TAXATION LAW

(J. Bersamin)

H. TAMBUNTING PAWNSHOP, INC., VS. COMMISSIONER OF INTERNAL

REVENUE
G.R. No. 172394, 13 October 2010
Taxation Law 2; VAT

Facts: H. Tambunting Pawnshop, Inc. (Tambunting), a domestic corporation duly

licensed to engage in the pawnshop business, received an assessment notice from the
Bureau of Internal Revenue (BIR), demanding the payment of deficiency Value-Added
Tax (VAT) and compromise penalty for taxable year 2000 in the amounts
of P5,212,404.52 and P25,000, respectively. Tambunting, disclaiming its liability,
protested the assessment with the respondent Commissioner of Internal Revenue (CIR),
arguing that pawnshops are not within the concept of all services and similar services
as provided in Section 108 (A) of the National Internal Revenue Code. Tambunting also
argues that the enumeration under Section 108(A) of the National Internal Revenue
Code of services subject to VAT is exclusive.

Held: It is now settled that for purposes of determining their tax liability, pawnshops
are treated as non-bank financial intermediaries. Accordingly, the consecutive
deferments of the effectivity date of the application of VAT on non-bank financial
intermediaries like pawnshops resulted in their non-liability for VAT during the
affected taxable years. Specifically, in First Planters Pawnshop, supra, the Court ruled on
the VAT liability of pawnshops for taxable years from 1996 to 2002, holding:

xxx Since petitioner is a non-bank financial intermediary, it is

subject to 10% VAT for the tax years 1996 to 2002; however, with the
levy, assessment and collection of VAT from non-bank financial
intermediaries being specifically deferred by law, then petitioner is not
liable for VAT during these tax years. But with the full implementation of
the VAT system on non-bank financial intermediaries starting January 1,
2003, petitioner is liable for 10% VAT for said tax year. And beginning
2004 up to the present, by virtue of R.A. No. 9238, Petitioner is no longer
liable for VAT but it is subject to percentage tax on gross receipts from 0%
to 5%, as the case may be.

As earlier mentioned, however, Tambunting paid to the BIR 25% of its VAT liability for
the years 2000 to 2002 pursuant to a settlement agreement. The tax liability in question
herein includes taxable year 2000 only. To align with the result herein, therefore,
Tambunting is entitled to a refund of any amount paid pursuant to the settlement
agreement corresponding to taxable year 2000 only.

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H. TAMBUNTING PAWNSHOP INC. VS. COMMISSIONER OF INTERNAL
REVENUE
G.R. No . 173373, 29 July 2013
Tax Deductions

Facts: H. Tambunting Pawnshop, Inc., a domestic corporation duly licensed and

authorized to engage in the pawnshop business, appeals the adverse decision
promulgated on 24 April 2006, whereby the Court of Tax Appeals En Banc (CTA En
Banc) affirmed the decision of the CTA First Division ordering it to pay deficiency
income taxes in the amount of P4,536,687.15 for taxable year 1997, plus 20%
delinquency interest computed from 29 August 2000 until full payment, but cancelling
the compromise penalties for lack of basis. The Bureau of Internal Revenue (BIR) issued
assessment notices and demand letters, all numbered 32-1-97, assessing Tambunting for
deficiency percentage tax, income tax and compromise penalties for taxable year 1997.
Tambunting instituted an administrative protest against the assessment notices and
demand letters with the Commissioner of Internal Revenue.

Held: The rule that tax deductions, being in the nature of tax exemptions, are to be
construed in strictissimi juris against the taxpayer is well settled. Corollary to this rule is
the principle that when a taxpayer claims a deduction, he must point to some specific
provision of the statute in which that deduction is authorized and must be able to prove
that he is entitled to the deduction which the law allows. An item of expenditure,
therefore, must fall squarely within the language of the law in order to be deductible. A
mere averment that the taxpayer has incurred a loss does not automatically warrant a
deduction from its gross income.

