CA affirmed the tax courts ruling on the ground that substantial evidence supported the factual findings
CHINA BANKING CORPORATION, petitioner, vs. COURT OF APPEALS, COURT OF TAX
APPEALS, and COMMISSIONER OF INTERNAL REVENUE, respondents.
[G.R. No. 147938. June 10, 2003]
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. CHINA BANKING
CORPORATION, respondent.
FACTS AS TO TAX PAYER:
On 20 July 1994, CBC paid P12,354,933.00 as gross receipts tax on its income from interests on loan
investments, commissions, services, collection charges, foreign exchange profits and other operating
earnings during the second quarter of 1994.
On 19 July 1996, CBC filed with the Commissioner of Internal Revenue (Commissioner) a formal claim
for tax refund or credit of P1,140,623.82 from the P12,354,933.00 gross receipts tax that CBC paid for
the second quarter of 1994. To ensure that it filed its claim within the two-year prescriptive period,[6] CBC
also filed on the same day a petition for review with the Court of Tax Appeals. Citing Asian Bank, CBC
argued that it was not liable for the gross receipts tax - amounting to P1,140,623.82 - on the sums withheld
by the Bangko Sentral ng Pilipinas as final withholding tax on CBCs passive interest income[7] in 1994.
Disputing CBCs claim, the Commissioner asserted that CBC paid the gross receipts tax pursuant to
Section 119 (now Section 121) of the National Internal Revenue Code (Tax Code) and pertinent Bureau
of Internal Revenue (BIR) regulations. The Commissioner argued that the final withholding tax on a banks
interest income forms part of its gross receipts in computing the gross receipts tax.[8] The Commissioner
contended that the term gross receipts means the entire income or receipt, without any deduction.
The Court of Tax Appeals ruled in favor of CBC and held that the 20% final withholding tax on interest
income does not form part of CBCs taxable gross receipts.
The CBC and the Commissioner both filed petitions for review under Rule 43 of the Rules of Court,
appealing the tax courts decision and resolution to the Court of Appeals.
AS TO THE GOVERNMENT:
On 30 January 1996, the Court of Tax Appeals in Asian Bank Corporation v. Commissioner of Internal
Revenue[4] ruled that the 20% final withholding tax on a banks passive interest income does not form part
of its taxable gross receipts
of the tax court. The 13th Division of the Court of Appeals, in its Decision of 16 October 2000[14] in CA-
G.R. SP No. 50790, also affirmed the tax courts ruling on the ground that the 20% final withholding tax
does not form part of CBCs taxable gross receipts.
ISSUE AS TO THE TAX PAYER: Whether the 20% final withholding tax on interest income should form
part of CBCs gross receipts in computing the gross receipts tax on banks.
ISSUE AS TO THE GOVERNMENT: Whether the final withholding tax on a bank’s interest income forms
part of its gross receipts in computing the gross receipts tax.
HELD:
We rule that the amount of interest income withheld in payment of the 20% final withholding tax forms
part of CBCs gross receipts in computing the gross receipts tax on banks.
Section 121 of the Tax Code expressly subjects interest income to the gross receipts tax on banks. Such
express inclusion of interest income in taxable gross receipts creates a presumption that the entire
amount of the interest income, without any deduction, is subject to the gross receipts tax. As ruled by the
Supreme Court of New Mexico in Kewanee Industries, Inc. v. Reese,[64] -
x x x There is a presumption that receipts of a person engaging in business are subject to the gross
receipts tax. For Kewanee to prevail, it must clearly overcome this presumption. Additionally, where an
exception is claimed, the statute is construed strictly in favor of the taxing authority. The exemption must
be clearly and unambiguously expressed in the statute, and must be clearly established by the taxpayer
claiming the right thereto. Thus, taxation is the rule and the claimant must show that his demand is within
the letter as well as the spirit of the law. (Citations and quotations omitted)
To overcome this presumption, CBC must point to a specific provision of law allowing the deduction of
the final withholding tax from its taxable gross receipts. CBC has failed to cite any provision of law allowing
the final tax as an exemption, deduction or exclusion. Thus, CBCs claim has no legal leg to stand on.
G.R. No. 162775 October 27, 2006
INTERCONTINENTAL BROADCASTING CORPORATION (IBC), represented by ATTY. RENATOQ.
BELLO, in his capacity as CEO and President, petitioner,
vs.
NOEMI B. AMARILLA, CORSINI R. LAGAHIT, ANATOLIO G. OTADOY, and CANDIDO C.
QUIÑONES, JR.,respondents.

FACTS AS TO TAXPAYER:
On various dates, petitioner employed the following persons at its Cebu station: Candido C. Quiñones,
Jr.; on February 1, 1975;3 Corsini R. Lagahit, as Studio Technician, also on February 1, 1975;4 Anatolio
G. Otadoy, as Collector, on April 1, 1975;5 and Noemi Amarilla, as Traffic Clerk, on July 1, 1975.6 On
March 1, 1986, the government sequestered the station, including its properties, funds and other assets,
and took over its management and operations from its owner, Roberto Benedicto.
In the meantime, the four (4) employees retired from the company and received, on staggered basis, their
retirement benefits under the 1993 Collective Bargaining Agreement (CBA) between petitioner and the
bargaining unit of its employees.
In the meantime, a P1,500.00 salary increase was given to all employees of the company, current and
retired, effective July 1994. However, when the four retirees demanded theirs, petitioner refused and
instead informed them via a letter that their differentials would be used to offset the tax due on their
retirement benefits in accordance with the National Internal Revenue Code (NIRC).
The four (4) retirees filed separate complaints13 against IBC TV-13 Cebu and Station Manager Louella
F. Cabañero for unfair labor practice and non-payment of backwages before the NLRC, Regional
Arbitration Branch VII.
The complainants averred that their retirement benefits are exempt from income tax under Article 32 of
the NIRC. Sections 28 and 72 of the NIRC, which petitioner relied upon in withholding their differentials,
do not apply to them since these provisions deal with the applicable income tax rates on foreign
corporations and suits to recover taxes based on false or fraudulent returns.
