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TAXATION LAW

GENERAL PRINCIPLES On February 8, 1971, the Commissioner of Internal Revenue issued


Non-retroactive application to taxpayers Revenue Memorandum Circular No. 4-71, revoking General Circular No.
Section 246, NIRC V-334, and holding that the latter was "erroneous for lack of legal basis,"
because "the tax therein prescribed should be based on gross income
ABS-CBN Broadcasting Corp. v. Court of Tax Appeals without deduction whatever.
G.R. No. 52306, October 12, 1981
In 1971, the Commissioner issued a letter of assessment and demand for
DOCTRINE: Any rulings or circulars promulgated by the CIR have no deficiency withholding income tax for years 1965 to 1968. The company
retroactive application when it would be prejudicial to taxpayers. requested for reconsideration; where the Commissioner did not act upon.

Any revocation, modification, or reversal of and of the rules and ISSUE:


regulations promulgated in accordance with the preceding section or any Whether Revenue Memorandum Circular 4-71, revoking General Circular
of the rulings or circulars promulgated by the Commissioner of Internal V-334, may be retroactively applied.
Revenue shall not be given retroactive application if the relocation,
modification, or reversal will be prejudicial to the taxpayers, except in the RULING:
following cases: (a) where the taxpayer deliberately mis-states or omits No. Any rulings or circulars promulgated by the CIR have no retroactive
material facts from his return or any document required of him by the application when it would be prejudicial to taxpayers. The retroactive
Bureau of Internal Revenue: (b) where the facts subsequently gathered application of Memorandum Circular No. 4-71 prejudices ABS-CBN since
by the Bureau of Internal Revenue are materially different from the facts (1) the assessment and demand on petitioner to pay deficiency
on which the ruling is based; or (c) where the taxpayer acted in bad faith. withholding income tax was also made three years after 1968 for a period
of time commencing in 1965; and, (2) ABS-CBN was no longer in a
FACTS: position to withhold taxes due from foreign corporations because it had
ABS-CBN Broadcasting Corporation was engaged in the business of already remitted all film rentals and no longer had any control over them
telecasting local as well as foreign films acquired from foreign when the new Circular was issued.
corporations not engaged in trade or business with the Philippines for
which ABS-CBN paid rentals after withholding income tax of 30% of one- Commissioner of Internal Revenue v. Burroughs, Ltd.
half of the film rentals. In implementing Section 4(b) of the Tax Code, the G.R. No. 66653, June 19, 1986
Commissioner issued General Circular V-334. Pursuant thereto, ABS-
CBN Broadcasting Corp. dutifully withheld and turned over to the BIR DOCTRINE: Any revocation, modification, or reversal of any of the rules
30% of ½ of the film rentals paid by it to foreign corporations not and regulations promulgated in accordance with the preceding section or
engaged in trade or business in the Philippines. The last year that the any of the rulings or circulars promulgated by the Commissioner shag
company withheld taxes pursuant to the Circular was in 1968. not be given retroactive application if the revocation, modification, or
reversal will be prejudicial to the taxpayer except in the following cases
On 27 June 1968, RA 5431 amended Section 24 (b) of the Tax Code (a) where the taxpayer deliberately misstates or omits material facts from
increasing the tax rate from 30% to 35% and revising the tax basis from his return or in any document required of him by the Bureau of Internal
“such amount” referring to rents, etc. to “gross income.” Revenue; (b) where the facts subsequently gathered by the Bureau of
Internal Revenue are materially different from the facts on which the
ruling is based, or (c) where the taxpayer acted in bad faith.
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modification, or reversal will be prejudicial to the taxpayer except
FACTS: in the following cases (a) where the taxpayer deliberately
Burroughs is a foreign corporation. On March 1979, the corporation’s misstates or omits material facts from his return or in any
branch applied with the Central Bank an authority to remit to its parent document required of him by the Bureau of Internal Revenue; (b)
