WESTERN MINDANAO POWER CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 181136, June 13, 2012, 2nd Division, 672 SCRA 350 Facts: WMPC is a corporation engaged in the production and sale of electricity registered as a VAT taxpayer with the BIR. WMPC alleges that it sells solely to the National Power Corporation and so pursuant to Section 108(b) (3) of the National Internal Revenue Code, its power generation services to NPC is zero-rated.
Under Section 112(A) of the NIRC, a VAT-registered taxpayer may, within two years after the close of the taxable quarter, apply for the issuance of a tax credit or refund of creditable input tax due or paid and attributable to zero-rated or effectively zero-rated sales. Hence WMPC filed with the CIR applications for a tax credit certificate of its input VAT. The CIR however argued that WMPC was not entitled to a tax refund in view of its failure to comply with the invoicing requirements provided in the ff. section:
SECTION 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: xxx 5. the word "zero rated" imprinted on the invoice covering zero-rated sales; and xxx
The CTA decided in favor of the CIR and dismissed WMPC’s petition regarding his claim for Tax Refunds. Issue: Whether or not WMPC is entitled for a refund or tax credit despite its non-compliance to the invoicing requirements -its Official Receipts don’t contain the phrase "zero-rated". WMPC is not entitled.
Ruling: Being a derogation of the sovereign authority, a statute granting tax exemption is strictly construed against the person or entity claiming the exemption. When based on such statute, a claim for tax refund partakes of the nature of an exemption. Hence, the same rule of strict interpretation against the taxpayer-claimant applies to the claim.
In a claim for tax refund or tax credit, the applicant must prove not only entitlement to the grant of the claim under substantive law. It must also show satisfaction of all the documentary and evidentiary requirements for an administrative claim for a refund or tax credit. The mere approval of WMPC’s application for zero-rating 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.
Under the NIRC, a creditable input tax should be evidenced by a VAT invoice or official receipt, which may only be considered as such when it complies with certain requirements. Such that "(i)f the sale is subject to zero percent (0%) value-added tax, the term ‘zero-rated sale’ shall be written or printed prominently on the invoice or receipt."
In the case at bar, WMPC failed to comply with the said requirements, that being the case, it cannot be entitled to the tax refund or tax credits that it claims.
TEAM PACIFIC CORPORATION VS DAZA GR NO. 167732 JULY 11, 2012
SECOND DIVISION (676 SCRA 82)
FACTS: Petitioner, TPC, is a domestic corporation engaged in the business of assembling and exporting semiconductor devices. TPC had been paying local business taxes assessed at ½ rate pursuant to Section 75(c) of Ordinance No. 24-93, otherwise known as the Taguig Revenue Code. When it renewed its business license in 2004, TPC’s business tax for the first quarter of 2004 was assessed in the sum of P208,109.77. Respondent, in assessing the tax, applied the full value of rates under Section 75 of the Taguig Revenue Code instead of the ½ rate under paragraph (c) of the same provision. On January 19, 2004, TPC paid the tax with protest. Subsequent to its April 13, 2004 demand for
refund or issuance of a tax credit, TPC filed on April 14, 2004 a petition for certiorari under Rule 65 before the RTC. TPC alleged that no formal action was taken regarding its protest on or before March 19, 2004 or within the period of 60 days. TPC contended that it was simply informed that the assessment based at the full rate was justified. The RTC dismissed the petition for lack of merit. Hence, this petition on pure questions of law.
ISSUES: 1.) Whether or not TPC availed the correct remedy against respondent’s illegal assessment when it appealed the lower court’s decision directly to the Supreme Court
HELD: Granted that a Rule 45 petition for review on certiorari is the proper mode of appeal when the issues raised are purely questions of law, TPC lost sight of the fact that, as amended by RA no. 9272, paragraph c (2) (a), Section 7 of RA No. 1125 has vested the Court of Tax Appeals with the exclusive appellate jurisdiction over, among others, appeals from the judgments, resolutions or orders of the RTC in tax collection cases originally decided by them in their respective territorial jurisdiction.
As amended by Section 9 of RA No. 9282, Section 11 of RA No. 1125 likewise requires that the appeal be perfected within thirty(30) days after receipt of the decision and shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure.
To our mind, TPC’s erroneous availment of the wrong mode of appeal and direct resort to this Court instead of the CTA both warrant the dismissal of the petition at bench. The rule is settled that the perfection of an appeal in the manner and within the period fixed by law is not only mandatory but jurisdictional and non-compliance with these legal requirements is fatal to a party’s cause.
CITY OF IRIGA v. CASURECO G.R. No. 192945, September 5, 2012 Second Division
680 SCRA 236
Facts: CASURECO is an electric cooperative created through PD 269 and registered with the National Electrification Administration (NEA). It distributes electric power within the City of Iriga and the “Rinconada” area.
In 2003, petitioner City of Iriga required CASURECO to submit a report of its gross receipts for the period 1997-2002. On the basis of the report submitted, it was assessed and required to pay franchise taxes due for the period 1998-2003. It refused to pay said taxes on the ground that it is an electric cooperative provisionally registered with the Cooperative Development Authority (CDA), and therefore exempt from the payment of local taxes. Thus, on March 15, 2004, petitioner filed a complaint for collection of local taxes against CASURECO before the RTC. CASURECO denied liability for the assessed taxes, asserting that the computation of the petitioner was erroneous because it included 1) gross receipts from service areas beyond the latter’s territorial jurisdiction; 2) taxes that had already prescribed; and 3) taxes during the period when it was still exempt from local government tax by virtue of its then subsisting registration with the CDA.
The RTC ruled that CASURECO is liable for franchise taxes based on its gross receipts from Iriga City and the Rinconada area on the ground that the “situs of taxation is the place where the privilege is exercised.” On Appeal by CASURECO, CA relieved CASURECO from liability to pay franchise taxes. It reasoned that CASURECO is a non-profit entity; not a “businesses enjoying a franchise” pursuant to Section 137 of the LGC and, thus, exempt from paying the assessed franchise tax.
Issues: (1) Whether or not CASURECO is liable for the payment of local franchise taxes; and
(2) Whether or not the situs of taxation is the place where the franchise holder exercises its franchise regardless of the place where its services or products are delivered.
