GENERAL PRINCIPLES OF TAXATION
R.A. 9504 (TAX EXEMPTION OF MINIMUM WAGE EARNERS AND INCREASING PERSONAL/ADDITIONAL EXEMPTIONS / CHANGE IN Optional Standard Deduction) must be liberally construed. We are mindful of the strict construction rule when it comes to the interpretation of tax exemption laws. The canon, however, is tempered by several exceptions, one of which is when the taxpayer falls within the purview of the exemption by clear legislative intent. In this situation, the rule of liberal interpretation applies in favor of the grantee and against the government. In this case, there is a clear legislative intent to exempt the minimum wage received by an MWE who earns additional income on top of the minimum wage. As previously discussed, this intent can be seen from both the law and the deliberations. Accordingly, we see no reason why we should not liberally interpret R.A. 9504 in favor of the taxpayers. (JAIME N. SORIANO VS. SECRETARY OF FINANCE AND
THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY 24, 2017, C.J. SERENO) It must be borne in mind that tax exemptions, which respondents obviously want or desire to avail of in this case, are strictissimi juris. Indeed, taxation is the rule and tax exemption the exception. Tax exemptions should be granted only by clear and unequivocal provision of law on the basis of language too plain to be misunderstood, We hold that in this case respondents have utterly failed to make out even a prima facie for tax exemption in their favor. (BUREAU OF INTERNAL REVENUE VS. MANILA HOME TEXTILE, INC., GR 203057, JUNE 6, 2016, J. DEL CASTILLO) In matters of taxation, the government cannot be estopped by the mistakes, errors or omissions of its agents for upon it depends the ability of the government to serve the people for whose benefit taxes are collected. (COMMISSIONER OF INTERNAL REVENUE VS. NIPPON EXPRESS (PHILS.)
CORPORATION, G.R. NO. 212920, SEPTEMBER 16, 2015)
It is settled that tax exemptions must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a specific provision of law conferring on the taxpayer, in clear and plain terms, exemption from a common burden. Any doubt whether a tax exemption exists is resolved against the taxpayer. MERALCO has failed to present herein any express grant of exemption from real property tax of its transformers, electric posts, transmission lines, insulators, and electric meters that is valid and binding even under the Local Government Code. (MANILA ELECTRIC COMPANY VS. THE CITY ASSESSOR AND CITY TREASURER OF LUCENA CITY G.R. NO. 166102, AUGUST 5, 2015) San Roque, held that BIR Ruling No. DA-489-03 was a general interpretative rule because it was a response to a query made, not by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits. Thus, it applies to all taxpayers alike, and not only to one particular taxpayer. (COMMISSIONER OF INTERNAL REVENUE VS. AIR LIQUIDE PHILIPPINES,
INC., G.R. NO. 210646, JULY 29, 2015)
The claim of a taxpayer under a tax amnesty shall be allowed when the liability involves the deficiency in payment of income tax. However, it must be disallowed when the taxpayer is assessed on his capacity as a withholding tax agent because the person who earned the taxable income was another person other than the withholding agent. (LG ELECTRONICS PHILIPPINES, INC. VS.
The Court has consolidated these 3 petitions as they involve the same parties, similar facts and common questions of law. This is not the first time that Fort Bonifacio Development Corporation (FBDC) has come to this Court about these issues against the very same respondents (CIR), and the Court En Banc has resolved them in two separate, recent cases that are applicable here. It is of course axiomatic that a rule or regulation must bear upon, and be consistent with, the provisions of the enabling statute if such rule or regulation is to be valid. In case of conflict between a statute and an administrative order, the former must prevail. To be valid, an administrative rule or regulation must conform, not contradict, the provisions of the enabling law. An implementing rule or regulation cannot modify, expand, or subtract from the law it is intended to implement. Any rule that is not consistent with the statute itself is null and void. To recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as basis of transitional input tax credit under Section 105 is a nullity. (FORT BONIFACIO DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE AND REVENUE DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG AND PATEROS, BUREAU OF INTERNAL REVENUE, G.R. NO. 175707, NOVEMBER 19, 2014, J. LEONARDO-DE CASTRO) For Double taxation to take place, the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and the taxes must be of the same kind or character. Because Section 21 of the Revenue Code of Manila imposed the tax on a person who sold goods and services in the course of trade or business based on a certain percentage of his gross sales or receipts in the preceding calendar year, while Section 15 and Section 17 likewise imposed the tax on a person who sold goods and services in the course of trade or business but only identified such person with particularity, namely, the wholesaler, distributor or dealer (Section 15), and the retailer (Section 17), all the taxes – being imposed on the privilege of doing business in the City of Manila in order to make the taxpayers contribute to the city’s revenues – were imposed on the same subject matter and for the same purpose. (NURSERY CARE
CORPORATION; SHOEMART, INC.; STAR APPLIANCE CENTER, INC.; H&B, INC.; SUPPLIES STATION, INC.; and HARDWARE WORKSHOP, INC. vs. ANTHONY ACEVEDO, in his CAPACITY AS THE TREASURER OF MANILA; AND THE CITY OF MANILA, G.R. NO. 180651, JULY 30, 2014, J. BERSAMIN) "Time and again, the Court has held that it is a necessary judicial practice that when a court has laid down a principle of law as applicable to a certain facts, it will adhere to that principle and apply it to all future cases in which the facts are substantially the same. Stare decisis et non quieta movere, stand by the decisions and disturb not what is settled. Stare decisis simply means that for the sake of certainty, a conclusion reached in one case should be applied to those that follow if the facts are substantially the same, even though the parties may be different. It proceeds from the first principle of justice that, absent any powerful countervailing considerations, like cases ought to be decided alike. Thus, where the same questions relating to the same event have been put forward by the parties similarly situated as in a previous case litigated and decided by a competent court, the rule of stare decisis is a bar to any attempt to relitigate the same issue." The Court has pronounced in Republic of the Philippines v. Sunlife Assurance Company of Canada " that under the Tax Code although respondent is a cooperative, registration with the CDA is not necessary in order for it to be exempt from the payment of both percentage taxes on insurance premiums, under Section 121; and documentary stamp taxes on policies of insurance or annuities it grants, under Section 199." The CTA observed that the factual circumstances obtaining in Sunlife and the present case are substantially the same. Hence, the CTA based its assailed decision on the doctrine enunciated by the Court in the
said case. (COMMISSIONER OF INTERNAL REVENUE VS. THE INSULAR LIFE ASSURANCE CO.
