SIGNIFICANT DECISIONS OF THE COURT OF TAX APPEALS

August 2013

Assessments
1. The period to appeal with the CTA from the notice of final decision on disputed
assessment is jurisdictional and failure to comply therewith deprives the CTA of its
jurisdiction to determine the correctness of the assessment.
On October 10, 2011, taxpayer received a copy of the final decision on disputed assessment
(FDDA), which was sent by the BIR through registered mail. On October 19, 2011, taxpayer
received another copy of the FDDA from the BIR sent through personal delivery. On
November 10, 2011, taxpayer filed its petition for review before the CTA.
The Court dismissed the petition. Under Section 228 of the NIRC and Republic Act No. 1125,
taxpayer has 30 days to appeal such FDDA to the CTA. Inasmuch as the taxpayer received
a copy of the FDDA on October 10, 2011, the period within which to elevate the case on
appeal must necessarily commence therefrom. Since the petition was filed only on
November 10, 2011, it was filed out of time. At the time the taxpayer elevated its case before
the CTA, the assessment had already become final, executory and demandable. Taxpayers
failure to comply with the 30-day period to appeal effectively deprived the CTA of jurisdiction
to entertain and determine the correctness of the disputed assessment. (One Hundred
Services, Inc. vs. Commissioner of Internal Revenue, CTA EB No. 941, August 22,
2013)
2.
The imposition of deficiency interest and delinquency interest can be
simultaneous.
There is a difference in the basis of imposition of deficiency interest and delinquency interest.
Deficiency interest in Section 249(B) and delinquency interest in Section 249(C)(3) of the Tax
Code are separate and distinct from each other. As to the imposition, in deficiency interest, it
is imposed on the unpaid tax until the deficiency is fully paid, while in delinquency interest, it
is imposed on the failure to pay (i) the amount of tax due on any return required to be filed,
(ii) the amount of tax due for which no return is required, or (iii) deficiency tax, or any
surcharge or interest thereon on the due date appearing in the notice and demand from the
Commissioner.
As to when the interest legally accrues, in deficiency interest, it is on any deficiency tax
assessed from the date prescribed for payment until the full payment thereof, while
assessment of the delinquency interest is imposed upon failure to pay a deficiency tax, or
any surcharge or interest thereon reckoned from the due date appearing in the notice and
demand of the Commissioner until the amount is fully paid. (Takenaka Corporation
Philippine Branch vs. CIR, CTA EB Case No. 853, August 22, 2013)

3.
A pre-need company that does not indicate the amount intended as
contribution to the trust fund is not entitled to exclude the same in its VATable
receipts.
Taxpayer, a pre-need company, was assessed for deficiency VAT. The assessment was
based on the amount of realized income appearing in its financial statements. Taxpayer
treated its contribution to the trust fund as allowable deduction/exclusion in accordance with
Revenue Memorandum Circular No. 13-96.
Based on RMC 13-96, the contributions to trust funds are generally excluded from gross
income subject to VAT, provided that said contributions are indicated in the VAT official
receipts. Otherwise, the entire amount shall be subject to VAT. The taxpayer did not indicate
in the official receipts it issued the amount of its contribution to the trust fund. Thus, the BIR
is correct in assessing the taxpayer for deficiency VAT for failure to comply with the RMC.
(College Assurance Plan Phils., Inc, vs. Commissioner of Internal Revenue, CTA Case
No. 7190, August 16, 2013)
4.
A defective waiver does not extend the prescriptive period to make an
assessment.
A waiver executed without the notarized written authority from the corporation authorizing the
signatory to sign the waiver in behalf of the corporation is defective. Likewise, the date of
acceptance not clearly indicated in the waiver makes the waiver defective. Also, the waiver is
not properly notarized if the name of the affiant is not specified; there is superimposition on
the date and place of notarization without counter-signature; and the date and place of
issuance of Community Tax Certificate is not indicated. For failure of the waiver to strictly
conform with RMO 20-90 and RDAO 05-01, the period of limitation of the issuance of an
assessment was not extended. (Commissioner of Internal Revenue vs. Belle
Corporation, CTA EB No. 962, August 15, 2013)
5.
The Court does not acquire jurisdiction if there is no decision or inaction yet on
a taxpayers protest.
Taxpayer received on January 27, 2011 Formal Letter of Demand and Assessment Notices
covering deficiency taxes. On February 25, 2011, taxpayer filed its protest arguing in
substance that the assessment has no basis. Through a letter dated April 12, 2011, the
Regional Director informed the taxpayer that its protest has been forwarded to the Revenue
District Office for appropriate action. In a letter dated September 19, 2011, the Revenue
District Officer informed the taxpayer that they are standing pat on their assessment but
issued a revised assessment. On November 16, 2011, taxpayer filed a petition for review
before the CTA. The BIR averred that the taxpayer prematurely invoked the intervention of
the Court.
A decision appealable to the CTA has been interpreted to mean the decision of the
commissioner on the protest of the taxpayer against the assessment. The subject of the
appeal in the instant case is the letter of the Revenue District Officer which is still subject for
review by the Assessment Division of the BIR and subject to the approval of the
Commissioner. The said letter cannot be considered a final decision. Thus, the Court has no
jurisdiction as there is no decision or inaction to speak of. (Brixton Investment Corporation
vs. Commissioner of Internal Revenue, CTA Case No. 8379, August 12, 2013)

