Consolidated Tax 2 Case Digests, Part II

REMEDIES OF THE TAXPAYER
ALLIED BANKING CORPORATION vs. CIR Facts: BIR issued a PAN against Allied Banking Corporation for deficiency Documentary Stamp Tax and Gross Receipts Tax for the tax year 2001. Allied received it on May 18, 2004 and filed a protest against it on May 27, 2004. BIR wrote a Formal Letter of Demand with Assessment Notices to petitioner stating that in case petitioner disagree with the final decision of BIR, they may appeal the same within thirty (30) days from receipt hereof, otherwise said deficiency tax assessment shall become final, executory and demandable. Petitioner received the Formal Letter of Demand with Assessment Notices on August 30, 2004. Allied then filed a Petition for Review with the CTA. CIR filed his Answer with a motion to dismiss the case on the ground that petitioner failed to file an administrative protest on the Formal Letter of Demand with Assessment Notices. CTA granted the dismissal saying that neither the formal letter nor the dismissal can be appealed but only decisions of the Commissioner of Internal Revenue on the disputed assessment that can be appealed before the CTA. In this case, petitioner failed to file an administrative protest on the formal letter of demand with the corresponding assessment notices. Hence, the assessments did not become disputed assessments as subject to the Courts review under Republic Act No. 9282. Allied moved to reconsider, denied,
In the instant case, petitioner timely filed a protest after receiving the PAN. In response thereto, the BIR issued a Formal Letter of Demand with Assessment Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was to dispute the assessments by filing an administrative protest within 30 days from receipt thereof. Petitioner, however, did not protest the final assessment notices. Instead, it filed a Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the Petition for Review by the CTA was proper. However, a careful reading of the Formal Letter of Demand with Assessment Notices leads us to agree with petitioner that the instant case is an exception to the rule on exhaustion of administrative remedies, i.e., estoppel on the part of the administrative agency concerned. It appears from the foregoing demand letter that the CIR has already made a final decision on the matter and that the remedy of petitioner is to appeal the final decision within 30 days. petitioner disputed the PAN but not the Formal Letter of Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a protest against the Formal Letter of Demand with Assessment Notices since the language used and the tenor of the demand letter indicate that it is the final decision of the respondent on the matter. Viewed in the light of the foregoing, respondent is now estopped from claiming that he did not intend the Formal Letter of Demand with Assessment Notices to be a final decision. , the Formal Letter of Demand with Assessment Notices which was not administratively protested by the petitioner can be considered a final decision of the CIR appealable to the CTA because the words used, specifically the words "final decision" and "appeal", taken together led petitioner to believe that the Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on the letter-protest it filed and that the available remedy was to appeal the same to the CTA.MANUEL BPI vs. WENCESLAO TRINIDAD, CIR
The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an administrative protest is an integral part of the remedies given to a taxpayer in challenging the legality or validity of an assessment. According to the CTA En Banc,although there are exceptions to the doctrine of exhaustion of administrative remedies, the instant case does not fall in any of the exceptions. Issue: whether the Formal Letter of Demand dated July 16, 2004 can be construed as a final decision of the CIR appealable to the CTA under RA 9282. Held: The petition is meritorious. RA 9282 has been interpreted to mean that decisions of the CIR on the protest of the taxpayer against the assessments can be appealed before the CTA.
FACTS: July 13, 1916, the defendant Collector, through his duly authorized agent at Zamboanga, seized and distrained property, consisting of machinery for sawing lumber and advertised them for sale, to realize the sum of P2,159.79, alleged forestry charges of Pujalte and Co. The BPI claimed to be the owner of the property seized and demanded its release, having been denied, BPI paid to the defendant the sum of P2,159.79 under protest, and brought the present action in the CFI of Zamboanga to recover the sum it paid. It alleged that the property seized, formerly belonged to the Taba Saw Mill Co., a copartnership formed by Pujalte and Co. and one Ramon Murga; Murga later sold all his rights, title, and interest in the copartnership to Pujalte and Co., which thereby became its sole owner. Taba Saw Mill Co. chattel mortgaged to BPI, the property in question, as security for the payment of two promissory notes for the sum of P180,000. When the tax lien was found to be
1|C h u a Da vi d De l os Re ye s D o ct or Du n g c a M a n u e l Ra r o S or o Ta x I I C Di ge s t s
due to the Government from Pujalte and Co. as forestry charges, and when the property was seized by the defendant, the said chattel mortgage was still subsisting. The lower court, dismissed the plaintiff's complaint and absolved the defendant from all liability, ruling that, Pujalte and Co. was liable to pay the taxes for which the property in question was distrained was not of BPIs but Pujalte and Co., When BPI having "voluntarily and spontaneously" paid the debt of the latter, had no cause of action against the defendant collector, and could only recover the sum so paid by it from Pujalte and Co., under the Civil Code; And that the plaintiff should have proceeded under section 141 of Act No. 2339, and not under section 140 of the said Act; "Even supposing for a moment" that the plaintiff had a right of action against the defendant to recover the sum paid by it to the latter, yet this action must fail because the property in question, having been used by Pujalte and Co. in its business of cutting and sawing lumber, was liable to seizure and distraint under section 149 of Act No. 2339. From that judgment the plaintiff appealed to this court. ISSUE: Whether or not, the lower court erred in dismissing the case and holding that plaintiff should have proceeded under section 141 of Act No. 2339, and not under section 140. RULING: YES. Section 140 of the Internal Revenue Law (Act No. 2339 provides as follows:
section 149 of Act No. 2339, which in no way provides for the forfeiture of the property on which such a lien attaches. Forfeiture is "the divestiture of property without compensation, in consequence of an offense. The effect of such forfeiture is to transfer the title to the specific thing from the owner to the sovereign power." (12 R. C. L., 124.) There is a great difference between a seizure under forfeiture and a seizure to enforce a tax lien. In the former all the proceeds derived from the sale of the thing forfeited are turned over to the Collector of Internal Revenue (sec. 148, Act No. 2339) in the latter the residue of such proceeds over and above what is required to pay the tax sought to be realized, including expenses, is returned to the owner of the property (second paragraph, sec. 152, Act No. 2339). Clearly, the remedy applicable to the present case is that provided for in section 140, above quoted, and which the plaintiff invoked. DISPOSITIVE PORTION: For the foregoing reasons the judgment appealed from is hereby revoked, and it is hereby ordered and decreed that a judgment be entered in favor of the plaintiff and against the defendant, ordering the latter to refund to the former the sum of P2,159.79, with interest thereon at the legal rate from the 13th day of July, 1916, until paid, and without any finding as to costs. So ordered.SORO Final decision of the CIR Oceanic Wireless Network Inc. v. CIR (2005)
SEC. 140. Recovery of tax paid under protest. When the validity of any tax in questioned, or amount disputed, or other question raised as to liability therefor, the person against whom or against whose property the same is sought to be enforced shall pay the tax under instant protest, or upon protest within ten days, and shall thereupon request the decision of the Collector of Internal Revenue. If the decision of the Collector of Internal Revenue is adverse, or if no decision is made by him within six months from the date when his decision was requested, the taxpayer may proceed, at any time within two years after the payment of the tax, to bring an action against the Collector of Internal Revenue for the recovery of the sum alleged to have been illegally collected, the process to be served upon him, upon the provincial treasurer, or upon the officer collecting the tax. Section 141 of the same Act provides: SEC. 141. Action to contest forfeiture of chatted. In case of the seizure of personal property under claim of forfeiture the owner, desiring to contest the validity of the forfeiture, may at any time before sale or destruction of the property bring an action against the person seizing the property or having possession thereof to recover the same, and upon giving proper bond may enjoin the sale; or after the sale and within six months he may bring an action to recover the net proceeds realized at the sale. The lower court was of the opinion that the plaintiff should have proceeded under the latter section above quoted and not under the former. It cannot be maintained that the personal property in question was seized by the defendant "under claim of forfeiture;" nor could it have been legally seized under claim of forfeiture. It was seized to enforce an alleged tax lien, under
Facts: Petitioner received from the BIR deficiency tax assessments for the taxable year 1984, total amount is P8.6M. The petitioner filed a protest and asked for reconsideration. The Chief of the BIR Accounts Receivable and Billing Division denied petitioners request for reinvestigation, and requested the petitioner to pay said amount within 10 days from the receipt thereof. (DEMAND LETTER) The petitioner failed to pay within the prescribed period, the Assistant Commissioner for Collection issued warrants of distraint and/or levy and garnishment, these were served on Oct 19 and 17, 1991. Petitioner filed a petition for review with the CTA. The CTA dismissed the petition for lack of jurisdiction, because the petitioner filed beyond the 30 day period. The Petitioner filed a Motion for Reconsideration arguing that the demand letter CANNOT BE CONSIDERED AS THE FINAL DECISION OF THE CIR because the letter was signed by a subordinate and NOT THE COMMISSIONER. The MR was denied and the petitioner filed a Petition for Review with the CA, the petitioner argues that there was no final decision to speak of because the Commissioner had yet to make a personal determination as regards the merits of petitioners case. The CA dismissed the petition for lack of merit, as well as the petitioners MR (of the dismissal). Issues:
1. 2.
Whether or not the demand letter is deemed final and executory? Whether or not the demand letter attained finality despite the fact that it was ISSUED and SIGNED by the Chief of the Accounts Receivable and Billing Division instead of the BIR Commissioner?
YES. The general rule is that the Commissioner of Internal Revenue may delegate any power vested upon him by law to Division Chiefs or to officials of higher rank. He cannot, however, delegate the four powers granted to him under the National Internal Revenue Code (NIRC).1 Thus, the authority to make tax assessments may be delegated to subordinate officers. Said assessment has the same force and effect as that issued by the Commissioner himself, if not reviewedor revised by the latter such as in this case. CHUA CIR vs. Union Shipping Corp & CTA Facts: Commissioner of Internal Revenue assessed against Yee Fong Hong, Ltd. and/or herein private respondent Union Shipping Corporation for deficiency income taxes. , private respondent protested the assessment. Petitioner, without ruling on the protest, issued a 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 private respondent filed with respondent court its Petition for Review of the petitioner's assessment of its deficiency income taxes Respondent Tax Court, in a decision dated December 9, 1983, ruled in favor of private respondent Issue: W/N the issuance of a warrant of distraint and levy is proof of the finality of an assessment. NO Ruling: ISSUANCE OF WARRANT OF DISTRAINT NOT CONSIDERED FINAL DECISION
Held: 1. YES.
A demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. The determination on whether or not a demand letter is final is conditioned upon the language used or the tenor of the letter being sent to the taxpayer. The Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment. On the basis of his 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. Taxpayer PROS OF A FINAL ASSESSMENT The 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 requests for recomputation and reconsideration. 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. would also deter the Commissioner from unfairly making the taxpayer grope in the dark and speculate as to which action constitutes the decision appealable to the tax court
1 SEC. 6. Power of the Commissioner to Make Assessments' and Prescribe Additional Requirements for Tax Administration and Enforcement. ' (A) Examination of Returns and Determination of Tax Due. - After a return has been filed as required under the provisions of this Code, the Commissioner or his duly authorized representative may authorize the examination of any taxpayer and the assessment of the correct amount of tax; Provided, however, That failure to file a return shall not prevent the Commissioner from authorizing the examination of any taxpayer. The tax or ny deficiency tax so assessed shall be paid upon notice and demand from the Commissioner or from his duly authorized representative. . . . (Emphasis supplied)
In this case, the letter of demand dated January 24, 1991, unquestionably constitutes the final action taken by the Bureau of Internal Revenue on petitioner's request for reconsideration when it reiterated the tax deficiency assessments due from petitioner, and requested its payment. Failure to do so would result in the 'issuance of a warrant of distraint and levy to enforce its collection without further notice.
