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Recent Jurisprudence (April 2014 – April 2018) Taxation

A compilation continued by the Philippine Association of Law


Schools (PALS) & Ateneo de Davao for the 2018 Bar Operations

GENERAL PRINCIPLES OF TAXATION

Ambiguities in tax laws are strictly construed against the government. In answering the question of
who is subject to tax statues, it is basic that in case of doubt, such statues are to be construed
strongly against the government and in favor of the subjects or citizens because burdens are not to
be imposed nor presumed to be imposed beyond what statues expressly and clearly import. As
burdens, taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax laws.
For this Court to subject the entire amount of MEDICARD’s gross receipt without exclusion, the
authority should have been reasonably founded from the language of the statute. That language is
wanting in this case. The CIR’s interpretation of gross receipts in the present case is patently
erroneous. (MEDICARD PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE; G.R.
NO. 222743; APRIL 5, 2017; J. REYES)

R.A. 9504 (TAX EXEMPTION OF MINIMUM WAGE EARNERS AND INCREASING


PERSONAL/ADDITIONAL EXEMPTIONS / CHANGE IN Optional Standard Deduction) must be
liberally construed. We are mindful of the strict construction rule when it comes to the
interpretation of tax exemption laws. The canon, however, is tempered by several exceptions, one
of which is when the taxpayer falls within the purview of the exemption by clear legislative intent.
In this situation, the rule of liberal interpretation applies in favor of the grantee and against the
government. In this case, there is a clear legislative intent to exempt the minimum wage received by
an MWE who earns additional income on top of the minimum wage. As previously discussed, this
intent can be seen from both the law and the deliberations. Accordingly, we see no reason why we
should not liberally interpret R.A. 9504 in favor of the taxpayers. (JAIME N. SORIANO VS.
SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450,
JANUARY 24, 2017, C.J. SERENO)

It must be borne in mind that tax exemptions, which respondents obviously want or desire to avail
of in this case, are strictissimi juris. Indeed, taxation is the rule and tax exemption the exception.
Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of
language too plain to be misunderstood, We hold that in this case respondents have utterly failed to
make out even a prima facie for tax exemption in their favor. (BUREAU OF INTERNAL REVENUE
VS. MANILA HOME TEXTILE, INC., GR 203057, JUNE 6, 2016, J. DEL CASTILLO)

In matters of taxation, the government cannot be estopped by the mistakes, errors or omissions of
its agents for upon it depends the ability of the government to serve the people for whose benefit
taxes are collected. (COMMISSIONER OF INTERNAL REVENUE VS. NIPPON EXPRESS (PHILS.)
CORPORATION, G.R. NO. 212920, SEPTEMBER 16, 2015)

It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax
exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain
terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved
against the taxpayer. MERALCO has failed to present herein any express grant of exemption from
real property tax of its transformers, electric posts, transmission lines, insulators, and electric
meters that is valid and binding even under the Local Government Code. (MANILA ELECTRIC
COMPANY VS. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY G.R. NO. 166102,
AUGUST 5, 2015)

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San Roque, held that BIR Ruling No. DA-489-03 was a general interpretative rule because it was a
response to a query made, not by a particular taxpayer, but by a government agency tasked with
processing tax refunds and credits. Thus, it applies to all taxpayers alike, and not only to one
particular taxpayer. (COMMISSIONER OF INTERNAL REVENUE VS. AIR LIQUIDE PHILIPPINES,
INC., G.R. NO. 210646, JULY 29, 2015)

The claim of a taxpayer under a tax amnesty shall be allowed when the liability involves the
deficiency in payment of income tax. However, it must be disallowed when the taxpayer is assessed
on his capacity as a withholding tax agent because the person who earned the taxable income was
another person other than the withholding agent. (LG ELECTRONICS PHILIPPINES, INC. VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 165451, DECEMBER 03, 2014, J. LEONEN)
The Court has consolidated these 3 petitions as they involve the same parties, similar facts and
common questions of law. This is not the first time that Fort Bonifacio Development Corporation
(FBDC) has come to this Court about these issues against the very same respondents (CIR), and the
Court En Banc has resolved them in two separate, recent cases that are applicable here. It is of
course axiomatic that a rule or regulation must bear upon, and be consistent with, the provisions of
the enabling statute if such rule or regulation is to be valid. In case of conflict between a statute and
an administrative order, the former must prevail. To be valid, an administrative rule or regulation
must conform, not contradict, the provisions of the enabling law. An implementing rule or
regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule
that is not consistent with the statute itself is null and void. To recapitulate, RR 7-95, insofar as it
restricts the definition of "goods" as basis of transitional input tax credit under Section 105 is a
nullity. (FORT BONIFACIO DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL
REVENUE AND REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG AND
PATEROS, BUREAU OF INTERNAL REVENUE, G.R. NO. 175707, NOVEMBER 19, 2014, J.
LEONARDO-DE CASTRO)

For Double taxation to take place, the two taxes must be imposed on the same subject matter, for
the same purpose, by the same taxing authority, within the same jurisdiction, during the same
taxing period; and the taxes must be of the same kind or character. Because Section 21 of the
Revenue Code of Manila imposed the tax on a person who sold goods and services in the course of
trade or business based on a certain percentage of his gross sales or receipts in the preceding
calendar year, while Section 15 and Section 17 likewise imposed the tax on a person who sold
goods and services in the course of trade or business but only identified such person with
particularity, namely, the wholesaler, distributor or dealer (Section 15), and the retailer (Section
17), all the taxes – being imposed on the privilege of doing business in the City of Manila in order to
make the taxpayers contribute to the city’s revenues – were imposed on the same subject matter
and for the same purpose. (NURSERY CARE CORPORATION; SHOEMART, INC.; STAR APPLIANCE
CENTER, INC.; H&B, INC.; SUPPLIES STATION, INC.; and HARDWARE WORKSHOP, INC. vs.
ANTHONY ACEVEDO, in his CAPACITY AS THE TREASURER OF MANILA; AND THE CITY OF
MANILA, G.R. NO. 180651, JULY 30, 2014, J. BERSAMIN)

"Time and again, the Court has held that it is a necessary judicial practice that when a court has laid
down a principle of law as applicable to a certain facts, it will adhere to that principle and apply it to
all future cases in which the facts are substantially the same. Stare decisis et non quieta movere,
stand by the decisions and disturb not what is settled. Stare decisis simply means that for the sake
of certainty, a conclusion reached in one case should be applied to those that follow if the facts are

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substantially the same, even though the parties may be different. It proceeds from the first principle
of justice that, absent any powerful countervailing considerations, like cases ought to be decided
alike. Thus, where the same questions relating to the same event have been put forward by the
parties similarly situated as in a previous case litigated and decided by a competent court, the rule
of stare decisis is a bar to any attempt to relitigate the same issue." The Court has pronounced in
Republic of the Philippines v. Sunlife Assurance Company of Canada " that under the Tax Code
although respondent is a cooperative, registration with the CDA is not necessary in order for it to be
exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and
documentary stamp taxes on policies of insurance or annuities it grants, under Section 199." The
CTA observed that the factual circumstances obtaining in Sunlife and the present case are
substantially the same. Hence, the CTA based its assailed decision on the doctrine enunciated by the
Court in the said case. (COMMISSIONER OF INTERNAL REVENUE VS. THE INSULAR LIFE
ASSURANCE CO. LTD., G.R. NO. 197192, JUNE 4, 2014, J. REYES)

An opportunity must be given the internal revenue branch of the government to investigate and
confirm the veracity of the claims of the taxpayer. The absolute freedom that petitioner seeks to
automatically credit tax payments against tax liabilities for a succeeding taxable year, can easily
give rise to confusion and abuse, depriving the government of authority and control over the
manner by which the taxpayers credit and offset their tax liabilities, not to mention the resultant
loss of revenue to the government under such a scheme. (COCA-COLA BOTTLERS PHILIPPINES,
INC., vs. CITY OF MANILA; LIBERTY M. TOLEDO, in her capacity as Officer-in-Charge (OIC),
Treasurer of the CITY OF MANILA; JOSEPH SANTIAGO, IN HIS CAPACITY AS OIC, CHIEF
LICENSE DIVISION OF THE CITY OF MANILA; REYNALDO MONTALBO, IN HIS CAPACITY AS
CITY AUDITOR OF THE CITY OF MANILA, G.R. NO. 197561, APRIL 7, 2014, J. PERALTA)

Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the
identified special projects, which includes “cell sites” or telecommunications towers, the fees
imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily revenue-raising.
While the fees may contribute to the revenues of the Municipality, this effect is merely incidental.
Thus, the fees imposed in Ordinance No. 18 are not taxes. (SMART COMMUNICATIONS INC., vs.
MUNICIPALITY OF MALVAR, BATANGAS, G.R. No. 204429, FEBRUARY 18, 2014, J. CARPIO)

POWERS OF THE BIR

As regards private entities and the BIR, the power to decide disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising
under the NIRC or other laws administered by the BIR is vested in the CIR subject to the exclusive
appellate jurisdiction of the CTA, in accordance with Section 4 of the NIRC; but where the disputing
parties are all public entities (covers disputes between the BIR and other government entities), the
case shall be governed by PD 242.

In a dispute between PSALM and NPC, which are both wholly government- owned corporations,
and the BIR, a government office, over the imposition of VAT on the sale of the two power plants,
there is no question that original jurisdiction is with the CIR, who issues the preliminary and the
final tax assessments. If the government entity disputes the tax assessment, the dispute is already
between the BIR (represented by the CIR) and another government entity, in this case, the

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petitioner PSALM. (POWER SECTOR ASSET AND LIABILITIES MANAGEMENT CORPORATION


VS. COMMISSIONER OF INTERNAL REVENUE; G.R. 198146; AUGUST 8, 2017; J. CARPIO)

INCOME TAXATION

Any of the accounting period and methods discussed in Chapter VIII, Title II of the NIRC may be
employed by any taxpayers so long as it reflects its income properly and such methods is used
regularly. Section 43 of the NIRC authorizes the CIR to allow the use of a method of
accounting—even when not expressly mentioned in the NIRC—that in its opinion would clearly
reflect the income of the taxpayer. An example of such method not expressly mentioned in the
NIRC, but duly approved by the CIR, is the “crop method of accounting,” authorized under RAM No.
2-95. This method recognizes that the harvesting and selling of crops do not fall within the same
year that they are planted or grown. The rule enjoins the recognition of the expense (or the
deduction of the cost) of crop production in the year that the crops are sold (when income is
realized). It is wholly justifiable for Lancaster, as a business engaged in the production and
marketing of tobacco, to adopt the crop method of accounting. (COMMISSIONER OF INTERNAL
REVENUE VS. LANCASTER PHILIPPINES, INC.; G.R. NO. 183408; JULY 12, 2017; J. MARTIRES)

In essence, the matching concept, which is one of the generally accepted accounting principles,
directs that the expenses are to be reported in the same period that related revenues are earned. It
attempts to match revenue with expenses that helped earn it. A reading of RAM No. 2-95, which
authorizes the use of “crop method of accounting,” clearly evinces that it conforms with the concept
that the expenses paid or incurred be deducted in the year in which gross income from the sale of
the crops is realized. Put in another way, the expenses are matched with the related incomes which
are eventually earned. Nothing from the provision is strictly required that for the expense to be
deductible, the income to which such expense is related to be realized in the same year that it is
paid or incurred. (COMMISSIONER OF INTERNAL REVENUE VS. LANCASTER PHILIPPINES, INC.;
G.R. NO. 183408; JULY 12, 2017; J. MARTIRES)

Thus, this Court held in the above-cited PAL consolidated cases: However, upon the amendment of
the 1997 NIRC, Section 22 of R.A. 9337 abolished the franchise tax and subjected PAL and similar
entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from
taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays
corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other
option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other
taxes, except VAT, and subject to certain conditions provided in its charter. It bears to note that the
repealing clause of RA 9337 enumerated the laws or provisions of laws which it repeals. However,
there is nothing in the repealing clause, nor in any other provisions of the said law, which makes
specific mention of PD 1590 as one of the acts intended to be repealed. (COMMISSIONER OF
INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R.
NO. 215705-07 FEBRUARY 22, 2017, J. PERALTA)

A careful review of the pleadings reveals that there is no countervailing consideration for the Court
to revisit its aforequoted ruling in G.R. Nos. 195909 and 195960 (Commissioner of Internal
Revenue v. St. Luke's Medical Center, Inc.). Thus, under the doctrine of stare decisis, which states
that "[o]nce a case has been decided in one way, any other case involving exactly the same point at
issue x x x should be decided in the same manner," the Court finds that SLMC is subject to l0%

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income tax insofar as its revenues from paying patients are concerned. To be clear, for an
institution to be completely exempt from income tax, Section 30(E) and (G) of the 1997 NIRC
requires said institution to operate exclusively for charitable or social welfare purpose. But in case
an exempt institution under Section 30(E) or (G) of the said Code earns income from its for-profit
activities, it will not lose its tax exemption. However, its income from for-profit activities will be
subject to income tax at the preferential 10% rate pursuant to Section 27(B) thereof.
(COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO.
203514, FEBRUARY 13, 2017, J. DEL CASTILLO)

As to whether SLMC is liable for compromise penalty under Section 248(A) of the 1997 NIRC for its
alleged failure to file its quarterly income tax returns, this has also been resolved in G.R Nos.
195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.), where
the imposition of surcharges and interest under Sections 248 and 249 of the 1997 NIRC were
deleted on the basis of good faith and honest belief on the part of SLMC that it is not subject to tax.
Thus, following the ruling of the Court in the said case, SLMC is not liable to pay compromise
penalty under Section 248(A) of the 1997 NIRC. (COMMISSIONER OF INTERNAL REVENUE VS. ST.
LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO)

While the Court agrees with the CIR that the payment confirmation from the BIR presented by
SLMC is not a competent proof of payment as it does not indicate the specific taxable period the said
payment covers, the Court finds that the Certification issued by the Large Taxpayers Service of the
BIR dated May 27, 2013, and the letter from the BIR dated November 26, 2013 with attached
Certification of Payment and application for abatement are sufficient to prove payment especially
since CIR never questioned the authenticity of these documents. In fact, in a related case, G.R. No.
200688, entitled Commissioner of Internal Revenue v. St. Luke's Medical Center, lnc., the Court
dismissed the petition based on a letter issued by CIR confirming SLMC's payment of taxes, which is
the same letter submitted by SLMC in the instant case. (COMMISSIONER OF INTERNAL REVENUE
VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL
CASTILLO)

In sum, R.A. 9504, like R.A. 7167 in Umali, was a piece of social legislation clearly intended to afford
immediate tax relief to individual taxpayers, particularly low-income compensation earners.
Indeed, if R.A. 9504 was to take effect beginning taxable year 2009 or half of the year 2008 only,
then the intent of Congress to address the increase in the cost of living in 2008 would have been
negated. Therefore, following Umali, the test is whether the new set of personal and additional
exemptions was available at the time of the filing of the income tax return. In other words, while the
status of the individual taxpayers is determined at the close of the taxable year, their personal and
additional exemptions - and consequently the computation of their taxable income - are reckoned
when the tax becomes due, and not while the income is being earned or received. The NIRC is clear
on these matters. The taxable income of an individual taxpayer shall be computed on the basis of
the calendar year. The taxpayer is required to file an income tax return on the 15th of April of each
year covering income of the preceding taxable year. The tax due thereon shall be paid at the time
the return is filed. It stands to reason that the new set of personal and additional exemptions,
adjusted as a form of social legislation to address the prevailing poverty threshold, should be given
effect at the most opportune time as the Court ruled in Umali. (JAIME N. SORIANO VS. SECRETARY
OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY
24, 2017, C.J. SERENO.)

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A clarification is proper at this point. Our ruling that the MWE exemption is available for the entire
taxable year 2008 is premised on the fact of one's status as an MWE; that is, whether the employee
during the entire year of 2008 was an MWE as defined by R.A. 9504. When the wages received
exceed the minimum wage anytime during the taxable year, the employee necessarily loses the
MWE qualification. Therefore, wages become taxable as the employee ceased to be an MWE. But the
exemption of the employee from tax on the income previously earned as an MWE remains. As the
exemption is based on the employee's status as an MWE, the operative phrase is when the
employee ceases to be an MWE. Even beyond 2008, it is therefore possible for one employee to be
exempt early in the year for being an MWE for that period, and subsequently become taxable in the
middle of the same year with respect to the compensation income, as when the pay is increased
higher than the minimum wage. The improvement of one's lot, however, cannot justly operate to
make the employee liable for tax on the income earned as an MWE. Additionally, on the question of
whether one who ceases to be an MWE may still be entitled to the personal and additional
exemptions, the answer must necessarily be yes. The MWE exemption is separate and distinct from
the personal and additional exemptions. One's status as an MWE does not preclude enjoyment of
the personal and additional exemptions. Thus, when one is an MWE during a part of the year and
later earns higher than the minimum wage and becomes a non-MWE, only earnings for that period
when one is a non-MWE is subject to tax. It also necessarily follows that such an employee is
entitled to the personal and additional exemptions that any individual taxpayer with taxable gross
income is entitled. A different interpretation will actually render the MWE exemption a totally
oppressive legislation. It would be a total absurdity to disqualify an MWE from enjoying as much as
P150,000 in personal and additional exemptions just because sometime in the year, he or she
ceases to be an MWE by earning a little more in wages. Laws cannot be interpreted with such
absurd and unjust outcome. It is axiomatic that the legislature is assumed to intend right and equity
in the laws it passes. Critical, therefore, is how an employee ceases to become an MWE and thus
ceases to be entitled to an MWE's exemption. In sum, the proper interpretation of R.A. 9504 is that
it imposes taxes only on the taxable income received in excess of the minimum wage, but the MWEs
will not lose their exemption as such. Workers who receive the statutory minimum wage their basic
pay remain MWEs. The receipt of any other income during the year does not disqualify them as
MWEs. They remain MWEs, entitled to exemption as such, but the taxable income they receive
other than as MWEs may be subjected to appropriate taxes. (JAIME N. SORIANO VS. SECRETARY
OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY
24, 2017, C.J. SERENO)

Section 1 of R.A. No. 9337, amending Section 27(c) of R.A. No. 8424, by excluding petitioner from
the enumeration of GOCCs exempted from corporate income tax, is valid and constitutional. In
addition, we hold that: 1)Petitioner’s tax privilege of paying five percent (5%) franchise tax in lieu
of all other taxes with respect to its income from gaming operations, pursuant to P.D. 1869, as
amended, is not repealed or amended by Section 1(c) of R.A. No. 9337; 2)Petitioner’s income from
gaming operations is subject to the five percent (5%) franchise tax only; and 3)Petitioner’s income
from other related services is subject to corporate income tax only. (PHILIPPINE AMUSEMENT
AND GAMING CORPORATION VS. THE BUREAU OF INTERNAL REVENUE, G.R. NO. 215427,
DECEMBER 10, 2014, J. PERALTA)

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DOCUMENTARY STAMP TAX/ CAPITAL GAINS TAX

The maturity of PNB's interbank call loans was irrelevant in determining its DST liability for taxable
year 1997, relation to which the applicable law was the National Internal Revenue Code of 1977
(1977 NIRC), as amended by Presidential Decree No. 195916 and Republic Act No. 7660. Section
180 of the 1977 NIRC provides that the DST of P0.30 on each P200.00, or fractional part thereof,
shall only be imposed on the face value of: (1) loan agreements; (2) bills of exchange; (3) drafts; (4)
instruments and securities issued by the Government or any of its instrumentalities; (5) certificates
of deposits drawing interest; (6) orders for the payment of any sum of money otherwise than at
sight or on demand; and (7) promissory notes, whether negotiable or non-negotiable, except bank
notes issued for circulation, and on each renewal of any such note. Interbank call loans, although
not considered as deposit substitutes, are not expressly included among the taxable instruments
listed in Section 180; hence, they may not be held as taxable. The five-day maturity of interbank call
loans came to be introduced only by Section 22(y) of the National Internal Revenue Code of 1997
(1997 NIRC). The provisions of the 1997 NIRC cannot be given retrospective effect to the prejudice
of PNB. This is because tax laws are prospective in application, unless their retroactive application
is expressly provided. (COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE NATIONAL
BANK, G.R. No. 195147, JULY 11, 2016, J. BERSAMIN)

The payment of the DST and the filing of the DST Declaration Return upon loading/reloading of the
DS metering machine must not be considered as the "date of payment" when the prescriptive
period to file a claim for a refund/credit must commence. For DS metering machine users, the
payment of the DST upon loading/reloading is merely an advance payment for future application.
The liability for the payment of the DST falls due only upon the occurrence of a taxable transaction.
Therefore, it is only then that payment may be considered for the purpose of filing a claim for a
refund or tax credit. Since actual payment was already made upon loading/reloading of the DS
metering machine and the filing of the DST Declaration Return, the date of imprinting the
documentary stamp on the taxable document must be considered as the date of payment
contemplated under Section 229 of the NIRC. (PHILIPPINE BANK OF COMMUNICATIONS VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 194065, JUNE 20, 2016, C.J. SERENO)

A perusal of the subject provision would clearly show it pertains only to sale transactions where
real property is conveyed to a purchaser for a consideration. The phrase “granted, assigned,
transferred or otherwise conveyed” is qualified by the word “sold” which means that documentary
stamp tax under Section 196 is imposed on the transfer of realty by way of sale and does not apply
to all conveyances of real property. Indeed, as correctly noted by the respondent, the fact that
Section 196 refers to words “sold”, “purchaser” and “consideration” undoubtedly leads to the
conclusion that only sales of real property are contemplated therein. (COMMISSIONER OF
INTERNAL REVENUE VS. LA TONDENA DISTILLERS, INC. (LTDI) [NOW GINEBRA SAN MIGUEL],
G.R. NO. 175188, JULY 15, 2015)

Capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder
the tax. As a general rule, therefore, any of the parties to a transaction shall be liable for the full
amount of the documentary stamp tax due, unless they agree among themselves on who shall be
liable for the same. In this case, with respect to the capital gains tax, we find merit in petitioner’s
posture that pursuant to Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code
(NIRC), capital gains tax due on the sale of real property is a liability for the account of the seller. It

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has been held that since capital gains is a tax on passive income, it is the seller, not the buyer, who
generally would shoulder the tax. Also, there is no agreement as to the party liable for the
documentary stamp tax due on the sale of the land to be expropriated. But while DPWH rejects any
liability for the same, this Court must take note of petitioner’s Citizen’s Charter, which functions as
a guide for the procedure to be taken by the DPWH in acquiring real property through
expropriation under RA 8974. The Citizen’s Charter, issued by DPWH itself on December 4, 2013,
explicitly provides that the documentary stamp tax, transfer tax, and registration fee due on the
transfer of the title of land in the name of the Republic shall be shouldered by the implementing
agency of the DPWH, while the capital gains tax shall be paid by the affected property owner.
(REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS
AND HIGHWAYS VS. ARLENE R. SORIANO, G.R. NO. 211666, FEBRUARY 25, 2015, J. PERALTA)

It should be noted that a DST is in the nature of an excise tax because it is imposed upon the
privilege, opportunity or facility offered at exchanges for the transaction of the business. DST is a
tax on documents, instruments, loan agreements, and papers evidencing the acceptance,
assignment, or transfer of an obligation, right or property incident thereto. DST is thus imposed on
the exercise of these privileges through the execution of specific instruments, independently of the
legal status of the transactions giving rise thereto. The transfer of real properties from SPPC to
PSPC is not subject to DST considering that the same was not conveyed to or vested in PSPC by
means of any specific deed, instrument or writing. There was no deed of assignment and transfer
separately executed by the parties for the conveyance of the real properties. The conveyance of real
properties not being embodied in a separate instrument but is incorporated in the merger plan,
thus, PSPC is not liable to pay DST. Notably, R.A. No. 9243, entitled “An Act Rationalizing the
Provisions of the Documentary Stamp Tax of the National Internal Revenue Code of 1997” was
enacted and took effect on April 27, 2004, which exempts the transfer of real property of a
corporation, which is a party to the merger or consolidation, to another corporation, which is also a
party to the merger or consolidation, from the payment of DST. (COMMISSIONER OF INTERNAL
REVENUE VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 192398, SEPTEMBER
29, 2014, J. VILLARAMA, JR.)

