Escolar Documentos
Profissional Documentos
Cultura Documentos
Lorenzo v. Posadas
CIR filed a motion before the CFI praying that the Lorenzo be
ordered to pay the said amount. The motion was granted. Lorenzo
paid under protest and asked for a refund. CIR refused to refund.
I: (a) When does the inheritance tax accrue and when must
it be satisfied? UPON DEATH
Lorenzo asserts that article 657 of the Civil Code (the rights to
the succession of a person are transmitted from the moment of his
death) operates only in so far as forced heirs are concerned.
Since Thomas Hanley died on May 27, 1922, the inheritance tax
accrued as of the date.
However, it does not follow that the obligation to pay the tax arose
as of the date. The time for the payment on inheritance tax is
fixed by the Revised Administrative Code w/c provides that the
payment must be made before entrance into possession of the
property of the fideicommissary or cestui que trust. Thus, the tax
Zapanta v Posadas
Tuason v Posadas
They filed their protest and the judgment was that the defendant
must return the amount claimed by the plaintiff. Posadas appealed
and argued that the collection of these amounts as inheritance tax
is authorized by the law.
R: YES.
Section 1540 then provides that after deductions have been made,
there shall be added to the resulting amount the value of all gifts
or advances made by the predecessor to any of those who,
after his death, shall prove to be his heirs, devisees,
legatees, or donees mortis causa.
When the law say all gifts, it doubtless refers to gifts inter vivos,
and not mortis causa. Both the letter and the spirit of the law
leave no room for any other interpretation.
The language refers to donation that took effect before the donor's
death, and not to mortis causa donations, which can only be made
with the formalities of a will, and can only take effect after the
donor's death.
In this case, it appears that the Tuazons, after the death of
Espereanza, were found to be legatees under her will. Thus, the
donation inter vivos she had made to them in 1922 and 1923,
must be added to the net amount that is to be taxed.
If the donee inter vivos was found to be legatees, heirs,
devisees OR donees mortis causa of the decedent, then
they would have to pay the inheritance tax.
The reason for this is because the donation inter vivos is
deemed
to
be
a
transfer
in
anticipation
of
inheritance/death, meaning that it is a scheme to evade
payment of taxes.
Dizon v Posadas
R: YES.
The plaintiffs took possession of the said lands, received the fruits and
obtained TCTs.
The donor then died w/o any forced heir and in her will, she
bequeathed to each of the donees the sum of P5,000.
After the estate had been distributed among the instituted legatees
and before delivery of their respective shares, the CIR ruled that the
donees should pay inheritance tax.
They thus paid under protest, contending that Art 1540 of the Revised
Administrative Code (after deductions have been made, there shall be
added to the resulting amount the value of all gifts / advances made by
the predecessor to any of those who after his death prove to be heirs,
devisees, legatees or donees mortis causa) does NOT include
donations inter vivos. If it does, it is null and void as it violates
uniformity of taxation.
I: W/n donations inter vivos is included in Sec. 1540 of the
Administrative Code
R: No.
The gifts referred to in section 1540 of the Revised Administration Code
are, obviously, those donations inter vivos that take effect immediately
or during the lifetime of the donor but are made in consideration or in
contemplation of death.
Gifts inter vivos, the transmission of which is NOT MADE IN
CONTEMPLATION OF THE DONOR'S DEATH should not be understood as
included within the said legal provision for the reason that it would
amount to imposing a direct tax on property and not on the
transmission.
This act does not come within the scope of the provisions contained in
Article XI of Chapter 40 of the Administrative Code which deals
expressly with the tax on inheritances, legacies and other acquisitions
mortis causa.
His sister Josefina became the guardian over his person, while his
property was placed under the guardianship of the PNB by the RTC
of Dumaguete.
However, PNB did NOT file and estate tax return, instead it advised
his heirs to execute an extrajudicial settlement and to pay taxes
on the estate.
The BIR then made a 2nd amendment for deficiency estate tax, w/c
Josefina paid under protest.
the 60k for notarial fee for the EJ Settlement should be allowed as
a deduction from the gross estate.
Judicial expenses are expenses for administration. Administration
expenses are deductible from the gross estate. Expenses must be
essential to the proper settlement of the estate.
In conformity with his last will, that house and the lot on
which it stands were adjudicated to his eight children, each being
given a one-eighth proindiviso.
R: YES.
Justice Dizon authorized Atty. Gonzales to sign and file the required
estate tax return.
Atty. Gonzales filed the estate tax return with the BIR Regional
Office of San Pablo City, showing a NIL estate tax liability (no tax
liability- in this case, because the deductions exceed the gross
estate).
R: No.
Florentino Pamintuan filed an income tax return for the year 1919
and paid an amount on the basis of said return.
The court then ordered the delivery to the heirs of their respective
shares of the inheritance after paying the corresponding
inheritance taxes which were duly paid.
CIR v Pineda
Atanasio Pineda died and was survived by his wife Felicisima (the
appointed administratrix) and 15 children.
After the estate proceedings, the BIR investigated the income tax
liability of the estate for the years 1945, 1946, 1947 and 1948 and
it found that the corresponding income tax returns were not filed.
The CIR found the estate liable for Deficiency Income Tax (DIT),
Additional residence tax for 1945 (ART 45), and Real Estate
dealer's tax for the 4th qtr of 1946 and the whole year of 1947
(REDT 46-47) .
CTA held that Manuel was liable for payment corresponding to his
share of such taxes.
On the other hand, CIR insisted that Manuel should be liable for
the payment of ALL the taxes found by the Tax Court to be due
The SC held that "after the partition of an estate, heirs and distributees are liable individually for
the payment of all lawful outstanding claims against the estate in proportion to the amount or value
of the property they have respectively received from the estate."
2
If any person, corporation, partnership, joint-account (cuenta en participacion), association, or
insurance company liable to pay the income tax, neglects or refuses to pay the same after demand,
the amount shall be a lien in favor of the Government of the Philippines from the time when the
assessment was made by the Commissioner of Internal Revenue until paid with interest, penalties,
and costs that may accrue in addition thereto upon all property and rights to property belonging to
the taxpayer: . . .
CIR v Gonzales
Matias Yusay died leaving his two children as his heirs, Jose & Lilia.
Jose was appointed administrator who filed with BIR an estate and
inheritance tax return declaring personal & real properties of their
father but the return did not mention any heir.
CIR appealed to the SC alleging that the right to assess the taxes
in question has not been lost by prescription since the return
which did not name the heirs cannot be considered true and
complete return to start the running of the period of limitations of
5 years under Sec 331 of Tax Code and pursuant to Sec 332 he has
10 years within which to make the assessment counted from the
discovery on September 24, 1953 of the identity of the heirs.
I: W/n the right of the CIR to assess the estate and inheritance
taxes in question has prescribed - NO
W/n the return filed by Jose sufficient to commence the running of
the prescriptive period to assess said taxes NO
R: When tax return is considered sufficient
A return need not be complete in all particulars. It is sufficient if it
complies substantially with law. There is substantial compliance
(1) when the return is made in good faith & is not false or
fraudulent;
On MR filed by Lilia: Lilia insists that since she administers only 1/3 of the
estate of her father, she should not be liable for the whole tax. And she
suggests that the intestate estate of Matias Yusay should be liable for the
said taxes, 1/3 to be paid by Lilia and 2/3 to be paid by Florencia (wife of
deceased Jose).
Ruling of the Court: Estate and inheritance taxes are satisfied from the
estate and are to be paid by the executor or administrator. Where there are
2 or more executors, all of them are severally liable for the payment of the
estate tax. The inheritance tax, although charged against the account of
each beneficiary, should be paid by the executor or administrator.
Failure to pay the estate and the inheritance taxes before distribution of
the estate would subject the executor or administrator to criminal liability.
It is immaterial that Lilia administers only 1/3 of the estate & will receive as
her share only said portion, for her right to the estate comes after taxes. As
an administratrix, she is liable for the entire estate tax. As an heir, she is
liable for the entire inheritance tax although her liability would not exceed
the amount of her share in the estate.
DONORS TAX
Tang Ho v. CIR
They thus paid the sum of P53k+ representing the amount of the
basic taxes, and put up a surety bond to guarantee payment of the
balance demanded.
Sometime later, they requested the CIR for a revision of their tax
assessments, and submitted donor's and donee's gift tax returns
showing that the children received gifts inter vivos and proper nuptias.
o
each child received by way of gift inter vivos, every year
from 1939 to 1950 (except in 1947 and 1948) P4,000 in
cash;
o
each of the eight children who married during the period
aforesaid, were given an additional P20,000 as dowry or
gift propter nuptias;
Gibbs v. CIR
CIR initially assessed the spouses a donee gift tax of P75 on each
of the beneficiaries or a total of about P750. These assessments were
based upon the DIFFERENCE between said market value of the shares
of stock and the stipulated consideration for transfer thereof.
The spouses paid within the period fixed by law but SOUGHT a
refund.
There being no real consideration for the transfer, gift taxes should
be based on the full market value of the shares of stock at the
time of the respective transfer, and not merely on the difference
between the said market value and the consideration stipulated in
the trust agreements.
R: YES.
A donation made by the corporation to the heirs of a deceased
officer out of gratitude for the officer's past services is considered a
donation and is subject to donee's gift tax.
Art. 726 of the CivCode states that When a person gives to
another a thing ... on account of the latter's merits or of the services
rendered by him to the donor, provided they do not constitute a
demandable debt, ..., there is also a donation.
The fact that his services contributed in a large measure to
the success of the company did not give rise to a recoverable
debt, and the conveyances made by the company to his heirs
remain a gift or donation.
ALSO, the value of such services which do not constitute a
recoverable debt is NOT deductible from the donation.
The actual consideration for the cession of the policies was
the Company's gratitude to Pirovano. Gratitude has no economic
value and is not "consideration" in the sense that the word is used
under the Tax Code.
OTHERS:
Sec111 [where property is transferred for less than adequate
consideration, amt exceeding consideration deemed a gift] is NOT
applicable).
Whether remuneratory or simple, the conveyance remained a gift.
The definition of CONSIDERATION is anything that is bargained for
by the promisor and given by the promisee in exchange for the
promise
Pirovano's successful activities as officer of the De la Rama
Steamship Co. cannot be deemed such consideration for the gift to his
heirs, since the services were rendered long before the Company
ceded the value of the life policies to said heirs; cession and services
were not the result of one bargain or of a mutual exchange of
promises.
A subsequent promise to pay for past services is a nudum pactum
i.e., one that is unenforceable in view of the common law rule that
consideration must consist in a legal benefit to the promisee or some
legal detriment to the promisor.
ACCRA v. CIR
VAT
Commissioner of Internal Revenue v. Mirant Pagbilao Corporation
Mitsubishi MPC NPC
BIR asserted that MPC's claim for refund CANNOT be granted since
MPC's sale of electricity to NPC is NOT zero-rated for its failure to
secure an approved application for zero-rating.
The CTA granted MPC's claim for input VAT refund or credit for PhP
10,766,939.48. The CA rendered its assailed decision modifying that of
the CTA decision by granting most of MPC's claims for tax refund or
credit for P146,760,509.48.
I: W/n MPC is entitled to the refund of its input VAT payments made
from 1993 to 1996
R: Yes, but only to the extent of P10M+, given that claim has
prescribed.
Prescription. MP's claim for refund / tax credit for the creditable input
VAT was filed beyond the period provided by law for such claim. Sec.
112(A) of the NIRC provides that any VAT-registered person, whose
sales are zero-rated may apply for the issuance of tax credit WITHIN 2
YEARS after the close of the taxable quarter when the sales were
made. MPC filed a refund in Dec 1999 when it should have filed in Sept
1998 (since the close of the quarter was Sept 1996).
Creditable input VAT is an indirect tax which can be shifted or
passed on to the buyer, transferee, or lessee of the goods, properties,
or services of the taxpayer.
The fact that the subsequent sale or transaction involves a wholly-tax
exempt client, resulting in a zero-rated or effectively zero-rated
transaction, does NOT, standing alone, deprive the taxpayer of its right
to a refund for any unutilized creditable input VAT, albeit the erroneous,
illegal, or wrongful payment angle does not enter the equation.
History of VAT. The law that originally imposed the VAT in the
country, as well as the subsequent amendments of that law, has been
drawn from the tax credit method (practiced in Europe).
If at the end of a taxable quarter the output taxes charged by a seller
are EQUAL to the input taxes passed on by the suppliers, no payment
is required. HOWEVER, when output taxes EXCEED input taxes, the
excess has to be paid. On the other hand, if the input taxes EXCEED
the output taxes, the excess shall be CARRIED OVER TO THE
succeeding quarter/s.
Should the input taxes result from zero-rated or effectively zero-rated
transactions or from the acquisition of capital goods, any EXCESS over
the output taxes shall be refunded to the taxpayer / credited against
other internal revenue taxes.
Zero-rated transactions generally refer to the export sale of goods
and supply of services. The tax rate is set at zero. When applied to the
tax base, such rate obviously results in no tax chargeable against the
purchaser. The seller of such transactions charges no output tax, but
can claim a refund of or a tax credit certificate for the VAT previously
charged by suppliers.
OTHERS:
BIR and other tax agencies have a duty to treat claims for refunds and
tax credits with proper attention and urgency. Had RDO No. 60 and,
later, the BIR proper acted, instead of sitting, on MPC's underlying
application for effective zero rating, the matter of addressing MPC's
right, or lack of it, to tax credit or refund could have plausibly been
addressed at their level and perchance freed the taxpayer and the
government from the rigors of a tedious litigation.
