POWER MAX CONSULTING GROUP INC.

NATIONAL TAX CONGRESS

Crowne Plaza Galleria
Ortigas Center, Pasig City
Thursday, October 16, 2014
9:00-10:30 am

LATEST DECISIONS OF THE COURT OF

TAX APPEALS AND SUPREME COURT
JUANITO C. CASTAEDA, JR.
Associate Justice, Court of Tax Appeals
1

INTRODUCTION
SUPREME COURT - FINAL ARBITER
The Supreme Court by tradition and in
our system of judicial administration,
has the last word on what the law is; it
is the final arbiter of any justifiable
controversy. There is only one
Supreme Court from whose decisions
all other courts should take their
bearings. Commissioner of Internal Revenue
(CIR) v. Michel J. Lhuillier, G.R. No. 150947, July 15,
2003, 406 SCRA 178.
2

INTRODUCTION
The CA and the CTA are now of the same level
pursuant to RA 9282. Decisions of the CA are thus no
longer superior to nor reversive of those of the CTA. xxx
all rulings of this Court on questions of law are
conclusive and binding on all courts including the CA.
All courts must take their bearings from the decisions of
this Court. Systra Philippines, Incorporated v. CIR, G.R. No. 176290, Res. Sept. 21,
2007, 533 SCRA 776.

INTRODUCTION
Under the principle of stare decisis or rule of
binding precedent, the general rule is that decisions
of the Supreme Court have the force and effect of
law and are binding upon the courts. However, this is
not a hard and fast rule. There should be no blind
adherence to precedent. What is important is that
the court decision must be right. CIR v. PLDT, G.R. No.
140230, Dec. 15, 2005, 478 SCRA 61.

No doctrine or principle of law laid down by the

Supreme Court in a decision rendered en banc or in
division may be modified or reversed except by the
Supreme Court sitting en banc. Section 4 (3), Article VIII,
1987 Philippine Constitution

INTRODUCTION
Supreme Court Minute Resolutions
constitute res judicata only with
respect to the same subject matter
and the same issues concerning the
same subject matter. They are not
binding precedent. Philippine Health Care
Providers, Inc. v. CIR, G.R. No. 167330, Sept. 18, 2009, 600 SCRA
413, Resolution reversing June 12, 2008 Decision.

CTA HAS JURISDICTION OVER SPECIAL CIVIL ACTION FOR

CERTIORARI ASSAILING AN INTERLOCUTORY ORDER ISSUED
BY RTC IN LOCAL TAX CASE

The authority of the CTA to take cognizance of

petitions for certiorari questioning interlocutory
orders issued by the RTC in a local tax case is
included in the powers granted by the
Constitution as well as inherent in the exercise
of its appellate jurisdiction. The exercise by
two judicial bodies, CA and CTA, of jurisdiction
over the same subject matter will result to split
jurisdiction. The City of Manila, represented by Mayor Jose L. Atienza,
Jr., et al. v. Hon. Caridad H. Grecia-Cuerdo, in her capacity as Presiding
Judge of the RTC Br 112, Pasay City; et al., GR 175723, Feb. 4, 2014.
6

CTA En Banc assumed jurisdiction on the special

civil action of certiorari assailing CTA Divisions
Resolution which denied the Motion for Judgment
on the Pleading citing The City of Manila, et al. v. Hon. Caridad H.
Grecia-Cuerdo, et al., GR 175723, Feb. 4, 2014. Nonetheless, no
grave abuse of discretion by CTA Division in
denying petitioners Motion for Judgment on the
Pleading as no admissions made by respondent
(only admission is to admit existence of FDDA, not
to its invalidity and defectiveness) to make
judgment on pleadings proper. Dacudao Brothers, Inc.,
Represented by its President, Antonio G. Dacudao v. CTA, 2nd Div., et al.,
CTA EB 819, Res. May 2, 2014.
7

INTERLOCUTORY ORDER IN CRIMINAL CASES ISSUED BY

CTA DIVISION IS APPEALABLE TO SC VIA CERTIORARI
UNDER RULE 65; AMENDMENT OF INFORMATION

The aggrieved partys only remedy after failing to

obtain reconsideration of an interlocutory order
issued by CTA Division in a criminal case is to file
a petition for certiorari under Rule 65 with the SC.
The amendments sought by the prosecution are
merely formal and not substantial. Amendments
are formal when they do not charge another
offense different from that charged in the original
one; or do not alter the prosecutions theory of the
case & affect the form of defense accused has. Dr.
Joel C. Mendez v. People, GR 179962, June 11, 2014.
8

CTAs LIMITED JURISDICTION;

TAXES vis--vis FEES
CTA has no jurisdiction over cases
involving validity of an Ordinance
imposing fees and not taxes. Considering
that the fees in Ordinance No. 18 are not
in the nature of local taxes, and Smart is
questioning the constitutionality of the
ordinance, the CTA correctly dismissed
the petition for lack of jurisdiction. Smart
Communications, Inc. v. Municipality of Malvar, Batangas, GR 204429,
Feb. 18, 2014.

CTAS JURISDICTION EXCLUDES THE POWER

TO RULE ON THE CONSTITUTIONALITY OR
VALIDITY OF A LAW/RULE/REGULATION

CTA has no jurisdiction to try the petition assailing

the constitutionality or validity of RMO Nos. 722010 & 1-2000 which was denied by the CIR in
BIR Ruling ITAD 2013-11 & by Sec. of Finance.
BIR Rulings & RMOs fall under the quasilegislative or rule-making powers in the 1st par. of
Sec. 4, 1997 NIRC but do not fall under other
matters over which CTA has jurisdiction. CTAs
jurisdiction does not include cases where the
constitutionality of a law or rule is challenged citing
British American Tobacco v. Camacho, G.R. 163583, Aug. 20, 2008. Egis
Project S.A. v. The Secretary of Finance & CIR, CTA EB 1023, Sept. 16, 2014.
10

CTAS JURISDICTION ON OTHER MATTERS;

FINALITY OF ASSESSMENT DOES NOT BAR
AVAILMENT OF AMNESTY PER RA 9480

Compliance with the amnesty requirements

entitles the applicant to the benefits of the law
even if the assessment is final and executory
per Tax Amnesty Law of 2007 (RA 9480).
CIRs Letter dated July 16, 2008 declaring the
taxpayers availment of amnesty as invalid, is
appealable to CTA under other matters
considering that Tax Amnesty is a collection
matter citing CIR v. Hambrecht & Quist Philippines, Inc., GR 169225, Nov.
17, 2010. CIR v. Philippine Aluminum Wheels, Inc., CTA EB 994, May 19,
2014.
11

JURISDICTION OF RTC ON CASES INCAPABLE OF

PECUNIARY ESTIMATION

RTC has jurisdiction over cases incapable of

pecuniary estimation. Money claim is merely
incidental to the central issue of whether
respondent is subject to tax imposed under
Sec. 21 of the Manila Revenue Code which
imposes tax on VAT entities. Citifinancial
Corp. is not an entity subject to VAT but to
percentage tax. The City Treasurer of the City of Manila v. City
Financial Corporation, CTA AC 111 (Civil Case No. 07-117472), May 28, 2014 &
Res. July 21, 2014.

12

continuation

It is expressly exempt from VAT under

Sec. 109 (aa) NIRC. Sec. 21(A) of MRC
subjects only VAT entities to tax. Sec. 19
already imposes 30% of 1% tax on gross
receipts derived by banks and other
financial institutions. The City Treasurer of the City Manila
v. City Financial Corporation, CTA AC 111 (Civil Case No. 07-117472), May
28, 2014.

13

CTAS JURISDICTION ON NULLIFICATION OF A 48HOUR NOTICE & 5-DAY VCN ISSUED BY THE CIR
The nullification CIRs 48-hour notice and 5-day Vat
Compliance Notice (VCN) is within CTAs jurisdiction
under other matters. Both notices were declared
void for failure comply with RMO 003-09; i.e. no
details of the findings of the investigating office & did
not state particular provision violated.
Assessments based on findings from surveillance are
deemed prima facie correct but will not apply if it
lacks due process, i.e., no factual basis of the
surveillance. Assessment must still comply with test
of reasonableness; must not be arbitrary &
capricious. Elric Auxiliary Services Corporation/Sacred Heart Gas
Station v. CIR, et al., CTA 8315, Feb. 17, 2014 & Res. April 30, 2014.
14

RTCS JURISDICTION OVER LOCAL

TAX CASES
RTC Makati has no jurisdiction over action
for Injunction assailing the decision of the
City Treasurer of Tuguegarao City which
denied the protest on assessment for
deficiency local franchise tax. The acts
sought to be enjoined are outside its
territorial boundaries. Jurisdiction lies with
RTC of the 2nd Judicial Region where the
City of Tuguegarao is part of. PLDT v. City of
Tuguegarao, et al.,, CTA AC No. 103, July 11, 2014 & Res. Sept. 30, 2014
15

SUPERVISION & REGULATION OF CUSTOMS BROKERAGE

PROFESSION IS NOW WITH PROFESSIONAL REGULATORY
BOARD FOR CUSTOMS BROKERS (PRBCB)

SC upheld the RTC ruling nullifying BOCs CAO 3-2006

which requires the accreditation by the BOC of customs
brokers who intend to practice before the BOC.
The Customs Brokers Act of 2004 transferred the
supervision and regulation of the customs brokerage
profession from the Board of Examiners (of which COC
is an ex-officio chairman) to the Professional Regulatory
Board for Customs Broker (PRBCB).
Certified customs brokers can practice their profession
in any collection district without securing another
license from BOC (Sec. 19 of RA 9280). Airlift Asia Customs
Brokerage, Inc. and Allan G. Benedicto v. CA, et al., G.R. No. 183664,
July 28, 2014.
16

CTAS CRIMINAL JURISDICTION;

EVIDENCE
CTAs jurisdiction - principal amount of taxes
& fees, exclusive of charges & penalties is
P1M or more (here P1,779,770.61).
Jurisdiction of a court over a criminal case is
determined by the allegations in the
complaint/information & not by the result of
the evidence presented at the trial.
Accused-petitioner was sentenced to
indeterminate penalty of not less than 8 yrs
& 1 day, nor more than 12 yrs imprisonment
& fine of P8,000 for smuggling of 15 units of
Kia Sportage & Hyundai Galloper. Roel Paquit
Sayson v. People, CTA EB Crim 025, April 1, 2014.
17

continuation

Affidavit of Legal Disclaimer containing accuseds admission

as the sole proprietor of Trex Eve, although not formally
offered but offered during hearing before the BOC, formed
part of the records of the case (COC v. CTA, GR No. 132929,
July 3, 2000) & was given evidentiary weight as a notarized
document. citing Gliceria Carandang-Collantes, et al., v. Felix Capuno, et al., GR
No. L-55373, July 25, 1983.

