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Case List Remedies under the NIRC

CIR v. Sony Philippines, Inc., G.R. No. 178697, November 17, 2010
Pilipinas Shell Petroleum Corporation v. CIR , G.R. No. 172598, December 21, 2007
CIR v. Menguito, G.R. No. 167560, September 17, 2008
CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010
CIR v. Pascor Realty and Development Corporation, et al., , June 29, 1999
CIR v. Hantex Trading Co., Inc., G.R. No. 136975, March 31, 2005
Magnetic Resonance Imaging Services v. CIR, CTA Case No. 6608, October 20, 2009
CIR v. Phoenix Assurance Co., Ltd., G.R. No. L-19727, May 20, 1965
CIR v. GJM Philippines Manufacturing Inc., CTA En Banc Case No. 637, March 6, 2012
CIR v. BF Goodrich Philippines, Inc., et al., G.R. No. 1041771, February 24, 1999
Philippine Journalists, Inc. v. CIR , G.R. No. 162852, December 15, 2004
CIR v. FMF Development Corporation, G.R. No. 167765, June 30, 2008
CIR v. Kudos Metal Corporation, G.R. No. 178087, May 5, 2010
National Marketing Corporation (NAMARCO) v. Tecson, G.R. No. L-29131, August 27, 1969
CIR v. Primetown Property Group, Inc., G.R. No. 162155, August 28, 2007
Adamson, et al. v. Court of Appeals, et al., G.R. Nos. 120935 and 124557, May 21, 2009
BPI v. CIR , G.R. No. 139736, October 17, 2005
CIR v. Isabela Cultural Corporation, G.R. No. 135210, July 11, 2011
Advertising Associates, Inc. v. Court of Appeals, G.R. No. 59758, December 26, 1984
Yabes, et al. v. Flojo, et al., G.R. No. L-46954, July 20, 1982
Fishwealth Canning Corporation v. CIR , G.R. No. 179343, January 21, 2010
Lascona Land Co., Inc. v. CIR, et al., G.R. No. 171251, March 5, 2012
Allied Banking Corporation v. Parayno, CTA Case No. 6565, November 3, 2004
Rizal Commercial Banking Corporation v. CIR, G.R. No. 168498, April 24, 2007
La Flor Dela Isabela, Inc. v. CIR, CTA En Banc No. 672, February 2, 2012
Oceanic Wireless Network, Inc. v. CIR, G.R. No. 148380, December 9, 2005
CIR v. Philamlife, G.R. No. 105208, May 29, 1995
CIR v. Tokyo Shipping, G.R. No. 68252, May 25, 1995
CIR v. Manila Electric Company, Inc., CTA En Banc No. 773, May 8, 2012
CIR v. PNB, G.R. No. 161997, October 25, 2005
CIR v. TMX Sales, Inc., G.R. No. 83736, January 15, 1992
ACCRA Investments Corporation v. Court of Appeals, G.R. No. 96322, December 20, 1991
Citibank N.A. v. Court of Appeals, G.R. No. 107434, October 10, 1997
CIR v. Palanca, G.R. No. L-16626, October 29, 1966
CIR v. Philippine American Life Insurance Co., et al., G.R. No. 105208, May 29, 1995
Gibbs v. Collector of Internal Revenue, G.R. No. L-13453, February 29, 1960
CIR v. Splash Corporation, CTA En Banc No. 330, May 5, 2008
Atlas Consolidated Mining and Development Corporation v. CIR , G.R. Nos. 141104 & 148763, June 8,
2007
CIR v. Mirant Pagbilao Corporation, G.R. No. 172129, September 12, 2008
CIR v. Aichi Forging Company of Asia, Inc., G.R. No. 184823, October 6, 2010
Calamba Steel Center, Inc. v. CIR, G.R. No. 151857, April 28, 2005
Philam Asset Management, Inc. v. CIR, G.R. Nos. 156637 and 162004, December 14, 2005
Silkair (Singapore) Pte. Ltd. V. CIR, G.R. No. 166482, January 25, 2012
CIR v. Mirant Philippines Operations Corporation, , June 15, 2011

CIR vs. Sony Philippines, Inc.


Facts:
LOA was issued. The LOA issued by the BIR covered the period 1997 and unverified prior years.
However, the LOA was invalidated by a prior Court of Tax Appeals (CTA) en banc decision (CTA EB 90,
July 5, 2007) because the taxpayer commenced business operations only on Oct. 1, 1997, indicating that
the taxpayer was not yet operating during the period covered by the examination.
On Dec. 6, 1999 CIR issued a preliminary assessment for 1997 deficiency taxes and penalties to Sony,
which it protested.
A petition for review was filed by Sony before the CTA, within 30 days after the lapse of the 180 days
from the submission of the supporting documents to the CIR.
CTA-1st Division disallowed the deficiency VAT assessment the subsidized advertising expense paid by
Sony was duly covered by a VAT invoice resulted in an input VAT credit. However, for the EWT, the
deficiency assessment was upheld.
CIR sought reconsideration on the ground that Sony should be liable for the deficiency VAT. It contends
that Sonys advertising expense cannot be considered as an input VAT credit because the same was
eventually reimbursed by Sony International Singapore (SIS). As a result, Sony is not entitled to a tax
credit and that the said advertising expense should be for the account of SIS.
ISSUE: 1. W/N the source of the payment of tax is relevant to determine
2. WON the assessment is valid

On April 22, 1998, the BIR sent a collection letter[4] to Pilipinas Shell for alleged deficiency excise
tax liabilities of PhP 1,705,028,008.06 for the taxable years 1992 and 1994 to 1997, inclusive of
delinquency surcharges and interest. As basis for the collection letter, the BIR alleged that Pilipinas Shell
is not a qualified transferee of the TCCs it acquired from other BOI-registered companies.
Pilipinas Shell protested the collection letter, but the protest was denied by the BIR. Pilipinas Shell filed
its motion for reconsideration. However, due to respondents inaction on the motion, Pilipinas Shell filed a
petition for review before the CTA.
CTA ruled that the use by Pilipinas Shell of the TCCs was legal and valid, and that respondents attempt
to collect alleged delinquent taxes and penalties from Pilipinas Shell without an assessment constitutes
denial of due process. Respondent elevated the case to the CA still pending to date.
SECOND ASSESSMENT: THIS IS WHAT IS IMPORTANT!
Despite the pendency the above case, the Center sent several letters (3 letters) to Pilipinas Shell, which
required them to submit copies of pertinent sales invoices and delivery receipts covering sale
transactions of their products to the TCC assignors/transferors purportedly in connection with an ongoing
post audit, ANDrequired submission of the same documents covering Pilipinas Shell Industrial Fuel Oil
(IFO) deliveries to Spintex International, Inc AND FINALLY requesting a list of the serial numbers of the
TCCs assigned or transferred to it by various BOI-registered companies, either assignors or transferors.
In reply Pilipinas Shell emphasized that the required submission of these documents had no legal basis.
For non-compliance, the Center informed Pilipinas Shell of the cancellation of the first batch of TCCs
transferred to them. Pilipinas Shell motion for reconsideration was not acted upon.
On November 22, 1999, Pilipinas Shell received the November 15, 1999 assessment letter[12] from
respondent for excise tax deficiencies, surcharges, and interest based on the first batch of cancelled
TCCs. All these cancelled TCCs were also part of the subject matter in pending case.
Pilipinas Shell protested[13] the assessment letter, but the protest was denied by the BIR, constraining it
to file another petition for review[14] before the CTA, docketed as CTA Case No. 6003.
By virtue of RA 9282 (act which expanded the jurisdiction of CTA), CTA Division granted the petition for
review holding that respondent failed to prove with convincing evidence that the TCCs transferred to
Pilipinas Shell were fraudulently issued as respondents finding of alleged fraud was merely speculative.
Respondent filed his MR of the above decision which was rejected. Appealed the above decision before
the CTA En Banc. En Banc resolved respondents appeal by holding that Pilipinas Shell was liable to pay
the alleged excise tax deficiencies arising from the cancellation of the TCCs.
Thus, PSPC filed this petition.

Ruling:
1. NO. Sonys deficiency VAT assessment derived from the CIRs allowance of the input VAT credits that
should have been realized from advertising expense of the latter.
Under Sec. 110 of the 1997 Tax Code, an advertising expense duly covered by a VAT invoice is a
legitimate business expense. It cannot be denied that Sony incurred advertising expense. CIRs own
witness Aluquin even testified that advertising companies issued invoices in the name of Sony and the
latter paid for the same.
Hence, Sony incurred and paid for advertising expense services. Where the money came from is another
matter all together.
Before any VAT is levied, there must be sale, barter or exchange of goods or property.
In this case, there was no sale, barter, exchange in the subsidy given by SIS to Sony. It was but a dole
out and not in payment for the goods or properties sold, bartered or exchanged by Sony.
ISSUE:
WHETHER OR NOT THE ASSESSMENT DATED 15 NOVEMBER 1999 IS VOID CONSIDERING THAT IT
2. The revenue examiner went beyond the authority conferred by LOA. A LOA authorizes or empowers a FAILED TO COMPLY WITH THE STATUTORY AS WELL AS REGULATORY REQUIREMENTS IN THE ISSUANCE
designated revenue officer to examine, verify and scrutinize a taxpayers books and records in relation to OF ASSESSMENTS? YES.
his internal revenue tax liability for a particular period. The LOA, the examiners were authorize to Pilipinas Shell avers that its statutory and procedural right to due process was violated by respondent in
examine Sonys book of accounts and other accounting records for the period 1997 and unverified prior the issuance of the assessment. It claims that respondent violated RR 12-99 since no pre-assessment
years. However, CIRs basis for deficiency vat for 1997was 1998. They acted without authority in notice was issued to PSPC before the November 15, 1999 assessment. Moreover, PSPC argues that the
arriving at the deficiency vat assessment. It should be considered without orce and effect a nullity.
November 15, 1999 assessment effectively deprived it of its statutory right to protest the preFurthermore, the period 1997 and unverified prior years violates Revenue Memorandum Order (RMO) assessment within 30 days from receipt of the disputed assessment letter.
No. 43-90, which states that a LOA should cover a taxable period not exceeding one taxable year. It also
prohibits the issuance of LOAs covering the audit of unverified prior years. Hence, the SC held that the HELD:
deficiency assessment against the taxpayer was canceled.
While this has likewise been mooted by our discussion above, it would not be amiss to state that Pilipinas
Shells rights to substantive and procedural due process have indeed been violated. The facts show that
------------PSPC was not accorded due process before the assessment was levied on it. The Center
PILIPINAS SHELL vs. CIR
required Pilipinas Shell to submit certain sales documents relative to supposed delivery of IFOs by PSPC
to the TCC transferors. PSPC contends that it could not submit these documents as the transfer of the
Facts:
subject TCCs did not require that it be a supplier of materials and/or component supplies to the
FIRST ASSESSMENT
transferors in a letter dated October 29, 1999 which was received by the Center on November 3,
Petitioner Pilipinas Shell, a Philippine subsidiary of the international petroleum giant Shell, and is 1999. On the same day, the Center informed Pilipinas Shell of the cancellation of the subject TCCs. The
engaged in the importation, refining and sale of petroleum products in the country. It was granted Tax objections of Pilipinas Shell were brushed aside by the Center and the assessment was issued by
Credit Certificates (TCC) by the Dept. of Finance by the Duty Drawback Center (Center in brevity). respondent on November 15, 1999, without following the statutory and procedural requirements clearly
Pilipinas Shell used the TCCs in payment of some of its excise tax liabilities.
provided under the NIRC and applicable regulations.

What is applicable is RR 12-99, which superseded RR 12-85, pursuant to Sec. 244 in relation to Sec. 245
of the NIRC implementing Secs. 6, 7, 204, 228, 247, 248, and 249 on the assessment of national internal
revenue taxes, fees, and charges. The procedures delineated in the said statutory provisos and RR 1299 were not followed by respondent, depriving Pilipinas Shell of due process in contesting the formal
assessment levied against it. Respondent ignored RR 12-99 and did not issue Pilipinas Shell a notice for
informal conference[44] and a preliminary assessment notice, as required.[45] Pilipinas Shells November
4, 1999 motion for reconsideration of the purported Center findings and cancellation of the subject TCCs
and the TDM was not even acted upon.
Pilipinas Shell was merely informed that it is liable for the amount of excise taxes it declared in its excise
tax returns for 1992 and 1994 to 1997 covered by the subject TCCs via the formal letter of demand and
assessment notice. For being formally defective, the November 15, 1999 formal letter of demand and
assessment notice is void. Paragraph 3.1.4 of Sec. 3, RR 12-99 pertinently provides:

1. Whether or not CKCS, Inc. and CKCS are one and the same taxable entity with the same tax base and
liability.
2. WON there was a valid formal assessment notice.

The power of taxation is sometimes called also the power to


destroy. Therefore it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and uniformly, lest
the tax collector kill the hen that lays the golden egg. And, in the order to maintain
the general publics trust and confidence in the Government this power must be used
justly and not treacherously.
--------------------

Ruling:
1. CKCS, Inc. and CKCS are one and the same taxable entity with the same tax base and liability. The
Court considers the presence of the following circumstances to wit; when the owner of one directs and
controls the operations of the other, and the payments effected or received by one are for the accounts
due from or payable to the other, or when the properties or products of one are all sold to the other,
which in turn immediately sells them to the public as substantial evidence in support of the finding that
the two are actually one juridical taxable personality. All the circumstances are present in this case.
The Supreme Court held that based on evidence presented, respondents CKCS is also known and
referred to as CKCS, Inc. Moreover, respondent and his wife own, manage and act as proprietors of
CKCS, and that through said business, respondent also had taxable transactions with Texas Instruments
Phil., Inc. and Club John Hay. CKCS and CKCS, Inc. are merely employing the fiction of their separate
corporate existence to evade payment of proper taxes.
2. If taxpayer denies ever having received an assessment from BIR, its incumbent upon the latter
to prove by competent evidence that notice was received by addressee. Since respondent hasnt adduced
sufficient evidence that petitioner had in fact received pre-assessment notice & post-reporting notice
required by law, it cant be assumed that petitioner had been served said notices.
It should be emphasized that the stringent requirement that an assessment notice be satisfactorily
proven to have been issued and released or, if receipt thereof is denied, that said assessment notice
have been served on the taxpayer, applies only to formal assessments prescribed under Section 228 of
the National Internal Revenue Code, but not to post-reporting notices or pre-assessment notices. The
issuance of a valid formal assessment is a substantive prerequisite to tax collection, for it contains not
only a computation of tax liabilities but also a demand for payment within a prescribed period, thereby
signaling the time when penalties and interests begin to accrue against the taxpayer and enabling the
latter to determine his remedies therefor. Due process requires that it must be served on and received by
the taxpayer. A post-reporting notice and pre-assessment notice do not bear the gravity of a formal
assessment notice. The post-reporting notice and pre-assessment notice merely hint at the initial findings
of the BIR against a taxpayer and invites the latter to an "informal" conference or clarificatory meeting.
Neither notice contains a declaration of the tax liability of the taxpayer or a demand for payment thereof.
Hence, the lack of such notices inflicts no prejudice on the taxpayer for as long as the latter is properly
served a formal assessment notice.
------------------

CIR V. DOMINADOR MENGUITO SEPTEMBER 17, 2008

CIR v. Metro Star Superama, Inc., G.R. No. 185371, December 8, 2010

Facts:
Respondent is married to Jeanne Menguito and is engaged in the restaurant and/or cafeteria business.
The spouses owned Copper Kettle Cafeteria Specialist ( hereinafter CKCS ) located at Kalayaan Bar,
Departure Area, Ninoy Aquino International Airport, Pasay City. They are also the owners of a business
named Copper Kettle Catering Services, Inc ( hereinafter CKCS, Inc.) located at Club John Hay, Baguio
City with which Texas Instruments Phil., Inc. and Club John Hay had a contract. Subsequently, BIR
Baguio received information that respondent has undeclared income from Texas Instruments Phil., Inc.
and Club John Hay. On September 2, 1997, after due investigation, the BIR issued assessment notices
stating therein that there is due from respondent deficiency income and percentage tax covering the
years 1991,1992 and 1993. Ms. Jeane Menguito protested the assessments. Respondent thereafter filed
the present case praying for the cancellation and withdrawal of the deficiency income tax and percentage
tax assessments. The Court of Tax Appeals ordered respondent to pay the CIR the deficiency income,
percentage taxes and
delinquency interest. However the Court of Appeals reversed the decision.

On January 26, 2001, the Regional Director of Revenue of Legazpi City, issued letter of Authority to
examine Metro Stars books of accounts and other accounting records for income tax and other internal
revenue taxes for the taxable year 1999.
For Metro Stars failure to comply with several requests for the presentation of records and Subpoena
Duces Tecum, BIR of Legazpi City proceeded with the investigation based on the best evidence
obtainable preparatory to the issuance of assessment notice.
On April 11, 2002, Metro Star received a Formal Letter of Demand dated April 3, 2002 from Revenue
District No. 67, Legazpi City, assessing petitioner the amount of P292,874.16.) for deficiency valueadded and withholding taxes for the taxable year 1999.
Subsequently, Revenue District Office No. 67 sent a copy of the Final Notice of Seizure dated May 12,
2003, which petitioner received on May 15, 2003, giving the latter last opportunity to settle its deficiency
tax liabilities within ten (10) [days] from receipt thereof, otherwise respondent BIR shall be constrained
to serve and execute the Warrants of Distraint and/or Levy and Garnishment to enforce collection.
On February 6, 2004, petitioner received from Revenue District Office No. 67 a Warrant of Distraint
and/or Levy No. 67-0029-23 dated May 12, 2003 demanding payment of deficiency value-added tax and
withholding tax payment in the amount of P292,874.16.

3.1.4 Formal Letter of Demand and Assessment Notice.The formal letter of


demand and assessment notice shall be issued by the Commissioner or his duly
authorized representative. The letter of demand calling for payment of the taxpayers
deficiency tax or taxes shall state the facts, the law, rules and regulations, or
jurisprudence on which the assessment is based, otherwise, the formal letter of
demand and assessment notice shall be void. The same shall be sent to the taxpayer
only by registered mail or by personal delivery. x x x (Emphasis supplied.)
In short, respondent merely relied on the findings of the Center which did not
givePilipinas Shell ample opportunity to air its side. While Pilipinas Shell indeed
protested the formal assessment, such does not denigrate the fact that it was deprived
of statutory and procedural due process to contest the assessment before it was
issued. Respondent must be more circumspect in the exercise of his functions, as this
Court aptly held in Roxas v. Court of Tax Appeals:

Issues:

On July 30, 2004, petitioner filed with the Office of respondent Commissioner a Motion for
Reconsideration pursuant to Section 3.1.5 of Revenue Regulations No. 12-99.
On February 8, 2005, respondent Commissioner, through its authorized representative, Revenue
Regional Director of Revenue Region 10, Legaspi City, issued a Decision denying petitioners Motion for
Reconsideration. Petitioner, through counsel received said Decision on February 18, 2005.
Denying that it received a Preliminary Assessment Notice (PAN) and claiming that it was not accorded
due process, Metro Star filed a petition for review[4] with the CTA.
The CTA-Second Division found merit in the petition of Metro Star and, on March 21, 2007, rendered a
decision, granting the petition and ordering CIR from collecting the subject taxes. It opined that [w]hile
there [is] a disputable presumption that a mailed letter [is] deemed received by the addressee in the
ordinary course of mail, a direct denial of the receipt of mail shifts the burden upon the party favored by
the presumption to prove that the mailed letter was indeed received by the addressee.[5] It also found
that there was no clear showing that Metro Star actually received the alleged PAN, dated January 16,
2002. It, accordingly, ruled that the Formal Letter of Demand dated April 3, 2002, as well as the Warrant
of Distraint and/or Levy dated May 12, 2003 were void, as Metro Star was denied due process.[6]
The CIR sought reconsideration[7] but the motion was denied. CIR filed a petition for review [9] with
the CTA-En Banc, but the petition was dismissed after a determination that no new matters were raised.
The motion for reconsideration[10] filed by the CIR was likewise denied by the CTA-En Banc in
its November 18, 2008Resolution.[11]
Hence this petition.

The Court need not belabor to discuss the matter of Metro Stars failure to file its protest, for it
is well-settled that a void assessment bears no fruit.
--------------------CIR V PASCOR REALTY
G.R 128315
June 29, 1999

Facts: The CIR authorized certain BIR officers to examine the books of accounts and
other accounting records of Pascor Realty and Development Corp. (PRDC) for 1986, 1987 and 1988. The
examination resulted in recommendation for the issuance of an assessment of P7,498,434.65 and
P3,015,236.35 for 1986 and 1987, respectively.
On March 1, 1995, Commissioner filed a criminal complaint for tax evasion against PRDC, its
president and treasurer before the DOJ. Private respondents filed immediately an urgent request for
reconsideration on reinvestigation disputing the tax assessment and tax liability.
On March 23, 1995, private respondents received a subpoena from the DOJ in connection with
the criminal complaint. In a letter dated, May 17, 1995, the Commissioner denied private respondents
request for reconsideration (reinvestigation on the ground that no formal assessment has been issued
which the latter elevated to the CTA on a petition for review. The Commissioners motion to dismiss on
the ground of the CTAs lack of jurisdiction inasmuch as no formal assessment was issued against private
respondent was denied by CTA and ordered the Commissioner to file an answer but did not instead filed
ISSUES & HELD:
a petition with the CA alleging grave abuse of discretion and lack of jurisdiction on the part of CTA for
1. Whether or not Metro Star was denied due process? YES.
considering the affidavit/report of the revenue officers and the endorsement of said report as assessment
The Court agrees with the CTA that the CIR failed to discharge its duty and present any which may be appealed to he CTA. The CA sustained the CTA decision and dismissed the petition.
evidence to show that Metro Star indeed received the PAN dated January 16, 2002. It could have simply
presented the registry receipt or the certification from the postmaster that it mailed the PAN, but failed. Issues:
Neither did it offer any explanation on why it failed to comply with the requirement of service of the PAN. 1. Whether or not the criminal complaint for tax evasion can be construed as an assessment.
It merely accepted the letter of Metro Stars chairman dated April 29, 2002, that stated that he had 2. Whether or not an assessment is necessary before criminal chargesfor tax evasion may be instituted.
received theFAN dated April 3, 2002, but not the PAN; that he was willing to pay the tax as computed by
the CIR; and that he just wanted to clarify some matters with the hope of lessening its tax liability.
Held:
The filing of the criminal complaint with the DOJ cannot be construed as a formal assessment.
Neither the Tax Code nor the revenue regulations governing the protest assessments provide a specific
2. Is the failure to strictly comply with notice requirements tantamount to a denial of due process?
definition or form of an assessment.
Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is An assessment must be sent to and received by the taxpayer, and must demand payment of the taxes
liable for deficiency taxes through the sending of a PAN. He must be informed of the facts and the law described therein within a specific period. The revenue officers affidavit merely contained a computation
upon which the assessment is made. The law imposes a substantive, not merely a formal, requirement. of respondents tax liability. It did not state a demand or period for payment. It was addressed to the
To proceed heedlessly with tax collection without first establishing a valid assessment is evidently Secretary of Justice not to the taxpayer. They joint affidavit was meant to support the criminal complaint
violative of the cardinal principle in administrative investigations - that taxpayers should be able to for tax evasion; it was not meant to be a notice of tax due and a demand to private respondents for the
present their case and adduce supporting evidence.[14]
payment thereof. The fact that the complaint was sent to the DOJ, and not to private respondent, shows
It is clear that the sending of a PAN to taxpayer to inform him of the assessment made is but that commissioner intended to file a criminal complaint for tax evasion, not to issue an assessment.
part of the due process requirement in the issuance of a deficiency tax assessment, the absence of
An assessment is not necessary before criminal charges can be filed. Acriminal charge need not
which renders nugatory any assessment made by the tax authorities. The use of the word shall in only be supported by a prima facie showing of failure to file a required return. The CIR had, in such tax
subsection 3.1.2describes the mandatory nature of the service of a PAN. The persuasiveness of the right evasioncases, discretion on whether to issue an assessment, or to file a criminal case against the
to due process reaches both substantial and procedural rights and the failure of the CIR to strictly comply taxpayer, or to do both.
with the requirements laid down by law and its own rules is a denial of Metro Stars right to due ---------------------------process.[15] Thus, for its failure to send the PAN stating the facts and the law on which the assessment
was made as required by Section 228 of R.A. No. 8424, the assessment made by the CIR is void.
CIR vs. HANTEX TRADING CO., INC. G.R. No. 136975; March 31, 2005
The case of CIR v. Menguito[16] cited by the CIR in support of its argument that only the nonservice of the FAN is fatal to the validity of an assessment, cannot apply to this case because the issue Facts: Hantex Trading Co is a company organized under the Philippines. It is engaged in the sale of
therein was the non-compliance with the provisions of R. R. No. 12-85 which sought to interpret Section plastic products, it imports synthetic resin and other chemicals for the manufacture of its products. For
229 of the old tax law. RA No. 8424 has already amended the provision of Section 229 on protesting an this purpose, it is required to file an Import Entry and Internal Revenue Declaration (Consumption Entry)
assessment. The old requirement of merely notifying the taxpayer of the CIRs findings was changed in with the Bureau of Customs under Section 1301 of the Tariff and Customs Code. Sometime in October
1998 to informing the taxpayer of not only the law, but also of the facts on which an assessment would 1989, Lt. Vicente Amoto, Acting Chief of Counter-Intelligence Division of the Economic Intelligence and
be made. Otherwise, the assessment itself would be invalid.[17] The regulation then, on the other hand, Investigation Bureau (EIIB), received confidential information that the respondent had imported
simply provided that a notice be sent to the respondent in the form prescribed, and that no consequence synthetic resin amounting to P115,599,018.00 but only declared P45,538,694.57. Thus, Hentex receive a
would ensue for failure to comply with that form.
subpoena to present its books of account which it failed to do. The bureau cannot find any original copies

