tax review case digest (1)

8/12/2019 Tax Review Case Digest (1)

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Assignment of Tax Credit Certificate (TCC); Exception to Estoppel

CIR vs. Petron Corporation, GR No. 185568, march 21, 2012

Facts: Petron, a Board of Investment (BOI)-registered enterprise, was an assignee of several Tax Credit Certificates (TCCs) from various BOI-

registered enterprises for the taxable years 1995-1998. Petron subsequently utilized said TCCs to pay its excise taxes for said taxable years. The

TCCs had a Liability Clause which provided: Both the TRANSFEROR and the TRANSFEREE shall be jointly and severally liable for any fraudulent

act or violation of the pertinent laws, rules and regulations relating to the transfer of this TAX CREDIT CERTIFICATE. Sometime in 1999, a post-

audit of said TCCs was conducted by the DOF. The TCCs and the TDMs were cancelled by reason of fraud.The DOF found that said TCCs were

fraudulently obtained by the transferors and subsequently the same was fraudulently transferredto Petron. Thus, On January 30, 2002, The CIR

issued an assessment against Petron for deficiency excise taxes for the taxable years1995 to 1998 based on the ground that the TCCs utilized bypetitioner in its payment of excise taxes have been cancelled by the DOF for having been fraudulently issued and transferred. Subsequently,

petron filed a protest letter regarding said assessment. In 2002, the CIR served a Warrant of Distraint and/or Levy on petitioner to enforce

payment of the tax deficiencies. Construing the Warrant of Distraint and/or Levy as the final adverse decision of the BIR on its protest of the

assessment, Petron filed a petition before the CTA contending that the assignment/transfer of the TCCs to petitioner by the TCC holders was

submitted to, examined andapproved by the concerned government agencies which processed the assignment in accordance with law and

revenue regulations and that the assessment and collection of alleged excise tax deficiencies sought to be collected by the BIR against

petitioner through the January 30, 2002 letter are already barred by prescription. The CTA Second Division ruled for the CIR. Petron appealed

the decision to the CTA En banc which, in turn, reversed the CTA 2nd

Division decision, based on the following on the ground that Petron was

considered an innocent transferee of the subject TCCs andmay not be prejudiced by a re-assessment of excise tax liabilities that respondent has

already settled, when due, with the use of theTCCs.Issue: Is Petron still liable to pay its excise taxes?

Held:

PETRONS

NON-PARTICIPATION IN FRAUDULENT ACTSRR 5-2000 prescribes the regulations governing the manner of issuance of TCCs and the conditions

for their use, revalidation andtransfer. Under the said regulation, a TCC may be used by the grantee or its assignee in the payment of its direct

internal revenue taxliability. It may be transferred in favor of an assignee subject to the following conditions: 1) the TCC transfer must be withprior approvalof the Commissioner or the duly authorized representative; 2) the transfer of a TCC should be limited to one transfer only; and 3)

the

transferee shall strictly use the TCC for the payment of the assignees direct internal revenue tax liability and shall not b

e convertible tocash. A TCC is valid only for 10 years subject to the following rules: (1) it must be utilized within five (5) years from the date of

issue;and (2) it must be revalidated thereafter or be otherwise considered invalid.

The processing of a TCC is entrusted to a specialized agency called the One

-Stop-Shop Inter-Agency Tax Credit and Duty Drawback

Center to expedite the processing and approval of tax credits and duty drawbacks.

A TCC may be assigned through a Deed of Assignment, which the assignee submits to the Center for its approval. Upon approval of the deed,

the Center will issue a DOF Tax Debit Memo (DOF-

TDM), which will be utilized by the assignee to pay the latters tax

liabilities for a specified period. Upon surrender of the TCC and the DOF-TDM, the corresponding Authority to Accept Payment of Excise Taxes

(ATAPET) will be issued by the BIR Collection Program Division and will be submitted to the issuing office of the BIR for acceptance by the

Assistant Commissioner of Collection Service. This act of the BIR signifies its acceptance of the TCC as payment of the assignees excise taxes.

Thus, it is apparent that a TCC undergoes a stringent process of verification by various specialized government agencies before it is accepted as

payment of an assignees tax liabilityThe CIR had no allegation that there was a deviation from the process for theapproval of the TCCs, which Petron used as payment to settle its

excise tax liabilities for the years 1995 to 1998.Further, any merit in the position of CIR on this issue is negated by the Joint Stipulation it

entered into with Petron in the proceedingsbefore the said Division. As correctly noted by the CTA En Banc, herein parties jointly stipulated

before the Second Division in CTACase No. 6423 as follows:13. That petitioner (Petron) did not participate in the procurement and issuance of

the TCCs, which TCCs were transferred to Petron and later utilized by Petron in payment of its excise taxes.

LASCONA VS. CIR, GR. 171251, March 5, 2012

Taxation Failure of the CIR to Decide a Protest Remedies of the Taxpayer

In March 1998, the Commissioner of Internal Revenue (CIR) issued a formal assessment notice (FAN) to Lascona Land Co., Inc. (LLCI) demanding

the latter to pay P753k in taxes. LLCI filed a timely protest on April 20, 1998. From said date (since no supporting document was required to be

submitted), the CIR has 180 days to decide on the protest. However, the CIR promulgated its decision on March 3, 1999. LLCI received a copy of

the decision on March 12, 1999. On April 12, 1999, LLCI appealed the decision to the Court of Tax Appeals (CTA). The CIR moved for the

dismissal of the appeal on the ground that under a revenue regulation issued by the Bureau of Internal Revenue (RR No. 12-99), if the CIR or its

representative failed to act on a protest within the 180-day period the taxpayer may appeal within 30 days from the lapse of the 180-day period

to the CTA otherwise, the decision shall become final and executory; that LLCI failed to appeal within the said period hence the CTA has no

jurisdiction over the case appealed by LLCI.

ISSUE: Whether or not the CIR is correct.

HELD: No. The revenue regulation is invalid. Under the law (Section 228 of the National Internal Revenue Code), a taxpayer has two remedies if

the CIR failed to act on his protest within the 180-day period, to wit;

1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days from receipt of the decision, or

2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-day period.

Interpreting the above provision, the taxpayer has two options in case of inaction by the CIR. First is to appeal to the CTA within 30 days from

the lapse of the 180 day period; or second, wait for the CIR to issue the decision and then appeal, if adverse, to the CTA within 30 days from the

receipt of the decision by the taxpayer (because even if the CIR failed to decide on the case within the 180 day period, it can still decide on it

and may even issue a favorable judgment to the taxpayer, hence it may be logical to wait and only appeal if the adverse decision is actually

received).


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In the case at bar, LLCI chose to wait for the CIR to decide on the case and it did not appeal within 30 days from the lapse of the 180-day period.

LLCI received the adverse decision of the CIR on March 12, 1999. It appealed on April 12, 1999 which is still within the 30-day period to appeal

to the CTA.

The revenue regulation in question is invalid because in effect, it limited the remedy provided for by the law. Section 228 of the NIRC prevails

over the said revenue regulation. The said revenue regulation cannot validly take away the option of the taxpayer to continue waiting, even

after the lapse of the 180 day period, for the CIR to decide on the case and just appeal, within 30 days from receipt, if the CIRs ruling is adverse.

It must however be noted that these two remedies are mutually exclusive.

***92. COMMISSIONER OF INTERNAL REVENUE (CIR), petitioner, vs.Pilipinas Shell Petroleum Corporation, respondent.G.R. No. 188497 April 25,

2012VILLARAMA, JR., J.:Because an excise tax is a tax on the manufacturer and not on thepurchaser, and there being no express grant under

the NIRC of exemption from payment of excise tax to local manufacturers of petroleum products sold to international carriers, and absent

anyprovision in the Code authorizing the refund or crediting of suchexcise taxes paid, the Court holds that Sec. 135 (a) should beconstrued as

prohibiting the shifting of the burden of the excisetax to the international carriers who buys petroleum products fromthe local manufacturers.

The provision merely allows theinternational carriers to purchase petroleum products without theexcise tax component as an added cost in the

price fixed by themanufacturers or distributors/sellers. Consequently, the oilcompanies which sold such petroleum products to

internationalcarriers are not entitled to a refund of excise taxes previously paidon the goods.

Facts:

1. Respondent is engaged in the business of processing,treating and refining petroleum for the purpose of producingmarketable products and

the subsequent sale thereof. Respondentfiled several formal claims with the Large Taxpayers Audit &Investigation Division II of the BIR on the

following dates:

a. On July 2002

for refund or tax creditin the totalamount of P28,064,925.15,

representing excise taxes

it allegedly paid on sales and deliveries of gas and fueloils to various international carriers during the periodOctober to December 2001.

b.

