Silkair v.

CIR
G.R. No. 173594 February 6, 2008

Lessons Applicable: Tax exemption is personal and direct

FACTS:

 Petitioner Silkair (Singapore) Pte. Ltd., a foreign corp. which has a Philippine representative office, is an
outline international air carrier
 Dec 19, 2001: Silkair filed with the BIR a written application for the refund of excise tax it paid on its
purchases or jet fuels from Petron Corp. from Jan - June 2000
 Dec 26, 2001: not having been acted upon by the BIR, it filed a petition for review before the CTA
 CTA: denied its petition on the ground that the excise tax is imposed on Petron are manufacturer
 When the burden is shifted to Silkair, it is no longer a tax but added cost of goods purchased
 After changing counsel to Atty. Pastrana CTA En Banc dismissed it for being filed out of time.
 Petitioner filed a Petition for Review with the SC

ISSUE: W/N Silkair can claim a refund for indirect excise tax

HELD: Petition is denied.

 Section 130 (A) (2) of the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be
filed and the excise tax paid by the manufacturer or producer before removal of domestic products from
place of production." Thus, Petron Corporation, not Silkair, is the statutory taxpayer which is entitled to
claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement
between RP and Singapore.
 Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair
for jet fuel is not a tax but part of the price which Silkair had to pay as a purchaser
 Unlike in Maceda v. Macaraig Jr. where it expressly includes indirect taxes. Rule that tax exemptions are
construed in strictissimi juris against taxpayer applies

ERNESTO M. MACEDA, petitioner, vs. HON. CATALINO MACARAIG, JR

G.R. No. 88291 May 31, 1991; G.R. No. 88291 June 8, 1993

FACTS: On November 3, 1986, Commonwealth Act No. 120 created the NPC as a public corporation to undertake
the development of hydraulic power and the production of power from other sources.
Effective March 10, 1987, Executive Order No. 93 once again withdrew all tax and duty incentives granted to
government and private entities which had been restored under Presidential Decree Nos. 1931 and 1955 but it gave
the authority to FIRB to restore, revise the scope and prescribe the date of effectivity of such tax and/or duty
exemptions.
On June 24, 1987 the FIRB issued Resolution No. 17-87 restoring NPC's tax and duty exemption privileges
effective March 10, 1987. On October 5, 1987, the President, through respondent Executive Secretary Macaraig,
Jr., confirmed and approved FIRB Resolution No. 17-87.
Though the issues raised was resolved by the Supreme Court in G.R. No. 88291, the issues was again brought to
the Supreme Court for the second time by the petitioner in G.R. No. 88291.
ISSUE: Whether or not the powers conferred upon the FIRB by Section 2(a), (b), and (c) and (4) of Executive
Order No. 93 "constitute undue delegation of legislative power and is, therefore, unconstitutional.”
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RULING: No.
With the growing complexities of modern life and the many technical fields of governmental functions, as in matters
pertaining to tax exemptions, delegation of legislative powers has become the rule and non-delegation the
exception. The legislature may not have the competence, let alone the interest and the time, to provide direct and
efficacious solutions to many problems attendant upon present day undertakings. The legislature could not be
expected to state all the detailed situations wherein the tax exemption privilege would be restored. The task may be
assigned to an administrative body like the Fiscal Incentives Review Board (FIRB).
When E.O No. 93 (S'86) was issued, President Aquino was exercising both Executive and Legislative powers.
Thus, there was no power delegated to her, rather it was she who was delegating her power. She delegated it to
the FIRB, which, for purposes of E.O No. 93 (S'86), is a delegate of the legislature. Clearly, she was not sub-
delegating her power.
And E.O. No. 93 (S'86), as a delegating law, was complete in itself — it set forth the policy to be carried out 85 and
it fixed the standard to which the delegate had to conform in the performance of his functions, 86 both qualities
having been enunciated by this Court in Pelaez vs. Auditor General. 87
For delegation to be constitutionally valid, the law must be complete in itself and must set forth sufficient standards.

Certain aspects of the taxing process that are not really legislative in nature are vested in administrative agencies.
In this case, there really is no delegation, to wit: a) power to value property; b) power to assess and collect taxes; c)
power to perform details of computation, appraisement or adjustment; among others.

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SEAGATE TECHNOLOGY (PHILIPPINES),

respondent. (G.R. No. 153866; February 11, 2005)

PRINCIPLE:
Business companies registered in and operating from the Special Economic Zone in Naga, Cebu are entities
exempt from all internal revenue taxes and the implementing rules relevant thereto, including the value-added taxes
or VAT. Although export sales are not deemed exempt transactions, they are nonetheless zero-rated. Hence, the
distinction between exempt entities and exempt transactions has little significance, because the net result is that the
taxpayer is not liable for the VAT. A VAT-registered enterprise may comply with all requisites to claim a tax refund
of or credit for the input VAT it paid on capital goods it purchased. In short, after compliance with all requisites, such
enterprise is entitled to refund or credit.

FACTS:
A VAT-registered enterprise, STP has principal office address at the new Cebu Township One, Special Economic
Zone, Barangay Cantao-an, Naga, Cebu. STP is registered with the Philippine Export Zone Authority (PEZA) and
certified to engage in the manufacture of recording components primarily used in computers for export. VAT returns
were filed for the period 1 April 1998 to 30 June 1999. With supporting documents, a claim for refund of VAT input
taxes in the amount of 28 million pesos (inclusive of the 12-million VAT input taxes subject of this Petition for
Review) was filed on 4 October 1999.

CIR did not act promptly upon STP's claim so the latter elevated the case to the CTA for review in order to toll the
running of the two-year prescriptive period.

On appeal, CIR asserted that by virtue of the PEZA registration alone of STP, the latter is not subject to the VAT.
According to CIR, STP's sales transactions intended for export are not exempt.

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ISSUE:
[1] Is STP entitled to refund or tax credit for puchases?

HELD:
[1] Yes, STP is entitled to refund or tax credit

As a PEZA-registered enterprise within a special economic zone, STP is entitled to the fiscal incentives and benefit
provided for in either PD 66 or EO 226. It shall, moreover, enjoy all privileges, benefits, advantages or exemptions
under both Republic Act Nos. (RA) 7227 and 7844.
Its sales transactions intended for export may not be exempt, but like its purchase transactions, they are zero-rated.
No prior application for the effective zero rating of its transactions is necessary. Being VAT-registered and having
satisfactorily complied with all the requisites for claiming a tax refund of or credit for the input VAT paid on capital
goods purchased, STP is entitled to such VAT refund or credit.

STP, which as an entity is exempt, is different from its transactions which are not exempt. The end result, however,
is that it is not subject to the VAT. The non-taxability of transactions that are otherwise taxable is merely a
necessary incident to the tax exemption conferred by law upon it as an entity, not upon the transactions
themselves.

LAWS MENTIONED IN THIS CASE:

PD 66 = exemption from internal revenue laws and regulations for raw materials, etc. brough into the zone to be
stored, broken up, etc.

Despite availment of PD 66 benefits, the following will still apply: net-operating loss carry over; accelerated
depreciation; foreign exchange and financial assistance; and exemption from export taxes, local taxes and licenses.

EO 226 = income tax holiday; additional deduction for labor expense; simplification of customs procedure;
unrestricted use of consigned equipment; access to a bonded manufacturing warehouse system; privileges for
foreign nationals employed; tax credits on domestic capital equipment, as well as for taxes and duties on raw
materials; and exemption from contractors taxes, wharfage dues, taxes and duties on imported capital equipment
and spare parts, export taxes, duties, imposts and fees, local taxes and licenses, and real property taxes.

Despite availment of EO 226 benefits, the following will still apply: net-operating loss carry over; accelerated
depreciation; foreign exchange and financial assistance; and exemption from export taxes, local taxes and licenses.

RA 7227 = tax and duty-free importation of raw materials, capital and equipment. Availment of RA 7227 benefits
does not stop the ecozone benefits under RA 7916.

RA 7227 = no local or national taxes shall be imposed in the zone. Banking and finance shall also be liberalized
under minimum Bangko Sentral regulation with the establishment of foreign currency depository units of local
commercial banks and offshore banking units of foreign banks.

RA 7844 = negotiable tax credits for locally-produced materials used as inputs

PD 1853 = preferential credit facilities

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 COMMISSIONER OF INTERNAL REVENUE vs. SAN ROQUE POWER CORP.
G.R. No. 187485 February 12, 2013
707 SCRA 66 Supreme Court En Banc

FACTS:
 On October 11, 1997, San Roque Power Corporation (San Roque) entered into a Power Purchase
Agreement (PPA) with the National Power Corporation (NPC) by building the San Roque Multi-Purpose
Project in San Manuel, Pangasinan.
 The San Roque Multi-Purpose Project allegedly incurred, excess input VAT in the amount of
P559,709,337.54 for taxable year 2001 which it declared in its Quarterly VAT Returns filed for the same
year.
 San Roque duly filed with the BIR separate claims for refund, amounting to P559,709,337.54, representing
unutilized input taxes as declared in its VAT returns for taxable year 2001.
 However, on March 28, 2003, San Roque filed amended Quarterly VAT Returns for the year 2001 since it
increased its unutilized input VAT To the amount of P560,200,283.14. San Roque filed with the BIR on the
same date, separate amended claims for refund in the aggregate amount of P560,200,283.14.
 On April 10, 2003, a mere 13 days after it filed its amended administrative claim with the CIR on March 28,
2003, San Roque filed a Petition for Review with the CTA.
 CIR alleged that the claim by San Roque was prematurely filed with the CTA.

ISSUE:
 WON San Roque is entitled to tax refund? – NO.