of the products Hentex imported since the originals were eaten by termites. Thus, the Bureau relied on
the certified copies of the respondents Profit and Loss Statement for 1987 and 1988 on file with the SEC,
the machine copies of the Consumption Entries, Series of 1987, submitted by the informer, as well as
excerpts from the entries certified by Tomas and Danganan. The case was submitted to the CTA which
ruled that Hentex have tax deficiency and is ordered to pay, per investigation of the Bureau. The CA
ruled that the income and sales tax deficiency assessments issued by the petitioner were unlawful and
baseless since the copies of the import entries relied upon in computing the deficiency tax of the
respondent were not duly authenticated by the public officer charged with their custody, nor verified
under oath by the EIIB and the BIR investigators.
Issue: Whether or not the final assessment of the petitioner against the respondent for deficiency income
tax and sales tax for the latters 1987 importation of resins and calcium bicarbonate is based on
competent evidence and the law.
Held: Central to the second issue is Section 16 of the NIRC of 1977, as amended which provides that the
CIR has the power to make assessments and prescribe additional requirements for tax administration
and enforcement. Among such powers are those provided in paragraph (b), which provides that Failure
to submit required returns, statements, reports and other documents. When a report required by law
as a basis for the assessment of any national internal revenue tax shall not be forthcoming within the
time fixed by law or regulation or when there is reason to believe that any such report is false,
incomplete or erroneous, the Commissioner shall assess the proper tax on the best evidence obtainable.
This provision applies when the CIR undertakes to perform her administrative duty of assessing the
proper tax against a taxpayer, to make a return in case of a taxpayers failure to file one, or to amend a
return already filed in the BIR. The best evidence envisaged in Section 16 of the 1977 NIRC, as
amended, includes the corporate and accounting records of the taxpayer who is the subject of the
assessment process, the accounting records of other taxpayers engaged in the same line of business,
including their gross profit and net profit sales. Such evidence also includes data, record, paper,
document or any evidence gathered by internal revenue officers from other taxpayers who had personal
transactions or from whom the subject taxpayer received any income; and record, data, document and
information secured from government offices or agencies, such as the SEC, the Central Bank of the
Philippines, the Bureau of Customs, and the Tariff and Customs Commission. However, the best evidence
obtainable under Section 16 of the 1977 NIRC, as amended, does not include mere photocopies of
records/documents. The petitioner, in making a preliminary and final tax deficiency assessment against a
taxpayer, cannot anchor the said assessment on mere machine copies of records/documents. Mere
photocopies of the Consumption Entries have no probative weight if offered as proof of the contents
thereof. The reason for this is that such copies are mere scraps of paper and are of no probative value as
basis for any deficiency income or business taxes against a taxpayer.
Companies exempt from zero-rate tax
-----------------Magnetic Resonance Imaging Services v. CIR ,
CTA Case No. 6608, October 20, 2009.
The petitioner in the case argued that the assessment issued against it lacks factual and legal
bases for the reason that it is based merely on a tentative income-tax return, as the revenue examiner
supposedly totally disregarded the amended return that the company filed in making the assessment.
According to the taxpayer, this should not have been the case since the amendment of the return has no
adverse impact on the companys tax liability.
In effect, the taxpayer is asserting that since it was able to amend the tentative income tax return that it
previously filed, prior to the expiration of the three-year period prescribed under the law and the
issuance of the applicable Letter of Authority, the BIR should have disregarded the same and instead,
should have limited its investigation on the amended return subsequently filed by the company.
Nonetheless, the CTA Second Division ruled that the BIR is not prevented from looking into the
petitioners tentative return since under the Tax Code, in ascertaining the correctness of any return, or in

making a return when none has been made, or in determining the liability of any person for any internalrevenue tax, or in collecting any such liability, or in evaluating tax compliance, the commissioner is
authorized to examine any book, paper, record or other data which may be relevant or material to such
inquiry. The court further said that once a return has been filed, or even when a return has not been
filed, the commissioner is empowered to authorize the examination of any taxpayer to determine
whether or not the latter is liable for any unpaid or deficiency internal revenue taxes.
In conducting the examination, respondent or his duly authorized representative is given much
latitude as to what documents may be examined considering that the law allows him or his authorized
representative to look into any book, paper, record or other data which may be relevant to ascertain
the correctness of the return filed. Moreover, in view of the provisions of the Tax Code which provides
that (a)ny return, statement or declaration filed in any office authorized to receive the same shall not be
withdrawn, the court held that once a return has been filed, the commissioner or his duly authorized
representative is not precluded from examining the correctness of any return filed at their office for the
reason that the term any return is indicative that a
tentative return is likewise included. Surely, the abovementioned pronouncements of the CTA Second
Division must serve as a caution to taxpayers who haphazardly file a tentative return just to beat the
deadline and rely on the idea of filing an amended return.
Therefore, the best safeguard of taxpayers against tax assessments is still the
maintenance of efficient and organized books of accounts and records, and of course,
not to rely on presumptions.
----------------CIR v. GJM Philippines Manufacturing Inc.
Facts:
Petitioner is a corporation, duly organized and existing under the laws of the Republic of the Philippines,
and also duly registered as a Philippine Export Zone Authority (PEZA) investor/locator.
On April 12, 2000, petitioner filed its Annual Income Tax Return for taxable year 1999. Sometime in
2001, Warnaco (HK) Ltd., then petitioner's parent company, underwent bankruptcy proceedings, and
this resulted in the conveyance of ownership of petitioner and its global affiliates to Luen Thai Overseas
Limited in December 2001. Thereafter, the present owner set in place streamlining efforts, among which
was the transfer of petitioner's Makati Office to the facilities in Rosario, Cavite.
On October 18, 2002, the BIR, through Revenue District Officer Ner Alfredo B. Plana, sent a letter of
informal conference dated October 14, 2002, by facsimile transfer, informing petitioner that the report of
investigation on its income and business tax liabilities for the calendar year ended December 31, 1999
had been submitted. The report reveals that petitioner is still liable for an income tax deficiency and
corresponding 20% interest as well as compromise penalty in the total amount of P1,192,541.51, from
shipment/loading freights, fringe benefit taxes, etc. On February 12, 2003, respondent issued a PreAssessment Notice.
On April 14, 2003, respondent issued the undated Assessment Notice No. IT-17316-99-03-282 against
petitioner, indicating a deficiency income tax assessment in the amount of P1,480,099.29.
On August 18, 2003, respondent issued a Final Notice Before Seizure addressed to petitioner informing
the latter that it was being given a last opportunity to make the necessary settlement of the same
deficiency income tax for taxable year 1999. Petitioner claims that although said notice indicated its new
address at Phase 2 Lot 9 Blk. 4, PEZA, Rosario, Cavite, the same never reached it.
On December 8, 2003, petitioner received a Warrant of Distraint and/or Levy from the BIR RDO [No.] 48West Makati, which stemmed from Assessment/Demand No. IT-17316-99-03-282 on April 14, 2003,
involving the amount of P1,480,099.29, as deficiency income tax for taxable year 1999. Accompanying
the said Warrant were the Preliminary Collection Letter dated July 25, 2003, and the Final Notice Before
Seizure dated August 18, 2003.
On January 7, 2004, petitioner filed its Letter Protest dated January 6, 2004 against the said Warrant of
Distraint and/ or Levy dated November 27, 2003. And on January 26, 2004, petitioner received
respondent's letter dated January 15, 2003, supposedly constituting the respondent's final decision on
the disputed assessment, denying petitioner's protest for lack of factual and legal bases.
The Ruling of the Court in Division: FAN and Warrant is CANCELLED and

WITHDRAWN.
Issue:
WON THE FORMAL ASSESSMENT NOTICE (FAN) FOR DEFICIENCY INCOME TAX FOR TAXABLE YEAR 1999
HAD BEEN RELEASED, MAILED OR SENT TO HEREIN RESPONDENT WITHIN THE 3-YEAR PRESCRIPTIVE
PERIOD UNDER SECTION 203 OF THE NIRC OF 1997.
HELD:

The three (3)-year period within which the CIR can validly issue an assessment is reckoned
from: (a) the last day required by law for filing the final adjustment return, i.e., on or before the fifteenth
(15th) day of April, or on or before the fifteenth (15th) day of the fourth (4th) month following the close
of the fiscal year, as the case may be; or (b) the date of actual filing of the return, whichever is later.
Based on the records of the case, GJM filed its Annual Income Tax Return for the taxable year
1999 on April 12, 2000, consequently, the three (3)-year period within which the CIR can validly issue
assessment is until April 15, 2003. And records show that the FAN, with attached Details of
Discrepancies, was released, mailed and sent through registered mail on April 14, 2003. Apparently, the
FAN was made within the period provided under Section 203 of the 1997 NIRC, as amended. The settled
rule in our jurisprudence is that when mail matter is sent by registered mail, there may exist a
presumption, set forth under Section 2(v), Rule 131 of the Rules of Court, that it was received in the
regular course of mail. The facts to be proved in order to raise this presumption are: (a) that the letter
was properly addressed with postage prepaid; and (b) that it was mailed. Once these facts are proved,
the presumption is that the letter was received by the addressee as soon as it could have been
transmitted to him in the ordinary course of the mails. While respondent avers that it sent through
registered mail the subject assessment notice on April 14, 2003, within the three (3)-year
prescriptive period, petitioner denies having received the said assessment notice from respondent.
Petitioner alleges (i) that it came to know of the deficiency income tax assessment only on December 8,
2003 when it was served with the Warrant of Distraint and/ or Levy; and (ii) that it was able to receive
the Formal Assessment Notice and the Details of Discrepancies on January 26, 2004, when the same
documents were attached to respondent's letter dated January 15, 2004. Therefore, considering that
petitioner denies receipt of the said mail, it behooves upon respondent to prove that it was indeed
received by petitioner.
The failure of the respondent to prove receipt of the assessment by the Petitioner leads to the
conclusion that no assessment was issued. Consequently, the government's right to issue an assessment
for the said period has already prescribed.
To prove that the subject mail was served upon petitioner, respondent offered in evidence the
Transmittal Letter No. 282 dated April 14, 2003 duly prepared and signed by Ms. Ma. Nieva A. Guerrero,
as Chief of the Assessment Division of BIR Revenue Region No. 8-Makati. Notably however, respondent
did not present Ma. Nieva A. Guerrero to testify on the said Transmittal Letter dated April 14, 2003 which
she supposedly prepared and signed, considering that petitioner has denied having received the subject
Formal Assessment Notice and the Details of Discrepancies. Furthermore, independent evidence, such as
the registry receipt of the assessment notice, or a certification from the Bureau of Posts, could have
easily been obtained, and offered before this Court, yet respondent failed to do so.
Thus, for failure of respondent to establish that Formal Assessment Notice No. IT-17316-99-03-282 had
been released, mailed or sent within the three (3)-year prescriptive period under Section 203 of the NIRC
of 1997, the right of the Government to assess the subject tax has prescribed
CIR v. Phoenix Assurance Co., Ltd
Facts: Phoenix Assurance Co. Ltd., a foreign insurance corporation organized under the laws of Great
Britain, is licensed to do business in the Philippines with head office in London. Through its head office it
entered, in London, into worldwide reinsurance treaties with various foreign insurance companies. It
agreed to cede a portion of premiums received on original insurances underwritten by its head office,
subsidiaries, and branch offices throughout the world, in consideration for assumption by the foreign

insurance companies of an equivalent portion of the liability from such original insurances. Pursuant to
such reinsurance treaties,
Phoenix Assurance Co., Ltd. ceded portions of the premiums it earned from its underwriting business in
the Philippines (1952, P316,526.75; 1953, P246,082.04; 1954, P203,384.69) upon which the CIR , by
letter of 6 May 1958, assessed withholding tax totaling P183,838.42 (1952, P75,966.42; 1953,
59,059.68; 1954, 48,812.32). On 1 April 1951, Phoenix Assurance filed its Philippine income tax return
for 1950, claiming therein, among others, a deduction of P37,147.04 as net addition to marine insurance
reserve equivalent to 40% of the gross marine insurance premiums received during the year. The
Commissioner disallowed P11,772.57 of such claim for deduction and subsequently assessed against
Phoenix Assurance the sum of P1,884.00 as deficiency income tax. The disallowance resulted from the
fixing by the Commissioner of the net addition to the marine insurance reserve at 100% of the marine
insurance premiums received during the last three months of the year. The Commissioner assumed that
ninety and thirty days are approximately the length of time required before shipments reach their
destination or before claims are received by the insurance companies. On 1 April 1953 Phoenix
Assurance filed its Philippine income tax return for 1952, declaring therein a deduction from gross income
of P35,912.25 as part of the head office expenses incurred for its Philippine business, computed at 5% on
its gross Philippine income. On 30 August 1955 it amended its income tax return for 1952 by excluding
from its gross income the amount of P316,526.75 representing reinsurance premiums ceded to foreign
reinsurers and further eliminating deductions corresponding to the ceded premiums. The amended return
showed an income tax due in the
amount of P2,502.00. The Commissioner disallowed P15,826.35 of the claimed deduction for head office
expenses and assessed a deficiency tax of P5,667.00 on 24 July 1958. On 30 April 1954 Phoenix
Assurance filed its Philippine income tax return for 1953 and claimed therein a deduction from gross
income of P33,070.88 as head office expenses allocable to its Philippine business, equivalent to 5% of its
gross Philippine income. On 30 August 1955 it amended its 1953 income tax return to exclude from its
gross income the amount of P246,082.04 representing reinsurance premiums ceded to foreign
reinsurers. At the same time it requested the refund of P23,409.00 as overpaid income tax for 1953. To
avoid the prescriptive period provided for in Section 306 of the Tax Code, it filed a petition for review on
11 August 1956 in the Court of Tax Appeals praying for such refund. After verification of the amended
income tax return the Commissioner disallowed P12,304.10 of the deduction representing head office
expenses allocable to Philippine business thereby reducing the refundable amount to P20,180.00. On 29
April 1955 Phoenix Assurance filed its Philippine income tax return for 1954 claiming therein, among
others, a deduction from gross income of P29,624.75 as head office expenses allocable to its Philippine
business, computed at 5% of its gross Philippine income. It also excluded from its gross income the
amount of P203,384.69 representing reinsurance premiums ceded to foreign reinsurers not doing
business in the Philippines. On 1 August 1958 the Bureau of Internal Revenue released an assessment
for deficiency income tax for the years 1952 and 1954 against Phoenix Assurance amounting to P2,847.
The assessment resulted from the disallowance of a portion of the deduction claimed by Phoenix
Assurance as head office expenses allocable to its business in the Philippines fixed by the Commissioner
at 5% of the net Philippine income instead of 5% of the gross Philippine income as claimed in the
returns. Phoenix Assurance protested against the assessments for withholding tax and deficiency income
tax. However, the Commissioner denied such protest.
Subsequently, Phoenix Assurance appealed to the Court of Tax Appeals (CTA Cases 305 and 543). In a
decision dated 14 February 1962, the Court of Tax Appeals allowed in full the deduction claimed by
Phoenix Assurance for 1950 as net addition to marine insurance reserve; determined the allowable head
office expenses allocable to Philippine business to be 5% of the net income in the Philippines; declared
the right of the Commissioner to assess deficiency income tax for 1952 to have prescribed; absolved
Phoenix Assurance from payment of the statutory penalties for non-filing of withholding tax return. Thus,
the court ordered Phoenix Assurance to pay the Commissioner the respective amounts of P75,966.42,
P59,059.68 and P48,812.32, as withholding tax for the years 1952, 1953 and 1954, and P2,847.00 as
income tax for 1954, or the total sum of P186,685.42 within 30 days from the date the decision becomes
final. Upon the other hand, the Commissioner was ordered to refund to Phoenix Assurance the sum of
P20,180.00 as overpaid income tax for 1953, which sum is to be deducted from the total sum of
P186,685.42 due as taxes; and ordered further that if any amount of the tax is not paid within the time
prescribed, there shall be collected a surcharge of 5%

of the tax unpaid, plus interest at the rate of 1% a month from the date of delinquency to the date of
payment, provided that the maximum amount that may be collected as interest shall not exceed the
amount corresponding to a period of 3 years; without pronouncement as to costs. Both parties appealed
to the Supreme Court.
The Supreme Court modified the decision appealed from, and ordered Phoenix Assurance to pay the
Commissioner the amount of P75,966.42, P59,059.68 and P48,812.32 as withholding tax for the years
1952, 1953 and 1954, respectively, and the sums of P5,667.00 and P2,847.00 as income tax for 1952
and 1954 or a total of P192,352.42; and ordered the Commissioner to refund to Phoenix Assurance the
amount of P20,180.00 as overpaid income tax for 1953, which should be deducted from the amount of
P192,352.42; and ordered further that if the amount of P192,352.42 or a portion thereof is not paid
within 30 days from the date
the judgment becomes final, there shall be collected a surcharge and interest as provided for in Section
51 (e) (2) of the Tax Code. No costs.
HELD:
1. British Traders Insurance vs. CIR; Reinsurance premiums ceded to foreign reinsurers not doing
business in the Philippines pursuant to contracts executed abroad are income from sources within the
Philippines subject to withholding tax The question of whether reinsurance premiums ceded to foreign
reinsurers not doing business in the Philippines pursuant to contracts executed abroad are income from
sources within the Philippines subject to withholding tax under Section 53 and 54 of the Tax Code has
already been resolved in the affirmative in British Traders Insurance Co. Ltd. vs. CIR , L-20501, 30 April
1965.

6. Section 186 of the Insurance Law


Section 186 of the Insurance Law requires the setting up of reserves for liability on marine insurance,
thus . . . Provided, That for marine risks the insuring company shall be required to charge as the liability
for reinsurance fifty per centum of the premiums written in the policies upon yearly risks, and the full
premiums written in the policies upon all other marine risks not terminated.
7. Determination of the required reserve for marine insurance The reserve required for marine insurance
is determined on two bases: 50% of premiums under policies on yearly risks and 100% of premiums
under policies of marine risks not terminated during the year. Section 32 (a) of the Tax Code allows the
full amount of such reserve to be deducted from gross income. In the present case, the formulas for
determining the marine reserve employed by Phoenix Assurance and the Commissioner (40% of
premiums received during the year and 100% of premiums received during the last three months of the
year, respectively) do not comply with Section 186. Said determinations run short of the requirement.
For purposes of the Insurance Law, the Court therefore cannot countenance the same. Phoenix
Assurances claim for deduction of P37,147.04 being less than the amount required in Section 186 of the
Insurance Law, the same cannot be and is not excessive, and should therefore be fully allowed.

8. Purpose of the reserve; What is prohibited by income tax law The reserve called for in Section 186 is a
safeguard to the general public and should be strictly followed not only because it is an express provision
but also as a matter of public policy. However, for
income tax purposes a taxpayer is free to deduct from its gross income a lesser amount, or not to claim
2. Section 331 of the Tax Code; Period of limitation upon assessment and collection Section 331 of the any deduction at all. What is prohibited by the income tax law is to claim a deduction beyond the amount
Tax Code, which limits the right of the CIR to assess income tax within five years from the filing of the authorized therein. *
income tax return, states: Except as provided in the succeeding section, internal-revenue taxes shall be
assessed within five years after the return was filed, and no proceeding in court without assessment for 9. Items of income not belonging to the companys Philippine business excluded from head office
the collection of such taxes shall be begun after the expiration of such period. For the purposes of this expenses allocable to Philippine Branch; Paragraph 2, subsection (a), Section 30 of the Tax Code The
section a return filed before the last day prescribed by law for the filing thereof shall be considered as gross income of Phoenix Assurance consists of income from its Philippine business as well as reinsurance
filed on such last day: Provided, That this limitation shall not apply to cases already investigated prior to premiums received for its head office in London and reinsurance premiums ceded to foreign reinsurers.
the approval of this Code.
Since the items of income not belonging to its Philippine business are not taxable to its Philippine branch,
they should be excluded in determining the head office expenses allocable to said Philippine branch. This
3. Running of the prescriptive period commence from filing of original return The Court of Tax Appeals conclusion finds support in paragraph 2, subsection (a), Section 30 of the Tax Code, which provides that
ruled that the original return was a complete return containing information on various items of income Expenses allowable to non-resident alien individuals and foreign corporations. In the case of a nonand deduction from which respondent may intelligently compute and determine the tax liability of resident alien individual or a foreign corporation, the expenses deductible are the necessary expenses
petitioner, hence, the prescriptive period should be counted from the filing of said original
paid or incurred in carrying on any business or trade conducted within the Philippines exclusively.
return; the view which the Supreme Court sustains. The object of the Tax Code is to impose taxes for the Consequently, the deficiency assessments for 1952, 1953 and 1954, resulting from partial disallowance
needs of the Government, not to enhance tax avoidance to its prejudice. To hold otherwise would pave of deduction representing head office expenses, are sustained.
the way for taxpayers to evade the payment of taxes by simply reporting in their original return heavy
losses and amending the same more than five years later when the CIR has lost his authority to assess 10. Interest on tax payment; Absolution based on equitable ground
the proper tax thereunder.
The imposition of interest on unpaid taxes is one of the statutory penalties for tax delinquency, from the
payments of which the Court of Tax Appeals absolved the Phoenix Assurance on the equitable ground
4. Right of Commissioner to assess the deficiency tax has not prescribed Considering that the deficiency that the latters failure to pay the withholding tax was due to the Commissioners opinion that no
assessment was based on the amended return which, as aforestated, is substantially different from the withholding tax was due. Consequently, the taxpayer could be liable for the payment of statutory
original return, the period of limitation of the right to issue the same should be counted from the filing of penalties only upon its failure to comply with the Tax Courts judgment rendered on 14 February 1962,
the amended income tax return. From August 30, 1955, when the amended return was filed, to July 24, after Republic Act 2343 took effect. This part of the ruling of the court ought not to be disturbed.
1958, when the deficiency assessment was issued, less than five years elapsed. The right of the --------------------
Commissioner to assess the deficiency tax on such amended return has not prescribed.
CIR v. BF Goodrich Philippines
5. Section 32, paragraph (a) of the Tax Code Special provisions regarding income and deductions of Facts: Private respondent BF Goodrich Philippines Inc. was an American corporation prior to July 3,
insurance companies, whether domestic or foreign, Special deductions allowed to insurance companies 1974. As a condition for approving the manufacture of tires and other rubber products, private
Paragraph (a) of Section 32 of the Tax Code states In the case of insurance companies, except domestic respondent was required by the Central Bank to develop a rubber plantation. In compliance therewith,
life insurance companies and foreign life insurance companies doing business in the Philippines, the net private respondent bought from the government certain parcels of land in Tumajubong Basilan, in 1961
additions, if any, required by law to be made within the year to reserve funds and the sums other than
under the Public Land Act and the Parity Amendment to the 1935 constitution, and there developed a
dividends paid within the year on policy and annuity contracts may be deducted from their gross income: rubber plantation.
Provided, however, That the released reserve be treated as income for the year of release.