Tambunting did not properly prove that it had incurred losses. The subasta books it
presented were not the proper evidence of such losses from the auctions because they
did not reflect the true amounts of the proceeds of the auctions due to certain items
having been left unsold after the auctions. The rematado books did not also prove the
amounts of capital because the figures reflected therein were only the amounts given to
the pawnees. It is interesting to note, too, that the amounts received by the pawnees
were not the actual values of the pawned articles but were only fractions of the real
values.

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CHEVRON PHILIPPINES, INC. VS. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 210836, 1 September 2015
Excise Tax; Tax refund or the tax credit

Facts: Chevron sold and delivered petroleum products to CDC in the period from
August 2007 to December 2007. Chevron did not pass on to CDC the excise taxes paid
on the importation of the petroleum products sold to CDC in taxable year 2007; hence,
on June 26, 2009, it filed an administrative claim for tax refund or issuance of tax credit
certificate in the amount of P6,542,400.00. Considering that respondent Commissioner
of Internal Revenue (CIR) did not act on the administrative claim for tax refund or tax
credit, Chevron elevated its claim to the CTA by petition for review on June 29, 2009.
The case, docketed as CTA Case No. 7939, was raffled to the CTAs First Division. The
CTA First Division denied Chevrons judicial claim for tax refund or tax credit.

Held: Under Section 12917 of the NIRC, as amended, excise taxes are imposed on two
kinds of goods, namely: (a) goods manufactured or produced in the Philippines for
domestic sales or consumption or for any other disposition; and (b) things imported.
Undoubtedly, the excise tax imposed under Section 129 of the NIRC is a tax on
property. With respect to imported things, Section 131 of the NIRC declares that excise
taxes on imported things shall be paid by the owner or importer to the Customs officers,
conformably with the regulations of the Department of Finance and before the release
of such articles from the customs house, unless the imported things are exempt from
excise taxes and the person found to be in possession of the same is other than those
legally entitled to such tax exemption. For this purpose, the statutory taxpayer is the
importer of the things subject to excise tax.

Chevron, being the statutory taxpayer, paid the excise taxes on its importation of the
petroleum products. Pursuant to Section 135(c), supra, petroleum products sold to
entities that are by law exempt from direct and indirect taxes are exempt from excise
tax. The phrase which are by law exempt from direct and indirect taxes describes the
entities to whom the petroleum products must be sold in order to render the exemption
operative. Section 135(c) should thus be construed as an exemption in favor of the
petroleum products on which the excise tax was levied in the first place. The exemption
cannot be granted to the buyers that is, the entities that are by law exempt from direct
and indirect taxes because they are not under any legal duty to pay the excise tax.
Inasmuch as its liability for the payment of the excise taxes accrued immediately upon
importation and prior to the removal of the petroleum products from the
customshouse, Chevron was bound to pay, and actually paid such taxes. But the status
of the petroleum products as exempt from the excise taxes would be confirmed only
upon their sale to CDC in 2007 (or, for that matter, to any of the other entities or
agencies listed in Section 135 of the NIRC). Before then, Chevron did not have any legal
basis to claim the tax refund or the tax credit as to the petroleum products. Payment of
the excise taxes by Chevron upon its importation of petroleum products was deemed
illegal and erroneous upon the sale of the petroleum products to CDC ).

