COMMISSIONER OF INTERNAL REVENUE vs.

LIQUIGAZ PHILIPPINES
CORPORATION
G.R. No. 215534. April 18, 2016
MENDOZA, J.

FACTS: Liquigaz Philippines Corporation (Liquigaz) is a corporation duly organized

and existing under Philippine laws. On July 11, 2006, it received a copy of Letter of
Authority (LOA) No. 00067824, dated July 4, 2006, issued by the Commissioner of
Internal Revenue (CIR), authorizing the investigation of all internal revenue taxes for
taxable year 2005.

On April 9, 2008, Liquigaz received an undated letter purporting to be a Notice of

Informal Conference (NIC), as well as the detailed computation of its supposed tax
liability. On May 28, 2008, it received a copy of the Preliminary Assessment
Notice5 (PAN), dated May 20, 2008, together with the attached details of
discrepancies for the calendar year ending December 31, 2005. Upon investigation,
Liquigaz was initially assessed with deficiency withholding tax liabilities, inclusive of
interest in the aggregate amount of P23,931,708.72.

Thereafter, on June 25, 2008, it received a Formal Letter of Demand7 (FLD)/Formal

Assessment Notice (FAN), together with its attached details of discrepancies, for the
calendar year ending December 31, 2005. The total deficiency withholding tax
liabilities, inclusive of interest, under the FLD was P24,332,347.20.

On July 25, 2008, Liquigaz filed its protest against the FLD/FAN and subsequently
submitted its supporting documents on September 23, 2008.

Then, on July 1, 2010, it received a copy of the FDDA covering the tax audit under
LOA No. 00067824 for the calendar year ending December 31, 2005. As reflected in
the FDDA, the CIR still found Liquigaz liable for deficiency withholding tax liabilities,
inclusive of interest, in the aggregate amount of P22,380,025.19.

Consequently, on July 29, 2010, Liquigaz filed its Petition for Review before the CTA
Division assailing the validity of the FDDA issued by the CIR.

In its November 22, 2012 Decision, the CTA Division partially granted Liquigaz’s
petition cancelling the EWT and FBT assessments but affirmed with modification the
WTC assessment. It ruled that the portion of the FDDA relating to the EWT and the
FBT assessment was void pursuant to Section 228 of the National Internal Revenue
Code (NIRC) of 1997, as implemented by Revenue Regulations (RR) No. 12-99.

Both the CIR and Liquigaz moved for reconsideration, but their respective motions
were denied by the CTA Division in its February 20, 2013 Resolution. Aggrieved, they
filed their respective petitions for review before the CTA En Banc.

In its May 22, 2014 Decision, the CTA En Banc affirmed the assailed decision of the
CTA Division. It reiterated its pronouncement that the requirement that the taxpayer
should be informed in writing of the law and the facts on which the assessment was
made applies to the FDDA — otherwise the assessment would be void. The CTA En
Bancexplained that the FDDA determined the final tax liability of the taxpayer, which
may be the subject of an appeal before the CTA.

ISSUE: WHETHER THE COURT OF TAX APPEALS EN BANC ERRED IN PARTIALLY

UPHOLDING THE VALIDITY OF THE ASSESSMENT AS TO THE WITHHOLDING TAX ON
COMPENSATION BUT DECLARING INVALID THE ASSESSMENT ON EXPANDED
WITHHOLDING TAX AND FRINGE BENEFITS TAX.

RULING: YES. Central to the resolution of the issue is Section 228 of the NIRC and
RR No. 12-99, as amended. They lay out the procedure to be followed in tax
assessments. Under Section 228 of the NIRC, a taxpayer shall be informed in writing
of the law and the facts on which the assessment is made, otherwise, the assessment
shall be void. In implementing Section 228 of the NIRC, RR No. 12-99 reiterates the
requirement that a taxpayer must be informed in writing of the law and the facts on
which his tax liability was based.

