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BAR REVIEW PROGRAM

ARELLANO

ANALYTICAL SURVEY OF 2006 SUPREME COURT DECISIONS IN TAXATION

PROF. EDWIN R. ABELLA, CPA
I. Genera Pr!n"!# e$ %& Ta'a(!%n.....................................................................................)

a. BICOLANDIA DRUG CORPORATION, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent. G.R. No. !"##$$, %&ne ##, #''() A*+&na, %.............................................................................................................., -. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. CENTRAL LU.ON DRUG CORPORATION, respon ent G.R. No. !"/0!#, %&ne #(, #''(, A*+&na, %...................................................................................................." +. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. BICOLANDIA DRUG CORPORATION, respon ent. G.R. No. !"/'/,, %&12 ,!, #''() Ve1as+o, %r. %........................................................................................................0 . COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. BENGUET CORPORATION, respon ent, G.R. No. !"000$, %&12 !", #''() Gar+ia, %........0
II. In"%*e Ta'a(!%n........................................................................................................6

e. T3E MANILA BAN4ING CORPORATION, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent, G.R. No. !(/!!/, A&5&st #/, #''() San ova16G&tierre*, %..............................................................( 7. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. %ULIANE BAIER6NIC4EL, respon ent. G.R. No. !0,8$,, A&5&st #$, #'(, 9nares6 Santia5o, %............................................................................................................8 5. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. P3ILIPPINE AIRLINES, INC. respon ent. G.R. No. !('0#/, O+to-er $, #''() Pan5ani-an, %............................................................................................................................8 :. CARMELINO F. PANSACOLA, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent. G.R. No. !0$$$!, Nove;-er !(, #''() <&is&;-in5, %....................................................................................................../
III. Va +e,A--e- Ta'.......................................................................................................

i. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. SE4ISUI %US3I P3ILIPPINES, INC., respon ent. G.R. No. !"$(8!, %&12 #!, #''() Pan5ani-an, %............................................................................................................................/ =. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. MAGSA9SA9 LINES, INC., BALI>AG NAVIGATION, INC., FIM LIMITED OF T3E MARDEN GROUP ?34@ AND NATIONAL DEVELOPMENT COMPAN9, respon ents. G.R. No. !"($/", %&12 #/, #''() Tin5a, %....................................../

CENTER FOR LEGAL EDUCATION AND RESEARC2

A. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. P3ILIPPINE GLOBAL COMMUNICATIONS, INC., respon ent. G.R. no. !""($(, A&5&st !(, #''() Carpio, %...............................................................................................$
IV. O(1er B+$!ne$$ Ta'e$.............................................................................................30

1. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. TRUST>ORT39 PA>NS3OP, INC. respon ent. G.R. No. !"$/,", Ma2 #, #''() San ova1, %...............................................................................................!' ;. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. BAN4 OF P3ILIPPINE ISLANDS, respon ent. G.R. No. !"8,80, %&ne #(, #''() Tin5a, %..........................................................................................................................!!
V. D%"+*en(ar4 S(a*# Ta'..........................................................................................33

n. MIC3EL %. L3UILLER PA>NS3OP, INC, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent, G.R. No. !((8/(, Ma2 ,, #''() Septe;-er !!, #''( ?Reso1&tion@) 9nares6Santia5o, %......................................!! o. BAN4 OF P3ILIPPINES ISLANDS, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent, G.R. No. !,8''#, %&12 #8, #''() C:i+o6 Na*ario, %...........................................................................................................!#
VI. Re*e-!e$ !n Ta'a(!%n..............................................................................................3)

p. COMMISSIONER OF INTERNAL REVENUE,, petitioner vs. A.UCENA T. RE9ES, respon ent G.R. No. !0$($", %an&ar2 #8, #''()...............................!, B. A.UCENA T. RE9ES, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent G.R. No. !(,0/!, %an&ar2 #8, #''(, Pan5ani-an, C.%. ...........................................................................................................................!, r. RI.AL COMMERCIAL BAN4ING CORPORATION, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respon ent. G.R. No. !(/"$/, %&ne !(, #''() 9nares6Santia5o, %.....................................................................!, s. COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. MIRANT PAGBILAO CORPORATION, respon ent. G.R. No. !0$0$,, O+to-er !#, #''() C:i+o6Na*ario, %......................................................................................!" t. BENGUET CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respon ent. G.R. No. !"!#!#, %&ne ##,#''() Corona %..........................................................................................................................!0 &. FAR EAST BAN4 AND TRUST COMPAN9 AS TRUSTEE OF VARIOUS RETIREMENT FUNDS, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE AND T3E COURT OF APPEALS, respon ents. G.R. No. !,/$!$, Ma2 #, #''() Tin5a, %. ......................................................................................!( v. SAN PABLO MANUFACTURING CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respon ent. G.R. No. !"88"$, %&ne ##, #''() Corona, %. ..................................................................................!( C. BARCELON, RODAS SECURITIES, INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respon ent. G.R. No. !08'(", A&5&st 8, #''() C:i+o6Na*ario, %. ..............................................................................................!8 E. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. P3ILIPPINE GLOBAL COMMUNICATION, INC. respon ent. G.R. No. !(8!"(, O+to-er ,!, #''() C:i+o6N*ario, %..................................................................................!8

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2. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. CIT9TRUST BAN4ING CORPORATION, respon ent, G.R. No. !0'/!#, A&5&st ##, #''() Corona, %............................................................................................................!/

I. GENERAL PRINCIPLES OF TAXATION

How are the discounts given to senior citizens treated for income tax purpose? What are the distinctions between a tax credit and a tax deduction? If a tax privilege is given to the taxpayer, can it not opt to claim it as a refund? a. BICOLANDIA DRUG CORPORATION, petitioner vs. COMMISSIONER OF INTERNAL REVENUE, respondent. G.R. No. 142299, June 22, 2 !" A#$una, J. Petitioner claimed the 20% discount granted to senior citizens as a deduction from its gross income thereby giving it a tax relief equivalent to 35% (corporate income tax rate of the deduction! "ater if filed a claim for refund of overpaid income tax due to the error in computation of its tax liability maintaining the position that the discounts should have been treated pursuant to #!$! %o! &'32! (he )($ ordered the refund but on lesser amount! (he )($ made a recomputation of the income tax liability of the petitioner by allo*ing as tax credit the +cost of the discount, only *hich is computed by getting the percentage of cost of sales to total sales and multiplying it *ith total discounts granted! (his ruling *as affirmed by the )$! Issues: -hat is the amount allo*ed as tax credit. b )an the discount be claimed by the taxpayer as a tax refund. $! #eading of the provisions of /ection '(a of #!$! %o! &'320 is as follo*s1
+/ec! '! Privilege for the /enior )itizens 2 (he senior citizens shall be entitled to the follo*ing1 a (he grant of t*enty percent (20% discount from all establishments relative to utilization of transportation services0 hotels and similar lodging establishments0 restaurants and recreations centers and purchase of medicines any*here in the country1 Provided0 (hat private establishments may claim the cost as tax credit!,

(he term +cost, *hen applied to the discounts granted0 is susceptible to various interpretations! (he 34# by virtue of ## %o! 256' interpreted it to mean the tax cost *hich is the very reason *hy it *as treated as a deduction from gross income! (he economic effect of this treatment is the same as allo*ing 35% (tax cost of the discount as tax credit! (he )($0 on the other hand0 interpreted it to be the cost of the goods sold corresponding to the discounts to the extent that they could have increased the sales if no discounts *ere granted! /aid in another *ay0 *ere it not for the discounts there could have been additional sales in the same amount as the discounts0 so the cost is the cost of goods sold corresponding to these additional sales *ere it not for the discount! (he )($0 in determining the amount allo*ed as a tax credit0 came out *ith this formula0 viz1 (otal )ost of 7oods /old (otal /ales x (otal discounts granted 8 )ost of 9iscount

(he /) is not convinced *ith either of the t*o interpretations advances! (he /) ruled that the entity granting the discount is entitled to claim the entire amount of discount! (he +cost, referred to in

