TAX ASSESSMENT ISSUED WITHOUT PROPER AUTHORITY CAN BE DECLARED INVALID

THE ISSUANCE OF MOA DOES NOT HAVE THE SAME WEIGHT OF AUTHORITY WITH LOA

ORIENT OVERSEAS CONTAINER LINE LTD. REPRESENTED BY OOCL (PHILIPPINES) INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10296, JANUARY 9, 2025

Petitioner Orient Overseas Container Line LTD. filed a Petition for Review praying for the cancellation and withdrawal of the Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner argued that the assessment was void as the Revenue Officer (RO) conducting the audit was not named in a valid Letter of Authority (LOA), rendering the process invalid. Additionally, the assessment for each tax item lacked factual and legal bases, and compromise penalties were unjustified. On the other hand, the Respondent countered that the LOA issued was valid and that the RO who conducted the audit was properly authorized under the authority granted by the Memorandum of Assignment (MOA). Moreover, the assessed tax deficiencies and penalties were valid and supported by law, with the presumption of correctness of the assessments. In ruling, the Court held that the LOA was essential, and that the MOA could not substitute it. Citing Section 13 of the Tax Code of 1997, the authority granted under an LOA is two-fold: (1) the authority to examine taxpayers within a district’s jurisdiction to ensure the correct amount of tax is collected; and (2) the authority to examine taxpayers and recommend the assessment of any deficiency taxes due. In this context, only the CIR or his duly authorized representative may issue the LOA. In the case at bar, the RO continued the investigation solely based on a MOA, which was signed only by the Division Chief of the RLTAD-2. Consequently, the RO conducted an audit without a valid LOA. In the absence of a new and valid LOA, any resulting assessment would be deemed VOID. Thus, the Petition was GRANTED, and the assessment was declared VOID.

TAXPAYERS MUST FILE PROTEST LETTERS ON TIME & IN THE CORRECT FORMAT; FAILURE TO DO SO RESULTS IN FINAL TAX ASSESSMENTS WITH NO JUDICIAL RECOURSE

JEANIFER P. AJOC VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10642, DECEMBER 17, 2024

Petitioner, Jeanifer P. Ajoc, filed a Petition for Review seeking the nullification of the tax assessments issued by the Commissioner of Internal Revenue (CIR) for the taxable year 2014. The Petitioner argued that the assessments were void due to the alleged violation of her right to due process, as the Final Letter of Demand (FLD) was allegedly not properly served. Likewise, the Respondent’s right to collect had already prescribed, and the waiver extending the assessment period was invalid. Further, she referenced a Certificate of No Outstanding Liability issued by the BIR, asserting that it cleared her of any tax liabilities. On the other hand, the Respondent maintained that the CTA lacked jurisdiction over the case because the assessments had already become final, executory and demandable due to the Petitioner’s failure to file a valid administrative protest. The Respondent also presented evidence of proper service of the FLD, including a Registry Return Receipt, and argued that the Petitioner did not comply with the mandatory requirements for filing an administrative protest. In ruling, the Court found that the Petitioner's authorized representative had properly received the FLD. It also ruled that the Petitioner had failed to comply with the procedural requirements outlined in Section 228 of the Tax Code of 1997, as amended, and its implementing rules. Specifically, the Petitioner did not file a valid administrative protest within the required period after receiving the FLD, and the protest did not meet the prescribed requirements under Revenue Regulations No. 12-99, as amended by RR No. 18-2013, including the lack of necessary details and supporting evidence. Furthermore, the Petitioner did not submit all relevant supporting documents within the 60-day period mandated by Section 228, which rendered the protest void. Without a valid administrative protest, there will be no decision on an evaluation disputed for the Court to review. Consequently, the Petition was DISMISSED for lack of jurisdiction.

BILLING STATEMENT DOES NOT CONSTITUTE AN ASSESSMENT CONTEMPLATED UNDER SECTION 196 OF THE LGC FOR REFUND PURPOSES

TAGUIG CITY GOVERNMENT VS. KENSINGTON PLACE CONDOMINIUM CORPORATION

CTA EN BANC CASE NO. 2807, DECEMBER 3, 2024

Petitioner Taguig City Government filed a Petition for Partial Review seeking to reverse and set aside the earlier Decision and Order of the Regional Trial Court (RTC) of Taguig City holding the Respondent Kensington Place Condominium Corporation not liable to contractor’s tax and that the refund was timely filed. The Petitioner argued that the Billing Statement issued to the Respondent constituted an assessment, thus triggering the 60 days under Section 195 of the Local Government Code (LGC) within which to file a refund claim. The Respondent’s refund claim was filed beyond this period, making the assessment final and unappealable. In addition, The Respondent is liable for Local Business Tax (LBT) under Section 75 of the Taguig Revenue Code (TRC), as amended, classifying it as a contractor. On the other hand, the Respondent countered that Section 196 of the LGC, which allows a two-year period for filing refund claims, is applicable. It argued that the refund was timely filed within this period. Likewise, as a non-stock, non-profit corporation, it is not engaged in business for profit and should not be classified as a contractor liable for LBT. In ruling, the Court held in favor of the Respondent, finding that Section 196 of the LGC applies, allowing a two-year period for filing refund claims. Furthermore, the Respondent, as a non-stock, non-profit corporation, is not engaged in business for profit and thus is not liable for LBT. The Billing Statement was not considered an assessment under Section 195 of the LGC. Consequently, the Court DENIED the Petition, affirming the lower courts' decisions that the Respondent’s refund was timely and that it is not liable for LBT on contractors. The Court emphasized that condominium corporations, like the Respondent, are generally exempt from local business taxation under the LGC, irrespective of any local ordinance to the contrary.

THE THREE-YEAR PERIOD FOR THE COLLECTION OF THE ASSESSED TAX BEGINS TO RUN ON THE DATE THE ASSESSMENT NOTICE IS RELEASED, MAILED, OR SENT TO THE TAXPAYER

THE OMMISSION OF THE SPECIFIC DETAILS OR COMPUTATIONS EXPLAINING THE ASSESSED AMOUNT VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS

THE TAXPAYERS SHALL BE INFORMED IN WRITING OF THE LAW & THE FACTS ON WHICH THE ASSESSMENT IS MADE; OTHERWISE, THE ASSESSMENT SHALL BE VOID

HAWAIIAN-PHILIPPINE COMPANY VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10726, NOVEMBER 13, 2024

Petitioner Hawaiian-Philippine Company filed a Petition for Review seeking the cancellation of the Assessment Notices issued by the Respondent Commissioner of Internal Revenue (CIR) assessing for deficiency taxes for the fiscal year (FY) ending September 30, 2017. The Petitioner argued that the Respondent’s right to assess has already prescribed. In addition, the assessments are void, asserting that the same lacks factual and legal basis. On the other hand, the Respondent contended that the assessments were made in accordance with prevailing laws and rules, as they present the factual and legal basis for the assessments. In ruling, the court cited the case of CIR vs. Villanueva, Jr. wherein the Supreme Court affirmed that the sending of the Formal Letter of Demand (FLD)/Final Assessment Notice (FAN) to the taxpayer is when the assessment is made. Further, Sections 203 and 222 of the 1997 Tax Code, as amended, clarify that the assessment refers specifically to the service of the FAN upon the taxpayer. Following this, in the case at bar, the assessments are considered made on December 22, 2020, when the FAN/FLD was served to and received by the Petitioner. However, during the surge of COVID-19, the BIR issued Revenue Memorandum Circular (RMC) No. 136-220, which extended the prescriptive period to assess in areas placed under ECQ or MECQ. As per examination, the periods to assess have partly prescribed and only the deficiency income tax (for FY ending September 2017), VAT (for 3rd and 4th quarters), EWT and FWV (for the periods from May to September 2017) shall be retained in determining Petitioner’s tax liabilities. Nevertheless, the Court finds that the Petitioner is not liable for the remaining deficiency taxes for failure of the Respondent to provide the details of the foregoing assessment items. As a final note, the BIR’s right to collect deficiency taxes must stem from a valid assessment. While Respondent’s findings enjoy a presumption of correctness, it is an established doctrine that the same must still be based on actual and verifiable facts, not mere presumptions. Thus, the Petition was GRANTED, and the Assessment Notices were CANCELLED and SET ASIDE.

IMPROPER NOTIFICATION & LACK OF OPPORTUNITY TO RESPOND CONSTITUTE A VIOLATION OF DUE PROCESS RENDERING THE TAX ASSESSMENTS VOID

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review challenging the Court of Tax Appeals (CTA) 3rd Division’s earlier Decision and Resolution which canceled the assessment issued against the Respondent Fidela D. Fernandez. The Respondent, a sole proprietor of Bacacay Shell Station, had been assessed by the Petitioner covering the Taxable Year 2006. The Petitioner issued a Formal Letter of Demand (FLD) and assessment notices addressed to "Rommel Braga," who purportedly received the notices at the Respondent's registered address. The Respondent denied that Braga was her authorized representative, arguing that the service of notices was invalid. Despite this, the Petitioner issued Warrants of Garnishment (WOG) and insisted that the assessments had become final and executory. The Respondent attempted to compromise the assessment by offering to settle at a lower amount, which the Petitioner rejected, citing that the amount was below the statutory minimum compromise threshold. In an earlier Decision, the CTA 3rd Division canceled the assessment because the notices were not properly served. It also ordered a refund of the compromise amount. In ruling, the Court cited the Supreme Court landmark case of Mannasoft, which emphasized the need for proper service directly to the taxpayer or a duly authorized representative. Improper notification and lack of opportunity to respond constitute a violation of due process rendering the tax assessments void. Consequently, the Petition was DENIED for lack of merit.

FOR PURPOSES OF SITUS OF LOCAL BUSINESS TAX, FINANCIAL INSTITUTIONS RECORDING THEIR SALES AT THEIR BRANCH OR SALES OUTLET MUST PAY TAXES TO THE MUNICIPALITY WHERE THE OUTLET IS LOCATED

TOYOTA FINANCIAL SERVICES PHILIPPINES CORPORATION VS. CITY OF DAVAO & ERWIN P. ALPARAQUE, IN HIS CAPACITY AS THE ACTING CITY TREASURER OF THE CITY OF DAVAO

CTA AC NO. 280, OCTOBER 15, 2024

Petitioner Toyota Financial Services Philippines Corporation filed a Petition for Review seeking the reversal of the Davao City Regional Trial Court (RTC)’s decision sustaining the Respondent City Treasurer of Davao’s assessment for alleged deficiency taxes and fees for years 2009 to 2018. The Petitioner argued that the RTC incorrectly relied on the definition of "doing business" under Republic Act (R.A.) No. 7042, which applies only to foreign entities, not financial institutions governed by the General Banking Act. The Petitioner asserted that the Local Government Code (LGC) should apply, defining "doing business" as engaging in trade or commercial activity regularly with a view to profit. It claimed that it was not doing business in Davao since it is only operating a lending desk in Davao and actively soliciting clients at the Toyota dealership. Additionally, the LGC and Revenue Code of Davao state that the situs of Local Business Tax (LBT) is based on the place where sales are made and recorded, which was in Makati City. On the other hand, the Respondent countered that the Petitioner is liable for tax assessments under the Revenue Code of Davao City, which defines "doing business" to include "the solicitation of orders." In ruling, the Court held that the RTC erred in applying R.A. No. 7042 pointing that Sec. 131(d) of the LGC should apply. The Petitioner is engaged in business, noting that it admitted to operating a "lending desk" and accepting loan applications to earn profits. However, it should not pay the assessed taxes since Davao City is not the situs of the taxes payable. Sec 150 of the LGC states that for tax collection, financial institutions and businesses must record sales at their branch or sales outlet, with taxes paid to the municipality where the outlet is located. If there is no outlet, the sale is recorded at the principal office, and taxes are paid to that municipality. As loan applications do not fall under these definitions, neither do they fall under the coverage of transactions. In this case, sales will be recorded and paid at the principal office in Makati City, where loan applications are processed and approved. Moreover, the Revenue Code of Davao states that the city or municipality listed in the Articles of Incorporation (AOI) or registration papers as the official address or said principal office is considered the situs for tax purposes. Consequently, the Petition was GRANTED resulting in the cancellation of the assessment.

THE IDENTITY OF THE PAYOR & PAYEE MUST BE CLEARLY ESTABLISHED IN BIR FORMS NO. 2307 OR CWT CERTIFICATES

TAX REFUND OR CREDIT APPLICANTS MUST PROVE NOT ONLY ENTITLEMENT BUT ALSO SHOW COMPLIANCE WITH ALL DOCUMENTARY & EVIDENTIARY REQUIREMENTS

SERVICE RESOURCES INC. VS COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2776, SEPTEMBER 30, 2024

Petitioner Service Resource, Inc. filed a Petition for Review assailing the Court Special Second Division’s earlier Decision which granted its partial claim for refund. The Petitioner argued that the law and revenue regulations do not specifically provide that BIR Form No. 2307 must contain the name, Taxpayer Identification Number (TIN), and address of the payee before it becomes sufficient in proving the fact of withholding. In ruling, citing the Philippine Bank of Communication case, the requirements for a Creditable Withholding Tax (CWT) refund or tax credit are: (a) file with the CIR within two (2) years; (b) report the income as part of gross income; and (c) provide a payor’s statement showing the payment and tax withheld. The Court in Division found that the Petitioner submitted CWT Certificates with incorrect or missing TIN and address, issued under a different name, and lacking the payor's authorized signature. Thus, the Petitioner was unable to comply with the 3rd requisite. The Court emphasized that the identity of both parties must be established in these certificates. Failure to do so would necessarily affect the credibility of the said BIR forms. A tax refund or credit applicant must demonstrate both entitlement and compliance with all documentary and evidentiary requirements. Finding no grave abuse of discretion by the Division, the Court En Banc upheld its Decision. Thus, the Petition was DENIED for lack of merit.

CONSPIRACY IS NOT PRESUMED; THERE IS CONSPIRACY WHEN TWO OR MORE PERSONS COME TO AN AGREEMENT CONCERNING THE COMMISSION OF A FELONY & DECIDE TO COMMIT IT

A CTA CRIMINAL CASE ACQUITTING THE ACCUSED FOR FAILURE OF THE PROSECUTION TO DISCHARGE ITS BURDEN TO PROVE BEYOND REASONABLE DOUBT THAT ACCUSED VIOLATED SECTION 254 OF THE TAX CODE

A DEFECTIVE NOTARIZATION WILL STRIP THE DOCUMENT OF ITS PUBLIC CHARACTER & REDUCE IT TO A PRIVATE INSTRUMENT

PEOPLE OF THE PHILIPPINES VS. ALMAN GAY A TIN, ANDY CHUA, JIMMY CHUA & JOHN DOE

CTA CRIM NO. O-684, SEPTEMBER 24, 2024

Accused Alman Gayatin, Andy Chua, Jimmy Chua and a certain John Doe were charged for violation of Section 254 of the Tax Code of 1997 for willfully evading or defeating any tax due without lawful cause and despite repeated demands to pay the Excise Tax for their cigarette products. Accused Gayatin, for his part, argued that he cannot be held liable since he was neither the owner nor the possessor of the alleged illegal products found in the Alter Trade Property. He further contended that the search and entry of the police officers without a valid search warrant is void and unlawful, thus, all things, goods, or items seized or obtained during the said illegal search are considered fruits of a poisonous tree and are inadmissible in any proceedings. The Plaintiff, on the other hand, claimed that the Accused employed an unscrupulous scheme to evade or defeat the payment of Excise Tax on cigarettes by operating surreptitiously. Additionally, there was no document to prove the existence of a Lease Contract except the forged documents, which the Accused presented as an after-thought to escape criminal liabilities. In ruling, the Court cited the Supreme Court case of CIR vs. The Estate of Benigno P. Toda, Jr. wherein tax evasion connotes the integration of three (3) factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being evil, in bad faith, willful, or deliberate and not accidental; and, (3) a course of action or failure of action which is unlawful. In the case at bar, the Prosecution offered no evidence to prove that Accused Gayatin conspired with the other Accused and acted as principal by indispensable cooperation. It bears stressing that conspiracy must be proven beyond reasonable doubt and is never presumed. Further, the Court finds that there is no clear nexus between the Accused Gayatin and the excisable goods found in his property. Logically, without proof that Accused Gayatin possessed the excisable goods, it cannot be said that he is liable to pay the Excise Tax due thereon. Moreover, it can hardly be said that Accused is attempting to evade or defeat the Excise Tax imposed considering that he has actively participated in the assessment by presenting evidence to support his claim. Thus, Accused Alman Gayatin was ACQUITTED of the crime charged. Further, the case was ARCHIVED, pending the arrest of the Accused Andy Chua, Jimmy Chua and John Doe.

INDIVIDUALS NOT LISTED AMONG THE TAXPAYER’S EMPLOYEES ARE CONSIDERED UNAUTHORIZED REPRESENTATIVES OF THE TAXPAYER

DUE PROCESS WAS VIOLATED WHEN THE BIR FAILED TO FULLY INFORM THE TAXPAYER OF THE LEGAL & FACTUAL BASIS FOR THE ASSESSMENT, RENDERING THE ASSESSMENT NULL & VOID

TOASTERLEVER, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10646, SEPTEMBER 23, 2024

Petitioner Toasterlever Inc. filed a Petition for Review praying for the cancellation of the assessments and the Warrant of Distraint and Levy (WDL) issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner claims it did not receive the Notice for Informal Conference (NIC), Preliminary Assessment Notice (PAN), or Final Assessment Notice (FAN), as these were received by individuals who were not authorized representatives or employees of the Petitioner. The Petitioner argued that its explanations and supporting documents were rejected by the Respondent without justification, as reflected in the identical content of the PAN and FAN. On the other hand, the Respondent asserted that the Petition was filed beyond the 30-day period from receipt of the WDL. Likewise, due process was followed in serving the Letter of Authority (LOA), NIC, PAN, and FAN to registered employees of the Petitioner, as evidenced by the Affidavit of Service. In ruling, the time for filing and service of pleadings during the period is suspended and resumed after seven (7) calendar days counted from the first day of the physical reopening of the court in accordance with the Supreme Court Administrative Circular No. 83-2021. Since the court reopened on October 20, 2021, the Petition for Review filed on October 27, 2021, is considered timely. In addition, Section 3.1.6 of Revenue Regulations (RR) No. 18-2013 states that notices may be served personally to the party, and if personal service is impractical due to the party's absence at their registered address, notice may be served by substituted service to their clerk or another person having charge. The Court agrees that the notices were received by individuals who are not authorized representatives of the Petitioner, as they are not listed among the Petitioner's employees. Moreover, citing the case of Avon Products Manufacturing, Inc. vs. CIR, the Court declared the FAN/FLD null and void due to the BIR's complete disregard for due process when it failed to fully inform the taxpayer of the legal and factual basis for the assessment, despite the latter's defenses and submission of supporting documents pursuant to Section 228 of the Tax Code. Like the Avon case, there was no discussion in the FLD about the Respondent's findings and the reasons for rejecting the Petitioner's refutations and explanations against the PAN. Thus, the Petitioner was left unaware of how the Respondent or his authorized representative appreciated its explanations or defenses. Applying the ruling in Avon, there is no question that the Respondent's disregard of the due process standards, and his failure to sufficiently inform the Petitioner of the reasons for his conclusions, render the subject assessment, null and void. Hence, the Petition was GRANTED, and the assessments were declared VOID. Consequently, the WDL was CANCELLED.

IF GENERATION OF REVENUE IS THE PRIMARY PURPOSE & REGULATION IS MERELY INCIDENTAL, THE IMPOSITION IS A TAX; BUT IF REGULATION IS THE PRIMARY PURPOSE, THE FACT THAT REVENUE IS INCIDENTALLY RAISED DOES NOT MAKE THE IMPOSITION A TAX

BARANGAY MAY ONLY IMPOSE FEES & CHARGES, WHICH SHOULD NOT BE BASED ON THE CAPITAL INVESTMENT OR GROSS SALES OR RECEIPTS OF THE TAXPAYER

LGC AUTHORIZES THE BARANGAY TO LEVY OTHER FEES & CHARGES ON PLACES OF RECREATION WHICH CHARGE ADMISSION FEES; HOWEVER, SUCH FEE OR CHARGE MAY NOT BE BASED ON GROSS SALES OR RECEIPTS

SM PRIME HOLDINGS, INC. VS. BARANGAY 350, ZONE 35, DISTRICT III, CITY OF MANILA

CTA AC NO. 278, SEPTEMBER 20, 2024

Petitioner SM Prime Holdings, Inc. filed a Petition for Review praying for the cancellation of the Assessment Notice issued by the Respondent Barangay 350, Zone 35, District III, City of Manila, which demanded the payment of Amusement Fee in connection with the operation of SM City San Lazaro's cinema theaters for the year 2018. The Petitioner argued that based on the text of the Barangay Revenue Code, the purpose of the Amusement Fee was to raise revenues rather than to regulate the operation of places of recreation. Further, it asserted that while imposing taxes on places for recreation is outside respondent Barangay 350 authority, the Amusement Fee constituted double taxation and completely replicated the Amusement Taxes that were being imposed by the City of Manila. On the other hand, the Respondent countered that it is only proper that it be allowed by the court to collect the Petitioner the accurate and proper Amusement Fee to defray what has been appropriate for the calendar year, so as not to jeopardize its operation and services to its constituency. In ruling, under Section 152(a) of the Local Government Code (LGC), the barangay is authorized to impose taxes but only on stores or retailers with fixed business establishments with gross sales or receipts of the preceding calendar year of Php 50,000 or less, in the case of cities; and Php 30,000 or less, in the case of municipalities, at a rate not exceeding 1% on such gross sales or receipts. Undeniably, Petitioner, a cinema theater owner/operator, is not a store or retailer with fixed establishment, contemplated under Section 152(a) of the LGC, which may be taxed on its gross sales or receipts as sought by Section 13 of the Barangay Revenue Code. Plainly, the Respondent is not authorized to impose a tax on amusement/recreation establishments. It may only impose fees and charges, which should not be based on capital investment or gross sales or receipts of the taxpayer. In sum, since the subject Amusement Fee, which is veritably a tax, is beyond the authority of Respondent to impose, any exaction based thereon is invalid. Consequently, Section 13 of the Barangay Revenue Code is patently ultra vires. Thus, the Petition was GRANTED and the Assessment Notice demanding payment of amusement fee was CANCELLED.

WHILE TAX REFUNDS ARE STRICTLY CONSTRUED AGAINST THE TAXPAYER, THE GOVERNMENT SHOULD NOT RESORT TO TECHNICALITIES & LEGALISMS, MUCH LESS FRIVOLOUS APPEALS, TO KEEP THE MONEY IT IS NOT ENTITLED TO AT THE EXPENSE OF THE TAXPAYERS

INCOME OF ANY KIND, TO THE EXTENT REQUIRED BY ANY TREATY OBLIGATION BINDING UPON THE GOVERNMENT OF THE PHILIPPINES SHALL NOT BE INCLUDED IN GROSS INCOME & SHALL BE EXEMPT FROM TAXATION

COMMISSIONER OF INTERNAL REVENUE VS. DIDDLEY BOW INVESTMENT HOLDINGS B.V.

CTA EN BANC CASE NO. 2787, SEPTEMBER 20, 2024

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the earlier Decision promulgated by the Special Third Division of the Court of Tax Appeal (CTA) ordering the Petitioner to refund or issue a Tax Credit Certificate (TCC) in favor of the Respondent Diddley Bow Investment Holdings B.V. (DBI) in the amount of Php 8,389,431.00, allegedly representing Final Withholding Tax (FWT) erroneously withheld on the interest income derived by the Respondent in various T-bonds. The Petitioner argued that the Respondent’s claim for refund should be denied due to the failure of the latter to comply with the documentary requirements and failure to substantiate its administrative claim for tax refund. In addition, the Petitioner submitted that tax refunds are in the nature of exemptions and are to be considered strictissimi juris against the entity claiming the same. On the other hand, the Respondent contended that they have fully substantiated its claim for refund representing its erroneously paid FWT. In ruling, the Court emphasized that the Petitioner did not even present any evidence to controvert the Respondent's judicial claim for refund. In view of the basic rule that mere allegations are not evidence and not equivalent to proof, the Court ruled that the Petitioner's allegation is essentially self-serving and devoid of any evidentiary weight. Furthermore, the interests accruing or arising from the T-Bonds are exempt from income taxation pursuant to Section 32(B)(5) of the 1997 Tax Code, in relation to Article 11(3)(a) of the Republic of the Philippines-Netherlands Tax Treaty. Verily, the Court finds that based on the evidence presented and submitted, the Respondent has sufficiently established its entitlement to its claim for FWT refund. Thus, the Petition was DENIED for lack of merit.

PROOF OF ACTUAL REMITTANCE TO THE BIR OF THE TAXES WITHHELD IS NOT INDISPENSABLE IN CLAIMS FOR REFUND OR ISSUANCE OF TAX CREDIT CERTIFICATE

BY SELECTING "TO BE REFUNDED" IN THE ANNUAL ITR & CARRYING OVER ONLY THE PRIOR YEAR'S EXCESS CREDITS, THE CLAIMED CWT MAY BE ELIGIBLE FOR A REFUND

GLOBAL ENERGY SUPPLY CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10871, SEPTEMBER 20, 2024

Petitioner Global Energy Supply Corporation filed a Petition for Review seeking a refund of alleged unutilized and excess creditable withholding tax (CWT). The Petitioner asserts that the refund claim was filed within the two-year prescriptive period, supported by Certificates of Creditable Withholding Tax (CWT) and that the income and CWT were reported in its 2019 Income Tax Returns (ITR) without being carried over to subsequent periods. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) argues that the Petitioner failed to provide evidence linking CWT to declared income in the ITR, did not prove tax remittance, and did not comply with Revenue Memorandum Order (RMO) No. 52-98 and Revenue Regulations (RR) No. 2-2006, rendering the refund claim invalid and unsubstantiated. In ruling, the Court held that the proof of actual remittance to the BIR of the taxes withheld is not indispensable in claims for refund. In addition, considering that the Petitioner opted for a refund by marking the box corresponding to the option "To be refunded" in its Annual ITR for the Taxable Year (TY) 2019, and carried over only the amount of the prior year's excess credits in its Quarterly ITR for the first quarter of TY 2020 and 2020 Annual ITR, the claimed CWT for TY 2019 may be a proper subject of a claim for credit or refund, pursuant to Section 76 of the Tax Code. Furthermore, the Petitioner’s administrative and judicial claims were filed within the two-year prescriptive period from the 2019 Annual ITR filing, with withholding established through the submission of the relevant BIR Forms 2307. However, out of the total CWT previously determined to be properly supported by BIR Forms 2307, only a portion corresponding to the income payments verified to be included in the Petitioner’s taxable gross income in its 2019 Annual ITR should be granted. Consequently, the Petition was PARTIALLY GRANTED.

INVALIDATION OF TAX ASSESSMENTS DUE TO LACK OF PROPER AUTHORITY

CENTRAL LUZON DRUG CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10045, SEPTEMBER 10, 2024

Petitioner Central Luzon Drug Corporation filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner claimed that the assessments were invalid as the Revenue Officers (ROs) who conducted the audit were not properly authorized by a valid Letter of Authority (LOA) and that the audit was performed based on a mere Memorandum of Assignment (MOA), and not a valid LOA, following the reassignment of ROs. Moreover, the tax assessments were null and void due to the absence of a valid LOA authorizing the ROs to conduct the audit, as the law requires. The Petitioner relied on the jurisprudence established in Commissioner of Internal Revenue v. McDonald's Philippines Realty Corp., which mandates an LOA for an audit. On the contrary, the Respondent argued that a LOA is unnecessary for ROs from Large Taxpayer Services (LTS) as their authority comes directly from the CIR’s organic powers under Section 6(a) of the National Internal Revenue Code (NIRC). The CIR also contended that an MOA is sufficient for reassigning ROs under Revenue Memorandum Order (RMO) No. 62-2010. In ruling, the Court held that the assessments were invalid. LOA is essential for conducting an audit, even when ROs are from the LTS. The MOA issued did not fulfill the legal requirement for authorizing an audit, making the tax assessments void. Consequently, the Court GRANTED resulting in the cancellation of the assessment.

A CORPORATION MUST INDICATE ITS INTENT TO REQUEST A TAX REFUND OR CLAIM A TAX CREDIT BY SELECTING THE APPROPRIATE OPTION IN THE ITR

PROOF OF ACTUAL REMITTANCE OF TAXES TO THE BIR IS NOT INDISPENSABLE IN A CLAIM FOR REFUND OF EXCESS CWT

CIR VS. AZ CONTRACTING SYSTEM SERVICE

CTA EN BANC CASE NO. 2757, AUGUST 30, 2024

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking partial reversal of the earlier Decision and Resolution of the Court in Division, granting the refund of the unutilized Creditable Withholding Tax (CWT) of the Respondent AZ Contracting System Service. The Petitioner insisted that the Respondent failed to prove that there was an erroneous or illegal assessment of taxes against it. Likewise, the Respondent failed to provide sufficient documents to prove the income claimed was declared in the Annual Income Tax Returns (ITR) and did not show evidence of actual remittance of withheld taxes to the BIR. On the other hand, the Respondent countered that the Petition should be denied because it merely repeats allegations already resolved in the previous Decision and Resolution. Additionally, the Respondent has partly demonstrated that the income subject to withholding taxes was declared as part of the gross income, and the documents outlined in Revenue Memorandum Order (RMO) No. 53-98 serve only as audit guidelines, not as mandatory requirements for supporting a tax credit or refund claim. In ruling, the Court held that proof of actual remittance is not required to claim a refund for unutilized tax credits, and the Petitioner cannot invoke the Respondent's alleged non-compliance with RMO No. 53-98 as grounds to deny the tax refund or credit claim. Consequently, the Petition was DENIED for lack of merit.

TAX EVASION CASE SHOULD BE DISMISSED IF THE PROSECUTION FAILS TO FILE IT WITHIN PRESCRIPTIVE PERIOD

PEOPLE OF THE PH VS ZIEGFRIED LOO TIAN

CTA EN BANC CRIMINAL CASE NO.118, AUGUST 29, 2024

Plaintiff-Appellant, the People of the Philippines, filed a Petition for Review against the Accused-Appellee, Ziegfried Loo Tian, challenging the dismissal of a case for violating Section 254 of the National Internal Revenue Code (NIRC) of 1997. The Accused was charged with attempting to evade payment of Value-Added Tax (VAT) for the second quarter of 2010. The Court dismissed the case on the grounds of prescription in December 2022, and the Plaintiff-Appellant's Motion for Reconsideration (MR) was denied in March 2023. The Plaintiff-Appellant argued that the prescription had not set in, claiming that the discovery of the violation and the institution of judicial proceedings interrupted the prescriptive period. They also asserted that the Accused willfully attempted to evade VAT. In response, the Accused-Appellee argued that the government’s right to prosecute had prescribed under the NIRC's five-year limitation, and that the delay in filing violated his right to a speedy disposition. In ruling, the Court held that the Plaintiff-Appellant's MR was filed late, making the initial decision final and executory. Moreover, even if the Motion had been timely filed, the right to prosecute had prescribed, as the Information was filed in 2022, more than five (5) years after discovering the violation in 2012. Consequently, the Court DENIED the Petition and AFFIRMED the dismissal of the case.

THE CLASSIFICATION IS NOT LIMITED TO EXISTING CONDITIONS & APPLIES EQUALLY TO ALL MEMBERS OF THE SAME CLASS OF NON-LIFE INSURANCE

LIFE INSURANCE & NON-LIFE INSURANCE DIFFER SIGNIFICANTLY, WARRANTING DISTINCT TAXATION

FINDING NO VIOLATION OF EQUAL PROTECTION OR TAX UNIFORMITY, THE COURT SEES NO REASON TO HALT THE IMPLEMENTATION OF THE PROVISIONS

STANDARD INSURANCE CO INC VS. CIR

CTA CASE NO. SCA-0009, AUGUST 22, 2024

Petitioner Standard Insurance Co. Inc. filed a Petition for Certiorari assailing the constitutionality of imposition of 12% Value-Added Tax (VAT) and 12.5% Documentary Stamp Tax (DST) on non-life insurance premiums. The Petitioner argued that constitutional challenges require: (a) an actual case or controversy; (b) standing to challenge; (c) timely raising of the issue; and (d) constitutionality as the central issue. The Petitioner asserted that provisions violate constitutional rights to equal protection and uniform taxation due to changed circumstances, warranting the application of "relative unconstitutionality." On the other hand, the Respondent insisted that the Petitioner failed to meet the requirements for judicial review, as there is no actual case or controversy, and the issue of constitutionality is not the central matter of the case. In ruling, the Petition has satisfied the requisites for judicial review. Furthermore, equal protection is not violated by a law with reasonable classification, which must: (1) have substantial distinction; (2) relate to the law's purpose; (3) not be limited to current conditions; and (4) apply equally within the same class. The components of life insurance substantially differ from those of non-life insurance. The Premium Tax on insurance policies consists of a taxable savings portion, disadvantaging them compared to bank savings, where only interest income is taxed. Reducing the Premium Tax would help address this unequal tax treatment. Absent a clear breach of the Constitution showing that the classification between life and non-life insurance was unreasonable, capricious, or unfounded, the Court finds no reason to impede the continued implementation of the assailed provisions. Consequently, the Petition was DENIED for lack of merit.

WHAT DETERMINES THE JURISDICTION OF THE COURT IS THE NATURE OF THE ACTION PLEADED AS APPEARING FROM THE ALLEGATIONS IN THE COMPLAINT

THE CLAIM IS CONSIDERED CAPABLE OF PECUNIARY ESTIMATION IF IT IS PRIMARILY FOR THE RECOVERY OF A SUM OF MONEY & WHETHER JURISDICTION IS IN THE MUNICIPAL OR REGIONAL COURTS WOULD DEPEND ON THE AMOUNT OF THE CLAIM

THE JURISDICTION TO DECIDE APPEALS UNDER SECTION 195 OF THE LGC DEPENDS ON THE AMOUNT OF LOCAL TAXES, FEES, OR CHARGES SUBJECT OF THE NOTICE OF ASSESSMENT ISSUED BY THE LOCAL TREASURER

TRICOR MANAGEMENT & DEVELOPMENT CORPORATION VS. CEBU CITY GOVERNMENT & OFFICE OF THE CITY TREASURER

CTA AC NO. 299, AUGUST 22, 2024

Petitioner Tricor Management & Development Corporation filed a Petition for Review praying that a judgment be rendered setting aside the assailed orders of the Regional Trial Court (RTC), Branch 19 of Cebu City, one of which is the dismissal of the Petitioner’s complaint on the jurisdictional ground. The Petitioner argued that the RTC has jurisdiction over the case as the sole issue is the propriety of the deficiency tax assessment, irrespective of the tax assessed, and thus, the action is one incapable of pecuniary estimation. On the other hand, respondents Cebu City Government and Office of The City Treasurer asserted that contrary to the Petitioner's protest, the instant action is capable of pecuniary estimation because the principal relief sought is an appeal from the assessment for the payment of additional business taxes and charges, including surcharge, interest and penalty for taxable year (TY) 2020. In ruling, the Court cited the Supreme Court ruling in China Banking Corporation vs. City Treasurer of Manila, citing the case of Luz R. Yamane vs. BA Lepanto Condominium Corporation, which provides that that with the enactment of Republic Act (R.A.) No. 9282, the authority of the RTC to exercise either original or appellate jurisdiction over local tax cases depends on the amount of the claim. Considering that the total amount of local business taxes, fees, and charges subject of the Letter of Assessment (Final Demand) dated October 5, 2022, issued by the Petitioner to the Respondents for TY 2020 does not exceed the jurisdictional threshold of two million (Php 2,000,000) for RTCs, the RTC of Cebu City, Branch 19 did not err in ruling that it has no jurisdiction to take cognizance of the appeal filed by the Petitioner. Thus, the Petition was DENIED for lack of merit.

THE TITLE “FORMAL LETTER OF DEMAND” IS A CLEAR REQUIREMENT FOR PAYMENT

DUE PROCESS REQUIRES BIR TO CONSIDER THE TAXPAYER'S DEFENSES & PROVIDE A WRITTEN EXPLANATION OF THE LAW & FACTS BEHIND THE ASSESSMENT, OR ELSE THE ASSESSMENT IS VOID

ALTIMAX BROADCASTING CO. INC. VS CIR

CTA CASE NO. 10687, AUGUST 21, 2024

Petitioner Altimax Broadcasting Co. Inc. filed a Petition for Review praying for the reversal and the setting aside of Final Decision on Disputed Assessment (FDDA) on its alleged deficiency income tax issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner asserts that the Respondent's Formal Letter of Demand (FLD) and FDDA are legally deficient, as they lack a clear tax demand, fail to specify the factual and legal basis for the assessment, and do not provide reasons for denying the Petitioner's defenses or conducting a proper quality audit. In ruling, the Court held that the title "Formal Letter of Demand" clearly indicates a demand, and the phrases "requested to pay" or "requested to settle" do not diminish its clear requirement for payment of deficiency tax. Citing the Supreme Court landmark case of Avon, due process requires the Bureau of Internal Revenue to consider the taxpayer's defenses and evidence. The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void. Consequently, the Petition was GRANTED, and the FLD/FAN issued was CANCELLED and SET ASIDE.

FAILURE TO PROVIDE REASON OR ACKNOWLEDGE THE PROTEST VIOLATES THE TAXPAYER'S DUE PROCESS RIGHTS & RENDERS THE ASSESSMENT VOID

COMMISSIONER OF INTERNAL REVENUE VS. THE RESIDENCES AT GREENBELT CONDOMINIUM CORPORATION

CTA CASE NO. 2810, AUGUST 5, 2024

Petitioner Commissioner of Internal Revenue filed a Petition for Review challenging the earlier Decision and Resolution of the Court in Division, which nullified the deficiency tax assessments issued by the Petitioner against the Respondent The Residences at Greenbelt Condominium Corporation. The Petitioner argued that protesting the Preliminary Assessment Notice (PAN) is optional, as the right to protest is based on administrative procedures, not the Tax Code. Petitioner contends that the PAN is preliminary and not the final assessment, arguing that protesting the PAN is optional and its non-protest does not render it final or non-appealable. The Petitioner also submits that Avon is inapplicable to the present case due to variance in their respective factual milieu. Petitioner insists that reiteration of an assessment does not constitute a violation of due process but instead, it only signifies the denial of the protest and/or irrelevant documents. In ruling, the Court agrees with the Court in Division in applying the Avon case, which states that failing to provide reasons for rejecting the respondent's defenses or acknowledging the protest letter violates the taxpayer's due process rights. The taxpayer's right to protest against the PAN is based on substantive law. Once the taxpayer opts to file such a protest, the CIR has no choice but to consider it and cannot just take it for granted without offending the taxpayer's due process rights and invalidating the assessment. Failure by the CIR to comply with these requirements shall lead to the assessment void. Consequently, the Petition was DENIED.

FAILURE TO GIVE DUE CONSIDERATION TO THE ARGUMENTS & EVIDENCE SUBMITTED IN THE PETITIONER'S REPLY & PROTEST VIOLATES THEIR RIGHT TO DUE PROCESS, RENDERING THE ASSESSMENTS VOID

BIO-RESOURCE POWER GENERATION CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10372, JULY 30, 2024

Petitioner Bio-Resource Power Generation Corporation filed a Petition for Review praying for the cancelation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that its right to due process was violated when the Respondent completely disregarded the pieces of evidence submitted in its Reply to the Preliminary Assessment Notice (PAN). On the other hand, the Respondent asserted that the assessments clearly state the factual and legal bases and were made in accordance with prevailing laws and rules. In ruling, citing the Avon case, when the Respondent rejects the explanations, specific reasons and supporting facts must be provided, and these must be included in the record. Merely stating that the Petitioner failed to introduce sufficient evidence is overly general and fails to provide specific reasons for rejecting the Petitioner's arguments. There is a clear inaction and omission to give due consideration to the arguments and evidence submitted which constitute deplorable transgressions of Petitioner’s right to due process and shall render the assessment void. Consequently, the Petition was GRANTED, and the assessment was CANCELLED.

INTERNAL REVENUE TAXES MUST BE ASSESSED WITHIN THREE YEARS FROM THE FILING DEADLINE OR THE LATE FILING DATE

MOA WITHOUT THE SIGNATURE OF CIR OR REVENUE REGIONAL DIRECTOR IS INVALID TO AUTHORIZE EXAMINATION

TAXPAYER HAS 15 DAYS TO RESPOND FROM THE DATE OF RECEIPT OF THE PAN, NOT FROM WHEN IT WAS MAILED

TRAVEL WAREHOUSE INC VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10098, JULY 12, 2024

Petitioner Travel Warehouse Inc. filed a Petition for Review praying for the cancelation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner contended that the right to assess has prescribed and that issuing the Final Assessment Notice (FAN) before the expiration of the 15-day period to reply on the Preliminary Assessment Notice (PAN) violated due process. On the other hand, the Respondent countered that since the PAN was mailed on October 4, 2018, the 15-day response period expired on October 19, 2018. In ruling, Section 203 of the Tax Code mandates that the government assess internal revenue taxes within three (3) years of the filing deadline or the late filing date. Thus, an assessment notice issued after this period is invalid. Furthermore, the Revenue Officer lacked authority, as the MOA, signed only by the Revenue District Officer, was insufficient to validly authorize the examination. In addition, citing Section 3.1.1 of Revenue Regulation (RR) No. 18-2013, the taxpayer has 15 days to respond from the date of receiving the PAN, not from the date it was mailed by the BIR. The Respondent failed to wait for the expiration of the 15-day period and deprived the Petitioner of its right to due process. Consequently, the Petition was GRANTED, and the assessment was CANCELLED.

FAILURE TO APPEAL WITHIN THE SET PERIOD PREVENTS THE COURT FROM GAINING JURISDICTION OVER THE CASE

QUADFOODS CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10419, JUNE 6, 2024

Petitioner Quadfoods Corporation filed a Petition for Review with an Urgent Motion for Suspension of Collection of Tax and a Motion to Dispense with the Payment of Bond, seeking to have the deficiency tax assessment issued by the Respondent Commissioner of Internal Revenue (CIR) declared null and void. The Petitioner claims that they are not liable for the alleged assessment contained in the Final Decision on Disputed Assessment (FDDA). In ruling, the Court held that the Petitioner must file an appeal within thirty (30) days from the receipt of the FDDA. The Petitioner can choose to appeal either to the Court of Tax Appeals (CTA) or request a reconsideration to the CIR if the FDDA is issued by the CIR's authorized representative. If the CIR has already issued an FDDA, the Petitioner must appeal to the CTA within thirty (30) days from the receipt of the CIR’s decision. Petitioner’s records show that the FDDA was received on January 29, 2019. However, the Petitioner claims it received the FDDA on January 28, 2019. Counting thirty (30) days from these dates, the deadline to file the Appeal was either February 27, 2019, or February 28, 2019. Unfortunately, the Petition was filed late on December 9, 2020, more than a year after the appeal period had lapsed. Consequently, the Court did not acquire jurisdiction over the case. Hence, the instant Petition was DISMISSED.

FOR THE ACCUSED TO BE CONVICTED, THE PROSECUTION SHOULD FULFILL THE TEST OF MORAL CERTAINTY NEEDED TO SUPPORT A CONVICTION

PEOPLE OF THE PHILIPPINES V. ANGELITO O. DELA PENA

CTA CRIMINAL CASE NO. 0-844, JUNE 2, 2024

The Accused was charged with violation of Section 255 of the 1997 Tax Code, as amended, for the taxable year 2008 without formally protesting against or appealing the same. When arraigned, Accused entered a plea of not guilty to the charge. In support of the allegations, the Prosecution presented in evidence the Preliminary Assessment Notice (PAN) with the corresponding Registry Return Notice and the Formal Letter of Demand (FLD) with the corresponding Registry Return Receipt. Following the review of the evidence presented by both parties, the Court found that the evidence of the Prosecution fails to fulfill the test of moral certainty needed to support a conviction. To sustain a conviction for willful failure to pay taxes punishable under Section 255 of the 1997 Tax Code, the Prosecution must prove beyond reasonable doubt the existence of the following elements: (1) the taxpayer is required to pay any tax, make a return, keep any record or supply correct and accurate information or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations; (2) the taxpayer failed to do so; and (3) such failure is willful. The Prosecution’s failure to prove that the PAN and FLD were properly served upon the Accused renders void the deficiency assessment issued by the BIR. It follows, then, that the first element of the crime as charged has not been proven. The CTA also found that the second and third elements were not present either since there being no requirement to pay the taxes sought to be collected, the Accused was justified in not paying the same, and much less is his failure to do so willfully. Even if the assessment here was found to be void due to the Prosecution’s failure to prove that the PAN and the FLD were properly served upon the Accused, that, in itself, is not reason for the Court not to proceed to render judgement on the civil liability, the Accused’s civil liability for taxes must and can be proven by competent evidence other than assessment. No such competent evidence was presented by the Prosecution in the case. Neither were any of the Prosecution’s documentary evidence offered to prove the Accused civil liability. None of the pieces of evidence, nor the testimony of the Prosecution’s witness qualify, individually or taken together, as competent evidence to prove his civil liability. The Accused has been ACQUITTED of the crime charged on the ground of reasonable doubt.

GROSS RECEIPTS FOR THE PRECEDING CALENDAR YEAR THAT HAS BEEN SUBJECTED TO A 3% FRANCHISE TAX MUST BE SHOWN IN ORDER TO AVAIL OF THE EXEMPTION

“IN LIEU OF ALL TAXES” CLAUSE IS LIMITED TO THE KIND OF TAXES, TAXING AUTHORITY & OBJECT TAXES SPECIFIED IN LAW

NATIONAL GRID CORPORATION OF THE PHILIPPINES VS. CITY GOVERNMENT OF QUEZON CITY

CTA AC NO. 273, MAY 29, 2024

Petitioner National Grid Corporation of the Philippines filed a Petition for Review praying for the reversal of the decision and resolution both rendered by the Respondent City Government of Quezon City and the Regional Trial Court (RTC) dismissing the claim of Local Business Tax (LBT) refund paid under protest. Petitioner argued that with the enactment of Republic Act (R.A.) No. 9511 granting the Petitioner a Franchise to engage in the business of transmitting electricity and other activities that are necessary to support the safe and reliable operation of a transmission system of the Republic of the Philippines, it is exempt from the payment of business taxes, including the city tax upon its payment of 3% Franchise Tax based on its gross receipts. Likewise, Petitioner asserts that since its legislative franchise contains an “in lieu of all taxes” clause, it is exempt from paying all kinds of taxes, whether levied or collected by any authority, including local government units, as long as it is in connection with its franchise. In ruling, the court disagreed. To avail of tax exemptions, tax exemptions must be clear and unequivocal and must be directly stated in a specific legal provision; and the “in lieu of all taxes” clause is limited to the kind of taxes, taxing authority, and object of taxes specified in the law. Petitioner’s Franchise constitutes an express and categorical statement that it is exempt from payment of local taxes on its gross receipts from its electric power transmission. However, it must have paid the 3% franchise tax on the gross receipts to be exempted. The 2020 gross receipts of the Petitioner must be subjected to a 3% Franchise Tax to avail of the 2021 local tax exemption. Section 143 of the Local Government Code (LGC) of 1991 provides that “tax on business” must be based on “gross sales or receipts for the preceding calendar year. Thus, for the Petitioner to avail of its exemption, it must show that the gross receipts for the preceding calendar year have been subjected to a 3% Franchise Tax. For petitioner to continue the exempt business activity, it is incumbent upon the Petitioner to show that the gross receipts from electric power transmission for the preceding year, 2020, were properly subjected to 3% Franchise Tax as required under R.A. 9511. Consequently, the Petition was PARTIALLY GRANTED, and the case was REMANDED to the Regional Trial Court for further proceedings.

