COMMISSIONER OF INTERNAL REVENUE vs.

AICHI FORGING
COMPANY OF ASIA, INC.- Tax Refund

FACTS:

On September 30, 2004, Aichi Forging filed a claim for refund/credit of input VAT
attributable to its zero-rated sales for the period July 1, 2002 to September 30, 2002
with the CIR through the DOF One-Stop Shop. On the same day, Aichi Forging filed a
Petition for Review with the CTA for the same action. The BIR disputed the claim and
alleged that the same was filed beyond the two-year period given that 2004 was a leap
year and thus the claim should have been filed on September 29, 2004. The CIR also
raised issues related to the reckoning of the 2-year period and the simultaneous filing of
the administrative and judicial claims.

ISSUES:

(1) Was the Petitioner’s administrative claim filed out of time?

(2) Was the filing of the judicial claim premature?

HELD:

(1) NO. The right to claim the refund must be reckoned from the “close of the taxable
quarter when the sales were made” – in this case September 30, 2004. The Court
added that the rules under Sections 204 (C) and 229 as cross-referred to Section 114
do not apply as they only cover erroneous payments or illegal collections of taxes which
is not the case for refund of unutilized input VAT. Thus, the claim was filed on time even
if 2004 was a leap year since the sanctioned method of counting is the number of
months.

(2) YES. Section 112 mandates that the taxpayer filing the refund must either wait for
the decision of the CIR or the lapse of the 120-day period provided therein before filing
its judicial claim. Failure to observe this rule is fatal to a claim. Thus, Section 112 (A)
was interpreted to refer only to claims filed with the CIR and not appeals to the CTA
given that the word used is “application”. Finally, the Court said that applying the 2-year
period even to judicial claims would render nugatory Section 112 (D) which already
provides for a specific period to appeal to the CTA --- i.e., (a) within 30 days after a
decision within the 120-day period and (b) upon expiry of the 120-day without a
decision.

TAGANITO MINING CORPORATION VS. COMMISSIONER

CTA Case No. 4702 April 28, 1995

FACTS
Taganito Mining Corporation (TMC) is a domestic corporation expressly
granted a
permit by the government via an operating contract to explore, develop
and utilize
mineral deposits found in a specified portion of a mineral reservation
area located in
Surigao del Norte and owned by the government. In exchange, TMC is
obliged to pay
royalty to the government over and above other taxes. During July to
December 1989,
TMC removed, shipped and sold substantial quantities of Beneficiated
Nickel Silicate
ore and chromite ore and paid excise taxes in the amount of
Php6,277,993.65 in
compliance with Sec.151(3) of the Tax Code. The 5% excise tax was
based on the
amount and weight shown in the provisional invoice issued by TMC.
The metallic
minerals are then shipped abroad to Japanese buyers where the
minerals were
analyzed allegedly by independent surveyors upon unloading at its port
of destination.
Analysis abroad would oftentimes reveal a different value for the
metallic minerals from
that indicated in the temporary/provisional invoice submitted by TMC.
Variance is in the
“market values” in the
provisional invoice and that indicated in the final calculation sheet
presented by the buyers. Variances occur in the weight of the shipment
or the price of
the metallic minerals per kilogram and sometimes in their metallic
content resulting in
discrepancies in the total selling price. It is always the price indicated
in the final invoice
that is determinative of the amount that the buyers will eventually pay
TMC. TMC had
no quarrel with the price they would receive from the clients for the
metallic minerals
sold, but claims that there has been overpayment of excise taxes
already paid to the
government declaring that the 5% excise tax were based on the
amount indicated in the
provisional invoice, and if the excise tax would be based on the final
invoice, they would
be paying less.
TMC’s contention:

TMC is entitled to a refund because the actual market value that

should be made the basis of the taxes is the amount specified in the
independent
surveyor abroad
Commissioner defense:

(1) claim for refund is subject pending administrative

investigation; (2) tax was collected in accordance with law; (3) burden
of proof is upon
the taxpayer to establish the right to refund;(4) mere allegations of
refundability do not
ipso facto merit refund claimed; (5) claims for refund of taxes are
construed strictly
against claimant, it being in the nature of an exemption
; (6) TMC’s right to claim for

refund is already barred after failing to file it within the 2 year

prescriptive period, which
should be counted from the time specified by law for payment and not
on the date of
actual payment.

