Taxation Law Case Digests

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TAXATION LAW CASE DIGESTS
1)
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR), petitioner, vs. THE
BUREAU OF INTERNAL REVENUE (BIR), represented herein by HON. JOSE MARIO
BUÑAG, in his official capacity as COMMISSIONER OF INTERNAL REVENUE, public
respondent,
EN BANC [G.R. No. 172087. March 15, 2011.]
JOHN DOE and JANE DOE, who are persons acting for, in behalf, or under the
authority of Respondent, public and private respondents.
Peralta
Petitioner Philippine Amusement and Gaming Corporation (PAGCOR) seeks for the
declaration of nullity of Section 1 of Republic Act (R.A.) No. 9337 insofar as it
amends Section 27 (c) of the National Internal Revenue Code of 1997, by excluding
petitioner from exemption from corporate income tax for being repugnant to
Sections 1 and 10 of Article III of the Constitution. Petitioner further seeks to prohibit
the implementation of Bureau of Internal Revenue (BIR) Revenue Regulations No.
16-2005 for being contrary to law.
FACTS:
• PAGCOR is exempt from the payment of any type of tax, except a franchise tax of
five percent (5%) of the gross revenue.
• P.D. No. 1399 was issued expanding the scope of PAGCOR's exemption, as follows:
Customs Duties, taxes and other imposts on importations
Income and other taxes
Dividend Income
• With the enactment of R.A. No. 9337 10 on May 24, 2005. It amended Section 27
(c) of the National Internal Revenue Code of 1997 by excluding PAGCOR from the
enumeration of GOCCs that are exempt from payment of corporate income tax, pay
such rate of tax upon their taxable income as are imposed by this Section upon
corporations or associations engaged in similar business, industry, or activity.
• Different groups assailed the validity and constitutionality of the said Republic Act.
• Court dismissed all the petitions and upheld the constitutionality of R.A. No. 9337.
• Respondent BIR issued Revenue Regulations (RR) No. 162005, specifically
identifying PAGCOR as one of the franchisees subject to 10% VAT imposed under
Section 108 of the National Internal Revenue Code of 1997, as amended by R.A. No.
9337.
• Gross Receipts of all other franchisees, other than those covered by Sec. 119 of
the Tax Code, regardless of how their franchisees may have been granted, shall be
subject to the 10% VAT imposed under Sec. 108 of the Tax Code. This includes,
among others, the Philippine Amusement and Gaming Corporation (PAGCOR), and

its licensees or franchisees.
• Hence, the present petition for certiorari.
ISSUE:
Whether or not PAGCOR is still exempt from corporate income tax and VAT with the
enactment of R.A. No. 9337?
HELD:
Taxation is the rule and exemption is the exception. The burden of proof rests upon
the party claiming exemption to prove that it is, in fact, covered by the exemption
so claimed. As a rule, tax exemptions are construed strongly against the claimant.
Exemptions must be shown to exist clearly and categorically, and supported by
clear legal provision.
As for the corporate income tax, PAGCOR is not exempt. In this case, it failed to
prove that it is still exempt from the payment of corporate income tax, considering
that Section 1 of R.A. No. 9337 amended Section 27 (c) of the National Internal
Revenue Code of 1997 by omitting PAGCOR from the exemption. The legislative
intent, as shown by the discussions in the Bicameral Conference Meeting, is to
require PAGCOR to pay corporate income tax; hence, the omission or removal of
PAGCOR from exemption from the payment of corporate income tax. 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. Thus, the express mention of the GOCCs exempted from
payment of corporate income tax excludes all others. Not being excepted, petitioner
PAGCOR must be regarded as coming within the purview of the general rule that
GOCCs shall pay corporate income tax, expressed in the maxim: exceptio firmat
regulam in casibus non exceptis.
As for the validity of RR No. 16-2005, the Court holds that the provision subjecting
PAGCOR to 10% VAT is invalid for being contrary to R.A. No. 9337. Nowhere in R.A.
No. 9337 is it provided that petitioner can be subjected to VAT. R.A. No. 9337 is
clear only as to the removal of petitioner's exemption from the payment of
corporate income tax
It is settled rule that in case of discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic law prevails, because the said
rule or regulation cannot go beyond the terms and provisions of the basic law. RR
No. 16-2005, therefore, cannot go beyond the provisions of R.A. No. 9337. Since
PAGCOR is exempt from VAT under R.A. No. 9337, the BIR exceeded its authority in
subjecting PAGCOR to 10% VAT under RR No. 16-2005; hence, the said regulatory
provision is hereby nullified.
Petition is partly granted – not exempt from corporate income tax but exempt from
paying VAT.

2)
Atlas Consolidated Mining & Dev’t Corp. v. CIR
GR No. 159471 Jan 26, 2011
Peralta, J:
Facts:
Petitioner Atlas Corporation (Atlas) is a zero rated VAT person fo being an exporter
of copper concentrates under sec 100 of the NIRC.
On Jan. 24, 1994, it filed its VAT returns for the 4th quarter of 1993 showing a total
input tax of P863,556, 963.74 and an excess VAT credit of P842,336,291.60.
On Jan. 25, 1996, it applied for a tax refund or a tax credit certificate with the CIR.
On the same date, Atlas filed the same claim for refund with the CTA claiming that
they (2) year prescriptive period is about to expire under Sec 230 of NIRC.
The CIR failed to file an answer with the CTA.
So CTA declared CIR in default.
On Aug 24, 1998, the CTA denied petitioner’s claim for refund, for failure to comply
with documentary requirements prescribed under Sec. 16 of RR 5-87 amended by
RR 3-88 dated April 17, 1988.
Atlas filed a motion for reconsideration to reopen the case for it to be able to submit
the required documents, together with proof for non-availment for prior succeeding
quarters of input vat.
CTA granted the motion.
CTA rendered resolution dated June 21, 2000 denying Atlas’ claim for having been
prescribed and for failure to substantiate its claim that it has not applied excess
input tax to any output taxes.
The petitioner appealed to the CA
CA affirmed CTA’s decision in toto.
Issue:
WON, Atlas failed to comply with substantiation requirements?
Held:
Yes, there was failure to comply with substantiation requirements required under
the RR.

The formal offer of evidence of the petitioner failed to include photocopy of its
export documents, as required. There is no way therefore, in determining the kind of
goods and the actual amount of export sales it allegedly made during the quarter
involved.
This finding is very crucial, when we try to relate it with the requirement of the
aforementioned regulations that the input tax being claimed for refund or tax credit
must be shown to be entirely attributable to the zero rated transaction, in this case,
export sales of goods.
Without the export documents, the purchase invoiced receipts submitted by the
petitioner as proof of its input taxes cannot be verified as being directly attributable
to the goods so exported.
It must be remembered that when claiming tax refund/credit, the vat registered tax
payer must be able to establish that it does have refundable or creditable input vat,
and the same has not been applied against its output tax liabilities – information
which are supposed to be reflected in the taxpayer’s vat returns. Thus, an
application for tax refund/credit must be accompanied by copies of the taxpayer’s
vat returns for the taxable quarters concerned.
A claim of return or exemption from tax payments must be clearly shown and be
based on language in the law too plain to be mistaken. Taxation is the rule,
exemption is the exception.
3)
PHIL. BANKING CORP. (GLOBAL) vs. CIR, 577 SCRA 366
FACTS: Petitioner is a domestic corporation duly licensed as a banking institution.
For the taxable years 1996 and 1997, petitioner offered its “Special/Super Savings
Deposit Account” (SSDA) to its depositors. The SSDA is a form of a savings deposit
evidenced by a passbook and earning a higher interest rate than a regular savings
account. Petitioner believes that the SSDA is not subject to Documentary Stamp Tax
(DST) under Section 180 of the 1977 National Internal Revenue Code (NIRC), as
amended. The Commissioner of Internal Revenue (respondent) sent petitioner a
Final Assessment Notice assessing deficiency DST based on the outstanding
balances of its SSDA, including increments, in the total sum of P17,595,488.75 for
1996 and P47,767,756.24 for 1997. These assessments were based on the
outstanding balances of the SSDA appearing in the schedule attached to petitioner’s
audited financial statements for the taxable years 1996 and 1997. Petitioner alleges
that the only difference between the regular savings account and the SSDA is that
the SSDA is for depositors who maintain savings deposits with a substantial average
daily balance, and as an incentive, they are given higher interest rates than regular
savings accounts. These deposits are classified separately in petitioner’s financial
statements in order to maintain a separate record for savings deposits with
substantial balances entitled to higher interest rates. It further alleges that the
SSDA is a necessary offshoot of the deregulated interest rate regime in bank
deposits. Furthermore, it argues that even on the assumption that a passbook
evidencing the SSDA is a certificate of deposit; no DST will be imposed because only
negotiable certificates of deposits are subject to tax under Section 180 of the 1977
NIRC. Respondent explains that under Section 180 of the 1977 NIRC, certificates of

deposits deriving interest are subject to the payment of DST. Petitioner’s passbook
evidencing its SSDA is considered a certificate of deposit, and being very similar to
a time deposit account, it should be subject to the payment of DST. The Court of Tax
Appeals (en banc) rendered its decision by affirming the decision of the second
division ruling in favor of the CIR. The CTA ruled that a deposit account with the
same features as a time deposit, i.e., a fixed term in order to earn a higher interest
rate, is subject to DST imposed in Section 180 of the 1977 NIRC.
ISSUE: WON petitioner’s SSDAs are “certificates of deposits drawing interest” as
used in Section 180 of the 1977 NIRC thus subject to DST.
HELD: Yes. It is clear that the SSDA is a certificate of deposit drawing interest
subject to DST even if it is evidenced by a passbook and non-negotiable in
character. As correctly observed by the CTA, a certificate of deposit is a written
acknowledgment by a bank of the receipt of a sum of money on deposit which the
bank promises to pay to the depositor, to the order of the depositor, or to some
other person or his order, whereby the relation of debtor or creditor between the
bank and the depositor is created. In International Exchange Bank v. Commissioner
of Internal Revenue, the SC held that: A document to be deemed a certificate of
deposit requires no specific form as long as there is some written memorandum that
the bank accepted a deposit of a sum of money from a depositor. What is important
and controlling is the nature or meaning conveyed by the passbook and not the
particular label or nomenclature attached to it, inasmuch as substance, not form, is
paramount. Documentary stamp tax is a tax on documents, instruments, loan
agreements, and papers evidencing the acceptance, assignment, sale or transfer of
an obligation, right or property incident thereto. A DST is actually an excise tax
because it is imposed on the transaction rather than on the document. It is evident
that petitioner is liable to pay its DST, however by virtue of RA 9480 granting tax
amnesty; DST is one of the taxes covered by the Tax Amnesty Program. Considering
also the fact that Metrobank absorbed the petitioner in a consolidation proceeding
and was able to comply with the requirements enumerated in RA 9480, as
implemented by DO 29-07 and RMC 19-2008, petitioner need not pay the said DST.
4)
CIR vs PLDT
FACTS: PLDT is a grantee of a franchise under R.A. 7082 to install, operate and
maintain a telecommunications system throughout the Philippines. It imported for
its
business on different dates (Oct 1992 to May 1994) equipment, machineries and
spare parts. PLDT paid the BIR the amount of P164,510,953.00, this includes
compensation tax; advance sales tax and other internal revenue taxes. For similar
importations made between Mar 1994 to May 1994, PLDT paid P116,041,333.00
VAT.
On March 15, 1994, PLDT addressed a letter to the BIR seeking a confirmatory

ruling on its tax exemption privilege under Section 12 of R.A. 7082. Responding, the
BIR issued on April 19, 1994 Ruling No. UN-140-94, it holds that PLDT, is exempt
from VAT on its importation of equipment, machineries and spare parts . . . needed
in its franchise operations. Armed with the foregoing BIR ruling, PLDT filed on
December 2, 1994 a claim for tax credit/refund of the VAT, compensating taxes,
advance sales taxes and other taxes it had been paying "in connection with its
importation of various equipment, machineries and spare parts needed for its
operations".
With its claim not having been acted upon by the BIR, PLDT filed with the CTA a
petition for review. On February 18, 1998, the CTA rendered a decision granting
PLDT's petition. In time, the BIR Commissioner moved for a reconsideration but the
CTA, denied the motion. BIR Commissioner elevated the matter to the CA, which
dismissed its petition. Hence recourse to SC.
ISSUE: WON PLDT is exempt from paying VAT, compensating taxes, advance
sales taxes and internal revenue taxes on its importations.
RULING: PLDT is partly correct. They are liable to pay VAT, but not liable to pay
compensating taxes and advance sales taxes.
There can be no serious argument that PLDT, vis-à-vis its payment of internal
revenue taxes on its importations in question, is effectively claiming exemption
from
taxes not falling under the category of direct taxes. The claim covers VAT, advance
sales tax and compensating tax.
The NIRC classifies VAT as "an indirect tax . . . the amount of [which] may be shifted
or passed on to the buyer, transferee or lessee of the goods". As aptly pointed out

by Judge Amancio Q. Saga in his dissent in C.T.A. Case No. 5178, the VAT on
importation of goods partakes of an excise tax levied on the privilege of importing
articles. It is not a tax on the franchise of a business enterprise or on its earnings. It
is imposed on all taxpayers who import goods. The VAT on importation replaces the
advance sales tax payable by regular importers who import articles for sale or as
raw materials in the manufacture of finished articles for sale.
Advance sales tax has the attributes of an indirect tax because the tax-paying
importer of goods for sale or of raw materials to be processed into merchandise
can shift the tax or, lay the "economic burden of the tax", on the purchaser, by
subsequently adding the tax to the selling price of the imported article or finished
product.
Compensating tax also partakes of the nature of an excise tax payable by all
persons who import articles, whether in the course of business or not. The rationale
for compensating tax is to place, for tax purposes, persons purchasing from
merchants in the Philippines on a more or less equal basis with those who buy
directly from foreign countries.
It bears to stress that the liability for the payment of the indirect taxes lies only
with
the seller of the goods or services, not in the buyer thereof. Thus, one cannot
invoke
one's exemption privilege to avoid the passing on or the shifting of the VAT to him
by the manufacturers/suppliers of the goods he purchased. The Court has stated
that taxation is the rule, exemption is the exception. Accordingly, statutes granting
tax exemptions must be construed in strictissimi juris against the taxpayer and
liberally in favor of the taxing authority.

To him, therefore, who claims a refund or exemption from tax payments rests the
burden of justifying the exemption by words too plain to be mistaken and too
categorical to be misinterpreted. As may be noted, the clause "in lieu of all taxes"
in
Section 12 of RA 7082 is immediately followed by the limiting or qualifying clause
"on this franchise or earnings thereof", suggesting that the exemption is limited to
taxes imposed directly on PLDT since taxes pertaining to PLDT's franchise or
earnings are its direct liability. Accordingly, indirect taxes, not being taxes on
PLDT's franchise or earnings, are outside the purview of the "in lieu" provision.
Pursuant to EO27341 which took effect on Jan 1988, a multi-stage value-added tax
was put into place to replace the tax on original and subsequent sales tax. It means
that compensating tax and advance sales tax were no longer collectible internal
revenue taxes under the NILRC when the Bureau of Customs made the
assessments in question and collected the corresponding tax. Stated a bit
differently, PLDT was no longer under legal obligation to pay compensating tax and
advance sales tax on its importation from 1992 to 1994.
The CTA had determined that PLDT is entitled to a total refundable amount of
P94,673,422.00 (P87,257,031.00 of compensating tax + P7,416,391.00 =
P94,673,422.00). Accordingly, it behooves the BIR to grant a refund of the advance
sales tax and compensating tax in the total amount of P94,673,422.00, subject to
the condition that PLDT present proof of payment of the corresponding VAT on said
transactions.
WHEREFORE, the petition is partially GRANTED.
5)
MANUEL N. MAMBA, RAYMUND P. GUZMAN and LEONIDES N. FAUSTO, Petitioners,
vs.
EDGAR R. LARA, JENERWIN C. BACUYAG, WILSON O. PUYAWAN, ALDEGUNDO Q.