HSBC issued SWIFT messages to its clients containing instructions about their accounts. HSBC paid
DST on the said messages. However, later on, HSBC filed for tax refund for the DST it paid. CIR
denied their claim. On review with the Supreme Court, it held that an electronic message containing
instructions to debit their respective local or foreign currency accounts in the Philippines and pay a
certain named recipient also residing in the Philippines is not transaction contemplated under
Section 181 of the Tax Code. They are also not bills of exchange due to their non-negotiability.
Hence, they are not subject to DST. (THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED-PHILIPPINE BRANCHES VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO.
166018 & 167728, JUNE 4, 2014, J. LEONARDO-DE CASTRO)

FRANCHISE TAX

The power to impose a tax, fee, or charge or to generate revenue shall be exercised by the
Sanggunian of the local government unit concerned through an appropriate ordinance which must
pass muster the test of constitutionality and the test of consistency with the prevailing laws. Under
Section 137 and Section 151 of the LGC, the power to impose franchise tax belongs to the province
and cities. On the other hand, the municipalities are prohibited from levying the taxes specifically

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allocated to provinces as provided in Section 142 of the LGC. Thus, Ordinance No. 25 imposing
franchise tax on all business venture operations carried out through a franchise within the
municipality, is void. At the time the ordinance in question was enacted in 1992, the local
government of Pasig, then a municipality, had no authority to levy franchise tax. The conversion of
the municipality into a city does not remove the original infirmity of the subject ordinance. An
assessment and collection pursuant to the said ordinance is, perforce, legally infirm. (CITY OF
PASIG & SALUMBRE VS. MERALCO; G.R. NO. 181710; MARCH 7, 2018; J. MARTIRES)

The amendment of the 1997 NIRC, in connection with Section 22 of R.A. 9337 abolished the
franchise tax on domestic airlines and subjected PAL and similar entities to corporate income tax
and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties,
registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted
in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic
corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and
subject to certain conditions provided in its charter. In this case, the CTA found that PAL had paid
basic corporate income tax for fiscal year ending 31 March 2006. Consequently, PAL may now claim
exemption from taxes, duties, charges, royalties, or fees due on all importations of its commissary
and catering supplies, provided it shows that 1) such articles or supplies or materials are imported
for use in its transport and non-transport operations and other activities incidental thereto; and 2)
they are not locally available in reasonable quantity, quality, or price. (REPUBLIC OF THE
PHILIPPINES, REP. BY THE COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC.
(PAL) / COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE AIRLINES, INC. (PAL), G.R.
NO. 209353-54/G.R. NOS. 211733-34, JULY 6, 2015)

A corporation that has been ordered to pay franchise tax delinquency but which facilities, including
its nationwide franchise, had been transferred to the National Transmission Corporation
(TRANSCO) by operation of law during the time of the alleged delinquency, cannot be ordered to
pay as it is not the proper party subject to the local franchise tax, the transferee being the one liable.
(NATIONAL POWER CORPORATION VS. PROVINCIAL GOVERNMENT OF BATAAN,
SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL
CAPACITY AS PROVINCIAL TREASURER OF BATAAN) AND THE REGISTER OF DEEDS OF THE
PROVINCE OF BATAAN, G.R. NO. 180654, APRIL 21, 2014, J. ABAD)

EXCISE TAX

Section 145(C) of the NIRC is clear that the excise tax on cigarettes packed by machine is imposed
per pack. “Per pack” was not given a clear definition by the NIRC. However, a “pack” would
normally refer to a number of individual components packaged as a unit. Under the same provision,
cigarette manufacturers are permitted to bundle cigarettes packed by machine in the maximum
number of 20 sticks; and aside from 20’s, the law also allows packaging combination of not more
than 20’s—it can be 4 pouches of 5 cigarette sticks in a pack (4x5’s), 2 pouches of 10 cigarettes
(2x10’s), etc. In RA 10351, the lawmakers intended to impose the excise tax on every pack of
cigarettes that come in 20 sticks. Individual pouches or packaging combinations of 5’s and 10’s for
retail purposes are allowed and will be subjected to the same excise tax rate as long as they are
bundled together by not more than 20 sticks. By issuing Section 11 of RR 17-2012 and Annex “D-1”
on Cigarettes Packed by Machine of RMC 90-2012—which imposes an excise tax on each individual
package of cigarettes packed in 5 sticks, 10 sticks, and other packaging combinations below 20

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sticks—the BIR went beyond the express provisions of RA 10351. It is a well-settled principle that a
revenue regulation cannot amend the law it seeks to implement. Thus, Section 11 of RR 17-2012
and Annex “D-1” on Cigarettes Packed by Machine of RMC 90-2012 are null and void. (SECRETARY
OF FINANCE CESAR V. PURISIMA AND COMMISSIONER OF INTERNAL REVENUE KIM S.
JACINTO-HENARES VS. PHILIPPINE TOBACCO INSTITUTE, INC.; G.R. NO. 210251; APRIL 17,
2017; J. CARPIO)

Lastly, as in the abovecited cases, petitioners in the present petition again raise the issue regarding
PAL's alleged failure to comply with the conditions set by Section 13 of PD 1590 for its imported
tobacco and alcohol products to be exempt from excise tax. These conditions are: (1) such supplies
are imported for the use of the franchisee in its transport/non-transport operations and other
incidental activities; and (2) they are not locally available in reasonable quantity, quality and price.
However, as this Court has previously held, the matter as to PAL's supposed noncompliance with
the conditions set by Section 13 of P.D. 1590 for its imported supplies to be exempt from excise tax,
are factual determinations that are best left to the CTA, which found that PAL had, in fact, complied
with the above conditions. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF
CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NO. 215705-07 FEBRUARY 22, 2017, J.
PERALTA)

Whether the Bureau of Internal Revenue may issue notices of discrepancy that effectively changes
"San Mig Light"'s classification from new brand to variant - the issues involve an application of
Section 143 of the 1997 National Internal Revenue Code (Tax Code), as amended, on the definition
of a variant, which is subject to a higher excise tax rate than a new brand. This case also applies the
requirement in Rep. Act No. 9334 that reclassification of certain fermented liquor products
introduced between January 1, 1997 and December 31, 2003 can only be done by an act of
Congress. Excise taxes are imposed on the production, sale, or consumption of specific goods.
Generally, excise taxes on domestic products are paid by the manufacturer or producer before
removal of those products from the place of production. The excise tax based on weight, volume
capacity, or any other physical unit of measurement is referred to as "specific tax." If based on
selling price or other specified value, it is referred to as "ad valorem" tax. The excise tax on beer is a
specific tax based on volume, or on a per liter basis. Before its amendment, Section 143 provided for
three (3) layers of tax rates, depending on the net retail price per liter. How a new beer product is
taxed depends on its classification, i.e. whether it is a variant of an existing brand or a new brand.
Variants of a brand that were introduced in the market after January 1, 1997 are taxed under the
highest tax classification of any variant of the brand. On the other hand, new brands are Initially
classified and taxed according to their suggested net retail price, until a survey is conducted by the
Bureau of Internal Revenue to determine their current net retail price in accordance with the
specified procedure. Parenthetically, the Bureau of Internal Revenue's actions reflect its admission
and confirmation that "San Mig Light" is a new brand. (COMMISSIONER OF INTERNAL REVENUE
VS. SAN MIGUEL CORPORATION, G.R. NOS. 205045 & 205723, JANUARY 25, 2017, J. LEONEN)

Any reclassification of fermented liquor products should be by act of Congress. Section 143 of the
Tax Code, as amended by Rep. Act No. 9334, provides for this classification freeze referred to by the
parties. In any event, petitioner's letters and Notices of Discrepancy, which effectively changed San
Mig Light's brand's classification from "new brand to variant of existing brand," necessarily changes
San Mig Light's tax bracket. Based on the legislative intent behind the classification freeze
provision, petitioner has no power to do this. A reclassification of a fermented liquor brand

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introduced between January 1, 1997 and December 31, 2003, such as "San Mig Light," must be by
act of Congress. There was none in this case. A variant under the Tax Code has a technical meaning.
It is determined by the brand (name) or logo of the beer product. The variant contemplated under
the tax Code has a technical meaning. A variant is determined by the brand (name) of the beer
product, whether it was formed by prefixing or suffixing a modifier to the root name of the alleged
parent brand, or whether it carries the same logo or design. The purpose behind the definition was
to properly tax brands that were presumed to be riding on the popularity of previously registered
brands by being marketed under an almost identical name with a prefix, suffix, or a variant. It seeks
to address price differentials employed by a manufacturer on similar products differentiated only
in brand or design. Specifically, the provision was meant to obviate any tax avoidance by
manufacturing firms from the sale of lower priced variants of its existing beer brands, thus, falling
in the lower tax bracket with lower excise tax rates. To favor government, a variant of a brand is
taxed according to the highest rate of tax for that particular brand. "San Mig Light" and "Pale Pilsen"
do not share a root word. Neither is there an existing brand in the list (Annexes C-1 and C-2 of the
Tax Code) called "San Mig" to conclude that "Light" is a suffix rendering "San Mig Light" as its
"variant." As discussed in the Court of Tax Appeals Decision, "San Mig Light" should be considered
as one brand name. Respondent's statements describing San Mig Light as a low-calorie variant is
not conclusive of its classification as a variant for excise tax purposes. Burdens are not to be
imposed nor presumed to be imposed beyond the plain and express terms of the law. "The general
rule of requiring adherence to the letter in construing statutes applies with peculiar strictness to
tax laws and the provisions of a taxing act are not to be extended by implication." Furthermore,
respondent's payment of the higher taxes starting January 30, 2004 after deficiency assessments
were made cannot be considered as an admission that its San Mig Light is a variant. Section
130(A)(2) of the Tax Code requires payment of excise tax "before removal of domestic products
from place of production." These payments were made in protest as respondent subsequently filed
refund claims. Because the Bureau of Internal Revenue granted respondent's request in its October
27, 1999 letter and confirmed this grant in its subsequent letters, respondent cannot be faulted for
relying on these actions by the Bureau of Internal Revenue. The authority of the Bureau of Internal
Revenue to overrule, correct, or reverse the mistakes or errors of its agents is conceded. However,
this authority must be exercised reasonably, i.e., only when the action or ruling is patently
erroneous or patently contrary to law. For the presumption lies in the regularity of performance of
official duty, and reasonable care has been exercised by the revenue officer or agent in evaluating
the facts before him or her prior to rendering his or her decision or ruling—in this case, prior to the
approval of the registration of San Mig Light as a new brand for excise tax purposes. A contrary view
will create disorder and confusion in the operations of the Bureau of Internal Revenue and open the
administrative agency to inconsistencies in the administration and enforcement of tax
laws. (COMMISSIONER OF INTERNAL REVENUE VS. SAN MIGUEL CORPORATION, G.R. NOS.
205045 & 205723, JANUARY 25, 2017, J. LEONEN)

Excise tax on petroleum products is essentially a tax on property, the direct liability for which
pertains to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by
the statutory taxpayer on petroleum products sold to any of the entities or agencies named in
Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal
or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC.
This is because the exemption granted under Section 135 of the NIRC must be construed in favor of
the property itself, that is, the petroleum products. (CHEVRON PHILIPPINES, INC. VS.
COMMISSIONER OF INTERNAL REVENUE G.R. NO. 210836. SEPTEMBER 1, 2015)

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Stemmed leaf tobacco is subject to the specific tax under Section 141(b). It is a partially prepared
tobacco. The removal of the stem or midrib from the leaf tobacco makes the resulting stemmed leaf
tobacco a prepared or partially prepared tobacco. Since the Tax Code contained no definition of
“partially prepared tobacco,” then the term should be construed in its general, ordinary, and
comprehensive sense. However, importation of stemmed leaf tobacco is not included in the
exemption under Section 137. The transaction contemplated in Section 137 does not include
importation of stemmed leaf tobacco for the reason that the law uses the word “sold” to describe
the transaction of transferring the raw materials from one manufacturer to another. Finally, excise
taxes are essentially taxes on property because they are levied on certain specified goods or articles
manufactured or produced in the Philippines for domestic sale or consumption or for any other
disposition, and on goods imported. In this case, there is no double taxation in the prohibited sense
despite the fact that they are paying the specific tax on the raw material and on the finished product
in which the raw material was a part, because the specific tax is imposed by explicit provisions of
the Tax Code on two different articles or products: (1) on the stemmed leaf tobacco; and (2) on
cigar or cigarette. (LA SUERTE CIGAR & CIGARETTE FACTORY VS. COURT OF APPEALS AND
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 125346, G.R. NOS. 136328-29, G.R. NO.
144942, G.R. NO. 148605, G.R. NO. 158197, G.R. NO. 165499, NOVEMBER 11, 2014, J. LEONEN)

Petitioner filed the instant petition assailing the decision of the CTA finding PAL exempt from
payment of excise tax. Affirming the decision of the CTA the SC ruled that PD 1590 has not been
revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege of PAL provided
in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of
RA 9334. Such being the case, PAL is indeed exempt from payment of excise tax. (COMMISSIONER
OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC.,
G.R. NOS. 212536-37, AUGUST 27, 2014, J. VELASCO, JR.)

FINAL WITHHOLDING TAX

Section 2.57(A) of RR No. 02-98 explains the characterization of an FWT: Under the FWT system,
the amount of income tax withheld by the withholding agent is constituted as a full and final
payment of the income tax due from the payee on the said income. The liability for payment of the
tax rests primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the
tax or in case of under withholding, the deficiency tax shall be collected from the payor/withholding
agent. The payee is not required to file an income tax return for the particular income. The finality
of the withholding tax is limited only to the payee’s income tax liability on the particular income. It
does not extend to the payee’s other tax liability on said income, such as when the said income is
further subject to a percentage tax. For example, if a bank receives income subject to FWT, the same
shall be subject to a percentage tax. From the foregoing, it can be gleaned that FWT are considered
as full and final payment of the income tax due, and thus, are not subject to any adjustments.
(METROPOLITAN BANK & TRUST COMPANY VS. THE COMMISSIONER OF INTERNAL
REVENUE; G.R. NO. 182582; APRIL 17, 2017; J. PERLAS-BERNABE)

EBCC's liability for interest payment became due and demandable starting June 1, 2002 as
expressly stated in the agreement. Considering that under RR No. 02-98, the obligation of EBCC to
deduct or withhold tax arises at the time an income is paid or payable, whichever comes first, and

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considering further that under the said RR, the term "payable" refers to the date the obligation
becomes due, demandable or legally enforceable. Thus, no error is found on the CTA En Banc’s
ruling stating that EBCC had no obligation to withhold any taxes on the interest payment for the
year 2000 as the obligation to withhold only commenced on June 1, 2002, and thus cancelling the
assessment for deficiency FWT on interest payments. (EDISON (BATAAN) COGENERATION CORP.
VS. CIR/REPUBLIC OF THE PHILIPPINES REPRESENTED BY THE CIR VS. EDISON (BATAAN)
COGENERATION CORP.; G.R. NO. 201665/201668; August 30, 2017; J. DEL CASTILLO)

PAL is entitled to a refund because it is not responsible for the remittance of tax to the Bureau of
Internal Revenue. When a particular income is subject to a final withholding tax, it means that a
withholding agent will withhold the tax due from the income earned to remit it to the BIR. The
withholding agent is the payor liable for the tax, and any deficiency in its amount shall be collected
from it. Should the BIR find that the taxes were not properly remitted, its action is against the
withholding agent, and not against the taxpayer. In the case at bar, PAL is the income earner and
the payee of the final withholding tax, and the Agent Banks are the withholding agents who are the
payors responsible for the deduction and remittance of the tax. The failure of the Agent Banks to
remit the amounts does not affect and should not prejudice PAL. The BIR’s cause of action is against
the Agent Banks. Thus, PAL is not obliged to remit, let alone prove the remittance of, the taxes
withheld. PAL needs only to prove that taxes were withheld through Certificates of Final Taxes
Withheld issued by the Agent Banks. (PHILIPPINE AIRLINES, INC. VS. CIR/CRIR VS. PHILIPPINE
AIRLINES, INC.; G.R. NO. 206079-80/206309; JANUARY 17, 2018; J. LEONEN)

Should there have been a simultaneous sale to 20 or more lenders/investors, the Poverty
Eradication and Alleviation Certificates or the PEACe Bonds are deemed deposit substitutes within
the meaning of Sec. 22(Y) of the 1997 NIRC and RCBC Capital would have been obliged to pay the
20% FWT on the interest or discount from the PEACe Bonds. Further, the obligation to withhold the
20% final tax on the corresponding interest from the PEACe Bonds would likewise be required of
any lender/investor had the latter turned around and sold said PEACe Bonds, whether in whole or
part, simultaneously to 20 or more lenders or investors. The Court notes, however, that under
Section 24 of the 1997 NIRC, interest income received by individuals from long-term deposits or
investments with a holding period of not less than five (5) years is exempt from the final tax. Thus,
should the PEACe Bonds be found to be within the coverage of deposit substitutes, the proper
procedure was for the Bureau of Treasury to pay the face value of the PEACe Bonds to the
bondholders and for the BIR to collect the unpaid FWT directly from RCBC Capital, or any lender or
investor if such be the case, as the withholding agents. (BANCO DE ORO, ET AL. VS. REPUBLIC OF
THE PHILIPPINES, ET AL., G.R. NO. 198756, JANUARY 13, 2015, J. LEONEN)

VALUE- ADDED TAX

The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not
form part of gross receipts for VAT purposes. An HMO like MEDICARD is principally engaged in the
sale of services. Its VAT base and corresponding liability is, thus, determined under Section 108(A)
of the NIRC as amended by RA No. 9337. The definition of “gross receipts” of an HMO under RR No.
16-2005 merely presumed that the amount received by an HMO as membership fee is the HMO’s
compensation for their services. As a mere presumption, an HMO is allowed to establish that a
portion of the amount it received as membership fee does NOT actually compensate it but some
other person, which in this case are the medical service providers themselves. In the course of its

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business, its members can either avail of medical services from MEDICARD’s accredited healthcare
providers or directly from MEDICARD. In the former, MEDICARD would not be actually providing
the actual healthcare service; Thus based on industry practice, MEDICARD informs its would-be
member beforehand that 80% of the membership fee would be earmarked for medical utilization
and only 20% comprises its service fee. In the latter case, MEDICARD’s sale of its sale of its services
is exempt from VAT under Section 109(G) of the NIRC. (MEDICARD PHILIPPINES, INC. VS.
COMMISSIONER OF INTERNAL REVENUE; G.R. NO. 222743; APRIL 5, 2017; J. REYES)

The Commissioner of Internal Revenue (CIR) is given 120 days to decide an administrative claim
for refund/credit of unutilized or unapplied input Value Added Tax (VAT) attributable to zero-rated
sales. In case of a decision rendered or inaction after the 120-day period, the taxpayer may institute
a judicial claim by filing an appeal before the Court of Tax Appeals (CTA) within 30 days from the
decision or inaction. Both 120- and 30-day periods are mandatory and jurisdictional. An appeal
taken prior to the expiration of the 120-day period without a decision or action of the
Commissioner is premature and, thus, without a cause of action. (AICHI FORGING COMPANY OF
ASIA, INC. VS. COURT OF TAX APPEALS - EN BANC AND COMMISSIONER OF INTERNAL
REVENUE; G.R. 193625; AUGUST 30, 2017; J. MARTIRES)

The sale of the Pantabangan-Masiway and Magat Power Plants by petitioner PSALM to private
entities is not subject to VAT since the sale was made pursuant to PSALM's mandate to privatize
NPC generation assets, and was not undertaken in the course of trade or business. In selling the
power plants, PSALM was merely exercising a governmental function for which it was created
under the EPIRA law. (POWER SECTOR ASSET AND LIABILITIES MANAGEMENT CORPORATION
VS. COMMISSIONER OF INTERNAL REVENUE; G.R. 198146; AUGUST 8, 2017; J. CARPIO)

The 120-day and 30-day reglementary periods for the filing of judicial claims for unutilized
creditable input tax or input Value Added Tax (VAT) under Section 112(C) of the National Internal
Revenue Code are both mandatory and jurisdictional. CE Luzon’s claims for refund of creditable
input tax for the first, third, and fourth quarters of taxable year 2003 were filed prematurely
because it did not wait for the Commissioner of Internal Revenue to render a decision or for the
120-day period to lapse before elevating its judicial claim with the Court of Tax Appeals.

However, despite its non-compliance with Section 112(C) of the National Internal Revenue Code, CE
Luzon's judicial claims are shielded from the vice of prematurity. It relied on the Bureau of Internal
Revenue Ruling DA-489-03, which expressly states that "a taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the [Court of Tax Appeals] by
way of a Petition for Review." Taxpayers who have relied on the Bureau of Internal Revenue Ruling
DA-489-03, from its issuance on December 10, 2003 until its reversal on October 6, 2010 are,
therefore, shielded from the vice of prematurity. (CE LUZON GEOTHERMAL POWER COMPANY,
INC. VS. COMMISSIONER OF INTERNAL REVENUE/REPUBLIC OF THE PHILIPPINES
REPRESENTED BY BUREAU OF INTERNAL REVENUE VS. CE LUZON GEOTHERMAL POWER
COMPANY, INC.; G.R. NOS. 197526/199676-77; JULY 26, 2017; J. LEONEN)

In Visayas Geothermal Power Company v. Commissioner of Internal Revenue, the Court came up
with an outline summarizing the pronouncements in San Roque, to wit: For clarity and guidance,
the Court deems it proper to outline the rules laid down in San Roque with regard to claims for
refund or tax credit of unutilized creditable input VAT. They are as follows:

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1. When to file an administrative claim with the CIR:


a. General rule
(Section 112(A) and Mirant case) Within 2 years from the close of the taxable
quarter when the sales were made.

b. Exception
(Atlas case) Within 2 years from the date of payment of the output VAT, if the
administrative claim was filed from June 8, 2007 (promulgation of Atlas) to September 12,
2008 (promulgation of Mirant).

2. When to file a judicial claim with the CTA:


a. General rule
Section 112(D); not Section 229
i. Within 30 days from the full or partial denial of the administrative claim by the
CIR; or
ii. Within 30 days from the expiration of the 120-day period provided to the CIR to
decide on the claim.

This is mandatory and jurisdictional beginning January 1, 1998 (effectivity of 1997 NIRC).

b. Exception
BIR Ruling No. DA-489-03.

The judicial claim need not await the expiration of the 120-day period, if such was filed from
December 10, 2003(issuance of BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation of
Aichi). (SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR,
GR NO. 201326, FEB 8, 2017, J. CAGUIOA)

In Burmeister, the Court clarified that an essential condition to qualify for zero-rating under the
aforequoted provision is that the service-recipient must be doing business outside the Philippines.
Following Burmeister, the Court, in Accenture, Inc. v. Commissioner of Internal Revenue,
(Accenture), emphasized that a taxpayer claiming for a VAT refund or credit under Section 108(B)
has the burden to prove not only that the recipient of the service is a foreign corporation, but also
that said corporation is doing business outside the Philippines. (SITEL PHILIPPINES
CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO. 201326, FEB 8, 2017,
J. CAGUIOA)

The CTA Division also did not err when it denied the amount of P2,668,852.55, allegedly
representing input taxes claimed on Sitel's domestic purchases of goods and services which are
supported by invoices/receipts with pre-printed TIN-V. In Western Mindanao Power Corp. v.
Commissioner of Internal Revenue, the Court ruled that in a claim for tax refund or tax credit, the
applicant must prove not only entitlement to the grant of the claim under substantive law, he must
also show satisfaction of all the documentary and evidentiary requirements for an administrative
claim for a refund or tax credit and compliance with the invoicing and accounting requirements
mandated by the NIRC, as well as by revenue regulations implementing them. The NIRC requires
that the creditable input VAT should be evidenced by a VAT invoice or official receipt, which may

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only be considered as such when the TIN-VAT is printed thereon, as required by Section 4.108-1 of
RR 7-95. In the same vein, considering that the subject invoice/official receipts are not imprinted
with the taxpayer's TIN followed by the word VAT, these would not be considered as VAT
invoices/official receipts and would not give rise to any creditable input VAT in favor of Sitel.
(SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO.
201326, FEB 8, 2017, J. CAGUIOA)

For internal revenue purposes, the sale of raw cane sugar is exempt from VAT because it is
considered to be in its original state. On the other hand, refined sugar is an agricultural product that
can no longer be considered to be in its original state because it has undergone the refining process;
its sale is thus subject to VAT. Although the sale of refined sugar is generally subject to VAT, such
transaction may nevertheless qualify as a VAT-exempt transaction if the sale is made by a
cooperative. Under Section 109(1) of the NIRC, sales by agricultural cooperatives are exempt from
VAT provided the following conditions concur, viz:

First, the seller must be an agricultural cooperative duly registered with the CDA. An agricultural
cooperative is "duly registered" when it has been issued a certificate of registration by the CDA.
This certificate is conclusive evidence of its registration.
Second, the cooperative must sell either:
1) exclusively to its members; or
2) to both members and non-members, its produce, whether in its original state or processed form.

