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Claims for taxes, whether assessed before or after On the contrary, under Section 87 of the NIRC, it is the
the death of the deceased, can be collected from the probate or settlement court which is bidden not to
heirs even after the distribution of the properties of
the decedent. They are exempted from the authorize the executor or judicial administrator of the
application of the statute of non-claims. The heirs decedent's estate to deliver any distributive share to any
shall be liable therefor, in proportion to their share in party interested in the estate, unless it is shown a
the inheritance. 13 Certification by the Commissioner of Internal Revenue
that the estate taxes have been paid. This provision
Thus, the Government has two ways of collecting disproves the petitioner's contention that it is the probate
the taxes in question. One, by going after all the
heirs and collecting from each one of them the
court which approves the assessment and collection of
amount of the tax proportionate to the inheritance the estate tax.
received. Another remedy, pursuant to the lien
created by Section 315 of the Tax Code upon all If there is any issue as to the validity of the BIR's decision
property and rights to property belong to the to assess the estate taxes, this should have been
taxpayer for unpaid income tax, is by subjecting said
property of the estate which is in the hands of an pursued through the proper administrative and judicial
heir or transferee to the payment of the tax due the avenues provided for by law.
estate. (Commissioner of Internal Revenue vs.
Pineda, 21 SCRA 105, September 15, 1967.) Section 229 of the NIRC tells us how:
From the foregoing, it is discernible that the approval of Sec. 229. Protesting of assessment. � When the
the court, sitting in probate, or as a settlement tribunal Commissioner of Internal Revenue or his duly
over the deceased is not a mandatory requirement in the authorized representative finds that proper taxes
should be assessed, he shall first notify the taxpayer
collection of estate taxes. It cannot therefore be argued of his findings. Within a period to be prescribed by
that the Tax Bureau erred in proceeding with the levying implementing regulations, the taxpayer shall be
and sale of the properties allegedly owned by the late required to respond to said notice. If the taxpayer
President, on the ground that it was required to seek first fails to respond, the Commissioner shall issue an
the probate court's sanction. There is nothing in the Tax assessment based on his findings.
Code, and in the pertinent remedial laws that implies the
Such assessment may be protested administratively
necessity of the probate or estate settlement court's by filing a request for reconsideration or
reinvestigation in such form and manner as may be 318 and 324 of the old tax code (Republic Act 5203), the
prescribed by implementing regulations within (30) BIR's Notices of Levy on the Marcos properties, were
days from receipt of the assessment; otherwise, the
assessment shall become final and unappealable. issued beyond the allowed period, and are therefore null
and void:
If the protest is denied in whole or in part, the
individual, association or corporation adversely . . . the Notices of Levy on Real Property (Annexes
affected by the decision on the protest may appeal O to NN of Annex C of this Petition) in satisfaction of
to the Court of Tax Appeals within thirty (30) days said assessments were still issued by respondents
from receipt of said decision; otherwise, the decision well beyond the period mandated in Revenue
shall become final, executory and demandable. (As Memorandum Circular No. 38-68. These Notices of
inserted by P.D. 1773) Levy were issued only on 22 February 1993 and 20
May 1993 when at least seventeen (17) months had
already lapsed from the last service of tax
Apart from failing to file the required estate tax return assessment on 12 September 1991. As no notices of
within the time required for the filing of the same, distraint of personal property were first issued by
petitioner, and the other heirs never questioned the respondents, the latter should have complied with
assessments served upon them, allowing the same to Revenue Memorandum Circular No. 38-68 and
lapse into finality, and prompting the BIR to collect the issued these Notices of Levy not earlier than three
(3) months nor later than six (6) months from 12
said taxes by levying upon the properties left by September 1991. In accordance with the Circular,
President Marcos. respondents only had until 12 March 1992 (the last
day of the sixth month) within which to issue these
Petitioner submits, however, that "while the assessment Notices of Levy. The Notices of Levy, having been
of taxes may have been validly undertaken by the issued beyond the period allowed by law, are thus
void and of no effect. 15
Government, collection thereof may have been done in
violation of the law. Thus, the manner and method in
We hold otherwise. The Notices of Levy upon real
which the latter is enforced may be questioned
property were issued within the prescriptive period and in
separately, and irrespective of the finality of the former,
accordance with the provisions of the present Tax Code.
because the Government does not have the unbridled
The deficiency tax assessment, having already become
discretion to enforce collection without regard to the clear
final, executory, and demandable, the same can now be
provision of law." 14
collected through the summary remedy of distraint or levy
pursuant to Section 205 of the NIRC.
Petitioner specifically points out that applying
Memorandum Circular No. 38-68, implementing Sections
The applicable provision in regard to the prescriptive be collected by levy upon real property within three years
period for the assessment and collection of tax deficiency following the assessment of the tax. Since the estate tax
in this instance is Article 223 of the NIRC, which assessment had become final and unappealable by the
pertinently provides: petitioner's default as regards protesting the validity of
the said assessment, there is now no reason why the BIR
Sec. 223. Exceptions as to a period of limitation of cannot continue with the collection of the said tax. Any
assessment and collection of taxes. � (a) In the case objection against the assessment should have been
of a false or fraudulent return with intent to evade tax
or of a failure to file a return, the tax may be
pursued following the avenue paved in Section 229 of the
assessed, or a proceeding in court for the collection NIRC on protests on assessments of internal revenue
of such tax may be begun without assessment, at taxes.
any time within ten (10) years after the discovery of
the falsity, fraud, or omission: Provided, That, in a Petitioner further argues that "the numerous pending
fraud assessment which has become final and
executory, the fact of fraud shall be judicially taken
court cases questioning the late president's ownership or
cognizance of in the civil or criminal action for the interests in several properties (both real and personal)
collection thereof. make the total value of his estate, and the consequent
estate tax due, incapable of exact pecuniary
xxx xxx xxx determination at this time. Thus, respondents'
assessment of the estate tax and their issuance of the
(c) Any internal revenue tax which has been Notices of Levy and sale are premature and oppressive."
assessed within the period of limitation above
prescribed, may be collected by distraint or levy or
He points out the pendency of Sandiganbayan Civil Case
by a proceeding in court within three years following Nos. 0001-0034 and 0141, which were filed by the
the assessment of the tax. government to question the ownership and interests of
the late President in real and personal properties located
xxx xxx xxx within and outside the Philippines. Petitioner, however,
omits to allege whether the properties levied upon by the
The omission to file an estate tax return, and the BIR in the collection of estate taxes upon the decedent's
subsequent failure to contest or appeal the assessment estate were among those involved in the said cases
made by the BIR is fatal to the petitioner's cause, as pending in the Sandiganbayan. Indeed, the court is at a
under the above-cited provision, in case of failure to file a loss as to how these cases are relevant to the matter at
return, the tax may be assessed at any time within ten issue. The mere fact that the decedent has pending
years after the omission, and any tax so assessed may cases involving ill-gotten wealth does not affect the
enforcement of tax assessments over the properties petitioner has not pointed out one single provision in the
indubitably included in his estate. Memorandum of the Special Audit Team which gave rise
to the questioned assessment, which bears a trace of
Petitioner also expresses his reservation as to the falsity. Indeed, the petitioner's attack on the assessment
propriety of the BIR's total assessment of bears mainly on the alleged improbable and
P23,292,607,638.00, stating that this amount deviates unconscionable amount of the taxes charged. But mere
from the findings of the Department of Justice's Panel of rhetoric cannot supply the basis for the charge of
Prosecutors as per its resolution of 20 September 1991. impropriety of the assessments made.
Allegedly, this is clear evidence of the uncertainty on the
part of the Government as to the total value of the estate Moreover, these objections to the assessments should
of the late President. have been raised, considering the ample remedies
afforded the taxpayer by the Tax Code, with the Bureau
This is, to our mind, the petitioner's last ditch effort to of Internal Revenue and the Court of Tax Appeals, as
assail the assessment of estate tax which had already described earlier, and cannot be raised now via Petition
become final and unappealable. for Certiorari, under the pretext of grave abuse of
discretion. The course of action taken by the petitioner
It is not the Department of Justice which is the reflects his disregard or even repugnance of the
government agency tasked to determine the amount of established institutions for governance in the scheme of a
taxes due upon the subject estate, but the Bureau of well-ordered society. The subject tax assessments having
Internal Revenue, 16 whose determinations and become final, executory and enforceable, the same can
assessments are presumed correct and made in good no longer be contested by means of a disguised protest.
faith. 17 The taxpayer has the duty of proving otherwise. In In the main, Certiorari may not be used as a substitute for
the absence of proof of any irregularities in the a lost appeal or remedy. 19 This judicial policy becomes
performance of official duties, an assessment will not be more pronounced in view of the absence of sufficient
disturbed. Even an assessment based on estimates is attack against the actuations of government.
prima facie valid and lawful where it does not appear to
have been arrived at arbitrarily or capriciously. The On the matter of sufficiency of service of Notices of
burden of proof is upon the complaining party to show Assessment to the petitioner, we find the respondent
clearly that the assessment is erroneous. Failure to appellate court's pronouncements sound and resilient to
present proof of error in the assessment will justify the petitioner's attacks.
judicial affirmance of said assessment. 18 In this instance,
Anent grounds 3(b) and (B) � both alleging/claiming assessments, (upon which the Levy and sale of
lack of notice � We find, after considering the facts properties were based), nor appealed the same to
and circumstances, as well as evidences, that there the Court of Tax Appeals.
was sufficient, constructive and/or actual notice of
assessments, levy and sale, sent to herein petitioner There being sufficient service of Notices to herein
Ferdinand "Bongbong" Marcos as well as to his petitioner (and his mother) and it appearing that
mother Mrs. Imelda Marcos. petitioner continuously ignored said Notices despite
several opportunities given him to file a protest and
Even if we are to rule out the notices of assessments to thereafter appeal to the Court of Tax Appeals, �
personally given to the caretaker of Mrs. Marcos at the tax assessments subject of this case, upon
the latter's last known address, on August 26, 1991 which the levy and sale of properties were based,
and September 12, 1991, as well as the notices of could no longer be contested (directly or indirectly)
assessment personally given to the caretaker of via this instant petition for certiorari. 20
petitioner also at his last known address on
September 12, 1991 � the subsequent notices given Petitioner argues that all the questioned Notices of Levy,
thereafter could no longer be ignored as they were
sent at a time when petitioner was already here in
however, must be nullified for having been issued without
the Philippines, and at a place where said notices validly serving copies thereof to the petitioner. As a
would surely be called to petitioner's attention, and mandatory heir of the decedent, petitioner avers that he
received by responsible persons of sufficient age has an interest in the subject estate, and notices of levy
and discretion. upon its properties should have been served upon him.
