Escolar Documentos
Profissional Documentos
Cultura Documentos
Q-91-17322 was raffled to Branch 86, then presided over by Judge Antonio P.
Solano. The identical informations read as follows:
That in Quezon City, Metro Manila and within the jurisdiction of this Honorable
Court and upon verification and audit conducted by the Bureau of Internal Revenue
on the 1979 corporate annual income tax return and financial statements of El Oro
Engravers Corp., with office address at 809 Epifanio delos Santos Avenue, Quezon
City, Metro Manila, it was ascertained that said corporation was found liable to pay
the amount of P2,369,085.46, as deficiency corporate income tax for the year 1979
and that, despite demand of the payment of the aforesaid deficiency tax by the
Bureau of Internal Revenue and received by said corporation, which demand has
already become final, said El Oro Engravers Corp., through above-named accused,
the responsible corporate-officers of said corporation, failed and refused, despite
repeated demands, and still fail and refuse to pay said tax liability.
CONTRARY TO LAW.[5]
On September 25, 1991, both accused posted bail bond in the sum of
P1,000.00 each, for their provisional liberty.
On November 6, 1991, accused filed with the Regional Trial Court, Quezon
City, Branch 86, a motion to dismiss/quash[6] information (Q-91-17322) for the
reason that it was exactly the same as the information against the accused pending
before RTC, Quezon City, Branch 105 (Q-91-17321). However, on November 11,
1991, Judge Solano denied the motion.[7]
In the meantime, on July 25, 1993, Jose J. Tupaz, Jr. died in Quezon City.
Subsequently, accused Petronila C. Tupaz filed with the Regional Trial Court,
Quezon City, Branch 105, a petition for reinvestigation, which Judge Ulep granted
in an order dated August 30, 1994.[8]
On September 5, 1994, Senior State Prosecutor Bernelito R. Fernandez stated
that no new issues were raised in the request for reinvestigation, and no cogent
reasons existed to alter, modify or reverse the findings of the investigating
On May 20, 1996, Judge Ulep of Regional Trial Court, Quezon City, Branch
105, granted the motion for withdrawal of the information in Criminal Case No. Q91-17321 and dismissed the case, as prayed for by the prosecution.
On May 28, 1996, Prosecutor Agcaoili filed with the Regional Trial Court,
Quezon City, Branch 105, a motion to reinstate information in Criminal Case Q-9117321,[14] stating that the motion to withdraw information was made through
palpable mistake, and was the result of excusable neglect. He thought that Criminal
Case No. Q-91-17321 was identical to Criminal Case No Q-90-12896, wherein
accused was charged with nonpayment of deficiency contractors tax, amounting to
P346,879.29.
Over the objections of accused, on August 6, 1996, the Regional Trial Court,
Quezon City, Branch 105, granted the motion and ordered the information in
Criminal Case No. Q-91-17321 reinstated.[15]On September 24, 1996, accused filed
with the trial court a motion for reconsideration. On December 4, 1996, the trial
court denied the motion.
Hence, this petition.
On July 9, 1997, we required respondents to comment on the petition within
ten (10) days from notice. On October 10, 1997, the Solicitor General filed his
comment.[16]
On October 26, 1998, the Court resolved to give due course to the petition and
required the parties to file their respective memoranda within twenty (20) days from
notice. The parties have complied.
Petitioner submits that respondent judge committed a grave abuse of
discretion in reinstating the information in Criminal Case No. Q-91-17321 because
(a) the offense has prescribed; or (b) it exposes her to double jeopardy.
As regards the issue of prescription, petitioner contends that: (a) the period of
assessment has prescribed, applying the three (3) year period provided under Batas
Pambansa No. 700; (b) the offense has prescribed since the complaint for
preliminary investigation was filed with the Department of Justice only on June 8,
1989, and the offense was committed in April 1980 when she filed the income tax
return covering taxable year 1979.
Petitioner avers that while Sections 318 and 319 of the NIRC of 1977 provide
a five (5) year period of limitation for the assessment and collection of internal
revenue taxes, Batas Pambansa Blg. 700, enacted on February 22, 1984, amended
the two sections and reduced the period to three (3) years. As provided under B.P.
Blg. 700, the BIR has three (3) years to assess the tax liability, counted from the last
day of filing the return, or from the date the return is filed, whichever comes
later. Since the tax return was filed in April 1980, the assessment made on July 16,
1984 was beyond the three (3) year prescriptive period.
We agree with the Solicitor General that the shortened period of three (3)
years prescribed under B.P. Blg. 700 is not applicable to petitioner. B.P. Blg. 700,
effective April 5, 1984, specifically states that the shortened period of three years
shall apply to assessments and collections of internal revenue taxes beginning
taxable year 1984. Assessments made on or after April 5, 1984 are governed by the
five-year period if the taxes assessed cover taxable years prior to January 1, 1984.
[21]
The deficiency income tax under consideration is for taxable year 1979. Thus, the
period of assessment is still five (5) years, under the old law. The income tax return
was filed in April 1980. Hence, the July 16, 1984 tax assessment was issued within
the prescribed period of five (5) years, from the last day of filing the return, or from
the date the return is filed, whichever comes later.
Petitioner submits that B.P. Blg. 700 must be given retroactive effect since it is
favorable to the accused. Petitioner argues that Article 22 of the Revised Penal Code,
regarding the allowance of retroactive application of penal laws when favorable to
the accused shall apply in this case.
The Solicitor General, in his comment, maintains that the prescriptive period
for assessment and collection of petitioners deficiency corporate income tax was
five (5) years. The Solicitor General asserts that the shortened period of three (3)
years provided under B.P. Blg. 700 applies to assessments and collections of internal
revenue taxes beginning taxable year 1984. Since the deficiency corporate income
tax was for taxable year 1979, then petitioner was still covered by the five (5) year
period. Thus, the July 16, 1984 tax assessment was made within the prescribed
period.
At the outset, it must be stressed that internal revenue taxes are self-assessing
and no further assessment by the government is required to create the tax
liability. An assessment, however, is not altogether inconsequential; it is relevant in
the proper pursuit of judicial and extra judicial remedies to enforce taxpayer
liabilities and certain matters that relate to it, such as the imposition of surcharges
and interest, and in the application of statues of limitations and in the establishment
of tax liens.[17]
An assessment contains not only a computation of tax liabilities, but also a
demand for payment within a prescribed period. The ultimate purpose of assessment
Article 22 of the Revised Penal Code finds no application in this case for the
simple reason that the provisions on the period of assessment can not be considered
as penal in nature.
Petitioner also asserts that the offense has prescribed. Petitioner invokes
Section 340 (now 281 of 1997 NIRC) of the Tax Code which provides that
violations of any provision of the Code prescribe in five (5) years. Petitioner asserts
that in this case, it began to run in 1979, when she failed to pay the correct corporate
tax due during that taxable year. Hence, when the BIR instituted criminal
proceedings on June 8, 1989, by filing a complaint for violation of the Tax Code
with the Department of Justice for preliminary investigation it was beyond the
prescriptive period of five (5) years. At most, the BIR had until 1984 to institute
criminal proceedings.
On the other hand, the Solicitor General avers that the information for
violation of the Tax Code was filed within the prescriptive period of five (5) years
provided in Section 340 (now 281 in 1997 NIRC) of the Code. It is only when the
assessment has become final and unappealable that the five (5) year period
commences to run. A notice of assessment was issued on July 16, 1984. When
petitioner failed to question or protest the deficiency assessment thirty (30) days
therefrom, or on August 16, 1984, it became final and unappealable. Consequently,
it was from this period that the prescriptive period of five (5) years
commenced. Thus, the complaint filed with the Department of Justice on June 8,
1989 was within the prescribed period.
We agree with the Solicitor General that the offense has not
prescribed. Petitioner was charged with failure to pay deficiency income tax after
repeated demands by the taxing authority. In Lim, Sr. v. Court of Appeals,[22] we
stated that by its nature the violation could only be committed after service of notice
and demand for payment of the deficiency taxes upon the taxpayer. Hence, it cannot
be said that the offense has been committed as early as 1980, upon filing of the
income tax return. This is so because prior to the finality of the assessment, the
taxpayer has not committed any violation for nonpayment of the tax. The offense
was committed only after the finality of the assessment coupled with taxpayers
willful refusal to pay the taxes within the allotted period. In this case, when the
notice of assessment was issued on July 16, 1984, the taxpayer still had thirty (30)
days from receipt thereof to protest or question the assessment. Otherwise, the
assessment would become final and unappealable. [23] As he did not protest, the
assessment became final and unappealable on August 16, 1984. Consequently, when
the complaint for preliminary investigation was filed with the Department of Justice
on June 8, 1989, the criminal action was instituted within the five (5) year
prescriptive period.
Petitioner contends that by reinstating the information, the trial court exposed
her to double jeopardy. Neither the prosecution nor the trial court obtained her
permission before the case was dismissed. She was placed in jeopardy for the first
time after she pleaded to a valid complaint filed before a competent court and the
case was dismissed without her express consent. When the trial court reinstated the
information charging the same offense, it placed her in double jeopardy.
The Solicitor General further contends that, assuming arguendo that the case
was dismissed without petitioners consent, there was no valid dismissal of the case
since Prosecutor Agcaoili was under a mistaken assumption that it was a charge of
nonpayment of contractors tax.
We sustain petitioners contention. The reinstatement of the information would
expose her to double jeopardy. An accused is placed in double jeopardy if he is
again tried for an offense for which he has been convicted, acquitted or in another
manner in which the indictment against him was dismissed without his consent. In
the instant case, there was a valid complaint filed against petitioner to which she
pleaded not guilty. The court dismissed the case at the instance of the prosecution,
without asking for accused-petitioners consent. This consent cannot be implied or
presumed.[24] Such consent must be expressed as to have no doubt as to the accuseds
conformity.[25] As petitioners consent was not expressly given, the dismissal of the
case must be regarded as final and with prejudice to the re-filing of the case.
[26]
Consequently, the trial court committed grave abuse of discretion in reinstating
the information against petitioner in violation of her constitutionally protected right
against double jeopardy.
WHEREFORE, we GRANT the petition. We enjoin the lower court, the
Regional Trial Court of Quezon City, Branch 105, from trying Criminal Case No. Q91-17321 and order its dismissal. Costs de oficio.
SO ORDERED.
Puno, Kapunan, and Ynares-Santiago, JJ., concur.
Davide, Jr., C.J., (Chairman), see dissenting opinion.
Petitioner also asserts that the trial court gravely erred when, over her
objections, it admitted the amended information. She submits that the amendment is
substantial in nature, and would place her in double jeopardy.
On the other hand, the Solicitor General contends that reinstating the
information does not violate petitioners right against double jeopardy. He asserts that
petitioner induced the dismissal of the complaint when she sought the
reinvestigation of her tax liabilities. By such inducement, petitioner waived or was
estopped from claiming her right against double jeopardy.
December 8, 2010
P1,697,718.90
Output Tax
P 154,338.08
_____________
VAT Payable
P 154,338.08
20% Interest
On January 26, 2001, the Regional Director of Revenue Region No. 10,
Legazpi City, issued Letter of Authority No. 00006561 for Revenue Officer
Daisy G. Justiniana to examine petitioners books of accounts and other
accounting records for income tax and other internal revenue taxes for the
taxable year 1999. Said Letter of Authority was revalidated on August 10,
2001 by Regional Director Leonardo Sacamos.
Late Payment
For petitioners failure to comply with several requests for the presentation of
records and Subpoena Duces Tecum, [the] OIC of BIR Legal Division issued
an Indorsement dated September 26, 2001 informing Revenue District
Officer of Revenue Region No. 67, Legazpi City to proceed with the
investigation based on the best evidence obtainable preparatory to the
issuance of assessment notice.
Compensation
P 38,584.54
79,746.49
Compromise Penalty
P16,000.00
2,400.00
18,400.00
136,731.01
P 291,069.09
WITHHOLDING TAX
Expanded
Total Tax Due
Less: Tax Withheld
2,772.91
110,103.92
P 112,876.83
111,848.27
Compromise Penalty
TOTAL
P 1,805.07 x x x.
*Expanded
Withholding Tax
P1,949,334.25
x 5%
10,000.25
x 10%
193,261.20
x 5%
Rental Expense
41,272.73
x 1%
412.73
Security Service
156,142.01
x 1%
1,561.42
Film Rental
Audit Fee
Service Contractor
P 110,103.92
Total
SUMMARIES OF DEFICIENCIES
VALUE ADDED TAX
P 291,069.09
WITHHOLDING TAX
1,805.07
TOTAL
P 292,874.16
Subsequently, Revenue District Office No. 67 sent a copy of the Final Notice
of Seizure dated May 12, 2003, which petitioner received on May 15, 2003,
giving the latter last opportunity to settle its deficiency tax liabilities within ten
(10) [days] from receipt thereof, otherwise respondent BIR shall be
constrained to serve and execute the Warrants of Distraint and/or Levy and
Garnishment to enforce collection.
On February 6, 2004, petitioner received from Revenue District Office No. 67
a Warrant of Distraint and/or Levy No. 67-0029-23 dated May 12, 2003
demanding payment of deficiency value-added tax and withholding tax
payment in the amount of P292,874.16.
On July 30, 2004, petitioner filed with the Office of respondent
Commissioner a Motion for Reconsideration pursuant to Section 3.1.5 of
Revenue Regulations No. 12-99.
The CTA-Second Division found merit in the petition of Metro Star and, on
March 21, 2007, rendered a decision, the decretal portion of which reads:
WHEREFORE, premises considered, the Petition for Review is hereby
GRANTED. Accordingly, the assailed Decision dated February 8, 2005 is
hereby REVERSED and SET ASIDE and respondent is ORDERED TO
DESIST from collecting the subject taxes against petitioner.
The CTA-Second Division opined that "[w]hile there [is] a disputable
presumption that a mailed letter [is] deemed received by the addressee in
the ordinary course of mail, a direct denial of the receipt of mail shifts the
burden upon the party favored by the presumption to prove that the mailed
letter was indeed received by the addressee."5 It also found that there was
no clear showing that Metro Star actually received the alleged PAN, dated
January 16, 2002. It, accordingly, ruled that the Formal Letter of Demand
dated April 3, 2002, as well as the Warrant of Distraint and/or Levy dated
May 12, 2003 were void, as Metro Star was denied due process.6
The CIR sought reconsideration7 of the decision of the CTA-Second Division,
but the motion was denied in the latters July 24, 2007 Resolution.8
Aggrieved, the CIR filed a petition for review9 with the CTA-En Banc, but the
petition was dismissed after a determination that no new matters were
raised. The CTA-En Banc disposed:
WHEREFORE, the instant Petition for Review is hereby DENIED DUE
COURSE and DISMISSED for lack of merit. Accordingly, the March 21, 2007
Decision and July 27, 2007 Resolution of the CTA Second Division in CTA
Case No. 7169 entitled, "Metro Star Superama, Inc., petitioner vs.
Commissioner of Internal Revenue, respondent" are hereby AFFIRMED in
toto.
SO ORDERED.
The motion for reconsideration10 filed by the CIR was likewise denied by the
CTA-En Banc in its November 18, 2008 Resolution.11
The CIR, insisting that Metro Star received the PAN, dated January 16,
2002, and that due process was served nonetheless because the latter
received the Final Assessment Notice (FAN), comes now before this Court
with the sole issue of whether or not Metro Star was denied due process.
The general rule is that the Court will not lightly set aside the conclusions
reached by the CTA which, by the very nature of its functions, has
accordingly developed an exclusive expertise on the resolution unless there
has been an abuse or improvident exercise of authority.12 In Barcelon, Roxas
Securities, Inc. (now known as UBP Securities, Inc.) v. Commissioner of
Internal Revenue,13 the Court wrote:
Jurisprudence has consistently shown that this Court accords the findings of
fact by the CTA with the highest respect. In Sea-Land Service Inc. v. Court of
Appeals [G.R. No. 122605, 30 April 2001, 357 SCRA 441, 445-446], this
Court recognizes that the Court of Tax Appeals, which by the very nature of
its function is dedicated exclusively to the consideration of tax problems, has
necessarily developed an expertise on the subject, and its conclusions will
not be overturned unless there has been an abuse or improvident exercise
of authority. Such findings can only be disturbed on appeal if they are not
supported by substantial evidence or there is a showing of gross error or
abuse on the part of the Tax Court. In the absence of any clear and
convincing proof to the contrary, this Court must presume that the CTA
rendered a decision which is valid in every respect.
On the matter of service of a tax assessment, a further perusal of our ruling
in Barcelon is instructive, viz:
Jurisprudence is replete with cases holding that if the taxpayer denies ever
having received an assessment from the BIR, it is incumbent upon the latter
to prove by competent evidence that such notice was indeed received by the
addressee. The onus probandi was shifted to respondent to prove by
contrary evidence that the Petitioner received the assessment in the due
course of mail. The Supreme Court has consistently held that while a mailed
letter is deemed received by the addressee in the course of mail, this is
merely a disputable presumption subject to controversion and a direct denial
thereof shifts the burden to the party favored by the presumption to prove
that the mailed letter was indeed received by the addressee (Republic vs.
Court of Appeals, 149 SCRA 351). Thus as held by the Supreme Court
in Gonzalo P. Nava vs. Commissioner of Internal Revenue, 13 SCRA 104,
January 30, 1965:
"The facts to be proved to raise this presumption are (a) that the letter was
properly addressed with postage prepaid, and (b) that it was mailed. Once
these facts are proved, the presumption is that the letter was received by the
addressee as soon as it could have been transmitted to him in the ordinary
course of the mail. But if one of the said facts fails to appear, the
presumption does not lie. (VI, Moran, Comments on the Rules of Court,
1963 ed, 56-57 citing Enriquez vs. Sunlife Assurance of Canada, 41 Phil
269)."
x x x. What is essential to prove the fact of mailing is the registry receipt
issued by the Bureau of Posts or the Registry return card which would have
been signed by the Petitioner or its authorized representative. And if said
documents cannot be located, Respondent at the very least, should have
submitted to the Court a certification issued by the Bureau of Posts and any
other pertinent document which is executed with the intervention of the
Bureau of Posts. This Court does not put much credence to the self serving
documentations made by the BIR personnel especially if they are
unsupported by substantial evidence establishing the fact of mailing. Thus:
"While we have held that an assessment is made when sent within the
prescribed period, even if received by the taxpayer after its expiration (Coll.
of Int. Rev. vs. Bautista, L-12250 and L-12259, May 27, 1959), this ruling
makes it the more imperative that the release, mailing or sending of the
notice be clearly and satisfactorily proved. Mere notations made without the
taxpayers intervention, notice or control, without adequate supporting
evidence cannot suffice; otherwise, the taxpayer would be at the mercy of
the revenue offices, without adequate protection or defense." (Nava vs. CIR,
13 SCRA 104, January 30, 1965).
x x x.
The failure of the respondent to prove receipt of the assessment by the
Petitioner leads to the conclusion that no assessment was issued.
Consequently, the governments right to issue an assessment for the said
period has already prescribed. (Industrial Textile Manufacturing Co. of the
Phils., Inc. vs. CIR CTA Case 4885, August 22, 1996). (Emphases supplied.)
The Court agrees with the CTA that the CIR failed to discharge its duty and
present any evidence to show that Metro Star indeed received the PAN
dated January 16, 2002. It could have simply presented the registry receipt
or the certification from the postmaster that it mailed the PAN, but failed.
Neither did it offer any explanation on why it failed to comply with the
requirement of service of the PAN. It merely accepted the letter of Metro
Stars chairman dated April 29, 2002, that stated that he had received the
FAN dated April 3, 2002, but not the PAN; that he was willing to pay the tax
as computed by the CIR; and that he just wanted to clarify some matters
with the hope of lessening its tax liability.
This now leads to the question: Is the failure to strictly comply with notice
requirements prescribed under Section 228 of the National Internal Revenue
Code of 1997 and Revenue Regulations (R.R.) No. 12-99 tantamount to a
denial of due process? Specifically, are the requirements of due process
satisfied if only the FAN stating the computation of tax liabilities and a
demand to pay within the prescribed period was sent to the taxpayer?
The answer to these questions require an examination of Section 228 of the
Tax Code which reads:
SEC. 228. Protesting of Assessment. - When the Commissioner or his duly
authorized representative finds that proper taxes should be assessed, he
shall first notify the taxpayer of his findings: provided, however, that a
preassessment notice shall not be required in the following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as appearing on
the face of the return; or
(b) When a discrepancy has been determined between the tax
withheld and the amount actually remitted by the withholding agent;
or
(c) When a taxpayer who opted to claim a refund or tax credit of
excess creditable withholding tax for a taxable period was
determined to have carried over and automatically applied the
same amount claimed against the estimated tax liabilities for the
taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on exciseable articles has not been
paid; or
(e) When the article locally purchased or imported by an exempt
person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred
to non-exempt persons.
The taxpayers shall be informed in writing of the law and the facts on which
the assessment is made; otherwise, the assessment shall be void.
Within a period to be prescribed by implementing rules and regulations, the
taxpayer shall be required to respond to said notice. If the taxpayer fails to
the case may be (in the case Revenue Regional Offices) or by the
Chief of Division concerned (in the case of the BIR National Office)
of the discrepancy or discrepancies in the taxpayer's payment of his
internal revenue taxes, for the purpose of "Informal Conference," in
order to afford the taxpayer with an opportunity to present his side
of the case. If the taxpayer fails to respond within fifteen (15) days
from date of receipt of the notice for informal conference, he shall
be considered in default, in which case, the Revenue District Officer
or the Chief of the Special Investigation Division of the Revenue
Regional Office, or the Chief of Division in the National Office, as
the case may be, shall endorse the case with the least possible
delay to the Assessment Division of the Revenue Regional Office or
to the Commissioner or his duly authorized representative, as the
case may be, for appropriate review and issuance of a deficiency
tax assessment, if warranted.
3.1.2 Preliminary Assessment Notice (PAN). If after review and
evaluation by the Assessment Division or by the Commissioner or
his duly authorized representative, as the case may be, it is
determined that there exists sufficient basis to assess the taxpayer
for any deficiency tax or taxes, the said Office shall issue to the
taxpayer, at least by registered mail, a Preliminary Assessment
Notice (PAN) for the proposed assessment, showing in detail, the
facts and the law, rules and regulations, or jurisprudence on which
the proposed assessment is based (see illustration in ANNEX A
hereof). If the taxpayer fails to respond within fifteen (15) days from
date of receipt of the PAN, he shall be considered in default, in
which case, a formal letter of demand and assessment notice shall
be caused to be issued by the said Office, calling for payment of
the taxpayer's deficiency tax liability, inclusive of the applicable
penalties.
3.1.3 Exceptions to Prior Notice of the Assessment. The notice
for informal conference and the preliminary assessment notice shall
not be required in any of the following cases, in which case,
issuance of the formal assessment notice for the payment of the
taxpayer's deficiency tax liability shall be sufficient:
(i) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax appearing
on the face of the tax return filed by the taxpayer; or
xxx
xxx
It is said that taxes are what we pay for civilized society. Without taxes, the
government would be paralyzed for the lack of the motive power to activate
and operate it. Hence, despite the natural reluctance to surrender part of
ones hard-earned income to taxing authorities, every person who is able to
must contribute his share in the running of the government. The government
for its part is expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and enhance their moral
and material values. This symbiotic relationship is the rationale of taxation
and should dispel the erroneous notion that it is an arbitrary method of
exaction by those in the seat of power.
But even as we concede the inevitability and indispensability of taxation, it is
a requirement in all democratic regimes that it be exercised reasonably and
in accordance with the prescribed procedure. If it is not, then the taxpayer
has a right to complain and the courts will then come to his succor. For all
the awesome power of the tax collector, he may still be stopped in his tracks
if the taxpayer can demonstrate x x x that the law has not been
observed.21 (Emphasis supplied).
x -- -- -- -- -- -- -- -- -- -- -- -- -- x
G.R. No. 163581
"On July 8, 1993, Maria C. Tancinco (or decedent) died, leaving a 1,292
square-meter residential lot and an old house thereon (or subject property)
located at 4931 Pasay Road, Dasmarias Village, Makati City.
"On the basis of a sworn information-for-reward filed on February 17, 1997
by a certain Raymond Abad (or Abad), Revenue District Office No. 50
(South Makati) conducted an investigation on the decedents estate (or
estate). Subsequently, it issued a Return Verification Order. But without the
required preliminary findings being submitted, it issued Letter of Authority
No. 132963 for the regular investigation of the estate tax case. Azucena T.
Reyes (or [Reyes]), one of the decedents heirs, received the Letter of
Authority on March 14, 1997.
"On February 12, 1998, the Chief, Assessment Division, Bureau of Internal
Revenue (or BIR), issued a preliminary assessment notice against the
estate in the amount of P14,580,618.67. On May 10, 1998, the heirs of the
decedent (or heirs) received a final estate tax assessment notice and a
demand letter, both dated April 22, 1998, for the amount of P14,912,205.47,
inclusive of surcharge and interest.
"On June 1, 1998, a certain Felix M. Sumbillo (or Sumbillo) protested the
assessment [o]n behalf of the heirs on the ground that the subject property
had already been sold by the decedent sometime in 1990.
"On November 12, 1998, the Commissioner of Internal Revenue (or [CIR])
issued a preliminary collection letter to [Reyes], followed by a Final Notice
Before Seizure dated December 4, 1998.
"On January 5, 1999, a Warrant of Distraint and/or Levy was served upon
the estate, followed on February 11, 1999 by Notices of Levy on Real
Property and Tax Lien against it.
"On March 2, 1999, [Reyes] protested the notice of levy. However, on March
11, 1999, the heirs proposed a compromise settlement of P1,000,000.00.
"In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to pay
50% of the basic tax due, citing the heirs inability to pay the tax assessment.
On March 20, 2000, [the CIR] rejected [Reyess] offer, pointing out that since
the estate tax is a charge on the estate and not on the heirs, the latters
financial incapacity is immaterial as, in fact, the gross value of the estate
amounting to P32,420,360.00 is more than sufficient to settle the tax liability.
Thus, [the CIR] demanded payment of the amount of P18,034,382.13 on or
before April 15, 2000[;] otherwise, the notice of sale of the subject property
would be published.
"On April 11, 2000, [Reyes] again wrote to [the CIR], this time proposing to
pay 100% of the basic tax due in the amount of P5,313,891.00. She
reiterated the proposal in a letter dated May 18, 2000.
"As the estate failed to pay its tax liability within the April 15, 2000 deadline,
the Chief, Collection Enforcement Division, BIR, notified [Reyes] on June 6,
2000 that the subject property would be sold at public auction on August 8,
2000.
"On June 13, 2000, [Reyes] filed a protest with the BIR Appellate Division.
Assailing the scheduled auction sale, she asserted that x x x the
assessment, letter of demand[,] and the whole tax proceedings against the
estate are void ab initio. She offered to file the corresponding estate tax
return and pay the correct amount of tax without surcharge [or] interest.
"Without acting on [Reyess] protest and offer, [the CIR] instructed the
Collection Enforcement Division to proceed with the August 8, 2000 auction
sale. Consequently, on June 28, 2000, [Reyes] filed a [P]etition for [R]eview
with the Court of Tax Appeals (or CTA), docketed as CTA Case No. 6124.
"On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of
Preliminary Injunction or Status Quo Order, which was granted by the CTA
on July 26, 2000. Upon [Reyess] filing of a surety bond in the amount
ofP27,000,000.00, the CTA issued a [R]esolution dated August 16, 2000
ordering [the CIR] to desist and refrain from proceeding with the auction sale
of the subject property or from issuing a [W]arrant of [D]istraint or
[G]arnishment of [B]ank [A]ccount[,] pending determination of the case
and/or unless a contrary order is issued.
"[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i) that the
CTA no longer has jurisdiction over the case[,] because the assessment
against the estate is already final and executory; and (ii) that the petition was
filed out of time. In a [R]esolution dated November 23, 2000, the CTA denied
[the CIRs] motion.
"During the pendency of the [P]etition for [R]eview with the CTA, however,
the BIR issued Revenue Regulation (or RR) No. 6-2000 and Revenue
Memorandum Order (or RMO) No. 42-2000 offering certain taxpayers with
delinquent accounts and disputed assessments an opportunity to
compromise their tax liability.
"On November 25, 2000, [Reyes] filed an application with the BIR for the
compromise settlement (or compromise) of the assessment against the
estate pursuant to Sec. 204(A) of the Tax Code, as implemented by RR No.
6-2000 and RMO No. 42-2000.
"On December 26, 2000, [Reyes] filed an Ex-Parte Motion for Postponement
of the hearing before the CTA scheduled on January 9, 2001, citing her
pending application for compromise with the BIR. The motion was granted
and the hearing was reset to February 6, 2001.
"On January 29, 2001, [Reyes] moved for postponement of the hearing set
on February 6, 2001, this time on the ground that she had already paid the
compromise amount of P1,062,778.20 but was still awaiting approval of the
National Evaluation Board (or NEB). The CTA granted the motion and reset
the hearing to February 27, 2001.
"On February 19, 2001, [Reyes] filed a Motion to Declare Application for the
Settlement of Disputed Assessment as a Perfected Compromise. In said
motion, she alleged that [the CIR] had not yet signed the compromise[,]
because of procedural red tape requiring the initials of four Deputy
Commissioners on relevant documents before the compromise is signed by
the [CIR]. [Reyes] posited that the absence of the requisite initials and
signature[s] on said documents does not vitiate the perfected compromise.
"Commenting on the motion, [the CIR] countered that[,] without the approval
of the NEB, [Reyess] application for compromise with the BIR cannot be
considered a perfected or consummated compromise.
"On March 9, 2001, the CTA denied [Reyess] motion, prompting her to file a
Motion for Reconsideration Ad Cautelam. In a [R]esolution dated April 10,
2001, the CTA denied the [M]otion for [R]econsideration with the suggestion
that[,] for an orderly presentation of her case and to prevent piecemeal
resolutions of different issues, [Reyes] should file a [S]upplemental [P]etition
for [R]eview[,] setting forth the new issue of whether there was already a
perfected compromise.
"On May 2, 2001, [Reyes] filed a Supplemental Petition for Review with the
CTA, followed on June 4, 2001 by its Amplificatory Arguments (for the
Supplemental Petition for Review), raising the following issues:
1. Whether or not an offer to compromise by the [CIR], with the
acquiescence by the Secretary of Finance, of a tax liability pending in court,
that was accepted and paid by the taxpayer, is a perfected and
consummated compromise.
2. Whether this compromise is covered by the provisions of Section 204 of
the Tax Code (CTRP) that requires approval by the BIR [NEB].
"Answering the Supplemental Petition, [the CIR] averred that an application
for compromise of a tax liability under RR No. 6-2000 and RMO No. 42-2000
requires the evaluation and approval of either the NEB or the Regional
Evaluation Board (or REB), as the case may be.
"On June 14, 2001, [Reyes] filed a Motion for Judgment on the Pleadings;
the motion was granted on July 11, 2001. After submission of memoranda,
the case was submitted for [D]ecision.
"On June 19, 2002, the CTA rendered a [D]ecision, the decretal portion of
which pertinently reads:
WHEREFORE, in view of all the foregoing, the instant [P]etition for [R]eview
is hereby DENIED. Accordingly, [Reyes] is hereby ORDERED to PAY
deficiency estate tax in the amount of Nineteen Million Five Hundred Twenty
Four Thousand Nine Hundred Nine and 78/100 (P19,524,909.78), computed
as follows:
xxxxxxxxx
[Reyes] is likewise ORDERED to PAY 20% delinquency interest on
deficiency estate tax due of P17,934,382.13 from January 11, 2001 until full
payment thereof pursuant to Section 249(c) of the Tax Code, as amended.
"In arriving at its decision, the CTA ratiocinated that there can only be a
perfected and consummated compromise of the estates tax liability[,] if the
NEB has approved [Reyess] application for compromise in accordance with
RR No. 6-2000, as implemented by RMO No. 42-2000.
"Anent the validity of the assessment notice and letter of demand against the
estate, the CTA stated that at the time the questioned assessment notice
and letter of demand were issued, the heirs knew very well the law and the
facts on which the same were based. It also observed that the petition was
not filed within the 30-day reglementary period provided under Sec. 11 of
Rep. Act No. 1125 and Sec. 228 of the Tax Code."5
Ruling of the Court of Appeals
In partly granting the Petition, the CA said that Section 228 of the Tax Code
and RR 12-99 were mandatory and unequivocal in their requirement. The
assessment notice and the demand letter should have stated the facts and
the law on which they were based; otherwise, they were deemed void.6 The
appellate court held that while administrative agencies, like the BIR, were
not bound by procedural requirements, they were still required by law and
equity to observe substantive due process. The reason behind this
requirement, said the CA, was to ensure that taxpayers would be duly
apprised of -- and could effectively protest -- the basis of tax assessments
against them.7 Since the assessment and the demand were void, the
proceedings emanating from them were likewise void, and any order
emanating from them could never attain finality.
The appellate court added, however, that it was premature to declare as
perfected and consummated the compromise of the estates tax liability. It
explained that, where the basic tax assessed exceeded P1 million, or where
the settlement offer was less than the prescribed minimum rates, the
National Evaluation Boards (NEB) prior evaluation and approval were the
The Issues
In GR No. 159694, petitioner raises the following issues for the Courts
consideration:
"I.
Whether petitioners assessment against the estate is valid.
"II.
Whether respondent can validly argue that she, as well as the other heirs,
was not aware of the facts and the law on which the assessment in question
is based, after she had opted to propose several compromises on the estate
tax due, and even prematurely acting on such proposal by paying 20% of the
basic estate tax due."11
The foregoing issues can be simplified as follows: first, whether the
assessment against the estate is valid; and, second, whether the
compromise entered into is also valid.
The Courts Ruling
The Petition is unmeritorious.
First Issue:
Validity of the Assessment Against the Estate
The second paragraph of Section 228 of the Tax Code12 is clear and
mandatory. It provides as follows:
The procedure for protesting an assessment under the Tax Code is found in
Chapter III of Title VIII, which deals with remedies. Being procedural in
nature, can its provision then be applied retroactively? The answer is yes.
The general rule is that statutes are prospective. However, statutes that are
remedial, or that do not create new or take away vested rights, do not fall
under the general rule against the retroactive operation of statutes.14Clearly,
Section 228 provides for the procedure in case an assessment is protested.
The provision does not create new or take away vested rights. In both
instances, it can surely be applied retroactively. Moreover, RA 8424 does not
state, either expressly or by necessary implication, that pending actions are
excepted from the operation of Section 228, or that applying it to pending
proceedings would impair vested rights.
Second, the non-retroactive application of Revenue Regulation (RR) No. 1299 is of no moment, considering that it merely implements the law.
A tax regulation is promulgated by the finance secretary to implement the
provisions of the Tax Code.15 While it is desirable for the government
authority or administrative agency to have one immediately issued after a
law is passed, the absence of the regulation does not automatically mean
that the law itself would become inoperative.
At the time the pre-assessment notice was issued to Reyes, RA 8424
already stated that the taxpayer must be informed of both the law and facts
on which the assessment was based. Thus, the CIR should have required
the assessment officers of the Bureau of Internal Revenue (BIR) to follow
the clear mandate of the new law. The old regulation governing the issuance
of estate tax assessment notices ran afoul of the rule that tax regulations -old as they were -- should be in harmony with, and not supplant or modify,
the law.16
It may be argued that the Tax Code provisions are not self-executory. It
would be too wide a stretch of the imagination, though, to still issue a
regulation that would simply require tax officials to inform the taxpayer, in
any manner, of the law and the facts on which an assessment was based.
That requirement is neither difficult to make nor its desired results hard to
achieve.
Fourth, petitioner violated the cardinal rule in administrative law that the
taxpayer be accorded due process. Not only was the law here disregarded,
but no valid notice was sent, either. A void assessment bears no valid fruit.
The law imposes a substantive, not merely a formal, requirement. To
proceed heedlessly with tax collection without first establishing a valid
assessment is evidently violative of the cardinal principle in administrative
investigations: that taxpayers should be able to present their case and
adduce supporting evidence.19 In the instant case, respondent has not been
informed of the basis of the estate tax liability. Without complying with the
unequivocal mandate of first informing the taxpayer of the governments
claim, there can be no deprivation of property, because no effective protest
can be made.20 The haphazard shot at slapping an assessment, supposedly
based on estate taxations general provisions that are expected to be known
by the taxpayer, is utter chicanery.
Validity of Compromise
It would be premature for this Court to declare that the compromise on the
estate tax liability has been perfected and consummated, considering the
earlier determination that the assessment against the estate was void.
Nothing has been settled or finalized. Under Section 204(A) of the Tax Code,
where the basic tax involved exceeds one million pesos or the settlement
offered is less than the prescribed minimum rates, the compromise shall be
subject to the approval of the NEB composed of the petitioner and four
deputy commissioners.
Finally, as correctly held by the appellate court, this provision applies to all
compromises, whether government-initiated or not. Ubi lex non distinguit,
nec nos distinguere debemos. Where the law does not distinguish, we
should not distinguish.
2. That petitioner filed its income tax returns for the years 1948,
1949, 1950, and 1951, on February 28, 1949, March 31, 1950,
March 31, 1951, and March 1, 1952, respectively, and the amounts
assessed thereon as per return, were promptly paid.
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson, First Division
P2,927.69
3,952.19
5,927.00
14,406.00
xxx
xxx
On the basis of the foregoing stipulation of facts, the Court of Tax Appeals
rendered the decision above adverted to, in part stating:
xxx
xxx
AQUINO, J.:
The issue in this case is whether the decision of the Court of First Instance
of Manila (not the Tax Court) in an income tax case is reviewable by the
Appellate Court or by this Court.
In a demand letter dated August 31, 1967, the Commissioner of Internal
Revenue assessed against Augusto Basa deficiency income taxes for 1957
to 1960 totalling P16,353.12.*
As may be noted, the deficiencies were based on the taxpayer's failure to
report in full his capital gains on the sales of land. This omission or
underdeclaration of income justified the imposition of 50% surcharge.
The taxpayer did not contest the assessments in the Tax Court. The
Commissioner's letter-decision on the case was dated December 6, 1974.