Court had already laid down the dictum that the Commissioner should always indicate to the taxpayer in clear and unequivocal language what constitutes his final determination of the disputed assessment There appears to be no dispute that petitioner did not rule on private respondent's motion for reconsideration but contrary to the above ruling of this Court, left private respondent in the dark as to which action of the Commissioner is the decision appealable to the Court of Tax Appeals. Had he categorically stated that he denies private respondent's motion for reconsideration and that his action constitutes his final determination on the disputed assessment, private respondent without needless difficulty would have been able to determine when his right to appeal accrues and the resulting confusion would have been avoided Under the circumstances, the Commissioner of Internal Revenue, not having clearly signified his final action on the disputed assessment, legally the period to appeal has not commenced to run. Thus, it was only when private respondent received the summons on the civil suit for collection of deficiency income on December 28, 1978 that the period to appeal commenced to run. law library The request for reinvestigation and reconsideration was in effect considered denied by petitioner when the latter filed a civil suit for collection of deficiency income. So. that on January 10, 1979 when private respondent filed the appeal with the Court of Tax Appeals, it consumed a total of only thirteen (13) days well within the thirty day period to appeal pursuant to Section 11 of R.A. 1125 BTW-- the Commissioner of Internal Revenue Misael P. Vera, on query of respondent's counsel, opined that respondent corporation being merely a husbanding agent is not liable for the payment of the income taxes due from the foreign ship owners loading cargoes in the PhilippinesDAVID CIR V ISABELAG.R. No. 135210 Petitioner= CTA, Respomdent= Isabela Cultural Corporation Facts: 'In an investigation conducted on the 1986 books of account of [respondent, petitioner] had the preliminary [finding] that [respondent] incurred a total income tax deficiency of P9,985,392.15, inclusive of increments. Upon protest by [respondent's] counsel, the said preliminary assessment was reduced to the amount of P325,869.44. On February 23, 1990, [respondent] received from [petitioner] an assessment letter demanding payment for the taxable period from January 1, 1986 to December 31, 1986.In a letter, dated March 22, 1990, filed with the [petitioner's] office on March 23, 1990[respondent] requestedreconsideration of the subject assessment.Supplemental to its protest was a letter, were attached certain documents supportive of its protest, as well as a Waiver of Statute of Limitation, where it was indicated that [petitioner] would only have until April 5, 1991 within which to asses and collect the taxes that may be found due from [respondent] after the re-investigation.
[Respondent] received from [petitioner] a Final Notice Before Seizure, dated December 22, 1994 In said letter, [petitioner] demanded payment of the subject assessment within ten (10) days from receipt thereof. Otherwise, failure on its part would constrain [petitioner] to collect the subject assessment through summary remedies. [Respondent] considered said final notice of seizure as [petitioner's] final decision. Hence, the instant petition for review filed with this Court. The CTA having rendered judgment dismissing the petition, [respondent] filed the instant petition anchored on the argument that [petitioner's] issuance of the Final Notice Before Seizure constitutes [its] decision on [respondent's] request for reinvestigation, which the [respondent] may appeal to the CTA. CA reversed the Court of Tax Appeals. The CA considered the final notice sent by petitioner as the latter's decision, which was appealable to the CTA. The appellate court reasoned that the final Notice before seizure had effectively denied petitioner's request for a reconsideration of the commissioner's assessment. The CA relied on the long-settled tax jurisprudence that a demand letter reiterating payment of delinquent taxes amounted to a decision on a disputed assessment. Issue: Whether or not the Final Notice before Seizureconstitutes the final decision of the CIR appealable to the CTA? Held: Yes.A final demand letter from the Bureau of Internal Revenue, reiterating to the taxpayer the immediate payment of a tax deficiency assessment previously made, is tantamount to a denial of the taxpayer's request for reconsideration. Such letter amounts to a final decision on a disputed assessment and is thus appealable to the Court of Tax Appeals (CTA). Prior to the decision on a disputed assessment, there may still be exchanges between the commissioner of internal revenue (CIR) and the taxpayer. The former may ask clarificatory questions or require the latter to submit additional evidence. However, the CIR's position regarding the disputed assessment must be indicated in the final decision. It is this decision that is properly appealable to the CTA for review.The very title expressly indicated that it was a finalnotice prior to seizure of property. The letter itself clearly stated that respondent was being given "this LAST OPPORTUNITY" to pay; otherwise, its properties would be subjected to distraint. Furthermore, Section 228 of the National Internal Revenue Code states that a delinquent taxpayer may nevertheless directly appeal a disputed assessment, if its request for reconsideration remains unacted upon 180 days after submission thereof. Lastly, jurisprudence dictates that a final demand letter for payment of delinquent taxes may be considered a decision on a disputed or protested assessment. In the instant case, the second notice received by private respondent verily indicated its nature that it was final. Unequivocably, therefore, it was tantamount to a rejection of the request for reconsideration. DELOSREYES
YABES vs. FLOJO Facts: Doroteo Yabes of Calamaniugan Cagayan, is an exclusive dealer of products of the International Harvester Macleod, Inc., received on or about May 1, 1962, a letter from the CIR dated March 27, 1962, demanding payment of the amount of P15,976.81, as commercial broker's fixed and percentage taxes plus surcharges and the sum of P2,530 as compromise penalty allegedly due from Yabes for the years 1956-1960; On May 11, 1962, Doroteo Yabes, through his counsel, filed with the Commissioner's Office his letter protesting the assessment of commercial broker's fixed and percentage taxes plus penalties against him on the ground that his agreements with the International Harvester Macleod, Inc. were of purchase and sale, and not of agency, hence he claimed he was not able to pay such kind of taxes; Thereafter, there ensued an exchange of correspondence between the lawyers of Doroteo Yabes and the Commissioner; the Commissioner in a letter dated August 3, 1962, informed Doroteo Yabes that he acted as a commercial broker "in accordance with the ruling of this Office in the case of Cirilo D. Constantino;" in turn, Doroteo Yabes, in a letter dated August 22, 1962, requested for the reinvestigation, or review of the case by the appellate division of the Bureau of Internal Revenue in accordance with standing rules, regulations or practice on the matter; Yabes also wrote the Commissioner on August 24, 1962, requesting that the appeal be held in abeyance pending final decision of the Case of Cirilo D. Constantino; in reply, the Commissioner informed Doroteo Yabes in a letter dated September 18, 1962, that the latter's request for reinvestigation was denied on the ground that he has "not submitted any evidence to offset the findings of this Office as to warrant a reinvestigation thereof, but eight days later or on September 26, 1962, the Commissioner wrote a letter advising Doroteo Yabes that "the administrative appeal ... will be held in abeyance pending the resolution of the issues in a similar case (obviously referring to the aforesaid Constantino case)"; To give time for the Commissioner to study the case and several other cases similar thereto, the lawyers of Doroteo Yabes agreed to file, and their client, Doroteo Yabes did file a tax waiver on October 20, 1962, extending the period of prescription to December 31, 1967; Then Doroteo Yabes died and no estate proceedings were instituted for the settlement of his estate; his widow also died during the pendency of the case; the petitioners are the children of the deceased taxpayer. On March 14, 1966, the Court of Tax Appeals decided the Constantino "test" case. The Court of Tax Appeals ruled that agreements entered into by Constantino with the International Harvester Macleod, Inc. were of purchase and sale, and not of agency, hence no commercial broker's fixed and percentage fees could be collected from the said taxpayer. However this Court on February 27, 1970, in G.R. No. L-25926 reversed the Court of Tax Appeals and ruled in favor of the Commissioner of Internal Revenue. After a lapse of about five years, the heirs of the deceased Doroteo Yabes, through their lawyers, received a letter from the Commissioner dated July 27, 1967, requesting that they "waive anew the Statute of Limitations" and further confirming the previous understanding that the final resolution of the protest of the deceased Doroteo Yabes was "being held in abeyance until the Supreme Court renders its decision on a similar case involving the same factual and legal issues brought to it on appeal" (referring to the Constantino "test" case); conformably with the request of the Commissioner, the heirs of Doroteo Yabes filed a revised waiver further extending the period of prescription to December 31, 1970. Thereafter, no word was received by the petitioners or their lawyers during the interim of more than three (3) years, but on January 20, 1971, petitioners as heirs of the
deceased Doroteo Yabes received the summons and a copy of the complaint filed by the Commissioner. Taking the complaint as the final decision of the Commissioner on the disputed assessment against the deceased taxpayer Doroteo Yabes, petitioners filed on February 12, 1971, a petition for review of said disputed assessment with the Court of Tax Appeals; 18 later on the same day, February 12, 1971, petitioners filed their answer to the complaint of the Commissioner before the Court of First Instance of Cagayan; 19 and alleged therein, by way of special defense, that the Court of Tax Appeals has exclusive jurisdiction of the action and that there is another action of the same nature between the parties relating to the same assessment pending before the Court of Tax Appeals; ISSUE: Whether or not the assessment made by the Commissioner of Internal Revenue against the deceased taxpayer Doroteo Yabes, as contained in the letter dated March 27, 1962, has become final, executory and incontestable, after Doroteo Yabes had received the Commissioner's letter dated August 3, 1962, denying the latter's protest against the said assessment on September 18, 1962 and his failure to appeal therefrom within the 30-day period contemplated under Section 11, of Republic Act 1125 Held: NO. There is no reason for Us to disagree from or reverse the Court of Tax Appeals' conclusion that under the circumstances of this case, what may be considered as final decision or assessment of the Commissioner is the filing of the complaint for collection in the respondent Court of First Instance of Cagayan, the summons of which was served on petitioners on January 20, 1971, and that therefore the appeal with the Court of Tax Appeals in CTA Case No. 2216 was filed on time. 36 The respondent Court of First Instance of Cagayan can only acquire jurisdiction over this case filed against the heirs of the taxpayer if the assessment made by the Commissioner of Internal Revenue had become final and incontestable. If the contrary is established, as this Court holds it to be, considering the aforementioned conclusion of the Court of Tax Appeals on the finality and incontestability of the assessment made by the Commissioner is correct, then the Court of Tax Appeals has exclusive jurisdiction over this case. Petitioners received the summons in Civil Case No. II-7 of the respondent Court of First Instance of Cagayan on January 20, 1971, and petitioners filed their appeal with the Court of Tax Appeals in CTA Case No. 2216, on February 12, 1971, well within the thirty-day prescriptive period under Section 11 of Republic Act No. 1125. The Court of Tax Appeals has exclusive appellate jurisdiction to review on appeal any decision of the Collector of Internal Revenue in cases involving disputed assessments and other matters arising under the National Internal Revenue Code.DOCTOR FISHWEALTH CANNING CORPORATION vs.CIR. Issue: whether ther petitioner arguing that the CTA En Banc erred in holding that the petition it filed before the CTA First Division as well as that filed before it (CTA En Banc) was filed out of time. Facts: CIR (respondent), by Letter of Authority dated May 16, 2000,1 ordered the examination of the internal revenue taxes for the taxable year 1999 of Fishwealth Canning Corp.
The investigation disclosed that petitioner was liable in the amount of P2,395,826.88 representing income tax, value added tax (VAT), withholding tax deficiencies and other miscellaneous deficiencies. \ y Petitioner eventually settled these obligations CIRt reinvestigated petitioners books of accounts and other records of internal revenue taxes covering the same period for the purpose of which it issued a subpoena duces tecum requiring petitioner to submit its records and books of accounts. Petitioner requested the cancellation of the subpoena on the ground that the same set of documents had previously been examined. As petitioner did not heed the subpoena, respondent thereafter filed a criminal complaint against petitioner but it was dismissed for insufficiency of evidence Respondent sent, on August 6, 2003, petitioner a Final Assessment Notice of income tax and VAT deficiencies totaling for the taxable year 1999,4 which assessment petitioner contested by letter of September 23, 2003.5 CIR t thereafter issued a Final Decision on Disputed Assessment dated August 2, 2005, which petitioner received on August 4, 2005, denying its letter of protest, apprising it of its income tax and VAT liabilities and requesting the immediate payment thereof, "inclusive of penalties incident to delinquency." Respondent added that if petitioner disagreed, it may appeal to (CTA) "within thirty (30) days from date of receipt hereof, otherwise our said deficiency income and value-added taxes assessments shall become final, executory, and demandable."7 petitioner filed, a Letter of Reconsideration dated August 31, 2005.8 a Preliminary Collection Letter dated September 6, 2005, respondent demanded payment of petitioners tax liabilities,9 drawing petitioner to file on October 20, 2005 a Petition for Review10 before the CTA.