Thus, on October 20, 1992, formal assessment
notices were served upon Mrs. Marcos c/o the
We do not agree. In the case of notices of levy issued to
petitioner, at his office, House of Representatives, satisfy the delinquent estate tax, the delinquent taxpayer
Batasan Pambansa, Q.C. (Annexes "A", "A-1", "A- is the Estate of the decedent, and not necessarily, and
2", "A-3"; pp. 207-210, Comment/Memorandum of exclusively, the petitioner as heir of the deceased. In the
OSG). Moreover, a notice to taxpayer dated October same vein, in the matter of income tax delinquency of the
8, 1992 inviting Mrs. Marcos to a conference relative
to her tax liabilities, was furnished the counsel of
late president and his spouse, petitioner is not the
Mrs. Marcos � Dean Antonio Coronel (Annex "B", p. taxpayer liable. Thus, it follows that service of notices of
211, ibid). Thereafter, copies of Notices were also levy in satisfaction of these tax delinquencies upon the
served upon Mrs. Imelda Marcos, the petitioner and petitioner is not required by law, as under Section 213 of
their counsel "De Borja, Medialdea, Ata, Bello, the NIRC, which pertinently states:
Guevarra and Serapio Law Office", on April 7, 1993
and June 10, 1993. Despite all of these Notices,
petitioner never lifted a finger to protest the xxx xxx xxx
. . . Levy shall be effected by writing upon said SO ORDERED.
certificate a description of the property upon which
levy is made. At the same time, written notice of the
levy shall be mailed to or served upon the Register
of Deeds of the province or city where the property is
located and upon the delinquent taxpayer, or if he be
absent from the Philippines, to his agent or the
manager of the business in respect to which the
liability arose, or if there be none, to the occupant of
the property in question.
GARCIA, J.:
1 [1]
Penned by Associate Justice Romeo J. Callejo, Sr., now a
member of this Court, and concurred in by Associate Justices
Godardo A. Jacinto (ret.) and Candido V. Rivera (ret.); Rollo, pp.
20-34.
2. Resolution dated October 1988, then Deputy Commissioner Santos also
16, 20002[2] denying issued Revenue Memorandum Circular (RMC)
No. 59-88, again declaring that the sale of gold
petitioner’s motion for
by a VAT-registered taxpayer to the Central
reconsideration. Bank is subject to the zero-rate VAT. No less
than five Rulings were subsequently issued by
The facts, as narrated by the CA in its basic [petitioner] from 1988 to 1990 reiterating and
confirming its position that the sale of gold by a
Resolution of May 10, 2000, are: VAT-registered taxpayer to the Central Bank is
subject to the zero-rate VAT.
[Respondent] is a domestic corporation As a corollary, and in reliance, of the
engaged in mining business, specifically the foregoing issuances, [respondent], during the six
exploration, development and operation of (6) taxable quarters in question covering the
mining properties for purposes of commercial period January 1, 1988 to July 31, 1989, sold
production and the marketing of mine products. gold to the Central Bank and treated these sales
It is a VAT-registered enterprise, with VAT as zero-rated – that is, subject to the 0% VAT.
Registration No. 31-0-000027 issued on January During the same period, [respondent] thus
1, 1988. Sometime in January 1988, incurred input taxes attributable to said sales to
[respondent] filed an application for zero-rating the Central Bank. Consequently, [respondent]
of its sales of mine products, which application filed with the Commissioner of Internal
was duly approved by the [petitioner] Revenue applications for the issuance of Tax
Commissioner of Internal Revenue. Credit Certificates for input VAT Credits
attributable to its export sales - that is, inclusive
On August 28, 1988, then Deputy of direct export sales and sale of gold to the
Commissioner of Internal Revenue Eufracio D. Central Bank corresponding to the same taxable
Santos issued VAT Ruling No. 378-88 which periods, to wit:
declared that the sale of gold to the Central
Bank is considered an export sale and therefore AMOUNT OF TAX CREDIT APPLIED FOR
subject to VAT at 0% rate. On December 14, TAXABLE PERIOD
2 [2]
Rollo, pp. 35-36.
P34,449,817.71 retroactive application of VAT Ruling 008-92
01Jan88 to 30 Apr88 because their claim for refund of input taxes are
P30,382,666.86 not lost because the same are allowable on its
01May88 to 31Jul88 output taxes on the sales of gold to Central
P30,146,774.47 Bank; on its output taxes on other sales; and as
01Aug88 to 31Oct88 deduction to income tax under Section 29 of the
P13,467,663.41 Tax Code.
01Nov88 to 31Jan89
P 7,030,261.29 On the basis of the aforequoted BIR
01Feb89 to 30Apr89 Issuances, [petitioner] thus treated
P18,263,960.28 [respondent’s] sales of gold to the Central Bank
01May89 to 31Jul89 as domestic sales subject to 10% VAT but
allowed [respondent] a total tax credit of only
(CTA Decision dated March 23, 1995; Pages 83-86, P81,991,810.91 which corresponded to VAT
rollo) input taxes attributable to its direct export sales
(CTA Decision dated March 23, 1995; Page
Meanwhile, on January 23, 1992, then 87). Notwithstanding this finding of the
Commissioner Jose U. Ong issued VAT Ruling [petitioner], [respondent] was not refunded the
No. 008-92 declaring and holding that the sales said amounts of tax credit claimed. Thus, to
of gold to the Central Bank are considered suspend the running of the two-year prescriptive
domestic sales subject to 10% VAT instead of period (Sec. 106, NIRC) for claiming refunds or
0% VAT as previously held in BIR Issuances tax credits, [respondent] instituted x x x
from 1998 to 1990. Subsequently, VAT Ruling consolidated Petitions for Review with the
No. 59-92, dated April 28, 1992, x x x were Court of Tax Appeals, praying for the issuance
issued by [petitioner] reiterating the treatment of of “Tax Credit Certificates” for the following
sales of gold to the Central Bank as domestic input VAT credits attributable to export sales
sales, and expressly countenancing the transacted during the taxable quarters or periods
Retroactive application of VAT Ruling No. 008- in question, to wit:
92 to all such sales made starting January 1,
1988, ratiocinating, inter alia, that the mining CTA Case
companies will not be unduly prejudiced by a
Number Amount of Tax Credit Applied denied the whole amount of its claim for tax credit of
for Taxable Period
P131,741,034.22. The tax court held that the alleged
4429 P64,832,374.67
01JAN88 to31JUL88 prejudice to respondent as a result of the retroactive
4495 P43,614,437.88 application of VAT Ruling No. 008-92 issued on
01AUG88to31JAN89
4575 P23,294,221.77 January 23, 1992 to the latter’s gold sales to the
01FEB89 to31JUL89
P131,741,034.22 = Central Bank (CB) from January 1, 1988 to July 31,
TOTAL
1989 is merely speculative and not actual and
Significantly, the total amount of imminent so as to proscribe said Ruling’s
P131,741,034.22, as hereinabove computed,
corresponds to the total input VAT credits retroactivity. The CTA further held that respondent
attributable to export sales made by
[respondent] during the taxable periods set forth would not be unduly prejudiced considering that VAT
and therefore, represents a combination of input
tax attributable to both (1) direct export sales Ruling No. 59-92 which mandates the retroactivity of
and (2) sales of gold to the Central Bank. VAT Ruling No. 008-92 likewise provides for
(Words in brackets added).3[3]
alternative remedies for the recovery of the input VAT.
In a decision dated March 23, 1995,4[4] the
Court of Tax Appeals (CTA) dismissed respondent’s Its motion for reconsideration having been
aforementioned consolidated Petitions for Review and denied by the tax court, respondent appealed to the
CA whereat its recourse was docketed as CA-G.R. SP
3 [3]
CA Resolution; Rollo, pp. 21-24.
4 [4]
Rollo, pp. 51-64.
No. 38413.
[petitioner Commissioner of Internal Revenue]
is hereby ordered to issue [respondent] a TAX
At first, the CA, in a decision dated May 30, CREDIT in the amount of P131,741,034.22.
1996,5[5] affirmed in toto that of the tax court. SO ORDERED.
However, upon respondent’s motion for In its reversal action, the CA ruled that the tax
reconsideration, the CA, in the herein assailed basic credit in the total amount of P131,741,034.22 consists
Resolution dated May 10, 2000, reversed itself by of (1) P81,991,810.91, representing input VAT credits
setting aside its earlier decision of May 30, 1996 and attributable to direct export sales subject to 0% VAT,
ordering herein petitioner to issue in respondent’s and (2) P49,749,223.31, representing input VAT
favor a tax credit in the amount of P131,741,034.22, attributable to sales of gold to the CB which were
to wit: subject to 0% when said sales were made in 1988 and
1989. In effect, the CA rejected the retroactive
IN THE LIGHT OF ALL THE application of VAT Ruling No. 008-92 to the subject
FOREGOING, [respondent’s] Motion for
Reconsideration, x x x as supplemented, is gold sales of respondent because of the resulting
GRANTED. The Decision of this Court, dated
May 30, 1996, affirming the Decision of the prejudice to the latter despite the existence of
Court of Tax Appeals x x x is SET ASIDE. The
alternative modes for the recovery of the input VAT.
5 [5]
Penned by Associate Justice Pacita Canizares-Nye (ret.),
with former Associate Justice Pedro Ramirez (ret.) and former CA
Associate Justice Romeo J. Callejo, Jr., concurring; Rollo, pp. 86-
94.