Testimony of Atty. Lyndon F. De los Santos,

linking accused as the owner of Trex Eve is a
positive declaration of a credible witness on
affirmative matters which is given more weight
than denials of the accused. Trex Eve Auto
Sales & Services, a sole proprietorship, &
accused Sayson were treated one & the same.
Roel Paquit Sayson v. People, CTA EB Crim 025, April 1,
2014.

18

CONDOMINIUM FEES ARE NOT SUBJECT

TO INCOME & WITHHOLDING TAX
Condominium dues are not subject to EWT. Assessment for 2005
deficiency EWT, final withholding VAT & FWT in the modified
amount of P18,770,754.40 plus interest & surcharge was upheld
except assessment arising from condominium dues. Amount
offered in compromise agreement was treated as initial payment
on deficiency taxes. Where the basic assessed tax exceeds P1M,
prior approval of the National Evaluation Board is a condition sine
qua non. Officemetro Philippines, Inc. (formerly REGUS CENTRES, INC.) v.
CIR, CTA 8382, June 3, 2014 RMC 65-2012 issued on Aug. 31, 2012 is
NOT applicable for violation of Sec. 246 of 1997 NIRC on the
non-retroactivity of rulings. Officemetro Philippines, Inc. (formerly
REGUS CENTRES, INC.) v. CIR, CTA 8382, Res. Aug. 15, 2014.

19

GOODWILL AS PART OF THE TOTAL CONSIDERATION IN THE SALE

OF ASSET IS SUBJECT TO THE SAME TAX AS THE SALE OF THE
ASSET, i.e. CGT, THUS NO LONGER SUBJECT TO ORDINARY INCOME
TAX

The assignment to GPAP-Singapore of the shares of

stocks of GPAP-Phils subscribed by HSBC is a sale
of capital asset. Hence, the total consideration
(P899,342,921) in the Share Sale And Purchase
Agreement between HSBC & GPAP-Singapore
which carries with it the Goodwill connected to the
business is subject to CGT. The Goodwill as
additional paid-in capital (P885,378,821) is not
treated separately. FAN was cancelled. The HongKong &
Shanghai Banking Corporation Limited Phil. Br. v. CIR, CTA Case No.
8428, Oct. 13, 2014.

20

FOREX
GAIN
ON
HEDGING
ACTIVITY
NOT
ATTRIBUTABLE TO REGISTERED ACTIVITY BY A PEZAREGISTERED ENTITY IS SUBJECT TO INCOME TAX
CASE

RULING

Aegis PeopleSupport Inc. [Formerly

PeopleSupport (Philippines), Inc. v.
CIR, CTA 8267, May 28, 2014.

Refund of alleged 2008 excess income tax payment

of P38,087,854.48 was denied for failure to prove
that forex gain arose from activities with income tax
incentive. Petitioner failed to prove that forex gain is
entirely attributable to its registered activity. The
movement of Citibank dollar accounts shows other
credits which can be part of hedging gain that is not
directly attributable to BOI or PEZA-registered
activity.

Aegis PeopleSupport Inc. [Formerly The claim for refund of P66,177,830.95 allegedly
People Support (Philippines), Inc.] v. erroneous payment of income tax for 2007 was
CIR, CTA EB 996, Aug. 4, 2014.
denied. The forex gain on hedging activity is outside
the registered activity as a contact center, hence, not
covered by the ITH.

21

INCOME FROM MICRO-FINANCING

ACTIVITY OF AN NGO IS TAXABLE
A non-profit civic organization on its income from
micro-finance activity & which is not a registered
activity, is subject to income tax & VAT. (Sec. 30(G)
of 1997 NIRC & Sec. 5 of RR 14-2007) Citing CIR v. CA &
COMASERCO, GR 125355, Mar. 30, 2000, even a non-stock, nonprofit, organization or govt. entity is liable to VAT on
sale of services for a fee. However, all assessments
were cancelled due to prescription. The waiver was
invalid for lack of date of acceptance by respondent
& no proof of receipt by petitioner. Kabalikat Para Sa
Maunlad Na Buhay, Inc. v. CIR, CTA 8336, June 20, 2014 & Res. Oct. 1, 2014.

22

TAX DEDUCTIONS MUST BE SUBSTANTIATED

Assessment for 1997 deficiency IT of
P4,536,87.15 was upheld for failure to
substantiate the deductions. Official receipts
cannot be substituted by Withholding tax
returns, cash vouchers, lessors certifications
& contracts of lease in claiming security &
janitorial expenses, mngt. & professional fees
& rental expenses.
On the alleged losses due to fire & theft,
submission of Sworn Declaration of Loss is
mandated by RR 12-77. H. Tambunting Pawnshop, Inc.
v. CIR, GR No. 173373, July 29, 2013.

23

INTEREST EXPENSE CANNOT BE DEDUCTED IF

NOT PROVEN TO BE RELATED TO BUSINESS
Petitioner failed prove that the loan was
a reasonable necessity to its trade or
business. The financial statements did
not indicate how the proceeds from loan
were used. Hence, assessment for
2008 deficiency income tax arising from
disallowance of interest expense on a
loan obligation previously deducted
from taxable income was UPHELD.
Festo Holdings, Inc. v. CIR, CTA 8334, Mar. 12, 2014
& Res. June 2, 2014.

24

DETERMINATION OF DIRECT COSTS FOR A

PEZA-REGISTERED ENTITY
In determining the direct costs for purposes of
computing the 5% GIT of a PEZA-registered entity, the
test is the direct relation of the expense in the rendition
of the PEZA-registered services. If the expense can be
directly attributed in providing the PEZA-registered
services, then it should be treated as direct cost.
RR 11-05 is not an all-inclusive list of expenses but
merely enumerates the expense that can be considered
as direct costs. Assessment for deficiency 2006 IT
arising from disallowed items of COS was upheld with
modification. East Asia Utilities Corporation v. CIR, CTA 8179, May 21,
2014.
25

MATCHING PRINCIPLE
Excess of income payments per alphalist over expense per ITR & FS is
not equivalent to undeclared income. No proof was presented to show
that the difference brought about by the mathematical comparison was
an actual source of taxable income. Assuming that there is unaccounted
source of cash or undeclared income, there are also payments or
expenses which were unreported. Related expenses offset the
undeclared income. Assessment with respect to 2006 deficiency income
tax of P28,400,036.96 & compromise penalty were cancelled. East Asia
Power Resources Corp. v. CIR, CTA Case No. 8182, Res. April 14, 2014.

Alleged unsupported expenses, overclaimed representation &

entertainment, disallowed expenses for non-withholding & nonwithholding of dues were not considered income. Discrepancy of
expenses per Alphalist & Financial Statements/ITR is a mere conjecture
not valid to support the finding of taxable income. Assessments were
cancelled & withdrawn. Shinko Electric Industries Co., Ltd. v. CIR, CTA Case No.
8213, Feb. 10, 2014.

26

UNDECLARED
DISBURSEMENT
IS
NOT
EQUIVALENT TO UNDECLARED INCOME
SUBJECT TO TAX
Assessment for 2004 deficiency income tax, VAT &
DST amounting to P152,890,193.76 was modified by
CTA to P1,752,107.38 (plus interest) to exclude
assessment arising from alleged undeclared
disbursements. The undeclared disbursements
amounting to P206,260,123.85 cannot be equated to
undeclared income. Imposition/Assessment of income
tax is when the income was received or realized & not
when there is an undeclared disbursement. A taxpayer
is free to deduct from its gross income a lesser amount,
or not claim any deduction at all. What is prohibited is
to claim a deduction beyond the amount authorized.
Toyota Manila Bay Corporation v. CIR, CTA 8227, Sept. 3, 2014.
27

EXCESS OF FMV/BOOK VALUE OVER SELLING PRICE IS

SUBJECT TO DONORS TAX; NON-RETROACTIVITY OF RULING
DOES NOT APPLY ON AN INVALID RULING

Excess of BV over SP of BLC shares sold by

petitioner is subject to deficiency donors tax &
surcharge of P170,229,925.14 plus deficiency &
delinquency interest. No intent to donate is
necessary under Sec. 100 NIRC. BIR Ruling DA
[DT-065)717-2009, Nov. 27, 2009, signed by
Asst. CIR for Legal Service is not binding since it
is merely interpretative. Ruling of first impression
can only be issued by CIR per Sec. 7 NIRC. Metro
Pacific Corporation [now NEO Oracle Holdings, Inc.] v. CIR, CTA 8318, June
11, 2014 & Res. Sept. 16, 2014.

28

continuation

Non-retroactivity of ruling under Sec. 246 NIRC does not

apply. RMC 25-2011, March 2, 2011, revoked BIR Ruling
DA [DT-065)717-2009.
RR 6-2008 defines FMV of stocks not listed and traded
as Book Value. FMV excess over selling price deemed
gift.
RR 6-13 new definition of FMV using Adjusted Net Asset
Method.
U.S. jurisprudence merely persuasive, not per se
controlling. Metro Pacific Corporation [now NEO Oracle Holdings, Inc.]
v. CIR, CTA 8318, June 11, 2014 & Res. Sept. 16, 2014.
29

HMO IS VATABLE ON GROSS RECEIPTS

WITHOUT DEDUCTIONS
HMO is subject to VAT on its gross receipts
including amount allegedly earmarked but
not proven paid to unrelated third party or
received as reimbursement for advance
payment on behalf of another which does not
redound to the benefit of the payor. It was
directed to pay 2008 VAT deficiency
excluding prescribed portion in the amount of
P157,157,754.47
plus
deficiency
&
delinquency interest. Maxicare Healthcare Corporation v.
CIR, CTA 8441, April 21, 2014.
30

continuation

Sec. 10, RR 4-2007 amended definition of

gross receipts under Sec. 4.108-4 of RR 162005 to include xxx except those amounts
earmarked for payment to unrelated third (3 rd)
party or received as reimbursement for
advance payment on behalf of another which
do not redound to the benefit of the payor,
BUT NOT Sec. 4.108-3 (k) of RR 16-2005
which specifically refers to HMOs. RMC
039-10 in accordance with RR 16-2005.
Maxicare Healthcare Corporation v. CIR, CTA 8441, April 21, 2014.
31

REGISTRATION WITH CDA IS NOT NECESSARY TO BE EXEMPT

FROM DST UNDER SEC. 199 OF 1997 NIRC; PRINCIPLE OF STARE
DECISIS; LAW PREVAILS OVER REGULATION

A non-stock mutual life insurance company need not

register with Cooperative Development Authority in
order to be exempt from DST on insurance policies
citing RP v. Sunlife Assurance Company of Canada,
GR No. 158085, Oct. 14, 2005, 473 SCRA 129 as a
binding precedent. There is no such requirement
under Sec. 199 of 1997 NIRC & under Insurance
Code. Old Cooperative Code (PD 175) & subsequent
RA 6939 do not apply. CIR vs. The Insular Life Assurance Co.
Ltd., GR No. 197192, June 4, 2014.

