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 EXECUTIVE COMMITTEE
Over-all Chairperson Mary Cyriell C. Sumanqui
Chairperson for Academics Erica Mae C. Vista
Chairperson for Hotel Operations Ben Rei E. Barbero
Vice Chairperson for Secretariat Jhelsea Louise B. Dimaano
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Vice Chairperson for Audit Arra Olmaya J. Badangan
Vice Chairperson for EDP Jordan N. Chavez
Vice Chairperson for Logistics Hanz Darryl D.Tiu
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SUBJECT COMMITTEE
Subject Chair for Political Law Cherish Kim B. Ferrer
Subject Chair for Labor Law Kristina D. Cabugao
Subject Chair for Civil Law Ma. Cristina D. Arroyo
Subject Chair for Taxation Law Maria Carissa C. Guinto
Subject Chair for Mercantile Law Dentzen S. Villegas
Subject Chair for Criminal Law Maria Regina C. Gameng
Subject Chair for Remedial Law Raymond F. Ramos
Subject Chair for Legal Ethics Rhev Xandra Acuña

LAYOUT AND CONTENT EDITORS

Roger P. Cuaresma Camille Victoria D. Dela Cruz
Gabrielle Anne S. Endona Paulo O. Hernandez
Joelle Mae J. Garcia Teresa Katherine R. Kua
Micah Regina A. Gonzales Ma. Lourdes M. Santos
Zennia S. Turrecha
Nestor J. Porlucas, Jr.

SAN BEDA COLLEGE OF LAW

ADMINISTRATION
Dean Atty. Marciano G. Delson
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 MARIA CARISSA C. GUINTO
Subject Chair

SHENA GLADDYS P. BAYLON

Assistant Subject Chair

ANGELICA MARIE C. MANUEL

Subject Electronic Data Processing

SUBJECT HEADS
General Principles REINA G. FABREGAS
Income Tax CARLOTA N. VILLAROMAN
Transfer Tax APOLLO JULIUS S. STA MARIA
Value-Added Tax JELLYN C. CLEMENTE
Tax Administration, Enforcement, MIGUIEL A. DE ALVA
and Remedies
Real Property and Local Tax ATHENAI FRANCES R. QUINTON

SUBJECT MEMBERS
LIANNE MAE D. ENRIQUEZ JEWEL JOICE G. DAYTIA
ANISHA M. HADJI HASSAN MIKKAELA S. MONES
MARY EVIELYN N. MATEO ANDREA PATRICIA D. DAQUIAL
MARIE SHERRYDANE C. REYES ALFRED-FRANCIS P. GALLEGOS
ALYSSA R. ZARRAGA JOY CRISTEL G. GAYONA
TAGMA ESTHER V. GARABILES MARIONE NICOLE P. BUGARIN
MAREANE MABEL A. CHAVEZ KATRINA ANN S. PRADO

ADVISERS
Atty. NICASIO C. CABANEIRO, CPA
Atty. DANTE O. DELA CRUZ, CPA
 PREFACE
The COVERED CASES AND J. PERLAS-BERNABE CASE DOCTRINES was
crafted as an apt response for the need to provide a comprehensive compilation of
jurisprudence, promulgated by the Supreme Court, covered for this year’s Bar
Examinations. This complement significantly the other bar review materials in the
repository of the San Beda Centralized Bar Operations.

On this year’s edition, the COVERED CASES is in two forms: a printed copy of
the Covered Cases: Case Doctrines, and a digital copy of the Covered Cases: Case
Digests which include the Supreme Court decisions released from July 1, 2017 to June
30, 2018; while the J. PERLAS-BERNABE CASE DOCTRINES includes the
summary of the rulings pronounced by the 2019 Bar Examination Chairperson, the
Honorable Justice Estela M. Perlas-Bernabe, from September 16, 2011 to December
31, 2018.

In addition to that, the cases herein are categorized and arranged based on the
2019 Supreme Court Bar Exam Syllabus in order to guide its readers in their
appreciation and understanding of the court decisions.

With this material, the San Beda Centralized Bar Operations seeks to uphold
its legacy of service and excellence in helping the examinees achieve their goal of
becoming worthy members of the legal profession.

UT IN OMNIBUS GLORIFICETUR DEUS!

THIS IS THE INTELLECTUAL PROPERTY OF THE

SAN BEDA UNIVERSITY COLLEGE OF LAW
CENTRALIZED BAR OPERATIONS.

THE UNAUTHORIZED COPYING, REPRODUCTION,

MODIFICATION OR DISTRIBUTION
OF ANY OF THE CONTENTS OF THIS BOOK IS
STRICTLY PROHIBITED.
 TABLE OF CONTENTS
TAXATION LAW
Page
Number

Commissioner of Internal Revenue vs. Covanta Energy Philippine Holdings, Inc .. 1

G.R. No. 203160; January 24, 2018
Commissioner of Internal Revenue vs. Philippine Aluminum Wheels, Inc. ……….. 2
G.R. No. 216161; August 9, 2017

Commissioner of Internal Revenue vs. Lancaster Philippines, Inc. ………………… 3

G.R. No. 183408; July 12, 2017
Philippine Amusement and Gaming Corporation vs. Commissioner of Internal …. 4
Revenue and the Head Revenue Executive Assistant, Large Taxpayer Service
G.R. Nos. 210689-90; November 22, 2017
Edison (Bataan) Cogeneration Corporation ……………………………………………... 5
vs. Commissioner of Internal Revenue
G.R. No. 201665; August 30, 2017
Hacienda Luisita, Inc. vs. PARC …………………………………………………………… 6
G.R. No. 171101; April 24, 2018

Coca–Cola Bottlers Philippines, Inc. vs. Commissioner of Internal Revenue …….. 7

G.R. No. 222428; February 19, 2018
Power Sector Assets and Liabilities Management Corporation ……………………... 8
vs. Commissioner of Internal Revenue
G.R. No. 198146; August 8, 2017

Commissioner of Internal Revenue vs. Systems Technology Institute, Inc. ………. 9

G.R. No. 220835; July 26, 2017
Commissioner of Internal Revenue vs. Transitions Optical Philippines, Inc. ……... 10
G.R. No. 227544; November 22, 2017
Commissioner of Internal Revenue vs. Bank of the Philippine Islands …………….. 11
G.R. No. 224327; June 11, 2018
Philippine Airlines, Inc. vs. Commissioner of Internal Revenue …………………….. 12
G.R. Nos. 206079-80; January 17, 2018
University Physician Services Inc. – Management, Inc. vs. …………………………... 13
Commissioner of Internal Revenue
G.R. No. 205955; March 7, 2018
Commissioner of Internal Revenue vs. Cebu Holdings, Inc. …………………………. 14
G.R. No. 189792; June 20, 2018
CE Luzon Geothermal Power Company Inc. …………………………………………….. 15
vs. Commissioner of Internal Revenue
G.R. No. 197526; July 26, 2017

Beaumont Holdings Corpọration vs. Attys. Rosario V.E. Reyes, ……………………. 16

Wilfredo C. Villar, Francisco T. Endriga, Atty. Sheilah F.P. Elbinias-Uyboco
and Mark M. Litonjua
G.R. No. 207306; August 7, 2017
Katherine Rose Salva vs. Ildefonso Magpile …………………………………………..… 17
G.R. No. 220440; November 8, 2017

Philippine Ports Authority vs. City of Davao …………………………………………..… 18

G.R. No. 190324; June 6, 2018
Commissioner of Internal Revenue vs. Court of Tax Appeals and ………………….. 19
Petron Corporation (Resolution)
G.R. No. 207843; February 14, 2018
Philippine Airlines, Inc. vs. Commissioner of Internal Revenue …………………..… 20
G.R. Nos. 206079-80; January 17, 2018
Steel Corporation of the Philippines vs. Bureau of Customs ………..……………….. 21
G.R. No. 220502; February 12, 2018

Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue ……... 22

G.R. No. 197519; November 8, 2017
Team Sual Corporation vs. Commissioner of Internal Revenue …………………….. 23
G.R. Nos. 201225-26; April 18, 2018
Bureau of Internal Revenue vs. …………………………………………………………….. 24
Hon. Ernesto D. Acosta and Chevron Philippines, Inc.
G.R. No. 195320; April 23, 2018
Aichi Forging Company of Asia, Inc. vs. Court of Tax Appeals – En Banc ………… 25
and Commissioner of Internal Revenue
G.R. No. 193625; August 30, 2017
Team Energy Corporation vs. Commissioner of Internal Revenue …………………. 26
G.R. No. 197663; March 14, 2018
City of Manila vs. Cosmos Bottling Corporation ………………………………………... 27
G.R. No. 196681; June 27, 2018
Procter & Gamble Asia Pte Ltd. vs. Commissioner of Internal Revenue …………… 28
G.R. No. 205652; September 6, 2017
Commissioner of Internal Revenue vs. Hedcor Sibulan, Inc. ………………………… 29
G.R. No. 209306; September 27, 2017
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

COMPLIANCE WITH ALL THE REQUIREMENTS AND PAYMENT OF THE

CORRESPONDING AMNESTY TAX ENTITLE THE TAXPAYER TO AVAIL THE TAX
AMNESTY PROGRAM

Commissioner of Internal Revenue vs. Covanta Energy Philippine Holdings, Inc.

G.R. No. 203160; January 24, 2018
Reyes, Jr., J.

FACTS:
This petition for review on certiorari under Rule 45 seeks to reverse and set aside CTA En
Banc’s decision affirming the cancellation and withdrawal of the deficiency tax assessments on
Covanta Energy Philippine Holdings, Inc. (CEPHI) by virtue of a tax amnesty under R.A. No. 9048.

The CIR issued Formal Letters of Demand and Assessment Notices against CEPHI for
deficiency value-added tax (VAT), expanded withholding tax (EWT) and deficiency minimum
corporate income tax (MCIT) for the taxable year 2001. CEPHI, pending its unacted protest to the
CIR, filed petitions before the CTA, to cancel and withdraw the deficiency assessments by the CIR.
During the pendency of the case, CEPHI filed a Supplemental Petition, informing the CTA that it
availed of the tax amnesty under R.A. No. 9480. Thereafter, the CTA 2nd Division rendered a
decision partially granting the petitions of CEPHI with respect to the deficiency VAT and MCIT
assessments, but since tax amnesty does not extend to withholding agents with respect to their
withholding tax liabilities, CEPHI was ordered to pay its deficiency EWT assessments.

On appeal with CTA En Banc, CIR contended that CEPHI’s non-compliance with the tax
amnesty law’s requirements - failure to provide complete information in its Statement of Assets,
Liabilities, and Net worth (SALN), particularly the columns requiring the Reference and Basis of
Valuation - is sufficient basis to disqualify CEPHI from the tax amnesty program. However, it was
found that CEPHI attached schedules to its SALN both original and amended, which provide the
required information under R.A. No. 9480. CIR’s appeal was denied. Hence, this petition.

ISSUE:
Is failure to fill in the columns requiring Reference and Basis for Valuation sufficient reason
to disqualify CEPHI from tax amnesty program under R.A. No. 9480?

RULING:
No. CEPHI fully complied with the requirements of R.A. No. 9480 which entitled it to avail
of the tax amnesty program.

A taxpayer may avail of tax amnesty program under R.A. No. 9480 by complying with the
documentary submissions – SALN, Notice of Application and Tax Amnesty Return - to the BIR and
thereafter, paying the applicable amnesty tax. It is only when: (a) the taxpayer fails to file a SALN
and the Tax Amnesty Return; or (b) the net worth of the taxpayer in the SALN as of December 31,
2005 is proven to be understated to the extent of 30% or more that the taxpayer shall cease to
enjoy these immunities and privileges.

Here, it is undisputed that CEPHI completed the all the requirements. While the columns
for Reference and Basis for Valuation in the SALN were left blank, CEPHI attached schedules to
its SALN both original and amended, which provide the required information under R.A. No. 9480
and its implementing rules and regulations. As such, these were deemed filled when CEPHI
referred to the attached schedules in its SALN.

Thus, as a matter of course, CEPHI is entitled to the immediate enjoyment of the

immunities and privileges of the tax amnesty program.

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COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

COMPLIANCE WITH THE REQUIREMENTS OF AMNESTY LAW ENTITLES THE

TAXPAYER TO ITS BENEFITS

Commissioner of Internal Revenue vs. Philippine Aluminum Wheels, Inc.