This time, it was petitioner who moved for a VAT Ruling No. 008-92 to respondent would not
reconsideration but his motion was denied by the CA prejudice the latter.
in its subsequent Resolution of October 16, 2000.
Initially, the Court, in its Resolution of January
6[6]
Hence, petitioner’s present recourse assailing 24, 2001, denied the Petition for lack of
only that portion of the CA Resolution of May 10, verification and certification against forum shopping.
2000 allowing respondent the amount of However, upon petitioner’s manifestation and motion
P49,749,223.31 as tax credit corresponding to the for reconsideration, the Court reinstated the Petition in
input VAT attributable to its sales of gold to the CB its subsequent Resolution of March 5, 2001.7[7]
for the period January 1, 1988 to July 31, 1989. It is
The petition must have to fall.
petitioner’s sole contention that the CA erred in
rejecting the retroactive application of VAT Ruling
We start with the well-entrenched rule that
No. 008-92, dated January 23, 1992, subjecting sales
rulings and circulars, rules and regulations,
of gold to the CB to 10% VAT to respondent’s sales of
promulgated by the Commissioner of Internal
gold during the period from January 1, 1988 to July
Revenue, would have no retroactive application if to
31, 1989. Petitioner posits that, contrary to the ruling
of the appellate court, the retroactive application of
6 [6]
Rollo, pp. 95-96.
7 [7]
Rollo, p. 173.
so apply them would be prejudicial to the taxpayers.8 gathered by the Bureau of Internal Revenue are
materially different from the facts on which the
[8]
ruling is based; or c) where the taxpayer acted in
bad faith.
9 [9]
Section 104 (a) of the (old) Tax Code, now Section 110
(A).
10 [10]
Sec. 100 (a) of the (old) Tax Code. Said provision
specifically reads: “Sec. 100 Value-added tax on sales of goods –
(a) Rate and base of tax. – There shall be levied, assessed and
collected on every sale, barter or exchange of goods, a value-added
tax equivalent to 10% of the gross selling price or gross value in
money of the goods sold, bartered or exchanged, such tax to be
paid by the seller or transferor x x x”; now Sec. 106 (A).
required to register under Section 107 of the (old) Tax Simply stated, a taxpayer subject to 10% output
Code.11[11] VAT on its sales of goods and services may recover its
input VAT costs by passing on said costs as output
The VAT system of taxation allows a VAT- VAT to its buyers of goods and services but it cannot
registered taxpayer to recover its input VAT either by claim the same as a refund or tax credit, while a
(1) passing on the 10% output VAT on the gross taxpayer subject to 0% on its sales of goods and
selling price or gross receipts, as the case may be, to services may only recover its input VAT costs by
its buyers, or (2) if the input tax is attributable to the filing a refund or tax credit with the BIR.
purchase of capital goods or to zero-rated sales, by
filing a claim for a refund or tax credit with the BIR.12 Here, the claimed tax credit of input tax
[12]
amounting to P49,749,223.31 represents the costs or
expenses incurred by respondent in connection with
its gold production. Relying on BIR Rulings,
11 [11]
Section 104 (a) of the (old) Tax Code, now Section 110 specifically VAT Ruling No. 378-88, dated August 28,
(A).
12 [12]
Sec. 104 (b) of the (old) Tax Code. Said provision 1988, and VAT Ruling No. 59-88, dated December 14,
specifically reads:
1988, both of which declared that sales of gold to the
(b) Excess Output or Input Tax. – x x x Any input tax attributable
to the purchase of capital goods or to zero-rated sales by a VAT- CB are considered export sales subject to 0%,
registered person may at his option be refunded or credited against
other internal revenue taxes subject to the provisions of Sec. 106;
now Sec. 110 (B).
respondent sold gold to the CB from January 1, 1988
to July 31, 1989 without passing on to the latter its Clearly, from the foregoing, the prejudice to
input VAT costs, obviously intending to obtain a respondent by the retroactive application of VAT
refund or credit thereof from the BIR at the end of the Ruling No. 008-92 to its sales of gold to the CB from
taxable period. However, by the time respondent January 1, 1988 to July 31, 1989 is patently evident.
applied for refund/credit of its input VAT costs, VAT
Ruling No. 008-92 dated January 23, 1992, treating Verily, by reason of the denial of its claim for
sales of gold to the CB as domestic sales subject to refund/credit, respondent has been precluded from
10% VAT, and VAT Ruling No. 059-92 dated April 28, recovering its input VAT costs attributable to its sales
1992, retroactively applying said VAT Ruling No. of gold to the CB during the period mentioned, for the
008-92 to such sales made from January 1, 1988 following reasons:
onwards, were issued. As a result, respondent’s
application for refund/credit was denied and, as First, because respondent could not pass on to
likewise found by the CA, it was even subsequently the CB the 10% output VAT which would be
assessed deficiency output VAT on October 19, 1992 retroactively imposed on said transactions, not having
in the total amounts of P252,283,241.95 for the year passed the same at the time the sales were made on
1988, and P244,318,148.56 for the year 1989.13[13] the assumption that said sales are subject to 0%, and,
hence, maybe refunded or credited later. And second,
13 [13]
May 10, 2000, CA Resolution; Rollo, p. 27.
because respondent could not claim the input VAT
costs as a refund/credit as it has been prevented such subject to 10% VAT, treat the input VAT as cost and
option, the sales in question having been retroactively deduct the same from income for income tax
subjected to 10% VAT, ergo limiting recovery of said purposes.
costs to the application of the same against the output
tax which will result therefrom. We are not persuaded.
Indeed, respondent stands to suffer substantial The first remedy cannot be applied in this case.
economic prejudice by the retroactive application of As correctly found by the CA, respondent has clearly
the VAT Ruling in question. shown that it has no “other transactions” subject to
10% VAT, and petitioner has failed to prove the
But petitioner maintains otherwise, arguing that existence of such “other transactions” against which
respondent will not be unduly prejudiced since there to set off respondent’s input VAT.14[14]
are still other available remedies for it to recover its
input VAT costs. Said remedies, so petitioner points Anent the second remedy, prejudice will still,
out, are for respondent to either (1) use said input indubitably, result because treating the input VAT as
taxes in paying its output taxes in connection with its an income tax deductible expense will yield only a
other sales transactions which are subject to the 10% partial and not full financial benefit of having the
VAT or (2) if there are no other sales transactions 14 [14]
CA Resolution, May 10, 2000; Rollo, p. 30.
input VAT refunded or used as a tax credit. We quote “(b) Excess output or input tax. – xxx
Any input tax attributable to xxx zero-rated
with approval the CA’s observations in this respect, sales by a VAT-registered person may at his
option be refunded or credited against other
thus: internal revenue taxes, subject to the
provisions of Section 106.”
x x x even assuming that input VAT is On the other hand, a tax deduction may
still available for deduction, [respondent] still be used only against gross income for purposes
suffers prejudice. As a zero-rated taxpayer of income tax. A tax deduction is not allowed
(pursuant to the 1988 to 1990 BIR issuances), against other internal revenue taxes such as
[respondent] could have claimed a cash refund excise taxes, documentary stamp taxes, and
or tax credit of the input VAT in the amount of output VAT.
P49,749,223.31. If it had been allowed a cash
refund or tax credit, it could have used the full 2.42.2 In terms of income tax, a tax
amount thereof to pay its other tax obligations deduction is only an expense item in computing
(or, in the case of a cash refund, to fund its income tax liabilities (Sections 27 to 29, Tax
operations). With VAT Ruling No. 059-92, Code) while a tax credit is a direct credit against
[respondent] is precluded from claiming the final income tax due (Section 106[b], Tax
cash refund or tax credit and is limited to the so- Code). This is illustrated in the example below:
called remedy of deducting the input VAT from
gross income. But a cash refund or tax credit is Assume that in 1988, respondent had a
not the same as a tax deduction. A tax gross income of P1,000,000,000 and deductible
deduction has less benefits than a tax credit. expenses in general (such as salaries, utilities,
Consider the following differences; transportation, fuel and costs of sale) of
P500,000,000. Assume also that [respondent]
2.42.1 A tax credit may be used to pay had input VAT of P131,741,034.22, the amount
any national internal revenue tax liability. being claimed in the instant case.
Section 104(b) of the Tax Code states; [Respondent’s] income tax liability, depending
on whether it utilized the input tax as tax credit
or tax deduction, would be as follows:
Gross income (Section 28, Tax Code)
a. Tax credit P1,000,000,000.00
Deductions
Gross Income (Section 28, Tax Code) General (Section 29, Tax Code)
P500,000,000.00
P1,000,000,000.00 Input VAT (VAT Ruling No. 059-92)
Deductions (Section 29, Tax Code) P131,741,034.22P
( 631,741,034.22)
500,000,000.00) Taxable income (Section 27, Tax Code)
Taxable Income (Section 27, Tax Code) P 368,258,966.78
24 [6]
the determination of its VAT payment. Apparently, it
Transactions Subject to Zero Percent (%) Rate. – The following
services performed in the Philippines by VAT-registered persons shall be was only on April 14, 1998 that MPC paid Mitsubishi
subject to zero-percent rate: x x x (3) Services rendered to persons whose
exemption under special laws x x x effectively subjects the supply of such
services to zero percent (0%) rate.
the VAT component for the progress billings from
April 1993 to September 1996, and for which the National Internal Revenue Code (NIRC), MPC
Mitsubishi issued Official Receipt (OR) No. 0189 in went to the CTA via a petition for review, docketed as
the aggregate amount of PhP 135,993,570. CTA Case No. 6133.
On August 25, 1998, MPC, while awaiting Answering the petition, the BIR Commissioner,
approval of its application aforestated, filed its citing Kumagai-Gumi Co. Ltd. v. CIR,25[7] asserted
quarterly VAT return for the second quarter of 1998 that MPC’s claim for refund cannot be granted for this
where it reflected an input VAT of PhP main reason: MPC’s sale of electricity to NPC is not
148,003,047.62, which included PhP 135,993,570 zero-rated for its failure to secure an approved
supported by OR No. 0189. Pursuant to the procedure application for zero-rating.
prescribed in Revenue Regulations No. 7-95, MPC
filed on December 20, 1999 an administrative claim Before the CTA, among the issues stipulated by
for refund of unutilized input VAT in the amount of the parties for resolution were, in gist, the following:
PhP 148,003,047.62.