For its part, petitioner averred that under Section 21 of the NIRC, the retirement benefits received by
employees from their employers constitute taxable income. While retirement benefits are exempt from
taxes under Section 28(b) of said Code, the law requires that such benefits received should be in accord
with a reasonable retirement plan duly registered with the Bureau of Internal Revenue (BIR) after
compliance with the requirements therein enumerated.
AS TO THE GOVERNMENT:
On February 14, 2000, the Labor Arbiter rendered judgment in favor of the retirees. The NLRC held that
the benefits of the retirement plan under the CBAs between petitioner and its union members were subject
to tax as the scheme was not approved by the BIR. However, it had also been the practice of petitioner
to give retiring employees their retirement pay without tax deductions and there was no justifiable reason
for the respondent to deviate from such practice.
Aggrieved, petitioner elevated the decision before the CA. the CA rendered judgment dismissing the
petition for lack of merit. The appellate court declared that the salary differentials of the respondents are
part of their taxable gross income, considering that the CBA was not approved, much less submitted to
the BIR.
ISSUE AS TO THE TAXPAYER: whether their retirement benefits are exempt from income tax under
Article 32 of the NIRC.
ISSUE AS TO THE GOVERNMENT: whether the retirement benefits received by employees from their
employers constitute taxable income
HELD:
Yes. Under the NIRC, the retirement benefits of respondents are part of their gross income subject to
taxes. Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened
to prove the concurrence of the following elements: (1) a reasonable private benefit plan is maintained
by the employer; (2) the retiring official or employee has been in the service of the same employer for at
least 10 years; (3) the retiring official or employee is not less than 50 years of age at the time of his
retirement; and (4) the benefit had been availed of only once. Respondents were qualified to retire
optionally from their employment with petitioner. However, there is no evidence on record that the 1993
CBA had been approved or was ever presented to the BIR; hence, the retirement benefits of respondents
are taxable. Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes on
said benefits and remit the same to the BIR. However, the Court agrees with respondents’ contention
that petitioner did not withhold the taxes due on their retirement benefits because it had obliged itself to
pay the taxes due thereon. This was done to induce respondents to agree to avail of the optional
retirement scheme.
G.R. No. 197590 November 24, 2014
BUREAU OF INTERNAL REVENUE, as represented by the COMMISSIONER OF INTERNAL
REVENUE,Petitioner,
vs.
COURT OF APPEALS, SPOUSES ANTONIO VILLAN MANLY, and RUBY ONG
MANLY, Respondents.
FACTS AS TO TAXPAYER:
Antonio Manly is stockholder and EVP of Standard Realty corp, a family owned corporation while at the
same time engaged in rental business. His wife, herein co accused is a housewife. the spouses were
able to acquire valuable properties such as the log house in Tagaytay City, a Toyota Rav 4 and a Toyota
Prado.
FACTS AS TO THE GOVERNMENT:
On April 27, 2005, the BIR issued LOA No. 2001 00012387 authorizing its revenue officers to investigate
respondent spouses for internal revenue tax liabilities for the year 2003 and prior years.
On June 6, 2005, BIR issued a letter to respondents requiring them to submit documentary evidence.
The Spouses failed to comply, thus on June 23, 2005, the revenue officers executed = a joint affidavit
purporting to the declared annual income of the spouses for the years 1998-2003. In the said affidavit, it
was alleged that despite the modest income declared, the spouses were able to acquire valuable
properties such as the log house in Tagaytay City, a Toyota Rav 4 and a Toyota Prado.
The revenue officers recommended the filing of criminal cases against the respondents, for failing to
supply the correct and accurate information in their ITRs for the years 2000, 2001 and 2003, punishable
under Sec. 254 and 255, in relation to Sec. 248 (B) of R.A. 8424 (Tax Reform Act of 1997).
The State Prosecutor recommended for the filing of criminal charges against respondents: 3 counts of
violation of Sec. 254 (attempt to evade or defeat tax), 3 counts of violation of Sec. 255 (failure to supply
correct and accurate information), and 3 counts of violation of Sec. 255 (failure to pay).
On July 27, 2009, Justice Secretary Agnes Devanadera reversed the resolution of the State Prosecutor.
She found no willful failure to pay or attempt to evade or defeat the tax on the part of the respondent
spouses. She also pointed to the BIR’s failure to issue a deficiency tax assessment against respondents
is a prerequisite to the filing of criminal case for tax evasion.
BIR filed a petition for certiorari before the CA, however, the petition was dismissed.
ISSUE AS TO THE TAXPAYER:
Whether the spouses Manly can be sued for tax evasion?
ISSUE AS TO THE GOVERNMENT:
Whether the issuance of a deficiency tax assessment is a prerequisite to the filing of criminal case for tax
evasion?
HELD:
No, the issuance of a deficiency tax assessment is not a prerequisite to the filing of criminal case for tax
evasion
In Ungab v. Judge Cusi, Jr.,66 we ruled that tax evasion is deemed complete when the violator has
knowingly and willfully filed a fraudulent return with intent to evade and defeat a part or all of the
tax.67 Corollarily, an assessment of the tax deficiency is notrequired in a criminal prosecution for tax
evasion.68 However, in Commissioner of Internal Revenue v. Court of Appeals,69 we clarified that
although a deficiency assessment is not necessary, the fact that a tax is due must first be proved before
one can be prosecuted for tax evasion.
In the case of income, for it to be taxable, there must be a gain realized or received by the taxpayer,
which is not excluded by law or treaty from taxation.71 The government is allowed to resort to all evidence
or resources available to determine a taxpayer’s income and to use methods to reconstruct his income.72
A method commonly used by the government isthe expenditure method, which is a method of
reconstructing a taxpayer’s income by deducting the aggregate yearly expenditures from the declared
yearly income.73 The theory of this method is that when the amount of the money that a taxpayer spends
during a given year exceeds his reported or declared income and the source of such money is
unexplained, it may be inferred that such expenditures represent unreported or undeclared income.
Moreover, by just looking at the tables presented by petitioner, there is a manifest showing that
respondent spouses had under declared their income. The huge disparity between respondent Antonio’s
reported or declared annual income for the past several years and respondent spouses’ cash acquisitions
for the years 2000, 2001, and 2003 cannot be ignored. Infact, it makes uswonder how they were able to
purchase the properties in cash given respondent Antonio’s meager income.