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/ection '(a of #!$! %o! &'32 refers to the amount of the 20% discount extended to senior citizens in their purchase of medicines! (his amount shall be applied as a tax credit0 and may be deducted from the tax liability of the entity concerned! 4f there is no current tax due0 of the establishment reports a net loss for the period0 the credit may be carried over to the succeeding taxable year! (CIR vs. Central Drug Corp. April 15, 2005, 456 SCRA 414) $nent the second issue0 the /) ruled that the remedy of refund is not available! (he la* expressly provides that the discount given to senior citizens may be claimed as a tax credit0 and not a refund! (hus0 *here the *ords of a statute are clear0 plain and free from ambiguity0 it must be given its literal meaning and applied *ithout attempted interpretation! (Fian a vs. !eople"s #a$ %n&or'e(ent )oar*, +.R. ,o. 10-6./, 0ar'1 .1, 1--5, 24. SCRA 165). $ccordingly0 the /) directed issuance of tax credit certificates to petitioner instead of the refund prayed for! arellano la* (his bring us to the issue of *hether *hat is being as:ed to be refunded is the +discount, or the overpaid income tax! -hich is to be applied first in paying the income tax liability of the petitioner0 the tax credit or the amount of money tendered. 4t must be born in mind that there *as an overpayment of the tax because of the re5computation that *as made0 treating this time the discount as tax credit instead of treating of it as deduction from gross income! (he amount of the tax credit ho*ever0 is not sufficient to offset petitioner;s income tax hence0 a substantial amount *as also paid for the years covered! -ere it not for *rong treatment of the discount0 there could have been no overpayment made! -ill the overpayment not constitute an erroneously paid tax thereby giving the taxpayer the right to file a claim for refund under /ection 20' and 226 of the %4#). $nother important point in this case is 2 if the discount is not allo*ed to be refunded but it is allo*ed to be refunded but it is allo*ed to be granted as a tax credit certificate0 as in this case0 then there seems to be a circumvention of the rule laid do*n in )entral 9rug (2005 ! (his is because a tax credit certificate can not be used for payment of other tax liabilities or at the option of the o*ner can sale the same! -ill his not be equivalent to the grant of cold cash to the taxpayer and therefore the effect is the same as that of a refund! -hat is not allo*ed directly should not be allo*ed indirectly! <r it might be that the /) is of the impression that tax credit certificate issued *ill only be used for future income tax liability *hich seems to be the inclination in the succeeding case! %. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. CENTRAL LU(ON DRUG CORPORATION, respondent G.R. No. 14)*12, June 2!, 2 !, A#$una, J. =ust li:e the first case herein discussed0 this case delves on the 20% discount granted to senior citizens! (he respondent filed a claim for refund on the unutilized portion for the discount *hich it claimed as a tax credit! (he )($ ruled that the tax credit benefit is only to the extent of respondent;s tax liability during the year0 hence the claim for refund is not allo*ed! (he )$ modified that decision and ruled that the unutilized portion can be carried over to the next taxable period if there is no current tax liability! (his ruling by the )$ *as affirmed by the /)! 4n bringing the case to the /)0 the )4# maintains that the discount should only be allo*ed as a deduction from gross income and not a reduction from the tax liability! (he la* (#!$! %o! &'32 provides that the discount is available as a tax credit! >o*ever0 the implementing regulations (## %o! 256' treat it as a deduction from gross income follo*ing the customary treatment of a sales discount! <n this apparent conflict bet*een the la* and its implementing rules0 the /) said that *hen the la* says that the cost of the discount may be claimed as a tax credit0 it means that the amount 2 *hen claimed 2 shall be treated as reduction from any tax liability! (he la* cannot be amended by a mere regulation! (he administrative agencies issuing these regulations may not enlarge0 alter or restrict the provisions of the la* they administer! 4n fact0 a regulation that operates to create a rule out of harmony *ith the statute is a mere nullity! (CIR vs. 2*a. De !rieto, 10- !1il. 5-2) (he /) also touched on the nature of the benefit granted to the establishment selling to senior citizens! 4t emphasized that +the tax credit benefit granted to the establishment can be deemed as their

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?ust compensation for private property ta:en by the /tate for public use! (he privilege en?oyed by the senior citizens does not come directly from the /tate0 but rather from the private establishments concerned! (o deprive the taxpayer of their right to apply the tax credit against future tax liability *ill be to deny them the ?ust compensation for the property ta:en! $. COMMISSIONER OF INTERNAL REVENUE, petitioner vs. BICOLANDIA CORPORATION, respondent. G.R. No. 14) )+, Ju,- +1, 2 !" Ve,a'$o, J.. J. DRUG

(he la* (#!$! %o! &'32 allo*s the discounts as a tax credit but its implementing regulations (## %o! 256' only allo*s the same as deductions from gross income! (he /) ruled that in cases of conflict bet*een the la* and the rules and regulations implementing the la*0 the la* shall al*ays prevail! (he distinction bet*een a tax credit and a tax deduction *as emphasized by the court0 thus @
+ $ tax credit is an amount subtracted from an individual;s or entity;s tax liability to arrive at the total tax liability! $ tax credit reduces the taxpayer;s liability0 compared to a deduction *hich reduces taxable income upon *hich the liability is calculated! $ credit differs from deduction to the extent that the former is subtracted from the tax *hile the latter is subtracted from income before the tax is computed!, ('iting )la'3"s #a$ Di'tionar4)

4t bears emphasis that #!$! %o! &'32 is no* repealed by #!$! 625& *hich *as approved into la* on Aebruary 2B0 200'! Cnder this later la*0 discounts given to senior citizens are treated as deduction from gross income and no longer allowed as tax credit. (he tax treatment thereby under the present la* *as made consistent *ith financial accounting treatment thereby ma:ing the tax system more attuned to the principle of administrative feasibility!

Can a ruling which is prejudicial to the taxpayer be given a retroactive application? This question was answered squarely in the following case. /. COMMISSIONER OF INTERNAL REVENUE, petitioner, &'. BENGUET CORPORATION, respondent, G.R. No. 14***9, Ju,- 14, 2 !" Ga.$0a, J. /ince the inception of the D$( in E6FF0 sale of gold to )entral 3an: has been considered by the 34# to be zero5rated! (D$( #uling 3&F5FF and #G) %o! 56HFF ! <n =anuary 230 E6620 )ommissioner <ng issued D$( #uling %o! 00F562 declaring and holding that the sale of gold to the )3 are considered domestic sales sub?ect to the E0% D$(! /ubsequently0 D$( #uling %o! 56562 dated $pril 2F0 E662 *as issued reiterating the treatment of sales of gold to )3 and expressly countenancing the retroactive application of D$( #uling %o! 00F562 to all such sales made starting =anuary E0 E6FF! Issue1 )an a ruling0 changing the tax treatment of a transaction from one sub?ect to 0% to one sub?ect to E0%0 be given a retroactive application. (he /) ruled in the negative! (he )4# is precluded from adopting a position inconsistent *ith one previously ta:en *here in?ustice *ould result therefrom0 or *hen there has been a misrepresentation to the taxpayer! (citing $3/5)3% 3roadcasting )orp! vs! )($ and )4#0 E0F /)#$ E'2 4s there really an actual and imminent in?ury to the taxpayer if the ruling is given a retroactive application. -hile the )($ said there is none0 the )$ had ta:en a contrary vie* *hich *as affirmed by the /)!

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(he D$( system of taxation allo*s a D$(5registered taxpayer to recover its input D$( either by (E passing on the E0% output D$( on the gross selling price or gross receipts0 as the case may be0 to its buyer0 or (2 if the input tax is attributable to the purchase of capital gods or to zero5rated sales0 by filing a claim for refund or tax credit *ith the 34#! /imply stated0 a taxpayer sub?ect to E0% output D$( on its sales of goods and services may recover its input D$( costs by passing on said costs as output D$( to its buyers of goods and services but it cannot claim the same as a refund or tax credit0 *hile a taxpayer sub?ect to 0% on its sales of goods and services may only recover its input costs by filing a refund or tax credit *ith the 34#! (he /) is correct in holding that a retroactive imposition of the D$( on the sale of gold to )entral 3an: *ill definitely result to substantial economic pre?udice to respondent! Airst0 the respondent could no longer pass5on to )3 the E0% output D$( *hich *ould be retroactively imposed on said transactions0 and second0 it *ill also be prevented from claiming the refund because the sale is no longer zero rated! 4f this happens the entire cost of the input D$( *ill be borne by respondent 3enguet *ithout any avenue for recovery!