1. Whether or not [MPC] has unapplied
or unutilized creditable input VAT for the 2nd
quarter of 1998 attributable to zero-rated sales
Since the BIR Commissioner failed to act on its to NPC which are proper subject for refund
pursuant to relevant provisions of the NIRC;
claim for refund and obviously to forestall the running
of the two-year prescriptive period under Sec. 229 of 25[7]
CTA Case No. 4670, July 29, 1997.
2. Whether the creditable input VAT of
MPC for said period, if any, is substantiated by In view of all the foregoing, the instant
documents; and petition is PARTIALLY GRANTED.
Accordingly, respondent is hereby ORDERED
3. Whether the unutilized creditable to REFUND or in the alternative, ISSUE A TAX
input VAT for said quarter, if any, was applied CREDIT CERTIFICATE in favor of the
against any of the VAT output tax of MPC in the petitioner its unutilized input VAT payments
subsequent quarter. directly attributable to its effectively zero-rated
sales for the second quarter of 1998 in the
reduced amount of P10,766,939.48, computed
To provide support to the CTA in verifying and as follows:
analyzing documents and figures and entries Claimed Input VAT
P148,003,047.62
contained therein, the Sycip Gorres & Velayo (SGV),
Less: Disallowances
an independent auditing firm, was commissioned.
a.) As summarized by SGV & Co. in its initial
report (Exh. P)
The Ruling of the CTA I. Input Taxes on Purchases of Services:
1. Supported by documents
other than VAT Ors P
10,629.46
On the basis of its affirmative resolution of the 2. Supported by photocopied VAT OR
879.09
first issue, the CTA, by its Decision dated March 18, II. Input Taxes on Purchases of Goods:
1. Supported by documents other than
2003, granted MPC’s claim for input VAT refund or VAT invoices
165,795.70
credit, but only for the amount of PhP 10,766,939.48. 2. Supported by Invoices with TIN only
1,781.82
The fallo of the CTA’s decision reads: 3. Supported by photocopied VAT
invoices for refund or tax credit have not been amply
3,153.62
III. Input Taxes on Importation of Goods: substantiated by pertinent documents, such as but not
1. Supported by photocopied documents
[IEDs and/or Bureau of Customs limited to VAT ORs, invoices, and other supporting
(BOC) Ors]
716,250.00 documents. Wrote the CTA:
2. Supported by broker’s computations
91,601.00 990,090.69
We agree with the above SGV findings
b.) Input taxes without supporting documents as that out of the remaining taxes of
summarized in Annex A of SGV & Co.’s P136,246,017.45, the amount of P252,477.45
supplementary report (CTA records, was not supported by any document and should
page 134) 252,447.45 therefore be outrightly disallowed.
c.) Claimed input taxes on purchases of services As to the claimed input tax of
from P135,993,570.00 (P136,246,017.45 less
Mitsubishi Corp. for being substantiated by P252,477.45 ) on purchases of services from
dubious OR 135,996,570.0026[8]
Mitsubishi Corporation, Japan, the same is
Refundable Input
found to be of doubtful veracity. While it is true
P10,766,939.48 that said amount is substantiated by a VAT
official receipt with Serial No. 0189 dated April
14, 1998 x x x, it must be observed, however,
SO ORDERED.27[9]
that said VAT allegedly paid pertains to the
services which were rendered for the period
Explaining the disallowance of over PhP 137 1993 to 1996. x x x
million claimed input VAT, the CTA stated that most The Ruling of the CA
of MPC’s purchases upon which it anchored its claims
26 [8]
Should be 135,993,570.00 as per this petition and CA decision.
27[9]
Supra note 2, at 62.
Aggrieved, MPC appealed the CTA’s Decision SO ORDERED.28[10]
In net effect, MPC did not, for the VATable The CA, citing Sec. 110(A)(1)(B) of the NIRC,
MPC-Mitsubishi 1993 to 1996 transactions adverted held that OR No. 0189 constituted sufficient proof of
to, immediately pay the corresponding input VAT. OR payment of creditable input VAT for the progress
No. 0189 issued on April 14, 1998 clearly reflects the billings from Mitsubishi for the period covering April
36 [18]
Rollo, p. 57.
37 [19] 38 [20]
Id. at 60. Id. at 57.
7, 1993 to September 6, 1996. Sec. 110(A)(1)(B) of As the Court distinctly notes, the law considers a
the NIRC pertinently provides: duly-executed VAT invoice or OR referred to in the
above provision as sufficient evidence to support a
Section 110. Tax Credits. –
claim for input tax credit. And any doubt as to what
A. Creditable Input Tax. –
OR No. 0189 was for or tended to prove should
(1) Any input tax evidenced by a VAT invoice reasonably be put to rest by the SGV report on which
or official receipt issued in accordance with
Section 113 hereof on the following transactions the CTA notably placed much reliance. The SGV
shall be creditable against the output tax:
report stated that “[OR] No. 0189 dated April 14,
(a) Purchase or importation of goods:
1998 is for the payment of the VAT on the progress
xxxx billings” from Mitsubishi Japan “for the period April
(b) Purchase of services on which a value- 7, 1993 to September 6, 1996 for the E & M
added tax has been actually paid.
(Emphasis ours.) Equipment Erection Portion of the Company’s
contract with Mitsubishi Corporation (Japan).”39[21]
Without necessarily saying that the BIR is
precluded from requiring additional evidence to prove VAT presumably paid on April 14, 1998
that input tax had indeed paid or, in fine, that the
taxpayer is indeed entitled to a tax refund or credit for
input VAT, we agree with the CA’s above disposition. 39[21]
Id.
While available records do not clearly indicate is understandable why Mitsubishi, in its effort to
when MPC actually paid the creditable input VAT recover the amount it advanced, used the PhP 26.203:
amounting to PhP 135,993,570 (USD 5,190,000) for USD 1 exchange formula in OR No. 0189 for USD
the aforesaid 1993 to 1996 service purchases, the 5,190,000.
presumption is that payment was made on the date
appearing on OR No. 0189, i.e., April 14, 1998. In No showing of interest payment not fatal to claim
fact, said creditable input VAT was reflected in MPC’s for refund
VAT return for the second quarter of 1998.
Contrary to petitioner’s posture, the matter of
The aforementioned May 12, 1995 letter from nonpayment by MPC of the interests demanded by
Mitsubishi to MPC provides collaborating proof of Mitsubishi is not an argument against the fact of
the belated payment of the creditable input VAT angle. payment by MPC of its creditable input VAT or of the
To reiterate, Mitsubishi, via said letter, apprised MPC authenticity or genuineness of OR No. 0189; for at the
of the VAT component of the service purchases MPC end of the day, the matter of interest payment was
made and reminded MPC that Mitsubishi had between Mitsubishi and MPC and may very well be
advanced VAT payments to which Mitsubishi was covered by another receipt. But the more important
entitled and from which it was demanding interest consideration is the fact that MPC, as confirmed by
payment. Given the scenario depicted in said letter, it the SGV, paid its obligation to Mitsubishi, and the
latter issued to MPC OR No. 0189, for the VAT (A) Zero-rated or Effectively Zero-rated
Sales. – Any VAT-registered person, whose sales
component of its 1993 to 1996 service purchases. are zero-rated or effectively zero-rated may,
within two (2) years after the close of the
taxable quarter when the sales were made,
The next question is, whether or not MPC is apply for the issuance of a tax credit
certificate or refund of creditable input tax
entitled to a refund or a TCC for the alleged unutilized due or paid attributable to such sales, except
transitional input tax, to the extent that such
input VAT of PhP 135,993,570 covered by OR No. input tax has not been applied against output
tax: x x x. (Emphasis ours.)
0189 which sufficiently proves payment of the input
VAT. The above proviso clearly provides in no
uncertain terms that unutilized input VAT payments
We answer the query in the negative. not otherwise used for any internal revenue tax due
the taxpayer must be claimed within two years
Claim for refund or tax credit filed out of time reckoned from the close of the taxable quarter
when the relevant sales were made pertaining to
The claim for refund or tax credit for the the input VAT regardless of whether said tax was
creditable input VAT payment made by MPC paid or not. As the CA aptly puts it, albeit it
embodied in OR No. 0189 was filed beyond the erroneously applied the aforequoted Sec. 112(A),
period provided by law for such claim. Sec. 112(A) of “[P]rescriptive period commences from the close of
the NIRC pertinently reads: the taxable quarter when the sales were made and not
from the time the input VAT was paid nor from the for refund or tax credit filed on December 10, 1999
time the official receipt was issued.”40[22] Thus, when had already prescribed.
a zero-rated VAT taxpayer pays its input VAT a year
after the pertinent transaction, said taxpayer only has Reckoning for prescriptive period under
Secs. 204(C) and 229 of the NIRC inapplicable
a year to file a claim for refund or tax credit of the
unutilized creditable input VAT. The reckoning frame
To be sure, MPC cannot avail itself of the
would always be the end of the quarter when the
provisions of either Sec. 204(C) or 229 of the NIRC
pertinent sales or transaction was made, regardless
which, for the purpose of refund, prescribes a
when the input VAT was paid. Be that as it may, and
different starting point for the two-year prescriptive
given that the last creditable input VAT due for the
limit for the filing of a claim therefor. Secs. 204(C)
period covering the progress billing of September 6,
and 229 respectively provide:
1996 is the third quarter of 1996 ending on September
30, 1996, any claim for unutilized creditable input Sec. 204. Authority of the
Commissioner to Compromise, Abate and
VAT refund or tax credit for said quarter prescribed Refund or Credit Taxes.— The Commissioner
may –
two years after September 30, 1996 or, to be precise, xxxx
on September 30, 1998. Consequently, MPC’s claim (c) Credit or refund taxes erroneously or
illegally received or penalties imposed without
authority, refund the value of internal revenue
40[22]
stamps when they are returned in good
Id. at 37.
