TAGANITO MINING vs. CIR (Tax 2)

G.R. No. 198076               November 19, 2014

TAGANITO MINING CORPORATION, Petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS:

On December 30, 2003, Taganito filed with respondent Commissioner of Internal Revenue (CIR), through its Excise Taxpayers’ Assistance Division under the Large Taxpayers Division, an application for refund of its excess input VAT paid on its domestic purchases of taxable goods and services and importation of goods amounting to 4,447,651.32 for the period January 1, 2002 to December 3, 2002.

On February 19, 2004, 51 days after the filing ofits application with the CIR, Taganito filed with the CTA a petition for review. At that time, the CIR had not yet finally acted upon Taganito’s application for refund. The CIR answered that the claim for refund was still subject to investigation.

On October 27, 2009, the CTA Division partially granted Taganito’s petition and ordered the CIR to refund the amount of ₱3,636,854.07.

The CIR moved for reconsideration, arguing that the petition for review was prematurely filed because Taganito did not wait for the lapse of 120 days mandated by Section 112(D) of the National Internal Revenue Code of 1997 (NIRC). Therefore, the CTA was bereft of jurisdiction to rule on the petition. The said motion was denied.

The CIR then filed a petition for review before the CTA En Banc, claiming that Taganito failed to exhaust administrative remedies under Section 112(D) of the NIRC before resorting to judicial appeal, and that it failed to present concreteand convincing proof thatthe CIR did not have enough reason to deny its administrative claim for refund.

In the assailed Decision, dated April 18, 2011, the CTA En Banc granted the petition, reversed and set aside the decision and the resolution of the CTA Division, and ordered the case dismissed for being prematurely filed.

In the assailed Resolution, dated August 9, 2011, the CTA En Banc denied Taganito’s motion for reconsideration.

Hence, the present petition.

ISSUE:

The sole issue at hand is whether or not Taganito’s judicial claim for refund/credit was prematurely filed.

RULING:

No, accordingly, the general rule is that the 120+30 day period is mandatory and jurisdictional from the effectivity of the 1997 NIRC on January 1, 1998, up to the present. As an exception, judicial claims filed from December 10, 2003 to October 6, 2010 need not wait for the exhaustion of the 120-day period.12

From the foregoing, it is clear that the two-year period under Section 229 does not apply to claims for a refund or tax credit for unuti I ized creditable input VAT because it is not considered "excessively" collected. Instead, San Roque settled that Section l 12 applies to claims for a refund or tax credit for unutilized creditable input VAT, thereby making the 120+30 day period prescribed therein mandatory and jurisdictional in nature.

As an exception to the mandatory and jurisdictional nature of the 120+ 30 day period, judicial claims filed between December 10, 2003 or from the issuance of BIR Ruling No. DA-489-03, up to October 6, 2010 or the reversal of the ruling in Aichi, need not wait for the lapse of the 120+ 30 day period in consonance with the principle of equitable estoppel.

In the present case, Taganito filed its judicial claim with the CTA on February 19, 2004, clearly within the period of exception of December I 0, 2003 to October 6, 20 I 0. Its judicial claim was, therefore, not prematurely filed and should not have been dismissed by the CT A En Banc. WHEREFORE, the petition is GRANTED. 

MICROSOFT PHILS., INC. vs. CIR (Tax 2)

G.R. No. 180173               April 6, 2011

MICROSOFT PHILIPPINES, INC., Petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS:

On 27 December 2002, Microsoft filed an administrative claim for tax credit of VAT input taxes in the amount of ₱11,449,814.99 with the BIR. The administrative claim for tax credit was filed within two years from the close of the taxable quarters when the zero-rated sales were made.

On 23 April 2003, due to the BIR's inaction, Microsoft filed a petition for review with the CTA. Microsoft claimed to be entitled to a refund of unutilized input VAT attributable to its zero-rated sales and prayed that judgment be rendered directing the claim for tax credit or refund of VAT input taxes for taxable year 2001.

On 16 June 2003, respondent Commissioner of Internal Revenue (CIR) filed his answer and prayed for the dismissal of the petition for review.

In a Decision dated 31 August 2006, the CTA Second Division denied the claim for tax credit of VAT input taxes. The CTA explained that Microsoft failed to comply with the invoicing requirements of Sections 113 and 237 of the NIRC as well as Section 4.108-1 of Revenue Regulations No. 7-957 (RR 7-95). The CTA stated that Microsoft's official receipts do not bear the imprinted word "zero-rated" on its face, thus, the official receipts cannot be considered as valid evidence to prove zero-rated sales for VAT purposes.

Microsoft filed a motion for reconsideration which was denied by the CTA Second Division in a Resolution dated 8 January 2007.

Microsoft then filed a petition for review with the CTA En Banc. In a Decision dated 24 October 2007, the CTA En Banc denied the petition for review and affirmed in toto the Decision dated 31 August 2006 and Resolution dated 8 January 2007 of the CTA Second Division. The CTA En Banc found no new matters that have not been considered and passed upon by the CTA Second Division and stated that the petition had only been a mere rehash of the arguments earlier raised.

Hence, this petition.

ISSUE:

The main issue is whether Microsoft is entitled to a claim for a tax credit or refund of VAT input taxes on domestic purchases of goods or services attributable to zero-rated sales for the year 2001 even if the word "zero-rated" is not imprinted on Microsoft's official receipts.

RULING:

Sec. 4.108-1. Invoicing Requirements. – All VAT-registered persons shall, for every sale or lease of goods or properties or services, issue duly registered receipts or sales or commercial invoices which must show:

1. the name, TIN and address of seller;

2. date of transaction;

3. quantity, unit cost and description of merchandise or nature of service;

4. the name, TIN, business style, if any, and address of the VAT-registered purchaser, customer or client;

5. the word "zero-rated" imprinted on the invoice covering zero-rated sales; and

6. the invoice value or consideration.

x x x

Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoices or receipts and this shall be considered as a "VAT invoice." All purchases covered by invoices other than a "VAT invoice" shall not give rise to any input tax. (Emphasis supplied)

The invoicing requirements for a VAT-registered taxpayer as provided in the NIRC and revenue regulations are clear. A VAT-registered taxpayer is required to comply with all the VAT invoicing requirements to be able to file a claim for input taxes on domestic purchases for goods or services attributable to zero-rated sales. A "VAT invoice" is an invoice that meets the requirements of Section 4.108-1 of RR 7-95. Contrary to Microsoft's claim, RR 7-95 expressly states that "[A]ll purchases covered by invoices other than a VAT invoice shall not give rise to any input tax." Microsoft's invoice, lacking the word "zero-rated," is not a "VAT invoice," and thus cannot give rise to any input tax.

We have ruled in several cases11 that the printing of the word "zero-rated" is required to be placed on VAT invoices or receipts covering zero-rated sales in order to be entitled to claim for tax credit or refund. In Panasonic v. Commissioner of Internal Revenue,12 we held that the appearance of the word "zero-rated" on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT is actually paid. Absent such word, the government may be refunding taxes it did not collect.

CIR vs. MAGSAYSAY LINES, INC. (Tax 2)

G.R. No. 146984             July 28, 2006

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

MAGSAYSAY LINES, INC., BALIWAG NAVIGATION, INC., FIM LIMITED OF THE MARDEN GROUP (HK) and NATIONAL DEVELOPMENT COMPANY, respondents.

FACTS:
NDC decided to sell to private enterprise all of its shares in its wholly-owned subsidiary the National Marine Corporation (NMC). The NDC decided to sell in one lot its NMC shares and five (5) of its ships. Private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy the shares and the vessels thus they executed a contract of sale.

Private respondents through counsel received VAT Ruling No. 568-88 dated 14 December 1988 from the BIR, holding that the sale of the vessels was subject to the 10% VAT. The ruling cited the fact that NDC was a VAT-registered enterprise, and thus its "transactions incident to its normal VAT registered activity of leasing out personal property including sale of its own assets that are movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT]."

