Supreme Court Cases Digest
PUBLIC OFFICIALS MUST BE GIVEN THE OPPORTUNITY TO EXPLAIN ANY PRIMA FACIE APPEARANCE OF DISCREPANCY IN SALN
THE REPORTING INDIVIDUAL CANNOT BE SUBJECT TO DISCIPLINARY ACTION WITHOUT BEING INFORMED OF HIS OR HER ERRORS OR OMISSIONS
SALN IS IMPORTANT IN PROMOTING ACCOUNTABILITY & TRANSPARENCY IN THE PUBLIC SERVICE
DEPARTMENT OF FINANCE-REVENUE INTEGRITY PROTECTION SERVICE VS. UTHMAN FUENTES MAMADRA & ROSALINDA PASTOLERO MAMADRA
G.R. NO. 255328, DECEMBER 6, 2023, UPLOADED MARCH 26, 2024
Petitioner Department of Finance-Revenue Integrity Protection Service filed a Petition for Review on Certiorari assailing the Court of Appeals (CA)’s earlier Decision and Resolution. Petitioner argued that the CA erred in not imposing the penalty of dismissal from the service, as provided under Republic Act (R.A.) No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees, against the Respondents Uthman Fuentes Mamadra and Rosalinda Pastolero Mamadra (Spouses Mamadra). In ruling, the Court reiterated that the laws on Statement of Assets, Liabilities, and Net Worth (SALN) aim to curtail the acquisition of unexplained wealth. Here, the properties which the spouses Mamadra failed to declare were not alleged nor proven to have been acquired through unexplained sources, or that the values of the said properties were disproportionate to their salaries and other lawful income. Moreover, as correctly argued by the Spouses Mamadra, R.A. No. 6713 does not automatically impose liability on erring public officials or employees. The law and its rules allow public officials to review and fix mistakes in their asset declarations. Here, the Spouses Mamadra were not given the opportunity to amend or correct their SALN, which could have been prevented if they were properly apprised by their office. Notably, in filing their 2014 SALN, the Spouses Mamadra already rectified the alleged inaccuracies in their previous SALNs. Thus, the Court found no error in the CA Decision regarding the non-imposition of the penalty of dismissal from the service. However, the Court did not agree with the CA, finding the Spouses Mamadra guilty of Simple Negligence. Given that the review and compliance mechanism was not complied with, administrative liability for omissions or errors in SALNs will not attach. Hence, the Petition was PARTIALLY GRANTED and the administrative charges against Spouses Mamadra were DISMISSED.
ADMIN PENALTIES FOR FOREIGN INVESTMENT ACT VIOLATION ARE IMPRESCRIPTIBLE
LACHES OR ESTOPPEL CANNOT APPLY TO SEC
ESTOPPELS AGAINST THE PUBLIC ARE LITTLE FAVORED
NEW COAST HOTEL, INC. VS. SECURITIES & EXCHANGE COMMISSION
G.R. NO. 264667, NOVEMBER 8, 2023, UPLOADED MARCH 18, 2024
Petitioner New Coast Hotel, Inc. filed a Petition for Review on Certiorari assailing the Court of Appeals (CA)’ earlier Decision and Resolution, which affirmed the ruling of the Respondent Securities and Exchange Commission (SEC) holding the Petitioner administratively liable for violation of Republic Act (R.A.) No. 7042, as amended by R.A. No. 8179, or the Foreign Investments Act of 1991 (FIA). Petitioner argued that since the Respondent should have discovered its offense as early as 2005 based on filings it made to the Respondent, it is barred by prescription from acting on their violation. Likewise, the Respondent is barred by estoppel by laches from penalizing their violation of the FIA since it failed to act on the same immediately. In ruling, the Court found that no error was committed by CA when it refused to apply Section 1149 of the Civil Code in determining the prescriptive period for violation of administrative offenses under the FIA. Since there was no specific prescription period provided for FIA violations, the Courts could not impose one. Prescription is a statutory matter, and without a specified period in the law, the violation remained actionable. Also, there is no evidence to support the defense of laches. The elements required for laches are delay, lack of notice, and prejudice. Laches is an equitable doctrine, and its application is controlled by equitable considerations. Since there was no undue delay or negligence on the part of the Respondent, the defense of laches was not applicable in this case. Consequently, the Petition was DENIED. The CA’s Decision and Resolution were AFFIRMED. Petitioner was held LIABLE for violating the FIA.
CHAMPERTOUS CONTRACT LIKE LITIGATION FINANCING ARRANGEMENT IS VOID FOR BEING CONTRARY TO PUBLIC POLICY
RODCO CONSULTANCY & MARITIME SERVICES CORPORATION HEREIN REPRESENTED BY FROILAN G. CLEMENTE, JR. VS. FLOSERFINO G. ROSS & ANTONIA T. ROSS
G.R. NO. 259832, NOVEMBER 6, 2023, UPLOADED MARCH 14, 2024
Petitioner RODCO Consultancy and Maritime Services Corporation filed a Petition for Review on Certiorari assailing the Court of Appeals (CA)’s earlier Decision and Resolution, which dismissed the Complaint for Sum of Money and Damages filed against Respondents Floserfino G. Ross (Floserfino) and Antonia T. Ross (Antonia). Petitioner argued that the Contract between the parties is a Contract of Loan wherein Petitioner undertook to pay for the expenses and extend assistance to Respondents in recovering their money with the understanding that they will reimburse Petitioner when they are able to recover their money claims. Petitioner also argued that providing legal services is incidental in case the claim necessitates the filing of the action before the competent court or quasi-judicial body. On the other hand, the Respondents countered that their consent in agreeing to the Irrevocable Memorandum of Agreement was vitiated as they were only made aware of the compensation due to Petitioner after issuing two blank checks. They also insisted that Petitioner is not permitted to collect lawyer’s fees as its employees and officers are not members of the Philippines Bar. In ruling, the Court held that the contract entered into by the Petitioner and the Respondents is void. A careful study of the terms of the Irrevocable Memorandum of Agreement and its supporting documents reveals that the arrangement between the parties is similar to a litigation financing arrangement. Here, the Petitioner gave money to finance the labor case instituted by Floserfino against his former employer and assisted him by securing the services of Atty. Concepcion to handle his case. In exchange, Floserfino and Antonia undertook to reimburse the Petitioner the expenses it incurred in litigating his labor case. The Court held that the litigation financing arrangement between the parties is prohibited because it is similar to a “Champertous Contract,” which is void for being contrary to public policy. The terms of the Irrevocable Memorandum of Agreement are ambiguous as to the exact amount to be recovered from Floserfino, which is disadvantageous to him. The Petitioner was required to show cause for its alleged unauthorized practice of law. Consequently, the Petition was DENIED.
WHAT DETERMINES REGULAR EMPLOYMENT IS THE REASONABLE CONNECTION BETWEEN WORK PERFORMED BY THE EMPLOYEE & THE USUAL BUSINESS OR TRADE OF THE EMPLOYER
MANGGAGAWA SA KOMUNIKASYON NG PILIPINAS VS. PLDT, INC., PLDT, INC. VS. HON. SECRETARY OF LABOR & EMPLOYEMENT SILVESTRE H. BELLO III; & MANGGAGAWA SA KOMUNIKASYON NG PILIPINAS & SILVESTRE H. BELLO III, IN HIS CAPACITY AS THE SECRETARY OF THE DEPARTMENT OF LABOR & EMPLOYMENT VS. PLDT, INC.
G.R. NO. 244695, 244752 & 245294, FEBRUARY 14, 2024, UPLOADED MARCH 7, 2024
Petitioners Manggagawa sa Komunikasyon ng Pilipinas (MKP), PLDT, Inc. (PLDT), and Silvestre Bello III, in his capacity as then Secretary of Department of Labor and Employment (Sec. Bello) filed their respective Petitions for Review on Certiorari assailing the earlier Decision and Resolution of the Court of Appeals (CA). MKP claimed that the CA erred in holding that the specific group of contracted workers that perform work not “directly related to the core activities” of PLDT, such as janitors and security guards, among others, cannot be regularized by PLDT. On the other hand, PLDT asserted that the CA erred in upholding the regularization of the contractors’ workers performing installation, repair, and maintenance services. Meanwhile, Sec. Bello argued that his finding that PLDT was engaged in labor-only contracting is strongly supported by the fact that PLDT was exercising control over the workers of the contractors. In ruling, the Court clarified that labor contracting is not illegal per se. The fact that PLDT had contracted out specific jobs, works, or services does not automatically mean that the contractors’ employees are the direct employees of PLDT. The Court also agreed with the CA that the ruling of the Regional Director was highly conjectural as it was based mainly on anecdotal evidence, i.e., the interviews conducted by the Labor Law Compliance Officers of not more than a thousand individuals, which figure also includes regular PLDT employees, but results of which were made to apply to at least 7,344 employees. The evidence relied upon by Sec. Bello failed to establish, among others, labor-only contracting and other illicit forms of employment arrangements. The Court is also in accord with the CA’s pronouncements that Sec. Bello mistook PLDT’s exercise of its power to control the results which control as to the means and methods of achieving the said results. The Court, nevertheless, sustained the CA’s findings that the workers engaged in installation, repair, and maintenance services of PLDT lines need to be regularized because they perform tasks that are necessary and desirable, and directly related to the business of PLDT. The computation of the monetary awards, to which PLDT and the erring contractors are solidarily liable, needs to be revisited. Consequently, the Petitions were DISMISSED. The Decision and Resolution of CA were AFFIRMED, and the Resolution of Sec. Bello was MODIFIED. Sec. Bello’s Order to regularize the workers of PLDT’s service contractors was SET ASIDE, except those performing installation, repair, and maintenance services, who are hereby declared regular employees of PLDT subject to the terms of the REMAND.
CERTIORARI IS NOT A SUBSTITUTE FOR A LOST APPEAL
THE PROPER REMEDY TO QUESTION THE CTA EN BANC’S JUDGMENT IS A PETITION FOR REVIEW ON CERTIORARI UNDER RULE 45 & NOT THROUGH A PETITION FOR CERTIORARI UNDER RULE 65
HEDCOR, INC. VS. COURT OF TAX APPEALS & COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 252407, JULY 31, 2023, UPLOADED FEBRUARY 27, 2024
Petitioner Hedcor, Inc. filed a Petition for Certiorari assailing the CTA En Banc’s earlier Decision and Resolution which dismissed its claim for refund or tax credit for unutilized input Value-Added Tax (VAT). Petitioner argued that the CTA En Banc committed grave abuse of discretion amounting to lack or excess of jurisdiction in deciding the case based on the Republic Act (R.A.) No. 9513 or the Renewable Act of 2008, which was not discussed during the trial, and that they were unfairly denied a new trial to present evidence. Also, under R.A. No. 9513, purchases by renewable energy developers are automatically zero-rated for tax purposes and do not require prior registration. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) countered that the Petitioner used the wrong legal remedy, and that the CTA has the authority to rule on issues not initially raised. In ruling, the Court resolved to dismiss the Petition. By filing a special civil action for Certiorari under Rule 65 of the Rules of Court to assail the CTA En Banc Decision and Resolution, the Petitioner availed itself of the wrong remedy. The proper remedy to question the CTA En Banc' s judgment is a Petition for Review on Certiorari under Rule 45. It is settled that a special civil action for Certiorari under Rule 65 of the Rules of Court is proper only when there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law. In addition, the issues raised by the Petitioner, although claiming to involve grave abuse of discretion, are clearly for the correction of errors of judgment, not errors of jurisdiction. Where the issue or question involved affects the wisdom of the decision-not the jurisdiction of the court to render the decision-the same is beyond the province of a Special Civil Action for Certiorari. Consequently, the Petition was DISMISSED.
A PROVISION OF SOCIAL SECURITY ACT OF 1997 ON DISQUALIFICATION OF COMMON-LAW SPOUSE AS PRIMARY BENEFICIARY IS DECLARED VOID
BELINDA D.R. DOLERA VS. SOCIAL SECURITY SYSTEM
G.R. NO. 253940, OCTOBER 24, 2023, UPLOADED FEBRUARY 15, 2024
Petitioner Belinda D.R. Dolera, as the surviving spouse of an SSS beneficiary, filed a Petition for Review on Certiorari assailing the Court of Appeals (CA)s’ earlier Decision and Resolution concurring with the Respondent Social Security Commission (SSS) that the Petitioner is not entitled to Survivorship Pension under the Social Security System (SSS) Law. Petitioner argued that the proviso “as of the date of disability” in Section 13-A(c) of the SSS Law (subject proviso), which qualifies the term “primary beneficiaries,” violates the due process and equal protection clauses of the Constitution. The Respondent averred that although Petitioner was the legal spouse of a deceased SSS member, she cannot be considered as a Primary Beneficiary under Section 13-A(c), as their marriage was contracted after her husband became disabled. In ruling, the Court held that the subject proviso violates the equal protection clause of the Constitution. By analogy, the subject proviso may be correlated to the phrase “as of the date of his retirement” in Section 12-B(d), which the Court, in Dycaico case, held as violative of the equal protection clause. Notably, both Sections 12-B(d) and 13-A(c) discriminate against the groups of dependent spouses who married the pensioners after the latter qualified for their pension. The classification espoused by Section 13-A(c) does not rest on real and substantial distinctions and is not germane to the purpose of the law. It discriminates against common-law relationships which are common and recognized by the Family Code. Consequently, the Petition was GRANTED. The proviso “as of the date of disability” in Section 13-A(c) of Republic Act No. 8282 was declared VOID for being contrary to the due process and equal protection clauses of the Constitution. The Respondent was ORDERED to process the claim of the Petitioner for Survivorship Pension.
AN ORDER GRANTING A DEMURRER TO EVIDENCE IS A JUDGMENT ON THE MERITS & IS TANTAMOUNT TO AN ACQUITTAL
PEOPLE OF THE PHILIPPINES VS. HON.COURT OF TAX APPEALS & EDDIE MITRA ESTALLO, JR.
G.R. NO. 265531, JULY 31, 2023, UPLOADED FEBRUARY 13, 2024
Petitioner People of the Philippines filed a Petition for Certiorari assailing the CTA 1st Division‘s earlier Resolutions granting the Demurrer to Evidence filed by Private Respondent Eddie Mitra Estallo, Jr., thereby resulting in his acquittal from the charge of violation of Section 255 of the Tax Code, as amended. In ruling, a Demurrer to Evidence is a Motion to Dismiss on the ground of insufficiency of evidence. Since the grant of Demurrer amounts to an acquittal, any further prosecution for the same offense would violate the Accused’s constitutional right against double jeopardy. Nevertheless, jurisprudence provides an exception to the Finality-of-Acquittal Doctrine. The doctrine does not apply when the Prosecution was denied a fair opportunity to be heard, which was not the case here. The Prosecution was able to present all its documentary and testimonial evidence unhindered. Thereafter, it was able to submit not only a Formal Offer of Evidence but also a Supplement thereto, which the CTA carefully weighed and evaluated. Considering that the Prosecution was given all the opportunity to present its case against the Private Respondent, it can be firmly concluded that the trial was not a sham. Thus, the Finality-of-Acquittal Doctrine must prevail in this case. Giving due course to the Petition would defile Private Respondent’s right against double jeopardy. Consequently, the Petition was DENIED.
FOR UNLIQUIDATED CLAIMS, COMPENSATORY INTEREST STARTS TO RUN WHEN THE DEMAND BECOMES LIQUIDATED
WHERE THE DEMAND IS ESTABLISHED WITH REASONABLE CERTAINTY, THE INTEREST SHALL BEGIN TO RUN FROM THE TIME THE CLAIM IS MADE
C-E CONSTRUCTION VS. C-P EQUITIES CORPORATION & CP EQUITIES CORPORATION VS. ASB DEVELOPMENT CORPORATION & C-E CONSTRUCTION CORPORATION
G.R. NO. 233765 & 234184, JULY 5, 2023, UPLOADED FEBRUARY 6, 2024
Petitioners C-E Construction Corporation (CECON) and CP Equities Corporation (CP Equities) filed Consolidated Petitions for Review on Certiorari challenging the earlier Decision and Resolution of the Court of Appeals (CA). Here, CP Equities sought compensation for the damage wrought on its property, the CPJ Building, during the construction of the adjacent BSA Suites by ASB Development Corporation (ASB) and its contractor, CECON. This case does not concern a loan or forbearance of money and falls squarely under paragraph II. (2) of the guidelines in Nacar that when an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially. In ruling, the Court determined that legal interest should be applied at a rate of 6% per annum, beginning from April 18, 2010, the date of the Regional Trial Court (RTC)'s decision, as this is when the demand for compensation became reasonably certain, not from April 15, 1999, the date of extrajudicial demand, because the demand was still uncertain and yet to be liquidated. Regarding the issue of actual damages for the repair of CPJ Building, the Court declined to review, stating that it is a factual issue beyond the scope of the Petition. However, the Court agreed with CP Equities on certain points, including errors made by the CA in its judgment. It reinstated certain amounts awarded by the RTC, which were improperly reviewed by the CA. Consequently, the Petition of CECON was DENIED and the Petition of CP Equities was PARTIALLY GRANTED.
THE ACT OF PLAYING RADIO BROADCASTS THROUGH LOUDSPEAKERS CONSTITUTES PUBLIC PERFORMANCE, REGARDLESS OF CONTROL OVER THE SONGS PLAYED ON THE RADIO
USING COPYRIGHTED MUSIC VIA RADIO BROADCAST PLAYED THROUGH LOUDSPEAKERS, AS BACKGROUND MUSIC IN RESTAURANTS FOR THE ENTERTAINMENT OF CUSTOMERS & FOR THE ENHANCEMENT OF THEIR DINING EXPERIENCE, FALLS OUTSIDE THE AMBIT OF FAIR USE & THUS AMOUNTS TO COPYRIGHT INFRINGEMENT
ICEBERGS FOOD CONCEPTS, INC. & ALLAN JOHN T. YOUNG VS. FILIPINO SOCIETY OF COMPOSERS, AUTHORS & PUBLISHERS, INC. G.R. NO. 256091, APRIL 12, 2023, UPLOADED JANUARY 19, 2024
Petitioners Icebergs Food Concepts, Inc. (Icebergs) and Allan John T. Young filed a Petition for Review on Certiorari challenging the Court of Appeals (CA)'s Decision affirming the Regional Trial Court (RTC)'s ruling that they are liable for copyright infringement. Icebergs claimed that it was not engaged in “public performance” as it did not play a sound recording, but merely switched on a radio transmitter. It also insisted that pursuant to the Principle of Reciprocity, Respondent Filipino Society of Composers, Authors, and Publishers, Inc. (FILSCAP) cannot collect License Fees from Icebergs on behalf of United States-based copyright holders. On the other hand, FILSCAP countered that the Intellectual Property (IP) Code provision on what constitutes public performance is clear, as it includes the “making audible of recorded sounds in a setting outside the immediate family circle and the playing, either directly or by means of any device or process of any work that is not a recorded sound or audio-visual work.” In ruling, the Supreme Court affirmed the rulings of the lower courts. FILSCAP had the authority to license and collect License Fees for the public performance of musical compositions through the Deeds of Assignment executed by its members and reciprocal agreements with foreign societies. Also, Icebergs committed copyright infringement by playing copyrighted music without a License. The Court relied on the definition of public performance in the IP Code, which includes making recorded sounds audible in a place where persons outside the normal circle of a family and their closest social acquaintances are present. The Court also cited previous cases that established playing radio broadcasts through loudspeakers as public performance. On the invocation of “Fair Use,” the Court concluded that Icebergs' use of copyrighted music as background music in their restaurants did not constitute “Fair Use.” FILSCAP was entitled to compensation for the infringement of their copyright, and Icebergs was ordered to pay actual damages, moral and exemplary damages, attorney's fees, and monitoring expenses. Consequently, the Petition was DENIED.
CONSTITUTIONALITY OF THE TRAIN LAW
EXCISE TAX PROVISIONS OF THE TRAIN ACT MAY NOT BE STRUCK DOWN FOR BEING REGRESSIVE] [A PROGRESSIVE TAX SYSTEM DID NOT PROHIBIT REGRESSIVE TAXES
ACT TEACHERS REP. ANTONIO TINIO, BAYAN MUNA REP. PARTY-LIST REP. CARLOS ISAGANI ZARATE & ANAKPAWIS REP. PARTY-LIST ARIEL “KA AYIK” CASILAO VS. PRESIDENT RODRIGO ROA DUTERTE, HOUSE OF REPRESENTATIVES SPEAKER PANTALEON ALVAREZ, DEPUTY SPEAKER RANEO ABU, MAJORITY LEADER RODOLFO FARINAS & DEPUTY MAJORITY LEADER REP. ARTHUR DEFENSOR, JR.
G.R. NO. 236118 & 236295, JANUARY 24, 2023, UPLOADED DECEMBER 13, 2023
Petitioners, including legislators and consumer groups, filed Petitions for Certiorari under Rule 65 seeking to strike down the Republic Act (R.A.) No. 10963, or the “Tax Reform for Acceleration and Inclusion” (TRAIN) Act, which amended R.A. No. 8424, or the National Internal Revenue Code of 1997, for having been passed by Congress and signed by President Duterte in violation of the 1987 Constitution and the Internal Rules of the House of Representatives. Petitioners argued that the law was unconstitutionally passed due to a lack of quorum and violated the equal protection clause. Also, the taxes imposed by the law are regressive and burden low-income families. On the other hand, the Respondents, including President Duterte and government officials, countered that the law was validly enacted and necessary for the government's programs. In ruling, the Court held that it has jurisdiction over the case, and that the law was validly enacted. The determination of a quorum is an internal matter of the House and should be left to its discretion. Likewise, Section 48 of the TRAIN Act is not a “prohibited rider.” Further, while the Petitioners presented statistics and surveys to advance their cause, none are truly determinative of the cumulative effects of the TRAIN Act on low-income households. The TRAIN Act’s impact on low-income households was considered during its formulation and the Court noted that measures such as unconditional cash transfers and social welfare programs were implemented to mitigate the economic burden on marginalized families. A mere allegation of arbitrariness was insufficient; instead, persuasive proof of an unconstitutional aspect was required. On the excise tax provisions on diesel, coal, LPG, and kerosene, it cannot also be considered in isolation and must be read in conjunction with the other provisions of the law. The Constitution does not really prohibit the imposition of indirect taxes which, like VAT, are regressive. The Court concluded that the TRAIN Act does not violate the due process clause, equal protection clause, or Section 28(1) Article VI of the Constitution. Consequently, the Petitions were DISMISSED.
A FALSE RETURN, FOR THE PURPOSE OF INVOKING THE 10-YEAR PRESCRIPTIVE PERIOD, MUST BE INTENTIONAL & DONE WITH THE INTENT TO EVADE TAX
THE LAW ON PRESCRIPTION SHOULD BE LIBERALLY INTERPRETED IN FAVOR OF TAXPAYERS & EXCEPTIONS TO THE STATUTE OF LIMITATIONS SHOULD BE STRICTLY CONSTRUED
THE BURDEN OF PROVING THE FILING OF A FALSE RETURN WITH INTENT TO EVADE TAX RESTS UPON THE BIR
MCDONALD’S PHILIPPINES REALTY CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 247737, AUGUST 8, 2023, UPLOADED DECEMBER 5, 2023
Petitioner McDonald’s Philippines Realty Corporation filed a Petition for Review on Certiorari under Rule 45 assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution which upheld with modifications the Final Decision on Disputed Assessment of Respondent Commissioner of Internal Revenue (CIR). The Petitioner argued that Respondent’s right to assess had already prescribed and that the CTA En Banc erred in applying the extraordinary 10-year assessment period. On the other hand, the Respondent countered that its right to assess did not prescribe because prima facie evidence exists that the Value-Added Tax (VAT) returns in question are false returns. In ruling, the Court held that CTA En Banc was not justified in applying the 10-year assessment period. The Court emphasized that the 10-year period should not be applied automatically and that the tax authorities have the burden of proving the existence of falsity or fraud. The Court also emphasized importance of due process in tax assessments, including the communication of the basis for extending the assessment period and the avoidance of contradictory positions by the tax authorities. The Court explained that for the 10-year assessment period to apply, the tax authorities must prove that the taxpayer filed a false return with intent to evade tax. Mere errors or inaccuracies in a return, without intent to evade tax, do not constitute a false return. The Court abandoned its previous strict interpretation of a false return as any deviation from the truth, whether intentional or not. Since the Formal Letter Demand (FLD) and/or Final Assessment Notice (FAN) was issued beyond the basic three (3)-year period and the Respondent’s invocation of the extraordinary 10-year assessment period is unavailing, the Court held that the VAT assessments have prescribed. Thus, it is no longer necessary to discuss the correctness of the VAT assessment. Hence, the Petition was GRANTED, and the earlier Decision and Resolution of CTA En Banc were REVERSED and SET ASIDE.
FINAL ASSESSMENT BY CIR IS NOT NECESSARY FOR CIVIL LIABILITY IN CRIMINAL TAX CASE
USE OF ESTIMATES IN CHARGES DOES NOT AFFECT THE JURISDICTION OF THE CTA
PROBABLE CAUSE TO INDICT A TAXPAYER FOR A CRIMINAL OFFENSE UNDER TAX LAWS DOES NOT MEAN THAT THE COMPLAINT OR INFORMATION STATES WITH PARTICULARITY THE EXACT AMOUNT OR PRECISE COMPUTATION OF DEFICIENCY TAX
PEOPLE OF THE PHILIPPINES VS. JOEL C. MENDEZ & JOEL C. MENDEZ VS. PEOPLE OF THE PHILIPPINES,
G.R. NOS. 208310-11 & G.R. NO. 208662, MARCH 28, 2023, UPLOADED NOVEMBER 21, 2023
Both Joel Mendez (Joel) and the People of the Philippines, through the Office of Solicitor General (OSG), filed their separate Petitions for Review assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution. The assailed issuances found Joel guilty beyond reasonable doubt for violating Section 255 of the 1997 Tax Code, as amended, for failure to file Income Tax Returns (ITRs) and failure to supply correct and accurate information in the returns. Joel appealed the decision, arguing that the CTA did not have jurisdiction over the case because the amounts stated in the Amended Information were mere estimates, and that the Prosecution failed to prove his guilt beyond reasonable doubt. The OSG argued that the computation of deficiency taxes by the Revenue Officer, pursuant to a Letter of Authority, may be the basis for the imposition of civil liability upon the taxpayer. In ruling, the Court held that the CTA had jurisdiction over the case and that the Prosecution had established Joel's guilt. The Court clarified that a final assessment by the Commissioner of Internal Revenue (CIR) is not necessary for the imposition of civil liability for unpaid taxes in a criminal tax case. Likewise, the jurisdiction of the CTA over criminal cases is determined by the amount of taxes and fees claimed in the Information, regardless of whether the amount is estimated or proven during trial. The Court explained that the use of estimates was necessary due to Joel's noncompliance with the requests for records and documents from the Bureau of Internal Revenue (BIR). The Court remanded the case to the CTA Division to determine and compute Joel's civil liability for taxes and penalties based on the evidence on record submitted during trial. Consequently, the Petition filed by Joel was DENIED and the Petition filed by OSG was PARTIALLY GRANTED.
PRESENCE OF SUFFICIENT REASON TO RELAX THE RULE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES
OCEANAGOLD (PHILIPPINES), INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 234614, JUNE 14, 2023, UPLOADED NOVEMBER 19, 2023
The Petitioner Oceanagold (Philippines), Inc. filed a Petition for Review on Certiorari assailing the CTA En Banc’s earlier Decision and Resolution denying its Petition due to lack of jurisdiction. The Petitioner’s main contention is against the seizure and detention of its copper concentrates by the BIR and the validity of Revenue Memorandum Circular (RMC) No. 17-2013. As a backgrounder, the Petitioner inherited rights under a Financial or Technical Assistance Agreement for mining activities. It sought confirmation of tax exemption for minerals from the Commissioner of Internal Revenue (CIR), which was initially granted but later revoked. The BIR detained the Petitioner's copper concentrates several times, alleging non-payment of excise tax, leading to legal challenges by the Petitioner. The Petitioner argued that the CTA erred in denying jurisdiction. In ruling, the Court found merit in the Petitioner's argument regarding the CTA's jurisdiction over challenges to tax laws or regulations. However, it stressed the need to exhaust administrative remedies, which the Petitioner failed to do in some instances. The Court acknowledged exceptions to this rule, such as violation of due process or urgency of judicial intervention, which might apply to the Petitioner's case. Consequently, the Petition was PARTLY GRANTED. The Court set aside the CTA's Decision and remanded the case back to the CTA for further proceedings, directing it to consider the merits of the case.
CONSTITUTIONALITY OF PROFITEERING DEFINITION UNDER THE PRICE ACT
UNIVERSAL ROBINA CORPORATION VS. DTI, THE DTI SECRETARY & THE DIRECTOR FOR DTI’S BUREAU OF TRADE REGULATIONS & CONSUMER PROTECTION
G.R. NO. 203353, FEBRUARY 14, 2023, UPLOADED NOVEMBER 17, 2023
Petitioner Universal Corporation filed a Petition for Review on Certiorari assailing the Regional Trial Court (RTC)’s earlier Decision, which denied the Petition for Declaratory Relief for failing to show the invalidity of the laws and executive issuances. The Petitioner was accused of selling flour at a price deemed too high, and the Public Respondent Department of Trade and Industry (DTI) issued a Preliminary Order to reduce the selling price. The Petitioner argued that the definition of profiteering under the Price Act was void for vagueness, as it lacked standards and guidelines to determine a commodity’s “true worth” or a price grossly in excess of it. Likewise, penalizing profiteering without sufficiently defining what constitutes it violated one’s right to be informed of the nature and cause of an accusation against them. In ruling, the Supreme Court (SC) ruled that the definition of profiteering under the Price Act is constitutional. It held that the law provides a standard for determining profiteering, and the lack of mathematical exactitude in the definition does not render it vague. The purpose of the law is to protect consumers from unscrupulous business practices and that the definition of profiteering is sufficient to guide business conduct. Consequently, the Petition was DENIED, and the constitutionality of the Price Act was UPHELD.
NOT ONLY CUSTOMS BROKER CAN SIGN DECLARATION OF GOODS
CHAMBER OF CUSTOMS BROKERS, INC. VS. COMMISSIONER OF CUSTOMS
G.R. NO. 256907, FEBRUARY 20, 2023, UPLOADED SEPTEMBER 5, 2023
Petitioner Chamber of Customs Brokers, Inc. filed a Petition for Review on Certiorari under Rule 45 assailing the Court of Appeals’ earlier Decision which affirmed the Decision of the Regional Trial Court (RTC) in dismissing the Petition for Declaratory Relief. Petitioner argued that Republic Act (R.A.) No. 10863 (“Customs Modernization and Tariff Act”) did not repeal or modify the exclusive signing provision of Section 27 of R.A. No. 9280 (“Customs Brokers Act of 2004”). The Petitioner contended that allowing declarants to sign goods declarations without a customs broker’s exclusive involvement would be inconsistent with the professionalization and expertise goals of R.A. No. 9280. On the other hand, the Respondent Commissioner of Customs argued that R.A. No. 10863, being a later law, repealed, amended, or modified inconsistent provisions of prior laws, including R.A. No. 9280. In ruling, the Court rejected the Petitioner’s argument that there were inconsistencies between the two (2) laws, emphasizing that the provision in R.A. No. 10863 expanded the signatory options without undermining R.A. No. 9280’s goals. The Court found that R.A. 10863 did not violate the equal protection clause, as there was a legitimate government interest in allowing declarants to sign goods declarations, and this change was reasonably connected to that interest. Consequently, the Petition was DENIED upholding the validity of R.A. No. 10863’s provisions allowing declarants, with the assistance of customs brokers, to sign goods declarations.