CAYOSA, JR., NORMAN A. AGATEP, ESTRELLA P. FERNANDEZ, VILMER V. VILORIA,
BAYLON A. CALAGUI, CECILIA MAEVE T. LAYOS, PREFERRED VENTURES CORP., ASSET
BUILDERS CORP., RIZAL COMMERCIAL BANKING CORPORATION, MALAYAN
INSURANCE CO., and LAND BANK OF THE PHILIPPINES, Respondents.
DEL CASTILLO, J.:
FACTS: On November 5, 2001, the Sangguniang Panlalawigan of Cagayan passed
Resolution No. 2001-272 authorizing Governor Edgar R. Lara to engage the services
of and appoint Preferred Ventures Corporation as financial advisor or consultant for
the issuance and flotation of bonds to fund the priority projects of the governor
without cost and commitment.
On November 19, 2001, the Sangguniang Panlalawigan, through Resolution No. 2902001, ratified the Memorandum of Agreement (MOA) entered into by Gov. Lara and
Preferred Ventures Corporation. The MOA provided that the provincial government
of Cagayan shall pay Preferred Ventures Corporation a one-time fee of 3% of the
amount of bonds floated.
On February 15, 2002, the Sangguniang Panlalawigan approved Resolution No.
2002-061-A authorizing Gov. Lara to negotiate, sign and execute contracts or
agreements pertinent to the flotation of the bonds of the provincial government in
an amount not to exceed P500 million for the construction and improvement of
priority projects to be approved by the Sangguniang Panlalawigan.
On May 20, 2002, the majority of the members of the Sangguniang Panlalawigan of
Cagayan approved Ordinance No. 19-2002, authorizing the bond flotation of the
provincial government in an amount not to exceed P500 million to fund the
construction and development of the new Cagayan Town Center. The Resolution
likewise granted authority to Gov. Lara to negotiate, sign and execute contracts and
agreements necessary and related to the bond flotation subject to the approval and
ratification by the Sangguniang Panlalawigan.
On October 20, 2003, the Sangguniang Panlalawigan approved Resolution No. 3502003 ratifying the Cagayan Provincial Bond Agreements entered into by the
provincial government, represented by Gov. Lara, to wit:
a. Trust Indenture with the Rizal Commercial Banking Corporation (RCBC) – Trust and
Investment Division and Malayan Insurance Company, Inc. (MICO).
b. Deed of Assignment by way of security with the RCBC and the Land Bank of the
Philippines (LBP). c. Transfer and Paying Agency Agreement with the RCBC – Trust
and Investment Division.
d. Guarantee Agreement with the RCBC – Trust and Investment Division and MICO.
e. Underwriting Agreement with RCBC Capital Corporation.
On even date, the Sangguniang Panlalawigan also approved Resolution No. 3512003, ratifying the Agreement for the Planning, Design, Construction, and Site
Development of the New Cagayan Town Center entered into by the provincial
government, represented by Gov. Lara and Asset Builders.
Corporation, represented by its President, Mr. Rogelio P. Centeno.
On May 20, 2003, Gov. Lara issued the Notice of Award to Asset Builders
Corporation, giving to the latter the planning, design, construction and site
development of the town center project for a fee of P213,795,732.39.
On December 12, 2003, petitioners Manuel N. Mamba, Raymund P. Guzman and
Leonides N. Fausto filed a Petition for Annulment of Contracts and Injunction with
prayer for a Temporary Restraining Order/Writ of Preliminary Injunction against
Edgar R. Lara, Jenerwin C. Bacuyag, Wilson O. Puyawan, Aldegundo Q. Cayosa, Jr.,
Norman A. Agatep, Estrella P. Fernandez, Vilmer V. Viloria, Baylon A. Calagui, Cecilia

Maeve T. Layos, Preferred Ventures Corporation, Asset Builders Corporation, RCBC,
MICO and LBP.
At the time of the filing of the petition, Manuel N. Mamba was the Representative of
the 3rd Congressional District of the province of Cagayan while Raymund P. Guzman
and Leonides N. Fausto were members of the Sangguniang Panlalawigan of
Cagayan.
Edgar R. Lara was sued in his capacity as governor of Cagayan, while Jenerwin C.
Bacuyag, Wilson O. Puyawan, Aldegundo Q. Cayosa, Jr., Norman A. Agatep, Estrella
P. Fernandez, Vilmer V. Viloria, Baylon A. Calagui and Cecilia Maeve T. Layos were
sued as members of the Sangguniang Panlalawigan of Cagayan. Respondents
Preferred Ventures Corporation, Asset Builders Corporation, RCBC, MICO and LBP
were all impleaded as indispensable or necessary parties.
ISSUE: WON petitioners have legal standing to sue as taxpayers.
HELD: YES.
A taxpayer is allowed to sue where there is a claim that public funds are illegally
disbursed, or that the public money is being deflected to any improper purpose, or
that there is wastage of public funds through the enforcement of an invalid or
unconstitutional law. A person suing as a taxpayer, however, must show that the act
complained of directly involves the illegal disbursement of public funds derived from
taxation. He must also prove that he has sufficient interest in preventing the illegal
expenditure of money raised by taxation and that he will sustain a direct injury
because of the enforcement of the questioned statute or contract. In other words,
for a taxpayer’s suit to prosper, two requisites must be met: (1) public funds derived
from taxation are disbursed by a political subdivision or instrumentality and in doing
so, a law is violated or some irregularity is committed and (2) the petitioner is
directly affected by the alleged act.
In light of the foregoing, it is apparent that contrary to the view of the RTC, a
taxpayer need not be a party to the contract to challenge its validity. As long as
taxes are involved, people have a right to question contracts entered into by the
government.
In this case, although the construction of the town center would be primarily
sourced from the proceeds of the bonds, which respondents insist are not
taxpayer’s money, a government support in the amount of P187 million would still
be spent for paying the interest of the bonds. In fact, a Deed of Assignment was
executed by the governor in favor of respondent RCBC over the Internal Revenue
Allotment (IRA) and other revenues of the provincial government as payment and/or
security for the obligations of the provincial government under the Trust Indenture
Agreement dated September 17, 2003. Records also show that on March 4, 2004,
the governor requested the Sangguniang Panlalawigan to appropriate an amount of
P25 million for the interest of the bond. Clearly, the first requisite has been met. As
to the second requisite, the court, in recent cases, has relaxed the stringent "direct
injury test" bearing in mind that locus standi is a procedural technicality. By
invoking "transcendental importance", "paramount public interest", or "far-reaching
implications", ordinary citizens and taxpayers were allowed to sue even if they
failed to show direct injury. In cases where serious legal issues were raised or where
public expenditures of millions of pesos were involved, the court did not hesitate to
give standing to taxpayers.
We find no reason to deviate from the jurisprudential trend.

To begin with, the amount involved in this case is substantial. Under the various
agreements entered into by the governor, which were ratified by the Sangguniang
Panlalawigan, the provincial government of Cagayan would incur the Total Cost of
P231,908,232.39.
What is more, the provincial government would be shelling out a total amount of
P187 million for the period of seven years by way of subsidy for the interest of the
bonds. Without a doubt, the resolution of the present petition is of paramount
importance to the people of Cagayan who at the end of the day would bear the
brunt of these agreements.
Another point to consider is that local government units now possess more powers,
authority and resources at their disposal, which in the hands of unscrupulous
officials may be abused and misused to the detriment of the public. To protect the
interest of the people and to prevent taxes from being squandered or wasted under
the guise of government projects, a liberal approach must therefore be adopted in
determining locus standi in public suits.
In view of the foregoing, we are convinced that petitioners have sufficient standing
to file the present suit. Accordingly, they should be given the opportunity to present
their case before the RTC.
6)
G.R. No. 171266
April 4, 2007
INTERNATIONAL EXCHANGE BANK, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
CARPIO MORALES, J.:
Facts:
Petitioner, a banking institution duly organized and existing under the laws of the
Philippines, was served a Letter of Authority by the Commissioner of Internal
Revenue (respondent) directing the examination by a Special Team of petitioner’s
books of accounts and other accounting records for the year 1997 and "unverified
prior years." An examination of said documents was in fact conducted.
Petitioner subsequently received a "Notice to Taxpayer"from the Assistant
Commissioner, notifying it of the results of the examination conducted by the
Special Team regarding its tax liabilities, and requesting it to appear for an informal
conference to present its side.
On January 6, 2000, petitioner was personally served with an undated PreAssessment Notice (PAN) assessing it of deficiency on its purchases of securities
from the Bangko Sentral ng Pilipinas or Government Securities Purchased-Reverse
Repurchase Agreement (RRPA) and its FSD for the taxable years 1996 and 1997.
The Notice stated that the Government Securities Purchased-RRP obtained by
petitioner is subject to DST under Section 180 of the NIRC, as amended, since this
falls under the classification of Deposits Substitutes as defined by RR 3-97; and the
Savings Deposit-FSD should be treated as time deposits considering that its features
are very much the same as time deposits (interest rates; terms). In substance,
these are certificate[s] of deposits subject to Documentary Stamp Tax under Section
180 of the NIRC which provides among others that certificate[s] of deposits bearing
interest and others not payable on sight or demand are subject to DST. The PAN
advised petitioner that in case it was not agreeable to the above-quoted findings, it
may "see the Assistant Commissioner-Enforcement Service to clarify issues arising

from the investigation and/or review," and its failure to do so within 15 days from
receipt of the PAN would mean that it was agreeable.
On January 12, 2000, petitioner received a Formal Assessment Notice (FAN) for
deficiency DST on its RRPA and FSD, including surcharges, in the amounts of
P25,180,492.15 for 1996 and P75,383,751.55 for 1997, and an accompanying
demand letter requesting payment thereof within 30 days.
Acting on the FAN, petitioner filed on February 11, 2000 a protest letter alleging that
the assessments should be reconsidered on the grounds that: (1) the assessments
are null and void for having been issued without any authority and due process, and
were made beyond the prescribed period for making assessments; (2) there is no
law imposing DST on RRPA, and assuming that DST was payable, it is the Bangko
Sentral ng Pilipinas which is liable therefor; (3) there is no law imposing DST on its
FSD; and (4) assuming the deficiency assessments for DST were proper, the
imposition of surcharges was patently without legal authority.
Respondent failed to act on the protest, prompting petitioner to file a petition for
review before the Court of Tax Appeals (CTA). The CTA, in its decision ordered the
cancellation and withdrawal of the deficiency assessments pertaining to the reverse
purchase agreements, however UPHELD the deficiency assessments pertaining to
savings deposits-FSD are hereby UPHELD and petitioner is ORDERED to PAY the
respondent. Petitioner moved for reconsideration of the CTA Division decision.
Respondent moved too for a partial review of the decision. Petitioner argued that its
FSD is not subject to DST since it was not one of the documents enumerated either
under the 1977 Tax Code (Tax Code) or the 1997 National Internal Revenue Code
(NIRC). Respondent on the other hand argued that petitioner should be liable not
only for DST on its FSD but also on its RRPA.
For lack of merit, the CTA Division denied petitioner’s motion for reconsideration and
respondent’s motion for partial reconsideration.
Only petitioner appealed to the CTA En Banc before which it proffered, among
others, that its FSD cannot be considered a certificate of deposit subject to DST
under Section 180 of the Tax Code for, unlike a certificate of deposit which is a
negotiable instrument, the passbook it issued for its FSD was not payable to the
order of the depositor or to some other person as the deposit could only be
withdrawn by the depositor or by a duly authorized representative.
The CTA En Banc affirmed the decision of the CTA Division finding petitioner liable
for payment of deficiency DST for its FSD.
Hence, the present petition for review on certiorari, petitioner reiterating the same
grounds advanced before the CTA En Banc.
ISSUE: Whether or not petitioner’s FSD is subject to DST for the years assessed.
RULING: YES
Petitioner posits its FSD is not a certificate of deposit since there is nothing in the
terms and conditions printed on the passbook evidencing it that can be construed to
mean that the bank or banker acknowledges the receipt of a sum of money on
deposit. Petitioner moreover posits that the FSD, unlike a certificate of deposit, is
not negotiable or payable to the order of some other person or his order but is "only
withdrawable by the depositor or his authorized representative."25
Petitioner’s position does not lie.
As correctly found by the CTA En Banc, a passbook representing an interest earning
deposit account issued by a bank qualifies as a certificate of deposit drawing
interest. A document to be deemed a certificate of deposit requires no specific form
as long as there is some written memorandum that the bank accepted a deposit of

a sum of money from a depositor. What is important and controlling is the nature or
meaning conveyed by the passbook and not the particular label or nomenclature
attached to it, inasmuch as substance, not form, is paramount.
Contrary to petitioner’s claim, not all certificates of deposit are negotiable. A
certificate of deposit may or may not be negotiable as gathered from the use of the
conjunction or, instead of and, in its definition. A certificate of deposit may be
payable to the depositor, to the order of the depositor, or to some other person or
his order. In any event, the negotiable character of any and all documents under
Section 180 is immaterial for purposes of imposing DST. Orders for the payment of
sum of money payable at sight or on demand are of course explicitly exempted from
the payment of DST. Thus, a regular savings account with a passbook which is
withdrawable at any time is not subject to DST, unlike a time deposit which is
payable on a fixed maturity date.
The FSD, like a time deposit, provides for a higher interest rate when the deposit is
not withdrawn within the required fixed period; otherwise, it earns interest
pertaining to a regular savings deposit. Having a fixed term and the reduction of
interest rates in case of pre-termination are essential features of a time deposit. In
order for a depositor to earn the agreed higher interest rate in a SA-FSD, the
amount of deposit must be maintained for a fixed period. Such being the case, We
agree with the finding that the SA-FSD is a deposit account with a fixed term.
Withdrawal before the expiration of said fixed term results in the reduction of the
interest rate. Having a fixed term and reduction of interest rate in case of pretermination are essentially the features of a time deposit. Hence, this Court concurs
with the conclusion reached in the assailed Decision that petitioner’s SA-FSD and
time deposit are substantially the same. . . . (Italics in the original; underscoring
supplied)
It bears emphasis that DST is levied on the exercise by persons of certain privileges
conferred by law for the creation, revision, or termination of specific legal
relationships through the execution of specific instruments. It is an excise upon the
privilege, opportunity or facility offered at exchanges for the transaction of the
business.
While tax avoidance schemes and arrangements are not prohibited, tax laws cannot
be circumvented in order to evade payment of just taxes. To claim that time
deposits evidenced by passbooks should not be subject to DST is a clear evasion of
the rule on equality and uniformity in taxation that requires the imposition of DST
on documents evidencing transactions of the same kind, in this particular case, on
all certificates of deposits drawing interest.
WHEREFORE, the petition is DENIED.
SO ORDERED.
7)
MICROSOFT PHILIPPINES, INC., petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.
[G.R. No. 180173. April 6, 2011.]
CARPIO
FACTS:
• Microsoft Philippines, Inc., petitioner, is a value-added tax (VAT) taxpayer. Its sales
from Microsoft Operations Pte Ltd. and Microsoft Licensing, Inc. qualify as zero-rated

sales.
• In 2001, petitioner claims an input tax amounting to Php11,449,814.99 on its
domestic purchases of taxable goods and services.
• An administrative claim for tax credit in VAT input taxes was filed in 2002.
• There was no response from the Bureau of Internal Revenue (BIR), thus a petition
for review was filed with the Court of Tax Appeals (CTA). Microsoft claimed to be
entitled to a refund of unutilized input VAT attributable to its zero-rated sales and
prayed that judgment be rendered directing the claim for tax credit or refund of VAT
input taxes for taxable year 2001.
• Respondent Commissioner of Internal Revenue (CIR) filed for the petition’s
dismissal.
• The CTA denied petitioner’s claim, saying that it failed to comply with the
invoicing requirements of Sections 113 and 237 of the NIRC as well as Section
4.108-1 of Revenue Regulations No. 7-95 (RR 7-95). Also, its official receipts do not
have “zero-rated” print on its face, thus inadmissible as valid evidence to prove the
zero-rated sales for VAT purposes.
• The motion for reconsideration and petition for review were also denied.
• Hence, this petition.
ISSUE:
Whether or not petitioner can claim a tax credit or refund even if there is no “zerorated” printed on its receipts?
HELD:
No, it cannot claim a tax refund.
The taxpayer claiming the tax credit or refund has the burden of proving that he is
entitled to the refund or credit, in this case VAT input tax, by submitting evidence
that he has complied with the requirements laid down in the tax code and the BIR's
revenue regulations under which such privilege of credit or refund is accorded.
The provisions of Sections 113(A) and 237 of the National Internal Revenue Code
(NIRC) lay down the invoicing requirements for VAT-registered persons. Also, Section
4.108-1 of Revenue Regulation 7-95 enumerates what must appear on the official
receipt’s face, one of which is the word “zero-rated”.
The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC
and revenue regulations are clear. A VAT-registered taxpayer is required to comply
with all the VAT invoicing requirements to be able to file a claim for input taxes on

domestic purchases for goods or services attributable to zero-rated sales. A “VAT
invoice” is an invoice that meets the requirements of Section 4.108-1 of RR 7-95.
The printing of the word “zero-rated” is required to be placed on VAT invoices or
receipts covering zero-rated sales in order to be entitled to claim for tax credit or
refund.
Microsoft failed to comply with the invoicing requirements of the NIRC and its
implementing revenue regulation to claim a tax credit or refund of VAT input tax for
taxable year 2001.
8)
CIR v. FEBTC (BPI)
GR No. 173854 March 15, 2010
Del Castillo, J:
Facts:
On April 10, 1995, FEBTC filed with the BIR (2) Corporate Annual Income Tax Returns
for its Corporate Banking Unit (CBU) and another for its Foreign Currency Deposit
Unit (FCDU) for the taxable year Dec. 31, 1994.
The return consolidated the corporation’s overall income tax liability for 1994. It
reflected a refundable amount of income tax of P12M. This amount was carried over
to 1995.
On April 25, 1996, FEBTC filed its annual income tax return which showed a total of
overpaid income tax amount of P17M.
FEBTC sought to refund P13M and applied with the BIR.
Due to the failure of the CIR to act on the application of tax refund, FEBTC brought
the matter to the CTA via petition for review.
Trial ensued. FEBTC submitted its ITR for 1994 and 1995 for both CBU and FCDU,
Certificates of Creditable tax withheld, monthly remittance returns of income taxes
issued by various withholding agents.
BIR did not present any evidence.
On Oct. 4, 1999, CTA rendered a decision denying FEBTC’s claim for refund on the
ground that it failed to show that the income derived from rentals and sale of
property form with the taxes were withheld were reflected in its 1994 annual ITR.
On Oct. 20, 1999, FEBTC filed a motion for new trial based on excusable negligence
and to present additional evidence to support its claim.
It was denied by the CTA.
The matter was elevated to the CA. CA found that FEBTC has duly proven that the

income derived form rentals and sale of real property upon which taxes were
withheld were included in the return as part of Gross income.
CA therefore, reversed the CTA’s decision.