Ruling: (1) Yes, CASURECO is liable to pay the assessed franchise tax. The Court held that the tax exemption (on payment of "all national government, local government and municipal taxes and fees, including franchise, filing, recordation, license or permit fees or taxes) granted to electric cooperatives under PD 269 was validly withdrawn by subsequent laws (RA 6938 and LGC) at the time of the assessment. Thus, CASURECO can no longer claim any exemption from the payment of local taxes, including the subject franchise tax.
Further, to be liable for local franchise tax, the following requisites should concur: (1) that one has a "franchise" in the sense of a secondary or special franchise; and (2) that it is exercising its rights or privileges under this franchise within the territory of the pertinent local government unit. By virtue of PD 269, NEA granted CASURECO a franchise to operate an electric light and power service for a period of fifty (50) years, and it is undisputed that CASURECO operates within Iriga City and the Rinconada area. It is, therefore, liable to pay franchise tax notwithstanding its non-profit nature.
In National Power Corporation v. City of Cabanatuan, the Court declared that “a franchise tax is a tax on the privilege of transacting business in the state and exercising corporate franchises granted by the state.” It is not levied on the corporation simply for existing as a corporation, upon its property or its income, but on its exercise of the rights or privileges granted to it by the government. It is within this context that the phrase “tax on businesses enjoying a franchise” in Section 137 of the LGC should be interpreted and understood.
(2) Yes, Since it partakes of the nature of an excise tax the situs of taxation is the place where the privilege is exercised, in this case in the City of Iriga, where CASURECO has its principal office and from where it operates, regardless of the place where its services or products are delivered. Hence, franchise tax covers all gross receipts from Iriga City and the “Rinconada area.”
The Court reiterates that a franchise tax is a tax levied on the exercise by an entity of the rights or privileges granted to it by the government. In the absence of a clear and subsisting legal provision granting it tax exemption, a franchise holder, though non-profit in nature, may validly be assessed franchise tax by a local government unit.
ASIA INTERNATIONAL AUCTIONEERS, INC. vs.CIR G.R. No. 179115, September 26, 2012, Supreme Court Second Division, 682 SCRA 49
FACTS: AIA operates within the Subic Special Economic Zone. CIR assessed it for deficiency value added tax (VAT) and excise tax.During the pendency of the case in 2007, Republic Act 9480 (RA 9480), otherwise known as the Tax Amnesty Act of 2007, took effect granting a tax amnesty to qualified taxpayers for all national internal revenue taxes for the taxable year 2005 and prior years, with or without assessments duly issued therefor, that have remained unpaid as of December 31, 2005. The Tax Amnesty Program under RA 9480 may be availed of by any person except those who are disqualified under Section 8…(a) Withholding agents with respect to their withholding tax liabilities; xxx.
Relevantly,AIA filed a Manifestation and Motion with Leave of the Honorable Court to Defer or Suspend Further Proceedings on the ground that it availed of the
Tax Amnesty Program under RA 9480. It submitted to the Court a Certification of Qualificationissued by the BIR stating that AIA "has availed and is qualified for Tax Amnesty for the Taxable Year 2005 and Prior Years" pursuant to RA 9480.
The CIR contends that AIA is disqualified under Section 8(a) of RA 9480 from availing itself of the Tax Amnesty Program because it is "deemed" a withholding agent for the deficiency taxes. The CIR also argues that AIA, being an accredited investor/taxpayer situated at the Subic Special Economic Zone, should have availed of the tax amnesty granted under RA 9399 and not under RA 9480.
ISSUE: 1) WON AIA is disqualified because it is deemed a withholding agent for the deficiency taxes. 2) WON AIA should have availed of the tax amnesty granted under RA 9399 instead. NO.
RULING: 1) NO, AIA is not a withholding agent. The CIR did not assess AIA as a withholding agent that failed to withhold or remit the deficiency VAT and excise tax to the BIR under relevant provisions of the Tax Code. Hence, the argument that AIA is "deemed" a withholding agent for these deficiency taxes is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes. To distinguish, in indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted or passed on to another person. On the other hand, in case of withholding taxes, the incidence and burden of taxation fall on the same entity, the statutory taxpayer. The burden of taxation is not shifted to the withholding agent who merely collects, by withholding, the tax due from income payments to entities arising from certain transactionsand remits the same to the government. Due to this difference, the deficiency VAT and excise tax cannot be "deemed" as withholding taxes merely because they constitute indirect taxes. Moreover, records support the conclusion that AIA was assessed not as a withholding agent but, as the one directly liable for the said deficiency taxes.
2) NO. AIA may avail of RA 9480.RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude taxpayers within its coverage from availing of other tax amnesty programs available or enacted in futurolike RA 9480. More so, RA 9480 does not exclude from its coverage taxpayers operating within special economic zones. As long as it is within the bounds of the law, a taxpayer has the liberty to choose which tax amnesty program it wants to avail.
Lastly, the Court takes judicial notice of the "Certification of Qualification" issued by Eduardo A. Baluyut, BIR Revenue District Officer, stating that AlA "has availed and is qualified for Tax Amnesty for the Taxable Year 2005 and Prior Years" pursuant to RA 9480. In the absence of sufficient evidence proving that the certification was issued in excess of authority, the presumption that it was issued in the regular performance of the revenue district officer's official duty stands.
COMMISSIONER OF INTERNAL REVENUE v. SAN MIGUEL CORPORATION
G.R. No. 184428 November 23, 2011 FACTS:
San Miguel Corporation, a domestic corporation engaged in the manufacture and sale of fermented liquor, produces as one of its products “Red Horse” beer which is sold in 500-ml. and 1-liter bottle variants.
On January 1, 1998, Republic Act (R.A.) No. 8424 or the Tax Reform Act of 1997 took effect. It reproduced, as Section 143 thereof, the provisions of Section 140 of the old National Internal Revenue Code as amended by R.A. No. 8240 [2] which became effective on January 1, 1997. Section 143 of the Tax Reform Act of 1997 reads:
SEC. 143. Fermented Liquor. - There shall be levied, assessed and collected an excise tax on beer, lager
beer, ale, porter and other fermented liquors except tuba, basi, tapuy and similar domestic fermented liquors in accordance with the following schedule:
x x x
The excise tax from any brand of fermented liquor within the next three (3) years from the effectivity of Republic Act No. 8240 shall not be lower than the tax which was due from each brand on October 1, 1996.
The rates of excise tax on fermented liquor under paragraphs (a), (b) and (c) hereof shall be increased by twelve percent (12%) on January 1, 2000.