On October 2002, a

similar claim

for refund or taxcredit was filed by respondent with the BIR covering theperiod January to March 2002 in the amountof P41,614,827.99.

c.

On July 2003, a

formal claim for refund or tax credit

in the amount of P30,652,890.55

covering deliveries

from April to June 2002

2.

Since no action was taken by the petitioner on its claims,respondent filed petitions for review before the CTA on Septemberand December of

2003.3.

CTAs First Division ruled that respondent is

entitled t

o therefund of excise taxes in the reduced amountof P95,014,283.00. The CTA First

Division relied on a previousruling

rendered by the CTA En Banc in the case of Pilipinas ShellPetroleum Corporation v. CIR (Nov. 2006) where the CTA alsogranted respondents

claim for refund on the basis of excise taxexemption for petroleum products sold to international carriers of foreign registry for their use or

consumption outside thePhilippines. Petitioners MR denied.

4.

On appeal, CTA En Banc upheld the ruling of the FirstDivision. Petitioners MR with CTA likewise denied. Hence, thispetition.5.Respondent

claims it is entitled to a tax refund becausethose petroleum products it sold to international carriers are notsubject to excise tax, hence the

excise taxes it paid uponwithdrawal of those products were erroneously or illegally collectedand should not have been paid in the first place.

Since the excisetax exemption attached to the petroleum products themselves, themanufacturer or producer is under no duty to pay the excise

taxthereon.

Issue: whether respondent as manufacturer or producer of petroleum products is

exempt

from the payment of excise tax onsuch petroleum products it sold to international carriers?Held: NO. CTA decision REVERSED and SET ASIDE.

The claims fortax refund or credit filed by respondent are DENIED for lack of basis.

1.

Excise taxes, as the term is used in the NIRC, refer to taxesapplicable to certain specified goods or articles manufactured orproduced in the

Philippines for domestic sales or consumption orfor any other disposition and to things imported into thePhilippines. These taxes are imposed

in addition to the value-addedtax (VAT). As to petroleum products, Sec. 148 provides that excisetaxes attach to the following refined and

manufactured mineral oilsand motor fuels as soon as they are in existence.

2.


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Beginning January 1, 1999, excise taxes levied on locallymanufactured petroleum products and indigenous petroleum arerequired to be paid

before their removal from the place of production. However, Sec. 135 provides: Petroleum Products Soldto International Carriers and Exempt

Entities orAgencies.Petroleum products sold to the following

are exempt

from excise tax:

(a) International carriers of Philippine or foreign registry on theiruse or consumption outside the Philippines: Provided, That thepetroleum

products sold to these international carriers shall bestored in a bonded storage tank and may be disposed of only inaccordance with the rules

and regulations to be prescribed by theSecretary of Finance, upon recommendation of the Commissioner;x x x3.Under Chapter II Exemption or

Conditional Tax-FreeRemoval of Certain Goods of Title VI, Sections 133, 137, 138, 139and 140 cover conditional tax-free removal of specifiedgoods orarticles, whereas Sections 134 and 135 provide for taxexemptions. While the exemption found in Sec. 134 makesreference to the

nature and quality of the goods manufactured(domestic denatured alcohol) without regard to the tax status of the buyer of the said goods, Sec.

135 deals with the tax treatmentof a specified article (petroleum products) in relation to its buyer orconsumer. Respondents failure to make

this important distinctionapparently led it to mistakenly assume that the tax exemptionunder Sec. 135 (a) attaches to the goods themselves

such thatthe excise tax should not have been paid in the first place.

4.

On July 1996, petitioner Commissioner issued

RevenueRegulations 8-96

(Excise Taxation of Petroleum Products) whichprovides: SEC. 4. Time and Manner of Payment of Excise Tax onPetroleum Produc ts, Non-

Metallic Minerals and IndigenousPetroleumI. Petroleum Products x x x x a) On locallymanufactured petroleum products: The

specific tax onpetroleum products locally manufactured or produced inthe Philippines shall be paid by the manufacturer, producer,owner or

person having possession of the same

, and such taxshall be paid within fifteen (15) days from date of removal from theplace of production.

5.Thus, if an airline company purchased jet fuel froman unregistered supplier who could not present proof of payment of specific tax, the

company is liable to pay thespecific tax on the date of purchase. Since the excise taxmust be paid upon withdrawal from the place ofproduction,respondent cannot anchor its claim for refund on the theorythat the excise taxes due thereon should not have beencollected or

paid in the first place.

6.

Sec. 229 of the NIRC allows the recovery of taxeserroneously or illegally collected. An erroneous or illegal tax isdefined as one levied without

statutory authority, or uponproperty not subject to taxation or by some officer having noauthority to levy the tax, or one which is some other

similar respectis illegal.

7.

Respondents locally manufactured petroleum products areclearly subject to excise tax under Sec. 148.Hence, its claim fortax refund may not

be predicated on Sec. 229 of the NIRC allowinga refund of erroneous or excess pa yment of tax. Respondentsclaim is premised on what it

determined as a tax exemptionattaching to the goods themselves, which must be based on astatute granting tax exemption, or the result of

legislative grace.Such a claim is to be construed

strictissimi juris

against thetaxpayer, meaning that the claim cannot be made to rest on vagueinference.Where the rule of strict interpretation against

thetaxpayer is applicable as the claim for refund partakes of thenature of an exemption, the claimant must show that he clearlyfalls under the

exempting statute.8.The exemption from excise tax payment on petroleumproducts under Sec. 135 (a) is conferred on international

carrierswho purchased the same for their use or consumption outsidethe Philippines. The only condition set by law is for thesepetroleumproducts to be stored in a bonded storage tank and maybe disposed of only in accordance with the rules and regulations tobe prescribed by the

Secretary of Finance, upon recommendationof the Commissioner.

9.

[JURISPRUDENCE] In addition, the Solicitor General, arguesthat respondent cannot shift the tax burden to internationalcarriers who are allowed

to purchase its petroleum productswithout having to pay the added cost of the excise tax. In PhilippineAcetylene Co., Inc. v. CIR, this Court held

that petitionermanufacturer who sold its oxygen and acetylene gases to NPC, atax-exempt entity, cannot claim exemption from the payment

of sales tax simply because its buyer NPC is exempt fromtaxation. The Court explained that the percentage tax on sales of merchandise

imposed by the Tax Code is due from themanufacturer and not from the buyer.

10.

The language of Sec. 135 indicates that the tax exemptionmentioned therein is conferred on specified buyers or consumers of the excisable

articles or goods. Unlike Sec. 134 which explicitlyexempted the article or goods itself without due regard to the taxstatus of the buyer or

purchaser, Sec. 135 exempts from excise taxpetroleum products which were sold to international carriers andother tax-exempt agencies and

entities.

11.

Considering that the excise taxes attaches to petroleumproducts as soon as they are in existence as such, there can be

no outright exemption from the payment of excise tax onpetroleum products sold to international carriers. The sole basisthen of respondents

claim for refund is the express grant of excisetax exemption in favor of international carriers under Sec. 135 (a)for their purchases of locally

manufactured petroleumproducts. Pursuant to our ruling in Philippine Acetylene, a taxexemption being enjoyed by the buyer cannot be the

basis of aclaim for tax exemption by the manufacturer or seller of the goodsfor any tax due to it as the manufacturer or seller. The excise

taximposed on petroleum products under Sec. 148 is the direct liabilityof the manufacturer who cannot thus invoke the excise taxexemption

granted to its buyers who are international carriers.

12.

In Maceda v. Macaraig, Jr., the Court specifically mentionedexcise tax as an example of an indirect tax where the tax burdencan be shifted to

the buyer. However, because of the taxexemptions privileges being enjoyed by NPC under existing laws,the tax burden may not be shifted to it

by the oil companies whoshall pay for fuel oil taxes on oil they supplied to NPC.

13.


