1. CIR v.
Isabela Cultural 361 scra 71 The accrual of income and expense is permitted when the all-events test has been met. This test requires:
DOCTRINE: The requisites for the deductibility of ordinary and necessary trade, business, or professional
expenses, like expenses paid for legal and auditing services, are: (a) the expense must be ordinary and
necessary; (b) it must have been paid or incurred during the taxable year; (c) it must have been paid or
incurred in carrying on the trade or business of the taxpayer; and (d) it must be supported by receipts,
records or other pertinent papers. The requisite that it must have been paid or incurred during the taxable
year is further qualified by Section 45 of the NIRC which states that: "[t]he deduction provided for in this
Title shall be taken for the taxable year in which ‘paid or accrued’ or ‘paid or incurred’, dependent upon
the method of accounting upon the basis of which the net income is computed x x x".
FACTS: Isabela Cultural Corp.(ICC for brevity) , a domestic corporation received from BIR assessment
notice no. FAS-1-86-90000680 (680 for brevity) for deficiency income tax in the amount of PhP
333,196.86 and assessment notice no. FAS-1-86-90-000681 (681 for brevity) for deficiency expanded
withholding tax in the amount of PhP 4,897.79, inclusive of surcharge and interest both for the taxable
year 1986. The deficiency income tax of PhP 333,196 arose from BIR disallowance of ICC claimed
expenses deductions for professional and security services billed to and paid by ICC in 1986.
The deficiency expanded withholding tax of PhP4,897.79 was allegedly due to the failure of ICC to
withhold 1% expanded withholding tax on its claimed PhP244,890 deduction for security services.
Court of Tax Appeal and Court of Appeal affirmed that the professional services were rendered to ICC in
1984 and 1985, the cost of the service was not yet determinable at that time, hence, it could be considered
as deductible expenses only in 1986 when ICC received the billing statement for said service. It further
ruled that ICC did not state its interest income from the promissory notes of Realty Investment and that
ICC properly withheld the remitted taxes on the payment for security services for the taxable year 1986.
Petitioner contend that since ICC is using the accrual method of accounting, the expenses for the
professional services that accrued in 1984 and 9185 should have been declared as deductions from
income during the said years and the failure of ICC to do so bars it from claiming said expenses as
deduction for the taxable year 1986.
ISSUE: WON Isabela who uses accrual method can claim on 1986 only
HELD: No. Case is remanded to the BIR for the computation of Isabela Cultural Corporation’s liability
under Assessment Notice No. FAS-1-86-90-000680.
The requisites for the deductibility of ordinary and necessary trade, business, or professional expenses,
like expenses paid for legal and auditing services, are:
(a) the expense must be ordinary and necessary;
(b) it must have been paid or incurred during the taxable year; - qualified by Section 45 of the National
Internal Revenue Code (NIRC) which states that: "[t]he deduction provided for in this Title shall be taken
for the taxable year in which ‘paid or accrued’ or ‘paid or incurred’, dependent upon the method of
accounting upon the basis of which the net income is computed
(c) it must have been paid or incurred in carrying on the trade or business of the taxpayer; and
(d) it must be supported by receipts, records or other pertinent papers.
Revenue Audit Memorandum Order No. 1-2000, provides that under the accrual method of accounting,
expenses not being claimed as deductions by a taxpayer in the current year when they are incurred
cannot be claimed as deduction from income for the succeeding year. Thus, a taxpayer who is authorized
to deduct certain expenses and other allowable deductions for the current year but failed to do so cannot
deduct the same for the next year.
The accrual method relies upon the taxpayer’s right to receive amounts or its obligation to pay them, in
opposition to actual receipt or payment, which characterizes the cash method of accounting. Amounts of
income accrue where the right to receive them become fixed, where there is created an enforceable
liability. Similarly, liabilities are accrued when fixed and determinable in amount, without regard to
indeterminacy merely of time of payment.
(1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable accurate
determination of such income or liability.
The all-events test requires the right to income or liability be fixed, and the amount of such income or
liability be determined with reasonable accuracy. However, the test does not demand that the amount of
income or liability be known absolutely, only that a taxpayer has at his disposal the information necessary
to compute the amount with reasonable accuracy. The all-events test is satisfied where computation
remains uncertain, if its basis is unchangeable; the test is satisfied where a computation may be unknown,
but is not as much as unknowable, within the taxable year. The amount of liability does not have to be
determined exactly; it must be determined with "reasonable accuracy." Accordingly, the term "reasonable
accuracy" implies something less than an exact or completely accurate amount.
The propriety of an accrual must be judged by the facts that a taxpayer knew, or could reasonably be
expected to have known, at the closing of its books for the taxable year.
Accrual method of accounting presents largely a question of fact; such that the taxpayer bears the burden
of proof of establishing the accrual of an item of income or deduction.
In the instant case, the expenses for professional fees consist of expenses for legal and auditing services.