DUE PROCESS REQUIRES THE BIR TO CONSIDER THE DEFENSES & EVIDENCE SUBMITTED BY THE TAXPAYER & TO RENDER A DECISION BASED ON THESE SUBMISSIONS; FAILURE TO ADHERE TO THESE REQUIREMENTS CONSTITUTES A DENIAL OF DUE PROCESS & TAINTS THE ADMINISTRATIVE PROCEEDINGS WITH INVALIDITY

SUMITOMO CORPORATION-MANILA BRANCH VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10412, MAY 14, 2024

Petitioner Sumitomo Corporation-Manila Branch filed a Petition for Review seeking the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that the tax assessments were erroneous and lacked a factual and legal basis and that the Respondent failed to comply with procedural requirements, invalidating the assessments. On the contrary, the Respondent argues that the tax assessments were valid and based on proper procedures and that they complied with all procedural requirements in issuing the assessment notices. In ruling, the Court found merit in the Petitioner's contention that its right to due process was violated based on Section 228 of the 1997 Tax Code, as amended, and relevant Supreme Court rulings, notably the Avon case wherein the Court emphasized that the taxpayer must not only be allowed to present its defenses and evidence but also that the Commissioner and his subordinates must give due consideration to the same. As noted, the Formal Letter of Demand/Final Assessment Notice (FLD/FAN) failed to sufficiently inform the Petitioner of specific reasons for the BIR's conclusions, denying the Petitioner a fair opportunity to defend itself. It was also observed that the Respondent did not consider the Petitioner's defenses and supporting documents adequately, violating due process. Moreover, the period to assess the Petitioner has lapsed. The Respondent’s power to assess was limited by Section 203 of the 1997 Tax Code, and the waivers extending the assessment period were found invalid due to non-compliance with Revenue Memorandum Order No. 20-90 and Revenue Delegation Authority Order No. 05-01 guidelines. Consequently, the Petition was GRANTED, and the resulting assessments were CANCELLED and WITHDRAWN.

CRIMINAL CASES ARE BASICALLY IMPRESCRIPTIBLE. HOWEVER, VIOLATIONS SHALL NEVERTHELESS PRESCRIBE IF MORE THAN FIVE (5) YEARS HAVE LAPSED FROM THE TIME OF THE COMMISSION OF THE OFFSENSE, IF KNOWN, UP TO THE DATE OF FILING OF THE INFORMATION BEFORE THE COURT

PEOPLE OF THE PHILIPPINES VS. STAR ASSET MANAGEMENT NPL, INC., MARK S. FRONDO & JOSEPH RYAN R. SYCIP

CTA EN BANC CRIMINAL CASE 129, APRIL 22, 2024

Petitioner People of the Philippines filed a Petition for Review assailing the earlier Resolutions of the CTA 1st Division dismissing the case instituted against the Respondents Star Asset Management NPL, Inc. Mark S. Frondoso and Joseph Ryan R. Sycip. The case arose from the alleged willful failure to pay tax under Sections 253, 255, and 256 of the 1997 Tax Code, as amended. To counter, the Respondents argued that the Petition should be dismissed outright as prescription in filing the Information has already set in. Accordingly, the five-year prescriptive period provided under Section 281 of the 1997 Tax Code, as amended, has already set in on February 13, 2022. Thus, the Information filed on December 6, 2022 was already late. In ruling, the Court held that the offense charged had already prescribed when the Information was filed citing Section 281 of the 1997 Tax Code, as amended, which provides that all violations of any provision of the Code shall prescribe after five (5) years. Prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment. The foregoing provision presents two (2) modes for the commencement of the period of prescription: (1) from the day of the commission of the violation of the law; or (2) when the day of the commission is unknown, from the discovery of the commission and the institution of judicial proceedings for its investigation and punishment. Citing the case of Lim and Revenue Memorandum Circular (RMC) No. 101-90, Petitioner had five (5) years counted from February 13, 2017, or until February 13, 2022, to file the Information in Court. The Information dated March 9, 2022, was filed with this Court only on December 6, 2022. Consequently, the offense charged had already prescribed when the Information was filed, thus, the Petition was DISMISSED on the ground of prescription.

WHEN THERE IS A PENDING PROTEST, THE ASSESSMENT IS NON-DEMANDABLE & THE BIR CANNOT COLLECT A NON-DEMANDABLE ASSESSMENT

COLLECTION MEASURES EMANATING FROM NON-DEMANDABLE ASSESSMENT SHALL BE VOID & OF NO FORCE & EFFECT

TAX AUTHORITIES ARE BOUND TO CONSIDER THE PROTEST FIRST, BEFORE PROCEEDING AGAINST THE TAXPAYER FOR COLLECTION

C.U.T. COMMERCIAL CORPORATION VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 9933, MARCH 22, 2024

Petitioner C.U.T. Commercial Corporation filed a Petition for Review asking the Court to declare as void the Preliminary Collection Letter (PCL) issued by the Respondent Bureau of Internal Revenue (BIR), relative to the alleged deficiency taxes for the taxable year 2014. The Petitioner argued that the PCL was premature, taking into account that its Motion for Reconsideration (MR) of the Final Decision on Disputed Assessment (FDDA) was still pending before the Commissioner of Internal Revenue (CIR). On the other hand, the Respondent countered that the issuance of the PCL was proper, taken that the FDDA had already become final and executory. In ruling, the Court cited the Supreme Court case of Light Rail Transit Authority vs. Bureau of Internal Revenue (LRTA Case) wherein it explained that to ground the collection measures on the premise of the existence of "delinquent taxes" is incorrect. A PCL, as well as a Final Notice Before Seizure, Warrant of Distraint and/or Levy, or other means of summary administrative collection, remain tentative for as long as there is a pending administrative appeal before the Office of the CIR. In the case at bar, the assessment against the Petitioner remained to be non-demandable, on account of circumstances similar to those in the LRTA Case. In other words, the assessment against the Petitioner remained tentative given the pending MR before the CIR. Thus, the Petition was GRANTED, and the subject PCL was ANNULLED for being void and ineffectual.

ISSUANCE OF NEW LOA FOR THE CONTINUANCE OF AUDIT DOES NOT INVALIDATE PRIOR AUDIT

NECESSITY OF A DEFINITE DUE DATE IN TAX ASSESSMENT NOTICES FOR THEM TO BE CONSIDERED VALID

IBMS TECHNOLOGY PHILIPPINES CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10177, MARCH 15, 2024

The Petitioner IBMS Technology Phils. Corporation filed a Petition for Review praying that the 2015 tax assessments issued by the Respondent Commissioner of Internal Revenue (CIR) be cancelled and withdrawn. The Petitioner argued that the original Letter of Authority (LOA) was void due to a subsequent LOA and claimed that the period of limitation for assessment and collection has already prescribed. On the other hand, the Respondent countered, asserting the validity of the original LOA, disputing the expiration of assessment time limits, and placing the burden of proof on the Petitioner to challenge the assessment's validity. In ruling, the Court held that the issuance of a new LOA to continue the audit process did not invalidate the prior audit. The Court emphasized that the new LOA served as a replacement for the original LOA and authorized the examination of the Petitioner's books of accounts. The Court upheld the validity of the audit process despite the issuance of a new LOA. Regarding the prescription of the assessment and collection period, the Court recognized the partial set-in of prescription. However, the Court highlighted the importance of a definite due date in tax assessment notices. Since the Final Assessment Notice (FAN) lacked a clear due date for payment, the assessment is invalid and ineffectual. Since the subject assessment is void, the Petitioner cannot likewise be held liable to the Compromise Penalty. Hence, the Petition was GRANTED, and the tax assessment was CANCELLED.

IN THE ABSENCE OF AN APPEALABLE DECISION FROM THE CIR, CTA HAS NO AUTHORITY TO VALIDLY ACQUIRE JURISDICTION OVER THE PETITION FOR REVIEW

BAYUGAN FARMERS MILLERS MULTI-PURPOSE COOPERATIVE VS. COMMISSIONER OF INTERNAL REVENUE & ATTY. NASSER A. TANGGOR-OIC REGIONAL DIRECTOR, REVENUE REGION NO. 17

CTA CASE NO. 9928, MARCH 7, 2024

Petitioner Bayugan Farmers Millers Multi-Purpose Cooperative filed a Petition for Review as a result of the alleged inaction of the Respondent, Commissioner in Internal Revenue (CIR) on its Appeal/Request for Reconsideration of the Final Decision on Disputed Assessment (FDDA) holding it liable to deficiency tax assessment. The assessment arose from the Respondent’s imposition of tax assessments on the Petitioner’s income from gas pump operation allegedly considered as unrelated activities. The Petitioner claims that the gas pump operation is an integral component of its primary business. As one operating a multi-purpose cooperative involved in activities such as rice and corn milling, trading, agriculture, and industrial production, fuel is an important, if not indispensable, requirement to the main business of milling, trading, and agricultural and industrial production. Likewise, its net surplus from cooperative operations is not profit but rather excess payments from members for borrowed loans. Further, Article 85 of the Republic Act (R.A.) No. 9520, or the Cooperative Code of 2008 does not specify the source of the net surplus, interpreting the non-taxability of surplus to apply to all income, whether from related or unrelated business activities. The argument extends to the claim that its surplus does not constitute realized gain. On the other hand, the Respondent counters that the Income and Value-Added Tax (VAT) assessments have factual and legal bases. The sale of fuel at the gasoline pumping station was not part of their registered activities until February 12, 2015, when the Amended Articles of Cooperation were approved by the Cooperative Development Authority (CDA) Consequently, taxation can be applied to this business line. In ruling, the Court held that it has no jurisdiction over the instant petition. Citing Section 7(a)(1) and (2) of R.A. No. 1125 as amended by R.A. 9282, inaction by the CIR in cases involving disputed assessments, refunds of internal revenue taxes, fees, or other charges, penalties in relation thereto, or other matters arising under the Tax Code or other laws administered by the BIR, where the Tax Code provides a specific period for action, in which case the inaction shall be deemed a denial. However, there is only one (1) "180-day period" of inaction to speak of, which shall be counted from the date of filing of the protest and not from the date of filing of administrative appeal. Section 228 of the 1997 Tax Code, as amended, and Section 3.1.4 of Revenue Regulations (RR) No. 12-1999, do not provide that a fresh 180-day period is granted to the CIR to act on an administrative appeal. Therefore, without a decision from the CIR that can be appealed, this Court lacks jurisdiction over the Petition. The Petitioner's only option is to wait for the Respondent's final decision on its administrative appeal and then appeal it to the Court within 30 days of receiving it. Hence, the Petition was DISMISSED for lack of jurisdiction.

CONSEQUENCES OF FAILING TO OBEY SUMMONS & PRODUCE REQUIRED DOCUMENTS AS MANDATED BY THE BIR

JIMMY A. ANG & OLIVIA N. ANG VS. PEOPLE OF THE PHILIPPINES

CTA EN BANC CRIMINAL CASE NO. 096, FEBRUARY 22, 2024

Petitioners Jimmy A. Ang and Olivia N. Ang, officers of The Value Systems Philippines, Inc., filed a Petition for Review to reverse their conviction for the violation of Section 266 of the 1997 Tax Code, as amended, for failure to comply with a Subpoena Duces Tecum (SDT) issued by the BIR. The Petitioners contended that the SDT was void and without effect because it was issued over a year before the issuance of the SDT. They also argued that the SDT was irregularly served on them and that they never neglected the SDT. On the other hand, the Respondent People of the Philippines countered that the Petitioners' insistent attack on the alleged irregularities in the SDT's service was unfounded. The Petitioners' receipt of the SDT was admitted by Jimmy Ang himself. In ruling, the court found that the Petitioners were duly summoned and that there was no error in the actions of the lower courts in this regard. The Petitioners had been properly notified through their representative, Raquel Encinas, who received the SDT and other notices on their behalf. It was established that the SDT was served in accordance with the relevant procedures and that the Petitioners had knowledge of its contents. The Court emphasized that the Petitioners willfully neglected to appear and produce the required documents before the BIR, despite the extension of time given. Consequently, the Petition was DENIED. The Court AFFIRMED the conviction of the Petitioners for violation of Section 266 of the 1997 Tax Code and upheld the penalties imposed on the Petitioners for their non-compliance with the SDT, i.e. one (1) year imprisonment and a fine imposed on both the Petitioners in the amount of ₱5,000.00. However, the Court WITHDREW and SET ASIDE the ₱50,000.00 penalty imposed on The Value Systems Philippines, Inc.

FAILURE TO COMPLY WITH THE INVOICING REQUIREMENTS FOR ZERO-RATED SALES PRECLUDES THE ENTITLEMENT TO A REFUND

COMMISSIONER OF INTERNAL REVENUE VS. SCHAEFFLER PHILIPPINES INC.

CTA CASE NO. 10358, FEBRUARY 15, 2024

Petitioner Schaeffler Philippines Inc. filed a Petition for Review seeking a refund of the amount of unutilized input Value-Added Tax (VAT) attributable to its zero-rated sales for the first (1st) quarter of calendar year (CY) 2018. The Petitioner argued that the Respondent Commissioner of Internal Revenue (CIR)’s disallowance of exhibit evidence of Philippine Economic Zone Authority (PEZA) Certifications proving its sales to ecozone entities as qualified zero-rated sales are devoid of any factual or legal basis. It argued that these exhibits sufficiently establish the status of these entities as enterprises duly registered with the PEZA, and sales to these entities are treated as export sales subject to 0% VAT. On the other hand, the Respondent claimed that the Petitioner failed to substantiate that it sold goods to PEZA-registered entities considering that the Court had denied admission in evidence of Exhibits “P-22” to “P-26” representing the PEZA-issued certifications since they are mere photocopies. Additionally, the Petitioner has failed to comply with the requisites before secondary evidence is allowed in lieu of the originals. In ruling, the Court held that all of the Petitioner’s alleged zero-rated sales, evidenced by VAT invoices, do not bear the term “zero-rated sale” written or printed prominently on the face of the VAT invoices. Section 113 (B)(2)(c) of the 1997 Tax Code, as amended, provides that the term “zero-rated sale” shall be written or printed prominently on the invoice or receipt for sales that are subject to 0% VAT. Consequently, the Petition was DENIED.

THE ABSENCE OF THE CIR’S DISCLOSURE OF THE LAWS & FACTS JUSTIFYING THE REJECTION OF THE LETTER OF PROTEST CONSTITUTES A VIOLATION OF DUE PROCESS RIGHTS, RENDERING THE ASSESSMENT VOID

COMMISSIONER OF INTERNAL REVENUE, VS. ATLAS PRECISION ENVIRONMENT CORPORATION

CTA CASE NO.2686, FEBRUARY 13, 2024

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the earlier Decision and Resolution declaring that the subject assessment issued against the Respondent Atlas Precision Environment Corporation as void due to its failure to comply with the due process requirements. The Petitioner argued that there was no violation of the Respondent’s due process and that the Special Third Division erred in the cancellation of the assessment. On the other hand, the Respondent claimed that the assessment issued against it was patently arbitrary and capricious when the Petitioner failed to issue a valid Final Assessment Notice (FAN) containing the necessary laws and facts upon which the denial of its letter protest was made. In ruling, Section 228 of the 1997 Tax Code, as amended, and Section 3 of Revenue Regulations (RR) No. 12-99, as amended, both mandate the Petitioner to inform the taxpayer in writing of the law and facts on which the assessment is made, otherwise, the assessment shall be void. Moreover, failure to provide the Respondent with the necessary laws, facts, and explanations of the grounds for rejecting its protest constitutes a violation of the Respondent’s right to due process. Consequently, the Petition was DENIED, and the assailed Decision and Resolution were AFFIRMED.

BY WAY OF A LIMITATION, A PROVINCE CANNOT IMPOSE A TAX ON BUSINESS ENJOYING A FRANCHISE OPERATING WITHIN THE TERRITORIAL JURISDICTION OF ANY CITY LOCATED WITHIN THE PROVINCE

SINCE THE SITUS OF TAXATION IS THE PLACE WHERE THE PRIVILEGE IS EXERCISED, THE CITY IN WHICH THE FRANCHISE HOLDER HAS ITS PRINCIPAL OFFICE & EXERCISES THE SAID PRIVILEGE HAS THE POWER TO IMPOSE FRANCHISE TAX ON THE LATTER’S GROSS RECEIPTS, EVEN WHEN THE SOURCE THEREOF IS BEYOND OR OUTSIDE THE TERRITORIAL LIMITS OF THE SAID CITY

THE LOCAL GOVERNMENT UNIT OF CAMARINES SUR VS. CAMARINES SUR II ELECTRIC COOPERATIVE, INC. (CASURECO II) & THE LOCAL GOVERNMENT UNIT OF NAGA CITY

CTA AC NO. 264, DECEMBER 19, 2023

Petitioner Local Government Unit (LGU) of Camarines Sur filed a Petition for Review assailing the Regional Trial Court (RTC)’s earlier Decision declaring the Respondent LGU-Naga City as the sole LGU entitled to the Respondent Camarines Sur II Electric Cooperative, Inc. (CASURECO II)’s local Franchise Tax. The Petitioner argued that it is the rightful LGU entitled to the Franchise Tax due from the Respondent CASURECO II over the nine (9) municipalities within its jurisdiction. On the other hand, the Respondents countered that the Respondent LGU-Naga City has the sole authority to assess and collect the tax based on gross receipts earned within the entire coverage area of the Respondent CASURECO II. In ruling, the Court emphasizes the authority of LGUs to impose and collect taxes, fees, and charges, subject to the guidelines and limitations provided by Congress. It interprets and applies the provisions of the Local Government Code (LGC), particularly Sections 137 and 151, in light of the City of Iriga case. The Court concluded that the Respondent LGU-Naga City where the Respondent CASURECO II’s principal office is located, has the authority to assess and collect the Franchise Tax based on gross receipts earned within the entire coverage area of the Respondent CASURECO II, including the nine (9) municipalities, despite being within the territorial jurisdiction of the Petitioner. Consequently, the Petition was DENIED.

EVEN IF THE GUILT OF THE ACCUSED HAS NOT BEEN SATISFACTORILY ESTABLISHED, HE IS NOT NECESSARILY EXEMPT FROM CIVIL LIABILITY FOR TAXES WHICH MAY ONLY BE PROVED BY PREPONDERANCE OF EVIDENCE

PEOPLE OF THE PHILIPPINES VS. RIZALDY GOLORAN CHUA

CTA CRIMINAL CASE NO. O-792 & O-793, NOVEMBER 30, 2023

Accused Rizaldy Goloran Chua was charged with violation of Section 255 of the 1997 Tax Code, as amended, for failure to supply correct and accurate information in his Income Tax Returns (ITR). The Accused argued that the Plaintiff failed to prove that his non-declaration of income in his ITRs relative to his gold sales with the Bangko Sentral ng Pilipinas (BSP) was willful or designed to evade or defeat his income tax obligations. In ruling, the Court emphasized that the burden of proof in criminal prosecutions lies with the Prosecution to establish the guilt of the Accused beyond reasonable doubt. In this case, the Court found that the Plaintiff failed to prove the willful failure by the Accused to supply correct and accurate information in the Annual ITRs filed for the specified taxable years, creating reasonable doubt as to his guilt. Therefore, the Court concluded that the Plaintiff failed to discharge the burden of proving all the essential elements of the crime attributed to the Accused, leading to his acquittal. Furthermore, citing the recent case of People vs. Mendez, it contained two doctrines, one of which was that the obligation of the taxpayer to pay the tax is not a civil liability arising from the crime that could be extinguished by his acquittal in the criminal charge. In the interest of justice, the Court of Tax Appeals (CTA) reopened the case for the reception of evidence for the Accused on the civil aspect of the case. Consequently, the Accused was ACQUITTED of the offenses charged against him for the failure of the Plaintiff to prove beyond reasonable doubt.

COURT OF TAX APPEALS HAS JURISDICTION OVER THE DEPARTMENT OF FINANCE DECISION

MIDTOWN PRINTING CO., INC. VS. SECRETARY OF THE DEPARTMENT OF FINANCE & COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10055, NOVEMBER 23, 2023

Petitioner Midtown Printing Co., Inc. filed a Petition for Review praying that the earlier BIR Ruling denying its request for confirmation that the printing of yearbooks is exempted from Value-Added Tax (VAT) for lack of legal basis, be set aside and declared invalid and void. Petitioner challenged the dismissal by the Secretary of Finance (SOF) of its Request for Review of BIR Ruling issued by the Respondent Commissioner of Internal Revenue (CIR) based on purely technical grounds. It argued that the Court of Tax Appeals (CTA) has jurisdiction over the Petition under its inherent power and expanded jurisdiction. On the other hand, the Respondent contended that the Court has no jurisdiction, and assuming without conceding that the CTA has jurisdiction, the Petition deserves no merit because the assailed BIR Ruling is valid and not contrary to law. Likewise, the supposed irregularities cited by the Petitioner in the issuance of the BIR Ruling do not constitute excusable negligence that would warrant a relaxation of the mandatory and jurisdictional rules on appeal. In ruling, the CTA held that it has jurisdiction over the decisions of the SOF. To leave undetermined the mode of appeal from the SOF would be an injustice to taxpayers prejudiced by his adverse rulings. However, the Court ruled that the SOF properly dismissed the Petitioner’s Request for Review of BIR Ruling for being time-barred. While the Petitioner alleged circumstances which, accordingly, warrant the relaxation of the procedural rules and the resolution of the case on the merits, it failed to present evidence to prove the same. Consequently, the Petition was DENIED.

"ASSESSMENTS" OF LBT THAT MUST BE PAID AS A PREREQUISITE FOR THE RENEWAL OF BUSINESS PERMIT COULD NOT BE CONSIDERED AS THE "NOTICE OF ASSESSMENT"

BILLING STATEMENTS ARE NOT IN THE NATURE OF NOTICE OF ASSESSMENTS

HOLCIM PHILIPPINES, INC. VS. THE CITY OF TAGUIG & CITY TREASURER OF THE CITY OF TAGUIG

CTA AC NO. 268, NOVEMBER 15, 2023

Petitioner Holcim Philippines, Inc. filed a Petition for Review praying for the Court to render judgment granting its claim for a refund of alleged illegally and/or erroneously collected Local Business Tax (LBT). The Petitioner argued that the Billing Statements issued by the Business Permit and Licensing Office (BPLO) of the Respondent City of Taguig are not the “assessments” contemplated in Section 195 of the Local Government Code (LGC) and are not formal “assessments” that should be formally protested. On the other hand, the Respondent countered that the Billing Statements issued to the Petitioner are in the nature of Notice of Assessment (NOA) as contemplated in Section 195 of the LGC, and that the lower court is correct in ruling that the Petitioner’s claims for a refund were filed out of time. In ruling, a perusal of the Billing Statements shows that the same did not provide notice of the facts and laws on which the billed amounts were based. From the details indicated in the said Billing Statements, it can be observed that the same was issued not as assessments of LBT but for the renewal of the Petitioner’s business permit. No deficiency tax, surcharge, or interest were indicated in the subject Billing Statements. Thus, the said Billing Statements cannot be considered as the NOA contemplated under Section 195 of the LGC. Moreover, the Court found that the Petitioner complied with the prescriptive period for filing claims for a refund of LBT and that the Petitioner is entitled to a refund of the amount claimed. Hence, the Petition was GRANTED.

UNDER THE CURRENT STATE OF LAW, ELECTRIC COOPERATIVES REGISTERED WITH THE NEA ARE SUBJECT TO INCOME TAX ON CERTAIN SOURCES

THE STATE OF LAW, AS IT IS NOW, CONFERS NO ABSOLUTE INCOME TAX EXEMPTION PRIVILEGE TO NEA-REGISTERED COOPERATIVES

TAXPAYERS WHO RELY ON A PREVIOUS RULING OF THE CIR IN GOOD FAITH MAY NOT BE PREJUDICED BY ITS SUBSEQUENT REVERSAL

LACK OF AUTHORITY OF THE REVENUE OFFICERS IS TANTAMOUNT TO THE ABSENCE OF A LETTER OF AUTHORITY ITSELF WHICH RESULTS IN A VOID ASSESSMENT

CIR’S FAILURE TO CONSIDER THE TAXPAYER’S REPLY & PROTEST & TO PROVIDE AN EXPLANATION WHY THE ARGUMENTS RAISED THEREIN WERE REJECTED, ARE VIOLATIVE OF THE TAXPAYER’S DUE PROCESS RIGHTS THAT RENDERS THE ASSESSMENT VOID

NUEVA ECIJA I ELECTRIC COOPERATIVE, INC. VS. COMMISSIONER OF INTERNAL REVENUE & REGIONAL DIRECTOR OF REVENUE REGION NO. 4, CITY OF SAN FERNANDO PAMPANGA OF THE BIR

CTA CASE NO. 10587 & 10632, NOVEMBER 13, 2023

Petitioner Nueva Ecija I Electric Cooperative, Inc. (NEECO 1) filed two (2) Petitions for Review seeking for the cancellation of the assessments issued by the Respondent Commissioner of Internal Revenue (CIR) for taxable years (TYs) 2012 and 2013. The Petitioner, by the very nature of its franchise, argued that it is not liable to income tax. Likewise, it is a non-stock, non-profit electric cooperative duly organized under Presidential Decree (P.D.) No. 269 and enjoys permanent exemption from income taxes. On the other hand, the Respondent countered that the Petitioner is not exempt from the payment of income tax based on Revenue Memorandum Circular (RMC) No. 74-2013, which circularized the Bureau of Internal Revenue (BIR)’s MARELCO Ruling, providing that electric cooperatives registered with the National Electrification Administration (NEA) are subject to income tax on their electric service operations. In ruling, the Court held that the supposed permanent income tax exemption of electric cooperatives under P.D. No. 269, as amended, which has been effectively withdrawn by subsequent legislation, was not entirely restored by the Fiscal Incentives Review Board (FIRB) Resolution No. 24-87. Thus, at present, electric cooperatives registered with the NEA are subject to income tax for income derived from (1) electric service operations; and (2) other sources such as interest income from bank deposits and yield or any other monetary benefit from bank deposits and yield or any other similar arrangements. Notwithstanding that the Petitioner is subject to income tax, the assessment for TY 2012 is void for being violative of Section 246 of the Tax Code, as amended, which provides for the non-retroactivity of Rulings. Moreover, the Revenue Officers (ROs) who conducted the audit of the Petitioner for TY 2013 were not clothed with the proper authority as one of the ROs was not named in the Letter of Authority (LOA) authorizing the audit as her supposed authority only emanated from a Memorandum of Assignment (MOA) issued by the Revenue District Officer, and the other RO was never named in the LOA nor the MOA. A review of the records also showed that the Preliminary Assessment Notice (PAN), Formal Letter of Demand (FLD), and Final Decision on Disputed Assessment (FDDA) for TY 2012 are all identical, as well as the PAN, FLD, and FDDA for TY 2013. Consequently, Respondent failed to consider any of the arguments raised by the Petitioner in its Replies and Protests. Thus, the Respondent failed to observe the due process rights of the Petitioner rendering the assessments for TYs 2012 and 2013 void. Consequently, the Petitions were GRANTED, and the assessments and their resulting Warrant of Distraint and/or Levy were all CANCELLED.

JURISDICTION IS NOT DICTATED BY TAXPAYER BY INVOKING THE LACK THEREOF WHEN ITS CLAIM FOR A REFUND WAS DENIED DUE TO ITS OWN FAILURE TO ESTABLISH ITS ENTITLEMENT

JURISDICTION, ONCE ACQUIRED, CONTINUES UNTIL THE CASE IS FINALLY TERMINATED

SECRETARY OF JUSTICE HAS JURISDICTION BETWEEN & AMONG GOVERNMENT AGENCIES & GOCCS

NATIONAL DEVELOPMENT COMPANY VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2572, NOVEMBER 13, 2023

Petitioner National Development Company (NDC) filed a Petition for Review seeking to nullify the Court of Tax Appeals (CTA) 3rd Division’s earlier Decision denying its request for a refund of Value-Added Tax (VAT). Petitioner maintained that the dispute between a Government-Owned and Controlled Corporation (GOCC) (i.e., Petitioner) and the Respondent Commissioner of Internal Revenue (CIR), representing the BIR, a government agency, is within the jurisdiction of the Secretary of Justice (SOJ) pursuant to the Presidential Decree (P.D.) No. 242. Likewise, the Court in Division should not have denied its claim for a refund but rather dismissed the case for lack of jurisdiction. In ruling, the Court referred to the Supreme Court (SC)’s ruling in the CIR vs. SOJ and MCWD case, which held that a party cannot invoke jurisdiction at one time and reject it at another time in the same controversy to suit its interests and convenience. While it was already settled that the SOJ has jurisdiction between and among government agencies and GOCCs, regardless of the nature of the dispute, i.e., all, without exception, save for those cases already pending at the time of the effectivity of the P.D. No. 242, the Court cannot allow the Petitioner to change its stance when it lodged its claim for a refund before the Court in Division and eventually allege lack of jurisdiction when it filed its Petition for Review before the Court En Banc after the CTA 3rd Division denied its claim for lack of merit. Moreover, the Petitioner failed to establish its entitlement to a refund. After a perusal of records, the Petitioner indeed failed to prove not only its actual input VAT incurred, evidenced by official receipts and/or invoices issued from its purchases but also its own sales to the government, which may be substantiated by the official receipts and/or invoices it issued. Consequently, the Petition was DENIED.

REFUND OF ERRONEOUSLY PAID WITHHOLDING TAX AS A RESULT OF VAGUE TRAIN LAW ON VETO ON 15% ROHQ TAX

ERRONEOUSLY PAID TAXES MAY ALSO COME IN THE FORM OF TAX PAYMENTS FOR THE WRONG CATEGORY OF TAX

TAXES WITHHELD & REMITTED WITHOUT STATUTORY AUTHORITY CONSTITUTES ERRONEOUSLY PAID TAX WHICH IS REFUNDABLE

ROYAL CARIBBEAN CRUISES LTD., DOING BUSINESS UNDER THE NAME RCL REGIONAL OPERATING HEADQUARTERS VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10256, NOVEMBER 7, 2023

Petitioner Royal Caribbean Cruises Ltd. filed a Petition for Review seeking a refund of erroneously paid 15% Final Withholding Tax (FWT). The Petitioner argued that the claim for a refund should be granted because it is only liable for the payment of withholding taxes on wages using the graduated tax rate based on the Tax Reform for Acceleration and Inclusion (TRAIN) Law as vetoed. In ruling, the Court held that considering the confusion brought about by the amendment introduced to Section 25 of the 1997 Tax Code, as amended by the TRAIN Law, and the subsequent veto of the President to the proviso of Section 6(F) of the TRAIN Law, the Petitioner should not be faulted for having paid both the 15% FWT and the withholding taxes on wages to avoid being penalized, as the question of whether the 15% FWT or the regular income tax is applicable may be considered a doubtful question of law. Since the said proviso was vetoed by then-President Duterte, it effectively removed the preferential tax rate of 15% of gross income of employees of Regional Headquarters/Regional Operating Headquarters (RHQs/ROHQs), Offshore Banking Units (OBUs), and petroleum service contractors and subcontractors, effective January 1, 2018. Thus, said employees’ salaries, wages, annuities, compensation, remuneration, and other emoluments, such as honoraria and allowances, are now subject to the regular income tax rate. Consequently, the Petitioner’s payment of the 15% FWT is without statutory basis or not legally due. Hence, the Petition was GRANTED.

DECLARATION OF UNCONSTITUTIONALITY OF REVENUE MEMORANDUM CIRCULAR NO. 32-2022

THE TAX PRIVILEGE UNDER PRESIDENTIAL DECREE NO. 1869, AS TO THE PAYMENT OF 5% FRANCHISE TAX, DOES NOT EXTEND TO PAGCOR’S LICENSEES

BB INTERNATIONAL LEISURE & RESORT DEVELOPMENT CORPORATION, HANN INTERNATIONAL LEISURE, INC. (FORMERLY WIDUS INTERNATIONAL LEISURE, INC.) & HANN PHILIPPINES, INC. (FORMERLY WIDUS PHILIPPINES, INC.) VS. BIR, CIR & JOHN DOES & JANE DOES, AS PERSONS ACTING FOR IN BEHALF, OR UNDER THE AUTHORITY OF BIR & CIR

CTA CASE NO. 10841, OCTOBER 27, 2023

Petitioners BB International Leisure and Resort Development Corporation, Hann International Leisure, Inc., and Hann Philippines, Inc. filed a Petition for Certiorari and Prohibition seeking for the suspension of collection and/or issuance of a Temporary Restraining Order (TRO) and/or Writ of Preliminary Injunction in relation to the Respondent Commissioner of Internal Revenue (CIR)’s Revenue Memorandum Circular (RMC) No. 32-2022 which clarifies the tax treatment of the Philippine Amusement and Gaming Corporation (PAGCOR), its licensees and contractees. The Petitioner insisted that RMC No. 32-2022 is void and contrary to law as it violates the constitutional right to equal protection of law and non-impairment of contract. Likewise, the imposition of the 5% Franchise Tax (FT) is arbitrary, unconscionable, and unjust. In ruling, the Court held that the fifth (5th) sentence of the first (1st) paragraph of Item IV of the said RMC, specifically on the imposition of 5% FT, has no legal basis as Presidential Decree (P.D.) No. 1869, otherwise known as the PAGCOR Charter, does not extend to PAGCOR’s licensees. Thus, the Respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction in inserting the 5% FT as among the taxes imposed on PAGCOR’s licensees within the Special Economic Zone. However, since the fifth (5th) sentence of the first (1st) paragraph of Item IV of RMC No. 32-2022 is the only issue and found invalid, all the other parts of said rules and regulations remain valid. There is also no necessity to issue a TRO or Permanent Injunctive Order. Consequently, the Petition was PARTIALLY GRANTED.

ALLEGATIONS OF FALSITY OR FRAUD IN THE FILING OF TAX RETURNS MUST BE PROVEN TO EXIST BY CLEAR & CONVINCING EVIDENCE & CANNOT BE JUSTIFIED BY MERE SPECULATION

THE FRAUD OR FALSITY CONTEMPLATED BY LAW IS ACTUAL & NOT CONSTRUCTIVE IN NATURE] [IN ORDER TO STAND THE TEST OF JUDICIAL SCRUTINY, THE ASSESSMENT MUST BE BASED ON ACTUAL FACTS

THE PRESUMPTION OF THE CORRECTNESS OF AN ASSESSMENT, BEING A MERE PRESUMPTION, CANNOT BE MADE TO REST ON ANOTHER PRESUMPTION

RICKY TAN TANGAN VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10150, OCTOBER 19, 2023

Petitioner Ricky Tan Tangan filed a Petition for Review seeking the cancellation of the assessments and the Warrant of Distraint and Levy (WDL) issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner argued that the subject assessments are void since there are based on unverified third-party information (TPI) and issued beyond the three (3)-year ordinary prescriptive period for assessment. On the other hand, the Respondent countered that there was no denial of due process as the Petitioner himself admitted to receiving both the Final Assessment Notice (FAN) and the subsequent WDL issued. Likewise, the ten (10)-year prescriptive period should apply since the Petitioner’s Income Tax Returns (ITR) for the Calendar Year 2012 was a fraudulent return on account of his failure to declare sales or receipts in an amount exceeding 30% of that declared per returns. In ruling, the Respondent failed to convince the Court that the Petitioner indeed filed a fraudulent tax return; thus, the extraordinary prescriptive period of ten (10) years cannot be applied. Nevertheless, even assuming, for the sake of argument, that the period to assess the Petitioner was extended beyond the ordinary three (3)-year prescriptive period, the assessments are still void for being presumptions since they are based on unverified data. In assessment proceedings, if there arises TPI discrepancies, the taxpayer is required to submit schedules and reconciliations to substantiate his or her claims with a Sworn Statement to attest the veracity and authenticity of the schedules and documents presented or submitted. On the other hand, the BIR is mandated to obtain Sworn Statements from TPI sources to attest the veracity of the data provided, which the BIR failed to do. Hence, the Petition was GRANTED, and the assessments were declared VOID. Consequently, the WDL was CANCELLED.

TAXPAYER CANNOT BE REQUIRED TO AWAIT THE DECISION OF THE LOCAL TREASURER ANY LONGER; OTHERWISE, ITS JUDICIAL ACTION SHALL BE BARRED BY PRESCRIPTION

BOTH SECTIONS 195 & 196 OF THE LOCAL GOVERNMENT CODE REQUIRE THAT TAXPAYER SHOULD FIRST EXHAUST ADMINISTRATIVE REMEDIES BEFORE BRINGING THE APPROPRIATE ACTION IN COURT-WRITTEN PROTEST WITH THE LOCAL TREASURER FOR THE ASSESSMENT & WRITTEN CLAIM FOR REFUND OR CREDIT WITH THE SAME OFFICE FOR REFUND OR CREDIT

CITY TREASURER OF MAKATI REPRESENTED BY ACTING CITY TREASURER JESUSA E. CUNETA VS. KURIMOTO (PHILIPPINES) CORPORATION

CTA AC NO. 257, AUGUST 31, 2023

Petitioner City Treasurer of Makati filed a Petition for Review praying that the earlier Orders of the Regional Trial Court (RTC) be set aside and seeking the dismissal of the Respondent Kurimoto (Philippines) Corporation’s claim for a refund. The Petitioner argued that the Court erred in holding that it was estopped from invoking the rule of exhaustion of administrative remedies. The Petitioner asserted that the Respondent raised the issue of estoppel as an afterthought in a desperate attempt to get a favorable ruling since the Revised Assessment reflecting the overpayment was formally issued only on July 18, 2019, while the Respondent's Petition for Refund was filed with the court a quo on January 23, 2019. However, the Court found that the Respondent had shown, to the Court's satisfaction, that it had exhausted the administrative remedies provided under Sections 195 and 196 of the Local Government Code (LGC), i.e., written protest or written claim for refund or credit with the Local Treasurer, before resorting to courts. The Court held that the court a quo was correct in granting the Respondent's Motion for Summary Judgment and ordering the Petitioner to refund the Respondent the amount of Php 162,400.86, representing its tax overpayment for Taxable Year (TY) 2016. The Court's ruling affirms the importance of exhausting administrative remedies before resorting to the courts. The Doctrine of Exhaustion of Administrative Remedies requires that before a party is allowed to seek the intervention of the court, he or she should have availed himself of all the means of administrative processes afforded him or her. The rationale behind the Doctrine is that administrative agencies are better equipped to resolve questions of fact and to interpret the law in their areas of expertise. Consequently, the Petition was DENIED.

IN EXHAUSTION OF ADMINISTRATIVE REMEDIES, THE TAXPAYER CANNOT BE REQUIRED TO AWAIT THE DECISION ON ITS ADMINISTRATIVE CLAIM BEFORE FILING A JUDICIAL CLAIM

CITY TREASURER OF MAKATI REPRESENTED BY ACTING CITY TREASURER JESUSA E. CUNETA VS. KURIMOTO (PHILIPPINES) CORPORATION

CTA AC NO. 257, AUGUST 31, 2023

Petitioner City Treasurer of Makati filed a Petition for Review praying that the Orders of the Regional Trial Court (RTC) be set aside and that the Court dismiss Respondent Kurimoto (Philippines) Corporation’s claim for a refund. The Petitioner insisted that the proper way for the Respondent to claim a refund is by filing a protest within sixty (60) days from the 2017 Assessment of the tax deficiency for Taxable Year (TY) 2016 pursuant to Section 195 of the Local Government Code (LGC). On the other hand, the Respondent countered that it complied with the requirement to file a protest to claim the refund subject of this case, i.e., the 2018 Assessment. Respondent did not protest the 2017 Assessment because it was superseded by the 2018 Assessment, both covering TY 2016. In ruling, both Sections 195 and 196 of LGC require that the taxpayer should first exhaust the administrative remedies referred to therein before bringing the appropriate action in court, such as a written protest with the Local Treasurer, in the case of Section 195, and a written claim for a refund or credit with the same office, in case of Section 196. The Court could not decipher the logic in the Petitioner’s argument considering that the Respondent properly and timely availed the administrative remedies provided under Sections 195 and 196 of the LGC. A perusal of records revealed that the Respondent went through the process of exhausting the administrative remedies available to it by protesting the 2018 Assessment, which covered TY 2016, and filing a claim for refund of the additional assessment paid on January 23, 2017, which is the subject of the refund claim in this case, within the periods provided under Section 195 and 196. The Respondent timely filed its written claim for refund with Petitioner. It could not be made to wait for the latter’s decision on its administrative claim before filing a judicial claim since the Respondent only had two (2) years from payment to do so. Anent Petitioner’s claim that the assessment for TY 2016 had already become final and unappealable under Section 195, the Court reiterated that the 2018 Assessment, which includes TY 2016, had been timely protested, administratively, and judicially. Thus, the Respondent’s timely protest meant that the assessment had not attained finality. Consequently, the Petition was DENIED for lack of merit.

2ND LOA FROM “RUN AFTER TAX EVADERS” NATIONAL INVESTIGATION DIVISION IS NOT PROHIBITED

GOLDEN DONUTS, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9676, AUGUST 30, 2023

Petitioner Golden Donuts, Inc. filed a Petition for Certiorari seeking to nullify the Run After Tax Evaders (RATE) Letter of Authority (LOA) issued by the Respondent Commissioner of Internal Revenue (CIR) for the Taxable Year (TY) 2007, citing the absence of a Preliminary Investigation. The Petitioner claimed that its 2007 books of accounts were already the subject of a full-blown assessment that was subsequently terminated after payment of the deficiency taxes. Likewise, the Petitioner further asserted that if there were findings of alleged fraud, then it should have been first informed of the fraud's nature; otherwise, the RATE LOA would be violative of its constitutional right to due process. On the other hand, the Respondent countered that the issuance of the RATE LOA was based on the finding of prima facie evidence of fraud as evinced by a Memorandum recommended by the Chief of the BIR's National Investigation Division (NID) to the CIR, which is one of the exceptions under the Tax Code, as amended. In ruling, the Court found that the finding of prima facie evidence of fraud, as evinced by the Memorandum recommended by the Chief of the BIR's NID to the CIR, is a sufficient reason for the issuance of the RATE LOA. The Court also found that the issuance of the RATE LOA did not violate the Petitioner's right to due process because it was merely an authorization to examine the Petitioner's books of accounts and other accounting records. The Court further held that the examination of the Petitioner's books of accounts and other accounting records was necessary to determine whether there were any discrepancies or irregularities in the Petitioner's tax returns. Consequently, the Petition was DENIED.

TO BE ENTITLED TO A REFUND OR CREDIT OF ERRONEOUSLY OR ILLEGALLY COLLECTED TAX, THE CLAIM FOR REFUND OR CREDIT MUST BE FILED WITHIN TWO (2) YEARS FROM THE DATE OF PAYMENT OF TAX OR PENALTY, REGARDLESS OF ANY SUPERVENING CAUSE THAT MAY ARISE AFTER PAYMENT

TIMELINESS OF FILING THE CLAIM IS MANDATORY & JURISDICTIONAL

AN APPEAL IS NOT A MATTER OF RIGHT BUT IS A MERE STATUTORY PRIVILEGE

ACE/SAATCHI & SAATCHI ADVERTISING, INC. VS. THE HONORABLE COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2645, AUGUST 15, 2023

Petitioner Ace/Saatchi & Saatchi Advertising, Inc. filed a Petition for Review seeking reversal of the CTA 3^rd Division’s earlier Decision and Resolution denying its Petition for lack of jurisdiction. Petitioner contended that its Petition “is not for the recovery of any penalty erroneously paid by and collected by the BIR.” Likewise, it is not contesting the denial of the refund but is contesting the existence of the delinquent account. Simply put, the Petitioner is contesting the Respondent Commissioner of Internal Revenue (CIR)’s ground for denying its refund claim. In ruling, it is clear that the Petitioner’s cause of action is the Respondent’s denial of its refund, and the declaration of the non-existence of the delinquent account is only incidental. Thus, the Court applied Sections 204(C) and 229 of the 1997 Tax Code, as amended, which require administrative and judicial claims to be filed within the same two-year prescriptive period. The Court cannot take cognizance of a judicial claim for a refund filed either prematurely or out of time. Here, the Court found that the last day to file the Petition before the Court in Division was on August 14, 2016. Indeed, the Petition was belatedly filed on June 27, 2017, or 317 days after August 14, 2016. Hence, the CTA 3^rd Division did not err in ruling that it had no jurisdiction over the subject Petition. Consequently, the Petition was DENIED.

UNLESS THE OFFEROR KNOWS OF THE ACCEPTANCE, THERE IS NO MEETING OF MINDS OF THE PARTIES & NO REAL CONCURRENCE OF OFFER & ACCEPTANCE

A PREVIOUSLY ISSUED LETTER NOTICE (LN) MUST BE CONVERTED TO AN LOA BEFORE THE REVENUE OFFICER MAY FURTHER PROCEED WITH THE AUDIT & EXAMINATION OF THE TAXPAYER

ED & F MAN PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10053, AUGUST 10, 2023

Petitioner ED & F Man Philippines, Inc. filed a Petition for Review seeking a refund of the alleged erroneously paid compromise amount. The Petitioner maintained that its compromise payment was illegally collected by the Bureau of Internal Revenue (BIR) because (1) the Value-Added Tax (VAT) assessment for Taxable Year (TY) 2008 is barred by the Statute of Limitations; (2) the BIR’s issuance of a termination letter in its favor, demonstrates its full settlement of such VAT liability for such period; (3) the VAT assessment lacks legal and factual basis; and (4) the Final Assessment Notice (FAN) was issued, sans a valid Letter of Authority (LOA). On the other hand, the Respondent Commissioner of Internal Revenue (CIR) argued that the Petitioner proposed a compromise settlement for the VAT assessment, which the BIR agreed to, as demonstrated by the Certificate of Availment (COA) and the Authority to Cancel Assessment (ATCA). In ruling, for a contract, such as a compromise, to exist, consent of the contracting parties must be had, inter alia. No contract, too, shall arise unless its acceptance is communicated to the offeror. Here, the Respondent only established the BIR’s approval of the Petitioner’s compromise offer pertaining to the deficiency VAT assessment covering TY 2008, and nothing else. The Respondent failed to provide formidable proof that is indicative of the Petitioner’s knowledge of the BIR’s approval of said compromise offer, prior to the filing of its second administrative claim for refund. Being non-existent, the alleged compromise agreement did not give rise to conclusiveness on the matter supposed to have been settled by the Petitioner and the BIR. For this reason, the Petitioner may still impugn its refund claim premised on the alleged invalidity of such assessment. On whether the Petitioner is entitled to a refund of the alleged erroneously paid compromise payment, the Court found that the BIR conducted an invalid examination on the Petitioner as no LOA was issued relative to the deficiency VAT assessment. The assessment was solely anchored on a Letter Notice. Hence, the Petition was GRANTED, and a refund was warranted.