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On April 1978, then President Ferdinand E. Marcos issuedPresidential Decree (P.D.) No. 1359 which amended the 1077 TaxCode provided under

2

nd

par. of Sec. 134: However, petroleumproducts sold to an international carrier for its use or consumptionoutside of the Philippines shall not be

subject to specific tax,provided, that the country of said carrier exempts from taxpetroleum products sold to Philippine carr iers.14.Founded on

the principles of international comity andreciprocity, P.D. No. 1359 granted exemption from payment of excise tax but only to foreign

international carriers who are allowedto purchase petroleum products free of specific tax provided thecountry of said carrier also grants tax

exemption to Philippinecarriers. Both the earlier amendment in the 1977 Tax Code andthe present Sec. 135 of the 1997 NIRC did not exempt

the oilcompanies from the payment of excise tax on petroleum productsmanufactured and sold by them to internationalcarriers. THUS:15.Because an excise tax is a tax on the manufacturer and noton the purchaser, and there being no express grant under the

NIRCof exemption from payment of excise tax to local manufacturers of petroleum products sold to international carriers, and absent

anyprovision in the Code authorizing the refund or crediting of suchexcise taxes paid, the Court holds that Sec. 135 (a) should beconstrued as

prohibiting the shifting of the burden of the excisetax to the international carriers who buys petroleum products fromthe local

manufacturers.Said provision thus merely allows theinternational carriers to purchase petroleum products without theexcise tax component as

an added cost in the price fixed by themanufacturers or distributors/sellers.Consequently, the oil companies which sold such petroleum

products to internationalcarriers are not entitled to a refund of excise taxes previously paidon the goods.

16.

Time and again, we have held that tax refunds are in thenature of tax exemptions which result to loss of revenue for thegovernment. Upon the

person claiming an exemption from taxpayments rests the burden of justifying the exemption by wordstoo plain to be mistaken and too

categorical to be misinterpreted,itis never presumed nor be allowed solely on the ground of equity.These exemptions, therefore, must not rest

on vague, uncertain or indefinite inference, but should be granted only by aclear and unequivocal provision of law on the basis of language

tooplain to be mistaken. Such exemptions must be strictly construedagainst the taxpayer, as taxes are the lifeblood of the government.

VATQualification for Zero-rated saleACCENTURE, INC. vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 190102 July 11, 2012

Facts:Petitioner Accenture, a VAT registered entity, is a corporation engaged in the business of providing management consulting,business

strategies development, and selling and/or licensing of software. The monthly and quarterly VAT returns of Accenture showthat,

notwithstanding its application of the input VAT credits earned from its zero-rated transactions against its output VAT liabilities, itstill had

excess or unutilized input VAT credits in the amount of P37,038,269.18. Thus, Accenture filed with the Department of Finance(DoF) an

administrative claim for the refund or the issuance of a Tax Credit Certificate (TCC). When the DoF did not act on the claim, Accenture filed a

Petition for Review with CTA praying for the issuance of a TCC in its favour.The CIR answered that the sale by Accenture of goods and services

to its clients are not zero-rated transactions and that Accenture has failed to prove that it is entitled to a refund, because its claim has not been

fully substantiated or documented. Rulingthat Accentures services would qualify for zero-rating under the 1997 National Internal Revenue

Code of the Philippines (Tax Code)only if the recipient of the services was doing business outside of the Philippines, the Division of the CTA

ruled that since Accenturehad failed to present evidence to prove that the foreign clients to which the former rendered services did business

outside thePhilippines, it was not entitled to refund.On appeal before the CTA en banc, Accenture argued that because the case pertained to

the third and the fourth quarters of taxable year 2002, the applicable law was the 1997 Tax Code, and not R.A. 9337 and that prior to the

amendment introduced by (R.A.)9337, there was no requirement that the services must be rendered to a person engaged in business

conducted outside the Philippinesto qualify for zero-rating. Nevertheless, the CTA en banc affirmed the decision of the division. Hence thispresent petition for reviewbefore the SC.

Issues:1.Should the recipient of the services be "doing business outside the Philippines" for the transaction to be zero-rated under Section

108(B)(2) of the 1997 Tax Code?2.Has Accenture successfully proven that its clients are entities doing business outside the Philippines?3.Is

Accenture entitled to tax refund?

Held:1.Recipient of services must be doing business outside the Philippines for the transactions to qualify as zero-rated. Accenture anchors its

refund claim on Section 112(A) of the 1997 Tax Code, which allows the refund of unutilized input VAT earnedfrom zero-rated or effectively

zero-rated sales. The provision reads:SEC. 112. Refunds or Tax Credits of Input Tax. -(A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-

registered person, whose sales are zero-rated or effectively zero-rated may,within two (2) years after the close of the taxable quarter when the

sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except

transitional input tax, to the extent that such input tax has notbeen applied against output tax: Provided, however, That in the case of zero-

rated sales under Section 106(A)(2)(a)(1), (2) and (B) andSection 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof

had been duly accounted for in accordance withthe rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where

the taxpayer is engaged in zero-ratedor effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the

amount of creditable inputtax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated

proportionately on the basisof the volume of sales. Section 108(B) referred to in the foregoing provision was first seen when Presidential

Decree No. (P.D.) 199431amended Title IV of P.D. 1158 which is also known as the National Internal Revenue Code of 1977. Several Decisions

have referred tothis as the 1986 Tax Code, even though it merely amended Title IV of the 1977 Tax Code.Two years thereafter, or on 1 January

1988, Executive Order No. (E.O.) 27333 further amended provisions of Title IV. E.O. 273 bytransferring the old Title IV provisions to Title VI and

filling in the former title with new provisions that imposed a VAT.The VAT system introduced in E.O. 273 was restructured through Republic Act

No. (R.A.) 7716. This law, which was approved on 5May 1994, widened the tax base. Section 3 thereof reads:SECTION 3. Section 102 of the

National Internal Revenue Code, as amended, is hereby further amended to read as follows:"SEC. 102. Value-added tax on sale of services and

use or lease of properties. x x xx x x x x x x x x"(b) Transactions subject to zero-rate. The following services performed in the Philippines by

VAT-registered persons shall besubject to 0%:


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ANGELES UNIVERSITY vs. CITY OF ANGELES. JULIET G. QUINSAAT

G.R. No. 189999, June 27, 2012Facts:

Angeles University was converted into a non-stock, non-profit education foundation under the provisions of Republic Act(R.A.) No. 6055.

Petitioner filed with the Office of the City Building Official an application for a building permit for theconstruction of an 11-storey building of the

Angeles University Foundation Medical Center in its main campus the saidoffice issue a Building permit fee and Locational Clearance Fee

. Petitioner make a letter to respondent City Tresurer JulietG. Quinssat and City Building Official Donato Z. Dizon alleging that it is exempt from

payment of the building permit andlocational clearance fee. Petitioner also reminded the respondent that they have previously issued building

permitacknowledging such exemption from payment of building permit fees. The DOJ and trial court render decision in favor topetitioner forexempting in payment. But the CA reverse the decision of court in favor to respondent. Petitioner file a MRbut it was denied by CA.

Issue:

WON the Angeles University is exempted in

Building permit fee

and

Locational Clearance Fee

.

Ruling:No.

Under R.A. No. 6055, petitioner was granted exemption only from income tax derived from its educational activities andreal property used

exclusively for educational purposes. Regardless of the repealing clause in the National Building Code,the CA held that petitioner is still not

exempt because a building permit cannot be considered as the other charges mentioned in Sec. 8 of R.A. No. 6055 which refers to

impositions in the nature of tax, import duties, assessments and othercollections for revenue purposes, following the ejusdem generisrule. The

CA further stated that petitioner has not shownthat the fees collected were excessive and more than the cost of surveillance, inspection and

regulation. And while petitioner may be exempt from the payment of real property tax, petitioner in this case merely alleged that the subject

property is to be used actually, directly and exclusively for educational purposes, declaring merely that such premises is intended to house the sports and other facilities of the university but by reason of the occupancy of informal settlers on thearea, it cannot yet

utilize the same for its intended use. Thus, the CA concluded that petitioner is not entitled to the refundof building permit and related fees, as

well as real property tax it paid under protest.R.A. No. 6055 granted tax exemptions to educational institutions like petitioner which converted

to non-stock, non-profiteducational foundations. Section 8 of said law provides:SECTION 8. The Foundation shall be exempt from the payment

of all taxes, import duties, assessments, and other chargesimposed by the Government onall income derived from or property, real or personal,

used exclusively for the educationalactivities of the Foundation.(Emphasis supplied.)

A charge is broadly defined as the price of, or rate for, something, while the word fee pertains to a charge fixed by

law for services of public officers or for use of a privilege under control of government.

As used in the Local Government Code of 1991 (R.A. No. 7160), charges refers to pecuniary liability, as rents or fees against persons or property,

while fee means a charge fixed by law or ordinance for the regulation or inspection of a business or activity.