HELD:
 No. San Roque is not entitled to a tax refund because it failed to comply with the mandatory and
jurisdictional requirement of waiting 120 days before filing its judicial claim.
 On April 10, 2003, a mere 13 days after it filed its amended administrative claim with the CIR on March 28,
2003, San Roque filed a Petition for Review with the CTA, which showed that San Roque did not wait for
the 120-day period to lapse before filing its judicial claim.
 Compliance with the 120-day waiting period is mandatory and jurisdictional, under RA 8424 or the Tax
Reform Act of 1997. Failure to comply renders the petition void.
 It violates the doctrine of exhaustion of administrative remedies and renders the petition premature and
without a cause of action, with the effect that the CTA does not acquire jurisdiction over the taxpayer’s
petition.
 Article 5 of the Civil Code provides, "Acts executed against provisions of mandatory or prohibitory laws
shall be void, except when the law itself authorizes their validity."
 Thus, San Roque’s petition with the CTA is a mere scrap of paper.
 Well-settled is the rule that tax refunds or credits, just like tax exemptions, are strictly construed
against the taxpayer.
 Whether the Atlas doctrine or the Mirant doctrine is applied to San Roque is immaterial because what is at
issue in the present case is San Roque’s non-compliance with the 120-day mandatory and jurisdictional
period, which is counted from the date it filed its administrative claim with the CIR. The 120-day period may
extend beyond the two-year prescriptive period, as long as the administrative claim is filed within the two-
year prescriptive period. However, San Roque’s fatal mistake is that it did not wait for the CIR to decide
within the 120-day period, a mandatory period whether the Atlas or the Mirant doctrine is applied.
 Section 112(D) of the 1997 Tax Code is clear, unequivocal, and categorical that the CIR has 120 days to
act on an administrative claim. The taxpayer can file the judicial claim
(1) Only within 30 days after the CIR partially or fully denies the claim within the 120- day period, or
(2) only within 30 days from the expiration of the 120- day period if the CIR does not act within the 120-day period.

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  Even if, contrary to all principles of statutory construction as well as plain common sense, we gratuitously
apply now Section 4.106-2(c) of Revenue Regulations No. 7-95, still San Roque cannot recover any
refund or credit because San Roque did not wait for the 60-day period to lapse, contrary to the
express requirement in Section 4.106-2(c).
 SC granted the petition of CIR to deny the tax refund or credit claim of San Roque.

ATLAS CONSOLIDATED MINING v. CIR

FACTS: Petitioner corporation is engaged in the business of mining, production, and sale of various mineral
products, such as gold, pyrite, and copper concentrates. It is a VAT-registered taxpayer.
Petitioner corporation filed with the BIR the application for the refund/credit of its input VAT on its purchases of
capital goods and on its zero-rated sales. When its application for refund/credit remained unresolved by the BIR,
petitioner filed a Petition for Review with the CTA. The CTA denied the claims on the grounds that for zero-rating to
apply, 70% of the company's sales must consists of exports, that the same were not filed within the 2-year
prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20, 1994), and that
petitioner failed to submit substantial evidence to support its claim for refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and
PHILPOS within the Export Processing Zone Authority (EPZA) as zero-rated export sales; the 2-year prescriptive
period should be counted from the date of filing of the last adjustment return which was April 15, 1993, and not on
every end of the applicable quarters; and that the certification of the independent CPA attesting to the correctness
of the contents of the summary of suppliers’ invoices or receipts examined, evaluated and audited by said CPA
should substantiate its claims.

ISSUES:
1. Whether or not the claims were filed within the 2-year prescriptive period
2. Whether or not the claims for refund/credit of input VAT of petitioner corporation have sufficient legal bases
3. Whether or not petitioner sufficiently established the factual bases for its applications for refund/credit of
input VAT

HELD:
1. YES. The filing of a quarterly income tax returns required in Section 85 (now Section 68) and implemented per
BIR Form 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual
tax due. These quarterly tax payments which are computed based on the cumulative figures of gross receipts and
deductions in order to arrive at a net taxable income, should be treated as advances or portions of the annual
income tax due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87 (now
Section 69) which provides for the filing of adjustment returns and final payment of income tax. Consequently, the
two-year prescriptive period provided in Section 292 (now Section 230) of the Tax Code should be computed from
the time of filing the Adjustment Return or Annual Income Tax Return and final payment of income tax.
2. YES. Section 106(b)(2), in relation to Section 100(a)(2) of the Tax Code of 1977, as amended, allowed the
refund/credit of input VAT on export sales to enterprises operating within export processing zones and registered
with the EPZA, since such export sales were deemed to be effectively zero-rated sales.
Tax treatment of goods brought into the export processing zones is only consistent with the Destination
Principle and Cross Border Doctrine to which the Philippine VAT system adheres. According to the Destination
Principle, goods and services are taxed only in the country where these are consumed. In connection with
the said principle, the Cross Border Doctrine mandates that no VAT shall be imposed to form part of the
cost of the goods destined for consumption outside the territorial border of the taxing authority. Hence,
actual export of goods and services from the Philippines to a foreign country must be free of VAT, while
those destined for use or consumption within the Philippines shall be imposed with 10% VAT. Export

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processing zones are to be managed as a separate customs territory from the rest of the Philippines and,
thus, for tax purposes, are effectively considered as foreign territory. For this reason, sales by persons from
the Philippine customs territory to those inside the export processing zones are already taxed as exports.
3. NO. For a judicial claim for refund to prosper, however, respondent must not only prove that it is a VAT registered
entity and that it filed its claims within the prescriptive period. It must substantiate the input VAT paid by purchase
invoices or official receipts. This respondent failed to do. Petitioner corporation failed to present together with its
application the required supporting documents, whether before the BIR or the CTA.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign
authority, and should be construed in strictissimi juris against the person or entity claiming the exemption.
The taxpayer who claims for exemption must justify his claim by the clearest grant of organic or statute law
and should not be permitted to stand on vague implications.

Visayas Geothermal Power Company vs CIR G.R. No. 197525, 4 June 2014

Facts:
On December 6, 2006, VGPC filed an administrative claim for refund with the BIR District Office. And on January 3,
2007, while the administrative claim was pending, VGPC filed its judicial claim via petition for review with the CTA p
raying for a refund or the issuance of a tax credit certificate.
CTA En Banc dismissed the petition on the ground that the judicial claim was prematurely filed because according t
o it, 120-day has to expire first before it can be appealed.

Issue:
WON VGPC’s judicial claim for refund was prematurely filed.

Ruling:
No. The general rule is that the 120+30 day period is mandatory and jurisdictional from the effectivity of the 1997 NI
RC on January 1, 1998 up to present. As an exception, judicial claims filed from December 10, 2003, in view of the
BIR Ruling No. DA-489-
03, to October 6, 2010, when it was reversed by the Supreme Court in Aichion Case, need not wait for the exhausti
on of the 120-day period.
In the case at bar, VGPC filed its administrative claim with the CIR on December 6, 2006 and later, its judicial claim
with the CTA on January 3, 2007. The judicial claim was clearly filed within the period of exception and was, therefo
re, not premature and should not have been dismissed by the CTA En Banc.
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CIR v. PHILIPPINE AIRLINES, GR No. 180066, 2009-07-07

Facts:
PAL is a domestic corporation organized under the corporate laws of the Republic of the Philippines; declared the
national flag carrier of the country; and the grantee under Presidential Decree No. 1590... of a franchise to
establish, operate, and maintain... transport services for the carriage of passengers, mail, and property by air, in
and between any and all points and places throughout the Philippines, and between the Philippines and other
countries.
For its fiscal year ending 31 March 2001

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, PAL allegedly incurred zero taxable income,[6] which left it with unapplied creditable withholding tax[7] in the
amount of P2,334,377.95. PAL did not pay any MCIT for the... period.
PAL requested for the refund of its unapplied creditable withholding tax for FY 2000-2001
Acting on the aforementioned letter of PAL, the Large Taxpayers Audit and Investigation Division 1
, issued
Tax Verification Notice No. 00201448, authorizing Revenue Officer Jacinto Cueto, Jr. (Cueto) to verify... the
supporting documents and pertinent records relative to the claim of PAL for refund of its unapplied creditable
withholding tax for FY 2000-20001. In a letter dated 19 August 2003, LTAID 1 Chief Armit S. Linsangan invited PAL
to an informal conference at the BIR National
Office in Diliman, Quezon City, on 27 August 2003, at 10:00 a.m., to discuss the results of the investigation
conducted by Revenue Officer Cueto, supervised by Revenue Officer Madelyn T. Sacluti.
BIR officers and PAL representatives attended the scheduled informal conference, during which the former relayed
to the latter that the BIR was denying the claim for refund of PAL and, instead, was assessing PAL for deficiency
MCIT for FY 2000-2001. The PAL representatives... argued that PAL was not liable for MCIT under its franchise.
The BIR officers then informed the PAL representatives that the matter would be referred to the BIR Legal Service
for opinion.
The LTAID 1 issued, on 3 September 2003, PAN No. INC FY-3-31-01-000094, which was received by PAL on 23
October 2003. LTAID 1 assessed PAL for P262,474,732.54, representing deficiency MCIT for FY 2000-2001, plus
interest and compromise penalty
PAL protested PAN No. INC FY-3-31-01-000094 through a letter dated 4 November 2003 to the BIR LTS.
On 12 January 2004, the LTAID 1 sent PAL a Formal Letter of Demand for deficiency MCIT for FY 2000-2001 in the
amount of P271,421,88658
The BIR LTS rendered on 7 May 2004 its Final Decision on Disputed Assessment, which was received by PAL on
26 May 2004. Invoking Revenue Memorandum Circular (RMC) No. 66-2003, the BIR LTS denied with finality the
protest of PAL and reiterated the request that PAL immediately pay... its deficiency MCIT for FY 2000-2001,
inclusive of penalties incident to delinquency.
PAL filed a Petition for Review with the CTA
The CTA Second Division promulgated its Decision... in favor of PAL.
In a Resolution dated 2 January 2007, the CTA Second Division denied the Motion for Reconsideration of the CIR.
It was then the turn of the CIR to file a Petition for Review with the CTA en banc... the CTA en banc denied the
Petition of the CIR for lack of merit. The CTA en banc likewise denied the Motion for Reconsideration of the CIR

Issues:
whether PAL is liable for deficiency MCIT for FY 2000-2001.

