CTA Jurisdiction Over Appeals Requires Timely Reconsideration Motion

Prepared by: UST Tax Law Review Petition Class 2017-18
Submitted to: Atty. Noel Ortega
VISAYAS GEOTHERMAL POWER COMPANY vs. COMMISIONER OF INTERNAL

REVENUE
G.R. No. 205279, 07 JUNE 2017 THIRD DIVISION (REYES, J.)
DOCTRINE OF THE CASE:
The BIR Ruling No. DA-489-03 referred to in the exception was recognized by the Court to be a general interpretative
rule applicable to all taxpayers. All taxpayers can rely on it from the time of its issuance on December 10, 2003 up to its
reversal by the Court in CIR v. Aichi Forging Company of Asia, Inc. on October 6, 20 I 0, where this Court held that
the 120+30-day periods are mandatory and jurisdictional.
FACTS
The petitioner is a special purpose limited partnership established primarily to "invest in, acquire,
finance, complete, construct, develop, improve, operate, maintain and hold that certain partially
constructed power production geothermal electrical· generating facility in Malitbog, Leyte Province,
Philippines (the "Project"), and other property incidental thereto, for the production and sale of
electricity from geothermal resources, to sell or otherwise dispose of the Project and such other
property." It is registered with the Bureau of Internal Revenue (BIR) as a Value-Added Tax (VAT)
taxpayer with Taxpayer Identification No. 003-832-538-000.
On February 13, 2009, the petitioner filed with the BIR an administrative claim for refund of unutilized
input VAT covering the taxable year 2007 in the amount of Pl 1,902,576.07. On March 30, 2009, it
proceeded to immediately file a petition for review with the CTA, as it claimed that the BIR failed to act
upon the claim for refund. Proceedings ensued before the CTA. To substantiate its claim for refund, the
petitioner cited, among other laws, Section 6 of Republic Act (R.A.) No. 9136, otherwise known as the
"Electric Power Industry Reform Act of 2001," which provides in part that "[p ]ursuant to the objective
of lowering electricity rates to end-users, sales of generated power by generation companies shall be
[VAT] zero-rated." It also referred to the 1997 National Internal Revenue Code (NIRC), as amended by
R.A. No. 9337, which imposes a zero percent VAT rate on sale of power generated through renewable
sources of energy.
The CTA Division denied the petition for being prematurely filed. Citing Section 112(C) of the 1997
NIRC, which provides that the Commissioner of Internal Revenue (CIR) has 120 days within which to
decide on an application for refund or tax credit, to be reckoned from the date of submission of
complete documents in support of the application. Since the administrative claim for refund was filed on
February 13, 2009, the CIR had until June 13, 2009 within which to act on the claim. The petition for
review, however, was prematurely filed on March 30, 2009, or a mere 45 days from the filing of the
administrative claim with the BIR. The dismissal of the case was based solely on this ground, as the tax
court found it needless to still address the petitioner's compliance with the requisites for entitlement to
tax refund or credit.
This decision was affirmed in toto by the CTA En Banc this the instant case. Hence, this petition for
review on certiorari.
ISSUE
WON the judicial claim for refund of the petitioner was prematurely filed.
HELD
No. The present case falls within the exception.
1
The Court ruled in San Roque that "[f]ailure to comply with the 120-day waiting period violates a
mandatory provision of law. It violates the doctrine of exhaustion of administrative remedies and renders
the petition premature and thus without a cause of action, with the effect that the CTA does not acquire
jurisdiction over the taxpayer's petition." "The old rule that the taxpayer may file the judicial claim,
without waiting for the [CIR's] decision if the two-year prescriptive period is about to expire, cannot
apply because that rule was adopted before the enactment of the 30-day period." With the current rule
that gives a taxpayer 30 days to file the judicial claim even if the CIR fails to act within the 120-day
period, the remedy of a judicial claim for refund or credit is always available to a taxpayer.
As the petitioner correctly pointed out, this general rule that calls for a strict compliance with the
120+30-day mandatory periods admits of an exception. The Court has declared, also in San Roque:
[S]trict compliance with the 120+ 30[-]day periods is necessary for such a claim to
prosper, whether before, during, or after the effectivity of the Atlas doctrine, except
for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December
2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated
the 120+30[-]day periods as mandatory andjurisdictional. (Emphasis ours)
The BIR Ruling No. DA-489-03 referred to in the exception was recognized by the Court to be a general
interpretative rule applicable to all taxpayers, as it was a response to a query made, not by a particular
taxpayer but by a government agency23 tasked with processing tax refunds and credits.
VI. BIR Ruling No. DA-489-03 dated 10 December 2003

BIR Ruling No. DA-489-03 does provide a valid claim for equitable estoppel under
Section 246 of the Tax Code. BIR Ruling No. DA-489-03 expressly states that the
"taxpayer-claimant need not wait for the lapse of the 120-day period before it could
seek judicial relief with the CTA by way of Petition for Review." Prior to this ruling,
the BIR held x x x that the expiration of the 120-day period is mandatory and
jurisdictional before a judicial claim can be filed. 2 (Emphasis ours)
All taxpayers can rely on it from the time of its issuance on December 10, 2003 up to its reversal by the
Court in CIR v. Aichi Forging Company of Asia, Inc. 26 on October 6, 20 I 0, where this Court held that
the 120+30-day periods are mandatory andjurisdictional.27 It is material that both administrative and
judicial claims in the present case were filed by the petitioner in 2009. The CTA En Banc's reliance on
the general rule enunciated by the Court in San Roque is misplaced. Notwithstanding the fact that the
petitioner failed to wait for the expiration of the 120-day mandatory period, the CTA could still take
cognizance of the petition for review.
ASIATRUST DEVELOPMENT BANK, INC., PETITIONERS, VS. COMMISSIONER OF

INTERNAL REVENUE, RESPONDENTS
G.R. NO. 201530, 19 APRIL 2017, FIRST DIVISION (DEL CASTILLO, J.)

 An application for tax abatement is deemed approved only upon the issuance of a termination letter
by the Bureau of Internal Revenue (BIR).
 In order for the CTA En Banc to take cognizance of an appeal via a petition for review, a timely
motion for reconsideration or new trial must first be filed with the CTA Division that issued the
assailed decision or resolution. Failure to do so is a ground for the dismissal of the appeal
2
FACTS
Asiatrust Development Bank was issued three formal letters of demand with assessment notices for
deficiency internal revenue taxes for fiscal years 1996, 1997, and 1998.
On March 17, 2000, Asiatrust timely protested the assessment notices.
Due to the inaction of the CIR on the protest, Asiatrust filed before the CTA a Petition for Review
praying for the cancellation of the tax assessments for deficiency income tax, documentary stamp tax
(DST) - regular, DST - industry issue, final withholding tax, expanded withholding tax, and fringe
benefits tax issued against it by the CIR.
On December 28, 2001, the CIR issued against Asiatrust new Assessment Notices for deficiency taxes in
the amounts of ₱l 12,816,258.73, ₱53,314,512.72, and ₱133,013,458.73, covering the fiscal years ending
June 30, 1996, 1997, and 1998, respectively. On the same day, Asiatrust partially paid said deficiency tax
assessments.
On April 19, 2005, the CIR approved Asiatrust's Offer of Compromise of DST - regular assessments for
the fiscal years ending June 30, 1996, 1997, and 1998.
During the trial, Asiatrust manifested that it availed of the Tax Abatement Program for its deficiency
final withholding tax - trust assessments for fiscal years ending June 30, 1996 and 1998; and that on June
29, 2007, it paid the basic taxes in the amounts of P4,187,683.27 and P6,097,825.03 for the said fiscal
years, respectively. 11 Asiatrust also claimed that on March 6, 2008, it availed of the provisions of
Republic Act (RA) No. 9480, otherwise known as the Tax Amnesty Law of 2007.
On January 20, 2009, the CTA Division rendered a Decision partially granting the Petition. The CTA
Division declared void the tax assessments for fiscal year ending June 30, 1996 for having been issued
beyond the three-year prescriptive period. However, due to the failure of Asiatrust to present
documentary and testimonial evidence to prove its availment of the Tax Abatement Program and the
Tax Amnesty Law, the CTA Division affirmed the deficiency DST- Special Savings Account (SSA)
assessments for the fiscal years ending June 30, 1997 and 1998 and the deficiency DST - Interbank Call
Loans (IBCL) and deficiency final withholding tax - trust assessments for fiscal year ending June 30,
1998, in the total amount of ₱142,777,785.91.
Asiatrust filed a Motion for Reconsideration attaching photocopies of its application for abatement and
deposit slips as evidence. The CIR on the other hands filed a Motion for Partial Reconsideration of the
assesments finding prescription and cancellation of notices. The CTA En Banc denied both appeals
hence the instant case.
ISSUE/S
1. WON Asiatrust‘s application for tax abatement is deemed approved.
2. WON the CTA En Banc committed error when it dismissed CIR‘s petition for review on the
ground that it failed to timely file a motion for reconsideration or new trial with the division.
HELD:
1. Based on the guidelines, the last step in the tax abatement process is the issuance of the
termination letter. The presentation of the termination letter is essential as it proves that the
taxpayer's application for tax abatement has been approved. Thus, without a termination letter, a
tax assessment cannot be considered closed and terminated.
3
In this case, Asiatrust failed to present a termination letter from the BIR. Instead, it presented a
Certification issued by the BIR to prove that it availed of the Tax Abatement Program and paid
the basic tax. It also attached copies of its BIR Tax Payment Deposit Slips and a Jetter issued by
RDO Nacar. These documents, however, do not prove that Asiatrust's application for tax
abatement has been approved. If at all, these documents only prove Asiatrust's payment of basic
taxes, which is not a ground to consider its deficiency tax assessment closed and terminated.
Since no tennination letter has been issued by the BIR, there is no reason for the Court to
consider as closed and terminated the tax assessment on Asiatrust's final withholding tax for
fiscal year ending June 30, 1998. Asiatrust's application for tax abatement will be deemed
approved only upon the issuance of a tem1ination letter, and only then will the deficiency tax
assessment be considered closed and terminated. However, in case Asiatrust's application for tax
abatement is denied, any payment made by it would be applied to its outstanding tax liability. For
this reason, Asiatrust's allegation of double taxation must also fail.
2. SECTION 1. Review of cases in the Court en banc. - In cases falling under the exclusive appellate
jurisdiction of the Court en bane, the petition for review of a decision or resolution of the Court
in Division must be preceded by the filing of a timely motion for reconsideration or new trial
with the Division.
Thus, in order for the CTA En Banc to take cognizance of an appeal via a petition for review, a
timely motion for reconsideration or new trial must first be filed with the CTA Division that
issued the assailed decision or resolution. Failure to do so is a ground for the dismissal of the
appeal as the word "must" indicates that the filing of a prior motion is mandatory, and not
merely directory.
The same is true in the case of an amended decision. Section 3, Rule 14 of the same rules defines
an amended decision as "[a]ny action modifying or reversing a decision of the Court en bane or
in Division." As explained in CE Luzon Geothermal Power Company, Inc. v. Commissioner of Internal
Revenue, an amended decision is a different decision, and thus, is a· proper subject of a motion
for reconsideration.
In this case, the CIR's failure to move for a reconsideration of the Amended Decision of the
CTA Division is a ground for the dismissal of its Petition for Review before the CTA En
Banc. Thus, the CTA En .Banc did not err in denying the CIR's appeal on procedural grounds.
Due to this procedural lapse, the Amended Decision has attained finality insofar as the CIR is
concerned.
Medicard Philippines, INC., vs. Commissioner of Internal Revenue

G.R. No. 222743 April 5, 2017
DOCTRINES OF THE CASE:
The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross
receipts for VAT purposes - Before the Court, the parties were one in submitting the legal issue of whether the amounts
MEDICARD earmarked, corresponding to 80% of its enrollment fees, and paid to the medical service providers should
form part of its gross receipt for VAT purposes, after having paid the VAT on the amount comprising the 20%. It is
significant to note in this regard that MEDICARD established that upon receipt of payment of membership fee it actually
issued two official receipts, one pertaining to the VATable portion, representing compensation for its services, and the other
4
represents the non-vatable portion pertaining to the amount earmarked for medical utilization.: Therefore, the absence of an
actual and physical segregation of the amounts pertaining to two different kinds of fees cannot arbitrarily disqualify
MEDICARD from rebutting the presumption under the law and from proving that indeed services were rendered by its
healthcare providers for which it paid the amount it sought to be excluded from its gross receipts.
FACTS
MEDICARD is a Health Maintenance Organization (HMO) that provides prepaid health and
medical insurance coverage to its clients. Individuals enrolled in its health care programs pay an annual
membership fee and are entitled to various preventive, diagnostic and curative medical services provided
by duly licensed physicians, specialists and other professional technical staff participating in the group
practice health delivery system at a hospital or clinic owned, operated or accredited by it.
MEDICARD filed its First, Second, and Third Quarterly VAT Returns. Upon finding some
discrepancies between MEDICARD's Income Tax Returns (ITR) and VAT Returns, the CIR informed
MEDICARD. CIR also issued a Preliminary Assessment Notice (PAN) against MEDICARD for
deficiency VAT. A Memorandum was likewise issued recommending the issuance of a Formal
Assessment Notice (FAN) against MEDICARD.
On January 4, 2008, MEDICARD received CIR's FAN dated December 10, 2007 for alleged
deficiency VAT for taxable year 2006 in the total amount of P 96,614,476.69,10 inclusive of penalties.
According to the CIR, the taxable base of HMOs for VAT purposes is its gross receipts without
any deduction under Section 4.108.3(k) of Revenue Regulation (RR) No. 16-2005. Citing Commissioner of
Internal Revenue v. Philippine Health Care Providers, Inc., the CIR argued that since MEDICARD does not
actually provide medical and/or hospital services, but merely arranges for the same, its services are not
VAT exempt.
MEDICARD argued that: (1) the services it render is not limited merely to arranging for the
provision of medical and/or hospital services by hospitals and/or clinics but include actual and direct
rendition of medical and laboratory services; in fact, its 2006 audited balance sheet shows that it owns x-
ray and laboratory facilities which it used in providing medical and laboratory services to its members; (2)
out of the ₱.9B membership fees, ₱319M was received from clients that are registered with the
Philippine Export Zone Authority (PEZA) and/or Bureau of Investments; (3) the processing fees
amounting to ₱1.5 Million should be excluded from gross receipts because P5.6 Million of which
represent advances for professional fees due from clients which were paid by MEDICARD while the
remainder was already previously subjected to VAT; (4) the professional fees in the amount of P1M
should also be excluded because it represents the amount of medical services actually and directly
rendered by MEDICARD and/or its subsidiary company; and xx
CIR issued a Tax Verification Notice authorizing Revenue Officer to verify the supporting
documents of MEDICARD's Protest. MEDICARD also submitted additional supporting documentary
evidence in aid of its Protest.
MEDICARD received CIR's Final Decision on Disputed Assessment, denying MEDICARD's

protest.
MEDICARD proceeded to file a petition for review before the CTA. CTA Division rendered a
Decision affirming with modifications the CIR's deficiency VAT assessment. It held that:
5
xx
(4) the amounts that MEDICARD earmarked , and eventually paid to doctors, hospitals and
clinics cannot be excluded from · the computation of its gross receipts under the provisions of
RR No. 4-2007 because the act of earmarking or allocation is by itself an act of ownership and
management over the funds by MEDICARD which is beyond the contemplation of RR No. 4-
2007;
(5) MEDICARD's earnings from its clinics and laboratory facilities cannot be excluded from its
gross receipts because the operation of these clinics and laboratory is merely an incident to
MEDICARD's main line of business as HMO and there is no evidence that MEDICARD
segregated the amounts pertaining to this at the time it received the premium from its members;
and xx
MEDICARD filed a MR but it was denied. Hence, MEDICARD elevated the matter to the CTA en banc.
CTA en banc partially granted the petition only insofar as the 10% VAT rate for January 2006 is
concerned but sustained the findings of the CTA Division in all other matters.
MEDICARD‘s MR denied. Hence, MEDICARD now seeks recourse to this Court via a petition for
review on certiorari.
ISSUE
WON the amounts that Medicard earmarked and eventually paid to the medical service providers should
still form part of its gross receipts for vat purposes.
HELD
Negative. The amounts earmarked and eventually paid by MEDICARD to the medical service providers
do not form part of gross receipts for VAT purposes.
The CTA en banc overlooked that the definition of gross receipts under RR No. 16-2005 merely
presumed that the amount received by an HMO as membership fee is the HMO's compensation for
their services. As a mere presumption, an HMO is, thus, allowed to establish that a portion of the
amount it received as membership fee does NOT actually compensate it but some other person, which
in this case are the medical service providers themselves. It is a well-settled principle of legal
hermeneutics that words of a statute will be interpreted in their natural, plain and ordinary acceptation
and signification, unless it is evident that the legislature intended a technical or special legal meaning to
those words. The Court cannot read the word "presumed" in any other way.
It is notable in this regard that the term gross receipts as elsewhere mentioned as the tax
base under the NIRC does not contain any specific definition. Therefore, absent a statutory
definition, this Court has construed the term gross receipts in its plain and ordinary meaning, that
is, gross receipts is understood as comprising the entire receipts without any
deduction. Congress, under Section 108, could have simply left the term gross receipts similarly
undefined and its interpretation subjected to ordinary acceptation,. Instead of doing so, Congress
limited the scope of the term gross receipts for VAT purposes only to the amount that the
taxpayer received for the services it performed or to the amount it received as advance payment
for the services it will render in the future for another person.
In the proceedings ·below, the nature of MEDICARD's business and the extent of the services
it rendered are not seriously disputed. As an HMO, MEDICARD primarily acts as an intermediary
6
between the purchaser of healthcare services (its members) and the healthcare providers (the doctors,
hospitals and clinics) for a fee. By enrolling membership with MEDICARD, its members will be able to
avail of the pre-arranged medical services from its accredited healthcare providers without the necessary
protocol of posting cash bonds or deposits prior to being attended to or admitted to hospitals or clinics,
especially during emergencies, at any given time. Apart from this, MEDICARD may also directly provide
medical, hospital and laboratory services, which depends upon its member's choice.
Thus, in the course of its business as such, MEDICARD members can either avail of medical
services from MEDICARD's accredited healthcare providers or directly from MEDICARD. In the
former, MEDICARD members obviously knew that beyond the agreement to pre-arrange the healthcare
needs of its members, MEDICARD would not actually be providing the actual healthcare service. Thus,
based on industry practice, MEDICARD informs its would-be member beforehand that 80% of the
amount would be earmarked for medical utilization and only the remaining 20% comprises its
service fee. In the latter case, MEDICARD's sale of its services is exempt from VAT under
Section 109(G).
The CTA's ruling and CIR's Comment have not pointed to any portion of Section 108 of the
NIRC that would extend the definition of gross receipts even to amounts that do not only pertain to the
services to be performed: by another person, other than the taxpayer, but even to amounts that were
indisputably utilized not by MED ICARD itself but by the medical service providers.
For this Court to subject the entire amount of MEDICARD's gross receipts without exclusion,
the authority should have been reasonably founded from the language of the statute. That language is
wanting in this case. In the scheme of judicial tax administration, the need for certainty and predictability
in the implementation of tax laws is crucial. Our tax authorities fill in the details that Congress may not
have the opportunity or competence to provide. The regulations these authorities issue, are relied upon
by taxpayers, who are certain that these will be followed by the courts. Courts, however, will not uphold
these authorities' interpretations when dearly absurd, erroneous or improper. The CIR's interpretation of
gross receipts in the present case is patently erroneous for lack of both textual and non-textual support.
As to the CIR's argument that the act of earmarking or allocation is by itself an act of ownership
and management over the funds, the Court does not agree. On the contrary, it is MEDICARD's act of
earmarking or allocating 80% of the amount it received as membership fee at the time of
payment that weakens the ownership imputed to it. By earmarking or allocating 80% of the
amount, MEDICARD unequivocally recognizes that its possession of the funds is not in the
concept of owner but as a mere administrator of the same. For this reason, at most, MEDICARD's
right in relation to these amounts is a mere inchoate owner which would ripen into actual ownership if,
and only if, there is underutilization of the membership fees at the end of the fiscal year. Prior to that,
MEDICARD is bound to pay from the amounts it had allocated as an administrator once its members
avail of the medical services of MEDICARD's healthcare providers.
Before the Court, the parties were one in submitting the legal issue of whether the amounts
MEDICARD earmarked, corresponding to 80% of its enrollment fees, and paid to the medical service
providers should form part of its gross receipt for VAT purposes, after having paid the VAT on the
amount comprising the 20%. It is significant to note in this regard that MEDICARD established that
upon receipt of payment of membership fee it actually issued two official receipts, one
pertaining to the VATable portion, representing compensation for its services, and the other
represents the non-vatable portion pertaining to the amount earmarked for medical utilization.
Therefore, the absence of an actual and physical segregation of the amounts pertaining to two different
kinds of fees cannot arbitrarily disqualify MEDICARD from rebutting the presumption under the law
7
and from proving that indeed services were rendered by its healthcare providers for which it paid the
amount it sought to be excluded from its gross receipts.
With the foregoing discussions on the nullity of the assessment on due process grounds and
violation of the NIRC, on one hand, and the utter lack of legal basis of the CIR's position on the
computation of MEDICARD's gross receipts, the Court finds it unnecessary, nay useless, to discuss the
rest of the parties' arguments and counter-arguments.
In fine, the foregoing discussion suffices for the reversal of the assailed decision and resolution
of the CTA en banc grounded as it is on due process violation. The Court likewise rules that for purposes
of determining the VAT liability of an HMO, the amounts earmarked and actually spent for medical
utilization of its members should not be included in the computation of its gross receipts.
Metropolitan Bank & Trust Company vs. CIR

G.R. No. 182582 April 17, 2017
As aptly put in CIR v.TMX Sales, Inc., "payment of quarterly income tax should only be considered [as] mere
installments of the annual tax due. These quarterly tax payments which are computed based on the cumulative figures of
gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the
annual income tax due, to be adjusted at the end of the calendar or fiscal year. x x x Consequently, the two-year
prescriptive period x x x should be computed from the time of filing of the Adjustment Return or Annual Income Tax
Return and final payment of income tax." Verily, since quarterly income tax payments are treated as mere "advance
payments" of the annual corporate income tax, there may arise certain situations where such "advance payments" would
cover more than said corporate taxpayer's entire income tax liability for a specific taxable year. Thus, it is only logical to
reckon the 2-year prescriptive period from the time the Final Adjustment Return or the Annual Income Tax Return was
filed, since it is only at that time that it would be possible to determine whether the corporate taxpayer had paid an amount
exceeding its annual income tax liability.
XX final withholding taxes are considered as full and final payment of the income tax due, and thus, are not subject to any
adjustments. Thus, the two (2)-year prescriptive period commences to run from the time the refund is ascertained, i.e., the
date such tax was paid, and not upon the discovery by the taxpayer of the erroneous or excessive payment of taxes.
FACTS
Solidbank Corporation (Solidbank) entered into an agreement with Luzon Hydro Corporation
(LHC), whereby the former extended to the latter a foreign currency denominated loan in the principal
amount of US$123,780,000.00 (Agreement). Pursuant to the Agreement, LHC is bound to shoulder all
the corresponding internal revenue taxes required by law to be deducted or withheld on the said loan, as
well as the filing of tax returns and remittance of the taxes withheld to the BIR.
Metrobank acquired Solidbank, and consequently, assumed the latter's rights and obligations
under the aforesaid Agreement.
On March 2, 2001 and October 31, 2001, LHC paid Metro bank the total amounts of
US$1,538,122.17 and US$1,333,268.31, respectively. Pursuant to the Agreement, LHC withheld, and
eventually paid to the BIR, the 10% final tax on the interest portions of the aforesaid payments, on the
8
same months that the respective payments were made to petitioner. In sum, LHC remitted a total
ofUS$106,178.69, or ₱5,296,773.05.
According to Metrobank, it mistakenly remitted the aforesaid amounts to the BIR as well when
they were inadvertently included in its own Monthly Remittance Returns of Final Income Taxes
Withheld for the months of March 2001 and October 2001. Thus, on December 27, 2002, it filed a letter
to the BIR requesting for the refund thereof. Thereafter and in view of respondent, the CIR‘s inaction,
Metrobank filed its judicial claim for refund via a petition for review filed before the CTA on September
10, 2003.
CTA Division denied Metrobank's claims for refund for lack of merit. It ruled that Metrobank's
claim relative to the March 2001 final tax was filed beyond the 2-year prescriptive period. It pointed out
that since Metrobank remitted such payment on April 25, 2001, the latter only had until April 25, 2003 to
file its administrative and judicial claim for refunds. In this regard, while Metro bank filed its
administrative claim well within the afore said period, or on December 27, 2002, the judicial claim was
filed only on September 10, 2003. Hence, the right to claim for such refund has prescribed. Xx
Metrobank‘s MR was partially granted xx However, it affirmed the denial of the claim relative to
its March 2001 final tax on the ground of prescription. Aggrieved, Metrobank filed a petition for partial
review before the CTA En Banc.
CTA En Banc affirmed the CTA Division's ruling. It held that since Metrobank's March 2001
final tax is in the nature of a final withholding tax, the two (2)-year prescriptive period was correctly
reckoned by the CTA Division from the time the same was paid on April 25, 2001. As such, Metro
bank's claim for refund had already prescribed as it only filed its judicial claim on September 10, 2003.
Hence, this petition.
Metrobank insists that the filing of its administrative and judicial claims on December 27, 2002
and September 10, 2003, respectively, were well-within the 2-year prescriptive period. Citing ACCRA
Investments Corporation v. Court of Appeals, CIR v. TMX Sales, Inc., CIR v. Philippine American Life Insurance,
Co., and CIR v. CDCP Mining Corporation, Metrobank contends that the aforesaid prescriptive period
should be reckoned not from April 25, 2001 when it remitted the tax to the BIR, but rather, from
the time it filed its Final Adjustment Return or Annual Income Tax Return for the taxable year
of 2001, or in April 2002, as it was only at that time when its right to a refund was ascertained.
ISSUE
WON the CTA En Banc correctly held that Metrobank's claim for refund relative to its March 2001 final
tax had already prescribed.
HELD
Affirmative.
Section 229 of the same Code provides for the proper procedure in order to claim for such
refunds, to wit:
Section 229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty
claimed to have been collected without authority, or of any sum alleged to have been
9
excessively or in any manner wrongfully collected, until a claim for refund or credit has
been duly filed with the Commissioner; but such suit or proceeding may be maintained,
whether or not such tax, penalty, or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of two (2) years
from the date of payment of the tax or penalty regardless of any supervening cause that
may arise after payment: Provided, however, That the Commissioner may, even without a written
claim therefor, refund or credit any tax, where on the face of the return upon which payment
was made, such payment appears clearly to have been erroneously paid. (Emphases and
underscoring supplied)
As may be gleaned from the foregoing provisions, a claimant for refund must first file an
administrative claim for refund before the CIR, prior to filing a judicial claim before the CTA.
Notably, both the administrative and judicial claims for refund should be filed within the two (2)-
year prescriptive period indicated therein, and that the claimant is allowed to file the latter even
without waiting for the resolution of the former in order to prevent the forfeiture of its claim
through prescription. In this regard, case law states that "the primary purpose of filing an
administrative claim [is] to serve as a notice of warning to the CIR that court action would follow unless
the tax or penalty alleged to have been collected erroneously or illegally is refunded. To clarify, Section
229 of the Tax Code - then Section 306 of the old Tax Code - however does not mean that the taxpayer
must await the final resolution of its administrative claim for refund, since doing so would be
tantamount to the taxpayer's forfeiture of its right to seek judicial recourse should the 2-year prescriptive
period expire without the appropriate judicial claim being filed."
The cases cited by Metrobank in its defense involved corporate income taxes, in which the
corporate taxpayer is required to file and pay income tax on a quarterly basis, with such payments being
subject to an adjustment at the end of the taxable year. As aptly put in CIR v.TMX Sales, Inc., "payment
of quarterly income tax should only be considered [as] mere installments of the annual tax due. These
quarterly tax payments which are computed based on the cumulative figures of gross receipts and
deductions in order to arrive at a net taxable income, should be treated as advances or portions of the
annual income tax due, to be adjusted at the end of the calendar or fiscal year. x x x Consequently, the
two-year prescriptive period x x x should be computed from the time of filing of the Adjustment
Return or Annual Income Tax Return and final payment of income tax." Verily, since quarterly
income tax payments are treated as mere "advance payments" of the annual corporate income tax, there
may arise certain situations where such "advance payments" would cover more than said corporate
taxpayer's entire income tax liability for a specific taxable year. Thus, it is only logical to reckon the 2-
year prescriptive period from the time the Final Adjustment Return or the Annual Income Tax
Return was filed, since it is only at that time that it would be possible to determine whether the
corporate taxpayer had paid an amount exceeding its annual income tax liability.
On the other hand, the tax involved in this case is a 10% final withholding tax on
Metrobank's interest income on its foreign currency denominated loan extended to LHC. In this
regard, Section 2.57 (A) of Revenue Regulations No. 02-98 explains the characterization of taxes of this
nature, to wit:
Section 2.57. Withholding of Tax at Source
(A) Final Withholding Tax. - Under the final withholding tax system[,] the amount of income
tax withheld by the withholding agent is constituted as a full and final payment of the
income tax due from the payee on the said income. The liability for payment of the tax rests
10
primarily on the payor as a withholding agent. Thus, in case of his failure to withhold the tax or
in case of under withholding, the deficiency tax shall be collected from the payor/withholding
agent. The payee is not required to file an income tax return for the particular income.
xx
From the foregoing, it may be gleaned that final withholding taxes are considered as full and
final payment of the income tax due, and thus, are not subject to any adjustments. Thus, the two
(2)-year prescriptive period commences to run from the time the refund is ascertained, i.e., the date
such tax was paid, and not upon the discovery by the taxpayer of the erroneous or excessive payment
of taxes.
In the case at bar, it is undisputed that Metrobank's final withholding tax liability in March 2001
was remitted to the BIR on April 25, 2001. As such, it only had until April 25, 2003 to file its
administrative and judicial claims for refund. However, while Metrobank's administrative claim was filed
on December 27, 2002, its corresponding judicial claim was only filed on September 10, 2003.
Therefore, Metrobank's claim for refund had clearly prescribed.
Finally, the Court finds untenable Metrobank's resort to the principle of solutio indebiti in support
of its position. In CIR v. Manila Electric Company, the Court rejected the application of said principle to tax
refund cases, viz.:
In this regard, petitioner is misguided when it relied upon the six (6)-year prescriptive period for
initiating an action on the ground of quasi contract or solutio indebiti under Article 1145 of the
New Civil Code. There is solutio indebiti where: (1) payment is made when there exists no binding
relation between the payor, who has no duty to pay, and the person who received the payment;
and (2) the payment is made through mistake, and not through liberality or some other
cause. Here, there is· a binding relation between petitioner as the taxing authority in this
jurisdiction and respondent MERALCO which is bound under the law to act as a
withholding agent of NORD/LB Singapore Branch, the taxpayer. Hence, the first
element of solutio indebiti is lacking. Moreover, such legal precept is inapplicable to the
present case since the Tax Code, a special law, explicitly provides for a mandatory
period for claiming a refund for taxes erroneously paid.
Tax refunds are based on the general premise that taxes have either been erroneously or
excessively paid. Though the Tax Code recognizes the right of taxpayers to request the return of
such excess/erroneous payments from the government, they must do so within a prescribed
period. Further, "a taxpayer must prove not only his entitlement to a refund, but also his
compliance with the procedural due process as nonobservance of the prescriptive periods within
which to file the administrative and the judicial claims would result in the denial of his
claim."35 (Emphasis and underscoring supplied)
In sum, the CTA Division and CT A En Banc correctly ruled that Metrobank's claim for refund in
connection with its final withholding tax incurred in March 2001 should be denied on the ground of
prescription.
11
MITSUBISHI CORPORATION - MANILA BRANCH, v COMMISSIONER OF

INTERNAL REVENUE,
GR No. 175772, June 5, 2017, FIRST DIVISION (Perlas-Bernabe,J.)
DOCTRINE OF THE CASE
The Philippine Government's assumption of "all fiscal levies and taxes," which includes the subject taxes, is clearly a form
of concession given to Japanese suppliers, contractors or consultants in consideration of the OECF Loan, which proceeds
were used for the implementation of the Project. Therefore, considering that petitioner paid the subject taxes in the aggregate
amount of ₱52,612,812.00, which it was not required to pay, the BIR erroneously collected such amount. Accordingly,
petitioner is entitled to its refund.
FACTS
The governments of Japan and the Philippines executed an Exchange of Notes, whereby the
former agreed to extend a loan amounting to Forty Billion Four Hundred Million Japanese Yen to the
latter through the then Overseas Economic Cooperation Fund (OECF, now Japan Bank for
International Cooperation) for the implementation of the Calaca II Coal-Fired Thermal Power Plant
Project (Project). The Philippine Government, by itself or through its executing agency, undertook to
assume all taxes imposed by the Philippines on Japanese contractors engaged in the Project. Meanwhile,
the National Power Corporation (NPC), as the executing government agency, entered into a contract
with Mitsubishi Corporation for the engineering, supply, construction, installation, testing, and
commissioning of a steam generator, auxiliaries, and associated civil works for the Project (Contract).
The Contract's foreign currency portion was funded by the OECF loans. The Contract indicated NPC' s
undertaking to pay any and all forms of taxes that are directly imposable under the Contract.
Petitioner filed its Income Tax Return for the fiscal year that ended on March 31, 1998 with the
Bureau of Internal Revenue. Petitioner included in its income tax due the amount of ₱44,288,712.00,
representing income from the OECF-funded portion of the Project. On the same day, petitioner also
filed its Monthly Remittance Return of Income Taxes Withheld and remitted ₱8,324,100.00 as BPRT for
branch profits remitted to its head office in Japan out of its income for the fiscal year that ended on
March 31, 1998 .
Petitioner filed with the respondent Commissioner on Internal Revenue (CIR) an administrative claim
for refund of Fifty Two Million Six Hundred Twelve Thousand, Eight Hundred Twelve Pesos
(P52,612,812.00), representing the erroneously paid amounts of P44,288,712.00 as income tax and
₱8,324,100.00 as BPRT corresponding to the OECF-funded portion of the Project. To suspend the
running of the two-year period to file a judicial claim for refund, petitioner filed a petition for review
before the CTA.
The CTA Division granted the petition and ordered the CIR to refund to petitioner the amounts it
erroneously paid as income tax and BPRT. The CTA En Banc reversed the CTA Division's rulings and
declared that petitioner is not entitled to a refund of the taxes it paid to the CIR.
ISSUES
Is the petitioner entitled to a refund? If in the affirmative, from which government entity should
the refund be claimed?
12
RULING
YES. The Petitioner is entitled to a refund. In this case, it is fairly apparent that the subject taxes
in the amount of ₱52,612,812.00 was erroneously collected from petitioner, considering that the
obligation to pay the same had already been assumed by the Philippine Government by virtue of its
Exchange of Notes with the Japanese Government. Case law explains that an exchange of notes is
considered as an executive agreement, which is binding on the State even without Senate concurrence.
To "assume" means "[t]o take on, become bound as another is bound, or put oneself in place of
another as to an obligation or liability." This means that the obligation or liability remains, although the
same is merely passed on to a different person. In this light, the concept of an assumption is therefore
different from an exemption, the latter being the "[f]reedom from a duty, liability or other requirement"
or "[a] privilege given to a judgment debtor by law, allowing the debtor to retain [a] certain property
without liability."Thus, contrary to the CTA En Bane's opinion, the constitutional provisions on tax
exemptions would not apply.
Thus, in line with the tax assumption provision under the Exchange of Notes, Article VIII (B)
(1) of the Contract states that NPC shall pay any and all forms of taxes that are directly imposable under
the Contract.
The Philippine Government's assumption of "all fiscal levies and taxes," which includes the
subject taxes, is clearly a form of concession given to Japanese suppliers, contractors or consultants in
consideration of the OECF Loan, which proceeds were used for the implementation of the Project.
Therefore, considering that petitioner paid the subject taxes in the aggregate amount of ₱52,612,812.00,
which it was not required to pay, the BIR erroneously collected such amount. Accordingly, petitioner is
entitled to its refund.
To reiterate, petitioner's entitlement to the refund is based on the tax assumption provision in
the Exchange of Notes. Given that this is a case of tax assumption and not an exemption, the BIR is,
therefore, not without recourse; it can properly collect the subject taxes from the NPC as the proper
party that assumed petitioner's tax liability.
Marubeni Philippines Corporation Vs. Commissioner of Internal Revenue

G.R. No. 198485, June 5, 2017, FIRST DIVISION (Caguioa, J.)
In fine, Marubeni's judicial claim for refund was, as correctly found by the CTA En Banc, premature and the CTA was
devoid of any jurisdiction over the petition for review because of Marubeni's failure to strictly comply with the 120+30 day
periods required by Section 112 (C) of the 1997 Tax Code.
FACTS
Marubeni is a domestic corporation duly registered with the Bureau of Internal Revenue (BIR) as
a Value-Added Tax (VAT) taxpayer. On April 25, 2000, Marubeni filed its Quarterly VAT Return for the
1st quarter of Calendar Year (CY) 2000 with the BIR. Marubeni filed with the BIR a written claim for a
refund and/or the issuance of a TCC, which it later amended on reducing its claim to ₱3,887,419.31. On
the same date, Marubeni filed a petition for review before the CTA claiming a refund and/or issuance
ofa TCC in the amount of ₱3,887,419.31. On December 8, 2008, Marubeni filed its Memorandum and
on January 15, 2009, the case was deemed submitted for decision.
13
The CTA Second Division dismissed Marubeni's judicial claim. The CTA Second Division ruled
that following Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, Marubeni timely filed its
administrative claim for refund and/or the issuance of a TCC on March 27, 2002, which was within the
two-year period from the close of the 1st quarter of CY 2000, but that Marubeni's judicial claim for
refund and/or issuance of TCC that was filed on April 25, 2002 (or the same day Marubeni amended its
administrative claim for a refund and/or the issuance of a TCC to ₱3,887,419.31) was late because this
should have been filed also within the two-year period from the close of the 1st quarter of CY 2000.
Marubeni moved for reconsideration, but this was denied by the CT A Second Division in its Resolution
dated October 20, 2009.
The CTA En Banc rendered a Decision affirming with modification the Decision and Resolution
of the CTA Second Division. The CTA En Banc agreed with the CTA Second Division that Marubeni
timely filed its administrative claim for refund. But as to Marubeni' s judicial claim for refund, the CTA
En Banc ruled that following Section 112 (D) of the National Internal Revenue Code (1997 Tax Code)
and the Court's ruling in Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. , the filing of
the petition for review with the CTA was premature. According to the CTA En Banc, Marubeni should
have filed its petition for review with the CTA 30 days from receipt of the decision of the CIR denying
the claim or after the expiration of the 120-day period from the filing of the administrative claim with the
CIR.
Marubeni moved for reconsideration but the CTA En Banc denied this in a Resolution
ISSUE
1.) Did Marubeni timely filed its claim?
2.) Did the CIR waived the defense of non-exhaustion of administrative remedies.
RULING
1.) NO. Section 112(C) expressly grants the Commissioner 120 days within which to decide the
taxpayer's claim. The law is clear, plain, and unequivocal: "x x x the Commissioner shall grant a refund or
issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the
date of submission of complete documents." Following the verba legis doctrine, this law must be applied
exactly as worded since it is clear, plain, and unequivocal. The taxpayer cannot simply file a petition with
the CT A without waiting for the Commissioner's decision within the 120-day mandatory and
jurisdictional period. The CTA will have no jurisdiction because there will be no "decision" or "deemed a
denial" decision of the Commissioner for the CT A to review.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the
decision or inaction of the Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the
claim or after the expiration of the one hundred twenty dayperiod, appeal the decision or the
unacted claim with the Court of Tax Appeals. (Emphasis supplied)
As this law states, the taxpayer may, if he wishes, appeal the decision of the Commissioner to the
CTA within 30 days from receipt of the Commissioner's decision, or if the Commissioner does not act
on the taxpayer's claim within the 120-day period, the taxpayer may appeal to the CTA within 30 days
from the expiration of the 120-day period. Section 112(A) and (C) must be interpreted according to its
clear, plain, and unequivocal language. The taxpayer can file his administrative claim for refund or credit
at anytime within the two-year prescriptive period. If he files his claim on the last day of the two-year
prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing
14
to decide the claim. If the Commissioner decides the claim on the 120th day, or does not decide it on
that day, the taxpayer still has 30 days to file his judicial claim with the CTA. This is not only the plain
meaning but also the only logical interpretation of Section l 12(A) and (C).
Marubeni therefore failed to comply with the mandatory and jurisdictional requirement of
Section 112 (C) when it filed its petition for review with the CTA on April 25, 2002, or just 29 days after
filing its administrative claim before the BIR on March 27, 2002.
In fine, Marubeni's judicial claim for refund was, as correctly found by the CTA En Banc, premature and
the CTA was devoid of any jurisdiction over the petition for review because of Marubeni's failure to
strictly comply with the 120+30 day periods required by Section 112 (C) of the 1997 Tax Code. To
recall, Marubeni filed its administrative claim on March 27, 2002. The CIR had 120 days from that date
within which to rule on that administrative claim. But within 29 days from March 27, 2002, or on April
25, 2002, Marubeni already filed its petition for review with the CTA.
2. NO. The failure to observe the 120 days prior to filing of a judicial claim for refund is not a mere
non-exhaustion of administrative remedies but is jurisdictional in nature. Considering further that the 30-
day period to appeal to the CT A is dependent on the 120-day period, both periods are hereby rendered
jurisdictional.1âwphi1 Failure to observe 120 days prior to the filing of a judicial claim is not a mere non-
exhaustion of administrative remedies, but is likewise considered jurisdictional. The period of 120 days is
a prerequisite for the commencement of the 30-day period to appeal to the CTA. In both instances,
whether the CIR renders a decision (which must be made within 120 days) or there was inaction, the
period of 120 days is material. Accordingly, the CIR's failure to raise the issue of compliance with the
120+30 day periods in its Answer to Marubeni's petition for review cannot be deemed a waiver of such
objection.
MINDANAO SHOPPING DESTINATION CORPORATION v. RODRIGO R. DUTERTE

[ GR No. 211093, Jun 06, 2017 ]
Section 191 has no bearing in the instant case because what actually took place in the questioned Ordinance was the
correction of an erroneous classification, and not, an upward adjustment or increase of tax rates. The fact that there occurred
an increase in payment due to the reclassification is of no moment, because: (1) reclassification is not prohibited; (2)
reclassification was made to effect a correction; and (3) the taxes imposed upon the reclassified taxpayers, was not amended
or increased from that stated in the Local Government Code. And, it is worthwhile to mention that petitioners have not
denied that they are engaged in the retail business, hence, the reclassification was right, proper and legal.
FACTS:
Respondent Sangguniang Panglungsod of Davao City (Sanggunian), enacted an ordinance imposing a
graduated business tax where retailers would have to pay 1.25% of the gross sales/receipts exceeding
P400,000.00. Under the old tax ordinance of Davao City, Ordinance No. 230, Series of 1990, wholesalers
and retailers were grouped as one, thus, the tax base and tax rate imposed upon retailers were the same
as that imposed upon wholesalers. Subsequently, with the implementation of Republic Act No. 7160,
otherwise known as the Local Government Code of the Philippines, the latter authorized a difference in
the tax treatment between wholesale and retail businesses. Where before under the old tax ordinance,
Davao City retailers only paid ½ of 1% of the gross sales/receipts exceeding P2,000,000.00, now under
the new tax ordinance, retailers would have to pay 1.25% of the gross sales/receipts exceeding
P400,000.00. Petitioners lamented that the assailed Ordinance increased the tax rate on them, as retailers,
by more than the maximum allowable rate of 0.15%, from 50% of 1% (0.5%) of the gross receipts to
15
1.5% (now, 1.25%). of the gross receipts, thus, violating Section 191 in relation to Sections 143 and 151
of the Code.
ISSUE:
Whether or not the ordinance is constitutional?
RULING:
YES
Firstly, Section 191 of the LGC presupposes that the following requirements are present for it to apply,
to wit: (i) there is a tax ordinance that already imposes a tax in accordance with the provisions of the
LGC; and (ii) there is a second tax ordinance that made adjustment on the tax rate fixed by the first tax
ordinance. In the instant case, both elements are not present.
As to the first requirement, it cannot be said that the old tax ordinance (first ordinance) was imposed in
accordance with the provisions of the LGC. To reiterate, the old tax ordinance of Davao City was
enacted before the LGC came into law. Thus, the assailed new ordinance, Davao City Ordinance No.
158-05, Series of 2005 was actually the first to impose the tax on retailers in accordance with the
provisions of the LGC.
As to the second requirement, the new tax ordinance (second ordinance) imposed the new tax base and
the new tax rate as provided by the LGC for retailers. It must be emphasized that a tax has two
components, a tax base and a tax rate. However, Section 191 contemplates a situation where there is
already an existing tax as authorized under the LGC and only a change in the tax rate would be effected.
Again, the new ordinance Davao City provided, not only a tax rate, but also a tax base that were
appropriate for retailers, following the parameters provided under the LGC. Suffice it to say, the second
requirement is absent. Thus, given the absence of the above two requirements for the application of
Section 191 of the LGC, there is no reason for the latter to cover a situation where the ordinance, as in
this case, was an initial implementation of R.A. 7160.
Secondly, Section 191 of the LGC will not apply because with the assailed tax ordinance, there is no
outright or unilateral increase of tax to speak of. The resulting increase in the tax rate for retailers was
merely incidental. When Davao City enacted the assailed ordinance, it merely intended to rectify the
glaring error in the classification of wholesaler and retailer in the old ordinance. Petitioners are retailers
as contemplated by the LGC. Petitioners never disputed their classification as retailers. Thus, being
retailers, they are subject to the tax rate provided under Section 69 (d) and not under Section 69 (b) of
the assailed ordinance. In effect, under the assailed ordinance as amended, petitioners as retailers are now
assessed at the tax rate of one and one-fourth (1 ¼%) percent on their gross sales and not the fifty-five
(55%) percent of one (1%) percent on their gross sales since the latter tax rate is only applicable to
wholesalers, distributors, or dealers. The assailed ordinance merely imposes and collects the proper and
legal tax due to the local government pursuant to the LGC. While it may appear that there was indeed a
significant adjustment on the tax rate of retailers which affected the petitioners, it must, however, be
emphasized that the adjustment was not by virtue of a unilateral increase of the tax rate of petitioners as
retailers, but again, merely incidental as a result of the correction of the classification of wholesalers and
retailers and its corresponding tax rates in accordance with the provisions of the LGC.
Thirdly, it must be pointed out that the limitation under Section 191 of the LGC was provided to guard
against possible abuse of the LGU's power to tax. In this case, however, strictly speaking, the new tax
rate for petitioners as retailers under the assailed ordinance is not a case where there was an imposition
of a new tax rate, rather there is merely a rectification of an erroneous classification of taxpayers and tax
rates, i.e., of grouping retailers and wholesalers in one category, and their corresponding rates. The
16
amendment of the old tax ordinance was not intended to abuse the LGU's taxing powers but merely
sought to impose the rates as provided under the LGC as in fact the tax rate imposed was even lower
than the rate authorized by the LGC. In effect, the assailed ordinance merely corrected the old ordinance
so that it will be in accord with the LGC. To rule otherwise is tantamount to pronouncing that Davao
City can no longer correct the apparent error in classifying wholesaler and retailer in the same category
under its old tax ordinance. Such proposition runs counter to the well-entrenched principle that estoppel
does not apply to the government, especially on matters of taxation. Taxes are the nation's lifeblood
through which government agencies continue to operate and with which the State discharges its
functions for the welfare of its constituents.
However, while Davao City may rectify and amend their old tax ordinance in order to give full
implementation of the LGC, it, however, cannot impose a straight 1.25% at its initial implementation of
the LGC in so far as retailers are concerned. Davao City should, at the very least, start with 1% (the
minimum tax rate) as provided under Section 143 (d) of the LGC. While Davao City cannot be faulted in
failing to immediately implement the LGC, petitioners cannot likewise be unjustly prejudiced by its initial
implementation of the LGC. It is but fair and reasonable that Davao City at its initial implementation of
the LGC, impose the tax rates as provided in Section 143. It is only then that the imposition of the tax
rate on retailers will not be considered as confiscatory or oppressive, considering that the reclassification
of wholesaler and retailer and their corresponding tax rate being observed now is in accord with the
LGC.
CIR v. SEMIRARA MINING CORPORATION