G.R. No. 216161; August 9, 2017
Carpio, J.

FACTS:
This petition for review on certiorari filed by petitioner Commissioner of Internal Revenue
(CIR) assails the CTA Decision cancelling the assessment of deficiency taxes against respondent
Philippine Aluminum Wheels, Inc. (PAWI) after the latter availed of the benefits under R.A. No.
9480 or the Tax Amnesty Act of 2007.

PAWI received assessment notices from the BIR for taxable year 2001. After it requested
for reconsideration from the CIR, the BIR issued a Final Decision on Disputed Assessment (FDDA)
demanding full payment of the deficiency taxes. Later, PAWI filed with the BIR an application for
abatement of its tax liabilities for year 2001. The BIR denied the application on the ground that the
FDDA has become final, executory, and demandable because PAWI failed to appeal the FDDA
with the CTA. PAWI then partially paid its deficiency taxes by paying only the deficiency withholding
tax and afterwards availed of tax amnesty under R.A. No. 9480. PAWI complied with the necessary
requirements of R.A. No. 9480.

The BIR denied PAWI’s request under the tax amnesty and ordered it to pay its deficiency
tax assessment. BIR reasons that the FDDA has become final and executory for the failure of
PAWI to appeal it to the CTA within the prescribed period. Further, PAWI’s availment of amnesty
had no effect on the assessment due to the finality of the FDDA prior to PAWI’s tax amnesty
availment.

ISSUE:
Is respondent PAWI entitled to the benefits of the Tax Amnesty Program (R.A. No. 9480)
and therefore immune from payment of deficiency taxes?

RULING:
Yes. The application for availment of tax amnesty by PAWI was in compliance with the law
(R.A. No. 9480) and the applicable regulation, resulting to its immunity from paying taxes, as well
as the applicable civil, criminal, and administrative penalties. Section 1 of R.A. No. 9480 includes
in the coverage of the law all national internal revenue taxes for taxable year 2005 and prior years,
with or without duly issued assessments that were unpaid as of December 31, 2005. Furthermore,
Section 6 (a) of the same law provides immunity from payment of taxes, as well as additions
thereto, and the appurtenant civil, criminal or administrative penalties under the NIRC, arising from
the failure to pay any and all internal revenue taxes for taxable year 2005 and prior years. To
implement said law, the Department of Finance issued D.O. No. 29-07 and Section 6 of said
issuance provides that the completion of the requirements outlined in the said section shall be
deemed full compliance with the provision of R.A. No. 9480.

In this case, the completion of the requirements by PAWI shall be deemed full compliance
with the tax amnesty program, the law mandates that the taxpayer shall thereafter be immune from
the payment of taxes, and additions thereto, as well as the appurtenant penalties, arising from the
failure to pay any and all internal revenue taxes for taxable year 2005 and prior years. Therefore,
compliance with the requirements and the lack of disqualifications under R.A. No. 9480 entitle
PAWI to the benefits given by the said law, including the immunity from the payment of its
deficiency taxes and the applicable penalties for taxable year 2001.

2|
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

CROP METHOD OF ACCOUNTING, WHERE EXPENSES PAID OR INCURRED ARE

DEDUCTIBLE IN THE YEAR GROSS INCOME FROM SALE OF CROPS IS REALIZED IS
ALLOWED BY NIRC

Commissioner of Internal Revenue vs. Lancaster Philippines, Inc.

G.R. No. 183408; July 12, 2017
Martires, J.

FACTS:
This is a petition for review on certiorari under Rule 45 of Commissioner of Internal
Revenue (CIR) seeking to reverse and set aside the Decision and Resolution of the CTA En Banc
in granting the cancellation of the deficiency income tax assessment of Lancaster Philippines, Inc.
(Lancaster) for fiscal year April 1, 1998 to March 31, 1999.

Lancaster is a domestic corporation engaged in the production, processing, and marketing

of tobacco. In 1999, the BIR issued a Letter of Authority to examine Lancaster’s books of accounts
and other accounting records for all internal revenue taxes from taxable year 1998 to an
unspecified date. The BIR then issued a Preliminary Assessment Notice citing that Lancaster
overstated its purchases for fiscal year April 1998 to March 1999 and failed to comply with the
generally accepted accounting principle of proper matching of cost and revenue. It disallowed the
purchases of tobacco from farmers covered by Purchase Invoice Vouchers (PIVs) for the months
of February and March 1998 as deductions against income for fiscal year April 1998 to March
1999.

Lancaster contends that for the past decades, it has used an entire “tobacco-cropping
season” to determine its total purchases covering a one-year period from October 1 to September
30 of the following year as against its fiscal year; that it has been adopting the 6-month timing
difference to conform to the matching concept; and that this has long been installed as part of the
company’s system and consistently applied in its accounting books. Lancaster also argued that
the questioned purchases should not have been disallowed since the production of tobacco is
unique in that the costs are taken as of a different period and posted in the year in which the gross
income from the crop is realized.

ISSUE:
Were the purchases from February and March 1998 correctly disallowed as deductions
against income of Lancaster for fiscal year April 1998 to March 1999 for its failure to comply with
the generally accepted accounting principle of proper matching of cost and revenue?

RULING
No. The purchases in question were incorrectly disallowed as deductions.

Section 43 of the NIRC authorizes the CIR to allow the use of an accounting method that
in its opinion would clearly reflect the income of the taxpayer. An example is the “crop method of
accounting” under R.A.M. No. 2-95. The crop method recognizes that the harvesting and selling
of crops do not fall within the same year that they are planted or grown. Hence, expenses paid or
incurred are deductible in the year the gross income from the sale of the crops is realized.

Considering that the crop year of Lancaster starts from October to September of the
following year, it follows that all of its expenses in the crop production within the crop year from
October 1997 to September 1998, including the questioned purchases, are rightfully deductible for
income tax purposes in the year when the gross income from the crops are realized. Hence, the
questioned purchases were incorrectly disallowed and as such, the deficiency tax assessment
should be cancelled. Here, the Court finds it wholly justifiable for Lancaster, as a business engaged
in the production and marketing of tobacco, to adopt the crop method of accounting.

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COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

PAGCOR’S INCOME DERIVED FROM OTHER RELATED SERVICES IS SUBJECT TO

CORPORATE INCOME TAX

Philippine Amusement and Gaming Corporation vs. Commissioner of Internal Revenue and
the Head Revenue Executive Assistant, Large Taxpayer Service
G.R. Nos. 210689-90; November 22, 2017
Caguioa, J.

FACTS:
These are consolidated petitions for review on certiorari assailing the Decision of the CTA
En Banc which affirms the CTA Division ruling confirming the assessments for deficiency income
and withholding taxes of Philippine Amusement and Gaming Corporation (PAGCOR).

PAGCOR is a duly created government instrumentality by virtue of P.D. No. 1869. Said
law provides that no tax of any kind or form, income or otherwise, as well as fees, charges or levies
of whatever nature, whether national or local, shall be assessed and collected under its franchise
from PAGCOR; nor shall any form of tax or charge attach in any way to the earnings of PAGCOR
from its operation under its franchise. PAGCOR received a notice for an informal conference
regarding the results of an investigation regarding all its internal revenue tax liabilities for taxable
year 2005 and 2006. PAGCOR protested the assessment and due to the inaction of the CIR, filed
before the CTA a petition for review.

PAGCOR claims that under its Charter, it is liable only for the 5% franchise tax which is in
lieu of all kinds of national and local taxes, levies, fees, or assessments; and said tax privilege was
not amended or repealed by R.A. No. 9337. CIR counters that PAGCOR is no longer exempt from
the payment of income taxes because it is excluded from the list of GOCCs exempt from corporate
income tax under the amendments of the 1997 NIRC introduced by R.A. No. 9337.

ISSUE:
Is PAGCOR only liable for the 5% franchise tax in lieu of all kinds of taxes, levies, fees, or
assessments of any kind considering its exclusion from the list of GOCCs exempt from corporate
income tax under R.A. No. 9337?

RULING:
No. PAGCOR is not only liable for the 5% franchise tax but is likewise liable for corporate
income tax.

In PAGCOR vs. BIR, the court declared valid and constitutional Section 1 of R.A. No. 9337,
which excluded PAGCOR from the list of GOCCs exempt from corporate income tax. The Court
upheld PAGCOR’s contention that its income from gaming operations is subject only to 5%
franchise tax under P.D. No. 1869, as amended, in relation to R.A. No. 9337. The Court clarified
that R.A. No. 9337 did not repeal the tax privilege granted to PAGCOR under P.D. No. 1869, with
respect to its income from gaming operations. What R.A. No. 9337 withdrew was PAGCOR’s
exemption from corporate income tax on its income derived from other related services, previously
granted under Section 27(C) of R.A. No. 8424.

In this case, the assessments for deficiency income tax covers both PAGCOR’s income
derived from gaming operations and other related services. Considering that the Court has already
ruled that PAGCOR, under its Charter, remains to be exempt from income tax on its gaming
operations, then PAGCOR should only be made liable to pay for deficiency income tax on its
income derived from other related services for taxable years 2005 and 2006. The portions of the
assessment insofar as they pertain to PAGCOR’s income from gaming operations must therefore
be cancelled and set aside.

Hence, PAGCOR is liable for the 5% franchise tax and corporate income tax on its income
from other related services.

4|
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

OBLIGATION TO WITHHOLD FWT FOR INTEREST PAYMENTS ONLY ARISES WHEN

INCOME BECOMES PAYABLE

Edison (Bataan) Cogeneration Corporation vs. Commissioner of Internal Revenue

G.R. No. 201665; August 30, 2017
Del Castillo, J.

FACTS:
This is a petition for review on certiorari assailing the decision of the CTA finding petitioner
Edison (Bataan) Cogeneration Corporation (EBCC) liable for final withholding taxes.

EBCC received from the Commissioner of Internal Revenue (CIR) assessment notices
finding it liable for deficiency final withholding taxes (FWT) for taxable year 2000. After inaction on
its protest by the CIR, EBCC elevated the matter to the CTA. The CTA held that EBCC is only
liable for FWT in a reduced amount. The deficiency FWT was reduced on the basis that EBCC is
not yet liable for FWT for year 2000 on interest payments it made to Ogden Power International
Holdings, Inc. (Ogden) on loan agreements with the latter since its liability for interest payment
became due and demandable only on June 1, 2002. What was left as deficiency FWT was the
taxes that EBCC failed show evidence of remittance and payment.

EBCC insists that it is not required to withhold FWT for the interest payments because
those became due and demandable only on June 1, 2002 and even if the first payment was due
on January 4, 2001, such would not result to a liability for FWT in the year 2000 under R.R. No. 2-
98.

The CIR calls for retroactive application of R.R. No. 12-01 which provides that the
withholding of final tax commences at the time an income payment is paid or payable, or the
income payment is accrued or recorded as an expense or asset, whichever is applicable in the
payor’s book, whichever comes first.

ISSUE:
Is petitioner liable for FWT on its interest payments due and demandable on June 1, 2002
when the first payment is due on January 4, 2001?

RULING:
No. EBCC is not liable for FWT on its interest payments to Ogden for the same had only
been due and demandable on June 1, 2002, but it is still liable for the deficiency FWT as it failed
to substantiate its alleged remittance.

Section 2.57.4 of R.R. No. 2-98 is instructive which provides that the obligation of the payor
to deduct and withhold the tax arises at the time an income is paid or payable, whichever comes
first, the term ‘payable’ refers to the date the obligation becomes due, demandable or legally
enforceable.

In this case, the loan agreement with Ogden states EBCC's liability for interest payment
became due and demandable starting June 1, 2002. Applying R.R. No. 2-98, EBCC had no
obligation to withhold any taxes on the interest payment for the year 2000 as the obligation to
withhold only commenced on June 1, 2002. In any case, even if the first payment was due on
January 4, 2001 as claimed by the CIR, EBCC would still not be liable, as the tax assessment
pertained to taxable year 2000 and not 2001.