In view of the foregoing,we are convinced that there is probable cause to indict respondent spouses for
tax evasion as petitioner was able to show that a tax is due from them.
KNOWLEDGE:
Tax evasion is deemed complete when the violator has knowingly and willfully filed fraudulent return with
intent to evade and defeat a part or all of the tax.
G.R. No. 169899 February 06, 2013
PHILACOR CREDIT CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS AS TO TAX PAYER:
ISSUE AS TO THE GOVERNMENT: Whether or not DST applies to PN.
Philacor is a domestic corporation engaged in the business of retail financing. A prospective buyer of a
home appliance – with neither cash nor any credit card – may purchase appliances on installment basis HELD:
from an appliance dealer. After Philacor conducts a credit investigation and approves the buyer’s
No, Philacor is not liable for the DST on the issuance of the PN.
application, the buyer executes a unilateral promissory note in favor of the appliance dealer.

Philacor received Pre-Assessment Notices of deficiency taxes for this year. Philacor’s Finance Manager,
Under Section 173 of the National Internal Revenue Code, the persons primarily liable for the payment
contested the tentative computations of deficiency taxes (totaling P20,037,013.83) through a letter dated
of DST are the persons (1) making; (2) signing; (3) issuing; (4) accepting; or (5) transferring the taxable
April 17, 1995. Philacor protested the PANs, with a request for reconsideration and reinvestigation. It
documents, instruments or papers. Should these parties be exempted from paying tax, the other party
alleged that the assessed deficiency income tax was erroneously computed when it failed to take into
who is not exempt would then be liable. In this case, petitioner Philacor is engaged in the business of
account the reversing entries of the revenue accounts and income adjustments, such as repossessions,
retail financing. Through retail financing, a prospective buyer of home appliance may purchase an
write-offs and legal accounts. As for the deficiency DST, Philacor claims that the accredited appliance
appliance on installment by executing a unilateral promissory note in favor of the appliance dealer, and
dealers were required by law to affix the documentary stamps on all promissory notes purchased until
the same promissory note is assigned by the appliance dealer to Philacor. Thus, under this arrangement,
the enactment of Republic Act No. 7660, otherwise known as An Act Rationalizing Further the Structure
Philacor did not make, sign, issue, accept or transfer the promissory notes. It is the buyer of the
and Administration of the Documentary Stamp Tax, which took effect on January 15, 1994. In addition,
appliances who made, signed and issued the documents subject to tax while it is the appliance dealer
Philacor filed, on the following day, a supplemental protest, arguing that the assessments were void for
who transferred these documents to Philacor which likewise indisputably received or “accepted” them.
failure to state the law and the facts on which they were based.
Acceptance, however, is an act that is not even applicable to promissory notes, but only to bills of
FACTS AS TO THE GOVERNMENT: exchange. Under the Negotiable Instruments Law, the act of acceptance refers solely to bills of exchange.
In a ruling adopted by the Bureau of Internal Revenue as early as 1995, “acceptance” has been defined
Pursuant to Letter of Authority No. 17107, Revenue Officer Celestino Mejia examined Philacor’s books as having reference to incoming foreign bills of exchange which are accepted in the Philippines by the
of accounts and other accounting records for the fiscal year August 1, 1992 to July 31, 1993. drawees thereof, and not as referring to the common usage of the word as in receiving. Thus, a party to
a taxable transaction who “accepts” any documents or instruments in the plain and ordinary meaning
Similarly, the Bureau of Internal Revenue (BIR) failed to take into account the reversing entries of
does not become primarily liable for the tax.
repossessions, legal accounts, and write-offs when it computed the percentage tax; thus, the total income
reported, that the BIR arrived at, was not equal to the actual receipts of payment from the customers. The word "accepting" appearing in Section 210 of the National Internal Revenue Code has reference to
incoming foreign bills of exchange which are accepted in the Philippines by the drawees thereof.
CTA Division rendered decision. It concluded that Philacor failed to declare part of its income, making it
Accordingly, the documentary stamp tax on freight receipts is due at the time the receipts are issued and
liable for deficiency income tax and percentage tax. However, it also found that the Commissioner of
from the transportation company issuing the same. The fact that the transportation contractor issuing the
Internal Revenue (CIR) erred in his analysis of the entries in Philacor’s books thereby considerably
freight receipts shifts the burden of the tax to the shipper does not make the latter primarily liable to the
reducing Philacor’s liability to a deficiency income tax of P1,757,262.47 and a deficiency percentage tax
payment of the tax
of P613,987.86. The CTA also ruled that Philacor is liable for the DST on the issuance of the promissory
notes and their subsequent transfer or assignment. Noting that Philacor failed to prove that the DST on SUPREME TRANSLINER, INC., MOISES C. ALVAREZ and PAULITA S. ALVAREZ,
its promissory notes had been paid for these two transactions, the CTA held Philacor liable for deficiency
DST of P673,633.88. Petitioners,

ISSUE AS TO THE TAXPAYER: WON Philacor is liable for the DST on the issuance of the PN. - versus -
BPI FAMILY SAVINGS BANK, INC.,
Respondent.
G.R. No. 165617
BPI FAMILY SAVINGS BANK, INC.,
Petitioner,
- versus -
SUPREME TRANSLINER, INC., MOISES C. ALVAREZ and PAULITA S. ALVAREZ,
Respondents.
G.R. No. 165837
FACTS AS TO TAXPAYER:
On April 24, 1995, Supreme Transliner, Inc. represented by its Managing Director, Moises C. Alvarez,
and Paulita S. Alvarez, obtained a loan in the amount of P9,853,000.00 from BPI Family Savings Bank
with a 714-square meter lot covered by Transfer Certificate of Title No. T-79193 in the name of Moises
C. Alvarez and Paulita S. Alvarez, as collateral.[1]
The mortgagors requested for the elimination of liquidated damages and reduction of attorneys fees and
interest (1% per month) but the bank refused. On May 21, 1997, the mortgagors redeemed the property
by paying the sum of P15,704,249.12. A Certificate of Redemption[4] was issued by the bank on May 27,
1997.
