, which had
no legal personalities apart from individual members. Further,
the pool is a partnership as evidence by a common fund, the
existence of executive board and the fact that while the pool is
not in itself, a reinsurer and does not issue any insurance policy,
its work is indispensable, beneficial and economically useful to
the business of the ceding companies and Munich, because
without it they would not have received their premiums.
As to the claim of double taxation, the pool is a
taxable entity distinct from the individual corporate entities of the
ceding companies. The tax on its income is obviously different
from the tax on the dividends received by the said companies.
Clearly, there is no double taxation.
As to the argument on prescription, the prescriptive
period was totaled under the Section 333 of the NIRC, because
the taxpayer cannot be located at the address given in the
information return filed and for which reason there was delay in
sending the assessment. Further, the law clearly states that the
prescriptive period will be suspended only if the taxpayer
informs the CIR of any change in the address.
Subject Matter: Tax Refund
PHILEX MINING CORP V CIR
306 SCRA 126 (April 21, 1999)
Facts:
From July 1, 1980 to December 31, 1981, Philex
Mining Corp. purchased from several oil companies, refined and
manufactured minerals, motor fuels, and diesel fuel oils. Specific
taxes of P2,492,677.22 were paid. On October 22, 1982, the
company availed of the provisions of RA 1435 granting refund of
25% of the tax paid and provided proof of the use of the oils, as
required. Pending such claim for refund (P623,169.30
representing the 25%) with the CIR, the company filed another
claim for refund with the same amount plus 20% interest
thereon with the CTA on November 16, 1982. The CTA granted
the refund but only P16,747.36 which was based on the amount
deemed paid under Sections 1 & 2 of RA 1435. Philex contends
the refund should be based on the actual specific taxes paid as
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
per the increased rates provided in Sections 142 and 145 (which
became Sections 153 and 156) of the NIRC.
Held:
CTA is incorrect. In 1977, PD 1158 codified all existing
laws. Sections 142 and 145 of the Tax Code, as amended by
Sections 1 and 2 of RA 1435 were re-numbered to Sections 153
and 156. Later, these sections were amended by PD 1672 and
subsequently by EO 672 increasing the tax rates for certain oil
and fuel products. In effect, the reason for the refund ceased to
exist. (The purpose of the tax was for Highway Special Fund
which was abolished in 1985). SC affirmed therefore the
decision of the CA & CTA that the basis of tax refund under RA
1435 is computed on the basis of the specific tax deemed paid
under Sections 1 & 2 and not the increased rates actually paid
under the 1977 NIRC, citing several cases in support thereof.
Further, although Philex paid the taxes on their oil and
fuel purchases based on the increased rates, the latter law did
not specifically provide for a refund based on the increased
rates. Since the grant of refund privileges must be strictly
construed against the taxpayer, the basis for the refund remains
to be the amounts deemed paid under Sections 1 and 2 of RA
1435. Also, there is no merit to petitioners assertion that
equity and justice demands that the computation for tax refunds
be based on actual amounts paid under Sections 153 and 156
of the NIRC, there being no tax exemption solely on the ground
of equity.
SC finally held: The rule is that no interest on refund
of tax can be awarded unless authorized by law of the collection
of the tax was attended by arbitrariness. An action is not
arbitrary when exercised honestly and upon due consideration
where there is room for two opinions, however much of it may
be believed that an erroneous conclusion was reached.
Arbitrariness presupposes inexcusable or obstinate disregard of
legal provisions. None of the exceptions are presents in this
case. Respondents decision was based on an honest
interpretation of the law. We see no reason why there should be
payment of interest.
Subject Matter: Tax Refund
CIR V PHILAMLIFE
244 SCRA 446 (May 29, 1995)
Facts:
On May 30, 1983, Philamlife paid its 1983 1 st Quarter
income tax of P3,246,141. On August 29, 1983, it paid P396,874
for the 2nd Quarter and also paid P708,464 for the3rd Quarter. In
the 4th Quarter however, it suffered loss and thereby had no
income tax liability. It therefore declared refund of the 1 st and 2nd
Quarter payments. In 198r, Philamlife suffered loss again and
applied for tax credit of its overpaid taxes in 1983 and 1982. ON
December 16, 1985, it filed another claim for refund with the
CIRs appellate division for an amended and increased amount.
On January 2, 1986, it filed petition for review with the CTA.
The issue is the reckoning date of the two-year
prescriptive period provided in Section 230 of the NIRC for the
recovery of tax erroneously or illegally collected. CIR claims that
the running of the prescriptive period commences from the
remittance/payment at the end of the first quarter of the tax
withheld instead of from the filing of the Final Adjustment
Return. In such a case, Philamlife is not entitled for refund.
Held:

