Summary of Selected Recent Tax Cases
SUPREME COURT DECISIONS The determination of the proper category of tax
SMI-ED Philippines Technology, Inc. v.
Commissioner of Internal Revenue (CIR), G.R.
No. 175410, November 12, 2014
In an action for the refund of taxes allegedly
erroneously paid, the Court of Tax Appeals
(CTA) may determine whether there are taxes
that should have been paid in lieu of the taxes
paid. The determination of proper category of
tax that should have been paid is not an
assessment. It is incidental to determining
whether there should be a refund.
The term “assessment” refers to the
determination of amounts due from a person
obligated to make payments. In the context of
national internal revenue collection, it refers to
the determination of the taxes due from a
taxpayer under the Tax Code. The CTA has no
power to make an assessment at the first
instance. On matters such as tax collection, tax
refund, and others relating to the national
internal revenue taxes, the CTA’s jurisdiction is
appellate in nature.
In this case, the CTA’s jurisdiction was acquired
because petitioner brought the case on appeal
before the CTA after the BIR had failed to act on
petitioner’s claim for refund of erroneously paid
taxes. The CTA did not acquire jurisdiction as a
result of a disputed assessment of a BIR
decision.
As mentioned, the CTA has no assessment
powers. In stating that petitioner’s transactions
are subject to capital gains tax, however, the
CTA was not making an assessment. It was
merely determining the proper category of tax
that petitioner should have paid, in view of its
claim that it erroneously imposed upon itself
and paid the 5% final tax imposed upon PEZA-
registered enterprises.
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that petitioner should have paid is an incidental
matter necessary for the resolution of the
principal issue, which is whether petitioner was
entitled to a refund.
China Banking Corporation v. CIR, G.R. No.
172509, February 4, 2015
The filing of a request for reinvestigation alone
will not suspend the statute of limitations. Two
things must concur before it can toll the running
of the statute of limitations: (1) there must be a
request for reinvestigation; and (2) the CIR must
have granted it.
The failure to raise the defense of prescription
at the administrative level will not prevent the
taxpayer from raising it at the appeal stage. The
fact that the claim of the government is time-
barred is a matter of record. The conclusion
that prescription has set in was arrived at using
the evidence on record. The date of receipt of
the assessment notice was not disputed, and
the date of the attempt to collect was
determined by merely checking the records as
to when the Answer of the CIR containing the
demand to pay the tax was filed.
The Philippine American Life and General
Insurance Company v. The Secretary of Finance
and the CIR, G.R. No. 210987, November 24,
2014
Issue: Whether the CTA has jurisdiction over
the appeal of the adverse ruling of the
Secretary of Finance with respect to the issue
on the interpretation of the provision of the Tax
Code.
Held: Section 4, Tax Code provides that the
CIR's power to interpret the provisions of the
Tax Code and other tax laws is subject to review
by the Secretary of Finance. Admittedly, there
is no provision in law that expressly provides
where exactly the ruling of the Secretary of
Finance is appealable to. Section 7(a)(1),
Republic Act (RA) No. 1125, as amended,
addresses the seeming gap in the law as it vests
the CTA, albeit impliedly, with jurisdiction over
the CA petition as “other matters” arising under
the NIRC or other laws administered by the
Bureau of Internal Revenue (BIR). Even though
the provision suggests that it only covers rulings
of the CIR, the Supreme Court held that it was,
nonetheless, sufficient enough to include
appeals from the Secretary’s review under
Section 4, Tax Code.
Indeed, to leave undetermined the mode of
appeal from the Secretary of Finance would be
an injustice to taxpayers prejudiced by his
adverse rulings. To remedy this situation, the
Supreme Court implied from the purpose of RA
No. 1125 and its amendatory laws that the CTA
is the proper forum with which to institute the
appeal. This is not, and should not, in any way,
be taken as a derogation of the power of the
Office of President but merely as recognition
that matters calling for technical knowledge
should be handled by the agency or quasi-
judicial body with specialization over the
controversy.
CIR v. BASF Coating + Inks Phils., Inc., G.R. No.
198677, November 26, 2014
Issue: Whether the running of the BIR’s 3-
year prescriptive period to assess under
Sections 203 and 222, Tax Code was suspended
when the Corporation failed to notify the BIR in
writing of its change of address, pursuant to the
provisions of Section 223, Tax Code and Section
11, BIR Revenue Regulations (Rev. Regs.) No.
12-85.
Held: Despite the absence of a formal written
notice of the Corporation’s change of address,
the fact remains that the BIR became aware of
respondent’s new address as shown by
documents replete in its records. As a
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consequence, the running of the 3-year period
to assess respondent was not suspended and
has already prescribed.
It might not also be amiss to point out that BIR's
issuance of the First Notice Before Issuance of
Warrant of Distraint and Levy violated the
corporation’s right to due process because no
valid notice of assessment was sent to it. An
invalid assessment bears no valid fruit. The law
imposes a substantive, not merely a formal,
requirement. To proceed heedlessly with tax
collection without first establishing a valid
assessment is evidently violative of the cardinal
principle in administrative investigations: that
taxpayers should be able to present their case
and adduce supporting evidence. In the instant
case, the BIR has not properly been informed of
the basis of its tax liabilities. Without complying
with the unequivocal mandate of first informing
the taxpayer of the government’s claim, there
can be no deprivation of property, because no
effective protest can be made.
Rohm Apollo Semiconductor Philippines v. CIR,
G.R. No. 168950, January 14, 2015
In a claim for refund or tax credit of unutilized
input value-added tax (VAT), the 30-day period
to appeal, after the expiration of the 120-day
period given to the BIR to resolve the refund
claim, is mandatory and jurisdictional. The only
exception to the general rule is when BIR Ruling
No. DA-489-03 (December 10, 2003) was still in
force, that is, between December 10, 2003 and
October 5, 2010, The BIR Ruling excused
premature filing, declaring that the taxpayer-
claimant need not wait for the lapse of the 120-
day period before it could seek judicial relief
with the CTA by way of Petition for Review. In
sum, premature filing is allowed for cases falling
during the time when BIR Ruling No. DA-489-03
was in force. Nevertheless, late filing is
absolutely prohibited even for cases falling
within that period.
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Philippine Amusement and Gaming
Corporation (PAGCOR) v. BIR, G.R. No. 215427,
December 10, 2014
PAGCOR’S income from gaming operations is
subject only to the 5% franchise tax under
Presidential Decree (PD) 1869, as amended,
while its income from other related services is
subject to corporate income tax pursuant to PD
1869, as amended, as well as RA No. 9337.
CITY OF MANILA, et al. v. RTC and Malaysian
Airline System, G.R. No. 120051, December 10,
2014
Among the common limitations on the taxing
power of local government units (LGUs) is
Section 133(j), Local Government Code (LGC),
which states that “[u]nless otherwise provided
herein,” the taxing power of LGUs shall not
extend to “[t]axes on the gross receipts of
transportation contractors and persons
engaged in the transportation of passengers or
freight by hire and common carriers by air, land
or water, except as provided in this Code[.]”
