1) CIR vs Lancaster

Facts:
The Government through the Bureau of Internal Revenue conducted an examination of
books of accounts and other accounting records for all internal revenue taxes for the
period from taxable year 1998 of Lancaster Inc. After the examination, BIR issued
Preliminary Assessment Notice (PAN)8 which cited Lancaster for: 1) overstatement of
its purchases for the fiscal year April 1998 to March 1999; and 2) noncompliance with
the generally accepted accounting principle of proper matching of cost and revenue.
GA:
The contention of the BIR is based on Section 45 of the National Internal Revenue
Code in relation to Section 43 of the same and Revenue Regulations No. 2 which states
that the Crop-Basis method of reporting income may be used by a farmer engaged in
producing crops which take more than one (1) year from the time of planting to the time
of gathering and disposing of crop, in such a case, the entire cost of producing the crop
must be taken as deduction in the year in which the gross income from the crop is
realized and that the taxable income should be computed upon the basis of the
taxpayer's annual accounting period

TA:
Lancaster upon receipt of PAN argued that , that for the past decades, it has used an
entire 'tobacco-cropping season' to determine its total purchases covering a one-year
period from 1 October up to 30 September of the following year (as against its fiscal
year which is from 1 April up to 31 March of the following year); that it has been
adopting the 6-month timing difference to conform to the matching concept (of cost and
revenue); and that this has long been installed as part of the company's system and
consistently applied in its accounting books.

Issue:
Whether the BIR is correct in disallowing the February and March 1998 purchases as
expenses , which Lancaster posted in its fiscal year ending on 31 March 1999 (FY
1999) instead of the fiscal year ending on 31 March 1998?

Ruling:
The Court found it wholly justifiable for Lancaster, as a business engaged in the
production and marketing of tobacco, to adopt the crop method of accounting. A
taxpayer is authorized to employ what it finds suitable for its purpose so long as it
consistently does so, and in this case, Lancaster does appear to have utilized the
method regularly for many decades already. Considering that the crop year of Lancaster
starts from October up to September of the following year, it follows that all of its
expenses in the crop production made within the crop year starting from October 1997
to September 1998, including the February and March 1998 purchases covered by
purchase invoice vouchers, are rightfully deductible for income tax purposes in the year
when the gross income from the crops are realized.

Personal End notes:

The deductions provided for in NIRC 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, unless in order to clearly reflect the income, the
deductions should be taken as of a different period.
A taxpayer is authorized to employ what it finds suitable for its purpose so long as it
consistently does so, and in this case, Lancaster does appear to have utilized the
method regularly for many decades already. Considering that the crop year of Lancaster
starts from October up to September of the following year, it follows that all of its
expenses in the crop production made within the crop year starting from October 1997
to September 1998, including the February and March 1998 purchases covered by
purchase invoice vouchers, are rightfully deductible for income tax purposes in the year
when the gross income from the crops are realized

4) China Banking Corp vs CIR

Facts:
China Banking Corporation is a universal bank duly organized and existing under the
laws of the Philippines. For the taxable years 1982 to 1986, CBC was engaged in
transactions involving sales of foreign exchange to the Central Bank of the Philippines.
Upon receipt of the notice of assessment. In 1989, the Government through the Bureau
of Internal Revenue issued an assessment against China Banking Corporation finding
them liable for deficiency DST on the sales of foreign bills of exchange to the Central
Bank. CBC filed a protest for said assessment. On 2001, more than 12 years after the
filing of the protest, the Commissioner of Internal Revenue (CIR) rendered a decision
reiterating the deficiency DST assessment and ordered the payment thereof plus
increments within 30 days from receipt of the Decision.
GA:
The failure to raise the defense of prescription at the administrative level prevents the
taxpayer from raising it at the appeal stage.
Facts Taxpayer :

CBC filed its protest on 1898, raising the following defenses: ) double taxation, as the
bank had previously paid the DST on all its transactions involving sales of foreign bills of
exchange to the Central Bank; (2) absence of liability, as the liability for the DST in a
sale of foreign exchange through telegraphic transfers to the Central Bank falls on the
buyer ? in this case, the Central Bank; (3) due process violation, as the bank’s records
were never formally examined by the BIR examiners; (4) validity of the assessment, as
it did not include the factual basis therefore; (5) exemption, as neither the tax-exempt
entity nor the other party was liable for the payment of DST before the effectivity of
Presidential Decree Nos. (PD) 1177 and 1931 for the years 1982 to 1986. CBC states
that the government has three years from 19 April 1989, the date the former received
the assessment of the CIR, to collect the tax. Within that time frame, however, neither a
warrant of distraint or levy was issued, nor a collection case filed in court.
Issue:
Whether the right of the BIR to collect the assessed DST from CBC is barred by
prescription