Issue:
WON, respondent FEBTC has proven its entitlement to the refund?
Held:
No.
CTA’s decision was reinstated.
A perusal of the respondent’s annual income tax return shows that the foss income
was derived solely from sale of services. In fact, the phrase “not applicable” was
printed on the schedule pertaining to rent, sale of real property and trust income.
Thus, based on the entries in the return, the income derived from rentals and sales
of real property upon which the creditable income taxes are withheld were not
included in respondent’s gross income as reflected in its return.
Since no income was reported, it follows that no tax was withheld.
FEBTC’s contention that rentals were part of other income was not supported by
evidence.
CA also erred that the certificates of creditable tax withheld at source. It
immediately granted the refund without first verifying whether the fact of
withholding was established by the certificates as required by the RR 6-85
The burden is on the taxpayer to prove its entitlement to the refund.
The taxpayer must still present substantial evidence to prove his claim for refund.
9)
CIR vs. MIRANT (PHILS.) OPERATING CORP., 652 SCRA 80
FACTS: Petitioner is empowered to perform the lawful duties of his office including,
among others, the duty to act on and approve claims for refund or tax credit as
provided by law while respondent Mirant is primarily engaged in the design,
construction, assembly, commissioning, operation, maintenance, rehabilitation and
management of gas turbine and other power generating plants and related facilities
using coal, distillate, and other fuel provided by and under contract with the
Government of the Republic of the Philippines or any subdivision, instrumentality or
agency thereof, or any government-owned or controlled corporations or other
entities engaged in the development, supply or distribution of energy. On October
15, 1999, Mirant filed with the Bureau of Internal Revenue (BIR) its income tax
return for the fiscal year ending June 30, 1999, declaring a net loss of

P235,291,064.00 and unutilized tax credits of ₱32,263,388.00. On April 17, 2000,
Mirant filed with the BIR an amended income tax return (ITR) for the fiscal year
ending June 30, 1999, reporting an increased net loss amount of ₱379,324,340.00
but reporting the same unutilized tax credits of ₱32,263,388.00, which it opted to
carry over as a tax credit to the succeeding taxable year. This was also the scheme
on the following year. On September 20, 2001, Mirant wrote the BIR a letter
claiming a refund of ₱87,345,116.00 representing overpaid income tax for the FY
ending June 30, 1999, the interim period covering July 1, 1999 to December 31,
1999, and CY ending December 31, 2000. As the prescriptive period for judicial
claims was about to expire, Mirant elevated this case to CTA by way of Petition for
Review. The CTA First Division rendered judgment partially granting Mirant’s claim
for refund in the reduced amount of ₱38,620,427.00, representing its duly
substantiated unutilized creditable withholding taxes for taxable year 2000 out of
the total claim of ₱38,718,323.00 therefore. Additionally, Mirant’s claim for the
refund of its unutilized tax credits for the taxable year 1999 in the total amount of
₱48,626,793.00, was denied as it exercised the carry-over option with regard to the
said unutilized tax credits, which is irrevocable pursuant to the provisions of Section
76 of the 1997 NIRC. On motion for reconsideration, the CTA en banc denied due
course and dismissed the cases.
ISSUE: WON respondent is entitled for a refund or tax credit in the amount of
P38,620,427.00.
HELD: Yes, Mirant is entitled, as it opted, to a refund of its excess creditable
withholding tax for the taxable year 2000 in the amount of ₱38,620,427.00. The last
sentence of Section 76 is clear in its mandate. Once a corporation exercises the
option to carry-over and apply the excess quarterly income tax against the tax due
for the taxable quarters of the succeeding taxable years, such option is irrevocable
for that taxable period. Having chosen to carry-over the excess quarterly income
tax, the corporation cannot thereafter choose to apply for a cash refund or for the
issuance of a tax credit certificate for the amount representing such overpayment.
In this case, Mirant clearly ticked the box signifying that the overpayment was “To
be carried over as tax credit next year/quarter.” Item 31 of the Annual Income Tax
Return Form (BIR Form No. 1702) also clearly indicated “If overpayment, mark one
box only. (Once the choice is made, the same is irrevocable).” Applying the
irrevocability rule in Section 76, Mirant having opted to carry over its tax
overpayment for the fiscal year ending July 30, 1999 and for the interim period
ending December 31, 1999, it is now barred from applying for the refund of the said
amount or for the issuance of a tax credit certificate therefore, and for the unutilized
tax credits carried over from the fiscal year ended June 30, 1998. The Court agrees
with the conclusion of the CTA that Mirant complied with all the requirements for the
refund of its unutilized creditable withholding taxes for taxable year 2000. First,
Mirant clearly complied with the two-year period. Second, Mirant was also able to
establish that the income, upon which the creditable withholding taxes were paid,
was declared as part of its gross income in its ITR. Finally, Mirant was also able to
establish the fact of withholding of the creditable withholding tax.
10)
FIRST DIVISION [G.R. No. 181298. January 10, 2011.]
BELLE CORP vs. CIR

Doctrine: Sec 69 of the old NIRC allows unutilized tax credits to be refunded as long
as the claim is filed within the prescriptive period. This, however, no longer holds
true under Sec 76 of the 1997 NIRC as the option to carry-over excess income tax
payments to the succeeding taxable year is now irrevocable.
Belle Corporation is a domestic corporation engaged in the real estate and property
business. On May 30, 1997, Belle Corp filed with the BIR its ITR for the first quarter
of 1997, showing an income tax due of P236,679,254.00, which it paid through PCI
Bank, an Authorized Agent Bank of the BIR. On August 14, 1997, it filed with the BIR
its second quarter ITR, declaring an overpayment of income taxes in the amount of
P66,634,290.00. In view of the overpayment, no taxes were paid for the second and
third quarters of 1997. Petitioner's ITR for the taxable year ending December 31,
1997 thereby reflected an overpayment of income taxes in the amount of
P132,043,528.00. Instead of claiming the amount as a tax refund, petitioner
decided
to apply it as a tax credit to the succeeding taxable year by marking the tax credit
option box in its 1997 ITR. For the taxable year 1998, Belle Corp.'s amended ITR
showed an overpayment of P106,447,318.00.
On April 12, 2000, petitioner filed with the BIR an administrative claim for refund of
its unutilized excess income tax payments for the taxable year 1997 in the amount
of
P106,447,318.00. Notwithstanding the filing of the administrative claim for refund,
Belle Corp. carried over the amount of P106,447,318.00 to the taxable year 1999
and applied a portion thereof to its 1999 Minimum Corporate Income Tax (MCIT)
liability, as evidenced by its 1999 ITR.
Due to the inaction of the respondent CIR, it appealed its claim for refund of
unutilized excess income tax payments for the taxable year 1997 in the amount of

P106,447,318.00 with the CTA via a Petition for Review, which denied the
company's petition for refund. The CTA racioned that it is an elementary rule in
taxation that an automatic carry over of an excess income tax payment should only
be made for the succeeding year. To allow the application of excess taxes paid for
two successive years would run counter to the specific provision of the law abovementioned. Belle Corp. sought reconsideration but the same was denied prompting
it to elevate the matter to the CA.
The CA, applying Philippine Bank of Communications v. Commissioner of Internal
Revenue, denied the petition. The CA explained that the overpayment for taxable
year 1997 can no longer be carried over to taxable year 1999 because excess
income payments can only be credited against the income tax liabilities of the
succeeding taxable year, in this case up to 1998 only and not beyond. Neither can
the overpayment be refunded as the remedies of automatic tax crediting and tax
refund are alternative remedies. Belle moved for reconsideration, the CA, however,
denied the same.
Issue: WON Belle is entitled to a refund of its excess income tax payments for the
taxable year 1997 in the amount of P106,447,318.00.
HELD: No.
Under Sec 69 of the old NIRC, in case of overpayment of income taxes, a
corporation may either file a claim for refund or carry-over the excess payments to
the succeeding taxable year. Availment of one remedy, however, precludes the
other. Although these remedies are mutually exclusive, we have in several cases
allowed corporations, which have previously availed of the tax credit option, to file a
claim for refund of their unutilized excess income tax payments.Thus, under Sec 69
of the old NIRC, unutilized tax credits may be refunded as long as the claim is filed
within the two-year prescriptive period.
Sec. 69 is now repealed and the applicable law is Sec.76 of the 1997 NIRC.
Section 76. Final Adjustment Return. — Every corporation liable to tax

under Section 24 shall file a final adjustment return covering the total net income
for
the preceding calendar or fiscal year. If the sum of the quarterly tax payments
made
during the said taxable year is not equal to the total tax due on the entire taxable
net
income of that year the corporation shall either:
(a) Pay the excess tax still due; or
(b) Be refunded the excess amount paid, as the case may be.
In case the corporation is entitled to a refund of the excess estimated quarterly
income taxes paid, the refundable amount shown on its final adjustment return
may
be credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years. Once the option to carry over and apply
the excess quarterly income tax against income tax due for the taxable quarters of
the succeeding taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for tax refund or issuance of a
tax credit certificate shall be allowed therefor. (Emphasis supplied)
Under the new law, in case of overpayment of income taxes, the remedies are still
the same; and the availment of one remedy still precludes the other. But unlike
Section 69 of the old NIRC, the carry-over of excess income tax payments is no
longer limited to the succeeding taxable year. Unutilized excess income tax
payments may now be carried over to the succeeding taxable years until fully
utilized. In addition, the option to carry-over excess income tax payments is now
irrevocable. Hence, unutilized excess income tax payments may no longer be
refunded.
In the instant case, both the CTA and the CA applied Section 69 of the old NIRC in

denying the claim for refund. We find, however, that the applicable provision should
be Section 76 of the 1997 NIRC because at the time petitioner filed its 1997 final
ITR, the old NIRC was no longer in force. Since Belle Corp. already carried over its
1997 excess income tax payments to the succeeding taxable year 1998, it may no
longer file a claim for refund of unutilized tax credits for taxable year 1997.
To repeat, under the new law, once the option to carry-over excess income tax
payments to the succeeding years has been made, it becomes irrevocable. Thus,
applications for refund of the unutilized excess income tax payments may no longer
be allowed.
WHEREFORE, the petition is hereby DENIED.
11)
EXXONMOBIL PETROLEUM AND CHEMICAL HOLDINGS, INC. - PHILIPPINE BRANCH,
Petitioner, vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
MENDOZA, J.:
FACTS: Petitioner Exxon is a foreign corporation duly organized and existing under
the laws of the State of Delaware, United States of America. It is authorized to do
business in the Philippines through its Philippine Branch, with principal office
address at the 17/F The Orient Square, Emerald Avenue, Ortigas Center, Pasig City.
Exxon is engaged in the business of selling petroleum products to domestic and
international carriers. In pursuit of its business, Exxon purchased from Caltex
Philippines, Inc. (Caltex) and Petron Corporation (Petron) Jet A-1 fuel and other
petroleum products, the excise taxes on which were paid for and remitted by both
Caltex and Petron. Said taxes, however, were passed on to Exxon which ultimately
shouldered the excise taxes on the fuel and petroleum products.
From November 2001 to June 2002, Exxon sold a total of 28,635,841 liters of Jet A-1
fuel to international carriers, free of excise taxes amounting to Php105,093,536.47.
On various dates, it filed administrative claims for refund with the Bureau of Internal
Revenue (BIR) amounting to Php105,093,536.47.
On October 30, 2003, Exxon filed a petition for review with the CTA claiming a
refund or tax credit in the amount of Php105,093,536.47, representing the amount
of excise taxes paid on Jet A-1 fuel and other petroleum products it sold to
international carriers from November 2001 to June 2002.
ISSUE: WON Exxon, as the distributor and vendor of petroleum products to
international carriers registered in foreign countries which have existing bilateral
agreements with the Philippines, is the proper party to claim a tax refund for the
excise taxes paid by the manufacturers, Caltex and Petron, and passed on to it as
part of the purchase price.
HELD: NO.
The excise tax, when passed on to the purchaser, becomes part of the purchase
price.
Excise taxes are imposed under Title VI of the NIRC. They apply to specific goods

manufactured or produced in the Philippines for domestic sale or consumption or for
any other disposition, and to those that are imported. In effect, these taxes are
imposed when two conditions concur: first, that the articles subject to tax belong to
any of the categories of goods enumerated in Title VI of the NIRC; and second, that
said articles are for domestic sale or consumption, excluding those that are actually
exported.
There are, however, certain exemptions to the coverage of excise taxes, such as
petroleum products sold to international carriers and exempt entities or agencies.
Under Section 135, petroleum products sold to international carriers of foreign
registry on their use or consumption outside the Philippines are exempt from excise
tax, provided that the petroleum products sold to such international carriers shall be
stored in a bonded storage tank and may be disposed of only in accordance with the
rules and regulations to be prescribed by the Secretary of Finance, upon
recommendation of the Commissioner.
The confusion here stems from the fact that excise taxes are of the nature of
indirect taxes, the liability for payment of which may fall on a person other than he
who actually bears the burden of the tax.
As early as the 1960’s, this Court has ruled that the proper party to question, or to
seek a refund of, an indirect tax, is the statutory taxpayer, or the person on whom
the tax is imposed by law and who paid the same, even if he shifts the burden
thereof to another.
12)
G.R. No. 169103
March 16, 2011
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
MANILA BANKERS' LIFE INSURANCE CORPORATION, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
FACTS:
Respondent Manila Bankers’ Life Insurance Corporation is a duly organized domestic
corporation primarily engaged in the life insurance business. On May 28, 1999,
petitioner Commissioner of Internal Revenue issued Letter of Authority authorizing a
special team of Revenue Officers to examine the books of accounts and other
accounting records of respondent for taxable year "1997 & unverified prior years."
On December 14, 1999, based on the findings of the Revenue Officers, the
petitioner issued a Preliminary Assessment Notice against the respondent for its
deficiency internal revenue taxes for the year 1997. The respondent agreed to all
the assessments issued against it except to the amount of P2,351,680.90
representing deficiency documentary stamp taxes on its policy premiums and
penalties. Thus, on January 4, 2000, the petitioner issued against the respondent a
Formal Letter of Demand with the corresponding Assessment Notices attached, one
of which was Assessment Notice No. ST-DST2-97-0054-2000 pertaining to the
documentary stamp taxes due on respondent’s policy premiums composing of
respondent’s "Money Plus Plan" and group insurance policies.
On February 3, 2000, the respondent filed its Letter of Protest with the Bureau of
Internal Revenue (BIR) contesting the assessment for deficiency documentary
stamp tax on its insurance policy premiums. Despite submission of documents on
April 3, 2000, as required by the BIR’s letter, the respondent’s Protest was not acted
upon by the BIR within the 180-day period given to it by Section 228 of the 1997