The official receipt proves payment by MPC of its creditable input VAT
relative to its purchases from Mitsubishi. BIR is precluded from
requiring additional evidence to prove that input tax had indeed paid
or, in fine, that the taxpayer is indeed entitled to a tax refund or credit
for input VAT, we agree with the CA's above disposition. As the Court
distinctly notes, the law considers a duly-executed VAT invoice or OR
referred to in the above provision as sufficient evidence to support a
claim for input tax credit.
Acesite is the owner and operator of the Holiday Inn Manila Pavilion
Hotel. It leases a portion of the hotels premises to the PAGCOR for
casino operations. It also caters food and beverages to PAGCORs
casino patrons through the hotels restaurant outlets.
From 1996 to 1997, Acesite incurred VAT amounting to P30M+ from its
rental income and sale of food and beverages to PAGCOR during said
period.
Thus, PAGCOR paid the amount due to Acesite minus the P30M+ VAT
while Acesite paid the VAT to the CIR.
I: W/n the 0% VAT rate (under then Sec 108 (B)(3) of the NIRC) applies
to Acesite
R: Yes.
The law even grants tax exempt status to persons dealing with
PAGCOR in casino operations. The unmistakable conclusion is that
PAGCOR is not liable for the P30M+ VAT and neither is Acesite as
Acesite is effectively subject to zero percent rate under the NIRC.
OTHERS:
It is true that VAT can either be incorporated in the value of the goods,
properties, or services sold or leased, in which case it is computed as
1/11 of such value, or charged as an additional 10% to the value.
Verily, the seller or lessor has the option to follow either way in
charging its clients and customer.
In the instant case, Acesite followed the latter method, that is,
charging an additional 10% of the gross sales and rentals. Be that as it
may, the use of either method, and in particular, the first method, does
not denigrate the fact that PAGCOR is exempt from an indirect tax, like
VAT.
BWSC-Denmark, the coordination manager, established BWSCMindanao (domestic corp doing business in Davao) which
subcontracted the actual operation and maintenance of NAPOCORs
two power barges.
It then filed a claim for the issuance of a tax credit certificate with the
BIR, believing that it erroneously paid the output VAT for 1996 due to
its availment of the Voluntary Assessment Program (VAP) of the BIR.
CTA ordered BIR to issue a tax credit certificate for the P6M+ in favor
of BSCW-Mindanao. This was affirmed by the CA.
I: W/n BWSC-Mindanao is entitled to the refund of P6,994,659.67 as
erroneously paid output VAT for the year 1996
R: Yes, they are entitled to refund. Their services ARE actually still
subject to 10% VAT BUT they are not liable for such given their reliance
on BIR Rulings.
An essential condition for qualification to zero-rating under Section
102(b)(2) of RR 5-96 is that services other than processing,
manufacturing, or repacking of goods must be performed for persons
doing business OUTSIDE the Philippines.
In this case, the payer-recipient of BWSC-Mindanaos services is the
Consortium which is a joint-venture doing business in the Philippines.
While the Consortiums principal members are non-resident foreign
corporations, the Consortium itself is doing business in the Philippines.
This is shown clearly in BIR Ruling No. 023-95 which states that the
contract between the Consortium and NAPOCOR is for a 15-year term.
Considering this length of time, the Consortiums operation and
maintenance of NAPOCORs power barges cannot be classified as a
single or isolated transaction.
The Consortium does not fall under Section 102(b)(2) which requires
that the recipient of the services must be a person doing business
outside the Philippines.
Therefore, BWSC-Mins services to the Consortium, not being supplied
to a person doing business outside the Philippines, cannot legally
qualify for 0% VAT.
The Court recognizes the rule that the VAT system generally follows the
"destination principle" (exports are zero-rated whereas imports are
taxed).
However, as the Court stated in American Express, there is an
exception to this rule, which is the 0% VAT on services enumerated in
Section 102 and performed in the Philippines. To be exempt from the
destination principle under Section 102(b)(1) and (2), the services
must be (a) performed in the Philippines; (b) for a person doing
business outside the Philippines; and (c) paid in acceptable foreign
currency accounted for in accordance with BSP rules.
In contrast, this case involves a recipient of services the Consortium
which is doing business in the Philippines.
Nevertheless, in seeking a refund of its excess output tax, respondent
relied on VAT Rulings insofar as they held that the services being
rendered by BWSCMI is subject to VAT at zero percent (0%). BWSCs
reliance on these BIR rulings binds BIR.
BIRs revocation CANNOT be given retroactive effect since it will
prejudice the taxpayer, w/c is prohibited by Sec 246 of the NIRC.
NDC decided to sell its National Marine Corporation (NMC) shares and 5
of its ships, w/c were offered for public bidding.
Among the stipulated terms and conditions for the public auction was
that the winning bidder was to pay "a VAT of 10% on the value of the
vessels.
Magsaysay Lines offered to buy the shares and the vessels for P168M.
The bid was made by Magsaysay Lines, purportedly for a new company
still to be formed composed of itself, Baliwag Navigation, Inc., and FIM
Limited of the Marden Group based in Hongkong (collectively, private
respondents)
The NDC drew on the Letter of Credit to pay for the VAT, and the
amount of P15,120,000.00 in taxes was paid on 16 March 1989.
CTA ruled that the sale of a vessel was an "isolated transaction," not
done in the ordinary course of NDCs business, and was thus not
subject to VAT, which under Section 99 of the Tax Code, was applied
only to sales in the course of trade or business.
mperial v. CIR: The term "carrying on business" does not mean the
performance of a single disconnected act, but means conducting,
prosecuting and continuing business by performing progressively all
the acts normally incident thereof.
In the instant case, the sale was an isolated transaction. The sale
which was involuntary and made pursuant to the declared policy of
Government for privatization could no longer be repeated or carried on
with regularity.
CIR v. SEKISUI
Having registered with the BIR as a VAT taxpayer, Sekisui filed its
quarterly returns with the BIR, in the amount of P4M paid by it in
connection with its domestic purchase of capital goods and services.
Said input taxes remained unutilized since Sekisui has not engaged in
any business activity or transaction for which it may be liable for
output tax and for which said input taxes may be credited.
Sekisui then filed with the One-Stop-Shop Inter-Agency Tax Credit and
Duty Drawback Center of the Department of Finance (CENTER-DOF)
two separate applications for tax credit/refund of VAT input taxes paid.
CIR denied this, but CTA ruled that Sekisui was entitled to refund.
If the entity avails itself of the 5% preferential tax rate under the first
scheme, it is exempt from all taxes, including the VAT;
Notwithstanding the fact that its purchases should have been zerorated, Sekisui was able to prove that it had paid input taxes in the
amount of P4M, as substantially supported by invoices and ORs.
While an ecozone is within the Philippines, it is deemed a separate
customs territory. Sales by suppliers from outside the borders of the
ecozone to this separate customs territory are deemed as exports and
treated as export sales.
Since 100% of Sekisui's products are exported, all its transactions are
deemed export sales and are thus VAT zero-rated. Sekisui has no
output tax with which it could offset its paid input tax. Since the
subject input tax it paid for its domestic purchases of capital goods and
services remained unutilized, it can claim a refund for the input VAT
previously charged by its suppliers.
TAX IS UNIFORM.
However, to the extent that the input tax is less than 70% of the
output tax, then 100% of such input tax is still creditable.
More importantly, the excess input tax, if any, is retained in a
businesss books of accounts and remains creditable in the succeeding
quarter/s. This is explicitly allowed by Section 110(B), which provides
that if the input tax exceeds the output tax, the excess shall be
carried over to the succeeding quarter or quarters.
In addition, Section 112(B) allows a VAT-registered person to apply for
the issuance of a tax credit certificate or refund for any unused input
taxes, to the extent that such input taxes have not been applied
against the output taxes. Such unused input tax may be used in
payment of his other internal revenue taxes.
The non-application of the unutilized input tax in a given quarter is not
ad infinitum, as petitioners exaggeratedly contend.
On the other hand, it appears that petitioner Garcia failed to
comprehend the operation of the 70% limitation on the input tax.
According to petitioner, the limitation on the creditable input tax in
effect allows VAT-registered establishments to retain a portion of the
taxes they collect, which violates the principle that tax collection and
revenue should be for public purposes and expenditures.
As earlier stated, the input tax is the tax paid by a person,
passed on to him by the seller, when he buys goods. Output
tax meanwhile is the tax due to the person when he sells
goods. In computing the VAT payable, three possible scenarios may
arise:
o
If output tax = input tax = no payment
o
If output tax > input tax = person liable for excess, to be
paid to BIR
o
If input tax > output tax = excess shall be carried over to
the succeeding quarter or quarters.
o
IF input tax results from zero-rated or effectively zerorated transactions, any excess over the output taxes shall
be REFUNDED to the taxpayer / credited against other
internal revenue taxes, at the taxpayers option.
Section 8 of R.A. No. 9337 however, imposed a 70% limitation on the
input tax. Thus, a person can credit his input tax only up to the extent
of 70% of the output tax.
There is no retention of any tax collection because the taxpayer
has already previously paid the input tax to a seller, and the
seller will subsequently remit such input tax to the BIR. The
party directly liable for the payment of the tax is the seller. What only
needs to be done is for the person/taxpayer to apply or credit these
input taxes, as evidenced by receipts, against his output taxes.
TAX IS REGRESSIVE, BUT IT IS NOT INVALID.
Direct tax is a tax for which a taxpayer is directly liable on the transaction
or business it engages in, without transferring the burden to someone else.
Examples are individual and corporate income taxes, transfer taxes, and
residence taxes.
ABAKADA v. Ermita (Oct 18, 2005)
This case is about the Resolution of the Motion for Reconsideration filed
by herein petitioners based on the decision rendered by the court on
Sept. 1, 2005, upholding the constitutionality of RA 9337 or the VAT
Reform Act.
Toshiba filed its VAT returns for the year 1996 reporting its input VAT
and alleging that its input VAT was from its purchases of capital goods
and services which remained unutilized since it had not yet engaged in
any business activity for which it may be liable for output VAT.
Consequently, Toshiba filed with the One-Stop Shop Inter-Agency Tax
Credit and Duty Drawback center of the Department of Finance
applications for tax credit/refund of its unutilized input VAT.
Toshiba also filed a petition for review with the CTA to toll the running
of the two-year prescriptive period for judicially claiming a tax
credit/refund.
CTA ordered the CIR to refund or to issue a tax credit certificate to
Toshiba.
CIR opposed on the ground that since Toshiba is registered with PEZA
as an Ecozone Export Enterprise, its business is not subject to VAT
pursuant to Section 109 of the Tax Code. Since Toshibas business is
not subject to VAT, the capital goods and services it purchased are
considered not used in VAT taxable business and therefore, it is not
entitled to refund of input taxes on such capital goods.
I: W/n Toshiba is entitled to the tax credit/refund of its input VAT on its
purchases of capital goods and services
R: Yes, Toshiba is entitled to tax credit/refund of its input VAT on its
purchases of capital goods and services.
An Ecozone enterprise is a VAT-exempt entity. Sales of goods,
properties, and services by persons from the Customs Territory to
Ecozone enterprise shall be subject to VAT at zero percent (0%).
PEZA-registered enterprises, which would necessarily be located within
Ecozones, are VAT-exempt entities because of Section 8 of RA 7916
which establishes the fiction that Ecozones are foreign territory. The
national territory of the Philippines outside of the proclaimed borders of
the Ecozone are referred to as Customs Territory. The provision
provides that PEZA shall manage and operate the Ecozones as a
separate customs territory, thus creating the fiction that the Ecozone is
a foreign territory.
The Philippine VAT system adheres to the Cross Border Doctrine,
according to which, no VAT shall be imposed to form part of the cost of
goods destined for consumption outside of the territorial board of the
taxing authority.
Sales of goods, properties, and services by a VAT-registered supplier
from the Customs Territory to an Ecozone enterprise shall be treated as
export sales.
If such sales are made by a VAT-registered supplier, they shall be
subject to VAT at 0%. In zero-rated transactions, the VAT-registered
supplier shall not pass on any output VAT to the Ecozone enterprise,
and at the same time, shall be entitled to claim tax credit/refund of its
input VAT attributable to such sales.
CIR v Seagate
Although export sales are not deemed exempt transactions, they are
nonetheless zero-rated, because the ecozone within which it is
registered is managed and operated by the PEZA as a separate
customs territory.
This means that in such zone is created the legal fiction of foreign
territory.
Under the cross-border principle of the VAT system being enforced
by the BIR, no VAT shall be imposed to form part of the cost of goods
destined for consumption outside of the territorial border of the taxing
authority. If exports of goods and services from the Philippines to a
foreign country are free of the VAT, then the same rule holds for such
exports from the national territory -- except specifically declared areas
-- to an ecozone.
THUS, sales made by a VAT-registered person in the customs territory
to a PEZA-registered entity are considered exports to a foreign
country
Conversely, sales by a PEZA-registered entity to a VAT-registered
person in the customs territory are deemed imports from a foreign
country.
An ecozone, even though a geographical territory of the Philippines, is
however regarded in law as foreign soil. This legal fiction is necessary
to give meaningful effect to the policies of the special law creating the
zone.