[ GR No. 202922, Jun 19, 2017 ]
Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to its claim for tax credit or
refund of excess unutilized excess VAT. This holds especially true when the application for tax credit or refund of excess
unutilized excess VAT has arrived at the judicial level.
FACTS:
Semirara Mining Corporation, a duly registered and existing domestic corporation as a non-VAT
enterprise, is engaged in coal mining business. SMC sells its coal production to National Power
Corporation (NPC), a government-owned and controlled corporation, in accordance with the duly
executed Coal Supply Agreement. SMC has been selling coal to NPC for years without paying VAT
pursuant to the exemption granted under Section 16 of PD No. 972. However, after Republic Act (RA)
No. 9337, which amended certain provisions of the National Internal Revenue Code (NIRC) of 1997, as
amended, took effect on July 1, 2005, NPC started to withhold a tax of five percent (5%) representing
the final withholding VAT on SMC's coal billings pursuant to Section 114(C) of the same law, on the
belief that the sale of coal by SMC was no longer exempt from VAT. Pursuant to a BIR ruling, BIR
sustained its position that its coal to NPC was still exempt from VAT.
The CIR insists that SMC's claim for VAT refund should be denied for failure to submit, at the
administrative level, the required supporting documents prescribed under RMO No. 53-98.
ISSUE:
Whether or not the failure of the taxpayer to comply with the requirements listed under RMO
No. 53-98 is not fatal to its claim for tax credit or refund of excess unutilized excess VAT?
RULING:
NO.
17
RMO No. 53-98 is addressed to internal revenue officers and employees, for purposes of equity and
uniformity, to guide them as to what documents they may require taxpayers to present upon audit of
their tax liabilities. Nothing stated in the issuance would show that it was intended to be a benchmark in
determining whether the documents submitted by a taxpayer are actually complete to support a claim for
tax credit or refund of excess unutilized excess VAT. As expounded in Commissioner of Internal
Revenue v. Team Sual Corporation (formerly Mirant Sual Corporation):
The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the NIRC,
RR 3-88 or RMO 53-98 itself that requires submission of the complete documents enumerated
in RMO 53-98 for a grant of a refund or credit of input VAT. The subject of RMO 53-98 states
that it is a "Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax
Liabilities x x x." In this case, TSC was applying for a grant of refund or credit of its input tax.
There was no allegation of an audit being conducted by the CIR. Even assuming that RMO 53-
98 applies, it specifically states that some documents are required to be submitted by the
taxpayer "if applicable."
Moreover, if TSC indeed failed to submit the complete documents in support of its application,
the CIR could have informed TSC of its failure, consistent with Revenue Memorandum Circular
No. (RMC) 42-03. However, the CIR did not inform TSC of the document it failed to submit,
even up to the present petition. The CIR likewise raised the issue of TSC's alleged failure to
submit the complete documents only in its motion for reconsideration of the CTA Special First
Division's 4 March 2010 Decision. Accordingly, we affirm the CTA EB's finding that TSC filed
its administrative claim on 21 December 2005, and submitted the complete documents in
support of its application for refund or credit of its input tax at the same time.
Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to its claim for
tax credit or refund of excess unutilized excess VAT. This holds especially true when the application for
tax credit or refund of excess unutilized excess VAT has arrived at the judicial level. After all, in the
judicial level or when the case is elevated to the Court, the Rules of Court governs. Simply put, the
question of whether the evidence submitted by a party is sufficient to warrant the granting of its prayer
lies within the sound discretion and judgment of the Court.
CIR v. SEMIRARA MINING CORPORATION

[ GR No. 202922, Jun 19, 2017 ]
Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to its claim for tax credit or
refund of excess unutilized excess VAT. This holds especially true when the application for tax credit or refund of excess
unutilized excess VAT has arrived at the judicial level.
FACTS:
Semirara Mining Corporation, a duly registered and existing domestic corporation as a non-VAT
enterprise, is engaged in coal mining business. SMC sells its coal production to National Power
Corporation (NPC), a government-owned and controlled corporation, in accordance with the duly
executed Coal Supply Agreement. SMC has been selling coal to NPC for years without paying VAT
pursuant to the exemption granted under Section 16 of PD No. 972. However, after Republic Act (RA)
No. 9337, which amended certain provisions of the National Internal Revenue Code (NIRC) of 1997, as
amended, took effect on July 1, 2005, NPC started to withhold a tax of five percent (5%) representing
the final withholding VAT on SMC's coal billings pursuant to Section 114(C) of the same law, on the
belief that the sale of coal by SMC was no longer exempt from VAT. Pursuant to a BIR ruling, BIR
sustained its position that its coal to NPC was still exempt from VAT.
18
ISSUE:
Whether or not the tax exemption granted to SMC provided under Section 16 of PD No. 972
was revoked, withdrawn or repealed expressly or impliedly - by Congress with the enactment of RA No.
9337?
RULING: No.
In furtherance of this policy, Section 16 of PD No. 972 provides various incentives to COC operators,
including tax exemptions, to wit:
SEC. 16. Incentives to Operators. - The provisions of any law to the contrary notwithstanding, a
contract executed under this Decree may provide that the operator shall have the following
incentives:
a) Exemption from all taxes except income tax;
b) Exemption from payment of tariff duties and compensating tax on importation of machinery
and equipment and spare parts and materials required for the coal operations subject to the
following conditions.[41]
As VAT is one of the national internal revenue taxes, it falls within the tax exemptions provided under
PD No. 972.
Section 16 of PD No. 972 was, in turn, incorporated in the terms and conditions of SMC's COC, to wit:
SECTION V - RIGHTS AND OBLIGATIONS OF THE PARTIES

xxxx
5.2 The OPERATOR shall have the following rights:
a) Exemption from all taxes (national and local) except income tax;
It is a fundamental rule in statutory construction that a special law cannot be repealed or modified by a
subsequently enacted general law in the absence of any express provision in the latter law to that
effect. A special law must be interpreted to constitute an exception to the general law in the absence of
special circumstances warranting a contrary conclusion.The repealing clause of RA No. 9337, a general
law, did not provide for the express repeal of PD No. 972, a special law. Section 24 of RA No. 9337
pertinently reads:
SEC. 24. Repealing Clause. - The following laws or provisions of laws are hereby repealed and the
persons and/or transactions affected herein are made subject to the value-added tax subject to
the provisions of Title IV of the National Internal Revenue Code of 1997, as amended:
(A) Section 13 of R.A. No. 6395 on the exemption from value-added tax of the National Power
Corporation (NPC);
(B) Section 6, fifth paragraph of R.A. No. 9136 on the zero VAT rate imposed on the sales of
generated power by generation companies; and
(C) All other laws, acts, decrees, executive orders, issuances and rules and regulations or parts
19
thereof which are contrary to and inconsistent with any provisions of this Act are hereby
repealed, amended or modified accordingly.
Had Congress intended to withdraw or revoke the tax exemptions under PD No. 972, it would have
explicitly mentioned Section 16 of PD No. 972, in the same way that it specifically mentioned Section 13
of RA No. 6395 and Section 6, paragraph 5 of RA No. 9136, as among the laws repealed by RA No.
9337.
The CTA also correctly ruled that RA No. 9337 could not have impliedly repealed PD No. 972.
In Mecano v. Commission on Audit,the Court extensively discussed how repeals by implication operate, to
wit:
There are two categories of repeal by implication. The first is where provisions in the two acts on the
same subject matter are in an irreconcilable conflict. The later act to the extent of the conflict constitutes
an implied repeal of the earlier one. The second is if the later act covers the whole subject of the earlier
one and is clearly intended as a substitute, it will operate to repeal the earlier law.
Implied repeal by irreconcilable inconsistency takes place when the two statutes cover the same subject
matter; they are so clearly inconsistent and incompatible with each other that they cannot be reconciled
or harmonized; and both cannot be given effect, that is, that one law cannot [be] enforced without
nullifying the other.
Comparing the two laws, it is apparent that neither kind of implied repeal exists in this case. RA No.
9337 does not cover the whole subject matter of PD No. 972 and could not have been intended to
substitute the same. There is also no irreconcilable inconsistency or repugnancy between the two laws.
While under RA No. 9337, the "sale or importation of coal and natural gas, in whatever form or state"
was deleted from the list of VAT exempt transactions, Section 7 of the same law reads:
SEC. 7. Section 109 of the same Code, as amended, is hereby further amended to read as
follows:
"SEC. 109. Exempt Transactions. - (1) Subject to the provisions of Subsection (2) hereof, the
following transactions shall be exempt from the value-added tax:
xxxx
"(K) Transactions which are exempt under international agreements to which the Philippines
is a signatory or under special laws, except those under Presidential Decree No. 529;
Verily, as things stand, SMC is exempt from the payment of VAT on the sale of coal produced under its
COC, because Section 16(a) of PD No. 972, a special law, grants SMC exemption from all national taxes
except income tax. Accordingly, SMC is entitled to claim for a refund of the 5% final VAT erroneously
withheld on SMC's coal billings and remitted by NPC to the BIR.
In view of the foregoing, this office hereby rules that since the main object of the COC for which the tax
exemption was granted is the active exploration, development and production of coal resources, SMC's
sales of coal produced by virtue of a COC with EDB remain exempt from VAT pursuant to Section
109(k) of the Tax Code, as amended by R.A. 9337, in relation to PD 972, as amended.
20
PILIPINAS SHELL PETROLEUM CORPORATION v. COMMISSIONER OF CUSTOMS

G.R. NO.195876, 5 December 2016, THIRD DIVISION (Perez, J.)
It is the law itself that considers an imported article abandoned for failure to file the corresponding Import Entry
and Internal Revenue Declaration within the allotted time. No acts or omissions to establish intent to abandon is necessary
to effectuate the clear provision of the law. Further, Section 1603 of the TCCP provides that in the absence of fraud or
protest, the passing of one year from the settlement of duties shall render the same as final. Such finality renders inoperable
the deemed abandonment.
FACTS
On April 7, 1996, Pilipinas Shell Petroleum Corporation (Shell)‘s importation of barrels of Arab
Light Crude arrived. After three days or on April 10, 1996, the shipment was unloaded from vessels to
oil tanks in Batangas. Republic Act (R.A.) No. 8180 reduced tariff duty on imported crude oil from 10%
to 3% and took effect on April 16, 1996. Shell, on May 23, 1996, paid for Import Entry and Internal
Revenue Declaration (IEIRD) equivalent to 3%. Four years later, Bureau of Customs (BOC) sent Shell a
demand letter, collecting due from the aforesaid crude oil importation, representing the difference
between the allegedly due computed at 10% and the actual amount paid computed at 3%. BOC argued
that the importation made by shell occurred in a prior date and hence, was not yet covered by RA 8081.
After five years, another demand letter was sent, collecting the dutiable value of its 1996 crude oil
importation which BOC claimed has been abandoned in favor of the Government, as the subject
importations was filed and accepted beyond 30-day period prescribed by law.
The Court of Tax Appeals (CTA) in Division denied the petition and said the excuse in delay of
IEIRD is implausible. As Government now owns subject shipment, Shell has no right to withdraw.
There was fraud on the part of Shell because it gave undue benefits to importers by allowing release of
shipments to the damage and prejudice of Government, who under the law already owns shipments.
The CTA Former En Banc affirmed the CTA in Division‘s ruling pertaining to the implied abandonment
caused by Shell‘s failure to file the IEIRD within the 30-day period, and said that fraud is not controlling
in this case as even without fraud, Shell is still liable for payment of dutiable value by operation of law.
Shell contended that as there is no fraud and that the right of the BOC to claim has already
prescribed. The Memorandum issued by Investigation and Prosecution Division of BOC was not
formally offered in evidence hence, inadmissible evidence against alleged fraud. Even if the
Memorandum is legally admitted in evidence, it still does not provide convincing proof to fraud.
ISSUES:
1. Did Pilipinas Shell Petroleum impliedly abandon the subject shipment of Arab Light Crude
Oil in favor of the government when it failed to file the Import Entry and Internal Revenue Declaration?
2. Did Pilipinas Shell Petroleum commit fraud in belatedly filing its Import Entry and Internal
Revenue Declaration within the 30-day period prescribed under Section 1301 of the Tariff and Customs
Code of the Philippines?
3. Has the Commissioner of Customs‘ right to claim against Pilipinas Shell Petroleum already
prescribed?
21
RULING:
1. YES. The law is clear and explicit in non-extensibility of 30-day period for the importer to file
the entry. R.A. 7651 changes previous law, and no longer requires that there be other acts or
omissions where an intent to abandon can be inferred. Now it is enough that the importer fails
to file the required import entries within the reglementary period. In the Chevron case, it was
explained that the term ―ipso facto‖ is defined as ―by the very act itself.‖ Hence, there is no need for any
affirmative act on the part of the government. By using the term ―ipso facto‖ in Section 1802 of the Tariff
and Customs Code of the Philippines (TCCP), as amended by R.A. No. 7651, the legislature removed
the need for abandonment proceedings.
Shell‘s contention that the belated filing of its import entries is justified due to the late
arrival of its import documents, which are necessary for the proper computation of the import
duties, cannot be sustained. Such excuses cannot also be accepted, as the absence of supporting
documents should not have prevented Shell from complying with the mandatory non-extendible
period, since the law prescribes an extremely serious consequence for delayed filing. If this kind
of excuse was to be accepted, then the collection of customs duties would be at the mercy of importers,
which our lawmakers try to avoid. For all the foregoing, the Court ruled that the late filing of the
IEIRDs alone, which constituted implied abandonment, makes Shell liable for the payment of the
dutiable value of the imported crude oil.
2. NO. For fraud to exist, it must be intentional, consisting of deception willfully and deliberately
done or resorted to in order to induce another to give up some right. It is never presumed and the
burden of proof to establish lies in the person making such allegation since every person is presumed to
be in good faith. Fraud must be established by evidence and the evidence must be clear and convincing,
not preponderant.
In the case at bench, a perusal of the records reveals that there is neither any iota of evidence nor
concrete proof offered and admitted to clearly establish that Shell committed any fraudulent acts. The
CTA in Division relied solely on the Memorandum dated 2 February 2001 issued by the CIIS-IPD of the
BOC in ruling the existence of fraud committed by Shell. However, there is no showing that such
document was ever presented, identified, and testified to or offered in evidence by either party before the
trial court. Indubitably, no evidentiary value can be given to any documentary evidence merely attached
to the BOC Records, as the rules on documentary evidence require that such documents must be
formally offered before the CTA. Section 34, Rule 132 of the Rules of Court provides that the court
shall consider no evidence which has not been formally offered. The purpose for which the evidence is
offered must be specified.
Clearly therefore, evidence not formally offered during the trial cannot be used for or against a
party litigant by the trial court in deciding the merits of the case. Neither may it be taken into account on
appeal. Since the rule on formal offer of evidence is not a trivial matter, failure to make a formal offer
within a considerable period of time shall be deemed a waiver to submit it. Consequently, any evidence
that has not been offered and admitted thereafter shall be excluded and rejected.
3. YES. There being no fraud on part of Shell, BOC‘s rights to question the propriety of the
IEIRD and to collect the amount of the alleged deficiency customs duties, more so the entire value of
the subject shipment, have already prescribed. In the absence of fraud, the entry and corresponding
payment of duties made by Shell becomes final and conclusive upon all parties after one (1) year from
the date of the payment of duties in accordance with Section 1603 of the TCCP.
22
DEUTSCHE KNOWLEDGE SERVICES PTE. LTD. v COMMISSIONER OF INTERNAL

REVENUE
G.R. No. 197980. DECEMBER 1, 2016, FIRST DIVISION (LEONARDO-DE CASTRO, J.)
The rule is that the 120+30 day period of compliance before filing a judicial claim is a jurisdictional requirement for the
Court of Tax Appeals to take cognizance of the case. Non-observance of these procedural ruling warrants the dismissal of
the case on the ground of premature filing. A recognized exception is when the filing period is covered from December 10,
2003- October 6, 2010 as explained by the court in the San Roque Case.
FACTS
On March 31, 2009, petitioner filed an application for Tax Credit/Refund of its allegedly excess
and unutilized input VAT for the 1st quarter of the calendar year 2007 in the amount of P12,549,446.30
with respondent Commissioner of Internal Revenue. Citing inaction on the part of respondent, petitioner
on April 17, 2009 filed a Petition for Review or seventeen (17) days after petitioner filed an application for tax
credit/refund with respondent based on Section 112 and 229 of the National Internal Revenue Code of 1997,
as amended.
However, on June 8, 2009, instead of an Answer respondent filed a Motion to Dismiss on

ground of prescription. Citing the case of Commissioner of Internal Revenue v. Mirant Pagbilao
Corporation (Mirant Case), respondent alleged that the Petition for Review was filed out of time on the
ground of having been filed beyond the two-year prescriptive period.
A day after or on June 9, 2009, respondent filed an Answer again citing the same grounds in the
Motion to Dismiss in her Special and Affirmative defenses. CTA Second Division resolved to grant said
motion on October 28, 2009. Petitioner filed a motion for reconsideration thereon on November 16,
2009. The Court promulgated a Resolution which denied petitioner's Motion for Reconsideration.
Petitioner then filed a petition for review with the CTA En Banc. However, the said tribunal
merely affirmed with modification the assailed resolutions and dismissed petitioner's suit for having been
prematurely filed prior to the expiration of the 120-day period granted to respondent to resolve the tax
claim. Hence, petitioner resorted to the present appeal, by way of a petition for review under Rule 45.
ISSUE
Whether the filing of petitioner's claim for refund/credit of input VAT before the CTA warrants a
dismissal as premature for non-compliance with the 120+30 day period.
RULING
Section 112(C) 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 taxpayer's 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.
In the instant case, the administrative claim or application for tax credit/refund of its allegedly
excess and unutilized input VAT for the first quarter of taxable year 2007 was filed on March 31, 2009 or
within the two-year prescriptive period. Respondent had 120 days or until July 29, 2009 to determine the
validity of the claim. However, petitioner filed an appeal by way of a petition for review on April 17,
23
2009 or 17 days after the filing of the administrative claim. Apparently, petitioner did not wait for the
decision of the CIR or the lapse of the 120-day period and this is in clear contravention of Section l12(C)
of the 1997 NIRC, as amended, and of the doctrine laid down in the Aichi case.
However, subsequent to the Aichi ruling and during the pendency of the case at bar, the
Supreme Court En Banc resolved the consolidated cases involved in Commissioner of Internal Revenue v. San
Roque Power Corporation (San Roque case) and stated that a judicial claim for refund of input VAT which
was filed with the CTA before the lapse of the 120-day period under Section 112 of the NIRC is
considered to have been timely made, if such filing occurred after the issuance of the Bureau of Internal
Revenue (BIR) Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of the Aichi
doctrine which was promulgated on October 6, 2010.
Pursuant to the CIR's power to interpret tax laws under Section 4 of the NIRC, the CIR issued
BIR Ruling No. DA-489-03 which we considered in San Roque as a general interpretative rule that may
be relied upon by taxpayers from the time the rule was issued up to its reversal by the CIR or by this
Court, thus, providing a valid claim for equitable estoppel under Section 246 of the NIRC.
In the present case, the records indicate that petitioner filed its administrative claim for tax
credit/refund of its allegedly excess and unutilized input VAT for the 1st quarter of the calendar year
2007 in the amount of with respondent on March 31, 2009. Subsequently, petitioner filed its judicial
claim on the same matter through a petition for review with the CT A on April 17, 2009. It is undisputed
that the aforementioned date of filing falls within the period following the issuance of BIR Ruling No.
DA-489-03 on December 10, 2003 but before the promulgation of the Aichi case on October 6, 2010. In
accordance with the doctrine laid down in San Roque, we rule that petitioner's judicial claim had been
timely filed and should be given due course and consideration by the CTA.
SECRETARY OF FINANCE CESAR B. PURISIMA AND COMMISSIONER OF

INTERNAL REVENUE KIM S. JACINTO-HENARES v. REPRESENTATIVE CARMELO
F. LAZATIN AND ECOZONE PLASTIC ENTERPRISES CORPORATION | G.R. No.
210588 | 29 November 2016 | (En Banc) Brion, J.
Thus, the Legislature intended Freeport Economic Zones (FEZs) to enjoy tax incentives in general — whether with respect
to the transactions that take place within its special jurisdiction, or the persons/establishments within the jurisdiction. From
this perspective, the tax incentives enjoyed by FEZ enterprises must be understood to necessarily include the tax exemption
of importations of selected articles into the FEZ.
FACTS
The Secretary of Finance, upon the recommendation of petitioner Commissioner of Internal Revenue
(CIR) Kim S. Jacinto-Henares, signed RR 2-2012, which requires the payment of VAT and excise tax on
the importation of all petroleum and petroleum products coming directly from abroad and brought into
the Philippines, including Freeport and economic zones (FEZs). It then allows the credit or refund of
any VAT or excise tax paid if the taxpayer proves that the petroleum previously brought in has been sold
to a duly registered FEZ locator and used pursuant to the registered activity of such locator. Carmelo F.
Lazatin, a member of the House of Representatives, filed a petition for prohibition and injunction
against the said Regulation, while Ecozone Plastic Enterprises Corporation (EPEC) sought to intervene
in the proceedings as a co-petitioner. Eventually, the RTC ruled in favor of herein respondents and
declared the Regulation unconstitutional. A direct recourse through a Rule 45 certiorari petition on pure
question of law is now sought.
24
ISSUES
Whether respondents Lazatin and EPEC have legal standing to bring the action; whether RR 2-2012 is
valid and constitutional
HELD
Respondents have legal standing; RR 2-2012 is invalid and unconstitutional
Members of Congress possess the legal standing to question acts that amount to a usurpation of the
legislative power of Congress. When the implementing rules and regulations issued by the Executive
contradict or add to what Congress has provided by legislation, the issuance of these rules amounts to an
undue exercise of legislative power and an encroachment of Congress' prerogatives. Further, as an
enterprise located in the Clark FEZ, its importations of petroleum and petroleum products will be
directly affected by RR 2-2012. Thus, its interest in the subject matter — a personal and substantial one
— gives it legal standing to question the issuance's validity.
Under RA 9400 and its Implementing Rules, Clark FEZ is considered a customs territory separate and
distinct from the Philippines customs territory. Thus, as opposed to importations into and
establishments in the Philippines customs territory, which are fully subject to Philippine customs and tax
laws, importations into and establishments located within the Clark FEZ (FEZ Enterprises) enjoy special
incentives, including tax and duty-free importation. More specifically, Clark FEZ enterprises shall be
entitled to the freeport status of the zone and a 5% preferential income tax rate on its gross income, in
lieu of national and local taxes.
RR 2-2012 explicitly covers even petroleum and petroleum products imported and/or brought into the
various FEZs in the Philippines. Hence, when an FEZ enterprise brings petroleum and petroleum
products into the FEZ, under RR 2-2012, it shall be considered an importer liable for the taxes due on
these products. RR 2-2012 clearly imposes VAT and excise tax on the importation of petroleum and
petroleum products into FEZs. Strictly speaking, however, articles brought into these FEZs are not
taxable importations under the law. The Philippine VAT system adheres to the cross border doctrine,
which states that no VAT shall be imposed to form part of the cost of the goods destined for
consumption outside the Philippine customs territory. Laws such as RA 7227, RA 7916, and RA 9400
have established certain special areas as separate customs territories. In this regard, we have already held
that such jurisdictions, such as the Clark FEZ, are, by legal fiction, foreign territories.
Therefore, the act of bringing the goods into an FEZ is not a taxable importation. As long as the goods
remain (e.g., sale and/or consumption of the article within the FEZ) in the FEZ or re-exported to
another foreign jurisdiction, they shall continue to be tax-free. However, once the goods are introduced
into the Philippine customs territory, it ceases to enjoy the tax privileges accorded to FEZs. It shall then
be considered as an importation subject to all applicable national internal revenue taxes and customs
duties.
Further, the refund mechanism provided by RR 2-2012 does not amount to a tax exemption. Even if the
possibility of a subsequent refund exists, the fact remains that FEZ enterprises must still spend money
and other resources to pay for something they should be immune to in the first place. This completely
contradicts the essence of their tax exemption.
25
COMMISSIONER OF CUSTOMS v. WILLIAM SINGSON AND TRITON SHIPPING

CORPORATION
| G.R. No. 181007 | 21 November 2016 | (Third Division) Reyes, J.
In all proceedings taken for the seizure and/or forfeiture of any vessel, vehicle, aircraft, beast or articles under the provisions
of the tariff and customs laws, the burden of proof shall lie upon the claimant: Provided, That probable cause shall be first
shown for the institution of such proceedings and that seizure and/or forfeiture was made under the circumstances and in the
manner described in the preceding sections of this Code.
FACTS
TSC owns a vessel loaded with bags of rice due for shipment, and consigned to Singson. The elements
of the Philippine Navy, however, apprehended and seized the vessel and its entire rice cargo somewhere
in Cebu for allegedly carrying suspected smuggled rice. Later, the District Collector of Customs (DCC)
of Port of Cebu issued a Warrant of Seizure and Detention (WSD) against the vessel and its cargo for
violation of the Tariffs and Customs Code. Forfeiture proceedings followed. This was set aside, and the
ship and its cargo was ordered released. The case was then indorsed to the Bureau of Customs in Manila
for approval of the Customs Commissioner (CC), who reversed the DCC and ordered forfeiture.
Respondents filed for reconsideration but the same was denied. They filed a petition for review with the
CTA, who reversed the CC. Petitioner moved for reconsideration but it was denied; hence, it filed a
petition for review before the CA, who affirmed the CTA. Petitioner filed for reconsideration which was
also denied; hence this petition.
ISSUE
Whether or not the CA erred in affirming the CTA's decision.
HELD
The Court adopts the above-mentioned findings of fact of both the CTA and the CA.
The petitioner argues that the 15,000 bags of rice were unlawfully imported into the Philippines; hence,
there was legal ground for the forfeiture of the rice and its carrying vessel. The petitioner solely relies its
argument on the certification issued by the PCG Station Commander in Manila, which was included in
the parties' Joint Stipulation filed with the CTA. Clearly, this evidence does not suffice. The said
certification is not sufficient to prove that the respondents violated the TCC. The certification presented
by the petitioner does not reveal any kind of deception committed by the respondents. Such certification
is not adequate to support the proposition sought to be established which is the commission of fraud.
Moreso, at the time the vessel and its cargo were seized on September 25, 2001, the elements of the PN
never had a probable cause that would warrant the filing of the seizure proceedings. In fact, the
petitioner ordered the forfeiture of the rice cargo and its carrying vessel on the mere assumption of
fraud. Notably, the 2nd Indorsement issued by the petitioner failed to clearly indicate any actual
commission of fraud or any attempt or frustration thereof.
The TCC requires the presence of probable cause before any proceeding for seizure and/or forfeiture is
instituted. Based on the afore-quoted provision, before forfeiture proceedings are instituted, the law
requires the presence of probable cause which rests on the petitioner who ordered the forfeiture of the
shipment of rice and its carrying vessel. Once established, the burden of proof is shifted to the claimant.
26
COMMISSIONER OF INTERNAL REVENUE vs. FITNESS BY DESING, INC.

G.R. No. G.R. No. 215957; 09 November 2016
―To avail of the ten (10) year prescriptive period of assessment, the Commissioner of Internal Revenue should prove that the
facts upon which the fraud is based has been communicated to the taxpayer. Further, the Final Assessment Notice is not
valid if it does not contain a definite due date for payment by the taxpayer.‖
FACTS:
The Final Assessment Notice (―FAN‖) was issued by the Bureau of Internal Revenue (―BIR‖) after the
lapse of the three (3)-year assessment period. Respondent filed a protest to the FAN, citing prescription.
The BIR issued a Warrant of Distraint and/or Levy. Respondent elevated its appeal to the Court of Tax
Appeals (―CTA‖).
In its Answer, the Commissioner of Internal Revenue (―CIR‖) alleged that the ten (10) year prescription
is applicable because of the respondent‘s filing of a false and fraudulent income tax return as it
intentionally failed to reflect its true sales. The CTA held that the assessment already prescribed, and that
it is invalid for failure to comply with Section 228 of the Tax Code.
The CIR elevated its appeal to the Supreme Court, alleging that the ten (10) year prescriptive period is
applicable on the ground of fraud, and that nothing in the law provides that the due date for payment is
a substantive requirement for the validity of a final assessment notice.
ISSUE:
WON the assessment is valid
HELD:
The assessment is not valid under Section 228 of the Tax Code.
An assessment refers to the determination of amounts due from a person obliged to make payments.
The indispensability of affording taxpayers sufficient written notice of his/her tax liability is a clear
definite requirement. Section 228 if the Tax Code and Revenue Regulations (―Rev. Regs.‖) No. 12-99 as
amended, transparently outline the procedure in tax assessment.
The word ―shall‖ in Section 228 of the Tax Code and Rev. Regs. 12-99 means the act of informing the
tax payer of both the factual and legal bases of the assessments is mandatory. The law requires that the
bases be reflected in the formal letter of demand and assessment notice. This cannot be presumed.
Otherwise, the express mandate of Section 228 and Rev. Regs 12-99 would be nugatory. The
requirement enables the taxpayer to make an effective protest or appeal of the assessment or decision.
The rationale behind the requirement that taxpayers should be informed of the facts and the law on
which the assessments are based conforms with the constitutional mandate that no person shall be
deprived of his/her property without due process of law. Between the power of the State to tax and an
individual‘s right to due process, the scale favors the right of the taxpayer to due process.
The purpose of the written notice requirement is to aid the taxpayer in making a reasonable protest if
necessary. Merely notifying the tax payer of his/her tax liabilities without details or particulars is not
enough.
However, in this case, the BIR failed to clearly state the FAN the allegations of fraud committed by
respondent to serve the purpose of an assessment notice to aid respondent in filing effective protest.
27
Fraud is a question of fact that should be alleged and duly proven. The willful neglect to file the required
tax return or the fraudulent intent to evade the payment of taxes, considering that the same is
accompanied by legal consequences, cannot be presumed. Fraud entails corresponding sanctions under
the tax law. Therefore, it is indispensable for the CIR to include the basis for its allegations of fraud in
the assessment notice.
Further, the Supreme Court noted that the FAN failed to state the definite amount of tax liability and the
period when it is due. An assessment does not include a computation of tax liabilities; it also includes a
demand for payment within a period prescribed. Its main purpose is to determine the amount that a
taxpayer is liable to pay. A final assessment notice to the effect that the amount therein stated is due as
tax and a demand for payment thereof. This demand for payment signals the time when penalties and
interests begin to and received by the taxpayer, and must demand payment of the taxes described therein
within a specific period.
In this case, however, the FAN lacks the definite amount of tax liability as it provides that ―the interest
and the total amount due will have to be adjusted if prior or beyond April 15, 2004.‖ Further, the FAN
failed to specify the due date for payment of the tax liability.
NATIONAL POWER CORPORATION vs. THE PROVINCIAL TREASURER OF

BENGUET, et al.
G.R. No. 209303, 14 November 2016
―If the property being taxed has not been dropped from the assessment roll, taxes must be paid under protest if the
exemption from taxation is insisted upon.‖
FACTS:
National Power Corporation (―NPC‖) is a government-owned and controlled corporation created to
undertake the development of power generation and production from hydroelectric or other sources,
and may undertake the construction, operation and maintenance of power plants, dams, reservoirs, and
other works. It operates and maintains the Binga Hydro-Electric Power Plant. Respondents Provincial
Treasurer, Provincial Assessor, Municipal Treasurer and Municipal Assessor of Itogon are
representatives of the province of Benguet, a local government unit. Respondent issued the subject
assessment in their official capacities.
Municipal Assessor of Benguet assessed the NPC the amount of ₱62,645,668.80 real property tax. NPC
challenged before the Local Board of Assessment Appeals (―LBAA‖) the legality of the assessment and
the authority of the respondents to assess and collect real property taxes from it when its properties are
exempt pursuant to Section 234 (b) and (c) of Local Government Code (―LGC‖).
Respondents alleged that NPC‘s properties were not exempt from tax since the properties were classified
in their tax declarations as ―industrial,‖ ―for industrial use,‖ or ―machineries‖ and ―equipment.‖ There
was no evidence that the properties were being used for generation and transmission of electric power.
LBAA deferred the proceedings upon NPC‘s payment under protest of the assessed amount, or upon
filing of a surety bond to cover the disputed amount of tax. NPC filed a petition for review before the
Central Board of Assessment Appeals (―CBAA‖) claiming that payment under protest was not required
before it could challenge the authority of respondents to assess tax on tax exempt properties before the
28
LBAA. CBAA dismissed the appeal for being filed out of time. The CBAA, in an Order denied the
NPC‘s motion for reconsideration. It ruled that it is incumbent upon the NPC to pay under protest
before the LBAA could entertain its appeal as provided under LGC. NPC appealed to CTA En Banc by
filing a Petition for Review. The CTA En Banc denied the same for lack of merit.
ISSUE:
WON NPC need to pay the assessed amount under protest in claiming for an exception from the
payment of real property tax?
RULING:
Yes. Settled is the rule that should the taxpayer/real property owner question the excessiveness or
reasonableness of the assessment, LGC directs that the taxpayer should first pay the tax due before his
protest can be entertained.
A claim for exemption from the payment of real property taxes does not actually question the assessor‘s
authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the
assessment by the local assessor. Every person who shall claim exemption from payment of real property
taxes imposed upon said property shall file with the provincial, city or municipal assessor sufficient
documentary evidence in support for such claim.
The burden of proving is upon whom the subject real property is declared. If the property being taxed
has not been dropped from the assessment roll, taxes must be paid under protest if the exemption from
taxation is insisted upon.
NPC‘s failure to comply with the mandatory requirement of payment under protest in accordance with
Section 252 of the LGC was fatal to its appeal.
COMMISSIONER OF INTERNAL REVENUE v. SECRETARY OF JUSTICE, and

PHILIPPINE AMUSEMENT AND GAMING CORPORATION
G.R. No. 177387, November 9, 2016, FIRST DIVISION (BERSAMIN, J.)

Unlike the case of PAL, however, R.A. No. 7716 does not specifically exclude PAGCOR's exemption under
P.D. No. 1869 from the grant of exemptions from VAT. A close scrutiny of PD 1869 SEC 13(2) clearly gives
PAGCOR a blanket exemption to taxes with no distinction on whether the taxes arc direct or indirect. Indeed, by
extending the exemption to entities or individuals dealing with PAGCOR, the legislature clearly granted exemption also
from indirect taxes. It must be noted that the indirect tax of VAT, as in the instant case, can be shifted or passed to the
buyer, transferee, or lessee of the goods, properties, or services subject to VAT. Thus, by extending the tax exemption to
entities or individuals dealing with PAGCOR in casino operations, it is exempting PAGCOR from being liable to
indirect taxes.
FACTS:
PAGCOR has operated under a legislative franchise granted by PD No. 1869, whose Section 13(2)
provides that: (2) Income and other Taxes - (a) Franchise Holder: No tax of any kind or form,
income or otherwise, as well as fees, charges or levies of whatever nature, whether National or
Local, shall he assessed and collected under this Franchise from the Corporation; nor shall any
form of tax or charge attach in any way to the earnings of the Corporation, except a Franchise
29
Tax of five percent of the gross revenue or earnings derived by the Corporation from its
operation under this Franchise. xxx
Notwithstanding the aforesaid 5% franchise tax imposed, BIR issued several assessments against
PAGCOR for alleged deficiency VAT, FWT on fringe benefits, and EWT. PAGCOR filed a letter-
protest with the BIR. CIR did not act on PAGCOR‘s letter-protest within the 180-day period from the
latter's submission of additional documents. Hence, PAGCOR filed an appeal with the Secretary of
Justice (SOJ). SOJ Gonzales rendered a decision declaring PAGCOR exempt from the payment of
all taxes except the 5% franchise tax provided in its Charter.
ISSUES:
(1)Is the PAGCOR liable for the payment of VAT?; and
(2)Is the PAGCOR liable for the payment of withholding taxes?
RULING:
(1)NO. R.A. No. 7716 indicates that Congress has not intended to repeal PAGCOR's privilege
to enjoy the 5% franchise tax in lieu of all other taxes. Although Section 3 of R.A. No. 7716 imposes
10% VAT on the sale or exchange of services, including the use or lease of properties, the provision also
considers transactions that are subject to 0% VAT. On the other hand, Section 4 of R.A. No. 7716
enumerates the transactions exempt from VAT, viz.: "SEC.103. Exempt transactions. - The following
shall he exempt from the value-added tax: xxx "(q) Transactions which are exempt under special
laws, except those granted under Presidential Decree Nos. 66, 529, 972, 1491, and 1590, and nonelectric
cooperatives under republic Act No. 6938, or international agreements to which the Philippines is a
signatory; xxx
RA no. 7716 expressly amends PAL's franchise (P.D. No. 1590) by specifically excepting from
the grant of exemptions from the VAT PAL's exemption under P.D. No. 1590. This is within the power
of Congress to do under Art. XII, § 11 of the Constitution, which provides that the grant of a franchise
for the operation of a public utility is subject to amendment, alteration or repeal by Congress when the
common good so requires. Unlike the case of PAL, however, R.A. No. 7716 does not specifically
exclude PAGCOR's exemption under P.D. No. 1869 from the grant of exemptions from VAT.
Moreover, the exemption of PAGCOR from VAT is supported by Section 6 of R.A. No. 9337, which
retained Section 108 (B) (3) of R.A. No. 8424, thus: SEC. 108. Value-Added Tax on Sale of Services and Use
or Lease of Properties. (A) Rate and Base of Tax. There shall be levied, assessed and collected, a value-added
tax equivalent to 10% of gross receipts derived from the sale or exchange of services, including the use
or lease of properties: xxx (B) Transactions Subject to Zero Percent (0%) Rate. The following
services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%)
rate; xxx (3) Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively subjects the supply of such
services to zero percent (0%) rate; xxx
It is undisputed that P.D. 1869 grants the latter an exemption from the payment of taxes. A
close scrutiny of PD 1869 SEC 13(2) clearly gives PAGCOR a blanket exemption to taxes with no
distinction on whether the taxes arc direct or indirect. Indeed, by extending the exemption to
entities or individuals dealing with PAGCOR, the legislature clearly granted exemption also from indirect
taxes. It must be noted that the indirect tax of VAT, as in the instant case, can be shifted or passed to the
buyer, transferee, or lessee of the goods, properties, or services subject to VAT. Thus, by extending
the tax exemption to entities or individuals dealing with PAGCOR in casino operations, it is
exempting PAGCOR from being liable to indirect taxes. It is true that VAT can either be
incorporated in the value of the goods, properties, or services sold or leased, in which case it is
computed as 1/11 of such value, or charged as an additional 10% to the value. Verily, the seller or
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lessor has the option to follow either way in charging its clients and customer. In the instant case,
Acesite followed the latter method, that is, charging an additional 10% of the gross sales and rentals. Be
that as it may, the use of either method, and in particular, the first method, does not denigrate the
fact that PAGCOR is exempt from an indirect tax, like VAT. Thus, while it was proper for
PAGCOR not to pay the 10% VAT charged by Acesite, the latter is not liable for the payment of it as it
is exempt in this particular transaction by operation of law to pay the indirect tax. Such exemption falls
within the former Section 102 (b) (3) of the 1977 Tax Code, as amended (now Sec. 108 [b] [3] of R.A.
8424).
The rationale for the exemption from indirect taxes provided for in P.O. 1869 and the extension
of such exemption to entities or individuals dealing with PAGCOR in casino operations are best
elucidated from the 1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons, Inc., where the
absolute tax exemption of the World Health Organization (WHO) upon an international agreement was
upheld. We held in said case that the exemption of contractee WHO should be implemented to mean
that the entity or person exempt is the contractor itself who constructed the building owned by
contractee WHO, and such does not violate the rule that tax exemptions are personal because the
manifest intention of the agreement is to exempt the contractor so that no contractor's tax may be
shifted to the contractee WHO. Thus, the proviso in P.D. 1869, extending the exemption to
entities or individuals dealing with PAGCOR in casino operations, is clearly to proscribe any
indirect tax, like VAT, that may be shifted to PAGCOR. The Court also deems it warranted to
cancel the assessments for deficiency withholding VAT pertaining to the payments made by PAGCOR
to its catering service contractor.
(2)YES. (a)FWT on Fringe Benefits: The recomputed assessment for deficiency final
withholding taxes related to the car plan granted to PAGCOR's employees and for its payment of
membership dues and fees. Section 33 of the NIRC, imposes FBT, now at 33%. FBT is treated as a final
income tax on the employee that shall be withheld and paid by the employer on a calendar quarterly
basis. As such, PAGCOR is a mere withholding agent inasmuch as the FBT is imposed on
PAGCOR's employees who receive the fringe benefit. PAGCOR's liability as a withholding
agent is not covered by the tax exemptions under its Charter. The car plan extended by PAGCOR
to its qualified officers is evidently considered a fringe benefit as defined under Section 33 of the NIRC.
To avoid the imposition of the FBT on the benefit received by the employee, and, consequently, to
avoid the withholding of the payment thereof by the employer, PAGCOR must sufficiently establish
that the fringe benefit is required by the nature of, or is necessary to the trade, business or
profession of the employer, or when the fringe benefit is for the convenience or advantage of the
employer. (Convenience of the Employer Rule) But PAGCOR was not able to prove such.
As for the payment of the membership dues and fees, the Court finds that this is not considered
a fringe benefit that is subject to FBT and which holds PAGCOR liable for FWT. PAGCOR‘s nature
of business is casino operations and it derives business from its customers who play at the casinos. In
furtherance of its business, PAGCOR usually attends its VIP customers, amenities such as playing rights
to golf clubs. The membership of PAGCOR to these golf clubs and other organizations are intended to
benefit respondent's customers and not its employees. Aside from this, the membership is
under the name of PAGCOR, and as such, cannot be considered as fringe benefits because it is
the customers and not the employees of PAGCOR who benefit from such memberships.
(b)EWT: NO. The Court finds that PAGCOR is not liable for deficiency EWT on its payment
for: (1) audit services rendered by the COA and (2) prizes and other promo items. PAGCOR's payment
to the COA for its audit services is exempted from withholding tax pursuant to Sec. 2.57.5 (A) of
Revenue Regulation (RR) 2-98, which states: SEC. 2.57.5. Exemption from Withholding Tax –The
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withholding of creditable withholding tax prescribed in these Regulations shall not apply to income
payments made to the following: (A) National government and its instrumentalities, including provincial,
city or municipal governments; On the other hand, the prizes and other promo items were already
subjected to the 20% FWT pursuant to Section 24(B)(l) of the NIRC. To impose another tax on these
items would amount to obnoxious or prohibited double taxation because the taxpayer would be taxed
twice by the same jurisdiction for the same purpose. Hence, except for the foregoing, the Court upholds
the validity of the assessment against PAGCOR for deficiency expanded withholding tax.
YES. PAGCOR is liable for EWT on the remainder. The remainder of the compensation
income that PAGCOR paid for the services of its contractual, casual, clerical and messengerial
employees are clearly subject to expanded withholding tax by virtue of Section 79 (A) of the NIRC
which reads: Sec. 79 Income Tax Collected at Source.- (A) Requirement of Withholding. - Every
employer making payment of wages shall deduct and withhold upon such wages a tax determined in
accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon
recommendation of the Commissioner: Provided, however, That no withholding of a tax shall be
required where the total compensation income of an individual does not exceed the statutory minimum
wage, or Five thousand pesos (₱5,000) per month, whichever is higher. In addition, Section 2.57.3(C) of
RR 2-98 states that: SEC. 2.57.3 Persons Required to Deduct and Withhold. - The following persons are
hereby constituted as withholding agents for purposes of the creditable tax required to be withheld on
income payments enumerated in Section 2.57.2: xxx (c) All government offices including government-
owned or controlled corporations, as well as provincial, city and municipal governments.
As for the rest of the assessment for deficiency expanded withholding tax arising from
PAGCOR's (1) reimbursement for over-the-counter purchases by its agents; (2) tax payments; (3)
security deposit; and (4) importations, the Court observes that PAGCOR did not present sufficient and
convincing proof to establish its non-liability.
COMMISSIONER OF INTERNAL REVENUE, v. DE LA SALLE UNIVERSITY, INC

G.R. No. 196596, November 9, 2016, (BRION, J.)