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LUZON HYDRO CORP. VS. CIR

G.R. No. 188260, 13 November 2013
Refund or Tax Credit

Facts: The petitioner, a corporation duly organized under the laws of the Philippines,
has been registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer under
Taxpayer Identification No. 004-266-526. It was formed as a consortium of several
corporations, namely: Northern Mini Hydro Corporation, Aboitiz Equity Ventures,
Inc., Ever Electrical Manufacturing, Inc. and Pacific Hydro Limited. Pursuant to the
Power Purchase Agreement entered into with the National Power Corporation (NPC),
the electricity produced by the petitioner from its operation of the Bakun Hydroelectric
Power Plant was to be sold exclusively to NPC. Relative to its sale to NPC, the
petitioner was granted by the BIR a certificate for Zero Rate for VAT purposes in the
periods from January 1, 2000 to December 31, 2000; February 1, 2000 to December 31,
2000 (Certificate No. Z-162-2000); and from January 2, 2001 to December 31, 2001
(Certificate No. 2001-269). The petitioner alleged herein that it had incurred input VAT
in the amount of P9,795,427.89 on its domestic purchases of goods and services used in
its generation and sales of electricity to NPC in the four quarters of 2001; and that it had
declared the input VAT of P9,795,427.89 in its amended VAT returns for the four
quarters on 2001. Petitioner filed a written claim for refund or tax credit relative to its
unutilized input VAT for the period from October 1999 to October 2001 aggregating
P14,557,004.38.7 Subsequently, on July 24, 2002, it amended the claim for refund or tax
credit to cover the period from October 1999 to May 2002 for P20,609,047.56.
Respondent Commissioner of Internal Revenue (Commissioner) did not ultimately act
on the petitioners claim despite the favorable recommendation. Hence, on April 14,
2003, the petitioner filed its petition for review in the CTA, praying for the refund or tax
credit certificate (TCC) corresponding to the unutilized input VAT paid for the four
quarters of 2001 totalling P9,795,427.88, which was denied.

Held: A claim for refund or tax credit for unutilized input VAT may be allowed only if
the following requisites concur, namely: (a) the taxpayer is VAT-registered; (b) the
taxpayer is engaged in zero-rated or effectively zero-rated sales; (c) the input taxes are
due or paid; (d) the input taxes are not transitional input taxes; (e) the input taxes have
not been applied against output taxes during and in the succeeding quarters; (f) the
input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (g) for
zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)(1) and (2), the
acceptable foreign currency exchange proceeds have been duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; (h) where
there are both zero-rated or effectively zerorated sales and taxable or exempt sales, and
the input taxes cannot be directly and entirely attributable to any of these sales, the
input taxes shall be proportionately allocated on the basis of sales volume; and (i) the
claim is filed within two years after the close of the taxable quarter when such sales
were made.

Petitioner did not produce evidence showing that it had zero-rated sales for the four
quarters of taxable year 2001. As the CTA En Banc precisely found, the petitioner did
not reflect any zero-rated sales from its power generation in its four quarterly VAT
returns, which indicated that it had not made any sale of electricity. Had there been
zero-rated sales, it would have reported them in the returns. Indeed, it carried the
burden not only that it was entitled under the substantive law to the allowance of its
claim for refund or tax credit but also that it met all the requirements for evidentiary
substantiation of its claim before the administrative official concerned, or in the de novo
litigation before the CTA in Division.

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NURSERY CARE CORPORATION, ET AL. VS. ANTHONY ACEVEDO

G.R. No. 180651, 30 July 2014
Double Taxation; Refund
Facts: The City of Manila assessed and collected taxes from the individual petitioners
pursuant to Section 15 (Tax on Wholesalers, Distributors, or Dealers) and Section 17
(Tax on Retailers) of the Revenue Code of Manila. At the same time, the City of Manila
imposed additional taxes upon the petitioners pursuant to Section 21 of the Revenue
Code of Manila, as amended, as a condition for the renewal of their respective business
licenses for the year 1999.

Held: Double taxation means taxing the same property twice when it should be taxed
only once; that is, "taxing the same person twice by the same jurisdiction for the same
thing." It is obnoxious when the taxpayer is taxed twice, when it should be but once.
Otherwise described as "direct duplicate taxation," the two taxes must be imposed on
the same subject matter, for the same purpose, by the same taxing authority, within the
same jurisdiction, during the same taxing period; and the taxes must be of the same
kind or character. In this case, the collection of taxes pursuant to Section 21 of the
Revenue Code of Manila constituted double taxation. Thus, the taxes collected pursuant
thereto must be refunded.

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AGRIEX CO. LTD. VS. HON. TITUS VILLANUEVA

G.R. No. 158150, 10 September 2014
Tariff and Customs Laws

Facts: Petitioner filed a petition for certiorari with the CA, claiming that the Collector of
Customs had no jurisdiction to issue WSD No. 2001-13B and the October 18, 2001
Notice of Sale concerning the 180,000 bags of Thai white rice, which had entered the
SBF only for transshipment to other countries. It insists that the auction sale of the
180,000 bags was null and void for failing to comply with Executive Order No. 272,
which required presidential approval when the amount to be generated from the sale
was at least P50 Million; that the sale disregarded the memorandum of agreement
between the Bureau of Customs and the NFA; that the rice was sold at P785.00 per 50-
kilo bag instead of P1,100.00, the price established by the Bureau of Agricultural
Statistics; and that no notice of auction sale was sent to the NFA or its accredited
dealers.