There is a difference between ZERO-RATED TRANSACTIONS and
EXEMPT / EFFECTIVE ZERO-RATED TRANSACTIONS
Zero-rated
It is automatic zero-rating.
Refers to the export sale of
goods and supply of services.
Exempt
It is effective zero rating.
Refers to the sale of goods or
supply of services to persons or
entities whose exemption under
special laws or Intl agreements
to which the Philippines is a
signatory effectively subjects
such transactions to a zero rate.
Intended
to
benefit
the
purchaser who, not being
directly and legally liable for the
payment of the VAT, will
ultimately bear the burden of the
tax shifted by the suppliers.
Exempt Party
- a person or entity granted VAT
exemption under the Tax Code, a
special law or an international
agreement to which the Philippines
is a signatory, and by virtue of
which its taxable transactions
become exempt from the VAT.
- Such party is also not subject to
the VAT, but may be allowed a tax
refund of or credit for input taxes
paid, depending on its registration
as a VAT or non-VAT taxpayer.
While the liability is imposed on one person, the burden may be passed on
to another. Therefore, if a special law merely exempts a party as a seller
from its direct liability for payment of the VAT, but does not relieve the
same party as a purchaser from its indirect burden of the VAT shifted to it
by its VAT-registered suppliers, the purchase transaction is not exempt.
Applying this principle to the case at bar, the purchase transactions entered
into by respondent are not VAT-exempt.
OTHERS:
Special laws may certainly exempt transactions from the VAT.
However, the Tax Code provides that those falling under PD 66 are not. The
purchase transactions it entered into are, therefore, not VAT-exempt. These
are subject to the VAT; respondent is required to register. Its sales
transactions, however, will either be zero-rated or taxed at the standard
rate of 10 percent, depending again on the application of the destination
principle (Under this principle, goods and services are taxed only in the
country where these are consumed. Thus, exports are zero-rated, but
imports are taxed).
When VAT Rate is at 0% or at 10%
0%- if Seagate enters into such sales transactions with a purchaser (usually
in a abroad) for use or consumption OUTSIDE the Philippines
10%- if Seagate entered into with a purchaser for use or consumption IN
the Philippines, UNLESS the purchaser is exempt from the indirect burden of
the VAT, in which case it shall also be zero-rated.
Since the purchases of respondent are not exempt from the VAT, the rate to
be applied is zero.
The Tax Exemptions are Broad and Express
Applying the special laws enumerated above, respondent as an
entity is exempt from internal revenue laws and regulations. This
exemption covers both direct and indirect taxes, stemming from the very
nature of the VAT as a tax on consumption, for which the direct liability is
imposed on one person but the indirect burden is passed on to another.
Respondent, as an exempt entity, can neither be directly charged for the
VAT on its sales nor indirectly made to bear, as added cost to such sales,
the equivalent VAT on its purchases. Ubi lex non distinguit, nec nos
distinguere debemus. Where the law does not distinguish, we ought not to
distinguish.
Tax Refund or Credit is in Order
Having determined that respondents purchase transactions are
subject to a zero VAT rate, the tax refund or credit is in order. As correctly
held by both the CA and the Tax Court, respondent had chosen the fiscal
incentives in EO 226 over those in RA 7916 and PD 66. It opted for the
income tax holiday regime instead of the 5 percent preferential tax regime.
Therefore, respondent can be considered exempt, not from the VAT, but
only from the payment of income tax for a certain number of years,
depending on its registration as a pioneer or a non-pioneer enterprise.
Summary
To summarize, special laws expressly grant preferential tax
treatment to business establishments registered and operating within an
ecozone, which by law is considered as a separate customs territory. As
such, respondent is exempt from all internal revenue taxes, including the
VAT, and regulations pertaining thereto. It has opted for the income tax
holiday regime, instead of the 5 percent preferential tax regime. As a
matter of law and procedure, its registration status entitling it to such tax
holiday can no longer be questioned. Its sales transactions intended for
export may not be exempt, but like its purchase transactions, they are zerorated. No prior application for the effective zero rating of its transactions is
necessary. Being VAT-registered and having satisfactorily complied with all
the requisites for claiming a tax refund of or credit for the input VAT paid on
capital goods purchased, respondent is entitled to such VAT refund or
credit.
American Express v. CIR
Petitioner Amex-Phil is a Philippine branch of American Express
International, Inc., a corporation duly organized under Delaware, US
laws. It is a servicing unit of American Express International, Inc. HK
branch, engaged primarily to facilitate the collection of Amex HK's
receivables from Amex cardholders residing or situated in the
Philippines, as well as the payment of Amex HK to American Express
accredited service establishments and merchants in the Philippines.
Amex-Phil made a request in writing to BIR for qualification as a zero
rated VAT enterprise.
BIR issued a VAT Ruling declaring that as a VAT registered entity whose
service is paid for in acceptable foreign currency which is remitted
inwardly to the Philippines and accounted for in accordance with the
rules and regulations of the Central Bank of the Philippines, Amex-Phils
service income is automatically zero rated effective January 1, 1988.
For this, there is no need to file an application for zero-rate.
For the taxable year 1998, petitioner allegedly generated and recorded
revenues in the total amount of P81k which were paid for in HK in
foreign currency inwardly remitted to the Philippines and accounted for
in accordance with the rules and regulations of the BSP.
Amex-Phil asserts that said revenues qualify as zero-rated pursuant Tax
Code as confirmed in the VAT Ruling. For the same period, Amex-Phil
allegedly paid input VAT amounting to P3.9M+ on its domestic
purchases of taxable goods/services. Petitioner nonetheless claims that
its output VAT liability for the period amounted only to P4k thereby
leaving an unutilized input VAT of P3M averred to be directly attributable
to its zero-rated sales.
Petitioner contends that the input VAT payments in 1998 were paid in
the course of its trade or business. Further, the unapplied input VAT
payments subject of this case had not been carried over to the
succeeding first quarter of 1999.
I: W/N Amex-Phil is entitled to a refund of P3,967,561.06 allegedly
representing unutilized input VAT payments on domestic purchases
of taxable goods/services which are directly attributable to zero-rated
sales for the period January 1 to December 31, 1998
R: YES. Petitioner's claim for refund is hereby PARTIALLY GRANTED.
Respondent CIR is ORDERED to REFUND to petitioner the sum of
P3,967,336.97 representing unutilized input VAT payments for the
period January 1 to December 31, 1998.
The onus (burden) of taxation under our VAT system is in the country
where the goods, property or services are destined and consumed.
This is the reason why under our VAT Law, goods, property or services
destined to be consumed in the Philippines are subject to the 10% VAT
whereas exports are zero-rated.
Amexs transactions were considered zero-rated because they were
services that were paid for in an acceptable foreign currency &
accounted for in accordance w/ the rules & regulations of the BSP since
its transactions were paid in HK foreign currency which was inwardly
remitted to the Philippines & accounted for in accordance w/ the rules of
BSP.
The governing law in the case at bar is Section 112(A)[then Section
106(a)] in relation to Section 108(B)(2) of the Tax Code. 3 In conformity
with this law, to be entitled to a refund or tax credit of input VAT
payments directly attributable to zero-rated or effectively zerorated sales, the following requisites must be complied with:
1) there must be zero-rated or effectively zero-rated sales;
2) that input taxes were incurred or paid;
3) that such input VAT payments are directly attributable to zero-rated
sales or effectively zero-rated sales;
4) that the input VAT payments were not applied against any output
VAT liability; and
5) that the claim for refund was filed within the two-year prescriptive
period.
PETITIONER in this case fulfilled all the requirements, except the 3rd (not
all of the input VAT payments were attributable to the zero-rated sales),
hence the partial grant.
1st requirement: Petitioner's sales of services qualify as zero-rated
sales. It is a VAT registered entity and its sales of services to AMEX HK
falls under Section 108(B)(2) of the Tax Code. Further, petitioner's
service fee earnings amounting to P81k were paid for in acceptable
foreign currency (US dollars) and accounted for in accordance with the
rules and regulations of the BSP as evidenced by the various telex
advices and demand deposit statementsand certification from BPI Forex
Corporation.
2ndrequisite: Petitioner submitted various suppliers' invoices and ORs
which are valid documents in accordance with Sections 113 and 237 of
the Tax Code. From said documents, petitioner established that it paid
an input VAT in the sum of P3,972,025.15 on its domestic purchases of
taxable goods/services for the year 1998.
3rd requisite: Not all of the substantiated input VAT payments of
P3,972,025.15 were directly attributable to petitioner's zero-rated sales.
For the year 1998, petitioner had taxable sales in the amount of
P46,881.80 with the corresponding output VAT of P4,688.18 Indubitably,
only the input VAT of P3,967,336.97, arrived at by deducting the output
VAT of P4,688.18 from the substantiated input VAT of P3,972,025.15,
can be directly attributed to petitioner's zero-rated sales for the subject
period.
those made prior to its enactment. Executive Order No. 273 stated that
any person who, in the course of trade or business, sells, barters or
exchanges goods and services, was already liable to pay VAT. The
present law merely stresses that even a nonstock, nonprofit
organization or government entity is liable to pay VAT for the sale of
goods and services.
Section 108 of the NIRC defines the phrase "sale of services" as the
"performance of all kinds of services for others for a fee, remuneration
or consideration." It includes "the supply of technical advice,
assistance or services rendered in connection with technical
management or administration of any scientific, industrial or
commercial undertaking or project."
It is immaterial whether the primary purpose of a corporation indicates
that it receives payments for services rendered to its affiliates on a
reimbursement-on-cost basis only, without realizing profit, for purposes
of determining liability for VAT on services rendered. As long as the
entity provides service for a fee, remuneration or consideration, then
the service rendered is subject to VAT.
SM Prime and First Asia are both engaged in the business of operating
cinema houses, among others.
BIR sent them both preliminary assessment notices for VAT deficiency
on cinema ticket sales.
Both protested, but BIR denied their protests, arguing that the list of
enumerated services under Sec. 108 of the NIRC is not
exhaustive because it covers all sales of services. Also, the
deficiency assessments were based on Revenue Memorandum Circular
No. 28-2001.
CTA ruled that the activity of showing cinematographic films was NOT
subject to VAT, and should instead be subject to an amusement tax.
CTA en banc affirmed this, saying that section 108 of the NIRC actually
sets forth an exhaustive enumeration of what services are intended to
be subject to VAT, w/c does NOT include the showing films and motion
pictures.
The enumeration of services subject to VAT under Sec. 108 of the NIRC
is not exhaustive. It is up to the court to determine if showing of films
and motion pictures fall under the phrase similar services of Sec. 108
by ascertaining the intent of the legislature.
The repeal of the Local Tax Code by the LGC of 1991 is not a legal basis
for the imposition of VAT on the gross receipts of cinema/theater
Pawnshops are not under 108 of the NIRC but are specifically
classified as other Non-bank Financial Intermediaries by RA
9238.
Prior to the passage of the EVAT Law in 1994, pawnshops were treated as
lending investors subject to lending investor's tax.
Subsequently, pawnshops were then treated as VAT-able enterprises
under the general classification of "sale or exchange of services" under
Section 108 (A) of the Tax Code of 1997, as amended. Finally, R.A. No.
9238 [which was passed in 2004] classified pawnshops as Other
Non-bank Financial Intermediaries.
At the time of the disputed assessment, that is, for the year 2000,
pawnshops were not subject to 10% VAT under the general provision on
"sale or exchange of services" as defined under Section 108 (A) of the
Tax Code of 1997, which states: "'sale or exchange of services' means
the performance of all kinds of services in the Philippines for others for a
fee, remuneration or consideration . . . ."
Instead, due to the specific nature of its business, pawnshops were then
subject to 10% VAT under the category of non-bank financial
intermediaries.
The Court finds that pawnshops should have been treated as nonbank financial intermediaries from the very beginning, subject to
the appropriate taxes provided by law, thus
o
Under the NIRC of 1977, pawnshops should have been levied the
5% percentage tax on gross receipts imposed on bank and
non-bank financial intermediaries under (now) Section 121 of
the Tax Code of 1997
o
With the imposition of the VAT under the EVAT Law, pawnshops
should have been subjected to the 10% VAT imposed on banks
and non-bank financial intermediaries and financial institutions
under (now) Section 108 of the Tax Code of 1997
o
However, through the years, various laws effectively deferred
the levy, collection, and assessment of 10% VAT on services
rendered by banks, non-bank financial intermediaries, finance
companies, and other financial intermediaries not performing
quasi-banking functions from 1994 to December 31, 2002;
o
With no further deferments given by law, the levy, collection and
assessment of the 10% VAT on banks, non-bank financial
intermediaries, finance companies, and other financial
intermediaries not performing quasi-banking functions were
finally made effective beginning January 1, 2003;
o
2004: Finally, with the enactment of R.A. No. 9238 in 2004, the
services of banks, non-bank financial intermediaries, finance
companies, and other financial intermediaries not performing
quasi-banking functions were specifically exempted from VAT,
and the 0% to 5% percentage tax on gross receipts on other non-
Then, RA 7716 took effect, which amended the OLD NIRC and
included sales of real property in the coverage of VAT.
Because the law then was prior to RA 7716, no VAT was paid.
However, at the effectivity of RA 7716, FBDC became a VATRegistered person, liable for VAT and entitled for transactional
input tax credit.
It paid VAT but utilized its transitional input tax credit, which offset
each other.
Upon FBDC asking the BIR whether the offsetting was valid, BIR
recommended that their claim TITC was correct.