The importance of providing the taxpayer of adequate written notice of his tax liability
is undeniable. Section 228 of the NIRC declares that an assessment is void if the
taxpayer is not notified in writing of the facts and law on which it is made. Again,
Section 3.1.4 of RR No. 12-99 requires that the FLD must state the facts and law on
which it is based, otherwise, the FLD/FAN itself shall be void. Meanwhile, Section
3.1.6 of RR No. 12-99 specifically requires that the decision of the CIR or his duly
authorized representative on a disputed assessment shall state the facts, law and
rules and regulations, or jurisprudence on which the decision is based. Failure to do
so would invalidate the FDDA.

It is undisputed that the FDDA merely showed Liquigaz’ tax liabilities without any
details on the specific transactions which gave rise to its supposed tax deficiencies.
While it provided for the legal bases of the assessment, it fell short of informing
Liquigaz of the factual bases thereof. Thus, the FDDA as regards the EWT and FBT
tax deficiency did not comply with the requirement in Section 3.1.6 of RR No. 12-99,
as amended, for failure to inform Liquigaz of the factual basis thereof.

As such, the Court agrees with the tax court that it becomes even more imperative
that the FDDA contain details of the discrepancy. Failure to do so would deprive
Liquigaz adequate opportunity to prepare an intelligent appeal. It would have no way
of determining what were considered by the CIR in the defenses it had raised in the
protest to the FLD. Further, without the details of the assessment, it would open the
possibility that the reduction of the assessment could have been arbitrarily or
capriciously arrived at.

The Court, however, finds that the CTA erred in concluding that the assessment on
EWT and FBT deficiency was void because the FDDA covering the same was void. The
assessment remains valid notwithstanding the nullity of the FDDA because as
discussed above, the assessment itself differs from a decision on the disputed
assessment.
As established, an FDDA that does not inform the taxpayer in writing of the facts and
law on which it is based renders the decision void. Therefore, it is as if there was no
decision rendered by the CIR. It is tantamount to a denial by inaction by the CIR,
which may still be appealed before the CTA and the assessment evaluated on the
basis of the available evidence and documents. The merits of the EWT and FBT
assessment should have been discussed and not merely brushed aside on account of
the void FDDA.

On the other hand, the Court agrees that the FDDA substantially informed Liquigaz
of its tax liabilities with regard to its WTC assessment. As highlighted by the CTA, the
basis for the assessment was the same for the FLD and the FDDA, where the salaries
reflected in the ITR and the alphalist were compared resulting in a discrepancy of
P9,318,255.84. The change in the amount of assessed deficiency withholding taxes
on compensation merely arose from the modification of the tax rates used — 32% in
the FLD and the effective tax rate of 25.40% in the FDDA. The Court notes it was
Liquigaz itself which proposed the rate of 25.40% as a more appropriate tax rate as
it represented the effective tax on compensation paid for taxable year 2005.22 As
such, Liquigaz was effectively informed in writing of the factual bases of its
assessment for WTC because the basis for the FDDA, with regards to the WTC, was
identical with the FAN — which had a detail of discrepancy attached to it.

To recapitulate, a “decision” differs from an “assessment” and failure of the FDDA to

state the facts and law on which it is based renders the decision void — but not
necessarily the assessment. Tax laws may not be extended by implication beyond
the clear import of their language, nor their operation enlarged so as to embrace
matters not specifically provided.
COMMISSIONER OF INTERNAL REVENUE vs. FAR EAST BANK amp; TRUST
COMPANY (NOW BANK OF THE PHILIPPINE ISLANDS)
G.R. No. 173854. March 15, 2010
DEL CASTILLO, J.

FACTS: On April 10, 1995, respondent filed with the Bureau of Internal Revenue
(BIR) two Corporate Annual Income Tax Returns, one for its Corporate Banking Unit
(CBU) and another for its Foreign Currency Deposit Unit (FCDU), for the taxable year
ending December 31, 1994. The return for the CBU consolidated the respondent’s
overall income tax liability for 1994, which reflected a refundable income tax of
P12,682,864.00.

Pursuant to Section 69 of the old National Internal Revenue Code (NIRC), the amount
of P12,682,864.00 was carried over and applied against respondent’s income tax
liability for the taxable year ending December 31, 1995. On April 15, 1996,
respondent filed its 1995 Annual Income Tax Return, which showed a total overpaid
income tax in the amount of P17,443,133.00.