32

continuation

Section 8 of RMC No. 48-91 requiring the

submission of the Certificate of Registration
with the CDA cannot prevail over the clear
absence of an equivalent requirement
under the Tax Code. Basic law prevails
over an administrative ruling. CIR vs. The Insular Life
Assurance Co. Ltd., GR No. 197192, June 4, 2014.

33

ELECTRONIC PAYMENT INSTRUCTION FROM

ABROAD BY A NON-RESIDENT INVESTOR TO A
LOCAL BANK IS NOT SUBJECT TO DST

The e-payment messages from abroad by nonresident investor clients of HSBC which contains
instructions to debit their local or foreign currency
account in the Philippines to pay recipients
residing in the Philippines is not subject to DST.
The e-messages are not negotiable instruments
under Sec. 181 of the 1997 NIRC,but mere
memoranda; it is parallel to an automatic bank
transfer of local funds from SA to CA in one bank.
Refund granted. The Hongkong and Shanghai Banking
Corporation Limited-Philippine Branches v. CIR, G.R. Nos. 166018 & 167728,
June 4, 2014.
34

INTERCOMPANY BORROWINGS EVIDENCED BY

CASH RECEIPTS & DISBURSEMENT VOUCHERS
ARE SUBJECT TO DST
Assessment for 2007 deficiency DST on intercompany debt
instruments was upheld while deficiency DST on lease
contract was cancelled upon proof of payment. Sec. 179 of
1997 NIRC imposes DST on all debt instruments including
Cash & Journal vouchers evidencing intercompany
loans/advances implemented by RR 13-04.
A foreign corporation is not the same juridical entity as its
branch office in the Philippines for purposes of imposing
DST on intercompany borrowings citing Marubeni Corporation v.
CIR & CTA, GR No. 76573, Sept. 14, 1989. E.E. Black Ltd.-Phil. Br. v.
CIR, CTA 8526, April 10, 2014 & Res. June 25, 2014.

35

DST ON SALE OF SHARES IS BASED

ON PAR VALUE
DST on sale of shares of stocks is computed
based on the total par value of the shares & not
on their gross purchase price. (Sec. 175 of the 1997
NIRC, as amended & Sec. 4 of RR 13-04) Refund of
erroneously paid 2009 DST of P3,066,823.75 on
sale of shares of stocks was granted. CIR v. Eco
Leisure and Hospitality Holding Company, Inc., CTA EB 1013, Jan. 14,
2014 & Res. July 17, 2014.

36

PURCHASE OF ASSET THAT DOES NOT RESULT

TO MERGER IS NOT SUBEJCT TO DST

Bank of Commerce was not held liable

for the 1999 deficiency DST of Traders
Royal Bank upon showing in the
Purchase and Sale Agreement that
there was no merger between the said
banks. CIR v. Bank of Commerce, GR No. 180529, Nov. 13, 2013.

37

NEWLY CONSOLIDATED RURAL BANK IS NOT

ENTITLED ANEW TO TAX EXEMPTION UNDER RA
7353
The claim for refund of erroneously paid 2012 GRT
amounting to P152,511,746.35 was denied. A newly
consolidated rural bank is not entitled anew to tax
exemption under Sec. 15 of RA 7353 or The Rural
Banks Act of 1992 when the constituent rural
banks had previously availed the same tax
exemption. It is covered by Sec. 18 of RA 7353,
incentives specifically for merged or consolidated
entity which excluded tax exemption. One Network Bank,
Inc. (A Rural Bank) v. CIR, CTA 8640, April 11, 2014 & Res. July 7, 2014.

38

DULY REGISTERED COOPERATIVES TRANSACTING

BUSINESS WITH MEMBERS ONLY ARE EXEMPT
FROM VAT
Petitioners claim of P9,537,306 erroneously paid advance
VAT on refined sugar was granted. It is a duly registered
cooperative transacting business with members only, hence,
exempted from VAT under Sec. 109 (L) of the 1997 NIRC &
Art. 60 of Philippine Cooperative Code of 2008 or RA 9520. It
faithfully complied with the requirements to be exempt: (1)
Certificate of Registration with CDA; (2) Certificate of Good
Standing issued by CDA; and (3) Certificate of Tax Exemption
issued by BIR. The claim was fully substantiated & was filed
with the two-year prescriptive period under Sec. 229. Victorias
Milling Company Farmers Multi-Purpose Cooperative v. CIR, et. al., CTA
8658, Sept. 10, 2014.

39

EXEMPTION FROM EXCISE TAX; SPECIAL

LAW PREVAILS OVER THE GENERAL LAW
PALs charter, PD 1590, is a special law which has not been
expressly revoked by the NIRC of 1997, as amended by Sec. 6
of RA 9334. The phrase under Sec. 6 of RA 9334 which states
that the provisions of any special or general law to the
contrary notwithstanding, did not expressly repeal the
exemptions granted under PALs franchise because it did not
specifically identify PD 1590 as one of the acts intended to be
repealed.
Upon showing compliance with the conditions for exemption
from excise tax, PAL was granted a refund of P 4,550,858
excise taxes on its 2007 importation of cigarettes and alcoholic
drinks for its commissary supplies. CIR & COC v. Philippine Airlines,
Inc., G.R. No. 212536-37, Aug. 27, 2014.

40

BEST EVIDENCE OBTAINABLE RULE; 50%

RULE OF APPROXIMATION
Assessment for 2007 deficiency IT & EWT was
affirmed with modifications.

CTA upheld the use of Best

Evidence Obtainable
50% Rule of approximation (Secs.
2.3 & 2.4(c) of RMC 23-2000,
implementing Sec. 6 (B) of 1997
NIRC)
citing Mariano Zamora v. Collector of Internal Revenue, G.R.
No. L-15290, May 31, 1963. Village-Green Hog Farm, Inc.
v. CIR, CTA 8375, Aug. 1, 2014.

41

NON-ISSUANCE OF LOA DOES NOT

INVALIDATE FAN; HMO GROSS RECEIPTS
Assessment for 2006 deficiency VAT was
affirmed with modifications requiring
payment of P223,173,208.35 (basic tax &
surcharge) plus deficiency & delinquency
interest. Absence of LOA does not
invalidate FAN. The case of CIR v. Sony
Philippines, Inc., GR No. 178697, Nov. 17,
2010 does not apply. In Sony case,
assessment issued outside the scope of
LOA is void (for the period 1997 and
unverified years) Here, no LOA was issued
but a Letter Notice (LN). Medicard Philippines, Inc.
(Medicard) v. CIR, CTA 7948, June 5, 2014. & Res. Sept. 15,
2014.
42

continuation

Sec. 6 of 1997 NIRC authorizes assessments

other than by LOAs.
RMO 30-2003 provided system-generated
issuance of LNs as a mode of informing
taxpayers of the discrepancies.
RMO 42-2003 authorized no-contact-auditapproach assessment & issuance of LNs
without need of conducting examination of
taxpayers books. Medicard Philippines, Inc. (Medicard) v.
CIR, CTA 7948, June 5, 2014.
43

continuation

On payments to doctors & hospitals. The amount

earmarked for future payment to doctors & hospitals are
VATABLE for lack of proof that they are money in trust.
On earnings from its clinic & laboratory facilities. It is
Vatable for lack of proof that the amount received was
segregated for medical & lab services at the time
premiums were received.
Receipts from PEZA & BOI registered clients are zerorated; the others without certification are subject to VAT.
Vouched Commission expense for broker and direct
salaries included in the Cost of Sales should not be
deducted from gross receipts. Medicard Philippines, Inc.
(Medicard) v. CIR, CTA 7948, June 5, 2014.

44

ASSESSMENT ISSUED OUTSIDE THE SCOPE OF

LOA IS VOID; CASES BEFORE CTA ARE
LITIGATED DE NOVO
Assessment for 2006 deficiency DST, VAT, IT & EWT.
LOA covers only 2006 hence, 2005 DST Assessment is void while
2006 VAT Assessment has prescribed. 2006 DST assessment did
not prescribe as petitioner failed to submit or even prove
compliance with respect to time for filing & payment of DST [Sec.
200 (B) of 1997 NIRC]. Petitioner failed to present evidence to
disprove assessment on EWT & IT. CTA is a court of record, it is
required to conduct a formal trial to prove every minute aspect of
any claim. Cases before the CTA are litigated de novo. 2006 IT,
EWT & DST assessments were sustained. AFP General Insurance
Corporation v. CIR, CTA 8191, Mar. 13, 2014. In Amended Decision dtd
Sept. 1, 2014, VAT 2006 Assessment was upheld based on falsity
(30% rule) due to substantial underdeclaration of sales.
45

FAILURE TO PROTEST; PAN REMAINED VALID

EVEN IF ISSUED BY DE FACTO OFFICER
FLD/FAN received on April 14, 2009 became final for failure to
protest within 30 days. . An assessment that has become final
& executory for failure to protest within the statutory period
does not fall within other matters. On Nov. 8, 2010 (after
lapse of 30 days to file protest), it filed a letter to the BIR
captioned Request for Ruling. BIRs Letter Ruling dated
March 10, 2011 resolving the Request for Ruling does not fall
within other matters clause as it arose from undisputed
assessment.
PAN remained valid even if the one who issued it was
considered to be a mere de facto officer. Adelardo K. Pagente v.
Hon. Esmeralda M. Tabule, et al., CTA EB 1030, June 3, 2014.