CGT, AS A FORM OF TAX ON INCOME, IS IMPOSED ON THE SALE, EXCHANGE, OR DISPOSITION OF CAPITAL ASSETS

DST MUST BE PAID UPON THE ISSUANCE OF THE INSTRUMENT EVIDENCING THE TRANSFER OR CONVEYANCE OF REAL PROPERTY, IRRESPECTIVE OF WHETHER THE CONTRACT THAT GAVE RISE TO IT IS RESCISSIBLE, VOID, VOIDABLE, OR UNENFORCEABLE

GREAT LANDHO, INC., TT&T DEVELOPMENT, INC. & TAMA PROPERTIES INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10184, AUGUST 4, 2023

Petitioners Great Landho, Inc. (GLI), TT&T Development, Inc. (TDI), and Tama Properties Inc. (TPI) filed a Petition for Review praying for the refund or tax credit of Php 15.8 Million allegedly representing erroneously paid Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) in connection with the sale or transfer of parcels of land entered into between the Petitioner GLI, as buyer, and the Petitioners TDI and TPI, as sellers. The Petitioners argued that the amounts of CGT and DST paid pursuant to the sale transactions that were subsequently cancelled should be considered erroneously paid taxes, hence, should be recovered as a tax refund or credit. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) countered that the Petitioners’ CGT and DST payments were not erroneously collected, as the said taxes on the subject sale transactions accrued on the day of the execution of the valid contracts of sale of real properties. In ruling, the Court held that Petitioner TDI is entitled to the refund of erroneously paid CGT, but Petitioner GLI is not entitled to the refund of its DST payments. Here, since the Petitioners GLI and TDI mutually agreed to rescind the Deed of Absolute Sale, the sale transaction was not consummated and thus, no actual conveyance or transfer of property was made between them. As a direct consequence, the seller derived no income thereon that is subject to CGT. On the other hand, DST is an excise tax imposed on the privilege to transfer or convey a real property through the execution of a Contract of Sale or a Deed of Absolute Sale and not upon the transfer or conveyance itself. Consequently, the subsequent mutual cancellation or revocation of the sale transactions did not operate to cancel the DST liability due on the duly executed Deeds of Absolute Sale. This is because Petitioners TDI and TPI had already exercised the privilege to transfer or convey their respective real properties to Petitioner GLI upon the due execution of the Deeds of Absolute Sale. Thus, the subject DST payments cannot be considered erroneous. Thus, the Petition was PARTIALLY GRANTED.

A WRIT OF CERTIORARI WILL NOT BE ISSUED WHERE THE REMEDY OF APPEAL IS AVAILABLE TO AN AGGRIEVED PARTY

BUREAU OF INTERNAL REVENUE, REPRESENTED BY COMMISSIONER CAESAR R. DULAY VS. HON. MENARDO I. GUEVARRA IN HIS CAPACITY AS SECRETARY OF JUSTICE & FERDINAND SANTOS IN HIS CAPACITY AS PRESIDENT OF CAMP JOHN HAY HOTEL CORPORATION

CTA EN BANC CASE NO. 2569, AUGUST 3, 2023

Petitioner Bureau of Internal Revenue (BIR) filed a Petition for Review seeking issuance of a resolution directing the Public Respondent Secretary of Justice and State Prosecutors to file Information indicting the Private Respondent Ferdinand Santos for a violation of Section 266 of the 1997 Tax Code, as amended, in relation to the failure to produce necessary documents. The Petitioner argued that the subject of its Petition for Certiorari is a final decision of the Secretary of Justice and that there is no more appeal available under the law except the remedy provided under Rule 65 of the Revised Rules of Court. On the other hand, the Respondent countered that the Petition for Certiorari is the wrong remedy due to the availability of an ordinary appeal. In ruling, the Court held that the Petition for Certiorari was a proper remedy. A Petition for Certiorari is appropriate when there is no more appeal available, and in this case, it was the correct recourse. However, the Court did not find any clear abuse of discretion in the actions of the Secretary of Justice in affirming the Investigating Prosecutor's Resolution dismissing the complaint against the Private Respondent for lack of probable cause. The Investigating Prosecutor found no evidence to prove that the Private Respondent was apprised and informed of whatever records and documents still needed to be presented. Consequently, the Petition was DENIED.

60-DAY REGLEMENTARY PERIOD FOR FILING A PETITION FOR PROHIBITION

PROCEDURAL RULES ARE NOT TO BE DISDAINED AS MERE TECHNICALITIES THAT MAY BE IGNORED AT WILL TO SUIT THE CONVENIENCE OF A PARTY

NATIONAL FOOD AUTHORITY, REPRESENTED BY CARLITO G. CO, REGIONAL DIRECTOR OF NFA-NATIONAL CAPITAL REGION (NFA-NCR) VS. PROVINCIAL GOVERNMENT OF BATANES, PROVINCIAL ASSESSOR & PROVINCIAL TREASURER, BASCO BATANES

CTA AC NO. 244, AUGUST 2, 2023

Petitioner National Food Authority (NFA) filed a Petition for Review seeking reversal of the earlier RTC’s Orders. The Petitioner argued that its Petition for Prohibition was filed on time. Specifically, the sixty (60)-day period to file the said Petition should not be counted from its receipt of the Notice on 05 March 2019 (through a member of its staff from the alleged receipt of the NFA’s Administrator on 11 April 2019). Moreover, it maintained that it is a government instrumentality and, thus, exempt from the payment of Real Property Tax (RPT). In ruling, the Court held that the Special Civil Action of Prohibition may be availed of by the Petitioner. However, the same was filed out of time. Here, it is undisputed that the Petitioner, through its Batanes Provincial Office, received the Notice on 05 March 2019. Petitioner should have then filed its Petition for Prohibition not later than 04 May 2019, i.e., within 60 days from 05 March 2019. However, the Petitioner filed the Petition for Prohibition only on 03 June 2019, way beyond the mandated 60-day reglementary period to do so. The Petitioner did not provide any justifiable reason for its failure to comply with the 60-day reglementary period. It merely contended that the receipt of the NFA-Legal Affairs Department should be its reckoning point. Consequently, the Court was unable to countenance such a nonchalant stance. Thus, the Petition for Prohibition having been filed out of time, the Court sees no need to delve into the case’s merits. Consequently, the Petition was DENIED.

PRELIMINARY INVESTIGATION IS ONLY FOR OFFENSES WITH MORE THAN FOUR (4) YEARS OF IMPRISONMENT WITHOUT REGARD TO FINE

JIMMY A. ANG & OLIVIA N. ANG VS. PEOPLE OF THE PHILIPPINES

CTA EN BANC CRIMINAL CASE. NO. 095, AUGUST 2, 2023

Petitioners Jimmy A. Ang and Olivia N. Ang filed a Petition for Review challenging the Regional Trial Court (RTC)’s Judgment finding them guilty beyond reasonable doubt for violation of Section 266 of the 1997 Tax Code, as amended, for failing to comply with the Bureau of Internal Revenue (BIR)’s Subpoena Duces Tecum (SDT). The BIR sought to audit their company, The Value Systems Phils., Inc. (TVSPI), for the period from January 1, 2018, to June 30, 2018. The Petitioners were each sentenced to suffer the penalty of imprisonment of one (1) year and ordered to pay a fine of Php 5,000.00 each. In ruling, the Court rejected the Petitioners' claim that a Preliminary Investigation was required on their case. The law mandates the Preliminary Investigation only for offenses carrying a penalty of at least four (4) years of imprisonment, regardless of any accompanying fines. Since the maximum penalty for their offense was two (2) years of imprisonment, they were not entitled to a Preliminary Investigation. The Court also underscored that the Petitioners had waived their right to challenge the absence of Preliminary Investigation by failing to raise the issue before entering their plea. Importantly, the Court reinforced that good faith or motive was not a valid defense for offenses classified as mala prohibita. In conclusion, the Court upheld the conviction of the Petitioners for their negligence in complying with the BIR's SDT, emphasizing that they had no right to a Preliminary Investigation, and good faith was not a valid defense in cases involving mala prohibita offenses. Consequently, the Petition was DENIED.

ELECTRIC COOPERATIVES REGISTERED WITH THE NEA HAS THE OPTION TO REGISTER WITH THE CDA & IN CASE IT OPTS NOT TO DO SO, SUCH ELECTRIC COOPERATIVE SHALL NOT BE ENTITLED TO THE BENEFITS & PRIVILEGES UNDER THE CDA LAW

ZAMBALES ELECTRIC COOPERATIVE I, INC. VS. BUREAU OF INTERNAL REVENUE, REVENUE REGION NO. 4

CTA CASE NO. 10165, AUGUST 1, 2023

Petitioner Zambales Electric Cooperative I, Inc. (ZAMECO I) filed a Petition for Review praying that the assessment notice, which the Respondent Bureau of Internal Revenue (BIR) Revenue Region No. 4 issued, be declared as null and void. The Petitioner argued that being a non-stock and non-profit (NSNP), it is not liable for deficiency income tax assessment pointing out that Presidential Decree (P.D.) No. 269, otherwise known as the “National Electrification Administration (NEA) Decree,” provides the exemption. Likewise, the Respondent failed to consider the provisions of Article 127 of the Republic Act (R.A.) No. 6938 (The Cooperative Code of the Philippines) and Article 143 of R.A. No. 9520 (Philippine Cooperative Code of 2008) which show that P.D. No. 269 has not been amended or repealed by the enactment of the Cooperative Code, and thus, the exemption from paying income taxes for electric cooperatives under Section 39 of P.D. No. 269 still applies. In ruling, the Court held that Section 18 of R.A. No. 9520 provides that an electric cooperative registered with the NEA has the option to register with the Cooperative Development Authority (CDA), and in case it opts not to do so, such electric cooperative shall not be entitled to the benefits and privileges under R.A. No. 9520. In contrast, should an electric cooperative opt to register with the CDA, it shall no longer be covered by P.D. No. 269, as amended. Thus, while a delineation was created between the coverage of P.D. No. 269, as amended, and R.A. No. 6938 and 9520, such a system is not indicative of the supposed continuation of the tax exemption privileges of electric cooperatives. Pertinently, electric cooperatives have been granted income tax exemption, provided they operate in conformity with the purposes and provisions of P.D. No. 269. On May 7, 2013, Congress enacted R.A. No. 10531 ("National Electrification Administration Reform Act of 2013″), which introduced amendments to P.D. No. 269, as amended. There is nothing in R.A. No. 10531, which states that the income tax exemption of electric cooperatives under P.D. No. 269, as amended, has been totally reverted or restored. Thus, at present, electric cooperatives registered with the NEA are subject to income tax with respect to income derived from electric service operations, as clarified in Revenue Memorandum Circular (RMC) No. 74-2013, which circularized a BIR ruling regarding the income tax exemption of electric cooperatives registered with the NEA. Based on the foregoing, the Court disagreed with the Petitioner's claim that exemption from paying income taxes for electric cooperatives. Consequently, the Petition was DENIED for lack of merit.

ONE OF THE REQUISITES FOR THE CLAIM OF VAT REFUND IS THAT THERE MUST BE ZERO-RATED OR EFFECTIVELY ZERO-RATED SALES

SUPERIORITY OF WRITTEN EVIDENCE OVER ORAL EVIDENCE

SANKYU-ATS CONSORTIUM-B VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10471, AUGUST 1, 2023

Petitioner Sankyu-ATS Consortium-B filed a Petition for Review seeking to annul the earlier Decision of the Respondent Commissioner of Internal Revenue (CIR) denying the Petitioner’s claim for Value-Added Tax (VAT) refund. The Petitioner asserted that it is entitled to a VAT refund and/or issuance of a Tax Credit Certificate (TCC) in the amount of Php 3.7 Million which is attributable to its zero-rated sales of goods and services to Philippines Sinter Corporation (PSC) as it was able to comply with the requisites. On the other hand, the Respondent countered that the Court has no jurisdiction over the Petition considering that the Petitioner failed to submit the complete documentary requirements in support of its application for a refund, which is tantamount to non-filing. In ruling, the Court held that it has jurisdiction over the Petition. However, the Petitioner was unable to prove that its sales were zero-rated or effectively zero-rated. The records of the case revealed that the Philippine Economic Zone Authority (PEZA) Certificate of Registration (COR) of PSC, Petitioner’s only client, was denied admission for failure to submit the duly marked document. True, the Petitioner’s witness testified that its only client during the pertinent taxable period is PEZA-registered, and this was not questioned nor rebutted by the Respondent. The Petitioner’s bare assertion, without any documentary evidence, is not sufficient to prove that PSC is indeed a PEZA-registered export enterprise. As the Petitioner was unable to prove compliance with the 3rd requisite for a VAT refund, the Court need not belabor on the other requisites for refund. The Petitioner was unable to establish its claim. Consequently, the Petition was DENIED for lack of merit.

THE RIGHT OF THE TAXPAYER TO ANSWER THE PAN CARRIES WITH IT THE CORRELATIVE DUTY ON THE PART OF THE CIR TO CONSIDER THE RESPONSE THERETO

THE ISSUANCE OF FAN WITHOUT EVEN HEARING THE SIDE OF THE TAXPAYER IS ANATHEMA TO THE CARDINAL PRINCIPLES OF DUE PROCESS

DIZON FARMS PRODUCE, INC. VS. COMMISSIONER OF INTERNAL REVENUE & COMMISSIONER OF INTERNAL REVENUE VS. DIZON FARMS PRODUCE, INC.

CTA EN BANC CASE NO. 2516 & 2521, AUGUST 1, 2023

Dizon Farms Produce, Inc. (DFPI) and Commissioner of Internal Revenue (CIR) both filed their Petitions for Review assailing the CTA 3rd Division’s earlier Decision and Resolution. DFPI argued that the Court in Division erred in holding that DFPI is precluded from further questioning the validity of the Final Assessment Notice (FAN). DFPI asserted that it would not have agreed to pay the Documentary Stamp Tax (DST) assessment if it knew that the said assessment was void ab initio. The CIR maintained that the Court in Division gravely erred in partially granting DFPI’s Petition thereby ordering the cancellation of the FAN and Assessment Notices. It argued that an action against a taxpayer’s Protest to Preliminary Assessment Notice (PAN) is not required by the BIR Rules and Regulations. In ruling, the Court held that the Avon case applies to the case at bar. Hence, the subject FAN and Assessment Notices, except DST, are void for failure to adhere to the requirements of due process. In Avon, the Supreme Court categorically pronounced that the CIR’s inaction and omission to give due consideration to the arguments and evidence submitted by a taxpayer are deplorable transgressions of the latter’s right to due process. Thus, issuance of a FAN, without consideration and evaluation of the defenses contained in a taxpayer’s Protest to a PAN, constitutes a violation of the taxpayer’s right to due process which renders the assessment void. The records of the case are clear that in issuing the FAN and Assessment Notices, the BIR neither addressed nor delved into the arguments raised by DFPI in its Protest Letter. As a consequence of such violation, the said deficiency tax assessments are rendered VOID and cannot be enforced against DFPI, except for the assessed basic DST. DFPI is estopped from questioning the validity of the DST assessment since it already indicated its concurrence to the assessed basic DST.

THE CRIME OF SMUGGLING IS CONSUMMATED EVEN IF THE OFFENDER MERELY ASSISTED IN THE FRAUDULENT IMPORTATION OF ANY ARTICLE CONTRARY TO THE LAW

PEOPLE OF THE PHILIPPINES VS. EMELITA RAMIREZ y TAYLO & SHIELA LARRACOCHEA y TACBAS aka SHIELA NERI y LARRACOCHEA aka SHIELA LARRACOCHEA NERI

CTA CRIMINAL CASE NO. A-9, JULY 27, 2023

Accused Appellants Emelita Ramirez (Ramirez) and Shiela Larracochea (Larracochea) filed an Appeal from the earlier Decision of the Regional Trial Court (RTC) convicting them of the crime of Unlawful Importation as defined and penalized under the Tariff and Customs Code of the Philippines (TCCP), as amended. The Prosecution argued that it was uncontroverted that the Accused Larracochea, as a Licensed Customs Broker, processed and facilitated the importation of 12,000 bags of red onions from China in conspiracy with ETR Trading under the Accused Ramirez, the registered proprietor thereof as consignee. The Accused Ramirez asserted that the Prosecution failed to establish that she took part in processing the subject importation. Accused Larracochea, on the other hand, asserted that it was not established by the Prosecution that she had any connection with ETR Trading other than being its broker for the subject shipment and that the Prosecution failed to prove that she had a hand in the preparation or caused the preparation of the alleged falsified Import Permit. In ruling, the Court held that the Accused Larracochea committed the crime of smuggling. The Court discussed the elements of the second type of smuggling, which are all satisfied. Here, the fact of the importation of onion into the Philippines was established. Secondly, the importation was contrary to the law as it lacked the necessary Plant Quarantine Clearance from the Bureau of Plant Industry. Thirdly, the importation was done fraudulently, the use of a falsified Plant Quarantine Clearance is a badge of fraud intended to deceive the Bureau of Customs (BoC) to release the subject shipment. Lastly, it was undisputed that the Accused Larracochea, as a Licensed Customs Broker, assisted Jocelyn Young, who claims to be a representative of ETR Trading, in the processing and facilitating the importation of the 12,000 bags of red onion from China. However, the Prosecution failed to establish by positive and conclusive evidence that Accused Ramirez acted in conspiracy with Accused Larracochea in the commission of the crime of Unlawful Importation. Consequently, the Appealed Decision was AFFIRMED, insofar as it found the Accused Larracochea guilty beyond reasonable doubt of the crime of Unlawful Importation. Accused Ramirez was ACQUITTED on reasonable doubt.

IT IS THE DECISION OR RULING, NOT THE INACTION OF THE COMMISSIONER OF CUSTOMS, THAT IS APPEALABLE TO THE CTA

L.T.J.S. STORE, REPRESENTED BY ITS OWNER/PROPRIETOR MR. ANTONIO DE JESUS SILVA VS. HON. DISTRICT COLLECTOR OF CUSTOMS, MICP, & HON. COMMISSIONER OF CUSTOMS, REY LEONARDO B. GUERRERO

CTA EN BANC CASE NO. 2563, JULY 27, 2023

Petitioner L.T.J.S. Store filed a Petition for Review seeking the reversal of the assailed Resolution and the reinstatement of its Petition for Duty and Tax Refund before the Court in Division. The Petitioner claimed that Respondent Commissioner of Customs’ unjustifiable inaction and unfair delay forced it to file a Petition for Duty and Tax Refund with the Court in Division on June 25, 2021. In ruling, while exhaustion of administrative remedies is not necessary where there is unreasonable delay or official inaction that will irretrievably prejudice the Petitioner, the Court held the said exception not applicable as the Petitioner failed to allege and substantiate the material facts surrounding the supposed “unjustifiable inaction and unfair delay” of Respondents in acting on its protest and appeal. Furthermore, the Petition failed to show whether the pertinent procedures for dispute settlement under the Customs Modernization and Tariff Act (CMTA) have been violated by Respondents. Nonetheless, even if the Court in Division had jurisdiction over Respondent's inaction, the case would still not prosper because of the Petitioner’s failure to comply with the requirements under Section 2, Rule 6 of the Revised Rules of the Court of Tax Appeals (CTA), in relation to Section 2 Rule 42 of the Revised Rules of Court. A cursory reading of the Petition for Duty and Tax Refund reveals that it has no allegation of the Court’s jurisdiction, no statement of material dates showing that it was filed on time, no statement of the issue/s that puts forth the questions of fact or law to be considered by the Court, no argument or reason for the allowance of the appeal was adduced, no jurisprudence cited, and no certified true copies of the assailed judgments or final order. Moreover, even if the Petitioner properly filed a Petition, the Court in Division would still dismiss the same for having been filed out of time on June 25, 2021, or 32 days later. Consequently, the Petition was DENIED.

TO AVAIL OF THE CGT EXEMPTION ON SALE OF PRINCIPAL RESIDENCE, THE SELLER SHOULD DULY NOTIFY THE BIR WITHIN 30 DAYS FROM THE DATE OF SALE OR DISPOSITION THROUGH A PRESCRIBED RETURN OF HIS INTENTION TO AVAIL OF THE SAID EXEMPTION

ESTELITA R. RODRIGUEZ, MARIA CHRISTINA M. RODRIGUEZ, GERARDO M. RODRIGUEZ, JOSE MARIANO M. RODRIGUEZ & EDMOND M. RODRIGUEZ VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10151, JULY 20, 2023

Petitioners Estrelita R. Rodriguez, et al., filed a Petition for Review seeking a refund of erroneously paid Capital Gains Tax (CGT) for the sale of residential property. Earlier, the Respondent Commissioner of Internal Revenue (CIR) denied their claim for a refund on the ground that they failed to file a Sworn Statement of Intent/Escrow Agreement pursuant to the existing rules. Petitioners argued that they complied with the essential basic conditions for exemption from payment of CGT for the sale of the principal residence. On the other hand, the Respondent contended that the Petitioners are not entitled to refund as well as the statutory exemption since they failed to notify the Respondent within thirty (30) days from the date of sale or disposition of their intention to avail of the tax exemption as required by the 1997 Tax Code, as amended. Even assuming arguendo that Petitioners are entitled to a refund, it is incumbent upon the Petitioners to show compliance with the procedure as mandated by law and regulations, and their failure to prove the same is fatal to their claim for refund. In ruling, Petitioner failed to show that there was an erroneous or illegal CGT collected by the government. Here the Court finds that there is no indication that Petitioners fulfilled the third condition for the tax exemption granted under Section 24(D)(2) of the 1997 Tax Code, as amended. Accordingly, the Respondent should have been duly notified by the Petitioners within 30 days from the date of sale or disposition through a prescribed return of his or her intention to avail of the said tax exemption. Moreover, in filing the CGT return, it was noted that the Petitioners did not treat the transaction as an exempt sale and the property being sold is not the principal residence of Petitioners and that the latter do not intend to construct or acquire a new principal residence within 18 months from the date of disposition/sale consistent with the information that the said transaction is not an exempt sale. Thus, there being no required notification, the refund claim must already fail and its failure to execute and submit the required Escrow Agreement for the subject transaction warrants the denial of the present refund claim. Consequently, the Petition was DENIED for lack of merit.

CTA HAS NO JURISDICTION ON REGULATORY FEES BUT ONLY ON LOCAL TAXES

NLEX CORPORATION (FORMERLY MANILA NORTH TOLLWAYS CORPORATION, AS THE SURVIVING CORPORATION & HAS ABSORBED TOLLWAYS MANAGEMENT CORPORATION) VS. MUNICIPALITY OF GUIGUINTO, BULACAN & HON. GUILLERMA DL. GARRIDO, IN HER CAPACITY AS THE OIC-MUNICIPAL TREASUERER OF GUIGUINTO, BULACAN

CTA EN BANC CASE NO. 2514, JULY 19, 2023

Petitioner NLEX Corporation filed a Petition for Review seeking reconsideration of the CTA 2nd Division’s earlier Decision and Resolution. The Petitioner argued that CTA has jurisdiction to rule on the validity of the regulatory fees assessed by the Respondent Municipality of Guiguinto, Bulacan against the Petitioner. In ruling, the CTA is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction. The jurisdiction of the CTA regarding Local Tax and Real Property Tax (RPT) cases is provided under Section 7(a)(3) of Republic Act (R.A.) No. 1125, or the Act Creating the CTA, as amended. The Supreme Court already ruled that local tax cases consist of cases arising from Local Business Tax (LBT) and RPT. Here, the subject matter of the assessment being appealed also includes regulatory fees. Hence, not being local taxes, the Court in Division correctly ruled that it has no jurisdiction on regulatory fees assessed by the Respondent. Consequently, the Petition was DENIED.

THE RECKONING OF THE 5-YEAR PRESCRIPTIVE PERIOD WOULD DEPEND ON HOW THE CRIME OF TAX EVASION IS COMMITTED

PEOPLE OF THE PHILIPPINES VS. SKI CONSTRUCTION GROUP, INC., CLAUDIO B. ALTURA, ALBERT ALTURA & CORNELIO V. CAEDO CTA CRIMINAL CASE NO. A-17, JULY 17, 2023

Plaintiff-Appellant People of the Philippines filed an Appeal assailing the Regional Trial Court (RTC)’s earlier Resolutions. Plaintiff-appellant argued that the five (5)-year prescriptive period for the offense, i.e., violation of Section 255, in relation to Sections 253(d) and 256 of the 1997 Tax Code, as amended, would only begin to run upon the filing of the criminal complaint against the Accused-Appellees Ski Construction Group, Inc. (SKI), Claudio B. Altura, Albert Altura and Cornelio V. Caedo on 15 February 2018. Thus, the filing of the Information on 15 January 2020 was well within such period. Accused-Appellees countered that the five (5)-year prescriptive period should have been counted from the expiration of the period of payment which is on 13 February 2014. In ruling, the Court reiterated the Supreme Court (SC)’s discussion that the prescription of tax evasion has varying reckoning dates. In cases involving fraudulent returns, the crime is only discovered after the BIR has been given an opportunity to investigate the taxpayer and certain discrepancies constituting such offense are found. On the other hand, in cases where the date of commission is readily available, prescription shall begin to run from the crime is committed. Here, although it is alleged that Accused-Appellee SKI failed to file a correct or accurate return, the BIR made no finding of fraud. Instead, it pursued an audit of accused-appellee SKI until the former issued a Final Assessment Notice (FAN) on 13 January 2014, which demanded that payment be made within 30 days from the date of the FAN or until 12 February 2014. Applying the principles in Lim case, when the period of payment had lapsed without any payment being made, a perceived offense of tax evasion due to willful failure to pay was apparently committed by accused-appellee SKI and its responsible officers on 13 February 2014. Counting five (5) years from the date of the apparent commission of the said offense, Information for the same should have been filed with the RTC by 13 February 2019. Therefore, when the Information was filed on 15 January 2020, the offense charged in the Information had already prescribed.

MEMORANDUM OF ASSIGNMENT (MOA) WITHOUT NEW LOA RESULTS IN A VOID ASSESSMENT

COMMISSIONER OF INTERNAL REVENUE VS. ROBINSONS TOYS, INC.

CTA EN BANC CASE NO. 2560, JULY 13, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the CTA 3rd Division’s earlier Decision and Resolution cancelling the assessment issued to the Petitioner Robinsons Toys, Inc. Petitioner argued that the assessment is still valid despite the lack of an Electronic Letter of Authority (eLOA) because there was an issued LOA that previously authorized the Revenue Officer (RO) to conduct an audit. Likewise, Revenue Memorandum Order (RMO) No. 61-2010 and 69-2010 were substantially complied with when the Memorandum of Assignment (MOA) was issued for the reassignment of the audit to a new RO. Further, the absence of due dates on the assessment notice should not be a ground to invalidate the assessment and it already contained a definite amount of tax liability. On the other hand, the Respondent maintained that the assessment is void due to the absence of LOA to conduct the audit and failure to state due dates for payment in the subject assessment. In ruling, the Court held that the absence of an eLOA does not automatically invalidate the assessments, and a manual LOA still validly authorized an RO to conduct an audit. However, the Court finds that the assessment against the Respondent is void due to the absence of a new LOA for reassignment of the audit, failure to observe due process in issuing assessment notices, and failure to indicate a definite due date for payment in the subject Final Assessment Notice. Consequently, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.

VAT EXEMPT IS DIFFERENT FROM ZERO-RATED

PASSED-ON VAT ATTRIBUTABLE TO VAT-EXEMPT SALES MAY NOT BE CLAIMED AS INPUT VAT REFUND OR CREDIT

IN ZERO-RATED VAT, THE ENTITY ENJOYING INCENTIVES UNDER A SPECIAL LAW IS NOT THE SELLER, BUT RATHER, THE BUYER

MELCO RESORTS LEISURE (PHP) CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2608, JULY 11, 2023

Petitioner Melco Resorts Leisure (Php) Corporation filed a Petition for Review assailing the CTA 1st Division’s earlier Decision and Resolution. The Petitioner argued that it is entitled to the tax exemption granted under Presidential Decree (PD) No. 1869, otherwise known as the “Philippine Amusement and Gaming Corporation (PAGCOR) Charter” concerning its revenues from gaming operations, as Section 13 extends PAGCOR’s tax exemption to corporations with whom PAGCOR has a contractual relationship. With this exemption, the Petitioner argued that the input Value-Added Tax (VAT) should not have been passed on to the Petitioner by its suppliers on purchases related to the Petitioner’s gaming operations. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) quoted the Court in Division in stating that nowhere in the case records does it show that the Petitioner is engaged in the zero-rated sale of goods or services or in transactions other than the business of developing and operating tourist facilities, including a hotel-casino entertainment complex. In ruling, the Court discussed the requisites for a valid claim for a refund or tax credit of input VAT attributable to zero-rated sales under Section 112 of the 1997 Tax Code, as amended. Here, the Petitioner was not able to prove that it is engaged in zero-rated sales. Sales to PAGCOR, and by extension, corporations, associations, agencies, or individuals with whom the Corporation or operator has any contractual relationship with the operations of the casinos such as the Petitioner herein, is subject to zero VAT rate. However, what is contemplated in this case are sales of services by Petitioner and not to Petitioner. The provision that applies to sales by Petitioner is Section 109(1)(K) of the 1997 Tax Code, as amended. Accordingly, Petitioner’s sale of services is exempt from VAT and not subject to zero rate. Such distinction carries significant differences, most especially in the ability of a taxpayer to claim passed-on VAT as a tax credit or refund. Therefore, the Petitioner’s refund or tax credit claim under Section 112 of the 1997 Tax Code, as amended, fails. Consequently, the Petition was DENIED.

THE 10-YEAR PRESCRIPTIVE PERIOD SHALL APPLY IF THERE IS PRIMA FACIE EVIDENCE OF FALSITY OF RETURNS FILED

A MERE REFERRAL LETTER & A MOA ISSUED BY AN RDO DO NOT & COULD NOT CONFER AUTHORITY TO REVENUE OFFICER

ZENOREX MARKETING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10175, JULY 10, 2023

Petitioner Zenorex Marketing Corporation filed a Petition for Review praying for the reversal of the Decision rendered by the Respondent Commissioner of Internal Revenue (CIR) upholding the deficiency tax assessments. The Petitioner argued that the Respondent has only three (3) years within which to assess a taxpayer. Likewise, the Respondent’s right to assess the Expanded Withholding Tax (EWT) and Withholding Tax on Compensation (WTC) for January to November 2007 has already prescribed since the Final Assessment Notice (FAN) was issued only on 14 January 2011. On the other hand, the Respondent countered that the withholding tax assessments are not internal revenue taxes and are in the nature of penalty, hence, the same are imprescriptible. Further, even assuming that the withholding tax assessments are subject to prescription, the subject assessments have not yet prescribed, since what applies here is the 10-year prescriptive period for failure of the Petitioner to report its proper expenses and compensation subject withholding taxes in an amount exceeding 30%. In ruling, the Court held that internal revenue taxes include EWT and WTC, hence, assessments, are also subject to prescription. Here, there is prima facie evidence of false returns because of substantial under-declaration of income payments subject to withholding taxes, which the Petitioner failed to refute. Hence, the 10-year prescriptive period will apply. Consequently, the issuance of the FAN was well within the Respondent’s period to assess. However, notwithstanding the Petitioner’s failure to raise as an issue, the Court finds it necessary to determine whether the Revenue Officers (ROs) who examined the Petitioner were duly authorized to do so. Here, the ROs who continued the audit of the Petitioner were not authorized by a duly issued Letter of Authority (LOA). They merely relied on their authority from the Referral Letter and Memorandum of Assignment (MOA) executed by their Revenue District Officer (RDO), who is not authorized to issue LOAs. Thus, notwithstanding the Court’s findings that the deficiency EWT and WTC assessments have not prescribed, the Court cannot allow the assessment and the subsequent collection of said deficiency taxes for being VOID. Consequently, the Petition was GRANTED.

PROSECUTION IS BURDENED TO PROVE CORPUS DELICTI BEYOND REASONABLE DOUBT

REASSIGNMENT OF EXAMINATION TO NEW REVENUE OFFICERS NECESSITATES THE ISSUANCE OF A NEW LOA

PEOPLE OF THE PHILIPPINES VS. GREAT DOMESTIC INSURANCE COMPANY OF THE PHILIPPINES, MAR S. LOPEZ, JEMMA L. LAMCES & MARCELESA F. SARTO

CTA EN BANC CRIMINAL CASE NO. 094, JULY 10, 2023

Petitioner People of the Philippines filed a Petition for Review assailing the CTA 1st Division’s earlier Resolutions dismissing the criminal case against the Respondent Jemma Lamces (Lamces) on the grounds of insufficiency of evidence. Petitioner argued that there is no longer any need to prove the position of Lamces as Treasurer of Respondent Great Domestic Insurance Company of the Philippines as such fact was admitted by her in her Pre-Trial Brief and, thus, she may be held liable under Sections 253(d) and 256 of the Tax Code, as amended. Respondent Lamces countered that the Judicial Affidavits of the Petitioner’s witnesses failed to name her as a responsible officer of the Accused Corporation and did not specify the names of the responsible officers. Also, the Respondent stated that the Petitioner was unable to prove that the failure to pay tax was willful on her part. In ruling, jurisprudence already enumerated the elements that must be established by the Prosecution to secure the conviction of the Accused Corporation and the responsible officers for violation of Section 255 in relation to Sections 253(d) and 256 of the Tax Code, as amended. Here, the Prosecution failed to prove the first element, which requires that the corporate taxpayer was liable to pay tax under Tax Code, because of the following: (1) question on the identity of the Accused Corporation since there is a discrepancy between the name of the corporation that was audited and assessed by the BIR and the name of the corporation that was indicted in court; and (2) void assessment due to the absence of a Letter of Authority (LOA) authorizing the new Revenue Officers. Such failure of the Prosecution also extinguished the civil liability arising from the crime. Consequently, the Petition was DENIED.

ASSESSMENT SHOULD NOT BE BASED ON PRESUMPTION BUT ON FACTS

JULIO R. DE QUINTO VS. BUREAU OF INTERNAL REVENUE, THRU REVENUE DISTRICT OFFICES NO. 04 MANDALUYONG CITY & 07, QUEZON CITY

CTA CASE NO. 9623, JULY 4, 2023

Petitioner Julio R. De Quinto filed a Verified Petition praying for the issuance of a Temporary Restraining Order (TRO) and/or preliminary injunction to enjoin the Respondent Bureau of Internal Revenue (BIR) from implementing the assailed Warrant of Distraint and/or Levy (WDL) and to nullify the deficiency tax liabilities. Petitioner argued that the subject assessment for the taxable year 2011, which was allegedly the result of a computerized matching conducted by the BIR from the information/data provided by 3rd party sources under a Letter Notice (LN), has no basis at all, thus, it should be declared null and void. In ruling, based on the records of the case, after the Petitioner protested the information in the LN, the Revenue Officer (RO) did not secure the required sworn statement from the 3rd party sources, but merely relied on the notation in the confirmation letters that failure to respond to such letter shall mean that the information therein will be “assumed to be true and correct.” If only they had validated from Petron, a 3rd Party, it would have come to their knowledge that the Petitioner has no more transactions with Petron in the year 2011. Considering that the assessments contained in the LN were not fully validated either from the 3rd party sources or from the Petitioner’s accounting records, such assessments were not based on facts but merely on presumptions. Thus, the assessment was null and void. Hence, the Verified Petition was GRANTED.

TAXPAYER’S NON-RECEIPT OF THE ASSESSMENT NOTICE WOULD BE TRANSGRESSIVE OF HIS RIGHT TO DUE PROCESS ON ASSESSMENT

COMMISSIONER OF INTERNAL REVENUE VS. LINDEN SUITES, INC., AS REPRESENTED BY EUGENE U. BALCOS

CTA EN BANC CASE NO. 2551, JULY 4, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review challenging the earlier Decision and Resolution of the Court in Division, which nullified the deficiency tax assessments issued by the Petitioner against the Respondent Linden Suites, Inc. The Petitioner asserted that the Preliminary Assessment Notice (PAN) was served to, and received by the Respondent’s alleged staff, and was served by registered mail; thus, due process on the service of PAN was duly complied with. On the other hand, the Respondent countered that no PAN was validly served to, and received by it, as offensive of its right to due process on assessments. In ruling, the Court shares the Respondent’s view. Glaringly, Revenue Officer (RO) Villanueva and Group Supervisor (GS) Hagan are the persons clothed with personal knowledge of the events regarding the BIR's purported service of, and the Respondent's receipt of the PAN. These individuals failed to take the witness stand. Instead, the Petitioner picked RO Padit to identify and testify on the contents of said PAN and Affidavit of Service. RO Padit is without personal knowledge of the circumstances surrounding the purported service of and receipt by the Respondent of the PAN. Such being the case, the pieces of evidence adduced by the Petitioner to demonstrate service and receipt of the PAN are hearsay evidence. The BIR, too, failed to validly serve the PAN, through a registered mail, to the Respondent. No witness was presented to identify the Registry Receipt and even authenticate the signature appearing thereon. Even a certification from the postmaster was neither offered as evidence. Consequently, the Petition was DENIED.

THE PERIOD OF PRESCRIPTION FOR A TAX CASE WHERE THE DATE OF ACTUAL COMMISSION IS UNKNOWN BEGINS TO RUN FROM THE DISCOVERY & INSTITUTION OF PROCEEDINGS FOR ITS INVESTIGATION & SHALL ONLY BE TOLLED BY FILING AN INFORMATION WITH THE COURT

ULYSSES PALCONET CONSEBIDO VS. HON. ANNA LEAH Y. TIONGSON-MENDOZA (PRESIDING JUDGE, REGIONAL TRIAL COURT OF PALAWAN-BRANCH 164) & COMMISSIONER OF INTERNAL REVENUE & THE PEOPLE OF THE PHILIPPINES

CTA CASE NO. 10357, JUNE 30, 2023

Petitioner Ulysses Palconet Consebido filed a Petition for Certiorari and Prohibition seeking that the assailed Orders of Public Respondent Judge be set aside and reversed. The Petitioner argued that following the Lim Case, prescription began on January 30, 2014, i.e., the filing date of the Joint Complaint-Affidavit with the Department of Justice (DOJ) for Preliminary Investigation. Hence, the Petitioner asserted that the Information filed on May 20, 2019, exceeds the five (5)-year prescriptive period under Section 281 of the 1997 Tax Code, as amended. The Petitioner contended that the Public Respondent judge erred in denying his Motion to Quash Information and insisted that prescription is interrupted only when the case is filed in Court and not by the conduct of the Preliminary Investigation. Public Respondent Commissioner of Internal Revenue (CIR) maintained that the running of the prescriptive period on January 30, 2014, which is the filing of the Joint-Complaint Affidavit with the DOJ, also interrupted the same prescriptive period. In ruling, based on the Lim Case, the proceeding for investigation and punishment of a crime, i.e., preliminary investigation, commences the prescriptive period and is tolled by filing the Information in court. The period between the Preliminary Investigation and the filing of the Information in court must not exceed five (5) years. Here, the Joint Complaint-Affidavit against Petitioner for purposes of Preliminary Investigation was filed on January 20, 2014, and the Information was later filed on May 20, 2019, or only after five (5) years and four (4) months. As such, the right to prosecute had already prescribed. Hence, the Petition was GRANTED, and the assailed Orders were SET ASIDE.

FOR THE 500% SURCHARGE TO BE IMPOSED, MISDECLARATION MUST BE QUALIFIED BY THE FACT THAT THE SAME IS EITHER INTENTIONAL OR FRAUDULENT

OMEGA SIX GLOBAL CORPORATION AND MA. DOLORES F. BANAAG/Z3 TRUCKING VS. COMMISSIONER OF CUSTOMS

CTA CASE NO. 10692, JUNE 22, 2023

Petitioners Omega Six Global Corporation (OSGC) and Ma. Dolores F. Banaag/Z3 Trucking (Z3) filed a Joint Petition for Review seeking reversal of the Respondent Commissioner of Customs’ undated Resolution. Petitioners challenged the legality of the OSGC’s shipment’s forfeiture, the further imposition of a 500% surcharge on its liabilities, and Z3’s vehicle’s forfeiture for being a common carrier. On the other hand, the Respondent countered that the subject shipment’s seizure was proper since it was imported without the necessary National Telecommunication Commission (NTC) import permit and the forfeiture of the subject vehicle was warranted since it was inside the said vehicle that the illegally imported goods were being transported. In ruling, on the issue of misdeclaration, the Court finds that intentional misdeclaration was not established aptly to warrant the imposition of a 500% surcharge pursuant to Section 1400 of the Customs Modernization and Tariff Act (CMTA). However, the fact remains that the subject shipment’s importation was still not accompanied by the required permits from the NTC, making the seizure thereof proper under the circumstances. On the matter of the subject vehicle’s seizure, the Court is unable to make any evidence-based finding that Petitioner Z3 is a common carrier. Even with the absence of a factual finding that Petitioner Z3 is a common carrier since there is likewise no proof of fraud on Petitioner OSGC’s part, a further seizure of the property of Petitioner Z3 (who may be an innocent party to the misdeclaration) does not sit well with the Court. It was noted that there is no evidence that Petitioner Z3 was privy to the misdeclaration or discrepancy between the goods declared and actually delivered. Hence, the Petition was PARTIALLY GRANTED, the Petitioner OSGC was ORDERED to pay the assessed duties and other costs, without the 500% surcharge, on the subject shipment, and the Respondent is ORDERED to RELEASE the subject vehicle to Petitioner Z3, without further costs.

AS A RULE, NO ARREST, SEARCH & SEIZURE CAN BE MADE WITHOUT A VALID WARRANT ISSUED BY A COMPETENT JUDICIAL AUTHORITY

A MISSION ORDER IS NOT EQUIVALENT TO A VALID SEARCH WARRANT ISSUED BY THE COURT

COMMISSIONER OF INTERNAL REVENUE VS. GB GLOBAL EXPREZ, INC.

CTA EN BANC CASE NO. 2583, JUNE 22, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking reversal of the CTA 1st Division’s earlier Decision and Resolution ordering the Petitioner to return the seized articles and issue to Respondent GB Global Exprez, Inc. the required Permit to Operate. Petitioner maintained that he did not violate the Respondent’s right to due process and its right against unreasonable searches and seizures because Section 171 of the Tax Code, as amended, does not require any warrant or order from the Court for Revenue Officers’ searches and seizures of articles subject to tax. The Respondent countered that its right to due process was violated when the Petitioner issued the undated Mission Order without particularly describing the things to be searched and seized on its business premises. In ruling, the Court held that the right against unreasonable searches and seizures is a matter of constitutional dictum. There must be a warrant issued by a judge and premised on a finding of probable cause before a search can be effected. However, there are exceptions, but none is present here. The BIR Strike Team had sufficient time to obtain a search warrant. However, instead of securing the necessary search and seizure warrant in 2018 and February 2020, when the BIR already noticed the alleged illegal activities and complaint letters were sent to their office, the BIR opted to issue a Mission Order and conducted the search, seizure, and business closure on the Respondent two (2) days after receiving the Anonymous Letter on July 27, 2020. Assuming arguendo that a valid search warrant is not required, and the Mission Order was validly issued under Section 171 of the Tax Code, the conduct of search, seizure, and closure would still be void given the infirmities surrounding the implementation of the Mission Order. Thus, the Respondent’s failure to register cigarette brands warrants only the revocation of its Permit to Operate and the assessment and collection of excise taxes. The BIR Strike Team, undoubtedly, exceeded the penalty for such a violation when it seized the Respondent’s equipment, raw materials, and finished products and closed its business and manufacturing plant operation. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.

VOID ASSESSMENT DUE TO SET-IN OF PRESCRIPTION, IMPROPER SERVICE OF FORMAL ASSESSMENT NOTICE & REITERATION OF PRELIMINARY ASSESSMENT NOTICE

COMMISSIONER OF INTERNAL REVENUE VS. GATEWAY RURAL BANK, INC.

CTA EN BANC CASE NO. 2537, JUNE 22, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the CTA 2nd Division’s earlier Decision and Resolution which cancelled the assessment issued to the Respondent Gateway Rural Bank, Inc. The Petitioner argued that the Respondent filed a request for reinvestigation, however, it proceeded to CTA without even waiting for the final decision on its request, which renders its Petition as prematurely filed. Likewise, the Petitioner maintained that receipt of assessment notice via substituted service is valid. On the other hand, the Respondent countered that the earlier Petition was timely filed. As there was no valid assessment notice, it could not have filed a request for reinvestigation. Further, there was no valid personal service as the person who allegedly received the assessment notice was not authorized to receive tax assessments. In ruling, the Court En Banc agreed with the Court in Division that the cancellation of the Preliminary Collection Letter and Final Notice Before Seizure is proper as these were not preceded by a valid formal tax assessment. Likewise, the Final Assessment Notice (FAN) is invalid because its issuance was made outside the prescriptive period for assessment, its service was improper and ineffectual, and its issuance constitutes a violation of due process since the Petitioner simply reiterated the findings in the Preliminary Assessment Notice (PAN) without addressing the reply submitted by the Respondent. Consequently, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.

CRIMINAL ACTIONS BEFORE THE CTA ARE INSTITUTED BY THE FILING OF INFORMATION & THE INSTITUTION OF THE CRIMINAL ACTION INTERRUPTS THE RUNNING OF THE PERIOD OF PRESCRIPTION

PEOPLE OF THE PHILIPPINES VS. WINTELECOM, INC./HUA C. UYCHIYONG (TREASURER)

CTA EN BANC CRIMINAL CASE NO. 090, JUNE 21, 2023

Petitioner People of the Philippines filed a Petition for Review seeking a reversal of the Court in Division’s earlier Resolutions. Petitioner submitted that the two (2) Information were filed within the five (5)-year prescriptive period provided under Section 281 of the 1997 Tax Code, as amended. It argued that the filing of the Complaint-Affidavit before the Department of Justice (DOJ) tolls the running of the prescriptive period for offenses punishable by special laws. On the other hand, Respondent Hua C. Uychiyong countered that the prescription had long set in considering that from the time of the discovery of the alleged violation of the Tax Code up to the filing of the two (2) Information, more than five (5) years have lapsed. In ruling, the Court En Banc finds that the filing of the Information in Court on November 8, 2019, effectively tolls the running of the five (5)-year prescriptive period, not the filing of the Joint Complaint-Affidavit with the DOJ on April 30, 2015. Counting five (5) years from the alleged commission of the offense involving a violation of the Tax Code on June 5, 2011, the prescriptive period to institute the criminal action under Section 281 of the Tax Code, as amended, lapsed on June 5, 2016. Being over three (3) years late, the right of the government to institute the subject cases against Respondents had already prescribed when the two (2) Information were filed before the Court in Division on November 8, 2019. Consequently, the Petition was DENIED for lack of merit.