On the assumption that the assessments had become final and
incontestable, the Commissioner on September 3, 1975 sued the taxpayer in
the Manila Court of First Instance for the collection of said amount.
The trial court in a decision dated April 20, 1976 affirmed the assessments
and ordered Basa to pay P16,353.12 plus 5% surcharge and one percent
monthly interest from August 31, 1967 to August 31, 1970.
Instead of appealing to this Court directly under Republic Act No. 5440, in
relation to Rules 41 and 45 of the Rules of Court, since no factual issues are
involved, Basa tried to appeal to the Court of Appeals. He did not perfect his
appeal within the reglementary period. The trial court dismissed it in its order
dated October 1, 1976.
FIRST DIVISION
On December 23, 1976 Basa filed the instant special civil action of certiorari
wherein he assailed the trial court's decision.
We hold that the petition is devoid of merit. The trial court acted within its
jurisdiction in rendering its decision and dismissing Basa's appeal. He
should have appealed to this Court. His failure to do so rendered the
decision final and executory. He has no cause of action for certiorari.
The decision is correct. If he wanted to contest the assessments, he should
have appealed to the Tax Court. Not having done so, he could not contest
the same in the Court of First Instance.
The issue of prescription raised by him is baseless. The assessments were
predicated on the fact that his income tax returns, if not fraudulent, were
false because he underdeclared his income. In such a case, the deficiency
assessments may be made within ten years after the discovery of the falsity
or omission. The court action should be instituted within five years after the
assessment but this period is suspended during the time that the
Commission is prohibited from instituting a court action.**
As explained in the Solicitor General's memorandum, Basa's requests for
reinvestigation tolled the prescriptive period of five years within which court
action may be brought (Commissioner of Internal Revenue vs. Capitol
Subdivision, Inc., 119 Phil. 1051; Collector of Internal Revenue vs. Suyoc
Consolidated Mining Company, 104 Phil. 819). Moreover, the issue of
prescription should have been raised in the Tax Court.
WHEREFORE, the trial court's judgment is affirmed. No costs.
- versus -
Promulgated:
January 21, 2010
x--------------------------------------------------x
DECISION
SO ORDERED.
Makasiar, C.J., Concepcion, Jr., Escolin and Cuevas, JJ., concur.
Abad Santos, J., took no part
which it issued a subpoena duces tecum requiring petitioner to submit its records and
ground that the same set of documents had previously been examined.
In his Answer,[11] respondent argued, among other things, that the petition
criminal complaint against petitioner for violation of Sections 5 (c) and 266 of the
was filed out of time which argument the First Division of the CTA upheld and
1997 Internal Revenue Code, which complaint was dismissed for insufficiency of
evidence.[3]
Petitioner filed a Motion for Reconsideration [13] which was denied.[14] The
Respondent sent, on August 6, 2003, petitioner a Final Assessment Notice
of income tax and VAT deficiencies totaling P67,597,336.75 for the taxable year
1999,[4] which assessment petitioner contested by letter of September 23, 2003. [5]
On November 21, 2006, petitioner filed a petition for review before the
Respondent thereafter issued a Final Decision on Disputed Assessment
dated August 2, 2005, which petitioner received on August 4, 2005, denying its letter
CTA En Banc[16] which, by Decision[17] of July 5, 2007, held that the petition before
the First Division, as well as that before it, was filed out of time.
of protest, apprising it of its income tax and VAT liabilities in the amounts
of P15,396,905.24 and P63,688,434.40 [sic], respectively, for the taxable year 1999,
[6]
delinquency. Respondent added that if petitioner disagreed, it may appeal to the Court
Hence, the present petition,[18] petitioner arguing that the CTA En Banc
erred in holding that the petition it filed before the CTA First Division as well as that
filed before it (CTA En Banc) was filed out of time.
of Tax Appeals (CTA) within thirty (30) days from date of receipt hereof, otherwise
our said deficiency income and value-added taxes assessments shall become final,
executory, and demandable.
[7]
[8]
THIRD DIVISION
In the case at bar, petitioners administrative protest was denied by Final
Decision on Disputed Assessment dated August 2, 2005 issued by respondent and
which petitioner received on August 4, 2005. Under the above-quoted Section 228 of
the 1997 Tax Code, petitioner had 30 days to appeal respondents denial of its protest
to the CTA.
Petitioner,
Present:
Division. It filed one, however, on October 20, 2005, hence, it was filed out of
PERALTA,
time. For a motion for reconsideration of the denial of the administrative protest does
not toll the 30-day period to appeal to the CTA.
ABAD,
- versus VILLARAMA, JR., and
MENDOZA, JJ.
authorizing a special audit team to examine the books of accounts and other
Promulgated:
accounting records for all internal revenue taxes from January 1, 1994 to December
Respondent.
31, 1995.[4]
September 7, 2011
x --------------------------------------------------------------------------------------- x
MENDOZA, J.:
Petitioner
Rizal
Commercial
Banking
Corporation (RCBC) is
[3]
Particulars
Deficiency
Income Tax
1995 (ST-INC95-0199-2000)
1994 (ST-INC94-0200-2000)
Deficiency Gross
Receipts Tax
1995 (ST-GRT95-0201-2000)
1994 (ST-GRT94-0202-2000)
Deficiency Final
Withholding Tax
1995 (ST-EWT95-0203-2000)
Basic Tax
Interest
Compromise
Penalties
252,150,988.01
191,496,585.96
25,000.00
443
216,478,397.90
207,819,261.99
25,000.00
424
13,697,083.68
12,428,696.21
2,819,745.52
28
2,488,462.38
2,755,716.42
25,000.00
64,365,610.12
58,757,866.78
25,000.00
123
1994 (ST-EWT94-0204-2000)
Deficiency Final
Tax on FCDU
Onshore Income
1995 (ST-OT95-0205-2000)
1994 (ST-OT94-0206-2000)
Deficiency
Expanded
Withholding Tax
1995 (ST-EWT95-0207-2000)
1994 (ST-EWT94-0208-2000)
Deficiency
Documentary
Stamp Tax
1995 (STDST1-95-02092000)
1995 (STDST2-95-02102000)
1994 (STDST3-94-02112000)
1994 (STDST4-94-02122000)
TOTALS
53,058,075.25
59,047,096.34
25,000.00
support it. Much later on November 20, 2000, it filed a petition for review before the
CTA, pursuant to Section 228 of the 1997 Tax Code.[7]
81,508,718.20
61,901,963,.52
25,000.00
34,429,503.10
33,052,322.98
25,000.00
5,051,415.22
4,583,640.33
113,000.00
4,482,740.35
4,067,626.31
78,200.00
351,900,539.39
315,804,946.26
250,000.00
367,207,105.29
331,535,844.68
300,000.00
460,370,640.05
512,193,460.02
300,000.00
223,037,675.89
240,050,706.09
300,000.00
2,130,226,954.83
2,035,495,733.89
4,335,945.52
Disagreeing with the said deficiency tax assessment, RCBC filed a protest
on February 24, 2000 and later submitted the relevant documentary evidence to
Particulars
Deficiency Income
Tax
1995 (INC-95000003)
1994 (INC-94000002)
Deficiency Gross
Receipts Tax
1995 (GRT-95000004)
1994 (GRT-94000003)
Deficiency Final
Withholding Tax
1995 (FT-95000005)
1994 (FT-94000004)
Deficiency Final
Tax on FCDU
Onshore Income
1995 (OT-95000006)
1994 (OT-94-
Basic Tax
Interest
374,348.45
346,656.92
1,392,366.28
1,568,605.52
2,000,926.96
3,322,589.63
138,368.61
161,872.32
362,203.47
351,287.75
188,746.43
220,807.47
81,508,718.20
79,052,291.08
34,429,503.10
40,277,802.26
Surcharge &/
Compromise
1,367,222.04
000005)
Deficiency
Expanded
Withholding Tax
1995 (EWT-95000004)
1994 (EWT-94000003)
Deficiency
Documentary
Stamp Tax
1995 (DST-95000006)
1995 (DST2-95000002)
1994 (DST-94000005)
1994 (DST2-94000001)
TOTALS
RCBC, however, refused to pay the following assessments for deficiency onshore
tax and documentary stamp tax which remained to be the subjects of its petition for
520,869.72
505,171.80
25,000.00review:[10]
297,949.95
348,560.63
25,000.00
Particulars
Deficiency Final Tax
on FCDU Onshore
Income
Basic
149,972.68
Interest
599,890.72
Sub Total
6,238,460.62
Deficiency
Documentary Stamp
226,266.18
Tax
Basic
4,260,026.21
Surcharge
24,953,842.46
905,064.74
17,040,104.84
164,712,903.44
126,155,645.38
Sub Total
12,291,947.73
TOTALS
1994
1995
Total
34,429,503.10
40,277,802.26
81,508,718.20
79,052,291.08
115,938,221.30
119,330,093.34
74,707,305.36
160,561,009.28
235,268,314.64
17,040,104.84
4,260,026.21
24,953,842.46
6,238,460.62
41,993,947.30
10,498,486.83
21,300,131.05
31,192,303.08
52,492,434.13
96,007,436.41
191,753,312.36
287,760,748.77
On the same day, RCBC paid the following deficiency taxes as assessed
RCBC argued that the waivers of the Statute of Limitations which it
by the BIR:[9]
executed on January 23, 1997 were not valid because the same were not signed or
Particulars
1994
1995
Total
conformed to by the respondent CIR as required under Section 222(b) of the Tax
2,965,549.44
300,695.84
722,236.11
6,701,893.17
3,687,785.55
7,002,589.01
Code.[11] As regards the deficiency FCDU onshore tax, RCBC contended that
410,174.44
714,682.02
1,124,856.46
the borrower, constituted by law as the withholding agent, that was primarily liable
TOTALS
because the onshore tax was collected in the form of a final withholding tax, it was
1,052,753.48
1,725,243.62
1,131,330.92
749,863.40
1,881,194.32
5,480,240.78
9,941,428.18
15,421,668.96
deficiency income tax, deficiency gross receipts tax, deficiency final withholding
In its Resolution[17] dated April 11, 2005, the CTA-First Division substantially
tax, deficiency expanded withholding tax, and deficiency documentary stamp tax
upheld its earlier ruling, except for its inadvertence in the addition of the total
(not an industry issue) for 1994 and 1995. [14] It, however, upheld the assessment for
amount of deficiency taxes. As such, it modified its earlier decision and ordered
deficiency final tax on FCDU onshore income and deficiency documentary stamp
tax for 1994 and 1995 and ordered RCBC to pay the following amounts plus 20%
delinquency tax:
[15]
Particulars
Deficiency Final Tax on
FCDU Onshore Income
Basic
Interest
Sub Total
Deficiency
Documentary Stamp
Tax (Industry Issue)
Basic
Surcharge
Sub Total
TOTALS
RCBC elevated the case to the CTA-En Banc where it raised the following
issues:
1994
1995
Total
22,356,324.43
26,153,837.08
16,067,952.86
15,583,713.19
115,938, 221.30
119,330,093.34
48,510,161.51
31,651,666.05
119,330,093.34
I.
Whether or not the right of the respondent to assess
deficiency onshore tax and documentary stamp tax for
taxable year 1994 and 1995 had already prescribed when it
issued the formal letter of demand and assessment notices
for the said taxable years.
II.
17,040,104.84
4,260,026.21
24,953,842.46
6,238,460.62
41,993,947.30
10,498,486.83
21,300,131.05
31,192,303.08
52,492,434.13
69,810,292.56
62,843,969.13
171,822,527.47
Unsatisfied, RCBC filed its Motion for Reconsideration on January 21, 2005,
arguing that: (1) the CTA erred in its addition of the total amount of deficiency taxes
The CTA-En Banc, in its assailed Decision, denied the petition for lack of
and the correct amount should only be 132,654,261.69 and not 171,822,527.47;
merit. It ruled that by receiving, accepting and paying portions of the reduced
(2) the CTA erred in holding that RCBC was estopped from questioning the validity
assessment, RCBC bound itself to the new assessment, implying that it recognized
of the waivers; (3) it was the payor-borrower as withholding tax agent, and not
the validity of the waivers. [20] RCBC could not assail the validity of the waivers after
RCBC, who was liable to pay the final tax on FCDU, and (4) RCBCs special
it had received and accepted certain benefits as a result of the execution of the said
[16]
waivers.[21] As to the deficiency onshore tax, it held that because the payor-borrower
was merely designated by law to withhold and remit the said tax, it would then
follow that the tax should be imposed on RCBC as the payee-bank. [22] Finally, in
special savings account, it held that petitioners special savings account was a
and
certificate of deposit and, as such, was subject to documentary stamp tax. [23]
While awaiting the decision of this Court, RCBC filed its Manifestation
dated July 22, 2009, informing the Court that this petition, relative to the DST
deficiency assessment, had been rendered moot and academic by its payment of the
tax
deficiencies
on
Documentary
Stamp
Tax (DST) on
Special
Savings
Account (SSA) for taxable years 1994 and 1995 after the BIR approved its
ground that the said waivers were merely attested to by Sixto Esquivias, then
out that the only remaining issues raised in the present petition were those pertaining
Coordinator for the CIR, and that he failed to indicate acceptance or agreement of
to RCBCs deficiency tax on FCDU Onshore Income for taxable years 1994 and
the CIR, as required under Section 223 (b) of the 1977 Tax Code. [28] RCBC further
1995 in the aggregate amount of 80,161,827.56 plus 20% delinquency interest per
argues that the principle of estoppel cannot be applied against it because its payment
annum. The CIR prayed that RCBC be considered to have withdrawn its appeal with
of the other tax assessments does not signify a clear intention on its part to give up
respect to the CTA-En Banc ruling on its DST on SSA deficiency for taxable years
1994 and 1995 and that the questioned CTA decision regarding RCBCs deficiency
tax on FCDU Onshore Income for the same period be affirmed. [25]
THE ISSUES
Under Article 1431 of the Civil Code, the doctrine of estoppel is anchored
on the rule that an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying
thereon. A party is precluded from denying his own acts, admissions or
representations to the prejudice of the other party in order to prevent fraud and
falsehood.[30]
Before any further discussion, it should be pointed out that RCBC erred in citing the
abovementioned Revenue Regulations No. 2-98 because the same governs collection
at source on income paid only on or after January 1, 1998. The deficiency
withholding tax subject of this petition was supposed to have been withheld on
income paid during the taxable years of 1994 and 1995. Hence, Revenue
Regulations No. 2-98 obviously does not apply in this case.
cashflow. Under the withholding tax system, the payor is the taxpayer upon whom
the tax is imposed, while the withholding agent simply acts as an agent or a collector
of the government to ensure the collection of taxes. [33]
Based on the foregoing, the liability of the withholding agent is independent from
that of the taxpayer. The former cannot be made liable for the tax due because it is
the latter who earned the income subject to withholding tax. The withholding agent
is liable only insofar as he failed to perform his duty to withhold the tax and remit
the same to the government. The liability for the tax, however, remains with the
taxpayer because the gain was realized and received by him.
While the payor-borrower can be held accountable for its negligence in performing
its duty to withhold the amount of tax due on the transaction, RCBC, as the taxpayer
and the one which earned income on the transaction, remains liable for the payment
of tax as the taxpayer shares the responsibility of making certain that the tax is
properly withheld by the withholding agent, so as to avoid any penalty that may
arise from the non-payment of the withholding tax due.
RCBC cannot evade its liability for FCDU Onshore Tax by shifting the blame on the
payor-borrower as the withholding agent. As such, it is liable for payment of
deficiency onshore tax on interest income derived from foreign currency loans,
pursuant to Section 24(e)(3) of the National Internal Revenue Code of 1993:
Sec. 24. Rates of tax on domestic corporations.
xxxx
(e) Tax on certain incomes derived by domestic
corporations
xxxx
(3) Tax on income derived under the Expanded Foreign
Currency Deposit System. Income derived by a depository
bank under the expanded foreign currency deposit system
from foreign currency transactions with nonresidents,
offshore banking units in the Philippines, local
commercial banks including branches of foreign banks
that may be authorized by the Central Bank to transact
business with foreign currency depository system units
and other depository banks under the expanded foreign
currency deposit system shall be exempt from all taxes,
except taxable income from such transactions as may be
specified by the Secretary of Finance, upon
recommendation of the Monetary Board to be subject to
the usual income tax payable by banks: Provided, That
interest income from foreign currency loans granted by
such depository banks under said expanded system to
residents (other than offshore banking units in the
Philippines or other depository banks under the expanded
system) shall be subject to a 10% tax. (Emphasis supplied)
As a final note, this Court has consistently held that findings and
conclusions of the CTA shall be accorded the highest respect and shall be presumed
valid, in the absence of any clear and convincing proof to the contrary. [36] The CTA,
as a specialized court dedicated exclusively to the study and resolution of tax
problems, has developed an expertise on the subject of taxation. [37] As such, its
decisions shall not be lightly set aside on appeal, unless this Court finds that the
questioned decision is not supported by substantial evidence or there is a showing of
abuse or improvident exercise of authority on the part of the Tax Court. [38]
SO ORDERED.
constitutes a final determination on a disputed assessment. [1] Words must be carefully chosen
Associate Justice
in order to avoid any confusion that could adversely affect the rights and interest of the
taxpayer.
Assailed in this Petition for Review on Certiorari[2] under Section 12 of Republic
Act (RA) No. 9282,[3] in relation to Rule 45 of the Rules of Court, are the August 23, 2006
Decision[4] of the Court of Tax Appeals (CTA) and its October 17, 2006 Resolution [5] denying
SECOND DIVISION
ALLIED BANKING
CORPORATION,
Factual Antecedents
Petitioner,
Present:
On April 30, 2004, the Bureau of Internal Revenue (BIR) issued a Preliminary
CARPIO, J., Chairperson,
Assessment Notice (PAN) to petitioner Allied Banking Corporation for deficiency
BRION,
DEL CASTILLO,
Documentary Stamp Tax (DST) in the amount of P12,050,595.60 and Gross Receipts Tax
ABAD, and
PEREZ, JJ.
(GRT) in the amount of P38,995,296.76 on industry issue for the taxable year 2001.
- versus -
COMMISSIONER OF
INTERNAL REVENUE,
Promulgated:
Respondent.
February 5, 2010
x --------------------------------------------------------x
DECISION
[6]
Petitioner received the PAN onMay 18, 2004 and filed a protest against it on May 27, 2004.
[7]
On July 16, 2004, the BIR wrote a Formal Letter of Demand with Assessment
Notices to petitioner, which partly reads as follows:[8]
WHEREFORE, the
Motion
to
Dismiss
is GRANTED. The Petition for Review is hereby DISMISSED for
lack of jurisdiction.
Petitioner received the Formal Letter of Demand with Assessment Notices on August 30,
2004.[9]
SO ORDERED.[16]
Aggrieved, petitioner moved for reconsideration but the motion was denied by the
Proceedings before the CTA First Division
On September 29, 2004, petitioner filed a Petition for Review [10] with the CTA
which was raffled to its First Division and docketed as CTA Case No. 7062.[11]
On February 22, 2006, petitioner appealed the dismissal to the CTA En Banc.
[18]
On December 7, 2004, respondent CIR filed his Answer.[12] On July 28, 2005, he
filed a Motion to Dismiss[13] on the ground that petitioner failed to file an administrative protest
on the Formal Letter of Demand with Assessment Notices. Petitioner opposed the Motion to
Dismiss on August 18, 2005.[14]
[15]
Finding
no
reversible
error in
the
Resolutions
dated October
12,
2005 and February 1, 2006 of the CTA First Division, the CTA En Banc denied the Petition
for Review[19]as well as petitioners Motion for Reconsideration.[20]
The CTA En Banc declared that it is absolutely necessary for the taxpayer to file an
administrative protest in order for the CTA to acquire jurisdiction. It emphasized that an
administrative protest is an integral part of the remedies given to a taxpayer in challenging the
legality or validity of an assessment. According to the CTA En Banc, although there are
exceptions to the doctrine of exhaustion of administrative remedies, the instant case does not
fall in any of the exceptions.
Issue
Hence, the present recourse, where petitioner raises the lone issue of whether the
Formal Letter of Demand dated July 16, 2004 can be construed as a final decision of the CIR
appealable to the CTA under RA 9282.
Our Ruling
xxxx
The CTA, being a court of special jurisdiction, can take cognizance only of
matters that are clearly within its jurisdiction.[21] Section 7 of RA 9282 provides:
The word decisions in the above quoted provision of RA 9282 has been interpreted
to mean the decisions of the CIR on the protest of the taxpayer against the assessments.
[22]
Corollary thereto, Section 228 of the National Internal Revenue Code (NIRC) provides for
response thereto, the BIR issued a Formal Letter of Demand with Assessment
(d) When the excise tax due on excisable articles has not
been paid; or
(e) When an article locally purchased or imported by an
exempt person, such as, but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or transferred to nonexempt persons.
In the instant case, petitioner timely filed a protest after receiving the PAN. In
Notices. Pursuant to Section 228 of the NIRC, the proper recourse of petitioner was to dispute
thereof. Petitioner, however, did not protest the final assessment notices. Instead, it filed a
Petition for Review with the CTA. Thus, if we strictly apply the rules, the dismissal of the
Petition for Review by the CTA was proper.
The case is an
exception to the
rule
on
exhaustion of
administrative
remedies
considering that in its Resolution, it said, The opinions promulgated by the Secretary of Justice
are advisory in nature, which may either be accepted or ignored by the office seeking the
The 25% surcharge and 20% interest have been imposed pursuant to the
provision of Section 248(A) and 249(b), respectively, of the National
Internal Revenue Code, as amended.
opinion, and any aggrieved party has the court for recourse. The statement of the respondent in
said case led the petitioner to conclude that only a final judicial ruling in her favor would be
Similarly, in this case, we find the CIR estopped from claiming that the filing of the
Petition for Review was premature because petitioner failed to exhaust all administrative
remedies.
It appears from the foregoing demand letter that the CIR has already made a final
decision on the matter and that the remedy of petitioner is to appeal the final decision within 30
2.
days.
In this case, records show that petitioner disputed the PAN but not the Formal Letter
of Demand with Assessment Notices. Nevertheless, we cannot blame petitioner for not filing a
protest against the Formal Letter of Demand with Assessment Notices since the language used
and the tenor of the demand letter indicate that it is the final decision of the respondent on the
matter. We have time and again reminded the CIR to indicate, in a clear and unequivocal
language, whether his action on a disputed assessment constitutes his final determination
thereon in order for the taxpayer concerned to determine when his or her right to appeal to the
tax court accrues.[26] Viewed in the light of the foregoing, respondent is now estopped from
claiming that he did not intend the Formal Letter of Demand with Assessment Notices to be a
final decision.
What we are saying in this particular case is that, the Formal Letter of Demand with
Moreover, we cannot ignore the fact that in the Formal Letter of Demand with
Assessment Notices which was not administratively protested by the petitioner can be
Assessment Notices, respondent used the word appeal instead of protest, reinvestigation, or
considered a final decision of the CIR appealable to the CTA because the words used,
reconsideration. Although there was no direct reference for petitioner to bring the matter
specifically the words final decision and appeal, taken together led petitioner to believe that the
directly to the CTA, it cannot be denied that the word appeal under prevailing tax laws refers to
Formal Letter of Demand with Assessment Notices was in fact the final decision of the CIR on
the filing of a Petition for Review with the CTA. As aptly pointed out by petitioner, under
the letter-protest it filed and that the available remedy was to appeal the same to the CTA.
Section 228 of the NIRC, the terms protest, reinvestigation and reconsideration refer to the
administrative remedies a taxpayer may take before the CIR, while the term appeal refers to
We note, however, that during the pendency of the instant case, petitioner availed of
the remedy available to the taxpayer before the CTA. Section 9 of RA 9282, amending Section
the provisions of Revenue Regulations No. 30-2002 and its implementing Revenue
11 of RA 1125,
[27]
likewise uses the term appeal when referring to the action a taxpayer must
Memorandum Order by submitting an offer of compromise for the settlement of the GRT,
take when adversely affected by a decision, ruling, or inaction of the CIR. As we see it then,
DST and VAT for the period 1998-2003, as evidenced by a Certificate of Availment
petitioner in appealing the Formal Letter of Demand with Assessment Notices to the CTA
dated November 21, 2007.[30]Accordingly, there is no reason to reinstate the Petition for
merely took the cue from respondent. Besides, any doubt in the interpretation or use of the
word appeal in the Formal Letter of Demand with Assessment Notices should be resolved in
favor of petitioner, and not the respondent who caused the confusion.
To be clear, we are not disregarding the rules of procedure under Section 228 of the
NIRC, as implemented by Section 3 of BIR Revenue Regulations No. 12-99.
[28]
are REVERSED andSET ASIDE. The Petition for Review in CTA Case No. 7062 is
It is the
Formal Letter of Demand and Assessment Notice that must be administratively protested or
petitioners offer of compromise for the settlement of the gross receipts tax, documentary stamp
disputed within 30 days, and not the PAN. Neither are we deviating from our pronouncement
in St. Stephens Chinese Girls School v. Collector of Internal Revenue,[29] that the counting of
the 30 days within which to institute an appeal in the CTA commences from the date of receipt
SO ORDERED.
of the decision of the CIR on the disputed assessment, not from the date the assessment was
issued.
FIRST DIVISION
G.R. No. 166018
June 4, 2014
x-----------------------x
G.R. No. 167728
THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITEDPHILIPPINE BRANCHES, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
These petitions for review on certiorari1 assail the Decision2 and Resolution
dated July 8, 2004 and October 25, 2004, respectively, of the Court of
Appeals in CA-G.R. SP No. 77580, as well as the Decision3 and Resolution
dated September 2, 2004 and April 4, 2005, respectively, of the Court of
Appeals in CA-G.R. SP No. 70814. The respective Decisions in the said
cases similarly reversed and set aside the decisions of the Court of Tax
Appeals (CTA) in CTA Case Nos. 59514 and 6009,5 respectively, and
dismissed the petitions of petitioner Hongkong and Shanghai Banking
Corporation Limited-Philippine Branches (HSBC). The corresponding
Resolutions, on the other hand, denied the respective motions for
reconsideration of the said Decisions.
HSBC performs, among others, custodial services on behalf of its investorclients, corporate and individual, resident or non-resident of the Philippines,
with respect to their passive investments in the Philippines, particularly
investments in shares of stocks in domestic corporations. As a custodian
bank, HSBC serves as the collection/payment agent with respect to
dividends and other income derived from its investor-clients passive
investments.6
P 6,981,447.90
October 1997
6,209,316.60
November 1997
3,978,510.30
December 1997
2,403,717.30
Total
P19,572,992.10
B. January to December 1998
January 1998
P 3,328,305.60
February 1998
4,566,924.90
March 1998
5,371,797.30
April 1998
4,197,235.50
May 1998
2,519,587.20
June 1998
2,301,333.00
July 1998
1,586,404.50
August 1998
1,787,359.50
September 1998
1,231,828.20
October 1998
1,303,184.40
November 1998
2,026,379.70
December 1998
2,684,097.50
Total
The foregoing transactions are carried out under instruction from abroad and
P32,904,437.30 [do] not involve actual fund transfer since the funds are already in the
Philippine accounts. The instructions are in the form of electronic messages
(i.e., SWIFT MT100 or MT 202 and/or MT 521). In both cases, the payment
On August 23, 1999, the Bureau of Internal Revenue (BIR), thru its then
is against the delivery of investments purchased. The purchase of
Commissioner, Beethoven Rualo, issued BIR Ruling No. 132-99 to the effect
investments and the payment comprise one single transaction. DST has
that instructions or advises from abroad on the management of funds
already been paid under Section 176 for the investment purchase.
located in the Philippines which do not involve transfer of funds from abroad
are not subject to DST. BIR Ruling No. 132-99 reads:
B. Other transactions:
Date: August 23, 1999
FERRY TOLEDO VICTORINO GONZAGA
& ASSOCIATES
G/F AFC Building, Alfaro St.
Salcedo Village, Makati
Metro Manila
Attn: Atty. Tomas C. Toledo
Tax Counsel
Gentlemen:
This refers to your letter dated July 26, 1999 requesting on behalf of your
clients, the CITIBANK & STANDARD CHARTERED BANK, for a ruling as to
whether or not the electronic instructions involving the following transactions
of residents and non-residents of the Philippines with respect to their local or
foreign currency accounts are subject to documentary stamp tax under
Section 181 of the 1997 Tax Code, viz:
A. Investment purchase transactions:
An overseas client sends instruction to its bank in the Philippines to either:
(i) debit its local or foreign currency account and to pay a
named recipient in the Philippines; or
thereof, of the face value of any such bill of exchange, or order, or Philippine
equivalent of such value, if expressed in foreign currency. (Underscoring
supplied.)
a documentary stamp tax shall be imposed on any bill of exchange or order
for payment purporting to be drawn in a foreign country but payable in the
Philippines.
Under the foregoing provision, the documentary stamp tax shall be levied on
the instrument, i.e., a bill of exchange or order for the payment of money,
which purports to draw money from a foreign country but payable in the
Philippines. In the instant case, however, while the payor is residing outside
the Philippines, he maintains a local and foreign currency account in the
Philippines from where he will draw the money intended to pay a named
recipient. The instruction or order to pay shall be made through an electronic
message, i.e., SWIFT MT 100 or MT 202 and/or MT 521. Consequently,
there is no negotiable instrument to be made, signed or issued by the payee.
In the meantime, such electronic instructions by the non-resident payor
cannot be considered as a transaction per se considering that the same do
not involve any transfer of funds from abroad or from the place where the
instruction originates. Insofar as the local bank is concerned, such
instruction could be considered only as a memorandum and shall be entered
as such in its books of accounts. The actual debiting of the payors account,
local or foreign currency account in the Philippines, is the actual transaction
that should be properly entered as such.
Under the Documentary Stamp Tax Law, the mere withdrawal of money from
a bank deposit, local or foreign currency account, is not subject to DST,
unless the account so maintained is a current or checking account, in which
case, the issuance of the check or bank drafts is subject to the documentary
stamp tax imposed under Section 179 of the 1997 Tax Code. In the instant
case, and subject to the physical impossibility on the part of the payor to be
present and prepare and sign an instrument purporting to pay a certain
obligation, the withdrawal and payment shall be made in cash. In this light,
the withdrawal shall not be subject to documentary stamp tax. The case is
parallel to an automatic bank transfer of local funds from a savings account
to a checking account maintained by a depositor in one bank.
Likewise, the receipt of funds from another bank in the Philippines for
deposit to the payees account and thereafter upon instruction of the nonresident depositor-payor, through an electronic message, the depository
bank to debit his account and pay a named recipient shall not be subject to
documentary stamp tax.
It should be noted that the receipt of funds from another local bank in the
Philippines by a local depository bank for the account of its client residing
abroad is part of its regular banking transaction which is not subject to
documentary stamp tax. Neither does the receipt of funds makes the
recipient subject to the documentary stamp tax. The funds are deemed to be
part of the deposits of the client once credited to his account, and which,
thereafter can be disposed in the manner he wants. The payor-clients
further instruction to debit his account and pay a named recipient in the
Philippines does not involve transfer of funds from abroad. Likewise, as
stated earlier, such debit of local or foreign currency account in the
Philippines is not subject to the documentary stamp tax under the
aforementioned Section 181 of the Tax Code.
In the light of the foregoing, this Office hereby holds that the instruction
made through an electronic message by non-resident payor-client to debit
his local or foreign currency account maintained in the Philippines and to pay
a certain named recipient also residing in the Philippines is not the
transaction contemplated under Section 181 of the 1997 Tax Code. Such
being the case, such electronic instruction purporting to draw funds from a
local account intended to be paid to a named recipient in the Philippines is
not subject to documentary stamp tax imposed under the foregoing Section.
This ruling is being issued on the basis of the foregoing facts as
represented. However, if upon investigation it shall be disclosed that the
facts are different, this ruling shall be considered null and void.
Very truly yours,
(Sgd.) BEETHOVEN L. RUALO
Commissioner of Internal Revenue8
With the above BIR Ruling as its basis, HSBC filed on October 8, 1999 an
administrative claim for the refund of the amount of P19,572,992.10
allegedly representing erroneously paid DST to the BIR for the period
covering September to December 1997.
Subsequently, on January 31, 2000, HSBC filed another administrative claim
for the refund of the amount ofP32,904,437.30 allegedly representing
erroneously paid DST to the BIR for the period covering January to
December 1998.
As its claims for refund were not acted upon by the BIR, HSBC subsequently
brought the matter to the CTA as CTA Case Nos. 5951 and 6009,
respectively, in order to suspend the running of the two-year prescriptive
period.
The CTA Decisions dated May 2, 2002 in CTA Case No. 6009 and dated
December 18, 2002 in CTA Case No. 5951 favored HSBC. Respondent
Commissioner of Internal Revenue was ordered to refund or issue a tax
credit certificate in favor of HSBC in the reduced amounts of P30,360,570.75
in CTA Case No. 6009 andP16,436,395.83 in CTA Case No. 5951,
representing erroneously paid DST that have been sufficiently substantiated
with documentary evidence. The CTA ruled that HSBC is entitled to a tax
refund or tax credit because Sections 180 and 181 of the 1997 Tax Code do
not apply to electronic message instructions transmitted by HSBCs nonresident investor-clients:
However, the Court of Appeals reversed both decisions of the CTA and ruled
that the electronic messages of HSBCs investor-clients are subject to DST.
The Court of Appeals explained:
At bar, [HSBC] performs custodial services in behalf of its investor-clients as
regards their passive investments in the Philippines mainly involving shares
of stocks in domestic corporations. These investor-clients maintain
Philippine peso and/or foreign currency accounts with [HSBC]. Should they
desire to purchase shares of stock and other investments securities in the
Philippines, the investor-clients send their instructions and advises via
electronic messages from abroad to [HSBC] in the form of SWIFT MT 100,
MT 202, or MT 521 directing the latter to debit their local or foreign currency
account and to pay the purchase price upon receipt of the securities (CTA
Decision, pp. 1-2; Rollo, pp. 41-42). Pursuant to Section 181 of the NIRC,
[HSBC] was thus required to pay [DST] based on its acceptance of these
electronic messages which, as [HSBC] readily admits in its petition filed
before the [CTA], were essentially orders to pay the purchases of securities
made by its client-investors (Rollo, p. 60).
Appositely, the BIR correctly and legally assessed and collected the [DST]
from [HSBC] considering that the said tax was levied against the
acceptances and payments by [HSBC] of the subject electronic
messages/orders for payment. The issue of whether such electronic
messages may be equated as a written document and thus be subject to tax
is beside the point. As We have already stressed, Section 181 of the law
cited earlier imposes the [DST] not on the bill of exchange or order for
payment of money but on the acceptance or payment of the said bill or
order. The acceptance of a bill or order is the signification by the drawee of
its assent to the order of the drawer to pay a given sum of money while
payment implies not only the assent to the said order of the drawer and a
recognition of the drawers obligation to pay such aforesaid sum, but also a
the finding of the CTA that the electronic messages "cannot be considered
negotiable instruments as they lack the feature of negotiability, which, is the
ability to be transferred" and that the said electronic messages are "mere
memoranda" of the transaction consisting of the "actual debiting of the
[investor-client-payors] local or foreign currency account in the Philippines"
and "entered as such in the books of account of the local bank," HSBC.16
More fundamentally, the instructions given through electronic messages that
are subjected to DST in these cases are not negotiable instruments as they
do not comply with the requisites of negotiability under Section 1 of the
Negotiable Instruments Law, which provides:
Sec. 1. Form of negotiable instruments. An instrument to be negotiable
must conform to the following requirements:
SEC. 181. Stamp Tax Upon Acceptance of Bills of Exchange and Others.
Upon any acceptance or payment of any bill of exchange or order for the
payment of money purporting to be drawn in a foreign country but payable in
the Philippines, there shall be collected a documentary stamp tax of Thirty
centavos (P0.30) on each Two hundred pesos (P200), or fractional part
thereof, of the face value of any such bill of exchange, or order, or the
Philippine equivalent of such value, if expressed in foreign currency.
(Emphasis supplied.)
Section 230 of the 1977 Tax Code, as amended, which governs HSBCs
claim for tax refund for DST paid during the period September to December
1997 and subject of G.R. No. 166018, is worded exactly the same as its
counterpart provision in the 1997 Tax Code quoted above.
The origin of the above provision is Section 117 of the Tax Code of
1904,17 which provided: SECTION 117. The acceptor or acceptors of any bill
of exchange or order for the payment of any sum of money drawn or
purporting to be drawn in any foreign country but payable in the Philippine
Islands, shall, before paying or accepting the same, place thereupon a
stamp in payment of the tax upon such document in the same manner as is
required in this Act for the stamping of inland bills of exchange or promissory
notes, and no bill of exchange shall be paid nor negotiated until such stamp
shall have been affixed thereto.18 (Emphasis supplied.)
SEC. 30. Stamp tax upon documents and papers. Upon documents,
instruments, and papers, and upon acceptances, assignments, sales, and
transfers of the obligation, right, or property incident thereto documentary
taxes for and in respect of the transaction so had or accomplished shall be
paid as hereinafter prescribed, by the persons making, signing, issuing,
accepting, or transferring the same, and at the time such act is done or
transaction had:
xxxx
(h) Upon any acceptance or payment upon acceptance of any bill of
exchange or order for the payment of money purporting to be drawn in a
foreign country but payable in the Philippine Islands, on each two hundred
pesos, or fractional part thereof, of the face value of any such bill of
exchange or order, or the Philippine equivalent of such value, if expressed in
foreign currency, two centavos[.] (Emphasis supplied.)
order for the payment of money that was drawn abroad but payable in the
Philippines.
SEC. 39. A Bill of Exchange is one that "denotes checks, drafts, and all other
kinds of orders for the payment of money, payable at sight or on demand, or
after a specific period after sight or from a stated date."
SEC. 46. Bill of Exchange, etc. When any bill of exchange or order for the
payment of money drawn in a foreign country but payable in this country
whether at sight or on demand or after a specified period after sight or from
a stated date, is presented for acceptance or payment, there must be affixed
upon acceptance or payment of documentary stamp equal to P0.02 for
each P200 or fractional part thereof. (Emphasis supplied.)
It took its present form in Section 218 of the Tax Code of 1939,21 which
provided:
SEC. 218. Stamp Tax Upon Acceptance of Bills of Exchange and Others.