The tax exemption granted to non-stock, non-profit educational institutions is conditioned only on the actual,
direct and exclusive use of their revenues and assets for educational purposes. While tax exemptions may also be granted to
proprietary educational institutions, these exemptions may be subject to limitations imposed by Congress. By the Tax Code's
clear terms, a proprietary educational institution is entitled only to the reduced rate of 10% corporate income tax. The
reduced rate is applicable only if: (1) the proprietary educational institution is non profit and (2) its gross income from
unrelated trade, business or activity does not exceed 50% of its total gross income. Consistent with Article XIV, Section 4
(3) of the Constitution, these limitations do not apply to non-stock, non-profit educational institutions. Thus, we declare the
last paragraph of Section 30 of the Tax Code without force and effect for being contrary to the Constitution insofar as it
subjects to tax the income and revenues of non-stock, non-profit educational institutions used actually, directly and
exclusively for educational purpose. This pertains only to non-stock, non-profit educational institutions and does not cover
the other exempt organizations under Section 30 of the Tax Code.
FACTS:
BIR issued a PAN to DLSU. Subsequently BIR through a FLD assessed DLSU the following
deficiency taxes: (1) income tax on rental earnings from restaurants/canteens and bookstores operating
within the campus; (2) VAT on business income; and (3) DST on loans and lease contracts. DLSU
protested the assessment. CIR failed to act on the protest. DLSU filed a petition for review with the
CTA Division. CTA Division partially granted DLSU's petition for review. CTA Division, in view of the
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supplemental evidence submitted, reduced the amount of DLSU's tax deficiencies. CTA En Banc
affirmed.
ISSUES:
(1)Were DLSU‘s income and revenues proved to have been actually, directly and exclusively used for
educational purposes exempt from duties and taxes?;
(2)Should the entire assessment be voided because of the defective LOA?
RULING:
(1)YES. Article XIV, Section 4 (3) of the 1987 Constitution, which reads: (3) All revenues
and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for
educational purposes shall be exempt from taxes and duties. Upon the dissolution or cessation of the
corporate existence of such institutions, their assets shall be disposed of in the manner provided by law.
Proprietary educational institutions, including those cooperatively owned, may likewise be entitled to
such exemptions subject to the limitations provided by law including restrictions on dividends and
provisions for reinvestment.
The constitutional provision refers to two kinds of educational institutions: (1) non-stock, non-
profit educational institutions (NSNPEI) and (2) proprietary educational institutions (PEI).
DLSU falls under the first category. While DLSU's claim for tax exemption arises from and is based on
the Constitution, the Constitution, in the same provision, also imposes certain conditions to avail of the
exemption. There is a marked distinction between the treatment of non-stock, non-profit educational
institutions and proprietary educational institutions. The tax exemption granted to non-stock, non-
profit educational institutions is conditioned only on the actual, direct and exclusive use of their
revenues and assets for educational purposes. While tax exemptions may also be granted to
proprietary educational institutions, these exemptions may be subject to limitations imposed by
Congress.
YMCA CASE: The YMCA is exempt only from property tax but not from income tax. As a last
ditch effort to avoid paying the taxes on its rental income, the YMCA invoked the tax privilege granted
under Article XIV, Section 4 (3) of the Constitution. The Court denied YMCA's claim that it falls under
Article XIV, Section 4 (3) of the Constitution holding that the term educational institution, when used in
laws granting tax exemptions, refers to the school system (synonymous with formal education); it
includes a college or an educational establishment; it refers to the hierarchically structured and
chronologically graded learnings organized and provided by the formal school system. The Court then
significantly laid down the requisites for availing the tax exemption under Article XIV, Section 4
(3), namely: (1) the taxpayer falls under the classification non-stock, non-profit educational
institution; and (2) the income it seeks to be exempted from taxation is used actually, directly
and exclusively for educational purposes.
We now adopt YMCA as precedent and hold that: The last paragraph of Section 30 of the
Tax Code is without force and effect with respect to non-stock, non-profit educational
institutions, provided, that the non-stock, non-profit educational institutions prove that its
assets and revenues are used actually, directly and exclusively for educational purposes; The
tax-exemption constitutionally-granted to non-stock, non-profit educational institutions, is not
subject to limitations imposed by law.
Unlike Article VI, Section 28 (3) of the Constitution, which exempts from tax only the assets,
i.e., "all lands, buildings, and improvements, actually, directly, and exclusively used for religious,
charitable, or educational purposes ... ," Article XIV, Section 4 (3) categorically states that "[a]ll revenues
and assets ... used actually, directly, and exclusively for educational purposes shall be exempt from taxes
and duties." The addition and express use of the word revenues in Article XIV, Section 4 (3) of the
Constitution is not without significance. We find that the text demonstrates the policy of the 1987
Constitution, discernible from the records of the 1986 Constitutional Commission to provide
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broader tax privilege to non-stock, non-profit educational institutions as recognition of their role
in assisting the State provide a public good. The tax exemption was seen as beneficial to
students who may otherwise be charged unreasonable tuition fees if not for the tax exemption
extended to all revenues and assets of non-stock, non-profit educational institutions.
Article XIV, Section 4 (3) does not require that the revenues and income must have also
been sourced from educational activities or activities related to the purposes of an educational
institution. The phrase all revenues is unqualified by any reference to the source of revenues. Thus, so
long as the revenues and income are used actually, directly and exclusively for educational purposes, then
said revenues and income shall be exempt from taxes and duties.
Taxation of Assets v. Taxation of Revenues: Revenues consist of the amounts earned by a
person or entity from the conduct of business operations. It may refer to the sale of goods, rendition of
services, or the return of an investment. Revenue is a component of the tax base in income tax, VAT,
and LBT. Assets, on the other hand, are the tangible and intangible properties owned by a person or
entity. It may refer to real estate, cash deposit in a bank, investment in the stocks of a corporation,
inventory of goods, or any property from which the person or entity may derive income or use to
generate the same. In Philippine taxation, the fair market value of real property is a component of the tax
base in RPT. Also, the landed cost of imported goods is a component of the tax base in VAT on
importation and tariff duties. Thus, when a non-stock, non-profit educational institution proves
that it uses its revenues actually, directly, and exclusively for educational purposes, it shall be
exempted from income tax, VAT, and LBT. On the other hand, when it also shows that it uses
its assets in the form of real property for educational purposes, it shall be exempted from RPT.
To be clear, proving the actual use of the taxable item will result in an exemption, but the specific tax
from which the entity shall be exempted from shall depend on whether the item is an item of
revenue or asset.
Use of Asset v. Use of Revenues: The lease of a portion of a school building for commercial
purposes, removes such asset from the property tax exemption granted under the Constitution. There is
no exemption because the asset is not used actually, directly and exclusively for educational
purposes. The commercial use of the property is also not incidental to and reasonably necessary for the
accomplishment of the main purpose of a university, which is to educate its students. However, if the
university actually, directly and exclusively uses for educational purposes the revenues earned
from the lease of its school building, such revenues shall be exempt from taxes and duties. The
tax exemption no longer hinges on the use of the asset from which the revenues were earned, but on the
actual, direct and exclusive use of the revenues for educational purposes.
To avail of the exemption, the taxpayer must factually prove that it used actually, directly
and exclusively for educational purposes the revenues or income sought to be exempted. The
crucial point of inquiry then is on the use of the assets or on the use of the revenues. These are two
things that must be viewed and treated separately. But so long as the assets or revenues are used actually,
directly and exclusively for educational purposes, they are exempt from duties and taxes.
NSNPEI v. PEI: the privilege granted to the former is conditioned only on the actual, direct
and exclusive use of their revenues and assets for educational purposes. While that of the latter‘s may be
subject to limitations imposed by law. While a non-stock, non-profit educational institution is classified
as a tax-exempt entity under Section 30 (Exemptions from Tax on Corporations) of the Tax Code, a
proprietary educational institution is covered by Section 27 (Rates of Income Tax on Domestic
Corporations). Section 30 provides that exempt organizations like non-stock, non-profit educational
institutions shall not be taxed on income received by them as such. Section 27 (B), on the other hand,
states that "proprietary educational institutions ... which are non profit shall pay a tax of 10% on their
taxable income .. . Provided, that if the gross income from unrelated trade, business or other activity
exceeds 50% of the total gross income derived by such educational institutions ... [the regular corporate
income tax of 30% shall be imposed on the entire taxable income ... "
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By the Tax Code's clear terms, a proprietary educational institution is entitled only to the
reduced rate of 10% corporate income tax. The reduced rate is applicable only if: (1) the
proprietary educational institution is non profit and (2) its gross income from unrelated trade,
business or activity does not exceed 50% of its total gross income. Consistent with Article XIV,
Section 4 (3) of the Constitution, these limitations do not apply to non-stock, non-profit
educational institutions. Thus, we declare the last paragraph of Section 30 of the Tax Code
without force and effect for being contrary to the Constitution insofar as it subjects to tax the income
and revenues of non-stock, non-profit educational institutions used actually, directly and exclusively for
educational purpose. We make this declaration in the exercise of and consistent with our duty to uphold
the primacy of the Constitution. Finally, we stress that our holding here pertains only to non-stock,
non-profit educational institutions and does not cover the other exempt organizations under
Section 30 of the Tax Code.
(2)NO. A LOA is the authority given to the appropriate revenue officer to examine the books
of account and other accounting records of the taxpayer in order to determine the taxpayer's correct
internal revenue liabilities and for the purpose of collecting the correct amount of tax, in accordance
with Section 5 of the Tax Code, which gives the CIR the power to obtain information, to
summon/examine, and take testimony of persons. The LOA commences the audit process and informs
the taxpayer that it is under audit for possible deficiency tax assessment.
The relevant provision is Section C of RMO No. 43-90. What this provision clearly
prohibits is the practice of issuing LOAs covering audit of unverified prior years. RMO 43-90
does not say that a LOA which contains unverified prior years is void. It merely prescribes that if
the audit includes more than one taxable period, the other periods or years must be specified.
The provision read as a whole requires that if a taxpayer is audited for more than one taxable
year, the BIR must specify each taxable year or taxable period on separate LOAs. In the present
case, the LOA issued to DLSU is for Fiscal Year Ending 2003 and Unverified Prior Years. The LOA
does not strictly comply with RMO 43-90 because it includes unverified prior years. This does not mean,
however, that the entire LOA is void. The assessment for taxable year 2003 is valid because this taxable
period is specified in the LOA. DLSU was fully apprised that it was being audited for taxable year 2003.
Corollarily, the assessments for taxable years 2001 and 2002 are void for having been unspecified on
separate LOAs as required under RMO No. 43-90.
Takenaka Corporation, Phil. Branch vs CIR

GR no. 193321. October 19, 2016, Bersamin, J.:
DOCTRINE
VAT invoice is necessary for every sale, barter or exchange of goods or properties, while VAT official receipt pertains to
lease of goods or properties and sale of services.
The mere fact that an application for zero-rating has been approved by the BIR does not, by itself, justify the grant of a
refund or tax credit. The taxpayer claiming refund must further comply with the invoicing and accounting requirements
mandated by the NIRC.
Facts:
 Takenaka is a subcontractor which entered into an on-shore construction contract with Phil. Air
Terminal Co., Inc. (PIATCO)(PEZA-registered) for constructing NAIA Terminal III. Takenaka
filed its quarterly VAT returns for the 4 taxable quarters of 2002 on April 24, 2002, July 22, 2002,
35
October 22, 2002 and January 22, 2003. BIR then ruled that the sale of goods and services rendered
by Takenaka to PIATCO are subject to 0% VAT.
 Takenaka filed a claim for tax refund. Due to BIR‘s inaction, a petition for review was filed before
the CTA. The claim was granted but was reversed and the claim denied upon CIR‘s petition for
review with CTA en banc.
 Takenaka claims that it has proved its claim for refund by presenting sales invoices.
Issue:
WON the sales invoices were sufficient evidence to prove zero-rated sales of services to PIATCO.
Ruling:
No, the sales invoice is insufficient to prove the zero-rated sales of Takenaka.
 VAT invoice is necessary for every sale, barter or exchange of goods or properties, while VAT
official receipt pertains to lease of goods or properties and sale of services. (Sec. 113, NIRC)
 A VAT invoice is the seller‘s best proof of the sale of goods or services to the buyer while a
VAT official receipt is the buyer‘s best proof of the payment of goods or services received from
the seller.
o In this case, Takenaka submitted sales invoices, not official receipts, to support its claim
for refund. The submissions were inadequate for the purpose intended. Without proper
VAT official receipts issued to its clients, the payments received by Takenaka for
providing services to PEZA-registered entities cannot qualify for VAT zero-rating.
 Further, the mere fact that Takenaka‘s application for zero-rating has been approved by the BIR
does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming refund must
further comply with the invoicing and accounting requirements mandated by the NIRC.
WHEREFORE, the petition for review is DENIED. The decision of CTA en banc is AFFIRMED.
CIR vs Deutsche Knowledge Services, Inc. (DKS)

GR no. 211072. November 7, 2016, Caguioa, J.:
A reiteration of the San Roque Case, which allowed the filing of judicial claims for refund of input VAT prior to the lapse
of the one hundred-twenty (120)-day period from filing of the administrative claim with the BIR for the period 10 December
2003 until 06 October 2010. Prior to 10 December 2003 and after 06 October 2010, the observance of the 120-day
period is mandatory and jurisdictional in the filing of judicial claims for refund of input VAT with the CTA.
Facts:
On 30 June 2009, DKS for refund of its excess and unutilized input VAT for the second quarter of
2007. The judicial claim was filed with the CTA prior to the lapse of the 120-day period after its filing of
the administrative claim for refund with the CIR, and prior to the lapse of the 2 year period from the
close of the taxable quarter when the sales were made.
The CIR alleges that the judicial claim for refund of input VAT filed by DKS was prematurely filed; and
as such, prayed for the dismissal of the claim.
Issue:
WON the DKS‘ judicial claim for refund of excess and unutilized input VAT for the 2nd quarter of
2007 prematurely filed.
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Ruling:
No, the judicial claim for refund was seasonably filed.
 As a general rule, a VAT-registered taxpayer claiming for refund or tax credit of its excess and
unutilized input VAT must file and administrative claim within 2 years from the close of the
taxable quarter when the sales are made. The CIR is given 120 days from the submission of
complete documents in support of said administrative claim, within which to grant or deny said
claim. Judicial claims for refund of excess and unutilized input VAT may be filed with the CTA
within 30 days from the receipt of the decision of the CIR in the administrative claim or from
the expiration of the 120-day period of the CIR to act on such administrative claim. (Aichi case)
 An exception to the above rule was, however, carved in San Roque case which noted the BIR‘s
issuance of BIR Ruling No. DA-489-03 prior to promulgation of the Aichi Case or on 10
December 2003. In said ruling, the BIR expressly allowed the filing of judicial claims with the
CTA even before the lapse of the 120-day period. The SC held that said ruling furnishes a valid
basis to hold the CIR in estoppel because the CIR had misled taxpayers into filing judicial claims
with the CTA even prior to the lapse of the 120-day period.
 As such, the 120-day waiting period does not apply to claims for refund that were prematurely
filed during the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003
until 06 October 2010, when the Aichi Case was promulgated; but before and after said period,
the observance of the 120-day period is mandatory and jurisdictional.
PROVINCIAL ASSESSOR OF AGUSAN DEL SUR v. FILIPINAS PALM OIL

PLANTATION, INC.
G.R. No. 183416, October 05, 2016, SECOND DIVISION (Leonen,J.)
The exemption from real property taxes given to cooperatives applies regardless of whether or not the land owned is leased.
This exemption benefits the cooperative's lessee. The characterization of machinery as real property is governed by the Local
Government Code and not the Civil Code.
FACTS
Filipinas Palm Oil Plantation Inc. (Filipinas) is a private organization engaged in palm oil
plantation of National Development Company (NDC) lands in Agusan del Sur. Within the plantation,
there are also three (3) plantation roads and a number of residential homes constructed by Filipinas for
its employees. After the Comprehensive Agrarian Reform Law was passed, NDC lands were transferred
to Comprehensive Agrarian Reform Law beneficiaries who formed themselves as the merged NDC-
Guthrie Plantations, Inc. - NDC-Guthrie Estates, Inc. (NGPI-NGEI) Cooperatives. Filipinas entered
into a lease contract agreement with NGPI-NGEI. The Provincial Assessor assessed Filipinas' properties
found within the plantation area particularly real property tax on the land leased from the Cooperative
and on the road equipment and mini-haulers on the plantation area.
ISSUES
1. Whether the exemption privilege of NGPI-NGEI from payment of real property tax extends to
respondent Filipinas Palm Oil Plantation Inc. as lessee of the parcel of land owned by
cooperatives
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2. Whether respondent's road equipment and mini haulers are movable properties and have not
been immobilized by destination for real property taxation.
RULING
1. Yes. Section 234(d) of the Local Government Code specifically provides for real property tax
exemption to cooperatives: Exemptions from Real Property Tax. — The following are exempted from
payment of the real property tax: (d) All real property owned by duly registered cooperatives as provided for under
[Republic Act] No. 6938. NGPI-NGEI, as the owner of the land being leased by respondent, falls within
the purview of the law. Section 234 of the Local Government Code exempts all real property owned by
cooperatives without distinction. Nothing in the law suggests that the real property tax exemption only
applies when the property is used by the cooperative itself. Similarly, the instance that the real property is
leased to either an individual or corporation is not a ground for withdrawal of tax exemption.
As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical

persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes
the general rule, viz., they are withdrawn upon the effectivity of the LGC except those granted to local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and
educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to
Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of
Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned
by limiting the retention only to those enumerated therein; all others not included in the enumeration
lost the privilege upon the effectivity of the LGC.
The roads that respondent constructed within the leased area should not be assessed with real
property taxes. The roads that respondent constructed became permanent improvements on the land
owned by the NGPI-NGEI by right of accession under the Civil Code. Despite the land being leased by
respondent when the roads were constructed, the ownership of the improvement still belongs to NGPI-
NGEI. The land is owned by the cooperatives at the time respondent built the roads. Hence, whatever is
incorporated in the land, either naturally or artificially, belongs to the NGPI-NGEI as the landowner.
Although the roads were primarily built for respondent's benefit, the roads were also being used by the
members of NGPI and the public. Therefore, NGPI-NGEI, as owner of the roads that permanently
became part of the land being leased by respondent, shall be liable for real property taxes, if any.
However, by express provision of the Local Government Code, NGPI-NGEI is exempted from
payment of real property tax.
2. No, the road equipment and mini haulers shall be considered as real property, subject to real
property tax. Although the road equipment and mini-haulers have not been immobilized in accordance
with Article 415(5) of the Civil Code, the road equipment and mini-haulers falls within the term
―machinery‖ under Section 199(o) of the LGC, as it is actually, directly and exclusively used by Filipinas
to meet the needs of its operations in palm oil production. As between the Civil Code, a general law
governing property and property relations, and the Local Government Code, a special law granting
LGUs the power to impose real property tax, then the latter shall prevail.
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PILMICO-MAURI FOODS CORP. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 175651, September 14, 2016, THIRD DIVISION (Reyes, J.)
The statutory test of deductibility, under Section 34 of the NIRC, where it is axiomatic that to be deductible as a
business expense, three conditions are imposed, namely: (a) both ordinary and necessary; (b) incurred in carrying a business
or trade; and (c) paid or incurred within the taxable year, then, it shall be allowed as a deduction from the gross income. In
addition, not only must the taxpayer meet the business test, he must substantially prove by evidence or records the deductions
claimed under the law, specifically under Section 237, otherwise, the same will be disallowed.
FACTS
PMFC is a domestic corporation with principal place of business at Cebu City. The books of
accounts of PMFC pertaining to 1996 were examined by the CIR for deficiency income, value-added tax
(VAT) and withholding tax liabilities. In the assessment, the claim for deduction of PMFC for business
expenses were disallowed on the ground that it was not substantiated by the official receipts and
invoices. PMFC further argues that in determining the deductibility of the purchase of raw materials
from gross income, Section 34 of the NIRC is the applicable provision and not Section 237 relative to
the mandatory requirement of keeping records of official receipts, upon which the CTA had misplaced
reliance. PMFC also claims that prior to the promulgation of the 1997 NIRC, the law does not require
the production of official receipts to prove an expense.
ISSUE
Whether the nature of evidence required to prove an ordinary expense like raw materials is
governed by Section34 of the NIRC and not by Section 237 as found by the CTA.
RULING
No. The Court finds that the alleged differences between the requirements of Section 34
invoked by PMFC, on one hand, and Section 237 relied upon by the CTA, on the other, are more
imagined than real. It is a rule in statutory construction that every part of the statute must be interpreted
with reference to the context. The law, thus, intends for the aforementioned sections to be read together,
and not for one provision to be accorded preference over the other.
The statutory test of deductibility where it is axiomatic that to be deductible as a business

expense, three conditions are imposed, namely: (a) both ordinary and necessary; (b) incurred in carrying a
business or trade; and (c) paid or incurred within the taxable year, then, it shall be allowed as a deduction
from the gross income. In addition, not only must the taxpayer meet the business test, he must
substantially prove by evidence or records the deductions claimed under the law, otherwise, the same will
be disallowed. The mere allegation of the taxpayer that an item of expense is ordinary and necessary does
not justify its deduction. It is, thus, clear that Section 34 does not exempt the taxpayer from
substantiating claims for deductions. While official receipts are not the only pieces of evidence which can
prove deductible expenses, if presented, they shall be subjected to examination. PMFC submitted official
receipts as among its evidence, and the CTA doubted their veracity. PMFC was, however, unable to
persuasively explain and prove through other documents the discrepancies in the said receipts.
Accordingly, Section 237 is applicable to determine if such receipts and invoices may substantiate such
claims for deduction.
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BANCO DE ORO, et al. v. REPUBLIC OF THE PHILIPPINES, et al.

G.R. NO. 198756, 16 August 2016, EN BANC (Leonen, J.)
In Section 22(Y) of the National Internal Revenue Code, the reckoning of whether there are 20 or more
individuals or corporate lenders is crucial in determining the tax treatment of the yield from the debt instrument. In other
words, if there are 20 or more lenders, the debt instrument is considered a deposit substitute and subject to 20% final
withholding tax.
FACTS
The Bureau of Treasury announced to all Government Securities Eligible Dealers (GSEDs) that
30 billion worth of 10-year zero Coupon Bonds would be auctioned. The announcement stated that ―the
issue being limited to 19 lenders and while taxable shall not be subject to 20% final withholding tax.‖ A
memo was also released regarding the Formula for the Zero-Coupon Bond, which included a formula in
determining the purchase price and settlement amount of the said coupon bonds.
One day before the auction, Bureau of Treasury issued the guidelines for the 10-year Zero
Coupon, which reiterated that the Bonds to be auctioned are not subject to the 20% withholding tax as
the issue will be limited to a maximum of 19 lenders in the primary market pursuant to a regulation
issued by the Bureau of Internal Revenue (BIR). On the day of the auction, Rizal Commercial Banking
Corporation (RCBC) participated on behalf of Caucus of Development NGO Networks (CODE-NGO)
and they won the bid. The Bureau of Treasury then released P35 billion worth of Bonds at yield-to-
maturity of 12.57% to RCBC.
RCBC then entered into an underwriting agreement with CODE-NGO, where RCBC Capital
was appointed as the Issue Manager and Lead Underwriter for the offering of the PEACe Bonds. RCBC
Capital sold and distributed the Government Bonds, and various banks including Banco De Oro et al.
purchased the PEACe Bonds on different dates. However, 11 days before the maturity of the PEACe
Bonds, the Commissioner of Internal Revenue issued a ruling declaring that the PEACe Bonds, being
deposit substitutes, were subject to 20% final withholding tax.
Due to the issued ruling, the Secretary of Finance directed the Bureau of Treasury to withhold
20% final tax from the face value of the PEACe Bonds upon their payment at maturity. BIR then issued
another ruling which clarified the final withholding of the tax due on the discount interest earned on the
PEACe Bonds. It clarified that the ruling should not only be imposed to RCBC/CODE-NGO but also
to all subsequent holders of the Bonds.
Banco De Oro et al. filed with the Supreme Court a petition for Certiorari, Prohibition, and/or
Mandamus. The application for a temporary restraining order (TRO) was also granted by the Court. On
January 13, 2015, the Court issued its Decision holding that the number of lenders/investors at every
transaction is determinative of whether the debt is a deposit substitute, subject to 20% final withholding
tax. It also held that the BIR Rulings disregarded the 20-lender rule provided in Section 22 (Y) of the
National Internal Revenue Code (NIRC). Banco De Oro et al. then filed the instant case to direct the
RCBC to comply with the TRO.
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ISSUES:
1. Did Banco De Oro, et al. violate the rule on exhaustion of administrative remedies when they
questioned the 2011 BIR Rulings directly to the Court, and not to the Secretary of Finance?
2. Should the 20-lender rule under Section 22 (Y) of the NIRC used to determine whether debt
instruments and securities are ―deposit substitutes‖, be applied to issuances of government debt
instruments? Are PEACe Bonds considered ―deposit substitutes‖?
3. Is the seller in the secondary market the proper withholding agent of the final withholding tax
(FWT) due on the yield or interest income derived from the government debt instruments considered as
deposit substitutes?
4. Assuming that the PEACe Bonds are considered ―deposit substitutes,‖ is the government or the
BIR estopped from imposing and/or collecting the 20% withholding tax from the face value of these
Bonds?
RULING:
1. NO. Republic Act (RA) No. 9282 expanded the jurisdiction of the Court of Tax Appeals and
elevated its rank to the level of a collegiate court with special jurisdiction. Section 1 specifically provides
that the Court of Tax Appeals is of the same level as the Court of Appeals and possesses ―all the
inherent powers of a Court of Justice.‖ The Court of Tax Appeals has undoubted jurisdiction to pass
upon the constitutionality or validity of a tax law or regulation when raised by the taxpayer as a defense
in disputing or contesting an assessment or claiming a refund. It is only in the lawful exercise of its
power to pass upon all matters brought before it, as sanctioned by Section 7 of RA No. 1125, as
amended.
The Court also declared that the Court of Tax Appeals may likewise take cognizance of cases
directly challenging the constitutionality or validity of a tax law or regulation or administrative issuance
(revenue orders, revenue memorandum circulars, rulings). Section 7 of RA No. 1125, as amended, is
explicit that, except for local taxes, appeals from the decisions of quasi-judicial agencies (Commissioner
of Internal Revenue, Commissioner of Customs, Secretary of Finance, Central Board of Assessment
Appeals, Secretary of Trade and Industry) on tax-related problems must be brought exclusively to the
Court of Tax Appeals. In other words, within the judicial system, the law intends the Court of Tax
Appeals to have exclusive jurisdiction to resolve all tax problems. Petitions for writs of certiorari against
the acts and omissions of the said quasi-judicial agencies should, thus, be filed before the Court of Tax
Appeals. Hence, the determination of the validity of the issuances clearly falls within the exclusive
appellate jurisdiction of the Court of Tax Appeals under Section 7(1) of RA No. 1125, as amended,
subject to prior review by the Secretary of Finance, as required under RA No. 8424.
2. YES. The 20-lender rule must be used to determine whether the debt instruments are ―deposit
substitutes.‖ The definition of deposit substitutes in Section 22(Y) specifically defined ―public‖ to mean
―twenty (20) or more individual or corporate lenders at any one time.‖ The qualifying phrase for public
introduced by the National Internal Revenue Code shows that a change in the meaning of the provision
was intended, and the Court should construe the provision as to give effect to the amendment. Hence, in
light of Section 22(Y), the reckoning of whether there are 20 or more individuals or corporate lenders is
crucial in determining the tax treatment of the yield from the debt instrument. In other words, if there
are 20 or more lenders, the debt instrument is considered a deposit substitute and subject to 20% final
withholding tax.
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Under the National Internal Revenue Code, however, deposit substitutes include not only the
issuances and sales of banks and quasi-banks for relending or purchasing receivables and other similar
obligations, but also debt instruments issued by commercial, industrial, and other non-financial
companies to finance their own needs or the needs of their agents or dealers.
The developments in the National Internal Revenue Code reflect the rationale for the application of the
withholding system to yield from deposit substitutes, which is essentially to maximize and expedite the
collection of income taxes by requiring its payment at the source, as with the case of the interest on bank
deposits. When banks sell deposit substitutes to the public, the final withholding tax is imposed on the
interest income because it would be difficult to collect from the public. Thus, the incipient scheme in the
final withholding tax is to achieve an effective administration in capturing the interest-income windfall
from deposit substitutes as a source of revenue. Thus, the PEACe Bonds are not treated as deposit
substitutes.
3. YES. Generally, a corporation may obtain funds for capital expenditures by floating either
shares of stock (equity) or bonds (debt) in the capital market. Shares of stock or equity securities
represent ownership, interest, or participation in the issuer-corporation. On the other hand, bonds or
debt securities are evidences of indebtedness of the issuer-corporation. New securities are issued and
sold to the investing public for the first time in the primary market. Transactions in the primary market
involve an actual transfer of funds from the investor to the issuer of the new security. The transfer of
funds is evidenced by a security, which becomes a financial asset in the hands of the buyer/investor.
Meanwhile, secondary markets refer to the trading of outstanding or already-issued securities. In any
secondary market trade, the cash proceeds normally go to the selling investor rather than to the issuer.
In a 10-year zero-coupon bond, the discount (or interest) is not earned in the first period, i.e.,
the value of the instrument does not equal par at the end of the first period. The total discount is earned
over the life of the instrument. Nonetheless, the total discount is considered earned on the year of sale
based on current value. In view of this, the successful GSED-bidder, as agent of the Bureau of Treasury,
has the primary responsibility to withhold the 20% final withholding tax on the interest valued at present
value, when its sale and distribution of the government securities constitutes a deposit substitute
transaction. The 20% final tax is deducted by the buyer from the discount of the bonds and included in
the remittance of the purchase price.
The final tax withheld by the withholding agent is considered as a ―full and final payment of the
income tax due from the payee on the said income [and the] payee is not required to file an income tax
return for the particular income.‖ Section 10 of Department of Finance Department Order No. 020-
10140 in relation to the National Internal Revenue Code also provides that no other tax shall be
collected on subsequent trading of the securities that have been subjected to the final tax.
4. YES. The government or the BIR is estopped from imposing and/or collecting the 20%
withholding tax from the face value of these Bonds. The Court ruled that in the interest of justice and
fair play, rulings or circulars promulgated by the Commissioner of Internal Revenue have no retroactive
application where applying them would prove prejudicial to taxpayers who relied in good faith on
previous issuances of the Commissioner.
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BLOOMBERRY RESORTS AND HOTELS, INC. v. BUREAU OF INTERNAL REVENUE

G.R. NO. 212530, 10 August 2016, THIRD DIVISION (Perez, J.)
PAGCOR’s income derived from gaming operations is subject only to the 5% franchise tax, in lieu of all other
taxes, including corporate income tax. Thus, all contractees and licensees of PAGCOR, upon payment of the 5% franchise
tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos.
FACTS
Philippine Amusement and Gaming Corporation (PAGCOR) granted to Bloomberry Resorts

and Hotels, Inc. (Bloomberry) a provisional license to establish and operate an integrated resort and
casino complex. Thus, being one of its licensees, Bloomberry only pays PAGCOR license fees, in lieu of
all taxes, as contained in its provisional license and consistent with the PAGCOR Charter or Presidential
Decree (P.D.) No. 1869, which provides the exemption from taxes of persons or entities contracting
with PAGCOR in casino operations. However, Republic Act (R.A.) No. 9337 amended Section 27(C) of
the National Internal Revenue Code (NIRC) of 1997, which excluded PAGCOR from the enumeration
of GOCCs exempt from paying corporate income tax. Then Commissioner Kim Henares issued
Revenue Memorandum Circulars (RMC) declaring that PAGCOR, in addition to the five percent (5%)
franchise tax of its gross revenue under P.D. No. 1869, is now subject to corporate income tax under the
NIRC. PAGCOR‘s contractees and licensees are likewise subject to income tax under the NIRC.
Bloomberry filed a petition for certiorari and prohibition, arguing that P.D. No. 1869 is an
existing valid law which exempts the contractees and licensees of PAGCOR from the payment of all
kinds of taxes except the 5% franchise tax on its gross gaming revenue, and that this exemption was not
repealed by the deletion of PAGCOR in the list of tax-exempt entities under the NIRC. It further argued
that the CIR acted without or in excess of its jurisdiction, or with grave abuse of discretion amounting to
lack or excess of jurisdiction when she issued the assailed provision in RMC which repealed or amended
P.D. No. 1869. On the other hand, the CIR countered that it merely clarified the taxability of PAGCOR
and its contractees and licensees for income tax purposes as well as other franchise grantees similarly
situated under prevailing laws.
ISSUE:
Is the provision of Revenue Memorandum Circular (RMC), subjecting contractees and licensees
of the PAGCOR to income tax under the NIRC, valid and constitutional, considering that P.D. No.
1869 grants tax exemptions to such contractees and licensees?
RULING:
NO. First. Under P.D. No. 1869, as amended, PAGCOR is subject to income tax only with
respect to its operation of related services. Accordingly, the income tax exemption ordained under
Section 27(c) of R.A. No. 8424 clearly pertains only to PAGCOR‘s income from operation of related
services. Such income tax exemption could not have been applicable to PAGCOR‘s income from
gaming operations as it is already exempt therefrom under Sec. 13(2)(a) of P.D. No. 1869, as amended.
Indeed, the grant of tax exemption or the withdrawal thereof assumes that the person or entity
involved is subject to tax. This is the most sound and logical interpretation because PAGCOR could not
have been exempted from paying taxes which it was not liable to pay in the first place. This is clear from
43
the wordings of P.D. No. 1869, as amended, imposing a franchise tax of five percent (5%) on its gross
revenue or earnings derived by PAGCOR from its operation under the Franchise in lieu of all taxes of
any kind or form, as well as fees, charges or levies of whatever nature, which necessarily include
corporate income tax.
In other words, there was no need for Congress to grant tax exemption to PAGCOR with
respect to its income from gaming operations as the same is already exempted from all taxes of any kind
or form, income or otherwise, whether national or local, under its Charter, save only for the five percent
(5%) franchise tax. The exemption attached to the income from gaming operations exists independently
from the enactment of R.A. No. 8424.
Second. There is no conflict between P.D. No. 1869, as amended, and R.A. No. 9337. The
former lays down the taxes imposable upon PAGCOR, as follows: (1) a five percent (5%) franchise tax
of the gross revenues or earnings derived from its operations conducted under the Franchise, which shall
be due and payable in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or
description, levied, established or collected by any municipal, provincial or national government
authority; and (2) income tax for income realized from other necessary and related services, shows and
entertainment of PAGCOR. With the enactment of R.A. No. 9337, which withdrew the income tax
exemption under R.A. No. 8424, PAGCOR‘s tax liability on income from other related services was
merely reinstated. The Court agrees with PAGCOR that if the lawmakers had intended to withdraw
PAGCOR‘s tax exemption of its gaming income, then Section 13(2)(a) of P.D. 1869 should have been
amended expressly in R.A. No. 9487, or the same, at the very least, should have been mentioned in the
repealing clause of R.A. No. 9337. However, the repealing clause never mentioned PAGCOR‘s Charter
as one of the laws being repealed.
Given that PAGCOR‘s Charter is not deemed repealed or amended by R.A. No. 9337, income
derived by PAGCOR from its gaming operations such as the operation and licensing of gambling
casinos, gaming clubs and other similar recreation or amusement places, gaming pools and related
operations is subject only to 5% franchise tax, in lieu of all other taxes, including corporate income tax.
With respect to PAGCOR‘s income from operation of other related services, the same is subject to
income tax only. The Court concluded that the CIR committed grave abuse of discretion amounting to
lack or excess of jurisdiction when she issued RMC No. 33-2013 subjecting both income from gaming
operations and other related services to corporate income tax and 5% franchise tax considering that it
unduly expands the Court‘s Decision dated 15 March 2011 without due process, which creates additional
burden upon PAGCOR.
As the PAGCOR Charter states in unequivocal terms that exemptions granted for earnings
derived from the operations conducted under the franchise specifically from the payment of any tax,
income or otherwise, as well as any form of charges, fees or levies, shall inure to the benefit of and
extend to corporation(s), association(s), agency(ies), or individual(s) with whom the PAGCOR or
operator has any contractual relationship in connection with the operations of the casino(s) authorized to
be conducted under this Franchise, so it must be that all contractees and licensees of PAGCOR, upon
payment of the 5% franchise tax, shall likewise be exempted from all other taxes, including corporate
income tax realized from the operation of casinos. Plainly, too, upon payment of the 5% franchise tax,
Bloomberry‘s income from its gaming operations of gambling casinos, gaming clubs and other similar
recreation or amusement places, and gaming pools, defined within the purview of the aforesaid section,
is not subject to corporate income tax.
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COMMISSIONER OF INTERNAL REVENUE V. GOODYEAR PHILIPPINES, INC.

G.R. No. 216130; 03 August 2016
Both the administrative and judicial claims for refund for erroneous withholding and remittance of tax
must be filed within the two (2) year prescriptive period. The taxpayer need not await the action of the
Commissioner in the administrative claim before filing the judicial claim for refund before the CTA, if
the two (2) year prescriptive period is about to lapse.
Facts:
Respondent taxpayer exercised its right of redemption on the shares held by its corporate
preferred shareholder (―Shareholder‖), which is organized and existing under the laws of Ohio, US. The
redemption price consists of (1) aggregate par value of the preferred shares; and (2) accrued and unpaid
dividends. The respondent filed an application for relief for double taxation from the International Tax
Affairs Division (―ITAD‖) of the Bureau of Internal Revenue (―BIR‖) to confirm that the redemption is
not subject to Philippine income tax under the Republic of the Philippines – United States Tax Treaty
(―RP-US Tax Treaty‖). However, it took the conservative approach and still withheld fifteen percent
(15%) final withholding tax (―FWT‖) on the difference of the redemption price and the aggregate value
of the preferred shares, i.e. the portion of the redemption price representing accrued and unpaid
dividends. Thereafter, within two (2) years from the date of payment of the FWT, the respondent filed
an administrative claim for refund of the FWT on the ground that it was erroneously withheld and
remitted. Thirteen (13) days from filing of the administrative claim, the respondent filed a judicial claim
for refund of the FWT with the CTA.
Issues:
1. WON the judicial claim for refund was prematurely filed; and
2. WON the difference between the redemption price paid to the Shareholder and the par value
of the preferred shares is subject to withholding tax as dividends declared to a foreign corporation.
Held:
1. NO. In claims for refund of erroneously paid taxes, both the administrative and judicial claims
for refund must be filed within two (2) years from the payment of tax.
Section 229 of the Tax Code states that judicial claims for refund must be filed within two (2)
years from the date of payment of the tax or penalty, providing further that the same may not be
maintained until a claim for refund or credit has been duly filed with the CIR. Section 229 of the Tax
Code, however, does not mean that the taxpayer must await the final resolution of the administrative
claim for refund since doing so will be tantamount to the taxpayer‘s forfeiture of its right to seek judicial
recourse should the two (2)-year prescriptive period expire without the appropriate judicial claim being
filed. Section 229 of the Tax Code, as worded, only required that an administrative claim for refund be
filed prior to the judicial claim.
2. NO. The difference between the redemption price and the par value of the preferred shares is
not a dividend, and should not be taxed as such.
The SC noted that the Shareholder is a US corporation and referred to the RP-US Tax Treaty
for the definition of dividends. Under the RP-US Tax Treaty, dividends ―means any distribution made by
a corporation to its shareholders out of its earnings or profits. The Court noted that respondent was
45
operating on deficit at the time the redemption was made. It does not have unrestricted retained earnings
from which it can issue dividends.
The SC furthermore noted that one of the primary features of an ordinary dividend is that the
distribution should be in the nature of a recurring return on stock. The amount paid by respondent to
the Shareholder did not represent a periodic distribution of dividend, but rather a payment by
respondent for the redemption. The Shareholder surrenders and relinquishes the preferred shares upon
payment of the redemption price.
The Municipality of Alfonso Lista, Ifugao, represented by Charles L. Cattiling, in his capacity as
Municipal Mayor and Estrella S. Aliguyon, in her capacity as Municipal Treasurer vs. The
Court of Appeals, Special former Sixth Division and SN Aboitiz Power-Magat, Inc.
G.R. No. 191442. July 27, 2016
A pioneer enterprise registered with the BOI has a clear and unmistakable right to be exempt from paying LBTs under the
Local Government Code. However, SNAPM's entitlement to a six-year exemption from LBTs already expired on July
12, 2013; hence, the municipality now has the right to collect LBTs from SNAPM.
FACTS:
SNAPM is a corporation engaged in the financing and acquisition of hydropower generating

facilities privatized by the Power Sector Assets and Liabilities Management Corporation (PSALM). On
December 31, 2006, SNAPM entered into an agreement with PSALM to acquire the Magat Power Plant
located along the boundary of Alfonso Lista, Ifugao, and Ramon, Isabela. SNAPM registered its power
plant operation as a pioneer enterprise with the Board of Investments (BOI). BOI approved the
application on July 12, 2007. The Local Government Code exempts BOI-registered pioneer enterprises
from the payment of local business taxes (LBTs) for a period of 6 years from the date of registration.
SNAPM however, overlooked this exemption and paid its LBTs for the year 2007. On January 20, 2009,
SNAPM realized its mistake and notified the officials of Alfonso Lista, Ifugao, of its exemption from
paying LBTs until July 11, 2013. However, the mayor refused to recognize the exemption. He threatened
to withhold the issuance of a mayor‘s Permit should SNAPM refuse to pay its LBTs. On January 29,
2009, SNAPM paid its LBTs for the first quarter of 2009 under protest. In return, the mayor of Alfonso
Lista issued a temporary mayor‘s permit effective only until March 15, 2009. On February 16, 2009,
SNAPM presented the Municipality with a letter from the BOI that confirmed its exemption from
paying LBTs for a period of six (6) years from July 12, 2007. Nevertheless, the municipality refused to
recognize SNAPM‘s exemption.
March 4, 2009, SNAPM filed an administrative claim with the Municipal Treasurer for a tax
refund or tax credit of its paid LBTs. On March 6, 2009, SNAPM also filed a complaint for injunction
(with an application for a Temporary Restraining Order [TRO] and/or a writ of preliminary injunction)
before the RTC against the municipality. March 18, 2009, the RTC denied SNAPM‘s application for a
TRO.
ISSUE:
Whether or not a pioneer enterprise registered with the BOI is exempt from local business tax
46
HELD:
A pioneer enterprise registered with the BOI has a clear and unmistakable right to be exempt
from paying LBTs under the Local Government Code. However, SNAPM's entitlement to a six-year
exemption from LBTs already expired on July 12, 2013; hence, the municipality now has the right to
collect LBTs from SNAPM.
TRIDHARMA MARKETING CORPORATION v. COURT OF TAX APPEALS, SECOND

DIVISION, AND THE COMMISSIONER OF INTERNAL REVENUE
G.R. No. 215950, June 20, 2016 (BERSAMIN, J.)
The CTA may order the suspension of the collection of taxes provided that the taxpayer either: (1) deposits the
amount claimed; or (2) files a surety bond for not more than double the amount. The requirement of the bond as a condition
precedent to suspension of the collection applies only in cases where the processes by which the collection sought to be made by
means thereof are carried out in consonance with the law, not when the processes are in plain violation of the law that they
have to be suspended for jeopardizing the interests of the taxpayer.
FACTS
On August 16, 2013, the petitioner received a Preliminary Assessment Notice (PAN) from the BIR
assessing it with various deficiency taxes - income tax (IT), value-added tax (VAT), withholding tax on
compensation (WTC), expanded withholding tax (EWT) and documentary stamp tax (DST). A
substantial portion of the deficiency income tax and VAT arose from the complete disallowance by the
BIR of the petitioner's purchases from Etheria Trading in 2010 amounting to P4,942,937,053.82. The
petitioner replied to the PAN through its letter dated August 30, 2013.
On September 23, 2013, the petitioner received from the BIR a Formal Letter of Demand assessing it
with deficiency taxes for the taxable year ending December 31, 2010 amounting to P4,697,696,275.25,
inclusive of surcharge and interest. It filed a protest against the formal letter of demand. CIR required
the petitioner to submit additional documents in support of its protest, and the petitioner complied.
On February 28, 2014, the petitioner received a Final Decision on Disputed Assessment worth
P4,473,228,667.87. Petitioner filed a request for reconsideration but was denied.
Prior to the CIR's decision, the petitioner paid the assessments corresponding to the WTC, DST and
EWT deficiency assessments, inclusive of interest, amounting to P5,836,786.10. It offered to
compromise the alleged deficiency assessments on IT and VAT.
On June 13, 2014, the petitioner appealed to the CTA via Petition for Review with Motion to Suspend
Collection of Tax.
The CTA in Division granted the motion provided, however, the petitioner deposits surety bond
equivalent to 150% of the assessment (P6.7B). Petitioner filed MR to reduce the amount of bond, it was
granted and reduced, equivalent to deficiency assessment for IT and VAT.
Hence, this special civil action for certiorari.
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ISSUE
Did the CTA in Division commit grave abuse of discretion in requiring the petitioner to file a surety
bond despite the supposedly patent illegality of the assessment that was beyond the petitioner's net
worth but equivalent to the deficiency assessment for IT and VAT?
RULING
The petition for certiorari is meritorious.
Section 11 of Republic Act No. 1125 (R.A. No. 1125),15 as amended by Republic Act No. 9282 (RA
9282)16 it is stated that:
Sec. 11. Who may appeal; effect of appeal. — x x x
No appeal taken to the Court of Tax Appeals from the decision of the Collector of Internal Revenue or
the Collector of Customs shall suspend the payment, levy, distraint, and/or sale of any property of the
taxpayer for the satisfaction of his tax liability as provided by existing law: Provided, however, That
when in the opinion of the Court the collection by the Bureau of Internal Revenue or the
Commissioner of Customs may jeopardize the interest of the Government and/or the taxpayer
the Court at any stage of the proceeding may suspend the said collection and require the
taxpayer either to deposit the amount claimed or to file a surety bond for not more than double
the amount with the Court. (bold Emphasis supplied.)
Clearly, the CTA may order the suspension of the collection of taxes provided that the taxpayer either:
(1) deposits the amount claimed; or (2) files a surety bond for not more than double the amount.
The petitioner argues that the surety bond greatly exceeds its net worth and makes it legally impossible to
procure the bond from bonding companies that are limited in their risk assumptions. As shown in its
audited financial statements for the year ending December 31, 2013, its net worth only amounted to
P916,768,767.00, making the amount of P4,467,391,881.76 fixed for the bond nearly five times greater
than such net worth.
The surety bond imposed by the CTA was within the parameters delineated in Section 11 of R.A. 1125,
as amended. The Court holds, however, that the CTA in Division gravely abused its discretion under
Section 11 because it fixed the amount of the bond at nearly five times the net worth of the petitioner
without conducting a preliminary hearing to ascertain whether there were grounds to suspend the
collection of the deficiency assessment on the ground that such collection would jeopardize the interests
of the taxpayer. Although the amount of P4,467,391,881.76 was itself the amount of the assessment, it
behoved the CTA in Division to consider other factors recognized by the law itself towards suspending
the collection of the assessment, like whether or not the assessment would jeopardize the interest of the
taxpayer, or whether the means adopted by the CIR in determining the liability of the taxpayer was legal
and valid. Simply prescribing such high amount of the bond like the initial 150% of the deficiency
assessment or later on even reducing the amount of the bond to equal the deficiency assessment would
practically deny to the petitioner the meaningful opportunity to contest the validity of the assessments,
and would likely even impoverish it as to force it out of business.
As aptly held in Roxas, et al. v. CTA, et al.:
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised
with caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally
and uniformly, lest the tax collector "kill the hen that lays the golden egg."
48
Legitimate enterprises enjoy the constitutional protection not to be taxed out of existence. Incurring
losses because of a tax imposition may be an acceptable consequence but killing the business of an entity
is another matter and should not be allowed. It is counter-productive and ultimately subversive of the
nation's thrust towards a better economy which will ultimately benefit the majority of our people.
Moreover, Section 11 of R.A. 1125, as amended, indicates that the requirement of the bond as a
condition precedent to suspension of the collection applies only in cases where the processes by which
the collection sought to be made by means thereof are carried out in consonance with the law, not when
the processes are in plain violation of the law that they have to be suspended for jeopardizing the
interests of the taxpayer.
The petitioner submits that the patent illegality of the assessment was sufficient ground to dispense with
the bond requirement because the CIR was essentially taxing its sales revenues without allowing the
deduction of the cost of goods sold by virtue of the CIR refusing to consider evidence showing that it
had really incurred costs.21 However, the Court is not in the position to rule on the correctness of the
deficiency assessment, which is a matter still pending in the CTA. Conformably with the pronouncement
in Pacquiao v. Court of Tax Appeals, First Division, and the Commissioner of Internal Revenue, a ruling that has
precedential value herein, the Court deems it best to remand the matter involving the petitioner's plea
against the correctness of the deficiency assessment to the CTA for the conduct of a preliminary hearing
in order to determine whether the required surety bond should be dispensed with or reduced.
CORAL BAY NICKEL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 190506, June 13, 2016, (BERSAMIN, J.)
The exception to the mandatory and jurisdictional compliance with the 120+30 day-period is when the claim for
the tax refund or credit was filed in the period between December 10, 2003 and October 5, 2010 during which BIR
Ruling No. DA-489-03 was still in effect.
Following the Philippine VAT system's adherence to the Cross Border Doctrine and Destination Principle, the
VAT implications are that "no VAT shall be imposed to form part of the cost of goods destined for consumption outside of
the territorial border of the taxing authority"
FACTS
The petitioner, a domestic corporation engaged in the manufacture of nickel and/or cobalt mixed
sulphide, is a VAT entity registered with the BIR. It is also registered with the PEZA as an Ecozone
Export Enterprise.
On August 5, 2003, the petitioner filed its Amended VAT Return declaring unutilized input tax from its
domestic purchases of capital goods, other than capital goods and services, for its third and fourth
quarters of 2002 totalling P50,124,086.75. On June 14, 2004, it filed with RDO its Application for Tax
Credits/Refund together with supporting documents.
Due to the alleged inaction of the respondent, the petitioner elevated its claim to the CTA on July 8,
2004 by petition for review, praying for the refund of the aforesaid input VAT.
After trial on the merits, the CTA in Division promulgated its decision on March 10, 2008 denying the
petitioner's claim for refund on the ground that the petitioner was not entitled to the refund of alleged
unutilized input VAT following Section 106(A)(2)(a)(5) of the NIRC, in relation to Article 77(2) of the
Omnibus Investment Code and conformably with the Cross Border Doctrine.
49
Hence, this appeal, whereby the petitioner contends that Toshiba is not applicable inasmuch as the
unutilized input VAT subject of its claim was incurred from May 1, 2002 to December 31, 2002 as a
VAT-registered taxpayer, not as a PEZA-registered enterprise; that during the period subject of its claim,
it was not yet registered with PEZA because it was only on December 27, 2002 that its Certificate of
Registration was issued; that until then, it could not have refused the payment of VAT on its purchases
because it could not present any valid proof of zero-rating to its VAT-registered suppliers; and that it
complied with all the procedural and substantive requirements under the law and regulations for its
entitlement to the refund.
ISSUES
Was the filing of petitioner‘s judicial claim premature?
Was the petitioner, an entity located within an ECOZONE, entitled to the refund of its unutilized input
taxes incurred before it became a PEZA registered entity?
RULING
The appeal is bereft of merit.
We first explain why we have given due course to the petition for review on certiorari despite the
petitioner's premature filing of its judicial claim in the CTA.
The petitioner filed with the BIR on June 10, 2004 its application for tax refund or credit representing
the unutilized input tax for the third and fourth quarters of 2002. Barely 28 days later, it brought its
appeal in the CTA contending that there was inaction on the part of the petitioner despite its not having
waited for the lapse of the 120-day period mandated by Section 112 (D) of the 1997 NTRC. At the time
of the petitioner's appeal, however, the applicable rule was that provided under BIR Ruling No. DA-489-
03, issued on December 10, 2003, to wit:
It appears, therefore, that it is not necessary for the Commissioner of Internal Revenue to first act
unfavorably on the claim for refund before the Court of Tax Appeals could validly take cognizance of
the case. This is so because of the positive mandate of Section 230 of the Tax Code and also by virtue of
the doctrine that the delay of the Commissioner in rendering his decision does not extend the
reglementary period prescribed by statute.
Incidentally, the taxpayer could not be faulted for taking advantage of the full two-year period set by law
for filing his claim for refund [with the Commissioner of Internal Revenue]. Indeed, no provision in the
tax code requires that the claim for refund be filed at the earliest instance in order to give the
Commissioner an opportunity to rule on it and the court to review the ruling of the Commissioner of
Internal Revenue on appeal. xxx
As pronounced in Silicon Philippines Inc. vs. Commissioner of Internal Revenue,15 the exception to the
mandatory and jurisdictional compliance with the 120+30 day-period is when the claim for the tax
refund or credit was filed in the period between December 10, 2003 and October 5, 2010 during which
BIR Ruling No. DA-489-03 was still in effect. Accordingly, the premature filing of the judicial claim was
allowed, giving to the CTA jurisdiction over the appeal.
As to the main issue, we sustain the assailed decision of the CTA En Banc.
50
The petitioner's insistence, that Toshiba is not applicable because it was a PEZA-registered entity during
the time subject of the claim for tax refund or credit, is unwarranted. The most significant difference
between Toshiba and this case is that Revenue Memorandum Circular No. 74-99 was not yet in effect at
the time Toshiba brought its claim for refund. Regardless of the distinction, however, Toshiba actually
discussed the VAT implication of PEZA-registered enterprises and ECOZONE-located enterprises in
its entirety, which renders Toshiba applicable to the petitioner's case.
Prior to the effectivity of RMC 74-99, the old VAT rule for PEZA-registered enterprises was based on
their choice of fiscal incentives, namely: (1) if the PEZA-registered enterprise chose the 5% preferential
tax on its gross income in lieu of all taxes, as provided by Republic Act No. 7916, as amended, then it
was VAT-exempt; and (2) if the PEZA-registered enterprise availed itself of the income tax holiday
under Executive Order No. 226, as amended, it was subject to VAT at 10% (now, 12%).
With the issuance of RMC 74-99, the distinction under the old rule was disregarded and the new circular
took into consideration the two important principles of the Philippine VAT system: the Cross Border
Doctrine and the Destination Principle.
Thus, Toshiba opined:ChanRoblesVirtualawlibrary
The rule that any sale by a VAT-registered supplier from the Customs Territory to a PEZA-registered
enterprise shall be considered an export sale and subject to zero percent (0%) VAT was clearly
established only on 15 October 1999, upon the issuance of RMC No. 74-99. Prior to the said date,
however, whether or not a PEZA-registered enterprise was VAT-exempt depended on the type of fiscal
incentives availed of by the said enterprise.
xxxx
This old rule clearly did not take into consideration the Cross Border Doctrine essential to the
VAT system or the fiction of the ECOZONE as a foreign territory. It relied totally on the choice of
fiscal incentives of the PEZA-registered enterprise. Again, for emphasis, the old VAT rule for PEZA-
registered enterprises was based on their choice of fiscal incentives: (1) If the PEZA-registered enterprise
chose the five percent (5%) preferential tax on its gross income, in lieu of all taxes, as provided by Rep.
Act No. 7916, as amended, then it would be VAT-exempt; (2) If the PEZA-registered enterprise availed
of the income tax holiday under Exec. Order No. 226, as amended, it shall be subject to VAT at ten
percent (10%). Such distinction was abolished by RMC No. 74-99, which categorically declared
that all sales of goods, properties, and services made by a VAT-registered supplier from the
Customs Territory to an ECOZONE enterprise shall be subject to VAT, at zero percent (0%)
rate, regardless of the tatter's type or class of PEZA registration; and, thus, affirming the nature
of a PEZA-registered or an ECOZONE enterprise as a VAT-exempt entity.18 (underscoring
and Emphasis supplied)
Furthermore, Section 8 of Republic Act No. 7916 mandates that PEZA shall manage and operate the
ECOZONE as a separate customs territory. The provision thereby establishes the fiction that an
ECOZONE is a foreign territory separate and distinct from the customs territory. Accordingly, the sales
made by suppliers from a customs territory to a purchaser located within an ECOZONE will be
considered as exportations. Following the Philippine VAT system's adherence to the Cross Border
Doctrine and Destination Principle, the VAT implications are that "no VAT shall be imposed to form
part of the cost of goods destined for consumption outside of the territorial border of the taxing
authority"
It is important to note herein that respondent Toshiba is located within an ECOZONE. The
national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be
referred to as the Customs Territory.
51
Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the
ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a
foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in
the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales
made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as
an importation into the Customs Territory.20 (underscoring and emphasis are supplied)
The petitioner's principal office was located in Barangay Rio Tuba, Bataraza, Palawan. Its plant site was
specifically located inside the Rio Tuba Export Processing Zone — a special economic zone
(ECOZONE). As such, the purchases of goods and services by the petitioner that were destined for
consumption within the ECOZONE should be free of VAT; hence, no input VAT should then be paid
on such purchases, rendering the petitioner not entitled to claim a tax refund or credit. Verily, if the
petitioner had paid the input VAT, the CTA was correct in holding that the petitioner's proper recourse
was not against the Government but against the seller who had shifted to it the output VAT following
RMC No. 42-03,22which provides:
In case the supplier alleges that it reported such sale as a taxable sale, the substantiation of remittance of
the output taxes of the seller (input taxes of the exporter-buyer) can only be established upon the
thorough audit of the suppliers' VAT returns and corresponding books and records. It is, therefore,
imperative that the processing office recommends to the concerned BIR Office the audit of the records
of the seller.
In the meantime, the claim for input tax credit by the exporter-buyer should be denied without prejudice
to the claimant's right to seek reimbursement of the VAT paid, if any, from its supplier.
We should also take into consideration the nature of VAT as an indirect tax. Although the seller is
statutorily liable for the payment of VAT, the amount of the tax is allowed to be shifted or passed on to
the buyer. However, reporting and remittance of the VAT paid to the BIR remained to be the
seller/supplier's obligation. Hence, the proper party to seek the tax refund or credit should be the
suppliers, not the petitioner.
PROCTER AND GAMBLE ASIA PTE LTD. v. COMMISSIONER OF INTERNAL

REVENUE G.R. No. 204277, May 30, 2016, SECOND DIVISION (Brion, J.)