REMITTANCE OF SOCIAL SECURITY CONTRIBUTIONS ARE STATUTORY OBLIGATION OF EVERY EMPLOYER
PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION VS. SOCIAL SECURITY SYSTEM
G.R. NO. 252592, AUGUST 31, 2022, UPLOADED AUGUST 10, 2023
Petitioner Philippine Telegraph & Telephone Corporation filed a Petition for Review on Certiorari praying the reversal of the earlier Decision and Resolution of the Court of Appeals, which affirmed the Resolution of the Respondent Social Security System (SSS) requiring the Petitioner to pay its outstanding salary/calamity loan delinquency with penalties. Petitioner argued that it was not liable for the delinquent payments and that Respondent erred in computing its existing liability since it failed to consider the amount paid or deducted from its employees’ retirement pay representing their salary calamity loans. Further, it was under rehabilitation, and the payment of the delinquent salary/calamity loan amortizations would prejudice its Rehabilitation Plan. In ruling, the Court held that the Petitioner cannot shirk from its statutory obligation to pay the delinquent salary/calamity loan amortizations of its employees. The Court noted that the Rehabilitation Court approved the Rehabilitation Plan and ordered the Petitioner to settle its delinquent salary/calamity loan amortizations. Petitioner’s defense of payment remains unproven. Moreover, the Respondent’s Order to pay does not grant the Respondent undue preference as a creditor. Consequently, the Petition was DENIED for lack of merit. The total amount due shall be subject to a legal interest of 6% per annum reckoned from the finality of the Court's ruling until full satisfaction.
LOCAL ORDINANCES, HOWEVER LAUDABLE THEIR OBJECTIVES MIGHT BE, SHOULD NOT CONTRAVENE STATE-ENACTED LEGISLATION
LOCAL GOVERNMENT UNITS MERELY DERIVE THEIR POWER FROM THE STATE LEGISLATURE; AS SUCH, THEY CANNOT REGULATE ACTIVITIES ALREADY ALLOWED BY STATUTE
CITY OF BATANGAS VS. JG SUMMIT PETROCHEMICAL CORPORATION & FIRST GAS POWER CORPORATION
G.R. NO. 190266-67, MARCH 15, 2023, UPLOADED AUGUST 8, 2023
Petitioner City of Batangas filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the Court of Appeals declaring Ordinance No. 3, Series of 2001, which sought to regulate water usage by industrial and commercial establishments, enacted by the Sangguniang Panlungsod of the City of Batangas unconstitutional for want of necessity, lack of public hearing, and violation of due process. Petitioner contended that the Ordinance was enacted for the general welfare of its constituents and was within the scope of the City’s regulatory and taxation powers. On the other hand, Respondents First Gas and FGP maintained that the Petitioner arrogated unto itself the power to prohibit the utilization of water, a function exclusive to the National Water Resources Board (NWRB). Likewise, the power of the City Mayor to issue a cease-and-desist order upon mere knowledge of a violation of the Ordinance violated businesses' right to notice and hearing. In ruling, the Court held in favor of the Respondents. Local ordinances, no matter how laudable their objectives, cannot contravene State-enacted legislation. With no proof that the enactment of the Ordinance was with prior approval of the NWRB, the said Ordinance is void for contravening a statute. Under the Water Code, the appropriation, utilization, conservation, and protection of our country's water resources is under the jurisdiction of the NWRB. Consequently, the Petition was DENIED.
FDDA WILL BECOME FINAL WHEN NO APPEAL TO THE CIR OR TO THE CTA WILL BE FILED
SOLUTIO INDEBITI APPLIES WHEN THE PAYMENT WAS MADE THROUGH MISTAKE
CITY OF MAKATI VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 200395, MARCH 15, 2023, UPLOADED JULY 18, 2023
Petitioner City of Makati filed a Petition for Review on Certiorari arguing that the Final Decision on Disputed Assessment (FDDA) dated October 16, 2003, issued by the Respondent Commissioner of Internal Revenue (CIR) is void and cannot be considered final assessment, and the Php 200 Million paid by the Petitioner shall be returned by the BIR since the compromise agreement was subsequently disapproved. In ruling, the Court discussed that FDDA shall state the facts and law on which it is based to provide the taxpayer the opportunity to file an intelligent appeal before the CIR. Merely notifying the taxpayer of its liabilities without elaborating on its details is insufficient. Here, a perusal of the said FDDA reveals substantial compliance with the due process requirement. The FDDA clearly contains the facts, applicable law, rules, and regulation on which the tax deficiency imposed upon the Petitioner were based. It cannot be said that the City of Makati was merely notified of the assessment. Moreover, the said FDDA was received by the Petitioner on October 20, 2003. Consequently, the appeal to the CIR or the CTA may be filed until November 19, 2003. However, instead of filing a request for reconsideration before the CIR or an appeal before the CTA, on October 24, 2003, the Petitioner instead filed with the BIR Regional Director a request for re-computation and submitted supporting documents. Until November 19, 2003, no appeal was filed before the CTA; neither was there any request for reconsideration before the CIR. Thus, the CIR correctly found that the assessments have become final, executory, demandable, and unappealable. As to the compromise agreement, the Court held that solutio indebiti is not applicable between the Petitioner and the Respondent. The finality of the FDDA rendered the assessments demandable, enforceable, and collectible. Thus, the payment of Php 200 Million was not made through mistake; it is rightly considered a partial settlement of the tax obligation of the Petitioner. Consequently, the Petition was DENIED.
TAXING AUTHORITIES ARE NOT EXCUSED FROM COMPLYING WITH THE REQUIREMENTS OF A VALID SUBSTITUTED SERVICE EVEN IF THE TAXPAYER’S REGISTERED OR KNOWN ADDRESS IS LOCATED INSIDE AN ESTABLISHMENT WITH A CENTRAL RECEIVING STATION
COMMISSIONER OF INTERNAL REVENUE VS. SOUTH ENTERTAINMENT GALLERY, INC.
G.R. NO. 223767, APRIL 24, 2023, UPLOADED JUNE 13, 2023
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari seeking reversal of the CTA En Banc’s earlier Decision and Resolution canceling the assessment issued to the Respondent South Entertainment Gallery, Inc. The Petitioner insisted on the valid service of the assessment notice and maintained that it had successfully established that the assessment notice was properly addressed to the Respondent’s registered address and was mailed and received by the Respondent. In ruling, Revenue Regulations (RR) No. 12-99 provides that the assessment notice shall be sent to the taxpayer only by personal delivery or by registered mail, and service thereof can either be considered actually or constructively received. Under the same Regulations, effecting constructive service involves two (2) requisites: (1) leaving the notice on the premises of the taxpayer, and (2) the fact of such service is attested to, witnessed, and signed by at least two (2) Revenue Officers (ROs) other than the RO who constructively served the same. The presumption that a letter duly directed and mailed was received in the regular course of the mail is merely a disputable presumption that may be controverted. Without proof that the two (2) requisites had been duly complied with, service of the assessment notice at the ground floor of the administrative office of SM City Pampanga, where mail matters and other documents are received for distribution to tenants of the mall, cannot be deemed constructive service to the Respondent. The Court declared that the Petitioner’s failure to prove that the assessment notice was properly served on the Respondent by registered mail renders VOID the deficiency assessment. Validity of the assessment need not be discussed, because a void assessment bears no fruit. Consequently, the Petition was DENIED.
A PATENT DISREGARD OF SIMPLE, ELEMENTARY & WELL-KNOWN RULES CONSTITUTES GROSS IGNORANCE OF THE LAW
SEC STANDS AS A CO-EQUAL BODY OF RTC
SECURITIES & EXCHANGE COMMISSION, REPRESENTED BY COMMISSIONER EMILIO B. AQUINO VS. HON. OSCAR P. NOEL, JR. PRESIDING JUDGE, BRANCH 35, REGIONAL TRIAL COURT, GENERAL SANTOS CITY, SOUTH COTABATO
A.M. NO. RTJ-23-029, JANUARY 28, 2023, UPLOADED ON JUNE 13, 2023
Complainant Securities and Exchange Commission (SEC) filed a Complaint charging the Respondent Hon. Oscar P. Noel Jr., Presiding Regional Trial Court (RTC) Judge of the “Kapa Investment case,” with Gross Ignorance of the Law. The complainant contended that it is a co-equal body of RTC, hence, the RTC cannot interfere with or overturn its rulings. As such, the Respondent’s acts of issuing a Temporary Restraining Order (TRO) and Writ of Preliminary Investigation (WPI) against the Cease-and-Desist Order (CDO) constitute Gross Ignorance of the Law. The Respondent insisted that the RTC has jurisdiction over the subject case, considering that “Kapa” raised the constitutional issue of free exercise of religion, and did not delve into trading and securities. In ruling, the Court held that the SEC stands as a co-equal body of the RTC; hence, all orders and issuances issued by the SEC in the exercise of such jurisdiction may not be interfered with, let alone overturned, by the RTCs. The Court finds the Respondent’s insistence untenable for the simple reason that the Respondent cannot feign ignorance of the fact that his issuance of a TRO and WPI in the subject case will have the effect of restraining the enforcement of the CDO issued by the SEC, a co-equal body. The Respondent should have refrained from acting on the subject case. More significantly, the Respondent violated the Doctrine on Primary Jurisdiction. Consequently, the Court finds the Respondent GUILTY of Gross Ignorance of the Law. He is SUSPENDED from office without salary and other benefits for a period of two (2) years.
A PARTY WHO DESIRES THE COURT TO REJECT THE ADMISSION OF ANY EVIDENCE FORMALLY OFFERED, MUST DO SO IN THE FORM OF A TIMELY OBJECTION
IT IS ONLY UPON THE FORMAL OFFER THAT THE PURPOSE OF A DOCUMENT IS DISCLOSED & ASCERTAINED & THAT AN OBJECTION CAN BE MADE AGAINST ITS ADMISSION AS AN EXHIBIT
COMMISSIONER OF INTERNAL REVENUE VS. VESTAS SERVICES PHILIPPINES, INC.
G.R. NO. 255085, MARCH 29, 2023, UPLOADED MAY 11, 2023
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition seeking to reverse and set aside the earlier Decision and Resolution of the CTA En Banc, which affirmed the Amended Decision of the CTA Division. The CTA Division partially granted Respondent Vestas Services Philippines, Inc.’s claim for a refund or issuance of a Tax Credit Certificate (TCC) for its unutilized input Value-Added Tax (VAT) attributable to its zero-rated receipts. Petitioner anchored his Petition on the supposed error on the part of the CTA Division in allowing the Respondent to present additional evidence and thereafter, admitting such additional evidence, despite irregularities in its Motion for Reconsideration. Thus, for Respondent’s alleged failure to properly establish the timeliness of its judicial claim, its claim for tax refund or credit should be denied. Respondent averred that while the CIR indeed opposed the motion, it never objected to the presentation of the Transmittal Letter as secondary evidence. The CIR failed to object or comment on the Respondent’s Supplemental Formal Offer of Evidence. In ruling, the Court emphasized that objection to documentary evidence must be made at the time it is formally offered, not earlier, because it is at that time the purpose of the offer has already been disclosed and ascertained. Thus, the Petitioner’s opposition made prior to the Respondent’s Supplemental Formal Offer of Evidence cannot possibly substitute the objection required under the rules. The Petitioner likewise chose not to file a Supplemental Memorandum where he could have explained his earlier omission to file a comment on the formal offer, and where he could have raised his objections to the admission of the Transmittal Letter. The records are also bereft of any showing that the Petitioner questioned the testimony of the Respondent's witness nor the veracity of the Transmittal Letter during the hearing for the presentation of the Respondent's additional evidence. Thus, without any prompt objection from the Petitioner, the admission of the supplemental evidence was justified. As to the timeliness of the judicial claim, the Court found that the Respondent was able to timely file its judicial claim before the CTA. Consequently, the Petition was DENIED.
WARRANT OF DISTRAINT AND/OR LEVY IS THE ADVERSE DECISION APPEALABLE TO THE CTA & NOT THE FDDA
WHERE THE BIR CONDUCTS AN AUDIT WITHOUT A VALID LOA, OR IN EXCESS OF THE AUTHORITY DULY PROVIDED THEREFOR, THE RESULTING ASSESSMENT SHALL BE VOID & INEFFECTUAL
COMMISSIONER OF INTERNAL REVENUE VS. MANILA MEDICAL SERVICES, INC. (MANILA DOCTORS HOSPITAL)
G.R. NO. 255473, FEBRUARY 13, 2023, UPLOADED APRIL 24, 2023
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of Court of Tax Appeals (CTA) En Banc affirming the Decision which declared the Final Assessment Notice (FAN) and the Warrant of Distraint or Levy (WDL) issued against the Respondent Manila Medical Services, Inc. for being null and void. Petitioner maintained that the Final Decision on Disputed Assessment (FDDA) should be the adverse decision appealable to the CTA and not the WDL. However, the Respondent denied that it received the said FDDA. In ruling, even assuming that the FDDA was really received by Respondent, the same would still be void for failure to comply with the requirements. The alleged FDDA merely informed the Respondent of its supposed tax liabilities without any basis. Hence, the Court ruled that the WDL is the adverse decision appealable to the CTA and not the FDDA. Moreover, the Petitioner argued that what the Letter of Authority (LOA) authorizes is the conduct of an audit against a taxpayer by the BIR’s revenue officers (ROs), but the Court disagreed. It was held that an LOA is the authority given to the appropriate RO assigned to perform assessment functions. Contrary to Petitioner's argument, if the ROs that were previously indicated in an LOA were reassigned or transferred to another case and as such, a new RO will handle the case that was previously assigned to them, the issuance of a new LOA in favor of the new handling RO is required. Therefore, without the new LOA, the new RO was not authorized to conduct the examination and assessment of the tax liabilities of Respondent. Consequently, the Petition was DENIED.
PAYMENT OF FEES FOR THE ISSUANCE OF BUSINESS PERMITS IS REGULATORY IN NATURE UNDER THE LGU'S POLICE POWER
BUSINESS PERMIT FEE IS NOT A TAX FOR REVENUE GENERATION
TAX-EXEMPT ENTITIES CANNOT CLAIM TO BE EXEMPTED FROM PAYING FEES FOR BUSINESS PERMITS
BASES CONVERSION & DEVELOPMENT AUTHORITY & JOHN HAY MANAGEMENT CORPORATION VS. CITY GOVERNMENT OF BAGUIO CITY
G.R. NO. 192694, FEBRUARY 22, 2023, UPLOADED APRIL 24, 2023
Petitioners Bases Conversion and Development Authority (BCDA) and John Hay Management Corporation (JHMC) filed a Petition for Review on Certiorari assailing the earlier Decision and Order of the Regional Trial Court (RTC) upholding an Administrative Order requiring establishments within the John Hay Special Economic Zone (JHSEZ) to secure business permits and pay the corresponding fees to continue their business operations. Petitioners argued that the issuance of business permits is “primarily revenue-raising” since before it can be issued, establishments must pay the applicable fees based on their gross receipts for the fiscal year. Petitioners insisted that establishments in JHSEZ have preferential tax treatment under the law. Respondent City Government of Baguio countered that the business permit fees were regulatory in nature since their main purpose is to regulate trade for efficient and effective governance and for the promotion of the general welfare. In ruling, the Court clarified that business taxes are regulatory in nature since they are essentially fees paid for the exercise of a privilege. While the power to impose business taxes is rooted in a Local Government Unit (LGU)’s power to generate its own sources of revenue, the imposition itself is in the exercise of its police power. The Court held that the mayor’s permit fee is not a tax that establishments within JHSEZ are exempt from paying. No statute authorizes Petitioner to issue permits or regulate businesses inside the JHSEZ. Without an express grant by law, the Respondent’s police power prevails. Thus, locators within JHSEZ not duly registered with the Philippine Economic Zone Authority (PEZA) are liable to pay business permit fees to the Respondent. Consequently, the Petition was DENIED.
ADMINISTRATIVE CLAIM FOR REFUND IS NOT A VALID SUBSTITUTE FOR THE LOST REMEDY OF APPEAL TO QUESTION THE FINAL DECISION OF THE CIR ON THE DISPUTED ASSESSMENT
BREWERY PROPERTIES, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 239260, MARCH 6, 2023, UPLOADED APRIL 12, 2023
Petitioner Brewery Properties, Inc. filed a Petition for Review on Certiorari assailing the earlier CTA En Banc’s Decision. Petitioner argued that it was not sufficiently informed of the facts on which the assessment was made; hence, the deficiency Documentary Stamp Tax (DST) assessment is void. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) countered that the Petitioner failed to follow the proper remedy to contest the Final Decision on Disputed Assessment (FDDA) within thirty (30) days from receipt thereof; thus, it has lost its remedy to contest the illegality of the tax assessed by the Respondent. In ruling, the Court ruled in favor of the Respondent. The Petitioner availed of the wrong remedy. The Details of Discrepancy attached to the assessment notices clearly stated the factual and legal bases of the DST assessment. Under the Tax Code, a taxpayer has thirty (30) days from receipt of the disputed assessment to appeal to the CTA. Otherwise, the assessment shall become final, executory, and demandable. Since the Petitioner received the FDDA on 19 September 2012, the Petitioner had only until 19 October 2012 to file an appeal before the CTA to question the FDDA. Considering that the Petitioner did not exercise the remedy of appeal, the FDDA became final, executory, and demandable. Petitioner is thereby precluded from questioning the legality or validity of the assessment in the guise of claiming a refund of the DST and penalties paid under protest. Consequently, the Petition was DENIED.
THE CLOSURE OF AMA BANK IS UNWARRANTED AS IT IS NOT BASED ON THE GROUNDS PROVIDED BY LAW
AMA BANK IS NOT AN AILING BANK
PHILIPPINE DEPOSIT INSURANCE CORPORATION (PDIC) VS. MA FE BALCEDA SINORO & THE MAJORITY STOCKHOLDERS OF AMA RURAL BANK OF MANDALUYONG, INC. & BANGKO SENTRAL NG PILIPINAS VS. MA FE BALCEDA SINORO & THE MAJORITY STOCKHOLDERS OF AMA RURAL BANK OF MANDALUYONG, INC.
G.R. NO. 253411, & 253270, MARCH 1, 2023, UPLOADED MARCH 31, 2023
Petitioners Philippine Deposit Insurance Corporation (PDIC) and Bangko Sentral ng Pilipinas (BSP) filed their Petitions for Review on Certiorari seeking to reverse and set aside the earlier Court of Appeals (CA)’ Decision. BSP asserted that it did not gravely abuse its discretion in issuing Monetary Board (MB) Resolution No. 1705.D because it relied on substantial evidence consisting of empirical data and verifiable information in deciding to close AMA Bank. BSP also contended that factual findings of administrative bodies charged with their specific field of expertise, such as BSP is in the realm of banking regulation, are afforded great weight by the courts, and are deemed conclusive. Meanwhile, PDIC questioned the CA’s grant of certiorari and prohibition against it, arguing that it did not exercise judicial or quasi-judicial functions when it implemented MB Resolution No. 1705.D. In ruling, the power and authority of the MB to close banks is an exercise of police power, which is subject to judicial inquiry. There is no doubt that MB has the authority to forbid a bank from doing business and place it under receivership. However, BSP failed to sufficiently establish the existence of any grounds that would warrant the closure of AMA Bank and its being placed under receivership. AMA Bank has not announced its closure, nor has it been dormant for at least sixty (60) days. No depositors complained of any difficulty in withdrawing their deposits, nor creditors claimed any default in the payment of their credit. The records are also bereft of any finding of insufficiency of realizable assets to meet AMA Bank's liabilities. There being no valid grounds that would justify AMA Bank's closure, the inevitable conclusion is that MB Resolution No. 1705.D. is void. Consequently, PDIC's Letter issued to implement the same, is likewise void. Accordingly, the Petitions were both DENIED.
IF THE TERMS OF A CBA ARE CLEAR & THERE IS NO DOUBT AS TO THE INTENTION OF THE CONTRACTING PARTIES, THE LITERAL MEANING OF ITS STIPULATION SHALL PREVAIL
FOR AN EMPLOYEE TO AVAIL OF THE BEREAVEMENT LEAVE, HE OR SHE NEED NOT PERSONALLY ATTEND THE WAKE OR FUNERAL OF HIS OR HER DECEASED RELATIVE
PENINSULA EMPLOYEES' UNION-NUWHRAIN VS. MANILA PENINSULA HOTEL, INC.
G.R. NO. 250312, FEBRUARY 1, 2023, UPLOADED MARCH 3, 2023
Petitioner Peninsula Employees Union-NUWHRAIN filed a Petition for Review on Certiorari seeking the reversal of the earlier Court of Appeals’ Decision and Resolution which justified the Respondent Manila Peninsula Hotel, Inc. in denying the bereavement leave applications of its employees inasmuch as they admitted that they will not go to the wake of their deceased relatives. The Petitioner insisted that the Collective Bargaining Agreement (CBA) should be enforced on its face without stipulating the parties’ real intention. In ruling, the Court agreed with the Voluntary Arbitrator and the Petitioner that the provision of the CBA does not require the employee to attend the wake of the deceased relative. A plain reading of the CBA shows that the only requisites for the entitlement of an employee to bereavement leave are the following: (1) death of relatives listed under the provision; (2) prior notice; (3) presentation of proof of relationship; and (4) death certificate. Thus, the provision being clear, the Respondent must thus yield to the pertinent CBA provision and may not require the employee’s personal attendance to the wake as a requisite to availment of bereavement leave. Hence, the Petition was GRANTED.
FOR THE PDIC TO RECOGNIZE THE TRANSFEREE AS THE BENEFICIAL OWNER OF THE RESULTING DEPOSIT ACCOUNTS, HE/SHE MUST BE A QUALIFIED RELATIVE OF THE TRANSFEROR
QUALIFIED RELATIVE MEANS RELATIVE WITHIN THE SECOND DEGREE OF CONSANGUINITY OR AFFINITY
THE DUTY OF THE BANK TO INFORM ITS DEPOSITORS REGARDING THE REGULATORY ISSUANCE DOES NOT AFFECT THE EFFECTIVITY OF THE LAW OR WILL REQUIRE LESS THAN STRICT COMPLIANCE TO THE SAME
PHILIPPINE DEPOSIT INSURANCE CORPORATION VS. JOSEFINA L. ADOR DIONISIO-ESGUERRA
G.R. NO. 236240, FEBRUARY 8, 2023, UPLOADED FEBRUARY 17, 2023
Petitioner Philippine Deposit Insurance Corporation (PDIC) filed a Petition for Review on Certiorari assailing the earlier Court of Appeals’ Decision and Resolution which reversed the Petitioner’s denial of the deposit insurance claim of the Respondent Josefina L. Ador Dionisio-Esguerra. The Petitioner asserted that the requisites which would warrant the grant of deposit insurance prescribed in PDIC Regulatory Issuance No. 2009-03 (RI 2009-03) are absent in this case. On the other hand, the Respondent countered that RI 2009-03 is not binding upon her because the Petitioner failed to prove that Cooperative Rural Bank of Bulacan, Inc. (CRBBI) posted a copy of RI 2009-03 on the bank premises as required in RI 2009-03. In ruling, the Court held that the Respondent is not entitled to her deposit insurance claim because she is not the beneficial owner of the deposit account pursuant to the requirements under RI 2009-03. There is no document evidencing the donation from Atty. Linsangan in the custody of CRBBI upon takeover of the PDIC and, as a relative only within the third degree of consanguinity, the Respondent is not a Qualified Relative of Atty. Linsangan. The Court disagreed with the contention of the Respondent because RI 2009-03 was duly published in a newspaper of general circulation, which is considered constructive notice to all owners of bank deposits. Hence, the Petition was GRANTED.
ALPHALISTING REQUIREMENT OF THE BIR SPECIFICALLY ON THE DISCLOSURE OF SENSITIVE PERSONAL INFORMATION SUCH AS THE NAME & TIN IS UNCONSTITUTIONAL
BIR & SEC REGULATIONS WERE STRUCK DOWN FOR FAILURE TO INCLUDE GUARANTEES TO PROTECT SENSITIVE INFORMATION TO BE COLLECTED
SEC CANNOT ENFORCE TAX LAWS & REGULATIONS] [DOF & BIR CANNOT REGULATE MATTERS PERTAINING TO SECURITIES & INVESTMENT RELATIONSHIPS
PHILIPPINE STOCK EXCHANGE, INC., BANKERS ASSOCIATION OF THE PHILIPPINES, PHILIPPINE ASSOCIATION OF SECURITIES BROKERS & DEALERS, INC., FUND MANAGERS ASSOCIATION OF THE PHILIPPINES, TRUST OFFICERS ASSOCIATION OF THE PHILIPPINES & MARMON HOLDINGS, INC. VS. SECRETARY OF FINANCE, COMMISSIONER OF INTERNAL REVENUE & CHAIRPERSON OF THE SECURITIES & EXCHANGE COMMISSION
G.R. NO. 213860, JULY 5, 2022, UPLOADED FEBRUARY 17, 2023
Petitioners Philippine Stock Exchange, Inc., et.al., filed a Petition for Certiorari and Prohibition assailing the constitutionality of Revenue Regulations (RR) No. 1-2014, Revenue Memorandum Circular (RMC) No. 5-2014, and Securities and Exchange Commission Memorandum Circular (SEC MC) No. 10-2014 (collectively, the questioned regulations), for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Petitioners argued that the right to privacy of the dividend payees would be violated when their names and Tax Identification Numbers are disclosed in the alphabetical list. On the other hand, Respondents Secretary of Finance, Commissioner of Internal Revenue (CIR), and Chairperson of SEC maintained that all withholding agents who received personal information relating to each disclosed investor are covered by the confidentiality rule of the Tax Code and SEC. In ruling, the Court finds that the questioned regulations violate the Petitioners’ right to privacy. It can be argued that the question regulations serve a compelling state interest: the effective and proper collection of taxes. However, the Respondents failed to present any evidence to show and prove that the questioned regulations were narrowly drawn as the “least restrictive means for effecting the invoked interest.” There may be abuses as a result of the enforcement of the questioned regulations: there is no assurance that the information gathered and submitted to the listed companies pursuant to the questioned regulations will be protected, and not be used for any other purposes outside the stated purpose. Moreover, the Court ruled that the SEC Chairperson had no authority to issue SEC MC No. 10-2014, in the implementation of tax laws and regulations. The Secretary of Finance and the CIR, in including the prohibition on the use of Philippine Central Depositary Inc. (PCD) Nominee in RR No. 1-2014 and RMC No. 5-2014, also acted outside their scope of authority. Consequently, the Petition was GRANTED, and the questioned regulations were STRUCK DOWN for being UNCONSTITUTIONAL.
THE FRANCHISE OF PAL REMAINS THE GOVERNING LAW ON ITS EXEMPTION FROM TAXES
FOR THE IMPORTED COMMISSARY & CATERING SUPPLIES TO BE EXEMPT FROM EXCISE TAX, THE SUPPLIES MUST BE IMPORTED FOR THE USE OF THE FRANCHISEE IN ITS TRANSPORT/NON-TRANSPORT OPERATIONS & OTHER INCIDENTAL ACTIVITIES & THEY ARE NOT LOCALLY AVAILABLE IN REASONABLE QUANTITY, QUALITY, OR PRICE
COMMISSIONER OF INTERNAL REVENUE & COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC. & PHILIPPINE AIRLINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE & COMMISSIONER OF CUSTOMS
G.R. NO. 236343-45 & G.R. NO. 236372-74, JANUARY 17, 2023, UPLOADED FEBRUARY 14, 2023
Both the Commissioner of Internal Revenue (CIR) and the Philippine Airlines, Inc. (PAL) filed their Petitions for Review on Certiorari assailing the earlier CTA 2nd Division’s Decision and Resolution partially granting PAL’s claim for a refund or issuance of a Tax Credit Certificate (TCC) for its erroneously paid excise taxes. PAL insisted that it has presented sufficient evidence that it is entitled to the remaining amounts, for a full refund. On the other hand, the CIR maintained that under the present excise tax regime, all alcohol and tobacco importations are subject to excise tax sans exemption. Even granting that PAL is entitled to the tax privilege, CIR insisted that PAL failed to prove that it met the conditions under Section 13 of Presidential Decree (P.D.) No. 1590, or the Act Granting a New Franchise to PAL. In ruling, the Court held that the tax privilege of PAL provided in Section 13 of P.D. No. 1590 has not been revoked by Section 131 of the 1997 Tax Code. As regards PAL’s alleged non-compliance with the conditions set by Section 13(b)(2) of P.D. No. 1590, there is no question that the imported liquors, wines, and cigarettes were “inflight materials” used in PAL’s transport/flight operations and the imported items were not locally available in a reasonable quantity, quality, or price. Also, the Court agreed with PAL that the printouts of the VAT Quarterly Returns representing payments made through the Electronic Filing and Payment System in the BIR website are considered original documents. Thus, the CTA erroneously disregarded PAL’s claim for a full refund. Consequently, the Petition was DENIED, and the CIR was ORDERED to REFUND the claimed amount in full.
RTC JUDGE WAS HELD IGNORANT FOR OVERSTEPPING JURISDICTION OF SEC OVER REVISED CORPORATION CODE
IF ORDINARY PEOPLE ARE PRESUMED TO KNOW THE LAW, JUDGES ARE DUTY-BOUND TO ACTUALLY KNOW & UNDERSTAND IT
SECURITIES & EXCHANGE COMMISSION, REPRESENTED BY EMILIO B. AQUINO VS. HON. RENATO V. TAMPAC
A.M. NO. RTJ-21-008, OCTOBER 6, 2021, UPLOADED FEBRUARY 10, 2023
Petitioner Securities and Exchange Commission (SEC) filed an administrative complaint for gross ignorance of the law against Respondent Judge Renato V. Tampac. SEC maintained that the Respondent erred in assuming jurisdiction over the case “Alabel Maasim Credit Cooperative (ALAMCCO) vs. SEC” and in issuing a Status Quo Ante Order (SQAO) despite the proscription in Section 179 of the Revised Corporation Code (RCC). In ruling, Section 179 states that "[n]o court below the Court of Appeals shall have jurisdiction to issue a restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy that directly or indirectly interferes with the exercise of the powers, duties and responsibilities of the [Securities and Exchange] Commission that falls exclusively within its jurisdiction." Here, the Respondent blatantly disregarded Section 179 of the RCC when he issued the Order providing for an SQAO against the SEC and Resolution permanently enjoining the SEC from posting a public advisory against ALAMCCO on investment scams. The Advisory subject of the Petition before Respondent’s sala was issued pursuant to the SEC’s powers and functions under the Securities and Regulations Code. Thus, the Respondent had no jurisdiction to take cognizance of the case and issue an injunction against the SEC. Consequently, the Respondent Judge was found GUILTY of gross ignorance of the law.