Upon any acceptance or payment of any bill of exchange or order for the
payment of money purporting to be drawn in a foreign country but payable in
the Philippines, there shall be collected a documentary stamp tax of four
centavos on each two hundred pesos, or fractional part thereof, of the face
value of any such bill of exchange or order, or the Philippine equivalent of
such value, if expressed in foreign currency. (Emphasis supplied.)
It then became Section 230 of the 1977 Tax Code,22 as amended by
Presidential Decree Nos. 1457 and 1959,which, as stated earlier, was
worded exactly as Section 181 of the current Tax Code:
SEC. 230. Stamp tax upon acceptance of bills of exchange and others.
Upon any acceptance or payment of any bill of exchange or order for the
payment of money purporting to be drawn in a foreign country but payable in
the Philippines, there shall be collected a documentary stamp tax of thirty
centavos on each two hundred pesos, or fractional part thereof, of the face
value of any such bill of exchange, or order, or the Philippine equivalent of
such value, if expressed in foreign currency. (Emphasis supplied.)
The pertinent provision of the present Tax Code has therefore remained
substantially the same for the past one hundred years.1wphi1 The identical
text and common history of Section 230 of the 1977 Tax Code, as amended,
and the 1997 Tax Code, as amended, show that the law imposes DST on
either (a) the acceptance or (b) the payment of a foreign bill of exchange or
Joaquin G. Chung, Jr. Law Office for respondent Tulmar Trading Corp.
property and deliver it upon order of the court or the Internal Revenue
Commissioner.
Eliodoro C. Cruz & Arsenio P. Dizon for Maritime Co. of the Philippines.
MENDOZA, J.:
This is a petition for certiorari to set aside the resolution dated April 4,
1986 1 of the National Labor Relations Commission in NLRC Case No. NCR12-4233-84 (Domingo C. Niangar v. Maritime Company of the Philippines),
affirming the denial by the Labor Arbiter 2 of petitioner's motion to annul the
sheriff's sale of four barges or, in the alternative, to order him to remit the
proceeds of his sale to the Bureau of the Internal Revenue for the
satisfaction of the tax liabilities of private respondent Maritime Company of
the Philippines.
The facts are as follows:
On January 12, 1984 the Commissioner of the Internal Revenue sent two
letters 3 of demand to the respondent Maritime Company of the Philippines
for deficiency common carrier's tax, fixed tax, 6% Commercial Broker's tax,
documentary stamp tax, income tax and withholding taxes in the total
amount of P17,284,882.45.
The assessment became final and executory as private respondent did not
contest it. But as private respondent did not pay its tax liability either, the
Commissioner of Internal Revenue issued warrants of distraint of personal
property and levy of real property of private respondent. Copies of the
warrants, both dated January 23, 1985, were served on January 28, 1985 on
Yoly T. Petrache, private respondent's accountant. 4
On April 16, 1985 a "Receipt for Goods, Articles, and Things Seized 5 under
Authority of the National Internal Revenue Code" was executed, covering,
among other things, six barges identified as MCP-1,2,3,4,5 and 6. This
receipt is required by 303 (now 206) of the NIRC as proof of the
constructive distraint of property. It is an undertaking by the taxpayer or
person in possession of the property covered that he will preserve the
The receipt was prepared by the BIR for the signature of a representative of
respondent Maritime Company of the Philippines, but it was not in fact
signed. Petitioner later explained that the individuals who had possession of
the barges had refused to sign the receipt.
This circumstance has given rise to the question in this case as it appears
that four of the barges placed under constructive distraint were levied upon
execution by respondent deputy sheriff of Manila on July 20, 1985 to satisfy
a judgment for unpaid wages and other benefits of employees of respondent
Maritime Company of the Philippines. More specifically, the question in this
case is the validity of the warrant of distraint served by the Revenue Seizure
Officer against the writ of execution subsequently levied upon the same
property by the deputy sheriff of Manila to satisfy the claims of employees in
NLRC Case No. NCR-12-4233-84 (Domingo C. Niangar, et al. v. Maritime
Company of the Philippines) for P490,749.21.
The four barges were sold by respondent deputy sheriff at a public auction
on August 12, 1985. The highest bidder, Daniel C. Sabino, subsequently
sold them to private respondents Fernando S. Tuliao and Tulmar Trading
Corporation.
On September 4, 1985, petitioner asked the Labor Arbiter to annul the sale
and to enjoin the sheriff from disposing of the proceeds of the sale or, in the
alternative, to remit them to the Bureau of Internal Revenue so that the
amount could be applied to the payment of private respondent Maritime
Company's tax liabilities.
In an order dated September 30, 1985, Labor Arbiter Ceferina Diosana
denied the motion on the ground that petitioner Commissioner of Internal
Revenue failed to show that the barges which were levied upon in execution
and sold at public auction had been validly placed under constructive
distraint. 6 The Labor Arbiter likewise rejected petitioner's contention that the
government's claim for taxes was preferred under Art. 2247, in relation to Art.
2241(1) of the Civil Code, on the ground that under this provisions only taxes
and fees which are due on specific movables enjoy preference, whereas the
taxes claimed by petitioner were not due on the four barges in question.
The order was appealed to the NLRC, which in resolution dated April 4,
1986, affirmed the denial of the Internal Revenue Commissioner's motion.
Hence this petition for certiorari.
For reasons to be presently stated, the petition is granted.
The National Internal Revenue Code provides for the collection of delinquent
taxes by any of the following remedies: (a) distraint of personal property or
levy of real property of the delinquent taxpayer and (b) civil or criminal
action.
With respect to the four barges in question, petitioner resorted to
constructive distraint pursuant to 303 (now 206) of the NLRC. This
provisions states:
Constructive distraint of the property of a taxpayer. To
safeguard the interest of the Government, the
Commissioner of Internal Revenue may place under
constructive distraint the property of a delinquent taxpayer
or any taxpayer who, in his opinion, is retiring from any
business subject to tax, or intends to leave the Philippines,
or remove his property therefrom, or hide or conceal his
property, or perform any act tending to obstruct the
proceedings, for collecting the tax due or which may be
due from him.
The constructive distraint of personal property shall be
effected by requiring the taxpayer or any person having
possession or control of such property to sign a receipt
covering the property distrained and obligate himself to
preserve the same intact and unaltered and not to dispose
of the same in any manner whatever without the express
authority of the Commissioner of Internal Revenue.
were the four barges (MCP-2, MCP-3, MCP-5, and MCP-6), had been
distrained by the Commissioner of Internal Revenue. 10
The "Notice of Seizure of Personal Property," a copy of which was received
by Atty. Redentor R. Melo in behalf of Maritime Company of the Philippines,
together with the receipt of the Coast Guard, belies the claim of respondent
deputy sheriff that when he levied upon the four barges there was no
indication that the barges had previously been placed under distraint by the
Commissioner of Internal Revenue.
Accordingly, what we said in the prior case 11 in upholding the validity of
distraint of two of the six barges (MCP Nos. 1 and 4), fully applies in this
case:
It is settled that the claim of the government predicated on
a tax lien is superior to the claim of a private litigant
predicated on a judgment. The tax lien attaches not only
from the service of the warrant of distraint of personal
property but from the time the tax became due and
payable. Besides, the distraint on the subject properties of
the Maritime Company of the Philippines as well as the
notice of their seizure were made by petitioner, through
the Commissioner of the Internal Revenue, long before the
writ of the execution was issued by the Regional Trial
Court of Manila, Branch 31. There is no question then that
at the time the writ of execution was issued, the two (2)
barges, MPC-1 and MCP-4, were no longer properties of
the Maritime Company of the Philippines. The power of
the court in execution of judgments extends only to
properties unquestionably belonging to the judgment
debtor. Execution sales affect the rights of the judgment
debtor only, and the purchaser in an auction sale acquires
only such right as the judgment debtor had at the time of
sale. It is also well-settled that the sheriff is not authorized
to attach or levy on property not belonging to the judgment
debtor.
Nor is there any merit in the contention of the NLRC that taxes are
absolutely preferred claims only with respect to movable or immovable
properties on which they are due and that since the taxes sought to be
collected in this case are not due on the barges in question the
government's claim cannot prevail over the claims of employees of the
Maritime Company of the Philippines which, pursuant to Art. 110 of the Labor
Code, "enjoy first preference."
In Republic v. Peralta 12 this Court rejected a similar contention. Through Mr.
Justice Feliciano we held:
. . . [T]he claim of the Bureau of Internal Revenue for
unpaid tobacco inspection fees constitutes a claim for
unpaid internal revenue taxes which gives rise to a tax lien
upon all the properties and assets, movable or
immovable, of the insolvent as taxpayer. Clearly, under
Articles 2241 No. 1, 2242 No. 1, and 2246-2249 of the
Civil Code, this tax claim must be given preference over
any other claim of any other creditor, in respect of any and
all properties of the insolvent.
xxx xxx xxx
Article 110 of the Labor Code does not purport to create a
lien in favor of workers or employees for unpaid wages
either upon all of the properties or upon any particular
property owned by their employer. Claims for unpaid
wages do not therefore fall at all within the category of
specially preferred claims established under Articles 2241
and 2242 of the Civil Code, except to the extent that such
claims for unpaid wages are already covered by Article
2241, number 6: "claims for laborer's wages, on the goods
manufactured or the work done," or by Article 2242,
number 3: "claims of laborers and other workers engaged
in the construction, reconstruction or repair of buildings,
canals and other works, upon said buildings, canals or
other works." To the extent that claims for unpaid wages
fall outside the scope of Article 2241, number 6 and 2242,
PADILLA, J.:
This is an appeal under section 18, Republic Act No. 125, by the Mithi Ng
Bayan Cooperative Marketing Association Inc., from that part of a judgment
dated 14 August 1958 rendered by the Court of Tax Appeals upholding the
decision of the Collector of Internal Revenue that denied the petitioner's
claim for refund of the sum of P3,590.53 paid by it as privilege or fixed tax
upon business and percentage tax, and surcharge. due (Annex A) and the
resolution dated 8 October 1958, denying its motion r reconsideration.
On 3 July 1953, Pedro Guevarra, an agent of the Bureau of Internal
Revenue, assigned in San Pablo City, reported to the provincial revenue
agent that the petitioner, an, association of persons organized and
incorporated as a cooperative marketing association under the provisions of
the Cooperative Marketing Law Act No. 3425, as amended and the
Corporation Law, Act No. 1459, as amended, has been operating a ricemill
in barrio Calios, Santa Cruz, Laguna, where palay owned by members and
non members are milled, that a fee is charged and collected by the petitioner
from the owners for milling their palay; and that the petitioner paid the fixed
tax of P10 due for the year 1952 and the percentage tax of 2% due on the
total value of rice milled during the first and second quarters of 1952 but did
not pay the fixed tax due for the year 1953 and the percentage tax of 2%
due on the total value of rice milled during the third quarter of 1952 to the
first quarter of 1953. The agent recommended that a letter be sent payment
of the total Sum of to the petitioner demanding computed as follows:
P3,610.53. computed as follows:.
P 10.00
25% Surcharge
thereon ..........................................................
2,864.42
716.11
Compromise ........................................................................
.....
TOTAL TAX
LIABILITY ...................................................
20.00
P3,610.53
(Exhibit 1, pp. 2-3, BIR rec.). Acting upon the recommendation of the agent,
on 19 December 1953 the respondent Collector of Internal Revenue
demanded from the petitioner payment of the sum of P3,590.53 (less P20 for
compromise), within 30 days from receipt of the letter of demand and
informed it that if it be not agreeable to the assessment, it could take up the
matter with the Conference Staff of the Bureau of Internal Revenue by filing
within the same period of time a written notice of its in attention to appear
before the Staff either in person or by an attorney-at-law or a certified public
accountant as counsel and that if it be agreeable to extrajudicially settle the
penal liabilities arising from violations of the National Internal Revenue
Code, as amended, it could pay the sum of P100 as penalty in addition to
the sum of P3,590.53, or a total of P3,690.53 (Exhibit E). On 13 January
1954 the petitioner wrote to the respondent Collector informing him that it
was not agreeable to his proposal and filed its notice of intention to appear
before the Conference Staff (Exhibit F). After hearing, on 9 December 1954
the Conference Staff recommended to the respondent Collector the
enforcement of the assessment dated 19 December 1953 for taxes and
surcharge in the sum of P3,590.53 and suggested the imposition upon the
petitioner of a compromise penalty in the sum of P100 (Exhibit 9). The
respondent Collector approved the recommendation of the Conference staff
and on 4 January 1955 demanded payment of the tal sum of 690.53 within
ten day from receipt of the letter, otherwise it would enforce collection
through the summary remedies provided for by law (Exhibit G).
On 14 February 1955 the petitioner appealed under the revisions of section
11, Republic Act No. 1125, to the Court of Tax Appeals to have the decision
of the Collector of Internal Revenue reviewed. On 16 March 1955 the
respondent Collector filed under the provisions of Rule 7 of he Rules of the
Court of Tax Appeals his answer to the petition for review of the decision of
the respondent Collector.
After hearing and after the parties had filed their respective memoranda and
the petitioner a reply to the respondent's memorandum, on 14 August 1958
the Court rendered judgment declaring that the "petitioner can not be
considered as having been organized in accordance with Act No. 3425, and
its claim for exemption under Section 18 of said Act can not be sustained."
The dispositive part of the judgment provides:
FOR THE FOREGOING CONSIDERATIONS, we are of he opinion
that the sum of P3,590.53, representing the fixed and percentage
taxes, plus surcharge, was validly collected from petitioner as
operator of a rice mill, and its claim for refund hereof must be, as
the same is hereby, denied. With respect to he sum of P100.00 as
compromise penalty, the collection thereof being unauthorized and
illegal, respondent is ordered to refund he said amount, plus
interest at the legal rate. No pronouncement as to costs. (Annex A)
On 3 September 1958 the petitioner filed a motion for reconsideration, on 29
September 1958 the respondent, an objection thereto, and on 2 October
1958 the petitioner, a reply to the respondent's objection. On 8 October 1958
the Court denied the petitioner's motion for reconsideration on Hence this
appeal. The petitioner's appeal is only with respect to that part of the
judgment upholding the legality of the imposition of the sum of P3,590.53 as
taxes and surcharge due and denying its claim for refund of the said amount.
Is the petitioner an association organized under the provisions of the
Cooperative Marketing Law, Act No. 3425, as amended, exempt from the
payment of privilege tax or fixed tax upon business and percentage tax,
imposed by sections 178, 182, 183 and 189, of the National Internal
Revenue Code, as amended, is the question to be resolved in this appeal.
Section 48, Act No. 3425, as amended by Republic Act No. 702, exempting
cooperative associations organized under the said Law from payment of
merchant's sales tax, income tax and other percentage taxes, provides:
Any association organized under this Act shall not be subject to the
payment of the merchant's sales tax, the income tax, and all others
percentage taxes of whatever nature and description.
Any exemptions under any and all existing laws applying to
agricultural products in the possession or under the control of the
individual producer, shall apply similarly and completely to
agricultural products delivered by the farmer members to the
that the persons who brought and milled their palay in the petitioner's ricemill
from 2 to 31 March 1953 listed in Exhibits D, D-1 and 10 and their respective
relation to the members of he petitioner-organization stated therein, would
testify that they were known or called in the community by the names or nick
names appearing therein; that they themselves brought their palay or had it
brought through their respective relatives landlords or employers to the
ricemill for milling; and that to abbreviate the proceeding and avoid a lengthy
and costly litigation, the said persons appearing in the list (Exhibits D, D-1
and 10), would no longer be present to testify at the hearing of the case. The
evidence at hand does not sufficiently establish the fact that all members of
the petitioner association are engaged in the production of agricultural
products. Hence, it cannot be said to have been organized as a cooperative
marketing association and entitled to exemption from the payment of taxes
provided for in section 48 of the Cooperative Marketing Law, Act No. 3425,
as amended.
The judgment under review is affirmed, with costs against the petitioner.
Bengzon, C.J., Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes,
Dizon, De Leon and Natividad, JJ.,concur.
CUEVAS, J.:
this office within ten (10) days from receipt hereof so that
this case may be closed.
xxx xxx xxx
Sgd.Melencio Dom
Acting Commission
of Internal Revenu
Gentlemen:
xxx xxx xxx
It was also ascertained that in 1949 you manifested
2,052.48 cubic meters of timber, the forest charges and
surcharges of which in the total amount of P15,443.55 was
demanded of you by the Bureau of Forestry on January
15, 1949. ...
In view thereof there is due from you the amount of
P33,595.26 as deficiency sales tax, forest charges and
surcharges, committed as follows:
Sales Tax x x x
Forest Charges
Forest charges and surcharges for the year 1949
appealed to the Secretary of Agriculture and Natural
Resources P15,443.55
xxx xxx xxx
Total amount due & payable P33,595.26
Demand is hereby made upon you to pay the aforesaid
amount of P 33,595.26 to the City Treasurer of Manila or
CONCEPCION JR., J:
Petition for certiorari and prohibition with preliminary injunction and
restraining order to annul and set aside the informations filed in Criminal
Case Nos. 1960, 1961, 1962, 1963, 1964, and 1965 of the Court of First
Instance of Davao, all entitled: "People of the Philippines, plaintiff, versus
Quirico Ungab, accused;" and to restrain the respondent Judge from further
proceeding with the hearing and trial of the said cases.
It is not disputed that sometime in July, 1974, BIR Examiner Ben Garcia
examined the income tax returns filed by the herein petitioner, Quirico P.
Ungab, for the calendar year ending December 31, 1973. In the course of
his examination, he discovered that the petitioner failed to report his income
derived from sales of banana saplings. As a result, the BIR District Revenue
Officer at Davao City sent a "Notice of Taxpayer" to the petitioner informing
him that there is due from him (petitioner) the amount of P104,980.81,
representing income, business tax and forest charges for the year 1973 and
inviting petitioner to an informal conference where the petitioner, duly
assisted by counsel, may present his objections to the findings of the BIR
Examiner. 1 Upon receipt of the notice, the petitioner wrote the BIR District
Revenue Officer protesting the assessment, claiming that he was only a
dealer or agent on commission basis in the banana sapling business and
that his income, as reported in his income tax returns for the said year, was
accurately stated. BIR Examiner Ben Garcia, however, was fully convinced
that the petitioner had filed a fraudulent income tax return so that he
submitted a "Fraud Referral Report," to the Tax Fraud Unit of the Bureau of
Internal Revenue. After examining the records of the case, the Special
Investigation Division of the Bureau of Internal Revenue found sufficient
proof that the herein petitioner is guilty of tax evasion for the taxable year
1973 and recommended his prosecution: t.hqw
(1) For having filed a false or fraudulent income tax return
for 1973 with intent to evade his just taxes due the
government under Section 45 in relation to Section 72 of
the National Internal Revenue Code;
(2) For failure to pay a fixed annual tax of P50.00 a year in
1973 and 1974, or a total of unpaid fixed taxes of P100.00
plus penalties of 175.00 or a total of P175.00, in
accordance with Section 183 of the National Internal
Revenue Code;
(3) For failure to pay the 7% percentage tax, as a producer
of banana poles or saplings, on the total sales of
P129,580.35 to the Davao Fruit Corporation, depriving
thereby the government of its due revenue in the amount
of P15,872.59, inclusive of surcharge. 2
In a second indorsement to the Chief of the Prosecution Division, dated
December 12, 1974, the Commissioner of Internal Revenue approved the
prosecution of the petitioner. 3
Thereafter, State Prosecutor Jesus Acebes who had been designated to
assist all Provincial and City Fiscals throughout the Philippines in the
investigation and prosecution, if the evidence warrants, of all violations of the
National Internal Revenue Code, as amended, and other related laws, in
Administrative Order No. 116 dated December 5, 1974, and to whom the
case was assigned, conducted a preliminary investigation of the case, and
finding probable cause, filed six (6) informations against the petitioner with
the Court of First Instance of Davao City, to wit: t.hqw
(1) Criminal Case No. 1960 Violation of Sec. 45, in
relation to Sec. 72 of the National Internal-Revenue Code,
for filing a fraudulent income tax return for the calendar
year ending December 31, 1973; 4
The petitioner also claims that the filing of the informations was precipitate
and premature since the Commissioner of Internal Revenue has not yet
resolved his protests against the assessment of the Revenue District Officer;
and that he was denied recourse to the Court of Tax Appeals.
The contention is without merit. What is involved here is not the collection of
taxes where the assessment of the Commissioner of Internal Revenue may
be reviewed by the Court of Tax Appeals, but a criminal prosecution for
violations of the National Internal Revenue Code which is within the
cognizance of courts of first instance. While there can be no civil action to
enforce collection before the assessment procedures provided in the Code
have been followed, there is no requirement for the precise computation and
assessment of the tax before there can be a criminal prosecution under the
Code. t.hqw
The contention is made, and is here rejected, that an
assessment of the deficiency tax due is necessary before
the taxpayer can be prosecuted criminally for the charges
preferred. The crime is complete when the violator has, as
in this case, knowingly and willfully filed fraudulent returns
with intent to evade and defeat a part or all of the tax. 14
An assessment of a deficiency is not necessary to a
criminal prosecution for willful attempt to defeat and evade
the income tax. A crime is complete when the violator has
knowingly and willfuly filed a fraudulent return with intent
to evade and defeat the tax. The perpetration of the crime
is grounded upon knowledge on the part of the taxpayer
that he has made an inaccurate return, and the
government's failure to discover the error and promptly to
assess has no connections with the commission of the
crime. 15
Besides, it has been ruled that a petition for reconsideration of an
assessment may affect the suspension of the prescriptive period for the
collection of taxes, but not the prescriptive period of a criminal action for
violation of law. 16 Obviously, the protest of the petitioner against the
assessment of the District Revenue Officer cannot stop his prosecution for
SO ORDERED.
Barredo (Chairman), Aquino, Abad Santos and De Castro, JJ.,
concur.1wph1.t
VITUG, J.:p
The Commissioner of Internal Revenue ("CIR") disputes the decision, dated
31 March 1995, of respondent Court of Appeals 1 affirming the 10th August
1994 decision and the 11th October 1994 resolution of the Court of Tax
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20% 5
A bill, which later became Republic Act ("RA") No. 7654, 6 was
enacted, on 10 June 1993, by the legislature and signed into law,
on 14 June 1993, by the President of the Philippines. The new law
became effective on 03 July 1993. It amended Section 142(c)(1) of
the National Internal Revenue Code ("NIRC") to read; as follows:
are the real owner/s thereof, then it follows that the same
shall be considered foreign brand for purposes of
determining the ad valorem tax pursuant to Section 142 of
the National Internal Revenue Code. As held in BIR Ruling
No. 410-88, dated August 24, 1988, "in cases where it
cannot be established or there is dearth of evidence as to
whether a brand is foreign or not, resort to the World
Tobacco Directory should be made."
(SGD) LIWAYWA
VINZONS-CHAT
Commissioner
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner
Victor A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to
Fortune Tobacco but it was addressed to no one in particular. On
15 July 1993, Fortune Tobacco received, by ordinary mail, a
certified xerox copy of RMC 37-93.
In a letter, dated 19 July 1993, addressed to the appellate division
of the BIR, Fortune Tobacco requested for a review, reconsideration
and recall of RMC 37-93. The request was denied on 29 July 1993.
The following day, or on 30 July 1993, the CIR assessed Fortune
Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with
the CTA. 8
SO ORDERED. 9
In its resolution, dated 11 October 1994, the CTA dismissed for lack
of merit the motion for reconsideration.
The CIR forthwith filed a petition for review with the Court of
Appeals, questioning the CTA's 10th August 1994 decision and 11th
October 1994 resolution. On 31 March 1993, the appellate court's
Special Thirteenth Division affirmed in all respects the assailed
decision and resolution.
EFFECTIVITY OR ENFORCEABILITY
BUT INTO ITS CORRECTNESS OR
PROPRIETY; RMC 37-93 IS
CORRECT. 10
In fine, petitioner opines that RMC 37-93 is merely an interpretative
ruling of the BIR which can thus become effective without any prior
need for notice and hearing, nor publication, and that its issuance is
not discriminatory since it would apply under similar circumstances
to all locally manufactured cigarettes.
The Court must sustain both the appellate court and the tax court.
Petitioner stresses on the wide and ample authority of the BIR in
the issuance of rulings for the effective implementation of the
provisions of the National Internal Revenue Code. Let it be made
clear that such authority of the Commissioner is not here doubted.
Like any other government agency, however, the CIR may not
disregard legal requirements or applicable principles in the exercise
of its quasi-legislative powers.
Let us first distinguish between two kinds of administrative
issuances a legislative rule and aninterpretative rule.
In Misamis Oriental Association of Coco Traders,
Inc., vs. Department of Finance Secretary, 11 the Court expressed:
. . . a legislative rule is in the nature of subordinate
legislation, designed to implement a primary legislation by
providing the details thereof . In the same way that laws
must have the benefit of public hearing, it is generally
required that before a legislative rule is adopted there
must be hearing. In this connection, the Administrative
Code of 1987 provides:
Public Participation. If not otherwise required by law, an
agency shall, as far as practicable, publish or circulate
notices of proposed rules and afford interested parties the
May 3, 2006
YNARES-SANTIAGO, J.:
Assailed in this petition for review on certiorari is the June 29, 2004
Decision1 of the Court of Appeals in CA-G.R. SP No. 67667, which reversed
the October 24, 2001 Decision2 of the Court Tax Appeals and ordered
petitioner Michel J. Lhuillier Pawnshop, Inc., to pay (1) P19,961,636.09 as
deficiency Value Added Tax (VAT); and (2) P3,142,986.02 as deficiency
Documentary Stamp Tax (DST), for the year 1997.
SO ORDERED.4
Respondent filed a motion for partial reconsideration praying that petitioner
be ordered to pay deficiency interest of 20% per annum for failure to pay the
same on January 2, 2000, as indicated in the notices. On December 29,
2004, the Court of Appeals granted the motion and modified the June 29,
2004 decision as follows:
WHEREFORE, the instant petition is hereby GRANTED. The decision of the
Court of Tax Appeals dated October 24, 2001 is REVERSED and SET
ASIDE. In lieu thereof, respondent Michel J. Lhuillier Pawnshop, Inc., is
ORDERED TO PAY: (1) 19,961,636.09, as deficiency Value-Added Tax,
inclusive of surcharge and interest; (2) P3,142,986.02, as deficiency
Documentary Stamp Tax, inclusive of surcharge and interest, for the year
1997; and (3) Delinquency Interest at the rate of 20% per annum from
January 2, 2000, until the deficiency assessment are fully paid, pursuant to
Section 249 of the National Internal Revenue Code. No pronouncement as
to costs.
SO ORDERED.
The settled rule is that tax laws must be construed in favor of the taxpayer
and strictly against the government; and that a tax cannot be imposed
without clear and express words for that purpose.14 Taking our bearing from
the foregoing doctrines, we scrutinized Section 195 of the NIRC, but there is
no way that said provision may be interpreted in favor of petitioner. Section
195 unqualifiedly subjects all pledges to DST. It states that "[o]n every x x
x pledge x x x there shall be collected a documentary stamp tax x x x." It is
clear, categorical, and needs no further interpretation or construction. The
explicit tenor thereof requires hardly anything than a simple application.15
Section 12 of the Pawnshop Regulation Act and Section 21 of the Rules and
Regulations For Pawnshops11issued by the Central Bank12 to implement the
Act, require every pawnshop or pawnbroker to issue, at the time of every
such loan or pledge, a memorandum or ticket signed by the pawnbroker and
containing the following details: (1) name and residence of the pawner; (2)
date the loan is granted; (3) amount of principal loan; (4) interest rate in
percent; (5) period of maturity; (6) description of pawn; (7) signature of
pawnbroker or his authorized agent; (8) signature or thumb mark of pawner
or his authorized agent; and (9) such other terms and conditions as may be
agreed upon between the pawnbroker and the pawner. In addition, Central
Bank Circular No. 445,13 prescribed a standard form of pawn tickets with
entries for the required details on its face and the mandated terms and
conditions of the pledge at the dorsal portion thereof.
Section 3 of the Pawnshop Regulation Act defines a pawn ticket as follows:
"Pawn ticket" is the pawnbrokers receipt for a pawn. It is neither a security
nor a printed evidence of indebtedness."
True, the law does not consider said ticket as an evidence of security or
indebtedness. However, for purposes of taxation, the same pawn ticket is
proof of an exercise of a taxable privilege of concluding a contract of pledge.
At any rate, it is not said ticket that creates the pawnshops obligation to pay
DST but the exercise of the privilege to enter into a contract of pledge. There
The onus of proving that pawnshops are not subject to DST is thus shifted to
petitioner. In establishing tax exemptions, it should be borne in mind that
taxation is the rule, exemption is the exception. Accordingly, statutes
granting tax exemptions must be construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority. One who claims an
exemption from tax payments rests the burden of justifying the exemption by
words too plain to be mistaken and too categorical to be misinterpreted.16
In the instant case, there is no law specifically and expressly exempting
pledges entered into by pawnshops from the payment of DST. Section
19917 of the NIRC enumerated certain documents which are not subject to
stamp tax; but a pawnshop ticket is not one of them. Hence, petitioners
nebulous claim that it is not subject to DST is without merit. It cannot be
over-emphasized that tax exemption represents a loss of revenue to the
government and must, therefore, not rest on vague inference.18 Exemption
from taxation is never presumed. For tax exemption to be recognized, the
grant must be clear and express; it cannot be made to rest on doubtful
implications.19
The Court notes that BIR Ruling No. 305-87,20 and BIR Ruling No. 01888,21 which held that a pawn ticket is subject to DST because it is an
evidence of a pledge transaction, had been revoked by BIR Ruling No. 32588.22In the latter ruling, the BIR held that DST is a tax on the document; and
since a pawn ticket is not an evidence of indebtedness, it cannot be subject
to DST. Nevertheless, this interpretation is not consistent with the provisions
of Section 195 of the NIRC which categorically taxes the privilege to enter
into a contract of pledge. Indeed, administrative issuances must not
override, supplant or modify the law but must be consistent with the law they
intend to carry out.23
Finally, petitioner invokes the declaration of nullity of Revenue Memorandum
Circular (RMC) No. 43-91 inCommissioner of Internal Revenue v. Michel J.
Lhuillier Pawnshop, Inc.24 Said case, however, is not applicable to the
present controversy. RMC No. 43-91 is actually a clarification of Revenue
Memorandum Order No. 15-91 which classified pawnshops as "lending
investors" and imposed upon them a 5% lending investors tax. While RMC
No. 43-91 declared in addition that pawnshops are subject to DST, such was
never an issue inCommissioner of Internal Revenue v. Michel J. Lhuillier
Pawnshop, Inc., because nowhere was it mentioned therein that the
pawnshop involved was directed to pay DST. Otherwise stated, the
declaration of nullity of RMC No. 43-91 was the Courts finding, among
others, that pawnshops cannot be classified as lending investors; and
certainly not because pawnshops are not subject to DST. The invocation of
said ruling is therefore misplaced.
WHEREFORE, the petition is DENIED and the June 29, 2004 Decision of
the Court of Appeals, as modified on December 29, 2004, in CA-G.R. SP
No. 67667, is AFFIRMED.
SO ORDERED.
CONSUELO YNARES-SANTIAGO
Associate Justice
P 18,480,000.00
Quezon City
By:
(signed)
Sir:
Petitioner BPI did not receive any immediate reply to its protest letter.
However, on 15 October 1992, the BIR issued a Warrant of Distraint and/or
Levy6 against petitioner BPI for the assessed deficiency DST for taxable year
1985, in the amount of P27,720.00 (excluding the compromise penalty
of P300.00). It served the Warrant on petitioner BPI only on 23 October
1992.7
On behalf of our client, Bank of the Philippine Islands (BPI), we have the
honor to protest your assessment against it for deficiency documentary
stamp tax for the year 1985 in the amount of P28,020.00, arising from its
sale to the Central Bank of U.S. $500,000.00 on June 6, 1985 and another
U.S. $500,000.00 on June 14, 1985.
Then again, petitioner BPI did not hear from the BIR until 11 September
1997, when its counsel received a letter, dated 13 August 1997, signed by
then BIR Commissioner Liwayway Vinzons-Chato, denying its "request for
In reply, please be informed that after a thorough and careful study of the
facts of the case as well as the law and jurisprudence pertinent thereto, this
Office finds the above argument to be legally untenable. It is admitted that
while industry practice or market convention has the force of law between
the members of a particular industry, it is not binding with the BIR since it is
not a party thereto. The same should, therefore, not be allowed to prejudice
the Bureau of its lawful task of collecting revenues necessary to defray the
expenses of the government. (Art. 11 in relation to Art. 1306 of the New Civil
Code.)
Petitioner BPI raised in its Petition for Review before the CTA, in addition to
the arguments presented in its protest letter, dated 16 November 1989, the
defense of prescription of the right of respondent BIR Commissioner to
enforce collection of the assessed amount. It alleged that respondent BIR
Commissioner only had three years to collect on Assessment No. FAS-5-8589-002054, but she waited for seven years and nine months to deny the
protest. In her Answer and subsequent Memorandum, respondent BIR
Commissioner merely reiterated her position, as stated in her letter to
petitioner BPI, dated 13 August 1997, which denied the latters protest; and
remained silent as to the expiration of the prescriptive period for collection of
the assessed deficiency DST.
Moreover, let it be stated that even before the amendment of Sec. 222 (now
Sec. 173) of the Tax Code, as amended, the same was already interpreted
to hold that the other party who is not exempt from the payment of
documentary stamp tax liable from the tax. This interpretation was further
strengthened by the following BIR Rulings which in substance state:
1. BIR Unnumbered Ruling dated May 30, 1977
"x x x Documentary stamp taxes are payable by either person, signing,
issuing, accepting, or transferring the instrument, document or paper. It is
now settled that where one party to the instrument is exempt from said
taxes, the other party who is not exempt should be liable."
2. BIR Ruling No. 144-84 dated September 3, 1984
"x x x Thus, where one party to the contract is exempt from said tax, the
other party, who is not exempt, shall be liable therefore. Accordingly, since
A.J.L. Construction Corporation, the other party to the contract and the one
assuming the payment of the expenses incidental to the registration in the
vendees name of the property sold, is not exempt from said tax, then it is
the one liable therefore, pursuant to Sec. 245 (now Sec. 196), in relation to
Sec. 222 (now Sec. 173), both of the Tax Code of 1977, as amended."
Premised on all the foregoing considerations, your request for
reconsideration is hereby DENIED.8
Upon receipt of the above-cited letter from the BIR, petitioner BPI proceeded
to file a Petition for Review with the CTA on 10 October 1997;9 to which
After due trial, the CTA rendered a Decision on 02 February 1999, in which it
identified two primary issues in the controversy between petitioner BPI and
respondent BIR Commissioner: (1) whether or not the right of respondent
BIR Commissioner to collect from petitioner BPI the alleged deficiency DST
for taxable year 1985 had prescribed; and (2) whether or not the sales of
US$1,000,000.00 on 06 June 1985 and 14 June 1985 by petitioner BPI to
the Central Bank were subject to DST.
The CTA answered the first issue in the negative and held that the statute of
limitations for respondent BIR Commissioner to collect on the Assessment
had not yet prescribed. In resolving the issue of prescription, the CTA
reasoned that
In the case of Commissioner of Internal Revenue vs. Wyeth Suaco
Laboratories, Inc., G.R. No. 76281, September 30, 1991, 202 SCRA
125, the Supreme Court laid to rest the first issue. It categorically ruled that a
"protest" is to be treated as request for reinvestigation or reconsideration
and a mere request for reexamination or reinvestigation tolls the prescriptive
period of the Commissioner to collect on an assessment. . .
...
In the case at bar, there being no dispute that petitioner filed its protest on
the subject assessment on November 17, 1989, there can be no conclusion
other than that said protest stopped the running of the prescriptive period of
the Commissioner to collect.
Section 320 (now 223) of the Tax Code, clearly states that a request for
reinvestigation which is granted by the Commissioner, shall suspend the
prescriptive period to collect. The underscored portion above does not mean
that the Commissioner will cancel the subject assessment but should be
construed as when the same was entertained by the Commissioner by not
issuing any warrant of distraint or levy on the properties of the taxpayer or
any action prejudicial to the latter unless and until the request for
reinvestigation is finally given due course. Taking into consideration this
provision of law and the aforementioned ruling of the Supreme Court
in Wyeth Suaco which specifically and categorically states that a protest
could be considered as a request for reinvestigation, We rule that
prescription has not set in against the government.11
The CTA had likewise resolved the second issue in the negative. Referring
to its own decision in an earlier case,Consolidated Bank & Trust Co. v. The
Commissioner of Internal Revenue,12 the CTA reached the conclusion that
the sales of foreign currency by petitioner BPI to the Central Bank in taxable
year 1985 were not subject to DST
From the abovementioned decision of this Court, it can be gleaned that the
Central Bank, during the period June 11, 1984 to March 9, 1987 enjoyed tax
exemption privilege, including the payment of documentary stamp tax (DST)
pursuant to Resolution No. 35-85 dated May 3, 1985 of the Fiscal Incentive
Review Board. As such, the Central Bank, as buyer of the foreign currency,
is exempt from paying the documentary stamp tax for the period abovementioned. This Court further expounded that said tax exemption of the
Central Bank was modified beginning January 1, 1986 when Presidential
Decree (P.D.) 1994 took effect. Under this decree, the liability for DST on
sales of foreign currency to the Central Bank is shifted to the seller.
In sum, the CTA decided that the statute of limitations for respondent BIR
Commissioner to collect on Assessment No. FAS-5-85-89-002054 had not
yet prescribed; nonetheless, it still ordered the cancellation of the said
Assessment because the sales of foreign currency by petitioner BPI to the
Central Bank in taxable year 1985 were tax-exempt.