Ruling:
The Court answers in the negative.
The basic corporate income tax of PAL shall be based on its annual net taxable income, computed in accordance
with the National Internal Revenue Code (NIRC). Presidential Decree No. 1590 also explicitly authorizes PAL, in the
computation of its basic corporate income tax, to (1)... depreciate its assets twice as fast the normal rate of
depreciation;[14] and (2) carry over as a deduction from taxable income any net loss incurred in any year up to five
years following the year of such loss.[15]
Franchise tax, on the other hand, shall be two per cent (2%) of the gross revenues derived by PAL from all sources,
whether transport or nontransport operations. However, with respect to international air-transport service, the
franchise tax shall only be imposed on the gross... passenger, mail, and freight revenues of PAL from its outgoing
flights.
In its income tax return for FY 2000-2001, filed with the BIR, PAL reported no net taxable income for the period,
resulting in zero basic corporate income tax, which would necessarily be lower than any franchise tax due from PAL
for the same period.
a domestic corporation must pay whichever is higher of: (1) the income tax under Section 27(A) of the NIRC of
1997, computed by applying the tax rate therein to the taxable income of the corporation; or (2) the MCIT under
Section 27(E), also of the NIRC of 1997,... equivalent to 2% of the gross income of the corporation. Although this

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may be the general rule in determining the income tax due from a domestic corporation under the NIRC of 1997, it
can only be applied to PAL to the extent allowed by the provisions in the franchise of PAL... specifically governing
its taxation.
After a conscientious study of Section 13 of Presidential Decree No. 1590, in relation to Sections 27(A) and 27(E) of
the NIRC of 1997, the Court, like the CTA en banc and Second Division, concludes that PAL cannot be subjected to
MCIT for FY 2000-2001.
Although both are income taxes, the MCIT is different from the basic corporate income tax, not just in the rates, but
also in the bases for their computation. Not being covered by Section 13(a) of Presidential Decree No. 1590,...
which makes PAL liable only for basic corporate income tax, then MCIT is included in "all other taxes" from which
PAL is exempted.

G.R. No. 175108

CHINA BANKING CORPORATION v. CIR

PERALTA, J.:
This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court which seeks the review and
reversal of the Decision[1] dated June 16, 2006 and Resolution[2] dated October 17, 2006 of the former Fifth Division
of the Court of Appeals (CA).

The factual antecedents follow.

For the four quarters of 1996, petitioner paid P93,119,433.50 as gross receipts tax (GRT) on its income from the
interests on loan investments, commissions, service and collection charges, foreign exchange profit and other
operating earnings.

In computing its taxable gross receipts, petitioner included the 20% final withholding tax on its passive interest
income,[3] hereunder summarized as follows:

Gross Receipts
Date of Filing Return/Payment Taxable
1996 Exhs. ___Tax Paid
of Tax to the BIR Gross Receipts
1st qtr. A 22-Apr-96 P 534,500,491.61 P 24,055,944.08
2nd qtr. A-1 22-Jul-96 582,985,457.89 26,394,956.47
3rd qtr. A-2 21-Oct-96 427,801,196.81 18,427,999.31
4th qtr. A-3 20-Jan-97 552,378,276.18 24,240,533.64
Total: P 2,097,665,422.49 P 93,119,433.50

On January 30, 1996, the Court of Tax Appeals (CTA) rendered a Decision entitled Asian Bank Corporation v.
Commissioner of Internal Revenue,[4] wherein it ruled that the 20% final withholding tax on a bank's passive interest
income should not form part of its taxable gross receipts.

On the strength of the aforementioned decision, petitioner filed with respondent a claim for refund on April 20, 1998,
of the alleged overpaid GRT for the four (4) quarters of 1996 in the aggregate amount of P6,646,829.67, detailed as
follows:

8
 Gross Receipts Corrected Gross Excess GRT
1996 __Tax Paid _Receipts Tax ____Payment

1st qtr. P 24,055,944.08 P 22,114,548.10 P 1,941,395.99

2nd qtr. 26,394,956.45 25,050,429.40 1,344,527.06
3rd qtr. 18,427,999.33 17,087,138.98 1,340,860.34
4th qtr. ____24,240,533.64 __22,219,487.36 ___2,021,046.28
Total: __P 93,119,433.50 _P 86,471,603.84 __P 6,646,829.67

On even date, petitioner filed its Petition for Review with the CTA.

The CTA, on November 8, 2000, rendered a Decision[5] agreeing with petitioner that the 20% final withholding tax
on interest income does not form part of its taxable gross receipts. However, the CTA dismissed petitioner's claim
for its failure to prove that the 20% final withholding tax forms part of its 1996 taxable gross receipts. The Decision
states in part:

Moreover, the Court of Appeals in the case of Commissioner of Internal Revenue vs. Citytrust Investment
Philippines, Inc., CA G.R. Sp No. 52707, August 17, 1999, affirmed our stand that the 20% final withholding tax on
interest income should not form part of the taxable gross receipts. Hence, we find no cogent reason nor justification
to depart from the wisdom of our decision in the Asian Bank case, supra.

xxxx

Lastly, since Petitioner failed to prove the inclusion of the 20% final withholding taxes as part of its 1996 taxable
gross receipts (passive income) or gross receipts (passive income) that were subjected to 5% GRT, it follows that
proof was wanting that it paid the claimed excess GRT, subject of this petition.

xxxx

IN THE LIGHT OF ALL THE FOREGOING, the instant Petition for Review is DISMISSED for insufficiency of
evidence.

SO ORDERED.[6]

Not in conformity with the CTA's ruling, petitioner interposed an appeal before the CA.

In its appeal, petitioner insists that it erroneously included the 20% final withholding tax on the bank's passive
interest income in computing the taxable gross receipts. Therefore, it argues that it is entitled, as a matter of right, to
a refund or tax credit.

In a Decision[7] dated June 16, 2006, the CA denied petitioner's appeal. It ruled in this wise:

x x x Unfortunately for China Bank, it is flogging a dead horse as this argument has already been shot down
in China Banking Corporation vs. Court of Appeals (G.R. No. 146749 & No. 147983, June 10, 2003) where it was
ruled the Tax Court, which decided Asia Bank on June 30, 1996 not only erroneously interpreted Section 4(e) of
Revenue Regulations No. 12-80, it also cited Section 4(e) when it was no longer the applicable revenue regulation.
The revenue regulations applicable at the time the tax court decided Asia Bank was Revenue Regulations No. 17-
84, not Revenue Regulation 12-80.

xxxx

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WHEREFORE, the instant petition is DENIED DUE COURSE and DISMISSED.

SO ORDERED.[8]

Petitioner sought reconsideration of the aforementioned decision arguing that Section 4 (e) of Revenue Regulations
(RR) No. 12-80 remains applicable as the basis of GRT for banks in taxable year 1996.

On October 17, 2006, the CA issued a Resolution[9] denying petitioner's motion for reconsideration on the ground
that no new or compelling reason was presented by petitioner to warrant the reversal or modification of its decision.

Hence, this petition wherein petitioner contends that:

THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS FAILED TO POINT TO THE LEGAL
BASIS FOR THE EXCLUSION OF THE AMOUNT OF TAX WITHHELD ON PASSIVE INCOME FROM ITS GROSS
RECEIPTS FOR PURPOSES OF TAXATION.[10]

In essence, the issue to be resolved is whether the 20% final tax withheld on a bank's passive income should be
included in the computation of the GRT.

Petitioner avers that the 20% final tax withheld on its passive income should not be included in the computation of
its taxable gross receipts. It insists that the CA erred in ruling that it failed to show the legal basis for its claimed tax
refund or credit, since Section 4 (e) of RR No. 12-80 categorically provides for the exclusion of the amount of taxes
withheld from the computation of gross receipts for GRT purposes.

We do not agree.

In a catena of cases, this Court has already resolved the issue of whether the 20% final withholding tax should form
part of the total gross receipts for purposes of computing the GRT.

In China Banking Corporation v. Court of Appeals,[11] we ruled that the amount of interest income withheld, in
payment of the 20% final withholding tax, forms part of the bank's gross receipts in computing the GRT on banks.
The discussion in this case is instructive on this score:

The gross receipts tax on banks was first imposed on 1 October 1946 by Republic Act No. 39 ("RA No. 39") which
amended Section 249 of the Tax Code of 1939. Interest income on banks, without any deduction, formed part of
their taxable gross receipts. From October 1946 to June 1977, there was no withholding tax on interest income from
bank deposits.

On 3 June 1977, Presidential Decree No. 1156 required the withholding at source of a 15% tax on interest on bank
deposits. This tax was a creditable, not a final withholding tax. Despite the withholding of the 15% tax, the entire
interest income, without any deduction, formed part of the bank's taxable gross receipts. On 17 September 1980,
Presidential Decree No. 1739 made the withholding tax on interest a final tax at the rate of 15% on savings account,
and 20% on time deposits. Still, from 1980 until the Court of Tax Appeals decision in Asia Bank on 30 January
1996, banks included the entire interest income, without any deduction, in their taxable gross receipts.

In Asia Bank, the Court of Tax Appeals held that the final withholding tax is not part of the bank's taxable gross
receipts. The tax court anchored its ruling on Section 4(e) of Revenue Regulations No. 12-80, which stated that the
gross receipts "shall be based on all items actually received" by the bank. The tax court ruled that the bank does
not actually receive the final withholding tax. As authority, the tax court cited Collector of Internal Revenue v. Manila

10
Jockey Club, which held that "gross receipts of the proprietor should not include any money which although
delivered to the amusement place had been especially earmarked by law or regulation for some person other than
the proprietor. x x x

Subsequently, the Court of Tax Appeals reversed its ruling in Asia Bank. In Far East Bank & Trust Co. v.
Commissioner and Standard Chartered Bank v. Commissioner, both promulgated on 16 November 2001, the tax
court ruled that the final withholding tax forms part of the bank's gross receipts in computing the gross
receipts tax. The tax court held that Section 4(e) of Revenue Regulations 12-80 did not prescribe the computation
of the gross receipts but merely authorized "the determination of the amount of gross receipts on the basis of the
method of accounting being used by the taxpayer.