Section 133(j), LGC clearly and unambiguously
proscribes LGUs from imposing any tax on the
gross receipts of transportation contractors,
persons engaged in the transportation of
passengers or freight by hire, and common
carriers by air, land, or water. However,
confusion arose from the phrase “unless
otherwise provided herein,” found at the
beginning of the said provision. The City of
Manila and its public officials insisted that said
clause recognized the power of the municipality
or city, under Section 143(h), LGC, to impose tax
“on any business subject to the excise, value-
added or percentage tax under the National
Internal Revenue Code, as amended.” And it
was pursuant to Section 143(h), LGC that the
City of Manila and its public officials enacted,
approved, and implemented Section 21(B),
Manila Revenue Code, as amended.
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The Supreme Court held that Section 133(j),
LGC prevails over Section 143(h), LGC, and that
Section 21(B), Manila Revenue Code, as
amended, was manifestly in contravention of
the former. Section 133(j), LGC is a specific
provision that explicitly withholds from any
LGU, i.e., whether the province, city,
municipality, or barangay, the power to tax the
gross receipts of transportation contractors,
persons engaged in the transportation of
passengers or freight by hire, and common
carriers by air, land, or water. In contrast,
Section 143, LGC defines the general power of
the municipality (as well as the city, if read in
relation to Section 151, LGC) to tax businesses
within its jurisdiction. While paragraphs (a) to
(g) thereof identify the particular businesses
and fix the imposable tax rates for each,
paragraph (h) is apparently the “catch-all
provision” allowing the municipality to impose
tax “on any business, not otherwise specified in
the preceding paragraphs, which the
Sanggunian concerned may deem proper to
tax[.]”
ING Bank N.V. Manila Branch v. CIR, G.R. No.
167679, July 22, 2015
The tax on compensation income is withheld at
source under the creditable withholding tax
system wherein the tax withheld is intended to
equal or at least approximate the tax due of the
payee on the said income. It was designed to
enable (a) the individual taxpayer to meet his or
her income tax liability on compensation
earned; and (b) the government to collect at
source the appropriate taxes on compensation.
Taxes withheld are creditable in nature. Thus,
the employee is still required to file an income
tax return to report the income and/or pay the
difference between the tax withheld and the
tax due on the income. For over withholding,
the employee is refunded. Therefore, absolute
or exact accuracy in the determination of the
amount of the compensation income is not a
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prerequisite for the employer’s withholding
obligation to arise.
The obligation of the payor/employer to deduct
and withhold the related withholding tax arises
at the time the income was paid or accrued or
recorded as an expense in the payor’s/
employer's books, whichever comes first.
Petitioner ING Bank accrued or recorded the
bonuses as deductible expense in its books.
Therefore, its obligation to withhold the related
withholding tax due from the deductions for
accrued bonuses arose at the time of accrual
and not at the time of actual payment.
CIR v. Mirant Pagbilao Corporation, G.R. No.
180434, January 20, 2016
It is indisputable that compliance with the 120-
day waiting period is mandatory and
jurisdictional. Failure to comply with the 120-
day waiting period violates a mandatory
provision of law. It violates the doctrine of
exhaustion of administrative remedies and
renders the petition premature and thus
without a cause of action, with the effect that
the CTA does not acquire jurisdiction over the
taxpayer’s petition.
The charter of the CTA expressly provides that
its jurisdiction is to review on appeal “decisions
of the [CIR] in cases involving x x x refunds of
internal revenue taxes.” When a taxpayer
prematurely files a judicial claim for tax refund
or credit with the CTA without waiting for the
decision of the CIR, there is no “decision” of the
CIR to review and thus the CTA as a court of
special jurisdiction has no jurisdiction over the
appeal. The charter of the CTA also expressly
provides that if the CIR fails to decide within “a
specific period” required by law, such “inaction
shall be deemed a denial” of the application for
tax refund or credit. It is the CIR’s decision, or
inaction “deemed a denial,” that the taxpayer
can take to the CTA for review. Without a
decision or an “inaction x x x deemed a denial”
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of the CIR, the CTA has no jurisdiction over a
petition for review.
The old rule that the taxpayer may file the
judicial claim, without waiting for the CIR’s
decision if the two-year prescriptive period is
about to expire, cannot apply because that rule
was adopted before the enactment of the 30-
day period. The 30-day period was adopted
precisely to do away with the old rule, so that
under the VAT System the taxpayer will always
have 30 days to file the judicial claim even if the
CIR acts only on the 120th day, or does not act at
all during the 120-day period. With the 30-day
period always available to the taxpayer, the
taxpayer can no longer file a judicial claim for
refund or credit of input VAT without waiting
for the Commissioner to decide until the
expiration of the 120-day period.
PAGCOR v. BIR, G.R. No. 208731, January 27,
2015
Following the verba legis doctrine, the law must
be applied exactly as worded since it is clear,
plain, and unequivocal. A textual reading of
Section 3.1.5, Rev. Regs. No. 12-99,
implementing Section 228, Tax Code gives a
protesting taxpayer, like PAGCOR, only three
options:
1. If the protest is wholly or partially denied by
the CIR or his authorized representative,
then the taxpayer may appeal to the CTA
within 30 days from receipt of the whole or
partial denial of the protest;
2. If the protest is wholly or partially denied by
the CIR’s authorized representative, then
the taxpayer may appeal to the CIR within
30 days from receipt of the whole or partial
denial of the protest and
3. If the CIR or his authorized representative
failed to act upon the protest within 180
days from submission of the required
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 supporting documents, then the taxpayer
may appeal to the CTA within 30 days from
the lapse of the 180-day period.
When PAGCOR filed its petition before the CTA
on March 11, 2009, there was still no denial of
PAGCOR’s protest by either the Regional
Director or the CIR. Thus, when PAGCOR filed its
petition before the CTA, it is clear that PAGCOR
failed to make use of any of the three options
described above. A petition before the CTA may
only be made after a whole or partial denial of
the protest by the CIR or the CIR's authorized
representative.
PAGCOR has clearly failed to comply with the
requisites in disputing an assessment as
provided by Section 228 and Section 3.1.5.
Indeed, PAGCOR’s lapses in procedure have
made the BIR’s assessment final, executory, and
demandable, thus obviating the need to further
discuss the issue of the propriety of imposition
of fringe benefits tax.
Silicon Philippines, Inc. v. CIR, G.R. No. 182387,
March 2, 2016
Under Section 112, Tax Code, the administrative
claim of a VAT-registered person for the
issuance by the respondent of tax credit
certificates or the refund of input taxes paid on
zero-rated sales or capital goods imported may
be made within two years after the close of the
taxable quarter when the sale or
importation/purchase was made.
Upon the filing of an administrative claim,
respondent is given a period of 120 days within
which to: (1) grant a refund or issue the tax
credit certificate for creditable input taxes; or
(2) make a full or partial denial of the claim for a
tax refund or tax credit. Failure on the part of
respondent to act on the application within the
120-day period shall be deemed a denial.
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The 120-day period begins to run from the date
of submission of complete documents
supporting the administrative claim. If there is
no evidence showing that the taxpayer was
required to submit—or actually submitted—
additional documents after the filing of the
administrative claim, it is presumed that the
complete documents accompanied the claim
when it was filed.