National Internal Revenue Code (NIRC) within which to rule on the protest. Hence,
on October 26, 2000, the respondent filed a Petition for Review with the CTA for the
cancellation of Assessment Notice No. ST-DST2-97-0054-2000. The respondent
invoked the CTA ruling in the similar case of Lincoln Philippine Life Insurance
Company, Inc. (now Jardine-CMA Life Insurance Company, Inc.) v. Commissioner of
Internal Revenue, wherein the CTA held that the tax base to be used in computing
the documentary stamp tax is the value at the time the instrument is issued
because the documentary stamp tax is levied and paid only once, which is at the
time the taxable document is issued.
On April 4, 2002, the CTA granted the respondents’ Petition ordering the
Commissioner of Internal Revenue to CANCEL and WITHDRAW Assessment Notice
No. ST-DST2-97-0054-2000.
Aggrieved by the decision, the petitioner went to the Court of Appeals on a Petition
for Review.
On April 29, 2005, the Court of Appeals sustained the cancellation of Assessment
Notice No. ST-DST2-97-0054-2000.
The petitioner asked for reconsideration of the above Decision and cited this Court’s
March 19, 2002 Decision in Commissioner of Internal Revenue v. Lincoln Philippine
Life Insurance Company, Inc., the very same case the respondent invoked before
the CTA. The petitioner argued that in Lincoln, this Court reversed both the CTA and
the Court of Appeals and sustained the validity of the deficiency documentary
stamp tax imposed on the increase in the sum insured even though no new policy
was issued because the increase, by reason of the "Automatic Increase Clause," was
already definite at the time the policy was issued.
On July 27, 2005, the Court of Appeals sustained its ruling, and stated that the
Lincoln Case was not applicable because the increase in the sum assured in
Lincoln’s insurance policy was definite and determinable at the time such policy was
issued as the automatic increase clause, which allowed for the increase, formed an
integral part of the policy; whereas in the respondent’s case, "the tax base of the
disputed deficiency assessment was not [a] definite or determinable increase in the
sum assured."
The petitioner is now before us praying for the nullification of the Court of Appeals’
April 29, 2005 Decision and July 27, 2005 Resolution and to have the assessment for
deficiency documentary stamp tax on respondent’s policy premiums, plus 25%
surcharge for late payment and 20% annual interest, sustained.
ISSUES: Whether or not the imposition of documentary stamp tax on increases in
the coverage or sum assured by existing life insurance policies, even without the
issuance of new policies is valid.
RULING:
Documentary stamp tax is a tax on documents, instruments, loan agreements, and
papers evidencing the acceptance, assignment, sale or transfer of an obligation,
right or property incident thereto. It is in the nature of an excise tax because it is
imposed upon the privilege, opportunity or facility offered at exchanges for the
transaction of the business. It is an excise upon the facilities used in the transaction
of the business distinct and separate from the business itself.
To elucidate, documentary stamp tax is levied on the exercise of certain privileges
granted by law for the creation, revision, or termination of specific legal
relationships through the execution of specific instruments. Examples of these
privileges, the exercise of which are subject to documentary stamp tax, are leases
of lands, mortgages, pledges, trusts and conveyances of real property. Documentary

stamp tax is thus imposed on the exercise of these privileges through the execution
of specific instruments, independently of the legal status of the transactions giving
rise thereto. The documentary stamp tax must be paid upon the issuance of these
instruments, without regard to whether the contracts which gave rise to them are
rescissible, void, voidable, or unenforceable.
Accordingly, the documentary stamp tax on insurance policies, though imposed on
the document itself, is actually levied on the privilege to conduct insurance
business. Under Section 173, the documentary stamp tax becomes due and payable
at the time the insurance policy is issued, with the tax based on the amount insured
by the policy as provided for in Section 183.
Documentary Stamp Tax
on the "Money Plus Plan"
The petitioner would have us reverse both the CTA and the Court of Appeals based
on our decision in Commissioner of Internal Revenue v. Lincoln Philippine Life
Insurance Company, Inc. This Court ruled that the increase in the sum assured
brought about by the "automatic increase" clause incorporated in Lincoln’s Junior
Estate Builder Policy was still subject to documentary stamp tax, notwithstanding
that no new policy was issued, because the date of the effectivity of the increase, as
well as its amount, were already definite and determinable at the time the policy
was issued. As such, the tax base under Section 183, which is "the amount fixed in
the policy," is "the figure written on its face and whatever increases will take effect
in the future by reason of the ‘automatic increase clause.’" This Court added that
the automatic increase clause was "in the nature of a conditional obligation under
Article 1181, by which the increase of the insurance coverage shall depend upon
the happening of the event which constitutes the obligation."
Since the Lincoln case, wherein the then CIR’s arguments for the BIR are very
similar to the petitioner’s arguments herein, was decided in favor of the BIR, the
petitioner is now relying on our ruling therein to support his position in this case.
Although the two cases are similar in many ways, they must be distinguished by the
nature of the respective "clauses" in the life insurance policies involved, where we
note a major difference. In Lincoln, the relevant clause is the "Automatic Increase
Clause" which provided for the automatic increase in the amount of life insurance
coverage upon the attainment of a certain age by the insured, without any need for
another contract. In the case at bar, a simple reading of respondent’s guaranteed
continuity clause will show that it is significantly different from the "automatic
increase clause" in Lincoln. The only things guaranteed in the respondent’s
continuity clause were: the continuity of the policy until the stated expiry date as
long as the premiums were paid within the allowed time; the non-change in
premiums for the duration of the 20-year policy term; and the option to continue
such policy after the 20-year period, subject to certain requirements. In fact, even
the continuity of the policy after its term was not guaranteed as the decision to
renew it belonged to the insured, subject to certain conditions. Any increase in the
sum assured, as a result of the clause, had to survive a new agreement between the
respondent and the insured. The increase in the life insurance coverage was only
corollary to the new premium rate imposed based upon the insured’s age at the
time the continuity clause was availed of. It was not automatic, was never
guaranteed, and was certainly neither definite nor determinable at the time the
policy was issued.
Therefore, the increases in the sum assured brought about by the guaranteed
continuity clause cannot be subject to documentary stamp tax under Section 183 as

insurance made upon the lives of the insured.
However, it is clear from the text of the guaranteed continuity clause that what the
respondent was actually offering in its Money Plus Plan was the option to renew the
policy, after the expiration of its original term. Consequently, the acceptance of this
offer would give rise to the renewal of the original policy.
To argue that there was no new legal relationship created by the availment of the
guaranteed continuity clause would mean that any option to renew, integrated in
the original agreement or contract, would not in reality be a renewal but only a
discharge of a pre-existing obligation. The truth of the matter is that the guaranteed
continuity clause only gave the insured the right to renew his life insurance policy
which had a fixed term of twenty years. And although the policy would still continue
with essentially the same terms and conditions, the fact is, its maturity date,
coverage, and premium rate would have changed. We cannot agree with the CTA in
its holding that "the renewal, is in effect treated as an increase in the sum assured
since no new insurance policy was issued." The renewal was not meant to restore
the original terms of an old agreement, but instead it was meant to extend the life
of an existing agreement, with some of the contract’s terms modified. This renewal
was still subject to the acceptance and to the conditions of both the insured and the
respondent. This is entirely different from a simple mutual agreement between the
insurer and the insured, to increase the coverage of an existing and effective life
insurance policy.
It is clear that the availment of the option in the guaranteed continuity clause will
effectively renew the Money Plus Plan policy, which is indisputably subject to the
imposition of documentary stamp tax under Section 183 as an insurance renewed
upon the life of the insured.
Documentary Stamp Tax
on Group Life Insurance
The petitioner is also asking this Court to sustain his deficiency documentary stamp
tax assessment on the additional premiums earned by the respondent in its group
life insurance policies.
In its original and most common form, group insurance provides life or health
insurance coverage for the employees of one employer.
The coverage terms for group insurance are usually stated in a master agreement
or policy that is issued by the insurer to a representative of the group or to an
administrator of the insurance program, such as an employer. The employer acts as
a functionary in the collection and payment of premiums and in performing related
duties. Likewise falling within the ambit of administration of a group policy is the
disbursement of insurance payments by the employer to the employees. Most
policies, such as the one in this case, require an employee to pay a portion of the
premium, which the employer deducts from wages while the remainder is paid by
the employer. This is known as a contributory plan as compared to a noncontributory plan where the premiums are solely paid by the employer.
Although the employer may be the titular or named insured, the insurance is
actually related to the life and health of the employee. Indeed, the employee is in
the position of a real party to the master policy, and even in a non-contributory
plan, the payment by the employer of the entire premium is a part of the total
compensation paid for the services of the employee. Put differently, the labor of the
employees is the true source of the benefits, which are a form of additional
compensation to them. (Emphasis ours.)
When a group insurance plan is taken out, a group master policy is issued with the

coverage and premium rate based on the number of the members covered at that
time. In the case of a company group insurance plan, the premiums paid on the
issuance of the master policy cover only those employees enrolled at the time such
master policy was issued. When the employer hires additional employees during the
life of the policy, the additional employees may be covered by the same group
insurance already taken out without any need for the issuance of a new policy.
The respondent claims that since the additional premiums represented the
additional members of the same existing group insurance policy, then under our tax
laws, no additional documentary stamp tax should be imposed since the
appropriate documentary stamp tax had already been paid upon the issuance of the
master policy. The respondent asserts that since the documentary stamp tax, by its
nature, is paid at the time of the issuance of the policy, "then there can be no other
imposition on the same, regardless of any change in the number of employees
covered by the existing group insurance."
To resolve this issue, it would be instructive to take another look at Section 183: On
all policies of insurance or other instruments by whatever name the same may be
called, whereby any insurance shall be made or renewed upon any life or lives.
Whenever a master policy admits of another member, another life is insured and
covered. This means that the respondent, by approving the addition of another
member to its existing master policy, is once more exercising its privilege to
conduct the business of insurance, because it is yet again insuring a life. It does not
matter that it did not issue another policy to effect this change, the fact remains
that insurance on another life is made and the relationship of insurer and insured is
created between the respondent and the additional member of that master policy.
In the respondent’s case, its group insurance plan is embodied in a contract which
includes not only the master policy, but all documents subsequently attached to the
master policy. Among these documents are the Enrollment Cards accomplished by
the employees when they applied for membership in the group insurance plan. The
Enrollment Card of a new employee, once registered in the Schedule of Benefits and
attached to the master policy, becomes evidence of such employee’s membership
in the group insurance plan, and his right to receive the benefits therein. Every time
the respondent registers and attaches an Enrollment Card to an existing master
policy, it exercises its privilege to conduct its business of insurance and this is
patently subject to documentary stamp tax as insurance made upon a life under
Section 183.
This Court would like to make it clear that the assessment for deficiency
documentary stamp tax is being upheld not because the additional premium
payments or an agreement to change the sum assured during the effectivity of an
insurance plan are subject to documentary stamp tax, but because documentary
stamp tax is levied on every document which establishes that insurance was made
or renewed upon a life.
WHEREFORE, the petition is GRANTED. The April 29, 2005 Decision and the July 27,
2005 Resolution of the Court of Appeals in CA-G.R. SP No. 70600 are hereby SET
ASIDE. Respondent Manila Bankers’ Life Insurance Corp. is hereby ordered to pay
petitioner Commissioner of Internal Revenue the deficiency documentary stamp tax
in the amount of P1,646,449.26, plus the delinquency penalties of 25% surcharge
on the amount due and 20% annual interest from January 5, 2000 until fully paid.
SO ORDERED.
*In sum: As regards the “Money Plus Plan,” when the insured agrees to avail the
option to renew the policy after the 20 year life of the policy, then it is an altogether

different transaction which would require the payment of DST. As well as in group
insurance policies, when another employee is added to the group policy, an
insurance on a life distinct from those already insured is transacted thus would
properly be the subject of a DST. Yun lang un. Haha! :D Haba no?
13)
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
FILINVEST DEVELOPMENT CORPORATION, Respondent.
G.R. No. 163653
July 19, 2011
Ponente: PEREZ, J.:
Facts:
*The owner of 80% of the outstanding shares of respondent Filinvest Alabang, Inc.
(FAI), respondent Filinvest Development Corporation (FDC) is a holding company
which also owned 67.42% of the outstanding shares of Filinvest Land, Inc. (FLI). On
29 November 1996, FDC and FAI entered into a Deed of Exchange with FLI whereby
the former both transferred in favor of the latter parcels of land appraised at
P4,306,777,000.00. In exchange for said parcels which were intended to facilitate
development of medium-rise residential and commercial buildings, 463,094,301
shares of stock of FLI were issued to FDC and FAI.
*On various dates during the years 1996 and 1997, in the meantime, FDC also
extended advances in favor of its affiliates, namely, FAI, FLI, Davao Sugar Central
Corporation (DSCC) and Filinvest Capital, Inc. (FCI).8 Duly evidenced by instructional
letters as well as cash and journal vouchers, said cash advances amounted
toP2,557,213,942.60 in 19969 and P3,360,889,677.48 in 1997.
*On 3 January 2000, FDC received from the BIR a Formal Notice of Demand to pay
deficiency income and documentary stamp taxes, plus interests and compromise
penalties.
Issue: WON THE ADVANCES EXTENDED BY RESPONDENT TO ITS AFFILIATES ARE NOT
SUBJECT TO INCOME TAX.
Ruling:
Yes, Our circumspect perusal of the record yielded no evidence of actual or possible
showing that the advances FDC extended to its affiliates had resulted to the
interests subsequently assessed by the CIR. For all its harping upon the supposed
fact that FDC had resorted to borrowings from commercial banks, the CIR had
adduced no concrete proof that said funds were, indeed, the source of the advances
the former provided its affiliates. While admitting that FDC obtained interest-bearing
loans from commercial banks,45 Susan Macabelda - FDC's Funds Management
Department Manager who was the sole witness presented before the CTA - clarified
that the subject advances were sourced from the corporation's rights offering in
1995 as well as the sale of its investment in Bonifacio Land in 1997.
Even if we were, therefore, to accord precipitate credulity to the CIR's bare assertion
that FDC had deducted substantial interest expense from its gross income, there
would still be no factual basis for the imputation of theoretical interests on the
subject advances and assess deficiency income taxes thereon. More so, when it is
borne in mind that, pursuant to Article 1956 of the Civil Code of the Philippines, no
interest shall be due unless it has been expressly stipulated in writing. Considering
that taxes, being burdens, are not to be presumed beyond what the applicable
statute expressly and clearly declares,48 the rule is likewise settled that tax
statutes must be construed strictly against the government and liberally in favor of

the taxpayer.
14)
Diaz v. Sec. of Finance
GR No. 193007 July 19, 2011
Abad; J:
Facts:
Petitioners Renato Diaz and Aurora Timbol filed a petition for declaratory relief
assailing the validity of the impending imposition of the VAT on tollway operators.
Vat would result to increased toll fees.
BIR attempted to impose vat on toll fees during the time of Pres. GMA but it was
deferred.
Upon the assumption of Pres. Noynoy Aquino, BIR revived the idea of the vat on toll
and it will be imposed beginning Aug 16, 2010.
Petitioners argue that the congress did not intend to include toll fees within the
meaning of a sale of services that are vatable. According to petitioners toll fee is a
user’s tax and not sale of services. And it will amount to tax on public service and
would violate non impairment clause.
On Aug 13, 2010, the court issued a TRO and required Sec. of Finance and CIR to
comment.
BIR insists that VAT is imposed on all kinds of services of franchise grantees
including tollway operators except when the law provides otherwise.
Issue:
WON, toll fees collected by toll way operators be subject to VAT?
Held:
Yes.
Vat is levied, assessed and collected on gross receipts derived from the sale or
exchange of service as well as from the use or lease of properties.
The enumeration of affected services is not exclusive
Fees, paiod by the public to tollway operatiors for the use of tollways are not taxes
in any sense. Taxes are imposed under the power of the government for the purpose
of raising revenues. Toll fees are collected by private tollway operators as
reimbursement for the cost and expsnese incurred in the construction maintenance
and operation of the tollways as well as to assure them a reasonable margin of
income.