ISSUE:

Whether the sale by the National Development Company (NDC) of five (5) of its vessels to the private respondents is subject to value-added tax (VAT) under the National Internal Revenue Code of 1986 (Tax Code) then prevailing at the time of the sale.

RULING:
No, CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary course of NDC’s business, and was thus not subject to VAT, which under Section 99 of the Tax Code, was applied only to sales in the course of trade or business.

"doing business" conveys the idea of business being done, not from time to time, but all the time.

"Course of business" is what is usually done.

What is clear therefore, "course of business" or "doing business" connotes regularity of activity.  In the instant case, the sale was an isolated transaction. 

CIVIL COMPLAINT FOR EJECTMENT

REPUBLIC OF THE PHILIPPINES

NATIONAL CAPITAL JUDICIAL REGION

METROPOLITAN TRIAL COURT

CITY OF PARAÑAQUE

BRANCH 87

YUGENE IBARRA       Civil Case No. 2016-117

Plaintiff,                             For : EJECTMENT

-versus-

ANNALISA MONTEZA

Defendant,

x----------------------------------------×

COMPLAINT

  Plaintiff, YUGENE IBARRA by, counsel and unto this Honorable Court, most respectfully states that:

1. Plaintiff is formerly a Filipino and subsequently acquired a British citizenship, of legal age, resided and worked in United Kingdom and now resident of Parañaque City, Philippines.

2. Defendant ANNALISA MONTEZA is a Filipino, of legal age, formerly married to Plaintiff's brother Gregorio who is now deceased. ANNALISA is a resident of No. 25 Marigold Street, San Antonio de Padua Subdivision Valley 1, Parañaque City, Philippines;

3. That the Plaintiff is the owner of a parcel of land No. 25 Marigold Street, San Antonio de Padua Subdivision Valley 1, Parañaque City, Philippines covered by TCT No. 002- 15634 and Real Property Tax Receipt No. 076-89543. A copy of which is attached hereto and made an integral part hereof as "ANNEX A";

4. Plaintiff allowed her only brother Gregorio and his family to live in the said property;

5. Unfortunately, on May 16, 2015, Gregorio died leaving his spouse Annalisa and their 2 (two) minor children orphaned,  out of sympathy, she allowed the continued stay of his brother’s family in her property.

6. On December 20, 2019, the Plaintiff wrote a demand letter to her sister-in-law conveying her intent to repossess the house and lot as she is going to use it for her permanent sojourn in the Philippines. A copy of which is attached hereto and made an integral part hereof as "ANNEX B";

7. Meanwhile, despite the demand letter, Annalisa who has by this time remarried and has a child with her new husband, remained unperturbed;

8. On January 25, 2020, the lawyer of the Plaintiff sent Annalisa a NOTICE TO VACATE THE PREMISES immediately, but the latter refused to heed to said demand. A copy of which is attached hereto and made an integral part hereof as "ANNEX C";

9. Notwithstanding receipt of the demand letter, defendant still refused to vacate the subject property and continues to unlawfully occupy the same to the prejudice of Plaintiff;

10. The Plaintiff thereby is deprived of her rightfull possession and gainful use of the property;

PRAYER

   WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that after due hearing judgement be rendered:

1. Directing Defendant to vacate the premises and to surrender its possession to Plaintiff.

2. Other measures of relief and remedies that are just and equittable under the circumstances are likewise prayed for.

Parañaque City

14 February 2020.

EDWIN C. PUNO

IBP No.1004691/01-08-9/PPLM

PTR No. 0513159/01-06-19/Parañaque

Roll No. 56918

MCLE Compliance No.V-0010494/09-16-15

Counsel for Plaintiff

Blk 3 Lot 3 San Benedicto Street

Metrocor- B Homes, Better Living Subdivision Parañaque City

Tel No: 905-2924

attyedwin.puno@gmail.com

VERIFICATION AND CERTIFICATION

  I, YUGENE IBARRA,  Filipino, of legal age, married and a  resident of Parañaque City Philippines, after having duly sworn to in accordance with law, do hereby depose and state:

1. I am the Plaintiff in this case;

2. I have caused the preparation and filing of the foregoing Complaint, the contents of which are the facts stated therein are true and correct of my own personal knowledge and based on genuine and authentic records of the case;

3. I further certify that I have not commenced any other action or proceedings involving the same issues in the Supreme Court, The Court of Appeals, or any other court, tribunal or quasi-judicial agency, and to the best of our knowledge, no such action is pending before the Supreme Court, the Court of Appeals, or any other court, tribunal or quasi-judicial agency;

4. Should it come to my knowledge that a similar action or proceeding has been filed or is pending before Supreme Court, the Court of Appeals, or any other court, tribunal or quasi-judicial agency, we hereby undertake to notify the court ot tribunal taking cognizance of the above-captioned case as such fact within give (5) days from knowledge thereof;

5. I am executing this sworn statement in compliance with Sections 5 and 5 Rule 7 of the Revised Rules of Court;

  IN WITNESS WHEREOF, I have signed this document hereunto this 14 day of February, 2020 at Parañaque City.

YUGENE IBARRA

Affiant

  SUBSCRIBED AND SWORN to before me this 14 day of February, 2020 at Parañaque City, Philippines. Affiant Yugene Ibarra exhibiting to me her Driver’s License IDENTIFICATION CARD with No.444203 issued by Land Transportation Office, showing affiant's name, address, pictures and signatures as competent proof of her identity.

Doc. No. 62;                                           Notary Public

Page No. 76; 

Book No. 84;

Series of 2020.

COMPLAINT AFFIDAVIT FOR VIOLATION OF BP 22

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF JUSTICE

OFFICE OF THE CITY PROSECUTOR

PARAÑAQUE CITY

KARLA PETRINA ASSISTIO

Complainant,

I.S. NO. XV-12-INV-15-F-01378

For : VIOLATION OF B.P. 22

(2 COUNTS)

-versus-

ANNA ROSARIO ROJAS

Respondent,
x------------------------------------------------x

COMPLAINT-AFFIDAVIT

   I, KARLA PETRINA ASSISTIO, a Filipino, of legal age, with office address at 23 Kanlaon St, Cor. M. Cuenco, Bgy. Sto. Domingo Quezon City, after having been duly sworn in accordance with law, do hereby depose and state that:

1. I am the owner of a Laundromat “Summa con Laundry” in Banawe Quezon City. It is a flourishing business;

2. Anna Rosario Rojas, is my friend, Flipino, of legal age, owner of a single proprietorship business funeral parlor named “Libing Things” with a business address at 1125 J. Vargas Avenue, Scout Fuentebella St. Tomas Morato, Quezon City;

3. Because Anna's funeral parlor is not doing so well, on August 23,2019, Anna sought my help by borrowing money in the amount of Php 500,000 to augment her losses;

4. Anna and I executed a loan agreement whereby Anna would pay me back the total sum after 6 months. For this purpose, Anna tendered a post-dated check to me, drawn from BDO Banawe Branch  with Check No. 1103452789, in the amount of ,PHP 500,000.00 dated February 23. 2020;

5. Photocopy of the said check is hereto attached and marked as "Annex A";

6. Consequently, when I presented the check to the bank on its due date, the same was dishonored due to (DRAWN AGAINST INSUFFICIENCY OF FUNDS) “DAIF”;

7. I immediately called Anna to inform her that the check bounced. Anna in turn committed to issue another check which she assured would be a good check;

8. On February 26, 2020. Anna issued to me as payment another check, drawn from BDO Banawe Branch with Check No. 1145237894 and worth Php 500,000.00;

9. Photocopy of the said check is hereto attached and marked as "Annex B";

10. However, when I went to the bank to encash the check the same was dishonored this time due to “ACCOUNT CLOSED”;

11. Furious and disappointed with her for toying with my trust, I sent a demand letter dated March 1, 2020 to Anna notifying her of the bounced checks she issued;

12. Photocopy of the said demand letter is hereto attached and marked as "Annex C";

13 Anna replied and said that she would pay her obligation in cash but since then, she intentionally and maliciously evaded her obligations;

14. As a result, the Complainant was compelled to engage the services og the undersigned counsel at an agreed amount equivalent to 25% as Attorney's Fees;

15. I am executing this affidavit to attest to the truth of the foregoing facts and for the purpose of charging ANNA ROSARIO ROJAS for violation of the provisions of BATAS PAMBANSA BLG. 22 for 2 counts which includes the original and replacement checks issued by Anna.