On June 11, 1997, the mortgagors filed a complaint against the bank to recover the allegedly unlawful
and excessive charges totaling P5,331,237.77, with prayer for damages and attorneys fees, docketed as
Civil Case No. 97-72 of the Regional Trial Court of Lucena City, Branch 57.
On February 14, 2002, the trial court rendered its decision[5] dismissing the complaint and the banks
counterclaims.
The mortgagors appealed to the CA (CA-G.R. CV No. 74761) which, by Decision[7] dated April 6,
2004 reversed the trial court.
The CA ruled that attorneys fees and liquidated damages were already included in the bid price
of P10,372,711.35 as per the recitals in the Certificate of Sale that said amount was paid to the foreclosing
mortgagee to satisfy not only the principal loan but also interest and penalty charges, cost of publication
and expenses of the foreclosure proceedings.
Hence, these petitions separately filed by the mortgagors and the bank.
FACTS AS TO THE GOVERNMENT:
For non-payment of the loan, the mortgage was extrajudicially foreclosed and the property was sold to
the bank as the highest bidder in the public auction conducted by the Office of the Provincial Sheriff
of Lucena City. On August 7, 1996, a Certificate of Sale[2] was issued in favor of the bank and the same
was registered on October 1, 1996.
Before the expiration of the one-year redemption period, the mortgagors notified the bank of their intention
to redeem the property. Accordingly, the Statement of Account[3] was prepared by the bank indicating the
total amount due under the mortgage loan agreement with Capital Gains Tax included.
ISSUE AS TO TAXPAYER: whether the foreclosing mortgagee should pay capital gains tax upon
execution of the certificate of sale, and if paid by the mortgagee, whether the same should be shouldered
by the redemptioner.
AS TO THE GOVERNMENT: WON capital gains tax applies even before the expiration of the redemption
period.
HELD:
RR No. 4-99 issued on March 16, 1999, further amends RMO No. 6-92 relative to the payment of Capital
Gains Tax and Documentary Stamp Tax on extrajudicial foreclosure sale of capital assets initiated by
banks, finance and insurance companies.
SEC. 3. CAPITAL GAINS TAX.
(1) In case the mortgagor exercises his right of redemption within one year from the issuance of
the certificate of sale, no capital gains tax shall be imposed because no capital gains has been
derived by the mortgagor and no sale or transfer of real property was realized.
In this case, the retroactive application of RR No. 4-99 is more consistent with the policy of aiding the
exercise of the right of redemption. As the Court of Tax Appeals concluded in one case, RR No. 4-99 has
curbed the inequity of imposing a capital gains tax even before the expiration of the redemption period
[since] there is yet no transfer of title and no profit or gain is realized by the mortgagor at the time of
foreclosure sale but only upon expiration of the redemption period.
Considering that herein petitioners-mortgagors exercised their right of redemption before the expiration
of the statutory one-year period, petitioner bank is not liable to pay the capital gains tax due on the
extrajudicial foreclosure sale. There was no actual transfer of title from the owners-mortgagors to the
foreclosing bank. Hence, the inclusion of the said charge in the total redemption price was unwarranted
and the corresponding amount paid by the petitioners-mortgagors should be returned to them.
‘G.R. No. 167679 July 22, 2015
ING BANK N.V., engaged in banking operations in the Philippines as ING BANK N.V. MANILA
BRANCH,Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS AS TO THE TAXPAYER:
On January 3, 2000, ING Bank received a Final Assessment Notice11 dated December 3, 1999.12 The
Final Assessment Notice also contained the Details of Assessment13 and 13 Assessment Notices "issued
by the Enforcement Service of the Bureau of Internal Revenue.
On February 2, 2000, ING Bank "paid the deficiency assessments for [the] 1996 compromise penalty,
1997 deficiency documentary stamp tax and 1997 deficiency final tax in the respective amounts of
₱1,000.00, ₱1,000.00 and ₱75,013.25 [the original amount of ₱73,752.47 plus additional
interest]."16 ING Bank, however, "protested [on the same day] the remaining ten (10) deficiency tax
assessments in the total amount of ₱672,576,939.18."
ING Bank filed a Petition for Review before the Court of Tax Appeals on October 26, 2000. This case
was docketed as C.T.A. Case No. 6187.18 The Petition was filed to seek "the cancellation and withdrawal
of the deficiency tax assessments for the years 1996 and 1997, including the alleged deficiency
documentary stamp tax on special savings accounts, deficiency onshore tax, and deficiency withholding
tax on compensation mentioned above.”
FACTS AS TO THE GOVERNMENT:
After trial, the Court of Tax Appeals Second Division rendered its Decision upholding the assessments
for 1996 and 1997 deficiency withholding tax on compensation, 1996 deficiency onshore tax and 1996
and 1997 deficiency documentary stamp tax on special savings accounts.
On December 8, 2004, ING Bank filed its appeal before the Court of Tax Appeals En Banc.23 The Court
of Tax Appeals En Banc denied due course to ING Bank’s Petition for Review and dismissed the same
for lack of merit.
ISSUE AS TO THE TAXPAYER: Whether ING Bank may validly avail itself of the tax amnesty granted
by Republic Act No. 9480;
ISSUE AS TO THE GOVERNMENT: Whether petitioner ING Bank is liable for deficiency withholding tax
on accrued bonuses for the taxable years 1996 and 1997.
RULING:
1. YES. Taxpayers with pending tax cases may avail themselves of the tax amnesty program under RA
9480.
In CS Garment, Inc. v. CIR, this court has declared the exception ‘issues and cases which were ruled by
any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer’ under BIR
Revenue MC No. 19-2008 as invalid, for going beyond the scope of the provisions of the Tax Amnesty
Law."
Neither the law nor the implementing rules state that a court ruling that has not attained finality would
preclude the availment of the benefits of the Tax Amnesty Law. Both R.A. 9480 and DOF Order No. 29-
07 are quite precise in declaring that "tax cases subject of final and executory judgment by the courts"
are the ones excepted from the benefits of the law.