II. INCOME TAXATION

he !inimum Corporate Income ax shall be imposed beginning on the fourth year following the commencement of business operations" e. T2E MANILA BAN3ING CORPORATION, petitioner &'. COMMISSIONER OF INTERNAL REVENUE, respondent, G.R. No. 1!)11), Au4u'5 2), 2 !" San/o&a,6Gu50e..e#, J. Ganila ban: *as incorporated in E6BE and since had engaged in the commercial ban:ing business until it *as ordered closed by the 3/P in E6F& due to insolvency! <n =une 230 E6660 the 3/P authorized it to operate as a (hrift ban:! (he follo*ing years0 specifically on $pril &0 20000 it filed its annual corporate income tax return and paid P330 FEB0EB'!00 as G)4( for taxable year E666! 4t filed a claim for refund maintaining the position that since it )($ denied the claim for refund (*hich *as affirmed by the )$ on the ground that petitioner is not a ne* corporation hence not entitled to the grace period of four years! Issue1 -hat is the rec:oning date for the G)4( in so far as thrift ban:s are concerned. Cnder the la* (#!$! F'2' 0 G)4( is imposed beginning on the fourth year follo*ing the commencement of business operations! #evenue #egulations %o! 656F provides that +Aor purpose of the G)4(0 the taxable year in *hich business operations commenced shall be the year in *hich the domestic corporation registered *ith the 34#!, Petitioner registered as a commercial ban: *ith the 34# in E6BE and again registered on =anuary 2E0 E666 as a thrift ban:! >o*ever0 *ith respect to thrift ban:s0 the date of commencement of business operations is the date the particular thrift ban: *as registered *ith the /I) or the date *hen the )ertificate of $uthority to <perate *as issued to it by the Gonetary 3oard of the 3/P0 *hichever comes later (## %o! '565 implementing #!$! %o! &60B ! (he /) ruled that *hat applied to petitioner is ## %o! '565 and not ## %o! 656F! 4t is0 therefore0 entitled to a grace period of four years counted from =une 230 E666 *hen it *as authorized by the 3/P to operate as a thrift ban: (it having been registered *ith /I) at an earlier date ! )onsequently0 it should only pay it G)4( after four (' years from E666!

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$ thrift ban: is a different taxpayer from that of the commercial ban:0 hence0 for purposes of the G)4(0 the thrift ban: *ill be considered as an entirely ne* entity although it continued to use the same corporate name used by it as a commercial ban:! arellano la* 7. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. JULIANE BAIER6NIC3EL, respondent. G.R. No. 1*+89+, Au4u'5 29, 2 !, 9na.e'6San50a4o, J.

#espondent is a non5resident 7erman citizen and employed as the President of =ubanitex0 4nc!0 a domestic corporation engaged in manufacturing0 mar:eting on *holesale only0 buying or other*ise acquiring0 holding0 importing and exporting0 selling and disposing embroidered textile products! #espondent *as li:e*ise appointed as commission agent by =ubanitex *hereby it *as agreed that she *ill receive E0% sales commission on all sales actually concluded through her efforts! Issue5 -hether or not the commissions earned by the non5resident alien5respondent are taxable in the Philippines! (he /) ruled that a non5resident alien is taxable in the Philippines only on income earned from *ithin! )ommission are compensation for services and they are considered earned from *ithin if the services are rendered *ithin the Philippines (Se'tion 42, ,IRC)! (he important factor therefore *hich determined the source of income of personal services is not the residence of the payor0 or the place *here the contract for service is entered into0 or the place of payment0 but the place where the services were actually rendered. /ince the respondent failed to prove that the mar:eting services *hich gave rise to the commissions are rendered in 7ermany0 she could not claim exemption from the imposition of the income tax! (he /) heavily relied on the fact that respondent presented no evidence to prove that =ubanitex does not sell embroidered products in the Philippines and that her appointment as commission agent is exclusively for 7ermany and other Iuropean mar:ets! 3asic is the rule that he *ho claims exemption from a tax burden must assume the responsibility of proving the same! (he rule availing under our ?urisdiction has al*ays been that0 taxation is the rule and exemption is only an exception to that rule! 4. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. P2ILIPPINE AIRLINES, INC. respondent. G.R. No. 1! *2), O$5o%e. 9, 2 !" Pan4an0%an, J. (he case involves the application of the tax provision in P$";s franchise defining its liability for taxes! P!9! E5600 the legislative franchise of P$" granted it an option to pay the lo*er of t*o alternatives1 (E the basic corporate income tax based on P$";s annual net taxable income computed in accordance *ith the provisions of the %4#)0 or (2 a franchise tax of t*o percent of gross revenues! $vailment of either of these t*o alternatives shall exempt the airline from the payment of +all other taxes,! <n this basis0 a claim for refund of the 20% final *ithholding tax on its interest income *ith various ban:s *as instituted! Issue5 -ill the 6in lieu o& all ot1er ta7es8 provision in P$";s franchise relieve it from paying the 20% final *ithholding tax on its interest on ban: deposits even if there *ere in fact no taxes paid. (he /) ruled that the +in lieu of all other taxes, provision in P$";s franchise is broad enough to cover the 20% final *ithholding tax0 thereby ma:ing it exempt from its imposition! (he /) explained that for the year involved0 P$" chose to be sub?ected to the basic corporate income 6'o(pute* in a''or*an'e $it1 t1e provisions o& t1e ,ational Internal Revenue Co*e8. (he computation of the income tax is anchored on the definition of taxable income! /ection 3E of the %4#) provides1 +(axable income means the pertinent items of gross income specifies in the (ax )ode0 less the deductions andJor personal and additional exemptions0 if any0 authorized for these types of income,! /ection 32 enumerated the items of

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gross income to include interest and other passive income! >o*ever0 since these passive incomes are already sub?ect to different rates and taxed finally at source0 they are no longer included in the computation of the gross income0 *hich determines taxable income! (he /) concluded as follo*s1 6Clearl4, t1en, t1e 9asi' 'orporate in'o(e ta7 i*enti&ie* in t1e &ran'1ise relates to t1e general rate o& .5: as stipulate* in Se'tion 2; o& t1e <a7 Co*e. <1e &inal 20: ta7es *ispute* in t1e present 'ase are not 'overe* un*er Se'tion 1.(a) o& !A#"s &ran'1ise= t1us, a re&un* is in or*er.8 Iven if P$" chooses the corporate income tax because it results to a Kero liability the fact remains that the income tax contemplated under the franchise is not the ordinary meaning *e place on it 2 a tax of the privilege of earning an income 2 but it is still in the imposed in consideration of the franchise0 the incomes tax if chosen is a tax on the privilege of engaging in the franchised activity and not a tax on the privilege of earning an income! (he t*o options given to P$" give it only a computational discretion on ho* much franchise tax to pay! (he tax paid in any of the t*o alternatives is in lieu of all other taxes including the 20% final *ithholding tax! :. CARMELINO F. PANSACOLA, petitioner &'. COMMISSIONER OF INTERNAL REVENUE, respondent. G.R. No. 1*9991, No&e;%e. 1!, 2 !" <u0'u;%0n4, J. Issue5 )ould the exemptions under /ection 35 of the %4#)0 *hich too: effect on =anuary E0 E66F0 be availed of for taxable year E66&. %o! (here is nothing in the la* that expresses any such intent of ma:ing its application retroactive! (he policy declaration in the enactment of #!$! %o! F'2' do not indicate it *as a social legislation that ad?usted personal and additional exemption should retroact! -hat is the nature of personal exemptions. Personal exemptions are the theoretical personal0 living and family expenses of an individual taxpayer! (hese are arbitrary amounts *hich have been calculated by our la*ma:ers to be roughly equivalent to the minimum of subsistence0 ta:ing into account the personal status and additional qualified dependents of the taxpayer!

III.

VALUE,ADDED TAX
0. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. SE3ISUI JUS2I P2ILIPPINES, INC., respondent. G.R. No. 149!81, Ju,- 21, 2 !" Pan4an0%an, J.