LTD., G.R. NO. 197192, JUNE 4, 2014, J. REYES)
An opportunity must be given the internal revenue branch of the government to investigate and confirm the veracity of the claims of the taxpayer. The absolute freedom that petitioner seeks to automatically credit tax payments against tax liabilities for a succeeding taxable year, can easily give rise to confusion and abuse, depriving the government of authority and control over the manner by which the taxpayers credit and offset their tax liabilities, not to mention the resultant loss of revenue to the government under such a scheme. (COCA-COLA BOTTLERS PHILIPPINES, INC., vs. CITY OF
MANILA; LIBERTY M. TOLEDO, in her capacity as Officer-in-Charge (OIC), Treasurer of the CITY OF MANILA; JOSEPH SANTIAGO, IN HIS CAPACITY AS OIC, CHIEF LICENSE DIVISION OF THE CITY OF MANILA; REYNALDO MONTALBO, IN HIS CAPACITY AS CITY AUDITOR OF THE CITY OF MANILA, G.R. NO. 197561, APRIL 7, 2014, J. PERALTA)
Since the main purpose of Ordinance No. 18 is to regulate certain construction activities of the identified special projects, which includes “cell sites” or telecommunications towers, the fees imposed in Ordinance No. 18 are primarily regulatory in nature, and not primarily revenue-raising. While the fees may contribute to the revenues of the Municipality, this effect is merely incidental. Thus, the fees imposed in Ordinance No. 18 are not taxes. (SMART COMMUNICATIONS INC., vs. MUNICIPALITY OF MALVAR, BATANGAS, G.R. No. 204429, FEBRUARY 18, 2014, J. CARPIO) INCOME TAXATION Thus, this Court held in the above-cited PAL consolidated cases: However, upon the amendment of the 1997 NIRC, Section 22 of R.A. 9337 abolished the franchise tax and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter. It bears to note that the repealing clause of RA 9337 enumerated the laws or provisions of laws which it repeals. However, there is nothing in the repealing clause, nor in any other provisions of the said law, which makes specific mention of PD 1590 as one of the acts intended to be repealed. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NO. 215705-07 FEBRUARY 22, 2017, J. PERALTA) A careful review of the pleadings reveals that there is no countervailing consideration for the Court to revisit its aforequoted ruling in G.R. Nos. 195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.). Thus, under the doctrine of stare decisis, which states that "[o]nce a case has been decided in one way, any other case involving exactly the same point at issue x x x should be decided in the same manner," the Court finds that SLMC is subject to l0% income tax insofar as its revenues from paying patients are concerned. To be clear, for an institution to be completely exempt from income tax, Section 30(E) and (G) of the 1997 NIRC requires said institution to operate exclusively for charitable or social welfare purpose. But in case an exempt institution under Section 30(E) or (G) of the said Code earns income from its for-profit activities, it will not lose its tax exemption. However, its income from for-profit activities will be subject to income tax at the
preferential 10% rate pursuant to Section 27(B) thereof. (COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO) As to whether SLMC is liable for compromise penalty under Section 248(A) of the 1997 NIRC for its alleged failure to file its quarterly income tax returns, this has also been resolved in G.R Nos. 195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.), where the imposition of surcharges and interest under Sections 248 and 249 of the 1997 NIRC were deleted on the basis of good faith and honest belief on the part of SLMC that it is not subject to tax. Thus, following the ruling of the Court in the said case, SLMC is not liable to pay compromise penalty under Section 248(A) of the 1997 NIRC. (COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S
MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO)
While the Court agrees with the CIR that the payment confirmation from the BIR presented by SLMC is not a competent proof of payment as it does not indicate the specific taxable period the said payment covers, the Court finds that the Certification issued by the Large Taxpayers Service of the BIR dated May 27, 2013, and the letter from the BIR dated November 26, 2013 with attached Certification of Payment and application for abatement are sufficient to prove payment especially since CIR never questioned the authenticity of these documents. In fact, in a related case, G.R. No. 200688, entitled Commissioner of Internal Revenue v. St. Luke's Medical Center, lnc., the Court dismissed the petition based on a letter issued by CIR confirming SLMC's payment of taxes, which is the same letter submitted by SLMC in the instant case. (COMMISSIONER OF INTERNAL REVENUE VS. ST. LUKE’S MEDICAL CENTER, INC., G.R. NO. 203514, FEBRUARY 13, 2017, J. DEL CASTILLO) In sum, R.A. 9504, like R.A. 7167 in Umali, was a piece of social legislation clearly intended to afford immediate tax relief to individual taxpayers, particularly low-income compensation earners. Indeed, if R.A. 9504 was to take effect beginning taxable year 2009 or half of the year 2008 only, then the intent of Congress to address the increase in the cost of living in 2008 would have been negated. Therefore, following Umali, the test is whether the new set of personal and additional exemptions was available at the time of the filing of the income tax return. In other words, while the status of the individual taxpayers is determined at the close of the taxable year, their personal and additional exemptions - and consequently the computation of their taxable income - are reckoned when the tax becomes due, and not while the income is being earned or received. The NIRC is clear on these matters. The taxable income of an individual taxpayer shall be computed on the basis of the calendar year. The taxpayer is required to file an income tax return on the 15th of April of each year covering income of the preceding taxable year. The tax due thereon shall be paid at the time the return is filed. It stands to reason that the new set of personal and additional exemptions, adjusted as a form of social legislation to address the prevailing poverty threshold, should be given effect at the most opportune time as the Court ruled in Umali. (JAIME N. SORIANO VS. SECRETARY OF FINANCE AND
THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY 24, 2017, C.J. SERENO.)
A clarification is proper at this point. Our ruling that the MWE exemption is available for the entire taxable year 2008 is premised on the fact of one's status as an MWE; that is, whether the employee during the entire year of 2008 was an MWE as defined by R.A. 9504. When the wages received exceed the minimum wage anytime during the taxable year, the employee necessarily loses the MWE qualification. Therefore, wages become taxable as the employee ceased to be an MWE. But the exemption of the employee from tax on the income previously earned as an MWE remains. As the
exemption is based on the employee's status as an MWE, the operative phrase is when the employee ceases to be an MWE. Even beyond 2008, it is therefore possible for one employee to be exempt early in the year for being an MWE for that period, and subsequently become taxable in the middle of the same year with respect to the compensation income, as when the pay is increased higher than the minimum wage. The improvement of one's lot, however, cannot justly operate to make the employee liable for tax on the income earned as an MWE. Additionally, on the question of whether one who ceases to be an MWE may still be entitled to the personal and additional exemptions, the answer must necessarily be yes. The MWE exemption is separate and distinct from the personal and additional exemptions. One's status as an MWE does not preclude enjoyment of the personal and additional exemptions. Thus, when one is an MWE during a part of the year and later earns higher than the minimum wage and becomes a non-MWE, only earnings for that period when one is a non-MWE is subject to tax. It also necessarily follows that such an employee is entitled to the personal and additional exemptions that any individual taxpayer with taxable gross income is entitled. A different interpretation will actually render the MWE exemption a totally oppressive legislation. It would be a total absurdity to disqualify an MWE from enjoying as much as P150,000 in personal and additional exemptions just because sometime in the year, he or she ceases to be an MWE by earning a little more in wages. Laws cannot be interpreted with such absurd and unjust outcome. It is axiomatic that the legislature is assumed to intend right and equity in the laws it passes. Critical, therefore, is how an employee ceases to become an MWE and thus ceases to be entitled to an MWE's exemption. In sum, the proper interpretation of R.A. 9504 is that it imposes taxes only on the taxable income received in excess of the minimum wage, but the MWEs will not lose their exemption as such. Workers who receive the statutory minimum wage their basic pay remain MWEs. The receipt of any other income during the year does not disqualify them as MWEs. They remain MWEs, entitled to exemption as such, but the taxable income they receive other than as MWEs may be subjected to appropriate taxes.