The expenses for legal services pertain to the 1984 and 1985 legal and retainer fees of the law firm
Bengzon Zarraga Narciso Cudala Pecson Azcuna & Bengson, and for reimbursement of the expenses
of said firm in connection with ICC’s tax problems for the year 1984. As testified by the Treasurer of ICC,
the firm has been its counsel since the 1960’s. - failed to prove the burden
2. CIR vs. Union Shipping Corp
Facts: In a letter dated December 27, 1974 herein petitioner Commissioner of Internal Revenue assessed
against Tee Fong Hong Ltd. and/or herein private respondent Union Shipping Corporation, the total sum
of Php583,155.22 as deficiency income taxes due for the years 1971 and 1972. Said letter was received
on January 4, 1975, and in a letter dated January 10, 1975, received by petitioner on January 13, 1975,
private responded protested the assessment. Petitioner, without ruling on the protest, issued a warrant
of distraint and levy, which was served on private respondent’s counsel, Clemente Celso, on November
25, 1976. In a letter dated November 27, 1976, received by petitioner on November 29, 1976, private
respondent reiterated its request for reinvestigation of the assessment and for the reconsideration of the
summary collection thru the warrant of distraint and levy. Petitioner again, without acting on the request
for reinvestigation and reconsideration of the warrant of distraint and levy, filed a collection suit before
branch XXI of the the CFI of Manila and docketed as civil case no. 120459 against private respondent.
Summons in the said collection case issued to private respondent on December 28, 1978.
Issue: Whether or not issuance of writ of distraint and levy is a proof of finality of an assessment.
Held: Yes. The main thrust of their petition is that the issuance of a warrant distraint and levy is proof of
the finality of an assessment because it is the most drastic action of all media of enforcing the collection
of tax, and is tantamount to an outright denial of a motion for reconsideration of an assessment. Among
others, petitioners contends that the warrant of distraint and levy was issued after respondent corporation
filed a request for reconsideration of subject assessment, thus constituting petitioner’s final decision in
the disputed assessment.
We deem it appropriate to state that the commissioner of internal revenue should always indicate to the
taxpayer is clear and unequivocal language whenever his action on an assessment questioned by a
taxpayer constitute his final determination on the disputed assessment as contemplated by sections 7
and 11 of RA 1125 as amended. On the basis of this statement indubitably showing that the
commissioner’s communicated action is his final decision on the contested assessment, the aggrieved
taxpayer would then be able to take recourse to the tax court at the opportune time. Without needless
difficulty, the taxpayer would be able to determine when his right to appeal to the tax court accrues. This
rule of conduct would also obviate all desire and opportunity on the part of the taxpayer to continually
delay the finality of the assessment — and, consequently, the collection of the amount demanded as
taxes – by repeated request for recomputation and reconsideration. On the part of the commissioner, this
would encourage his office to conduct a careful and thorough study of every questioned assessment and
render a correct and definite decision thereon in the first instance. This would also deter the commissioner
from unfairly making the taxpayer grope in the dark and speculate as to which action continues the
decision appealable to the tax court of greater imports this rule of conduct would must a pressing need
for fair play, regularity, and orderliness in the administrative action.
3. Advertising Associates vs. CA
FACTS: Advertising Associates is being held liable for 3% Contractor’s percentage tax for rental income
from the lease of neon signs and billboards imposed by 1933 tax code on business agents and
independent contractors.
petitioner relies on the Collector's rulings dated September 12, 1960 and June 20, 1967 that it is neither
an independent contractor nor a business agent (Exh. G and H).
As already stated, it considers itself a media company, like a newspaper or a radio broadcasting
company, but not an advertising agency in spite of the purpose stated in its articles of incorporation. It
argues that its act of leasing its neon signs and billboards does not make it a business agent or an
independent contractor. It stresses that it is a mere lessor of neon signs and billboards and does not
perform advertising services.
Section 191 defines an independent contractor as including all persons whose activity consists essentially
of the sale of all kinds of services for a fee. Section 194(v) of the Tax Code defines a business agent as
including persons who conduct advertising agencies.
its business is limited to the making, construction and installation of billboards and electric signs and
making and printing of posters, signs, handbills, etc..It contends that it is a media company, not an
advertising company.
The Commissioner required Advertising Associates to pay P297,927.06 and P84,773.10 as contractor's
tax for 1967-1971 and 1972, respectively, including 25% surcharge (the latter amount includes interest)
on its income from billboards and neon signs.
The basis of the assessment is the fact that the taxpayer's articles of incorporation provide that its primary
purpose is to engage in general advertising business. Its income tax returns indicate that its business
was advertising
 September 13 and November 21, 1974 – requested 2 letters of cancellation
 March 31, 1978 - the Commissioner resorted to the summary remedy of issuing two warrants
of distraint, directing the collection enforcement division to levy on the taxpayer's personal
properties as would be sufficient to satisfy the deficiency taxes
 May 23, 1979 - Acting Commissioner Efren I. Plana wrote a letter in answer to the requests of
the taxpayer for the cancellation of the assessments and the withdrawal of the warrants of
distraint. He justified the assessments by stating that the rental income of Advertising
Associates from billboards and neon signs constituted fees or compensation for its advertising
services.
 June 18, 1979 - Advertising Associates received that letter and Nineteen days later or on July
7, it filed its petition for review. In its resolution of August 28, 1979, the Tax Court enjoined the
enforcement of the warrants of distraint.
 CTA ruling - did not resolve the case on the merits. It ruled that the warrants of distraint were
the Commissioner's appealable decisions. Since Advertising Associates appealed from the
decision of May 23, 1979, the petition for review was filed out of time. It was dismissed. The
taxpayer appealed to this Court.