FAILURE TO SATISFY THE REQUIREMENTS FOR ENTITLEMENT OF PREFERENTIAL RATE IS FATAL IN THE CLAIM OF LOWER PREFERENTIAL RATE

RP-GERMANY TAX TREATY CALLS FOR NRFC & NOT INDIVIDUAL AS BENEFICIAL OWNER TO AVAIL OF LOWER PREFERENTIAL TAX

CROMA MEDIC, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2213, JUNE 13, 2023

Petitioner Croma Medic, Inc. filed a Petition for Review seeking the reversal of the CTA Special 2nd Division’s earlier Decision and Resolution. The Petitioner argued that it complied with the requirements under the Philippines-Germany (RP-Germany) Tax Treaty and it was able to prove and establish its chronological facts evidencing the overpayment of Final Withholding Tax (FWT) on the dividends it declared in favor of BEPHA, a German company that virtually owns 100% of its shares of stock, hence, qualified for the application of the 5% preferential tax rate granted under Article 10(2)(a) of the RP-Germany Tax Treaty. The Petitioner also contends that it is entitled to the refund of the excess 5% FWT in dividends that it paid to the Respondent Commissioner of Internal Revenue (CIR). In ruling, the Petitioner failed to prove that the beneficial owner of the dividends is a Non-Resident Foreign Corporation (NRFC) entitled to avail of the preferential tax rates under the RP-Germany Tax Treaty. Here, the Court finds that there is no indication that BEPHA is a resident of Germany or subject to tax in Germany and failed to satisfy the requirements for entitlement to the said preferential tax on dividends. Consequently, the Court shall apply the normal rate of 30% to dividends paid. Hence, the Petition was DENIED for lack of merit.

FAILURE TO PROVE PRIOR YEAR EXCESS CREDITS IS FATAL IN THE CLAIM OF A REFUND

AECOM PHILIPPINES, INC. VS COMMISSIONER OF INTERNAL REVENUE

CTA CASE EN BANC CASE NO. 2653, JUNE 7, 2023

Petitioner Aecom Philippines Inc. filed a Petition for Review seeking the reversal of the CTA 1st Division’s earlier Decision and Resolution. The Petitioner mainly argued that the Court in Division erred in ruling that the Petitioner failed to prove that its income payments were declared as part of the gross income reported in its Annual Income Tax Returns (ITR). In ruling, the Court denied the Petition since the Petitioner still failed to show the total breakdown of the total income as declared in its amended annual ITR. Consequently, the Court cannot verify whether the gross income payments on which the subject Creditable Withholding Taxes (CWT) were made certainly formed part of the gross income. Thus, the Court En Banc finds no compelling reason to disturb the findings of the Court in Division in the Assailed Decision and Resolution.

FAILURE TO FILE A PROTEST LETTER ON TIME RENDERS THE FLD/FAN FINAL, EXECUTORY & DEMANDABLE

INVALIDITY OF FDDA DOES NOT AFFECT THE VALIDITY OF FAN

COMMISSION ON ELECTIONS VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10245, JUNE 2, 2023

Petitioner Commission on Elections (COMELEC) filed a Petition for Review seeking to reverse the Respondent Commissioner of Internal Revenue (CIR)’s Decision sustaining the alleged deficiency tax assessment. Petitioner argued that contrary to the claim of the Respondent, the supposed Formal Letter of Demand/Final Assessment Notice (FLD/FAN) did not become final as it was not properly served to the Petitioner. In ruling, a perusal of records revealed that the FLD/FAN attached to the Petition bears the rubber stamp of COMELEC Finance Service Department, Jai Conde, who received the FLD/FAN and was stationed in the said Department. Further, Petitioner did not raise as an issue the propriety of the service of FLD/FAN in its protest letters. The Petitioner even expressed its sincerest apologies for its admitted delay in responding to the FLD/FAN. Considering that Petitioner’s protest letters were filed beyond the 30-day period prescribed by Section 228 of the Tax Code, as amended, the FLD/FAN became final, executory, and demandable. On the other hand, even though not raised as an issue, the Details of Discrepancies attached to the Final Decision on Disputed Assessment (FDDA) merely reiterated or copied verbatim what is indicated in the Details of Discrepancies attached to the subject FLD. The Court emphasized that the concerned taxpayer must be fully apprised of the factual and legal bases of the assessments and must not be left unaware of how the Respondent or his authorized representative appreciated the refutations, explanations, or defenses raised by the Petitioner in connection with the assessments. Thus, the FDDA is invalid. However, jurisprudence provides that the invalidity of the FDDA does not affect the validity of the final assessment. Hence, the assessment in the FLD stands and its validity is not affected by the invalidity of the FDDA. Consequently, the Petition was DENIED.

SLAUGHTER FEES ARE NOT LOCAL TAXES BUT REGULATORY FEES, THUS, CTA HAS NO JURISDICTION

SAN MIGUEL FOODS, INC. VS. OFFICE OF THE CITY TREASURER, CITY OF DAVAO

CTA EN BANC CASE NO. 2535, MAY 18, 2023

Petitioner San Miguel Foods, Inc. (SMFI) filed a Petition for Review seeking the reversal or modification of the CTA 1st Division’s earlier Decision and Resolution and praying to remand the case to the Court a quo for the resolution of the issues raised therein. The main issue is whether the Court has jurisdiction over regulatory fees imposed by the Local Government Unit (LGU) pursuant to its taxing authority under the Local Government Code (LGC) and whether the imposed fees should be considered a fee or a tax. In ruling, the Court explained the importance of classifying the local imposition to determine the issue of jurisdiction. If the primary purpose is revenue, then the imposition is properly classified as an exercise of the power to tax. On the other hand, if the purpose is primarily to regulate, then it is deemed an exercise of police power in the form of a fee, even though revenue is incidentally generated. Here, the Court finds that the Permit Fees to slaughter are, therefore, not local taxes and the Court a quo had already dismissed a similar and earlier Petition filed by the Petitioner for lack of jurisdiction. All told, the Court En Banc finds no reason to modify or reverse the assailed Decision and assailed Resolution of the Court a quo. Hence, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.

ENVIRONMENTAL FEE IS NOT A TAX, THUS, CTA HAS NO JURISDICTION

DOLE PHILIPPINES, INC.-STANFILCO DIVISION VS. THE SANGGUNIANG PANLUNGSOD OF THE CITY OF DAVAO & THE HON. SARA Z. DUTERTE-CARPIO & BELLA LINDA N. TANJILI, IN THEIR RESPECTIVE CAPACITIES AS MAYOR & TREASURER OF THE CITY OF DAVAO CTA EN BANC CASE NO. 2461, MAY 12, 2023

Petitioner Dole Philippines, Inc.-Stanfilco Division filed a Petition for Review assailing the CTA 2nd Division’s earlier Decision and Resolution. The Petitioner mainly argued that the CTA 2nd Division erred in ruling that it has no jurisdiction over the subject matter of the case. In ruling, the Court resolved that the CTA is a Court of Special Jurisdiction and can only take cognizance of matters that are clearly within its jurisdiction. Here, the Court has exclusive jurisdiction to review local tax cases originally resolved by the Regional Trial Court (RTC). Considering that the Environmental Tax under the Watershed Code of Davao City is not in the nature of a local tax, the Court in Division correctly dismissed the Petition for lack of jurisdiction. Thus, the Court renders the discussion of other issues raised by the Petitioner unnecessary. Consequently, the Petition was DENIED for lack of merit.

TO BE EXEMPT FROM TAXATION OF REAL PROPERTIES, EDUCATIONAL INSTITUTION MUST FIRST PROVE THAT IT IS A NON-STOCK, NON-PROFIT

ASSESSMENT MUST SHOW THE PARTICULAR PROVISION OF LAW VIOLATED

MALAYAN EDUCATION SYSTEM, INC. (FORMERLY KNOWN AS MALAYAN COLLEGES, INC. & PRESENTLY OPERATING UNDER THE NAME OF MAPUA UNIVERSITY) VS. CITY OF MANILA, CITY MAYOR & CITY TREASURER

CTA AC NO. 260, MAY 10, 2023

Petitioner Malayan Education System, Inc. filed a Petition for Review seeking the reversal of the Court’s earlier Decision and Order declaring valid the Local Business Tax (LBT) assessment issued by the Respondent City of Manila, its City Mayor, and its City Treasurer. The Petitioner argued that the lower court erred in ruling that Respondents have the authority to impose LBT on it since it is an educational institution. In ruling, the Court held that the Petitioner’s income is subject to LBT. The absolute tax exemption of an educational institution is available only to non-stock, non-profit educational institutions although it may be extended to proprietary educational institutions subject to further limitations and provisions of law. Thus, the Petitioner must first prove that it is a non-stock, non-profit educational institution. However, in the earlier Decision, it is an undisputed fact that the Petitioner is a stock and for-profit educational institution. Thus, it may be subject to LBT. However, the Petitioner’s right to due process was violated by the Respondents by not indicating in the letter of assessment the particular provision of law which the former supposedly violated. In the Yamane case, the Supreme Court ruled that the assessment issued by the LGU should be sufficiently informative to apprise the taxpayer of the legal basis of the tax. Consequently, the Petition was PARTIALLY GRANTED.

IT WILL BE DIFFICULT FOR LGUs TO ENJOY GENUINE & MEANINGFUL LOCAL AUTONOMY IF THEY COULD INCREASE ONLY UP TO 10% OF THE TAX RATES UNDER THE LOCAL GOVERNMENT CODE (LGC) DURING ITS ENTIRE EXISTENCE

SAN ROQUE POWER CORPORATION VS. MUNICIPALITY OF SAN MANUEL, PANGASINAN & ELIZABETH T. CORPUZ IN HER CAPACITY AS MUNICIPAL TREASURER OF SAN MANUEL, PANGASINAN

CTA AC NO. 256, MAY 10, 2023

Petitioner San Roque Power Corporation filed a Petition for Review seeking to annul the earlier Decision and Resolution denying its claim for a refund or tax credit of the excess Local Business Tax (LBT). Petitioner insisted that Section 191 and Article 281 of the IRR limit the LGU’s authority to increase LBT at a rate not exceeding 10% of the rate imposed in Section 143 of the LGC; that the 10% cap under Section 191 is a cap on aggregate adjustments; and the LGU’s aggregate adjustments cannot go beyond 10%. On the other hand, the Respondent Municipality of San Manuel, Pangasinan countered that the pronouncements of the Supreme Court (SC) in the De Lima and Mindanao Shopping cases would negate the allegation of the Petitioner that the adjustment referred to in Section 191 is a cumulative or aggregate adjustment of the tax rates and that the adjustment be reckoned on the rates fixed under the LGC. In ruling, the Court finds merit in the Respondent’s arguments. In the De Lima case, the SC explicitly declared that the option to increase the tax rates under the LGC arises every five (5) years. When the LGU decides to take that option, the basis for the adjustment or increase would be the prevailing tax rate. In the Mindanao Shopping case, the SC clarified that the maximum 10% adjustment under Section 191 of the LGC is based on the adjusted tax rate. Given the foregoing jurisprudential pronouncement and the 10% threshold under Section 191, Respondent San Manuel could have increased the LBT rate to 66% of 1% of gross sales or receipts. Still, it only imposed 65% of 1%. Indeed, Respondent San Manuel did not violate Section 191 when it passed Section 2A.02 (b) and (c) of the 2018 Revenue Code, increasing the LBT rate from 60% of 1% to 65% of 1% in excess of Php 2 Million gross sales or receipts on “wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature” and on “contractors, and other independent contractors,” based on the prevailing or adjusted tax rate. Hence, the Petitioner is not entitled to refund the alleged excess LBT paid. Moreover, having established that the elements of litis pendentia are present, the Court ruled that Petitioner is guilty of forum shopping. Consequently, the Petition was DENIED.

CAPITAL GAINS TAX SHOULD BE ASSESSED BY REGION WHERE PROPERTY IS TRANSFERRED OR LOCATED

TAXPAYER CAN RELY ON BIR RULING ISSUED IN ITS FAVOR

JTKC LAND, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10059, APRIL 26, 2023

Petitioner JTKC Land, Inc. filed a Petition for Review seeking the nullification of the Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner argued that Revenue Region No. 008-Makati City did not have the authority to issue a Letter of Authority (LOA) for the assessment of the Capital Gains Tax (CGT) since the same was already covered by an LOA issued by Revenue Region No. 007-Quezon City (which authorized the audit of the Petitioner’s books for all internal revenue taxes). Likewise, assuming that the LOA is valid, its reliance on BIR Ruling No. 178-08 issued in its favor is not incorrect since it was not specifically revoked by any subsequent issuances. Further, Revenue Memorandum Circular (RMC) No. 55-2010 was issued to specifically revoke certain BIR Rulings. RMC No. 55-2010, however, did not mention Ruling 178-08 that was issued to the Petitioner nor did it include a clause for the automatic revocation of other BIR rulings not identified therein. On the other hand, the Respondent CIR argued that Revenue Region No. 008-Makati City is authorized to issue an LOA since it has jurisdiction over the location of the condominium project in Makati City. Thus, the FDDA is valid. As for the substantive issues, BIR Ruling No. 178-08 was only anchored on the validity of the BIR Ruling No. DA-455-2007. However, with the revocation of the latter ruling due to the issuance of RMC No. 55-2010, BIR Ruling No. 178-08 was nullified automatically. Consequently, at the time of the assessment in 2015, the Petitioner was no longer exempted from taxes arising from transactions covered by the Joint Venture Agreement and the Project Investment Agreements. Further, contracts entered between the Petitioner and its investors are considered Contracts of Sale that ought to be subjected to withholding taxes. In ruling, the Court held that Revenue Region No. 008-Makati City has the authority to assess the Petitioner since the Petitioner’s condominium project (the subject of the assessment) is undoubtedly located within the territorial jurisdiction of Revenue Region No. 008-Makati City. Moreover, the Project Investment Agreements appear to carry Contracts to Sell, thus, subject to the withholding tax. The Court finds that Respondent erred when he decreed in BIR Ruling No. 178-08 that the Project Investment Agreements are just investment contracts, and the subsequent allocation or delivery of the residential condominium units to the supposed investors was a mere return of capital and is not a taxable event. Notwithstanding the Court’s findings that the assessments are valid and that the Project Investment Agreements, being akin to Contracts to Sell should be subject to withholding tax, the Court still cannot allow the assessment and subsequent collection of the deficiency taxes because it is barred by the exemption granted under BIR Ruling No. 178-08 issued in the Petitioner’s favor. The Court ruled that Petitioner can rely on BIR Ruling No. 178-08 of the BIR for being a specific interpretative ruling. Hence, the Petition was GRANTED, and the assessment was CANCELLED and SET ASIDE.

SBMA FREEPORT ENTITY IS EXEMPT FROM DST ONLY AFTER A CERTIFICATE OF REGISTRATION & TAX EXEMPTION IS ISSUED

THE TELEEMPIRE INCORPORATED VS. THE COMMISSIONER OF INTERNAL REVENUE & THE REGIONAL DIRECTOR OF REVENUE REGION NO. 4, CITY OF SAN FERNANDO, PAMPANGA

CTA CASE NO. 9968, APRIL 25, 2023

Petitioner The Teleempire Incorporated filed a Petition for Review seeking the cancellation of the Documentary Stamp Tax (DST) assessment issued by the Respondent Commissioner of Internal Revenue (CIR) and to refund or issue a Tax Credit Certificate (TCC) on the alleged erroneously and illegally collected DST it paid. The Petitioner argued that upon the execution of the Lease Agreement with the Subic Bay Metropolitan Authority (SBMA) on February 26, 2016, it is deemed registered as a Subic Bay Freeport (SBF) enterprise with the SBMA. Being so, it is exempt from the assessed DST, pursuant to Section 12(c) of the Republic Act (RA) No. 7227, otherwise known as the Bases Conversion and Development Authority. On the other hand, the Respondent countered that the Lease Agreement was entered into on February 26, 2016, whereas the SBMA only issued a Certificate of Registration and Tax Exemption (CRTE) in favor of the Petitioner on April 26, 2016. For them, it is the date of issuance of said CRTE which is the reckoning point of the Petitioner’s tax exemption under R.A. No. 7227. In ruling, the Court held that the local and national tax exemption in Section 12(c) of R.A. No. 7227 kicks in, only upon SBMA’s issuance of COR or CRTE to a business enterprise within the Subic Special Economic Zone (SSEZ). Given that the SBMA issued the CRTE to the Petitioner on April 26, 2016, the latter may only be considered as a business enterprise within the SSEZ, exempt from national and local taxes as of said date. Ergo, the lease transaction, evidenced by the Lease Agreement executed by and between the Petitioner and SBMA on February 26, 2016, or prior to the issuance of said CRTE on April 26, 2016, is subject to DST. Consequently, the alleged erroneously and illegally collected DST and the penalties it paid were likewise denied. In any event, however, the Court deleted the imposition of the compromise penalty, because the Petitioner never agreed to its imposition. Consequently, the Petition was PARTIALLY GRANTED.

ABUNDANCE OF PROCEDURAL & SUBSTANTIVE REASONS ARE FATAL TO THE CASE

TAXPAYERS’ NUMEROUS VIOLATIONS OF THE RULES ONLY SHOW THEIR CONSCIOUS DISREGARD OF THE PROCEDURES

REITOH COLD STORAGE INC., WE LEAD GROUP HOLDINGS, INC., ELENCE MARINE & INDUSTRIAL CORPORATION, MBPS CABLING CORPORATION, GARUDA CONSTRUCTION CORPORATION, BCP DERMATOLOGICAL CORPORATION, AUDIO VIDEO SOLUTIONS CORPORATION, DUNAMIS IMPORT-EXPORT PHILS. INC., ALEN V. DRAGON CORPORATION, MEDEV MEDICAL DEVICES CORPORATION, CHRYSALIS CONSTRUCTION & TRADING CORPORATION, PAPISS INC., ICON REEFER CORPORATION, JRT CONSTRUCTION & TRADING CORPORATION, DATALINK SOLUTIONS TECHNOLOGY & CONSULTANCY INC., ABBE TECHNOLOGY SOLUTIONS INC. EXEQUIEL BALANLAY ADORA, KEN N RIE TRANSPORT INC., R2B2 REALTY & DEVELOPMENT CORPORATION, G2K CORPORATION, MAXX ENERGIE VENTURES CORPORATION & POWERSOURCE PHILIPPINES, INC. VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 10420, APRIL 19, 2023

Petitioner Reitoh Cold Storage Inc., et. al. filed a Petition for Review by way of Mandamus praying that the Court mandate the Respondent Bureau of Internal Revenue (BIR) to issue the Certificate of Tax Delinquencies/Tax Liabilities (CTD) and Acceptance Payment Form (APF) in favor of the Petitioners so that they may be deemed to have fully complied with all the conditions set forth in the Tax Amnesty Act. According to the Petitioners, the denial of the requests for the issuance of the Notice of Issuance of Authority to Cancel Assessment (NIATCA) in their favor after they filed their Tax Amnesty Returns and APFs and paid the amnesty taxes is a decision of the Commissioner of Internal Revenue (CIR) arising under the Tax Code and its related laws; hence, the CTA is the proper court for the filing of a Petition for Review. On the other hand, the Respondent countered that the Court has no jurisdiction over the Petition, praying that the alleged decision denying the application for tax amnesty be reversed. In ruling, the Court held that it has jurisdiction over Petitions for Certiorari, Prohibition, and/or Mandamus. However, the Petitioners failed to file the Petition on time and the Petition has been rendered moot and academic by the expiration of the period for the availment of Tax Amnesty on Delinquencies. The Petitioners also failed to satisfy the essential requisites of a Petition for Mandamus. First, Petitioners should have proved a clear legal right to the issuance of the CTDS and duly endorsed APFs. Second, the Respondent has the duty to perform the act because the same is mandated by law. Third, the Petitioners failed to prove that the Respondent neglected to perform any ministerial duty. Fourth, the issuance of CTDs, APFs, and NIATCAs is a discretionary function of the Respondent, not a ministerial one. Fifth, the Petitioners have other plain, speedy, and adequate remedies in the ordinary course of law. Likewise, they failed to satisfy the essential requisites of a Petition for Certiorari. Nonetheless, even if the Court ignores Petitioners’ non-compliance with the essential and formal requisites, the Petition still fails for having been filed out of time and for being moot and academic. Consequently, the Petition was DISMISSED.

FAILURE OF THE TAXPAYER TO FILE A PROTEST LETTER ON FAN WILL RESULT IN A DEMANDABLE ASSESSMENT

A VALID ADMINISTRATIVE PROTEST TO THE FINAL ASSESSMENT MUST BE FILED WITHIN THIRTY (30) DAYS FROM RECEIPT THEREOF

COMMISSIONER OF INTERNAL REVENUE VS. FOUR SEAS TRADING CORPORATION

CTA EN BANC CASE NO. 2507, APRIL 5, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the Court in Division’s earlier Decision which invalidated the CIR’s Final Notice Before Seizure (FNBS), Preliminary Assessment Notice (PAN), and Final Assessment Notices and Formal Letter of Demand (FAN/FLD) issued to the Respondent Four Seas Trading Corporation. The Petitioner maintained that as Respondent failed to protest the FAN within the reglementary period, the assessment had become final, executory and demandable. Being so, the Court in Division has no jurisdiction over the case. On the other hand, the Respondent whined that it never had the opportunity to administratively protest the final assessment as it failed to receive any of the assessment documents from the BIR. In ruling, the Court found that the Respondent requested copies of the FAN from the BIR, which were received on August 1, 2018. It had every opportunity to administratively protest the same with the BIR. Yet it failed to do so. Hence, the Petition was GRANTED.

IT IS NECESSARY THAT THE CASE MUST BE CONSIDERED A “DELINQUENT ACCOUNT” TO AVAIL OF THE TAX AMNESTY

ST. GERRARD CONSTRUCTION GEN. CONTRACTOR & DEVELOPMENT CORPORATION VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 10427, APRIL 5, 2023

Petitioner St. Gerrard Construction Gen. Contractor and Development Corporation filed a Petition for Mandamus praying that in view of its availment of the tax amnesty on delinquencies pursuant to the Republic Act (RA) No. 11213, or the Tax Amnesty Act, the Court mandates the Respondent to issue the Certificate of Tax Delinquencies (CTD) and Acceptance Payment Form (APF) in its favor so it may be deemed to have fully complied with all the conditions set forth in the law, including the payment of its amnesty tax, that its delinquency may be considered settled, and that the tax amnesty granted become final and irrevocable. On the other hand, the Respondent Bureau of Internal Revenue contended that the Petitioner is, in truth and in fact, not entitled to the Tax Amnesty Program under RA No. 11213. In ruling, the Petitioner failed to establish that it has a clear legal right to be issued a CTD and APF. When Petitioner availed of the Tax Amnesty in 2019, it had yet no tax delinquency which would qualify under the Tax Amnesty Act. There is also no showing that the Petitioner withheld taxes and had failed to remit the same, as required by the Tax Amnesty Act. Consequently, the Petition was DISMISSED.

A HANDWRITING OF A PERSON MAY BE PROVED BY A WITNESS WHO BELIEVES IT TO BE THE HANDWRITING OF SUCH PERSON WHO HAS SEEN THE PERSON WRITE

A PUBLIC DOCUMENT IS SELF-AUTHENTICATING & REQUIRES NO FURTHER AUTHENTICATION IN ORDER TO BE PRESENTED AS EVIDENCE IN COURT

COMMISSIONER OF INTERNAL REVENUE VS. AIG SHARED SERVICES CORPORATION (PHILIPPINES)

CTA EN BANC CASE NO. 2545, MARCH 27, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the partial reversal and setting aside of the CTA 3rd Division’s earlier Decision and Resolution, which partially granted the claim for a refund of the Petitioner AIG Shared Services Corporation (Philippines) in the amount of Php 33,998.77, representing the latter’s unutilized excess input Value-Added Tax (VAT) attributable to its zero-rated sales/receipts. The Petitioner argued that the Respondent’s witness is not competent to prove the due execution of the Respondent’s exhibits in relation to the Master Service Agreements and the Certificates of Non-Registration because he was neither the person who executed the said records nor the person before whom the execution was acknowledged. In ruling, the Court finds that the witness has properly identified and authenticated the Master Service Agreements considering that he is familiar with the signatories of said documents. On the other hand, the Certificates of Non-Registration issued by the Philippine Securities and Exchange Commission (SEC) require no further authentication. Hence, the Court held that the Respondent’s witness was able to sufficiently identify and authenticate the documents alleged by the Petitioner to be hearsay evidence. Consequently, the Petition was DENIED.

CTA HAS JURISDICTION ON COMPROMISE SETTLEMENT

TAX COLLECTION MUST BE PRECEDED BY A VALID ASSESSMENT TO ALLOW THE TAXPAYER TO PROTEST THE ASSESSMENT

FIDELA D. FERNANDEZ VS. CEASAR R. DULAY, COMMISSIONER OF INTERNAL REVENUE & OIC-RD GERRY O. DUMAYAS, BIR REVENUE REGION NO. 10

CTA CASE NO. 9908, MARCH 24, 2023

Petitioner Fidela D. Fernandez filed a Petition for Review praying that the tax assessment issued to him by the Respondents Commissioner of Internal Revenue (CIR) be declared void ab initio and ordering the Respondent to refund the amount paid as a compromise to Petitioner. The Petitioner argued that the assessment could never become final, executory, and demandable, as it is void for having been issued in violation of due process. In view of the invalid assessment, there was nothing to compromise. On the other hand, the Respondents countered that the decision of CIR on administrative compromise is discretionary and does not fall within the jurisdiction of the Court of Tax Appeals. Likewise, due process was observed in the service of BIR Notices. In ruling, the Court was not convinced, the decision of the CIR in relation to the exercise of his power to enter a compromise that is tainted by failure to abide by the parameters set by law, is subject to the CTA’s exclusive appellate jurisdiction. Moreover, the Respondents failed to prove that the assessment notices were actually received by the Petitioner. Considering that the subject assessment was issued in violation of the Petitioner’s right to due process, the same is void. Correspondingly, there being no valid assessment, there is no basis to deny the Petitioner’s request to pay a compromise settlement. Hence, the Petition was GRANTED, the assessment notices were CANCELLED and SET ASIDE, and the Respondents were ORDERED to REFUND to the Petitioner the amount paid as a compromise settlement.

ASSESSMENT SHOULD BE CANCELLED DUE TO SET-IN OF PRESCRIPTION

WITHHOLDING TAX ASSESSMENTS ARE NOT IMPRESCRIPTIBLE

DATE OF ISSUANCE OF THE FLD/FAN DETERMINES WHETHER OR NOT THE CIR WAS ABLE TO ISSUE AN ASSESSMENT WITHIN THE PRESCRIPTIVE PERIOD

PET PLANS, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10002, MARCH 23, 2023

Petitioner Pet Plans, Inc. filed a Petition for Review seeking the reversal of the Decision of the Respondent Commissioner of Internal Revenue (CIR), which denied its request for reconsideration of the Final Decision on Disputed Assessments, citing prescription as a defense. The Petitioner averred that it received the Formal Letter of Demand/Final Assessment Notice (FLD/FAN) beyond the three (3) year period to assess. On the other hand, the Respondent countered that its right to assess the Petitioner has not yet prescribed and that the assessment of withholding taxes is imprescriptible. In ruling, the Petitioner was able to overturn the presumption that it filed false returns. Accordingly, the three (3)- year prescriptive period to issue tax assessments applies. Moreover, the Court held that the Expanded Withholding Tax (EWT) and Withholding Tax on Compensation (WTC) assessments are not imprescriptible. Accordingly, the assessment is void because it was only issued on 3 June 2009 at the earliest, which is beyond the three (3)-year prescriptive period for the Respondent to assess. Consequently, the deficiency tax assessment is NULL AND VOID for being issued beyond the prescriptive period.

BIR PRIOR APPLICATION FOR ZERO-RATING DOES NOT APPLY TO EFFECTIVELY ZERO-RATING

COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE MINING SERVICE CORPORATION

CTA EN BANC CASE NO. 2579, MARCH 14, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking nullification of the CTA 2nd Division’s earlier Decision and Resolution, partially granting the Respondent Philippine Mining Service Corporation’s claim for a refund or issuance of a Tax Credit Certificate (TCC) of its unutilized and/or unapplied and excess input Value-Added Tax (VAT) attributable to its zero-rated sales. Petitioner claimed that the Court in Division erred when it ruled that the BIR’s disallowance of Php 19.8 Million is inconsistent with the law. On the other hand, the Respondent countered that the Petitioner failed to ascribe or even state any reversible error committed by the Court in Division, which correctly ruled that an approved application for VAT zero-rating is not a prerequisite to allocating input VAT attributable to zero-rated sales. In ruling, the Court En Banc agreed with the Court in Division. Nowhere in the Tax Code does it mandate that a taxpayer must obtain a prior application for zero rating for a transaction with PEZA-registered entities to be considered zero-rated. Jurisprudence is clear that BIR regulations additionally requiring an approved prior application for zero rating cannot prevail over the clear VAT nature of transactions with PEZA-registered entities. Consequently, the Petition was DENIED.

WARRANT OF DISTRAINT AND/OR LEVY (WDL) EMANATING FROM A NON-DEMANDABLE ASSESSMENT IS VOID & OF NO FORCE & EFFECT

WDL ISSUED PENDING APPEAL WITH THE CIR IS VOID

XPERT AIR SERVICES, INC. VS. THE COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10171, MARCH 14, 2023

Petitioner Xpert Air Services, Inc. filed a Petition for Review, praying that judgment be rendered declaring the Warrant of Distraint and/or Levy (WDL) as well as the tax assessment issued by the Respondent Commissioner of Internal Revenue (CIR) as null and void. The Petitioner claimed that the tax assessments, which the subject WDL seeks to collect, are null and void as the Letter of Authority (LOA) authorizing the examination of its books of accounts allegedly ceased to be valid. In ruling, the Court held that the WDL is void not because the LOA is invalid but for having been issued prematurely. If a WDL is issued while the tax assessment is still pending appeal with the CIR, the WDL is void and should be of no force and effect. Here, the Petitioner received the Final Decision on Disputed Assessment (FDDA) on May 10, 2019, and appealed the FDDA before the CIR on June 6, 2019. However, pending action by the CIR on the appeal, the Petitioner received the WDL on August 29, 2019, enforcing the collection of the alleged deficiency tax assessments based on the FDDA. Hence, the WDL was declared null and void. Moreover, the Court cannot yet rule on the validity/correctness of the deficiency tax assessments as the same are still pending appeal. Consequently, the Petition was PARTIALLY GRANTED.

NO NEED FOR AN IMPORT PERMIT FROM THE NATIONAL FOOD AUTHORITY (NFA) ON THE “OUT-QUOTA” IMPORTATION OF RICE

COMMISSIONER OF CUSTOMS VS. STA. ROSA FARM PRODUCTS CORPORATION

CTA EN BANC CASE NO. 2542, MARCH 10, 2023

Petitioner Commissioner of Customs filed a Petition for Review seeking nullification of the CTA 1st Division’s earlier Decision and Resolution which ordered the Petitioner to refund the Respondent Sta. Rosa Farm Products Corporation with the proceeds of the auction sale, less the corresponding customs duties imposable on the subject shipments of rice and other applicable expenses and obligations. The Petitioner argued that since the Respondent has no Import Permit from the National Food Authority (NFA), the subject rice shipments were rightfully forfeited in favor of the government. In ruling, the Court En Banc held that there is no need for the Respondent to secure Import Permits from the NFA for the subject shipments, as correctly ruled by the Court in Division. NFA’s Memorandum Circular No. AO-2017-08-002 governs only the “in-quota” importations of rice and does not cover “out-quota” importations thereof. Since the subject importations of rice were identified as “out-quota” by the NFA, there is no need for the latter to issue import permits. The Court En Banc finds that the Petitioner had no legal basis to seize the rice shipments for lack of NFA Import Permits. Thus, the Petitioner’s forfeiture and disposal of the subject rice shipments by public auction sale are void. Since the forfeiture and subsequent public auction sale of the rice shipments are void, the Court En Banc ruled that the Respondent is entitled to a refund of the proceeds received by the Petitioner on the public auction sale. Consequently, the Petition was DENIED.

CTA IS NOT LIMITED TO CASES THAT INVOLVE DECISIONS OF CIR ON MATTERS RELATING TO ASSESSMENTS OR REFUNDS

NO INCOME TAX SHOULD BE IMPOSED ON THE SUPPOSED UNDECLARED PURCHASES & EXPENSES

JINNA MARIA O. YAP VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 10019, MARCH 9, 2023

Petitioner Jinna Maria O. Yap filed a Petition for Review praying that judgment be rendered lifting the Respondent Commissioner of Internal Revenue (CIR)’s Warrant of Distraint and/or Levy (WDL) and declaring the Assessment Notices and Collection Letter as void. The Petitioner argued that she is not liable for an alleged deficiency income tax because undeclared sales cannot prove undeclared income. On the other hand, the Respondent countered that the Court has no jurisdiction. In ruling, the Court held that it has jurisdiction over the case. The Respondent’s argument must fail in light of the Republic Act (R.A.) No. 1125, or the Act Creating the CTA, as amended, which confers upon the CTA the jurisdiction to decide not only cases on disputed assessments and refunds of internal revenue taxes, but also “other matters” arising under the Tax Code. Clearly, the validity of a WDL is an issue that falls under “other matters” arising from the Tax Code that is within the jurisdiction of the CTA to decide upon. Moreover, it was found that the tax assessments are partially incorrect. The Court held that the undeclared purchases and expenses, even when the same are truly undeclared, should not be automatically treated as income, on which income tax should be imposed. Hence, the Petition was PARTIALLY GRANTED. Considering that the deficiency tax assessments issued by the Respondent against the Petitioner are partially incorrect, the Petitioner was ORDERED TO PAY the Respondent the modified amounts.

A JUDICIAL ADMISSION REMOVES AN ADMITTED FACT FROM THE FIELD OF CONTROVERSY

TAXPAYER HAS 30 DAYS FROM RECEIPT OF THE FINAL DECISION ON DISPUTED ASSESSMENT (FDDA) TO FILE AN APPEAL

FIVE PERCENT (5%) GROSS INCOME TAX COVERS DOCUMENTARY STAMP TAX (DST)

COMMISSIONER OF INTERNAL REVENUE VS. CEBU LIGHT INDUSTRIAL PARK, INC.

CTA EN BANC CASE NO. 2466, MARCH 8, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the Court in Division’s earlier Decision and Resolution which partially granted the Respondent Cebu Light Industrial Park, Inc.’s request for cancellation of its tax assessments. Petitioner argued that the Respondent belatedly filed its appeal on June 2, 2017, because the Respondent has 30 days from receipt of the Assistant Regional Director’s Letter, tantamount to FDDA on April 10, 2016, or until May 10, 2016, to institute an Appeal. Petitioner also maintained that the Respondent is liable for the Documentary Stamp Tax (DST). On the other hand, the Respondent countered that the Preliminary Collection Letter (PCL) received on May 5, 2017, is considered as the Petitioner’s Final Decision on Disputed Assessment (FDDA), and that it cannot be made liable to pay for DST because it is a Philippine Economic Zone Authority (PEZA)-Registered Enterprise, that elected the 5% preferential rate, in lieu of national taxes, among others. In ruling, a party who judicially admits a fact cannot later challenge the fact, as judicial admissions are a waiver of proof; the production of evidence is dispensed with. Here, in the parties’ Joint Stipulation of Facts and Issues, among the admissions they made is that the Respondent received the PCL on May 5, 2017, which is considered the final decision of Petitioner. Thus, the earlier Petition was seasonably instituted on June 2, 2017. On whether the Respondent is liable for DST, the Court held that since the Respondent was issued a PEZA Certificate of Registration, the Petitioner may not hold the Respondent liable for DST pursuant to Section 24 of the Republic Act (R.A.) No. 7916, as amended, or the Special Economic Zone Act of 1995.

ANY ASSESSMENT OF INTERNAL REVENUE TAXES AGAINST ANY TAXPAYER SHALL ONLY BE DONE WITHIN THE 3-YEAR PRESCRIPTIVE PERIOD UNLESS THE PAYMENT OF SAID TAXES WAS ATTENDED WITH FRAUD

TAXPAYER IS ONLY MANDATED TO SECURE ITS BOOKS OF ACCOUNTS & ACCOUNTING RECORDS FOR A PERIOD OF THREE (3) YEARS ABSENT ANY EXTRAORDINARY CIRCUMSTANCES

PHILIPPINE HYDRO (PH) INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10618, MARCH 6, 2023

Petitioner Hydro (PH) Inc. filed a Petition for Certiorari praying that the Subpoena Duces Tecum (SDT) and the Letter of Authority (LOA) issued by the Respondent Commissioner of Internal Revenue (CIR) be declared void. The Petitioner argued that the Respondent committed grave abuse of discretion amounting to excess or lack of jurisdiction in issuing the SDT and LOA on the ground that the right of the Respondent to assess the Petition has already prescribed. In ruling, the Court held that it has jurisdiction over the Petition for Certiorari and that all the requisites for the issuance of a Writ of Certiorari are present. First, the Respondent exercises quasi-judicial power. Second, the Respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction. Here, the right of the Respondent to assess the Petitioner’s internal revenue taxes for taxable years 2008 to 2012 had already prescribed when the LOA was issued in 2021. There was no indication in either the subject SDT or LOA that the tax examination that would be conducted by the Respondent was a result of any findings of fraud against the Petitioner. The 3-year period should be applied. Thus, the issuance of the subject SDT has no legal basis. Also, the holding period on the Petitioner’s books of accounts had already lapsed. Lastly, the Petitioner has no plain, speedy, and adequate remedy after the issuance of the SDT. The denial of the Petition for Certiorari will result in the failure of justice as the Petitioner will be required to take the less speedy remedy of going through the tedious and protracted rigors of protesting an assessment to have it cancelled on the ground that it is intrinsically invalid for having been issued pursuant to a void LOA and beyond the 3-year prescriptive period to assess. Hence, the Petition was GRANTED, and the SDT and the LOA were both CANCELLED.

NEA REGISTERED ELECTRIC COOPERATIVE (EC) IS INCOME TAX EXEMPT EVEN IF IT DID NOT OPT TO REGISTER UNDER CDA

UNDER PD NO. 269, EC IS ENTITLED TO A PERMANENT EXEMPTION FROM PAYMENT OF INCOME TAXES DURING ITS EXISTENCE

MISAMIS ORIENTAL II RURAL ELECTRIC SERVICE COOPERATIVE, INC. (MORESCO-II) VS. COMMISSIONER OF INTERNAL REVENUE CTA CASE NO. 10145, FEBRUARY 28, 2023

Petitioner Misamis Oriental II Rural Electric Service Cooperative Inc. filed a Petition for Review praying for the cancellation of the Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner contended that as an Electric Cooperative (EC), it is exempted from payment of Income Tax by virtue of Section 39 of Presidential Decree (P.D.) No. 269, otherwise known as the “National Electrification Administration (NEA) Decree,” despite its non-registration with the Cooperative Development Authority (CDA). On the other hand, the Respondent countered that the Petitioner’s Income Tax exemption is dependent on its successful registration with the CDA. In ruling, the law gives an EC three (3) options as regards its registration with the passage of the Republic Act (R.A.) No. 6939, otherwise known as the “Cooperative Development Authority (CDA) Law.” First, it may choose to remain as a non-stock, non-profit cooperative. Second, it may convert itself into a stock cooperative and register under the CDA. Third, it may convert itself into a stock corporation registered under the Securities and Exchange Commission (SEC). If an EC elects the 1st option, it will be governed by the provisions of P.D. No. 269 but will not be entitled to the incentives under the CDA Law. If the EC chooses the 2nd option, it shall continue to enjoy the benefits of P.D. No. 269 but the enjoyment of the incentives under R.A. No. 6939 shall be dependent on its successful registration with the CDA. If the EC opts for the 3rd option, it shall be entitled to all the rights and powers of any stock corporation but no longer enjoy the incentives provided by P.D. No. 269, as amended, or R.A. No. 6939, as amended. Notwithstanding the ECs’ choice, it will nevertheless remain subject to the NEA’s regulatory power. Here, the Petitioner has opted for the 1st option. The Court held that R.A. No. 10531, which strengthens P.D. No. 269, does not require an EC to register with the CDA as a condition precedent to enjoy the incentives under R.A. No. 10531. R.A. No. 9520, which amends the Philippine Cooperative Code, also affirmed the EC’s right to remain registered with the NEA without necessarily registering with the CDA. Contrary also to the Respondent’s contention, EC’s Income Tax exemption under P.D. No. 269 is not dependent on any condition other than an EC’s legal existence; hence, the exemption stands as long as the Petitioner legally operates. Thus, the Petition was GRANTED, and the Respondent was ENJOINED from collecting from the Petitioner.

ADMINISTRATIVE & JUDICIAL CLAIM FOR REFUND OF LBT MUST BE FILED WITHIN 2 YEARS FROM PAYMENT OF TAX

DATA & ASSESSMENT FORM IS NOT TANTAMOUNT TO THE NOTICE OF ASSESSMENT

NOTICE OF ASSESSMENT IS REQUIRED FOR THE ASSESSMENT TO BE VALID

CITY OF MANILA AS REPRESENTED BY ITS CITY MAYOR, HONORABLE FRANCISCO “ISKO MORENO” DOMAGOSO & OIC-CITY TREASURER VS. MARINA SQUARE PROPERTIES

CTA AC NO. 252, FEBRUARY 20, 2023

Petitioners City of Manila and its OIC-City Treasurer filed a Petition for Review seeking the reversal of the Regional Trial Court (RTC)’s earlier Decision granting the claim for refund in favor of the Respondent Marina Square Properties, Inc. Petitioners argued that the Respondent failed to establish its alleged overpayment for Local Business Taxes (LBT). Likewise, the competence of the Respondent’s witness, the Chief Accountant, to testify was not duly established, and the Respondent is guilty of undue delay in claiming a refund. On the other hand, the Respondent countered that its claims for refund of overpaid LBT were filed within the 2-year prescription period. Further, its witness need not be armed with a Board Resolution authorizing her to testify for the Respondent since she merely testified as a witness for the Respondent. In ruling, to be entitled to a claim for a refund of erroneously or illegally collected LBT, the taxpayer must first file a written claim for a refund or credit with the Local Treasurer; and subsequently file a judicial case for a refund, both of which must be filed within two (2) years from the payment of the tax. Here, records show that the Respondent paid the LBT and other local fees on February 12, 2016, as a prerequisite for the renewal of the Respondent’s business permit. Hence, the Respondent’s administrative claim filed on November 3, 2017, and its judicial claim for refund filed on February 1, 2018, was timely instituted. Also, the Court held that the RTC committed no reversible error in giving credence to the testimony of the Respondent’s sole witness. There is no substantive or procedural rule which requires a witness for a party to present some form of authorization to testify as a witness for the party presenting him or her. Moreover, a perusal of records disclosed that no notice of assessment was issued against the Respondent for the alleged deficiency taxes, except for a Data and Assessment Form. Lastly, the Court finds the Respondent entitled to a refund of erroneously collected and paid LBT. Consequently, the Petition was DENIED for lack of merit.

IMPORTATION OF WHITE RICE IS NOT PROHIBITED BUT REGULATED

COMMISSIONER OF CUSTOMS VS. PROGRESSIVE GRAINS MILLING CORPORATION

CTA EN BANC CASE NO. 2493, FEBRUARY 20, 2023

Petitioner Commissioner of Customs filed a Petition for Review praying for the reversal of the CTA 2nd Division’s earlier Decision and Resolution. Petitioner argued that the rice shipment found in excess of the quantity allowed under the Respondent Progressive Grains Milling Corporation National Food Authority (NFA)’s import permit is considered a prohibited importation or contrary to law, hence, subject to forfeiture. On the other hand, the Respondent countered that rice is merely a “regulated” and not a “prohibited” commodity and that the subject excess rice may not be considered a prohibited article because the excess rice is still within the 9250 metric tons quota covered by the Respondent’s NFA Certificate of Eligibility for rice importation. In ruling, nothing in the records pointed to collusion or fraud that would make the subject importations unlawful. Here, the Respondent alleged that it was not aware of the excess. Also, the Respondent has already paid in advance all taxes and duties and took immediate action to secure the required import permit for the excess shipments. In the absence of fraud on the part of the Respondent, the Court finds no error in the CTA 2nd Division’s conclusion to release the subject white rice shipments upon the payment of the assessed customs duties, fines, and storage fees. Contrary to the Petitioner’s contention, the law does not specifically prohibit the importation of rice. At most, the subject rice shipments were merely regulated and not prohibited commodities. Consequently, the Petition was DENIED

CONDOMINIUM ASSOCIATION DUES ARE NOT SUBJECT TO VAT

COLLECTION OF ASSOCIATION DUES DOES NOT REDOUND TO THE BENEFIT OF CONDOMINIUM CORPORATION

TO CLAIM FOR REFUND OF ERRONEOUSLY PAID TAX, THERE MUST BE CONVINCING PROOF OF ACTUAL PAYMENT

PACIFIC PLAZA CONDOMINIUM CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10199, FEBRUARY 10, 2023

Petitioner Pacific Plaza Condominium Corporation filed a Petition for Review praying for the refund or credit of its erroneously paid Value-Added Tax (VAT) against the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that the condominium dues it collected from its members are not subject to VAT. On the other hand, the Respondent countered that the gross receipts of condominium corporations, including association dues, membership fees, and other assessments/charges are subject to VAT. Likewise, the Respondent also insisted that the Petitioner failed to sufficiently prove and demonstrate that the subject taxes were erroneously or illegally collected. In ruling, the Court held that the condominium association dues collected by the Petitioner from its members are not subject to VAT. Association dues do not involve a sale, barter, or exchange of goods or properties or sale of service; hence, they are not subject to VAT. However, the Petitioner failed to prove payment to the BIR of the amount claimed for refund. A perusal of the evidence showed that the Petitioner has no excess over the output VAT that could be refunded. Since there is no excess payment that may be the subject of a claim for a refund or credit, the Petitioner’s claim must be denied. Consequently, the Petition was DENIED.

