UPDATES IN TAX JURISPRUDENCE by Japar B. Dimaampao Associate Justice Court of Appealsal oe, ae UPDATES IN TAX JURISPRUDENCE 1 TAXES ARE NOT SUBJECT TO SET-OFF; EXCEPTIONS cannot be subject to compensation because the government and As a rule, tax: hh other. However, the Supreme Court the taxpayer are not creditors and debtors of ead allowed the offsetting of taxes under the following exceptional cass In Commissioner of Internal Revenue v. Court of Tax Appeals, 234 SCRA 348, the Court allowed offéetting of taxes in'a tax refund cage because there was an exist deficiency income and business tax assessment against the taxpayer The Court said that {ko award such refund despite the existence of that deficiency assessment is an absurdity and polarity in conceptual effects” and that “to grant the refund without determination of the proper assessment and the tax due would inevitably result in multiplicity of proceedings or suits. Commissioner of Internal Revenue, 612 SCRA Similarly, in South Africa Airways v. he correctness of the return filed 665, the Court permitted the offsetting of taxes because t by the taxpayer was put in issue. ioner of Internal ‘D Philippines Technology, Inc. x. Com “ Revenue, 739 SCRA 691, the Court also allowed offsetting because there was a need for fhe court to determine if a taxpayer claiming refund of erroneously paid taxes is mare properly liable for taxes other than that paid. The Court explained that the seepenination of the proper category of tax that should have been paid is not 90 esceement but is an incidental issue that must be resolved in order to determite chether there should be a refund, However, x x x while offsetting may be allowed, the BIR can no longer assess the taxpayer for deficiency taxes in excess ‘of the amount claimed for refund if prescription has already set in. In the recent case of SMI Imall these cases, the Supreme Court allowed offsetting of taxes only becouse the determination of the taxpayer's liability is intertwined with the resolution of the claim for tax refund of erroneously or illegally collected taxes under Section 229 of the NIRC. ICIR v. Toledo Power Company, 775 SCRA 709] 2. AN OFFLINE INTERNATIONAL AIR CARRIER SELLING PASSAGE TICKETS IN THE PHILIPPINES, THROUGH [A GENERAL SALES AGENT, IS A RESIDENT FOREIGN CORPORATION DOING BUSINESS IN THE PHILIPPINES Doing business includes appointing representatives or distributors operating under full control of the foreign corporation, domiciled in the Philippines of who in any thlendar year stay in the country for a period totaling one hundred eighty (180) days or more. 2018Upon this point, an offline carrier, a foreign air carrier not certified by the Civil Aeronautics Board, that maintains office or has designated or appointed agents or employees in the Philippines, through whom, it sells or offers for sale any air transportation, or negotiates for, or holds itself out by solicitation, advertisement, or otherwise sells, provides, furnishes, contracts, or arranges for such transportation, is undoubtedly “doing business” or “engaged in trade or business in the Philippines. As such, it is taxable under Section 28(A)(1), and not Section 28(A)(3) of the 1997 National Internal Revenue Code, subject to any applicable tax treaty to which the Philippines is a signatory. Pursuant to Article 8 of the RP-Canada Tax Treaty, Air Canada may only be imposed a maximum tax of 1% %» of its gross revenues earned from the sale of its tickets in the Philippines. [Air Canada v, CIR, 778 SCRA 131] MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA) IS EXEMPT FROM REAL ESTATE TAX In the 2006 MIAA case, the Supreme Court held that MIAA's airport lands and buildings are exempt from real estate tax imposed by local governments; that it is not a GOCC but an instrumentality of the national government, with its real properties being ‘owned by the Republic of the Philippines, and these are exempt from real estate tax. The Court declared that MCIAA is an instrumentality of the national government. [Mactan- Cebu International Airport Authority (MCIAA) v. City of Lapu-Lapu and Elena T. Pacaldo. 757 SCRA 323] 4, THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) IS AN INSTRUMENTALITY OF THE NATIONAL GOVERNMENT EXEMPT FROM PAYMENT OF REAL PROPERTY TAXES PEZA is an intrumentality of the national government. It is not integrated within the department framework but is an a; attached to the Department of Trade and Industry. It administers its own funds and operates autonomously with the PEZA Board ‘as an instrumentality of the national government. PEZA is vested with special functions or jurisdiction by law. Being an instrument of the national government, the PEZA cannot be taxed by local government units. [City of Lapu-Lapu ¢. Philippine Economic Zone Authority, 742 SCRA 5241 PAGCOR IS STILL EXEMPT FROM CORPORATE INCOME TAX WITH RESPECT TO ITS INCOME FROM GAMING OPERATIONS, Under P.D, 1869, as amended, PAGCOR is subject to income tax only with respect to its operation of related services. Accordingly, the income tax exemption 2018 2