Although the CIR has the power to redefine the concept of goods,
it pertains to more technical matters. It cannot go as far as to
amend the provision, as it include goods and real property in the
course of business. Thus, in case of conflict between a statue and
an administrative order, the statue shall prevail
Justice Antonio Carpio dissent: The transitional input tax credit
applies only when taxes where paid on the properties in the beginning
inventory, but this would constitute a new requisite to the application
of transitional input tax credit and would require the taxpayer
additional proof of payment of taxes. He also argues that the word
presumptive assumes the payment of tax, thus requiring prior
payment of taxes. The law necessarily comes into existence only after
the introduction of VAT. However, presumptive input tax credit is
included in the OLD NIRC but was never integrated until the NEW NIRC
took effect, which is more than a decade. Thus, the old meaning is not
anymore attached to the word. Only those goods on which input VAT
was paid could form the basis of input tax credit. However, this brings
about the again absurd situation where goods not subject to VAT are
acquired but liable for other tax (estate / donor / capital gains).
As a last point, the prohibition of using value of real properties in the
beginning inventory in RR 7-95 has already been repealed by RR 6-97.
The provisions of Section 105 of the NIRC remain intact despite the
enactment of RA 7716. Section 105 however was amended with the
passage of the New NIRC
1) Sec 100 of the Old NIRC as amended by RA7716, could not have
supplied the distinction between the treatment of real properties or
real estate dealers, and the treatment of transactions involving other
commercial goods, as said distinction is found in section 105 and,
subsequently, revenue regulations no. 7-95 which defines the input tax
creditable to a real estate dealer who becomes subject to vat for the
first time.
A law must not be read in truncated parts; its provisions must be read
in relation to the whole law.
Having been defined in Section 100 of the NIRC, the term "goods" as
used in Section 105 of the same code could not have a different
meaning.
From Jan to Dec 2001, PLDT collected from PAL the said 10%
Overseas Communication Tax4 on the amount paid by PAL for overseas
telephone calls it made through PLDT.
PAL filed w/ the BIR a claim for refund of the OCT it alleged to have
erroneously paid in 2001. This was based on its franchise, Sec 13 of PD
1590, w/c granted it:
o
1) the option to pay either the basic corporate income tax
on its annual net taxable income or the 2% percent
franchise tax on its gross revenues, whichever was lower;
and
o
2) the exemption from all other taxes, duties, royalties,
registration, license and other fees and charges imposed
by any municipal, city, provincial or national authority or
government agency, now or in the future, except only
real property tax.
Also invoking a BIR Ruling in 1994, PAL maintained that, other than
being liable for basic corporate income tax or the franchise tax,
whichever was lower, PAL was exempted from ALL OTHER TAXES,
including the OCT by virtue of the in lieu of all taxes clause in Section
13 of PD1590.
BIR failed to act on the request for refund of PAL, so PAL filed a
petition for review before the CTA.
CTA ordered BIR to refund PAL the 10% OCT erroneusly collected.
(However CTA held that out of the total amount of P127k respondent
sought to refund, only P126k was supported / documents)
I: W/n CTA was correct in holding that BIR should refund PAL for
10% OCT
R: Yes, CTA was correct.
The language used in Section 13 of PD 1590, granting PAL tax
exemption, is clearly all-inclusive.
The basic corporate income tax or franchise tax paid by
respondent shall be in lieu of all other taxes, duties, royalties,
registration, license, and other fees and charges of any kind, nature, or
description imposed, levied, established, assessed or collected by any
municipal, city, provincial, or national authority or government agency,
now or in the future x x x, except only real property tax.
OCT - imposed by Section 120 of the NIRC, w/c shall be collected upon every overseas dispatch or
message transmitted from the Phils by telephone or other communication equipment.
BIR likewise opposed the claim for refund of PAL based on the argument that the latter was not
exempted from final withholding tax on interest income, because said tax should be deemed part of
the basic corporate income tax, which respondent had opted to pay. This Court was unconvinced by
BIRs argument, ratiocinating that basic corporate income tax, under Section 13(a) of Presidential
Decree No. 1590, relates to the general rate of 35% (reduced to 32% by the year 2000) imposed on
taxable income by Section 27(A) of the NIRC. Although the definition of gross income is broad
enough to include all passive incomes, the passive incomes already subjected to different rates of
final tax to be withheld at source shall no longer be included in the computation of gross income,
which shall be used in the determination of taxable income. The interest income of respondent is
already subject to final withholding tax of 20%, and no longer to the basic corporate income tax of
35%. Having established that final tax on interest income is not part of the basic corporate income
tax, then the former is considered as among all other taxes from which respondent is exempted
under Section 13 of Presidential Decree No. 1590.
By basing the tax rate on the annual net taxable income, PD 1590
necessarily recognized the situation in which taxable income may
result in a negative amount and thus translate into a zero tax liability.
The fallacy of the CIRs argument is evident from the fact that the
payment of a measly sum of one peso would suffice to exempt PAL
from other taxes, whereas a zero liability arising from its losses would
not. There is no substantial distinction between a zero tax and a onepeso tax liability.
Thus, by merely exercising its option to pay for basic corporate
income tax even if it had zero liability for the same due to its net loss
position in 2001 PAL was already exempted from all other taxes,
including the OCT.
The issuance of subpoena duces tecum for the production of the documents
requested by the FDI which documents FDI claims to be crucial to its
defense is unnecessary in view of the CTA order for CIR to certify and
forward to it all the records of the case. If the order has not been complied
with, the CTA can enforce it by citing CIR for indirect contempt.
*Other issue pointed out by the Court: Sablan was not a party to the case
and the testimonies, documents, and admissions sought by FDI were not
relevant to the issue before the CTA. The only issues which surfaced during
the preliminary hearing before were whether CIRs issuance of assessment
against FDI had prescribed and whether FDIs tax return was fraudulent.
Besides, the subpoenas and answers to the written interrogatories would
violate RA 2338 as implemented by Finance Department Order 46-66.
Bonifacio Sy Po v CTA
Bonifacia is the widow of the late Mr. Po Bien Sing who died in 1980. In
taxable year 1964-1972, he was the sole proprietor of Silver Cup Wine
factory in Cebu. He was engaged in the business of manufacture and sale
of compound liquors, using alcohol and other ingredients as raw materials.
Silver Cup was alleged to have committed tax evasion amounting
to millions of pesos so Secretary of Finance ordered Finance-BIR-NBI Team
to conduct an investigation. A letter and a subpoena duces tecum were
issued against Silver Cup requesting production of books and accounting
documents. Po Bien Sing, however, did not comply with this. This prompted
the team to enter the factory bodega. They seized different brands of
alcohol products, a total of 1,555 cases. On basis of the teams
investigation, CIR assessed Po Bien Sing deficiency income tax amounting
to P12.7M.
Fact obtained from the decision: The former employees of the
factory testified on the fraudulent practices of Po Bien Sing. The factory
personnel manager testified that false entries were entered in the official
register book. The assistant factory superintendent also testified that when
the storekeeper is not around, illegal operations happen. Untaxed alcohol is
brought from Cebu Alcohol plant into the compound of Silver Cup. When the
storekeeper returns, he sees nothing because the untaxed alcohol is
brought directly to a secret tunnel within the bodega itself.
Bonifacia protested the deficiency assessments. A reinvestigation
was done but yielded the same results in view of the taxpayers insistent
failure to present the books of accounts. Warrants of distraint and levy were
issued by CIR but Bonifacia deemed it only as a denial of her protest.
Issue:
Whether or not the assessments have valid and legal bases? Yes.
Held:
(Hence, CTA and CIR have not committed errors, CTA decision is affirmed.)
Ratio:
1.
2.
3.
CIR v Benipayo
(see block digests for the rest)
within which to appeal the case to the CTA, which they failed to avail of
.
OTHERS:
Criminal Charges were filed against Mrs. Marcos for violation of Secs.
82, 83 and 84, NIRC.
The CIR thereby caused the preparation of estate tax return for the
estate of the late president, the income returns of the Marcos spouses
for 1985 and 1986, and the income tax returns of petitioner Marcos II
for 1982 to 1985.
Mambulao Lumber v RP
Mambulao assails decision of the CA, contending that the period to file
a collection suit has already lapsed thus CIR is barred by prescription. It
contends that period should be reckoned from the January 1949 when
it was assessed by the BOF.
NIRC Sec 332 provides that tax may be collected by distraint / levy OR
by a proceeding in court ONLY if begun (1) within 5 years after the
assessment of the tax, or (2) prior to the expiration of any
period for collection agreed upon in writing by the CIR and
taxpayer BEFORE expiration of such 5-year period.
THUS, 5-year period should be computed from the August 1958 letter
of the BIR.
Forest charges are internal revenue taxes and the sole power and duty
to collect the same is lodged with the BIR and not w/ the Bureau of
Forestry.
Therefore, for the purpose of computing the 5-year period within which
to file a complaint for collection, the demand or even the assessment
made by the Bureau of Forestry is immaterial.
The BIR Letter in August 1958 and case filed in August 1961 was well
within the 5-year period to institute case.
Also, given that Mambulao did NOT appeal assessment to the
CTA within 30 days from receipt of the letter (1959 as
prescribed by RA 1125), the assessment became final and
executory.
In a suit for collection of internal revenue taxes, where the assessment
has already become final and executory, the action to collect is akin to
an action to enforce a judgment.
No inquiry can be made therein as to the merits of the original case or
the justness of the judgment relied upon. Petitioner is thus already
precluded from raising the defense of prescription.
Where the taxpayer did not contest the deficiency income tax
assessed against him, the same became final and properly
collectible by means of an ordinary court action.
The taxpayer cannot dispute an assessment which is being enforced by
judicial action, He should have disputed it before it was brought to
court.
Lim Tian Teng Sons & Co., Inc., a domestic corporation with principal
office in Cebu City, engaged in 1951 and 1952, among others, in the
exportation of copra.
Lim Tian then filed its income tax return for 1952 based on accrued
income and expenses. Its return showed a loss of P56,109.98.
CIR assessed Lim Tian of deficiency income tax and 50% surcharge
thereon amounting to P5,037.00 and demanded payment thereof not
later than February 15, 1957.
CIR did NOT reply but instead referred the case to the SolGen for
collection by judicial action.
SolGen demanded from Lim Tian payment w/in 5 days, stating that
otherwise judicial action would be instituted without further notice.
Lim Tian thus wrote CIR and SolGen, reiterating its request for
reinvestigation. It requested that it be allowed to present its
explanation together w/ supporting papers relative to its income tax
liability.
Deputy Collector of CIR informed the taxpayer that its request for
reinvestigation would be granted provided it executed within 10 days a
WAIVER of the statute of limitations as required in General Circular V258 dated August 20, 1957. The Deputy Collector extended the period
within which to execute and file with him the waiver of the statute of
limitations to December 31, 1957, but advised that if no waiver is
the CTA, said period had long lapsed when the CIR filed the complaint
in this case on September 2, 1958.
Taxpayers failure to appeal to the CTA in due time made the
assessment in question final, executory and demandable.
And when the action was instituted on September 2, 1958 to enforce
the deficiency assessment in question, it was already barred from
disputing the correctness of the assessment or invoking any defense
that would reopen the question of his tax liability on merits. Otherwise,
the period of 30 days for appeal to the Court of Tax Appeals would
make little sense.
OTHERS: Indications that taxpayer's income tax is fraudulent: Firstly,
taxpayer's beginning inventory for 1952 did not state the truth in
considering the copra outturn as copra on hand, for on December 31,
1951 such copra was not any more in taxpayer's bodega. It was in
transit to a foreign port. And the taxpayer no longer owned the copra.
As a matter of fact, it already received payment for the same.
Secondly, by observing regularly its own system of accounting,
taxpayer had no choice but to account the copra outturn as accrued
income. This it did not do. For such deviation, we see no other purpose
than to lessen, if not obliterate as in fact it did, its income tax liability
per its return. The lower court therefore did not err in imposing the
50% surcharge.
Basa v Republic
In a demand letter dated August 31, 1967, the CIR assessed against
Augusto Basa deficiency income taxes for 1957-1960 totaling P16k.
I: W/n the decision CFI Manila (not the Tax Court) in an income tax case
is reviewable by Appellate Court or by SC.
On May 11, 1962, Yabes, through his counsel, filed with the CIR a letter
protesting the assessment of the said taxes and penalties on the
ground that his agreements w/ International Harvester were of
purchase and sale, and NOT of agency, hence he claimed he was not
able to pay such kind of taxes.
Yabes then filed a tax waiver on October 20, 1962, extending the
period of prescription to December 31, 1967.
After 5 yrs, the heirs of the Yabes received a letter from CIR requesting
that they "waive anew the Statute of Limitations" and further
confirming the previous understanding that the final resolution of the
protest of the deceased Doroteo Yabes was "being held in abeyance
until the Supreme Court renders its decision on a similar case involving
the same factual and legal issues brought to it on appeal" (referring to
the Constantino "test" case).
Yabes filed a revised waiver further extending the period of prescription
to December 31 1970.
After, no word was received by Yabes heirs during the interim of more
than 3 yrs, but on January 20, 1971, they received the summons and a
copy of the complaint filed by the Commissioner in the CFI seeking to
collect taxes.
I: W/N CFI can lawfully acquire jurisdiction over a contested
assessment made by the CIR against Yabes w/c has not yet become
final, executory and incontestable, and which assessment is being
contested in the CTA and still pending consideration
R: No, CFI had no jurisdiction and should have dismissed the case.