SERVICE OF THE LOA TO AN UNAUTHORIZED PERSON RENDERS THE ASSESSMENT VOID

SERVICE OF THE LOA TO THE TAXPAYER BEYOND 30 DAYS FROM ITS ISSUANCE RENDERS THE SUBJECT LOA & THE RESULTING ASSESSMENTS VOID

GOLDEXTREME TRADING COMPANY VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10129, FEBRUARY 7, 2023

Petitioner Goldxtreme Trading Co. filed a Petition for Review seeking cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that the service of the second Letter of Authority (LOA) is invalid considering that the LOA was served to a certain Nins De Guzman (Ms. De Guzman) not under the employ of the Petitioner. According to the Petitioner, when the second LOA was subsequently served, such LOA has long expired. On the other hand, the Respondent argued that the Petitioner has already admitted receipt of the LOA. In ruling, the Court held that an LOA must be served or presented to the taxpayer within 30 days from the date of issuance; otherwise, it becomes null and void, unless revalidated. Here, the Petitioner’s Managing Partner explicitly denied receipt of the second LOA addressed to him. Records revealed that the Petitioner was informed and provided with a copy of the second LOA only 69 days after its issuance. Upon verification from the Post Office, it was learned that the mail matter containing the second LOA was delivered and received by Ms. De Guzman, who was neither an employee nor an authorized representative of the Petitioner. Hence, the Court finds the receipt of the second LOA by Ms. De Guzman an invalid service. Moreover, the subsequent service of the same LOA to the Petitioner on October 26, 2018, or 69 days after the date of its issuance, was likewise invalid, for failure to observe the 30-day mandatory period. Consequently, the Petition was GRANTED, and the Respondent’s letter of denial was REVERSED. Accordingly, the deficiency tax assessments were CANCELLED and SET ASIDE.

BIR MUST SEND A CONFIRMATION REQUEST OF THIRD-PARTY INFORMATION (TPI) TO TPI SOURCE, WHO, IN TURN, MUST VALIDATE SAID TPI

ASSESSMENTS CANNOT BE MADE TO REST ON MERE PRESUMPTIONS NO MATTER HOW REASONABLE OR LOGICAL SAID PRESUMPTIONS MAY BE

GRAND GEO SPHERES CONSTRUCTION CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10207, FEBRUARY 6, 2023

Petitioner Grand Geo Spheres Construction Corp. filed a Petition for Review seeking to nullify the Letter Notice (LN) issued by the Respondent Commissioner of Internal Revenue (CIR) demanding payment of the alleged deficiency taxes. Petitioner asserted that the assessment is wanting in legal and factual basis because it stemmed from the discrepancy between sales declared per its tax returns and the purchases of its alleged customers, without obtaining the required sworn statements from Third-Party Information (TPI) sources. On the other hand, the Respondent countered that the assessment was based on the information obtained from the BIR Reconciliation of Listings for Enforcement (RELIEF) system, which is presumed true and correct. In ruling, Revenue Memorandum Order (RMO) No. 30-2003 provides that if the taxpayer is refuting the data appearing in the LN, there must be a confirmation request/s on the TPI source. In turn, the TPI source should confirm the data through a confirmation certificate. Such requirement was not met. Here, the Revenue Officer admitted that the data in the LN, (i.e., purchases of alleged customers from Petitioner, used as the foundation of the Petitioner’s deficiency taxes), were unverified. Given that the purchases were unverified, the Petitioner’s additional revenues/receipts culled therefrom is simply a presumption and not a fact. Hence, the Petition was GRANTED. Consequently, the LN and deficiency taxes were DECLARED VOID.

THE EXERCISE OF THE COURT’S JURISDICTION TO RULE ON THE DECISIONS OF THE COMMISSIONER OF CUSTOMS IS CONDITIONED ON THE TIMELINESS OF THE FILING OF THE APPEAL

ADELC TRADING/RYAN DOMINIQUE L. TANJUTCO VS. THE HONORABLE REY LEONARDO B. GUERRERO, IN HIS CAPACITY AS COMMISSIONER OF THE BUREAU OF CUSTOMS

CTA EN BANC CASE NO. 2469, FEBRUARY 2, 2023

Petitioner Adelc Trading/Ryan Dominique Tanjutco filed a Petition for Review praying for the reversal of the earlier Resolution of the Court in Division dismissing the case for lack of jurisdiction. Here, Petitioner only filed its Petition for Review with the Court on July 8, 2019. Petitioner reasoned that it could not file its Petition for Review earlier since its Letter for Reconsideration dated January 8, 2018, has not been resolved when it received on January 17, 2018, the physical copy of the Respondent Commissioner of Bureau of Customs’ August 26, 2016, Decision. Petitioner instead reckoned the 30-day period from June 6, 2019, when it received the Respondent’s Resolution denying the Petitioner’s Letter for Reconsideration. In ruling, the Court finds the reasoning of Petitioner unavailing. Moreover, the filing of a Motion for Reconsideration is not an available remedy in seizure proceedings. Even assuming that a motion for reconsideration was available to the Petitioner, the Court in Division has already ruled that the appeal was filed out of time. The 30-day reglementary period should be counted from the receipt of the 2016 Decision via e-mail on February 28, 2017, and the Motion for Reconsideration merely suspended the counting of the reglementary period. Consequently, the Petition was DENIED.

REFUND OF ERRONEOUS COMPROMISE PENALTIES AS A RESULT OF TAX COMPLIANCE VERIFICATION FINDINGS

COMPROMISE PENALTIES INCIDENT TO VIOLATIONS MUST BE ITEMIZED IN A SEPARATE ASSESSMENT NOTICE

COMMISSIONER OF INTERNAL REVENUE VS. HENRYVILLE, INC.

CTA EN BANC CASE NO. 2531, FEBRUARY 1, 2023

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking reversal of the CTA 3rd Division’s earlier Decision and Resolution granting the refund or issuance of a Tax Credit Certificate (TCC) in favor of the Respondent Henryville Inc. Petitioner claimed that it complied with the requirements of Revenue Memorandum Order (RMO) No. 19-2007 and that the compromise penalties were collected with authority as the Mission Order was approved by the Regional Director. Further, the payment was done voluntarily after the breakdown of the total compromise penalties was thoroughly explained to the authorized representatives of the Respondent. In ruling, the Court held that RMO No. 19-2007 is clear in mandating that all amounts of compromise penalties incident to violations must be itemized in a separate assessment notice/demand letter, which the Petitioner failed to comply with and instead, immediately proceeded to issue the BIR Form 0605 (Payment Form) with no itemized amounts of compromise penalties relative to the Respondent’s violations. Therefore, the imposition was considered illegally collected and erroneous. Consequently, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.

ANY FEE COLLECTED FROM OCCUPANTS OR GUESTS OF SUCH OCCUPANTS MAY BE CONSIDERED REASONABLE & NECESSARY FEES FOR THE UPKEEP OF THE CONDOMINIUM & DOES NOT RENDER IT AS ENGAGED IN BUSINESS

ANY COLLECTION RECEIVED BY THE CONDOMINIUM CORPORATION FROM MEMBERS FOR THE EXCLUSIVE USE OF AMENITIES DOES NOT PARTAKE OF PROFIT FOR LOCAL BUSINESS TAX PURPOSES

TAGUIG CITY GOVERNMENT, HON. MA. LAARNI CAYETANO, IN HER CAPACITY AS THE (FORMER) MAYOR OF THE CITY OF TAGUIG & ATTY. MARIANITO MIRANDA, IN HIS CAPACITY AS THE (FORMER) TREASURER OF THE CITY OF TAGUIG VS. SERENDRA CONDOMINIUM CORPORATION

CTA EN BANC CASE NO. 2404, JANUARY 30, 2023

Petitioners Taguig City Government, its Mayor, and City Treasurer filed a Petition for Review seeking that a new decision be rendered ordering the Respondent Serendra Condominium Corporation liable for payment of Local Business Taxes (LBT), Business Plate/Sticker, and Environmental Impact Fee (EIF). Petitioner mainly argued that the Respondent is engaged in profit-making activities, thus, subject to LBT. Likewise, it maintained that condominium corporations, whether engaged in business or not, are liable for payment of EIF. On the other hand, the Respondent countered that the Court in Division was correct in ruling that Petitioners erroneously imposed LBT, Business Plate/Sticker Fee, and EIF on the Respondent who is not engaged in business. In ruling, the Court held that Petitioners failed to establish the fact that Respondent had actually engaged in business activities. A reading of the Articles of Incorporation and pertinent portions of the Audited Financial Statements do not expressly allow nor show that the Respondent is engaged in profit-making activities. Thus, it is not subject to LBT and business Plate/Sticker Fee. On the other hand, the Court has no jurisdiction to rule on EIF which is a regulatory fee and not a tax. Consequently, the Petition was PARTIALLY GRANTED.

THE ACCUSED'S FAILURE TO PAY THE DEFICIENCY INCOME TAX ASSESSED IN A VOID FORMAL LETTER OF DEMAND & ASSESSMENT NOTICES DOES NOT GIVE RISE TO ANY CRIMINAL OR CIVIL LIABILITY ON THE PART OF THE ACCUSED

PEOPLE OF THE PHILIPPINES VS. THE PROPRIETOR OF CELIA’S HANDBAG, RODOLFO QUEZON REYES

CTA CRIMINAL CASE NO. O-859, JANUARY 18, 2023

Accused Rodolfo Quezon Reyes, the Proprietor of Celia’s Handbag, was charged with violation of Section 255 of the 1997 Tax Code, as amended, for the alleged refusal and failure to pay basic deficiency income tax. The Accused argued that he never received the Preliminary Assessment Notice (PAN), Formal Letter of Demand (FLD), and Assessment Notices (ANs). In ruling, examination of the PAN, FLD, and ANs shows that said notices were received by a certain Cristina E. Ellosa. With the Accused’s admission that Ellosa is his employee, there was a valid substituted service. The Accused cannot then feign ignorance that he was not able to receive the assessment notices when substituted service was made upon his employee. Notwithstanding the substituted service of the PAN, FLD, and ANs, the assessment is void for being issued beyond the 3-year prescriptive period. Also, assuming that the FLD was issued within the prescriptive period, the assessment is still void as the FLD and ANs bear no due date for payment. As the assessment is void for being issued beyond the prescriptive period and without a due date for payment in violation of the Accused’s right to due process of law, there was no reason to adjudge the Accused liable to pay deficiency income tax pursuant to the void FLD and ANs. Consequently, the Accused was ACQUITTED of the crime of violation of Section 255 of the 1997 Tax Code, as amended, for failure of the Prosecution to prove his guilt beyond reasonable doubt, without any civil liability.

A DEFICIENCY TAX ASSESSMENT IS NOT NECESSARY BEFORE A CRIMINAL CASE MAY BE FILED

HOLDING COMPANIES, ASIDE FROM MERELY HOLDING THE STOCK OF ANOTHER CORPORATION OR CORPORATIONS, MAY ENGAGE IN INVESTMENT/FINANCIAL ACTIVITIES FOR THEIR SUBSIDIARY/IES

PHILIPPINE DEPOSITARY RECEIPTS ARE NOT STATEMENTS NOR ARE THEY CERTIFICATES OF OWNERSHIP OF A CORPORATION

PEOPLE OF THE PHILIPPINES VS. RAPPLER HOLDINGS CORPORATION/MARIA A. RESSA

CTA CRIMINAL CASE NO. O-679 TO O-682, JANUARY 18, 2023

Accused Rappler Holdings Corporation (RHC) and Maria Ressa were charged with violations of Sections 254 and 255 of the 1997 Tax Code, as amended. Plaintiff People of the Philippines alleged that the Accused’s willful failure to report RHC’s trading income in its Annual Income Tax Returns (AITR) and its sales receipts in their quarterly Value-Added Tax (VAT) returns, constitute essential elements of the crimes described in Sections 254 and 255 of the 1997 Tax Code, as amended. Plaintiff theorized that Accused RHC is a “dealer in securities” when it made several purchases of Rappler, Inc.’s shares and resold the same through the issuance of Philippine Depositary Receipts (PDRs) in favor of foreign buyers. The Accused countered that it does not hold itself out to the public as a dealer in securities. Likewise, it is registered with the Securities and Exchange Commission (SEC) as a holding company, which is reflected in its primary purpose. Further, the Revenue Officers did not conduct a formal investigation and failed to comply with the requirements under Revenue Memorandum Order No. 27-2010 and 24-2008, thereby violating the Accused’s due process rights. In ruling, the Court held that there is no requirement for the precise computation and assessment of the tax before there can be a criminal prosecution. Thus, the Accused’s right to due process was not violated, notwithstanding the absence of valid tax assessments or even when the said tax assessments were issued and the same were not received by the taxpayer. As to the substantial aspect, the Court ruled that the Accused RHC is not a dealer in securities. The evidence shows that the Accused RHC was not habitually or regularly engaged in the purchase and resale of securities. The issuance of the PDRs by RHC was done pursuant to a legitimate business purpose (i.e., to raise capital for its subsidiary, which is consistent with one of the purposes of RHC as a holding company). RHC did not earn any trading income from the issuance of PDRs to foreign entities. The process by which the PDRs were issued to foreign entities reveals that it did not involve a sale of shares of stock but were investment transactions. Having determined, the non-taxability of the issuance of PDRs to foreign entities, the Court concluded that the elements of the crime charged were not present. Consequently, the Accused RHC and Maria Ressa were ACQUITTED for failure of the Prosecution to prove their guilt beyond reasonable doubt.

INCOME DERIVED FROM THE JUNKET AGREEMENT WITH PAGCOR COVERED BY FRANCHISE TAX IS INCOME FROM GAMING OPERATIONS, THUS, EXEMPT FROM CORPORATE INCOME TAX

PRIME INVESTMENT KOREA, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2483, JANUARY 9, 2023

Petitioner Prime Investment Korea, Inc. filed a Petition for Review seeking the reversal of the earlier Decision and Resolution. Petitioner prayed that it be declared not liable for corporate income tax on revenues derived from its junket gaming operations and order the Respondent Commissioner of Internal Revenue to refund or issue a Tax Credit Certificate (TCC) in favor of the Petitioner for the erroneously or excessively paid corporate income tax on a junket and e-junket gaming revenues. In ruling, a perusal of the Junket Agreement showed that it allows the Petitioner to engage in casino gaming operations as Philippine Amusement and Gaming Corporation (PAGCOR)’s agent-an activity that is exempt from corporate income tax. The Junket Agreement provides that the Petitioner shall shoulder the 5% Franchise Tax due on the gross winnings on the Junket Gaming Rooms and shall remit the Franchise Tax to the PAGCOR for remittance to the BIR. Hence, the Court was convinced that the Petitioner’s income from the operation of the casino pursuant to the Junket Agreements is not subject to the corporate income tax as these are classified as “income derived from gaming operations” pursuant to Section 13(2) of the Philippine Gaming Corporation Charter. Meanwhile, the Petitioner’s payment of monthly Minimum Guaranteed Fee to PAGCOR, in exchange for PAGCOR’s grant of authority, forms part of PAGCOR’s “income from the operation of other related services” which is subject to corporate income tax. Consequently, the Petition was GRANTED, and the case was REMANDED to the Court in Division for the determination of the refundable amount.

ABSENCE OF OFFICIAL RECEIPTS ISSUED IN A NAME APPROVED & AUTHORIZED BY THE SECURITIES & EXCHANGE COMMISSION IS TANTAMOUNT TO NON-COMPLIANCE WITH THE SUBSTANTIATION REQUIREMENTS

VAT-REGISTERED PERSONS ARE REQUIRED TO PRINT THEIR TIN FOLLOWED BY THE WORD "VAT" IN THEIR INVOICES OR RECEIPTS

COMMISSIONER OF INTERNAL REVENUE VS. KEPCO CORPORATION & KEPCO ILIJAN CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2475 & 2477, JANUARY 9, 2023

Both Commissioner of Internal Revenue (CIR) and Kepco Ilijan Corporation (KEILCO) filed their Petitions for Review assailing the Court’s earlier Decision and Resolution partially granting KEILCO’s claim for a refund or issuance of a Tax Credit Certificate (TCC) of its unutilized input Value-Added Tax (VAT) attributable to its zero-rated sales of electricity. CIR alleged that the judicial claim was prematurely filed and that KEILCO failed to comply with the invoicing requirements for it to be entitled to a tax refund or issuance of a TCC. On the other hand, KEILCO contended that it is entitled to a full refund and that it should not be faulted for the alleged failure of its suppliers/sellers to comply with the invoicing requirements. In ruling, the Court held that KEILCO need not observe the 120-day mandatory period before it could file a judicial claim with the CTA. Moreover, the mere allegation that KEILCO failed to comply with the invoicing requirements will not merit a reversal of the grant of tax refund or issuance of TCC. However, the Court ruled that the Court in Division correctly disallowed the amount of Php 47,559,061.24 for failure to comply with the invoicing requirements. The disallowed official receipts and invoices, which do not show KEILCO’s name, Tax Identification Number (TIN), address, and no “TIN-VAT” printed, cannot be considered as VAT invoices/official receipts, and would not give rise to any creditable input VAT in favor of KEILCO. Also, the Court cannot assume that the name “KEPCO” in the disallowed official receipts and invoices refers to one entity, KEILCO. Consequently, the Petitions were both DENIED.

A CASE QUESTIONING AN EXERCISE OF MINISTERIAL ACT THROUGH A DEPARTMENT ORDER SHOULD BE DISMISSED DUE TO LACK OF JURISDICTION

IN FILING AN APPEAL BEFORE CTA, IT IS ESSENTIAL THAT THE APPEALED ACTION HAS BEEN DONE IN THE EXERCISE OF JUDICIAL OR QUASI-JUDICIAL POWERS

ECOSSENTIAL FOODS CORPORATION VS. HON. EMMANUEL F. PINOL, IN HIS CAPACITY AS SECRETARY OF THE DEPARTMENT OF AGRICULTURE & COMMISSIONER REY LEONARDO GUERRERO, IN HIS CAPACITY AS THE COMMISSIONER OF THE BUREAU OF CUSTOMS

CTA CASE NO. 9929, DECEMBER 1, 2022

Petitioner Ecossential Foods Corporation filed an Amended Petition for Review seeking nullification of Department Order (DO) No. 06, Series of 2018, issued by the Respondent Secretary of the Department of Agriculture. Petitioner claimed that the Court has jurisdiction over the present controversy based on Section 29 of Republic Act No. 8800, or the Safeguard Measures Act. It also argued that in imposing the Special Safeguard (SSG), DO No. 06 transgressed the provisions of the General Agreement on Tariffs and Trade of 1994 (GATT), ASEAN Trade in Goods Agreement (ATIGA), and Common Effective Preferential Tariff (CEPT) Scheme. The Philippines, being a party to the ATIGA, import of coffee products from Indonesia (another member of the ASEAN) is subject to a 9% preferential rate on import duties. On the other hand, the Respondent maintained that DO No. 06 is a valid and legal enactment because the Respondent Secretary has the authority to impose SSG under Section 29 of RA No. 8800. In ruling, the Court finds that it has no jurisdiction. The law limits the scope of the CTA’s jurisdiction only to “decisions” rendered by the Respondent Secretary. Here, DO No. 06 is not a decision or ruling but a form of subordinate legislation (or, at the very least, a ministerial act of the Respondent Secretary). Since DO No. 06 is neither a decision nor ruling as contemplated by the statute, any action or decision on the merits that the CTA will make, in this case, would be void for lack of jurisdiction. Consequently, the Amended Petition was DISMISSED.

PRELIMINARY COLLECTION LETTER NOTICES ARE BIR'S DECISION ON DISPUTED ASSESSMENTS

A LETTER MAY BE CONSIDERED THE COMMISSIONER'S FINAL DECISION ON A DISPUTED ASSESSMENT IF IT COMMUNICATES TO THE TAXPAYER IN CLEAR & UNEQUIVOCAL LANGUAGE WHAT CONSTITUTES THE COMMISSIONER'S FINAL DETERMINATION OF THE DISPUTED ASSESSMENT

IMPROPER SERVICE RENDERS THE ASSESSMENT VOID

JOSELITO B. YAP VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 10063, NOVEMBER 29, 2022

Petitioner Joselito Yap filed a Petition for Review praying that judgment be rendered declaring the Assessment Notices and Preliminary Collection Letter (PCL) Notices for taxable years (TY) 2011, 2012, and 2013, issued by the Respondent Commissioner of Internal Revenue (CIR) null and void. Petitioner argued that the PCL Notices received on April 4, 2019, can be considered as Final Decision on Disputed Assessment (FDDA), which is the decision appealable to the Court. On the other hand, the Respondent countered that the letter dated July 30, 2018, received on September 4, 2018, constitutes the FDDA. In ruling, the Court held that the PCL Notices are considered the FDDA or the decision appealable to the Court. Thus, the 30-day period to appeal with the Court should be reckoned from the receipt of the PCL notice, i.e., April 4, 2019, and not from the date the Petitioner received the letter dated July 30, 2018, i.e., September 4, 2018. The Petition was, therefore, timely filed on April 11, 2019. Moreover, the Petitioner alleged that the Letter of Authority (LOA) and Assessment Notices were received by persons who are not employees of JAPI Enterprises and were not served at JAPI Enterprise’s registered address. Here, Respondent failed to establish that personal service was not practicable to justify the Revenue Officer’s resort to substituted service. Since the Respondent was unable to present sufficient evidence to prove that the LOA and Assessment Notices for TYs 2011, 2012, and 2013, were properly served and received by the Petitioner or by its authorized representative/s, there are no valid assessments. Consequently, the PCL Notices are VOID.

IF THE TAXPAYER OPTS TO APPEAL TO THE CIR THE FINAL DECISION OF THE LATTER'S DULY AUTHORIZED REPRESENTATIVE, THE TAXPAYER'S REMAINING OPTION IS TO WAIT FOR THE CIR'S DECISION BEFORE ELEVATING ITS CASE TO THE CTA

WHEN A TAXPAYER OPTS TO FILE AN ADMINISTRATIVE APPEAL, THE CIR IS NOT GIVEN A FRESH OR SEPARATE 180-DAY PERIOD WITHIN WHICH TO DECIDE THE ADMINISTRATIVE APPEAL

HIJO AGRARIAN REFORM BENEFICIARIES' COOPERATIVE (HARBCO) VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9797, NOVEMBER 28, 2022

Petitioner Hijo Agrarian Reform Beneficiaries Cooperative filed a Petition for Review seeking to appeal the Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR). The Petitioner argued that the subject deficiency tax assessment issued by the Respondent against it is barred by prescription. On the other hand, the Respondent countered that the Petitioner failed to timely file its appeal before the Court; thus, the assessment already became final, executory, and demandable. In ruling, when a taxpayer’s protest is denied by the CIR’s duly authorized representative, a taxpayer is given two (2) alternative remedies, to either: (1) appeal to the CTA within 30 days from the date of receipt of the representative’s decision; or (2) to elevate his protest through a request for reconsideration to the CIR, within the same 30-day period, otherwise referred to as an “administrative appeal.” Thereafter, if the taxpayer’s administrative appeal is not acted upon by the CIR within 180 days from the filing of the protest, the concerned taxpayer may either: (1) appeal to the CTA within 30 days after the expiration of the said 180-day period; or (2) await the final decision of the CIR on the disputed assessment and appeal such final decision to the CTA within 30 days from receipt of a copy thereof. Considering that the 180-day period has already lapsed by the time the Petitioner received the FDDA and the Petitioner opted to file an administrative appeal before the Respondent, through a Motion for Reconsideration, within 30 days from receipt thereof, the only remedy available to the Petitioner at this point is to wait for the Respondent’s decision before filing an appeal before the Court. Without waiting for any action from the Respondent, the Petitioner filed the instant Petition. Consequently, the Petition was DISMISSED for lack of jurisdiction.

GENERAL PROFESSIONAL PARTNERSHIP PURELY ENGAGED IN THE PRACTICE OF PROFESSION IS NOT SUBJECT TO LOCAL BUSINESS TAX

CASAS+ ARCHITECTS VS. THE CITY OF MAKATI & JESUSA E. CUNETA, IN HER CAPACITY AS THE CITY TREASURER OF THE CITY OF MAKATI

CTA AC CASE NO. 259, NOVEMBER 24, 2022

Petitioner Casas+ Architects filed a Petition for Review against the Respondents City of Makati and Jesusa Cuneta, in her capacity as the City Treasurer of Makati, assailing the Order granting the Respondent’s Motion for Reconsideration dismissing the Petitioner’s claim for a refund of erroneously paid Local Business Taxes (LBT). The Petitioner argued that it is a General Professional Partnership (GPP), hence, not subject to the tax imposed under Section 3A.02(g) of the Revised Makati Revenue Code (RMRC). On the other hand, the Respondent contended that the Petitioner was not purely engaged as a GPP since it was also engaged in services other than in the exercise of its profession. In ruling, the Court finds that the Petitioner is purely engaged in the practice of the profession. The Petitioner presented evidence to prove that it was not involved in interior decoration but in interior design and that it did not employ laborers and construction workers. The Court also agreed with the Petitioner’s argument that the billing assessments for the 2nd quarter of 2014 to the 4th quarter of 2015, which were issued by the Respondent in relation to the Petitioner’s renewal of its business permits, were not the assessments contemplated under Section 195 of the Local Government Code (LGC). Considering that the Petitioner’s remedy falls under Section 196 of the LGC, and that the Petitioner is not engaged in any activity other than the practice of architecture, the Court held that the Petitioner is entitled to its claim for a refund but to a reduced amount. Consequently, the Petition was PARTIALLY GRANTED.

BUSINESS TAXES ARE DUE IN THE CITY WHERE THE TRADE OR COMMERCIAL ACTIVITIES ARE CONDUCTED

IN ORDER FOR A CITY TO VALIDLY IMPOSE LOCAL BUSINESS TAX, THE SITUS (i.e., PRINCIPAL PLACE OF BUSINESS OR BRANCH & SALES OFFICE) THEREOF MUST BE IN THAT CITY

LAZADA E-SERVICES PHILIPPINES, INC. VS. CITY OF MAKATI, CITY TREASURER OF MAKATI

CTA AC NO. 261, NOVEMBER 23, 2022

Petitioner Lazada E-Services Philippines, Inc. filed a Petition for Review against Respondents, the City of Makati, and the City Treasurer of Makati, praying that the Regional Trial Court’s earlier Decision and Resolution be reversed. Petitioner argued that there is no legal basis to support the ruling of the Court a quo that the Petitioner continued to be liable for the Local Business Tax (LBT) to Makati City until the filing of its application for the retirement of business. Petitioner asserted that after the transfer of its principal office to Taguig City in 2016, it only maintained an administrative office in Makati, which did not record any sales transactions nor issue receipts or invoices. Thus, Respondents have no authority to impose LBT for the years 2016 and 2017. In ruling, contrary to the ruling of the Court a quo, the authority of local government units to impose LBT for 2016 and 2017 is not dependent on the procedural requirement of filing an application for the retirement of business but is conditioned on the business transactions conducted within their territorial jurisdiction. However, the Petitioner failed to prove that the operations in its Makati office were limited to non-revenue generating activities. Hence, the LBT assessments issued to Petitioner were sustained except for the year 2016, which was cancelled for lack of sufficient factual basis. Consequently, the Petition was PARTIALLY GRANTED. The earlier Decision and Order were AFFIRMED with MODIFICATION.

CLAIM FOR LOCAL BUSINESS TAX REFUND SHOULD BE DISMISSED FOR FAILURE TO PROVE WITH PREPONDERANCE OF EVIDENCE

HOLCIM PHILIPPINES, INC. VS. THE CITY OF MANILA & JOSEPHINE D. DAZA, IN HER CAPACITY AS THE CITY TREASURER OF THE CITY OF MANILA

CTA AC NO. 251, NOVEMBER 18, 2022

Petitioner Holcim Philippines, Inc. filed a Petition for Review against Respondents City of Manila and its City Treasurer, Josephine Daza, seeking a reversal of the earlier Regional Trial Court (RTC)’s Decision. The Petitioner argued that it does not need a separate business permit deeming it a manufacturer or wholesaler of essential commodities before it could take advantage of the preferential rate of Local Business Tax under the Local Government Code (LGC). It contended that all it needs to comply with are the reglementary periods laid down in the LGC. On the other hand, the Respondent countered that aside from the periods provided in the LGC, the Petitioner is still bound to prove the fact of an erroneous or illegal collection in which it failed to do so. In ruling, for the Petitioner to be entitled to the discounted tax rate, it is incumbent upon the Petitioner to prove that it is engaged in business as a manufacturer, miller, producer, wholesaler, distributor, dealer, or retailer of cement or other essential commodities. However, from the nature of its business, the Petitioner is not exclusively engaged in the sale and/or manufacture of cement. According to its Amended Articles of Incorporation, it may engage in the sale and/or manufacture of all kinds of minerals and building materials that may or may not fall within the scope of the essential commodities. Consequently, the Court finds that the Petitioner has failed to prove, with preponderance of evidence, that it is entitled to the preferential rate. The Court finds no reversible error in the RTC’s denial of the Petitioner’s claim for refund. Consequently, the Petition was DENIED.

IT IS THE PROVINCIAL GOVERNOR WHO HAS THE AUTHORITY TO FILE SUITS ON BEHALF OF THE PROVINCE

AUTHORITY TO FILE PETITION IS NOT WITH TREASURER

IMELDA MACANES, IN HER CAPACITY AS THE PROVINCIAL TREASURER OF BENGUET & MERLITA G. TOLITO, IN HER CAPACITY AS THE OFFICER-IN-CHARGE OF THE MUNICIPAL TREASURY OFFICE OF BAKUN, BENGUET VS. LUZON HYDRO CORPORATION

CTA EN BANC CASE NO. 2407, NOVEMBER 7, 2022

Petitioners Provincial Treasurer of Benguet and Officer-in-Charge (OIC) of the Municipal Treasury Office of Bakun, Benguet filed a Petition for Review assailing the Central Board of Assessment Appeals (CBAA) Decision and Resolution. The Petitioners claimed that the applicability of Executive Order (E.O.) No. 88-2019 was never raised as an issue before the proceedings in the Local Board Assessment Appeals (LBAA) and the CBAA. On the other hand, the Respondent Luzon Hydro Corporation countered that the CBAA correctly applied E.O. No. 88 and that the Petitioners failed to show authority to file the Petition. In ruling, the Court held that the Petitioners are not empowered to file the Petition and to sign the requisite Verification and Certification of Non-Forum Shopping. Although Sections 183 and 266 of the Local Government Code authorize the Local Treasurer to collect delinquent taxes, fees, charges, or other revenues and real property tax through judicial action, said provisions show that such authority applies specifically to a collection case. The instant Petition does not involve collecting delinquent taxes or real property tax by the Provincial and OIC Municipal Treasurers. The discharge of any other powers may only be made by authority of law or by an ordinance. As the Petitioner filed the Petition in their official capacity, the filing thereof should be supported by a valid authorization from the Sangguniang Panlalawigan, which in this case no written proof of their authority to file the Petition was presented. The Court also held that the CBAA did not err in applying E.O. No. 88. Consequently, the Petition was DISMISSED.

SUBSTITUTED SERVICE CAN BE RESORTED TO WHEN THE PARTY IS NOT PRESENT AT THE REGISTERED OR KNOWN ADDRESS

IF KNOWN ADDRESS IS THE PLACE OF RESIDENCE, SUBSTITUTED SERVICE CAN BE MADE BY LEAVING THE COPY WITH A PERSON OF LEGAL AGE RESIDING THEREIN

PEOPLE OF THE PHILIPPINES VS KJET ENTERPRISES & JULIE GRACE MAGAHIS y RAFON

CTA CRIMINAL CASE NOS. O-768 AND O-769, NOVEMBER 3, 2022

Accused KJET Enterprises and its sole proprietor Julie Grace Magahis y Rafon were charged for violation of Section 255 of the 1997 Tax Code, as amended, for their failure to pay deficiency taxes. Plaintiff People of the Philippines maintained that due process was observed in the assessment of the Accused. It argued that the Letter of Authority and the assessment notices were validly served through substituted service while all other issuances were properly served via registered mail. Further, despite the finality and adequate notice and demand for payment of deficiency taxes, the Accused failed willfully to pay. On the other hand, the Accused countered that they did not receive any notice of the assessment. They argued that the service of said notices on the Accused Magahis, through her father Esmeraldo, was invalid. In ruling, the rules provide that substituted service may be made at the taxpayer’s residential address by leaving a copy of the notice with a person of legal age residing therein. It must be noted that at the time the notices were first served at Accused KJET’s business address, KJET had already ceased operations and did not notify the BIR of any change in the Accused entity’s registered business address nor the closure of the operations, hence, the BIR was justified in resorting to substituted service. Consequently, the Court sees no issue with the service of the notices to Esmeraldo considering that he is a person of legal age residing therein. All the elements of tax evasion having been proved, the Accused Magahis’ feigned ignorance of the assessment against her cannot exempt her from criminal liability. Consequently, the Court finds the accused GUILTY beyond reasonable doubt of violation of Section 255 of the Tax Code, as amended.

DENIAL OF REQUESTS FOR LOA CANCELLATION IS NEITHER A DECISION NOR A QUASI-JUDICIAL ACT OF THE CIR

REVENUE OFFICERS, GROUP SUPERVISORS & THE CHIEF OF THE LEGAL DIVISION ARE NOT PERFORMING A QUASI-JUDICIAL FUNCTION WHEN THEY SIGN & ISSUE RESPONSE LETTER

ST. TIMOTHY CONSTRUCTION CORPORATION, ST. MATTHEW GEN. CONTRACTOR & DEVELOPMENT CORPORATION, ALPHA & OMEGA CONTRACTOR & DEVELOPMENT CORPORATION, ST. GERRARD CONSTRUCTION GEN. CONTRACTOR & DEVELOPMENT CORPORATION & PACIFICO F. DISCAYA II VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 10472, NOVEMBER 3, 2022

Petitioners St. Timothy Construction Corporation, et al., filed a Petition for Review under Rule 65 of the Revised Rules of Court, assailing the response letters issued by the Respondent Bureau of Internal Revenue, denying the Petitioners’ respective requests for cancellation of the Letters of Authority (LOAs) issued to them. Petitioners submitted that a Petition for Certiorari filed with the Court of Tax Appeals (CTA) is the correct remedy as the CTA’s jurisdiction is not limited to cases that involve decisions of the Commissioner of Internal Revenue (CIR) on matters involving assessments or refunds but also covers other cases arising from the Tax Code, as amended. Petitioners argued that the denial of their requests for LOA cancellation is a decision of the Commissioner of Internal Revenue (CIR) arising under the Tax Code and its related laws. On the other hand, the Respondent countered that the Petition for Certiorari should be outrightly dismissed since the power of CIR to make assessments and prescribe additional requirements for tax administration and enforcement (i.e., issuance of LOA) are neither judicial nor quasi-judicial in nature. In ruling, the Court held that Petitioners failed to satisfy the essential requisites for a Petition for Certiorari. The issuance of the response letters denying the Petitioners’ request for cancellation of LOAs is not a judicial or quasi-judicial act of the Respondent. Also, the Petitioners failed to show that the issuance of the subject LOAs is tainted with grave abuse of discretion. Lastly, Petitioners failed to exhaust all other remedies available to them. Consequently, the Petition was DISMISSED.

IF GENERATION OF REVENUE IS THE PRIMARY PURPOSE, THE IMPOSITION IS A TAX BUT, IF REGULATION IS THE PRIMARY PURPOSE, THE IMPOSITION IS PROPERLY CATEGORIZED AS A REGULATORY FEE

SLAUGHTER FEES ARE NOT TAX, THUS, CTA HAS NO JURISDICTION

SAN MIGUEL FOODS, INC. VS. OFFICE OF THE CITY TREASURER, CITY OF DAVAO, REPRESENTED BY BELLA LINDA N. TANJILI CITY TREASURER

CTA AC NO. 249, OCTOBER 12, 2022

Petitioner San Miguel Foods, Inc. filed a Petition for Review praying for the reversal of the Regional Trial Court (RTC)’s Joint Decision and Order, and for the cancellation of the Orders of Payment issued by Respondent Davao City Treasurer assessing it a Permit Fee on its slaughter activity. The Petitioner claimed that RTC recklessly misapplied the Animal Welfare Act of 1998 in concluding that there is no double taxation, because the purpose of the Permit Fee to slaughter is to ensure that inhuman acts in the slaughter of the birds are prevented, and the purpose for the ante-mortem and post-mortem fees is to ensure that the birds slaughtered are safe for public consumption. On the other hand, the Respondent countered that the imposition of Permit Fee to slaughter or the ante-mortem and post-mortem fees are not taxes but are impositions in relation to the regulation of the operation of slaughterhouses. In ruling, the Court explained that the purpose of an imposition will determine its nature as either a tax or a fee. If the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly classified as an exercise of the power to tax. On the other hand, if the purpose is primarily to regulate, then it is deemed an exercise of police power in the form of a fee, even though revenue is incidentally generated. Here, the Court finds that the permit fees to slaughter as well as the ante-mortem and post-mortem fees imposed by Respondent are not local taxes. Consequently, the Tax Court is without jurisdiction to entertain the appeal. Hence, the Petition was DISMISSED.

FAILURE OF THE PROSECUTION TO SHOW THAT THE PAN & FAN WERE MAILED TO & SERVED UPON THE ACCUSED, THE ASSESSMENT IS RENDERED VOID

FAN IS INVALID IF IT DOES NOT BEAR A DUE DATE FOR THE PAYMENT OF TAX AS IT NEGATES THE BIR'S DEMAND FOR PAYMENT

PEOPLE OF THE PHILIPPINES VS. ERRIZARO SHOE CORPORATION, EFREN RIZALITO M. LAZARO & EDNA S. LAZARO

CTA CRIMINAL CASE NO. O-704, SEPTEMBER 28, 2022

Accused Errizaro Shoe Corporation (ESC) and its officers, Efren Rizalito Lazaro and Edna Lazaro were involved in a criminal case for violation of the 1997 Tax Code, as amended, for their alleged refusal and failure to pay the basic deficiency Value-Added Tax (VAT). The sole issue for resolution is whether the Accused willfully failed to file VAT returns and to pay the corresponding tax therein. In ruling, to determine whether the Accused ESC willfully failed to pay deficiency VAT, it is proper to ascertain first whether the assessment issued by the Bureau of Internal Revenue (BIR) is valid. Here, there is no proof that the Preliminary Assessment Notice (PAN) and Final Assessment Notice (FAN) were mailed to and served upon the Accused ESC or its officers. Moreover, the Formal Assessment Notice (FAN) does not bear a due date or deadline for the payment of deficiency VAT. With the glaring failure of the Prosecution to prove that the Accused ESC was served with a valid FAN, the Court finds that the Accused has no obligation to pay the deficiency VAT as indicated in the void FAN. Stated differently, the failure of the Accused to pay the deficiency VAT assessed in a void FAN does not give rise to any criminal or civil liability. Since there is no valid assessment to speak of, the third element (i.e., taxpayer’s failure to pay the tax was willful) of the crime of Willful Failure to Pay Tax was not met. Hence, the Accused ESC and its officers were ACQUITTED without any civil liability.

THE IMPOSITION OF TAX RATES, OVER & ABOVE THE CEILING RATES IMPOSED BY A STATUTE IS BEYOND THE SCOPE OF CORPORATE POWERS OF THE LOCAL GOVERNMENT UNIT

LBT EXCEEDING THE RATE UNDER LGC IS NOT VALID

THE CITY OF ANGELES & THE CITY TREASURER OF ANGELES VS. SUPER SHOPPING MARKET, INC. & SANFORD MARKETING CORPORATION, CTA AC NO. 237, SEPTEMBER 28, 2022

Petitioners City of Angeles and the City Treasurer of Angeles filed a Petition for Review praying for the reversal of the earlier Decision of the Regional Trial Court (RTC) invalidating the Local Business Tax (LBT) assessment of the Respondents Super Shopping Market, Inc., and Sanford Marketing Corporation. The Petitioners argued that the 3.3% and 1.65% tax rate imposed is valid pursuant to Section 191 of the Local Government Code (LGC). On the other hand, Respondents countered that the Petitioners cannot impose LBT on retailers of non-essential commodities at a rate exceeding the adjustment allowed by LGC. In ruling, the maximum tax rates that can be imposed by municipalities for retailers of essential commodities as stated under Section 143(c) of the LGC, as amended, are as follows: with gross sales or receipts for the preceding calendar year of Php 400,000 or less, the annual rate is 1%; and if more than Php 400,000, the rate is 0.5%. Meanwhile, the maximum tax rates that a city may impose may exceed the maximum rates allowed for the province or municipality by not more than 50%. However, a perusal shows that the tax rates imposed by the Angeles City Revenue Code on retailers exceeded the maximum allowable rates of tax prescribed by the statute. The Court held that the RTC’s computation of the tax refund is supported by law and jurisprudence, and therefore valid, albeit with slight modifications. Consequently, the Petition was DENIED, and the earlier Decision of the RTC was AFFIRMED WITH MODIFICATION.

THE CASES THAT SHOULD BE FILED BEFORE THE CTA MUST PERTAIN TO RTC DECISIONS, RESOLUTIONS, OR ORDERS CONCERNING LOCAL TAX CASES

CE CASECNAN WATER & ENERGY COMPANY, INC. VS. THE MUNICIPALITY OF ALFONSO CASTAŃEDA, NUEVA VIZCAYA & JERRY P. PASIGIAN, JR. & JENNIFER M. TIONGSON, IN THEIR RESPECTIVE CAPACITIES AS MAYOR & TREASURER (OIC) OF THE MUNICIPALITY OF ALFONSO CASTAŃEDA

CTA EN BANC CASE NO. 2492, SEPTEMBER 23, 2022

Petitioner CE Casecnan Water and Energy Company, Inc. filed a Petition for Review seeking nullification of the CTA 1st Division’s earlier Decision ruling that it has no jurisdiction over the subject matter of the case. The Petitioner mainly argued that the CTA 1st erred in ruling that it has no jurisdiction over the subject matter of the case. In ruling, Section 7(a)(3) of Republic Act (R.A.) No. 1125, as amended by R.A. No. 9282 or the Act expanding the jurisdiction of the CTA, provides that CTA has exclusive appellate jurisdiction to review by appeal the decisions, orders, or resolutions of the Regional Trial Courts in local tax cases originally decided or resolved by them in the exercise of their original or appellate jurisdiction. A case is considered a “local tax case” when the subject thereof involves taxes that are imposed by the Local Government Units. Here, although the original case heard in the lower court seems to pertain to the validity of an assessment issued by the Respondents Municipality of Alfonso Castańeda, Nueva Vizcaya, and its Mayor and Treasurer, a simple perusal of the aforesaid assessment itself disclosed that it does not involve a tax dispute. Accordingly, the Court En Banc shall no longer discuss the other issues raised by the Petitioner since the CTA has no jurisdiction over the subject matter of the case. Consequently, the Petition was DENIED.

SALE AT PUBLIC AUCTION OF ABANDONED RICE

NOTWITHSTANDING THE FAILURE TO ACKNOWLEDGE DULY SENT NOTICES & COMMUNICATIONS TO THE ACCREDITED IMPORTER’S REGISTERED ELECTRONIC MAIL ADDRESS, THE SAME SHALL BE DEEMED RECEIVED UPON SUCCESSFUL TRANSMITTAL THEREOF

SILVERICE TRADING CORPORATION VS. HON. REY LEONARDO GUERRERO, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF CUSTOMS, ATTY. ERASTUS SANDINO AUSTRIA, IN HIS OFFICIAL CAPACITY AS DISTRICT COLLECTOR, MANILA INTERNATIONAL CONTAINER PORT & THE BUREAU OF CUSTOMS

CTA CASE NO. 10088, SEPTEMBER 22, 2022

Petitioner Silverice Trading Corporation filed a Petition for Review impugning the Consolidated Order and Resolution of the Respondent Commissioner of Customs, which affirmed the Decree of Abandonment and approved the public auction of the Petitioner’s rice shipment. The Petitioner maintained that Section 1129 of the Customs Modernization and Tariff Act (CMTA) requires that notice to claim goods must be given to the owner, importer, or consignee thereof before Respondents may declare abandonment of said goods in favor of the government. In ruling, to set Section 1129 of the CMTA in motion, the following conditions must concur: (1) the assessed duties, taxes, and other charges were paid by the owner, importer, consignee, or interested parties on the imported goods; (2) due notice by the customs authorities to claim such goods must be served upon the owner, importer, consignee, or interested parties thereof; and (3) the owner, importer, consignee, or interested parties failed to claim said goods within 30 days from the payment of assessed duties, taxes, and other charges. These conditions were met. The contention of the Petitioner that the e-mail notice is invalid since it did not acknowledge the receipt thereof, nor did the Respondents present an affidavit of the party serving the same, was held to be specious. Hence, the Decree of Abandonment was issued in consonance with Section 1129 of CMTA, and the approval of the public auction of the rice shipments abandoned by the Petitioner was, as well, warranted. Consequently, the Petition was DENIED.

GENERAL PROFESSIONAL PARTNERSHIP IS EXEMPT FROM LOCAL BUSINESS TAX

NELIA A. BARLIS, IN HER CAPACITY AS THE OIC-CITY TREASURER OF THE CITY OF MAKATI & THE CITY OF MAKATI VS. GF & PARTNERS, ARCHITECTS, CO.

CTA AC NO. 247, SEPTEMBER 16, 2022

Petitioners OIC-City Treasurer of Makati and the City of Makati filed a Petition for Review assailing the Regional Trial Court (RTC)’s earlier Decision ordering the cancellation of the Notice of Assessment and declared Respondent GF & Partners, Architects, Co. not liable to Local Business Tax (LBT) for being a General Professional Partnership (GPP). Petitioners argued that the Respondent is not purely a GPP. Further, the Respondent was assessed based on Section 3A.02(g) of the Revised Makati Revenue Code not as a GPP but as a “Contractor” or as an owner or operator of a business establishment rendering or offering the services enumerated in the said section. In ruling, persons who are subject to Professional Tax are not included in the term “Contractor.” Hence, they are not subject to the LBT. The Court found that the partners of Respondent have been paying their Professional Tax with the Petitioners in their individual capacity. In absence of any convincing evidence that Respondent is engaged in any trade or business other than the general practice of architecture as a profession, the Court ruled that Respondent is not liable to pay the subject LBT. Consequently, the Petition was DENIED.

SURCHARGE IS MANDATORY & AUTOMATICALLY DUE, ONCE THE TAX IS NOT PAID ON TIME

SURCHARGE & INTEREST IMPOSED AS A RESULT OF LATE PAYMENT OF TAX DO NOT REQUIRE AN LOA NOR A PAN

IMPOSITION OF COMPROMISE PENALTIES WITHOUT THE CONFORMITY OF THE TAXPAYER IS CONSIDERED ILLEGAL & UNAUTHORIZED

COMMISSIONER OF INTERNAL REVENUE VS. TANN PHILIPPINES, INCORPORATED

CTA EN BANC CASE NO. 2415, SEPTEMBER 14, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the CTA 3rd Division’s earlier Decision and Resolution holding the Respondent Tann Philippines, Incorporated not liable for the surcharge, interest, and compromise penalty for the one-day late payment. Petitioner claimed that the collection of the Respondents’ deficiency surcharge, interest, and compromise penalty for late payment was anchored on Sections 205 and 207, in relation to Sections 248(A)(4) and 249(A) of the 1997 Tax Code, as amended. Hence, no Letter of Authority (LOA) is needed to collect the same. In ruling, the Court held that the Respondent is liable to pay the “one-day late payment” penalties. The imposition of late payment surcharge and interest is mandatory and automatic; hence, the Collection Notice is valid even if issued and served without a Letter of Authority (LOA) and a Preliminary Assessment Notice (PAN). Contrary to the Respondent’s argument that the surcharge sought to be imposed is excessive and unjustly assessed, the Court ruled otherwise, hence, cannot be abated. The issuance of the Warrant of Garnishment to enforce the collection of surcharge and interest is proper. However, the Respondent is not liable to pay the compromise penalty since compromise, by its nature, is mutual. Consequently, the Petition was PARTIALLY GRANTED. Having collected the whole amount, Petitioner was ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of the Respondent of the erroneously collected compromise penalty.