Out of the P17,433,133.00 refundable income tax, only P13,645,109.00 was sought
to be refunded by respondent. As to the remaining P3,798,024.00, respondent opted
to carry it over to the next taxable year.

On May 17, 1996, respondent filed a claim for refund of the amount of
P13,645,109.00 with the BIR. Due to the failure of petitioner Commissioner of
Internal Revenue (CIR) to act on the claim for refund, respondent was compelled to
bring the matter to the CTA on April 8, 1997 via a Petition for Review docketed as
CTA Case No. 5487.

After the filing of petitioner’s Answer, trial ensued. To prove its entitlement to a
refund, respondent presented the following documents:

Exhibits Nature and Description

A Corporate Annual Income Tax Return covering
income of respondent’s CBU for the year ended
December 31, 1994 together with attachments
B Corporate Annual Income Tax Return covering
income of respondent’s FCDU for the year ended
December 31, 1994 together with attachments
C Corporate Annual Income Tax Return covering
income of respondent’s CBU for the year ended
December 31, 1995 together with attachments
D Corporate Annual Income Tax Return covering
income of respondent’s FCDU for the year ended
December 31, 1995 together with attachments
N to Z; Certificates of Creditable
AA to UU Withholding Tax and Monthly Remittance
Returns of Income Taxes Withheld issued by
various withholding agents for the year ended
December 31, 1994
 VV Letter claim for refund dated May 8, 1996 filed
with the Revenue District Office No. 33 on May
17, 1996

Petitioner, on the other hand, did not present any evidence. On October 4, 1999, the
CTA rendered a Decision denying respondent’s claim for refund on the ground that
respondent failed to show that the income derived from rentals and sale of real
property from which the taxes were withheld were reflected in its 1994 Annual
Income Tax Return.

On October 20, 1999, respondent filed a Motion for New Trial based on excusable
negligence. It prayed that it be allowed to present additional evidence to support its
claim for refund.However, the motion was denied on December 16, 1999 by the CTA.

On appeal, the CA reversed the Decision of the CTA. The CA found that respondent
has duly proven that the income derived from rentals and sale of real property upon
which the taxes were withheld were included in the return as part of the gross income.
Hence, this present recourse.

ISSUE: Whether respondent has proven its entitlement to the refund.

RULING: NO. A taxpayer claiming for a tax credit or refund of creditable withholding
tax must comply with the following requisites:

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.

The two-year period requirement is based on Section 229 of the NIRC of 1997 While
the second and third requirements are found under Section 10 of Revenue Regulation
No. 6-85, as amended.

There is no dispute that respondent complied with the first requirement. The filing of
respondent’s administrative claim for refund on May 17, 1996 and judicial claim for
refund on April 8, 1997 were well within the two-year period from the date of the
filing of the return on April 10, 1995.

However, as to the second and third requirements, the tax court and the appellate
court arrived at different factual findings. Between the decision of the CTA and the
CA, it is the former’s that is based on the evidence and in accordance with the
applicable law and jurisprudence.

To establish the fact of withholding, respondent submitted Certificates of Creditable

Tax Withheld at Source and Monthly Remittance Returns of Income Taxes Withheld,
which pertain to rentals and sales of real property, respectively. However, a
perusal of respondent’s 1994 Annual Income Tax Return shows that the gross income
was derived solely from sales of services. In fact, the phrase “NOT APPLICABLE”
was printed on the schedules pertaining to rent, sale of real property, and trust
income. Thus, based on the entries in the return, the income derived from rentals
and sales of real property upon which the creditable taxes were withheld were
not included in respondent’s gross income as reflected in its return. Since no
income was reported, it follows that no tax was withheld. To reiterate, it is incumbent
upon the taxpayer to reflect in his return the income upon which any creditable tax
is required to be withheld at the source.

