SURVEY OF 2012 TAX CASES

DE LA SALLE HEALTH SERVICES INSTITUTE, INC. V. CIR, CTA CASE NO. 8194, MAY 15, 2012 VAT on sale of Drugs to In-Patients

The sale of pharmacy medicines to in-patients is not subject to VAT. The sale of drugs to a hospitals in-patients is considered part of the term hospital services covered by the exemption from VAT under Section109(G) of the Tax Code.

The Court of Tax Appeals (CTA) held that the maintenance and operation of a pharmacy or drugstore by a hospital is a necessary and essential service or facility rendered by any hospital for its patients. Thus, unlike the sale of retailing drugs or medicines by drugstores which involves the buying of goods the procurement of medicines and pharmaceutical items from the hospital drugstore or pharmacy for in-patients amounts to the availment of services of the hospital by the inpatients.

REPUBLIC CEMENT CORPORATION V. CIR, CTA EB NO. 821 RE CTA CASE NO. 7114, JULY 18, 2012

Period to collect deficiency and delinquency interest In the event that a taxpayer is held liable for deficiency taxes, the BIR is authorized to impose both deficiency and delinquency interests simultaneously, pursuant to Section 249 of the Tax Code. The deficiency interest should be computed from the date prescribed for the payment of deficiency tax until its full payment, while the delinquency interest should be imposed on the deficiency tax and deficiency interest, and computed from the due date prescribed under the assessment notice until the full payment thereof.

DUMEX PHILIPPINES, INC. V. CIR, CTA CASE NO. 7790, APRIL 3, 2012
VAT refund due to closure of business

Under Section 112(B) of the Tax Code, a VAT-registered taxpayer whose registration has been cancelled due to retirement from or cessation of business, may apply for refund or issuance of TCC of its unused input tax within two years from the date of cancellation of its VAT registration. The cancellation of VAT registration due to retirement of business requires the filing of notice of closure of business through the submission of an Application for Registration Update (BIR Form 1905). Under Section 236 of the Tax Code, the taxpayers cancellation of VAT registration becomes effective on the first day of the month following the month when the BIR Form 1905 was filed with the appropriate RDO where the taxpayer is registered. Thus, the two-year prescriptive period commences from the first day of the month following the month the taxpayer filed its BIR Form 1905 or application for cancellation of its VAT registration.

CIR V. GJM PHILIPPINES MANUFACTURING INC., CTA EB CASE NO. 637, MARCH 6, 2012

Proof of receipt of assessment

An assessment is deemed made within the prescriptive period under Section 203 of the Tax Code if the notice of assessment is released, mailed or sent by the CIR to the taxpayer within the prescriptive period. It is not necessary that the taxpayer received the notice of assessment within the prescriptive period. However, it must be proven that the taxpayer actually received the assessment, i.e. notice was released, mailed and sent on a timely basis.

If the taxpayer denies ever having received the assessment, it is incumbent upon the BIR to prove by competent evidence that the notice was indeed received by the taxpayer. To prove receipt of the assessment in due course of mail, the registry receipt, registry return card or certification issued by the Bureau of Posts should be presented.

JP MORGAN CHASE BANK V. CIR, CTA EB, MARCH 13, 2012

Refund of input VAT prior to VAT registration

Input VAT attributable to zero-rated sales incurred by a taxpayer prior to its VAT registration may not be the subject of refund. Under Section 112 of the Tax Code, one of the conditions for entitlement to refund or tax credits of excess unutilized input tax from zero-rated sales is that the taxpayer should be a VAT-registered taxpayer. Thus, to be entitled to refund of input VAT, the taxpayer refund-claimant must prove that it was a VAT-registered taxpayer during the period it incurred its unutilized input VAT.