6.
Issuance of the formal assessment notice before the lapse given to the
taxpayer to answer the preliminary assessment notice is not a violation of due
process.
On January 06, 2009, taxpayer received a preliminary assessment notice (PAN) assessing it
for deficiency taxes. On January 16, 2009, or ten days after the receipt of the PAN and
before the lapse of the 15-day reglementary period for taxpayer to respond to the PAN,
taxpayer received the final assessment notice (FAN), dated January 14, 2009. Taxpayer
argued that its right to due process was violated when the BIR issued the FAN before the
lapse of the 15-day period to respond to the PAN.
According to the Court, a protest against the PAN, unlike the protest against the FAN, is not
indispensable. A PAN may or may not even be protested by the taxpayer, and the fact of
non-protest shall not in any way make the PAN final and unappealable. Thus, the issuance of
the FAN before the lapse of the 15-day period for the taxpayer to file its protest to the PAN,
inflicts no prejudice on the taxpayer for as long as the latter is properly served a formal
assessment notice and that it was able to intelligently contest the FAN by filing a protest
letter within the period provided by law. (Oakwood Management Services (Philippines),
Inc. vs. Commissioner of Internal Revenue, CTA Case No. 7989, August 08, 2013)
7.
The Court has jurisdiction to rule on the petition when the BIR issues warrant
of distraint and/or levy on erroneous or void determinations.
On May 30, 2007, the taxpayer received a copy of the final assessment notice (FAN) issued
by the BIR, for which it filed its protest on January 07, 2007. On August 28, 2007, taxpayer
received the first collection letter from the BIR. Subsequently, a final notice before seizure
was served on the taxpayer on January 17, 2008. Taxpayer availed of the tax amnesty on
February 29, 2008. On September 08, 2008, the BIR issued a warrant of distraint and/or levy
(WDAL) against the taxpayer. Taxpayer filed a petition for review claiming immunity from the
payment of taxes by virtue of its availment of the tax amnesty and praying for the nullification
of the WDAL issued against it. The BIR claims that the Court has no jurisdiction over the
case considering that it was filed out of time.
The Court ruled that it has jurisdiction. According to the Court, the taxpayer is not assailing
the correctness or the validity of the assessment as contained in the FAN. The finality of the
assessment does not preclude the taxpayer from questioning the validity of the right of the
BIR to exact payment of the alleged tax liabilities by way of the issuance and implementation
of the WDAL. The Court has jurisdiction to rule on the petition when the BIR issues warrant
of distraint and/or levy on erroneous or void determinations. This is based on the fact that the
case is not an appeal on the disputed assessment which is subject to the reglementary
period but it is a case to determine whether the issuance of the WDAL is proper. Further, the
issue to be addressed is not the timeliness of the protest but rather whether the BIR may
validly collect taxes by way of WDAL despite the availment of the amnesty. (Commissioner
of Internal Revenue vs. Transfield Philippines, Inc., CTA EB Case No. 907, August 05,
2013)

Local Taxes
8. Local Finance Circular, being a mere administrative issuance, cannot override
what is explicitly stated in an enacted law.
Taxpayer had been previously paying real property taxes on its load haul and dump (LHD)
mobile mining equipment. However, it stopped paying taxes on said properties after the
issuance of Local Finance Circular No. 2-09 by the Department of Finance. Said circular
declared that mobile equipment such as dump trucks, excavators, bulldozers, payloaders, or
similar equipment used in mining operations are considered personal properties not subject
to real property taxes. Taxpayer was then assessed by the municipality for the unpaid real
property taxes.
Taxpayers LHDs are not only specialized self-propelled or self-powered machines, but are
specially designed to be exclusively used to meet the needs of the taxpayers mining
activities. These are the kind of machines specially acquired, and intentionally and purposely
being used to and from the underground tunnels of the company. These fall under the
definition of the machinery based on Article 415 (5) of the Civil Code and Section 199(o) of
the Local Government Code. The Department of Finance cannot change the classification of
the LHDs or the equipment/machinery in section 199(o) of the Local Government Code from
real to personal property. (Lepanto Consolidated Mining Company vs. vs. Mrieta A.
Bondad, in her capacity as Municiapal Treasurer of the Municipality of Mankayan
Benguet, CTA AC No. 96, August18, 2013)