Therefore, EBCC is not liable for FWT on its interest payments because those are only
due and demandable in a taxable period other than year under assessment.

|5
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE TERM ‘LEGITIMATE CORPORATE EXPENSES” REFERS TO THE DEFINITION OF

"ORDINARY AND NECESSARY EXPENSES" USED FOR TAXATION PURPOSES

Hacienda Luisita, Inc. vs. PARC

G.R. No. 171101; April 24, 2018
Velasco, Jr., J.

FACTS:
In the fallo of its underlying decision and resolution, the Supreme Court directed petitioner
Hacienda Luisita Incorporated (HLI) to, among others, pay the 6,296 qualified farm-worker
beneficiaries (FWBs) of the hacienda the unspent or unused balance of the proceeds of the sale
of the 580.51-hectare lot received by the company from Luisita Realty, Inc., the consideration of
PhP750,000,000 received by its owned subsidiary, Centennary Holdings, Inc., for the sale of the
remaining 300 hectares to Luisita Industrial Park Corporation, and the price of PhP80,511,500 paid
by the government through the Bases Conversion Development Authority for the sale of the 80.51-
hectare lot used for the construction of the SCTEX road network.

For this purpose, DAR was ordered to engage the services of (1) Reyes Tacandong & Co.
(RT&Co.); (2) Ms. Carissa May Pay-Penson, CPA; and (3) Navarro Amper & Co. (Deloitte) as
panel of three accounting firms. The audit panel was appointed to determine if the P1,330,511,500
proceeds of the sale of the lots were actually used or spent for legitimate corporate purposes by
HLI. Given that, as previously stated, any unspent or unused balance and any disallowed
expenditures as determined by the panel shall be distributed to the 6,296 FWBs.

ISSUE:
Were the P1,330,511,500 proceeds of the sale of the lots actually used or spent for
legitimate corporate purposes by HLI?

RULING:
Yes, the proceeds of the sale of the lots were actually used for legitimate corporate
purposes.

The term ‘legitimate corporate expenses” refers to the definition of "ordinary and necessary
expenses" used for taxation purposes. Ordinarily, an expense will be considered 'necessary' where
the expenditure is appropriate and helpful in the development of the taxpayer's business. It is
'ordinary' when it connotes a payment which is normal in relation to the business of the taxpayer
and the surrounding circumstances. The term 'ordinary' does not require that the payments be
habitual or normal in the sense that the same taxpayer will have to make them often; the payment
may be unique or non-recurring to the particular taxpayer affected. In arriving as to what shall be
deemed the unspent or unused balance of the sales proceeds, the following are to be deducted
therefrom: (1) 3% of the proceeds that were already paid to the FWBs; (2) tax expenses relating
to the transfer of titles to the transferees; and (3) expenditures incurred by the Company for
legitimate corporate expenses.

 After comparing the corporate expenses claimed in the Income Tax Return against
corporate expenses in the Audited Financial Statement, all three members of the audit panel have
determined that the legitimate corporate expenses of HLI for the years 1998 up to 2011, coupled
with the taxes and expenses related to the sale and the 3% share already distributed to the FWBs,
far exceed the proceeds of the sale of the adverted 580.51-hectare lot.

In net effect, there is no longer any unspent or unused balance of the sales proceeds
available for distribution. Thus, the decision directing that "any unspent or unused balance and any
disallowed expenditures as determined by the audit shall be distributed to the 6,296 original FWBs"
are considered fully complied with.

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 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

SECTION 229 OF THE NIRC IS INAPPLICABLE TO CLAIMS FOR THE RECOVERY OF

UNUTILIZED AND UNDECLARED INPUT VAT

Coca-Cola Bottlers Philippines, Inc. vs. Commissioner of Internal Revenue

G.R. No. 222428; February 19, 2018
Peralta, J.

FACTS:
This is a petition for review on certiorari under Rule 45 of petitioner Coca-Cola Bottlers
Philippines, Inc. (Coca-Cola) seeking to reverse and set aside the Resolution of CTA En Banc
denying petitioner’s claim for refund or issuance of tax credit.

Coca-Cola is a VAT-registered domestic corporation engaged in the manufacture and

selling of beverages. It filed its quarterly VAT return ending March 31, 2008 and amended the
same a few times thereafter. The BIR issued a Letter of Authority to audit petitioner’s books of
accounts for all internal revenue taxes for taxable year 2008. Subsequently, it filed an
administrative claim for refund of its alleged over/erroneous payment of VAT for the first quarter of
2008. Three days after, petitioner filed with the CTA a judicial claim for the refund or issuance of
tax credit certificate.

Coca-Cola avers that its claim for refund/tax credit is hinged not on the basis of “excess”
input tax per se but on the basis of the inadvertence of applying the undeclared input tax against
the output VAT. Furthermore, Coca-Cola claims that since it is already barred from amending its
VAT return due to the fact that it has been issued with a letter of authority, it is left with no other
recourse but to apply for a claim for refund for the undeclared input VAT under Section 229 of the
NIRC.

ISSUE:
Is petitioner’s claim for refund on the basis of applying the undeclared input tax against the
output VAT within the purview of Section 229 of the NIRC?

RULING:
No. Petitioner’s claim for refund is not within the purview of Section 229 of the NIRC.

In CIR vs. San Roque Power Corporation, the Court explained that input VAT is not
“excessively” collected as understood under Section 229 because at the time the input VAT is
collected the amount paid is correct and proper. In short, there must be a wrongful payment
because what is paid, or part of it, is not legally due.

It is clear, based on the foregoing, that neither the law nor jurisprudence authorize
petitioner’s claim for refund or issuance of tax credit of its undeclared input tax against the output
VAT. In asserting its alleged right to said claim, petitioner unfortunately failed to convince the Court
that is entitled to the refund or credit of input VAT it advertently failed to include in its VAT return.
This is because petitioner’s claim is not governed by Section 229 as an ordinary refund or credit
outside of the VAT system as the same does not involve a tax that is “erroneously, illegally,
excessively, or in any manner wrongfully collected.” Neither is said claim authorized under Section
110 (B) and 112 (A) as it does not seek to refund or credit input tax due or paid attributable to zero-
rated or effectively zero-rated sales.

Hence, petitioner’s claim for refund should not be allowed as it is not within the purview of
Section 229 of the NIRC.

|7
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

SALE WHICH IS AN EXERCISE OF A GOVERNMENTAL FUNCTION MANDATED BY

LAW IS NOT IN THE COURSE OF TRADE OR BUSINESS AND, THUS, NOT SUBJECT TO
VAT

Power Sector Assets and Liabilities Management Corporation vs. Commissioner of Internal
Revenue
G.R. No. 198146; August 8, 2017
Carpio, J.

FACTS:
This petition for review assails CA Decision nullifying the Decisions of the Secretary of
Justice in OSJ Case No. 2007- 3 for lack of jurisdiction.

Power Sector Assets and Liabilities Management Corporation (PSALM), is a government-

owned and controlled corporation (GOCC) created under R.A. No. 9136, also known as the Electric
Power Industry Reform Act of 2001 (EPIRA), the principal purpose of which is to manage the
orderly sale, disposition and privatization of the National Power Corporation (NPC).

PSALM conducted public biddings for the privatization of the Pantabangan-Masiway

Hydroelectric Power Plant (Plant). First Gen Hydropower Corporation was the winning bidder of
the Plant. On August 28, 2007, the NPC received a letter dated August 14, 2007 from the Bureau
of Internal Revenue (BIR) demanding immediate payment of ₱3.8 billion deficiency Value-Added
Tax (VAT) for the sale of the Plant. The NPC indorsed the demand letter to PSALM, which filed
with the Department of Justice a petition for adjudication of the dispute with the BIR to resolve the
issue of whether the sale of the power plants should be subject to VAT. The BIR moved for
reconsideration, alleging among others that the sale of the subject power plants by PSALM to
private entities is in the course of trade or business, as contemplated under Section 105 of the
National Internal Revenue Code (NIRC) of 1997, which covers incidental transactions subject to
VAT.

ISSUE:
Is the sale of the powerplant by PSALM, a GOCC created primarily for the liquidation of
NPC, to private entities subject to VAT?

RULING:
No. The sale is not subject to VAT.

Under Section 105 of the NIRC, any person who, in the course of trade or business, sells,
barters, exchanges, leases goods or properties, renders services, and any person who imports
goods shall be subject to the VAT imposed in Sections 106 to 108. It further states that the phrase
“in the course of trade or business” means the regular conduct or pursuit of a commercial or an
economic activity, including transactions incidental thereto, by any person regardless of whether
or not the person engaged therein is a nonstock, nonprofit private organization (irrespective of the
disposition of its net income and whether or not it sells exclusively to members or their guests), or
government entity.

The sale of the power plants is not “in the course of trade or business” as contemplated
under Section 105 of the NIRC. It is not in pursuit of a commercial or economic activity but a
governmental function mandated by law to privatize NPC generation assets. PSALM was created
primarily to liquidate all NPC financial obligations and stranded contract costs in an optimal
manner. PSALM is limited to selling only NPC assets and IPP contracts of NPC. The sale of NPC
assets by PSALM is not "in the course of trade or business" but purely for the specific purpose of
privatizing NPC assets in order to liquidate all NPC financial obligations. PSALM is tasked to sell
and privatize the NPC assets within the term of its existence. Thus, it is very clear that the sale of
the power plants was an exercise of a governmental function mandated by law for the primary
purpose of privatizing NPC assets in accordance with the guidelines imposed by the EPIRA law.

Thus, the sale of the power plants, not made in the ordinary course of business of business,
is not subject to VAT.

8|
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

A WAIVER OF STATUTE OF LIMITATIONS SHOULD STRICTLY COMPLY WITH

REQUIREMENTS SET BY LAW

Commissioner of Internal Revenue vs. Systems Technology Institute, Inc.

G.R. No. 220835; July 26, 2017
Caguioa, J.

FACTS:
This petition for review on certiorari was filed by petitioner Commissioner of Internal
Revenue (CIR) assailing the CTA ruling cancelling the tax assessments of respondent Systems
Technology Institute, Inc. (STI) on the ground that the period to assess or collect taxes has
prescribed and the waiver made by STI is defective.

STI was subjected to BIR audit and examination for its fiscal year 2003. On three instances,
waivers were executed by STI extending the prescriptive period for fiscal year 2003. In all those
instances, the signatory did not have a notarized written authority from STI’s Board of Directors.
STI received a Formal Assessment Notice from the CIR for deficiency taxes for fiscal year 2003.
STI filed a request for reconsideration/reinvestigation on the assessment but the CIR still found
STI liable for same deficiency taxes. STI appealed to the CTA. The CTA cancelled the assessment
finding that the waivers executed by STI were defective for failure to comply with R.M.O. No. 20-
90 and R.D.A.O. No. 05-01, rendering the assessment barred by prescription.

The CIR asserts that the waivers executed by the parties are valid and that STI' s active
participation in the administrative investigation amounts to estoppel that prescription can no longer
be invoked. For its part, STI contends that the requisites under R.M.O. No. 20-90 are mandatory
and no less than the Supreme Court has affirmed in various cases that the failure to comply
therewith results in the nullity of the waiver and consequently, the assessments.

ISSUE:
Is the period to assess deficiency taxes against respondent STI already prescribed on the
ground that the waiver of statute of limitations executed by STI is defective?

RULING:
Yes. The period to assess already prescribed since waiver of statute of limitations executed
by STI is defective for failure to comply with the procedures and requirements of R.M.O. No. 20-
90 and R.D.A.O. No. 05-01, which are the implementing regulations of Section 222 (b) of the NIRC.
The requirements set out in both issuances are mandatory and must be strictly followed.

In this case, STI’s signatory to the three waivers did not have a notarized written authority
from the board of directors. R.D.A.O. No. 05-01 mandates that the authorized revenue official to
ensure that the waiver is duly accomplished, and the delegated signatory is authorized to sign in
behalf of the taxpayer before accepting it. The revenue official should not accept if the waiver is
not notarized, or when the written delegation is not in writing or not duly notarized. Lastly, the
waivers did not specify the kind of tax and amount of tax due. The waiver of statute of limitations
is a bilateral agreement between the taxpayer and the BIR to extend the period to assess and
collect deficiency taxes to a certain date; there can be no agreement if the kind and amount of
taxes to be assessed and collected were not indicated.

Hence, the periods for the CIR to assess or collect internal revenue taxes were never
extended because of the failure to execute a compliant waiver of statute of limitations; and as a
result, the subject assessment was barred by prescription.