Decision is NOT yet final, executory and incontestable.
CIR contends that Yabes received the Commissioner's letter dated
August 3, 1962, denying the latter's protest against the said
assessment on September 18, 1962 and FAILED to appeal therefrom
within the 30-day period contemplated under Section 11, of Republic
Act 1125.
HOWEVER, the period for appeal to this Court should NOT be counted
from September 18, 1962. In a letter of July 27, 1967, CIR informed
Yabes that a resolution of their protest was being held in abeyance
until the Supreme Court renders a decision on a similar case "involving
the same factual and legal issues".
As a matter of fact, in an earlier letter dated September 26, 1962, CIR
also informed Yabes' counsel that "administrative appeal for and in
behalf of their clients will be held in abeyance pending resolution of the
issues on a similar case which was appealed by you to the Court of Tax
Appeals".
It is thus clear in these letters that CIR reconsidered the finality of his
decision of August 3, 1962, assuming arguendo that the letter had a
tenor of finality.
The records show that a warrant of distraint and levy was issued on
October 2, 1970. Had this been served on Doroteo Yabes, it would have
been equivalent to a final decision. There is, however, nothing to
show that it was ever served on Yabes. Neither is there
anything in the record to show that a formal decision of denial
was made after CIR's letter of July 27, 1967.
CRIMINAL ACTION
Republic v Patanao
Ungab v Cusi
In July, 1974, BIR examined the income tax returns filed by Ungab,
for the calendar year ending December 31, 1973. BIR discovered
that Ungab failed to report his income derived from sales of
banana saplings.
BIR Examiner, however, was fully convinced that Ungab had filed a
fraudulent income tax return so that he submitted a "Fraud
Referral Report," to the Tax Fraud Unit of the BIR.
Adamson v CA
Basilan Estates, Inc. filed with CTA a petition for review of the
Commissioner's assessment, alleging prescription of the period for
assessment and collection.
Tupaz v Ulep
State Prosecutor Molon filed w/ the MTC an information against Petronilla
Tupaz and her late husband Jose Tupaz as corporate officers of El Oro
Engravers Corp, for non-payment of deficiency corporate income taxes
for year 1979. MTC dismissed the case for lack of jurisdiction.
7 months later, Monlon filed w/ the RTC 2 informations against the
accused and her late husband for the same alleged nonpayment of
deficiency corp income. Case 1 was raffled to Judge Ulep (Branch 105)
while Case 2 was raffled to Judge Solano (Branch 86).
Accused filed w/ RTC Branch 86 (Case 2) a motion to dismiss /quash the
information since it was exactly the same as the information against the
Nava v CIR
RP v CA
BIR reiterated its demand through THREE letters, one of w/c was
dated Sept 19, 1956 (2nd letter).
Nielson did NOT heed the demand so BIR filed a complaint for
collection w/ the CFI.
Case was dismissed for failure to serve summons. The case was
subsequently refiled.
Nielson claims that the assessment did NOT become final since it
did not receive the same.
BIR claims that since the assessment was sent through ordinary
mail and it was never returned to BIR, it must be considered to have
been received by Nielson upon the expiration of 5 days after mailing.
Since the BIR had not adduced proof that Nielson had in fact
received the 1st demand letter, it cannot be assumed that Neilson
received the said letter.
THREE days later, CIR wrote Western a letter of demand for the
payment of the amount, including therein a breakdown of said
assessment.
CIR denied the request on July 30, 1959 and reiterated its demand
for payment of the amount w/in 30 DAYS from receipt.
Western, on Dec 18, 1959, filed w/ the CTA a petition for review of
the assessment. It argued that the period for making the assessment
had already prescribed.
I: W/n the period for making and issuing the assessment has
prescribed
RP v Marsman Dev
o
3rd: Nov 1954: P400+ representing surcharges
Marsman acknowledged the assessments through a letter, where
it requested that it be furnished w/ an itemized statement of the taxes,
and gave notice of its intention to question the validity and the legality
of the assessments.
BIR told Marsman that it must, within 10 DAYS, comply w/ the
requirements for requests for reinvestigation and reexamination of tax
assessments.6
Marsman asked for an exemption from this requirements, which
was denied by the BIR.
BIR then reiterated that Marsman had 5 days to comply otherwise
assessment shall become final.
Marsman failed to act on this.
Final tax notices were sent to Marsman on April 1956.
A warrant of distraint and levy was issued 3 months later.
BIR filed a case with the CFI of Manila which ordered Marsman to
pay the total assessed amount of P53,133. Hence this appeal.
I: W/n the BIRs right to assess and collect taxes from 1945-1959
had prescribed
R: NO, BIRs right to assess and collect taxes from 1945-1959 had
not yet prescribed.
Marsman contends that CIR had only 5 years within which to
assess the percentage and forest charges herein involved.
For the filing of a return to be reckoned as the starting point of the
period to make an assessment, such return must have been
substantially complete. There was no showing that Marsman indeed
filed a return, and even if it did, the alleged return was incomplete.
Thus, in case of a false or fraudulent return, the period to make an
assessment is 10 YEARS. Assessment was made w/in the 10 YEAR
period.
As to the prescription of the right to collect on the 2 nd
assessment
Amendedcomplaints are deemed filed only on the date of its
admission; when it comes to substantive matters such as prescription,
the admission retroacts to the day it was actually filed, which in this
case was Aug 1959, STILL w/in the 5 year period to collect.
As to the prescription of the suit against Marmsans
liquidator
Section 77 of the Corporation Law provides for a three-year period
for the continuation of the corporate existence of the corporation for
purposes of liquidation.
Writing under oath specifying grounds relied on and other necessary docs
Phoenix filed its income tax returns from 1952 to 54, making
amendments (1955) to the originals (1953, 54, 55).
CTA said that the right of the CIR to assess deficiency taxes had
already prescribed.
R: NO.
Period given by the Tax Code for the CIR to assess income tax is 5
YEARS from the filing of the income tax return.
CTA ruled that the original return was a complete one containing
info on various items of income and deduction from w/c the CIR
determines the tax liability of Phoenix. THIS IS WRONG.
THUS, the right to issue the assessment must be counted from the
filing of the AMENDED income tax return.
To hold otherwise would pave the way for taxpayer to evade the
payment of taxes simply reporting in their original return heavy losses
and amending the same more than 5 years later when the
Commissioner has lost his authority to assess the proper tax there
under.
The object of the tax code is to impose taxes for the needs of the
government, not to enhance tax avoidance to its prejudice.
Butuan was assessed for P40k+ for sales tax, penalty and
compromise penalty on its sales of logs, later on reduced to P38k+
after reinvestigation.
The taxpayer must file a return for the particular tax required by
law in order to avail himself of the benefits of Section 331.
In this case, the omission to file sales return for the years 1951 to
1953 were discovered in Sept 17, 1957, still w/in the 10-year period.
Thus, the assessment and collection of tax has NOT YET prescribed.
I: W/n the right of the BIR to collect deficiency taxes for 1948 and
1949 is already barred by prescription
R:
Tan Guan and one Gonzalo Padua were the cashier and the
president of one Imperial, involved in the manufacturing of cigarettes.
800 bobbins of cigarette paper. CIR then filed a civil action on May 7,
1958 against Tan Guan.
Tan Guan then, who could not be located initially, filed an appeal
on the distraint of his properties claiming prescription of action.
I: W/n the action had prescribed
R: No, the action did not prescribe.
Tan Guan is claiming that first, the initial 72,400 assessment was
made on January 21, 1953 while the second action was filed on May 7,
1958 or beyond the prescriptive period of 5 years.
However, in spite of what Tan Guan was claiming, the prescriptive
action was INTERRUPTED, firstly on February 1953 when Padua (on the
first assessment) appealed the disputed assessment of 72,400.
On the second assessment, there was no 5 years yet as the first
assessment was done on May 1953, while the second one was May 7
1958, clearly no 5 years yet. Moreover, the prescriptive period of five
(5) years applies only when a return is filed. However, in the case of a
false or fraudulent return with intent to evade tax or of a failure to file
a return, the tax may be assessed, or a proceeding in court for the
collection of such tax may be begun without assessment, at any time
within ten years after the discovery of the falsity, fraud, or omission.
Since in this case, there was no return, the 10 year prescriptive
period hasnt lapsed yet!
ADDITIONAL NOTES: The prescriptive period may be interrupted
by a REQUEST FOR REINVESTIGATION w/c is granted; and if on the
basis of such reinvestigation, another assessment is made, the
prescriptive period shall be counted from the new assessment.
HOWEVER, a mere request for reinvestigation will NOT suspend the
prescriptive period if not reconsidered/acted upon.
Ayala Securities Corp filed its ITR w/ the CIR for the fiscal year w/c
ended on Sept 30, 1955.
Income tax due on the return was duly paid w/in the period
prescribed by law.
CIR then advised Ayala for the assessment of P758k unpaid tax on
its accumulated surplus.
CTA and SC both held that the assessment was made beyond the
5-year period and thus had no binding force and effect.
PJI filed its Annual Income Tax Return for the calendar year which
ended on December 31, 1994
Oct 5, 1998- Assessment Division of the BIR issued PreAssessment Notices which informed PJI of the results of the
investigation finding that petitioner had deficiency taxes
(P136,952,408.97)
Nov 26, 1999- PJI asked BIR for a clarification how it became
liable for tax deficiency and sent a follow up letter asserting that
its record did not show receipt of Assessment/Demand No. 331-000757-94
May 12, 2000- PJI filed a Petition for Review with the CTA. One of
its grounds was that the assessment, having been made beyond
the 3-year prescriptive period was null and void
RP v Lim de Yu
Rita Lim de Yu filed her yearly income tax returns from 1948
through 1953.
BIR assessed the taxes due on each return, and Rita paid them
accordingly. On July 17, 1956 the Bureau issued to Rita deficiency
income tax assessments for the years 1945 to 1953 in the total
amount of P22,450.50.
Upon Rita's failure to pay, an action for collection was filed against
her in the CFI of Cotabato on May 11, 1959.
Lower court dismissed the case on the ground that right to collect
had already prescribed pursuant to the waiver.
I/R: 1) W/n lower court was correct in ruling that the
deficiency income taxes for 1948, 1949 and 1956 were NOT
collected on time
YES, lower court was correct. Deficiency taxes were NOT collected
on time.
Although Republic alleged that the returns were false and
fraudulent (prescribing 10 yrs instead of 5), it FAILED to establish such
allegation.
In fact, every time Rita filed her returns, and every time there was
a recomputation by the Bureau, she PAID the amounts due.
Even the Bureau itself appears none too sure as to the real amts of
net income for those years.
It is NOT enough that fraud is alleged as it must be duly
established. Hence, the 10yr period for fraud cases cannot be availed
of.
Also, the tax years 1948 to 1950 cannot be deemed included in
the "waiver of the statute of limitations.
Although Sec332 waiver provides fro an exemption to the code,
such AGEREMENT must be made BEFORE, and NOT AFTER the
expiration of the original period. It prevents prescription from attaching
and does NOT operate to authorize extension once prescription has
attached.
Thus, the amounts were not collected on time.
2) W/n LC was correct in dismissing the case because the
right to collect had prescribed already pursuant to waiver
NO, LC was incorrect on this point.
Assessment and collection are 2 dif processes. Sec331 gives gov 5
years from filing of return within w/c to assess taxes due. Sec332b
allows extension of this agreement by WRITTEN AGREEMENT between
taxpayer and CIR.
On the other hand, par.c. is concerned w/ collection of taxes after
assessment, regardless of whether made during 5yrs or UPON
extension.
Hence, collection can be affected w/in 5 yrs OR the agreed upon
extension between taxpayer and commissioner.
Thus, assessment and collection if made not later than Dec 1958
should be deemed to refer merely to the right to assess and NOT to
collect, for it that were so, agreement would LIMIT instead of extend
the right to collect.
RP v Heirs of Cesar Jalandoni
BIR then conducted another investigation and this time it found (1)
that the market value of the lands reported in the return filed by Cesar
Jalandoni was underdeclared; (2) that seven sugar lands in Talisay-Silay
were omitted from the return the same having a market value of
P100,200.00; and (3) the shares of stock owned by the deceased in the
Victorias Milling Company, Hawaiian-Philippine Company and Central
Azucarera de la Carlota, were underdeclared.
Tan Guan and Sia Lin, Chinese nationals, organized and registered
the Phil Surplus Company, a general partnership.
Aznar v CTA
Vera v Fernandez
R: NO. Claim is NOT barred and gov can still collect w/in
the prescriptive period.
RP v Limcaco
RP v Ret
On February 23, 1949, Damian Ret filed with the BIR his
Income Tax Return for the year 1948, where he made it appear that his
net income was only P2k+ with no income tax liability at all.
The BIR found out later that the return was fraudulent
since Ret's income, derived from his sales of office supplies to different
provincial government offices, totaled P94k+.
N.I.R.C. penalized under Sec. 73, thereof (Crim. Cases Nos. 19037, and
19038. He pleaded guilty to the two (2) cases and was sentenced to
pay a fine of P300.00 in each.
After his conviction, the Republic filed the present
complaint for the recovery of Ret's deficiency taxes in the total sum of
P103k+ plus 5% surcharge and 1% monthly interest.
Instead of answering, he presented a Motion to Dismiss
on February 8, 1958, claiming that the "cause of action had already
prescribed".