They are not government exactions.
VAT on tollway operations cannot be deemed a tax on tax due to the nature of the
VAT as an indirect tax.
15)
MERCURY DRUG CORP. vs. CIR, 654 SCRA 124
FACTS: Pursuant to Republic Act No. 7432, petitioner Mercury Drug Corporation
(petitioner), a retailer of pharmaceutical products, granted a 20% sales discount to
qualified senior citizens on their purchases of medicines. For the taxable year April
to December 1993 and January to December 1994, the amounts representing the
20% sales discount totalled P3,719,287.68 and P35,500,593.44, respectively, which
petitioner claimed as deductions from its gross income. Realizing that Republic Act
No. 7432 allows a tax credit for sales discounts granted to senior citizens, petitioner
filed with the Commissioner of Internal Revenue (CIR) claims for refund in the
amount ofP2,417,536.00 for the year 1993 and P23,075,386.00 for the year 1994.
Since the CIR failed to act upon the petitioner’s claim, the CTA ruled that respondent
should grant or issue a tax credit certificate in the reduced amount of
P1,688,178.43 representing the latter’s overpaid income tax for the taxable year
1993. However, the claim for refund for taxable year 1994 is denied. The Court of
Tax Appeals favored petitioner by declaring that the 20% sales discount should be
treated as tax credit rather than a mere deduction from gross income. The Court of
Tax Appeals however found some discrepancies and irregularities in the cash slips
submitted by petitioner as basis for the tax refund. Hence, it disallowed the claim
for taxable year 1994 and some portion of the amount claimed for 1993 by
petitioner. Petitioner elevated the case to the Court of Appeals via a Petition for
Review under Rule 43. Petitioner sought a partial modification of the above
resolution raising as legal issue the basis of the computation of tax credit. The CA
rendered a Decision sustaining the Court of Tax Appeals and dismissing the petition.
ISSUE: WON the claim for tax credit should be based on the full amount of the 20%
senior citizens’ discount.
HELD: Yes. The Court of Tax Appeals in M.E. Holding concedes that the 20% sales
discount granted to qualified senior citizens should be treated as tax credit but it
placed reliance on the Court of Appeals’ decision in Commissioner of Internal
Revenue v. Elmas Drug Corporation where the term “cost of the discount” was
interpreted to mean only the direct acquisition cost, excluding administrative and
other incremental costs. This was the very same case relied upon by the Court of
Appeals in the present case. We finally affirmed in M.E. Holding that the tax credit
should be equivalent to the actual 20% sales discount granted to qualified senior
citizens. It is worthy to mention that Republic Act No. 7432 had undergone two (2)
amendments; first in 2003 by Republic Act No. 9257 and most recently in 2010 by
Republic Act No. 9994. The 20% sales discount granted by establishments to
qualified senior citizens is now treated as tax deduction and not as tax credit. As
we have likewise declared in Commissioner of Internal Revenue v. Central Luzon
Drug Corporation, this case covers the taxable years 1993 and 1994, thus, Republic
Act No. 7432 applies. Section 4 par. A of Republic Act No. 7432 specifically allows
the 20% senior citizens' discount to be claimed by the private establishment as a

tax credit and not merely as a tax deduction from gross sales or gross income. The
law however is silent as to how the “cost of the discount” as tax credit should be
construed.
16)
FIRST DIVISION [G.R. No. 180390. July 27, 2011.]
PRUDENTIAL BANK, vs. CIR
Doctrine: A certificate of deposit need not be in a specific form; thus, a passbook of
an interest-earning deposit account issued by a bank is a certificate of deposit
drawing interest.
Facts: On July 23, 1999, Prudential bank received from the CIR a Final Assessment
Notice and a Demand Letter for deficiency Documentary Stamp Tax (DST) for the
taxable year 1995 on its Repurchase Agreement with the BSP, Purchase of Treasury
Bills from the BSP, and on its Savings Account Plus [SAP] product, in the amount of
P18,982,734.38. Prudential Bank protested the assessment on the ground that the
documents subject matter of the assessment are not subject to DST.
CIR denied the protest, thus a Petition for Review before the CTA was filed. The First
Division of the CTA affirmed the assessment for deficiency DST insofar as the SAP is
concerned, but cancelled and set aside the assessment on petitioner's repurchase
agreement and purchase of treasury bills with the BSP. Prudential moved for partial
reconsideration but the same was denied thus the appeal to the CTA En Banc. The
CTA En Banc denied the appeal for lack of merit. It affirmed the ruling of its First
Division that petitioner's SAP is a certificate of deposit bearing interest subject to
DST under Section 180 of the old NIRC, as amended by RA 7660.
Prudential sought reconsideration but later moved to withdraw the same in view of
its availment of the Improved Voluntary Assessment Program (IVAP) pursuant to
Revenue Regulations and Revenue Memo Order. On October 30, 2007, the CTA En
Banc rendered a Resolution denying petitioner's motion to withdraw for noncompliance with the requirements for abatement. In the same Resolution, the CTA
En Banc denied petitioner's motion for reconsideration for lack of merit.
Issue:WON the SAP is not subject to DST
Ruling: Prudential Bank's Savings Account Plus is subject to Documentary Stamp
Tax. DST is imposed on certificates of deposit bearing interest pursuant to Section
180 of the old NIRC, as amended, to wit:
Sec. 180. Stamp tax on all loan agreements, promissory notes, bills of exchange,
drafts, instruments and securities issued by the government or any of its
instrumentalities, certificates of deposit bearing interest and others not payable on
sight or demand. — On all loan agreements signed abroad wherein the object of the
contract is located or used in the Philippines; bills of exchange (between points
within the Philippines), drafts, instruments and securities issued by the Government
or any of its instrumentalities or certificates of deposits drawing interest, or orders
for the payment of any sum of money otherwise than at the sight or on demand, or
on all promissory notes, whether negotiable or non-negotiable, except bank notes
issued for circulation, and on each renewal of any such note, there shall be collected

a documentary stamp tax of Thirty centavos (P0.30) on each Two hundred pesos, or
fractional part thereof, of the face value of any such agreement, bill of exchange,
draft, certificate of deposit, or note: Provided, That only one documentary stamp tax
shall be imposed on either loan agreement, or promissory note issued to secure
such loan, whichever will yield a higher tax: provided, however, that loan
agreements or promissory notes the aggregate of which does not exceed Two
hundred fifty thousand pesos (P250,000.00) executed by an individual for his
purchase on installment for his personal use or that of his family and not for
business, resale, barter or hire of a house, lot, motor vehicle, appliance or furniture
shall be exempt from the payment of the documentary stamp tax provided under
this section. (Emphasis supplied.)
A certificate of deposit is defined as "a written acknowledgment by a bank or banker
of the receipt of a sum of money on deposit which the bank or banker promises to
pay to the depositor, to the order of the depositor, or to some other person or his
order, whereby the relation of debtor and creditor between the bank and the
depositor is created."
Similarly, in this case, although the money deposited in a SAP is payable anytime,
the withdrawal of the money before the expiration of 30 days results in the
reduction of the interest rate. In the same way, a time deposit withdrawn before its
maturity results to a lower interest rate and payment of bank charges or penalties.
The fact that the SAP is evidenced by a passbook likewise cannot remove its
coverage from Section 180 of the old NIRC, as amended. A document to be
considered a certificate of deposit need not be in a specific form. Thus, a passbook
issued by a bank qualifies as a certificate of deposit drawing interest because it is
considered a written acknowledgement by a bank that it has accepted a deposit of
a sum of money from a depositor.
WHEREFORE, the petition is hereby DENIED.
17)
CITY OF PASIG, REPRESENTED BY THE CITY TREASURER and THE CITY ASSESSOR,
Petitioner, vs.
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE PRESIDENTIAL COMMISSION
ON GOOD GOVERNMENT, Respondent.
CARPIO, J.:
FACTS: Mid-Pasig Land Development Corporation (MPLDC) owned two parcels of
land, with a total area of 18.4891 hectares, situated in Pasig City. The properties are
covered by Transfer Certificate of Title (TCT) Nos. 337158 and 469702 and Tax
Declaration Nos. E-030-01185 and E-030-01186 under the name of MPLDC. Portions
of the properties are leased to different business establishments.
In 1986, the registered owner of MPLDC, Jose Y. Campos, voluntarily surrendered
MPLDC to the Republic of the Philippines.
On 30 September 2002, the Pasig City Assessor’s Office sent MPLDC two notices of
tax delinquency for its failure to pay real property tax on the properties for the
period 1979 to 2001 totaling P256,858,555.86. In a letter dated 29 October 2002,
Independent Realty Corporation (IRC) President Ernesto R. Jalandoni and Treasurer
Rosario Razon informed the Pasig City Treasurer that the tax for the period 1979 to
1986 had been paid, and that the properties were exempt from tax beginning 1987.

In letters dated 10 July 2003 and 8 January 2004, the Pasig City Treasurer informed
MPLDC and IRC that the properties were not exempt from tax. In a letter dated 16
February 2004, MPLDC General Manager Antonio Merelos and Jalandoni again
informed the Pasig City Treasurer that the properties were exempt from tax. In a
letter dated 11 March 2004, the Pasig City Treasurer again informed Merelos that
the properties were not exempt from tax.
On 20 October 2005, the Pasig City Assessor’s Office sent MPLDC a notice of final
demand for payment of tax for the period 1987 to 2005 totaling P389,027,814.48.
On the same day, MPLDC paid P2,000,000 partial payment under protest.
On 9 November 2005, MPLDC received two warrants of levy on the properties. On 1
December 2005, respondent Republic of the Philippines, through the Presidential
Commission on Good Government (PCGG), filed with the RTC a petition for
prohibition with prayer for issuance of a temporary restraining order or writ of
preliminary injunction to enjoin petitioner Pasig City from auctioning the properties
and from collecting real property tax.
On 2 December 2005, the Pasig City Treasurer offered the properties for sale at
public auction. Since there was no other bidder, Pasig City bought the properties
and was issued the corresponding certificates of sale.
ISSUE: WON the lower courts erred in granting PCGG’s petition for certiorari,
prohibition and mandamus and in ordering Pasig City to assess and collect real
property tax from the lessees of the properties.
HELD: YES. Even as the Republic of the Philippines is now the owner of the
properties in view of the voluntary surrender of MPLDC by its former registered
owner, Campos, to the State, such transfer does not prevent a third party with a
better right from claiming such properties in the proper forum. In the meantime, the
Republic of the Philippines is the presumptive owner of the properties for taxation
purposes.
Section 234(a) of Republic Act No. 7160 states that properties owned by the
Republic of the Philippines are exempt from real property tax "except when the
beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person." Thus, the portions of the properties not leased to taxable entities are
exempt from real estate tax while the portions of the properties leased to taxable
entities are subject to real estate tax. The law imposes the liability to pay real
estate tax on the Republic of the Philippines for the portions of the properties leased
to taxable entities. It is, of course, assumed that the Republic of the Philippines
passes on the real estate tax as part of the rent to the lessees.
In the present case, the parcels of land are not properties of public dominion
because they are not "intended for public use, such as roads, canals, rivers,
torrents, ports and bridges constructed by the State, banks, shores, roadsteads."
Neither are they "intended for some public service or for the development of the
national wealth." MPLDC leases portions of the properties to different business
establishments. Thus, the portions of the properties leased to taxable entities are
not only subject to real estate tax, they can also be sold at public auction to satisfy
the tax delinquency.
In sum, only those portions of the properties leased to taxable entities are subject to
real estate tax for the period of such leases. Pasig City must, therefore, issue to
respondent new real property tax assessments covering the portions of the
properties leased to taxable entities. If the Republic of the Philippines fails to pay

the real property tax on the portions of the properties leased to taxable entities,
then such portions may be sold at public auction to satisfy the tax delinquency.
18)
RCBC VS CIR
GR NO. 170257 SEPT 7 2011
FACTS:
Petitioner Rial Commercial Banking Corporation (RCBC) is a corporation engaged in
general banking operations. On August 15, 1996, RCBC received Letter of Authority
No. 133959 issued by then (CIR) Liwayway Vinzons-Chato, authorizing a special
audit team to examine the books of accounts and other accounting records for all
internal revenue taxes from January 1, 1994 to December 31, 1995.
On January 23, 1997, RCBC executed two Waivers of the Defense of Prescription
Under the Statute of Limitations of the National Internal Revenue Code covering the
internal revenue taxes due for the years 1994 and 1995, effectively extending the
period of the Bureau of Internal Revenue (BIR) to assess up to December 31, 2000.
RCBC received a Formal Letter of Demand together with Assessment Notices from
the BIR for the following deficiency tax assessments. Disagreeing with the said
deficiency tax assessment, RCBC filed a protest on February 24, 2000 and later
submitted the relevant documentary evidence to support it; it filed a petition for
review before the CTA.
RCBC paid the deficiency taxes as assessed by the BIR, however, refused to pay the
assessments for deficiency onshore tax and documentary stamp tax which
remained to be the subjects of its petition for review.]
CBC argued that the waivers of the Statute of Limitations which it executed on
January 23, 1997 were not valid because the same were not signed or conformed to
by the respondent CIR as required under Section 222(b) of the Tax Code. As regards
the deficiency FCDU onshore tax, RCBC contended that because the onshore tax
was collected in the form of a final withholding tax, it was the borrower, constituted
by law as the withholding agent that was primarily liable for the remittance of the
said tax.
ISSUE:
1. Whether petitioner, by paying the other tax assessment covered by the waivers
of the statute of limitations, is rendered estopped from questioning the validity of
the said waivers with respect to the assessment of deficiency onshore tax.
2. Whether petitioner, as payee-bank, can be held liable for deficiency onshore tax,
which is mandated by law to be collected at source in the form of a final withholding
tax.
HELD:
1. Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored on the
rule that “an admission or representation is rendered conclusive upon the person
making it, and cannot be denied or disproved as against the person relying
thereon.” A party is precluded from denying his own acts, admissions or
representations to the prejudice of the other party in order to prevent fraud and
falsehood.
Estoppel is clearly applicable to the case at bench. RCBC, through its partial

payment of the revised assessments issued within the extended period as provided
for in the questioned waivers, impliedly admitted the validity of those waivers. Had
petitioner truly believed that the waivers were invalid and that the assessments
were issued beyond the prescriptive period, then it should not have paid the
reduced amount of taxes in the revised assessment. RCBC’s subsequent action
effectively belies its insistence that the waivers are invalid. The records show that
on December 6, 2000, upon receipt of the revised assessment, RCBC immediately
made payment on the uncontested taxes. Thus, RCBC is estopped from questioning
the validity of the waivers. To hold otherwise and allow a party to gainsay its own
act or deny rights which it had previously recognized would run counter to the
principle of equity which this institution holds dear.
2. RCBC erred in citing the abovementioned Revenue Regulations No. 2-98 because
the same governs collection at source on income paid only on or after January 1,
1998. The deficiency withholding tax subject of this petition was supposed to have
been withheld on income paid during the taxable years of 1994 and 1995. Hence,
Revenue Regulations No. 2-98 obviously does not apply in this case.
The Court has explained that the purpose of the withholding tax system is threefold: (1) to provide the taxpayer with a convenient way of paying his tax liability; (2)
to ensure the collection of tax, and (3) to improve the government’s cashflow.
Under the withholding tax system, the payor is the taxpayer upon whom the tax is
imposed, while the withholding agent simply acts as an agent or a collector of the
government to ensure the collection of taxes.
It is, therefore, indisputable that the withholding agent is merely a tax collector and
not a taxpayer.
In the operation of the withholding tax system, the withholding agent is the payor, a
separate entity acting no more than an agent of the government for the collection
of the tax in order to ensure its payments; the payer is the taxpayer – he is the
person subject to tax imposed by law; and the payee is the taxing authority. In
other words, the withholding agent is merely a tax collector, not a taxpayer. Under
the withholding system, however, the agent-payor becomes a payee by fiction of
law. His (agent) liability is direct and independent from the taxpayer, because the
income tax is still imposed on and due from the latter. The agent is not liable for
the tax as no wealth flowed into him – he earned no income. The Tax Code only
makes the agent personally liable for the tax arising from the breach of its legal
duty to withhold as distinguished from its duty to pay tax since:
“the government’s cause of action against the withholding agent is not for the
collection of income tax, but for the enforcement of the withholding provision of
Section 53 of the Tax Code, compliance with which is imposed on the withholding
agent and not upon the taxpayer.”
The liability of the withholding agent is independent from that of the taxpayer. The
former cannot be made liable for the tax due because it is the latter who earned the
income subject to withholding tax. The withholding agent is liable only insofar as he
failed to perform his duty to withhold the tax and remit the same to the
government. The liability for the tax, however, remains with the taxpayer because
the gain was realized and received by him.
While the payor-borrower can be held accountable for its negligence in performing
its duty to withhold the amount of tax due on the transaction, RCBC, as the
taxpayer and the one which earned income on the transaction, remains liable for