Note: The doctrine of estoppel cannot be applied as an exception to the statute of limitations on
the assessment of taxes considering that there is a detailed procedure for the proper execution of
the waiver of statute of limitations, which the BIR must strictly follow.

|9
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE ASSESSMENT TO BE SERVED TO THE TAXPAYER WITHIN THE PRESCRIPTIVE

PERIOD IS THE FINAL ASSESSMENT NOTICE (FAN), NOT THE PRELIMINARY
ASSESSMENT NOTICE (PAN)

Commissioner of Internal Revenue vs. Transitions Optical Philippines, Inc.

G.R. No. 227544; November 22, 2017
Leonen, J.

FACTS:
This is a petition for review on certiorari assailing the decision of the CTA cancelling the
assessment issued by the petitioner Commissioner of Internal Revenue (CIR) against respondent
Transitions Optical Philippines, Inc. (Transitions Optical).

Transitions Optical was subjected to BIR audit for 2004. Two waivers were executed which
extended the prescriptive period to November 30, 2008. Thereafter, BIR issued a Preliminary
Assessment Notice (PAN) dated November 11, 2008, then it issued a Final Assessment Notice
(FAN) and a Formal Letter of Demand (FLD) dated November 28, 2008. In its protest, Transitions
Optical alleged that the demand for deficiency taxes has already prescribed for the FAN was
mailed on December 2, 2008. The BIR reiterated the assessment, prompting Transitions Optical
to file a petition for review before the CTA. The CTA cancelled the assessment by declaring that
the waivers were defective and therefore void. Even assuming they were valid, the BIR failed to
present adequate evidence to prove that it issued the FAN and FLD within the extended period
agreed upon on the second waiver.

CIR argues that the assessment required to be issued within the prescriptive period refers
to the actual issuance of the PAN, not the FAN. On the other hand, Transitions Optical posit that
the waivers were defective and assuming the waivers were valid, the assessment is still void
because the FAN was served on December 4, 2008.

ISSUE:
Has the period to assess deficiency taxes already prescribed when the FAN was served
beyond the extended prescriptive period?

RULING:
Yes. The assessment was served beyond the prescriptive period in violation of Section
203 of the NIRC.

Under Sections 203 and 222 of the NIRC, taxes shall be assessed within 3 years after the
last day prescribed by law for the filing of the return, and no proceeding in court without assessment
for the collection of such taxes shall be begun after the expiration of such period except if before
the expiration of the 3-year period, both the CIR and the taxpayer have agreed in writing to its
assessment after such time (3-year period). Considering Sections 203 and 222 of the NIRC, it is
clear that the contemplated assessment refers to the service of the FAN to the taxpayer. A PAN
merely informs the taxpayer of the initial findings of the BIR. It contains the proposed assessment,
and the facts, law, rules, and regulations or jurisprudence on which the proposed assessment is
based. It does not contain a demand for payment but usually requires the taxpayer to reply within
15 days from receipt. Otherwise, the CIR will finalize an assessment and issue a FAN. The FAN
contains not only a computation of tax liabilities but also a demand for payment within a prescribed
period. As soon as it is served, an obligation arises on the part of the taxpayer concerned to pay
the amount assessed and demanded. It also signals the time when penalties and interests begin
to accrue against the taxpayer.

In this case, the BIR is at fault for accepting the defective waivers for non-compliance with
R.M.O. No. 20-90 and R.D.A.O. No. 05-01. As to the assessment and assuming the waivers were
valid, the FAN was mailed on December 4, 2008, still after the agreed prescriptive period.

Hence, the period to assess deficiency taxes against Transitions Optical has prescribed
after the FAN was served beyond the prescriptive period.

10 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

NO ASSESSMENT IF THE RECEIPT THEREOF CANNOT BE PROVEN

Commissioner of Internal Revenue vs. Bank of the Philippine Islands

G.R. No. 224327; June 11, 2018
Peralta, J.

FACTS:
This is a petition for review on certiorari assailing the CTA’s Decision of annulling the
warrant of distraint and levy issued by the Commissioner of Internal Revenue (CIR) against
respondent Bank of the Philippine Islands (BPI).

Citytrust Banking Corporation (CBC) filed its Income Tax Return (ITR) for 1986 on April
15, 1987 and was afterwards subjected to audit for that year. Thereafter, it executed three Waivers
of the Statute of Limitations. On May 6, 1991, the CIR mailed a letter with Assessment Notices
demanding for payment of the deficiency taxes. CBC filed their protest on May 27, 1991 but it was
denied and a letter was again issued by the CIR on February 5, 1992 requesting payment.
Subsequently, CBC merged with BPI. In 2011, a Warrant of Distraint and/or Levy was issued
against BPI, prompting it to file a Petition for Review with the CTA. The CTA granted the petition
and cancelled the Warrant of Distraint and/or Levy on the ground that the assessment notices were
issued beyond the three-year prescriptive period; and the waivers did not extend the period
because they were not in the proper form under R.M.O. No. 20-90. Furthermore, the CTA ruled
that the CIR failed to prove that it sent a notice of assessment and that it was received by BPI
(CBC then) before the period to assess had prescribed.

CIR argues that the tax assessment became final and executory because BPI failed to
protest the final assessment dated February 5, 1992. BPI, on the other hand, claims that it never
received any final decision on the disputed assessment from the CIR granting or denying its
protest, in whole or in part. Specifically, it argues that it did not receive the letter and final
assessment dated February 5, 1992 from the BIR.

ISSUE:
Is there a valid assessment notice against BPI when the letter and final assessment were
mailed but were not received?

RULING:
No. While a mailed letter is deemed received by the addressee in the ordinary course of
mail, this is still merely a disputable presumption subject to controversion, and a direct denial of
the receipt thereof shifts the burden upon the party favored by the presumption to prove that the
mailed letter was indeed received by the addressee (Republic vs. CA, G.R. No. L-38540; April 30,
1987). Failure to prove the receipt of the assessment by the taxpayer would necessarily lead to
the conclusion that no assessment was issued. Moreover, the assessment is barred by prescription
because they were all issued beyond the three-year period and the waivers were invalid for non-
compliance with R.M.O. No. 20-90.

In this case, the CIR was unable to present substantial proof that its February 5, 1992 letter
was received by BPI when the latter denied its receipt; therefore, the assessment dated May 6,
1991 should be deemed as the final decision of the CIR which was timely protested on May 27,
1991. However, even if the CIR proved the receipt of the February 5, 1992 letter, it does not cure
the invalidity of the assessment because the assessment notices were issued beyond the
prescriptive period of three years as the waivers executed by CBC-BPI are all invalid for non-
compliance with R.M.O. No. 20-90.

Therefore, the CIR failed to issue assessment notices against BPI for it did not prove that
they were received by the latter within the prescriptive period.

| 11
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

REMITTANCE NEED NOT BE PROVEN BY THE TAXPAYER FOR TAXES WITHHELD TO

THE BIR

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue

G.R. Nos. 206079-80; January 17, 2018
Leonen, J.

FACTS:
These are consolidated petitions for review on certiorari questioning the CTA’s decision
denying the claim for refund of Philippine Airlines, Inc. (PAL) on withholding taxes withheld from
its interest income on its various deposits with different banks.

In 2002, PAL earned interest income from deposits and placement, and the banks
deducted final withholding taxes. PAL filed with the BIR a request for tax refund because it was
tax exempt under its franchise. After inaction by the BIR, PAL elevated the case to the CTA. The
CTA found PAL exempt from withholding taxes but only partially granted the refund on taxes
because PAL failed to adequately prove the remittance of some taxes withheld to the BIR.

The Commissioner of Internal Revenue (CIR) argues that PAL only showed the amounts
withheld by banks but those may not be the taxes withheld from PAL's interest income. Further,
evidence presented in the CTA should not be considered because the CTA's judicial review must
be limited to whether the CIR rightfully ruled on the administrative claim. In allowing the
presentation of new evidence, the CTA did not conduct a judicial review but rather, it adopted an
entirely new proceeding. PAL, on the other hand, argues that it established the withholding and
remittance of final taxes through the Certificates of Final Taxes Withheld issued to it by the banks.
It contends that these Certificates are prima facie evidence of actual remittance, and if
uncontroverted, are sufficient proof of remittance. It maintains that proof of actual remittance is not
necessary. PAL need not establish the remittance of income taxes because this function is vested
with the agent banks as the payors and withholding agents. PAL further asserts that the CTA is a
court of record, required to conduct a trial de novo. Thus, it should not be barred from considering
new evidence not submitted in the administrative claim for refund.

ISSUES:
(1) Can evidence not presented in the administrative claim for refund in the BIR be
presented in the Court of Tax Appeals?; and
(2) Is proof of remittance necessary for PAL to claim a refund of taxes withheld from it?

RULING:
(1) Yes, the CTA is not limited by the evidence presented in the administrative claim. The
claimant may present new and additional evidence to the CTA to support its case for tax refund.
Section 8 of R.A. No. 1125 states that the CTA is a court of record. As such, parties are expected
to litigate and prove every aspect of their case anew and formally offer all their evidence. No value
is given to documentary evidence submitted in the BIR unless it is formally offered in the CTA. As
evidence is considered and evaluated again, the scope of the CTA's review covers factual findings.

(2) No, remittance need not be proven. PAL only needs to prove that taxes were withheld
from its income. The taxes on interest income are in the nature of a withholding tax so the party
liable for remitting the amounts withheld is the withholding agent under Section 57 of the NIRC
and as implemented under Section 2.57 or R.R. No. 2-1998. Should the BIR find that taxes were
not properly remitted, its action is against the withholding agent. Certificates of taxes withheld is
already a sufficient and competent proof to establish the withholding of taxes.

12 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

CARRY OVER OF TAX CREDITS IS IRREVOCABLE

University Physician Services Inc. – Management, Inc. vs. Commissioner of Internal Revenue
G.R. No. 205955; March 7, 2018
Martires, J.

FACTS:
This a petition for review on certiorari filed by petitioner University Physician Services Inc.-
Management, Inc. (UPSI-MI) seeking the reversal of the CTA’s decision which denied UPSI-MI’s
application for tax refund or issuance of Tax Credit Certificate (TCC) of its unutilized creditable
income tax for taxable year 2006.

In its 2006 Income Tax Return (ITR), UPSI-MI had a prior year excess credit of
P2,331,102.00 and creditable tax withheld of P2,972,834.00; it had a tax due of P99,595.00 for a
net tax credit of P5,159,341.00. In its 2007 ITR, it utilized the total credits of P5,159,341.00 as prior
year credits but immediately filed an amended 2007 return opting to utilize as prior year credits
only the amount P2,231,507.00. It then opted to file a refund by issuance of a tax credit certificate
with the BIR the amount of P2,972,834.00. The Commissioner of Internal Revenue (CIR), however,
did not act on the refund claim, prompting UPSI-MI to appeal to the CTA. The CTA also denied the
petition on that UPSI-MI was barred by Section 76 of the NIRC when it elected to carry over the
credits in its original return despite amending the same.

UPSI-MI argues that when it filed its 2006 ITR, it checked the option that it chose to be
issued a TCC. Such choice was irrevocable in the same way that the carry-over of credits is also
irrevocable. It contended that when it made the choice for the issuance of TCC, it precluded the
choice of carry-over of credits; the reason why it rectified the mistake in its original 2007 ITR.

ISSUE:
Is the carry-over of tax credits by UPSI-MI irrevocable, thereby also barring it from
requesting a refund of its tax credits?

RULING:
Yes. The choice to be issued a TCC is irrevocable.

Section 76 of the NIRC provides that once the taxpayer chooses the option to carry-over
and apply the excess quarterly income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be considered irrevocable for that
taxable period and no application for cash refund or issuance of a tax credit certificate shall be
allowed therefor. A perfunctory reading of the law unmistakably discloses that the irrevocable
option referred to is the carry-over option only. There is nothing to infer that the other choices, i.e.,
cash refund or tax credit certificate, is also irrevocable. The law does not prevent a taxpayer who
originally opted for a refund or tax credit certificate from shifting to the carry-over of the excess
creditable taxes.