ISSUES:
1. WON petitioner is liable to pay deficiency tax.
2. WON the Petition was filed out of time
3. WON the right to collect already prescribed.
HELD:
1. the undeniable fact is that neon signs and billboards are primarily designed for advertising. We
hold that the petitioner is a business agent and an independent contractor as contemplated in
sections 191 and 194(v).
However, in view of the prior rulings that the taxpayer is not a business agent nor an independent
contractor and in view of the controversial nature of the deficiency assessments, the 25% surcharge
should be eliminated
2. petition for review was filed on time. The reviewable decision is that contained in Commissioner
Plana's letter of May 23, 1979 and not the warrants of distraint.
3. 1977 Tax Code, Presidential Decree No. 1158, effective on June 3, 1977, provides that the tax
may be collected by distraint or levy or by a judicial proceeding begun "within five years after
the assessment of the tax".
The taxpayer received on June 18, 1973 and March 5, 1974 the deficiency assessments herein. The
warrants of distraint were served upon it on April 18 and May 25, 1978 or within five years after the
assessment of the tax. Obviously, the warrants were issued to interrupt the five-year prescriptive period.
Its enforcement was not implemented because of the pending protests of the taxpayer and its requests
for withdrawal of the warrants which were eventually resolved in Commissioner Plana's letter of May 23,
1979.
It should be noted that the Commissioner did not institute any judicial proceeding to collect the tax. He
relied on the warrants of distraint to interrupt the running of the statute of limitations. He gave the taxpayer
ample opportunity to contest the assessments but at the same time safeguarded the Government's
interest by means of the warrants of distraint.
4. CIR vs. Metro Star Superama Inc 2010
Taxation – Pre-Assessment Notice – Due Process Requirement
FACTS: In January 2001, a revenue officer was authorized to examine the books of accounts of Metro
Star Superama, Inc. In April 2002, after the audit review, the revenue district officer issued a formal
assessment notice against Metro Star advising the latter that it is liable to pay P292,874.16 in deficiency
taxes. Metro Star assailed the issuance of the formal assessment notice as it averred that due process
was not observed when it was not issued a pre-assessment notice. Nevertheless, the Commissioner of
Internal Revenue authorized the issuance of a Warrant of Distraint and/or Levy against the properties of
Metro Star.
Metro Star then appealed to the Court of Tax Appeals (CTA Case No. 7169). The CTA ruled in favor of
Metro Star.
ISSUE: Whether or not due process was observed in the issuance of the formal assessment notice
against Metro Star.
HELD: No. It is true that there is a presumption that the tax assessment was duly issued. However, this
presumption is disregarded if the taxpayer denies ever having received a tax assessment from the Bureau
of Internal Revenue. In such cases, it is incumbent upon the BIR to prove by competent evidence that
such notice was indeed received by the addressee-taxpayer. The onus probandi was shifted to the BIR
to prove by contrary evidence that the Metro Star received the assessment in the due course of mail. In
the case at bar, the CIR merely alleged that Metro Star received the pre-assessment notice in January
2002. The CIR could have simply presented the registry receipt or the certification from the postmaster
that it mailed the pre-assessment notice, but failed. Neither did it offer any explanation on why it failed to
comply with the requirement of service of the pre-assessment notice. The Supreme Court emphasized
that the sending of a pre-assessment notice is part of the due process requirement in the issuance of a
deficiency tax assessment,” the absence of which renders nugatory any assessment made by the tax
authorities.
Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.
But even so, it is a requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure.
 5. Lascona land vs. CIR 2012
FACTS: In March 1998, the Commissioner of Internal Revenue (CIR) issued a formal assessment notice
(FAN) to Lascona Land Co., Inc. (LLCI) demanding the latter to pay P753k in taxes. LLCI filed a timely
protest on April 20, 1998. From said date (since no supporting document was required to be submitted),
the CIR has 180 days to decide on the protest. However, the CIR promulgated its decision on March 3,
1999. LLCI received a copy of the decision on March 12, 1999. On April 12, 1999, LLCI appealed the
decision to the Court of Tax Appeals (CTA). The CIR moved for the dismissal of the appeal on the ground
that under a revenue regulation issued by the Bureau of Internal Revenue (RR No. 12-99), if the CIR or
its representative failed to act on a protest within the 180-day period the taxpayer may appeal within 30
days from the lapse of the 180-day period to the CTA otherwise, the decision shall become final and
executory; that LLCI failed to appeal within the said period hence the CTA has no jurisdiction over the
case appealed by LLCI.
ISSUE: Whether or not the CIR is correct.
HELD: No. The revenue regulation is invalid. Under the law (Section 228 of the National Internal Revenue
Code), a taxpayer has two remedies if the CIR failed to act on his protest within the 180-day period, to
wit;
1) the taxpayer adversely affected by the decision may appeal to the CTA within 30 days from receipt of
the decision, or
2) may appeal to the CTA within 30 days from the lapse of the one hundred eighty (180)-day period.
Interpreting the above provision, the taxpayer has two options in case of inaction by the CIR. First is to
appeal to the CTA within 30 days from the lapse of the 180 day period; or second, wait for the CIR to
issue the decision and then appeal, if adverse, to the CTA within 30 days from the receipt of the decision
by the taxpayer (because even if the CIR failed to decide on the case within the 180 day period, it can
still decide on it and may even issue a favorable judgment to the taxpayer, hence it may be logical to wait
and only appeal if the adverse decision is actually received).