ISSUE:
1. WON TMC is entitled to refund
2. WON the actual market value that should be used should be the
market value after
the assessment abroad was conducted

HELD:
1. NO. Tax refund partake of the nature of an exemption, and as such,
tax exemption
cannot be allowed unless granted in the most explicit and categorical
language. Taxes
are what we pay for civilized society. Without taxes, the government
would be paralyzed
for lack of the motive power to activate and operate it.
2. NO. use market value right after removal from the bed or mines. Sec.
151(3) of the
Tax Code1: on all metallic minerals, a tax of five percent (5%) based on
the actual
market value of the gross output thereof
at the time of removal
, in the case of those
locally extracted or produced: or the value used by the Bureau of
Customs in
determining tariff and customs duties, net of excise tax and value-
added tax, in case of
importation. The law refers to the actual market value of the minerals
at the time these
minerals were moved away from the position it occupied, i.e. Philippine
valuation and
analysis because it is in this country where these minerals were
extracted, removed and
eventually shipped abroad. To reckon the actual market value at the
time of removal is
also consistent with the essence of an excise tax. It is a charge upon
the privilege of
severing or extracting minerals from the earth, and is due and payable
upon removal of
the mineral products from its bed or mines (Republic Cement vs.
Comm, 23 SCRA
967). The law is clear. It does not speak of actual market value at the
time the mineral
products are unloaded at the country of destination neither does it
speak of the selling
price as the basis of the excise tax. The law even requires payment of
excise taxes
upon the removal of the mineral product or quarry resources from the
locality where
mined or upon removal from customs custody in the case of
importations (Sec. 151 © of
the Tax Code). It would then necessitate an analysis of these metallic
minerals upon its
removal to be able to accomplish the payment of excise taxes as
required by law.
Furthermore, it would be impossible for one to comply with the date
prescribed by law
for payment of excise taxes if one has to wait for the final analysis to
be done in the
country where it is to be shipped and certainly impractical. This set-up
established by
the petitioner is contrary to the principle of administrative feasibility
which is one of the
basic principles of a sound tax system. Tax laws should be capable of
convenient, just
and effective administration which is why it fixes a standard or a
uniform tax base upon
which taxes should be paid. In the case of excise taxes on mineral and
mineral
products, the basis provided by law is the actual market value of these
minerals at the
time of removal.

PASCUAL v. Commissioner of InternalRevenue #10 BUSORG

G.R. No. 78133 October 18, 1988

GANCAYCO, J.:

FACTS:
On June 22, 1965, petitioners bought two (2)parcels of land from Santiago
Bernardino, et al.and on May 28, 1966, they bought anotherthree (3)
parcels of land from Juan Roque. Thefirst two parcels of land were sold by
petitionersin 1968 to Marenir Development Corporation,while the three
parcels of land were sold bypetitioners to Erlinda Reyes and Maria Samsonon
March 19,1970. Petitioner realized a netprofit in the sale made in 1968 in
the amount of P165, 224.70, while they realized a net profit of P60,000 in
the sale made in 1970. Thecorresponding capital gains taxes were paid
bypetitioners in 1973 and 1974 .Respondent Commissioner informed
petitionersthat in the years 1968 and 1970, petitioners asco-owners in the
real estate transactions formedan unregistered partnership or joint
venturetaxable as a corporation under Section 20(b)and its income was
subject to the taxesprescribed under Section 24, both of theNational Internal
Revenue Code; that theunregistered partnership was subject tocorporate
income tax as distinguished fromprofits derived from the partnership by
themwhich is subject to individual income tax.
ISSUE:
Whether petitioners formed an unregisteredpartnership subject to corporate
income tax(partnership vs. co-ownership)
RULING:
Article 1769 of the new Civil Code lays down therule for determining when
a transaction shouldbe deemed a partnership or a co-ownership.Said article
paragraphs 2 and 3, provides:(2) Co-ownership or co-possession does not
itself establish a partnership, whether such co-ownersor co-possessors do or
do not share any profitsmade by the use of the property; (3) Thesharing of
gross returns does not of itself establish a partnership, whether or not
thepersons sharing them have a joint or commonright or interest in any
property from which thereturns are derived;The sharing of returns does not
in itself establish a partnership whether or not thepersons sharing therein
have a joint or commonright or interest in the property. There must bea
clear intent to form a partnership, theexistence of a juridical personality
different fromthe individual partners, and the freedom of eachparty to
transfer or assign the whole property.In the present case, there is clear
evidence of co-ownership between the petitioners. There isno adequate basis
to support the propositionthat they thereby formed an
unregisteredpartnership. The two isolated transactionswhereby they
purchased properties and sold thesame a few years thereafter did not
therebymake them partners. They shared in the grossprofits as co- owners
and paid their capital gainstaxes on their net profits and availed of the
taxamnesty thereby. Under the circumstances, theycannot be considered to
have formed anunregistered partnership which is thereby liablefor corporate
income tax, as the respondentcommissioner
proposes. And even assuming for the sake of argumentthat such
unregistered partnership appears tohave been formed, since there is no
suchexisting unregistered partnership with a distinctpersonality nor with
assets that can be heldliable for said deficiency corporate income tax,then
petitioners can be held individually liable aspartners for this unpaid
obligation of thepartnership.
G.R. No. L-68118 October 29, 1985
JOSE P. OBILLOS, JR., SARAH P. OBILLOS, ROMEO P. OBILLOS and
REMEDIOS P. OBILLOS,
brothers and sisters, petitioners
vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS,
respondents.

Facts:
On March 2, 1973 Jose Obillos, Sr. bought two lots with areas of 1,124
and 963 square meters of located at
Greenhills, San Juan, Rizal. The next day he transferred his rights to
his four children, the petitioners, to enable
them to build their residences. The Torrens titles issued to them
showed that they were co-owners of the two
lots.
In 1974, or after having held the two lots for more than a year, the
petitioners resold them to the Walled City
Securities Corporation and Olga Cruz Canada for the total sum of
P313,050. They derived from the sale a total
profit of P134, 341.88 or P33,584 for each of them. They treated the
profit as a capital gain and paid an income
tax on one-half thereof or of P16,792.
In April, 1980, the Commissioner of Internal Revenue required the four
petitioners to pay
corporate income
tax
on the total profit of P134,336 in addition to individual income tax on
their shares thereof. The petitioners
are being held liable for deficiency income taxes and penalties
totalling P127,781.76 on their profit of
P134,336, in addition to the tax on capital gains already paid by them.
The Commissioner acted on the theory that the four petitioners had
formed an unregistered partnership or joint
venture The petitioners contested the assessments. Two Judges of the
Tax Court sustained the same. Hence, the
instant appeal.

Issue:
Whether or not the petitioners had indeed formed a partnership or joint
venture and thus liable for corporate tax.

Held:
The Supreme Court held that the petitioners should not be considered
to have formed a partnership just because
they allegedly contributed P178,708.12 to buy the two lots, resold the
same and divided the profit among
themselves. To regard so would result in oppressive taxation and
confirm the dictum that the power to tax
involves the power to destroy. That eventuality should be obviated.
As testified by Jose Obillos, Jr., they had no such intention. They were
co-owners pure and simple. To consider
them as partners would obliterate the distinction between a co-
ownership and a partnership. The petitioners
were not engaged in any joint venture by reason of that isolated
transaction.
*
Article 1769(3) of the Civil Code provides that "the sharing of gross
returns does not of itself establish a
partnership, whether or not the persons sharing them have a joint or
common right or interest in any
property from which the returns are derived". There must be an
unmistakable intention to form a
partnership or joint venture.*