16
CIR is wrong. The prescriptive period of two years
should commence to run only from the time that the refund is
ascertained, which can only be determined after a final
adjustment return is accomplished. In the present case, this
date is April 16, 1984, and two years from this date would be
April 19, 1986. The record shows that the claim for refund was
field on December 10, 1985 and the petition for review was
brought before the CTA on January 2, 1986. Both dates are
within the two-year reglementary period. Even if the two-year
prescriptive period had already lapsed, the same is not
jurisdictional and may be suspended for reasons of equity and
other special circumstances.
Subject Matter: Tax Assessment
DAYRIT, ET. AL. V CRUZ, ETC., ET. AL.
L-39910, September 26, 1998
Facts:
After separate estate and inheritance tax returns for
the estate of the late spouses Marta T. Teodoro and Don Toribio
Teodoro were filed, deficiency estate and inheritance tax
assessments were issued in the sums of P1,662,072.34,
P1,542,293.01, P1,747,790.94, and P1,578,458.72.
Subsequently, petitioners, heirs of the late spouses, asked for a
reconsideration of the assessments alleging that the same were
contrary to law and not supported by sufficient evidence. At the
same time, petitioners requested a period of 30 days within
which to submit their position paper in support of their claim.
However, after this, the CIR filed a motion for
allowance of claim against the estate of the CFI of Rizal, for a
payment of said sums after which the petitioners filed separate
appositions alleging that the estate and inheritance taxes sought
to be collected have already been settled in accordance of P.O.
23 as amended, or the Tax Amnesty Decree; and that, at any
rate, the assessments have not become final and executory.
The lower court having approved said claim,
petitioners appealed contending that respondent judge acted
with grave abuse of discretion in granting said claim.
Issue:
Whether or not said assessments have become final
and executory.
Held:
Petitioners contend that due to the pendency of their
motion for reconsideration of the deficiency assessments, the
tax assessments in question have not yet become final and
executory. They further contend that their availment of tax
amnesty under P.D. 23, as amended, is a bar to tax collection.
As regards the tax assessments, the act of the CIR in
filing a motion for allowance of the claim of the estate and
inheritance taxes may be considered as an outright denial of
petitioners request for reconsideration. From the date of receipt
of the copy of the CIRs letter for collection of estate and
inheritance taxes against the estates of the late spouses,
petitioners must contest or dispute the same and upon denial
thereof, the petitioners have a period of 30 days within which to
appeal to the CTA. This they failed to avail of. Failure of the
petitioner to appeal to the CTA in due time made the
assessments in question final, executory and demandable. The
assessment having become final and executory, the CFI
properly acquired jurisdiction.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
Subject Matter: CTA
MAGSAYSAY LINES, INC., ET. AL. V CA
G.R. No. 111184, August 12, 1996
Facts:
Petitioners, consisting of investors/shipping
companies field on April 10, 1989 a petition for refund of the
CTA for reversal of certain VAT rulings and for the refund of
P15,120,000 representing erroneously paid 10% VAT on the
sale thru public bidding of 5 vessels by the National
Development Corp. to said group of investors. On April 27,
1992, the CTA ordered the CIR to refund the amount to
petitioners.
The resolution of the CTA dated December 9, 1992,
delaying its motion for reconsideration was received by
respondent CIR on January 6, 1993. Upon receipt thereof, CIR,
thru the office of the SOL-GEN, filed on the same date with the
CA a motion for reconsideration of 30 days or until February 6,
1993, within which to file a petition for review. However, on
February 5, 1993, the OSG filed on behalf of respondent CIR a
second motion for extension of 30 days, or until March 8, 1993,
within which to file said petition.
On February 11, 1993, the OSG received the
resolution dated February 3, 1993 of respondent appellate court
granting respondent CIRS first motion for extension with a
warning that so further extension shall be entertained.
Manifestation and motion, on March 8, 1993, or within the period
requested in the second motion for extension, the petition for
review was filed thru registered mail.
In a resolution of May 3, 1993, respondent CA
dismissed the petition for being filed out of time. Later, however,
the CA reconsidered its ruling and directed herein petitioner to
file its comment on the reinstated petition. Hence, petitioners
filed the instant petition.
Issue:
Whether or not the motion for extension to file a
petition for review of CA my be permitted.
Held:
The petition is devoid of merit. The petition for review
pending before respondent appellate court was file din
accordance with circular no. 1-91, dated January 27, 1991.
While circular no. 1-91 is silent as to whether a motion for
extension of time to file a petition for review with the CA may be
permitted, nevertheless, the court already ruled in Liboro vs. CA,
that such motion is allowed and should be granted.
Parenthetically, it should be mentioned that Adm. Circular no. 1-
95 which took effect on February 15, 1995 allows motion for
extension of time to file petitions for review.
The resort to the filing of the first motion for extension
dated January 6, 1993 was proper, and said motion validly and
timely filed, pursuant to the then prevailing rules of procedure.
The first motion having been granted on February 3, 1993 or
well within the period of extension asked for, was no less valid
and effective. Therefore, petitioner has until February 6, 1993 to
file the subject petition for review.
With respect to the 2nd motion for extension filed on
February 5, 1993, the court took cognizance of the fact that the
intermittent and extended power failures assuming almost daily
throughout 1993 rendered substantial work delays inevitable.