***CIR vs. Philippine Global Communication Inc. [G.R. No. 167146 October 31, 2006]Facts: Philippine Global (respondent) is a corporation engaged in telecommunications, filed its Annual Income Tax Return for taxable year 1990

on 15 April 1991. On 13 April 1992, the Commissioner of Internal Revenue (CIR) issued Letter of Authority No. 0002307, authorizing the

appropriate Bureau of Internal Revenue (BIR) officials to examine the books of account and other accounting records of respondent, in

connection with the investigation of respondents 1990 income tax liability. BIR sent a letter to respondent requesting the latter to present for

examination certain records and documents, but respondent failed to present any document. Respondent received a Preliminary Assessment

Notice dated 13 April 1994 for deficiency income tax inclusive of surcharge, interest, and compromise penalty, arising from deductions that

were disallowed for failure to pay the withholding tax and interest expenses that were likewise disallowed. On the following day, 22 April 1994,

respondent received a Formal Assessment Notice with Assessment Notice No. 000688-80-7333, dated 14 April 1994, for deficiency income tax.

Phil Global filed two letters of protests, in both letters, respondent requested for the cancellation of the tax assessment. More than eight years

after the assessment was presumably issued, respondent received from the CIR a Final Decision dated 8 October 2002 denying the

respondents protest against Assessment Notice No. 000688-80-7333, and affirming the said assessment in toto.

CTA rendered a Decision in favor of respondent on 9 June 2004. It decided that the protest letters filed by the respondent cannot constitute a

request for reinvestigation, hence, they cannot toll the running of the prescriptive period to collect the assessed deficiency income tax. Thus,

since more than three years had lapsed from the time Assessment Notice No. 000688-80- 7333 was issued, the CIRs right to collect the same

has prescribed in conformity with Section 269 of the National Internal Revenue Code of 1977.

Issues:(1) Whether or not CIRs right to collect respondents alleged deficiency income tax is barred by prescription under Section 269(c) of the Tax

Code of 1977

(2) Whether or not the prescription on assessment was suspended by virtue of the alleged request of reinvestigation by Phil Global

Held: Petition was denied.

The law prescribed a period of three years from the date the return was actually filed or from the last date prescribed by law for the filing of

such return, whichever came later, within which the BIR may assess a national internal revenue tax. However, the law increased the

prescriptive period to assess or to begin a court proceeding for the collection without an assessment to ten years when a false or fraudulent
http://coffeeafficionado.blogspot.com/2012/03/cir-vs-philippine-global-communication.htmlhttp://coffeeafficionado.blogspot.com/2012/03/cir-vs-philippine-global-communication.html


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return was filed with the intent of evading the tax or when no return was filed at all. In such cases, the ten-year period began to run only from

the date of discovery by the BIR of the falsity, fraud or omission.

If the BIR issued this assessment within the three-year period or the ten-year period, whichever was applicable, the law provided another three

years after the assessment for the collection of the tax due thereon through the administrative process of distraint and/or levy or through

judicial proceedings. The three-year period for collection of the assessed tax began to run on the date the assessment notice had been

released, mailed or sent by the BIR.

The assessment, in this case, was presumably issued on 14 April 1994 since the respondent did not dispute the CIRs claim. Th erefore, the BIRhad until 13 April 1997. However, as there was no Warrant of Distraint and/or Levy served on the respondents nor any judicial proceedings

initiated by the BIR, the earliest attempt of the BIR to collect the tax due based on this assessment was when it filed its Answer in CTA Case No.

6568 on 9 January 2003, which was several years beyond the three-year prescriptive period. Thus, the CIR is now prescribed from collecting the

assessed tax.

Court has also clarified that the statute of limitations on the collection of taxes should benefit both the Government and the taxpayers further

illustrated the harmful effects that the delay in the assessment and collection of taxes inflicts upon taxpayers, that is for the purpose of

expediting the collection of taxes, so that the agency charged with the assessment and collection may not tarry too long or indefinitely to the

prejudice of the interests of the Government, which needs taxes to run it; and for the taxpayer so that within a reasonable time after filing his

return, he may know the amount of the assessment he is required to pay, whether or not such assessment is well founded and reasonable so

that he may either pay the amount of the assessment or contest its validity in court.

The Tax Code of 1977, as amended, provides instances when the running of the statute of limitations on the assessment and collection of

national internal revenue taxes could be suspended, even in the absence of a waiver, Among the exceptions, and invoked by the CIR as a

ground for this petition, is the instance when the taxpayer requests for a reinvestigation which is granted by the Commissioner. However, thisexception does not apply to this case since the respondent never requested for a reinvestigation.

Revenue Regulations No. 12-85, the Procedure Governing Administrative Protests of Assessment of the Bureau of Internal Revenue, issued on

27 November 1985, defines the two types of protest, the request for reconsideration and the request for reinvestigation.

Section 6. Protest. - The taxpayer may protest administratively an assessment by filing a written request for reconsideration or reinvestigation

specifying the following particulars:

x x x x

For the purpose of protest herein

(a) Request for reconsideration-- refers to a plea for a re-evaluation of an assessment on the basis of existing records without need of additional

evidence. It may involve both a question of fact or of law or both.

(b) Request for reinvestigationrefers to a plea for re-evaluation of an assessment on the basis of newly-discovered evidence or additionalevidence that a taxpayer intends to present in the investigation. It may also involve a question of fact or law or both.

The main difference between these two types of protests lies in the records or evidence to be examined by internal revenue officers, whether

these are existing records or newly discovered or additional evidence. A re-evaluation of existing records which results from a request for

reconsideration does not toll the running of the prescription period for the collection of an assessed tax. Section 271 distinctly limits the

suspension of the running of the statute of limitations to instances when reinvestigation is requested by a taxpayer and is granted by the CIR.

In the present case, the separate letters of protest dated 6 May 1994 an d 23 May 1994 are requests for reconsideration. The CIRs allegation

that there was a request for reinvestigation is inconceivable since respondent consistently and categorically refused to submit new evidence

and cooperate in any reinvestigation proceedings.

The distinction between a request for reconsideration and a request for reinvestigation is significant. It bears repetition that a request for

reconsideration, unlike a request for reinvestigation, cannot suspend the statute of limitations on the collection of an assessed tax. If both types

of protest can effectively interrupt the running of the statute of limitations, an erroneous assessment may never prescribe. If the taxpayer fails

to file a protest, then the erroneous assessment would become final and unappealable. On the other hand, if the taxpayer does file the protest

on a patently erroneous assessment, the statute of limitations would automatically be suspended and the tax thereon may be collected long

after it was assessed. Meanwhile the interest on the deficiencies and the surcharges continue to accumulate. And for an unrestricted number of

years, the taxpayers remain uncertain and are burdened with the costs of preserving their books and records. This is the predicament that the

law on the statute of limitations seeks to prevent.

***PROTECTORS SERVICES, INC., V CA ET. AL. G.R. No 118176, April 12, 2000

Facts:Petition Protectors Services, Inc., (PSI) is a contractor engaged in recruiting security guards for clients. After an audit investigation, the

BIR assessed PSI deficiency percentage taxes including surcharges, penalties and interests of P503,564.39, P831,464.30 and P1,514,047.86 for
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1983, 1984 and 1985, respectively. On December 7, 1987, respondent CIR sent demand letters for payment of said assessments for 1983 and

1984 on December 10, 1987, but denied receiving the notice of deficiency tax for 1985.

Petitioner PSI, sent a protest letter dated January 12, 1988 regarding the 1983 and 1984 assessments, claiming that gross receipts subject to

percentage tax should exclude salaries of the security guards, employers share of SSS, SIF and Medicare contributions. Without formally acting

thereon, the BIR sent a follow-up letter dated July 12, 1988 for the settlement of the taxes based on its computation, plus additional

documentary stamp taxes of P2,025 on PSIs capitalization for 1983 and 1984 and as deficiency expanded withholding tax of P703.41, thereby

bringing the total unsettled tax to P2,851,805.16.

On July 12, 1988, petition paid the P2,025 documentary stamp tax and P703.41 deficiency expanded withholding tax. The following day, PSI

filed its second protest for the 1983 and 1984 assessments and included for the first time its protest against the 1985 assessment. On

November 9, 1990, the BIR denied the protests stating that salaries of security guards are part of taxable gross receipts for determination of

contractors tax.

PSI filed a petition for review on December 5, 1990 with the CTA averring that assessments for documentary stamp and expanded withholding

taxes and without basis having been paid on July 22, 1988; the period for collection of the 1985 assessment letter therefore, the period to

collect the percentage taxes for the first, second and third quarter of 1984 has lapsed, the assessment letter therefore having been sent on

December 10, 1987, or beyond 3 years from filing of the quarterly returns, and that the base amount was erroneous since salaries of security

guards, employers share of SSS, SIF and medicare contributions should not form part of taxable gross receipts.

The CTA dismissed the petition stating that: (1) the assessments were made within the 3-year prescriptive period which should be reckoned

from January 20, 1985, the date of filing the final return; (2) receipt of the 1985 assessment cannot be denied as all assessments were sent in 1

envelope, as testified to by BIR personal; and (3) the protest letter having filed only on January 12, 1988, or 33 days from December 10, 1987,

the request for reinvestigation was filed out of time. On review by the CA, the CTAs decision was affirmed.