46

PAN IS PART OF DUE PROCESS

CASES
Yumex Philippines
Corporation v. CIR, CTA
8331, Nov. 28, 2013 &
Res. Mar. 3, 2014

FINDINGS/RULING
The FLD, FAN & PAN were all received by the
petitioner on the same day, Jan. 18, 2011. It was not
given opportunity to respond to PAN. Assessment
for deficiency IAET for 2007 was cancelled for lack
of due process.

CIR v. La Frutera, Inc., Assessment for 2004 deficiency EWT was

CTA EB 1011, Aug. 4, cancelled. Two Formal Letters of Demand (FLD) &
2014.
Assessment Notices were received on Dec. 28,
2007 without any PAN. PAN was received only on
Aug. 28, 2009.
SVI Information Services
Corporation v. CIR, CTA
8496, Feb. 10, 2014 &
Res. Mar. 21, 2014.

The Preliminary Collection Letter amounting to

P14,513,761.44 was cancelled & withdrawn. PAN
was not delivered to petitioner. (violation of Sec. 228
of the 1997 NIRC & RR 12-99)
47

continuation

Even RR No. 18-2013 amending Sec. 3 of RR

12-99 mandates that PAN must be issued
before issuance of FAN/FLD. SVI Information Services
Corporation v. CIR, CTA 8496, Feb. 10, 2014 & Res. Mar. 21, 2014.

48

PAN IS PART OF DUE PROCESS; POST REPORTING

NOTICE IS NOT A SUBSTITUTE OF PAN; EXCEPTION
WHERE PAN IS NOT NECESSARY
Assessments for 2003 deficiency IT, VAT, FWT, FBT & DST were
cancelled. PAN was sent to taxpayers old address at 5/F R.
Magsaysay Center, 1680, Malate, Manila instead of 15/F Sec. A
Ramon Magsaysay CTR Roxas Blvd. PAN was sent via ordinary
mail in violation of RR 12-99 that it be issued at least by
registered mail.
The Post Reporting Notice (Notice) showed mere computation
without legal bases, thus, cannot take the place of PAN.
Assessment for deficiency WTC was upheld as it falls in the
exception where PAN is not required; when tax withheld does not
tally with the amount actually remitted (Sec. 228 [b], 1997 NIRC).
Direct Container Line Phils., Inc. (Now Vanguard Logistics Services Phils.,
Inc.) v. CIR, CTA EB 1019, Aug. 4, 2014.
49

NO VALID SERVICE OF FAN

CASES

FINDINGS/RULINGS

CIR v. Gallardo and Attempted service to unauthorized personnel; refusal will not
Associates, CTA EB give rise to constructive service, even though witnessed by 2
other revenue officers. No evidence that written report of
1043, June 10, 2014.

constructive service was made (RR 12-99). WT Assessment

was cancelled.

South Entertainment
Gallery, Inc. v. CIR,
CTA 8286, Amended
Dec. July 7, 2014.

Receipt by unauthorized person, i.e. a Receiving Officer.

FLD;FAN; Final Notice Before Seizure & Warrant of Distraint for
2007 were cancelled.

South Entertainment
Gallery, Inc. v. CIR,
CTA 8257, July 9, 2014.

Petitioner, a tenant at SM City Pampanga, denied receipt of

FAN. No proof that Brian David, a Warehouse Asst. at SM City
Pampanga, is authorized to receive letters on behalf of
petitioner & he did not confirm petitioners receipt of the letter.
2005 Assessment was cancelled.
50

VALID SERVICE & RECEIPT OF

PAN & FAN NECESSARY
CASES

RULINGS

Coolmate Corporation v. FAN for 2006 deficiency income tax was null & void. Both
CIR, et al., CTA 8264, PAN & FAN were mailed via registered mail to petitioners
May 19, 2014 & Res. Aug. old address despite notice to CIR of the change of
28, 2014.

address. PAN was received but not FAN. Disputable

presumption that assessment notice was received in the
regular course of mail will not lie if CIR failed to prove FAN
was sent to petitioners proper address.

Manuel B. Palaganas
doing business under
the name and Style
STEMIKO COMMERCIAL
v. CIR, CTA 8394, Sept.
17, 2014

2006 Assessments were cancelled and set aside. PAN

was personally received by a person not proven to be an
employee and an authorized agent of petitioner. Both the
amended PAN & FAN were sent via registered mail; the
Registry Return Receipt showed unauthenticated
signatures.

51

FINAL DECISION ON DISPUTED ASSESSMENT

(FDDA) MUST BE BASED ON LAW AND FACTS
FDDA is void when it contains different amount than that of
FAN without stating the factual basis of the new computation
or details of assessment. FDDA with respect to EWT & FBT
were cancelled while assessment on WTC was sustained.
The requirement under Sec. 228 of the 1997 NIRC & RR 1299 that the taxpayer shall be informed in writing of the law
and the facts on which the assessment is made; otherwise,
the assessment shall be void applies to FDDA.
FDDA determines the final tax liability of the taxpayer
appealable to CTA.
CIR v. Liquigaz Philippines Corp. & Liquigaz Philippines Corp. v. CIR,
CTA EB 989 & 990, May 22, 2014.
52

CIRs FINAL DECISION APPEALABLE TO CTA

The court considered the Final Notice Before
Seizure (Final Notice) as the CIRs final decision
appealable to CTA within 30 days from receipt
citing CIR v. Isabela Cultural Corporation, G.R. No.
135210, July 11, 2001, 361 SCRA 71. Final Notice was
received on Jan. 4, 2007, it has 30 days or until
Feb. 3, 2007 to appeal, but the petition was filed
only on Oct. 31, 2007. Petition was filed out of
time. The subsequent issuance of Warrant of
Distraint and/or Levy, Notice of Levy on Real
Property & CIRs correspondence were only
taken by the CIR to further emphasize her final
decision contained in the Final Notice
appealable to the CTA. Philippine Dream Company,
Inc. v. CIR, CTA EB 986, July 25, 2014.
53

PREMATURE APPEAL; WHEN BIR LETTER IS NOT

A FINAL DECISION APPEALABLE TO CTA
Petitioner immediately filed a Petition without
protesting the FAN. BIR Letter of a Regional
Director, with FLD & FAN, indicating that his office
is left with no alternative but to issue Final
Assessment Notice reiterating the demand for the
payment of the deficiency donors tax shown
therein to protect the interest of the government is
not a final decision appealable to the court. Petition
assailing the Formal Letter of Demand (FLD) & FAN
on 2009 deficiency Donors Tax was prematurely filed.
Castalloy Technology Corp., et al. v. Atty. Jose Tan, CESO V, as RD., BIR
Region No. 13, Cebu City, acting for & in behalf of the CIR, CTA 8244, Jan.
30, 2014 & Res. June 9, 2014.
54

PERIOD TO PROTEST HAS PRESCRIBED;

FAILURE TO PROTEST
CTA has no jurisdiction when assessment has
not been disputed. Assessment attained
finality when taxpayer failed to file a protest
within the time allowed, hence, validity of the
assessment may no longer be questioned on
appeal. Petitioner failed to protest the FAN
within 30 days from receipt on Dec. 23, 2010.
The Petition with CIR was filed only on Oct.
25, 2011. White Rose Merchandising, Inc. v. Albert B. Alocilja as RD
of RR No. 14 in 2010, et al., CTA 8401, May 2, 2014.

55

WAIVER OF PRESCRIPTION
CASES

RULINGS/FINDINGS

Dole Phils., Inc. v. CIR, The waivers dated Aug. 21, 1990, June 6, 1991 &
CTA 8155, Mar. 21, 2014 & Feb. 17, 1993 were defective for failure of CIR to sign
Res. June 9, 2014.
& indicate date of acceptance.
CIR v. La Frutera, Inc., (1) No date of acceptance by the CIR; (2) Notarized
CTA EB 1011, Aug. 4, only on Dec. 28, 2008 or a year after it was executed
2014.
on Dec. 28, 2007; (3) Nothing in waiver that shows

petitioner was furnished a duly accepted waiver; (4)

Type of tax due was not indicated; & (5) No evidence
to show authority of the signatory.
Transitions
Optical (1) Written & notarized authorities of petitioners
Philippines, Inc. v. CIR, signatory were not secured by the CIR & were not
CTA 8442, Sept. 1, 2014
presented in court; (2) No date of acceptance by CIRs

representative; and (3) No fact of receipt by petitioner

in the original copy of the waiver.
WAIVERS must strictly comply with the provisions of law & implementing
regulations. (Sec. 222, 1997 NIRC; RMO 20-90; RDAO05-01)
56

10-YR PRESCRIPTIVE PERIOD TO ASSESS

APPLIES WHEN THERE IS FALSITY
There was falsity when petitioner failed to present
documents to substantiate the unsupported excess input
VAT & petitioners repeated failure to submit/present its
books of accounts & acctg. records placed the CIR at a
disadvantage making the 10-yr period from time of
discovery of falsity the applicable prescriptive period. FAN
for 2001 received on July 28, 2005 was made within the
10-yr period. The Waiver was valid; Revenue District
Officer who signed it was authorized to sign & accept
waivers for cases pending investigation/ verification/
reinvestigation in the RDOs per RDAO 05-01. 2001
Assessment for deficiency VAT was upheld. Archipelago
Motors Corp. v. CIR, CTA Case 8321, Aug. 1, 2014.
57

PERIOD TO ASSESS; CHANGE OF THEORY

ON APPEAL IS NOT ALLOWED
During trial, CIR based its argument on the
allegation that Isuzu failed to file 2005 EWT returns
which was ultimately disproved by the latter. On
reconsideration, CIR change its theory, from nonfiling of returns to false or fraudulent return. CIRs
change of theory, without additional evidentiary
support, cannot be given the benefit of 10-yr
prescriptive period under Sec. 222 of the 1997
NIRC. The 3-yr period under Sec. 203 applies to
EWT. Assessment for deficiency EWT for Jan.-Nov.
2005 was cancelled & withdrawn due to prescription.
CIR v. Isuzu Philippines Corporation, CTA EB 1005, Aug. 4, 2014.

58

PRESCRIBED
ASSESSMENT;
ROYALTY
PAYMENTS FORM PART OF TRANSACTION
VALUE IN COMPUTING IMPORT DUTIES

Assessment for deficiency VAT for July 1, 2001 Dec. 31, 2003 was
cancelled due to prescription. The 3-yr prescriptive period applies as no
waiver of prescription was executed. It was only on June 16, 2008 &
Dec. 9, 2008, after the lapse of 7 yrs. from start of importation in July
2001, that assessments were issued.