Thereafter, on December 16, 1999, the Secretary of Finance issued Revenue Regulations No. 17-99 increasing the applicable tax rates on fermented liquor by 12%. This increase, however, was qualified by the last paragraph of Section 1 of Revenue Regulations No. 17-99 which reads:
Provided, however, that the new specific tax rate for any existing brand of cigars, cigarettes packed by machine, distilled spirits, wines and fermented liquors shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.
For the period June 1, 2004 to December 31, 2004, respondent was assessed and paid excise taxes amounting to P2,286,488,861.58 for the 323,407,194 liters of Red Horse beer products removed from its plants. Said amount was computed based on the tax rate of P7.07/liter or the tax rate which was being applied to its products prior to January 1, 2000, as the last paragraph of Section 1 of Revenue Regulations No. 17-99 provided that the new specific tax rate for fermented liquors “shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.” Respondent, however, later contended that the said qualification in the last paragraph of Section 1 of Revenue Regulations No. 17-99 has no basis in the plain wording of Section 143. Respondent argued that the applicable tax rate was only the P 6.89/liter tax rate stated in Revenue Regulations No. 17-99, and that accordingly, its excise taxes should have been only P2,228,275,566.66.
ISSUE:
W/N the provision in the last paragraph of Section 1 of Revenue Regulations No. 17-99 is an invalid administrative interpretation of Section 143 of the Tax Reform Act of 1997
HELD:
YES. During the 3-year transition period, Section 143 provides that “the excise tax from any brand of fermented liquor…shall not be lower than the tax which was due from each brand on October 1, 1996.” After the transitory period, Section 143 provides that the excise tax rate shall be the figures provided under paragraphs (a), (b) and (c) of Section 143 but increased by 12%, without regard to whether such rate is lower or higher than the tax rate that is actually being paid prior to January 1, 2000 and therefore, without regard to whether the revenue collection starting January 1, 2000 may turn out to be lower than that collected prior to said date. Revenue Regulations No. 17-99, however, created a new tax rate when it added in the last paragraph of Section 1 thereof, the qualification that the tax due after the 12% increase becomes effective “shall not be lower than the tax actually paid prior to January 1, 2000.” As there is nothing in Section 143 of the Tax Reform Act of 1997 which clothes the BIR with the power or authority to rule that the new specific tax rate should not be lower than the excise tax that is actually being paid prior to January 1, 2000, such interpretation is clearly an invalid exercise of the power of the Secretary of Finance to interpret tax laws and to promulgate rules and regulations necessary for the effective enforcement of the Tax Reform Act of 1997. Said qualification must, perforce, be struck down as invalid and of no effect.
It bears reiterating that tax burdens are not to be imposed, nor presumed to be imposed beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails as said rule or regulation cannot go beyond the terms and provisions of the basic law. It must be stressed that the objective of issuing BIR Revenue Regulations is to establish parameters or guidelines within which our tax laws should be implemented, and not to amend or modify its substantive meaning and import.
SECOND DIVISION
G.R. No. 180006: September 28, 2011(658 SCRA 289) COMMISSIONER OF INTERNAL REVENUE, PETITIONER, VS.
FORTUNE TOBACCO CORPORATION,
RESPONDENT.
Facts: Prior to January 1, 1997, manufacturers of
cigarettes are subject to pay excisetaxes on their products in the form of ad valorem taxes. Beginning January 1, 1997, Republic Act No. 8240 took effect and a shift to specific taxes was made. The 1977 Tax Code was later repealed by RA 8424, or the National Internal Revenue Code of 1997. To implement the 12% increase in specific taxes mandated under Section 145 of the 1997 Tax Code and pursuant to its rule-making powers, the CIR issued RR 17-99.
Fortune Tobacco Corporation paid in advance excise taxes for the year 2003 in the amount of P11.15 billion, and for the period covering January 1 to May 31, 2004 in the amount of P4.90 billion. In June 2004, Fortune Tobacco filed an administrative claim for tax refund with the CIR for erroneously and/or illegally collected taxes in the amount of P491 million. Without waiting for the CIR's action on its claim, Fortune Tobacco filed with the CTA a
judicial claim for tax refund.
Issue: Whether or not Fortune Tobacco Corporation is
entitled to refund.
Ruling: Yes, Fortune Tobacco Corporation is entitled to
refund because the proviso in Section 1 of RR 17-99 was invalid.
Section 145 states that during the transition period, i.e., within the next three (3) years from the effectivity of the Tax Code, the excise tax from any brand of cigarettes shall not be lower than the tax due from each brand on 1 October 1996. This qualification, however, is conspicuously absent as regards the 12% increase which is to be applied on cigars and cigarettes packed by machine, among others, effective on 1 January 2000. The proviso in Section 1 of RR 17-99 clearly went beyond the terms of the law it was supposed to implement, and therefore entitles Fortune Tobacco to claim a refund of the overpaid excise taxes collected pursuant to this provision.
RATIONALE: The omission in the law in fact reveals the legislative intent not to adopt the "higher tax rule"
The 1997 Tax Code's provisions on excise taxes have omitted the adoption of certain tax measures. These omissions are telling indications of the intent of Congress not to adopt the omitted tax measures; they are not simply unintended lapses in the law's wording that, as the CIR claims, are nevertheless covered by the spirit of the law. Had the intention of Congress been solely to increase revenue collection, a provision similar to the third paragraph of Section 145(c) would have been incorporated in Sections 141 and 142 of the 1997 Tax Code. This, however, is not the case. The Congress was not unaware that the "higher tax rule" is a proviso that should ideally apply to the increase after the transition period (as the CIR embodied in the proviso in Section 1 of RR 17-99).
This remark notwithstanding, the final version of the bill that became RA 9334 contained no provision similar to the proviso in Section 1 of RR 17-99 that imposed the tax due as of December 31, 1999 if this tax is higher than the new specific tax rates. Thus, it appears that despite its awareness of the need to protect the increase
of excise taxes to increase government revenue, Congress ultimately decided against adopting the
"higher tax rule.
DIAGEO PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 183553 : November 12, 2012 Second Division
685 SCRA 168
FACTS Petitioner Diageo Philippines, Inc. (Diageo) is primarily engaged in the business of importing, exporting, manufacturing, marketing, distributing, buying and selling, by wholesale, all kinds of beverages and liquors. Ï‚It is registered with the Bureau of Internal Revenue (BIR) as an excise tax taxpayer.
Diageo purchased raw alcohol from its supplier for use in the manufacture of its beverage and liquor products. The supplier imported the raw alcohol and paid the related excise taxes thereon before the same were sold to the petitioner. The purchase price for the raw alcohol included, among others, the excise taxes paid by the supplier.