FOR AN ACTIVITY TO BE SUBJECT TO VAT, IT MUST BE IN PURSUIT OF A COMMERCIAL OR ECONOMIC UNDERTAKING
VAT SHOULD NOT BE APPLIED TO THE INTEREST INCOME ON THE LOANS IT GRANTED TO ITS AFFILIATES
INTEREST ON ACCOMMODATION LOAN BY MANAGEMENT COMPANY TO AFFILIATES IS NOT SUBJECT TO VAT
LAPANDAY FOODS CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 186155, JANUARY 17, 2023, UPLOADED FEBRUARY 8, 2023
Petitioner Lapanday Foods Corporation filed a Petition for Review seeking the reversal and setting aside of the CTA En Banc’s earlier Decision. The Petitioner opposed the CTA’s view that the loan assistance provided to its affiliates is incidental to its business. Likewise, loans, being for accommodation only, cannot be considered transactions in pursuit of the Petitioner’s business as a management company. In ruling, the Court held that the CTA En Banc erred in holding that Petitioner’s loan transactions are incidental to its main line of business. Whatever interest the Petitioner may have earned from the loan accommodation is merely passive. Being such, it could also not be considered as derived from a commercial or economic undertaking. Further, the subject loans not being incidental transactions to the Petitioner's main business is rooted not only in the fact that such loans are merely isolated and not for commercial or economic purposes, but also in the apparent lack of any showing of a connection between the granting of financial assistance and the primary purpose of providing management services to clients. Considering that the interest income on loans granted by the Petitioner is not subject to Value-Added Tax (VAT), it is futile to discuss the matter concerning the proper computation of the VAT liability. Hence, the Petition was GRANTED.
SITUS OF INCOME OF AIRTIME FEES ABROAD IS PHILIPPINE SOURCED
ACES PHILIPPINES CELLULAR SATELLITE CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 226680, AUGUST 30, 2022, UPLOADED FEBRUARY 1, 2023
Petitioner Aces Philippines Cellular Corporation filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the CTA En Banc upholding the Final Decision on Disputed Assessment (FDDA) issued by the Respondent Commissioner of Internal Revenue (CIR) against the Petitioner. The Respondent assessed the Petitioner for the deficiency Final Withholding Tax (FWT) on satellite airtime fees paid to Aces Bermuda, a Non-Resident Foreign Corporation (NRFC), on the theory that such payments constituted Philippine-sourced income. Petitioner insisted that Aces Bermuda rendered all services outside the Philippines. In ruling, the Court held that the satellite airtime fees accrue when the satellite airtime is delivered to the Petitioner and is utilized by the Philippine subscriber for a voice or data call. The accrual of fees payable to Aces Bermuda signifies the inflow of economic benefits. The following establishes the Philippine situs of Aces Bermuda’s income from satellite airtime fee payments: (1) the income-generating activity is directly associated with the gateway located within the Philippine territory; and (2) engaging in the business of providing satellite communication services in the Philippines is a government-regulated industry. Also, the Petitioner failed to establish that the satellite airtime fee payments are foreign-sourced. In sum, the satellite airtime fee payments to Aces Bermuda constitute income from sources within the Philippines. Thus, the Respondent correctly assessed the Petitioner for deficiency FWT for its failure to withhold the proper amount of tax from its income payments to Aces Bermuda. Consequently, the Petition was DISMISSED. The earlier Decision and Resolution were AFFIRMED WITH MODIFICATION relative to the interest computation.
THE TERMS & CONDITIONS OF AN APPROVED REHABILITATION PLAN ARE BINDING ON CREDITORS
CHINA BANKING CORPORATION VS. ST. FRANCIS SQUARE REALTY CORPORATION, ST. FRANCIS SQUARE DEVELOPMENT CORPORATION & SECURITIES & EXCHANGE COMMISSION
G.R. NO. 232600-04, JULY 27, 2022, UPLOADED FEBRUARY 1, 2023
Petitioner China Banking Corporation filed a Petition for Review on Certiorari assailing the earlier Decision of the Court of Appeals which prohibited the Petitioner from charging interest and penalties on outstanding loans beginning May 4, 2000. Petitioner argued that the rehabilitation plan does not compel a secured creditor to waive interest, penalties, and other charges on the loans of the Respondents St. Francis Square Realty Corporation and St. Francis Square Development Corporation. Since it had not consented to the waiver of interests, penalties, and other charges, the Court of Appeals should not have allowed the release of the mortgaged properties on the ground of over-collateralization. However, based on the Rehabilitation Plan, secured creditors have two (2) options by which the loans owed them can be settled: (1) through dacion en pago wherein all penalties shall be waived; or (2) if the secured creditors do not consent to dacion en pago, through the disposition or sale of the mortgaged properties at selling prices but without interest, penalties, and other related charges accruing after the date of the initial suspension order, which here was May 4, 2000. Following the Petitioner's refusal to avail of dacion en pago, the only remaining option to pay off the loans was through the disposition or sale of the mortgaged properties, without accrual of interest, penalties, and other related charges following the issuance of the stay order on May 4, 2000. Since the Court had already long confirmed the validity of the subject Rehabilitation Plan, its terms must be strictly complied with. In ruling, there is nothing unlawful with the directive of the Court of Appeals to release properties from the mortgage. It cannot be considered an infringement of the Petitioner's alleged right to due process. For the modification of the mortgage contracts in fact is part and parcel of the Rehabilitation Plan itself. Consequently, the Petition was DENIED.
SEC MEMORANDUM CIRCULAR IN 2009 REQUIRING SEC ACCREDITATION OF INDIVIDUAL CERTIFIED PUBLIC ACCOUNTANTS (CPAs) WAS DECLARED VOID
INDIVIDUAL CPAs ARE NOT UNDER SEC'S AUTHORITY & JURISDICTION, THUS, CANNOT BE GOVERNED BY THE SAME RULES
THE POWER TO SUPERVISE THE ACCOUNTING PROFESSION & TO IMPOSE REGULATIONS ON CPAs IS EXCLUSIVELY DELEGATED TO THE PROFESSIONAL REGULATORY BOARD OF ACCOUNTANCY
SECURITIES & EXCHANGE COMMISSION VS. 1ACCOUNTANTS PARTY-LIST, INC., REPRESENTED BY ITS PRESIDENT, CHRISTIAN JAY D. LIM IN HIS CAPACITY AS CPA, FROILAN G. AMPIL, ALLAN M. BASARTE, VIRGILIO F. AGUNOD & JONAS P. MASCARINAS
G.R. NO. 246027, JUNE 21, 2022, UPLOADED JANUARY 27, 2023
Petitioner Securities and Exchange Commission (SEC) filed a Petition for Review on Certiorari assailing the earlier Decision and Order of the Regional Trial Court (RTC) declaring void the Rule 68, paragraph 3 of Amended Implementing Rules and Regulations of the Securities Regulation Code (SRC) and SEC Memorandum Circular (MC) No. 13-2009, which require mandatory accreditation of Certified Public Accountants (CPAs) acting as external auditors. Petitioner argued that it is authorized by the SRC and the Corporation Code to impose the assailed issuances, that the said issuances do not contravene the Republic Act (R.A.) No. 9298 or the “Philippine Accountancy Act of 2004” nor restrict the right of accountants to practice their profession, and SEC MC No. 13-2009 does not violate the equal protection clause. In ruling, the Court held that the Petitioner’s reliance on the provisions of the SRC and the Corporation Code is misplaced. The SEC’s jurisdiction is only over juridical entities and their directors, officers, and stockholders, as well as those that directly deal with the securities issued by said entities. Thus, Petitioner acted ultra vires when it issued the assailed regulations, even when there is an executed Memorandum of Agreement with the Board of Accountancy that allows for such accreditation with the SEC. Also, since no law provides for the classification of CPAs, the SEC has no legal mandate to impose its own classification. Moreover, the accreditation requirement has no rational connection with ensuring the reliability of financial reports. The Court ruled that the accreditation requirement imposed by the assailed issuances amounts to a licensing requirement that curtails the right of CPAs to practice their profession. Consequently, the Petition was DENIED. The earlier Decision and Order of the RTC were AFFIRMED.
REASSIGNMENT OR TRANSFER OF REVENUE OFFICER REQUIRES NEW LOA
VOID ASSESSMENT DUE TO ISSUANCE OF MOA AS SUBSTITUTE TO LOA
MOA IS NOT A PROOF OF AUTHORITY OF REVENUE OFFICER TO AUDIT OR INVESTIGATE
COMMISSIONER OF INTERNAL REVENUE VS. WELLINGTON INVESTMENT & MANUFACTURING CORPORATION
G.R. NO. 249795, NOVEMBER 29, 2022, UPLOADED JANUARY 22, 2023
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution declaring void the subject assessments for having been issued without a Letter of Authority (LOA) by Petitioner or his duly authorized representative. In ruling, the Court found no error on the part of the CTA En Banc when it raised the issue of lack of authority of the Revenue Officers (ROs) who conducted the audit. Citing the Court’s ruling in CIR vs. McDonald’s Philippines Realty Corporation, the Court held that: (1) the reassignment or transfer of RO requires the issuance of a new or amended LOA for the substitute or replacement RO to continue the audit; (2) the use of a Memorandum of Assignment (MOA), Referral Memorandum, or such equivalent document, directing the continuation of the audit by an unauthorized RO usurps the functions of the LOA; and (3) Revenue Memorandum Order (RMO) No. 43-90 expressly and specifically requires the issuance of a new LOA if ROs are reassigned or transferred. Moreover, the MOA, Referral Memorandum, or any equivalent document is not proof of the existence of authority of the substitute or replacement ROs to examine a taxpayer's books of accounts, which is the function of an LOA. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.
SC RESOLUTION AFFIRMING CONVICTION FOR NOT REMITTING SSS CONTRIBUTIONS WITH MODIFICATION OF PENALTY UNDER THE NEW LAW
PATRICIA MARIE A. DE GUZMAN VS. PEOPLE OF THE PHILIPPINES & SOCIAL SECURITY SYSTEM
G.R. NO. 257317, AUGUST 17, 2022, UPLOADED JANUARY 16, 2023
Petitioner Patricia Marie A. De Guzman filed a Petition for Review by Certiorari assailing the earlier Decision and Resolution of the Court of Appeals which affirmed her conviction for failure to remit Social Security System (SSS) contributions, in violation of the Social Security Law. In ruling, for the failure of employer Sun and Shield Security Agency, Inc. to remit SSS contributions within the first 10 days of each calendar month following the month for which they are applicable, Petitioner, as a then-director of the corporation, was found accountable for payment of the unpaid contributions and penalties. However, considering that the introduced law amendments are favorable to the Petitioner, the penalty for failure to remit employees’ contributions shall be 2% per month on unremitted contributions from the date the contributions fall due until paid. Consequently, the earlier Decisions and Resolutions were AFFIRMED WITH MODIFICATION AS TO PENALTY, and the Petitioner was found GUILTY beyond reasonable doubt.
NON-PRESENTATION OF THE BOI CERTIFICATE OF REGISTRATION AT THE TIME OF PAYMENT OF LBT DOES NOT CONSTITUTE A WAIVER TO RECOVER THE TAX ERRONEOUSLY COLLECTED & PAID
THE CITY GOVERNMENT OF MAKATI & THE CITY TREASURER OF MAKATI VS. SOUTH LUZON TOLLWAY CORPORATION
G.R. NO. 258121, SEPTEMBER 28, 2022, UPLOADED JANUARY 16, 2023
Petitioners City Government of Makati and its City Treasurer filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the Court of Tax Appeals (CTA) En Banc affirming with modification the Decision granting the Respondent South Luzon Tollway Corporation’s claim for a tax refund. Petitioners maintained that it was justified in assessing and collecting Local Business Tax (LBT) from the Respondent, as well as denying the refund thereof because it never presented its Board of Investments (BOI) Certificate of Registration at the time the said tax was paid. Petitioners also posited that assuming that the Respondent is entitled to its claim, it may only be granted in the form of a tax credit. In ruling, the Court held that the non-presentation of the BOI Certificate of Registration at the time of payment of LBT is not fatal to the Respondent’s case. Here, the Respondent had successfully discharged the burden of proving tax refund. The Respondent proved its actual payment of LBT subject to refund, as evidenced by Official Receipt issued by Petitioners. Likewise, the Respondent submitted its BOI Certificate of Registration to show that it is a pioneer enterprise exempt from paying said tax when Petitioners collected the same. Thus, the Respondent is entitled to be refunded of the amount it paid to the Petitioners, in cash, contrary to the Petitioners’ asseveration that the Respondent may only avail of a tax credit. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.
REAL PROPERTIES USED FOR GOVERNMENTAL FUNCTIONS ARE EXEMPT FROM REAL PROPERTY TAX
CTA HAS EXCLUSIVE APPELLATE JURISDICTION OVER LOCAL TAX CASES DECIDED BY THE RTC
CITY GOVERNMENT OF PAGADIAN, CITY TREASURER & CITY ASSESSOR OF PAGADIAN CITY VS. NATIONAL FOOD AUTHORITY
G.R. NO. 261464, AUGUST 31, 2022, UPLOADED JANUARY 16, 2023
Petitioners, the City Government of Pagadian, its City Treasurer, and its City Assessor, filed a Petition for Review on Certiorari assailing the Court of Appeals (CA) earlier Decision and Resolution affirming the ruling of the Regional Trial Court (RTC) which declared the Respondent National Food Authority (NFA) a government instrumentality whose real properties used in governmental functions are exempt from payment of Real Property Tax (RPT). In ruling, the Court held that Rule 45 of the Rules of Court provides that the decisions of the RTC, in these cases, shall be appealable before the Court of Tax Appeals (CTA), and the latter’s decisions are appealable before this court through a Petition for Review on Certiorari. Filing an appeal before the wrong court, which acted without jurisdiction to take cognizance of the same (i.e., the NFA whose real properties used in governmental functions are exempt from payment of RPT), has become final and executory. Consequently, the Petition was DENIED, and the CA’s earlier Decision and Resolution were VOID.
INPUT TAX DOES NOT REQUIRE DIRECT ATTRIBUTABILITY TO BE CREDITABLE OR REFUNDABLE
COMMISSIONER OF INTERNAL REVENUE VS. TAGANITO HPAL NICKEL CORPORATION
G.R. NO. 259024, SEPTEMBER 28, 2022, UPLOADED JANUARY 16, 2023
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari to reverse and set aside the CTA’s earlier Decision and Resolution granting the issuance of a Tax Credit Certificate (TCC) of the Respondent Taganito HPAL Nickel Corporation on its unutilized input taxes for the taxable year 2013. Petitioner argued that the Respondent failed to determine which creditable input taxes are attributable to its zero-rated sales citing Section 112 (A) of the 1997 Tax Code, as amended. In ruling, the Court held that the law does not require direct attributability for an input tax to be creditable or refundable. However, it is required that the creditable input tax should be attributable to the zero-rated or effectively zero-rated sales. Consequently, the factual findings and conclusions of the CTA are deemed final and conclusive. Thus, the Petition was DENIED, and the Decision and Resolution were AFFIRMED.
ERRONEOUS INCLUSION OF A DEAD PERSON AS INCORPORATOR DOES NOT CALL FOR THE IMMEDIATE DISSOLUTION OF THE COMPANY
QUASI-JUDICIAL AGENCIES LIKE THE SEC DO NOT HAVE THE RIGHT TO SEEK THE REVIEW OF AN APPELLATE COURT DECISION REVERSING ANY OF ITS RULINGS BECAUSE IT IS NOT A REAL PARTY IN INTEREST
SECURITIES & EXCHANGE COMMISSION VS. AZ 17/31 REALTY, INC. & AZUCENA LOCSIN-GARCIA VS. AZ 17/31 REALTY, INC.
G.R. NO. 239010 & G.R. NO. 240888, JULY 6, 2022, UPLOADED DECEMBER 13, 2022
Petitioners Azucena Locsin-Garcia (Azucena) and the Securities and Exchange Commission (SEC) filed their separate Petitions for Review assailing the earlier Decision and Resolution of the Court of Appeals (CA) declaring that the inclusion of the name of Pacita Javier (Pacita) as incorporator of Respondent AZ 17/31 Realty, Inc. albeit she was already deceased, did not amount to fraud insofar as the procurement of the company’s certificate of registration was concerned. Azucena sought revocation of the Respondent’s registration because the Respondent made it appear that Pacita was still very much alive, was able to sign the Articles of Incorporation (AOI), act as initial director when in truth, and in fact, she was already dead three and a half (3 ½) years prior to its incorporation. SEC argued that the falsification and misrepresentation of material facts in the AOI amount to fraud. On the other hand, granting it committed a mistake in the AOI, Respondent prayed that any of the lesser penalties of suspension and/or fine be imposed in lieu of revocation. In ruling, the Court held that the Petition of SEC must be expunged for lack of capacity to sue. On Azucena’s Petition, the Court discussed that while Pacita’s inclusion as an incorporator may be the subject of a criminal case for fraud under the Revised Penal Code, it does not equate to fraud contemplated under the Corporation Code for dissolution of a corporation. The name of Pacita should be dropped as an incorporator and her subscription, including earnings, returned to her estate. Instead of hastily ordering the dissolution of the Respondent, the SEC should have ordered it to amend its AOI. For compliance purposes, the Court deemed that a period of six (6) months is reasonable. Non-compliance will merit the Respondent’s revocation of its certificate of registration. Consequently, the Petition of SEC was DENIED on grounds that it is not a real party in interest. The Petition of Azucena was also DENIED, and the earlier Decision and Resolution were AFFIRMED with MODIFICATION.
REASSIGNMENT OF AUDIT TO A NEW RO MUST BE MADE THROUGH A VALID NEW LOA AS SIGNED BY THE CIR HIMSELF OR BY HIS AUTHORIZED REPRESENTATIVE, OTHERWISE, IT WILL RENDER THE ASSESSMENT NULL & VOID
VALID REASSIGNMENT OF A TAX INVESTIGATION TO A DIFFERENT RO WILL NOT IMPEDE THE COLLECTION OF TAXES
A NEW LOA FOR VALID REASSIGNMENT CAN BE RECONCILED WITH THE “ONE LOA PER TAXABLE YEAR” RULE
REPUBLIC OF THE PHILIPPINES VS. ROBIEGIE CORPORATION
G.R NO. 260261, OCTOBER 3, 2022, UPLOADED DECEMBER 7, 2022
Petitioner Republic of the Philippines filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution canceling the assessment issued to the Respondent Robiegie Corporation. In an earlier Decision, the CTA cited the case of Commissioner of Internal Revenue vs. McDonald’s Philippines Realty Corp. which provides that the reassignment of a new Revenue Officer (RO) to continue the audit without a separate or amended Letter of Authority (LOA) will violate the taxpayer’s right to due process and, therefore, null and void. In ruling, Supreme Court held that the Petitioner’s assertion that an LOA is not an “authorization letter” of the ROs but a mere notice of investigation to the taxpayer is erroneous and blatantly contrary to the text of the law. Sections 6(A) and 13 of the 1997 Tax Code, as amended, provides that ROs may only examine taxpayers, in the course of carrying out, in conformance to, or agreement with, or according to, a validly issued LOA which must be issued and signed either by the Regional Directors, Deputy Commissioners, Commissioner, or his duly authorized representative. Contrary to the Petitioner’s position, issuance of a new LOA as a requisite for a valid reassignment of audit to a new RO will not impede the collection of taxes. As Petitioner reasoned that such reassignment is effected through a Memorandum Referral since only one (1) LOA per taxable year can be issued to a taxpayer, the Court submits that a new LOA for valid reassignment can be reconciled with the “one LOA per taxable year” rule under Revenue Memorandum Order (RMO) No. 8-2006 which authorizes the issuance of duplicate LOAs, subject to the CIR’s discretion to determine which LOA shall prevail. Simply, the CIR or his duly authorized representatives may issue a new LOA to the newly assigned RO, and such LOA can be made to prevail over the LOA issued to the previous investigating officer. In the instant case, the Petitioner failed on the requirement that reassignment of RO must be made pursuant to an LOA as signed and issued by the CIR or his duly authorized representative. Hence, the said new RO had no authority to investigate the Respondent. Thus, the Court resolved to DENY the Petition.
AN INSTRUMENTALITY OF THE NATIONAL GOVERNMENT CANNOT BE TAXED BY LOCAL GOVERNMENT
PROPERTIES OWNED BY A NATIONAL GOVERNMENT INSTRUMENTALITY ARE EXEMPT FROM REAL PROPERTY TAXATION
REAL PROPERTY OWNED BY THE STATE IS NOT TAXABLE
LIGHT RAIL TRANSIT AUTHORITY VS. CITY OF PASAY, REPRESENTED BY THE CITY TREASURER & THE CITY ASSESSOR
G.R. NO. 211299, JUNE 28, 2022, UPLOADED NOVEMBER 8, 2022
Petitioner Light Rail Transit Authority filed a Petition for Review seeking the cancellation of the earlier Resolution of the Court of Appeals affirming the ruling of the Regional Trial Court that Petitioner should not be extended a tax exemption. Petitioner claimed that it is a government instrumentality exempt from local taxation. It is operating the light rail system for the Republic of the Philippines, which is the true owner of the subject real properties. In ruling, the Court discussed the definition of a government instrumentality and a Government-Owned and Controlled Corporation (GOCC) in relation to the Administrative Code of 1987. A close scrutiny of the definition of GOCC in the said Code will show that the Petitioner would not fall under such definition. Since the Petitioner is neither a stock nor a non-stock corporation, it does not qualify as a GOCC. The Petitioner is merely an attached agency to the Department of Transportation. Hence, the Petitioner, being an instrumentality of the national government, cannot be taxed by the local government. The Court agreed with the Petitioner’s position that the real owner of the properties is actually the State and concluded that the properties of the Petitioner are not merely patrimonial properties but are properties of the public dominion that cannot be subjected to real property tax. Consequently, the Petition was GRANTED.
HOLDING COMPANY IS NOT DEEMED A “NON-BANK FINANCIAL INTERMEDIARY” FOR THE IMPOSITION OF LOCAL BUSINESS TAX ON DIVIDENDS & INTEREST RECEIVED
CITY OF DAVAO & THE CITY TREASURER OF DAVAO CITY VS. ARC INVESTORS INC.
G.R NO. 249668, JULY 13, 2022, UPLOADED SEPTEMBER 1, 2022
Petitioners, City of Davao and its City Treasurer, filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA)’s earlier Decision and Resolution canceling and setting aside the assessment of the Respondent ARC Investors, Inc. Earlier, the Petitioner imposed Local Business Taxes (LBT) on the Respondent’s dividend income from San Miguel Corporation's preferred shares of stock. The issue at hand is whether the Respondent is a Non-Bank Financial Intermediary (NBFI) and should be subject to LBT pursuant to Section 143(f) in relation to Section 151 of the Local Government Code (LGC). In ruling, the Court held that the Respondent is a holding company and cannot be deemed as an NBFI since there is no indication that the Respondent was authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking activities as an NBFI and has not actually engaged principally in NBFI activities on a regular and recurring basis as stated in its AOI. Further, the Court cited the earlier Supreme Court En Banc case of COCOFED vs. Republic of the Philippines, in which the Court declared that the Respondent is one of the 14 holding companies established to own and hold SMC shares of stock, which were formed or organized solely for the benefit of the coconut farmers and for the development of the coconut industry. Hence, LBT cannot be imposed on the same. Since the shares were acquired using coconut levy funds, which have been established to be public in character, these shall be treated as government assets and are exempt from taxes. Thus, the Petition for Review was DENIED.
VAT EXEMPTION OF CONDOMINIUM DUES ISSUE IS RENDERED MOOT & ACADEMIC GIVEN PRIOR SUPREME COURT DECISIONS
SUPREME COURT CANNOT RENDER JUDGMENT AFTER THE ISSUE HAS ALREADY BEEN RESOLVED BY OR THROUGH EXTERNAL DEVELOPMENTS & NO RELIEF PRAYED FOR CAN BE GRANTED OR DENIED
FRITZ BRYN ANTHONY M. DELOS SANTOS VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 222548, JUNE 22, 2022, UPLOADED JULY 29, 2022
Petitioner Fritz Bryn Anthony M. Delos Santos filed a Petition for Certiorari assailing the validity of Revenue Memorandum Circular No. 65-2012. The Circular clarifies the taxability of association dues, membership fees, and other assessments or charges collected by condominium corporations. Petitioner contended that even if the revocation by the Tax Reform for Acceleration and Inclusion (TRAIN) Law mooted the Petition, this Court should still consider since there is a need: (1) to curb the Circular’s effects on erroneously collected Value-Added Tax (VAT); (2) to fix the nature of activities that should be subjected to VAT; and (3) to prevent a similar Circular from being enacted in the future. In ruling, the Court already held in previous Decisions that the Respondent Commissioner of Internal Revenue (CIR) gravely abused his authority in issuing the Circular, and in declaring that association dues, membership fees, and other assessments or charges are subject to income tax, VAT, and withholding tax. The Circular unduly expanded and modified several provisions of the Tax Code. The very nature of a condominium corporation negates the application of the Tax Code provisions on VAT. Thus, the promulgation of the previous Decisions of the Supreme Court declaring the Circular invalid has mooted the Petition. Consequently, the Petition was DISMISSED for being moot and academic.
IF THE ILLNESS IS A NON-OCCUPATIONAL DISEASE, PROOF MUST BE SHOWN THAT THE RISK OF CONTRACTING THE DISEASE IS INCREASED BY THE WORKING CONDITIONS
STRICT RULES OF EVIDENCE ARE NOT APPLICABLE IN CLAIMS FOR COMPENSATION
NON-OCCUPATIONAL DISEASE IS NOT COMPENSABLE UNLESS AGGRAVATED BY WORKING CONDITIONS
AN EMPLOYEES’ COMPENSATION LAW OR A SOCIAL LEGISLATION SHOULD BE CONSTRUED IN FAVOR OF LABOR
SOCIAL SECURITY SYSTEM VS. VIOLETA A. SIMACAS
G.R. NO. 217866, JUNE 20, 2022, UPLOADED JULY 12, 2022
Petitioner Social Security System (SSS) filed a Petition for Review on Certiorari challenging the Court of Appeals (CA)’s Decision and Resolution which reversed the Employees Compensation Commission (ECC)’s denial of Respondent Violeta Simacas’ claim for death benefits under Presidential Decree (P.D.) No. 626, as amended. Petitioner argued that since prostate cancer is not considered an occupational disease, Respondent is obligated to prove that the work of Irnido (husband of Respondent) increased the risk of him contracting the disease. It maintained that the absence of medical information demonstrating that Irnido’s working conditions caused his prostate cancer renders Respondent’s claim of work connection untenable. In ruling, the Court held that in establishing compensability, the claimant need only present substantial proof that the nature of the deceased’s work or working conditions increased the risk of them contracting prostate cancer. A review of records revealed that Respondent proved that Irnido’s working conditions increased the risk of him contracting prostate cancer. It is not unlikely that Irnido’s work as a helper in assisting the welder and machinist in cutting steel materials increased the risk of him contracting the disease. This probability suffices to warrant the grant of the claimed benefits. Consequently, the Petition was DENIED.
ACTION FOR INTERPLEADER MAY NOT BE UTILIZED TO CIRCUMVENT THE IMMUTABILITY OF A FINAL & EXECUTORY JUDGMENT
SPECIAL PREFERRED CREDIT IS SUPERIOR TO ORDINARY PREFERRED CREDIT
BUREAU OF INTERNAL REVENUE VS. TICO INSURANCE COMPANY, INC., GLOWIDE ENTERPRISES, INC. & PACIFIC MILLS, INC.
G.R. NO. 204226, APRIL 18, 2022, UPLOADED JULY 11, 2022
Petitioner Bureau of Internal Revenue (BIR) filed a Petition for Review on Certiorari assailing the Court of Appeals (CA)’s earlier Decision and Resolution. Respondents Glowide Enterprises, Inc. (Glowide) and Pacific Mills, Inc. (PMI) asserted that Respondent Tico Insurance Company, Inc. (TICO)’s Complaint for Interpleader is improper since it collaterally attacks a final and executory judgment in favor of Respondents Glowide and PMI. BIR countered that the suit for Interpleader is proper since it is only intended to determine which of TICO’s creditors had a better right to its condominium units, which are the only properties left that TICO may dispose of to pay its outstanding debts to different creditors, in contrast to the earlier case which only determined TICO’s liability to Glowide and PMI. In ruling, the Court agreed with the findings of the CA that the filing of the instant Complaint is improper since it is a belated attempt on TICO’s part to assail the final and executed judgment. Even assuming arguendo that the proceedings were valid, the Court held without merit the contention of the BIR that its claim is still preferred over Glowide and PMI’s claim, since it enjoys absolute preference over any other claims pursuant to the Civil Code, which provides that tax claims have preference over any other claim of any other creditor in respect of any, and all properties, of the insolvent. The Court finds no reason to depart from the CA’s findings that Glowide and PMI’s claim is preferred over the BIR’s and are, thus, entitled to possession and conveyance of the condominium units. TICO’s tax claim is only an ordinary preferred credit since it is not based on taxes due on the condominium units but on TICO’s deficiency tax assessments. On the other hand, Glowide and PMI’s claim is a special preferred credit, and, thus, superior to the BIR’s tax claim, which is only an ordinary preferred credit. Consequently, the Petition was DENIED.
TAX AMNESTY DOES NOT COVER WITHHOLDING TAX
A TAX AMNESTY, MUCH LIKE A TAX EXEMPTION, IS NEVER FAVORED OR PRESUMED IN LAW] [TREASURER CAN BE HELD CRIMINALLY LIABLE FOR VIOLATIONS OF THE TAX CODE
BUREAU OF INTERNAL REVENUE V. SAMUEL B. CAGANG
G.R. NO. 230104, MARCH 16, 2022, UPLOADED JULY 5, 2022
Petitioner Bureau of Internal Revenue (BIR) filed a Petition for Review on Certiorari seeking to reverse the Court of Appeals (CA)’s earlier Decision and Resolution, which annulled the Resolution of the Department of Justice. Petitioner posited that: (1) CEDCO, Inc. (CEDCO) is disqualified from availing of the tax amnesty under Republic Act (R.A.) No. 9480 (“2007 Tax Amnesty Law”) due to its existing withholding tax liabilities; and (2) there is probable cause to charge Respondent Samuel B. Cagang with violation of Section 255 of the 1997 Tax Code, as amended, insofar as he failed to cause the payment of the withholding taxes due. In ruling, the Court finds that the tax amnesty under R.A. No. 9480 does not extend to CEDCO concerning its existing withholding tax liabilities, as explicitly provided in the said law. However, as to the deficiency taxes on Income Tax and Value-Added Tax (VAT), the Court held that CEDCO is entitled to avail of the tax amnesty considering that it had submitted the necessary documents and complied with the requirements. Regarding the 2nd issue, contrary to the contention of the Respondent that he cannot be held liable because he was never appointed as the CEDCO’s Treasurer, the Court was inclined to agree with the Petitioner that there exists probable cause to charge the Respondent with the violation of Section 255 of the 1997 Tax Code, as amended. A review of the records revealed that evidence exists that Respondent, albeit for a short period, was appointed by CEDCO’s Board of Directors as Corporate Secretary/Treasurer. Hence, the Petition was GRANTED. Consequently, the CA’s earlier Decision and Resolution were SET ASIDE.
GOVERNMENT INSTRUMENTALITIES ARE EXEMPT FROM RPT UNLESS BENEFICIAL OWNERSHIP IS TRANSFERRED TO A TAXABLE PERSON
OBLIGATION OF TAXABLE PERSON TO PAY RPT REGARDLESS OF WHETHER OR NOT IT IS THE OWNER AT THE TIME BENEFICIAL USE WAS GRANTED
UNIMASTERS CONGLOMERATION INCORPORATED VS. TACLOBAN CITY GOVERNMENT PRIVATIZATION & MANAGEMENT OFFICE, PHILIPPINE TOURISM AUTHORITY & THE PROVINCE OF LEYTE
G.R. NO. 214195, MARCH 23, 2022, UPLOADED MAY 27, 2022
Petitioner Unimasters Conglomeration Incorporated filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s earlier Resolutions holding it liable for Real Property Tax (RPT). Petitioner argues that the payment of RPT should rest on the Republic, if the beneficial user fails to pay the required taxes thereon and since it also waived its tax exemption when it contractually assumed the payment of RPT in the lease contract. In ruling, Section 234 (a) of the Local Government Code provides that government instrumentalities are exempt from RPT but shall not extend to taxable private entities to whom the beneficial use of the government instrumentality's properties has been vested. Citing the Court’s ruling in the landmark City of Pasig case, the Court held that the moment the beneficial use of the property owned by the government instrumentality is granted to Petitioner in this case, a taxable person, the tax exemption is lifted and the liability to pay RPT falls to the Petitioner, regardless of whether or not it is the owner. Further, while the Court recognizes the existence of the provision in the Lease Contract pertaining to the Respondent’s assumption of tax liability, such assumption of the obligation to pay RPT does not automatically exonerate the Petitioner from the burden created by law. Under the general principle of relativity of contracts, a contract cannot favor or prejudice a third person, even if they are aware of such contract and has acted with knowledge thereof. Simply put, when there is no privity of contract, there is no obligation or liability to speak of. Thus, the Petition is DENIED, and the assailed Decision is AFFIRMED.