  IN WITNESS WHEREOF, I have hereto set my hand this 15th of March 2020 in Parañaque City, Philippines.

KARLA PETRINA ASSISTIO

Affiant

  SUBSCRIBED AND SWORN to before me this 15th of March 2016 at Parañaque City Philippines and I FURTHER CERTIFY that I have personally examined the affiant and I am satisfied that she has read and personally understood the contents of her foregoing "Complaint-Affidavit".

RAPHAEL S. SUYO

Asst. City Prosecutor

Roll No. 56918

IBP No.1004691/01-08-9/PPLM

PTR No. 0513159/01-06-19/Parañaque

MCLE Compliance No.V-0010494/09-16-15

Issued on April 20, 2005

COMPLAINT AFDIDAVIT FOR MURDER

REPUBLIC OF THE PHILIPPINES

DEPARTMENT OF JUSTICE

OFFICE OF THE CITY PROSECUTOR

MANILA

THE REPUBLIC OF THE PHILIPPINES

Complainant,

-versus-                                                                                                  Case No. 143143

                                            For: Murder

CAIN A. ABAD

Defendant,

x-----------------------------------x

COMPLAINT AFFIDAVIT

I, WILMA C. MANLAPAZ, 50 years old, widow, a Filipino citizen and a resident of Block  3 Lot 12 Iriga Street South City Homes Phase 1 Brgy. Sto. Tomas Sampaloc Manila, after having been duly sworn to in accordance with law, hereby deposes and says THAT:

1. I am the wife of the deceased ROBERTO A. MANLAPAZ, 62 years old, Filipino citizen and a  resident of Block 3, Lot 12 Iriga Street South City Homes Phase 1 Brgy. Sto. Tomas Sampaloc Manila.

2. I am instituting this crimimal complaint against MR. CAIN A. ABAD, 32 years old, married, a Filipino citizen and a resident of Blk 8 Lot 15 Jae Street Brgy. Sinalhan Sampaloc Manila for MURDER as defined and penalized under Art. 248 of the Revised Penal Code.

Art. 248. Murder. — Any person who, not falling within the provisions of Article 246 shall kill another, shall be guilty of murder and shall be punished by reclusion temporal in its maximum period to death, if committed with any of the following attendant circumstances:

1. With treachery, taking advantage of superior strength, with the aid of armed men, or employing means to weaken the defense or of means or persons to insure or afford impunity.

2. In consideration of a price, reward, or promise.

3. By means of inundation, fire, poison, explosion, shipwreck, stranding of a vessel, derailment or assault upon a street car or locomotive, fall of an airship, by means of motor vehicles, or with the use of any other means involving great waste and ruin.

4. On occasion of any of the calamities enumerated in the preceding paragraph, or of an earthquake, eruption of a volcano, destructive cyclone, epidemic or other public calamity.

5. With evident premeditation.

6. With cruelty, by deliberately and inhumanly augmenting the suffering of the victim, or outraging or scoffing at his person or corpse.

3. The criminal offense complained of was committed as follows:

a. That in the evening of May 20, 2020, a benefit dance was held in the dance hall at the public plaza in Bagong Sirang, Barangay Sto. Tomas Sampaloc Manila. The dance was managed by my husband  who was president of the affair.

b. While the benefit dance was going on, Ely Banculo, Dominador Laurio, and Cain Abad drank beer "grande" at a corner store near the plaza. When the three decided to retire, they offered a last drink to my husband, who accepted it.

c. Shortly after eleven o'clock in the evening, they asked permission to leave. After the three had departed, my husband went to the comfort room about ten meters away. I had decided to go after him and waited a few steps away from the comfort room.

d. When my husband went outside the comfort room, I saw Cain Abad suddenly jabbed my husband on the right jaw. The blow caused my husband to fall on the ground. Cain plunged his hand knuckle with a protruding blade three times into my husband's body as he lay on the ground, wounding him on the right chest, on the back, and in the right armpit. After rendering my husband prostrate, Cain fled.

e. Crying for help, I asked and begged to bring my husband to the nearest hospital which was responded to with haste by Rodney Cataran and other people. The sworn statement of Rodney Cataran is hereunto attached and made an integral part of this complaint as Annex “A”.

f. Upon arrival at the  Manila Hospital, Dr. Pia Gomez, immediately attended my husband and after a thorough examination, declared him dead on arrival. The medico-legal autopsy report, the NSO death certificate and a certification from the City Civil Registrar of my husband is hereunto attached and made an integral part of the complaint as Annex “B”, “ C”, and “D, respectively.

g. After attending my husband to the Hospital, I reported the said incident to the nearest police station. A true and faithful machine copy of the police report is hereby attached here as “Annex E”.

4. By reason of the foregoing, I sufferred sleepless nights and incurred expenses for funeral which the defendant should compensate in a form of damages including but not limited to moral, exemplary damages and the exact amount which i will prove during trial. 

5. Other measures of relief and remedies that are just and equittable under the circumstances are likewise prayed for.

6. I am therefore executing this Complaint-Affidavit freely and voluntarily in support of my intent to file a case of murder and/or the appropriate case against Mr. Cain A. Abad.

IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of May, 2020 at Manila  Philippines.

WILMA C. MANLAPAZ

  Complainant/Affiant

SUBSCRIBED AND SWORN to before me this 23rd of May 2020 at Manila Philippines and I FURTHER CERTIFY that I have personally examined the affiant and I am satisfied that she has read and personally understood the contents of her foregoing "Complaint-Affidavit"

RAPHAEL S. SUYO

Prosecutor

Roll No. 56918

IBP No. 1004691/ 01-08-9 / PPLM

PTR No. 0513159 / 01-06-19 / Manila

MCLE Compliance No. V-0010494 / 09-16-15

Issue on April 20, 2005

SVI INFORMATION vs. CIR (Tax 2)

SVI INFORMATION SERVICES CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

CTA Case No. 8496

FACTS:

Petitioner  received  Letter of Authority  (LOA) No. 000087833 dated September  11, 2008  from  the BIR, authorizing  the examination of petitioner's  books of accounts and other  financial  records  for all internal revenue taxes for taxable year 2007. On October  20,  2009,  petitioner received  a Post Reporting  Notice from BIR Revenue District Office (ROO) No. 43A. Said notice,  pursuant to the LOA, informed petitioner of the tentative findings for deficiency income tax, VAT, EWT, and withholding  tax on compensation liabilities for taxable year  2007 and directed petitioner  to  attend an informal conference  or  to submit documentary evidence to refute said findings.

On October 28,  2009,  petitioner replied  to the Post Reporting  Notice through  a  letter dated  October 26, 2009  addressed  to Mr. Wilfreda M. Pantino, the Revenue  Officer of BIR ROO No. 43A. Thereafter, on November  11,  2010,  petitioner  received  from respondent Assessment  Notices (FAN) and a Formal  Letter of Demand with attached  Details of Discrepancies  dated October  18,  2010.

Petitioner protested  the FAN through  a letter  dated  December  10, 2010, addressed  to Ms. Lorna Tobias,  Chief of the Assessment  Division of BIR RDO No. 43A. Subsequently,  petitioner  received  a Preliminary  Collection  Letter8 on April 26, 2012,  finding  petitioner  liable  for deficiency  taxes in the  total amount of P14,513,761.44, inclusive of interest. On May 24, 2012,  petitioner  received  a Final Notice  Before  Seizure (Final  Notice) dated May 10,  2012  from BIR RDO No. 43A, reiterating the demand  for  payment of the alleged  deficiency  income  tax, VAT and EWT for  taxable  year  2007. Hence, petitioner  filed  the  instant  Petition  for Review on May 25,  2012.