Ruling:
The Court granted the Petition on the ground that the right of the BIR to collect the
assessed DST is barred by the statute of limitations. e records do not show when the
assessment notice was mailed, released or sent to CBC. Nevertheless, the latest
possible date that the BIR could have released, mailed or sent the assessment notice
was on the same date that CBC received it, 19 April 1989. Assuming therefore that 19
April 1989 is the reckoning date, the BIR had three years to collect the assessed DST.
However, the records of this case show that there was neither a warrant of distraint or
levy served on CBC's properties nor a collection case filed in court by the BIR within the
three-year period. The demand was made almost thirteen years from the date from
which the prescriptive period is to be reckoned. Thus, the attempt to collect the tax was
made way beyond the three-year prescriptive period. Also, the fact that the taxpayer in
this case may have requested a reinvestigation did not toll the running of the three-year
prescriptive period as provided in Section 320 of the 1977 Tax Code. The Court
likewise pronounced that although petitioner has raised the issue of prescription for the
first time only, If the pleadings or the evidence on record show that the claim is barred
by prescription, the court is mandated to dismiss the claim even if prescription is not
raised as a defense.

Personal End notes:

If the pleadings or the evidence on record show that the claim is barred by prescription,
the court is mandated to dismiss the claim even if prescription is not raised as a
defense.

PHILACOR CREDIT CORPORATION , vs. COMMISSIONER OF INTERNAL

REVENUE,
Facts:
Philacor is a domestic corporation engaged in the business of retail financing. A
prospective buyer of a home appliance – with neither cash nor any credit card – may
purchase appliances on installment basis from an appliance dealer. BIR examined
Philacor’s books of accounts and other accounting records for the fiscal year August 1,
1992 to July 31, 1993, and was demanded with tentative computations of deficiency
taxes totaling P20, 037,013.83

GA:
.BIR argued that since the subject promissory notes do not bear documentary stamps,
Philacor can be held liable for DST. As for the assignments, it forwarded that each and
every transaction involving promissory notes is subject to the DST under Section 173 of
the 1986 Tax Code; Philacor is liable as the transferee and assignee of the promissory
notes

Taxpayer:
Philacor protested the assessment on the ground that the assessed deficiency income
tax was erroneously computed when it failed to take into account the reversing entries
of the revenue accounts and income adjustments, such as repossessions, write-offs
and legal accounts. Also, , Philacor claims that the accredited appliance dealers were
required by law to affix the documentary stamps on all promissory notes purchased until
the enactment of RA 7660
Issue:
Philacor is liable for the Documentary Stamps Tax on the issuance of promissory notes

Ruling:
As provided in the Tax Code, the persons primarily liable for the payment of DST are the
persons (1) making; (2) signing; (3) issuing; (4) accepting; or (5) transferring the taxable
documents, instruments or papers. Should these parties be exempted from paying tax,
the other party who is not exempt would then be liable. In this case, petitioner Philacor is
engaged in the business of retail financing. Through retail financing, a prospective buyer
of home appliance may purchase an appliance on installment by executing a unilateral
promissory note in favor of the appliance dealer, and the same promissory note is
assigned by the appliance dealer to Philacor. Thus, under this arrangement, Philacor did
not make, sign, issue, accept or transfer the promissory notes. It is the buyer of the
appliances who made, signed and issued the documents subject to tax while it is the
appliance dealer who transferred these documents to Philacor which likewise indisputably
received or “accepted” them. Acceptance, however, is an act that is not even applicable
to promissory notes, but only to bills of exchange. Under the Negotiable Instruments Law,
the act of acceptance refers solely to bills of exchange. In a ruling adopted by the Bureau
of Internal Revenue as early as 1995, “acceptance” has been defined as having reference
to incoming foreign bills of exchange which are accepted in the Philippines by the drawees
thereof, and not as referring to the common usage of the word as in receiving. Thus, a
party to a taxable transaction who “accepts” any documents or instruments in the plain
and ordinary meaning does not become primarily liable for the tax

PEN:
the persons primarily liable for the payment of DST are the persons (1) making; (2)
signing; (3) issuing; (4) accepting; or (5) transferring the taxable documents, instruments
or papers. Should these parties be exempted from paying tax, the other party who is not
exempt would then be liable