THE 5-YEAR PERIOD TO COLLECT APPLIES ONLY TO THE ASSESSMENTS ISSUED WITHIN THE EXTRAORDINARY PERIOD OF 10 YEARS
THE USE OF AN ERRONEOUS REMEDY IS A CAUSE FOR THE OUTRIGHT DISMISSAL OF THE PETITION FOR CERTIORARI
COMMISSIONER OF INTERNAL REVENUE VS. COURT OF TAX APPEALS SECOND DIVISION & QL DEVELOPMENTS, INC.
G.R. NO. 258947, MARCH 29, 2022, UPLOADED MAY 25, 2022
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Certiorari and Prohibition challenging the Court of Tax Appeals (CTA) 2nd Division’s Resolutions which cancelled Respondent QL Development, Inc.’s deficiency tax assessment on the ground of prescription and enjoined the Petitioner from collecting the assessed deficiency taxes against Respondent. The Court noted that the Petitioner directly filed a Petition for Certiorari and Prohibition with the Court, alleging that the Resolutions are Interlocutory Orders that cannot be appealed before the CTA En Banc. In ruling, the Court first discussed the distinctions between a Final Judgment or Order and an Interlocutory Order, and there is no doubt that the Resolutions are final judgments or orders. The Petitioner’s proper remedy on the adverse Resolutions was to file an Appeal by way of a Petition for Review. Thus, the Petitioner’s filing of the instant Petition is erroneous. Nonetheless, even if the Court were to disregard the impropriety of the remedy resorted to by the Petition, the same should still be dismissed. The Court held that the CTA Division erred when it applied the 5-year period to collect taxes. The 5-year period for collection of taxes only applies to assessments issued within the extraordinary period of ten (10) years in cases of false or fraudulent return or failure to file a return. Here, given that the assessment was issued within the 3-year ordinary prescriptive period to assess, the Petition had another three (3) years to initiate the collection of taxes. Since the Final Assessment Notice or the Formal Letter of Demand was mailed on December 12, 2014, the Petitioner had another three (3) years reckoned from said date, or until December 12, 2017, to enforce collection. Verily, prescription had already set-in when the CIR initiated its collection efforts only in 2020. Consequently, the Petition was DISMISSED, and the earlier Resolutions were AFFIRMED.
ASSESSMENTS ISSUED BEYOND THE THREE-YEAR PRESCRIPTION PERIOD ARE INVALID
THE WAIVER IS DEFECTIVE & INVALID IN THE ABSENCE OF DATE OF ACCEPTANCE BY THE BIR
WITHOUT A DEFINITE DATE OF ACTUAL DEMAND OF PAYMENT BY THE TAXPAYER, THE ASSESSMENT IS INVALID
THE USE OF AN ERRONEOUS REMEDY IS A CAUSE FOR THE OUTRIGHT DISMISSAL OF THE PETITION FOR CERTIORARI
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE BUREAU OF INTERNAL REVENUE VS. FIRST GAS POWER CORPORATION
G.R. NO. 214933, FEBRUARY 15, 2022, UPLOADED MAY 16, 2022
Petitioner Bureau of Internal Revenue filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision affirming the cancellation of the assessment issued to the Respondent First Gas Power Corporation since it was issued beyond the three-year prescription period in violation of Section 203 of the 1997 Tax Code, as amended. Likewise, the Waivers issued were not valid because the date of acceptance by the Petitioner was not indicated in the Waivers. In ruling, the Court cited Revenue Memorandum Order (RMO) No. 20-90 and Revenue Delegation Administrative Order (RDAO) No. 09-2001, which clearly mandate that the date of acceptance by the BIR should be indicated in the Waiver; therefore, the failure to comply with the mandatory and strict compliance of the said RMO and RDAO renders the Waiver defective and ineffectual. Furthermore, it was noted that the assessments noticed failed to indicate the specific date or period to settle the tax liabilities. Citing the landmark case of CIR vs. Fitness By Design, Inc., the Court held that a FAN is invalid if it does not contain a definite due date for payment by the taxpayer. Consequently, the Petition for Review on Certiorari was DENIED, and the earlier Decision was AFFIRMED.
WHILE A WAIVER MAY HAVE BEEN DEFICIENT IN FORMALITIES, THE TAXPAYER'S BELATED ACTION ON QUESTIONING ITS VALIDITY TILTS THE SCALES IN FAVOR OF THE TAX AUTHORITIES
NO TAXPAYER MAY BE ALLOWED TO EXECUTE HAPHAZARD WAIVERS DELIBERATELY, GO THROUGH THE MOTIONS THAT THE WAIVERS ARE EFFECTIVE & LEAD THE TAX AUTHORITIES TO BELIEVE THAT THE ASSESSMENT PERIOD HAS BEEN EXTENDED, ONLY TO DENY THE VALIDITY THEREOF WHEN IT BECOMES UNFAVORABLE TO HIM
ASIAN TRANSMISSION CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 230861, FEBRUARY 14, 2022, UPLOADED MAY 13, 2022
Petitioner Asian Transmission Corporation filed a Motion for Reconsideration of the Court’s Decision denying the earlier Petition for Review on Certiorari. The core issue lies in the validity of eight (8) Waivers of the Defense of Prescription under the Statute of Limitations of the Tax Code, executed successively by the Petitioner. In the decision sought to be reconsidered, the Court recounted the defects found in the Waivers, to wit: (1) the notarization of the Waivers was not in accordance with the Rules on Notarial Practice; (2) several Waivers failed to indicate the date of acceptance by the BIR; (3) the Waivers were not signed by the proper revenue officer; and (4) the Waivers failed to specify the type of tax and the amount of tax due. Petitioner argued that the Court focused solely on the 1st defect attributed to it and failed to address the issues arising from the three (3) other defects attributed to the BIR. Petitioner likewise argued that the principles of “in pari delicto” do not apply with respect to the 2nd, 3rd, and 4th defects. In ruling, the Court held that the taxpayer’s contributory fault or negligence coupled with estoppel would render effectively an otherwise flawed waiver, regardless of the physical number of mistakes attributable to a party. Here, Petitioner issued eight (8) successive Waivers for four (4) years. Defects had always marred the Waivers, and yet the Petitioner continued to correspond with the tax authorities and allowed them to proceed with their investigation, as extended by the Waivers in question. The Petitioner consented to the BIR’s extended investigation and failed to assail the Waivers’ validity at the earliest opportunity giving rise to estoppel. Petitioner's belated attempt to cast doubt over the Waivers' validity could only be interpreted as a mere afterthought to resist possible tax liability. Consequently, the Motion for Reconsideration was DENIED.
ONE OF THE ELEMENTS OF FORUM SHOPPING IS THE IDENTITY OF RELIEFS BETWEEN THE TWO PROCEEDINGS
IF NO RES JUDICATA WOULD RESULT FROM THE RESOLUTION OF ONE OR OTHER PROCEEDING, THERE IS NO FORUM SHOPPING
THE BUREAU OF CUSTOMS & THE COMMISSIONER OF CUSTOMS VS. JADE BROS. FARM & LIVESTOCK, INC.
G.R. NO. 246343, NOVEMBER 18, 2021, UPLOADED MAY 12, 2022
Petitioner Commissioner of Customs filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA)’s earlier Decision and Resolution. Previously, Petitioner refused to release the imported rice shipment to Respondent Jade Bros. Farm and Livestock, Inc. as the latter supposedly had no import permit from the National Food Authority (NFA). From this controversy stemmed two (2) parallel proceedings: before the Regional Trial Court (RTC) and another before the Petitioner’s Bureau of Customs. Petitioner argued that the Respondent engaged in forum shopping by filing the Petition for Review before the CTA Division, despite the pendency of the Civil Case before the RTC. In ruling, the Court first discussed the elements of forum shopping and found that Respondent did not commit forum shopping. No identity of relief between the two (2) proceedings exists. To begin with, the Civil Case is a proceeding for declaratory relief, for which Respondent questioned the legal basis for the District Collector’s imposition of an import permit. In contrast, the Respondent’s Petition before the CTA Division was precipitated by the District Collector’s impending auction of its imported rice shipments. Consequently, no res judicata would result from the resolution of one or the other proceeding. Assuming the RTC adjudged the Petitioners without legal basis in requiring permits to import rice shipments, the District Collector's actions regarding the public auction would still have been beyond the scope of the resolution. On the other hand, even if the CTA Division had ruled on the legality of the Respondent's rice imports, the legality of the NFA issuances relied on by Petitioners would still be pending before the RTC. Thus, the Respondent did not commit forum shopping. Consequently, the Petition was DENIED. Since the rice shipments imported by Respondent have already been auctioned, Petitioner was ORDERED TO RELEASE to Respondent the proceeds of the auction sale.
CTA & NOT THE RTC HAS THE JURISDICTION TO RULE ON THE CONSTITUTIONALITY & VALIDITY OF REVENUE ISSUANCES BY THE CIR
RR 4-11 ON ALLOCATION OF COSTS & EXCLUSIVE DEDUCTION FOR BANKS IS VOID FOR HAVING BEEN ISSUED ULTRAVIRES
THE ALLOCATION RULES UNDER RR 4-2011 ARE ARBITRARY & INDISCRIMINATE IMPOSITION OF A UNIFORM ACCOUNTING METHOD
DEPARTMENT OF FINANCE, REPRESENTED BY ITS SECRETARY, & THE BUREAU OF INTERNAL REVENUE, REPRESENTED BY ITS COMMISSIONER VS. ASIA UNITED BANK ET AL.
G.R. NOS. 240163 & 240168-69, DECEMBER 1, 2021, UPLOADED MAY 12, 2022
Petitioner Department of Finance filed a Petition for Review on Certiorari, raising pure questions of law. Petitioner argued that the Regional Trial Court (RTC) erred in ruling that it had jurisdiction over the Petitions assailing the validity of Revenue Regulations (RR) No. 4-2011. On the other hand, the Respondents Asia United Bank et al. maintained that RR No. 4-2011 is an invalid administrative issuance for being issued without a legal basis, for curtailing the deductions granted by the Tax Code, and for modifying the Tax Code. In ruling, the Court held that the Court of Tax Appeals (CTA) has jurisdiction to rule on the constitutionality or validity of tax law, regulation, or administrative issuance. Nevertheless, despite the procedural infirmities of the Petition and proceedings before the lower court, the Court deemed it prudent to take cognizance of the present Petition as the validity of the actions of the Petitioners that affect numerous banks and other financial institutions is in issue. The Court thus availed itself of its judicial prerogative and ruled that RR 4-2011 is void. In this case, RR 4-2011 provides an allocation method for different units or income streams within one bank or financial institution. The Commissioner of Internal Revenue (CIR), through RR 4-2011, allocates costs and expenses between operations of a depository bank and other financial institutions. By prescribing a method for allocating and reporting expenses, the CIR effectively derogated the right of taxpayer banks and other financial institutions to adopt their own accounting method. Moreover, RR No. 4-2011 inevitably impairs the taxpayers’ right to claim deductions. In issuing the said RR, which requires the allocation of costs and expenses of banks with respect to its Regular Banking Units (RBU) and Foreign Currency Deposit Units (FCDU)/ Expanded Foreign Currency Deposit Unit (EFCDU) or Offshore Banking Unit (OBU) operations and as to its “tax paid income” and “tax-exempt income” activities, Petitioner effectively imposed an additional requirement for deductibility of expenses which is not provided under the Tax Code. RR 4-2011, therefore, effectively qualified the deduction bestowed by the Tax Code, thereby modifying the law. Consequently, the Petition was DENIED, and RR 4-2011 was declared VOID.
ELECTRIC COOPERATIVES UNDER NEA ARE WITHDRAWN WITH LOCAL TAX INCENTIVES UNLESS REGISTERED WITH CDA
BENGUET ELECTRIC COOPERATIVE VS. THE MUNICIPALITY OF LA TRINIDAD, BENGUET
G.R. NO. 229428, NOVEMBER 29, 2021, UPLOADED MAY 6, 2022
Petitioner Benguet Electric Cooperative filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution. Petitioner asserted that the CTA En Banc erred in sustaining the Decision of the CTA Division that the Petitioner could not file a Petition for Prohibition before the Regional Trial Court (RTC) since the Petitioner failed to file a timely protest pursuant to Section 195 of the Local Government Code (LGC). In ruling, Prohibition is resorted to when the proceedings of any tribunal are without or in excess of its jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law. Here, Petitioner had 30 days from the receipt of the denial of its protest with the Local Treasurer to file an Appeal with the RTC, hence, it could not resort to the remedy of Prohibition. Considering that the Petitioner did not file any appeal with the RTC within the 30 days provided under Section 195 of the LGC, the assessments for Local Business Taxes (LBTs) became conclusive and unappealable. As correctly held by the CTA Division and En Banc, considering that tax privileges granted to electric cooperatives registered with National Electrification Administration (NEA) under Presidential Decree (P.D.) 269 were validly withdrawn, and only those registered with the Cooperative Development Authority (CDA) under Republic Act (R.A.) No. 6938 may continue to enjoy the tax privileges under the Cooperative Code, Petitioner is liable to pay LBT, even if it is a nonstock and non-profit cooperative. Consequently, the Petition was DENIED.
EXECUTIVE VICE PRESIDENT IS NOT A PROPER & RESPONSIBLE OFFICER TO INDICT IF NO ACTIVE PARTICIPATION IN THE MANAGEMENT, HENCE, SHOULD BE ACQUITTED
GENOVEVA S. SUAREZ VS. PEOPLE OF THE PHILIPPINES & THE BUREAU OF INTERNAL REVENUE
G.R. NO. 253429, OCTOBER 6, 2021, UPLOADED APRIL 18, 2022
Petitioner Genoveva S. Suarez, Executive Vice-President of 21st Century Entertainment, Inc. (21st Century), filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the CTA En Banc, which affirmed her conviction for failure of 21st Century to pay its tax liabilities. The Petitioner insisted that she is not a responsible officer of 21st Century who may be held criminally liable for the failure to pay taxes. In ruling, the Court, in SEC v. Price Richardson Corporation, stated that to be criminally liable for the acts of a corporation, there must be a showing that its officers, directors, and shareholders actively participated in or had the power to prevent the wrongful act. Here, the Petitioner’s position as Executive Vice-President of 21st Century will not per se make her liable for the failure of 21st Century to pay its tax liabilities. In the words of Section 253 of the Tax Code, Petitioner must have been the employee or officer responsible for the violation. Contrary to the conclusion arrived at by the RTC and CTA, the Petitioner's letter to the BIR asking for an extension of time to pay the tax liabilities of 21st Century and signifying her intent as representative of 21st Century to settle the tax liabilities of the corporation through compromise, is not enough to pronounce her guilt beyond reasonable doubt. This single letter does not suffice to prove that the Petitioner has actively participated in or has failed to prevent the violation by 21st Century. Thus, the Petition was GRANTED, and the earlier Decision and Resolution were REVERSED and SET ASIDE.
JUDICIAL CLAIMS FILED DURING THE WINDOW PERIOD FROM 10 DECEMBER 2003 TO 6 OCTOBER 2010, NEED NOT WAIT FOR THE EXHAUSTION OF THE 120-DAY PERIOD
NO PREMATURE FILING PURSUANT TO 120+30 DAY RULE
HARTE-HANKS PHILIPPINES, INC., VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 205189, MARCH 7, 2022, UPLOADED APRIL 18, 2022
Petitioner Harte-Hanks Philippines, Inc. filed a Petition for Review on Certiorari seeking reversal of the CTA’s earlier decision affirming Respondent Commissioner of Internal Revenue’s Motion to Dismiss on the ground of premature filing. Petitioner argued that the premature filing of the judicial claim for refund is not jurisdictional, but merely constitutes failure to state a cause of action. Earlier, on June 29, 2010, Petitioner filed a Petition for Review with the CTA, praying for the refund representing excess input value-added tax (VAT) attributable to zero-rated sales. In ruling, the general rule under Section 112(C) of the Tax Code, as explained in the Aichi case, is clear, plain, and unequivocal. The observance of the 120 and 30-day periods is crucial in filing a judicial appeal before the CTA. However, there is an exception to this general rule. BIR Ruling No. DA-489-03, a general interpretative rule, expressly states that the taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA. The Court emphasized that, although Petitioner did not actually invoke BIR Ruling No. DA-489-03 in any of its pleadings to justify the timeliness of its judicial claim with the CTA, the BIR Ruling applies to all taxpayers who filed their judicial claims within the window period of December 10, 2003 to October 6, 2010, or from the time of its issuance up to its reversal in the Aichi case. The CTA, therefore, has jurisdiction over the judicial claim filed by Petitioner. Thus, the Petition was GRANTED.
RDO IS NOT AUTHORIZED TO ISSUE FDDA
VOID FDDA IS CONSIDERED INACTION BY THE CIR THAT IS APPEALABLE TO THE CTA
COMMISSIONER OF INTERNAL REVENUE VS. TYCO INFORMATION SOLUTIONS CORPORATION
G.R. NO. 241422-23, NOVEMBER 11, 2021, UPLOADED APRIL 4, 2022
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s Decision and Resolution affirming the CTA Division’s Decision and Resolution that reduced the deficiency tax liability of Respondent Tyco Information Solutions Corporation. Petitioner averred that the CTA has no jurisdiction to review the letter of Revenue District Officer (RDO) Dumayas, hence, it should have dismissed outright the Respondent’s Petition. In ruling, the Court found an error in the CTA when it ruled that RDO Dumayas was clothed with authority to issue the final decision of the BIR in disputed assessments to be appealed to the CTA. Consistent with Revenue Administrative Order No. 10-00, RDO Dumayas was merely authorized to conduct factual verification of Respondent’s protest and thereafter, submit a report on the result of the investigation to the Regional Office. No authority was given to RDO Dumayas to issue the final decision. Accordingly, the letter from RDO Dumayas stating that the same is the BIR’s final decision on Respondent’s protest, hence, Respondent should appeal to the CTA within 30 days from receipt to prevent the assessment from becoming final and executory, is void for lack of authority. It is not a valid final decision of the CIR or his duly authorized representative subject for review by the CTA. Nonetheless, the CTA has authority to evaluate the assessment issued against Respondent as the void letter is tantamount to inaction by the CIR or his duly authorized representative in disputed assessments, which is appealable to the CTA. The Court emphasized that a void final decision on a disputed assessment means that as if no decision was rendered by the CIR or his duly authorized representative. Thus, the CTA would still have jurisdiction to review the tax assessment as the CTA is conferred with authority to review not only decisions but also inactions of the CIR in disputed assessments. Corollary, the CTA did not commit any reversible error in taking cognizance of Respondent’s Petition. Hence, the Petition was DENIED.
AN EMPLOYER-EMPLOYEE RELATIONSHIP MAY EXIST BETWEEN A RELIGIOUS ORGANIZATION & ITS MINISTERS
SSS LAW ALSO COVERS RELIGIOUS ORGANIZATION
THE SALVATION ARMY VS. SOCIAL SECURITY SYSTEM
G.R. NO. 230095, SEPTEMBER 15, 2021, UPLOADED APRIL 1, 2022
Petitioner The Salvation Army filed a Petition for Review on Certiorari seeking for the cancellation of the earlier Decision of Court of Appeals (CA). Petitioner argued that CA committed a serious error of law in affirming the ruling of the Social Security System (SSS), denying the request for retroactive conversion of the coverage status of Salvation Army officers (religious ministers) from employee members to non-employee members. In ruling, the provisions of the Labor Code and its Implementing Rules and Regulations encompass religious institutions. The nature of these associations does not bar the formation of an employer-employee relationship. Republic Act (R.A.) No. 1161 or the Social Security Law, as amended by R.A. No. 8282 provides that the "coverage in the SSS shall be compulsory upon all employees not over sixty years of age and their employers.” In denying the Petition, the Court held that the term "employer" as used in the Social Security Law is "sufficiently comprehensive enough as to include religious and charitable institutions or entities not organized for profit" particularly as they are not included in the list of exceptions expressly stated under the same law. The Court recognized in another case that an employer-employee relationship may exist between a religious organization and its ministers, judged on the basis of the institution's bylaws and other surrounding circumstances in relation to the four-fold test, namely: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) power to control. Upon examination, the Court found that an employer-employee relationship exists between the Petitioner and its ministers. Moreover, the coverage of a religious institution, such as Petitioner, in the SSS does not violate the non-establishment clause of the Constitution. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.
UPON FILING BY THE TAXPAYER OF HIS COMPLETE DOCUMENTS TO SUPPORT HIS APPLICATION OR EXPIRATION OF THE PERIOD GIVEN, THE CIR HAS 120 DAYS WITHIN WHICH TO DECIDE THE CLAIM FOR TAX CREDIT OR REFUND
AMORTIZATION OF INPUT VAT ON DEPRECIABLE CAPITAL GOODS WITH AGGREGATE ACQUISITION COST OF MORE THAN PHP 1 MILLION FOR THE MONTH OF PURCHASE DOES NOT DEPRIVE THE TAXPAYER OF ANY TAX CREDIT, BUT MERELY DELAYS THE CREDITING OF THE SAME BY SPREADING IT OUT OVER THE AMORTIZATION PERIOD
COMMISSIONER OF INTERNAL REVENUE VS. TAGANITO MINING CORPORATION & TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NOS. 219630-31 & 219635-36, DECEMBER 7, 2021, UPLOADED MARCH 23, 2022
Commissioner of Internal Revenue (CIR) and Taganito Mining Corporation (TMC) filed their separate Petitions for Review on Certiorari seeking the reversal of the CTA EN Banc’s earlier Decision and Resolution affirming the Decision of CTA Division ordering CIR to refund or issue a Tax Credit Certificate (TCC) in favor of TMC. CIR contended that the judicial claim of TMC was prematurely filed. The controversy lies in the 120+30-day period, with the CIR insisting that the 120-day period had not commenced at all because TMC did not submit the complete documents. In Total Gas case, since Total Gas did not receive any notice from the BIR that its submitted documents were in any way inadequate, the Court found that Total Gas had submitted complete documents in support of its claim on August 28, 2008 and started counting the 120 days from said date. Here, TMC is deemed to have already submitted its complete documents together with its administrative claim on December 1, 2009. Similar to Total Gas, the BIR did not give any notice to TMC that it lacked supporting documents and/or that TMC needed to submit additional documents. As the Court also declared in Total Gas, such written notice from the taxing authority is essential. Hence, the 120-day period for the BIR to act on the administrative claim of TMC commenced on December 1, 2009, and expired on March 31, 2010. Given the inaction of the BIR by the end of the period, TMC had 30 days from March 31, 2010, or until April 30, 2010, to file its judicial claim. TMC then timely filed its Petition on April 21, 2010. On the other hand, TMC asserted that CTA En banc committed an error in affirming the CTA Division ruling that the refund granted to a 100% zero-rated taxpayer of its input tax on depreciable goods amounting to more than P1 Million is subject to amortization. In ruling, the Court held that TMC is not deprived of any of the input tax attributable to its zero-rated sales when the amount of tax refund or credit granted to it for the input VAT on depreciable capital goods attributable to its zero-rated sales, with aggregate acquisition cost exceeding Php 1 Million for the month of purchase or importation, is amortized for 60 months or the estimated useful life of the capital goods, whichever is shorter. Ultimately, TMC will still be able to receive the full amount of the input VAT granted as a tax refund or credit by the end of the amortization period. Consequently, the Petitions were both DENIED for lack of merit.
A HOLDING COMPANY THAT IS NOT A BANK OR FINANCIAL INSTITUTION IS NOT LIABLE FOR LBT
CITY OF MAKATI & THE CITY TREASURER OF MAKATI CITY VS. METRO PACIFIC INVESTMENTS CORPORATION
G.R. NO. 241796, NOVEMBER 11, 2021, UPLOADED MARCH 23, 2022
Petitioner City of Makati and the City Treasurer of Makati City filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the Court of Tax Appeals (CTA) En Banc ordering the refund of erroneously paid or illegally collected Local Business Tax (LBT) on dividends and interest income in favor of the Respondent Metro Pacific Investments Corporation. Petitioner argued that Respondent is engaged in activities enumerated in Sec. 3A.02(h) of the Revised Makati Revenue Code (RMRC), thus, subject to LBT. On the other hand, Respondent countered that the imposition of LBT should be consistent with the RMRC's definition of a holding company as a controlling company that has one or more subsidiaries and confines its activities primarily to its management. In ruling, the Court held that Petitioner may not impose business taxes on the Respondent’s dividend and interest as there is no showing that it is a bank or financial institution or engaged in similar investment and financial activities. With the failure of Petitioner to justify the imposition of LBT on Respondent’s income on dividends and interests, the latter is entitled to a refund of the erroneously paid LBT. Thus, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.
TAX REFUNDS, LIKE TAX EXEMPTIONS, ARE CONSTRUED STRICTLY AGAINST THE TAXPAYER
COMMISSIONER OF INTERNAL REVENUE VS. MACQUARIE OFFSHORE SERVICES PTY LTD-PHILIPPINE BRANCH
G.R. NO. 225 169, OCTOBER 6, 2021, UPLOADED MARCH 11, 2022
Petitioner Commissioner of Internal Revenue filed a Petition for Review on Certiorari alleging that Respondent Macquarie Offshore Services Pty. Ltd. failed to prove that MFHL, the recipient of its services, was doing business outside the Philippines so that such sale of services would qualify as zero-rated transactions. On the other hand, Respondent countered that it had presented more than enough proof to show that its client MFHL is a foreign entity doing business outside the Philippines and the CTA had correctly considered its evidence in its totality. In ruling, the Court held that with both the CTA Division and the CTA En Banc, in this case, giving weight and credence to Respondent's documentary evidence as sufficient proof that MFHL is an NRFC, the Court shall not disturb such finding, absent any showing of grave abuse of discretion. Hence, the Petition was DENIED for lack of merit.
TAX ON SALE OF SHARE OF STOCK SOLD OR EXCHANGED THROUGH INITIAL PUBLIC OFFERING UNDER SECTION 127(B) IS SEPARATELY COMPUTED FOR SHARES IN THE PRIMARY & SECONDARY OFFERINGS
I-REMIT, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 209755, NOVEMBER 9, 2020, UPLOADED ON FEBRUARY 22, 2021
Petitioner I-Remit, Inc. filed a Petition for Review seeking to reverse the Court of Tax Appeals (CTA)’s earlier Decision denying its claim for refund of Other Percentage Tax. Petitioner argued that the tax on sale of shares of stock sold or exchanged through Initial Public Offering (IPO) should be jointly computed for both sale of shares in primary offering, where the shares are offered by the issuing corporation, and in secondary offering, where the shares are offered by the selling shareholders of the corporation. Following such argument, an overpayment will arise as the tax rate will be lower of what was applied when the tax was paid. On the other hand, Respondent Commissioner of Internal Revenue (CIR) countered that the tax should be separately computed for the sale for shares in the primary and secondary offerings. In ruling, the Court held that the tax under Section 127(B) of the 1997 Tax Code, as amended, is imposed on each sale of shares of stock in closely held corporations through IPO. Since tax is imposed on every sale of shares of stock, there is a need to determine which sales are covered in the sale of shares through IPO. On this score, second paragraph of Section 127(B) of the 1997 Tax Code, as amended, precisely provides for the types of sales involved: sale by the issuing corporation in primary offering and sale by each of the corporation's shareholders in secondary offering. Thus, every sale in Section 127(B) of the same Code is referenced to the seller, i.e., the issuing corporation in case of primary offering, and each of the selling shareholders of the corporation in case of secondary offering. The sale contemplated is not lone, lump sum sale, since more than one sale may transpire under Section 127(B) of the same Code. Thus, the Petition for Review was DENIED, and the assailed Decision and Resolution were AFFIRMED.
APPROPRIATE DILIGENCE REQUIRED OF A BANK MUST BE HIGH DEGREE OF DILIGENCE, IF NOT UTMOST
BDO UNIBANK, INC. VS. MAPUA INSTITUTE OF TECHNOLOGY RETIREMENT FUND, INC
G.R. NO. 248736, OCTOBER 6, 2021, UPLOADED DECEMBER 9, 2021
The Supreme Court issued a resolution following the case of Petitioner BDO Unibank, Inc. and Respondent Mapua Institute of Technology Retirement Fund, Inc. The Petitioner is said to have failed to exercise the utmost diligence required from it as a bank. Banking policy requires checks being encashed amounting to more than Php 200,000 be confirmed with the authorized signatories of the check. The Regional Trial Court (RTC) and Court of Appeals (CA) found that aside from the assertion of company policy, Petitioner failed to prove that the bearer check was verified with the Respondent. Such disregard is tantamount to negligence. With finality, RTC also noted that the Respondent is guilty of contributory negligence and should bear a portion of the loss. In ruling, the Court found no reason to disturb the earlier Decision and Resolution holding the Petitioner liable. Thus, the Petition was DENIED, and earlier Decision and Resolution were AFFIRMED.
MERE INTENT TO UNLOAD INTO THE PHILIPPINES CONSUMMATES IMPORTATION
A COMMON CARRIER, NOT CHARTERED OR LEASED, IS EXEMPT FROM FORFEITURE
ANY VESSEL OR CARGO USED IN ILLEGAL IMPORTATION OR EXPORTATION INTO OR FROM THE PHILIPPINES SHALL BE SUBJECTED TO FORFEITURE
THE COMMISSIONER OF CUSTOMS & THE UNDERSECRETARY OF THE DEPARTMENT OF FINANCE VS.
GOLD MARK SEA CARRIERS, INC., AS THE REGISTERED OWNER OF THE BARGE “CHERYL ANN”
G.R. NO. 208318, JUNE 30, 2021, UPLOADED DECEMBER 1, 2021
Petitioners Commissioner of Customs and Undersecretary of the Department of Finance filed a Complaint seeking reversal of the earlier Decision of the CTA En Banc which allowed the release of the barge of Respondent Gold Mark Sea Carriers, Inc. Petitioners posited that Respondent, as the registered owner of the Barge “Cheryl Ann”, failed to rebut the prima facie evidence of illegal importation. It did not present any controverting evidence during the forfeiture proceedings showing that it had the necessary permit and licenses to import used oil into the Philippines. In ruling, Section 1202 of the Tariff and Customs Code of the Philippines (TCCP) provides that the act of importation commences from the time the carrying vessel or aircraft enters the Philippine territory and the carrying vessel or aircraft unloads or intends to unload the article or goods in the Philippines. Contrary to the findings of the CTA En Banc, the cargo of barge "Cheryl Ann" was not bound for Malaysia, but in truth, was bound to unload its cargo in the Philippines. Records showed that all along, the Philippines, no other, was the only and final destination of the illegal importation of used oil on board the ·barge "Cheryl Ann." It was an illegal importation because it was not covered by a corresponding importation permit in violation of existing laws and rules and regulations. The use of the barge to transport the illegal importation warranted the forfeiture of both the barge and the illegal cargo. To be exempt from forfeiture, Section 2530(a) and (k) of the TCCP explicitly requires that the vessel be a common carrier, not a chartered or leased vessel. Here, Respondent's Charter Agreement with the cargo owner belies its claim that it is exempt from forfeiture. Thus, the Petition was GRANTED, and the earlier Decision of the CTA En Banc was REVERSED and SET ASIDE. Consequently, the Indorsements of the Petitioners ordering the seizure and forfeiture of the barge “Cheryl Ann” in favor of the government were REINSTATED.