On August 2, 1973, the Justice Secretary rendered an opinion that ownership rights of Americans over
Public agricultural lands, including the right to dispose or sell their real estate, would be lost upon
expiration on July 3, 1974 of the Parity Amendment. Thus, private respondent sold its Basilan land
holding to Siltown Realty Phil. Inc., (Siltown) for P500,000 on January 21, 1974. Under the terms of the
sale, Siltown would lease the property to private respondent for 25 years with an extension of 25 years
at the option of private respondent.
Private respondent books of accounts were examined by BIR for purposes of determining its tax
liability for 1974. This examinationresulted in the April 23, 1975 assessment of private respondent for
deficiency income tax which it duly paid. Siltowns books of accounts were also examined, and on the
basis thereof, on October 10, 1980, the Collector of Internal Revenue assessed deficiency donors tax of
P1,020,850 in relation to said sale of the Basilan landholdings.
Private respondent contested this assessment on November 24, 1980. Another assessment dated March
16, 1981, increasing the amount demanded for the alleged deficiency donors tax, surcharge, interest
and compromise penalty and was received by private respondent on April 9, 1981. On appeal, CTA
upheld the assessment. On review, CA reversed the decision of the court finding that the assessment was
made beyond the 5-year prescriptive period in Section 331 of the Tax Code.
Issue: Whether or not petitioners right to assess has prescribed.

about to prescribe. Lastly, it did not contain the date of acceptance by the CIR , a requisite necessary to
determine whether the waiver was validly accepted before the expiration of the original three-year
period. Bear in mind that the waiver in question is a bilateral agreement, thus necessitating the very
signatures of both the Commissioner and the taxpayer to give birth to a valid agreement.
-----------------CIR vs. KUDOS METAL CORPORATION
FACTS:
Kudos Metal Corporation filed its Income Tax Return (ITR) on April 1999 for taxable year 1998. However,
pursuant to Letter of Authority, the BIR issued three notices of Presentation of Records to Kudos but
Kudos did not comply with the said notice. The BIR then issued subpoena duces tecum, thus the review
and audit of the record ensued.
However, on December 2001, Pasco, the accountant of Kudos executed an affidavit of Waiver of
Prescription duly notarized and was received by BIR and accepted the same by Assistant Commissioner
Salazar. Pasco executed second waiver on February 2003 following the process undergone by the first
waiver she executed.
The BIR later issued a Preliminary Notice of Assessment followed by Formal Demand letter to Kudos
asking them to settle their tax liabilities for the year 2008 covering the following:
Income Tax
9,693,897.85
VAT
13,962,460.90
EWT
1,712,336.76
Withholding Compensation Tax
247,353.24
Penalties
8,000.00
TOTAL
25,624,048.76

Held: Applying then Sec. 331, NIRC (now Sec. 203, 1997 NIRC which provides a 3-year prescriptive
period for making assessments), it is clean that the October 16, 1980 and March 16, 1981 assessments
were issued by the BIR beyond the 5-year statute of limitations. The court thoroughly studied the records
of this case and found no basis to disregard the 5-year period of prescription, expressly set under Sec.
331 of the Tax Code, the law then in force.
For the purpose of safeguarding taxpayers from any unreasonableexamination, investigation
or assessment, our tax law provides astatute of limitations in the collection of taxes. Thus, the law or
prescription, being a remedial measure, should be liberally construed in order to afford such protection. On appeal, the Court of Tax Appeal en banc affirmed the decision of the CTA Second Division ruling that
As a corollary, the exceptions to the law on prescription should perforce be strictly construed.
the governments right to assess taxes has already prescribed. BIR appealed then appealed to the
------------------Supreme Court.
CIR , vs. FMF DEVELOPMENT CORPORATION. [G.R. No. 167765. June 30, 2008.]

ISSUE:
Whether or not the right of the government to assess taxes has already prescribed despite the waivers
Facts: FMF filed its Corporate Annual Income Tax Return for taxable year 1995 and declared a loss of executed by the accountant of Kudos.
P3,348,932. On May 8, 1996, however, it filed an amended return and declared a loss of P2,826,541.
The BIR then sent FMF pre-assessment notices, all dated October 6, 1998, informing it of its alleged tax HELD:
liabilities. 4 FMF filed a protest against these notices with the BIR and requested for a Supreme Court affirmed the decision of the CTA en banc stating that Section 222 of tax code provide that
reconsideration/reinvestigationFMF President Enrique Fernandez executed a waiver of the three-year the period to assess and collect taxes may only be extended upon written agreement between the CIR
prescriptive period for the BIR to assess internal revenue taxes, hence extending the assessment period. and the taxpayer following the procedures laid down on RMO 20.90 and RDAO 05-01 such as:
The waiver was accepted and signed by RDO Zambarrano. FMF received amended pre-assessment
1. Waiver must in official form and the expiration period must be stated.
notices 5 dated October 6, 1999 from the BIR. FMF immediately filed a protest on November 3, 1999 but
2. Waiver must be notarized and must be signed by the duly authorized representative in case
on the same day, it received BIR's Demand Letter and Assessment Notice No. 33-1-00487-95 dated
of representation.
October 25, 1999 reflecting FMF's alleged deficiency taxes and accrued interests. FMF filed a letter of
3. The revenue officer must sign the waiver indicating that the BIR has accepted and agreed to
protest on the assessment invoking, inter alia, 7 the defense of prescription by reason of the invalidity of
the waiver.
the waiver. In its reply, the BIR insisted that the waiver is valid because it was signed by the RDO, a duly
4. Both the date of execution by the taxpayer and the acceptance by the revenue officer
authorized representative of petitioner. It also ordered FMF to immediately settle its tax liabilities;
should be before the expiration of the period agreed upon in case of subsequent waiver.
otherwise, judicial action will be taken. Treating this as BIR's final decision, FMF filed a petition for review
5. The fact of receipt by the taxpayer of his file copy must be indicated din the original.
with the CTA challenging the validity of the assessment. CTA and CA ruled in favor of respondent.
In the above case, there is not written authorization given by the management of Kudos to Pasco to
Issue/ Held: W/N the waiver is valid- NO
execute such waiver. The date of execution of the waiver was not indicated to show if it was executed
before the lapsed of the agreed period in the first waiver. The fact of the acceptance of the file copy of
Ratio: Applying RMO No. 20-90, the waiver in question here was defective and did not validly extend the the taxpayer was not indicated on the original. The second waiver was filed after the lapsed of the agreed
original three-year prescriptive period. Firstly, it was not proven that respondent was furnished a copy of period in the first waiver which was on December 2002. These shows that the waivers were incomplete
the BIR-accepted waiver. Secondly, the waiver was signed only by a revenue district officer, when it and defective thus not in accordance with the procedures provided for. Thus, due to the defective
should have been signed by the Commissioner as mandated by the NIRC and RMO No. 20-90, waivers, the prescriptive period of 3-years was not extended and it remained 3 years in this case thus
considering that the case involves an amount of more than P1 million, and the period to assess is not yet the governments right as already prescribed making the assessment in effective.

-------------------National Marketing Corporation (NAMARCO) v. Tecson

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.

On 10/14/55, the CFI-Mla. rendered judgment in a civil case, Price Stabilization Corp. vs. Tecson, et al.
Copy of this decision was, on 10/21/55 served upon defendants in said case. On 12/21/65, NAMARCO, as
successor to all the properties, assets, rights, and choses in action of Price, as pltff in that case and
judgment creditor therein, filed w/ the same court, a complaint against defendants for the revival of the
judgment rendered therein. Def. Tecson moved to dismiss said complaint, upon the ground of
prescription of action, among others. The motion was granted by the court. Hence, the appeal to the CA
w/c was certified to the SC, upon the ground that the only question raised therein is one of law.

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.

HELD:
The very conclusion thus reached by appellant shows that its theory contravenes the explicit provision of
Art. 13 limiting the connotation of each "year"-- as the term is used in our laws-- to 365 days.
[The action to enforce a judgment which became final on December 21, 1955 prescribes in 10 years.
Since the Civil Code computes "years" in terms of 365 days each, the action has prescribed on December
19, 1955, since the two intervening leap years added two more days to the computation. It is not the
calendar year that is considered.]
---------------------

On June 20, 1990, Lucas Adamson and AMC sold 131,897 common shares of stock in Adamson and
Adamson, Inc. (AAI) to APAC Holding Limited (APAC). The shares were valued atP7,789,995.00. On June
22, 1990, P159,363.21 was paid as capital gains tax for the transaction.

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
ISSUE: W/n the present action for the revival of a judgment is barred by the statute of limitations.
the final adjusted return.
We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the
Pursuant to Art. 1144 (3), NCC, an action for judgment must be brought w/in 10 yrs from the time the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the
judgment sought to be revived has become final. This in turn, took place on 12/21/55 or 30 days from reglementary period
notice of the judgment-- w/c was received by defendants on 10/21/55-- no appeal having been taken --------------------therefrom. The issue is thus confined to the date on w/c the 10 yrs from 12/21/55 expired. Pltff alleges
that it was 12/21/65, but appellee maintains otherwise, because :when the law speaks of years xxx it
shall be understood that years are of 365 days each"-- and, in 1960 and 1964 being leap years, so that Adamson, et al. v. Court of Appeals
10 yrs of 365 days each, or an aggregate of 3650 days, from 12/21/55, expired on 12/19/65.
FACTS:
Plaintiff.-appellant further insists that there is no question that when it is not a leap year, 12/21 to 12/21 Case involves a petition for review on certiorari filed by petitioners LUCAS G. ADAMSON, THERESE JUNE
of the following year is one year. If the extra day in a leap year is not a day of the year, bec. it is the D. ADAMSON, and SARA S. DE LOS REYES (private respondents), in their respective capacities as
366th day, then to what year does it belong? Certainly, it must belong to the year where it falls, and president, treasurer and secretary of Adamson Management Corporation (AMC) against then CIR
therefore, that the 366 days constitute one yr.
Liwayway Vinzons-Chato (COMMISSIONER).

CIR v. Primetown Property Group


GR 161155; August 28, 2007
Facts:
Gilbert Yap, vice chair of respondent Primetown Property Group, Inc., applied for the refund or credit of
income tax respondents 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.

On October 12, 1990, AMC sold to APAC Philippines, Inc. another 229,870 common shares of stock
in AAI for P17,718,360.00. AMC paid the capital gains tax of P352,242.96.
On October 15, 1993, the Commissioner issued a Notice of Taxpayer to AMC, Lucas G. Adamson,
Therese June D. Adamson and Sara S. de los Reyes, informing them of deficiencies on their payment of
capital gains tax and Value Added Tax (VAT).
A deficiency tax assessment was issued against Petitioners relating to their payment of capital gains tax
and VAT on their sale of shares of stock and parcels of land. Subsequent to the preliminary conference,
the CIR filed with the Department of Justice her Affidavit of Complaint against Petitioners. The Court of
Appeals ultimately ruled that, in a criminal prosecution for tax evasion, assessment of tax deficiency is
not required because the offense of tax evasion is complete or consummated when the offender has
knowingly and willfully filed a fraudulent return with intent to evade the tax.
ISSUES:
(1) Dis the CIR issue an assessment?
(2) Must a criminal prosecution for tax evasion be preceded by a deficiency tax assessment?
(3) Does the CTA have jurisdiction on the case?

HELD:
(1) NO. The recommendation letter of the Commissioner cannot be considered a formal assessment as
(a) it was not addressed to the taxpayers; (b) there was no demand made on the taxpayers to pay the
Issue:
Whether or not the counting of the 2-year prescriptive period for filing claim of refund is tax liability, nor a period for payment set therein; (c) the letter was never mailed or sent to the
governed by the Civil Code.

taxpayers by the Commissioner. It was only an affidavit of the computation of the alleged liabilities and CIR V. ISABELA CULTURAL CORP. (515 SCRA 556)
thus merely served as prima facie basis for filing criminal informations.
Facts:
When the Bureau of Internal Revenue disallowed Isabela Cultural Corporations claimed deductions for
(2) YES. When fraudulent tax returns are involved as in the cases at bar, a proceeding in court after the the years 1984-1986 in their 1986 taxes for expense deductions, to wit:
collection of such tax may be begun without assessment considering that upon investigation of the
(1) Expenses for auditing services for the year ending 31 December 1985;
examiners of the BIR, there was a preliminary finding of gross discrepancy in the computation of the
(2) Expenses for legal services for the years 1984 and 1985; and
capital gains taxes due from the transactions. The Tax Code is clear that the remedies may proceed
(3) Expense for security services for the months of April and May 1986.
simultaneously.
As such, the former charged the latter for deficiency income taxes. Isabela Cultural Corporation contests
the assessment.
(3) NO. While the laws governing the CTA have expanded the jurisdiction of the Court, they did not Issues and Ruling:
change the jurisdiction of the CTA to entertain an appeal only from a final decision of the Commissioner,
1. For a taxpayer using the accrual method, when do the facts present themselves in such a
or in cases of inaction within the prescribed period. Since in the cases at bar, the Commissioner has not
manner that the taxpayer must recognize income or expense?
issued an assessment of the tax liability of the Petitioners, the CTA has no jurisdiction.
The accrual of income and expense is permitted when the all-events test has been met. This test
------------------requires: (1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable
accurate determination of such income or liability. The test does not demand that the amount of income
or liability be known absolutely, only that a taxpayer has at his disposal the information necessary to
compute the amount with reasonable accuracy. The all-events test is satisfied where computation
remains uncertain, if its basis is unchangeable; the test is satisfied where a computation may be
BPI v CIR
unknown, but is not as much as unknowable, within the taxable year.
G.R No. 139786 October 17, 2005
2. W/N the deductions were properly claimed by Isabela Cultural Corporation.
The deductions for expenses for professional fees consisting of expenses for legal and auditing services
Facts: The BIR issued an Assessment for a deficiency of Documentary Stamp Tax (DST). The petitioner are NOT allowable. However, the deductions for expenses for security services were properly claimed by
filed a protest letter, requesting for reconsideration with BIR however the latter did not reply. Instead, Isabela Cultural Corporation. For the legal and auditing services, Isabela Cultural Corporation could have
BIR issued a warrant for distraint/levy against petitioner BPI. The petitioner did not hear from BIR until reasonably known the fees of those firms that it hired, thus satisfying the all-events test. As such, per
September 11, 1997 when then Commissioner Liwayway Vinzons-Chado, denied its request for Revenue Audit Memorandum Order No. 1-2000, they cannot validly be deducted from its gross income
reconsideration.
for the said year and were therefore properly disallowed by the BIR. As for the security services, because
Subsequently, the petitioner filed a petition for review with the CTA, raising the defense of they were incurred in 1986, they could be properly claimed as deductions for the said year.
prescription. The CTA denied the petition and held that the period of prescription had not yet prescribed
nonetheless, it held that the petitioner was not liable for the deficiency of DST.
Notes:
On appeal, the CA reversed the ruling of CTA on the issue of DST tax and held that the The requisites for the deductibility of ordinary and necessary trade, business, or professional expenses,
petitioner was indeed liable for DST.
like expenses paid for legal and auditing services, are:
a. The expense must be ordinary and necessary;
ISSUE: Whether or not the right of the respondent to collect from petitioner BPI is barred by
b. It must have been paid or incurred during the taxable year;
prescription?
c. It must have been paid or incurred in carrying on the trade or business of the taxpayer; and
d. It must be supported by receipts, records, or other pertinent papers.
Held: Yes, the Court ruled that the period to collect has already prescribed. The BIR has three years, Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting,
counted from the date of actual filing of the return or from the last date prescribed by law for the filing of expenses not being claimed as deductions by a taxpayer in the current year when they are incurred
such return, whichever comes later, to assess a national internal revenue tax or to begin a court cannot be claimed as deduction from income for the succeeding year. Thus, a taxpayer who is authorized
proceeding for the collection thereof without an assessment. In case of a false or fraudulent return with to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot
intent to evade tax or the failure to file any return at all, the prescriptive period for assessment of the tax deduct the same for the next year.
due shall be 10 years from discovery by the BIR of the falsity, fraud, or omission. When the BIR validly ---------------------issues an assessment, within either the three-year or ten-year period, whichever is appropriate, then the Advertising Associates, Inc. v. Court of Appeals (fulltext)
BIR has another three years after the assessment within which to collect the national internal revenue This case is about the liability of Advertising Associates, lnc. for P382,700.16 as 3% contractor's
tax due thereon by distraint, levy, and/or court proceeding. The assessment of the tax is deemed made percentage tax on its rental income from the lease of neon signs and billboards imposed by section 191
and the three-year period for collection of the assessed tax begins to run on the date the assessment of the Tax Code.
notice had been released, mailed or sent by the BIR to the taxpayer.
The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's
In their Decisions, both the CTA and the Court of Appeals found that the filing by petitioner BPI tax for 1967-1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest)
of a protest letter suspended the running of the prescriptive period for collecting the assessed DST. This on its income from billboards and neon signs.
Court, however, takes the opposing view, and, based on the succeeding discussion, concludes that there The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its
is no valid ground for suspending the running of the prescriptive period for collection of the deficiency primary purpose is to engage in general advertising business. Its income tax returns indicate that its
DST assessed against petitioner BPI.
business was advertising
The statute of limitations on assessment and collection of taxes is for the protection of the Advertising Associates contested the assessments in its 'letters of June 25, 1973 (for the 1967-71
taxpayer and, thus, shall be construed liberally in his favor.
deficiency taxes) and March 7, 1974 (for the 1972 deficiency). The Commissioner reiterated the
---------------------assessments in his letters of July 12 and September 16,1974.

10

The taxpayer requested the cancellation of the assessments in its letters of September 13 and November
21, 1974 (p. 3, Rollo). Inexplicably, for about four years there was no movement in the case. Then, on
March 31, 1978, the Commissioner resorted to the summary remedy of issuing two warrants of distraint,
directing the collection enforcement division to levy on the taxpayer's personal properties as would be
sufficient to satisfy the deficiency taxes (pp. 4, 29 and 30, Rollo). The warrants were served upon the
taxpayer on April 18 and May 25, 1978.
More than a year later, Acting Commissioner Efren I. Plana wrote a letter dated May 23, 1979 in answer
to the requests of the taxpayer for the cancellation of the assessments and the withdrawal of the
warrants of distraint.
He justified the assessments by stating that the rental income of Advertising Associates from billboards
and neon signs constituted fees or compensation for its advertising services. He requested the taxpayer
to pay the deficiency taxes within ten days from receipt of the demand; otherwise, the Bureau would
enforce the warrants of distraint. He closed his demand letter with this paragraph:
This constitutes our final decision on the matter. If you are not agreeable, you may
appeal to the Court of Tax Appeals within 30 days from receipt of this letter.
Advertising Associates received that letter on June 18, 1979. Nineteen days later or on July 7, it filed its
petition for review. In its resolution of August 28, 1979, the Tax Court enjoined the enforcement of the
warrants of distraint.
The Tax Court did not resolve the case on the merits. It ruled that the warrants of distraint were the
Commissioner's appealable decisions. Since Advertising Associates appealed from the decision of May 23,
1979, the petition for review was filed out of time. It was dismissed. The taxpayer appealed to this Court.
We hold that the petition for review was filed on time. The reviewable decision is that contained in
Commissioner Plana's letter of May 23, 1979 and not the warrants of distraint.
No amount of quibbling or sophistry can blink the fact that said letter, as its tenor shows, embodies the
Commissioner's final decision within the meaning of section 7 of Republic Act No. 1125. The
Commissioner said so. He even directed the taxpayer to appeal it to the Tax Court. That was the same
situation in St. Stephen's Association and St. Stephen's Chinese Girl's School vs. Collector of Internal
Revenue, 104 Phil. 314, 317-318.
The directive is in consonance with this Court's dictum that the Commissioner should always indicate to
the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed
assessment. That procedure is demanded by the pressing need for fair play, regularity and orderliness in
administrative action (Surigao Electric Co., Inc. vs. Court of Tax Appeals, L-25289, June 28, 1974, 57
SCRA 523).
On the merits of the case, the petitioner relies on the Collector's rulings dated September 12, 1960 and
June 20, 1967 that it is neither an independent contractor nor a business agent (Exh. G and H).
As already stated, it considers itself a media company, like a newspaper or a radio broadcasting
company, but not an advertising agency in spite of the purpose stated in its articles of incorporation. It
argues that its act of leasing its neon signs and billboards does not make it a business agent or an
independent contractor. It stresses that it is a mere lessor of neon signs and billboards and does not
perform advertising services.
But the undeniable fact is that neon signs and billboards are primarily designed for advertising. We hold
that the petitioner is a business agent and an independent contractor as contemplated in sections 191
and 194(v).
However, in view of the prior rulings that the taxpayer is not a business agent nor an independent
contractor and in view of the controversial nature of the deficiency assessments, the 25% surcharge
should be eliminated (C. M. Hoskins & Co., Inc. vs. CIR , L-28383, June 22, 1976, 71 SCRA 511, 519;
Imus Electric Co., Inc. vs. CIR , 125 Phil. 1084).
Petitioner's last contention is that the collection of the tax had already prescribed. Section 332 of the
1939 Tax Code, now section 319 of the 1977 Tax Code, Presidential Decree No. 1158, effective on June
3, 1977, provides that the tax may be collected by distraint or levy or by a judicial proceeding begun
'within five years after the assessment of the tax".
The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The
warrants of distraint were served upon it on April 18 and may 25,1978 or within five years after the
assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period.
Its enforcement was not implemented because of the pending protests of the taxpayer and its requests

for withdrawal of the warrants which were eventually resolved in Commissioner Plana's letter of May 23,
1979.
It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He
relied on the warrants of distraint to interrupt the running of the statute of limitations. He gave the
taxpayer ample opportunity to contest the assessments but at the same time safeguarded the
Government's interest by means of the warrants of distraint.
WHEREFORE, the judgment of the Tax Court is reversed and set aside. The Commissioner's deficiency
assessments are modified by requiring the petitioner to pay the tax proper and eliminating the 25%
surcharge, interest and penalty. In case of non-payment, the warrants of distrant should be
implemented. The preliminary injunction issued by the Tax Court on August 28, 1979 restraining the
enforcement of said warrants is lifted. No costs.
YABES vs. FLOJO
Facts:
Doroteo Yabes of Calamaniugan Cagayan, is an exclusive dealer of products of the International
Harvester Macleod, Inc., received on or about May 1, 1962, a letter from the CIR dated March 27, 1962,
demanding payment of the amount of P15,976.81, as commercial broker's fixed and percentage taxes
plus surcharges and the sum of P2,530 as compromise penalty allegedly due from Yabes for the years
1956-1960; On May 11, 1962, Doroteo Yabes, through his counsel, filed with the Commissioner's Office
his letter protesting the assessment of commercial broker's fixed and percentage taxes plus penalties
against him on the ground that his agreements with the International Harvester Macleod, Inc. were of
purchase and sale, and not of agency, hence he claimed he was not able to pay such kind of
taxes; Thereafter, there ensued an exchange of correspondence between the lawyers of Doroteo Yabes
and the Commissioner; the Commissioner in a letter dated August 3, 1962, informed Doroteo Yabes that
he acted as a commercial broker "in accordance with the ruling of this Office in the case of Cirilo D.
Constantino;" in turn, Doroteo Yabes, in a letter dated August 22, 1962, requested for the
reinvestigation, or review of the case by the appellate division of the Bureau of Internal Revenue in
accordance with standing rules, regulations or practice on the matter; Yabes also wrote the
Commissioner on August 24, 1962, requesting that the appeal be held in abeyance pending final decision
of the Case of Cirilo D. Constantino; in reply, the Commissioner informed Doroteo Yabes in a letter dated
September 18, 1962, that the latter's request for reinvestigation was denied on the ground that he has
"not submitted any evidence to offset the findings of this Office as to warrant a reinvestigation
thereof, but eight days later or on September 26, 1962, the Commissioner wrote a letter advising
Doroteo Yabes that "the administrative appeal ... will be held in abeyance pending the resolution of the
issues in a similar case (obviously referring to the aforesaid Constantino case)"; To give time for the
Commissioner to study the case and several other cases similar thereto, the lawyers of Doroteo Yabes
agreed to file, and their client, Doroteo Yabes did file a tax waiver on October 20, 1962, extending the
period of prescription to December 31, 1967; Then Doroteo Yabes died and no estate proceedings were
instituted for the settlement of his estate; his widow also died during the pendency of the case; the
petitioners are the children of the deceased taxpayer. On March 14, 1966, the Court of Tax Appeals
decided the Constantino "test" case. The Court of Tax Appeals ruled that agreements entered into by
Constantino with the International Harvester Macleod, Inc. were of purchase and sale, and not of agency,
hence no commercial broker's fixed and percentage fees could be collected from the said taxpayer.
However this Court on February 27, 1970, in G.R. No. L-25926 reversed the Court of Tax Appeals and
ruled in favor of the CIR . After a lapse of about five years, the heirs of the deceased Doroteo Yabes,
through their lawyers, received a letter from the Commissioner dated July 27, 1967, requesting that they
"waive anew the Statute of Limitations" and further confirming the previous understanding that the final
resolution of the protest of the deceased Doroteo Yabes was "being held in abeyance until the Supreme
Court renders its decision on a similar case involving the same factual and legal issues brought to it on
appeal" (referring to the Constantino "test" case); conformably with the request of the Commissioner,
the heirs of Doroteo Yabes filed a revised waiver further extending the period of prescription to
December 31, 1970. Thereafter, no word was received by the petitioners or their lawyers during the
interim of more than three (3) years, but on January 20, 1971, petitioners as heirs of the deceased
Doroteo Yabes received the summons and a copy of the complaint filed by the Commissioner. Taking the