17
Hence the 2nd motion for extension was justified and the grant
thereof was proper under the circumstances.
While generally speaking, a review on appeal is not a
matter of right but of sound judicial discretion, and may be
granted only when there are special and important reasons
therefore, in this instance, substantial justice would be better by
allowing the appeal.
Subject Matter: Tax Refund
BPI FAMILY SAVINGS BANK, INC., V CA
G.R. No. 122480, April 12, 2000
Facts:
Petitioner banks annual corporate income tax return
for 1989 showed that it suffered a loss of P8,286,960, and that it
had a total refundable amount of P297,492 inclusive of
P112,491 being claimed as tax refund in the present case.
However, petitioner declared in its 1989 income tax return as a
tax credit in the succeeding taxable year.
On October 11, 1991, petitioner bank filed a written
claim for refund of P112,491 with the BIR alleging that it did not
apply the 1989 refundable amount of P297,492 as tax credit to
its 1990 annual corporate income tax return or either tax
liabilities due to business losses it incurred for the same year.
Without waiting for respondent CIRs action in its claim for
refund, petitioner filed a petition for review with the CTA.
CTA dismissed the petition on the ground that
petitioner bank failed to present as evidence its 1990 annual
income tax return to prove that it had not yet credited the
amount of P297,422, inclusive of P112,491 which is the subject
of the present controversy to its 1990 tax liability. Since
petitioner declared in its 1989 income tax return that it would
apply the excess withholding tax as tax credit for the following
year, the tax court presumed that it did so. Petitioner failed to
overcome this presumption because it did not present its 1990
tax return which would have shown that the amount was not
applied as a tax credit. Hence, it was concluded that petition
was not entitled to a tax refund. The CA affirmed said decision
of the CTA.
Issue:
Whether or not petitioner is entitled to a tax refund of
P112,491 representing creditable withholding tax paid for 1989.
Held:
The petition is meritorious. As a rule, the factual
findings on the appellate court are binding on the SC. This rule,
however, does not apply where, inter alia, the judgment is
premised on a misapprehension of facts or when the appellate
court failed to notice certain relevant facts which if considered
would justify a different conclusion. This case is one such
exception.
Strict procedural rules generally frown up the
submission of the return the trial. R.A. 1125, the law creating the
CTA, however, specifically provides the proceedings before it
shall not be governed strictly by the technical rules of
evidence. The paramount considerations remains the
ascertainment of truth. Verily, the quest for orderly presentation
of issues is not an absolute. It should not bar courts from
considering undisputed facts to arrive at a just determination of
a controversy.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
While tax refunds are in the nature of the exceptions
and are to the construct strictissimi juris against the claimant,
under the facts of this case, petitioner has established its claim.
Substantial justice equity, and fair play are on the side
of petitioner. Technicalities and legalisms, however, exalted,
should not be misused by the government to keep money not
belonging to it and thereby enrich would be better by allowing to
appeal.
Subject Matter: Tax Assessment
PROTECTORS SERVICES, INC., V CA ET. AL.
G.R. No 118176, April 12, 2000
Facts:
Petition Protectors Services, Inc., (PSI) is a contractor
engaged in recruiting security guards for clients. After an audit
investigation, the BIR assessed PSI deficiency percentage taxes
including surcharges, penalties and interests of P503,564.39,
P831,464.30 and P1,514,047.86 for 1983, 1984 and 1985,
respectively. On December 7, 1987, respondent CIR sent demand
letters for payment of said assessments for 1983 and 1984 on
December 10, 1987, but denied receiving the notice of deficiency
tax for 1985.
Petitioner PSI, sent a protest letter dated January 12,
1988 regarding the 1983 and 1984 assessments, claiming that
gross receipts subject to percentage tax should exclude salaries of
the security guards, employers share of SSS, SIF and Medicare
contributions. Without formally acting thereon, the BIR sent a
follow-up letter dated July 12, 1988 for the settlement of the taxes
based on its computation, plus additional documentary stamp taxes
of P2,025 on PSIs capitalization for 1983 and 1984 and as
deficiency expanded withholding tax of P703.41, thereby bringing
the total unsettled tax to P2,851,805.16.
On July 12, 1988, petition paid the P2,025 documentary
stamp tax and P703.41 deficiency expanded withholding tax. The
following day, PSI filed its second protest for the 1983 and 1984
assessments and included for the first time its protest against the
1985 assessment. On November 9, 1990, the BIR denied the
protests stating that salaries of security guards are part of taxable
gross receipts for determination of contractors tax.
PSI filed a petition for review on December 5, 1990 with
the CTA averring that assessments for documentary stamp and
expanded withholding taxes and without basis having been paid on
July 22, 1988; the period for collection of the 1985 assessment
letter therefore, the period to collect the percentage taxes for the
first, second and third quarter of 1984 has lapsed, the assessment
letter therefore having been sent on December 10, 1987, or beyond
3 years from filing of the quarterly returns, and that the base
amount was erroneous since salaries of security guards,
employers share of SSS, SIF and medicare contributions should
not form part of taxable gross receipts.
The CTA dismissed the petition stating that: (1) the
assessments were made within the 3-year prescriptive period which
should be reckoned from January 20, 1985, the date of filing the
final return; (2) receipt of the 1985 assessment cannot be denied as
all assessments were sent in 1 envelope, as testified to by BIR
personal; and (3) the protest letter having filed only on January 12,
1988, or 33 days from December 10, 1987, the request for
reinvestigation was filed out of time. On review by the CA, the
CTAs decision was affirmed.
Issues:
Whether or not the CTA has jurisdiction to act on the
petition for review filed before it.

18
Whether or not the assessments against PSI for
deficiency percentage tax for 1983 and 1984 were made
within the prescriptive period.
Whether or not the period for collection of taxes for
taxable years 1983, 1984 and 1985 has already
prescribed.
Whether or not the assessments are correct.
Held:
An assessment maybe administratively protested within
30 days from receipt thereof; otherwise, the assessment shall
become final and unappealable. In this case, PSI received the
assessments on December 10, 1987 and protested the 1983 and
1984 assessments on January 12, 1988, or 33 days thereafter.
Hence, the protests were filed out of time and PSI can no longer
dispute the correctness of assessment. The CTA correctly
dismissed the appeal for lack of jurisdiction.
Petitioners contention that the Governments right to
assess and collect the 1983, 1984 and 1985 assessments had
already prescribed in view of BP700, which reduced the prescriptive
period for assessment and collection of internal revenue taxes to 3
yrs, lacks merit BP700 was approved on April 5, 1984. The 3-year
prescriptive period for assessment and collection of revenue taxes
applied to taxes paid beginning 1984. Clearly, the tax assessment
made on December 10, 1987, for the par 1983 was still covered by
the 5-year statutory prescriptive period.
The 3-year prescriptive period for assessment of
contractors tax should be computed at the time of filing of the final
annual percentage tax return, when it can be finally acclaimed if the
taxpayer still has an unpaid tax, and not from the tentative quarterly
payments.
As to the contention that for failure of the BIR to
commence collection of the 1983, 1984 and 1985 deficiency taxes
either by judicial action or by distraint and levy, the governments
right to collect the tax has prescribed, the court ruled that the
suspension of the running of the statute of limitations for tax
collection for the period during which the commissioner is
prohibited from making the assessment or beginning distraint or
levy or a proceeding in court and 60 days thereafter. In the instant
case, PSI filed a petition before the CTA to prevent the collection of
the assessed deficiency tax. When the CTA dismissed the case,
petitioner elevated the case to the SC, hoping for a review in the
favor. The actions taken by petitioner before the CTA and the SC
suspended the running of the statute of limitation.
As to the correctness of the assessment, it was held that
contractors tax on gross receipts imposed on business agents
including private detective watchman agencies, was a tax on the
sale of services or labor, imposed on the exercise of a privilege.
The term gross receipts means all amounts received by the prime
or principal contractor as the total price, undiminished by the
amount paid to the subcontractor under the subcontract
arrangement. Hence, gross receipts could not be diminished by
employers SSS, SIF and medicare contributions. Furthermore, it
has been consistently ruled by the BIR that the salaries paid to
security guards should form part of the gross receipts subject to tax.
Subject Matter: CTA, Jurisdiction
CIR V VILLA, ET. AL.
L-23988, January 2, 1968
Facts:
Leonardo S. Villa, a doctor of medicine and his wife
filed joint income tax returns for 1951 to 1956. Subsequently, the
BIR determined the income of the spouses by the use of the net
worth method and issued on February 23, 1961 assessments
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
for deficiency income tax for 1951 to 1956 and residence tax for
1951 to 1957. Dr. Villa received the assessment on April 7,
1961.
Without contesting said assessment in the BIR, he
filed on May 4, 1961 a petition for review in the CTA.
Issue:
Did the CTA acquire jurisdiction over the case?
Held:
The CTA did not acquire jurisdiction over the case.
The word decision in par. 1, sec. 7 of RA 1125 (law creating
the Court of Tax Appeals) has been interpreted to mean the
decisions of the CIR on the protest of the taxpayer against the
assessments. Definitely, said word does not signify the
assessment itself.
Jurisdiction over the subject matter is fundamental for
the count to act on a given controversy. It is conferred by law,
not by the consent of the parties. It can be challenged at any
stage of the proceedings and for lack of jurisdictions a court can
dismiss a case motu proprio.
Subject Matter: CTA
LIBORO V CA, ET. AL.
G.R. No. 101132, January 29, 1993
Facts:
Petitioner Liboro, a practicing lawyer field his income
tax return for 1980. However, on September 30 and November
30, 1985 he was notified of his tax deficiency. He responded
with a letter protest dated December 19, 1985, but this was
denied by the CIR on May 11, 1988 for lack of legal basis.
Petitioner filed a petition for review with the CTA which
dismissed his petition on March 29, 1991. Petitioner received
the decision on May 29, 1991 and, therefore, had until June 13,
1991 to file a petition for review with the CA.
However, instead of filing a petition for review,
petitioner, on June 11, 1991, filed a notice of appeal with the
CTA, and on June 13, 1991 field a motion for extension of 30
days to file a petition for review before the CA. The CA denied
his motion on June 20, 1991 the ground that SC circular No. 1-
91 then in force did not authorize and extension of the period for
filing a petition for review and regarded the proceedings closed
and terminated. On July 18, 1991, petitioners motion for
reconsideration and for admission of his petition were denied.
Issue:
Whether Circular No. 1-91 then in force allows the CA
to grant a motion for extension to file a petition for review from
the final order or decision of the CTA and other quasi-judicial
agencies.
Held:
The prohibition against granting an extension of time
applies only in a case where ordinary appeal is perfected by a
mere notice of appeal. The reason is that only the filing of the