The tax court also held in Far East Bank and Standard Chartered Bank that the exclusion of the final
withholding tax from gross receipts operates as a tax exemption which the law must expressly grant. No
law provides for such exemption. In addition, the tax court pointed out that Section 7(c) of Revenue
Regulations No. 17-84 had already superseded Section 4(e) of Revenue Regulations No. 12-80. x x
x[12] (Emphasis supplied)

Notably, this Court, in the same case, held that under RR Nos. 12-80 and 17-84, the Bureau of Internal Revenue
(BIR) has consistently ruled that the term gross receipts do not admit of any deduction. It emphasized that interest
earned by banks, even if subject to the final tax and excluded from taxable gross income, forms part of its gross
receipt for GRT purposes. The interest earned refers to the gross interest without deduction, since the regulations
do not provide for any deduction.[13]

Further, in Commissioner of Internal Revenue v. Solidbank Corporation,[14] this Court held that "gross receipts" refer
to the total, as opposed to the net, income. These are, therefore, the total receipts before any deduction for the
expenses of management.[15]

In Commissioner of Internal Revenue v. Bank of Commerce,[16] we again adhered to the ruling that the term "gross
receipts" must be understood in its plain and ordinary meaning. In this case, we ruled that gross receipts should be
interpreted as the whole amount received as interest, without deductions; otherwise, if deductions were to be made
from gross receipts, it would be considered as "net receipts." The Court ratiocinated as follows:

The word "gross" must be used in its plain and ordinary meaning. It is defined as "whole, entire, total, without
deduction." A common definition is "without deduction." x x x Gross is the antithesis of net. Indeed, in China
Banking Corporation v. Court of Appeals, the Court defined the term in this wise:

As commonly understood, the term "gross receipts" means the entire receipts without any deduction. Deducting any
amount from the gross receipts changes the result, and the meaning, to net receipts. Any deduction from gross
receipts is inconsistent with a law that mandates a tax on gross receipts, unless the law itself makes an exception.
As explained by the Supreme Court of Pennsylvania in Commonwealth of Pennsylvania v. Koppers Company, Inc.

Highly refined and technical tax concepts have been developed by the accountant and legal technician primarily
because of the impact of federal income tax legislation. However, this in no way should affect or control the normal
usage of words in the construction of our statutes; x x x Under the ordinary basic methods of handling accounts, the
term gross receipts, in the absence of any statutory definition of the term, must be taken to include the whole total
gross receipts without any deductions, x x x.[17]

Again, in Commissioner of Internal Revenue v. Bank of the Philippine Islands,[18] this Court ruled that "the legislative
intent to apply the term in its ordinary meaning may also be surmised from a historical perspective of the levy on
gross receipts. From the time the gross receipts tax on banks was first imposed in 1946 under R.A. No. 39 and
throughout its successive reenactments, the legislature has not established a definition of the term 'gross receipts.'

11
Absent a statutory definition of the term, the BIR had consistently applied it in its ordinary meaning, i.e., without
deduction. On the presumption that the legislature is familiar with the contemporaneous interpretation of a statute
given by the administrative agency tasked to enforce the statute, subsequent legislative reenactments of the subject
levy sans a definition of the term 'gross receipts' reflect that the BIR's application of the term carries out the
legislative purpose."[19]

In sum, all the aforementioned cases are one in saying that "gross receipts" comprise "the entire receipts without
any deduction." Clearly, then, the 20% final withholding tax should form part of petitioner's total gross receipts for
purposes of computing the GRT.

Also worth noting is the fact that petitioner's reliance on Section 4 (e) of RR 12-80 is misplaced as the same was
already superseded by a more recent issuance, RR No. 17-84.

This fact was elucidated on by the Court in the case of Commissioner of Internal Revenue v. Citytrust Investment
Phils. Inc.,[20] where it held that RR No. 12-80 had already been superseded by RR No. 17-84, viz.:

x x x Revenue Regulations No. 12-80, issued on November 7, 1980, had been superseded by Revenue
Regulations No. 17-84 issued on October 12, 1984. Section 4 (e) of Revenue Regulations No. 12-80 provides
that only items of income actually received shall be included in the tax base for computing the GRT. On the other
hand, Section 7 (c) of Revenue Regulations No. 17-84 includes all interest income in computing the GRT,
thus:

Section 7. Nature and Treatment of Interest on Deposits and Yield on Deposit Substitutes.

The interest earned on Philippine Currency bank deposits and yield from deposit substitutes subjected to the
(a) withholding taxes in accordance with these regulations need not be included in the gross income in computing
the depositor's/ investor's income tax liability. x x x
Only interest paid or accrued on bank deposits, or yield from deposit substitutes declared for purposes of
(b) imposing the withholding taxes in accordance with these regulations shall be allowed as interest expense
deductible for purposes of computing taxable net income of the payor.
If the recipient of the above-mentioned items of income are financial institutions, the same shall be included
(c)
as part of the tax base upon which the gross receipt tax is imposed.

Revenue Regulations No. 17-84 categorically states that if the recipient of the above-mentioned items of
income are financial institutions, the same shall be included as part of the tax base upon which the gross
receipts tax is imposed. x x x.[21] (Emphasis supplied)

Significantly, the Court even categorically stated in the aforementioned case that there is an implied repeal of
Section 4 (e). It held that there exists a disparity between Section 4 (e) of RR No. 12-80, which imposes the GRT
only on all items of income actually received (as opposed to their mere accrual) and Section 7 (c) of RR No. 17-84,
which includes all interest income (whether actual or accrued) in computing the GRT. Plainly, RR No. 17-84,
which requires interest income, whether actually received or merely accrued, to form part of the bank's taxable
gross receipts, should prevail.[22]

All told, petitioner failed to point to any specific provision of law allowing the deduction, exemption or exclusion from
its taxable gross receipts, of the amount withheld as final tax. Besides, the exclusion sought by petitioner of the
20% final tax on its passive income from the taxpayer's tax base constitutes a tax exemption, which is highly
disfavored. A governing principle in taxation states that tax exemptions are to be construed in strictissimi
juris against the taxpayer and liberally in favor of the taxing authority and should be granted only by clear and
unmistakable terms.[23]

12
WHEREFORE, premises considered, the Decision dated June 16, 2006 and Resolution dated October 17, 2006 of
the former Fifth Division of the Court of Appeals are hereby AFFIRMED in toto.

SO ORDERED.

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

FACTS:

On December 20, 2012. Pres. Benigno Aquino III signed RA 10351 also known as the Sin Tax Reform Law. The
mentioned Law amended RA 8424. On December 21, 2012, the Sec. of Finance, upon the CIR’s recommendation,
imposed tax individually on cigarette pouches of 5’s and 10’s even if bundled in packaging combinations not
exceeding 20 sticks.
As a result, the PTI filed a petition before the RTC for declaratory relief with an application for writ of preliminary
injunction. The RTC favored the PTI and granted its petition. Hence, the Sec. of Finance and the CIR through the
Office of the Solicitor General filed an instant petition. Meanwhile, the SC issued a TRO against the PTI and RTC.

ISSUE:

Whether or not the RTC erred in granting the petition to impose tax on combination pouches of 5’s and 10’s not
exceeding 20 sticks rather than taxing individually pouches of 5’s and 10’s.

RULING:

No, the SC affirmed the decision of the RTC. Basing from the intention and clear interpretation of RA 10351,
combined with the deliberation made during the bicameral conference of Congress, tax should be imposed on
cigarette pouched by machine as packaging combination of 20 cigarette sticks as a whole and not to individual
packaging combinations on pouches of 5’s and 10’s. The SC stated further that the BIR went beyond its jurisdiction
by imposing additional burden to the Tobacco Sector through issuance of its revenue regulations. In so doing, the
BIR made an amendment which was not under its functions. The amendments of laws, according to SC, were one
of Congress’ primary concerns and functions

13
 G.R. No. 166482 January 25, 2012
SILKAIR (SINGAPORE) PTE. LTD., Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION
VILLARAMA, JR., J.:
Assailed in this Rule 45 Petition is the Decision1 dated September 13, 2004 and Resolution2 dated December 21,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 82902.
Petitioner Silkair (Singapore) Pte. Ltd. is a foreign corporation duly licensed by the Securities and Exchange
Commission (SEC) to do business in the Philippines as an on-line international carrier operating the Cebu-
Singapore-Cebu and Davao-Singapore-Davao routes. In the course of its international flight operations, petitioner
purchased aviation fuel from Petron Corporation (Petron) from July 1, 1998 to December 31, 1998, paying the
excise taxes thereon in the sum of ₱5,007,043.39. The payment was advanced by Singapore Airlines, Ltd. on
behalf of petitioner.
On October 20, 1999, petitioner filed an administrative claim for refund in the amount of ₱5,007,043.39
representing excise taxes on the purchase of jet fuel from Petron, which it alleged to have been erroneously paid.
The claim is based on Section 135 (a) and (b) of the 1997 Tax Code, which provides:
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies. – Petroleum
products sold to the following are exempt from excise tax:
(a) International carriers of Philippine or foreign registry on their use or consumption outside the
Philippines: Provided, That the petroleum products sold to these international carriers shall be stored in a bonded
storage tank and may be disposed of only in accordance with the rules and regulations to be prescribed by the
Secretary of Finance, upon recommendation of the Commissioner;
(b) Exempt entities or agencies covered by tax treaties, conventions and other international agreements for
their use or consumption: Provided, however, That the country of said foreign international carrier or exempt entities
or agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; and
x x x x (Emphasis supplied.)
Petitioner also invoked Article 4(2) of the Air Transport Agreement between the Government of the Republic of the
Philippines and the Government of the Republic of Singapore 3 (Air Transport Agreement between RP and
Singapore) which reads:
ART. 4
xxxx
2. Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board aircraft in
the territory of one Contracting Party by, or on behalf of, a designated airline of the other Contracting Party and
intended solely for use in the operation of the agreed services shall, with the exception of charges corresponding to
the service performed, be exempt from the same customs duties, inspection fees and other duties or taxes imposed
in the territory of the first Contracting Party, even when these supplies are to be used on the parts of the journey
performed over the territory of the Contracting Party in which they are introduced into or taken on board. The
materials referred to above may be required to be kept under customs supervision and control.4
Due to the inaction by respondent Commissioner of Internal Revenue, petitioner filed a petition for review with the
Court of Tax Appeals (CTA) on June 30, 2000.
On July 28, 2003, the CTA rendered its decision5 denying petitioner’s claim for refund. Said court ruled that while
petitioner’s country indeed exempts from similar taxes petroleum products sold to Philippine carriers, petitioner
nevertheless failed to comply with the second requirement under Section 135 (a) of the 1997 Tax Code as it failed
to prove that the jet fuel delivered by Petron came from the latter’s bonded storage tank. Presiding Justice Ernesto
D. Acosta dissented from the majority view that petitioner’s claim should be denied, stating that even if the bonded
storage tank is required under Section 135 (a), the claim can still be justified under Section 135 (b) in view of our
country’s existing Air Transport Agreement with the Republic of Singapore which shows the reciprocal enjoyment of
the privilege of the designated airline of the contracting parties.