Whether the CIR rules in favor of or against the
taxpayer, or does not act at all on the
administrative claim, within the period of 120
days from the submission of complete
documents, the taxpayer may resort to a
judicial claim before the CTA.
The judicial claim shall be filed within a period
of 30 days after the receipt of respondent’s
decision or after the expiration of the 120- day
period, whichever is sooner. Aside from the
specific exception to the mandatory and
jurisdictional nature of the periods provided by
the law, any claim filed in a period less than or
beyond the 120+30 days provided by the Tax
Code is outside the jurisdiction of the CTA.
Spouses Emmanuel D. PACQUIAO and JINKEE J.
Pacquiao v. CTA and CIR, G.R. No. 213394, April
6, 2016
Section 11, RA No. 1125, as amended by RA No.
9282, embodies the rule that an appeal to the
CTA from the decision of the CIR will not
suspend the payment, levy, distraint, and/or
sale of any property of the taxpayer for the
satisfaction of his tax liability as provided by the
existing law. The exception to this rule can be
found in Section 11 which states that when in
the opinion of the Court the collection by the
aforementioned government agencies may
jeopardize the interest of the Government
and/or the taxpayer, the Court at any stage of
the proceeding may suspend the said collection
and require the taxpayer either to deposit the
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amount claimed or to file a surety bond for not
more than double the amount with the Court.
Despite some amendments to the law, the CTA
has ample authority to issue injunctive writs to
restrain the collection of tax and to even
dispense with the deposit of the amount
claimed or the filing of the required bond,
whenever the method employed by the CIR in
the collection of tax jeopardizes the interests of
a taxpayer for being patently in violation of the
law.
Such authority emanates from the jurisdiction
conferred to it by Sections 7 and 11, RA No.
1125.
The authority of the courts to issue injunctive
writs to restrain the collection of tax and to
dispense with the deposit of the amount
claimed or the filing of the required bond is not
simply confined to cases where prescription has
set in. Whenever it is determined by the courts
that the method employed by the CIR in the
collection of tax is not sanctioned by law, the
bond requirement under Section 11, RA No.
1125 should be dispensed with. The purpose of
the rule is not only to prevent jeopardizing the
interest of the taxpayer, but more importantly,
to prevent the absurd situation wherein the
court would declare “that the collection by the
summary methods of distraint and levy was
violative of law, and then, in the same breath
require the petitioner to deposit or file a bond
as a prerequisite for the issuance of a writ of
injunction.”
Though it may be true that it would have been
premature for the CTA to immediately
determine whether the assessment made
against the petitioners was valid or whether the
warrants were properly issued and served, still,
it behooved upon the CTA to properly
determine, at least preliminarily, whether the
CIR, in its assessment of the tax liability of the
petitioners, and its effort of collecting the same,
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complied with the law and the pertinent
issuances of the BIR itself. The CTA should have
conducted a preliminary hearing and received
evidence so it could have properly determined
whether the requirement of providing the
required security under Section 11, R.A. No.
1125 could be reduced or dispensed with
pendente lite.
If there would be a need for a bond or to
reduce the same, the CTA should take note that
the Supreme Court, in A.M. No. 15-92-01-CTA,
resolved to approve the CTA En Banc Resolution
No. 02-2015, where the phrase “amount
claimed” stated in Section 11, R.A. No. 1125
was construed to refer to the principal amount
of the deficiency taxes, excluding penalties,
interests and surcharges.
CIR v. Liquigaz Philippines Corporation, G.R.
No. 215534, April 18, 2016
A void Final Decision on Disputed Assessment
(FDDA) does not ipso facto render the
assessment void.
It is necessary to differentiate an “assessment”
from a “decision.” It is the “decision” which is
appealable to the CTA and not the assessment.
An assessment becomes a disputed assessment
after a taxpayer has filed its protest to the
assessment in the administrative level.
Thereafter, the CIR either issues a decision on
the disputed assessment or fails to act on it and
is, therefore, considered denied. The taxpayer
may then appeal the decision on the disputed
assessment or the inaction of the CIR.
The FDDA must state the facts and law on which
it is based to provide the taxpayer the
opportunity to file an intelligent appeal. The
reason for requiring that taxpayers be informed
in writing of the facts and law on which the
assessment is made is the constitutional
guarantee that no person shall be deprived of
his property without due process of law. Merely
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notifying the taxpayer of its tax liabilities
without elaborating on its details is insufficient.
The requirement should be in place so that the
taxpayer could be adequately informed of the
basis of the assessment enabling him to prepare
an intelligent protest or appeal of the
assessment or decision. Substantial compliance
with the requirement under Section 228, Tax
Code is permissible, provided that the taxpayer
would be eventually apprised in writing of the
factual and legal bases of the assessment to
allow him to file an effective protest.
It is undisputed that the FDDA merely showed
Liquigaz’s tax liabilities without any details on
the specific transactions which gave rise to its
supposed tax deficiencies. While it provided for
the legal bases of the assessment, it fell short of
informing Liquigaz of the factual bases thereof.
Thus, the FDDA as regards the EWT and FBT tax
deficiency did not comply with the requirement
in Section 3.1.6 of Rev. Regs. No. 12-99, as
amended, for failure to inform Liquigaz of the
factual basis thereof.
The Court, however, finds that the CTA erred in
concluding that the assessment on EWT and
FBT deficiency was void because the FDDA
covering the same was void. The assessment
remains valid notwithstanding the nullity of the
FDDA because, as discussed above, the
assessment itself differs from a decision on the
disputed assessment.
As established, an FDDA that does not inform
the taxpayer in writing of the facts and law on
which it is based renders the decision void.
Therefore, it is as if there was no decision
rendered by the CIR. It is tantamount to a denial
by inaction by the CIR, which may still be
appealed before the CTA and the assessment be
evaluated on the basis of the available evidence
and documents. The merits of the EWT and FBT
assessment should have been discussed and not
merely brushed aside on account of the void
FDDA.
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CIR v. Hambrecht & Quist Philippines, Inc., G.R.
No. 169225, November 17, 2010
The appellate jurisdiction of the CTA is not
limited to cases which involve decisions of the
CIR on matters relating to assessments or
refunds. The second part of Section 7(1), RA
No. 1125, as amended, covers other cases that
arise out of the NIRC or related laws
administered by the BIR. In the case at bar, the
issue at hand is whether or not the BIR’s right to
collect taxes had already prescribed and that is
a subject matter falling under Section 223(c),
1986 NIRC. Thus, the issue of prescription of
the BIR’s right to collect taxes may be
considered as covered by the term “other
matters” over which the CTA has appellate
jurisdiction.
The fact that an assessment has become final
for failure of the taxpayer to file a protest
within the time allowed only means that the
validity or correctness of the assessment may
no longer be questioned on appeal. However,
the validity of the assessment itself is a separate
and distinct issue from the issue of whether the
right of the CIR to collect the validly assessed
tax has prescribed. This issue of prescription,
being a matter provided for by the NIRC, is well
within the jurisdiction of the CTA to decide.
Capitol Wireless, Inc. v. The Provincial
Treasurer of Batangas, the Provincial Assessor
of Batangas, the Municipal Treasurer and
Assessor of Nasugbu Batangas, G.R. No.