CIR vs Pilipinas Shell Petroleuem Corp

Facts

Pilipinas Shell Petroleum Corporation is a manufacturer or producer of gas and fuel which
are used by international carriers. Under Section 135 the tax code, petroleum products
sold to international carriers are tax-exempt. Pilipinas Shell, based on excise taxes it
allegedly paid on sales and deliveries of gas and fuel oils to various international carriers
during the period of October to December 2001, January to March 2002, and April to June
2002 filed a formal claim for tax refund or tax credit with the Bureau of Internal Revenue.
However, despite such claims, no action was taken by the CIR

GA::
CIR avers that Sec. 130 (D) is explicit on the circumstances under which a taxpayer may
claim for a refund of excise taxes paid on manufactured products, which express
enumeration did not include those excise taxes paid on petroleum products which were
eventually sold to international carriers

Taxpayer:

Pilipinas Shell maintains that since petroleum products sold to qualified international
carriers are exempt from excise tax, no taxes should be imposed on the article, to which
goods the tax attaches, whether in the hands of the said international carriers or the
petroleum manufacturer or producer. As these excise taxes have been erroneously paid
taxes, they can be recovered under Sec. 229 of the NIRC.

Issue:

Whether Plipinas Shell as manufacturer or producer of petroleum products is exempt from

the payment of excise tax on such petroleum products it sold to international carrier

Ruling:

The claims for tax refund or credit filed by respondent Pilipinas Shell Petroleum
Corporation are should be denied for lack of basis. The language of Sec. 135 indicates
that the tax exemption mentioned therein is conferred on specified buyers or consumers
of the excisable articles or goods (petroleum products). Unlike Sec. 134 which explicitly
exempted the article or goods itself (domestic denatured alcohol) without due regard to
the tax status of the buyer or purchaser, Sec. 135 exempts from excise tax petroleum
products which were sold to international carriers and other tax-exempt agencies and
entities.

Excise tax is a tax on the manufacturer and not on the purchaser, and there being no
express grant under the NIRC of exemption from payment of excise tax to local
manufacturers of petroleum products sold to international carriers, and absent any
provision in the Code authorizing the refund or crediting of such excise taxes paid, the
Court holds that Sec. 135 (a) should be construed as prohibiting the shifting of the burden
of the excise tax to the international carriers who buys petroleum products from the local
manufacturers. Said provision thus merely allows the international carriers to purchase
petroleum products without the excise tax component as an added cost in the price fixed
by the manufacturers or distributors/sellers. Consequently, the oil companies which sold
such petroleum products to international carriers are not entitled to a refund of excise
taxes previously paid on the goods.

PEN:
Tax refunds are in the nature of tax exemptions which result to loss of revenue for the
government. Upon the person claiming an exemption from tax payments rests the burden
of justifying the exemption by words too plain to be mistaken and too categorical to be
misinterpreted, it is never presumed nor be allowed solely on the ground of equity.

Commissioner of Internal Revenue vs McGeorge Food Industries, Inc.

Facts:

McGeorge Food Industries, Inc. filed with the Bureau of Internal Revenue (BIR) its final
adjustment income tax return for the calendar year ending 31 December 1997. The return
indicated a tax liability of P5,393,988 against a total payment of P10,130,176 for the first
three quarters, resulting in a net overpayment of P4,736,188 . It chose to carry it over to
the succeeding year as tax credit, indicating in its 1997 final return that it wished the
amount to be applied as credit to next year. It then filed its final adjustment return for the
calendar year ending 31 December 1998, indicating a tax liability of P5,799,056. Instead
of applying to this amount its unused tax credit carried over from 1997 (P4,736,188), as
it was supposed to do, Mcgeorge merely deducted from its tax liability the taxes withheld
at source for 1998 (P217,179) and paid the balance of P5,581,877

GA::

The Government through the Commissioner of Internal Revenue asserts that respondent
is precluded from seeking a refund for its overpayment in 1997 after it opted to carry-over
and apply it to its future tax liability, following Section 76 of the 1997 NIRC. Section 76
applies to respondent because by the time respondent filed its final adjustment return for
1997 on 15 April 1998, the 1997 NIRC was already in force, having taken effect on 1
January 1998.

Taxpayer:

McGeorge Food Industries, Inc claims that the refund was proper because respondent
complied with the requirements of timely filing of the claim and its substantiation.