All taxpayers may rely on BIR Ruling No. DA-489-03 from the time of its issuance on December 10, 2003, until its
effective reversal by the Aichi Doctrine adopted on October 6, 2010. Thus, judicial claims for tax credit or refund instituted
before the CTA should be given due course, despite their failure to comply with the 120- and 30-day periods.
FACTS:
Petitioner PGAPL is a foreign corporation with a Regional Operating Headquarters (ROHQ) in the
Philippines. On October 24, 2005, and January 26, 2006, PGAPL filed with the BIR its Original
Quarterly VAT returns for the Third and Fourth quarters of 2005, respectively. On April 4, 2007,
PGAPL amended its Quarterly VAT returns for the last two quarters of 2005, reporting both sales
subject to 10% VAT and zero-rated sales. For the last two quarters of 2005, PGAPL claimed it incurred
unutilized input VAT amounting to P53,624,427.14. On August 21, 2007, PGAPL filed an administrative
claim for tax refund with the BIR for input VAT attributable to its zero-rated sales covering the period
July 2005 to September 2005 and October 2005 to December 2005. Claiming that the CIR has not acted
52
on its application, PGAPL elevated the case to the CTA by filing a petition for review before the CTA
division on September 27, 2007. The CTA Division dismissed PGAPL's petition ruling that the filing of
the judicial claim for tax refund or credit before the CTA is premature, because the petitioner proceeded
with its appeal even before the expiration of the 120-day period given to the CIR to decide on its claim
for tax refund or credit of excess input VAT. PGAPL moved for reconsideration, but the CTA denied
its motion. Thereafter, petitioner filed a petition for review before the CTA en banc but the same was
also denied. Petitioner claims that since its judicial claim was filed before the CTA on September 27,
2007, when BIR Ruling No. DA-489-03 was in effect, its judicial claim should be deemed as having been
timely filed. The CIR argues that her office has the exclusive and original jurisdiction to interpret tax
laws, subject to the review of the Secretary of Finance, as provided in Section 4 of the NIRC. Hence,
BIR Ruling No. DA-489-03 was issued ultra vires, having been issued by the BIR Deputy Commissioner,
not by the CIR. The CIR further claims that even if we assume that the said ruling is valid, it still does
not apply to the case of PGAPL, because it did not prove that it acted in good faith. According to
respondent, if PGAPL truly relied on the BIR ruling in good faith, it should have raised the rule set forth
in the said BIR ruling as early as the time the present case was pending before the CTA.
ISSUE:
WON the judicial claim of PGAPL was timely filed
RULING:
YES. In accordance with the equitable estoppel principle under Section 246 of the NIRC, the court ruled
in San Roque-Taganito that there are exceptions to the strict rule that compliance with the Aichi
Doctrine is mandatory and jurisdictional, one of which is BIR Ruling No. DA-489-03. If the CIR issues a
ruling, either a specific one applicable to a particular taxpayer or a general interpretative rule applicable to
all taxpayers, and, as a result, misleads the taxpayers affected by the rule, into filing prematurely judicial
claims with the CTA, the CIR cannot be allowed to later on question the CTA's assumption of
jurisdiction over such claim. Therefore, as a general interpretative rule, all taxpayers may rely on BIR
Ruling No. DA-489-03 from the time of its issuance on December 10, 2003, until its effective reversal by
the Aichi Doctrine adopted on October 6, 2010. Thus, judicial claims for tax credit or refund instituted
before the CTA should be given due course, despite their failure to comply with the 120- and 30-day
periods. The Court ruled that PGAPL was in good faith when it relied on BIR Ruling No. DA-489-03
because first, good faith is always presumed and this presumption can only be overcome by clear and
convincing evidence. The mere allegation that the petitioner failed to raise BIR Ruling No. DA-489-03
before the CTA is insufficient to negate this presumption. Second, even if petitioner did not raise the
BIR ruling before the CTA, the court can take cognizance of an official act emanating from the BIR, an
executive department of the government. Judicial notice of BIR Ruling No. DA-489-03 is all the more
mandatory especially when it has been applied consistently by this Court in its past rulings. Furthermore,
the power to interpret rules and regulations is not exclusive and may be delegated by the CIR to the
Deputy Commissioner.
CAPITOL WIRELESS, INC. v. THE PROVINCIAL TREASURER OF BATANGAS, THE

PROVINCIAL ASSESSOR OF BATANGAS, THE MUNICIPAL TREASURER AND
ASSESSOR OF NASUGBU, BATANGAS G.R. No. 180110, May 30, 2016, SECOND DIVISION
(Peralta, J.)

1. In disputes involving real property taxation, the general rule is to require the taxpayer to first avail of
administrative remedies and pay the tax under protest before allowing any resort to a judicial action,
except when the assessment itself is alleged to be illegal or is made without legal authority.
53
2. Submarine or undersea communications cables are akin to electric transmission lines which the Court
declared as "no longer exempted from real property tax" and may qualify as "machinery" subject to real
property tax under the Local Government Code.
FACTS:
Petitioner Capitol Wireless Inc. (Capwire) is a Philippine corporation in the business of providing
international telecommunications services. Capwire has signed agreements with other local and foreign
telecommunications companies covering an international network of submarine cable systems such as
the Asia Pacific Cable Network System (APCN); the Brunei-Malaysia-Philippines Cable Network System
(BMP-CNS), the Philippines-Italy (SEA-ME-WE-3 CNS), and the Guam Philippines (GP-CNS) systems.
The agreements provide for co-ownership and other rights among the parties over the network.
Petitioner Capwire claims that it is co-owner only of the so-called "Wet Segment" of the APCN, while
the landing stations or terminals and Segment E of APCN located in Nasugbu, Batangas are allegedly
owned by the Philippine Long Distance Telephone Corporation (PLDT). Moreover, it alleges that the
Wet Segment is laid in international, and not Philippine, waters. On May 15, 2000, Capwire submitted a
Sworn Statement of True Value of Real Properties at the Provincial Treasurer's Office, Batangas City,
Batangas Province, for the Wet Segment of the system. As a result, the respondent Provincial Assessor
issued Assessments of Real Property (ARP) against Capwire. The Provincial Assessor had determined
that the submarine cable systems described in Capwire's Sworn Statement of True Value of Real
Properties are taxable real property but Capwire contested such claims. The reason cited by Capwire is
that the cable system lies outside of Philippine territory as the same is on international waters. Capwire
then received a Warrant of Levy and a Notice of Auction Sale, respectively, from the respondent
Provincial Treasurer which prompted Capwire to file a Petition for Prohibition and Declaration of
Nullity of Warrant of Levy, Notice of Auction Sale and/or Auction Sale with the RTC of Batangas City.
The RTC dismissed the petition for failure of the petitioner Capwire to follow the requisite of payment
under protest as well as failure to appeal to the Local Board of Assessment Appeals (LBAA), as provided
for in Sections 226 and 229 of Republic Act (R.A.) No. 7160, or the Local Government Code. The CA
affirmed the decision of the RTC. Petitioner Capwire asserts that recourse to the LBAA, or payment of
the tax under protest, is inapplicable to the case at bar since there is no question of fact involved, or that
the question involved is not the reasonableness of the amount assessed but, rather, the authority and
power of the assessor to impose the tax and of the treasurer to collect it. It further asserts that the cable
system is not subject to tax. The respondents insist that the case presents questions of fact such as the
extent and portion of the submarine cable system that lies within the jurisdiction of the said local
governments, as well as the nature of the so-called indefeasible rights as property of Capwire.
ISSUE:
1. WON the dismissal of Capwire's petition by the RTC proper
2. WON submarine wires or cables used for communications may be taxed like other real estate.
RULING:
1. YES. No error attended the ruling of the appellate court that the case involves factual questions that
should have been resolved before the appropriate administrative bodies. In disputes involving real
property taxation, the general rule is to require the taxpayer to first avail of administrative remedies and
pay the tax under protest before allowing any resort to a judicial action, except when the assessment
itself is alleged to be illegal or is made without legal authority. For example, prior resort to administrative
action is required when among the issues raised is an allegedly erroneous assessment, like when the
reasonableness of the amount is challenged, while direct court action is permitted when only the legality,
power, validity or authority of the assessment itself is in question. Stated differently, the general rule of a
prerequisite recourse to administrative remedies applies when questions of fact are raised, but the
exception of direct court action is allowed when purely questions of law are involved.
54
Capwire argues based on mere legal conclusions, culminating on its claim of illegality of respondents'
acts, but the conclusions are yet unsupported by facts that should have been threshed out quasi-judicially
before the administrative agencies. Therefore, Capwire's resort to judicial action, premised on its legal
conclusion that its cables (the equipment being taxed) lie entirely on international waters, without first
administratively substantiating such a factual premise, is improper and was rightly denied. Its proposition
that the cables lie entirely beyond Philippine territory, and therefore, outside of Philippine sovereignty, is
a fact that is not subject to judicial notice since, on the contrary, it is in fact certain that portions of the
cable would definitely lie within Philippine waters.
2. YES. Submarine or undersea communications cables are akin to electric transmission lines which the
Court has recently declared in Manila Electric Company v. City Assessor and City Treasurer of Lucena
City, as "no longer exempted from real property tax" and may qualify as "machinery" subject to real
property tax under the Local Government Code. Both electric lines and communications cables, in the
strictest sense, are not directly adhered to the soil but pass through posts, relays or landing stations, but
both may be classified under the term "machinery" as real property under Article 415(5) of the Civil
Code for the simple reason that such pieces of equipment serve the owner's business or tend to meet the
needs of his industry or works that are
on real estate. Even objects in or on a body of water may be classified as such, as "waters" is classified as
an immovable under Article 415(8) of the Code. The Court held that "it is a familiar phenomenon to see
things classed as real property for purposes of taxation which on general principle might be considered
personal property."
Since the submarine cable system's Landing Station in Nasugbu, Batangas is owned by PLDT and not by
Capwire, the latter is not liable for the real property tax on this Landing Station. Nonetheless, Capwire
admits that it co-owns the submarine cable system that is subject of the tax assessed and being collected
by public respondents. As the Court takes judicial notice that Nasugbu is a coastal town and the
surrounding sea falls within what the United Nations Convention on the Law of the Sea (UNCLOS)
would define as the country's territorial sea (to the extent of 12 nautical miles outward from the nearest
baseline, under Part II, Sections 1 and 2) over which the country has sovereignty, including the seabed
and subsoil, it follows that indeed a portion of the submarine cable system lies within Philippine territory
and thus falls within the jurisdiction of the said local taxing authorities. It therefore belies Capwire's
contention that the cable system is entirely in international waters. Further, under Part VI, Article 79 of
the UNCLOS, the Philippines clearly has jurisdiction with respect to cables laid in its territory that are
utilized in support of other installations and structures under its jurisdiction. And as far as local
government units are concerned, the areas described above are to be considered subsumed under the
term "municipal waters" which, under the Local Government Code, includes "not only streams, lakes,
and tidal waters within the municipality, not being the subject of private ownership and not comprised
within the national parks, public forest, timber lands, forest reserves or fishery reserves, but also marine
waters included between two lines drawn perpendicularly to the general coastline from points where the
boundary lines of the municipality or city touch the sea at low tide and a third line parallel with the
general coastline and fifteen (15) kilometers from it."
Furthermore, Capwire failed to claim tax exemption from real property taxation from the provincial
assessor. And even under Capwire's legislative franchise, RA 4387, which amended RA 2037, where it
may be derived that there was a grant of real property tax exemption for properties that are part of its
franchise, or directly meet the needs of its business, such had been expressly withdrawn by the Local
Government Code, which took effect on January 1, 1992. Such express withdrawal had been previously
held effective upon exemptions bestowed by legislative franchises granted prior to the effectivity of the
Local Government Code. Capwire fails to allege or provide any other privilege or exemption that were
granted to it by the legislature after the enactment of the Local Government Code. Therefore, the
presumption stays that it enjoys no such privilege or exemption. Tax exemptions are strictly construed
against the taxpayer because taxes are considered the lifeblood of the nation.
55
COMMISSIONER OF INTERNAL REVENUE v. LIQUIGAZ PHILIPPINES

COPORATION
G.R. Nos. 215534 & 215557, 18 April 2016, FIRST DIVISION, (Mendoza, J.)
A decision differs from an ―assessment‖ and failure of the FDDA to state the facts and law on which it is based
renders the decision void – but not necessarily the assessment.
FACTS:
Liquigaz Philippines Corporation (Liquigaz), a corporation duly organized and existing under
Philippines laws, received a copy of a Letter of Authority (LOA) issued by the Commissioner of Internal
Revenue (CIR), authorizing the investigation of all internal revenue taxes for taxable year 2005. On April
9, 2008, Liquigaz received an undated letter purporting to be a Notice of Informal Conference (NIC), as
well as the detailed computation of its supposed tax liability. Subsequently, Liquigaz received a copy of
the Preliminary Assessment Notice (PAN), together with the attached details of discrepancies for the
calendar year ending December 31, 2005. Thereafter, it received a Formal Letter of Demand
(FLD)/Formal Assessment Notice (FAN).
Liquigaz filed a protest against the FLD/FAN. Then, Liquigaz received a copy of the Final
Decision Disputed Assessment (FDDA) covering the tax audit under the previous LOA and finding
Liquigaz liable for deficiency withholding tax liabilities. Consequently, Liquigaz filed a petition before the
Court of Tax Appeals Division (CTA Division) assailing the validity of the FDDA.
The CTA Division partially granted the petition, cancelling the Expanded Withholding Tax
(EWT) and Fringe Benefits Tax (FBT) assessments but modifying the Withholding Tax on
Compensation (WTC). It ruled that the portion of the FDDA relating to the EWT and FBT was void
because it failed to notify the taxpayer of the factual bases thereof, as required in Section 228 of the
National Internal Revenue Code (NIRC). Aggrieved, the CIR and Liquigaz filed their respective petitions
before the CTA En Banc which affirmed the court a quo decision.
ISSUE:
Should the assessment be invalidated since the FDDA did not provide for the facts on which the
assessment was based?
RULING:
YES. The importance of providing the taxpayer of adequate written notice of his tax liability is
undeniable. Section 228 of the NIRC declares that an assessment is void if the taxpayer is not notified in
writing of the facts and law on which it is made. Again, Section 3.1.4 of Revenue Regulation (RR) No.
12-99 requires that the FLD must state the facts and law on which it is based, otherwise, the FLD/FAN
itself shall be void. Meanwhile, Section 3.1.6 of RR No. 12-99 specifically requires the decision of the
CIR or his duly authorized representative on a disputed assessment shall state the facts, law and rules and
regulations, or jurisprudence on which the decision is based. Failure to do so would invalidate the
FDDA.
But a void FDDA does not ipso facto render the assessment void.
56
A decision of the CIR on a disputed assessment differs from the assessment itself. What is
appealable to the CTA is the ―decision‖ of the CIR on disputed assessment and not the assessment itself.
An assessment becomes a disputed assessment after a taxpayer has filed its protest to the assessment in
the administrative level. Thereafter, the CIR either issues a decision on the disputed assessment or fails
to act on it and is, therefore, denied. The taxpayer may then appeal the decision on the disputed
assessment or the inaction of the CIR. Hence, the invalidity of one does not necessarily result to the
invalidity of the other – unless the law or regulations otherwise provide.
A perusal of the FDDA reveals that it merely contained a table of Liquigaz‘s supposed tax liabilities,
without providing any details. While it provided for the legal bases of the assessment, it fell short on
informing Liquigaz of the factual bases thereof. thus, the FDDA is void.
The Court found that the CTA erred in concluding that the assessment on EWT and FBT
deficiency was void because the FDDA covering the same was void. The assessment remains valid
notwithstanding the nullity of the FDDA because as discussed above, the assessment itself differs from a
decision on the disputed assessment.
As established, an FDDA that does not inform the taxpayer in writing of the facts and law on
which it is based renders the decision void. Therefore, it is as if there was no decision rendered by the
CIR. It is tantamount to a denial by inaction by the CIR, which may still be appealed before the CTA
and the assessment evaluated on the basis of the available evidence and documents. The merits of the
EWT and FBT assessment should have been discussed and not merely brushed aside on account of the
void FDDA.
SPOUSES EMMANUEL AND JINKEE PACQUIAO v. THE COURT OF TAX APPEALS –

FIRST DIVISION and THE COMMISSION OF INTERNAL REVENUE
G.R. No. 213394, 06 April 2016, SECOND DIVISION (Mendoza, J.)
The purpose of the rule (dispensing of the bond requirement) is not only to prevent jeopardizing the interest of the
taxpayer, but more importantly, to prevent the absurd situation wherein the court would declare ―that the collection by the
summary methods of distraint and levy was violative of law, and then, in the same breath require the petitioner to deposit or
file a bond as a prerequisite for the issuance of a writ of injunction.‖
FACTS
On April 1, 2009, Pacquiao filed his 2008 income tax return, reporting his Philippine-sourced
income, and later on, amended to include his US-sourced income.
Pacquiao received a Letter of Authority (LA) on March 25, 2010 (March LA) from the Bureau of
Internal Revenue (BIR) for the examination of his books of accounts and other accounting records from
January 1 to December 31, 2008.
On April 15, 2010, Pacquiao filed his 2009 income tax return, which although reflecting his
Philippine-sourced income, failed to include his income derived from his US earnings and his Value
Added Tax (VAT) returns from 2008 and 2009.
57
Subsequently, the Commissioner on Internal Revenue (CIR) issued another LA on July 27, 2010
(July LA), authorizing BIR‘s National Investigation Division (NID) to examine the accounting records of
both spouses from 1995 to 2009, which was later on replaced by issuing separate electronic versions of
July LA to both spouses. Spouses Pacquiao questioned the propriety of the CIR investigation, stated
that they were already investigated by the BIR for the years prior to 2007 and that in 2008, as pursuant to
March LA, no fraud was found to have been committed.
On June 31, 2012, the CIR issued its Notice of Initial Assessment-Informal Conference (NIC)
directly addressed to Spouses Pacquiao, informing them that they were liable for deficiency income taxes.
And later on May 14, 2013, the BIR issued its Final Decision on Disputed Assessment (FDDA),
addressed only to Pacquiao for deficiency income taxes and VAT for the years 2008 and 2009 amounting
to Php2,261,217,439.92, inclusive of interests and surcharges. However, on July 19, 2013, a Preliminary
Collection Letter (PCL) was issued demanding the both spouses to pay the said amount.
On August 7, the BIR sent the spouses the Final Notice Before Seizure (FNBS) informing them
of their last opportunity to make the necessary settlement of the deficiency. Hence, the Spouses
Pacquiao paid in installments a total of Php32,196,534.40.
The Spouses Pacquiao, thereafter, filed a Petition for Review before the Court of Tax Appeals
(CTA) contending that the assessment of the CIR was defective because it was predicated on its mere
allegation that they were guilty of fraud. Pending appeal, the Spouses Pacquiao sought the suspension of
the issuance of warrants of distraint and/or levy and warrants of garnishment.
Meanwhile, the Accounts Receivable Monitoring Division of the BIR (BIR-ARMD) informed
the Spouses Pacquiao that despite their initial payment, the amount to be collected from both of them
still amounted to P3,259,643,792.24, for deficiency income tax for taxable years 2008 and 2009, and
P46,920,235.74 for deficiency VAT for the same period. A warrant of distraint and/or levy against
Pacquiao and Jinkee was likewise issued, thus, prompting the Spouses Pacquiao to file an Urgent Motion
to Lift Warrants of Distraints and/or Levy and Garnishment. The Spouses Pacquiao also questioned the
necessity of the cash deposit and bond requirement under Section 11 of Republic Act (R.A.) No. 1125,
arguing that the CIR‘s assessment of their tax liabilities was highly questionable.
The CTA granted the said motion and ordered the CIR to desist from collecting on the
deficiency tax assessments against the Spouses Pacquiao. It noted that the amount sought to be
collected was way beyond the Spouses Pacquiao‘s net worth, which, based on Pacquiao‘s Statement of
Assets, Liabilities and Net Worth (SALN), only amounted to P1,185,984,697.00. The CTA opined that
the collection of the total amount of P3,298,514,894.35 from the Spouses Pacquiao would be highly
prejudicial to their interests and should, thus, be suspended pursuant to Section 11 of R.A. No. 1125, as
amended. However, the Spouses Pacquiao were required to deposit the amount of P3,298,514,894.35 or
post a bond in the amount of P4,947,772,341.53 as there was no justification that the Spouses Pacquiao
should deposit less than the disputed amount.
The Spouses Pacquiao sought partial reconsideration praying for the reduction of the amount of
the bond required or an extension of 30 days to file the same. The CTA denied their motion to reduce
the required cash deposit or bond, but allowed them an extension of thirty (30) days within which to file
the same. Hence, the present petition.
58
ISSUE:
May the CTA require Spouses Pacquiao to post a bond, in order to suspend the collection of
deficiency taxes, even if the CIR employed a tax collection process violative of Spouses Pacquiao‘s right
to due process?
RULING:
NO. The Resolutions of the CTA, in so far as it required the petitioners to deposit first a cash
bond in the amount of P3,298,514,894.35 or post a bond of P4,947,772,341.53, should be further
enjoined until the issues are settled in a preliminary hearing to be conducted by it.
Section 11 of R.A. No. 1125, as amended by R.A. No. 9282, embodies the rule that an appeal to
the CTA from the decision of the CIR will not suspend the payment, levy, distraint, and/or sale of any
property of the taxpayer for the satisfaction of his tax liability as provided by existing law. When, in the
view of the CTA, the collection may jeopardize the interest of the Government and/or the taxpayer, it
may suspend the said collection and require the taxpayer either to deposit the amount claimed or to file a
surety bond. Such authority emanates from the jurisdiction conferred to it not only by Section 11 of
R.A. No. 1125, but also by Section 7 of the same law.
As explained by the Court in previous cases, whenever it is determined by the courts that the
method employed by the CIR in the collection of tax is not sanctioned by law, the bond requirement
under Section 11 of R.A. No. 1125 should be dispensed with. The purpose of the rule is not only to
prevent jeopardizing the interest of the taxpayer, but more importantly, to prevent the absurd situation
wherein the court would declare ―that the collection by the summary methods of distraint and levy was
violative of law, and then, in the same breath require the petitioner to deposit or file a bond as a
prerequisite for the issuance of a writ of injunction.‖
In rendering the assailed resolution, the CTA, without stating the facts and law, made a
determination that the illegality of the methods employed by the CIR to effect the collection of tax was
not patent. Absent any evidence and preliminary determination by the CTA, the Court cannot make any
factual finding and settle the issue of whether the Spouses Pacquiao should comply with the security
requirement under Section 11, R.A. No. 1125. The determination of whether the methods, employed by
the CIR in its assessment, jeopardized the interests of a taxpayer for being patently in violation of the law
is a question of fact that calls for the reception of evidence which would serve as basis. In this regard, the
CTA is in a better position to initiate this given its time and resources.
SILICON PHILIPPINES, INC. (FORMERLY INTEL PHILIPPINES MANUFACTURING,

INC.), Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent. G.R. No. 182737,
March 02, 2016
FACTS
Petitioner is a corporation engaged in the business of designing, developing, manufacturing and

exporting integrated circuit components. It is a preferred pioneer enterprise registered with the Board of
Investments. It is likewise registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer by
59
virtue of its sale of goods and services with a permit to print accounting documents like sales invoices
and official receipts.
On 24 July 2001, petitioner filed its 2nd Quarter VAT Return reporting the amount of P765,696,325.68 as
its zero-rated sales.
Its 3rd Quarter VAT Return filed on 23 October 2001 indicated zero-rated sales in the amount of
P571,812,011.26. This amount was increased to P678,418,432.83 in the Amended 3rd Quarter VAT
Return filed on 29 October 2001.
The 4th Quarter VAT Return filed on 15 January 2002 reported zero-rated sales in the amount of
P1,000,052,659.89. This amount remained unchanged in the Amended 4th Quarter VAT Return filed on
22 May 2002.
Petitioner sought to recover the VAT it paid on imported capital goods for the 2ndquarter of 2001. On
16 October 2001, it filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center,
Department of Finance, an application for a tax credit/refund in the amount of P9,038,279.56.
On 4 September 2002, petitioner also filed for a tax credit/refund of the VAT it had paid on imported
capital goods for the 3rd and 4th quarters of 2001 in the amounts of P1,420,813.04 and
P14,582,023.62,16 respectively.
Because of the continuous inaction by respondent on the administrative claims of petitioner for a tax
credit/refund in the total amount of P25,041,116.22, the latter filed separate petitions for review before
the CTA.
CTA Case No. 6741 filed on 30 July 2003 sought to recover P9,038,279.56 for the 2ndquarter of
2001; CTA Case No. 6800 filed on 20 October 2003, the amount of P1,420,813.04 for the 3rd quarter of
2001;and CTA Case No. 6841 filed on 30 December 2003, P14,582,023.62 for the 4th quarter of 2001.
The CTA En Banc affirmed the CTA Second Division Decision dated 5 February 2007 and
Resolution4 dated 29 June 2007 in CTA Case Nos. 6741, 6800 & 6841. That Decision denied the claim
for tax refund or issuance of tax credit certificates corresponding to petitioner's excess/unutilized input
value-added tax (VAT) for the 2nd, 3rd and 4th quarters of taxable year 2001. The CTA En Banc
Resolution denied petitioner's motion for reconsideration
Issues
[WHETHER] THE COURT OF TAX APPEALS ERRED IN DENYING [PETITIONER'S] CLAIM

FOR REFUND OF ITS EXCESS / UNUTILIZED INPUT VAT DERIVED FROM
IMPORTATION OF CAPITAL GOODS DUE TO ITS FAILURE TO PROVE THE EXISTENCE
OF ZERO-RATED EXPORT SALES.[WHETHER] THE COURT OF TAX APPEALS ERRED IN
FINDING THAT [PETITIONER] FAILED TO COMPLY WITH THE REQUIREMENTS OF A
VALID CLAIM FOR REFUND / TAX CREDIT OF INPUT VAT PAID ON ITS IMPORTATION
OF CAPITAL GOODS.
[WHETHER] THE COURT OF TAX APPEALS ERRED IN RULING THAT [PETITIONER]
FAILED TO PROVE THAT THE GOODS IMPORTED ARE CAPITAL GOODS
60
[WHETHER] THE INPUT VAT ON THE ALLEGED NON-CAPITAL GOODS ARE STILL
REFUNDABLE BECAUSE THEY ARE ATTRIBUTABLE TO THE ZERO RATED SALES OF
[PETITIONER, A 100% EXPORT ENTERPRISE]lesVirtualawlibrary
Held
The administrative claim of a VAT-registered person for the issuance by respondent of tax credit
certificates or the refund of input taxes paid on zero-rated sales or capital goods imported may be made
within two years after the close of the taxable quarter when the sale or importation/purchase was made.
Upon the filing of an administrative claim, respondent is given a period of 120 days within which to (1)
grant a refund or issue the tax credit certificate for creditable input taxes; or (2) make a full or partial
denial of the claim for a tax refund or tax credit. Failure on the part of respondent to act on the
application within the 120-day period shall be deemed a denial.
Note that the 120-day period begins to run from the date of submission of complete documents
supporting the administrative claim. If there is no evidence showing that the taxpayer was required to
submit - or actually submitted - additional documents after the filing of the administrative claim, it is
presumed that the complete documents accompanied the claim when it was filed.
Considering that there is no evidence in this case showing that petitioner made later submissions of
documents in support of its administrative claims, the 120-day period within which respondent is
allowed to act on the claims shall be reckoned from 16 October 2001 and 4 September 2002.
Whether respondent rules in favor of or against the taxpayer - or does not act at all on the administrative
claim - within the period of 120 days from the submission of complete documents, the taxpayer may
resort to a judicial claim before the CTA. The judicial claim shall be filed within a period of 30 days after
the receipt of respondent's decision or ruling or after the expiration of the 120-day period, whichever is
sooner.
Aside from a specific exception to the mandatory and jurisdictional nature of the periods provided by
the law, any claim filed in a period less than or beyond the 120+30 days provided by the NIRC is outside
the jurisdiction of the CTA.
The judicial claim for the 4th quarter of 2001, while filed within the period 10 December 2003 up to 6
October 2010, cannot find solace in BIR Ruling No. DA-489-03. The general interpretative rule allowed
the premature filing of judicial claims by providing that the "taxpayer-claimant need not wait for the
lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for
Review."The rule certainly did not allow the filing of a judicial claim long after the expiration of the
120+30 day period.
As things stood, the CTA had no jurisdiction to act upon, take cognizance of, and render judgment upon
the petitions for review filed by petitioner. For having been rendered without jurisdiction, the decision of
the CTA Second Division in this case - and consequently, the decision of the CTA En Banc - is a total
nullity that creates no rights and produces no effect.
61
Given the foregoing, there is no reason for this Court to rule upon the issues raised by petitioner in the
instant petition.c
COMMISSIONER OF INTERNAL REVENUE v. GJM PHILIPPINES MANUFACTURING,

INC., G.R. No. 202695, February 29, 2016
FACTS
On April 12, 2000, GJM filed its Annual Income Tax Return for the year 1999. Thereafter, its parent
company, Warnaco (ITK) Ltd., underwent bankruptcy proceedings, resulting in the transfer of
ownership over GJM and its global affiliates to Luen Thai Overseas Limited in December 2001. On
August 26, 2002, GJM informed the Revenue District Officer of Trece Martirez, through a letter, that on
April 29, 2002, it would be canceling its registered address in Makati and transferring to Rosario, Cavite,
which is under Revenue District Office (RDO) No. 54. On August 26, 2002, GJM's request for transfer
of its tax registration from RDO No. 48 to RDO No. 54 was confirmed through Transfer Confirmation
Notice No. OCN ITR 000018688.
On October 1 8, 2002, the Bureau of Internal Revenue (BIR) sent a letter of informal conference
informing GJM that the report of investigation on its income and business tax liabilities for 1999 had
been submitted. The report disclosed that GJM was still liable for an income tax deficiency and the
corresponding 20% interest, as well as for the compromise penalty in the total amount of P1,192,541.51.
On February 12, 2003, the Bureau of Internal Revenue (BIR) issued a Pre-Assessment Notice and
Details of Discrepancies against GJM. On April 14, 2003, it issued an undated Assessment Notice,
indicating a deficiency income tax assessment in the amount of PI,480,099.29. On July 25, 2003, the BIR
issued a Preliminary Collection Letter requesting GJM to pay said income tax deficiency for the taxable
year 1999. Said letter was addressed to GJM's former address in Pio del Pilar, Makati. On August 18,
2003, although the BIR sent a Final Notice Before Seizure to GJM's address in Cavite, the latter claimed
that it did not receive the same.
On December 8, 2003, GJM received a Warrant of Distraint and/or Levy from the BIR RDO No. 48-
West Makati. The company then filed its Letter Protest on January 7, 2004, which the BIR denied on
January 15, 2004. Hence, GJM filed a Petition for Review before the CTA.
On January 26, 2010, the CTA First Division rendered a Decision in favor of GJM. When its Motion for
Reconsideration was denied, the CIR brought the case to the CTA En Banc.
On March 6, 2012, the CTA En Banc denied the CIR's petition. The CIR filed a Motion for
Reconsideration but the same was denied for lack of merit. Thus, the instant petition.
ISSUES:
WHETHER OR NOT THE FORMAL ASSESSMENT NOTICE (FAN) FOR DEFICIENCY
INCOME TAX ISSUED TO GJM FOR TAXABLE YEAR 1999 WAS RELEASED, MAILED, AND
SENT WITHIN THE THREE (3)-YEAR PRESCRIPTIVE PERIOD UNDER SECTION 203 OF
THE NIRC OF 1997.
WHETHER OR NOT THE BIR'S RIGHT TO ASSESS GJM FOR DEFICIENCY INCOME TAX
FOR TAXABLE YEAR 1999 HAS ALREADY PRESCRIBED.
62
HELD:
Thus, the CIR has three (3) years from the date of the actual filing of the return or from the last day
prescribed by law for the filing of the return, whichever is later, to assess internal revenue taxes. Here,
GJM filed its Annual Income fax Return for the taxable year 1999 on April 12, 2000. The three (3)-year
prescriptive period, therefore, was only until April 15, 2003. The records reveal that the BIR sent the
FAN through registered mail on April 14, 2003, well-within the required period. The Court has held that
when an assessment is made within the prescriptive period, as in the case at bar, receipt by the taxpayer
may or may not be within said period. But it must be clarified that the rule does not dispense with the
requirement that the taxpayer should actually receive the assessment notice, even beyond the prescriptive
period. GJM, however, denies ever having received any FAN.
If the taxpayer denies having received an assessment from the BIR, it then becomes incumbent upon the
latter to prove by competent evidence that such notice was indeed received by the addressee.Flere,
the onus probandi has shifted to the BIR to show by contrary evidence that GJM indeed received the
assessment in the due course of mail. It has been settled that while a mailed letter is deemed received by
the addressee in the course of mail, this is merely a disputable presumption subject to controversion, the
direct denial of which shifts the burden to the sender to prove that the mailed letter was, in fact, received
by the addressee.
To prove the fact of mailing, it is essential to present the registry receipt issued by the Bureau of Posts or
the Registry return card which would have been signed by the taxpayer or its authorized representative.
And if said documents could not be located, the CIR should have, at the very least, submitted to the
Court a certification issued by the Bureau of Posts and any other pertinent document executed with its
intervention. The Court does not put much credence to the self-serving documentations made by the
BIR personnel, especially if they are unsupported by substantial evidence establishing the feet of mailing.
While it is true that an assessment is made when the notice is sent within the prescribed period, the
release, mailing, or sending of the same must still be clearly and satisfactorily proved. Mere notations
made without the taxpayer's intervention, notice or control, and without adequate supporting evidence
cannot suffice. Otherwise, the defenseless taxpayer would be unreasonably placed at the mercy of the
revenue offices.
The BIR's failure to prove GJM's receipt of the assessment leads to no other conclusion but that no
assessment was issued. Consequently, the government's right to issue an assessment for the said period
has already prescribed.
PHILIPPINE AMUSEMENT AND GAMING CORPORATION v. BUREAU OF

INTERNAL REVENUE, COMMISSIONER OF INTERNAL REVENUE, and REGIONAL
DIRECTOR, REVENUE REGION No. 6
G.R. No. 208731, 27 January 2016, SECOND DIVISION (Carpio, J.)
If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one hundred
eighty (180) days from date of submission, by the taxpayer, of the required documents in support of his protest, the taxpayer
may appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period, otherwise the
assessment shall become final, executory and demandable.
63
FACTS:
On October 10, 2007, PAGCOR received a Post Reporting Notice showing deficiencies on
fringe benefit taxes (FBT). On January 17, 2008, PAGCOR received a Final Assessment Notice (FAN)
dated January 14, 2008, with demand for payment of deficiency FBT for taxable year 2004 in the amount
of P48,589,507.65. On January 24, 2008, PAGCOR filed a protest to the FAN with the BIR Regional
Director (RD). On August 14, 2008, PAGCOR elevated its protest to respondent CIR in a Letter dated
August 13, 2008, there being no action taken thereon as of that date. On March 11, 2009, PAGCOR
filed the instant Petition for Review alleging respondents' inaction in its protest on the disputed
deficiency FBT.
The CTA 1st Division ruled in favor of respondents on the ground that the petition for review
filed before it was filed out of time. The CTA 1st Division stated: ―As earlier stated, [PAGCOR] timely
filed its administrative protest on January 24, 2008. In accordance with Section 228 of the Tax Code,
respondent CIR or her duly authorized representative had 180 days or until July 22, 2008 to act on the
protest. After the expiration of the 180-day period without action on the protest, as in the instant case,
the taxpayer, specifically [PAGCOR], had 30 days or until August 21, 2008 to assail the non-
determination of its protest. Clearly, the conclusion that the instant Petition for Review was filed beyond
the reglementary period for appeal on March 11, 2009, effectively depriving the Court of jurisdiction
over the petition, is inescapable.‖ The CTA en banc affirmed the decision.
ISSUE:
Whether or not the petition for review before the CTA 1st division was filed out of time.
HELD:
No. The CTA En Banc and 1st Division were correct in dismissing PAGCOR's petition.
However, as we shall explain below, the dismissal should be on the ground of premature, rather than
late, filing.
Relevant provisions:
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative
finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: x x x.
Within a period to be prescribed by implementing rules and regulations, the taxpayer shall be
required to respond to said notice. If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his findings.
Such assessment may be protested administratively by filing a request for reconsideration or

reinvestigation within thirty (30) days from receipt of the assessment in such form and manner
as may be prescribed by implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant supporting documents shall have
been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision,
or from the lapse of one hundred eighty (180)-day period; otherwise, the decision shall become
final, executory and demandable.
64
Section 3.1.5 of Revenue Regulations No. 12-99, implementing Section 228 above, provides:
3.1.5. Disputed Assessment. - The taxpayer or his duly authorized representative may protest
administratively against the aforesaid formal letter of demand and assessment notice within thirty
(30) days from date of receipt thereof.xx x.
If the taxpayer fails to file a valid protest against the formal letter of demand and assessment
notice within thirty (30) days from date of receipt thereof, the assessment shall become final,
executory and demandable.
If the protest is denied, in whole or in part, by the Commissioner, the taxpayer may appeal to the
Court of Tax Appeals within thirty (30) days from the date of receipt of the said decision,
otherwise, the assessment shall become final, executory and demandable.
In general, if the protest is denied, in whole or in part, by the Commissioner or his duly
authorized representative, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days
from date of receipt of the said decision, otherwise, the assessment shall become final executory and
demandable: Provided, however, that if the taxpayer elevates his protest to the Commissioner within
thirty (30) days from date of receipt of the final decision of the Commissioner's duly authorized
representative, the latter's decision shall not be considered final, executory and demandable, in which
case, the protest shall be decided by the Commissioner. If the Commissioner or his duly authorized
representative fails to act on the taxpayer's protest within one hundred eighty (180) days from date of
submission, by the taxpayer, of the required documents in support of his protest, the taxpayer may
appeal to the Court of Tax Appeals within thirty (30) days from the lapse of the said 180-day period,
otherwise the assessment shall become final, executory and demandable.
The CTA 1st Division and CTA En Banc both established that PAGCOR received a FAN on 17
January 2008, filed its protest to the FAN addressed to RD Misajon on 24 January 2008, filed yet
another protest addressed to the CIR on 14 August 2008, and then filed a petition before the CTA on 11
March 2009. There was no action on PAGCOR's protests filed on 24 January 2008 and 14 August 2008.
PAGCOR only three options: (1). If the protest is wholly or partially denied by the CIR or his
authorized representative, then the taxpayer may appeal to the CTA within 30 days from receipt of the
whole or partial denial of the protest. (2.) If the protest is wholly or partially denied by the CIR's
authorized representative, then the taxpayer may appeal to the CIR within 30 days from receipt of the
whole or partial denial of the protest. (3.) If the CIR or his authorized representative failed to act upon
the protest within 180 days from submission of the required supporting documents, then the taxpayer
may appeal to the CTA within 30 days from the lapse of the 180-day period. To further clarify the three
options: A whole or partial denial by the CIR's authorized representative may be appealed to the CIR or
the CTA. A whole or partial denial by the CIR may be appealed to the CTA. The CIR or the CIR's
authorized representative's failure to act may be appealed to the CTA. There is no mention of an appeal
to the CIR from the failure to act by the CIR's authorized representative.
Under the third option described above, even if we grant leeway to PAGCOR and consider its
unspecified April 2008 submission, PAGCOR still should have waited for the RD's decision until 27
October 2008, or 180 days from 30 April 2008. PAGCOR then had 30 days from 27 October 2008, or
until 26 November 2008, to file its petition before the CTA. PAGCOR, however, did not make use of
the third option. PAGCOR did not file a petition before the CTA on or before 26 November 2008.
65
Under the second option, PAGCOR ought to have waited for the RD's whole or partial denial
of its protest before it filed an appeal before the CIR. PAGCOR rendered the second option moot when
it formulated its own rule and chose to ignore the clear text of Section 3.1.5. PAGCOR "elevated an
appeal" to the CIR on 13 August 2008 without any decision from the RD, then filed a petition before
the CTA on 11 March 2009. A textual reading of Section 228 and Section 3 .1.5 will readily show that
neither Section 228 nor Section 3 .1.5 provides for the remedy of an appeal to the CIR in case of the
RD's failure to act. The third option states that the remedy for failure to act by the CIR or his authorized
representative is to file an appeal to the CTA within 30 days after the lapse of 180 days from the
submission of the required supporting documents. PAGCOR clearly failed to do this.
When PAGCOR filed its petition before the CTA, it is clear that PAGCOR failed to make use
of any of the three options described above. A petition before the CTA may only be made after a whole
or partial denial of the protest by the CIR or the CIR's authorized representative. When PAGCOR filed
its petition before the CTA on 11 March 2009, there was still no denial of PAGCOR's protest by either
the RD or the CIR. Therefore, under the first option, PAGCOR's petition before the CTA had no cause
of action because it was prematurely filed. The CIR made an unequivocal denial of PAGCOR's protest
only on 18 July 2011, when the CIR sought to collect from PAGCOR the amount of P46,589,507.65.
The CIR's denial further puts PAGCOR in a bind, because it can no longer amend its petition before the
CTA.
PAGCOR has clearly failed to comply with the requisites in disputing an assessment as provided
by Section 228 and Section 3.1.5. Indeed, PAGCOR's lapses in procedure have made the BIR's
assessment final, executory and demandable, thus obviating the need to further discuss the issue of the
propriety of imposition of fringe benefits tax.
COMMISSIONER OF INTERNAL REVENUE v. MIRANT PAGBILAO CORPORATION