14
Its motion for reconsideration having been denied by the CTA, petitioner elevated the case to the CA. Petitioner
assailed the CTA in not holding that there are distinct and separate instances of exemptions provided in paragraphs
(a), (b) and (c) of Section 135, and therefore the proviso found in paragraph (a) should not have been applied to the
exemption granted under paragraph (b).
The CA affirmed the denial of the claim for tax refund and dismissed the petition. It ruled that while petitioner is
exempt from paying excise taxes on petroleum products purchased in the Philippines by virtue of Section 135 (b),
petitioner is not the proper party to seek for the refund of the excise taxes paid. Petitioner’s motion for
reconsideration was likewise denied by the appellate court.
In this appeal, petitioner argues that it is the proper party to file the claim for refund, being the entity granted the tax
exemption under the Air Transport Agreement between RP and Singapore. It disagrees with respondent’s
reasoning that since excise tax is an indirect tax it is the direct liability of the manufacturer, Petron, and not the
petitioner, because this puts to naught whatever exemption was granted to petitioner by Article 4 of the Air
Transport Agreement.
Petitioner further contends that respondent is estopped from questioning the right of petitioner to claim a refund of
the excise taxes paid after issuing BIR Ruling No. 339-92 which already settled the matter. It further points out that
the CTA has consistently ruled in a number of decisions involving the same parties that petitioner is the proper party
to seek the refund of excise taxes paid on its purchases of petroleum products. Finally, it emphasizes that
respondent never raised in issue petitioner’s legal personality to seek a tax refund in the administrative level. Citing
this Court’s ruling in the case of Commissioner of Internal Revenue v. Court of Tax Appeals, et al.6 petitioner
asserts that respondent is in estoppel to question petitioner’s standing to file the claim for refund for its failure to
timely raise the issue in the administrative level, as well as before the CTA.
On the other hand, the Solicitor General on behalf of respondent, maintains that the excise tax passed on to the
petitioner by Petron being in the nature of an indirect tax, it cannot be the subject matter of an administrative claim
for refund/tax credit, following the ruling in Contex Corporation v. Commissioner of Internal Revenue.7 Moreover,
assuming arguendo that petitioner falls under any of the enumerated transactions/persons entitled to tax exemption
under Section 135 of the 1997 Tax Code, what the law merely contemplates is exemption from the payment of
excise tax to the seller/manufacturer, in this case Petron, but not an exemption from payment of excise tax to the
BIR, much more an entitlement to a refund from the BIR. Being the buyer, petitioner is not the person required by
law nor the person statutorily liable to pay the excise tax but the seller, following the provision of Section 130 (A) (1)
(2).
The Solicitor General also asserts that contrary to petitioner’s argument that respondent never raised in the
administrative level the issue of whether petitioner is the proper party to file the claim for refund, records would
show that respondent actually raised the matter of whether petitioner is entitled to the tax refund being claimed in
his Answer dated August 8, 2000, in the Joint Stipulation of Facts, and in his Memorandum submitted before the
CTA where respondent categorically averred that "petitioner x x x is not the entity directly liable for the payment of
the tax, hence, not the proper party who should claim the refund of the excise taxes paid."8
We rule for the respondent.
The core issue presented is the legal personality of petitioner to file an administrative claim for refund of excise
taxes alleged to have been erroneously paid to its supplier of aviation fuel here in the Philippines.
In three previous cases involving the same parties, this Court has already settled the issue of whether petitioner is
the proper party to seek the refund of excise taxes paid on its purchase of aviation fuel from a local
manufacturer/seller. Following the principle of stare decisis, the present petition must therefore be denied.
Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic sale or consumption
or for any other disposition and to things imported into the Philippines, 9 is basically an indirect tax. While the tax is
directly levied upon the manufacturer/importer upon removal of the taxable goods from its place of production or
from the customs custody, the tax, in reality, is actually passed on to the end consumer as part of the transfer value
or selling price of the goods, sold, bartered or exchanged. 10 In early cases, we have ruled that for indirect taxes
(such as valued-added tax or VAT), the proper party to question or seek a refund of the tax is the statutory
taxpayer, the person on whom the tax is imposed by law and who paid the same even when he shifts the burden
thereof to another.11 Thus, in Contex Corporation v. Commissioner of Internal Revenue,12 we held that while it is
true that petitioner corporation should not have been liable for the VAT inadvertently passed on to it by its supplier
since their transaction is a zero-rated sale on the part of the supplier, the petitioner is not the proper party to claim

15
such VAT refund. Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax credit and
accordingly refund the petitioner of the VAT erroneously passed on to the latter. 13
In the first Silkair case14 decided on February 6, 2008, this Court categorically declared:
The proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the
tax is imposed by law and who paid the same even if he shifts the burden thereof to another. Section 130 (A) (2) of
the NIRC provides that "[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by
the manufacturer or producer before removal of domestic products from place of production." Thus, Petron
Corporation, not Silkair, is the statutory taxpayer which is entitled to claim a refund based on Section 135
of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet
fuel is not a tax but part of the price which Silkair had to pay as a purchaser.15 (Emphasis supplied.)
Just a few months later, the decision in the second Silkair case16 was promulgated, reiterating the rule that in the
refund of indirect taxes such as excise taxes, the statutory taxpayer is the proper party who can claim the refund.
We also clarified that petitioner Silkair, as the purchaser and end-consumer, ultimately bears the tax burden, but
this does not transform its status into a statutory taxpayer.
The person entitled to claim a tax refund is the statutory taxpayer. Section 22(N) of the NIRC defines a taxpayer as
"any person subject to tax." In Commissioner of Internal Revenue v. Procter and Gamble Phil. Mfg. Corp., the Court
ruled that:
‘A "person liable for tax" has been held to be a "person subject to tax" and properly considered a "taxpayer." The
terms "liable for tax" and "subject to tax" both connote a legal obligation or duty to pay a tax.’
The excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the products
from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax is already paid by
Petron. Petron, being the manufacturer, is the "person subject to tax." In this case, Petron, which paid the excise
tax upon removal of the products from its Bataan refinery, is the "person liable for tax." Petitioner is neither a
"person liable for tax" nor "a person subject to tax." There is also no legal duty on the part of petitioner to pay the
excise tax; hence, petitioner cannot be considered the taxpayer.
Even if the tax is shifted by Petron to its customers and even if the tax is billed as a separate item in the aviation
delivery receipts and invoices issued to its customers, Petron remains the taxpayer because the excise tax is
imposed directly on Petron as the manufacturer. Hence, Petron, as the statutory taxpayer, is the proper
party that can claim the refund of the excise taxes paid to the BIR.17 (Emphasis supplied.)1avvphi1
Petitioner’s contention that the CTA and CA rulings would put to naught the exemption granted under Section 135
(b) of the 1997 Tax Code and Article 4 of the Air Transport Agreement is not well-taken. Since the supplier herein
involved is also Petron, our pronouncement in the second Silkair case, relative to the contractual undertaking of
petitioner to submit a valid exemption certificate for the purpose, is relevant. We thus noted:
The General Terms & Conditions for Aviation Fuel Supply (Supply Contract) signed between petitioner (buyer) and
Petron (seller) provide:
"11.3 If Buyer is entitled to purchase any Fuel sold pursuant to the Agreement free of any taxes, duties or
charges, Buyer shall timely deliver to Seller a valid exemption certificate for such purchase." (Emphasis
supplied)
This provision instructs petitioner to timely submit a valid exemption certificate to Petron in order that Petron will not
pass on the excise tax to petitioner. As correctly suggested by the CTA, petitioner should invoke its tax exemption
to Petron before buying the aviation jet fuel. Petron, however, remains the statutory taxpayer on those excise taxes.
Revenue Regulations No. 3-2008 (RR 3-2008) provides that "subject to the subsequent filing of a claim for excise
tax credit/refund or product replenishment, all manufacturers of articles subject to excise tax under Title VI of the
NIRC of 1997, as amended, shall pay the excise tax that is otherwise due on every removal thereof from the place
of production that is intended for exportation or sale/delivery to international carriers or to tax-exempt
entities/agencies." The Department of Finance and the BIR recognize the tax exemption granted to international
carriers but they consistently adhere to the view that manufacturers of articles subject to excise tax are the statutory
taxpayers that are liable to pay the tax, thus, the proper party to claim any tax refunds. 18
The above observation remains pertinent to this case because the very same provision in the General Terms and
Conditions for Aviation Fuel Supply Contract also appears in the documentary evidence submitted by petitioner
before the CTA.19 Except for its bare allegation of being "placed in a very complicated situation" because Petron,

16
"for fear of being assessed by Respondent, will not allow the withdrawal and delivery of the petroleum products
without Petitioner’s pre-payment of the excise taxes," petitioner has not demonstrated that it dutifully complied with
its contractual undertaking to timely submit to Petron a valid certificate of exemption so that Petron may
subsequently file a claim for excise tax credit/refund pursuant to Revenue Regulations No. 3-2008 (RR 3-2008). It
was indeed premature for petitioner to assert that the denial of its claim for tax refund nullifies the tax exemption
granted to it under Section 135 (b) of the 1997 Tax Code and Article 4 of the Air Transport Agreement.
In the third Silkair case20 decided last year, the Court called the attention to the consistent rulings in the previous
two Silkair cases that petitioner as the purchaser and end-consumer of the aviation fuel is not the proper party to
claim for refund of excise taxes paid thereon. The situation clearly called for the application of the doctrine, stare
decisis et non quieta movere. Follow past precedents and do not disturb what has been settled. Once a case has
been decided one way, any other case involving exactly the same point at issue, as in the case at bar, should be
decided in the same manner.21 The Court thus finds no cogent reason to deviate from those previous rulings on the
same issues herein raised.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated September 13, 2004 and
Resolution dated December 21, 2004 of the Court of Appeals in CA-G.R. SP No. 82902 are AFFIRMED.
With costs against the petitioner.
SO ORDERED.