Diageo filed with the BIR applications for tax refund/issuance of tax credit certificates corresponding to the excise taxes which its supplier paid but passed on to it as part of the purchase price of the subject raw alcohol invoking Section 130(D) of the Tax Code.
CIR, CTA and CTA en banc ruled that Diageo is not the proper party to claim a refund but the supplier.
ISSUE WON Diageo has the legal personality to file a claim for refund or tax credit for the excise taxes paid by its supplier on the raw alcohol it purchased and used in the manufacture of its exported goods.
HELD No. Diageo has no legal personality to
file the claim.
Excise taxes partake of the nature of indirect taxes. Excise taxes imposed under Title VI of the Tax Code are taxes on property which are imposed on "goods manufactured or produced in the Philippines for domestic sales or consumption or for any other disposition and to things imported." Though excise taxes are paid by the manufacturer or producer before removal of domestic products from the place of production or by the owner or importer before the release of imported articles from the customs house, the same partake of the nature of indirect taxes when it is passed on to the subsequent purchaser.
Indirect taxes are defined as those wherein the liability for the payment of the tax falls on one person but the burden thereof can be shifted to another person. When the seller passes on the tax to his buyer, he, in effect, shifts the tax burden, not the liability to pay it, to the purchaser as part of the price of goods sold or services rendered.
Accordingly, when the excise taxes paid by the supplier were passed on to Diageo, what was shifted is not the tax per se but an additional cost of the goods sold. Thus, the supplier remains the statutory taxpayer even if Diageo, the purchaser, actually shoulders the burden of tax.
The statutory taxpayer is the proper party to claim refund of indirect taxes.
CAGAYAN ELECTRIC POWER AND LIGHT CO., INC. vs CITY OF CAGAYAN DE ORO
G.R. No. 191761; November 14, 2012; Second Division, 685 SCRA 609
Facts: On January 10, 2005, the Sangguniang Panlungsod of Cagayan de Oro (City Council) passed Ordinance No. 9503-2005 imposing a tax on the lease or rental of electric and/or telecommunication posts, poles or towers by pole owners to other pole users at ten percent (10%) of the annual rental income derived from such lease or rental. CEPALCO filed a petition for
declaratory relief assailing the validity of the Ordinance before the RTC on the ground that: 1) the tax imposed by the disputed ordinance is in reality a tax on income which appellee City of Cagayan de Oro may not impose, the same being expressly prohibited by Section 133(a) of the Local Government Code (LGC) 2) assuming the City Council can enact the assailed ordinance, it is nevertheless exempt from the imposition by virtue of Republic Act No. 9284 (R.A. 9284) providing for its franchise. The City, raised the following defences: 1) the enactment and implementation of the subject ordinance was a valid and lawful exercise of its powers pursuant to the 1987 Constitution, the Local Government Code, 2) non-exemption of CEPALCO because of the express withdrawal of the exemption provided by Section 193 of the LGC; 3) failure of respondent to exhaust administrative remedies under the Local Government Code.
RTC ruled in favour of the City of Cagayan de Oro which was affirmed by the CA.
Issues: 1) W/N CEPALCO is tax exempt in the imposition of the said ordinance. NO
2) W/N the said ordinance is in compliance with the taxing limitations in the LGC.NO
3) W/N failure of respondent to exhaust administrative remedies is fatal. NO
Held: 1) CEPALCO’s claim of exemption must fail in light of Sec. 193 of the LGC and Sec.9 of its own franchise.
The Local Government Code withdrew tax exemption privileges previously given to natural or juridical persons, and granted local government units the power to impose franchise tax, thus SEC. 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.
RA 9284 provides: SEC. 9. Tax Provisions. The‒ grantee, its successors or assigns, shall be subject to the payment of all taxes, duties, fees or charges and other impositions applicable to private electric utilities under the National Internal Revenue Code (NIRC) of 1997, as amended, the Local Government Code and other applicable laws: Provided, That nothing herein shall be construed as repealing any specific tax exemptions, incentives, or privileges granted under any relevant law: Provided, further, That all rights, privileges, benefits and exemptions accorded to existing and future private electric utilities by their respective franchises shall likewise be extended to the grantee.
The grantee shall file the return with the city or province where its facility is located and pay the taxes due thereon to the Commissioner of Internal Revenue or his duly authorized representative in accordance with the NIRC and the return shall be subject to audit by the Bureau of Internal Revenue.
Tax exemptions are strictly construed against the claimant. It must be based on clear legal provision. It cannot arise by mere implication.
2) CEPALCO’s act of leasing for a consideration the use of its posts, poles or towers to other people falls under the LGC’s definition of business. In relation to Secs. 131(d) and 143(h), the city may impose taxes, fees and charges on any business which is not specified in Sec.143(a) to (g) and which the sanggunian concerned may deem proper to tax. However, the 10% tax rate imposed by Ordinance clearly violates Section 143(h) of the LGC, as it states that "on any business subject to x x x value-added x x x tax under the National
Internal Revenue Code, as amended, the rate of tax shall not exceed two percent (2%) of gross sales or receipts of the preceding calendar year" from the lease of goods or properties.
3) The law requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice, within 30days from effectivity thereof. In case the Secretary decides to appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60days, a party could already proceed to seek relief in court. In this case, the ordinance took effect on 19 February 2005. CEPALCO filed its petition for declaratory relief before the RTC on 30 September 3005, clearly beyond the 30- day period provided in Section 187, LGC. It also did not appeal to the Secretary of Justice. However, in the present case, the application of the rules was relaxed in view of the more substantive matters.
ACCENTURE, INC. vs. COMMISSIONER OF INTERNAL REVENUE
G.R. No. 190102; Second Division; July 11, 2012; 676 SCRA 325
FACTS: Accenture, Inc. is a corporation engaged in the business of providing management consultation. It is a duly registered VAT taxpayer or enterprise.
Accenture’s monthly and quarterly VAT returns for 2002 show that it has VAT tax credits amounting to P35,178,844.21. Thus, Accenture filed with the Department of Finance (DoF) a claim for the refund or the issuance of a Tax Credit Certificate (TCC).
The DoF did not act on the claim of Accenture. Hence, on August 31, 2004, Accenture filed a Petition for Review with the First Division of the CTA.In its reply, the CIR opposed the grant of a tax refund or TCC because the sale by Accenture of goods and services to its clients are not zero-rated transactions.