120+30 DAY RULE TO FILE FOR JUDICIAL CLAIM FOR REFUND HAS EXCEPTION
ALL TAXPAYERS CAN RELY ON BIR RULING NO. DA-489-03 FROM THE TIME OF ITS ISSUANCE ON 10 DECEMBER 2003 UP TO ITS REVERSAL IN AICHI ON 6 OCTOBER 2010, AS AN EXCEPTION TO THE MANDATORY AND JURISDICTIONAL 120+30 DAY RULE
HEDCOR SIBULAN, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 202093, SEPTEMBER 15, 2021, UPLOADED NOVEMBER 29, 2021
Petitioner Hedcor Sibulan, Inc. filed a Petition for Review assailing the earlier Decision and Resolution of the CTA En Banc dismissing the Petition filed in relation to its refund claim, for having been prematurely filed. Pursuant to the Tax Code, the Commissioner of Internal Revenue (CIR) had 120 days within which to either grant or deny the Petitioner’s administrative claim. Since the Petitioner filed its judicial claim merely four (4) days after filing its administrative claim, the CTA Division ruled that it had not acquired jurisdiction since its action was not yet ripe for judicial determination. In ruling, the Supreme Court first discussed that the 120-day period is mandatory and jurisdictional. It should, therefore, be strictly observed for the tax credit refunds to prosper. The mandatory nature of the 120-day period was explained in Commissioner of Internal Revenue v. Aichi Forging Co. of Asia, Inc. (Aichi). The pronouncement in Aichi, however, is not without exception. There are two (2) recognized exceptions to the mandatory and jurisdictional nature of the period. First, if the CIR, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA. Second, if the CIR issued a general interpretative rule which misled all the taxpayers into prematurely filing judicial claims with the CTA. The CIR, in such a case, is not allowed to later question the CTA’s assumption of jurisdiction over such a claim since equitable estoppel has been set in. BIR Ruling No. DA-489-03 falls under the second exception. Issued on December 10, 2003, the said BIR Ruling expressly provides that a taxpayer-claimant may seek judicial relief with the CTA by filing a Petition without waiting for the 120-day period to lapse. Thus, the judicial claim filed by the Petitioner was not prematurely filed. The administrative claim was filed on June 25, 2010. Four (4) days later, or on June 29, 2010, Petitioner filed its judicial claim. It is evident that the judicial claim was filed well within the issuance of BIR Ruling No. DA-489-03 before it was invalidated by Aichi on October 6, 2010. Thus, Petitioner’s immediate filing of Petition without waiting for the prescribed period of 120-days to lapse is permissible. The instant case should, therefore, be remanded to the CTA Division for the determination of the refundable or creditable amount due to Petitioner, if any. Consequently, the Petition was GRANTED, and the earlier Decision and Resolution were REVERSED and SET ASIDE.
A REPRESENTATIVE OFFICE, TREATED AS RHQ, IS EXEMPT FROM INCOME TAX & IS NOT LIABLE TO PAY VAT
SUBSIDIES REMITTED BY HEAD OFFICE TO REPRESENTATIVE OFFICE CANNOT BE CONSIDERED AS INCOME
COMMISSIONER OF INTERNAL REVENUE VS. SHINKO ELECTRIC INDUSTRIES CO,. LTD.
G.R. NO. 226287, JULY 6, 2021, UPLOADED NOVEMBER 15, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari seeking to reverse the earlier decision of the Court of Tax Appeals (CTA) En Banc canceling the Income Tax and Value-Added Tax (VAT) assessments against Respondent Shinko Electric Industries Co., Ltd. Petitioner argued that the Respondent should be treated as a taxable Regional Operating Headquarter (ROHQ) because it renders "qualifying services" pursuant to Section 22(EE) of the 1997 Tax Code, as amended. To support its argument, the Petitioner relied on Respondent's Securities and Exchange Commission (SEC) Registration, which states that it performs "promotion and quality control” of the parent company's products. On the other hand, Respondent countered that it is a Representative Office of a foreign corporation, and, as such, it does not derive income from sources within the Philippines. Hence, it is not liable to the assessment. In ruling, the Court held that applying the definition of a representative office under Section 1 (c), Rule I of the Implementing Rules and Regulations (IRR) of Republic Act (R.A.) No. 7042, otherwise known as the “Foreign Investments Act of 1991”, the closest to a representative office is a Regional or Area Headquarter (RHQ). Pursuant to Section 28(A)(6)(a) and Section 109 (P) of the 1997 Tax Code, an RHQ shall not be subject to income tax and VAT. Likewise, Respondent cannot be considered as an ROHQ because it deals directly with its parent company's clients in the Philippines, an activity which ROHQs are prohibited by law to do. In view of the foregoing, the assessment was CANCELLED, and the earlier Decision and Resolution were AFFIRMED.
CONCLUSIVENESS OF COMPANY PHYSICIAN REPORT IS NECESSARY OTHERWISE LABOR DICTATES PERMANENT & TOTAL DISABILITY IS PRESENT
A COMPANY-DESIGNATED PHYSICIAN WHO FAILS TO FURNISH AN ASSESSMENT TO THE SEAFARER, FAILS TO ABIDE BY DUE PROCESS
FAILURE OF THE COMPANY-DESIGNATED PHYSICIANS TO ISSUE A COMPLETE, FINAL & DEFINITE ASSESSMENT, PETITIONER IS RIGHTFULLY ENTITLED TO TOTAL & PERMANENT DISABILITY BENEFITS
DIONISIO M. REYES VS. MAGSAYSAY MITSUI OSK MARINE INC., MOL SHIPMANAGEMENT CO., LTD., AND/OR CAPT. FRANCISCO MENOR
G.R. NO. 209756, JUNE 14, 2021, UPLOADED NOVEMBER 4, 2021
Petitioner Dionisio Reyes filed a Petition for Review on Certiorari challenging the earlier Decision and Resolution of the Court of Appeals (CA), which affirmed the Decision and Resolution of the National Labor Relations Commission (NLRC). During his employment with Magsaysay Mitsui OSK Marine, Inc., in behalf of its principal Mol Shipmanagement Co. Ltd. (Respondents), Petitioner figured in an accident. Aside from their company-designated physicians and with the inattentiveness of the Respondents, Petitioner sought a second medical opinion from a private physician who found him permanently disabled and unfit to return to sea duty. Respondents argued that the presentation of a prematurely issued medical report from a doctor who was never privy to Petitioner’s treatment and while he was still undergoing continuous treatment with the company physicians, cannot be considered credible evidence to justify Petitioner’s exaggerated claim for total and permanent disability benefits. Petitioner countered that it was well within his right to seek a second medical opinion when he became dubious of the findings of the company-designated physicians. The controversy was nestled on the argument that Petitioner is entitled to permanent and total disability benefits. In ruling, the Supreme Court did not consider the company-designated physicians’ finding of Petitioner’s fitness to work, because it was deficient. While it cannot be denied that Petitioner was receiving medical attention from the company-designated physicians for more than four (4) months since his repatriation, a perusal of the Final Report would reveal that the same is not definite and conclusive. To be conclusive, a medical assessment must be complete and definite to reflect the seafarer's true condition and to give the correct disability benefits. Thus, Petitioner cannot be faulted for securing a second opinion from a physician of his choice, which was well within his right. Indeed, his chosen doctor declared him unfit for sea duties permanently. Therefore, for the Respondents' failure to provide a conclusive medical report and to inform Petitioner of his medical assessment within the prescribed period, the disability grading is, by operation of law, total and permanent. Consequently, the Petition was GRANTED. Respondents were ORDERED to pay Petitioner the amount of US$ 118,000 as disability benefits.
THE ACT OF FILING A FRAUDULENT RETURN MUST BE INTENTIONAL & NOT ATTRIBUTABLE TO "MISTAKE, CARELESSNESS, OR IGNORANCE”
DUE PROCESS REQUIRES THAT TAXPAYERS BE SUFFICIENTLY INFORMED OF THE FACTUAL BASIS FOR THE ALLEGATION OF FRAUD IN THE FILING OF THEIR TAX RETURNS
ASSESSMENTS MUST BE BASED ON FACTS & NOT MERE PRESUMPTIONS
COMMISSIONER OF INTERNAL REVENUE VS. SPOUSES REMIGIO P. MAGAAN & LETICIA L. MAGAAN
G.R. NO. 232663, MAY 3, 2021, UPLOADED NOVEMBER 4, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the earlier Decision and Resolution of the CTA En Banc, which reversed the Decision and Resolution of the CTA 2nd Division. Petitioner argued that the tax assessments against Respondents Spouses Remigio Magaan and Leticia Magaan had factual and legal bases. Allegedly, through witness Yolanda Maniwang’s confidential information, Petitioner discovered Respondent’s underdeclared income from their operation of Imilec Tradehaus and L4R Realty. Petitioner relied on the amounts stated in the checks issued by Maniwang as a basis for the deficiency assessments against Respondents. Petitioner also insisted on having proven Respondents’ intent to evade paying correct taxes with clear and convincing evidence. As this constitutes fraud, Petitioner maintained that the 10-year prescriptive period applies, and the deficiency assessments were seasonably issued. On the other hand, Respondents argued that fraud has not been proven. They pointed out that there is no proof that the checks were deposited in their bank accounts and denied having received any income from the checks. They noted that Petitioner made no attempt to subpoena the banks where the checks were deposited to show the Respondents’ alleged ownership of the accounts. In ruling, the Supreme Court held that the Petitioner has the burden of proving that a return was filed with the intent to evade payment of correct taxes. It must be proven with clear and convincing evidence amounting to more than a mere preponderance and cannot be justified by mere speculation. Petitioner must establish the existence of actual and intentional fraud. Thus, for Petitioner to invoke the 10-year prescriptive period, he must prove the following with clear and convincing evidence: (1) Respondents received taxable income; (2) they underdeclared or did not declare the taxable income in their tax returns; and (3) they intended to evade payment of correct taxes due. Here, Petitioner failed to establish that Respondents received income from Maniwang’s check payments. Most of the checks were issued to Imilec Tradehaus, and Respondent Remigio Magaan’s name appeared as co-payee. Being a co-payee check does not automatically establish the fact of income. Even if Respondent Remigio admitted having extended a loan to Maniwang, this act is not subject to taxation. Petitioner did not even submit the Respondents’ tax returns to prove that their income from the alleged loan payments were not declared. The checks were also not formally offered in evidence. Not only did Petitioner fail to state the factual basis of the alleged fraud in the assessments, but they also failed to establish that Respondent filed fraudulent returns with intent to evade payment of correct taxes. Without fraud, the period for issuing assessments has prescribed. Ultimately, then, Petitioner belatedly issued the deficiency assessments to Respondent. Consequently, the Petition was DENIED.
BEFORE A LOCAL TAX CASE MAY BE ELEVATED TO THE COURT OF COMPETENT JURISDICTION, IT IS MANDATORY FOR THE TAXPAYER TO PROTEST FIRST THE DEFICIENCY ASSESSMENT BY CONTESTING ITS LEGALITY
BEFORE THE CASE CAN BE RAISED ON APPEAL TO THE CTA, THE ACTION BEFORE THE RTC MUST BE IN THE NATURE OF A TAX CASE
LOCAL TAX CASE IS UNDERSTOOD TO MEAN AS A DISPUTE BETWEEN AN LGU AND A TAXPAYER INVOLVING THE IMPOSITION OF LGU'S POWER TO LEVY TAX, FEES, OR CHARGES AGAINST THE PROPERTY OR BUSINESS OF THE TAXPAYER CONCERNED
MACTEL CORPORATION VS. THE CITY GOVERNMENT OF MAKATI, THE CITY TREASURER OF MAKATI CITY & THE OFFICER-IN-CHARGE OF THE OFFICE OF THE CITY ADMINISTRATOR & HEAD OF BUSINESS PERMITS OFFICE
G.R. NO. 244602, JULY 14, 2021, UPLOADED OCTOBER 21, 2021
Petitioner Mactel Corporation filed a Petition for Review on Certiorari assailing the Amended Decision the Resolution of the Court of Tax Appeals (CTA) En Banc which reversed and set aside the earlier Decision affirming the Decision and the Resolution of the CTA 2nd Division holding that CTA has no jurisdiction. In coming up with a decision, the Court highlighted the chronology of events leading to the present Petition. The Respondent City Treasurer of Makati issued a deficiency business tax assessment against the Petitioner for the taxable years 2010-2013 based on the face value of the prepaid cards. During the renewal of business permit, the Respondent denied the same, and subsequently issued a Billing Statement for deficiency business tax for 2014. Petitioner filed a protest against the Notice of Assessment as well as the Billing Statement. However, the Respondent refused to receive the latter. Since Petitioner was not able to obtain its business permit to enable it to continue doing business, Petitioner filed a Petition for Declaratory Relief with a Prayer for Mandatory and Prohibitory Injunction with the trial court. The Regional Trial Court (RTC) of Makati City issued an Order that: (1) enjoins the Respondents from further proceeding with the assessment of local taxes until the resolution of the case; and (2) orders Respondents to issue a temporary Business Permit in favor of Petitioner. To further substantiate its position, Petitioner prayed for the trial court to apply the Principle of Conclusiveness of Judgment ordering the Respondents to use as basis for computation of business taxes the discount given (Php 3) by the telecom companies, and not the entire selling price (Php 273) of the prepaid cards as earlier decided and finalized. Citing Ignacio vs. Office of the City Treasurer of Quezon City, whereby Petitioner argued that disputing local tax assessment must involve the application of tax laws, not the enforcement of a final and executory judgment. In ruling, the Court held that the assailed orders of the RTC do not fall under the appellate jurisdiction of the CTA. The Petition for Certiorari filed by Respondents with the CTA assailing the Orders of the RTC of Makati City was DISMISSED for lack of jurisdiction. Consequently, the Amended Decision of the CTA En Banc stating that the CTA 2nd Division has jurisdiction over the Petition for Certiorari was REVERSED and SET ASIDE. Thus, the earlier decision of CTA En Banc that it has no jurisdiction over the case was REINSTATED.
A HOLDING COMPANY IS NOT A NON-BANK FINANCIAL INTERMEDIARY, HENCE, NOT LIABLE FOR LBT
MAKATI REVENUE CODE ALLOWS TAXPAYERS TO EITHER CLAIM A REFUND OR TAX CREDIT OF ERRONEOUSLY PAID LBT
MAKATI CITY & THE CITY TREASURER OF MAKATI CITY VS. METRO PACIFIC RESOURCES, INC.
G.R. NO. 251065, JUNE 30, 2021, UPLOADED SEPTEMBER 24, 2021
Petitioner The City of Makati filed a Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Tax Appeals (CTA) En Banc ordering the refund of erroneously paid or illegally collected local business tax (LBT) in favor of Respondent Metro Pacific Resources, Inc. The CTA previously ruled that Respondent is not an entity authorized by the Bangko Sentral ng Pilipinas (BSP) to perform quasi-banking functions and that it did not advertise itself as lending, investing, or financing company. To be exact, there is no proof that Respondent is principally engaged in investment activities. Although Respondent’s Articles of Incorporation may involve one of the activities enumerated in the BSP Manual of Regulations for Non-Bank Financial Institutions, the primary purpose is inadequate to justify the conclusion that Respondent is performing functions of a financial intermediary. Since Respondent is a holding company and not an investment company, a bank, or other financial intermediary, it is not liable for LBT at the rate under Section 3A.02 (h) of the Makati Revenue Code. Lastly, Section 7B.14 (d) of the same Code allows taxpayers to either claim a refund or credit of erroneously or illegally collected tax. The selection of one of the options shall forfeit the application of the other. In the instant case, the Respondent had consistently applied for refund of erroneously paid LBT when it filed its claim with City Treasurer of Makati City, complaint with the Regional Trial Court, and thereafter, with the CTA; hence, there is no basis for Petitioner’s argument that Respondent’s claim may only be granted in the form of a tax credit. In view of the foregoing, the Petition was DENIED, and the Decision and Resolution were AFFIRMED.
NGCP IS EXEMPT FROM REAL PROPERTY TAX DUE TO THE EXPRESS GRANT IN FRANCHISE BUT SUBJECT TO CBAA DETERMINATION ON THE ACTUAL USE OF THE PROPERTY
NATIONAL GRID CORPORATION OF THE PHILIPPINES VS. CENTRAL BOARD OF ASSESSMENT APPEALS, ET AL.
G.R. NOS 218289-90, JUNE 23, 2021, UPLOADED SEPTEMBER 23, 2021
Petitioner National Grid Corporation of the Philippines filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s earlier Decision holding it liable to Real Property Tax (RPT). Petitioner argued that under Republic Act (R.A.) No. 9511 or “An Act Granting the National Grid Corporation of the Philippines a Franchise to Engage in the Business of Conveying or Transmitting Electricity through High Voltage Back-Bone System of Interconnected Transmission Lines, Substations, and Related Facilities”, it is only liable to pay 3% Franchise Tax, and no other, whether the tax or taxes are levied by the local or national authority. On the other hand, the Private Respondent City Assessor of Cabanatuan maintained that the properties in question are subject to the RPT since the R.A. 9511 does not expressly exempt the Petitioner from paying local taxes, and the Congress did not give any express grant to it. In ruling, the Supreme Court held that all laws granting tax exemption are strictly construed against the taxpayers since it restricts the collection of taxes necessary for the existence of the government. Consequently, the Petitioner’s franchise constitutes an express and categorical statement on its exemption from RPT on properties actually and directly used for its electric power transmission. However, records are lacking any information regarding the nature and the actual use of these properties. Thus, the Court REMANDED the case to the Central Board of Assessment Appeals (CBAA) to determine its actual use and the nature for the purpose, to resolve the merits of the Petitioner’s claim for exemption from RPT. Consequently, the Petition was PARTIALLY GRANTED, and the earlier Decision was SET ASIDE.
TAX CERTIFICATES ARE VITAL TO THE CLAIM FOR EXCESS OR UNUTILIZED CWT
EVIDENCE OF ACTUAL REMITTANCE IS UNNECESSARY IN REFUND CASES
COMMISSIONER OF INTERNAL REVENUE VS. AYALA CORPORATION
G.R. NO. 256539, JULY 28, 2021, UPLOADED SEPTEMBER 22, 2021
Petitioner Commissioner of Internal Revenue filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s Decision holding that Respondent Ayala Corporation is entitled to the issuance of a Tax Credit Certificate (TCC) in the amount of Php 127,292,477.20, representing its excess or unutilized Creditable Withholding Tax (CWT) for the calendar years 2012 and 2013. In ruling, proof of actual remittance is not necessary for the Respondent’s claim to prosper. The Respondent should only present the withholding tax certificates issued by the withholding agents since the latter shall be responsible for the withholding and remittance of such taxes. Thus, the Court resolved to AFFIRM the earlier Decision.
AN ARGUMENT NOT AVERRED IN THE PLEADINGS NOR RAISED DURING THE TRIAL IN THE LOWER COURT CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL
8199 CONVENIENCE CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 256566, JULY 28, 2021, UPLOADED SEPTEMBER 22, 2021
Petitioner 8199 Convenience Corporation filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s Decision and Resolution upholding the Income Tax and Value-Added Tax (VAT) assessment issued by the Respondent Commissioner of Internal Revenue (CIR), based on the application of “best-evidence obtainable rule.” In ruling, the Court reiterated that according to the Rules of Court, an argument belatedly raised for the first time is not allowed considering that the same could have been raised in previous pleadings or during a trial facilitated by the lower court. Further, the CTA En Banc already provided a leeway in the application of technicalities in pursuit of substantial justice, and still found that the assessments are validly issued with no defects. Given the absence of any convincing proof that the CTA En Banc erred in the previous Decision, the Court resolved to uphold the tax assessments issued against the Petitioner. Consequently, the Petition was DENIED.
PETITION FOR DECLARATORY RELIEF IS NOT PROPER TO QUESTION THE ASSESSMENT
COMMISSIONER OF INTERNAL REVENUE VS. STANDARD INSURANCE COMPANY, INC.
G.R. NO. 219340, APRIL 28, 2021, UPLOADED SEPTEMBER 21, 2021
Respondent Standard Insurance Co., Inc. filed a Motion for Reconsideration of the earlier Decision which granted the Petition for Review on Certiorari of Petitioner Commissioner of Internal Revenue (CIR), which sought the reversal of the earlier Decision of the Regional Trial Court (RTC). The RTC decision granted Respondent’s Petition for Declaratory Relief. Respondent alleged that the RTC has jurisdiction to take cognizance of Respondent’s action for declaratory relief and that the latter has fully satisfied the essential requisites of a Petition for Declaratory Relief (Petition). In ruling, the Court discussed that the said action must comply with the following requisites: (1) the subject matter of the controversy must be a deed, will, contract or other written instrument, statute, executive order or regulation, or ordinance; (2) the terms of said documents and the validity thereof are doubtful and require judicial construction; (3) there must have been no breach of the documents in question; (4) there must be an actual justiciable controversy or the “ripening seeds” of one between persons whose interests are adverse; (5) the issue must be ripe for judicial determination; and (6) adequate relief is not available through other means or other forms of action or proceeding. After review of the records, the Court found no reason to disturb the finding that the RTC should have dismissed Respondent’s Petition for failure to comply with the above third, fourth, fifth, and sixth requisites. In connection with the third requisite, Respondent had already received assessments from the BIR for deficiency documentary stamp taxes (DST) when it filed its Petition. In view thereof, the RTC should have already dismissed Respondent's Petition for lack of jurisdiction. Anent the fourth and fifth requisites, Respondent's Petition does not present a justiciable controversy ripe for judicial determination. Respondent's Petition failed to demonstrate that Respondent's legal rights are subject of an imminent or threatened violation that should be prevented by the declaratory relief sought; the apprehension that its business may be rendered technically insolvent in view of the continued enforcement of the taxes under Sections 108 and 184 of the Tax Code appear to be merely conjectural and anticipatory. Moreover, Respondent's adequate remedy upon receipt of the Final Decision on Disputed Assessment for the DST deficiency was to file an Appeal in due course with the CTA instead of resorting to a Petition for Declaratory Relief with the RTC. Thus, the sixth requisite is likewise absent. Consequently, the Motion for Reconsideration was DENIED with FINALITY for lack of merit.
TIMELINESS IN FILING JUDICIAL CLAIM FOR REFUND
ENERGY DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 203367, MARCH 17, 2021, UPLOADED SEPTEMBER 21, 2021
Petitioner Energy Development Corporation filed a Petition for Review on Certiorari assailing the earlier the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution dismissing its judicial claim for tax credit or refund of its unutilized input VAT. In the earlier motion, Respondent Commissioner of Internal Revenue (CIR) asserted that the Petitioner failed to comply with the prescriptive periods under Section 112(C) of the 1997 Tax Code, as amended. Respondent alleged that the Petitioner did not wait for: (a) the CIR’s action on its administrative claim for input VAT refund before appealing to the CTA within 30 days; and (b) in the alternative of the CIR’s inaction, reckon the 30-day period to appeal from the expiration of 120 days from the date of the submission of complete documents to support the administrative claim under Section 112(A) of the same code. Petitioner countered that the Aichi case, which reinstated the 120+30-day periods as mandatory and jurisdictional, cannot be applied retroactively. The bone of contention here stemmed in the applicability, or inapplicability, of the Aichi case. However, it must be pointed out that the touchstone of Petitioner's casus belli is found in Section 112 (C) of the 1997 Tax Code, as amended. Contrary to the argument of the Petitioner, the Aichi case is definitive on the nature of the prescriptive periods for the filing of claims for input VAT refund under the then Section 112(A) and (C) of the 1997 Tax Code, as amended. As held in the Aichi case, there is nothing in Section 112 of the 1997 Tax Code, as amended which sanctions the simultaneous filing of administrative and judicial claims, and the filing of the judicial claim prior to the action of the CIR or the lapse of the 120-day period within which the CIR is required to act on the administrative claim. Section 112(A) of the 1997 Tax Code, as amended simply cannot be invoked as the prescriptive period for both administrative and judicial claims of input VAT refund with the CIR. The taxpayer claiming input VAT tax credit or refund should not ignore subsection (C) on judicial claims. However, given the difficult question of law and conflicting rulings by the Court, Petitioner and taxpayers alike have hedged their actions in the filing of simultaneous administrative and judicial claims or the filing of premature judicial claims on an incorrect interpretation of Section 112 (A) and (C) of the 1997 Tax Code, as amended. The Court ruled in the San Roque case that all taxpayers can rely on BIR Ruling No. DA-489-03 dated December 10, 2003, issued by the CIR from the time of its issuance up to its reversal in the Aichi case on October 6, 2010. The said BIR Ruling expressly states that the “taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review.” In ruling, the Court held that BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on December 10, 2003, up to its reversal by this Court in the Aichi case on October 6, 2010, where the Supreme Court held that the 120+30-day periods are mandatory and jurisdictional. Clearly, from the foregoing, Petitioner did not comply with Section 112 (C) of the 1997 Tax Code, as amended relative to the filing of its judicial claim before the CTA. Thus, even without harping on the applicability of the Aichi case, Petitioner's premature judicial claim has no leg to stand on. However, applying the exception molded in the San Roque case, the Petition before the CTA should be reinstated since the filing of its administrative and judicial claims fell within the stated period. Thus, the Petition was GRANTED, and the earlier Decision and Resolution of the CTA En Banc were REVERSED and SET ASIDE. Consequently, the Petition for Review before the CTA 2nd Division was REINSTATED.
REQUISITES FOR A VALID WAIVER OF STATUTE OF LIMITATION
AVAILMENT OF THE TAX AMNESTY EXONERATES A TAXPAYER FROM LIABILITY
LA FLOR DELA ISABELA INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R NO. 202105, APRIL 28, 2021, UPLOADED SEPTEMBER 21, 2021
Petitioner La Flor Isabela, Inc. filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s Decisions and Resolutions upholding the assessment issued by the Respondent Commissioner of Internal Revenue (CIR). Petitioner argued that the waivers executed were null and void, thus, did not toll the running of the prescriptive period. In ruling, the Court held that under Revenue Memorandum Order (RMO) No. 20-90, a valid Waiver of Statute of Limitations must be: (a) in writing; (b) agreed to by both by the Commissioner and the taxpayer; (c) executed before the expiration of the ordinary prescriptive periods for assessment and collection; and (d) for a definite period beyond ordinary prescriptive period for assessment and collection. Upon scrutiny, the Court noted that the Waivers did not strictly comply with the provisions of RMO No. 20-90, thus, the period of the Respondent to assess or collect the alleged deficiency tax was not extended. Consequently, the issuance of the Formal Letter of Demand against the Petitioner is null and void on the ground of prescription. Further, it was noted that the Petitioner has availed the Tax Amnesty Program under Republic Act (R.A.) No. 9480, otherwise known as “The Tax Amnesty Act of 2005.” Considering the Petitioner’s compliance with the requirements under R.A. No. 9480 as implemented by the Department of Finance Department Order No. 20-97, it is now deemed absolved of its obligations, and is already immune from the payment of the taxes as well as additions, civil, criminal, and administrative penalties. Thus, Petition was GRANTED, and the earlier Decision was REVERSED and SET ASIDE.
FUNERAL BENEFITS MAY BE GRANTED IN THE INTEREST OF JUSTICE & EQUITY NOTWITHSTANDING THE AGE COVERAGE OF SSS MEMBERSHIP
SOCIAL SECURITY SYSTEM VS. LYDIA DELA CRUZ
G.R. NO. 205046, JULY 7, 2021, UPLOADED SEPTEMBER 14, 2021
Petitioner Social Security System (SSS) filed a Petition for Review on Certiorari assailing the Court of Appeal’s (CA) Decision and Resolution which reversed Social Security Commission (SSC) Resolution denying Respondent’s Lydia Dela Cruz’s claim for the funeral benefit for his father Felimon Dela Cruz. Felimon made a misrepresentation regarding his date of birth upon his registration for compulsory social security coverage with SSS during his employment with ABS Trucking wherein he was initially registered at 50 years old when he was, in fact, 70 years old at that time. SSS denied Lydia’s claim for funeral benefit on the ground that Felimon was 70 years old when he was granted compulsory membership which is beyond the maximum age for compulsory coverage of 60. The case was elevated to the SSC in which the Commission upheld the denial of Lydia’s claim citing the maximum age limit and that Felimon cannot be considered a member, whether voluntary or compulsory, for he does not fall among any of the categories. As such, his beneficiaries are not entitled to funeral benefits. On a subsequent appeal, the CA reversed the SSC’s ruling and granted Lydia’s claim for funeral benefits applying the principle that social legislation should be liberally construed in favor of the employee. Furthermore, it was taken into consideration that Felimon made 65 monthly contributions and that SSS previously granted him partial disability benefits even with the knowledge of his true date of birth. The prevailing law at the time of Felimon’s registration with the SSS in 1990 was Republic Act (R.A.) No. 1161 which recognizes compulsory membership as one of the types of social security coverage, and although R.A. No. 1792 deleted the provisions on voluntary coverage, the Court held that voluntary membership still exists under R.A. No. 1161, as clarified in the case of Canovas vs. Batangas Transportation Co. Felimon was proven to be outside the scope of compulsory coverage following the fact the he was already 70 years old when he was registered with the SSS. In addition, he does not fall under any of the instances for voluntary membership. Notwithstanding the foregoing, the Court sustained the CA’s grant of funeral benefits in the interest of justice and equity. It has been a recurring resolution for the Court to uphold the policy of liberality of the law in favor of labor, and this extends to the treatment of a member’s registration to allow claims for SSS benefits as ruled in numerous cases. In the instant case, SSS did not cancel Felimon’s membership and continued to accept and credit in his account the contributions remitted after he disclosed his true date of birth. Furthermore, it was implied that the partial disability benefits granted to Felimon was a refund of his monthly contributions and the factuality thereof cannot be questioned since the SSS did not attach to the instant Petition such material records that could serve as basis for the Court to examine the CA’s factual findings. In resolution, the Court sustained the CA’s liberal treatment in the grant of funeral benefit to Lydia in pursuit of social justice. Hence, the Petition was DENIED.
TAXPAYER CANNOT RELY ON BIR RULINGS ISSUED TO A DIFFERENT ENTITY IN DEFENSE OF ITS POSITION
COMPROMISE PENALTY CAN ONLY BE COLLECTED IF AGREED UPON BY THE TAXPAYER
COMMISSIONER OF INTERNAL REVENUE VS. SOUTH PREMIERE POWER CORPORATION
G.R. NOS. 252627 & 252630, JUNE 16, 2021, UPLOADED AUGUST 26, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA)’s previous Decision and Resolution, which granted the refund or issuance of Tax Credit Certificate (TCC) in favor of the Respondent South Premiere Power Corporation representing surcharge, interest, and compromise penalty in the aggregate amount of Php 1,359,773.48. Previously, the Respondent relied on the prevailing court decisions and BIR rulings supporting its position that some of its transactions are not subject to Documentary Stamp Tax (DST). Such was subsequently negated by the Court as elucidated that Respondent cannot rely on them for it did not secure its own favorable ruling from the BIR, hence, it is still liable, and consequently, not entitled to the refund of the surcharge and interest. Further, the Court held that the imposition of 25% surcharge and 20% interest per annum was justified, pursuant to Sections 248 and 249 of the 1997 Tax Code, as amended, following the undisputed fact that the Respondent did not pay the DST on various transactions and did not file the related DST returns for the taxable year 2010. The compromise penalty, however, cannot be imposed on the Respondent since there was no sufficient evidence of any agreement made for such. In relation to this, the Court cited the case of Wonder Chemical Engineering Corporation vs. CTA and reiterated that compromise penalty could only be collected or imposed by agreement or conformity of the taxpayer; the absence of which renders the imposition of said penalty illegal and unauthorized. Consequently, the Petition was PARTIALLY GRANTED, and Petitioner was ordered to refund or issue TCC to Respondent the amount of Php 25,000.00 representing the compromise penalty.