Issues:

Whether or not the CTA has jurisdiction to act on the petition for review filed before it.

Whether or not the assessments against PSI for deficiency percentage tax for 1983 and 1984 were made within the prescriptiv e period.

Whether or not the period for collection of taxes for taxable year s 1983, 1984 and 1985 has already prescribed.

Whether or not the assessments are correct.

Held:An assessment maybe administratively protested within 30 days from receipt thereof; otherwise, the assessment shall become final and

unappealable. In this case, PSI received the assessments on December 10, 1987 and protested the 1983 and 1984 assessments on January 12,

1988, or 33 days thereafter. Hence, the protests were filed out of time and PSI can no longer dispute the correctness of assessment. The CTA

correctly dismissed the appeal for lack of jurisdiction.

Petitioners contention that the Governments right to assess and collect the 1983, 1984 and 1985 assessments had already pre scribed in view

of BP700, which reduced the prescriptive period for assessment and collection of internal revenue taxes to 3 yrs, lacks merit BP700 wasapproved on April 5, 1984. The 3-year prescriptive period for assessment and collection of revenue taxes applied to taxes paid beginning 1984.

Clearly, the tax assessment made on December 10, 1987, for the par 1983 was still covered by the 5-year statutory prescriptive period.

The 3-year prescriptive period for assessment of contractors tax should be computed at the time of filing of the final annual percentage tax

return, when it can be finally acclaimed if the taxpayer still has an unpaid tax, and not from the tentative quarterly payments.

As to the contention that for failure of the BIR to commence collection of the 1983, 1984 and 1985 deficiency taxes either by judicial action or

by distraint and levy, the governments right to collect the tax has prescribed, the court ruled that the suspension of the running of the statute

of limitations for tax collection for the period during which the commissioner is prohibited from making the assessment or beginning distraint

or levy or a proceeding in court and 60 days thereafter. In the instant case, PSI filed a petition before the CTA to prevent the collection of the

assessed deficiency tax. When the CTA dismissed the case, petitioner elevated the case to the SC, hoping for a review in the favor. The actions

taken by petitioner before the CTA and the SC suspended the running of the statute of limitation.

As to the correctness of the assessment, it was held that contractors tax on gross receipts imposed on business agents including private

detective watchman agencies, was a tax on the sale of services or labor, imposed on the exercise of a privilege. The term gross receipts

means all amounts received by the prime or principal contractor as the total price, undiminished by the amount paid to the subcontractor

under the subcontract arrangement. Hence, gross receipts could not be diminished by employers SSS, SIF and medicare contributions.

Furthermore, it has been consistently ruled by the BIR that the salaries paid to security guards should form part of the gross receipts subject to

tax

CIR vs. First Express Pawnshop Company, Inc.

G.R. Nos. 172045-46; June 16 2009


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Facts: CIR issued assessment notices against Respondent for deficiency income tax, VAT and documentary stamp tax on deposit on subscription

and on pawn tickets. Respondent filed its written protest on the assessments. When CIR did not act on the protest during the 180-day period,

respondent filed a petition before the CTA.

Issue: Has Respondents right to dispute the assessment in the CTA prescribed?

Held: NO. The assessment against Respondent has not become final and unappealable. It cannot be said that respondent failed to submit

relevant supporting documents that would render the assessment final because when respondent submitted its protest, respondent attached

all the documents it felt were necessary to support its claim. Further, CIR cannot insist on the submission of proof of DST payment because suchdocument does not exist as respondent claims that it is not liable to pay, and has not paid, the DST on the deposit on subscription.

The term "relevant supporting documents" are those documents necessary to support the legal basis in disputing a tax assessment as

determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents and cannot demand what type of supporting

documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a

taxpayer cannot submit. Since the taxpayer is deemed to have submitted all supporting documents at the time of filing of its protest, the 180-

day period likewise started to run on that same date.

Bank of the Philippine Islands vs Commissioner of Internal Revenue

Taxation Collection Prescriptive Period Reconsideration vs Reinvestigation

On October 20, 1989, the Bureau of Internal Revenue (BIR) issued a formal assessment notice (FAN) against the Bank of the Philippine Islands

(BPI). The FAN demanded BPI to pay P28k in taxes. In November 1989, BPI filed a protest however the protest did not specify if it was a request

for reconsideration or a reinvestigation. The BIR did not reply on the protest but on October 15, 1992 (four days before the expiration of the

period to collector 1095 days [3 years]after issuance of FAN on 10/20/1989), the Commissioner of Internal Revenue (CIR) issued a warrant of

distraint/levy against BPI for the satisfaction of the assessed tax. The warrant was served to BPI on October 23, 1992 (four days after period has

prescribed). In September 1997, the CIR finally sent a letter to BPI advising the latter that its protest is denied.ISSUE:

1. Whether or not the filing of the protest by BPI suspended the running of the prescriptive period.

2. Whether or not the governments right to collect the assessed tax has prescribed.

HELD:

1. No. The protest did not indicate whether BPI was asking for a reconsideration or a reinvestigation but since BPI did not adduceadditional evidence, it should be treated as a request for reconsideration. Under the tax code, a request for reconsideration does

not suspend the running of the prescriptive period. Even assuming that the protest is a request for reinvestigation, the same did not

toll the running of the prescriptive period because the CIR failed to show proof that the request has been granted and that a

reinvestigation has been actually conducted. In fact, BPI never heard from the BIR not until the CIR decided the protest in

September 19975 years after the protest has been filed.

2. Yes. When it comes to collection, even though the warrant for distraint/levy was issued within the prescriptive period, it is requiredthat the same should be served upon the taxpayer within the prescriptive period. This is because it is upon the service of the

Warrant that the taxpayer is informed of the denial by the BIR of any pending protest of the said taxpayer, and the resolute

intention of the BIR to collect the tax assessed. In the case at bar, BPI received the warrant 4 days after the expiration of the

prescriptive period hence, the right to collect has already prescribed.

G.R. No. 178788

United Airlines vs. Commissioner of Internal Revenue

September 29, 2009

Facts:

International airline, petitioner United Airlines, filed a claim for income tax refund. Petitioner sought to be refunded the erroneously collected

income tax from in the amount of P5,028,813.23on passenger revenue from tickets sold in the Philippines, the uplifts of which did not

originate in the Philippines. The airlines ceased operation originating form the Philippines since February 21, 1998.

Court of tAx appeals ruled the petitioner is not entitled to a refund because under the NIRC, income tax on GPB also includes gross revenue

from carriage of cargoes from the Philippines. And upon assessment by the CTA, it was found out that petitioner deducted items from its cargo

revenues which should have entitled the government to an amount of P31.43 million, which is obviously higher than the amount the petitioner

prayed to be refunded.

Petitioner argued that the petitioners supposed underpayment cannot offset his claim to a refund as established by well-settled jurisprudence.

Issue:

Whether or not petitioner is entitled to a refund?

HELd:

Petitioner was correct in averring that his claim to a refund cannot be subject to offsetting or, as it claimed the offsetting to be, a legal

compensation under Sec. 28(A)(3)(a)


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Petitioners (similar) tax refund claim assumes that the tax return that it filed was correct. Given, however, the finding of the CTA that

petitioner, although not liable under Sec. 28(A)(3)(a) of the 1997 NIRC, is liable under Sec. 28(A)(1), the correctness of the return filed by

petitioner is now put in doubt. As such, we(the court) cannot grant the prayer for a refund.

The court held that the petitioner is not entitled to a refund, Having underpaid the GPB tax due on its cargo revenues for 1999, the amount of

the former being even much higher (P31.43 million) than the tax refund sought (P5.2 million).

Relevant note:

The Court have consistently ruled that there can be no off-setting *or compensation+ of taxes against the claims that the taxpayer may have

against the government. A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than

the tax being collected. The collection of a tax cannot await the results of a lawsuit against the government.(francia vs Intermediate appellate

court)

The grant of a refund is founded on the assumption that the tax return is valid, that is, the facts stated therein are true and correct. The

deficiency assessment, although not yet final, created a doubt as to and constitutes a challenge against the truth and accuracy of the facts

stated in said return which, by itself and without unquestionable evidence, cannot be the basis for the grant of the refund. (CIR vs CTA)

Filinvest Development Corporation vs. CIR

G.R. No. 146941, Aug. 9, 2007

Findings of fact of the CTA is entitled the greatest respect Stare decisis et non quieta movere

FACTS:

Filinvest filed a claim for refund, or in the alternative, the issuance of TCC with CIR in the amount of P4,178,134.00 representing excess

creditable withholding taxes for taxable years 1994, 1995, and 1996.