ISSUE:

Whether or not the FAN and the PCL are  null and void since  petitioner never received  a Preliminary Assessment Notice from  respondent.

RULING:
Yes, the law and the regulations are clear on the requirements for procedural due process on the issuance of assessment for deficiency taxes. Full and complete compliance with these requirements is mandatory to ensure the validity of the assessment. Consequently, a void assessment bears no valid fruit. The issuance of PAN is an integral part of procedural due process. The PAN lays down the factual and legal basis for the assessment. We reiterate the Assailed Decision's discussion on the indispensable nature of the PAN in the issuance of assessments and give emphasis to the fact that the 1997 NIRC provided that the issuance of PAN in assessments is mandatory in tax assessments except in a few instances, specifically enumerated by law, where it is not required.

In the instant case, respondent failed to prove that the PAN was delivered to petitioner. Records show that respondent did not formally offer as her evidence any document, such as a copy of a registry return receipt in case of service through registered mail or the alleged request for certification addressed to the Pasig City Post Office, which will prove that petitioner did in fact receive the disputed PAN. Respondent also failed to convince this Court that the PAN was personally received by petitioner.

Accordingly, in the absence of proof of actual receipt by petitioner of a PAN in violation of Section 228 of the NIRC of 1997 and RR No. 12-99, as amended by RR No. 18-2013, this Court finds that petitioner was not accorded procedural due process in the issuance of the assessment.

FABTECH vs. CIR (Tax 2)

FABTECH EXPORT INDUSTRIES, INC., vs. COMMISSIONER OF INTERNAL REVENUE, 

CTA Case No. 8435 Petitioner

FACTS:

Respondent through Revenue Region No. 9, San Pablo City issued Letter of Authority11 with No. 200800007920 on September 11, 2008 to examine petitioner's books of accounts and other accounting records for all internal revenue taxes covering the period from January 1, 2007 to December 31, 2007. The said Letter of Authority was revalidated on January 20, 2009; and a Post Reporting Notice was issued on January 29, 2010 for deficiency VAT, deficiency withholding tax and compromise penalty in the aggregate amount of P3,114,4 71.15. 

On the other hand, respondent through Bureau of Internal Revenue, Letter Notice Task Force - National Office (BIR, LN Task Force) issued a Letter of Authority with No. 2009 00010290 on May 11, 2010 authorizing 

RO Lalaine F. Faraon Team Head Satina B. Marinduque, to examine petitioner's books of account and other accounting records for income tax, value added tax, withholding tax issues based per LN No. 056 TRS 07-00-

00014 and the corresponding preprocessed data under TRS for taxable year 2007. Subsequently, respondent issued a Notice for Informal Conference and Preliminary Assessment Notice.

On January 24, 2011, pursuant to LOA No. 2009 00010290 and Letter Notices 056-TRS-07-00-00014 respondent (BIR, LN Task Force) issued a Final Assessment Notices with Details of Discrepancies and Assessment Notice assessing petitioner for deficiency value-added tax and deficiency 

income tax.

In a letter dated March 2, 2011, to which petitioner protested the said Final Assessment Notice, respondent replied on March 30, 2011. Respondent (BIR, LN Task Force), likewise, sent a Letter dated May 11, 2011 to petitioner informing the latter that she was withdrawing and cancelling the Final Assessment Notice. 

On April 11, 2011, respondent, through BIR, Revenue Region No. 9, San Pablo City, issued the subject Formal Letter of Demand, Details of Discrepancies (Annex "A" of Formal Letter of Demand) and Audit Results/ Assessment Notices for deficiency value-added tax and compromise penalty.

ISSUE:

Whether or not the Formal Letter of Demand with Audit Results/Assessment Notice dated 11 April 2011 was issued in violation of petitioner's right to due process.

RULING:

Yes, Indeed, Section 228 of the Tax Code clearly requires that the taxpayer must first be informed that he is liable for deficiency taxes through the sending of a PAN. He must be informed of the facts and the law upon which the assessment is made. The law imposes a substantive, not merely a formal, requirement. To proceed heedlessly with tax collection without first establishing a valid assessment is evidently violative of the cardinal principle in administrative investigations - that taxpayers should be able to present their case and adduce supporting evidence. 

After careful evaluation of the records, it appears that there was no preassessment notice issued in connection with Letter of Authority LOA No. 2008 00007920. Despite respondent's failure to notify petitioner of its assessment, the former still issued the subject Formal Letter of Demand, Details of Discrepancies and Audit Results/ Assessment Notices. It is worthy to note that the Preliminary Assessment Notice attached in the record was issued in connection with the Letter of Authority LOA No. 2009 00010290, but not with the LOA No. 2008 00007920. Clearly, respondent violated petitioner's right to due process. Thus, the Formal Letter of Demand, Details of Discrepancies and Audit Results/ Assessment Notices are null and void.

SOUTH ENTERTAINMENT vs. CIR (Tax 2)

South Entertainment Gallery, Inc., vs. CIR

CTA Case No. 8257, 9 July 2014.

FACTS:

The Commissioner presented a witness who attested that he received mail matters from the postman for distribution to the addresee-tenants of SM City Pampanga. He gives them to the contractor personnel of SM City Pampanga who, in turn, delivers the same to the addresee-tenants. However the witness presented actually has no hand on the personal delivery of mails to the addresee-tenants of SM City Pampanga. Aside from the testimony of this witness, there was no proof to show the actual receipt of petitioner of the FLD. In addition, the witness was not even proven as the person authorized to receive letters on behalf of petitioner and he cannot even at least affirm or acknowledge that, indeed, petitioner received the subject FLD. 

ISSUE:

Whether petitioner's right to due process in the issuance of the subject assessment was deemed violated.

RULING:

Yes, if taxpayer denies receipt of Formal Assessment Notice (“FAN”), it is essential for CIR to prove the fact of mailing through the registry receipt issued by the Bureau of Posts or the registry return card, which would have been signed by taxpayer's authorized representative or a certification issued by the Bureau of Posts and any other pertinent document which is executed with the intervention of the Bureau of Posts that mail matter was served upon taxpayer’s authorized representative. It is not enough that registry return card was presented by the CIR. Such should have been signed by taxpayer’s authorized representative.

Thus, the WDL cannot be held legal and valid. Having proven that the Final Assessment Notice (FAN) was not served.

CIR vs. FITNESS BY DESIGN (Tax 2)

COMMISSIONER OF INTERNAL REVENUE vs. FITNESS BY DESIGN, INC.

CT A EB No. 970 

(CTA Case No. 7160)

FACTS:

On April 11 , 1996, petitioner filed its Annual Income Tax Return for the taxable year 1995 reflecting that it was still on its pre-operating stage. On June 9, 2004, petitioner received a copy from respondent a FAN dated March 17, 2004, for deficiency taxes in the total amount of P10,647,529.68. 

Petitioner asserts that the questioned assessments became final, executory and demandable for failure of petitioner to file its protest within the required period. Moreover, even assuming that the questioned assessments are essentially void, respondent belatedly questioned it only for the first time in its memorandum. Besides, as petitioner claims, the Court has admitted several exhibits demonstrating  respondent's unreported income and that it failed to contest such unreported income in the administrative level. Finally, petitioner claims that the 10-year prescriptive period should apply since the return that where filed are false and fraudulent and that respondent failed to file its Value-added tax and documentary stamp tax returns. 

On the other hand, respondent argues that the Final Assessment Notice cannot be considered as a valid deficiency assessment since it is only a request for payment without specifying the period within which to pay the alleged assessments, hence, it is not in accordance with Section 228 of the National Internal Revenue Code of 1997, as amended, and implemented by Section 3.1.4 of Revenue Regulations No. 12-99.