(JAIME N. SORIANO VS. SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 184450, JANUARY 24, 2017, C.J. SERENO) Section 1 of R.A. No. 9337, amending Section 27(c) of R.A. No. 8424, by excluding petitioner from the enumeration of GOCCs exempted from corporate income tax, is valid and constitutional. In addition, we hold that: 1)Petitioner’s tax privilege of paying five percent (5%) franchise tax in lieu of all other taxes with respect to its income from gaming operations, pursuant to P.D. 1869, as amended, is not repealed or amended by Section 1(c) of R.A. No. 9337; 2)Petitioner’s income from gaming operations is subject to the five percent (5%) franchise tax only; and 3)Petitioner’s income from other related services is subject to corporate income tax only. (PHILIPPINE AMUSEMENT AND GAMING
CORPORATION VS. THE BUREAU OF INTERNAL REVENUE, G.R. NO. 215427, DECEMBER 10, 2014, J. PERALTA)
DOCUMENTARY STAMP TAX/ CAPITAL GAINS TAX
The maturity of PNB's interbank call loans was irrelevant in determining its DST liability for taxable year 1997, relation to which the applicable law was the National Internal Revenue Code of 1977 (1977 NIRC), as amended by Presidential Decree No. 195916 and Republic Act No. 7660. Section 180 of the 1977 NIRC provides that the DST of P0.30 on each P200.00, or fractional part thereof, shall only be imposed on the face value of: (1) loan agreements; (2) bills of exchange; (3) drafts; (4) instruments and securities issued by the Government or any of its instrumentalities; (5) certificates of deposits drawing interest; (6) orders for the payment of any sum of money otherwise than at sight or on demand; and (7) promissory notes, whether negotiable or non-negotiable, except bank notes
issued for circulation, and on each renewal of any such note. Interbank call loans, although not considered as deposit substitutes, are not expressly included among the taxable instruments listed in Section 180; hence, they may not be held as taxable. The five-day maturity of interbank call loans came to be introduced only by Section 22(y) of the National Internal Revenue Code of 1997 (1997 NIRC). The provisions of the 1997 NIRC cannot be given retrospective effect to the prejudice of PNB. This is because tax laws are prospective in application, unless their retroactive application is expressly provided. (COMMISSIONER OF INTERNAL REVENUE vs. PHILIPPINE NATIONAL BANK, G.R. No. 195147, JULY 11, 2016, J. BERSAMIN) The payment of the DST and the filing of the DST Declaration Return upon loading/reloading of the DS metering machine must not be considered as the "date of payment" when the prescriptive period to file a claim for a refund/credit must commence. For DS metering machine users, the payment of the DST upon loading/reloading is merely an advance payment for future application. The liability for the payment of the DST falls due only upon the occurrence of a taxable transaction. Therefore, it is only then that payment may be considered for the purpose of filing a claim for a refund or tax credit. Since actual payment was already made upon loading/reloading of the DS metering machine and the filing of the DST Declaration Return, the date of imprinting the documentary stamp on the taxable document must be considered as the date of payment contemplated under Section 229 of the NIRC. (PHILIPPINE BANK OF COMMUNICATIONS VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 194065, JUNE 20, 2016, C.J. SERENO) A perusal of the subject provision would clearly show it pertains only to sale transactions where real property is conveyed to a purchaser for a consideration. The phrase “granted, assigned, transferred or otherwise conveyed” is qualified by the word “sold” which means that documentary stamp tax under Section 196 is imposed on the transfer of realty by way of sale and does not apply to all conveyances of real property. Indeed, as correctly noted by the respondent, the fact that Section 196 refers to words “sold”, “purchaser” and “consideration” undoubtedly leads to the conclusion that only sales of real property are contemplated therein. (COMMISSIONER OF INTERNAL REVENUE VS. LA TONDENA DISTILLERS, INC. (LTDI) [NOW GINEBRA SAN MIGUEL], G.R. NO. 175188, JULY 15, 2015) Capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax. As a general rule, therefore, any of the parties to a transaction shall be liable for the full amount of the documentary stamp tax due, unless they agree among themselves on who shall be liable for the same. In this case, with respect to the capital gains tax, we find merit in petitioner’s posture that pursuant to Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC), capital gains tax due on the sale of real property is a liability for the account of the seller. It has been held that since capital gains is a tax on passive income, it is the seller, not the buyer, who generally would shoulder the tax. Also, there is no agreement as to the party liable for the documentary stamp tax due on the sale of the land to be expropriated. But while DPWH rejects any liability for the same, this Court must take note of petitioner’s Citizen’s Charter, which functions as a guide for the procedure to be taken by the DPWH in acquiring real property through expropriation under RA 8974. The Citizen’s Charter, issued by DPWH itself on December 4, 2013, explicitly provides that the documentary stamp tax, transfer tax, and registration fee due on the transfer of the title of land in the name of the Republic shall be shouldered by the implementing agency of the DPWH, while the capital gains tax shall be paid by the affected property owner. (REPUBLIC OF THE
PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS VS. ARLENE R. SORIANO, G.R. NO. 211666, FEBRUARY 25, 2015, J. PERALTA)
It should be noted that a DST is in the nature of an excise tax because it is imposed upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. DST is a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, or transfer of an obligation, right or property incident thereto. DST is thus imposed on the exercise of these privileges through the execution of specific instruments, independently of the legal status of the transactions giving rise thereto. The transfer of real properties from SPPC to PSPC is not subject to DST considering that the same was not conveyed to or vested in PSPC by means of any specific deed, instrument or writing. There was no deed of assignment and transfer separately executed by the parties for the conveyance of the real properties. The conveyance of real properties not being embodied in a separate instrument but is incorporated in the merger plan, thus, PSPC is not liable to pay DST. Notably, R.A. No. 9243, entitled “An Act Rationalizing the Provisions of the Documentary Stamp Tax of the National Internal Revenue Code of 1997” was enacted and took effect on April 27, 2004, which exempts the transfer of real property of a corporation, which is a party to the merger or consolidation, to another corporation, which is also a party to the merger or consolidation, from the payment of DST. (COMMISSIONER OF INTERNAL REVENUE VS. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. NO. 192398, SEPTEMBER 29, 2014, J. VILLARAMA, JR.) HSBC issued SWIFT messages to its clients containing instructions about their accounts. HSBC paid DST on the said messages. However, later on, HSBC filed for tax refund for the DST it paid. CIR denied their claim. On review with the Supreme Court, it held that an electronic message 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 transaction contemplated under Section 181 of the Tax Code. They are also not bills of exchange due to their non-negotiability. Hence, they are not subject to DST. (THE HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED-PHILIPPINE BRANCHES VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 166018 & 167728, JUNE 4, 2014, J. LEONARDO-DE CASTRO) FRANCHISE TAX The amendment of the 1997 NIRC, in connection with Section 22 of R.A. 9337 abolished the franchise tax on domestic airlines and subjected PAL and similar entities to corporate income tax and value-added tax (VAT). PAL nevertheless remains exempt from taxes, duties, royalties, registrations, licenses, and other fees and charges, provided it pays corporate income tax as granted in its franchise agreement. Accordingly, PAL is left with no other option but to pay its basic corporate income tax, the payment of which shall be in lieu of all other taxes, except VAT, and subject to certain conditions provided in its charter. In this case, the CTA found that PAL had paid basic corporate income tax for fiscal year ending 31 March 2006. Consequently, PAL may now claim exemption from taxes, duties, charges, royalties, or fees due on all importations of its commissary and catering supplies, provided it shows that 1) such articles or supplies or materials are imported for use in its transport and non-transport operations and other activities incidental thereto; and 2) they are not locally available in reasonable quantity, quality, or price. (REPUBLIC OF THE PHILIPPINES, REP. BY THE
COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC. (PAL) / COMMISSIONER OF INTERNAL REVENUE VS. PHILIPPINE AIRLINES, INC. (PAL), G.R. NO. 209353-54/G.R. NOS. 211733-34, JULY 6, 2015)
A corporation that has been ordered to pay franchise tax delinquency but which facilities, including its nationwide franchise, had been transferred to the National Transmission Corporation (TRANSCO) by operation of law during the time of the alleged delinquency, cannot be ordered to pay as it is not the proper party subject to the local franchise tax, the transferee being the one liable. (NATIONAL
POWER CORPORATION VS. PROVINCIAL GOVERNMENT OF BATAAN, SANGGUNIANG PANLALAWIGAN OF BATAAN, PASTOR B. VICHUACO (IN HIS OFFICIAL CAPACITY AS PROVINCIAL TREASURER OF BATAAN) AND THE REGISTER OF DEEDS OF THE PROVINCE OF BATAAN, G.R. NO. 180654, APRIL 21, 2014, J. ABAD) EXCISE TAX Section 145(C) of the NIRC is clear that the excise tax on cigarettes packed by machine is imposed per pack. "Per pack" was not given a clear definition by the NIRC. However, a "pack" would normally refer to a number of individual components packaged as a unit. Under the same provision, cigarette manufacturers are permitted to bundle cigarettes packed by machine in the maximum number of 20 sticks and aside from 20's, the law also allows packaging combinations of not more than 20's -it can be 4 pouches of 5 cigarette sticks in a pack (4x5's), 2 pouches of 10 cigarette sticks in a pack (2xl0's), etc. Based on this maximum packaging and allowable combinations, the BIR, with RA 10351 as basis, issued RR 17-2012. The BIR also released RMC 90-2012, specifically Annex "D-1" on Cigarettes Packed by Machine, in accordance with RA 10351 and RR 17-2012, showing in tabular form the different brands of locally-manufactured cigarettes packed by machine with the brand names, content/unit (pack), net retail price, and the applicable excise tax rates effective 1 January 2013. The net retail price of some brand names was converted into individual packages of 5’s or 10’s pursuant to Section 11 of RR 17-2012. xxx From the above discussion, it can be gleaned that the lawmakers intended to impose the excise tax on every pack of cigarettes that come in 20 sticks. Individual pouches or packaging combinations of 5's and 10's for retail purposes are allowed and will be subjected to the same excise tax rate as long as they are bundled together by not more than 20 sticks. Thus, by issuing Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012, the BIR went beyond the express provisions of RA 10351. In this case, Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012 clearly contravened the provisions of RA 10351. It is a well-settled principle that a revenue regulation cannot amend the law it seeks to implement. In Commissioner of Internal Revenue v. Seagate Technology (Philippines), we held that a mere administrative issuance, like a BIR regulation, cannot amend the law; the former cannot purport to do any more than implement the latter. The courts will not countenance an administrative regulation that overrides the statute it seeks to implement. In the present case, a reading of Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012 reveals that they are not simply regulations to implement RA 10351. They are amendatory provisions which require cigarette manufacturers to be liable to pay for more tax than the law, RA 10351, allows. The BIR, in issuing these revenue regulations, created an additional tax liability for packaging combinations smaller than 20 cigarette sticks. In so doing, the BIR amended the law, an act beyond the power of the BIR to do. In sum, we agree with the ruling of the RTC that Section 11 of RR 17-2012 and Annex "D-1" on Cigarettes Packed by Machine of RMC 90-2012 are null and void. Excise tax on cigarettes packed by machine shall be imposed on the packaging combination of 20 cigarette sticks as a whole and not to individual packaging combinations or pouches of 5's, 10's, etc. (SECRETARY OF FINANCE CESAR V. PURISIMA VS. PHILIPPINE TOBACCO INSTITUTE, INC., GR NO. 210251, APRIL 17, 2017, J. CARPIO)
Lastly, as in the abovecited cases, petitioners in the present petition again raise the issue regarding PAL's alleged failure to comply with the conditions set by Section 13 of PD 1590 for its imported tobacco and alcohol products to be exempt from excise tax. These conditions are: (1) such 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 reasonable quantity, quality and price. However, as this Court has previously held, the matter as to PAL's supposed noncompliance with the conditions set by Section 13 of P.D. 1590 for its imported supplies to be exempt from excise tax, are factual determinations that are best left to the CTA, which found that PAL had, in fact, complied with the above conditions. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF
CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NO. 215705-07 FEBRUARY 22, 2017, J. PERALTA)
Whether the Bureau of Internal Revenue may issue notices of discrepancy that effectively changes "San Mig Light"'s classification from new brand to variant - the issues involve an application of Section 143 of the 1997 National Internal Revenue Code (Tax Code), as amended, on the definition of a variant, which is subject to a higher excise tax rate than a new brand. This case also applies the requirement in Rep. Act No. 9334 that reclassification of certain fermented liquor products introduced between January 1, 1997 and December 31, 2003 can only be done by an act of Congress. Excise taxes are imposed on the production, sale, or consumption of specific goods. Generally, excise taxes on domestic products are paid by the manufacturer or producer before removal of those products from the place of production. The excise tax based on weight, volume capacity, or any other physical unit of measurement is referred to as "specific tax." If based on selling price or other specified value, it is referred to as "ad valorem" tax. The excise tax on beer is a specific tax based on volume, or on a per liter basis. Before its amendment, Section 143 provided for three (3) layers of tax rates, depending on the net retail price per liter. How a new beer product is taxed depends on its classification, i.e. whether it is a variant of an existing brand or a new brand. Variants of a brand that were introduced in the market after January 1, 1997 are taxed under the highest tax classification of any variant of the brand. On the other hand, new brands are Initially classified and taxed according to their suggested net retail price, until a survey is conducted by the Bureau of Internal Revenue to determine their current net retail price in accordance with the specified procedure. Parenthetically, the Bureau of Internal Revenue's actions reflect its admission and confirmation that "San Mig Light" is a new brand. (COMMISSIONER OF INTERNAL REVENUE VS. SAN MIGUEL CORPORATION, G.R. NOS. 205045 & 205723, JANUARY 25, 2017, J. LEONEN) Any reclassification of fermented liquor products should be by act of Congress. Section 143 of the Tax Code, as amended by Rep. Act No. 9334, provides for this classification freeze referred to by the parties. In any event, petitioner's letters and Notices of Discrepancy, which effectively changed San Mig Light's brand's classification from "new brand to variant of existing brand," necessarily changes San Mig Light's tax bracket. Based on the legislative intent behind the classification freeze provision, petitioner has no power to do this. A reclassification of a fermented liquor brand introduced between January 1, 1997 and December 31, 2003, such as "San Mig Light," must be by act of Congress. There was none in this case. A variant under the Tax Code has a technical meaning. It is determined by the brand (name) or logo of the beer product. The variant contemplated under the tax Code has a technical meaning. A variant is determined by the brand (name) of the beer product, whether it was formed by prefixing or suffixing a modifier to the root name of the alleged parent brand, or whether it carries the same logo or design. The purpose behind the definition was to properly tax brands that