In this case, UPSI-MI, despite its initial option to refund its 2006 excess creditable tax,
subsequently indicated in its 2007 short-period Final Adjustment Return (FAR) that it carried over
the 2006 excess creditable tax and applied the same against its 2007 income tax due. It’s a
constructive choice on its part that it instead elects the carry over option. The irrevocability rule
forbade it to revert to its initial choice. Neither may it insist that the insertion of the carry-over in the
2007 FAR was by mere mistake or inadvertence.

Therefore, UPSI-MI’s constructive choice to carry over its tax credits in its original ITR is
irrevocable and it is barred from reverting instead to the refund of its credits.

| 13
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

UNSUBSTANTIATED AND UTILIZED TAX CREDITS FOR SAME TAXABLE PERIOD

CANNOT BE UTILIZED IN SUCCEEDING PERIODS

Commissioner of Internal Revenue vs. Cebu Holdings, Inc.

G.R. No. 189792; June 20, 2018
Carpio, J.

FACTS:
This is a petition for review on certiorari assailing the CTA’s Decision which ordered the
issuance of a tax credit certificate (TCC) in favor of respondent Cebu Holdings, Inc. (CBI).

In its Income Tax Returns (ITR) for 2002, CBI indicated that it is opting to be issued a TCC
in the amount of P18,992,055.00, representing the creditable tax withheld for year 2002. In 2005,
CBI filed a written claim for TCC with the BIR but it was unacted so it elevated the matter to the
CTA. In its Decision, the CTA only granted refund in the amount of P2,083,878.07 after
recomputing the proper tax due/credit of CBI, accounting for unsubstantiated prior year excess
credits and creditable taxes withheld. After CTA disallowed the prior year excess credits in 2002,
it appears that excess credits of P16,194,108.00, which was carried over by CBI for taxable year
2003, are from the unsubstantiated credits in 2002. CBI then tried to withdraw its Petition for it shall
no longer pursue the refund claim and instead will opt to carry forward the excess creditable
income taxes until fully utilized, but it was denied.

The CIR asserts that CBI is not entitled to the refund. Furthermore, the CIR reiterates that
respondent is liable for deficiency income tax for taxable year 2003 because respondent
erroneously carried over the amount of P16,194,108.00 as prior year's excess credits, to which it
is not entitled to. CBI argues that the alleged deficiency income tax for taxable year 2003 has no
bearing on the case which merely involves a claim for a TCC for taxable year 2002.

ISSUE:
Should CBI be subjected to an assessment for deficiency income taxes for taxable year
2003 on account of its unsubstantiated tax credits carried over and utilized on said year?

RULING:
Yes. CBI should be assessed for deficiency income taxes, as properly computed by the
CTA, the substantiated prior year excess credits for 2002 was already applied against the income
tax liability for that year. The excess of the creditable tax withheld for 2002 against the income tax
liability for that year is the subject of the claim for TCC which is valid. Therefore, the prior year
excess credits carried over to year 2003 pertain to the same unsubstantiated prior year excess
credits in 2002 and should be disallowed. It is then incumbent on the CIR to issue a Final
Assessment Notice and demand letter for the payment of CBI’s deficiency tax liability for year
2003.

In this case, the 2003 prior year credits which CBI is not entitled clearly affected its income
tax liability for that year. The CIR, however, erred in arguing the P16,194,108.00 disallowed prior
year excess credits as already the deficiency income tax of CBI. A recalculation of CBI’s ITR and
income tax liability for 2003 is in order to account for that year’s tax credits but zeroing out the prior
year tax credits. The computation made by the Court revealed that CBI is still liable for deficiency
income tax in the amount of P8,540,182.00, after accounting for tax credits.

Therefore, CBI is subject to a tax assessment for deficiency income taxes after it utilized
prior tax credits for 2003 which it was not entitled to.

14 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

EXCESS INPUT TAX OR CREDITABLE INPUT TAX IS NOT AN ERRONEOUSLY,

EXCESSIVELY, OR ILLEGALLY COLLECTED TAX

CE Luzon Geothermal Power Company Inc. vs. Commissioner of Internal Revenue

G.R. No. 197526; July 26, 2017
Leonen, J.

FACTS:
The first petition for review was filed by CE Luzon Geothermal Power Company, Inc. (CE
Luzon) against the Commissioner of Internal Revenue (CIR). The second petition was instituted
by the Bureau of Internal Revenue (BIR), on behalf of the Republic of the Philippines, against CE
Luzon.

CE Luzon is a VAT-registered taxpayer engaged in the energy industry. It owns and

operates the CE Luzon Geothermal Power Plant, which generates power for sale to the Philippine
National Oil Company-Energy Development Corporation by virtue of an energy conversion
agreement. In the course of its operations, CE Luzon incurred unutilized creditable input tax
amounting to P26,574,388.99 for taxable year 2003. Luzon then filed before the BIR an
administrative claim for refund of its unutilized creditable input tax. Without waiting for the CIR to
act on its claim, or for the expiration of 120 days, CE Luzon instituted before the Court of Tax
Appeals (CTA) a judicial claim for refund which was subsequently denied.

CE Luzon contends that creditable input tax attributable to zero-rated sales is excessively
collected tax. CE Luzon asserts that since the prescriptive periods in Section 112(C) of the NIRC
are merely permissive, it should yield to Section 229. Moreover, Section 112(C) does not state that
a taxpayer is barred from filing a judicial claim for non-compliance with the 120-day period.
However, CIR argues that Section 112(C) clearly provides that in claims for refund of creditable
input tax, taxpayers can only elevate their judicial claim upon receipt of the decision denying their
administrative claim or upon the lapse of 120 days. Moreover, the tax covered in Section 112 is
different from the tax in Section 229. Section 112(C) covers unutilized input tax while Section 229
pertains to national internal revenue tax that is erroneously or illegally collected.

ISSUE:
Is creditable input tax attributable to zero-rated sales an excessively collected tax?

RULING:
No, excess input tax or creditable input tax is not an erroneously, excessively, or illegally
collected tax because the taxpayer pays the proper amount of input tax at the time it is collected.

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.

Here, CE Luzon is claiming for refund of its excess or unutilized creditable input tax and
not those erroneously, excessively or illegally collected.

Hence, it is Section 112(C) and not Section 229 of the NIRC that governs claims for refund
of creditable input tax.

| 15
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

FULL PAYMENT OF REALTY TAX DUE ON PROPERTY SUBJECT OF A TAX SALE

RENDERS INAPPLICABLE THE DEPOSIT REQUIREMENT UNDER SECTION 267 OF THE
LGC

Beaumont Holdings Corpọration vs. Attys. Rosario V.E. Reyes, Wilfredo C. Villar, Francisco T.
Endriga, Atty. Sheilah F.P. Elbinias-Uyboco and Mark M. Litonjua
G.R. No. 207306; August 7, 2017
Caguioa, J.

FACTS:
In a petition for review on certiorari under Rule 45, the Beaumont Holdings Corporation
(BHC) assails the CA’s decision denying their appeal and affirmed the RTC’s dismissal of their
complaint.

BHC is the registered owner of two lots located in Fort Bonifacio, Taguig City. The City
Government of Taguig sent two letters to BHC on November 6, 2007, requiring the settlement of
real property taxes (RPT) on the two lots for the years 2005, 2006, and the 4th quarter 2007 within
the same month. BHC paid the taxes on November 29, 2007 for which Official Receipt was issued.
However, the two lots were subjected to public auction due to delinquency taxes declared as such
even before letters were sent to BHC. As such, BHC filed a Complaint alleging that public sale of
two lots was invalid since first, it had paid and settled the required RPT within the period prescribed,
and second, the subject lots were not tax delinquent.

Attys. Reyes, Villar, Endriga, Atty. Elbinias-Uyboco (Respondent City Officials) and
Litonjua (Highest Bidder) however, seek the dismissal of the Complaint for lack of merit. They
alleged that BHC failed to comply with Section 267 of the LGC requiring the deposit of the amount
for which the property was sold plus interest before a tax sale is assailed and that the two lots were
validly sold at auction because of BHC's failure to settle the delinquent RPT due thereon despite
several reminders and to redeem them by paying the correct amount.

ISSUE:
Is Section 267 of the LGC applicable to BHC thus requiring it to deposit the amount of
property plus interest before the complaint on tax sale be given due course?

RULING:
No, Section 267 of the LGC is not applicable here.

As expressed in Section 267 itself, the amount deposited shall be paid to the purchaser at
the auction sale if the deed is declared invalid; otherwise, it shall be returned to the depositor. The
deposit, equivalent to the value for which the real property was sold plus interest, is essentially
meant to reimburse the purchaser of the amount he had paid at the auction sale should the court
declare the sale invalid. Clearly, the deposit precondition is an ingenious legal device to guarantee
the satisfaction of the tax delinquency. On the assumption that the subject two lots are not tax
delinquent, then there is no need for the deposit requirement under Section 267 because the realty
taxes due on the subject two lots have already been paid and there are no tax delinquencies to be
collected or satisfied.

Here, the RPT due on the subject two lots appear to have been paid - with the Official
Receipts issued having been appended to the Complaint. With the presentation of the Official
Receipts, showing payment of the unpaid realty taxes within the period prescribed, the delinquent
status of the subject two lots is negated.

Thus, Section 267 is not being circumvented, and that, in this case, is inapplicable because
there appears to be no tax delinquency.

16 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

STRICT ADHERENCE TO THE STATUTES GOVERNING TAX SALES IMPERATIVE NOT

ONLY FOR THE PROTECTION OF THE TAXPAYERS, BUT ALSO TO ALLAY ANY
POSSIBLE SUSPICION OF COLLUSION BETWEEN THE BUYER AND THE PUBLIC
OFFICIALS CALLED UPON TO ENFORCE THE LAWS

Katherine Rose Salva vs. Ildefonso Magpile

G.R. No. 220440; November 8, 2017
Peralta, J.

FACTS:
In this petition for review on certiorari under Rule 45, the petitioner assails the CA’s
decision reversing the RTC’s decision of declaring the auction sale valid.

Ildefonso Magpile acquired a parcel of land in Makati City. His title thereto was registered
and bears "2118 Apolinario, Makati, Rizal" as his postal address. He filed with the Office of the
Municipal Assessor a Sworn Statement and wrote "1772 Evangelista, Bangkal, Makati, M.M." as
his postal address. Magpile failed to pay the real property taxes due on the subject property from
1998 up to 2006. Thus, the City Treasurer sent him billing statements, notice of realty tax
delinquency, and warrants of levy at the address "2118 Apolinario St., Bangkal, Makati City." The
subject property was then sold at a public auction to Katherine Rose Salva.

Almost two years after, Magpile filed a petition to declare the auction sale null and void on
the ground that Magpile did not receive the notices of sale and warrant of levy sent as required by
Sections 254 and 258 of the LGC. He asserted that his former postal address is no longer existing
since 1996. Salva filed an Answer and alleged that the City Treasurer enjoys the presumption of
regularity in the performance of his duties, and even assuming that Magpile's allegations are true,
he is estopped for his failure to call the attention of City Treasurer about the continued use of 2118
Apolinario St., Bangkal, Makati City as his postal address.

ISSUE:
Were the notice of delinquency and the sending of warrant of levy under Sections 254 and
258 of LGC properly complied with to make the auction sale to Salva valid?

RULING
No, the requirements of Sections 254 and 258 of the LGC were not properly complied with.

Section 254 of the LGC mandates that the notice of delinquency must be posted and
published. Under Section 258, the warrant of levy should be sent to the registered owner, or person
having legal interest therein as stated. The public auction of land to satisfy delinquency derogates
or impinges on property rights and due process. Thus, the steps prescribed by law are mandatory
and must be strictly followed; if not, the sale of the real property is invalid and does not make its
purchaser the new owner. Strict adherence to the statutes governing tax sales is imperative not
only for the protection of the taxpayers, but also to allay any possible suspicion of collusion
between the buyer and the public officials called upon to enforce the laws.

Here, notice was sent to the former address of Magpile, despite his address in the sworn
statement being different. Hence, it cannot be definitely ascertained that the documents were in
fact received by Magpile. Adding to the doubt is the undisputed allegation of Magpile that, per
Certification issued by the Barangay Captain of Pio del Pilar, Makati, "2118 Apolinario Street" has
been replaced by "1510 A & B Apolinario Street" since 1996. If indeed true, there is really no way
that the mail matters would reach the addressee.