Assessment for deficiency customs duties was affirmed with

modification. Sec. 1603 of the TCCP (as amended by RA 9135) &
Customs Administrative Order (CAO) 5-2001 provide 4 exceptions to
the 3-yr period of finality of liquidation, to wit: (1) existence of fraud;(2) a
pending protest; (3) compliance audit pursuant to TCCP; or (4)
liquidation of import entry was merely tentative. Considering the
compliance audit on June 2004 was within the 3-yr period, assessment
has not prescribed. Ajinomoto Philippines Corp. v. COC, CTA 7901, June
24, 2013.

59

continuation

Sec. 201 of RA 9135 & CAO 5-2001 provide that

royalties & license fees related to the goods being
valued may be added as part of the transaction
value for purposes of computing customs duties.
Ajinomoto Philippines Corp. v. COC, CTA 7901, June 24, 2013.

The court upheld COCs computation based on best

evidence available (mere photocopy of Details of
Importation & Import Entries). Citing CIR v. Hantex Trading Co.
Inc., GR No. 136975, Mar. 31, 2005, the govt. can determine tax
liability by estimation, using documents which may
not be acceptable in a judicial proceeding. Ajinomoto
Philippines Corp. v. COC , CTA 7901 Res. Nov. 15, 2013.
60

PERIOD OF COLLECTION UNDER

1997 NIRC
The Preliminary Collection Letter for
1992 was issued on Feb. 21, 2002,
while FAN was issued on Jan. 9, 1996.
The three (3)-year* period to collect had
lapsed. When there is a valid
assessment, the three (3)-year period to
collect runs from the date the
assessment notice has been released,
mailed or sent to the taxpayer. CIRs
right to collect the 1992 deficiency EWT
has prescribed. CIR v. United Salvage and Towage
(Phils.), Inc., G.R. No. 197515, July 2, 2014.
* [now 5 years under Sec. 222 (c) of the 1997 NIRC per BPI v. CIR, G.R. No. 139736, Oct. 17
61
2005, 473 SCRA 205]

UNACTED REQUEST FOR REINVESTIGATION WILL NOT TOLL

THE PERIOD TO COLLECT; PAN MUST BE FORMALLY OFFERED;
FAN MUST CONTAIN LEGAL & FACTUAL BASES
The request for reinvestigation on March 14, 1997 did not suspend the
running of the statute of limitations. CIR acted only on Jan. 22, 2001 beyond
the 3-yr period (now 5 yrs) reckoned from Jan. 9, 1996. The request should
first be granted, in order to effect suspension citing BPI v. CIR, G.R. No. 139736,
Oct. 17, 2005, 473 SCRA 205 (citing Collector v. Suyoc Consolidated, No. L-11527,
Nov. 25, 1958, 104 Phil. 819).
Assessment for 1994 deficiency EWT was cancelled due to:
1. PAN was not formally offered (citing Vda. De Oate v. CA, 320 Phil. 344 [1995] &
Dizon v. CA, 576 Phil. 110, 128 [2008]), presentation of PAN is not mere procedural
technicality. Cases before the CTA are litigated de novo.
2. FAN lacked legal & factual bases. The assessment for 1994 issued on Jan. 19, 1998
should have complied with RR 12-99. RR 12-99 was applied retroactively.
. Assessment for 1998 deficiency EWT was sustained as it complied with Sec. 228 of
the 1997 NIRC & RR 12-99. CIR v. United Salvage and Towage (Phils.), Inc., G.R.
No. 197515, July 2, 2014.

62

PERIOD TO COLLECT; COURT MAY REVIEW

MATTERS EVEN IF NOT RAISED AS ISSUES
1985 deficiency DST assessment was cancelled due to
prescription even if prescription was never raised. For three (3)
years (prescriptive period to collect is now 5 years) since BPI
received the assessment notice on June 16, 1989, no warrant of
distraint or levy or any judicial proceeding was initiated against
BPI properties. The BIRs earliest attempt to collect was when it
filed its answer in the CTA on Feb. 23, 1999, several years
beyond the 3-yr prescriptive period to collect. The request for
reconsideration/investigation did not toll the running of the period
since the BIR only responded to BPI on Aug. 4, 1998 or after nine
years from the protest letter of BPI. BIRs right to collect has
already prescribed. BPI v. CIR, G.R. No. 181836, July 9, 2014.

63

PRESCRIPTIVE PERIOD TO COLLECT

The Warrant of Distraint and Levy (WDL) issued by the CIR
falls under other matters arising under the NIRC or other
laws administered by the BIR. The WDL was cancelled due
to prescription. CIR has five (5) years or until April 26, 2009 to
enforce collection reckoned from April 26, 2004 when the
Formal Letter of Demand and Audit Result/ Assessment
Notice No. VT-01-000112 both dated Feb. 5, 2004 in the
amount of P155,492,011.33 for 2001 deficiency VAT were
issued & received by respondent. It was only on Feb. 22,
2010 when the WDL was served on respondent, or after the
lapse of the 5-yr prescriptive period. CIR v. Abundance Providers and
Entrepreneurs Corp., CTA EB 999, Aug. 18, 2014.

64

SUSPENSION OF COLLECTION
SC, in Aug. 18, 2014 Resolution, issued a
TRO against the April 22, 2014 & July 11,
2014 Resolutions issued by CTA First
Division insofar as it require spouses
Pacquiao to either deposit a cash bond of
P3,298,514,894.35 or post a surety bond
of P4,947,772,341.53 as a condition to
suspend the collection of deficiency IT &
VAT assessments for 2008 & 2009. TRO
was issued indefinitely and until further
orders from the SC.
Spouses Emmanuel D. Pacquiao and Jinky J.
Pacquiao v. The CTA-First Division & The CIR, G.R.
No. 213394, Res. Aug. 18, 2014.
65

continuation

SC en banc, issued a TRO, effective

immediately and continuing until further
orders, enjoining RTC Br 11, Manila
from (1) implementing lower courts
Orders & Writ of Preliminary Injunction
dated Jan. 24, 2014 on seizing, holding
the rice shipments; (2) proceeding with
the case; & (3) private respondents
Galang & Souza from undertaking any
and all action on the subject rice
shipments. Sec. Proceso J. Alcala, et al. v.
Hon. Cicero D. Jurado, Jr., et al., G.R. No.
211375, March 18, 2014

66

CONDITIONS FOR REFUND

(1) The claim must be filed within the two-year period from date of
payment of tax; The 2-yr prescriptive period is mandatory regardless of
any supervening cause

The claim for refund of P224,760,926.65 representing 10% FWT on

its interest payments for the period Jan 1999 to July 2002 was
DENIED due to prescription. BIR Ruling No. DA-342-2003
issued on Oct. 7, 2003 stating that the lender is a foreign
government-owned financing institution of Germany tax exempt
under Sec. 32 (B)(7)(a) of the 1997 NIRC, is NOT the operative act
from which entitlement of refund is determined. The two (2)-yr
prescriptive period under Sec. 229 of the 1997 NIRC is mandatory
regardless of any supervening cause that may arise after payment.
Solutio indebiti is not applicable when there is a binding relation
between the parties. CIR v. Manila Electric Company (MERALCO), GR No.
181459, June 9, 2014.
67

CONDITIONS FOR REFUND

(2) the return of the recipient must show the income
payment received was declared as part of the gross
income;
The claim of 2006 unutilized CWT amounting to P
45,481,271 was denied for failure to establish that the
income payments related to the claimed CWT formed
part of the income declared in the 2006 Annual ITR.
Petitioner failed to indicate in its Amended Annual ITR
the breakdown of its components. United Coconut Planters Bank
v. CIR, CTA EB 979, Sept. 3, 2014.

68

CONDITIONS FOR REFUND

(3) fact of withholding is established by a copy of a statement duly issued
by the payor to the payee.
It is not necessary to present the person who executed and prepared the
Certificates of CWT to testify personally as to the authenticity of the
certificates. Faithful reproductions of the original copies of CWT Certificates
would suffice to establish the fact of withholding citing CIR v. Mirant (Philippines)
Operations, Corporation, GR Nos. 171742 &176165, June 15, 2011. Rule 13 of the
RRCTA allows the presentation of the original CWT with the ICPA. The claim
for refund was granted. CIR v. Team (Philippines) Operations Corporation
[Formerly Mirant (Philippines) Operations Corporation], GR No. 185728, Oct. 16,
2013;

(4) Irrevocability under Sec. 76 of 1997 NIRC

The concept of irrevocability under Sec. 76 of 1997 NIRC must be strictly
observed. The taxpayer complied with all the conditions for the grant of refund,
hence, entitled to refund. CIR v. Team [Philippines] Operations Corporation
[formerly Mirant (Phils) Operations Corporation], GR No. 179260,
69 April 2, 2014.

continuation

The claim for refund of 2010 unutilized CWT

amounting to P9,325,323 was granted upon proof of
compliance with all the conditions for refund. Doosan
Heavy Industries & Construction Co., Ltd. (Philippine Branch) v. CIR, CTA
8626, Sept. 17, 2014.

70

PROOF OF ACTUAL REMITTANCE OF TAXES

WITHHELD IS NOT INDISPENSABLE IN
REFUND
Proof of actual remittance to the BIR of the taxes withheld is not
indispensable in a claim for refund of excess CWTs. The
withholding and remittance of tax is the responsibility of the
payor and not the payee citing CIR v. Asian Transmission Corp., G.R.
No. 179617, Jan. 19, 2011. Here, taxpayer established the fact of
withholding through the withholding tax certificates (BIR Form
2307) duly issued by the payors. It even presented the
Certification of Remittances issued by the BIR Revenue
Accounting Division (BIR RAD). The claim for refund of
P38,380,606 excess 2009 CWT was granted after full
compliance with the requisites. CIR v. Doosan Heavy Industries &
Construction Co., Ltd. (Philippine Branch), CTA EB 1090, Aug. 4, 2014.

71

NON-SUBMISSION OF SUPPORTING DOCUMENTS;

BIR FORM NO. 2307 CANNOT BE SUBSTITUTED
Withholding Tax Remittance Returns (BIR Form No. 1606) &
Capital Gains Tax Return (BIR Form No. 1706) are NOT substitutes
for the submission of BIR Form No. 2307 in a claim for refund.
Secs. 2.58.3 (B) & 2.58 of RR 2-98 must be strictly observed.
Non-submission of supporting documents in the administrative level
is not fatal to a claim for refund. Judicial claims are litigated de
novo. Refund of 2009 excess CWT was partially granted.
Philippine Bank of Communications v. CIR, CTA 8460,
April 24, 2014 & Res. June 20, 2014.