In the case at bar, LLCI chose to wait for the CIR to decide on the case and it did not appeal within 30
days from the lapse of the 180-day period. LLCI received the adverse decision of the CIR on March 12,
1999. It appealed on April 12, 1999 which is still within the 30-day period to appeal to the CTA.
The revenue regulation in question is invalid because in effect, it limited the remedy provided for by the
law. Section 228 of the NIRC prevails over the said revenue regulation. The said revenue regulation
cannot validly take away the option of the taxpayer to continue waiting, even after the lapse of the 180
day period, for the CIR to decide on the case and just appeal, within 30 days from receipt, if the CIR’s
ruling is adverse.
It must however be noted that these two remedies are mutually exclusive.
6. Rohm vs. CIR 2015
FACTS: Petitioner (Rohm Apollo) is a domestic corporation registered with the Securities and Exchange
Commission. It is also registered with the Philippine Economic Zone Authority as an Ecozone Export
Enterprise. Petitioner is in the business of manufacturing semiconductor products, particularly microchip
transistors and tantalium capacitors. Further, it is registered with the Bureau of Internal Revenue (BIR)
as a value-added taxpayer.
Sometime in June 2000, prior to the commencement of its operations on 1 September 2001, Rohm Apollo
engaged the services of Shimizu Philippine Contractors, Inc. (Shimizu) for the construction of a factory.
For services rendered by Shimizu, petitioner made initial payments of P198,551,884.28 on 7 July 2000
and P132,367,923.58 on 3 August 2000.
Petitioner treated the payments as capital goods purchases and thus filed with the BIR an administrative
claim for the refund or credit of accumulated unutilized creditable input taxes on 11 December 2000. As
the close of the taxable quarter when the purchases were made was 30 September 2000, the
administrative claim was filed well within the two-year prescriptive period.
Pursuant to Section 112(D) of the 1997 Tax Code, the Commissioner of Internal Revenue (CIR) had a
period of 120 days from the filing of the application for a refund or credit on 11 December 2000, or until
10 April 2001, to act on the claim. The waiting period, however, lapsed without any action by the CIR on
the claim.
Instead of filing a judicial claim within 30 days from the lapse of the 120-day period on 10 April, or until
10 May 2001, Rohm Apollo filed a Petition for Review with the CTA docketed as CTA Case No. 6534 on
11 September 2002. It was under the belief that a judicial claim had to be filed within the two-year
prescriptive period ending on 30 September 2002.
On 27 May 2004, the CTA First Division rendered a Decision denying the judicial claim for a refund or tax
credit. The CTA First Division held, among others, that petitioner must have at least submitted its VAT
return for the third quarter of 2001, since it was in that period that it began its business operations. The
purpose was to verify if indeed petitioner did not carry over the claimed input VAT to the third quarter or
the succeeding quarters.
On 14 July 2004, petitioner filed a Motion for Reconsideration, but the tax court stood by its Decision. On
18 January 2005, the taxpayer elevated the case to the CTA En Banc via a Petition for Review. On 22
June 2005, the CTA En Banc rendered its Decision denying Rohm Apollo’s Petition for Review. Petitioner
filed this Rule 45 Petition, arguing that it has satisfied all the legal requirements for a valid claim for refund
or tax credit of unutilized input VAT.
ISSUE: WON the CTA acquired jurisdiction over the claim for the refund or tax credit of unutilized input
VAT?
RULING: The court denied the Petition on the ground that the petitioner’s judicial claim for a refund/tax
credit was filed beyond the prescriptive period.
Section 112(D) of the 1997 Tax Code states the time requirements for filing a judicial claim for the refund
or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves
as a waiting period to give time for the CIR to act on the administrative claim for a refund or credit; and
the period of 30 days, which refers to the period for filing a judicial claim with the CTA. It is the 30-day
period that is at issue in this case.
The landmark case of Commissioner of Internal Revenue v. San Roque Power Corporation has
interpreted Section 112 (D). The Court held that the taxpayer can file an appeal in one of two ways: (1)
file the judicial claim within 30 days after the Commissioner denies the claim within the 120-day
waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period
if the Commissioner does not act within that period.
On 11 December 2000, petitioner filed with the BIR an application for the refund or credit of accumulated
unutilized creditable input taxes. Thus, the CIR had a period of 120 days from 11 December 2000, or until
10 April 2001, to act on the claim. It failed to do so, however. Rohm Apollo should then have treated the
CIR’s inaction as a denial of its claim. Petitioner would then have had 30 days, or until 10 May 2001, to
file a judicial claim with the CTA. But Rohm Apollo filed a Petition for Review with the CTA only on 11
September 2002. The judicial claim was thus filed late.
Justice Carpio stated: “The old rule that the taxpayer may file the judicial claim, without waiting for the
Commissioner's decision if the two-year prescriptive period is about to expire, cannot apply because that
rule was adopted before the enactment of the 30-day period. The 30-day period was adopted precisely
to do away with the old rule, so that under the VAT System the taxpayer will always have 30 days to file
the judicial claim even if the Commissioner acts only on the 120th day, or does not act at all during the
120-day period. With the 30-day period always available to the taxpayer, the taxpayer can no longer file
a judicial claim for refund or credit of input VAT without waiting for the Commissioner to decide until the
expiration of the 120-day period. The 30-day period to appeal is mandatory and jurisdictional.”