company abroad the branch profit: where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the
Amount Applied for: P7,647,058.00 ruling is based, or (c) where the taxpayer acted in bad faith.
15% Branch Profit Remittance Tax: P1,147,048.70
Amount Actually Remitted: P6,499,999.30 The prejudice that would result to private respondent Burroughs Limited
by a retroactive application of Memorandum Circular No. 8-82 is beyond
On 24 December 1980, Burroughs claims a tax refund/credit of question for it would be deprived of the substantial amount of
P172,058.90. Based on the Ruling of Acting Commissioner of Internal P172,058.90. And, insofar as the enumerated exceptions are concerned,
Revenue, the branch profit remittance tax should be 15% of the amount admittedly, Burroughs Limited does not fall under any of them.
actually remitted.
Commissioner of Internal Revenue v. Mega Gen. Mdsg. Corp.
The CTA granted the tax credit but CIR argued that Burroughs is no G.R. No. L-69316, September 30, 1988
longer entitled to refund because Memorandum Circular No. 8-82 dated
17 March 1982 had revoked and/or repealed the BIR ruling of 21 Jan DOCTRINE: Any revocation, modification, or reversal of and of the rules
1980. and regulations promulgated in accordance with the preceding section or
any of the rulings or circulars promulgated by the Commissioner of
ISSUE: Internal Revenue shall not be given retroactive application if the
Whether Memorandum Circular No. 8-82 (MC 8-82) dated 17 March relocation, modification, or reversal will be prejudicial to the taxpayers,
1982 can be given retroactive effect. except in the following cases: (a) where the taxpayer deliberately mis-
states or omits material facts from his return or any document required
RULING: of him by the Bureau of Internal Revenue: (b) where the facts
No. Petitioner's aforesaid contention is without merit. What is applicable subsequently gathered by the Bureau of Internal Revenue are materially
in the case at bar is still the Revenue Ruling of January 21, 1980 different from the facts on which the ruling is based; or (c) where the
because private respondent Burroughs Limited paid the branch profit taxpayer acted in bad faith.
remittance tax in question on March 14, 1979. Memorandum Circular
No. 8-82 dated March 17, 1982 cannot be given retroactive effect in the FACTS:
light of Section 327 of the National Internal Revenue Code which On April 22, 1975, the respondent corporation wrote the Commissioner
provides: of Internal Revenue for clarification as to whether imported crude
paraffin wax is subject to specific tax under the Tax Code.
Sec. 327. Non-retroactivity of rulings. Any revocation,
modification, or reversal of any of the rules and regulations Former Commissioner Misael P. Vera in his reply to said that it
promulgated in accordance with the preceding section or any of essentially certain kinds of wax (not including paraffin) was subject.
the rulings or circulars promulgated by the Commissioner shag
not be given retroactive application if the revocation,
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Respondent corporation in a letter, dated 27 November 1975, requested Commissioner of Internal Revenue v. Telefunken Semiconductor
for a refund or tax credit of the amount of P321,436.79 representing the (Phils.) Inc.
difference between the amount paid as specific tax and the 7% advance G.R. No. 103915, October 23, 1995
sales tax.
DOCTRINE: BIR rulings may not be given retroactive effect, if the same
Since the law (Section 142(i) of the Tax Code, amended by P.D. No. 392) is prejudicial to the taxpayer.
does not make any distinction as to the kind of wax subject to specific
tax, then Acting Commissioner of Internal Revenue Efren I. Plana, 28 Any revocation, modification or reversal of any of the rules and
January 1977 denied respondent Corporation's claim for refund or tax regulations promulgated in accordance with the preceding Sections or
credit of the amount of P321,436,79. On this ruling, respondent any of the rulings or circulars promulgated by the Commissioner shall
corporation filed a request for reconsideration. This was denied by not be given retroactive application if the revocation, modification or
petitioner. reversal will be prejudicial to the taxpayers, except in the following cases:

On 11 January 1978, however, Plana granted the corporation’s claim for (a) Where the taxpayer deliberately misstates or omits material facts from
refund or credit pertaining to the importation made 18 April 1975. The his return or any document required of him by the Bureau of Internal
Corporation protested the tax assessment of 8 May 1978, which was Revenue;(b) Where the facts subsequently gathered by the Bureau of
denied by the Commissioner. Internal Revenue are materially different from the facts on which the
ruling is based; or(c) Where the taxpayer acted in bad faith.
ISSUE:
Whether respondent corporation's importation of crude paraffin wax on FACTS:
June 21 and August 17, 1977 are subject to specific tax under Section Private respondent Telefunken is a domestic corporation registered with
142 (i) of the Tax Code, as amended by P.D. No. 392, promulgated on the Board of Investments (BOI) as an export producer on a preferred
February 18, 1974. pioneer status under Republic Act No. 6135.

RULING: From October 1979 to September 1981, Telefunken produced semi-


Yes. Contrary to the Court of Tax Appeals' ruling, We believe that the conductor devices amounting to P92,843,774.00 which were entirely sold
letter of Commissioner Plana dated January 11, 1978 did not in any way to foreign markets.
revoke his ruling dated January 28, 1977 which ruling applied the
specific tax to wax (without distinction). The reason he removed in 1978 It filed percentage tax returns on the said exportation declaring a total of
private respondent's liability for the specific tax was NOT (as erroneously P2,482,042.35 as contractor's tax, which was paid and verified to have
pointed out by the Court of Tax Appeals) because he wanted to revoke, been received by the government.
expressly or implicitly, his ruling of January 28, 1977 but because the
P321,436.79 tax referred to importation BEFORE January 28, 1977 and Telefunken wrote a letter to the Appellate Division of the Bureau of
hence still covered by the ruling of Commissioner Vera, and not by the Internal Revenue (BIR) dated January 19, 1982 stating that the payment
January 28, 1977 ruling of Commissioner Plana. Hence, Mega should of contractor's tax of P2,482,042.35 was erroneous and requested its
pay the assessed tax. refund or tax credit thereof. Telefunken contended that under the
provisions of Section 7 of Republic Act No. 6135 in relation to Section 8
(a) of Republic Act No. 5186 (The Investment Act), it was exempted from

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the payment of all national internal revenue taxes for the period in back the VAT in computing the tax base for purposes of the fifteen
question, except for income tax. percent (15%) ad valorem tax.

ISSUE: Alhambra industries, Inc. (Alhambra) is a domestic corporation engaged


Whether Telefunken is exempted from contractor’s tax under RA 6135 for in the manufacture and sale of cigar and cigarette products. On May 7,
the period of October 1979-September 1981. 1991 private respondent received a letter dated April 26, 1991 from the
Commissioner of Internal Revenue assessing its deficiency Ad Valorem
RULING: Tax (AVT) in the total amount of P488,396.62, inclusive of increments,
Yes. Sec. 191(16) of the previous Tax Code, which was the basis of the on the removals of cigarette products from their place of production
Asian Transmission ruling, employs essentially the same wording as that during the period Nov. 2, 1990 to January 22, 1991.
of the 1977 version [Sec.205(16)], therefore the same construction Alhambra filed protest against amount assessed by the CIR, however, it
applies. Both Sec. 191(16) of the old NIRC and Sec.205(16) of the 1977 was denied by the latter at the same time increasing the amount
NIRC specifically mention pioneer industries registered with the Board of assessed to P520,835.29. Alhambra filed a petition for review with the
Investments under Republic Act No. 5186 as exempt from payment of the CTA, despite payment under protest the amount of P520,835.29. On
contractor's tax. Telefunken falls under the category of pioneer industries December 1, 1993, CTA ordered petitioner to refund said amount to
contemplated in NIRC Sec. 205(16) and is entitled to the tax exemption Alhambra
therein. Under Sec. 246 of the NIRC, BIR rulings may not be given
retroactive effect, if the same is prejudicial to the taxpayer. ISSUE:
Commissioner of Internal Revenue v. Court of Appeals Whether the new ruling should be given retroactive effect thus, in effect
G.R. No. 117982, February 6, 1997 revoking the tax exemption given to the petitioner in the first BIR ruling.

DOCTRINE: Any revocation, modification, or reversal of any rules and RULING:


regulations promulgated in accordance with the preceding section or any The court held in the negative. In its ruling, it states that well-entrenched
of the rulings or circulars promulgated by the Commissioner of Internal is the rule that rulings and circulars, rules and regulations promulgated
Revenue shall not be given retroactive application if the revocation, by the Commissioner of Internal Revenue would have no retroactive
modification, or reversal will be prejudicial to the taxpayers except in the application if to so apply them would be prejudicial to the taxpayers.
following cases: a) where the taxpayer deliberately misstates or omits
material facts from his return or in any document required of him by the Section 246 provides for the Non-retroactivity of rulings: “Any revocation,
Bureau of Internal Revenue; b) where the facts subsequently gathered by modification, or reversal of any rules and regulations promulgated in
the Bureau of Internal Revenue are materially different from the facts on accordance with the preceding section or any of the rulings or circulars
which the ruling is based; or c) where the taxpayer acted in bad faith. promulgated by the Commissioner of Internal Revenue shall not be given
retroactive application if the revocation, modification, or reversal will be
FACTS: prejudicial to the taxpayers except in the following cases: a) where the
The present case arose from the discrepancy in the taxable base on taxpayer deliberately misstates or omits material facts from his return or
which the excise tax is to apply on account of two incongruous BIR in any document required of him by the Bureau of Internal Revenue; b)
Rulings: (1) BIR Ruling 473-88 dated 4 October 1988 which excluded the where the facts subsequently gathered by the Bureau of Internal
VAT from the tax base in computing the fifteen percent (15%) excise tax Revenue are materially different from the facts on which the ruling is
due; and, (2) BIR Ruling 017-91 dated 11 February 1991 which included based; or c) where the taxpayer acted in bad faith.”
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