19
notice of appeal is required to perfect an appeal and nothing
more. However, it is different in a petition for review where
pleading is required to be verified. A petition for review, unlike
an ordinary appeal, requires careful preparation and research in
order to put up a persuasive and formidable position.
Since Circular No. 1-91 provides that an appeal from
the CTA other quasi-judicial agencies to the CA is by a petition
for review, and no longer by mere notice of appeal, a
corresponding motion for extension of time to file a petition for
review should likewise be granted.
But the extension nonetheless should be limited only
to 15 days, save exceptionally meritorious cases where the CA
may grant it a longer period.
Subject Matter: Prescriptive Period
AZNAR CASE (August 23, 1974)
Facts:
Matias Aznar died on May 15, 1958. His income tax
returns from 1945 to 1951 were examined by the BIR. Doubting
the truth of the income that he had reported, the Commissioner
ordered the investigation of the case on the basis of the net
worth method. Substantial under-declarations of income were
discovered. On November 28, 1952, the BIR notified AZNAR of
a tax delinquency of P723,032.66 which was later reduced to
P381,096.07 upon reinvestigation.
On February 20, 1953, AZNARs properties were
placed under distraint and levy. On April 1, 1955, AZNAR
appealed to the CTA. The CTA found that AZNAR made
substantial under-declarations of his income as follows: he
under-declared his income for 1946 by 227%; 564% for 1947;
95% for 1948; 486% for 1949; 946% 1950; 490% 1951.
Issues:
Whether or not the right of the Commissioner to
assess AZNARs deficiency income taxes for 1946, 1947 and
1948 had prescribed at the time the assessment was made.
Held:
On the issue of prescription the count applied the 10-
year prescriptive period and ruled that prescription had not set
in. the court opined that AZNARs returns were false because
the under-declaration of income constituted a deviation from the
truth. The court stated that the ordinary prescriptive period of 5
years (now 3 years) would apply under normal circumstances
but whenever the government is placed at a disadvantage as to
prevent its lawful agent from making a proper assessment of tax
liabilities due to false or fraudulent returns intended to evade
payment of taxes or failure to the returns, the period of 10 years
provided for in the law from the discovery of the falsity, fraud or
omission even seems to be inadequate and should be the one
enforced.
Subject Matter: Prescriptive Period
REPUBLIC V RET
March 31, 1962
Facts:
Damian Ret filed 2 false and fraudulent returns for
1948 and 1949 for which he was assessed by the BIR the sums
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
of P34,907.33 and P68,338.40 including 50% surcharge for
found. Demand was made on January 3, 1951 for payment.
Ret refused to pay. On June 20, 1951, an assessment
notice was issued but he still refused. Subsequently, Ret was
prosecuted in 2 criminal cases for filing false or fraudulent
returns. He pleaded guilty thereto and was sentenced to pay a
fined of P300 in each case.
After his conviction, on September 21, 1957, the
Government filed a complaint for the collection of Rets income
taxes but the lower court dismissed the case on the ground that
the governments right to collect by judicial action had
prescribed as more than five (now three) years had elapsed
from the date of the assessment of Rets taxes.
The government however contended that prescription
did not take place because the prescriptive period for collection
was suspended when the 2 informations were filed on May 29,
1952 and began to run again from the receipt of the courts
decision on April 20, 1955.
Issue:
Whether or not the prescriptive period was suspended
when the 2 informations were filed.
Held:
According to the SC, however, the prescriptive period
for the civil action is suspended during the pendency of the
criminal nation only when the civil liability arises from the
offense committed. However, such rule does not apply here
because the criminal actions for the violations are entirely
separate and distinct from the civil suit.
The court further stated that there is nothing in the law
which would have stopped the plaintiff-appellant from filing the
civil suit simultaneously with or during the pendency of the
criminal case.
Subject Matter: Tax Assessment
REPUBLIC V LIM TIAN TENG SONS & CO. INC.
March 31, 1968
Facts:
Lim Tian Teng Sons & Co., a domestic corporation
with principal office in Cebu City, engaged in 1951 and 1952,
among others, in the exportation of copra. The copra was
weighted before shipment in the port of departure and upon
arrival in the port of destination. The weight before shipment
was called copra outturn. To allow for loss in weight due to
shrinkage said exporter collected only 95% of the amount
appearing in the letter of credit covering every copra outturn.
The 5% balance remained outstanding until final liquidation and
adjustment.
On March 30, 1953 Lim Tian Teng Sons & Co. filed its
income tax return for 1952 based on accrued income and
expenses. Its return showed a loss of P55, 109.98. It took up as
part of the beginning inventory for 1952 the copra outturn
shipped in 1951 in the sum of P95,500.00 already partially
collected, as part of its outstanding stock as of December 31,
1951.
In the audit and examination of taxpayers 1952
income tax return, the CIR eliminated the P95,500.00 outturn
from the beginning inventory for 1952 and considered it as
accrued income for 1951. This increased taxpayers 1952 net
taxable income. Accordingly, in a letter dated January 16, 1957
received by Lim Tian. On January 30, 1957, the CIR assessed a