As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. The only exception
to the general rule is when BIR Ruling No. DA-489-03 was still in force, that is, between 10 December
2003 and 5 October 2010, The BIR Ruling excused premature filing, declaring that the taxpayer-claimant
need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way
of Petition for Review.
Premature filing is allowed for cases falling during the time when BIR Ruling No. DA-489-03 was in force;
nevertheless, late filing is absolutely prohibited even for cases falling within that period. The petitioner
filed its judicial claim with the CTA on 11 September 2002. This was before the issuance of BIR Ruling
No. DA-489-03 on 10 December 2003. Thus, Rohm Apollo could not have benefited from the BIR Ruling.
Besides, its situation was not a case of premature filing of its judicial claim but one of late filing. To repeat,
its judicial claim was filed on 11 September 2002 – long after 10 May 2001, the last day of the 30-day
period for appeal. The case thus falls under the general rule – the 30-day period is mandatory and
jurisdictional.
Hence, the CTA lost jurisdiction over Rohm Apollo’s claim for a refund or credit
7. RCBC vs. CIR 2011
FACTS: RCBC received the final assessment notice on July 5, 2001. It filed a protest on July 20, 2001.
As the protest was not acted upon, it filed a Petition for Review with the Court of Tax Appeals (CTA) on
April 30, 2002, or more than 30 days after the lapse of the 180-day period reckoned from the submission
of complete documents. The CTA dismissed the Petition for lack of jurisdiction since the appeal was filed
out of time.
ISSUE: Has the action to protest the assessment judicially prescribed?
HELD: YES. The assessment has become final. The jurisdiction of the CTA has been expanded to include
not only decision but also inactions and both are jurisdictional such that failure to observe either is fatal.
However, if there has been inaction, the taxpayer can choose between (1) file a Petition with the CTA
within 30 days from the lapse of the 180-day period OR (2) await the final decision of the CIR and appeal
such decision to the CTA within 30 days after receipt of the decision. These options are mutually exclusive
and resort to one bars the application of the other. Thus, if petitioner belatedly filed an action based on
inaction, it cannot subsequently file another petition once the decision comes out.
--------------------------------
Facts: Petitioner RCBC is a general banking corporation and it filed its annual corporate ITRs for the
Foreign Currency Deposit Unit (FCDU) for the taxable years 1994 and 1995.
On Aug. 15, 1996, RCBC received a Letter of Authority (LoA) issued by respondent CIR authorizing a
special audit team to examine the former’s books of accounts, records, and other documents for internal
revenue taxes from Jan. 1, 1994 – Dec. 31, 1995.
On Jan. 23, 1997, RCBC executed 2 waivers of defense of prescription under the Statute of Limitations
covering the taxable years 1994 and 1995, thus, extending the period for the BIR to assess up to Dec.
31, 2000.
On Jan. 27, 2000, RCBC received a FLD with assessment notices showing the deficiency tax totaling
Php4.1 billion.
On Feb. 24, 2000, RCBC filed its protest together with relevant documentary evidence.
On Dec. 6, 2000, RCBC got another FLD with a FAN which was dated Oct. 20, 2000 which was by reason
of the requested reinvestigation reducing the deficiency tax to only Php303 million.
RCBC then paid but only Php15.4. It refused to pay the deficiency onshore tax and documentary stamp
tax (DST) totaling Php287 million. RCBC also argued that the Jan. 23, 1997 waiver it made was not valid
on the ground that it was not signed by the CIR as required by sec. 222(b) of the NIRC.
On the onshore issue, RCBC stated as defense that it was a borrower and a constituted as the withholding
agent that was primarily liable for remittance of said tax.
CTA partially grants. But ordered RCBC to pay Php171.8 million for the onshore tax. Also, it cannot assail
the validity of the waivers after it had paid the reduced amount of taxes.
On July 22, 2009, while on appeal to the Supreme Court, RCBC manifested that this case is now moot
and academic as it already paid the DST on Special Savings Account for the taxable years 1994 and
1995 after BIR approved the tax abatement.
Issue: WON petitioner is estopped from assailing the validity of the waivers
Held: YES. Article 1431 of the New Civil Code gives basis to the doctrine of estoppel. It states that an
admission or representation is rendered conclusive upon the person making it, and cannot be denied or
disproved as against the person relying thereon. A party is precluded from denying his own acts,
admissions or representations to the prejudice of the other party in order to prevent fraud and falsehood.
Such doctrine is applicable here as RCBC, through its partial payment of the revised assessments issued
within the extended period impliedly admitted the validity of the waivers.
As evidence, RCBC even immediately paid the said deficiency tax upon receipt of the revised
assessments on Dec. 6, 2000. Thus, RCBC is already estopped. Had RCBC truly believed that the
waivers were invalid and that the assessments were issued beyond the prescriptive period, then it
shouldn’t have paid the reduced amount in the assessment.
8. CIR vs. Hambrecht 2010
FACTS: The assessment against Hambrecht & Quist had become final and unappelable since there was
a failure to protest the same within the 30-day period provided by law. However, the CTA held that the
BIR failed to collect within the prescribed time and thus ordered the cancellation of the assessment notice.