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received on August 4, 2005. Under the above-quoted Section 228 of the 1997 Tax Code, petitioner had 30 days to appeal respondents denial of its protest to the CTA. Since petitioner received the denial of its administrative protest on August 4, 2005, it had until September 3, 2005 to file a petition for review before the CTA Division. It filed one, however, on October 20, 2005, hence, it was filed out of time. For a motion for reconsideration of the denial of the administrative protest does not toll the 30-day period to appeal to the CTA.DUNGCA
y y
RIZAL COMMERCIAL BANKING CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE FACTS: For resolution is petitioners Motion for Reconsideration of our Decision affirming the Decision of the Court of Tax Appeals En Banc , denying petitioners Petition for Relief from Judgment and Motion for Reconsideration. As founded by the CTA, the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. Petitioner opted to file a petition for review before the CTA. Unfortunately, the petition for review was filed out of time, it was filed more than 30 days after the lapse of the 180-day period. Consequently, it was dismissed by the CTA for late filing. Petitioner did not file a motion for reconsideration or make an appeal; hence, the disputed assessment became final, demandable and executory. Now on the present petition, Petitioner reiterates its claim that its former counsels failure to file petition for review with the CTA within the period set by Section 228 of the NIRC was excusable. Petitioner maintains that its counsels neglect in not filing the petition for review within the reglementary period was excusable. It alleges that the counsels secretary misplaced the Resolution hence the counsel was not aware of its issuance and that it had become final and executory. ISSUE: When does the Inaction of the Commissioner to resolve an issue brought before its office, renders the allowance of a filing of a petition for review before the Court of tax Appeals. RULING: The Court of Tax Appeals is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction. It is clear that the jurisdiction of the Court of Tax Appeals has been expanded to include not only decisions or rulings but inaction as well of the Commissioner of Internal Revenue. The decisions, rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax Appeals with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such decision or ruling, or within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments. This 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessments. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same.
y y
respondent argued, among other things, that the petition was filed out of time, Petitioner filed a Motion for Reconsideration13 which was denied
petitioner filed a petition for review before the CTA En Banc16 which, by Decision17 of July 5, 2007, held that the petition before the First Division, as well as that before it, was filed out of time.
Held: y petitioners administrative protest was denied by Final Decision on Disputed Assessment dated August 2, 2005 issued by respondent and which petitioner
In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: 1) file a petition for review with the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or 2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. However, these options are mutually exclusive, and resort to one bars the application of the other. In the instant case, the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. Thus, petitioner opted to file a petition for review before the Court of Tax Appeals. Unfortunately, the petition for review was filed out of time, i.e., it was filed more than 30 days after the lapse of the 180-day period. Consequently, it was dismissed by the Court of Tax Appeals for late filing. Petitioner did not file a motion for reconsideration or make an appeal; hence, the disputed assessment became final, demandable and executory. Based on the foregoing, petitioner can not now claim that the disputed assessment is not yet final as it remained unacted upon by the Commissioner; that it can still await the final decision of the Commissioner and thereafter appeal the same to the Court of Tax Appeals. This legal maneuver cannot be countenanced. After availing the first option, i.e., filing a petition for review which was however filed out of time, petitioner can not successfully resort to the second option, i.e., awaiting the final decision of the Commissioner and appealing the same to the Court of Tax Appeals, on the pretext that there is yet no final decision on the disputed assessment because of the Commissioners inaction. DISPOSITIVE PORTION: WHEREFORE, in view of the foregoing, petitioners motion for reconsideration is DENIED. SO ORDERED.MANUEL PROPER PARTY TO FILE A CLAIM FOR REFUND SILKAIR (SINGAPORE) PTE. LTD., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent. FACTS: -Silkair is a foreign corporation organized under the laws of Singapore with a Philippine representative office in Cebu City. It is an online international carrier plying the SingaporeCebu-Singapore and Singapore-Cebu-Davao-Singapore routes -Silkair filed with the BIR an administrative claim for the refund of P3,983,590.4 in excise taxes which it allegedly erroneously paid on its purchases of aviation jet fuel from Petron Corporation (Petron) from June to December 2000 -Silkairs basis for its claim is BIR Ruling No. 339-92 and Section 135 of NIRC which includes the petroleum products not to be subject to excise taxes -BIR took no action
-Silkair filed a petition for review with the CTA -SIlkair invoked its exemption from payment of excise taxes and relied on the reciprocity clause under Article 4(2) of the Air Transport Agreement entered between the Republic of the Philippines and the Republic of Singapore -CTA First Division found that petitioner was qualified for tax exemption under Section 135(b) of the NIRC, as long as the Republic of Singapore exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies under Article 4(2) of the Air Transport Agreement -However, it ruled that petitioner was not entitled to the excise tax exemption for failure to present proof that it was authorized to operate in the Philippines from June to December 2000 due to the courts non-admission of some of its documents, which were merely photocopies i.e. Certificate of Registration with SEC and its operating permits issued by the Civil Aeronautics Board -Silkair asserts that despite its failure to present the original copies, the CTA should take judicial notice since those documents were already offered and admitted in evidence in similar cases pending before the CTA -CIR also contends that an excise tax, being an indirect tax, is the direct liability of the manufacturer or producer. CIR reiterates that when an excise tax on petroleum products is added to the cost of goods sold to the buyer, it is no longer a tax but becomes part of the price which the buyer has to pay to obtain the goods. -According to CIR, Silkair cannot seek reimbursement for its alleged erroneous payment of the excise tax since it is neither the entity required by law nor the entity statutorily liable to pay the said tax -SIlkair claims that this involves a clear grant of tax exemption to it by law and by virtue of an international agreement between the Philippines and Singapore. And Silkair being the entity which made the erroneous tax payment of the excise tax, it is the proper party to file the claim for refund -CTA dismissed Silkairs petition on the ground of failure to prove that it was authorized to operate in the Philippines and that Silkair is further not found to be the proper party to file the instant claim for refund -Silkair contends that the clear intent of the provisions of the NIRC and the Air Transport Agreement is to exempt aviation fuel from payment of excise tax, whether such is a direct or an indirect tax. According to Silkair, the excise tax on aviation fuel, though initially payable by the manufacturer or producer, attaches to the goods and becomes the liability of the person having possession thereof Issue:
WON Silkair is the proper party to claim for the refund of excise taxes paid on aviation fuel Held: -NO -SC held that the proper party to question, or seek a refund of, an indirect tax is the statutory taxpayer, the person on whom the tax is imposed by law and who paid the same even if he shifts the burden thereof to another -Even if the consumers or purchasers ultimately pay for the tax, they are not considered the taxpayers. The fact that Petron, on whom the excise tax is imposed, can shift the tax burden to its purchasers does not make the purchasers the taxpayers and the consumers the withholding agent -Silkair, as the purchaser and end-consumer, ultimately bears the tax burden, but this does not transform its status into a statutory taxpayer -the proper party to question, or claim a refund or tax credit of an indirect tax is the statutory taxpayer, which is Petron in this case, as it is the company on which the tax is imposed by law and which paid the same even if the burden thereof was shifted or passed on to another -As to Silkairs assertion that the CTA may take judicial notice of its SEC Registration, previously offered and admitted in evidence in similar cases before the CTA, SC does not agree -Evidence presented in the previous cases cannot be considered in this instant case without being offered in evidence -Silkair was already given enough time and opportunity to present the originals or certified true copies of the needed documents -Silkair failed to establish its authority to operate in the Philippines from June to December 2000 -The exemptions provided for in the NIRC, must not rest on vague, uncertain or indefinite inference, but should be granted only by a clear and unequivocal provision of law on the basis of language too plain to be mistaken, exceptions must be strictly construed against the taxpayer, as taxes are the lifeblood of the government -Petition DENIED. CTAs decisionRARO CIR vs. SMART COMMUNICATION, INC. FACTS: Respondent Smart Communications, Inc entered into three Agreements for Programming and Consultancy Services with Prism Transactive (M) Sdn. Bhd. (Prism), a nonresident Malaysian corporation. Under the agreements, Prism was to provide programming and consultancy services for the installation of the Service Download Manager (SDM) and the
Channel Manager (CM), and for the installation and implementation of Smart Money and Mobile Banking Service SIM Applications (SIM Applications) and Private Text Platform (SIM Application). Prism billed respondent in the amount of US$547,822.45, thinking that these payments constitute royalties, respondent withheld the amount of US$136,955.61 or P7,008,840.43, representing the 25% royalty tax under the RP-Malaysia Tax Treaty and remitted the same to the BIR. Within the 2 year period to claim a refund, respondent filed with the BIR, through the ITAD, an administrative claim for refund of the amount of P7,008,840.43. Petitioner CIR failed to act on the claim for refund, respondent filed a Petition for Review with the CTA, where respondent claimed that it is entitled to a refund because the payments made to Prism are not royalties but business profits, pursuant to the definition of royalties under the RP-Malaysia Tax Treaty and accourding to said treaty, business profits are taxable in the Philippines only if attributable to a permanent establishment in the Philippines, the payments made to Prism, a Malaysian company with no permanent establishment in the Philippines, should not be taxed. Petitioner in its Answer argued that respondent, as withholding agent, is not a party-in-interest to file the claim for refund. The 2nd Division of the CTA upheld respondents right, as a withholding agent, to file the claim for refund for the partial amount. Although it agreed with respondent that the payments for the CM and SIM Application Agreements are business profits, and are not subject to tax under the RP-Malaysia Tax Treaty, the 2nd Division found the payment for the SDM Agreement a royalty subject to withholding tax. Accordingly, respondent was granted refund in the amount of P3,989,456.43 only. Both parties moved for partial reconsideration but was denied. Unsatisfied, both parties appealed to the CTA En, which rendered a Decision affirming the partial refund granted to respondent. In sustaining respondents right to file the claim for refund, the CTA En Banc said that although respondent and Prism are unrelated entities, such circumstance does not affect the status of [respondent] as a party-in-interest [as its legal interest] is based on its direct and independent liability under the withholding tax system. The CTA En Banc also concurred with the 2nd Divisions characterization of the payments made to Prism, specifically that the payments for the CM and SIM Application Agreements constitute business profits, while the payment for the SDM Agreement is a royalty. Only petitioner sought reconsideration of the Decision. The CTA En Banc, however, found no cogent reason to reverse its Decision, and thus, denied, hence this present recourse. ISSUE: Whether respondent has the right to file the claim for refund Petitioners Arguments: Respondents right to claim the refund are inapplicable since the withholding agents therein are wholly owned subsidiaries of the principal taxpayers, unlike in the instant case where the withholding agent and the taxpayer are unrelated entities. Petitioner further claims that since respondent did not file the claim on behalf of Prism, it has no legal
standing to claim the refund. To rule otherwise would result to the unjust enrichment of respondent, who never shelled-out any amount to pay the royalty taxes. Petitioner, thus, posits that the real party-in-interest to file a claim for refund of the erroneously withheld taxes is Prism. He cites as basis the case of Silkair (Singapore) Pte, Ltd. v. Commissioner of Internal Revenue, where it was ruled that the proper party to file a refund is the statutory taxpayer. Finally, assuming that respondent is the proper party, petitioner counters that it is still not entitled to any refund because the payments made to Prism are taxable as royalties, having been made in consideration for the use of the programs owned by Prism. Respondents Arguments: Respondent, on the other hand, maintains that it is the proper party to file a claim for refund as it has the statutory and primary responsibility and liability to withhold and remit the taxes to the BIR. It points out that under the withholding tax system, the agent-payor becomes a payee by fiction of law because the law makes the agent personally liable for the tax arising from the breach of its duty to withhold. Thus, the fact that respondent is not in any way related to Prism is immaterial. RULING: The petition is bereft of merit. Pursuant to Sections 204(c) and 229 of the National Internal Revenue Code (NIRC), the person entitled to claim a tax refund is the taxpayer. However, in case the taxpayer does not file a claim for refund, the withholding agent may file the claim. In Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation, a withholding agent was considered a proper party to file a claim for refund of the withheld taxes of its foreign parent company. Pertinent portions of the Decision read: A person liable for tax has been held to be a person subject to tax and properly considered a taxpayer. The terms liable for tax and subject to tax both connote legal obligation or duty to pay a tax. It is very difficult, indeed conceptually impossible, to consider a person who is statutorily made liable for tax as not subject to tax. By any reasonable standard, such a person should be regarded as a party in interest, or as a person having sufficient legal interest, to bring a suit for refund of taxes he believes were illegally collected from him. In Philippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, this Court pointed out that a withholding agent is in fact the agent both of the government and of the taxpayer, and that the withholding agent is not an ordinary government agent. If, as pointed out in Philippine Guaranty, the withholding agent is also an agent of the beneficial owner of the dividends with respect to the filing of the necessary income tax return and with respect to actual payment of the tax to the government, such authority may reasonably be held to include the authority to file a claim for refund and to bring an action for recovery of such claim. This implied authority is especially warranted where, as in the instant case, the withholding agent is the wholly owned subsidiary of the parent-stockholder and therefore, at all times, under the effective control of such parent-stockholder. In the circumstances of this case, it seems particularly unreal to deny the implied authority of P&GPhil. to claim a refund and to commence an action for such refund.