20
deficiency income tax of P10,074.00 and 50% surcharge them
amounting to 5,037.00 and demanded payment thereof not later
than February 15, 1954.
On January 31, 1957 Lim Tian requested for
reinvestigation of its 1952 income tax liability. The CIR did not
reply; instead he referred the case to the solicitor general for
collection by judicial action.
On September 20, 1957 the solicitor general
demanded from Lim Tian the payment of P15,111.50 within five
days, stating that otherwise judicial action would be instituted
without further notice.
Thereupon, the Deputy Collector of Internal Revenue,
by his letter dated October 15, 1957 informed the taxpayer that
its request for reinvestigation would be granted provided it
executed within 10 days a waive of the statute of limitations. As
him Tian failed to file a waiver of the statute of limitations, the
collector of I.R. instituted 8 months after, or on September 2,
1958 an action in the CFI for the collection of deficiency income
tax. The CFI rendered decision ordering the defendant to pay
the plaintiff as the assessment is valid.
Both parties appealed, raising only question of law.
Issue:
Whether or not the Commissioner is required to rule
first on the taxpayers request for reinvestigation before he can
go to count for collecting the tax assessed.
Held:
Nowhere in the Tax Code is the Commissioner
required to rule first on the taxpayers request for reinvestigation
before he can go to court for the purpose of collecting the tax
assessed. According to the court, the legislative policy is to give
the Commissioner much latitude in the speedy and prompt
collection of taxes because it is on taxation that the government
depends to obtain the means to carry in its operations.
When the commissioner did not reply to the tax
payers request for reinvestigation/reconsideration and instead
referred the case to the solicitor general for judicial collection,
this was indicative of his decision against reinvestigation.
Subject Matter: Tax Assessment
DAYRIT, ET. AL. V CRUZ, ETC., ET. AL.
L-39910, September 26, 1998
Facts:
After separate estate and inheritance tax returns for
the estate of the late spouses Marta T. Teodoro and Don Toribio
Teodoro were filed, deficiency estate and inheritance tax
assessments were issued in the sums of P1,662,072.34,
P1,542,293.01, P1,747,790.94, and P1,578,458.72.
Subsequently, petitioners, heirs of the late spouses, asked for a
reconsideration of the assessments alleging that the same were
contrary to law and not supported by sufficient evidence. At the
same time, petitioners requested a period of 30 days within
which to submit their position paper in support of their claim.
However, after this, the CIR filed a motion for
allowance of claim against the estate of the CFI of Rizal, for a
payment of said sums after which the petitioners filed separate
appositions alleging that the estate and inheritance taxes sought
to be collected have already been settled in accordance of P.O.
23 as amended, or the Tax Amnesty Decree; and that, at any
rate, the assessments have not become final and executory.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
The lower court having approved said claim,
petitioners appealed contending that respondent judge acted
with grave abuse of discretion in granting said claim.
Issue:
Whether or not said assessments have become final
and executory.
Held:
Petitioners contend that due to the pendency of their
motion for reconsideration of the deficiency assessments, the
tax assessments in question have not yet become final and
executory. They further contend that their availment of tax
amnesty under P.D. 23, as amended, is a bar to tax collection.
As regards the tax assessments, the act of the CIR in
filing a motion for allowance of the claim of the estate and
inheritance taxes may be considered as an outright denial of
petitioners request for reconsideration. From the date of receipt
of the copy of the CIRs letter for collection of estate and
inheritance taxes against the estates of the late spouses,
petitioners must contest or dispute the same and upon denial
thereof, the petitioners have a period of 30 days within which to
appeal to the CTA. This they failed to avail of. Failure of the
petitioner to appeal to the CTA in due time made the
assessments in question final, executory and demandable. The
assessment having become final and executory, the CFI
properly acquired jurisdiction.
Subject Matter: CTA
MAGSAYSAY LINES, INC., ET. AL. V CA
G.R. No. 111184, August 12, 1996
Facts:
Petitioners, consisting of investors/shipping
companies field on April 10, 1989 a petition for refund of the
CTA for reversal of certain VAT rulings and for the refund of
P15,120,000 representing erroneously paid 10% VAT on the
sale thru public bidding of 5 vessels by the National
Development Corp. to said group of investors. On April 27,
1992, the CTA ordered the CIR to refund the amount to
petitioners.
The resolution of the CTA dated December 9, 1992,
delaying its motion for reconsideration was received by
respondent CIR on January 6, 1993. Upon receipt thereof, CIR,
thru the office of the SOL-GEN, filed on the same date with the
CA a motion for reconsideration of 30 days or until February 6,
1993, within which to file a petition for review. However, on
February 5, 1993, the OSG filed on behalf of respondent CIR a
second motion for extension of 30 days, or until March 8, 1993,
within which to file said petition.
On February 11, 1993, the OSG received the
resolution dated February 3, 1993 of respondent appellate court
granting respondent CIRS first motion for extension with a
warning that so further extension shall be entertained.
Manifestation and motion, on March 8, 1993, or within the period
requested in the second motion for extension, the petition for
review was filed thru registered mail.
In a resolution of May 3, 1993, respondent CA
dismissed the petition for being filed out of time. Later, however,
the CA reconsidered its ruling and directed herein petitioner to
file its comment on the reinstated petition. Hence, petitioners
filed the instant petition.
Issue:
Whether or not the motion for extension to file a
petition for review of CA my be permitted.