CIR v. MAGSAYSAY LINES, GR NO. 146984, 2006-07-28

Facts:
The Court of Tax Appeals (CTA) and the Court of Appeals commonly ruled
that the sale is not subject to VAT.
Pursuant to a government program of privatization, NDC decided to sell to
private enterprise all of its shares
P... ursuant to a government program of privatization, NDC decided to sell to
private enterprise all of its shares in... the National Marine Corporation
(NMC).
The NDC decided to sell in one lot its NMC shares and five (5) of its ships,
which are 3,700 DWT
Tween-Decker, "Kloeckner" type vessels
The NMC shares and the vessels were offered for public bidding. Among the
stipulated terms and conditions for the public auction was that the winning
bidder was to pay "a value added tax of 10% on the value of the vessels."...
private... respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy
the shares and the vessels for P168,000,000.00.
The bid was approved by the Committee on Privatization, and a Notice of
Award dated 1 July 1988 was issued to Magsaysay Lines.
VAT Ruling No. 568-88 dated 14 December 1988 from the BIR, holding that
the sale of the vessels was subject to the 10% VAT.
At this point, NDC drew on the Letter of Credit to pay for the VAT, and the
amount of P15,120,000.00 in taxes was paid... private respondents filed an
Appeal and Petition for Refund with the CTA... refund of the VAT payment
made... amounting to P15,120,000.00
CIR) opposed the petition
The CTA ruled that the sale of a vessel was an "isolated transaction," not
done in the ordinary course of NDC's business, and was thus not subject to
VAT,... which under Section 99 of the Tax Code, was applied only to sales in
the course of trade or business.
Issues:
whether the sale by the National Development Company (NDC) of five (5) of
its vessels to the private respondents is subject to value-added tax (VAT)
under the National Internal Revenue Code of 1986 (Tax Code) then...
prevailing at the time of the sale.
Ruling:
The fact that the sale was not in the... course of the trade or business of NDC
is sufficient in itself to declare the sale as outside the coverage of VAT.
the tax is... levied only on the sale, barter or exchange of goods or services
by persons who engage in such activities, in the course of trade or business.
based on the aforecited jurisprudence, is that "course of business" or "doing
business" connotes regularity of activity. In the instant case, the sale was an
isolated transaction. The sale which was involuntary and made pursuant to
the declared policy of
Government for privatization could no longer be repeated or carried on with
regularity. It should be emphasized that the normal VAT-registered activity of
NDC is leasing personal property
Principles:
VAT
The conclusion that the sale was not in the course of trade or business,
which the CIR does not dispute before this Court,[24] should have definitively
settled the matter. Any sale, barter or exchange of goods or services not in
the course of trade or... business is not subject to VAT.

Mindanao II Geothermal Partnership vs. CIR G.R. 193301, 11

March 2013

Facts:

Mindanao II Geothermal Partnership sold its fully depreciated Nissan Patrol, CIR said t
hat the sale is subject to VAT. Mindanao, in its defense, asserted that the sale is not incid
ental transaction in the course of its business, hence, an isolated transaction that should
not have been subject to VAT.

Issue:

Whether or not an isolated transaction can be an incidental transaction for purposes of

VAT liability.

Ruling:

Yes, just because a transaction is said to be an isolated one, it does not follow that it can
not be an incidental transaction.

Mindanao II’s business is to convert the steam supplied to it by PNOC-

EDC into electricity and to deliver the electricity to NPC. In the course
of business, Mindanao II bought and eventually sold a Nissan Patrol. Pr
ior to the sale, the Nissan Patrol was part of Mindanao II’s property, plant and eq
uipment. Therefore, the sale of the Nissan Patrol is an incidental trans
action made in the course of business which should be liable for VAT.

MARCELO INVESTMENT AND MANAGEMENT CORPORATION, and

THE HEIRS OF EDWARD T. MARCELO, NAMELY, KATHERINE J.
MARCELO, ANNA MELINDA J. MARCELO REVILLA, and JOHN STEVEN
J. MARCELO,
Petitioners, vs.
JOSE T. MARCELO, JR.,
Respondent.