When CIR had not resolved petitioners claim for refund and the 2 -yr prescriptive period was about to lapse, the latter filed a Petition for

Review with the CTA, which, however, dismissed the petition for review for insufficiency of evidence because petitioner failed to present in

evidence its 1997 income tax return. CA also denied the petition for review subsequently filed on the same ground of insufficiency of evidence.

ISSUE:

Whether or not petitioner is entitled to the tax refund or tax creditPETITIONERS CONTENTION:

CA erred (1) in denying the claim for tax refund on the sole ground of failure to present in evidence its Annual Income Tax Return for

Corporations for 1997 despite holding that it had complied with all the requirements to sustain a claim for tax refund; (2) relying on CTA cases

cited in its Decision as jurisprudential basis to support its ruling; (3) not ruling that Sec. 34, Rule 132, RoC, being a procedural rule, should be

liberally construed in order that substantial justice due petitioner shall have been served; and (4) not ruling that, petitioner having proved that

it paid excess taxes for taxable years 1995 and 196, has shifted the burden of evidence to respondent CIR to show the factual basis to deny

petitioners claim.

THEORY OF DEFENSE:

In claims for tax refund, the burden of proof of refundability rests with claimant. Petitioner did not comply with the rules on formal offer of

evidence. CA did not err in relying on CTA cases because the latter is an authority on matters of taxation and therefore its resolutions carry

great weight.

HELD:

Petitioner is entitled to the tax refund or tax credit.

Factual findings of the CTA, as affirmed by the CA, are entitled to the highest respect and will not be disturbed on appeal unless it is shown that

the lower courts committed gross error in the appreciation of facts.

The appellate court itself acknowledges that petitioner had complied with the requirements to sustain a claim for tax refund or credit. In the

light of RA 1125, as amended, the law creating the CTA, provides that proceedings therein shall not be governed strictly by technical rules of

evidence. Moreover, this Court has held time and again that technicalities should not be used to defeat substantive rights, especially those that

have been established as a matter of fact.

The CA, likewise, erred in relying on CTA decisions as jurisprudential basis for its decision. By tradition and in our system of judicial
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administration this Court has the last word on what the law is, and that its decisions applying or interpreting the laws or the Constitution form

part of the legal system of the country, all other courts should take their bearings from the decisions of this Court, ever mindful of what this

Court said fifty-seven years ago in People vs. Verathat a becoming modesty of inferior courts demands conscious realization of the position

that they occupy in the interrelation and operation of the integrated judicial system of the nation.

The principle of stare decisis et non quieta movere, enjoins adherence to judicial precedents. It requires our courts to follow a rule already

established in a final decision of the Supreme Court. That decision becomes a judicial precedent to be followed in subsequent cases by all courts

in the land.

In ruling the case, the Court adopted its own ruling in BPI-Family Savings Bank vs. Court of Appeals.

CIR v. AICHI FORGING COMPANY OF ASIA, INC.

G.R. No. 184823 October 6, 2010

Del Castillo,J.

Doctrine:

- The CIR has 120 days, from the date of the submission of the complete documents within which to grant or deny the claim for refund/credit of

input vat. In case of full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the CTA within 30 days from receipt of the

decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer

is to appeal the inaction of the CIR to CTA within 30 days.

- A taxpayer is entitled to a refund either by authority of a statute expressly granting such right, privilege, or incentive in his favor, or under the

principle of solutio indebitirequiring the return of taxes erroneously or illegally collected. In both cases, a taxpayer must prove not only his

entitlement to a refund but also his compliance with the procedural due process.

- As between the Civil Code and the Administrative Code of 1987, it is the latter that must prevail being the more recent law, following the legalmaxim, Lex posteriori derogat priori.

- The phrase within two (2) years x x x apply for the issuance of a tax credit certificate or refund under Subsection (A) of Section 112 of the

NIRC refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA.

Facts:

Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated sales from July 1, 2002 to September 30, 2002. The CTA 2nd

Division partially granted respondents claim for refund/credit.

Petitioner filed a Motion for Partial Reconsideration, insisting that the administrative and the judicial claims were filed beyond the two-year

period to claim a tax refund/credit provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap

year, the filing of the claim for tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on September 29,

2004. He cited as basis Article 13 of the Civil Code, which provides that when the law speaks of a year, it is equivalent to 365 days. In addition,

petitioner argued that the simultaneous filing of the administrative and the judicial claims contravenes Sections 112 and 229 of the NIRC.

According to the petitioner, a prior filing of an administrative claim is a condition precedent before a judicial claim can be filed.

The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The decision was affirmed. Thus the case was elevated to

the Supreme Court.

Respondent contends that the non-observance of the 120-day period given to the CIR to act on the claim for tax refund/credit in Section 112(D)

is not fatal because what is important is that both claims are filed within the two-year prescriptive period. In support thereof, respondent citedCommissioner of Internal Revenue v. Victorias Milling Co., Inc. [130 Phil 12 (1968)] where it was ruled that if the CIR takes time in deciding the

claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA before the end of the two-year period

without awaiting the decision of the CIR.

Issues:

1. Whether or not the claim for refund was filed within the prescribed period

2. Whether or not the simultaneous filing of the administrative and the judicial claims contravenes Section 229 of the NIRC, which requires the

prior filing of an administrative claim, and violates the doctrine of exhaustion of administrative remedies

Held:

1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (G.R. No. 172129, September 12, 2008) , the

two-year period should be reckoned from the close of the taxable quarter when the sales were made.

In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No. 162155, August 28, 2007, 531 SCRA 436) , we said that as

between the Civil Code, which provides that a year is equivalent to 365 days, and the Administrative Code of 1987, which states that a year is

composed of 12 calendar months, it is the latter that must prevail being the more recent law, following the legal maxim, Lex posteriori derogat

priori.

Thus, applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30,

2002 expired on September 30, 2004. Hence, respondents administrative claim was timely filed.

2. Yes. We find the filing of the judicial claim with the CTA premature.

Section 112(D) of the NIRC clearly provides that the CIR has 120 days, from the date of the submission of the complete documents in support

of the application *for tax refund/credit+, within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayers

recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR

fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

Subsection (A) of Section 112 of the NIRC states that any VAT -registered person, whose sales are zero-rated or effectively zero-rated may,

within two yearsafter the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refundof

creditable input tax due or paid attributable to such sales. The phrase within two (2) years x x x apply for the issuance o f a tax credit

certificate or refund refers to applications for refund/credit filed with the CIRand not to appeals made to the CTA.


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The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc.is inapplicable as the tax provision involved in that case is Section

306, now Section 229 of the NIRC. Section 229 does not apply to refunds/credits of input VAT.

The premature filing of respondents claim for refund/credit of input VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was

acquired by the CTA.

G.R. No. 178090 February 8, 2010

PANASONIC COMMUNICATIONS IMAGING CORPORATION OF THEPHILIPPINES (formerly MATSUSHITA BUSINESS MACHINECORPORATION OF

THE PHILIPPINES) vs. COMMISSIONER OFINTERNAL REVENUEFacts:

Petitioner Panasonic Communications Imaging Corporation of thePhilippines produces and exports plain paper copiers and their sub-

assemblies,parts, and components. It is a registered value-added tax (VAT) enterprise.

From1998 to 1999, petitioner generated export sales where it paid input VATof P9,368,482.40 believing that its sales are zero-rated sales.

Claiming that theinput VAT it paid remained unutilized. Panasonic filed with the Bureau of InternalRevenue (BIR) two separate applications for

refund or tax credit of what it paid.When the BIR did not act on the same, Panasonic filed a petition for review withthe Court of Tax Appeals

(CTA).

The CTA First Division denied the petitionstating that while petitioners export sales were subject to 0% VAT under theNIRC, the same did not

qualify for zero-rating because the word "zero-rated" wasnot printed on its export invoices. This omission violates the invoicingrequirements of

Section 4.108-1 of Revenue Regulations (RR) 7-95. The motionfor reconsideration was denied. On appeal, the CTA

en banc

upheld the FirstDivisions decision.

Issue:

Whether or not the words "zero-rated" must appear in the sales invoice sothat a claim for refund of unutilized input VAT on zero-rated saleswill be proper.