IT IS IMPROPER FOR THE CIR TO DISALLOW EXCESS INPUT VAT MERELY ON THE GROUND THAT THE AMOUNT OF DEFICIENCY WAS CARRIED OVER TO THE SUCCEEDING RETURNS

PAG-ASA STEEL WORKS, INC. VS. BUREAU OF INTERNAL REVENUE, COMMISSIONER OF INTERNAL REVENUE & ASSISTANT COMMISSIONER TERESITA M. ANGELES & COMMISSIONER OF INTERNAL REVENUE VS. PAG-ASA STEEL WORKS, INC.

CTA CASE NO. 2410, 2412, 9506, SEPTEMBER 13, 2022

Pag-Asa Steel Works, Inc. (PSWI) and Commissioner of Internal Revenue (CIR) filed their separate Petitions for Review assailing the CTA 1st Division’s earlier Decision and Resolution. Several issues were raised, such as the disallowance of sales discount for failure to substantiate, disallowance of zero-rated sales for failure to provide proof of client’s entitlements, imposition of Value-Added Tax (VAT) on hauling income in the absence of proof that the same is purely reimbursement of cost, imposition of VAT on the debit memo as well as offsetting arrangement on receivables and payables to establish arm’s length, and disallowance of input tax due to invoicing defects. CIR argued that the CTA 1st Division erred in computing PSWI’s deficiency VAT assessment. Accordingly, the input VAT that should be deducted from the output VAT amounted only to Php 492,711,991.05, instead of Php 726,205,217.28. Likewise, the excess input tax of Php 233,493,226.23 (as of June 30, 2014) had been forwarded to succeeding returns after the period of audit and thus, cannot be credited against PSWI's deficiency VAT assessment. In ruling, except for the issue of the imposition of VAT on hauling income in the absence of proof that the same is purely reimbursement of cost, the Court En Banc concurs with all the findings of the Court in Division in the Assailed Decision and Resolution and finds that there is no compelling reason to disturb those findings. The Court must uphold the correctness of the assessment since there is no evidence to support PSWI's claims regarding the hauling charges. Moreover, it is improper for the CIR to disallow PSWI's excess input tax merely on the ground that the amount of deficiency was carried over to succeeding returns after the period of audit. PSWI has a total allowable input tax per return amounting to Php 726,205,217.28, the Court in Division correctly credited the said amount against PSWI's deficiency VAT liability. To be sure, any tax benefit derived by PSWI from the carry-over of excess input tax redounds to that subsequent period and not to the period covered by the subject VAT assessment. Logically, the assessment should be made in that succeeding period. Hence, the CIR’s Petition lacks merit. Consequently, the consolidated Petitions were DENIED, and the Assailed Decision and Resolution were AFFIRMED.

AN ASSESSMENT IS NULL & VOID FOR LACK OF LOA

COMMISSIONER OF INTERNAL REVENUE VS. JED MARKETING, CORPORATION

CTA EN BANC CASE NO. 2377, SEPTEMBER 12, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the nullification of the CTA 2nd Division’s Decision and Resolution, cancelling the assessment of the Respondent Jed Marketing Corporation. Petitioner argued that Revenue Memorandum Order (RMO) No. 08-2006 states that only one Letter of Authority (LOA) should be issued to the same taxpayer, for the same tax type and period, and that RMO No. 69-2010 allows the issuance of a Memorandum of Assignment (MOA) for the continuation of audit or investigation of a case to another Revenue Officer (RO) due to resignation or retirement or transfer of the original RO. Further, the Respondent was duly afforded the opportunity to controvert the initial findings. On the other hand, the Respondent countered that the presumption of regularity of the assessments, in this case, is overturned by the evidence of the fact that the assessments are null and void based on the lack of LOA and violation of due process. In ruling, the Court cited Section 13 of the 1997 Tax Code, as amended, which provides that the authority of an RO to examine or recommend the assessment of any deficiency tax due must be exercised pursuant to an LOA. Considering that the examination and assessment were issued without the requisite LOA, the assessments issued against Respondent are null and void.

PETITION FOR REVIEW OF A DECISION OR RESOLUTION OF THE COURT IN DIVISION MUST BE PRECEDED BY THE FILING OF A TIMELY MOTION FOR RECONSIDERATION BEFORE THE CTA EN BANC

TO AVAIL OF THE PETITION FOR RELIEF FROM JUDGEMENT UNDER RULE 38 OF THE RULES OF COURT, THE PETITIONER'S RIGHT TO APPEAL MUST BE DEPRIVED THROUGH FRAUD, ACCIDENT, MISTAKE, OR EXCUSABLE NEGLIGENCE

NON-OBSERVANCE OF THE 15-DAY PERIOD TO PROTEST THE PAN VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS & RENDERS THE ASSESSMENT VOID

COMMISSIONER OF INTERNAL REVENUE VS. SCRIPT2010, INC.

CTA CASE NO. 9415, AUGUST 25, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 2nd Division’s earlier Decisions and Resolutions, cancelling the assessments of the Respondent Script2010, Inc. Petitioner argued that he complied with both procedural and substantive due process in the issuance of the subject assessment; that the Court in Division erred in denying the Motion for Reconsideration (MR), and that the Court in Division could have treated the MR as a Petition for Relief from Judgment under Rule 38 of the Rules of Court. On the other hand, Respondent countered that the Petition should be dismissed for being filed out of time; that the MR cannot be treated as a Petition for Relief from Judgment under Rule 38 of the Rules of Court, and that the Court did not err in cancelling and setting aside the Petitioner's assessment for violation of due process. In ruling, the Court first held that the Petitioner failed to observe the condition precedent as required under Section 1, Rule 8 of the Revised Rules of CTA when he failed to timely file an MR of the original decision. The Amended Decision had already become final and executory with respect to the Petitioner and rendered his appeal before the Court En Banc invalid. Moreover, Petitioner cannot avail himself of the Petition for Relief from Judgment under Rule 38 of the Rules of Court because he was not deprived of his right to appeal through fraud, accident, mistake, or excusable negligence. Further, the Petitioner issued the subject Formal Letter of Demand/Final Assessment Notice (FLD/FAN) on 8 January 2015, which was five (5) days earlier than the Respondent's last day to file a Reply to the Preliminary Assessment Notice (PAN). Clearly, the Petitioner violated the Respondent's right to due process. Thus, the assessment is null and void. Consequently, the Petition was DENIED for lack of merit.

FOR SALES OF ELECTRICITY & GENERATION SERVICES TO ENTITIES OTHER THAN THE NATIONAL POWER CORPORATION TO QUALIFY FOR VAT ZERO-RATING, THE VAT-REGISTERED TAXPAYER MUST SUBMIT ITS CERTIFICATE OF COMPLIANCE ISSUED BY THE ENERGY REGULATION COMMISSION

FIRST GEN HYDRO POWER CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2456, AUGUST 18, 2022

Petitioner First Gen Hydro Power Corporation filed a Petition for Review appealing the CTA 2nd Division’s earlier Decision and Resolution denying its Motion for Reconsideration and alternative prayer to allow the presentation of supplemental evidence. Petitioner contended that it proved, by preponderance of evidence, that its excess and unutilized input VAT attributable to zero-rated sales should be refunded. Likewise, it is erroneous for the Court in Division to not allow the Petitioner to present supplemental evidence. In ruling, Section 6 of the Republic Act (R.A.) No. 9136 or the “Electric Power Industry Reform Act of 2001” (EPIRA) requires the issuance of a Certificate of Compliance (COC) by the Energy Regulation Commission (ERC) before the generation company may commence its commercial operations. Thus, the Court found no reversible error in the Court in Division’s finding that Petitioner’s sales are disqualified for VAT zero-rating for the period covering January 1, 2016 to February 29, 2016, when it has yet to be issued a COC by the ERC. Said sales cannot qualify for VAT zero-rating without the submission of a COC as these sales were made to entities other than National Power Corporation. The Court also held that there is no compelling reason to allow the presentation of supplemental evidence. The Court agreed with the Court in Division’s pronouncement that Petitioner’s attempt to recall its witness to elaborate on matters presented in evidence or working papers contained in the BIR Records, and to offer additional documentary evidence to refute the findings thereto constitutes “forgotten evidence”. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.

A PRESUMPTIVE ASSESSMENT SHALL BE PREPARED BY THE CITY TREASURER IF THERE IS A FAILURE OF THE TAXPAYER TO PROVIDE PERTINENT DOCUMENTS

SMART COMMUNICATIONS, INC. VS. HON. JUDGE AUGUSTO JOSE Y. ARREZA AS ACTING PRESIDING JUDGE OF THE REGIONAL TRIAL COURT, BRANCH 133, MAKATI CITY, HON. JESUSA E. CUNETA, IN HER CAPACITY AS OIC CITY TREASURER OF MAKATI CITY & CITY OF MAKATI

CTA EN BANC CASE NO. 2386, AUGUST 15, 2022

Petitioner Smart Communications, Inc. filed a Petition for Review challenging the CTA 2nd Division’s earlier Decision and Resolution affirming the Resolution of the Makati Regional Trial Court (RTC-Makati), which granted the Respondent Makati City’s Motion for Production or Inspection of Documents. Petitioner argued that the documents for production or inspection are irrelevant and immaterial to the resolution of the case. On the other hand, the Respondent differed and countered that the requested documents are relevant and material. The issue in the case before RTC-Makati is whether Makati City Treasurer erred in assessing the Petitioner for deficiency franchise taxes based on its total nationwide revenue as appearing in its Income Tax Returns and not merely based on gross annual receipts within Makati City. Hence, the requested documents would probably aid the RTC-Makati in the determination of the payment of the correct local franchise taxes. In ruling, the Court held that the City Treasurer’s power to require the submission of documents is necessary to enforce Makati local tax laws, by the examination of books of accounts and pertinent records, to determine and ascertain the correct tax liability of any person. In view of the failure of the Petitioner to provide the requested documents, Makati City presumed Petitioner to be liable for deficiency franchise taxes based on available records. In reviewing the City Treasurer’s assessment, RTC-Makati must make its determination of the taxpayer’s tax liabilities and may require the production of documents to aid its resolution of the principal issue of the correct amount of deficiency local franchise taxes to be paid. Hence, no grave abuse of discretion was committed by RTC-Makati in granting the Motion for Production or Inspection of Documents. Consequently, the Petition was DENIED.

ELEMENTS OF TECHNICAL SMUGGLING

PEOPLE OF THE PHILIPPINES VS. IAN CHRISTOPHER MIGUEL Y BAYONETA, MARCELO N. GOMEZ

CTA CRIMINAL CASE NO. A-7, AUGUST 10, 2022

Accused-Appellant Ian Christopher Miguel y Bayoneta appealed the Joint Decision and Order convicting him of the crime of violation of Section 3601 of the Tariff and Customs Code of the Philippines (TCCP), as amended. The Accused argued that the trial court erred in convicting him of smuggling because Silver Glade Enterprises is not a registered importer of garlic and was not issued a Sanitary and Phytosanitary (SPS) Import Clearance. The Office of the Solicitor General (OSG) countered that the elements of smuggling were complied with in this case. In ruling, Section 3601 of the TCCP, punishes the crime of smuggling, which is committed by any person who: (1) fraudulently imports or brings into the Philippines any article contrary to law; (2) assists in so doing any article contrary to law; or (3) receives, conceals, buys, sells, or in any manner facilitate the transportation, concealment, or sale of such goods after importation, knowing the same to have been imported contrary to law. The elements of the 2nd type of smuggling are as follows: (1) there is an importation into the Philippines of any article; (2) contrary to law; (3) done fraudulently; and (4) the Accused assisted in the importation. A perusal of records revealed that the 3rd element of fraud was not satisfied. No willful or deliberate intent to defraud the Government of the correct taxes and duties to be paid can be inferred from the Accused. The only issue is the lack of SPS Import Clearance, which is borne of the Accused’s erroneous interpretation of an Administrative Order of the Department of Agriculture. Considering that the Prosecution was not able to establish that all the elements of the crime of smuggling were satisfied, the Appeal was GRANTED. Consequently, the Accused was ACQUITTED of the crime of Violation of Section 3601 of the TCCP.

A PARTY ADVERSELY AFFECTED BY A DECISION OR RULING OF THE COMMISSIONER OF CUSTOMS MAY FILE AN APPEAL WITH THE CTA WITHIN 30 DAYS AFTER THE RECEIPT OF SUCH DECISION OR RULING

MONACAT TRADING VS. COMMISSIONER OF CUSTOMS, BUREAU OF CUSTOMS

CTA CASE NO. 9851, AUGUST 4, 2022

Petitioner Monacat Trading, an accredited importer, filed a Petition for Review seeking to reverse the Respondent Commissioner of Customs’ Order, denying its Motion for Reconsideration. Petitioner argued that there was no probable cause for the issuance of the seizure and forfeiture order. Likewise, there was no undervaluation because it used the declared transaction values from the commercial invoices as the basis for the dutiable values of the subject vehicles. On the other hand, the Respondent countered that the Court lacks jurisdiction. In ruling, the Court held that it has no jurisdiction over the instant case. Section 11 of Republic Act No. 1125 (“An Act Creating the Court of Ta Appeals”), as amended, mandates that the period to file an appeal to the Court of Tax Appeals is 30 days from receipt of the assailed decision or ruling. Petitioner alleged in its Petition that it received the Respondent’s Order on May 3, 2018. It, thus, had 30 days from receipt thereof to file the Petition, or until June 2, 2018. In support of its claim on the timeliness of the appeal, Petitioner offered as evidence the Respondent’s Order (exhibit). However, the Court denied the admission of the exhibit as it was not duly identified by a competent witness. With the denial of admission of the exhibit, Petitioner was, thus, left with no evidence to prove that it indeed received the Respondent’s assailed Order on the date claimed. As Petitioner failed to clearly establish the timely filing of its Petition, it must perforce fail. Assuming the Court has jurisdiction, contrary to the Petitioner’s argument, the Court still finds that there exists probable cause for seizure and/or forfeiture of the subject vehicles for misdeclaration and undervaluation. Consequently, the Petition was DENIED.

THE AUTHORITY TO RELEASE IMPORTED GOODS IS NOT NECESSARY AT THE TIME OF THE SHIPMENTS’ ARRIVAL

THE IMPORTER’S SWORN STATEMENT SHALL BE SUBMITTED TOGETHER WITH THE IMPORT ENTRY/SINGLE ADMINISTRATIVE DOCUMENT FOR EACH SHIPMENT FOR VALIDATION & CLEARANCE PURPOSES

A PERMIT TO OPERATE IS A CONDITION SINE QUA NON BEFORE ENGAGING IN BUSINESS AS AN IMPORTER OF AUTOMOBILES

GAMMA GRAY MARKETING VS. BUREAU OF CUSTOMS, REPRESENTED BY ITS COMMISSIONER, ISIDRO S. LAPENA

CTA CASE NO. 9855, JULY 27, 2022

Petitioner Gamma Gray Marketing filed a Petition for Review seeking to cancel the Respondent Bureau of Customs Commissioner’s earlier Decision. Petitioner contended that the Importer’s Sworn Statement (ISS) and the Authority to Release Imported Goods (ATRIG) are not required prior to importation, but only necessary before the release of the subject motor vehicles from customs custody. On the other hand, the Respondent countered that it is legally impossible for the Petitioner to submit the required ISS and the ATRIG covering the subject imported motor vehicles because it lacked the necessary BIR Permit to Operate as an Importer of Automobiles. Also, given that the Petitioner grossly undervalued its importations, the Respondent insisted that the subject motor vehicles were illegally imported and validly subjected to seizure and forfeiture by the government. In ruling, the Court held that the ATRIG is not necessary upon the arrival of the shipments as long as the custody thereof is still with the Respondent. However, this is not the case for the ISS because it forms an integral part of the import/shipping documents submitted at the port of entry. The purpose of such ISS requirements is to obtain an accurate valuation of the imported goods and to ensure that all duties, taxes, and other charges due on the imported goods are properly collected. Moreover, before engaging in the business of importing automobiles, an importer must secure a BIR Permit to Operate, and such permit is a pre-requisite for the issuance of the ATRIG. Taking into consideration the discrepancies discovered during value verification that evince intent to under-declare the subject shipments’ value, plus the fact that the Petitioner imported the subject motor vehicles without securing the requisite BIR Permit to Operate as Importer of Automobiles, the Court is inclined to rule that there exists probable cause for the issuance of Warrants of Seizure and Detention against the subject imported motor vehicles. Consequently, the Petition was DENIED.

AN ORDINANCE INCOMPATIBLE WITH ANY EXISTING LAW OR STATUTE IS ULTRA VIRES; HENCE, NULL & VOID

SECTION 311 OF THE CALOOCAN UPDATED REVENUE CODE IS INVALID DUE TO INCOMPATIBILITY WITH THE LOCAL GOVERNMENT CODE (LGC)

COMMON CARRIERS SHALL BE EXEMPT FROM LOCAL BUSINESS TAXES UNDER SECTION 113 OF THE LGC

CITY OF CALOOCAN & HON. ANALIZA E. MENDIOLA, IN HER CAPACITY AS THE CITY TREASURER OF CALOOCAN CITY VS. LIGHT RAIL MANILA CORPORATION

CTA EN BANC NO. 2446, JUNE 30, 2022

Petitioner City of Caloocan filed a Petition for Review seeking reversal of the Court in Division’s earlier Decision and Resolution ordering the Petitioner to desist from further assessing the Respondent Light Rail Manila Corporation for local business taxes on its gross receipts. Petitioner argued that the Petition for Prohibition and Mandamus was improper since Section 195 of the Local Government Code (LGC) provides the Respondent a plain, adequate, and speedy remedy to challenge the assessment made by the City Treasurer's Office. Likewise, the Respondent is liable for the local business tax under the provisions of Section 311 of the Caloocan Updated Revenue Code. In ruling, the Court held that the granting of the Petition for Issuance of a Writ of Prohibition is proper as the record shows that, pursuant to Sec. 2, Rule 65 of the Rules of Court, all the elements for the issuance of a Writ of Prohibition are present. Furthermore, Section 311 of the Caloocan Updated Revenue Code should be struck down as ultra vires as it is contrary to the provisions of the Local Government Code (LGC) based on two (2) grounds: (1) Section 195 of the LGC does not require payment of the assessed business tax before a taxpayer can file a protest; and (2) it shortens the sixty (60)-day period to thirty (30) days within which to file a protest. On the propriety of the assessment, the Respondent has satisfied all the requirements for it to be considered a common carrier according to Article 1732 of the New Civil Code; thus, it is exempt from paying the local business taxes under Section 113 (j) of the LGC. Hence, the Petition for Review was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED. Consequently, the assessments were CANCELLED and SET ASIDE, and the Petitioner was ENJOINED and PROHIBITED from collecting the said amount from the Respondent.

TO ATTRIBUTE TO THE ACCUSED A "WILLFUL FAILURE TO PAY" THE TAX, IT MUST BE SHOWN THAT SUCH FAILURE OR OMISSION BY THE ACCUSED WAS DONE KNOWINGLY, INTENTIONALLY & WITH THE SPECIFIC INTENT NOT TO PAY THE TAX

THE PROSECUTION HAS THE BURDEN TO PROVE THAT ALL THE ELEMENTS OF THE OFFENSE ARE PRESENT & THAT THE ACCUSED COMMITTED THE SAID OFFENSE

PEOPLE OF THE PHILIPPINES VS. ROBIGIE CORPORATION & GRACE G. SUCKSUPHAN

CTA EN BANC CRIMINAL CASE NO. 084, JUNE 30, 2022

Petitioner People of the Philippines filed a Petition for Review seeking nullification of the CTA 1st Division’s earlier Decision acquitting the Respondents Robigie Corporation and Grace G. Sucksuphan of the offense charged. Petitioner claimed that the Accused willfully and unlawfully failed and refused and neglected to pay the deficiency internal revenue tax liabilities despite repeated demands. On the other hand, Respondents challenged the service of the Letter of Authority (LOA) and denied receipt of the assessment notices. In ruling, the Court En Banc agreed with the conclusion reached by the 1st Division that Sucksuphan’s failure to pay Robiegie’s deficiency tax liabilities was not willful since the Petitioner failed to prove Robigie’s receipt of the LOA and the assessment notices. Here, the Respondents denied receipt of the LOA and the assessment notices. Such denial, therefore, shifts the burden to the Petitioner to prove that the LOA and the assessment notices were duly delivered and received by Robigie. Considering that the Petitioner was not able to prove beyond reasonable doubt that Sucksuphan was made fully aware of Robigie’s obligation to pay the deficiency taxes and when to pay the same, it could not be established that her failure to pay the tax was willful on her part. Consequently, the Petition was DENIED.

ABSENCE OF AN LOA ON REASSIGNMENT RENDERS THE ASSESSMENT NULL & VOID

NON-OBSERVANCE OF THE 15-DAY PERIOD TO PROTEST THE PAN VIOLATES THE TAXPAYER’S RIGHT TO DUE PROCESS & RENDERS THE ASSESSMENT VOID

COMMISSIONER OF INTERNAL REVENUE VS. GLOBAL FRESH PRODUCTS INC.

CTA EN BANC CASE NO. 2392, JUNE 30, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 3rd Division’s earlier Decision, canceling the assessment issued to the Respondent Global Fresh Products, Inc. Petitioner argued that the Respondent was afforded due process because it could file its protest against the assessment notices. Likewise, the issuance of a Memorandum of Assignment (MOA) authorizing the new Revenue Officer (RO) to continue the audit and assessment of a previous RO authorized under a valid LOA will not subvert any right of the Respondent. Thus, it does not violate the due process of law. On the other hand, the Respondent reiterated that the absence of a validly issued LOA to conduct the audit renders the present assessment void. In ruling, the Court has been consistent that an RO tasked to conduct the books of taxpayers must be authorized by an LOA and requires the issuance of a new LOA in case of any reassignment or transfer of cases to another RO. In this case, a mere MOA signed by a Revenue District Officer (RDO) does not and cannot confer authority to a RO to continue the audit. Hence, the subject MOA signed by the RDO is neither tantamount to an LOA nor a supplement thereto. Considering the absence of a new LOA, the assessment for deficiency taxes is inescapably void. Furthermore, the lapse of the 15-day for the Respondent to file its protest on the Preliminary Assessment Notice (PAN) unmistakably shows the Petitioner's non-observance of the mandatory 15-day period given to the Respondent. This essentially deprived the Respondent of the opportunity to be heard on the PAN, thus violating the taxpayer's right to due process. Consequently, the subject Formal Assessment Notice is void and bears no valid fruit. Therefore, the Petition was DENIED for lack of merit.

THE DECISION ON THE COMMISSIONER OF CUSTOMS, IF NOT TIMELY PROTESTED & APPEALED BY THE IMPORTER TO THE COMMISSIONER OF CUSTOMS, BECOMES FINAL NOT ONLY AS TO THE IMPORTER BUT AGAINST THE GOVERNMENT AS WELL

NOTICE TO A REGULAR IMPORTER TO LODGE OR FILE, PAY, CLAIM, OR MARK MAY BE DONE VIA ELECTRONIC NOTICE SENT TO THE REGISTERED EMAIL ADDRESS OF CONCERNED ACCREDITED IMPORTERS OR EXPORTERS

VICTOR R. DEL ROSARIO RICE MILL CORPORATION VS. HON. REY LEONARDO B. GUERRERO, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF CUSTOMS, ATTY. ERASTUS SANDINO AUSTRIA, IN HIS OFFICIAL CAPACITY AS DISTRICT COLLECTOR, MANILA INTERNATIONAL CONTAINER PORT & THE BUREAU OF CUSTOMS

CTA CASE NO. 10082, JUNE 28, 2022

Petitioner Victor R. Del Rosario Rice Mill Corporation filed a Petition for Review seeking reversal of the Consolidated Order and Resolution of Respondents Commissioner of Customs, District Collector, Manila International Container Port, and the Bureau of Customs. Petitioner contended that since the assailed Consolidated Order was already the Decision of the Respondent Customs Commissioner on the Petitioner’s Letter-Appeals, there is no need to appeal the denial again before him, and the proper recourse is for the Petitioner to file a Petition for Review. On the other hand, Respondents countered that the assailed Consolidated Order has become final and unappealable because the Petitioner failed to appeal the same to the Respondent Customs Commissioner, within 15 days from receipt thereof pursuant to Section 114 of the Customs Modernization and Tariff Act (CMTA). In ruling, the Court agreed with the Respondents. Petitioner should have filed an appeal before the Respondent Customs Commissioner on or before 17 May 2019, which is 15 days from the Petitioner’s receipt of the Consolidated Order on 02 May 2019. Contrary also to the Petitioner’s allegation that it was denied due process of law since there is no proof that it received Respondent District Collector’s “Notice to Pay” sent via email plus the fact that the Decrees of Abandonment were issued two (2) days thereafter, the Court agreed with Respondents’ assertions that: (1) Petitioner was duly notified of its tax deficiencies via electronic service, deemed completed upon successful sending of the email notice to its registered email address and received it even without an acknowledgment receipt; and (2) since the Petitioner is a regular rice importer, it falls under the category of a knowledgeable importer, who is presumed to know the arrival of its shipments, and thus, is expected to pay the assessed duties, taxes, and other charges on its rice import shipments, within 15 calendar days from receipt of the Notice of Final Assessment. Consequently, the Petition was DISMISSED for lack of jurisdiction.

PETITION FOR PROHIBITION IS NOT AN ADEQUATE REMEDY WHEN ADMINISTRATIVE REMEDIES ARE OUTLINED CLEARLY BY LAW

NATIONAL FOOD AUTHORITY VS. PROVINCE OF NUEVA VIZCAYA, OFFICE OF THE PROVINCIAL TREASURER & THE PROVINCIAL ASSESSOR’S OFFICE, PROVINCE OF NUEVA VIZCAYA

CTA EN BANC CASE NO. 2361, JUNE 27, 2022

Petitioner National Food Authority (NFA) filed a Petition for Review with Motion for Suspension of Collection of Tax, against Respondents Province of Nueva Vizcaya, Office of the Provincial Treasurer, and the Provincial Assessor’s Office, seeking reversal of the CTA 2nd Division’s earlier Decision and Resolution. Petitioner assailed the conclusion of the Court 2nd Division that it has no jurisdiction to entertain the Petition for its alleged failure to comply with the procedural requirements under the Local Government Code (LGC). In ruling, the Court En Banc agreed with the Court in Division that the Petition for Prohibition is not the proper remedy against the Real Property Tax (RPT) assessments issued by the Provincial Treasurer of Nueva Vizcaya. Central to the remedy of Prohibition is the absence of any appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. The antecedent facts of the case showed that Petitioner has an available plain and adequate administrative remedy against an RPT assessment found in the provisions of the Local Government Code, beginning with the filing of the protest. The Petitioner should have exhausted the administrative remedies. Petitioner’s failure to file the necessary protest and to pay the tax under protest made the subject RPT assessments final, executory, and demandable. Consequently, the Petition was DENIED for lack of merit and jurisdiction.

FOR AN ASSESSMENT TO BE VALID, THERE MUST BE PROOF OF ACTUAL RECEIPT OF THE ASSESSMENT NOTICE

COMMISSIONER OF INTERNAL REVENUE VS. SQUARE ONE REALTY CORPORATION

CTA EN BANC CASE NO. 2396, JUNE 23, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 3rd Division’s earlier Decisions and Resolutions canceling the assessments issued to the Respondent Square One Realty Corporation. Petitioner argued that the assessments have become final and unappealable due to the Respondent's failure to file a valid protest to the Formal Letter of Demand/Formal Assessment Notice (FLD/FAN). Petitioner insists that the FLD/FAN were duly issued and served to the Respondent’s registered mail at its registered address, as supported by the corresponding Registry Receipt. In ruling, the FLD/FAN was not proven to have been received by the Respondent. For an assessment to be valid, it is incumbent upon the BIR to prove the taxpayer’s actual receipt of the assessment notice. Hence, there being no valid assessment issued, the collection efforts of the Petitioner, such as the issuance of the Preliminary Collection Letter as well as the Final Notice Before Seizure, are likewise VOID.

THE RECKONING OF THE 180-DAY PERIOD FOR THE CIR TO ACT ON THE PROTEST SHOULD BE ON THE EXTENDED PERIOD TO FILE SUPPORTING DOCUMENTS, SHOULD THERE BE ANY

CIR OR HIS DULY AUTHORIZED REPRESENTATIVE IS DUTY-BOUND TO WAIT FOR THE EXPIRATION OF 15 DAYS FROM THE DATE OF RECEIPT OF THE PAN BEFORE ISSUING THE FLD & ASSESSMENT NOTICE

THE MANDATORY 15-DAY PERIOD IS RECKONED FROM THE DATE OF ACTUAL RECEIPT OF THE PAN & NOT THE DATE OF ISSUANCE OF THE PAN

COMMISSIONER OF INTERNAL REVENUE VS. SOLUTIONS USING RENEWABLE ENERGY, INC.

CTA EN BANC CASE NO. 2387, JUNE 23, 2022

Petitioner Commissioner of Internal Revenue (CIR) seeking to reverse the CTA 1st Division’s Decision and Resolution canceling the assessment issued to the Respondent Solutions Using Renewable Energy, Inc. Petitioner maintained that the earlier Petition was not timely filed before the Court in Division. Likewise, the reckoning period of the start of the 180-day period for the CIR to decide cannot be made to depend on the Respondent’s date of submission of documents when the same is outside the 60-day period provided by law. Further, the issuance of the assessment notices did not violate the right of the Respondent to due process, as the assessment notices were duly served and received. In ruling, the Court discussed that in cases of a request for reinvestigation, the taxpayer is given 60 days from the filing of a request for reinvestigation to submit the relevant supporting documents in support of the protest. Upon submission of relevant supporting documents, the period of action on the part of the CIR or his duly authorized representative is 180 days. In case of inaction, the taxpayer may either appeal to the Court in Division within 30 days after the expiration of the 180-day period or await the final decision of the CIR’s duly authorized representative on the disputed assessment. Here, Respondent was able to file the relevant supporting documents timely. However, Respondent received a letter from the Revenue Officer (RO) stating that the 60-day period to submit relevant supporting documents had lapsed and gave Respondent an additional period of 15 days to file the documents. On this score, the Court agreed that the reckoning of the 180-day period for the CIR to act on the protest should be on the extended period given by the RO. It cannot be ignored that it was because of the Letter issued by RO which prompted Respondent to re-submit its relevant supporting documents despite the fact that it had already submitted the same earlier. On the due process requirements, a taxpayer has 15 days from receipt of the Preliminary Assessment Notice (PAN) to file a protest with the BIR. If, during the said period, the taxpayer fails to file a protest to the PAN, it is only then that the CIR, or his duly authorized representative, can consider the taxpayer in default and correspondingly cause the issuance of a Formal Letter of Demand (FLD) and Assessment Notice. Here, the PAN was received by Respondent on January 7, 2014, and the FLDs and Assessments Notices were prematurely issued and received on January 13, 2014. The CIR, in failing to await the lapse of the 15-day period, disregarded the mandatory due process requirement, thereby denying Respondent of its right to due process. Consequently, the Petition was DENIED.

AN LOA MUST BE SERVED WITHIN THIRTY (3O) DAYS FROM THE TIME IT IS ISSUED; OTHERWISE, IT BECOMES NULL & VOID UNLESS REVALIDATED

THERE CAN BE NO WILLFUL FAILURE TO PAY TAX IF THERE IS NO REQUIREMENT TO PAY THE SAME AT ALL

THE PROSECUTION MUST RELY ON THE STRENGTH OF ITS EVIDENCE & NOT ANCHOR ITS SUCCESS UPON THE WEAKNESS OF THE EVIDENCE OF THE ACCUSED

PEOPLE OF THE PHILIPPINES VS. IRA GENERAL SECURITY SERVICES, INC. & TRANQUILINO R. AGLUBUB, JR.

CTA CRIMINAL CASE NOS. O-776-778, JUNE 22, 2022

Accused Ira General Security Services, Inc. (IGSSI) and Tranquilino Aglubub, Jr. (Aglubub) are charged with willful failure to pay tax under Section 255 of the Tax Code, as amended. Accused Aglubub maintained that the Prosecution failed to prove his guilt beyond reasonable doubt. He argued that the subject assessments are void since the Letter of Authority (LOA) was sent to the taxpayer beyond the 30-day reglementary period, and the notices from the BIR were received by individuals not duly authorized by Accused IGSSI to receive the same. In ruling, the Court found that the assessments were based on a valid LOA since the manual LOA issued on 24 June 2010 was served on 21 July 2010, or within the 30-day reglementary period. However, the Court agreed with the Accused Aglubub that the assessments were all received by individuals not duly authorized by Accused IGSSI. Since the assessment notices were not received by Accused IGSSI’s authorized representative, the same cannot be considered as having been validly issued, and therefore, considered void. In addition, the assessments are void for lack of authority of the Group Supervisor who participated in the audit and recommended the issuance of a Preliminary Assessment Notice. Since the subject assessments are void, accused IGSSI cannot be said to have failed to pay the deficiency taxes, much more to have done so willfully. Consequently, the Accused IGSSI and Aglubub were ACQUITTED of the offenses charged for the failure of the Prosecution to prove their guilt beyond reasonable doubt.

WHILE EVERY CITIZEN MUST HONESTLY PAY THE RIGHT TAXES, THE GOVERNMENT HAS A COROLLARY DUTY TO JUSTLY RETURN WHAT HAS BEEN ERRONEOUSLY & EXCESSIVELY GIVEN TO IT

COMMISSIONER OF INTERNAL REVENUE VS. KUWAIT AIRWAYS CORPORATION

CTA EN BANC CASE NO. 2525, JUNE 16, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the earlier Decision and Resolution of the CTA 2nd Division, granting the issuance of a Tax Credit Certificate (TCC) in favor of the Respondent Kuwait Airways Corporation. Petitioner claimed that in an action for a refund, the burden of proof is on the taxpayer to establish its right thereto. Respondent countered that it has proven with substantial and concrete documentary and testimonial evidence its entitlement to the issuance of TCC. Respondent also averred that, as confirmed in a BIR Ruling, it is entitled to avail of the preferential income tax rate of 1 ½% on its Gross Philippine Billings earned pursuant to the Philippines-Kuwait tax treaty. In ruling, records revealed that the Respondent had offered the testimonies of its witnesses, as well as exhibits, to prove that it is entitled to the issuance of TCC. The Court noted that the Petitioner failed to act on the Respondent’s administrative claim and failed to present any evidence during the trial before the Court in Division to support his assertion that the Respondent is not entitled to its claim for a TCC. Based on the evidence on record and the oft-repeated arguments of the parties, the Court found that the Respondent was able to establish its entitlement to the claimed TCC. Thus, the issuance of a TCC in its favor is proper. Consequently, the Petition was DENIED.

THE COLLECTION OF DEFICIENCY TAX CANNOT BE MADE IN A CRIMINAL CASE WITHOUT FORMAL ASSESSMENT

PEOPLE OF THE PHILIPPINES V. REBECCA S. TIOTANGCO

CTA EN BANC CRIMINAL CASE NO. 086, JUNE 9, 2022

Petitioner People of the Philippines filed a Petition for Review seeking partial reconsideration of the earlier Decision and Resolution of the CTA 1st Division finding Respondent Rebecca Tiotangco guilty beyond reasonable doubt on two (2) counts of violation of Section 255 of the Tax Code, as amended, and ordered to pay a fine. Petitioner argued that the CTA 1st Division erred in holding that a tax deficiency cannot be collected in a criminal proceeding in court without an assessment. In ruling, while the law explicitly mandates the inclusion of civil liability for the payment of taxes in judgment in the criminal case, it is also clear that there must be a final determination of such civil liability by the Commissioner of Internal Revenue (CIR) before they may be included in the judgment. This determination of civil liability for the payment of internal revenue taxes by the CIR refers to a formal assessment. Petitioner was mistaken in assuming that the civil liability for the payment of taxes and penalties is already deemed instituted upon filing criminal action for tax evasion. The Court held untenable the contention of the Petitioner that Respondent received the assessment notices that were duly mailed to her. Petitioner was only able to prove that the assessment notices were mailed, as evidenced by registry receipts. There was no proof that these notices were actually received by Respondent. Consequently, the Petition was DENIED.

TAXPAYER IS DUTY-BOUND TO ELEVATE A "DENIAL DUE TO INACTION" TO A COURT OF COMPETENT JURISDICTION

SERVICE RESOURCES, INC. VS. PASIG CITY, REPRESENTED BY HON. ROBERT EUSEBIO, CITY MAYOR & MARITA A. CALEJA, OIC-CITY TREASURER,

CTA AC NO. 243, JUNE 3, 2022

Petitioner Resources, Inc. filed a Petition for Review seeking to annul the Regional Trial Court (RTC)’s earlier Decision as well as the 1st and the 2nd Notices of Assessment, both issued by Respondent Pasig City Treasurer. Petitioner mainly argued that the 2nd Notice effectively denied its protest (1st letter), and its 2nd letter cannot be considered as another protest since it relates to the same taxable years (as the 1st letter), nor would it have the effect of resetting the period provided under Local Government Code, that is, Respondent City Treasurer would have another 60 days to decide the 2nd letter. Likewise, assessments were arbitrarily issued without examining its books of accounts and other pertinent records. Further, Petitioner averred that the assessments against it violated the prohibition against double taxation since they have been based on gross revenues and not gross receipts. In ruling, the taxpayer has 30 days, either from the receipt of the denial of its protest or lapse of the 60-day period, within which to appeal with the court of competent jurisdiction. Otherwise, the assessment becomes conclusive and unappealable. With respect to the 1st Notice, the 30-day period for Petitioner to file an appeal with the Court lapsed on May 30, 2012, without being filed; hence, the 1st Notice became conclusive and unappealable. On this score alone, it becomes unnecessary to delve into the supposed timeliness of the filing of the prior Petition, considering that the 1st Notice had already attained finality. As a result, the issuance of the 2nd Notice on June 1, 2012, increasing the amount of the Local Business Tax assessments, is null and void as the 1st Notice can no longer be amended, modified, or set aside by the Respondent Treasurer or this Court. Considering that the 1st Notice already attained finality, the Court found no need to tackle the other arguments raised by Petitioner. Consequently, the Petition was DENIED for lack of merit.

IF THE TAXPAYER DENIES HAVING RECEIVED AN ASSESSMENT FROM THE BIR, IT THEN BECOMES INCUMBENT UPON THE LATTER TO PROVE BY COMPETENT EVIDENCE THAT SUCH NOTICE WAS INDEED RECEIVED BY THE ADDRESSEE

ONLY THE TAXPAYER OR HIS AUTHORIZED REPRESENTATIVE MAY RECEIVE THE ASSESSMENT FROM THE BIR & MERE PRESENTATION OF THE REGISTRY RECEIPTS IS INSUFFICIENT

PEOPLE OF THE PHILIPPINES VS. SHIRLEY YANG (PRESIDENT), RAQUEL VILLARANTE (CORPORATE SECRETARY) & ZALDY G. TRINIDAD (ACCOUNTING MANAGER), (CARDONA APPAREL, INC.)

CTA CRIMINAL CASE NOS. O-202, O-203, O-204 & O-205, JUNE 1, 2022

Accused Shirley Yang (President of Cardona Apparel, Inc.), Raquel Villarante (Corporate Secretary), and Zaldy Trinidad (Accounting Manager) were charged for violations of Section 255 of the 1997 Tax Code, as amended. The Prosecution asserted that despite repeated demands and notices, Cardona and/or Accused failed to pay Cardona’s deficiency taxes, knowing fully well that the tax assessment has already become final, due, and demandable. The Accused countered that there was no proper service of the Preliminary Assessment Notice (PAN). In ruling, the Prosecution must establish and prove that the requirements in the issuance of the assessment notices were complied with. To prove the fact of mailing of the PAN, the Prosecution presented a Registry Return Receipt. However, only the back side of the Registry Return Receipt was presented and offered in evidence, which only contains the name of the addressee. The Memorandum of the Prosecution likewise provides that the PAN was issued and was sent to the registered office address of Cardona, but the same was returned unserved as the company was alleged to have moved out. However, the Revenue Officer testified that the PAN was mailed to the office of the Accused Raquel Villarante. In ruling, the Court held that there was no valid service of the PAN. It may be the duty of the taxpayer to notify the BIR of the change of its registered business address or closure of business. However, its failure to do the same does not necessarily negate the BIR’s strict obligation to inform the taxpayer in writing of the facts and the law on which the assessment is made. Thus, for the failure of the BIR to inform the taxpayer, the Court held that the subject assessment is VOID.

IN CASE OF NON-PAYMENT OF THE FRANCHISE TAX BY PAGCOR, NO TAX EXEMPTION PRIVILEGE IS CONFERRED ON PAGCOR & CONSEQUENTLY, IT FOLLOWS THAT PAGCOR'S CONTRACTEES & LICENSEES SHALL NEITHER BE ENTITLED TO ANY TAX EXEMPTION

PAYMENT OF LICENSE FEES IS SEPARATE & DISTINCT FROM THE PAYMENT OF FRANCHISE TAXES

CONTRACTEES OR LICENSEES MUST SHOW PAGCOR'S PAYMENT OF THE 5% FRANCHISE TAX TO BE ENTITLED TO TAX INCENTIVE

PREMIUM LEISURE & AMUSEMENT, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10060, MAY 26, 2022

Petitioner Premium Leisure and Amusement, Inc. filed a Petition for Review praying that judgment be rendered ordering the Respondent Commissioner of Internal Revenue (CIR) to refund or issue in favor of the Petitioner a Tax Credit Certificate (TCC) for the erroneously paid income tax. Petitioner argued that Philippine Amusement and Gaming Corporation (PAGCOR)’s exemption from income tax on gaming revenues extends to its licensees and contractees. On the other hand, Respondent countered that the Petitioner had not proven its entitlement to the refund or issuance of a TCC. In ruling, the Court ruled that to be entitled to the incentives of PAGCOR, particularly the exemption from corporate income tax, Petitioner must primarily show that it is a contractee and licensee of PAGCOR and that the pertinent 5% Franchise Tax was paid. Here, Petitioner was able to show that it is a contractee and licensee of PAGCOR. On the 2nd requisite, the records revealed that while the Petitioner undoubtedly demonstrated that their Consortium remitted License Fees to PAGCOR in relation to the gaming revenues, it miserably failed to prove PAGCOR’s payment of the Franchise Tax due to the National Government. The remittance of License Fees by the Consortium to PAGCOR cannot be equated with the payment of Franchise Tax by PAGCOR to the National Government because the License Fees are paid by the Consortium as a consideration for the grant of the Gaming License by PAGCOR. There being no proof that the corresponding Franchise Tax was paid by PAGCOR, Petitioner’s tax exemption was not established. Consequently, the Petition was DISMISSED for lack of merit.

BIR HAS FIVE (5) YEARS TO COLLECT THE ASSESSMENT IN THE ABSENCE OF FRAUD

COMMISSIONER OF INTERNAL REVENUE VS. SUNNYPHIL INCORPORATED

CTA EN BANC CASE NO. 2232, MAY 24, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the Court of Tax Appeals (CTA) 3rd Division’s earlier Decision and Resolution granting refund of erroneously paid tax in favor of the Respondent Sunnyphil Incorporated. Petitioner argued that the CTA 3rd Division erred in granting the Respondent’s claim for a refund. He contended that despite the lack of a Letter of Authority authorizing the Revenue Officer (RO) who assessed the Respondent, the issuance of a Memorandum to such effect was enough to clothe such RO with authority. However, before the Court En Banc proceeded in the resolution of the sole issue raised, the Court noted that the Respondent’s prior Petition for Review filed with the Court in Division was mainly grounded on the Petitioner’s supposed prescribed action of collection against it. It did not raise any issue on the invalidity of the Petitioner’s assessment but sought a refund of the taxes paid under protest on such grounds. In BPI case, the Supreme Court applied a 3-year prescriptive period only because the taxes involved were assessed in 1989 or prior to the 1977 Tax Code's amendment. In the present case, Respondent was assessed for alleged deficiency taxes in 2010, thus, the 5-year period would now apply. The records showed that the Respondent received the Final Assessment Notice on January 14, 2010. From then on, the Petitioner would have five (5) years or until January 14, 2015, to collect the Respondent’s tax deficiencies. However, Petitioner took no action to collect within the said 5-year period. Respondent received the Final Decision on Disputed Assessment, Preliminary Collection Letter, and Final Notice Before Seizure only on 13 May 2016, 03 May 2016, and 16 May 2016, respectively, or more than a year after the end of the 5-year prescribed period. Even if the Court were to uphold the assessment, as Petitioner argued, or deem that administrative res judicata should preclude an inquiry into the validity of the assessment, still, a refund is in order as Petitioner’s right to collect had indubitably prescribed. Consequently, the Petition was DENIED.

MAP & SAWT ARE NOT REQUIRED TO SUBSTANTIATE THE CLAIM FOR CWT REFUND

CWTs, EVEN WITHOUT THE TESTIMONY OF THE WITHHOLDING AGENT WHO ISSUED, ARE ADMISSIBLE IN EVIDENCE

COMMISSIONER OF INTERNAL REVENUE VS. SONOMA SERVICES, INC.

CTA EN BANC NO. 2467, MAY 24, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 3rd Division’s earlier Decision and Resolution granting the refund of the excess and unutilized Creditable Withholding Tax (CWT) in favor of the Respondent Sonoma Services, Inc. Petitioner argued that the Respondent’s failure to present the documentary requirements prescribed under Revenue Regulations (RR) No. 2-98, as amended by RR No. 2-2006, and the failure to submit the CWTs are inadmissible in evidence for being hearsay, and therefore, sufficient reasons to deny refund claims. In ruling, the Court held that RR No. 2-2006 only imposes a penalty of a fine for non-submission of the Summary of Alphabetical List of Withholding Taxes (SAWT) and Monthly Alphabetical List of Payees (MAP) but not the outright denial of a claim for a tax refund; hence, the Petitioner has no legal basis for insisting that the alleged non-submission of SAWT and MAP should result in the denial of the Respondent’s claim for a refund. Furthermore, the CWTs are sufficient to prove the fact of withholding, and even without the testimony of the withholding agent or payor who issued the CWTS, the same are admissible in evidence. Thus, the Petition was DENIED, and the earlier decision and resolution were AFFIRMED.