were presumed to be riding on the popularity of previously registered brands by being marketed under an almost identical name with a prefix, suffix, or a variant. It seeks to address price differentials employed by a manufacturer on similar products differentiated only in brand or design. Specifically, the provision was meant to obviate any tax avoidance by manufacturing firms from the sale of lower priced variants of its existing beer brands, thus, falling in the lower tax bracket with lower excise tax rates. To favor government, a variant of a brand is taxed according to the highest rate of tax for that particular brand. "San Mig Light" and "Pale Pilsen" do not share a root word. Neither is there an existing brand in the list (Annexes C-1 and C-2 of the Tax Code) called "San Mig" to conclude that "Light" is a suffix rendering "San Mig Light" as its "variant." As discussed in the Court of Tax Appeals Decision, "San Mig Light" should be considered as one brand name. Respondent's statements describing San Mig Light as a low-calorie variant is not conclusive of its classification as a variant for excise tax purposes. Burdens are not to be imposed nor presumed to be imposed beyond the plain and express terms of the law. "The general rule of requiring adherence to the letter in construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act are not to be extended by implication." Furthermore, respondent's payment of the higher taxes starting January 30, 2004 after deficiency assessments were made cannot be considered as an admission that its San Mig Light is a variant. Section 130(A)(2) of the Tax Code requires payment of excise tax "before removal of domestic products from place of production." These payments were made in protest as respondent subsequently filed refund claims. Because the Bureau of Internal Revenue granted respondent's request in its October 27, 1999 letter and confirmed this grant in its subsequent letters, respondent cannot be faulted for relying on these actions by the Bureau of Internal Revenue. The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the mistakes or errors of its agents is conceded. However, this authority must be exercised reasonably, i.e., only when the action or ruling is patently erroneous or patently contrary to law. For the presumption lies in the regularity of performance of official duty, and reasonable care has been exercised by the revenue officer or agent in evaluating the facts before him or her prior to rendering his or her decision or ruling—in this case, prior to the approval of the registration of San Mig Light as a new brand for excise tax purposes. A contrary view will create disorder and confusion in the operations of the Bureau of Internal Revenue and open the administrative agency to inconsistencies in the administration and enforcement of tax laws. (COMMISSIONER OF INTERNAL REVENUE VS. SAN MIGUEL
CORPORATION, G.R. NOS. 205045 & 205723, JANUARY 25, 2017, J. LEONEN)
Excise tax on petroleum products is essentially a tax on property, the direct liability for which pertains to the statutory taxpayer (i.e., manufacturer, producer or importer). Any excise tax paid by the statutory taxpayer on petroleum products sold to any of the entities or agencies named in Section 135 of the National Internal Revenue Code (NIRC) exempt from excise tax is deemed illegal or erroneous, and should be credited or refunded to the payor pursuant to Section 204 of the NIRC. This is because the exemption granted under Section 135 of the NIRC must be construed in favor of the property itself, that is, the petroleum products. (CHEVRON PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE G.R. NO. 210836. SEPTEMBER 1, 2015) Stemmed leaf tobacco is subject to the specific tax under Section 141(b). It is a partially prepared tobacco. The removal of the stem or midrib from the leaf tobacco makes the resulting stemmed leaf tobacco a prepared or partially prepared tobacco. Since the Tax Code contained no definition of “partially prepared tobacco,” then the term should be construed in its general, ordinary, and comprehensive sense. However, importation of stemmed leaf tobacco is not included in the exemption under Section 137. The transaction contemplated in Section 137 does not include
importation of stemmed leaf tobacco for the reason that the law uses the word “sold” to describe the transaction of transferring the raw materials from one manufacturer to another. Finally, excise taxes are essentially taxes on property because they are levied on certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and on goods imported. In this case, there is no double taxation in the prohibited sense despite the fact that they are paying the specific tax on the raw material and on the finished product in which the raw material was a part, because the specific tax is imposed by explicit provisions of the Tax Code on two different articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette. (LA SUERTE CIGAR & CIGARETTE FACTORY VS. COURT OF APPEALS AND
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 125346, G.R. NOS. 136328-29, G.R. NO. 144942, G.R. NO. 148605, G.R. NO. 158197, G.R. NO. 165499, NOVEMBER 11, 2014, J. LEONEN)
Petitioner filed the instant petition assailing the decision of the CTA finding PAL exempt from payment of excise tax. Affirming the decision of the CTA the SC ruled that PD 1590 has not been revoked by the NIRC of 1997, as amended. Or to be more precise, the tax privilege of PAL provided in Sec. 13 of PD 1590 has not been revoked by Sec. 131 of the NIRC of 1997, as amended by Sec. 6 of RA 9334. Such being the case, PAL is indeed exempt from payment of excise tax. (COMMISSIONER OF INTERNAL REVENUE AND COMMISSIONER OF CUSTOMS VS. PHILIPPINE AIRLINES, INC., G.R. NOS. 212536-37, AUGUST 27, 2014, J. VELASCO, JR.) FINAL WITHHOLDING TAX Should there have been a simultaneous sale to 20 or more lenders/investors, the Poverty Eradication and Alleviation Certificates or the PEACe Bonds are deemed deposit substitutes within the meaning of Sec. 22(Y) of the 1997 NIRC and RCBC Capital would have been obliged to pay the 20% FWT on the interest or discount from the PEACe Bonds. Further, the obligation to withhold the 20% final tax on the corresponding interest from the PEACe Bonds would likewise be required of any lender/investor had the latter turned around and sold said PEACe Bonds, whether in whole or part, simultaneously to 20 or more lenders or investors. The Court notes, however, that under Section 24 of the 1997 NIRC, interest income received by individuals from long-term deposits or investments with a holding period of not less than five (5) years is exempt from the final tax. Thus, should the PEACe Bonds be found to be within the coverage of deposit substitutes, the proper procedure was for the Bureau of Treasury to pay the face value of the PEACe Bonds to the bondholders and for the BIR to collect the unpaid FWT directly from RCBC Capital, or any lender or investor if such be the case, as the withholding agents. (BANCO DE ORO, ET AL. VS. REPUBLIC OF THE PHILIPPINES, ET AL., G.R. NO. 198756, JANUARY 13, 2015, J. LEONEN) VALUE- ADDED TAX The amounts earmarked and eventually paid by MEDICARD to the medical service providers do not form part of gross receipts for VAT purposes. Since an HMO like MEDICARD is primarily engaged in arranging for coverage or designated managed care services that are needed by plan holders/members for fixed prepaid membership fees and for a specified period of time, then MEDICARD is principally engaged in the sale of services. Its VAT base and corresponding liability is, thus, determined under Section 108(A) of the Tax Code, as amended by Republic Act No. 9337. What applies to MEDICARD is the definition of gross receipts of an HMO under RR No. 16-2005 and not the modified definition of gross receipts in general under the RR No. 4-2007. Xxx In the proceedings