The 1st division of the CTA ruled against Accenture. It reasoned that Accenture’s services would only qualify as zero-rated under the 1997 NIRC if the recipient of the services was doing business outside of the Philippines. This decision was subsequently upheld by the CTA en banc.
Basically, Accenture argues in this case that it should be given a refund because Section 108(B) of the 1997 Tax Code does not really require that clients should be doing business outside the Philippines for transactions to be considered zero-rated. It cites the case of CIR v. American Express (Amex), where the SC supposedly ruled the existence of a clear legislative intent not to impose the condition of being "consumed abroad” as qualification for zero-rated transactions. Moreover, it argues that the only requirement under the said section is that the consideration for services rendered be in foreign currency in accordance with the rules of the BangkoSentral.
ISSUE: Whether or not the recipient of the services should be "doing business outside the Philippines" for the transaction to qualify as zero-rated under Section 108(B)(2) of the 1997 Tax Code
RULING:YES. The recipient of services must be doing business outside the Philippines for the transactions to qualify as zero-rated. This can only be the logical interpretation of Section 102 (b) (2). If the provider and recipient of the "other services" are
both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section 102 (a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the recipient of services. To interpret Section 102 (b) (2) to apply to a payer-recipient of services doing business in the Philippines is to make the payment of the regular VAT under Section 102 (a) dependent on the generosity of the taxpayer. The provider of services can choose to pay the regular VAT or avoid it by stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102 (a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a mandatory exaction, not a voluntary contribution.
Moreover, the SC clarified that the case of Amex merely declared that the section in issue does not require that the services be consumed abroad to be zero-rated. However, nowhere in that case did the SC discuss the necessary qualification of the recipient of the service. To come within the purview of Section 108(B)(2), it is not enough that the recipient of the service be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident foreign corporation. In this case, while Accenture may have established that its clients are foreign, it failed to prove that the foreign clients to whom it rendered its services were clients doing business outside the Philippines or nonresident foreign corporations.
GULF AIR COMPANY, PHILIPPINE BRANCH (GF),petitioner, vs COMMISSIONER OF INTERNAL REVENUE,respondent. G.R. No. 182045, 19 SEPTEMBER 2012, THIRD DIVISION, 681 SCRA 377 FACTS: Petitioner Gulf Air was assessed for its deficiency on percentage tax and it received a letter denying its claim for tax credit or refund of excess percentage tax remittance for the first, second and fourth quarters of 2000.
On appeal, CTA ruled that RR No. 6-66 was the applicable rule, providing that gross receipts should be computed based on the cost of the single one-way fare as approved by the Civil Aeronautics Board (CAB), because the period involved in the assessment covered the first, second and fourth quarters of 2000 and the amended percentage tax returns were filed on October 25, 2001. Revenue Regulations No. 15-2002, which took effect on October 26, 2002, could not be given retroactive effect because it was declarative of a new right as it provided a different rule in determining gross receipts. In addition, it noted that GF failed to include in its gross receipts the special commissions on passengers and cargo.
ISSUE: WON the definition of “gross receipts,” for purposes of computing the 3% Percentage Tax under Section 118(A) of the 1997 National Internal Revenue Code (NIRC), should include special commissions on passengers and special commissions on cargo based on the rates approved by the CAB.
RULING: Yes. GF’s contention that gross receipts should be based on the “net” amount (the amount actually received, derived, collected, and realized by the petitioner from passengers, cargo and excess baggage, actually received) that has been validated by the issuance of RR No. 15-2002 which expressly superseded the former, is without merit.
There is no doubt that prior to the issuance of Revenue Regulations No. 15-2002 which became effective on October 26, 2002, the prevailing rule then for the purpose of computing common carrier’s tax was RR No. 6-66. While the petitioner’s interpretation has been vindicated by the new rules which compute gross revenues based on the actual amount received by the
airline company as reflected on the plane ticket, this does not change the fact that during the relevant taxable period involved in this case, it was Revenue Regulations No. 6-66 that was in effect. Tax laws, including rules and regulations, operate prospectively unless otherwise legislatively intended by express terms or by necessary implication.
GF is reminded that rules and regulations interpreting the tax code and promulgated by the Secretary of Finance, who has been granted the authority to do so by Section 244 of the NIRC, “deserve to be given weight and respect by the courts in view of the rule-making authority given to those who formulate them and their specific expertise in their respective fields.” As such, absent any showing that RR No. 6-66 is inconsistent with the provisions of the NIRC, its stipulations shall be upheld and applied accordingly. This is in keeping with our primary duty of interpreting and applying the law. REPUBLIC OF THE PHILIPPINES vs. CITY OF PARANAQUE
G.R. No. 191109 July 18, 2012/ THIRD DIVISION/ 677 SCRA 246
FACTS:A petition for review on certiorari under Rule 45 assailing the January 8, 2010 Order of the RTC, Branch 195, Paranaque City, which ruled that petitioner Philippine Reclamation Authority (PRA) is a GOCC, a taxable entity, and, therefore, not exempt from payment of real property taxes.
The Public Estates Authority (PEA) is a government corporation created by virtue of PD No. 1084. By virtue of E.O. No. 525, PEA was designated as the agency primarily responsible for integrating, directing and coordinating all reclamation projects for and on behalf of the National Government. Then President Arroyo issued E.O. No. 380 transforming PEA into PRA, which shall perform all the powers and functions of the PEA relating to reclamation activities.
By virtue of its mandate, PRA reclaimed several portions of the foreshore and offshore areas of Manila Bay, including those located in Parañaque City. Then Parañaque City Treasurer Carabeo issued Warrants of Levy on PRA’s reclaimed properties (Central Business Park and Barangay San Dionisio) based on the assessment for delinquent real property taxes made by then Parañaque City Assessor Soledad Medina Cue for tax years 2001 and 2002.
PRA filed a Motion which sought to declare as null and void the assessment for real property taxes, the levy based on the said assessment, the public auction sale conducted on April 7, 2003, and the Certificates of Sale issued pursuant to the auction sale.
On January 8, 2010, the RTC rendered its decision dismissing PRA’s petition. In ruling that PRA was not exempt from payment of real property taxes, the RTC reasoned out that it was a GOCC under Section 3 of P.D. No. 1084. It was organized as a stock corporation because it had an authorized capital stock divided into no par value shares.
Issue(s): Whether or not PRA is liable to pay real property tax on the subject reclaimed lands. Not liable.