Petitioner, however, submits that this ruling applies only when the withholding agent and the taxpayer are related parties, i.e., where the withholding agent is a wholly owned subsidiary of the taxpayer. We do not agree. Although such relation between the taxpayer and the withholding agent is a factor that increases the latters legal interest to file a claim for refund, there is nothing in the decision to suggest that such relationship is required or that the lack of such relation deprives the withholding agent of the right to file a claim for refund. Rather, what is clear in the decision is that a withholding agent has a legal right to file a claim for refund for two reasons. First, he is considered a taxpayer under the NIRC as he is personally liable for the withholding tax as well as for deficiency assessments, surcharges, and penalties, should the amount of the tax withheld be finally found to be less than the amount that should have been withheld under law. Second, as an agent of the taxpayer, his authority to file the necessary income tax return and to remit the tax withheld to the government impliedly includes the authority to file a claim for refund and to bring an action for recovery of such claim. In this connection, it is however significant to add that while the withholding agent has the right to recover the taxes erroneously or illegally collected, he nevertheless has the obligation to remit the same to the principal taxpayer. As an agent of the taxpayer, it is his duty to return what he has recovered; otherwise, he would be unjustly enriching himself at the expense of the principal taxpayer from whom the taxes were withheld, and from whom he derives his legal right to file a claim for refund. DISPOSITIVE PORTION: WHEREFORE, the petition is DENIED. The assailed Decision dated June 28, 2007 and the Resolution dated July 31, 2007 of the Court of Tax Appeals En Banc are hereby AFFIRMED. The Bureau of Internal Revenue is hereby ORDERED to ISSUE a TAX CREDIT CERTIFICATE to Prism Transactive (M) Sdn. Bhd. in the amount of P3,989,456.43 representing the overpaid final withholding taxes for the month of August 2001. SO ORDERED.SORO BPI v. CIR Facts: Prior to its merger with petitioner Bank of the Philippine Islands (BPI) on July 1985, The Family Bank and Trust Co. (FBTC) earned income consisting of rentals from its leased properties and interest from its treasury notes for the period January 1 to June 30, 1985. Creditable withholding taxes in the total amount of P174,065.77 were remitted to respondent Commissioner of Internal Revenue FBTC, however, suffered a new loss of about P64,000,000.00 during the period in question. It also had an excess credit of P2,146,072.57 from the previous year. Thus, upon its dissolution in 1985, FBTC had a refundable of P2,320,138.34, representing that year's tax credit of P174,065.77 and the previous year's excess credit of P2,146,072.57
As FBTC's successor-in-interest, petitioner BPI claimed this amount as tax refund, but respondent Commissioner of Internal Revenue refunded only the amount of P2,146,072.57, leaving a balance of P174,065.77. Accordingly, petitioner filed a petition for review in the Court of Tax Appeals on December 29, 1987, seeking the refund of the aforesaid amount.2 However, in its decision rendered on July 19, 1994, the Court of Tax Appeals dismissed petitioner's petition for review and denied its claim for refund on the ground that the claim had already prescribed the appeals court affirmed the decision of the CTA Issue: whether petitioner's claim is barred by prescription. YES Ruling: The resolution of this question requires determination of when the two-year period of prescription under 292 of the Tax Code started to run There is no dispute that FBTC ceased operations on June 30, 1985 upon its merger with petitioner BPI. The merger was approved by the Securities and Exchange Commission on July 1, 1985. Petitioner contends, however that its claim for refund has yet prescribed because the two-year prescriptive period commenced to run only after it had filed FBTC's Final Adjustment Return on April 15 1986, pursuant to 46(a) of the National Internal Revenue Code of 1977 (the law applicable at the time of this transaction) which provided that Corporation returns. (a) Requirement. Every corporation, subject to the tax herein imposed, except foreign corporations not engaged in trade or business in the Philippines shall render, in duplicate, a true and accurate quarterly income tax return and final or adjustment return in accordance with the provisions of Chapter X of this Title. The return shall be filed by the president, vice-president, or other principal officer, and shall be sworn to by such officer and by the treasurer or assistant treasurer. The Court of Tax Appeals correctly ruled that the prescriptive period should be counted from July 31, 1985, 30 days after the approval by the SEC of the plan of dissolution in view of 78 of the Code. In case of the dissolution of a corporation, the period of prescription should be reckoned from the date of filing of the return required by 78 of the Tax Code. Hence, Petitioner's claim for refund is barred by prescription It is the Final Adjustment Return, in which amounts of the gross receipts and deductions have been audited and adjusted, which is reflective of the results of the operations of a business enterprise. It is only when the return, covering the whole year, is filed that the taxpayer will be able to ascertain whether a tax is still due or a refund can be claimed based on the adjusted and audited figures.7 Hence, this Court has ruled that at the earliest, the two-year prescriptive period for claiming a refund commences to run on the date of filing of the adjusted final tax return
As the FBTC did not file its quarterly income tax returns for the year 1985, there was no need for it to file a Final adjustment Return because there was nothing for it to adjust or to audit. After it ceased operations on June 30, 1985, its taxable year was shortened to six months, from January 1, 1985 to June 30, 1985 The situation of FBTC is precisely what was contemplated under 78 of the Tax Code. It thus became necessary for FBTC to file its income tax return within 30 days after approval by the SEC of its plan or resolution of dissolution. Indeed, it would be absurd for FBTC to wait until the fifteenth day of April, or almost 10 months after it ceased its operations, before filing its income tax return. Thus, 46(a) of the Tax Code applies only to instances in which the corporation remains subsisting and its business operations are continuing. In instances in which the corporation is contemplating dissolution, 78 of the Tax Code applies Petitioner further argues that the filing of a Final Adjustment Return would fall due on July 30, 1985, even before the due date for filing the quarterly return. This argument begs the question. It assumes that a quarterly return was required when the fact is that, because its taxable year was shortened, the FBTC did not have to file a quarterly return. In fact, petitioner presented no evidence that the FBTC ever filed such quarterly return in 1985 Petitioner contends that what 78 required was an information return, not an income tax return. It cites Revenue Memorandum Circular No. 14-85, of then Acting Commissioner of Internal Revenue Ruben B. Ancheta, referring to an "information return" in interpreting Executive Order No. 1026, which amended 78.12 The contention has no merit. The circular in question must be considered merely as an administrative interpretation of the law which in no case is binding on the courts.13 The opinion in question cannot be given any effect inasmuch as it is contrary to 244 of Revenue Regulation No. 2, as amended, which was issued by the Minister of Finance pursuant to the authority to him by 78 of the Tax Code. This provision states SEC. 244. Return of corporations contemplating dissolution or retiring from business. All corporations, partnership joint accounts and associations, contemplating dissolution or retiring ............. shall, within 30 days after the approval of such resolution authorizing their dissolution, and within the same period after their retirement from business, file their income tax returns xxx Considering that 78 of the Tax Code, in relation to 244 of Revenue Regulation No. 2 applies to FBTC, the two-year prescriptive period should be counted from July 30, 1985, i.e., 30 days after the approval by the SEC of its plan for dissolution. In accordance with 292 of the Tax Code, July 30, 1985 should be considered the date of payment by FBTC of the taxes withheld on the earned income. Consequently, the two-year period of prescription ended on July 30, 1987CHUA RELIANCE ON AN ADMINISTRATIVE ISSUANCE CITIBANK VS. COURT OF APPEALS
10 | C h u a D a v i d D e l o s R e y e s D o c t o r D u n g c a M a n u e l R a r o S o r o T a x I I C D i g e s t s
Facts: Citibank is a foreign corporation doing business in the Philippines. In 1979 and 1980, its tenants withheld and paid to the Bureau of Internal Revenue its taxes on rents due to Citibank. This is pursuant to Section 1(c) of the Expanded Withholding Tax Regulations requiring lessee to withhold and remit to the BIR five percent (5%) of the rental due the lessor, by way of advance payment of the latters income liability. On April 15, 1980, Citibank filed its corporate income tax returns for the year ended December 31, 1979 showing a net loss of P74,854,916.00 and its tax credits totalled P6,257,780.00, even without including the amounts withheld on rental income under the Expanded Withholding Tax System, the same not having been utilized or applied for the reason that the years operation resulted in a loss. The taxes thus withheld by the tenants from rentals paid to Citibank in 1979 were not included as tax credits. For the year ended December 31, 1980, Citibanks corporate income tax returns filed on April 15, 1981, showed a net loss of P77,071,790.00 for income tax purposes. Its available tax credit (refundable) at the end of 1980 amounting to P11,532,855.00 was not utilized or applied. The said available tax credits did not include the amounts withheld by Citibanks tenants from rental payments in 1980 but the rental payments for that year were declared as part of its gross income included in its annual income tax returns The lessor, Citibank then asked for tax refund alleging that it is not liable for any income tax liability because its annual operation resulted in a net loss as shown in its income tax return filed at the end of the taxable year. The Court of Tax Appeals adjudged Citibanks entitlement to the tax refund sought for. The BIR Commissioner appealed to the Court of Appeals who reversed the CTAs decision. Hence, this petition for review on certiorari. Issue: W/N the lessor-Citibank is entitled to a refund on account of its loss in operations. YES Ruling: THE PETITION IS MERITORIOUS. PETITIONER IS ENTITLED TO REFUND UNDER SECTION 230 OF THE NIRC. In the present case, there is no question that the taxes were withheld legally by the tenants. However, the annual income tax returns of Citibank for tax years 1979 and 1980 undisputedly reflected the net losses it suffered. Taxes withheld do not remain legal and correct at the end of the taxable year if the taxpayer had sustained a loss in its annual operation. (UB) In several cases, we have already ruled that income taxes remitted partially on a periodic or quarterly basis should be credited or refunded to the taxpayer on the basis of the taxpayers final adjusted returns, not on such periodic or quarterly basis.