ISSUE:

WHETHER OR NOT THE QUESTIONED INCOME TAX, VALUE-ADDED TAX AND DOCUMENTARY STAMP TAX ASSESSMENTS FOR TAXABLE YEAR 1995 ISSUED AGAINST RESPONDENT IS FINAL AND EXECUTORY.

RULING:

No, The taxpayers shall be informed in writing of the law and the facts on which the assessment is made; otherwise, the assessment shall be void.

The subject FAN did not make a clear and categorical demand for payment of the alleged tax liabilities for it contains merely a request for payment.  In sum, the FAN failed to comply with the requirements of a valid assessment notice and create confusion on the part of the taxpayer. In one case, the Supreme Court admonished respondent for using vague language in an assessment notice. It was held that words must be carefully chosen to avoid any confusion that could adversely affect the rights and interest of the taxpayer. Respondent must therefore indicate in a clear and unequivocal language whether his action on a disputed assessment constitutes his final determination thereon in order for the taxpayer concerned to determine when his or her right to appeal to the tax court accrues. This is certainly absent in the subject assessment notices. 

GLOBAL METAL vs. CIR (Tax 2)

GLOBAL METAL TECH CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE 

CTA Case No. 8329

CTA

Case

No

.

8329

FACTS:

Respondent issued Letter of Authority to examine petitioner's books of accounts and other accounting records for all internal revenue taxes for the period covering October 1, 2005 to September 30, 2006. 

Petitioner was eventually found to be liable for deficiency tax; thus, respondent sent to petitioner a Notice of Informal Conference dated July 16, 2008. On September 12, 2008, RDO issued  an Assessment Notice against petitioner. On February 5, 2009, petitioner received the Preliminary Assessment Notice (PAN).

On February 20, 2009, petitioner protested the PAN by filing a letter dated February 19, 2009 with respondent, disputing the deficiency FWT assessment. Respondent issued the Formal Letter of Demand all dated February 17, 2009, which petitioner received on February 25, 2009.

On May 15, 2009, petitioner filed its protest letter dated May 12, 2009 against the Formal Letter of Demand. Respondent denied petitioner's protest through a letter dated July 12, 2011, which was received by the latter on August 2, 2011. 

ISSUE:

WHETHER OR NOT THE RIGHT OF PETITIONER TO DUE PROCESS WAS VIOLATED BY RESPONDENT WHEN RESPONDENT ISSUED THE FORMAL ASSESSMENT NOTICE BEFORE THE LAPSE OF THE 15- DAY PERIOD FROM DATE OF RECEIPT OF PRELIMINARY ASSESSMENT NOTICE GRANTED BY LAW FOR PETITIONER TO RESPOND TO THE PRELIMINARY ASSESSMENT NOTICE.

RULING:

Yes, the CTA En Banc explained that a protest against the PAN, unlike the protest against the FAN, is not indispensable. A PAN may or may not even be protested to by the taxpayer, and the fact of non-protest shall not in any way make the PAN final and unappealable. Therefore, the issuance of the FAN before the lapse of the 15-day period for the taxpayer to file its protest to the PAN, inflicts no prejudice on the taxpayer for as long as the latter is properly served a FAN and that it was able to intelligently contest the FAN by filing a protest letter within the period provided by 

law. Moreover, this Court observed that petitioner was afforded the procedural due process required by law when it was fully apprised of the legal and factual bases of the assessment issued against it and that petitioner was given the opportunity to substantially protest or dispute the assailed assessments via its protest letter. 

Considering the afore-cited cases and the PAN with attached Details of Discrepancies, petitioner was afforded due process by apprising it of the legal and factual bases of 

the assessment.

CIR vs. AJINOMOTO (Tax 2)

COMMISSIONER OF INTERNAL REVENUE vs. AJINOMOTO PHILIPPINES CORPORATION

CTA EB CASE NO. 1010  

(CTA Case  No.  7877)

x-------------------------------------x 

AJINOMOTO PHILIPPINES Petitioner, -versus- COMMISSIONER OF INTERNAL RINGPIS-LIBAN, JJ. REVENUE, CTA EB CASE NO. 1015 CORPORATION, (CTA Case  No.  7877) 

FACTS:

Ajinomoto received the Preliminary Assessment Notice (PAN) on December 16, 2008 giving Ajinomoto 15 days from receipt thereof to response and thereafter on December 22, 2008, received the Final Assessment Notice (FAN). Thus, Ajinomoto assert that the absence of its opportunity to contest and reply to the PAN before the FAN was issued was an infirmity that effectively deprive Ajinomoto of its right to procedural due process.

ISSUE:

Whether there was a denial of due process due to violation of Section 228 of the Tax Code and Revenue Regulation No. 12-99.

RULING:

None, though respondent successively issued the Notice of Informal Conference, the Preliminary Assessment Notice and the Formal Letter of Demand, together with the 

Details of Discrepancies and Assessment Notices, one after another, the fact remains that petitioner has been duly notified of the procedures prescribed under Section 228 and has been informed of the factual and legal bases of the assessments.

In fact, petitioner was able to exhaustively protest respondent's assessments in a Letter dated December 23, 2008. It cannot be denied that Ajinomoto had been given the opportunity to refute the charges against it, was able to timely file its administrative protest and was able to discuss its position on the deficiencies being assessed against it. Apparently, there was substantial compliance in the procedure in protesting the assessments and petitioner's right to due process was adequately observed and protected. 

ESS MANUFACTURING vs. CIR (Tax 2)

ESS MANUFACTURING COMPANY, INC., vs. COMMISSIONER OF INTERNAL REVENUE

CTA CASE NO. 7958 

FACTS:

ESS filed a Petition for Review on August 10, 2009, as well as an application for a Temporary Restraining Order and/ or Temporary Preliminary Injunction, praying that a TRO be issued and such be converted into a writ of preliminary injunction and that the assessments amounting to Php35,101,455.74 be declared null and void, and that the same be cancelled.

ISSUES:

(1) Whether or not the Letter of Authority No. 00039017 dated September 5, 2006 issued by respondent to petitioner was valid;

(2) Whether or not the assessments for deficiency expanded withholding tax, withholding tax on compensation, and fringe benefits issued by respondent to petitioner for taxable year 2005 had already prescribed;

(3) Whether the assessments for taxable year 2005 have not become final and executory, thus the Court has jurisdiction over the present petition.

RULING:

(1) Yes, the presumption of regularity in the performance of official duties prevails. As for the said erasure, respondent was correct in pointing out that it was merely a clerical/ typographical error which would not affect the substantial rights of the taxpayer. The said error of correcting the name of the Revenue Officer from "NUESTRE" to "NUESTRO" is not the erasure contemplated under the law. Thus, the Court finds the Letter of Authority issued by BIR valid.

(2) Court finds that the assessments covering January to November for deficiency expanded withholding tax, withholding tax on compensation, as well as the first three quarters for fringe benefits tax were made beyond the prescribed period. Applying the earlier discussion, that there being no false return, the prescriptive period of three (3)-years must be applied. 

(3) Yes, petitioner in this case filed an administrative protest to the assessment when it filed a "Motion for Reconsideration of FAN received on December 15, 2008" on January 13, 2009.

It is very clear to the Court t at there was no need for a submission of documents, as claimed by respondent, since petitioner is asking respondent to review or re-evaluate the assessment based on all the existing records which was already provided in the audit and during the communication between the parties prior to the issuance of the FAN. 

Thus, respondent had 180 days from January 13, 2009, or until July 12, 2009 to decide on the "Moti n for Reconsideration of FAN received on December 15, 2008." Upon respondent's inaction after the 180 days, petitioner has 30 days, or nntil August 11, 2009 to file a petition before this Court. Petitioner filed the present Petition for 

Review on August 10, 2009, which was clearly within the period provided by law. 

Clearly, petitioner complied with the requirements of the law in disputing a tax assessment, pursuant to Section 228 of the Tax Code. Hence, the tax assessment cannot be considered as final, executory and demandable.