Ruling: The Supreme Court is convinced that PRA is not a GOCC either under Section 2(3) of the Introductory Provisions of the Administrative Code or under Section 16, Article XII of the 1987 Constitution. PRA was not organized either as a stock or a non-stock corporation. Neither was it created by Congress to operate commercially and compete in the private market.
Instead, PRA is a government instrumentality vested with corporate powers and performing an essential public service pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. Being an incorporated government instrumentality, it is exempt from payment of real property tax.
Clearly, respondent has no valid or legal basis in taxing the subject reclaimed lands managed by PRA. On the other hand, Section 234(a) of the LGC, in relation to its Section 133(o), exempts PRA from paying realty taxes and protects it from the taxing powers of local government units.
SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real property tax:
(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.
SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:
x x x x (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units.
It is clear from Section 234 that real property owned by the Republic is exempt from real property tax unless the beneficial use thereof has been granted to a taxable person. In this case, there is no proof that PRA granted the beneficial use of the subject reclaimed lands to a taxable entity. There is no showing on record either that PRA leased the subject reclaimed properties to a private taxable entity.
This exemption should be read in relation to Section 133(o) of the same Code, which prohibits local governments from imposing "taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x." The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. COMMISSIONER OF INTERNAL REVENUE vs. PETRON CORPORATION
G.R. No. 185568, March 21, 2012, 668 SCRA 735, (SECOND DIVISION)
The Facts: During the period covering the taxable years 1995 to 1998, Petron had been an assignee of several Tax Credit Certificates (TCCs) from various BOI-registered entities for which Petron utilized in the payment of its excise tax liabilities. The transfers and assignments of the said TCCs were approved by the Department of Finance’s One Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (DOF Center). Petitioner’s acceptance and use of the TCCs as payment of its excise tax liabilities for the taxable years 1995 to 1998, had been continuously approved by the DOF as well as the BIR’s Collection Program Division.
On January 30, 2002, CIR issued the assailed Assessment against Petron for deficiency excise taxes for the taxable years 1995 to 1998, in the total amount of P 739,003,036.32, inclusive of surcharges and interests, based on the ground that the TCCs utilized by Petron in its payment of excise taxes have been cancelled by the DOF for having been fraudulently issued and transferred, pursuant to its EXCOM Resolution No. 03-05-99.
The CTA Second Division held Petron liable for deficiency excise taxes on the ground that the cancellation by the DOF of the TCCs previously issued to and utilized by respondent to settle its tax liabilities had the effect of nonpayment of the latter’s excise taxes. The CTA En Banc reversed and set aside the decision of the Second Division.
The Issue: Whether or not Petron is liable for its tax liabilities from 1995 to 1998.
The Ruling: Petron cannot be held liable for the tax deficiencies.
Petron is a transferee in good faith and for value of the subject TCCs. Petron has not been shown or proven to have participated in the alleged fraudulent acts involved in the transfer and utilization of the subject TCCs.
The Liability Clause of the TCCs reads: Both the TRANSFEROR and the TRANSFEREE shall be jointly and severally liable for any fraudulent act or violation of the pertinent laws, rules and regulations relating to the transfer of this TAX CREDIT CERTIFICATE.
The above clause clearly provides only for the solidary liability relative to the transfer of the TCCs from the original grantee to a transferee. There is nothing in the above clause that provides for the liability of the transferee in the event that the validity of the TCC issued to the original grantee by the Center is impugned or where the TCC is declared to have been fraudulently procured by the said original grantee. Any fraud or breach of law or rule relating to the issuance of the TCC by the Center to the transferor or the original grantee is the latter's responsibility and liability. The transferee in good faith and for value may not be unjustly prejudiced by the fraud committed by the claimant or transferor in the procurement or issuance of the TCC from the Center. It is not only unjust but well-nigh violative of the constitutional right not to be deprived of one's property without due process of law. Thus, a re-assessment of tax liabilities previously paid through TCCs by a transferee in good faith and for value is utterly confiscatory, more so when surcharges and interests are likewise assessed. A transferee in good faith and for value of a TCC who has relied on the Center's representation of the genuineness and validity of the TCC transferred to it may not be legally required to pay again the tax covered by the TCC which has been belatedly declared null and void. A TCC is valid and effective upon its issuance and is not subject to a post-audit. Petron has the right to rely on the validity and effectivity of the TCCs that were assigned to it.
Therefore, the court finds Petron to be an innocent transferee for value of the subject TCCs. Consequently, the Tax Returns it filed for the years 1995 to 1998 are not considered fraudulent. Hence, the CIR had no legal basis to assess the excise taxes or any penalty surcharge or interest thereon, as respondent had already paid the appropriate excise taxes using the subject TCCs.
DELA LLANA v. CHAIRPERSON, COA G. R. No. 180989 / February 7, 2012 / EN BANC / 665 SCRA 176 FACTS: COA issued COA Circular No. 89-299 which lifted its system of pre-audit of government financial transactions. Section 3.2 thereof provides: “whenever circumstances warrant, such as where the internal control system of a government agency is inadequate, COA may reinstitute pre-audit or adopt such other control measures, including temporary or special pre-audit, as are necessary and appropriate to protect the
funds and property of the agency.”
DelaLlana, as a taxpayer, wrote to COA regarding the recommendation of the Senate Committee on Agriculture and Food that the Department of Agriculture set up an internal pre-audit service. The COA replied to DelaLlana informing him of the prior issuance of Circular No. 89- 299 which provides that whenever the circumstances warrant, the COA may reinstitute pre-audit or adopt such other control measures as necessary and appropriate to protect the funds and property of an agency.
DelaLlana filed a petition for certiorari alleging that the pre-audit duty on the part of the COA cannot be lifted by a mere circular, considering that the pre-audit is a constitutional mandate enshrined in Section 2 of Article IX-D of the 1987 Constitution. He further claims that, because of the lack of pre- audit by COA, serious irregularities in government transactions have been committed, such as the P728-million fertilizer fund scam, irregularities in the P550-million call center laboratory project of the Commission on Higher Education, and many others.