11

complaint as the final decision of the Commissioner on the disputed assessment against the deceased
taxpayer Doroteo Yabes, petitioners filed on February 12, 1971, a petition for review of said disputed
assessment with the Court of Tax Appeals; 18 later on the same day, February 12, 1971, petitioners filed
their answer to the complaint of the Commissioner before the Court of First Instance of Cagayan; 19 and
alleged therein, by way of special defense, that the Court of Tax Appeals has exclusive jurisdiction of the
action and that there is another action of the same nature between the parties relating to the same
assessment pending before the Court of Tax Appeals;
ISSUE: Whether or not the assessment made by the CIR against the deceased taxpayer Doroteo Yabes,
as contained in the letter dated March 27, 1962, has become final, executory and incontestable, after
Doroteo Yabes had received the Commissioner's letter dated August 3, 1962, denying the latter's protest
against the said assessment on September 18, 1962 and his failure to appeal therefrom within the 30day period contemplated under Section 11, of Republic Act 1125.
Held: NO.
There is no reason for Us to disagree from or reverse the Court of Tax Appeals' conclusion that under the
circumstances of this case, what may be considered as final decision or assessment of the Commissioner
is the filing of the complaint for collection in the respondent Court of First Instance of Cagayan, the
summons of which was served on petitioners on January 20, 1971, and that therefore the appeal with
the Court of Tax Appeals in CTA Case No. 2216 was filed on time. 36 The respondent Court of First
Instance of Cagayan can only acquire jurisdiction over this case filed against the heirs of the taxpayer if
the assessment made by the CIR had become final and incontestable. If the contrary is established, as
this Court holds it to be, considering the aforementioned conclusion of the Court of Tax Appeals on the
finality and incontestability of the assessment made by the Commissioner is correct, then the Court of
Tax Appeals has exclusive jurisdiction over this case. Petitioners received the summons in Civil Case No.
II-7 of the respondent Court of First Instance of Cagayan on January 20, 1971, and petitioners filed their
appeal with the Court of Tax Appeals in CTA Case No. 2216, on February 12, 1971, well within the thirtyday prescriptive period under Section 11 of Republic Act No. 1125. The Court of Tax Appeals has
exclusive appellate jurisdiction to review on appeal any decision of the Collector of Internal Revenue in
cases involving disputed assessments and other matters arising under the National Internal Revenue
Code.
------------FISHWEALTH CANNING CORPORATION v. CIR
G.R. No. 179343 January 21, 2010
FACTS:
Petitioner was assessed for income tax, Value Added Tax and withholding tax. After Court of Tax Appeals
issued a Final Decision on Disputed Assessment, Petitioner filed a Letter of Reconsideration with the CIR
instead of appealing the same to the Court of Tax Appeals within 30 days. The CIR then issued a
Preliminary Collection Letter which prompted the Petitioner to file its Petition with the Court of Tax
Appeals. CIR argued that the Petition with the Court of Tax Appeals was filed out of time.
ISSUE:
Did the filing of a Reconsideration toll the running of the 30-day period to appeal to the Court of Tax
Appeals?
HELD:
NO. A Motion for Reconsideration of the denial of the administrative protest does not toll the 30-day
period to appeal to the Court of Tax Appeals.
--------------FISHWEALTH CANNING CORPORATION v. CIR
The CIR (respondent), by Letter of Authority dated May 16, 2000, ordered the examination of
the internal revenue taxes for the taxable year 1999 of Fishwealth Canning Corp. (petitioner). The
investigation disclosed that petitioner was liable in the amount of P2,395,826.88 representing income
tax, value added tax (VAT), withholding tax deficiencies and other miscellaneous deficiencies. Petitioner
eventually settled these obligations on August 30, 2000.
The petition is bereft of merit.

Section 228 of the 1997 Tax Code provides that an assessment


x x x may be protested administratively by filing a request for reconsideration or reinvestigation within
thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by
implementing rules and regulations. Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180)
days from submission of documents, the taxpayer adversely affected by the decision or inaction
may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from
the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final,
executory and demandable. (underscoring supplied)
In the case at bar, petitioners administrative protest was denied by Final Decision on Disputed
Assessment dated August 2, 2005 issued by respondent and which petitioner received on August 4,
2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal
respondents denial of its protest to the CTA.
Since petitioner received the denial of its administrative protest on August 4, 2005, it had
until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however,
on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the
administrative protest does not toll the 30-day period to appeal to the CTA.
On petitioners final contention that it has a meritorious case in view of the dismissal of the
above-mentioned criminal case filed against it for violation of the 1997 Internal Revenue Code, the same
fails. For the criminal complaint was instituted not to demand payment, but to penalize the taxpayer for
violation of the Tax Code.
-----------------Lascona Land Co., Inc. v. CIR
On March 27, 1998, the CIR issued Assessment Notice No. 0000047-93-407 against Lascona Land
(Lascona) informing the latter of its alleged deficiency income tax for the year 1993 in the amount
of P753,266.56.
Consequently, on April 20, 1998, Lascona filed a letter protest, but was denied., thus:
Anent the 1993 tax case of subject taxpayer, please be informed that while we
agree with the arguments advanced in your letter protest, we regret, however, that
we cannot give due course to your request to cancel or set aside the assessment
notice issued to your client for the reason that the case was not elevated to the Court
of Tax Appeals as mandated by the provisions of the last paragraph of Section 228 of
the Tax Code. By virtue thereof, the said assessment notice has become final,
executory and demandable. In view of the foregoing, please advise your client to pay
its 1993 deficiency income tax liability in the amount of P753,266.56.
On April 12, 1999, Lascona appealed the decision before the CTA. Lascona alleged that the Regional
Director erred in ruling that the failure to appeal to the CTA within 30 days from the lapse of the 180-day
period rendered the assessment final and executory.
The CIR, however, maintained that Lascona's failure to timely file an appeal with the CTA after the lapse
of the 180-day reglementary period provided under Section 228 of the NIRC resulted to the finality of the
assessment.
CTA, in its Decision,7 nullified the subject assessment. It held that in cases of inaction by the CIR on the
protested assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal to the
CTA within thirty (30) days from the lapse of the one hundred eighty (180)-day period, or (2) wait until
the Commissioner decides on his protest before he elevates the case.
The CIR moved for reconsideration. It argued that in declaring the subject assessment as final, executory
and demandable, it did so pursuant to Section 3 (3.1.5) of Revenue Regulations No. 12-99 dated
September 6, 1999 which reads, thus:
If the Commissioner or his duly authorized representative fails to act on the taxpayer's protest within one
hundred eighty (180) days from date of submission, by the taxpayer, of the required documents in
support of his protest, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from
the lapse of the said 180-day period; otherwise, the assessment shall become final, executory and
demandable.

12

On March 3, 2000, the CTA denied the CIR's motion for reconsideration for lack of merit. 8 The CTA held
that Revenue Regulations No. 12-99 must conform to Section 228 of the NIRC. It pointed out that the
former spoke of an assessment becoming final, executory and demandable by reason of the inaction by
the Commissioner, while the latter referred to decisions becoming final, executory and demandable
should the taxpayer adversely affected by the decision fail to appeal before the CTA within the prescribed
period. Finally, it emphasized that in cases of discrepancy, Section 228 of the NIRC must prevail over the
revenue regulations.
HELD:
The Supreme Court declared that Lasconas appeal was timely filed on April 12, 1999 before the
CTA. The appeal was made within 30 days after receipt of the copy of the decision, reckoned from March
12, 1999 when Lascona received the Letter dated March 3, 1999.
In case the CIR failed to act on the disputed assessment within the 180-day period from date
of submission of documents, a taxpayer can either: (1) file a petition for review with the Court of Tax
Appeals within 30 days after the expiration of the 180-day period; or (2) await the final decision of the
Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals
within 30 days after receipt of a copy of such decision. These options are mutually exclusive and resort to
one bars the application of the other. In arguing that the assessment became final and executory by the
sole reason that petitioner failed to appeal the inaction of the Commissioner within 30 days after the
180-day reglementary period, respondent, in effect, limited the remedy of Lascona, as a taxpayer, under
Section 228 of the National Internal Revenue Code to just one, that is to appeal the inaction of the
Commissioner on its protested assessment after the lapse of the 180-day period. This is incorrect. The
word decisions in paragraph 1, Section 7 of Republic Act No. 1125, has been interpreted to mean
the decisions of the CIR on the protest of the taxpayer against the assessments. Taxpayers cannot be
left in quandary by the Commissioners inaction on the protested assessment. The taxpayers must be
informed informed of its action in order that the taxpayer should be able to take recourse to the tax court
at the opportune time. Finally, as pointed out by the Court of Tax Appeals, to adopt the interpretation of
the Commissioner will not only sanction inefficiency, but will likewise condone the Bureau of Internal
Revenues inaction
-----------------------Allied Banking Corporation v. Parayno
FACTS: Allied Banking Corporation is a duly licensed domestic commercial banking institution with
principal office at 6754 Ayala Avenue, Makati City, Metro Manila.

2.
3.

Since the 30 day period expired from the lapse of the 180-day period without Allied Bank filing the
appeal as required by law the assessments have become final.
BIR claims that the 180-day period ran from Sept. 24, 1999, the date when petitioner filed its
protest-letter.
Allied Banks Market Savings Deposit is considered a certificate of deposit contemplated and
taxable under SECTIOn 180 of the Tax Code;
In the case of BPI-Family Bank V. CIR & CTA, CA-GR No. SP 29853, Sept. 19, 1994, the CA in
interpreting NIRC SECTION 180 named with particularity the instruments subject to D.S.T.:
i.
ii.
iii.
iv.
v.

promissory note, whether negotiable or not;


bills of exchange;
drafts;
certificates of deposit;
debt instruments used for deposit substitutes.

4.

A certificate of deposit is a written acknowledgment of a bank of the receipt of money on deposit


which the bank promises to pay to the depositor, bearer or to some other person or order (Olson
Estate 206, Iowa, 706 cited in Agbayani, p.44)
5. Elements of Certificate of Deposit:
(i.) that a bank received money on deposit;
(ii.) from someone who is considered a depositor;
(iii.) that the bank acknowledges the receipt of the deposit in writing;
(iv.) that the bank promises to pay to the depositor/ bearer/ or to some other person or order the
deposit or any part thereof.
Allied Banks Market Savings Deposit has met these requirements.
6. SECTION 180 does not prescribe any particular form for a certificate of deposit.
7. All presumptions are in favor of the
correctness of tax assessments.
Good Faith are tax assessors and the validity of their actions are presumed.
They will be presumed to have taken into consideration all the facts to which their attention was
called. (CIR V. Construction Resources of Asia, Inc.)
It is incumbent upon the taxpayer to prove the contrary (Mindanao Bus Company V. CIR; CIR V.
Antonio Tuazon, Inc.), and failure to do so shall vest legality to respondents actions and
BIR assessed them for Deficiency Documentary Stamp Tax on its Market Savings Deposit Placements for
assessments.
1997, computed as:
The case was deemed submitted for decision on June 18, 2004.
Total Market Savings Deposit
P 8,098,772,166.67
Allied Bank claims that Market Savings Deposit is not the same as Time Deposit since
Rate of Tax
0.30 / 200
(1.) it has no specific maturity date;
Basic Documentary Stamp Tax Due
P 12,148,158.25
(2.) it is evidenced by a regular savings passbook
Add: 25% Surcharge
P 3,037,039.56
BIR counters that Allied Banks Market Savings Deposit has the similar features to a time deposit such
TOTAL AMOUNT DUE & PAYABLE:
P 15,185,197.81
as:
BIR final decision along with warning of Warrant of Distraint and/ or Levy and Garnishment was received (1.) higher interest rate than regular savings account;
(2.) required minimum deposit balance;
by Allied Bank on Oct. 15, 2002.
(3.) holding period in order to avail of the preferential rate
Allied Bank filed this petition for review in the C.T.A.
BIRs Answer Special and Affirmative Defenses:
1. C.T.A. has no jurisdiction over the instant case as the subject assessments have already become ISSUE/S:
1. WON the C.T.A. has jurisdiction over the instant case for failure of Allied Bank to comply with
final, executory and demandable in accordance with SECTION 228 of the 1997 Tax Code;
SECTION 228 of the NIRC 1997?
xxx xxx xxx
If the protest is denied in whole or in part, or is not acted upon within 180 days from submission of 2.
documents, the taxpayer adversely affected by the decision or inaction may appeal to the C.T.A. within
30 days from receipt of the said decision, or from the lapse of the 180-day period;
Otherwise, the decision shall become final, executory and demandable.

WON the Market Savings Deposit is of the same nature as that of Time Deposit and therefore subject
to Documentary Stamp Tax?

HELD:
1.) C.T.A. has jurisdiction

13

2.) Yes both the certificate of time deposit as well as the passbook evidencing market savings deposit,
are subject to Documentary Stamp Tax.
RATIO:
(1.) In this particular case, the petition for review was filed on time, on Nov. 14, 2002, within 30 days
from receipt of the Decision of the CIR.
Citing LASCONA LAND CO., INC. V. CIR C.T.A. Case No. 5777; Jan. 4, 2000:
It bears stressing that the wordings of Section 228 of the Tax Code clearly provide that it is only
the decision not appealed by the taxpayer that becomes final, executory and demandable.
Otherwise, the authors of the law could have easily included the words assessment as also
becoming final, executory and demandable should the BIR fail to act on the protest within 180 days.
As aptly cited by Petitioner, in CIR V. Villa, the SC held:
The word decisions in paragraph 1, SECTION 7 of RA 1125, quoted above has been
interpreted to mean the decisions of the CIR on the protest of the taxpayer against the
assessments.
Definitely, said word does not signify the assessment itself.
In the first place, we believe the respondent court erred in holding that the assessment
in question is the respondent Collectors decision or ruling appealable to it, and that
consequently, the period of 30 days prescribed by SECTION 11 of RA 1125 within which
petitioner should have appealed to the respondent court must be counted from its receipt
of said assessment.
Where a taxpayer questions an assessment and asks the Collector to reconsider or cancel
the same because he (the taxpayer) believes he is not liable therefor, the assessment
becomes a disputed assesment that the Collector must decide, and the taxpayer can
appeal to the C.T.A. only upon receipt of the decision of the Collector on the disputed
assessment, xxx
The same interpretation finds support in
RA 1125
SECTION 11. WHO MAY APPEAL; EFFECT OF APPEAL. Any person, association or
corporation adversely affected by a decision or ruling the the Collector of Internal Revenue,
the Collector of Customs or any provincial or city Board of Assessment Appeals may file an
appeal in the CTA within 30 days after the receipt of such decision or ruling.
Note that the law uses the word decisions, not assessments, thus further indicating the
legislative intent to subject to judicial review the decision of the Commissioner on the protest
against an assessment but not the assessment itself.
Verily, in case of inaction, Sec. 228 of the Tax Code merely gave the taxpayer an option:
first, he may appeal to the CTA within 30 days from the lapse of the 180-day period; or
second, he may wait until the Commissioner decides on his protest before he elevates his case.
The court believes that the taxpayer was given this option so that in case his protest is not acted
upon within the 180-day period, he may be able to seek immediate relief and need not wait for an
indefinite period of time for the Commissioner to decide.
But if he chooses to wait for a positive action on the part of the Commissioner, then the same could
not result in the assessment becoming final, executory and demandable.
(2.) Terminologies are mere matters which are capable of being overturned by circumstances.
What is controlling is the nature and the true character of the transaction as it is conveyed by the
instrument or document attached to it. (L.R. Heat Treating Co.)
Documentary Stamp Tax is an excise tax on the privilege to enter into a transaction.
NIRC
SECTION 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 OTEHRS
NOT PAYABLE ON SIGHT OR DEMAND. - - On all:

(1.) 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),
(2.) drafts, instruments and securities issued by the Government or any of its instrumentalities or
(3.) certificates of deposits drawing interest, or
(4.) orders for the payment of any sum of money otherwise than at sight or on demand, or
(5.) on all promissory notes, whether negotiable or non-negotiable, except bank notes issued for
circulation, and
(6.) on each renewal of any such note,
There shall be collected a Documentary Stamp Tax (DST) of P0.30 on each P200, or fractional part
thereof, of the face value of any such: agreement, bill of exchange, draft, certificate of deposit, or note:
Provided, That only 1 DST shall be imposed on either loan agreement, or promissory notes issued to
secure such loan whichever will yield a higher tax:
xxx xxx xxx
The law subjects a certificate of deposit to documentary stamp tax.
The law taxes the document because of the transaction (citing The Law On Transfer and Business
Taxation, by Hector S. de Leon, 1998 ed., p. 351).
A certificate of deposit is any 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 some other person or his order xxx (Far East Bank & Trust Company V. Querimit).
The definition does not prescribe or require any particular form nor does it qualify.
In determining what instruments are subject to DST substance would control over the form.
A time deposit refers to a deposit amount paying interest for a fixed term, with the understanding
that the funds cannot be withdrawn before maturity without giving advanced notice.
Usually carry penalties for early withdrawal in a form of reduced interest rates.
In both Time Deposit and Market Savings Deposit the deposit may be withdrawn anytime, but the
depositor gets to earn a lower rate of interest.
The Only Difference is the Evidence of Deposit.
Time Deposit
Certificate of Deposit
Market Savings Deposit
Passbook
The Court cited the testimony of Allied Banks Witness Ms. Jimenez.
The premium rate given in a Market Savings Deposit is an incentive for a client who keeps his money
for at least 30 days in the bank.
The client can choose a period: 30 or 60 days.
DISPOSITION: Petition DISMISSED for lack of merit.
CIR Decision assessing Allied Bank of Deficiency Documentary Stamp Tax for 1997 are hereby
AFFIRMED.
Allied Bank is DIRECTED TO PAY the assessment, plus 30% delinquency interest from Nov. 14,
2002 up to the time such amount is fully paid.
NOTES: I think this decision is overturned by the Oct. 2005 CA case: Lascona V. CIR
Its not really fair to expect us to know the proper interpretation when the CTA interpretation
specialized court for taxes gets overturned by CAs interpretation
----------------------------RCBC vs CIR 522 SCRA 144Facts:
RCBC received a Formal Letter of Demand dated May 25, 2001 from the respondent CIR for its
taxliabilities particularly for Gross Onshore Tax in the amount of P53,998,428.29 and Documentary
StampTax for its Special Savings Placements in the amount of P46,717,952.76, for the taxable year 1997
.Petitioner filed a protest letter/request for reconsideration/reinvestigation pursuant to Section 228 of the

14

NIRC. As the protest was not acted upon by the respondent, petitioner filed a petition for review withthe
CTA for the cancellation of the assessments. Respondent filed a motion to resolve first the issue of CTAs
jurisdiction, which was granted by the CTA in a Resolution dated September 10, 2003.8 The petition for
review was dismissed because it was filed beyond the 30-day period following the lapse of 180 days from
petitioners submission of documents in support of its protest, as provided under Section228 of the NIRC
and Section 11 of R.A. No. 1125, otherwise known as the Law Creating the Court of Tax Appeals.
Petitioner did not file a motion for reconsideration or an appeal to the CTA En Banc fromthe dismissal of
its petition for review. Consequently, the September 10, 2003 Resolution became finaland executory on
October
1,
2003
and Entry
of
Judgment
was
made
on December
1,
2003.9Thereafter, respondent sent a Demand Letter to petitioner for the payment of the deficiency taxas
sessments. On February 20, 2004, petitioner filed a Petition for Relief from Judgment on the ground
of excusable negligence of its counsels secretary who allegedly misfiled and lost the September 10,
2003Resolution. The CTA
Second Division set
the case for hearing on April 2, 200411
during which petitioners counsel was present.12
Respondent filed an Opposition13 while petitioner submitted itsManifestation and Counter-Motion. On
May 3, 2004, the CTA Second Division rendered a Resolution15denying petitioners Petition for Relief
from Judgment. Petitioners motion for reconsideration wasdenied in a Resolution dated November 5,
2004, hence it filed a petition for review with the CTA En Banc, docketed as C.T.A. EB No. 50, which
affirmed the assailed Resolutions of the CTA SecondDivision in a Decision dated June 7, 2005.
Ruling:
As provided in Sec. 228, the failure of the taxpayer to appeal from an assessment on time rendered the
assessment final, executory and demandable. RCBC is precluded from disputing the correctness of the
assessment. While the right to appeal a decision of the Commissioner of CTA is merely a statutory
remedy, nevertheless the requirement that it must be brought within 30 days is jurisdictional. If a
statutory remedy provides as a condition precedent that the action to enforce it must be commenced
within a prescribed time, such requirement is jurisdictional and failure to comply therewith may be raised
in a MTD.
------------------------La Flor dela Isabela, Inc. v CIR
La Flor is a domestic corporation. In 2000 the letter of authority for assessment for taxable year 1999
was issued by the BIR. From 2002 to 2005, La Flor executed five Waivers to extend BIRs period to
assess the taxes. The Formal Letter of Demand (FDL) for the tax deficiency was received by La Flor
before the expiration of the 5th waiver in 2005.
La Flor immediately filed a protest against the FDL. It also filed a supplemental protest less than two
weeks after. After 2 years, June 2007, La Flor received a Final Decision on Disputed Assessments (FDDA)
indicating its deficiency taxes in the total amount of P10,460,217.23.
On October 2007, petitioner filed an application for tax amnesty. Ten days later it also filed an application
for compromise agreement pursuant to Section 204 of the Tax Code. La Flor received an undated
Warrant of Distraint and/or Levy (WDL) issued by BIR.
ISSUE: WON La Flor can still validly assail the assessment.
HELD: NO.
If a protest is not acted upon by respondent within 180 days from submission of supporting documents,
the taxpayer adversely affected by such inaction may appeal to the CTA within 30 days from the lapse of
the 180-day period. La Flor should have appealed to the CTA when it did not receive action on its protest
immediately.
To reiterate, the failure of a taxpayer to file a petition for review with the Court of Tax Appeals within the
statutory period rendered the disputed assessment final, executory and demandable, thereby precluding
the said taxpayer from interposing the defenses of legality or validity of the assessment and prescription
of the Government's right to assess. Indeed, any objection against the assessment should have been
pursued following the avenue paved in Section 229 (now Section 228) of the NIRC on protests on
assessments of internal revenue taxes.