x x x When applied to taxpayers filing income tax returns on a quarterly basis, the date of payment mentioned in Section 292 (now Section 230) must be deemed to be qualified by Sections 68 and 69 of the present Tax Code x x x. It may be observed that although quarterly taxes due are required to be paid within 60 days from the close of each quarter, the fact that the amount shall be deducted from the tax due for the succeeding quarter shows that until a final adjustment return shall have been filed, the taxes paid in the preceding quarters are merely partial taxes due from a corporation. Neither amount can serve as the final figure to quantify what is due the government nor what should be refunded to the corporation. This interpretation may be gleaned from the last paragraph of Section 69 of the Tax Code which provides that the refundable amount, in case a refund is due a corporation, is that amount which is shown on its final adjustment return and not on its quarterly returns. xxx xxx xxx Clearly the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished. Private respondent being a corporation, Section 292 (now Section 230) cannot serve as the sole basis for determining the two-year prescriptive period for refunds. x x x x. Accordingly, the withheld amounts equivalent to five percent of the gross rental are remitted to the BIR and are considered creditable withholding taxes under Section 53-f, i.e., creditable against income tax liability for that year. The taxes withheld, as ruled in Gibbs vs. Commissioner of Internal Revenue,17 are in the nature of payment by a taxpayer in order to extinguish his possible tax obligation. They are installments on the annual tax which may be due at the end of the taxable year.18chanroblesvirtuallawlibrary In this case, petitioners lessees withheld and remitted to the BIR the amounts now claimed as tax refunds. That they were withheld and remitted pursuant to Rev. Reg. No. 13-78 does not derogate from the fact that they were merely partial payments of probable taxes. Like the corporate quarterly income tax, creditable withholding taxes are subject to adjustment upon determination of the correct income tax liability after the filing of the corporate income tax return, as at the end of the taxable year. This final determination of the corporate income tax liability is provided in Section 69, NIRC: SEC. 69. Final Adjustment Return. - Every corporation liable to tax under Section 24 shall file a final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax due on the entire taxable net income of that year the corporation shall either: (a) Pay the excess tax still due; or (b) Be refunded the excess amount paid, as the case may be.
In case the corporation is entitled to a refund of the excess estimated quarterly income taxes paid, the refundable amount shown on its final adjustment return may be credited against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding taxable year. The taxes thus withheld and remitted are provisional in nature. We repeat: five per cent of the rental income withheld and remitted to the BIR pursuant to Rev. Reg. No. 13-78 is, unlike the withholding of final taxes on passive incomes, a creditable withholding tax; that is, creditable against income tax liability if any, for that taxable year.DAVID CIR V PHILAMLIFEGR 105208 Facts: Private respondent Philamlife paid to the Bureau of Internal Revenue (BIR) its first quarterly corporate income tax for Calendar Year (CY) 1983. For its Fourth and final quarter ending December 31, private respondent suffered a loss and thereby had no income tax liability. In the return for that quarter, it declared a refund representing the first and second quarterly payments. In 1984, private respondent again suffered a loss and declared no income tax liability. However, it applied as tax credit for 1984representing its 1982 and 1983 overpaid income taxes. Private respondent filed a claim for its 1982 income tax refund of P133,084.00. On November 22, 1984, it filed a petition for review with the Court of Tax Appeals with respect to its 1982 claim for refund. Issue: What is the reckoning date of the two-year prescriptive period provided in section 230 on NIRC regarding on the recovery of tax erroneously or illegally collected? Held: Section 292 (now Section 230) stipulates that the two-year prescriptive period to claim refunds should be counted from date of payment of the tax sought to be refunded. When applied to tax payers filing income tax returns on a quarterly basis, the date of payment mentioned in Section 292 (now Section 230) must be deemed to be qualified by Sections 68 and 69 of the present Tax Code. Clearly, the prescriptive period of two years should commence to run only from the time that the refund is ascertained, which can only be determined after a final adjustment return is accomplished. In the present case, this date is April 16, 1984, and two years from this date would be April 16, 1986. The record shows that the claim for refund was filed on December 10, 1985 and the petition for review was brought before the CTA on January 2, 1986. Both dates are within the two-year reglementary period. Private respondent being a corporation, Section 292 (now Section 230) cannot serve as the sole basis for determining the two-year prescriptive period for refunds. As we have earlier said in the TMX Sales case, Sections 68, 69, and 70 on Quarterly Corporate Income Tax Payment and Section 321 should be considered in conjunction with it. Moreover, even if the two-year period had already lapsed, the same is not jurisdictional 4 and may be suspended for reasons of equity and other special circumstances.DELOSREYES CIRvs.COURT OF APPEALS, COURT OF TAX APPEALS and BANK OF THE PHILIPPINE ISLANDS as LIQUIDATOR OF PARAMOUNT ACCEPTANCE CORPORATION
Facts: Petitioner, Bank of the Philippine Islands (BPI for short) is a bank and trust corporation duly organized and existing under Philippine laws and acts as the liquidator of Paramount Acceptance Corporation after its dissolution on March 31, 1986. On April 2, 1986, Paramount Acceptance Corporation (Paramount for brevity) filed its Corporate Annual Income Tax Return, for calendar year ending December 31, 1985, declaring a Net Income of P3,324,802.00. The income tax due thereon is P1,153,681.00. However, Paramount paid the BIR its quarterly income tax. After deducting Paramount's total quarterly income tax payments of from its income tax, the return showed a refundable amount of P65,259.00. The appropriate box in the return was marked with a cross (x) indicating "To be refunded" the amount of P65,29,00. n April 14, 1988, petitioner BPI, as liquidator of Paramount, through counsel filed a letter dated April 12, 1988 reiterating its claim for refund of P65,259.00 as overpaid income tax for the calendar year 1985. The following day or on April 15, 1988. BPI filed the instant petition with this Court in order to toll the running of the prescriptive period for filing a claim for refund of overpaid income taxes. Issue: Whether the two-year period of prescription for filing a claim for refund, as provided in 230 of the National Internal Revenue Code, is to be counted from April 2, 1986 when the corporate income tax return was actually filed Held:YES Petitioner disagrees with the foregoing decision of the Court of Appeals. He contends that the two-year prescriptive period should be computed from April 2, 1984, when the final adjustment return was actually filed, because that is the time of payment of the tax, within the meaning of 230 of the NIRC. We agree. The conclusions reached by the appellate court are contrary to the very rulings cited by it. In Commissioner of Internal Revenue v. TMX Sales, Inc., 4 this Court, in rejecting the contention that the period of prescription should be counted from the date of payment of the quarterly tax, held: . . . [T]he filing of a quarterly income tax return required in Section 85 [now Section 68] and implemented per BIR Form 1702-Q and payment of quarterly income tax should only be considered mere installments of the annual tax due. These quarterly tax payment which are computed based on the cumulative figures of gross receipts and deductions in order to arrive at a net taxable income, should be treated as advances or portions of the annual income tax due, to be adjusted at the end of the calendar or fiscal year. This is reinforced by Section 87 [now Section 69] which provides for the filing of adjustment returns and final payment of income tax. Consequently, the two-year prescriptive period provided in Section 292 [now Section 230 of the Tax Code] should be computed from the time of filing the Adjustment Return or Annual Income Tax Return and final payment of income tax.
Thus, it can be deduced from the foregoing that, in the contest of 230, which provides for a two-year period of prescription counted "from the date of payment of the tax" for actions for refund of corporate income tax, the two-year period should be computed from the time of actual filing of the Adjustment Return or Annual Income Tax Return. This is so because at that point, it can already be determined whether there has been an overpayment by the taxpayer. Moreover, under 49(a) of the NIRC, payment is made at the time the return is filed. In the case at bar, Paramount filed its corporate annual income tax return on April 2, 1986. However, private respondent BPI, as liquidator of Paramount, filed a written claim for refund only on April 14, 1988 and a petition for refund only on April 15, 1988. Both claim and action for refund were thus barred by prescription. The foregoing conclusion makes it unnecessary for us to pass on the other issues raised in this case by petitioner. WHEREFORE, the decision of the Court of Appeals is REVERSED and the petition for refund filed by private respondent is DISMISSED on the ground that it is barred by prescription.SO ORDERED. DOCTOR ALLISON J. GIBBS and ESTHER K. GIBBS, vs.COLLECTOR OF INTERNAL REVENUE and COURT of TAX APPEALS
respondent denied the request for refund, and required petitioners to pay the amounts surcharge, interest, and compromise penalty. Notice of said denial was received by petitioners on November 14, 1956. On September 27, 1957, petitioners filed with respondent Court a petition for review and refund, with a motion for suspension of collection of penalties. On October 7, 1957, respondent Collector filed a motion to dismiss, on the ground that the petition was filed beyond the 30-day , respondent court dismissed the petition Petitioners contend that Section 306 of the Revenue Code provides that judicial proceedings may be instituted for recovery of an internal revenue tax within two years from the date of payment. This was so before the enactment of Republic Act No. 1125 . . .petitioners should have appealed to this Court within 30 days from November 14, 1956, that is, not later than December 15, 1956, On December 11, 1957, petitioners filed a motion for reconsideration of said order, but the same was denied by respondent court on January 31, 1958. Hence, this petition for review
y y
Held: Issue 1. whether or not petitioners' appeal (petition for review and refund) from the decision of respondent Collector of Internal Revenue, was filed with respondent Court of Tax Appeals within the statutory period\ 2. whether the letter-decision dated October 26, 1956 denying their request for refund of the deficiency income tax paid by them, was signed but merely by the Deputy CIR, could not be considered as a final decision on their said request Facts y On March 14, 1956, petitioners protested the deficiency income tax assessment in the amount of P12,284.00, exclusive of surcharge and interest, for the year 1950, issued against them by the respondent CIR, on the ground that said deficiency assessment was based on a disallowance of bad debts and losses claimed in their income tax return for 1950. , respondent Collector rejected petitioners' protest and reiterated his demand. , petitioners sent a check in the amount of P12,284.00 to respondent as payment of said deficiency assessment, at the same time demanding the immediate refund of the amount paid. 1.Petitioners, however, contend that although their appeal was filed beyond said 30-day period, respondent court still had jurisdiction over the same, by virtue of the provision of Section 306 of the NIRC y y The contention is devoid of any merit. In the case of Johnston Lumber Co., Inc. vs. Court of Tax Appeals, conclude that where payment has already been made and the taxpayer is merely asking for its refund, he must first file with the Collector of Internal Revenue a claim for refund before taking the matter to the Court, as required by Section 306 of the National Internal Revenue Code and that appeals from decisions or rulings of the Collector of Internal Revenue to the Court of Tax Appeals must always be perfected within 30 days after the receipt of the decision Under the above ruling, it is clear that Section 306 of the National Internal Revenue Code should be construed together with Section 11 of Republic Act No. 1125. In fine, a taxpayer who has paid the tax, whether under protest or not, and who is claiming a refund of the same, must comply with the requirements of both sections, that is, he must file a claim for refund with the CIR within 2 years from the date of his payment of the tax, as required by said Section 306 of the NIRC, and appeal to the CTA within 30 days from receipt of the Collector's decision or ruling denying his claim for refund, as required by said Section 11 of Republic Act No. 1125.