Herein respondent BIR Commissioner appealed the Decision of the CTA to
the Court of Appeals. In its Decision dated 11 August 1999,14 the Court of
Appeals sustained the finding of the CTA on the first issue, that the running
of the prescriptive period for collection on Assessment No. FAS-5-85-89002054 was suspended when herein petitioner BPI filed a protest on 17
November 1989 and, therefore, the prescriptive period for collection on the
Assessment had not yet lapsed. In the same Decision, however, the Court of
Appeals reversed the CTA on the second issue and basically adopted the
position of the respondent BIR Commissioner that the sales of foreign
currency by petitioner BPI to the Central Bank in taxable year 1985 were
subject to DST. The Court of Appeals, thus, ordered the reinstatement of
Assessment No. FAS-5-85-89-002054 which required petitioner BPI to pay
the amount of P28,020.00 as deficiency DST for taxable year 1985, inclusive
of the compromise penalty.
Comes now petitioner BPI before this Court in this Petition for Review
on Certiorari, seeking resolution of the same two legal issues raised and
discussed in the courts below, to reiterate: (1) whether or not the right of
respondent BIR Commissioner to collect from petitioner BPI the alleged
deficiency DST for taxable year 1985 had prescribed; and (2) whether or not
the sales of US$1,000,000.00 on 06 June 1985 and 14 June 1985 by
petitioner BPI to the Central Bank were subject to DST.
I
Applying the above decision to the case at bar, petitioner cannot be held
liable for DST on its 1985 sales of foreign currencies to the Central Bank, as
the latter who is the purchaser of the subject currencies is the one liable
thereof. However, since the Central Bank is exempt from all taxes during
1985 by virtue of Resolution No. 35-85 of the Fiscal Incentive Review Board
dated March 3, 1985, neither the petitioner nor the Central Bank is liable for
the payment of the documentary stamp tax for the formers 1985 sales of
foreign currencies to the latter. This aforecited case of Consolidated Bank
vs. Commissioner of Internal Revenue was affirmed by the Court of Appeals
in its decision dated March 31, 1995, CA-GR Sp. No. 35930. Said decision
was in turn affirmed by the Supreme Court in its resolution denying the
petition filed by Consolidated Bank dated November 20, 1995 with the
Supreme Court under Entry of Judgment dated March 1, 1996.13
The efforts of respondent Commissioner to collect on Assessment No. FAS5-85-89-002054 were already barred by prescription.
Anent the question of prescription, this Court disagrees in the Decisions of
the CTA and the Court of Appeals, and herein determines the statute of
limitations on collection of the deficiency DST in Assessment No. FAS-5-8589-002054 had already prescribed.
The period for the BIR to assess and collect an internal revenue tax is
limited to three years by Section 203 of the Tax Code of 1977, as
amended,15 which provides that
the latest date the BIR could have released, mailed or sent the Assessment
and Assessment Notice to petitioner BPI was on the same date they were
received by the latter, on 20 October 1989. Counting the three-year
prescriptive period, for a total of 1,095 days,21 from 20 October 1989, then
the BIR only had until 19 October 1992 within which to collect the assessed
deficiency DST.
The earliest attempt of the BIR to collect on Assessment No. FAS-5-85-89002054 was its issuance and service of a Warrant of Distraint and/or Levy on
petitioner BPI. Although the Warrant was issued on 15 October 1992,
previous to the expiration of the period for collection on 19 October 1992, the
same was served on petitioner BPI only on 23 October 1992.
Under Section 223(c) of the Tax Code of 1977, as amended, it is not
essential that the Warrant of Distraint and/or Levy be fully executed so that it
can suspend the running of the statute of limitations on the collection of the
tax. It is enough that the proceedings have validly began or commenced and
that their execution has not been suspended by reason of the voluntary
desistance of the respondent BIR Commissioner. Existing jurisprudence
establishes that distraint and levy proceedings are validly begun or
commenced by the issuance of the Warrantand service thereof on the
taxpayer.22 It is only logical to require that the Warrant of Distraint and/or
Levy be, at the very least, served upon the taxpayer in order to suspend the
running of the prescriptive period for collection of an assessed tax, because
it may only be upon the service of the Warrant that the taxpayer is informed
of the denial by the BIR of any pending protest of the said taxpayer, and the
resolute intention of the BIR to collect the tax assessed.
If the service of the Warrant of Distraint and/or Levy on petitioner BPI on 23
October 1992 was already beyond the prescriptive period for collection of
the deficiency DST, which had expired on 19 October 1992, then what more
the letter of respondent BIR Commissioner, dated 13 August 1997 and
received by the counsel of the petitioner BPI only on 11 September 1997,
denying the protest of petitioner BPI and requesting payment of the
deficiency DST? Even later and more unequivocally barred by prescription
on collection was the demand made by respondent BIR Commissioner for
payment of the deficiency DST in her Answer to the Petition for Review of
petitioner BPI before the CTA, filed on 08 December 1997.23
II
There is no valid ground for the suspension of the running of the prescriptive
period for collection of the assessed DST under the Tax Code of 1977, as
amended.
In their Decisions, both the CTA and the Court of Appeals found that the
filing by petitioner BPI of a protest letter suspended the running of the
prescriptive period for collecting the assessed DST. This Court, however,
takes the opposing view, and, based on the succeeding discussion,
concludes that there is no valid ground for suspending the running of the
prescriptive period for collection of the deficiency DST assessed against
petitioner BPI.
A. The statute of limitations on assessment and collection of taxes is for the
protection of the taxpayer and, thus, shall be construed liberally in his favor.
Though the statute of limitations on assessment and collection of national
internal revenue taxes benefits both the Government and the taxpayer, it
principally intends to afford protection to the taxpayer against unreasonable
investigation. The indefinite extension of the period for assessment is
unreasonable because it deprives the said taxpayer of the assurance that he
will no longer be subjected to further investigation for taxes after the
expiration of a reasonable period of time.24 As aptly explained in Republic of
the Philippines v. Ablaza25
The law prescribing a limitation of actions for the collection of the income tax
is beneficial both to the Government and to its citizens; to the Government
because tax officers would be obliged to act promptly in the making of
assessment, and to citizens because after the lapse of the period of
prescription citizens would have a feeling of security against unscrupulous
tax agents who will always find an excuse to inspect the books of taxpayers,
not to determine the latters real liability, but to take advantage of every
opportunity to molest peaceful, law-abiding citizens. Without such a 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. The law on prescription being a remedial measure
should be interpreted in a way conducive to bringing about the beneficent
purpose of affording protection to the taxpayer within the contemplation of
the Commission which recommend the approval of the law.
In order to provide even better protection to the taxpayer against
unreasonable investigation, the Tax Code of 1977, as amended, identifies
specifically in Sections 223 and 22426 thereof the circumstances when the
assessed deficiency DST under Section 224 of the Tax Code of 1977, as
amended.
...
For the purpose of the protest herein
The Tax Code of 1977, as amended, also recognizes instances when the
running of the statute of limitations on the assessment and collection of
national internal revenue taxes could be suspended, even in the absence of
a waiver, under Section 224 thereof, which reads
SEC. 224. Suspension of running of statute. The running of the statute of
limitation provided in Section[s] 203 and 223 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 reinvestigation 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.31
Of particular importance to the present case is one of the circumstances
enumerated in Section 224 of the Tax Code of 1977, as amended, wherein
the running of the statute of limitations on assessment and collection of
taxes is considered suspended "when the taxpayer requests for a
reinvestigation which is granted by the Commissioner."
This Court gives credence to the argument of petitioner BPI that there is a
distinction between a request for reconsideration and a request for
reinvestigation. Revenue Regulations (RR) No. 12-85, issued on 27
November 1985 by the Secretary of Finance, upon the recommendation of
the BIR Commissioner, governs the procedure for protesting an assessment
and distinguishes between the two types of protest, as follows
PROTEST TO ASSESSMENT
SEC. 6. Protest. The taxpayer may protest administratively an assessment
by filing a written request for reconsideration or reinvestigation. . .
Even if, for the sake of argument, this Court glosses over the distinction
between a request for reconsideration and a request for reinvestigation, and
considers the protest of petitioner BPI as a request for reinvestigation, the
filing thereof could not have suspended at once the running of the statute of
limitations. Article 224 of the Tax Code of 1977, as amended, very plainly
requires that the request for reinvestigation had been granted by the BIR
Commissioner to suspend the running of the prescriptive periods for
assessment and collection.
That the BIR Commissioner must first grant the request for reinvestigation as
a requirement for suspension of the statute of limitations is even supported
by existing jurisprudence.
In the case of Republic of the Philippines v. Gancayco,33 taxpayer Gancayco
requested for a thorough reinvestigation of the assessment against him and
placed at the disposal of the Collector of Internal Revenue all the evidences
he had for such purpose; yet, the Collector ignored the request, and the
records and documents were not at all examined. Considering the given
facts, this Court pronounced that
. . .The act of requesting a reinvestigation alone does not suspend the
period. The request should first be granted, in order to effect
suspension. (Collector vs. Suyoc Consolidated, supra; also Republic vs.
Ablaza, supra). Moreover, the Collector gave appellee until April 1, 1949,
within which to submit his evidence, which the latter did one day before.
There were no impediments on the part of the Collector to file the collection
case from April 1, 1949. . . .34
In Republic of the Philippines v. Acebedo,35 this Court similarly found that
. . . [T]he defendant, after receiving the assessment notice of September 24,
1949, asked for a reinvestigation thereof on October 11, 1949 (Exh.
A). There is no evidence that this request was considered or acted
upon.In fact, on October 23, 1950 the then Collector of Internal Revenue
issued a warrant of distraint and levy for the full amount of the assessment
(Exh. D), but there was no follow-up of this warrant. Consequently, the
request for reinvestigation did not suspend the running of the period
for filing an action for collection.
The burden of proof that the taxpayers request for reinvestigation had been
actually granted shall be on respondent BIR Commissioner. The grant may
be expressed in communications with the taxpayer or implied from the
This refers to your protest against and/or request for reconsideration of the
assessment/s of this Office against you involving the amount of P28,020.00
under FAS-5-85-89-002054 dated October 23, 1989 as deficiency
documentary stamp tax inclusive of compromise penalty for the year 1985.
This Court finds that although there is no compelling reason to abandon its
decision in the Wyeth Suaco case, the said case cannot be applied to the
particular facts of the Petition at bar.
Although the protest letters prepared by SGV & Co. in behalf of private
respondent did not categorically state or use the words "reinvestigation" and
"reconsideration," the same are to be treated as letters of reinvestigation and
reconsideration
These letters of Wyeth Suaco interrupted the running of the five-year
prescriptive period to collect the deficiency taxes. The Bureau of Internal
Revenue, after having reviewed the records of Wyeth Suaco, in
accordance with its request for reinvestigation, rendered a final
assessment It was only upon receipt by Wyeth Suaco of this final
assessment that the five-year prescriptive period started to run again.47
The foremost criticism of petitioner BPI of the Wyeth Suaco decision is
directed at the statement made therein that, "settled is the rule that the
prescriptive period provided by law to make a collection by distraint or levy
or by a proceeding in court is interrupted once a taxpayer requests for
reinvestigation or reconsideration of the assessment."48 It would seem that
both petitioner BPI and respondent BIR Commissioner, as well as, the CTA
and Court of Appeals, take the statement to mean that the filing alone of the
request for reconsideration or reinvestigation can already interrupt or
suspend the running of the prescriptive period on collection. This Court
therefore takes this opportunity to clarify and qualify this statement made in
the Wyeth Suaco case. While it is true that, by itself, such statement would
appear to be a generalization of the exceptions to the statute of limitations
on collection, it is best interpreted in consideration of the particular facts of
the Wyeth Suaco case and previous jurisprudence.
The Wyeth Suaco case cannot be in conflict with the Suyoc case because
there are substantial differences in the factual backgrounds of the two cases.
The Suyoc case refers to a situation where there were repeated requests or
positive acts performed by the taxpayer that convinced the BIR to delay
collection of the assessed tax. This Court pronounced therein that the
repeated requests or positive acts of the taxpayer prevented or estopped it
from setting up the defense of prescription against the Government when the
latter attempted to collect the assessed tax. In the Wyeth Suaco case,
taxpayer Wyeth Suaco filed a request for reinvestigation, which was
apparently granted by the BIR and, consequently, the prescriptive period
was indeed suspended as provided under Section 224 of the Tax Code of
1977, as amended.49
To reiterate, Section 224 of the Tax Code of 1977, as amended, identifies
specific circumstances when the statute of limitations on assessment and
collection may be interrupted or suspended, among which is a request for
Applying the given rules to the present Petition, this Court finds that
SO ORDERED.
(a) The statute of limitations for collection of the deficiency DST in
Assessment No. FAS-5-85-89-002054, issued against petitioner BPI, had
already expired; and
(b) None of the conditions and requirements for exception from the statute of
limitations on collection exists herein: Petitioner BPI did not execute any
waiver of the prescriptive period on collection as mandated by paragraph (d)
of Section 223 of the Tax Code of 1977, as amended; the protest filed by
petitioner BPI was a request for reconsideration, not a request for
reinvestigation that was granted by respondent BIR Commissioner which
could have suspended the prescriptive period for collection under Section
224 of the Tax Code of 1977, as amended; and, petitioner BPI, other than
filing a request for reconsideration of Assessment No. FAS-5-85-89-002054,
did not make repeated requests or performed positive acts that could have
persuaded the respondent BIR Commissioner to delay collection, and that
would have prevented or estopped petitioner BPI from setting up the
defense of prescription against collection of the tax assessed, as required in
the Suyoc case.
This is a simple case wherein respondent BIR Commissioner and other BIR
officials failed to act promptly in resolving and denying the request for
reconsideration filed by petitioner BPI and in enforcing collection on the
assessment. They presented no reason or explanation as to why it took
them almost eight years to address the protest of petitioner BPI. The statute
on limitations imposed by the Tax Code precisely intends to protect the
MINITA V. CHICO-NAZARIO
Associate Justice
the BIR also mailed a letter to PNOC informing it of the demand letter sent to
PNB.9
PNOC, in another letter, dated 14 October 1986, reiterated its proposal to
settle its tax liability through the set-off of the said tax liability against
NAPOCOR'S pending claim for tax refund/credit.10 The BIR replied on 11
November 1986 that the proposal for set-off was premature since
NAPOCOR's claim was still under process. Once more, BIR requested
PNOC to settle its tax liability in the total amount of P385,961,580.82,
consisting ofP303,343,765.32 final tax, plus P82,617,815.50 interest
computed until 15 November 1986.11
On 09 June 1987, PNOC made another offer to the BIR to settle its tax
liability. This time, however, PNOC proposed a compromise by
paying P91,003,129.89, representing 30% of the P303,343,766.29 basic tax,
in accordance with the provisions of Executive Order (E.O.) No. 44.12
Then BIR Commissioner Bienvenido A. Tan, in a letter, dated 22 June 1987,
accepted the compromise. The BIR received a total tax payment on the
interest earnings and/or yields from PNOC's money placements with PNB in
the amount of P93,955,479.12, broken down as follows:
2,952
91,003
93,955,4
Outstanding balance
BIR Commissioner Tan replied through a letter, dated 08 March 1988, that
private respondent Savellano was already fully paid the informer's reward
equivalent to 15% of the amount of tax actually collected by the BIR
pursuant to its compromise agreement with PNOC. BIR Commissioner Tan
further explained that the compromise was in accordance with the provisions
of E.O. No. 44, Revenue Memorandum Order (RMO) No. 39-86, and RMO
No. 4-87.16
Private respondent Savellano submitted another letter, dated 24 March
1988, to BIR Commissioner Tan, seeking reconsideration of his decision to
compromise the tax liability of PNOC. In the same letter, private respondent
Savellano questioned the legality of the compromise agreement entered into
by the BIR and PNOC and claimed that the tax liability should have been
collected in full.17
On 08 April 1988, while the aforesaid Motion for Reconsideration was still
pending with the BIR, private respondent Savellano filed a Petition for
Review ad cautelam with the CTA, docketed as CTA Case No. 4249. He
claimed therein that BIR Commissioner Tan acted "with grave abuse of
discretion and/or whimsical exercise of jurisdiction" in entering into a
compromise agreement that resulted in "a gross and unconscionable
diminution" of his reward. Private respondent Savellano prayed for the
enforcement and collection of the total tax assessment against taxpayer
PNOC and/or withholding agent PNB; and the payment to him by the BIR
Commissioner of the 15% informer's reward on the total tax collected.18 He
would later amend his Petition to implead PNOC and PNB as necessary and
indispensable parties since they were parties to the compromise
agreement.19
In his Answer filed with the CTA, BIR Commissioner Tan asserted that the
Petition stated no cause of action against him, and that private respondent
Savellano was already paid the informer's reward due him. Alleging that the
Petition was baseless and malicious, BIR Commissioner Tan filed a
counterclaim for exemplary damages against private respondent
Savellano.20
PNOC and PNB filed separate Motions to Dismiss, both arguing that the
CTA lacked jurisdiction to decide the case.21 In its Resolution, dated 28
November 1988, the CTA denied the Motions to Dismiss since the question
of lack of jurisdiction and/or cause of action do not appear to be
indubitable.22
After their Motions to Dismiss were denied by the CTA, PNOC and PNB filed
their respective Answers to the amended Petition. PNOC averred, among
other things, that (1) it had no privity with private respondent Savellano; (2)
the BIR Commissioner's discretionary act in entering into the compromise
agreement had legal basis under E.O. No. 44 and RMO No. 39-86 and RMO
No. 4-87; and (3) the CTA had no jurisdiction to resolve the case against
it.23 On the other hand, PNB asserted that (1) the CTA lacked jurisdiction
over the case; and (2) the BIR Commissioner's decision to accept the
compromise was discretionary on his part and, therefore, cannot be
reviewed or interfered with by the courts.24 PNOC and PNB later filed their
amended Answer invoking an opinion of the Commission on Audit (COA)
disallowing the payment by the BIR of informer's reward to private
respondent Savellano.25
The CTA, thereafter, ordered the parties to submit their evidence,26 to be
followed by their respective Memoranda.27
On 23 November 1990, private respondent Savellano, filed a Manifestation
with Motion for Suspension of Proceedings, claiming that his pending Motion
On 11 June 1991, PNB appealed to the Department of Justice (DOJ) the BIR
assessment, dated 16 January 1991, for deficiency withholding tax in the
sum of P294,958,450.73. PNB alleged that its appeal to the DOJ was
sanctioned under P.D. No. 242, which provided for the administrative
settlement of disputes between government offices, agencies, and
instrumentalities, including government-owned and controlled corporations.37
91,003,129.89On 17 July 1991, PNB filed a Motion to Suspend the Collection of Tax by the
BIR. It alleged that despite its request for reconsideration of the deficiency
withholding tax assessment, dated 16 January 1991, BIR Commissioner
Ong sent another letter, dated 23 April 1991, demanding payment of
Amount still due and collectible
P 294,958,450.73the P294,958,450.73 deficiency withholding tax on the interest earnings
and/or yields from PNOC's money placements. The same letter informed
PNB that this was the BIR Commissioner's final decision on the matter and
that the BIR Commissioner was set to issue a warrant of distraint and/or levy
This BIR letter was received by PNB on 06 February 1991,31 and was
against PNB's deposits with the Central Bank of the Philippines. PNB further
protested by it through a letter, dated 11 April 1991.32 The BIR denied PNB's
alleged that the levy and distraint of PNB's deposits, unless restrained by the
protest on the ground that it was filed out of time and, thus, the assessment
CTA, would cause great and irreparable prejudice not only to PNB, a
had already become final.33
government-owned and controlled corporation, but also to the Government
itself.40
Private respondent Savellano, on 22 February 1991, filed an Omnibus
Motion moving to withdraw his previous Motion for Suspension of
Pursuant to the Order of the CTA, during the hearing on 19 July 1991,41 the
Proceeding since BIR Commissioner Ong had finally resolved his Motion for
parties submitted their respective Memoranda on PNB's Motion to Suspend
Reconsideration, and submitting by way of supplemental offer of evidence
Proceedings.42
(1) the letter of BIR Commissioner Ong, dated 13 February 1991, informing
private respondent Savellano of the action on his Motion for
On 20 September 1991, private respondent Savellano filed another Omnibus
Reconsideration; and (2) the demand-letter of BIR Commissioner Ong to
Motion calling the attention of the CTA to the fact that the BIR already
34
PNB, dated 16 January 1991.
issued, on 12 August 1991, a warrant of garnishment addressed to the
Central Bank Governor and against PNB. In compliance with the said
Despite the oppositions of PNOC and PNB, the CTA, in a Resolution, dated
warrant, the Central Bank issued, on 23 August 1991, a debit advice against
02 May 1991, resolved to allow private respondent Savellano to withdraw his
the demand deposit account of PNB with the Central Bank for the amount
previous Motion for Suspension of Proceeding and to admit the
ofP294,958,450.73, with a corresponding transfer of the same amount to the
supplementary evidence being offered by the same party.35
demand deposit-in-trust of BIR with the Central Bank. Since the assessment
had already been enforced, PNB's Motion to Suspend Proceedings became
moot and academic. Private respondent Savellano, thus, moved for the
In its Order, dated 03 June 1991, the CTA considered the case submitted for
36
denial of PNB's Motion to Suspend Proceedings and for an order requiring
decision as of the following day, 04 June 1991.
Less: Amount paid under E.O. No. 44
BIR to deposit with the CTA the amount of P44,243,767.00 as his informer's
reward, representing 15% of the deficiency withholding tax collected.43
Both PNOC and PNB opposed private respondent Savellano's Omnibus
Motion, dated 20 September 1991, arguing that the DOJ already ordered the
suspension of the collection of the tax deficiency. There was therefore no
basis for private respondent Savellano's Motion as the same was premised
on the erroneous assumption that the tax deficiency had been collected.
When the DOJ denied the BIR Commissioner's Motion to Dismiss and
required him to file his answer, the DOJ assumed jurisdiction over PNB's
appeal, and the CTA should first suspend its proceedings to give the DOJ
the opportunity to decide the validity and propriety of the tax assessment
against PNB.44
The CTA, on 28 May 1992, rendered its decision, wherein it upheld its
jurisdiction and disposed of the case as follows:
WHEREFORE, judgment is rendered declaring the COMPROMISE
AGREEMENT between the Bureau of Internal Revenue, on the one
hand, and the Philippine National Oil Company and Philippine
National Bank, on the other, as WITHOUT FORCE AND EFFECT;
The Commissioner of Internal Revenue is hereby ordered to
ENFORCE the ASSESSMENT of January 16, 1991 against
Philippine National Bank which has become final and unappealable
by collecting from Philippine National Bank the deficiency
withholding tax, plus interest totalling (sic) P294,958,450.73;
In a Resolution, dated 16 November 1992, the CTA denied the Motions for
Reconsideration filed by PNOC and PNB since they substantially raised the
same issues in their previous pleadings and which had already been passed
upon and resolved adversely against them.46
PNOC and PNB filed separate appeals with the Court of Appeals seeking
the reversal of the CTA decision in CTA Case No. 4249, dated 28 May 1992,
and the CTA Resolution in the same case, dated 16 November 1992.
2. The respondent Court erred in not finding that the Court of Tax
Appeals has no jurisdiction to question the compromise agreement
entered into by the Commissioner of Internal Revenue; and
demand letter it received, dated 08 October 1986. The BIR and PNOC
eventually reached a compromise agreement on 22 June 1987. Private
respondent Savellano questioned the validity of the compromise agreement
because the reduced amount of tax collected from PNOC, by virtue of the
compromise agreement, also proportionately reduced his informer's reward.
Private respondent Savellano then requested the BIR Commissioner to
review and reconsider the compromise agreement. Acting on the request of
private respondent Savellano, the new BIR Commissioner declared the
compromise agreement to be without basis and issued the demand letter,
dated 16 January 1991, against PNB, as the withholding agent for PNOC.
It is clear from the foregoing that the BIR demand letter, dated 16 January
1991, could not stand alone as a new assessment. It should always be
considered in the factual context summarized above.
In fact, the demand letter, dated 16 January 1991, actually referred to the
withholding tax assessment first issued in 1986 and its eventual settlement
through a compromise agreement. In addition, the computation of the
deficiency withholding tax was based on the figures from the 1986
assessments against PNOC and PNB, and BIR no longer conducted a new
audit or investigation of either PNOC and PNB before it issued the demand
letter on 16 January 1991.
These constant references to past events and circumstances demonstrate
that the demand letter, dated 16 January 1991, was not a new assessment,
but rather, the latest action taken by the BIR to collect on the tax
assessments issued against PNOC and PNB in 1986.
PNB argues that the demand letter, dated 16 January 1991, introduced a
new controversy. We see it differently as the said demand letter presented
the resolution by BIR Commissioner Ong of the previous controversy
involving the compromise of the 1986 tax assessments. BIR Commissioner
Ong explicitly declared therein that the compromise agreement was without
legal basis, and requested PNB, as the withholding agent, to pay the amount
of withholding tax still due.
B. The CTA correctly retained jurisdiction over CTA Case No. 4249
by virtue of Republic Act No. 1125.
Having established that the BIR demand letter, dated 16 January 1991, did
not constitute a new assessment, then, there could be no basis for PNB's
claim that any dispute arising from the new assessment should only be
between BIR and PNB.
Still proceeding from the argument that there was a new dispute between
PNB and BIR, PNB sought the suspension of the proceedings in CTA Case
No. 4249, after it contested the deficiency withholding tax assessment
against it and the demand for payment thereof before the DOJ, pursuant to
P.D. No. 242. The CTA, however, correctly sustained its jurisdiction and
continued the proceedings in CTA Case No. 4249; and, in effect, rejected
DOJ's claim of jurisdiction to administratively settle or adjudicate BIR's
assessment against PNB.
The CTA assumed jurisdiction over the Petition for Review filed by private
respondent Savellano based on the following provision of Rep. Act No. 1125,
the Act creating the Court of Tax Appeals:
SECTION 7. Jurisdiction. The Court of Tax Appeals shall
exercise exclusive appellate jurisdiction to review by appeal, as
herein provided (1) Decisions of the Collector of Internal Revenue in
cases involving disputed assessments, refunds of internal
revenue taxes, fees or other charges, penalties imposed in
relation thereto, or other matters arising under the National
Internal Revenue Code or other law or part of law
administered by the Bureau of Internal
Revenue; . . . (Underscoring ours.)
In his Petition before the CTA, private respondent Savellano requested a
review of the decisions of then BIR Commissioner Tan to enter into a
compromise agreement with PNOC and to reject his claim for additional
informer's reward. He submitted before the CTA questions of law involving
the interpretation and application of (1) E.O. No. 44, and its implementing
rules and regulations, which authorized the BIR Commissioner to
compromise delinquent accounts and disputed assessments pending as of
31 December 1985; and (2) Section 316(1) of the National Internal Revenue
Code of 1977 (NIRC of 1977), as amended, which granted to the informer a
reward equivalent to 15% of the actual amount recovered or collected by the
BIR.54 These should undoubtedly be considered as matters arising from the
NIRC and other laws being administered by the BIR, thus, appealable to the
CTA under Section 7(1) of Rep. Act No. 1125.
PNB, however, insists on the jurisdiction of the DOJ over its appeal of the
deficiency withholding tax assessment by virtue of P.D. No. 242. Provisions
on jurisdiction of P.D. No. 242 read:
as the general law of the land. (Ex Parte United States, 226 U. S.,
420; 57 L. ed., 281; Ex Parte Crow Dog, 109 U. S., 556; 27 L. ed.,
1030; Partee vs. St. Louis & S. F. R. Co., 204 Fed. Rep., 970.)
Where there are two acts or provisions, one of which is special and
particular, and certainly includes the matter in question, and the
other general, which, if standing alone, would include the same
matter and thus conflict with the special act or provision, the special
must be taken as intended to constitute an exception to the general
act or provision, especially when such general and special acts or
provisions are contemporaneous, as the Legislature is not to be
presumed to have intended a conflict. (Crane v. Reeder and
Reeder, 22 Mich., 322, 334; University of Utah vs. Richards, 77 Am.
St. Rep., 928.)60
It has, thus, become an established rule of statutory construction that
between a general law and a special law, the special law prevails
Generalia specialibus non derogant.61
Sustained herein is the contention of private respondent Savellano that P.D.
No. 242 is a general law that deals with administrative settlement or
adjudication of disputes, claims and controversies between or among
government offices, agencies and instrumentalities, including governmentowned or controlled corporations. Its coverage is broad and sweeping,
encompassing all disputes, claims and controversies. It has been
incorporated as Chapter 14, Book IV of E.O. No. 292, otherwise known as
the Revised Administrative Code of the Philippines.62 On the other hand,
Rep. Act No. 1125 is a special law63 dealing with a specific subject matter
the creation of the CTA, which shall exercise exclusive appellate jurisdiction
over the tax disputes and controversies enumerated therein.
Following the rule on statutory construction involving a general and a special
law previously discussed, then P.D. No. 242 should not affect Rep. Act No.
1125. Rep. Act No. 1125, specifically Section 7 thereof on the jurisdiction of
the CTA, constitutes an exception to P.D. No. 242. Disputes, claims and
controversies, falling under Section 7 of Rep. Act No. 1125, even though
solely among government offices, agencies, and instrumentalities, including
government-owned and controlled corporations, remain in the exclusive
appellate jurisdiction of the CTA. Such a construction resolves the alleged
inconsistency or conflict between the two statutes, and the fact that P.D. No.
242 is the more recent law is no longer significant.
Even if, for the sake of argument, that P.D. No. 242 should prevail over Rep.
Act No. 1125, the present dispute would still not be covered by P.D. No.
242. Section 1 of P.D. No. 242 explicitly provides that only disputes, claims
and controversies solely between or among departments, bureaus, offices,
agencies, and instrumentalities of the National Government, including
constitutional offices or agencies, as well as government-owned and
controlled corporations, shall be administratively settled or adjudicated.
While the BIR is obviously a government bureau, and both PNOC and PNB
are government-owned and controlled corporations, respondent Savellano is
a private citizen. His standing in the controversy could not be lightly brushed
aside. It was private respondent Savellano who gave the BIR the
information that resulted in the investigation of PNOC and PNB; who
requested the BIR Commissioner to reconsider the compromise agreement
in question; and who initiated CTA Case No. 4249 by filing a Petition for
Review.
In Bay View Hotel, Inc. v. Manila Hotel Workers' Union-PTGWO, et al.,64] this
Court upheld the jurisdiction of the Court of Industrial Relations over the
ordinary courts and justified its decision in the following manner:
We are unprepared to break away from the teaching in the cases
just adverted to. To draw a tenuous jurisdictional line is to
undermine stability in labor litigations. A piecemeal resort to one
court and another gives rise to multiplicity of suits. To force the
employees to shuttle from one court to another to secure full
redress is a situation gravely prejudicial. The time to be lost, effort
wasted, anxiety augmented, additional expense incurred these
are considerations which weigh heavily against split jurisdiction.
Indeed, it is more in keeping with orderly administration of justice
that all the causes of action here "be cognizable and heard by only
one court: the Court of Industrial Relations."
The same justification is used in the present case to reject DOJ's jurisdiction
over the BIR and PNB, to the exclusion of the other parties. The rights of all
four parties in CTA Case No. 4249, namely the BIR, as the tax collector;
PNOC, the taxpayer; PNB, the withholding agent; and private respondent
Savellano, the informer claiming his reward; arose from the same factual
background and were so closely interrelated, that a pronouncement as to
one would definitely have repercussions on the others. The ends of justice
were best served when the CTA continued to exercise its jurisdiction over
CTA Case No. 4249. The CTA, which had assumed jurisdiction over all the
parties to the controversy, could render a comprehensive resolution of the
issues raised and grant complete relief to the parties.
II
Validity of the Compromise Agreement
A. PNOC could not apply for a compromise under E.O. No. 44
because its tax liability was not a delinquent account or a disputed
assessment as of 31 December 1985.
PNOC and PNB, on different grounds, dispute the decision of the CTA in
CTA Case No. 4249 declaring the compromise agreement between BIR and
PNOC without force and effect.
PNOC asserts that the compromise agreement was in accordance with E.O.
No. 44, and its implementing rules and regulations, and should be binding
upon the parties thereto.
E.O. No. 44 granted the BIR Commissioner or his duly authorized
representatives the power to compromise any disputed assessment or
delinquent account pending as of 31 December 1985, upon the payment of
an amount equal to 30% of the basic tax assessed; in which case, the
corresponding interests and penalties shall be condoned. E.O. No. 44 took
effect on 04 September 1986 and remained effective until 31 March 1987.
The disputed assessments or delinquent accounts that the BIR
Commissioner could compromise under E.O. No. 44 are defined under
Revenue Regulation (RR) No. 17-86, as follows:
a) Delinquent account Refers to the amount of tax due on or
before December 31, 1985 from a taxpayer who failed to pay the
same within the time prescribed for its payment arising from (1) a
self assessed tax, whether or not a tax return was filed, or (2) a
deficiency assessment issued by the BIR which has become final
and executory.
Where no return was filed, the taxpayer shall be considered
delinquent as of the time the tax on such return was due, and in
availing of the compromise, a tax return shall be filed as a basis for
computing the amount of compromise to be paid.
b) Disputed assessment refers to a tax assessment disputed or
protested on or before December 31, 1985 under any of the
following categories:
1)
if the same is administratively protested within thirty (30)
days from the date the taxpayer received the assessment, or
2.)
if the decision of the BIR on the taxpayer's administrative
protest is appealed by the taxpayer before an appropriate court.
PNOC's tax liability could not be considered a delinquent account since (1) it
was not self-assessed, because the BIR conducted an investigation and
assessment of PNOC and PNB after obtaining information regarding the
non-withholding of tax from private respondent Savellano; and (2) the
demand letter, issued against it on 08 August 1986, could not have been a
deficiency assessment that became final and executory by 31 December
1985.
The dissenting opinion contends, however, that the tax liability of PNOC
constitutes a self-assessed tax, and is, therefore, a delinquent account as of
31 December 1985, qualifying for a compromise under E.O. No. 44. It
anchors its argument on the declaration made by this Court in Tupaz v.
Ulep,65 that internal revenue taxes are self-assessing.
It is not denied herein that the self-assessing system governs Philippine
internal revenue taxes. The dissenting opinion itself defines self-assessed
tax as, "a tax that the taxpayer himself assesses or computes and pays to
the taxing authority." Clearly, such a system imposes upon the taxpayer the
obligation to conduct an assessment of himself so he could determine and
declare the amount to be used as tax basis, any deductions therefrom, and
finally, the tax due.
E.O. No. 44 covers self-assessed tax, whether or not a tax return was filed.
The phrase "whether or not a tax return was filed" only refers to the
compliance by the taxpayer with the obligation to file a return on the dates
specified by law, but it does not do away with the requisite that the tax must
be self-assessed in order for the taxpayer to avail of the compromise. The
second paragraph of Section 2(a) of RR No. 17-86 expressly commands,
and still imposes upon the taxpayer, who is availing of the compromise
under E.O. No. 44, and who has not previously filed any return, the duty to
conduct self-assessment by filing a tax return that would be used as the
basis for computing the amount of compromise to be paid.
Section 2(a)(1) of RR No. 17-86 thus involves a situation wherein a taxpayer,
after conducting a self-assessment, discovers or becomes aware that he
had failed to pay a tax due on or before 31 December 1985, regardless of
whether he had previously filed a return to reflect such tax; voluntarily comes
forward and admits to the BIR his tax liability; and applies for a compromise
thereof. In case the taxpayer has not previously filed any return, he must fill
out such a return reflecting therein his own declaration of the taxable amount
and computation of the tax due. The compromise payment shall be
computed based on the amount reflected in the tax return submitted by the
taxpayer himself.
Neither PNOC nor PNB, the taxpayer and the withholding agent,
respectively, conducted self-assessment in this case. There is no showing
that in the absence of the tax assessment issued by the BIR against them,
that PNOC and/or PNB would have voluntarily admitted their tax liabilities,
already amounting to P385,961,580.82, as of 15 November 1986, and would
have offered to compromise the same. In fact, both PNOC and PNB were
conspicuously silent about their tax liabilities until they were assessed
thereon.
Any attempt by PNOC and PNB to assess and declare by themselves their
tax liabilities had already been overtaken by the BIR's conduct of its audit
and investigation and subsequent issuance of the assessments, dated 08
August 1986 and 08 October 1986, against PNOC and PNB, respectively.
The said tax assessments, uncontested and undisputed, presented the
results of the BIR audit and investigation and the computation of the total
amount of tax liabilities of PNOC and PNB. They should be controlling in
this case, and should not be so easily and conveniently ignored and set
aside. It would be a contradiction to claim that the tax liabilities of PNOC
and PNB are self-assessed and, at the same time, BIR-assessed; when it is
clear and simple that it had been the BIR that conducted the assessment
and determined the tax liabilities of PNOC and PNB.
That the BIR-assessed tax liability should be differentiated from a selfassessed one, is supported by the provisions of RR No. 17-86 on the basis
for computing the amount of compromise payment. Note that where tax
liabilities are self-assessed, the compromise payment shall be computed
based on the tax return filed by the taxpayer.66 On the other hand, where the
BIR already issued an assessment, the compromise payment shall be
computed based on the tax due on the assessment notice.67
For instances where the BIR had already issued an assessment against the
taxpayer, the tax liability could still be compromised under E.O. No. 44 only
if: (1) the assessment had been final and executory on or before 31
December 1985 and, therefore, considered a delinquent account as of said
date;68 or (2) the assessment had been disputed or protested on or before
31 December 1985.69
RMO No. 39-86, which provides the guidelines for the implementation of
E.O. No. 44, does mention different types of assessments that may be
compromised under said statute (i.e., jeopardy assessments, arbitrary
assessments, and tax assessments of doubtful validity). RMO No. 39-86
may not have expressly stated any qualification for these particular types of
assessments; nonetheless, E.O. No. 44 specifically refers only to
assessments that were delinquent or disputed as of 31 December 1985.
E.O. No. 44 and all BIR issuances to implement said statute should be
interpreted so that they are harmonized and consistent with each other.
Accordingly, this Court finds that the different types of assessments
mentioned in RMO No. 39-86 would still have to qualify as delinquent
accounts or disputed assessments as of 31 Dcember 1985, so that they
could be compromised under E.O. No. 44.
The BIR had first written to PNOC on 08 August 1986, demanding payment
of the income tax on the interest earnings and/or yields from PNOC's money
placements with PNB from 15 October 1984 to 15 October 1986. This
demand letter could be regarded as the first assessment notice against
PNOC.