EAST ASIA POWER vs. CIR (Tax 2)

EAST ASIA POWER RESOURCES, CORP. -versus- COMMISSIONER OF INTERNAL REVENUE CTA CASE No. 8182 

FACTS:

On April 27, 2007, petitioner filed its income tax return for calendar year 2006 with the BIR  reporting a total tax overpayment of P26, 105,588.00.

On October 1, 2007, petitioner received Letter of Authority (LOA) No. After examination of books of account. Petitioner received from respondent, Notice of Informal Conference. On December 14, 2009, petitioner received a Pre-Assessment Notice (PAN) dated November 20, 2009 informing the former of the deficiency tax findings for calendar year 2006 on income tax, value-added tax (VAT), expanded withholding tax (EWT), and compromise penalty in the amount of P27,788,313.00, P2,631 ,826.23, P493, 182.22, and P25,000.00, inclusive of interest as of November 18, 2009. On January 12, 2010, petitioner received, through registered mail, Formal Letter of Demand assessing petitioner for alleged deficiency income tax in the amount of P28,400,036.96, deficiency VAT of P2,689,762.50, and deficiency EWT of P503,693.79 inclusive of interests as of January 15, 2010 and compromise penalty of P25,000.00, or a total of P31 ,618,493.25 for calendar year 2006.

Petitioner sent a letter of protest disputing the assessments and praying for reconsideration thereof, however denied.

ISSUE:

Whether or not petitioner is liable to pay the aggregate amount of P31 ,618,493.25 inclusive of interest and compromise penalty, representing deficiency income tax, VAT and EWT for taxable year 2006.

RULING:

Compromise penalty - No. Under Revenue Memorandum Order No. 01-90, compromise penalties are only amounts suggested in settlement of criminal liability, and may not be imposed or exacted on the taxpayer in the event that a taxpayer refuses to pay the same. Absent a showing that herein petitioner consented to the compromise penalty, its imposition should be deleted. The imposition of the same without the conformity of the taxpayer is illegal and unauthorized.

Deficiency income tax -  No. The various sales invoices issued by petitioner as well as the journal voucher and official receipt related to the sale of petitioner's fixed asset for taxable year 2006 show that petitioner reports its income on accrual basis of accounting both for income tax and VAT 

purposes. 

Under the accrual method, income is recognized in the period it is earned regardless of whether it has been received or not. The employment of such method of accounting, or any method for that matter, as long as it clearly reflects income, is  recognized for income tax purposes in Section 43 of the NIRC of 1997.

Thus, petitioner has fully accounted for its sales of managerial services for the year 2006 based on the sales invoices it issued for the said year whether or not payments have been received for the said services. 

Likewise, pursuant to Section 32(A)(2) of the NIRC of 1997, petitioner properly reported the gain derived from its sale of fixed asset for the year 2006 part of its "Non-Operating and Other Income."

Evidently, the deficiency income tax assessment on the alleged undeclared sales of P15,293,127.92 was a mere result of respondent's erroneous comparison of the income per petitioner's VAT returns against its collections for the year 2006.

PROCTER & GAMBLE vs. CIR (Tax 2)

G.R. No. 202071               February 19, 2014

PROCTER & GAMBLE ASIA PTE LTD., Petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS:

On 26 September and 13 December 2006, petitioner filed administrative claims with the Bureau of Internal Revenue (BIR) for the refund or credit of the input VAT attributable to the former’s zero-rated sales covering the periods 1 July-30 September 2004 and 1 October-31 December 2004, respectively.

On 2 October and 29 December 2006, petitioner filed judicial claims for the aforementioned refund or credit of its input VAT. Respondent filed separate Answers to the two cases, which were later consolidated, basically arguing that petitioner failed to substantiate its claims for refund or credit.

Trial on the merits ensued. On 17 January 2011, the CTA First Division rendered a Decision dismissing the judicial claims for having been prematurely filed. It ruled that petitioner had failed to observe the mandatory 120-day waiting period to allow the Commissioner of Internal Revenue (CIR) to decide on the administrative claim. Petitioner’s Motion for Reconsideration was denied on 15 March 2011.

Petitioner thereafter filed a Petition for Review before the CTA En Banc. The latter, however, issued the assailed Decision affirming the ruling of the CTA First Division. Petitioner’s Motion for Reconsideration was denied in the assailed Resolution.

Hence, petitioner filed the present petition.

Petitioner argue that 120-day waiting period is not jurisdictional. Respondent to submit its Comment, counters that the 120-day period to file judicial claims for a refund or tax credit is mandatory and jurisdictional. Failure to comply with the waiting period violates the doctrine of exhaustion of administrative remedies, rendering the judicial claim premature. Thus, the CTA does not acquire jurisdiction over the judicial claim.

ISSUE:

Whether respondent is correct.

RULING:

Respondent is correct on this score. However, it fails to mention that San Roque also recognized the validity of BIR Ruling No. DA-489-03. The 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."

The Court, in San Roque, ruled that equitable estoppel had set in when respondent issued BIR Ruling No. DA-489-03. This was a general interpretative rule, which effectively misled all taxpayers into filing premature judicial claims with the CTA. Thus, taxpayers could rely on the ruling from its issuance on 10 December 2003 up to its reversal on 6 October 2010, when CIR v. Aichi Forging Company of Asia, lnc. was promulgated.

The judicial claims in the instant petition were filed on 2 October and 29 December 2006, well within the ruling's period of validity. Petitioner is in a position to "claim the benefit of BIR Ruling No. DA-489-03, which shields the filing of its judicial claim from the vice of prematurity."

CIR vs. PILIPINAS SHELL PETROLEUM (Tax 2)

G.R. No. 188497               February 19, 2014

COMMISSIONER OF INTERNAL REVENUE, Petitioner,

vs.

PILIPINAS SHELL PETROLEUM CORPORATION, Respondent.

FACTS:

Petitioner PSPC used Tax Credit Certificates (TCCs) to settle its excise tax liabilities from 1988 to 1997. PSPC acquired these TCCs from other BOI-registered companies through the DOF One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (Center). In 1999, PSPC received the November 15, 1999 assessment letter from respondent CIR for excise tax deficiencies, surcharges, and interest arising from the Center’s cancellation of the TCCs utilized by PSPC. The said TCCs were cancelled because of the alleged fraud attending their original issuance. 

ISSUE:

WON the assessment dated November 15, 1999 is void considering that it failed to comply with the statutory as well as regulatory requirements in the issuance of assessments.

RULING:

Yes, CIR failed to first issue the (1) Notice of Informal Conference and (2) Preliminary Assessment Notice that are required under RR 12-99.

Where the procedures delineated in statutory provisos and revenue regulations were not followed by the Commissioner of Internal Revenue, it deprived the taxpayer of due process in contesting the formal assessment levied against it. Respondent ignored RR 12-99 and did not issue PSPC a notice for informal conference and a preliminary assessment notice, as required. For being formally defective, the November 15, 1999 formal letter of demand and assessment notice is void.

DAKUNAO vs. CIR (Tax 2)

DAKUDAO & SONS, INC., Petitioner CTA Case No. 8501 Members: -versus-CASTANEDA, JR., Chairperson CASANOVA, and COTANGCO-MANALASTAS,J~ COMMISSIONER OF INTERNAL REVENUE.

FACTS:

Petitioner owned two (2) parcels of land located in Davao City. On December 20, 2011, petitioner paid the BIR the amount of
P112,140,000.00 for the VAT of said transfer. Petitioner however alleged that since the transfer of the subject parcels of land was made in exchange for shares of stock to a controlled corporation, its payment of VAT was erroneous and/or excessive. Thus, on May 2, 2012, petitioner filed an administrative claim for VAT refund with the BIR. On June 11, 2012, petitioner filed the instant Petition for Review pursuant to Sections 204(C) and 229 of the National Internal Revenue Code (NIRC) of 1997, as amended.

ISSUE:

Whether Petitioner's claim for refund was filed within the period prescribed by law.