Issue:

Whether or not McGeorge Food Industries is entitled to tax refund

RULING:

The respondent is not entitled to a refund under Section 76 of the 1997 NIRC, the law in
effect at the time respondent made known to the BIR its preference to carry over and
apply its overpayment in 1997 to its tax liability in 1998. In lieu of refund, respondent’s
overpayment should be applied to its tax liability for the taxable years following 1998 until
it is fully credited. Once the taxpayer opts to carry-over the excess income tax against the
taxes due for the succeeding taxable years, such option is irrevocable for the whole
amount of the excess income tax, thus, prohibiting the taxpayer from applying for a refund
for that same excess income tax in the next succeeding taxable years. The unutilized
excess tax credits will remain in the taxpayer’s account and will be carried over and
applied against the taxpayer’s income tax liabilities in the succeeding taxable years until
fully utilized.As respondent opted to carry-over and credit its overpayment in 1997 to its
tax liability in 1998, Section 76 makes respondent’s exercise of such option irrevocable,
barring it from later switching options to "[apply] for cash refund." Instead, respondent’s
overpayment in 1997 will be carried over to the succeeding taxable years until it has been
fully applied to respondent’s tax liabilities. Hence, under Section 76 of the 1997 NIRC,
respondent’s claim for refund is unavailing. However, respondent is entitled to apply its
unused creditable overpayment in 1997 to its tax liability arising after 1998 until such has
been fully applied.

PEN:
Once the taxpayer opts to carry-over the excess income tax against the taxes due for the
succeeding taxable years, such option is irrevocable for the whole amount of the excess
income tax, thus, prohibiting the taxpayer from applying for a refund for that same excess
income tax in the next succeeding taxable years. The unutilized excess tax credits will
remain in the taxpayer’s account and will be carried over and applied against the
taxpayer’s income tax liabilities in the succeeding taxable years until fully utilized

CBK POWER LTD vs CIR

Facts
CBK Power is a limited partnership duly organized and existing under the laws of the
Philippines, and primarily engaged in the development and operation of hydro electric
power generating plants in Laguna. BK Power borrowed money from Industrial Bank of
Japan, Fortis-Netherlands, Raiffesen CBank, Fortis-Belgium, and Mizuho Bank for which
it remitted interest payments from May 2001 to May 2003. It allegedly withheld final taxes
from said payments based on the following rates: (a) fifteen percent (15%) for Fortis-
Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty percent (20%) for
Industrial Bank of Japan and Mizuho Bank. ordingly, on April 14, 2003, CBK Power filed
a claim for refund of its excess final withholding taxes allegedly erroneously withheld and
collected

GA:

.The Commissioner argued that CBK Power cannot claim for refund with respect to the
excess final withholding taxes from Fortis-Netherlands because CBK Power failed to
obtain an International Tax Affairs Division (ITAD) ruling pursuant to RMO No. 1-2000
with respect to the said transactions. Furthermore, the Commissioner assails the claim
for refund on the basis of CBK Power’s failure to exhaust administrative remedies prior to
its filing the petition before the CTA first division.

TA:

According to CBK Power, under the relevant tax treaties between the Philippines and the
respective countries in which each of the banks is a resident, the interest income derived
by the aforementioned banks are subject only to a preferential tax rate of 10%.
Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final
withholding taxes allegedly erroneously withheld and collected for the years 2001 and
2002 with the BIR Revenue Region No. 9. The claim for refund of excess final withholding
taxes in 2003 was subsequently filed on March 4, 2005.

Issue:

Whether or not ITAD ruling is a condition sine qua non for the claim for refund of its
erroneous payment of final withholding taxes

Ruling:

No, ITAD ruling is not required in this case. he Court held that the obligation to comply
with a tax treaty must take precedence over the objective of RMO No. 1-2000.

Bearing in mind the rationale of tax treaties, the period of application for the availment of
tax treaty relief as required by RMO No. 1-2000 should not operate to divest entitlement
to the relief as it would constitute a violation of the duty required by good faith in complying
with a tax treaty. The denial of the availment of tax relief for the failure of a taxpayer to
apply within the prescribed period under the administrative issuance would impair the
value of the tax treaty. At most, the application for a tax treaty relief from the BIR should
merely operate to confirm the entitlement of the taxpayer to the relief.

Logically, noncompliance with tax treaties has negative implications on international

relations, and unduly discourages foreign investors. While the consequences sought to
be prevented by RMO No. 1-2000 involve an administrative procedure, these may be
remedied through other system management processes, e.g., the imposition of a fine or
penalty. But we cannot totally deprive those who are entitled to the benefit of a treaty for
failure to strictly comply with an administrative issuance requiring prior application for tax
treaty relief.