#espondent is a PIK$ registered enterprise availing of the incentive under I< %o! 22B thus entitled to an income tax holiday! 4t registered *ith the 34# as a D$( taxpayer and exported all of its products! /ince it has unutilized input taxes0 it claimed for a D$( refund! Issue5 )an a PIK$5registered enterprise be covered by the D$( system. 3usiness enterprise registered *ith the PIK$ may choose bet*een t*o fiscal incentive schemes1 (E t pay a five percent preferential tax rate on its gross income and thus be exempt from all other taxesL or (2 to en?oy an income tax holiday (4(> 0 in *hich case it is not exempt from other national revenue taxes including the D$(! >aving availed of the second incentive scheme0 respondent is covered by the D$( system! /ince respondent *as able to prove that all its manufactures products are in fact exported0 all of its sales are zero5rated! $ccordingly0 it is entitled to claim as refund all unutilized input taxes! =. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. MAGSA9SA9 LINES, INC., BALI>AG NAVIGATION, INC., FIM LIMITED OF T2E MARDEN GROUP ?23@ AND NATIONAL DEVELOPMENT COMPAN9, respondents. G.R. No. 14!9)4, Ju,- 2), 2 !" T0n4a, J.

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%9) is a D$(5registered enterprise! 4t sold five of its ship leased to "uzon /tevedoring )ompany to different buyers all in E6FF! Issue5 4s the sale of the five vessels sub?ect to D$(. (he /) ruled in the negative! $ny sale0 barter or exchange of goods or services not in the course of trade or business is not sub?ect to D$(! 4n rendering this decision0 the )ourt obviously did not give *eight to the ruling issued by the )ommissioner (D$( #uling %o! 5BF5FF on 9ecember E'0 E6FF0 holding that the sale of the vessels *as sub?ect to E0% D$(! (he ruling cited the fact that %9) *as a D$(5registered enterprise0 and thus its +transactions incident to its normal D$(5registered activity of leasing out personal property including sale of its o*n assets that are movable0 tangible ob?ects0 *hich are appropriable or transferable are sub?ect to the E0% D$(! $s emphasized by the /)0 a sale to be taxable must be a sale in the course of trade or business0 *hich connotes regularity of activity (I(perial vs. Colle'tor, +. R. ,o. #>;-24, Septe(9er .0, 1-55). (he )ourt further ruminates 2 +4n the instant case0 the sale *as an isolated transaction! (he sale *hish *as involuntary and made pursuant to the declared policy of 7overnment for privatization could no longer be repeated or carried on *ith regularity! 4t should be emphasized that the normal D$(5registered activity of %9) is leasing personal property!, )($ granted the refund! )$ reversed on the ground that *hile it is an isolated transaction0 it qualifies as a deemed sale! <n a motion for reconsideration0 )$ turned around saying that there is no cessation of business to *arrant a deemed sale! (he /) affirmed the grant of the refund because it is not a transaction in the course of trade or business! (his rule may no longer apply at present in vie* of the amendment introduced by #!$! %o! &&EB (ID$( "a* *hich too: effect0 =anuary E0 E66B ! /ection E05 of the %4#) in pertinent part no* provides that +(he phrase 6in t1e 'ourse o& tra*e or 9usiness8 means the regular conduct or pursuit of a commercial or an economic activity0 including transactions incidental thereto0 by any person regardless of *hether or not the person engaged therein is a nonstoc:0 nonprofit private organization (irrespective of the disposition of its net income and *hether or not it sells exclusively to members of their guests 0 or government entity!, A. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. P2ILIPPINE GLOBAL COMMUNICATIONS, INC., respondent. G.R. no. 144!9!, Au4u'5 1!, 2 !" Ca.B0o, J. (his case revolves around the issue on the business tax liability of a franchise grantee during the time that the enforcement of the D$( la* is suspended! 4t must be recalled that #!$! %o! &&EB (ID$( *as enacted in E663 to ta:e effect fifteen (E5 days after its complete publication in the <fficial 7azette or in at least t*o (2 ne*spaper of general circulation *hichever comes earlier! >aving been published earlier in the Galaya and the =ournal on Gay 2F0 E66'! (his la* placed all franchise grantees (except *ater0 gas and electric utilities *ithin the coverage of the D$(! >o*ever0 the /) issued a (#< on =une 300 E66'0 en?oining the enforcement andJor implementation of the said la* due to consolidated cases filed assailing its constitutionality! (<olentino, et al. vs. Se'retar4 o& Finan'e)! (he (#< *as only lifted on <ctober 300 E665 and the ID$( la* *as implemented beginning =anuary E0 E66B! 9uring the time that the implementation of the ID$( *as suspended0 respondent continued to pay the franchise tax! "ater it filed a claim for refund of these franchise taxes paid (from 2nd quarter of E66' to 'th quarter of E665 amounting to P&00 &650E50!5E! 4t *as the respondent;s position that the passage of the ID$( la* removed them from the ambit of the franchise tax and that the (#< issued in (olentino et! al! en?oining the enforcement of the said la*

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did not have the effect of extending the obligation to pay the 3% franchise tax since the exemption from or removal of liability for said 3% franchise tax under the ID$( la* *as not an issue in those cases! Aor failure of the 34# to act on the claim for refund0 it *as elevated to the )($! (he )($ granted the claim and *as affirmed by the )$! Issue5 -hen the franchise tax is replaced by the D$( but the latter;s enforcement is temporarily en?oined0 *ill this exempt the franchise grantee from any business tax liability. (he /) ruled that the abolition of the 3% franchise tax on telecommunication companies0 and its replacement by the E0% D$(0 *as effective and implemented only on =anuary E0 E66B! (his means that the abolition and replacement must ta:e place at the same time! (hus0 respondent;s claim for refund must fail! 4t *as further pointed out by the /) that +(o grant a refund of the franchise it paid prior to the effectivity and implementation of the D$( *ould create a vacuum and thereby deprive the government from collecting either the D$( or the franchise tax,! Ixemption from taxes is never presumed! 4t must be based on positive grant by the legislature in language too clear to be mista:en and too categorical to be misinterpreted! (o uphold the right of the government to impose the tax is based on the principle that taxes are the lifeblood of the Government and their prompt and certain availability are an imperious need. (Co((issioner vs. !ine*a, 21 SCRA 105)

IV.

OT2ER BUSINESS TAXES

,. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. TRUST>ORT29 PA>NS2OP, INC. respondent. G.R. No. 149)+4, Ma- 2, 2 !" San/o&a,, J.

(he issue raised for resolution is *hether pa*nshops are included in the term leading investors for purposes of imposing the 5% percentage tax under /ection EEB of the %ational 4nternal #evenue )ode of E6&&0 as amended by Ixecutive <rder %o! 2&3. (his same issue *as ans*ered by the /) in the earlier case of )4# s! G= "huiller Pa*nshop0 20030 in the negative0 holding that *hile pa*nshops are indeed engaged in the business of lending money0 they cannot bee deemed 6len*ing investors8 for the purpose of imposing the 5% lending investor;s tax! /uch ruling is anchored on the follo*ing reasons1 E! Cnder /ection E62 of the (ax )ode imposing the fixed taxes on business0 lending investors and pa*nshops *ere found on different captions and *ere sub?ect to different fixed taxesL 2! )ongress never intended pa*nshops to be treated in the same *ay as lending investors! 3oth the E6&& and E6FB %4#) dealth *ith pa*nshops and lending investors differentlyL 3! /ection EEB of the (ax )ode of E6&&0 as amended by I!<! %o! 2&30 sub?ects to percentage tax dealers in securities and lending investors only! (here is no mention of pa*nshopsL '! (he 34# had ruled several times prior to the issuance of #G< %o! E556E and #G) %o! '356E that pa*nshops *ere not sub?ected to the 5% percentage tax imposed on lending investorsL 5! /ince /ection EEB of the %4#) of E6&&0 *hich breathed life on the questioned administrative issuances0 had already been repealed0 #G< E556E and #G) '356E0 *hich depended upon it0 are deemed automatically repealedL and