Respondent’s explanation that its income derived from rentals and sales of real
properties were included in the gross income but were classified as “Other Earnings”
in its Schedule of Income attached to the return is not supported by the evidence.
There is nothing in the Schedule of Income to show that the income under the
heading “Other Earnings” includes income from rentals and sales of real property. No
documentary or testimonial evidence was presented by respondent to prove this. In
fact, respondent, upon realizing its omission, filed a motion for new trial on the
ground of excusable negligence with the CTA. Respondent knew that it had to present
additional evidence showing the breakdown of the “Other Earnings” reported in its
Schedule of Income attached to the return to prove that the income from rentals and
sales of real property were actually included under the heading “Other
Earnings.” Unfortunately, the CTA was not convinced that there was excusable
negligence to justify the granting of a new trial.

Moreover, the fact that the petitioner failed to present any evidence or to refute the
evidence presented by respondent does not ipso facto entitle the respondent to a tax
refund. It is not the duty of the government to disprove a taxpayer’s claim for refund.
Rather, the burden of establishing the factual basis of a claim for a refund rests on
the taxpayer.

And while the petitioner has the power to make an examination of the returns and to
assess the correct amount of tax, his failure to exercise such powers does not create
a presumption in favor of the correctness of the returns. The taxpayer must still
present substantial evidence to prove his claim for refund. As we have said, there is
no automatic grant of a tax refund.

Hence, for failing to prove its entitlement to a tax refund, respondent’s claim must
be denied. Since tax refunds partake of the nature of tax exemptions, which are
construed strictissimi juris against the taxpayer, evidence in support of a claim must
likewise be strictissimi scrutinized and duly proven.
BPI LEASING CORPORATION, vs. THE HONORABLE COURT OF APPEALS,
COURT OF TAX APPEAL, AND COMMISSIONER OF INTERNAL REVENUE
G.R. No. 127624. November 18, 2003
AZCUNA, J.

FACTS: BCL is a corporation engaged in the business of leasing properties. For the
calendar year 1986, BLC paid the Commissioner of Internal Revenue (CIR) a total of
P1,139,041.49 representing 4% “contractor’s percentage tax” then imposed by
Section 205 of the National Internal Revenue Code (NIRC), based on its gross rentals
from equipment leasing for the said year amounting to P27,783,725.42.

On November 10, 1986, the CIR issued Revenue Regulation 1986. Section 6.2 thereof
provided that finance and leasing companies registered under Republic Act 5980 shall
be subject to gross receipt tax of 5%-3%-l% or actual income earned. This means
that companies registered under Republic Act 5980, such as BLC, are not liable for
“contractor’s percentage tax” under Section 205 but are, instead, subject to “gross
receipts tax” under Section 260 (now Section 122) of the NIRC. Since BLC had earlier
paid the aforementioned “contractor’s percentage tax,” it re-computed its tax
liabilities under the “gross receipts tax” and arrived at the amount of P361,924.44.

On April 11, 1988, BLC filed a claim for a refund with the CIR for the amount of
P777,117.05, representing the difference between the P1,139,041.49 it had paid as
“contractor’s percentage tax” and P361,924.44 it should have paid for “gross receipts
tax.” Four days later, to stop the running of the prescriptive period for refunds,
petitioner filed a petition for review with the CTA.

In a decision dated May 13, 1994, the CTA dismissed the petition and denied BLC’s
claim of refund. The CTA held that Revenue Regulation 19-86, as amended, may only
be applied prospectively such that it only covers all leases written on or after January
1, 1987. The CTA ruled that, since BLC’s rental income was all received prior to 1986,
it follows that this was derived from lease transactions prior to January 1, 1987, and
hence, not covered by the revenue regulation.

A motion for reconsideration of the CTA’s decision was filed, but was denied in a
resolution dated July 26, 1995.8BLC then appealed the case to the Court of Appeals,
which issued the aforementioned assailed decision and resolution.9 Hence, the
present petition.

ISSUE: 1. WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS PROSPECTIVE

OR RETROACTIVE IN ITS APPLICATION.

2. WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, FAILED TO MEET

THE QUANTUM OF EVIDENCE REQUIRED IN REFUND CASES.