Others Jurisdiction of the CTA

9. The question on the validity of a ruling issued by the Commissioner and Secretary
of Finance as well as revenue memorandum circular is beyond the jurisdiction of
the CTA.
The taxpayer filed with the Law Division of the BIR a request for VAT ruling to request
confirmation that the services rendered to persons engaged in international air transport
operations, such as those provided by local suppliers to taxpayer for the
accommodation/lodging including meals of its pilots and cabin crews, are subject to 0% VAT
in accordance with Section 108(B)(4) of the 1997 Tax Code. In response, the Commissioner
issued BIR Ruling No. 099-2011 where the Commissioner ruled that sales of services to
petitioner by local suppliers are not zero-rated but subject to 12% VAT, citing as basis
Section 108(B)(4) of the 1997 Tax Code, Section 4.108-5(b)(4) of RR 16-05, answer 11 to
question 11 of RMC 46-08, and VAT Ruling No. 021-01. Taxpayer appealed to the Secretary
of Finance who affirmed the ruling of the Commissioner. The taxpayer then filed a petition to
CTA, questioning the ruling of the Commissioner, the confirmatory letter of the Secretary of
Finance as well as answer to question 11 of RMC 46-08 as being contrary to the provisions
of the law.
The CTA dismissed the petition for lack of jurisdiction. According to the Court, the issue
pertaining to the validity of the ruling issued by the BIR, the letter of the Secretary of Finance
and answer to question 11 of RMC 46-08 is beyond its jurisdiction. (Delta Air Lines, Inc. vs.
Hon. Sec. Cesar V. Purisima, CTA Case No. 8360, August 15, 2013)

Criminal Case
10. Failure to pay deficiency tax cannot be considered wilful as to constitute a
voluntary and intentional infraction of the law if the accused is not aware of the
existence of and the obligation to pay.
As the president of the corporation-taxpayer, accused was charged for violation of Sections
56(b) and 57(A)(B) in relation to Sections 253(d), 255 and 256 of the NIRC, allegedly for
wilfully, unlawfully and feloniously failing and refusing to pay tax despite the receipt of
assessment notice and demand to pay deficiency tax from the BIR. Accused contended that
he is entitled to acquittal based on two grounds, one of which is that the prosecution failed to
prove that the element of wilfulness or deliberate intent to evade the payment of taxes is
present in the case. He argued that the prosecution has not clearly proven that he received
the preliminary assessment notice and/or the final assessment notice issued by the BIR.
With regard to the element of wilfulness, the prosecution was not able to present any
evidence which would prove that the non-payment of the tax was accompanied by the state
of wilfulness.
The elements of the offense under Sections 253(d), 255 and 256 of the Tax Code are as
follows:
1. Accused, being a partner, president, general manager, branch manager, treasurer,
officer-in-charge, and employee, is required to pay tax, make a return, keep any
record, or supply correct and accurate information; and
2. Accused wilfully fails to pay such tax, make such return, keep such record, or supply
such correct and accurate information, or withhold or remit taxes withheld or refund
excess taxes withheld on compensation, at the time required by law or regulations.
With the direct denial of the accused that he received the PAN and the FAN, the burden is
shifted to the prosecution to prove that the mailed letter was received by the accused. The
Court found that while the notices were all signed by the respective recipients thereof, there
was, however, no printed name under or beside the respective signature appearing on the
notices. Thus, there is no way for the Court to determine who actually received the said
documents. The prosecution miserably failed to show the actual receipt of the PAN and FAN
by the accused or by any of the authorized representative of the corporation.
The crime of failure to pay tax under section 255 is defined by the element of wilfulness of
not paying the tax, which in turn requires showing of knowledge and voluntariness.
Accused cannot be expected to pay tax deficiency if he is not aware of the existence of and
the obligation to pay. Thus, the alleged failure to pay the said deficiency tax cannot be
considered wilful as to constitute a voluntary and intentional infraction of the law. (People of
the Philippines vs. Victorio A. Ocampo, CTA Crim. Case No. 0-260, August 05, 2013).