21
Held:
The petition is devoid of merit. The petition for review
pending before respondent appellate court was file din
accordance with circular no. 1-91, dated January 27, 1991.
While circular no. 1-91 is silent as to whether a motion for
extension of time to file a petition for review with the CA may be
permitted, nevertheless, the court already ruled in Liboro vs. CA,
that such motion is allowed and should be granted.
Parenthetically, it should be mentioned that Adm. Circular no. 1-
95 which took effect on February 15, 1995 allows motion for
extension of time to file petitions for review.
The resort to the filing of the first motion for extension
dated January 6, 1993 was proper, and said motion validly and
timely filed, pursuant to the then prevailing rules of procedure.
The first motion having been granted on February 3, 1993 or
well within the period of extension asked for, was no less valid
and effective. Therefore, petitioner has until February 6, 1993 to
file the subject petition for review.
With respect to the 2nd motion for extension filed on
February 5, 1993, the court took cognizance of the fact that the
intermittent and extended power failures assuming almost daily
throughout 1993 rendered substantial work delays inevitable.
Hence the 2nd motion for extension was justified and the grant
thereof was proper under the circumstances.
While generally speaking, a review on appeal is not a
matter of right but of sound judicial discretion, and may be
granted only when there are special and important reasons
therefore, in this instance, substantial justice would be better by
allowing the appeal.
Subject Matter: Tax Refund
BPI FAMILY SAVINGS BANK, INC., V CA
G.R. No. 122480, April 12, 2000
Facts:
Petitioner banks annual corporate income tax return
for 1989 showed that it suffered a loss of P8,286,960, and that it
had a total refundable amount of P297,492 inclusive of
P112,491 being claimed as tax refund in the present case.
However, petitioner declared in its 1989 income tax return as a
tax credit in the succeeding taxable year.
On October 11, 1991, petitioner bank filed a written
claim for refund of P112,491 with the BIR alleging that it did not
apply the 1989 refundable amount of P297,492 as tax credit to
its 1990 annual corporate income tax return or either tax
liabilities due to business losses it incurred for the same year.
Without waiting for respondent CIRs action in its claim for
refund, petitioner filed a petition for review with the CTA.
CTA dismissed the petition on the ground that
petitioner bank failed to present as evidence its 1990 annual
income tax return to prove that it had not yet credited the
amount of P297,422, inclusive of P112,491 which is the subject
of the present controversy to its 1990 tax liability. Since
petitioner declared in its 1989 income tax return that it would
apply the excess withholding tax as tax credit for the following
year, the tax court presumed that it did so. Petitioner failed to
overcome this presumption because it did not present its 1990
tax return which would have shown that the amount was not
applied as a tax credit. Hence, it was concluded that petition
was not entitled to a tax refund. The CA affirmed said decision
of the CTA.
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
Issue:
Whether or not petitioner is entitled to a tax refund of
P112,491 representing creditable withholding tax paid for 1989.
Held:
The petition is meritorious. As a rule, the factual
findings on the appellate court are binding on the SC. This rule,
however, does not apply where, inter alia, the judgment is
premised on a misapprehension of facts or when the appellate
court failed to notice certain relevant facts which if considered
would justify a different conclusion. This case is one such
exception.
Strict procedural rules generally frown up the
submission of the return the trial. R.A. 1125, the law creating the
CTA, however, specifically provides the proceedings before it
shall not be governed strictly by the technical rules of
evidence. The paramount considerations remains the
ascertainment of truth. Verily, the quest for orderly presentation
of issues is not an absolute. It should not bar courts from
considering undisputed facts to arrive at a just determination of
a controversy.
While tax refunds are in the nature of the exceptions
and are to the construct strictissimi juris against the claimant,
under the facts of this case, petitioner has established its claim.
Substantial justice equity, and fair play are on the side
of petitioner. Technicalities and legalisms, however, exalted,
should not be misused by the government to keep money not
belonging to it and thereby enrich would be better by allowing to
appeal.
Subject Matter: Tax Assessment
PROTECTORS SERVICES, INC., V CA ET. AL.
G.R. No 118176, April 12, 2000
Facts:
Petition Protectors Services, Inc., (PSI) is a contractor
engaged in recruiting security guards for clients. After an audit
investigation, the BIR assessed PSI deficiency percentage taxes
including surcharges, penalties and interests of P503,564.39,
P831,464.30 and P1,514,047.86 for 1983, 1984 and 1985,
respectively. On December 7, 1987, respondent CIR sent
demand letters for payment of said assessments for 1983 and
1984 on December 10, 1987, but denied receiving the notice of
deficiency tax for 1985.
Petitioner PSI, sent a protest letter dated January 12,
1988 regarding the 1983 and 1984 assessments, claiming that
gross receipts subject to percentage tax should exclude salaries
of the security guards, employers share of SSS, SIF and
Medicare contributions. Without formally acting thereon, the BIR
sent a follow-up letter dated July 12, 1988 for the settlement of
the taxes based on its computation, plus additional documentary
stamp taxes of P2,025 on PSIs capitalization for 1983 and 1984
and as deficiency expanded withholding tax of P703.41, thereby
bringing the total unsettled tax to P2,851,805.16.
On July 12, 1988, petition paid the P2,025
documentary stamp tax and P703.41 deficiency expanded
withholding tax. The following day, PSI filed its second protest
for the 1983 and 1984 assessments and included for the first
time its protest against the 1985 assessment. On November 9,
1990, the BIR denied the protests stating that salaries of
security guards are part of taxable gross receipts for
determination of contractors tax.
 TAX LAW REVIEWER
22 SAINT LOUIS UNIVERSITY BAR OPERATIONS

PSI filed a petition for review on December 5, 1990
with the CTA averring that assessments for documentary stamp
and expanded withholding taxes and without basis having been
paid on July 22, 1988; the period for collection of the 1985
assessment letter therefore, the period to collect the percentage
taxes for the first, second and third quarter of 1984 has lapsed,
the assessment letter therefore having been sent on December
10, 1987, or beyond 3 years from filing of the quarterly returns,
and that the base amount was erroneous since salaries of
security guards, employers share of SSS, SIF and medicare
contributions should not form part of taxable gross receipts.
The CTA dismissed the petition stating that: (1) the
assessments were made within the 3-year prescriptive period
which should be reckoned from January 20, 1985, the date of
filing the final return; (2) receipt of the 1985 assessment cannot
be denied as all assessments were sent in 1 envelope, as
testified to by BIR personal; and (3) the protest letter having filed
only on January 12, 1988, or 33 days from December 10, 1987,
the request for reinvestigation was filed out of time. On review
by the CA, the CTAs decision was affirmed.
CTA to prevent the collection of the assessed deficiency tax.
When the CTA dismissed the case, petitioner elevated the case
to the SC, hoping for a review in the favor. The actions taken by
petitioner before the CTA and the SC suspended the running of
the statute of limitation.
As to the correctness of the assessment, it was held
that contractors tax on gross receipts imposed on business
agents including private detective watchman agencies, was a
tax on the sale of services or labor, imposed on the exercise of
a privilege. The term gross receipts means all amounts
received by the prime or principal contractor as the total price,
undiminished by the amount paid to the subcontractor under the
subcontract arrangement. Hence, gross receipts could not be
diminished by employers SSS, SIF and medicare contributions.
Furthermore, it has been consistently ruled by the BIR that the
salaries paid to security guards should form part of the gross
receipts subject to tax.