condition by the purchaser, and, in his
discretion, redeem or change unused stamps that In any case, no such suit or proceeding
have been rendered unfit for use and refund shall be filed after the expiration of two (2)
their value upon proof of destruction. No credit years from the date of payment of the tax or
or refund of taxes or penalties shall be penalty regardless of any supervening cause
allowed unless the taxpayer files in writing that may arise after payment: Provided,
with the Commissioner a claim for credit or however, That the Commissioner may, even
refund within two (2) years after the payment without a written claim therefor, refund or credit
of the tax or penalty: Provided, however, That any tax, where on the face of the return upon
a return filed showing an overpayment shall be which payment was made, such payment
considered as a written claim for credit or appears clearly to have been erroneously paid.
refund. (Emphasis ours.)
xxxx
Notably, the above provisions also set a two-
Sec. 229. Recovery of Tax Erroneously
or Illegally Collected.— No suit or proceeding year prescriptive period, reckoned from date of
shall be maintained in any court for the recovery payment of the tax or penalty, for the filing of a claim
of any national internal revenue tax hereafter
alleged to have been erroneously or illegally of refund or tax credit. Notably too, both provisions
assessed or collected, or of any penalty claimed
to have been collected without authority, of any apply only to instances of erroneous payment or
sum alleged to have been excessively or in any
manner wrongfully collected without authority, illegal collection of internal revenue taxes.
or of any sum alleged to have been excessively
or in any manner wrongfully collected, until a
claim for refund or credit has been duly filed MPC’s creditable input VAT not erroneously paid
with the Commissioner; but such suit or
proceeding may be maintained, whether or not
such tax, penalty, or sum has been paid under
protest or duress.
For perspective, under Sec. 105 of the NIRC, lease of goods or properties or on each rendition
of services in the course of trade or business as
creditable input VAT is an indirect tax which can be they pass along the production and distribution
chain, the tax being limited only to the value
shifted or passed on to the buyer, transferee, or lessee added to such goods, properties or services by
of the goods, properties, or services of the taxpayer. the seller, transferor or lessor. It is an indirect
tax that may be shifted or passed on to the
The fact that the subsequent sale or transaction buyer, transferee or lessee of the goods,
properties or services. As such, it should be
involves a wholly-tax exempt client, resulting in a understood not in the context of the person or
entity that is primarily, directly and legally
zero-rated or effectively zero-rated transaction, does liable for its payment, but in terms of its nature
not, standing alone, deprive the taxpayer of its right to as a tax on consumption. In either case, though,
the same conclusion is arrived at.
a refund for any unutilized creditable input VAT,
The law that originally imposed the VAT
albeit the erroneous, illegal, or wrongful payment in the country, as well as the subsequent
amendments of that law, has been drawn from
angle does not enter the equation. the tax credit method. Such method adopted the
In Commissioner of Internal Revenue v. mechanics and self-enforcement features of the
VAT as first implemented and practiced in
Seagate Technology (Philippines), the Court explained Europe x x x. Under the present method that
relies on invoices, an entity can credit against or
the nature of the VAT and the entitlement to tax refund subtract from the VAT charged on its sales or
outputs the VAT paid on its purchases, inputs
or credit of a zero-rated taxpayer: and imports.
Viewed broadly, the VAT is a uniform If at the end of a taxable quarter the
tax x x x levied on every importation of goods, output taxes charged by a seller are equal to the
whether or not in the course of trade or business, input taxes passed on by the suppliers, no
or imposed on each sale, barter, exchange or payment is required. It is when the output taxes
exceed the input taxes that the excess has to be taxable quarter when the relevant sales or transactions
paid. If, however, the input taxes exceed the
output taxes, the excess shall be carried over to were made pertaining to the creditable input VAT,
the succeeding quarter or quarters. Should the
input taxes result from zero-rated or effectively applies to the instant case, and not to the other actions
zero-rated transactions or from the acquisition which refer to erroneous payment of taxes.
of capital goods, any excess over the output
taxes shall instead be refunded to the taxpayer As a final consideration, the Court wishes to
or credited against other internal revenue taxes.
remind the BIR and other tax agencies of their duty to
xxxx
treat claims for refunds and tax credits with proper
Zero-rated transactions generally refer attention and urgency. Had RDO No. 60 and, later, the
to the export sale of goods and supply of
services. The tax rate is set at zero. When BIR proper acted, instead of sitting, on MPC’s
applied to the tax base, such rate obviously
results in no tax chargeable against the underlying application for effective zero rating, the
purchaser. The seller of such transactions
charges no output tax, but can claim a refund matter of addressing MPC’s right, or lack of it, to tax
of or a tax credit certificate for the VAT credit or refund could have plausibly been addressed
previously charged by suppliers.41[23]
(Emphasis added.) at their level and perchance freed the taxpayer and the
government from the rigors of a tedious litigation.
Considering the foregoing discussion, it is clear
that Sec. 112(A) of the NIRC, providing a two-year
The all too familiar complaint is that the
prescriptive period reckoned from the close of the
government acts with dispatch when it comes to tax
41[23]
G.R. No. 153866, February 11, 2005, 451 SCRA 132, 141-
143.
collection, but pays little, if any, attention to tax
claims for refund or exemption. It is high time our tax rated sales for the second quarter in the total amount
collectors prove the cynics wrong. of PhP 10,766,939.48.
C E R T I FI CAT I O N
Pursuant to Section 13, Article VIII of the
ARTURO D. BRION Constitution, and the Division Chairperson’s
Associate Justice Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the
ATT E S TAT I O N Court’s Division.
I attest that the conclusions in the above
Decision had been reached in consultation before the
case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
- versus
-
THIRD DIVISION
Corona,
Carpio Morales,
COMMISSIONER OF
and
G.R. No. 152609
INTERNAL REVENUE,
Garcia, JJ
Petitioner,
Present:
AMERICAN EXPRESS
INTERNATIONAL, INC.
Pang
Promulgated:
aniba
(PHILIPPINE BRANCH),
n, J.,
Respondent.
June 29, 2005
Chairman,
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- --
-- -- -- -- -- -- -- -- -- -- -- -- -- x
Sandoval-
Gutierrez,
DECISION under any of the categories provided
A
s a general rule, the value-
However, our VAT law itself provides Since respondent’s services meet
for a clear exception, under which the these requirements, they are zero-
when the following requirements are Regulations that alter or revoke the
met: (1) the service is performed in above requirements are ultra vires
follows:
“WHEREFORE, premises
considered, the petition is hereby
The Facts
“Amex Philippines registered itself
with the Bureau of Internal Revenue
(BIR), Revenue District Office No. 47
(East Makati) as a value-added tax
Quoting the CTA, the CA narrated (VAT) taxpayer effective March 1988
and was issued VAT Registration
Certificate No. 088445 bearing VAT
the undisputed facts as follows: Registration No. 32A-3-004868. For the
period January 1, 1997 to December 31,
1997, [respondent] filed with the BIR its
“[Respondent] is a Philippine quarterly VAT returns as follows:
branch of American Express
International, Inc., a corporation duly Exhibit Period Covered Date Filed
organized and existing under and by
virtue of the laws of the State of D 1997 1st Qtr. April 18, 1997
Delaware, U.S.A., with office in the F 2nd Qtr. July 21, 1997
G 3rd Qtr. October 2, 1997
Philippines at the Ground Floor, ACE
H 4th Qtr. January 20, 1998
Building, corner Rada and de la Rosa
Streets, Legaspi Village, Makati City. It
is a servicing unit of American Express “On March 23, 1999, however,
International, Inc. - Hongkong Branch [respondent] amended the aforesaid
(Amex-HK) and is engaged primarily to returns and declared the following:
facilitate the collections of Amex-HK
receivables from card members situated
in the Philippines and payment to Taxable Output Zero-rated Domestic Input
service establishments in the Ex Sales VAT Sales Purchases VAT
Philippines. h
19
97 P5,193.66 and P6,799.43, respectively.
[Respondent] cites as basis therefor,
P59,597. P5,959.7P17,513,80 P6,778,182 P677,818.
I 20 2 1.11 .30 23
Section 110 (B) of the 1997 Tax Code, to
1st state:
qtr
J ‘Section 110. Tax
2n 67,517.2 6,751.72 17,937,361 9,333,242. 933,324.2 Credits. -
d
0 .51 90 9
qtr xxx xx
K x xxx
3r 51,936.6 5,193.66 19,627,245 8,438,357. 843,835.7
d
0 .36 00 0
‘(B) Excess Output or
qtr
L 13,080,822 1,308,082.
Input Tax. - If at the end of any
4th 67,994.3 6,799.43 25,231,225 .10 21 taxable quarter the output tax
qtr 0 .22 exceeds the input tax, the
excess shall be paid by the
P247,045 P24,704.P80,309,63 P37,630,60 P3,763,06 VAT-registered person. If the
To .30 53 3.20 4.30 0.43 input tax exceeds the output
tal tax, the excess shall be
carried over to the succeeding
quarter or quarters. Any input
“On April 13, 1999, [respondent] tax attributable to the
filed with the BIR a letter-request for the purchase of capital goods or
refund of its 1997 excess input taxes in to zero-rated sales by a VAT-
the amount of P3,751,067.04, which registered person may at his
amount was arrived at after deducting option be refunded or credited
from its total input VAT paid of against other internal revenue
taxes, subject to the
P3,763,060.43 its applied output VAT
provisions of Section 112.’