Such an assessment, issued only on 08 August 1986, could not have been
final and executory as of 31 December 1985 so as to constitute a delinquent
account. Neither was the assessment against PNOC an assessment that
could have been disputed or protested on or before 31 December 1985,
having been issued on a later date.
Given that PNOC's tax liability did not constitute a delinquent account or a
disputed assessment as of 31 December 1985, then it could not be
compromised under E.O. No. 44.
The assessment against PNOC, instead, was more appropriately covered by
Revenue Memorandum Circular (RMC) No. 31-86. RMC No. 31-86 clarifies
the scope of availment of the tax amnesty under E.O. No. 4170 and
compromise payments on delinquent accounts and disputed assessments
under E.O. No. 44. The third paragraph of RMC No. 31-86 reads:
[T]axpayers against whom assessments had been issued from
January 1 to August 21, 1986 may settle their tax liabilities by way
of compromise under Section 246 of the Tax Code as amended by
paying 30% of the basic assessment excluding surcharge, interest,
penalties and other increments thereto.
E.O. No. 44 is not for the benefit of the taxpayer alone, who can extinguish
his tax liability by paying the compromise amount equivalent to 30% of the
basic tax. It also benefits the Government by making collection of delinquent
accounts and disputed assessments simpler, easier, and faster. Payment of
the compromise amount must be made immediately, in cash or in manager's
check. Although deferred or staggered payments may be allowed on a
case-to-case basis, the mode of payment remains unchanged, and must still
be made either in cash or in manager's check.
PNOC's offer to set-off was obviously made to avoid actual cash-out by the
company. The offer defeated the purpose of E.O. No. 44 because it would
not only delay collection, but more importantly, it would not guarantee
collection. First of all, BIR's collection was contingent on whether the claim
for tax refund/credit of NAPOCOR would be subsequently granted. Second,
collection could not be made immediately and would have to wait until the
resolution of the claim for tax refund/credit of NAPOCOR. Third, there is no
proof, other than the bare allegation of PNOC, that NAPOCOR's claim for
tax refund/credit is an account receivable of PNOC. A possible dispute
between NAPOCOR and PNOC as to the proceeds of the tax refund/credit
would only delay collection by the BIR even further.
It was only in its letter, dated 09 June 1987, that PNOC actually offered to
compromise its tax liability in accordance with the terms and circumstances
prescribed by E.O. No. 44 and its implementing rules and regulations, by
stating that:
Consequently, we reiterate our previous request for compromise
under E.O. No. 44, and convey our preparedness to settle the
subject tax assessment liability by payment of the compromise
amount ofP91,003,129.89, representing thirty percent (30%) of the
basic tax assessment of P303,343,766.29, in accordance with E.O.
No. 44 and its implementing BIR Revenue Memorandum Order No.
39-86.80
PNOC claimed in the same letter that it had previously requested for a
compromise under the terms of E.O. No. 44, but this Court could not find
evidence of such previous request. There are stark and substantial
differences in the terms of PNOC's offer to compromise in its earlier letters,
dated 25 September 1986 and 14 October 1986 (set-off of the entire amount
of its tax liability against the claim for tax refund/credit of NAPOCOR), to
those in its letter, dated 09 June 1987 (payment of the compromise amount
representing 30% of the basic tax assessed against it), making it difficult for
this Court to accept that the letter of 09 June 1987 merely reiterated PNOC's
offer to compromise in its earlier letters.
This Court likewise cannot give credence to PNOC's allegation that
beginning 25 September 1986, the date of its first letter to the BIR, there
were continuing negotiations between PNOC and BIR that culminated in the
compromise agreement on 22 June 1987. Aside from the exchange of
letters recounted in the preceding paragraphs, both PNOC and PNB failed to
present any other proof of the supposed negotiations.
After the BIR denied the second offer of PNOC to set-off its tax liability
against the claim for tax refund/credit of NAPOCOR in a letter, dated 11
November 1986, there is no other evidence of subsequent communication
between PNOC and the BIR. It was only after almost seven months, or on
09 June 1987, that PNOC again wrote a letter to the BIR, this time offering to
pay the compromise amount of 30% of the basic tax assessed against. This
letter was already filed beyond 31 March 1987, after the lapse of the
effectivity of E.O. No. 44 and the deadline for filing applications for
compromise under the said statute.
Evidence of meetings between PNOC and the BIR, or any other form of
communication, wherein the parties presented their offer and counter-offer to
the other, would have been very valuable in explaining and supporting BIR
Commissioner Tan's decision to accept PNOC's third offer to compromise
after denying the previous two. The absence of such evidence herein
negates PNOC's claim of actual negotiations with the BIR.
Therefore, even assuming arguendo that the tax liabilities of PNOC and PNB
qualify as delinquent accounts or disputed assessments as of 31 December
1985, the application for compromise filed by PNOC on 09 June 1987, and
accepted by then BIR Commissioner Tan on 22 June 1987, was still filed
way beyond 31 March 1987, the expiration date of the effectivity of E.O. No.
44 and the deadline for filing of applications for compromise under RMO No.
39-86.
as amended. Then again, petitioners PNOC and PNB failed to allege, much
less present evidence, that BIR Commissioner Tan acted in accordance with
Section 246 of the NIRC of 1977, as amended, when he entered into the
compromise agreement with PNOC.
E. The CTA may set aside a compromise agreement that is
contrary to law and public policy.
PNB also asserts that the CTA had no jurisdiction to set aside a compromise
agreement entered into in good faith. It relies on the decision of this Court in
Republic v. Sandiganbayan85 that a compromise agreement cannot be set
aside merely because it is too one-sided. A compromise agreement should
be respected by the courts as the res judicata between the parties thereto.
This Court, though, finds that there are substantial differences in the factual
background of Republic v. Sandiganbayan and the present case.
The compromise agreement executed between the Presidential Commission
on Good Government (PCGG) and Roberto S. Benedicto in Republic v.
Sandiganbayan was judicially approved by the Sandiganbayan. The
Sandiganbayan had ample opportunity to examine the validity of the
compromise agreement since two years elapsed from the time the
agreement was executed up to the time it was judicially approved. This
Court even stated in the said case that, "We are not dealing with the usual
compromise agreement perfunctorily submitted to a court and approved as a
matter of course. The PCGG-Benedicto agreement was thoroughly and, at
times, disputatiously discussed before the respondent court. There could be
no deception or misrepresentation foisted on either the PCGG or the
Sandiganbayan."86
In addition, the new PCGG Chairman originally prayed for the re-negotiation
of the compromise agreement so that it could be more just, fair, and
equitable, an action considered by this Court as an implied admission that
the agreement was not contrary to law, public policy or morals nor was there
any circumstance which had vitiated consent.87
The above-mentioned circumstances strongly supported the validity of the
compromise agreement in Republic v. Sandiganbayan, which was why this
Court refused to set it aside. Unfortunately for the petitioners in the present
case, the same cannot be said herein.
The Court of Appeals, in upholding the jurisdiction of the CTA to set aside
the compromise agreement, ruled that:
We are unable to accept petitioner's submissions. Its formulation of
the issues on CIR and CTA's lack of jurisdiction to disturb a
compromise agreement presupposes a compromise
agreement validly entered into by the CIR and not, when as in this
case, it was indubitably shown that the supposed compromise
agreement is without legal support. In case of arbitrary or
capricious exercise by the Commissioner or if the proceedings were
fatally defective, the compromise can be attacked and reversed
through the judicial process (Meralco Securities Corporation v.
Savellano, 117 SCRA 805, 812 [1982]; Sarah E. Ramsay, et. al. v.
U.S. 21 Ct. C1 443, aff'd 120 U.S. 214, 30 L. Ed. 582; Tyson v.
U.S., 39 F. Supp. 135 cited in page 18 of decision) .88
Although the general rule is that compromises are to be favored, and that
compromises entered into in good faith cannot be set aside,89 this rule is not
without qualification. A court may still reject a compromise or settlement
when it is repugnant to law, morals, good customs, public order, or public
policy.90
The compromise agreement between the BIR and PNOC was contrary to
law having been entered into by BIR Commissioner Tan in excess or in
abuse of the authority granted to him by legislation. E.O. No. 44 and the
NIRC of 1977, as amended, had identified the situations wherein the BIR
Commissioner may compromise tax liabilities, and none of these situations
existed in this case.
The compromise, moreover, was contrary to public policy. The primary duty
of the BIR is to collect taxes, since taxes are the lifeblood of the Government
and their prompt and certain availability are imperious needs.91 In the
present case, however, BIR Commissioner Tan, by entering into the
compromise agreement that was bereft of any legal basis, would have
caused the Government to lose almost P300 million in tax revenues and
would have deprived the Government of much needed monetary resources.
Allegations of good faith and previous execution of the terms of the
compromise agreement on the part of PNOC would not be enough for this
Court to disregard the demands of law and public policy. Compromise may
be the favored method to settle disputes, but when it involves taxes, it may
be subject to closer scrutiny by the courts. A compromise agreement
involving taxes would affect not just the taxpayer and the BIR, but also the
whole nation, the ultimate beneficiary of the tax revenues collected.
F. The Government cannot be estopped from collecting taxes by
the mistake, negligence, or omission of its agents.
The new BIR Commissioner, Commissioner Ong, had acted well within his
powers when he set aside the compromise agreement, dated 22 June 1987,
after finding that the said compromise agreement was without legal basis.
When he took over from his predecessor, there was still a pending motion for
reconsideration of the said compromise agreement, filed by private
respondent Savellano on 24 March 1988. To resolve the said motion, he
reviewed the compromise agreement and, thereafter, came upon the
conclusion that it did not comply with E.O. No. 44 and its implementing rules
and regulations.
It had been declared by this Court in Hilado v. Collector of Internal Revenue,
et al.,92 that an administrative officer, such as the BIR Commissioner, may
revoke, repeal or abrogate the acts or previous rulings of his predecessor in
office. The construction of a statute by those administering it is not binding
on their successors if, thereafter, the latter becomes satisfied that a different
construction should be given.
It is evident in this case that the new BIR Commissioner, Commissioner
Ong, construed E.O. No. 44 and its implementing rules and regulations
differently from that of his predecessor, former Commissioner Tan, which led
to Commissioner Ong's revocation of the BIR approval of the compromise
agreement, dated 22 June 1987. Such a revocation was only proper
considering that the former BIR Commissioner's decision to approve the said
compromise agreement was based on the erroneous construction of the law
(i.e., E.O. No. 44 and its implementing rules and regulations) and should not
give rise to any vested right on PNOC.93
Furthermore, approval of the compromise agreement and acceptance of the
compromise payment by his predecessor cannot estop BIR Commissioner
Ong from setting aside the compromise agreement, dated 22 June 1987, for
lack of legal basis; and from demanding payment of the deficiency
withholding tax from PNB. As a general rule, the Government cannot be
estopped from collecting taxes by the mistake, negligence, or omission of its
agents94 because:
. . . Upon taxation depends the Government ability to serve the
people for whose benefit taxes are collected. To safeguard such
shall be deemed waived when such defense was not properly pleaded and
the facts alleged and evidences submitted by the parties were not sufficient
to support a finding by this Court on the matter.102 In Querol v. Collector of
Internal Revenue,103 this Court pronounced that prescription, being a matter
of defense, imposes the burden on the taxpayer to prove that the full period
of the limitation has expired; and this requires him to positively establish the
date when the period started running and when the same was fully
accomplished.
In making its conclusion that the assessment and collection in this case had
prescribed, the dissenting opinion took liberties to assume the following facts
even in the absence of allegations and evidences to the effect that: (1) PNB
filed returns for its withholding tax obligations for taxable year 1985; (2) PNB
reported in the said returns the interest earnings of PNOC's money
placements with the bank; and (3) that the returns were filed on or before the
prescribed date, which was 25 January 1986.
It is not safe to adopt the first and second assumptions in this case
considering that Section 269 of the NIRC of 1977, as amended, provides for
a different period of limitation for assessment and collection of taxes in case
of false or fraudulent return or for failure to file a return. In such cases, the
BIR is given 10 years after discovery of the falsity, fraud, or omission within
which to make an assessment.104
It is also not safe to accept the third assumption since there can be a
possibility that PNB filed the withholding tax return later than the prescribed
date, in which case, following the dictates of Section 268 of the NIRC of
1977, as amended, the three-year prescriptive period shall be counted from
the date the return was actually filed.105
PNB's withholding tax returns for taxable year 1985, duly received by the
BIR, would have been the best evidence to prove actual filing, the date of
filing and the contents thereof. These facts are relevant in determining
which prescriptive period should apply, and when such prescriptive period
should begin to run and when it had lapsed. Yet, the pleadings did not refer
to any return, and no return was made part of the records of the present
case.
This Court could not make a proper ruling on the matter of prescription on
the mere basis of assumptions; such an issue should have been properly
raised, argued, and supported by evidences submitted by the parties
themselves before the BIR and the courts below.
(c) 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.
Sections 268 and 269(c) of the NIRC of 1977, as amended, should be read
in conjunction with one another. Section 268 requires that assessment be
made within three years from the last day prescribed by law for the filing of
the return. Section 269(c), on the other hand, provides that when an
assessment is issued within the prescribed period provided in Section 268,
the BIR has three years, counted from the date of the assessment, to collect
the tax assessed either by distraint, levy or court action. Therefore, when an
enforce and collect the tax, and (2) PNB and/or PNOC to pay the tax
making CTA Case No. 4249 a collection case. That the Amended Petition
for Review was filed by the informer and not the taxpayer; and that the
prayer for the enforcement of the tax assessment and payment of the tax
was also made by the informer, not the BIR, should not affect the nature of
the case as a judicial action for collection. In case the CTA grants the
Petition and the prayer therein, as what has happened in the present case,
the ultimate result would be the collection of the tax assessed.
Consequently, upon the filing of the Amended Petition for Review by private
respondent Savellano, judicial action for collection of the tax had been
initiated and the running of the prescriptive period for collection of the said
tax was terminated.
Supposing that CTA Case No. 4249 is not a collection case which stops the
running of the prescriptive period for the collection of the tax, CTA Case No.
4249, at the very least, suspends the running of the said prescriptive period.
Under Section 271 of the NIRC of 1977, as amended, the running of the
prescriptive period to collect deficiency taxes shall be suspended for the
period during which the BIR Commissioner is prohibited from beginning a
distraint or levy or instituting a proceeding in court, and for 60 days
thereafter.108 Just as in the cases of Republic v. Ker & Co.,
Ltd.109 and Protector's Services, Inc. v. Court of Appeals,110 this Court
declares herein that the pendency of the present case before the CTA, the
Court of Appeals and this Court, legally prevents the BIR Commissioner from
instituting an action for collection of the same tax liabilities assessed against
PNOC and PNB in the CTA or the regular trial courts. To rule otherwise
would be to violate the judicial policy of avoiding multiplicity of suits and the
rule on lis pendens.
Once again, that CTA Case No. 4249 was initiated by private respondent
Savellano, the informer, instead of PNOC, the taxpayer, or PNB, the
withholding agent, would not prevent the suspension of the running of the
prescriptive period for collection of the tax. What is controlling herein is the
fact that the BIR Commissioner cannot file a judicial action in any other court
for the collection of the tax because such a case would necessarily involve
the same parties and involve the same issues already being litigated before
the CTA in CTA Case No. 4249. The three-year prescriptive period for
collection of the tax shall commence to run only after the promulgation of the
decision of this Court in which the issues of the present case are resolved
with finality.
Whether the filing of the Amended Petition for Review by private respondent
Savellano entirely stops or merely suspends the running of the prescriptive
period for collection of the tax, it had been premature for the BIR
Since the BIR had already collected P294,958,450.73 from PNB through the
execution of the writ of garnishment over PNB's deposit with the Central
Bank, then private respondent Savellano should be awarded 15% thereof as
reward since the said collection could still be traced to the information he
had given.
WHEREFORE, in view of the foregoing, the Petitions of PNOC and PNB in
G.R. No. 109976 and G.R. No. 112800, respectively, are hereby DENIED.
This Court AFFIRMS the assailed Decisions of the Court of Appeals in CAG.R. SP No. 29583 and CA-G.R. SP No. 29526, which affirmed the decision
of the CTA in CTA Case No. 4249, with modifications, to wit:
(1) The compromise agreement between PNOC and the BIR,
dated 22 June 1987, is declared void for being contrary to law and
public policy, and is without force and effect;
(2)Paragraph 2 of RMO No. 39-86 remains a valid provision of the
regulation;
(3)The withholding tax assessment against PNB, dated 08 October
1986, had become final and unappealable. The BIR Commissioner
is ordered to enforce the said assessment and collect the amount
ofP294,958,450.73, the balance of tax assessed after crediting the
previous payment made by PNOC pursuant to the compromise
agreement, dated 22 June 1987; and
(4) Private respondent Savellano shall be paid the remainder of
his informer's reward, equivalent to 15% of the deficiency
withholding tax ordered collected herein, or P 44,243,767.61.
SO ORDERED.
THIRD DIVISION
[G.R. No. 104171. February 24, 1999]
This is the main question raised before us in this Petition for Review
on Certiorari assailing the Decision[1] dated February 14, 1992, promulgated by the
Court of Appeals[2] in CA-GR SP No. 25100.The assailed Decision reversed the
Court of Tax Appeals (CTA)[3] which upheld the BIR commissioners assessments
made beyond the five-year statute of limitations.
private respondent sold to Siltown Realty Philippines, Inc. on January 21, 1974, its
Basilan landholding for P500,000 payable in installments. In accord with the terms
of the sale, Siltown Realty Philippines, Inc. leased the said parcels of land to private
respondent for a period of 25 years, with an extension of another 25 years at the
latters option.
Based on the BIRs Letter of Authority No. 10115 dated April 14, 1975, the
books and accounts of private respondent were examined for the purpose of
determining its tax liability for taxable year 1974.The examination resulted in the
April 23, 1975 assessment of private respondent for deficiency income tax in the
amount of P6,005.35, which it duly paid.
Subsequently the BIR also issued Letters of Authority Nos. 074420 RR and
074421 RR and Memorandum Authority Reference No. 749157 for the purpose of
examining Siltowns business, income and tax liabilities. On the basis of this
examination, the BIR commissioner issued against private respondent on October
10, 1980, an assessment for deficiency in donors tax in the amount of P1,020,850, in
relation to the previously mentioned sale of its Basilan landholdings to
Siltown. Apparently, the BIR deemed the consideration for the sale insufficient, and
the difference between the fair market value and the actual purchase price a taxable
donation.
The Facts
The facts are undisputed. [4] Private Respondent BF Goodrich Phils., Inc. (now
Sime Darby International Tire Co. Inc.), was an American-owned and controlled
corporation previous to July 3, 1974. As a condition for approving the manufacture
by private respondent of tires and other rubber products, the Central Bank of the
Philippines required that it should develop a rubber plantation. In compliance with
this requirement, private respondent purchased from the Philippine government in
1961, under the Public Land Act and the Parity Amendment to the 1935
Constitution, certain parcels of land located in Tumajubong, Basilan, and there
developed a rubber plantation.
More than a decade later, on August 2, 1973, the justice secretary rendered an
opinion stating that, upon the expiration of the Parity Amendment on July 3, 1974,
the ownership rights of Americans over public agricultural lands, including the right
to dispose or sell their real estate, would be lost. On the basis of this Opinion,
SO ORDERED.[5]
The petitioner contends that the Court of Appeals erred in reversing the CTA
on the issue of prescription, because its ruling was based on factual findings that
should have been left undisturbed on appeal, in the absence of any showing that it
had been tainted with gross error or grave abuse of discretion. [8] The Court is not
persuaded.
True, the factual findings of the CTA are generally not disturbed on appeal
when supported by substantial evidence and in the absence of gross error or grave
abuse of discretion. However, the CTAs application of the law to the facts of this
controversy is an altogether different matter, for it involves a legal question. There is
a question of law when the issue is the application of the law to a given set of
facts. On the other hand, a question of fact involves the truth or falsehood of alleged
facts.[9] In the present case, the Court of Appeals ruled not on the truth or falsity of
the facts found by the CTA, but on the latters application of the law on prescription.
Hence, this Petition for Review under Rule 45 of the Rules of Court. [7]
Section 331 of the National Internal Revenue Code provides:
The Issues
SEC. 331. Period of limitation upon assessment and collection. 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 expiration of such period. For the
purposes 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.
Applying this provision of law to the facts at hand, it is clear that the October
16, 1980 and the March 1981 assessments were issued by the BIR beyond the fiveyear statute of limitations. The Court has thoroughly studied the records of this case
and found no basis to disregard the five-year period of prescription. As succinctly
pronounced by the Court of Appeals:
1974 were duly filed by the petitioner, and assessment of taxes due for such year -including that on the transfer of properties on June 21, 1974 -- was made on April
13, 1975 and acknowledged by Letter of Confirmation No. 101155 terminating the
examination on this subject. The subsequent assessment of October 10, 1980
modified, by that of March 16, 1981, was made beyond the period expressly set in
Section 331 of the National Intenal Revenue Code xxx. [10]
Petitioner relies on the CTA ruling, the salient portion of which reads:
Falsity is what we have here, and for that matter, we hasten to add that the second
assessment (March 16, 1981) of the Commissioner was well-advised having been
made in contemplation of his power under Section 15 of the 1974 Code (now
Section 16, of NIRC) to assess the proper tax on the best evidence obtainable when
there is reason to believe that a report of a taxpayer is false, incomplete or
erroneous.More, when there is falsity with intent to evade tax as in this case, the
ordinary period of limitation upon assessment and collection does not apply so that
contrary to the averment of petitioner, the right to assess respondent has not
prescribed.
What is the considered falsity? The transfer through sales of the parcels of land in
Tumajubong, Lamitan, Basilan in favor of Siltown Realty for the sum
of P500,000.00 only whereas said lands had been sworn to under Presidential
Decree No. 76 (Dec. 6, 1972) as having a value of P2,683,467 (P2,475, 467
+ P207,700) (see Declaration of Real Property form, p. 28, and p. 15, no. 5, BIR
Record).[11]
For the purpose of safeguarding taxpayers from any unreasonable
examination, investigation or assessment, our tax law provides a statute of
limitations in the collection of taxes. Thus, the law on prescription, being a remedial
measure, should be liberally construed in order to afford such protection. [12] As a
corollary, the exceptions to the law on prescription should perforce be strictly
construed.
Section 15 of the NIRC, on the other hand, provides that [w]hen a report
required by law as a basis for the assessment of any national internal revenue tax
shall not be forthcoming within the time fixed by law or regulation, or when there is
reason to believe that any such report is false, incomplete, or erroneous, the
Commissioner of Internal Revenue shall assess the proper tax on the best evidence
Ineludibly, the BIR failed to show that private respondent's 1974 return was
filed fraudulently with intent to evade the payment of the correct amount of tax.
[15]
Moreover, even though a donor's tax, which is defined as "a tax on the privilege
of transmitting one's property or property rights to another or others without
adequate and full valuable consideration,"[16] is different from capital gains tax, a tax
on the gain from the sale of the taxpayer's property forming part of capital assets,
[17]
the tax return filed by private respondent to report its income for the year 1974
was sufficient compliance with the legal requirement to file a return. In other words,
the fact that the sale transaction may have partly resulted in a donation does not
change the fact that private respondent already reported its income for 1974 by filing
an income tax return.
Since the BIR failed to demonstrate clearly that private respondent had filed a
fraudulent return with the intent to evade tax, or that it had failed to file a return at
all, the period for assessments has obviously prescribed. Such instances of
negligence or oversight on the part of the BIR cannot prejudice taxpayers,
considering that the prescriptive period was precisely intended to give them peace of
mind.
Based on the foregoing, a discussion of the validity and legality of the assailed
assessments has become moot and unnecessary.
1.
On June 13, 1990, petitioner filed with the Court of Appeals a petition for
review of the decision of the Court of Tax Appeals.[3]
On November 9, 1990, the Court of Appeals promulgated its decision
affirming the appealed decision of the tax court. [4]
On December 4, 1990, petitioner filed a motion for reconsideration of the
Court of Appeals decision.
On February 7, 1991, the Court of Appeals denied the motion. [5]
On March 18, 1991, within the extended time granted, petitioner filed with the
Supreme Court a petition for review on certiorari of the decision of the Court of
Appeals.[6]
In the petition, the Commissioner of Internal Revenue submits that the Court
of Appeals erred:
(1) in not holding that respondent is liable for deficiency income tax and
advance sales tax in view of its failure to declare its income realized for the years
1959 to 1961 from the sales of its dollar quota to local Chinese textile dealers at a
premium of 70% to 80% of the dollar value, which dollar quota rights were
allocated by the Central Bank of the Philippines to enable respondent to import taxfree textile raw materials to be manufactured into finished products for re-export
pursuant to the provisions of the Embroidery Law (R.A. No. 3137), and
(2) in not holding that the imposition of 50% surcharge for fraud was legal and
justified.[7]
The issues raised are clearly factual and must be resolved on the basis of the
evidence adduced before the tax court. The case tarried too long in the tax court. In
the meantime, the star witness had died, and the needed originals of documentary
evidence could no longer be located.
What is more, it is a fundamental rule that an appeal via certiorari from a
decision of the Court of Appeals to the Supreme Court may raise only questions of
law, which must be distinctly set forth. [8]Findings of fact of the Court of Appeals and
even of the tax court are final, binding or conclusive on the parties [9] and upon this
Court,[10] which will not be reviewed[11] or disturbed on appeal unless these findings
are not supported by evidence, [12] with certain well recognized exceptions, such as
(1) when the conclusion is grounded entirely on speculations [13], surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or
impossible; (3) where there is grave abuse of discretion; (4) when the judgment is
based on a misapprehension of facts; (5) when the findings of fact are conflicting;
(6) when the Court of Appeals, in making its findings, went beyond the issues of the
case and the same is contrary to the admissions of both appellant and appellee; (7)
when the findings of the Court of Appeals are contrary to those of the trial courts;
[14]
(8) when the findings of fact are conclusions without citation of specific evidence
on which they are based; (9) when the Court of Appeals overlooked certain relevant
facts not disputed by the parties, which, if properly considered, would justify a
different conclusion; and (10) when the findings of fact of the Court of Appeals are
premised on the absence of evidence and are contradicted by the evidence on record.
[15]
This case does not come within any of the exceptions.
WHEREFORE, the Court hereby AFFIRMS the appealed decision of the
Court of Appeals in CA-G.R. SP No. 20813.
No costs.
SO ORDERED.
Davide, Jr., CJ., (Chairman), Melo, and Kapunan, JJ., concur.
Petitioner,
YNARES-SANTIAGO, J.,
- versus -
Chairperson,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
COURT OF APPEALS,
CHICO-NAZARIO,
COURT OF TAX APPEALS
NACHURA, JJ.
and COMMISSIONER OF
INTERNAL REVENUE,
Promulgated:
Respondents.
March 27, 2007
x------------------------------------------------x
As the CIR failed to act on its claim, petitioner filed a Petition for
[9]
DECISION
Review with the CTA on April 13, 1998. It attached to its Petition several
documents, including: 1) Certificate of Income Tax Withheld on Compensation (BIR
AUSTRIA-MARTINEZ, J.:
Form No. W-2) for the Year 1995 executed by Oscar Lozano covering P720.00 as
tax withheld on rental income paid to petitioner (Exhibit II); [10] and 2) Monthly
Remittance Return of Income Taxes Withheld under BIR Form No. 1743W issued
Court assails the May 28, 2002 Decision [1] and October 16, 2002 Resolution[2] of the
Court of Appeals (CA) in CA-G.R. SP No. 55470 [3] which affirmed the October 5,
1999 Decision[4] of the Court of Tax Appeals (CTA) in CTA Case No. 5611.
In his Answer,[12] respondent CIR interposed special and afirmative
The facts are as stated by the CTA.[5]
The CTA issued the October 5, 1999 Decision granting only a portion of petitioners
Corporation/Partnership Annual Income Tax Return[6] for fiscal year 1995, Banco
Filipino Savings and Mortgage Bank (petitioner) declared a net operating loss
of P211,476,241.00 and total tax credit of P13,103,918.00, representing the prior
years excess tax credit ofP11,481,342.00 and creditable withholding taxes
of P1,622,576.00.[7]
[14]
Sec. 10. Claim for tax credit or refund. (a) Claims for
Tax Credit or Refund of income tax deducted and withheld on
income payments shall be given due course only when it is
shown on the return that the income payment received has been
declared as part of the gross income and the fact of withholding
is established by a copy of the Withholding Tax Statement duly
issued by the payor to the payee showing the amount paid and
the amount of tax withheld therefrom xxx. (Emphasis supplied)
payors and reflecting taxes deducted and withheld on petitioner-payees income from
the rental of its real properties. On the other hand, the CTA disallowed
the P1,603,691.60-portion of petitioners claim for tax refund on the ground that its
Exhibit II and Exhibits C through Z lack probative value as these are not in BIR
Form No. 1743.1,[15] the form required under Revenue Regulations No. 6-85 (as
amended by Revenue Regulation No. 12-94), to support a claim for refund. [16]
There is no doubt that petitioner complied with the first two requirements in that the
claim it filed on January 30, 1998 was well within the two-year prescriptive period
Petitioner filed a Petition for Review[17] with the CA but the CA dismissed
counted from the date of filing of its annual income tax return (Exhibit A) on April
the same in the May 28, 2002 Decision assailed herein. Its Motion for
12, 1996; and that said return reflects the amount of P1,622,576.00 subject of the
claim.[21]
The question is whether it complied with the third condition by presenting
Hence, herein Petition where the issues may be condensed into one:
2 (Exhibit II) and Monthly Remittance Return of Income Taxes Withheld under BIR
petitioners claim for tax refund on the ground that the latters Exhibit II and Exhibits
There are three conditions for the grant of a claim for refund of creditable
and remitted. It appeals for liberality considering that its annual return clearly shows
withholding tax: 1) the claim is filed with the CIR within the two-year period from
the date of payment of the tax; [19] 2) it is shown on the return of the recipient that the
income payment received was declared as part of the gross income; [20] and, 3) the
The Court rejected a similar plea for liberality just recently in Far East
Bank and Trust Company v. Court of Appeals.[23] In that case, Far East Bank and
to the payee showing the amount paid and the amount of the tax withheld
Trust Company (FEBTC), acting as the surviving entity from a merger with Cavite
Development Bank (CDB), filed a claim for refund of creditable taxes withheld by
CDB from the sale of its acquired assets. FEBTC attached to its claim: a)
confirmation receipts, payment orders and official receipts issued by the Central
Bank and the BIR; b) Income Tax Returns supported by financial statements filed by
FEBTC with the BIR; and c) a schedule prepared by FEBTC Accounting
As to what evidence would establish the nature of the tax withheld and the income
payment from which it was deducted, the Court held:
Petitioner also asserts that the confusion or difficulty
in the implementation of Revenue Memorandum Circular 7-90
was the reason why CDB took upon itself the task of
withholding the taxes arising from the sale, to ensure
accuracy. Assuming this were true, CDB should have,
nevertheless, accomplished the necessary returns to clearly
identify the nature of the payments made and file the same
with the BIR. Section 2 of the circular clearly provides that the
amount of withholding tax paid by a corporation to the BIR
during the quarter on sales or exchanges of property and
which are creditable against the corporations tax liability are
evidenced by Confirmation/Official Receipts and covered by
BIR Form Nos. 1743W and 1743-B.On the other hand,
Revenue Regulation 6-85 states that BIR Form No. 1743.1
establishes the fact of withholding. Since no competent
evidence was adduced by petitioner, the failure to offer these
returns as evidence of the amount of petitioners entitlement
during the trial phase of this case is fatal to its cause. x x x.
[25]
(Emphasis supplied)
In fine, the document which may be accepted as evidence of the third condition, that
is, the fact of withholding, must emanate from the payor itself, and not merely from
the payee, and must indicate the name of the payor, the income payment basis of the
tax withheld, the amount of the tax withheld and the nature of the tax paid.
does not state the amount and nature of the income payment. Hence, it cannot be
taxes from the sale of acquired assets can be found in BIR Form No. 1743.1. As
described inSection 6
[26]
[27]
is a written statement issued by the payor as withholding agent showing the income
or other payments made by the said withholding agent during a quarter or year and
the amount of the tax deducted and withheld therefrom. It readily identifies the
payor, the income payment and the tax withheld. It is complete in the relevant
details which would aid the courts in the evaluation of any claim for refund of
Exhibit B which would link the the transactions described therein to the taxes
In relation to withholding taxes from rental income, the requisite information can be
found in BIR Form No. 1743-750. Petitioner is well aware of this for its own
take the place of BIR Form No. 1743.1 and its Exhibit II, of BIR Form No. 1743-
Exhibits AA through HH are all in BIR Form No. 1743-750. As earlier stated, the
750. Petitioner cannot fault the CA and CTA for finding said evidence insufficient to
CTA approved petitioners claim for refund to the extent of P18,884.40, which is the
support its claim for tax refund. Such finding of both courts, obviously grounded on
evidence, will not be so lightly discarded by this Court,[30] not even on a plea for
In the present case, the disputed portions of petitioners claim for refund is supported
merely by Exhibits C through Z and Exhibit II. Exhibits C through Z were issued by
petitioner as payee purportedly acting as withholding agent, and not by the alleged
No costs.
indicate the amount and nature of the income payments upon which the tax was
computed or the nature of the transactions from which the income payments were
SO ORDERED.
derived, specifically whether it resulted from the sale of petitioners acquired assets.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
It appears that petitioner failed to file its formal offer of evidence in the CTA,
constraining the tax court to rule in favor of the CIR. As explained by the
CTA:
...Its repeated non-appearance and failure to comply with court procedures
such as the filing of a formal offer of evidence and memorandum only serve
CORONA, J.:
Before this Court is a petition for review on certiorari of the decision[1] of the
The Rules of Court is strict in considering no evidence which has not been
Court of Appeals (CA) in CA-G.R. SP No. 49597 dated January 31, 2001
formally offered (Section 24, Rule 132). Without any formal offer of evidence,
and the resolution dated August 23, 2001 denying the motion for
thus, we could only blame the petitioner for its lost cause. Simply put, it has
reconsideration.
[2]
Petitioner Far East Bank & Trust Company (FEBTC)[3] filed with the Bureau of
Internal Revenue an application for a tax credit/tax refund of alleged excess
payments of its gross receipts tax (GRT). FEBTC claimed it
had overpaid its GRT for the 3rd and 4th quarters of 1994 and the entire
1995 amounting to P14,816,373.
Aggrieved, petitioner elevated the case to the CA.[7] The appellate court
found the petition devoid of merit. Eventually, it dismissed the petition and
affirmed the CTA decision in toto. Petitioner's motion for reconsideration was
also denied. Thus, this petition.
Petitioner urges this Court to reverse and set aside the ruling of the appellate
court. It contends that it appended its formal offer of evidence to its motion
for reconsideration in the CTA. It now asks us to relax procedural rules in the
interest of justice.
Second, if no appeal or motion for reconsideration is filed on time, the
We deny the petition and rule against petitioner FEBTC on two points.
judgment or final order of the court becomes final and executory.[14] Here, the
records of the case confirm that petitioner's motion for reconsideration in the
First, it is well-settled that the courts cannot consider evidence which has not
[8]
CTA was filed out of time. Petitioner received its notice and a copy of the
been formally offered. Parties are required to inform the courts 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
[9]
motion for reconsideration on August 26, 1998,[16] the decision of the CTA
had already attained finality. As a final judgment, it had by then already laid
[10]
the issues to rest and the appellate courts could no longer review it.
function, judgments must become final at some definite time fixed by law. [17]
Appeals[11] 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
are AFFIRMED.
marked and identified exhibits [were] not incorporated in the records... They
are nowhere to be found."[12]
SO ORDERED.
[13]
THIRD DIVISION
[ G.R. NO. 151857, April 28, 2005 ]
CALAMBA STEEL CENTER, INC. (FORMERLY JS STEEL
CORPORATION), PETITIONER, VS. COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT.
DECISION
PANGANIBAN, J.:
A tax refund may be claimed even beyond the taxable year following that in
which the tax credit arises. Hence, excess income taxes paid in 1995 that
have not been applied to or used in 1996 may still be the subject of a tax
refund in 1997, provided that the claim for such refund is filed with the
internal revenue commissioner within two years after payment of said
taxes. As a caveat, the Court stresses that the recognition of the entitlement
to a tax refund does not necessarily mean the automatic payment of the sum
claimed in the final adjustment return of the taxpayer. The amount of the
claim must still be proven in the normal course.
Petitioner also reported quarterly payments for the second and third
quarters of 1995 in the amounts of P2,328,747.26 and P1,082,108.00,
respectively.
The Case
It is the proposition of the [p]etitioner that for the year 1995, several of its
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
clients withheld taxes from their income payments to [p]etitioner and remitted
assailing the January 10, 2002 Decision[2] of the Court of Appeals (CA) in
Thus, an administrative claim was filed by the [p]etitioner on April 10, 1997
The sole issue submitted for [o]ur determination is whether or not [p]etitioner
withholding taxes for the year 1995. The instant petition was subsequently
than that presented before the CTA was adduced to prove that excess tax
3)
payments had been made in 1995. From the inception of the case to the
formal offer of its evidence, petitioner did not present its 1996 income tax
return to disclose its total income tax liability, thus making it difficult to
evidence that the tax refund or tax credit being sought is allowed under the
National Internal Revenue Code and its implementing rules and regulations;
and
4)
The Issue
Claims for tax refund or tax credit are construed strictly against the
requiring petitioner to submit its 1996 annual income tax return to support
its
[o]fficer
claim for refund, nonetheless ignored the existence of the tax return
extant on the record the authenticity of which has not been denied or its
liable for deficiency value added tax. Petitioner also presented rebuttal
evidence.
The Courts Ruling
taxable year exceeds its total income tax due also for that year.
The Petition is partly meritorious.
Sole Issue:
Entitlement to Tax Refund
Section 24 shall file a final adjustment return covering the total taxable
itswithholding agents; and that, applying the above-quoted Section 69, this
income for the preceding calendar or fiscal year. If the sum of the quarterly
excess should be credited against itsincome tax liabilities for 1996. However,
tax payments made during the said taxable year is not equal to the total tax
it claimed in 1997 that it should get a refund, because it was still unable to
due on the entire taxable net income of that year the corporation shall either:
use the excess income taxes paid in 1995 against its tax liabilities in 1996.