UCSFA-MPC satisfies these two requisites. (COMMISSIONER OF INTERNAL REVENUE VS. UNITED
CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE COOPERATIVE, G.R. NO. 209776,
DECEMBER 7, 2016, J. BRION)

Subsequent to the Aichi ruling and during the pendency of the case at bar, the Supreme Court En
Banc resolved the consolidated cases involved in Commissioner of Internal Revenue vs. San Roque
Power and stated that a judicial claim for refund of input VAT which was filed with the CTA before
the lapse of the 120-day period under Section 112 of the NIRC is considered to have been timely
made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR) Ruling No.
DA-489-03 dated December 10, 2003 but before the adoption of the Aichi doctrine which was
promulgated on October 6, 2010. It is undisputed that the date of filing in the case at bar falls within
the period following the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 but before
the promulgation of the Aichi case on October 6, 2010. In accordance with the doctrine laid down in
San Roque, we rule that petitioner's judicial claim had been timely filed and should be given due
course and consideration by the CTA. (DEUTSCHE KNOWLEDGE SERVICES PTE. LTD. VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 197980, DECEMBER 1, 2016, J. LEONARDO-
DE CASTRO)

The CTA did not err in denying the claim for refund on the ground that the petitioner had not
established its zero-rated sales of services to PIATCO through the presentation of official receipts.
In this regard, as evidence of an administrative claim for tax refund or tax credit, there is a certain
distinction between a receipt and an invoice. Section 113 of the NIRC of 1997 provides that a VAT
invoice is necessary for every sale, barter or exchange of goods or properties, while a VAT official
receipt properly pertains to every lease of goods or properties; as well as to every sale, barter or
exchange of services. A "sales or commercial invoice" is a written account of goods sold or services

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rendered indicating the prices charged therefor or a list by whatever name it is known which is
used in the ordinary course of business evidencing sale and transfer or agreement to sell or transfer
goods and services. A "receipt" on the other hand is a written acknowledgment of the fact of
payment in money or other settlement between seller and buyer of goods, debtor or creditor, or
person rendering services and client or customer. A VAT invoice is the seller's best proof of the sale
of goods or services to the buyer, while a VAT receipt is the buyer's best evidence of the payment of
goods or services received from the seller. A VAT invoice and a VAT receipt should not be confused
and made to refer to one and the same thing. Certainly, neither does the law intend the two to be
used alternatively. The petitioner submitted sales invoices, not official receipts, to support its claim
for refund. In light of the aforestated distinction between a receipt and an invoice, the submissions
were inadequate for the purpose thereby intended. The mere fact that an application for zero
rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit.
The taxpayer claiming the refund must further comply with the invoicing and accounting
requirements mandated by the NIRC, as well as by revenue regulations implementing them.
(TAKENAKA CORPORATION – PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL
REVENUE, G.R. NO. 193321, OCTOBER 19, 2016, J. BERSAMIN)

The failure to indicate the words “zero-rated” on the invoices and receipts issued by a taxpayer
would result in the denial of the claim for refund or tax credit. The Court has consistently ruled on
the denial of a claim for refund or tax credit whenever the word “zero-rated” has been omitted on
the invoices or sale receipts of the taxpayer-claimant. Furthermore, the CTA is a highly specialized
court dedicated exclusively to the study and consideration of revenue-related problems, in which it
has necessarily developed an expertise. Hence, its factual findings, when supported by substantial
evidence, will not be disturbed on appeal. (EASTERN TELECOMMUNICATIONS PHILIPPINES,
INC., VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 183531, MARCH 25, 2015, J.
REYES)

Cargill filed two claims for refund. However, the court ruled that the rule must therefore be that
during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6,
2010 (when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day
period before it could file a judicial claim for refund of excess input VAT before the CTA. Before and
after the aforementioned period (i.e., December 10, 2003 to October 6, 2010), the observance of the
120-day period is mandatory and jurisdictional to the filing of such claim. (CARGILL PHILIPPINES,
INC VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 203774, MARCH 11, 2015, J.
PERLAS- BERNABE)

This Court has consistently held as fatal the failure to print the word “zero-rated” on the VAT
invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if
the claims were made prior to the effectivity of R.A. 9337. As to the sufficiency of a Northern
Mindanao’s company invoice to prove the sales of services to NPC, the Court finds that this claim is
without sufficient legal basis. A VAT invoice is the seller’s best proof of the sale of goods or services
to the buyer, while a VAT receipt is the buyer’s best evidence of the payment of goods or services
received from the seller. The requirement of imprinting the word “zero-rated” proceeds from the
rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement
of the same Tax Code and its amendments. A VAT-registered person whose sales are zero-rated or
effectively zero-rated, Section 112(A) specifically provides for a two-year prescriptive period after
the close of the taxable quarter when the sales were made within which such taxpayer may apply

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for the issuance of a tax credit certificate or refund of creditable input tax. (NORTHERN
MINDANAO POWER CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO.
185115, FEBRUARY 18, 2015, CJ. SERENO)

Section 112(C) of the 1997 Tax Code states the time requirements for filing a judicial claim for the
refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days,
which serves as a waiting period to give time for the CIR to act on the administrative claim for a
refund or credit; and the period of 30 days, which refers to the period for filing a judicial claim with
the CTA. It is the 30-day period that is at issue in this case. (ROHM APOLLO SEMICONDUCTOR
PHILIPPINES VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 168950, JANUARY 14,
2015, C.J. SERENO)

Its petition for review having been denied by the CTA for being prematurely filed, petitioner filed
the instant petition arguing that since it filed its judicial claim after the issuance of BIR Ruling No.
DA-489-03, but before the adoption of the Aichi doctrine, it can invoke the said BIR Ruling. The SC
ruled that the jurisdiction of the CTA over decisions or inaction of the CIR is only appellate in nature
and, thus, necessarily requires the prior filing of an administrative case before the CIR under
Section 112. A petition filed prior to the lapse of the 120-day period prescribed under said Section
would be premature for violating the doctrine on the exhaustion of administrative remedies. There
is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day period. The
Court in San Roque noted that BIR Ruling No. DA-489-03, dated December 10, 2003, expressly
stated 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." Hence, taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on December 10, 2003 up to its reversal by this
Court in Aichi on October 6, 2010, where it was held that the 120+30 day period was mandatory
and jurisdictional. (TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL
REVENUE, G.R. NO. 201195, NOVEMBER 26, 2014, J. MENDOZA)

CE Luzon filed an action for refund of the VAT. The court ruled that While both claims for refund
were filed within the two (2)-year prescriptive period, CE Luzon failed to comply with the 120-day
period as it filed its judicial claim in C.T.A. Case No. 6792 four (4) days after the filing of the
administrative claim, while in C.T.A. Case No. 6837, the judicial claim was filed a day after the filing
of the administrative claim. Proceeding from the aforementioned jurisprudence, only C.T.A. Case
No. 6792 should be dismissed on the ground of lack of jurisdiction for being prematurely filed. In
contrast, CE Luzon filed its administrative and judicial claims for refund in C.T.A. Case No. 6837
during the period, i.e., from December 10, 2003 to October 6, 2010, when BIR Ruling No. DA-489-03
was in place. As such, the aforementioned rule on equitable estoppel operates in its favor, thereby
shielding it from any supposed jurisdictional defect which would have attended the filing of its
judicial claim before the expiration of the 120-day period. (COMMISSIONER OF INTERNAL
REVENUE VS. CE LUZON GEOTHERMAL POWER COMPANY, INC., G.R. NO. 190198, SEPTEMBER
17, 2014, J. PERLAS- BERNABE)

Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language.
The taxpayer can file his administrative claim for refund or credit at anytime within the two-year
prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim
is still filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the
Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer

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still has 30 days to file his judicial claim with the CTA. This is not only the plain meaning but also
the only logical interpretation of Section 112(A) and (C). (SAN ROQUE POWER CORPORATION VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 205543, JUNE 30, 2014, J. LEONARDO-DE
CASTRO)
The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims
for a refund or tax credit for unutilized creditable input VAT. Section 229 pertains to the recovery of
taxes erroneously, illegally, or excessively collected. San Roque stressed that “input VAT is not
‘excessively’ collected as understood under Section 229 because, at the time the input VAT is
collected, the amount paid is correct and proper.” It is, therefore, Section 112 which applies
specifically with regard to claiming a refund or tax credit for unutilized creditable input VAT.
(VISAYAS GEOTHERMAL POWER COMPANY VS. COMMISSIONER OF INTERNAL REVENUE, G.R.
NO. 197525, JUNE 4, 2014, J. MENDOZA)

A claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against
the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is
compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance
with the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or
after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No.
DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which
again reinstated the 120+30 day periods as mandatory and jurisdictional. (MIRAMAR FISH
COMPANY, INC., VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 185432, JUNE 4, 2014,
J. PEREZ)

LOCAL TAXATION

Section 137 of Republic Act No. 7160 (the Local Government Code of 1991) is categorical in stating
that franchise tax can only be imposed on businesses enjoying a franchise. This goes without saying
that without a franchise, a local government unit cannot impose franchise tax. Indeed, the
enactment of EPIRA separated the transmission and sub-transmission functions of the state-owned
Napocor from its generation function, and transferred all its transmission assets to the then newly-
created TRANSCO, which was wholly owned by PSALM Corporation at that time. Power generation
is no longer considered a public utility operation, and companies which shall engage in power
generation and supply of electricity are no longer required to secure a national franchise. This is
expressly provided under Section 6 of EPIRA. EPIRA effectively removed power generation from
the ambit of local franchise taxes. Hence, as regards Napocor's business of generating electricity, the
franchise taxes sought to be collected by the Provincial Government of Bataan for the latter part of
2001 up to 2003 are devoid of any statutory basis. As regards Napocor's electric transmission
function, under Section 8 of the same law, all transmission assets of Napocor were to be transferred
to TRANSCO within six (6) months from the effectivity of EPIRA, or by December 26, 2001. Hence,
until the transfer date of the transmission assets, which by express provision of EPIRA shall not be
later than December 26, 2001, these assets, as well as the franchise, belong to and are operated by
Napocor, and the latter is consequently subject to the local franchise tax. (NATIONAL POWER
CORPORATION VS. PROVINCIAL GOVERNMENT OF BATAAN, GR 180654, MARCH 6, 2017, J.
LEONEN)

Under Section 187 of the Local Government Code of 1991, aggrieved taxpayers who question the
validity or legality of a tax ordinance are required to file an appeal before the Secretary of Justice

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before they seek intervention from the regular courts. In Reyes v. Court of Appeals, this Court
declared the mandatory nature of Section 187 of the Local Government Code of 1991. The doctrine
of exhaustion of administrative remedies, like the doctrine on hierarchy of courts, is not an iron-
clad rule. It admits of several well-defined exceptions. In Alta Vista Golf and Country Club v. City of
Cebu, this Court excluded the case from the strict application of the principle on exhaustion of
administrative remedies, particularly for non-compliance with Section 187 of the Local Government
Code of 1991, on the ground that the issue raised in the Petition was purely legal. In this case,
however, the issues involved are not purely legal. There are factual issues that need to be addressed
for the proper disposition of the case. In other words, this case is still not ripe for adjudication. To
question the validity of the ordinance, petitioners should have first filed an appeal before the
Secretary of Justice. (CRISANTO M. AALA VS. HON. REY T. UY, G.R. NO. 202781, JANUARY 10,
2017, J. LEONEN)

Under Section 166 of the Local Government Code of 1991, local taxes "shall accrue on the first (1st)
day of January of each year.” When the questioned ordinance was published in July 2012, the City
Government of Tagum could not have immediately issued real property tax assessments. Hence,
petitioners had ample time within which to question the validity of the tax ordinance. In cases
where the validity or legality of a tax ordinance is questioned, the rule that real property taxes must
first be paid before a protest is lodged does not apply. Taxpayers must first receive an assessment
before this rule is triggered. In Jardine, this Court ruled that prior payment under protest is not
required >> when the taxpayer is questioning the very authority of the assessor to impose taxes.
Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is
required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act
on his protest. In the case at bench, however, the petitioners are questioning the very authority and
power of the assessor, acting solely and independently, to impose the assessment and of the
treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but
attacks on the very validity of any increase. (CRISANTO M. AALA VS. HON. REY T. UY, G.R. NO.
202781, JANUARY 10, 2017, J. LEONEN)

Settled is the rule that should the taxpayer/real property owner question the excessiveness or
reasonableness of the assessment, Section 252 of the LGC of 1991 directs that the taxpayer should
first pay the tax due before his protest can be entertained. There shall be annotated on the tax
receipts the words "paid under protest." It is only after the taxpayer has paid the tax due that he
may file a protest in writing within 30 days from payment of the tax to the Provincial, City or
Municipal Treasurer, who shall decide the protest within sixty days from receipt. In no case is the
local treasurer obliged to entertain the protest unless the tax due has been paid. Moreover, as
settled in jurisprudence, a claim for exemption from the payment of real property taxes does not
actually question the assessor's authority to assess and collect such taxes, but pertains to the
reasonableness or correctness of the assessment by the local assessor. By providing that real
property not declared and proved as tax-exempt shall be included in the assessment roll, this
implies that the local assessor has the authority to assess the property for realty taxes, and any
subsequent claim for exemption shall be allowed only when sufficient proof has been adduced
supporting the claim. Thus, if the property being taxed has not been dropped from the assessment
roll, taxes must be paid under protest if the exemption from taxation is insisted upon. Finally, while
it is evident in jurisprudence that the filing of motion for reconsideration before the LBAA is
allowed, this Court finds that, inevitably, the filing of the appeal before the CBAA through registered
mail on November 16, 2006 was already late. It is settled that the "fresh period rule" in the case of

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Domingo Neypes, et al. vs. Court of Appeals, et al. applies only to judicial appeals and not to
administrative appeals. In the instant case, the subject appeal, i.e., appeal from a decision of the
LBAA to the CBAA, is not judicial but administrative in nature. Thus, the "fresh period rule" in
Neypes does not apply. (NATIONAL POWER CORPORATION VS. THE PROVINCIAL TREASURER
OF BENGUET, THE PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL TREASURER OF
ITOGON, BENGUET AND THE MUNICIPAL ASSESSOR OF ITOGON, BENGUET, G.R. NO. 209303,
NOVEMBER 14, 2016, J. PERALTA)

Indisputably, the power of LGUs to impose business taxes derives from Section 143 of the LGC.
However, the same is subject to the explicit statutory impediment provided for under Section
133(h) of the same Code which prohibits LGUs from imposing “taxes, fees or charges on petroleum
products.” It can, therefore, be deduced that although petroleum products are subject to excise tax,
the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the
LGC to impose business taxes. (BATANGAS CITY, MARIA TERESA GERON, IN HER CAPACITY AS
CITY TREASURER OF BATANGAS CITY, ET AL. VS. PILIPINAS SHELL PETROLEUM
CORPORATION, G.R. NO. 187631, JULY 8, 2015)

The collections made accrue to its socialized housing programs and projects. The (socialized
housing) tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a
regulatory purpose. The levy is primarily in the exercise of the police power for the general welfare
of the entire city. As with the State, LGUs may be considered as having properly exercised their
police power only if there is a lawful subject and a lawful method or, to be precise, if the following
requisites are met: (1) the interests of the public generally, as distinguished from those of a
particular class, require its exercise and (2) the means employed are reasonably necessary for the
accomplishment of the purpose and not unduly oppressive upon individuals. (JOSE J. FERRER, JR.
VS. CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON CITY, CITY TREASURER OF
QUEZON CITY AND CITY ASSESSOR OF QUEZON CITY, G.R. NO. 210551, JUNE 30, 2015)

The garbage fee is not valid imposition being violative of the equal protection as the rates charged
under the ordinance are unjust and equitable. A resident of a condominium unit or socialized
housing pay twice the amount of a resident of a lot similar in size There is no substantial distinction
between an occupant of a lot and an occupant of a condominium unit, socialized housing project or
apartment as the garbage output produced by these types of occupants is uniform and does not
vary to a large degree. A similar schedule of fee would have been just and equitable. The
classification is not germane to the purpose of promoting shared responsibility. There is
discrimination between occupant of a lot and occupant of a condo unit or socialized housing
project. (JOSE J. FERRER, JR. VS. CITY MAYOR HERBERT BAUTISTA, CITY COUNCIL OF QUEZON
CITY, CITY TREASURER OF QUEZON CITY AND CITY ASSESSOR OF QUEZON CITY, G.R. NO.
210551. JUNE 30, 2015)

In the case at bar, through the application and enforcement of Sec. 14 of R.A. 9167 which earmarks
the income on amusement taxes imposed by LGUs in favor of FDCP and the producers of graded
films, the income from the amusement taxes levied by the covered LGUs did not and will under no
circumstance accrue to them, not even partially, despite being the taxing authority therefor.
Congress therefore, clearly overstepped its plenary legislative power, the amendment being
violative of the fundamental law’s guarantee on local autonomy as echoed in Sec. 130(d) of the LGC
which provide that revenue collected pursuant to the said code shall inure to the benefit of the local

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government. (FILM DEVELOPMENT COUNCIL OF THE PHILIPPINES VS. COLON HERITAGE


REALTY CORPORATION, OPERATOR OF ORIENTE, OPERATOR OF ORIENTE GROUP
THEATERS, REPRESENTED BY ISIDRO A. CANIZARES/FILM DEVELOPMENT COUNCIL OF THE
PHILIPPINES VS. CITY OF CEBU AND SM PRIME HOLDINGS, INC., G.R. NO. 203754/G.R. NO.
204418, JUNE 16, 2015)

In this case the Supreme Court applied to MCIAA the findings and conclusions of the Court in the
2006 MIAA case, ruling: MIAA is a government instrumentality vested with corporate powers and
performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the
Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by
local governments under Section 133(o) of the Local Government Code. The exception to the
exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the
Local Government Code. Such exception applies only if the beneficial use of real property owned by
the Republic is given to a taxable entity. (MACTAN CEBU INTERNATIONAL AIRPORT
AUTHORITY (MCIAA) VS. CITY OF LAPU-LAPU, ET AL., G.R. NO. 181756, JUNE 15, 2015)

Setting the rate of the additional levy for the special education fund at less than 1% is within the
taxing power of local government units. It is consistent with the guiding constitutional principle of
local autonomy. It was well within the power of the Sangguniang Panlalawigan of Palawan to enact
an ordinance providing for additional levy on real property tax for the special education fund at the
rate of 0.5% rather than at 1%. (LUCENA D. DEMAALA VS. COMMISSION ON AUDIT,
REPRESENTED BY ITS CHAIRPERSON COMMISSIONER MA. GRACIA M. PULIDO TAN, G.R. NO.
199752, FEBRUARY 17, 2015, J. LEONEN)

It is already well-settled that although the power to tax is inherent in the State, the same is not true
for the LGUs to whom the power must be delegated by Congress and must be exercised within the
guidelines and limitations that Congress may provide. In the case at bar, the sanggunian of the
municipality or city cannot enact an ordinance imposing business 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, when said sanggunian was already specifically
prohibited from doing so. Any exception to the express prohibition under Section 133(j) of the LGC
should be just as specific and unambiguous. Section 21(B) of the Manila Revenue Code, as amended,
is null and void for being beyond the power of the City of Manila and its public officials to enact,
approve, and implement under the LGC.(CITY OF MANILA, HON. ALFREDO S. LIM, AS MAYOR OF
THE CITY OF MANILA, ET AL. VS. HON. ANGEL VALERA COLET, AS PRESIDING JUDGE,
REGIONAL TRIAL COURT OF MANILA (BR. 43), ET AL., G.R. NO. 120051, DECEMBER 10, 2014,
J. LEONARDO-DE CASTRO)

The City’s yearly imposition of the 25% surcharge, which was sustained by the trial court and the
Court of Appeals, resulted in an aggregate penalty that is way higher than NAPOCOR’s basic tax
liabilities. A surcharge regardless of how it is computed is already a deterrent. While it is true that
imposing a higher amount may be a more effective deterrent, it cannot be done in violation of law
and in such a way as to make it confiscatory. (NATIONAL CORPORATION POWER VS. CITY OF
CABANATUAN REPRESENTED BY ITS CITY MAYOR, HON. HONORATO PEREZ, G.R. NO. 177332,
OCTOBER 01, 2014, J. LEONEN)

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REAL PROPERTY TAX

Regardless of whether the mortgages constituted on LANECO's properties constitute as lien


thereon, these cannot defeat the right of the PGLN to make those properties answerable for
delinquent real property taxes, since local government taxes serve as superior lien over the
property subject of the tax, as clearly laid out in Section 257 of the LGC. The PGLN, therefore, is well
within its right to assess LANECO with real property taxes, and to exercise its remedies under
Section 256 of the LGC for the collection thereof, including by administrative action thru levy on its
real properties. Accordingly, the Supreme Court finds no cogent reason to rule that the PGLN
committed grave abuse of discretion in resorting to the administrative remedy of levy as to warrant
the issuance of a writ of prohibition. (LANAO DEL NORTE ELECTRIC COOPERATIVE, INC. AS
REPRESENTED BY ITS GENERAL MANAGER ENGR. RESNOL C. TORRES VS. PROVINCIAL
GOVERNMENT OF LANAO DEL NORTE, ET AL.; G.R. NO. 185420; AUGUST 29, 2017; J. VELASCO
JR.)

Section 60 of R.A. No. 9136, which purportedly prohibits electric cooperatives from disposing,
transferring, and conveying its assets and properties within the period of the rehabilitation and
modernization program, does not prohibit local government units from resorting to the
administrative remedy of levy on real property. Nothing in the aforecited provisions withdrew the
remedy of tax collection by administrative action from the LGUs. Instead, these provisions merely
ascribe limitations on, and lay down the consequences of, any voluntary transfer and disposition of
assets by the electric cooperatives themselves. They do not limit the LGUs' remedies against electric
cooperatives to judicial actions in collecting real property taxes. (LANAO DEL NORTE ELECTRIC
COOPERATIVE, INC. AS REPRESENTED BY ITS GENERAL MANAGER ENGR. RESNOL C. TORRES
VS. PROVINCIAL GOVERNMENT OF LANAO DEL NORTE, ET AL.; G.R. NO. 185420; AUGUST 29,
2017; J. VELASCO JR.)

Under Section 133(n) of the Local Government Code, the taxing power of local government units
shall not extend to the levy of taxes, fees, or charges on duly registered cooperatives under the
Cooperative Code. Section 234(d) of the Local Government Code specifically provides for real
property tax exemption to cooperatives. NGPI-NGEI, as the owner of the land being leased by
respondent, falls within the purview of the law. Section 234 of the Local Government Code exempts
all real property owned by cooperatives without distinction. Nothing in the law suggests that the
real property tax exemption only applies when the property is used by the cooperative itself.
Similarly, the instance that the real property is leased to either an individual or corporation is not a
ground for withdrawal of tax exemption. This exemption benefits the cooperative's lessee.
Moreover, the characterization of machinery as real property is governed by the Local Government
Code and not the Civil Code. (PROVINCIAL ASSESSOR OF AGUSAN DEL SUR VS. FILIPINAS PALM
PLANTATION, G.R. NO. 183416, OCTOBER 5, 2016, J. LEONEN)

In disputes involving real property taxation, the general rule is to require the taxpayer to first avail
of administrative remedies and pay the tax under protest before allowing any resort to a judicial
action, except when the assessment itself is alleged to be illegal or is made without legal authority.
For example, prior resort to administrative action is required when among the issues raised is an
allegedly erroneous assessment, like when the reasonableness of the amount is challenged, while
direct court action is permitted when only the legality, power, validity or authority of the
assessment itself is in question. Stated differently, the general rule of a prerequisite recourse to

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administrative remedies applies when questions of fact are raised, but the exception of direct court
action is allowed only when purely questions of law are involved. (CAPITOL WIRELESS, INC. VS.
PROVINCIAL TREASURER OF BATANGAS, GR 180110, MAY 30, 2016, PERALTA, J.)