RULING:
Yes, Pursuant to Sections 204(C) and 229, and as held in several cases, a taxpayer is given a period of two (2) years from payment of tax within which to file a refund, regardless of any supervening cause that may arise.

In the instant case, petitioner remitted its VAT Payment Form (BIR Form No. 0605)37 together with the BTR-BIR Payment Slip38 in the amount of P112,140,000.00 on December 20, 2011. Counting the two-year period from the date of payment of the tax, petitioner had until December 20, 2013 within which to pursue its claim in both administrative and judicial levels. Perusal of the case records shows that petitioner filed its administrative claim for VAT refund on May 2, 2012, and its judicial claim via Petition for Review on June 11, 2012. Accordingly, both claims fall squarely within the period prescribed by law.

HSBC vs. CIR (Tax 2)

G.R. No. 166018               June 4, 2014

THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCHES, Petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent;

x - - - - - - - - - - - - - - - - - - - - - - - x

G.R. No. 167728

THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED-PHILIPPINE BRANCHES, Petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS:

Petitioner HSBC received emails from its foreign clientele to debit funds from their accounts for the payment of shares and securities in the Philippines. After debiting the appropriate taxes to the BIR, HSBC then requested that the latter rule on whether or not such email transactions were negotiable instruments subject to documentary stamp tax (DST). The BIR responded in the negative, holding that such emails were not transactions contemplated in Sec. 181 of the 1997 Tax Code. On the strength of this response, HSBC proceeded to demand the return of their tax payments advanced on the presumption that DST was applicable. However, as BIR did not heed HSBC’s requests for the return of the payments, HSBC filed with the Court of Tax Appeals. CTA ruled in their favor. CA reversed, holding that Sec. 181 does not apply to the instrument or bill of exchange per se, but on the acceptance or payment of said order. Hence this petition for review on certiorari before the SC.

ISSUE:

Whether or not the emails are subject to DST.

RULING:

No. The Court agrees with the CTA that the DST under Section 181 of the Tax Code is levied on the acceptance or payment of "a bill of exchange purporting to be drawn in a foreign country but payable in the Philippines" and that "a bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer." A bill of exchange is one of two general forms of negotiable instruments under the Negotiable Instruments Law.

The Court further agrees with the CTA that the electronic messages of HSBC’s investor-clients containing instructions to debit their respective local or foreign currency accounts in the Philippines and pay a certain named recipient also residing in the Philippines is not the transaction contemplated under Section 181 of the Tax Code as such instructions are "parallel to an automatic bank transfer of local funds from a savings account to a checking account maintained by a depositor in one bank." The Court favorably adopts the finding of the CTA that the electronic messages "cannot be considered negotiable instruments as they lack the feature of negotiability, which, is the ability to be transferred" and that the said electronic messages are "mere memoranda" of the transaction consisting of the "actual debiting of the [investor-client-payor’s] local or foreign currency account in the Philippines" and "entered as such in the books of account of the local bank," HSBC.

COMMISSIONER vs. CE CASECNAN WATER AND ENERGY COMPANY, INC (Tax 2)

COMMISSIONER OF INTERNAL REVENUE vs. CE CASECNAN WATER AND ENERGY COMPANY, INC., CTA EB No. 1072 

April 28,2014

FACTS:

Invoking the provision under Section 108(B)(7) of the 1997 NIRC, as amended by Republic Act No. 9337, sales by power generating companies of electricity produced through renewable sources of energy, such as hydropower, are classified as zero-rated. The input VAT on power generating companies' purchases of goods and services attributable to zero-rated sales are refundable in accordance with Section 112 of the Tax Code, on  November 10, 2010, respondent filed before the BIR an administrative refund claim of P16,702,501.38 attributable to zero-rated sales of power to NIA for taxable year 2009. 

Petitioner's inaction has prompted respondent to file a Petition for Review docketed as CTA Case No. 8245 with the CTA's Special Third Division on March 30, 2011. 

In ruling for the respondent, the Court in Division issued a Decision dated May 10, 2013 partially granting its refund claim in the reduced amount of P16,101,029.44 representing its unutilized input VAT attributable to its zero-rated sales to NIA for taxable year 2009. The refundable amount resulted by deducting input VAT attributable to zero-rated sales of P16,250,159.04 from net output VAT payable of P149,129.60.

Dissatisfied, petitioner moved for partial reconsideration of the assailed Decision; however, in the Resolution dated September 19, 2013, the Court in Division denied the same for lack of merit. Petitioner seeks recourse before the Court en banc.

ISSUE:

WHETHER THE RESPONDENT TIMELY FILED AN APPEAL TO THE CTA AND COMPLIED WITH THE ADMINISTRATIVE PROCESS UNDER SECTION 112 OF THE TAX CODE. THUS, THIS COURT HAS JURISDICTION TO RULE ON THE REFUND CLAIM. 

RULING:

Yes, considering that respondent has submitted supporting documents together with its administrative claim before the BIR pursuant to Section 112 of the 1997 NIRC, as amended, the 120-day period should be reckoned from November 10, 2010. Despite of the petitioner's inaction on the refund claim, respondent may appeal to this Court 

within thirty (30) days from expiry of the 120-day period on March 10, 2011, or until April 11, 2011. 17 Hence, respondent's appeal on March 30, 2011 was within the reglementary period. 

Clearly, the Court in Division correctly ordered petitioner to grant the refund or the issuance of the tax credit certificate in favor of the respondent in the amount of P16,101,029.44 representing unutilized input VAT attributable to its zero-rated sales to NIA for taxable year 2009. 

WHEREFORE, premises considered, the Petition for Review is hereby DISMISSED. The assailed Decision dated May 10, 2013 and the Resolution dated September 19, 2013 are AFFIRMED.

MAMBULAO LUMBER vs. REPUBLIC (Tax 2)

GR. No. L-37061 September 5, 1984

MAMBULAO LUMBER COMPANY, petitioner,

vs.

REPUBLIC OF THE PHILIPPINES, respondent.

FACTS:

Mambulao Lumber Company paid the Government a total of P9,127.50 as reforestation charges. Having found liable for an aggregate amount of P4,802.37 for forest charges, it contended that since the Republic (Government) has not made use of the reforestation charges for reforesting the denuded area of the land covered by the company’s license, the Republic should refund said amount or, if it cannot be refunded, at least the company should be compensated with what it owed the Republic for reforestation charges.

ISSUE:

Whether taxes may be subject of set-off or compensation.

RULING:

Internal revenue taxes, such as forest charges, cannot be the subject of set-off or compensation. A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off under the statutes of set-off, which are construed uniformly, in the light of public policy, to exclude the remedy in an action or any indebtedness of the State or municipality to one who is liable to the State or municipality for taxes. Neither are they subject of recoupment since they do not arise out of the contract or transaction sued on.Taxes are not in the nature of contracts between the parties but grow out of a duty to, and are the positive acts of the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required.

ARCHES vs. BELLOSILLO (Tax 2)

G.R. No. L-23534             May 16, 1967

JOSE A. ARCHES, petitioner-appellant,

vs.

ANACLETO I. BELLOSILLO and JAIME ARANETA, respondents-appellees.

Jose A. Arches for petitioner-appellant.

Office of the Solicitor General Arturo A. Alafriz, Solicitor A.B. Afurong and Atty. S.S. Soriano for respondents-appellees.

FACTS:

Petitioner-appellant Jose Arches filed on February 27, 1954 his income tax return for 1953. Within five years thereafter, or on February 26, 1959, deficiency income tax and residence tax assessments were issued against him.

Said assessments not having been disputed, the Republic represented by the Bureau of Internal Revenue Regional, Director, filed suit on December 29, 1960, in the municipal court of Roxas City, to recover from petitioner-appellant the sum of P4,441.25 as deficiency income tax and additional residence tax for 1953. Arches then moved to dismiss the complaint on the ground that it did not expressly show the approval of the Revenue Commissioner, as required by Section 308 of the Tax Code, and on the further ground of prescription of the action. 