CFI held that the five-year period fixed by law for the
filing of suit for the collection of income tax having already expired, the
plaintiff has no cause of action against the defendant and the motion
to dismiss should be and is hereby granted, and the case is dismissed
without pronouncement as to costs.
I: W/n right of BIR to collect income taxes had already
prescribed
R: YES, cause of action has already prescribed.
Section 332 of the Revenue Code does NOT apply to
income taxes if the collection of said taxes will be made by summary
proceedings, because this is provided for by Section 51 (d); but if the
collection of income taxes is to be effected by court action, then
section 332 will be the controlling provision.
The gov contends that granting the applicability of Sec
332, it has 10 yrs from discovery of fraud, falsity or omission within w/c
to file the action.
Under this section, the CIR is given 2 alternatives:
o
Assess tax WITHIN 10 YRS from discovery of falsity, fraud,
omission
o
File an action in court for the collection of tax WITHOUT
ASSESSMENT also WITHIN 10 YRS from discovery of
falsity, fraud, omission
In this case, the assessment has been made and this fact
has taken it out of the realm of Sec 332 (a) and placed it under Sec
332 (c) w/c provides that payment must be made w/in 5 YEAR
prescriptive period.
The CIR made the assessment on January 20, 1951 and
had up to January 20, 1956 to file the necessary action. It was only on
September 5, 1957, that an action was filed in Court for the
collection of alleged deficiency income tax far beyond the 5-year
period.
Gov was NOT prohibited from collecting deficiency
income tax during pendency of criminal cases. The present
complaint against Ret is NOT for the recovery of civil liability arising
from the offense of falsification; it is for the collection of deficiency
income tax. The criminal actions are entirely separate and distinct from
the present civil suit. There is nothing in the law which would have
stopped CIR from filing this civil suit simultaneously with or during the
pendency of the criminal cases.
It is also averred that the period of prescription for
the collection of tax was suspended because of the written
extrajudicial demand made by the CIR.
HOWEVER, the only agreement that could have
suspended
the
running
of
the
prescriptive
period
was
a written agreement between Solano and the Collector, entered before
the expiration of the five (5) year prescriptive period, extending the
period of limitations prescribed by law.
In the instant case, there is no such written agreement.
RP v Razon
He eventually left the Phils for the USA after securing a tax
clearance. He never returned to the Phils.
The same were by Jai Alai by telegraphic transfer and later by Sen.
Madrigal, a stockholder.
The judicial suit was intitiated in 1953 impleading Jai Alai. Thus,
only 4 years had elapsed from the time of discovery of the
omission to file a return from filing a judicial suit. Action to collect
had NOT prescribed.
OTHERS:
Assadourian was a nonresident alien not engaged in trade or
business in the Philippines, which means that he was within the
purview of Section 53 (b) of the then National Internal Revenue Code
which requires any person or corporation in control of his earnings as
such nonresident alien to withhold 20% from such annual or periodical
gains, profits and income as tax.
With regard to the payment of Jai-Alai to Assadourian, it was held
that it was not merely for the purchase price of certain inchoate or
contingent interest belonging to him, but it was considered income
where withholding tax is mandatory. This is due to the fact that
Assadourian, in consideration of the sum of 200,000.00,
acknowledged full payment of all his claim for percentages earned by
the Jai-Alai Stadium for the years 1940 to 1945, and to be earned
during the years 1946 to 1950. Since Jai-Alai made payment directly
to Assadourian, there is no doubt that the former is liable for
withholding tax.
Payment made by Sen. Madrigal was really payment made on
behalf of Jai Alai.
RP v Acebedo
Acebedos lawyers then wrote the CIR informing him that the
books of their client were ready at their office for examination. The
reply was dated more than a year later, or on October 4, 1955, when
the Collector bestirred himself for the first time in connection with the
reinvestigation sought, and required that the defendants specify his
objections to the assessment and execute "the enclosed forms for
waiver, of the statute of limitations."
The last part of the letter was a warning that unless the waiver
"was accomplished and submitted within 10 days the collection of the
deficiency taxes would be enforced by means of the remedies provided
for by law.
CIR v CA
January 15, 1982 and November 20, 1981: Carnation filed its
Corporation Annual Income Tax Return and its Manufacturers/Producers
Percentage Tax Return respectively for the quarter ending September
30, 1981.
In 1987, Carnation, through its Senior Vice President, signed three
separate "WAIVERS of the Statute of Limitations Under the National
Internal Revenue Code" wherein it waived the running of the
prescriptive period provided for in provisions of the NIRC and consents
to the assessment and collection of the taxes which may be found due
after reinvestigation and reconsideration at anytime before or after the
lapse of the period of limitations fixed the provisions of the NIRC, but
not after (13 April 1987 for the earlier-executed waiver, or June 14,
1987 for the later waiver, or July 30, 1987 for the subsequent waiver,
as the case may be).
However, the taxpayer does not waive any prescription already
accrued in its favor.
The waivers were not signed by the BIR Commissioner or any
of his agents.
Carnation received BIR's letter of demand asking the said corporation
to pay deficiency income tax, deficiency sales tax and deficiency sales
tax on undeclared sales, all for the year 1981. This demand letter was
accompanied by 3 assessment Notices.
Carnation disputed the assessments and requested a reconsideration
and reinvestigation thereof.
CIR contends that the waivers signed by Carnation were valid although
not signed by the BIR Commissioner because:
o
(a) when the BIR agents/examiners extended the period to audit
and investigate Carnation's tax returns, the BIR gave its implied
consent to such waivers;
o
(b) the signature of the Commissioner is a mere formality and the
lack of it does not vitiate binding effect of the waivers; and
o
(c) that a waiver is not a contract but a unilateral act of
renouncing ones right to avail of the defense of prescription and
remains binding in accordance with the terms and conditions set
forth in the waiver
CTA held that assessment Notices are NULL AND VOID for having been
issued beyond the five-year prescriptive period provided by law.
I: W/n the 3 waivers signed Carnation are valid and binding as to toll
the running of the prescriptive period for assessment and not bar the
Government from issuing subject deficiency tax assessments?
R: NO, the waivers are NOT valid. The prescriptive period is NOT
suspended.
Sec. 203 of the National Internal Revenue Code, the law then
applicable provides that Except as provided in the succeeding section,
internal revenue taxes shall be assessed within five years after the
return was filed, and no proceeding in court without assessment for the
collection of such taxes shall be begun after the expiration of such
period. For the purpose of this section, a return filed before the last day
prescribed by law for the filing thereof shall be considered as filed on
such last day: Provided, That this limitation shall not apply to cases
already investigated prior to the approval of this Code.
Carnations income 1981 with income and sales taxes could have been
validly assessed only until January 14, 1987 and November 19, 1986,
respectively. In other words the assessments by the CIR should be
passed from:
RP v Lopez
BIR agreed on the request provided that Lopez waives the statue
of limitations.
Lopez countered that the BIR should then finish the investigation
by Dec 31, 1957 or else the case would prescribe.
RP v Arache
BIR requested PNOC to settle its liability for taxes on the interests
earned by its money placements with PNB and which PNB did not
withhold.
Savellano was paid by the BIR a tax equal to15% of the amount in
the compromise agreement.
I: W/n the right of BIR to assess and collect the income tax had
already prescribed
Issue:
Can procedural rules be relaxed to give due course to the petition? NO, not
in this case. Petition is denied against FEBTC.
Rationale:
First, it is well-settled that the courts cannot consider evidence which has
not been formally offered. Parties are required to inform the courts of the
purpose of introducing their respective exhibits to assist the latter in ruling
on their admissibility in case an objection thereto is made. Without a formal
offer of evidence, courts are constrained to take no notice of the evidence
even if it has been marked and identified. Needless to say, the failure of
petitioner to make a formal offer of evidence was detrimental to its cause.
This case does not fall within the exception in Oate v. Court of Appeals
where the Court relaxed the foregoing rule and allowed evidence, not
formally offered, to be considered on condition that: (1) evidence must
have been identified by testimony duly recorded and (2) it must have been
incorporated in the records of the case. In this case, "[petitioners] duly
marked and identified exhibits [were] not incorporated in the records...
They are nowhere to be found."
A tax refund is in the nature of a tax exemption which must be construed
strictissimi juris against the taxpayer. To stress, the taxpayer must present
convincing evidence to substantiate a claim for refund. Without any
documentary evidence on record, petitioner failed to discharge the burden
of proving its right to a tax credit/tax refund. Therefore, the CTA and CA
correctly denied its claim.
Second, if no appeal or motion for reconsideration is filed on time, the
judgment or final order of the court becomes final and executory. Here, the
records of the case confirm that petitioners motion for reconsideration in
the CTA was filed out of time. Petitioner received its notice and a copy of
the CTA decision on August 4, 1998.15 Under the rules, it had fifteen days
(or until August 19, 1998) to move for reconsideration. By the time it filed
its motion for reconsideration on August 26, 1998, the decision of the CTA
had already attained finality. As a final judgment, it had by then already laid
the issues to rest and the appellate courts could no longer review it.
CIR v Phil Global Comm
Philippine Global Communication was assessed for deficiency taxes in April
1994. On May 1994, they filed 2 letters of protest requesting for the
cancellation of the tax assessment for lack of factual and legal basis. In
2002, respondents received a decision from the CIR denying the protest.
Respondents appealed the CTA and ruled that the right to collect on the
1994 tax assessment has prescribed.
ISSUE: W/N the action to collect has prescribed. (YES)
RATIO:
Section 269(c) provides that any internal revenue tax which has been
assessed within the period of limitation above-prescribed may be collected
by distraint or levy or by a proceeding in court within three years following
the assessment of the tax. The assessment, in this case, was presumably
issued on 14 April 1994 since the respondent did not dispute the CIRs
claim. Therefore, the BIR had until 13 April 1997. The earliest attempt of
the BIR to collect the tax due based on this assessment was when it filed its
Answer in CTA Case No. 6568 on 9 January 2003.
Reason for Prescriptive Period:
Under the former law, the right of the Government to collect the tax does
not prescribe. However, in fairness to the taxpayer, the Government should
be estopped from collecting the tax where it failed to make the necessary
investigation and assessment within 5 years after the filing of the return
and where it failed to collect the tax within 5 years from the date of
assessment thereof. Just as the government is interested in the stability of
its collections, so also are the taxpayers entitled to an assurance that they
will not be subjected to further investigation for tax purposes after the
expiration of a reasonable period of time.
Prescription in the assessment and in the collection of taxes is provided by
the Legislature for the benefit of both the Government and the taxpayer;
for the Government for the purpose of expediting the collection of taxes, so
that the agency charged with the assessment and collection may not tarry
too long or indefinitely to the prejudice of the interests of the Government,
which needs taxes to run it; and for the taxpayer so that within a
reasonable time after filing his return, he may know the amount of the
assessment he is required to pay, whether or not such assessment is well
founded and reasonable so that he may either pay the amount of the
assessment or contest its validity in court.
Without such legal defense taxpayers would furthermore be under
obligation to always keep their books and keep them open for inspection
subject to harassment by unscrupulous tax agents.
Suspension of Prescriptive Period:
Section 224 provides that the prescriptive period is suspended when the
taxpayer requests for a reinvestigation. This exception does not apply to
this case since the respondent never requested for a reinvestigation. More
importantly, the CIR could not have conducted a reinvestigation where, as
admitted by the CIR in its Petition, the respondent refused to submit any
new evidence.
Request for reconsideration-- refers to a plea for a reevaluation of an assessment on the basis of existing
deficiency DST, or after the lapse of more than thirteen (13) years, that the
CIR acted on the request for reinvestigation, warranting the conclusion that
prescription had already set in. The Office of the Solicitor General (OSG)
filed a Comment dated 1 June 2007, on behalf of the CIR, asserting that the
prescriptive period was tolled by the protest letters filed by BPI which were
granted and acted upon by the CIR. Such action was allegedly
communicated to BPI as, in fact, the latter submitted additional documents
pertaining to its SWAP transactions in support of its request for
reinvestigation. Thus, it was only upon BPIs receipt on 13 January 2003 of
the 9 August 2002 Decision that the period to collect commenced to run
again. The OSG cites the case of Collector of Internal Revenue v. Suyoc
Consolidated Mining Company, et al.(Suyoc case) in support of its argument
that BPI is already estopped from raising the defense of prescription in view
of its repeated requests for reinvestigation which allegedly induced the CIR
to delay the collection of the assessed tax. In its Reply dated 30 August
2007, BPI argues against the application of the Suyoc case on two points:
first, it never induced the CIR to postpone tax collection; second, its request
for reinvestigation was not categorically acted upon by the CIR within the
three-year collection period after assessment. BPI maintains that it did not
receive any communication from the CIR in reply to its protest letters.
Issue: Whether the collection of the deficiency DST is barred by
prescription and whether BPI is liable for DST on its SWAP loan transactions.
actual filing of the tax return to assess a national internal revenue tax or to
commence court proceedings for the collection thereof without an
assessment. When it validly issues an assessment within the three (3)-year
period, it has another three (3) years within which to collect the tax due by
distraint, levy, or court proceeding. The assessment of the tax is deemed
made and the three (3)-year period for collection of the assessed tax begins
to run on the date the assessment notice had been released, mailed or sent
to the taxpayer. As applied to the present case, the CIR had three (3) years
from the time he issued assessment notices to BPI on 7 April 1989 or until 6
April 1992 within which to collect the deficiency DST. However, it was only
on 9 August 2002 that the CIR ordered BPI to pay the deficiency.