SBMA CAN IMPOSE COMMON UTILITY SERVICE AREA (CUSA) FEES
CUSA FEES ARE NOT IN THE NATURE OF TAX
PHILIP MORRIS PHILIPPINES MANUFACTURING, INC. VS. SUBIC BAY METROPOLITAN AUTHORITY
G.R. NO. 232797, JUNE 14, 2021, UPLOADED AUGUST 10, 2021
Petitioner Philip Morris Philippines Manufacturing, Inc. filed an Appeal by Certiorari from the Court of Appeals (CA)’s earlier Decision and Resolution affirming the Decision of the Regional Trial Court (RTC) dismissing the Complaint for Injunction with Application for Issuance of a Writ of Preliminary Injunction filed by the Petitioner against the Respondent Subic Bay Metropolitan Authority. Petitioner insisted that the Respondent’s imposition of the Common Utility Service Area (CUSA) Fee is unilateral, forced, and has the effect of amending, varying, or modifying the terms of the Assignment of Leasehold Rights (ALR) and the Subic Technopark Corporation Master Lease Agreement (STEP MLA). Likewise, CUSA Fee is not a mere regulatory fee but a tax, as it is being collected for public purpose, i.e., to fund municipal services within the common areas of the Subic Bay Freeport Zone (SBFZ) which are for the direct benefit of the general public. In his Comment, Respondent reiterated the contractual obligations of the Petitioner under the ALR and STEP MLA as well as the implementing rules and regulations. Likewise, Petitioner should have submitted the matter for arbitration pursuant to the Arbitration Clause of the ALR and STEP MLA. Further, CUSA Fee is merely a cost recovery or reimbursement mechanism, and as such, does not constitute revenue, and is not intended to raise revenue. In ruling, both Republic Act No. 7227 or the “Bases Conversion and Development Act of 1992” and its Implementing Rules and Regulations expressly grant the Respondent with authority to fix reasonable service and utility fees necessary for the establishment, operation, maintenance of utilities, other services, and infrastructure of the SBFZ. Necessarily, these fees would include the charges collected by SBMA from its tenants to cover the expenses for security services or law enforcement, fire protection and prevention, street cleaning, and street lighting, which comprise the CUSA Fee. Administrative Order No. 31 directed government-owned and controlled corporations, such as the Respondent, not only to rationalize existing fees but also to impose additional charges "to enable the government to effectively provide services without straining the National Government's sources.” The Respondent, not previously collecting charges or fees for the subject services from business establishments or locators in the SBFZ is not a bar to the subsequent implementation of the CUSA Fee. The law clearly granted it authority to impose reasonable fees and charges for the provision of the municipal services covered by CUSA Fee. On the theory that the CUSA Fee is in reality a tax, the Court held that it is not a tax measure since the revenue generated therefrom did not exceed the cost of regulation. The penalty for non-payment of the CUSA Fee was also sustained. Thus, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.
CUSTOMS MEMORANDUM ORDER MAY BE CONSIDERED INVALID IF IT IS ULTRA VIRES
IMPORTATION OF RIGHT-HAND DRIVE VEHICLES INTO SUBIC BAY FREEPORT ZONE DOES NOT CONSTITUTE IMPORTATION OF GOODS INTO THE DOMESTIC TERRITORY
BUREAU OF CUSTOMS HAS NO AUTHORITY TO RESTRICT THE FREE FLOW OF GOODS IN THE SUBIC BAY FREEPORT ZONE
BUREAU OF CUSTOMS VS. JAPANESE 4X4 EXPORT CORPORATION REPRESENTED BY PIETRO GEROUE
G.R. NO. 227542, MAY 12, 2021, UPLOADED JULY 30, 2021
Petitioner Bureau of Customs (BOC) filed a Petition for Review on Certiorari seeking to reverse the Regional Trial Court (RTC)’s earlier Decision enjoining it on the enforcement of Customs Memorandum Order (CMO) No. 16-2005 within the Subic Bay Freeport Zone. Petitioner argued that the RTC erred in: (1) finding that all the elements of a Petition for Declaratory Relief are present; and (2) declaring the said CMO as invalid within the Subic Bay Freeport Zone and in enjoining the Petitioner to implement the issuance. In ruling, the Court held that CMO No. 16-2005 is ultra vires because it extends the importation ban of right-hand drive vehicles into foreign territory. This act is an intrusion upon the powers granted to the Subic Bay Metropolitan Authority (SBMA) under Section 13(b)(2) of Republic Act (R.A.) No. 7227 or “Bases Conversion and Development Act of 1992.” Moreover, the Court found that CMO No. 16-2005 went beyond the scope of its enabling law, R.A. No. 8506 or “An Act Banning the Registration and Operation of Vehicles With Right-hand Steering Wheel in Any Private or Public Street, Road or Highway” which banned the importation of right-hand motor vehicles and, ultimately, their use inside the domestic territory. Since the shipment took place from one foreign territory to another, Respondent Japanese 4X4 Export Corporation does not import or cause the importation of goods into the customs territory of the Philippines. In this case, Petitioner cannot validly assert its authority over the transaction. Furthermore, the enforcement of CMO No. 16-2005 inside the Freeport Zone is invalid as it does not serve the primordial purpose of the importation ban. In this regard, the Court will keep the statute’s intent to preserve the free flow of goods and capital in Subic Bay. Thus, the Petition for Review on Certiorari was DENIED.
NON-SUBMISSION OF SUPPORTING DOCUMENTS AT THE ADMINISTRATIVE LEVEL IS NOT FATAL TO THE CLAIM FOR REFUND BECAUSE JUDICIAL CLAIMS ARE LITIGATED DE NOVO
A TAXPAYER-CLAIMANT NEED NOT WAIT FOR THE CIR’S ACTION OR REQUEST TO SUBSTANTIATE THE REFUND CLAIM BY SUBMITTING NECESSARY DOCUMENTS
COMMISSIONER OF INTERNAL REVENUE VS. NANOX PHILIPPINES, INC.
G.R. NO. 230416, MAY 5, 2021, UPLOADED JULY 30, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the grant of refund to Respondent Nanox Philippines, Inc. on its erroneously paid Final Withholding Tax (FWT), raising for the first time the issue of lack of jurisdiction. Petitioner argued that the Respondent failed to exhaust all the administrative remedies available. It is only at the judicial stage that the Respondent submitted pieces of evidence to establish its entitlement to refund, but not at the administrative level. Further, Respondent cannot submit for the first time before the Court of Tax Appeals (CTA) pieces of evidence to support its entitlement for refund. In ruling, the Supreme Court held that the Respondent did not violate the rule on exhaustion of administrative remedies when it immediately instituted a judicial action without the necessary documents submitted at the administrative level. Additionally, Petitioner did not request supporting documents from the Respondent; rather, it simply did not act on the claim. In CIR vs. Univation Motor Philippines, Inc., Sections 204(c) and 229 of the 1997 Tax Code, as amended only require that an administrative claim be priorly filed, that is, to give the BIR, at the administrative level, an opportunity to act on said claim. Petitioner was mistaken that documents submitted at the administrative level cannot be presented in support of the judicial claim. However, the CTA may consider evidence that was not presented to the BIR, and the taxpayer-claimant may present new and additional evidence to the CTA to support its claim. Thus, regardless of whether the pieces of evidence were presented at the administrative level, all evidence submitted and formally offered by Respondent before the CTA can be considered and be given credence in determining the propriety of the tax refund. Consequently, the Court resolved to DENY the Petition.
FAILURE OF THE BIR TO VERIFY THE AMOUNTS IT OBTAINED FROM THIRD-PARTY MATCHING WILL RESULT IN THE CANCELLATION OF THE ASSESSMENT
IN ORDER TO BE VALID, AN ASSESSMENT MUST BE BASED ON ACTUAL FACTS SUPPORTED BY CREDIBLE EVIDENCE
COMMISSIONER OF INTERNAL REVENUE VS. MCC TRANSPORT SINGAPORE PTE LTD
G.R NO 255382, JUNE 28, 2021, UPLOADED JULY 30, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution canceling the assessment of the Respondent MCC Transport Singapore Pte. Ltd. due to the issue of prescription and for the failure of the Petitioner to verify the amounts obtained from the computerized/third-party matching by securing confirmation or certification from the third-party information source, or from externally sourced data. In ruling, the Supreme Court held that the Petitioner cannot insist on the applicability of Revenue Memorandum Order (RMO) No. 13-2012 to justify the use of unverified third-party information as basis for its assessment. The said RMO clearly provides that it can only be retroactively applied for the 2009 and 2010 Letter Notices. Upon scrutiny, it was shown that the Letter Notice, in this case, was issued in 2011, and thus, outside the coverage of the RMO. Moreover, to be valid, an assessment must be based on facts supported by credible evidence. However, even if the amounts were verified, Petitioner failed to prove that the Respondent filed a false or fraudulent return. Hence, the ten (10) year prescriptive period shall not apply in this case and the period of prescription must be counted from three (3) years from the date of filing of the returns. Since the Formal Assessment Notice (FAN) was received by the Respondent beyond the prescriptive period, the Petition was DENIED, and the earlier decision was AFFIRMED.
MOOT & ACADEMIC ON CTA ISSUE OF FORUM SHOPPING
COMMISSIONER OF CUSTOMS VS. PTT PHILIPPINES TRADING CORPORATION
G.R. NOS. 203138-40, FEBRUARY 15, 2021, UPLOADED JULY 26, 2021
Petitioner Commissioner of Customs (CoC) filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s earlier Resolutions which were found in favor of Respondent PTT Philippines Trading Corporation. Petitioner raised the following issues: (1) the CTA has no jurisdiction over CTA Case No’s. 8002 and 8023; hence, the CTA En Banc acted without jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction in reinstating and remanding subject Petitions for Review for further proceedings, and (2) the CTA En Banc committed serious error amounting to lack or excess of jurisdiction in reinstating and remanding CTA Case Nos. 7707, 8002, and 8023 despite Respondent’s glaring act of intentional forum shopping. Petitioner argued that said cases are dismissible on the ground of forum shopping since all three (3) cases similarly assail the validity of the demand letter from the Bureau of Customs. In ruling, forum shopping exists when a party repeatedly avails himself of several judicial remedies in different courts, either simultaneously or successively, all of which are substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues, either pending in or already resolved adversely by some other court. In finding that there was no forum shopping, the Supreme Court agreed with the CTA En Banc in holding that the causes of action of the three (3) Petitions differ. In CTA Case No. 7707, Respondent questioned the legality of the demand letter and prayed that it be nullified. CTA Case No’s. 8002 and 8023 have similar causes of action as both pray for the refund of the amount that Respondent paid, representing erroneously paid taxes and customs duties. However, CTA Case No’s. 8002 and 8023 are mere supplemental Petitions to CTA Case No. 7707. Given that the issues raised, and the reliefs prayed for in CTA Case No’s. 8002 and 8023 are closely related, if not intertwined, with those raised in CTA Case No. 7707, the CTA En Banc properly ordered their consolidation. The parties must present and argue their divergent positions in the consolidated cases for the tax tribunal to arrive at a complete and just resolution of the case and avoid multiplicity of suits. CTA Case No’s. 8002 and 8023 being supplemental Petitions to CTA Case No. 7707, the jurisdictional issue of whether the CTA can act on the same is already rendered moot and need no longer be discussed. Thus, the Petition was DENIED, and the earlier Resolutions were AFFIRMED.
REAL PROPERTY TAX (RPT) ASSESSMENT IS VALID EVEN WITHOUT AN ORDINANCE
EXECUTIVE ORDER (E.O.) NO. 173 DOES NOT DISTINGUISH BETWEEN OUTSTANDING LIABILITIES & THOSE THAT HAD BEEN PAID
THE PROVINCE OF NUEVA VIZCAYA, PROVINCIAL TREASURER OF NUEVA VIZCAYA, OFFICE OF THE MUNICIPAL ASSESSOR & TREASURER MUNICIPALITY OF ALFONSO CASTANEDA PROVINCE OF NUEVA VIZCAYA VS. CE CASECNAN WATER & ENERGY COMPANY, INC.
G.R. NO. 241302, FEBRUARY 1, 2021, UPLOADED JULY 15, 2021
Petitioners Province of Nueva Vizcaya, Provincial Treasurer, Office of the Municipal Assessor and Treasurer, Municipality of Alfonso Castaneda, Province of Nueva Vizcaya, filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s Decision. The CTA concurred with the Central Board of Assessment Appeals (CBAA) that the assessments made by the local assessor against the Respondent CE Casecnan Water and Energy Company, Inc. were not supported by a valid and legal tax ordinance. Hence, the Province of Nueva Vizcaya is bereft of any authority to impose a Real Property Tax (RPT). Aggrieved, the Petitioners insisted that the tax assessments issued by the Provincial Assessor for the years 2003 to 2005 are valid and argued that Executive Order (E.O.) No. 173 only applies to unpaid and existing taxes, fees, fines, and penalties. Since the Respondent has already paid its RPT liability, the condonation of tax liability under E.O. No. 173 can no longer be applied in its favor. In ruling, the Supreme Court held that the CBAA and CTA En Banc incorrectly concluded that the assessment issued by the Provincial Assessor is null and void because no valid and legal tax ordinance exists to support the same. Pursuant to the power of the local government units to fix the assessment level and adapt a schedule of Fair Market Values (FMV), the Province of Nueva Vizcaya enacted Tax Ordinance No. 99-002 adapting the 1999 Schedule of FMV for the different classes of real properties in Nueva Vizcaya and Tax Ordinance No. 2000-003 fixing the assessment levels for the years 2000 to 2002. While the said tax ordinances are specifically for the years 2000 to 2002 only, the failure of the Province to update its Schedule of FMV and assessment levels will not prevent it from levying RPT using as a basis the existing assessment levels and schedule of FMV. Hence, the assessment of RPT was valid. On the other hand, the provisions of E.O. No. 173, which reduce and condone RPT and interest/penalties assessed on the power generation facilities of Independent Power Producers (IPP) under Build-Operate-Transfer (BOT) contracts with Government-Owned and Controlled Corporations (GOCC) are applicable in this case. Respondent is an Independent Power Producer (IPP) that entered a Build-Operate-Transfer (BOT) Contract with the National Irrigation Administration (NIA), a GOCC. Hence, the provisions of E.O. No. 173 should be applied in its favor. Moreover, the said E.O. does not distinguish between outstanding liabilities and those that had been paid at the time the E.O. became effective. Consequently, the Petition was PARTIALLY GRANTED, and the earlier Decision was AFFIRMED with MODIFICATIONS. The case was REMANDED to the CBAA to determine the amount to be refunded to the Respondent.
PD NO. 242 AS AMENDED BY EO NO. 292 INSTITUTING THE ADMINISTRATIVE CODE OF 1987 EXPRESSLY EXEMPTS LOCAL GOVERNMENTS FROM THE COVERAGE OF ADMINISTRATIVE SETTLEMENT OR ADJUDICATION OF DISPUTES
THE AUTHORITY TO EXERCISE, EITHER ORIGINAL OR APPELLATE JURISDICTION, OVER LOCAL TAX CASES IS DEPENDENT ON THE AMOUNT OF THE CLAIM
LOCAL TREASURER OR HIS DULY AUTHORIZED REPRESENTATIVE CAN ISSUE NOTICE OF ASSESSMENT STATING THE NATURE OF THE TAX, FEE, OR CHARGE, AMOUNT OF DEFICIENCY, SURCHARGES, INTERESTS & PENALTIES IF HE FINDS THAT THEY HAVE NOT BEEN CORRECTLY PAID
QUEZON CITY, REPRESENTED BY ITS MAYOR, HON. HERBERT M. BAUTISTA & MS. RUBY ROSA G. GUEVERRA, IN HER CAPACITY AS OFFICER-IN-CHARGE-CITY TREASURER'S OFFICE VS. NATIONAL TRANSMISSION COMMISSION
G.R. NO. 246817, MAY 12, 2021, UPLOADED JULY 12, 2021
Petitioner Quezon City, represented by its Mayor and Officer-in-Charge Treasurer’s Office, Hon. Herbert M. Bautista and Ms. Ruby Rosa G. Gueverra, respectively, issued a Letter of Assessment to Respondent National Transmission Corporation (TRANSCO), for payment of Php 375,394,968.75 as additional business tax including surcharges and penalties for taxable years 2001-2003. Respondent protested arguing that it is exempt from business taxes for being a government instrumentality performing governmental functions, which the Petitioner denied. Respondent further escalated its protest to the Regional Trial Court (RTC) but was dismissed for failure to exhaust administrative remedies with the Department of Justice (DOJ) pursuant to Presidential Decree (P.D.) No. 242. On Petition for Review filed with the Court of Tax Appeals (CTA), the decision of the RTC was reversed, and the decision was later affirmed by CTA En Banc. On the latest Petition, Petitioner seeks the reversal of the assailed disposition of the CTA En Banc. In ruling, the Court held, quoting P.D. 242, that the settlement of dispute is now embodied in Chapter 14, Book IV of Executive Order (EO) 292 or Administrative Code of 1987: “This Chapter shall, however, not apply to disputes involving the Congress, the Supreme Court, the Constitutional Commissions, and local governments.”. It is to be recalled that the Petitioner is a Local Government Unit (LGU). To further specify competent court having jurisdiction over the case, China Banking Corporation vs. City of Manila provides that cases where the amount sought to be refunded is below the jurisdictional amount of the RTC, the Metropolitan, Municipal, and Municipal Circuit Trial Courts have authority to rule. Since the claim is within the jurisdictional amount of the RTC, then, the RTC is a competent court that has jurisdiction over the complaint. Therefore, the Petition was DENIED.
ENTERPRISES REGISTERED WITH PEZA ARE NOT LIABLE TO IAET
REASONABLE PURPOSE FOR NOT DISTRIBUTING EARNINGS EXEMPTS AN ENTITY FROM IAET
COMMISSIONER OF INTERNAL REVENUE VS. YUMEX PHILIPPINES CORPORATION
G.R. NO. 222476, MAY 5, 2021, UPLOADED JULY 12, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s earlier Decision canceling the Improperly Accumulated Earnings Tax (IAET) assessment of the Respondent Yumex Philippines Corporation. Petitioner argued that there is sufficient factual basis for the IAET assessment since the same is imposed on the income from the unregistered activity and is not covered under the Income Tax Holiday (ITH). Since the Respondent did not contest the findings and merely argued that its earnings were not subject to IAET, then the Petitioner considered it an undisputed issue. On the other hand, Respondent countered and reiterated the CTA's ruling that Sec. 4 or Revenue Regulations (RR) No. 2-2001 exempts enterprises duly registered with the Philippine Economic Zone Authority (PEZA) from IAET. Further, the non-distribution of dividends is justified because of the need for an appropriation for new projects. In ruling, the Court noted the Petitioner’s imposition of IAET in all the Respondent's income without establishing the prima facie why it deemed such income as improperly accumulated, while the Respondent was able to prove that it had accumulated its earnings for reasonable business purposes. Thus, the Petition was DENIED for lack of merit, and the earlier Decision and Resolution were AFFIRMED.
THE BCDA IS A GOVERNMENT INSTRUMENTALITY
A GOVERNMENT INSTRUMENTALITY IS EXEMPT FROM THE PAYMENT OF DOCKET FEES
BASES CONVERSION & DEVELOPMENT AUTHORITY VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 205466, JANUARY 11, 2021, UPLOADED JUNE 30, 2021
Petitioner Bases Conversion and Development Authority (BCDA) filed a Petition for Review assailing the Court of Tax Appeals (CTA)’s earlier Decision and Resolution denying its Petition as well as the Motion for Reconsideration due to lack of merit and for failure to include a notice of hearing in the Motion. Petitioner argued that being a government instrumentality, it is exempt from the payment of docket fees. Likewise, notice of hearing is not applicable to the CTA En Banc since it is not a trier of fact. In ruling, the Supreme Court cited its earlier Decision which also involved the Petitioner and held that the Petitioner is a government instrumentality. As a government instrumentality, it is exempt from the payment of docket fees pursuant to Section 22, Rule 141 of the Rules of Court, as amended. On the issue of notice of hearing, such is required pursuant to Section 5, Rule 2 and Section 3, Rule 15 of the Revised Rules of Procedure of the CTA and Section 4 and 5, Rule 15 of the Rules of Court. Nevertheless, it is also well-settled that procedural rules may be relaxed when a stringent application would hinder rather than serve the demands of substantial justice. In the instant case, the Supreme Court deemed it appropriate to relax the technical rules of procedure. Thus, the Petition was GRANTED, and the assailed decision and resolution were REVERSED AND SET ASIDE.
CTA HAS EXCLUSIVE APPELLATE JURISDICTION OVER DECISIONS OF THE CIR ON CASES INVOLVING DISPUTED ASSESSMENTS, REFUNDS, FEES OR OTHER CHARGES, PENALTIES IN RELATION THERETO, OR OTHER MATTERS ARISING UNDER THE TAX CODE OR OTHER LAWS ADMINISTERED BY THE BIR
GOLDEN DONUTS, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 252816, FEBRUARY 3, 2021, UPLOADED JUNE 18, 2021
Petitioner Golden Donuts, Inc. filed a Petition for Review on Certiorari, assailing the Court of Tax Appeals (CTA)’s earlier Decision and Resolution dismissing the Petition for Review earlier filed due to lack of jurisdiction. In 2008, the Respondent Commissioner of Internal Revenue (CIR) issued a Letter of Authority (LOA) covering the taxable year 2007, and the Petitioner subsequently paid the recomputed deficiency taxes in 2012. However, in 2017, Petitioner received another LOA covering the same taxable year 2007. Petitioner questioned the legality of the issuance of the 2017 LOA. The CTA En Banc agreed with the CTA in Division that the issuance of an LOA and Subpoena Duces Tecum (SDT) does not fall under the matters within which the CTA may take cognizance prior to the issuance of a final assessment, hence, this Petition. In ruling, the Court held that the Petition is meritorious. In De Jesus vs. Court of Appeals, the Court said that a Court may issue a Writ of Certiorari in aid of its appellate jurisdiction if the said Court has jurisdiction to review, by appeal or writ of error, the final orders, or decisions of the lower court. Following the ruling of the Court in the City of Manila, the CTA may take cognizance of a Petition for Certiorari to determine whether there is grave abuse of discretion amounting to lack or excess of jurisdiction committed by the BIR in issuing the 2017 LOA against the Petitioner as well as the SDT, considering that a previous investigation of the same taxable year 2007 was already conducted pursuant to a 2008 LOA, and Petitioner has already settled its tax liabilities arising out of said investigation. Nonetheless, in accordance with the liberal spirit pervading the Rules of Court, the interest of substantial justice, and considering that the Petition for Review was filed within the 30-day reglementary period, which is within the 60-day reglementary period to file a Petition for Certiorari under Rule 65 of the Rules of Court, and because of the significance of the issue on jurisdiction, the Court deems it proper and justified to relax the rules and, thus, treat the Petition for Review as Petition for Certiorari. Therefore, the case was REMANDED to the CTA in Division.
IN ORDER NOT TO BE IN DEFAULT, IT MUST BE SHOWN THAT THE FAILURE TO FILE ANSWER WAS DUE TO FRAUD, ACCIDENT, MISTAKE, OR EXCUSABLE NEGLIGENCE
COMMISSIONER OF INTERNAL REVENUE VS. THE THIRD DIVISION OF THE COURT OF TAX APPEALS & AZ CONTRACTING SYSTEM SERVICE, INC.
G.R. NO. 238093, JANUARY 26, 2021, UPLOADED JUNE 18, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Certiorari seeking to reverse the Court of Tax Appeals (CTA) 3rd Division’s earlier Resolution denying the Motion for Reconsideration (MR) and affirming the earlier denial of Motion to Lift Order of Default and Admit Attached Answer. In the earlier case, Respondent AZ Contracting System Service, Inc. filed a Petition for Review seeking refund of excess and unutilized creditable withholding taxes due to inaction of the claim for refund. The CTA issued Summons, directing Petitioner to submit his Answer within 15 days from receipt thereof. However, Petitioner failed to file his Answer. As such, Respondent filed a Motion to Declare him In Default, and the same was granted. Petitioner then filed a Motion to Lift the Order of Default and Admit Attached Answer alleging that the BIR Records were only forwarded to the Litigation Division on a later date, despite several follow-up requests, and that these records are vital in the preparation of his Answer meritoriously and intelligently. The CTA denied the Petitioner’s Motion and held that the Petitioner failed to show that his failure to file an Answer was due to excusable negligence, and that he has a meritorious defense. The CTA underscored that the grounds raised by the Petitioner did not prevent him from asking for additional time to file an Answer or to file an Opposition to Motion to Declare in Default. Dissatisfied, Petitioner, then, again filed an MR and maintained that he had no intention to file his Answer belatedly nor to violate the Court’s directive. The CTA considered the said Motion as a second MR, which is expressly prohibited under Section 2, Rule 52 of the Rules of Court since it essentially prays for reconsideration of the resolution declaring the Petitioner in default. Petitioner filed the present Petition for Certiorari claiming that he has no other plain, speedy, and adequate remedy in the ordinary course of the law to seek the reversal or nullification of the assailed Resolution which will promptly and immediately relieve the Petitioner from its injurious effects. In ruling, the Revised Rules of the CTA does not prohibit the filing of MR of any decision, resolution, or order of the Court. What the said CTA Rules prohibit, as well as Section 2, Rule 52 of the Rules of Court, which is suppletory to the CTA Rules, is the filing of a second MR of a decision, final resolution, or order. Moreover, the Supreme Court found that all the elements for a valid declaration of default are present in the instant case. Thus, the CTA was correct in granting the Private Respondent’s Motion and declaring the Petitioner in default. The CTA also correctly denied the Motion to Lift Order of Default since the reasons of the Petitioner are not excusable to merit the lifting of an order of default. It was within the CTA’s discretion to deny the Motion to Lift the Order of Default. Thus, the Petition was DISMISSED, and the earlier Resolution was AFFIRMED.
GOVERNMENT INSTRUMENTALITY IS EXEMPT FROM RPT EXCEPT WHEN BENEFICIAL USE IS GIVEN TO THE LESSEE
ATTY. RACIMO R. ESTAMPADOR VS. THE CITY ASSESSOR OF MANILA
G.R. NO. 227288, MARCH 18, 2021, UPLOADED JUNE 18, 2021
Petitioner Atty. Racimo R. Estampador filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution arguing that the CTA erred in remanding the case to the Local Board of Assessment Appeals (LBAA) and ruling that Philippine Port Authority (PPA) should be impleaded as an indispensable party. In addition, Petitioner faulted the CTA for not applying the City of Pasig case and ignoring paragraph 8 of the terms and conditions of the Contract of Lease, which provides that all taxes and assessments levied or to be levied upon the leased premises shall be for the exclusive account of the lessor. On the other hand, the Respondent City Assessor of Manila countered that the Court, in the City of Pasig case, recognizes that the Republic of the Philippines will not pay the tax on the leased portions of its property but will just pass the real estate tax to the lessee. In ruling, the Court held that PPA is not an indispensable party; PPA’s interest is separable from the interest of Petitioner. Hence, remand is not necessary. Moreover, the ruling in the City of Pasig case is subject to the assumption that “Republic of the Philippines passes on the real estate tax as part of the rent to the lessees.” The PPA being a government instrumentality, Section 234(a) of the Local Government Code, which must be read in conjunction with Section 133(o), is applicable. Accordingly, its properties are generally exempted from payment of real property taxes. That exemption, however, ceases when the beneficial use of its properties has been granted to a taxable person. In this case, while the tax liability is being assumed by PPA, the use and possession of the leased property are lodged on the Petitioner. In fine, the tax liability must be a liability that arises from the law, which the local government unit can rightfully and successfully enforce, not the contractual liability that is enforceable only between the parties to the contract. As such, it is clearly the Petitioner who bears the responsibility to pay the Real Property Tax. Thus, the Petitioner is not entitled to a refund he paid under protest to the City of Manila. Moreover, it is only the Petitioner who can demand compliance from PPA with respect to the contractual obligation it assumed under Paragraph 8 of the Contract of Lease, not the City of Manila. Consequently, the Petition was PARTIALLY GRANTED, and the earlier decision and resolution were REVERSED and SET ASIDE.
TAX-FREE EXCHANGE MERELY DEFERS THE RECOGNITION OF GAIN OR LOSS
SALE OF SHARES ACQUIRED THROUGH TAX-FREE EXCHANGE IS SUBJECT TO CGT & NOT TO RCIT
COMMISSIONER OF INTERNAL REVENUE VS. THE HONGKONG SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCH
G.R. NO. 227121, DECEMBER 9, 2020, UPLOADED JUNE 15, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA)’s earlier Decision and Resolution canceling the deficiency income tax assessment against the Respondent Hong Kong Shanghai Banking Corporation Limited-Philippine Branch on the alleged sale of the goodwill of its Merchant Acquiring Business (MAB). In the instant case, Respondent entered into two transactions: (1) a tax-free transfer of its information technology assets and agreement of its MAB in exchange for GPAP-Phils. Inc. Shares; and (2) the subsequent sale or assignment of its GPAP-Phils. Inc. shares to GPAP-Singapore. Petitioner insists that the second transaction involves an alleged sale of goodwill, which makes the Respondent liable for deficiency income taxes. In ruling, the Supreme Court elucidated that share of stock acquired through a tax-free exchange is subject to tax. This is because, in a tax-free exchange, the recognition of gain or loss arising from the exchange is merely deferred. The gain realized from the sale of shares acquired, through a tax-free exchange transaction, is subject to Capital Gains Tax (CGT), as held in several rulings issued by the BIR. Applying such in the instant case, the subsequent disposition of the Respondent of its GPAP-Phils. Inc. shares in favor of GPAP-Singapore is subject to CGT and not to Regular Corporate Income Tax (RCIT) under Section 27(A) of the 1997 Tax Code, as amended, upon which the Petitioner’s assessment is based. Further, nothing in the agreement between Respondent and GPAP-Singapore supports the Petitioner’s position that goodwill was sold to GPAP-Singapore. On the argument of the Petitioner that the restructuring methodology employed by the Respondent is a form of tax evasion scheme to escape income tax liability, the Supreme Court elucidated that a taxpayer has the legal right to decrease the amount of what otherwise would be his taxes or altogether avoid them by means which the law permits. Such is called tax avoidance. On the other hand, tax evasion connotes fraud using pretenses and forbidden devices to lessen or defeat taxes. In the instant case, Petitioner failed to proffer any clear and convincing proof of fraud on the part of the Respondent. Thus, the Petition was DENIED, and the assailed Decision and Resolution were AFFIRMED.