180110, May 30, 2016
Issue: Whether submarine wires or cables used
for communications may be taxed similar to
other real estate.
Held: Submarine or undersea communications
cables are akin to electric transmission lines
which are “no longer exempted from real
property tax” and may qualify as “machinery”
subject to real property tax under the LGC. To
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the extent that the equipment’s location is
determinable to be within the taxing authority’s
jurisdiction, the Court sees no reason to
distinguish between submarine cables used for
communications and aerial or underground
wires or lines used for electric transmission, so
that both pieces of property do not merit a
different treatment in the aspect of real
property taxation.
It is not in dispute that the submarine cable
system’s Landing Station in Nasugbu, Batangas
is owned by PLDT and not by Capwire.
Obviously, Capwire is not liable for the real
property tax on this Landing Station.
Nonetheless, Capwire admits that it co-owns
the submarine cable system that is subject of
the tax assessed and being collected by public
respondents. As the Court takes judicial notice
that Nasugbu is a coastal town and the
surrounding sea falls within what the United
Nations Convention on the Law of the Sea
(UNCLOS) would define as the country’s
territorial sea (to the extent of 12 nautical miles
outward from the nearest baseline, under Part
II, Sections 1 and 2) over which the country has
sovereignty, including the seabed and subsoil, it
follows that indeed a portion of the submarine
cable system lies within Philippine territory and
thus falls within the jurisdiction of the said local
taxing authorities. It easily belies Capwire’s
contention that the cable system is entirely in
international waters. And even if such portion
does not lie in the 12-nautical-mile vicinity of
the territorial sea but further inward, this Court
has held that “whether referred to as Philippine
‘internal waters’ under Article I, Constitution or
as ‘archipelagic waters’ under UNCLOS Part III,
Article 49(1, 2, 4), the Philippines exercises
sovereignty over the body of water lying
landward of (its) baselines, including the air
space over it and the submarine areas
underneath.” Further, under Part VI, Article
7946, UNCLOS, the Philippines clearly has
jurisdiction with respect to cables laid in its
territory that are utilized in support of other
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installations and structures under its
jurisdiction.
CIR v. Next Mobile, G.R. No. 212825, December
29, 2015
Section 203, Tax Code mandates the BIR to
assess internal revenue taxes within three years
from the last day prescribed by law for the filing
of the tax return or the actual date of filing of
such return, whichever comes later. Hence, an
assessment notice issued after the three-year
prescriptive period is not valid and effective.
Exceptions to this rule are provided under
Section 222, Tax Code.
Section 222(b), Tax Code provides that the
period to assess and collect taxes may only be
extended upon a written agreement between
the CIR and the taxpayer executed before the
expiration of the three-year period. Revenue
Memorandum Order (RMO) No. 20-90 issued
on April 4, 1990 and Revenue Delegation
Authority Order (RDAO) No. 05-01 issued on
August 2, 2001 provide the procedure for the
proper execution of a waiver.
The Court has consistently held that a waiver of
the statute of limitations must faithfully comply
with the provisions of RMO No. 20-90 and
RDAO No. 05-01 in order to be valid and
binding.
The general rule is that when a waiver does not
comply with the requisites for its validity
specified under RMO No. 20-90 and RDAO No.
01-05, it is invalid and ineffective to extend the
prescriptive period to assess taxes. However,
due to its peculiar circumstances, the Court
treated this case as an exception to this rule
and found the Waivers valid for the following
reasons:
1. The parties in this case are in pari delicto or
“in equal fault.” In pari delicto connotes
that the two parties to a controversy are
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 equally culpable or guilty and they shall
have no action against each other.
However, although the parties are in pari
delicto, the Court may interfere and grant
relief at the suit of one of them, where
public policy requires its intervention, even
though the result may be that a benefit will
be derived by one party who is in equal guilt
with the other.
Here, to uphold the validity of the Waivers
would be consistent with the public policy
embodied in the principle that taxes are the
lifeblood of the government, and their
prompt and certain availability is an
imperious need. Taxes are the nation’s
lifeblood through which government
agencies continue to operate and which the
State discharges its functions for the
welfare of its constituents. As between the
parties, it would be more equitable if
petitioner’s lapses were allowed to pass
and consequently uphold the Waivers in
order to support this principle and public
policy.
2. The Court has repeatedly pronounced that
parties must come to court with clean
hands. Parties who do not come to court
with clean hands cannot be allowed to
benefit from their own wrongdoing.
Following the foregoing principle,
respondent should not be allowed to
benefit from the flaws in its own Waivers
and successfully insist on their invalidity in
order to evade its responsibility to pay
taxes.
3. Respondent is estopped from questioning the
validity of its Waivers. While it is true that
the Court has repeatedly held that the
doctrine of estoppel must be sparingly
applied as an exception to the statute of
limitations for assessment of taxes, the
Court finds that the application of the
doctrine is justified in this case. Verily, the
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application of estoppel in this case would
promote the administration of the law,
prevent injustice and avert the
accomplishment of a wrong and undue
advantage. Respondent executed five
Waivers and delivered them to petitioner,
one after the other. It allowed petitioner to
rely on them and did not raise any objection
against their validity until petitioner
assessed taxes and penalties against it.
Moreover, the application of estoppel is
necessary to prevent the undue injury that
the government would suffer because of
the cancellation of petitioner’s assessment
of respondent’s tax liabilities.
4. The Court cannot tolerate this highly
suspicious situation. In this case, the
taxpayer, on the one hand, after voluntarily
executing waivers, insisted on their
invalidity by raising the very same defects it
caused. On the other hand, the BIR
miserably failed to exact from respondent
compliance with its rules. The BIR’s
negligence in the performance of its duties
was so gross that it amounted to malice and
bad faith. Moreover, the BIR was so lax such
that it seemed that it consented to the
mistakes in the Waivers. Such a situation is
dangerous and open to abuse by
unscrupulous taxpayers who intend to
escape their responsibility to pay taxes by
mere expedient of hiding behind
technicalities.
Pilipinas Total Gas v. CIR, G.R. No. 207112,
December 8, 2015
In a claim for refund of unutilized VAT, it is the
taxpayer who ultimately determines when
complete documents have been submitted for
the purpose of commencing and continuing the
running of the 120-day period. After all, he may
have already completed the necessary
documents the moment he filed his
administrative claim, in which case, the 120-day
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period is reckoned from the date of filing. The
taxpayer may have also filed the complete
documents on the 30th day from filing of his
application, pursuant to Revenue Memorandum
Circular No. 49-2003. He may very well have
filed his supporting documents on the first day
he was notified by the BIR of the lack of the
necessary documents. In such cases, the 120-
day period is computed from the date the
taxpayer is able to submit the complete
documents in support of his application.
Then, except in those instances where the BIR
would require additional documents in order to
fully appreciate a claim for tax credit or refund,
in terms what additional document must be
presented in support of a claim for tax credit or
refund — it is the taxpayer who has that right
and the burden of providing any and all
documents that would support his claim for tax
credit or refund. After all, in a claim for tax
credit or refund, it is the taxpayer who has the
burden to prove his cause of action. As such, he
enjoys relative freedom to submit such
evidence to prove his claim.