LICENSEE OF PAGCOR IS VAT EXEMPT & NOT VAT ZERO-RATED, THUS, NOT SUBJECT TO INPUT VAT REFUND AFTER 5% FRANCHISE TAX PAYMENT

VAT ZERO-RATING IS DIFFERENT FROM VAT EXEMPTION

ONLY THOSE ENGAGED IN ZERO-RATED OR EFFECTIVELY ZERO-RATED SALES CAN APPLY FOR INPUT VAT REFUND

MELCO RESORTS LEISURE (PHP) CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NOS. 9582, 9667 & 9724, MAY 23, 2022

Petitioner Melco Resorts Leisure (Php) Corporation filed three (3) Petitions for Review seeking a refund or issuance of Tax Credit Certificate (TCC) on its unutilized input Value-Added Tax (VAT) arising from zero-rated sales. Petitioner anchored its claim pursuant to Presidential Decree No. 1869 or the Philippine Amusement and Gaming Corporation (PAGCOR) Charter, which grants PAGCOR and its licensees an exemption from both direct and indirect taxes, such as VAT. On the other hand, Respondent Commissioner of Internal Revenue (CIR) countered that only those VAT-registered persons whose sales of goods, properties, or services are zero-rated or effectively zero rated may apply for the issuance of TCC or refund of input tax attributable to such sales. In ruling, the Court held that the Petitioner is VAT exempt. Before PAGCOR or any of its licensees can enjoy tax exemption, the 5% Franchise Tax must first be paid. Records revealed that Petitioner had paid the 5% Franchise Tax. Consequently, it is VAT-exempt. The Tax Code clearly provides that only VAT-registered persons whose sales are zero-rated or effectively zero-rated may apply for the input VAT refund. While it has been shown that the Petitioner is exempt from VAT because it is PAGCOR licenses, the same does not automatically mean that its sales are subject to VAT zero-rating. Being VAT exempt means that no VAT, either the 12% or the 0% rate, is imposed at all for the subject sales transaction. On the other hand, engaging in VAT zero-rated transactions means that a sale is subjected to the 0% VAT rate. Here, the records were bereft of any showing that Petitioner is engaged in zero-rated or effectively zero-rated transactions. As Petitioner is simply VAT exempt and has not shown to be engaged in any of the zero-rated or effectively zero-rated transactions, it cannot claim for refund of its input VAT. Consequently, the Petitions were DENIED.

DOE CERTIFICATE OF REGISTRATION, REGISTRATION WITH THE BOI & THE DOE CERTIFICATE OF ENDORSEMENT OF THE RE DEVELOPER MUST ALL BE PRESENTED TO PROVE THAT THE PURCHASES OF THE RE DEVELOPER ARE VAT ZERO-RATED

UNDER EPIRA, A CERTIFICATE OF COMPLIANCE IS A PREREQUISITE BEFORE ONE CAN BE CONSIDERED AS A GENERATION COMPANY ENTITLED TO TAX INCENTIVES

TRANS-ASIA RENEWABLE ENERGY CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE & COMMISSIONER OF INTERNAL REVENUE VS. TRANS-ASIA RENEWABLE ENERGY CORPORATION

CTA EN BANC CASE NO'S. 2314 & 2347, MAY 17, 2022

Trans-Asia Renewable Energy Corporation (Trans-Asia) and Commissioner of Internal Revenue (CIR) filed their separate Petitions for Review assailing the CTA 3rd Division’s earlier Decision. Trans-Asia argued that the 3rd Division erred in partially denying its claim for refund or issuance of a Tax Credit Certificate (TCC) for excess and unutilized input VAT for the period of claim, mainly on the ground that it failed to prove that it is a generation company authorized by the Energy Regulation Commission (ERC) to operate facilities used in the generation of electricity. CIR argued that the law requires that only creditable input taxes directly attributable to the zero-rated sales may be refunded. In ruling, the Court held that the registration as a Renewable Energy (RE) Developer and the issuance of the corresponding Department of Energy (DOE) Certification are not enough to enjoy the incentive of VAT zero-rating on sales of renewable sources of energy. An RE Developer must secure the following documents to avail of the fiscal incentives pursuant to RE Law: (1) DOE Certificate of Registration; (2) Registration with the BOI; and (3) Certificate of Endorsement by the DOE. Records revealed that there was no evidence shown that Trans-Asia was issued a Certificate of Endorsement by the DOE on a per transaction basis. Hence, failure to comply will not entitle the claimant to VAT zero-rating and perforce, its refund claim must fail. Nonetheless, even if Trans-Asia failed to comply with the requirements for VAT zero-rating under the RE Law, its sales for June 2015 still qualify for VAT zero-rating, given that it presented a Certificate of Completion (COC) issued by ERC on June 1, 2015, to prove that it is a generation company and engaged in zero-rated sales of power generated from renewable sources of energy. Trans-Asia’s claim for a refund is not based only on the RE Law but also on the Electric Power Industry Reform Act (EPIRA). Under the EPIRA, a generation company must secure a COC before its sale of power or fuel generated from renewable energy sources qualify for VAT zero-rating. Accordingly, Trans-Asia had qualified for VAT zero-rating under the EPIRA but only starting June 1, 2015, when the ERC issued a COC in its favor. On the other hand, contrary to the CIR’s position, there is no requisite in the Tax Code that requires that the input taxes subject of a claim for refund to be directly attributable to zero-rated sales or effectively zero-rated sales. The law merely states that the creditable input VAT should be attributable to zero-rated or effectively zero-rated sales. Consequently, both the Petitions were DENIED for lack of merit.

TIEZA IS EXEMPT FROM CORPORATE INCOME TAX, THUS, ERRONEOUSLY WITHHELD TAX ON SALE OF PROPERTY SHOULD BE REFUNDED

PREMIER CENTRAL, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10251, MAY 16, 2022

Petitioner Premier Central, Inc. filed a Petition for Review seeking a refund of Creditable Withholding Tax (CWT) in connection to its purchased property from the Tourism Infrastructure and Enterprise Zone Authority (TIEZA). Petitioner argued that since TIEZA is exempt from income tax, it was erroneous for Respondent Commissioner of Internal Revenue (CIR) to have assessed and collected from Petitioner CWT, interest, surcharge, and compromise penalty on the acquisition of property. In ruling, TIEZA is not obliged to pay corporate income tax under Section 74 of Republic Act No. 9593 or the Tourism Act of 2009, as implemented by Section 67, Chapter IV, Rule IV of its Implementing Rules and Regulations (IRR). In granting corporate income tax exemption to TIEZA, the law and its IRR make no distinction as to whether TIEZA’s income was derived from governmental or proprietary activities. Thus, all income derived by TIEZA, including the income derived from the sale of the property, is exempt from corporate income tax. Considering that TIEZA is exempt from corporate income tax, Petitioner, as the buyer of the property, is not obliged to withhold CWT on the purchase price. It was, therefore, erroneous and illegal for the BIR to have required Petitioner to withhold and remit CWT equivalent to 6% of the purchase price of the property, plus interest, surcharge, and compromise penalty. Having established the legal basis for the grant of the refund sought and having duly substantiated the remittance to the BIR, Petitioner is entitled to the grant of its claim for refund. Thus, the Petition was GRANTED.

TO BE EXEMPT FROM INCOME TAX & CONSEQUENTLY, FROM FWT, ON INCOME RECEIVED FROM INVESTMENTS OF T-BONDS, THE CLAIMANT MUST ESTABLISH THAT IT IS A (1) FOREIGN GOVERNMENT (2) A FINANCING INSTITUTION OWNED, CONTROLLED, ENJOYING REFINANCING OR REGIONAL FINANCING INSTITUTIONS ESTABLISHED BY FOREIGN GOVERNMENTS, OR (3) AN INTERNATIONAL OR REGIONAL FINANCIAL INSTITUTION ESTABLISHED BY FOREIGN GOVERNMENTS

GIC PRIVATE LIMITED VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10017, MAY 11, 2022

Petitioner GIC Private Limited (formerly known as Government of Singapore Investment Corporation Private Limited) filed a Petition for Review seeking to refund the alleged erroneously withheld Final Withholding Taxes (FWT) on its investments in the Philippine Treasury Bonds (T-Bonds) for the period January 2017 to October 2018. Petitioner claimed that the interest income from its investment in Philippine T-bonds must be exempt from income tax and FWT. Pursuant to Section 32(B)(7)(a) of the 1997 Tax Code, as amended and as implemented by Section 2.57.5 of Revenue Regulations (RR) No. 2-98, income derived from investment in the Philippines in loans, stocks, bonds or other domestic securities by (a) foreign governments; (b) financing institutions owned, controlled, or enjoying refinancing or regional financial institutions established by foreign governments; and, (c) international or regional financial institutions established by foreign governments must be exempted from income tax and likewise exempt from FWT. The pieces of evidence submitted by the Petitioner established that it is a financial institution wholly-owned and controlled by the Government of Singapore and, therefore, exempt from the payment of income tax and FWT on the interest income derived from its investment in the Philippine T-Bonds. To be entitled to a refund of erroneously paid taxes, the Petitioner must prove the following requisites under Section 204 (C) and 299 of the 1997 Tax Code, as amended: (1) the tax has been erroneously or illegally collected, or the penalty has been collected without authority, and/or any sum has been excessively or in any manner wrongfully collected; and (2) the claim for refund or credit must have been filed within two (2) years from the date of payment of tax, or penalty. Such has been proven by the Petitioner having offered both testimonial and documentary evidence without any contrary proof by the Respondent. Thus, the Petition was GRANTED, and the Respondent was ordered to REFUND in favor of the Petitioner.

AN ASSESSMENT IS VOID IF IT FAILS TO STATE A DEFINITE DATE TO SETTLE

PEPSI-COLA PRODUCTS PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9170, MAY 6, 2022

Petitioner Pepsi-Cola Products Philippines, Inc. filed a Petition for Review seeking to cancel the assessment issued by the Respondent Commissioner of Internal Revenue (CIR), citing prescription as its defense. Petitioner argued that the Formal Letter of Demand was received beyond the 3-year prescriptive period in violation of Section 203 of the 1997 Tax Code, as amended. In ruling, the Court noted that since the assessment issued by the Respondent failed to clearly demand payment of the supposed tax liabilities within a specific period, the same cannot be considered valid assessment notice. To be clear, an assessment must not only indicate the assessment's legal and factual bases but also state a demand for payment of the computed tax liabilities within a specific period. In the absence thereof, it negates the CIR's demand for payment, making the final assessment notice defective and therefore, void. Thus, the Petition was GRANTED, resulting in the CANCELLATION of the assessment.

PD 198 SERVES BOTH AS LOCAL WATER DISTRICTS' GENERAL OR PRIMARY FRANCHISE AND SPECIAL OR SECONDARY FRANCHISE

WHAT PD 198 GRANTS TO LOCAL WATER DISTRICTS IS NOT ONLY THE RIGHT TO EXIST AS CORPORATE ENTITIES PER SE BUT ALSO THE RIGHT TO OPERATE AS PUBLIC UTILITIES

DAVAO CITY WATER DISTRICT VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NOS. 9138, 9139, 9140, 9141, 9142 & 9143, MAY 6, 2022

Petitioner Davao City Water District filed Petitions for Review seeking a refund of the Franchise Tax payments. Petitioner claimed that a Franchise Tax could not be imposed on a non-franchisee. Likewise, a franchise is not necessary for the Petitioner to operate as a water utility company. In ruling, the Court held that the term "franchise" as contemplated by Section 119 of the 1997 Tax Code, as amended, refers to a special or secondary franchise. Section 119 pertains to the right or privilege to engage in the business of radio or television broadcasting and also to business undertakings classified as electric, gas, or water utilities. To be liable for Franchise Tax, it is required that: (1) the taxpayer holds a franchise to engage in business activities specified under the law; (2) the taxpayer engages in the business covered by the law granting its franchise; and (3) for franchise grantees engaged in radio and/or television broadcasting, their annual gross receipts for the preceding year do not exceed Php 10 Million. The Petitioner fulfills all these requisites. First, the Petitioner holds a franchise to operate as a water utility. Presidential Decree 198 or the Provincial Water Utilities Act of 1973 serves as Petitioner’s general or primary franchise and special or secondary franchise. Second, there was no doubt that Petitioner was actually operating within the territorial jurisdiction of the City of Davao as a water utility company. Third, since the Petitioner is not a franchise grantee engaged in radio and/or television broadcasting, the annual gross receipts threshold requirement of Php 10 Million under Section 119 does not apply. Given that all the requisites are present, Petitioner is considered a franchise holder and, correspondingly, subject to the Franchise Tax imposed thereon. The Court also found the Petitioner’s contention that a franchise is not necessary for its operation as a water utility untenable. Local water districts are considered public utilities, thus, are required to obtain a franchise for their operation as mandated by Section 11, Article XII of the Constitution. For failure of the Petitioner to establish its right to refund, the Petitions cannot be granted. Hence, the Petitions were DENIED for lack of merit.

THE DISCRETIONARY POWER OF THE CIR TO ENTER INTO COMPROMISES CAN NOT BE SUPERIOR TO THE POWER OF JUDICIAL REVIEW BY THE COURTS

FOR THE COURT TO ACQUIRE JURISDICTION, AN ASSESSMENT MUST FIRST BE DISPUTED BY THE TAXPAYER & RULED UPON BY THE CIR TO WARRANT A DECISION FROM WHICH A PETITION FOR REVIEW MAY BE TAKEN TO THE COURT

COMMISSIONER OF INTERNAL REVENUE VS. NEW FARMERS PLAZA, INC.

CTA EN BANC CASE NO. 2290, MAY 6, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the CTA 1st Division’s earlier Decision and Resolution. Petitioner claimed that the CTA in Division erred in assuming jurisdiction over the present case. Petitioner posited that he has the discretion to approve or disapprove a compromise application. On the other hand, Respondent New Farmers Plaza, Inc. countered that CTA 1st Division correctly assumed jurisdiction and accurately provided the corresponding relief in exercising its “other matters” jurisdiction. In ruling, the Court agreed with the Respondent’s submission. Those controversies over which the CIR had exercised the quasi-judicial functions of his power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, and penalties imposed concerning those that involved the CIR’s exercise of quasi-legislative powers are included in the “other matters” jurisdiction. Correspondingly, the denial of offers of compromise squarely falls under the “other matters." Hence, the Court has jurisdiction to take cognizance of the Notice of Denial issued by the Petitioner on the Respondent’s Offer of Compromise concerning the latter’s deficiency tax assessments. On the claim of the Petitioner that the deficiency assessment he issued to Respondent is valid and is not violative of due process, this time, the Court agreed with the Petitioner’s position. Here, it was never disputed, and, in fact, Respondent readily admitted in its Petition that when it received the Formal Letter of Demand, it did not file any protest. Consequently, the deficiency tax assessments against Respondent had long attained finality and cannot be questioned on appeal. The Court will only acquire jurisdiction over “disputed assessments” if there is due compliance with the procedure. Thus, the Petition was GRANTED, and the case was REMANDED to the CTA in Division to determine the validity of the Notice of Denial of Respondent’s Offer of Compromise.

FOR SEPARATION BENEFITS DUE TO REDUNDANCY TO REMAIN TAX-EXEMPT, THE BENEFICIARY MUST PROVE THE FACT OF REDUNDANCY BY SUBMITTING THE REPORTORIAL REQUIREMENTS

COMMISSIONER OF INTERNAL REVENUE VS. MA. JETHRA B. PASCUAL

CTA EN BANC CASE NO. 2400, MAY 5, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the Court 3rd Division's Decision granting the refund in favor of Respondent Ma. Jethra B. Pascual pertaining to the erroneous/overpayment of withholding tax on compensation imposed on her retirement pay, due to her involuntary separation from Deutsche Bank. Petitioner argued that Respondent failed to establish the fact of redundancy due to her non-compliance with the documentary requirements pursuant to Revenue Memorandum Order (RMO) No. 66-2016. Likewise, submitting the requirements listed under said RMO was necessary for a successful claim for a refund. Further, the Respondent is not entitled to a refund of the claimed taxes withheld, given her admission to receiving her "retirement pay" pursuant to Deutsche Bank's AG Manila Branch Employees' Retirement Plan. In ruling, the Court held that the obligation to submit such documentary requirements is imposed on the employer. The Respondent cannot be expected to submit such requirements. Likewise, RMO No. 66-2016 does not have any retroactive effect. Despite its false designation as “retirement pay,” the Respondent’s benefit under the Retirement Plan" is not taxable since she received the same as a consequence of redundancy and not due to her retirement. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.

THE BIR IS BOUND TO WAIT FOR THE EXPIRATION OF THE 15-DAY PERIOD RECKONED FROM THE DATE OF RECEIPT OF PAN BEFORE FAN CAN BE ISSUED

COMMISSIONER OF INTERNAL REVENUE VS. THE ORCHARD GOLF & COUNTRY CLUB, INC.

CTA EN BANC CASE NO. 2335, APRIL 25, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review praying for the reversal of the Court 3rd Division’s earlier Decision and Resolution which canceled the assessment issued against the Respondent The Orchard Golf and Country Club. Petitioner argued that the Respondent’s right to due process was not violated since it was given the opportunity to refute the Preliminary Assessment Notice (PAN). On the other hand, the Respondent countered that the Petitioner violated its right to due process when the Formal Letter of Demand/Formal Assessment Notice (FLD/FAN) was issued barely two (2) days from the Respondent’s receipt of the PAN and before the lapse of the 15-day period to respond to the PAN. In ruling, the Court held that the Petitioner is bound to wait for the expiration of the 15-day period, reckoned from the date of receipt of the PAN before the FLD/FAN can be issued. The fact that the Respondent was able to protest the FLD/FAN and that its request for reinvestigation was allegedly granted, does not cure the violation of its due process at the PAN level. The Court finds no reason to reverse nor modify the assailed Decision and Resolution.

AN LOA SHOULD COVER A TAXABLE PERIOD NOT EXCEEDING ONE (1) TAXABLE YEAR

A CLOSURE ORDER MUST ONLY BE ISSUED BASED ON SPECIFIC GROUNDS ENUMERATED UNDER SECTION 114 OF THE 1997 TAX CODE

SOFGEN HOLDINGS LIMITED PHILIPPINE BRANCH VS. COMMISSIONER INTERNAL REVENUE

CTA CASE NO. 9691, APRIL 21, 2022

Petitioner Sofgen Holdings Limited-Philippine Branch filed a Petition for Review seeking cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue. The assessment stemmed from a 48-Hour Notice as well as a 5-Day Value-Added Tax (VAT) Compliance Notice to respond to the VAT assessment, which eventually led to the Closure Order issued by the Respondent. Petitioner argued that the Letter of Authority (LOA) is null and void since the Revenue Officers (RO) who conducted the audit went beyond the authority given to him. In ruling, the Court held that the RO authorized to conduct the audit exceeded his authority. Records revealed that the LOA covers the examination of the Petitioner’s accounting records from April 1, 2015 to March 31, 2016, contrary to its calendar year as its taxable year. Revenue Memorandum Order (RMO) No. 43-90 provides that an LOA should cover a taxable year not exceeding one (1) taxable year. Further, the Closure Order must be struck down since the same is only issued for specific grounds under Section 115 of the 1997 Tax Code. Nonetheless, it must be emphasized that the power to suspend the business operations and temporarily close the business establishment of any VAT-registered person under Section 115 of the 1997 Tax Code is separate and distinct from the power to assess under Section 228 of the same Code. Thus, there was a violation of Petitioner's right to due process pertaining to the issuance of the subject VAT assessment, rendering the same VOID.

CONTRACTEES & LICENSEES OF PAGCOR ARE EXEMPT FROM INCOME TAX ON ITS GAMING REVENUE

PAYMENT OF FRANCHISE TAX EXEMPTS PAGCOR CONTRACTEES & LICENSEES TO ALL TAXES FROM ITS REVENUE FROM CASINOS

REVENUES FROM GAMING OPERATIONS ARE SUBJECT TO 5% FRANCHISE TAX

COMMISSIONER OF INTERNAL REVENUE VS. TRAVELLERS INTERNATIONAL HOTEL GROUP, INC.

CTA EN BANC CASE NO. 2385, APRIL 20, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the earlier Decision and Resolution of the Court 1st Division canceling the income tax assessment issued against the Respondent Travellers International Hotel Group, Inc. Petitioner argued that the Respondent’s revenues from its gaming operations are not exempt from income tax under Section 13(2)(b) of Presidential Decree (P.D.) No. 1869 granting franchise to Philippine Amusement and Gaming Corporation (PAGCOR). On the other hand, Respondent argued that being a licensee of PAGCOR, it is exempt from income tax on gaming revenues pursuant to P.D. 1869. In ruling, the Court held that there was no legal basis to reverse the assailed Decision and Resolution of the Court 1st Division. Section 1 of Republic Act (R.A.) No. 9337 or an Act Amending Certain Provisions of the 1997 Tax Code was neither amended nor repealed. As such, PAGCOR, its contractees and licensees remain exempted from the payment of corporate income tax and other taxes upon payment of the 5% Franchise Tax. Since the law is clear, exemption inures to their benefit. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.

ISSUANCE OF CERTIFICATE OF TAX DELINQUENCIES & ACCEPTANCE PAYMENT FORMS DEPENDS ON THE TAXPAYER’S COMPLIANCE WITH THE EXISTING LAW, RULES & REGULATIONS ON TAX AMNESTY

PETITION FOR MANDAMUS MAY NOT LIE IF DOCUMENTS TO SUPPORT THE AVAILMENT OF TAX AMNESTY IS DISCRETIONARY

MEGA RICTON COMMERCIAL & INDUSTRIAL CORPORATION, FAITH IN GOD RPM PROFESSIONAL & TECHNICAL CORPORATION & MAYEL V. VILLACERAN VS. BUREAU OF INTERNAL REVENUE

CTA CASE NO. 10398, APRIL 13, 2022

Petitioners Mega Ricton Commercial and Industrial Corporation, Faith in God RPM Professional and Technical Corporation, and Mayel V. Villceran filed a Petition for Mandamus against the Respondent Bureau of Internal Revenue. Petitioners claimed that they have a legal right to be issued their respective Certificates of Tax Delinquencies (CTD) and Acceptance Payment Forms (APF) because they are qualified to avail of the tax amnesty under Republic Act (R.A.) No. 11213 or the Tax Amnesty Act. However, the Respondent refused to issue the subject documents because the Petitioners were not qualified under Revenue Memorandum Circular (RMC) No. 57-2019. In ruling, Revenue Regulations No. 4-2019, which is the Implementing Rules and Regulations of R.A. No. 11213, provides the documentary requirements that should be submitted by applicants: (1) Tax Amnesty Return (TAR); (2) APF; and (3) CTD. Contrary to the Petitioners' claim that they are qualified to avail of the Tax Amnesty, no TARs were presented as evidence, while the remaining documentary requirements, i.e., CTDs and APFs, are precisely the subject matter of this Petition. Thus, Petitioner failed to comply with the requirements. The Court also held that the issuance of the subject CTD and APF is a discretionary function of the Respondent and not a ministerial one. However, such discretion is guided by the provisions of the law, rules, and regulations. Consequently, the Petition was DENIED for lack of merit.

FOR AN INTERNATIONAL CARRIER TO BE EXCUSED FROM IMPOSITION OF PHILIPPINE INCOME TAX ON ITS GROSS PHILIPPINE BILLINGS, THE TAX LAW OF THE INTERNATIONAL CARRIER’S HOME COUNTRY SHOULD EXEMPT CARRIERS OF PHILIPPINE ORIGIN FROM SUCH COUNTRY’S INCOME TAXES, WITH NO OTHER CONDITIONS

COMMISSIONER OF INTERNAL REVENUE VS. GULF AIR COMPANY PHILIPPINE BRANCH

CTA EN BANC CASE NO. 2439, APRIL 12, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the nullification of the CTA 1st Division’s earlier Decision and Resolution granting Respondent Gulf Air Company Philippine Branch’s claim for refund. Petitioner averred that under the Agreement, Respondent, as the operating carrier, operates the flights while Philippine Airlines, Inc. (PAL), as the marketing carrier, is only given the right to sell tickets for certain Gulf Air flights. As such, PAL is not operating in Bahrain, the home country of Respondent. It follows, therefore, that the Respondent cannot claim an exemption from payment of Gross Philippine Billings Tax. Petitioner also stressed that the Respondent failed to show that Philippine carriers are actually enjoying the income tax exemption in the home country of the Respondent. On the other hand, the Respondent countered that proof of actual enjoyment by Philippine carriers of the income tax exemption in the home of the international carrier is not required. In ruling, a plain reading of the Republic Act (R.A.) No. 10378, or the “Act Recognizing the Principle of Reciprocity as the Basis for the Grant of Income Tax Exemptions to International Carriers,” shows that for purposes of availing the exemption from income tax under the Rule on Reciprocity, it is sufficient that the international carrier's home country grants an income tax exemption to Philippine carriers. The Court found the Petitioner’s interpretation of the law as groundless for it essentially required that a Philippine carrier be actually operating in the home country of the international carrier, the absence of which deprives the latter of the privilege of tax exemption in the Philippines. The sole requirement for an international carrier to be excused from the imposition of Philippine income tax on its Gross Philippine Billings is that the tax law of the international carrier’s home country exempts carriers of Philippine origin from such country’s income taxes. The Respondent was able to demonstrate that it is entitled to a refund of income taxes on Gross Philippine Billings that were incorrectly paid. Consequently, the Petition was DENIED.

PROOF OF TAXPAYER'S PRIOR PAYMENT OF THE 3% FRANCHISE TAX, BASED ON ITS GROSS RECEIPTS DERIVED FROM ITS OPERATION UNDER ITS FRANCHISE, IS REQUIRED TO REAP THE BENEFITS OF THE NATIONAL & LOCAL TAX EXEMPTION

FRANCHISE TAX IS IN LIEU OF NATIONAL & LOCAL TAX INCLUDING CONTRACTORS TAX

NATIONAL GRID CORPORATION OF THE PHILIPPINES VS. THE CITY OF TACLOBAN & ZOSIMA A. CORDANO, IN HER CAPACITY AS CITY TREASURER OF TACLOBAN

CTA EN BANC CASE NO. 2133, MARCH 31, 2022

Petitioner National Grid Corporation of the Philippines filed a Petition for Review challenging the earlier Decision and Resolution of the Court in Division sustaining Respondent City Treasurer of Tacloban’s deficiency contractor’s tax assessment. Petitioner argued that the payment of the 3% Franchise Tax is not a prerequisite for the enjoyment of the tax-exempt privileges under the Republic Act (R.A.) No. 9511 or the Act Granting the National Grid Corporation of the Philippines a Franchise to Engage in the Business of Conveying or Transmitting Electricity. Petitioner further asserted that by its presentation of the BIR Certification dated September 4, 2018, it had satisfactorily proved that it paid its Franchise Taxes for the year 2009. In ruling, the Court held that payment of the 3% Franchise Tax is the operative act to claim exemption from real property tax under Section 9 of R.A. No. 9511. Failure to prove such prior payment of the required 3% Franchise Tax would lead to the Petitioner’s non-entitlement to its national and local tax exemption. Consequently, the Petition was DENIED.

THE QUESTION OF WHETHER AN ENTITY IS A GOVERNMENT INSTRUMENTALITY EXEMPT FROM PAYMENT OF RPT IS A QUESTION OF LAW

UNLESS THE GOVERNMENT INSTRUMENTALITY IS ORGANIZED AS A STOCK OR NON-STOCK CORPORATION, IT REMAINS A GOVERNMENT INSTRUMENTALITY EXERCISING NOT ONLY GOVERNMENTAL BUT ALSO CORPORATE POWERS

NATIONAL FOOD AUTHORITY IS A GOVERNMENT INSTRUMENTALITY, THUS, EXEMPT FROM RPT

NATIONAL FOOD AUTHORITY VS. CITY ASSESSOR & CITY TREASURER OF MALOLOS, BULACAN

CTA AC NO. 241, MARCH 16, 2022

Petitioner National Food Authority (NFA) filed a Petition for Review seeking reversal of the Regional Trial Court’s (RTC) earlier decision denying its Petition for failure to prove its right to be exempt from real property taxes (RPT) since it is a government-owned and controlled corporation (GOCC). Petitioner argued that it is created by virtue of the Presidential Decree (P.D.) No. 1770 or the “National Food Authority Act” and it is considered a government instrumentality, not a GOCC, as affirmed in Republic Act (R.A.) No. 11203 or the “Act Liberalizing the Importation, Exportation and Trading of Rice”, and its related Implementing Rules and Regulations. Petitioner also asserted that it cannot be a GOCC because it is neither a stock nor non-stock corporation, it does not compete with the private sector, and it is not required to meet the test of economic viability which is required for GOCCs. Petitioner averred that it has sufficiently proven its claim that it is a government instrumentality, hence, exempt from RPT. In ruling, pursuant to Manila International Airport Authority Supreme Court decided case, and Section 3(n) of R.A. No. 10149 or the “GOCC Governance Act of 2011”, to be classified as a government instrumentality, the government entity must: not be a stock or non-stock corporation; not integrated within the department framework; be vested with special functions or jurisdiction by law; be endowed with some if not all corporate powers; administer special funds; enjoy operational autonomy, usually through a charter; and perform "essential public services for the common good, services that every modern State must provide its citizens. On the other hand, to be considered a GOCC, the government entity must be a stock or non-stock corporation and must pass the twin tests of the common good and economic viability. Scrutiny of PDs and RAs related to the operations of Petitioner led to a conclusion that Petitioner is an instrumentality of the government performing as it does “essential public services for the common good, services that every modern State must provide its citizens”. Considering that Petitioner is a government instrumentality, it is exempt from payment of all taxes, including RPT. Thus, the Petition was GRANTED. Consequently, the earlier Decision was REVERSED and SET ASIDE. The Notices of Realty Tax Delinquency were declared NULL and VOID.

ISSUANCE OF A VALID LOA IS AN ESSENTIAL PART OF THE DUE PROCESS RIGHTS OF A TAXPAYER RELATIVE TO THE CONDUCT OF AN EXAMINATION OR ASSESSMENT

THE RDO IS NOT ONE OF THE AUTHORIZED REPRESENTATIVES OF THE CIR TO ISSUE LOA

COMMISSIONER OF INTERNAL REVENUE VS. AC CORPORATION

CTA EN BANC CASE NO. 2279, FEBRUARY 28, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to cancel the CTA 2nd Division’s earlier decision. Petitioner argued that Respondent AC Corporation is estopped from assailing the authority of the persons who received the Letter of Authority (LOA) as it was never raised at the administrative level. Petitioner also contended that the assigned Revenue Officer (RO) is authorized to conduct the audit of Respondent’s books of accounts and other accounting records for taxable year 2007 pursuant to a valid Memorandum of Assignment (MOA). Respondent agreed with the ruling of the Court in Division that the LOA was void because it was received by an unauthorized person. It also countered that the assigned RO was not authorized to continue the audit by the mere issuance of a MOA which was signed by a Revenue District Officer (RDO). In ruling, the Court agreed with the Petitioner that the principle of estoppel applies in this case, but by way of laches. Records showed that the Respondent never questioned the lack of an LOA in its protest letters. At the very least, the Respondent should have requested for an LOA, if it was true that it had not received any copy thereof from the alleged “unauthorized” security guard before it allowed the ROs to examine any of its accounting records. This notwithstanding, the Court found the deficiency tax assessments void for lack of authority of the RO who continued the audit examination of Respondent’s tax records. The assigned RO was not named in the original LOA but was assigned to continue the audit by way of a MOA signed by the RDO, who is not one of the officials tasked to issue LOAs. The Court held that the said MOA does not pass the test of validity, hence, the assessments issued as a result thereof, are void. Consequently, the Petition was DENIED.

IN A CLAIM FOR TAX REFUND OR TAX CREDIT, THE APPLICANT MUST PROVE NOT ONLY ENTITLEMENT TO THE GRANT OF THE CLAIM UNDER SUBSTANTIVE LAW; IT MUST ALSO SHOW SATISFACTION OF ALL THE DOCUMENTARY & EVIDENTIARY REQUIREMENTS FOR AN ADMINISTRATIVE CLAIM FOR REFUND OR TAX CREDIT

YILAN HOLDINGS COMPANY, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2307, FEBRUARY 28, 2022

Petitioner Yilan Holdings Co., Inc. filed a Petition for Review assailing the CTA 3rd Division’s earlier decision, which denied the Petitioner’s claim for refund of input VAT arising from the domestic purchase of taxable goods and services, capital goods, and domestic purchases of goods other than taxable goods, allegedly attributable to effectively zero-rated sales. Petitioner asserted that it purchased two (2) parcels of land, which were subsequently leased to a PEZA-registered enterprise, under a Contract of Lease. Such lease should be treated as a VAT zero-rated sale. The Petitioner also claimed that it reflected its income from the Contract of Lease in its subsequent VAT returns. In ruling, the Court affirmed the 3rd Division’s findings that Petitioner’s lease transactions may qualify for VAT zero-rating. However, despite being entitled to VAT zero-rate, the Petitioner failed to show proof of VAT zero-rated sales when it failed to present the VAT official receipts issued for such lease transactions. The entitlement to claim a tax credit or refund of creditable input tax due or paid is conditioned on the existence of zero-rated or effectively zero-rated sales. Unfortunately, upon careful examination of the records, the Petitioner failed to submit any VAT official receipt for the said lease transactions to prove the existence of its alleged zero-rated or effectively zero-rated sales. Compliance with the invoicing requirements is clearly mandatory, failure to comply therewith is fatal to the Petitioner's claim for refund. In light of the absence of zero-rated or effectively zero-rated sales, it is unnecessary to discuss the Petitioner's compliance or non-compliance with the other requirements for this claim for the issuance of a tax credit certificate or refund of unutilized input VAT. Hence, the Petition was DENIED for lack of merit.

THE RUNNING OF THE THREE (3)-YEAR PERIOD TO COLLECT SHALL BE SUSPENDED WHEN THE TAXPAYER REQUESTS FOR REINVESTIGATION & THE CIR GRANTS THE SAME

TO PROVE THE FACT OF MAILING, IT IS ESSENTIAL TO PRESENT THE REGISTRY RECEIPT & THE REGISTRY RETURN CARD ISSUED BY THE POSTMASTER OF THE BUREAU OF POSTS BEARING THE SIGNATURE OF THE RECIPIENT TAXPAYER OR ITS DULY AUTHORIZED REPRESENTATIVE SIGNIFYING RECEIPT OF THE SUBJECT MAIL MATTER

COMMISSIONER OF INTERNAL REVENUE VS. FIRST FAR EAST DEVELOPMENT CORPORATION

CTA EN BANC CASE NO. 2354, FEBRUARY 28, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking nullification of the CTA 1st Division’s earlier decision canceling the assessments issued to Respondent First Far East Development Corporation. Petitioner insisted that he granted the Respondent’s request for reinvestigation through the Notice of Hearing issued on April 5, 1994. Hence, the period to assess and collect the subject taxes has not yet prescribed. In ruling, Section 203 of the Tax Code, as amended, provides that the government is mandated to assess internal revenue taxes within three (3) years after the return was filed. Hence, an assessment notice issued after the said three-year prescriptive period is no longer valid and effective. Here, Respondent was assessed for deficiency taxes for taxable year 1990 and the assessment notices were received on May 25, 1993. Respondent filed on June 21, 1993 a protest letter on the assessments with a request for reinvestigation. Said protest was followed by another protest on December 3, 1993. Then, on October 9, 2007, it filed a supplemental protest praying for the cancellation of the tax assessments on the grounds of prescription. Thereafter, on August 17, 2017, Respondent received the CIR's Decision denying its protest. Petitioner insisted that the prescriptive period was validly extended when he granted the request for reinvestigation through the Notice of Hearing dated April 5, 1994 mailed to Petitioner. However, there was no clear evidence to verify that a Notice of Hearing was indeed issued, mailed, and received by Respondent. Hence, Petitioner cannot collect the subject deficiency taxes because there was no competent evidence to prove that indeed Respondent's request for reinvestigation was granted by the CIR. Thus, the three-year prescriptive period for collecting from Petitioner the deficiency taxes for taxable year 1990 has prescribed. Consequently, the Petition was DENIED for lack of merit. Petitioner was ENJOINED and PROHIBITED from collecting the assessment from the Respondent.

FACTUAL FINDINGS WHICH, IN THE ABSENCE OF ANY CLEAR SHOWING OF ABUSE, ARBITRARINESS, OR CAPRICIOUSNESS, ARE BINDING & CONCLUSIVE UPON THE COURT

COMMISSIONER OF INTERNAL REVENUE VS. TEAM SUAL CORPORATION

CTA EN BANC CASE NO. 2353, FEBRUARY 10, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking reversal of the earlier decision of the Court in Division partially granting refund in favor of the Respondent Team Sual Corporation pertaining to the latter’s unutilized excess input value-added tax (VAT) attributable to the zero-rated sales. Petitioner argued that the refund should be denied for failure on the part of the Respondent to allocate the sales attributable to zero-rated and vatable based on the volume of sales. In ruling, the Court cited Section 112(A) of the Tax Code, which provides that for an input tax to be creditable, the amount due or paid must be allocated proportionally based on the volume of sales. A perusal of the records showed that the factual findings of the Court in Division that Respondent’s input VAT was subjected already to proportional allocation should not be disturbed. Findings which are free of abuse, arbitrariness, or capriciousness are binding and conclusive. Consequently, the Petition was DENIED.

NO PROVISION STATING THAT PROVISIONAL, COMMERCIAL, OR SUPPLEMENTARY INVOICES NEED NOT CONTAIN THE REQUIRED INFORMATION IN A VAT INVOICE

OCEANAGOLD (PHILIPPINES), INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2259, FEBRUARY 9, 2022

Petitioner OceanaGold (Philippines), Inc. filed a Petition for Review seeking the reversal of the earlier Decision and Resolution of the Court 2nd Division denying its claim for refund of alleged unutilized input value-added tax (VAT) attributable to zero-rated sales due to invoicing defects. Petitioner argued that the absence of the written or prominently printed “zero-rated” sale in its provisional invoices is not fatal to its claim for refund. Furthermore, provisional invoices are not valid proof to support the claim of input tax, and their issuance is merely for recording, monitoring, and control purposes, in this case, to provisionally determine the market value of the minerals at the time of shipment. On the other hand, Respondent Commissioner of Internal Revenue (CIR) insisted that under Section 113 of the Tax Code, the VAT invoice referred to means the VAT Sales Invoice evidencing the sale of goods issued to customers and not the supplementary invoice such as the provisional invoice herein. In ruling, the Court held that nowhere in Revenue Regulations (RR) No. 18-2012 provides that provisional, commercial, or supplementary invoices need not contain the required information in a VAT invoice. Consequently, there is no compelling reason to reverse or modify the earlier Decision and Resolution. Thus, the same were AFFIRMED.

WHETHER THE TVN IS EQUIVALENT TO AN LOA WHICH WILL SERVE AS THE AUTHORITY OF THE RO TO CONDUCT THE TAXPAYERS RELATIVE TO THEIR CLAIMS OF REFUND

THE ABSENCE OF AN LOA PRIOR TO THE ISSUANCE OF NOTICE OF ASSESSMENT IS FATAL NOT ONLY ON THE TAX EXAMINATION CONDUCTED BUT ALSO ON THE NOTICES SUBSEQUENTLY ISSUED

JINZAI EXPERTS, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9473, FEBRUARY 9, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal and setting aside of the Decision and Resolution of CTA 2nd Division canceling the assessment issued against the Respondent Jinzai Experts, Inc. Petitioner insisted that there is no law prohibiting him as well as his Regional Directors to delegate the issuance of Tax Verification Notice (TVN) to the Revenue District Officer (RDO) and that such TVN is equivalent to a Letter of Authority (LOA). Likewise, an administrative officer should be allowed to decide within his/her level of competence just like at the judicial level where the issues not raised in the lower court cannot be raised for the first time on appeal. Further, Respondent is already estopped from assailing the issuance of said TVN. In ruling, the Court held that a TVN, which is nowhere mentioned in the 1997 Tax Code, is not equivalent to an LOA that vests authority to the Revenue Officer to conduct tax examination on the financial records of a taxpayer. Considering that the tax examination itself, as well as the notices issued, are invalidated, the other issues raised by the Petitioner will no longer be discussed. Thus, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.

IT IS NOT FOR THE RTC TO DETERMINE IN A PETITION FOR CERTIORARI WHERE ONLY ERRORS OF JURISDICTION MAY BE RAISED

PEOPLE OF THE PHILIPPINES VS. ARNEL CORTEZ MANALOTO & ERWIN SICANGCO CARREON

CTA EN BANC CRIMINAL CASE NO. 085, FEBRUARY 9, 2022

Prosecution filed a Petition for Review seeking nullification of the Order of the Regional Trial Court-Branch 56, Angeles City denying its Petition for Certiorari. Prosecution begs the Court En Banc to examine the error of the Regional Trial Court (RTC) in not finding that there is grave abuse of discretion on the part of the Municipal Trial Court in Cities (MTCC) in deciding the criminal cases against the Accused Manaloto and Carreon who were charged with Failure to Register for Value-Added Tax (VAT) in violation of Section 275, in relation to Section 236 (G) and 257 (A) (2) of the 1997 Tax Code. In ruling, the Court held that the Prosecution failed to prove that there is an abuse of discretion on the part of the MTCC. Whether MTCC committed an error of judgment in its exercise of legitimate jurisdiction in deciding the criminal cases against both Accused, is not for the RTC to determine in a Petition for Certiorari where only errors of jurisdiction may be raised. The abuse of discretion contemplated by law must be grave and patent. Such was not proven before the proceedings in the RTC. Thus, the Petition was DENIED for lack of merit.

DETERMINATION OF SITUS OF PERFORMANCE OF SERVICES IS ESSENTIAL IN THE CLAIM FOR INPUT VAT REFUND

ASURION HONG KONG LIMITED-ROHQ VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9852, FEBRUARY 9, 2022

Petitioner Asurion Hong Kong Limited-ROHQ filed a Petition for Review seeking refund of alleged unutilized input VAT arising from zero-rated sales covering the 1st and 2nd quarters for calendar year (CY) 2016. Several issues were raised but the main issue devolved on the place of performance of services to be qualified for zero-rating. In ruling, the Court cited Sections 108 and 112 of the 1997 Tax Code which enumerate the requisites before a refund or issuance of Tax Credit Certificate prosper. Specifically, Section 108(B)(2) of the 1997 Tax Code provides the essential elements that must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%). Perusal of records revealed that the Petitioner failed to establish that the subject services were performed in the Philippines. Consequently, the Petition was DENIED for lack of merit.

PERFORMANCE OF SERVICES IN THE PHILIPPINES IS A PRE-REQUISITE FOR VALID INPUT VAT REFUND TO PROSPER

REGUS SERVICE CENTRE, PHILIPPINES B.V.-ROHQ VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10124, FEBRUARY 9, 2022

Petitioner Regus Service Centre, Philippines B.V.-ROHQ filed a Petition for Review seeking refund of its unutilized input value tax (VAT) attributable to its export sales. Petitioner asserts that it has complied with all the requirements pursuant to Section 112 of the 1997 Tax Code. In ruling, the Court held that the qualification for zero-rated sales must be established before the claimant will be entitled to a refund. To be subject to a zero percent (0%) VAT rate, the services must be performed in the Philippines by a VAT-registered person pursuant to Section 108(B)(2) of the Tax Code. A perusal of the documents showed that the Service Agreement between the Petitioner and its foreign client does not stipulate that the subject services were to be performed by Petitioner in the Philippines. Moreover, no evidence has been provided to prove such a fact. It can also be inferred from the Service Agreement that not only the Petitioner but also a Third-Party provider is allowed to perform the same services which negates the exclusivity of the service. Consequently, the Petition was DENIED for lack of merit.

REQUISITES FOR VALID INPUT VAT REFUND ON UNUTILIZED INPUT TAX ATTRIBUTABLE TO ZERO-RATED SALES

MAERSK GLOBAL SERVICES CENTRES (PHILIPPINES) LTD. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10022, JANUARY 26, 2022

Petitioner Maersk Global Services Centres (Philippines), Ltd. filed a Petition for Review seeking refund of the alleged unutilized input value-added tax (VAT) on its zero-rated sales in the amount of Php 37,943,875.63 for the calendar year 2017. Petitioner claimed that it has complied with the necessary requirements to qualify for the input VAT refund. On the other hand, Respondent Commissioner of Internal Revenue (CIR) claimed otherwise asserting that the Petitioner failed to prove that the recipient of service is doing business outside the Philippines. Likewise, the option to carry over bars the claimant from seeking refund. In ruling, perusal of the documents showed that the input taxes subject of the claim was carried over to the succeeding 1st quarter taxable year 2018 in the amount Php 37,943,875.08. 63. At the same time, the said amount was also deducted as "VAT Refund/TCC Claimed” on the quarterly VAT return for the 1st quarter of 2018, which would prevent the carry-over or application of the claimed input VAT in the succeeding taxable periods. Nonetheless, Petitioner has proven that its valid excess input taxes amounting to Php 35,236,379.03 is more than enough to cover its output VAT liability of Php 114,696.430. Hence, the excess input taxes in the amount of Php 35,236,379.03 remained unutilized. Thus, the Petition was PARTIALLY GRANTED resulting in reduced amount of input VAT qualified for refund or issuance of tax credit certificate in the amount of Php 35,236,379.03.

IN CASE OF RE-ASSIGNMENT OR TRANSFER OF CASES TO ANOTHER RO, IT IS MANDATORY THAT A NEW LOA SHALL BE ISSUED, OTHERWISE, THE ASSESSMENT OR EXAMINATION IS A NULLITY

METRO MAIN STAR ASIA CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9302, JANUARY 26, 2022

Petitioner Metro Main Star Asia Corporation filed a Petition for Review seeking cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argues that Revenue Officer (RO) Arriola was not duly authorized to conduct the audit as her authority was based merely on a Memorandum of Assignment (MOA). Further, the issuance of an MOA is not a substitute for an LOA in cases where there is reassignment or transfer of cases to another RO as this runs counter to the provision of Revenue Memorandum Order (RMO) No. 43-90. In ruling, the Court cited Section 13 of the 1997 Tax Code, which provides that an RO's authority to examine or recommend the assessment must be exercised pursuant to an LOA. Pursuant to the case of Medicard Philippines, Inc. vs. CIR, it was emphasized that unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. Likewise, in CIR vs. Sony Philippines, Inc., the Court stressed that in the absence of such an authority, the assessment or examination is a nullity. Further, in the recent case of CIR vs. Mcdonald’s Philippines Realty Corporation, reassigning or transferring revenue officers without a separate or amended LOA: (1) violates the taxpayer’s right to due process in tax or audit investigations; (2) usurps the statutory power of the CIR or his duly authorized representative to grant the power to examine the books of account of a taxpayer; and (3) does not comply with existing BIR rules and regulations, particularly RMO No. 43-90. Based on the foregoing, the Petition was GRANTED resulting in the CANCELLATION of the assessment.