SECTION 229 OF THE 1997 TAX CODE, AS AMENDED IS INAPPLICABLE TO CLAIMS FOR THE RECOVERY OF UNUTILIZED INPUT VAT
UNDER THE VAT SYSTEM, THERE IS NO INSTANCE WHERE THE INPUT VAT PAID IS COLLECTED "EXCESSIVELY" OR MORE THAN WHAT IS LEGALLY DUE
COCA-COLA BOTTLERS PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 221694, JANUARY 19, 2021, UPLOADED JUNE 11, 2021
Petitioner Coca-Cola Bottlers Philippines, Inc. filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution affirming the denial of the CTA Special 2nd Division of Petitioner’s claim for refund or issuance of a Tax Credit Certificate (TCC) allegedly representing over/erroneous payment of output VAT. Petitioner averred that due to inadvertence, several purchases of services with input taxes that have been paid were not declared in its Quarterly VAT Returns. Thus, the same was not charged to the output tax payable. Petitioner argued that this resulted in the alleged over/erroneously paid output tax. However, because of the issuance of a Letter of Authority, Petitioner could no longer amend its VAT Returns to include these taxes when the error was discovered. Hence, Petitioner resorted to filing claims for refund. CTA Special 2nd Division ruled that only input taxes which are substantiated and declared in the Petitioner’s Quarterly VAT Return can be credited against the output tax for the same taxable year. Applying the foregoing, the claimed input taxes for the subject quarters cannot be credited against Petitioner's output taxes since said input taxes were not declared in the return. Further, the independent CPA determined that the amount of Petitioner’s input tax payments is insufficient to cover the alleged output tax in the periods in issue. Therefore, Petitioner could not have possibly made excessive output VAT payments. Likewise, the CTA En Banc emphasized that for Section 229 of the 1997 Tax Code, as amended to apply, there must be an excessive and wrongful payment because what is paid, or part of it, is not legally due. In ruling, the Supreme Court found no cogent reason to reverse or modify the findings of the CTA. Section 229 of the Tax Code is inapplicable to claims for the recovery of unutilized input VAT. Input VAT is not “excessively” collected as contemplated in Section 229 because, at the time the input VAT is collected, the amount paid is correct and proper. Moreover, suppose said input VAT is in fact "excessively" collected as understood under Section 229, in that case, it is the person legally liable to pay the input VAT, and not the person to whom the tax is passed on and who is applying the input VAT as credit for his own output VAT, who can file the judicial claim for refund or credit outside the VAT system. Even assuming, for argument's sake, that Petitioner's application for refund or issuance of Tax Credit has any legal basis, said claim must still fail in view of the Petitioner's failure to substantiate the same properly. Actions for tax refund or credit, as in the instant case, are in the nature of a claim for exemption. As such, the law is not only construed in strictissimi juris against the taxpayer; the pieces of evidence presented entitling a taxpayer to an exemption must also be strictissimi scrutinized and duly proven. Consequently, the Petition was DENIED, and the earlier Decision and Resolution were AFFIRMED.
A NEW LOA RE-ASSIGNING THE AUDIT TO A NEW RO MUST BE SIGNED BY THE CIR HIMSELF OR BY HIS AUTHORIZED REPRESENTATIVES TO BE VALID
GAMING REVENUES OF A PAGCOR LICENSEE IS EXEMPT FROM INCOME TAX AFTER PAYMENT OF THE 5% FRANCHISE TAX
COMMISSIONER OF INTERNAL REVENUE VS. TRAVELLERS INTERNATIONAL HOTEL GROUP INC.
G.R NO. 255487, MAY 3, 2021, UPLOADED JUNE 8, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution canceling the assessment issued against the Respondent Travellers International Hotel Group, Inc. due to the absence of authority to conduct audit. In ruling, the Supreme Court held that unless authorized by the CIR or by his duly authorized representatives, through a Letter of Authority (LOA), an examination of the taxpayer cannot ordinarily be taken. Upon perusal of documents, the alleged new LOA re-assigning the audit to a new RO was not signed by the CIR nor his duly authorized representatives. Consequently, the RO has no authority to examine the Respondent’s books of accounts, which makes the resulting assessment void. However, even if the authority was valid, the Respondent’s gaming revenues as a Philippine Gaming Corporation (PAGCOR) licensee are exempt from income tax after payment of the 5% Franchise Tax citing the case of Bloomberry Resorts and Hotels, Inc vs. Bureau of Internal Revenue. Thus, the Court resolved to DENY the Petition.
THE RECKONING OF THE 120-DAY PERIOD FOR THE CIR TO DECIDE ON THE CLAIM FOR REFUND IS UPON THE DATE OF THE TAXPAYER’S SUBMISSION OF COMPLETE DOCUMENTS
COMMISSIONER OF INTERNAL REVENUE VS. PHILEX MINING CORPORATION
G.R. NO. 218057, JANUARY 18, 2021, UPLOADED MAY 26, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the Court of Tax Appeals (CTA) En Banc’s previous Decision ordering to refund the Respondent Philex Mining Corporation the amount representing its excess unutilized input Value-Added Tax (VAT). In ruling, the Court elucidated that the reckoning date of the 120-day period within which the CIR should decide on the Respondent’s claim for refund is upon the latter’s submission of complete documents. In relation, it was further clarified that it is the taxpayer who ultimately determines if complete documents have been submitted to the CIR. Considering that no action was taken by the Petitioner within the said 120-day period, the Respondent had to file a judicial claim before the 30-day period accorded to it lapses. Anent the substantiation requirements of the claim for refund, the Court found it unnecessary to go over and review the documents which were already verified by the CTA division since factual questions should not be entertained in Petitions on Certiorari. Moreover, the Court found no cogent reason to depart from the En Banc’s Decision. Lastly, the Court agreed with the tax tribunal that the submission of subsidiary sales and purchase journals is not indispensable in the claim of tax refund/credit for such documents are not enumerated in the substantiation requirements under Section 112(A) of the 1997 Tax Code, as amended. Thus, the Petition was DENIED for lack of merit, and the Decision and Resolution of the CTA En Banc were AFFIRMED.
LACK OF AUTHORITY OF THE RO TO CONDUCT THE AUDIT WILL RENDER THE ASSESSMENT NULL & VOID
COMMISSIONER OF INTERNAL REVENUE VS. TRINITY FRANCHISING & MANAGEMENT CORPORATION
G.R. NO. 255094, APRIL 26, 2021, UPLOADED MAY 19, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the Court of Tax Appeals (CTA) En Banc’s earlier Decision and Resolution canceling the assessment issued against the Respondent Trinity Franchising and Management Corporation finding that the BIR Revenue Officer (RO) who recommended the issuance of tax assessments was without authority to do so in the absence of a validly signed Letter of Authority (LOA) in its favor. In ruling, the Supreme Court held that CTA En Banc correctly held that the tax assessments were invalid due to the RO’s lack of authority to conduct an audit. The new LOA re-assigning the audit to RO Pedrosa was neither signed by the Petitioner nor his duly authorized representatives as identified in the Tax Code and in the prevailing BIR regulations. Thus, RO Pedrosa did not have the authority to examine the Respondent's books of accounts and tax records and recommended the issuance of tax assessments. Consequently, the Petitioner failed to show any reversible error committed by the CTA En Banc. Thus, the Court resolved to DENY the Petition.
BURDEN OF PROOF RESTS UPON THE TAXPAYER TO ESTABLISH, BY SUFFICIENT & COMPETENT EVIDENCE, ITS ENTITLEMENT TO CLAIM FOR REFUND
PHILIPPINE AIRLINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE & COMMISSIONER OF CUSTOMS
G.R. NO. 231638, FEBRUARY 17, 2021, UPLOADED MAY 18, 2021
Petitioner Philippine Airlines, Inc. filed a Petition for Review on Certiorari seeking to reverse the Court of Tax Appeals (CTA)’s earlier Decisions and Resolutions denying its claim for refund of alleged erroneously paid excise taxes. Petitioner claimed that it attached material portions of the records in its Petition contrary to the allegations of the Respondents Commissioner of Internal Revenue (CIR) and Commissioner of Customs (CoC). Likewise, it sufficiently proved that its imported liquors, wines, and cigarettes were not locally available in a reasonable quantity, quality, or price, as part of the requirements on the refund. In ruling, the Court found that Petitioner attached to the Petition material portions of the records in compliance with Section 4, Rule 45 of the Rules of Court. The Court was convinced that Petitioner sufficiently proved compliance with the second condition for excise tax exemption and reiterated Section 13 (b)(2) of Presidential Decree (P.D.) No. 1590 or “An Act Granting a New Franchise to Philippine Airlines, Inc. to Establish, Operate, and Maintain Air-Transport Services in the Philippines and Other Countries” which provides for the conditions that must be complied with for the imported commissary and catering supplies to be exempt from excise tax, namely: (1) the supplies are imported for the use of the franchisee in its transport/non-transport operations and other incidental activities; and (2) they are not locally available in a reasonable quantity, quality, or price. The CTA committed a severe departure from settled jurisprudence amounting to abuse or improvident exercise of authority when it ruled that the pieces of evidence the Petitioner presented are "inadequate" to show compliance with Section 13 (b)(2) of P.D. No. 1590. However, the Court resolved to deny the Petitioner's claim for a refund on the excise tax it paid on cigarettes as it fell short of proving the non-availability of the imported cigarettes at reasonable quantity, quality, or price. Thus, the Petition for Review on Certiorari was PARTLY GRANTED. The case was REMANDED to the CTA to determine the Petitioner's entitlement to a refund of excise taxes paid on importation of liquors and wines.
ADMINISTRATIVE REMEDIES ARE INAPPLICABLE WHEN THE ISSUE PRESENTED IS A PURE QUESTION OF LAW
THE LIABILITY TO PAY REAL PROPERTY TAXES ON GOVERNMENT-OWNED PROPERTIES, THE BENEFICIAL OR ACTUAL USE OF WHICH WAS GRANTED TO A TAXABLE ENTITY, DEVOLVES ON THE TAXABLE BENEFICIAL USER
METROPOLITAN WATERWORKS & SEWERAGE SYSTEM VS. CENTRAL BOARD OF ASSESSMENT APPEALS, THE PASAY CITY LOCAL BOARD OF ASSESSMENT APPEALS, PASAY CITY, THE PASAY CITY TREASURER & CITY ASSESSOR
G.R. NO. 215955, JANUARY 13, 2021, DATE UPLOADED ON MARCH 19, 2021
Petitioner Metropolitan Waterworks and Sewerage System filed a Petition for Certiorari seeking tax exemption from real property tax and reversal of the Court of Appeal’s Decision and Resolutions, dismissing the Petitioner’s appeal for failure to exhaust administrative remedies, requiring proof of exemption and payment under protest. A careful reading of the Petitioner’s arguments revealed that it is neither challenging the reasonableness of the City Assessor’s assessment nor asserting error on the part of the City Treasurer’s computation of the assessed tax. The issue of whether a local government is authorized to assess and collect real property taxes from a government entity is a pure question of law, which is beyond the Local Board of Assessment Appeals (LBAA) and Central Board of Assessment Appeals (CBAA)’s jurisdiction. Thus, despite the alleged non-exhaustion of administrative remedies, the Supreme Court gave due course to the Petition on the ground that the controversy involves a question of law. On the other hand, the Petitioner’s 2018 Case has already been settled with finality, that it is a government instrumentality vested with corporate powers and, as such, exempt from the payment of real property taxes. The tax exemption that its properties carry, however, ceases when their beneficial use has been extended to a taxable person. All the assessments issued in the name of the Petitioner should, thus, be declared void. To be clear, Respondent Pasay City was not precluded from availing of the appropriate remedies under the law to assess and collect real property taxes from the private entities to which the Petitioner may have granted the beneficial use of its properties. Moreover, the Petitioner’s claim for a refund of real property taxes erroneously paid will not be automatically an issue. The amount is a factual matter that must be threshed out with certainty in the normal course and following the administrative procedures. For these reasons, the Petition was PARTLY GRANTED. The earlier Resolutions were REVERSED and SET ASIDE.
APPLICATION OF THE FILINVEST CASE IN TRANSACTIONS AFTER THE EFFECTIVITY OF THE 1997 TAX CODE DOES NOT VIOLATE THE PRINCIPLE OF NON-RETROACTIVITY OF LAWS & RULINGS
LEGAL INTEREST IMPOSED ON DEFICIENCY TAXES SHALL BE 12% EFFECTIVE JANUARY 1, 2018
E.E. BLACK LTD.-PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 221655, JANUARY 20, 2021, UPLOADED MARCH 8, 2021
The Supreme Court held that the application of the Filinvest case in transactions after the effectivity of the 1997 Tax Code, as amended, does not violate the principle of non-retroactivity of laws and rulings. In the Filinvest case, the term “loan agreements” is subject to Documentary Stamp Tax (DST) pursuant to Section 180 of the old 1993 Tax Code. Section 180 of the 1993 Tax Code was, however, carried over to the 1997 Tax Code, as amended. As a result, the imposition of DST on loan agreements was retained in the present Section 179 of the 1997 Tax Code, as amended. The Supreme Court, however, modified the imposed interest on the deficiency DST considering the amendment in Section 249 by Republic Act (R.A.) No. 10963, otherwise known as the “Tax Reform for Acceleration and Inclusion Law,” as implemented by Revenue Regulations (RR) No. 21-18. Effective January 1, 2018, the legal interest to be imposed on deficiency taxes shall be 12%.
THE POWER TO LEVY FRANCHISE TAX IS BESTOWED ONLY TO PROVINCES & CITIES
AN ORDINANCE WHICH IS CONTRARY TO AN EXISTING LAW IS NULL & VOID
MANILA ELECTRIC COMPANY VS. CITY OF MUNTINLUPA & NELIA BARLIS
G.R. NO. 198529, FEBRUARY 9, 2021, UPLOADED MARCH 3, 2021
Petitioner Manila Electric Company (MERALCO) filed a Petition for Review on Certiorari assailing the Court of Appeals (CA)’s earlier Decision declaring Section 25 of Municipal Ordinance (MO) No. 93-35 as valid starting only from the date of the effectivity of Republic Act (R.A.) No. 7926, otherwise known as the “Charter of the City of Muntinlupa.” Also, CA ordered MERALCO to comply with the Respondent City of Muntinlupa’s demands for a certified Statement of Gross Sales/Receipts and to pay its Franchise Tax. In ruling, the Supreme Court cited the case of Legaspi vs. City of Cebu, which explains the two (2) tests in determining the validity of an ordinance (i.e., the Formal Test and the Substantive Test). The Formal Test requires the determination of whether the ordinance was enacted within the corporate powers of the Local Government Unit and whether the same was passed pursuant to the procedures laid down by the law. On the other hand, the Substantive Test primarily assesses the reasonableness and fairness of the ordinance and significantly its compliance with the Constitution and existing statutes. Applying the Formal Test, the passing of MO No. 93-35, particularly Section 25 thereof, has failed to meet the requirements of a valid ordinance, given that it was beyond the corporate powers of the then Municipality of Muntinlupa. It likewise failed the Substantive Test as it deviated from the express provision of R.A. No. 7160, otherwise known as the “Local Government Code,” particularly Section 142 in relation to Sections 134, 137, and 151. Such provisions clearly set out that municipalities may only levy taxes not otherwise levied by the provinces and that Franchise Tax may only be levied by provinces and cities. Section 137 particularly provides that provinces may impose a Franchise Tax on businesses granted a franchise to operate. Since provinces have been vested with the power to levy a Franchise Tax, it follows that municipalities, pursuant to Section 142 of R.A. 7160, could no longer levy it. Therefore, Section 25 of MO No. 93-35, which was enacted when Muntinlupa was still a municipality, and which imposed a Franchise Tax on public utility corporations within its territorial jurisdiction, is ultra vires for being violative of Section 142 of R.A. No. 7160. Further, Section 56 of the Charter of Muntinlupa City has no curative effect on Section 25 of MO No. 93-35, the latter being null and void. Section 56 of the Charter of Muntinlupa City cannot breathe life into the invalid Section 25 of MO No. 93-35. Section 56 of the transitory provisions of the Charter of Muntinlupa City contemplates only those ordinances that are valid and legally existing at the time of its enactment. Thus, the Petition was GRANTED, and the assailed decision was REVERSED AND SET ASIDE.
THE ENUMERATION OF DEDUCTIBLE DIRECT COST UNDER RR NO. 11-2005 BY A PEZA-REGISTERED ENTITY IS NOT EXCLUSIVE
COMMISSIONER OF INTERNAL REVENUE VS. EAST ASIA UTILITIES CORPORATION
G.R. NO. 225266, NOVEMBER 16, 2020, UPLOADED MARCH 2, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari seeking to reverse the CTA En Banc’s Decision on the reduced amount of deficiency income tax assessment of the Respondent East Asia Utilities Corporation. Petitioner argued that the enumeration of direct costs and expenses under Revenue Regulations (RR) No. 11-2005 is exclusive. In ruling, the Court held that under the Philippine Economic Zone Authority (PEZA) Law, a PEZA-registered enterprise, such as the Respondent, is entitled to the special tax of 5% on gross income in lieu of all national and local taxes. Gross income refers to the gross sales or gross revenues derived from the business activity within the ecozone, net of sales discounts, sales returns and allowances, minus cost of sales or direct costs, but before any deduction that is made for administrative expenses or incidental loses during a given taxable period. Thereafter, the BIR issued RR No. 2-2005 for computing the total 5% tax rate, the cost of sales or direct cost with the phrase “shall consist only” of the items listed in the said RR. Later, the BIR issued RR No. 11-2005, removing the exclusivity of the enumeration of costs or expenses that are allowed as a deduction from gross income. As the amendment in RR No. 11-2005 now stands, the enumeration of allowable deductions was only made, by way of example or illustrations of the nature and type of expenses that may be deducted from a PEZA-registered enterprise’s gross income, to compute the 5% Gross Income Tax (GIT). Thus, CTA En Banc did not err in examining the nature and type of the expenses the Respondent claimed as deductions vis-à-vis their relation to the Respondent’s registered activities in computing the correct amount of tax deficiency. Consequently, the Petition was DENIED.
TAX ON SALE OF SHARE OF STOCK SOLD OR EXCHANGED THROUGH INITIAL PUBLIC OFFERING UNDER SECTION 127(B) IS SEPARATELY COMPUTED FOR SHARES IN THE PRIMARY & SECONDARY OFFERINGS
I-REMIT, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 209755, NOVEMBER 9, 2020, UPLOADED FEBRUARY 22, 2021
Petitioner I-Remit, Inc. filed a Petition for Review seeking to reverse the Court of Tax Appeals (CTA)’s earlier Decision denying its claim for a refund of Other Percentage Tax. Petitioner argued that the tax on the sale of shares of stock sold or exchanged through the Initial Public Offering (IPO) should be jointly computed for both sales of shares in a primary offering, where the shares are offered by the issuing corporation, and in a secondary offering, where the shares are offered by the selling shareholders of the corporation. Following such argument, an overpayment will arise as the tax rate will be lower than what was applied when the tax was paid. On the other hand, the Respondent Commissioner of Internal Revenue (CIR) countered that the tax should be separately computed for the sale of shares in the primary and secondary offerings. In ruling, the Court held that the tax under Section 127(B) of the 1997 Tax Code, as amended, is imposed on each sale of shares of stock in closely held corporations through an IPO. Since a tax is imposed on every sale of shares of stock, there is a need to determine which sales are covered in the sale of shares through IPO. On this score, the second paragraph of Section 127(B) of the 1997 Tax Code, as amended, precisely provides for the types of sales involved: sale by the issuing corporation in a primary offering and sale by each of the corporation's shareholders in a secondary offering. Thus, every sale in Section 127(B) of the same Code is referenced to the seller (i.e., the issuing corporation in case of a primary offering and each of the selling shareholders of the corporation in case of a secondary offering). The sale contemplated is not a lone or lump sum sale, since more than one sale may transpire under Section 127(B) of the same Code. Thus, the Petition was DENIED, and the assailed Decision and Resolution were AFFIRMED.
THE COURT OF TAX APPEALS (CTA) & NOT THE REGIONAL TRIAL COURT (RTC) HAS JURISDICTION TO PASS ON THE CONSTITUTIONALITY OR VALIDITY OF TAX LAW, REGULATION, OR ADMINISTRATIVE ISSUANCE
CTA HAS EXCLUSIVE JURISDICTION TO RESOLVE TAX PROBLEMS EXCEPT IN CASES QUESTIONING THE LEGALITY OR VALIDITY OF ASSESSMENT OF LOCAL TAXES WHERE THE RTC HAS JURISDICTION
GAMES & AMUSEMENT BOARD & BUREAU OF INTERNAL REVENUE VS. KLUB DON JUAN DE MANILA, INC. & CESAR A VILA, JR., MANILA JOCKEY CLUB, INC. PHILIPPINE RACING CLUB, INC., & METRO MANILA TURF CLUB, INC.
GR NO. 252189, FEBRUARY 18, 2021, UPLOADED FEBRUARY 22, 2021
Petitioners Games and Amusement Board (GAB) and the Bureau of Internal Revenue (BIR) filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision and Resolution of the Court of Appeals. Earlier, Respondent Klub Don Juan asserted that the GAB and the BIR should be restrained from enforcing the provision of the TRAIN Law on the increased Documentary Stamp Tax (DST) rate. Instead, the franchise rates should continue to apply since it was not explicitly amended by the TRAIN Law. In ruling, the Court held that since the issue in this case is the validity of the provision of the TRAIN Law on the higher DST rate, the RTC is still devoid of jurisdiction. In Banco de Oro vs. Republic of the Philippines, the Court settled the question of which Court has the jurisdiction to determine the constitutionality or validity of tax laws, rules and regulations, and other administrative issuances of the BIR. The case of Banco De Oro made it clear that the CTA not only has the jurisdiction to pass upon the constitutionality or validity of a tax law or regulation when raised by the taxpayer as a defense in disputing or contesting an assessment or claiming a refund, but also, it has jurisdiction on cases directly challenging the constitutionality or validity of a tax law, regulation, or administrative issuances such as Revenue Orders, Revenue Memorandum Circulars, Revenue Regulations, and Rulings. The same case intends the CTA to have exclusive jurisdiction to resolve all tax problems, except in cases questioning the legality or validity of the assessment of local taxes where the RTC has jurisdiction. Thus, the Petition was GRANTED.
INPUT VAT MUST FIRST BE PROVEN TO EXCEED OUTPUT VAT FOR A CLAIM OF REFUND TO PROSPER
TOTAL (PHILIPPINES) CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 247341, NOVEMBER 18, 2020, UPLOADED FEBRUARY 17, 2021
Petitioner Total (Philippines) Corporation filed a Petition seeking to reverse the CTA En Banc’s Decision and Resolution denying its claim for a refund. In ruling, the Court discussed that for a taxpayer to validly claim a refund of unutilized input Value-Added Tax (VAT) attributable to zero-rated or effectively zero-rated sales, the following requirements must be complied with: (1) the taxpayer-claimant is VAT-registered; (2) the taxpayer-claimant is engaged in zero-rated or effectively zero-rated sales; (3) there are creditable input taxes due or paid attributable to the zero-rated or effectively zero-rated sales; (4) the input tax has not been applied against the output tax; and (5) the claim for a refund is filed within the prescribed period. In the instant case, the core issue is the compliance of the 4th requisite, that is, whether the valid input VAT attributable to Petitioner's zero-rated sales has not been applied against its output VAT liability. Simply, the input tax has not been applied against the output tax and such application is "proper" as provided for in Section 112 of the 1997 Tax Code, as amended. However, the determination of compliance is purely a factual issue, thus, the CTA has the jurisdiction to determine compliance therewith. As ruled by the CTA in this case, the Petitioner has properly substantiated input VAT amounting to Php 594,510,839.75, which is less than the amount of its output VAT liability of Php 722,903,477.94. Plainly, Petitioner failed to satisfy the 4th requisite, that is, the input tax has not been applied against the output tax because its input VAT is not enough to cover its output VAT liability. As such, no refund or issuance of a Tax Credit Certificate (TCC) should be issued in favor of the Petitioner since it still has an unpaid output VAT liability, and there is no excess input VAT to speak of. Thus, the Court found no reason to reverse and set aside the assailed CTA En Banc's Decision and Resolution.
PROOF OF ACTUAL EXPORTATION OF GOODS SOLD BY A VAT-REGISTERED TAXPAYER TO A BOARD OF INVESTMENT REGISTERED ENTERPRISE IS VITAL FOR TRANSACTION TO BE CONSIDERED AS ZERO-RATED EXPORT SALES
COMMISSIONER OF INTERNAL REVENUE VS. FILMINERA RESOURCES CORPORATION
G.R. NO. 236325, SEPTEMBER 16, 2020, UPLOADED JANUARY 26, 2021
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari seeking to reverse the CTA En Banc’s Decision granting the input VAT refund in favor of the Respondent Filminera Resources Corporation. In ruling, the Court held that the tax treatment of export sales is based on the Cross Border Doctrine and Destination Principle under the Philippines VAT system. Under the Destination Principle, goods and services are taxed only in the country where they are consumed. In this regard, no VAT shall be imposed to form part of the cost of goods destined for consumption outside the territorial border of the taxing authority. Hence, the actual export of goods and services from the Philippines to a foreign country must be free of VAT; while those destined for use or consumption within the Philippines shall be imposed with VAT. In Revenue Memorandum Circular (RMC) No. 74-99, the Bureau clarified that sales made to PEZA-registered enterprises are qualified for zero-rating, pursuant to the Cross-Border Doctrine. The BIR similarly applied the Cross-Border Doctrine to sales made by VAT-registered suppliers to BOI-registered enterprises whose products are 100% exported, under Revenue Memorandum Order (RMO) No. 09-00. To ensure compliance with invoicing requirements, RMO No. 09-00 requires the BOI-registered buyer to furnish its suppliers with a copy of the BOI Certification attesting that it exported 100% of its products. Consequently, the seller would be able to comply with the invoicing requirements. The BOI-registered buyer must, however, export its products. To be sure, the certification contains a proviso that the attestation of 100% exportation by the BOI-registered buyer will be revoked in case of failure to export its entire product. Upon perusal of documents, Respondent failed to prove that its sales are export sales. The Court reiterated that without the Certification from the BOI attesting actual exportation by the buyer of its entire products, the sales made during that period are not considered zero-rated export sales. Consequently, the Respondent is not entitled to a refund or tax credit. Thus, the Petition was GRANTED.
FINAL NOTICE BEFORE SEIZURE IS CONSIDERED A DENIAL OF PROTEST
THE COURT HAS NO JURISDICTION ON PETITIONS BELATEDLY FILED
PHILIPPINE DREAM COMPANY, INC. VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 216044, AUGUST 27, 2020, UPLOADED DECEMBER 7, 2020
Petitioner Philippine Dream Company, Inc. filed a Petition for Review seeking reversal of the CTA’s earlier Decision dismissing the Petition for lack of jurisdiction. The Petitioner argued that the Final Notice Before Seizure is not a final decision of the Respondent Commissioner of Internal Revenue (CIR) on its protest, therefore, cannot be the basis of an appeal to the CTA. On the other hand, the Respondent countered that the Final Notice Before Seizure is already a final decision denying the Petitioner’s protest and, as such, the Petitioner had 30 days to appeal from receipt thereof. In ruling, Section 228 of the 1997 Tax Code, as amended, as cited in the case of Lascona Land Co., Inc. vs. CIR, provides that a taxpayer has two (2) options in case of the inaction of the CIR on the protested assessment. First, the taxpayer has the option to file a Petition for Review with the CTA within 30 days after the expiration of the 180-day period. Second, the taxpayer may await the final decision of the CIR on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision. As ruled in CIR vs. Isabela Cultural Corporation, the Final Notice Before Seizure was considered as CIR’s denial of a protest. As such, Petitioner should have disputed the final decision on the assessment with the Court within 30 days upon its receipt of the Final Notice Before Seizure. In the instant case, the Petition was filed after the lapse of the said 30-day period. As held in the case of RCBC vs. CIR, the 30-day period within which to file an appeal is jurisdictional, and failure to comply therewith would bar the appeal and deprive the CTA of its jurisdiction to entertain and determine the correctness of the assessments. Thus, the Petition was DENIED, and the earlier Decision of the CTA was AFFIRMED.
CONFLICTING CLAIMS OF ALILEM ILOCOS SUR, BAKUN BENGUET & MAKATI CITY OVER RIGHTFUL LBT ON SALES OF LUZON HYDRO
WHERE BOTH PARTIES HAVE A COMMONALITY OF INTERESTS, THE APPEAL OF ONE IS DEEMED TO BE THE VICARIOUS APPEAL OF THE OTHER
THE CITY OF MAKATI VS. THE MUNICIPALITY OF BAKUN & LUZON HYDRO CORPORATION
G.R. NO. 225226, JULY 7, 2020, UPLOADED DECEMBER 4, 2020
Petitioner City of Makati filed a Petition for Review on Certiorari seeking reversal of CTA En Banc’s Decision and Resolution denying its earlier plea for reconsideration. The case stemmed from a special civil action for Interpleader with Prayer for Preliminary Injunction and/or Temporary Restraining Order filed before the Regional Trial Court (RTC) of Makati City. Luzon Hydro Corporation (LHC) sought to compel the City of Makati (Makati), the Municipality of Alilem (Alilem), and the Municipality of Bakun (Bakun) to litigate among themselves their conflicting claims on LHC's liability for LBT under the Republic Act (R.A.) No. 7160. LHC pays Alilem the 30% portion of its LBT allocated for the site of the principal office given that Alilem is specified as the location of LHC's principal office in its Articles of Incorporation. For three (3) years since 2004, the 70% portion of the LBT was equally apportioned among Alilem, Bakun, and Makati, such that each LGU received 23.33%-Alilem and Bakun as power plant sites and Makati as a "project office" site. Via Resolution, Bakun questioned the sharing scheme and invoked the Bureau of Local Government and Finance (BLGF) opinion that only Bakun and Alilem should share in the 70% portion of LHC's LBT because LHC's Makati office was a mere "administrative office." Accordingly, Makati can only collect the mayor's permit fee and other regulatory fees under its existing local tax ordinances. Makati moved for reconsideration of the CTA En Banc's Decision, which was denied for lack of merit. In resolving the case, the CTA considered where LHC's sales, transactions, and operations were undertaken. Having noted that these did not take place at the Makati office, the CTA concluded that it was a mere administrative office. Moreover, even if no sales were recorded or undertaken at the LHC's Makati office, Makati would have been entitled to share with LHC's power plant sites in the 70% portion of the business tax if it could be shown that the Makati office was a project office of LHC akin to a factory. Finally, the Supreme Court agreed that Bakun and Alilem share a commonality of interest in the case. The fact that only Bakun appealed the RTC's decision in the Interpleader case does not preclude Alilem from benefiting from a judgment favoring Bakun. Finding no reversible error in the Decision and Resolution of the CTA En Banc, the Petition was DENIED.
FEES COLLECTED BY RECREATIONAL CLUBS FOR THE MAINTENANCE, PRESERVATION & UPKEEP OF OPERATIONS & FACILITIES ARE NOT SUBJECT TO INCOME TAX & VAT
COMMISSIONER OF INTERNAL REVENUE VS. FEDERATION OF GOLF CLUBS OF THE PHILIPPINES, INC.