Petitioner ING Bank showed that it complied with the requirements under RA 9480. The CIR never
questioned that petitioner ING Bank fully complied with the requirements for tax amnesty under the law.
Moreover, the contestability period of one (1) year from the time of petitioner ING Bank’s availment of the
tax amnesty law on December 14, 2007 lapsed. Correspondingly, it is fully entitled to the immunities and
privileges mentioned under Section 6 of RA 9480.
RA 9480 confers no discretion on the CIR, its authority under RA 9480 is limited to determining whether
(a) the taxpayer is qualified to avail oneself of the tax amnesty; (b) all the requirements for availment
under the law were complied with; and (c) the correct amount of amnesty tax was paid within the period
prescribed by law.
2. YES. An expense, whether the same is paid or payable, shall be allowed as a deduction only if it is
shown that the tax required to be deducted and withheld therefrom was paid to the BIR.
Under the NIRC, every form of compensation for personal services is subject to income tax and,
consequently, to withholding tax. Petitioner ING Bank insists that the bonus accruals in 1996 and 1997
were not yet subject to withholding tax because these bonuses were actually distributed only in the
succeeding years of their accrual when the amounts were finally determined.
The tax on compensation income is withheld at source under the creditable withholding tax system
wherein the tax withheld is intended to equal or at least approximate the tax due of the payee on the said
income. It was designed to enable (a) the individual taxpayer to meet his or her income tax liability on
compensation earned; and (b) the government to collect at source the appropriate taxes on
compensation. Taxes withheld are creditable in nature. Thus, the employee is still required to file an
income tax return to report the income and/or pay the difference between the tax withheld and the tax
due on the income. For over withholding, the employee is refunded. Therefore, absolute or exact accuracy
in the determination of the amount of the compensation income is not a prerequisite for the employer’s
withholding obligation to arise.
MERCURY DRUG CORPORATION, G.R. No. 164050
Petitioner,
-versus- July 20, 2011
COMMISSIONER OF INTERNAL REVENUE,
Respondent.
FACTS AS TO TAXPAYER:
Pursuant to Republic Act No. 7432, petitioner Mercury Drug Corporation (petitioner), a retailer of
pharmaceutical products, granted a 20% sales discount to qualified senior citizens on their purchases of
medicines for the taxable year April to December 1993 and January to December 1994. With this,
petitioner claims an amount representing the 20% sales discount as deductions from its gross income.
Realizing that RA 7432 allows tax credit for the sales granted to senior citizens, petitioner filed with CIR
claims for refund for the years 1993 and 1994. Computation of its overpayment of income tax was
presented by petitioner.
Petitioner moved for partial reconsideration which CTA modified its ruling by increasing the taxable
creditable tax amount. still unsatisfied with the decision, petitioner appealed with CA seeking partial
modification of the CTA resolution raising a legal issue on the basis of the computation of tax credit.
Petitioner contended that the actual discount granted to the senior citizens, rather than the acquisition
cost of the item availed by senior citizens, should be the basis for computation of tax credit.
FACTS AS TO THE GOVERNMENT:
When CIR failed to act on petitioner’s claims, the latter filed petitioner for review with the CTA. CTA ruled
in favor of petitioner and treated the 20% sales discount as tax credit rather than a deduction from the
gross income. However, the CTA did not grant the full amount of claims because if found some
discrepancies and irregularities in the cash slips submitted by petitioner. The CTA stated that the tax
credit must be based on the actual cost of the medicine and not the whole amount of the 20% senior
citizens discount, thus the formula applied is: cost of sales/gross sales x amount of 20% sales discount.
The CA affirms the CTA decision. It interpreted the term "cost" as used in Section 4(a) of Republic Act
No. 7432 to mean the acquisition cost of the medicines sold to senior citizens. Hence, comes this petition
for review before the SC.
ISSUE AS TO THE TAXPAYER: Whether the claim for tax credit should be based on the full amount of
the 20% senior citizens’ discount or the acquisition cost of the merchandise sold.
ISSUE AS TO THE GOVERNMENT: Whether the 20% sales discount granted by establishments to
qualified senior citizens be treated as tax deduction and not as tax credit.
HELD:
The court ruled that the cost of discount should be computed on the actual amount of the discount
extended to senior citizens.
RA 7432, which grants, among others, sales discounts to senior citizens on the purchase of medicines,
imposes burden to private establishments amounting to taking of private property for public use with just
compensation in the form of tax credit. However, said law does not provide how the cost of the discount
as tax credit be computed. Thus, the court construed the cost as referring to the amount of the 20% sales
discount extended by establishments to senior citizens in the purchase of medicines.
However, the Court gave full accord to the factual findings of the Court of Tax Appeals with respect to the
actual amount of the 20% sales discount. Thus the court held that petitioner is entitled to a tax credit
equivalent to the actual amounts of the 20% sales discount as determined by the Court of Tax Appeals.
It is worthy to mention that Republic Act No. 7432 had undergone two (2) amendments; first in 2003 by
Republic Act No. 9257 and most recently in 2010 by Republic Act No. 9994. The 20% sales discount
granted by establishments to qualified senior citizens is now treated as tax deduction and not as tax
credit. As we have likewise declared in Commissioner of Internal Revenue v. Central Luzon Drug
Corporation,[19] this case covers the taxable years 1993 and 1994, thus, Republic Act No. 7432 applies.
G.R. No. 168331 : October 11, 2012
UNITED INTERNATIONAL PICTURES AB, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE,
Respondent.
FACTS AS TO TAXPAYER : United International Pictures (UIP) (petitioner) filed with the Bureau of
Internal Revenue (BIR) its Corporation Annual Income Tax Return for the calendar year ended December
31, 1998 reflecting, among others, a net taxable income from operations in the sum of P24,961,200.00,
an income tax liability of P8,486,808.00, but with an excess income tax payment in the amount of
P4,325,152.00 arising from quarterly income tax payments and creditable taxes withheld at source.
UIP opted to carry-over as tax credit to the succeeding taxable year the said overpayment by putting an
"x" mark on the corresponding box.