ISSUES: 1. WON DelaLlana has standing to file the present suit as a taxpayer. YES
2. WON petition for certiorari filed by DelaLlana is proper. NO
3. WON it is the constitutional duty of COA to conduct a pre-audit before the
consummation of government
transaction. NO
DelaLlana has standing to file the present suit as a taxpayer. This Petition has been filed as a taxpayer’s suit.A taxpayer is deemed to have the standing to raise a constitutional issue when it is established that public funds from taxation have been disbursed in alleged contravention of the law or the Constitution.Petitioner claims that the issuance of Circular No. 89-299 has led to the dissipation of public funds through numerous irregularities in government financial transactions. These transactions have allegedly been left unchecked by the lifting of the pre-audit performed by COA, which, petitioner argues, is its Constitutional duty. Thus, petitioner has standing to file this suit as a taxpayer, since he would be adversely affected by the illegal use of public money.
The petition for certiorari filed by DelaLlana is not proper. DelaLlana is correct in that decisions and orders of the COA are reviewable by the Court via a petition for certiorari. However, these refer to decisions and orders which were rendered by the COA in its quasi-judicial capacity. Circular No. 89-299 was promulgated by theCOA under its quasi-legislative or rule-making powers. Hence, Circular No. 89-299 is not reviewable by certiorari.Nonetheless, the Court decides to resolve the petition despite the improper remedy, in view of the public importance of the issues raised.
It is not the constitutional duty of the COA to conduct a pre-audit. DelaLlana claimed that the constitutional duty of COA includes the duty to conduct pre-audit. A pre-audit is an examination of financial transactions before their consumption or payment. It seeks to determine whether the following conditions are present: (1) the proposed expenditure complies with an appropriation law or other specific statutory authority; (2) sufficient funds are available for the purpose; (3) the proposed expenditure is not unreasonable or extravagant, and the unexpended balance of appropriations to which it will be charged is sufficient to cover the entire amount of the expenditure; and (4) the transaction is approved by the proper authority and the claim is duly supported by authentic underlying evidence. It could, among others, identify government agency transactions that are suspicious on their face prior to their implementation and prior to the
disbursement of funds.
DelaLlana’s allegations find no support in the Section 2 of Article IX-D of the 1987 Constitution. There is nothing in the said provision that requires the COA to conduct a pre-audit of all government transactions and for all government agencies. Hence, the conduct of a pre-audit is not a mandatory duty of COA. This discretion on its part is in line with the constitutional pronouncement that the COA has the exclusive authority to define the scope of its audit and examination.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., vs THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 168856, August 29, 2012, THIRD DIVISION, 679 SCRA 305
FACTS: Petitioner Eastern Telecommunications Philippines, Inc. (ETPI) generates foreign currency revenues from transactions to non-resident foreign telecommunications companies which are inwardly remitted in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. Believing that it is entitled to a refund for the unutilized input VAT attributable to its zero-rated sales, ETPI filed with the Bureau of Internal Revenue (BIR) an administrative claim for refund and/or tax credit in the amount of P 23,070,911.75 representing excess input VAT derived from its zero-rated sales for the period from January 1999 to December 1999. The Division of the CTA denied the petition for lack of merit, finding that ETPI failed to imprint the word "zero-rated" on the face of its VAT invoices or receipts, in violation of Revenue Regulations No. 7-95. In addition, ETPI failed to substantiate its taxable and exempt sales, the verification of which was not included in the examination of the commissioned independent certified public accountant.
ISSUES:
1. WON Imprinting of the word "zero-rated" on the invoices or receipts is required. YES 2. WON ETPI’s failure to imprint the word "zero-rated" on its invoices or receipts is fatal to its claim for tax refund or tax credit for excess input VAT. YES
RULING:
1.Imprinting of the word "zero-rated" on the invoices or receipts is required. Section 244 of the NIRC explicitly grants the Secretary of Finance the authority to promulgate the necessary rules and regulations for the effective enforcement of the provisions of the tax code. Such rules and regulations "deserve to be given weight and respect by the courts in view of the rule-making authority given to those who formulate them and their specific expertise in their respective fields. In the case of sale of real property subject to VAT and where the zonal or market value is higher than the actual consideration, the VAT shall be separately indicated in the invoice or receipt. 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. The need for taxpayers to indicate in their invoices and receipts the fact that they are zero-rated or that its transactions are zero-rated became more apparent upon the integration of the abovequoted provisions of Revenue Regulations No. 7-95 in Section 113 of the NIRC enumerating the invoicing requirements of VAT-registered persons when the tax code was amended by Republic Act (R.A.) No. 9337. A consequence of failing to comply with the invoicing requirements is the denial of the claim for tax refund or tax credit, as stated in Revenue Memorandum Circular No. 42-2003, to wit: 2.Tax refunds are strictly construed against the taxpayer; ETPI failed to substantiate its claim.
ETPI should be reminded of the well-established rule that tax refunds, which are in the nature of tax exemptions, are construed strictly against the taxpayer and liberally in favor of the government. This is because
taxes are the lifeblood of the nation. Thus, the burden of proof is upon the claimant of the tax refund to prove the factual basis of his claim. Unfortunately, ETPI failed to discharge this burden. The CIR is correct in pointing out that ETPI is engaged in mixed transactions and, as a result, its claim for refund covers not only its zero-rated sales but also its taxable domestic sales and exempt sales. Therefore, it is only reasonable to require ETPI to present evidence in order to substantiate its claim for input VAT.
Considering that ETPI reported in its annual return its zero-rated sales, together with its taxable and exempt sales, the CTA ruled that ETPI should have presented the necessary papers to validate all the entries in its return. Only its zero-rated sales, however, were accompanied by supporting documents. With respect to its taxable and exempt sales, ETPI failed to substantiate these with the appropriate documentary evidence. Noteworthy also is the fact that the commissioned independent certified public account did not include in his examination the verification of such transactions.
LVM Construction vs. F.T. Sanchez G.R. No. 181961
Promulgated: December 5, 2011 SCRA:
661 page, 531
Facts: Petitioner LVM Construction Corporation (LVM) is a duly licensed construction firm primarily engaged in the construction of roads and bridges for the Department of Public Works and Highways (DPWH). Awarded the construction of the Arterial Road Link Development Project in Southern Leyte (the Project), LVM sub-contracted approximately 30% of the contract amount with the Joint Venture composed of respondents F.T. Sanchez Corporation (FTSC), Socor Construction Corporation (SCC) and Kimwa Construction Development Corporation(KCDC). The Sub-Contract Agreement executed by the parties pertinently provided as follows: “4) Ten percent (10%) retention to be deducted for every billing of sub-contractor as prescribed under the Tender Documents.” For work rendered in the premises, the Joint Venture sent LVM a total of 27 Billings. In a letter dated 16 May 2001, however, LVM apprised the Joint Venture of the fact that its auditors have belatedly discovered that no deductions for E-VAT had been made from its payments on Billing Nos. 1 to 26 and that it was, as a consequence, going to deduct the 8.5% payments for said tax from the amount still due in the premises. In its 14 June 2001 Reply, the Joint Venture claimed that, having issued Official Receipts for every payment it received, it was liable to pay 10% VAT thereon and that LVM can, in turn, claim therefrom an equivalent input tax of 10%. On 26 April 2006, the CIAC rendered its decision granting the Joint Venture’s claims, discounting the contractual and legal bases for LVM’s claim that it had the right to offset its E-VAT payments from the retention money still in its possession. The CIAC’s decision was affirmed in toto by the CA.