Ruling:

Yes.Zero-rated transactions generally refer to the export sale of goods and services.When applied to the tax base or the selling price of the

goods or services sold,such zero rate results in no tax chargeable against the foreign buyer or customer.But, although the seller in such

transactions charges no output tax, he can claima refund of the VAT that his suppliers charged him. The seller thus enjoysautomatic zero rating,

which allows him to recover the input taxes he paidrelating to the export sales, making him internationally competitive. For theeffective zero

rating of such transactions, however, the taxpayer has to be VAT-registered and must comply with invoicing requirements. Interpreting

theserequirements, respondent CIR ruled that under Revenue Memorandum Circular (RMC) 42-2003, the taxpayers failure to comply with

invoicing requirements willresult in the disallowance of his claim for refund.If the claim for refund is based on the existence of zero-rated sales

by thetaxpayer but it fails to comply with the invoicing requirements in the issuance of sales invoices, its claim for tax credit/refund of VAT on

its purchases shall bedenied considering that the invoice it is issuing to its customers does not depictits being a VAT-registered taxpayer whose

sales are classified as zero-ratedsales. Nonetheless, this treatment is without prejudice to the right of the taxpayer to charge the input taxes to

the appropriate expense account or asset accountsubject to depreciation, whichever is applicable. Moreover, the case shall be

referred by the processing office to the concerned BIR office for verification of other tax liabilities of the taxpayer.

***FIRST DIVISION [G.R. No. 181298. January 10, 2011.]BELLE CORP vs. CIRDoctrine: Sec 69 of the old NIRC allows unutilized tax credits to be

refunded as long as the claim is filed within the prescriptive period. This, however, no longer holds true under Sec 76 of the 1997 NIRC as the

option to carry-over excess income tax payments to the succeeding taxable year is now irrevocable. Belle Corporation is a domestic corporation

engaged in the real estate and property business.

On May 30, 1997, Belle Corp filed with the BIR its ITR for the first quarter of 1997, showing an income tax due of P236,679,254.00, which it

paid through PCI Bank, an Authorized Agent Bank of the BIR. On August 14, 1997, it filed with the BIR its second quarter ITR, declaring an

overpayment of income taxes in the amount of P66,634,290.00. In view of the overpayment, no taxes were paid for the second and third

quarters of 1997. Petitioner's ITR for the taxable year ending December 31, 1997 thereby reflected an overpayment of income taxes in the

amount of P132,043,528.00. Instead of claiming the amount as a tax refund, petitioner decided to apply it as a tax credit to the succeeding

taxable year by marking the tax credit option box in its 1997 ITR. For the taxable year 1998, Belle Corp.'s amended ITR showed an overpayment

of P106,447,318.00. On April 12, 2000, petitioner filed with the BIR an administrative claim for refund of its unutilized excess income tax

payments for the taxable year 1997 in the amount of P106,447,318.00. Notwithstanding the filing of the administrative claim for refund, Belle

Corp. carried over the amount of P106,447,318.00 to the taxable year 1999 and applied a portion thereof to its 1999 Minimum Corporate

Income Tax (MCIT) liability, as evidenced by its 1999 ITR. Due to the inaction of the respondent CIR, it appealed its claim for refund of unutilized

excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00 with the CTA via a Petition for Review, which denied

the company's petition for refund. The CTA racioned that it is an elementary rule in taxation that an automatic carry over of an excess income

tax payment should only be made for the succeeding year. To allow the application of excess taxes paid for two successive years would run

counter to the specific provision of the law above-mentioned. Belle Corp. sought reconsideration but the same was denied prompting it to

elevate the matter to the CA.The CA, applying Philippine Bank of Communications v. Commissioner of Internal Revenue, denied the petition.

The CA explained that the overpayment for taxable year 1997 can no longer be carried over to taxable year 1999 because excess income

payments can only be credited against the income tax liabilities of the succeeding taxable year, in this case up to 1998 only and not beyond.

Neither can the overpayment be refunded as the remedies of automatic tax crediting and tax refund are alternative remedies. Belle moved for

reconsideration, the CA, however, denied the same.

Issue: WON Belle is entitled to a refund of its excess income tax payments for the taxable year 1997 in the amount of P106,447,318.00.


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HELD: No.Under Sec 69 of the old NIRC, in case of overpayment of income taxes, a corporation may either file a claim for refund or carry-over

the excess payments to the succeeding taxable year. Availment of one remedy, however, precludes the other. Although these remedies are

mutually exclusive, we have in several cases allowed corporations, which have previously availed of the tax credit option, to file a claim for

refund of their unutilized excess income tax payments.Thus, under Sec 69 of the old NIRC, unutilized tax credits may be refunded as long as the

claim is filed within the two-year prescriptive period.

Sec. 69 is now repealed and the applicable law is Sec.76 of the 1997 NIRC.Section 76.Final Adjustment Return.

Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total net income for the preceding calendar or

fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net

income of that year the corporation shall either: (a)Pay the excess tax still due; or(b)Be refunded the excess amount paid, as the case may be.In

case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final

adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable

years. Once the option to carry over and apply the excess quarterly income tax against income tax due for the taxable quarters of the

succeeding taxable years has been made, such option shall be considered irrevocable for that taxable period and no application for tax refund

or issuance of a tax credit certificate shall be allowed therefor. (Emphasis supplied) Under the new law, in case of overpayment of income

taxes, the remedies are still the same; and the availment of one remedy still precludes the other. But unlike Section 69 of the old NIRC, the

carry-over of excess income tax payments is no longer limited to the succeeding taxable year. Unutilized excess income tax payments may now

be carried over to the succeeding taxable years until fully utilized. In addition, the option to carry-over excess income tax payments is now

irrevocable. Hence, unutilized excess income tax payments may no longer be refunded. In the instant case, both the CTA and the CA applied

Section 69 of the old NIRC in denying the claim for refund. We find, however, that the applicable provision should be Section 76 of the 1997

NIRC because at the time petitioner filed its 1997 final ITR, the old NIRC was no longer in force. Since Belle Corp. already carried over its 1997

excess income tax payments to the succeeding taxable year 1998, it may no longer file a claim for refund of unutilized tax credits for taxable

year 1997.To repeat, under the new law, once the option to carry-over excess income tax payments to the succeeding years has been made, itbecomes irrevocable. Thus, applications for refund of the unutilized excess income tax payments may no longer be allowed.WHEREFORE, the

petition is hereby DENIED.

COMMISSIONER OF INTERNAL REVENUE vs. METRO STAR SUPERAMA, INC.- Pre-Assessment Notice

FACT:

Metro Star Superama was audited for taxable year 1999 and received a Preliminary 15-day Letter on November 15, 2001. On April 11, 2002, it

received a Formal Letter of Demand dated April 3, 2002. Denying that it received a Pre-Assessment Notice and thus not accorded due process,

Metro Star Superama filed a Petition with the CTA.

ISSUE:

Was the Petitioner accorded the required due process?

HELD:

NO. Since the Petitioner denied receipt of the Pre-Assessment Notice, the burden of proving the same shifts to the BIR. To raise the

presumption of receipt, it must be shown that (a) the letter was properly addressed with postage prepaid and (b) that it was mailed. If receipt is

denied, the BIR must then show actual receipt through presentation of the registry receipt or, if the same cannot be located, at least acertification from the Bureau of Posts.

The Court likewise added that the issuance of a Pre-Assessment Notice is a mandatory requirement save only on specified instances. The old

rule laid down in CIR vs. Menguito that only the FAN is mandatory no longer applies since the same was ruled upon based on the old provision.

Taxation Pre-Assessment Notice Due Process Requirement

In January 2001, a revenue officer was authorized to examine the books of accounts of Metro Star Superama, Inc. In April 2002, after the audit

review, the revenue district officer issued a formal assessment notice against Metro Star advising the latter that it is liable to pay P292,874.16 in

deficiency taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that due process was not observed when it was

not issued a pre-assessment notice. Nevertheless, the Commissioner of Internal Revenue authorized the issuance of a Warrant of Distraint

and/or Levy against the properties of Metro Star.

Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of Metro Star.

ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice against Metro Star.

HELD: No. It is true that there is a presumption that the tax assessment was duly issued. However, this presumption is disregarded if the

taxpayer denies ever having received a tax assessment from the Bureau of Internal Revenue. In such cases, it is incumbent upon the BIR to

prove by competent evidence that such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the BIR to

prove by contrary evidence that the Metro Star received the assessment in the due course of mail. In the case at bar, the CIR merely alleged

that Metro Star received the pre-assessment notice in January 2002. The CIR could have simply presented the registry receipt or the

certification from the postmaster that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it failed to

comply with the requirement of service of the pre-assessment notice. The Supreme Court emphasized that the sending of a pre-assessment

notice is part of the due process requirement in the issuance of a deficiency tax assessment, the absence of which renders n ugatory any

assessment made by the tax authorities.