Due to uncertainty, it is therefore held that auction sale is invalid due to noncompliance of
Sections 254 and 258 of the LGC.

| 17
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

CTA HAS EXCLUSIVE JURISDICTION TO ENJOIN LEVY OF TAXES AND AUCTION OF

PROPERTIES IN TAX CASES

Philippine Ports Authority vs. City of Davao

G.R. No. 190324; June 6, 2018
Leonen, J.

FACTS:
This petition for review on certiorari was filed by petitioner Philippine Ports Authority (PPA)
appealing the CA’s dismissal of its petition for certiorari due to lack of jurisdiction of the said court
on cases involving the levy and auction of its properties because of tax liabilities.

PPA received an assessment for real property taxes for its administered properties at Sasa
Port. PPA filed an appeal with the CTA after the denial of its appeals with both the LBAA and
CBAA. The subject properties were sold in an auction with the City of Davao (City) as the buyer
and PPA only knew about the auction sale after receiving a notice to redeem the sold properties.
Thus, it filed a petition for certiorari before the CA questioning the auction sale on the ground that
the City’s taxation of its real properties and the subsequent auction sale were without or in excess
of jurisdiction and contrary to law. It also assailed the adverse decision of the CBAA in the same
petition. While PPA’s petition was pending before the CA, the CTA promulgated its decision in
favor of PPA. The CA denied PPA’s petition on the ground that it should have been filed with the
CTA, who has exclusive jurisdiction on the matter, and that PPA committed forum shopping.

PPA argues that there is no question on the jurisdiction of the CTA, but the CA may take
cognizance of its action as a matter of urgency for there was no other speedy and adequate
remedy at the time but to file the petition for certiorari with the CA.

ISSUE:
Does the CA have jurisdiction to grant injunctive relief on the subject auction sale?

RULING:
No, the law grants the exclusive appellate jurisdiction to the CTA and urgency does not
divest this exclusive appellate jurisdiction.

Section 7, par. (a)(5) of R.A. No. 1125, as amended by R.A. No. 9282 provides that the
CTA shall exercise exclusive appellate jurisdiction to review by appeal the decisions of the CBAA
in the exercise of its appellate jurisdiction over cases involving the assessment and taxation of real
property originally decided by the provincial or city board of assessment appeals. Further, Section
6, Rule 135 of the Rules of Court provides that when by law, jurisdiction is conferred on a court or
judicial officer, all auxiliary writs, processes, and other means necessary to carry in into effect may
be employed by such court or officer.

Here, the decision of the CBAA in exercise of its appellate jurisdiction is covered by the
CTA’s exclusive jurisdiction. Hence, the CTA had jurisdiction over the appeal questioning whether
or not PPA was liable for real property tax, thus, the CTA, and not the CA, has the power to
preserve the subject of the appeal, to give effect to its final determination, and, when necessary,
to control the auxiliary and incidental matters and to prohibit or restrain acts which might interfere
with the exercise of its jurisdiction over the appeal, to the exclusion of all other courts.

Therefore, when the CTA acquired jurisdiction over the appeal, the CA had been precluded
from taking cognizance of the case for it is the CTA who has exclusive jurisdiction to review the
decision and to grant injunctive reliefs and auxiliary writs in exercise of this jurisdiction.

18 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

EXCEPT FOR LOCAL TAX CASES, CTA HAS THE EXCLUSIVE APPELLATE
JURISDICTION TO RESOLVE ALL TAX PROBLEMS

Commissioner of Internal Revenue vs. Court of Tax Appeals and Petron Corporation
G.R. No. 207843; February 14, 2018
Perlas-Bernabe, J.

FACTS:
This is a resolution on the motion for reconsideration filed by private respondent Petron
Corporation (Petron) on the Supreme Court’s prior decision in the same case which ruled that the
CTA does not have the jurisdiction to determine the validity of the interpretations of tax laws made
by the CIR in the exercise of its quasi-legislative power under the NIRC.

The Commissioner of Internal Revenue (CIR) in a letter interpreting Section 148 (e) of the
NIRC opined that alkylate is subject to excise tax. In implementation of said letter, the Bureau of
Customs (BoC) assessed excise tax on Petron’s importation of alkylate. Petron filed a petition for
review before CTA contesting the BoC’s assessment of excise taxes and assailing the CIR’s
interpretation. Petron failed to elevate BoC’s assessment to the Secretary of Finance, but it filed
an administrative refund claim with the BIR which was eventually elevated to the CTA. The CTA
struck down the CIR’s interpretation which prompted the latter to elevate the case to the SC
alleging that the CTA had no jurisdiction to take cognizance of a case involving the CIR's exercise
of interpretative or quasi-legislative functions. In a July 2015 Decision by the SC, it upheld the
CIR’s position that the CTA’s jurisdiction does not include the power to rule on the constitutionality
or validity of law, rule, or regulation. Thereafter, Petron field a motion for reconsideration; hence,
this resolution.

CIR reiterates its position that the CTA cannot take cognizance of the case because the
court’s jurisdiction is to resolve tax disputes and excluded from it is the power to rule on the
constitutionality or validity of a law, rule or regulation. Petron maintains that the CTA has jurisdiction
to pass upon the validity of the CIR's interpretative ruling on alkylate, arguing that the CTA may
rule on the validity of a revenue regulation, ruling, issuance or other matters arising under the NIRC
and other tax laws administered by the BIR.

ISSUE:
Does the CTA have the jurisdiction to rule on the validity and constitutionality of CIR’s
interpretations of tax laws?

RULING:
Yes, Section 7 (a) (1) of R.A. No. 1125 provides that the CTA has the exclusive appellate
jurisdiction to review by appeal: “(1) Decisions of the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
in relation thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue.”. Reading the Section 7, it is explicitly provided
that except for local taxes, appeals from decisions of quasi-judicial agencies on tax-related
problems must be brought exclusively to the CTA. The law intended that the CTA is to have
exclusive jurisdiction to resolve all tax problems.

In this case, considering that the CTA has jurisdiction to review claims for tax refunds which
it and the proceeding is ongoing, the CTA may proceed to also rule on the CIR’s interpretation.

Therefore, the determination of the validity of the CIR’s issuances clearly falls within the
exclusive appellate jurisdiction of the CTA under Section 7 of R.A. No. 1125, subject to prior review
of the Secretary of Finance under the NIRC.

| 19
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

CTA IS A COURT OF RECORD WHOSE REVIEW POWERS COVER FACTUAL FINDINGS

Philippine Airlines, Inc. vs. Commissioner of Internal Revenue
G.R. Nos. 206079-80; January 17, 2018
Leonen, J.

FACTS:
These are consolidated petitions for review on certiorari questioning the CTA’s decision
denying the claim for refund of Philippine Airlines, Inc. (PAL) on withholding taxes withheld from
its interest income on its various deposits with different banks.

In 2002, PAL earned interest income from deposits and placement, and the banks
deducted final withholding taxes. PAL filed with the BIR a request for tax refund because it was
tax exempt under its franchise. After inaction by the BIR, PAL elevated the case to the CTA. The
CTA found PAL exempt from withholding taxes but only partially granted the refund on taxes
because PAL failed to adequately prove the remittance of some taxes withheld to the BIR.

The Commissioner of Internal Revenue (CIR) argues that PAL only showed the amounts
withheld by banks but those may not be the taxes withheld from PAL's interest income. Further,
evidence presented in the CTA should not be considered because the CTA's judicial review must
be limited to whether the CIR rightfully ruled on the administrative claim. In allowing the
presentation of new evidence, the CTA did not conduct a judicial review but rather, it adopted an
entirely new proceeding. PAL, on the other hand, argues that it established the withholding and
remittance of final taxes through the Certificates of Final Taxes Withheld issued to it by the banks.
It contends that these Certificates are prima facie evidence of actual remittance, and if
uncontroverted, are sufficient proof of remittance. It maintains that proof of actual remittance is not
necessary. PAL need not establish the remittance of income taxes because this function is vested
with the agent banks as the payors and withholding agents. PAL further asserts that the CTA is a
court of record, required to conduct a trial de novo. Thus, it should not be barred from considering
new evidence not submitted in the administrative claim for refund.

ISSUES:
(1) Can evidence not presented in the administrative claim for refund in the BIR be
presented in the Court of Tax Appeals?; and
(2) Is proof of remittance necessary for PAL to claim a refund of taxes withheld from it?

RULING:
(1) Yes, the CTA is not limited by the evidence presented in the administrative claim. The
claimant may present new and additional evidence to the CTA to support its case for tax refund.
Section 8 of R.A. No. 1125 states that the CTA is a court of record. As such, parties are expected
to litigate and prove every aspect of their case anew and formally offer all their evidence. No value
is given to documentary evidence submitted in the BIR unless it is formally offered in the CTA. As
evidence is considered and evaluated again, the scope of the CTA's review covers factual findings.

(2) No, remittance need not be proven. PAL only needs to prove that taxes were withheld
from its income. The taxes on interest income are in the nature of a withholding tax so the party
liable for remitting the amounts withheld is the withholding agent under Section 57 of the NIRC
and as implemented under Section 2.57 or R.R. No. 2-1998. Should the BIR find that taxes were
not properly remitted, its action is against the withholding agent. Certificates of taxes withheld is
already a sufficient and competent proof to establish the withholding of taxes.

20 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE REMEDY FROM THE DENIAL OF THE BUREAU OF CUSTOMS OF EXEMPTION

FROM CUSTOMS DUTIES AND FEES IS AN APPEAL TO THE COURT OF TAX APPEALS

Steel Corporation of the Philippines vs. Bureau of Customs

G.R. No. 220502; February 12, 2018
Peralta, J.

FACTS:
This is a petition for review on certiorari under Rule 45 filed by the plaintiff, Steel
Corporation of the Philippines (SteelCorp), seeking to reverse the CA’s decision of dismissing the
complaint due to lack of jurisdiction.

Petitioner SteelCorp was placed under rehabilitation for which a Stay Order was issued,
effective until the final court approval of the rehabilitation plan. Pursuant to such, SteelCorp sought
to enforce the privilege granted under Section 19 of the FRIA waiving the taxes and fees due to
the National and Local Governments from the effectivity of the Commencement Order until the
approval of the rehabilitation plan.

In a letter to the BOC, SteelCorp manifested its intent to avail the privilege over customs
duties and fees due for the period covered by the amnesty. The DOF Undersecretary however
disapproved the same holding that the temporary tax exemption privilege does not include customs
duties and fees. SteelCorp thus filed a petition for injunction against the respondents before the
RTC to enjoin the assessment of customs duties and fees against SteelCorp.

The OSG, acting for and in behalf of the Government, filed a Motion to Dismiss (MTD),
arguing that the RTC has no jurisdiction to hear and determine the complaint since original
jurisdiction was with the CTA. The complaint was thus dismissed. The appeal to the CA was
likewise dismissed. The CA affirmed that the proper remedy of SteelCorp from the DOF decision
disapproving the request for tax exemption should have been an appeal to the CTA as provided
under Section 7 (4) of R.A. No. 1125, as amended by R.A. No. 9282.

ISSUE:
Is the CA correct in holding that the CTA has the jurisdiction over appeals from decisions
of the DOF denying requests for tax exemption?

RULING:
Yes, the CA is correct in holding that the CTA has exclusive jurisdiction over appeals from
decisions of the DOF denying requests for tax exemption.

With the enactment of R.A. No. 1125, the CTA was granted the exclusive appellate
jurisdiction to review by appeal all cases involving disputed assessments of internal revenue taxes,
customs duties, and real property taxes. In general, it has jurisdiction over cases involving liability
for payment of money to the Government or the administration of the laws on national internal
revenue, customs, and real property.

In this case, SteelCorp sought to enforce the privilege granted under Section 19 of the
FRIA waiving the taxes and fees due to the National and Local Governments. Thus, from the clear
purpose of R.A. No. 1125 and its amendatory laws, the CTA is the proper forum to file the appeal
from the DOF’s denial of the tax exemption. Matters calling for technical knowledge should be
handled by such court as it has the specialty to adjudicate tax, customs, and assessment cases.