72

SURVIVING
ENTITY
IRREVOCABILITY RULE

IS

BOUND

BY

In a merger, the claim for refund by the

surviving entity (AXIA) of the excess CWT
of the absorbed corporation (MESC) is
denied because the latter chose to carry
over its excess CWT. AXIA is bound by
MESCs previous choice, hence, AXIA can
only carry over to the succeeding taxable
years MESCs excess CWT. Irrevocability
rule applies. Axia Power Holdings Philippines Corporation v. CIR,
CTA 8092, Feb. 25, 2014 & Res. July 14, 2014.
73

FAILURE TO PROVE COMPLIANCE WITH BOI

REQUIREMENTS IS FATAL IN REFUND
For failure of a BOI-registered entity to prove
compliance with BOI requirements, its claim for
refund of P61,456,346.70 representing 2006 income
tax was denied. Both Sec. 3. Rule III of the 2007
Revised Rules & Regulations in the Availment of
Income Tax Holiday & the old rules require an
application for ITH incentive. Despite having
Certificate of ITH entitlement by BOI, in addition, it
needs to present to court a BOI-approved application
within the required period. CIR v. CE Casecnan Water & Energy
Company, Inc., CTA EB 967, Nov. 4, 2013 & Res. April 22, 2014.

74

COMPLIANCE
NEEDED

WITH

BIR

CHECKLIST

NOT

The claim for refund of 2004 input VAT was

partially granted upon showing that relevant
supporting documents were submitted. Checklist
of documents mentioned in RMO 53-98 pertained
to audit requirements not to refund cases. The
120-day period is reckoned from the time the
administrative claim and supporting documents
were filed on 21 December 2005. Both
administrative & judicial claims were timely filed.
CIR v. Team Sual Corporation (formerly Mirant Sual Corporation), G.R.
No. 205055, July 18, 2014.

75

STATUTORY TAXPAYER IS THE PROPER

PARTY TO CLAIM REFUND OF INDIRECT TAX
The claim for refund of the excise taxes paid on
petroleum products sold to international carriers from
October 2001 to June 2002 amounting to
P95,014,283.00 was granted. The statutory taxpayer
who is directly liable to pay the excise tax on its
petroleum products, is entitled to a refund of taxes it
paid for petroleum products sold to international
carriers, the latter being exempted from excise tax
under Sec. 135 (a) of the NIRC.
Principle of pacta sunt servanda applies.
CIR v. Pilipinas Shell Petroleum Corporation, GR No. 188497, Res. Feb. 19,
2014 Reversing Decision April 25, 2012.
76

On June 5, 2014, CTA amended its

Decision dated December 5, 2013 and
partially granted the claim for refund of
P89,032,170.49 representing excise taxes
found to be fully substantiated applying the
recent case of CIR v. Pilipinas Shell Petroleum Corporation, GR
No. 188497, Res. Feb. 19, 2014. Pilipinas Shell Petroleum Corp. v. CIR, CTA
7871, Amended Dec. June 5, 2014. & Res. Sept. 1, 2014.

77

VAT ORs & VAT RETURNS CANNOT BE

SUBSTITUTED BY FINANCIAL STATEMENTS

The claim for refund of unutilized input VAT

was denied for failure of the taxpayer to prove
the existence of zero-rated sales. VAT ORs &
VAT returns cannot be substituted by financial
statements. Claimant must prove entitlement
under the substantive law and compliance
with the evidentiary substantiation before the
administrative official or in the de novo
litigation before the CTA Division. Luzon Hydro
Corporation v. CIR, GR No. 188260, Nov. 13, 2013.

78

OTHER GROUNDS FOR DISALLOWANCES OF REFUND

CLAIMS
CASES

FINDINGS/RULINGS

Phil. Gold Processing and

Refining Corp. v. CIR, CTA
8301, Feb. 27, 2014 & Res.
May 29, 2014.

Even BOI-registered entity needs

to present VAT invoices & export
documents. Claim denied.

Consolidated cases of
Filminera Resources Corp.
v. CIR, CTA Case Nos. 8528 &
8576, Sept. 25, 2014.

Failure to prove that the buyers

products were 100% exported.
Claim denied.

Emerson Electric (Asia)

Limited-ROHQ v. CIR, CTA
Case 8470, Oct. 1, 2014.

Petitioners ATP was issued only

on July 22, 2008 after the period
when the alleged zero-rated sales
occurred (period of claim July-Dec
2007). Claim denied.
79

Image taken from shutterstock.com

ALLEGED EXCESS INPUT VAT

OUTPUT VAT

IS LESS THAN

Refund of alleged unutilized input VAT of P98,422,081.41 for FY

2010 was denied based on the courts findings:
Input VAT reported per VAT return

Less: Disallowances (not properly substantiated per

Secs. 110 (A) & 113 (A)(B) 1997 NIRC; Secs.
4.110-1, 4.110-8 & 4.113-1, RR 16-2005)
Valid Input VAT

218,916,263.97

197,753,778.25
P

21,162,485.72

The court took into consideration the output VAT declared per
return:
Output VAT

Less: Valid Input VAT

Output VAT still due

119,369,965.37
21,162,485.72

98,207,479.65

Procter & Gamble Asia, Pte. Ltd. v. CIR, CTA 8341, Feb. 24, 2014 & Res. July 2,
80
2014.

INCOME TAX DUE IS MORE THAN THE ALLEGED

EXCESS INCOME TAXES PAID
Prior Years CWTs
Substantiated CWTs for 2005
Less: Taxes Due 2005 & 2006
Taxes Still Due

P6,662,857.36
12,645,269.06
P (5,982,411.70)

Taxable Year 2007

Petitioners claimed CWTs for 2007
Less: Unsubstantiated CWTs for 2007
Substantiated CWTs for 2007
Less: Income Tax Due for 2007
Amount to be refunded/issued

P18,872,767.00
13,854,315.80
P 5,018,451.20
6,654,501.43
(P1,636,050.23)

Sumisetsu Philippines, Inc. v. CIR, CTA EB 993, March 4, 2014 & Res. Sept. 22, 2014.

81

120-30 DAY PRESCRIPTIVE PERIOD

UNDER SECTION 112 OF 1997 NIRC IS
MANDATORY
AND
JURISDICTIONAL;
EXCESS INPUT VAT IS NOT EXCESSIVELY
COLLECTED TAX UNDER SECTION 229;
EQUITABLE ESTOPPEL
Consolidated cases of CIR v. San Roque Power Corp., GR 187485, 196113 &
197156, Feb. 12, 2013, 690 SCRA 336; affirmed with finality Res. Oct. 8, 2013.

82

Summary of rules on claims for refund/tax credit of

unutilized input VAT:
1. When to file an administrative claim with the CIR:
a. General rule Section 112 (A) and Mirant
within 2 years from the close of the taxable
quarter when the sales were made.
b. Exception Atlas
within 2 years from the date of payment of the
output VAT, if the administrative claim was filed
from June 8, 2007 (promulgation of Atlas) to
September 12, 2008 (promulgation of Mirant)
Visayas Geothermal Power Company v. CIR, G.R. No. 197525, June 4, 2014. See
also CIR v. Mindanao II Geothermal Partnership, G.R. No. 191498, Jan.15, 2014
83

2. When to file a judicial claim with the CTA:

a. General rule Section 112 (D); not Section 229
i.

Within 30 days from the full or partial denial of the

administrative claim by the CIR; or

ii.

Within 30 days from the expiration of the 120-day

period provided to the CIR to decide on the claim.
This is mandatory and jurisdictional beginning
January 1, 1998 (effectivity of 1997 NIRC).

Visayas Geothermal Power Company v. CIR, G.R. No. 197525, June 4, 2014. See
also CIR vs Mindanao II Geothermal Partnership, G.R. No. 191498, Jan.15, 2014

84

Exception BIR Ruling No. DA-489-03

The judicial claim need not await the
expiration of the 120-day period, if such
was filed from December 10, 2003
(issuance of BIR Ruling No. DA-489-03)
to October 6, 2010 (promulgation of
Aichi). [equitable estoppel and doctrine
of operative fact]
85

N.B.
RMC 54-2014
If the claim for VAT refund or credit is not
acted upon by the Commissioner within 120day period as required by law, such inaction
shall be deemed a denial of the application
for tax refund or credit.
Failure to file judicial claim with CTA within 30
days from the expiration of the 120-day period
rendered the CIRs decision, or inaction
deemed a denial, final & unappealable.
86

Recent SC & CTA cases applying San Roque ruling.

Cases

Rulings

Nippon Express (Phils.)

Corp. v. CIR, G.R. No.
196907, March 13, 2013,
693 SCRA 456.

Premature, did not fall within the

period of exception. The 120+30-day

Applied Food Ingredients

Company, Inc. v. CIR,
G.R. No. 184266, Nov.
11, 2013.

-same-

CIR v. Team Sual Corp.

(formerly Mirant Sual
Corp.), GR 194105, Feb.
5, 2014.

-same-

mandatory periods were already in law &

BIR Ruling No. DA 489-03 had not yet
been issued.

87

Cases

Rulings

Hedcor Sibulan, Inc. v. CIR, CTA

EB 987, Oct. 7, 2013; CIR v.
Procter and Gamble Asia Pte.
Ltd., CTA EB 839, May 17, 2013
& Res. Oct. 2, 2013; Philex
Mining Corporation v. CIR, CTA
EB 787, May 28, 2013 & Res.
Oct. 1, 2013. San Roque Power
Corp. v. CIR, CTA 938, Res. Nov.
20, 2013.

Premature, fell within the window

period, i.e., from 10 December 2003 up
to 6 October 2010.

The CIR v. Visayas Geothermal

Power Company, Inc., G.R. No.
181276, Nov. 11, 2013.

The claim for refund under CTA Case

No. 6790 was denied due to prematurity
while CTA Case No. 6838 was
remanded to CTA for determination of
refundable amount; it was made after
the issuance of BIR Ruling DA-489-03.
88

Cases

Rulings

Procter & Gamble Asia PTE LTD.

v. CIR, G.R. No. 202071, Res.
February 19, 2014; Team Energy
Corporation
(formerly
Mirant
Pagbilao Corporation v. CIR, G.R.
No. 197760, January 13, 2014.