--------------OCEANIC WIRELESS NETWORK, INC. vs. CIR(G.R. No. 148380, December 9, 2005) | MCACB
Facts:
The controversy in this case started when the petitioner received from the BIR deficiency tax
assessments for the year 1984. When the petitioner filed a protest and requested for a reconsideration
or cancellation of the same, the Chief of the Accounts Receivable and Billing Division of the BIR National
Office reiterated the tax assessments and requested the petitioner to pay within 10 days, while denied its
request for reinvestigation. Upon the petitioners failure to pay the subject tax assessments within the
prescribed period, the Asst. Commissioner for Collection, acting for the CIR, issued the corresponding
warrants of distraints and/or levy and garnishment. This prodded the petitioner to file a Petition for
Review with the CTA to contest the issuance of the warrants and to enforce the collection of the tax
assessments.
The CTA, however, dismissed the petition, declaring that it was filed beyond the 30-day period reckoned
from the time it received the demand letter on January 24, 1991 by the Chief of the BIR Accounts
Receivable and Billing Division.
Issue:
Is the demand letter for tax deficiency assessments issued and signed by a subordinate officer who was
acting in behalf of the CIR deemed final and executor and subject to an appeal to the CTA?
Ruling:
Yes. Firstly, a demand letter for payment of delinquent taxes may be considered a decision on a
disputed or protested assessment. The determination on whether or not a demand letter is final is
conditioned upon the language used or the tenor of the letter being sent to the taxpayer. In this case,
the demand letter received by the petitioner signified a character of finality for it clearly indicates its firm
stand against the reconsideration of the assessment when it indicated that failure to do so (to pay)
would result in the issuance of a warrant of distraint and levy to enforce its collection without further
notice.
Secondly, the letter attained finality despite the fact that it was issued and signed by the Chief of the
Accounts Receivable and Billing Division instead of the CIR. This is because the act of the said Chief does
not fall under the exceptions provided in Sec. 7 of the NIRC, which constitutes actions of the CIR that are
non-delegable. Further, Sec. 6 of the NIRC expressly provides that the Commissioner or his duly
authorized representative may authorize the examination of any taxpayer and the assessment of the
correct amount of tax.
Lastly, the petitioner failed to avail of its right to bring the matter before the CTA within the reglementary
period upon the receipt of the demand letter reiterating the assessed delinquent taxes and denying its
request for reconsideration which constituted the final determination by the BIR on petitioners protest.
Being a final disposition by the said agency, the same would have been a proper subject for appeal to the
CTA.
-------------CIR vs.TOKYO SHIPPING CO. LTD., represented by SORIAMONT STEAMSHIP AGENCIES INC
244 SCRA 342; May 26, 1995
Facts: Tokyo Shipping a foreign corporation represented in the Philippines by Soriamont Steamship
Agencies and owns and operates M/V Gardenia. NASUTRA 2 chartered M/V Gardenia to load 16,500
metric tons of raw sugar in the Philippines. Soriamont Agency, 4 paid the required income and common
carrier's taxes P59,523.75 and P47,619.00, respectively (Total P107,142.75). Upon arriving, however, at
Guimaras Port of Iloilo, the vessel found no sugar for loading. NASUTRA and Soriamont mutually agreed
to have the vessel sail for Japan without any cargo. Claiming the pre-payment of income and common
carrier's taxes as erroneous since no receipt was realized from the charter agreement, Tokyo instituted a
claim for tax credit or refund of the sum P107,142.75 from CIR. Petitioner failed to act promptly on the

15

claim , hence Tokyo filed a petition for review 6 before Court of Tax Appeals. CTA decided for Tokyo and be entitled to a lesser increase in rates, all excess amounts collected by MERALCO shall be refunded to its
denied MR of CIR.
customers or credited to their future consumption. Thus, MERALCO paid the income tax due on its
taxable income based
Issue: WON Tokyo Shipping Co. Ltd., is entitled to a refund or tax credit whether it was able to prove on gross electric revenue computed at an average basic distribution rate of P2.996 per kwh (i.e., existing
that it derived no receipts from its charter agreement, and hence is entitled to a refund of the taxes it average rate of P2.812 per kwh, plus provisional increase ofP0.184).
pre-paid to the government.
On February 16, 1998, the ERB rendered a decision granting a rate increase of only P0.017 per kwh and
ordering MERALCO to refund or credit to its customers the average amount ofP0.167 per kwh beginning
Ruling: Yes. Pursuant to Section 24 (b) (2) of the National Internal Revenue Code which at that time, a February 1994.
resident foreign corporation engaged in the transport of cargo is liable for taxes depending on the MERALCO appealed the decision of the ERB to the Court of Appeals, docketed as CA-G.R. SP No. 46888.
amount of income it derives from sources within the Philippines. Thus, before such a tax liability can be On February 24, 1999, the Court of Appeals rendered a decision reversing the ERB decision.
enforced the taxpayer must be shown to have earned income sourced from the Philippines.
The CIR and the Lawyers Against Monopoly and Poverty, et al. appealed the decision of the Court of
Indeed, a claim for refund is in the nature of a claim for exemption 8 and should be construed Appeals to the Supreme Court, docketed as G.R. No. 141314 entitled "Republic of the Philippines,
in strictissimi juris against the taxpayer. And Tokyo has the burden of proof to establish the factual basis represented by Energy Regulatory Board vs. Manila Electric Company ", and G.R. No. 141369 entitled
of its claim for tax refund.
"Lawyers Against Monopoly and Poverty (LAMP), et al. vs. Manila Electric Company ", respectively.
But sufficient evidence has already been adduced by Tokyo proving that it derived no receipt from its On November 15, 2002, the Supreme Court rendered a decision in G.R. Nos. 141314 and 141369
charter agreement with NASUTRA - M/V "Gardenia" arrived in Iloilo on January 10, 1981 but found no reversing the decision of the Court of Appeals. On May 5, 2003, the decision of the Supreme Court
raw sugar to load and returned to Japan without any cargo laden on board.
became final and executory. On November 27, 2003, MERALCO filed a claim for tax refund or credit
--------------------------of excess income tax payments with the CIR.
CIR v. Philamlife
On May 4, 2005, due to inaction, MERALCO appealed to this Court in Division its claim for refund or tax
Facts: On May 30, 1983, Philamlife paid its 1983 1st Quarter income tax of P3,246,141. On August 29, credit of excess income tax payment by way of a "Petition for Review (Ad Cautelam )".
1983, it paid P396,874 for the 2nd Quarter and also paid P708,464 for the3rd Quarter. In the 4th In her answer, by way of special and affirmative defenses, the CIR alleged: this Court is without
Quarter however, it suffered loss and thereby had no income tax liability. It therefore declared refund of jurisdiction to entertain the instant petition; MERALCO's assertion that the two (2)-year period should be
the 1st and 2nd Quarter payments. In 198r, Philamlife suffered loss again and applied for tax credit of its reckoned from the time the Supreme Court decision came out cannot be sustained; MERALCO has no
overpaid taxes in 1983 and 1982. ON December 16, 1985, it filed another claim for refund with the CIRs cause of action under the provision of solutio indebiti; equity belongs to those who come to court with
appellate division for an amended and increased amount. On January 2, 1986, it filed petition for review clean hands; MERALCO had the opportunity to claim for refund as early as 1998 when the ERB issued its
with the CTA.
decision ordering MERALCO to refund PO.l67 per kilowatthour to its consumers; and the
inequity of MERALCO is further exposed when it prayed for the refund of the entire amount of alleged
The issue is the reckoning date of the two-year prescriptive period provided in Section 230 of the NIRC erroneously collected income taxes it paid from 1994- 1998 and 2000-2001, when it has not even
for the recovery of tax erroneously or illegally collected. CIR claims that the running of the prescriptive showed proof that it paid all of the amounts it should refund to its consumers.
period commences from the remittance/payment at the end of the first quarter of the tax withheld On November 22, 2005, MERALCO filed a "Motion for Leave to Amend Petition for Review (Ad Cautelam)"
instead of from the filing of the Final Adjustment Return. In such a case, Philamlife is not entitled for with attached "Amended Petition for Review (Ad Cautelam)" for the purpose of excluding its claim for tax
refund.
refund or credit for taxable year 2001 in the amount ofP1,071,546,018.00 on the ground that on October
3, 2005, MERALCO received the letter-decision dated September 21, 2005 from the CIR partially granting
Held: CIR is wrong. The prescriptive period of two years should commence to run only from the time that its administrative claim for refund or credit for taxable year 2001 to the extent of P894,4 73,932.58, but
the refund is ascertained, which can only be determined after a final adjustment return is accomplished. denying the claim for taxable years 1994-1998 and 2000 due to prescription. In its "Amended Petition for
In the present case, this date is April 16, 1984, and two years from this date would be April 19, 1986. Review (Ad Cautelam)", MERALCO prayed that it be refunded or issued a tax credit certificate in the
The record shows that the claim for refund was field on December 10, 1985 and the petition for review amount of P6,035,988,264.00, representing excess income tax payments for taxable years 1994-1998
was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary and 2000.
period. Even if the two-year prescriptive period had already lapsed, the same is not jurisdictional and On November 24, 2005, the Second Division granted MERALCO's "Motion for Leave to Amend Petition for
may be suspended for reasons of equity and other special circumstances.
Review (Ad Cautelam)", admitted the "Amended Petition for Review (Ad Cautelam)", and granted the CIR
-------------fifteen ( 15) days from notice to file her amended answer.
CIR v. Manila Electric Company, Inc
On December 9, 2005, the CIR filed her "Answer" to the Amended Petition for Review (Ad Cautelam).
THE PARTIES
After the pre-trial was terminated, on May 5, 2006, MERALCO filed a "Motion to Suspend Proceedings",
Petitioner is the duly appointed CIR empowered to assess and collect all national internal revenue taxes, which the Court granted. On September 20, 2006, the CIR filed a "Manifestation with Motion to Admit
fees, and charges, including the power to decide refunds of internal revenue taxes, fees or other charges, Attached Supplemental Answer", which the Court granted. On November 30, 2006, MERALCO filed its
with office address at the Bureau of Internal Revenue (hereinafter "BIR") National Office Building, Agham "Reply" to the supplemental answer. After trial on the merits, on December 6, 2010, the Second Division
Road, Diliman, Quezon City, where she may be served with summons and other legal processes. On the rendered the assailed Decision granting the Amended Petition for Review.
other hand, respondent Manila Electric Company (hereinafter "MERALCO") is a domestic corporation duly On December 23, 2010, MERALCO filed a "Motion for Partial Reconsideration and Clarification", while on
organized and existing under the
December 28, 2010, the CIR filed her "Motion for Reconsideration". In a Resolution dated April 15, 2011,
laws of the Republic of the Philippines, with principal office at Lopez Building, Ortigas Avenue, Pasig City, both motions were denied for lack of merit.
and engaged in the business of distributing and supplying electric power.
On December 23, 1993, MERALCO filed with the Energy Regulatory Board (hereinafter "ERB") an ISSUE: WHETHER THE SECOND DIVISION OF THE HONORABLE COURT ERRED IN GRANTING
application for the revision of its rate schedules with a prayer for a provisional approval of the increase, RESPONDENT'S CLAIM FOR REFUND IN THE AGGREGATE AMOUNT OF I!5,796,342,792.71 FOR
docketed as ERB Case No. 93-118. On January 28, 1994, the ERB issued an Order granting a provisional TAXABLE YEARS 1994-1998 AND 2000 DESPITE THE FACT THAT SAID CLAIM IS BARRED ON ACCOUNT
increase of P0.184 per kwh, subject to the condition that after hearing and evaluation, should MERALCO OF PRESCRIPTION.

16

was merely provisional and subject to the condition that after hearing and evaluation, should MERALCO
be entitled to a lesser increase in rates, all excess collected by MERALCO shall be refunded to its
customers or credited to their future consumption. At the outset, when the ERB provisionally granted and
Petitioner CIR 's Arguments
subjected to a condition its application for increase, MERALCO should have known the consequences of a
The CIR argues that a claim for refund cannot be made after the two (2)- year prescriptive period possible reduction of its application.
provided under Section 229 of the NIRC of 1997, as amended. Since the claim for refund covers the ----------------taxable periods 1994 to 1998 and 2000, the Petition for Review filed on May 4, 2005 was evidently filed
beyond the prescriptive period, and with the recommendation of denial from the Revenue Examiners on CIR v. PNB
the ground of prescription, the inescapable conclusion is that MERALCO is barred from recovering income Thru this appeal by way of a petition for review on certiorari under Rule 45 of the Rules of Court,
taxes paid for the subject taxable years.
petitioner CIR seeks to set aside the Decision dated October 14, 20031 of the Court of Appeals (CA)
in CA-G.R. SP No. 76488 and its Resolution dated January 26, 20042 denying petitioners motion for
Respondent MERALCO's Counter-Arguments
reconsideration.
Respondent MERALCO, on the other hand, counter-argues that no one, not even the State should enrich The petition is cast against the following factual setting:
itself at the expense of another. Relying in good faith on the ERB 's issuance of the provisional increase, In early April 1991, respondent Philippine National Bank (PNB) issued to the Bureau of Internal Revenue
the decision of the ERB on the allowable increase, the appeal to the Court of Appeals and the subsequent (BIR) PNB Cashiers Check No. 109435 for P180,000,000.00. The check represented PNBs advance
decision ofthe Supreme Court in G.R. Nos. 141314 and 141369, MERALCO claims that on said interim income tax payment for the banks 1991 operations and was remitted in response to then President
periods, it should not be penalized for declaring for tax purposes the income it derived therefrom, and Corazon C. Aquinos call to generate more revenues for national development. The BIR acknowledged
thus, prays for the dismissal of the petition.
receipt of the amount by issuing Payment Order No. C-10151465 and BIR Confirmation Receipt No.
22063553, both dated April 15, 1991.3
HELD:
Via separate letters dated April 19 and 29, 1991 and May 14, 19914 to then BIR Commissioner Jose C.
1. The two (2)-vear prescriptive period under Section 229 is mandatory
Ong, PNB requested the issuance of a tax credit certificate (TCC) to be utilized against future tax
Section 229 provides:
obligations of the bank.
"SEC. 229. Recovery of Tax Erroenously or Illegally Collected.
For the first and second quarters of 1991, PNB also paid additional taxes amounting to P6,096,150.00
XXX XXX
and P26,854,505.80, respectively, as shown in its corporate quarterly income tax return filed on May 30,
In any case, no such suit or proceeding shall be filed after the expiration of two (2)
1991.5Inclusive of the P180 Million aforementioned, PNB paid and BIR received in 1991 the aggregate
years from the date of payment of the tax or penalty regardless of any supervening
amount of P212, 950,656.79.6 This final figure, if tacked to PNBs prior years excess tax credit
cause that may arise after payment: Provided, however, That the Commissioner may,
(P1,385,198.30) and the creditable tax withheld for 1991 (P3,216,267.29), adds up to P217,552,122.38.
even without a written claim therefor, refund or credit any tax, where on the face of
By the end of CY 1991, PNBs annual income tax liability, per its 1992 annual income tax
the return upon which payment was made, such payment appears clearly to have been
return,7 amounted to P144,253,229.78, which, when compared to its claimed total credits and tax
erroneously paid".
payments of P217,552,122.38, resulted to a credit balance in its favor in the amount
Therefore, MERALCO's claim for refund should have been filed within the two (2)-year prescribed period, of P73,298,892.60.8 This credit balance was carried-over to cover tax liability for the years 1992 to
reckoned from the dates the income taxes thereon had been paid, and not from May 5, 2003, the date 1996, but, as PNB alleged, was never applied owing to the banks negative tax position for the said
the decision of the
inclusive years, having incurred losses during the 4-year period.
Supreme Court in G.R. Nos. 141314 and 141369 had become final and executory. MERALCO's appeals to On July 28, 1997, PNB wrote then BIR Commissioner Liwayway Vinzons-Chato, Attention: Appellate
the Court of Appeals and to the Supreme Court are both extraneous matters that occurred after payment Division, to inform her about the above developments and to reiterate its request for the issuance of a
of the tax, hence, not relevant in determining the prescriptive period.
TCC, this time for the "unutilized balance of its advance payment made in 1991 amounting to
P73,298,892.60".9 This request was forwarded for review and further processing to the Office of the
2 .The rule on solutio indebiti cannot be applied toMERALCO
Deputy Commissioner for Legal and Inspection Group, Lilian B. Hefti, and then to the BIRs Large
MERALCO cannot invoke the rule of solutio indebiti to justify its claim for refund.
Taxpayers Service.
In the case of Bank of the Philippine Islands vs. Sarmiento, 484 SCRA 271, the Supreme Court held:
In a letter dated July 26, 2000, PNB sought reconsideration of the decision of Deputy Commissioner Hefti
"There is solutio indebiti where: (1) payment is made when there exists no binding relation between the not to take cognizance of the banks claim for tax credit certificate on the ground that the jurisdiction of
payor, who has no duty to pay, and the person who received the payment; and (2) the payment is made the Appellate Division is limited to claims for tax refund and credit "involving erroneous or illegal
through mistake, and not through liberality or some other cause. x x x The quasi-contract of solutio collection of taxes whenever there are questions of law and/or facts and does not include claims for
indebiti is based on the ancient principle that no one shall enrich himself unjustly at the expense of refund of advance payment, pursuant to Revenue Administrative Order [RAO] No. 7-95 dated October
another" (Power Commercial and Industrial Corporation v. Court of Appeals, G.R. No. I 19745, June 20, 10, 1995."10 In her letter-reply dated August 8, 2008,11 Deputy Commissioner Hefti denied PNBs request
1997, 274 SCRA 597, 612, 61 3).
for reconsideration with the following explanations:
Pursuant to the above ruling, the elements of solutio indebiti are: ( 1) payment is made when there In reply, please be advised that upon review . . . of your case, this Office finds that the same presents no
exists no binding relation between the payor, who has no duty to pay, and the person who received the legal question for resolution. Rather, what is involved is the verification of factual matters, i.e., the
payment; and (2) the payment is made through mistake, and not through liberality or some other cause. existence of material facts to establish your entitlement to refund. Such facts were initially verified
Both elements are lacking in the present case. First, there exists a binding relation between MERALCO through the proper audit of your refund case by the investigating unit under the functional control and
and the CIR. MERALCO is a taxpayer obligated to pay income taxes on the income it declared in its supervision of the Deputy Commissioner, Operations Group of this Bureau. It is therefore right and
income tax returns for the years 1994-1998 and 2000. Second, there is no mistake on the part of proper for the Operations Group to review, confirm and/or pass judgment upon the findings of the unit
MERALCO when it paid income taxes to the BIR for the years 1994-1998 and 2000. MERALCO was fully under it.
aware ofthe status of its application for revision of its rate schedule and the proceedings that transpired At any rate, sound management practices demand that issues as crucial as refund cases be subjected to
thereafter. It was fully aware that the increase granted to it in the ERB Order dated January 28, 1994 complete staff work. There might be a little delay in the transition of cases but expect the new

17

procedures to be well-established in no time. Allow us, however, to allay your concern about delayed
processing of your claim. In fact, the undersigned has made representations with the Operations Group
about your case and if you would check the status of your case again, you will find that the same has
been duly acted upon." (Emphasis supplied)
On August 14, 2001, PNB again wrote the BIR requesting that it be allowed to apply its unutilized
advance tax payment of P73,298,892.60 to the banks future gross receipts tax liability.12
Replying, the BIR Commissioner denied PNBs claim for tax credit for the following reasons stated in his
letter of May 21, 2002, to wit:13
1. The amount subject of claim for [TCC] is being carried over from your 1991 to 1996 Annual Income
Tax Returns. xxx. To grant your claim would result into granting it twice first for tax carry over as
shown in your 1991 amended Income Tax Return and second for granting a tax credit.
2. When you requested for a refund on April 19, 1991, reiterated on April 29, 1991 and again on May 14,
1991 on alleged excess income taxes, the same was considered premature since the determination . . .
of your income tax liability can only be ascertained upon filing of your Final or Adjusted Income Tax
Return for 1991 on or before April 15, 1992.
3. When you carried over the excess tax payments from 1991 to 1996 Annual Income Tax Return, you
had already abandoned your original intention of claiming for a [TCC]. Furthermore, the 1991 amended
Income Tax Return you filed on April 14, 1994 clearly showed that the amount being claimed has already
been applied as tax credit against your 1992 income tax liability.
4. Although there was already a recommendation for the issuance of a [TCC] by the Chief, Appellate
Division and concurred in by the Assistant Commissioner, Legal Service, the recommendation was for . . .
year 1992 and not for the taxable year 1991, which is the taxable year involved in this case.
5. Even if you reiterated your claim for tax credit certificate when you filed your claim on July 28, 1997,
the same has already prescribed on the ground that it was filed beyond the two (2) year prescriptive
period as provided for under Section 204 of NIRC. [Words in bracket and emphasis added]
On June 20, 2002, PNB, via a petition for review, appealed the denial action of the BIR Commissioner to
the Court of Tax Appeals (CTA). There, its appellate recourse was docketed as C.T.A. Case No. 6487.
The Revenue Commissioner filed a motion to dismiss PNBs aforementioned petition on ground of
prescription under the 1977 National Internal Revenue Code (NIRC)14. To this motion, PNB interposed an
opposition, citingCIR vs. Philippine American Life Insurance Co.15
In its Resolution of October 10, 2002,16 the CTA granted the Commissioners motion to dismiss and,
accordingly, denied PNBs petition for review, pertinently stating as follows:
To reiterate, both the claim for refund and the subsequent appeal to this court must be filed within the
same two (2)-year period [provided in Sec. 230 of the NIRC]. This is not subject to qualification. The
court is bereft of any jurisdiction or authority to hear the instant Petition for Review, considering that the
above stated action for refund was filed beyond the two (2)-year prescriptive period as allowed under the
Tax Code. (Words in bracket added)
PNBs motion for reconsideration was denied by the tax court in its subsequent Resolution of March 20,
2003.17
In time, PNB filed a petition for review with the Court of Appeals (CA), thereat docketed as CA-G.R. SP
No. 76488, arguing that the applicability of the two (2)-year prescriptive period is not jurisdictional and
that said rule admits of certain exceptions.18 Following the filing by the Commissioner Internal Revenue
of his Comment to PNBs petition in CA-G.R. in SP No. 76488, respondent PNB filed a Supplement to its
Petition for Review.19
In the herein assailed Decision dated October 14, 2003,20 the appellate court reversed the ruling of the
CTA, disposing as follows:
WHEREFORE, premises considered, the present petition is hereby GIVEN DUE COURSE. Consequently,
the assailed Resolutions dated October 10, 2002 and March 30, 2003 of the Court of Tax Appeals in
C.T.A. Case No. 6487 are hereby ANNULLED and SET ASIDE. The case is hereby REMANDED to the
respondent Commissioner for issuance with deliberate dispatch of the tax credit certificate after
completion of processing of petitioners claim/request by the concerned BIR officer/s as to the correct
amount of tax credit to which petitioner is entitled.
No pronouncements as to costs.
SO ORDERED.
In gist, the appellate court predicated its disposition on the following main premises:

1. Considering the "special circumstance" that the tax credit PNB has been seeking is to be sourced not
from any tax erroneously or illegally collected but from advance income tax payment voluntarily made in
response to then President Aquinos call to generate more revenues for the government, in no way can
the amount of P180 million advanced by PNB in 1991 be considered as erroneously or illegally paid tax.21
2. The BIR is deemed to have waived the two (2)-year prescriptive period when its officials led the PNB
to believe that its request for tax credit had not yet prescribed since the matter was not being treated as
an ordinary claim for tax refund/credit or a simple case of excess payment.
3. CIR vs. Philippine American Life Insurance Co.22 instructs that even if the two (2)-year prescriptive
period under the Tax Code had already lapsed, the same is not jurisdictional, and may be suspended for
reasons of equity and other special circumstances. PNBs failure to apply the advance income tax
payment due to its negative tax liability in the succeeding taxable years i.e., 1992-1996, should not be
subject to the two (2)-year limitation as to bar its claim for tax credit. The advance income tax payment,
made as it were under special circumstances, warrants a suspension of the two (2)-year limitation,
underscoring the fact that PNBs claim is not even a simple case of excess payment.
In time, the BIR Commissioner moved for a reconsideration, but its motion was denied by the appellate
court in its equally challenged Resolution of January 26, 2004.23
Hence, the Commissioners present recourse on the following substantive submissions:
1. A prior tax assessment before respondent PNB can apply for tax credit is unnecessary;
2. PNBs letter dated April 19, 29 and May 14, 1991 cannot be legally interpreted as claims for refund or
tax credit as required by the NIRC;
3. PNBs claim for tax credit is barred by prescription; and
4. The equitable principle of estoppel does bar the BIR petitioner from collecting taxes due. 24
Petitioner first scores the CA for concluding that "the amount of advance income tax payment voluntarily
remitted to the BIR by the [respondent] was not a consequence of a prior tax assessment or computation
by the taxpayer based on business income" and, therefore, it cannot "be treated as similar to those
national revenue taxes erroneously, illegally or wrongfully paid as to be automatically covered by the two
(2)-year limitation under Sec. 230 [of the NIRC] for the right to its recovery." Petitioner invokes the all
too-familiar principle that the collection of taxes, being the lifeblood of the nation,25 should be summary
and with the least interference from the courts.
Pressing its point, petitioner asserts that what transpired under the premises is a case of excessive
collection not arising from an erroneous, illegal of wrongful assessment and collection. According to
petitioner, respondent PNB, after making a prepayment of taxes in 1991, had realized, upon filing, in
1992, of its 1991 final annual income tax return, the excess payment by simple process of mathematical
computation; hence, it was unnecessary to make any assessment of overpaid taxes. Moreover, petitioner
points out that the tenor of PNBs letters of April 19, 29, and May 14, 199126 indicated a mere request for
an issuance of a TCC covering the advance payments of taxes, not a claim for refund or tax credit of
overpaid national internal revenue taxes.
Citing Revenue Regulation No. 10-77, petitioner likewise argues that any excess or overpaid income tax
for a given taxable year may be carried to the succeeding taxable year only. It cannot, petitioner
expounds, go beyond, as what respondent PNB attempted to do in 1997, when, after realizing the
inapplicability of the excess carry-forward scheme for its 1992 income tax liabilities owing to its negative
tax position for the 1992 to 1996 tax period, it belatedly requested for a TCC issuance.
Lastly, petitioner urges the Court to make short shrift of the invocation of equity and estoppel, on the
postulate that the erroneous application and enforcement of tax laws by public officers does not preclude
the subsequent correct application of such laws.27
In its Comment, respondent PNB contends that its claim for tax credit did not arise from overpayment
resulting from erroneous, illegal or wrongful collection of tax. And obviously having in mind the holding of
this Court in Juan Luna Subdivision Inc. vs. Sarmiento,28 respondent stresses that its P180 Million
advance income tax payment for 1991 partakes of the nature of a deposit made in anticipation of taxes
not yet due or levied. Accordingly, respondent adds, the P180 Million was strictly not a payment of a
valid and existing tax liability, let alone an erroneous payment, the refund of which is governed by
Section 230 of the NIRC.
Taking a different tack, respondent PNB would also argue that, even assuming, in gratia argumenti that
the two (2)-year limitation in Section 230 of the NIRC is of governing application, still the prescriptive

18

period set forth therein is not jurisdictional. The suspension of the statutory limitation in this case, PNB
adds, is justified under exceptional circumstance.
We rule for respondent PNB.
As may be recalled, both the CTAs and the BIRs refusal to grant PNBs claim for refund or credit was
based on the proposition that such claim was time-barred. On the other hand, the CA rejected both the
CTAs and BIRs stance for reasons as shall be explained shortly.
As we see it then, the core issue in this case pivots on the applicability hereto of the two (2)-year
prescriptive period under in Section 230 (now Sec. 229) of the NIRC, reading:
"SEC. 230. Recovery of tax erroneously or illegally collected. No suit or proceeding shall be maintained
in any court for the recovery of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected , . . , or of any sum, alleged to have been excessive or in
any manner wrongfully collected, until a claim for refund or credit has been duly filed with the
Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum
has been paid under protest or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two [(2)] years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund
or credit any tax, where on the face of the return upon which payment was made, such payment appears
clearly to have been erroneously paid. (Underscoring added.)
Here, respondent PNB requested the BIR to issue a TCC on the remaining balance of the advance income
tax payment it made in 1991. It should be noted that the request was made considering that, while PNB
carried over such credit balance to the succeeding taxable years, i.e., 1992 to 1996, its negative tax
position during said tax period prevented it from actually applying the credit balance of P73, 298,892.60.
It is fairly correct to say then that the claim for tax credit was specifically pursued to enable the
respondent bank to utilize the same for future tax liabilities. However, petitioner ruled that the claim in
question is time-barred, the bank having filed such claim only in 1997, or more than two (2) years from
1992 when the overpayment of annual income tax for 1991 was realized by the bank and the amount of
excess payment ascertained with the filing of its final 1991 income tax return.
In rejecting petitioners ruling, as seconded by the CTA, the CA stated that PNBs request for issuance of
a tax credit certificate on the balance of its advance income tax payment cannot be treated as a simple
case of excess payment as to be automatically covered by the two (2)-year limitation in Section
230, supra of the NIRC.
We agree with the Court of Appeals.
Section 230 of the Tax Code, as couched, particularly its statute of limitations component, is, in context,
intended to apply to suits for the recovery of internal revenue taxes or sums erroneously, excessively,
illegally or wrongfully collected.
Black defines the term erroneous or illegal tax as one levied without statutory authority.29 In the strict
legal viewpoint, therefore, PNBs claim for tax credit did not proceed from, or is a consequence of
overpayment of tax erroneously or illegally collected. It is beyond cavil that respondent PNB issued to the
BIR the check for P180 Million in the concept of tax payment in advance, thus eschewing the notion that
there was error or illegality in the payment. What in effect transpired when PNB wrote its July 28, 1997
letter30 was that respondent sought the application of amounts advanced to the BIR to future annual
income tax liabilities, in view of its inability to carry-over the remaining amount of such advance payment
to the four (4) succeeding taxable years, not having incurred income tax liability during that period.
The instant case ought to be distinguished from a situation where, owing to net losses suffered during a
taxable year, a corporation was also unable to apply to its income tax liability taxes which the law
requires to be withheld and remitted. In the latter instance, such creditable withholding taxes, albeit also
legally collected, are in the nature of "erroneously collected taxes" which entitled the corporate taxpayer
to a refund under Section 230 of the Tax Code. So it is that in Citibank, N.A. vs. Court of Appeals31, we
held:
The taxes thus withheld and remitted are provisional in nature. We repeat: five percent of the rental
income withheld and remitted to the BIR pursuant to Rev. Reg. No. 13-78 is, unlike the withholding of
final taxes on passive incomes, a creditable withholding tax; that is, creditable against income tax
liability if any, for that taxable year.

In CIR vs. TMX Sales, Inc., this Court ruled that the payments of quarterly income taxes (per Section
68, NIRC) should be considered mere installments on the annual tax due. These quarterly tax payments .
. . should be treated as advances or portions of the annual income tax due, to be adjusted at the end of
the calendar or fiscal year. The same holds true in the case of the withholding of creditable tax at source.
Withholding taxes are "deposits" which are subject to adjustments at the proper time when the complete
tax liability is determined.
In this case, the payments of the withholding taxes for 1979 and 1980 were creditable to the income tax
liability, if any, of petitioner-bank, determined after the filing of the corporate income tax returns on April
15, 1980 and April 15, 1981. As petitioner posted net losses in its 1979 and 1980 returns, it was not
liable for any income taxes. Consequently and clearly, the taxes withheld during the course of the taxable
year, while collected legally under the aforecited revenue regulation, became untenable and took on the
nature of erroneously collected taxes at the end of the taxable year. (Underscoring added)
Analyzing the underlying reason behind the advance payment made by respondent PNB in 1991, the CA
held that it would be improper to treat the same as erroneous, wrongful or illegal payment of tax within
the meaning of Section 230 of the Tax Code. So that even if the respondents inability to carry-over the
remaining amount of its advance payment to taxable years 1992 to 1996 resulted in excess credit, it
would be inequitable to impose the two (2)-year prescriptive period in Section 230 as to bar PNBs claim
for tax credit to utilize the same for future tax liabilities. We quote with approval the CAs disquisition on
this point:
Thus, in no sense can the subject amount of advance income tax voluntarily remitted to the BIR by the
[respondent], not as a consequence of prior tax assessment or computation by the taxpayer based on
business income, be treated as similar to those national revenue taxes erroneously, illegally or
wrongfully paid as to be automatically covered by the two (2)-year limitation under Sec. 230 for the right
to its recovery. When the P180 million advance income tax payment was tendered by [respondent], no
tax had been assessed or due, or actually imposed and collected by the BIR. Neither can such payment
be considered as illegal having been made in response to a call of patriotic duty to help the national
government . We therefore hold that the tax credit sought by [respondent] is not simply a case of
excess payment, but rather for the application of the balance of advance income tax payment for
subsequent taxable years after failure or impossibility to make such application or carry over the
preceding four (4)-year period when no tax liability was incurred by petitioner due to losses in its
operations. It is truly inequitable to strictly impose the two (2)-year prescriptive period as to legally bar
any request for such tax credit certificate considering the special circumstances under which the advance
income tax payment was made and the unexpected event (four years of business losses) which
prevented such application or carry over. Ironically, both the [petitioner] and CTA would fault the
[respondent] for electing to credit or carry over the excess amount of tax payment advanced instead of
choosing to refund any such excess amount, holding that such decision on the part of petitioner caused
the two (2)-year period to lapse without the petitioner filing such a request for the issuance of a tax
credit certificate. They emphasized that the advance tax payment was made with the understanding that
any excess amount will be either carried over to the next taxable year or refunded. It appears then that
the request for issuance of a tax credit certificate was arbitrarily interpreted by respondent as a simple
claim for refund instead of a request for application of the balance (excess amount) to tax liability for the
succeeding taxable years, as was the original intention of [respondent] when it tendered the advance
payment in 1991."32 (Emphasis in the original; words in bracket added)
Petitioner insists that a prior tax assessment in this case was unnecessary, the excess tax payment
having already been ascertained by the end of 1992 upon the filing by respondent of its adjusted final
return. Thus, petitioner adds, the two (2)-year prescriptive period to recover said excess credit balance
had begun to run from the accomplishment of the said final return and, ergo, PNBs claim for tax credit
asserted in 1997 is definitely belated. Additionally, petitioner, citing Revenue Regulation No. 10-77,
contends that the carrying forward of any excess or overpaid income tax for a given taxable year is
limited to the succeeding taxable year only.
We do not agree.
Revenue Regulation No. 10-7733 governs the method of computing corporate quarterly income tax on a
cumulative basis. Section 7 thereof provides:
SEC. 7. Filing of final or adjustment return and final payment of income tax. -- A final or an adjustment
return . . . covering the total taxable income of the corporation for the preceding calendar or fiscal year

19

shall be filed on or before the 15th day of the fourth month following the close of the calendar or fiscal
year. xxxx. The amount of income tax to be paid shall be the balance of the total income tax shown on
the final or adjustment return after deducting therefrom the total quarterly income taxes paid during the
preceding first three quarters of the same calendar or fiscal year.
"Any excess of the total quarterly payments over the actual income tax computed and shown
in the adjustment or final corporate income tax return shall either (a) be refunded to the
corporation, or (b) may be credited against the estimated quarterly income tax liabilities for the
quarters of the succeeding taxable year. The corporation must signify in its annual corporate
adjustment return its intention whether to request for the refund of the overpaid income or claim for
automatic tax credit to be applied against its income tax liabilities for the quarters of the succeeding
taxable year by filling the appropriate box on the corporate tax return. (B.I.R. Form No. 1702) [Emphasis
added]
As can be gleaned from the above, the mandate of Rev. Reg. No. 10-77 is hardly of any application to
PNBs advance payment which, needless to stress, are not "quarterly payments" reflected in the adjusted
final return, but a lump sum payment to cover future tax obligations. Neither can such advance lump
sum payment be considered overpaid income tax for a given taxable year, so that the carrying forward of
any excess or overpaid income tax for a given taxable year is limited to the succeeding taxable year
only.34 Clearly, limiting the right to carry-over the balance of respondents advance payment only to the
immediately succeeding taxable year would be unfair and improper considering that, at the time payment
was made, BIR was put on due notice of PNBs intention to apply the entire amount to its future tax
obligations.
In Commissioner vs. Phi-am Life35, the Court ruled that an availment of a tax credit due for reasons other
than the erroneous or wrongful collection of taxes may have a different prescriptive period. Absent any
specific provision in the Tax Code or special laws, that period would be ten (10) years under Article 1144
of the Civil Code. Significantly, Commissioner vs. Phil-Am is partly a reiteration of a previous holding that
even if the two (2)-year prescriptive period, if applicable, had already lapsed, the same is not
jurisdictional36 and may be suspended for reasons of equity and other special circumstances.37
While perhaps not in all fours because it involved the refund of overpayment due to misinterpretation of
the law on franchise, our ruling in Panay Electric Co. vs. Collector of Internal Revenue38, is apropos.
There, the Court stated:
"xxx(L)egally speaking, the decision of the Tax Court [on the two-year prescriptive period for tax refund]
is therefore correct, being in accordance with law. However, ones conscience does not and cannot rest
easy on this strict application of the law, considering the special circumstances that surround this case.
Because of his erroneous interpretation of the law on franchise taxes, the Collector, from the year 1947
had illegally collected from petitioner the respectable sum of . . . . From a moral standpoint, the
Government would be enriching itself of this amount at the expense of the taxpayer. (Words in bracket
added and underscoring added.)
Like the CA, this Court perceives no compelling reason why the principle enunciated in Panay
Electric andCommissioner vs. Phil-Am Life should not be applied in this case, more so since the amount
over which tax credit is claimed was theoretically booked as advance income tax payment. It bears
stressing that respondent PNB remitted the P180 Million in question as a measure of goodwill and
patriotism, a gesture noblesse oblige, so to speak, to help the cash-strapped national government. It
would thus indeed, be unfair, as the CA correctly observed, to leave respondent PNB to suffer losing
millions of pesos advanced by it for future tax liabilities. The cut becomes all the more painful when it is
considered that PNBs failure to apply the balance of such advance income tax payment from 1992 to
1996 was, to repeat, due to business downturn experienced by the bank so that it incurred no tax liability
for the period.
The rule of long standing is that the Court will not set aside lightly the conclusions reached by the CTA
which, by the very nature of its functions, is dedicated exclusively to the resolution of tax problems and
has, accordingly, developed an expertise on the subject, unless there has been an abuse or improvident
exercise of authority.39 It is likewise settled that to a claimant rests the onus to establish the factual basis
of his or her claim for tax credit or refund.40 In this case, however, petitioner does not dispute that a
portion of the P180 Million PNB remitted to the BIR in 1991 as advance payment remains unutilized for
the purpose for which it was intended in the first place. But petitioner asserts that respondents right to
recover the same is already time-barred. The CTA upheld the position of petitioner. The CA ruled

otherwise. We find the CAs position more in accord with the facts on record and is consistent with
applicable laws and jurisprudence.
Verily, the suspension of the two (2)-year prescriptive period is warranted not solely by the objective or
purpose pursuant to which respondent PNB made the advance income tax payment in 1991. Records
show that petitioners very own conduct led the bank to believe all along that its original intention to
apply the advance payment to its future income tax obligations will be respected by the BIR.
Notwithstanding respondent PNBs failure to request for tax credit after incurring negative tax position in
1992, up to taxable year 1996, there appears to be a valid reason to assume that the agreed carrying
forward of the balance of the advance payment extended to succeeding taxable years, and not only in
1992. Thus, upon posting a net income in 1997 and regaining a profitable business operation, respondent
bank promptly sought the issuance of a TCC for the reason that its credit balance of P73, 298,892.60
remained unutilized. If ever, petitioners pose about respondent PNB never having made a written claim
for refund only serves to buttress the latters position that it was not out to secure a refund or recover
the aforesaid amount, but for the BIR to issue a TCC so it can apply the same to its future tax
obligations.
Lest it be overlooked, petitioner peremptorily denied the request for tax credit on the ground of its
having been filed beyond the two (2)-year prescriptive period. In the same breath, however, petitioner
appears to have glossed over an incident which amounts to an earlier BIR ruling that "there is no legal
question to be resolved but only a factual investigation" in the processing of PNBs claim. Even as
petitioner concluded such administrative investigation, it did not deny the request for issuance of a tax
credit certificate on any factual finding, such as the veracity of alleged business losses in the taxable
years 1992 to 1996, during which the respondent bank alleged the credit balance was not applied. Lastly,
there is no indication that petitioner considered respondents request as an ordinary claim for refund, the
very reason why the same was referred by the BIR for processing to the Operations Group of the Bureau.
Hence, no reversible error was committed by the CA in holding that, upon basic considerations of equity
and fairness, respondents request for issuance of a tax credit certificate should not be subject to the two
(2)-year limitation in Section 230 of the NIRC.
With the foregoing disquisitions, the Court finds it unnecessary to delve on the question of whether or
not mistakes of tax officers constitute a bar to collection of taxes by the BIR Commissioner.
The procedural issue presently raised by petitioner, i.e., respondent PNBs alleged non-compliance with
the forum shopping rule when its petition for review filed with the CTA did not contain the requisite
authority of PNB Vice President Ligaya R. Gagolinan to sign the certification, need not detain us long.
Petitioner presently faults the CA for not having taken notice that PNBs initiatory pleading before the
CTA suffers from an infirmity that justifies the dismissal thereof. But it is evident that the issue of forum
shopping is being raised for the first time in this appellate proceedings. Accordingly, the Court loathes to
accommodate petitioners urging for the dismissal of respondents basic claim on the forum-shopping
angle. As earlier ruled by this Court, a party ought to invoke the issue of forum shopping, assuming its
presence, at the first opportunity in his motion to dismiss or similar pleading filed in the trial court. Else,
he is barred from raising the ground of forum shopping in the Court of Appeals and in this Court.41 So it
must be here.
WHEREFORE, the petition is DENIED for lack of merit and the assailed decision and resolution of the
Court of Appeals in CA-G.R. SP No. 76488 AFFIRMED.
-----------CIR v. TMX Sales, Inc.
Jan. 15, 1992
Gutierrez, Jr., J.
Facts: TMX Sales filed its quarterly income tax return for the first quarter of 1981 and consequently paid
an income tax on May 15, 1981. During the subsequent quarters, it suffered losses so that when it filed
on April 15, 1982, its Annual Income Tax Return for the year ended December 31, 1981, declared a net
loss of P6, 156, 525.00
On July 9, 1982, TMX thru its external auditor, SGV & Co. filed with the Appellate Division of the Bureau
of Internal Revenue (BIR) a claim for refund in the amount of P247, 010.00 representing overpaid
income tax.

20

Claim was not acted upon by the CIR and on March 14, 1984, TMX filed a petition for review before the
Court of Tax Appeals against CIR, praying that petitioner be ordered to refund to TMX the said amount
representing overpaid income tax.
CIR responded by saying that petitioner TMX Sales is already barred from claiming the same considering
that more than 2 years had already elapsed between the payment (May 15, 1981) and the filing of the
claim in Court (March 14, 1984).
On April 29, 1988, Court of Tax Appeals granted the petition of TMX and ordered CIR to refund the
amount claimed. The Tax Court viewed the quarterly income tax paid as a portion or instalment of the
total annual income tax due. In its assailed decision, it said (this isnt the whole thing, but just what
seem to be the most important parts):
When a tax is paid in instalments, the prescriptive period of 2 year provided in Sec.
306 (now Sec. 292) of the Revenue Code should be counted from the date of the final
payment or last instalment. This rule proceeds from the theory that in contemplation of
tax laws, there is no payment until the whole or entire tax liability is completely paid.
In this regard the word tax or words the tax in statutory provisions comparable to
Sec. 306 of our Revenue Code have been uniformly held to refer to the entire tax and
not a portion thereof and the vocable payment of tax within statutes requiring refund
claim, refer to the date when all the tax was paid, not when a portion was paid.
Petitioner CIR now seeks reversal of above decision.

The most reasonable and logical application of the law would be to compute the 2-year prescriptive
period at the time of filing the Final Adjustment Return or the Annual Income Tax Return, when it can
finally be ascertained if the taxpayer has still to pay additional income tax or if he is entitled to a refund
of overpaid income tax.
Also, Sec. 321 of the NIRC requires that the books of accounts of companies or persons with gross
quarterly sales or earnings exceeding P25, 000 be audited and examined yearly by an independent
Certified Public Accountant their income tax returns be accompanied by relevant documents. It is
generally recognized that before an accountant can make a certification on the financial statements or
render and auditors opinion, an audit of the books of accounts has to be conducted in accordance with
generally accepted auditing standards.
Since the audit, as required by Sec. 321, is to be conducted yearly, then it is the Final Adjustment
Return, where the figures of the gross receipts and deductions have been audited and adjusted, that is
truly reflective of the results of the operations of a business enterprise. Thus, it is only when the
Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still
due or a refund can be claimed based on the adjusted and audited figures.
The filing of quarterly income tax returns and payment should only be considered mere instalments of
the annual tax due. Consequently, the two-year prescriptive period provided in Sec. 292 of the Tax Code
should be computed from the time of the filing of the Adjustment Return or Annual Income Tax Return
and final payment of tax.
In this case, TMX filed a suit for a refund on March 14, 1984. Since the 2-year period should be counted
Issue: Does the 2-year prescriptive period to claim a refund of erroneously collected tax provided for in from the filing of Adjustment Return on April 15, 1982, TMX is not yet barred by prescription.
Sec. 292 (now Sec. 230) of the National Internal Revenue Code (NIRC) commence to run from the date -----------------the quarterly income tax was paid, as contended by petitioner, or from the date of filing of the Final
Adjustment Return (final payment) as claimed by private respondent?
ACCRA Investments Corporation v. Court of Appeals
Facts: ACCRA INVESTMENTS (ACCRAIN) is a domestic corporation engaged in the business of real estate
Ruling: Petition denied. Decision of the Court of Tax Appeals dated April 29, 1988 is affirmed.
investment and management consultancy. ACCRAIN filed with the Bureau of Internal Revenue its
Reasoning: Sec. 292, par. 2 of the National Internal Revenue Code provides that
annual corporate income tax return for the calendar year reporting a net loss of P2,957,142.00 on April
In any case, no such suit or proceeding shall be begun after the expiration of two
15, 1982. ACCRAIN declared as creditable all taxes withheld at source by various withholding agents
years from the date of payment of the tax or penalty regardless of any supervening
which withholding agents aforestated paid and remitted the above amounts representing taxes on rental,
cause that may arise after payment.
commission and consultancy income of the petitioner corporation to the Bureau of Internal Revenue.
Petitioner contends that the basis in computing the two-year period of prescription should be May 15, ACCRAIN filed a claim for refund. Pending action of the respondent Commissioner on its claim for refund,
1981, the date when the quarterly income tax was paid and not April 15, 1982, when the Final the petitioner corporation, on April 13, 1984, filed a petition for review with the respondent Court of Tax
Adjustment Return for the year ended December 1981 was filed.
Appeals. The CTA dismissed the case for being filed out of time and the MR was likewise denied. A
Sec. 292 of the NIRC should be interpreted in relation to the other provisions of the Tax Code in order to petition for review was submitted to the SC and the SC referred the case to the CA. The CA affirmed
give effect the legislative intent and to avoid an application of the law which made lead to inconvenience decision of the CTA.
and absurdity. Court cited People v. Rivera, which stated that statutes should receive a sensible
construction, such as will give effect to the legislative intention and so as to avoid an unjust or an absurd Issue: Whether or not the claim for refund was filed on time
conclusion. Where there is ambiguity, such interpretation as will avoid inconvenience and absurdity is to
be adopted.
Held: YES. Crucial in the resolution of the instant case is the interpretation of the phraseology "from the
Courts must give effect to the general legislative intent that can be discovered from or is unravelled by date of payment of the tax" in the context of Section 230 on Recovery of tax erroneously or illegally
the four corners of the statute, and in order to discover said intent, the whole statute, and not only a collected.
part thereof, should be considered. Every section, provision or clause of the statute must be expounded
by reference to each other in order to arrive at the effect contemplated by the legislature. The intention A correct application of the Gibbs case according to the court is that a taxpayer whose income is
of the legislator must be ascertained from the whole text of the law and every part of the act is to be withheld at source will be deemed to have paid his tax liability at the end of the tax year. It is from when
taken into view.
the same falls due at the his latter date then, or when the two-year prescriptive period under Section
Thus, in resolving the case, the Court considered not only Sec. 292 but also other provisions of the Tax 306 of the Revenue Code starts to run with respect to payments effected through the withholding tax
Code. Sec. 292 provides a 2 year prescriptive period to file a suit for a refund of a tax erroneously or system..
illegally paid, counted from the time the tax was paid. Sec. 85 provides for a method of computing
corporate quarterly income tax which is on a cumulative basis while Sec. 87 requires the filing of an The aforequoted ruling presents two alternative reckoning dates, (1) the end of the tax year; and (2)
adjustment returns and final payment of income tax.
when the tax liability falls due. In the instant case, it is undisputed that the petitioner corporation's
In the case, the amount claimed by TMX Sales based on its Adjustment Return is equivalent to the tax withholding agents had paid the corresponding taxes withheld at source to the Bureau of Internal
paid during the first quarter. A literal application of Sec. 292 would thus pose no problem as the two-year Revenue from February to December 1981. ACCRAIN is not claiming a refund of overpaid withholding
prescriptive period from the time the quarterly income tax was paid can easily be determined. However, taxes, per se. It is asking for the recovery the refundable or creditable amount determined upon the
if the quarter in which overpayment is made cannot be ascertained, then a literal application would lead petitioner corporation's filing of the its final adjustment tax return on or before 15 April 1982 when its tax
to absurdity and inconvenience.
liability for the year 1981 fell due. The petitioner corporation's taxable year is on a calendar year basis,