Thereafter, whether these documents are
actually complete as required by law is for the
CIR and the courts to determine. Besides, as
between a taxpayer-applicant, who seeks the
refund of his creditable input tax and the CIR, it
cannot be denied that the former has greater
interest in ensuring that the complete set of
documentary evidence is provided for proper
evaluation of the State.
Taxpayers cannot simply be faulted for failing to
submit the complete documents enumerated in
RMO No. 53-98, absent notice from a revenue
officer or employee that other documents are
required. Granting that the BIR found that the
documents submitted by Total Gas were
inadequate, it should have notified the latter of
the inadequacy by sending it a request to
produce the necessary documents in order to
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make a just and expeditious resolution of the
claim.
Indeed, a taxpayer's failure with the
requirements listed under RMO No. 53-98 is not
fatal to its claim for tax credit or refund of
excess unutilized excess VAT. This holds
especially true when the application for tax
credit or refund of excess unutilized excess VAT
has arrived at the judicial level. After all, in the
judicial level or when the case is elevated to the
Court, the Rules of Court governs. Simply put,
the question of whether the evidence
submitted by a party is sufficient to warrant the
granting of its prayer lies within the sound
discretion and judgment of the Court.
COURT OF TAX APPEALS DECISIONS
Toenec Philippines, Inc. (TPI) v. CIR, CTA Case
No. 8653, January 27, 2016
Issue: Whether the donee is liable for donor’s
tax on the donation made by a non-resident
stockholder.
Held: No. The burden to pay the donor’s tax is
imposed upon the donor and not upon the
donee (TPI, in this case). The liability to pay
donor’s tax is not transferable.
The person or entity liable to pay donor’s tax is
the donor, or the person or entity transferring
the property to another. Where the donor is a
non-resident, the return must be filed with the
Philippine Embassy or with the Office of the
Commissioner, particularly with the Revenue
District Office No. 39.
The gift tax or donor’s tax is a tax on the
privilege of transmitting one’s property or
property rights to another or others without
adequate and full valuable consideration.
Donor’s tax is a “direct tax,” i.e., it is a tax for
which a taxpayer is directly liable on the
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transaction or business it engages in, without
transferring the burden to someone else.
The City Government of Makati et al. v.
Honorable Regional Trial Court (RTC), Makati
City, Branch 59 and Mactel Corporation, CTA
A.C. Case No. 147, February 9, 2015
Issue: Whether the CTA has jurisdiction over the
petition for certiorari under Rule 65, Rules of
Court in a case stemming from the City of
Makati’s unlawful withholding and/or denial of
private respondent’s business permit
application.
Held: No. RA No. 9282, which amended RA
No. 1125, expanded the jurisdiction of the CTA
and provided that the CTA has exclusive
appellate jurisdiction to review by appeal
decisions, orders or resolutions of the RTC in
local tax cases originally decided or resolved by
them in the exercise of their original or
appellate jurisdiction, among others.
Local tax case is understood to mean as a
dispute between the LGU and a taxpayer which
involves the imposition of the LGU’s power to
levy tax, fees, or charges against the property of
the taxpayer concerned. It is for this reason that
the LGC, provided guidelines for the proper
assessment and collection of tax, fees, or
charges by the LGU and, equally, in case of
disagreement, the affected taxpayer may
dispute the same in accordance with the
remedies that the LGC provides.
This case does not involve a local tax case. The
nature of private respondent’s petition with the
court a quo is for the unlawful withholding of
business permit and/or denial of the application
thereof by the petitioners. As such, the petition
includes a prayer for preliminary mandatory
injunctive relief for the issuance of a temporary
business permit to private respondent until the
main case pending before the RTC-Branch 59 of
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Makati City is resolved with finality. This is not a
tax case. It is a civil case.
CIR v. Elric Auxiliary Services Corporation/
Sacred Heart Services Gas Station, CTA En Banc
Case No. 1174, March 3, 2016
Issue: Whether the CTA has jurisdiction to
determine the validity of a 48-Hour Notice and
5-Day VAT Compliance Notice issued by the BIR.
Held: The appellate jurisdiction of the CTA is not
limited to cases which involve decisions of the
CIR on matters relating to assessments or
refunds. The CTA also has jurisdiction in other
cases that arise out of the National Internal
Revenue Code (NIRC) or related laws
administered by the BIR pursuant to Section
7(a)(1), RA No. 1125, as amended, as well as
Rule 4, Section 3(a)(1), in relation to Rule 8,
Section 4(a), Revised Rules of the Court of Tax
Appeals.
Thus, the “Oplan Kandado” through the 48-
Hour Notice and the 5-Day VAT Compliance
Notice issued pursuant to Section 115, Tax Code
(Power of the CIR to Suspend the Business
Operations of a Taxpayer), and implemented by
Revenue Memorandum Order No. 3-2009, falls
within the meaning of “other matters arising
under the National Internal Revenue Code.”
City Assessor of Paranaque v. Portal Holdings,
Inc., CTA EB Case No. 998, January 26, 2016
Issue: Whether the Local Board of Assessment
Appeals (LBAA) and Central Board of
Assessment Appeals (CBAA) has jurisdiction to
review the constitutionality of a tax ordinance
which gave rise to the assessment.
Held: Yes. Even though respondent’s appeal to
the LBAA and CBAA likewise raises the issue of
constitutionality of Paranaque City Ordinance
No. 03-06, the same does not divest the LBAA
of its jurisdiction to hear and decide on the
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correctness of the new assessment, which is the
very subject of respondent’s appeal.
National Transmission Corporation v.
Municipality of Labrador, CTA En Banc Case No.
1250, April 8, 2016
Issues: Whether a taxpayer may seek the refund
of taxes paid arising from a void assessment of
an LGU which has become final and executory
for failure of the taxpayer to appeal within the
prescribed period.
Held: No. When the period to protest has
lapsed, the taxpayer cannot thereafter pay for
the tax then ask for refund. Since the
assessments had already become final on
account of the failure of the taxpayer to appeal
with the court of competent jurisdiction within
the prescribed period, to cancel the tax
assessment issued against it and to issue a tax
refund in its favor is to allow the taxpayer to
indirectly file an appeal against the assessments
which had already become final and executory.
This will allow the taxpayer to indirectly file an
appeal against the final decisions of the local
treasurer of the Municipality of Labrador,
Pangasinan beyond the 60-day period
mandated by law. What one cannot do directly,
he cannot do indirectly.
Urbano L. Velasco v. BIR, CTA Case No. 8497,
May 17, 2016
Issue: Whether the sale for less than the book
value per share is subject to donor’s tax under
Section 100, Tax Code even if (1) there was no
donative intent; (2) the transfer was conducted
at arm’s length; and (3) it was done in the
ordinary course of business.
Held: Yes. Donor’s tax is imposed upon the
transfer by any person of the property by gift as
provided under Section 98, Tax Code. Included
in the concept of a gift or donation is the
amount in excess of the fair market value of the
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property over the value of the consideration for
property transferred for less than adequate and
full consideration pursuant to Section 100, Tax
Code.