RULING: 1. PROSPECTIVE. The principle is well entrenched that statutes, including

administrative rules and regulations, operate prospectively only, unless the
legislative intent to the contrary is manifest by express terms or by necessary
implication. In the present case, there is no indication that the revenue regulation
may operate retroactively. Furthermore, there is an express provision stating that it
“shall take effect on January 1, 1987,” and that it “shall be applicable to all leases
written on or after the said date.” Being clear on its prospective application, it must
be given its literal meaning and applied without further interpretation. Thus, BLC is
not in a position to invoke the provisions of Revenue Regulation 19-86 for lease
rentals it received prior to January 1, 1987.

2. YES. It is also apt to add that tax refunds are in the nature of tax exemptions. As
such, these are regarded as in derogation of sovereign authority and are to be strictly
construed against the person or entity claiming the exemption. The burden of proof
is upon him who claims the exemption and he must be able to justify his claim by the
clearest grant under Constitutional or statutory law, and he cannot be permitted to
rely upon vague implications. Nothing that BLC has raised justifies a tax refund.
SMI-ED PHILIPPINES TECHNOLOGY, INC. vs. COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 175410. November 12, 2014
LEONEN, J.

FACTS: SMI-Ed Philippines is a PEZA-registered corporation authorized “to engage

in the business of manufacturing ultra high-density microprocessor unit package.”

After its registration on June 29, 1998, SMI-Ed Philippines constructed buildings and
purchased machineries and equipment.7 As of December 31, 1999, the total cost of
the properties amounted to P3,150,925,917.00.

SMI-Ed Philippines “failed to commence operations.”9Its factory was temporarily

closed, effective October 15, 1999. On August 1, 2000, it sold its buildings and some
of its installed machineries and equipment to Ibiden Philippines, Inc., another PEZA-
registered enterprise, for ¥2,100,000,000.00 (P893,550,000.00). SMI-Ed Philippines
was dissolved on November 30, 2000.

In its quarterly income tax return for year 2000, SMI-Ed Philippines subjected the
entire gross sales of its properties to 5% final tax on PEZA-registered corporations.
SMI-Ed Philippines paid taxes amounting to P44,677,500.00.

On February 2, 2001, after requesting the cancellation of its PEZA registration and
amending its articles of incorporation to shorten its corporate term, SMI-Ed
Philippines filed an administrative claim for the refund of P44,677,500.00 with the
Bureau of Internal Revenue (BIR). SMI-Ed Philippines alleged that the amount was
erroneously paid. It also indicated the refundable amount in its final income tax return
filed on March 1, 2001. It also alleged that it incurred a net loss of
P2,233,464,538.00.

The BIR did not act on SMI-Ed Philippines’ claim, which prompted the latter to file a
petition for review before the Court of Tax Appeals on September 9, 2002. The Court
of Tax Appeals Second Division denied SMI-Ed Philippines’ claim for refund in the
decision dated December 29, 2004.

The Court of Tax Appeals Second Division found that SMI-Ed Philippines’
administrative claim for refund and the petition for review with the Court of Tax
Appeals were filed within the two-year prescriptive period.15 However, fiscal
incentives given to PEZA-registered enterprises may be availed only by PEZA-
registered enterprises that had already commenced operations.16 Since SMI-Ed
Philippines had not commenced operations, it was not entitled to the incentives of
either the income tax holiday or the 5% preferential tax rate. Payment of the 5%
preferential tax amounting to P44,677,500.00 was erroneous.

The Court of Tax Appeals denied SMI-Ed Philippines’ motion for reconsideration in its
June 15, 2005 resolution. On July 17, 2005, SMI-Ed Philippines filed a petition for
review before the Court of Tax Appeals En Banc. In the decision promulgated on
November 3, 2006, the Court of Tax Appeals En Banc dismissed SMI-Ed Philippines’
petition and affirmed the Court of Tax Appeals Second Division’s decision and
resolution.

SMI-Ed Philippines filed a petition for review before this court on December 27,
2006, praying for the grant of its claim for refund and the reversal of the Court of
Tax Appeals En Banc’s decision.