21

hence, with respect to the 1981 taxable year, ACCRAIN had until 15 April 1982 within which to file its by Sec. 68 and 69 of the present. Tax Code. It may be observed that although quarterly taxes due are
final adjustment return. The petitioner corporation duly complied with this requirement
required to be paid within 60 days from the close of each quarter, the fact that the amount shall be
deducted from the tax due for the succeeding quarter shows that until a final adjustment return shall
Anent claims for refund, section 8 of Revenue Regulation No. 13-78 issued by the Bureau of Internal have been filed, the taxes paid in the preceding quarters are merely partial taxes due from a corporation.
Revenue requires that:
Neither amount can serve as the final figure to quantify what is due the government nor what should be
refunded to be corporation. This interpretation may be gleaned from the last paragraph of Sec. 69 of the
Section 8. Claims for tax credit or refund Claims for tax credit or refund of income tax deducted and Tax Code which provides that the refundable amount, in case arefund is due a corporation, is that
withheld on income payments shall be given due course only when it is shown on the return that the amount which is shown on its finaladjustment return and not on its quarterly returns.
income payment received was declared as part of the gross income and the fact of withholding is -------------established by a copy of the statement, duly issued by the payor to the payee (BIR Form No. 1743-A)
showing the amount paid and the amount of tax withheld therefrom.
COMMISSIONER V. PALANCA
The term "return" in the case of domestic corporations like ACCRAIN refers to the final adjustment
return. It bears emphasis at this point that the rationale in computing the two-year prescriptive period
with respect to the petitioner corporation's claim for refund from the time it filed its final adjustment
return is the fact that it was only then that ACCRAIN could ascertain whether it made profits or incurred
losses in its business operations. The "date of payment", therefore, in ACCRAIN's case was when its tax
liability, if any, fell due upon its filing of its final adjustment return on April 15, 1982.
---------------------------

FACTS
July 1950, Don Carlos Palanca, Sr., donated to his son Carlos Jr., shares of stock in La Tondea, Inc.
amounting to 12,500 shares. Carlos Jr. failed to file a return on the donation within the statutory period
so Carlos Jr. was assessed P97,691.23 (gift tax), P24,442.81 (25% surcharge), P47,868.70 (interest),
which he paid on June 22, 1955.
March 1,1956, Carlos Jr. filed with BIR his ITR for 1955 claiming a deduction for interest of P9,706.45
and reporting a taxable income of P65,982.12. He was assessed P21,052.01 as income tax.
November 1956, Carlos Jr. filed an amended return for 1955, claiming an additional deduction of
P47,868.70 (allegedly the interest paid on the donees gift tax based on Sec.30(b)(1) of the Tax Code) so
taxable income is P18,113.42 (not P65,982.12) and tax due thereon in sum of P3,167.00. He claimed for
a refund of P17,885.01 (P21,052.01 - P3,167.00) BIR denied
Carlos Jr. reiterated claim for refund, BIR denied
BIR considered the donation by Carlos Sr. as a transfer in contemplation of death so Carlos Jr. was
assessed P191,591.62 as estate and inheritance taxes. Carlos paid P17,002.74 on June 22, 1955 as gift
tax (includes interest and surcharge) which was applied to his estate and inheritance tax liability.
Petitioner paid P60,581.80 as interest for delinquency.
-August 1958, Carlos Jr. filed again an amended ITR for 1955 claiming the following:
As interest deductions: P9,706.45 (as in the original ITR) + P60,581.80 (interest on the estate and
inheritance taxes); Net Taxable income: P5,400.32; Income tax due: P428.00; claimed a refund of
P20,624.01 (P21,052.01 P428) . Even before BIR ruled on his claim, Carlos Jr. filed petition for review
before CTA
-CTA: BIR refund Carlos P20,624.01

Citibank N.A. v. Court of Appeals


Facts: Citibank N.A. Philippine Branch (CITIBANK) is a foreign corporation doing business in the
Philippines. In 1979 and 1980, its tenants withheld and paid to the Bureau of Internal Revenue the taxes
on rents due to Citibank, pursuant to Section 1(c) of the Expanded Withholding Tax Regulations.
On April 15, 1980, Citibank field its corporate income tax returns for the year and ended December 31,
1979 showing a net loss of P74,854,916.00 and its tax credits totaled P6,257,780.00, even without
including the amounts withheld on rental income under the Expanded Withholding Tax System, the same
not having been utilized or applied for the reason that the years operation resulted in a loss. The taxes
thus withheld by the tenants from rentals paid to Citibank in 1979 were not included as tax credits
although a rental income amounting to P7,796,811.00 was included in its income declared for the year
ended December 31, 1979.
For the year ended December 31, 1980, Citibanks corporate income tax returns, filed on April 15, 1981,
showed a net loss P77,071,790.00 for income tax purposes. Its available tax credit at the end of 1980
amounting to P11,532,855.00 was not utilized or applied. The said available tax credits did not include
the amounts withheld by Citibanks tenants from rental payment sin 1980 but the rental payments for
that year were declared as part of its gross income included in its annual income tax returns. ISSUES
1. WON there is a difference between indebtedness and taxes to determine the deductible interest
On October 31, 1981, Citibank submitted its claim for refund of the aforesaid amounts of P270,160.56 (WON Palanca could claim interest deductions based on tax liability)
and P298,829.29, respectively or a total of P568,989.85; and on October 12, 1981 filed a petition for 2. WON claim for refund of Palanca already expired
review with the Court of Tax Appeals concerning subject claim for tax refund.
On August 30, 1981, the CTA adjudged Citibanks entitlement to thetax refund sought for, representing HELD
the 5% tax withheld and paid on Citibanks rental income for 1979 and 1980. The Court of Tax Appeals, 1. NO. Distinction became inconsequential. Interest on taxes should be considered as interests of
rejected Respondent CIRs argument that the claim was not seasonably filed. Not satisfied the indebtedness
Commissioner appealed to the Court of Appeals, CA ruled that Citibank N.A. Philippine branch, entitled to Ratio. While the distinction between taxes and debts was recognized in this jurisdiction, the variance
a tax refund/credit in the amount of P569,989.85, representing the 5% withheld tax in Citibanks rental in their legal conception does not extend to the interests paid on them, at least insofar as Sec.30(b)(1) of
income for the years 1979 and 1980 is REVERSED. Motion for Reconsideration of the petitioner bank was the NIRC1 is concerned (which authorizes deduction from gross income of interest paid within the taxable
denied. Hence, this petition.
year on indebtedness).
Issue: Whether or not income taxes remitted partially on a periodic or quarterly basis should be credited
or refunded to the taxpayer on the basis of the taxpayers final adjusted returns.
Held: In several cases, we have already ruled that income taxesremitted partially on a periodic or
quarterly basis should be credited or refunded to the taxpayer on the basis of the taxpayers final
adjusted returns, not on such periodic or quarterly basis. When applied to taxpayers filing income tax
returns on a quarterly basis, the date ofpayment mentioned in Sec. 230 must be deemed to be qualified

22

Reasoning. CIR argues that Carlos Jr. cannot deduct the interest due to its tax liabilities from his gross
income since it is not interest ON INDEBTEDNESS but interest on TAX (liabilities).
-however, in CIR v. PRIETO (wherein deductions of interest on donors tax was allowed) it was held that
the term indebtedness was defined as the unconditional and legally enforceable obligation for the
payment of money. It Thus, it is apparent that a tax may be considered an indebtedness.
2. NO
Ratio. Where the claim for refund was filed with the CTA even before it had been denied by the BIR, then
the 30-day prescription period under Sec.11, RA 1124(25) did not even commence to run. Where the tax
account was paid by installment, then the computation of the two-year prescriptive period under Sec.
306 of the Tax Code should be from the date of the last installment
Reasoning. CIR argued that under Sec.11(may appeal to CTA within 30-days from receipt of decision or
ruling), claim for refund already prescribed because outside 30-day period. Under Sec.306 of Tax Code
(No suit/proceeding shall be begun for recovery of tax erroneously or illegally collected after the
expiration of 2years from the date of payment of the tax penalty) CIR claims that under Palancas
withheld tax and under Receipt dated May 11, 1956, amounts paid by Carlos Jr. may no longer be
refunded as it was filed in court only on August 13, 1958 (beyond 2yr period)
-on 30-day period: did not even commence when case was filed because there was no final decision from
BIR yet when Carlos Jr. filed case with CTA
-on 2yr period: Palanca paid on installment. His last payment was on August 14, 1956. Therefore, since
the period of counting should be from time of last installment, he still filed claim on time on August 13,
1958!
Disposition. WHEREFORE, the decision appealed from is affirmed in full, without pronouncements on
costs.
---------------CIR v. Philippine American Life Insurance Co., et al
FACTS:
On May 30, 1983, private respondent Philamlife paid to the Bureau of Internal Revenue (BIR) its first quarterly corporate
income tax for Calendar Year (CY) 1983 amounting to P3,246,141.00. On August 29, 1983, it paid P396,874.00 for the
Second Quarter of 1983. For the Third Quarter of 1983, private respondent declared a net taxable income of
P2,515,671.00 and a tax due of P708,464.00. After crediting the amount of P3,899,525.00 it declared a refundable
amount of P3,158,061.00. For its Fourth and final quarter ending December 31, private respondent suffered a loss and
thereby had no income tax liability. In the return for that quarter, it declared a refund of P3,991,841.00 representing the
first and second quarterly payments: P215,742.00 as withholding taxes on rental income for 1983 and P133,084.00
representing 1982 income tax refund applied as 1983 tax credit.
In 1984, private respondent again suffered a loss and declared no income tax liability. However, it applied as tax credit
for 1984, the amount of P3,991,841.00 representing its 1982 and 1983 overpaid income taxes and the amount of
P250,867.00 as withholding tax on rental income for 1984.
On September 26, 1984, private respondent filed a claim for its 1982 income tax refund of P133,084.00. On November
22, 1984, it filed a petition for review with the Court of Tax Appeals (C.T.A. Case No. 3868) with respect to its 1982 claim
for refund of P133,084.00.
On December 16, 1985, it filed another claim for refund with petitioners appellate division in the aggregate amount of
P4,109,624.00.
The issue in this case is the reckoning date of the two-year prescriptive period provided in Section 230 of the National
Internal Revenue Code (formerly Section 292) which states that:
Recovery of tax erroneously or illegally collected. No suit or proceeding shall be maintained in
any court for the recovery of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed to have been collected
without authority, or of any sum alleged to have been excessive or in any manner wrongfully
collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit
or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under
protest or duress.
In any case, no such suit or proceeding shall be begun after the expiration of two years from the
date of payment of the tax or penalty regardless of any supervening cause that may arise after
payment:Provided, however, That the Commissioner may, even without a written claim therefor,

refund or credit any tax, where on the face of the return upon which payment was made, such
payment appears clearly to have been erroneously paid.
Forfeiture of refund. A refund check or warrant issued in accordance with the pertinent provisions
of this Code which shall remain unclaimed or uncashed within five (5) years from the date the said
warrant or check was mailed or delivered shall be forfeited in favor of the government and the
amount thereof shall revert to the General Fund.
Petitioner poses the following question: In a case such as this, where a corporate taxpayer remits/pays to the BIR tax
withheld on income for the first quarter but whose business operations actually resulted in a loss for that year, as
reflected in the Corporate Final Adjustment Return subsequently filed with the BIR, should not the running of the
prescriptive period commence from the remittance/payment at the end of the first quarter of the tax withheldinstead of
from the filing of the Final Adjustment Return?
In support of its contention, petitioner cites the case of Pacific Procon Ltd. v. Court of Tax Appeals, et a1. 2wherein the
CTA denied therein petitioner's claim for refund after it construed Section 292 (now Section 230) of the NIRC to be
mandatory and "not subject to any qualification," hence it applies regardless of the conditions under which payment may
have been made. The Tax Court ruled:
Under Section 292 (formerly Section 306) of the National Internal Revenue Code, a claim for refund
of a tax alleged to have been erroneously or illegally collected shall be filed with the CIR within two
years from the date of payment of the tax, and that no suit or proceeding for refund shall be begun
after the expiration of the said two-year period (Citation omitted). As a matter of fact, the said section
further provides that: . . . In any case, no such suit or proceeding shall be begun after the expiration
of two years from the date of payment of the tax or the date of payment of the tax or penalty
regardless of any supervening cause that may arise after payment.
Petitioner states that the phrase "regardless of supervening cause that may arise after payment" is an amendatory
phrase under the said Section 292 which did not appear in Section 306 of the old Tax Code before it was amended by
Presidential Decree No. 69, which became effective January 1, 1973. Petitioner argues that the incorporation of the said
phrase did away with any other interpretation and, therefore, the reckoning period of prescription under Section 292 (now
section 230) is from the date of payment of tax regardless of financial loss (the "supervening cause"). Thus, the claim for
refund of the amounts of P3,246,141.00 and P396,874.00 paid on May 30, 1983 and August 29, 1983, respectively, has
prescribed.
We find petitioner's contentions to be unmeritorious.
It is true that in the Pacific Procon case, we held that the right to bring an action for refund had prescribed, the tax having
been found to have been paid at the end of the first quarter when the withholding tax corresponding thereto was remitted
to the Bureau of Internal Revenue, not at the time of filing of the Final Adjustment Return in April of the following year.
However, this case was overturned by the Court in CIR v. TMX Sales Incorporated and the Court of Tax
Appeals, 3 wherein we said:
. . . in resolving the instant case, it is necessary that we consider not only Section 292 (now Section
230) of the National Internal Revenue Code but also the other provisions of the Tax Code,
particularly Sections 84, 85 (now both incorporated as Section 68), Section 86 (now Section 70) and
Section 87 (now Section 69) on Quarterly Corporate Income Tax Payment and Section 321 (now
Section 232) on keeping of books of accounts. All these provisions of the Tax Code should be
harmonized with each other.
Section 292 (now Section 230) stipulates that the two-year prescriptive period to claim refunds should be counted from
date of payment of the tax sought to be refunded. When applied to tax payers filing income tax returns on a quarterly
basis, the date of payment mentioned in Section 292 (now Section 230) must be deemed to be qualified by Sections 68
and 69 of the present Tax Code which respectively provide:
Sec. 68 Declaration of Quarterly Income Tax. Every corporation shall file in duplicate a quarterly
summary declaration of its gross income and deductions on a cumulative basis for the preceding
quarter or quarters upon which the income tax, as provided in Title II of this Code shall be levied,
collected and paid. The Tax so computed shall be decreased by the amount of tax previously paid or
assessed during the preceding quarters and shall be paid not later than sixty (60) days from the
close of each of the first three (3) quarters of the taxable year.
Sec. 69. 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 still due; or
(b) Be refunded the excess amount paid, as the case may be.

23

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 year.
It may be observed that although quarterly taxes due are required to be paid within sixty days from the close of each
quarter, the fact that the amount shall be deducted from the tax due for the succeeding quarter shows that until a final
adjustment return shall have been filed, the taxes paid in the preceding quarters are merely partial taxes due from a
corporation. Neither amount can serve as the final figure to quantity what is due the government nor what should be
refunded to the corporation.
This interpretation may be gleaned from the last paragraph of Section 69 of the Tax Code which provides that the
refundable amount, in case a refund is due a corporation, is that amount which is shown on its final adjustment return
and not on its quarterly returns.
Therefore, when private respondent paid P3,246,141.00 on May 30, 1983, it would not have been able to ascertain on
that date, that the said amount was refundable. The same applies with cogency to the payment of P396,874.00 on
August 29, 1983.
Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained,
which can only be determined after a final adjustment return is accomplished. In the present case, this date is April 16,
1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on
December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within
the two-year reglementary period. Private respondent being a corporation, Section 292 (now Section 230) cannot serve
as the sole basis for determining the two-year prescriptive period for refunds. As we have earlier said in the TMX
Sales case, Sections 68, 69, and 70 on Quarterly Corporate Income Tax Payment and Section 321 should be
considered in conjunction with it.
Moreover, even if the two-year period had already lapsed, the same is not jurisdictional 4 and may be suspended for
reasons of equity and other special circumstances. 5
Petitioner also raises the issue of whether or not private respondent has satisfactorily shown by competent evidence that
it is entitled to the amount sought to be refunded. This being a question of fact, this Court is bound by the findings of the
Court of Tax Appeals which has clearly established the propriety of private respondent's claim for refund for excess 1983
quarterly income tax payments. On the other hand, petitioner CIR has failed to present any documentary or testimonial
evidence in support of his case. Instead, he opted to postpone the hearings several times and later chose to submit the
case for decision on the basis of the records and pleadings of instant case.
To repeat, we find that private respondent has presented sufficient evidence in support of its claim for refund, whereas
petitioner has failed to controvert the same adequately.
WHEREFORE, the instant petition is DISMISSED and the decision of the Court of Appeals is hereby AFFIRMED in toto.
No costs.
SO ORDERED.

That Allison J. Gibbs was not merely the agent of the petitioners in the matter under litigation, contrary
to all that is alleged above, is demonstrated, however, by the following circumstances obtaining in this
case:
1. Allison J. Gibbs acknowledged for the petitioners receipt of the deficiency income tax
assessment, formally protested the same in writing, paid the assessment and likewise formally
demanded in writing its refund.
2. As far back as 1952, Allison J. Gibbs' Law office had been representing the petitioners as the
latter's counsel.
3. Atty. Francisco Collantes, to whom the assessment notice was admittedly addressed, at the
time of the said assessment, was a staff lawyer in the firm of Gibbs and Chuidian, of which Allison J.
Gibbs was a principal partner.
We find all the above as ample evidence of the lawyer-client-relationship of the petitioners
herein and Allison J, Gibbs. Besides, it should be recalled that among the charges which Allison J. Gibbs
claimed he would collect if his demand for refund for the petitioners were not effected by the respondent
Commissioner was "attorney's fees of twenty five percent (25%) of the amount involved." (Letter of
October 3, 1956.) How, then, may this statement be reconciled with the present denial that Allison was
indeed the petitioners' counsel when he wrote the said letter of October 3, 1956?
There can be no question, therefore, that the receipt of the October 26, 1956 letter-decision of the
respondent Commissioner by Allison J. Gibbs was receipt of the same by the petitioners, the former being
then the latter's legal counsel. In the premises, the respondent court cannot be considered to have erred,
therefore, in computing the 30-day prescriptive period in question from the date the said letter was
received by Allison J. Gibbs.
---------------------------CIR v. Splash Corporation

-----------------------ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR


GR Nos. 141104 & 148763, June 8, 2007
"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic or
statute law and should not be permitted to stand on vague implications."
"Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes."

------------Gibbs v. Collector of Internal Revenue


Facts:
Finley J. Gibbs and Diane P. Gibbs, c/o Francisco Collantes were assessed of deficiency Income Tax
Assessment Notice. Allison J. Gibbs signing as attorney-in-fact, acknowledged for the Gibbs who were
then living in Atherton, California receipt of the deficient income tax assessment; formally protested the
same in writing, paid the assessment and likewise formally demanded in writing its refund. Of course, the
petitioners maintain that Allison J. Gibbs, at least until September 30, 1957, acted merely as agent or
attorney-in-fact of the petitioners and never as their legal counsel. In support of this, it is argued that
prior to October 26, 1956, Allison J. Gibbs had explicitly qualified his signature to all his correspondences
regarding the disputed assessment as "attorney-in-fact." Furthermore, it is urged that as might be seen
on the face of the assessment notice itself, the real legal counsel of the petitioners in the matter of the
said assessment was Atty. Francisco Collantes.
HELD:

FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of
various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of
capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did not
immediately act on the matter prompting the petitioner to file a petition for review before the CTA. The
latter denied the claims on the grounds that for zero-rating to apply, 70% of the company's sales must
consists of exports, that the same were not filed within the 2-year prescriptive period (the claim for 1992
quarterly returns were judicially filed only on April 20, 1994), and that petitioner failed to submit
substantial evidence to support its claim for refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR
and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period should be
counted from the date of filing of the last adjustment return which was April 15, 1993, and not on every
end of the applicable quarters; and that the certification of the independent CPA attesting to the
correctness of the contents of the summary of suppliers invoices or receipts examined, evaluated and
audited by said CPA should substantiate its claims.
ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for
refund/credit of input VAT?

24

HELD: No. Although the Court agreed with the petitioner corporation that the two-year prescriptive
period for the filing of claims for refund/credit of input VAT must be counted from the date of filing of the
quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed as exports
because these export processing zones are to be managed as a separate customs territory from the rest
of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory, it still denies
the claims of petitioner corporation for refund of its input VAT on its purchases of capital goods and
effectively zero-rated sales during the period claimed for not being established and substantiated by
appropriate
and
sufficient
evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign
authority, and should be construed in strictissimi juris against the person or entity claiming the
exemption. The taxpayer who claims for exemption must justify his claim by the clearest grant of
organic or statute law and should not be permitted to stand on vague implications.
------------------------

asserted that the MPC's claim for refund cannot be granted because MPC's sale of electricity to NPC is not
zero-rated for its failure to secure an approved application for zero-rating. CTA granted MPC's claim for
input VAT refund or credit, but only P 10,766,939.48 and ordered the CIR to refund or issued Tax Credit
Certificate to MPC. Before the CA, modified CTAs decision by ordering the CIR to make refund or issue a
tax credit certificate in favor of MPC of its unutilized input VAT payments directly attributable to its
effectively
zero-rated
sales,
2nd
quarter
1998
of
P146,760,509.48.
ISSUES:

MPCs entitlement to zero-rating for VAT purposed for its sales and services to tax-exempt
NPC
Refund or Tax Credit for its unutilized input VAT, 2nd quarter of 1998

HELD:
Petition is Partly granted, ordering the CIR for the issuance of the tax credit certificate
to MPC representing its unutilized input VAT payments directly attributable to its effectively zero-rated
sales, 2nd quarter of P10,766,939.48 but denying the tax refund or credit to the extent of P135,993,570
CIR vs. MIRANT PAGBILAO CORPORATION (FORMERLY SOUTHERN ENERGY QUEZON, INC.) (P146,760,509.48 - P10,766,939.48) representing its input VAT payments for service purchases from
Mitsubishi Corporation of Japan for the construction of a portion of its Pagbilao, Quezon power station on
VELASCO JR., J.:
the ground
that it has prescribed.
MPC, formerly Southern Energy Quezon, Inc., and also formerly known as Hopewell (Phil.) Corporation, is
a domestic firm engaged in the generation of power which it sells to the National Power Corporation On claim for refund:
(NPC).
The claim for tax refund may be based on a statute granting tax exemption, which is to be construed
strictissimi juris against the taxpayer, meaning that the claim cannot be made to rest on vague inference.
From 1993 to 1996, MPC secured the services of Mitsubishi Corporation (Mitsubishi) of Japan. for the Where the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes
construction of the electrical and mechanical equipment portion of its Pagbilao, Quezon.
of the nature of an exemption, the claimant must show that he clearly falls under the exempting statute.
In its revised charter, as found in RA No. 6395, it is exempt from all taxes. The following ensued after
the sale of the power generation service to NPC, viz:

December 1, 1997:
With the above-mentioned exemption, it filed with the RDO No. 60 in Lucena City an
application for Effective Zero Rating covering the construction and operation of its
Pagbilao power state under a Build, Operate, and Transfer scheme. This application, it
based with Section 108(B)(3) of the Tax Code - Zero-rated for VAT purposes.

