Taxation Law 1: Cases: Power of the CIR to Exemption under
RA 7459
A.) Philippine Airlines, Inc. (PAL) vs. Commissioner of
Internal Revenue (GR 206079-80)1
Facts:
 The CIR through the Agent Banks imposed a
withholding tax on the bank deposits of PAL which
earned interest.
 PAL then filed a request for refund before the BIR who
then failed to act on the request.
 Due to the inaction of the BIR on its request PAL it
elevated the case to the CTA.
 Upon the elevation of the case before the Courts the
BIR denied the claim because it claimed that PAL
failed to prove that it is entitled to a refund.
 On the other hand the PAL claimed that it did not have
to do so since they were granted the exemption under
its franchise.
 CTA Special Division:
Partially Granted: PAL is entitled to the refund for
the withholding tax deducted by JP Morgan and Chase
Bank because it is the only claim it was able to prove.
 CTA En Banc:
 They upheld the decision of the CTA Special Division
and they also upheld the right of the CTA Special
Division to hold a trial de novo.
1 Philippine Airlines, Inc. (PAL) vs. Commissioner of Internal Revenue, 851
SCRA 518, January 17, 2018
Issues:
 WON the power of the CIR to act on a tax refund is
absolute and therefore if it does not act the CTA cannot
take cognizance of the case;
 WON the PAL is exempted from paying withholding
tax on its interest income for deposits in the bank under
its franchise.
Doctrine (Power of the CIR):
 The Commissioner has the power to decide on tax
refunds, but his or her decision is subject to the
exclusive jurisdiction of the CTA.
 The failure of the CIR to act on a tax refund will be
considered as a denial and will put the same under the
jurisdiction of the CTA.
 The power of the Court of Tax Appeals to exercise its
appellate jurisdiction does not preclude it from
considering new evidences.
Doctrine (Exemption under its (PAL) franchise. (PD 1590)):
 The PAL is exempted from paying withholding tax
over its deposits which earned interest income in
accordance with its franchise under PD 1590 and
therefore it is not necessary for them to prove that they
were actually exempted from paying the said taxes.
 The Congress has never envisioned to remove its
exemption because despite the various changes in our
tax laws the Congress has never expressly revoked the
said exemption.
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 B.) COMMISSIONER OF INTERNAL REVENUE v.
COVANTA ENERGY PHILIPPINE HOLDINGS,
(GR 203160)2
Facts:
 Covanta was assessed to have a deficiency in its value
added tax and expanded withholding tax remittance by
the BIR.
 Covanta then questioned the claim of the CIR and
thereafter filed a letter of protest before the BIR who
failed to act on the same.
 Due to the Agency’s inaction Covanta went on to the
CTA and there manifested that they have availed of the
tax amnesty granted under RA 9480.
 The CIR then argued that they cannot avail of the same
because they failed to comply with the documentary
requirements specifically their SALN.
 CTA Second Division:
Partially granted: They are ordered to pay a fraction
of the amount being asked by the BIR.
 CTA en banc:
Affirmed the decision of the CTA 2nd Division.
Issue:
 WON Covanta can avail of the tax amnesty under the
law.
Doctrine (Interpretation of tax amnesty law):
 Although by nature a tax amnesty law is a tax
exemption and as such it must be strictly construed
2 COMMISSIONER OF INTERNAL REVENUE v. COVANTA ENERGY PHILIPPINE
HOLDINGS, G.R. No. 203160, January 24, 2018
against the person claiming the exemption or amnesty
the same cannot disregard the plain text of the law.
 In this case the law is clear that as soon as the tax payer
submits all the documentary requirements of the law
they are already entitled to the tax amnesty and as to
the contents of the said documents the tax payer enjoys
a presumption of that it is true and correct and that it
must be debunked by a 3rd person claiming otherwise.
C.) SPLASH CORPORATION v. COMMISSIONER
OF INTERNAL REVENUE (CTA CASE 8904)3
Facts:
 Splash is the seller of the products of Dr. Hortaleza
which were subject to tax exemption under RA 7459
and it claimed the said tax exemptions as to the sale of
the said products.
 The CIR on the other under claims that they are not
covered by the exemption and thus their sale of the
products were subject to taxation.
Issue:
 WON Splash can avail of the tax exemption granted
under RA 7459.
Doctrine (Exemption under RA 7459):
 The exemption granted to the inventor under RA 7459
extends even to the manufacturer or seller of the said
3 SPLASH CORPORATION v. COMMISSIONER OF INTERNAL REVENUE, CTA
CASE 8904, February 2, 2018
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products, specifically its income when it comes to the
sale of the products, even if the latter was not the
inventor himself. That being said the same is still
subject to the limitations and period of time provided
under the law.

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