ISSUE: Whether petitioner was entitled to the refund.

RULING: YES. Petitioner is not entitled to benefits given to PEZA-registered

enterprises, including the 5% preferential tax rate under Republic Act No. 7916 or
the Special Economic Zone Act of 1995. This is because it never began its operation.
Essentially, the purpose of Republic Act No. 7916 is to promote development and
encourage investments and business activities that will generate
employment. Giving fiscal incentives to businesses is one of the means devised to
59

achieve this purpose. It comes with the expectation that persons who will avail these
incentives will contribute to the purpose’s achievement. Hence, to avail the fiscal
incentives under Republic Act No. 7916, the law did not say that mere PEZA
registration is sufficient.

Based on these provisions, the fiscal incentives and the 5% preferential tax rate are
available only to businesses operating within the Ecozone.60 A business is considered
in operation when it starts entering into commercial transactions that are not merely
incidental to but are related to the purposes of the business. It is similar to the
definition of “doing business,” as applied in actions involving the right of foreign
corporations to maintain court actions.

Petitioner never started its operations since its registration on June 29,
199863 because of the Asian financial crisis.64 Petitioner admitted this.65 Therefore, it
cannot avail the incentives provided under Republic Act No. 7916. It is not entitled
to the preferential tax rate of 5% on gross income in lieu of all taxes. Because
petitioner is not entitled to a preferential rate, it is subject to ordinary tax rates under
the National Internal Revenue Code of 1997.

The BIR had three years from the filing of petitioner’s final tax return in 2000 to
assess petitioner’s taxes. Nothing stopped the BIR from making the correct
assessment. The elevation of the refund claim with the Court of Tax Appeals was not
a bar against the BIR’s exercise of its assessment powers.

The BIR, however, did not initiate any assessment for deficiency capital gains
tax.78 Since more than a decade have lapsed from the filing of petitioner’s return, the
BIR can no longer assess petitioner for deficiency capital gains taxes, if petitioner is
later found to have capital gains tax liabilities in excess of the amount claimed for
refund.
The Court of Tax Appeals should not be expected to perform the BIR’s duties of
assessing and collecting taxes whenever the BIR, through neglect or oversight, fails
to do so within the prescriptive period allowed by law.

WHEREFORE, the Court of Tax Appeals’ November 3, 2006 decision is SET ASIDE.
The Bureau of Internal Revenue is ordered to refund petitioner SMI-Ed Philippines
Technology, Inc. the amount of 5% final tax paid to the BIR, less the 6% capital gains
tax on the sale of petitioner SMI-Ed Philippines Technology, Inc.’s land and building.
In view of the lapse of the prescriptive period for assessment, any capital gains tax
accrued from the sale of its land and building that is in excess of the 5% final tax
paid to the Bureau of Internal Revenue may no longer be recovered from petitioner
SMI-Ed Philippines Technology, Inc.
PHILIPPINE NATIONAL BANK vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 206019. March 18, 2015
VELASCO, JR., J.

FACTS: Gotesco Tyan Ming Development, Inc. (Gotesco), a Filipino corporation

engaged in the real estate business,1entered on April 7, 1995 into a syndicated loan
agreement with petitioner Philippine National Bank (PNB) and three (3) other banks.
To secure the loan, Gotesco mortgaged a six-hectare expanse known as the Ever
Ortigas Commercial Complex, under a mortgage trust indenture agreement in favor
of PNB, through its Trust Banking Group, as trustee.

Gotesco subsequently defaulted on its loan obligations. Thus, PNB foreclosed the
mortgaged property through a notarial foreclosure sale on July 30, 1999. On August
4, 1999, a certificate of sale was issued in favor of PNB, subject to Gotesco’s right,
as debtor and mortgagor, to redeem the property within one (1) year from the date
of inscription of the certificate of sale with the Register of Deeds of Pasig City on
November 9, 1999.

On October 20, 2000, Gotesco filed a civil case against PNB before the Regional Trial
Court of Pasig, Branch 168 (RTC) for the annulment of the foreclosure proceedings,
specific performance and damages with prayer for temporary restraining order (TRO)
and/or preliminary injunction.