January 28, 1998:


Since, no response has been received from the BIR district office (RDO), it refiled the
same application before the BIR.

May 13, 1999:


CIR issued VAT Ruling No. 052-99, stating that "the supply of electricity by Hopewell Phil.
to the NPC, shall be subject to the zero percent (0%) VAT, pursuant to Section 108 (B)
(3) of the NIRC of 1997."

April 14, 1998


MPC paid Mitsubishi the VAT component for the progress billings from April 1993September 1996, supported by OR No. 0189 covering P135,993,570.00. Mitsubishi had
advanced the VAT component as this serves as its output VAT which is essential for the
determination of its VAT payment.

August 25, 1998


While awaiting approval of its application, it file its quarterly VAT return, 2nd quarter of
1998, reflecting total Input VAT of P148,003,047.62 (inclusive of the P135,993,570.00 VAT
component of the progress billings)

December 20, 1999

MPC filed a claim for refund of the unutilized Input VAT of P148,003,047.62

No action from the CIR as of yet

On Prescription:
The claim for tax refund/ credit of input tax covered by OR No. 0189, re: purchases by MPC from
Mitsubishi from 1993 to 1996 was filed on December 20, 1999,clearly way beyond the two-year
prescriptive period set in Sec. 112 of the NIRC, which provides:
(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two (2) years after the close of the
taxable quarter when the sales were made, apply for the issuance of a tax credit certificate
or refund of creditable input tax due or paid attributable to such sales, except transitional input
tax, to the extent that such input tax has not been applied against output tax: x x x
The above proviso clearly provides that unutilized input VAT payments not otherwise used for any
internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the
taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether
said tax was paid or not.
Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said
taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The
reckoning frame would always be the end of the quarter when the pertinent sales or transaction was
made, regardless when the input VAT was paid.
The creditable input VAT due for the period covering the progress billing of September 6, 1996 is the
third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund
or tax credit for said quarter prescribed two years after September 30, 1996 or on September 30, 1998.
Consequently, MPC's claim for refund or tax credit filed on December
10, 1999 had already prescribed.

It filed a petition for review before the CTA and contends that with the inaction of the CIR, its claim for MPC cannot avail itself of the provisions of Section 204(C) or 229 of the NIRC which, for the purpose of
refund forestall the running of the two-year prescriptive period under Section 229 of the NIRC. CIR refund, prescribes a different starting point for the two-year prescriptive limit for the filing of a claim

25

therefore and in both instances apply only to erroneous payment or illegal collection of internal revenue
taxes.

Sec. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit
Taxes.-- The Commissioner may
xxxx

(c) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps that
have been rendered unfit for use and refund their value upon proof of destruction. No
credit or refund of taxes or penalties shall be allowed unless the taxpayer files in writing
with the Commissioner a claim for credit or refund within two (2) years after the payment
of the tax or penalty: Provided, however, That a return filed showing an overpayment shall
be
considered
as
a
written
claim
for
credit
or
refund.
xxxx

---------CIR v. Aichi Forging Company of Asia


FACTS:
On September 30, 2004, Aichi Forging filed a claim for refund/credit of input VAT attributable to its zerorated sales for the period July 1, 2002 to September 30, 2002 with the CIR through the DOF One-Stop
Shop. On the same day, Aichi Forging filed a Petition for Review with the CTA for the same action. The
BIR disputed the claim and alleged that the same was filed beyond the two-year period given that 2004
was a leap year and thus the claim should have been filed on September 29, 2004. The CIR also raised
issues related to the reckoning of the 2-year period and the simultaneous filing of the administrative and
judicial claims.

ISSUES:
(1) Was the Petitioners administrative claim filed out of time?
Sec. 229. Recovery of Tax Erroneously or Illegally Collected.-- No suit or proceeding shall (2) Was the filing of the judicial claim premature?
be maintained in any court for the recovery of any national internal revenue tax hereafter
alleged to have been erroneously or illegally assessed or collected, or of any penalty HELD:
claimed to have been collected without authority, of any sum alleged to have been (1) NO. The right to claim the refund must be reckoned from the close of the taxable quarter when the
excessively or in any manner wrongfully collected without authority, or of any sum alleged sales were made in this case September 30, 2004. The Court added that the rules under Sections 204
to have been excessively or in any manner wrongfully collected, until a claim for refund or (C) and 229 as cross-referred to Section 114 do not apply as they only cover erroneous payments or
credit has been duly filed with the Commissioner; but such suit or proceeding may be illegal collections of taxes which is not the case for refund of unutilized input VAT. Thus, the claim was
maintained, whether or not such tax, penalty, or sum has been paid under protest or filed on time even if 2004 was a leap year since the sanctioned method of counting is the number of
duress.
months.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date
of payment of the tax or penalty regardless of any supervening cause that may arise after payment:
Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit
any tax, where on the face of the return upon which payment was made, such payment appears clearly
to have been erroneously paid. (Emphasis ours.)
On entitlement to creditable input VAT:
Section 105 of the NIRC provides that a creditable input VAT is an indirect tax which can be shifted
or passed on to the buyer, transferee, or lessee of the goods, properties, or services of the taxpayer.
The fact that the subsequent sale or transaction involves a wholly-tax exempt client, resulting in a
zero-rated or effectively zero-rated transaction, does not, standing alone, deprive the taxpayer of its
right to a refund for any unutilized creditable input VAT, albeit the erroneous, illegal, or wrongful
payment angle does not enter the equation.

(2) YES. Section 112 mandates that the taxpayer filing the refund must either wait for the decision of the
CIR or the lapse of the 120-day period provided therein before filing its judicial claim. Failure to observe
this rule is fatal to a claim. Thus, Section 112 (A) was interpreted to refer only to claims filed with the
CIR and not appeals to the CTA given that the word used is application. Finally, the Court said that
applying the 2-year period even to judicial claims would render nugatory Section 112 (D) which already
provides for a specific period to appeal to the CTA --- i.e., (a) within 30 days after a decision within the
120-day period and (b) upon expiry of the 120-day without a decision.
--------------------------------Philam Asset vs CTA
Facts:

Its application has been drawn from the Tax Credit Method, of which an entity can credit against or
subtract from the VAT charged on its sales or outputs the VAT paid on its purchases, inputs and
imports. If at the end of a taxable quarter the output taxes charged by a seller are equal to the input
taxes passed on by the suppliers, no payment is required. It is when the output taxes exceed the
input taxes that the excess has to be paid. If, however, the input taxes exceed the output taxes, the
excess shall be carried over to the succeeding quarter or quarters.

Petitioner acts as invesment manager of PFI &PBFI. It provides management &technical services and thus
respectively paid for its services. PFI & PBFI withhold the amount of equivalent to 5% creditable tax
regulation. On April 3, 1998, filed itrwith a net loss thus incurred with holding tax. Petitioner filed for
refund from BIR but was unanswered . CTA denied the petition for review. CA held that to request for
either a refund or credit of income taxpaid, a corporation must signify its intention by marking the
corresponding box on its annual corporate adjustment return.

Should the input taxes result from zero-rated or effectively zero-rated transactions or from the
acquisition of capital goods, any excess over the output taxes shall instead be refunded to the
taxpayer or credited against other internal revenue taxes.

Issue:
Whether or not petitioner is entitled to a refund of its creditible taxes.

On Zero-rated transactions:
It refers to the export sale of goods and supply of services. The tax rate is set at zero. When applied to
the tax base, such rate obviously results in no tax chargeable against the purchaser. The seller of such
transactions charges no output tax, but can claim a refund of or a tax credit certificate for the VAT
previously charged by suppliers.

Ruling:
Any tax income that is paid in excess of its amount due to the government may be refunded, provided
that a taxpayer properly applies for the refund. One can not get a tax refund and a tax credit at the same
time for the same excess to income taxes paid. Failure to signify ones intention in Final Assessment
Return (FAR) does not mean outright barring of a valid request for a refund

26

Requiring that the ITR on the FAR of the succeeding year be presented to the BIR in requesting a tax
refund has no basis in law and jurisprudence. The Tax Code likewise allows the refund of taxes to
taxpayer that claims it in writing within 2 years after payment of the taxes. Technicalities and legalism
should not be misused by the government to keep money not belonging to it, and thereby enriched itself
at the expense of its law-abiding citizens.
--------------Calamba Steel Center Inc. v CIR
GR 151857, April 28, 2005
Facts:
Petitioner is a domestic corporation engaged in the manufacture of steel blanks for use by manufacturers
of automotive, electrical, electronics in industrial and household appliances.
In it's amended Corporate Annual Income Tax Return on June 4, 1996 it declared a net taxable income of
P9,461,597.00, tax credits of P6,471,246.00 and tax due in the amount of P3,311,559.00. It also
reported uarterly payments for the second and third quarters of 1995 in the amounts of P2,328,747.26
and P1,082,108.00, respectively.
It is the contention of the petitioner in this case filed in 1997, that it is entitled to a refund. The refund
was purportedly due to income taxes witheld from it, and remitted in its behalf, by the witholding agents.
Such witheld tax, as per petitioners 1997 return, were not utilised in 1996 since due to it's income/loss
positions for the three quarters of 1996.
ISSUE: Whether or not a tax refund may be claimed even beyong the taxable year following that in
which the tax credit arises.
Held: Yes, however; it is still incumbent upon the claimant to prove that it is entitled to such refund. Tax
refunds being in the nature of tax exemptions such must be construed strictissimi juris against the
taypayer-claimant. Under the NIRC, the only limitation as regards the claiming of tax refunds is that such
must be made within two years. The claim for refund made by Calamba steel was well within the 2 year
period.
As regards the procedure taken by counsel of Calamba Steel in submitting the final adjustment returns
(1996) after trial has been conducted, the Court said that although the ordinary rules of procedure from
upon this jurisprudence mandates that the proceedings before the tax court's shall not be governed by
strictly technical rules of evidence. Moreoover, as regards evidence, the court further said that Judicial
notice could have been taken by the cA and the CTA of the 1996 final adjustment return made by
petitioner in another case then pending with the CTA.
-----------------Silkair (Singapore) Pte. Ltd. V. CIR
Petitioner Silkair (Singapore) Pte. Ltd. is a foreign corporation duly licensed by the Securities and
Exchange Commission (SEC) to do business in the Philippines as an on-line international carrier operating
the Cebu-Singapore-Cebu and Davao-Singapore-Davao routes. In the course of its international flight
operations, petitioner purchased aviation fuel from Petron Corporation (Petron) from July 1, 1998 to
December 31, 1998, paying the excise taxes thereon in the sum of P5,007,043.39. The payment was
advanced by Singapore Airlines, Ltd. on behalf of petitioner.
On October 20, 1999, petitioner filed an administrative claim for refund in the amount of P5,007,043.39
representing excise taxes on the purchase of jet fuel from Petron, which it alleged to have been
erroneously paid. The claim is based on Section 135 (a) and (b) of the 1997 Tax Code, which provides:
SEC. 135. Petroleum Products Sold to International Carriers and Exempt Entities or Agencies.
Petroleum products sold to the following are exempt from excise tax:
(a) International carriers of Philippine or foreign registry on their use or consumption
outside the Philippines: Provided, That the petroleum products sold to these international
carriers shall be stored in abonded 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;
(b) Exempt entities or agencies covered by tax treaties, conventions and other
international agreements for their use or consumption: Provided, however, That the country

of said foreign international carrier or exempt entities or agencies exempts from similar taxes
petroleum products sold to Philippine carriers, entities or agencies; and
x x x x (Emphasis supplied.)
Petitioner also invoked Article 4(2) of the Air Transport Agreement between the Government of the
Republic of the Philippines and the Government of the Republic of Singapore 3 (Air Transport Agreement
between RP and Singapore) which reads:
ART. 4
xxxx
2. Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board
aircraft in the territory of one Contracting Party by, or on behalf of, a designated airline of the other
Contracting Party and intended solely for use in the operation of the agreed services shall, with the
exception of charges corresponding to the service performed, be exempt from the same customs duties,
inspection fees and other duties or taxes imposed in the territory of the first Contracting Party, even
when these supplies are to be used on the parts of the journey performed over the territory of the
Contracting Party in which they are introduced into or taken on board. The materials referred to above
may be required to be kept under customs supervision and control.4
Due to the inaction by respondent CIR , petitioner filed a petition for review with the Court of Tax
Appeals (CTA) on June 30, 2000.
On July 28, 2003, the CTA rendered its decision5 denying petitioners claim for refund. Said court ruled
that while petitioners country indeed exempts from similar taxes petroleum products sold to Philippine
carriers, petitioner nevertheless failed to comply with the second requirement under Section 135 (a) of
the 1997 Tax Code as it failed to prove that the jet fuel delivered by Petron came from the latters
bonded storage tank. Presiding Justice Ernesto D. Acosta dissented from the majority view that
petitioners claim should be denied, stating that even if the bonded storage tank is required under
Section 135 (a), the claim can still be justified under Section 135 (b) in view of our countrys existing Air
Transport Agreement with the Republic of Singapore which shows the reciprocal enjoyment of the
privilege of the designated airline of the contracting parties.
Its motion for reconsideration having been denied by the CTA, petitioner elevated the case to the CA.
Petitioner assailed the CTA in not holding that there are distinct and separate instances of exemptions
provided in paragraphs (a), (b) and (c) of Section 135, and therefore the proviso found in paragraph (a)
should not have been applied to the exemption granted under paragraph (b).
The CA affirmed the denial of the claim for tax refund and dismissed the petition. It ruled that while
petitioner is exempt from paying excise taxes on petroleum products purchased in the Philippines by
virtue of Section 135 (b), petitioner is not the proper party to seek for the refund of the excise taxes
paid. Petitioners motion for reconsideration was likewise denied by the appellate court.
In this appeal, petitioner argues that it is the proper party to file the claim for refund, being the entity
granted the tax exemption under the Air Transport Agreement between RP and Singapore. It disagrees
with respondents reasoning that since excise tax is an indirect tax it is the direct liability of the
manufacturer, Petron, and not the petitioner, because this puts to naught whatever exemption was
granted to petitioner by Article 4 of the Air Transport Agreement.
Petitioner further contends that respondent is estopped from questioning the right of petitioner to claim a
refund of the excise taxes paid after issuing BIR Ruling No. 339-92 which already settled the matter. It
further points out that the CTA has consistently ruled in a number of decisions involving the same parties
that petitioner is the proper party to seek the refund of excise taxes paid on its purchases of petroleum
products. Finally, it emphasizes that respondent never raised in issue petitioners legal personality to
seek a tax refund in the administrative level. Citing this Courts ruling in the case of CIR v. Court of Tax
Appeals, et al.6 petitioner asserts that respondent is in estoppel to question petitioners standing to file
the claim for refund for its failure to timely raise the issue in the administrative level, as well as before
the CTA.
On the other hand, the Solicitor General on behalf of respondent, maintains that the excise tax passed on
to the petitioner by Petron being in the nature of an indirect tax, it cannot be the subject matter of an
administrative claim for refund/tax credit, following the ruling in Contex Corporation v. CIR .7 Moreover,
assuming arguendo that petitioner falls under any of the enumerated transactions/persons entitled to tax
exemption under Section 135 of the 1997 Tax Code, what the law merely contemplates is exemption
from the payment of excise tax to the seller/manufacturer, in this case Petron, but not an exemption

27

from payment of excise tax to the BIR, much more an entitlement to a refund from the BIR. Being the
buyer, petitioner is not the person required by law nor the person statutorily liable to pay the excise tax
but the seller, following the provision of Section 130 (A) (1) (2).
The Solicitor General also asserts that contrary to petitioners argument that respondent never raised in
the administrative level the issue of whether petitioner is the proper party to file the claim for refund,
records would show that respondent actually raised the matter of whether petitioner is entitled to the tax
refund being claimed in his Answer dated August 8, 2000, in the Joint Stipulation of Facts, and in his
Memorandum submitted before the CTA where respondent categorically averred that "petitioner x x x is
not the entity directly liable for the payment of the tax, hence, not the proper party who should claim the
refund of the excise taxes paid."8
We rule for the respondent.
The core issue presented is the legal personality of petitioner to file an administrative claim for refund of
excise taxes alleged to have been erroneously paid to its supplier of aviation fuel here in the Philippines.
In three previous cases involving the same parties, this Court has already settled the issue of whether
petitioner is the proper party to seek the refund of excise taxes paid on its purchase of aviation fuel from
a local manufacturer/seller. Following the principle of stare decisis, the present petition must therefore be
denied.
Excise taxes, which apply to articles manufactured or produced in the Philippines for domestic sale or
consumption or for any other disposition and to things imported into the Philippines, 9 is basically an
indirect tax. While the tax is directly levied upon the manufacturer/importer upon removal of the taxable
goods from its place of production or from the customs custody, the tax, in reality, is actually passed on
to the end consumer as part of the transfer value or selling price of the goods, sold, bartered or
exchanged.10 In early cases, we have ruled that for indirect taxes (such as valued-added tax or VAT), the
proper party to question or seek a refund of the tax is the statutory taxpayer, the person on whom the
tax is imposed by law and who paid the same even when he shifts the burden thereof to another. 11 Thus,
in Contex Corporation v. CIR ,12 we held that while it is true that petitioner corporation should not have
been liable for the VAT inadvertently passed on to it by its supplier since their transaction is a zero-rated
sale on the part of the supplier, the petitioner is not the proper party to claim such VAT refund. Rather, it
is the petitioners suppliers who are the proper parties to claim the tax credit and accordingly refund the
petitioner of the VAT erroneously passed on to the latter.13
In the first Silkair case14 decided on February 6, 2008, this Court categorically declared:
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.15 (Emphasis
supplied.)
Just a few months later, the decision in the second Silkair case16 was promulgated, reiterating the rule
that in the refund of indirect taxes such as excise taxes, the statutory taxpayer is the proper party who
can claim the refund. We also clarified that petitioner Silkair, as the purchaser and end-consumer,
ultimately bears the tax burden, but this does not transform its status into a statutory taxpayer.
The person entitled to claim a tax refund is the statutory taxpayer. Section 22(N) of the NIRC defines a
taxpayer as "any person subject to tax." In CIR v. Procter and Gamble Phil. Mfg. Corp., the Court ruled
that:
A "person liable for tax" has been held to be a "person subject to tax" and properly considered a
"taxpayer." The terms "liable for tax" and "subject to tax" both connote a legal obligation or duty to pay
a tax.
The excise tax is due from the manufacturers of the petroleum products and is paid upon removal of the
products from their refineries. Even before the aviation jet fuel is purchased from Petron, the excise tax
is already paid by Petron. Petron, being the manufacturer, is the "person subject to tax." In this case,
Petron, which paid the excise tax upon removal of the products from its Bataan refinery, is the "person

liable for tax." Petitioner is neither a "person liable for tax" nor "a person subject to tax." There is also no
legal duty on the part of petitioner to pay the excise tax; hence, petitioner cannot be considered the
taxpayer.
Even if the tax is shifted by Petron to its customers and even if the tax is billed as a separate item in the
aviation delivery receipts and invoices issued to its customers, Petron remains the taxpayer because
the excise tax is imposed directly on Petron as the manufacturer. Hence, Petron, as the
statutory taxpayer, is the proper party that can claim the refund of the excise taxes paid to
the BIR.17 (Emphasis supplied.)1avvphi1
Petitioners contention that the CTA and CA rulings would put to naught the exemption granted under
Section 135 (b) of the 1997 Tax Code and Article 4 of the Air Transport Agreement is not well-taken.
Since the supplier herein involved is also Petron, our pronouncement in the second Silkair case, relative
to the contractual undertaking of petitioner to submit a valid exemption certificate for the purpose, is
relevant. We thus noted:
The General Terms & Conditions for Aviation Fuel Supply (Supply Contract) signed between petitioner
(buyer) and Petron (seller) provide:
"11.3 If Buyer is entitled to purchase any Fuel sold pursuant to the Agreement free of any taxes, duties
or charges, Buyer shall timely deliver to Seller a valid exemption certificate for such purchase."
(Emphasis supplied)
This provision instructs petitioner to timely submit a valid exemption certificate to Petron in order that
Petron will not pass on the excise tax to petitioner. As correctly suggested by the CTA, petitioner should
invoke its tax exemption to Petron before buying the aviation jet fuel. Petron, however, remains the
statutory taxpayer on those excise taxes.
Revenue Regulations No. 3-2008 (RR 3-2008) provides that "subject to the subsequent filing of a claim
for excise tax credit/refund or product replenishment, all manufacturers of articles subject to excise tax
under Title VI of the NIRC of 1997, as amended, shall pay the excise tax that is otherwise due on every
removal thereof from the place of production that is intended for exportation or sale/delivery to
international carriers or to tax-exempt entities/agencies." The Department of Finance and the BIR
recognize the tax exemption granted to international carriers but they consistently adhere to the view
that manufacturers of articles subject to excise tax are the statutory taxpayers that are liable to pay the
tax, thus, the proper party to claim any tax refunds.18
The above observation remains pertinent to this case because the very same provision in the General
Terms and Conditions for Aviation Fuel Supply Contract also appears in the documentary evidence
submitted by petitioner before the CTA.19 Except for its bare allegation of being "placed in a very
complicated situation" because Petron, "for fear of being assessed by Respondent, will not allow the
withdrawal and delivery of the petroleum products without Petitioners pre-payment of the excise taxes,"
petitioner has not demonstrated that it dutifully complied with its contractual undertaking to timely
submit to Petron a valid certificate of exemption so that Petron may subsequently file a claim for excise
tax credit/refund pursuant to Revenue Regulations No. 3-2008 (RR 3-2008). It was indeed premature for
petitioner to assert that the denial of its claim for tax refund nullifies the tax exemption granted to it
under Section 135 (b) of the 1997 Tax Code and Article 4 of the Air Transport Agreement.
In the third Silkair case20 decided last year, the Court called the attention to the consistent rulings in the
previous two Silkair cases that petitioner as the purchaser and end-consumer of the aviation fuel is not
the proper party to claim for refund of excise taxes paid thereon. The situation clearly called for the
application of the doctrine, stare decisis et non quieta movere. Follow past precedents and do not disturb
what has been settled. Once a case has been decided one way, any other case involving exactly the
same point at issue, as in the case at bar, should be decided in the same manner.21 The Court thus finds
no cogent reason to deviate from those previous rulings on the same issues herein raised.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision dated September 13, 2004
and Resolution dated December 21, 2004 of the Court of Appeals in CA-G.R. SP No. 82902
are AFFIRMED.
With costs against the petitioner.
SO ORDERED.
---------------CIR v. Mirant (Philippines) Operations Group

28

15 June 2011
FACTS:
Mirant entered into Operating and Management Agreements with Mirant Pagbilao Corporation (formerly
Southern Energy Quezon, Inc.) and Mirant Sual Corporation (formerly Southern Energy Pangasinan, Inc.)
to provide these companies with maintenance and management services in connection with the
operation, construction and commissioning of coal-fired power stations situated in Pagbilao, Quezon, and
Sual, Pangasinan respectively.
On September 20, 2001, Mirant wrote the BIR a letter claiming a refund of 87,345,116.00 representing
overpaid income tax.
CTA 1st Division: Partially granted Mirants claim for refund but the amount was reduced to P38 million
which constitutes the duly substantiated unutilized creditable withholding taxes.
ISSUE: WON Mirant is entitled to a tax refund or to the issuance of a tax credit certificate and, if it is,
then what is the amount to which it is entitled.
HELD: YES but it is limited to the substantiated claim.
Ratio:
1. 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.
2. Mirant complied with all the requirements for the refund of its unutilized creditable withholding taxes
for taxable year 2000.
The requisites for claiming a tax credit or a refund of creditable withholding tax:
1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax;
2) It must be shown on the return that the income received was declared as part of the gross income;
and
3) The fact of withholding must be established by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of the tax withheld.
Mirant complied with all the legal requirements and it 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.

29