liabilities only for the third and fourth
quarters of 1997 amounting to
“There being no immediate action (a) Rate and base
on the part of the [petitioner], of tax. - There
shall be levied,
[respondent’s] petition was filed on April assessed and
15, 1999. collected, a value-
added tax
“In support of its Petition for equivalent to 10%
Review, the following arguments were percent of gross
receipts derived
raised by [respondent]:
by any person
engaged in the
A. Export sales by a sale of services.
VAT-registered person, the The phrase “sale
consideration for which is paid of services”
for in acceptable foreign means the
currency inwardly remitted to performance of all
the Philippines and accounted kinds of services
for in accordance with existing for others for a
regulations of the Bangko fee, remuneration
or consideration,
Sentral ng Pilipinas, are
including those
subject to [VAT] at zero performed or
percent (0%). According to rendered by
[respondent], being a VAT- construction and
registered entity, it is subject service
to the VAT imposed under contractors: stock,
Title IV of the Tax Code, to real estate,
wit: commercial,
customs and
‘Section immigration
102.(sic) Value- brokers; lessors of
added tax on personal property;
sale of services.- lessors or
distributors of
cinematographic tho
films; persons se
engaged in me
milling, ntio
ned
processing,
in
manufacturing or the
repacking goods prec
for others; and edin
similar services g
regardless of sub
whether o[r] not para
the performance grap
thereof calls for h,
the exercise or the
con
use of the
sid
physical or mental erat
faculties: ion
Provided That the is
following services pai
performed in the d
Philippines by for
VAT-registered in
persons shall be acc
subject to 0%: ept
abl
e
(1) x
fore
xx
ign
(2)
curr
Ser
enc
vice
y
s
whi
oth
ch
er
is
tha
rem
n
itte 3, 1989, the pertinent portion
d of which reads as follows:
inw
ardl
y to ‘In Reply,
the please be
Phili informed that, as
ppin a VAT registered
es entity whose
and service is paid for
acc in acceptable
ount
foreign currency
ed
for which is remitted
in inwardly to the
acc Philippines and
ord accounted for in
anc accordance with
e the rules and
with regulations of the
the Central [B]ank of
rule the Philippines,
s
your service
and
reg income is
ulat automatically zero
ion rated effective
s of January 1, 1998.
the [Section 102(a)(2)
BS of the Tax Code
P. x as amended].[4]
x x.’ For this, there is
no need to file an
In addition, application for
[respondent] relied on VAT zero-rate.’
Ruling No. 080-89, dated April
B. Input taxes on were made, apply
domestic purchases of for the issuance of
taxable goods and services tax credit
related to zero-rated revenues certificate or
refund of the input
are available as tax refund in
taxes due or
accordance with Section 106 attributable to
(now Section 112) of the [Tax such sales, to the
Code] and Section 8(a) of extent that such
[Revenue] Regulations [(RR)] input tax has not
No. 5-87, to state: been applied
against output tax.
‘Section x x x. [Section
106. Refunds or 106(a) of the Tax
tax credits of Code]’[5]
input tax. -
‘Section
(A) Zero- 8. Zero-rating. -
rated or (a) In general. - A
effectively Zero- zero-rated sale is
rated Sales. - Any a taxable
VAT-registered transaction for
person, except value-added tax
those covered by purposes. A sale
paragraph (a) by a VAT-
above, whose registered person
sales are zero- of goods and/or
rated or are services taxed at
effectively zero- zero rate shall not
rated, may, within result in any
two (2) years after output tax. The
the close of the input tax on his
taxable quarter purchases of
when such sales goods or services
related to such incumbent upon the
zero-rated sale [respondent] to prove that it is
shall be available entitled thereto under the law
as tax credit or and he who claims exemption
refundable in
must be able to justify his
accordance with
Section 16 of
claim by the clearest grant of
these organic or statu[t]e law. An
Regulations. x x exemption from the common
x.’ [Section 8(a), burden [cannot] be permitted
[RR] 5-87].’[6] to exist upon vague
implications;
“[Petitioner], in his Answer filed on
May 6, 1999, claimed by way of Special 9. Moreover,
and Affirmative Defenses that: [respondent] must prove that
it has complied with the
7. The claim for refund governing rules with reference
is subject to investigation by to tax recovery or refund,
the Bureau of Internal which are found in Sections
Revenue; 204(c) and 229 of the Tax
Code, as amended, which are
8. Taxes paid and quoted as follows:
collected are presumed to
‘Section
have been made in
204. Authority of
accordance with laws and the Commissioner
regulations, hence, not to Compromise,
refundable. Claims for tax Abate and Refund
refund are construed strictly or Credit Taxes. -
against the claimant as they The
partake of the nature of tax Commissioner
exemption from tax and it is may - x x x.
(C) Credit tax or penalty:
or refund taxes Provided,
erroneously or however, That a
illegally received return filed with an
or penalties overpayment shall
imposed without be considered a
authority, refund written claim for
the value of credit or refund.’
internal revenue
stamps when they ‘Section
are returned in 229. Recovery of
good condition by tax erroneously
the purchaser, or illegally
and, in his collected.- No
discretion, suit or proceeding
redeem or change shall be
unused stamps maintained in any
that have been court for the
rendered unfit for recovery of any
use and refund national internal
their value upon revenue tax
proof of hereafter alleged
destruction. No to have been
credit or refund of erroneously or
taxes or penalties illegally assessed
shall be allowed or collected, or of
unless the any penalty
taxpayer files in claimed to have
writing with the been collected
Commissioner a without authority,
claim for credit or or of any sum
refund within two alleged to have
(2) years after been excessively
payment of the or in any manner
wrongfully written claim
collected, until a therefor, refund or
claim for refund or credit any tax,
credit has been where on the face
duly filed with the of the return upon
Commissioner; which payment
but such suit or was made, such
proceeding may payment appears
be maintained, clearly to have
whether or not been erroneously
such tax, penalty paid.’
or sum has been
paid under protest “From the foregoing, the [CTA],
or duress.
through the Presiding Judge Ernesto D.
In any Acosta rendered a decision[7] in favor of
case, no such suit the herein respondent holding that its
or proceeding services are subject to zero-rate
shall be begun pursuant to Section 108(b) of the Tax
(sic) after the
Reform Act of 1997 and Section 4.102-2
expiration of two
(2) years from the (b)(2) of Revenue Regulations 5-96, the
date of payment decretal portion of which reads as
of the tax or follows:
penalty regardless
of any ‘WHEREFORE, in view
supervening of all the foregoing, this Court
cause that may
finds the [petition] meritorious
arise after
payment: and in accordance with law.
Provided, Accordingly, [petitioner] is
however, That the hereby ORDERED to
Commissioner REFUND to [respondent] the
may, even without amount of P3,352,406.59
representing the latter’s as project studies, information, or
excess input VAT paid for the
year 1997.’”[8]
engineering and architectural
Pilipinas.
granting that it is valid, the ruling Petitioner raises this sole issue
repacking of goods for persons doing client, for which it gets paid in
be levied upon the supply of that for the purchase of goods and
establishments, to be reimbursed by
other credit device existing for the is, therefore, given “the power to
exists between the issuer and the extend credit sales through the use of
holder of the credit card enables the the credit card facilities of a non-bank
credit card company to avoid the risk
customers. Under
this system, the establishments do does not redeem the drafts at full
not deposit in their bank accounts the price. The agreement between them
credit card drafts[23] that arise from usually provides for discounts to be
the credit sales. Instead, they merely taken by the company upon its
credit card company and periodically end of each month, it then bills its
send the drafts evidencing those credit card holders for their
The credit card company, in fail to pay the amounts owed, the
credit[26]
process described above primarily belong -- takes charge not only of
consists of gathering the bills and redeeming the drafts from the ROCs
credit card drafts of different service and sending the checks to the service
Servicing the bill is not the same as redeemed. While it usually imposes
billing. For the former type of service finance charges[27] upon the holders,
they lose all significance when the business concept of a transfer price
branches and home office are viewed allows goods and services to be sold
itself, but merely to function as a these drafts and billings of credit card
its expenses are allocated to any of respondent, then with greater reason
establishments to respondent is
registered person[40] that gets paid in indirect tax[44] on services,[45] its main
the Tax Code, other special laws, or a foreign company that is a clearly
respondent entered into with its Hong commercial in nature; carried on over
is accounted for in conformity with of the tax.[51] Goods and services are
outcome of such service. While the the service be done abroad in order
clients -- the ROCs outside the thing in a way that thereby exhausts
the performer’s release from any past be physically used in or bound for a
upon its sending to its foreign client course”[55] when determining the
the drafts and bills it has gathered service “location or position x x x for
the Philippines, are therefore also existence, yet takes place upon
provides for an exception to the the service fall under any of the
zero percent VAT rate for services Tax Code; and, third, it be paid in
requirements for exemption from the foreign currency duly accounted for in
“processing, manufacturing or
Again, contrary to petitioner’s for persons doing business outside this
goods exported.[58] The law neither regulations of the BSP, are zero-rated.
associates services with exported clearly different from the product that
goods. It simply states that the arises from the rendition of such
persons in the Philippines -- services income must not be confused with the
determining the tax situs of a zero- is the place where the output of the
needed. Neither can conditions or has no choice but to “see to it that its
limits the services that may be sold specie” does not apply to Section
and are patently not of the same Nothing sets them apart from other
kind.[72] Project studies involve and similar general services that may
or modify what the law says. We quote the relevant portions of the
proceedings:
“Consumed Abroad”
Not Required by Legislature “Senator Maceda: Going back to
Section 102 just for the moment. Will the
Gentleman kindly explain to me - I am
referring to the lower part of the first
Interpellations on the subject in paragraph with the ‘Provided’. Section
102. ‘Provided that the following
services performed in the Philippines by
the halls of the Senate also reveal a
VAT registered persons shall be subject with, then they are not entitled to the
to zero percent.’ There are three here. zero ratings. Just like in the export of
What is the difference between the three minerals, if these are not exported, then
here which is subject to zero percent they cannot qualify under this provision
and Section 103 which is exempt of zero rating.
transactions, to being with?
“Senator Maceda: Mr. President,
“Senator Herrera: Mr. President, just one small item so we can leave
in the case of processing and this. Under the proviso, it is required
manufacturing or repacking goods for that the following services be performed
persons doing business outside the in the Philippines.
Philippines which are subsequently
exported, and where the services are “Under No. 2, services other than
paid for in acceptable foreign currencies those mentioned above includes, let us
inwardly remitted, this is considered as say, manufacturing computers and
subject to 0%. But if these conditions computer chips or repacking goods for
are not complied with, they are subject persons doing business outside the
to the VAT. Philippines. Meaning to say, we ship the
goods to them in Chicago or
“In the case of No. 2, again, as Washington and they send the payment
the Gentleman pointed out, these three inwardly to the Philippines in foreign
are zero-rated and the other one that he currency, and that is, of course, zero-
indicated are exempted from the very rated.
beginning. These three enumerations
under Section 102 are zero-rated “Now, when we say ‘services
provided that these conditions indicated other than those mentioned in the
in these three paragraphs are also preceding subsection[,’] may I have
complied with. If they are not complied some examples of these?