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B! #G) %o! '356E and #G< %o! E556E are null and void for *ant of publication considering that they are not merely interpretative but in the nature of a subordinate legislation! $pplying the principle of state *e'isis et non ?uieta (overe (follo* past precedents and do not disturb *hat has been settled 0 the /) feels that it is its duty to apply the previous ruling to the instant case! 4n E66B0 the lending investor;s tax *as abolished and *as replaced *ith the D$(! 3ecause of the #G) issued treating pa*nshops as a:in to lending investors0 various D$( assessments *ere also issued against the pa*nshops! "ater0 *hen the decision in 0@ #1uiller came out holding that pa*nshops are not lending investors0 the 34# insisted that pa*nshops are still sub?ect to D$( as sellers of services! (he dispute0 ho*ever0 is no* overta:en by events because the )ommissioner in 200' concluded an industry compromise *ith the pa*nshop operators and came out *ith a ne* regulations0 ## %o! E05 200'0classifying pa*nshops as non5ban: financial intermediaries! Pa*nshops are no* liable to the 5% gross receipts tax imposed under /ections E22 of the %4#)! ;. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. BAN3 OF P2ILIPPINE ISLANDS, respondent. G.R. No. 148+8*, June 2!, 2 !" T0n4a, J. $t issue is the question of *hether the 20% final tax on a ban:;s passive income0 *ithheld from the bac: at source0 still forms part of the ban:;s gross income for the purpose of computing its gross receipts tax liability! 3oth the )($ and the )$ ans*ered in the negative but the /) reversed in favor of the petitioner! (his same issue has already been ruled upon by the /) in the cases of C1ina )an3ing Corp., vs. CA, 200.= CIR vs. Soli*9an3, 200.= an* CIR vs. )an3 o& Co((er'e, 2005 and the /) finds no cogent reason to disturb *hat has been previously settled! 4% all of these cases0 the /) applied the o*nership test in determining the composition of gross receipts! (he /) ruminates in the )hina 3an: case as follo*s1
+4n the instant case0 )3) o*ns the interest income *hich is the source of payment of the final *ithholding tax! (he 7overnment subsequently becomes the o*ner of the money constituting the final tax *hen )3) pays the final *ithholding tax to extinguish its obligation to the government! (his is the consideration for the transfer of o*nership of the money from )3) to the government! (hus0 the amount constituting the final tax0 being originally o*ned by )3) as part of its interest income0 should form part of its taxable receipts!,

V. DOCUMENTARY STAMP TAX

n. MIC2EL J. L2UILLER PA>NS2OP, INC, petitioner &'. COMMISSIONER OF INTERNAL REVENUE, respondent, G.R. No. 1!!8)!, Ma- +, 2 !" SeB5e;%e. 11, 2 ! ?Re'o,u50on@" 9na.e'6San50a4o, J. (his case stemmed from an assessment for deficiency documentary stamp taxes on pa*n tic:ets issued by petitioners for the year E66&! (he )($ ruled for the cancellation of the assessment by holding that a pa*n tic:et is neither a security not a printed evidence of indebtedness and therefore0 cannot be sub?ect to 9/(! #uling on the petition filed by respondent0 the )$ reversed the )($ decision and sustained the assessment issued by the )ommissioner! (he )$ ratiocinated that a pa*n tic:et0 per se is not sub?ect to 9/(L rather0 it is the transaction involved0 *hich in this case is pledge0 that is being taxed %ot convinced0 petitioner filed *ith the /) a petition for revie* on certiorari raising this sole issue1 $re pa*n tic:et sub?ect to 9/(. (he /) affirmed the decision of the )$ and made the follo*ing ?ustification0 viz1

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+(rue0 the la* does not consider said tic:et as an evidence of security of indebtedness! >o*ever0 for purposes of taxation0 the same pa*n tic:et is proof of an exercise of a taxable privilege of concluding a contract of pledge! $t any rate0 it is nor said tic:et that creates the pa*nshops obligation to pay 9/( but the exercise of the privilege to enter into a contract of pledge! (here is therefore no basis for petitioner;s assertion that a 9/( is literally a tax on a document and that no tax may be imposed on a pa*n tic:et!,

(he /) in no certain terms said that contracts of pledge entered into by pa*nshops are sub?ect to 9/(! (he 9/( is essentially an excise taxL it is not an imposition on the document itself but on the privilege to enter into a taxable transaction of pledge! (his is clear under /ection E65 of the %ational 4nternal #evenue )ode! 4% a motion for reconsideration that *as filed0 the /) issued a #esolution on /eptember EE0 200B ordering the deletion of the surcharges and interest on the assessment! 4t too: cognizance of the existence of earlier rulings issued by the )ommissioner that pa*nshop tic:ets are not sub?ect to tax on the basis of previous interpretation of government agencies tas:ed to implement the tax la*0 are sufficient ?ustification to delete the imposition of surcharges and interest!, ('iting Connell )ros. Co. (!1il.) vs. Colle'tor, 11- !1il. 40, 1-6.= <ua on, @r. vs. inga*, 15; !1il. 15-= an* Cir vs. Repu9li' Ce(ent Corporation, 124 SCRA 46) arellano la* o. BAN3 OF P2ILIPPINES ISLANDS, petitioner &'. COMMISSIONER OF INTERNAL REVENUE, responden5, G.R. No. 1+8 2, Ju,- 28, 2 !" C:0$o6Na#a.0o, J. (his case arose from the assessment of 9/( made by the former 3an:s Ainancing and 4nsurance 9ivision of the 34# on the sale of foreign exchange to the 3/P under a /-$P arrangement! (he transaction starts *ith the offer of C!/! dollars (/pot sale by 3P4 at a the prevailing exchange rate to the 3/P sub?ect to the redemption at maturity at an agreed exchange rate (for*ard ! Cpon acceptance of the offer0 3P4 *ill cable its correspondent ban: abroad to remit the amount of C!/! dollars to the Aederal #eserve 3an: for credit to the account of the 3/P! $s soon as 3/P receives the credit advice from the Aederal #eserve 3an:0 it credits the account of 3P4 corresponding to the peso equivalent of the foreign exchange sold! Issue5 -ill the transaction give rise to the imposition of the 9/(. (he /) ruled that the sale of foreign currency per se is not sub?ect to 9/(! >o*ever0 the facility used in the transaction of the business is the one that is sub?ect to documentary stamp tax! (he /) observed that /ection E65 (no* /ection EF2 of the %4#) covers foreign bills of exchange0 letters of credit0 and orders for the payment of money0 dra*n in the Philippines but payable in a foreign country! Arom this enumeration0 t*o common elements need to be present1 (E dra*ing the instrument or ordering a dra*ee0 *ithin the PhilippinesL and (2 ordering the dra*ee to pay another person a specified amount of money outside the Philippines! )learly0 *hat is being taxed is the facility that allo*s a party to dra* the draft or ma:e the order to pay *ithin the Philippines and have the payment made in another country! 4t bears emphasis to mention at this point that *hile /ection E65 (no* /ection EF2 includes *ithin its coverage +orders for payment of money by telegraph or other*ise dra*n in but payable out of the Philippines, the documentary stamp tax regulations (## %o! 2B is more explicit *hen it said1
+/ection 5E1 -hat may be regarded as telegraphic transfer! 2 4f a local ban: cables to a certain ban: in a foreign country *ith *hich ban: said local ban: has a credit0 and directs that foreign ban: to pay to another ban: or person in the same locality a certain sum of money0 the document for and in respect such transaction *ill be regarded as a telegraphic transfer0 taxable under the provisions of /ection E''6(i of the $dministrative )ode!,

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(his ma:es the sale of foreign exchange under a s*ap arrangement a transaction sub?ect to the 9/( because of the facility used in its consummation! (here is a cable instruction from the local ban: in the Philippines *here payment of foreign currency has to ta:e place abroad! (his is a taxable telegraphic transfer *ithin the contemplation of la*!

VI.

REMEDIES IN TAXATION
B. COMMISSIONER OF INTERNAL REVENUE,, petitioner &'. A(UCENA T. RE9ES, respondent G.R. No. 1*9!94, Janua.- 28, 2 !" C. A(UCENA T. RE9ES, petitioner &'. COMMISSIONER OF INTERNAL REVENUE, respondent G.R. No. 1!+*)1, Janua.- 28, 2 !, Pan4an0%an, C.J.