The absence of donative intent does not
exempt the sales of stock transaction from
donor’s tax; and that even if there is no actual
donation, the difference in price is considered a
donation by fiction of law. This would mean
that proof of the presence or absence of the
elements of donation for purposes of donor’s
tax imposition is insignificant in cases involving
transfers of property falling under Section 100,
Tax Code.
Spouses Joseph Ejercito Estrada and Luisa P.
Ejercito v. CIR, CTA Case 7847, November 23,
2015
Issue: Whether the BIR can issue tax assessment
based on the findings of another agency or
tribunal, such as the Decision of Sandiganbayan
without its own investigation and supporting
documents.
Held: No. BIR’s tax assessment cannot be
sustained if (1) it is based merely on the findings
of another agency or tribunal, in this case the
Sandiganbayan’s Plunder Case Decision in
Criminal Case No. 26558 (Sandiganbayan
Decision), which is not in any way conclusive as
regards the issue on alleged deficiency taxes, (2)
there is no independent investigation; and (3)
no other supporting evidence was presented.
Derek Arthur P. Ramsay vs. CIR, CTA Case 8456,
September 17, 2015
Issue: Whether or not the Formal Letter of
Demand (FLD) without any demand to pay the
tax within a specified period of time is valid.
Held: No. Due process is satisfied if the FLD or
Final Assessment Notice (FAN) sent to the
taxpayer states the computation of tax liabilities
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and a demand to pay within the prescribed
period.
In the present case, since there was no demand
to pay within a specified period of time to be
found in the FLD and the attached Details of
Discrepancies, the issuance of the same did not
amount to a FAN.
In this case, the FLD dated January 4, 2012 with
the attached Details of Discrepancies stated: (1)
the computations and tabulations of the alleged
deficiency taxes due, together with interest,
surcharge, penalty, and their respective basis in
law for taxable years 2006 to 2009; (2) a
request to pay the deficiency internal revenue
tax liabilities through the duly authorized agent
bank in which he is enrolled within the time
shown in the enclosed assessment notice; and
(3) a note that the interest and total amount
due shall be adjusted if paid beyond February 8,
2012.
These statements do not amount to an
assessment notice as there was no mention of a
definite time when payment was due and
demandable.
Delta Air Lines, Inc. vs. Cesar V. Purisima et al.,
CTA En Banc Case No. 1113, September 10,
2015
Issue: Whether the CTA has jurisdiction to rule
on the validity of BIR Ruling No. 099-2011, DOF
Letter dated September 8, 2011, and Answer 11
to Question 11 of Revenue Memorandum
Circular No. 46-2008.
Held: Yes. The CTA’s jurisdiction under Section
7(a)(1), RA No. 1125, as amended, states that
the CTA shall exercise exclusive appellate
jurisdiction to review by appeal, decisions of the
CIR in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other
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matters arising under the NIRC or other laws
administered by the BIR.
In relation thereto, Section 4, Tax Code provides
that the CIR has the power to interpret the NIRC
and other tax laws administered by the BIR,
subject to the review of the Secretary of
Finance.
The Supreme Court has held that while there is
no provision in law that provides where exactly
the ruling of the Secretary of Finance is
appealable to, Sec. 7(a)(1), RA No. 1125, as
amended, addressed the seeming gap in the
law as it vests the CTA, albeit impliedly, with
jurisdiction on “other matters” arising under
the NIRC of 1997 or other laws administered by
the BIR.
CIR v. Hermano (San) Miguel Febres Cordero
Medical Education Foundation (De La Salle –
Health Science Institute), Inc., CTA EB Case No.
1151, February 17, 2015, CTA Case No. 8095
Issue: Whether the assessment is void where
the BIR issued the FLD without considering the
taxpayer’s reply to the Preliminary Assessment
Notice (PAN).
Held: Yes. A taxpayer is given an opportunity to
respond to the PAN within 15 days from receipt
thereof. Upon the lapse of the 15-day period,
without any response from the taxpayer, the
latter shall be considered in default and the BIR
shall issue a formal letter of demand and
assessment notices.
Here, respondent received a copy of the PAN
dated December 12, 2008 on January 5, 2009.
Pursuant to Rev. Regs. No. 12-99, respondent
has 15 days or until January 20, 2009 within
which to file a reply or protest against the PAN.
Respondent filed its protest to the PAN on
January 20, 2009. Barely a day after it filed its
protest to the PAN, or on January 21, 2009,
respondent received the Formal Letter of
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Demand and Assessment Notice No. 54-2005
which are both dated January 9, 2009.
Evidently, petitioner did not wait for
respondent to reply to the PAN nor considered
the arguments raised in respondent’s protest
thereto. The Formal Letter of Demand and
Assessment Notice No. 54-2005 were already
prepared by petitioner as early as January 9,
2009, or way before the lapse of the 15-day
period within which petitioner could file a reply
or protest to the PAN. The Supreme Court
categorically ruled that the non-compliance
with statutory and procedural due process
renders the final assessment notice as null and
void.
University of Santo Tomas Hospital, Inc. v. CIR,
CTA Case No. 8292, March 2, 2015
Issue: Whether a valid Letter of Authority (LA) is
required to conduct a tax assessment.
Held: Yes. AN LA is the authority given to the
appropriate revenue officer assigned to
perform assessment functions. It empowers or
enables said revenue officer to examine the
books of account and other accounting records
of a taxpayer for the purpose of collecting the
correct amount of tax. The provision also states
that the authority extends only to those
taxpayers within the jurisdiction of the district.
McDonald’s Philippines Realty Corporation v.
CIR, CTA Case No. 8655, June 1, 2016
Issue: Whether the assessment where the
revenue officer who conducted the audit was
not specifically named in the LA is valid.
Held: No. Only the revenue officers named in
the LA are authorized to conduct the audit on
taxpayers pursuant to Sections 6 and 13, Tax
Code. The LA is the jurisprudentially recognized
document which gives the revenue officer/s
named therein, the power to examine the
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books of account and other accounting records
of a taxpayer. A referral memorandum is not an
accepted substitute for the LA.
Since RO Rona B. Marcellano had not been
properly authorized to examine petitioner’s
books of accounts and other accounting
records, the resultant deficiency VAT
assessment is a nullity. Thus, the same must be
cancelled and set aside.
Ayala Hotels, Inc. v. CIR, CTA Case No. 8438,
March 31, 2015
Issue: Whether issuance of a FDDA before the
lapse of 60-day period to submit documents is
proper.
Held: No. It is undisputed that petitioner filed
its Letter-Protest on December 20, 2011
contesting the validity of FLD and Assessment
Notices issued by the respondent on November
9, 2011. Petitioner then has 60 days, or until
February 18, 2012, within which to submit
relevant documents in support of its
administrative protest. Respondent, for
unspecified reasons, issued the FDDA on
January 25, 2012, or 35 days before the lapse of
the 60-day period.
Respondent violated due process by her failure
to fully comply with the requirements of
Section 228 which allows petitioner to submit
the relevant documents agreed upon and
consider the same in rendering a sound and
informed decision. Instead, respondent blankly
issued the FDDA with nothing but petitioner’s
assertions and representations in its Letter-
Protest. The decision on the assessed deficiency
IT, VAT and DST is, therefore, null and void.