“Senator Herrera: Which portion “Senator Herrera: What is
is the Gentleman referring to? important here is that these services are
paid in acceptable foreign currency
“Senator Maceda: I am referring remitted inwardly to the Philippines.
to the second paragraph, in the same
Section 102. The first paragraph is “Senator Maceda: Yes, Mr.
when one manufactures or packages President. Like those Japanese tours
something here and he sends it abroad which include $50 for the services of a
and they pay him, that is covered. That woman or a tourist guide, it is zero-rated
is clear to me. The second paragraph when it is remitted here.
says ‘Services other than those
mentioned in the preceding “Senator Herrera: I guess it can
subparagraph, the consideration of be interpreted that way, although this
which is paid for in acceptable foreign tourist guide should also be considered
currency…’ as among the professionals. If they
earn more than P200,000, they should
“One example I could immediately be covered.
think of -- I do not know why this comes
to my mind tonight -- is for tourism or xxx xxx x
escort services. For example, the xx
services of the tour operator or tour
escort -- just a good name for all kinds Senator Maceda: So, the
of activities -- is made here at the services by Filipino citizens outside the
Midtown Ramada Hotel or at the Philippines are subject to VAT, and I am
Philippine Plaza, but the payment is talking of all services. Do big
made from outside and remitted into the contractual engineers in Saudi Arabia
country. pay VAT?
“Senator Herrera: This provision
applies to a VAT-registered person.
When he performs services in the
Philippines, that is zero-rated.
102(b) of the Tax Code, the principle have reenacted the law with full
“When a statute is susceptible of the rated, the Court upholds the former’s
thereafter [reenacts] the provisions between the decisions of the CTA and
[without] substantial change, such CA. This Court respects the findings
that the ruling carries out the like the CTA “which, by the nature of
cases and has necessarily developed withheld is not deducted from the tax
freed from the VAT, because the hereby DENIED, and the assailed
Chief Justice
Pursuant to Section 13, Article
[1]
Rollo, pp. 8-23.
[2]
Id., pp. 25-39. Fifth Division. Penned
VIII of the Constitution, and the by Justice Josefina Guevara-Salonga,
with the concurrence of Justices Godardo
Division Chairman’s Attestation, it is A. Jacinto (Division chair) and Eloy R.
Bello Jr. (member, now retired).
[3]
CA Decision, p. 15; rollo, p. 38.
hereby certified that the conclusions [4]
Outer brackets copied verbatim.
[5]
Ibid.
in the above Decision had been [6]
Ibid.
[7]
CTA Decision, pp. 1-15; rollo, pp. 40-
reached in consultation before the 54. Penned by then Presiding Judge
(now Presiding Justice) Ernesto D.
Acosta, with the concurrence of then
case was assigned to the writer of the Judges Ramon O. de Veyra and Amancio
Q. Saga (both retired).
[8]
opinion of the Court’s Division. CA Decision pp. 2-7; rollo, pp. 26-31.
Boldface characters, underscoring and
italics copied verbatim.
[9]
This case was deemed submitted for [12]
In fact, per VAT Ruling No. 080-89
decision on July 23, 2003, upon this addressed to Spencer F. Lenhart, vice-
Court’s receipt of petitioner’s president and general manager of
Memorandum, signed by Solicitor American Express International, Inc. (AEII
General Alfredo L. Benipayo, Assistant Philippines), BIR Deputy Commissioner
Solicitor General Fernanda Lampas Eufracio D. Santos wrote that “there is
Peralta and Associate Solicitor Romeo D. no need to file an application” for zero
Galzote. Respondent’s Memorandum -- rating.
signed by Attys. Rolando V. Medalla Jr., [13]
Garner (ed. in chief), Black’s Law
Ramon G. Songco, and Ma. Elizabeth E. Dictionary (8th ed., 1999), p. 1399.
Peralta-Loriega -- was received by this [14]
Smith, West’s Law Dictionary (1993),
Court on May 16, 2003. p. 737.
[10]
Petitioner’s Memorandum, p. 9; [15]
§99 [now §105] and §102(b)(2) [now
temporary rollo, p. 9. Original in upper §108(B)(2)] of the Tax Code. See
case. footnote 11; and Deoferio Jr. and
[11]
In the case at bar, the applicable Tax Mamalateo, The Value Added Tax in the
Code refers to the National Internal Philippines (2000), p. 33.
Revenue Code (NIRC) of 1986 as [16]
These are unlike some widely used
amended by Executive Order (EO) No. credit cards, such as Visa and
273 and Republic Act (RA) Nos. 7716 and MasterCard, that are issued by banks.
8241 dated July 25, 1987, May 5, 1994, See Meigs and Meigs, Accounting: The
and December 20, 1996, respectively. Basis for Business Decisions (5th ed.,
Today, the Tax Code refers to 1982), pp. 355-356.
RA 8424 as amended, otherwise known [17]
This is also known as the “Access
as the “Tax Reform Act of 1997,” which Devices Regulation Act of 1998”
took effect on January 1, 1998 approved on February 11, 1998.
(Commissioner of Internal Revenue v. [18]
For example, “Visa and MasterCard
CA, 385 Phil. 875, 883, March 30, 2000). are complex entities in that they are
owned by their member banks, provide services.” Garner (ed. in chief), supra, p.
network services to their member banks, 396.
and provide currency conversion as part Also known as personal credit,
of the network services, but have no it “may be extended by means of a
contracts with cardholders.” Schwartz v. charge account, an installment sale, or
Visa International Corp., 2003 WL by a personal loan.” Editorial staff of
1870370 (Cal. Superior), p. 50, April 7, Prentice-Hall, Inc., supra, p. 164.
2003, per Sabraw, J. [27]
In general, this term refers to
[19]
§3(f) of RA 8484. amounts paid on a percentage basis “for
[20]
Garner (ed. in chief), supra, p. 396. the privilege of making purchases on a
[21]
Ibid. deferred payment basis.” Smith, supra,
[22]
Editorial staff of Prentice-Hall, Inc., p. 314.
Encyclopedic Dictionary of Business Under §3(h) of RA 8484, more
Finance (1960), p. 181. specifically, these are amounts “to be
[23]
Credit card drafts are multi-part paid by the debtor incident to the
business forms signed by customers who extension of credit such as interest or
make purchases using credit cards. discounts, collection fees, credit
These forms are similar to checks that investigation fees, and other service
are drawn upon the funds of credit card charges.”
companies rather than upon the [28]
Garner (ed. in chief), supra, p. 199.
personal bank accounts of customers. [29]
In general, a home office refers to
Meigs and Meigs, supra, p. 355. “the use of a residence for business
[24]
Id., p. 356. purposes.” Smith, supra, p. 389.
[25]
Id., p. 355. More specifically, it is the
[26]
Consumer credit refers to the credit “principal place of business” where the
granted “to an individual to facilitate the main office is located as appearing in the
purchase of consumer goods and corporation’s articles of incorporation.
5th paragraph, §4.107-1 of RR 7-95, transaction affected it. Thus, if
dated December 9, 1995. reciprocal accounts are offset against
[30]
4th paragraph, §4.107-1 of RR 7-95, each other at the end of the financial
dated December 9, 1995. reporting period of the entire business
[31]
Meigs, Mosich, and Larsen, Modern enterprise, an intra-company transfer of
Advanced Accounting (2nd ed., 1979), p. assets will show neither an increase nor
145. a decrease in total assets, precisely
“Indeed, accounting operations because the transferred assets merely
x x x are inevitable, and have to be changed location from one unit of the
effected in the ordinary course of same entity to another; that is, from the
business, wherever the home office x x x home office to any of its branches or
extends its trade to another land through vice versa. In this scenario, there is
a branch office x x x.” Koppel obviously no change in ownership. See
(Philippines), Inc. v. Yatco, 77 Phil. 496, Meigs, Mosich, and Larsen, supra, pp.
512, October 10, 1946, per Hilado, J. 144-146, 149-150, 165.
[34]
[32]
Meigs, Mosich, and Larsen, supra, p. Petitioner’s Memorandum, p. 27;
148. temporary rollo, p. 27.
[35]
[33]
“Reciprocal accounts” are account For financial accounting purposes, the
titles found in the books of accounts of a parent company in Delaware is a single
home office and its branches that may entity composed of its home office, the
be likened to two sides of the same various ROCs and respondent.
coin. When one account -- the Though viewed as one, the parent
Investment in Branch account -- is company and respondent are, in law,
debited by the home office in its own separate and distinct juridical entities.
books for a particular transaction with a Applying Art. 44 of the Civil Code, each
branch, the other account -- the Home is a corporation for private interest or
Office account -- is credited by the latter, purpose to which the law grants a
also in its own books to show how that juridical personality, separate and
distinct from that of each shareholder. criteria of goal congruence, managerial
While the former is duly organized and effort, and sub-unit autonomy. Horngren
existing under and by virtue of the laws & Foster, Cost Accounting: A Managerial
of Delaware, the latter is registered and Emphasis (7th ed., 1991), pp. 855-856 &
operates under Philippine laws. 860.
“The act of one corporation [37]
Under a responsibility accounting
crediting or debiting the other for certain system in which the plans and actions of
items x x x is perfectly compatible with each responsibility center is measured, a
the idea of the domestic entity being or manager may be held accountable for
acting as a mere branch x x x of the sales only (of a revenue center); or for
parent organization. Such operations expenses only (of a cost center); or for
were called for [anyway] by the both revenues and costs (of a profit
exigencies or convenience of the entire center); or for revenues, costs and
business.” Koppel (Philippines), Inc. v. investments (of an investment center).
Yatco, supra, pp. 511-512. Horngren & Foster, id., p. 186.