In order to determine whether the prescriptive period for collecting the tax
deficiency was effectively tolled by BPIs filing of the protest letters dated
20 April and 8 May 1989 as claimed by the CIR, we need to examine
Section 320 of the Tax Code of 1977, which states:
Sec. 320. Suspension of running of statute.The running of the statute of
limitations provided in Sections 318 or 319 on the making of assessment
and the beginning of distraint or levy or a proceeding in court for collection,
in respect of any deficiency, shall be suspended for the period during which
the Commissioner is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty days thereafter;
when the taxpayer requests for a re-investigation which is granted
by the Commissioner; when the taxpayer cannot be located in the
address given by him in the return filed upon which a tax is being assessed
or collected: Provided, That if the taxpayer informs the Commissioner of
any change in address, the running of the statute of limitations will not be
suspended; when the warrant of distraint and levy is duly served upon the
taxpayer, his authorized representative, or a member of his household with
sufficient discretion, and no property could be located; and when the
taxpayer is out of the Philippines. There is nothing in the records of this
case which indicates, expressly or impliedly, that the CIR had granted the
request for reinvestigation filed by BPI. What is reflected in the records is
the piercing silence and inaction of the CIR on the request for
reinvestigation, as he considered BPIs letters of protest to be.
In fact, it was only in his comment to the present petition that the CIR,
through the OSG, argued for the first time that he had granted the request
for reinvestigation. His consistent stance invoking the Wyeth Suaco case,
as reflected in the records, is that the prescriptive period was tolled by
BPIs request for reinvestigation, without any assertion that the same had
been granted or at least acted upon.
In the Wyeth Suaco case, private respondent Wyeth Suaco Laboratories,
Inc. sent letters seeking the reinvestigation or reconsideration of the
deficiency tax assessments issued by the BIR. The records of the case
The SC held in this case that the right to collect had not yet been
lost. Although there is no question that the period began on April 8, 1953
when the assessment was made it was interrupted several times by the
respondent. First when it asked for an itemized information. Although it did
not specifically use the words review or reinvestigation one can see from
the request itself had the effect of questioning/assailing the correctness of
the assessment. Then again the period was interrupted when it requested
for reinvestigation thus the period was tolled gain and it was only Sept. 2,
1959 when the reinvestigation was denied the period began again and
when the taxpayers case was filed with the CTA on December 28, 1959
and the CIR answered (tantamount to a judicial action) it was well within
the prescription period.
April 8, 1953 December 28,1959 = 6 years, 8 months, 21 days
Less (all the interruptions): May 30, 1953 (clarification) June 21, 1955
( denied the petition) = 2 years 21 days
= There was left a period of 4 years and 8 months well within the
prescription period.
Lim, Sr v CA
Petitioner spouses Emilio E. Lim, Sr. and Antonia Sun Lim, with business
address at No. 336 Nueva Street, Manila, were engaged in the dealership of
various household appliances They filed income tax returns for the years
1958 and 1959. a raid was conducted at their business address by the NBI.
A similar raid was made on petitioners' premises at 111 12th Street,
Quezon City. Seized by the BIR from the Lim couple were business and
accounting records which served as bases for an investigation. BIR
informed petitioners that revenue examiners had been authorized to
examine their books of account. The 1958 and 1959 tax returns were found
false and fraudulent.
Lim asked for reinvestigation but was denied. On October 10, 1967, the BIR
rendered a final decision holding that there was no cause for reversal of the
assessment against the Lim couple. Petitioners were required to pay
deficiency income taxes for 1958 and 1959 amounting to P1,237,190.55
inclusive of interest, surcharges and compromise penalty for late payment.
The final notice and demand for payment was served on petitioners
through their daughter-in-law on July 3, 1968. Still there was no payment;
thus, four (4) separate criminal informations were filed against petitioners
for violation of Sections 45 and 51 in relation to Section 73 of the National
Internal Revenue Code. Trial ensued. The decisions of the court were.
In Criminal Cases Nos. 1789 and 1788:
WHEREFORE, in view of the foregoing considerations, the Court
finds the accused Emilio E. Lim, Sr. and Antonia Sun Lim guilty of a
violation of Section 51 penalized under Section 73 of the National
Internal Revenue Code and each is hereby sentenced in each case
to pay a fine of P2,000.00 and to pay the government pursuant to
principle of law that the method prescribed by statute for the collection of
taxes is generally exclusive, and unless a contrary intent be gathered from
the statute, it should be followed strictly.
Under the cited Tierra and Arnault cases, it is clear that criminal conviction
for a violation of any penal provision in the Tax Code does not amount at
the same time to a decision for the payment of the unpaid taxes inasmuch
as there is no specific provision in the Tax Code to that effect.
3) Considering that under Section 316 of the Tax Code prior to its
amendment the trial could not order the payment of the unpaid taxes as
part of the sentence, the question of whether or not the supervening death
of petitioner Emilio E. Lim, Sr. has extinguished his tax liability need not
concern us. However, with regard to the pecuniary penalty of fine imposed
on the deceased Lim, this is necessarily extinguished by his death in
accordance with Section 89 of the Revised Penal Code.
TAXPAYERS REMEDIES
Refunds
Vda de Aguinaldo v CIR
They did NOT declare said dividends in their joint ITR, but declared
P5k of said dividends in their ITR for 1953 and paid corresponding tax.
A year after, BIR re-examined the 1952 &1953 ITRs of the spouses
and discovered the non-declaration.
In Oct 1957, CIR assessed Aguinaldo for deficiency income tax for
1952, without crediting the overpayment in 1953.
He asked for a reconsideration but the CIR said that the P1,600
cannot be credited against the tax for 1952 since the claim for tax
credit was filed beyond the 2-year period provided for in 309 of the
NIRC.
After the husbands death, the wife Andrea appealed to the CTA.
Petitioner contends that Sec 309 does NOT require the filing of a
claim w/in 2 years from payment of the tax before credit should be
given.
Section 309 of the Tax Code CLERALY requires the filing by the
taxpayer of the written claim for credit / refund WITHIN 2 yrs after the
payment of tax, before the CIR can exercise his authority to grant
credit/ refund.
Such reqment is the condition precedent and non-compliance
PRECLUDES CIR from exercising the authority given.
In this case, the Aguinaldos paid the income tax on August 14,
1954 although the adjustment took place on August 29, 1955.
Tax credit was filed in JAN 1958, so clearly, more than two years
have elapsed (reckoned from both dates), beyond the period stated in
309.
Allison and Esther Gibbs protested the 1950 deficiency income tax
assessment issued against them by the CIR, on the ground that said
deficiency assessment was based on a disallowance of bad debts and
losses claimed in their income tax return for 1950.
CIR denied the request for refund, and required Gibbs to pay the
amounts of P1.5k and P2k as surcharge, interest, and compromise
penalty.
CIR filed a motion to dismiss, on the ground that the petition was
filed beyond the 30-day period provided under Section 11, in relation
to Section 7, of RA No. 1125, which motion, was opposed by Gibbs.
Gibbs argued that Section 306 of the Revenue Code provides that
judicial proceedings may be instituted for recovery of an internal
revenue tax within two years from the date of payment. CTA said this
was before RA1125 was enacted.
I: W/n the appeal of Gibbs was made within the statutory period
R: NO, the appeal was NOT made w/in the statutory period.
SEC. 306 of the Tax Code provides that for Recovery of tax
erroneously or illegally collected, the suit shall be begun within 2 years
from the date of payment of the tax or penalty.
RA No. 1125 was intended to cope with a situation where the
taxpayer, upon receipt of a decision or ruling of the CIR, elects to
appeal to the CTA instead of paying the tax. For this reason, the latter
part of said Section 11 RA 1125, provides that no such appeal would
suspend the payment of the tax demanded by the Government, unless
for special reasons, the CTA would deem it fit to restrain said collection.
Section 306 of the Tax Code, on the other hand, contemplates
of a case wherein the taxpayer paid the tax, whether under protest or
not, and later on decides to go to court for its recovery.
THUS, where payment has already been made and the
taxpayer is merely asking for its refund, he must first file with
the CIR a claim for refund WITHIN 2 YEARS from time of
payment before taking the matter to the CTA, as required by
Section 306 of the NIRC.
Appeals from decisions of CIR to CTA must ALWAYS be
perfected within 30 days after the receipt of the decision that
is being appealed, as required by Section 11 of RA No. 1125.
If the CIR takes time in deciding the claim, and the period
of two years is about to end, the suit or proceeding must be
started in the CTA before the end of the 2-year period without
awaiting the decision of the Collector.
This is so because of the positive requirement of Section 306 and
the doctrine that delay of the Collector in rendering decision does not
extend the peremptory period fixed by the statute.
THERE is no conflict and the 2 laws must be reconciled.
In this case, Gibbs filed the appeal MORE THAN 10 MONTHS after
receipt of the CIRs notice of denial. Thus, it was beyond the 30-day
period.
Cir v Palanca
Having deemed the denial as the final decision of the CIR, Allison
Gibbs wrote on October 1956 the CIR saying they are paying the
assessed amount as a sign of good faith, but reiterated that the
assessment is contrary to law. She also demanded refund of the
payment.
On Oct 1958, petitioners filed with the CTA a Petitioner for Review
and Refund of Income Tax with Motion for Suspension of Collection of
Additional Taxes, alleging mainly the claims for refunds and tax credits
in the letter.
HOWEVER, it is has been proven that Allison is not a mere atty-infact but counsel of Gibbs, and thus, receipt she should have
immediately filed an appeal upon denial.
Also, the claim that the letter of Oct 26 1956 was NOT a denial of
the claim for refund was unmeritorious. The letter clearly states that
for reasons stated in our letter dated Aug 28 1956, THIS OFFICE has
NO JUSTIFIABLE BASIS to grant your request.
2) W/n withholding tax credits amount to payment for the
purpose of determining the 2-year period provided in Sec 306
of the NIRC
YES, w/holding tax credits = payment!
2 year period shall be counted from the DATE THE WITHOLDING
TAX IS DUE.
A taxpayer, resident or non-resident, who contributes to the
withholding tax system, does so not really to deposit an amount to the
CIR but to perform and extinguish his tax obligation for the year
concerned.
In other words, he is paying his tax liabilities for that year.
Consequently, a taxpayer whose income is withheld at the source
will be deemed to have paid his tax liability when the same falls due at
the end of the tax year.
THUS, it is when the tax liability falls due, that the 2-year
prescriptive period under Section 306 of the Revenue Code starts to
run with respect to payments effected through the withholding tax
system.
It is of no consequence whatever that a claim for refund or credit
against the amount withheld at the source may have been presented
and may have remained unresolved since.
Taxpayer who has paid the tax, whether under protest or not, and
who is claiming a refund of the same, must file a claim for refund with
the CIR within 2 years from the date of his payment of the tax (Sec
306, NIRC)
He must then appeal to the CTA w/in 30 DAYS from receipt of the
CIRs decision denying claim for refund (Sec 11, RA 1125)
If, however, the Collector takes time in deciding the claim, and the
period of two years is about to end, the suit or proceeding must be
started in the CTA BEFORE the end of the 2-year period WITHOUT
awaiting the decision of the Collector. This is so because of the positive
requirement of Section 306 and the doctrine that delay of the Collector
in rendering decision does not extend the peremptory period fixed by
the statute.
CIR v Sweeney
A corporation organized, authorized, or existing under the laws of any foreign country, engaged
in trade or business within the Philippines, shall be taxable as provided in subsection (a) of this
section upon the total net income derived in the preceding taxable year from all sources within the
Philippines: Provided, however, That international carriers shall pay a tax of two and one-half per
cent (2 1/2%) on their gross Philippine billings: "Gross Philippine Billings" include gross revenue
realized from uplifts anywhere in the world by any international carrier doing business in the
Philippines of passage documents sold therein, whether for passenger, excess baggage or mail,
provided the cargo or mail originates from the Philippines. The gross revenue realized from the
said cargo or mail include the gross freight charge up to final destination. Gross revenue from
chartered flights originating from the Philippines shall likewise form part of "Gross Philippine
Billings" regardless of the place or payment of the passage documents . . . . .
inconsistent stand of the CIR. It did not withdraw its opposition to the
petition for review even when its counsel manifested that the BIR
examiner and the appellate division of the BIR have both
recommended the approval of Tokyo Shippings claim for refund.
Evidence supports the CTAs decision regarding the propriety of
tax refund due to Tokyo Shipping. Fair deal is expected by our
taxpayers from the BIR and the duty demands that BIR should refund
without any unreasonable delay what it has erroneously collected.
On the issue that Tokyo did NOT present its charter agreement w/
NASUTRA, it presupposes without any basis that the charter agreement
is prejudicial evidence against Tokyo. It will show that Tokyo earned a
charter fee with or without transporting its supposed cargo from Iloilo
to Japan.
CIR did not present evidence to support this allegation. Moreover,
the charter agreement could have been presented by CIR itself thru
the proper use of a subpoena duces tecum.
The taxes due were settled by applying PBComs tax credit memos
and accordingly, the BIR issued Tax Debit Memo for P3M and P1.6M,
respectively.
For the succeeding year, 1986, PBCom likewise reported a net loss
of P14.1M, and thus declared no tax payable for the year.
But during these two years, PBCom earned rental income from
leased properties.