The CIR disputed the jurisdiction of the CTA arguing that since the assessment had become final and
unappealable, the taxpayer can no longer dispute the correctness of the assessment even before the
CTA.
ISSUE: Can the CTA still take cognizance of an assessment case which has become ‘final and
unappealable for failure of the taxpayer to protest within the 30-day protest period?
HELD: YES. The appellate jurisdiction of the CTA is not limited to cases which involve decisions of the
CIR on matters relating to assessments or refunds. The CTA law clearly bestows jurisdiction to the CTA
even on “other matters arising under the National Internal Revenue Code”. Thus, the issue of whether
the right of the CIR to collect has prescribed, collection being one of the duties of the BIR, is considered
covered by the term “other matters”. The fact that assessment has become final for failure to protest only
means that the validity or correctness of the assessment may no longer be questioned on appeal.
However, this issue is entirely distinct from the issue of whether the right to collect has in fact prescribed.
The Court ruled that the right to collect has indeed prescribed since there was no proof that the request
for reinvestigation was in fact granted/acted upon by the CIR. Thus, the period to collect was never
suspended.
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FACTS: Respondent informed the Bureau of Internal Revenue (BIR), through its West-Makati District
Office of its change of business address from the 2nd Floor Corinthian Plaza, Paseo de Roxas, Makati
City to the 22nd Floor PCIB Tower II, Makati Avenue corner H.V. De la Costa Streets, Makati City. Said
letter was duly received by the BIR-West Makati on February 18, 1993.
Respondent received a tracer letter or follow-up letter issued by the Accounts Receivable/Billing Division
of the BIR’s National demanding for payment of alleged deficiency income and expanded
withholding taxes for the taxable year 1989 amounting to P2,936,560.87.
Respondent, through its external auditors, filed with the same Accounts Receivable/Billing Division
of the BIR’s National Office, its protest letter against the alleged deficiency tax assessments for 1989
as indicated in the said tracer letter dated October 11, 1993.
The alleged deficiency income tax assessment apparently resulted from an adjustment made to
respondent’s taxable income for the year 1989, on account of the disallowance of certain items of
expense, namely, professional fees paid, donations, repairs and maintenance, salaries and wages, and
management fees. The latter item of expense, the management fees, made up the bulk of the
disallowance, the examiner alleging, among others, that petitioner failed to withhold the appropriate tax
thereon. This is also the same basis for the imposition of the deficiency withholding tax assessment on
the management fees. Revenue Regulations No. 6-85 (EWT Regulations) does not impose or prescribe
EWT on management fees paid to a non-resident.
On November 7, 2001, nearly eight (8) years later, respondent’s external auditors received a letter
from herein petitioner Commissioner of Internal Revenue. The letter advised the respondent that
petitioner had rendered a final decision denying its protest on the ground that the protest against
the disputed tax assessment was allegedly filed beyond the 30-day reglementary period
prescribed in then Section 229 of the National Internal Revenue Code.
CTA: held that the subject assessment notice sent by registered mail on January 8, 1993 to
respondent’s former place of business was valid and binding since respondent only gave formal
notice of its change of address on February 18, 1993. Thus, the assessment had become final and
unappealable for failure of respondent to file a protest within the 30-day period provided by law.
However, the CTA (a) held that the CIR failed to collect the assessed taxes within the prescriptive period;
and (b) directed the cancellation and withdrawal of Assessment Notice No. 001543-89-5668.
Undaunted, the CIR filed a Petition for Review with the CTA En Banc
CTA En Banc: Petition DISMISSED
HELD: petition DENIED
1. Anent the first issue, petitioner argues that the CTA had no jurisdiction over the case since the
CTA itself had ruled that the assessment had become final and unappealable. The CIR argued
that, after the lapse of the 30-day period to protest, respondent may no longer dispute the
correctness of the assessment and its appeal to the CTA should be dismissed. The CIR took issue
with the CTA’s pronouncement that it had jurisdiction to decide "other matters" related to the tax
assessment such as the issue on the right to collect the same since the CIR maintains that when the law
says that the CTA has jurisdiction over "other matters," it presupposes that the tax assessment has not
become final and unappealable.
Section 7. Jurisdiction. - The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review
by appeal, as herein provided –
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters
arising under the National Internal Revenue Code or other law as part of law administered by the
Bureau of Internal Revenue. (Emphasis supplied.)
Plainly, the assailed CTA En Banc Decision was correct in declaring that there was nothing in the
foregoing provision upon which petitioner’s theory with regard to the parameters of the term
"other matters" can be supported or even deduced. What is rather clearly apparent, however, is
that the term "other matters" is limited only by the qualifying phrase that follows it.
Thus, on the strength of such observation, we have previously ruled that the appellate jurisdiction
of the CTA is not limited to cases which involve decisions of the CIR on matters relating to
assessments or refunds. The second part of the provision covers other cases that arise out of the
National Internal Revenue Code (NIRC) or related laws administered by the Bureau of Internal
Revenue (BIR).
In the case at bar, the issue at hand is whether or not the BIR’s right to collect taxes had already
prescribed and that is a subject matter falling under Section 223(c) of the 1986 NIRC, the law applicable
at the time the disputed assessment was made. To quote Section 223(c):
Any internal revenue tax which has been assessed within the period of limitation above-prescribed may
be collected by distraint or levy or by a proceeding in court within three years following the
assessment of the tax. (Emphases supplied.)