CASE DIGEST: COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. BASF COATING + INKS PHILS.,
INC., Respondent. (G.R. No. 198677; November 26, 2014)

2/3 of BC's board members and stockholders decided to dissolve the corporation by cutting its 50-year term of
existence (from 1990) short (only until March 31, 2001). Subsequently, BC moved out of its address in Las Piñas
City and transferred to Carmelray Industrial Park, Canlubang, Calamba, Laguna

On June 26, 2001, BC submitted 2 letters to BIR. The first was a notice of dissolution. The send was a
manifestation with documents supporting said dissolution such as BIR Form 1905 which refers to an update of
information contained in its tax registration. Thereafter, a FAN was sent to BC's former address in Las Piñas City.
The FAN indicated an amount of 18 million pesos representing income tax, VAT, WTC, EWT and DST for the
taxable year of 1999.

On March 5, 2004, BIR's RDO No. 39, South Quezon City, issued a First Notice Before Issuance of Warrant of
Distraint and Levy (FNB), which was sent to the residence of one of BC's directors.

On March 19, 2004, BC filed a protest letter citing lack of due process and prescription as grounds.

After 180 days without action on the part of the CIR, BC filed a petition for review with the CTA. Trial ensued.

The CTA 1D ruled that since the CIR was actually aware of BC's new address and such error in sending should not
be taken against BC. According to the CTA 1D, since there are no valid notices sent to BC, the subsequent
assessments against it are considered void.

CIR filed an MR. It was denied. So, it went to CTA en banc. The CTA En Banc held that CIR's right to assess
respondent for deficiency taxes for the taxable year 1999 has already prescribed and that the FAN issued to
respondent never attained finality because BC did not receive it.

CIR filed an MR. Denied.

17
ISSUE #1: Was the running of the 3-year prescriptive period to assess suspended when BC failed to notify
the CIR of its change of address?

No, the 3-year prescriptive period to assess was not suspended in favor of the CIR even if BC failed notify
regarding its change of address.

It is true that, under the Tax Code, the running of the Statute of Limitations shall be suspended when the taxpayer
cannot be located in the address given in the return filed upon which a tax is being assessed or collected. In
addition, Section 11 of RR 12-85 states that, in case of change of address, the taxpayer is required to give a written
notice thereof to the RDO or the district having jurisdiction over his former legal residence and/or place of business.

However, the Supreme Court ruled that the above-mentioned provisions on the suspension of the 3-year period to
assess apply only if the CIR is not aware of the whereabouts of the taxpayer.

In the present case, the CIR, by all indications, was well aware that BC had moved to its new address in Calamba,
Laguna, as shown by the documents which formed part of respondent's records with the BIR.

Moreover, before the FAN was sent to BC's old address, the RDO sent BC a letter regarding the results of its
investigation and an invitation to an information conference. This could not have been done without being aware of
BC's new address. Finally, the PAN was "returned to sender" before the FAN was sent.

Hence, despite the absence of a formal written notice of Bc's change of address, the fact remains that petitioner
became aware of respondent's new address as shown by 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.

ISSUE #2: Section 3.1.7 of BIR Revenue Regulation No. 12-99 allows "constructive service" if the
assessment notice is served by registered mail. This constructive service rule was upheld in Nava v.
Commissioner of Internal Revenue. Isn't there constructive service in BC's case?

No there is none.

The CIR's reliance on the provisions of Section 3.1.7 of BIR RR No. 12-9944 as well as on the case of Nava v.
Commissioner of Internal Revenue is misplaced, because in the said case, one of the requirements of a valid
assessment notice is that the letter or notice must be properly addressed. It is not enough that the notice is sent by
registered mail as provided under the said RR. In the instant case, the FAN was sent to the wrong address. Thus,
the CTA is correct in holding that the FAN never attained finality because BC never received it, either actually or
constructively.

November 22, 2017

G.R. No. 227544
COMMISSIONER OF INTERNAL REVENUE, Petitioner
vs.
TRANSITIONS OPTICAL PHILIPPINES, INC., Respondent
DECISION
LEONEN, J.:
Estoppel applies against a taxpayer who did not only raise at the earliest opportunity its representative's lack of
authority to execute two (2) waivers of defense of prescription, but was also accorded, through these waivers, more
time to comply with the audit requirements of the Bureau of Internal Revenue. Nonetheless, a tax assessment
served beyond the extended period is void.

18
This Petition for Review on Certiorari1 seeks to nullify and set aside the June 7, 2016 Decision2 and September 26,
2016 Resolution3 of the Court of Tax Appeals En Banc in CTA EB No. 1251. The Court of Tax Appeals En Banc
affirmed its First Division's September 1, 2014 Decision,4 cancelling the deficiency assessments against Transitions
Optical Philippines, Inc. (Transitions Optical).
On April 28, 2006, Transitions Optical received Letter of Authority No. 00098746 dated March 23, 2006 from
Revenue Region No. 9, San Pablo City, of the Bureau of Internal Revenue. It was signed by then Officer-in-Charge-
Regional Director Corazon C. Pangcog and it authorized Revenue Officers Jocelyn Santos and Levi Visaya to
examine Transition Optical's books of accounts for internal revenue tax purposes for taxable year 2004. 5
On October 9, 2007, the parties allegedly executed a Waiver of the Defense of Prescription (First Waiver).6 In this
supposed First Waiver, the prescriptive period for the assessment of Transition Optical's internal revenue taxes for
the year 2004 was extended to June 20, 2008.7 The document was signed by Transitions Optical's Finance
Manager, Pamela Theresa D. Abad, and by Bureau of Internal Revenue's Revenue District Officer; Myrna S.
Leonida.8
This was followed by another supposed Waiver of the Defense of Prescription (Second Waiver) dated June 2, 2008.
This time, the prescriptive period was supposedly extended to November 30, 2008.9
Thereafter, the Commissioner of Inte1nal Revenue, through Regional Director Jaime B. Santiago (Director
Santiago), issued a Preliminary Assessment Notice (PAN) dated November 11, 2008, assessing Transitions Optical
for its deficiency taxes for taxable year 2004. Transitions Optical filed a written protest on November 26, 2008.10
The Commissioner of Internal Revenue, again through Director Santiago, subsequently issued against Transitions
Optical a Final Assessment Notice (FAN) and a Formal Letter of Demand (FLD) dated November 28, 2008 for
deficiency income tax, value-added tax, expanded withholding tax, and final tax for taxable year 2004 amounting to
₱l 9, 701,849.68.11
In its Protest Letter dated December 8, 2008 against the FAN, Transitions Optical alleged that the demand for
deficiency taxes had already prescribed at the time the FAN was mailed on December 2, 2008. In its Supplemental
Protest, Transitions Optical pointed out that the FAN was void because the FAN indicated 2006 as the return
period, but the assessment covered calendar year 2004.12
Years later, the Commissioner of Internal Revenue, through Regional Director Jose N. Tan, issued a Final Decision
on the Disputed Assessment dated January 24, 2012, holding Transitions Optical liable for deficiency taxes in the
total amount of ₱l9,701,849.68 for taxable year 2004, broken down as follows;
Tax Amount
Income Tax ₱3,153,371.04
Value-Added Tax 1,231,393.4 7
Expanded Withholding Tax 175,339.51
Final Tax on Royalty 14,026,247.90
Final Tax on Interest Income 1,115,497. 76
Total ₱19,701,849.6813
On March 16, 2012, Transitions Optical filed a Petition for Review before the Court of Tax Appeals.14
In her Answer, the Commissioner of Internal Revenue interposed that Transitions Optical's claim of prescription was
inappropriate because the executed Waiver of the Defense of Prescription extended the assessment period. She
added that the posting of the FAN and FLD was within San Pablo City Post Office's exclusive control. She averred
that she could not be faulted if the FAN and FLD were posted for mailing only on December 2, 20081 since
November 28, 2008 fell on a Friday and the next supposed working day, December 1, 2008, was declared a
Special Holiday.15
After trial and upon submission of the parties' memoranda, the First Division of the Court of Tax Appeals (First
Division) rendered a Decision on September 1, 2014.16 It held:
In summary therefore, the Court hereby finds the subject Waivers to be defective and therefore void. Nevertheless,
granting for the sake of argument that the subject Waivers were validly executed, for failure of respondent however

19
to present adequate supporting evidence to prove that it issued the FAN and the FLD within the extended period
agreed upon in the 2nd Waiver, the subject assessment must be cancelled for being issued beyond the prescriptive
period provided by law to assess.
WHEREFORE, in light of the foregoing considerations, the instant Petition for Review is hereby GRANTED.
Accordingly, the Final Assessment Notice, Formal Letter of Demand and Final Decision on Disputed Assessment
finding petitioner Transitions Optical Philippines, Inc. liable for deficiency income tax, deficiency expanded
withholding tax, deficiency value-added tax and deficiency final tax for taxable year 2004 in the total amount of
₱19,701,849.68 are hereby CANCELLEU and SET ASIDE.
SO ORDER.ED.17 (Emphasis in the original)
The Commissioner of Internal Revenue filed a Motion for Reconsideration, which was denied by the First Division in
its Resolution18 dated November 7, 2014.
The Court of Tax Appeals En Banc affirmed the First Division Decision19 and subsequently denied the
Commissioner of Internal Revenue's Motion for Reconsideration.20
Hence, this Petition was filed before this Court. Transitions Optical filed its Comment.21
Petitioner contends that "[t]he two Waivers executed by the parties on October 9, 2007 and June 2, 2008
substantially complied with the requirements of Sections 203 and 222 of the [National Internal Revenue
Code]."22 She adds that technical rules of procedure of administrative bodies, such as those provided in Revenue
Memorandum Order (RMO) No. 20-90 issued on April 4, 1990 and Revenue Delegation Authority Order (RDAO)
No. 05-01 issued on August 2, 2001, must be liberally applied to promote justice.23 At any rate, petitioner maintains
that respondent is estopped from questioning the validity of the waivers since their execution was caused by the
delay occasioned by respondent's own failure to comply with the orders of the Bureau of Internal Revenue to submit
documents for audit and examination.24
Furthermore, petitioner argues that the assessment required to be issued within the three (3)-year period provided
in Sections 203 and 222 of the National Internal Revenue Code refer to petitioner's actual issuance of the notice of
assessment to the taxpayer or what is usually known as PAN, and not the FAN issued in case the taxpayer files a
protest.25
On the other hand, respondent contends that the Court of Tax Appeals properly found the waivers defective, and
therefore, void. It adds that the three (3)-year prescriptive period for tax assessment primarily benefits the taxpayer,
and any waiver of this period must be strictly scrutinized in light of the requirements of the laws and
rules.26 Respondent posits that the requirements for valid waivers are not mere technical rules of procedure that
can be set aside.27
Respondent further asserts that it is not estopped from questioning the validity of the waivers as it raised its
objections at the earliest opportunity.28 Besides, the duty to ensure compliance with the requirements of RMO No.
20-90 and RDAO No. 05-01, including proper authorization of the taxpayer's representative, fell primarily on
petitioner and her revenue officers. Thus, petitioner came to court with unclean hands and cannot be permitted to
invoke the doctrine of estoppel.29 Respondent insists that there was no clear showing that the signatories in the
waivers were duly sanctioned to act on its behalf.30
Even assuming that the waivers were valid, respondent argues that the assessment would still be void as the FAN
was served only on December 4, 2008, beyond the extended period of November 30, 2008. 31 Contrary to
petitioner's stance, respondent counters that the assessment required to be served within the three (3)-year
prescriptive period is the FAN and FLD, not just the PAN.32 According to respondent, ''it is the FAN and FLD that
formally notifly] the taxpayer, and categorica1ly [demand] from him, that a deficiency tax is due." 33
The issues for this Court's resolution are:
First, whether or not the two (2) Waivers of the Defense of Prescription entered into by the parties on October 9,
2007 and June 2, 2008 were valid; and
Second, whether or not the assessment of deficiency taxes against respondent Transitions Optical Philippines, Inc.
for taxable year 2004 had prescribed.
This Court denies the Petition. The Court of Tax Appeals committed no reversible error in cancelling the deficiency
tax assessments.
I
As a general rule, petitioner has three (3) years to assess taxpayers from the filing of the return. Section 203 of the
National Internal Revenue Code provides:

20
Section 203. Period of Limitation Upon Assessment m1d Collection. - Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the
expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the
three (3)-year period shall be counted from the day the return was filed. For purposes of this Section, a return filed
before the last day prescribed by law for the filing thereof shall be considered as filed on such last day.
An exception to the rule of prescription is found in Section 222(b) and (d) of this Code, viz:
Section 222. Exceptions as to Period of Limitation of Assessment and Collection of Taxes. -
....
(b) If before the expiration of the time prescribed in Section 203 for the assessment of the tax. both the
Commissioner and the taxpayer have agreed in writing to its assessment after such time, the tax may be assessed
within the period agreed upon. The period so agreed upon may be extended by subsequent written agreement
made before the expiration of the period previously agreed upon.
....
(d) Any internal revenue tax, which has been assessed within the period agreed upon as provided in paragraph (b)
hereinabove, may be collected by distraint or levy or by a proceeding in court within the period agreed upon in
writing before the expiration of the five (5) - year period. The period so agreed upon may be extended by
subsequent written agreements made before the expiration of the period previously agreed upon.
Thus, the period to assess and collect taxes may be extended upon the Commissioner of Internal Revenue and the
taxpayer's written agreement, executed before the expiration of the three (3)-year period.
In this case, two (2) waivers were supposedly executed by the parties extending the prescriptive periods for
assessment of income tax, value-added tax, and expanded and final withholding taxes to June 20, 2008, and then
to November 30, 2008.
The Court of Tax Appeals, both its First Division and En Banc, declared as defective and void the two (2) Waivers
of the Defense of Prescription for non-compliance with the requirements for the proper execution of a waiver as
provided in RMO No. 20-90 and RDAO No. 05-01. Specifically, the Court of Tax Appeals found that these Waivers
were not accompanied by a notarized written authority from respondent, authorizing the so-called representatives to
act on its behalf. Likewise, neither the Revenue District Office's acceptance date nor respondent's receipt of the
Bureau of Internal Revenue's acceptance was indicated in either document. 34
However, Presiding Justice Roman G. Del Rosario (Justice Del Rosario) in his Separate Concurring Opinion 35 in
the Court of Tax Appeals June 7, 2016 Decision, found that respondent is estopped from claiming that the waivers
were invalid by reason of its own actions, which persuaded the government to postpone the issuance of the
assessment. He discussed:
In the case at bar, respondent performed acts that induced the BIR to defer the issuance of the assessment.
Records reveal that to extend the BIR's prescriptive period to assess respondent for deficiency taxes for taxable
year 2004, respondent executed two (2) waivers. The first Waiver dated October 2007 extended the period to
assess until June 20, 2008, while the second Waiver, which was executed on June 2, 2008, extended the period to
assess the taxes until November 30, 2008. As a consequence of the issuance of said waivers, petitioner delayed
the issuance of the assessment.
Notably, when respondent filed its protest on November 26, 2008 against the Preliminary Assessment Notice dated
November 11, 2008, it merely argued that it is not liable for the assessed deficiency taxes and did not raise as an
issue the invalidity of the waiver and the prescription of petitioner's right to assess the deficiency taxes. In its protest
dated December 8, 2008 against the FAN, respondent argued that the year being audited in the FAN has already
prescribed at the time such FAN was mailed on December 2, 2008. Respondent even stated in that protest that it
received the letter (referring to the FAN dated November 28, 2008) on December 5, 2008, which accordingly is five
(5) days after the waiver it issued had prescribed. The foregoing narration plainly does not suggest that respondent
has any objection to its previously executed waivers. By the principle of estoppel, respondent should not be allowed
to question the validity of the waivers.36
In Commissioner of Internal Revenue v. Next Mobile, Inc. (formerly Nextel Communications Phils., lnc.),37 this Comi
recognized the doctrine of estoppel and upheld the waivers when both the taxpayer and the Bureau of Internal
Revenue were in part de lie to. The taxpayer's act of impugning its waivers after benefitting from them was
considered an act of bad faith:

21
In this case, respondent, after deliberately executing defective waivers, raised the very same deficiencies it caused
to avoid the tax liability determined by the BIR during the extended assessment period. It must be remembered that
by virtue of these Waivers, respondent was given the opportunity to gather and submit documents to substantiate
its claims before the [Commissioner of Internal Revenue] during investigation. It was able to postpone the payment
of taxes, as well as contest and negotiate the assessment against it. Yet, after enjoying these benefits, respondent
challenged the validity of the Waivers when the consequences thereof were not in its favor. In other words,
respondent's act of impugning these Waivers after benefiting therefrom and allowing petitioner to rely on the same
is an act of bad faith.38
This Court found the taxpayer estopped from questioning the validity of its waivers:
Respondent executed five Waivers and delivered them to petitioner, one after the other. It allowed petitioner to rely
on them and did not raise any objection against their validity until petitioner assessed taxes and penalties against it.
Moreover, the application of estoppel is necessary to prevent the undue injury that the government would suffer
because of the cancellation of petitioner's assessment of respondent's tax liabilities. 39 (Emphasis in the original)
Parenthetically, this Court stated that when both parties continued to deal with each other in spite of knowing and
without rectifying the defects of the waivers, their situation is "dangerous and open to abuse by unscrupulous
taxpayers who intend to escape their responsibility to pay taxes by mere expedient of hiding behind
technicalities."40
Estoppel similarly applies in this case.
Indeed, the Bureau of Internal Revenue was at fault when it accepted respondent's Waivers despite their non-
compliance with the requirements of RMO No. 20-90 and RDAO No. 05-01.
Nonetheless, respondent's acts also show its implied admission of the validity of the waivers. First, respondent
never raised the invalidity of the Waivers at the earliest opportunity, either in its Protest to the PAN, Protest to the
FAN, or Supplemental Protest to the FAN.41 It thereby impliedly recognized these Waivers' validity and its
representatives' authority to execute them. Respondent only raised the issue of these Waivers' validity in its Petition
for Review filed with the Court of Tax Appeals.42 In fact, as pointed out by Justice Del Rosario, respondent's Protest
to the FAN clearly recognized the validity of the Waivers,43 when it stated:
This has reference to the Final Assessment Notice ("[F]AN") issued by your office, dated November 28, 2008. The
said letter was received by Transitions Optical Philippines[,] Inc. (TOPI) on December 5, 2008, five days after the
waiver we issued which was valid until November 30, 2008 had prescribed.44 (Emphasis supplied)
Second, respondent does not dispute petitioner's assertion45 that respondent repeatedly failed to comply with
petitioner's notices, directing it to submit its books of accounts and related records for examination by the Bureau of
Internal Revenue. Respondent also ignored the Bureau of Internal Revenue's request for an Informal Conference to
discuss other "discrepancies" found in the partial documents submitted. The Waivers were necessary to give
respondent time to fully comply with the Bureau of Internal Revenue notices for audit examination and to respond to
its Informal Conference request to discuss the discrepancies.46 Thus, having benefitted from the Waivers executed
at its instance, respondent is estopped from claiming that they were invalid and that prescription had set in.
II
But, even as respondent is estopped from questioning the validity of the Waivers, the assessment is nonetheless
void because it was served beyond the supposedly extended period.
The First Division of the Court of Tax Appeals found that "the date indicated in the envelope/mail matter containing
the FAN and the FLD is December 4, 2008, which is considered as the date of their mailing." 47 Since the validity
period of the second Waiver is only until November 30, 2008, prescription had already set in at the time the FAN
and the FLD were actually mailed on December 4, 2008.
For lack of adequate supp01ting evidence, the Court of Tax Appeals rejected petitioner's claim that the FAN and
the FLD were already delivered to the post office for mailing on November 28, 2008 but were actually processed by
the post office on December 2, 2008, since December 1, 2008 was declared a Special Holiday.48 The testimony of
petitioner's witness, Dario A. Consignado, Jr., that he brought the mail matter containing the FAN and the FLD to
the post office on November 28, 2008 was considered self-serving, uncorroborated by any other evidence.
Additionally, the Certification presented by petitioner certifying that the FAN issued to respondent was delivered to
its Administrative Division for mailing on November 28, 2008 was found insufficient to prove that the actual date of
mailing was November 28, 2008.