Therefore, the CA did not err in affirming the order of the RTC which dissolved the writ of
preliminary injunction and dismissed SteelCorp's complaint for lack of jurisdiction. The appeal
should have been filed with the CTA.

| 21
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE TWO-YEAR PERIOD UNDER SECTION 112 DOES NOT EXTEND TO JUDICIAL
CLAIMS

Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue

G.R. No. 197519; November 8, 2017
Caguioa, J.

FACTS:
This is a petition for review on certiorari filed under Rule 45 against the Decisions rendered
by the CTA en Banc.

On August 16, 2005, Mindanao I Geothermal Partnership (MI) filed a request for the
issuance of Tax Credit Certificate (TCC) with the BIR arising from its unutilized creditable input
taxes accumulated from taxable year 2004. However, said application for issuance of TCC remains
unacted upon by CIR.

On July 21, 2006, Ml filed its Petition for Review, praying for the issuance of TCC which
covers merely the second to fourth quarters of taxable year 2004.The CTA First Division granted
the petition and ordered that TCC for the second, third and fourth quarters of taxable year 2004 be
issued. Aggrieved, the CIR elevated the case to the CTA En banc. The CTA En banc granted CIR's
Petition for Review through the Assailed Decision, setting aside the decision of the CTA First
Division and dismissing MI’s judicial claim for being filed out of time which is in violation of Section
112 of the NIRC.

Hence, this petition. MI argued that its judicial claim for VAT refund for the second quarter
of 2004 should not have been denied as it is filed within the two-year prescriptive period which
should have been reckoned from the filing of the relevant Quarterly VAT Returns.

ISSUE:
Does the two-year period provided for under Section 112 of the NIRC extend to judicial
claims?

RULING:
No. The two-year period under Section 112 of the NIRC applies only to administrative
claims and does not extend to judicial claims.
Anent judicial claims, the Court held that the one hundred twenty (120) and thirty (30)-day
periods under Section 112 (C) (now 90+30 under TRAIN) are mandatory and jurisdictional, such
that judicial claims filed beyond the thirty (30)-day period after such denial or lapse would be
deemed filed out of time.

The thirtieth (30th) day following October 20, 2005 (which is the date when the CIR's period
to act expired) fell on November 19, 2005, a Saturday. Accordingly, Ml had until November 21,
2005, the next working day, to file its judicial claim before the CTA.

Hence, as Ml filed its judicial claim only on July 21, 2006, over seven (7) months beyond
the expiration of the thirty (30)-day period, the CTA En Banc correctly ordered its dismissal.

22 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

A JUDICIAL CLAIM FOR REFUND OR TAX CREDIT ARISING FROM UNUTILIZED VAT
MUST COMPLY WITH THE MANDATORY 120+30 -DAY (NOW 90+30 -DAY UNDER
TRAIN) WAITING PERIOD

Team Sual Corporation vs. Commissioner of Internal Revenue

G.R. No. 201225-26; April 18, 2018
Reyes, Jr., J.

FACTS:
Challenged before the Court via Petitions for Review on Certiorari under Rule 45 are the
Consolidated Decision of the Court of Tax Appeals (CTA) En Banc dated September 15, 2011 and
its subsequent Resolution dated March 21, 2012 in CTA-EB Nos. 649 and 651. The assailed
Decision and Resolution modified the Amended Decision of the CTA Special First Division dated
June 7, 2010 and partially granted Team Sual Corporation's (TSC) claim for refund in the amount
of P123,110,001.68 representing unutilized input Value Added Tax (VAT) for the second, third,
and fourth quarters of taxable year 2001.

On March 20, 2003, TSC filed with the BIR an administrative claim for refund in the
aggregate amount of P166,720,367.79 for its unutilized input VAT for taxable year 2001. On March
31, 2003, without waiting for the resolution of its administrative claim for refund or tax credit, TSC
filed with the CTA Division a petition for review docketed as CTA Case No. 6630. Ultimately, on
September 15, 2011, the CTA En Banc rendered a Consolidated Decision granting petitioner's
claim for refund of input VAT for the second, third, and fourth quarters of taxable year 2001
amounting to P123,110,001.68. Insofar as the refund of the input VAT for the first quarter of taxable
year 2001 is concerned, the CTA En Banc ruled that the CTA did not acquire jurisdiction over it as
it had been filed prematurely.

TSC submits that at the time of the filing of its claims for refund, prevailing jurisprudence
espoused that the 120-day waiting period was merely permissive instead of mandatory.41
Otherwise stated, TSC argues that as long as a taxpayer-claimant filed both its administrative and
judicial claim within the two year prescriptive period under Section 112(A) of the NIRC then there
would be no need to comply with the 120-day waiting period.

ISSUE:
Did the CTA acquire jurisdiction over the judicial claim for refund or tax credit for the first
quarter of taxable year 2001 even without waiting for the resolution of the administrative claim?

RULING:
No. The CTA did not acquire jurisdiction over such judicial claim because of TSC’s failure
to comply with the mandatory 120+30-day waiting period.

In order for the CTA to acquire jurisdiction over a judicial claim for refund or tax credit
arising from unutilized input VAT, Section 112 of the NIRC requires that it must first comply with
the mandatory 120+30-day waiting period. Any judicial claim for refund or tax credit filed in
contravention of said period is rendered premature, depriving the CTA of jurisdiction to act on it.
The CIR is given a period of 120-days from the submission of complete documents in support of
the application to either grant or deny the claim. If the claim is denied by the CIR or the latter has
not acted on it within the 120-day period, the taxpayer-claimant is then given a period of 30 days
to file a judicial claim via petition for review with the CTA.

In the instant case, TSC filed its administrative claim for refund for taxable year 2001 on
March 20, 2003, well within the two-year period provided for by law. TSC then filed two separate
judicial claims for refund: one on March 31, 2003 for the first quarter of 2001, and the other on
July 23, 2003 for the second, third, and fourth quarters of the same year. Given the fact that
TSC's administrative claim was filed on March 20, 2003, the CIR had 120 days or until July 18,
2003 to act on it.

Thus, the first judicial claim was premature because TSC filed it in a mere 11 days after
filing its administrative claim.

| 23
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

NO CIVIL PROCEEDING INVOLVING MATTER ARISING UNDER NIRC SHALL BE

MAINTAINED BEFORE THE CTA EN BANC UNLESS AN APPEAL HAS BEEN
PREVIOUSLY FILED WITH THE CTA [DIVISION]

Bureau of Internal Revenue vs. Hon. Ernesto D. Acosta and Chevron Philippines, Inc.
G.R. No. 195320; April 23, 2018
Reyes, Jr., J.

FACTS:
In this Petition for Certiorari under Rule 65, the Bureau of Internal Revenue (BIR) assails
the Resolutions dated September 24, 2010 and December 3, 2010 promulgated by the Court of
Tax Appeals-Special First Division (CTA-Special First Division), which considered the motion for
reconsideration filed by the BIR as a mere scrap of paper and deemed the CTA-Special First
Division's Decision dated July 12, 2010 as final and executory.

On October 7, 2004, Chevron Philippines, Inc. (Chevron) filed an administrative claim for
refund or credit with the BIR representing alleged overpayment of excise taxes on imported
finished unleaded premium gasoline and diesel fuel. The BIR, however, did not act on Chevron's
claim. Thus, on the basis of Section 7 of Republic Act (R.A.) No. 1125, as amended by R.A. No.
9282, Chevron elevated the case to the CTA-Special First Division on October 28, 2005 via a
petition for review.

On July 12, 2010, the CTA-Special First Division rendered its Decision partly granting the
petition. The BIR moved for the reconsideration of this Decision on August 3, 2010. Such was
denied. Unshaken, the BIR once again moved for a reconsideration of the resolution, which the
CTA-Special First Division denied with finality in its Resolution dated December 3, 2010.

The CTA-Special First Division, after having confirmed that the BIR did not elevate the
issue before the CTA En Banc within the 15-day reglementary period to appeal, issued an Entry
of Judgment.

ISSUE:
Is the Special Civil Action for Certiorari under Rule 65 of the Rules of Court available as a
remedy to the BIR for decisions rendered by a division of CTA?

RULING:
No, the Special Civil Action for Certiorari under Rule 65 of the Rules of Court is not
available as a remedy to the BIR for decisions rendered by a division of CTA.

For cases before the CTA, a decision rendered by a division of the CTA is appealable to
the CTA En Banc as provided by Section 18 of R.A. No. 1125, as amended by R.A. No. 9282. Said
provision provides that no civil proceeding involving matter arising under the National Internal
Revenue Code, the Tariff and Customs Code or the Local Government Code shall be maintained,
except as herein provided, until and unless an appeal has been previously filed with the CTA and
disposed of in accordance with the provisions of this Act. Section 2 of Rule 4 of the Revised Rules
of the CTA also states that the CTA En Banc has exclusive appellate jurisdiction relative to the
review of the court divisions' decisions or resolutions on motion for reconsideration or new trial, in
cases arising from administrative agencies such as the BIR.
Here, BIR had every opportunity to elevate the matter to the CTA En Banc but chose not
to avail itself of this remedy. Even on this ground alone, the Court may already dismiss the present
petition.

Hence, the BIR cannot avail of Certiorari under Rule 65 to assail the decision of the CTA
First Division.

24 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE 120+30 -DAY (NOW 90+30 -DAY UNDER TRAIN) RULE IN FILING A JUDICIAL
APPEAL FOR A VAT REFUND IS MANDATORY AND JURISDICTIONAL

Aichi Forging Company of Asia, Inc. vs. Court of Tax Appeals – En Banc and Commissioner of
Internal Revenue
G.R. No. 193625; August 30, 2017
Martires, J.

FACTS:
This is a special civil action for certiorari seeking the reversal of the decision of the CTA
partially granting petitioner’s tax refund for failing to fully substantiate its claim.

On September 26, 2002, petitioner Aichi Forging Company of Asia, Inc. (Aichi) filed for a
claim of refund or tax credit with the BIR for its unutilized input tax credits for the third and fourth
quarters of year 2000 and all the quarters of 2001. Respondent Commissioner of Internal Revenue
(CIR) failed to act on the claim, prompting Aichi, in order to avoid the prescriptive period under
Sections 229 and 112 (D) of the NIRC, to file a petition for review before the CTA. The CTA partially
granted the tax refund because Aichi failed to substantiate its claim. The CIR questioned Aichi’s
petition for review before the CTA En Banc arguing that Aichi’s appeal was premature because
the 120-day period granted to the CIR to act on the refund has not yet lapsed when Aichi filed its
appeal. CIR posits that it had until January 20, 2003 to act on the administrative claim before the
30-day period to appeal of Aichi commences. The CTA En Banc dismissed CIR’s motion for
reconsideration on the ground that the law does not prohibit simultaneous filing of the
administrative and judicial claims for refund; and what is only controlling is the two-year prescriptive
period to file refund claims.

ISSUE:
Is Aichi’s petition for review before the CTA valid when it is filed before the thirty-day period
to appeal?

RULING:
No, the CTA did not validly acquire jurisdiction over the judicial claim because the appeal
was made prematurely and not in compliance with Section 112 of the NIRC.

Section 112 (D) of the Code provides that 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 (ninety-day
after TRAIN) period, appeal the decision or the unacted claim with the Court of Tax Appeals. The
120 + 30-day rule is both mandatory and jurisdictional such that the taxpayer is forced to wait the
expiration of the period before initiating an appeal before the CTA. This must be so because prior
to the expiration of the period, the CIR still has the statutory authority to render a decision. If there
is no decision and the period has not yet expired, there is no reason to complain of in the meantime.
Otherwise stated, there is no cause of action yet as would justify a resort to the court.

In this case, the CTA did not acquire jurisdiction over the appeal of Aichi for being filed
before the commencement of the thirty-day period to appeal to the CTA.

Therefore, the petition for review filed by Aichi is invalid and the decision partially granting
the tax refund rendered by the CTA must be set aside as a void judgment.

| 25
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE 120+30 (NOW 90+30 UNDER TRAIN) DAYS TO APPEAL A REFUND TO CTA IS
MANDATORY AND JURISDICTIONAL

Team Energy Corporation vs. Commissioner of Internal Revenue

G.R. No. 197663; March 14, 2018
Leonen, J.

FACTS:
This case involves two consolidated petitions for review assailing the CTA decision
granting a partial refund of Team Energy Corporation’s (Team Energy) unused input tax credits.