Later, UIP filed its Corporation Annual Income Tax Return for the calendar year ended December 31,
1999 wherein it reported, among others, a taxable income in the amount of P7,071,651.00 , an income
tax due of P2,333,645.00, but with an excess income tax payment in the amount of P9,309,292.00.
On the face of the 1999 return, UIP indicated its option by putting an "x" mark on the box "To be refunded."
On April 28, 2000, UIP filed with the BIR an administrative claim for refund in the amount of
P9,309,292.00.
FACTS AS TO THE GOVERNMENT:
As CIR did not act on UIP’ claim, the latter filed a petition for review that reached the Supreme Court. As
respondent did not act on petitioners claim, the latter filed a petition for review before the Court of Tax
Appeals (CTA) to toll the running of the two-year prescriptive period.
On September 12, 2001, the CTA rendered a Decision3ςrνll denying petitioners claim for refund for
taxable year 1998. It reasoned that since petitioner opted to carry over the 1998 tax overpayment as tax
credit to the succeeding taxable year, the same cannot be refunded pursuant to Section 76 of the National
Internal Revenue Code (NIRC) of 1997.
On August 31, 2004, the CA annulled and set aside the decision of the CTA.
ISSUE: 1. Whether UIP (petitioner) is perpetually barred to refund its tax overpayment for taxable year
1998 since it opted to carry-over its excess tax.
2. whether petitioner had sufficiently proven entitlement to refund its tax overpayments for taxable year
1999.
HELD:
1. Section 76 of the NIRC of 1997 states –
Section 76. Final Adjustment Return. – Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum
of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the
entire taxable income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.
In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income taxes
paid, the excess amount shown on its final adjustment return may be carried over and credited against
the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable years.
Once the option to carry-over and apply the excess quarterly income tax against income due for the
taxable quarters of the succeeding taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate
shall be allowed therefore. (Emphasis supplied)
From the aforequoted provision, it is clear that once a corporation exercises the option to carry-over, 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. In claiming for the refund of excess creditable withholding tax, UIP must show compliance with the
following basic requirements:
(1) The claim for refund was filed within two years as prescribed under Section 229 of the NIRC
of 1997;
(2) The income upon which the taxes were withheld were included in the return of the recipient
(Section 10, Revenue Regulations No. 6-85);
(3) The fact of withholding is established by a copy of a statement (BIR Form 1743.1) duly issued
by the payor (withholding agent) to the payee showing the amount paid and the amount of tax
withheld therefrom (Section 10, Revenue Regulations No. 6-85).
Here, it is undisputed that the claim for refund was filed within the two-year prescriptive period prescribed
under Section 229 of the NIRC of 1997 and that the taxpayer was able to present its certificate of
creditable tax withheld from its payor. However, records show that petitioner failed to reconcile the
discrepancy between income payments per its income tax return and the certificate of creditable tax
withheld.
Therefore, UIP’s claim for tax refund for taxable year 1999 must be denied, since it failed to prove that
the income payments subjected to withholding tax were declared as part of the gross income or the
taxpayer.
G.R. No. 211666, February 25, 2015
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS
AND HIGHWAYS, Petitioners, v. ARLENE R. SORIANO, Respondent.
FACTS AS TO TAXPAYER:
Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH), filed
an expropriation case against respondent Arlene R. Soriano, pursuant to Republic Act (RA) No. 8974,
otherwise known as “An Act to Facilitate the Acquisition of Right-Of-Way, Site or Location for National
Government Infrastructure Projects and for other Purposes”. The property sought to be expropriated shall
be used in implementing the construction of the North Luzon Expressway (NLEX)- Harbor Link Project
(Segment 9) from NLEX to MacArthur Highway, Valenzuela City.
FACTS AS TO THE GOVERNMENT:
Petitioner duly deposited to the Acting Branch Clerk of Court the amount of P420,000.00 representing
100% of the zonal value of the subject property. According to the RTC, the records of the case reveal
that petitioner adduced evidence to show that the total amount deposited is just, fair, and equitable.
On November 15, 2013, the RTC rendered its Decision ordering the plaintiff to pay defendant Arlene R.
Soriano Php2,100.00 per square meter or the sum of Four Hundred Twenty Thousand Pesos
(Php420,000.00) for the 200 square meters as fair, equitable, and just compensation with legal interest
at 12% per annum from the taking of the possession of the property, subject to the payment of all unpaid
real property taxes and other relevant taxes, if there be any; and to pay the defendant consequential
damages which shall include the value of the transfer tax necessary for the transfer of the subject property
from the name of the defendant to that of the plaintiff.
Petitioner filed a Motion for Reconsideration, but the RTC ruled in favor of the respondent, thus, this
petition.
ISSUE:
WON Petitioners should pay for the transfer taxes
HELD:
Regarding petitioner’s contention that it cannot be made to pay the value of the transfer taxes in the
nature of capital gains tax and documentary stamp tax, the same is partly meritorious.
With respect to the capital gains tax, the court finds merit in petitioner’s posture that pursuant to Sections
24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC), capital gains tax due on the sale
of real property is a liability for the account of the seller. It has been held that since capital gains is a tax
on passive income, it is the seller, not the buyer, who generally would shoulder the tax.
As to the documentary stamp tax, petitioner cites Section 196 of the 1997 NIRC as its basis in saying
that the documentary stamp tax is the liability of the seller. The provision cited does not explicitly impute
the obligation to pay the documentary stamp tax on the seller. In fact, according to the BIR, all the parties
to a transaction are primarily liable for the documentary stamp tax, as provided by Section 2 of BIR
Revenue Regulations No. 9-2000. As a general rule, any of the parties to a transaction shall be liable for
the full amount of the documentary stamp tax due, unless they agree among themselves on who shall be
liable for the same.
In this case, there is no agreement as to the party liable for the documentary stamp tax due on the sale
of the land to be expropriated. But petitioner’s Citizen’s Charter, which functions as a guide for the
procedure to be taken by the DPWH in acquiring real property through expropriation under RA 8974. The
Citizen’s Charter, issued by petitioner DPWH itself on December 4, 2013, explicitly provides that the
documentary stamp tax, transfer tax, and registration fee due on the transfer of the title of land in the
name of the Republic shall be shouldered by the implementing agency of the DPWH, while the capital
gains tax shall be paid by the affected property owner.