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. But even so, it is a requirement in all

democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure.

mmissioner of Internal Revenue vs Kudos Metal Corporation

Commissioner of Internal Revenue vs Kudos Metal Corporation

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Taxation Prescription Waiver of the Statute of Limitations Estoppel

In April 1999, Kudos Metal Corporation (KMC) filed its annual income tax return (ITR). In September 1999, the Bureau of Internal Revenue (BIR)

advised KMC that it will be subjected to a tax audit. In September 2000, a subpoena duces tecum was issued against KMC but the latter failed to

comply. In December 2001, about 4 months before the expiration of the government to make an assessment (April 2002), Nelia Pasco,

accountant of KMC, executed a waiver of the statute of limitations (SOL) in favor of BIR. A tax audit then ensued. In February 2003, another

such waiver was executed by Pasco. The audit continued. Finally, in September 2003more than three years from the filing of KMC of its ITR, a

formal assessment notice (FAN) was issued by the Commissioner of Internal Revenue (CIR) demanding KMC to pay P25 million in taxes.

KMC protested the FAN on the ground that it was issued beyond the prescriptive period; that it was issued beyond the prescriptive period

because there was no valid waiver of the SOL (in particular, the first waiver) because Pasco was not authorized by KMC to execute the same;that even if Pasco is authorized, the same is still void because it did not indicate the acceptance date of the BIR; that a copy of the waiver was

not furnished to KMC.

The CIR argued that KMC is already in estoppel because it acquiesced or it allowed the audit conducted by the BIR after the two waivers

executed by Pasco.

ISSUE: Whether or not KMC is in estoppels.

HELD: No. Apparently, Pasco was not authorized by KMC to execute the waiver. Even if KMC allowed the subsequent tax audit after such waiver

it did not bar KMC to raise the issue of prescription. This is reinforced by the fact that the waiver is infirm because of the lack of the date of

acceptance as well as the fact that a copy thereof was not furnished to KMC. These two are among the requirements provided for by Section

222 of the National Internal Revenue Code (NIRC) as to a valid waiver of the SOL. The provisions in Section 222 of NIRC provides for a detailed

procedure that must be strictly followed by the BIR in order that the taxpayer will have a valid waiver. The BIR cannot now hide behind the

doctrine of estoppel to cover its failure to comply with the law.

jurisprudence on which the assessment is based, otherwise theformal letter of demand and the notice of assessment shall be void

.

The formality of a control number in the assessment notice

is not arequirement

for its validity but rather the contents thereof which should informthe taxpayer of the declaration of deficiency tax against said taxpayer.

The Formal Letter of Demand dated August 7, 2002 contains not only a detailedcomputation of LMCECs tax deficiencies but alsodetails of the

specifieddiscrepancies, explaining the legal and factual bases of the assessment. It alsoreiterated that in the absence of accounting records and

other documentsnecessary for the proper determination of the companys internal revenue taxliabilities, the investigating revenue officers

resorted to the "

Best EvidenceObtainable

" as provided in Section 6(B) of the NIRC (third party information)Economic Recovery Assistance Payment (ERAP) Program

The program named as "Economic Recovery Assistance Payment (ERAP)Program" granted immunity from audit and investigation of income

tax, VAT andpercentage tax returns for 1998.

It expressly excluded withholding tax returns (whether for income, VAT, orpercentage tax purposes).

Since

such immunity from audit and investigation does not preclude thecollection of revenues generated from audit and enforcement activities

,it follows that the Bureau is likewise not barred from collecting any tax deficiencydiscovered as a result of tax fraud investigations.

Tax amnesty is a general pardon to taxpayers who want to start a cleantax slate

.

It also gives the government a chance to collect uncollected tax from taxevaders without having to go through the tedious process of a tax case.

Even assuming arguendo that the issuance of RR No. 2-99 is in the nature of tax amnesty, it bears noting that a tax amnesty, much like a tax

exemption, isnever favored nor presumed in law and if granted by statute, the terms of theamnesty like that of a tax exemption must be

construed strictly against thetaxpayer and liberally in favor of the taxing authority.

For the same reason,

the availment by LMCEC of VAP under RR No. 8-2001

as amended by RR No. 10-2001, through payment supposedly made in October29, 2001 before the said program ended on October 31, 2001,

did not amountto settlement of its assessed tax deficiencies for the period 1997 to1999

,

nor immunity from prosecution for filing fraudulent return andattempt to evade or defeat tax

.

As correctly asserted by petitioner, from the express terms of the aforesaidrevenue regulations,

LMCEC is not qualified to avail of the VAP grantingtaxpayers the privilege of last priority in the audit and investigation of all internal revenue

taxes for the taxable year 2000 and all prior yearsunder certain conditions

, considering that


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first, it was issued a PAN on February 19, 2001, and

second, it was the subject of investigation as a result of verified informationfiled by a Tax Informer under Section 282 of the NIRC duly recorded

in the BIR

Official Registry as Confidential Information (CI) No. 29-200053 even prior tothe issuance of the PAN.

Moreover, private respondentscannot invoke LMCECs availment of VAPto foreclose any subsequent audit of its account books and otheraccounting records in v iew of the

strong finding of underdeclarationin LMCECs payment of correct income tax liability by more than 30%

LMCEC -- the alleged violation of the general rule in Section 235 of the NIRC

allowingthe examination and inspection of taxpayers books of accounts and otheraccount ing records only once in a taxable year

likewise untenable

the discovery

of substantial underdeclarations

of income by LMCEC fortaxable years 1997, 1998 and 1999, as well as the necessity of obtaininginformation from third parties to ascertain the

correctness of the return filed orevaluation of tax compliance in collecting

taxes (as a result of thedisobedience to the summons issued by the Bureau against the privaterespondents), are circumstances warranting

exception from the generalrule in Section 235.

Consequently,respondent Secretarys ruling that the filing of criminalcomplaint for violation

of Sections 254 and 255 of the NIRC cannot prosperbecause of lack of prior determination of the existence of fraud,

is bereft of factualbasis and contradicted by the evidence on record.

Tax assessments by tax examiners are presumed correct

and made ingood faith, and all presumptions are in favor of the correctness of a taxassessment unless proven otherwise.

We have held that a

taxpayers failure to file a petition for review with theCourt of Tax Appeals within the statutory period rendered the disputedassessment final,

executory and demandable

, thereby precluding it frominterposing the defenses of legality or validity of the assessment and prescriptionof the Governm ents right to

assess.

Indeed, any objection against the assessment should have been pursuedfollowing the avenue paved in Section 229 (now Section 228) of the

NIRC onprotests on assessments of internal revenue taxes.

Records bear out that the

assessment notice and Formal Letter of Demanddated August 7, 2002

were duly

served on LMCEC on October 1, 2002

.

Private respondents

did not file a motion for reconsideration of the saidassessment notice and formal demand

; neither did they appeal to the Courtof Tax Appeals.

xxxxx

assessment may be protested by filing a request forreconsideration or reinvestigation within 30 days from receipt of theassessment by the

taxpayer

.

No such administrative protest was filed by private respondents seekingreconsideration of the August 7, 2002 assessment notice and formal

letter of demand.

Moreover,

these objections to the assessments should have been raised, considering the ample remedies afforded the taxpayer by the Tax Code

,with the Bureau of Internal Revenue and the Court of Tax Appeals, as describedearlier, and

cannot be raised now via Petition for Certiorari

, under thepretext of grave abuse of discretion.

The subject tax assessments having become final, executory and enforceable, thesame

can no longer be contested by means of a disguised protest


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.

The

determination of probable cause is part of the discretion granted tothe investigating prosecutor and ultimately, the Secretary of Justice

.

However,

this Court and the CA possess the power to review findingsof prosecutors in preliminary investigations

.

Although policy considerations call for the widest latitude of deference to theprosecutors findings, courts should never shirk from exercising

their power,when the circumstances warrant, to determine whether the prosecutorsfindings are supported by the facts, or by t he law.

In so doing,

courts do not act as prosecutors but as organs of the judiciary, exercising their mandate under the Constitution, relevantstatutes, and remedial

rules to settle cases and controversies.

Clearly,

the power of the Secretary of Justice to review does notpreclude this Court and the CA from intervening and exercising ourown powers of

review with respect to the DOJs findings

, such as in theexceptional case in which grave abuse of discretion is committed, as when aclear sufficiency or insufficiency of evidence to

support a finding of probablecause is ignored.

CIR vs. REYES

Taxation Contents of a Formal Assessment Notice

In 1993, Maria Tancino died leaving behind an estate worth P32 million. In 1997, a tax audit was conducted on the estate. Meanwhile, the

National Internal Revenue Code (NIRC) of 1997 was passed. Eventually in 1998, the

tax review case digest (1)

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