Facts:
Decedent Jose, Sr. died intestate. He was survived by his four compulsory heirs:
(1) Edward, (2) George, (3) Helen and (4) respondent Jose, Jr. In an Order dated
13 December 1991, the RTC appointed Edward as regu
lar administrator of Jose, Sr.’s estate.
The intestate court approved the Liquidation of the Inventory of the Estate of
Jose Sr which bears the conformity of all the heirs and considering that the
period for filing of money claims against the subject estate has already lapsed.
The RTC archived the intestate proceedings, pending Edward’s
submission of proof of payment of estate taxes. On 3 July 2009, Edward died, and
Jose Jr. moved for his appointment as new regular administrator which was
opposed by petitioners. On 6 January 2010, the RTC issued the assailed Order, now
appointing
Jose, Jr. as regular administrator of Jose, Sr.’s estate.
Petitioners filed an Omnibus Motion for Reconsideration of the 6 January 2010
Order and now moved for the appointment instead of
George as administrator of Jose, Sr.’s estate which was denied by the
RTC and and denied on appeal by the CA.
ISSUE:
Whether the appointment of a regular administrator is still necessary at this
liquidation, partition and distribution stage of the i
ntestate proceedings involving Jose, Sr.’s estate. YES
Petitioners contention: The appointment of a regular administrator is unnecessary
where there remains no pending matter in the settlement
of Jose, Sr.’s estate requiring attention and administration. T
here is no existing or unliquidated debt against the estate of Jose, Sr,
the settlement thereof being already at the liquidation, partition and distribution
stage. Further on that, the liquidation and proposed partition had long been
approved by the probate court.

HELD
: The settlement of Jose, Sr.’s estate is not yet through and
complete albeit it is at the liquidation, partition and distribution stage. Rule 90 of
the Rules of Court provides for the Distribution and Partition of the Estate. The
rule provides in pertinent part: SECTION 1. When order for distribution of
residue made.
–
x x x No distribution shall be allowed until payment of the obligations
above mentioned has been made or provided for, unless the distributees, or any of
them, give a bond, in a sum tobe fixed by the court, conditioned for the payment of
said obligations within such time as the court directs.

Dizon v CTA (Taxation)

Dizon v CTA G.R. No. 140944 April 30, 2008

FACTS:
On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the
probate of his will was filed with Branch 51 of the Regional Trial Court (RTC) of Manila
(probate court). The probate court then appointed retired Supreme Court Justice
Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon (petitioner)
as Special and Assistant Special Administrator, respectively, of the Estate of Jose
(Estate). Petitioner alleged that several requests for extension of the period to file the
required estate tax return were granted by the BIR since the assets of the estate, as
well as the claims against it, had yet to be collated, determined and identified.

ISSUES:
1. Whether or not the CTA and the CA gravely erred in allowing the admission of the
pieces of evidence which were not formally offered by the BIR; and
2. Whether the actual claims of the aforementioned creditors may be fully allowed as
deductions from the gross estate of Jose despite the fact that the said claims were
reduced or condoned through compromise agreements entered into by the Estate with
its creditors Or Whether or not the CA erred in affirming the CTA in the latter's
determination of the deficiency estate tax imposed against the Estate.

RULING:
1. Yes. While the CTA is not governed strictly by technical rules of evidence, as rules of
procedure are not ends in themselves and are primarily intended as tools in the
administration of justice, the presentation of the BIR's evidence is not a mere procedural
technicality which may be disregarded considering that it is the only means by which the
CTA may ascertain and verify the truth of BIR's claims against the Estate. The BIR's
failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its
cause

2. Yes. The claims existing at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions. Also, as held in Propstra v. U.S.,
where a lien claimed against the estate was certain and enforceable on the date of the
decedent's death, the fact that the claimant subsequently settled for lesser amount did
not preclude the estate from deducting the entire amount of the claim for estate tax
purposes. This is called the date-of-death valuation rule.