(his case *as borne out of these facts! Garia )! (ancinco died on =uly F0 E663! $ deficiency estate tax assessment *as issued against her estate on $pril 220 E66F! (he assessment notice follo*ed the old procedure laid do*n ## %o! E25F5 because at the time that the assessment *as issued0 no implementing rules *ere as yet issued on the ne* procedure for issuing an assessment under /ection 22F of the %4#)0 as amended by #!$! %o! F'2'! (he procedure simply requires that the taxpayer must be notified of the findings of the )ommissioner! >o*ever0 the old provision of the %4#) (/ection 226 *as amended and renumbered as /ection 22F *hich in explicit language provided5 6<1e ta7pa4er ot1er$ise s1all 9e in&or(e* in $riting o& t1e la$ an* &a'ts on $1i'1 t1e assess(ent is (a*e5 ot1er$ise, t1e assess(ent s1all 9e voi*.8 (his change *as introduced by #!$! %o! F'2' *hich too: effect on =anuary E0 E66F! Issues5 -hat is the status of an assessment issued in E66F if it failed to inform the taxpayer of the la* and the facts on *hich the assessment is made. )an this assessment be the basis of a compromise. (he /) ruled that the assessment is void ab initio! Cnder the present provisions of the (ax )ode and pursuant to elementary due process0 taxpayers must be informed in *riting of the la* and the facts upon *hich a tax assessment is basedL other*ise0 the assessment is void! 3eing invalid0 the assessment cannot in turn be used as a basis for the perfection of a tax compromise! (he )ommissioner ta:es the position that since the assessment *as issued at a time that the #egulations in force is ## %o! E25F50 the old rule in ma:ing an assessment should therefore be follo*ed! (he provision of /ection 22F *hich too: effect on =anuary E0 E66F is self executing! -hile it is true that the implementing rules (## %o! E2566 came out only on /eptember B0 E6660 this is merely an administrative rule interpretative of the statute! (he rule prevailing under our ?urisdiction is that +an administrative rule interpretative of a statute0 and not declarative of certain rights and corresponding obligations0 is given retroactive effect as of the date of the effectivity of the statute!, (A*a(son A ano( %*u'ation Institution, In'. vs. A*a(son Bniversit4 Fa'ult4 an* %(plo4ees Asso'iation, ,ove(9er -, 1-/-, 1;- SCRA 2;-). .. RI(AL COMMERCIAL BAN3ING CORPORATION, petitioner &'. COMMISSIONER OF INTERNAL REVENUE, respondent. G.R. No. 1!)49), June 1!, 2 !" 9na.e'6San50a4o, J.

(his case delves on the procedures of disputing an assessment provided for under /ection 22F of the %ational 4nternal #evenue )ode! 4t appears that on =uly 50 200E0 #)3) received a final assessment notice from the 34#! 4t filed a protest on =uly 200 200E and for failure of the )ommissioner to render a decision thereon0 #)3) filed its petition for revie* *ith the )($ on $pril 300 2002! (he )($ dismissed the petition for having been filed out of time!

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Issue5 -as the dismissal of the petition for revie* proper due to its having been filed out of timeC $pplying the clear provisions of /ection 22F0 the protest must be filed *ith thirty (30 days from receipt of the assessment *hich *as properly complied *ith by petitioner on =uly 200 200E! Arom this date the petitioner has until /eptember EF0 200E0 the )ommissioner had until Garch E&0 2002 (EF0 days to issue his decision! /ince the )ommissioner did not render a decision0 the taxpayer has to file a petition for revie* *ithin 30 days from Garch E&0 2002 or until $pril EB0 2002 *ithin *hich to elevate the case to the )($! (hus0 *hen the petitioner filed its petition for revie* on $pril 300 20020 the same is clearly filed out of time! (he /) held that the failure of the petitioner to appeal from an assessment on time rendered the assessment final0 executory and demandable! )onsequently0 petitioner is precluded from disputing the correctness of the assessment! (his decision must be aligned *ith the "ascona case (a )($ case *herein it *as ruled that the treatment of the )4#;s inaction as an adverse decision is merely optional to the taxpayer! (his means that if the )4# *ould later on rule on the protest despite the length of time it *as pending in the administrative level0 the aggrieved taxpayer can still appeal the adverse decision of the )4#! -hat is the )4# *ill not decide the protest but *ill ?ust enforce the collection of the assessed tax. $fter all0 the /) said that the assessment becomes final0 executory and demandable if no appeal is filed after the lapse of the EF05day period prescribed under /ection 22F of the (ax )ode! 4% that situation0 the "ascona decision *ill be put into test although it is believed that it *as already rendered moot and academic in vie* of the !rovisions o& R.A. ,o. -2/2 *e&ining t1e enlarge* Duris*i'tion o& t1e C<A. <o 1ol* ot1er$ise $oul* (a3e an assess(ent never rea'1 &inalit4 9e'ause o& t1e e7pe'tation t1at t1e CIR (a4 still *e'i*e on t1e assess(ent. (he better vie* *ould be to automatically deprive the )ommissioner of ?urisdiction on a protest once the taxpayer avails of its right to appeal *ith the )($! '. COMMISSIONER OF INTERNAL REVENUE, petitioner, &'. MIRANT PAGBILAO CORPORATION, respon*ent. G.R. No. 1*9*9+, O$5o%e. 12, 2 !" hico!"azario, #. (he facts of this case are straight for*ard! #espondent is a registered D$(5 taxpayer *ith a certificate of registration issued on =anuary 2B0 E66B! Aor the period $pril E0 E66B to 9ecember 3E0 E66B0 respondent religiously filed its quarterly D$( returns reflecting thereon the amount of accumulated input taxes! (hese input taxes *ere paid to D$( suppliers of capital goods and services for the construction and development of the po*er generating plant in Pagbilao0 Muezon! $ claim for refund for these input taxes *as filed *ith the 34#! -ithout *aiting for its resolution in the administrative level0 it filed a petition for revie* *ith the )($ on =uly E00 E66F0 in order to toll the running of the toe5year prescriptive period for claiming a refund under the la*! 4n ans*er to this petition0 the )ommissioner advanced as special and affirmative defenses that1 GP);s claim for refund is still pending investigation and consideration before his office0 accordingly0 the filing of the petition is prematureL *ell5settled is the doctrine that provisions for refund and credit are construed strictly against the taxpayer as they are in the nature of tax exemptionL the claimant has the burden to sho* that the taxes are erroneously paid and that the claim is filed *ithin the prescriptive period! (he )($ ruled in favor of GP) and declared that GP) had over*helmingly proved0 through the D$( invoices and official receipts it had presented0 that its purchases of goods and services *ere necessary in the construction of po*er plant facilities *hich is used in its business of po*er generation and sale!

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On an aBBea, 5o 5:e CA, 5:e Co;;0''0one. .a0'e/ neD a.4u;en5' D:0$: De.e ne&e. .a0'e/ 0n 5:e CTA E GP) is an electric utility sub?ect to the franchise tax and since it is exempt from D$(0 it is not entitled to the refund! (he )$0 finding no merit in the )ommissioner;s petition0 affirmed the )($ decision! Issue5 )an the )ommissioner change his theory of the case on appeal by raising for the first time on appeal questions of both fact and la* not ta:en up in the tax court. (he /) ruled against the petitioner! (he /) emphasized that +(he settled rule is that defenses not pleaded in the ans*er may not be raised for the first time on appeal! $ party cannot0 change fundamentally the nature of the issue in the case! -hen a party deliberately adopts a certain theory and the case is decided upon that theory in the court belo*0 he *ill not be permitted to change the same on appeal0 because to permit him to do so *ould be unfair to the adverse party,! (Carantes v. Court o& Appeals, +.R. ,o. #>...60, April 25, 1-;;, ;6 SCRA 514). arellano la* 5.
respondent.

BENGUET CORPORATION, petitioner, &'. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 141212, June 22,2 !" Co.ona J.