Is this possible? Stating the argument otherwise, may excess income
(a)
taxes paid in 1995 that could not be applied to taxes due in 1996 be
refunded in 1997?
(b)
Tax Refund
First, a tax refund may be claimed even beyond the taxable year following
Allowed by NIRC
No provision in our tax law limits the entitlement to such a refund, other than
a tax refund when the sum of the quarterlyincome taxes it paid during a
for it be made by
xxx
xxx
xxx
NIRC states that no refund of taxes shall be allowed unless the taxpayer
files in writing with the Commissioner [the] claim for x x x refund within two
years after the payment of the tax.
tax. Petitioner filed its claim in 1997 -- well within the two-year prescriptive
period. Thus, its unused tax credits in 1995 may still be refunded.
Even the phrase succeeding taxable year in the second paragraph of the
said Section 69 is a limitation that applies only to a tax credit, not a tax
refund. Petitioner herein does not claim a tax credit, but a tax refund.
Therefore, the statutory limitation does not apply.
Claims for Tax Credit or Refund of income tax deducted and withheld
on income payments shall be given due course only when it is shown on the
Applying the aforequoted legal provisions, if the excess income taxes paid in
the claim for such a refund is made within two years after payment of
(a)
return that the income payment received has been declared as part of the
gross income and the fact of withholding is established by a copy of the
Withholding Tax Statement duly issued by the payor to the payee showing
the amount paid and the amount of tax withheld therefrom.
(b)
sixty (60) days from date of the taxpayer's request provided, however, that
the taxpayer-applicant submitted for audit all his pertinent accounting records
and that the aforesaid records established the veracity of his claim for a
refund/credit of his excess expanded withholding tax credits.
The truth or falsity of the contents of or entries in the 1996 final adjustment
That petitioner filed its amended 1995 income tax return in 1996 is
uncontested. In addition, the resulting investigation by the BIR on August 15,
1997, reveals that the income accounts were correctly declared based on
the existing supporting documents.[9] Therefore, there is no need for
petitioner to show again the income payments it received in 1995 as part of
its gross income in 1996.
That petitioner filed its 1996 final adjustment return in 1997 is the crux of the
controversy. However, as will be demonstrated shortly, the lack of such a
return will not defeat its entitlement to a refund.
return, which has not been formally offered in evidence and examined by
respondent, involves, however, a question of fact. This Court is not a trier of
facts. Neither is it a collection agency for the government. Although we rule
that petitioner is entitled to a tax refund, the amount of that refund is a matter
for the CTA to determine judiciously based on the records that include its
own copy of petitioners 1996 final adjustment return.
Question of Law
findings of fact[14] (as well as that of the CA) are final, binding and
[10]
in petitions
[11]
sufficiently designated; or when the original record of the former case or any
part of it, is actually withdrawn from the archives by the court's direction, at
In the present case, the 1996 final adjustment return was attached as Annex
the request or with the consent of the parties, and admitted as a part of the
A to the Reply to Comment filed by petitioner with the CA.[22] The return
shows a negative amount for its taxable income that year. Therefore, it could
not have applied or used the excess tax credits of 1995 against its tax
liabilities in 1996.
Judicial Notice
of Attached Return
Fifth, the CA and CTA could have taken judicial notice of the 1996 final
adjustment return which had been attached in CTA Case No. 5799. Judicial
notice takes the place of proof and is of equal force.[23]
As a general rule, courts are not authorized to take judicial notice of the
contents of records in other cases tried or pending in the same court, even
when those cases were heard or are actually pending before the same
judge. However, this rule admits of exceptions, as when reference to such
records is sufficiently made without objection from the opposing parties:
Prior to rendering its Decision on January 12, 2000, the CTA was already
well-aware of the existence of another case pending before it, involving the
same subject matter, parties and causes of action.[25] Because of the close
connection of that case with the matter in controversy, the CTA could have
easily taken judicial notice[26] of the contested document attached in that
other case.
Section 2 of Rule 129 provides that courts may take judicial notice of
parties, a court may properly treat all or any part of the original record of a
case filed in its archives as read into the record of a case pending before it,
functions.[29] If the lower courts really believed that petitioner was not entitled
when, with the knowledge of the opposing party, reference is made to it for
to a tax refund, they could have easily required respondent to ascertain its
veracity and accuracy[30] and to prove that petitioner did not suffer any net
loss in 1996.
veracity of the return or file an opposition to the Motion and the return.
Despite the fact that the return was ignored by both the CA and the CTA, the
[31]
(on
latter even declared in another case (CTA Case No. 4897) that petitioner had
which it rests its entire arguments) is not on all fours with the facts of this
suffered a net loss for taxable year 1990. When attached to the Petition for
case.
Review filed before this Court, that Decision was not at all claimed by the
BIR to be fraudulent or nonexistent. The Bureau merely contended that this
While the petitioner in that case also filed a written claim for a tax refund, and
likewise failed to present its 1990 corporate annual income tax return, it
nonetheless offered in evidence its top-ranking officials testimony and
In this case, however, the BIR has not been given the chance to challenge
certification pertaining to only two taxable years (1989 and 1990). The said
the veracity of petitioners final adjustment return. Neither has the CTA
return was attached only to its Motion for Reconsideration before the CTA.
decided any other case categorically declaring a net loss for petitioner
intaxable year 1996. After this return was attached to petitioners Reply to
Comment before the CA, the appellate court should have required the filing
extended beyond two taxable years, because the excess credits in the first
(1995) taxable year had not been used up during the second (1996) taxable
year, and because the claim for the refund of those credits had been filed
during the third (1997) taxable year. Its final adjustment return was instead
[32]
In the
evidence and not to believe it are not incompatible with each other x x
x.[34] Mere allegations by petitioner of the figures in its 1996 final adjustment
instant case, there is no such undisputed fact as yet. The mere admission
return are not a sufficient proof of the amount of its refund entitlement. They
into the records of petitioners 1996 final adjustment return is not a sufficient
In addition, the BIR in BPI-Family Savings Bank did not controvert the
petitioner purportedly filed its administrative claim for a tax refund on April
10, 1997, the deadline for filing the 1996final adjustment return was not yet
over. Hence, it could not have attached this return to its claim.
Verily, the officers of the Bureau of Internal Revenue should receive the
For reasons unknown even to this Court, petitioner failed to offer such return
as evidence during the trial phase of this case. For its negligence, petitioner
[38]
right to demand it, and it was duly delivered through mistake, the obligation
to return it arises.[44]
intend to forge a weapon for erring litigants to violate the rules with impunity.
The liberal interpretation and application of rules apply only in proper cases
Decision SET ASIDE. The case is REMANDED to the Court of Tax Appeals
pronouncement as to costs.
proving the amount of its claim for tax refund. After all, [t]ax refunds are in
the nature of tax exemptions[41] and are to be construed strictissimi
SO ORDERED.
SECOND DIVISION
[G.R. No. 141973. June 28, 2005]
PHILIPPINE PHOSPHATE FERTILIZER CORPORATION, petitioner, vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Once more, we stand by our ruling that:
If the State expects its taxpayers to observe fairness and honesty in paying their
taxes, so must it apply the same standard against itself in refunding excess
payments. When it is undisputed that a taxpayer is entitled to a refund, the State
should not invoke technicalities to keep money not belonging to it. No one, not even
the State, should enrich oneself at the expense of another.[1]
The antecedents of this case are as follows:
Philippine Phosphate Fertilizer Corporation (Philphos) is a domestic
corporation registered with the Export Processing Zone Authority (EPZA). It
manufactures fertilizers for domestic and international distribution and as
such, utilizes fuel, oil and other petroleum products which it procures locally
from Petron Philippines Corporation (Petron). Petron initially pays the
Bureau of Internal Revenue (BIR) and the Bureau of Customs the taxes and
duties imposed upon the petroleum products. Petron is then reimbursed by
petitioner when Petron sells such petroleum products to the petitioner. In a
letter dated August 28, 1995, petitioner sought a refund of specific taxes paid
on the purchases of petroleum products from Petron for the period of
September 1993 to December 1994 in the total amount of P602,349.00
which claim is pursuant to the incentives it enjoyed by virtue of its EPZA
registration. Since the two-year period within which petitioner could file a
case for tax refund before the Court of Tax Appeals (CTA) was about to
expire and no action had been taken by the BIR, petitioner instituted a
petition for review before the CTA against the Commissioner of Internal
Revenue (CIR).[2] During the trial, to prove that the duties imposed upon the
petroleum products delivered to petitioner by Petron had been duly paid for
by petitioner, petitioner presented a Certification from Petron dated August
17, 1995; a schedule of petroleum products sold and delivered to petitioner
detailing the volume of sales and the excise taxes paid thereon; photocopies
of Authority to Accept Payment for Excise Taxes issued by the CIR
pertaining to petroleum products purchased; as well as the testimony of
Sylvia Osorio, officer of Petron, to attest to the summary and certification
presented.[3] The CIR did not present any evidence to controvert the ones
presented by petitioner nor did it file an opposition to petitioners formal offer
of evidence.[4]
On August 11, 1998, the CTA promulgated its Decision finding that
while petitioner is exempt from the payment of excise taxes, it failed to
sufficiently prove that it is entitled to refund in this particular case since it did
not submit invoices to support the summary of petroleum products sold and
delivered to it by Petron.[5] The CTA rationalized thus:
[P]etitioner, as an EPZA registered enterprise is exempted from the payment of
excise taxes, and if said taxes were passed on by the supplier to
EPZA registered enterprise like the petitioner, tax credit shall be granted to the
latter. The fact that it was not the petitioner who had paid the taxes directly to
the Bureau of Internal Revenue does not have an adverse effect on petitioners
action for refund. The law granting the exemption makes no distinction as to the
circumstances when the law shall apply. Since the law makes no distinction, neither
should we. The exemption is so broad as to cover the present situation. Since an
export processing zone is not considered to be covered by Philippine customs
and internal revenue laws, the taxes paid by the petitioner on the petroleum
products should be refunded or credited in its favor. Thus, the only thing left
for us to do is to determine whether or not petitioner is entitled to the amount
claimed for refund. After a careful scrutiny of the evidence presented, however,
there appears to be a dispute with respect to the amount claimed. Petitioner
submitted in evidence a certification issued by Petron to prove that the duties
imposed upon the petroleum products delivered to petitioner by Petron had been
duly paid for by petitioner (Exhibit A, p. 71, CTA records). Petitioner likewise
presented a schedule of petroleum products sold and delivered to petitioner detailing
the volume of sales and the excise taxes paid thereon (Exhibits A-1 to A-1a, pp. 7273, CTA records). However, to show that Petron had previously paid the excise taxes
on these petroleum products, petitioner presented photocopies of Authority to
4994,[8] involving similar facts, were granted by the CTA even without the
presentation of invoices. It then prayed that the CTA decision be
reconsidered and its claim for refund be allowed, or in the alternative, allow
petitioner to present and offer the invoices in evidence to present its claim.[9]
The CTA denied the motion for reconsideration on January 6, 1999,
explaining as follows:
It is important to note at the outset that Petitioners reliance on CTA Case Nos. 4994,
4654 and 4993 is misplaced because during the hearings of these cases up to the
time of formal offer of evidence, CTA Circular No. 1-95 was not yet in effect. The
nature and presentation of evidence involving voluminous documents prior to the
effectivity of CTA Circular No. 1-95 differ from that which is required by this Court
from the effectivity of said Circular beginning January 25, 1995. In the instant case,
the Petition for Review was filed on September 1, 1995. It is obviously clear that the
provisions of CTA Circular 1-95 already applied to Petitioners presentation of
evidence. Quoted hereunder are portions of CTA Circular 1-95:
1. The party who desires to introduce as evidence such voluminous documents must
present: (a) Summary containing the total amount/s of the tax account or tax paid for
the period involved and a chronological or numerical list of the numbers, dates and
amounts covered by the invoices or receipts; and (b) a Certification of an
independent Certified Public Accountant attesting to the correctness of the contents
of the summary after making an examination and evaluation of the voluminous
receipts and invoices. Such summary and certification must properly be identified by
a competent witness from the accounting firm.
2. The method of individual presentation of each and every receipt or invoice or
other documents for marking, identification and comparison with the originals
thereof need not be done before the Court or the Commissioner anymore after the
introduction of the summary and CPA certification. It is enough that the receipts,
invoices and other documents covering the said accounts or payments must be premarked by the party concerned and submitted to the Court in order to be made
accessible to the adverse party whenever she/he desires to check and verify the
correctness of the summary and CPA certification. However, the originals of the said
receipts, invoices or documents should be ready for verification and comparison in
case doubts on the authenticity of the particular documents presented is raised
during the hearing of the case.
It can be revealed from the evidence presented by the Petitioner that it failed to
present a certification of an independent Certified Public Accountant, as well as
the invoices supporting the schedules of petroleum products sold and delivered
to it by Petron. From this perspective alone, the claim for refund was correctly
denied. Now that an unfavorable decision has been rendered by this Court,
Petitioner belatedly seeks to present the invoices as additional evidence.
The prayer to present additional evidence partakes of the nature of a motion for new
trial under Section 1 Rule 37 of the 1997 Rules of Civil Procedure. It has already
been emphasized in several cases that failure to present evidence already existing at
the time of trial does not warrant the grant of a new trial because said evidence can
no longer be considered newly discovered but is more in the nature of forgotten
evidence. Neither can such inadvertence on the part of the counsel to present said
evidence qualify as excusable negligence. [10] (Emphasis supplied)
Petitioner then went to the Court of Appeals (CA) which issued the
herein assailed Resolution dismissing the petition for review, to wit:
CTA Presiding Judge Ernesto D. Acosta dissented with the view that in
the interest of justice, petitioner should be given a chance to prove its case
by allowing it to present the invoices of its purchases.[11] He reasoned that:
A review of the schedule of invoices, Exhibits A-1 A-1-a, reveals that there are only
about ninety four (94) invoices which does not need the assistance of an independent
CPA. It can easily be presented before this Court or before a Clerk of Court for
markings and comparison.
The reason advanced by the Petitioner was that they thought the presentation by the
Manager of Petron Corporation of a duly notarized certification (supporting the
schedules of invoices), coupled with testimonies of witness, Mrs. Sylvia Osorio of
Petron Corporation, are enough to prove their case. Respondent did not even
controvert said exhibits and testimonies. It is this Court that raised doubts on the
veracity of the claim in view of the absence of the invoices. This ground could easily
fall under the phrase mistake or excusable negligence as a ground for new trial under
Sec. 1(a) of Rule 37 and not under the phrase newly discovered evidence as stated in
our said resolution. The denial of this motion is too harsh considering that this case
is only civil in nature, govern (sic) merely by the rule on preponderance of evidence.
[12]
held that a refund may be granted solely on the basis of certifications issued
by Petron;[18] if it is the avowed purpose of CTA Circular No. 1-95 to ensure
the speedy administration of justice, it should not compel petitioner to
present additional voluminous evidence which will require the presentation of
a Certified Public Accountant (CPA) for court examination aside from
entailing additional costs to petitioner; petitioners counsel was of the honest
belief that he was not required to adhere to what is provided in CTA Circular
No. 1-95; petitioner should not be burdened by the infraction of its counsel
and should be given the fullest opportunity to establish the merits of its
action rather than for it to lose property on mere technicalities; it has also
been held that evidence not offered and formally presented in evidence
during the trial may still be considered by a court in the exercise of its
discretion so as not to allow a mere technicality to overcome justice and
fairness; petitioner should be granted its claim for refund, or, in the
alternative, be given an opportunity to present the pre-marked invoices in
accordance with CTA Circular No. 1-95.[19]
As to the second issue, petitioner explains that: its counsel was of the
belief that he was authorized to execute the affidavit of non-forum shopping;
in any event, its counsel immediately attached to the motion a copy of the
affidavit of non-forum shopping executed by petitioners President, Ramon C.
Avecilla as soon as he learned of his error; and Supreme Court
Administrative Circular No. 04-94 should be liberally construed
following Maricalum Mining Corp. vs. NLRC,[20] Loyola vs. Court of Appeals,
[21]
and Philippine Fishing Boat Officers and Engineers Union vs. Court of
Industrial Relations.[22]
It then prayed that: the resolutions of the CA and the Decision of the
CTA be reversed; and an order be issued to award petitioner tax credit
certificate/refund in the amount ofP602,349.00 representing excise taxes
paid for the period of September 1993 to December 1994 or in the
alternative to allow petitioner to adduce evidence before the CTA to support
its case.[23]
The CIR, in his Comment, contends that: the burden of proving
entitlement to the refund/credit rests upon petitioner; the CTA was correct in
requiring the submission of the invoices to support the schedules presented
especially in this case where the CTA cannot determine which part of the
huge amount paid by Petron actually represents the excise taxes paid on the
petroleum products actually delivered to petitioner; the schedules are selfserving and if not corroborated by evidence have no evidentiary weight; the
CTA is not precluded from requiring other evidence which will once and for
all erase doubts to the claim for refund; claims for refund, partaking of the
nature of tax exemptions, are construed in strictissimi juris against the
taxpayer and liberally in favor of the taxing authority; even setting aside the
requirements in CTA Circular No. 1-95, petitioner is still obliged to present
the invoices in order to corroborate the entries in the summary and to reveal
whether or not the amount claimed for refund by petitioner is correct;
petitioners Motion for Reconsideration and Motion for New Trial filed on
January 25, 1999 were properly denied by the CTA for having been filed out
of time; and the CTAs decision must be respected on appeal since it has
developed an expertise on the subject.[24]
Anent the second issue, respondent avers that the CA did not err in
dismissing the petition for review on the ground that the affidavit of nonforum shopping was executed by petitioners counsel contrary to the
requirements in Sec. 5, Rule 7 of the Rules of Court; and that the denial of
the motion for reconsideration was also proper since the failure to comply
with the requirements of non-forum shopping shall not be curable by mere
amendment to the complaint.[25]
For clarity, we shall first discuss the issue of whether or not the CA
should have given due course to the petition for review.
The primary question that has to be resolved is whether an Affidavit of
Non-Forum Shopping, erroneously signed by counsel, may be cured by
subsequent compliance.
Generally, subsequent compliance with the requirement of affidavit of
non-forum shopping does not excuse a party from failure to comply in the
first instance.[26]
Supreme Court Administrative Circular No. 04-94 of Section 5, Rule 7
of the 1997 Rules of Civil Procedure which requires the pleader to submit a
certificate of non-forum shopping to be executed by the plaintiff or principal
party is mandatory.[27] A certification of the plaintiffs counsel will not suffice for
the reason that it is petitioner, and not the counsel, who is in the best
position to know whether he actually filed or caused the filing of a petition.
[28]
A certification against forum shopping signed by counsel is a defective
certification that is equivalent to non-compliance with the requirement and
constitutes a valid cause for the dismissal of the petition.[29] Hence, strictly
speaking, the CA was correct in dismissing the petition.
Which brings us to the other issue of whether or not the CTA should
have granted petitioners claim for refund.
In the case of Far Eastern Shipping Co. vs. Court of Appeals,[31] while
we said that, strictly, a certification against forum shopping by counsel is a
defective certification, the verification, signed by petitioners counsel in said
case, is substantial compliance inasmuch as it served the purpose of the
Rules of informing the Court of the pendency of another action or proceeding
involving the same issues.[32] We then explained that procedural rules are
instruments in the speedy and efficient administration of justice which should
be used to achieve such end and not to derail it.[33]
In Damasco vs. NLRC,[34] the certifications against forum shopping
were erroneously signed by petitioners lawyers, which, generally, would
warrant the outright dismissal of their actions. [35] We resolved however that
as a matter of social justice, technicality should not be allowed to stand in
the way of equitably and completely resolving the rights and obligations of
the parties.[36] In Cavile vs. Heirs of Clarita Cavile,[37] we likewise held that the
merits of the substantive aspects of the case may be deemed as special
circumstance for the Court to take cognizance of a petition although the
certification against forum shopping was executed and signed by only one of
the petitioners.[38] Finally, in Sy Chin vs. Court of Appeals,[39] we categorically
stated that while a petition may be flawed as the certificate of non-forum
shopping was signed only by counsel and not by the party, such procedural
lapse may be overlooked in the interest of substantial justice.[40]
Here, the affidavit of non-forum shopping was signed by petitioners
counsel. Upon receipt of the resolution of the CA, however, which dismissed
its petition for non-compliance with the rules on affidavit of non-forum
The general rule is that claimants of tax refunds bear the burden of
proving the factual basis of their claims.[43] This is because tax refunds are in
the nature of tax exemptions, the statutes of which are construed strictissimi
juris against the taxpayer and liberally in favor of the taxing authority.
[44]
Taxes are the lifeblood of the nation, therefore statutes that allow
exemptions are construed strictly against the grantee and liberally in favor of
the government.[45]
In this case, there is no dispute that petitioner is entitled to exemption
from the payment of excise taxes by virtue of its being an EPZA registered
enterprise.[46] As stated by the CTA, the only thing left to be determined is
whether or not petitioner is entitled to the amount claimed for refund.[47]
Petitioners entire claim for refund, however, was denied for petitioners
failure to present invoices allegedly in violation of CTA Circular No. 1-95. But
nowhere in said Circular is it stated that invoices are required to be
presented in claiming refunds. What the Circular states is that:
1. The party who desires to introduce as evidence such voluminous documents must
present: (a) Summary containing the total amount/s of the tax account or tax paid for
the period involved and a chronological or numerical list of the numbers, dates and
amounts covered by the invoices or receipts; and (b) a Certification of an
independent Certified Public Accountant attesting to the correctness of the contents
of the summary after making an examination and evaluation of the voluminous
receipts and invoices. Such summary and certification must properly be identified by
a competent witness from the accounting firm. (Emphasis supplied)
mistake or excusable negligence as a ground for new trial under Sec. 1(a) of Rule 37
andnot under the phrase newly discovered evidence as stated in our said resolution.
The denial of this motion is too harsh considering that this case is only civil in
nature, govern (sic) merely by the rule on preponderance of evidence. [50]
Sec. 1, Rule 37 of the Rules of Court provides as follows:
SECTION 1. Grounds of and period for filing motion for new trial or
reconsideration.--- Within the period for taking an appeal, the aggrieved party may
move the trial court to set aside the judgment or final order and grant a new trial for
one or more of the following causes materially affecting the substantial rights of said
party:
(a) Fraud, accident, mistake or excusable negligence which ordinary prudence could
not have guarded against and by reason of which such aggrieved party has probably
been impaired in his rights; or
(b) Newly discovered evidence, which could not, with reasonable diligence, have
discovered and produced at the trial, and which if presented would probably alter the
result.
It is true that petitioner could not move for new trial on the basis of
newly discovered evidence because in order to have a new trial on the basis
of newly discovered evidence, it must be proved that: (a) the evidence was
discovered after the trial; (b) such evidence could not have been discovered
and produced at the trial with reasonable diligence; (c) it is material, not
merely cumulative, corroborative or impeaching; and (d) it is of such weight
that, if admitted, will probably change the judgment.[51] This does not mean
however, that petitioner is altogether barred from having a new trial. As
pointed out by Judge Acosta, the reasons put forth by petitioner could fall
under mistake or excusable negligence.
The mistake that is allowable in Rule 37 is one which ordinary
prudence could not have guarded against.[52] Negligence to be excusable
must also be one which ordinary diligence and prudence could not have
guarded against and by reason of which the rights of an aggrieved party
have probably been impaired.[53] The test of excusable negligence is whether
EN BANC
[G.R. No. L-9408. October 31, 1956.]
EMILIO Y. HILADO, Petitioner, vs. THE COLLECTOR OF
INTERNAL REVENUE and THE COURT OF TAX
APPEALS, Respondents.
DECISION
BAUTISTA ANGELO, J.:
On March 31, 1952, Petitioner filed his income tax return for 1951
with the treasurer of Bacolod City wherein he claimed, among
other things, the amount of P12,837.65 as a deductible item from
his gross income pursuant to General Circular No. V-123 issued by
the Collector of Internal Revenue. This circular was issued pursuant
to certain rules laid down by the Secretary of Finance On the basis
of said return, an assessment notice demanding the payment of
P9,419 was sent toPetitioner, who paid the tax in monthly
installments, the last payment having been made on January 2,
1953.
Meanwhile, on August 30, 1952, the Secretary of Finance, through
the Collector of Internal Revenue, issued General Circular No. V-139
which not only revoked and declared void his general Circular No.
V- 123 but laid down the rule that losses of property which
occurred during the period of World War II from fires, storms,
shipwreck or other casualty, or from robbery, theft, or
embezzlement are deductible in the year of actual loss or
destruction of said property. As a consequence, the amount of
P12,837.65 was disallowed as a deduction from the gross income
ofPetitioner for 1951 and the Collector of Internal Revenue
demanded from him the payment of the sum of P3,546 as
deficiency income tax for said year. When the petition for
reconsideration filed by Petitioner was denied, he filed a petition
for review with the Court of Tax Appeals. In due time, this court
rendered
decision
affirming
the
assessment
made
by Respondent Collector of Internal Revenue. This is an appeal
from said decision.
It appears that Petitioner claimed in his 1951 income tax return the
deduction of the sum of P12,837.65 as a loss consisting in a
portion of his war damage claim which had been duly approved by
the Philippine War Damage Commission under the Philippine
Rehabilitation Act of 1946 but which was not paid and never has
been paid pursuant to a notice served upon him by said
Commission that said part of his claim will not be paid until the
United States Congress should make further appropriation. He
claims that said amount of P12,837.65 represents a business
asset within the meaning of said Act which he is entitled to deduct
as a loss in his return for 1951. This claim is untenable.
To begin with, assuming that said a mount represents a portion of
the 75% of his war damage claim which was not paid, the same
would not be deductible as a loss in 1951 because, according
to Petitioner, the last installment he received from the War
Damage Commission, together with the notice that no further
payment would be made on his claim, was in 1950. In the
circumstance, said amount would at most be a proper deduction
from his 1950 gross income. In the second place, said amount
cannot be considered as a business asset which can be deducted
as a loss in contemplation of law because its collection is not
enforceable as a matter of right, but is dependent merely upon the
generosity and magnanimity of the U. S. government. Note that, as
of the end of 1945, there was absolutely no law under
which Petitioner could claim compensation for the destruction of
his properties during the battle for the liberation of the Philippines.
And under the Philippine Rehabilitation Act of 1946, the payments
of claims by the War Damage Commission merely depended upon
its discretion to be exercised in the manner it may see fit, but the
non-payment of which cannot give rise to any enforceable right,
for, under said Act, All findings of the Commission concerning the
amount of loss or damage sustained, the cause of such loss or
damage, the persons to whom compensation pursuant to this title
is payable, and the value of the property lost or damaged, shall be
conclusive and shall not be reviewable by any court. (section
113).
It is true that under the authority of section 338 of the National
Internal Revenue Code the Secretary of Finance, in the exercise of
his administrative powers, caused the issuance of General Circular
No. V-123 as an implementation or interpretative regulation of
section 30 of the same Code, under which the amount of
P12,837.65 was allowed to be deducted in the year the last
installment was received with notice that no further payment
income tax for 1941, plus P1,414.50 as 5 per cent surcharge and P3,894.80
as 1 per cent monthly interest from March 1, 1946 to February 28, 1947, or a
total of P33,099.26. The assessment was made on February 11, 1947. On
February 21, 1947, the company asked for an extension of at least one year
from February 28, 1947 within which to pay the amount assessed, reserving
its right to question the correctness of the assessment. The Collector
granted an extension of only three months from March 20, 1947.
The company failed to pay the tax within the period granted to it and so the
Collector sent to it a letter on November 28, 1950 demanding payment of the
tax due as assessed, plus surcharge and interest up to December 31, 1950.
On April 6, 1951, the company asked for a reconsideration and
reinvestigation of the assessment, which was granted, the case being
assigned to another examiner, but the Collector made another assessment
against the company in the sum of P33,829.66. This new assessment was
made on March 7, 1952. On April 18, 1952, the Collector revised this last
assessment and required the company to pay the sum of P28,289.96 as
income tax, P1,414.50 as surcharge, P20,934.57 as interest up to April 30,
1952 and P40 as compromise.
After several other negotiations conducted at the request of respondent,
including an appeal to the Conference Staff created to act on such matters in
the Bureau of Internal Revenue, the assessment was finally reduced by the
Collector to P24,438.96, without surcharge and interest, and of this new
assessment the company was notified on July 28, 1955. Within the
reglementary period, the company filed with the Court of Tax Appeals a
petition for review of this assessment made on July 26, 1955 on the main
ground that the right of the Government to collect the tax has already
prescribed. After the case was heard, the court rendered its decision
upholding this defense and, accordingly, it set aside the ruling of the
Collector of Internal Revenue. The Collector interposed the present petition
for review.
Under the law, an internal revenue tax shall be assessed within five years
after the return is filed by the taxpayer and no proceeding in court for its
collection shall be begun after the expiration of such period (Section 331,
National Internal Revenue Code). The law also provides that where an
assessment of internal revenue tax is made within the above period, such
running of the period of limitation for in such case there is need of a written
agreement to extend the period between the Collector and the taxpayer,
there are cases however where a taxpayer may be prevented from setting
up the defense of prescription even if he has not previously waived it in
writing as when by his repeated requests or positive acts the Government
has been, for good reasons, persuaded to postpone collection to make him
feel that the demand was not unreasonable or that no harassment or
injustice is meant by the Government. And when such situation comes to
pass there are authorities that hold, based on weighty reasons, that such an
attitude or behavior should not be countenanced if only to protect the interest
of the Government.
This case has no precedent in this jurisdiction for it is the first time that such
has risen, but there are several precedents that may be invoked in American
jurisprudence. As Mr. Justice Cardozo has said: "The applicable principle is
fundamental and unquestioned. 'He who prevents a thing from being done
may not avail himself of the nonperformance which he has himself
occasioned, for the law says to him in effect "this is your own act, and
therefore you are not damnified." ' "(R. H. Stearns Co. vs. U.S., 78 L. ed.,
647). Or, as was aptly said, "The tax could have been collected, but the
government withheld action at the specific request of the plaintiff. The
plaintiff is now estopped and should not be permitted to raise the defense of
the Statute of Limitations." [Newport Co. vs. U.S., (DC-WIS), 34 F. Supp.
588].
The following authorities cited in the brief of the Solicitor General are in
point:
The petitioner makes the point that by the Revenue Act of May 29,
1928 (chap. 852, 45 Stat. at L. 791, 875, sec. 609, U.S.C. title 26,
sec. 2609), a credit against a liability in respect of any taxable year
shall be "void" if it has been made against a liability barred by
limitation. The aim of that provision, as we view it, was to invalidate
such a credit if made by the Commissioner of his own motion
without the taxpayer's approval or with approval failing short of
inducement or request. Cf. Stange vs. United States, 282 U. S.
270, 75 L. ed. 335, 51 S. Ct. 145, supra; Revenue Act of 1928, sec.
506 (b) (c), chap. 852, 45 Stat. at L. 791, 870, 871, U.S.C. title 26,
June 8, 2007
When the case was elevated to the Court of Appeals as CA-G.R. SP No.
47607, the appellate court, in its Decision,6 dated 6 July 1999, dismissed the
appeal of petitioner corporation, finding no reversible error in the CTA
Decision, dated 24 November 1997. The subsequent motion for
reconsideration of petitioner corporation was also denied by the Court of
Appeals in its Resolution,7 dated 14 December 1999.
G.R. No. 148763 involves almost the same set of facts as in G.R. No.
141104 presented above, except that it relates to the claims of petitioner
corporation for refund/credit of input VAT on its purchases of capital goods
and on its zero-rated sales made in the last three taxable quarters of 1990.
Thus, petitioner corporation comes before this Court, via a Petition for
Review on Certiorari under Rule 45 of the Revised Rules of Court, assigning
the following errors committed by the Court of Appeals
Petitioner corporation filed with the BIR its VAT Returns for the second, third,
and fourth quarters of 1990, on 20 July 1990, 18 October 1990, and 20
January 1991, respectively. It submitted separate applications to the BIR for
the refund/credit of the input VAT paid on its purchases of capital goods and
on its zero-rated sales, the details of which are presented as follows
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE
REQUIREMENT OF REVENUE REGULATIONS NO. 2-88 THAT
AT LEAST 70% OF THE SALES OF THE [BOARD OF
INVESTMENTS (BOI)]-REGISTERED FIRM MUST CONSIST OF
EXPORTS FOR ZERO-RATING TO APPLY.
II
THE COURT OF APPEALS ERRED IN AFFIRMING THAT
PETITIONER FAILED TO SUBMIT SUFFICIENT EVIDENCE
SINCE FAILURE TO SUBMIT PHOTOCOPIES OF VAT INVOICES
AND RECEIPTS IS NOT A FATAL DEFECT.
III
Date of Application
Period Covered
21 August 1990
P 54,014,722.04
21 November 1990
75,304,774.77
19 February 1991
43,829,766.10
When the BIR failed to act on its applications for refund/credit, petitioner
corporation filed with the CTA the following petitions for review
Date Filed
Period Covered
20 July 1992
9 October 1992
14 January 1993
Aggrieved, petitioner corporation filed with this Court another Petition for
Review on Certiorari under Rule 45 of the Revised Rules of Court, docketed
as G.R. No. 148763, raising the following issues
A.
no way of knowing with certainty just how much input VAT16 the taxpayer
may apply against its output VAT;17how much output VAT it is due to pay for
the quarter or how much excess input VAT it may carry-over to the following
quarter; or how much of its input VAT it may claim as refund/credit. It should
be recalled that not only may a VAT-registered taxpayer directly apply
against his output VAT due the input VAT it had paid on its importation or
local purchases of goods and services during the quarter; the taxpayer is
also given the option to either (1) carry over any excess input VAT to the
succeeding quarters for application against its future output VAT liabilities, or
(2) file an application for refund or issuance of a tax credit certificate
covering the amount of such input VAT.18 Hence, even in the absence of a
final adjustment return, the determination of any output VAT payable
necessarily requires that the VAT-registered taxpayer make adjustments in
its VAT return every quarter, taking into consideration the input VAT which
are creditable for the present quarter or had been carried over from the
previous quarters.
Moreover, when claiming refund/credit, the VAT-registered taxpayer must be
able to establish that it does have refundable or creditable input VAT, and the
same has not been applied against its output VAT liabilities information
which are supposed to be reflected in the taxpayer's VAT returns. Thus, an
application for refund/credit must be accompanied by copies of the
taxpayer's VAT return/s for the taxable quarter/s concerned.
Lastly, although the taxpayer's refundable or creditable input VAT may not be
considered as illegally or erroneously collected, its refund/credit is a privilege
extended to qualified and registered taxpayers by the very VAT system
adopted by the Legislature. Such input VAT, the same as any illegally or
erroneously collected national internal revenue tax, consists of monetary
amounts which are currently in the hands of the government but must
rightfully be returned to the taxpayer. Therefore, whether claiming
refund/credit of illegally or erroneously collected national internal revenue
tax, or input VAT, the taxpayer must be given equal opportunity for filing and
pursuing its claim.
For the foregoing reasons, it is more practical and reasonable to count the
two-year prescriptive period for filing a claim for refund/credit of input VAT on
zero-rated sales from the date of filing of the return and payment of the tax
due which, according to the law then existing, should be made within 20
days from the end of each quarter. Having established thus, the relevant
dates in the instant cases are summarized and reproduced below
Period Covered
Date of Filing(Return
w/ BIR)
Date of Filing(Application
w/ BIR)
20 July 1990
21 August 1990
18 October 1990
21 November 1990
20 January 1991
19 February 1991
20 April 1992
--
The above table readily shows that the administrative and judicial claims of
petitioner corporation for refund of its input VAT on its zero-rated sales for
the last three quarters of 1990 were all filed within the prescriptive period.
However, the same cannot be said for the claim of petitioner corporation for
refund of its input VAT on its zero-rated sales for the first quarter of 1992.
Even though it may seem that petitioner corporation filed in time its judicial
claim with the CTA, there is no showing that it had previously filed an
administrative claim with the BIR. Section 106(e) of the Tax Code of 1977,
as amended, explicitly provided that no refund of input VAT shall be allowed
unless the VAT-registered taxpayer filed an application for refund with
respondent Commissioner within the two-year prescriptive period. The
application of petitioner corporation for refund/credit of its input VAT for the
first quarter of 1992 was not only unsigned by its supposed authorized
representative, Ma. Paz R. Semilla, Manager-Finance and Treasury, but it
was not dated, stamped, and initialed by the BIR official who purportedly
received the same. The CTA, in its Decision,19 dated 24 November 1997, in
CTA Case No. 5102, made the following observations
Date of
Under Section 100(a) of the Tax Code of 1977, as amended, a 10% VAT was
imposed on the gross selling price or gross value in money of goods sold,
bartered or exchanged. Yet, the same provision subjected the following sales
made by VAT-registered persons to 0% VAT
(1) Export sales; and
(2) Sales to persons or entities whose exemption under special
laws or international agreements to which the Philippines is a
signatory effectively subjects such sales to zero-rate.
"Export Sales" means the sale and shipment or exportation of
goods from the Philippines to a foreign country, irrespective of any
shipping arrangement that may be agreed upon which may
influence or determine the transfer of ownership of the goods so
exported, or foreign currency denominated sales. "Foreign currency
denominated sales", means sales to nonresidents of goods
assembled or manufactured in the Philippines, for delivery to
residents in the Philippines and paid for in convertible foreign
currency remitted through the banking system in the Philippines.
These are termed zero-rated sales. A zero-rated sale is still considered a
taxable transaction for VAT purposes, although the VAT rate applied is 0%. A
sale by a VAT-registered taxpayer of goods and/or services taxed at 0% shall
not result in any output VAT, while the input VAT on its purchases of goods or
services related to such zero-rated sale shall be available as tax credit or
refund.20
Petitioner corporation questions the validity of Revenue Regulations No. 288 averring that the said regulations imposed additional requirements, not
found in the law itself, for the zero-rating of its sales to Philippine Smelting
and Refining Corporation (PASAR) and Philippine Phosphate, Inc.
