TAXATION

Transportation contractors, common carriers exempt from local business tax

In City of Manila v. Hon. Colet and Malaysian Air System, G.R. 120051, December 10,
2014, J. Leonardo-De Castro, Malaysian Airline System, along with other common carriers,
assailed the validity of Section 21(B) of the Manila Revenue Code, which imposed a local
business tax on the gross receipts of transportation contractors, persons who transport
passenger or freight for hire, and common carriers, among others.
The common carriers invoked Section 133(j) of the Local Government Code
(LGC) which states: unless otherwise provided herein, the taxing power of LGUs shall
not extend to taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common carriers by air,
land or water, except as provided in this Code.
The City of Manila and its public officials, on the other hand, insisted on the validity of
the provision. They contend that the clause unless otherwise provided herein
recognized the power of LGUs to to impose tax on any business subject to the excise, valueadded or percentage tax under the NIRC, citing Section 143(h) of the LGC. They assert
that it is upon these statutory bases that they enacted Sec. 21(B) of the Manila Revenue
Code.
ISSUE:
Is Sec. 21(B) of the Manila Revenue Code valid?
RULING:
No, Sec. 21(B) of the MRC is null and void for having being enacted ultra vires.
It is already well-settled that although the power to tax is inherent in the State, the
same is not true for the LGUs to whom the power must be delegated by Congress and must
be exercised within the guidelines and limitations that Congress may provide.
Among the common limitations on the taxing power of LGUs is Section 133(j)
of the LGC. The same clearly and unambiguously proscribes LGUs from imposing any tax
on the gross receipts of transportation contractors and common carriers.
The Court. ruled that Section 133(j) of the LGC prevails over Sec. 143(h) of the
same Code and declared that Sec. 21(B) of the MRC was manifestly in contravention of the
former.
Among others, it ratiocinated that Section 133(j) of the LGC is a specific provision
that explicitly withholds from any LGU the power to tax the gross receipts of transportation
contractors and common carriers, inter alia.
In contrast, Section 143 of the LGC defines the general power of the municipality
to tax businesses within its jurisdiction. While paragraphs (a) to (g) thereof identify the
particular businesses and fix the imposable tax rates for each, paragraph (h) is apparently
the catch-all provision allowing the municipality to impose tax on any business, not
otherwise specified in the preceding paragraphs, which the sanggunian concerned may
deem proper to tax.
The succeeding proviso of Section 143(h) of the LGC is not a specific grant of
power to the municipality or city to impose business tax on the gross sales or receipts of
such a business. Rather, the proviso only fixes a maximum rate of imposable business tax in
case the business taxed under Section 143(h) of the LGC happens to be subject to excise,
value added, or percentage tax under the NIRC.
The omnibus grant of power to municipalities and cities under Section 143(h) of
the LGC cannot overcome the specific exception/exemption in Section 133(j) of the
same Code. This is in accord with the rule on statutory construction that specific provisions
must prevail over general ones.
Consequently, the sanggunian of the municipality or city cannot enact an ordinance
imposing business tax on the gross receipts of transportation contractors and common
carriers, among others, when said sanggunian was already specifically prohibited from doing
so. Any exception to the express prohibition under Section 133(j) of the LGC should be just
as specific and unambiguous.

LGU entitled to collect real property taxes must indubitably show that subject real
properties are located within its territorial jurisdiction
In Sta. Lucia Realty & Development, Inc. vs. City of Pasig, G.R. No. 166838, June 15,
2011, J. Leonardo-De Castro, petitioner Sta. Lucia Realty & Development, Inc. (Sta. Lucia) is
the registered owner of several parcels of land which were subject of a Petition for the
Settlement of Boundary Dispute filed by Cainta against Pasig.
In 1995, Pasig filed a Complaint for the collection of real estate taxes on said disputed
lots, which were covered by TCTs, which indicate Pasig as their location.
Sta. Lucia, in its Answer, alleged that it had been paying its real estate taxes to
Cainta, just like what its predecessors-in-interest did. Meanwhile, Cainta, in its Answer-inIntervention, averred that it had been collecting the real property taxes on the subject
properties, which it claimed were within its territorial jurisdiction.
Sta. Lucia and Cainta thereafter moved for the suspension of the proceedings. This
was denied by the RTC, which rendered a decision in favor of Pasig. CA, however, ruled that
the that a prior resolution of the boundary dispute between Pasig and Cainta is necessary
before a tribunal can determine which LGU is entitled to collect realty taxes.
Is the CA correct?
RULING:
YES. The SC elucidated that that while a local government unit is authorized under
several laws to collect real estate tax on properties falling under its territorial jurisdiction, it
is imperative to first show that these properties are unquestionably within its
geographical boundaries.
Accentuating on the importance of delineating territorial boundaries, this Court,
in Mariano, Jr. v. Commission on Elections said:
The importance of drawing with precise strokes the territorial boundaries of a local
unit of government cannot be overemphasized. The boundaries must be clear for they
define the limits of the territorial jurisdiction of a local government unit. It can legitimately
exercise powers of government only within the limits of its territorial jurisdiction. Beyond
these limits, its acts are ultra vires. Needless to state, any uncertainty in the boundaries of
local government units will sow costly conflicts in the exercise of governmental powers
which ultimately will prejudice the people's welfare. This is the evil sought to be avoided by
the Local Government Code in requiring that the land area of a local government unit must
be spelled out in metes and bounds, with technical descriptions.
Clearly, therefore, the local government unit entitled to collect real property taxes
from Sta. Lucia must undoubtedly show that the subject properties are situated within its
territorial jurisdiction; otherwise, it would be acting beyond the powers vested to it by law.
120+30-day period in filing claims for credit/refund of unutilized input VAT credits
is mandatory and jurisdictional