the payment of tax as the taxpayer shares the responsibility of making certain that
the tax is properly withheld by the withholding agent, so as to avoid any penalty
that may arise from the non-payment of the withholding tax due.
RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the
payor-borrower as the withholding agent. As such, it is liable for payment of
deficiency onshore tax on interest income derived from foreign currency loans,
pursuant to Section 24(e)(3) of the National Internal Revenue Code of 1993
19)
ASIAWORLD PROPERTIES PHILIPPINE CORPORATION VS COMMISSION ON INTERNAL
REVENUE
FACTS:
Petitioner is a domestic corporation engaged in the business of real estate
development. For the calendar year ending Dec 31, 2001 petitioner filed its Annual
Income Tax Return on April 5, 2002. Petitioner declared a minimum corporate
income tax of 1, 222, 066 but with a refundable income tax payment of 6, 473, 959.
in 2001 ITR petitioner stated that the amount of 7, 468, 061 representing Prior years
excess Credits was net of year 1999 excess creditable withholding tax to be
refunded in the amount of 18,477,144. Petitioner also indicated in its ITR its option
to carry over as tax credit next year the overpayment. Petitioner filed with the
Revenue District Office (RDO) a request to refund in the amount of 18,477,144
allegedly representing partial excess creditable tax withheld for the year 2001.
Petitioner claimed that it is entitled of the refund. Petitioner also maintained that
the option to carry over and apply the excess quarterly income tax due in the
succeeding years is irrevocable only for the next taxable period when the excess
payment was carried over. Before the RDO could act on petitioners claim the latter
filed for a Petition for Review with the CTA to toll the running of the prescriptive
period. CTA denied the petition for lack of merit. Petitioner moved for
reconsideration but was denied. Petitioner appealed to the Court of Appeals which
affirmed the CTA ruling.
ISSUE:
Whether the exercise of the option to carry-over the excess income tax credit, which
shall be applied against the tax due in the succeeding taxable years, prohibits a
claim for refund in the subsequent taxable years for the unused portion of the
excess tax credits carried over.
RULING:
To arrive at the ruling of the Court it interprets Section 76 of the NIRC of 1997.
SEC. 76. Final Adjustment Return. – Every corporation liable to tax under Section 27
shall file a final adjustment return covering the total taxable income for the
preceding calendar or fiscal year. If the sum of the quarterly tax payments made
during the said taxable year is not equal to the total tax due on the entire taxable
income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid,
as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess
estimated quarterly income taxes paid, the excess amount shown on its final
adjustment return may be carried over and credited against the estimated quarterly
income tax liabilities for the taxable quarters of the succeeding taxable years. Once
the option to carry-over and apply the excess quarterly income tax against income
tax due for the taxable quarters of the succeeding taxable years has been made,
such option shall be considered irrevocable for that taxable period and no
application for cash refund or issuance of a tax credit certificate shall be allowed
therefore. (Emphasis supplied)
The Court cannot subscribe to petitioner’s view. Section 76 of the NIRC of
1997 clearly states: “Once the option to carry-over and apply the excess quarterly
income tax against income tax due for the taxable quarters of the succeeding
taxable years has been made, such option shall be considered irrevocable for that
taxable period and no application for cash refund or issuance of a tax credit
certificate shall be allowed therefore.” Section 76 expressly states that “the option
shall be considered irrevocable for that taxable period” – referring to the period
comprising the “succeeding taxable years.” Section 76 further states that “no
application for cash refund or issuance of a tax credit certificate shall be allowed
therefore” – referring to “that taxable period” comprising the “succeeding taxable
years.”
Thus, once the taxpayer opts to carry-over the excess income tax against the
taxes due for the succeeding taxable years, such option is irrevocable for the whole
amount of the excess income tax, thus, prohibiting the taxpayer from applying for a
refund for that same excess income tax in the next succeeding taxable years. The
unutilized excess tax credits will remain in the taxpayer’s account and will be
carried over and applied against the taxpayer’s income tax liabilities in the
succeeding taxable years until fully utilized.
In this case, petitioner opted to carry-over its 1999 excess income tax as tax
credit for the succeeding taxable years. As correctly held by the Court of Appeals,
such option to carry-over is not limited to the following taxable year 2000, but
should apply to the succeeding taxable years until the whole amount of the 1999
creditable withholding tax would be fully utilized.
20)
CIR vs Gonzales L-19495
FACTS
Jose Yusay and Lilia Yusay, inherited a vast portion of land from Matias Yusay.
Thereafter, the Commissioner of Internal Revenue assessed the inherited property
of the Yusay's.
Jose filed an estate and inheritance tax return amounting to 187,204.00
representing the whole estate of the decedent. However, the assessment of the
Commissioner differs from that submitted by the Latter.
The subject land being partitioned between the heirs, and as result of the death of
Jose, his wife incurred the demand of the Commissioner(irrelevant in the case at

bar)
The main dispute in the case at hand is the land inherited by Lilia Yusay, herein
Private Respondent. She disputes against petitioner assessment arguing that the
latter's claim of tax liability has expired due to the fact that the latest assessment
was made 8 years, 9 months and 2 days which was over the prescriptive period.
She posits that the CIR assessment should have been made within five years after
the filing of the return by the individual as provided by section 331 of the Tax Code
ISSUE
Whether or not the prescriptive period has expired
RULING
The Supreme Court held in favor of Petitioner
The Court noted that the tax return made by Jose was substantially defective due to
the fact that such return only covered 93 parcels of land covering 400 hectares and
left out 92 parcels covering 500 hectares.
The Court noted that the a Return need not be complied in particulars but must be
complied substantially, thus noting the requisites, to wit: (1) when the return is
made in good faith and is not false or fraudulent; (2) when it covers the entire
period involved; and (3) when it contains information as to the various items of
income, deduction and credit with such definiteness as to permit the computation
and assessment of the tax.
Hence, the Court cited section 3329(a) of the tax code, which provides for a ten
year prescription in case no return was filed. The exception to 331 of the Tax Code.
Thus, applying the aforesaid provision, and having it cleared that it is as if no return
was filed. The prescription have not yet expired, due to the fact that it is still within 10

years.
21)
Republic of the Philippines vs Philippine Airlines
FACTS:
PAL is a corporation duly organized and existing under and by virtue of the laws of
the Republic of the Philippines, which is engaged in the air transportation business.
PAL then availed of the communication services of the PLDT for its daily exigencies.
For the period January 1, 2002 to December 31, 2002, PAL allegedly paid PLDT the
10% [Overseas Communications Tax] OCT in the amount of P134,431.95 on its
overseas telephone calls. PAL, through its AVP-Financial Planning and Analysis, filed
with the CIR a claim for refund in the amount of P134,431.95 representing the total
amount of 10% OCT paid to PLDT from January to December 2002 citing as legal
bases Section 13 of Presidential Decree (P.D.) No. 1590 and BIR Ruling No. 97-94
dated April 13, 1994. Due to the Commissioner's inaction on its claim for refund, PAL
appealed before the CTA. Respondent PAL argued that since it incurred negative
taxable income for fiscal years 2002 and 2003 and opted for zero basic corporate
income tax, which was lower than the 2% franchise tax, respondent PAL had

complied with the "in lieu of all other taxes" clause of Presidential Decree (P.D.) No.
1590. Thus, it was no longer liable for all other taxes of any kind, nature, or
description, including the 10% OCT, and the erroneous payments thereof entitled it
to a refund pursuant to its franchise. Petitioner CIR disagreed. It maintained that
Section 120 of the 1997 NIRC, as amended, imposes 10% OCT on overseas
dispatch, message or conversion originating from the Philippines, which includes
PLDT communication services. It further stated that respondent PAL, in order for it
to be not liable for other taxes, in this case the 10% OCT, should pay the 2%
franchise tax, since it did not pay any amount as its basic corporate income tax.
CTA ruled that PAL was not required to pay 10% OCT and therefore not entitled to
the refund based on the lieu of all taxes under PD 1590.
ISSUE:
Whether or not PAL is exempt from the payment of the 10% OCT under its franchise
and makes it entitled to the refund.
RULING:
Sec. 13 of P.D. No. 1590 states that:
In consideration of the franchise and rights hereby granted, the grantee shall pay to
the Philippine Government during the life of this franchise whichever of subsections
(a) and (b) hereunder will result in a lower tax:
(a) The basic corporate income tax based on the grantee's annual net taxable
income computed in accordance with the provisions of the National Internal
Revenue Code; or
(b) A franchise tax of two percent (2%) of the gross revenues derived by the grantee
from all sources, without distinction as to transport or nontransport operations;
provided, that with respect to international air-transport service, only the gross
passenger, mail, and freight revenues from its outgoing flights shall be subject to
this tax.
The tax paid by the grantee under either of the above alternatives shall be in lieu of
all other taxes, duties, royalties, registration, license, and other fees and charges of
any kind, nature, or description, imposed, levied, established, assessed, or collected
by any municipal, city, provincial, or national authority or government agency, now
or in the future, including but not limited to the following: x x x x
The court decided in favor of the PAL stating:
A franchise is a legislative grant to operate a public utility. Like those of any other
statute, the ambiguous provisions of a franchise should be construed in accordance
with the intent of the legislature. In the present case, Presidential Decree 1590
granted Philippine Airlines an option to pay the lower of two alternatives: (a) "the
basic corporate income tax based on PAL's annual net taxable income computed in
accordance with the provisions of the National Internal Revenue Code" or (b) "a
franchise tax of two percent of gross revenues." Availment of either of these two
alternatives shall exempt the airline from the payment of "all other taxes," including
the 20 percent final withholding tax on bank deposits.
A careful reading of Section 13 rebuts the argument of the CIR that the "in lieu of all
other taxes" proviso is a mere incentive that applies only when PAL actually pays
something. It is clear that PD 1590 intended to give respondent the option to avail
itself of Subsection (a) or (b) as consideration for its franchise. Either option

excludes the payment of other taxes and dues imposed or collected by the national
or the local government. PAL has the option to choose the alternative that result in
lower taxes. It is not the fact of tax payment that exempts it, but the exercise of its
option.
22)
SILKAIR (SINGAPORE) PTE, LTD., petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.

Facts: Petitioner, Silkair (Singapore) Pte. Ltd. (Silkair), a corporation organized under
the laws of Singapore which has a Philippine representative office, is an online
international air carrier operating the Singapore-Cebu-Davao-Singapore, SingaporeDavao-Cebu-Singapore, and Singapore-Cebu-Singapore routes.
On December 19, 2001, Silkair filed with the Bureau of Internal Revenue (BIR) a
written application for the refund of P4,567,450.79 excise taxes it claimed to have
paid on its purchases of jet fuel from Petron Corporation from January to June 2000.
As the BIR had not yet acted on the application as of December 26, 2001, Silkair
filed a Petition for Review2 before the CTA. Opposing the petition, respondent
Commissioner on Internal Revenue (CIR) alleged in his Answer that petitioner failed
to prove that the sale of the petroleum products was directly made from a domestic
oil company to the international carrier. The excise tax on petroleum products is the
direct liability of the manufacturer/producer, and when added to the cost of the
goods sold to the buyer, it is no longer a tax but part of the price which the buyer
has to pay to obtain the article.
By Decision of May 27, 2005, the Second Division of the CTA denied Silkair’s petition
on the ground that as the excise tax was imposed on Petron Corporation as the
manufacturer of petroleum products, any claim for refund should be filed by the
latter; and where the burden of tax is shifted to the purchaser, the amount passed
on to it is no longer a tax but becomes an added cost of the goods purchased.
Issue: Whether or not the petitioner is the proper party to claim for refund or tax
credit.
Ruling: The Court ruled that the proper party to question, or seek a refund of, an
indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law
and who paid the same even if he shifts the burden thereof to another. Section 130
(A) (2) of the NIRC provides that "[u]nless otherwise specifically allowed, the return
shall be filed and the excise tax paid by the manufacturer or producer before
removal of domestic products from place of production." Thus, Petron Corporation,
not Silkair, is the statutory taxpayer which is entitled to claim a refund based on
Section 135 of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement
between RP and Singapore.
Even if Petron Corporation passed on to Silkair the burden of the tax, the additional

amount billed to Silkair for jet fuel is not a tax but part of the price which Silkair had
to pay as a purchaser.
23)
MISSING
24)
ALLIED BANKING CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
Facts:
In April 2004, the BIR issued a Preliminary Assessment Notice (PAN) to petitioner
Allied Banking Corporation for deficiency Documentary Stamp Tax (DST) in the
amount ofP12,050,595.60 and Gross Receipts Tax (GRT) in the amount of
P38,995,296.76 on industry issue for the taxable year 2001.Petitioner received the
PAN on May 18, 2004 and filed a protest against it on May 27, 2004.
On July 2004, the BIR wrote a Formal Letter of Demand with Assessment Notices
(FAN) to petitioner, which partly reads as follows:
xxx This is our final decision based on investigation. If you disagree, you may
appeal the final decision within thirty (30) days from receipt hereof, otherwise said
deficiency tax assessment shall become final, executory and demandable.
ABC then appealed the FAN with the Court of Tax Appeals (CTA). The Commissioner
of Internal Revenue (CIR) then filed a motion to dismiss on the ground that ABC did
not exhaust all administrative remedies by not filing an administrative protest on
the formal letter of demand with the corresponding assessment notice within 30
days from date of receipt thereof. Thus the motion to dismiss was granted and the
petition for review is dismissed for lack of jurisdiction.
CTA En Banc affirmed the ruling of the CTA First Division and denied the Petition for
Review as well as petitioner’s motion for Reconsideration.
The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction. It emphasized that
an administrative protest is an integral part of the remedies given to a taxpayer in
challenging the legality or validity of an assessment. According to the CTA En Banc,
although there are exceptions to the doctrine of exhaustion of administrative
remedies, the instant case does not fall in any of the exceptions.
Issue:
Whether or not the Formal Letter of Demand can be construed as a final decision of
the CIR appealable to the CTA under RA 9282
Held:
It is true that a FAN is not appealable with the CTA. However, this case holds an
exception. The wordings of the FAN issued by the CIR made it appear that the FAN is
actually the CIR’s final decision. It even advised ABC to file an appeal instead of
filing a protest. ABC cannot therefore be faulted for filing an appeal with the CTA
instead of filing a protest with the CIR. The CIR as well as his duly authorized
representative must indicate clearly and unequivocally to the taxpayer whether an
action constitutes a final determination on a disputed assessment. Words must be
carefully chosen in order to avoid any confusion that could adversely affect the
rights and interest of the taxpayer.
In the instant case, petitioner timely filed a protest after receiving the PAN. In

response thereto, the BIR issued a Formal Letter of Demand with Assessment
Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was
to dispute the assessments by filing an administrative protest within 30 days from
receipt thereof. Petitioner, however, did not protest the final assessment notices.
Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the
rules, the dismissal of the Petition for Review by the CTA was proper.
The case is an exception to the rule on exhaustion of administrative remedies
However, a careful reading of the Formal Letter of Demand with Assessment Notices
leads us to agree with petitioner that the instant case is an exception to the rule on
exhaustion of administrative remedies, i.e., estoppel on the part of the
administrative agency concerned.
It appears from the foregoing demand letter that the CIR has already made a final
decision on the matter and that the remedy of petitioner is to appeal the final
decision within 30 days.
In this case, records show that petitioner disputed the PAN but not the Formal Letter
of Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for
not filing a protest against the Formal Letter of Demand with Assessment Notices
since the language used and the tenor of the demand letter indicate that it is the
final decision of the respondent on the matter. We have time and again reminded
the CIR to indicate, in a clear and unequivocal language, whether his action on a
disputed assessment constitutes his final determination thereon in order for the
taxpayer concerned to determine when his or her right to appeal to the tax court
accrues. Viewed in the light of the foregoing, respondent is now estopped from
claiming that he did not intend the Formal Letter of Demand with Assessment
Notices to be a final decision.
To be clear, we are not disregarding the rules of procedure under Section 228 of the
NIRC. What we are saying is that, the Formal Letter of Demand with Assessment
Notices which was not administratively protested by the petitioner can be
considered a final decision of the CIR appealable to the CTA because the words
used, specifically the words “final decision” and “appeal”, taken together led
petitioner to believe that the Formal Letter of Demand with Assessment Notices was
in fact the final decision of the CIR on the letter-protest it filed and that the available
remedy was to appeal the same to the CTA.
WHEREFORE, the petition is hereby GRANTED. The assailed August 23, 2006
Decision and the October 17, 2006 Resolution of the Court of Tax Appeals are
REVERSED and SET ASIDE. The Petition for Review in CTA Case No. 7062 is hereby
DISMISSED based solely on the Bureau of Internal Revenue’s acceptance of
petitioner’s offer of compromise for the settlement of the gross receipts tax,
documentary stamp tax and value added tax, for the years 1998-2003.
25)
SOUTH AFRICAN AIRWAYS V. CIR
GR No. 180356, Feb. 16, 2010
Facts:
Petitioner South African Airways is a foreign corporation organized and existing
under and by virtue of the laws of the Republic of South Africa. Its principal office is
located in South Africa.
In the Philippines, it is an internal air carrier having no landing rights in the country.
Petitioner, however, has a general sales agent in the Philippines, Aerotel Limited