Premature judicial claims but fell

within the window period. No
mention of invocation of BIR
Ruling No. DA 489-03.

Taganito Mining Corporation v.

CIR, G.R. No. 197591, June 18,
2014.

Premature judicial claims but fell within

the window period. A party who does
not appeal from a judgment can no
longer seek modification or reversal of
the same. Since Taganito did not
appeal the CTA Divisions partial denial
of its claim, it is only entitled to partial
refund of P537,645.43 as originally
granted.

89

Cases

Rulings

Chevron Holdings Inc.,[formerly CALTEX (ASIA)

LIMITED] v. CIR, CTA EB 837, May 7, 2013 & Res.
Sept. 27, 2013. Consolidated cases of Silicon
Philippines v. CIR, G.R. Nos. 184360, 184361 &
184384, February 19, 2014.
CIR v. Dash Engineering Philippines, Inc., G.R. No.
184145, December 11, 2013.
CBK Power Company Limited v. CIR, GR Nos. 19872930, Jan. 15, 2014.
CIR v. Mindanao II Geothermal Partnership, GR No.
191498, Jan. 15, 2014.
CIR v. Silicon Philippines, Inc. (formerly Intel
Philippines Manufacturing, Inc.), GR No. 169778, Mar.
12, 2014. CIR v. Mindanao II Geothermal Partnership,
G.R. No. 189440, June 18, 2014.
San Roque Power Corp. v. CIR, G.R. No. 205543, June
30, 2014.

Prescribed.
Filed
beyond the 30-day
period to appeal from
the lapse of the 120day period.

90

Case

Ruling

Republic
of
the
Philippines, represented
by the CIR v. GST
Philippines, Inc. G.R. No.
190872, Oct. 17, 2013.

Premature and prescribed. The 120day period is to be reckoned with the

filing of the administrative claims when
taxpayer was presumed to have
attached the relevant supporting
documents.

91

Case

Ruling

Team Energy Corporation

(formerly Mirant Pagbilao
Corp.) v. CIR, G.R. No.
190928, January 13, 2014.

Not premature. Judicial claim fell within the

120+30 day prescriptive period. Section
112 (A) and (C) of the NIRC of 1997 must
be interpreted according to its clear, plain
and unequivocal language. Refund was
partially granted.

CIR v. Toledo Power, Inc.,

G.R. No. 183880, January
20, 2014.

Premature judicial claim (third quarter of

2001) and did not fall within the window
period. Premature judicial claim (fourth
quarter of 2001) but fell within the window
period. Refund was partially granted.

CIR
v.
CE
Luzon
Geothermal
Power
Company, Inc. G.R. No.
190198, Sept. 17, 2014.
92

Case

Ruling

Miramar Fish Company,

Inc. v. CIR, G.R. No.
185432, June 4, 2014.

Prescribed and premature but fell within the

window period. Claim for taxable year 2002
was denied due to prescription. Claim for
taxable year 2003, although premature but
within the window period, was denied for
failure of petitioner to comply with the
mandatory invoicing requirements under
Sec. 113 of the 1997 NIRC & Sec. 4.108-1
of RR 7-95.

93

RECENT APPLICATION OF SAN ROQUE

RULING
Even if prescription was raised for the first
time on appeal, Aichi & San Roque rulings
were applied. SC revoked the CIRs
previously issued TCC of P6,251,065.74
representing 2002 unutilized input VAT arising
from zero-rated sales & set aside CTAs ruling
partially granting the refund. The judicial
claim was filed out of time. Administrative
claim - May 30, 2003; Judicial claim - March
31, 2004 or 155 days late. CIR v. Mindanao II Geothermal
Partnership, GR No. 189440, June 18, 2014.
94

NON-RETROACTIVITY OF BIR RULING; MAKING CHOICE OF DEDUCTION

METHOD (OPTIONAL STANDARD DEDUCTION [OSD] OR ITEMIZED
DEDUCTIONS) IN 1ST QUARTER MANDATORY FOR THE YEAR

Petitioner is entitled to refund of P8,960,245

representing erroneously paid 2009 income
tax after choosing Optional Standard
Deduction. RR 16-2008 applies to taxable
year 2009. Its subsequent amendment by RR
2-2010 & RMC 016-10 will not be given
retroactive effect as it will prejudice the
taxpayer. (Sec. 246 of 1997 NIRC) COL Financial Group, Inc. v. CIR,
CTA 8454, April 15, 2014 & Res. June 2, 2014.

95

EFFECTS OF TAX AMNESTY; LAW PREVAILS OVER

REGULATIONS

Taxpayers with pending tax cases are still

qualified to avail of tax amnesty under 2007 Tax
Amnesty Law. The portion of the RMC 19-2008
which excludes the taxpayers with pending tax
cases from the amnesty availment was declared
invalid. The exception goes beyond the scope of
the provisions of the amnesty law. CS Garment, Inc. v.
CIR, GR No. 182399, Mar. 12, 2014.

96

TAX LIABILITY OF CORPORATE TAXPAYER & ITS

RESPONSIBLE OFFICER

97

TAX LIABILITY OF CORPORATE TAXPAYER & ITS

RESPONSIBLE OFFICER
The civil liability to pay the deficiency assessment
(DST & compromise penalty) remains the corporate
obligation of the corporation absent fraud or unlawful
act on the officers of the corporation.
Case was dismissed against accused Docena upon
his death. Criminal action is extinguished as there is
no longer a defendant to stand as the accused; while
accused Palad was acquitted for failure of the
prosecution to prove his guilt beyond reasonable
doubt. People v. Efren O. Docena and Rolando E. Palad, South Sea Surety
& Insurance Co., Inc., CTA Crim. Case No. O-087, Amended Decision, March 12,
2014.
98

TAX LIABILITY OF RESPONSIBLE OFFICER

Piercing the veil of corporate entity. The act of the

individual is the act of the corporation. People v.
Bienvenido S. Dimson, CTA Crim Case Nos. 0-071 & 0-085, July 2, 2014.

Civil liability of the accused was cancelled. The

accused cannot be held liable for the obligation of
Pic N Pac Mart, Inc., under the doctrine of separate
juridical entity. The accused was convicted not in
his personal capacity for non-payment of his
personal tax liability but in his capacity as the
president of Pic N Pac Mart, Inc., the entity
statutorily liable to pay the tax. Not being
impleaded, corporation was not held criminally &
civilly liable. People v. Wong Yan Tak, CTA EB Crim 024 (CTA Crim
Case O-090), Dec. 18, 2013.
99

LIABILITIES OF A CORPORATE TAXPAYER & ITS

RESPONSIBLE OFFICER
The corporate taxpayer H. Tambunting Pawnshop, Inc.
was held liable for deficiency DST of P2,610,478.21 on
its pawn tickets plus fine of P50,000 under Sec. 256 of
1997 NIRC.
The President was solidarily liable when he knowingly
participated in not protesting the assessment & was
sentenced to 1 2 years imprisonment with fine of
P10,000 for willful failure to pay DST. The court did
not give weight to the accuseds reliance on a BIR
Ruling No. 325-88. Corporate legal fiction was
disregarded. People v. Edmundo T. Ongsiako, Jr., H. Tambunting
Pawnshop, Inc. 822 M. Dela Fuente St., Sampaloc, Manila, CTA Crim Case No.
O-196, Feb. 26, 2014 & Amended Dec. July 22, 2014.
100

EVIDENCE; WHEN PRESENTING A CERTIFIED TRUE

COPY OF A PUBLIC DOCUMENT, IT MUST BE SHOWN
THAT IT WAS CERTIFIED BY THE LEGAL CUSTODIAN
Tax evasion & failure to file return against the accused were
dismissed for insufficiency of evidence. No probative value was
given to the COA Reports for being mere certified xerox copies of
the receiving copies. COA Reports were not certified true copies of
the originals nor duplicate copies of the originals, & were not
issued by the legal custodians. Citing People v. The Hon. Juanito C.
Castaeda, Jr., et al., GR No. 208290, Dec. 11, 2013. People v. Oscar Garcia y
Itchon, CTA Crim Nos. 0-253, 0-254, 0-255 & 0-256, Res. June 3, 2014. Motion

for Partial Reconsideration (of the Civil aspect of the case) was
denied. The primary basis of its assessment is the discredited
COA Reports. Plaintiff should have inspected the MWSS books
and records to determine the accused civil liability. People v. Oscar
Garcia y Itchon, CTA Crim Nos. 0-253, 0-254, 0-255 & 0-256, Res. Aug. 15, 2014.

101

RPT ASSESSMENT; PAYMENT UNDER PROTEST IS

MANDATORY
The assessment case for deficiency RPT was
remanded to LBAA for failure to pay under protest.
In
questioning
the
reasonableness
and
correctness of RPT assessment, Section 252 of
LGC of 1991 (RA 7160) requires payment under
protest as a condition sine qua non. A claim for tax
exemption does not question the authority of local
assessor to assess real property tax, but merely
raises a question of the reasonableness or
correctness of such assessment, which requires
payment under protest. Camp John Hay Development
Corporation v. Central Board of Assessment Appeals, et al., GR No.
169234, Oct. 2, 2013.
102

FRANCHISE TAX ASSESSEMENT

COMPLY WITH THE FACTUAL
REQUIREMENTS

NEED NOT
& LEGAL

Assessment issued by Province of Quirino against

NPC for 2002-2006 deficiency franchise tax was
upheld. Notice of assessment under Sec. 195 of the
LGC of 1991 needs only to state the nature of the tax,
fee or charge, the amount of deficiency, surcharge,
interest & penalty without need of stating the legal &
factual bases required under Sec. 228 of the 1997
NIRC. NPC is still liable to pay franchise tax by virtue
of Sec. 137 of LGC of 1991 (authority of LGU to
impose franchise tax) in relation to EPIRA Law (Sec.
70 of RA 9136) for its missionary electrification
function. National Power Corporation v. Province of Quirino & Fe B.
Mangaccat, CTA AC 108, June 18, 2014.
103

60-DAY WAITING PERIOD WITHIN WHICH THE LOCAL

TREASURER MAY ACT ON THE PROTEST IS
MANDATORY
Sec. 195 of the LGC requires that a taxpayer who questions the
validity/legality of an assessment issued by the local treasurer, may
within 60 days from receipt of the notice of assessment file a written
protest with the local treasurer. Thereafter, the treasurer shall decide
the protest within 60 days from the time of filing. Here, NPC filed its
protest on March 5, 2010. The treasurer had until May 4, 2010 to
resolve the protest. NPC filed its Appeal with the RTC-Br 44 of Initao,
Misamis Oriental on May 4, 2010, last day of the treasurer to resolve
the protest. NPC prematurely filed its appeal with RTC. The 60-day
mandatory period renders its appeal to RTC void & as such RTC
decision was reversed & set aside. CTA acquired no jurisdiction.
Municipality of Laguindingan et. al. v. National Power Corp. et. at., CTA AC No. 106,
Oct. 10, 2014.