On November 9, 2000, the RTC issued a TRO enjoining PNB from consolidating
ownership over the mortgaged property, then on December 21, 2000, a writ of
preliminary injunction. PNB’s motion for reconsideration was subsequently denied.

PNB went to the Court of Appeals (CA) via a Petition for Certiorari. The CA ruled in
favor of PNB and issued an Order reversing and setting aside the writ of preliminary
injunction issued by the RTC. Gotesco’s Motion for Reconsideration was denied on
December 22, 2003.6 As Gotesco did not challenge the CA ruling, the setting aside of
the writ of preliminary injunction became final and executory.

As it prepared for the consolidation of its ownership over the foreclosed property,
PNB paid the BIR Eighteen Million Six Hundred Fifteen Thousand Pesos (P18,615,000)
as documentary stamp tax (DST) on October 31, 2003. PNB also withheld and
remitted to the BIR withholding taxes equivalent to six percent (6%) of the bid price
of One Billion Two Hundred Forty Million Four Hundred Sixty-Nine Pesos and Eighty-
Two Centavos (P1,240,000,469.82) or Seventy-Four Million Four Hundred Thousand
and Twenty-Eight Pesos and Forty-Nine Centavos (P74,400,028.49) on October 31,
2003 and November 11, 2003.
Pending the issuance of the Certificate Authorizing Registration (CAR), the BIR
informed PNB that it is imposing interests, penalties and surcharges of Sixty-One
Million Six Hundred Seventy-Eight Thousand Four Hundred Ninety Pesos and Twenty-
Eight Centavos (Php61,678,490.28) on capital gains tax and Fifteen Million Four
Hundred Ninety-Four Thousand and Sixty-Five Pesos (Php15,494,065) on DST. To
facilitate the release of the CAR, petitioner paid all the surcharges, interests and
penalties assessed against it in the total amount of Seventy-Seven Million One
Hundred Seventy-Two Thousand Five Hundred Fifty-Five Pesos and Twenty-Eight
Centavos (Php77,172,555.28) on April 5, 2005.

On the claim that what it paid the BIR was not entirely due, PNB lost no time in
instituting the necessary actions. Thus, on October 27, 2005, it filed an administrative
claim for the refund of excess withholding taxes with the BIR. A day after, or on
October 28, 2005, it filed its petition for review before the tax court, docketed thereat
as CTA Case No. 7355.

In its July 12, 2010 consolidated Decision, the CTA Special First Division (First
Division), in CTA Case No. 7588, ordered the CIR to refund to PNB P77,172,555.28
representing its claim for refund of interests, surcharges and penalties on capital
gains taxes and documentary stamp taxes for the year 2003. In CTA Case No. 7355,
however, the First Division denied PNB’s claim for the refund of excess creditable
withholding taxes for insufficiency of evidence. The tax court agreed with PNB that
the applicable withholding rate was indeed five percent (5%) and not six percent
(6%).15Nevertheless, it held that PNB, while able to establish the fact of tax
withholding and the remittance thereof to the BIR, failed to present evidence to prove
that Gotesco did not utilize the withheld taxes to settle its tax liabilities. The First
Division further stated that PNB should have offered as evidence the 2003 Income
Tax Return (2003 ITR) of Gotesco to show that the excess withholding tax payments
were not used by Gotesco to settle its tax liabilities for 2003.

On July 30, 2010, PNB filed a Motion for Reconsideration (MR), attaching therewith,
among others, Gotesco’s 2003 ITR and the latter’s Schedule of Prepaid Tax, which
the First Division admitted as part of the records.

On April 5, 2011, the First Division issued a Resolution17 denying PNB’s MR mainly
because there were no documents or schedules to support the figures reported in
Gotesco’s 2003 ITR to show that no part of the creditable withholding tax sought to
be refunded was used, in part, for the settlement of Gotesco’s tax liabilities for the
same year. It stated that PNB should have likewise presented the Certificate of
Creditable Tax Withheld at Source (BIR Form No. 2307) issued to Gotesco in relation
to the creditable taxes withheld reported in its 2003 ITR. BIR Form No. 2307, so
declared in the Resolution, will confirm whether or not that the amount being claimed
by PNB was indeed not utilized by Gotesco to offset its taxes.