Corporation (Aerotel), who sells passage documents for compensation or
commission for petitioner’s off-line flights for the carriage of passengers and cargo
between ports or points outside the territorial jurisdiction of the Philippines.
Petitioner is not registered with the Securities and Exchange Commission. It is also
not licensed to do business here.
In 2010, It paid a 2.5% tax on its Gross Philippine Billings (GPB). However, it
subsequently filed a claim for refund, with the BIR, contending that it erroneously
paid tax on GPB.
As the claim for refund was unheeded, petitioner went to the CTA for review. The
latter ruled that petitioner is not liable to pay tax on its GPB, instead, it stated that
petitioner is a resident foreign corporation engaged in trade or business in the
Philippines. Thus, it is liable to pay a tax of 32% on its income derived from the
sales of passage documents in the Philippines.
Issues:
Is petitioner subject to 32% income tax as a resident foreign corporation?
Held:
Yes. Petitioner, inasmuch as it does not maintain flights to or from the Philippines, is
not taxable under GPB. However, since petitioner has a general sales agent here, it
is engaged in or doing business here and that the income they derived from within
the Philippines is taxable. It was held in the case of British Airways that the off-line
carrier is liable for the 32% tax on its taxable income.
In the instant case, the general rule is that resident foreign corporations shall be
liable for a 32% income tax on their income from within the Philippines, except for
resident foreign corporations that are international carriers that derive income “from
carriage of persons, excess baggage, cargo and mail originating from the
Philippines” which shall be taxed at 2 1/2% of their Gross Philippine Billings.
Petitioner, being an international carrier with no flights originating from the
Philippines, does not fall under the exception. As such, petitioner must fall under the
general rule.
To reiterate, the correct interpretation is that, if an international air carrier maintains
flights to and from the Philippines, it shall be taxed at the rate of 2 1/2% of its Gross
Philippine Billings, while international air carriers that do not have flights to and
from the Philippines but nonetheless earn income from other activities in the
country will be taxed at the rate of 32% of such income.
26)
CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC., Petitioner, v. THE
HON. EXECUTIVE SECRETARY ALBERTO ROMULO, THE HON. ACTING SECRETARY OF
FINANCE JUANITA D. AMATONG, and THE HON. COMMISSIONER OF INTERNAL
REVENUE GUILLERMO PARAYNO, JR., Respondents.
-CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC.is an association of
real estate developers and builders in the Philippines. It assails the validity of the
imposition of minimum corporate income tax (MCIT) on corporations and creditable
withholding tax (CWT) on sales of real properties classified as ordinary
assets.chanroblesvirtua|awlibary
Section 27(E) of RA 8424 provides for MCIT on domestic corporations and is
implemented by RR 9-98. Petitioner argues that the MCIT violates the due process
clause because it levies income tax even if there is no realized gain. Petitioner

claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because it is
highly oppressive, arbitrary and confiscatory which amounts to deprivation of
property without due process of law. It explains that gross income as defined under
said provision only considers the cost of goods sold and other direct expenses;
other major expenditures, such as administrative and interest expenses which are
equally necessary to produce gross income, were not taken into account.cЃa Thus,
pegging the tax base of the MCIT to a corporations gross income is tantamount to a
confiscation of capital because gross income, unlike net income, is not "realized
gain."
Petitioner also seeks to nullify Sections 2.57.2(J) (as amended by RR 6-2001) and
2.58.2 of RR 2-98, and Section 4(a)(ii) and (c)(ii) of RR 7-2003, all of which prescribe
the rules and procedures for the collection of CWT on the sale of real properties
categorized as ordinary assets. Petitioner contends that these revenue regulations
are contrary to law for two reasons:
1st, they ignore the different treatment by RA 8424 of ordinary assets and capital
assets and
2nd,, respondent Sec. Of Finance has no authority to collect CWT, much less, to
base the CWT on the gross selling price or FMV of the real properties classified as
ordinary assets.chanroblesvirtbary
Petitioner also asserts that the enumerated provisions of the subject revenue
regulations violate the due process clause because, like the MCIT, the government
collects income tax even when the net income has not yet been determined. They
contravene the equal protection clause as well because the CWT is being levied
upon real estate enterprises but not on other business enterprises, more particularly
those in the manufacturing sector.
ISSUES:
-WON The imposition of the MCIT on domestic corporations is unconstitutional and
(3) WON the imposition of CWT on income from sales of real properties classified as
ordinary assets under RRs 2-98, 6-2001 and 7-2003, is unconstitutional.
HELD:
The SC upheld the validity of the imposition by BIR of MCIT on corporations and
creditable withholding tax (CWT) on sales of real properties classified as ordinary
assets.
The Court held that the petitioner has miserably failed to discharge its burden of
convincing the Court that the imposition of MCIT and CWT is unconstitutional.” In
particular, the petitioner assailed the constitutionality of sec. 27(e) of RA 8424 (The
National Internal Revenue Code of 1997), and the revenue regulations (RRs) issued
by the BIR to implement said provision and those involving creditable withholding
taxes.
The Court ruled that MCIT did not violate due process. It stressed that an income tax
is arbitrary and confiscatory if it taxes capital because capital is not income. MCIT,
however, is imposed not on capital but on gross income which is arrived at by
deducting the capital spent by a corporation in the sale of its goods, i.e. the cost of
goods and other direct expenses from gross sales, the Court explained.
The Court upheld the authority of the Finance Secretary to order the collection of
CWT on sales of real property considered as ordinary assets. Section 57(b) of RA
8424 grants the Finance Secretary authority to require the withholding of a tax on
items of income payable to any person, national or juridical, residing in the
Philippines, it ruled.
The Court also ruled that there was no deprivation of property without due process

with the imposition of CWT. It said that “nothing is taken that is not due so there is
no confiscation of property repugnant to the constitutional guarantee of due
process.” It stressed that CWT “does not impose new taxes nor does it increase
taxes” but relates entirely to the method and time of payment.
(Guys, for the concept of MCIT and CWT, read the fyll text medyo mahaba nga lang)
27)
Angeles City vs Angeles Electric Corporation
Facts: Angeles Electric Corporation (AEC) was granted a legislative franchise under
RA 4079 to construct, maintain and operate an electric light, heat, and power
system for the purpose of generating and distributing electric light, heat and power
for sale in Angeles City, Pampanga. Pursuant to Section 3-A thereof, AEC’s payment
of franchise tax for gross earnings from electric current sold was in lieu of all taxes,
fees and assessments. Later on PD 551 reduced the franchise tax of electric
franchise holders. RA 7160 or the Local Government Code (LGC) of 1991 was passed
into law, conferring upon provinces and cities the power, among others, to impose
tax on businesses enjoying franchise. In accordance with the LGC, the Sangguniang
Panlungsod of Angeles City enacted Tax Ordinance No. 33, S-93, otherwise known as
the Revised Revenue Code of Angeles City (RRCAC). A petition seeking the reduction
of the tax rates and a review of the provisions of the RRCAC was filed with the
Sangguniang Panlungsod by Metro Angeles Chamber of Commerce and Industry Inc.
(MACCI) of which AEC is a member. There being no action taken by the Sangguniang
Panlungsod on the matter, MACCI elevated the petition to the Department of
Finance, which referred the same to the Bureau of Local Government Finance
(BLGF). In the petition, MACCI alleged that the RRCAC is oppressive, excessive,
unjust and confiscatory; that it was published only once and that no public hearings
were conducted prior to its enactment. Acting on the petition, the BLGF issued a
First Indorsement to the City Treasurer of Angeles City, instructing the latter to make
representations with the Sangguniang Panlungsod for the appropriate amendment
of the RRCAC in order to ensure compliance with the provisions of the LGC. Later on,
the City Treasurer issued a Notice of Assessment to AEC for payment of business
tax, license fee and other charges for the period 1993 to 2004 in the total amount
of P94,861,194.10. AEC filed a protest but was denied. AEC filed an appeal to the
RTC and at the same time the City Treasurer levied on the real properties of AEC. A
Notice of Auction Sale was published and posted announcing that a public auction of
the levied properties of AEC was to be held. This prompted AEC to file an Urgent
Motion for Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunction to enjoin Angeles City and its City Treasurer from levying, annotating the
levy, seizing, confiscating, garnishing, selling and disposing at public auction the
properties of AEC.
Issue: Can an injunction be issued to enjoin the collection of local taxes?
Held: YES. The Local Government Code does not specifically prohibit an injunction
enjoining the collection of taxes. This is different in the case of national taxes where
the Tax Code expressly provides that no court shall have the authority to grant an
injunction to restrain the collection on national internal revenue tax, fee or charge
with the sole exception of when the CTA finds that the collection thereof may
jeopardize the interest of the government and/or the taxpayer. Nevertheless, there

must still be proof of the existence of the requirements for injunction to be issued
under the Rules of Court (i.e., clear right to be protected and urgent necessity to
prevent serious damage).
28)
28. UNITED AIRLINES INC. V. CIR
GR No. 178788, Sept. 29, 2010
Facts:
FACTS:
Petitioner is a foreign corporation under the laws of Delaware, U.S.A. engaged in the
international airline business. It used to be an online international carrier of
passengers and cargo originating from the Philippines.
Upon the cessation of its passenger flights in and out of the Philippines, petitioner
appointed a sales agent here (Aerotel Ltd.) and continued operating its cargo flights
from the Philippines until starting 2001.
In 2002, petitioner filed a claim for a tax refund on the tax it paid for the gross
passengers and gross cargo revenues for the years 1999-2001 which included,
allegedly, the income taxes on the revenues from tickets sold in the Philippines the
uplift of which does not originate here.
It is petitioner’s contention that since it no longer operated passenger flights
origination from the country, its passenger revenue cannot be considered as income
from sources within the Philippines and hence should not be subject to Philippine
income tax.
The CTA First Division ruled that no refund may be granted to petitioner because
GPB also applies to gross revenue from carriage of cargoes originating from the
Philippines. Moreover, it found out that petitioner even underpaid its taxes on cargo
revenue.
On appeal to the CTA En Banc, the decision was affirmed. Hence, this petition.
Petitioner argued that their tax refund should be granted as there can be no offsetting or legal compensation in taxation.
ISSUE:
Is petitioner entitled to a tax refund as it is improper to apply off-setting in taxation?
HELD:
No. there is no off-setting or compensation in the case at bar. The court already
made a pronouncement that taxes cannot be subject to compensation for the
simple reason that the government and the taxpayer are not creditors and debtors
of each other. And that the grant of refund is founded on the assumption that the
tax return is valid.
In the case at bar, the CTA explained that it merely determined whether petitioner is
entitled to a refund based on the facts. However, upon examination by the CTA,
petitioner’s return was found out to be erroneous. As an effect, the taxes due on its
cargo revenues were underpaid, and as such, petitioner is not entitled to a refund of
its GPB tax on its passenger revenue.
The Court also ruled that “to avoid multiplicity of suits and unnecessary difficulties
and expenses” the issue of deficiency tax assessment be resolved jointly with the
its claim for refund – and doing so does not violate the rule against offsetting of

taxes.
It was emphasized that tax refunds are construed strictly against the taxpayers and
liberally in favor of the taxing authority. And in any event that petitioner has not
discharged its burden of proof in establishing the factual basis of its claim for
refund, there is no reason to disturb the findings of the CTA.
29)
CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC., Petitioner, v. THE
HON. EXECUTIVE SECRETARY ALBERTO ROMULO, THE HON. ACTING SECRETARY OF
FINANCE JUANITA D. AMATONG, and THE HON. COMMISSIONER OF INTERNAL
REVENUE GUILLERMO PARAYNO, JR., Respondents.
-CHAMBER OF REAL ESTATE AND BUILDERS' ASSOCIATIONS, INC.is an association of
real estate developers and builders in the Philippines. It assails the validity of the
imposition of minimum corporate income tax (MCIT) on corporations and creditable
withholding tax (CWT) on sales of real properties classified as ordinary assets.
Section 27(E) of RA 8424 provides for MCIT on domestic corporations and is
implemented by RR 9-98. Petitioner argues that the MCIT violates the due process
clause because it levies income tax even if there is no realized gain. Petitioner
claims that the MCIT under Section 27(E) of RA 8424 is unconstitutional because it is
highly oppressive, arbitrary and confiscatory which amounts to deprivation of
property without due process of law. It explains that gross income as defined under
said provision only considers the cost of goods sold and other direct expenses;
other major expenditures, such as administrative and interest expenses which are
equally necessary to produce gross income, were not taken into account.cЃa Thus,
pegging the tax base of the MCIT to a corporations gross income is tantamount to a
confiscation of capital because gross income, unlike net income, is not "realized
gain."
-Petitioner also seeks to nullify Sections 2.57.2(J) (as amended by RR 6-2001) and
2.58.2 of RR 2-98, and Section 4(a)(ii) and (c)(ii) of RR 7-2003, all of which prescribe
the rules and procedures for the collection of CWT on the sale of real properties
categorized as ordinary assets. Petitioner contends that these revenue regulations
are contrary to law for two reasons:
1st, they ignore the different treatment by RA 8424 of ordinary assets and capital
assets and
2nd,, respondent Sec. Of Finance has no authority to collect CWT, much less, to
base the CWT on the gross selling price or FMV of the real properties classified as
ordinary assets.
-Petitioner also asserts that the enumerated provisions of the subject revenue
regulations violate the due process clause because, like the MCIT, the government
collects income tax even when the net income has not yet been determined. They
contravene the equal protection clause as well because the CWT is being levied
upon real estate enterprises but not on other business enterprises, more particularly
those in the manufacturing sector.
ISSUES:
-WON The imposition of the MCIT on domestic corporations is unconstitutional and
-WON the imposition of CWT on income from sales of real properties classified as
ordinary assets under RRs 2-98, 6-2001 and 7-2003, is unconstitutional.
HELD:
The SC upheld the validity of the imposition by BIR of MCIT on corporations and
creditable withholding tax (CWT) on sales of real properties classified as ordinary

assets.
The Court held that the petitioner has miserably failed to discharge its burden of
convincing the Court that the imposition of MCIT and CWT is unconstitutional.” In
particular, the petitioner assailed the constitutionality of sec. 27(e) of RA 8424 (The
National Internal Revenue Code of 1997), and the revenue regulations (RRs) issued
by the BIR to implement said provision and those involving creditable withholding
taxes.
The Court ruled that MCIT did not violate due process. It stressed that an income tax
is arbitrary and confiscatory if it taxes capital because capital is not income. MCIT,
however, is imposed not on capital but on gross income which is arrived at by
deducting the capital spent by a corporation in the sale of its goods, i.e. the cost of
goods and other direct expenses from gross sales, the Court explained.
30)
Republic of the Philippines vs Aquafresh Seafoods
Facts: Aquafresh Seafoods sold two parcels of located at Barrio Banica in Roxas City
and paid the corresponding Capital Gains Tax and Documentary Stamp Tax due on
the sale. The Bureau of Internal Revenue (BIR), however, received a report that the
lots sold were undervalued for taxation purposes. This prompted the Special
Investigation Division (SID) of the BIR to conduct an occular inspection over the
properties. After the investigation, the SID concluded that the subject properties
were commercial with a zonal value of
P2,000.00 per square meter. Regional
Director, Leonardo Q. Sacamos (Director Sacamos) of the Revenue Region Iloilo City
sent two Assessment Notices apprising respondent of CGT and DST defencies.
Director Sacamos relied on the findings of the SID that the subject properties were
commercial with a zonal valuation of P2,000.00 per square meter. Respondent sent
a letter protesting the assessments made by Director Sacamos. Director Sacamos
denied respondent's protest for lack of legal basis. Respondent appealed, but the
same was denied with finality. The main thrust of respondent's petition was that the
subject properties were located in Barrio Banica, Roxas, where the pre-defined zonal
value was Php650.00 per square meter based on the “Revised Zonal Values of Real
Properties in the City of Roxas under Revenue District Office No. 72 – Roxas City”
(1995 Revised Zonal Values of Real Properties). Respondent asserted that the
subject properties were classified as “RR” or residential and not commercial.
Respondent argued that since there was already a pre-defined zonal value for
properties located in Barrio Banica, the BIR officials had no business re-classifying
the subject properties to commercial.
Issue: Is the requirement under Section 6 of the Tax Code of consultation with
competent appraisers both from the public and private sectors in determining fair
market value applicable in this case?
Held: YES. The BIR’s position that the requirement of consultation with appraisers is
mandatory only when formulating or making changes in the schedule of zonal
values is wrong. The Court held that the BIR’s act of classifying the subject
properties involved a re-classification and revision of the prescribed zonal values. It
was likewise added that the application of the rule of assigning zonal values based
on the ‘predominant use of property’ only applies when the property is located in an
area or zone where the properties are not yet classified and their zonal values are