(PHILPHOS), both of which are registered not only with the BOI, but also
with the then Export Processing Zone Authority (EPZA).21
The contentious provisions of Revenue Regulations No. 2-88 read
SEC. 2. Zero-rating. (a) Sales of raw materials to BOI-registered
exporters. Sales of raw materials to export-oriented BOIregistered enterprises whose export sales, under rules and
regulations of the Board of Investments, exceed seventy percent
Section 2 of Revenue Regulations No. 2-88, should not have been applied to
the zero-rating of the sales made by petitioner corporation to PASAR and
PHILPHOS. At the onset, it must be emphasized that PASAR and
PHILPHOS, in addition to being registered with the BOI, were also
registered with the EPZA and located within an export-processing zone.
Petitioner corporation does not claim that its sales to PASAR and
PHILPHOS are zero-rated on the basis that said sales were made to exportoriented BOI-registered corporations, but rather, on the basis that the sales
were made to EPZA-registered enterprises operating within export
processing zones. Although sales to export-oriented BOI-registered
enterprises and sales to EPZA-registered enterprises located within export
processing zones were both deemed export sales, which, under Section
100(a) of the Tax Code of 1977, as amended, shall be subject to 0% VAT
distinction must be made between these two types of sales because each
may have different substantiation requirements.
The Tax Code of 1977, as amended, gave a limited definition of export sales,
to wit: "The sale and shipment or exportation of goods from the Philippines
to a foreign country, irrespective of any shipping arrangement that may be
agreed upon which may influence or determine the transfer of ownership of
the goods so exported, or foreign currency denominated sales." Executive
Order No. 226, otherwise known as the Omnibus Investments Code of 1987
- which, in the years concerned (i.e., 1990 and 1992), governed enterprises
registered with both the BOI and EPZA, provided a more comprehensive
definition of export sales, as quoted below:
"ART. 23. "Export sales" shall mean the Philippine port F.O.B.
value, determined from invoices, bills of lading, inward letters of
credit, landing certificates, and other commercial documents, of
export products exported directly by a registered export producer or
the net selling price of export product sold by a registered export
producer or to an export trader that subsequently exports the same:
Provided, That sales of export products to another producer or to
an export trader shall only be deemed export sales whenactually
exported by the latter, as evidenced by landing certificates of similar
commercial documents: Provided, further, That without actual
exportation the following shall be considered constructively
exportedfor purposes of this provision: (1) sales to bonded
manufacturing warehouses of export-oriented manufacturers;
(2) sales to export processing zones; (3) sales to registered export
traders operating bonded trading warehouses supplying raw
materials used in the manufacture of export products under
guidelines to be set by the Board in consultation with the Bureau of
Internal Revenue and the Bureau of Customs; (4) sales to foreign
taxing authority. Hence, actual export of goods and services from the
Philippines to a foreign country must be free of VAT, while those destined for
use or consumption within the Philippines shall be imposed with 10%
VAT.24 Export processing zones25 are to be managed as a separate customs
territory from the rest of the Philippines and, thus, for tax purposes, are
effectively considered as foreign territory. For this reason, sales by persons
from the Philippine customs territory to those inside the export processing
zones are already taxed as exports.
Plainly, sales to enterprises operating within the export processing zones are
export sales, which, under the Tax Code of 1977, as amended, were subject
to 0% VAT. It is on this ground that petitioner corporation is claiming
refund/credit of the input VAT on its zero-rated sales to PASAR and
PHILPHOS.
The distinction made by this Court in the preceding paragraphs between the
zero-rated sales to export-oriented BOI-registered enterprises and zerorated sales to EPZA-registered enterprises operating within export
processing zones is actually supported by subsequent development in tax
laws and regulations. In Revenue Regulations No. 7-95, the Consolidated
VAT Regulations, as amended,26 the BIR defined with more precision what
are zero-rated export sales
(1) The sale and actual shipment of goods from the Philippines to a
foreign country, irrespective of any shipping arrangement that may
be agreed upon which may influence or determine the transfer of
ownership of the goods so exported paid for in acceptable foreign
currency or its equivalent in goods or services, and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng
Pilipinas(BSP);
(2) The sale of raw materials or packaging materials to a nonresident buyer for delivery to a resident local export-oriented
enterprise to be used in manufacturing, processing, packing or
repacking in the Philippines of the said buyer's goods and paid for
in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP);
(3) The sale of raw materials or packaging materials to an exportoriented enterprise whose export sales exceed seventy percent
(70%) of total annual production;
Any enterprise whose export sales exceed 70% of the total annual
production of the preceding taxable year shall be considered an
export-oriented enterprise upon accreditation as such under the
provisions of the Export Development Act (R.A. 7844) and its
implementing rules and regulations;
(4) Sale of gold to the Bangko Sentral ng Pilipinas (BSP); and
(5) Those considered export sales under Articles 23 and 77 of
Executive Order No. 226, otherwise known as the Omnibus
Investments Code of 1987, and other special laws, e.g. Republic
Act No. 7227, otherwise known as the Bases Conversion and
Development Act of 1992.
The Tax Code of 1997, as amended,27 later adopted the foregoing definition
of export sales, which are subject to 0% VAT.
This Court then reiterates its conclusion that Section 2 of Revenue
Regulations No. 2-88, which applied to zero-rated export sales to exportoriented BOI-registered enterprises, should not be applied to the
applications for refund/credit of input VAT filed by petitioner corporation since
it based its applications on the zero-rating of export sales to enterprises
registered with the EPZA and located within export processing zones.
Sufficiency of evidence
There can be no dispute that the taxpayer-claimant has the burden of
proving the legal and factual bases of its claim for tax credit or refund, but
once it has submitted all the required documents, it is the function of the BIR
to assess these documents with purposeful dispatch.28 It therefore falls upon
herein petitioner corporation to first establish that its sales qualify for VAT
zero-rating under the existing laws (legal basis), and then to present
sufficient evidence that said sales were actually made and resulted in
refundable or creditable input VAT in the amount being claimed (factual
basis).
It would initially appear that the applications for refund/credit filed by
petitioner corporation cover only input VAT on its purportedly zero-rated
sales to PASAR and PHILPHOS; however, a more thorough perusal of its
applications, VAT returns, pleadings, and other records of these cases would
reveal that it is also claiming refund/credit of its input VAT on purchases of
capital goods and sales of gold to the Central Bank of the Philippines (CBP).
This Court finds that the claims for refund/credit of input VAT of petitioner
corporation have sufficient legal bases.
As has been extensively discussed herein, Section 106(b)(2), in relation to
Section 100(a)(2) of the Tax Code of 1977, as amended, allowed the
refund/credit of input VAT on export sales to enterprises operating within
export processing zones and registered with the EPZA, since such export
sales were deemed to be effectively zero-rated sales.29 The fact that PASAR
and PHILPHOS, to whom petitioner corporation sold its products, were
operating inside an export processing zone and duly registered with EPZA,
was never raised as an issue herein. Moreover, the same fact was already
judicially recognized in the case Atlas Consolidated Mining & Development
Corporation v. Commissioner of Internal Revenue.30 Section 106(c) of the
same Code likewise permitted a VAT-registered taxpayer to apply for
refund/credit of the input VAT paid on capital goods imported or locally
purchased to the extent that such input VAT has not been applied against its
output VAT. Meanwhile, the effective zero-rating of sales of gold to the CBP
from 1989 to 199131 was already affirmed by this Court in Commissioner of
Internal Revenue v. Benguet Corporation,32 wherein it ruled that
At the time when the subject transactions were consummated, the
prevailing BIR regulations relied upon by respondent ordained that
gold sales to the Central Bank were zero-rated. The BIR interpreted
Sec. 100 of the NIRC in relation to Sec. 2 of E.O. No. 581 s. 1980
which prescribed that gold sold to the Central Bank shall be
considered export and therefore shall be subject to the export and
premium duties. In coming out with this interpretation, the BIR also
considered Sec. 169 of Central Bank Circular No. 960 which states
that all sales of gold to the Central Bank are considered
constructive exports. x x x.
This Court now comes to the question of whether petitioner corporation has
sufficiently established the factual bases for its applications for refund/credit
of input VAT. It is in this regard that petitioner corporation has failed, both in
the administrative and judicial level.
Applications for refund/credit of input VAT with the BIR must comply with the
appropriate revenue regulations. As this Court has already ruled, Revenue
Regulations No. 2-88 is not relevant to the applications for refund/credit of
input VAT filed by petitioner corporation; nonetheless, the said applications
must have been in accordance with Revenue Regulations No. 3-88,
amending Section 16 of Revenue Regulations No. 5-87, which provided as
follows
In case the application for refund/credit of input VAT was denied or remained
unacted upon by the BIR, and before the lapse of the two-year prescriptive
period, the taxpayer-applicant may already file a Petition for Review before
the CTA. If the taxpayer's claim is supported by voluminous documents,
such as receipts, invoices, vouchers or long accounts, their presentation
before the CTA shall be governed by CTA Circular No. 1-95, as amended,
reproduced in full below
Finally, assuming for the sake of argument that the non-presentation of the
required documents was due to the fault of the counsel of petitioner
corporation, this Court finds that it does not constitute excusable negligence
or mistake which would warrant the re-opening of the cases and/or holding
of new trial.
Neither is there any merit in the contention of petitioner corporation that the
non-presentation of the required documentary evidence was due to the
excusable mistake of its counsel, a ground under Section 1, Rule 37 of the
revised Rules of Court for the grant of a new trial. "Mistake," as it is referred
to in the said rule, must be a mistake of fact, not of law, which relates to the
case.52 In the present case, the supposed mistake made by the counsel of
petitioner corporation is one of law, for it was grounded on his interpretation
and evaluation that Revenue Regulations No. 3-88 and CTA Circular No. 195, as amended, did not apply to his client's cases and that there was no
need to comply with the documentary requirements set forth therein. And
although the counsel of petitioner corporation advocated an erroneous legal
position, the effects thereof, which did not amount to a deprivation of his
client's right to be heard, must bind petitioner corporation. The question is
not whether petitioner corporation succeeded in establishing its interests, but
whether it had the opportunity to present its side.53
Besides, litigation is a not a "trial and error" proceeding. A party who moves
for a new trial on the ground of mistake must show that ordinary prudence
could not have guarded against it. A new trial is not a refuge for the
obstinate.54 Ordinary prudence in these cases would have dictated the
presentation of all available evidence that would have supported the claims
for refund/credit of input VAT of petitioner corporation. Without sound legal
basis, counsel for petitioner corporation concluded that Revenue
Regulations No. 3-88, and later on, CTA Circular No. 1-95, as amended, did
not apply to its client's claims. The obstinacy of petitioner corporation and its
counsel is demonstrated in their failure, nay, refusal, to comply with the
appropriate administrative regulations and tax court circular in pursuing the
claims for refund/credit, now subject of G.R. Nos. 141104 and 148763, even
though these were separately instituted in a span of more than two years. It
is also evident in the failure of petitioner corporation to address the issue
and to present additional evidence despite being given the opportunity to do
so by the Court of Appeals. As pointed out by the appellate court, in its
Decision, dated 15 September 2000, in CA-G.R. SP No. 46718
x x x Significantly, in the resolution, dated 7 June 2000, this Court
directed the parties to file memoranda discussing, among others,
the submission of proof for "its [petitioner's] sales of gold, copper
concentrates, and pyrite to buyers." Nevertheless, the parties,
including the petitioner, failed to address this issue, thereby
necessitating the affirmance of the ruling of the Court of Tax
Appeals on this point.55
Summary
Hence, although this Court agreed with the petitioner corporation that the
two-year prescriptive period for the filing of claims for refund/credit of input
VAT must be counted from the date of filing of the quarterly VAT return, and
that sales to EPZA-registered enterprises operating within economic
processing zones were effectively zero-rated and were not covered by
Revenue Regulations No. 2-88, it still denies the claims of petitioner
corporation for refund of its input VAT on its purchases of capital goods and
effectively zero-rated sales during the second, third, and fourth quarters of
1990 and the first quarter of 1992, for not being established and
substantiated by appropriate and sufficient evidence. Petitioner corporation
is also not entitled to the re-opening of its cases and/or holding of new trial
since the non-presentation of the required documentary evidence before the
BIR and the CTA by its counsel does not constitute excusable negligence or
mistake as contemplated in Section 1, Rule 37 of the revised Rules of Court.
WHEREFORE, premises considered, the instant Petitions for Review are
hereby DENIED, and the Decisions, dated 6 July 1999 and 15 September
2000, of the Court of Appeals in CA-G.R. SP Nos. 47607 and 46718,
respectively, are hereby AFFIRMED. Costs against petitioner.
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, JJ., concur.
October 6, 2010
One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center, it only
claimed the amount of P3,891,123.82.11
In response, petitioner filed his Answer12 raising the following special and
affirmative defenses, to wit:
4. Petitioners alleged claim for refund is subject to administrative
investigation by the Bureau;
5. Petitioner must prove that it paid VAT input taxes for the period in
question;
6. Petitioner must prove that its sales are export sales
contemplated under Sections 106(A) (2) (a), and 108(B) (1) of the
Tax Code of 1997;
7. Petitioner must prove that the claim was filed within the two (2)
year period prescribed in Section 229 of the Tax Code;
8. In an action for refund, the burden of proof is on the taxpayer to
establish its right to refund, and failure to sustain the burden is fatal
to the claim for refund; and
9. Claims for refund are construed strictly against the claimant for
the same partake of the nature of exemption from taxation.13
Trial ensued, after which, on January 4, 2008, the Second Division of the
CTA rendered a Decision partially granting respondents claim for
refund/credit. Pertinent portions of the Decision read:
For a VAT registered entity whose sales are zero-rated, to validly claim a
refund, Section 112 (A) of the NIRC of 1997, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales. Any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, within two (2)
years after the close of the taxable quarter when the sales were made, apply
for the issuance of a tax credit certificate or refund of creditable input tax due
or paid attributable to such sales, except transitional input tax, to the extent
that such input tax has not been applied against output tax: x x x
Pursuant to the above provision, petitioner must comply with the following
requisites: (1) the taxpayer is engaged in sales which are zero-rated or
effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must
be filed within two years after the close of the taxable quarter when such
sales were made; and (4) the creditable input tax due or paid must be
attributable to such sales, except the transitional input tax, to the extent that
such input tax has not been applied against the output tax.
The Court finds that the first three requirements have been complied [with]
by petitioner.
With regard to the first requisite, the evidence presented by petitioner, such
as the Sales Invoices (Exhibits "II" to "II-262," "JJ" to "JJ-431," "KK" to "KK394" and "LL") shows that it is engaged in sales which are zero-rated.
The second requisite has likewise been complied with. The Certificate of
Registration with OCN 1RC0000148499 (Exhibit "C") with the BIR proves
that petitioner is a registered VAT taxpayer.
In compliance with the third requisite, petitioner filed its administrative claim
for refund on September 30, 2004 (Exhibit "N") and the present Petition for
Review on September 30, 2004, both within the two (2) year prescriptive
period from the close of the taxable quarter when the sales were made,
which is from September 30, 2002.
As regards, the fourth requirement, the Court finds that there are some
documents and claims of petitioner that are baseless and have not been
satisfactorily substantiated.
xxxx
In sum, petitioner has sufficiently proved that it is entitled to a refund or
issuance of a tax credit certificate representing unutilized excess input VAT
payments for the period July 1, 2002 to September 30, 2002, which are
attributable to its zero-rated sales for the same period, but in the reduced
amount of P3,239,119.25, computed as follows:
Amount of Claimed Input VAT
Less:
Exceptions as found by the ICPA
P 3,891,123.82
41,020.37
P 3,850,103.45 Petitioner argues that the administrative and judicial claims were filed
beyond the period allowed by law and hence, the honorable Court has no
610,984.20 jurisdiction over the same. In addition, petitioner further contends that
respondent's filing of the administrative and judicial [claims] effectively
P 3,239,119.25
eliminates the authority of the honorable Court to exercise jurisdiction over
the judicial claim.
In addition, We do not agree with the petitioner's contention that the 1997
NIRC requires the previous filing of an administrative claim for refund prior to
the judicial claim. This should not be the case as the law does not prohibit
the simultaneous filing of the administrative and judicial claims for refund.
What is controlling is that both claims for refund must be filed within the twoyear prescriptive period.
In sum, the Court En Banc finds no cogent justification to disturb the findings
and conclusion spelled out in the assailed January 4, 2008 Decision and
March 13, 2008 Resolution of the CTA Second Division. What the instant
petition seeks is for the Court En Banc to view and appreciate the evidence
in their own perspective of things, which unfortunately had already been
considered and passed upon.
WHEREFORE, the instant Petition for Review is hereby DENIED DUE
COURSE and DISMISSED for lack of merit. Accordingly, the January 4,
2008 Decision and March 13, 2008 Resolution of the CTA Second Division in
CTA Case No. 7065 entitled, "AICHI Forging Company of Asia, Inc. petitioner
vs. Commissioner of Internal Revenue, respondent" are hereby AFFIRMED
in toto.
Petitioner further argues that the CTA En Banc erred in applying Section
114(A) of the NIRC in determining the start of the two-year period as the said
provision pertains to the compliance requirements in the payment of
VAT.28 He asserts that it is Section 112, paragraph (A), of the same Code
that should apply because it specifically provides for the period within which
a claim for tax refund/ credit should be made.29
Petitioner likewise puts in issue the fact that the administrative claim with the
BIR and the judicial claim with the CTA were filed on the same day.30 He
opines that the simultaneous filing of the administrative and the judicial
claims contravenes Section 229 of the NIRC, which requires the prior filing
of an administrative claim.31 He insists that such procedural requirement is
based on the doctrine of exhaustion of administrative remedies and the fact
that the CTA is an appellate body exercising judicial review over
administrative actions of the CIR.32
Respondents Arguments
SO ORDERED.22
Petitioner sought reconsideration but the CTA En Banc denied23 his Motion
for Reconsideration.
Issue
Hence, the present recourse where petitioner interposes the issue of
whether respondents judicial and administrative claims for tax refund/credit
were filed within the two-year prescriptive period provided in Sections 112(A)
and 229 of
the NIRC.24
Petitioners Arguments
Petitioner maintains that respondents administrative and judicial claims for
tax refund/credit were filed in violation of Sections 112(A) and 229 of the
NIRC.25 He posits that pursuant to Article 13 of the Civil Code,26 since the
year 2004 was a leap year, the filing of the claim for tax refund/credit on
September 30, 2004 was beyond the two-year period, which expired on
September 29, 2004.27
(A) In General. Every person liable to pay the value-added tax imposed
under this Title shall file a quarterly return of the amount of his gross sales or
receipts within twenty-five (25) days following the close of each taxable
quarter prescribed for each taxpayer: Provided, however, That VATregistered persons shall pay the value-added tax on a monthly basis.
Unutilized input VAT must be claimed within two years after the close of the
taxable quarter when the sales were made
xxxx
redeem or change unused stamps that have been rendered unfit for use and
refund their value upon proof of destruction. No credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within two (2) years after the
payment of the tax or penalty: Provided, however, That a return filed
showing an overpayment shall be considered as a written claim for credit or
refund.
xxxx
Sec. 229. Recovery of Tax Erroneously or Illegally Collected. No suit or
proceeding shall be maintained in any court for the recovery of any national
internal revenue tax hereafter alleged to have been erroneously or illegally
assessed or collected, or of any penalty claimed to have been collected
without authority, of any sum alleged to have been excessively or in any
manner wrongfully collected without authority, or of any sum alleged to have
been excessively or in any manner wrongfully collected, until a claim for
refund or credit has been duly filed with the Commissioner; but such suit or
proceeding may be maintained, whether or not such tax, penalty, or sum has
been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of
any supervening cause that may arise after payment: Provided, however,
That the Commissioner may, even without a written claim therefor, refund or
credit any tax, where on the face of the return upon which payment was
made, such payment appears clearly to have been erroneously paid.
Notably, the above provisions also set a two-year prescriptive period,
reckoned from date of payment of the tax or penalty, for the filing of a claim
of refund or tax credit. Notably too, both provisions apply only to
instances of erroneous payment or illegal collection of internal revenue
taxes.
MPCs creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, 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.
xxxx
There obviously exists a manifest incompatibility in the manner of
Considering the foregoing discussion, it is clear that Sec. 112 (A) of the
NIRC, providing a two-year prescriptive period reckoned from the close
of the taxable quarter when the relevant sales or transactions were
made pertaining to the creditable input VAT, applies to the instant case,
and not to the other actions which refer to erroneous payment of
taxes.46 (Emphasis supplied.)
In view of the foregoing, we find that the CTA En Banc erroneously applied
Sections 114(A) and 229 of the NIRC in computing the two-year prescriptive
period for claiming refund/credit of unutilized input VAT. To be clear, Section
112 of the NIRC is the pertinent provision for the refund/credit of input VAT.
Thus, the two-year period should be reckoned from the close of the taxable
quarter when the sales were made.
The administrative claim was timely filed
Bearing this in mind, we shall now proceed to determine whether the
administrative claim was timely filed.
47
computing legal periods under the Civil Code and the Administrative Code of
1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the
Administrative Code of 1987, being the more recent law, governs the
computation of legal periods. Lex posteriori derogat priori.
Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987
to this case, the two-year prescriptive period (reckoned from the time
respondent filed its final adjusted return on April 14, 1998) consisted of 24
calendar months, computed as follows:
Year 1 1st calendar month April 15, 1998 to May 14, 1998
2nd calendar month May 15, 1998 to June 14, 1998
3rd calendar month June 15, 1998 to July 14, 1998
4th calendar month July 15, 1998 to August 14, 1998
5th calendar month August 15, 1998 to September 14, 1998
6th calendar month September 15, 1998 to October 14, 1998
7th calendar month October 15, 1998 to November 14, 1998
8th calendar month November 15, 1998 to December 14, 1998
9th calendar month December 15, 1998 to January 14, 1999
10th calendar month January 15, 1999 to February 14, 1999
11th calendar month February 15, 1999 to March 14, 1999
12th calendar month March 15, 1999 to April 14, 1999
Year 2 13th calendar month April 15, 1999 to May 14, 1999
14th calendar month May 15, 1999 to June 14, 1999
Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the
Administrative Code of 1987 deal with the same subject matter the
computation of legal periods. Under the Civil Code, a year is equivalent to
365 days whether it be a regular year or a leap year. Under the
22nd calendar month January 15, 2000 to February 14, 2000 Section 112(D) of the NIRC clearly provides that the CIR has "120 days,
from the date of the submission of the complete documents in support of the
23rd calendar month February 15, 2000 to March 14, 2000 application [for tax refund/credit]," within which to grant or deny the claim. In
case of full or partial denial by the CIR, the taxpayers recourse is to file an
24th calendar month March 15, 2000 to April 14, 2000
appeal before the CTA within 30 days from receipt of the decision of the CIR.
However, if after the 120-day period the CIR fails to act on the application for
tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the
We therefore hold that respondent's petition (filed on April 14, 2000) was
CIR to CTA within 30 days.
filed on the last day of the 24th calendar month from the day respondent
filed its final adjusted return. Hence, it was filed within the reglementary
period.51
In this case, the administrative and the judicial claims were simultaneously
filed on September 30, 2004. Obviously, respondent did not wait for the
decision of the CIR or the lapse of the 120-day period. For this reason, we
Applying this to the present case, the two-year period to file a claim for tax
find the filing of the judicial claim with the CTA premature.
refund/credit for the period July 1, 2002 to September 30, 2002 expired on
September 30, 2004. Hence, respondents administrative claim was timely
filed.
Respondents assertion that the non-observance of the 120-day period is not
fatal to the filing of a judicial claim as long as both the administrative and the
judicial claims are filed within the two-year prescriptive period52 has no legal
The filing of the judicial claim was premature
basis.
However, notwithstanding the timely filing of the administrative claim, we
are constrained to deny respondents claim for tax refund/credit for having
been filed in violation of Section 112(D) of the NIRC, which provides that:
SEC. 112. Refunds or Tax Credits of Input Tax.
xxxx
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
In fact, applying the two-year period to judicial claims would render nugatory
Section 112(D) of the NIRC, which already provides for a specific period
within which a taxpayer should appeal the decision or inaction of the CIR.
The second paragraph of Section 112(D) of the NIRC envisions two
scenarios: (1) when a decision is issued by the CIR before the lapse of the
120-day period; and (2) when no decision is made after the 120-day period.
In both instances, the taxpayer has 30 days within which to file an appeal
with the CTA. As we see it then, the 120-day period is crucial in filing an
appeal with the CTA.
With regard to Commissioner of Internal Revenue v. Victorias Milling, Co.,
Inc.53 relied upon by respondent, we find the same inapplicable as the tax
provision involved in that case is Section 306, now Section 229 of the NIRC.
And as already discussed, Section 229 does not apply to refunds/credits of
input VAT, such as the instant case.
In fine, the premature filing of respondents claim for refund/credit of input
VAT before the CTA warrants a dismissal inasmuch as no jurisdiction was
acquired by the CTA.
WHEREFORE, the Petition is hereby GRANTED. The assailed July 30,
2008 Decision and the October 6, 2008 Resolution of the Court of Tax
Appeals are hereby REVERSED and SET ASIDE. The Court of Tax Appeals
Second Division is DIRECTED to dismiss CTA Case No. 7065 for having
been prematurely filed.
SO ORDERED.
MARIANO C. DEL CASTILLO
Associate Justice
Quarter
Taxable Year
12 July 2005
2nd
2004
22 October 2004
12 July 2005
3rd
2004
25 January 2005
12 July 2005
4th
2004
Original
Amended
26 July 2004
July 2004, the date when the return for the second quarter was filed, as the
date from which to reckon the two-year prescriptive period for filing an
application for refund or credit of unutilized input VAT under Section 112(A).
As the two-year prescriptive period ended on 30 June 2006, the Petition for
Review of Mindanao II was filed out of time on 21 July 2006.29 The CIR
invoked the recently promulgated Mirant to support this theory.
The resolution of this case hinges on the question of compliance with the
following time requirements for the grant of a claim for refund or credit of
unutilized input VAT: (1) the two-year prescriptive period for filing an
application for refund or credit of unutilized input VAT; and (2) the 120+30
day period for filing an appeal with the CTA.
THE COURTS RULING
On 11 November 2009, the CTA En Banc rendered its Decision denying the
CIRs Petition for Review.30 On the question whether the application for
refund was timely filed, it held that the CTA Second Division correctly applied
the Atlas ruling.31 It reasoned that Atlas remained to be the controlling
doctrine. Mirant was a new doctrine and, as such, the latter should not apply
retroactively to Mindanao II who had relied on the old doctrine of Atlas and
had acted on the faith thereof.32
As to the issue of compliance with the 30-day period for appeal to the CTA,
the CTA En Banc held that this was a requirement only when the CIR
actually denies the taxpayers claim. But in cases of CIR inaction, the 30-day
period is not a mandatory requirement; the judicial claim is seasonably filed
as long as it is filed after the lapse of the 120-day waiting period but within
two years from the date of filing of the return.33
The CIR filed a Motion for Partial Reconsideration34 of the Decision, but it
was denied for lack of merit.35
Dissatisfied, the CIR filed this Rule 45 Petition, raising the following
arguments in support of its appeal:
I.
THE CTA 2ND DIVISION LACKED JURISDICTION TO TAKE
COGNIZANCE OF THE CASE.
II.
THE COURT A QUOS RELIANCE ON THE RULING IN ATLAS IS
MISPLACED.36
ISSUES
We deny Mindanao IIs claim for refund or credit of unutilized input VAT on
the ground that its judicial claims were filed out of time, even as we hold that
its application for refund was filed on time.
I.
MINDANAO IIS APPLICATION FOR
REFUND WAS FILED ON TIME
We find no error in the conclusion of the tax courts that the application for
refund or credit of unutilized input VAT was timely filed. The problem lies with
their bases for the conclusion as to: (1) what should be filed within the
prescriptive period; and (2) the date from which to reckon the prescriptive
period.
We thus take a different route to reach the same conclusion, initially focusing
our discussion on what should be filed within the two-year prescriptive
period.
A. The Judicial Claim Need Not Be Filed Within the Two-Year Prescriptive
Period
Section 112(A) provides:
SEC. 112. Refunds or Tax Credits of Input Tax.
(A) Zero-rated or Effectively Zero-rated Sales Any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, within two (2)
years after the close of the taxable quarter when the sales were made, apply
for the issuance of a tax credit certificate or refund of creditable input tax due
or paid attributable to such sales, except transitional input tax, to the extent
that such input tax has not been applied against output tax: Provided,
however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1),
(2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,
further, That where the taxpayer is engaged in zero-rated or effectively zerorated sale and also in taxable or exempt sale of goods or properties or
services, and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basis of the volume of sales.
Both the CTA Second Division and CTA En Banc decisions held that the
phrase "apply for the issuance of a tax credit certificate or refund" in Section
112(A) is construed to refer to both the administrative claim filed with the CIR
and the judicial claim filed with the CTA. This view, however, has no legal
basis.
In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.
(Aichi), we dispelled the misconception that both the administrative and
judicial claims must be filed within the two-year prescriptive period:37
There is nothing in Section 112 of the NIRC to support respondents view.
Subsection (A) of the said provision states that "any VAT-registered person,
whose sales are zero-rated or effectively zero-rated may, within two years
after the close of the taxable quarter when the sales were made, apply for
the issuance of a tax credit certificate or refund of creditable input tax due or
paid attributable to such sales." The phrase "within two (2) years x x x apply
for the issuance of a tax credit certificate or refund" refers to applications for
refund/credit filed with the CIR and not to appeals made to the CTA. This is
apparent in the first paragraph of subsection (D) of the same provision,
which states that the CIR has "120 days from the submission of complete
documents in support of the application filed in accordance with Subsections
(A) and (B)" within which to decide on the claim.
In fact, applying the two-year period to judicial claims would render nugatory
Section 112 (D) of the NIRC, which already provides for a specific period
within which a taxpayer should appeal the decision or inaction of the CIR.
The second paragraph of Section 112 (D) of the NIRC envisions two
scenarios: (1) when a decision is issued by the CIR before the lapse of the
120-day period; and (2) when no decision is made after the 120-day period.
In both instances, the taxpayer has 30 days within which to file an appeal
with the CTA. As we see it then, the 120-day period is crucial in filing an
appeal with the CTA. (Emphasis supplied)
The message of Aichi is clear: it is only the administrative claim that must be
filed within the two-year prescriptive period; the judicial claim need not fall
within the two-year prescriptive period.
Having disposed of this question, we proceed to the date for reckoning the
prescriptive period under Section 112(A).
B. Reckoning Date is the Close of the Taxable Quarter When the Relevant
Sales Were Made.
The other flaw in the reasoning of the tax courts is their reliance on the Atlas
ruling, which fixed the reckoning point to the date of filing the return and
payment of the tax.
The CIRs Stand
The CIRs stand is that Atlas is not applicable to the case at hand as it
involves Section 230 of the 1977 Tax Code, which contemplates recovery of
tax payments erroneously or illegally collected. On the other hand, this case
deals with claims for tax refund or credit of unutilized input VAT for the
second, third, and fourth quarters of 2004, which are covered by Section 112
of the 1977 Tax Code.38
The CIR further contends that Mindanao II cannot claim good faith reliance
on the Atlas doctrine since the case was decided only on 8 June 2007, two
years after Mindanao II filed its claim for refund or credit with the CIR and
one year after it filed a Petition for Review with the CTA on 21 July 2006.39
In lieu of Atlas, the CIR proposes that it is the Court's ruling in Mirant that
should apply to this case despite the fact that the latter was promulgated on
12 September 2008, after Mindanao II had filed its administrative claim in
2005.40 It argues that Mirant can be applied retroactively to this case, since
the decision merely interprets Section 112, a provision that was already
effective when Mindanao II filed its claims for tax refund or credit.
The Taxpayers Defense
On the other hand, Mindanao II counters that Atlas, decided by the Third
Division of this Court, could not have been superseded by Mirant, a Second
Division Decision of this Court. A doctrine laid down by the Supreme Court in
a Division may be modified or reversed only through a decision of the Court
sitting en banc.41
Mindanao II further contends that when it filed its Petition for Review, the
prevailing rule in the CTA reckons the two-year prescriptive period from the
date of the filing of the VAT return.42 Finally, after building its case on Atlas,
Mindanao II assails the CIRs reliance on the Mirant doctrine stating that it
cannot be applied retroactively to this case, lest it violate the rock-solid rule
that a judicial ruling cannot be given retroactive effect if it will impair vested
rights.43
Section 112(A) is the Applicable Rule
The issue posed is not novel. In the recent case of Commissioner of Internal
Revenue v. San Roque Power Corporation44 (San Roque), this Court
resolved the threshold question of when to reckon the two-year prescriptive
period for filing an administrative claim for refund or credit of unutilized input
VAT under the 1997 Tax Code in view of our pronouncements in Atlas and
Mirant. In that case, we delineated the scope and effectivity of the Atlas and
Mirant doctrines as follows:
The Atlas doctrine, which held that claims for refund or credit of input VAT
must comply with the two-year prescriptive period under Section 229, should
be effective only from its promulgation on 8 June 2007 until its abandonment
on 12 September 2008 in Mirant. The Atlas doctrine was limited to the
reckoning of the two-year prescriptive period from the date of payment of the
output VAT. Prior to the Atlas doctrine, the two-year prescriptive period for
claiming refund or credit of input VAT should be governed by Section 112(A)
following the verba legis rule. The Mirant ruling, which abandoned the Atlas
doctrine, adopted the verba legis rule, thus applying Section 112(A) in
computing the two-year prescriptive period in claiming refund or credit of
input VAT. (Emphases supplied)
Furthermore, San Roque distinguished between Section 112 and Section
229 of the 1997 Tax Code:
The input VAT is not "excessively" collected as understood under Section
229 because at the time the input VAT is collected the amount paid is correct
and proper. The input VAT is a tax liability of, and legally paid by, a VATregistered seller of goods, properties or services used as input by another
VAT-registered person in the sale of his own goods, properties, or services.
This tax liability is true even if the seller passes on the input VAT to the buyer
as part of the purchase price. The second VAT-registered person, who is not
legally liable for the input VAT, is the one who applies the input VAT as credit
for his own output VAT. If the input VAT is in fact "excessively" collected as
understood under Section 229, then it is the first VAT-registered person
the taxpayer who is legally liable and who is deemed to have legally paid for
the input VAT who can ask for a tax refund or credit under Section 229 as
an ordinary refund or credit outside of the VAT System. In such event, the
second VAT-registered taxpayer will have no input VAT to offset against his
own output VAT.
In a claim for refund or credit of "excess" input VAT under Section 110(B)
and Section 112(A), the input VAT is not "excessively" collected as
understood under Section 229. At the time of payment of the input VAT the
amount paid is the correct and proper amount. Under the VAT System, there
is no claim or issue that the input VAT is "excessively" collected, that is, that
the input VAT paid is more than what is legally due. The person legally liable
for the input VAT cannot claim that he overpaid the input VAT by the mere
existence of an "excess" input VAT. The term "excess" input VAT simply
means that the input VAT available as credit exceeds the output VAT, not that
the input VAT is excessively collected because it is more than what is legally
due. Thus, the taxpayer who legally paid the input VAT cannot claim for
refund or credit of the input VAT as "excessively" collected under Section
229.
Under Section 229, the prescriptive period for filing a judicial claim for refund
is two years from the date of payment of the tax "erroneously, . . .
illegally, . . . excessively or in any manner wrongfully collected." The
prescriptive period is reckoned from the date the person liable for the tax
pays the tax. Thus, if the input VAT is in fact "excessively" collected, that is,
the person liable for the tax actually pays more than what is legally due, the
taxpayer must file a judicial claim for refund within two years from his date of
payment. Only the person legally liable to pay the tax can file the judicial
claim for refund. The person to whom the tax is passed on as part of the
purchase price has no personality to file the judicial claim under Section 229.
Under Section 110(B) and Section 112(A), the prescriptive period for filing a
judicial claim for "excess" input VAT is two years from the close of the
taxable quarter when the sale was made by the person legally liable to pay
the output VAT. This prescriptive period has no relation to the date of
payment of the "excess" input VAT. The "excess" input VAT may have been
paid for more than two years but this does not bar the filing of a judicial claim
for "excess" VAT under Section 112(A), which has a different reckoning
period from Section 229. Moreover, the person claiming the refund or credit
of the input VAT is not the person who legally paid the input VAT. Such
person seeking the VAT refund or credit does not claim that the input VAT
was "excessively" collected from him, or that he paid an input VAT that is
more than what is legally due. He is not the taxpayer who legally paid the
input VAT.
As its name implies, the Value-Added Tax system is a tax on the value
added by the taxpayer in the chain of transactions. For simplicity and
efficiency in tax collection, the VAT is imposed not just on the value added by
the taxpayer, but on the entire selling price of his goods, properties or
services. However, the taxpayer is allowed a refund or credit on the VAT
previously paid by those who sold him the inputs for his goods, properties, or
services. The net effect is that the taxpayer pays the VAT only on the value
that he adds to the goods, properties, or services that he actually sells.
Under Section 110(B), a taxpayer can apply his input VAT only against his
output VAT. The only exception is when the taxpayer is expressly "zero-rated
or effectively zero-rated" under the law, like companies generating power
through renewable sources of energy. Thus, a non zero-rated VAT-registered
taxpayer who has no output VAT because he has no sales cannot claim a
tax refund or credit of his unused input VAT under the VAT System. Even if
the taxpayer has sales but his input VAT exceeds his output VAT, he cannot
seek a tax refund or credit of his "excess" input VAT under the VAT System.
He can only carry-over and apply his "excess" input VAT against his future
output VAT. If such "excess" input VAT is an "excessively" collected tax, the
taxpayer should be able to seek a refund or credit for such "excess" input
VAT whether or not he has output VAT. The VAT System does not allow such
refund or credit. Such "excess" input VAT is not an "excessively" collected
tax under Section 229. The "excess" input VAT is a correctly and properly
collected tax. However, such "excess" input VAT can be applied against the
output VAT because the VAT is a tax imposed only on the value added by
the taxpayer. If the input VAT is in fact "excessively" collected under Section
229, then it is the person legally liable to pay the input VAT, not the person to
whom the tax was passed on as part of the purchase price and claiming
credit for the input VAT under the VAT System, who can file the judicial claim
under Section 229.