Respondents sought the dismissal of the petition on the ground of lack of jurisdiction,
maintaining that an appeal to the Court of Tax Appeals (CTA) was the proper remedy
to assail the decision of the Commissioner of Customs, which the petitioner itself
expressly recognized in its February 20, 2002 Comment vis--vis their Manifestation
and Motion dated December 3, 2001; and that because the petitioner did not appeal to
the CTA within the prescribed period, the February 4, 2002 Consolidated Order of
Commissioner Villanueva became final and executory, and could no longer be the
subject of review in the present proceedings.

Held: The Collector of Customs was authorized to institute seizure proceedings and to
issue Warrants of Seizure and Detention (WSD) in the Subic Bay Freeport, subject to the
review by the Commissioner of Customs. Accordingly, the proper remedy to question
the order or resolution of the Commissioner of Customs was an appeal to the CTA, not
to the CA.

Both the Subic Bay Metropolitan Authority (SBMA) and the Bureau of Customs have
the power to seize and forfeit goods or articles entering the Subic Bay Freeport, except
that SBMAs authority to seize and forfeit goods or articles entering the Subic Bay
Freeport has been limited only to cases involving violations of RA No. 7227 or its IRR.
There is no question therefore, that the authority of the Bureau of Customs is larger in
scope because it covers cases concerning violations of the customs laws. The authority
of the Bureau of Customs to seize and forfeit goods and articles entering the Subic Bay
Freeport does not contravene the nature of the Subic Bay Freeport as a separate customs
authority. Indeed, the investors can generally and freely engage in any kind of business
as well as import into and export out goods with minimum interference from the
Government.

Yet, the treatment of the Subic Bay Freeport as a separate customs territory cannot
completely divest the Government of its right to intervene in the operations and
management of the Subic Bay Freeport, especially when patent violations of the
customs and tax laws are discovered. After all, Section 602 of the Tariff and Customs
Code vests exclusive original jurisdiction in the Bureau of Customs over seizure and
forfeiture cases in the enforcement of the tariff and customs laws.

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COMMISSIONER OF CUSTOMS VS. OILINK INTERNATIONAL

CORPORATION, G.R. No. 161759, 2 July 2014
Judicial Remedies

Facts: The Commissioner of Customs contended that the CTA should not take
cognizance of the case because of the lapse of the 30-day period within which to appeal,
arguing that on November 25, 1998, URC had already received the BOCs final
assessment demanding payment of the amount due within 10 days, but filed the
petition only on July 30, 1999. The Commissioner of Customs also argued that only
when the ensuing decision of the Collector and then the adverse decision of the
Commissioner of Customs would it be proper for Oilink to seek judicial relief from the
CTA.

Held: The Court ruled against the Commissioner of Customs. The reckoning date for
Oilinks appeal was July 12, 1999, not July 2, 1999, because it was on the former date
that the Commissioner of Customs denied the protest of Oilink. Clearly, the filing of the
petition on July 30, 1999 by Oilink was well within its reglementary period to appeal.
The insistence by the Commissioner of Customs on reckoning the reglementary period
to appeal from November 25, 1998, the date when URC received the final demand
letter, is unwarranted. The November 25, 1998 final demand letter of the BoC was
addressed to URC, not to Oilink. As such, the final demand sent to URC did not bind
Oilink unless the separate identities of the corporations were disregarded in order to
consider them as one.
The Court also ruled that the principle of non-exhaustion of administrative remedies
was not an iron-clad rule because there were instances in which the immediate resort to
judicial action was proper. As the records indicate, the Commissioner of Customs
already decided to deny the protest by Oilink and stressed then that the demand to pay
was final. In that instance, the exhaustion of administrative remedies would have been
an exercise in futility because it was already the Commissioner of Customs demanding
the payment of the deficiency taxes and duties