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CIR v. Sarangani Resources Corporation (SRC),
CTA EB Case No. 1098, 28 April 2015, CTA Case
No. 8105
Issue: Whether the administrative appeal to the
CIR will give rise to a fresh period of 180 days
for the CIR to resolve the appeal.
Held: No. The CIR or her duly authorized
representative (DAR) has 180 days from the
date of submission of the supporting
documents to decide the protest filed by a
taxpayer. If the CIR or her DAR failed to act on
the disputed assessment within the 180-day
period from the date of submission of
documents, the taxpayer can either: (1) file a
petition for review with the CTA within 30 days
after the expiration of the 180-day period; or
(2) await the final decision of the CIR on the
disputed assessments and appeal such final
decision to the CTA within 30 days after receipt
of a copy of such decision. These options are
mutually exclusive and resort to one bars the
application of the other.
In the instant case, SRC received a copy of the
FLD on December 22, 2008. On January 21,
2009, respondent filed a protest letter to the
FLD. On March 19, 2009, respondent submitted
all the relevant documents in support of its
protest. Therefore, the CIR or her DAR had 180
days from March 19, 2009, or until September
15, 2009, to decide the protest.
On July 15, 2009, Regional Director Yap
rendered a decision partially granting SRC’s
protest, which decision was received by SRC on
July 29, 2009. SRC elevated its protest to the CIR
on August 28, 2009, pursuant to Section 3.1.5,
Rev. Regs. No. 12-99. When SRC elevated its
protest, the CIR had only the remaining 18 days
of the 180-day period, or until September 15,
2009, within which to decide the protest. From
September 15, 2009, SRC had until October 15,
2009 to appeal to the CTA.
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However, SRC did not appeal to the CTA upon
the lapse of the 180-day period on September
15, 2009, nor within the 30-day period
therefrom. Instead, SRC submitted additional
documents on October 15, 2009 and counted
another 180-day period from October 15, 2009
for the CIR to decide its appeal. Within 30 days
from the lapse of the new 180-day period on
April 23, 2010, SRC filed a Petition for Review
with the CTA Division to appeal the inaction of
the CIR. Specifically, respondent filed the
Petition for Review on May 13, 2010.
Section 228, Tax Code provides only for one
180-day period for the CIR or her DAR to decide
the protest. Thus, Rev. Regs. No. 12-99, which
implements Section 228, does not provide for a
fresh or separate 180-day period for the CIR to
decide the appealed decision of her authorized
representative. [Note: SRC should have waited
for the final decision of the CIR on the
administrative appeal and filed a petition for
review with the CTA within 30 days from receipt
thereof.]
Esper R. Vargas, Jr. v. CIR, CTA Case No. 8750,
March 8, 2016
Issue: Whether the CIR is liable for actual
damages, in the form of filing fees and
attorney’s fees, resulting from the assessment.
Held: No. As a rule, attorney’s fees and
expenses of litigation cannot be recovered
unless, among others, the claimant is compelled
to litigate or incur expenses to protect his
interest. However, it is the CIR’s prime duty to
perform tax assessments and tax collections. On
the other hand, no compelling reason has been
offered by petitioner for the award of filing fees
and attorney’s fees. Further, the CTA has
consistently disallowed the award of actual
damages in tax cases.
In issuing the subject assessment, the
respondent is merely exercising the authority
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accorded her under the Tax Code to collect
taxes, and in so doing, fulfilling her mandated
duty as required under the law. For after all, the
primary duty of the BIR is to collect taxes, since
taxes are the lifeblood of the Government and
their prompt and certain availability are
imperious needs.
The City of Makati vs. The Municipality of
Bakun and Luzon Hydro Corporation (LHC), CTA
En Banc Case 1179, January 14, 2016
Issue: Whether the Makati Office is a branch
which requires payment of local business tax in
Makati City.
Held: No. In cases where there is a factory,
project office, plant, or plantation in pursuit of
business, 30% of all sales recorded in the
principal office shall be taxable by the city or
municipality where the principal office is
located and 70% of all sales recorded in the
principal office shall be taxable by the city or
municipality where the factory, project office,
plant or plantation is located.
In cases where a manufacturer, assembler,
producer, exporter or contractor has two (2) or
more factories, project offices, plants, or
plantations located in different localities, the
70% sales allocation shall be prorated among
the localities where the factories, project
offices, plants, and plantations are located in
proportion to their respective volumes of
production during the period for which the tax
is due.
In the case at bar, it is undisputed that 30% of
the local business tax was paid to Municipality
of Alilem as the principal office mentioned in
the Articles of Incorporation and the remaining
70% is being contested by the Municipality of
Bakun, Municipality of Alilem and Makati City.
Furthermore, it is undisputed that the LHC’s
electric power plant facility spans across the
provinces of Benguet and Ilocos Sur. The power
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station and switch chart are located in Alilem,
Ilocos Sur while the conveyance panel and
water intake are located in Bakun, Benguet. LHC
has an office in Makati City. Thus, the question
is raised as to whether Makati City should share
in the local business tax.
To be considered as a branch or sales office for
purposes of collection of the taxes, it is not
enough that the branch or sales office conducts
operations of the business as an extension of
the principal office, the branch or sales office
shall likewise record the sale or transaction and
the tax thereon shall accrue and shall be paid to
the municipality where such branch or sales
outlet is located pursuant to Article 243(b),
Administrative Order No. 270 in relation to
Section 150(a)(b)(d), LGC.
Philippine Plaza Holdings v. CIR, CTA Case No.
8609, August 12, 2016
Issue: Whether a claim for refund of surcharge
that was imposed for late filing of VAT return
and payment of tax due thereon may be
granted even without the filing of an
administrative claim for refund.
Held: Yes. The Supreme Court has, in certain
cases, allowed the refund case to prosper even
without a prior administrative claim. One such
exception is where the filing of an
administrative claim for refund is a useless
formality that can serve the interest of neither
the government nor the taxpayer. This case
falls within the exception considering that the
petitioner filed an application for abatement of
the surcharge that was imposed for late filing of
VAT return and payment of tax due and alleged
that such belated filing of the return and the
payment of the tax was due to a cause beyond
its control (i.e., the inaccessibility of the BIR’s
Electronic Filing and Payment System).
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Philippine Aerospace Development
Corporation v. CIR, CTA Case No. 8346 April 5,
2016
Issue: Whether an assessment where the
taxpayer did not receive the PAN is valid.
Held: No. Under Section 228, Tax Code and Rev.
Regs. No. 12-99, if there exists sufficient basis to
assess a taxpayer for any deficiency tax or taxes,
respondent shall issue and serve upon the said
taxpayer at least by registered mail, a PAN for
the assessment, indicating in detail the facts
and the law, rules and regulations, or
jurisprudence upon which the assessment is
based to ensure the legality of the said
assessment. The PAN is part of due process
requirement and non-compliance thereof
renders the assessment void.
Furthermore, if the taxpayer denies receipt of
an assessment from respondent, it is incumbent
upon the latter to prove by sufficient and
competent evidence that such notice was,
indeed served and received by the addressee.