104

PROSECUTION OF CUSTOMS MISDECLARATION

CTA did not commit grave abuse of discretion in the
dismissal of the case against Garcia and Vestidas Jr.
on alleged misdeclaration on the importation of 858
cartons of 17,160 pieces of Anti-Virus Software. The
acquittal of the accused was warranted by the fact that
the prosecution failed to present the certified true
copies of documentary evidence issued by the public
officer in custody of it; failed to competently and
properly identify the misdeclared goods; & failed to
identify the accused in court. Investigation of the
prosecution suggested. People v. The Hon. Juanito C. Castaeda,
Jr., et al., GR No. 208290, Dec. 11, 2013.

105

WARRANT OF SEIZURE AND DETENTION IS A CONDITION

PRECEDENT
FOR
SEIZURE
PROCEEDING;
20%
INTEREST/PENALTY CANNOT BE IMPOSED WHEN THERE IS NO
SEIZURE PROCEEDING

Warrant of Seizure and Detention (WSD) is a

condition precedent, before any seizure proceeding
can be formally initiated. Sections 2301 & 2303 of the
TCCP laid down the mandatory procedures in a
seizure case, to wit: (1) issuance of WSD; and (2)
service upon the owner or importer or his agent of the
written notice of seizure. Shipment cannot be seized
or forfeited for lack of WSD & lack of proof of fraud or
bad faith. Absent a pending seizure proceeding legally
initiated, the 20% penalty cannot be imposed. The COC &
The District Collector of Customs for the Port of Iloilo v. New Frontier Sugar
Corporation, GR 163055, June 11, 2014.

106

PIERCING THE VEIL OF CORPORATE

ENTITY
The doctrine of piercing the corporate veil cannot apply to
Oilink, a corporation having interlocking directors with URC,
as the COC did not establish that Oilink had been set up to
avoid the payment of taxes or duties.
Elements of instrumentality or alter ego are not present, to
wit: (1) control/complete domination; (2) control is used to
commit fraud; and (3) control & breach of duty must
proximately cause the injury or unjust loss complained of.
From the outset, the COC sought collection from URC for
deficiency taxes and duties on oil imports (deficiency VAT,
excise
taxes
and
special
duties
amounting
to
P138,060,200.49). The belated pursuit of Oilink was only an
afterthought. COC v. Oilink International Corporation, G.R. No. 161759,
July 2, 2014.
107

ELEMENTS
OF
ILLEGAL
IMPORTATION;
COMMENCEMENT OF IMPORTATION
M/V Coco Explorer a.k.a M/V 7,107 Islands Cruise (a cruise ship) was
forfeited upon proof that: (1) it did not pass through the customhouse
(Sec. 1201); (2) without proper documentation; (3) without payment of
taxes in violation of Sec. 2530 (l)(1) of the TCCP.
There was importation the moment the vessel entered the Port of
Batangas. The article subject of importation was the vessel itself.
Intent to import was shown in the MOA and series of event evidencing
outright sale of the vessel including partial payment of the purchase
price barely five days upon arrival of the vessel.
Title III of the TCCP pertains to Vessels and Aircrafts in Foreign
Trade applies only to vessels engage in foreign trade or cargo ships
but not to cruise ship. 7107 Islands Shipping Corp. v. Department of Finance,
CTA EB 912, April 1, 2014 & Res. Oct. 3, 2014.
108

FORFEITURE OF GOODS IN CUSTOMS IS IN REM

KANNY I tugboat and KANNY II dumblighter were forfeited for illegal
importation. Instances that proved illegal importation:
(1) There was no permit/license from MARINA for the use of the
vessel per RA 9295;
(2) the vessel surreptitiously entered in a seaport not considered
port of entry;
(3) it failed to show certification from BOC of payment of taxes
per Customs Memorandum Order (CMO) No. 25-1007; &
(4) the Tuvalu Ship Registry, Republic of Tuvalu, Polynesia
showed a registration for a single delivery voyage which is
usually for a
sale of a vessel.
Forfeiture of seized goods in the BOC is a proceeding against the
goods and not against the owner. It is in rem proceeding, the property
itself commits the violation and is treated the offender regardless of
the character or conduct of the owner. Cornelio Q. Casido
v. RP, et al., CTA
109
EB 919, Mar. 31, 2014.

REQUIREMENTS FOR CONDITIONALLY FREE

IMPORTATIONS
Petitioners 2007 & 2008 importations of printed plastic
rolls are subject to import duties for failure to comply
with the requirements of conditionally-free importations,
specifically the failure to submit the Affidavit of the
Importer. Importations of containers, holders & other
similar receptacles of any materials are conditionallyfree importations & exempt from import duties upon
compliance with the conditions [Sec. 105(m) of the
TCCP]. Par. I (M) of CAO No. 7-72, as amended by
CAO No. 11-74 Trully Natural Food Corp., represented by its Executive
Vice President/General Manager, Rodolfo C. Sobong v. DOF, CTA EB 1077,
Sept. 8, 2014.
110

continuation

Conditions for free importations & exemptions from import duties:

1.
2.

They are of such character as to be readily identifiable and/or reusable for shipment or transportation of goods;
They should be identified, examined and appraised by the customs
officials concerned, and a certificate of identification shall be issued;

3.

Affidavit of importer stating the value of the container & that it shall
be exclusively used for exportation abroad;

4.

Bond equal to 1 &1/2 times the duties, taxes & other charges,
conditioned for exportation or payment of duties, taxes & other
charges within 6 months, except for kraft paper bags for cement,
from date of acceptance of the import entry
Trully Natural Food Corp., represented by its Executive Vice
President/General Manager, Rodolfo C. Sobong v. DOF, CTA EB 1077, Sept.
8, 2014.
111

continuation

DOF Exemption is not the document

required for conditionally-free importation.
Trully Natural Food Corp., represented by its Executive Vice
President/General Manager, Rodolfo C. Sobong v. DOF, CTA EB 1077, Sept.
8, 2014.

112

SETTLEMENT OF CASE BY PAYMENT OF FINE OR

REDEMPTION OF FORFEITED PROPERTY IS
ALLOWED EXCEPT WHEN THERE IS FRAUD
Since fraud was established, the imported computer parts
were forfeited & petitioners settlement offer amounting to
P1,540,682.30 representing customs duties & penalty was
refused. (Sec. 2307, TCCP) There is prima facie evidence
of fraud as shown by undervaluation of shipment having a
difference of more than 30% between the declared value in
the entry ($41,779.59) and the actual value ($77,360.15).
Considering that petitioner failed to present evidence to
overcome the prima facie evidence of fraud, such prima
facie evidence suffices as proof of fraud penalized by
forfeiture under Sec. 2530 of the TCCP. Hewlett Packard
Philippines Corp. v. COC, CTA 8448, Aug. 12, 2014.

113

SMUGGLING
For Crim Case O-128, accused
Francisco Billones, President of
Rubills
International
Inc.,
was
sentenced to indeterminate penalty of
8 yrs & 1 day to 9 yrs plus fine of
P10,000 for unlawful importation
(violation of Sec. 3601, in relation to
Sec. 101 (k), TCCP; Sugar Order No.
8 & Joint Memorandum Order 42002) of 510,000 kgs of Refined
sugar initially declared as 306,000
kgs of Soya Beans. People v. Francisco
Billones, et al., CTA Crim O-128 & O-129, July 30, 2014.
114

continuation

For Crim Case O-129, accused was sentenced to

indeterminate penalty of 8 yrs & 1 day to 9 yrs plus
fine of P10,000 for various fraudulent practices (Sec.
3602, in relation to Secs. 2503 & 2530, TCCP)
Accused failed to substantiate his allegations of
cessation of business & transfer of its ownership to
Talaue Group. Meanwhile, accused Mary Lucille
Billones was acquitted for failure of prosecution to
prove her guilty beyond reasonable doubt. People v.
Francisco Billones, et al., CTA Crim O-128 & O-129, July 30, 2014.

115

continuation

While she appeared an incorporator in the

articles of incorporation, she does not appear
to be the treasurer of Rubills under both the
articles of incorporation or the General
Information Sheet. DOJ withdrew the
Information against the other accused for lack
of probable cause. People v. Francisco Billones, et al., CTA
Crim O-128 & O-129, July 30, 2014.

116

PAYMENT OF CUSTOMS DUTIES BEFORE PAYMENT

OF THE VALUE OF THE LOST SHIPMENT

For the lost shipment, COC was ordered to pay

Unimex the commercial value of the goods in the
amount of Euro 669,982.565 plus interest, upon
payment of customs duties by Unimex. Payment
by the COC of the value of the shipment was
conditioned upon the payment of the necessary
customs duties by Unimex. Unimex Micro-Electronics GmBH
v. RP, CTA EB 984, Sept. 25, 2014.

117

INSURANCE BROKER - VAT ON

PREMIUMS COLLECTED
Insurance Broker who issued VAT ORs
on premiums collected instead of merely
on commission is subject to VAT on total
premiums. Clients used VAT ORs in
claiming input VAT. Lacson & Lacson Insurance
Brokers, Inc. v. CIR, CTA 8203, Oct. 10, 2014 See Sec. 114 (D)
Consequences of Issuing Erroneous VAT Invoice or VAT Official
Receipts, 1997 NIRC

118

WHEN COMMISSION & PROFESSIONAL FEES

ARE NOT ORDINARY & NECESSARY
The commissions & professional fees were disallowed
as deductions for calendar year 2007 as these are not
ordinary & necessary in the conduct of petitioners
business. There is no reason to employ agents to sell
to a customer which happens to be its affiliate to
whom it sold 97% of its products& which even shares
the same office with petitioner. Also, other than the
vouchers & journal entry, no information was provided
as to which sales these commissions & professional
fees pertain. Composite Materials, Inc. v. CIR, CTA Case 8306, Oct. 10,
2014.

119

-THE END120