The municipal court denied the motion. Petitioner-appellant, his motion to reconsider having been denied also, resorted to the Court of First Instance of Capiz on a petition for certiorari and prohibition assailing the order denying his motion to dismiss. The trial court dismissed the petition. Hence, this appeal

ISSUE:

Whether the trial court is correct in dismissing the case.

RULING:

Yes, assuming, therefore, in gratia argumenti, that the suit is being erroneously — but not invalidly — entertained, for lack of express approval of the Commissioner or the Regional Director, certiorari would still not lie. An order denying a motion to dismiss is interlocutory and the remedy of the unsuccessful movant is to await the judgment on the merits and then appeal therefrom.7 And, as the Court of First Instance rightly observed, there was no showing of a special reason or urgent need to stop the proceedings at such early stage in the municipal court.

Petitioner-appellant would also raise the question of prescription. Again, this is not jurisdictional. And, We have already ruled that the proper prescriptive period for bringing civil actions is five years from the date of the assessment, under Section 332 of the Tax Code. The three-year period urged by petitioner-appellant under Section 51 (d) refers only to the summary remedies of distraint and levy. Here, the action was commenced one year, ten months and three days after the assessments were made; hence, well within the period.

Wherefore, the dismissal of appellant's petition for certiorari by the Court of First Instance is hereby affirmed. 

COMMISSIONER vs. PHOENIX (Tax 2)

G.R. No. L-19727             May 20, 1965

THE COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.

PHOENIX ASSURANCE CO., LTD., respondent.

FACTS:

Phoenix Assurance Co., Ltd., a foreign insurance corporation organized under the laws of Great Britain, is licensed to do business in the Philippines with head office in London. Through its head office, it entered in London into worldwide reinsurance treaties with various foreign insurance companies. It agree to cede a portion of premiums received on original insurances underwritten by its head office, subsidiaries, and branch offices throughout the world, in consideration for assumption  by the foreign insurance companies of an equivalent portion of the liability from such original insurances.

On August 1, 1958 the Bureau of Internal Revenue deficiency assessment on income tax for the years 1952 and 1954 against Phoenix Assurance Co, Ltd. The assessment resulted from the disallowance of a portion of the deduction claimed by Phoenix Assurance Co., Ltd. as head office expenses allocable to its business in the Philippines fixed by the Commissioner at 5% of the net Philippine income instead of 5% of the gross Philippine income as claimed in the returns. Phoenix Assurance Co., Ltd. protested against the aforesaid assessments for withholding tax and deficiency income tax. However, the Commissioner of Internal Revenue denied such protest. 

Subsequently, Phoenix Assurance Co., Ltd. appealed to the Court of Tax Appeals. In a decision dated February 14, 1962, the Court of Tax Appeals allowed in full the decision claimed by Phoenix Assurance Co., Ltd. for 1950 as net addition to marine insurance reserve; determined the allowable head office expenses allocable to Philippine business to be 5% of the net income in the Philippines; declared the right of the Commissioner of Internal Revenue to assess deficiency income tax for 1952 to have prescribed; absolved Phoenix Assurance Co., Ltd. from payment of the statutory penalties for non-filing of withholding tax return.

ISSUE:

Whether or not the right of the Commissioner of Internal Revenue to assess deficiency income tax for the year 1952 against Phoenix Assurance Co., Ltd., has prescribed.

RULING:

No, The question is. Should the running of the prescriptive period commence from the filing of the original or amended return?xxx the deficiency income tax in question could not possibly be determined, or assessed, on the basis of the original return filed on April 1, 1953, for considering that the declared loss amounted to P199,583.93, the mere disallowance of part of the head office expenses could not possibly result in said loss being completely wiped out and Phoenix being liable to deficiency tax. Not until the amended return was filed on August 30, 1955 could the Commissioner assess the deficiency income tax in question.”

Accordingly, he would wish to press for the counting of the prescriptive period from the filing of the amended return. Considering that the deficiency assessment was based on the amended return which, as aforestated, is substantially different from the original return, the period of limitation of the right to issue the same should be counted from the filing of the amended income tax return. From August 30, 1955, when the amended return was filed, to July 24, 1958, when the deficiency assessment was issued, less than five years elapsed. The right of the Commissioner to assess the deficiency tax on such amended return has not prescribed.

REPUBLIC vs. PERALTA (Tax 2)

G.R. No. L-56568 May 20, 1987

REPUBLIC OF THE PHILIPPINES, represented by the Bureau of Customs and the Bureau of Internal Revenue, petitioner,

vs.

HONORABLE E.L. PERALTA, PRESIDING JUDGE OF THE COURT OF FIRST INSTANCE OF MANILA, BRANCH XVII, QUALITY TABACCO CORPORATION, FRANCISCO, FEDERACION OBRERO DE LA INDUSTRIA TABAQUERA Y OTROS TRABAJADORES DE FILIPINAS (FOITAF) USTC EMPLOYEES ASSOCIATION WORKERS UNION-PTGWO, respondents.

Oscar A. Pascua for assignee F. Candelaria.

Teofilo C. Villarico for respondent Federation.

FACTS:

In the voluntary insolvency proceedings commenced in May 1977 by private respondent Quality Tobacco Corporation (the "Insolvent"), the following claims of creditors were filed:

xxx (iii) P1,085,188.22 by the Bureau of Internal Revenue for tobacco inspection fees covering the period 1 October 1967 to 28 February 1973; xxx

These obligation appear to be secured by surety bonds.  Some of these imported items are apparently still in customs custody so far as the record before this Court goes.

In its questioned Order of 17 November 1980, the trial court held that the above-claim of USTC and FOITAF (hereafter collectively referred to as the "Unions") for separation pay of their respective members embodied in final awards of the National Labor Relations Commission were to be preferred over the claims of the Bureau of Customs and the Bureau of Internal Revenue. 

ISSUE:

What impact Article 110 of the labor Code has had on those provisions of the Civil Code over Claims of the Bureau of Internal Revenue for Tabacco Inspection Fees.

RULING:

Under Section 315 of the National Internal Revenue Code ("old Tax Code"), later reenacted in Identical terms as Section 301 of the Tax Code of 1977,  an unpaid "internal revenue tax," together with related interest, penalties and costs, constitutes a lien in favor of the Government from the time an assessment therefor is made and until paid, "upon all property and rights to property belonging to the taxpayer."

Tobacco inspection fees are specifically mentioned as one of the miscellaneous taxes imposed under the National Internal Revenue Code, specifically Title VIII, Chapter IX of the old Tax Code and little VIII, Chapter VII of the Tax Code of 1977.  Tobacco inspection fees are collected both for purposes of regulation and control and for purposes of revenue generation: half of the said fees accrues to the Tobacco Inspection Fund created by Section 12 of Act No. 2613, as amended by Act No. 3179, while the other half accrues to the Cultural Center of the Philippines. Tobacco inspection fees, in other words, are imposed both as a regulatory measure and as a revenue-raising measure. In Commissioner of Internal Revenue us. Guerrero, et al 16 this Court held, through Mr. Chief Justice Concepcion, that the term "tax" is used in Section 315 of the old Tax Code:

not in the limited sense [of burdens imposed upon persons and/or properties, by way of contributions to the support of the Government, in consideration of general benefits derived from its operation], but, in a broad sense, encompassing all government revenues collectible by the Commissioner of Internal Revenue under said Code, whether involving taxes, in the strict technical sense thereof, or not. x x x As used in Title IX of said Code, the term 'tax' includes 'any national internal revenue tax, fee or charge imposed by the Code. 

It follows that the claim of the Bureau of Internal Revenue for unpaid tobacco inspection fees constitutes a claim for unpaid internal revenue taxes which gives rise to a tax lien upon all the properties and assets, movable and immovable, of the Insolvent as taxpayer. Clearly, under Articles 2241 No. 1, 2242 No. 1, and 2246-2249 of the Civil Code, this tax claim must be given preference over any other claim of any other creditor, in respect of any and all properties of the Insolvent.