FAILURE TO APPEAL WITHIN 30 DAYS FROM THE RECEIPT OF PRELIMINARY COLLECTION LETTER RENDERS THE ASSESSMENT FINAL & EXECUTORY

TEN-FOUR READYMIX CONCRETE, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2311, JANUARY 25, 2022

Prosecution filed a Petition for Review seeking nullification of the Order of the Regional Trial Court-Branch 56, Angeles City denying its Petition for Certiorari. Prosecution begs the Court En Banc to examine the error of the Regional Trial Court (RTC) in not finding that there is grave abuse of discretion on the part of the Municipal Trial Court in Cities (MTCC) in deciding the criminal cases against the Accused Manaloto and Carreon who were charged with Failure to Register for Value-Added Tax (VAT) in violation of Section 275, in relation to Section 236 (G) and 257 (A) (2) of the 1997 Tax Code. In ruling, the Court held that the Prosecution failed to prove that there is an abuse of discretion on the part of the MTCC. Whether MTCC committed an error of judgment in its exercise of legitimate jurisdiction in deciding the criminal cases against both Accused, is not for the RTC to determine in a Petition for Certiorari where only errors of jurisdiction may be raised. The abuse of discretion contemplated by law must be grave and patent. Such was not proven before the proceedings in the RTC. Thus, the Petition was DENIED for lack of merit.

EVIDENCE INTRODUCED WITHOUT OBJECTION BECOMES PART OF THE RECORD OF THE CASE & ALL THE PARTIES ARE AMENABLE TO ANY FAVORABLE OR UNFAVORABLE EFFECTS RESULTING FROM IT

IT IS A FUNDAMENTAL PRINCIPLE OF CORPORATION LAW THAT "A CORPORATION IS AN ENTITY SEPARATE & DISTINCT FROM ITS STOCKHOLDERS & FROM OTHER CORPORATIONS TO WHICH IT MAY BE CONNECTED

COMMISSIONER OF INTERNAL REVENUE VS. VESTAS SERVICES PHILIPPINES, INC.

CTA EN BANC CASE NO. 2255, JANUARY 25, 2022

Petitioner Commissioner of Internal Revenue filed a Petition for Review seeking reversal of the earlier Decision and Resolution of the Court of Tax Appeals partially granting Petitioner's claim for refund or issuance of a Tax Credit Certificate (TCC) representing unutilized excess input value-added tax (VAT) attributable to its zero-rated sales for the second quarter of the calendar year 2014. Petitioner asserts that Respondent failed to satisfy the requisite that it is engaged in zero-rated or effectively zero-rated sales since it is just an instrumentality of Vista Wind Systems, thus, failed to prove that it is a non-resident foreign corporation doing business outside the Philippines. Likewise, Respondent's failure to submit complete documents at the time of filing of its administrative claim as well as evidence such as the certificate of creditable withholding tax, which does not constitute conclusive evidence of payment and remittance to the BIR, are sufficient reasons to deny refund claims. Further, exhibits of Respondent should not be given any probative value for being hearsay evidence. In ruling, Petitioner is mistaken for two (2) reasons. First, evidence presented that Vista Wind Systems is a non-resident foreign corporation doing business outside the Philippines is sufficient to establish that it is a non-resident foreign corporation doing business outside the Philippines. The Respondent and Vista Wind Systems are two distinct corporate entities separately registered in two countries, Denmark, and the Philippines. Section 3(d) of Republic Act No. 7042 otherwise known as “Foreign Investments Act” as amended by R.A. No. 8179, specifies that being a shareholder in a domestic corporation does not equate to “doing business” in the Philippines. On the issue on substantiation of claim, nothing in Sec 112(A) of the 1997 Tax Code requires a taxpayer-claimant to prove the actual remittance of taxes withheld to grant a refund of unutilized input VAT. Lastly, the second Division did not err in admitting the testimony of the witness which was not objected by the parties. Thus, the Petition was DENIED.

CLAIMANT MUST SUBSTANTIATE ALL THE NECESSARY REQUIREMENTS TO QUALIFY FOR TAX REFUND OR CREDIT

REMA TIP TOP PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9794, JANUARY 24, 2022

Petitioner Rema Tip Top Philippines, Inc., filed a Petition for Review seeking refund of the alleged unutilized input VAT arising from its zero-rated sales covering the 4th quarter of taxable year (TY) 2015. Petitioner asserts that it is entitled for refund for meeting all the requisites pursuant to Sections 106, 108, and 112(A)(C) of the Tax Code. In ruling, the Court held that the qualification for zero-rated sales must be established before the claimant will be entitled to refund. Perusal of records disclosed the following: (a) failure to prove the existence of Non-Resident Foreign Corporation status of foreign clients; (b) services rendered fall under any of the categories under Section 108(B)(2); (c) services provided to clients are not in the same category as "processing, manufacturing or repacking goods"; (d) lack of verification whether the purported foreign currency remittances actually pertain to the alleged zero-rated sales of services; (e) defects on invoicing; and (f) failure to proportionally allocate sales to 12% VAT on the remaining valid input VAT. Consequently, failure to substantiate that the Petitioner has sufficient input taxes to offset output taxes due for the period covered merits the DENIAL of its claim for refund.

WHEN ACCUSED FILES DEMURRER TO EVIDENCE, THE ROLE OF COURTS IS TO ASCERTAIN WHETHER THERE IS COMPETENT OR SUFFICIENT EVIDENCE TO ISSUE A JUDGMENT AGAINST THE ACCUSED & TO DISMISS THE CASE IF IT FINDS NONE

PEOPLE OF THE PHILIPPINES VS. GRAND EAST EMPIRE CORPORATION & SOLANIA G. ONG

CTA CRIM. CASE NOS. 0-779, 0-780 & 0781, JANUARY 24, 2022

Accused Grand East Empire Corporation (“GEEC”) and Solania G. Ong filed a Motion for Leave of Court to File Demurrer to Evidence and Demurrer to Evidence praying for the dismissal of the case for insufficiency of evidence and for the release of Ong’s cash bond. In ruling, the Court held that when the Accused filed a Demurrer to Evidence, the role of the Courts is to "ascertain whether there is competent or sufficient evidence to issue a judgment" against the Accused and to dismiss the case if it finds none. In this case, Accused GEEC and Ong are indicted for violation of Section 255 in relation to Sections 253 and 256 of the Tax Code. Clearly, the Prosecution’s failure in establishing the BIR's compliance with the mandate of Section 228 of the Tax Code and Section 3 of Revenue Regulations No. 12-99 is tantamount to a violation of GEEC's rights to due process, rendering the assessment void, and it follows that GEEC is not liable to pay any deficiency taxes. Consequently, since GEEC has no deficiency taxes, the Company cannot be deemed to have willfully failed to pay the alleged deficiency tax liability. Hence, all the elements for an accused to be liable under Section 255 of the Tax Code were not established. Further, the penalty imposed under Sections 253 and 256 of the Tax Code cannot be imposed on Ong for the Prosecution's failure to prove that she is a responsible officer of GEEC during the taxable year 2006. Without any proof of Ong's role, designation, or position in GEEC, she cannot be held liable for violation of Section 255 in relation to Sections 253 and 256 of the Tax Code. Thus, the Motion was GRANTED.

WITHHOLDING AGENT HAS A LEGAL RIGHT TO FILE A CLAIM FOR REFUND PROVIDED IT HAS THE OBLIGATION TO REMIT THE SAME TO THE PRINCIPAL TAXPAYER

WITHHOLDING AGENT MAY FILE A CLAIM FOR REFUND ON BEHALF OF ITS FOREIGN PARENT COMPANY

WITHHOLDING AGENT NEED NOT BE RELATED PARTIES IN ORDER TO GAIN LEGAL PERSONALITY FOR FILING A CLAIM FOR REFUND

COMMISSIONER OF INTERNAL REVENUE VS. TOLEDO POWER COMPANY

CTA EN BANC CASE NO. 2359, JANUARY 5, 2022

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse and set aside the earlier decision of the CTA First Division on the issuance of Tax Credit Certificate (TCC) on alleged erroneously paid taxes arising from income payments made to a non-resident foreign corporation. Petitioner argued that Respondent Toledo Power Company is a mere withholding agent without any personality to claim for refund as the right belongs to the person to whom the tax is imposed by the statute. In addition, to be entitled to a refund or TCC the income payment should have been declared as part of the gross income. Further, the income payment received was not declared as part of its gross income because Respondent and Yashima are unrelated entities. On the other hand, Respondent countered that while it is indeed the taxpayer who has the legal personality to file a claim for refund, the withholding agent may also file a claim for refund in lieu of the taxpayer, pursuant to the ruling of the Supreme Court in Commissioner of Internal Revenue v. Smart Communication, lnc. In ruling, the Court held that a withholding agent has a legal right to file a claim for refund in case the taxpayer does not file a claim for refund. Further, a withholding agent is considered a proper party to file a claim for refund of the withheld taxes of its foreign parent company, and that the taxpayer need not be related parties in order for the withholding agent to have a right to file a claim for refund on behalf of the taxpayer. Thus, the Petition was DENIED for lack of merit.

PROPER MATCHING OF SALES INVOICE & AIRWAY BILL ARE ESSENTIAL IN A REFUND CASE OF INPUT VAT ATTRIBUTABLE TO ZERO-RATED SALES

AMERTRON INCORPORATED VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 9893, JANUARY 4, 2022

Petitioner Amertron Incorporated filed a Petition for Review seeking refund of alleged unutilized input Value-Added Tax (VAT) attributable to its zero-rated sales. Petitioner asserts that it has met all the requirements to qualify for input VAT refund. On the other hand, Respondent Commissioner of Internal Revenue (CIR) countered that the Petitioner failed to: (a) prove that it has zero-rated sales; (b) comply with the proper invoicing requirements when no corresponding zero-rated sales invoice were submitted to prove their export sales to Singapore; and (c) provide invoices that are covered by an Authority to Print (ATP) from the BIR. In ruling, the Court cited Section 106(A)(2)(a)(1) of the 1997 Tax Code, that for an export sale of goods to qualify as zero-rated, the following requirements must be met: (1) The sale was made by a VAT-registered person; (2) There was a sale and actual shipment of goods from the Philippines to a foreign country; and (3) The sale was paid for in acceptable foreign currency accounted for in accordance with the rules and regulations of the BSP. Perusal of the documents showed that out of Php 1,272,835,412.40, only Php 171,120,035.98 was considered valid zero-rated sales properly supported with the necessary documents. Likewise, the details of the amount of Php 171,120,035.98 do not match with the details in the sales invoices marked and submitted as evidence. Further, there is a difference in the names and addresses of the Petitioner’s customers appearing in their zero-rated sales invoices vis-à-vis the air waybill documents. Indisputably, Petitioner failed to establish the linkage between the air waybill documents and their zero-rated sales invoices; hence, the Court failed to ascertain whether the sales were shipped to the intended foreign customers. Consequently, the Petition was DENIED for lack of merit.

LAWS ARE APPLIED PROSPECTIVELY UNLESS OTHERWISE EXPRESSLY PROVIDED FOR

DENIED EXCISE TAX REFUND DUE TO BELATED FILING

LEPANTO CONSOLIDATED MINING COMPANY VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2273, DECEMBER 16, 2021

Petitioner Lepanto Consolidated Mining Company filed a Petition for Review seeking to reverse the Court’s earlier decision dismissing the Petition due to lack of jurisdiction because of belated filing. Petitioner argued that the dismissal is tantamount to a denial of the right to appeal and violation of the constitutional right to due process. Likewise, the provisions of Tax Reform for Acceleration and Inclusion (TRAIN) Law shall apply in this case. In ruling, the Court held that the Petitioner’s allegation that the TRAIN Law version of Section 112(C) of the Tax Code should be applied in the instant case is erroneous. The subject refund was filed in March and June 2011, or before the effectivity of the TRAIN Law. Thus, all amendments caused by the TRAIN Law to the Tax Code are wholly inapplicable in the present case. It is noteworthy that tax laws are applied prospectively unless otherwise expressly provided for. Under the pre-TRAIN Law, the taxpayer affected may, within 30 days from the receipt of the decision denying the claim or after the expiration of the 120-day period from the date of submission of complete documents in support of the application, appeal the decision or the unacted claim with the Court of Tax Appeals. Here, Petitioner failed to comply with the mandatory and jurisdictional 120+30-day period. Following the above discussions, the Court deems it unnecessary to resolve the other issues. Thus, the Petition was DENIED.

ROHQ & ITS MOTHER COMPANY MAY NOT BE TREATED AS A SEPARATE ENTITY

COMMISSIONER OF INTERNAL REVENUE VS. MSCI HONG KONG LIMITED

CTA EN BANC CASE NO. 2258, DECEMBER 15, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the earlier decision of the Court in Division partially granting the refund in favor of the Respondent MSCI Hong Kong Limited relative to its unutilized and excess input value-added tax (VAT) attributable to zero-rated sales of services rendered to foreign entities not engaged in business in the Philippines. Petitioner claimed that Respondent failed to prove such; and even insinuated that one of its recipients is the parent company. After going over the records of the case, the Court echoed the findings of the Court in Division that the Respondent sufficiently proved that its clients, MSCI, Inc. and IPD UK are not engaged in business within the Philippines. Accordingly, Petitioner relied on the Institutional Shareholder Services, Inc. Philippine ROHQ v. CIR (ISSI Case) which ruled that the Regional Operating Headquarter (ROHQ) and its mother company may not be treated as a separate entity in reference to MSCI, Inc. and MSCI Hong Kong Limited. However, it was elucidated that the Respondent is the Philippine Branch, and to be precise, the ROHQ of MSCI Hong Kong Limited, a Hong Kong based entity, not a subsidiary of MSCI, Inc., which was established under the laws of Delaware, USA – making it inapplicable to the case at bar. Considering the foregoing, Respondent is entitled to an input VAT refund. Therefore, Petition was DENIED for lack of merit, and earlier Decision and Resolution were AFFIRMED.

REASSIGNMENT OR TRANSFER OF CASES TO ANOTHER RO REQUIRES THE ISSUANCE OF AN LOA

A MOA IS A MERE NOTICE OF REASSIGNMENT & NOT A PROOF OF AUTHORITY TO CONDUCT AN EXAMINATION AND ASSESSMENT

HARD ROCK CAFÉ (MAKATI CITY) INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9945, DECEMBER 10, 2021

Petitioner Hard Rock Café (Makati City) Inc. filed a Petition for Review seeking cancellation of the assessment issued by Respondent Commissioner of Internal Revenue (CIR) covering the year 2014. Petitioner elevated the case to this Court following the expiration of the 180-day period within which the Respondent could act upon its preceding request for reinvestigation. It is well-settled that the authority granted to Revenue Officers (ROs) to conduct audit and examine taxpayer’s books is a continuing requirement and any gap in authorization will violate the taxpayer’s right to due process. Such authority emanates from a Letter of Authority (LOA) issued by the CIR or his duly authorized representative. In the instant case, the authority of the RO and the Group Supervisor (GS) reassigned to Petitioner merely came from a Memorandum of Assignment (MOA) issued by a Revenue District Officer (RDO). Revenue Memorandum Order (RMO) No. 43-90 mandates the issuance of a new LOA in cases of reassignment or transfer of examination to another RO. Moreover, in the case of CIR v. McDonald’s Philippines Realty Corporation the Supreme Court highlighted the difference between an MOA and LOA. The former being a notice of the fact of reassignment and transfer of cases, and the latter being the proof of existence of authority to conduct an examination and assessment. A mere MOA signed by the RDO does not and cannot confer proper authority to the RO and GS reassigned to the case of Petitioner. As such, their investigation and subsequent assessment of Petitioner’s tax deficiency could not be given any effect. It was further reiterated that the absence of an LOA results in the nullity of the assessment or examination due to violation of the taxpayer’s right to due process. Consequently, the Petition was GRANTED, and the assessment issued against Petitioner was CANCELLED AND SET ASIDE.

TAX CODE DOES NOT REQUIRE THE INPUT TAX TO BE DIRECTLY ATTRIBUTABLE TO ZERO-RATED SALES TO BE REFUNDABLE OR CREDITABLE

COURTS ARE BARRED UNDER THE BUSINESS JUDGMENT RULE FROM INTERFERING WITH THE BUSINESS JUDGMENTS, POLICIES & DECISION-MAKING BY AN ENTITY OR ITS OFFICERS WHEN THE SAME ARE MADE IN GOOD FAITH

COMMISSIONER OF INTERNAL REVENUE VS. S&WOO CONSTRUCTION PHILIPPINES, INC.

CTA EN BANC CASE NO. 2340, DECEMBER 10, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the partial refund or issuance of Tax Credit Certificate (TCC) in favor of Respondent S&WOO Construction Philippines, Inc. representing the latter's unutilized excess input VAT attributable to its zero-rated sales. Petitioner raised a lone assignment of error that the Court in Division erred in ruling that Respondent is entitled to refund. In ruling, the Court held that Petitioner has no standing to question the propriety of the service fees being charged by Respondent’s lone client Samsung Electro-Mechanics Philippines Corporation (SEMPHIL). Neither the Court nor Petitioner has a right to interfere with how Respondent bills its sales of services to its lone client, SEMPHIL. This is the very essence of the business judgment rule. Respondent was acting within its authority in including in the bill to SEMPHIL an amount corresponding to the input VAT it paid for its purchases of goods and services which were necessary to render services to SEMPHIL. Furthermore, on the contention that Respondent failed to prove that the input taxes sought to be refunded are directly attributable to its alleged zero-rated sale, is misplaced. The Court held that there is nothing in the Tax Code which states that the input tax needs to be directly attributable or a factor in the chain of production to the zero-rated sale for it to be creditable or refundable. In fact, the provision allows as tax credit an allocable portion of a taxpayer's input tax that is not directly and entirely attributable to the zero-rated sales. Nonetheless, provided that the subject input tax is evidenced by a VAT invoice or official receipt issued in accordance with Section 113 of the 1997 Tax Code, the same may be creditable against the output VAT. Therefore, the Petition was DENIED.

WHEN WORDS OF A STATUTE ARE CLEAR & UNAMBIGUOUS, COURTS CANNOT DEVIATE FROM THE TEXT OF LAW & RESORT TO INTERPRETATION

COMMISSIONER OF INTERNAL REVENUE VS. CHEVRON HOLDINGS, INC.

CTA EN BANC CASE NO. 2355, DECEMBER 9, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking reversal of the earlier Decision and Resolution partially granting Respondent Chevron Holdings, Inc. claim for refund representing unutilized input value-added tax (VAT) allegedly generated from its purchases vis-à-vis zero-rated sales for the 1st and 2nd quarters of 2015. Petitioner argued that input tax must come from purchases of goods that form part of the finished product or those that are directly used in the chain of production. In ruling, the Court cited Section 110(A) of the 1997 Tax Code, that for an input tax to be creditable, it must be evidenced by a VAT invoice or official receipt issued in accordance with Section 113 of the same Code. Accordingly, to be entitled to a claim for refund, the following requisites must be met: (1) taxpayer is VAT-registered; (2) refund claim is filed within the prescriptive period; (3) there must be zero-rated or effectively zero-rated sales; (4) input taxes were incurred or paid; (5) attributable to zero-rated or effectively zero-rated sales; and (6) they were not applied against any output VAT. The Court echoed the findings of the Court in Division that Respondent was able to comply with the foregoing requisites relative to the amount previously granted. Further, contrary to the Petitioner’s stance, it was explicated that when words of a statute are unambiguous, no deviation from and interpretation of such shall be made, and where the law does not distinguish, we ought not to. Following the discussion, Respondent has valid creditable input tax and is entitled to its refund. The Petition, therefore, was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.

DENIED INPUT VAT OF BOI-REGISTERED ENTITY DUE TO FAILURE TO PRESENT DOE ENDORSEMENT

YH GREEN ENERGY INCORPORATED VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9784, DECEMBER 7, 2021

Petitioner YH Green Energy Incorporated filed a Petition for Review seeking refund of its unutilized input VAT attributable to its zero-rated sales. Petitioner argues that it satisfied all the requisites for the VAT refund claim to prosper. Moreover, it was able to comply with the substantiation requirements of the BIR. In ruling, the Court held that Petitioner failed to establish that it is engaged in zero-rated sales. For a Renewable Energy Developer to qualify for VAT zero-rating, as contemplated under Republic Act No. 9513 otherwise known as “Renewable Energy Law of 2008” and its Implementing Rules and Regulations, DOE Certificate of Registration, Registration with the BOI, and Certificate of Endorsement from the DOE on a per transaction basis should be secured. Records showed that no DOE Certificate of Registration or a Certificate of Endorsement from the DOE, through the REMB, on a per transaction basis was submitted. The absence of these two (2) documents is fatal to Petitioner's cause. Petitioner likewise failed to establish that the unutilized input VAT is attributable to zero-rated sales. Scrutiny of documents showed that there were no zero-rated sales declared during the period of the claim against which the input VAT can be attributed. Also, it did not submit any corresponding VAT official receipts. Thus, the Petition was DENIED.

BOTH THE ADMINISTRATIVE & JUDICIAL CLAIMS FOR REFUND SHOULD BE FILED WITHIN THE 2-YEAR PRESCRIPTIVE PERIOD; THE LATTER CAN BE FILED EVEN WITHOUT WAITING FOR THE RESOLUTION OF THE FORMER

AECOM PHILIPPINES CONSULTANTS CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10008, DECEMBER 7, 2021

Petitioner Aecom Philippines Consultants Corporation filed a Petition for Review seeking refund of its excess and unutilized creditable withholding taxes (CWT) covering the fiscal year ended September 30, 2016. In the resolution of this case, the discussion centered on the exercise of the administrative remedies accorded to Petitioner. Pursuant to Section 204 (C) of the 1997 Tax Code, no credit or refund of taxes or penalties shall be allowed unless the taxpayer files with the Commissioner of Internal Revenue (CIR) a claim for credit or refund within two (2) years after the payment of the tax. Meanwhile, Section 229 of the Tax Code provides that in any case, no suit or proceeding shall be filed after the expiration of two (2) years from the payment of the tax. Both the administrative and judicial claims for refund should be filed within the 2-year prescriptive period, and the claimant is allowed to file the latter even without waiting for the resolution of the former to prevent the forfeiture of its claim through prescription. In relation to this, the Supreme Court ruled in a prevailing case that the 2-year period for claiming a refund shall be reckoned from the date of filing of final adjusted return or the annual income tax return (ITR) since it is only the time when the taxpayer would know whether a tax is still due, or a refund can be claimed based on the adjusted and audited figures. Examination of the chronology of events showed that Petitioner filed its administrative and judicial claims on January 15 and January 16, 2019, respectively, or just one (1) day apart. The Court deemed the Petitioner’s actions as disregard of the rule of requiring the exhaustion of administrative remedies for it did not afford the Respondent CIR ample time to decide the administrative claim for refund considering that such claim had voluminous supporting documents. Furthermore, in the recent case of Chin vs. Maersk-Filipinas Crewing, Inc., et al., the Supreme Court cautioned that every opportunity must be given to the agency to resolve the matter and to exhaust all opportunities for a resolution under the given remedy before elevating the case to the courts of justice. Petitioner clearly failed to exhaust the administrative remedies available to it, hence, the Petition was DENIED for lack of merit.

FAILURE TO INDICATE DEFINITE DATE TO SETTLE IN THE ASSESSMENT NOTICE RESULTS IN AN INVALID ASSESSMENT

COMMISSIONER OF INTERNAL REVENUE VS. UNIVERSAL ROBINA CORPORATION

CTA EN BANC CASE NO. 2280, DECEMBER 7, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the Decision and Resolution rendered by the Court of Tax Appeals (CTA) First Division cancelling the assessment issued to Respondent Universal Robina Corporation representing alleged deficiency improperly accumulated earnings tax (IAET). Petitioner claimed that its basic right to fair play and due process was violated when the Court in Division ruled on the issue on the lack of definite amount of tax liabilities and failure to state the due date of payment of such, which was not raised as an issue in the pleadings or during trial. In reply, the Court En Banc clarified that its authority is not limited to the issues stipulated by the parties but may also rule upon related issues necessary to achieve an orderly disposition of the case as provided under Section 1, Rule 14 of the Revised Rules of the Court of Tax Appeals (RRCTA). Accordingly, the Court in Division was correct in delving into such matter as it was deemed necessary with respect to the determination of the validity of the assessment issued to Respondent. Moreover, records showed that the issue on the validity of the Final Letter of Demand (FLD) and the assessment notices were taken up during trial as the parties agreed to resolve whether Respondent is liable for deficiency IAET. Hence, the Petitioner cannot claim that its right to due process has been violated. Perusal of the FLD further showed that it did not state a due date for the payment of taxes. In fact, the assessment notice indicated “remains unaccomplished” where a due date should have been stated. Thus, the assessment is invalid and as such, it shall bear no valid fruit. Consequently, the Petition was DENIED, and the assailed Decision and Resolution were AFFIRMED.

RDO IS NOT ONE OF THE OFFICIALS AUTHORIZED BY LAW TO SIGN AN LOA

ADMINISTRATIVE ISSUANCES CANNOT AMEND SUBSTANTIVE LAW

ALL AUDITS SHOULD BE CONDUCTED UNDER AN LOA & REQUIRES ISSUANCE OF A NEW LOA IN CASE OF ANY REASSIGNMENT OR TRANSFER OF CASES TO ANOTHER RO

REPUBLIC OF THE PHILIPPINES VS. ROBIEGIE CORPORATION

CTA EN BANC CASE NO. 2339, DECEMBER 2, 2021

Republic of the Philippines filed a Petition for Review, seeking to reverse and set aside the earlier Decision and Resolution of the Court in Division dismissing the tax assessment against Respondent Robiegie Corporation on the ground that the Revenue Officers (RO) were not duly authorized by a Letter of Authority (LOA) when they conducted the examination of books of accounts. Petitioner contends that a Memorandum of Assignment (MOA) is sufficient to confer authority upon the RO in question. In ruling, all audits should be conducted under an LOA, and require the issuance of a new LOA in case of any reassignment or transfer of cases to another RO. Perusal of records showed that the RO was not validly authorized by a new LOA, when she exercised assessment functions. Consequently, the subject tax assessments resulting from the investigation, audit, and recommendation is void. In any case, assuming arguendo, that the Memorandum Referral is accepted by this Court as a valid substitute for an LOA, it would still be insufficient as basis to confer authority, for the subject Memorandum showed that it was only signed by the Revenue District Officer (RDO). Under pertinent BIR issuances, RDO is not one of the officials authorized by law to sign an LOA or confer authority upon an RO to perform assessment functions. Thus, unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. Moreover, the Court did not accept the contention of the Petitioner that under Revenue Memorandum Orders, MOA should be recognized for the continuation of the audit. The issuances run counter to the provisions of Sections 6(A) and 13 of the 1997 Tax Code, which is the substantive law on the matter. It is well settled that a mere administrative issuance cannot amend the law. Thus, the provisions of RMO No.’s. 8-2006, 62-2010 and 69- 2010 relied upon by the Commissioner of Internal Revenue cannot prevail over the clear import of the Tax Code. With the foregoing disquisition, the Court finds no compelling reason to reverse nor modify the findings of the Court a quo in the assailed Decision and Resolution. Thus, the Petition was DENIED.

WHEN THE 120-DAY PERIOD LAPSES & THERE IS INACTION, THE INACTION IS THE DECISON ITSELF

RIOFIL CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2220, DECEMBER 2, 2021

Petitioner Riofil Corporation filed a Petition for Review seeking refund of its unutilized and unapplied input value-added tax (VAT) for the taxable year 2011. Petitioner contended that it timely filed its administrative and judicial claims for refund. Upon filing of an application for refund, the taxpayer-claimant must submit the required documents within 30 days. For additional documents, the taxpayer-claimant is also given 30 days from the request. From thereon, Commissioner of Internal Revenue (CIR) is given 120 days to decide on the claim. To recall the chronology of events, the 1st Letter of Authority (LOA) was issued on February 24, 2012; while the 2nd was received on September 6, 2012. Given the timeline, the Petitioner had until March 25, 2012 and October 6, 2012, respectively, to submit the required documents. It submitted only on April 11, 2012, and additional documents for both the 1st and 2nd administrative claims only on June 26, 2013 and October 18, 2013 – which were both past the deadline. Therefrom, Respondent CIR had until July 23, 2012 and February 3, 2013, respectively, to decide on the case. After which, Petitioner had until August 12, 2012 and March 5, 2013, respectively, to file its judicial claim. However, it was belatedly filed on April 6, 2016; hence, the denial of its administrative claim has become final. In ruling, the Court reiterated its stand in Rohm Apollo Semiconductor Philippines vs. CIR that when the 120-day period lapsed and there is inaction, the decision is the inaction itself. Despite receiving letters from Revenue Officer (RO) and Group Supervisor (GS) partially granting its claim, such is already considered denied due to inaction. Additionally, they are not authorized to do the same. Based on the foregoing, the Petitioner failed to timely file its judicial claim; therefore, the Petition was DENIED, and earlier Decision and Resolution were AFFIRMED.

WITHOUT INDICTMENT & WITHOUT BEING CHARGED IN THE INFORMATION, A PERSON CANNOT BE CONVICTED

THERE IS NO PENAL LAW THAT DIRECTLY CHARGES CORPORATE OFFICERS FOR WILLFUL ATTEMPT TO EVADE CORPORATE INCOME TAX

ENVIROAIRE, INC., REPRESENTED BY TYRONE N. ONG & ARLENE CHUA VS. PEOPLE OF THE PHILIPPINES

CTA EN BANC CRIMINAL CASE NO. 073, NOVEMBER 25, 2021

Petitioners Enviroaire, Inc., represented by Tyrone N. Ong and Arlene Chua, filed a Petition for Review praying to reverse and set aside the earlier Decision of the Court in Division finding them guilty beyond reasonable doubt of violating Section 254 in relation to Sections 253 and 256 of the Tax Code. The Court in Division rejected Petitioners' argument that Enviroaire was not required to report income in relation to its sale to the PNP in 2007 since it only received payment in 2008, hence, contrary to the accounting method employed in its financial reporting which is the Accrual Method of Accounting. Petitioners argued that that their right to be informed of the nature and cause of accusation against them was violated. They averred that based on the Amended Information, they were indicted for violation of Section 254 of the Tax Code for taxable year 2007, while the charges against them were based on official receipts that were issued in 2008. Further, they stressed that Respondent failed to prove the existence of all the elements of tax evasion under Section 254 of the Tax Code. In ruling, the Court resolved that Enviroaire was not charged as an Accused in the Amended Information, thus, the Court never obtained jurisdiction over it. Furthermore, Petitioners Ong and Chua's conviction must be set aside since Enviroaire was not charged in the Information and as such, their conviction has no leg to stand on. Likewise, the imposition of the penalty upon a corporate officer under Section 254 in relation to Section 253 of the Tax Code without first convicting the corporation is void. Henceforth, without a convicted corporation, there is no erring responsible officer. Also, to punish the officers without establishing the guilt of the juridical entity runs against the basic tenets of due process. It must be stressed that there is no penal law that directly charges the corporate officers for willful attempt to evade and defeat corporate income tax. Hence, without Enviroaire, the facts charged against Petitioners Ong and Chua do not constitute an offense. Therefore, the Petition was GRANTED, and C.T.A. Crim. Case No. 0-408 was DISMISSED on the grounds of lack of jurisdiction and the facts charged do not constitute an offense.

THE TAX CODE REQUIRES THAT THE ADMINISTRATIVE & JUDICIAL CLAIMS FOR REFUND MUST BE FILED WITHIN THE 2-YEAR PRESCRIPTIVE PERIOD REGARDLESS OF ANY SUPERVENING CAUSE THAT MAY ARISE AFTER PAYMENT

PMFTC, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 10110, NOVEMBER 25, 2021

Petitioner PMFTC, Inc. filed a Petition for Review seeking for refund and/or issuance of tax credit certificate (TCC) allegedly representing excise tax paid for cigarette packs. Petitioner argued that it is settled that the excise tax collected by Respondent Commissioner of Internal Revenue (CIR) pursuant to Section 11 of Revenue Regulations No. 17-2012, as clarified in Revenue Memorandum Circular No. 90-2012, was excessive and violative of the provisions of the Tax Code. On the other hand, Respondent countered that the Petitioner is not entitled to the claim since both the administrative and judicial claims for refund were filed out of time. In ruling, the Court cannot take cognizance of a judicial claim for refund filed either prematurely or out of time. Pursuant to Sections 204(C) and 229 of the 1997 Tax Code, the administrative and judicial claims for refund or credit of internal revenue taxes must be filed within the two (2)-year prescriptive period regardless of any supervening cause that may arise after payment. In addition, Section 229 is not only mandatory, but it also jurisdictional. As noted, the Petition was filed out of time. Hence, the Petition was DISMISSED due to lack of jurisdiction.

TAXPAYER MUST BE INFORMED IN WRITING OF THE LAW & FACTS ON WHICH THE ASSESSMENT IS MADE

CIR’S REJECTION OF TAXPAYER’S EXPLANATION MUST BE REASONABLE, BACKED WITH FACTS & COMMUNICATED

BAC-MAN GEOTHERMAL, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9728, NOVEMBER 18, 2021

Petitioner Bac-Man Geothermal, Inc. filed a Petition for Review seeking cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR) covering taxable year 2013. Several issues were raised but the case was ultimately decided based on the compliance with due process requirements in the issuance of the assessment. Section 228 of the 1997 Tax Code, as amended, and Revenue Regulations (RR) No. 12-99, as amended, require that taxpayer be informed in writing of the law and facts on which the assessment is made. The Court found the Preliminary Assessment Notice (PAN) compliant with aforecited provisions. However, the Formal Letter of Demand (FLD) and the Final Decision on Disputed Assessment (FDDA) were mere reproduction of the wordings of the PAN, differing only in the computation of the interest, and neither referred to the Petitioner’s reply nor addressed its arguments therein. Albeit the Revenue Officers (RO) preparing memoranda indicating the reasons for rejection of the Petitioner’s arguments, Respondent did not communicate these reasons. In ruling, Court cited the case of CIR vs. Avon Products Manufacturing, Inc. that although not obliged to accept the taxpayer’s explanations, the former must provide facts backing the rejection. Considering the following, the Petition was GRANTED, FLD was CANCELLED and WITHDRAWN, and FDDA was SET ASIDE.

IF THE TAXPAYER DENIES RECEIPT OF AN ASSESSMENT FROM THE BIR, THE LATTER HAS TO PROVE THAT SUCH ASSESSMENT WAS INDEED RECEIVED BY THE FORMER

10K SOUTH CONCRETE MIX SPECIALIST INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9730, NOVEMBER 18, 2021

Petitioner 10K South Concrete Mix Specialist Inc. filed a Petition for Review seeking for the cancellation of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Several issues were raised, but the Court instead resolved the issue of whether the Petitioner has received the assessment notice. Petitioner stresses that it was never received, either personally or through registered mail, the Formal Letter of Demand/Formal Assessment Notice (FLD/FAN). On the other hand, Respondent contends that the FLD/FAN was served to the Petitioner through registered mail. As held by the Supreme Court in CIR vs. T Shuttle Services, Inc., a mailed letter is deemed received by the addressee in the ordinary course of mail. However, this is merely a disputable presumption. If the taxpayer denies receipt of an assessment from the BIR, the latter must prove that such assessment was indeed received by the former. In the present case, while Respondent was able to present Postmaster Certification relative to the alleged mailing of the FLD to Petitioner, Respondent failed to prove that the document which was mailed to Petitioner was the FLD/FAN. Likewise, there was no evidence to attest to the fact that it was the Petitioner’s duly authorized representative who received such a document supposedly containing the FLD. Consequently, for having failed to comply with the due process requirements set forth in Section 288 of the 1997 Tax Code and Revenue Regulations No. 12-99, as amended, the assessment should be CANCELLED.

ASSESSMENT HAS BECOME FINAL & EXECUTORY FOR FAILURE TO FILE VALID PROTEST LETTER

HR MALL, INC. VS. COMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 9981, NOVEMBER 12, 2021

Petitioner HR Mall Inc. filed a Petition for Review seeking nullity of the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner claims that the period to assess for all its internal revenue taxes for the most part of the taxable year 2014 has already prescribed rendering the assessment null and void. In addition, there is no valid Letter of Authority (LOA). On the other hand, Respondent contends that since the subject Final Assessment Notice (FAN) has already become final, executory, and demandable, the Court no longer has jurisdiction to entertain the instant Petition and that the LOA was validly issued to Petitioner. In ruling, the Court held that the subject warrant of distraint and/or levy is valid since the Petitioner failed to file a valid protest against the FAN due to lack of statement as to the type of protest the Petitioner has filed. Based on the foregoing, the subject tax assessment has become final, executory, and demandable. Thus, the Petition was DENIED for lack of merit.

MOA IS NOT SUFFICIENT TO AUTHORIZE RO TO CONDUCT A TAX INVESTIGATION

COMMISSIONER OF INTERNAL REVENUE VS. LOYOLA PLANS CONSOLIDATED, INC.

CTA EN BANC CASE NO. 2324, NOVEMBER 11, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the earlier decision of the Court in Division cancelling the assessment against the Respondent Loyola Plans Consolidated, Inc. Petitioner argues that the Revenue Officers (ROs) assigned to continue the audit of Respondent's books were duly authorized. The factual antecedents of the case reveal that the tax examination conducted by Petitioner was preceded by the issuance of Letter of Authority (LOA) authorizing ROs Gomez, Yumang, and Group Supervisor San Diego of Large Taxpayer (LT) District Office-Makati to examine the Respondent's books of accounts. However, prior to the issuance of the assessment, a Memorandum of Assignment (MOA) signed by OIC-Chief of LT Division was issued to RO Urbano and GS Bennett for the continuation of the audit and to replace the previously assigned RO Gomez. In ruling, the Court referred to Section 6 of the 1997 Tax Code, which clearly states that, unless the CIR or his duly authorized representative so authorizes (through an LOA), an examination of the taxpayer cannot ordinarily be undertaken. The Court further cited numerous Court cases which provide that the issuance of an MOA for the continuation of the tax examination by another set of ROs will not cure the lack of authority by the latter ROs in the absence of an LOA. Thus, the subsequent notices resulting from such audit as a result of an unauthorized tax examination were NULL AND VOID.

EXCISE TAXES PAID DURING 5-YEAR RECOVERY PERIOD NOT RECOVERED WOULD MERELY FORM PART OF THE GOVERNMENT'S SHARE

OCEANAGOLD (PHILIPPINES), INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NOS. 10021 & 10061, NOVEMBER 10, 2021

Petitioner OceanaGold (Philippines), Inc., a mining service contractor of the Republic of the Philippines, filed a consolidated Petition for Review seeking for the refund or issuance of a Tax Credit Certificate (TCC) for excise taxes covering the 1st and 2nd quarters of the taxable year 2017. Petitioner claimed that the excise taxes were paid during the five-year recovery period under the Financial or Technical Assistance Agreement (FTAA). Further, it assailed the validity of BIR Ruling No. 10-2007, which confirmed its exemption from payment of such; and that Revenue Memorandum Circular (RMC) No. 17-2013, which reversed this exemption, is invalid for allegedly being issued without notice and hearing. On the other hand, Respondent Commissioner of Internal Revenue (CIR) raised that the Court is devoid of authority to rule on the attack on the validity of RMC No. 17-2013; and that it should have been first elevated to the Secretary of Finance. In ruling, the Court held that it is an appeal from the Respondent’s inaction on Petitioner’s administrative claim for refund or TCC for erroneously or illegally collected excise taxes under Section 229 of the 1997 Tax Code that was filed within the two-year period from the date of payment; thus, it has jurisdiction over the present Petition. Based on the FTAA, Petitioner had three (3) years from the approval of its Partial Declaration of Mining Feasibility (PDMF) on October 11, 2005, or until October 11, 2008, to develop and construct mining production facilities, and another three (3) years thereafter for the commencement of commercial production or up to the 4th quarter of 2011. Following this timeline, the recovery period would have ended in the 4th quarter of 2016. The subject payments for excise taxes were made in 2017, and Petitioner failed to submit to the Court supporting documents such as notice/s to the government of the delay. Additionally, even if the Petitioner presented evidence, excise taxes made within the recovery period not recovered would merely form part of the government’s share. Thus, the Court found no erroneous or illegal collection of excise taxes refundable; therefore, Petition was DENIED for lack of merit.

DENIAL OF EXCISE TAX REFUND DUE TO FAILURE TO SUFFICIENTLY PROVE THAT FINISHED GOODS REMOVED WERE PRODUCED FROM THE TAX-PAID RAW MATERIALS

COURTS ARE NOT BOUND BY THE FINDINGS OF THE ICPA

GINEBRA SAN MIGUEL, INC. VS. COMMISSIONER OF INTERNAL REVENUE

CTA EN BANC CASE NO. 2308, NOVEMBER 10, 2021

Petitioner Ginebra San Miguel, Inc. filed a Petition for Review seeking to reverse the earlier decision denying its claim for refund or issuance of a Tax Credit Certificate (TCC), allegedly representing excise taxes erroneously, excessively, and wrongfully assessed on, and collected by the Respondent Commissioner of Internal Revenue (CIR) on removals of its distilled spirits or finished goods. Petitioner alleged that the testimony of the Independent Certified Public Accountant (ICPA) is an expert testimony, stating that the usage of the ethyl alcohol inventory on the finished goods was fully accounted for using the First-In First-Out (FIFO) method of accounting. Hence, it is inequitable for the Court to deny the entire claim. In ruling, the Court held that Petitioner is not entitled to the excise tax refund. The imposition of excise taxes on the finished liquor products produced from tax-paid ethyl alcohol is contrary to the mandate of Section 170 of the 1997 Tax Code; however, the same must be disallowed for Petitioner did not convince the Court of the factual aspect of its claim. The Court finds that while Petitioner was able to present adequate documents supporting the transfer of the raw alcohol from one place to another, supposedly for each process such as compounding and packaging, it failed to support the actual utilization of the raw alcohol into the production. Furthermore, the Court may render judgment without considering the ICPA Report, for it is only persuasive in nature and not conclusive upon the Court. Thus, the Petition was DENIED.

CREDITABLE INPUT TAXES WHICH CANNOT BE DIRECTLY OR ENTIRELY ATTRIBUTABLE TO ANY SALE TRANSACTIONS SHALL BE ALLOCATED PROPORTIONALLY ON THE BASIS OF THE VOLUME OF SALES

THERE IS NOTHING IN SECTION 110(A) OF THE 1997 TAX CODE, AS AMENDED, WHICH STATES THAT ONLY THOSE INPUT TAXES FROM PURCHASES OF GOODS THAT FORM PART OF THE FINISHED PRODUCT OF THE TAXPAYER, OR MUST BE DIRECTLY USED IN THE CHAIN OF THE PRODUCTION SHALL BE CONSIDERED AS CREDITABLE

COMMISSIONER OF INTERNAL REVENUE VS. LEPANTO CONSOLIDATED MINING COMPANY

CTA EN BANC CASE NO. 2389, NOVEMBER 9, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the Decision of the Court of Tax Appeals (CTA) 3rd Division granting partial refund or issuance of Tax Credit Certificate (TCC) representing unutilized input Value Added Tax in favor of Respondent Lepanto Consolidated Mining Company. Petitioner argued that Respondent was not able to prove its entitlement since no attributability was established between the input VAT generated from its purchases vis-a-vis its zero-rated sales. Likewise, for input taxes to be refundable, the same must come from purchases of goods that form part of the finished product, or the purchases must be directly used in the chain of the production. In ruling, the Court held that Section 112 of the 1997 Tax Code does not absolutely require that input taxes subject of refund be directly attributable to zero-rated sales. Creditable input taxes which cannot be directly or entirely attributable to any sale transaction shall be allocated proportionally based on the volume of sales. Further, there is nothing in Section 110(A) of the 1997 Tax Code which states that only those input taxes from purchases of goods that form part of the finished product of the taxpayer or must be directly used in the chain of the production shall be considered as creditable. Evidently, contrary to the Petitioner’s allegation, attribution of the input VAT to the zero-rated sales need not always be direct, and there is no legal basis to limit the source of creditable input tax. Thus, the Petition was DENIED for lack of merit, and the assailed Decision and Resolution were AFFIRMED.

A MEMORANDUM OF ASSIGNMENT GIVES NO VALID AUTHORITY TO RO TO CONDUCT AUDIT; HENCE, ASSESSMENTS ARE VOID

COMMISSIONER OF INTERNAL REVENUE VS. PHILPLANS FIRST, INC.

CTA EN BANC CASE NO. 2351, NOVEMBER 9, 2021

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the Court’s earlier Decision and Resolution cancelling the assessment issued against the Respondent Philplans First, Inc. Petitioner argued that the issue of the authority of the Revenue Officers (ROs) was not raised, and therefore, the Court cannot take cognizance of the same in the disposition of the case. In ruling, the Court held that it is within its authority to consider the authority of the ROs who were assigned to conduct the examination for the same is relevant in determining the validity of the disputed assessments. As held in prevailing Court cases, the examination and assessment against a taxpayer should be pursuant to a Letter of Authority (LOA) emanating from the CIR or his duly authorized representatives; in the absence thereof, any subsequent assessment issued shall be void. Furthermore, the issuance of a Memorandum of Assignment (MOA) in the instant case is not a valid source of authority since it was not signed by the CIR or his duly authorized representative. Hence, the resulting assessments were declared VOID. Granting for the sake of argument that the ROs had the authority to conduct the audit of Respondent, the assessments issued are still void since the Formal Letter of Demand (FLD) and Assessment Notices bear no due date for the payment of tax liabilities. Consequently, the Petition was DENIED, and the previous Decision and Resolution were AFFIRMED.

ESTABLISHING NRFC STATUS OF A CLIENT IS FATAL IN CLAIMING FOR REFUND ATTRIBUTABLE TO ZERO-RATED SALES

DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD. VS. COMMISSIONER OF INTERNAL REVENUE, COMMISSIONER OF INTERNAL REVENUE VS. DEUTSCHE KNOWLEDGE SERVICES, PTE. LTD.

CTA EN BANC CASE NOS. 2248 & 2252, NOVEMBER 8, 2021

Commissioner of Internal Revenue (CIR) and Deutsche Knowledge Services, PTE. LTD (DKS) filed Petitions for Review praying for the reversal and setting aside of the earlier Decision and Resolution of the Court in Division partially granting the refund or issuance of tax credit certificate (TCC) for the unutilized excess input value-added tax (VAT) attributable to zero-rated sales of DKS to non-resident foreign corporations for the taxable year 2012. The sole issue to be resolved is whether DKS is entitled to the partial grant of its claim for refund. In ruling, the Court held that for purposes of zero-rating under Section 108(B)(2) of the Tax Code, the claimant must establish that a client is a Non-Resident Foreign Corporation (NRFC). Corollary, claimant must show sufficient proof that (1) it was established under the laws of another country; and (2) it is not engaged in trade or business in the Philippines. The Court in Division had correctly excluded the amount attributable to clients whose SEC Certificate of Non-Registration of the Company and Authenticated Articles of Association and/or Certificates of Registration/Good Standing/Incorporation were sufficiently provided. For disallowed input VAT due to lapses in the official receipts issued by the supplier of DKS, it was elucidated that due diligence on its part should have been observed. In the present Petitions, CIR failed to prove that the Assailed Decision of the Court was attended by grave abuse of discretion; hence, must remain undisturbed. Consequently, both Petitions were DENIED for lack of merit; and the earlier Decision and Resolution were AFFIRMED.