PEN:
The denial of the availment of tax relief for the failure of a taxpayer to apply within the
prescribed period under the administrative issuance would impair the value of the tax
treaty. At most, the application for a tax treaty relief from the BIR should merely operate
to confirm the entitlement of the taxpayer to the relief.

RCBC v. CIR

Facts:

Rizal Commercial Banking Corporation (RCBC) is a corporation engaged in general

banking operations. It seasonably filed its Corporation Annual Income Tax Returns for
Foreign Currency Deposit Unit for the calendar years 1994 and 1995. RCBC received
Letter of Authority issued by the Commissioner of Internal Revenue authorizing a special
audit team to examine the book of accounts and other accounting records for all internal
revenue taxes from January 1, 1994 to December 31, 1995. RCBC executed two Waivers
of the Defense of Prescription Under the Statute of Limitations of the NIRC covering the
internal revenue taxes due for the years 1994 and 1995, effectively extending the period
of the Bureau of Internal Revenue (BIR) to assess up to December 31, 2000. Then, on
January 27, 2000, RCBC received a Formal Letter of Demand together with Assessment
Notices from the BIR for the deficiency tax assessment

Government:

RCBC, as the taxpayer and the one which earned income on the transaction, remains
liable for the payment of tax as the taxpayer shares the responsibility of making certain
that the tax is properly withheld by the withholding agent, so as to avoid any penalty that
may arise from the non-payment of the withholding tax due

Taxpayer:

RCBC avers that that the waivers of the Statute of Limitations which it executed on
January 23, 1997 were not valid because the same were not signed or conformed to by
the respondent CIR as required under Section 222(b) of the Tax Code. As regards the
deficiency FCDU onshore tax, RCBC contended that because the onshore tax was
collected in the form of a final withholding tax, it was the borrower, constituted by law as
the withholding agent that was primarily liable for the remittance of the said tax. RCBC is
convinced that it is the payor-borrower, as withholding agent, who is directly liable for the
payment of onshore tax, citing Section 2.57(A) of Revenue Regulations No. 2-98.

ISSUE:
Whehter RCBC as payee-bank, can be held liable for deficiency onshore tax, which is
mandated by law to be collected at source in the form of a final withholding tax

Ruling:

RCBC erred in citing the abovementioned Revenue Regulations No. 2-98 because the
same governs collection at source on income paid only on or after January 1, 1998. . The
deficiency withholding tax subject of this petition was supposed to have been withheld on
income paid during the taxable years of 1994 and 1995. Hence, Revenue Regulations
No. 2-98 obviously does not apply in this case.

The liability of the withholding agent is independent from that of the taxpayer. The former
cannot be made liable for the tax due because it is the latter who earned the income
subject to withholding tax. The withholding agent is liable only insofar as he failed to
perform his duty to withhold the tax and remit the same to the government. The liability
for the tax, however, remains with the taxpayer because the gain was realized and
received by him. While the payor-borrower can be held accountable for its negligence in
performing its duty to withhold the amount of tax due on the transaction,. RCBC cannot
evade its liability for FCDU Onshore Tax by shifting the blame on the payor-borrower as
the withholding agent. As such, it is liable for payment of deficiency onshore tax on
interest income derived from foreign currency loans.

PEN:

The liability of the withholding agent is independent from that of the taxpayer. The former
cannot be made liable for the tax due because it is the latter who earned the income
subject to withholding tax. The withholding agent is liable only insofar as he failed to
perform his duty to withhold the tax and remit the same to the government. The liability
for the tax, however, remains with the taxpayer because the gain was realized and
received by him.

COMMISSIONER OF INTERNAL REVENUE vs Mirant Pagbilao Corporation (MPC)

Facts

Mirant Pagbilao Corporation (MPC) is a domestic firm engaged in the generation of

power which it sells to the National Power Corporation (NPC). In the light of the NPCs
tax exempt status, MPC, on the belief that its sale of power generation services to NPC.
On August 25, 1998, MPC, while awaiting approval of its application aforestated, filed its
quarterly VAT return for the second quarter of 1998 where it reflected an input VAT of
PhP 148,003,047.62, which included PhP 135,993,570. Pursuant to the procedure
prescribed in Revenue Regulations No. 7-95, MPC filed on an administrative claim for
refund of unutilized input VAT in the amount of PhP 148,003,047.62. .
Since the BIR Commissioner failed to act on its claim for refund and obviously to
forestall the running of the two-year prescriptive period under Sec. 229 of the Nationa
Government:

The Government though the Commission of Internal Revenue asserted that MPCs claim
for refund cannot be granted for this main reason: MPCs sale of electricity to NPC is not
zero-rated for its failure to secure an approved application for zero-rating.
Taxpayer:
Sec. 112(A) of the NIRC, providing a two-year prescriptive period reckoned from the
close of the taxable quarter when the relevant sales or transactions were made
pertaining to the creditable input VAT is applicable to the transactions of MPC
Issue:
Whether or not MPC is entitled to the refund of its input VAT payments made from 1993
to 1996
Ruling:
Creditable input VAT is an indirect tax which can be shifted or passed on to the buyer,
transferee, or lessee of the goods, properties, or services of the taxpayer. The fact that
the subsequent sale or transaction involves a wholly-tax exempt client, resulting in a
zero-rated or effectively zero-rated transaction, does not, standing alone, deprive the
taxpayer of its right to a refund for any unutilized creditable input VAT, albeit the
erroneous, illegal, or wrongful payment angle does not enter the equation.
It is clear that Sec. 112(A) of the NIRC, providing a two-year prescriptive period
reckoned from the close of the taxable quarter when the relevant sales or transactions
were made pertaining to the creditable input VAT, applies to the instant case, and not to
the other actions which refer to erroneous payment of taxes.

PEN:
BIR and other tax agencies of their duty to treat claims for refunds and tax credits with
proper attention and urgency.
Zero-rated transactions generally refer to the export sale of goods and supply of
services. The tax rate is set at zero. When applied to the tax base, such rate obviously
results in no tax chargeable against the purchaser. The seller of such transactions
charges no output tax, but can claim a refund of or a tax credit certificate for the VAT
previously charged by suppliers
Taganito Mining Corporation v. CIR
Facts:
Taganito is a duly-registered Philippine corporation and a VAT-registered entity
primarily engaged in the business of exploring, extracting, mining, selling, and exporting
precious metals and their byproducts. For the 1st, 2nd, 3rd, and 4th quarters of the year
2004, Taganito filed its Quarterly VAT Returns. Taganito filed before the Bureau of
Internal Revenue (BIR) an administrative claim for the refund of input VAT paid on its
domestic purchases of taxable goods and services and importation of goods during the
entire year of 2004. 51 days after the filing of its application with the CIR, Taganito filed
with the CTA a petition for review.
Government:
The Government through the BIR avers that that the petition for review was prematurely
filed because Taganito did not wait for the lapse of 120 days mandated by Section
112(D) of the National Internal Revenue Code

TA:
Tagaito argued that it was well-settled that a taxpayer need not wait for the decision of
the CIR on its administrative claim for refund before it could file its judicial claim for
refund, consonant with the period provided in Section 229 of the NIRC stating that no
suit for the recovery of erroneously or illegally collected tax should be filed after the
expiration of two years from the date of payment of the tax.

Issue:
The issue was whether or not Taganito’s judcial claim was prematurely filed.

Ruling:
The Court held that the two-year period under Section 229 does not apply to claims for
a refund or tax credit for unutilized creditable input VAT because it is not considered
‘excessively’ collected. Instead, San Roque settled that Section 112 applies to claims
for a refund or tax credit for unutilized creditable input VAT, thereby making the 120+ 30
day period prescribed therein mandatory and jurisdictional in nature

PEN:
the two-year period under Section 229 does not apply to claims for a refund or tax credit
for unutilized creditable input VAT because it is not considered ‘excessively’ collected

MINDANAO II GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF INTERNAL

REVENUE

FACTS:

Mindanao I and II (Mindanao) are value-added taxpayers, and Block Power Production
Facilities. They had a Build-Operate-Transfer contract with the Philippine National Oil
Corporation–Energy Development Company (PNOC-EDC), whereby Mindanao
converts steam supplied to it by PNOC-EDC into electricity, and then delivers the
electricity to the National Power Corporation (NPC) in behalf of PNOC-EDC.