In connection therewith, Section 3 of the 1986 NIRC states that the collection of taxes is one of the duties
of the BIR, to wit:
Sec. 3. Powers and duties of Bureau. - The powers and duties of the Bureau of Internal Revenue shall
comprehend the assessment and collection of all national internal revenue taxes, fees, and
charges and the enforcement of all forfeitures, penalties, and fines connected therewith including the
execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary
courts. Said Bureau shall also give effect to and administer the supervisory and police power conferred
to it by this Code or other laws. (Emphasis supplied.)
Thus, from the foregoing, the issue of prescription of the BIR’s right to collect taxes may be
considered as covered by the term "other matters" over which the CTA has appellate jurisdiction.
Furthermore, the phraseology of Section 7, number (1), denotes an intent to view the CTA’s jurisdiction
over disputed assessments and over "other matters" arising under the NIRC or other laws administered
by the BIR as separate and independent of each other. This runs counter to petitioner’s theory that the
latter is qualified by the status of the former, i.e., an "other matter" must not be a final and unappealable
tax assessment or, alternatively, must be a disputed assessment.
Likewise, the first paragraph of Section 11 of Republic Act No. 1125,
as amended by Republic Act No. 9282,8 belies petitioner’s assertion as the provision is explicit that, for
as long as a party is adversely affected by any decision, ruling or inaction of petitioner, said party may
file an appeal with the CTA within 30 days from receipt of such decision or ruling. The wording of the
provision does not take into account the CIR’s restrictive interpretation as it clearly provides that the mere
existence of an adverse decision, ruling or inaction along with the timely filing of an appeal operates to
validate the exercise of jurisdiction by the CTA.
To be sure, the fact that an assessment has become final for failure of the taxpayer to file a protest within
the time allowed only means that the validity or correctness of the assessment may no longer be
questioned on appeal. However, the validity of the assessment itself is a separate and distinct issue from
the issue of whether the right of the CIR to collect the validly assessed tax has prescribed. This issue of
prescription, being a matter provided for by the NIRC, is well within the jurisdiction of the CTA to decide.
2. With respect to the second issue, the CIR insists that its right to collect the tax deficiency it
assessed on respondent is not barred by prescription since the prescriptive period thereof was
allegedly suspended by respondent’s request for reinvestigation.
Based on the facts of this case, we find that the CIR’s contention is without basis.1avvphi1 The
pertinent provision of the 1986 NIRC is Section 224, to wit:
Section 224. Suspension of running of statute. – The running of the statute of limitations provided in
Sections 203 and 223 on the making of assessment and the beginning of distraint or levy or a proceeding
in court for collection, in respect of any deficiency, shall be suspended for the period during which the
Commissioner is prohibited from making the assessment or beginning distraint or levy or a proceeding in
court and for sixty days thereafter; when the taxpayer requests for a re-investigation which is
granted by the Commissioner; when the taxpayer cannot be located in the address given by him in the
return filed upon which a tax is being assessed or collected: Provided, That, if the taxpayer informs the
Commissioner of any change in address, the statute will not be suspended; when the warrant of distraint
and levy is duly served upon the taxpayer, his authorized representative, or a member of his household
with sufficient discretion, and no property could be located; and when the taxpayer is out of the
Philippines.
The plain and unambiguous wording of the said provision dictates that two requisites must
concur before the period to enforce collection may be suspended: (a) that the taxpayer requests
for reinvestigation, and (b) that petitioner grants such request.

On this point, we have previously held that:
The above section is plainly worded. In order to suspend the running of the prescriptive periods for
assessment and collection, the request for reinvestigation must be granted by the CIR.9 (Emphasis
supplied.)
Consequently, the mere filing of a protest letter which is not granted does not operate to suspend the
running of the period to collect taxes. In the case at bar, the records show that respondent filed a request
for reinvestigation on December 3, 1993, however, there is no indication that petitioner acted upon
respondent’s protest. As the CTA Original Division in C.T.A. Case No. 6362 succinctly pointed out in its
Decision, to wit:
It is evident that the respondent did not conduct a reinvestigation, the protest having been
dismissed on the ground that the assessment has become final and executory. There is nothing in
the record that would show what action was taken in connection with the protest of the petitioner. In fact,
petitioner did not hear anything from the respondent nor received any communication from the respondent
relative to its protest, not until eight years later when the final decision of the Commissioner was issued
(TSN, March 7, 2002, p. 24). In other words, the request for reinvestigation was not granted.
9. CIR vs. Next Mobile 2015
FACTS: Respondent filed with the BIR taxes for 2001. Respondent, through Sarmiento, their director of
Finance, executed several waivers of the statute of limitations to extend the prescriptive perios of
assessment for taxes.
On 2005, respondent received from the BIR a PAN and a formal letter of demand to pay deficiency income
tax. The BIR denied respondent's protest.
With the CTA, it was held that the demand was beyond the three year prescription period under the NIRC.
That the case does not apply the 10 year prescripton period as there was not false return by the
respondent. Also, the waivers did not validly extend the prescription because of irregularities.
ISSUE: Whether the period to pay has prescribed.
RULING: NO. The SC held that a waiver of the statute of limitations must faithfully comply with RMO No.