(now TeaM Energy Corporation)
G.R. No. 180434, January 20, 2016, THIRD DIVISION (Reyes, J.)
Compliance with the requirements on administrative claims with the CIR, which are to precede judicial actions
with the CTA, indubitably impinge on the tax court's jurisdiction. The Court ruled that the premature filing of a claim for
refund or credit of input VAT before the CTA warrants a dismissal, inasmuch as no jurisdiction is acquired by the tax
court.
FACTS:
Mirant Pagbilao Corporation (MPC) is engaged in the generation and distribution of electricity to
the National Power Corporation (NAPOCOR) under a Build, Operate, Transfer Scheme. In 1999, the
BIR approved MPC's application for Effective Zero-Rating for the construction and operation of its
power plant.
For taxable year 2000, the quarterly VAT returns filed by MPC showed an excess input VAT
paid on domestic purchases of goods, services and importation of goods in the amount of
P127,140,331.85. On March 11, 2002, MPC filed before the BIR an administrative claim for refund of its
input VAT for taxable year 2000. On March 26, 2002, fearing that the period for filing a judicial claim
for refund was about to expire, MPC proceeded to file a petition for review before the Court of Tax
Appeals (CTA), without waiting for the CIR's action on the administrative claim.
66
The CTA Second Division partially granted the refund claim of MPC but in the reduced amount
of P118,749,001.55, representing unutilized input VAT incurred for the second, third and fourth quarters
of taxable year 2000. The CTA Second Division held that by virtue of NAPOCOR's exemption from
direct and indirect taxes as provided for in Section 13 of Republic Act No. 6395, MPC's sale of services
to NAPOCOR is subject to VAT at 0% rate. The Secretary of Finance even issued a 1998 Memorandum
espousing the Supreme Court's ruling that purchases by NAPOCOR of electricity from independent
power producers are subject to VAT at 0% rate. As for arriving at the reduced amount, the CTA Second
Division found that (a) P2,116,851.79 input taxes claimed should be disallowed because MPC failed to
validate by VAT official receipts and invoices the excess payment of input taxes; (b) P6,274,478.51 of
input taxes was not properly documented; and (c) the input taxes of P127,140,331.85 for the year 2000
were already deducted by MPC from the total available input VAT as of April 25, 2002 as evidenced by
the 2002 first quarterly VAT return. The CTA en banc affirmed in toto the decision of the CTA Second
Division.
ISSUE:
Whether the CTA had jurisdiction to entertain MPC‘s judicial claim
HELD:
No. In the present dispute, compliance with the requirements on administrative claims with the
CIR, which are to precede judicial actions with the CTA, indubitably impinge on the tax court‘s
jurisdiction. In CIR v. Aichi Forging Company of Asia, Inc., the Court ruled that the premature filing of a
claim for refund or credit of input VAT before the CTA warrants a dismissal, inasmuch as no
jurisdiction is acquired by the tax court.
Failure to comply with the 120-day waiting period violates a mandatory provision of law. It
violates the doctrine of exhaustion of administrative remedies and renders the petition premature and
thus without a cause of action, with the effect that the CTA does not acquire jurisdiction over the
taxpayer‘s petition. To repeat, a claim for tax refund or credit, like a claim for tax exemption, is
construed strictly against the taxpayer. One of the conditions for a judicial claim of refund or credit
under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus,
strict compliance with the 120+30 day periods is necessary for such a claim to prosper, whether before,
during or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR
Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted,
which again reinstated the 120+30 day periods as mandatory and jurisdictional.
Contrary to the specified periods, specifically those that are provided in the second paragraph of
Section 112(D), MPC filed its petition for review with the CTA on March 26, 2002, or a mere 15 days
after it filed an administrative claim for refund with the CIR on March 11, 2002. It then did not wait for
the lapse of the 120-day period expressly provided for by law within which the CIR shall grant or deny
the application for refund.
Clearly, MPC's failure to observe the mandatory 120-day period under the law was fatal to its
immediate filing of a judicial claim before the CTA. It rendered the filing of the CTA petition premature,
and barred the tax court from acquiring jurisdiction over the same. Thus, the dismissal of the petition is
in order. "[T]ax refunds or tax credits - just like tax exemptions - are strictly construed against taxpayers,
the latter having the burden to prove strict compliance with the conditions for the grant of the tax
refund or credit."
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ALTA VISTA GOLF AND COUNTRY CLUB v. CITY OF CEBU, HON. MAYOR TOMAS R.
OSMEÑA, in his capacity as Mayor of Cebu, and TERESITA C. CAMARILLO, in her capacity
as the City Treasurer
G.R. No. 180235, January 20, 2016, FIRST DIVISION (LEONARDO-DE CASTRO, J.)
The general rule is that before a party is allowed to seek the intervention of the court, he or she should have availed
himself or herself of all the means of administrative processes afforded him or her xxx before the court's judicial power can
be sought. The premature invocation of the intervention of the court is fatal to one's cause of action. An exception is when a
case where the issue raised is a purely legal question, well within the competence; and the jurisdiction of the court and not the
administrative agency.
FACTS
Alta Vista Golf and Country Club (Alta Vista) is a non-stock and non-profit corporation
operating a golf course in Cebu City. On June 21, 1993, the Revised Omnibus Tax: Ordinance of the
City of Cebu was enacted, which provided for an amusement tax.
Alta Vista was originally assessed deficiency business taxes, fees, and other charges for the year
1998, which included amusement tax on its golf course. Cebu City repeatedly attempted to collect from
petitioner its deficiency business taxes, which substantially consist of amusement tax. Alta Vista refused
to pay the amusement tax arguing that the imposition of said tax was irregular, improper, and illegal.
Alta Vista proposed that while the question of the legality of the amusement tax on golf courses
is still unresolved, it will settle first the other assessments. Camarillo considered this as a Protest of
Assessment and rendered her ruling denying the protest. Alta Vista was later on served with a Closure
Order from Mayor Osmeña based on its non-payment of deficiency business taxes, amusement taxes
and operating without a business permit.
Alta Vista filed a Petition for Injunction, Prohibition, Mandamus, Declaration of Nullity of
Closure Order, Declaration of Nullity of Assessment, and Declaration of Nullity of Section 42 of Cebu
City Tax Ordinance, with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction,
against respondents. Respondents filed a Motion to Dismiss, which was opposed by Alta Vista.
RTC denied the petition for issuance of TRO. Alta Vista paid under protest.
RTC rendered a decision granting respondents‘ Motion to Dismiss and denying Alta Vista‘s
Petition, stating that Alta Vista failed to comply with the procedure outlined in Section 187 of the Local
Government Code and the fact that this case was filed beyond the period to file a case in court; that
because of the procedural infirmity in bringing about this case to the court, then the substantial issue of
the propriety of imposing amusement taxes on the green fees could no longer be determined.
ISSUE:
1. Is the power of judicial review over the validity of a local tax ordinance been restricted by Sec.
187 of the LGC?
2. Can the City of Cebu or any local government validly impose amusement tax to the act of
playing golf?
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RULING:
1. The present case is an exception to Section 187 of the Local Government Code and the doctrine
of exhaustion of administrative remedies.
The Court established in Reyes that Section 187 of the LGC is a significant procedural requisite and,
therefore, mandatory:
Clearly, the law requires that the dissatisfied taxpayer who questions the validity or legality of a tax
ordinance must file his appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case
the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court.
But if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek
relief in court. These three separate periods are clearly given for compliance as a prerequisite before
seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance
the orderly and speedy discharge of judicial functions. For this reason the courts construe these
provisions of statutes as mandatory.
A municipal tax ordinance empowers a local government unit to impose taxes. The power to tax is the
most effective instrument to raise needed revenues to finance and support the myriad activities of local
government units for the delivery of basic services essential to the promotion of the general welfare and
enhancement of peace, progress, and prosperity of the people. Consequently, any delay in implementing
tax measures would be to the detriment of the public. It is for this reason that protests over tax
ordinances are required to be done within certain time frames. In the instant case, it is our view that the
failure of petitioners to appeal to the Secretary of Justice within 30 days as required by Sec. 187 of R.A.
7160 is fatal to their cause.
Nevertheless, in later cases, the Court recognized exceptional circumstances that justify noncompliance
by a taxpayer with Section 187 of the Local Government Code.
The Court ratiocinated in Ongsuco v. Malones, thus:
It is true that the general rule is that before a party is allowed to seek the intervention of the court, he or
she should have availed himself or herself of all the means of administrative processes afforded him or
her. Hence, if resort to a remedy within the administrative machinery can still be made by giving the
administrative officer concerned every opportunity to decide on a matter that comes within his or her
jurisdiction, then such remedy should be exhausted first before the court's judicial power can be sought.
The premature invocation of the intervention of the court is fatal to one's cause of action. The doctrine
of exhaustion of administrative remedies is based on practical and legal reasons. The availment of
administrative remedy entails lesser expenses and provides for a speedier disposition of controversies.
Furthermore, the courts of justice, for reasons of comity and convenience, will shy away from a dispute
until the system of administrative redress has been completed and complied with, so as to give the
administrative agency concerned every opportunity to correct its error and dispose of the case. However,
there are several exceptions to this rule.
The rule on the exhaustion of administrative remedies is intended to preclude a court from
arrogating unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged
with an administrative body of special competence. Thus, a case where the issue raised is a purely legal
question, well within the competence; and the jurisdiction of the court and not the administrative agency,
would clearly constitute an exception. Resolving questions of law, which involve the interpretation and
69
application of laws, constitutes essentially an exercise of judicial power that is exclusively allocated to the
Supreme Court and such lower courts the Legislature may establish.
2. Section 42 of the Revised Omnibus Tax Ordinance, as amended, imposing amusement tax on
golf courses is null and void as it is beyond the authority of respondent Cebu City to enact under the
Local Government Code.
Respondents, however, cannot claim that Section 42 of the Revised Omnibus Tax Ordinance, as
amended, imposing amusement tax on golf courses, was enacted pursuant to the residual power to tax of
respondent Cebu City. A local government unit may exercise its residual power to tax when there is
neither a grant nor a prohibition by statute; or when such taxes, fees, or charges are not otherwise
specifically enumerated in the Local Government Code, National Internal Revenue Code, as amended,
or other applicable laws. In the present case, Section 140, in relation to Section 131(c), of the Local
Government Code already explicitly and clearly cover amusement tax and respondent Cebu City must
exercise its authority to impose amusement tax within the limitations and guidelines as set forth in said
statutory provisions.
PILIPINAS TOTAL GAS, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 207112, December 08, 2015, EN BANC (MENDOZA, J.)
The rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days
within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the
CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period
given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of
his filing, manifest that he no longer wishes to submit any other addition documents to complete his administrative claim, the
120 day period allowed to the CIR begins to run from the date of filing.
In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period
under Section 112(A) of the NIRC.
FACTS
Pilipinas Total Gas, Inc. (Total Gas) is engaged in the business of selling, transporting and
distributing industrial gas. It is also engaged in the sale of gas equipment and other related businesses.
For this purpose, Total Gas registered itself with the BIR as a VAT taxpayer.
On April 20, 2007 and July 20, 2007, Total Gas filed its Original Quarterly VAT Returns for the
First and Second quarters of 2007, respectively. On May 20, 2008, it filed its Amended Quarterly VAT
Returns for the first two quarters of 2007 reflecting its sales subject to VAT, zero-rated sales, and
domestic purchases of non-capital goods and services.
On May 15, 2008, Total Gas filed an administrative claim for refund of unutilized input VAT
for the first two quarters of taxable year 2007, inclusive of supporting documents.
On August 28, 2008, Total Gas submitted additional supporting documents to the BIR.
70
On January 23, 2009, Total Gas elevated the matter to the CTA in view of the inaction of the
CIR.
CTA Division dismissed the petition for being prematurely filed. It explained that Total Gas
failed to complete the necessary documents to substantiate a claim for refund, thus, the 120-day period
allowed to the CIR to decide its claim under Section 112 (C) of the NIRC, had not even started to run.
MR was denied.
CTA En Banc ruled that the CTA Division had no jurisdiction over the case because Total Gas
failed to seasonably file its petition, and that Total Gas failed to submit the complete supporting
documents to warrant the grant of its application for refund. MR was denied.
ISSUE:
1. Is the judicial claim for refund belatedly filed on 23 January 2009, or beyond the 30-day period to
appeal as provided in Section 112(c) of the Tax Code, as amended?
2. Is the submission of incomplete documents at the administrative level (BIR) renders the judicial
claim premature and dismissible for lack of jurisdiction?
RULING:
1. The judicial claim was timely filed.
Based on Section 112 (C) of the NIRC, the CIR has 120 days from the date of submission of
complete documents to decide a claim for tax credit or refund of creditable input taxes. The
taxpayer may, within 30 days from receipt of the denial of the claim or after the expiration of the
120-day period, which is considered a "denial due to inaction," appeal the decision or unacted claim
to the CTA.
To be clear, Section 112(C) categorically provides that the 120-day period is counted "from the date
of submission of complete documents in support of the application." Contrary to this mandate,
the CTA En Banc counted the running of the period from the date the application for refund was
filed or May 15, 2008, and, thus, ruled that the judicial claim was belatedly filed.
Indeed, the 120-day period granted to the CIR to decide the administrative claim under the Section
112 is primarily intended to benefit the taxpayer, to ensure that his claim is decided judiciously and
expeditiously. After all, the sooner the taxpayer successfully processes his refund, the sooner can
such resources be further reinvested to the business translating to greater efficiencies and
productivities that would ultimately uplift the general welfare. To allow the CIR to determine the
completeness of the documents submitted and, thus, dictate the running of the 120-day period,
would undermine these objectives, as it would provide the CIR the unbridled power to indefinitely
delay the administrative claim, which would ultimately prevent the filing of a judicial claim with the
CTA.
Under present law, when should the submission of documents be deemed "completed" for purposes of determining the
running of the 120-day period? For purposes of determining when the supporting documents have been
completed — it is the taxpayer who ultimately determines when complete documents have been
submitted for the purpose of commencing and continuing the running of the 120-day period. After
all, he may have already completed the necessary documents the moment he filed his administrative
claim, in which case, the 120-day period is reckoned from the date of filing.
The rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer
71
has thirty (30) days within which to submit the documentary requirements sufficient to support his
claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete
documents to support his application, or expiration of the period given, the CIR has 120 days within
which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing,
manifest that he no longer wishes to submit any other addition documents to complete his
administrative claim, the 120 day period allowed to the CIR begins to run from the date of filing.
In all cases, whatever documents a taxpayer intends to file to support his claim must be completed
within the two-year period under Section 112(A) of the NIRC. The 30-day period from denial of the
claim or from the expiration of the 120-day period within which to appeal the denial or inaction of
the CIR to the CTA must also be respected.
It bears mentioning at this point that the foregoing summation of the rules should only be made
applicable to those claims for tax credit or refund filed prior to June 11, 2014, such as the claim at
bench. As it now stands, RMC 54-2014 dated June 11, 2014 mandates that:
The application for VAT refund/tax credit must be accompanied by complete
supporting documents as enumerated in Annex "A" hereof. In addition, the taxpayer
shall attach a statement under oath attesting to the completeness of the submitted
documents xxx
For purposes of counting the 120-day period, it should be reckoned from August 28, 2008, the date
when Total Gas made its "submission of complete documents to support its application" for refund.
Consequently, counting from this later date, the BIR had 120 days to decide the claim or until
December 26, 2008. With absolutely no action or notice on the part of the BIR for 120 days, Total
Gas had 30 days or until January 25, 2009 to file its judicial claim. Total Gas, thus, timely filed its
judicial claim on January 23, 2009.
2. The judicial claim was not prematurely filed.

First, the 120-day period had commenced to run and the 120+30 day period was, in fact, complied
with. It is the taxpayer who determines when complete documents have been submitted for the
purpose of the running of the 120-day period. It must again be pointed out that this in no way
precludes the CIR from requiring additional documents necessary to decide the claim, or even
denying the claim if the taxpayer fails to submit the additional documents requested.
Second, the CIR sent no written notice informing Total Gas that the documents were incomplete or
required it to submit additional documents. Such notice by way of a written request is required by
the CIR to be sent to Total Gas. Neither was there any decision made denying the administrative
claim of Total Gas on the ground that it had failed to submit all the required documents. It was
precisely the inaction of the BIR which prompted Total Gas to file the judicial claim. Thus, by failing
to inform Total Gas of the need to submit any additional document, the BIR cannot now argue that
the judicial claim should be dismissed because it failed to submit complete documents.
Finally, it should be mentioned that the appeal made by Total Gas to the CTA cannot be said to be
premature on the ground that it did not observe the otherwise mandatory and juridictional 120+30
day period. When Total Gas filed its appeal with the CTA on January 23, 2009, it simply relied on [a]
BIR Ruling, which, at that time, was not yet struck down by the Court's ruling in Aichi. As explained
in San Roque, this Court recognized a period in time wherein the 120-day period need not be strictly
observed. Thus:
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed
strictly against the taxpayer. One of the conditions for a judicial claim of refund or
72
credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is
necessary for such a claim to prosper, whether before, during, or after the effectivity of
the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-
489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was
adopted, which again reinstated the 120+30 day periods as mandatory and
jurisdictional.
xxxx
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers
can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December
2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court
held that the 120+30 day periods are mandatory and jurisdictional.
COMMISSIONER OF INTERNAL REVENUE v. NEXT MOBILE, INC.
G.R. No. 212825, 07 December 2015, J. Velasco Jr.
The BIR's right to assess and collect taxes should not be jeopardized merely because of the mistakes and lapses of its
officers, especially in cases like this where the taxpayer is obviously in bad faith.
Facts:
On April 15, 2002, Respondent Next Mobile, Inc. filed with the BIR its ITR for taxable year ending
December 31, 2001. Respondent also filed its Monthly Remittance Returns of Final Income Taxes
Withheld (BIR Form No. 1601-F), its Monthly Remittance Returns of Expanded Withholding Tax (BIR
Form No. 1501-E) and its Monthly Remittance Return of Income Taxes Withheld on Compensation
(BIR Form No. 1601-C) for year ending December 31, 2001.
On September 25, 2003, respondent received a copy of the Letter of Authority dated September 8, 2003
signed by Regional Director Nestor S. Valeroso authorizing Revenue Officer Nenita L. Crespo of
Revenue District Office 43 to examine respondent's books of accounts and other accounting records for
income and withholding taxes for the period covering January 1, 2001 to December 31, 2001.
Ma. Lida Sarmiento (Sarmiento), respondent's Director of Finance, subsequently executed several
waivers of the statute of limitations to extend the prescriptive period of assessment for taxes due in
taxable year ending December 31, 2001 (Waivers).
On September 26, 2005, respondent received from the BIR a Preliminary Assessment Notice dated
September 16, 2005 to which it filed a Reply.
On October 25, 2005, respondent received a Formal Letter of Demand (FLD) and Assessment
Notices/Demand No. 43-734 both dated October 17, 2005 from the BIR, demanding payment of
deficiency income tax, FWT, EWT, increments for late remittance of taxes withheld, and compromise
penalty for failure to file returns/late filing/late remittance of taxes withheld, in the total amount of
P313,339,610.42 for the taxable year ending December 31, 2001.
73
On November 23, 2005, respondent filed its protest against the FLD and requested the reinvestigation
of the assessments. On July 28, 2009, respondent received a letter from the BIR denying its protest.
Thus, on August 27, 2009, respondent filed a Petition for Review before the CTA.
Issue:
WON waivers of the statute of limitations were valid and binding; thus, the three-year period of
limitation within which to assess deficiency taxes was not extended.
Ruling: The petition has merit.
Section 203 of the 1997 NIRC mandates the BIR to assess internal revenue taxes within three years from
the last day prescribed by law for the filing of the tax return or the actual date of filing of such return,
whichever comes later. Hence, an assessment notice issued after the three-year prescriptive period is not
valid and effective. Exceptions to this rule are provided under Section 222 of the NIRC.
Section 222(b) of the NIRC provides that the period to assess and collect taxes may only be extended
upon a written agreement between the CIR and the taxpayer executed before the expiration of the three-
year period. RMO 20-90 issued on April 4, 1990 and RDAO 05-01 issued on August 2, 2001 provide the
procedure for the proper execution of a waiver.
The general rule is that when a waiver does not comply with the requisites for its validity specified under
RMO No. 20-90 and RDAO 01-05, it is invalid and ineffective to extend the prescriptive period to
assess taxes. However, due to its peculiar circumstances, We shall treat this case as an exception to this
rule and find the Waivers valid for these reasons:
First, the parties in this case are in pari delicto or "in equal fault." Second, the Court has repeatedly
pronounced that parties must come to court with clean hands. Third, respondent is estopped from
questioning the validity of its Waivers. Finally, the Court cannot tolerate this highly suspicious situation.
In this case, the taxpayer, on the one hand, after voluntarily executing waivers, insisted on their invalidity
by raising the very same defects it caused. On the other hand, the BIR miserably failed to exact from
respondent compliance with its rules.
CHEVRON PHILIPPINES INC., vs. COMMISSIONER OF INTERNAL REVENUE

GR. No. 210836, 01 September 2015, J. Bersamin
Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory
taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory taxpayer on petroleum products
sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from
excise tax is deemed illegal or erroneous, and should be credited or refunded to the ayor pursuant to Section 204 of the
NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property
itself, that is, the petroleum products.
Facts:
Chevron sold and delivered petroleum products to CDC in the period from August 2007 to December
2007. Chevron did not pass on to CDC the excise taxes paid on the importation of the petroleum
products sold to CDC in taxable year 2007; hence it filed an administrative claim for tax refund or
74
issuance of tax credit certificate in the amount of P6,542,400.00.Considering that respondent CIR did
not act on the administrative claim for tax refund or tax credit, Chevron elevated its claim to the CTA by
petition for review.
The CTA First Division denied Chevron‘s judicial claim for tax refund or tax credit and later on also
denied Chevron‘s Motion for Reconsideration. In due course, Chevron appealed to the CTA En Banc,
which, in the decision affirmed the ruling of the CTA First Division, stating that there was nothing in
Section 135(c) of the NIRC that explicitly exempted Chevron as the seller of the imported petroleum
products from the payment of the excise taxes; and holding that because it did not fall under any of the
categories exempted from paying excise tax, Chevron was not entitled to the tax refund or tax credit.
The CTA En Banc noted that:
Considering that an excise tax is in the nature of an indirect tax where the tax burden can be shifted,
Section 135(c) of the NIRC of 1997, as amended, should be construed as prohibiting the shifting of the
burden of the excise tax to tax-exempt entities who buys petroleum products from the
manufacturer/seller by incorporating the excise tax component as an added cost in the price fixed by the
manufacturer/seller.
Issue:
Whether Chevron was entitled to the tax refund or the tax credit for the excise taxes paid on the
importation of petroleum products that it had sold to CDC in 2007.
Ruling: Chevron‘s Motion for Reconsideration is meritorious.
Under Section 129 of the NIRC, as amended, excise taxes are imposed on two kinds of goods, namely:
(a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any
other disposition; and (b) things imported. Undoubtedly, the excise tax imposed under Section 129 of
the NIRC is a tax on property.
With respect to imported things, Section 131 of the NIRC declares that excise taxes on imported things
shall be paid by the owner or importer to the Customs officers, conformably with the regulations of the
Department of Finance and before the release of such articles from the customs house, unless the
imported things are exempt from excise taxes and the person found to be in possession of the same is
other than those legally entitled to such tax exemption. For this purpose, the statutory taxpayer is the
importer of the things subject to excise tax.
Chevron, being the statutory taxpayer, paid the excise taxes on its importation of the petroleum
products.
Pursuant to Section 135(c), supra, petroleum products sold to entities that are by law exempt from direct
and indirect taxes are exempt from excise tax. The phrase which are by law exempt from direct and
indirect taxes describes the entities to whom the petroleum products must be sold in order to render the
exemption operative. Section 135(c) should thus be construed as an exemption in favor of the petroleum
products on which the excise tax was levied in the first place. The exemption cannot be granted to the
buyers – that is, the entities that are by law exempt from direct and indirect taxes – because they are not
under any legal duty to pay the excise tax.
75
Consequently, the payment of the excise taxes by Chevron upon its importation of petroleum products
was deemed illegal and erroneous upon the sale of the petroleum products to CDC.
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY v. CITY OF LAPU-LAPU

G.R. NO. 181756, 15 June 2015, FIRST DIVISION (Leonardo-De Castro, J.)
The Airport Lands and Buildings of MCIAA are properties devoted to public use, considered as properties of
public dominion and are thus, exempt from real estate tax.
FACTS
Petitioner Mactan-Cebu International Airport Authority (MCIAA) was created by Congress

under Republic Act No. 6958 to "undertake the economical, efficient and effective control, management
and supervision of the Mactan International Airport in the Province of Cebu and the Lahug Airport in
Cebu City. Upon its creation, MCIAA enjoyed exemption from realty taxes. On September 11, 1996,
however, the Supreme Court rendered a decision in Mactan-Cebu International Airport Authority v.
Marcos (the 1996 MCIAA case) declaring that upon the effectivity of Republic Act No. 7160 (The Local
Government Code of 1991), MCIAA was no longer exempt from real estate taxes.
Respondent City of Lapu-Lapu assessed the lots comprising the Mactan International Airport.
MCIAA averred that the lots covered are utilized solely and exclusively for public or governmental
purposes. MCIAA filed a petition with the Regional Trial Court (RTC) of Lapu-Lapu City to enjoin
respondent City from issuing a warrant of levy against MCIAA‘s properties and from selling them at
public auction for delinquency in realty tax obligations. After the RTC denied such, respondent City
forfeited and purchased MCIAA‘s properties as there was no interested bidder in the auction sale.
MCIAA filed a petition for certiorari with the Court of Appeals, which subsequently held that MCIAA is
a government-owned or controlled corporation and that its properties are subject to realty tax. The
appellate court further ruled that under Republic Act No. 6958, the properties of petitioner MCIAA may
not be conveyed or transferred to any person or entity except to the national government. MCIAA filed
a motion for partial reconsideration, citing Manila International Airport Authority v. Court of Appeals
(2006 case) which held that MCIAA is not considered a government-owned or controlled corporation,
but a government instrumentality which is exempt from the taxing powers of the City of Lapu-Lapu.
The Court of Appeals, however, applied the 1996 MCIAA case and refused to apply the 2006 case,
stating that the latter case has not yet attained finality.
ISSUE:
Are the properties of MCIAA, a government instrumentality, subject to real property tax?
RULING:
No. MCIAA is an instrumentality of the government; thus, its properties actually, solely and
exclusively used for public purposes, consisting of the airport terminal building, airfield, runway, taxiway
and the lots on which they are situated, are not subject to real property tax.
76
The 2006 MIAA case had, since the promulgation of the questioned Decision and Resolution,
reached finality and had in fact been either affirmed or cited in numerous cases by the Court. The
decision became final and executory on November 3, 2006.
The Court in the 2006 MIAA case cited Section 234(a) of the Local Government Code and held
that said provision exempts from real estate tax any "real property owned by the Republic of the
Philippines." The Court emphasized, however, that portions of the Airport Lands and Buildings that
MIAA leases to private entities are not exempt from real estate tax.
MCIAA is not a government-owned or controlled corporation but an instrumentality of the

National Government. There is no dispute that a government-owned or controlled corporation is not
exempt from real estate tax. A government-owned or controlled corporation must be "organized as a
stock or non-stock corporation." MCIAA is not organized as a stock or non-stock corporation. MCIAA
is not a stock corporation because it has no capital stock divided into shares. MCIAA has no
stockholders or voting shares.
A government instrumentality like MIAA falls under Section 133(o) of the Local Government
Code. It recognizes the basic principle that local governments cannot tax the national government,
which historically merely delegated to local governments the power to tax. While the 1987 Constitution
now includes taxation as one of the powers of local governments, local governments may only exercise
such power "subject to such guidelines and limitations as the Congress may provide."
When local governments invoke the power to tax on national government instrumentalities, such
power is construed strictly against local governments. The rule is that a tax is never presumed and there
must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is
taxable is resolved against taxation. This rule applies with greater force when local governments seek to
tax national government instrumentalities. Another rule is that a tax exemption is strictly construed
against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national
government instrumentality from local taxation, such exemption is construed liberally in favor of the
national government instrumentality.
As properties of public dominion, the Airport Lands and Buildings are outside the commerce of
man. The Court has also ruled that property of public dominion, being outside the commerce of man,
cannot be the subject of an auction sale. Properties of public dominion, being for public use, are not
subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on
execution or auction sale of any property of public dominion is void for being contrary to public policy.
Essential public services will stop if properties of public dominion are subject to encumbrances,
foreclosures and auction sale.
SAMAR-I ELECTRIC COOPERATIVE v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 193100, 10 December 2014, THIRD DIVISION (Villarama, Jr., J.)
The notice requirement under Section 228 of the NIRC is substantially complied with whenever the taxpayer had
been fully informed in writing of the factual and legal bases of the deficiency taxes assessment, which enabled the latter to file
an effective protest.
77
FACTS:
Samar-I Electric Cooperative, Inc. (SAMELCO-I) is an electric cooperative. SAMELCO-I filed
its 1997, 1998, and 1999 Annual Information Return of Income Tax Withheld on Compensation,
Expanded and Final Withholding Taxes. It cooperated in the audit and investigation conducted by the
Special Investigation Division of the BIR by submitting the required documents on December 5, 2000.
On October 19, 2001, BIR sent a Notice for Informal Conference which was received by SAMELCO-I
in November 2001; indicating the allegedly income and withholding tax liabilities of the latter for 1997 to
1999. On February 27, 2002, a letter was sent by SAMELCO-I to the BIR requesting a detailed
computation of the alleged 1997, 1998 and 1999 deficiency withholding tax on compensation.
On February 28, 2002, BIR issued a Preliminary Assessment Notice (PAN). The PAN was received by
SAMELCO-I on April 9, 2002, which was protested on April 18, 2002. However, on July 8, 2002, BIR
dismissed SAMELCO-I‘s protest and recommended the issuance of a Final Assessment Notice.
SAMELCO-I contends that the subject 1997 and 1998 withholding tax assessments on compensation
were issued beyond the prescriptive period of three years under Section 203 of the NIRC of 1997. It
further alleged that it was denied due process as the Final Demand Letter and Assessment Notices
(FAN) were silent as to the nature and basis of the assessments, and must therefore be declared void.
ISSUE:
Was there a violation of due process in the issuance of the final notice of assessment and letter
of demand?
RULING:
No, there was none. In the case at bar, SAMELCO-I was sufficiently apprised of the nature,
factual and legal bases, as well as how the deficiency taxes being assessed against it were computed.
SAMELCO-I failed to withhold taxes from its employees‘ 13th month pay and other benefits in
excess of thirty thousand pesos (₱30,000.00) amounting to ₱2,690,850.91 for the taxable years 1997 to
1999 – resulting to its filing of the subject false returns. It was SAMELCO-I‘s substantial under
declaration of withholding taxes in the amount of ₱2,690,850.91 which constituted the "falsity" in the
subject returns – giving respondent the benefit of the period under Section 222 of the NIRC of 1997 to
assess the correct amount of tax "at any time within ten (10) years after the discovery of the falsity, fraud
or omission."
The ordinary period of prescription of 5 years within which to assess tax liabilities under Sec.
331 of the NIRC should be applicable to normal circumstances, but whenever the government is placed
at a disadvantage so as to prevent its lawful agents from proper assessment of tax liabilities due to false
returns, fraudulent return intended to evade payment of tax or failure to file returns, the period of ten
years provided for in Sec. 332 (a) NIRC, from the time of the discovery of the falsity, fraud or omission
even seems to be inadequate and should be the one enforced.
Records reveal that on October 19, 2001, prior to the conduct of an informal conference,
SAMELCO-I was already informed of the results and findings of the investigations made by the BIR,
and was duly furnished with a copy of the summary of the report submitted by Revenue Officer Elisa G.
Ponferrada-Rapatan of the Special Investigation Division. Said summary report contained an explanation
of Findings of Investigation stating the legal and factual bases for the deficiency assessment.
SAMELCO-I was given the opportunity to protest the PAN by questioning BIR‘s interpretation of the
laws cited as legal basis for the computation of the deficiency withholding taxes and assessment of
minimum corporate income tax.
78
Although the FAN and demand letter issued to SAMELCO-I were not accompanied by a
written explanation of the legal and factual bases of the deficiency taxes assessed against the it, the
records showed that respondent in its letter dated April 10, 2003 responded to petitioner‘s October 14,
2002 letter-protest, explaining at length the factual and legal bases of the deficiency tax assessments and
denying the protest. Hence, SAMELCO-I‘s right to due process was not violated.
CE LUZON GEOTHERMAL POWER COMPANY, INC. v CIR

G.R. No. 200841-42, August 26, 2015, FIRST DIVISION (Perlas-Bernabe, J.)
Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore, be that during the
period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 2010 (when the Aichi case
was promulgated), taxpayers-claimants need not observe the 120-day period before it could file a judicial claim for refund of
excess input VAT before the CTA. Before and after the aforementioned period (i.e, December 10, 2003 to October 6,
2010), the observance of the 120-dav period is mandatory and jurisdictional to the filing of such claim.
FACTS:
CE Luzon is a VAT-registered domestic corporation. It filed its quarterly VAT returns for the year 2005
which reflected an overpayment of P20,546,004.87. CE Luzon maintained that its overpayment was due
to its domestic purchases of non-capital goods and services, services rendered by non-residents, and
importation of non-capital goods. On November 30, 2006, CE Luzon filed an administrative claim for
refund of its unutilized input VAT in the amount of P20,546,004.87 before BIR. Thereafter, on January
3, 2007, it filed a judicial claim for refund, by way of a petition for review, before the CTA. CIR claimed
that the amount being claimed by CE Luzon as unutilized input VAT was not properly documented and
that the filing of its petition for review was premature and, hence, should be denied.
CTA Division – partially granted CE Luzon's claim for tax refund, and thereby ordered the CIR to issue
a tax credit certificate in the reduced amount of P14,879,312.65, representing its unutilized input VAT
which was attributable to its VAT zero-rated sales for the year 2005. It found that while CE Luzon
timely filed its administrative and judicial claims within the two (2)-year prescriptive period, it, however,
failed to duly substantiate the remainder of its claim for unutilized input VAT, resulting in the partial
denial thereof. Dissatisfied, both parties moved for partial reconsideration. Thereafter, CE Luzon
and the CIR respectively appealed to the CTA En Banc.
CTA En Banc – set aside the CTA Division's findings, holding that CE Luzon's premature filing of its
claim divested the CTA of jurisdiction. It ruled that the filing of a judicial claim must be made within
thirty (30) days to be computed from either: (a) the receipt of the CIR's decision; or (b) after the
expiration of the 120-day period for the CIR to act. It noted that CE Luzon's petition was filed on
January 3, 2007, or only after the lapse of 34 days from the time it filed its administrative claim with the
BIR on November 30, 2006. Thus, considering that CE Luzon hastily filed its petition, its judicial claim
must be dismissed for being filed prematurely.
ISSUE:
The core issue in this case is whether or not the CTA En Banc correctly ordered the outright dismissal of
CE Luzon's claims for tax refund of unutilized input VAT on the ground of prematurity.
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RULING:
No. In the case of CIR v. Aichi Forging Company of Asia, Inc. (Aichi), it was held that the observance of the
120-day period is a mandatory and jurisdictional requisite to the filing of a judicial claim for refund
before the CTA. As such, its non-observance would warrant the dismissal of the judicial claim for lack of
jurisdiction. Withal, it was clarified in Aichi that the two (2)-year prescriptive period is only applicable to
administrative claims, and not to judicial claims. Accordingly, once the administrative claim is filed within
the two (2)-year prescriptive period, the taxpayer-claimant must wait for the lapse of the 120-day period
and, thereafter, he has a 30-day period within which to file his judicial claim before the CTA, even if said
120-day and 30-day periods would exceed the aforementioned two (2)-year prescriptive period.
Nevertheless, the Court, in the seminal case of CIR v. San Roque Power Corporation (San Roque), recognized
an exception to the mandatory and jurisdictional nature of the 120-day period. San Roque enunciated
that BIR Ruling No. DA-489-03 dated December 10, 2003 - which expressly declared that the "taxpayer-
claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the
CTA by way of Petition for Review" - provided a valid claim for equitable estoppel under Section 246 of
the NIRC.
In the more recent case of Taganito Mining Corporation v. CIR, the Court reconciled the pronouncements
in Aichi and San Roque, holding that from December 10, 2003 to October 6, 2010 which refers to the
interregnum when BIR Ruling No. DA-489-03 was issued until the date of promulgation of Aichi,
taxpayer-claimants need not observe the stringent 120-day period; but before and after said window
period, the mandatory and jurisdictional nature of the 120-day period remained in force, viz.:
Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore, be
that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to
October 6, 2010 (when the Aichi case was promulgated), taxpayers-claimants need not
observe the 120-day period before it could file a judicial claim for refund of excess input VAT
before the CTA. Before and after the aforementioned period (i.e, December 10, 2003 to
October 6, 2010), the observance of the 120-dav period is mandatory and jurisdictional to
the filing of such claim.
Here, records show that CE Luzon's administrative and judicial claims were filed on November 30, 2006
and January 3, 2007, respectively, or during the period of effectivity of BIR Ruling No. DA-489-03
and, thus, fell within the window period stated in San Roque, i.e., when taxpayer-claimants need not wait
for the expiration of the 120-day period before seeking judicial relief. Verily, the CTA En Banc erred
when it outrightly dismissed CE Luzon's petition on the ground of prematurity.
CIR v CTA and CBK POWER COMPANY LIMITED

G.R. Nos. 203054-55, July 29, 2015, THIRD DIVISION (Peralta, J.)
An order that does not finally dispose of the case, and does not end the Court's task of adjudicating the parties' contentions
and determining their rights and liabilities as regards each other, but obviously indicates that other things remain to be done
by the Court, is "interlocutory," e.g., an order denying a motion to dismiss under Rule 16 of the Rules x x x. Unlike a
"final" judgment or order, which is appealable, as above pointed out, an "interlocutory" order may not be questioned on
appeal except only as part of an appeal that may eventually be taken from the final judgment rendered in the case.
80
FACTS:
CBK Power Company Limited is an entity engaged in operation and maintenance of several
hydroelectric power plants in Laguna. It filed with the CTA a judicial claim for the issuance of a tax
credit certificate representing unutilized input taxes on its local purchases and importations of goods
other than capital goods, local purchases of services, payment of services rendered by non-residents,
including unutilized amortized input taxes on capital goods all attributable to zero rated sales. Earlier,
private respondent filed another judicial claim for the issuance of a tax credit certificate for unutilized
input taxes. Subsequently, private respondent filed a motion for consolidation of the two cases and
postponement of the pre-trial conference of the former.
CTA granted the motion for consolidation and set the pre-trial conference, however, CIR‘s counsel
failed to appear at the scheduled pre-trial conference as he was on leave for health reasons. The pre-trial
was reset. CIR's new counsel, Atty. Sandico, who was then assigned to handle the consolidated cases,
filed his consolidated pre-trial brief but failed to appear at the pre-trial conference, thus CBK moved that
CIR be declared in default.
CTA issued an Order of Default and allowed presentation of evidence ex parte. CIR filed a Motion to
Lift Order of Default alleging that the failure to attend the pre-trial conference was due to confusion in
office procedure in relation to the consolidation of CTA cases since one was being handled by a
different lawyer; that when the pre-trial conference was reset, petitioner's counsel, Atty. Sandico, had to
attend the hearing of another case in the CTA, hence, he unintentionally missed the pre-trial conference
of the consolidated cases. CTA denied the motion to lift order of default. CIR then filed the instant
petition for certiorari.
ISSUE:
Whether CIR chose an erroneous remedy when it filed a petition for certiorari with the SC since the
proper remedy on any adverse resolution of any division of the CTA is an appeal by way of a petition for
review with the CTA en banc.
RULING:
No. Given the differences between a final judgment and an interlocutory order, there is no doubt that
the CTA Order granting CBK‘s motion to declare petitioner in default and allowing CBK to present its
evidence ex parte, is an interlocutory order as it did not finally dispose of the case on the merits but will
proceed for the reception of the former's evidence to determine its entitlement to its judicial claim for
tax credit certificates. Even the CTA's subsequent orders denying petitioner's motion to lift order of
default and denying reconsideration thereof are all interlocutory orders since they pertain to the order of
default. CTA Orders are merely interlocutory, no appeal can be taken therefrom.
Commission of Internal Revenue vs. CTA (Second Division) and Petron Corporation G.R. No.
207843 July 15, 2015
In this case, there was even no tax assessment to speak of. While the customs collector admitted during the CTA's
hearing that the computation he had written at the back page of the IEIRD served as the final assessment imposing excise
81
tax on Petron's importation of alkylate, the Court concurs with the CIR's stance that the subject IEIRD was not yet the
customs collector's final assessment that could be the proper subject of review. And even if it were, the same should have been
brought first for review before the COC and not directly to the CTA. It should be stressed that the CTA has no
jurisdiction to review by appeal, decisions of the customs collector. The TCC prescribes that a party
adversely affected by a ruling or decision of the customs collector may protest such ruling or
decision upon payment of the amount due and, if aggrieved by the action of the customs
collector on the matter under protest, may have the same reviewed by the COC. It is only after
the COC shall have made an adverse ruling on the matter may the aggrieved party file an appeal
to the CTA.
The Case: Assailed in this petition for certiorari1 are the Resolutions dated February 13, 2013 and May
8, 2013 of the Court of Tax Appeals, Second Division (CTA) in CTA Case No. 8544 reversing and
setting aside the earlier dismissal of the petition for review filed by private respondent Petron
Corporation (Petron) in the said case on the bases of prematurity and lack of jurisdiction.
FACTS:
Petron, which is engaged in the manufacture and marketing of petroleum products, imports alkylate as a
raw material or blending component for the manufacture of ethanol-blended motor gasoline. xx
In June 2012, Petron imported 12,802,660 liters of alkylate and paid VAT in the total amount of
P41,657,533.00 as evidenced by Import Entry and Internal Revenue Declaration (IEIRD) No. SN
122406532. Based on the Final Computation, said importation was subjected by the Collector of
Customs (COC) upon instructions of the Commissioner of Customs (COC), to excise taxes of ₱4.35 per
liter, or in the aggregate amount of ₱55,691,571.00, and consequently, to an additional VAT of 12% on
the imposed excise tax in the amount of ₱6,682,989.00. Petron's tax liability was premised on the COC's
issuance of CMC No. 164-2012, which gave effect to the CIR's June 29, 2012 Letter interpreting Section
148 (e) of the NIRC as to include alkyl ate among the articles subject to customs duties
In view of the CIR's assessment, Petron filed before the CTA a petition for review, raising the
issue of whether its importation of alkylate as a blending component is subject to excise tax as
contemplated under Section 148 (e) of the NIRC.
CIR filed a motion to dismiss on the grounds of lack of jurisdiction and prematurity.
Initially, in a Resolution, CTA granted the CIR's motion and dismissed the case.
On Petron's MR, it reversed its earlier disposition and eventually denied the CIR's MR therefrom. In
effect, the CTA gave due course to Petron's petition, finding that: (a) the controversy was not essentially
for the determination of the constitutionality, legality or validity of a law, rule or regulation but a
question on the propriety or soundness of the CIR's interpretation of Section 148 (e) of the NIRC which
falls within the exclusive jurisdiction of the CTA under Section 4 thereof, particularly under the phrase
"other matters arising under [the NIRC]"; and (b) there are attending circumstances that exempt the case
from the rule on non-exhaustion of administrative remedies, such as the great irreparable damage that
may be suffered by Petron from the CIR's final assessment of excise tax on its importation.
Aggrieved, the CIR sought immediate recourse to the Court, through the instant petition, alleging that
the CTA committed grave abuse of discretion when it assumed authority to take cognizance of the case
despite its lack of jurisdiction to do so.
82
ISSUE:
WON the CTA properly assumed jurisdiction over the petition assailing the imposition of excise tax on
Petron's importation of alkylate based on Section 148 (e) of the NIRC.
HELD: Negative.
The CIR asserts that the interpretation of the subject tax provision, i.e., Section 148 (e) of the NIRC,
embodied in CMC No. 164-2012, is an exercise of her quasi-legislative function which is reviewable by
the Secretary of Finance, whose decision, in turn, is appealable to the Office of the President and,
ultimately, to the regular courts, and that only her quasi-judicial functions or the authority to decide
disputed assessments, refunds, penalties and the like are subject to the exclusive appellate jurisdiction of
the CTA. She likewise contends that the petition suffers from prematurity due to Petron 's failure to
exhaust all available remedies within the administrative level in accordance with the Tariff and Customs
Code (TCC).
Section 4 of the NIRC confers upon the CIR both: (a) the power to interpret tax laws in the exercise of
her quasi-legislative function; and (b) the power to decide tax cases in the exercise of her quasi-judicial
function. It also delineates the jurisdictional authority to review the validity of the CIR's exercise of the
said powers, thus:
SEC. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. - The
power to interpret the provisions of this Code and other tax laws shall be under the
exclusive and original jurisdiction of the Commissioner, subject to review by the
Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation thereto, or other matters arising under this
Code or other laws or portions thereof administered by the BIR is vested in the
Commissioner, subject to the exclusive appellate jurisdiction of the CTA.
The CTA is a court of special jurisdiction, with power to review by appeal decisions involving tax
disputes rendered by either the CIR or the COC. Conversely, it has no jurisdiction to determine the
validity of a ruling issued by the CIR or the COC in the exercise of their quasi-legislative powers
to interpret tax laws. These observations may be deduced from a reading of Section 7 of RA 1125, as
amended by RA 9282, entitled "An Act Creating the Court of Tax Appeals," enumerating the cases over
which the CT A may exercise its jurisdiction.
In this case, Petron's tax liability was premised on the COC's issuance of CMC No. 164-2012,
which gave effect to the CIR's June 29, 2012 Letter interpreting Section 148 (e) of the NIRC as to
include alkyl ate among the articles subject to customs duties, hence, Petron's petition before
the CTA ultimately challenging the legality and constitutionality of the CIR's aforesaid
interpretation of a tax provision. In line with the foregoing discussion, however, the CIR correctly
argues that the CTA had no jurisdiction to take cognizance of the petition as its resolution would
necessarily involve a declaration of the validity or constitutionality of the CIR's interpretation of
Section 148 (e) of the NIRC, which is subject to the exclusive review by the Secretary of Finance
and ultimately by the regular courts.
As the CIR aptly pointed out, the phrase "other matters arising under this Code," as stated in the second
paragraph of Section 4 of the NIRC, should be understood as pertaining to those matters directly
related to the preceding phrase "disputed assessments, refunds of internal revenue taxes, fees or
83
other charges, penalties imposed in relation thereto" and must therefore not be taken in
isolation to invoke the jurisdiction of the CTA. In other words, the subject phrase should be used
only in reference to cases that are, to begin with, subject to the exclusive appellate jurisdiction of the
CTA, i.e., those controversies over which the CIR had exercised her quasi-judicial functions or her
power to decide disputed assessments, refunds or internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, not to those that involved the CIR's exercise of quasi-legislative powers.
In Enrile v. CA, the Court, applying the statutory construction principle of ejusdem generis,
explained the import of using the general clause "other matters arising under the Customs Law or other
law or part of law administered by the Bureau of Customs" in the enumeration of cases subject to the
exclusive appellate jurisdiction of the CTA, saying that: [T]he 'other matters' that may come under the
general clause should be of the same nature as those that have preceded them applying the rule of
construction known as ejusdem generis. (Emphasis and underscoring supplied)
Hence, as the CIR's interpretation of a tax provision involves an exercise of her quasi-legislative
functions, the proper recourse against the subject tax ruling expressed in CMC No. 164-2012 is a review
by the Secretary of Finance and ultimately the regular courts.
In this case, there was even no tax assessment to speak of. While the customs collector admitted during
the CTA's hearing that the computation he had written at the back page of the IEIRD served as the final
assessment imposing excise tax on Petron's importation of alkylate, the Court concurs with the CIR's
stance that the subject IEIRD was not yet the customs collector's final assessment that could be the
proper subject of review. And even if it were, the same should have been brought first for review before
the COC and not directly to the CTA. It should be stressed that the CTA has no jurisdiction to
review by appeal, decisions of the customs collector. The TCC prescribes that a party adversely
affected by a ruling or decision of the customs collector may protest such ruling or decision
upon payment of the amount due and, if aggrieved by the action of the customs collector on the
matter under protest, may have the same reviewed by the COC. It is only after the COC shall
have made an adverse ruling on the matter may the aggrieved party file an appeal to the CTA.
Notably, Petron admitted to not having filed a protest of the assessment before the customs collector
and elevating a possible adverse ruling therein to the COC, reasoning that such a procedure would be
costly and impractical, and would unjustly delay the resolution of the issues which, being purely legal in
nature anyway, were also beyond the authority of the customs collector to resolve with finality. This
admission is at once decisive of the issue of the CTA's jurisdiction over the petition. There being no
protest ruling by the customs collector that was appealed to the COC, the filing of the petition
before the CTA was premature as there was nothing yet to review.
Verily, the fact that there is no decision by the COC to appeal from highlights Petron's failure to exhaust
administrative remedies prescribed by law. Before a party is allowed to seek the intervention of the
courts, it is a pre-condition that he avail of all administrative processes afforded him, such that if a
remedy within the administrative machinery can be resorted to by giving the administrative officer every
opportunity to decide on a matter that comes within his jurisdiction, then such remedy must be
exhausted first before the court's power of judicial review can be sought, otherwise, the premature resort
to the court is fatal to one's cause of action. While there are exceptions to the principle of exhaustion of
administrative remedies, it has not been sufficiently shown that the present case falls under any of the
exceptions.
84
COMMISSIONER OF INTERNAL REVENUE vs. AIR LIQUIDE PHILIPPINES, INC. G.R.