The EPIRA law, amended the Tax Reform Act of 1997 (RA 8424), when it decreed that
sales of power by generation companies shall be subjected to a zero rate of VAT.
Pursuant to EPIRA, Mindanao I and II filed their claims for the issuance of tax credit
certificates on unutilized or excess input taxes from their sales of generated power and
delivery of electric capacity and energy to NPC.
The CTA En Banc denied Mindanao II’s claims for refund tax credit for the first and
second quarters of 2003, and Mindanao I’s claims for refund/tax credit for the first,
second, third, and fourth quarters of 2003, for being filed out of time

GOVERNMENT:
. Government avers that Mindanao II’s judicial claims were filed beyond the period
allowed in Sec. 112(A), by which the reckoning of the two-year prescriptive period for
filing the application for refund or credit of input VAT attributable to zero-rated sales or
effectively zero-rated sales shall be counted from the close of the taxable quarter when
the sales were made (regardless of whether the tax was actually paid), according to CIR
v. Mirant Pagbilao

Taxpayer:
Mindanao I and II argues that their claims were timely filed pursuant to the case of
Atlas, which was then the controlling ruling at the time of the filing. The Mirant case,
which uses the close of the taxable quarter when the sales were made as the reckoning
date in counting the two-year prescriptive period, cannot be applied retroactively to their
prejudice.

ISSUE: Whether the reckoning date for counting the two-year prescriptive period in
Section 112 should be counted from the end of the taxable quarter when the sales were
made (Mirant) or the date of filing the return (Atlas)?

HELD: Neither Atlas nor Mirant applies, because when Mindanao II and Mindanao I filed
their respective administrative and judicial claims in 2005, neither case had been
promulgated. Atlas was promulgated on 8 June 2007, Mirant on 12 September 2008.
Besides, Atlas merely stated that the two-year prescriptive period should be counted
from the date of payment of the output VAT, not from the close of the taxable quarter
when the sales involving the input VAT were made. The Atlas doctrine did not interpret,
expressly or impliedly, the 120+30 day periods.

In determining whether the claims for the second, third and fourth quarters of 2003 had
been properly appealed, there is still see no need to refer to either Atlas or Mirant, or
even to Sec. 229. The second paragraph of Sect. 112(C) is clear that the taxpayer can
appeal to the CTA “within thirty (30) days from the receipt of the decision denying the
claim or after the expiration of the one hundred twenty day-period.”
The 120+30 day periods are mandatory and jurisdictional. The taxpayer cannot simply
file a petition with the CTA without waiting for the Commissioner’s decision within the
120-day period, because otherwise there would be no “decision” or “deemed a denial”
decision for the CTA to review. Moreover, Sec. 112(C) expressly grants a 30-day period
to appeal to the CTA, and this period need not necessarily fall within the two-year
prescriptive period, as long as the administrative claim is filed within such time. The said
prescriptive period does not refer to the filing of the judicial claim with the CTA, but to
the administrative claim with the Commissioner.

PEN:
1) An administrative claim must be filed with the CIR within two years after the close of
the taxable quarter when the zero-rated or effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in
support of the administrative claim within which to decide whether to grant a refund or
issue a tax credit certificate. The 120-day period may extend beyond the two-year
period from the filing of the administrative claim if the claim is filed in the later part of the
two-year period. If the 120-day period expires without any decision from the CIR, then
the administrative claim may be considered denied by inaction
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the
CIR’s decision denying the administrative claim, or from the expiration of the 120-day
period without any action from the CIR.

PhilAm LIFE vs. Secretary of Finance

Facts

The Philippine American Life and General Insurance Company (Philamlife) used to own
498,590 Class A shares in Philam Care Health Systems, Inc. (PhilamCare),
representing 49.89% of the latter's outstanding capital stock. Philamlife in a bid to
divest itself of its interests in the health maintenance organization industry, offered to
sell its shareholdings in PhilamCare through competitive bidding. Thus, it’s Class A
shares were sold based on the prevailing exchange rate at the time of the sale, to STI
Investments, Inc., who emerged as the highest bidder. fter the sale was completed and
the necessary documentary stamp and capital gains taxes were paid, Philamlife filed an
application for a certificate authorizing registration/tax clearance with the BIR

Government
: The Government through the Commissioner on Internal Revenue (Commissioner)
denied Philamlife's request through BIR Ruling No. 015-12. As determined by the
Commissioner, the selling price of the shares thus sold was lower than their book value
based on the financial statements of Philam Care as of the end of 2008.[6] As such,the
Commisioner held, donor's tax became imposable on the price difference pursuant to
the tax code

Facts Taxpayer:

Philamlife forwards that the transaction cannot attract donor’s tax liability since there
was no donative intent and, ergo, no taxable donation, that the shares were sold at their
actual fair market value and at arm’s length; that as long as the transaction conducted is
at arm’s length––such that a bonafide business arrangement of the dealings is done in
the ordinary course of business––a sale for less than an adequate consideration is not
subject to donor’s tax; and that donor’s tax does not apply to sale of shares sold in an
open bidding process.