G.R. NO. 226449, JULY 28, 2020, UPLOADED DECEMBER 4, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari assailing the earlier Decision of the Regional Trial Court (RTC) of Makati City, which declared Revenue Memorandum Circular (RMC) No. 35-2012 as null and void and granted declaratory relief to Respondent Federation of Golf Clubs of the Philippines, Inc. The Petitioner insisted on the validity of RMC No. 35-2012 as it stemmed from the Petitioner’s exercise of delegated rule-making power. In ruling, following the Principle of Stare Decisis Et Non Quieta Movera, which denies the examination and relitigation of issues where the same had already been decided upon, the Court has applied the ruling in the case of Association of Non-Profit Clubs, Inc. (ANPC) vs. CIR, which resolved that membership fees, assessment dues, and the like are neither income nor part of the gross receipts of recreational clubs; hence, they are not subject to income tax and Value-Added Tax (VAT). As such RMC No. 35-2012 is invalid insofar as it subjected membership fees, assessment fees, and those of similar nature collected by clubs, which are organized and operated exclusively for non-profit purposes, to income tax and VAT. Thus, the Petition was PARTLY GRANTED as the RTC, in declaring the invalidity of RMC No. 35-2012 in its entirety, is improper.
CTA HAS THE AUTHORITY TO TAKE COGNIZANCE OF OTHER MATTERS ARISING FROM THE 1997 TAX CODE
WAIVERS MUST BE IN THE FORM PRESCRIBED BY APPLICABLE REGULATIONS TO BE VALID
TAX MAY BE COLLECTED BY DISTRAINT OR LEVY WITHIN THREE (3) YEARS RECKONED FROM THE ASSESSMENT OF TAX
COMMISSIONER OF INTERNAL REVENUE VS. BANK OF THE PHILIPPINE ISLANDS
G.R. NO. 227049, SEPTEMBER 16, 2020, UPLOADED NOVEMBER 11, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the earlier decisions of the CTA cancelling the Warrant of Distraint and/or Levy issued against the Respondent Bank of the Philippine Islands. The Petitioner argued that the Court has no jurisdiction as the assessment has become final, executory, and unappealable upon the Respondent’s failure to appeal within 30 days from the receipt of the final decision contained in a letter dated February 5, 1992. Likewise, its right to assess has not prescribed as there were valid Waivers executed. In ruling, the Court held that the law expressly vests the CTA the authority to take cognizance of other matters arising from the 1977 Tax Code, which necessarily includes measures on the collection of tax such as Warrants of Distraint and/or Levy. Further, what was questioned by the Respondent in its Petition filed with the CTA is not the assessment, but the warrant issued. On the issue of prescription where the Petitioner argued that there were valid Waivers, the Court did not disturb the findings of the CTA invalidating the Waivers due to the absence of the Petitioner’s signature. Waivers, to be valid, must be in the form as prescribed by applicable tax regulations, which necessarily includes the assent of both the taxpayer and the CIR. Lastly, by the time the warrant was issued in November 2011, the Petitioner was no longer authorized to collect as this right has already prescribed. Under the 1997 Tax Code, tax may be collected by distraint or levy within three (3) years following the assessment of the tax. In the instant case, the assessment was issued in 1991 while the warrant was issued in 2011. Thus, the assailed Decision was AFFIRMED.
COMPROMISE IS GENERALLY FAVORED & THOSE ENTERED INTO IN GOOD FAITH CANNOT BE SET ASIDE
THE OSG IS ENTITLED TO A 5% SUCCESS FEE ON COMPROMISE
KEPCO PHILIPPINES CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 225750-51, JULY 28, 2020, UPLOADED NOVEMBER 9, 2020
Petitioner KEPCO Philippines Corporation filed a Petition for Review with Manifestation and Motion to Render Judgment on the Case based on the parties’ compromise settlement praying to declare the assessment case closed and terminated. As proof, the Petitioner attached a Certificate of Availment issued by the Respondent Commissioner of Internal Revenue (CIR) certifying that the National Evaluation Board (NEB) has already approved the Petitioner’s application for a compromise settlement. On the other hand, the Office of the Solicitor General (OSG) averred that the Compromise Agreement is not valid because it failed to allege and prove any of the grounds for a valid compromise and the Petitioner did not pay in full the compromise amount upon filing of the application. The OSG also manifested that it is entitled to collect a 5% success fee in case of government- approved compromise agreements. Meanwhile, the Respondent asserted that the Petitioner paid 40% of the basic tax assessed when it applied for compromise. In ruling, the Supreme Court discussed first that the power of the CIR to enter a compromise for deficiency taxes is explicit. The general rule is that the authority of the CIR to compromise is purely discretionary, and the Courts cannot interfere with his exercise of discretionary functions, absent grave abuse of discretion. Here, no grave abuse of discretion exists. The Petitioner complied with the procedures prescribed under the BIR rules on the application and approval of the compromise settlement on the ground of doubtful validity. Thus, the compromise settlement between Petitioner and Respondent is valid. Consequently, the Petition was DISMISSED, and the Manifestation was GRANTED. The case was considered CLOSED and TERMINATED. Finally, the OSG, as the counsel for the Respondent, should be entitled to a 5% success fee based on the total deficiency tax liabilities paid by the Petitioner.
ASSESSMENT IS VOID FOR FAILURE TO ACCORD THE TAXPAYER DUE PROCESS IN THEIR ISSUANCE
ASSESSMENT NOTICES ARE VOID FOR FAILURE TO CONTAIN A DEFINITE PERIOD WITHIN WHICH TO PAY THE TAXES DUE
PAN & FAN ARE NOT DULY SERVED UPON & RECEIVED BY THE TAXPAYER SINCE THE CIR FAILED TO IDENTIFY & AUTHENTICATE SIGNATURES ON REGISTRY RECEIPT FOR THE PURPOSE OF ASCERTAINING WHETHER THEY ARE THE TAXPAYER’S AUTHORIZED REPRESENTATIVES
COMMISSIONER OF INTERNAL REVENUE VS. T SHUTTLE SERVICES INC.
G.R. NO. 240729, AUGUST 24, 2020, UPLOADED OCTOBER 13, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition on Certiorari seeking reversal of the CTA En Banc’s earlier Decision cancelling the assessment issued to the Respondent T Shuttle Services, Inc. Petitioner argued the following: (1) no error or illegality can be ascribed to the assessment as due process was observed; (2) the Respondent failed to timely protest against the Formal Assessment Notice (FAN) and to submit supporting documents within 60 days; (3) the Respondent is liable for deficiency tax liability; and (4) the presumption of the propriety and exactness of tax assessment is in his favor. In ruling, the Supreme Court held that the Petitioner failed to prove that the Preliminary Assessment Notice (PAN) and the FAN were properly and duly served upon and received by the Respondent. As noted, the Petitioner failed to identify and authenticate the signatures appearing on registry receipt for the purpose of ascertaining whether such signatures were those of the Respondent's authorized representatives. Hence, it is readily apparent that the Petitioner could not have complied with the requirement of noting the position/designation/relationship of the recipient to the Respondent, the taxpayer. Additionally, the alleged deficiency tax assessment is void for failure to accord the Respondent due process in their issuance. Besides, even granting that the PAN and the FAN were properly served, assessment notices are still void for failure to contain a definite period within which to pay taxes due. Consequently, the Petition was DENIED, and the assailed CTA En Banc’s Decision and Resolution were AFFIRMED.
LGUS ARE PRECLUDED FROM AVAILING OF THE REMEDY OF LEVY AGAINST PROPERTIES OWNED BY GOVERNMENT INSTRUMENTALITIES, WHETHER OR NOT VESTED WITH CORPORATE POWERS
R.A. NO. 7160 EXEMPTS REAL PROPERTY OWNED BY THE REPUBLIC FROM RPT EXCEPT WHEN THE BENEFICIAL USE THEREOF HAS BEEN GRANTED, FOR CONSIDERATION OR OTHERWISE, TO A TAXABLE PERSON
PHILIPPINE HEART CENTER VS. THE LOCAL GOVERNMENT OF QUEZON CITY, CITY MAYOR OF QUEZON CITY, CITY TREASURER OF QUEZON CITY & CITY ASSESSOR OF QUEZON CITY
G.R. NO. 225409, MARCH 11, 2020, UPLOADED OCTOBER 1, 2020
Petitioner Philippine Heart Center filed a Petition for Review on Certiorari assailing the Decision and Resolution of the Respondent Local Government of Quezon City. Petitioner reiterated its claim for exemption from Real Property Tax (RPT) pursuant to the Presidential Decree 673 and Letter of Instruction 1455. Likewise, charitable institutions are exempt from paying RPT on their properties which are actually, directly, and exclusively being used for charitable purposes. In determining whether the Petitioner is a government instrumentality, the Court ruled that the Petitioner bears the essential characteristics of a government instrumentality vested with corporate powers, thus, exempt from RPT. Likewise, the properties of the Petitioner are properties of public dominion devoted to public use and welfare and, therefore, exempt from RPT and levy, without prejudice to the liability of taxable persons to whom the beneficial use of any of these properties has been granted. Thus, the Petition was GRANTED, and RPT assessments and the sale at public auction of the properties, were declared VOID.
LOCATION INDICATED IN THE TCT CANNOT BE RELIED ON IF THE PROPERTY IS IN DISPUTE
RPT IS PAYABLE TO THE LGU WHERE THE PROPERTY IS SITUATED
MUNICIPALITY OF CAINTA, RIZAL VS. SPOUSES ERNESTO E. BRANA & EDNA C. BRANA & CITY OF PASIG
G.R. NO. 199290, FEBRUARY 3, 2020, UPLOADED SEPTEMBER 8, 2020
Petitioner Municipality of Cainta, Rizal filed a Petition for Review on Certiorari assailing the Regional Trial Court’s (RTC) earlier Decision ordering Spouses Brana to pay Real Property Tax (RPT) to the City of Pasig over their properties which are part of the territories disputed in a civil case filed with the RTC of Antipolo. Such a decision was held on the basis that the RTC of Pasig is bound by the locational entries appearing on the Transfer Certificate of Title (TCT) of the subject real properties. The RTC held that unless corrected by a competent authority, the locational entries in the TCTs are controlling. In ruling, the Supreme Court cited the Real Property Tax Code and the Local Government Code which provides that the LGU where the property is situated has the right to collect taxes. Therefore, it is necessary to determine the location of the properties. However, the Supreme Court cannot make any definitive ruling on the location of the properties due to the pending boundary dispute case between the City of Pasig and the Municipality of Cainta, which is still pending in the RTC of Antipolo. The Supreme Court held that the location indicated in the TCTs cannot be relied on because the location of the properties is in dispute. Further, it would be more prudent for Spouses Brana to deposit the succeeding payment of RPT due on the subject properties in escrow for the City of Pasig/Municipality of Cainta to avoid any further animosity between the two (2) LGUs. Thus, the Petition was PARTIALLY GRANTED, and the assailed Decision was REVERSED AND SET ASIDE.
SC UPHELD THE IMPOSITION OF SURCHARGE FOR ONE-DAY LATE FILING
QATAR AIRWAYS COMPANY WITH LIMITED LIABILITY VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 238914, JUNE 8, 2020, UPLOADED SEPTEMBER 2, 2020
Petitioner Qatar Airways Company with Limited Liability filed a Petition for Review on Certiorari seeking reversal of the CTA En Banc’s earlier Decision denying its Petition for Review and holding it liable to the assessment issued by the Respondent Commissioner of Internal Revenue (CIR) in the amount of Php 7,385,209.00. The assessment arose from the Respondent’s imposition of surcharge because of one-day late filing of the Petitioner’s tax return. Petitioner argued that the imposition of surcharge was unjust and excessive as it had no intention to evade the filing and payment of its Quarterly Income Tax. In ruling, the Court held that the surcharge was neither unjust nor excessive. The Court relied on the CTA findings that there was no advice on Electronic Filing and Payment System (eFPS) unavailability, thus, belated filing due to technical problem is not a situation too bleak so as to render the Petitioner completely without recourse. Hence, as correctly observed by the CTA, Petitioner would not incur delay in the filing of its ITR if it filed the same before the deadline and not on the last day of filing. Also, the Petitioner’s averment that it had difficulty in interpreting the correct Gross Philippine Billings computation for income tax purposes is of no moment. The Petitioner could have filed a tentative quarterly income tax returns if it was still unsure with the figures to avoid delay and paying surcharge. Thereafter, it could modify, change, or amend the tentative returns already filed if warranted. Based on the foregoing, the Decision and Resolution of the CTA En Banc were AFFIRMED.
PROVINCIAL GOVERNMENT OF CAVITE IS ENJOINED TO PROCEED WITH DELINQUENCY SALE FOR NON-PAYMENT OF REAL PROPERTY TAX (RPT)
TO IMPOSE RPT ON TAXPAYER, WHO WAS NEITHER THE OWNER NOR THE BENEFICIAL USER OF THE PROPERTY DURING THE DESIGNATED PERIODS, WOULD NOT ONLY BE CONTRARY TO LAW BUT ALSO UNJUST
PROVINCIAL GOVERNMENT OF CAVITE & PROVINCIAL TREASURER OF CAVITE VS. CQM MANAGEMENT, INC.
G.R. NO. 248033, JULY 15, 2020, UPLOADED AUGUST 28, 2020
Petitioners Provincial Government of Cavite and Provincial Treasurer of Cavite filed a Petition for Review on Certiorari assailing the Decision and Resolution of the Court of Appeals (CA) enjoining the Petitioners from conducting a tax delinquency sale of the real properties of the Respondent CQM Management, Inc. in an earlier Decision, the CA ruled that the Respondent was neither the owner nor the entity with the actual or beneficial use or possession of the pieces of real property located inside the Philippine Economic Zone Authority (PEZA) for which RPT was sought by the Petitioners. Also, the properties involved were exempt from real estate taxation pursuant to the Republic Act (R.A.) No. 7916, otherwise known as the PEZA Law. In ruling, the Supreme Court denied the Petition for failure of the Petitioners to show that the CA committed any reversible error. Conducting a tax delinquency sale would effectively make the Respondent liable for the payment of RPT due which is not only contrary to law but is also unjust. Lastly, as correctly ruled by the CA, the collection of some of the unpaid RPT already prescribed. Consequently, the Petition was DENIED.
THE LAW DOES NOT PROHIBIT VERBAL REQUEST FOR ADDITIONAL DOCUMENTS IN SUPPORT OF INPUT VAT REFUND AS LONG AS IT IS DULY MADE BY AUTHORIZED BIR OFFICIALS
ZUELLIG-PHARMA ASIA PACIFIC LTD. PHILS. ROHQ VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 244154, JULY 15, 2020, UPLOADED AUGUST 28, 2020
Petitioner Zuellig-Pharma Asia Pacific Ltd. Phils. ROHQ filed a Petition for Review on Certiorari seeking reversal of the CTA En Banc’s Decision dismissing its claim for a refund or issuance of a Tax Credit Certificate (TCC) representing excess and unutilized input Value-Added Tax (VAT) for the calendar year 2010. The main issue is whether the Petitioner’s judicial claim for refund was filed out of time. In ruling, the Court held that the 120-day period should be reckoned from the time the taxpayer submitted complete documents in support of its administrative claim, without prejudice to the BIR’s request for additional documents, which did not obtain in this case; thus, with the lapse of 120 days, the taxpayer may file its judicial claim for refund within thirty (30) days. A perusal of the document shows that the Petitioner complied with the BIR official’s written and verbal request for additional documents and the verbal requests were well-documented and all confirmed by the BIR; hence, there is no danger of losing track when to reckon 120-day period. The 120-day period should, therefore, be reckoned from the April 29, 2014, Petitioner’s letter stating that it already submitted completed documents in support of its refund claim. In turn, the BIR has 120 days form such time (until August 27, 2014) to act on the administrative claim for refund, however, the BIR failed to act within such period. Hence, the Petitioner had thirty (30) days (until September 26, 2014) to file judicial claim. Thus, its Petition for Review was timely filed on September 25, 2014. Above disquisition only applies to claim for refund made prior to the Revenue Memorandum Circular (RMC) No. 54-2014 (June 12, 2014) wherein the taxpayer is now required to submit complete documents upon its filing of an administrative claim for VAT refund/tax credit, as no other documents shall be accepted thereafter. Consequently, Petition was GRANTED, and earlier Decision was REVERSED and SET ASIDE.
CIR COULD HAVE INFORMED THE TAXPAYER ON ITS FAILURE, IF TAXPAYER INDEED FAILED TO SUBMIT COMPLETE DOCUMENTS IN SUPPORT OF ITS CLAIM FOR REFUND
NON-SUBMISSION OF ALL DOCUMENTS ON REFUND AT THE ADMINISTRATIVE LEVEL IS NOT FATAL TO THE TAXPAYER’S JUDICIAL CLAIM FOR REFUND
COMMISSIONER OF INTERNAL REVENUE VS. CHEVRON HOLDINGS, INC. (FORMERLY CALTEX LIMITED)
G.R. NO. 233301, FEBRUARY 17, 2020, UPLOADED JULY 14, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review on Certiorari seeking reversal of the CTA En Banc’s earlier Decision and Resolution partially granting the claim for a tax refund/credit of the Respondent’s Chevron Holdings, Inc. relative to its unutilized input Value-Added Tax (VAT) attributable to zero-rated sales for the taxable year 2009. Petitioner maintained that the Respondent’s Petition with the CTA Division was prematurely filed since the 120-day period did not even commence to run for failure to submit complete documents to support its claim. On the other hand, the Respondent argued that the Petitioner did not notify it of the need to submit additional supporting documents to substantiate its claim and stressed that absent such notification, the documents submitted are deemed complete and sufficient. In ruling, the Court cited the landmark case of Pilipinas Total Gas, Inc. vs. CIR, which states that there is nothing in Section 112 of the Tax Code, Revenue Regulations (RR) No. 3-88, or Revenue Memorandum Order (RMO) No. 53-98 that requires submission of complete documents enumerated in RMO No. 53-98 for a grant of a refund or credit of input VAT. Hence, submission of all documents is not fatal to its judicial claim for a refund. Moreover, the Petitioner should have taken positive step in apprising the Respondent of the completeness and adequacy of its documents considering their particular relevance in reckoning the 120-day period. Consequently, the Petition was DENIED.
SC INVALIDATED THE BIR RMC NO. 65-2012 WHICH CLARIFIES THE TAXABILITY OF CONDOMINIUM DUES
BUREAU OF INTERNAL REVENUE VS. FIRST E-BANK TOWER CONDOMINIUM CORPORATION, G.R. NO. 215801
FIRST E-BANK TOWER CONDOMINIUM CORPORATION VS. BUREAU OF INTERNAL REVENUE, G.R. NO. 218924
JANUARY 15, 2020, UPLOADED ON JUNE 17, 2020
The Bureau of Internal Revenue (BIR) and First E-Bank Tower Condominium Corporation (First E-Bank) filed a Petition for Review and Special Civil Action for Certiorari, respectively, assailing the dispositions of the Court of Appeals (CA) which dismissed the appeals of the parties for alleged lack of jurisdiction and denied the parties’ respective Motions for Reconsideration (MR). The present action stemmed from the controversies brought about by BIR Revenue Memorandum Circular (RMC) No. 65-2012 clarifying the taxability of condominium dues. In ruling, the Court held that the Petition for Declaratory Relief is not the proper remedy to seek the invalidation of the said RMC. One of the requisites for an action for declaratory relief is that it must be filed before any breach or violation of an obligation. The matter of whether indeed the contributions of unit owners solely intended for the maintenance and upkeep of the common areas of the condominium building are taxable is imbued with public interest. Suffice it to state that taxes, being the lifeblood of the government, occupy a high place in the hierarchy of State priorities; hence, all questions pertaining to their validity must be promptly addressed with the least procedural obstruction. On the issue of jurisdiction, following the Trial Court's denial of their respective MR, the parties appealed to the CA. On June 26, 2014, CA dismissed the appeals, and on November 27, 2014, denied the parties' MR. Based on this sequence of events, the whole time the case was ongoing, the prevailing doctrine had been the British American Tobacco ordaining that the CTA did not have jurisdiction to decide the validity or constitutionality of laws or rules. Consequently, the parties correctly elevated the Trial Court’s resolution to the CA, which should have taken cognizance of, and resolved, the appeals on the merits. On the issue of the validity of RMC, the Court ruled that RMC No. 65-2012 is invalid for ordaining that "gross receipts of condominium corporations including association dues, membership fees, and other assessments/charges are subject to the Value-Added Tax (VAT), Income Tax, and income payments made to it are subject to the applicable withholding taxes." A law will not be construed as imposing a tax unless it does so clearly and expressly. In case of doubt, tax laws must be construed strictly against the government and in favor of the taxpayer. Taxes, as burdens that must be endured by the taxpayer, should not be presumed to go beyond what the law expressly and clearly declares. Thus, the Court resolved to REVERSE and SET ASIDE the assailed Resolutions of the CA; to DENY the Petition for Review and the Special Civil Action for Certiorari; to AFFIRM the Resolution and Order of the RTC, and to DECLARE the invalidity of RMC No. 65-2012.
THE SUPREME COURT MAY REMAND THE CASE TO THE CTA FOR FURTHER TRIAL IF BOTH PARTIES RAISED PROCEDURAL LAPSES
SC WARRANTS RELAXATION OF PROCEDURAL RULES IF STRICT ADHERENCE THERETO WOULD ONLY FRUSTRATE RATHER THAN PROMOTE JUSTICE
KABALIKAT PARA SA MAUNLAD NA BUHAY, INC. VS. COMMISSIONER OF INTERNAL REVENUE
COMMISSIONER OF INTERNAL REVENUE VS. KABALIKAT PARA SA MAUNLAD NA BUHAY, INC.
GR NOS. 217530-31, 217536-37, 217802, FEBRUARY 10, 2020, UPLOADED JUNE 17, 2020
Kabalikat Para Sa Maunlad Na Buhay, Inc., a non-profit civic organization, and the Commissioner of Internal Revenue (CIR) filed a Consolidated Petitions assailing the CTA En Banc’s Resolution which relied on Section 7, Rule 43 of the Rules of Court and dismissed both Petitions outright for being procedurally defective. In ruling, the Court held that it is not novel for courts to brush aside technicalities in the interest of substantial justice. The Court recounted the long jurisprudence supporting consistently the relaxation of procedural rules if strict adherence thereto would only frustrate rather than promote justice. To warrant relaxation of the rules, the erring party must: (a) show reasonable cause justifying its noncompliance with the rules; (b) convince the Court that the outright dismissal of the Petition would defeat the administration of substantive justice; and (c) offer proof of at least a reasonable attempt at compliance therewith. The desired leniency cannot be accorded absent valid and compelling reasons for such a procedural lapse. The Court found that the CTA En Banc erred when it refused to consider sufficient rectification of the parties’ respective mistakes. The circumstances in the present case warrant the relaxation of procedural rules. Thus, the Consolidated Petitions were GRANTED. The case was REMANDED to the CTA En Banc for resolution on the merits of the case.
LBT ASSESSMENT ON DIVIDENDS OF HOLDING COMPANY THAT IS NOT A NON-BANK FINANCIAL INTERMEDIARY IS VOID
NO IMPOSITION OF LBT ON DIVIDENDS EARNED FROM GOVERNMENT ASSETS
CITY OF DAVAO & MR. ERWIN ALPARAQUE, IN HIS OFFICIAL CAPACITY AS ACTING TREASURER OF THE CITY OF DAVAO VS. AP HOLDINGS, INC.
G.R. NO. 245887, JANUARY 22, 2020, UPLOADED JUNE 15, 2020
Petitioner City of Davao, as represented by its City Treasurer Erwin Alparaque, filed a Petition for Review on Certiorari seeking reversal of the Court of Tax Appeals (CTA)’s earlier Decision granting a refund of erroneously paid Local Business Tax (LBT) on dividends earned by the Respondent AP Holdings, Inc. from San Miguel Corporation (SMC) preferred shares and interests from money market placements. The Petitioner argued that the refund should not be granted and asserted that the Respondent is a non-bank financial intermediary or an investment company since it owned a substantial number of shares and received millions of peso dividends from its investments, thus, its earnings should be subject to LBT. Likewise, it has no other business except its stock investments and money market placements with SMC. On the other hand, the Respondent countered that it is not a bank or non-bank financial intermediary considering that it is not engaged in lending money, investing, reinvesting, or trading securities on a regular and recurring basis. Also, it is a holding company and expressly prohibited to act as a financial intermediary under its Articles of Incorporation. In ruling, the Supreme Court held that the Respondent cannot be considered a non-bank financial intermediary since its investment and placement of funds are not done in a regular or recurring manner for the purpose of earning profit. Rather, its management of dividends from the SMC shares is only in furtherance of its purpose as a CIIF holding company for the benefit of the Republic. Under Section 133(o) of the Local Government Code, LGUs cannot tax the National Government. The Respondent’s holding of the entire CIIF block of SMC shares are public assets owned by the Republic of the Philippines. Consequently, dividends and any income from these shares are exempt from LBT. Thus, the Petition was DENIED.
SC AFFIRMED THE EARLIER DECISION OF THE CTA EN BANC ON THE ENTITLEMENT OF THE BCDA TO REFUND CWT ON THE SALE OF BGC LAND
BETWEEN A GENERAL LAW & A SPECIAL LAW, THE LATTER PREVAILS
SPECIAL LAW IS DEEMED AN EXCEPTION TO THE GENERAL LAW
COMMISSIONER OF INTERNAL REVENUE VS. BASES CONVERSION AND DEVELOPMENT AUTHORITY
G.R. NO. 217898, JANUARY 15, 2020, UPLOADED JUNE 15, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review assailing the dispositions of the CTA En Banc which granted the claim for a tax refund of the Respondent Bases Conversion and Development Authority (BCDA) in relation to the sale of parcels of land in Bonifacio Global City to Net Group. The issue stemmed from the withholding made by Net Group on payments to the Respondent in the absence of a Certificate of Tax Exemption. Aggrieved, the Petitioner filed a refund claim but was denied by the Petitioner claiming that the Respondent is not exempt from the Creditable Withholding Tax (CWT) on the sale of its Global City properties, collectively referred to as the "Expanded Big Delta Lots." Also, the Respondent's failure to comply with the requirements for tax refund negates its entitlement to their claim of refund. The CTA En Banc ruled that while Respondent is, indeed, not among the exempt corporations listed under Section 27 (C) of the 1997 Tax Code, as amended, nevertheless, insofar as the sale of the "Expanded Big Delta Lots" is concerned, Republic Act (R.A.) No. 7227, or the BCDA Law, as amended by R.A. No. 7917, specifically exempts the Respondent from taxes. While the 1997 Tax Code and its amending statutes were only promulgated after Respondent was established, R.A. No. 7227, as amended is a special law. The 1997 Tax Code, being a general law, is not deemed to have amended or superseded a special law in the absence of an express repeal of 1997 Tax Code itself. On appeal, the Supreme Court agreed with the lower court, adding that between a general law and a special law, the latter prevails. A special law reveals the legislative intent more clearly than a general law does. Verily, the special law should be deemed an exception to the general law. Thus, the Petition was DENIED, and the earlier Decision of CTA En Banc was AFFIRMED.
DISMISSAL BY CTA OF THE CRIMINAL CASES ON THE GROUND OF PRESCRIPTION RENDERED THE ISSUE ON PROPRIETY OF THE DECISION OF CA AS MOOT & ACADEMIC
IMELDA SZE, SZE KOU FOR TERESITA NG VS. COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 210238, JANUARY 6, 2020, UPLOADED JUNE 15, 2020
Petitioners Imelda Sze, Sze Kou For, and Teresita Ng, officers of Chiat Sing Cardboard Corporation filed a Petition for Review on Certiorari seeking a review of Court of Appeals decision finding probable cause to indict them for the criminal case of tax evasion. Petitioners previously availed the Voluntary Assessment Program (VAP), granting taxpayers the privilege of last priority in the audit of all internal revenue taxes for the taxable year 2000 and all prior years, under certain conditions. Since the Petitioners refused to present their accounting records, the Respondent Commissioner of Internal Revenue (CIR) subsequently investigated and discovered that the Petitioners deliberately and willfully under-declared their tax bases to evade payment of correct internal revenue liabilities for the taxable years 1999 and 2000. Consequently, they were charged with tax evasion. The Complaint and Motion for Reconsideration (MR) filed by the Respondent were denied by the State Prosecutor and the Department of Justice (DOJ). Aggrieved, the Respondent elevated the case to the CA which gave due course to the Petition after finding records that show sufficient evidence of probable cause to indict the Petitioners for tax evasion and ordered DOJ to file the corresponding information with the Court of Tax Appeals (CTA). In ruling, the Supreme Court (SC) held that the dismissal by the CTA of the criminal cases on the ground of prescription rendered the issue on the propriety of the CA's decision in finding probable cause as moot and academic. Notably, prescription for violations of the 1997 Tax Code, as provided in Section 281 of the 1997 Tax Code, as amended, shall prescribe after five (5) years upon discovery. As determined by the CTA, since the filing of the original information of the case by the BIR before the court exceeded the 5-year prescriptive period, the right of action, therefore, had prescribed. The SC found it appropriate to abstain from passing upon the merits of this Petition where legal relief is neither needed nor called for. Thus, the Petition was DISMISSED.
ADMINISTRATIVE CLAIM FOR A REFUND OF ERRONEOUSLY PAID VAT SURCHARGE IS NOT NECESSARY BEFORE CTA MAY TAKE COGNIZANCE OF AMENDED PETITION FOR REVIEW
PENALTIES IMPOSED MAY BE ABATED ON THE GROUND THAT THE IMPOSITION THEREOF IS UNJUST OR EXCESSIVE
COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE PLAZA HOLDINGS INC.
G.R. NO. 247662, DECEMBER 10, 2019, UPLOADED JANUARY 22, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the Court of Tax Appeals (CTA) En Banc’s earlier Decision granting a refund to the Respondent Philippine Plaza Holdings Inc. relative to its erroneously paid Value-Added Tax (VAT) surcharge. The Petitioner argued that the CTA has no jurisdiction to take cognizance of the Amended Petition because the Respondent failed to exhaust administrative remedies. Moreover, the Respondent also failed to support its request for abatement. In ruling, the Court allowed the refund case to prosper even without a prior administrative claim. Filing of administrative claim for a refund would only delay the disposition of the case for the reason that it will be filed in the very same office that denied the Respondent of its application for abatement. In addition, the Respondent sufficiently proved that the late filing and payment of VAT returns is due to a system error in the Electronic Filing and Payment System (eFPS) facility which is beyond its control. Thus, the Court AFFIRMED the earlier Decision of the Court En Banc allowing a refund of VAT surcharge.
DIVIDEND PAYMENT IS DIFFERENT FROM RECEIPT OF PAYMENT OF STOCKHOLDERS ON LOANS
REQUISITES FOR PAYMENT TO BE CONSIDERED DIVIDEND ELABORATED
COMMISSIONER OF INTERNAL REVENUE VS. UNITED DISTRIBUTION MANAGEMENT, INC.
G.R. NO. 209725, DECEMBER 4, 2019, UPLOADED JANUARY 10, 2020
Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking the reversal of the Court of Tax Appeals (CTA) En Banc’s earlier Decision cancelling the assessment issued to the Respondent United Distribution Management, Inc. The Court earlier found that the final tax assessment lacks factual basis since the Respondent did not declare any dividend which can be subject to final tax. Records showed that the payments made to stockholders are not dividends but merely advances made to the latter as supported by adequate documentary evidence. In ruling, the Court held that assessment must be based on facts, citing the case of Collector of Internal Revenue vs. Benipayo. The presumption of correctness of an assessment cannot be made to rest on another presumption. Likewise, the following are essential requisites for a payment to be considered as dividend: (1) subject corporation must have earnings or profits; (2) corporate earnings or profits must be set aside, declared and ordered by the directors to be paid to the stockholders, on-demand or at a fixed time; and (3) distribution or payments of corporate earnings or profits in money or other property. Considering that all requisites are absent, the final tax assessment lacks factual and legal basis. Thus, the Court DENIED the Petition and AFFIRMED the earlier Decision of the Court En Banc.