22
This Court finds no clear and convincing reason to overturn these factual findings of the Court of Tax
Appeals.1âwphi1
Finally, petitioner's contention that the assessment required to be issued within the three (3)-year or extended
period provided in Sections 203 and 222 of the National Internal Revenue Code refers to the PAN is untenable.
Considering the functions and effects of a PAN vis a vis a FAN, it is clear that the assessment contemplated in
Sections 203 and 222 of the National Internal Revenue Code refers to the service of the FAN upon the taxpayer.
A PAN merely informs the taxpayer of the initial findings of the Bureau of Internal Revenue.49 It contains the
proposed assessment, and the facts, law, rules, and regulations or jurisprudence on which the proposed
assessment is based.50 It does not contain a demand for payment but usually requires the taxpayer to reply within
15 days from receipt. Otherwise, the Commissioner of Internal Revenue will finalize an assessment and issue a
FAN.
The PAN is a part of due process.51 It gives both the taxpayer and the Commissioner of Internal Revenue the
opportunity to settle the case at the earliest possible time without the need for the issuance of a FAN.
On the other hand, a FAN contains not only a computation of tax liabilities but also a demand for payment within a
prescribed period.52 As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay the
amount assessed and demanded. It also signals the time when penalties and interests begin to accrue against the
taxpayer. Thus, the National Internal Revenue Code imposes a 25% penalty, in addition to the tax due, in case the
taxpayer fails to pay the deficiency tax within the time prescribed for its payment in the notice of
assessment.53 Likewise, an interest of 20% per annum, or such higher rate as may be prescribed by rules and
regulations, is to be collected from the date prescribed for payment until the amount is fully paid.54 Failure to file an
administrative protest within 30 days from receipt of the FAN will render the assessment final, executory, and
demandable.
WHEREFORE, the Petition is DENIED. The June 7, 2016 Decision and September 26, 2016 Resolution of the
Court of Tax Appeals En Banc in CTAEB No. 1251 are AFFIRMED.
SO ORDERED.

COMMISSIONER OF INTERNAL REVENUE v. STANDARD CHARTERED BANK. G.R. No. 192173. July 29,
2015

FACTS:
Respondent received CIR's Formal Letter of Demand for alleged deficiency income tax, final income tax,
withholding tax - final and compensation, and increments for the taxable year worth P 33,326,211.37.
Respondent protested the said assessment by filing a letter-protest with the CIR requesting the assessment to be
withdrawn.
In the middle of things, respondent paid the BIR the assessed deficiency for both the withholding taxes.
Respondent then filed for a petition for the cancellation and setting aside of the assessments which the CTA
granted. The CTA held that it has already prescribed as it covered the taxable year of 1998.
The NIRC provides that the assessments should have been issued within the three-year prescriptive period. The
CIR also presented the Waivers of Statute of Limitations executed by the parties which extended the period to
assess respondent. The CTA held that the CIR failed to strictly comply and conform with the provisions of Revenue
Memorandum Order No. 20-90. The CTA held that the waivers were invalid.

ISSUE: Whether the assessments were already prescribed. Whether the waiver was invalid.

RULING:
Yes and yes.

The NIRC is clear that in a case where a return is filed beyond the period prescribed by law, the three-year period
shall be counted from the day the return was filed.

23
The waiver, as also provided by the NIRC, is an exception to the three-day prescription. But, as the CTA first held,
the provisions of the RMO should have been strictly complied with. Failing to comply renders a waiver defective and
ineffectual

People of the Philippines vs. Gloria V. Kintanar

C.T.A. EB CRIM. NO. 006
(C.T.A. CRIM. CASE NOS. 0-033 & 0-034)
December 3, 2010

NATURE OF THE CASE: A Petition for Review of the decision rendered by the Former Second Division
of the CTA which found Gloria Kintanar guilty of failure to file her Income Tax returns for years 2000 and 2001.
FACTS: Spouses Benjamin Kintanar and Gloria V. Kintanar were distributors or independent contractors
of Forever Living Products Phils. Inc. (FLPPI). It all began when the Investigation Division of the BIR received
confidential information of an alleged tax evasion scheme of the Spouses Kintanar. As a result thereof, BIR issued
a Letter of Authority to examine the books of accounts and other accounting records for taxable years 1999 to 2002.
The LOA was received by Mr. Kintanar on April 3, 2003. Gloria Kintanar failed to submit the required documents.
Thereafter, several notices and a subpoena were sent to her, by the BIR but the she remained
uncompliant.
On August 31, 2004 the husband of Gloria Kintanar filed a protest to the Letter of Demand and Assessment
notices sent by the BIR. Photocopies of the spouses’ joint income tax returns for the years 2000-2002 were
attached to the protest.
In response thereto, the BIR required the spouses to submit additional documents within 60 days. Again,
the spouses failed to comply with the said request; consequently, the assessment and the demand letter became
final, executory and demandable.
The prosecution proved that Gloria Kintanar failed to file her ITR’s for the years 1999-2001 and found her
liable for deficiency income taxes arising from income earned from FLPPI.
Gloria Kintanar testified that she filed her ITR’s for taxable years 2000-2001. She denied having willfully,
unlawfully and feloniously failed to file her ITR on said years as she has no personal knowledge of the actual filing
of the said returns because it was her husband who filed the ITR’s. Her husband on the other hand testified that he
filed the ITR’s for the years 1997-2004 through their hired accountant who prepared and filed their returns. Because
he relied upon his accountant, he only browsed the returns; therefore, he has no knowledge to the amount stated
thereon and to the address which their accountant filed their returns to.
The Former Second Division found Gloria Kintanar guilty beyond reasonable doubt of Violation of Section
255 of the NIRC of 1997. Hence, Gloria Kintanar filed this instant petition before the CTA En Banc.
ISSUES: Did Petitioner Gloria Kintanar violate Sec. 255 of the NIRC for failure to make or file her returns?
Was her failure to make or file a return willful?
ANSWER/RATIONALE/HELD: Yes, Gloria Kintanar is guilty beyond reasonable doubt for failure to make
or file a return under Section 255 of the NIRC .
Yes, she the Court found her to have willfully and deliberately failed to file her returns for the taxable years
2000-2001.
Section 255 contemplates four different situations punishable by law, for failure to:
1. To pay any tax;
2. To make a return;
3. To keep any record; and
4. To supply correct and accurate information.
Petitioner Gloria Kintanar is charged with failure to make or file a return. The elements of which are the
following:
a. the accused is a person required to make or file a return;

24
 b. the accused failed to make or file a return at the time required by law; and
c. That failure to make or file a return was willful.
All of the aforementioned elements are present in this case.
As to the 1st element, Gloria Kintanar is duty bound to make or file a return under Section 51 of the NIRC.
Considering that the she earned a substantial income as distributor of FLPPI; she is therefore required to make or
file her annual income tax return pursuant to Sec. 51 of the NIRC.
As to 2nd element, she failed to make or file her ITR’s for the taxable years 2000-2001. Gloria Kintanar had
no record that she filed the required ITR’s within the reglementary period to any of the Rev. District Offices of the
BIR. The only record the BIR has was when she was registered as a one-time transaction tax payer for capital
gains and documentary stamp in Cavite. The petitioner presented 2 ITR’s allegedly filed in the RDO of Novaliches.
However, the court did not give credence to the authenticity of the document as it contained material flaws. The
ITR’s were in itself incomplete, filed in an RDO having no jurisdiction over the place of residence of Mrs. Kintanar
and even her husband admitted that he did not even read the contents of the ITR and does not know where these
ITR’s were supposedly filed by their accountant. The 2 certifications submitted by Kintanar were likewise tainted
with various defects to wit; a) the certificates are undated; the certificates were issued by the RDO in Novaliches
which has the jurisdiction over the address reflected on the accused’s ITR. However, the ITR’s were stamped
received by the RDO in Cubao; and lastly, the signatory of the certificate was not presented nor was there an
attempt to present him to attest the veracity of the certificates.
As regards the 3rd element of "willfulness", it was sufficiently proven beyond reasonable doubt that
petitioner deliberately failed to make or file a return.
Willful in the tax crimes statutes means voluntary, intentional violation of a known legal duty, and
bad faith or bad purpose need not be shown [Mertens' Law of Federal Income Taxation, Chapter 47.05, page 28,
Volume 13, see U.S. v. Green, 757 F2d 116,85-1 USTC 9178 (CA7 1985), in which the Court, Citing U.S. v.
Moore, 627 F2d 830 (CA7 1980) and U.S. v. Verkuilen, 690 F2d 6-18, 82-2 USTC 9618 (CA7 1982), upheld the
conviction of a tax protester for willful failure to file returns.
An act or omission is "willfully" done if done voluntarily and intentionally and with specific intent to do
something the law forbids, or with specific intent to fail to do something the law requires to be done; that is, with
bad purpose to either disobey or disregard the law. A willful act may be described as one done intentionally,
knowingly and purposely, without justifiable excuse (Black's Law Dictionary, 51ed. p.1434).
Under the law, Gloria and her husband are obliged to file their ITRs for taxable years 2000 and 2001.
Thus, Gloria’s sole reliance on her husband to file their ITRs is not a valid reason to justify her non-filing. Being an
experienced businesswoman and having been an independent distributor of FLPPI since 1996, she ought to
know and understand all the matters concerning her business. This includes knowledge and awareness of her
tax obligation in connection with her business. She should know how much are her tax dues, the details
stated on the ITRs, where the same are filed, and other important facts related to the filing of her ITRs;
after all, these matters concern her finances. There were no affirmative acts on the part of Gloria Kintanar to make
sure that her obligation to file her ITRs had been fully complied with. Such neglect or omission, as aptly founded by
the Former Second Division, is tantamount to "deliberate ignorance” or "conscious avoidance".
Likewise, Gloria Kintanar was duly informed that no ITRs were filed, nor recorded under her name. There
were several notices sent to her by the BIR to comply with her tax obligations, but she opted not to comply.
Evidently, such non-compliance with the BIR’s notices clearly shows her intent not to file her ITRs.
Finding no reversible error, the Court En Banc affirms the assailed decision and Resolution of the
Former Second Division of this Court.
RULING: WHEREFORE, premises considered, the present Petition for Review is hereby DENIED. The
assailed Decision dated August 26, 2009 and Resolution dated November 26, 2009 of the Former Second
Division are hereby AFFIRMED.
SO ORDERED.

25