In due time, PNB filed an appeal before the CTA En Banc by way of a Petition for
Review. On September 12, 2012, the CTA En Banc, in the first assailed
Decision,21 denied PNB’s Petition for Review. After the denial of PNB’s Motion for
Reconsideration on February 12, 2013,23 the bank filed this instant petition.

ISSUE: Whether or not PNB is entitled to the refund of creditable withholding taxes
erroneously paid to the BIR.

RULING: YES. Although PNB was not able to submit Gotesco’s BIR Form No. 2307,
the Court is persuaded and so declares that PNB submitted evidence sufficiently
showing Gotesco’s non-utilization of the taxes withheld subject of the refund.

In this case, PNB was able to establish, through the evidence it presented, that
Gotesco did not in fact use the claimed creditable withholding taxes to settle its tax
liabilities, to reiterate: (1) Gotesco’s 2003 Audited Financial Statements, which still
included the mortgaged property in the asset account “Properties and Equipment,”
proving that Gotesco did not recognize the foreclosure sale and therefore, the
payment by PNB of the creditable withholding taxes corresponding to the same; (2)
Gotesco’s 2003 ITRs, which the CTA Special First Division required to show that the
excess creditable withholding tax claimed for refund was not used by Gotesco, along
with the 2003 Schedule of Prepaid Tax which itemized in detail the withholding taxes
claimed by Gotesco for the year 2003 amounting to P6,014,433.00; (3) the testimony
of Gotesco’s former accountant, proving that the amount subject of PNB’s claim for
refund was not included among the creditable withholding taxes stated in Gotesco’s
2003 ITR; and (4) the Withholding Tax Remittance Returns (BIR Form 1606) proving
that the amount of P74,400,028.49 was withheld and paid by PNB in the year 2003.

All in all, the evidence presented by petitioner sufficiently proved its entitlement to
the claimed refund. There is no need for PNB to present Gotesco’s BIR Form No.
2307, as insisted by the First Division, because the information contained in the said
form may be very well gathered from other documents already presented by PNB.
Thus, the presentation of BIR Form No. 2307 would be in the final analysis a
superfluity, of little or no value.

Ergo, the evidence on record sufficiently proves that the claimed creditable
withholding tax was withheld and remitted to the BIR, that such withholding and
remittance was erroneous, and that the claimed creditable withholding tax was not
used by Gotesco to settle its tax liabilities.
COMMISSIONER OF INTERNAL REVENUE, vs. THE PHILIPPINE AMERICAN
LIFE INSURANCE CO., THE COURT OF TAX APPEALS and THE COURT OF
APPEALS
G.R. No. 105208. May 29, 1995
ROMERO, J.

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 petitioner’s appellate
division in the aggregate amount of P4,109,624.00.

On January 2, 1986, private respondent filed a petition for review with the CTA,
docketed as CTA Case No. 4018 regarding its 1983 and 1984 claims for refund in the
above-stated amount.
Later, it amended its petition by limiting its claim for refund to only P3,858,757.00.
On September 16, 1991, the CTA rendered a decision granting the petition for refund
for P3,246,141.00 and P396,874.00 representing excess corporate income tax
payments for the first and second quarters of 1983, respectively, or a total of
P3,643,015.00 and denying petitioner’s claim for refund of P215,742.00 representing
1983 withholding taxes on rental income.

On appeal with the CA, the CA affirmed the CTA decision.

ISSUE: 1. WHETHER THE CLAIM FOR REFUND WAS TIMELY FILED.

RULING: YES. 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.

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 quantify 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
jurisdictional4 and may be suspended for reasons of equity and other special
circumstances.5

WHEREFORE, the instant petition is DISMISSED and the decision of the Court of
Appeals is hereby AFFIRMED in toto. No costs.