Issue:

W/N the sales of shares sold for less than an adequate consideration be subject to
donor’s tax?

Ruling:

The court rules that, the absence of donative intent, if that be the case, does not exempt
the sales of stock transaction from donor’s tax since Sec. 100 of the NIRC categorically
states that the amount by which the fair market value of the property exceeded the
value of the consideration shall be deemed a gift. Thus, even if there is no actual
donation, the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely
sets the parameters for determining the “fair market value” of a sale of stocks. Such
issuance was made pursuant to the Commissioner’s power to interpret tax laws and to
promulgate rules and regulations for their implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the
sale, was being applied retroactively in contravention to Sec. 246 of the NIRC.26
Instead, it merely called for the strict application of Sec. 100, which was already in force
the moment the NIRC was enacted.

PEN:

The absence of donative intent, if that be the case, does not exempt the sales of stock
transaction from donor’s tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value of the
consideration shall be deemed a gift. Thus, even if there is no actual donation, the
difference in price is considered a donation by fiction of law.

Commissioner of Internal Revenue v. Court of Tax Appeals and Petron Corporation

Facts

Petron is a corporation engaged in the production of petroleum products and is a Board

of Investment (BOI) – registered enterprise. CIR issued an Assessment against Petron
or deficiency excise taxes for the taxable years 1995 to 1998, inclusive of surcharges
and interests on the ground that the TCCs utilized by petitioner in the payment of excise
taxes have been cancelled by the DOF for having been fraudulently issued and
transferred

Government:

BIR forwards that the importation of alkylate as a blending component is subject to

excise tax pursuant to the tax code. also, the CIR asserts that the interpretation of the
subject tax provision, i.e., Section 148 (e) of the NIRC, embodied in CMC No. 164-2012,
is an exercise of her quasi-legislative function which is reviewable by the Secretary of
Finance, whose decision, in turn, is appealable to the Office of the President and,
ultimately, to the regular courts, and that only her quasi- judicial functions or the
authority to decide disputed assessments, refunds, penalties and the like are subject to
the exclusive appellate jurisdiction of the CTA.20 She likewise contends that the petition
suffers from prematurity due to Petron's failure to exhaust all available remedies within
the administrative level in accordance with the Tariff and Customs Code
(TCC).21redarclaw

Facts taxpayer:

Petron avers that CTA properly assumed jurisdiction over the petition assailing the
imposition of excise tax on Petron's importation of alkylate based on Section 148 (e) of
the NIRC.

Issue:

Whether Petron should be held liable for its excise tax liabilities from1995 to 1998?

Ruling:

the phrase "other matters arising under this Code," as stated in the second paragraph of
Section 4 of the NIRC, should be understood as pertaining to those matters directly
related to the preceding phrase "disputed assessments, refunds of internal revenue
taxes, fees or other charges, penalties imposed in relation thereto" and must therefore
not be taken in isolation to invoke the jurisdiction of the CTA.
In other words, the subject phrase should be used only in reference to cases that are,
to begin with, subject to the exclusive appellate jurisdiction of the CTA, i.e., those
controversies over which the CIR had exercised her quasi-judicial functions or her
power to decide disputed assessments, refunds or internal revenue taxes, fees or other
charges, penalties imposed in relation thereto, not to those that involved the CIR's
exercise of quasi-legislative powers. etron's failure to exhaust administrative remedies
prescribed by law. Before a party is allowed to seek the intervention of the courts, it is a
pre-condition that he avail of all administrative processes afforded him, such that if a
remedy within the administrative machinery can be resorted to by giving the
administrative officer every opportunity to decide on a matter that comes within his
jurisdiction, then such remedy must be exhausted first before the court's power of
judicial review can be sought, otherwise, the premature resort to the court is fatal to
one's cause of action.40 While there are exceptions to the principle of exhaustion of
administrative remedies, it has not been sufficiently shown that the present case falls
under any of the exceptions.

PEN:

Taxes are the nation’s lifeblood through which government agencies continue to
operate and with which the State discharges its functions for the welfare of its
constituents. As an exception, however, this general rule cannot be applied if it would
work injustice against an innocent party. Petron, in this case, was not proven to have
had any participation in or knowledge of the CIR’s allegation of the fraudulent transfer
and utilization of the subject TCCs.