below, the nature of MEDICARD's business and the extent of the services it rendered are not seriously disputed. As an HMO, MEDICARD primarily acts as an intermediary between the purchaser of healthcare services (its members) and the healthcare providers doctors, hospitals and clinics for a fee. By enrolling membership with MEDICARD, its members will be able to avail of the pre-arranged medical services from its accredited healthcare providers without the necessary protocol of posting cash bonds or deposits prior to being attended to or admitted to hospitals or clinics, especially during emergencies, at any given time. Apart from this, MEDICARD may also directly provide medical, hospital and laboratory services, which depends upon its member's choice. Thus, in the course of its business as such, MEDICARD members can either avail of medical services from MEDICARD's accredited healthcare providers or directly from MEDICARD. In the former, MEDICARD members obviously knew that beyond the agreement to pre-arrange the healthcare needs of its members, MEDICARD would not actually be providing the actual healthcare service. Thus, based on industry practice, MEDICARD informs its would-be member beforehand that 80% of the amount would be earmarked for medical utilization and only the remaining 20% comprises its service fee. In the latter case, MEDICARD's sale of its services is exempt from VAT under Section 109(G). The CTA's ruling and CIR's Comment have not pointed to any portion of Section 108 of the NIRC that would extend the definition of gross receipts even to amounts that do not only pertain to the services to be performed by another person, other than the taxpayer, but even to amounts that were indisputably utilized not by MEDICARD itself but by the medical service providers. In Philippine Health Care Providers, Inc. v. Commissioner of Internal Revenue, the Court adopted the principal object and purpose object in determining whether the MEDICARD therein is engaged in the business of insurance and therefore liable for documentary stamp tax. The Court held therein that an HMO engaged in preventive, diagnostic and curative medical services is not engaged in the business of an insurance. In sum, the Court said that the main difference between an HMO and an insurance company is that HMOs undertake to provide or arrange for the provision of medical services through participating physicians while insurance companies simply undertake to indemnify the insured for medical expenses incurred up to a pre-agreed limit. In the present case, the VAT is a tax on the value added by the performance of the service by the taxpayer. It is, thus, this service and the value charged thereof by the taxpayer that is taxable under the NIRC. For this Court to subject the entire amount of MEDICARD's gross receipts without exclusion, the authority should have been reasonably founded on the language of the statute. That language is wanting in this case. (MEDICARD. MEDICARD
PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE, GR NO. 222743, APRIL 5, 2017, J. REYES) In Visayas Geothermal Power Company v. Commissioner of Internal Revenue, the Court came up with an outline summarizing the pronouncements in San Roque, to wit: For clarity and guidance, the Court deems it proper to outline the rules laid down in San Roque with regard to claims for refund or tax credit of unutilized creditable input VAT. They are as follows: 1. When to file an administrative claim with the CIR: a. General rule (Section 112(A) and Mirant case) Within 2 years from the close of the taxable quarter when the sales were made. b. Exception
(Atlas case) Within 2 years from the date of payment of the output VAT, if the administrative claim was filed from June 8, 2007 (promulgation of Atlas) to September 12, 2008 (promulgation of Mirant). 2. When to file a judicial claim with the CTA: a. General rule Section 112(D); not Section 229 i. Within 30 days from the full or partial denial of the administrative claim by the CIR; or ii. Within 30 days from the expiration of the 120-day period provided to the CIR to decide on the claim. This is mandatory and jurisdictional beginning January 1, 1998 (effectivity of 1997 NIRC). b. Exception BIR Ruling No. DA-489-03.
The judicial claim need not await the expiration of the 120-day period, if such was filed from December 10, 2003(issuance of BIR Ruling No. DA-489-03) to October 6, 2010 (promulgation of Aichi). (SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR
NO. 201326, FEB 8, 2017, J. CAGUIOA)
In Burmeister, the Court clarified that an essential condition to qualify for zero-rating under the aforequoted provision is that the service-recipient must be doing business outside the Philippines. Following Burmeister, the Court, in Accenture, Inc. v. Commissioner of Internal Revenue, (Accenture), emphasized that a taxpayer claiming for a VAT refund or credit under Section 108(B) has the burden to prove not only that the recipient of the service is a foreign corporation, but also that said corporation is doing business outside the Philippines. (SITEL PHILIPPINES CORPORATION
(FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO. 201326, FEB 8, 2017, J. CAGUIOA)
The CTA Division also did not err when it denied the amount of P2,668,852.55, allegedly representing input taxes claimed on Sitel's domestic purchases of goods and services which are supported by invoices/receipts with pre-printed TIN-V. In Western Mindanao Power Corp. v. Commissioner of Internal Revenue, the Court ruled that in a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the claim under substantive law, he must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit and compliance with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. The NIRC requires that the creditable input VAT should be evidenced by a VAT invoice or official receipt, which may only be considered as such when the TIN-VAT is printed thereon, as required by Section 4.108-1 of RR 7-95. In the same vein, considering that the subject invoice/official receipts are not imprinted with the taxpayer's TIN followed by the word VAT, these would not be considered as VAT invoices/official receipts and would not give rise to any creditable input VAT in favor of Sitel. (SITEL PHILIPPINES CORPORATION
(FORMERLY CLIENTLOGIC PHILS., INC.), VS. CIR, GR NO. 201326, FEB 8, 2017, J. CAGUIOA)
For internal revenue purposes, the sale of raw cane sugar is exempt from VAT because it is considered to be in its original state. On the other hand, refined sugar is an agricultural product that can no longer
be considered to be in its original state because it has undergone the refining process; its sale is thus subject to VAT. Although the sale of refined sugar is generally subject to VAT, such transaction may nevertheless qualify as a VAT-exempt transaction if the sale is made by a cooperative. Under Section 109(1) of the NIRC, sales by agricultural cooperatives are exempt from VAT provided the following conditions concur, viz: First, the seller must be an agricultural cooperative duly registered with the CDA. An agricultural cooperative is "duly registered" when it has been issued a certificate of registration by the CDA. This certificate is conclusive evidence of its registration. Second, the cooperative must sell either: 1) exclusively to its members; or 2) to both members and non-members, its produce, whether in its original state or processed form. UCSFA-MPC satisfies these two requisites. (COMMISSIONER OF INTERNAL REVENUE VS. UNITED
CADIZ SUGAR FARMERS ASSOCIATION MULTI-PURPOSE COOPERATIVE, G.R. NO. 209776, DECEMBER 7, 2016, J. BRION) Subsequent to the Aichi ruling and during the pendency of the case at bar, the Supreme Court En Banc resolved the consolidated cases involved in Commissioner of Internal Revenue vs. San Roque Power and stated that a judicial claim for refund of input VAT which was filed with the CTA before the lapse of the 120-day period under Section 112 of the NIRC is considered to have been timely made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of the Aichi doctrine which was promulgated on October 6, 2010. It is undisputed that the date of filing in the case at bar falls within the period following the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 but before the promulgation of the Aichi case on October 6, 2010. In accordance with the doctrine laid down in San Roque, we rule that petitioner's judicial claim had been timely filed and should be given due course and consideration by the CTA. (DEUTSCHE KNOWLEDGE SERVICES PTE. LTD. VS. COMMISSIONER OF INTERNAL