As far as local government units are concerned, the areas described are to be considered subsumed
under the term “municipal waters” under the LGC. Although the term "municipal waters" appears in
the Code in the context of the grant of quarrying and fisheries privileges for a fee by local
governments, its inclusion in the Code's Book II which covers local taxation means that it may also
apply as guide in determining the territorial extent of the local authorities' power to levy real
property taxation. Thus, the jurisdiction or authority over such part of the subject submarine cable
system lying within Philippines jurisdiction includes the authority to tax the same, for taxation is
one (1) of the three (3) basic and necessary attributes of sovereignty, and such authority has been
delegated by the national legislature to the local governments with respect to real property
taxation. (CAPITOL WIRELESS, INC. VS. PROVINCIAL TREASURER OF BATANGAS, GR 180110,
MAY 30, 2016, PERALTA, J.)

The burden of proving exemption from local taxation is upon whom the subject real property is
declared. Under the LGC, every person by whom or for whom real property is declared, who shall
claim tax exemption for such property from real property taxation “shall file with the provincial,
city, or municipal assessor within thirty (30) days from the date of the declaration of real property
sufficient documentary evidence in support of such claim. (CAPITOL WIRELESS, INC. VS.
PROVINCIAL TREASURER OF BATANGAS, GR 180110, MAY 30, 2016, PERALTA, J.)

Being an instrumentality of the national government, the PEZA cannot be taxed by local
government units. Although a body corporate vested with some corporate powers, the PEZA is not a
government-owned or controlled corporation taxable for real property taxes. The PEZA’s
predecessor, the EPZA, was declared non-profit in character with all its revenues devoted for its
development, improvement, and maintenance. Consistent with this non-profit character, the EPZA
was explicitly declared exempt from real property taxes under its charter. Even the PEZA’s lands
and buildings whose beneficial use have been granted to other persons may not be taxed with real
property taxes. The PEZA may only lease its lands and buildings to PEZA-registered economic zone
enterprises and entities. These PEZA-registered enterprises and entities, which operate within
economic zones, are not subject to real property taxes. (CITY OF LAPU-LAPU VS. PHILIPPINE
ECONOMIC ZONE AUTHORITY; PROVINCE OF BATAAN, REPRESENTED BY GOVERNOR
ENRIQUE T. GARCIA, JR., AND EMERLINDA S. TALENTO, IN HER CAPACITY AS PROVINCIAL
TREASURER OF BATAAN VS. PHILIPPINE ECONOMIC ZONE AUTHORITY, G.R. NO. 184203,
G.R. NO. 187583, NOVEMBER 26, 2014, J. LEONEN)

Here, petitioner Genato was found delinquent in the payment of his real property taxes. However,
as he duly pointed out, a simple mathematical application would show that if the assessed values in
the 2nd and 3rd tax declarations were added, P4,866,350.00 and P3,831,520.00, the same would
amount to P8,697,870.00, the assessed value of the property as indicated in the original tax
declaration. Therefore, if all the tax declarations issued by respondent Pulmano refer to one and the
same property of petitioner, and the latter fully paid all its realty taxes due on the same, then it
would follow that the finding of delinquency did not have any basis. (GENATO INVESTMENTS, INC.
VS. HON. JUDGE OSCAR P. BARRIENTOS, IN HIS CAPACITY AS THE PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT, OF CALOOCAN CITY, BRANCH 123, EMILY P. DIZON, IN HER

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CAPACITY AS THE BRANCH CLERK OF COURT OF THE REGIONAL TRIAL COURT OF CALOOCAN
CITY, BRANCH 123, JIMMY T. SORO, COURT PROCESS SERVER OF THE REGIONAL TRIAL
COURT OF . CALOOCAN, BRANCH 123, EVELINA M. GARMA, CITY TREASURER OF CALOOCAN
CITY, PHILLIP L. YAM, OFFICER-IN-CHARGE, REAL PROPERTY TAX DIVISION OF THE
CALOOCAN CITY TREASURER'S OFFICE, ANTHONY B. PULMANO, OFFICER-IN-CHARGE, CITY
ASSESSOR OF CALOOCAN CITY, AND LAVERNE REALTY & DEVELOPMENT CORPORATION, G.R
NO. 207443, JULY 23, 2014, J. PEREZ)

The transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO
may qualify as “machinery” under the Local Government Code subject to real property tax.
MERALCO is a public utility engaged in electric distribution, and its transformers, electric posts,
transmission lines, insulators, and electric meters constitute the physical facilities through which
MERALCO delivers electricity to its consumers. Each may be considered as one or more of the
following: a “machine,” “equipment,” “contrivance,” “instrument,” “appliance,” “apparatus,” or
“installation.” The Court highlights that under Section 199(o) of the Local Government Code,
machinery, to be deemed real property subject to real property tax, need no longer be annexed to
the land or building as these “may or may not be attached, permanently or temporarily to the real
property,” and in fact, such machinery may even be “mobile.” The same provision though requires
that to be machinery subject to real property tax, the physical facilities for production, installations,
and appurtenant service facilities, those which are mobile, self-powered or self-propelled, or not
permanently attached to the real property (a) must be actually, directly, and exclusively used to
meet the needs of the particular industry, business, or activity; and (2) by their very nature and
purpose, are designed for, or necessary for manufacturing, mining, logging, commercial, industrial,
or agricultural purposes. (MANILA ELECTRIC COMPANY VS. THE CITY ASSESSOR AND CITY
TREASURER OF LUCENA CITY G.R. NO. 166102. AUGUST 5, 2015)

CUSTOMS MODERNIZATION AND TARIFF ACT

*NOTE: Republic Act (RA) No. 10863, otherwise known as the Customs Modernization and Tariff
Act (CMTA), was signed into law just recently on 30 May 2016.

The law is clear and explicit. It gives a non-extendible period of 30 days for the importer to file the
entry which we have already ruled pertains to both the IED and IEIRD. Thus under Section 1801 in
relation to Section 1301, when the importer fails to file the entry within the said period, he "shall be
deemed to have renounced all his interests and property rights" to the importations and these shall
be considered impliedly abandoned in favor of the government. It was the law itself which
considered the importation abandoned when it failed to file the IEIRDs within the allotted time. RA
7651 no longer requires that there be other acts or omissions where an intent to abandon can be
inferred. It is enough that the importer fails to file the required import entries within the
reglementary period. Abandonment of such shipment (imported article) constitutes renouncement
of all his interests and property rights therein. With regard to the assessments, however, there
being no evidence to prove that petitioner committed fraud in belatedly filing its Import Entry and
Internal Revenue Declaration within the 30-day period prescribed under Section 1301 of the TCCP,
as amended, respondent's rights to question the propriety thereof and to collect the amount of the
alleged deficiency customs duties, more so the entire value of the subject shipment, have already
prescribed. Simply put, in the absence of fraud, the entry and corresponding payment of duties

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made by petitioner becomes final and conclusive upon all parties after one (1) year from the date of
the payment of duties in accordance with Section 1603 of the TCCP, as amended. (PILIPINAS
SHELL PETROLEUM CORPORATION VS. COMMISSIONER OF CUSTOMS, G.R. NO. 195876,
DECEMBER 5, 2016, J. PEREZ)

With the cancellation of the TCCs, the tax liabilities of PSPC under the original assessments were
considered unpaid, hence BOC’s demand letters and the action for collection in the RTC. To
repeat, these assessed customs duties and taxes were previously assessed and paid by the taxpayer,
only that the TCCs turned out to be spurious and hence worthless certificates that did not
extinguish PSPC’s tax liabilities. (REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE
BUREAU OF CUSTOMS VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 209324.
DECEMBER 9, 2015)

In unlawful importation, also known as outright smuggling, goods and articles of commerce are
brought into the country without the required importation documents, or are disposed of in the
local market without having been cleared by the BOC or other authorized government agencies, to
evade the payment of correct taxes, duties and other charges. Such goods and articles do not
undergo the processing and clearing procedures at the BOC, and are not declared through
submission of import documents, such as the import entry and internal revenue declaration. In
various fraudulent practices against customs revenue, also known as technical smuggling, on the
other hand, the goods and articles are brought into the country through fraudulent, falsified or
erroneous declarations, to substantially reduce, if not totally avoid, the payment of correct taxes,
duties and other charges. Such goods and articles pass through the BOC, but the processing and
clearing procedures are attended by fraudulent acts in order to evade the payment of correct taxes,
duties, and other charges. Often committed by means of misclassification of the nature, quality or
value of goods and articles, undervaluation in terms of their price, quality or weight, and
misdeclaration of their kind, such form of smuggling is made possible through the involvement of
the importers, the brokers and even some customs officials and personnel. (BUREAU OF CUSTOMS
VS. THE HONORABLE AGNES VST DEVANADERA, ET AL. G.R. NO. 193253. SEPTEMBER 8,
2015)

The penalty of forfeiture could be imposed on any vessel engaged in smuggling, provided that the
following conditions were present, to wit: (1) The vessel is "used unlawfully in the importation or
exportation of articles into or from" the Philippines; (2) The articles are imported to or exported
from "any Philippine port or place, except a port of entry"; or (3) If the vessel has a capacity of less
than 30 tons and is "used in the importation of articles into any Philippine port or place other than
a port of the Sulu Sea, where importation in such vessel may be authorized by the Commissioner,
with the approval of the department head." With the absence of the first and second conditions, the
M/V Don Martin must be released. (M/V "DON MARTIN" VOY 047 AND CARGOES OF 6500
SACKS OF IMPORTED RICE, ET AL. VS. HON. SECRETARY OF FINANCE, BUREAU OF CUSTOMS,
AND THE DISTRICT COLLECTOR OF CAGAYAN DE ORO CITY, G.R. NO. 160206. JULY 15, 2015)

NFSC, Japan-based company, sells raw sugar. However, NFSC was charged by violation of the Joint
Order by the Commissioner Customs. The court ruled that NFSC did not violate the order and such
was in good faith. The Court ruled that the onus probandi to establish the existence of fraud is
lodged with the Bureau of Customs which ordered the forfeiture of the imported goods. Fraud is
never presumed. It must be proved. Failure of proof of fraud is a bar to forfeiture. The reason is that

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forfeitures are not favored in law and equity. The fraud contemplated by law must be intentional
fraud, consisting of deception willfully and deliberately done or resorted to in order to induce
another to give up some right. Absent fraud, the Bureau of Customs cannot forfeit the shipment in
its favor. (THE COMMISSIONER OF CUSTOMS & THE DISTRICT COLLECTOR OF CUSTOMS FOR
THE PORT OF ILOILO VS. NEW FRONTIER SUGAR CORPORATION, G.R. NO. 163055, JUNE 11,
2014, J. PEREZ)

TAX REMEDIES

An application for tax abatement will be deemed approved only upon the issuance of a termination
letter, and only then will the deficiency tax assessment be considered closed and terminated. Since
no termination letter has been issued by the BIR, there is no reason for the Court to consider as
closed and terminated the tax assessment on Asiatrust’s FWT for fiscal year ending June 30, 1998.
However, in case Asiatrust’s application for tax abatement is denied, any payment made by it would
be applied to its outstanding tax liability. (ASIATRUST DEVELOPMENT BANK, INC. VS.
COMMISSIONER OF INTERNAL REVENUE; G.R. NO. 201530; APRIL 19, 2017; J. DEL CASTILLO)

Taxpayers who availed themselves of the tax amnesty program are entitled to the immunities and
privileges under Section 6 of the law. This Court has declared that submission of the documentary
requirements and payment of the amnesty tax is considered full compliance with Republic Act No.
9480 and the taxpayer can immediately enjoy the immunities and privileges enumerated in Section
6 of the law. The plain and straightforward conditions were obviously meant to encourage
taxpayers to avail of the amnesty program, thereby enhancing revenue administration and
collection. The Court explained that the documentary requirements and payment of the amnesty
tax operate as a suspensive condition, such that completion of these requirements entitles the
taxpayer-applicant to immediately enjoy the immunities and privileges under Republic Act No.
9480. However, the Court further stated that Section 6 of the law contains a resolutory condition.
Immunities and privileges will cease to apply to taxpayers who, in their SALN, were proven to have
understated their net worth by 30% or more. Thus, the amnesty granted under the law is revoked
once the taxpayer is proven to have under-declared his assets in his SALN by 30% or more.
Pursuant to Section 10 of the Tax Amnesty Law, amnesty taxpayers who wilfully understate their
net worth shall not only be liable for perjury under the Revised Penal Code, but, upon conviction,
also subject to immediate tax fraud investigation in order to collect all taxes due and to criminally
prosecute for tax evasion. (COMMISSIONER OF INTERNAL REVENUE VS. APO CEMENT
CORPORATION G.R. NO.193381, FEBRUARY 8, 2017, LEONEN, J.)

Unlike the power to compromise or abate a taxpayer’s liability under Section 204 of the 1997
National Internal Revenue Code that is within the discretion of respondent Commissioner of
Internal Revenue, its authority under Republic Act No. 9480 is limited to determining whether (a)
the taxpayer is qualified to avail oneself of the tax amnesty; (b) all the requirements for availment
under the law were complied with; and (c) the correct amount of amnesty tax was paid within the
period prescribed by law. There is nothing in Republic Act No. 9480 which can be construed as
authority for respondent Commissioner of Internal Revenue to introduce exceptions and/or
conditions to the coverage of the law nor to disregard its provisions and substitute his own
personal judgment. (ING BANK N.V. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO.
167679. JULY 22, 2015)

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Qualified taxpayers with pending tax cases may still avail themselves of the tax amnesty program
under Republic Act No. 9480, otherwise known as the 2007 Tax Amnesty Act. Thus, the provision in
BIR Revenue Memorandum Circular No. 19-2008 excepting "issues and cases which were ruled by
any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer"
from the benefits of the law is illegal, invalid, and null and void. The duty to withhold the tax on
compensation arises upon its accrual. (ING BANK N.V., ENGAGED IN BANKING OPERATIONS IN
THE PHILIPPINES AS ING BANK N.V. MANILA BRANCH VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 167679, JULY 22, 2015, J. LEONEN)

The parties agreed to amicably settle all cases between them involving claims for tax refund/credit,
including the instant case. A review of the whereas clauses of the Universal Compromise Agreement
reveals the various court cases filed by petitioners, including this case, for the refund and/or
issuance of tax credit covering the local business taxes payments they paid to respondent City of
Manila pursuant to Section 21 of the latter’s Revenue Code. In this relation, it is observed that the
present case would have been rendered moot and academic had the parties informed the Court of
the UCA’s supervening execution. Be that as it may, and considering that: (a) the UCA appears to
have been executed in accordance with the requirements of a valid compromise agreement; (b) the
UCA was executed more than a year prior to the promulgation of the subject Decision; and (c) the
result of both the UCA and the subject Decision are practically identical, i.e., that petitioners are not
entitled to any tax refund/credit, the Court herein resolves to approve and adopt the pertinent
terms and conditions of the UCA insofar as they govern the settlement of the present dispute.
(METRO MANILA SHOPPING MECCA CORP., SHOEMART, INC., SM PRIME HOLDINGS, INC.,
STAR APPLIANCES CENTER, SUPER VALUE, INC., ACE HARDWARE PHILIPPINES, INC., HEAL TH
AND BEAUTY, INC., JOLLIMART PHILS. CORP.,
AND SURPLUS MARKETING CORPORATION VS. MS. LIBERTY M. TOLEDO, IN HER OFFICIAL
CAPACITY AS THE CITY TREASURER OF MANILA, AND THE CITY OF MANILA, G.R. NO. 190818.
NOVEMBER 10, 2014, J. PERLAS-BERNABE)

ASSESSMENT

A valid LOA does not necessarily clothe validity to an assessment issued on it, as when the revenue
officers designated in the LOA act in excess or outside of the authority granted them under said
LOA. In the present case, the subject LOA specified that the examination should be for the taxable
year 1998 only but the subsequent assessment issued against Lancaster involved disallowed
expenses covering the next fiscal year, or the period ending 31 March 1999. The taxable year
covered by the assessment being outside of the period specified in the LOA in this case, the
assessment issued against Lancaster is void. (COMMISSIONER OF INTERNAL REVENUE VS.
LANCASTER PHILIPPINES, INC.; G.R. NO. 183408; JULY 12, 2017; J. MARTIRES)

An assessment issued without an LOA is void for violating the taxpayer’s right to due process. The
examination of a taxpayer who has already filed his tax returns is a power that statutorily belongs
only to the CIR himself or his duly authorized representatives (Section 6, NIRC). There must be a
grant of authority, through an LOA, before any revenue officer can conduct an examination or
assessment and that such officer so authorized must not go beyond the authority given. Otherwise,
the assessment or examination shall be void. The circumstances contemplated under Section 6
where the taxpayer may be assessed through best-evidence obtainable, inventory-taking, or
surveillance among others has nothing to do with the LOA. These are simply methods of examining

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the taxpayer in order to arrive at the correct amount of taxes. (MEDICARD PHILIPPINES, INC. VS.
COMMISSIONER OF INTERNAL REVENUE; G.R. NO. 222743; APRIL 5, 2017; J. REYES)

The Court cannot convert the Letter Notice (LN) into the LOA required by law even if the same was
issued by the CIR himself. They serve a different purpose and their differences are crucial: First, an
LOA addressed to a revenue officer is specifically required under the NIRC before examination may
be had, while the LN is not found in the NIRC and serves as a notice to the taxpayer that a
discrepancy is found based on the BIR’s RELIEF System. Second, an LOA is valid only for 30 days
from date of issue, while LN has no such limitation. Third, an LOA gives the revenue officer only a
period of 10 days from receipt of LOA to conduct his examination of the taxpayer, whereas an LN
does not contain such limitation. (MEDICARD PHILIPPINES, INC. VS. COMMISSIONER OF
INTERNAL REVENUE; G.R. NO. 222743; APRIL 5, 2017; J. REYES)

LOA is required even without physical examination of the taxpayer’s financial books or records. The
LOA cannot be dispensed with just because none of the financial books or records being physically
kept by MEDICARD was examined. The authorization required under Section 6 of the NIRC is not
dependent on whether the taxpayer may be required to physically open his books and financial
records but only on whether the taxpayer is being subject to examination. (MEDICARD
PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE; G.R. NO. 222743; APRIL 5,
2017; J. REYES)

It was incumbent upon EBCC to prove that the deficiency tax assessment had no legal or factual
basis or that it had already paid or remitted the deficiency tax assessment as it is the taxpayer that
has the burden of proof to impugn the validity and correctness of the disputed deficiency tax
assessment upon filing of the Petition for Review with the CTA. It is a basic rule in evidence that the
person who alleges payment has the burden of proving that payment has indeed been made. More
so, in cases filed before the CTA, which are litigated de nova, party-litigants must prove every
minute aspect of their case. (EDISON (BATAAN) COGENERATION CORP. VS. CIR/REPUBLIC OF
THE PHILIPPINES REPRESENTED BY THE CIR VS. EDISON (BATAAN) COGENERATION CORP.;
G.R. NO. 201665/201668; August 30, 2017; J. DEL CASTILLO)

As stated by the CTA, the BIR cannot shift the blame to the taxpayer for issuing defective waivers.
The Court has ruled that the BIR cannot hide behind the doctrine of estoppel to cover its failure to
comply with RMO 20-90 and RDAO 05-01 which were issued by the BIR itself. A waiver of the
statute of limitations is a derogation of the taxpayer's right to security against prolonged and
unscrupulous investigations and thus, it must be carefully and strictly construed. Since the three
Waivers in this case are defective, they do not produce any effect and did not suspend the three-
year prescriptive period under Section 203 of the NIRC. (CIR VS. PHILIPPINE DAILY INQUIRER,
GR NO. 213943, MARCH 22, 2017, CARPIO, J.)

Tax assessments should first go through appropriate tax proceedings prescribed by law. The
present case is neither the proper venue nor the forum to determine the validity of these alleged
pending tax assessments or to declare its inclusion in the computation of just compensation
inasmuch as these were not presented before the lower courts. (REPUBLIC OF THE PHILIPPINES
VS. HON. JESUS MUPAS, G.R. NO. 181892, APRIL 19, 2016, J. BRION)

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A notice of assessment fixes and determines the tax liabilty of a taxpayer and is a notice to the effect
that the amount stated therein is due as tax and a demand to pay thereof. A notice of assessment as
provided for in the Real Property Tax Code should effectively inform the taxpayer of the value of a
specific property, or proportion thereof subject to tax, including the discovery, listing, classification,
and appraisal of properties. Nowhere does the resolution state that the tax declarations can be
considered as notices of assessment. (ROMEO PUCYUTAN, FOR AND IN BEHALF OF THE CITY OF
MUNTINLUPA, METRO MANILA AS ITS TREASURER VS. MANILA ELECTRIC COMPANY, G.R. NO.
197136, APRIL 18, 2016, J. PERALTA)

A "decision" differs from an "assessment" and failure of the FDDA to state the facts and law on
which it is based renders the decision void - but not necessarily the assessment. RR No. 12-99
where it is stated that failure of the FDDA to reflect the facts and law on which it is based will make
the decision void does not extend to the nullification of the entire assessment. Tax laws may not be
extended by implication beyond the clear import of their language, nor their operation enlarged so
as to embrace matters not specifically provided. (COMMISSIONER OF INTERNAL REVENUE VS.
LIQUIGAZ PHILIPPINES CORPORATION, G.R. NO. 215534 AND G.R. NO. 215557, APRIL 18,
2016, J. MENDOZA)

Nevertheless, the appraisal and assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO as machinery under Tax Declaration Nos. 019-6500 and
019-7394 were not in accordance with the Local Government Code and in violation of the right to
due process of MERALCO and, therefore, null and void.

It appears that the City Assessor of Lucena simply lumped together all the transformers, electric
posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City under
Tax Declaration Nos. 019-6500 and 019-7394, contrary to the specificity demanded under Sections
224 and 225 of the Local Government Code for appraisal and assessment of machinery. It is
apparent from these two provisions that every machinery must be individually appraised and
assessed depending on its acquisition cost, remaining economic life, estimated economic life,
replacement or reproduction cost, and depreciation. The City Assessor and the City Treasurer of
Lucena did not even provide the most basic information such as the number of transformers,
electric posts, insulators, and electric meters or the length of the transmission lines appraised and
assessed under Tax Declaration Nos. 019-6500 and 019-7394. There is utter lack of factual basis
for the assessment of the transformers, electric posts, transmission lines, insulators, and electric
meters of MERALCO. It is true that tax assessments by tax examiners are presumed correct and
made in good faith, with the taxpayer having the burden of proving otherwise. In this case,
MERALCO was able to overcome the presumption. (MANILA ELECTRIC COMPANY VS. THE CITY
ASSESSOR AND CITY TREASURER OF LUCENA CITY G.R. NO. 166102. AUGUST 5, 2015)

The notice requirement under Section 228 of the NIRC is substantially complied with whenever the
taxpayer had been fully informed in writing of the factual and legal bases of the deficiency taxes
assessment, which enabled the latter to file an effective protest. (SAMAR-I ELECTRIC
COOPERATIVE VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 193100, DECEMBER 10,
2014, J. VILLARAMA, JR.)