If, however, the Collector takes time in deciding the claim, and the period of two years is about to end, the suit or proceeding must be started in the CTA before the end of the two-year period without awaiting the decision of the Collector. This is so because of the positive requirement of Section 306 and the doctrine that delay of the Collector in rendering decision does not extend the peremptory period fixed by the statute We do not find the cases of Collector of Internal Revenue vs. Avelino, et al. (100 Phil., 327; 53 Off. Gaz. 645) and Collector of Internal Revenue vs. Zulueta, , the instant case involves a refund of taxes paid, while the cited cases involved the legality of the collection of taxes by summary administrative methods
CA- reversed the decision of CTAand ruled infavor of Primetown saying that the Civil Code did not distinguish between the regular year and a leap year thus filed on time. Issue:
WON the petition is filed on time. Held: Denied. EO 292 section 31 states that a year shall be understood to be 12 calendar months . SC defines a calendar month to be a month designated in the calendar without regard to the number of days it may contain. Therefore, applying Section 31 chapter 8 of the admin code of 1987, Primetowns petition filed on April 14, 2000 was filed on the last day of the 24th calendar month from the day Primetown filed its final adjusted return. Hernce within the reglamentary periodMANUEL REQUISITES OF A VALID CLAIM FOR REFUND CIR V. PERF CORPORATION, G.R. NO. 163345, JULY 4, 2008 Facts:
2. in their supplemental brief, . It is claimed that since the letter-decision dated October 26, 1956 denying their request for refund of the deficiency income tax paid by them, was signed not by the Collector, but merely by the Deputy CIR, it could not be considered as a final decision on their said request (NIRC SEC309 ) y Only the Collector has the authority to deal in refund cases. This is fallacious. In the first place, the cited provisions refer to the authority of the Collector of Internal Revenue to compromise, or to credit or refund taxes erroneously or illegally received, that is, when the action, in a manner of speaking, is against the Government. In such case, the authority is vested exclusively in the Collector himself. The purpose is to assure that no improper compromise, credit, or refund is made to the prejudice of the Government. But in the case before us, the action taken by the Deputy Collector in his letter of October 26, 1956, was precisely to deny the request for refund and demand the payment of the deficiency tax from petitioners. Certainly, this is well within the authority of the Deputy Collector and is final and binding unless revoked by the Collector. DUNGCA
-PERF is a domestic corporation engaged in the business of leasing properties to various clients including the Philippine American Life and General Insurance Company (Philamlife) and Read-Rite Philippines (Read-Rite) -On April 14, 1998, PERF filed its Annual ITR for the year 1997 showing a net taxable income in the amount of P6, 430,345.00 and income tax due of P2, 250,621.00 -For the year 1997, its tenants, Philamlife and Read-Rite, withheld and subsequently remitted creditable withholding taxes in the total amount of P3, 531,125.00 -After deducting creditable withholding taxes in the total amount of P3, 531,125.00 from its total income tax due of P2,250,621.00, PERF showed in its 1997 ITR an overpayment of income taxes in the amount of P1,280,504.00 -On November 3, 1999, PERF filed an administrative claim with the appellate division of the BIR for refund of overpaid income taxes in the amount of P1,280,504.00 -PERF did not mark the refund box in its 1997 Final Adjustment Return (FAR). Neither did it perform any act indicating that it chose tax credit. And in its 1998 ITR, PERF left blank the box/portion -Due to the inaction of the BIR, PERF filed a petition for review with the CTA
CIR V. PRIMETOWN Facts: Gilbert Yap, Vice Chair of Primetown Group applied for a tax refund or credit of income tax due to the business losses it incurred. Revenue officer required Primetown to submit additional documents however, its claim was not acted upon thus filed a petition for review before the CTA. CTA dismissed the petition for being filed beyond the 2 yr prescriptive period. According to the CTA, the 2 yr period is equivalent to 730 days pursuant to Art. 13 of the civil code. Since Primetown adjusted its final return on April 14, 1998 and the year 2000 is a leap year, the petition was filed on the 731 day after Primetown filed its final adjusted return, therefore beyond the reglamentary period.
-CTA denied the petition of PERF on the ground of insufficiency of evidence. The CTA noted that PERF did not indicate in its 1997 ITR the option to either claim the excess income tax as a refund or opt for an automatic tax credit left the Court with no way to determine what PERF has applied for -CTA likewise found that PERF failed to present evidence by not presenting its 1998 annual ITR -PERF moved for reconsideration attaching to its motion its 1998 ITR. The motion was, however, denied by the CTA -PERF filed a petition for review with the CA -CA ruled in favor of PERF and the Commissioner is ordered to refund to PERF the creditable withholding tax for the year 1997 -According to the CA, even if the taxpayer has indicated its option for refund or tax credit in its ITR, it does not mean that it will automatically be entitled to either option since the Commissioner must be given the opportunity to investigate and confirm the veracity of the claim -CA held that PERF had complied with the requisites for applying for a tax refund despite the failure to present its 1998 ITR. The sole purpose of requiring the presentation of PERFs 1998 ITR is to verify whether or not PERF had carried over the 1997 excess income tax claimed for refund to the year 1998. The verification process is not incumbent upon PERF; rather, it is the duty of the BIR to disprove the taxpayers claim Issue:
That the fact of withholding is established by a copy of a statement (BIR Form 1743.1) duly issued by the payor (withholding agent) to the payee, showing the amount paid and the amount of tax withheld therefrom -SC finds that PERF filed its administrative and judicial claims for refund within the two-year prescriptive period under Section 229 of the NIRC -SC also finds, based on the records from the CTA that PERF presented certificates of creditable withholding tax and also submitted in evidence the Monthly Remittance Returns of its withholding agents to prove the fact of remittance of taxes to the BIR -SC held that the failure of PERF to indicate its option in its annual ITR to avail itself of either the tax refund or tax credit is not fatal to its claim for refund -Section 76 offers two options: (1) filing for tax refund and (2) availing of tax credit. The two options are alternative and the choice of one precludes the other. However, the Court ruled that failure to indicate a choice, however, will not bar a valid request for a refund, should this option be chosen by the taxpayer later on -The requirement of indicating an option is only for the purpose of facilitating tax collection and failure to signify ones intention does not mean outright barring of a valid request for a refund, should one still choose this option later on -The failure of PERF to present in evidence the 1998 ITR is not fatal to its claim for refund -SC sustains the CAs ruling on the issue of PERFs refund and on the issue of the admissibility of PERFs 1998 ITR -Petition Denied RARO
WON PERF had complied with the requisites of a valid claim for refund Held: -YES -SC held that PERF substantially complied with the requisites for claim of refund -Requisites for a claim for refund: That the claim for refund was filed within the two (2) year period as prescribed under Section 230 of the National Internal Revenue Code; 1) That the income upon which the taxes were withheld were included in the return of the recipient; FACTS: "Atty. Jose San Agustin died leaving his wife Dra. Felisa L. San Agustin as sole heir. Probate proceedings were instituted thus, notice of decedent's death was sent to the CIR. An estate tax return reporting an estate tax due of P1,676,432.00 was filed on behalf of the estate, with a request for an extension of 2 years for the payment of the tax, because the decedent's widow does not have sufficient funds, and that the payment would have to come from the estate. However an extension of only 6 months was granted, subject to the imposition of penalties and interests under Sections 248 and 249 of the NIRC. When the probate court allowed the will, the executor submitted to the probate court an inventory of the estate with a motion for authority to withdraw funds for the payment of the estate tax, which was granted. Thereafter, the executor paid the estate tax in the amount of DR. FELISA L. VDA. DE SAN AGUSTIN, in substitution of JOSE Y. FERIA, in his capacity as Executor of the Estate of JOSE SAN AGUSTIN vs. COMMISSIONER OF INTERNAL REVENUE
P1,676,432 as reported in the Tax Return filed with the BIR. This was well within the 6 months extension period granted by the BIR. Later, the widow of the deceased, received a Pre-Assessment Notice from the BIR, showing a deficiency estate tax of P538,509.50, which, including surcharge, interest and penalties, amounted to P976,540.00. Within the given period, the executor filed a letter with the petitioner expressing readiness to pay the basic deficiency estate tax of P538,509.50 as soon as the probate court approves withdrawal thereof, but, requesting that the surcharge, interest, and other penalties, amounting to P438,040.38 be waived, considering that the assessed deficiency arose only on account of the difference in zonal valuation used by the Estate and the BIR, and that the estate tax due per return of P1,676,432.00 was already paid in due time within the extension period. To Commissioner persistence it issued an Assessment Notice again reiterating the demand in the pre- assessment notice and requesting payment on or before 30 days upon receipt. The executor requested a reconsideration of the assessment of P976,549.00 and waiver of the surcharge, interest, etc. The request for reconsideration was not acted upon until January 21, 1993, when the executor received a letter, stating that there is no legal justification for the waiver of the interests, surcharge and compromise penalty in this case, and requiring full payment of P438,040.38 representing such charges within 10 days from receipt thereof. Thus, respondent estate paid the amount of P438,040.38 under protest. A Petition for Review was filed by the executor with the CTA praying for a refund of the amount of P438,040.38. The Commissioner opposed the said petition, alleging that the CTA's jurisdiction was not properly invoked inasmuch as no claim for a tax refund of the deficiency tax collected was filed with the BIR before the petition was filed, in violation of Sections 204 and 230 of the NIRC. Moreover, there is no statutory basis for the refund of the deficiency surcharges, interests and penalties charged by the Commissioner upon the estate of the decedent. Upholding its jurisdiction over the dispute, the CTA rendered its Decision, modifying the CIR's assessment for surcharge, interests and other penalties from P438,040.38 to P13,462.74, representing interest on the deficiency estate tax, for which reason the CTA ordered the reimbursement to the respondent estate the balance of P423,577.64. The decision of the CTA was appealed by the CIR to the CA, the CA granted the petition of the CIR and held that the Court of Tax Appeals did not acquire jurisdiction over the subject matter and that, accordingly, its decision was null and void. ISSUE: Whether or not the filing of a claim for refund is essential before the filing of the petition for review. RULING: The case has a striking resemblance to the controversy in Roman Catholic Archbishop of Cebu vs. Collector of Internal Revenue. The petitioner in that case paid under
protest the sum of P5,201.52 by way of income tax, surcharge and interest and, forthwith, filed a petition for review before the Court of Tax Appeals. Then respondent Collector (now Commissioner) of Internal Revenue set up several defenses, one of which was that petitioner had failed to first file a written claim for refund, pursuant to Section 306 of the Tax Code, of the amounts paid. Convinced that the lack of a written claim for refund was fatal to petitioner's recourse to it, the Court of Tax Appeals dismissed the petition for lack of jurisdiction. On appeal to this Court, the tax court's ruling was reversed; the Court held: "We agree with petitioner that Section 7 of Republic Act No.1125, creating the Court of Tax Appeals, in providing for appeals from '(1) Decisions of the Collector 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 or part of the law administered by the Bureau of Internal Revenue allows an appeal from a decision of the Collector in cases involving' disputed assessments' as distinguished from cases involving' refunds of internal revenue taxes, fees or other charges, x x'; that the present action involves a disputed assessment'; because from the time petitioner received assessments Nos. 17-EC-00301-55 and 17-AC-600107-56 disallowing certain deductions claimed by him in his income tax returns for the years 1955 and 1956, he already protested and refused to pay the same, questioning the correctness and legality of such assessments; and that the petitioner paid the disputed assessments under protest before filing his petition for review with the Court a quo, only to forestall the sale of his properties that had been placed under distraint by the respondent Collector since December 4, 1957. To hold that the taxpayer has now lost the right to appeal from the ruling on, the disputed assessment but must prosecute his appeal under section 306 of the Tax Code, which requires a taxpayer to file a claim for refund of the taxes paid as a condition precedent to his right to appeal, would in effect require of him to go through a useless and needless ceremony that would only delay the ! disposition of the case, for the Collector (now Commissioner) would cer1ainly disallow the claim for refund in the same way as he disallowed the protest against the assessment. The law, should not be interpreted as to result in absurdities."5 The Court sees no cogent reason to abandon the above dictum and to require a useless formality that can serve the interest of neither the government nor the taxpayer. The tax court has aptly acted in taking cognizance of the taxpayer's appeal to it. DISPOSITIVE PORTION: WHEREFORE, the instant petition is partly GRANTED. The deficiency assessment for surcharge, interest and penalties is modified and recomputed to be in the amount of P148,090.00 surcharge of P134,627.37 and interest of P13,462.74. Petitioner estate having since paid the sum of P438,040.38, respondent Commissioner is hereby ordered to refund to the Estate of Jose San Agustin the overpaid amount of P289,950.38. No costs. SO ORDERED.SORO PBCOM vs. CIR , CTA & CA (1999)
Facts: Petitioner, Philippine Bank of Communications (PBCom) filed its quarterly income tax returns for the first and second quarters of 1985, reported profits, and paid the total income tax of P5M. The taxes due were settled by applying PBComs tax credit memos and accordingly, the Bureau of Internal Revenue (BIR) issued Tax Debit Memos. Subsequently, however, PBCom suffered losses so that when it filed its Annual Income Tax Returns for the year-ended December 31, 1985, it declared a net loss of P25M thereby showing no income tax liability. For the succeeding year, ending December 31, 1986, the petitioner likewise reported a net loss of P14M , and thus declared no tax payable for the year. But during these two years, PBCom earned rental income from leased properties. The lessees withheld and remitted to the BIR. On August 7, 1987, petitioner requested the Commissioner of Internal Revenue, among others, for a tax credit of P5M representing the overpayment of taxes in the first and second quarters of 1985. Thereafter, on July 25, 1988, petitioner filed a claim for refund of creditable taxes withheld by their lessees from property rentals in 1985 for P282,795.50 and in 1986 for P234,077.69. Pending the investigation of the respondent Commissioner of Internal Revenue, petitioner instituted a Petition for Review on November 18, 1988 before the Court of Tax Appeals (CTA). The losses petitioner incurred as per the summary of petitioners claims for refund and tax credit for 1985 and 1986, filed before the Court of Tax Appeals, are as follows: 1985 Net Income (Loss) Tax Due Quarterly tax Payments Made Tax Withheld at Source Excess Tax Payments 5,016,954.00 282,795.50 P5,299,749.50* ============== --234,077.69 P234,077.69 ============== (P25,317,228.00) NIL 1986 (P14,129,602.00) NIL
ISSUE: Whether or not the Court of Appeals erred in denying the plea for tax refund or tax credits on the ground of prescription, despite petitioners reliance on RMC No. 7-85, changing the prescriptive period of two years to ten years? HELD: NO. In this regard, therefore, there is no need to file petitions for review in the Court of Tax Appeals in order to preserve the right to claim refund or tax credit within the two-year period. As already stated, actions hereon by the Bureau are immediate after only a cursory preaudit of the income tax returns. Moreover, a taxpayer may recover from the Bureau of Internal Revenue excess income tax paid under the provisions of Section 86 of the Tax Code within 10 years from the date of payment considering that it is an obligation created by law (Article 1144 of the Civil Code).[9] After a careful study of the records and applicable jurisprudence on the matter, we find that, contrary to the petitioners contention, the relaxation of revenue regulations by RMC 7-85 is not warranted as it disregards the two-year prescriptive period set by law. Claims for refund or tax credit should be exercised within the time fixed by law because the BIR being an administrative body enforced to collect taxes, its functions should not be unduly delayed or hampered by incidental matters. Section 230 of the National Internal Revenue Code (NIRC) of 1977 (now Sec. 229, NIRC of 1997) provides for the prescriptive period for filing a court proceeding for the recovery of tax erroneously or illegally collected, viz.: Sec. 230. Recovery of tax erroneously or illegally collected. -- No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessive or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be begun after the expiration of two years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment; Provided however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid. (Italics supplied) The rule states that the taxpayer may file a claim for refund or credit with the Commissioner of Internal Revenue, within two (2) years after payment of tax, before any suit in CTA is commenced. The two-year prescriptive period provided, should be computed from the time of filing the Adjustment Return and final payment of the tax for the year.