G.R. No. 198756 January 13, 2015
BANCO DE ORO, BANK OF COMMERCE, CHINA BANKING CORPORATION, METROPOLITAN
BANK & TRUST COMPANY, PHILIPPINE BANK OF COMMUNICATIONS, PHILIPPINE NATIONAL
BANK, PHILIPPINE VETERANS BANK AND PLANTERS DEVELOPMENT BANK, Petitioners,
RIZAL COMMERCIAL BANKING CORPORATION AND RCBC CAPITAL
CORPORATION, Petitioners-Intervenors,
CAUCUS OF DEVELOPMENT NGO NETWORKS, Petitioner-Intervenor,
vs.
REPUBLIC OF THE PHILIPPINES, THE COMMISSIONER OF INTERNAL REVENUE, BUREAU OF
INTERNAL REVENUE, SECRETARY OF FINANCE, DEPARTMENT OF FINANCE, THE NATIONAL
TREASURER AND BUREAU OF TREASURY, Respondent.
FACTS AS TO TAXPAYER:
Banco de Oro, et al. filed a petition for Certiorari, Prohibition and Mandamus under Rule 65 to the
Supreme Court contending that the assailed 2011 BIR Ruling which ruled that “all treasury bonds are
‘deposit substitutes’ regardless of the number of lenders, in clear disregard of the requirement of twenty
(20) or more lenders mandated under the NIRC. Furthermore it will cause substantial impairment of their
vested rights under the Bonds since the ruling imposes new conditions by “subjecting the PEACE Bonds
to the twenty percent (20%) final withholding tax notwithstanding the fact that the terms and conditions
thereof as previously represented by the Government, through respondents BTr and BIR, expressly state
that it is not subject to final withholding tax upon their maturity.”
FACTS AS TO THE GOVERNMENT:
A notice by the Bureau of Treasury (BTr) to all Government Securities Eligible Dealer (GSED) entitled
Public Offering of Treasury Bonds denominated as the Poverty Eradication and Alleviation Certificates or
the PEACE Bonds, announced that P30 Billion worth of 10-year Zero-Coupon Bonds will be auctioned
on Oct. 16, 2011. The notice stated that the Bonds “shall be issued to not more than 19 buyers/lenders.
Lastly, it stated that “while taxable shall not be subject to the 20% final withholding tax” pursuant to the
BIR Revenue Regulation No. 020 2001. After the auction, RCBC which participated on behalf of CODE-
NGO was declared as the winning bidder having tendered the lowest bids. On October 7, 2011, “the BIR
issued the assailed 2011 BIR Ruling imposing a 20% FWT on the Government Bonds and directing the
BTr to withhold said final tax at the maturity thereof. Furthermore the Bureau of Internal Revenue issued
BIR Ruling No. DA 378-201157 clarifying that the final withholding tax due on the discount or interest
earned on the PEACE Bonds should “be imposed and withheld not only on RCBC/CODE NGO but also
onall subsequent holders of the Bonds.
The Commissioner of the Internal Revenue countered that the BTr has no power to contractually grant a
tax exemption in favour of Banco de Oro, et al.. Moreover, they contend that the word “any” in Section
22(Y) of the National Internal Revenue Code plainly indicates that the period contemplated is the entire
term of the bond and not merely the point of origination or issuance.
ISSUE:
Is the 10-year zero-coupon treasury bonds issued by the Bureau of Treasury subject to 20% Final
Withholding Tax?
HELD:
Under Sections 24(B)(1), 27(D)(1), and 28(A)(7) of the 1997 National Internal Revenue Code, a final
withholding tax at the rate of 20% is imposed on interest on any currency bank deposit and yield or any
other monetary benefit from deposit substitutes and from trust funds and similar arrangements. Under
Section 22(Y), deposit substitute is an alternative form of obtaining funds from the public (the term 'public'
means borrowing from twenty (20) or more individual or corporate lenders at any one time).
Hence, the number of lenders is determinative of whether a debt instrument should be considered a
deposit substitute and consequently subject to the 20% final withholding tax. Furthermore the phrase “at
any one time” for purposes of determining the “20 or more lenders” would mean every transaction
executed in the primary or secondary market in connection with the purchase or sale of securities.
In the case at bar, it may seem that there was only one lender — RCBC on behalf of CODE-NGO — to
whom the PEACE Bonds were issued at the time of origination. However, a reading of the underwriting
agreement and RCBC term sheet reveals that the settlement dates for the sale and distribution by RCBC
Capital (as underwriter for CODE-NGO) of the PEACE Bonds to various undisclosed investors.
At this point, however, we do not know as to how many investors the PEACE Bonds were sold to by
RCBC Capital. Should there have been a simultaneous sale to 20 or more lenders/investors, the PEACE
Bonds are deemed deposit substitutes within the meaning of Section 22(Y) of the 1997 National Internal
Revenue Code and RCBC Capital/CODE-NGO would have been obliged to pay the 20%final withholding
tax on the interest or discount from the PEACE Bonds. Further, the obligation to withhold the 20% final
tax on the corresponding interest from the PEACE Bonds would likewise be required of any
lender/investor had the latter turned around and sold said PEACE Bonds, whether in whole or part,
simultaneously to 20 or more lenders or investors.
G.R. No. 197525 June 4, 2014
VISAYAS GEOTHERMAL POWER COMPANY, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
FACTS AS TO TAXPAYER:
Petitioner Visayas Geothermal Power Company (VGPC) is a special limited partnership duly organized
and existing under Philippine Laws with its principal office at Milagro, Ormoc City, Province of Leyte. It is
principally engaged in the business of power generation through geothermal energy and the sale of
generated power to the Philippine National Oil Company (PNOC),pursuant to the Energy Conversion
Agreement.
VGPC filed with the Bureau of Internal Revenue (BIR)its Original Quarterly VAT Returns for the first to
fourth quarters of taxable year 2005 on April 25, 2005, July 25, 2005, October 25, 2006, and January 20,
2006, respectively.