Spouses Manly were charged with tax evasion due to their under declaration of income in their ITR.
The investigation of the revenue officers shows that the under declaration exceeded 30% of the

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declared income of the spouses. The Spouses Manly opposed the said complaint due to the lack of
deficiency tax assessment. In this case, the Court ruled that tax evasion is deemed complete when
the violator has knowingly and willfully filed a fraudulent return with intent to evade and defeat a
part or all of the tax. Corollarily, an assessment of the tax deficiency is not required in a criminal
prosecution for tax evasion. However, in Commissioner of Internal Revenue v. Court of Appeals, we
clarified that although a deficiency assessment is not necessary, the fact that a tax is due must first
be proved before one can be prosecuted for tax evasion. (BUREAU OF INTERNAL REVENUE, AS
REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE VS. COURT OF APPEALS,
SPOUSES ANTONIO VILLAN MANLY, AND RUBY ONG MANLY, G.R. NO. 197590, NOVEMBER 24,
2014, J. DEL CASTILLO)

PRESCRIPTIVE PERIOD OF ASSESSMENT

Section 203 of the NIRC of 1997, as amended, limits the CIR's period to assess and collect internal
revenue taxes to three (3) years counted from the last day prescribed by law for the filing of the
return or from the day the return was filed, whichever comes later. Thus, assessments issued after
the expiration of such period are no longer valid and effective. The primary reason behind the
prescriptive period on the CIR's right to assess or collect internal revenue taxes: that is, to
safeguard the interests of taxpayers from unreasonable investigation. (COMMISSIONER OF
INTERNAL REVENUE VS. SYSTEMS TECHNOLOGY INSTITUTE, INC.; G.R. NO. 220835; JULY 26
2017; J. CAGUIOA)

Section 203 of the NIRC, the prescriptive period to assess is set at three years. This rule is subject to
the exceptions provided under Section 222 of the NIRC. In Commissioner of Internal Revenue v.
Javier, this Court ruled that fraud is never imputed. The Court stated that it will not sustain findings
of fraud upon circumstances which, at most, create only suspicion. The Court added that the mere
understatement of a tax is not itself proof of fraud for the purpose of tax evasion. Thus, while the
filing of a fraudulent return necessarily implies that the act of the taxpayer was intentional and
done with intent to evade the taxes due, the filing of a false return can be intentional or due to
honest mistake. In CIR v. B.F. Goodrich Phils., Inc., the Court stated that the entry of wrong
information due to mistake, carelessness, or ignorance, without intent to evade tax, does not
constitute a false return. In this case, we do not find enough evidence to prove fraud or intentional
falsity on the part of PDI. Indeed, the Waivers executed by the BIR and PDI were meant to extend
the three-year prescriptive period, and would have extended such period were it not for the defects
found by the CTA. This further shows that at the outset, the BIR did not find any ground that would
make the assessment fall under the exceptions. Clearly, the defects in the Waivers resulted to the
non-extension of the period to assess or collect taxes, and made the assessments issued by the BIR
beyond the three-year prescriptive period void. (CIR VS. PHILIPPINE DAILY INQUIRER, GR NO.
213943, MARCH 22, 2017, CARPIO, J.)

Generally, internal revenue taxes shall be assessed within three (3) years after the last day
prescribed by law for the filing of the return, or where the return is filed beyond the period, from
the day the return was actually filed. Section 222 of the NIRC, however, provides for exceptions to
the general rule. It states that in the case of a false or fraudulent return with intent to evade tax or
of failure to file a return, the assessment may be made within ten (10) years from the discovery of
the falsity, fraud or omission. Thus, a mere showing that the returns filed by the taxpayer were

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false, notwithstanding the absence of intent to defraud, is sufficient to warrant the application of
the ten (10) year prescriptive period under Section 222 of the NIRC. Under Section 248(B) of the
NIRC, there is a prima facie evidence of a false return if there is a substantial underdeclaration of
taxable sales, receipt or income. The failure to report sales, receipts or income in an amount
exceeding 30% what is declared in the returns constitute substantial underdeclaration. In other
words, when there is a showing that a taxpayer has substantially underdeclared its sales, receipt or
income, there is a presumption that it has filed a false return. As such, the CIR need not immediately
present evidence to support the falsity of the return, unless the taxpayer fails to overcome the
presumption against it. (COMMISSIONER OF INTERNAL REVENUE VS. ASALUS CORPORATION,
G.R. NO. 221590, FEBRUARY 22, 2017, MENDOZA, J.)

It is true that neither the FAN nor the FDDA explicitly stated that the applicable prescriptive period
was the ten (10)-year period set in Section 222 of the NIRC. They, however, made reference to the
PAN, which categorically stated that "[t]he running of the three-year statute of limitation as
provided under Section 203 of the 1997 National Internal Revenue Code (NIRC) is not applicable
xxx but rather to the ten (10) year prescriptive period pursuant to Section 222(A) of the tax code
xxx." In Samar-I Electric Cooperative v. COMELEC, the Court ruled that it sufficed that the taxpayer
was substantially informed of the legal and factual bases of the assessment enabling him to file an
effective protest. Thus, substantial compliance with the requirement as laid down under Section
228 of the NIRC suffices, for what is important is that the taxpayer has been sufficiently informed of
the factual and legal bases of the assessment so that it may file an effective protest against the
assessment. (COMMISSIONER OF INTERNAL REVENUE VS. ASALUS CORPORATION, G.R. NO.
221590, FEBRUARY 22, 2017, MENDOZA, J.)

The CIR has three (3) years from the date of the actual filing of the return or from the last day
prescribed by law for the filing of the return, whichever is later, to assess internal revenue taxes.
Here, GJM filed its Annual Income Tax Return for the taxable year 1999 on April 12, 2000. The three
(3)-year prescriptive period, therefore, was only until April 15, 2003. The records reveal that the
BIR sent the FAN through registered mail on April 14, 2003, well-within the required period. The
Court has held that when an assessment is made within the prescriptive period, as in the case at
bar, receipt by the taxpayer may or may not be within said period. But it must be clarified that the
rule does not dispense with the requirement that the taxpayer should actually receive the
assessment notice, even beyond the prescriptive period. GJM, however, denies ever having received
any FAN. If the taxpayer denies having received an assessment from the BIR, it then becomes
incumbent upon the latter to prove by competent evidence that such notice was indeed received by
the addressee. Here, the onus probandi has shifted to the BIR to show by contrary evidence that
GJM indeed received the assessment in the due course of mail. It has been settled that while a
mailed letter is deemed received by the addressee in the course of mail, this is merely a disputable
presumption subject to controversion, the direct denial of which shifts the burden to the sender to
prove that the mailed letter was, in fact, received by the addressee. (COMMISSIONER OF
INTERNAL REVENUE VS. GJM PHILIPPINES MANUFACTURING, INC., GR. NO. 202695,
FEBRUARY 29, 2016, J. PERALTA)

The Court has held that when an assessment is made within the prescriptive period, as in the case
at bar, receipt by the taxpayer may or may not be within said period. But it must be clarified that
the rule does not dispense with the requirement that the taxpayer should actually receive the
assessment notice, even beyond the prescriptive period. If the taxpayer denies having received an

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assessment from the BIR, it then becomes incumbent upon the latter to prove by competent
evidence that such notice was indeed received by the addressee. Here, the onus probandi has
shifted to the BIR to show by contrary evidence that GJM indeed received the assessment in the clue
course of mail. It has been settled that while a mailed letter is deemed received by the addressee in
the course of mail, this is merely a disputable presumption subject to controversion, the direct
denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received
by the addressee. To prove the fact of mailing, it is essential to present the registry receipt issued by
the Bureau of Posts or the Registry return card which would have been signed by the taxpayer or its
authorized representative. (COMMISSIONER OF INTERNAL REVENUE VS. GJM PHILIPPINES
MANUFACTURING, INC., G.R. NO. 202695. FEBRUARY 29, 2016)

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 01-05, it is invalid and ineffective to extend the prescriptive period
to assess taxes. However, due to its peculiar circumstances, we shall treat this case as an exception
to this rule and find the Waivers valid for the reasons discussed below. First, the parties in this case
are in pari delicto or “in equal fault.” 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. Second, the Court has repeatedly pronounced that parties
must come to court with clean hands. 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. Finally, 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. (COMMISSIONER OF
INTERNAL REVENUE VS. NEXT MOBILE, INC., G.R. NO. 212825. DECEMBER 7, 2015)

A waiver is not automatically a renunciation of the right to invoke the defense of prescription. A
waiver of the Statute of Limitations is nothing more than “an agreement between the taxpayer and
the Bureau of Internal Revenue (BIR) that the period to issue an assessment and collect the taxes
due is extended to a date certain.” It is a bilateral agreement, thus necessitating the very signatures
of both the CIR and the taxpayer to give birth to a valid agreement. Furthermore, indicating in the
waiver the date of acceptance by the BIR is necessary in order to determine whether the parties
(the taxpayer and the government) had entered into a waiver “before the expiration of the time
prescribed in Section 203 (the three-year prescriptive period) for the assessment of the tax.” When
the period of prescription has expired, there will be no more need to execute a waiver as there will
be nothing more to extend. Hence, no implied consent can be presumed, nor can it be contended
that the concurrence to such waiver is a mere formality. (COMMISSIONER OF INTERNAL
REVENUE VS. STANDARD CHARTERED BANK, G.R. NO. 192173. JULY 29, 2015)

The assessment of the tax is deemed made and the three-year period for collection of the assessed
tax begins to run on the date the assessment notice had been released, mailed or sent by the BIR to
the taxpayer. Thus, failure of the BIR to file a warrant of distraint or serve a levy on taxpayer's
properties nor file collection case within the three-year period is fatal. Also, the attempt of the BIR
to collect the tax through its Answer with a demand for the taxpayer to pay the assessed DST in the
CTA is not deemed compliance with the Tax Code. (CHINA BANKING CORPORATION VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 172509, FEBRUARY 04, 2015, C.J. SERENO)

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Section 203 of the NIRC sets the three-year prescriptive period to assess. However the exceptions
are provided under Section 222 of the NIRC of 1997. In the case at bar, it was petitioner’s
substantial under declaration of withholding taxes in the amount of P2,690,850.91 which
constituted the “falsity” in the subject returns – giving respondent the benefit of the period under
Section 222 of the NIRC of 1997 to assess the correct amount of tax “at any time within ten (10)
years after the discovery of the falsity, fraud or omission. (SAMAR-I ELECTRIC COOPERATIVE
VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 193100. DECEMBER 10, 2014, J.
VILLARAMA JR.)

It is clear that the assailed deficiency tax assessment for the EWT in 1994 disregarded the
provisions of Section 228 of the [NIRC], as amended, as well as Section 3.1.4 of the Revenue
Regulations No. 12-99 by not providing the legal and factual bases of the assessment. Hence, the
formal letter of demand and the notice of assessment issued relative thereto are void. The statute of
limitations on assessment and collection of national internal taxes was shortened from five (5)
years to three (3) years by virtue of Batas Pambansa Blg. 700. Thus, [Petitioner CIR] has three (3)
years from the date of actual filing of the tax return to assess a national internal revenue tax or to
commence court proceedings for the collection thereof without an assessment. However, when it
validly issues an assessment within the three (3) year period, it has another three (3) years within
which to collect the tax due by distraint, levy, or court proceeding. (COMMISSIONER OF INTERNAL
REVENUE VS. UNITED SALVAGE AND TOWAGE (PHILS.), INC., G.R. NO. 197515, JULY 2, 2014, J.
PERALTA)

ASSESSMENT PROCESS
For a valid waiver of the statute of limitations for the assessment and collection of taxes under
Section 222(b) of the NIRC, the following procedures must be complied with: (1) The waiver must
be in the proper form prescribed by BIR issuance RMO 20- 90; (2) The waiver must be signed by
the taxpayer himself or his duly authorized representative; (3) The waiver should be duly
notarized; (4) The CIR or the revenue official authorized must sign the waiver indicating that the
BIR has accepted and agreed to the waiver; (5) Both the date of execution by the taxpayer and date
of acceptance by the Bureau should be before the expiration of the period of prescription or before
the lapse of the period agreed upon in case a subsequent agreement is executed; and (6) The waiver
must be executed in three copies.

These requirements are mandatory and must strictly be followed. Tested against the requirements
of RMO 20-90 and relevant jurisprudence, the Court cannot but agree with the CTA's finding that
the waivers subject of this case suffer from the following defects: (1)At the time when the first
waiver took effect, the period for the CIR to assess STI for deficiency EWT and deficiency VAT had
already prescribed; (2) STI's signatory to the three waivers had no notarized written authority
from the corporation's board of directors; and (3) the waivers in this case did not specify the kind
of tax and the amount of tax due.

Verily, considering the foregoing defects in the waivers executed by STI, the periods for the CIR to
assess or collect the alleged deficiency income tax, deficiency EWT and deficiency VAT were not
extended. The assessments subject of this case, which were issued by the BIR beyond the three-year
prescriptive, are therefore considered void and of no legal effect. (COMMISSIONER OF INTERNAL
REVENUE VS. SYSTEMS TECHNOLOGY INSTITUTE, INC.; G.R. NO. 220835; JULY 26 2017; J.
CAGUIOA)

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In this case the issue was whether or not the Trust Indenture Agreements entered into by Traders
Royal Bank and its clients constituted deposits or trusts. If it was a deposit then it will be subject to
documentary stamp tax. The Supreme Court held that the only way to determine the relationship
between the parties is to examine the terms and conditions provided under the actual indenture
agreement. However TRB failed to produce the actual agreement. In contrast, the BIR examiners
conducted a thorough audit and investigation of the books of account of TRB. The audit and
investigation resulted in the issuance of Assessment Notices against TRB for DST tax liabilities for
1996 and 1997, which were duly received by TRB. The tax assessments by tax examiners are
presumed correct and made in good faith. The taxpayer has the duty to prove otherwise. Therefore
the agreements were considered as deposits subject to DST. (COMMISSIONER OF INTERNAL
REVENUE VS, TRADERS ROYAL BANK, G.R. NO. 167134. MARCH 18, 2015, J. LEONARDO-DE
CASTRO)

Petitioner questions the decision of the CTA holding that its right to assess respondent of its tax
deficiencies for the taxable year 1999 has already prescribed for its failure to send the Formal
Assessment Notice to respondent’s new address despite respondent’s failure to give petitioner a
formal written notice of its change of address. The SC ruled that despite the absence of a formal
written notice of respondent's change of address, the fact remains that petitioner became aware of
respondent's new address as shown by the documents replete in its records. As a consequence, the
running of the three-year period to assess respondent was not suspended and has already
prescribed. (COMMISSIONER OF INTERNAL REVENUE VS. BASF COATING + INKS PHILS., INC.,
G.R. NO. 198677, NOVEMBER 26, 2014, J. PERALTA)

COMMISSIONER’S ACTION EQUIVALENT TO DENIAL OF PROTEST

Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to act on the application,
the taxpayer affected may, within 30 days after the expiration of the 120-day period, appeal the
unacted claim with the CTA. If the Commissioner 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. In this
case, when TSC filed its administrative claim on 21 December 2005, the CIR had a period of 120
days, or until 20 April 2006, to act on the claim. However, the CIR failed to act on TSC’s claim within
this 120-day period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or within
30 days after the expiration of the 120-day period. Hence, the judicial claim was not prematurely
filed. (COMMISSIONER OF INTERNAL REVENUE VS. TEAM SUAL CORPORATION, G.R. NO.
205055, JULY 18, 2014, J. CARPIO)

COLLECTION

SUSPENSION OF COLLECTION OF TAXES

The CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1)
deposits the amount claimed; or (2) files a surety bond for not more than double the amount. The
surety bond amounting to P4,467,391,881.76 imposed by the CTA was within the parameters
delineated in Section 11 of R.A. 1125, as amended. The Court holds, however, that the CTA in
Division gravely abused its discretion under Section 11 because it fixed the amount of the bond at

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nearly five times the net worth of the petitioner without conducting a preliminary hearing to
ascertain whether there were grounds to suspend the collection of the deficiency assessment on the
ground that such collection would jeopardize the interests of the taxpayer. Moreover, Section 11 of
R.A. 1125, as amended, indicates that the requirement of the bond as a condition precedent to
suspension of the collection applies only in cases where the processes by which the collection
sought to be made by means thereof are carried out in consonance with the law, not when the
processes are in plain violation of the law that they have to be suspended for jeopardizing the
interests of the taxpayer. (TRIDHARMA MARKETING CORPORATION vs. COURT OF TAX
APPEALS, SECOND DIVISION, AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. No.
215950, June 20, 2016, J. BERSAMIN)

PRESCRIPTIVE PERIOD

There is a distinction between a request for reconsideration and a request for reinvestigation. A
reinvestigation which entails the reception and evaluation of additional evidence will take more
time than a reconsideration of a tax assessment, which will be limited to the evidence already at
hand; this justifies why the reinvestigation can suspend the running of the statute of limitations on
collection of the assessed tax, while the reconsideration cannot. Hence, the period for BIR to collect
the deficiency DST already prescribed as the protest letter of BPI was a request for reconsideration,
which did not suspend the running of the prescriptive period to collect. (BANK OF THE
PHILIPPINE ISLANDS VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 181836, JULY 9,
2014, J. CARPIO)

TAX EXEMPTIONS

In CIR v. Philippine Airlines, Inc., this Court ruled that Section 13 of PD no. 1590 is clear and
unequivocal in exempting PAL from all taxes other than the basic corporate income tax or the 2%
franchise tax. Despite amendments to the NIRC, PAL remains exempt from all other taxes, duties,
royalties, registrations, licenses, and other fees and charges, provided it pays the corporate income
tax as granted in its franchise agreement. It further emphasized that no explicit repeals were made
on PD no. 1590. Necessarily, PAL remains exempt from tax on interest income earned from bank
deposits. Considering that PAL is not liable to pay the tax on interest income from bank deposits,
any payments made for that purpose are in excess of what is due from it. Thus, if PAL erroneously
paid for this tax, it is entitled to a refund. (PHILIPPINE AIRLINES, INC. VS. CIR/CRIR VS.
PHILIPPINE AIRLINES, INC.; G.R. NO. 206079-80/206309; JANUARY 17, 2018; J. LEONEN)

We take judicial notice that on 25 July 2016, the present CIR Caesar R. Dulay issued RMO No. 44-
2016. It is clear and unmistakable from the aforequoted constitutional provision that non-stock,
non-profit educational institutions are constitutionally exempt from tax on all revenues derived in
pursuance of its purpose as an educational institution and used actually, directly and exclusively for
educational purposes. This constitutional exemption gives the non-stock, non-profit educational
institutions a distinct character. And for the constitutional exemption to be enjoyed, jurisprudence
and tax rulings affirm the doctrinal rule that there are only two requisites:
(1) The school must be non-stock and non-profit; and
(2) The income is actually, directly and exclusively used for educational purposes.

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There are no other conditions and limitations. In this light, the constitutional conferral of tax
exemption upon non-stock and non-profit educational institutions should not be implemented or
interpreted in such a manner that will defeat or diminish the intent and language of the
Constitution. (HON. KIM S. JACINTO-HENARES VS. ST. PAUL COLLEGE OF MAKATI, G.R. NO.
215383, MARCH 8, 2017, CARPIO, J.)

Section 13 of PD No. 1869 evidently states that payment of the 5% franchise tax by PAGCOR and its
contractees and licensees exempts them from payment of any other taxes, including corporate
income tax. This provision providing for the said exemption was neither amended nor repealed by
any subsequent laws (i.e. Section 1 of R.A. No. 9337 which amended Section 27(C) of the NIRC of
1997); thus, it is still in effect. Guided by the doctrinal teachings in resolving the case at bench, it is
without a doubt that, like PAGCOR, its contractees and licensees remain exempted from the
payment of corporate income tax and other taxes since the law is clear that said exemption inures
to their benefit. As the PAGCOR Charter states in unequivocal terms that exemptions granted for
earnings derived from the operations conducted under the franchise specifically from the payment
of any tax, income or otherwise, as well as any form of charges, fees or levies, shall inure to the
benefit of and extend to corporation(s), association(s), agency(ies), or individual(s) with whom the
PAGCOR or operator has any contractual relationship in connection with the operations of the
casino(s) authorized to be conducted under this Franchise, so it must be that all contractees and
licensees of PAGCOR, upon payment of the 5% franchise tax, shall likewise be exempted from all
other taxes, including corporate income tax realized from the operation of casinos. Plainly, too,
upon payment of the 5% franchise tax, petitioner's income from its gaming operations of gambling
casinos, gaming clubs and other similar recreation or amusement places, and gaming pools, defined
within the purview of the aforesaid section, is not subject to corporate income tax. (BLOOMBERRY
RESORTS AND HOTELS, INC, v. BUREAU OF INTERNAL REVENUE, REPRESENTED BY
COMMISSIONER KIM S. JACINTO-HENARES, G.R. No. 212530, August 10, 2016, J. PEREZ)

TAX REFUND/CREDIT

The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate or refund"
found in Section 112 (D) of the 1997 Tax Code properly refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA. All that is required under the law is that the
appeal to the CTA is brought within 30 days from either decision or inaction.

Under the foregoing interpretation, there may be two possible scenarios when an appeal to the CTA
is considered fatally defective even when initiated within the two-year prescriptive period: first,
when there is no decision and the appeal is taken prior to the lapse of the 120-day mandatory
period, except only the appeal within the window period from 10 December 2003 to 6 October
2010; second, the appeal is taken beyond 30 days from either decision or inaction "deemed a
denial." In contrast, an appeal outside the 2-year period is not legally infirm for as long as it is
taken within 30 days from the decision or inaction on the administrative claim that must have been
initiated within the 2-year prescriptive period. In other words, the appeal to the CTA is always
initiated within 30 days from decision or inaction regardless whether the date of its filing is within
or outside the 2-year period of limitation. To repeat, except only to the extent allowed by the
window period, there is no legal basis for the insistence that the simultaneous filing of both
administrative and judicial claims (pursuant to Section 112 of the Tax Code) is permissible for as
long as both fall within the 2-year prescriptive period. (AICHI FORGING COMPANY OF ASIA, INC.

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VS. COURT OF TAX APPEALS - EN BANC AND COMMISSIONER OF INTERNAL REVENUE; G.R.
193625; AUGUST 30, 2017; J. MARTIRES)

Excess input tax or creditable input tax is not an erroneously, excessively, or illegally collected tax
because the taxpayer pays the proper amount of input tax at the time it is collected. Hence, it is
Section 112(C) and not Section 229 of the National Internal Revenue Code that governs claims for
refund of creditable input tax. That a VAT-registered taxpayer incurs excess input tax does not
mean that it was wrongfully or erroneously paid. It simply means that the input tax is greater than
the output tax, entitling the taxpayer to carry over the excess input tax to the succeeding taxable
quarters. If the excess input tax is derived from zero-rated or effectively zero-rated transactions,
the taxpayer may either seek a refund of the excess or apply the excess against its other internal
revenue tax. (CE LUZON GEOTHERMAL POWER COMPANY, INC. VS. COMMISSIONER OF
INTERNAL REVENUE/REPUBLIC OF THE PHILIPPINES REPRESENTED BY BUREAU OF
INTERNAL REVENUE VS. CE LUZON GEOTHERMAL POWER COMPANY, INC.; G.R. NOS.
197526/199676-77; JULY 26, 2017; J. LEONEN)

Under Section 76 of the NIRC, there are two options available to the corporation whenever it
overpays its income tax for the taxable year:
1. to carry over and apply the overpayment as tax credit against the estimated quarterly
income tax liabilities of the succeeding taxable years until fully utilized; and
2. to apply for a cash refund or issuance of a tax credit certificate within the prescribed period.