Issues:
Whether or not the CTA has jurisdiction to act on the
petition for review filed before it.
Whether or not the assessments against PSI for Subject Matter: CTA, Jurisdiction
deficiency percentage tax for 1983 and 1984 were
made within the prescriptive period. CIR V VILLA, ET. AL.
Whether or not the period for collection of taxes for L-23988, January 2, 1968
taxable years 1983, 1984 and 1985 has already
prescribed. Facts:
Leonardo S. Villa, a doctor of medicine and his wife
Whether or not the assessments are correct.
filed joint income tax returns for 1951 to 1956. Subsequently, the
BIR determined the income of the spouses by the use of the net
Held:
worth method and issued on February 23, 1961 assessments
An assessment maybe administratively protested
for deficiency income tax for 1951 to 1956 and residence tax for
within 30 days from receipt thereof; otherwise, the assessment
1951 to 1957. Dr. Villa received the assessment on April 7,
shall become final and unappealable. In this case, PSI received
1961.
the assessments on December 10, 1987 and protested the 1983
Without contesting said assessment in the BIR, he
and 1984 assessments on January 12, 1988, or 33 days
filed on May 4, 1961 a petition for review in the CTA.
thereafter. Hence, the protests were filed out of time and PSI
can no longer dispute the correctness of assessment. The CTA
Issue:
correctly dismissed the appeal for lack of jurisdiction.
Did the CTA acquire jurisdiction over the case?
Petitioners contention that the Governments right to
assess and collect the 1983, 1984 and 1985 assessments had
Held:
already prescribed in view of BP700, which reduced the
The CTA did not acquire jurisdiction over the case.
prescriptive period for assessment and collection of internal
The word decision in par. 1, sec. 7 of RA 1125 (law creating
revenue taxes to 3 yrs, lacks merit BP700 was approved on
the Court of Tax Appeals) has been interpreted to mean the
April 5, 1984. The 3-year prescriptive period for assessment and
decisions of the CIR on the protest of the taxpayer against the
collection of revenue taxes applied to taxes paid beginning
assessments. Definitely, said word does not signify the
1984. Clearly, the tax assessment made on December 10, 1987,
assessment itself.
for the par 1983 was still covered by the 5-year statutory
Jurisdiction over the subject matter is fundamental for
prescriptive period.
the count to act on a given controversy. It is conferred by law,
The 3-year prescriptive period for assessment of
not by the consent of the parties. It can be challenged at any
contractors tax should be computed at the time of filing of the
stage of the proceedings and for lack of jurisdictions a court can
final annual percentage tax return, when it can be finally
dismiss a case motu proprio.
acclaimed if the taxpayer still has an unpaid tax, and not from
the tentative quarterly payments.
As to the contention that for failure of the BIR to
commence collection of the 1983, 1984 and 1985 deficiency
Subject Matter: CTA
taxes either by judicial action or by distraint and levy, the
governments right to collect the tax has prescribed, the court
LIBORO V CA, ET. AL.
ruled that the suspension of the running of the statute of
G.R. No. 101132, January 29, 1993
limitations for tax collection for the period during which the
commissioner is prohibited from making the assessment or
Facts:
beginning distraint or levy or a proceeding in court and 60 days
Petitioner Liboro, a practicing lawyer field his income
thereafter. In the instant case, PSI filed a petition before the
tax return for 1980. However, on September 30 and November

Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.