On December 6, 2006, it filed an administrative claim for refund for the amount of 14,160,807.95 with the
BIR District Office No. 89 of Ormoc City on the ground that it was entitled to recover excess and unutilized
input VAT payments for the four quarters of taxable year 2005, pursuant to Republic Act (R.A.) No. 9136,3
which treated sales of generated power subject to VAT to a zero percent (0%) rate starting June 26,
2001.
Nearly one month later, on January3, 2007, while its administrative claim was pending, VGPC filed its
judicial claim via a petition for review with the CTA praying for a refund or the issuance of a tax credit
certificate in the amount of 14,160,807.95, covering the four quarters of taxable year 2005.
FACTS AS TO THE GOVERNMENT:
In its April 17, 2009 Decision, the CTA Second Division partially granted the petition as follows:
WHEREFORE, in view of the foregoing considerations, the Petition for Review is hereby PARTIALLY
GRANTED. Accordingly, respondent is ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX
CREDIT CERTIFICATE in favor of petitioner the reduced amount of SEVEN MILLION SIX HUNDRED
NINENTY NINE THOUSAND THREE HUNDRED SIXTY SIX PESOS AND 37/100 (₱7,699,366.37)
representing unutilized input VAT paid on domestic purchases of non-capital goods and services,
services rendered by non-residents, and importations of non-capital goods for the first to fourth quarters
of taxable year 2005.
The CTA Second Division found that only the amount of 7,699,366.37 was duly substantiated by the
required evidence. As to the timeliness of the filing of the judicial claim, the Court ruled that following the
case of Commissioner of Internal Revenue (CIR) v. Mirant Pagbilao Corporation (Mirant),5 both the
administrative and judicial claims were filed within the two-year prescriptive period provided in Section
112(A) of the National Internal Revenue Code of 1997 (NIRC),the reckoning point of the period being the
close of the taxable quarter when the sales were made.
In its October 29, 2009 Resolution,6 the CTA Second Division denied the separate motions for partial
reconsideration filed by VGPC and the CIR. Thus, both VGPC and the CIR appealed to the CTA En Banc.
In the assailed February 7, 2011 Decision,7 the CTA En Banc reversed and set aside the decision and
resolution of the CTA Second Division, and dismissed the original petition for review for having been filed
prematurely, to wit:
WHEREFORE, premises considered:
i. As regards CTA EB Case No. 562, the Petition for Review is hereby DISMISSED; and
ii. As regards CTA EB Case No. 561, the Petition for Review is hereby GRANTED.
Accordingly, the Decision, dated April 17, 2009, and the Resolution, dated October 29, 2009, of the CTA
Former Second Division are hereby REVERSED and SET ASIDE, and another one is hereby entered
DISMISSING the Petition for Review filed in CTA Case No. 7559 for having been filed prematurely.
The CTA En Banc explained that although VGPC seasonably filed its administrative claim within the two-
year prescriptive period, its judicial claim filed with the CTA Second Division was prematurely filed under
Section 112(D) of the National Internal Revenue Code (NIRC).Citing the case of CIR v. Aichi Forging
Company of Asia, Inc. (Aichi),9 the CTA En Banc held that the judicial claim filed 28 days after the
petitioner filed its administrative claim, without waiting for the expiration of the 120-day period, was
premature and, thus, the CTA acquired no jurisdiction over the case.
The VGPC filed a motion for reconsideration, but the CTA En Banc denied it in the assailed June 27,
2011 Resolution for lack of merit. It stated that the case of Atlas Consolidated Mining v. CIR (Atlas)10
relied upon by the petitioner had long been abandoned.
Hence, this petition.
ISSUE:
Whether VGPCI failed to observe the proper prescriptive period required by law for the filing of an appeal
before the CTA because it filed its petition before the end of the 120-day period granted to the CIR to
decide its claim for refund under Section 112(D) of the National Internal Revenue Code (NIRC).
HELD:
VGPCI’s judicial claim filed on September 30, 2003 was prematurely filed. However, the judicial claim
filed on December 19, 2003 was properly filed because of the exception brought about by BIR Ruling DA-
489-03.
VGPCI’s reliance on Gibbs and College of Oral & Dental Surgery is misplaced. At the time that both cases
were decided, there was no provision yet in the NIRC in force similar to Section 112.

VGPCI is also mistaken to argue that Section 229 is the more relevant provision of law. Section 229
applies only to taxes erroneously or illegally collected. The applicable provision of the NIRC is
undoubtedly Section 112, which deals specifically with creditable input tax.

The Court relied on the cases of Commissioner vs. Mirant, G.R. 172129, Commissioner vs. Aichi Forging,
G.R. 184823, and Commissioner vs. San Roque Power, G.R. No. 187485 to state that the appropriate
period for claiming a refund or a tax credit for unutilized input VAT is Section 112(A), and not Section 229
of the NIRC. Further, input VAT is not “excessively” collected as understood under Section 229 because
at the time the input VAT is collected, the amount paid is correct and proper.

The 120-day period under Section 112(D) is crucial in filing an appeal with the CTA.

The application of the 30-day period from receipt of the decision of the CIR or from the lapse of the 120-
day period (the “120+30 day period”) given to the taxpayer within which to file a petition for review with
the CTA is mandatory and jurisdictional.

However, the court took notice of the issuance by the BIR of Ruling No. DA-489-03 dated December 10,
2003 which allowed for the filing of a judicial claim without waiting for the end of the 120-day period
granted to the CIR to decide on the application for refund. Therefore, although the 120+30 day period in
Section 112(D) is mandatory and jurisdictional and must be applied from the effectivity of the 1997 Tax
Code on January 1, 1998, an exception shall be made for judicial claims filed from the issuance of BIR
Ruling No. DA 489-03 on December 10, 2003 until the promulgation of Commissioner vs. Aichi on
October 6, 2010.

Hence, the judicial claim filed on September 30, 2003 was prematurely filed and cannot be taken
cognizance of. However, the judicial claim filed on December 19, 2003 can be considered by the CTA
because of the exception brought about by the BIR Ruling.