The provision also provides that “Once the option to carry-over and apply the excess quarterly
income tax against income tax due for the taxable quarters of the succeeding taxable years has been
made, such option shall be considered irrevocable for that taxable period and no application for
cash refund or issuance of a tax credit certificate shall be allowed therefor.” A perfunctory reading
of the law unmistakably discloses that the irrevocable option referred to is the carry-over option
only. There appears nothing therein from which to infer that the other choice, i.e., cash refund or tax
credit certificate, is also irrevocable. If the intention of the lawmakers was to make such option of
cash refund or tax credit certificate also irrevocable, then they would have clearly provided so.
(UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC VS. CIR; G.R. No. 205955;
March 7, 2018; J. MARTIRES)

Aside from the uncompromising last sentence of Section 76, Section 228 of the NIRC recognizes
such freedom of a taxpayer to change its option from refund to carry-over. This law affords the
government a remedy by means of an assessment through the issuance of a FAN without a prior
PAN in case a taxpayer, who had previously claimed a refund or tax credit certificate (TCC) of
excess creditable withholding tax, subsequently applies such amount as automatic tax credit.
Section 228(c) contemplates a double recovery by the taxpayer of an overpaid income tax that
arose from an over-withholding of creditable taxes. In a case where the application for refund or
tax credit is still pending before the BIR, but the taxpayer had in the meantime automatically
carried over its excess creditable tax in the taxable quarters of the succeeding taxable year(s), the
only judicious course of action of the BIR is to deny the pending claim for refund. To insist on giving
due course to the refund claim only because it was the first option taken, and consequently
disallowing the automatic tax credit, is to encourage inefficiency or to suppress administrative
feasibility. It simply shows that the lawmakers never intended to make the choice of refund or tax

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credit certificate irrevocable. (UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC VS.
CIR; G.R. No. 205955; March 7, 2018; J. MARTIRES)

We have consistently ruled that claims for tax refunds, when based on statutes granting tax
exemption, partake of the nature of an exemption. Tax refunds and exemptions are exceptions
rather than the rule and for this reason are highly disfavored. Hence, in evaluating a claim for
refund, the rule of strict interpretation applies. This rule requires the claimant to prove not only his
entitlement to refund, but also his due observance of the reglementary periods within which he
must file his administrative and judicial claims for refund. Non-compliance with these substantive
and procedural due process requirements results in the denial of the claim. (COMMISSIONER OF
INTERNAL REVENUE VS. UNITED CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE
COOPERATIVE, G.R. NO. 209776, DECEMBER 7, 2016, J. BRION)

We therefore hold that respondent, as the statutory taxpayer who is directly liable to pay the excise
tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for
petroleum products sold to international carriers, the latter having been granted exemption from
the payment of said excise tax under Sec.135(a) of the NIRC. (COMMISSIONER OF INTERNAL
REVENUE VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 180402. FEBRUARY 10,
2016)

Pursuant to Section 112 of the National Internal Revenue Code (NIRC) of 1997 the requisites for
claiming unutilized/excess input VAT, except transitional input VAT, are as follows: 1)The
taxpayer-claimant is VAT registered; 2)The taxpayer-claimant is engaged in zero-rated or
effectively zero-rated sales; 3)There are creditable input taxes due or paid attributable to the zero-
rated or effectively zero-rated sales; 4)This input tax has not been applied against the output tax;
and 5)The application and the claim for a refund have been filed within the prescribed period.
(COMMISSIONER OF INTERNAL REVENUE VS. TOLEDO POWER COMPANY G.R. NOS. 195175 &
199645. AUGUST 10, 2015)

In both C.T.A. Case Nos. 7233 and 7294, the administrative claim for the refund of unutilized input
VAT attributable to the zero-rated or effectively zero-rated sales was timely filed on 23 December
2004, which was within two years from the close of the first and the second quarters of 2003 when
the sales were made. Similarly, this case also falls within the exception period by virtue of BIR
Ruling No. DA-489-03 as recognized in San Roque. In C.T.A. Case No. 7233, TPC filed its judicial
claim on 22 April 2005. In theory, the CTA does not have jurisdiction over the Petition, since it was
filed on the last day of the 120-day period for the CIR, or without waiting for the expiration of the
aforesaid period. However, BIR Ruling No. DA-489-03 allows this premature filing. TPC may claim
the benefits of that ruling in its Petition in C.T.A. Case No. 7233 for the refund of the unutilized input
VAT attributable to zero-rated or effectively zero-rated sales for the first quarter of 2003.
(COMMISSIONER OF INTERNAL REVENUE VS. TOLEDO POWER COMPANY G.R. NOS. 195175 &
199645. AUGUST 10, 2015)

The burden of proving entitlement to a tax refund is on the taxpayer. It is logical to assume that in
order to discharge this burden, the law intends the filing of an application for a refund to
necessarily include the filing of complete supporting documents to prove entitlement for the
refund. Otherwise, the mere filing of an application without any supporting document would be as
good as filing a mere scrap of paper. Besides, the taxpayer was already given two (2) years to

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determine its refundable taxes and complete the documents necessary to prove its claim. The
alleged completion of supporting documents after the filing of an application for an administrative
claim − and worse, after the filing of a judicial claim − is tantamount to legal maneuvering.
(HEDCOR, INC. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 207575. JULY 15, 2015)

For a claim for refund to be granted, the manner in proving it must be in accordance with the
prescribed rules of evidence. It would have been erroneous had the CTA En Banc relied on
petitioner's own Excise Tax Refund Computation Summary or the unsatisfactory explanation of its
lone witness to justify its claim for tax refund. As it has been said, time and again, that claims for tax
refunds are in the nature of tax exemptions which result in loss of revenue for the government.
Upon the person claiming an exemption from tax payments rests the burden of justifying the
exemption by words too plain to be mistaken and too categorical to be misinterpreted; it is never
presumed nor be allowed solely on the ground of equity. In addition, one who claims that he is
entitled to a tax refund must not only claim that the transaction subject of tax is clearly and
unequivocally not subject to tax -the amount of the claim must still be proven in the normal course,
in accordance with the prescribed rules on evidence. (FORTUNE TOBACCO CORPORATION VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 192024. JULY 1, 2015)

Those who claim for refund must not only prove its entitlement to the excess credits, but likewise
must prove that no carry-over has been made in cases where refund is sought. However, proving
that no carry-over has been made does not absolutely require the presentation of the quarterly
ITRs. With Winebrenner & Inigo Insurance Brokers, Inc. having complied with the requirements for
refund, and without the CIR showing contrary evidence other than its bare assertion of the absence
of the quarterly ITRs, copies of which are easily verifiable by its very own records, the burden of
proof of establishing the propriety of the claim for refund has been sufficiently discharged. Hence,
the grant of refund is proper. (WINEBRENNER & IÑIGO INSURANCE BROKERS, INC.
VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 206526, JANUARY 28, 2015, J.
MENDOZA)

The requirements for entitlement of a corporate taxpayer for a refund or the issuance of tax credit
certificate involving excess withholding taxes are as follows: 1) That the claim for refund was filed
within the two-year reglementary period pursuant to Sec. 229 of the NIRC; 2) When it is shown on
the ITR that the income payment received is being declared part of the taxpayer’s gross income;
and 3) When the fact of withholding is established by a copy of the withholding tax statement, duly
issued by the payor to the payee, showing the amount paid and income tax withheld from that
amount. Relevant to the instant case is requirements numbers 2 and 3, which were duly proved by
TPEC, as found by the courts a quo. With regard to the second requirement, it is fundamental that
the findings of fact by the CTA in Division are not to be disturbed without any showing of grave
abuse of discretion considering that the members of the Division are in the best position to analyze
the documents presented by the parties. Consequently, the Court adopts the findings of the CTA in
Division, which the CTA En Banc concurred with. (REPUBLIC OF THE PHILIPPINES,
REPRESENTED BY THE COMMISSIONER OF INTERNAL REVENUE VS. TEAM (PHILS.) ENERGY
CORPORATION (FORMERLY MIRANT PHILS ENERGY CORPORATION), G.R. NO. 188016,
JANUARY 14, 2015, J. BERSAMIN)

In this case, Duty Free Philippines claimed that it was exempted from the expanded withholding tax
under Revenue Regulation (R.R.) No. 6-94. The CTA Division ruled that Duty Free was not a tax-

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exempt entity in the absence of an express grant of tax exemption. Duty Free then directly appealed
to the Supreme Court under Rule 45. The Supreme Court said that Duty Free’s direct appeal to this
Court is fatal to its claim. Under RA 9282 Section 18, “A party adversely affected by a resolution of a
Division of the CTA on a motion for reconsideration or new trial, may file a petition for review with
the CTA en banc.” Clearly, the Supreme Court is without jurisdiction to review decisions rendered
by a division of the CTA, exclusive appellate jurisdiction over which is vested in the CTA en banc.
(DUTY FREE PHILIPPINES VS. BUREAU OF INTERNAL REVENUE, REPRESENTED BY HON.
ANSELMO G. ADRIANO, ACTING REGIONAL DIRECTOR, REVENUE REGION NO. 8, MAKATI CITY,
G.R NO. 197228, OCTOBER 8, 2014. SERENO.)

The certificate of creditable tax withheld at source is the competent proof to establish the fact that
taxes are withheld. It is not necessary for the person who executed and prepared the certificate of
creditable tax withheld at source to be presented and to testify personally to prove the authenticity
of the certificates. In Banco Filipino Savings and Mortgage Bank v. Court of Appeals, this court
declared that a certificate is complete in the relevant details that would aid the courts in the
evaluation of any claim for refund of excess creditable withholding taxes. In fine, the document
which may be accepted as evidence of the third condition, that is, the fact of withholding, must
emanate from the payor itself, and not merely from the payee, and must indicate the name of the
payor, the income payment basis of the tax withheld, the amount of the tax withheld and the nature
of the tax paid. (COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE NATIONAL BANK,
G.R. NO. 180290 SEPTEMBER 29, 2014, J. LEONEN)

Tax refunds are based on the general premise that taxes have either been erroneously or
excessively paid. Though the Tax Code recognizes the right of taxpayers to request the return of
such excess/erroneous payments from the government, they must do so within a prescribed period.
Further, "a taxpayer must prove not only his entitlement to a refund, but also his compliance with
the procedural due process as non-observance of the prescriptive periods within which to file the
administrative and the judicial claims would result in the denial of his claim." In the case at bar,
MERALCO had ample opportunity to verify on the tax-exempt status of NORD/LB for purposes of
claiming tax refund. Nevertheless, it only filed its claim for tax refund ten (10) months from the
issuance of the aforesaid Ruling. (COMMISSIONER OF INTERNAL REVENUE VS. MANILA
ELECTRIC COMPANY (MERALCO), G.R. NO. 181459, JUNE 9, 2014, J. PERALTA)

Under the first option, any tax on income that is paid in excess of the amount due the government
may be refunded, provided that a taxpayer properly applies for the refund. On the other hand, the
second option works by applying the refundable amount against the tax liabilities of the petitioner
in the succeeding taxable years. Hence, instead of moving for the issuance of a writ of execution
relative to the aforesaid decision, petitioner should have merely requested for the approval of the
City of Manila in implementing the tax refund or tax credit, whichever is appropriate. In other
words, no writ was necessary to cause the execution thereof, since the implementation of the tax
refund will effectively be a return of funds by the City of Manila in favor of petitioner while a tax
credit will merely serve as a deduction of petitioner’s tax liabilities in the future. Accordingly, while
we find merit in petitioner’s contention that there are two (2) ways by which respondents may
satisfy the judgment of the RTC-Manila: (1) to pay the petitioner the amount of Php3,036,887.33 as
tax refund; or (2) to issue a tax credit certificate in the same amount which may be credited by
petitioner from its future tax liabilities due to the respondent City of Manila, the issuance of the
Writ of Execution relative thereto was superfluous, because the judgment of the RTC-Manila can

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neither be considered a judgment for a specific sum of money susceptible of execution by levy or
garnishment under Section 9,Rule 39 of the Rules of Court nor a special judgment under Section 11,
Rule 39 thereof. (COCA-COLA BOTTLER’S PHILIPPINES, INC. VS. CITY OF MANILA, ET AL., G.R.
NO. 197561, APRIL 7, 2014, J. PERALTA)

There are three essential conditions for the grant of a claim for refund of creditable withholding
income tax, to wit: (1) the claim is filed with the Commissioner of Internal Revenue within the two-
year period from the date of payment of the tax; (2) it is shown on the return of the recipient that
the income payment received was declared as part of the gross income; and (3) the fact of
withholding is established by a copy of a statement duly issued by the payor to the payee showing
the amount paid and the amount of the tax withheld therefrom. (COMMISSIONER OF INTERNAL
REVENUE VS. TEAM [PHILIPPINES] OPERATIONS CORPORATION [FORMERLY MIRANT
(PHILS) OPERATIONS CORPORATION], G.R. NO. 179260, APRIL 2, 2014, J. PEREZ)

In Banco Filipino Savings and Mortgage Bank v. Court of Appeals, the Supreme Court laid down the
three essential conditions for the grant of a claim for refund of creditable withholding income tax,
namely: (1) the claim is filed with the Commissioner of Internal Revenue within the two-year
period from the date of payment of the tax; (2) it is shown on the return of the recipient that the
income payment received was declared as part of the gross income; and (3) the fact of withholding
is established by a copy of a statement duly issued by the payor to the payee showing the amount
paid and the amount of the tax withheld therefrom. (COMMISSIONER OF INTERNAL REVENUE,
VS. TEAM [PHILIPPINES] OPERATIONS CORPORATION [FORMERLY MIRANT (PHILS)
OPERATIONS CORPORATION], G.R. NO. 179260, APRIL 2, 2014, J. PEREZ)

Neither the law nor the implementing rules state that a court ruling that has not attained finality
would preclude the availment of the benefits of the Tax Amnesty Law. While tax amnesty, similar to
a tax exemption, must be construed strictly against the taxpayer and liberally in favor of the taxing
authority, it is also a well-settled doctrine that the rule-making power of administrative agencies
cannot be extended to amend or expand statutory requirements or to embrace matters not
originally encompassed by the law. Administrative regulations should always be in accord with the
provisions of the statute they seek to carry into effect, and any resulting inconsistency shall be
resolved in favor of the basic law. (CS GARMENT, INC., VS. COMMISSIONER OF INTERNAL
REVENUE, G.R. NO. 182399, MARCH 12, 2014, CJ. SERENO)

A tax credit or refund is strictly construed against the taxpayer. Strict compliance with the
mandatory and jurisdictional conditions prescribed by law to claim such tax refund or credit is
essential and necessary for such claim to prosper. Noncompliance with the mandatory periods,
nonobservance of the prescriptive periods, and nonadherence to exhaustion of administrative
remedies bar a taxpayer’s claim for tax refund or credit, whether or not the CIR questions the
numerical correctness of the claim of the taxpayer. (SILICON PHILIPPINES, INC., (FORMERLY
INTEL PHILIPPINES MANUFACTURING INC.), VS. COMMISSIONER OF INTERNAL REVENUE,
G.R. NO. 184360 & 184361/COMMISSIONER OF INTERNAL REVENUE VS. SILICON
PHILIPPINES, INC., (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) G.R. NO. 184384,
FEBRUARY 19, 2014, J. VILLARAMA, JR.)

Pilipinas Shell, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum
products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to

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international carriers, the latter having been granted exemption from the payment of said excise tax
under Sec. 135 (a) of the NIRC. (COMMISSIONER OF INTERNAL REVENUE VS. PILIPINAS SHELL
PETROLEUM CORPORATION, G.R. NO. 188497, FEBRUARY 19, 2014, J. VILLARAMA JR.)

TAX AMNESTY

R.A. No. 9480 governs the tax amnesty program for national internal revenue taxes for the taxable
year 2005 and prior years. Upon the taxpayer's full compliance with the requirements submitted to
the Bureau of Internal Revenue (BIR) and subsequent payment of the applicable amnesty tax, the
taxpayer is immediately entitled to the enjoyment of the immunities and privileges of the tax
amnesty program.

But when: (a) the taxpayer fails to file a SALN and the Tax Amnesty Return; or (b) the net worth of
the taxpayer in the SALN as of December 31, 2005 is proven to be understated to the extent of 30%
or more, the taxpayer shall cease to enjoy these immunities and privileges. Otherwise, the
taxpayer's SALN is presumed true and correct pursuant to Section 4 of R.A. No. 9480. The tax
amnesty law thus places the burden of overturning this presumption to the parties who claim that
there was an under declaration of the taxpayer's net worth.

While the columns for Reference and Basis for Valuation were indeed left blank, CEPHI attached
schedules to its SALN, both original and amended, which provide the required information under
R.A. No. 9480 and its implementing rules and regulations. CEPHI completed the requirements and
paid the corresponding amnesty tax, it is considered to have totally complied with the tax amnesty
program. As a matter of course, CEPHI is entitled to the immediate enjoyment of the immunities
and privileges of the tax amnesty Program. While tax amnesty is in the nature of a tax exemption,
which is strictly construed against the taxpayer, the Court cannot disregard the plain text of R.A. No.
9480. (CIR Vs. Covanta Energy Philippine Holdings, Inc.; G.R. 203160; January 24, 2018; J.
REYES, JR.)

STATUTORY BASIS FOR TAX REFUND UNDER THE TAX CODE

Prescriptive Period for Recovery of Tax

Under Section 204 of the NIRC, as amended, no credit or refund of taxes or penalties shall be
allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund
within two (2) years after the payment of the tax or penalty: Provided, however, that a return filed
showing an overpayment shall be considered as a written claim for credit or refund. A claimant for
refund must first file an administrative claim for refund before the CIR, prior to filing a judicial
claim before the CTA. Notably, both the administrative and judicial claims for refund should be filed
within the two (2)-year prescriptive period. As per Section 229 of the NIRC, the claimant is allowed
to file the latter even without waiting for the resolution of the former in order to prevent the
forfeiture of its claim through prescription. In cases involving a final withholding tax, the 2-year
period commences to run from the time the refund is ascertained, i.e., the date such tax was paid,
and not upon the discovery by the taxpayer of the erroneous or excessive payment of taxes. On the
other hand, in cases involving corporate income taxes, the period is reckoned from the time the
Final Adjustment Return or the Annual Income Tax Return was filed since only then would it be

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possible to determine whether it paid an amount exceeding its annual income tax liability. The six
(6)-year period provided under the principle of solutio indebiti does not apply in tax refund cases
because there is a binding relation between the taxing authority and the withholding agent.
Moreover, the NIRC, a special law, explicitly provides for a mandatory period for claiming a refund
or taxes erroneously paid. (METROPOLITAN BANK & TRUST COMPANY VS. THE
COMMISSIONER OF INTERNAL REVENUE; G.R. NO. 182582; APRIL 17, 2017; J. PERLAS-
BERNABE)

UCSFA-MPC's claim for refund -grounded as it is on payments of advance VAT alleged to have been
illegally and erroneously collected from November 15, 2007 to February 13, 2009 -is governed by
Sections 204(C) and 229 of the NIRC. These provisions are clear: within two years from the date of
payment of tax, the claimant must first file an administrative claim with the CIR before filing its
judicial claim with the courts of law. Both claims must be filed within a two-year reglementary
period. Timeliness of the filing of the claim is mandatory and jurisdictional. The court cannot take
cognizance of a judicial claim for refund filed either prematurely or out of time. In the present case,
the court a quo found that while the judicial claim was filed merely five days after filing the
administrative claim, both claims were filed within the two-year reglementary period. Thus, the
CTA correctly exercised jurisdiction over the judicial claim filed by UCSFA-MPC. (COMMISSIONER
OF INTERNAL REVENUE vs. UNITED CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE
COOPERATIVE, G.R. NO. 209776, DECEMBER 7, 2016, J. BRION)

Section 229 of the Tax Code states that judicial claims for refund must be filed within two (2) years
from the date of payment of the tax or penalty, providing further that the same may not be
maintained until a claim for refund or credit has been duly filed with the Commissioner of Internal
Revenue (CIR). The primary purpose of filing an administrative claim was to serve as a notice of
warning to the CIR that court action would follow unless the tax or penalty alleged to have been
collected erroneously or illegally is refunded. To clarify, Section 229 of the Tax Code – [then Section
306 of the old Tax Code] – however does not mean that the taxpayer must await the final resolution
of its administrative claim for refund, since doing so would be tantamount to the taxpayer's
forfeiture of its right to seek judicial recourse should the two (2)-year prescriptive period expire
without the appropriate judicial claim being filed. (COMMISSIONER OF INTERNAL REVENUE v.
GOODYEAR PHILIPPINES, INC., G.R. No. 216130, AUGUST 03, 2016, J. PERLAS-BERNABE)

The administrative claim of a VAT-registered person for the issuance by CIR 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. The
judicial claim shall be filed within a period of 30 days after the receipt of respondent's decision or
ruling or after the expiration of the 120-day period, whichever is sooner. Aside from a 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 NIRC is outside the
jurisdiction of the CTA. (SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES

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MANUFACTURING, INC.) VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 182737,


MARCH 02, 2016, CJ SERENO)

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. Note that 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 respondent 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. (SILICON PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R.
No. 182737. MARCH 2, 2016)

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. Clearly, MPC's failure to observe the mandatory 120-day period
under the law was fatal to its immediate filing of a judicial claim before the CTA. It rendered the
filing of the CTA petition premature, and barred the tax court from acquiring jurisdiction over the
same. Thus, the dismissal of the petition is in order. (COMMISSIONER OF INTERNAL REVENUE vs.
MIRANT PAGBILAO CORPORATION, G.R. No. 180434. JANUARY 20, 2016)

The rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer
has thirty (30) days within which to submit the documentary requirements sufficient to
support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of
his complete documents to support his application, or expiration of the period given, the CIR has
120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date
of his filing, manifest that he no longer wishes to submit any other addition documents to
complete his administrative claim, the 120 day period allowed to the CIR begins to run from the
date of filing. (PILIPINAS TOTAL GAS, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
207112. DECEMBER 8, 2015)

Pursuant to Section 112 (A)(4) 2 and (D)(4)3 of the NIRC, a taxpayer has two (2) years from the
close of the taxable quarter when the zero-rated sales were made within which to file with the CIR
an administrative claim for refund or credit of unutilized input VAT attributable to such sales. The
CIR, on the other hand, has 120 days from receipt of the complete documents within which to act on
the administrative claim. Upon receipt of the decision, a taxpayer has 30 days within which to
appeal the decision to the CTA. However, if the 120-day period expires without any decision from
the CIR, the taxpayer may appeal the inaction to the CTA within 30 days from the expiration of the
120-day period. (COMMISSIONER OF INTERNAL REVENUE vs. TOLEDO POWER COMPANY, G.R.
No. 196415. DECEMBER 2, 2015)

The Court has observed that based on the records, Nippon's administrative claim for the first
taxable quarter of 2002 which closed on March 31, 2002 was already time-barred for being filed on
April 22, 2004, or beyond the two (2)-year prescriptive period pursuant to Section 112(A) of the

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National Internal Revenue Code of 1997. Although prescription was not raised as an issue, it is well-
settled that if the pleadings or the evidence on record show that the claim is barred by prescription,
the Court may motu proprio order its dismissal on said ground. (COMMISSIONER OF INTERNAL
REVENUE vs. NIPPON EXPRESS (PHILS.) CORPORATION, G.R. No. 212920. SEPTEMBER 16,
2015)

The records show that CE Luzon’s administrative and judicial claims were filed on November 30,
2006 and January 3, 2007, respectively, or during the period of effectivity of BIR Ruling No. DA-489-
03 and, thus, fell within the window period stated in San Roque, i.e., when taxpayer-claimants need
not wait for the expiration of the 120-day period before seeking judicial relief. Verily, the CTA En
Banc erred when it outrightly dismissed CE Luzon’s petition on the ground of prematurity. (CE
LUZON GEOTHERMAL POWER COMPANY, INC. vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 200841-42. AUGUST 26, 2015)

In this case, since the filing of the administrative claim was done within the period where BIR
Ruling No. DA-489-03 was recognized valid, TPC is not compelled to observe the 120-day waiting
period. Nevertheless, it should have filed the Petition within 30 days after the expiration of the
120-day period. San Roque recognized BIR Ruling No. DA-489-03 which allowed the premature
filing of a judicial claim as an exception to the mandatory observance of the 120-day period. By
virtue of the doctrines laid down in San Roque, TPC should have filed its judicial claim from 23
December 2004 until 22 May 2005; however, it filed its Petition to the CTA only on 24 April 2006.
TPC lost its right to claim a refund or credit of its alleged excess input VAT attributable to zero-
rated or effectively zero-rated sales for taxable year 2004 by virtue of its own failure to observe the
prescriptive periods. (COMMISSIONER OF INTERNAL REVENUE vs. TOLEDO POWER COMPANY,
G.R. Nos. 195175 & 199645. AUGUST 10, 2015)

Pursuant to Section 112(C) of the NIRC, respondent had 120 days from the date of submission of
complete documents in support of the application within which to decide on the administrative
claim. Thereafter, the taxpayer affected by the CIR’s decision or inaction may appeal to the CTA
within 30 days from the receipt of the decision or from the expiration of the 120-day period.
Compliance with both periods is jurisdictional, considering that the 30-day period to appeal to the
CTA is dependent on the 120-day period. The period of 120 days is a prerequisite for the
commencement of the 30-day period to appeal. Strict compliance with the 120+30 day period is
necessary for a claim for a refund or credit of input VAT to prosper. An exception to that mandatory
period was, however, recognized in San Roque during the period between 10 December 2003,
when BIR Ruling No. DA-489-03 was issued, and 6 October 2010, when the Court promulgated
Aichi declaring the 120+30 day period mandatory and jurisdictional, thus reversing BIR Ruling No.
DA-489-03. (HEDCOR, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 207575. JULY
15, 2015)

For failure of Silicon to comply with the provisions of Section 112(C) of the NIRC, its judicial claims
for tax refund or credit should have been dismissed by the CTA for lack of jurisdiction. The Court
stresses that the 120/30-day prescriptive periods are mandatory and jurisdictional, and are not
mere technical requirements. (SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES
MANUFACTURING, INC.) vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 173241,
MARCH 25, 2015, J. LEONARDO-DE CASTRO)

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Gotesco’s relentless refusal to transfer registered ownership of the Ever Ortigas Commercial
Complex to PNB constitutes proof enough that Gotesco will not do any act inconsistent with its
claim of ownership over the foreclosed asset, including claiming the creditable tax imposed on the
foreclosure sale as tax credit and utilizing such amount to offset its tax liabilities. To do such would
run roughshod over Gotesco’s firm stance that PNB’s foreclosure on the mortgage was invalid and
that it remained the owner of the subject property. While perhaps it may be necessary to prove that
the taxpayer did not use the claimed creditable withholding tax to pay for his/its tax liabilities,
there is no basis in law or jurisprudence to say that BIR Form No. 2307 is the only evidence that
may be adduced to prove such non-use. (PHILIPPINE NATIONAL BANK vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 206019, MARCH 18, 2015, J. VELASCO JR.)