The onus probandi shifts to respondent to prove
by contrary evidence that petitioner received
the assessment in the due course of mail. In this
case, CIR decided not to present its evidence
and even failed to file its memorandum. Hence,
there was a failure to refute petitioner’s
position that it did not receive a PAN.
Hoya Glass Disk Philippines Inc. v. CIR, CTA
Case No. 8703, April 25, 2016
Issue: Whether the filing of a false return which
was unintentional will fall within the 10-year
extraordinary prescriptive period.
Held: Yes. The 10-year extraordinary
prescription period for the right of the CIR to
issue an assessment applies in three instances:
(1) false return; (2) fraudulent return; and (3)
failure to file a return. Unlike fraudulent
returns, a false return need not be intentional.
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Mere deviation from the truth gives rise to a
false return.
In the case at bar, the Court found that the
Monthly Remittance Return of Final Income
Taxes Withheld filed on March 10, 2007
pertaining to cash dividend payable on or
before January 31, 2007, was a false return on
the ground that it reflected therein that the
final income tax withheld relates “For the
Month of February 2007,” when it should have
been properly relating to taxpayer’s payable of
final income tax withheld “for the Month of
January 2007.”
Colgate-Palmolive Philippines, Inc. v.
Commissioner of Customs, CTA Case No. 7806,
January 26, 2016
Issue: Whether royalties are considered part of
the dutiable value subject to custom duties.
Held. Yes. The Memorandum of Agreement
between taxpayer and the Company which is
the holder of the trademark (CPC) reveal that
(a) the royalty payments relate also to imported
goods since the same is computed at the rate of
5% based on the net sales of the licensed
products without distinction as to the source of
the products sold whether imported or locally
manufactured; (b) the royalties are paid by the
petitioner to the seller, CPC; and (c) the
payment of royalties is a condition of sale of the
goods to the buyer because without the
royalties, petitioner could not have sold the
licensed products in the Philippines under the
CPC trademark as the MOA provides that the
agreement may be terminated once petitioner
fails to pay the royalty. In fact, there is no
evidence presented to establish that the
imported products would have been sold
separately in the Philippines under a different
brand other than that of CPC. Thus, the
royalties which are related to the goods being
valued (and which were paid by petitioner to
CPC as a condition of the sale of the imported
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goods) are considered part of the dutiable value
subject to customs duties pursuant to Section
201 of the TCCP.
Aces Philippines Cellular Satellite Corporation
(Aces PH) v. CIR, CTA EB Case No. 1242, June 8,
2016
Issue: Whether Aces PH's payment of satellite
air time fee to Aces International Limited (AIL) is
income from sources outside of the Philippines.
Held: No, it is income derived from sources
within the Philippines. It is settled
jurisprudence that the “source of income”
relates to the property, activity or service that
produced the income.
The satellite air time fees are considered
income from sources within the Philippines. The
services for satellite air time fees do not only
compound with use of the Garuda Satellite
(located in outer space) and the Network
Control Center (located in Indonesia), but also
require that satellite communication time be
available and delivered in the Philippines. There
is a continuous and very real connection
starting from the Philippines (that is the
agreement to sell satellite communications time
for the ACES System in the Philippines), Garuda
Satellite (located in outer space), the Network
Control Center (located in Indonesia) and again
the Philippines, through petitioner’s gateway
facilities. In fact, the activity and services that
produces the income is the undertaking of
providing satellite communication to be
delivered in the Philippines by AIL to petitioner.
In our income tax law, it is sufficient that the
income is derived from an activity within the
Philippines. Place of activity, not place of
business, is controlling. Since an activity may
consist of only a single transaction whereas
business implies a continuity of transaction.
Thus, the CIR was correct in imposing final
withholding tax on the service fees paid to AIL
Prepared for the
2016 Lasallian Commission on Bar Operations
which are considered income from sources
within the Philippines.
“Income” in our income tax law refers to the
flow of wealth. AIL's contract with petitioner
extended its activities within the Philippine
boundaries. It arises from the activity and
services that produces the income within the
Philippines. The satellite air time fees are
income from sources within the Philippines.
Thus, it enjoyed the protection of the
government and should be controlled by the
government. As wealth flowing from within the
taxing jurisdiction of the Philippines, said
income should properly share the burden of
maintaining the government. Accordingly, the
jurisdiction of the Philippine government to tax
must be upheld.
CIR v. Alpha Rigging & Moving Systems, Inc.
(Alpha Rigging), CTA EB Case No. 1076. January
8, 2015, CTA Case No. 8135
Issue: Whether the CTA correctly assumed
jurisdiction and nullified the Warrant of
Distraint and Levy (WDL) issued against Alpha
Rigging.
Held: There is no issue on jurisdiction. The
jurisdiction of the CTA over “other matters
arising under the National Internal Revenue
Code (NIRC) or other laws or part of law
administered by the Bureau of Internal
Revenue” is not limited to the timeliness and
validity of the collection procedure itself. The
second part of the provision covers other cases
that arise out of the NIRC or related laws
administered by the BIR. It gives the CTA the
jurisdiction to determine if the warrant of
distraint and levy issued by the BIR is valid and
to rule if the Waiver of Statute of Limitations
was validly effected.
A void assessment bears no fruit and a warrant
of distraint and/or levy issued pursuant a void
assessment is likewise null and void. The Court
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is not precluded from determining compliance
with the requirements of due process laid down
Prepared by:
by the law and by the BIR itself in the issuance
of deficiency tax assessment to determine the
Atty. Martin Ignacio D. Mijares
validity of the WDL. Atty. Bon Jeffrey M. Caluag
In the case at bar, the petitioner’s witness Atty. Oilie S. Haulo
testified that FLD and FAN No. 59/2000 and Atty. Iris Katrine M. Exchaure
2001 PAN were mailed and received by Atty. Karissa Inez A. Segundo
respondent, however, CIR failed to mark, offer,
identify and admit as evidence any registry SALVADOR LLANILLO & BERNARDO
receipt and return card to prove the fact of
Attorneys-at-Law
mailing and receipt. Likewise, in the CIR’s th
8 Floor, Tower One and Exchange Plaza
Answer to the petition before the CTA in
Ayala Triangle, Ayala Avenue
Division it alleged registry receipt and return
Makati City 1226 Philippines
card to prove the fact of mailing and receipt by
www.salvadorlaw.com
the taxpayer, however, no evidence was
info@salvadorlaw.com
marked, offered, identified and admitted during
trial.

Here, petitioner failed to prove that the 2000

FLD and FAN No. 59/2000 were indeed served
and received by respondent. As such, there is
no assessment to begin with, and petitioner
cannot be considered a delinquent taxpayer.
Consequently, there is no basis for the issuance
of WDL No. 059-10-018. Thus, WDL No. 059-10-
018 issued by respondent to petitioner, in so far
as it seeks to collect from petitioner deficiency
taxes for year 2000, is void.

Petitioner also failed to prove that the 2001 NIC

and PAN were served and received by
respondent. Such failure on the part of
petitioner makes the 2001 FLD and FAN No.
59/2001 as well as the WDL No. 059-10-018
invalid.

Page 19 of 19
Prepared for the
2016 Lasallian Commission on Bar Operations