Petitioner appointed "!)! 9iaz and )o!0 an accounting firm0 as its confidential payroll agent and tas:ed it *ith the remittance of *ithholding taxes on compensation *ith the 34#! Aor certain months in E6FF to E66E0 there *ere unremitted *ithholding taxes of petitioner;s executives amounting to PB0EFF0B&2!50! (he )ommissioner;s issued a letter demanding the payment thereof and in said letter it *as stated that all the payment orders and confirmation receipts reflected in petitioner;s annual return submitted to respondent;s $ccounting 9ivision *ere found to be fa:e0 that is0 not issued by the 3ureau of 4nternal #evenue! (he chec:s issued by the petitioner for the payment of the *ithholding taxes on compensation *ere not issued by the petitioner for the payment of the *ithholding taxes on compensation *ere not used as such but *ere found out to have been used in the purchase of loose documentary stamps of different clients of "!)! 9iaz and )o! (his fact is evident from the dorsal side of the sub?ect chec:s *hich bears the hand*ritten notes that they *ere used to pay documentary stamps *hich findings is corroborated by the report of the #evenue )ollection $gent *ho received these chec:s! (his case centers on one main issue1 -hat should be considered as the best evidence of payment of *ithholding taxes 2 the Pos and )#s *hich indicated that payment *as made as insisted by petitioner0 or the dorsal notes on the chec:s and reports of the 34# team that no such payments *ere made. (he ruling issued by the )($ as affirmed by the )$ is that 2 +-hen chec:s are used for payments in settling obligations0 the best evidence are the chec:s themselves! )onsidering that the Pos and )#s of petitioner0 although seemingly genuine0 do not appear in respondent;s records0 the best evidence in proving the petitioner;s alleged payments are the G(3) chec:s! $ careful scrutiny of these chec:s0 ho*ever0 revealed that they *ere not used to pay *ithholding taxes! (he chec:s themselves confirm respondent;s /pecial Pro?ect;s (eam;s findings that they *ere used to purchase documentary stamps from the 34#! Aor on the dorsal sides of the sub?ect chec:s are hand*ritten notes that they *ere used to pay documentary stamps! $s to ho* many pieces of documentary stamps *ere purchased for each denominations of P5!00 or P3!000 and even their respective serial numbers *ere also indicated at the bac: of each chec:s! (he /) ruled that the issue involves a question of fact *hich cannot be ta:en cognizance by it from the high tribunal is not a truer of facts! $ccordingly0 the findings of fact by the )($ are generally regarded as final0 binding and conclusive on the /)0 especially if these are substantially similar to the findings of the )$ *hich is normally the final arbiter of questions of fact! $s a final note0 the /) ruminates 2 Petitioner0 as a *ithholding agent0 is burdened by la* *ith public duty to collect the tax for the government! >o*ever0 its payroll agent0 "!)! 9iaz and )o!0 failed to remit to the 34# the *ithholding taxes on compensation! >ence0 no valid payment of the *ithholding taxes

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*as actually made by petitioner! )odal provisions on *ithholding tax are mandatory and must be complied *ith by the *ithholding agent! 4t follo*s that petitioner is liable to pay the unremitted *ithholding taxes! u. FAR EAST BAN3 AND TRUST COMPAN9 AS TRUSTEE OF VARIOUS RETIREMENT FUNDS, petitioner, &'. COMMISSIONER OF INTERNAL REVENUE AND T2E COURT OF APPEALS, respondents. G.R. No. 1+)919, Ma- 2, 2 !" $inga, #. (his case hinges on a claim for refund of erroneously paid taxes due to the *ithholding of the final tax on interest income earned in E663 by different employees trust managed by Aar Iast 3an:! (he four claims for refund involving four quarters of E663 *ere all filed *ith the 34# *ithin t*o years from the date of remittance of the tax! (he )ommissioner denied the claims due to the failure of the trustee5ban: to sufficiently substantiate the same! (he petitioner did not appeal the denial to the )($! >o*ever0 on $pril 2F0E6650 the petitioner filed a Gotion to $dmit /upplemental Petition in )($ case %o! 'F'F (involving claim for refund for an earlier year see:ing to include in that case the tax refund claimed for the year E663! (he )($ denied the admission of the supplemental petition and advised the petitioner to instead file a separate petition for revie* to *hich it complied but only <ctober 60 E665! Issues5 a -hat evidentiary requirements must be complied to substantiate the claim for refund. b 4s the t*o5year prescriptive period under /ection 226 of the (ax )ode0 tolled by the filing of a supplemental petition on a separate claim pending before the )($. (he evidentiary requirements that need to be introduced are the documentary proof of transactions such as confirmation receipts and purchase orders that *ould ordinarily sho* the fact of purchase of treasury bills or money mar:et placements by the various funds0 together *ith their individual ban: account numbers! (hese documents are the best evidence on the participation of the funds0 and *ithout them0 there is no *ay for the )ourt to verify the actual involvement of the funds in the alleged investment in treasury bills and money mar:et placements! /ince the petitioner failed to submit these vital documents0 the claim for refund must fail! <n the second issue0 the /) said that the filing of the supplemental motion having been denied by the )($ has produced no ?udicial effect! (he )($ acquired ?urisdiction over the claim for refund for taxes paid by petitioner in E663 only upon filing of the ne* Petition for #evie* on <ctober 60 E665 or more than t*o years from the date of payment of the taxes sought to be refunded! 3ut even if the )($ allo*ed the filing of the supplemental petition on $pril 2F0 E6650 it *ill not alter the fact that taxes paid from =anuary to $pril 2&0 E663 are no longer available for refund for the right to file the claim has already prescribed! $n appeal from the decision of the )ommissioner must be an independent action! 4t can not be done in the guise of supplementing a pending case in the )($! $llo*ing this *ould run counter to the provisions of /ection 226 of the %4#) *hich etched in stone the +supervening event clause, in pursuing a claim for refund! &. SAN PABLO MANUFACTURING CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, .e'Bon/en5. G.R. No. 148849, June 22, 2 !" Co.ona, J. (his case pertains to the exemption from miller;s tax *hich *as granted under /ection EBF of the E6F& (ax )ode! (he la* specifically exempts the eFBo.5a50on of rope0 coconut oil0 palm oil0 copra by5 products and desiccated coconuts0 *hether in their original state or as an ingredients or part of any manufactured article or products0 by the proprietor of the factory or by the miller himself! Petitioner sold crude coconut oil to Cnited )oconut )hemicals0 4nc! *hich *ere utilized by the buyer as ra* materials in the production of products for export! <n these local sales0 petitioner see:s exemption from paying the 3% miller;s tax!

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Issue5 4s the local sale of crude coconut oil by the miller covered by the exemption. (he /) ruled in the negative! (he rule is that the exemption must not be so enlarged by construction since the reasonable presumption is that the state has granted in express terms all it intended to grant and that0 unless the privilege is limited to the very terms of the statute0 the favor *ould be extended beyond *hat *as meant! -e have to adhere to the rule of e7pressio unius est e7'lusio alterius *hich is a canon of restrictive interpretation! 4ts application in this case is consistent *ith the construction of tax exemptions in stri'tissi(i Duris against the taxpayer! (o allo* /PG);s claim for tax exemption *ill violate these established principles and unduly derogate sovereign authority! 4t must be noted that *hat is exempted by la* are export sales made by the proprietor of the factory or by the miller himself! "ocal sales to another person0 even if the buyer *ill eventually export the same0 are undoubtedly beyond the scope of the exemption! D. BARCELON, ROGAS SECURITIES, INC., petitioner, &'. COMMISSIONER OF INTERNAL REVENUE, respondent. G.R. No. 1*8 !4, Au4u'5 8, 2 !" hico!"azario, #. (he core issue raised for resolution in this case is *hether or not respondent;s right to assess petitioner;s alleged deficiency income tax is barred by prescription! #ecords sho* that petitioner filed its $nnual 4ncome (ax #eturn for taxable year E6F& on $pril E'0 E6FF! (he last day for filing by petitioner of its return *as on $pril E50 E6FF0 thus0 giving respondent until $pril E50 E66E *ithin *hich to send an assessment notice! -hile respondent avers that it sent the assessment notice dated Aebruary E0 E66E on Aebruary B0 E66E0 *ithin the three (3 5 year period prescribed by la*0 petitioner denies having received an assessment notice from respondent! Petitioner alleges that it came to :no* of the deficiency tax assessment only on Garch E&0 E662 *hen it *as served *ith the -arrant of 9istraint and "evy! (he /) ruled for the taxpayer! (he high tribunal relied heavily on the failure on the part of respondent to prove by independent evidence0 such as the registry receipt of the assessment notice to the taxpayer! -hat *as merely presented is the 34# record boo: *here the name of the taxpayer0 the :ind of tax assessed0 the registry receipt number and the mailing *ere noted to *hich the custodian testified that she made the entries therein! 3ut these are all self5serving! 4n the case of ,ava v. Co((issioner, E2E Phil! EE&0 the /) stressed on the importance of proving the release0 mailing or sending of the notice and it said5 +-hile *e have held that an assessment is made *hen sent *ithin the prescribed period0 even if received by the taxpayer after its expiration ('iting Colle'tor vs. )autista, #>12250 and #> 1225-, 0a4 2;, 1-5-), this ruling ma:es it the more imperative that the release0 mailing0 or sending of the notice be clearly and satisfactorily proved! Gere notations made *ithout taxpayer;s intervention0 notice or control0 *ithout adequate supporting evidence0 cannot sufficeL other*ise0 the taxpayer *ould be at the mercy of the revenue officer0 *ithout adequate protection or defense! 4t is clear that the evidence presented by respondent is insufficient to give rise to the presumption that the assessment *as received in the regular course of mail! )onsequently0 the right of the government to assess and collect the alleged deficiency tax is barred by prescription! F. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. P2ILIPPINE GLOBAL COMMUNICATION, INC. respondent. G.R. No. 1!814!, O$5o%e. +1, 2 !" hico!"zario, #. (his involves a case of prescription so that the narration of specific dates on every action ta:en is indispensable for a proper understanding thereof! (he relevant dates are as follo*s1 E! $pril E50 E66E 2 respondent filed its 4(# for income earned in E660!