The CIR has 120 days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit
certificate. In case of failure on the part of the CIR to act on the application within the 120-day
period prescribed by law, the taxpayer has only has 30 days after the expiration of the 120-day
period to appeal the unacted claim with the CTA. Since petitioner’s judicial claim was filed before
the CTA only way beyond the mandatory 120+30 days to seek judicial recourse, such non-
compliance with the mandatory period of 30 days is fatal to its refund claim on the ground of
prescription. Consequently, the CTA has no jurisdiction over its judicial appeal considering that its
Petition for Review was filed out of time. Consequently, the claim for refund must be denied.
(NIPPON EXPRESS (PHILIPPINES) CORP. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No.
185666, FEBRUARY 04, 2015, J. PEREZ)

In Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore be
that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October
6, 2010 (when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day
period before it could file a judicial claim for refund of excess input VAT before the CTA. Before and
after the aforementioned period (i.e., December 10, 2003 to October 6, 2010), the observance of the
120-day period is mandatory and jurisdictional to the filing of such claim. (PANAY POWER
CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 203351, JANUARY 21,
2015, J. PERLAS-BERNABE)

A VAT-registered taxpayer need not wait for the lapse of the 120-day period to file a judicial claim
for unutilized VAT inputs before the CTA when the claim was filed on December 10, 2003 up to
October 6, 2010. If the claim is filed within those dates, the same shall not be considered
prematurely filed. In this case, records disclose that petitioner filed its administrative and judicial
claims for refund/credit of its input VAT in CTA Case No. 8082 on December 28, 2009 and March
30, 2010, respectively, or during the period when BIR Ruling No. DA-489-03 was in place, i.e., from
December 10, 2003 to October 6, 2010. As such, it need not wait for the expiration of the 120-day
period before filing its judicial claim before the CTA, and hence, is deemed timely filed. In view of
the foregoing, both the CTA Division and the CTA En Banc erred in dismissing outright petitioner’s
claim on the ground of prematurity. (MINDANAO II GEOTHERMAL PARTNERSHIP vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 204745, DECEMBER 08, 2014, J. PERLAS-
BERNABE)

In 1993, the BIR issued against respondent assessment notice for deficiency income tax for 1989. A
waiver of the defense of prescription was executed but it was not signed by the Commissioner or

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any of his authorized representatives and did not state the date of acceptance. The Court held that
the Commissioner’s right to collect has prescribed. The period to assess and collect deficiency taxes
may be extended only upon a written agreement between the Commissioner and the taxpayer prior
to the expiration of the three-year prescribed period. The BIR cannot claim the benefits of
extending the period when it was the BIR’s inaction which is the proximate cause of the defects of
the waiver. (COMMISSIONER OF INTERNAL REVENUE vs. THE STANLEY WORKS SALES
(PHILS.), INCORPORATED, G.R. No. 187589, DECEMBER 03, 2014, CJ. SERENO)

CBK Power filed its judicial claim for refund/credit just 20 days after it filed its administrative
claim. CTA En Banc dismissed the case for lack of jurisdiction as it failed to observe the mandatory
and jurisdictional 120-day period provided under Section 112 (D) of the National Internal Revenue
Code. The Court found that the CTA En Banc was incorrect. The Court recognized an exception in
which the existing BIR Ruling applicable to this case in which it held that taxpayer-claimant need
not wait for the lapse of the 120-day period before it could seek judicial relief. (CBK POWER
COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 198928, DECEMBER
03, 2014, J. PERLAS-BERNABE)

As an exception to the mandatory and jurisdictional nature of the 120+ 30 day period, judicial
claims filed between December 10, 2003 or from the issuance of BIR Ruling No. DA-489-03, up to
October 6, 2010 or the reversal of the ruling in Aichi, need not wait for the lapse of the 120+ 30 day
period in consonance with the principle of equitable estoppel. In the present case, Taganito filed its
judicial claim with the CTA on February 19, 2004, clearly within the period of exception of
December I 0, 2003 to October 6, 20 I 0. Its judicial claim was, therefore, not prematurely filed and
should not have been dismissed by the CTA En Banc. (TAGANITO MINING CORPORATION vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 198076, NOVEMBER 19, 2014, J. MENDOZA)

As a general rule, a taxpayer-claimant needs to wait for the expiration of the one hundred twenty
(120)-day period before it may be considered as "inaction" on the part of the Commissioner of
Internal Revenue (CIR). Thereafter, the taxpayer-claimant is given only a limited period of thirty
(30) days from said expiration to file its corresponding judicial claim with the CTA. However, with
the exception of claims made during the effectivity of BIR Ruling No. DA-489-03 (from 10 December
2003 to 5 October 2010), AT&T Communications has indeed properly and timely filed its judicial
claim covering the Second, Third, and Fourth Quarters of taxable year 2003, within the bounds of
the law and existing jurisprudence. The VAT invoice is the seller's best proof of the sale of the goods
or services to the buyer while the VAT receipt is the buyer's best evidence of the payment of goods
or services received from the seller. Thus, the High Court concluded that VAT invoice and VAT
receipt should not be confused as referring to one and the same thing. Certainly, neither does the
law intend the two to be used interchangeably. (AT&T COMMUNICATIONS SERVICES
PHILIPPINES, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 185969, NOVEMBER
19, 2014, J. PEREZ)

Aichi filed an application for tax credit/refund with the BIR on March 29, 2005. On 31 March 2005,
respondent filed judicial claim before the CTA. BIR contends that Aichi failed to observe the 120-
day reglementary period provided by NIRC for the CIR to act on the claim. In this issue the Supreme
court ruled that the Court agree with petitioner that the judicial claim was prematurely filed on 31
March 2005, since respondent failed to observe the mandatory 120day waiting period to give the
CIR an opportunity to act on the administrative claim. However, the Court ruled in San Roque that

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BIR Ruling No. DA-489-03 allowed the premature filing of a judicial claim, which means non-
exhaustion of the 120-day period for the Commissioner to act on an administrative claim. All
taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003
up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30
day periods are mandatory and jurisdictional. Therefore, respondent's filing of the judicial claim
barely two days after the administrative claim is acceptable, as it fell within the period during
which the Court recognized the validity of BIR Ruling No. DA-489-03. (COMMISSIONER OF
INTERNAL REVENUE vs. AICHI FORGING COMPANY OF ASIA, INC., G.R. No. 183421, OCTOBER
22, 2014, CJ SERENO)

Section 112 (D) (now renumbered as Section 112[C]) of RA 8424, which is explicit on
the mandatory and jurisdictional nature of the 120+30-day period, was already effective on January
1, 1998. That being said, and notwithstanding the fact that respondent's administrative claim had
been timely filed, the Court is nonetheless constrained to deny the averred tax refund or credit, as
its judicial claim therefore was filed beyond the 120+30-day period, and, hence - as earlier stated -
deemed to be filed out of time. As the records would show, the CIR had 120 days from the filing of
the administrative claim on July 21, 1999, or until November 18, 1999, to decide on respondent's
application. Since the CIR did not act at all, respondent had until December 18, 1999, the last day of
the 30-day period, to file its judicial claim. Respondent filed its petition for review with the
CTA only on January 9, 2001 and, thus, was one (1) year and 22 days late. (COMMISSIONER OF
INTERNAL REVENUE vs. BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR MINDANAO,
INC., G.R. No. 190021, OCTOBER 22, 2014, J. PERLAS-BERNABE)

The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the
two-year prescriptive period under Sec. 229, should be effective only from its promulgation on June
8, 2007 until its abandonment on [September 12, 2008] in Mirant. The Atlas doctrine was limited to
the reckoning of the two-year prescriptive period from the date of payment of the output VAT. The
Mirant ruling, which abandoned the Atlas doctrine, adopted the verba legis rule, thus applying Sec.
112(A) in computing the two-year prescriptive period in claiming refund or credit of input VAT.
Since July 23, 2008 falls within the window of effectivity of Atlas, CBK’s administrative claim for the
second quarter of 2006 was filed on time considering that it filed the original VAT return for the
second quarter on July 25, 2006. (CBK POWER COMPANY LIMITED vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 202066, SEPTEMBER 30, 2014, J. LEONEN)

As a general rule, compliance with the 120-day period stated in Section 112(D) of NIRC is
mandatory. However, a VAT-registered taxpayer claiming refund for input VAT may not wait for the
lapse of the 120-day period when the claim is filed between December 10, 2003 (the time of
promulgation of BIR Ruling No. DA-489-03) to October 6, 2010 (the time of promulgation of the
Aichi case). (TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE,
G.R. No. 197591, JUNE 18, 2014, J. PERLAS-BERNABE)

When a taxpayer seeking refund or tax credit under VAT files a judicial claim beyond the 30-day
period provided by the law, the same shall be dismissed for lack of jurisdiction. A taxpayer seeking
refund or tax credit under VAT must strictly follow the “120+30” rule to be entitled thereof,
otherwise, the claim shall be barred. In the present case, the respondent filed its administrative
claim on May 30, 2003. The petitioner CIR therefore had only until September 27, 2003 to decide
the claim, and following the petitioner’s inaction, the respondent had until October 27, 2003, the

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last day of the 30-day period to file its judicial claim. However, the respondent filed its judicial claim
with the CTA only on March 31, 2004 or 155 days late. Clearly, the respondent's judicial claim has
prescribed and the CTA did not acquire jurisdiction over the claim. (COMMISSIONER OF
INTERNAL REVENUE vs. MINDANAO II GEOTHERMAL PARTNERSHIP, G.R. No. 189440, JUNE
18, 2014, J. VILLARAMA, JR.)

The mandatory rule is that a judicial claim must be filed with the CTA within thirty (30) days from
the receipt of the Commissioner’s decision denying the administrative claim or from the expiration
of the 120–day period without any action from the Commissioner. Otherwise, said judicial claim
shall be considered as filed out of time. (COMMISSIONER OF INTERNAL REVENUE, vs. SILICON
PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.), G.R. No. 169778,
March 12, 2014, J. PEREZ)

What is important, as far as the present cases are concerned, is that the mere filing by a taxpayer of
a judicial claim with the CTA before the expiration of the 120-day period cannot operate to divest
the Commissioner of his jurisdiction to decide an administrative claim within the 120-day
mandatory period, unless the Commissioner has clearly given cause for equitable estoppel to apply
as expressly recognized in Section 246 of the Tax Code. (COMMISSIONER OF INTERNAL REVENUE
vs. TEAM SUAL CORPORATION (formerly MIRANT SUAL CORPORATION, G.R. No. 194105
February 5, 2014, J. REYES)

Under Section 112(C) of the NIRC, a taxpayer-claimant may only file a petition for review with the
CTA within 30 days from either: (1) the receipt of the decision of the CIR denying, in full or in part,
the claim for refund/tax credit; or (2) the lapse of the 120-day period given to the CIR to decide the
claim for refund/tax credit. The 120-day mandatory period may extend beyond the two-year
prescriptive period for filing a claim for refund/tax credit under Section 112(A) of the NIRC.
Consequently, the30-day period given to the taxpayer-claimant likewise need not fall under the
two-year prescriptive period. What matters is that the administrative claim for refund/tax credit of
unutilized input VAT is filed with the BIR within the two-year prescriptive period.
(COMMISSIONER OF INTERNAL REVENUE vs. TEAM SUAL CORPORATION (formerly MIRANT
SUAL CORPORATION), G.R. No. 194105, FEBRUARY 5, 2014, J. REYES)

TPI filed its third and fourth quarterly VAT returns for 2001 on October 25, 2001 and January 25,
2002, respectively. It then filed an administrative claim for refund of its unutilized input VAT for the
third and fourth quarters of 2001 on September 30, 2003. Thus, the CIR had 120 days or until
January 28, 2004, after the submission of TPI’s administrative claim and complete documents in
support of its application, within which to decide on its claim. Then, it is only after the expiration of
the 120-day period, if there is inaction on the part of the CIR, where TPI may elevate its claim with
the CTA within 30 days. In the present case, however, it appears that TPI’s judicial claims for refund
of its unutilized input VAT covering the third and fourth quarters of 2001 were prematurely filed
on October 24, 2003 and January 22, 2004, respectively. However, although TPI’s judicial claim for
the fourth quarter of 2001 has been filed prematurely, the most recent pronouncements of the
Court provide for a window wherein the same may be entertained. As held in the San Roque
ponencia, strict compliance with the 120+30 day mandatory and jurisdictional periods is not
necessary when the judicial claims are filed between December 10, 2003 (issuance of BIR Ruling
No. DA-489-03 which states that the taxpayer need not wait for the 120-day period to expire before
it could seek judicial relief) to October 6, 2010 (promulgation of the Aichi doctrine). Clearly,

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therefore, TPI’s refund claim of unutilized input VAT for the third quarter of 2001 was denied for
being prematurely filed with the CTA, while its refund claim of unutilized input VAT for the fourth
quarter of 2001 may be entertained since it falls within the exception provided in the Court’s most
recent rulings. (COMMISSIONER OF INTERNAL REVENUE vs. TOLEDO POWER, INC, G.R. No.
183880 JANUARY 20, 2014, J. PERALTA)

The taxpayer can file the appeal in one of two ways: (1) file the judicial claim within thirty days
after the Commissioner denies the claim within the 120-day period, or (2) file the judicial claim
within thirty days from the expiration of the 120-day period if the Commissioner does not act
within the 120-day period. Mindanao II filed its administrative claim for refund or credit for the
second, third, and fourth quarters of 2004 on 6 October 2005. The CIR, therefore, had a period of
120 days, or until 3 February 2006, to act on the claim. The CIR, however, failed to do so. Mindanao
II then could treat the inaction as a denial and appeal it to the CTA within 30 days from 3 February
2006, or until 5 March 2006. Mindanao II, however, filed a Petition for Review only on 21 July 2006,
138 days after the lapse of the 30-day period on 5 March 2006. The judicial claim was therefore
filed late. The CTA therefore lost jurisdiction over Mindanao Il’s claims for refund or credit.
(COMMISSIONER OF INTERNAL REVENUE vs. MINDANAO II GEOTHERMAL PARTNERSHIP G.R.
No. 1914498 JANUARY 15, 2014, CJ. SERENO)

While petitioner filed its administrative and judicial claims during the period of applicability of BIR
Ruling No. DA-489-03, it cannot claim the benefit of the exception period as it did not file its judicial
claim prematurely, but did so long after the lapse of the 30-day period following the expiration of
the 120-day period. Again, BIR Ruling No. DA-489-03 allowed premature filing of a judicial claim,
which means non-exhaustion of the 120-day period for the Commissioner to act on an
administrative claim, but not its late filing. For failure of petitioner to comply with the 120+30 day
mandatory and jurisdictional period, petitioner lost its right to claim a refund or credit of its alleged
excess input VAT. (CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. Nos.198729-30 JANUARY 15, 2014, CJ. SERENO)

In this case, petitioner filed its judicial claim for refund on April 18, 2007 or after the issuance of
BIR Ruling No. DA-489-03 on December 10, 2003 but before October 6, 2010, the date when the
Aichi case was promulgated. BIR Ruling No. DA-489-03 which is a general interpretative rule, was
issued in response to a query made, not by a particular taxpayer, but by a government agency
tasked with processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit
and Drawback Center of the Department of Finance. BIR ruling held that the taxpayer did not wait
for the lapse of the 120-day period to file for a judicial claim for refund. In the Aichi case, the Court
ruled that the 120-30-day period in Section 112 (C) of the NIRC is mandatory and its non-
observance is fatal to the filing of a judicial claim with the CTA. In this case, the Court explained that
if after the 120-day mandatory period, the Commissioner of Internal Revenue (CIR) fails to act on
the application for tax refund or credit, the remedy of the taxpayer is to appeal the inaction of the
CIR to the CTA within thirty (30) days. The judicial claim, therefore, need not be filed within the
two-year prescriptive period but has to be filed within the required 30-day period after the
expiration of the 120 days. Thus, even though petitioner’s judicial claim was prematurely filed
without waiting for the expiration of the 120-day mandatory period, the CTA may still take
cognizance of the instant case as it was filed within the period exempted from the 120-30-day
mandatory period. (TEAM ENERGY CORPORATION (formerly MIRANT PAGBILAO CORP.) vs.
COMMISSIONER OF INTERNAL REVENUE, G.R. No. 190928 JANUARY 13, 2014, J. PERALTA)

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GOVERNMENT REMEDIES

ADMINISTRATIVE REMEDIES

Section 229 of Presidential Decree (P.D.) No. 1158, the law in effect at the time of the disputed
assessment, stated that prior resort to the administrative remedies was necessary; otherwise, the
assessment would attain finality. Section 230 of P.D. No. 1158 allowed Alcantara to file his claim for
refund for the erroneously or illegally paid taxes. In this regard, such claim for refund was also a
prerequisite before any resort to the courts could be made to recover the erroneously or illegally
paid taxes. Yet, Alcantara immediately invoked the authority of the courts to protect his rights
instead of first going to the Commissioner of Internal Revenue for redress of his concerns about the
assessment and collection of taxes. His judicial recourse thus suffered from fatal prematurity
because his doing so rendered the assessment final. (DEMETRIO R. ALCANTARA vs. REPUBLIC OF
THE PHILIPPINES, G.R. No. 192536, March 15, 2017, BERSAMIN, J.)

The Supreme Court has upheld the validity of the BIR ruling, because the power to interpret rules
and regulations is not exclusive and may be delegated by the CIR to the Deputy Commissioner.
(PROCTOR AND GAMBLE ASIA PTE. LTD. vs. COMMISSIONER OF INTERNAL REVENUE, GR
204277, May 30, 2016, BRION, J.)

CBK Power raised the lone issue of whether or not an ITAD ruling is required before it can avail of
the preferential tax rate. On the other hand, the Commissioner claimed that CBK Power failed to
exhaust administrative remedies when it filed its petitions before the CTA First Division, and that
said petitions were not filed within the two-year prescriptive period for initiating judicial claims for
refund. The Court categorically held that the BIR should not impose additional requirements that
would negate the availment of the reliefs provided for under international agreements, especially
since said tax treaties do not provide for any prerequisite at all for the availment of the benefits
under said agreements. Nowhere and in no wise does the law imply that the Collector of Internal
Revenue must act upon the claim, or that the taxpayer shall not go to court before he is notified of
the Collector’s action. (CBK POWER COMPANY LIMITED vs. COMMISSIONER INTERNAL
REVENUE, G.R. Nos. 193383-84, JANUARY 14, 2015, J. PERLAS-BERNABE)

The issues raised before the Panel of Voluntary Arbitrators are: (1) whether the cash conversion of
the gasoline allowance shall be subject to fringe benefit tax or the graduated income tax rate on
compensation; and (2) whether the company wrongfully withheld income tax on the converted gas
allowance. The Voluntary Arbitrator has no competence to rule on the taxability of the gas
allowance and on the propriety of the withholding of tax. These issues are clearly tax matters, and
do not involve labor disputes. To be exact, they involve tax issues within a labor relations setting as
they pertain to questions of law on the application of Section 33 (A) of the NIRC. They do not
require the application of the Labor Code or the interpretation of the MOA and/or company
personnel policies. Furthermore, the company and the union cannot agree or compromise on the
taxability of the gas allowance. Taxation is the State’s inherent power; its imposition cannot be
subject to the will of the parties. If the union disputes the withholding of tax and desires a refund of
the withheld tax, it should have filed an administrative claim for refund with the CIR. Paragraph 2,
Section 4 of the NIRC expressly vests the CIR original jurisdiction over refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto, or other tax matters. (HONDA

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CARS PHILIPPINES, INC. vs. HONDA CARS TECHNICAL SPECIALIST AND SUPERVISORS UNION,
G.R. No. 204142, NOVEMBER 19, 2014, J. BRION)

There could be no presumption of the regularity of any administrative action which resulted in
depriving a taxpayer of his property through a tax sale. This is an exception to the rule that
administrative proceedings are presumed to be regular. This jurisprudential tenor clearly
demonstrates that the burden to prove compliance with the validity of the proceedings leading up
to the tax delinquency sale is incumbent upon the buyer or the winning bidder, which, in this case,
is Agojo. This is premised on the rule that a sale of land for tax delinquency is in derogation of
property and due process rights of the registered owner. In order to be valid, the steps required by
law must be strictly followed. Agojo must be reminded that the requirements for a tax delinquency
sale under the LGC are mandatory. Strict adherence to the statutes governing tax sales is imperative
not only for the protection of the taxpayers, but also to allay any possible suspicion of collusion
between the buyer and the public officials called upon to enforce the laws. (CORPORATE
STRATEGIES DEVELOPMENT CORP. and RAFAEL R. PRIETO vs. NORMAN A. AGOJO, G.R. No.
208740, NOVEMBER 19, 2014, J. MENDOZA)

Agriex Co. foreign corporation alleges that the Bureau of Customs exclusive original jurisdiction
over actual and physical possession of foreign shipments and thus RTC has no jurisdiction over
such. The court ruled that it is well settled that the Collector of Customs has exclusive jurisdiction
over seizure and forfeiture proceedings, and regular courts cannot interfere with his exercise
thereof or stifle or put it at naught. 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. Regional trial courts are devoid of any competence to pass upon
the validity or regularity of seizure and forfeiture proceedings conducted by the BOC and to enjoin
or otherwise interfere with these proceedings. Regional trial courts are precluded from assuming
cognizance over such matters even through petitions for certiorari, prohibition or mandamus.
(AGRIEX CO., LTD vs. HON. TITUS B. VILLANUEVA and HON. BILLY C. BIBIT G.R. No. 158150,
SEPTEMBER 10, 2014, J. BERSAMIN)

The CIR categorically admitted that it failed to formally offer the Preliminary Assessment Notices as
evidence. Worse, it advanced no justifiable reason for such fatal omission. Instead, it merely alleged
that the existence and due execution of the Preliminary Assessment Notices were duly tackled by
CIR’s witnesses. We hold that such is not sufficient to seek exception from the general rule
requiring a formal offer of evidence, since no evidence of positive identification of such Preliminary
Assessment Notices by petitioner’s witnesses was presented. (COMMISSIONER OF INTERNAL
REVENUE vs. UNITED SALVAGE AND TOWAGE (PHILS.), INC., G.R. No. 197515, JULY 2, 2014, J.
PERALTA)

JUDICIAL REMEDIES

The CTA has jurisdiction to rule on the issue of the scope of authority of the revenue officers to
conduct the examination of Lancaster’s books of accounts and accounting records. The law vesting
unto the CTA its jurisdiction is Section 7 of RA No. 1125, which provides that the jurisdiction of the
CTA is not limited only to cases which involve decisions or inactions of the CIR on matters relating

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to assessments or refunds but also includes other matters arising from the NIRC or related laws
administered by the BIR. It is clear that the issue on whether the revenue officers who had
conducted the examination on Lancaster exceeded their authority pursuant to LOA No. 00012289
may be considered as covered by the terms “other matters” under Section 7 of RA No. 1125 or its
amendment, RA No. 9282. The authority to make an examination or assessment, being a matter
provided for by the NIRC, is well within the exclusive appellate jurisdiction of the CTA.
(COMMISSIONER OF INTERNAL REVENUE VS. LANCASTER PHILIPPINES, INC.; G.R. NO.
183408; JULY 12, 2017; J. MARTIRES)