On May 20, 1993, the CTA rendered a decision which, as stated on the outset, denied the request of petitioner for a tax refund or credit in the sum amount of P5.2M, on the ground that it was filed beyond the two-year reglementary period provided for by law. On June 22, 1993, petitioner filed a Motion for Reconsideration of the CTAs decision but the same was denied due course for lack of merit. Thereafter, PBCom filed a petition for review of said decision and resolution of the CTA with the Court of Appeals. However on September 22, 1993, the Court of Appeals affirmed in toto the CTAs resolution dated July 20, 1993.
When the Acting Commissioner of Internal Revenue issued RMC 7-85, changing the prescriptive period of two years to ten years on claims of excess quarterly income tax payments, such circular created a clear inconsistency with the provision of Sec. 230 of 1977 NIRC. In so doing, the BIR did not simply interpret the law; rather it legislated guidelines contrary to the statute passed by Congress. It bears repeating that Revenue memorandum-circulars are considered administrative rulings (in the sense of more specific and less general interpretations of tax laws) which are issued from time to time by the Commissioner of Internal Revenue. It is widely accepted that the interpretation placed upon a statute by the executive officers, whose duty is to enforce it, is entitled to great respect by the courts. Nevertheless, such interpretation is not conclusive and will be ignored if judicially found to be erroneous. Thus, courts will not countenance administrative issuances that override, instead of remaining consistent and in harmony with, the law they seek to apply and implement.CHUA CIR v. CITYTRUST BANKING Facts: CTA ordered the CIR to grant Citytrust a refund representing Citytrust's overpaid income taxes for 1984 and 1985. CIR filed a motion for reconsideration (MR) on the ground that the Certificate of Tax Withheld was inconclusive evidence of payment and remittance of tax to the Bureau of Internal Revenue. In its supplemental MR, the CIR alleged an additional ground: that Citytrust had outstanding deficiency income and business tax liabilities of P4,509,293.711 for 1984, thus, the claim for refund was not in order The case was elevated to the CA. CA affirmed. On petition for review on certiorari to this Court, however, we ruled that there was an apparent contradiction between the claim for refund and the deficiency assessments against Citytrust. The case was remanded to the CT The tax court thereafter conducted the necessary proceedings. the CTA determined that: (1) the deficiency and gross receipts taxes had been fully paid and (2) the deficiency income tax was only partially settled. Except for a pending issue in another CTA proceeding, Citytrust considered all its deficiency tax liabilities for 1984 fully settled, hence, it prayed that it be granted a refund. The CIR interposed his objection, however, alleging that Citytrust still had unpaid deficiency income, business and withholding taxes for the year 1985 Issue: W/N respondent is entitled to refund Ruling:
The CIR claims that the CA erred in not holding that payment by Citytrust of its deficiency income tax was an admission of its tax liability and, therefore, a bar to its entitlement to a refund of income tax for the same taxable year In resolving this case, the CTA did not allow a set-off or legal compensation of the taxes involved. CTA sets aside respondent's objection and grants to petitioner the refund. Reasons: First, [respondent's position] violates the order of the Supreme Court in directing [the CTA] to conduct further proceedings for the reception of petitioner's evidence, and the disposition of the present case. Although the Supreme Court did not specifically mention what kind of petitioner's evidence should be entertained, [the CTA] is of the opinion that the evidence should pertain only to the 1984 assessments which were the only assessments raised as a defense on appeal to the Court of Appeals and the Supreme Court. The assessments embodied in Exhibit '5 of respondent were never raised on appeal to the higher [c]ourts. Hence, evidence related to said assessments should not be allowed as this will lead to endless litigation.
Second, [the CTA] has no jurisdiction to try an assessment case which was never appealed to it. With due respect to the Supreme Court's decision, it is [the CTA's ] firm stand that in hearing a refund case, the CTA cannot hear in the same case an assessment dispute even if the parties involved are the same parties. Records show that this Court made no previous direct ruling on Citytrust's alleged failure to substantiate its claim for refund. Instead, the order of this Court addressed the apparent failure of the Bureau of Internal Revenue, by reason of the mistake or negligence of its officials and employees, to present the appropriate evidence to oppose respondent's claim The CTA complied with the Court's order to conduct further proceedings for the reception of the CIR's evidence in CTA Case No. 4099. In the course thereof, Citytrust paid the assessed deficiencies to remove all administrative impediments to its claim for refund. But the CIR considered this payment as an admission of a tax liability which was inconsistent with Citytrust's claim for refund. There is indeed a contradiction between a claim for refund and the assessment of deficiency tax. The CA pointed out that the case was remanded to the CTA for the reception of additional evidence precisely to resolve the apparent contradiction. Because of the CTA's recognized expertise in taxation, its findings are not ordinarily subject to review specially where there is no showing of grave error or abuse on its part.DAVID
CIR v ADMUGR 115349
Facts: Private respondent is a non-stock, non-profit educational institution with auxiliary units and branches all over the Philippines. One such auxiliary unit is the Institute of Philippine Culture (IPC), which has no legal personality separate and distinct from that of private respondent. The IPC is a Philippine unit engaged in social science studies of Philippine society and culture. Occasionally, it accepts sponsorships for its research activities from international organizations, private foundations and government agencies. Private respondent received from petitioner Commissioner of Internal Revenue a demand letter dated June 3, 1983, assessing private respondent alleged deficiency contractor's tax, and an assessment for alleged deficiency income tax, both for the fiscal year ended March 31, 1978. Denying said tax liabilities; private respondent sent petitioner a letter-protest and subsequently filed with the latter a memorandum contesting the validity of the assessments. Petitioner rendered a letter-decision canceling the assessment for deficiency income tax but modifying the assessment for deficiency contractor's tax by increasing the amount. Unsatisfied, private respondent requested for a reconsideration or reinvestigation of the modified assessment. At the same time, it filed in the respondent court a petition for review of the said letter-decision of the petitioner. While the petition was pending before the respondent court, petitioner issued a final decisionreducing the assessment for deficiency contractor's tax. CA ruled in favour of ADMU, hence this petition. Issue: WON the factual findings and conclusions of the CTA affirmed by CA generally conclusive? Held: Yes. We reiterate that the "Court of Tax Appeals is a highly specialized body specifically created for the purpose of reviewing tax cases. Through its expertise, it is undeniably competent to determine the issue of whether" 21 Ateneo de Manila University may be deemed a subject of the three percent contractor's tax "through the evidence presented before it." Consequently, "as a matter of principle, this Court will not set aside the conclusion reached by . . . the Court of Tax Appeals which is, by the very nature of its function, dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject unless there has been an abuse or improvident exercise of authority. This point becomes more evident in the case before us where the findings and conclusions of both the Court of Tax Appeals and the Court of Appeals appear untainted by any abuse of authority, much less grave abuse of discretion. Thus, we find the decision of the latter affirming that of the former free from any palpable error.DELOSREYES RCBC vs. COMMISSIONER OF INTERNAL REVENUE(Resolution) Facts: For resolution is petitioners Motion for Reconsideration of our Decision1 dated June 16, 2006 affirming the Decision of the Court of Tax Appeals En Banc in C.T.A. EB No. 50, which affirmed the Resolutions of the Court of Tax Appeals Second Division dated May 3, 2004 and November 5, 2004 in C.T.A. Case No. 6475, denying petitioners Petition for Relief from Judgment and Motion for Reconsideration, respectively. Petitioner reiterates its claim that its former counsels failure to file petition for review with the Court of Tax Appeals within the period set by Section 228 of the National Internal Revenue Code of 1997 (NIRC) was excusable and raised the following issues for resolution:
A. THE DENIAL OF PETITIONERS PETITION FOR RELIEF FROM JUDGMENT WILL RESULT IN THE DENIAL OF SUBSTANTIVE JUSTICE TO PETITIONER, CONTRARY TO ESTABLISHED DECISIONS OF THIS HONORABLE COURT BECAUSE THE ASSESSMENT SOUGHT TO BE CANCELLED HAS ALREADY PRESCRIBED A FACT NOT DENIED BY THE RESPONDENT IN ITS ANSWER. B. CONTRARY TO THIS HONORABLE COURTS DECISION, AND FOLLOWING THE LASCONA DECISION, AS WELL AS THE 2005 REVISED RULES OF THE COURT OF TAX APPEALS, PETITIONER TIMELY FILED ITS PETITION FOR REVIEW BEFORE THE COURT OF TAX APPEALS; THUS, THE COURT OF TAX APPEALS HAD JURISDICTION OVER THE CASE. C. CONSIDERING THAT THE SUBJECT ASSESSMENT INVOLVES AN INDUSTRY ISSUE, THAT IS, A DEFICIENCY ASSESSMENT FOR DOCUMENTARY STAMP TAX ON SPECIAL SAVINGS ACCOUNTS AND GROSS ONSHORE TAX, PETITIONER IN THE INTEREST OF SUBSTANTIVE JUSTICE AND UNIFORMITY OF TAXATION, SHOULD BE ALLOWED TO FULLY LITIGATE THE ISSUE BEFORE THE COURT OF TAX APPEALS. Other than the issue of prescription, which is raised herein for the first time, the issues presented are a mere rehash of petitioners previous arguments, all of which have been considered and found without merit in our Decision dated June 16, 2006. Petitioner maintains that its counsels neglect in not filing the petition for review within the reglementary period was excusable. It alleges that the counsels secretary misplaced the Resolution hence the counsel was not aware of its issuance and that it had become final and executory. Issue: 1. Whether or not petitioners counsels negligence is excusable. 2.Whether or not petitioners action is barred by prescription Held: 1. NO.We are not persuaded. In our Decision, we held that:
Relief cannot be granted on the flimsy excuse that the failure to appeal was due to the neglect of petitioners counsel. Otherwise, all that a losing party would do to salvage his case would be to invoke neglect or mistake of his counsel as a ground for reversing or setting aside the adverse judgment, thereby putting no end to litigation. Negligence to be "excusable" must be one which ordinary diligence and prudence could not have guarded against and by reason of which the rights of an aggrieved party have probably been impaired. Petitioners former counsels omission could hardly be characterized as excusable, much less unavoidable. The Court has repeatedly admonished lawyers to adopt a system whereby they can always receive promptly judicial notices and pleadings intended for them. Apparently, petitioners counsel was not only remiss in complying with this admonition but he also failed to check periodically, as an act of prudence and diligence, the status of the pending case before the CTA Second Division. The fact that counsel allegedly had not renewed the employment of his secretary, thereby making the latter no longer attentive or focused on her work, did not relieve him of his responsibilities to his client. It is a problem personal to him which should not in any manner interfere with his professional commitments.3 2. YES. SECTION 3. Who May Appeal; Period to File Petition. (a) A party adversely affected by a decision, ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes, or by a decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry, the Secretary of Agriculture, or a Regional Trial Court in the exercise of its original jurisdiction may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition for review within the two-year period prescribed by law from payment or collection of the taxes. (n) From the foregoing, it is clear that the jurisdiction of the Court of Tax Appeals has been expanded to include not only decisions or rulings but inaction as well of the Commissioner of Internal Revenue. The decisions, rulings or inaction of the Commissioner are necessary in order to vest the Court of Tax Appeals with jurisdiction to entertain the appeal, provided it is filed within 30 days after the receipt of such decision or ruling, or within 30 days after the expiration of the 180-day period fixed by law for the Commissioner to act on the disputed assessments. This 30-day period within which to file an appeal is jurisdictional and failure to comply therewith would bar the appeal and deprive the Court of Tax Appeals of its jurisdiction to entertain and determine the correctness of the assessments. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same.7 In case the Commissioner failed to act on the disputed assessment within the 180-day period from date of submission of documents, a taxpayer can either: 1) file a petition for review with