20-90 and RDAO 05-01 in order to be valid. Sarmiento failed to show her authority to the BIR to sign the
waivers.
The BIR were also at fault having to neglect their ministerial duties.
Both parties knew the infirmities of the waivers but still continued. Respondents were held in bad faith as
after having benefited by the waivers by giving them more time to pay, they used the waivers they made
themselves when the consequences were not in their favor.
The BIR's negligence amounts to malic e and bad faith as they also knew the waivers did not conform
with RMO 20-90 and RDAO 05-01.
As both parties are in bad faith, the SC granted the petition on the issue of the nullification of the formal
letter of demand to the CTA.
----------------------------------------------------
FACTS:
On April 15, 2002, respondent filed with the Bureau of Internal Revenue (BIR) its Annual Income Tax
Return (ITR) for taxable year ending December 31, 2001. Respondent also filed its Monthly Remittance
Returns of Final Income Taxes Withheld (BIR Form No. 1601-F), its Monthly Remittance Returns of
Expanded Withholding Tax (BIR Form No. 1501-E) and its Monthly Remittance Return of Income Taxes
Withheld on Compensation (BIR Form No. 1601-C) for year ending December 31, 2001. On September
25, 2003, respondent received a copy of the Letter of Authority dated September 8, 2003 signed by
Regional Director Nestor S. Valeroso authorizing Revenue Officer Nenita L. Crespo of Revenue District
Office 43 to examine respondent's books of accounts and other accounting records for income and
withholding taxes for the period covering January 1, 2001 to December 31, 2001.
Ma. Lida Sarmiento (Sarmiento), respondent’s Director of Finance, subsequently executed several
waivers of the statute of limitations to extend the prescriptive period of assessment for taxes due in
taxable year ending December 31, 2001. On September 26, 2005, respondent received from the BIR a
Preliminary Assessment Notice dated September 16, 2005 to which it filed a Reply. On October 25, 2005,
respondent received a Formal Letter of Demand (FLD) and Assessment Notices/Demand No. 43-734
both dated October 17, 2005 from the BIR, demanding payment of deficiency income tax, final withholding
tax (FWT), expanded withholding tax (EWT), increments for late remittance of taxes withheld, and
compromise penalty for failure to file returns/late filing/late remittance of taxes withheld, in the total
amount of ₱313,339,610.42 for the taxable year ending December 31, 2001. On November 23, 2005,
respondent filed its protest against the FLD and requested the reinvestigation of the assessments. On
July 28, 2009, respondent received a letter from the BIR denying its protest. Thus, on August 27, 2009,
respondent filed a Petition for Review before the CTA docketed as CTA Case No. 7965. With the CTA, it
was held that the demand was beyond the three year prescription period under the NIRC. That the case
does not apply the 10 year prescription period as there was not false return by the respondent. Also, the
waivers did not validly extend the prescription because of irregularities.
ISSUE: Whether or not the period to pay has prescribed.
RULING: NO. The SC held that a waiver of the statute of limitations must faithfully comply with RMO No.
20-90 and RDAO 05-01 in order to be valid. Sarmiento failed to show her authority to the BIR to sign the
waivers. The BIR were also at fault having to neglect their ministerial duties. Both parties knew the
infirmities of the waivers but still continued. Respondents were held in bad faith as after having benefited
by the waivers by giving them more time to pay, they used the waivers they made themselves when the
consequences were not in their favor. The BIR's negligence amounts to malice and bad faith as they also
knew the waivers did not conform with RMO 20-90 and RDAO 05-01. As both parties are in bad faith, the
SC granted the petition on the issue of the nullification of the formal letter of demand to the CTA. The
Supreme Court held that a taxpayer who is in bad faith cannot impugn the validity of the waiver.
While the Supreme Court reiterated that a waiver must strictly comply with the requirements prescribed
by the regulations, it qualified and held that a taxpayer cannot impugn the validity of the waiver on the
basis of the defects he himself has caused after benefiting from it, as he will be deemed estopped by his
bad faith.
Despite the waiver’s non-compliance with the requirements in the regulations, the Supreme Court ruled
in favor of the BIR and treated the waiver as valid and binding upon the taxpayer since the defect was
attributable to the latter’s deliberate acts.
There is no hard-and-fast rule on the issuance of waivers, which is why taxpayers need to take all factors
into consideration. While executing a waiver may allow more time for a taxpayer to gather and submit
relevant documents before an assessment is finalized, it also prolongs the tax audit taking a toll on the
taxpayer’s time and resources, not to mention the continuous running of the interest penalty should the
assessment be found valid.
With the issuance of RMO 14-2016 and the pronouncement of the Supreme Court in the Next Mobile
case, it appears that tax assessments can no longer be won simply based on technicalities by attacking
the validity of waivers. Taxpayers should make it a point to focus not just on procedural or technical issues
but more on the merits or the strength of its substantive factual and legal bases against a tax assessment
of the BIR.
The Court of Tax Appeals (CTA), however, has differing views. In the most recent case of Next Mobile,
Inc. vs. Commissioner of Internal Revenue, the CTA, applying the Aznar ruling, interpreted that any
deviation from the truth, even a 5% under-declaration of the reported gross revenues, already constitutes
a false return and warrants the application of the 10-year prescriptive period to assess