Issue: W/N Respondents’ liability to pay Value Added Tax need not be stated in the sub contract agreement. : W/N a set off between the supposed E-Vat Payments of LVM and the retention money demanded by the Join Venture is valid.
SC Ruling: It needs to be stated and the set-off is not valid. For lack of any stipulation regarding the same in the parties’ Sub-Contract Agreement, we find that the CA correctly brushed aside LVM’s insistence on deducting its supposed E-VAT payments from the retention money demanded by the Joint Venture. Indeed, a contract constitutes the law between the parties who are, therefore, bound by its stipulations which, when couched
in clear and plain language, should be applied according to their literal tenor. That there was no agreement regarding the offsetting urged by LVM. Precisely, Sanchez, under the contract was required to issue official receipts registered with the BIR for every payment LVM makes for the progress billings, which it did. For these official receipts issued by Sanchez to LVM, Sanchez already paid 10% VAT to the BIR, thus: ‘The VAT Law is very clear. Everyone must pay 10% VAT based on their issued official receipts. These receipts must be official receipts and registered with the BIR. Respondent (LVM) must pay its output Vat based on its receipts. Complainant (Sanchez) must also pay output VAT based on its receipts.
LASCONA LAND CO. INC. v. CIR (G.R. No. 171251; March 5, 2012; THIRD DIVISION; 667 SCRA 455) FACTS:
On March 27, 1998, CIR issued Assessment against Lascona Land Co., Inc., informing the latter of its alleged deficiency income tax for the year 1993 in the amount of P753,266.56.
On April 20, 1998, Lascona filed a letter protest, but was denied by Norberto R. Odulio, OIC, Regional Director, BIR for that “reason that the case was not elevated to the Court of Tax Appeals as mandated by the provisions of the last paragraph of Section 228 of the Tax Code. By virtue thereof, the said assessment notice has become final, executory and demandable.”
On April 12, 1999, Lascona appealed the decision before the CTA. Lascona alleged that the Regional Director erred in ruling that the failure to appeal to the CTA within thirty (30) days from the lapse of the 180-day period rendered the assessment final and executory.
On January 4, 2000, the CTA, in its Decision; nullified the subject assessment. It held that in cases of inaction by the CIR on the protested assessment, Section 228 of the NIRC provided two options for the taxpayer: (1) appeal to the CTA within thirty (30) days from the lapse of the one hundred eighty (180)-day period, or (2) wait until the Commissioner decides on his protest before he elevates the case. CIR moved for reconsideration but the same was denied by the CTA. The CTA held that Revenue Regulations No. 12-99 must conform to Section 228 of the NIRC. Dissatisfied, the CIR filed an appeal before the CA. The Court of Appeals granted the CIR's petition. Hence, this petition.
ISSUE: Whether the subject assessment has become final, executory and demandable.
RULING: NO. Section 228 of the NIRC is instructional as to the remedies of a taxpayer in case of the inaction of the Commissioner on the protested assessment, to wit:
SEC. 228. Protesting of Assessment. − x x x
If the protest is denied in whole or in part, or is not acted upon within one hundred eighty (180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may appeal to the Court of Tax Appeals within (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise the decision shall become final, executory and demandable
Therefore, as in Section 228, when the law provided for the remedy to appeal the inaction of the CIR, it did not intend to limit it to a single remedy of filing of an appeal after the lapse of the 180-day prescribed period. Precisely, when a taxpayer protested an assessment, he naturally expects the CIR to decide either positively or negatively. A taxpayer cannot be prejudiced if he chooses to wait for the final decision of the CIR on the protested assessment. More so, because the law and jurisprudence have always contemplated a scenario where the CIR will decide on the protested assessment.
It must be emphasized, however, that in case of the inaction of the CIR on the protested assessment, while we reiterate − the taxpayer has two options, either: (1) file a petition for review with the CTA within 30 days after the expiration of the 180-day period; or (2) await the final decision of the Commissioner on the disputed assessment and appeal such final decision to the CTA within 30 days after the receipt of a copy of such decision, these options are mutually exclusive and resort to one bars the application of the other.
Accordingly, considering that Lascona opted to await the final decision of the Commissioner on the protested assessment, it then has the right to appeal such final decision to the Court by filing a petition for review within thirty days after receipt of a copy of such decision or ruling, even after the expiration of the 180-day period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments.[17] Thus, Lascona, when it filed an appeal on April 12, 1999 before the CTA, after its receipt of the Letter[18] dated March 3, 1999 on March 12, 1999, the appeal was timely made as it was filed within 30 days after receipt of the copy of the decision.
Southern Philippines Power Corporation v. CIR G.R. No. 179632 (October 19, 2011), Third Division 659 SCRA 658
Facts:
Petitioner Southern Philippines Power Corporation (SPP), a power company generating and selling electricity to the National Power Corporation, applied with the Bureau of Internal Revenue for zero-rating of its transactions under Section 108 (B)(3) of the National Internal Revenue Code. The BIR approved said application for taxable years 1999 and 2000.
Subsequently, it filed claims with respondent Commissioner of Internal Revenue (CIR) for a P5,083,371.57 tax credit or refund for 1999 and P6,221,078.44 for 2000. The amounts represented unutilized input VAT attributable to SPP’s zero-rated sale of electricity to NPC. The CIR maintained that SPP is not entitled to tax credit or refund.
The Second Division denied SPP’s claims and held that its zero-rated official receipts did not correspond to the quarterly VAT returns. Moreover, the receipts do not bear the words “zero-rated” in violation of RR 7-95. On appeal, the CTA En Banc affirmed the Second Division’s decision. SPP’s motion for reconsideration was also denied.
Issue: WON the CTA correctly ruled that SPP was not entitled to a tax refund or credit.