In the instant case, the input VAT that was the subject of refund refers to the VAT on start-up or pre-organization costs. During the period the VAT on the pre-operating expenses were incurred by the taxpayer, it was not yet a VAT-registered taxpayer. Hence, for failure to meet the criterion that the taxpayer is VAT registered, its claim for refund of its input VAT was denied by the CTA.

CITY OF MAKATI V. NIPPON EXPRESS PHILIPPINES CORP., CTA AC NO. 76, FEBRUARY 17, 2012

LBT assessment based on imputed sales

A local government unit (LGU) has no right to collect LBT on the receipts that properly belong to other LGUs where the taxpayer earned and recorded its sales. In the instant case, the City Treasurer of an LGU assessed a freight forwarding company for deficiency LBT and interest on its alleged untaxed gross receipts earned in its two branches, which are located in two different LGUs.

The CTA held that the situs rule under Section 150 of the Local Government Code (LGC) is clear and unequivocal that in case an establishment maintains or operates branches or sales outlets elsewhere, it shall record the sale in the branch or sales outlet making the sale or transaction. Naturally, the tax thereon shall accrue and shall be paid to the LGU where such branch or sales outlet is located. The CTA also ruled that even if there was underdeclaration or mis-declaration of the total taxable earnings of the taxpayer in its branches which deprived the other LGUs of their lawful dues, the City Treasurer may not collect what under the Revenue Code and LGC properly belongs to the two other LGUs.

EAST ASIA POWER RESOURCES, INC. V. CIR, CTA CASE NO.7956, DECEMBER 26, 2011
Validity of waiver of defense of prescription

Under Section 222(b) of the Tax Code, the three-year prescriptive period may be extended through an agreement in writing executed by the taxpayer and the Commissioner of Internal Revenue (CIR). In the execution of waivers of statute of limitations, Revenue Memorandum Order No. (RMO) 20-90, which implements Section 222(b) of the Tax Code, requires, among others, that: (a) the waiver shall be signed by the taxpayer himself or his duly appointed representative; (b) the date of acceptance by the BIR should be indicated in the waiver; and (c) the waiver shall be signed by the CIR for tax cases involving more than P1 million.

Failure to comply with the provisions of RMO 20-90 renders the waiver defective and does not extend the three-year prescriptive period of assessment.

Applying RMO 20-90, the CTA held that the waiver executed by the taxpayer with the BIR was defective due to the following reasons: First, the BIR failed to prove that the taxpayer was furnished a copy of the BIR-accepted waiver. Second, the waiver was signed by a Revenue District Officer when it should have been signed only by the CIR as mandated by the Tax Code and RMO 20-90, considering that the case involves anamount exceeding P1 million. Lastly, the waiver did not contain the date of acceptance by the CIR, a requisite necessary to determine whether the waiver was validly accepted before the expiration of the original three-year period.

UPSI MANAGEMENT V. CIR, CTA CASE NO. 7945, DECEMBER 16, 2011

Irrevocability rule on option to carry over excess income tax

A corporation whose quarterly income tax payments in a taxable year exceeds its total income tax due is given the option to either carry forward and credit its excess creditable withholding tax against its estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years or file a claim for tax refund either in the form of cash or tax credit certificate. Once the option to carryover is made, it becomes irrevocable for thattaxable period.

Having exercised the option to carry over its excess tax credit, the CTA held that the company is already bound by the irrevocability rule. Hence, it can no longer seek refund of its excess unutilized creditable withholding tax. Its only recourse therefore is to apply the excess to the succeeding quarters/years until it isfully utilized.

SILKAIR (SINGAPORE) PTE. LTD. VS. COMMISSIONER REVENUE, G.R. NO. 166482, JANUARY 25, 2012

OF INTERNAL

Proper Party to Seek a Tax Refund

Silkair

is a foreign corporation licensed to do business in the Philippines as an on-line international carrier. It purchased aviation fuel from Petron and paid the excise taxes. filed an administrative claim for refund for excise taxes on the purchase of jet fuel from Petron, which it alleged to have been erroneously paid.