REVENUE, G.R. NO. 197980, DECEMBER 1, 2016, J. LEONARDO-DE CASTRO)
The CTA did not err in denying the claim for refund on the ground that the petitioner had not established its zero-rated sales of services to PIATCO through the presentation of official receipts. In this regard, as evidence of an administrative claim for tax refund or tax credit, there is a certain distinction between a receipt and an invoice. Section 113 of the NIRC of 1997 provides that a VAT invoice is necessary for every sale, barter or exchange of goods or properties, while a VAT official receipt properly pertains to every lease of goods or properties; as well as to every sale, barter or exchange of services. A "sales or commercial invoice" is a written account of goods sold or services rendered indicating the prices charged therefor or a list by whatever name it is known which is used in the ordinary course of business evidencing sale and transfer or agreement to sell or transfer goods and services. A "receipt" on the other hand is a written acknowledgment of the fact of payment in money or other settlement between seller and buyer of goods, debtor or creditor, or person rendering services and client or customer. A VAT invoice is the seller's best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyer's best evidence of the payment of goods or services received from the seller. A VAT invoice and a VAT receipt should not be confused and made to refer to one and the same thing. Certainly, neither does the law intend the two to be used alternatively. The petitioner submitted sales invoices, not official receipts, to support its claim for refund. In light of the aforestated distinction between a receipt and an invoice, the submissions were
inadequate for the purpose thereby intended. The mere fact that an application for zero rating has been approved by the CIR does not, by itself, justify the grant of a refund or tax credit. The taxpayer claiming the refund must further comply with the invoicing and accounting requirements mandated by the NIRC, as well as by revenue regulations implementing them. (TAKENAKA CORPORATION – PHILIPPINE BRANCH VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 193321, OCTOBER 19, 2016, J. BERSAMIN) The failure to indicate the words “zero-rated” on the invoices and receipts issued by a taxpayer would result in the denial of the claim for refund or tax credit. The Court has consistently ruled on the denial of a claim for refund or tax credit whenever the word “zero-rated” has been omitted on the invoices or sale receipts of the taxpayer-claimant. Furthermore, the CTA is a highly specialized court dedicated exclusively to the study and consideration of revenue-related problems, in which it has necessarily developed an expertise. Hence, its factual findings, when supported by substantial evidence, will not be disturbed on appeal. (EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 183531, MARCH 25, 2015, J. REYES)
Cargill filed two claims for refund. However, the court ruled that the rule must therefore be that during the period December 10, 2003 (when BIR Ruling No. DA-489-03 was issued) to October 6, 2010 (when the Aichi case was promulgated), taxpayers-claimants need not observe the 120-day period before it could file a judicial claim for refund of excess input VAT before the CTA. Before and after the aforementioned period (i.e., December 10, 2003 to October 6, 2010), the observance of the 120-day period is mandatory and jurisdictional to the filing of such claim. (CARGILL PHILIPPINES, INC VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 203774, MARCH 11, 2015, J. PERLAS- BERNABE) This Court has consistently held as fatal the failure to print the word “zero-rated” on the VAT invoices or official receipts in claims for a refund or credit of input VAT on zero-rated sales, even if the claims were made prior to the effectivity of R.A. 9337. As to the sufficiency of a Northern Mindanao’s company invoice to prove the sales of services to NPC, the Court finds that this claim is without sufficient legal basis. A VAT invoice is the seller’s best proof of the sale of goods or services to the buyer, while a VAT receipt is the buyer’s best evidence of the payment of goods or services received from the seller. The requirement of imprinting the word “zero-rated” proceeds from the rule-making authority granted to the Secretary of Finance by the NIRC for the efficient enforcement of the same Tax Code and its amendments. A VAT-registered person whose sales are zero-rated or effectively zero-rated, Section 112(A) specifically provides for a two-year prescriptive period after the close of the taxable quarter when the sales were made within which such taxpayer may apply for the issuance of a tax credit certificate or refund of creditable input tax. (NORTHERN MINDANAO POWER
CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 185115, FEBRUARY 18, 2015, CJ. SERENO) Section 112(C) of the 1997 Tax Code states the time requirements for filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for a refund or credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA. It is the 30-day period that is at issue in this case. (ROHM APOLLO SEMICONDUCTOR
PHILIPPINES VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 168950, JANUARY 14, 2015, C.J. SERENO)
Its petition for review having been denied by the CTA for being prematurely filed, petitioner filed the instant petition arguing that since it filed its judicial claim after the issuance of BIR Ruling No. DA-489-03, but before the adoption of the Aichi doctrine, it can invoke the said BIR Ruling. The SC ruled that the jurisdiction of the CTA over decisions or inaction of the CIR is only appellate in nature and, thus, necessarily requires the prior filing of an administrative case before the CIR under Section 112. A petition filed prior to the lapse of the 120-day period prescribed under said Section would be premature for violating the doctrine on the exhaustion of administrative remedies. There is, however, an exception to the mandatory and jurisdictional nature of the 120+30 day period. The Court in San Roque noted that BIR Ruling No. DA-489-03, dated December 10, 2003, expressly stated 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." Hence, 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 Aichi on October 6, 2010, where it was held that the 120+30 day period was mandatory and jurisdictional. (TAGANITO MINING CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 201195, NOVEMBER 26, 2014, J. MENDOZA) CE Luzon filed an action for refund of the VAT. The court ruled that While both claims for refund were filed within the two (2)-year prescriptive period, CE Luzon failed to comply with the 120-day period as it filed its judicial claim in C.T.A. Case No. 6792 four (4) days after the filing of the administrative claim, while in C.T.A. Case No. 6837, the judicial claim was filed a day after the filing of the administrative claim. Proceeding from the aforementioned jurisprudence, only C.T.A. Case No. 6792 should be dismissed on the ground of lack of jurisdiction for being prematurely filed. In contrast, CE Luzon filed its administrative and judicial claims for refund in C.T.A. Case No. 6837 during the period, i.e., from December 10, 2003 to October 6, 2010, when BIR Ruling No. DA-489-03 was in place. As such, the aforementioned rule on equitable estoppel operates in its favor, thereby shielding it from any supposed jurisdictional defect which would have attended the filing of its judicial claim before the expiration of the 120-day period. (COMMISSIONER OF INTERNAL REVENUE VS. CE LUZON
GEOTHERMAL POWER COMPANY, INC., G.R. NO. 190198, SEPTEMBER 17, 2014, J. PERLAS- BERNABE) Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can file his administrative claim for refund or credit at anytime within the two-year prescriptive period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on time. The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner decides the claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim with the CTA. This is not only the plain meaning but also the only logical interpretation of Section 112(A) and (C). (SAN ROQUE POWER CORPORATION VS.
COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 205543, JUNE 30, 2014, J. LEONARDO-DE CASTRO)
The 2-year period under Section 229 does not apply to appeals before the CTA in relation to claims for a refund or tax credit for unutilized creditable input VAT. Section 229 pertains to the recovery of taxes erroneously, illegally, or excessively collected. San Roque stressed that “input VAT is not ‘excessively’ collected as understood under Section 229 because, at the time the input VAT is collected, the amount paid is correct and proper.” It is, therefore, Section 112 which applies specifically with regard to claiming a refund or tax credit for unutilized creditable input VAT.
(VISAYAS GEOTHERMAL POWER COMPANY VS. COMMISSIONER OF INTERNAL REVENUE, G.R.
NO. 197525, JUNE 4, 2014, J. MENDOZA)
A claim for tax refund or credit, like a claim for tax refund exemption, is construed strictly against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+30 day periods as mandatory and jurisdictional. (MIRAMAR FISH COMPANY, INC., VS. COMMISSIONER OF INTERNAL REVENUE, G.R. NO. 185432, JUNE 4, 2014, J. PEREZ) LOCAL TAXATION Section 137 of Republic Act No. 7160 (the Local Government Code of 1991) is categorical in stating that franchise tax can only be imposed on businesses enjoying a franchise. This goes without saying that without a franchise, a local government unit cannot impose franchise tax. Indeed, the enactment of EPIRA separated the transmission and sub-transmission functions of the state-owned Napocor from its generation function, and transferred all its transmission assets to the then newly-created TRANSCO, which was wholly owned by PSALM Corporation at that time. Power generation is no longer considered a public utility operation, and companies which shall engage in power generation and supply of electricity are no longer required to secure a national franchise. This is expressly provided under Section 6 of EPIRA. EPIRA effectively removed power generation from the ambit of local franchise taxes. Hence, as regards Napocor's business of generating electricity, the franchise taxes sought to be collected by the Provincial Government of Bataan for the latter part of 2001 up to 2003 are devoid of any statutory basis. As regards Napocor's electric transmission function, under Section 8 of the same law, all transmission assets of Napocor were to be transferred to TRANSCO within six (6) months from the effectivity of EPIRA, or by December 26, 2001. Hence, until the transfer date of the transmission assets, which by express provision of EPIRA shall not be later than December 26, 2001, these assets, as well as the franchise, belong to and are operated by Napocor, and the latter is consequently subject to the local franchise tax. (NATIONAL POWER CORPORATION VS. PROVINCIAL GOVERNMENT OF BATAAN, GR 180654, MARCH 6, 2017, J. LEONEN) Under Section 187 of the Local Government Code of 1991, aggrieved taxpayers who question the validity or legality of a tax ordinance are required to file an appeal before the Secretary of Justice before they seek intervention from the regular courts. In Reyes v. Court of Appeals, this Court declared the mandatory nature of Section 187 of the Local Government Code of 1991. The doctrine of exhaustion of administrative remedies, like the doctrine on hierarchy of courts, is not an iron-clad rule. It admits of several well-defined exceptions. In Alta Vista Golf and Country Club v. City of Cebu, this Court excluded the case from the strict application of the principle on exhaustion of administrative remedies, particularly for non-compliance with Section 187 of the Local Government Code of 1991, on the ground that the issue raised in the Petition was purely legal. In this case, however, the issues involved are not purely legal. There are factual issues that need to be addressed for the proper disposition of the case. In other words, this case is still not ripe for adjudication. To question the validity of the ordinance, petitioners should have first filed an appeal before the Secretary of Justice. (CRISANTO M. AALA VS. HON. REY T. UY, G.R. NO. 202781, JANUARY 10,
Under Section 166 of the Local Government Code of 1991, local taxes "shall accrue on the first (1st) day of January of each year.” When the questioned ordinance was published in July 2012, the City Government of Tagum could not have immediately issued real property tax assessments. Hence, petitioners had ample time within which to question the validity of the tax ordinance. In cases where the validity or legality of a tax ordinance is questioned, the rule that real property taxes must first be paid before a protest is lodged does not apply. Taxpayers must first receive an assessment before this rule is triggered. In Jardine, this Court ruled that prior payment under protest is not required >> when the taxpayer is questioning the very authority of the assessor to impose taxes. Hence, if a taxpayer disputes the reasonableness of an increase in a real estate tax assessment, he is required to "first pay the tax" under protest. Otherwise, the city or municipal treasurer will not act on his protest. In the case at bench, however, the petitioners are questioning the very authority and power of the assessor, acting solely and independently, to impose the assessment and of the treasurer to collect the tax. These are not questions merely of amounts of the increase in the tax but attacks on the very validity of any increase. (CRISANTO M. AALA VS. HON. REY T. UY, G.R. NO. 202781, JANUARY 10, 2017, J. LEONEN)
Settled is the rule that should the taxpayer/real property owner question the excessiveness or reasonableness of the assessment, Section 252 of the LGC of 1991 directs that the taxpayer should first pay the tax due before his protest can be entertained. There shall be annotated on the tax receipts the words "paid under protest." It is only after the taxpayer has paid the tax due that he may file a protest in writing within 30 days from payment of the tax to the Provincial, City or Municipal Treasurer, who shall decide the protest within sixty days from receipt. In no case is the local treasurer obliged to entertain the protest unless the tax due has been paid. Moreover, as settled in jurisprudence, a claim for exemption from the payment of real property taxes does not actually question the assessor's authority to assess and collect such taxes, but pertains to the reasonableness or correctness of the assessment by the local assessor. By providing that real property not declared and proved as tax-exempt shall be included in the assessment roll, this implies that the local assessor has the authority to assess the property for realty taxes, and any subsequent claim for exemption shall be allowed only when sufficient proof has been adduced supporting the claim. Thus, if the property being taxed has not been dropped from the assessment roll, taxes must be paid under protest if the exemption from taxation is insisted upon. Finally, while it is evident in jurisprudence that the filing of motion for reconsideration before the LBAA is allowed, this Court finds that, inevitably, the filing of the appeal before the CBAA through registered mail on November 16, 2006 was already late. It is settled that the "fresh period rule" in the case of Domingo Neypes, et al. vs. Court of Appeals, et al. applies only to judicial appeals and not to administrative appeals. In the instant case, the subject appeal, i.e., appeal from a decision of the LBAA to the CBAA, is not judicial but administrative in nature. Thus, the "fresh period rule" in Neypes does not apply. (NATIONAL POWER
CORPORATION VS. THE PROVINCIAL TREASURER OF BENGUET, THE PROVINCIAL ASSESSOR OF BENGUET, THE MUNICIPAL TREASURER OF ITOGON, BENGUET AND THE MUNICIPAL ASSESSOR OF ITOGON, BENGUET, G.R. NO. 209303, NOVEMBER 14, 2016, J. PERALTA)
Indisputably, the power of LGUs to impose business taxes derives from Section 143 of the LGC. However, the same is subject to the explicit statutory impediment provided for under Section 133(h) of the same Code which prohibits LGUs from imposing “taxes, fees or charges on petroleum products.” It can, therefore, be deduced that although petroleum products are subject to excise tax, the same is specifically excluded from the broad power granted to LGUs under Section 143(h) of the