The CTA can resolve an issue which was not raised by the parties. Under Section 1, Rule 14 of AM
No. 05-11-07-CTA, or the Revised Rules of the Court of Tax Appeals, the CTA is not bound by the
issues specifically raised by the parties but may also rule upon related issues necessary to achieve
an orderly disposition of the case. Thus, the CTA Division was, therefore, well within its authority to
consider in its decision the question on the scope of authority of the revenue officers who were
named in the LOA even though the parties had not raised the same in their pleadings or
memoranda. (COMMISSIONER OF INTERNAL REVENUE VS. LANCASTER PHILIPPINES, INC.; G.R.
NO. 183408; JULY 12, 2017; J. MARTIRES)

In order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely
motion for reconsideration or new trial must first be filed with the CTA Division that issued the
assailed decision or resolution. Failure to do so is a ground for the dismissal of the appeal as the
word “must” indicates that the filing of a prior motion for reconsideration is mandatory, and not
merely directory. The same is true in the case of an amended decision. Section 3, Rule 14 of the
same rules defines an amended decision as “any action modifying or reversing a decision of the
Court En Bank or in Division.” As explained in CE Luzon Geothermal Power Company, Inc. v.
Commissioner of Internal Revenue, 768 SCRA 269 (2015), as amended decision is a different
decision, and thus, is a proper subject of a motion for reconsideration. In this case, the CIR’s failure
to move for a consideration of the Amended Decision of the CTA Division is a ground for the
dismissal of its Petition for Review before the CTA En Banc. Thus, the CTA En Banc did not err in
denying the CIR’s appeal on procedural grounds. (COMMISSIONER OF INTERNAL REVENUE VS.
ASIATRUST DEVELOPMENT BANK, INC.; G.R. NO. 201680-81; APRIL 19, 2017; J. DEL
CASTILLO)

In CIR v. Aichi Forging Company of Asia, Inc. (2010), the Court ruled that compliance with the
120+30-day periods is mandatory and jurisdictional and is fatal to the filing of a judicial claim with
the CTA. Subsequently, however, in CIR v. San Roque, et al (2013), the Court recognized as an
exception BIR Ruling No. DA-489-03, issued prior to the promulgation of Aichi, where the BIR
expressly allowed the filing of judicial claims with the CTA even before the lapse of the 120-day
period. The CIR is in estoppel because it had misled taxpayers into filing judicial claims with the
CTA even before the lapse of the mandatory period. In this case, P&G's judicial claims were deemed
timely filed and should not have been dismissed by the CTA. It filed its judicial claims for refund on
2007 or after the issuance of BIR Ruling No. DA-489-03, but before Aichi was promulgated. It falls
within the excepted period stated in San Roque. (PROCTER & GAMBLE ASIA PTE LTD. VS.
COMMISSIONER OF INTERNAL REVENUE; G.R. No. 205652; September 6, 2017; J CAGUIOA)

The CIR argues P&G cannot rely on BIR Ruling No. DA-489-03 as it is only permissible from the date
of its issuance, on December 10, 2003, until October 31, 2005, or prior to the effectively of Revenue

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Regulation 16-2005 which echoes the mandatory and jurisdictional nature of the 120-day period
under Section 112(C) of the NIRC. This issue was already addressed by the Court in CIR v. Deutsche
Knowledge Services, Pte. Ltd. reiterating that all taxpayers may rely upon BIR Ruling No. DA-489-
03, as a general interpretative rule, from the time of its issuance until its effective reversal in Aichi.
While RR 16-2005 may have re-established the necessity of the 120-day period, taxpayers cannot
be faulted for still relying on BIR Ruling No. DA-489-03 even after the issuance of RR 16-2005
because the issue on the mandatory compliance of the 120-day period was only brought before the
Court and resolved with finality in Aichi. (PROCTER & GAMBLE ASIA PTE LTD. VS.
COMMISSIONER OF INTERNAL REVENUE; G.R. No. 205652; September 6, 2017; J CAGUIOA)

While the Commissioner has the right to hear a refund claim first, if he or she fails to act on it, it will
be treated as a denial of the refund, and the Court of Tax Appeals is the only entity that may review
this ruling. This does not preclude the appellate court from considering evidence that was not
presented in the administrative claim in the Bureau of Internal Revenue in view of Republic Act No.
1125 stating that the Court of Tax Appeals is a court of record. Thus, the review of the Court of Tax
Appeals is not limited to whether or not the Commissioner committed gross abuse of discretion,
fraud, or error of law, as contended by the Commissioner. As evidence is considered and evaluated
again, the scope of the Court of Tax Appeals' review covers factual findings. (PHILIPPINE
AIRLINES, INC. VS. CIR/CRIR VS. PHILIPPINE AIRLINES, INC.; G.R. NO. 206079-80/206309;
JANUARY 17, 2018; J. LEONEN)

An application for tax abatement is considered approved only upon the issuance of a termination
letter: Section 204(B) of the 1997 National lnternal Revenue Code empowers the CIR to abate or
cancel a tax liability. Based on the guidelines, the last step in the tax abatement process is the
issuance of the termination letter. The presentation of the termination letter is essential as it proves
that the taxpayer's application for tax abatement has been approved. Thus, without a termination
letter, a tax assessment cannot be considered closed and terminated. (ASIATRUST DEVELOPMENT
BANK, INC. vs. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 201530, APRIL 19, 2017,
DEL CASTILLO, J.)

The complaint was brought to assail the assessment and collection made by the Commissioner of
Internal Revenue. Based on Republic Act No. 1125, prior to its amendment by Republic Act No.
9282, the CTA had exclusive appellate jurisdiction over the appeal of the decisions of the
Commissioner of Internal Revenue. Accordingly, the CA correctly dismissed Alcantara's appeal on
the ground of lack of jurisdiction to entertain the same. The erroneous appeal deserved no fate but
dismissal. Section 2, Rule 50 of the Rules of Court expressly states: "An appeal erroneously taken to
the Court of Appeals shall not be transferred to the appropriate court but shall be dismissed
outright." (DEMETRIO R. ALCANTARA vs. REPUBLIC OF THE PHILIPPINES, G.R. No. 192536
MARCH 15, 2017, BERSAMIN, J.)

We deem it proper to clarify the last sentence in the decision that "[i]t did not matter where the
RTC decision was appealed, whether before the C[ourt Of A[ppeals] or the C[ourt of T[ax]
A[ppeals]." Republic Act No. 9282, which amended Republic Act No. 1125, took effect on April 23,
2004, and significantly expanded the extent and scope of the cases that the Court of Tax Appeals
was tasked to hear and adjudicate. Under Section 7, paragraph (a)(3), the Court of Tax Appeals is
vested with the exclusive appellate jurisdiction over, among others, appeals from the "decisions,
orders or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by

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them in the exercise of their original or appellate jurisdiction." The case a quo is a local tax case that
is within the exclusive appellate jurisdiction of the Court of Tax Appeals. (NATIONAL POWER
CORPORATION vs. PROVINCIAL GOVERNMENT OF BATAAN, G.R. 180654, MARCH 6, 2017,
LEONEN, J.)

The CTA is a highly specialized body that reviews tax cases and conducts trial de novo. Thus,
without any showing that the findings of the CTA are unsupported by substantial evidence, its
findings are binding on the Court. (COMMISSIONER OF INTERNAL REVENUE AND
COMMISSIONER OF CUSTOMS vs. PHILIPPINE AIRLINES, G.R. No. 215705-07 FEBRUARY 22,
2017, PERALTA, J.)

The Revised Rules of the CTA and even the Rules of Court which apply suppletorily thereto provide
for no instance in which the en banc may reverse, annul or void a final decision of a division. Verily,
the Revised Rules of the CTA provide(s) for no instance of an annulment of judgment at all. On the
other hand, the Rules of Court, through Rule 47, provides, with certain conditions, for annulment of
judgment done by a superior court, like the Court of Appeals, against the final judgment, decision or
ruling of an inferior court, which is the Regional Trial Court, based on the grounds of extrinsic fraud
and lack of jurisdiction. The Regional Trial Court, in turn, also is empowered to, upon a similar
action, annul a judgment or ruling of the Metropolitan or Municipal Trial Courts within its
territorial jurisdiction. But, again, the said Rules are silent as to whether a collegial court sitting en
banc may annul a final judgment of its own division. As earlier explained, the silence of the Rules
may be attributed to the need to preserve the principles that there can be no hierarchy within a
collegial court between its divisions and the en banc, and that a court’s judgment, once final, is
immutable. A direct petition for annulment of a judgment of the CTA to the Supreme Court,
meanwhile, is likewise unavailing, for the same reason that there is no identical remedy with the
High Court to annul a final and executory judgment of the Court of Appeals. RA No. 9282, Section 1
puts the CTA on the same level as the Court of Appeals, so that if the latter’s final judgments may
not be annulled before the Supreme Court, then the CTA’s own decisions similarly may not be so
annulled. And more importantly, it has been previously discussed that annulment of judgment is an
original action, yet, it is not among the cases enumerated in the Constitution, Article VIII, Section 5,
over which the Supreme Court exercises original jurisdiction. Annulment of judgment also often
requires an adjudication of facts, a task that the Court loathes to perform, as it is not a trier of facts.
Instead, what remained as a remedy for the petitioner was to file a petition for certiorari under Rule
65, which could have been filed as an original action before this Court and not before the CTA en
banc. xxx In any event, petitioner’s failure to avail of this remedy and mistake in filing of the wrong
action are fatal to its case and renders and leaves the CTA First Division’s decision as indeed final
and executory. By the time the instant petition for review was filed by petitioner with this Court,
more than sixty (60) days have passed since petitioner’s alleged discovery of its loss in the case as
brought about by the alleged negligence or fraud of its counsel. (COMMISSIONER OF INTERNAL
REVENUE vs. KEPCO ILIJAN CORPORATION G.R. No. 199422, JUNE 21, 2016, J. PERALTA, EN
BANC)

Despite the amendments to the law, the Court still holds that 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 not only by Section 11 of R.A. No.

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1125, but also by Section 7 of the same law. From all the foregoing, it is clear that 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. As explained by the Court, whenever it is determined by the courts that the
method employed by the Collector of Internal Revenue in the collection of tax is not sanctioned by
law, the bond requirement under Section 11 of R.A. 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. (SPOUSES EMMANUEL PACQUIAO AND JINKEE PACQUIAO vs. COURT OF TAX
APPEALS, G.R. NO. 213994, APRIL 16, 2016, J. MENDOZA)

Under Section 112 of the NIRC, if the administrative claim for tax credit or refund of input taxes is
not acted upon by the CIR within 120 days from the date of submission of complete documents in
support of the application, the taxpayer affected may appeal the unacted claim with the CTA within
30 days from the expiration of the 120-day period. In Aichi, this Court ruled that observance of the
120- and 30-day periods is crucial in the filing of an appeal before the CTA. By "crucial," this Court
meant that its observance is jurisdictional and mandatory, not merely permissive. Indeed, Aichi is
the prevailing doctrine on the matter of mandatory compliance with the 120- and 30-day periods in
the filing of judicial claims of tax credit or refund before the CTA. However, in the manner of most
rules, the Aichi Doctrine is also subject to exceptions. In accordance with the equitable estoppel
principle under Section 246 of the NIRC, we ruled in San Roque-Taganito that there are exceptions
to the strict rule that compliance with the Aichi Doctrine is mandatory and jurisdictional, one of
which is BIR Ruling No. DA-489-03. If the CIR issues a ruling, either a specific one applicable to a
particular taxpayer or a general interpretative rule applicable to all taxpayers, and, as a result,
misleads the taxpayers affected by the rule, into filing prematurely judicial claims with the CTA, the
CIR cannot be allowed to later on question the CTA's assumption of jurisdiction over such claim.
Since then, this Court has consistently adopted the ruling in San Roque-Taganito in holding that BIR
Ruling No. DA-489-03 is an exception to the Aichi Doctrine. We see no reason to disturb what is
now a settled ruling. (PROCTOR AND GAMBLE ASIA PTE. LTD. vs. COMMISSIONER OF
INTERNAL REVENUE, GR 204277, MAY 30, 2016, BRION, J.)

Concededly, there is no clear statement under R.A. No. 1125, the amendatory R.A. No. 9282, let
alone in the Constitution, that the CTA has original jurisdiction over a petition for certiorari. 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. When PAGCOR filed its petition before the CTA on 11 March
2009, there was still no denial of PAGCOR's protest by either the RD or the CIR. PAGCOR has clearly
failed to comply with the requisites in disputing an assessment as provided by Section 228 and
Section 3.1.5. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION vs. BUREAU OF
INTERNAL REVENUE, G.R. No. 208731. JANUARY 27, 2016)

While it is true that the CTA Division has the prerogative to grant a motion to withdraw under the
authority of the foregoing legal provisions, the attendant circumstances in this case should have
incited it to act otherwise. The primary reason, however, that militates against the granting of the
motion to withdraw is the fact that the CTA Division, in its August 10, 2011 Decision, had already
determined that Nippon was only entitled to refund the reduced amount of P2,614,296.84 since it

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failed to prove that the recipients of its services were non-residents "doing business outside the
Philippines"; hence, Nippon's purported sales therefrom could not qualify as zero-rated sales,
necessitating the reduction in the amount of refund claimed. Markedly different from this is the
BIR' s determination that Nippon should receive P21,675,128.91 as per the July 27, 2011 Tax Credit
Certificate, which is, in all, P19,060,832.07 larger than the amount found due by the CTA Division.
Therefore, as aptly pointed out by Associate Justice Teresita J. Leonardo-De Castro during the
deliberations on this case, the massive discrepancy alone between the administrative and judicial
determinations of the amount to be refunded to Nippon should have already raised a red flag to the
CTA Division. Clearly, the interest of the government, and, more significantly, the public, will be
greatly prejudiced by the erroneous grant of refund -at a substantial amount at that -in favor of
Nippon. Hence, under these circumstances, the CTA Division should not have granted the motion to
withdraw. (COMMISSIONER OF INTERNAL REVENUE vs. NIPPON EXPRESS (PHILS.)
CORPORATION, G.R. No. 212920. SEPTEMBER 16, 2015)

The Court thus declares that the CA's original jurisdiction over a petition for certiorari assailing the
DOJ resolution in a preliminary investigation involving tax and tariff offenses was necessarily
transferred to the CTA pursuant to Section 7 of R.A. No. 9282, and that such petition shall be
governed by Rule 65 of the Rules of Court, as amended. Accordingly, it is the CTA, not the CA, which
has jurisdiction over the petition for certiorari assailing the DOJ resolution of dismissal of the BOC's
complaint-affidavit against private respondents for violation of the TCCP. (BUREAU OF CUSTOMS
vs. THE HONORABLE AGNES DEVANADERA, et al.,G.R. No. 193253. SEPTEMBER 8, 2015)

Under Section 3, Rule 14 of the Revised Rules of the Court of Tax Appeals, an amended decision is
issued when there is any action modifying or reversing a decision of the CTA En Banc or in Division.
Pursuant to these parameters, it is clear that the CIR’s motions for partial reconsideration – i.e., (a)
motion for partial reconsideration of the June 24, 2009 Decision; and (b) motion for partial
reconsideration of the January 19, 2010 Amended Decision – assailed separate and distinct
decisions that were rendered by the CTA Division. Notably, its amended decision modified and
increased CE Luzon’s entitlement to a refund or tax credit certificate in the amount of -
17,277,938.47. Essentially, it was therefore a different decision and, hence, the proper subject of a
motion for reconsideration anew on the part of the CIR. Thus, CE Luzon’s procedural objection must
fail. (CE LUZON GEOTHERMAL POWER COMPANY, INC. vs. COMMISSIONER OF INTERNAL
REVENUE, G.R. No. 200841-42. AUGUST 26, 2015)

It is within the CTA's sound judicial discretion to give party-litigants every opportunity to properly
present their conflicting claims on the merits of the controversy without resorting to technicalities.
It should always be predicated on the consideration that more than the mere convenience of the
courts or of the parties of the case, the ends of justice and fairness would be served thereby. Courts
should be liberal in setting aside orders of default, for default judgments are frowned upon, and
unless it clearly appears that the reopening of the case is intended for delay, it is best that trial
courts give both parties every chance to fight their case fairly and in the open, without resort to
technicality. (COMMISSIONER OF INTERNAL REVENUE vs. COURT OF TAX APPEALS AND CB
POWER COMPANY LIMITED, G.R. Nos. 203054-55. JULY 29, 2015)

Petron admitted to not having filed a protest of the assessment before the customs collector and
elevating a possible adverse ruling therein to the COC, reasoning that such a procedure would be
costly and impractical, and would unjustly delay the resolution of the issues which, being purely

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legal in nature anyway, were also beyond the authority of the customs collector to resolve with
finality. This admission is at once decisive of the issue of the CTA's jurisdiction over the petition.
There being no protest ruling by the customs collector that was appealed to the COC, the filing of
the petition before the CTA was premature as there was nothing yet to review. (COMMISSIONER
OF INTERNAL REVENUE vs. COURT OF TAX APPEALS (2ND DIVISION) AND PETRON
CORPORATION, G.R. No. 207843. JULY 15, 2015)

Conformably with our ruling in BPI Leasing Corporation that the application of Section 244 of the
NIRC is an exercise of quasi-legislative or rule-making powers of the Secretary of Finance, and since
RR 2-2012 was issued by the Secretary of Finance based on Section 244 of the NIRC, such
administrative issuance is therefore quasi-legislative in nature which is outside the scope of a
petition for certiorari. (CLARK INVESTORS AND LOCATORS ASSOCIATION, INC. vs. SECRETARY
OF FINANCE AND COMMISSIONER OF INTERNAL REVENUE, G.R. No. 200670. JULY 6, 2015)

In praying to restrain the collection of RPT, petitioner also implicitly questions the propriety of the
assessment of such RPT. This is because in ruling as to whether to restrain the collection, the RTC
must first necessarily rule on the propriety of the assessment. A certiorari petition questioning an
interlocutory order issued in a local tax case falls under the jurisdiction of the CTA. (CE CASECNAN
WATER AND ENERGY COMPANY, INC. vs. THE PROVINCE OF NUEVA ECIJA, et al., G.R. No.
196278. JUNE 17, 2015)

Section 7 of R.A. No. 1125 as well as Section 3, Rule 4 of the Revised Rules of the Court of Tax
Appeals explicitly provide that the CTA has exclusive appellate jurisdiction over tax collection cases
decided by the RTC. (MITSUBISHI MOTORS PHILIPPINES CORPORATION vs. BUREAU OF
CUSTOMS, G.R. No. 209830, JUNE 17, 2015)

In case of an illegal assessment where the assessment was issued without authority, exhaustion of
administrative remedies is not necessary and the taxpayer may directly resort to judicial action.
The taxpayer shall file a complaint for injunction before the Regional Trial Court to enjoin the local
government unit from collecting real property taxes. The party unsatisfied with the decision of the
Regional Trial Court shall file an appeal, not a petition for certiorari, before the Court of Tax
Appeals, the complaint being a local tax case decided by the Regional Trial Court. The appeal shall
be filed within fifteen (15) days from notice of the trial court’s decision. In this case, the petition for
injunction filed before the Regional Trial Court of Pasay was a local tax case originally decided by
the trial court in its original jurisdiction. Since the PEZA assailed a judgment, not an interlocutory
order, of the Regional Trial Court, the PEZA’s proper remedy was an appeal to the Court of Tax
Appeals. (CITY OF LAPU-LAPU vs. PHILIPPINE ECONOMIC ZONE AUTHORITY; PROVINCE OF
BATAAN, REPRESENTED BY GOVERNOR ENRIQUE T. GARCIA, JR., AND EMERLINDA S.
TALENTO, IN HER CAPACITY AS PROVINCIAL TREASURER OF BATAAN vs. PHILIPPINE
ECONOMIC ZONE AUTHORITY, G.R. No. 184203, G.R. NO. 187583, NOVEMBER 26, 2014, J.
LEONEN)

NAPOCOR filed a petition for declaratory relief based on the assessments of real property taxes the
Municipality of Navotas imposed. It then questioned the legality of the tax imposition. On appeal,
the CTA En Banc ruled that the RTC has jurisdiction over the case even though administrative
remedies were not exhausted. The Court clarified that although there are instances were resort to
judicial action is allowed, it is not so in the case at hand. The fact that a separate chapter is devoted

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to the treatment of real property taxes, and a distinct appeal procedure is provided therefor does
not justify an inference that Section 7(a)(3) of R.A. 9282 pertains only to local taxes other than real
property taxes. Rather, the term "local taxes" in the aforementioned provision should be considered
in its general and comprehensive sense, which embraces real property tax assessments, in line with
the precept Generalia verba sunt generaliter inteligencia—what is generally spoken shall be
generally understood. Based on the foregoing, the general meaning of "local taxes" should be
adopted in relation to Paragraph (a)(3) of Section 7 of R.A. 9282, which necessarily includes real
property taxes. In fine, if a taxpayer is not satisfied with the decision of the CBAA or the RTC, as the
case may be, the taxpayer may file, within thirty (30) days from receipt of the assailed decision, a
petition for review with the CTA pursuant to Section 7(a) of R.A. 9282. In cases where the question
involves the amount of the tax or the correctness thereof, the appeal will be pursuant to Section
7(a)(5) of R.A. 9282. When the appeal comes from a judicial remedy which questions the authority
of the local government to impose the tax, Section 7(a)(3) of R.A. 9282 applies. Thereafter, such
decision, ruling or resolution may be further reviewed by the CTA En Banc pursuant to Section 2,
Rule 4 of the Revised Rules of the CTA. (NATIONAL POWER CORPORATION vs. MUNICIPAL
GOVERNMENT OF NAVOTAS, SANGGUNIANG BAYAN OF NAVOTAS AND MANUEL T. ENRIQUEZ,
G.R. No. 192300, NOVEMBER 24, 2014, J. PERALTA)

Philamlife sold its shares through a public bidding. However, the selling price was below the book
value of the shares. Hence, the BIR imposed donor’s tax on the price difference. Philamlife appealed
to the Secretary of Finance. Due to the adverse ruling, Philamlife appealed with the CA. CA alleged
that it does not have jurisdiction for jurisdiction lies with the CTA. The Court ruled that, the CTA can
now rule not only on the propriety of an assessment or tax treatment of a certain transaction, but
also on the validity of the revenue regulation or revenue memorandum circular on which the said
assessment is based. (THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY
vs. SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE, G.R. No. 210987,
NOVEMBER 24, 2014, J. VELASCO, JR.)

The respondents allege that the Court of Tax Appeals has no jurisdiction to make an assessment in
cases of an administrative claim for tax refunds. The Supreme Court ruled that in an action for the
refund of taxes allegedly erroneously paid, the Court of Tax Appeals may determine whether there
are taxes that should have been paid in lieu of the taxes paid. Determining the proper category of
tax that should have been paid is not an assessment. It is incidental to determining whether there
should be a refund. (SMI-ED PHILIPPINES TECHNOLOGY, INC. vs. COMMISSIONER OF
INTERNAL REVENUE, G.R. No. 175410, NOVEMBER 12, 2014, J. LEONEN)

The Commissioner of Customs contends that the CTA should not take cognizance of the case
because of the lapse of the 30-day period within which to appeal, arguing that on November 25,
1998 URC had already received the BoC’s final assessment demanding payment of the amount due
within 10 days, but filed the petition only on July 30, 1999. The Court ruled against the
Commissioner of Customs. The reckoning date was on date that the Commissioner of Customs
denied the protest of Oilink, July 12, 1999. The Commissioner of Customs posits that only when the
ensuing decision of the Collector and then the adverse decision of the Commissioner of Customs
would it be proper for Oilink to seek judicial relief from the CTA. The Court ruled that the principle
of non-exhaustion of administrative remedies was not an iron-clad rule because there were
instances in which the immediate resort to judicial action was proper. As the records indicate, the
Commissioner of Customs already decided to deny the protest by Oilink and stressed then that the

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demand to pay was final. In that instance, the exhaustion of administrative remedies would have
been an exercise in futility because it was already the Commissioner of Customs demanding the
payment of the deficiency taxes and duties. (COMMISSIONER OF CUSTOMS vs. OILINK
INTERNATIONAL CORPORATION, G.R. No. 161759, JULY 2, 2014, J. BERSAMIN)

UPDATED AND COMPILED BY ATENEO DE DAVAO UNIVERSITY


COLLEGE OF LAW UNDER THE AUSPICES OF PALS FOR THE
2018 BAR OPERATIONS
By:
ADDU –LAW STUDENTS: Candolita, Therese Anne S.
Ceballos, Celeste June R.
Estillore, Lizette Kaye F.
Manuel P. Quibod –Dean College of Law

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