23
30, 1985 he was notified of his tax deficiency. He responded
with a letter protest dated December 19, 1985, but this was
denied by the CIR on May 11, 1988 for lack of legal basis.
Petitioner filed a petition for review with the CTA which
dismissed his petition on March 29, 1991. Petitioner received
the decision on May 29, 1991 and, therefore, had until June 13,
1991 to file a petition for review with the CA.
However, instead of filing a petition for review,
petitioner, on June 11, 1991, filed a notice of appeal with the
CTA, and on June 13, 1991 field a motion for extension of 30
days to file a petition for review before the CA. The CA denied
his motion on June 20, 1991 the ground that SC circular No. 1-
91 then in force did not authorize and extension of the period for
filing a petition for review and regarded the proceedings closed
and terminated. On July 18, 1991, petitioners motion for
reconsideration and for admission of his petition were denied.
Issue:
Whether Circular No. 1-91 then in force allows the CA
to grant a motion for extension to file a petition for review from
the final order or decision of the CTA and other quasi-judicial
agencies.
Held:
The prohibition against granting an extension of time
applies only in a case where ordinary appeal is perfected by a
mere notice of appeal. The reason is that only the filing of the
notice of appeal is required to perfect an appeal and nothing
more. However, it is different in a petition for review where
pleading is required to be verified. A petition for review, unlike
an ordinary appeal, requires careful preparation and research in
order to put up a persuasive and formidable position.
Since Circular No. 1-91 provides that an appeal from
the CTA other quasi-judicial agencies to the CA is by a petition
for review, and no longer by mere notice of appeal, a
corresponding motion for extension of time to file a petition for
review should likewise be granted.
But the extension nonetheless should be limited only
to 15 days, save exceptionally meritorious cases where the CA
may grant it a longer period.
Subject Matter: Prescriptive Period
AZNAR CASE (August 23, 1974)
Facts:
Matias Aznar died on May 15, 1958. His income tax
returns from 1945 to 1951 were examined by the BIR. Doubting
the truth of the income that he had reported, the Commissioner
ordered the investigation of the case on the basis of the net
worth method. Substantial under-declarations of income were
discovered. On November 28, 1952, the BIR notified AZNAR of
a tax delinquency of P723,032.66 which was later reduced to
P381,096.07 upon reinvestigation.
On February 20, 1953, AZNARs properties were
placed under distraint and levy. On April 1, 1955, AZNAR
appealed to the CTA. The CTA found that AZNAR made
substantial under-declarations of his income as follows: he
under-declared his income for 1946 by 227%; 564% for 1947;
95% for 1948; 486% for 1949; 946% 1950; 490% 1951.
Issues:
Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.
TAX LAW REVIEWER
SAINT LOUIS UNIVERSITY BAR OPERATIONS
Whether or not the right of the Commissioner to
assess AZNARs deficiency income taxes for 1946, 1947 and
1948 had prescribed at the time the assessment was made.
Held:
On the issue of prescription the count applied the 10-
year prescriptive period and ruled that prescription had not set
in. the court opined that AZNARs returns were false because
the under-declaration of income constituted a deviation from the
truth. The court stated that the ordinary prescriptive period of 5
years (now 3 years) would apply under normal circumstances
but whenever the government is placed at a disadvantage as to
prevent its lawful agent from making a proper assessment of tax
liabilities due to false or fraudulent returns intended to evade
payment of taxes or failure to the returns, the period of 10 years
provided for in the law from the discovery of the falsity, fraud or
omission even seems to be inadequate and should be the one
enforced.
Subject Matter: Prescriptive Period
REPUBLIC V RET
March 31, 1962
Facts:
Damian Ret filed 2 false and fraudulent returns for
1948 and 1949 for which he was assessed by the BIR the sums
of P34,907.33 and P68,338.40 including 50% surcharge for
found. Demand was made on January 3, 1951 for payment.
Ret refused to pay. On June 20, 1951, an assessment
notice was issued but he still refused. Subsequently, Ret was
prosecuted in 2 criminal cases for filing false or fraudulent
returns. He pleaded guilty thereto and was sentenced to pay a
fined of P300 in each case.
After his conviction, on September 21, 1957, the
Government filed a complaint for the collection of Rets income
taxes but the lower court dismissed the case on the ground that
the governments right to collect by judicial action had
prescribed as more than five (now three) years had elapsed
from the date of the assessment of Rets taxes.
The government however contended that prescription
did not take place because the prescriptive period for collection
was suspended when the 2 informations were filed on May 29,
1952 and began to run again from the receipt of the courts
decision on April 20, 1955.
Issue:
Whether or not the prescriptive period was suspended
when the 2 informations were filed.
Held:
According to the SC, however, the prescriptive period
for the civil action is suspended during the pendency of the
criminal nation only when the civil liability arises from the
offense committed. However, such rule does not apply here
because the criminal actions for the violations are entirely
separate and distinct from the civil suit.
The court further stated that there is nothing in the law
which would have stopped the plaintiff-appellant from filing the
civil suit simultaneously with or during the pendency of the
criminal case.
 TAX LAW REVIEWER
24 SAINT LOUIS UNIVERSITY BAR OPERATIONS

When the commissioner did not reply to the tax

payers request for reinvestigation/reconsideration and instead
Subject Matter: Tax Assessment referred the case to the solicitor general for judicial collection,
this was indicative of his decision against reinvestigation.
REPUBLIC V LIM TIAN TENG SONS & CO. INC.
March 31, 1968

Facts:
Lim Tian Teng Sons & Co., a domestic corporation
with principal office in Cebu City, engaged in 1951 and 1952,
among others, in the exportation of copra. The copra was
weighted before shipment in the port of departure and upon
arrival in the port of destination. The weight before shipment
was called copra outturn. To allow for loss in weight due to
shrinkage said exporter collected only 95% of the amount
appearing in the letter of credit covering every copra outturn.
The 5% balance remained outstanding until final liquidation and
adjustment.
On March 30, 1953 Lim Tian Teng Sons & Co. filed its
income tax return for 1952 based on accrued income and
expenses. Its return showed a loss of P55, 109.98. It took up as
part of the beginning inventory for 1952 the copra outturn
shipped in 1951 in the sum of P95,500.00 already partially
collected, as part of its outstanding stock as of December 31,
1951.
In the audit and examination of taxpayers 1952
income tax return, the CIR eliminated the P95,500.00 outturn
from the beginning inventory for 1952 and considered it as
accrued income for 1951. This increased taxpayers 1952 net
taxable income. Accordingly, in a letter dated January 16, 1957
received by Lim Tian. On January 30, 1957, the CIR assessed a
deficiency income tax of P10,074.00 and 50% surcharge them
amounting to 5,037.00 and demanded payment thereof not later
than February 15, 1954.
On January 31, 1957 Lim Tian requested for
reinvestigation of its 1952 income tax liability. The CIR did not
reply; instead he referred the case to the solicitor general for
collection by judicial action.
On September 20, 1957 the solicitor general
demanded from Lim Tian the payment of P15,111.50 within five
days, stating that otherwise judicial action would be instituted
without further notice.
Thereupon, the Deputy Collector of Internal Revenue,
by his letter dated October 15, 1957 informed the taxpayer that
its request for reinvestigation would be granted provided it
executed within 10 days a waive of the statute of limitations. As
him Tian failed to file a waiver of the statute of limitations, the
collector of I.R. instituted 8 months after, or on September 2,
1958 an action in the CFI for the collection of deficiency income
tax. The CFI rendered decision ordering the defendant to pay
the plaintiff as the assessment is valid.
Both parties appealed, raising only question of law.

Issue:
Whether or not the Commissioner is required to rule
first on the taxpayers request for reinvestigation before he can
go to count for collecting the tax assessed.

Held:
Nowhere in the Tax Code is the Commissioner
required to rule first on the taxpayers request for reinvestigation
before he can go to court for the purpose of collecting the tax
assessed. According to the court, the legislative policy is to give
the Commissioner much latitude in the speedy and prompt
collection of taxes because it is on taxation that the government
depends to obtain the means to carry in its operations.

Prepared by the TAX LAW SECTION Chief JOCELYN ROSARIO Assistant Chief SOCRATES PADUA Members MONDAE BUENAFE,
MYLENE CANAO, MONALISA IBARRA, CESAR LACDAO, GLORIFE LICLICAN, DULCE MARTINEZ, ELILYN NATURA, DONNA
MICHELLE PINLAC, CECILYNNE ANDRADE and LOUBELLE ORTIZ. All Rights Reserved by the SAINT LOUIS UNIVERSITY COLLEGE
OF LAW BAR OPERATIONS 2003.