the Court of Tax Appeals within 30 days after the expiration of the 180-day period; or 2) await the final decision of the Commissioner on the disputed assessments and appeal such final decision to the Court of Tax Appeals within 30 days after receipt of a copy of such decision. However, these options are mutually exclusive, and resort to one bars the application of the other. In the instant case, the Commissioner failed to act on the disputed assessment within 180 days from date of submission of documents. Thus, petitioner opted to file a petition for review before the Court of Tax Appeals. Unfortunately, the petition for review was filed out of time, i.e., it was filed more than 30 days after the lapse of the 180-day period. Consequently, it was dismissed by the Court of Tax Appeals for late filing. Petitioner did not file a motion for reconsideration or make an appeal; hence, the disputed assessment became final, demandable and executory. Based on the foregoing, petitioner cannot now claim that the disputed assessment is not yet final as it remained unacted upon by the Commissioner; that it can still await the final decision of the Commissioner and thereafter appeal the same to the Court of Tax Appeals. This legal maneuver cannot be countenanced. After availing the first option, i.e., filing a petition for review which was however filed out of time, petitioner cannot successfully resort to the second option, i.e.,awaiting the final decision of the Commissioner and appealing the same to the Court of Tax Appeals, on the pretext that there is yet no final decision on the disputed assessment because of the Commissioners inaction. Lastly, we note that petitioner is raising the issue of prescription for the first time in the instant motion for reconsideration. Although the same was raised in the petition for review, it was dismissed for late filing. No motion for reconsideration was filed hence the disputed assessment became final, demandable and executory. Thereafter, petitioner filed with the Court of Tax Appeals a petition for relief from judgment. However, it failed to raise the issue of prescription therein. After its petition for relief from judgment was denied by the Court of Tax Appeals for lack of merit, petitioner filed a petition for review before this Court without raising the issue of prescription. It is only in the instant motion for reconsideration that petitioner raised the issue of prescription which is not allowed. The rule is well-settled that points of law, theories, issues and arguments not adequately brought to the attention of the lower court need not be considered by the reviewing court as they cannot be raised for the first time on appeal,8 much more in a motion for reconsideration as in this case, because this would be offensive to the basic rules of fair play, justice and due process.9This last ditch effort to shift to a new theory and raise a new matter in the hope of a favorable result is a pernicious practice that has consistently been rejected.DOCTOR
SANTOS VS PEOPLE
Facts ; y BIR wrote to the DOJ a letter regarding thr possible filing of the criminal charges against the petitioner BIR summarized the findings of the investigating BIR officers that the petitionr in her annual ITR for taxable year 2002 filed declared an income of 8 M derived from her talent fees solely from ABS CBN. However , confirmed that she received 14 M not only from ABS but from other sources. The estimated underdeclaration amount to 1.7 M including penalties , the non declaration by petitioner of amount equivalent to at least 84.18% of the income declared in her return was considered a substantial declaration of income, which constituted prima facie false or fraudulent return, under 248 b of the NIRC and sec 254 After an exchange affidavits and pleading of the parties prosecutor issued a probable cause and recommending the filing of a criminal information against the petitioner. Pursuant to DOJ resolution, information was filed with the CTA , however the CTA first division after noting several discrepancies in the information filed, required the state prosecutor to clarify and explain the same and submit the original copies of the affidavits and memoranda The prosecution on behalf of the state submitted Ex parte Motion to admit attached information. To be admitted as part of the record of the case. The second information addressed the discrepancies noted by the CTA in the 1st information. The CTA granted the motion, and admitted the second information, CTA issued waraant of arrest. The tax court lifted and recalled the warrant after petitioner voluntarily appeared and required the bail bond of 20k Petitioner filed with CTA 1st division motion to quash the information filed in CTA criminal case on the ff grounds; The fact does not constitute an offense, the officer who filed the information had no authority to do so , The CTA has no jurisdiction over the subject matter and information is void, CTA denied the motion to quash, petitioner filed MR and reinvestigation which was again denied. Then she filed with the CTA en banc a motion for extension of time to file petition for review however it was denied
Issue: Whether or not a resolution of CTA division denying motion to quash is a proper subject an appeal to the CTA en banc under RA 9282 sec 11 amending sec 18 of RA 1125 Held ; y The court distinguishes final judgments and orders from interlocutory orders Sec 2 rule 41 RC only final orders are subject to appeal. Incidental judgments or orders do not stay the progress of an action nor they are subject to appeal, There is no dispute that a court order denying a motion to quash is an interlocutory . the denial means that criminal information remains pending with the court which must be proceed to determine whether the accused is guilty of the crime charged. Equally settled is the rule that motion to quash being interlocutory is no immediately appealable nor can it be subject of a petition for certiorari. `as a general rule the denial of motion to quash is an interlocutory order which is not proper subject of an appeal or certiorari. It is not absolute subject to exception such as petition for certiorari when the tribunal excess of jurisdiction or with grave abuse of discretion The rationale for barring an appeal was extensively discussed in the case of matute vs ca The petition for review to be filed with the CTA en banc as the mode for appealing a decision, resolution under sec 18 of RA no 1125as amended is not totally new remedy unique to the CTA with a special application or use therein. To the contrary, the CTA merely adopts the procedure for petitions for review and appeals long established and practiced in the Phil courts. Accordingly ,doctrines, principles laid down in the jurisprudence by this court as regards to the petition for appeal and review in courts of general jurisdiction should likewise bind the CTA and cannot depart there from.DUNGCA THE UNITED STATES vs. CALIXTO SURLA G.R. No. 6536; September 2, 1911 PONENTE: J. MORELAND This is an appeal from a judgment of the CFI of Pampanga, convicting the accused of a violation of section 57 of Act No. 1189; the payment of the costs of the action, and confiscating in favor of the Insular Government the cigarettes sold in violation of the Internal Revenue Law, the factory, the land upon which it stands, the machinery, fixtures, and all other property located therein, and ordering the disposition of the goods and the rendition of an account of the proceeds of the same in the manner provided by law.
y y
FACTS: The accused Surla is a manufacturer of cigarettes and is the owner of the factory A5255, situated in the pueblo of Angeles, Pampanga. Roullven and Moran, internal-revenue agents, visited the said factory for inspection. In the presence of the accused the agents proceeded to take an inventory of the cigarettes found therein and also of the books of the factory. They found a shortage of 42,000 cigarettes. Surla admitted such shortage but stated that he did not know to what to attribute the shortage because ever since his first conviction he had always carried the key to the storehouse himself. He further stated that the shortage must be due to the mistakes of his superintendent, Eulogio Manalang. The agents then immediately visited the different stores in Angeles and found ten packages of cigarettes from the factory of Calixto Surla upon which the package number had been duplicated. The said internal-revenue agents, accompanied by Mr. Armstrong, another agent, returned to the factory and made an inventory of the materials, finding there also a shortage of 693 kilos and 740 grams. On this occasion Eulogio Manalang stated to the agent Armstrong that he had made a mistake in the official books of the daily production of the factory and exhibited to said agent a private book which contained as he stated correct notes of the number of cigarettes produced daily by the factory. On comparing the entries in the private book with those in the official registry, great differences were found between them. They aggregate to 52,500 cigarettes. If the differences in the entries on the two books had been made to appear in the official book, instead of a deficit of 42,000 cigarettes there would have been an excess of 10,500 cigarettes. After further discussion of the testimony presented by the accused, the court ordered the appealed decision. Hence this petition ISSUE: Whether or not the judgment of the trial court is fatally defective for it failed to state how the property forfeited shall be disposed of and its proceeds a accounted for. RULING: NO. As to the form of the judgment of confiscation, it is sufficient to say that it is entirely immaterial to the defendant, legally speaking, how the property, having been forfeited, belongs absolutely to the Government, and the proceeds arising from the disposal thereof also belong to the Government. (U. S. vs. Stowell, 133 U. S., 1, above.) Sections 42 [1189] invoked by the accused for the purpose of demonstrating how the forfeited property should be disposed of, and its proceeds divided, he asserting that under the terms thereof he is entitled to have the balance returned to him after the liquidation of the unpaid taxes and expenses of sale, is entirely inapplicable to forfeited property. It relates solely to the sale of property distrained to pay taxes of delinquents and the disposition of the proceeds thereof. The title to such property remains in the delinquent until the sale. It is never forfeited and is never in the government unless it becomes a purchaser at the sale. The property being his he is entitled to whatever surplus there may be after the payment of the taxes and all the expenses of the distraint and sale. In case of a forfeiture of property for crime, however, the title and ownership of the convict are absolutely divested and
pass to the Government. He ceases to have any interest therein. As a result he can have no interest in its proceeds. Section 50 [1189] prescribes the disposition of the property in such cases. DISPOSITIVE PORTION: The judgment appealed from is hereby affirmed, with costs against the appellant.SORO

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CIR v ADMUGR 115349

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