[36]
A “transfer price” is “[t]he price [38]
Meigs, Mosich, and Larsen, supra, p.
charged by one segment of an 146.
organization for a product or service [39]
Under §100 of the Tax Code, “export
supplied to another segment of the same sales” as applied to goods “means the
organization x x x.” Garner (ed. in sale and shipment or exportation of
chief), supra, p. 1227. goods from the Philippines to a foreign
There are three general country x x x or foreign currency
methods for determining transfer prices; denominated sales.” “Foreign currency
namely, market-based, cost-based, and denominated sales” refers to “sales to
negotiated. The method chosen must non-residents of goods assembled or
lead each sub-unit manager to make manufactured in the Philippines, for
optimal decisions for the organization as delivery to residents in the Philippines
a whole, in order to meet the three and paid for in convertible foreign
currency remitted through the banking 319 Phil. 755, 792 & 797, October 30,
system in the Philippines.” 1995.
[40]
Commissioner of Internal Revenue v. [46]
Deoferio Jr. and Mamalateo, supra,
Cebu Toyo Corp., GR No. 149073, pp. 49 & 89.
February 16, 2005. [47]
Commissioner of Internal Revenue v.
[41]
Deoferio Jr. and Mamalateo, supra, CA, supra, pp. 883-884.
pp. 33 & 67. [48]
2nd paragraph of §102(a) [now 2nd
[42]
Smith, supra, p. 892. paragraph of §108(A)] of the Tax Code.
[43]
See Kapatiran ng mga Naglilingkod See Deoferio Jr. and Mamalateo, supra,
sa Pamahalaan ng Pilipinas, Inc. v. Tan, pp. 89-90.
163 SCRA 371, 378-379, June 30, 1988. [49]
Commissioner of Internal Revenue v.
[44]
An indirect tax “is imposed upon CA, supra, p. 884, per Pardo, J.
goods [before] reaching the consumer [50]
Deoferio Jr. and Mamalateo, supra,
who ultimately pays for it, not as a tax, pp. 81, 82, 91, 92 & 204.
but as a part of the purchase price.” [51]
Deoferio Jr. and Mamalateo, id., pp.
Maceda v. Macaraig Jr., 223 SCRA 217, 43 & 93.
235, June 8, 1993, per Nocon, J.; [52]
Per VAT Ruling No. 040-98, relied
referring to Paras, Taxation upon by petitioner. See Petition, p. 9;
Fundamentals (1966), pp. 24-25. See rollo, p. 16.
Guzman, Crisis Under Arroyo Rages: [53]
Garner (ed. in chief), supra, p. 336.
People Bear the Brunt, IBON Birdtalk: [54]
Id., p. 1173.
Economic and Political Briefing, PSSC [55]
Id., p. 479.
Auditorium, PSSC Bldg., Commonwealth [56]
Id., p. 1421.
Ave., Quezon City, January 13, 2005, p. [57]
§102(b)(2) of the Tax Code.
14. [58]
See 5th paragraph of item 1 in the
[45]
See Tolentino v. Secretary of Finance, reply portion of VAT Ruling No. 040-98,
235 SCRA 630, 657, August 25, 1994, dated November 23, 1998.
and Tolentino v. Secretary of Finance,
[59]
See Alexander Howden & Co., Ltd. v. [68]
Luzon Surety Co., Inc. v. De Garcia,
The Collector (Now Commissioner) of 30 SCRA 111, 116, October 31, 1969, per
Internal Revenue, 121 Phil. 579, 583- Fernando, J. (later CJ.).
584, April 14, 1965. [69]
Contex Corp. v. Commissioner of
[60]
“[N]o state may tax anything not Internal Revenue, 433 SCRA 376, 387,
within its jurisdiction without violating July 2, 2004.
the due process clause of the [70]
Gove (ed. in chief) and the Merriam-
[C]onstitution.” Manila Gas Corp. v. Webster editorial staff, Webster’s Third
Collector of Internal Revenue, 62 Phil. New International Dictionary of the
895, 900, January 17, 1936, per Malcolm, English Language Unabridged (1976), p.
J. 136.
[61]
Deoferio Jr. and Mamalateo, supra, p. [71]
2nd paragraph of §102(a) [now 2nd
93. paragraph of §108(A)] of the Tax Code.
[62]
Alejandro, The Law on Taxation (1966 [72]
See Agpalo, supra, pp. 153-160.
rev. ed.), p. 33. [73]
Ibid.
[63]
Garner (ed. in chief), supra, p. 1503. [74]
See Regalado v. Yulo, 61 Phil. 173,
[64]
De Leon, The Fundamentals of 179, February 15, 1935.
Taxation (12th ed., 1998), p. 3. [75]
De Leon, supra, p. 83.
[65]
Deoferio Jr. and Mamalateo, supra, [76]
See 5th paragraph of item 1 in the
pp. 93. reply portion of VAT Ruling No. 040-98,
[66]
Agpalo, Statutory Construction (2nd dated November 23, 1998.
ed., 1990), p. 45. [77]
CA Decision, p. 11; rollo, p. 34.
[67]
Cebu Portland Cement Co. v. [78]
See Hilado v. Collector of Internal
Municipality of Naga, Cebu, 133 Phil. Revenue, 100 Phil. 288, 295, October 31,
695, 699, August 22, 1968, per 1956.
Fernando, J. (later CJ.). [79]
Philippine Bank of Communications v.
Commissioner of Internal Revenue, 361
Phil. 916, 929, January 28, 1999, per and ABS-CBN Broadcasting Corp. v. CTA,
Quisumbing, J. 195 Phil. 33, 41 & 44, October 12, 1981).
[80]
Ibid, (citing People v. Hernandez, 59 [84]
This section has been retained in RA
Phil. 272, 276, December 22, 1933, and 8424 as amended, with a slight
Molina v. Rafferty, 37 Phil. 545, 555, modification: “preceding section” was
February 1, 1918.) changed to “preceding Sections.”
[81]
Commissioner of Internal Revenue v. [85]
The Municipality Government of
Central Luzon Drug Corp., GR No. Pagsanjan, Laguna v. Reyes, 98 Phil.
159647, April 15, 2005, p. 26, per 654, 658, March 23, 1956.
Panganiban, J. [86]
Dueñas v. Santos Subdivision
[82]
See Commissioner of Internal Revenue Homeowners Association, 431 SCRA 76,
v. CA, 240 SCRA 368, 372, January 20, 89, June 4, 2004, per Quisumbing, J.
1995. (quoting Republic v. Sandiganbayan, 355
[83]
See Commissioner of Internal Phil. 181, 198, July 31, 1998, per
Revenue v. CA, 335 Phil. 219, 226-227, Panganiban, J.). See Home Development
February 6, 1997 (citing Commissioner Mutual Fund v. COA, GR No. 157001,
of Internal Revenue v. Telefunken October 19, 2004, per Carpio, J.
Semiconductor Philippines, Inc., 319 [87]
§246 of the Tax Code provides:
Phil. 523, 530, October 23, 1995; Bank “Non-retroactivity of
of America NT & SA v. CA, 234 SCRA 302, rulings. -- Any revocation, modification, or
reversal of x x x the rulings x x x
306-307, July 21, 1994; Commissioner of promulgated by the Commissioner shall not
Internal Revenue v. CTA, 195 SCRA 444, be given retroactive application if the
460-461, March 20, 1991; Commissioner revocation, modification, or reversal will be
prejudicial to the taxpayers except in the
of Internal Revenue v. Mega General following cases: (a) where the taxpayer
Merchandising Corp., 166 SCRA 166, deliberately misstates or omits material facts
172, September 30, 1988; Commissioner from his return or in any document required
of him by the [BIR]; (b) where the facts
of Internal Revenue v. Burroughs Ltd., subsequently gathered by the [BIR] are
226 Phil. 236, 240-241, June 19, 1986; materially different from the facts on which
the ruling is based; or (c) where the taxpayer Sutherland, Statutory Construction, Vol.
acted in bad faith.”
[88] II, [2nd ed.], sections 403 and 404).
1st paragraph of §4 of RA 8424, the [92]
Commissioner of Internal Revenue v.
Tax Code now in effect.
[89] Solidbank Corp., 416 SCRA 436, 455,
Hilado v. Collector of Internal
November 25, 2003, per Panganiban, J.
Revenue, supra, p. 294.
[90] (footnoting Alexander Howden & Co.,
Interpellations during the second
Ltd. v. The Collector [Now
reading of Committee Report No. 349 on
Commissioner] of Internal Revenue,
Senate Bill No. 1630 - VAT Refinements,
supra, p. 587, per Bengzon, J.P., J.); the
Record of the Senate, 2nd Regular
latter case citing Laxamana v. Baltazar,
Session (February 21, 1994 to April 20,
92 Phil. 32, 34-35, September 19, 1952,
1994), Vol. IV, No. 65, Monday, March 21,
and Mead Corporation v. Commissioner
1994, pp. 536-537. Italics and boldface
of Internal Revenue, 116 F.2d. 187, 194,
copied verbatim, but underscoring ours.
November 29, 1940, per Jones, Circuit J.
See Journal of the Senate, 2nd Regular [93]
Commissioner of Internal Revenue v.
Session (1993-1994), Vol. III, Monday,
CA, supra, pp. 885-886, (citing
March 21, 1994, p. 70.
[91] Commissioner of Internal Revenue v. CA,
ABS-CBN Broadcasting Corp. v. CTA,
204 SCRA 182, 189-190, November 21,
supra, p. 43, per Melencio-Herrera, J.
1991).
(citing Alexander Howden & Co., Ltd. v. [94]
Commissioner of Internal Revenue v.
Collector of Internal Revenue, 121 Phil.
Cebu Toyo Corp., supra. §110(B) of the
579, 587, April 14, 1965, and Biddle v.
Tax Code.
Commissioner of Internal Revenue, 302 [95]
Bank of America NT & SA v. CA,
U.S., 573, 582, 58 S.Ct. 379, 383,
supra, p. 307, per Vitug, J.
January 10, 1938). See In re R. [96]
“x x x within two (2) years after the
Mcculloch Dick, 38 Phil. 41, 77-78, April
close of the taxable quarter x x x,” per
16, 1918, per Carson, J. (quoting
§106 (now §112) of the Tax Code.