Any suggestion that the "excess" input VAT under the VAT System is an
"excessively" collected tax under Section 229 may lead taxpayers to file a
claim for refund or credit for such "excess" input VAT under Section 229 as
an ordinary tax refund or credit outside of the VAT System. Under Section
229, mere payment of a tax beyond what is legally due can be claimed as a
refund or credit. There is no requirement under Section 229 for an output
VAT or subsequent sale of goods, properties, or services using materials
subject to input VAT.
From the plain text of Section 229, it is clear that what can be refunded or
credited is a tax that is "erroneously . . . illegally, . . . excessively or in any
manner wrongfully collected." In short, there must be a wrongful payment
because what is paid, or part of it, is not legally due. As the Court held in
Thus, the task at hand is to determine the applicable period for this case.
In this case, Mindanao II filed its administrative claims for refund or credit for
the second, third and fourth quarters of 2004 on 6 October 2005. The case
thus falls within the first period as indicated in the above timeline. In other
words, it is covered by the rule prior to the advent of either Atlas or Mirant.
Accordingly, the proper reckoning date in this case, as provided by Section
112(A) of the 1997 Tax Code, is the close of the taxable quarter when the
relevant sales were made.
C. The Administrative Claims Were Timely Filed
We sum up our conclusions so far: (1) it is only the administrative claim that
must be filed within the two-year prescriptive period; and (2) the two-year
prescriptive period begins to run from the close of the taxable quarter when
the relevant sales were made.
Bearing these in mind, we now proceed to determine whether Mindanao II's
administrative claims for the second, third, and fourth quarters of 2004 were
timely filed.
Second Quarter
Since the zero-rated sales were made in the second quarter of 2004, the
date of reckoning the two-year prescriptive period is the close of the second
quarter, which is on 30 June 2004. Applying Section 112(A), Mindanao II had
two years from 30 June 2004, or until 30 June 2006 to file an administrative
claim with the CIR. Mindanao II filed its administrative claim on 6 October
2005, which is within the two-year prescriptive period. The administrative
claim for the second quarter of 2004 was thus timely filed. For clarity, we
present the rules laid down by San Roque in determining the proper
reckoning date of the two-year prescriptive period through the following
timeline:
Fourth Quarter
Here, the two-year prescriptive period is counted starting from the close of
the fourth quarter which is on 31 December 2004. The last day of the
prescriptive period for filing an application for tax refund/credit with the CIR
was on 31 December 2006. Mindanao II filed its administrative claim with the
CIR on 6 October 2005. Hence, the claims were filed on time, pursuant to
Section 112(A) of the 1997 Tax Code. (See timeline below)
II.
Third Quarter
As regards the claim for the third quarter of 2004, the two-year prescriptive
period started to run on 30 September 2004, the close of the taxable quarter.
It ended on 30 September 2006, pursuant to Section 112(A) of the 1997 Tax
Code. Mindanao II filed its administrative claim on 6 October 2005. Thus,
since the administrative claim was filed well within the two-year prescriptive
period, the administrative claim for the third quarter of 2004 was timely filed.
(See timeline below)
(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) and (B) hereof. In case of
full or partial denial of the claim for tax refund or tax credit, or the failure on
the part of the Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty (30) days from the
receipt of the decision denying the claim or after the expiration of the one
hundred twenty day-period, appeal the decision or the unacted claim with
the Court of Tax Appeals. (Emphases supplied)
Section 112(D) speaks of two periods: the period of 120 days, which serves
as a waiting period to give time for the CIR to act on the administrative claim
for refund or credit, and the period of 30 days, which refers to the period for
interposing an appeal with the CTA. It is with the 30-day period that there is
an issue in this case.
The CTA En Bancs holding is that, since the word "or" a disjunctive term
that signifies dissociation and independence of one thing from another is
used in Section 112(D), the taxpayer is given two options: 1) file an appeal
within 30 days from the CIRs denial of the administrative claim; or 2) file an
appeal with the CTA after expiration of the 120-day period, in which case the
30-day appeal period does not apply. The judicial claim is seasonably filed
so long as it is filed after the lapse of the 120-day waiting period but before
the lapse of the two-year prescriptive period under Section 112(A).46
We do not agree.
This law is clear, plain, and unequivocal. Following the well-settled verba
legis doctrine, this law should be applied exactly as worded since it is clear,
plain, and unequivocal. As this law states, the taxpayer may, if he wishes,
appeal the decision of the Commissioner to the CTA within 30 days from
receipt of the Commissioner's decision, or if the Commissioner does not act
on the taxpayer's claim within the 120-day period, the taxpayer may appeal
to the CTA within 30 days from the expiration of the 120-day period.
(Emphasis supplied)
The San Roque pronouncement is clear. The taxpayer can file the appeal in
one of two ways: (1) file the judicial claim within thirty days after the
Commissioner denies the claim within the 120-day period, or (2) file the
judicial claim within thirty days from the expiration of the 120-day period if
the Commissioner does not act within the 120-day period.
B. The Judicial Claim Was Belatedly Filed
In this case, the facts are not up for debate. Mindanao II filed its
administrative claim for refund or credit for the second, third, and fourth
quarters of 2004 on 6 October 2005. The CIR, therefore, had a period of 120
days, or until 3 February 2006, to act on the claim. The CIR, however, failed
to do so. Mindanao II then could treat the inaction as a denial and appeal it
to the CTA within 30 days from 3 February 2006, or until 5 March 2006.
Mindanao II, however, filed a Petition for Review only on 21 July 2006, 138
days after the lapse of the 30-day period on 5 March 2006. The judicial claim
was therefore filed late. (See timeline below.)
The 30-day period applies not only to instances of actual denial by the CIR
of the claim for refund or tax credit, but to cases of inaction by the CIR as
well. This is the correct interpretation of the law, as held in San Roque:47
Section 112(C)48 also expressly grants the taxpayer a 30-day period to
appeal to the CTA the decision or inaction of the Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty
day-period, appeal the decision or the unacted claim with the Court of Tax
Appeals.
The answer is found in San Roque. There, we declared that the 30-day
period to appeal is both mandatory and jurisdictional:
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal
to the CTA the decision or inaction of the Commissioner, thus:
x x x the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty
day-period, appeal the decision or the unacted claim with the Court of Tax
Appeals. (Emphasis supplied)
This law is clear, plain, and unequivocal. Following the well-settled verba
legis doctrine, this law should be applied exactly as worded since it is clear,
plain, and unequivocal. As this law states, the taxpayer may, if he wishes,
appeal the decision of the Commissioner to the CTA within 30 days from
receipt of the Commissioner's decision, or if the Commissioner does not act
on the taxpayer's claim within the 120-day period, the taxpayer may appeal
to the CTA within 30 days from the expiration of the 120-day period.
xxxx
Although Mindanao II has not invoked the BIR ruling, we deem it prudent as
well as necessary to dwell on this issue to determine whether this case falls
under the exception.
For this question, we come back to San Roque, which provides that BIR
Ruling No. DA-489-03 is a general interpretative rule; thus, taxpayers can
rely on it from the time of its issuance on 10 December 2003 until its reversal
by this Court in Aichi on 6 October 2010, when the 120+30 day periods were
held to be mandatory and jurisdictional. The Court reasoned as follows:
Section 112(A) and (C) must be interpreted according to its clear, plain, and
unequivocal language. The taxpayer can file his administrative claim for
refund or credit at anytime within the two-year prescriptive period. If he files
his claim on the last day of the two-year prescriptive period, his claim is still
filed on time. The Commissioner will have 120 days from such filing to
decide the claim. If the Commissioner decides the claim on the 120th day, or
does not decide it on that day, the taxpayer still has 30 days to file his
judicial claim with the CTA. This is not only the plain meaning but also the
only logical interpretation of Section 112(A) and (C).
xxxx
xxxx
When Section 112(C) states that "the taxpayer affected may, within thirty
(30) days from receipt of the decision denying the claim or after the
expiration of the one hundred twenty-day period, appeal the decision or the
unacted claim with the Court of Tax Appeals," the law does not make the
120+30 day periods optional just because the law uses the word " may." The
word "may" simply means that the taxpayer may or may not appeal the
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general
interpretative rule applicable to all taxpayers or a specific ruling applicable
only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule because it was a
response to a query made, not by a particular taxpayer, but by a government
agency tasked with processing tax refunds and credits, that is, the One Stop
Shop Inter-Agency Tax Credit and Drawback Center of the Department of
Finance . This government agency is also the addressee, or the entity
responded to, in BIR Ruling No. DA-489-03. Thus, while this government
agency mentions in its query to the Commissioner the administrative claim of
Lazi Bay Resources Development, Inc., the agency was in fact asking the
Commissioner what to do in cases like the tax claim of Lazi Bay Resources
Development, Inc., where the taxpayer did not wait for the lapse of the 120day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all
taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its
issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6
October 2010, where this Court held that the 120+30 day periods are
mandatory and jurisdictional.51
Thus, in San Roque, the Court applied this exception to Taganito Mining
Corporation (Taganito), one of the taxpayers in San Roque. Taganito filed its
judicial claim on 14 February 2007, after the BIR ruling took effect on 10
December 2003 and before the promulgation of Mirant. The Court stated:
Taganito, however, filed its judicial claim with the CTA on 14 February 2007,
after the issuance of BIR Ruling No. DA-489-03 on 10 December 2003.
Truly, Taganito can claim that in filing its judicial claim prematurely without
waiting for the 120-day period to expire, it was misled by BIR Ruling No. DA489-03. Thus, Taganito can claim the benefit of BIR Ruling No. DA-489-03,
which shields the filing of its judicial claim from the vice of prematurity.52
San Roque was also careful to point out that the BIR ruling does not
retroactively apply to premature judicial claims filed before the issuance of
the BIR ruling:
However, BIR Ruling No. DA-489-03 cannot be given retroactive effect for
four reasons: first, it is admittedly an erroneous interpretation of the law;
second, prior to its issuance, the BIR held that the 120-day period was
mandatory and jurisdictional, which is the correct interpretation of the law;
third, prior to its issuance, no taxpayer can claim that it was misled by the
BIR into filing a judicial claim prematurely; and fourth, a claim for tax refund
or credit, like a claim for tax exemption, is strictly construed against the
taxpayer.53
Thus, San Roque held that taxpayer San Roque Power Corporation, could
not seek refuge in the BIR ruling as it jumped the gun when it filed its judicial
her view, is unfair to taxpayers. It has been the view of this ponente that the
mandatory nature of 120+30 day period must be completely applied
prospectively or, at the earliest, only upon the finality of Aichi in order to
create stability and consistency in our tax laws. Nevertheless, this ponente is
mindful of the fact that judicial precedents cannot be ignored. Hence, the
majority view expressed in San Roque must be applied.
Bearing in mind the foregoing rules for the timely filing of a judicial claim for
refund or credit of unutilized input VAT, we rule on the present case of
Mindanao II as follows:
We find that Mindanao IIs situation is similar to that of Philex in San Roque.
As mentioned above, Mindanao II filed its judicial claim with the CTA on 21
July 2006. This was after the issuance of BIR Ruling No. DA-489-03 on 10
December 2003, but before its reversal on 5 October 2010. However, while
the BIR ruling was in effect when Mindanao II filed its judicial claim, the rule
cannot be properly invoked. The BIR ruling, as discussed earlier,
contemplates premature filing. The situation of Mindanao II is one of late
filing. To repeat, its judicial claim was filed on 21 July 2006 long after 5
March 2006, the last day of the 30-day period for appeal. In fact, it filed its
judicial claim 138 days after the lapse of the 30-day period. (See timeline
below)
(Exh. "D")
petitioner corporation was deemed to have paid its tax liabilities in question
under the withholding tax system. (CA Decision, pp. 4-5; Rollo, pp. 28-29)
The respondent appellate court in this case has misapplied jurisprudential
law. In the Gibbs case, supra, cited by the Court of Appeals, we have clearly
stated that:
tax liability for the year 1981 fell due. The distinction is essential in the
resolution of this case for it spells the difference between being barred by
prescription and entitlement to a refund.
Under Section 49 of the National Internal Revenue Code of 1986, as
amended, it is explicitly provided that:
Sec. 49. Payment and assessment of income tax for
individuals and corporations.
(a) Payment of tax (1) In general. - The total amount
of tax imposed by this Title shall be paid by the person
subject thereto at the time the return is filed. ...
Section 70, subparagraph (b) of the same Code states when the income tax
return with respect to taxpayers like the petitioner corporation must be filed.
Thus:
Sec. 70 (b) Time of filing the income return - The corporate
quarterly declaration shall be filed within sixty (60) days
following the close of each of the first three quarters of the
taxable year. The final adjustment return shall be filed on
or before the 15th day of the 4th month following the close
of the fiscal year, as the case may be. The petitioner
corporation's taxable year is on a calendar year basis,
hence, with respect to the 1981 taxable year, ACCRAIN
had until 15 April 1982 within which to file its final
adjustment return. The petitioner corporation duly
complied with this requirement. On the basis of the
corporate income tax return which ACCRAIN filed on 15
April 1982, it reported a net loss of P2,957,142.00.
Consequently, as reflected thereon, the petitioner
corporation, after due computation, had no tax liability for
the year 1981. Had there been any, payment thereof
would have been due at the time the return was filed
pursuant to subparagraph (c) of the aforementioned codal
provision which reads:
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
Clearly, 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 income it received from all
sources and the amount of withholding taxes remitted by its withholding
agents to the Bureau of Internal Revenue. The petitioner corporation filed its
final adjustment return for its 1981 taxable year on April 15, 1982. In our
Resolution dated April 10, 1989 in the case ofCommissioner of Internal
Revenue v. Asia Australia Express, Ltd. (G. R. No. 85956), we ruled that the
two-year prescriptive period within which to claim a refund commences to
run, at the earliest, on the date of the filing of the adjusted final tax return.
Hence, the petitioner corporation had until April 15, 1984 within which to file
its claim for refund. Considering that ACCRAIN filed its claim for refund as
early as December 29, 1983 with the respondent Commissioner who failed
to take any action thereon and considering further that the non-resolution of
its claim for refund with the said Commissioner prompted ACCRAIN to
reiterate its claim before the Court of Tax Appeals through a petition for
review on April 13, 1984, the respondent appellate court manifestly
committed a reversible error in affirming the holding of the tax court that
ACCRAIN's claim for refund was barred by prescription.
It bears emphasis at this point that the rationale in computing the two-year
prescriptive period with respect to the petitioner corporation's claim for
refund from the time it filed its final adjustment return is the fact that it was
only then that ACCRAIN could ascertain whether it made profits or incurred
losses in its business operations. The "date of payment", therefore, in
ACCRAIN's case was when its tax liability, if any, fell due upon its filing of its
final adjustment return on April 15, 1982.
April 2, 2014
On 15 April 2002, respondent filed its 2001 income tax return with the BIR,
reporting an income tax overpayment in the amount of P69,562,412.00
arising from unutilized creditable taxes withheld during the year, detailed as
follows:4
Sales/Revenues
Less: Cost of Sales/Services
Gross Income from Operation
Add: Non-Operating & Other Income
In line with its primary purpose, respondent entered into Operating and
Management Agreements with Mirant Pagbilao Corporation (MPC) [formerly
Southern Energy Quezon, Inc.] and Mirant Sual Corporation (MSC) [formerly
Southern Energy Pangasinan, Inc.] to provide MPC and MSC with operation
and maintenance services in connection with the operation, construction and
commissioning of the coal-fired thermal power stations situated in Pagbilao,
Quezon and Sual, Pangasinan, respectively. Payments received by
respondent from MPC and MSC relative to the said agreements were
allegedly subjected to creditable withholding taxes.
Less: Deductions
P922,569,303.00
938,543,252.00
(P15,973,949.00)
74,995,982.00
P 59,022,033.00
59,022,033.00
Taxable Income
Tax Rate
32%
Income Tax
NIL
Tax Payable/(Overpayment)
P 27,784,217.00
41,778,195.00
P 69,652,412.00
(P69,562,412.00)
Respondent marked the appropriate box manifesting its intent to have the
above overpayment refunded.
On 19 March 2003, pursuant to Section 76 in relation to Section 204 of the
NIRC of 1997, as amended, respondent filed with the BIR, a letter
requesting for the refund or issuance of a tax credit certificate corresponding
to its reported unutilized creditable withholding taxes for taxable year 2001 in
the amount ofP69,562,412.00.
Thereafter, on 27 March 2003, respondent filed a Petition for Review before
the CTA, in order to toll the running of the two-year prescriptive period
provided under Section 229 of the NIRC of 1997, as amended, which was
docketed as C.T.A. Case No. 6623.
The Ruling of the CTA in Division
In a Decision dated 4 August 2006,5 the CTA in Division granted
respondents Petition and ordered petitioner to refund or issue a tax credit
certificate in favor of the former the entire amount of P69,562,412.00,
representing its unutilized tax credits for the taxable year ended 31
December 2001.
The CTA in Division based its ruling on the numerous documentary evidence
presented by respondent during the proceedings, such as its Income Tax
Returns (ITRs) for taxable years 2001 and 2002, various Certificates of
Creditable Tax Withheld at Source for taxable year 2001 duly issued to it by
its withholding agents, and Report of the Commissioned Independent
Certified Public Accountant dated 15 March 2004, among others. The court a
quo reasoned that respondent has indeed established its entitlement to a
refund/tax credit of its excess creditable withholding taxes in compliance with
the following basic requirements: (1) that the claim for refund (or issuance of
a tax credit certificate) was filed within the two-year prescriptive period
prescribed under Section 204(C), in relation to Section 229 of the NIRC of
1997, as amended; (2) that the fact of withholding is established by a copy of
a statement duly issued by the payor (withholding agent) to the payee,
showing the amount paid and the amount of tax withheld therefrom; and (3)
that the income upon which the taxes were withheld was included in the
return of the recipient.6
Subsequently, on 8 November 2006, the CTA in Division denied petitioners
Motion for Reconsideration for lack of merit.7
Aggrieved, petitioner appealed to the CTA En Banc by filing a Petition for
Review pursuant to Section 18 of Republic Act (RA) No. 1125, as amended
by RA No. 92828 on 6 December 2006, docketed as CTA EB No. 224.
The Ruling of the CTA En Banc
The CTA En Banc affirmed in toto both the aforesaid Decision and
Resolution rendered by the CTA in Division in CTA Case No. 6623,
pronouncing that there was no cogent reason to disturb the findings and
conclusion spelled out therein. It revealed that what the petition seeks to
accomplish was for the CTA En Banc to view and appreciate the evidence in
another perspective, which unfortunately had already been considered and
passed upon correctly by the CTA in Division.
Upon denial of petitioners Motion for Reconsideration of the 19 June 2007
Decision9 of the CTA En Banc, it filed this Petition for Review on Certiorari
before this Court seeking the reversal of the aforementioned Decision and
the 13 August 2007 Resolution10 rendered in CTA EB No. 224.
Petitioner11 relies on the sole ground that the CTA En Banc gravely erred on
a question of law in affirming the CTA in Divisions ruling which ordered a
refund or issuance of tax credit certificate in favor of respondent despite the
fact that it is not supported by the evidence on record.12
The Issue and Our Ruling
The core issue for the Courts resolution is whether or not respondent has
established its entitlement for the refund or issuance of a tax credit certificate
in its favor the entire amount of P69,562,412.00 representing its unutilized
tax credits for taxable year ended 31 December 2001, pursuant to the
applicable provisions of the NIRC of 1997, as amended.
This is not novel.
In order to be entitled to a refund claim or issuance of a tax credit certificate
representing any excess or unutilized creditable withholding tax, it must be
shown that the claimant has complied with the essential basic conditions set
forth under pertinent provisions of law and existing jurisprudential
declarations.
In Banco Filipino Savings and Mortgage Bank v. Court of Appeals,13 this
Court had previously articulated that there are three essential conditions for
the grant of a claim for refund of creditable withholding income tax, to wit: (1)
the claim is filed with the Commissioner of Internal Revenue within the twoyear period from the date of payment of the tax;14 (2) it is shown on the
return of the recipient that the income payment received was declared as
part of the gross income;15 and (3) the fact of withholding is established by a
copy of a statement duly issued by the payor to the payee showing the
amount paid and the amount of the tax withheld therefrom.
The first condition is pursuant to Sections 204(C) and 229 of the NIRC of
1997, as amended, viz:
(B) Claims for tax credit or refund of any creditable income tax which was
deducted and withheld on income payments shall be given due course only
when it is shown that the income payment has been declared as part of the
gross income and the fact of withholding is established by a copy of the
withholding tax statement duly issued by the payor to the payee showing the
amount paid and the amount of tax withheld therefrom. (Emphasis supplied)
In addition to the abovementioned requisites, the NIRC of 1997, as
amended, likewise provides for the strict observance of the concept of the
irrevocability rule,17 the focal provision of which is Section 76 thereof, quoted
hereunder for easy reference:
SEC. 76. Final Adjustment Return. Every corporation liable to tax under
Section 27 shall file a final adjustment return covering the total taxable
income for the preceding calendar or fiscal year. If the sum of the quarterly
tax payments made during the said taxable year is not equal to the total tax
due on the entire taxable income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the
case may be.
In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of
any supervening cause that may arise after payment: Provided, however,
That the Commissioner may, even without a written claim therefor, refund or
credit any tax, where on the face of the return upon which payment was
made, such payment appears clearly to have been erroneously paid.
(Emphasis supplied)
Here, it is undisputed that the claim for refund was filed within the two-year
prescriptive period prescribed under Section 22918 of the NIRC of 1997, as
amended. Respondent filed19 its income tax return for taxable year 2001 on
15 April 2002. Counting from said date, it indeed had until 14 April
200420 within which to file its claim for refund or issuance of tax credit
certificate in its favor both administratively and judicially. Thus, petitioners
administrative claim and petition for review filed on 19 March 2003 and 27
March 2003, respectively, fell within the abovementioned prescriptive period.
Likewise, respondent was able to present various certificates of creditable
tax withheld at source from its payors, MPC and MSC, for taxable year 2001,
showing creditable withholding taxes in the aggregate amount
ofP70,805,771.42 (although the refund claim was
only P69,562,412.00).21 Moreover, as determined by the CTA in Division,
respondent declared the income related to the claimed creditable
withholding taxes of P69,562,412.00 on its return.22
Lastly, in compliance with Section 76 of the NIRC of 1997, as amended,
respondent opted to be refunded of its unutilized tax credit (as evidenced by
the "x" mark in the appropriate box of its 2001 income tax return), and the
same was not carried over in its 2002 income tax return; therefore, the entire
amount of P69,562,412.00 may be a proper subject of a claim for refund/tax
credit certificate.23
It is apt to restate here the hornbook doctrine that the findings and
conclusions of the CTA are accorded the highest respect and will not be
lightly set aside. The CTA, by the very nature of its functions, is dedicated
exclusively to the resolution of tax problems and has accordingly developed
an expertise on the subject unless there has been an abusive or improvident
exercise of authority.24
Consequently, its conclusions will not be overturned unless there has been
an abuse or improvident exercise of authority. Its findings can only be
disturbed on appeal if they are not supported by substantial evidence or
there is a showing of gross error or abuse on the part of the Tax Court. In the
absence of any clear and convincing proof to the contrary, this Court must
presume that the CTA rendered a decision which is valid in every respect.25
The Court in this case agrees with the conclusion of the CTA in Division and
subsequent affirmation of the CTA En Banc that respondent complied with all
the requirements for the refund of its unutilized creditable withholding taxes
for taxable period ending 31 December 2001. We adopt the factual and legal
findings as follows:
On the first ground, [petitioner] argues that [respondent] failed to present the
various withholding agents/payors to testify on the validity of the contents of
the Certificates of Creditable Tax Withheld at Source ("certificates"). Thus,
the certificates presented by [respondent] are not valid. And even assuming
that the certificates are valid, this Court cannot entertain the claim for
refund/tax credit certificates because the certificates were not submitted to
[petitioner].
[Petitioners] arguments are untenable since the certificates presented
(Exhibits "R", "S", "T", "U", "V", "W", and "X") were duly signed and prepared
under penalties of perjury, the figures appearing therein are presumed to be
true and correct. Thus, the testimony of the various agents/payors need not
be presented to validate the authenticity of the certificates.
In addition, that [respondent] did not submit the certificates to the [petitioner]
is of no moment. The administrative and judicial claim for refund and/or tax
credit certificates must be filed within the two-year prescriptive period
starting from the date of payment of the tax (Section 229, NIRC). In the
instant case, [respondent] filed its judicial claim (after filing its administrative
claim) precisely to preserve its right to claim. Otherwise, [respondent's] right
to the claim would have been barred. Considering that this [c]ourt had
jurisdiction over the claim, frespondent] rightfully presented the certificates
before this [c]ourt. Besides, any records that [petitioner] may have on the
administrative claim would eventually be transmitted to this [c]ourt under
Section S(b), Rule 6 of the Revised Rules of the Court of (Tax) Appeals.
As for the second ground, this [ c ]ourt finds [petitioner's] contention
unmeritorious.1wphi1 The requirements for claiming a tax refund/tax credit
certificates had been laid down in Citibank N.A. vs. Court of Appeals, G.R.
No. 107434, October 10, 1997. Nowhere in the case cited is proof of actual
remittance of the withheld taxes to the [petitioner] required before the
taxpayer may claim for a tax refund/tax credit certificates.26 (Emphasis
supplied)
In the same vein, this Court finds no abusive or improvident exercise of
authority on the part of the CT A in Division. Since there is no showing of
gross error or abuse on the part of the CT A in Division, and its findings are
supported by substantial evidence which were thoroughly considered during
the trial, there is no cogent reason to disturb its findings and conclusions.
All told, respondent complied with all the legal requirements and it is entitled,
as it opted, to a refund of its excess creditable withholding tax for the taxable
year 2001 in the amount of P69,562,412.00.
1953). The fact that almost the same ratio existed during the month
of July, 1955 does not provide a sufficient inference on the
conditions in 1952 and 1953. . .
In order to stand the test of judicial scrutiny, the assessment must
be based on actual facts. The presumption of correctness of
assessment being a mere presumption cannot be made to rest on
another presumption that the circumstances in 1952 and 1953 are
presumed to be the same as those existing in 1949 to 1951 and
July 1955. In the case under consideration there are no substantial
facts to support the assessment in question. ...
A review of the records has not disclosed anything sufficient to justify a
reversal of the above finding made by the Court of Tax Appeals. It should be
borne in mind that to sustain the deficiency tax assessed against respondent
would amount, in effect, to a finding that he had, for a considerable period of
time, cheated and defrauded the government by selling to each adult patron
two children's tax-free tickets instead of one ticket subject to the amusement
tax provided for in Section 260 of the National Internal Revenue Code. Fraud
is a serious charge and, to be sustained, it must be supported by clear and
convincing proof which, in the present case, is lacking.
The claim that respondent admitted having resorted to the anomalous
practice already mentioned is not entirely correct. What respondent appears
to have admitted was that during a certain limited period he had adopted a
sort of rebate system applicable to cases where adults and children came in
groups and were al anomalous practice already mentioned is not entirely
correct. What respondent appears to have admitted was that during a certain
limited period he had adopted a sort of rebate ystem applicable to cases
where adults and children came in group and were all charged 20 centavo
admission tickets. This practice was, however, discontinued when he was
informed by the Bureau of Internal Revenue that it was not in accordance
with law.
WHEREFORE, the appealed judgment is hereby affirmed with costs.
FIRST DIVISION
OCEANIC WIRELESS NETWORK, G.R. No. 148380
INC., Petitioner, Present:
dismissing the Petition for Review in CTA Case No. 4668 for lack of
jurisdiction.
DECISION
AZCUNA, J.:
dated September 16, 1994, declaring that said petition was filed
beyond the thirty (30)-day period reckoned from the time when the
demand letter of January 24, 1991 by the Chief of the BIR Accounts
Receivable and Billing Division was presumably received by
of
the
I
THE HONORABLE RESPONDENT CA ERRED
IN FINDING THAT THE DEMAND LETTER ISSUED BY
THE
(THEN)
ACCOUNTS
RECEIVABLE/BILLING
DIVISION OF THE BIR NATIONAL OFFICE WAS THE
FINAL DECISION OF THE RESPONDENT CIR ON THE
DISPUTED
ASSESSMENTS,
AND
HENCE
CONSTITUTED THE DECISION APPEALABLE TO THE
HONORABLE RESPONDENT CTA; AND,
Thus, the main issue is whether or not a demand letter for tax
deficiency assessments issued and signed by a subordinate officer
who was acting in behalf of the Commissioner of Internal Revenue,
Similarly, in Surigao Electric Co., Inc v. Court of Tax Appeals, [13] and
in CIR v. Union Shipping Corporation,[14] we held:
. . . In this letter, the commissioner not only
in effect demanded that the petitioner pay the
amount of P11,533.53 but also gave warning that
in the event it failed to pay, the said commissioner
would be constrained to enforce the collection
thereof by means of the remedies provided by law.
The tenor of the letter, specifically the statement
regarding
the
resort
to
legal
remedies,
unmistakably indicated the final nature of the
determination made by the commissioner of the
petitioners deficiency franchise tax liability.
(a)
The
power
to
recommend
the
promulgation of rules and regulations by
the Secretary of Finance;
(b)
Tax Appeals, while the denial of the protest was in the form of a
demand letter, the notation in the said letter making reference to
the protest filed by petitioner clearly shows the intention of the
respondent to make it as [his] final decision.[15]
Billing Division does not fall under any of the exceptions that have
SEC.
228. Protesting
of
Assessment. When the Commissioner or his duly
authorized representative finds that proper taxes
should be assessed, he shall first notify the
taxpayer of his findingsSuch assessment may be
protested administratively by filing a request for
reconsideration or reinvestigation within thirty (30)
days from receipt of the assessment in such form
and
manner
as
may
be
prescribed
by
implementing rules and regulations. Within sixty
(60) days from filing of the protest, all relevant
supporting documents shall have been submitted;
otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not
acted upon within one hundred (180) days from
submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to
the Court of Tax Appeals within thirty (30) days
from receipt of the said decision, or from the lapse
of the one hundred eighty (180) - day period;
otherwise, the decision shall become final,
executory and demandable.
delinquent
taxes
and
denying
its
request
for
was filed with the Court of Tax Appeals only on November 8, 1991.
executory.
Appeals dated October 31, 2000 and its Resolution dated May 3,
SO ORDERED.
thereof.[17]
We agree with the factual findings of the Court of Tax
Appeals that the demand letter may be presumed to have been
duly directed, mailed and was received by petitioner in the regular
and in this case, since the period to appeal has commenced to run
from the time the letter of demand was presumably received by
petitioner within a reasonable time after January 24, 1991, the
47,312,353.94 11,828,088.48
8,988,362.97 68,128,805.39
ROMERO, J.:
Petitioner Philex Mining Corp. assails the decision of the Court of Appeals
promulgated on April 8, 1996 in CA-G.R. SP No. 36975 1 affirming the Court
of Tax Appeals decision in CTA Case No. 4872 dated March 16,
1995 2 ordering it to pay the amount of P110,677,668.52 as excise tax
liability for the period from the 2nd quarter of 1991 to the 2nd quarter of 1992
plus 20% annual interest from August 6, 1994 until fully paid pursuant to
Sections 248 and 249 of the Tax Code of 1977.
The facts show that on August 5, 1992, the BIR sent a letter to Philex asking
it to settle its tax liabilities for the 2nd, 3rd and 4th quarter of 1991 as well as
the 1st and 2nd quarter of 1992 in the total amount of P123,821.982.52
computed as follows:
PERIOD COVERED BASIC TAX 25% SURCHARGE INTEREST
TOTAL EXCISE
TAX DUE
2nd Qtr., 1991 12,911,124.60 3,227,781.15 3,378,116.16
19,517,021.91
3rd Qtr., 1991 14,994,749.21 3,748,687.30 2,978,409.09
21,721,845.60
4th Qtr., 1991 19,406,480.13 4,851,620.03 2,631,837.72
26,889,937.88
In view of the BIR's denial of the offsetting of Philex's claim for VAT input
credit/refund against its excise tax obligation, Philex raised the issue to the
Court of Tax Appeals on November 6, 1992. 7 In the course of the
proceedings, the BIR issued Tax Credit Certificate SN 001795 in the amount
of P13,144,313.88 which, applied to the total tax liabilities of Philex of
P123,821,982.52; effectively lowered the latter's tax obligation to
P110,677,688.52.
Despite the reduction of its tax liabilities, the CTA still ordered Philex to pay
the remaining balance of P110,677,688.52 plus interest, elucidating its
reason, to wit:
Thus, for legal compensation to take place, both
obligations must be liquidated and demandable.
"Liquidated" debts are those where the exact amount has
already been determined (PARAS, Civil Code of the
Philippines, Annotated, Vol. IV, Ninth Edition, p. 259). In
the instant case, the claims of the Petitioner for VAT refund
is still pending litigation, and still has to be determined by
this Court (C.T.A. Case No. 4707). A fortiori, the liquidated
debt of the Petitioner to the government cannot, therefore,
be set-off against the unliquidated claim which Petitioner
conceived to exist in its favor (see Compaia General de
Tabacos vs. French and Unson, No. 14027, November 8,
1918, 39 Phil. 34). 8
Aggrieved with the decision, Philex appealed the case before the Court of
Appeals docketed as CA-GR. CV No. 36975. 11 Nonetheless, on April 8,
1996, the Court of Appeals a Affirmed the Court of Tax Appeals observation.
The pertinent portion of which reads: 12
WHEREFORE, the appeal by way of petition for review is
hereby DISMISSED and the decision dated March 16,
1995 is AFFIRMED.
Philex filed a motion for reconsideration which was, nevertheless, denied in
a Resolution dated July 11, 1996. 13
However, a few days after the denial of its motion for reconsideration, Philex
was able to obtain its VAT input credit/refund not only for the taxable year
1989 to 1991 but also for 1992 and 1994, computed as follows: 14
Period Covered Tax Credit Date
By Claims For Certificate of
VAT refund/credit Number Issue Amount
1994 (2nd Quarter) 007730 11 July 1996 P25,317,534.01
1994 (4th Quarter) 007731 11 July 1996 P21,791,020.61
Moreover, the Court of Tax Appeals ruled that "taxes cannot be subject to
set-off on compensation since claim for taxes is not a debt or contract." 9 The
dispositive portion of the CTA decision 10 provides:
Corollarily, the fact that Philex has pending claims for VAT input claim/refund
with the government is immaterial for the imposition of charges and penalties
prescribed under Section 248 and 249 of the Tax Code of 1977. The
payment of the surcharge is mandatory and the BIR is not vested with any
authority to waive the collection thereof. 28 The same cannot be condoned
for flimsy reasons, 29 similar to the one advanced by Philex in justifying its
non-payment of its tax liabilities.
Finally, Philex asserts that the BIR violated Section 106 (e) 30 of the National
Internal Revenue Code of 1977, which requires the refund of input taxes
within 60 days, 31 when it took five years for the latter to grant its tax claim for
VAT input credit/refund. 32
In this regard, we agree with Philex. While there is no dispute that a claimant
has the burden of proof to establish the factual basis of his or her claim for
tax credit or refund, 33 however, once the claimant has submitted all the
required documents it is the function of the BIR to assess these documents
with purposeful dispatch. After all, since taxpayers owe honestly to
government it is but just that government render fair service to the
taxpayers. 34
In the instant case, the VAT input taxes were paid between 1989 to 1991 but
the refund of these erroneously paid taxes was only granted in 1996.
Obviously, had the BIR been more diligent and judicious with their duty, it
could have granted the refund earlier. We need not remind the BIR that
simple justice requires the speedy refund of wrongly-held taxes. 35 Fair
dealing and nothing less, is expected by the taxpayer from the BIR in the
latter's discharge of its function. As aptly held inRoxas v. Court of Tax
Appeals: 36
The power of taxation is sometimes called also the power
to destroy. Therefore it should be exercised with caution to
minimize injury to the proprietary rights of a taxpayer. It
must be exercised fairly, equally and uniformly, lest the tax
collector kill the "hen that lays the golden egg" And, in
order to maintain the general public's trust and confidence
in the Government this power must be used justly and not
treacherously.
Despite our concern with the lethargic manner by which the BIR handled
Philex's tax claim, it is a settled rule that in the performance of governmental
function, the State is not bound by the neglect of its agents and officers.
Nowhere is this more true than in the field of taxation. 37 Again, while we
understand Philex's predicament, it must be stressed that the same is not a
valid reason for the non-payment of its tax liabilities.
To be sure, this is not to state that the taxpayer is devoid of remedy against
public servants or employees, especially BIR examiners who, in
investigating tax claims are seen to drag their feet needlessly. First, if the
BIR takes time in acting upon the taxpayer's claim for refund, the latter can
seek judicial remedy before the Court of Tax Appeals in the manner
prescribed by law. 38 Second, if the inaction can be characterized as willful
neglect of duty, then recourse under the Civil Code and the Tax Code can
also be availed of.
Art. 27 of the Civil Code provides:
Art. 27. Any person suffering material or moral loss
because a public servant or employee refuses or neglects,
without just cause, to perform his official duty may file an
action for damages and other relief against the latter,
without prejudice to any disciplinary action that may be
taken.
More importantly, Section 269 (c) of the National Internal Revenue Act of
1997 states:
xxx xxx xxx
(c) Wilfully neglecting to give receipts, as by law required
for any sum collected in the performance of duty or wilfully
neglecting to perform, any other duties enjoyed by law.
Simply put, both provisions abhor official inaction, willful neglect and
unreasonable delay in the performance of official duties. 39 In no uncertain
terms must we stress that every public employee or servant must strive to
render service to the people with utmost diligence and efficiency. Insolence
and delay have no place in government service. The BIR, being the
government collecting arm, must and should do no less. It simply cannot be
apathetic and laggard in rendering service to the taxpayer if it wishes to
remain true to its mission of hastening the country's development. We take
judicial notice of the taxpayer's generally negative perception towards the
BIR; hence, it is up to the latter to prove its detractors wrong.
In sum, while we can never condone the BIR's apparent callousness in
performing its duties, still, the same cannot justify Philex's non-payment of its
tax liabilities. The adage "no one should take the law into his own hands"
should have guided Philex's action.