No. 210646 July 29, 2015
Doctrine of the Case:

San Roque Doctrine - BIR Ruling No. DA-489-03, issued on December 10, 2003, stated that the taxpayer-claimant
need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of a petition for
review. Thus, all taxpayers can rely on the said BIR ruling from the time of its issuance on
December 10, 2003 up to its reversal by this Court in Aichi on October 6, 2010, where it was held that
the 120+30-day periods are mandatory and jurisdictional. In other words, the Aichi ruling was prospective in application.
The Case: This is a petition for review on certiorari seeking to reverse and set aside the July 29, 2013
Decision and the December 17, 2013 Resolution 2of the CTA En Banc which reversed and set aside the
July 3, 2012 Decision3 and the September 24, 2012 Resolution of the CTA Division, in a case involving an
application for issuance of a tax credit certificate for unutilized input VAT.
FACTS:
Respondent Air Liquide Philippines, Inc. (ALPI) is a domestic corporation registered with the BIR as a
VAT entity. It sells chemical products and renders certain related services to PEZA enterprises. On
January 22, 2008, ALPI filed with the BIR its Quarterly VAT Return for the 4th quarter of 2007.
Subsequently, on December 23, 2009, ALPI filed with petitioner CIR an application for issuance of a tax
credit certificate for its unutilized input VAT in the amount of P23,254,465.64 attributable to its
transactions with PEZA-registered enterprises for the 4th quarter of 2007.
On December 29, 2009, or only six (6) days later, ALPI filed its petition for review with the CTA
Division, without awaiting the resolution of its application for tax credit certificate or the expiration of
the 120-day period under Section 112(C) of the NIRC.
CTA Division, instead of ruling on the merits, dismissed the judicial claim for VAT refund for lack of
jurisdiction. The CTA Division noted that the CIR was given a period of one hundred twenty (120) days
within which to either grant or deny the claim for VAT refund or credit. ALPI, however, filed its judicial
claim before the CTA only 6 days after the filing of the administrative claim for tax credit with the CIR.
The failure of ALPI to observe the compulsory 120-day period warranted the dismissal of its petition.
ALPI moved for reconsideration, but the motion was denied by the CTA Division in its September 24,
2012 Resolution. Aggrieved, ALPI filed a petition for review with the CTA En Banc.
CTA En Banc reversed the ruling of the CTA Division, citing the consolidated cases of tax credit
certificate for unutilized input VAT. CIR v. San Roque, CIR v. Taganito and CIR v. Philex4 (San Roque). In
these cases, the Court recognized the legal effects of BIR Ruling No. DA-489-03, which stated that the
"taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief
with the CTA by way of Petition for Review." Thus, all taxpayers could rely on BIR Ruling No.
DA-489-03 from the time of its issuance on December 10, 2003 up to its reversal by this Court
in CIR v. Aichi (Aichi) on October 6, 2010, where it ruled that the 120+30-day period was
mandatory and jurisdictional.
Consequently, as ALPI filed its judicial claim for VAT credit on December 29, 2009, then it was covered
by BIR Ruling No. DA-489-03. ALPI need not wait for the lapse of the 120-day period before it could
seek judicial relief. The CTA En Banc remanded the case to the CTA Division for the determination of
the propriety of the VAT refund or credit claim.
The CIR filed its MR, but it was denied by the CTA En Banc in its December 17, 2013 Resolution.
Hence, this present petition.
85
ISSUE:
WON THE CTA DIVISION ACQUIRED JURISDICTION OVER ALPI’S PETITION FOR
REVIEW.
HELD:
The CTA Division acquired jurisdiction.
BIR Ruling No. DA-489-03, issued on December 10, 2003, stated that the taxpayer-claimant need not
wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of a
petition for review. This rule, however, was nullified in Aichi, promulgated on October 6,
2010. Aichi emphasized that the failure to await the decision of the Commissioner or the lapse of 120-
day period prescribed in Section 112(C) amounted to a premature filing.
To elucidate on the seemingly conflicting doctrines, San Roque clarified, once and for all, that BIR Ruling
No. DA-489-03 was a general interpretative rule. Thus, all taxpayers can rely on the said BIR ruling from
the time of its issuance on December 10, 2003 up to its reversal by this Court in Aichi on October 6,
2010, where it was held that the 120+30-day periods are mandatory and jurisdictional. In other words,
the Aichi ruling was prospective in application.
In the present case, ALPI can benefit from BIR Ruling No. DA-489-03. It filed its judicial claim for
VAT credit certificate on December 29, 2009, well within the interim period from December 10, 2003 to
October 6, 2010, so there was no need to wait for the lapse of 120 days prescribed in Section 112 (c) of
the NIRC.
The CIR asserted, however, that ALPI cannot invoke the exception from the San Roque Ruling as it did
not particularly allege BIR Ruling No. D-489-03 in its petition before the CTA. Thus, it poses a valid
question: Is there a need for a taxpayer to specifically invoke BIR Ruling No. DA-489-03 to benefit from
the same?
The Court answers in the negative and agrees with ALPI in its survey of cases which shows that BIR
Ruling No. DA-489-03 was applied even though the taxpayer did not specifically invoke the same. As
long as the judicial claim was filed between December 10, 2003 and October 6, 2010, then the taxpayer
would not be required to wait for the lapse of 120-day period.
HEDCOR, INC., vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 207575, July 15, 2015, FIRST DIVISION (SERENO, CJ)
Pursuant to Section 112(C) of the NIRC, respondent had 120 days from the date of submission of complete documents in
support of the application within which to decide on the administrative claim. Thereafter, the taxpayer affected by the CIR'
s decision or inaction may appeal to the CTA within 30 days from the receipt of the decision or from the expiration of the
120-day period. Compliance with both periods is jurisdictional, considering that the 30-day period to appeal to the CTA is
dependent on the 120-day period. The period of 120 days is a prerequisite for the commencement of the 30-day period to
appeal.
FACTS:
Petitioner is a domestic corporation primarily engaged in the operation of hydro-electric power plants
and the generation of hydro-electric power. It is a value-added tax (VAT) payer duly registered with the
86
Bureau of Internal Revenue (BIR). Petitioner alleged that in the course of operating its business, it
purchased domestic goods and services, as well as capital goods, and paid the corresponding VAT as
part of the purchase price. For the period covering taxable year 2008, its purchases amounted to
35,467,773.00 on which the corresponding input VAT was ₱4,256,132.80. However, after deductions of
output tax due from the accumulated input tax, petitioner still had an unused or excess input VAT in the
total amount of ₱4,217,955.84. Being in the business of generating of renewable sources of energy
through hydro power, petitioner maintained that it was entitled to zero-percent (0%) VAT, as the sales
of electric power to National Power Corporation (NPC) qualified as zero-rated sales pursuant to Section
108(B) (7) of the National Internal Revenue Code (NIRC).
On 28 December 2009, petitioner filed with the BIR an administrative claim for the refund. On 23
March 2010, it admittedly received from the BIR a Letter of Authority or request for the presentation of
records. Nevertheless, petitioner filed on 6 July 2010 a Petition for Review because of its apprehension
that the two (2) years provided by law to file a judicial claim would lapse on 21 July 2010 in view of
Atlas.
Petitioner filed on 29 October 2010 a Motion for Leave to File Supplemental Petition for Review. In its
motion, it manifested that it had submitted to the BIR on 20 September 2010 the last set of supporting
documents related to its administrative claim for a refund. The motion was granted by the CTA
Division, which then required petitioner to file the Supplemental Petition for Review and respondent, a
Supplemental Answer.
Respondent CIR filed a Motion to Dismiss on 8 November 2010 on the ground of lack of jurisdiction
which was granted. On appeal, the CTA en banc denied the Petition and ruled that the judicial claim had
been filed out of time.
ISSUE:
Is the CTA wrong and has no authority to deviate from the clear and literal meaning of Section 112 (D)
of the NIRC by counting the 120-day period from the filing of the administrative claim and not from the
last submission of complete documents in the administrative proceedings with the BIR?
RULING:
NO. The requirements for a taxpayer be able to claim a refund or credit of its input tax are found in
Section 112 of the NIRC, as amended, the relevant portions of which read:
Sec. 112. Refunds or Tax Credits of Input Tax.-
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be made. – In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim
for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application
within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of
the decision denying the claim or after the expiration of the one hundred twenty day period, appeal the
decision or the unacted claim with the Court of Tax Appeals.
87
Pursuant to Section 112(C) of the NIRC, respondent had 120 days from the date of submission of
complete documents in support of the application within which to decide on the administrative claim.
Thereafter, the taxpayer affected by the CIR' s decision or inaction may appeal to the CTA within 30
days from the receipt of the decision or from the expiration of the 120-day period. Compliance with
both periods is jurisdictional, considering that the 30-day period to appeal to the CTA is dependent on
the 120-day period. The period of 120 days is a prerequisite for the commencement of the 30-day period
to appeal.
Strict compliance with the 120+30 day period is necessary for a claim for a refund or credit of input
VAT to prosper. An exception to that mandatory period was, however, recognized in San
Roque 12 during the period between 10 December 2003, when BIR Ruling No. DA-489-03 was issued,
and 6 October 2010, when the Court promulgated Aichi declaring the 120+ 30 day period mandatory
and jurisdictional, thus reversing BIR Ruling No.DA-489-03.
Considering that the administrative claim was filed on 28 December 2009, petitioner had only until 27
May 2010 (counting 120+30 days) to appeal to the CTA the decision or inaction of the BIR. Petitioner
belatedly filed its judicial claim with the CTA on 6 July 2010.
Petitioner insists, though, that it filed on 20 September 2010 the complete documents supporting its
administrative claim; the 120-day period should then be counted from that date.
Petitioner contends that pursuant to Revenue Memorandum Circular (RMC) No. 49-2003, the 120 day
period must be counted from receipt of the complete documents.
Granting arguendo that the 120-day period should commence to run only upon receipt of the
Transmittal Letter, petitioner's judicial claim must still fail. RMC No. 49-2003 provides:
A-18 xxx
For claims to be filed by claimants with the respective investigating/processing office of the
administrative agency, the same shall be officially received only upon submission of complete
documents.
If we follow the assumptions of petitioner, its administrative claim would only be considered as officially
received on 20 September 2010, when it allegedly filed its complete supporting documents. By that time,
the period for filing an administrative application for a refund would have already prescribed on 30 June
2010, or two (2) years from the close of the taxable quarter when the relevant sales were made.
To reiterate, the right to appeal is a mere statutory privilege that requires strict compliance with the
conditions attached by the statute for its exercise. It has already lost its right to claim a refund or credit
of its alleged excess input VAT attributable to zero-rated or effectively zero-rated sales for the second
quarter of taxable year 2008 by virtue of its own failure to observe the prescriptive period.
88
CHINA BANKING CORPORATION vs. CITY TREASURER OF MANILA

G.R. No. 204117, July 1, 2015, SECOND DIVISION (MENDOZA,J.)
Time and again, it has been held that the perfection of an appeal in the manner and within the period laid down by law is
not only mandatory but also jurisdictional. The failure to perfect an appeal as required by the rules has the effect of defeating
the right to appeal of a party and precluding the appellate court from acquiring jurisdiction over the case. At the risk of
being repetitious, the Court declares that the right to appeal is not a natural right nor a part of due process. It is merely a
statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law.
FACTS:
On January 2007, on the basis of the reported income of respondent CBC's Sto. Cristo Branch,
Binondo, Manila, amounting to ₱34,310,777.34 for the year ending December 31, 2006, respondent CBC
was assessed the amount of ₱267,128.70 by petitioner City Treasurer of Manila, consisting of local
business tax, business permits, and other fees for taxable year 2007.
On January 15, 2007, respondent CBC paid the amount of ₱267,128.70 and protested, thru a Letter
dated January 12, 2007, the imposition of business tax under Section 21 of the Manila Revenue Code in
the amount of ₱154,398.50, on the ground that it is not liable of said additional business tax and the
same constitutes double taxation.
On February 8, 2007, petitioner acknowledged receipt of respondent CBC 's payment under protest of
the assessed amount and further informed respondent that she will await for respondent‘s formal
protest.
On March 27, 2007, respondent CBC wrote a letter-reply to [respondent's] petitioner‘s Letter dated
February 8, 2007, reiterating that respondent already protested the additional assessment under Section
21 of the Manila Revenue Code in its Letter dated January 12, 2007. In the same Letter, respondent
averred that pursuant to Section 195 of the Local Government Code ("LGC ''), petitioner had until
March 16, 2007 within which to decide the protest, and considering that respondent received the Letter
dated February 8, 2007, four days after the deadline to decide and petitioner did not even resolve the
protest, respondent formally demanded the refund of the amount of ₱154,398.50, representing the
business tax collected under Section 21 of the Manila Revenue Code.
On April 17, 2007, respondent CBC filed a Petition for Review with the RTC of Manila raising the sole
issue of whether or not respondent is subject to the local business tax imposed under Section 21 of the
Manila Revenue Code. On August 28, 2008, the Regional Trial Court, Branch 173, Manila
(RTC),rendered its decision granting the petition filed by CBC and ordered the City Treasurer to refund
the amount of ₱154,398.50
On October 1, 2010, the CTA Division reversed the decision of the RTC, effectively dismissing CBC‘s
protest against the disputed assessment. Although the CTA Division dismissed the City Treasurer‘s
contention that CBC‘s petition for review should have been filed with the Metropolitan Trial Court
(MeTC), nevertheless it found that the RTC did not have jurisdiction over the said petition for because it
was filed out of time. The CTA Division noted that the petition for review was filed one (1) day beyond
the reglementary period allowed by Section 195 of the Local Government Code16 (LGC)to taxpayers
who wished to appeal a denial of a protest due to the inaction of the City Treasurer. Consequently, the
CTA Division ruled that the City Treasurer‘s assessment against CBC had attained finality.
89
On appeal, the CTA En Banc affirmed the ruling of the CTA Division in toto, reiterating that the
petition for review was filed out of time.
ISSUE:
Is the Court of Tax Appeals correct in reversing the ruling of the trial court solely because of its assumed
pronouncement that the original petition was files one (1) day beyond the reglementary period?
RULING:
YES. Under the current state of law, there can be no doubt that the law does not prescribe any formal
requirement to constitute a valid protest. To constitute a valid protest, it is sufficient if what has been
filed contains the spontaneous declaration made to acquire or keep some right or to prevent an
impending damage. Accordingly, a protest is valid so long as it states the taxpayer‘s objection to the
assessment and the reasons therefor.
In this case, the Court finds that the City Treasurer‘s contention that CBC was not able to properly
protest the assessment to be without merit. The Court is of the view that CBC was able to properly file
its protest against the assessment of the City Treasurer when it filed its letter on January 15, 2007,
questioning the imposition while paying the assessed amount.
The Court, however, is of the view that the period within which the City Treasurer must act on the
protest, and the consequent period to appeal a "denial due to inaction," should be reckoned from
January 15, 2007, the date CBC filed its protest, and not March 27, 2007. Consequently, the Court finds
that the CTA En Banc did not err in ruling that CBC had lost its right to challenge the City Treasurer‘s
"denial due to inaction." On this matter, Section 195 of the LGC is clear:
SECTION 195. Protest of Assessment. -When the local treasurer or his duly authorized representative
finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating
the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interests and penalties.
Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written
protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final
and executory. The local treasurer shall decide the protest within sixty (60) days from the time of its
filing . If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice
canceling wholly or partially the assessment. However, if the local treasurer finds the assessment to be
wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The
taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the
sixty (60)-day period prescribed herein within which to appeal with the court of competent jurisdiction
otherwise the assessment becomes conclusive and unappealable.
Time and again, it has been held that the perfection of an appeal in the manner and within the period
laid down by law is not only mandatory but also jurisdictional. The failure to perfect an appeal as
required by the rules has the effect of defeating the right to appeal of a party and precluding the appellate
court from acquiring jurisdiction over the case. At the risk of being repetitious, the Court declares that
the right to appeal is not a natural right nor a part of due process. It is merely a statutory privilege, and
may be exercised only in the manner and in accordance with the provisions of the law.
90
At any rate, even if the Court considers CBC‘s appeal from the "denial due to inaction" by the City
Treasurer to have been timely filed, the same must be dismissed because it was not filed with a court of
competent jurisdiction.
Thus, although the Court in Yamane recognized that the RTC exercised its original jurisdiction over
cases decided by a local treasurer, it was quick to point out that with the advent of Republic Act
(R.A.)No. 9282, the jurisdiction of the RTC over such cases is no longer simply original and exclusive.
Republic Act No. 9282 definitively proves in its Section 7(a)(3) that the CTA exercises exclusive
appellate jurisdiction to review on appeal decisions, orders or resolutions of the Regional Trial Courts in
local tax cases original decided or resolved by them in the exercise of their original or appellate
jurisdiction. Moreover, the provision also states that the review is triggered "by filing a petition for
review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil
Procedure."
Clearly, with the passage of R.A. No. 9282, the authority to exercise either original or appellate
jurisdiction over local tax cases depended on the amount of the claim. In cases where the RTC exercises
appellate jurisdiction, it necessarily follows that there must be a court capable of exercising original
jurisdiction – otherwise there would be no appeal over which the RTC would exercise appellate
jurisdiction. The Court cannot consider the City Treasurer as the entity that exercises original jurisdiction
not only because it is not a "court" within the context of Batas Pambansa (B.P.)Blg. 129, but also
because, as explained above, "B.P. 129 expressly delineates the appellate jurisdiction of the Regional Trial
Courts, confining as it does said appellate jurisdiction to cases decided by Metropolitan, Municipal, and
Municipal Circuit Trial Courts." Verily, unlike in the case of the CA, B.P. 129 does not confer appellate
jurisdiction on the RTC over rulings made by non-judicial entities. The RTC exercises appellate
jurisdiction only from cases decided by the Metropolitan, Municipal, and Municipal Circuit Trial Courts
in the proper cases. The nature of the jurisdiction exercised by these courts is original, considering it will
be the first time that a court will take judicial cognizance of a case instituted for judicial action. Indeed, in
cases where the amount sought to be refunded is below the jurisdictional amount of the RTC, the
Metropolitan, Municipal, and Municipal Circuit Trial Courts are clothed with ample authority to rule on
such claims.
In all, the Court finds that the claim of petitioner CBC for refund should be dismissed not only for being
filed out of time but also for not being filed before a court of competent jurisdiction.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC. v. COMMISSIONER OF

INTERNAL REVENUE,
G.R. No. 183531, 25 March 2015, THIRD DIVISION (Reyes, J.)
If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer 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 be denied considering that the invoice it is issuing to its customers does not depict its being a VAT-registered taxpayer
whose sales are classified as zero-rated sales. Thus, failure to imprint the word ―zero-rated‖ on VAT official receipt is in
violation of the invoicing requirements
91
FACTS:
ETPI a VAT taxpayer entered into various international service agreements with international
telecommunications carriers and handles incoming telecommunications services for non-resident foreign
telecommunication companies and the relay of said international calls within and around other places in
the Philippines. Consequently, to broaden its distribution coverage of telecommunications services
throughout the country, ETPI entered into various interconnection agreements with local
carriers that can readily relay the said foreign calls to the intended local end-receiver. The non-
resident foreign corporations pays ETPI in US dollars inwardly remitted through the Philippine local
banks, Metropolitan Banking Corporation, HongKong and Shanghai Banking Corporation and Citibank.
ETPI filed an administrative claim with the BIR for the refund of the amount of P9,265,913.42
representing excess input tax attributable to its effectively zero-rated sales in 1998. Pending review by the
BIR, ETPI filed a Petition for Review before the CTA in order to toll the two-year reglementary period.
CTA however denied the petition because the VAT official receipts presented by ETPI to support its
claim failed to imprint the word ―zero-rated‖ on its face in violation of the invoicing requirements under
Section 4.108-1 of RR No. 7-95. It moved for reconsideration but was denied. ETPI pointed out that the
imprint of the word ―zero-rated‖ on the face of the sales invoice or receipt is merely required in RR No.
7-95 which cannot prevail over a taxpayer‘s substantive right to claim a refund or tax credit for its input
taxes.
ISSUE:
Whether or not the words ―zero-rated‖ is required on the invoices or receipts issued by VAT-
registered taxpayers
RULING:
Yes, it is required.
An applicant for a claim for tax refund or tax credit must not only prove entitlement to
the claim but also compliance with all the documentary and evidentiary requirements. A claim for the
refund of creditable input taxes must be evidenced by a VAT invoice or official receipt in accordance
with Section 110(A)(1) of the NIRC. Sections 237 and 238 of the same Code as well as Section 4.108-1
of RR No. 7-95 provide for the invoicing requirements that all VAT-registered taxpayers should observe,
such as: (a) the BIR Permit to Print; (b) the Tax Identification Number of the VAT-registered purchaser;
and (c) the word ―zero-rated‖ imprinted thereon. Thus, the failure to indicate the words ―zero-rated‖ on
the invoices and receipts issued by a taxpayer would result in the denial of
the claim for refund or tax credit.
Revenue Memorandum Circular No. 42-2003 on this point reads:

A-13: Failure by the supplier to comply with the invoicing requirements on the documents
supporting the sale of goods and services will result to the disallowance of the claim for input tax by the
purchaser-claimant.
If the claim for refund/TCC is based on the existence of zero-rated sales by the taxpayer
but it fails to comply with the invoicing requirements in the issuance of sales invoices (e.g.
failure to indicate the TIN), its claim for tax credit/refund of VAT on its purchases shall be
denied considering that the invoice it is issuing to its customers does not depict its being a
VAT-registered taxpayer whose sales are classified as zero-rated sales. Nonetheless, this treatment
92
is without prejudice to the right of the taxpayer to charge the input taxes to the appropriate expense
account or asset account subject 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.
In this respect, the Court has consistently ruled on the denial of a claim for refund or tax credit
whenever the word ―zero-rated‖ has been omitted on the invoices or sale receipts of the taxpayer-
claimant as pronounced in Panasonic Communications Imaging Corporation of the Philippines v. CIR wherein it
was ratiocinated, viz:
Section 4.108-1 of RR 7-95 proceeds from the rule-making authority
granted to the Secretary of Finance under Section 245 of the 1977 NIRC
(Presidential Decree 1158) for the efficient enforcement of the tax code and
of course its amendments. The requirement is reasonable and is in accord
with the efficient collection of VAT from the covered sales of goods and
services. As aptly explained by the CTA‘s First Division, the appearance of the
word “zero-rated” on the face of invoices covering zero-rated sales prevents
buyers from falsely claiming input VAT from their purchases when no VAT
was actually paid. If, absent such word, a successful claim for input VAT is
made, the government would be refunding money it did not collect.
Further, the printing of the word “zero-rated” on the invoice helps segregate sales that
are subject to 10% (now 12%) VAT from those sales that are zero-rated. Unable to submit the
proper invoices, petitioner Panasonic has been unable to substantiate its claim for refund.29 (Citations
omitted and emphasis ours)
NORTHERN MINDANAO POWER CORPORATION v. COMMISSIONER OF

INTERNAL REVENUE
G.R. No. 185115, 18, February 2015, FIRST DIVISION, (SERENO, C.J.)
Supreme Court has consistently held as fatal the failure to print the word ―zero-rated‖ on the VAT invoices or
official receipts in claims for a refund or credit of input VAT on zero-rated sales
FACTS:
NMPC is a corporation engaged in production sale of electricity as an independent power

producer and sells electricity to National Power Corporation (NPC). It allegedly incurred input value-
added tax (VAT) on its domestic purchases of goods and services that were used in its production and
sale of electricity to NPC. Petitioner filed an administrative claim for a refund on 25 July 2001 for taxable
year 2000 in the sum of P6,411,892.84. Thereafter, alleging inaction of respondent on these
administrative claims, petitioner filed a Petition with the CTA on 28 September 2001. However CTA
denied the petition on the ground that the term ―zero-rated‖ was not imprinted on the receipts or
invoices presented by petitioner in violation of Section 4.108-1 of Revenue Regulations No. 7-95.
93
ISSUE:
a.) Whether or not the action of the petitioner for filing of the refund claims were premature
b.) Whether or not the non-inclusion of the term zero-rated warrants the dismissal of the petition.
RULING:
a.) Yes, the actions were premature
For the year 2000, petitioner timely filed its administrative claim on 25 July 2001within the two-
year period from the close of the taxable quarter when the zero-rated sales were made. Pursuant to
Section 112(D) of the NIRC of 1997, respondent had 120 days or until 22 November 2001 within which
to act on petitioner‘s claim. It is only when respondent failed to act on the claim after the expiration of
that period that petitioner could elevate the matter to the tax court.
Records show, however, that petitioner filed its Petition with the CTA on 28 September 2001
without waiting for the expiration of the 120-day period. Barely 64 days had lapsed when the judicial
claim was filed with the CTA. The Court in San Roque has already settled that failure of the petitioner to
observe the mandatory 120-day period is fatal to its judicial claim and renders the CTA devoid of
jurisdiction over that claim. On 28 September 2001 – the date on which petitioner filed its judicial
claim for the period covering taxable year 2000 - the 120+30 day mandatory period was already in the
law and BIR Ruling No. DA-489-03 had not yet been issued. Considering this fact, petitioner did not
have an excuse for not observing the 120+30 day period. Again, as enunciated in San Roque, it is only the
period between 10 December 2003 and 6 October 2010 that the 120-day period may not be observed.
While the ponente had disagreed with the majority ruling in San Roque, the latter is now the judicial
doctrine that will govern like cases.
The judicial claim was thus prematurely filed for failure of petitioner to observe the 120-day
waiting period. The CTA therefore did not acquire jurisdiction over the claim for a refund of input VAT
for all the quarters of taxable year 2000.
b.) Yes, it is fatal.
In Western Mindanao Power Corporation v. CIR, we ruled:c
RR 7-95, which took effect on 1 January 1996, proceeds from the rule-making authority granted
to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its
amendments. In Panasonic Communications Imaging Corporation of the Philippines v. Commissioner of Internal
Revenue, we ruled that this provision is ―reasonable and is in accord with the efficient collection of VAT
from the covered sales of goods and services.‖ Moreover, we have held in Kepco Philippines Corporation v.
Commissioner of Internal Revenue that the subsequent incorporation of Section 4.108-1 of RR 7-95 in Section
113 (B) (2) (c) of R.A. 9337 actually confirmed the validity of the imprinting requirement on VAT
invoices or official receipts – a case falling under the principle of legislative approval of administrative
interpretation by reenactment.
In fact, this Court has consistently held as fatal the failure to print the word ―zero-rated‖ on the
VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales, even
if the claims were made prior to the effectivity of R.A. 9337. Clearly then, the present Petition must be
denied.
94
NOTE: Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter
or exchange of goods or properties, while a VAT official receipt properly pertains to every lease of
goods or properties; as well as to every sale, barter or exchange of services.
The Court has in fact distinguished an invoice from a receipt in Commissioner of Internal Revenue v.
Manila Mining Corporation:
A ―sales or commercial invoice‖ is a written account of goods sold or services rendered
indicating the prices charged therefor or a list by whatever name it is known which is used in the
ordinary course of business evidencing sale and transfer or agreement to sell or transfer goods and
services.
A ―receipt‖ on the other hand is a written acknowledgment of the fact of payment in money or
other settlement between seller and buyer of goods, debtor or creditor, or person rendering services and
client or customer.
A VAT invoice is the seller‘s best proof of the sale of goods or services to the buyer, while a
VAT receipt is the buyer‘s best evidence of the payment of goods or services received from the seller. A
VAT invoice and a VAT receipt should not be confused and made to refer to one and the same thing.
Certainly, neither does the law intend the two to be used alternatively.
CBK POWER COMPANY LIMITED v. COMMISSIONER OF INTERNAL REVENUE

G.R. Nos. 193383-84, January 14, 2015, FIRST DIVISION (Perlas-Bernabe, J.)
There was no violation of Section 229 since the law as worded, only requires that an administrative claim be
priorly filed. The Court understands the filing of the claim with the Collector of Internal Revenue to be intended primarily
as a notice of warning that unless the tax or penalty alleged to have been collected erroneously or illegally is refunded, court
action will follow.
FACTS:
CBK Power is a limited partnership primarily engaged in the development and operation of the
Caliraya, Botocan and Kalayaan hydroelectric power generating plants in Laguna (CBK Project). In order
to finance the project, CBK Power obtained a syndicated loan from several foreign banks. Certain
portions of the loan were later assigned by the original lenders to various other banks.
In February 2001, CBK borrowed money from Industrial Bank of Japan, Fortis-Netherlands,
Raiffesen Bank, Fortis-Belgium, and Mizuho Bank. Final taxes were withheld from the said payments.
However, according to CBK Power, under the relevant tax treaties between the Philippines and the
respective countries which each of the banks is a resident, the interest income by the aforementioned
banks are subject only to a preferential tax rate of 10%.
Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final
withholding taxes allegedly erroneously withheld and collected for the years 2001-2002. As for the claim
for refund for 2003, it was subsequently filed on March 4, 2005.
Spurred by the Commissioner‘s inaction, CBK Power filed petitions for review before the CTA.
The CTA First Division granted the petitions and ordered the refund of the amount claimed by CBK
Power. In its decision, the CTA declared that the required International Tax Affairs Division (ITAD)
ruling was not a condition sine qua non for the entitlement of the tax relief sought by the petitioner.
95
However, upon motion for reconsideration, it amended its decision and reduced the amount of
refund on the ground that CBK Power failed to obtain an ITAD ruling for its transactions with Fortis-
Netherlands.
The CTA En Banc affirmed the ruling that a prior application is indeed required by Revenue
Memorandum Order (RMO) 1-2000. The CTA En Banc also held that CBK Power‘s petitions for
review were properly filed within the two-year prescriptive period.
ISSUES:
1. Whether or not the BIR may add a requirement – prior application for an ITAD ruling – that is
not found in the income tax treaties before a taxpayer can avail of the preferential tax rates under
the treaties
2. Whether or not CBK Power failed to exhaust administrative remedies
RULING:
1. NO.
The obligation to comply with a tax treaty must take precedence over the objective of RMO No.
1-2000, in light of the time honored principle of pacta sunt servanda, which demands the performance in
good faith of treaty obligations on the part of the states that enter into the agreement.
Bearing in mind the rationale of tax treaties, the period of application for the availment of tax
treaty relief as required by RMO No. 1-2000 should not operate to divest entitlement to the relief as it
would constitute a violation of the duty required by good faith in complying with a tax treaty.
The objective of RMO No. 1-2000 in requiring the application for treaty relief with the ITAD
before a party‘s availment of the preferential rate under a tax treaty is to avert the consequences of any
erroneous interpretation and/or application of treaty provisions, such as claims for refund/credit for
overpayment of taxes, or deficiency tax liabilities for underpayment.
However, the underlying principle of prior application with the BIR becomes moot in refund
cases – as in the present case – where the very basis of the claim is erroneous or there is excessive
payment arising from the non-availment of a tax treaty relief at the first instance.
2. NO.
The Commissioner laments that he was deprived of the opportunity to act in the administrative
claim for refund since CBK Power hastily elevated the case on petition for review before the CTA. He
argues that this is violative of the doctrines of exhaustion of administrative remedies and of primary
jurisdiction.
However, had CBK Power awaited the action of the Commissioner on its claim for refund prior
to taking court action knowing fully well that the prescriptive period was about to end, it would have lost
not only its right to seek judicial recourse but its right to recover the final withholding taxes it
erroneously paid to the government thereby suffering irreparable damage.
Nowhere and in no wise does the law imply that the Collector of Internal Revenue must act
upon the claim, or that the taxpayer shall not go to court before he is notified of the Collector‘s action.
The Court understands the filing of the claim with the Collector of Internal Revenue to be
intended primarily as a notice of warning that unless the tax or penalty alleged to have been collected
erroneously or illegally is refunded, court action will follow.
96
MANILA ELECTRIC COMPANY V. THE CITY ASSESSOR AND CITY TREASURER

OF LUCENA CITY
G.R. No. 166102, August 5, 2015, FIRST DIVISION (Leonardo-De Castro, J.)
PAGCOR’s income derived from gaming operations is subject only to the 5% franchise tax, in lieu of all other
taxes, including corporate income tax. Thus, all contractees and licensees of PAGCOR, upon payment of the 5% franchise
tax, shall likewise be exempted from all other taxes, including corporate income tax realized from the operation of casinos.
FACTS:
Manila Electric Company (MERALCO) is a public utility engaged in electric distribution.
MERALCO had been successively granted franchises to operate in Lucena City since the year 1922 until
the present time.
In 1989, MERALCO received from the City Assessor a copy of a Tax Declaration covering the
following electric facilities, classified as capital investment: (a) transformer and electric post; (b)
transmission line; (c) insulator; and (d) electric meter.
MERALCO appealed this Tax Declaration to the Local Board of Assessment Appeals (LBAA),
which ruled in favor of Meralco. The City Assessor appealed to the Central Board of Assessment
Appeals (CBAA), which affirmed the judgment. Both bodies ruled that the facilities were not subject to
real property tax. This decision was not appealed by the City Assessor and thus became final and
executory.
Six years later, on October 29, 1997, MERALCO received a letter from the City Treasurer of
Lucena, stating that the company was being assessed real property tax delinquency on its machineries
beginning 1990, in the total amount of P17,925,117.34.
When MERALCO appealed this Tax Declaration, the LBAA declared that the Local
Government Code which took effect in 1991 had repealed the exemption of MERALCO from payment
of real property taxes on its poles, wires, insulators, transformers and meters. The CBAA agreed with the
LBAA‘s ruling.
MERALCO filed a Petition for Review under Rule 43 with the Court of Appeals. The CA
rejected all MERALCO‘s arguments and ruled that there was no basis for the real property tax
exemption under the Local Government Code.
MERALCO thus filed the instant Petition for Review on Certiorari.
ISSUES:
1. Whether or not the electric facilities qualify as ―machinery‖ under the Local Government Code
and are thus no longer exempt from real property taxes
2. Whether or not there was due process in the appraisal by the City Treasurer
RULING:
1. YES
MERALCO relies heavily on previous decisions which were rendered. However, the decisions in
CBAA Case No. 248 and the 1964 MERALCO case recognizing the exemption from real property tax of
the transformers, electric posts, transmission lines, insulators, and electric meters of MERALCO are no
longer applicable because of subsequent developments that changed the factual and legal milieu for
MERALCO in the present case.
The evident intent of the Local Government Code is to withdraw/repeal all exemptions from
local taxes, unless otherwise provided by the Code.
The limited and restrictive nature of the tax exemption privileges under the Local Government
Code is consistent with the State policy to ensure autonomy of local governments and the objective of
97
the Local Government Code to grant genuine and meaningful autonomy to enable local government
units to attain their fullest development as self-reliant communities and make them effective partners in
the attainment of national goals.
It is a basic precept of statutory construction that the express mention of one person, thing, act,
or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio
alterius.
Not being among the recognized exemptions from real property tax in Section 234 of the Local
Government Code, then the exemption of the transformers, electric posts, transmission lines, insulators,
and electric meters of MERALCO from real property tax granted under its franchise was among the
exemptions withdrawn upon the effectivity of the Local Government Code on January 1, 1998.
The Civil Code provides for the definition of real property under Article 415 of the Civil Code.
However, the facilities here do not fall squarely within the enumerations therein, not having the proper
requisites. The Civil Code likewise, does not define the term ―machinery.‖
On the other hand, while the Local Government Code still does not provide for a specific
definition of "real property," Sections 199(o) and 232 of the said Code, respectively, gives an extensive
definition of what constitutes "machinery" and unequivocally subjects such machinery to real property
tax.
Under Section 199(o) of the Local Government Code, machinery, to be deemed real property
subject to real property tax, need no longer be annexed to the land or building as these "may or may not
be attached, permanently or temporarily to the real property," and in fact, such machinery may even be
"mobile."
The same provision though requires that to be machinery subject to real property tax, the
physical facilities for production, installations, and appurtenant service facilities, those which are mobile,
self-powered or self-propelled, or not permanently attached to the real property (a) must be actually,
directly, and exclusively used to meet the needs of the particular industry, business, or activity; and (2) by
their very nature and purpose, are designed for, or necessary for manufacturing, mining, logging,
commercial, industrial, or agricultural purposes.
As between the Civil Code, a general law governing property and property relations, and the
Local Government Code, a special law granting local government units the power to impose real
property tax, then the latter shall prevail.
2. NO
Every machinery must be individually appraised and assessed depending on its acquisition cost,
remaining economic life, estimated economic life, replacement or reproduction cost, and depreciation.
The Local Government Code further mandates that the taxpayer be given a notice of the
assessment of real property. A notice of assessment, which stands as the first instance the taxpayer is
officially made aware of the pending tax liability, should be sufficiently informative to apprise the
taxpayer the legal basis of the tax.
A perusal of the documents received by MERALCO on October 29, 1997 reveals that none of
them constitutes a valid notice of assessment of the transformers, electric posts, transmission lines,
insulators, and electric meters of MERALCO.
It appears that the City Assessor of Lucena simply lumped together all the transformers, electric
posts, transmission lines, insulators, and electric meters of MERALCO located in Lucena City.
It is true that tax assessments by tax examiners are presumed correct and made in good faith,
with the taxpayer having the burden of proving otherwise. In this case, MERALCO was able to
overcome the presumption because it has clearly shown that the assessment of its properties by the City
Assessor was baselessly and arbitrarily done, without regard for the requirements of the Local
Government Code.
98
The exercise of the power of taxation constitutes a deprivation of property under the due
process clause, and the taxpayer's right to due process is violated when arbitrary or oppressive methods
are used in assessing and collecting taxes.
THE CITY OF DAVAO, REPRESENTED BY THE CITY TREASURER OF DAVAO CITY,

Petitioner, vs. THE INTESTATE ESTATE OF AMADO S. DALISAY, REPRESENTED BY
SPECIAL ADMINISTRATOR ATTY. NICASIO B. PADERNA, Respondent.
G.R. No. 207791 July 15, 2015 (Mendoza, J.)
The better theory that is consistent with the subject matter of the provision is that forfeiture of tax delinquent
properties transpires no later than the purchase made by the city due to lack of a bidder from the public. This happens on
the date of the sale, and not upon the issuance of the declaration of forfeiture. To rule otherwise would be similar to saying
that prior to the accrual of the local government’s right as a purchaser, an additional requirement of issuing a declaration of
forfeiture is necessary. Not only is this duty unfounded, but it also places the local government in a vacuum from the time of
the auction up to the time it issues the document.
FACTS:
The Estate of Amado S. Dalisay owned several properties, all situated in Davao City. These properties
were advertised for sale at a public auction for nonpayment of real estate taxes. The public auction was
scheduled on July 19, 2004. No bidders appeared on the date of the public auction, thus, the aforesaid
properties were acquired by the City Government of Davao. On September 13, 2005, or more than a
year after the public auction, the Declarations of Forfeiture for the properties were separately issued by
the City Treasurer.
On October 3, 2005, the City caused the annotation of the Declarations of Forfeiture on the
corresponding TCTs of the properties. Subsequently, the Estate inquired from the City Treasurer‘s
Office regarding the amount of the redemption price of the properties. On September 11, 2006, the Real
Property Tax Division of the City furnished the Estate copies of the billing statements containing a
handwritten summary of the amount showing the aggregate total of ₱4,996,534.
Thus, on September 13, 2006, the Estate delivered a written tender of payment to the City Treasurer
and, at the same time, tendered the amount of ₱5,000,000. The City, however, refused to accept the
same. This constrained the Estate to file the Notice to Deposit the ₱5,000,000 with the Office of the
Clerk of Court, RTC, at the disposal of the City Treasurer. In doing so, the Estate was made to pay legal
fees amounting to ₱75,200. An action for redemption, consignation and damages against the City was
consequently filed by the Estate with the RTC.
For its part, the City admitted the existence of the billing statements, but it posited that their issuance
was not an admission that the Estate still had the right to redeem the properties. The period of
redemption had long expired on July 19, 2005, a year after the subject properties were acquired by the
City during the public auction for want of a bidder. Hence, its refusal to accept the tendered amount was
valid and for a lawful cause.
99
ISSUE:
Whether the one year redemption period of forfeited tax delinquent properties purchased by the local
government for want of a bidder is reckoned from the date of the auction or sale or from the date of the
issuance of the declaration of forfeiture.
RULING:
DATE OF THE AUCTION OR SALE. While it is a given that redemption by property owners is
looked upon with favor, it is equally true that the right to redeem properties remains to be a statutory
privilege. Redemption is by force of law, and the purchaser at public auction is bound to accept it. In
other words, a valid redemption of property must appropriately be based on the law which is the very
source of this substantive right. It is, therefore, necessary that compliance with the rules set forth by law
and jurisprudence should be shown in order to render validity to the exercise of this right.
It is without question that Section 263 of the LGC lacks definiteness as to the reckoning point for the
redemption of tax delinquent properties. It merely employs the phrase, "within one (1) year from the
date of such forfeiture." On one hand, the City avers that the period commences from the date of the
forfeiture, that is, the date of the auction. On the other hand, the Estate insists that the redemption
period begins from the date when the declarations of forfeiture were issued. For the Court, the
arguments of the City point toward a more just and fair resolution of the perceived vagueness in the law.
First. The City‘s theory that the term "forfeiture," contemplated in the subject phrase, refers to the date
when the tax delinquent properties were sold at a public auction, holds more logic than the conjecture of
the Estate on the usage of the word "such." Indeed, Section 263 of the LGC takes into effect because of
one vital factor: the absence of a bidder in a public auction for tax delinquent properties. Were it not for
this fact, this provision would not come into operation or, at the least, find relevance. Sections 260 and
261 would have come into play in cases where a purchaser, other than the local government unit, places
a bid on the property. This is undeniably a distinct feature of Section 263 that cannot be ignored. The
absence of the public impels the City Treasurer to purchase the property in behalf of the city. Reason
would, therefore, dictate that this purchase by the City is the very forfeiture mandated by the law. The
contemplated "forfeiture" in the provision points to the situation where the local government ipso facto
"forfeits" the property for want of a bidder.
This analysis is ridden with substance that surpasses the hypothesis of the Estate. The Estate purely
speculates that the term "such" in the phrase "the date of such forfeiture," was only resorted to in order
to avoid the repetition of the words in the text of the law. It attempts to convince the Court that the
second paragraph of the same provision which mentions the phrase, "any such declaration of forfeiture,"
in connection with the duty of the Register of Deeds to transfer the title of the forfeited property, shows
that the "forfeiture" contemplated by the law is that of the issuance of the Declaration of Forfeiture.
While the Estate has a point in saying that the City may not speciously insist that the law does not say
that the one (1) year period of redemption is counted from the date of "declaration of forfeiture," this
proffered explanation is far more hallow and unfounded.
Second. It was held in the case of City Mayor v. RCBC that the owner of the delinquent real property or
person having legal interest therein, or his representative, has the right to redeem the property within one
year from the date of sale upon payment of the delinquent tax and other fees. Verily, the period of
redemption of tax delinquent properties should be counted not from the date of registration of the
certificate of sale, as previously provided by Section 78 of P.D. No. 464, but rather on the date of sale of
the tax delinquent property, as explicitly provided by Section 261 of R.A. No. 7160.
100
In applying the pronouncements in City Mayor to this case, the Court finds no harm in considering the
interpretation of Section 261 which is emphatic in saying that the redemption period is set "within one
(1) year from the date of sale," as applicable to Section 263. The usage of the terms "sale" and
"forfeiture" in Sections 261 and 263, respectively, only highlights a distinction in the situations covered
and produces no significant variance. The former refers to the voluntary purchase made by a bidder in
public auction while the latter points to the divesting of the ownership of a particular property on
account of the breach of a legal duty, without compensation,23 for example, the non-payment of tax.
Therefore, in cases covered by these pertinent provisions in the LGC, the date of the "sale" or
"forfeiture" is rightfully the point in time when the owner is divested of certain attributes of ownership
over the property albeit only until the redemption of the property. This translates to no other event but
to the date of the public auction. More than the purpose of uniformity and harmony among provisions
of law, the Court finds this conclusion as consistent with the intention of the law.
Third. At this juncture, the Court considers the peculiar fact involved in this case: the City Treasurer‘s
belated issuance of the disputed Declarations of Forfeiture. Clearly, this irregularity had eventually
shaped and brought forth the subject controversy. Had it not been for the severe delay in the issuance,
there would have been no dispute and the reckoning period of the redemption period would have been a
toss between closer dates, rather than those claimed, which are years apart, to wit: July 19, 2004 and
September 13, 2005.
The general rule is that the State cannot be put in estoppel by the mistakes or errors of its officials or
agents. Indeed, like all general rules, this is also subject to exceptions. Estoppel should not be invoked
except in a rare and unusual circumstance. It may not be invoked where they would operate to defeat the
effective operation of a policy adopted to protect the public. They must be applied with circumspection
and should be applied only in those special cases where the interests of justice clearly require it. The
Court, however, can only commiserate with the situation of the state and its lost chance of recovering its
property, as it still sees no reason to depart from the general rule.
The delay on the part of the Estate to at least inquire into the outcome of the auction and its misplaced
reliance on a curious document heightens the belief of the Court that the City may not be deprived of a
right that has long been vested in its favor. The odd timing in the issuance of the Declarations of
Forfeiture and its very contents which observably benefit the Estate to the core form a nagging doubt
that may not be easily shrugged off. This hinders the Court from applying the exceptions to the rule on
estoppel, when doing this would result in more impropriety.
BATANGAS CITY, MARIA TERESA GERON, In her capacity as City Treasurer of Batangas
City and TEODULFO A. DEGUITO, In his capacity as City Legal Officer of Batangas City,
Petitioners, vs. PILIPINAS SHELL PETROLEUM CORPORATION, Respondent.
G.R. No. 187631 July 8, 2015 (Peralta, J.)
Section 133 of the LGC is a specific provision that explicitly withhold from LGUs the power to impose taxes, fees and
charges on petroleum products. Strictly speaking, as long as the subject matter of the taxing powers of the LGUs is the
petroleum products per se or even the activity or privilege related to the petroleum products, such as manufacturing and
distribution of said products, it is covered by the said limitation and thus, no levy can be imposed.
101
FACTS:
Respondent Pilipinas Shell Petroleum Corporation operates an oil refinery and depot in Tabagao,
Batangas City, which manufactures and produces petroleum products that are distributed nationwide. In
2002, respondent was only paying the amount of ₱98,964 for fees and other charges which include the
amount of ₱1,180 as Mayor‘s Permit. However, petitioner Batangas City, through its City Legal Officer,
sent a notice of assessment to respondent demanding the payment of ₱92,373,720 and ₱312,656,253 as
business taxes for its manufacture and distribution of petroleum products. In addition, respondent was
also required and assessed to pay the amount of ₱4,299,851 as Mayor‘s Permit Fee based on the gross
sales of its Tabagao Refinery. The assessment was allegedly pursuant of Section 134 of the LGC of 1991
and Section 23 of its Batangas City Tax Code of 2002.
In response, respondent filed a protest contending among others that it is not liable for the payment of
the local business tax either as a manufacturer or distributor of petroleum products. It further argued
that the Mayor‘s Permit Fees are exorbitant, confiscatory, arbitrary, unreasonable and not
commensurable with the cost of issuing a license. petitioners denied respondent‘s protest and declared
that under Section 14 of the Batangas City Tax Code of 2002, they are empowered to withhold the
issuance of the Mayor‘s Permit for failure of respondent to pay the business taxes on its manufacture and
distribution of petroleum products.
ISSUE:
Whether a LGU is empowered under the LGC to impose business taxes on persons or entities engaged
in the business of manufacturing and distribution of petroleum products.
RULING:
NO. At the outset, it must be emphasized that although the power to tax is inherent in the State, the
same is not true for LGUs because although the mandate to impose taxes granted to LGUs is categorical
and long established in the 1987 Philippine Constitution, the same is not all encompassing as it is subject
to limitations as explicitly stated in Section 5, Article X of the 1987 Constitution. The rule governing the
taxing power of provinces, cities, municipalities and barangays is summarized in Icard v. City Council of
Baguio: It is settled that a municipal corporation unlike a sovereign state is clothed with no inherent
power of taxation. The charter or statute must plainly show an intent to confer that power or the
municipality, cannot assume it. And the power when granted is to be construed in strictissimi juris. Any
doubt or ambiguity arising out of the term used in granting that power must be resolved against the
municipality. Inferences, implication, deductions – all these- have no place in the interpretation of the
taxing power of a municipal corporation.
Therefore, the power of a province to tax is limited to the extent that such power is delegated to it either
by the Constitution or by statute. In conformity with the Constitution, Congress enacted the Local
Government Code of 1991. Among the common limitations on the taxing powers of LGUs under
Section 133 of the LGC is paragraph (h) which states that: Unless otherwise provided herein, the
exercise of taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy
of Excise taxes on articles enumerated under the National Internal Revenue Code, as amended, and
taxes, fees or charges on petroleum products.
102
Section 133(h) clearly specifies the two kinds of taxes which cannot be imposed by LGUs: (1) excise
taxes on articles enumerated under the NIRC, as amended; and (2) taxes, fees or charges on petroleum
products.
Indisputably, the power of LGUs to impose business taxes derives from Section 14314 of the LGC.
However, the same is subject to the explicit statutory impediment provided for under Section 133(h) of
the same Code which prohibits LGUs from imposing "taxes, fees or charges on petroleum products." It
can, therefore, be deduced that although petroleum products are subject to excise tax, the same is
specifically excluded from the broad power granted to LGUs under Section 143(h) of the LGC to
impose business taxes.
Additionally, Section 133(h) of the LGC makes plain that the prohibition with respect to petroleum
products extends not only to excise taxes thereon, but all "taxes, fees or charges." The earlier reference in
paragraph 143(h) to excise taxes comprehends a wider range of subject of taxation: all articles already
covered by excise taxation under the NIRC, such as alcohol products, tobacco products, mineral
products, automobiles, and such non-essential goods as jewelry, goods made of precious metals,
perfumes, and yachts and other vessels intended for pleasure or sports. In contrast, the later reference to
"taxes, fees and charges" pertains only to one class of articles of the many subjects of excise taxes,
specifically, "petroleum products." While LGUs are authorized to burden all such other class of goods
with "taxes, fees and charges," excepting excise taxes, a specific prohibition is imposed barring the
levying of any other type of taxes with respect to petroleum products.
On the contrary, Section 143 of the LGC defines the general power of LGUs to tax businesses within its
jurisdiction. Thus, the omnibus grant of power to LGUs under Section 143(h)of the LGC cannot
overcome the specific exception or exemption in Section 133(h) of the same Code. This is in accord with
the rule on statutory construction that specific provisions must prevail over general ones.
Article 232 defines with more particularity the capacity of a municipality to impose taxes on businesses.
However, it admits of certain exceptions, specifically, that businesses engaged in the production,
manufacture, refining, distribution or sale of oil, gasoline, and other petroleum products, shall not be
subject to any local tax imposed by Article 232.
FERRER, JR. v. BAUTISTA

G.R. No. 210551, June 30, 2015, PERALTA, J.:
Socialized Housing Tax charged by the Quezon City Government is a tax which is within its power to
impose. The tax is not a pure exercise of taxing power or merely to raise revenue; it is levied with a regulatory purpose. The
levy is primarily in the exercise of the police power for the general welfare of the entire city. It is greatly imbued with public
interest. Assessments for garbage collection services have been consistently treated as a fee and not a tax as it was actually a
fee for a service given by the city which had previously been provided at no cost to its citizens. Hence, not being a tax, the
contention that the garbage fee under Ordinance No. SP-2235 violates the rule on double taxation must necessarily fail.
FACTS:
On October 17, 2011, Quezon City Council enacted Ordinance No. SP-2095, S-2011, or the
Socialized Housing Tax of Quezon City, Section 3 of which provides for the imposition of a special
assessment equivalent to one-half per cent (0.5%) on the assessed value of land in excess of One
Hundred Thousand Pesos (Php100,000.00) shall be collected by the City Treasurer which shall accrue to
the Socialized Housing Programs of the Quezon City Government. The special assessment shall accrue
to the General Fund under a special account to be established for the purpose.
103
Effective for five (5) years, the Socialized Housing Tax (SHT) shall be utilized by the Quezon
City Government for the following projects: (a) land purchase/land banking; (b) improvement of
current/existing socialized housing facilities; (c) land development; (d) construction of core houses,
sanitary cores, medium-rise buildings and other similar structures; and (e) financing of public-private
partners hip agreement of the Quezon City Government and National Housing Authority (NHA) with
the private sector.
Under certain conditions, a tax credit shall be enjoyed by taxpayers regularly paying the special
assessment. The tax credit may be availed of only after five (5) years of continued payment. Further, the
taxpayer availing this tax credit must be a taxpayer in good standing as certified by the City Treasurer and
City Assessor. The tax credit to be granted shall be equivalent to the total amount of the special
assessment paid by the property owner. Furthermore, only the registered owners may avail of the tax
credit and may not be continued by the subsequent property owners even if they are buyers in good
faith, heirs or possessor of a right in whatever legal capacity over the subject property.
On the other hand, Ordinance No. SP-2235, S-2013 was enacted on December 16, 2013 and
took effect ten days after when it was approved by respondent City Mayor. The proceeds collected from
the garbage fees on residential properties shall be deposited solely and exclusively in an earmarked
special account under the general fund to be utilized for garbage collections.
The collection of the garbage fee shall accrue on the first day of January and shall be paid
simultaneously with the payment of the real property tax, but not later than the first quarter
installment. In case a household owner refuses to pay, a penalty of 25% of the garbage fee due, plus an
interest of 2% per month or a fraction thereof, shall be charged.
Ferrer, Jr. a Quezon City property owner, questions the validity of the said ordinances.
ISSUES:
1. Whether the Socialized Housing Tax is valid.