In San Roque Power Corporation vs. Commisioner of Internal Revenue, June 30, 2014,
G.R. No. 205543, J. Leonardo-De Castro, the CTA en banc denied the administrative and
judicial claims for refund of unutilized input VAT credits of San Roque because it filed its
judicial claims beyond the 30-day prescriptive period, reckoned from the lapse of the
120-day period for the CIR to act on the original administrative claims. Such 120+30day period, the CTA en banc stressed, is jurisdictional.
ISSUE:
Whether or not the dismissal was proper
RULING:

Yes, the dismissal was proper.

San Roque failed to comply with the 30-day mandatory periods for the filing of
its judicial claims under Section 112(C) of the NIRC of 1997, as amended. This can be
gleaned from the table below:
Tax
Perio
d
2006

Date
of End of 120-Day
Filing
of Period
for
Administrati CIR to Decide
ve
Claim

First
April 11, 2007 August 9, 2007
Quarte
r
Secon July 10, 2007
d
Quarte
r

November
2007

End of 30- Date

day
Actual
Period to Filing
File
Judicial
Appeal
Claim
with
CTA
September
8,
200720

7, December
7,
2007

of No.
of
Days:
of End of 120day
Period
to
Filing
of Judicial
Claim

March
2008

28, 232 days

June
2008

27, 233 days

Third
August
Quarte 2007
r

31, December
2007

29, January 28, March

2008
2008

28, 90 days

Fourth August
Quarte 2007
r

31, December
2007

29, January 28, March

2008
2008

28, 90 days

Consequently, the CTA did not acquire jurisdiction over said cases and correctly
dismissed the same.
The court reiterated its holding in the older case of San Roque (2013) where it
stated that the prescriptive periods under Section 112 of the NIRC of 1997, as
amended, shall be interpreted as follows:
Section 112(A) and (C) must be interpreted according to its clear, plain, and
unequivocal language. The taxpayer can file his administrative claim for refund or
credit at anytime within the two-year prescriptive period. If he files his claim on the last
day of the two-year prescriptive period, his claim is still filed on time. The
Commissioner will have 120 days from such filing to decide the claim. If the
Commissioner decides the claim on the 120th day, or does not decide it on that day,
the taxpayer still has 30 days to file his judicial claim with the CTA. This is not only the
plain meaning but also the only logical interpretation of Section 112(A) and (C).
The absence of the word zero-rated on
the invoices/receipts is fatal to a claim for
credit/refund of unutilized input VAT
In. CIR, J.R.A. Philippines, Inc., vs CIR, G.R. No. 177127, October 11, 2010, petitioner
J.R.A. Philippines, Inc. is a domestic corporation registered with the BIR as a VAT
taxpayer and as an Ecozone Export Enterprise with the Philippine Economic Zone Authority
(PEZA).
It filed several applications for tax credit/refund of unutilized input VAT on its zerorated sales for the taxable quarters of 2000. The claim for credit/refund, however, remained
unacted by the respondent. Hence, petitioner was constrained to file a petition before the
CTA.
CTA denied petitioners claim for refund/credit of input VAT attributable to its zerorated sales due to the failure of petitioner to indicate its Taxpayers Identification NumberVAT (TIN-V) and the word zero-rated on its invoices.
ISSUE:

Is the absence of the word zero-rated on the invoices/receipts is fatal to a claim for
credit/refund of input VA?
RULING:
Yes, failure to print the word zero-rated on the invoices/receipts is fatal to a claim
for credit/ refund of input VAT on zero-rated sales.
This has been squarely resolved in Panasonic Communications Imaging Corporation
of the Philippines ) v. Commissioner of Internal Revenue. In that case, we sustained the
denial of petitioners claim for tax credit/refund for non-compliance with Section 4.108-1 of
Revenue Regulations No. 7-95, which requires the word zero rated to be printed on the
invoices/receipts covering zero-rated sales. We explained that:
Zero-rated transactions generally refer to the export sale of goods and
services. The tax rate in this case is set at zero. When applied to the tax base
or the selling price of the goods or services sold, such zero rate results in no
tax chargeable against the foreign buyer or customer. But, although the seller
in such transactions charges no output tax, he can claim a refund of the VAT
that his suppliers charged him. The seller thus enjoys automatic zero rating,
which allows him to recover the input taxes he paid relating to the export
sales, making him internationally competitive.
For the effective zero rating of such transactions, however, the
taxpayer has to be VAT-registered and must comply with invoicing
requirements. x x x
Further, the printing of the word zero-rated on the invoice helps
segregate sales that are subject to 10% (now 12%) VAT from those sales that
are zero-rated. Unable to submit the proper invoices, petitioner Panasonic has
been unable to substantiate its claim for refund.
Consistent with the foregoing jurisprudence, petitioners claim for credit/ refund of
input VAT for the taxable quarters of 2000 must be denied.