CTA dismissed this for lack of merit; and thus denied PBComs
claim for refund/tax credit of overpaid income tax on the ground that it
was filed BEYOND the 2-year reglementary period provided for by law.
PBCom opted to apply for automatic tax credit. This was the basis
used (vis-a-vis the fact that the 1987 annual corporate tax return was
not offered by the petitioner as evidence) by the CTA in concluding that
PBCom had indeed availed of and applied the automatic tax credit to
the succeeding year, hence it can no longer ask for refund, as to [sic]
the two remedies of refund and tax credit are alternative. Since
PBCom opted for an automatic tax credit in accordance with Section 69
of the 1977 NIRC, as specified in its 1986 Final Adjusted Income Tax
Return, such a finding of fact must be respected by the Supreme Court.
This, especially, in light that the 1987 annual corporate tax return of
PBCom was not offered as evidence to controvert said fact.
CIR v CA
Paramount filed its Corporate Income Tax Return (CITR) for calendar
year of 1985. Paramount paid a total of P1.2+M.
The appropriate box in the return was marked with a cross (x)
indicating To be refunded the amount of P65k.
The following day or April 15, BPI filed and instant petition with CTA to
toll the running of the prescriptive period for filing a claim for refund of
overpaid income taxes.
The question was whether the 2-year prescriptive period for filing a
refund should be counted from April 2, when the CITR was actually filed
(under Sec. 230 of NIRC, where its provided that the period must be
counted from the day of payment of tax) or from April 15 (under Sec.
70b) where the final adjustment return could still be filed without
incurring any penalties.
CTA rendered a decision stating that period commenced from April 15,
1986, the last day for filing the corporate income tax return, and, since
the claim for refund was filed on April 14, 1988 and the action was
brought on April 15, 1988, it held that prescription had not set in.
made.
In CIR v. TMX Sales, SC held that the filing of a quarterly income tax
return and payment of quarterly income tax should only be considered
mere installments of the annual tax due.
These quarterly tax payments which are computed based on the
cumulative figures of gross receipts and deductions in order to arrive at
a net taxable income, should be treated as advances or portions of the
annual income tax due, to be adjusted at the end of the calendar or
fiscal year.
This is reinforced by Sec. 87 [now Sec. 69] which provides for the filing
of adjustment returns and final payment of income tax. Consequently,
the 2-year prescriptive period provided in Section 230 should be
computed from the time of filing the Adjustment Return or Annual
Income Tax Return and Final Payment of Income Tax.
This is so because at that point, it can already be determined whether
there has been an overpayment by the taxpayer. Moreover under Sec
49a, payment is made at the time return is filed.
In the case at bar, Paramount filed its corporate annual income tax
return on April 2, 1986. However, BPI, as liquidator of Paramount, filed
a written claim for refund only on April 14, 1988 and a petition for
refund only on April 15, 1988.
Both claim and action for refund were barred by prescription.
CIR v Philamlife
ACCRA v CA
CTA denied the claim on the ground that the 2-year prescriptive
period had already lapsed, based on the case of Gibbs ruling w/c stated
that a taxpayer whose income is withheld at source will be deemed to
have paid his tax liability when the same falls due at the end of the tax
year.
Sec 230 of the old NIRC provides that no suit or proceeding shall
begin after the expiration of two years from the date of payment of the
tax or penalty regardless of any supervening cause that may arise
after payment.
The lower court was wrong in considering the end of the tax
year as the proper reckoning date based on Gibbs, because ACCRAIn
is NOT claming a refund for overpaid witholding taxes, per se.
THUS, there is the need to file a return first before a claim for
refund can prosper inasmuch as the respondent Commissioner by his
own rules and regulations mandates that the corporate taxpayer
opting to ask for a refund must show in its final adjustment return the
Petitioner seeks a higher tax base (specific taxes actually paid) for
the refund it seeks.
I: W/N CA erred in basing the tax refund on the 20% specific taxes
deemed paid under RA 1435 (taxes deemed paid) instead of the
increased rates imposed by Sec 142 and 145 (taxes actually paid)
CIR v PNB
For the first and second quarters of 1991, PNB also paid additional
taxes.
On July 28, 1997, PNB wrote then BIR Commissioner VinzonsChato, to inform her about the above developments and to reiterate its
request for the issuance of a TCC, this time for the unutilized balance
of its advance payment made in 1991 amounting to P73,298,892.60.
CTA denied the claim on the ground that it had already prescribed
(beyond the 2-year prescriptive period).
PNB filed a petition for review with the Court of Appeals (CA).
(4) succeeding taxable years, not having incurred income tax liability
during that period.
It would be improper to treat the same as erroneous, wrongful or
illegal payment of tax within the meaning of Section 230 of the Tax
Code, since it would be inequitable to strictly impose the two
(2)-year prescriptive period as to legally bar any request for
such tax credit certificate considering the special
circumstances under which the advance income tax payment
was made and the unexpected event (four years of business
losses) which prevented such application or carry over.
The mandate of Rev. Reg. No. 10-77 is hardly of any application to
PNBs advance payment which, needless to stress, are not quarterly
payments reflected in the adjusted final return, but a lump sum
payment to cover future tax obligations. Neither can such advance
lump sum payment be considered overpaid income tax for a given
taxable year, so that the carrying forward of any excess or overpaid
income tax for a given taxable year is limited to the succeeding
taxable year only.
Limiting the right to carry-over the balance of
respondents advance payment only to the immediately
succeeding taxable year would be unfair and improper
considering that, at the time payment was made, BIR was put on
due notice of PNBs intention to apply the entire amount to its
future tax obligations.
The suspension of the two (2)-year prescriptive period is
warranted not solely by the objective or purpose pursuant to which
PNB made the advance income tax payment in 1991. Records show
that the BIRs very own conduct led PNB to believe all along
that its original intention to apply the advance payment to
its future income tax obligations will be respected by the BIR.
An availment of tax credit for reasons other than erroneous /
wrongful collection of taxes may have a different prescriptive period.
ABSENT any provision in the Tax Code / special laws, period = 10
years under Art 1144 of the CC.
1st case:
These options are (1) filing for a tax refund or (2) availing of a tax
credit. The first option is relatively simple: any tax on income that is
paid in excess of the amount due the government may be refunded,
provided that a taxpayer properly applies for the refund.
The second option works by applying the refundable amount, as
shown on the Final Adjustment Return (FAR) of a given taxable year,
against the estimated quarterly income tax liabilities of the succeeding
taxable year. These two options under Section 76 are alternative in
nature the choice of one precludes the other.
Failure to signify ones intention in the FAR does not mean outright
barring of a valid request for a refund, should one still choose this
option later on.
Requiring that the income tax return or the FAR of the succeeding
year be presented to the BIR in requesting a tax refund has no basis
in law and jurisprudence:
1. Section 76 does not mandate it. The law merely requires the filing
of the FAR for the preceding -- not the succeeding -- taxable year.
2. Moreover, there is no automatic grant of a tax refund. Exercising
the option for a tax refund or a tax credit does not ipso facto
confer upon a taxpayer the right to an immediate availment of the
choice made. Neither does it impose a duty on the government to
allow tax collection to be at the sole control of a taxpayer.
3. Moreover, the BIR ought to have on file its own copies of
petitioners FAR for the succeeding year, on the basis of which it
could rebut the assertion that there was a subsequent credit of the
excess income tax payments for the previous year. Its failure to
present this vital document to support its contention against the
grant of a tax refund to petitioner is certainly fatal.
4. Furthermore, the Tax Code allows the refund of taxes to a taxpayer
that claims it in writing within two years after payment of the
taxes erroneously received by the BIR. Despite the failure of
Philam to make the appropriate marking in the BIR form, the filing
of its written claim effectively serves as an expression of its choice
to request a tax refund, instead of a tax credit.
In the present case, although petitioner did not mark the refund
box in its 1997 FAR, neither did it perform any act indicating that it
chose a tax credit. On the contrary, it filed in 1998 a claim for refund
of its excess taxes withheld in 1997. Under these circumstances,
Philam is entitled to a tax refund of its 1997 excess tax credits.
Ratio for disallowing a tax refund of Philams 1998 excess tax
credits
As to the second case, Section 76 also applies. The carry-over
option under Section 76 is permissive. Once chosen, the carry-over
option shall be considered irrevocable for that taxable period, and no
3.
FEBTC v CIR
Meanwhile, the petitioner already had a pending petition before the CTA,
apparently involving the same legal issue but a previous taxable period.
Hoping to comply with the 2-year period within which to file an action for
refund under Section 230 of the Tax Code, petitioner filed a Motion to
Admit Supplemental Petition in the said pending case.
The CTA denied the motion, claiming that it would further delay the
proceedings. Nonetheless, the CTA advised that petitioner could instead file
a separate petition for review for the refund of the withholding taxes paid in
1993.
Petitioner followed the CTAs advice, and on October 9, 1995, it filed
another petition for review with the CTA. This was again denied due to
prescription and for failing to submit such necessary documentary proof of
transactions, such as confirmation receipts and purchase orders.
Its MR and/or Motion New Trial were also denied. The CA affirmed the CTAs
ruling.
Issues/Held: Did the lower courts erred in dismissing FEBTCs petition on a
mere technicality? NO! Petition denied.
Ratio:
1. Procedural error of FEBTC
Sec. 6 of Rule 43 provides that the petition for review must be accompanied
by "certified true copies of such material portions of the record referred to
in the petition and other supporting papers". Under Section 7, Rule 43, the
failure to attach such documents which should accompany the petition is
sufficient ground for the dismissal of the petition.
The CA would have no way to ascertain the veracity of the submissions
unless the certified true copies of such portions of the record referred to in
the petition be attached. The records are an essential requisite for the
determination of prima facie basis for giving due course to the petition.
The confirmation receipts and purchase orders would ordinarily show the
fact of purchase of treasury bills or money market placements by the
various funds. They represent the best evidence on the participation of the
funds. What has to be established though, as a matter of evidence, is that
the amount sought to be refunded to petitioner actually corresponds to the
tax withheld on the interest income earned from the exempt employees
trusts. The need to be determinate on this point especially that petitioner
earns interest income not only from its investments of employees trusts,
but on a whole range of accounts which do not enjoy the same broad
exemption as employees trusts. For these certifications to hold value, there
is particular need for them to segregate such taxes withheld from the
interest income of employees trusts, and those withheld from other income
sources. Otherwise, these certifications are ineffectual to establish the
present claim for refund.
From 1988 to 1997, PSPC paid part of its excise tax liabilities with Tax Credit
Certificates (TCCs) which it acquired through the Department of Finance
(DOF)
One
Stop
Shop
Inter-Agency
Tax
Credit
and Duty Drawback Center (Center)
from
other
BOI-registered
companies. BIR accepted the TCC payments and issued a tax debit
memoranda (TDM) .
April 22 1998 - However, despite such payment, BIR assess PSPC for
alleged deficiency excise tax liabilities of PhP1.7M for the taxable years
1992 and 1994 to 1997, inclusive of delinquency surcharges and interest.
BIR said that PSPC is not a qualified transferee of the TCCs it acquired
from other BOI-registered companies.
PSPC protested the collection letter, but the protest was denied. PSPC filed
its motion for reconsideration. CIR did not reply. PSPC filed a petition for
review before the CTA
CTA held that payment by the
that respondents attempt to
penalties from PSPC without
due process. Thus, it held that
appealed to the CA.
Pending appeal of Case 1, the Center sent letters to PSPC requiring the
latter to submit copies of pertinent sales invoices and delivery receipts
covering a) sale transactions with
the TCC assignors/transferors
purportedly in connection with an ongoing post audit and; b) PSPC
Industrial Fuel Oil (IFO) deliveries to Spintex International, Inc. PSPC replied
saying that the required submission of these documents had no legal basis,
for the applicable rules and regulations on the matter only require that both
the assignor and assignee of TCCs be BOI-registered entities. The Center
ignored this defense and informed PSPC of the cancellation of the first
batch of TCCs transferred to PSPC and the TDM covering PSPCs use of
these TCCs as well as the corresponding TCC assignments. PSPCs MR was
ignored.
November
22,
1999
PSPC
received
the November
15,
1999 assessment letter from respondent for excise tax deficiencies,
surcharges, and interest based on the first batch of cancelled TCCs
and TDM covering PSPCs use of the TCCs. PSPC protested the assessment
letter, but the protest was denied by the BIR, constraining it to file another
petition for review before the CTA
2.
Tax credits were granted under EO 226 as incentives to encourage investments in certain
businesses. A tax credit generally refers to an amount that may be subtracted directly from ones
total tax liability. It is an allowance against the tax itself or a deduction from what is owed by a
taxpayer to the government.
A TCC is a certification, duly issued to the taxpayer named therein, by the Commissioner or his
duly authorized representative, reduced in a BIR Accountable Form in accordance with the
prescribed formalities, acknowledging that the grantee-taxpayer named therein is legally entitled a
tax credit, the money value of which may be used in payment or in satisfaction of any of his
internal revenue tax liability (except those excluded), or may be converted as a cash refund,
or may otherwise be disposed of in the manner and in accordance with the limitations, if any, as
may be prescribed by the provisions of these Regulations.
5.
Respondent merely relied on the findings of the Center which did not give
PSPC ample opportunity to air its side. While PSPC indeed protested the
formal assessment, such does not denigrate the fact that it was deprived of
statutory and procedural due process to contest the assessment before it
was issued.
10