2. Whether the ordinance on garbage fee violates the rule on double taxation.
RULING:
The High Court ruled that the Socialized Housing Tax is valid. The tax is within the power of
Quezon City Government to impose. LGUs may be considered as having properly exercised their police
power only if there is a lawful subject and a lawful method. Herein, the tax is not a pure exercise of
taxing power or merely to raise revenue; it is levied with a regulatory purpose. The levy is primarily in the
exercise of the police power for the general welfare of the entire city. It is greatly imbued with public
interest. On the question of inequality, the disparities between a real property owner and an informal
settler as two distinct classes are too obvious and need not be discussed at length. The differentiation
conforms to the practical dictates of justice and equity and is not discriminatory within the meaning of
the Constitution. Notably, the public purpose of a tax may legally exist even if the motive which impelled
the legislature to impose the tax was to favor one over another. Further, the reasonableness of
Ordinance No. SP-2095 cannot be disputed. It is not confiscatory or oppressive since the tax being
imposed therein is below what the Urban Development Housing Act of 1992 actually allows. Even
better, on certain conditions, the ordinance grants a tax credit.
104
The High Court ruled in the negative. Pursuant to Section 16 of the LGC and in the proper exercise
of its corporate powers under Section 22 of the same, the Sangguniang Panlungsod of Quezon City, like
other local legislative bodies, is empowered to enact ordinances, approve resolutions, and appropriate
funds for the general welfare of the city and its inhabitants. In this regard, the LGUs shall share with the
national government the responsibility in the management and maintenance of ecological balance within
their territorial jurisdiction. The Ecological Solid Waste Management Act of 2000 affirms this authority
as it expresses that the LGUs shall be primarily responsible for the implementation and enforcement of
its provisions. Necessarily, LGUs are statutorily sanctioned to impose and collect such reasonable fees
and charges for services rendered. The fee imposed for garbage collections under Ordinance No. SP-
2235 is a charge fixed for the regulation of an activity as provided by the same. As opposed to
petitioner‘s opinion, the garbage fee is not a tax. Hence, not being a tax, the contention that the garbage
fee under Ordinance No. SP-2235 violates the rule on double taxation must necessarily fail.
FILM DEVELOPMENT COUNCIL v. COLON HERITAGE REALTY

G.R. No. 203754, June 16, 2015, Velasco, Jr., J
Local fiscal autonomy includes the power of LGUs to allocate their resources in accordance with their own
priorities. By earmarking the income on amusement taxes imposed by the LGUs in favor of FDCP and the producers of
graded films, the legislature appropriated and distributed the LGUs' funds-as though it were legally within its control-under
the guise of setting a limitation on the LGUs' exercise of their delegated taxing power.
FACTS:
Sometime in 1993, City of Cebu, in its exercise of its power to impose amusement taxes under
Section 140 of the Local Government Code (LGC) anchored on the constitutional policy on local
autonomy, passed City Ordinance No. LXIX otherwise known as the "Revised Omnibus Tax Ordinance
of the City of Cebu (tax ordinance)." Central to the case at bar are Sections 42 and 43, Chapter XI
thereof which require proprietors, lessees or operators of theatres, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement, to pay an amusement tax equivalent to thirty per cent
(30%) of the gross receipts of admission fees to the Office of the City Treasurer of Cebu City.
Almost a decade later, or on June 7, 2002, Congress passed RA 9167, creating the Film
Development Council qf the Philippines (FDCP) and abolishing the Film Development Foundation of
the Philippines, Inc. and the Film Rating Board. Sections. 13 and 14 of RA 9167 provided for the tax
treatment of certain graded films. The law further provides that proprietors, operators and lessees of
theaters or cinemas who fail to remit the amusement tax proceeds within the prescribed period shall be
liable to a surcharge equivalent to five per cent (5%) of the amount due for each month of delinquency
which shall be paid to the Council.
According to FDCP, from the time RA 9167 took effect up to the present, all the cities and
municipalities in Metro Manila, as well as urbanized and independent component cities, with the sole
exception of Cebu City, have complied with the mandate of said law.
Accordingly, FDCP, through the Office of the Solicitor General, sent on January 2009 demand
letters for unpaid amusement tax reward (with 5% surcharge for each month of delinquency) due to the
producers of the Grade "A" or "B" films to the cinema proprietors and operators in Cebu City. In said
letters, the proprietors and cinema operators, including private respondent Colon Heritage Realty Corp.
(Colon Heritage), were given ten (10) days from receipt thereof to pay the aforestated amounts to FDCP.
The demand, however, fell on deaf ears.
105
Because of the persistent refusal of the proprietors and cinema operators to remit the said
amounts as FDCP demanded, on one hand, and Cebu City's assertion of a claim on the amounts in
question, the city finally filed on May 18, 2009 before the RTC, a petition for declaratory relief with
application for a writ of preliminary injunction. In said petition, Cebu City sought the declaration of
Sections 13 and 14 of RA 9167 as invalid and unconstitutional. Similarly, Colon Heritage seeks to declare
Section 14 of RA 9167 as unconstitutional.
ISSUE:
Whether the RTC gravely erred in declaring Sections 13 and 14 of RA 9167 invalid for being
unconstitutional.
RULING:
The High Court ruled in the negative. It is apparent that what Congress did in issuing RA
9167 was not to exclude the authority to levy amusement taxes from the taxing power of the covered
LGUs, but to earmark, if not altogether confiscate, the income to be received by the LGU from the
taxpayers in favor of and for transmittal to FDCP, instead of the taxing authority. This is in clear
contravention of the constitutional command that taxes levied by LGUs shall accrue exclusively to said
LGU and is repugnant to the power of LGUs to apportion their resources in line with their priorities. In
the case at bar, through the application and enforcement of Sec. 14 of RA 9167, the income from the
amusement taxes levied by the covered LGUs did not and will under no circumstance accrue to them,
not even partially, despite being the taxing authority therefor. Congress, therefore, clearly overstepped its
plenary legislative power, the amendment being violative of the fundamental law's guarantee on local
autonomy. Moreover, it is undoubtedly a usurpation of the latter's exclusive prerogative to apportion
their funds, an impermissible intrusion into the LGUs' constitutionally-protected domain which puts to
naught the guarantee of fiscal autonomy to municipal corporations enshrined in our basic law.
It was argued that subject Sec. 13 is a grant by Congress of an exemption from amusement taxes
in favor of producers of graded films. Without question, this Court has previously upheld the power of
Congress to grant exemptions over the power of LGUs to impose taxes. This amusement tax reward,
however, is not a tax exemption. Exempting a person or entity from tax is to relieve or to excuse that
person or entity from the burden of the imposition. Here, however, it cannot be said that an exemption
from amusement taxes was granted by Congress to the producers of graded films. Take note that the
burden of paying the amusement tax in question is on the proprietors, lessors, and operators of the
theaters and cinemas that showed the graded films. Simply put, both the burden and incidence of the
amusement tax are borne by the proprietors, lessors, and operators, not by the producers of the graded
films. The transfer of the amount to the film producers is actually a monetary reward given to them for
having produced a graded film, the funding for which was taken by the national government from the
coffers of the covered LGUs. Without a doubt, this is not an exemption from payment of tax.
106
MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL

REVENUE
G.R. No. 204745, 8 December 2014, FIRST DIVISION (Perlas-Bernabe, J.)
The Court recognized an exception to the mandatory and jurisdictional nature of the 120-day period. It ruled that
BIR Ruling No. DA-489-03 dated December 10, 2003 provided a valid claim for equitable estoppel under Section 246
of the NIRC. In essence, the aforesaid BIR Ruling stated that the "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of Petition for Review."
FACTS
Mindanao II Geothermal Partnership is a VAT-registered entity engaged in the generation,

collection, and distribution of electricity. On March 11, 1997, Mindanao II/I allegedly entered into a
Built Operate-Transfer contract with the Philippine National Oil Corporation – Energy Development
Company (PNOC-EDC) for finance, for supply and engineering of geothermal power plant. In turn,
petitioner shall convert the steam into electric capacity and energy for the PNOC-EDC, and shall deliver
the same to the National Power Corporation on behalf of the PNOC-EDC.
On April 24, 2008, July 25, 2008, October 24, 2008, and January 2, 2009, petitioner filed its
quarterly VAT returns for the four (4) quarters of 2008 reflecting the amount of ₱6,149,256.25 as
unutilized/excess input VAT. On December 28, 2009, petitioner filed before the BIR District Office of
Kidapawan City, Cotabato an administrative claim for refund/credit of its unapplied and unutilized input
VAT for the year 2008 in the aforesaid amount. On March 30, 2010, petitioner filed its judicial claim for
refund/credit of its unutilized/excess input VAT for the first quarter of 2008, which is the subject of this
case (CTA Case No. 8082), in the amount of ₱1,624,603.33 before the CTA. About two (2) months
later, May 27, 2010, petitioner filed its judicial claim for refund/credit of its unutilized/excess input VAT
for the second to fourth quarters of 2008 in the amount of ₱4,524,652.92 before the CTA. Eventually,
the two cases were consolidated by the CTA.
On December 7, 2010, respondent CIR filed a Motion to Dismiss, praying for the dismissal of
judicial claim for refund/credit of its unutilized/excess input VAT for the first quarter of 2008 on the
ground of lack of jurisdiction. The CTA En Banc held that compliance with the 120-day period stated in
Section 112 (D) of the NIRC is a mandatory and judicial requisite in the filing of a judicial claim for
refund/credit of input VAT before the CTA. Hence, petitioner‘s noncompliance therewith is fatal to its
refund/credit claim and as such, the CTA Division correctly dismissed the same on the ground of
prematurity.
ISSUE:
Whether or not the judicial claim for refund/credit of its unutilized/excess input VAT for the
first quarter of 2008 shall be dismissed on the ground of lack of jurisdiction.
RULING:
The petition is meritorious. Section 112 of the NIRC, as amended by RA 9337, provides:
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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, x x x
xxxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. – In proper cases, the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input within one
hundred twenty (120) days from the date of submission of complete documents, xxx
In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part
of the Commissioner to act on the application within the period prescribed above, the taxpayer affected
may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of
the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax
Appeals.
In the Aichi case, the Court held that the observance of the 120-day period is a mandatory and
jurisdictional requisite to the filing of a judicial claim for refund/credit of input VAT before the CTA.
Consequently, its non-observance would lead to the dismissal of the judicial claim on the ground of lack
of jurisdiction. Aichi also clarified that the two (2)- year prescriptive period applies only to administrative
claims and not to judicial claims. Succinctly put, once the administrative claim is filed within the two (2)-
year prescriptive period, the claimant must wait for the 120-day period to end and, thereafter, he is given
a 30-day period to file his judicial claim before the CTA, even if said 120-day and 30-day periods would
exceed the aforementioned two (2)-year prescriptive period.
However, in CIR v. San Roque Power Corporation (San Roque), the Court recognized an exception to
the mandatory and jurisdictional nature of the 120-day period. It ruled that BIR Ruling No. DA-489-03
dated December 10, 2003 provided a valid claim for equitable estoppel under Section 246 of the NIRC.
In essence, the aforesaid BIR Ruling stated that the "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of Petition for Review."
Recently, in Taganito Mining Corporation v. CIR, the Court reconciled the pronouncements in the
Aichi and San Roque cases in the following manner:
Reconciling the pronouncements in the Aichi and San Roque cases, the rule must therefore be that
during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 2010
when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day period before
it could file a judicial claim for refund of excess input VAT before the CTA. Before and after the
aforementioned period, the observance of the 120-day period is mandatory and jurisdictional to the filing
of such claim.
In this case, records disclose that petitioner filed its administrative and judicial claims for
refund/credit of its input VAT in CTA Case No. 8082 on December 28, 2009 and March 30, 2010,
respectively, or during the period when BIR Ruling No. DA-489-03 was in place. As such, it need not
wait for the expiration of the 120-day period before filing its judicial claim before the CTA, and hence, is
deemed timely filed. In view of the foregoing, both the CTA Division and the CTA En Banc erred in
dismissing outright petitioner‘s claim on the ground of prematurity.
However, the Court is not inclined to grant outright petitioner‘s claim for refund/credit of input
VAT in CTA Case No. 8082 in the amount of ₱1,624,603.33 representing unutilized input VAT for the
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first quarter of 2008. This is because the determination of petitioner‘s entitlement to such claim would
necessarily involve questions of fact, which are not reviewable and cannot be passed upon by the Court
in the exercise of its power of review under Rule 45 of the Rules of Court. In addition, the CTA
Division, as affirmed by the CTA En Banc, dismissed the judicial claim on a preliminary procedural
technicality. Hence, the Court deems it prudent to remand the case to the CTA Division for resolution
of the instant case on the merits.
COMMISSIONER OF INTERNAL REVENUE vs. THE STANLEY WORKS SALES

(PHILS.), INCORPORATED 
G.R. No. 187589, 03 December 2014, FIRST DIVISION (Sereno, C.J.)
In 1993, the BIR issued against respondent assessment notice for deficiency income tax for 1989. A waiver of the
defense of prescription was executed but it was not signed by the Commissioner or any of his authorized representatives and
did not state the date of acceptance. The Court held that the Commissioner’s right to collect has prescribed. The period to
assess and collect deficiency taxes may be extended only upon a written agreement between the Commissioner and the
taxpayer prior to the expiration of the three-year prescribed period. The BIR cannot claim the benefits of extending the
period when it was the BIR’s inaction which is the proximate cause of the defects of the waiver.
FACTS
Stanley Works Sales is a domestic corporation, and Stanley Works Agencies Limited, Singapore
entered into a Representation Agreement. Under such agreement, Stanley-Singapore appointed Stanley
Works Sales as its sole agent for the selling of its products within the Philippines on an indent basis.
On April 16, 1990, Stanley Works Sales filed with the BIR its Annual Income Tax Return for
taxable year 1989. On March 19, 1993, the BIR issued against Stanley Works Sales a Pre-Assessment
Notice (PAN) for 1989 deficiency income tax.
On March 29, 1993, it received its copy of the PAN. The Commissioner issued to Stanley Works
Sales assessment for deficiency income tax for taxable year 1989. Stanley Works Sales filed a protest
letter and requested reconsideration and cancellation of the assessment.
A certain Mr. John Ang, on behalf of Stanley Works Sales, executed a ―Waiver of the Defense of
Prescription Under the Statute of Limitations of the National Internal Revenue Code.‖ Under the terms
of the Waiver, Stanley Works Sales waived its right to raise the defense of prescription under Section 223
of the NIRC of 1977 insofar as the assessment and collection of any deficiency taxes for the year ended
December 31, 1989, but not after June 30, 1994. This was not signed by the Commissioner or any of his
authorized representatives and did not state the date of acceptance. Stanley Works Sales did not execute
any other Waiver or similar document.
The Commissioner denied the request for reconsideration and ordered Stanley Works Sales to
pay the deficiency income tax plus interest that may have accrued.
Court of Tax Appeals found that although the assessment was made within the prescribed
period, the period within which the Commissioner may collect deficiency income taxes had already
lapsed. The CTA ruled that the request for reconsideration did not suspend the running of the
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prescriptive period to collect deficiency income tax. There was no valid waiver of the statute of
limitations, as the following infirmities were found: (1) there was no conformity, either by Stanley Works
Sales or his duly authorized representative; (2) there was no date of acceptance to show that both parties
had agreed on the Waiver before the expiration of the prescriptive period; and (3) there was no proof
that Stanley Works Sales was furnished a copy of the Waiver.
CTA En Banc affirmed this ruling.
ISSUES:
1. Whether or not the Commissioner‘s right to collect the deficiency income tax of respondent
for taxable year 1989 has prescribed
2. Whether or not Stanley‘s repeated requests and positive acts constitute ―estoppel‖ from
setting up the defense of prescription under the NIRC
RULING:
1. Yes, the Court ruled that it has prescribed.
The statute of limitations on the right to assess and collect a tax means that once the period
established by law for the assessment and collection of taxes has lapsed, the government‘s corresponding
right to enforce that action is barred by provision of law.
The period to assess and collect deficiency taxes may be extended only upon a written agreement
between the Commissioner and the taxpayer prior to the expiration of the three-year prescribed period
in accordance with Section 222 (b) of the NIRC. In relation to the implementation of this provision, the
CIR issued Revenue Memorandum Order (RMO) No. 20-9010 on 4 April 1990 to provide guidelines on
the proper execution of the Waiver of the Statute of Limitations.
A Waiver must strictly conform to RMO No. 20-90. The mandatory nature of the requirements
set forth in RMO No. 20-90 was recognized by the BIR itself in the latter‘s subsequent issuances,
namely, Revenue Memorandum Circular (RMC) Nos. 6-200513 and 29-2012. Thus, the BIR cannot
claim the benefits of extending the period to collect the deficiency tax as a consequence of the Waiver
when, in truth it was the BIR‘s inaction which is the proximate cause of the defects of the Waiver. The
BIR has the burden of ensuring compliance with the requirements of RMO No. 20-90, as they have the
burden of securing the right of the government to assess and collect tax deficiencies. This right would
prescribe absent any showing of a valid extension of the period set by the law.
The Waiver was not a unilateral act of the taxpayer. The BIR must act on it, either by
conforming to or by disagreeing with the extension. A waiver of the statute of limitations, whether on
assessment or collection, should not be construed as a waiver of the right to invoke the defense of
prescription but, rather, an agreement between the taxpayer and the BIR to extend the period to a date
certain, within which the latter could still assess or collect the taxes due.
The waiver does not imply that the taxpayer relinquishes the right to invoke prescription
unequivocally. The power of taxation is deemed inherent in order to support the government, tax
provisions are not all about raising revenue. Our legislature has provided safeguards and remedies
beneficial to both the taxpayer, to protect against abuse; and the government, to promptly act for the
availability and recovery of revenues. A statute of limitations on the assessment and collection of internal
revenue taxes was adopted to serve a purpose that would benefit both the taxpayer and the government.
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2. No, the Court held that Stanley Works Sales is not barred from setting up the defense of
prescription by its repeated requests and positive acts. It is not constituted estoppel.
Stanley Works Sales filed a Protest and asked for a reconsideration and cancellation of the
assessment on 19 May 1993. However, it is uncontested that the Commissioner failed to act on that
Protest until 29 November 2001, when the latter required the submission of other supporting
documents. In fact, the Protest was denied only on 22 March 2004.
The subsequent letters of Stanley Works Sales cannot be construed as inducements to extend the
period of limitation, since the letters were intended to urge the Commissioner to act on the Protest, and
not to persuade the latter to delay the actual collection.
Even assuming arguendo that the Waiver executed on is valid, the right of the Commissioner to
collect the deficiency income tax for the year 1989 would have already prescribed by 2001 when the
latter first acted upon the protest, more so in 2004 when it finally denied the reconsideration. Records
show that the Waiver extends only for the period ending 30 June 1994, and that there were no further
extensions or waivers executed.
Thus, the prescriptive period for collecting deficiency income tax for taxable year 1989 was
never suspended or tolled. Consequently, the right to enforce collection has already prescribed.
TAGANITO MINING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 201195, November 26, 2014, J. Mendoza
Its petition for review having been denied by the CTA for being prematurely filed, petitioner filed the instant petition arguing
that since it filed its judicial claim after the issuance of BIR Ruling No. DA-489-03, but before the adoption of the Aichi
doctrine, it can invoke the said BIR Ruling. The SC ruled that the jurisdiction of the CTA over decisions or inaction of the
CIR is only appellate in nature and, thus, necessarily requires the prior filing of an administrative case before the CIR
under Section 112. A petition filed prior to the lapse of the 120-day period prescribed under said Section would be
premature for violating the doctrine on the exhaustion of administrative remedies. There is, however, an exception to the
mandatory and jurisdictional nature of the 120+30 day period. The Court in San Roque noted that BIR Ruling No.
DA-489-03, dated December 10, 2003, expressly stated that the "taxpayer-claimant need not wait for the lapse of the
120-day period before it could seek judicial relief with the CTA by way of Petition for Review." Hence, taxpayers can rely
on BIR Ruling No. DA-489-03 from the time of its issuance on December 10, 2003 up to its reversal by this Court in
Aichi on October 6, 2010, where it was held that the 120+30 day period was mandatory and jurisdictional.
Facts:
On March 26, 2008, Petitioner Taganito Mining Corporation, a corporation engaged in the
business of exploring, extracting, mining, selling, and exporting precious metals and all kinds of ores,
metals, and by-products, filed with respondent CIR a claim for credit/refund of input VAT paid on its
domestic purchases of taxable goods and services and importation of goods amounting to
P22,421,260.26, for the period covering January 1, 2006 to December 31, 2006.
Thereafter, on April 17, 2008, as respondent CIR had not yet issued a final decision on the
administrative claim, Taganito filed a judicial claim before the CTA Division with the intention of tolling
the running of the two-year period to judicially claim a tax credit/refund under Sec. 229 of the NIRC of
1997. However, in view of the approval by the BIR of its application for tax credit/refund in the amount
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of P17,810,137.26, Taganito filed a supplemental petition for review limiting the issue of the case to the
remaining amount of P4,611,123.
The CTA Division denied Taganito‘s petition for review and its supplemental petiton for review
for lack of merit. It held that the official receipts submitted by Taganito in support of its claim did not
prove Taganito‘s actual payment of the claimed input VAT. It further held that the claim should be
denied for failure to meet the substantiation requirements under Section 4.110-8(a)(1) of Revenue
Regulation (R.R.) No. 16-05, providing that input taxes for the importation of goods must be
substantiated by the import entry or other equivalent document showing actual payment of VAT on the
imported goods. In denying the appeal of Taganito, the CTA En Banc, applying the case of CIR v. Aichi
Forging Company of Asia, Inc., held that in accordance with Section 112(C) of the NIRC, it was
incumbent upon the taxpayer to give the CIR a period of 120 days to either partially or fully deny the
claim; and it was only upon the denial of the claim or after the expiration of the 120-day period without
action, that the taxayer could seek judicial recourse. Considering that Taganito filed its judicial claim
before the expiration of the 120-day period, the CTA En Banc ruled that the judicial claim was
prematurely filed and, consequently, it had no jurisdiction to entertain the case. Hence, the present
petition.
Taganito argues that it filed its judicial claim after the issuance of BIR Ruling No. DA-489-03,
but before the adoption of the Aichi doctrine, such being the case it contends that it can invoke the said
BIR ruling which provided that the ―taxpayer-claimant need not wait for the lapse of the 120-day period
before it could seek judicial relief with the CTA by way of Petition for Review.‖ Thus, Taganito avers
that its petition for review was, therefore, not prematurely filed.
Issues:
1. Whether or not the petition for review filed by Taganito was prematurely filed.
2. Whether or not Taganito failed to duly substantiate its claim.
Ruling:
No, it was not. The Court agrees with Taganito that the prevailing doctrine pertinent to the issue at
hand is CIR v. San Roque Power Corporation (San Roque). It was conclusively settled therein that it is
Section 112 of the NIRC which is applicable specifically to claims for tax credit certificates and tax
refunds for unutilized creditable input VAT, and not Section 229.
Thus, under Section 112(A), the taxpayer may, within 2 years after the close of the taxable quarter when
the sales were made, via an administrative claim with the CIR, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales. Under Section 112(D),
the CIR must then act on the claim within 120 days from the submission of the taxpayer‘s complete
documents. In case of (a) a full or partial denial by the CIR of the claim, or (b) the CIR‘s failure to act on
the claim within 120 days, the taxpayer may file a judicial claim via an appeal with the CTA of the CIR
decision or unacted claim, within 30 days (a) from receipt of the decision; or (b) after the expiration of
the 120 - day period.
The 2 - year period under Section 229 does not apply to appeals before the CTA in relation to claims for
a refund or tax credit for unutilized creditable input VAT. Section 229 pertains to the recovery of taxes
erroneously, illegally, or excessively collected. San Roque stressed that "input VAT is not ‗excessively‘
collected as understood under Section 229 because, at the time the input VAT is collected, the amount
paid is correct and proper." It is, therefore, Section 112 which applies specifically with regard to claiming
a refund or tax credit for unutilized creditable input VAT.
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Upholding the ruling in Aichi, San Roque held that the 120+30 day period prescribed under Section
112(D) mandatory and jurisdictional. The jurisdiction of the CTA over decisions or inaction of the CIR
is only appellate in nature and, thus, necessarily requires the prior filing of an administrative case before
the CIR under Section 112. The CTA can only acquire jurisdiction over a case after the CIR has rendered
its decision, or after the lapse of the period for the CIR to act, in which case such inaction is considered
a denial. A petition filed prior to the lapse of the 120 - day period prescribed under said Section would be
premature for violating the doctrine on the exhaustion of administrative remedies.
There is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day
period. The Court in San Roque noted that BIR Ruling No. DA - 489 - 03, dated December 10, 2003,
expressly stated that the "taxpayer - claimant need not wait for the lapse of the 120 - day period before it
could seek judicial relief with the CTA by way of Petition for Review." This BIR Ruling was recognized
as a general interpretative rule issued by the CIR under Section 4 of the NIRC and, thus, applicable to all
taxpayers. Since the CIR has exclusive and original jurisdiction to interpret tax laws, it was held that
taxpayers acting in good faith should not be made to suffer for adhering t o such interpretations. Section
246 of the Tax Code, in consonance with equitable estoppel, expressly provides that a reversal of a BIR
regulation or ruling cannot adversely prejudice a taxpayer who in good faith relied on the BIR regulation
or ruling prior to its reversal. Hence, taxpayers can rely on BIR Ruling No. DA - 489 - 03 from the time
of its issuance on December 10, 2003 up to its reversal by this Court in Aichi on October 6, 2010, where
it was held that the 120+30 day period was mandatory and jurisdictional.
From the foregoing, it is clear that the two - year period under Section 229 does not apply to appeals
before the CTA with respect to claims for a refund or tax credit for unutilized creditable input VAT
since input VAT is not considered ―excessively‖ collected. Instead, it was settled that it is Section 112
which applies, thereby making the 120+30 day period prescribed therein mandatory and jurisdictional in
nature.
As an exception to the mandatory and jurisdictional nature of the 120+30 day period, judicial
claims filed from the issuance of BIR Ruling No. DA - 489 - 03 on December 10, 2003 up to its
reversal in Aichi on October 6, 2010, need not wait for the lapse of the 120+30 day period, in
consonance with the principle of equitable estoppel.
In the present case, Taganito filed its judicial claim with the CTA on April 17, 2008, clearly within the
period of exception of December 10, 2003 to October 6, 2010. Its judicial claim was, therefore, not
prematurely filed.
2. Yes, Taganito failed to duly substantiate its claim.
In any case, the Court finds no reason to deviate from the factual findings of the CTA. The Court agrees
with the finding of the CTA Division that Taganito failed to duly substantiate its claim.
Taganito insists that the official receipts issued by the bank authorized to collect import duties and taxes
are the best evidence to prove its payment of the input tax being claimed. Two official receipts were
presented in support of its claim, namely, OR No. 0028847 and OR No. 014371. As noted by the CTA,
there was no year indicated in OR No. 0028847, in support of the claim of - 1,131,431.00. It is plain that
this claim cannot be deemed to have been properly substantiated.
Even assuming that the proper year was indicated, these official receipts would still not comply with the
substantiation requirements provided by law. Indeed, under Sections 110(A) and 113(A) of the NIRC,
any input tax that is subject of a claim for refund must be evidenced by a VAT invoice or official receipt.
With regard to the importation of goods or properties, however, Section 4.110 - 8 of R.R. No. 16 - 05, as
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amended, further requires that an import entry or other equivalent document showing actual payment of
VAT on the imported good s must also be submitted, to wit:
SECTION 4.110 - 8. Substantiation of Input Tax Credits. – (a) Input taxes for the importation of goods
or the domestic purchase of goods, properties or services made in the course of trade or business,
whether such input taxes shall be credited against zero - rated sale, non - zero - rated sales, or subjected
to the 5% Final Withholding VAT, must be substantiated and supported by the following documents
and must be reported in the information returns required to be submitted to the Bureau:
(1) For the importation of goods – import entry or other equivalent document showing actual payment
of VAT on the imported goods.
In relation to this requirement, Customs Administrative Order No. 2 - 95 provides:
2.3 The Bureau of Customs Official Receipt (BCOR) will no longer be issued by the AABs (Authorized
Agent Banks) for the duties and taxes collected. In lieu thereof, the amount of duty and tax collected
including other required information must be machine validated directly on the following import
documents and signed by the duly authorized bank official:
2.3.1 Import Entry and Internal Revenue Declaration (IEIRD) for final payment of duties and taxes. x x
x
From the foregoing, it is apparent that an IEIRD is required to properly substantiate the payment of the
duties and taxes on imported goods. Considering that Taganito failed to submit the import entries
relevant to its claim, the CTA did not err in ruling that Taganito‘s claim was not sufficiently proven.
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY vs.

SECRETARY OF FINANCE and COMMISSIONER OF INTERNAL REVENUE
G.R. No. 210987, November 24, 2014, J. Velasco Jr.
Philamlife sold its shares through a public bidding. However, the selling price was below the book value of the shares.
Hence, the BIR imposed donor’s tax on the price difference. Philamlife appealed to the Secretary of Finance. Due to the
adverse ruling, Philamlife appealed with the CA. CA alleged that it does not have jurisdiction for jurisdiction lies with the
CTA. The Court ruled that, the CTA can now rule not only on the propriety of an assessment or tax treatment of a
certain transaction, but also on the validity of the revenue regulation or revenue memorandum circular on which the said
assessment is based.
Facts:
The Philippine American Life and General Insurance Company (Philamlife) used to own
498,590 Class A shares in Philam Care Health Systems , Inc. (PhilamCare), representing 49.89% of the
latter's outstanding capital stock. In 2009, Philamlife offered to sell its shareholdings in PhilamCare
through competitive bidding. Thus, on September 24, 2009, petitioner's Class A shares were sold for
USD 2, 190,000, or PhP 104,259,330 to STI Investments, the highest bidder.
Philamlife filed an application for a certificate authorizing registration/tax clearance with the
Bureau of Internal Revenue (BIR) to facilitate the transfer of the shares. Months lat er, petitioner was
informed that it needed to secure a BIR ruling in connection with its application due to potential donor‘s
tax liability. In compliance, Philamlife, requested a ruling to confirm that the sale was not subject to
donor‘s tax. However, the Commissioner on Internal Revenue (Commissioner) denied Philamlife‘s
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request through a BIR Ruling. The CIR stated that donor‘s tax is imposable on the price difference of
the book value and the selling price.
Philamlife then requested the Secretary of Fi nance to review the BIR Ruling issued by the CIR.
However, the Secretary affirmed the BIR Ruling. Philamlife then elevated the case to the Court of
Appeals via a petition for review. The CA dismissed the case for lack of jurisdiction stating that the case
should have been filed with the Court of Tax Appeals.
Issues:
1. Whether or not the CA has jurisdiction over contested decisions of the Secretary of Finance
2. Whether or not the appellate power of the CTA includes certiorari
3. Whether or not the subj ect transaction is a taxable donation
Ruling:
1. The CTA not the CA has jurisdiction over the matter.
Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would be an injustice
to taxpayers prejudiced by his adverse rulings. To remedy this situation, the Court implies from the
purpose of RA 1125 and its amendatory laws that the CTA is the proper forum with which to institute
the appeal. This is not, and should not, in any way, be taken as a derogation of the power of the Offic e
of President but merely as recognition that matters calling for technical knowledge should be handled by
the agency or quasi - judicial body with specialization over the controversy. As the specialized quasi -
judicial agency mandated to adjudicate tax, cust oms, and assessment cases, there can be no other court
of appellate jurisdiction that can decide the issues raised in the CA petition, which involves the tax
treatment of the shares of stocks sold.
2. The appellate power of the CTA includes certiorari.
The respective teachings in British American Tobacco and Asia International Auctioneers, at first blush,
appear to bear no conflict –– that when the validity or constitutionality of an administrative rule or
regulation is assailed, the regular courts have ju risdiction; and if what is assailed are rulings or opinions
of the Commissioner on tax treatments, jurisdiction over the controversy is lodged with the CTA. The
problem with the above postulates, however, is that they failed to take into consideration one crucial
point –– a taxpayer can raise both issues simultaneously.
Evidently, City of Manila can be considered as a departure from Ursal in that in spite of there being no
express grant in law, the CTA is deemed granted with powers of certiorari by implicat ion. Moreover,
City of Manila diametrically opposes British American Tobacco to the effect that it is now within the
power of the CTA, through its power of certiorari, to rule on the validity of a particular administrative
rule or regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the
propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the
revenue regulation or revenue memorandum circular on which the said assessmen t is based.
3. The price difference between the selling price and the book value is subject to donor‘s tax.
The absence of donative intent, if that be the case, does not exempt the sales of stock transaction from
donor's tax since Sec. 100 of the NIRC categorically states that the amount by which the fair market
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value of the property exceeded the value of the consideration shall be deemed a gift. Thus, even if there
is no actual donation, the difference in price is considered a donation by fiction of law.
HONDA CARS PHILIPPINES, INC., v. HONDA CARS TECHNICAL SPECIALIST AND

SUPERVISORS UNION
G.R. No. 204142, November 19, 2014, SECOND DIVISION (BRION, J.)
CASE DOCTRINE:
The Voluntary Arbitrator has no competence to rule on matters involving tax issues within a labor relations setting
as they pertain to questions of law on the application of the NIRC. They do not require the application of the Labor Code
or the interpretation of the MOA and/or company personnel policies. Consequently, if the company and/or the union
desire/s to seek clarification of these issues, it/they should have requested for a tax ruling from the BIR which have
the exclusive and original jurisdiction to interpret the provisions of the NIRC and other tax laws, subject to review by the
Secretary of Finance.
Under the withholding tax system, every employer has the duty to deduct and withhold upon the employee’s wages a
tax determined in accordance with the rules and regulations to be prescribed by the Secretary of Finance, upon the CIR’s
recommendation. The company merely performed its statutory duty to withhold tax based on its interpretation of the NIRC,
albeit that interpretation may later be found to be erroneous. Thus, if the BIR illegally or erroneously collected tax, the
recourse of the taxpayer, and in proper cases, the withholding agent, is against the BIR, and not against the withholding
agent.
FACTS:
Honda Cars Philippines, Inc., (company) and Honda Cars Technical Specialists and Supervisory
Union (union), the exclusive collective bargaining representative of the company‘s supervisors and
technical specialists, entered into a CBA in which the union members are to receive a transportation
allowance a month. This allowance will be converted into a monthly gasoline allowance to be used by
the union members for official business purposes and for home to office travel and vice-versa. However,
in the event the amount of gasoline is not fully consumed, the gasoline not used may be converted into cash, subject to
whatever tax may be applicable. Since the cash conversion is paid in the monthly payroll as an excess gas
allowance, the company considers the amount as part of the compensation that is subject to income tax
on compensation. Accordingly, the company deducted from the union members‘ salaries the withholding
tax corresponding to the conversion to cash of their unused gasoline allowance. The union, on the other
hand, opposed the company and argued that the gasoline allowance for its members is considered as
fringe benefit and not as compensation income that is subject to withholding tax. The disagreement
between the company and the union on the matter remained unsettled, and hence they submitted the
issue to a panel of voluntary arbitrators as required by the CBA.red
The Panel of Voluntary Arbitrators rendered a decision declaring that the cash conversion of the
unused gasoline allowance enjoyed by the members of the union is a fringe benefit subject to the fringe
benefit tax, not to income tax. The panel held that the deductions made by the company shall be
considered as advances subject to refund in future remittances of withholding taxes. The said decision
was affirmed by the CA with clarification that that while the gasoline allowance or the cash conversion
of its unused portion is a fringe benefit, it is not necessarily subject to fringe benefit tax. It is for the
reason that the grant of the gasoline allowance to the union members is primarily for the convenience
and advantage of Honda, their employer. Hence, this petition.
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ISSUES:
1. Is the Panel of Voluntary Arbitrators correct in deciding the case?

2. Does the union have a cause of action against the company? (In this case the SC did not rule on
the nature of gas allowance)
RULING:
1. No. The Voluntary Arbitrators has no jurisdiction to settle tax matters. The Voluntary
Arbitrator‘s jurisdiction is limited to labor disputes. The Voluntary Arbitrator has no competence to rule
on the taxability of the gas allowance and on the propriety of the withholding of tax. These issues are
clearly tax matters, and do not involve labor disputes. To be exact, they involve tax issues within a labor
relations setting as they pertain to questions of law on the application of Section 33 (A) of the NIRC.
They do not require the application of the Labor Code or the interpretation of the MOA and/or
company personnel policies.
Under paragraph 1, Section 4 of the NIRC, the CIR shall have the exclusive and original jurisdiction
to interpret the provisions of the NIRC and other tax laws, subject to review by the Secretary of Finance.
Consequently, if the company and/or the union desire/s to seek clarification of these issues, it/they
should have requested for a tax ruling from the BIR. On the other hand, if the union disputes the
withholding of tax and desires a refund of the withheld tax, it should have filed an administrative claim
for refund with the CIR. Paragraph 2, Section 4 of the NIRC expressly vests the CIR original
jurisdiction over refunds of internal revenue taxes, fees or other charges, penalties imposed in relation
thereto, or other tax matters.
2. No. The union has no cause of action against the company. Under the withholding tax system,
the employer as the withholding agent acts as both the government and the taxpayer‘s agent. Except in
the case of a minimum wage earner, every employer has the duty to deduct and withhold upon the
employee‘s wages a tax determined in accordance with the rules and regulations to be prescribed by the
Secretary of Finance, upon the CIR‘s recommendation. The company merely performed its statutory
duty to withhold tax based on its interpretation of the NIRC, albeit that interpretation may later be
found to be erroneous.
Thus, if the BIR illegally or erroneously collected tax, the recourse of the taxpayer, and in proper
cases, the withholding agent, is against the BIR, and not against the withholding agent. The union‘s cause
of action for the refund or non-withholding of tax is against the taxing authority, and not against the
employer.
FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF

INTERNAL REVENUE and REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO.
44, TAGUIG and PATEROS, BUREAU OF INTERNAL REVENUE
G.R. No. 175707, November 19, 2014, EN BANC (Leonardo-De Castro,J)
CASE DOCTRINE:
It is of course axiomatic that a rule or regulation must bear upon, and be consistent with, the provisions of the
enabling statute if such rule or regulation is to be valid. In case of conflict between a statute and an administrative order, the
former must prevail. To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the
enabling law. An implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to
117
implement. Any rule that is not consistent with the statute itself is null and void. To recapitulate, RR 7-95, insofar as it
restricts the definition of "goods" as basis of transitional input tax credit under Section 105 is a nullity.
In this case, the issues here have already been passed upon and resolved by the Court En Banc twice, in decisions
that have reached finality, and the Court are bound by the doctrine of stare decisis to apply those decisions to these
consolidated cases, for they involve the same facts, issues, and even parties. The Court held that FBDC is entitled to the 8%
transitional input tax on its beginning inventory of land, which is granted in Section 105 (now Section 111[A]) of the
NIRC, and granted the refund of the amounts FBDC had paid as output VAT for the different tax periods in question.
FACTS:
The parties Fort Bonifacio Development Corporation (FBDC) and the CIR entered into a
Stipulation of Facts, Documents, and Issue before the CTA for each case. It was established before the
CTA that FBDC is engaged in the development and sale of real property in the area known as the Fort
Bonifacio Global City (the Global City). The National Government, by virtue of Republic Act No. 7227
and Executive Order No. 40, was the one that conveyed to FBDC these parcels of land on February 8,
1995.
Accordingly, FBDC commenced developing the Global City, and since October 1996, had been
selling lots. At the time of acquisition, VAT was not yet imposed on the sale of real properties. Republic
Act No. 7716 (the Expanded Value-Added Tax [E-VAT] Law), which took effect on January 1, 1996,
restructured the VAT system. Prior to R.A 7716, real estate transactions were not subject to VAT, they
became subject to VAT upon the effectivity of said law. Thus, the sale of the parcels of land by FBDC
became subject to a 10% VAT, and this was later increased to 12%, pursuant to R.A 9337. FBDC
afterwards became a VAT-registered taxpayer.
On September 19, 1996, FBDC submitted to BIR, an inventory list of its properties as of
February 29, 1996. The total book value of the land inventory amounted to P71,227,503,200.00. On the
basis of Section 105 of the NIRC, FBDC claims a transitional or presumptive input tax credit of 8% of
P71,227,503,200.00, the total value of the real properties listed in its inventory, or a total input tax credit
of P5,698,200,256.00. After the value of the real properties was reduced due to a reconveyance by FBDC
to BCDA of a parcel of land, FBDC claims that it is entitled to input tax credit in the reduced amount of
P4,250,475,000.48. What FBDC seeks to be refunded are the actual VAT payments made by it in cash,
which it claims were either erroneously paid by or illegally collected from it. Each Claim for Refund is
based on FBDC‘s position that it is entitled to a transitional input tax credit under Section 105 of the old
NIRC, which more than offsets the VAT payments.
The succeeding cases referred to the amounts claimed by FBCD. (a)P486,355,846.78 in G.R. No.
175707; (b) P77,151,020.46 in G.R. No. 180035, and (c) P269,340,469.45 in G.R. No. 181092, which it
paid as VAT, or to a tax credit for said amounts.
ISSUES:
1. May the transitional/presumptive input tax credit under Section 105 of the NIRC be claimed
only on the "improvements" on real properties?
2. Is it necessary to have previous payment of sales tax or value-added tax by FBDC on its land
before it may claim the input tax credit granted by Section 105 (now Section 111[A]) of the
NIRC?
3. Is RR No. 7-95 a valid implementation of Section 105 of the NIRC?
4. Is FBDC is entitled to a refund?
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RULINGS:
1. The Court held in the earlier consolidated decision, G.R. Nos. 158885 and 170680, as follows:
there is nothing in Section 105 of the Old NIRC that prohibits the inclusion of real properties, together
with the improvements thereon, in the beginning inventory of goods, materials and supplies, based on
which inventory the transitional input tax credit is computed.
When it was drafted Section 105 could not have possibly contemplated concerns specific to real
properties, as real estate transactions were not originally subject to VAT. When transactions on real
properties were finally made subject to VAT beginning with Rep. Act No. 7716, no corresponding
amendment was adopted as regards Section 105 to provide for a differentiated treatment in the
application of the transitional input tax credit with respect to real properties or real estate dealers.
It was Section 100 of the Old NIRC, as amended by Rep. Act No. 7716, which made real estate
transactions subject to VAT for the first time. Prior to the amendment, Section 100 had imposed the
VAT "on every sale, barter or exchange of goods", without specifying the kind of properties that fall
within or under the generic class "goods" subject to the tax.
The EVAT law, expanded the coverage of the VAT by amending Section 100 of the Old NIRC.
First, it made every sale, barter or exchange of "goods or properties" subject to VAT. Second, it generally
defined "goods or properties" as "all tangible and intangible objects which are capable of pecuniary
estimation." Third, it included a non-exclusive enumeration of various objects that fall under the class
"goods or properties" subject to VAT, including "real properties held primarily for sale to customers or
held for lease in the ordinary course of trade or business.
From these amendments to Section 100, is there any differentiated VAT treatment on real
properties or real estate dealers that would justify the suggested limitations on the application of the
transitional input tax on them? We see none.
Rep. Act No. 7716 clarifies that it is the real properties "held primarily for sale to customers or
held for lease in the ordinary course of trade or business" that are subject to the VAT, and not when the
real estate transactions are engaged in by persons who do not sell or lease properties in the ordinary
course of trade or business. It is clear that those regularly engaged in the real estate business are accorded
the same treatment as the merchants of other goods or properties available in the market. Under Section
105, the beginning inventory of "goods" forms part of the valuation of the transitional input tax credit.
Goods, as commonly understood in the business sense, refers to the product which the VAT registered
person offers for sale to the public. With respect to real estate dealers, it is the real properties themselves
which constitute their "goods". Such real properties are the operating assets of the real estate dealer.
Section 4.100-1 of RR No. 7-95 itself includes in its enumeration of "goods or properties" such
"real properties held primarily for sale to customers or held for lease in the ordinary course of trade or
business." Said definition was taken from the very statutory language of Section 100 of the Old NIRC.
By limiting the definition of goods to "improvements" in Section 4.105-1, the BIR not only contravened
the definition of "goods" as provided in the Old NIRC, but also the definition which the same revenue
regulation itself has provided.
2. No. The Court has ruled that prior payment of taxes is not required for a taxpayer to avail of
the 8% transitional input tax credit provided in Section 105 of the old NIRC and that FBDC is entitled
to it, despite the fact that FBDC acquired the Global City property under a tax-free transaction.
119
Section 105 states that the transitional input tax credits become available either to (1) a person who
becomes liable to VAT; or (2) any person who elects to be VAT-registered. The clear language of the law
entitles new trades or businesses to avail of the tax credit once they become VAT-registered. The
transitional input tax credit, whether under the Old NIRC or the New NIRC, may be claimed by a
newly-VAT registered person such as when a business as it commences operations. Nothing in the Old
NIRC (or even the New NIRC) speaks of such a possibility or qualifies the previous payment of VAT or
any other taxes on the goods, materials and supplies as a pre-requisite for inclusion in the beginning
inventory.
It is apparent that the transitional input tax credit operates to benefit newly VAT-registered persons,
whether or not they previously paid taxes in the acquisition of their beginning inventory of goods,
materials and supplies. During that period of transition from non-VAT to VAT status, the transitional
input tax credit serves to alleviate the impact of the VAT on the taxpayer. The VAT-registered taxpayer
is obliged to remit a significant portion of the income it derived from its sales as output VAT. The
transitional input tax credit mitigates this initial diminution of the taxpayer's income by affording the
opportunity to offset the losses incurred through the remittance of the output VAT at a stage when the
person is yet unable to credit input VAT payments.
Under Section 105 of the Old NIRC, the rate of the transitional input tax credit is "8% of the value
of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is
higher." If indeed the transitional input tax credit is premised on the previous payment of VAT, then it
does not make sense to afford the taxpayer the benefit of such credit based on "8% of the value of such
inventory" should the same prove higher than the actual VAT paid.
3. In the Decision in G.R. Nos. 158885 and 170680, the Court struck down Section 4.105-1 of
Revenue Regulations No. 7-95 for being in conflict with the law. The decision reads in part as follows:
There is no logic that coheres with either E.O. No. 273 or Rep. Act No. 7716 which supports the
restriction imposed on real estate brokers and their ability to claim the transitional input tax credit based
on the value of their real properties. The very idea of excluding the real properties itself from the
beginning inventory simply runs counter to what the transitional input tax credit seeks to accomplish for
persons engaged in the sale of goods, whether or not such "goods" take the form of real properties or
commodities.
Under Section 105, the beginning inventory of "goods" forms part of the valuation of the
transitional input tax credit. Goods, as commonly understood in the business sense, refers to the product
which the VAT registered person offers for sale to the public. With respect to real estate dealers, it is the
real properties themselves which constitute their "goods". Such real properties are the operating assets of
the real estate dealer.
Section 4.100-1 of RR No. 7-95 itself includes in its enumeration of "goods or properties" such "real
properties held primarily for sale to customers or held for lease in the ordinary course of trade or
business." Said definition was taken from the very statutory language of Section 100 of the Old NIRC.
By limiting the definition of goods to "improvements" in Section 4.105-1, the BIR not only contravened
the definition of "goods" as provided in the Old NIRC, but also the definition which the same revenue
regulation itself has provided.
It is of course axiomatic that a rule or regulation must bear upon, and be consistent with, the
provisions of the enabling statute if such rule or regulation is to be valid. In case of conflict between a
statute and an administrative order, the former must prevail.
120
The CIR has no power to limit the meaning of the term "goods" in Section 105 of the Old NIRC absent
statutory authority to make such limitation. A contrary conclusion would mean the CIR could very well
moot the law or arrogate legislative authority unto himself by retaining sole discretion to provide the
definition and scope of the term "goods."
To be valid, an administrative rule or regulation must conform, not contradict, the provisions of
the enabling law. An implementing rule or regulation cannot modify, expand, or subtract from the law it
is intended to implement. Any rule that is not consistent with the statute itself is null and void.
To recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as basis of transitional input tax
credit under Section 105 is a nullity. As we see it then, the 8% transitional input tax credit should not be
limited to the value of the improvements on the real properties but should include the value of the real
properties as well.
4. Yes. As previously stated, the issues here have already been passed upon and resolved by this
Court En Banc twice, in decisions that have reached finality, and we are bound by the doctrine of stare
decisis to apply those decisions to these consolidated cases, for they involve the same facts, issues, and
even parties. The Court held that FBDC is entitled to the 8% transitional input tax on its beginning
inventory of land, which is granted in Section 105 (nowSection 111[A]) of the NIRC, and granted the
refund of the amounts FBDC had paid as output VAT for the different tax periods in question.
To give Section 105 a restrictive construction that transitional input tax credit applies only when
taxes were previously paid on the properties in the beginning inventory and there is a law imposing the
tax which is presumed to have been paid, is to impose conditions or requisites to the application of the
transitional tax input credit which are not found in the law. The courts must not read into the law what is
not there. To do so will violate the principle of separation of powers which prohibits this Court from
engaging in judicial legislation. It is now this Court‘s duty to apply the previous rulings to the present
case. Once a case has been decided one way, any other case involving exactly the same point at issue, as
in the present case, should be decided in the same manner.
Thus, we find that FBDC is entitled to a refund of the amounts of:

1) P486,355,846.78 in G.R. No. 175707,
2) P77,151,020.46 in G.R. No. 180035, and
3) P269,340,469.45 in G.R. No. 181092, which FBDC paid as VAT, or to a tax credit for said
amounts.
COMMISSIONER OF INTERNAL REVENUE, v. PHILIPPINE NATIONAL BANK,

G.R. No. 180290, September 29, 2014, SECOND DIVISION, (Leonen, J.)
Petitioner's posture that respondent is required to establish actual remittance to the Bureau of Internal Revenue deserves
scant consideration. Proof of actual remittance is not a condition to claim for a refund of unutilized tax credits. Under
Sections 57 and 58 of the 1997 National Internal Revenue Code, as amended, it is the payor-withholding agent, and not
the payee-refund claimant such as respondent, who is vested with the responsibility of withholding and remitting income
taxes.
121
FACTS
In several transactions including but not limited to the sale of real properties, lease and
commissions, respondents allegedly earned income and paid the corresponding income taxes due which
were collected and remitted by various payors as withholding agents to the Bureau of Internal Revenue
(―BIR‖) during the taxable year 2000. On November 11, 2002, respondent filed a claim for refund or the
issuance of a tax credit certificate in the amount of P26,466,735.40 for the taxable year 2000 with the
BIR.
Due to BIR's inaction on its administrative claim, respondent appealed before the Court of Tax
Appeals by way of a Petition for Review on April 11, 2003. The Court of Tax Appeals First Division
rendered a decision in favor of respondent.
On appeal, the Court of Tax Appeals En Banc sustained the First Division‘s ruling. It held that the fact
of withholding and the amount of taxes withheld from the income payments received by respondent
were sufficiently established by the creditable withholding tax certificates, and there was no need to
present the testimonies of the various payors or withholding agents who issued the certificates and made
the entries therein. It also held that respondent need not prove actual remittance of the withheld taxes
to the Bureau of Internal Revenue because the functions of withholding and remittance of income taxes
are vested in the payors who are considered the agents of petitioner.
ISSUE
Did the Respondent complied with all the requirements for judicial claim for refund of unutilized
creditable withholding taxes
RULING
YES. The questions on whether respondent‘s claim for refund of unutilized excess creditable
withholding taxes amounting to P23,762,347.83 were duly supported by valid certificates of creditable
tax withheld at source and whether it had sufficiently proven its claim are questions of fact. These issues
require a review, examination, evaluation, or weighing of the probative value of evidence presented,
especially the withholding tax certificates, which this court does not have the jurisdiction to do, barring
the presence of any exceptional circumstance, as it is not a trier of facts. Besides, as pointed out by
respondent, petitioner did not object to the admissibility of the 622 withholding tax certificates when
these were formally offered by respondent before the tax court.17 Hence, petitioner is deemed to have
admitted the validity of these documents.18 Petitioner‘s ―failure to object to the offered evidence
renders it admissible, and the court cannot, on its own, disregard such evidence.‖
At any rate, the Court of Tax Appeals First Division and En Banc uniformly found that
respondent has established its claim for refund or issuance of a tax credit certificate for unutilized excess
creditable withholding taxes for the taxable year 2000 in the amount of P23,762,347.83. The certificate
of creditable tax withheld at source is the competent proof to establish the fact that taxes are
withheld. It is not necessary for the person who executed and prepared the certificate of creditable tax
withheld at source to be presented and to testify personally to prove the authenticity of the certificates.
As described in Section 6 of Revenue Regulations No. 6-85, BIR Form No. 1743.1 is a written
statement issued by the payor as withholding agent showing the income or other payments made by the
said withholding agent during a quarter or year and the amount of the tax deducted and withheld
therefrom. It readily identifies the payor, the income payment and the tax withheld. It is complete in
122
the relevant details which would aid the courts in the evaluation of any claim for refund of
creditable withholding taxes.
Petitioner's posture that respondent is required to establish actual remittance to the Bureau of
Internal Revenue deserves scant consideration. Proof of actual remittance is not a condition to claim for
a refund of unutilized tax credits. Under Sections 57 and 58 of the 1997 National Internal Revenue
Code, as amended, it is the payor-withholding agent, and not the payee-refund claimant such as
respondent, who is vested with the responsibility of withholding and remitting income taxes.
BANK OF THE PHILIPPINE ISLANDS v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 181836, July 9, 2014, Carpio, J.
There is a distinction between a request for reconsideration and a request for reinvestigation. A reinvestigation
which entails the reception and evaluation of additional evidence will take more time than a reconsideration of a tax
assessment, which will be limited to the evidence already at hand; this justifies why the reinvestigation can suspend the
running of the statute of limitations on collection of the assessed tax, while the reconsideration cannot. Hence, the period for
BIR to collect the deficiency DST already prescribed as the protest letter of BPI was a request for reconsideration, which did
not suspend the running of the prescriptive period to collect.
FACTS:
BPI, successor-in-interest of Citytrust Banking Corporation, is a commercial banking

corporation organized and existing under the laws of the Philippines. On 19 May 1989, the Bureau of
Internal Revenue (BIR) issued an assessment finding BPI liable for deficiency DST on its sales of foreign
bills of exchange to the Central Bank, with the total amount due of PHP1,259,884.50. On 16 June 1989,
BPI received the assessment notice and demand letter from the BIR. Hence, BPI, through its counsel,
filed a protest letter requesting for the reinvestigation and/or reconsideration of the assessment for lack
of legal and factual bases.
The BPI alleged that it should not be liable for the assessed DST because: (1) based on
recognized business practice incorporated in the Bankers Association of the Philippines (BAP) Foreign
Exchange Trading Center Rule 2(e), DST was for the account of the buyer; (2) BIR Ruling No. 135-
87stated that neither the tax-exempt entity nor the other party shall be liable for the payment of DST
before the effectivity of Presidential Decree No. (PD) 1994 on 1 January 1986; (3) since the then law left
the tax to be paid indifferently by either party and the party liable was exempt, the document was exempt
from DST; and (4) the assessed DST was the same assessment made by the BIR for DST swap
transaction covering taxable years 1982-1986.
Commissioner of Internal Revenue (CIR) denied the "request for reconsideration." The CIR
held that BPI‘s arguments were legally untenable. The CIR cited BIR Unnumbered Ruling dated 30 May
1977 and BIR Ruling No. 144-84 dated 3 September 1984, where the liability to pay DST was shifted to
the other party, who was not exempt from the tax. As for being taxed twice, the CIR found that such
allegation was unsubstantiated by BPI.
BPI filed a petition for review before the CTA. CTA, then, ordered the cancellation of the
assessed DST on BPI. The CTA ruled that neither BPI nor Central Bank, which was tax-exempt, could
be liable for the payment of the assessed DST. Hence, the CIR appealed to the CA. The CA reversed the
CTA decision, hence, BPI filed a petition for review before the Supreme Court.
123
ISSUE:
Whether the period to collect the assessed DST for the year 1985 has prescribed.
RULING:
The High Court ruled in the affirmative. The BIR nevertheless insists that the running of the
prescriptive period to collect the tax was suspended by BPI‘s filing of a request for the reinvestigation
and/or reconsideration on 23 June 1989.
Of particular importance to the present case is one of the circumstances enumerated in Section
[320 (now, 223)] of the Tax Code of 1977, as amended, wherein the running of the statute of limitations
on assessment and collection of taxes is considered suspended "when the taxpayer requests for a
reinvestigation which is granted by the Commissioner."
The Court gives credence to the argument of BPI that there is a distinction between a request
for reconsideration and a request for reinvestigation. Revenue Regulations (RR) No. 12-85 governs the
procedure for protesting an assessment and distinguishes between the two types of protest, as follows–
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 reinvestigation – refers to a plea for re-evaluation of an assessment on the basis of
newly-discovered or additional evidence that a taxpayer intends to present in the reinvestigation.
It may also involve a question of fact or law or both.
Undoubtedly, a reinvestigation, which entails the reception and evaluation of additional

evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the
evidence already at hand; this justifies why the former can suspend the running of the statute of
limitations on collection of the assessed tax, while the latter cannot.
A close review of the contents thereof would reveal, however, that it protested Assessment No.
FAS-5-85-89-002054 based on a question of law, in particular, whether or not BPI was liable for DST on
its sales of foreign currency to the Central Bank in taxable year 1985. The same protest letter did not
raise any question of fact; neither did it offer to present any new evidence. In its own letter to BPI, dated
10 September 1992, the BIR itself referred to the protest of BPI as a request for reconsideration. These
considerations would lead this Court to deduce that the protest letter of BPI was in the nature of a
request for reconsideration, rather than a request for reinvestigation and, consequently, Section 224 of
the Tax Code of 1977, as amended, on the suspension of the running of the statute of limitations should
not apply.
Even if, for the sake of argument, the Court glosses over the distinction between a request for
reconsideration and a request for reinvestigation, and considers the protest of BPI as a request for
reinvestigation, the filing thereof could not have suspended at once the running of the statute of
limitations. Article 224 of the Tax Code of 1977, as amended, very plainly requires that the request for
reinvestigation had been granted by the BIR Commissioner to suspend the running of the prescriptive
periods for assessment and collection.
In the present case, the protest letter of BPI essentially raises the same question of law, that is
whether BPI was liable for DST on its sales of foreign bills of exchange to the Central Bank in the
taxable year 1985. Although it raised the issue of being taxed twice, the BIR admitted that BPI did not
124
present any new or additional evidence to substantiate its allegations. In its letter dated 4 August 1998,
the BIR itself referred to the protest of BPI as a request for reconsideration, found the arguments in it
legally untenable, and denied the request. Hence, the Court finds that the protest letter of BPI was a
request for reconsideration, which did not suspend the running of the prescriptive period to collect.
COMMISIONER OF INTERNAL REVENUE vs. UNITED SALVAGE AND TOWAGE

(PHILS.), INC.
G.R. No. 197515, July 2, 2014
―The law requires that the legal and factual bases of the assessment be stated in the formal letter of demand and assessment
notice. Thus, such cannot be presumed. Otherwise, the express provisions of Article 228 of the NIRC and RR No. 12-99
would be rendered nugatory. The alleged "factual bases" in the advice, preliminary letter and "audit working papers" did
not suffice. There was no going around the mandate of the law that the legal and factual bases of the assessment be stated in
writing in the formal letter of demand accompanying the assessment notice.‖
FACTS:
Respondent is engaged in the business of sub-contracting work for service contractors engaged in
petroleum operations in the Philippines.During the taxable years in question, it had entered into various
contracts and/or sub-contracts with several petroleum service contractors, such as Shell Philippines
Exploration, B.V. and Alorn Production Philippines for the supply of service vessels.
In the course of respondent‘s operations, petitioner found respondent liable for deficiency income tax,
withholding tax, value-added tax (―VAT‖) and documentary stamp tax (―DST‖) for taxable years
1992,1994, 1997 and 1998. Particularly, petitioner, through BIR officials, issued demand letters with
attached assessment notices for withholding tax on compensation (―WTC‖) and expanded withholding
tax (―EWT‖) for taxable years 1992, 1994 and 1998.
On January 29, 1998 and October 24, 2001, USTP filed administrative protests against the 1994 and
1998 EWT assessments.
On February 21, 2003, USTP appealed by way of Petition for Review before the Court in action (which
was thereafter raffled to the CTA-Special First Division) alleging, among others, that the Notices of
Assessment are bereft of any facts, law, rules and regulations or jurisprudence; thus, the assessments are
void and the right of the government to assess and collect deficiency taxes from it has prescribed on
account of the failure to issue a valid notice of assessment within the applicable period.
During the pendency of the proceedings, USTP moved to withdraw the aforesaid Petition because it
availed of the benefits of the Tax Amnesty Program under R.A. No. 9480.Having complied with all the
requirements therefor, the CTA-Special First Division partially granted the Motion to Withdraw and
declared the issues on income tax, VAT and DST deficiencies closed and terminated in accordance with
our pronouncement in Philippine Banking Corporation v. Commissioner of Internal Revenue.
Consequently, the case was submitted for decision covering the remaining issue on deficiency EWT and
WTC, respectively, for taxable years 1992, 1994 and 1998.
CTA-Special First Division declared that the right of petitioner to collect the deficiency EWT and WTC,
respectively, for taxable year 1992 had already lapsed pursuant to Section 203 of the Tax Code. Thus, in
125
ruling for USTP, the CTA-Special First Division cancelled Assessment Notice Nos. 25-1-00546-92 and
25-1-000545-92, both dated January 9, 1996 and covering the period of 1992, as declared in its Decision.
ISSUES:
Whether or not the Expanded Withholding Tax Assessments issued by petitioner against the respondent
for taxable year 1994 was without any factual and legal basis?
Whether or not petitioner‘s right to collect the creditable withholding tax and expanded withholding tax
for taxable year 1992 has already prescribed?
HELD:
Section 228 of the Tax Code provides that the taxpayer shall be informed in writing of the law and the
facts on which the assessment is made. Otherwise, the assessment is void. To implement the aforesaid
provision, Revenue Regulation No. 12-99 was enacted by the BIR which states that the formal letter of
demand and assessment notice shall be issued by the Commissioner or his duly authorized representative
and that such letter of demand calling for payment of the tax payer‘s deficiency tax or taxes shall state
the facts, the law and regulations, or jurisprudence on which the assessment is based, otherwise, the
formal letter of demand and assessment shall be void.
It is clear from the foregoing that a taxpayer must be informed in writing of the legal and factual bases of
the tax assessment made against him. The use of the word "shall" in these legal provisions indicates the
mandatory nature of the requirements laid down therein.
In the present case, a mere perusal of the FAN for the deficiency EWT for taxable year 1994 will show
that other than a tabulation of the alleged deficiency taxes due, no further detail regarding the assessment
was provided by petitioner. Only the resulting interest, surcharge and penalty were anchored with legal
basis. Petitioner should have at least attached a detailed notice of discrepancy or stated an explanation
why the amount of P48,461.76 is collectible against respondent and how the same was arrived at. Any
short-cuts to the prescribed content of the assessment or the process thereof should not be
countenanced, in consonance with the ruling in Commissioner of Internal Revenue v. Enron Subic
Power Corporation.
The Supreme Court disagreed on the ground that the advice of tax deficiency, given by the CIR to an
employee of Enron, as well as the preliminary five-day letter, were not valid substitutes for the
mandatory notice in writing of the legal and factual bases of the assessment. These steps were mere
perfunctory discharges of the CIR‘s duties incorrectly assessing a taxpayer. The requirement for issuing a
preliminary or final notice, as the case may be, informing a taxpayer of the existence of a deficiency tax
assessment is markedly different from the requirement of what such notice must contain. Just because
the CIR issued an advice, a preliminary letter during the pre-assessment stage and a final notice, in the
order required by law, does not necessarily mean that Enron was informed of the law and facts on which
the deficiency tax assessment was made.
The law requires that the legal and factual bases of the assessment be stated in the formal letter of
demand and assessment notice. Thus, such cannot be presumed. Otherwise, the express provisions of
Article 228 of the NIRC and RR No. 12-99 would be rendered nugatory. The alleged "factual bases" in
the advice, preliminary letter and "audit working papers" did not suffice. There was no going around the
126
mandate of the law that the legal and factual bases of the assessment be stated in writing in the formal
letter of demand accompanying the assessment notice.
The old law merely required that the taxpayer be notified of the assessment made by the CIR. This was
changed in 1998 and the taxpayer must now be informed not only of the law but also of the facts on
which the assessment is made. Such amendment is in keeping with the constitutional principle that no
person shall be deprived of property without due process. In view of the absence of a fair opportunity
for Enron to be informed of the legal and factual bases of the assessment against it, the assessment in
question was void
In one case decided by the Supreme Court, it was held that the court cannot countenance an assessment
based on estimates that appear to have been arbitrarily or capriciously arrived at. Although taxes are the
lifeblood of the government, their assessment and collection ―should be made in accordance with law as
any arbitrariness will negate the very reason for government itself.‖
Applying the aforequoted ruling to the case at bar, it is clear that the assailed deficiency tax assessment
for the EWT in 1994 disregarded the provisions of Section 228 of the Tax Code, as amended, as well as
Section 3.1.4 of Revenue Regulations No. 12-99 by not providing the legal and factual bases of the
assessment. Hence, the formal letter of demand and the notice of assessment issued relative thereto are
void.
CITY OF MANILA v. HON. ANGEL VALERA COLET

G.R. No. 120051, 10 December 2014 EN BANC (LEONARDO-DE CASTRO, J)
Although the power to tax is inherent in the State, the same is not true for the LGUs to whom the
power must be delegated by Congress and must be exercised within the guidelines and limitations that
Congress may provide.
FACTS:
The Manila Revenue Code enacted by the City Council of Manila contained a provision which
impose a business tax on the gross receipts of transportation contractors, persons engaged in the
transportation of passengers or freight by hire, and common carriers by air, land, or water. Ordinance
No. 7807 was thereafter enacted by the City Council of Manila amending several provisions of the
Manila Revenue Code. Section 21 of the Manila Revenue Code, as amended, imposed a lower tax rate on
the businesses that fell under it. The City of Manila, through its City Treasurer, began imposing and
collecting the business tax under Section 21(B) of the Manila Revenue Code, as amended, beginning
January 1994. Thereafter, several corporations affected by the imposition of said tax, impugned the
constitutionality of Section 21(B) of Ordinance No. 7794 of the City of Manila.
The City of Manila and its public officials insisted that said clause recognized the power of the
municipality or city, under Section 143(h) of the LGC, to impose tax "on any business subject to the
excise, value-added or percentage tax under the National Internal Revenue Code, as amended." And it
was pursuant to Section 143(h) of the LGC that the City of Manila and its public officials enacted,
approved, and implemented Section 21(B) of the Manila Revenue Code, as amended.
ISSUE:
Is Section 21(B) of the Manila Revenue Code, as amended, in conformity with the Constitution
and, therefore, valid?
RULING:
No. Section 21(B) of the Manila Revenue Code, as amended, is null and void for being beyond
the power of the City of Manila and its public officials to enact, approve, and implement under the LGC.
127
It is already well-settled that although the power to tax is inherent in the State, the same is not
true for the LGUs to whom the power must be delegated by Congress and must be exercised within the
guidelines and limitations that Congress may provide.
As held in Icard v. City Council of Baguio, a municipal corporation unlike a sovereign state is
clothed with no inherent power of taxation. The charter or statute must plainly show an intent to confer
that power or the municipality, cannot assume it. And the power when granted is to be construed in
strictissimi juris. Any doubt or ambiguity arising out of the term used in granting that power must be
resolved against the municipality. Inferences, implications, deductions – all these – have no place in the
interpretation of the taxing power of a municipal corporation. Therefore, the power of a province to tax
is limited to the extent that such power is delegated to it either by the Constitution or by statute.
Per Section 5, Article X of the 1987 Constitution, the power to tax is no longer vested
exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and
other charges. Nevertheless, such authority is subject to such guidelines and limitations as the Congress
may provide. Section 133(j) of the LGC clearly and unambiguously proscribes LGUs from imposing any
tax on the gross receipts of transportation contractors, persons engaged in the transportation of
passengers or freight by hire, and common carriers by air, land, or water. Section 133(j) of the LGC
prevails over Section 143(h) of the same Code, and Section 21(B) of the Manila Revenue Code, as
amended, was manifestly in contravention of the former.
Section 133(j) of the LGC is a specific provision that explicitly withholds from any LGU, i.e.,
whether the province, city, municipality, or barangay, the power to tax the gross receipts of
transportation contractors, persons engaged in the transportation of passengers or freight by hire, and
common carriers by air, land, or water. In contrast, Section 143 of the LGC defines the general power of
the municipality (as well as the city, if read in relation to Section 151 of the same Code) to tax businesses
within its jurisdiction. While paragraphs (a) to (g) thereof identify the particular businesses and fix the
imposable tax rates for each, paragraph (h) is apparently the "catch-all provision" allowing the
municipality to impose tax "on any business, not otherwise specified in the preceding paragraphs, which
the sanggunian concerned may deem proper to tax.
The omnibus grant of power to municipalities and cities under Section 143(h) of the LGC
cannot overcome the specific exception/exemption in Section 133(j) of the same Code. This is in accord
with the rule on statutory construction that specific provisions must prevail over general ones. A special
and specific provision prevails over a general provision irrespective of their relative positions in the
statute. Generalia specialibus non derogant. Where there is in the same statute a particular enactment and
also a general one which in its most comprehensive sense would include what is embraced in the former,
the particular enactmentmust be operative, and the general enactment must be taken to affect only such
cases within its general language as are not within the provisions of the particular enactment.
In the case at bar, the sanggunian of the municipality or city cannot enact an ordinance imposing
business tax on the gross receipts of transportation contractors, persons engaged in the transportation of
passengers or freight by hire, and common carriers by air, land, or water, when said sanggunian was
already specifically prohibited from doing so. Any exception to the express prohibition under Section
133(j) of the LGC should be just as specific and unambiguous. Second, the construction adopted by the
Court gives effect to both Sections 133(j) and 143(h) of the LGC. In construing a law, care should be
taken that every part thereof be given effect and a construction that could render a provision inoperative
should be avoided, and inconsistent provisions should be reconciled whenever possible as parts of a
harmonious whole.
128
Republic Act No. 7716, (Expanded Value-Added Tax Law), which took effect after the LGC on
May 28, 1994, expressly amended the NIRC of 1977 and added to Section 115 of the latter on
"Percentage tax on carriers and keepers of garages," the following proscription: "The gross receipts of
common carriers derived from their incoming and outgoing freight shall not be subjected to the local
taxes imposed under Republic Act No. 7160, otherwise known as the Local Government Code of 1991."
NATIONAL POWER CORPORATION vs. MUNICIPAL GOVERNMENT OF NAVOTAS,

SANGGUNIANG BAYAN OF NAVOTAS AND MANUEL T. ENRIQUEZ, in his capacity as
Municipal Treasurer of Navotas
G.R. No. 192300, November 24, 2014, J. Peralta
The fact that a separate chapter is devoted to the treatment of real property taxes, and a distinct appeal procedure
is provided therefor does not justify an inference that Section 7(a)(3) of R.A. 9282 pertains only to local taxes other than
real property taxes. Rather, the term "local taxes" in the aforementioned provision should be considered in its general and
comprehensive sense, which embraces real property tax assessments, in line with the precept Generalia verba sunt generaliter
inteligencia—what is generally spoken shall be generally understood. Based on the foregoing, the general meaning of "local
taxes" should be adopted in relation to Paragraph (a)(3) of Section 7 of R.A. 9282, which necessarily includes real
property taxes.
Facts:
National Power Corporation (NAPOCOR) entered into a Build Operate and Transfer Project
Agreements (BOTs) with Mirant Navotas I Corporation (MNC-I), and Mirant Navotas II Corporation
(MNC-II). The BOTs are for the construction, operation and eventual transfer to NAPOCOR of MNC-
I‘s 200MW and MNC-II‘s 100-MW gas turbine power stations. Consequently, NAPOCOR has the
obligation to pay for all taxes, except business taxes, relative to the implementation of the agreements.
For the 1st quarter of 2003, NAPOCOR paid the Municipality, real property taxes for the MNC-I and
MNC-II power stations, respectively. After the said quarter, NAPOCOR stopped paying the real
property taxes, claiming exemption from payment thereon pursuant to Section 234(c) of the Local
Government Code (LGC) of 1991. NAPOCOR informed the Municipal Assessor of Navotas (Municipal
Assessor) of their position on the exemption from real property tax of the subject properties. Pursuant
to the BOTs, MNC-I and MNC-II eventually transferred to NAPOCOR all their rights, title and
interests in and to the fixtures, fittings, plant and equipment, and improvements comprising the power
stations.
On May 25, 2005, MNC-II received four notices informing them about their real property tax
delinquencies. A Warrant of Levy and two Notices of Sale of Delinquent Real Property were received
from the Municipal Treasurer, scheduling the public auction of the subject properties on December 21,
2005.
On December 16, 2005, NAPOCOR filed before the Regional Trial Court (RTC) of Malabon City, a
Petition for Declaratory Relief, Annulment of Notice of Delinquency, Warrant of Levy, and Notice of
Sale with prayer for the issuance of a Writ of Preliminary Injunction and Temporary Restraining Order
(TRO). Such petition was denied by the RTC. Due to lack of bidders in the public auction, the properties
were forfeited in favor of the Municipality. NAPOCOR filed an amended petition before the RTC
seeking to declare as null and void the public auction and the forfeiture of the subject properties. The
RTC denied the amended petition.
129
A petition for review was filed before the Supreme Court. The petition was denied and the decision of
the RTC sustained. Resultantly, NAPOCOR filed a petition before the CTA En Banc. The CTA En
Banc dismissed the petition. Hence, this petition.
Issue:
Whether or not the CTA has jurisdiction to review the decision of the RTC which concerns a petition
for declaratory relief involving real property taxes.
Ruling:
Yes, the CTA has jurisdiction to review the decisions of the RTC.
Indeed, the CTA, sitting as Division, has jurisdiction to review by appeal the decisions, rulings and
resolutions of the RTC over local tax cases, which includes real property taxes. This is evident from a
perusal of the Local Government Code (LGC) which includes the matter of Real Property Taxation
under one of its main chapters.
The Court, therefore, disagrees with the conclusion of the CTA En Banc that real property taxes have
always been treated by our laws separately from local taxes. The fact that a separate chapter is devoted to
the treatment of real property taxes, and a distinct appeal procedure is provided therefor does not justify
an inference that Section 7(a)(3) of R.A. 9282 pertains only to local taxes other than real property taxes.
Rather, the term "local taxes" in the aforementioned provision should be considered in its general and
comprehensive sense, which embraces real property tax assessments, in line with the precept Generalia
verba sunt generaliter inteligencia—what is generally spoken shall be generally understood.
Based on the foregoing, the general meaning of "local taxes" should be adopted in relation to Paragraph
(a)(3) of Section 7 of R.A. 9282, which necessarily includes real property taxes. Second, as correctly
pointed out by NAPOCOR, when the legality or validity of the assessment is in question, and not its
reasonableness or correctness, appeals to the LBAA, and subsequently to the CBAA, pursuant to
Sections 22614 and 22915 of the LGC, are not necessary. Stated differently, in the event that the
taxpayer questions the authority and power of the assessor to impose the assessment, and of the
treasurer to collect the real property tax, resort to judicial action may prosper. Although as a rule,
administrative remedies must first be exhausted before resort to judicial action can prosper, there is a
well-settled exception in cases where the controversy does not involve
questions of fact but only of law. In the present case, the parties, even during the proceedings in the
lower court on 11 April 1994, already agreed "that the issues in the petition are legal", and thus, no
evidence was presented in said court.
In the case at bar, the claim of NAPOCOR essentially questions the very authority and power of the
Municipal Assessor to impose the assessment and of the Municipal Treasurer to collect the real property
tax with respect to the machineries and equipment located in the Navotas I and II power plants.
Certainly, it does not pertain to the correctness of the amounts assessed but attacks the validity of the
assessment of the taxes itself. The well-established rule is that the allegations in the complaint and the
character of the relief sought determine the nature of an action. Here, it is not disputed that the
machineries and equipment are being used for power generation. The primordial issue, however, is
whether these machineries and equipment are actually, directly and exclusively used by NAPOCOR
within the purview of Section 234(19 of the LGC, which exempts it from payment of real property taxes.
As can be gleaned from the foregoing, the issue is clearly legal given that it involves an interpretation of
the contract between the parties vis-à-vis the applicable laws, i.e., which entity actually, directly and
exclusively uses the subject machineries and equipment. The answer to such question would then
130
determine whether NAPOCOR is indeed exempt from payment of real property taxes. Since the issue is
a question of law, the jurisdiction was correctly lodged with the RTC.
In a similar way, as there has been an apparent admission by NAPOCOR that it is not questioning the
excessiveness or reasonableness of the real property tax assessment, but the legality thereof; there is no
need for NAPOCOR to pay the real property tax assessment before initiating a protest.
At this point, although the Court agrees with NAPOCOR on it stance that payment under protest is not
necessary, the Court still maintains the view that exhausting the available remedies of lodging an appeal
before the LBAA and CBAA before availing judicial intervention is still mandatory.
In fine, if a taxpayer is not satisfied with the decision of the CBAA or the RTC, as the case maybe, the
taxpayer may file, within thirty (30) days from receipt of the assailed decision, a petition for review with
the CTA pursuant to Section 7(a) of R.A. 9282. In cases where the question involves the amount of the
tax or the correctness thereof, the appeal will be pursuant to Section 7(a)(5) of R.A. 9282. When the
appeal comes from a judicial remedy which questions the authority of the local government to impose
the tax, Section 7(a)(3) of R.A. 9282 applies. Thereafter, such decision, ruling or resolution may be
further reviewed by the CTA En Banc pursuant to Section 2, Rule 4 of the Revised Rules of the CTA.
CORPORATE STRATEGIES DEVELOPMENT CORP. and RAFAEL R. PRIETO vs.

NORMAN A. AGOJO 
G.R. No. 208740, 19 November 2014, SECOND DIVISION (Mendoza, J.)
There could be no presumption of the regularity of any administrative action which resulted in depriving a taxpayer
of his property through a tax sale. This is an exception to the rule that administrative proceedings are presumed to be
regular. This jurisprudential tenor clearly demonstrates that the burden to prove compliance with the validity of the
proceedings leading up to the tax delinquency sale is incumbent upon the buyer or the winning bidder, which, in this case, is
Agojo. This is premised on the rule that a sale of land for tax delinquency is in derogation of property and due process
rights of the registered owner. In order to be valid, the steps required by law must be strictly followed. Agojo must be
reminded that the requirements for a tax delinquency sale under the LGC are mandatory. Strict adherence to the statutes
governing tax sales is imperative not only for the protection of the taxpayers, but also to allay any possible suspicion of
collusion between the buyer and the public officials called upon to enforce the laws.
FACTS:
CSDC is the registered owner of a parcel of land in Makati City located at Lot 18, Block 29 of
Pcs-1310 and covered by TCT No. 125211, with an area of 1,000 square meters. It is likewise covered by
Tax Declaration in the name of CSDC. From 1994 to 2006, its real property taxes in the amount of
P1,458,199.85, had not been paid. As a result, a warrant was issued on April 7, 2006, by the City
Treasurer of Makati subjecting the property to levy. A public auction sale was then conducted on May
24, 2006, during which Agojo turned out to be the highest bidder with a bid amount of P2,000,000.00.
Consequently, a certificate of sale was issued in his favor on even date. The said certificate was later
registered with the Registry of Deeds.
With the issuance of the Final Deed of Conveyance on July 3, 2007, or after the expiration of the
one (1) year redemption period, Agojo filed with the RTC a petition for the issuance of a new certificate
131
of title for the subject property. On February 13, 2008, an order was issued by the RTC setting the case
for hearing and directing the service of the notice of hearing upon all interested persons – the petitioners
herein, the Land Registration Authority (LRA), and the Register of Deeds of Makati City.
On August 22, 2008, CSDC filed its opposition to the said petition and Prieto, in his capacity as
CSDC President. As oppositors, CSDC and Prieto alleged that they did not receive a notice of tax
delinquency or the warrant subjecting the property; that the pertinent notice and warrant were apparently
sent to CSDC‘s old office address, despite its transfer to another location years ago; and that the sale
violated the procedural requirements prescribed under the LGC. Specifically, they questioned the
following: (a) the failure of the City Treasurer to exert further steps to send the warrant at the address
where the property itself was located; (b) the failure to serve the warrant on the occupant of the property
as mandated by Section 258 of the LGC; (c) the failure to serve the copies of the warrant of levy upon
the Register of Deeds and the City Assessor of Makati prior to the auction sale following the said
provision in relation to Section 260 of the LGC; (d) the failure to annotate the notice of levy on the title
of the property prior to the conduct of the auction sale on May 24, 2006;and (e) the gross inadequacy of
the bid price for the property considering that it only represented five (5) percent of the value of the
property in the total amount ofP35,000,000.00 based on the zonal valuation. Because of these alleged
defects, petitioner assailed the auction sale for being defective pursuant to the provisions of the LGC.
CSDC filed a motion to deposit the amount of P3,080,000.00 pursuant to Section 267 of the
LGC, as a guarantee to Agojo should the sale be declared void. On January 15, 2010, the RTC rendered a
decision which voided the auction sale.The CA decided to affirm the findings and conclusions of the
RTC. On March 18, 2013, the CA reconsidered its decision, thus, reversing its earlier pronouncement.
Hence, this petition.
ISSUES:
Whether or not the CA erred in (1) applying the presumption of regularity of an official act in a
tax delinquency case; (2) disregarding the legal requirements of a tax delinquency sale.
RULING:
1. No, the presumption of regularity cannot be applied.
Under Section 75 of Presidential Decree (P.D.) No. 1529, otherwise known as the Property
Registration Decree, the registered owner is given the right to pursue legal and equitable remedies to
impeach or annul the proceedings for the issuance of new certificates of title upon the expiration of the
redemption period. In this case, petitioners opposed the issuance of a new certificate of title in favor of
the respondent on the ground that the auction sale was null and void.
In Spouses Sarmiento v. CA, this Court reiterated the rule that there could be no presumption of
the regularity of any administrative action which resulted in depriving a taxpayer of his property through
a tax sale. This is an exception to the rule that administrative proceedings are presumed to be regular.
The above jurisprudential tenor clearly demonstrates that the burden to prove compliance with the
validity of the proceedings leading up to the tax delinquency sale is incumbent upon the buyer or the
winning bidder, which, in this case, is Agojo. This is premised on the rule that a sale of land for tax
delinquency is in derogation of property and due process rights of the registered owner. In order to be
valid, the steps required by law must be strictly followed.
132
2. Yes, the CA erred in disregarding the legal requirements.
Under Section 254 of the LGC, it is required that the notice of delinquency must be posted at
the main hall and in a publicly accessible and conspicuous place in each barangay of the local
government unit concerned. It shall also be published once a week for two (2) consecutive weeks, in a
newspaper of general circulation in the province, city, or municipality. Section 258 of the LGC further
requires that should the treasurer issue a warrant of levy, the same shall be mailed to or served upon the
delinquent owner of the real property or person having legal interest therein, or in case he is out of the
country or cannot be located, the administrator or occupant of the property. At the same time, the
written notice of the levy with the attached warrant shall be mailed to or served upon the assessor and
the Registrar of Deeds of the province, city or municipality within the Metropolitan Manila Area where
the property is located, who shall annotate the levy on the tax declaration and certificate of title of the
property, respectively. Section 260 of the LGC also mandates that within thirty (30) days after service of
the warrant of levy, the local treasurer shall proceed to publicly advertise for sale or auction the property
or a usable portion thereof as may be necessary to satisfy the tax delinquency and expenses of sale. Such
advertisement shall be effected by posting a notice at the main entrance of the provincial, city or
municipal building, and in a publicly accessible and conspicuous place in the barangay where the real
property is located, and by publication once a week for two (2) weeks in a newspaper of general
circulation in the province, city or municipality where the property is located.
Agojo utterly failed to show compliance with the aforestated requirements. First, no evidence
was adduced to prove that the notice of levy was ever received by the CSDC. There was no proof either
that such notice was served on the occupant of the property. It is essential that there be an actual notice
to the delinquent taxpayer, otherwise, the sale is null and void although preceded by proper
advertisement or publication. This proceeds from the principle of administrative proceedings for the sale
of private lands for non-payment of taxes being in personam. Second, the notice of tax delinquency was
not proven to have been posted at the Makati City Hall and in Barangay Dasmariñas, Makati City, where
the property is located.
Having established the lack of proof of receipt of the notice of levy by CSDC or by the occupant
of the subject property, and of the fact of publication, there is clearly reason to doubt the validity of the
proceedings leading to the tax delinquency sale made in favor of the respondent. Verily, the inescapable
fact that can be derived from all these is Agojo‘s inability to prove that he derived his right over the
property from a valid proceeding pursuant to the requirements of the LGC.
Agojo must be reminded that the requirements for a tax delinquency sale under the LGC are
mandatory. Strict adherence to the statutes governing tax sales is imperative not only for the protection
of the taxpayers, but also to allay any possible suspicion of collusion between the buyer and the public
officials called upon to enforce the laws. Particularly, the notice of sale to the delinquent landowners and
to the public in general is an essential and indispensable requirement of law, the non-fulfilment of which
vitiates the sale. Thus, the holding of a tax sale despite the absence of the requisite notice, as in this case,
is tantamount to a violation of the delinquent taxpayer‘s substantial right to due process.
133
NURSERY CARE CORPORATION; SHOEMART, INC.; STAR APPLIANCE CENTER,

INC.; H&B INC.; SUPPLIES STATION, INC.; and HARDWARE WORKSHOP, INC. v.
ANTHONY ACEVEDO, in his capacity as THE TREASURER OF MANILA; and THE CITY
OF MANILA
G.R. No. 180651, 30 July 2014, FIRST DIVISION (Bersamin, J.)
There is double taxation when the same taxpayer is taxed twice when he should be taxed only once for the same
purpose by the same taxing authority within the same jurisdiction during the same taxing period, and the taxes are of the
same kind or character. Double taxation is obnoxious.
FACTS:
The City of Manila assessed and collected taxes from the individual petitioners pursuant to
Section 15 (Tax on Wholesalers, Distributors, or Dealers) and Section 17 (Tax on Retailers) of the Revenue
Code of Manila. At the same time, the City of Manila imposed additional taxes upon the petitioners
pursuant to Section 21 of the Revenue Code of Manila, as amended, as a condition for the renewal of
their respective business licenses for the year 1999.
To comply with the City of Manila‘s assessment taxes under Section 21, the petitioners paid
under protest the amounts corresponding to the first quarter of 1999. By letter dated March 1, 1999, the
petitioners formally requested the Office of the City Treasurer for the tax credit or refund of the local
business taxes paid under protest. However, then City Treasurer Anthony Acevedo denied the request
and the subsequent reconsideration filed by the petitioners on April 8, 1999.
In the meanwhile, Liberty Toledo succeeded Acevedo as Manila‘s City Treasurer. On April 29,
1999, the petitioners filed their respective petitions for certiorari in the RTC of Manila.
ISSUE:
Is there double taxation when the City of Manila collected additional taxes pursuant to Section
21 of the Revenue Code of Manila?
RULING:
YES. The Court now holds that all the elements of double taxation concurred upon the City of
Manila‘s assessment on and collection of taxes from petitioners pursuant to Section 21 of the Revenue
Code of Manila.
Firstly, because Section 21 of the Revenue Code of Manila imposed the tax on a person who sold
goods and services in the course of trade or business based on a certain percentage of his gross sales or
receipts in the preceding calendar year, while Section 15 and Section 17 likewise imposed the tax on a
person who sold goods and services in the course of trade or business but only identified such person
with particularity, namely, the wholesaler, distributor or dealer (Section 15), and the retailer (Section 17),
all the axes – being imposed on the privilege of doing business in the City of Manila in order to make the
taxpayers contribute to the city‘s revenues – were imposed on the same subject matter and for the same
purpose.
134
Secondly, the taxes were imposed by the same taxing authority (the City of Manila) and within the
same jurisdiction in the same taxing period.
Thirdly, the taxes were all in the nature of local business taxes.
In fine, the imposition of the tax under Section 21 of the Revenue Code of manila constituted
double taxation, and the taxes collected pursuant thereto must be refunded.
135

CTA Jurisdiction Over Appeals Requires Timely Reconsideration Motion

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Prepared by: UST Tax Law Review Petition Class 2017-18

Submitted to: Atty. Noel Ortega

VISAYAS GEOTHERMAL POWER COMPANY vs. COMMISIONER OF INTERNAL

DOCTRINE OF THE CASE:

VI. BIR Ruling No. DA-489-03 dated 10 December 2003

ASIATRUST DEVELOPMENT BANK, INC., PETITIONERS, VS. COMMISSIONER OF

DOCTRINE OF THE CASE:

Medicard Philippines, INC., vs. Commissioner of Internal Revenue

DOCTRINES OF THE CASE:

MEDICARD received CIR's Final Decision on Disputed Assessment, denying MEDICARD's

Metropolitan Bank & Trust Company vs. CIR

DOCTRINE OF THE CASE:

Hence, this petition.

Section 2.57. Withholding of Tax at Source

MITSUBISHI CORPORATION - MANILA BRANCH, v COMMISSIONER OF

DOCTRINE OF THE CASE

Marubeni Philippines Corporation Vs. Commissioner of Internal Revenue

DOCTRINE OF THE CASE

MINDANAO SHOPPING DESTINATION CORPORATION v. RODRIGO R. DUTERTE

CIR v. SEMIRARA MINING CORPORATION

CIR v. SEMIRARA MINING CORPORATION

a) Exemption from all taxes except income tax;

SECTION V - RIGHTS AND OBLIGATIONS OF THE PARTIES

5.2 The OPERATOR shall have the following rights:

PILIPINAS SHELL PETROLEUM CORPORATION v. COMMISSIONER OF CUSTOMS

DOCTRINE OF THE CASE

DEUTSCHE KNOWLEDGE SERVICES PTE. LTD. v COMMISSIONER OF INTERNAL

DOCTRINE OF THE CASE

However, on June 8, 2009, instead of an Answer respondent filed a Motion to Dismiss on

SECRETARY OF FINANCE CESAR B. PURISIMA AND COMMISSIONER OF

COMMISSIONER OF CUSTOMS v. WILLIAM SINGSON AND TRITON SHIPPING

COMMISSIONER OF INTERNAL REVENUE vs. FITNESS BY DESING, INC.

NATIONAL POWER CORPORATION vs. THE PROVINCIAL TREASURER OF

COMMISSIONER OF INTERNAL REVENUE v. SECRETARY OF JUSTICE, and

DOCTRINE OF THE CASE:

COMMISSIONER OF INTERNAL REVENUE, v. DE LA SALLE UNIVERSITY, INC

DOCTRINE OF THE CASE:

Takenaka Corporation, Phil. Branch vs CIR

CIR vs Deutsche Knowledge Services, Inc. (DKS)

PROVINCIAL ASSESSOR OF AGUSAN DEL SUR v. FILIPINAS PALM OIL

DOCTRINE OF THE CASE

As to tax exemptions or incentives granted to or presently enjoyed by natural or juridical

PILMICO-MAURI FOODS CORP. v. COMMISSIONER OF INTERNAL REVENUE

DOCTRINE OF THE CASE

The statutory test of deductibility where it is axiomatic that to be deductible as a business

BANCO DE ORO, et al. v. REPUBLIC OF THE PHILIPPINES, et al.

DOCTRINE OF THE CASE

BLOOMBERRY RESORTS AND HOTELS, INC. v. BUREAU OF INTERNAL REVENUE

DOCTRINE OF THE CASE

Philippine Amusement and Gaming Corporation (PAGCOR) granted to Bloomberry Resorts

COMMISSIONER OF INTERNAL REVENUE V. GOODYEAR PHILIPPINES, INC.

SNAPM is a corporation engaged in the financing and acquisition of hydropower generating

TRIDHARMA MARKETING CORPORATION v. COURT OF TAX APPEALS, SECOND

DOCTRINE OF THE CASE

Hence, this special civil action for certiorari.

The petition for certiorari is meritorious.

CORAL BAY NICKEL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

DOCTRINE OF THE CASE

Was the filing of petitioner‘s judicial claim premature?

The appeal is bereft of merit.

PROCTER AND GAMBLE ASIA PTE LTD. v. COMMISSIONER OF INTERNAL

DOCTRINE OF THE CASE

CAPITOL WIRELESS, INC. v. THE PROVINCIAL TREASURER OF BATANGAS, THE