Team Energy is engaged in power generation and electricity sale to National Power
Corporation (NPC). Its sales are zero-rated. On December 14, 2004, it applied with the BIR for a
tax refund for its unutilized input VAT amounting to P83,465,353.50 for the year 2003. On April 22,
2005, Team Energy appealed its VAT refund claim for only the first quarter of 2003 in the amount
of P15,085,320.31 to the CTA. On July 22, 2005, it appealed its remaining refund claims for the
second to fourth quarters to the CTA for the remaining amount of P68,380,033.19. The CTA only
granted a refund of P11,161,392.67 (in proportion of substantiated zero-rated sales to total zero-
rated sales) for only the first quarter of 2003 because the appeal to the CTA for the other quarters
were filed beyond the 30-day period under the NIRC.

The CIR argues the refund was not properly substantiated according to the accounting and
invoicing requirements under the NIRC. The CIR also raised the additional argument that the
judicial claim for the second to fourth quarters of 2003 should be denied for they were filed beyond
the 30-day period to appeal under Section 112 of the NIRC. On the other hand, Team Energy
argues, however, that the application of the Aichi doctrine (making 120+30-day rule mandatory) to
its claim would violate the rule on non-retroactivity of judicial decisions. Team Energy adds that
when it filed its claims for refund with the BIR and the CTA, both the administrative and judicial
claims for refund must be filed within the two (2)-year prescriptive period. Moreover, Revenue
Regulations No. 7-95 did not require a specific number of days after the 60-day, now 120-day,
period given to the CIR to decide on the claim within which to appeal to the CTA

ISSUE:
Did Team Energy timely file its judicial appeal for refund before the CTA for the second to
fourth quarter of 2003?

RULING:
No. Section 112 of the NIRC is very clear that the resort to an appeal to the CTA should
be made within 30 days from the receipt of decision from the CIR denying the refund claim or from
the expiration of the 120-day period given to the CIR to decide on the claim. Compliance with this
120+30-day period is mandatory and jurisdictional. When Team Energy filed its refund claim, it
was covered by the 1997 NIRC which clearly provided for this 120+30-day rule.

In this case, Team Energy field an administrative claim on December 14, 2004; hence, the
BIR had until April 16, 2005 to act on the claim and Team Energy had until May 16, 2005 to file its
appeal to the CTA. It only filed its appeal for the second to fourth quarters on July 22, 2005, way
beyond the allowable period, divesting the CTA jurisdiction to consider the appeal.

Therefore, Team Energy failed to properly file its judicial appeal for refund for the second
to fourth quarters because it appealed the administrative claim beyond the 30-day period provided
under the NIRC. Observance of the 120+30-day (now 90+30 under TRAIN) period is mandatory
and jurisdictional so non-compliance shall not vest jurisdiction to the CTA.

26 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

THE FILING OF A MOTION FOR RECONSIDERATION OR NEW TRIAL TO QUESTION

THE DECISION OF A DIVISION OF THE COURT OF TAX APPEALS IS MANDATORY

City of Manila vs. Cosmos Bottling Corporation

G.R. No. 196681; June 27, 2018
Martires, J.

FACTS:
This is a petition for review on certiorari under Rule 45 assailing the February 16, 2011 and
April 20, 2011 Resolutions of the CTA En Banc.

For the first quarter of 2007, the City of Manila assessed Cosmos Bottling Corporation
(Cosmos) local business taxes and regulatory fees in the total amount of P1,226,781.05. Cosmos
protested the assessment through a letter, arguing that Tax Ordinance Nos. 7988 and 8011,
amending the Revenue Code of Manila (RCM), have been declared null and void. Cosmos also
argued that the collection of local business tax under Section 21 of the RCM in addition to Section
14 of the same code constitutes double taxation.

Cosmos also tendered payment of only P131,994.23 which they posit as the correct
computation of their local business tax for the first quarter of 2007. This payment was refused by
the City Treasurer. Cosmos was thus constrained to pay the assessment of P1,226,78,1.05.
Cosmos then filed its complaint with the RTC praying for the refund or issuance of a tax credit
certificate in the amount of P1,094,786.82. The RTC in its decision ruled in favor of Cosmos but
denied the claim for refund. On appeal, the CTA Division ruled in favor of Cosmos. Hence, petition
was made to CTA En Banc. Same was dismissed for failure to file a motion for reconsideration or
new trial before the CTA Division. Hence, this petition.

ISSUE:
Is the filing of a motion for reconsideration or new trial before the CTA Division an
indispensable requirement for filing an appeal before the CTA En Banc?

RULING:
Yes, the filing of a motion for reconsideration or new trial is an indispensable requirement
for filing an appeal before the CTA En Banc.

Section 18 of R.A. No. 1125, as amended by R.A. No. 9282 and R.A. No. 9503 requires a
prior motion for reconsideration or new trial before the same division of the CTA that rendered the
assailed decision before filing a petition for review with the CTA En Banc. Failure to file such motion
for reconsideration or new trial is cause for dismissal of the appeal before the CTA En Banc.
Corollary, Section 1, Rule 8 of the CTA Rules provides that in cases falling under the exclusive
appellate jurisdiction of the CTA En Banc, the petition for review of a decision or resolution of the
CTA Division must be preceded by the filing of a timely motion for reconsideration or new trial with
the CTA Division.

It is clear from the cited rule that the filing of a motion for reconsideration or new trial is
mandatory – not merely directory – as indicated by the word "must."

Here, no motion for reconsideration or new trial was filed by the City of Manila before going
to the CTA En Banc. Hence, CTA En Banc is correct in dismissing the said petition as filing a
motion for reconsideration or new trial is mandatory precondition in filing such petition.

| 27
COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

BIR RULING NO. DA-489-03 IS AN EXCEPTION FROM THE MANDATORY AND

JURISDICTIONAL 120+30 (NOW 90+30 UNDER TRAIN) -DAY PERIOD IN FILING FOR
JUDICIAL CLAIM

Procter & Gamble Asia Pte Ltd. vs. Commissioner of Internal Revenue
G.R. No. 205652; September 6, 2017
Caguioa, J.

FACTS:
Petitioner Procter & Gamble Asia Pte Ltd. (P&G) filed a Petition for Review seeking the
reversal of the Court of Tax Appeals (CTA) dismissing P&G's judicial claim for refund of unutilized
input value-added tax (VAT) attributable to its zero-rated sales for being prematurely filed.

On March 22, 2007 and May 2, 2007, P&G filed an application for refund/issuance of tax
credit certificates of its input VAT attributable to its zero-rated sales covering the taxable periods
of 1st and 2nd quarters of 2005, respectively. Without awaiting the 120 days administrative period
to decide, P&G filed with the CTA a judicial claim seeking the refund or issuance of TCC for its
input VAT on March 28, 2007 and June 8, 2007, for the 1st and 2nd quarters respectively.
Meanwhile, the Supreme Court promulgated on October 6, 2010 the case of CIR vs. Aichi Forging
Company of Asia (Aichi doctrine), wherein it was held that compliance with the 120-day period
granted to the CIR, within which to act on an administrative claim for refund or credit of unutilized
input VAT, as provided under Section 112(C) of the National Internal Revenue Code of 1997
(NIRC), as amended, is mandatory and jurisdictional. Thus, the CTA dismissed P&G’s judicial
claim for having been prematurely filed.

In this petition for review on certiorari, P&G avers that its judicial claims for tax refund/credit
was filed with CTA after the issuance of BIR Ruling No. DA-489-03 on December 10, 2003, but
before the adoption of the Aichi doctrine on October 6, 2010. Accordingly, pursuant to the Court's
ruling, its judicial claims with the CTA were deemed timely filed.

ISSUE:
Is the judicial claim for tax refund/credit filed after the issuance of BIR Ruling No. DA-489-
03 but before the adoption of the Aichi doctrine timely made?

RULING:
Yes, the claims were timely filed.

Section 112 of the NIRC provides that the CIR is given 120 days within which to grant or
deny a claim for refund. Upon receipt of CIR's decision or ruling denying the said claim, or upon
the expiration of the 120-day period without action from the CIR, the taxpayer has 30 days within
which to file a petition for review with the CTA. In San Roque, while the Court reiterated the
mandatory and jurisdictional nature of the 120+30-day periods, it recognized as an exception BIR
Ruling No. DA-489-03, issued prior to the promulgation of Aichi, where the BIR expressly allowed
the filing of judicial claims with the CTA even before the lapse of the 120-day period. The Court
held that BIR Ruling No. DA-489-03 furnishes a valid basis to hold the CIR in estoppel because
the CIR had misled taxpayers into filing judicial claims with the CTA even before the lapse of the
120-day period.

In this case, records show that P&G filed its judicial claims for refund on March 28, 2007
and June 8, 2007, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before the
date when Aichi was promulgated.

Thus, even though P&G filed its judicial claim without waiting for the expiration of the 120-
day mandatory period, the CTA can take cognizance of the case because the claim was filed within
the excepted period stated in San Roque. In other words, P&G's judicial claims were deemed
timely filed and should not have been dismissed by the CTA.

28 |
 COVERED CASES (JULY 01, 2017 TO JUNE 30, 2018)
ON TAXATION LAW

BIR RULING NO. DA-489-03 IS AN EXCEPTION FROM THE MANDATORY AND

JURISDICTIONAL 120+30 (NOW 90+30 UNDER TRAIN) -DAY PERIOD IN FILING FOR
JUDICIAL CLAIM

Commissioner of Internal Revenue vs. Hedcor Sibulan, Inc.

G.R. No. 209306; September 27, 2017
Caguioa, J.

FACTS:
This petition for review filed by CIR assails the CTA Decision remanding the case to the
CTA Division for the determination of Hedcor Sibulan Inc.’s (HSI) entitlement to a refund of its
alleged unutilized input VAT.

HSI is a domestic corporation engaged in generation and sale of power to the Davao Light
and Power Company, Inc. On May 20, 2008, HSI filed with the its Amended Quarterly VAT Returns
for the 1st quarter of 2008, which showed that it incurred unutilized input VAT attributable to its
zero-rated sales. On March 29, 2010, HSI filed its administrative claim for refund of unutilized input
VAT for the 1st quarter of 2008. One day after filing of its administrative claim, HSI filed its judicial
claim for refund with the CTA. The CIR argued that the judicial claim was prematurely filed.
Meanwhile, on October 6, 2010, the Supreme Court promulgated CIR vs. Aichi Forging Company
of Asia, Inc. where the Court held that compliance with the 120-day period granted to the CIR,
within which to act on an administrative claim for refund/credit of unutilized input VAT is mandatory
and jurisdictional. Thus, the judicial claim of HSI was dismissed for having been prematurely filed.
Further, on February 12, 2013, the Supreme Court decided in CIR vs. San Roque Power
Corporation, and held that BIR Ruling No. DA-489-03 was recognized as an exception to the
mandatory and jurisdictional nature of the 120-day waiting period. The CTA En Banc remanded
the case to the CTA Division for a complete determination of HSI's tax refund/credit.

ISSUE:
Is the filing of the judicial claim for refund/credit one day after filing its administrative claim
prematurely made?

RULING:
No, the judicial claim was not prematurely filed.

Under Section 112(C) of the NIRC of 1997, the CIR is given a period of 120 days within
which to grant or deny a claim for refund. Upon receipt of the CIR's decision or ruling denying the
said claim, or upon the expiration of the 120-day period without action from the CIR, the taxpayer
has thirty (30) days within which to file a petition for review with the CTA. In San Roque, the Court
recognized BIR Ruling No. DA-489-03 as an exception to the mandatory and jurisdictional nature
of the 120+30-day periods. The Court held that BIR Ruling No. DA-489-03, issued prior to the
promulgation of Aichi doctrine, which explicitly declared that the "taxpayer-claimant need not wait
for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of petition
for review," furnishes a valid basis to hold the CIR in estoppel because the CIR had misled
taxpayers into prematurely filing their judicial claims with the CTA.

Here, records show that HSI filed its judicial claim for refund on March 30, 2010, or after
the issuance of BIR Ruling No. DA-489-03, but before the date Aichi was promulgated. Thus, even
though HSI's claim was filed without waiting for the expiration, the CTA may still take cognizance
of the case because the claim was filed within the excepted period stated in San Roque.

| 29
 ABOUTTHEBOOK

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