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2! $pril 220 E66' 5 Aormal $ssessment %otice *as made assessing the taxpayer for deficiency income tax in the total amount of PEEF0 2&E0 B&2!00! 3! Gay B0 E66' 2 filed a formal protest letter against the assessment! '! Gay 230 E66' 5 other protest *as filed! (he previous and present protest as:ed for the cancellation of the assessment for being invalid for lac: of factual and legal basis! 5! <ctober EB0 2002 (more than eight years after the assessment *as issued 2 taxpayer received a Ainal 9ecision0 dated <ctober F0 20020 from the )ommissioner denying the protest! B! %ovember E50 2002 2 respondent filed a Petition for #evie* *ith the )($ invo:ing prescription as a defense! 8. =une 60 200' 5 )($ rendered a decision in favor of the respondent! $fter the filing a Gotion for #econsideration the )($ en 9an' affirmed! Issue5 -ill the filing of the timely protest by the taxpayer toll the running of the prescriptive period to collect the assessed deficiency income tax. (he /) ruled in the negative! (he running of the prescriptive period0 by express provision of /ection 22' (no* 223 0 can be suspended 6E1en t1e ta7pa4er re?uests &or a reinvestigation $1i'1 is grante* 94 t1e Co((issioner8. ## %o! E25F5 defined *hat is a request for reinvestigation on one hand and a request for reconsideration on the other! (he main difference bet*een these t*o types of protests lies in the records or evidence to be examined by internal revenue officers0 *hether these are existing records or ne*ly discovered or additional evidence! $ re5evaluation of existing records *hich results from a request for reconsideration does not toll the running of the prescription period for the collection of an assessed tax! -hile it is true that the provisions of /ection 223 of the %4#) is clear0 the ruling of the /) in the case of E4et1 Sua'o (+.R. ,o. ;62/1, Septe(9er .0, 1--1, 202 SCRA 125) set a different tone *hen the )ourt ruled that 6t1e pres'riptive perio* provi*e* 94 la$ to (a3e a 'olle'tion is interrupte* on'e a ta7pa4er re?uests &or reinvestigation or re'onsi*eration o& t1e assess(ent.8 4n the case of 3P4 vs! )4#0 7!#! %o! E36&3B0 <ctober E&0 20050 the /) too: occasion to examine carefully the -yeth decision and found out that there are inconsistencies *ith the la*! (he provision of /ection 223 is clear that a request for reinvestigation (not reconsideration *hich is granted by the )ommissioner can suspend the running of the prescriptive period to collect! arellano la* -. COMMISSIONER OF INTERNAL REVENUE, petitioner &'. CIT9TRUST BAN3ING CORPORATION, respondent, G.R. No. 1* )12, Au4u'5 22, 2 !" Co.ona, J. (his case involves a claim for refund for E6F' and E6F5! )($ ordered the )ommissioner to grant the refund! (he )4# filed a motion for reconsideration on the ground that the payment and remittance of the tax are not sufficiently proven and that )itytrust has an outstanding deficiency income and business tax liabilities for E6F'! (he )($ denied the motion *hich *as affirmed by the )$! <n a petition for revie* on 'ertiorari before the /)0 the /) too: cognizance of the apparent contradiction bet*een the claim for refund and the deficiency assessments against )itytrust0 and that the government could not be held in estoppel due to the negligence of its officials or employees0 especially in cases involving taxes! Aor that reason0 the case *as remanded by the /) to the )($ for reception of evidence! 4n compliance *ith the /) order0 the )($ conducted further proceedings for the reception of the )4#;s evidence! 4n the course thereof0 )itytrust paid the assessed deficiencies for E6F' to remove all administrative impediments to its claim for refund! >aving fully settled its tax liabilities for E6F'0 respondent prays that it be granted a refund! (he )4# interposed his ob?ection0 ho*ever0 alleging that )itytrust still had unpaid deficiency income0 business and *ithholding taxes for the year E6F5! 9ue to these deficiency assessments0 the )4# insisted that )itytrust *as not entitled to any refund!

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(he )($ set aside the )4#;s ob?ections and granted the refund! <n appeal0 the )$ denied the )4#;s petition for revie* for lac: of merit and affirmed the )($ decision *hich is again the sub?ect of this present petition for revie* on 'ertiorari! Issue5 4s a deficiency tax *hich *as never raised as a defense on appeal be considered in determining the taxpayer;s entitlement to a refund. (he )($ opines that it is not duty bound to receive evidence for these assessments pertaining to E6F5 for the follo*ing reasons1 E! $lthough the /) in its earlier order did not specifically mention *hat :ind of petitioner;s evidence should be entertained0 logic0 dictates that the evidence should pertain only to the E6F' assessments raised as a defense on appeal to the )$ and the /)! (he assessments for E6F5 *ere never raised on appeal and so they should never be allo*ed as this *ill lead to an endless litigation! 2! it! (he )($ has no ?urisdiction to try as assessment case *hich *as never appealed to

(he /upreme )ourt *as convinced *ith the ratiocination made by the )($ and decided to affirm the grant of the refund! (he /) once again said5 +3ecause of the )($;s recognized expertise in taxation0 its findings are not ordinarily sub?ect to revie* specially *here there is no sho*ing of grave error or abuse on its part!, 4t is thus clear that only an assessment and a claim for refund involving the same taxable period and under common ?urisdiction are required to be settled in one proceeding consonant *ith the earlier )ity (rust case! (here are compelling reasons *hy the concept of @settlement under one proceeding; may not be follo*ed as *hen it is expected to create utter confusion among taxpayers! 4t is of common :no*ledge that the la*s governing claims for refund are separate and distinct from those applicable to assessment of appeals! Aor example0 the period of time to appeal a refund case is *ithin t*o (2 years from the date of the payment0 *hile the filing of an assessment appeal requires the observance of thirty (30 days from the date of receipt of the denial of protest! (o illustrate0 let us ta:e a taxpayer *ho has an erroneously paid capital gains tax in $ugust E662! /ometime in $ugust E66'0 an assessment *as issued against him for deficiency income tax for the same taxable year! /upposing0 he immediately protested the assessment but the 34# did not immediately act on his protest0 *ill he still *ait for the 34#;s decision before he can go to the )($ to file his claim for refund. -hat about if the t*o5 year period appeal his refund is nearing expiration0 *ill he still *ait indefinitely for the decision on his protest0 so he can file both suits simultaneously *ith the )ourt. <f course0 the ans*er *ill be %<! %o*0 let us reverse the scenario! /upposing the 34#;s assessment came first but this time no protest *as made by the taxpayer! >ence0 the assessment became final and executory and so0 the 34# filed a collection case in the regular trial court! 9uring the pendency of the collect ion suit0 taxpayer discovered that he made an erroneous payment of a different :ind of tax! (o avoid multiplicity of suits0 *ill the 34# allo* the taxpayer to ventilate his claim for refund in the same collection case. <f course0 the 34# *ill ob?ect on the ground of ?urisdiction! (<1ese are t1e argu(ents relie* upon 94 t1e C<A in not allo$ing t1e 1-/4 assess(ents to 9e settles along $it1 t1e 1-/4 'lai( &or re&un* 'iting t1eir earlier resolution in C1e(o><e'1nis'1e 0&g. 2s. CIR pro(ulgate* in August .1, 1--5 (C<A Case ,o. 42.1) (his observation is being highlighted in vie* of the position ta:en by the /) in this particular case covered by this /urvey that1 +(his )ourt *ill not set aside lightly the conclusion reached by the )ourt of (ax $ppeals *hich0 *hich by the very nature of its function0 is dedicated exclusively to the

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consideration of tax problems and has necessarily developed an expertise on the sub?ect0 unless there has been an abuse or improvident exercise of authority!,
ARELLANO BAR REVIEW PROGRAM ARELLANO LAW FOUNDATION CENTER FOR LEGAL EDUCATION AND RESEARC2

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