not yet determined. If a determination has already been made, the BIR has no
discretion as regards its classification and/or valuation.
31)
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
HAMBRECHT & QUIST PHILIPPINES, INC., Respondent.
G.R. No. 169225
November 17, 2010
Ponente: LEONARDO-DE CASTRO, J.:
Facts:
*On November 4, 1993, respondent received a tracer letter or follow-up letter dated
October 11, 1993 issued by the Accounts Receivable/Billing Division of the BIR’s
National Office and signed by then Assistant Chief Mr. Manuel B. Mina, demanding
for payment of alleged deficiency income and expanded withholding taxes for the
taxable year 1989 amounting to P2,936,560.87.
*On December 3, 1993, respondent, through its external auditors, filed with the
same Accounts Receivable/Billing Division of the BIR’s National Office, its protest
letter against the alleged deficiency tax assessments for 1989 as indicated in the
said tracer letter dated October 11, 1993.
*On November 7, 2001, nearly eight (8) years later, respondent’s external auditors
received a letter from herein petitioner Commissioner of Internal Revenue dated
October 27, 2001. The letter advised the respondent that petitioner had rendered a
final decision denying its protest on the ground that the protest against the disputed
tax assessment was allegedly filed beyond the 30-day reglementary period
prescribed in then Section 229 of the National Internal Revenue Code.
Issues:
1. WHETHER OR NOT THE COURT OF TAX APPEALS HAS JURISDICTION TO RULE THAT
THE GOVERNMENT’S RIGHT TO COLLECT THE TAX HAS PRESCRIBED?
2. WHETHER OR NOT THE PERIOD TO COLLECT THE ASSESSMENT HAS PRESCRIBED?
Rulings:
1.Yes, Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal, as herein provided –
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under the National Internal
Revenue Code or other law as part of law administered by the Bureau of Internal
Revenue. (Emphasis supplied.)
Plainly, the assailed CTA En Banc Decision was correct in declaring that there was
nothing in the foregoing provision upon which petitioner’s theory with regard to the
parameters of the term "other matters" can be supported or even deduced. What is
rather clearly apparent, however, is that the term "other matters" is limited only by
the qualifying phrase that follows it.
Thus, on the strength of such observation, we have previously ruled that the
appellate jurisdiction of the CTA is not limited to cases which involve decisions of
the CIR on matters relating to assessments or refunds. The second part of the
provision covers other cases that arise out of the National Internal Revenue Code
(NIRC) or related laws administered by the Bureau of Internal Revenue (BIR).
2. No, Section 224. Suspension of running of statute. – The running of the statute of
limitations provided in Sections 203 and 223 on the making of assessment and the
beginning of distraint or levy or a proceeding in court for collection, in respect of

any deficiency, shall be suspended for the period during which the Commissioner is
prohibited from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty days thereafter; when the taxpayer requests for a
re-investigation which is granted by the Commissioner; when the taxpayer cannot
be located in the address given by him in the return filed upon which a tax is being
assessed or collected:Provided, That, if the taxpayer informs the Commissioner of
any change in address, the statute will not be suspended; when the warrant of
distraint and levy is duly served upon the taxpayer, his authorized representative,
or a member of his household with sufficient discretion, and no property could be
located; and when the taxpayer is out of the Philippines.
Consequently, the mere filing of a protest letter which is not granted does not
operate to suspend the running of the period to collect taxes.
32)
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. AICHI FORGING COMPANY OF
ASIA, INC., Respondent.cralaw
Doctrines:
• The CIR has 120 days, from the date of the submission of the complete
documents within which to grant or deny the claim for refund/credit of input vat. In
case of full or partial denial by the CIR, the 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.
• A taxpayer is entitled to a refund either by authority of a statute expressly
granting such right, privilege, or incentive in his favor, or under the principle of
solutio indebiti requiring the return of taxes erroneously or illegally collected. In
both cases, a taxpayer must prove not only his entitlement to a refund but also his
compliance with the procedural due process as non-observance of the prescriptive
periods within which to file the administrative and the judicial claims would result in
the denial of his claim.
• As between the Civil Code and the Administrative Code of 1987, it is the latter
that must prevail being the more recent law, following the legal maxim, Lex
posteriori derogat priori.
• The phrase “within two (2) years x x x apply for the issuance of a tax credit
certificate or refund” under Subsection (A) of Section 112 of the NIRC refers to
applications for refund/credit filed with the CIR and not to appeals made to the CTA.
FACTS:
The company filed a claim of refund/credit of input vat in relation to its zero-rated
sales from July 1, 2002 to September 30, 2002. The CTA 2nd Division partially
granted respondent’s claim for refund/credit.
CIR filed a Motion for Partial Reconsideration, insisting that the administrative and
the judicial claims were filed beyond the two-year period to claim a tax refund/credit
provided for under Sections 112(A) and 229 of the NIRC. He reasoned that since the
year 2004 was a leap year, the filing of the claim for tax refund/credit on September
30, 2004 was beyond the two-year period, which expired on September 29, 2004.
He cited as basis Article 13 of the Civil Code, which provides that when the law
speaks of a year, it is equivalent to 365 days. In addition, petitioner argued that the
simultaneous filing of the administrative and the judicial claims contravenes
Sections 112 and 229 of the NIRC. According to the petitioner, a prior filing of an

administrative claim is a “condition precedent” before a judicial claim can be filed.
The CTA denied the MPR thus the case was elevated to the CTA En Banc for review.
The decision was affirmed. Thus the case was elevated to the SC.
Respondent contends that the non-observance of the 120-day period given to the
CIR to act on the claim for tax refund/credit in Section 112(D) is not fatal because
what is important is that both claims are filed within the 2-year prescriptive period.
In support thereof, respondent cited CIR v. Victorias Milling Co., Inc. [130 Phil 12
(1968)] where it was ruled that “if the CIR takes time in deciding the claim, and the
period of two years is about to end, the suit or proceeding must be started in the
CTA before the end of the two-year period without awaiting the decision of the CIR.”
ISSUES:
1. WON the claim for refund was filed within the prescribed period
2. WON the simultaneous filing of the administrative and the judicial claims
contravenes Section 229 of the NIRC, which requires the prior filing of an
administrative claim, and violates the doctrine of exhaustion of administrative
remedies
HELD:
1. Yes. As ruled in the case of CIR v. Mirant Pagbilao Corporation (2008), the twoyear period should be reckoned from the close of the taxable quarter when the sales
were made.
In CIR v. Primetown Property Group, Inc (2007), we said that as between the Civil
Code, which provides that a year is equivalent to 365 days, and the Administrative
Code of 1987, which states that a year is composed of 12 calendar months, it is the
latter that must prevail being the more recent law, following the legal maxim, Lex
posteriori derogat priori.
Thus, applying this to the present case, the two-year period to file a claim for tax
refund/credit for the period July 1, 2002 to September 30, 2002 expired on
September 30, 2004. Hence, respondent’s administrative claim was timely filed.
2. Yes. We find the filing of the judicial claim with the CTA premature.
Section 112(D) of the NIRC clearly provides that the CIR has “120 days, from the
date of the submission of the complete documents in support of the application [for
tax refund/credit],” within which to grant or deny the claim. In case of full or partial
denial by the CIR, the 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.
Subsection (A) of Section 112 of the NIRC states that “any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, within two 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.” The phrase “within two (2) years x x x apply for the issuance of a tax
credit certificate or refund” refers to applications for refund/credit filed with the CIR
and not to appeals made to the CTA.
The case of CIR v. Victorias Milling, Co., Inc. is inapplicable as the tax provision
involved in that case is Section 306, now Section 229 of the NIRC. Section 229 does
not apply to refunds/credits of input VAT.
The premature filing of respondent’s claim for refund/credit of input VAT before the
CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.

33)
ASEAN PACIFIC PLANNERS, APP CONSTRUCTION AND DEVELOPMENT CORPORATION*
AND CESAR GOCO, petitioners,
vs.
CITY OF URDANETA, CEFERINO J. CAPALAD, WALDO C. DEL CASTILLO, NORBERTO M.
DEL PRADO, JESUS A. ORDONO AND AQUILINO MAGUISA,**, respondents.
Facts:
This case stemmed from a Complaint for annulment of contracts with prayer for
preliminary prohibitory injunction and temporary restraining order filed by
respondent Waldo C. Del Castillo, in his capacity as taxpayer, against respondents
City of Urdaneta and Ceferino J. Capalad doing business under the name JJEFWA
Builders, and petitioners Asean Pacific Planners (APP) represented by Ronilo G. Goco
and Asean Pacific Planners Construction and Development Corporation (APPCDC)
represented by Cesar D. Goco.
Del Castillo alleged that then Urdaneta City Mayor Rodolfo E. Parayno entered into
five contracts for the preliminary design, construction and management of a fourstorey twin cinema commercial center and hotel involving a massive expenditure of
public funds amounting to P250 million, funded by a loan from the Philippine
National Bank (PNB). For minimal work, the contractor was allegedly paid P95
million. Del Castillo also claimed that all the contracts are void because the object is
outside the commerce of men. The object is a piece of land belonging to the public
domain and which remains devoted to a public purpose as a public elementary
school. Additionally, he claimed that the contracts, from the feasibility study to
management and lease of the future building, are also void because they were all
awarded solely to the Goco family.
In their Answer, APP and APPCDC claimed that the contracts are valid. Urdaneta City
Mayor Amadeo R. Perez, Jr., who filed the city's Answer, joined in the defense and
asserted that the contracts were properly executed by then Mayor Parayno with
prior authority from the Sangguniang Panlungsod. Mayor Perez also stated that Del
Castillo has no legal capacity to sue and that the complaint states no cause of
action.
Issue:
Whether or not the RTC err and commit grave abuse of discretion in entertaining the
taxpayers' suits.
Held:
Petitioners argue that a taxpayer may only sue where the act complained of directly
involves illegal disbursement of public funds derived from taxation. The allegation of
respondents Del Castillo, Del Prado, Ordono and Maguisa that the construction of
the project is funded by the PNB loan contradicts the claim regarding illegal
disbursement since the funds are not directly derived from taxation.
Respondents Del Castillo, Del Prado, Ordono and Maguisa counter that their
personality to sue was not raised by petitioners APP and APPCDC in their Answer
and that this issue was not even discussed in the RTC's assailed orders.
Petitioners' contentions lack merit. The RTC properly allowed the taxpayers' suits. In
Public Interest Center, Inc. v. Roxas, we held:
In the case of taxpayers' suits, the party suing as a taxpayer must prove that he has
sufficient interest in preventing the illegal expenditure of money raised by taxation.
Thus, taxpayers have been allowed to sue where there is a claim that public funds
are illegally disbursed or that public money is being deflected to any improper

purpose, or that public funds are wasted through the enforcement of an invalid or
unconstitutional law.
xxxx
Petitioners' allegations in their Amended Complaint that the loan contracts entered
into by the Republic and NPC are serviced or paid through a disbursement of public
funds are not disputed by respondents, hence, they are invested with personality to
institute the same.
Here, the allegation of taxpayers Del Castillo, Del Prado, Ordono and Maguisa that
P95 million of the P250 million PNB loan had already been paid for minimal work is
sufficient allegation of overpayment, of illegal disbursement, that invests them with
personality to sue. Petitioners do not dispute the allegation as they merely insist,
albeit erroneously, that public funds are not involved. Under Article 1953 of the Civil
Code, the city acquired ownership of the money loaned from PNB, making the
money public fund. The city will have to pay the loan by revenues raised from local
taxation or by its internal revenue allotment.
In addition, APP and APPCDC's lack of objection in their Answer on the personality to
sue of the four complainants constitutes waiver to raise the objection under Section
1, Rule 9 of the Rules of Court
34)
Fitness By Design vs CIR
Facts: Respondent, CIR assessed the petitioner, Fitness By Design for deficiency
income taxes for the tax year 1995. Petitioner protested and filed a Petition for
Review with Motion to Suspend Collection of Income Tax, before the Court of Tax
Appeals and raised prescription as a defense. A preliminary hearing on the issue of
prescription was conducted during which petitioner’s former bookkeeper attested
that certified public accountant, Leonardo Sablan illegally took custody of
petitioner’s accounting records, invoices, and official receipts and turned them over
to the BIR. Petitioner requested for the issuance of subpoena ad testificandum to
Sablan for the hearing and of subpoena duces tecum to the BIR for the production
of the Affidavit of the Informer bearing on the assessment in question. In addition,
petitioner submitted written interrogatories addressed to Sablan. The CTA denied
petitioner’s motion for Issuance of Subpoenas and disallowed the submission by
petitioner of written interrogatories to Sablan. The CTA found that to require Sablan
to testify would violate Section 2 of Republic Act No. 2338, as implemented by
Section 12 of Finance Department Order No. 46-66, proscribing the revelation of
identities of informers of violations of internal revenue laws, except when the
information is proven to be malicious or false.
Issue: Did the CTA err and committed grave of abuse of discretion in denying the
motions for subpoenas and written interrogatories?
Held: NO. In requesting the issuance of the subpoenas and the submission of written
interrogatories, petitioner sought to establish that its accounting records and
related documents, invoices, and receipts which were the bases of the assessment
against it were illegally obtained. The only issues, however, which surfaced during
the preliminary hearing before the CTA, were whether respondent’s issuance of
assessment against petitioner had prescribed and whether petitioner’s tax return
was false or fraudulent. Besides, as the CTA held, the subpoenas and answers to the

written interrogatories would violate Section 2 of Republic Act No. 2338 as
implemented by Section 12 of Finance Department Order No. 46-66. Petitioner
claims, however, that it only intended to elicit information on the whereabouts of
the documents it needs in order to refute the assessment, and not to disclose the
identity of the informer. Petitioner’s position does not persuade. The interrogatories
addressed to Sablan and the revenue officers show that they were intended to
confirm petitioner’s belief that Sablan was the informer. Lastly, Petitioner impugns
the manner in which the documents in question reached the BIR, Sablan having
allegedly submitted them to the BIR without its (petitioner’s) consent. Petitioner’s
lack of consent does not, however, imply that the BIR obtained them illegally or that
the information received is false or malicious. Nor does the lack of consent preclude
the BIR from assessing deficiency taxes on petitioner based on the documents.
Section 5 of the Tax Code allows the BIR access to all relevant or material records
and data in the person of the taxpayer, and the BIR can accept documents which
cannot be admitted in a judicial proceeding where the Rules of Court are strictly
observed. To require the consent of the taxpayer would defeat the intent of the law
to help the BIR assess and collect the correct amount of taxes.
35)
CIR v. Primetown Property Group
GR 162155; August 28, 2007
Facts:
Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the
refund or credit of income tax respondent’s paid in 1997.
The CTA found that respondent filed its final adjusted return on April 14, 1998. Thus,
its right to claim a refund or credit commenced on that date. According to the CTA,
the two-year prescriptive period under Section 229 of the NIRC for the filing of
judicial claims was equivalent to 730 days. Because the year 2000 was a leap year,
respondent's petition, which was filed 731 days after respondent filed its final
adjusted return, was filed beyond the reglementary period.
On appeal, the CA reversed and set aside the decision of the CTA. It ruled that
Article 13 of the Civil Code did not distinguish between a regular year and a leap
year. According to the CA, even if the year 2000 was a leap year, the periods
covered by April 15, 1998 to April 14, 1999 and April 15, 1999 to April 14, 2000
should still be counted as 365 days each or a total of 730 days. A statute which is
clear and explicit shall be neither interpreted nor construed.
Issue:
Whether or not the counting of the 2-year prescriptive period for filing claim of
refund is governed by the Civil Code.
Held:
Counting of 2-year period for filing claim for refund is no longer in accordance with
Art 13 of the Civil Code but under Sec 31 of EO 227 - The Administrative Code of
1987.
As between the Civil Code, which provides that a year is equivalent to 365 days,
and the Administrative Code of 1987, which states that a year is composed of 12
calendar months, it is the latter that must prevail being the more recent law,
following the legal maxim, Lex posteriori derogat priori.

In the case at bar, there are 24 calendar months in 2 years. For a Final Corporate
ITR filed on Apr 14, 1998, the counting should start from Apr 15, 1998 and end on
Apr 14, 2000. The procedure is 1st month -Apr 15, 1998 to May 14, 1998 …. 24th
month - Mar 15, 2000 to Apr 14, 2000. National Marketing v. Tecson, 139 Phil 584
(1969) is no longer controlling. The 2-year period should start to run from filing of
the final adjusted return.
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on
the last day of the 24th calendar month from the day respondent filed its final
adjusted return. Hence, it was filed within the reglementary period.

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