It

Held: For indirect taxes, the proper party to seek a tax refund 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. Thus, Petron, not Silkair, is the statutory taxpayer which is entitled to claim a refund. Excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the products from their refineries. In this case, Petron, which paid the excise tax upon removal of the products from its Bataan refinery, is the person liable for tax.

EVONO V. CIR, CTA EB NO. 705 JUNE 4, 2012

Donors Tax

The CTA held that there is a clear animus donandi or intent to give when the names of minor children who are not earning any income are included in the CAR and certificate of titles of the property. While it is true that minor children can save money from their allowances and buy properties from their savings, considering the childrens age and the price of property, the children will not be able to save a substantial amount, even if they receive enormous allowances from the parents. Moreover, it is highly unlikely for an individual to own real property at such an early age and without a source of income; thus the CTA deemed the transaction to be a donation.

LASCONA LAND, INC. VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 171251, MARCH 5, 2012

Appeal from Decision/Inaction of CIR

The CIR argues that the assessment has became final and executory for the reason that Petitioner failed to appeal the inaction of the Commissioner within 30 days after the lapse of the 180-day reglementary period.

Held:

In case of protested assessments, the taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application of the other. Thus, if taxpayer opts to await for the final decision of the Commissioner, it has the right to appeal such final decision to the CTA even after the expiration of the 180day period.

ACCENTURE, INC. VS. COMMISSIONER NO. 190102, JULY 11, 2012.

OF INTERNAL

REVENUE, G.R.

Zero Rated Sales of Services

Accenture is a corporation engaged in the business of providing management consulting, business strategies development, and selling and/or licensing of software. It filed an administrative claim for refund on its unutilized input VAT claiming that its sale of services is zero rated under Section 102(b)(2) of the 1997 Tax Code.

HELD: Section 102(b)(2) of the 1997 Tax Code considers as zero rated, the sale of services, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the BSP.

If the provider and recipient of services are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the recipient of services.
It is not enough that the recipient of the services be proven to be a foreign corporation; it must be specifically proven to be a non-resident foreign corporation.

TEAM PACIFIC CORPORATION VS. DAZA AS MUNICIPAL TREASURER OF TAGUIG, G.R. NO. 167732, JULY 11, 2012. Appeal on Local Business Tax Assessments

A taxpayer dissatisfied with a local treasurers denial of or inaction on his protest over an assessment has 30 days within which to appeal to the court of competent jurisdiction reckoned from the taxpayers receipt of the denial of his protest or the lapse of the 60-day period within which the local treasurer is required to decide the protest. The treasurer cannot be said to be performing a judicial or quasi-judicial in assessing the business tax and/or effectively denying the taxpayers protest. For this reason, the treasurers actions are not the proper subjects of a Rule 65 petition for certiorari which is the appropriate remedy in cases where the tribunal, board or officer exercising judicial or quasi-judicial functions acted without or in grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in law.

PHILIPPINE RECLAMATION AUTHORITY VS. CITY OF PARANAQUE, G.R. NO. 191109, JULY 18, 2012.

Exemption from real property tax Section 133 of the LGC prohibits local governments from imposing taxes of any kind on the National Government, its agencies or instrumentalities. However, Section 193 of the LGC has withdrawn tax exemptions enjoyed by, among others government-owned or controlled corporations (GOCCs). On the other hand, Section 234 of the LGC exempts from real property tax, real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration, or otherwise, to a taxable person.

The PRA is not a GOCC because it is neither a stock nor non-stock corporation as required by the Administrative Code, which is the governing law defining the legal relationship and status of government entities. PRA is a government instrumentality vested with corporate powers and performing an essential public service. Being an incorporated government instrumentality, it is exempt from payment of real property tax. Moreover, real property owned by the Republic of the Philippines is exempt from real property tax unless the beneficial use thereof has been granted to a taxable person.

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