Tax Doctrines:

Remedies Under NIRC

The Commissioner of the BIR must first grant the request for reinvestigation as a
requirement for the suspension of the statute of limitations. The act of requesting a
reinvestigation alone does not suspend the period. The request should first be
granted, in order to effect suspension. (CIR vs. United Salvage and Towage Phils.
Inc.)
The wordings of the FAN issued by the CIR made it appear that the FAN is actually
the CIRs final decision. It even advised ABC to file an appeal instead of filing a
protest. ABC cannot therefore be faulted for filing an appeal with the CTA instead of
filing a protest with the CIR. The CIR as well as his duly authorized representative
must indicate clearly and unequivocally to the taxpayer whether an action
constitutes a final determination on a disputed assessment. Words must be carefully
chosen in order to avoid any confusion that could adversely affect the rights and
interest of the taxpayer. (Allied Banking Corp. vs CIR)
In case of inaction, Sec. 228 of the Tax Code merely gave the taxpayer an option: first,
he may appeal to the CTA within 30 days from the lapse of the 180-day period; or
second, he may wait until the Commissioner decides on his protest before he
elevates his case. The court believes that the taxpayer was given this option so that in
case his protest is not acted upon within the 180-day period, he may be able to seek
immediate relief and need not wait for an indefinite period of time for the
Commissioner to decide. The 30-day period is mandatory, otherwise assessment
becomes final and executor. (Lascona Land vs. CIR)
The ordinary period of prescription of 5 years within which to assess tax liabilities
under Sec. 331 of the NIRC should be applicable to normal circumstances, but
whenever the government is placed at a disadvantage so as to prevent its lawful
agents from proper assessment of tax liabilities due to false returns, fraudulent
return intended to evade payment of tax or failure to file returns, the period of ten
years provided for in Sec. 332 (a) NIRC, from the time of the discovery of the falsity,
fraud or omission even seems to be inadequate and should be the one enforced.
(Samar-I Electric Cooperative vs. CIR)
It is true that there is a presumption that the tax assessment was duly issued.
However, this presumption is disregarded if the taxpayer denies ever having
received a tax assessment from the Bureau of Internal Revenue. In such cases, it is
incumbent upon the BIR to prove by competent evidence that such notice was
indeed received by the addressee-taxpayer. The issuance of a deficiency tax

assessment, the absence of which renders nugatory any assessment made by the tax
authorities. (CIR vs Metro Star Suprema)
In an action for refund of taxes allegedly erroneously paid, the CTA may determine
whether there are other taxes that should have been paid in lieu of the taxes paid.
Such is not an assessment but a determination of the proper category of tax to be
paid which is merely incidental in determining the propriety of refund. If the
taxpayer is found liable for taxes other than the ones alleged to be erroneously paid,
the amount of taxpayers liability should be computed and deducted from the
refundable amount. (SMI-Ed vs. CIR)
Waiver is infirm because of the lack of the date of acceptance as well as the fact that a
copy thereof was not furnished to KMC. These two are among the requirements
provided for by Section 222 of the National Internal Revenue Code (NIRC) as to a
valid waiver of the SOL. The provisions in Section 222 of NIRC provides for a
detailed procedure that must be strictly followed by the BIR in order that the
taxpayer will have a valid waiver. The BIR cannot now hide behind the doctrine of
estoppel to cover its failure to comply with the law. (CIR vs. Kudos Metal Corp.)
The taxpayer was not able to formally notify the BIR of its change of address. On the
other hand, the BIR continued to transmit its assessment notices to the wrong
address, a practice which, combined with the other circumstances, rendered its
notices invalid. This means both parties were in pari delicto or equally at fault,
giving rise to a situation where a court may refuse to intervene. Nevertheless, the
weight of justice tilted in favor of the taxpayer. (CIR vs. BASF Coating and Inks
Phils., Inc.)
The period to assess and collect deficiency taxes may be extended only upon a
written agreement between the Commissioner and the taxpayer prior to the
expiration of the three-year prescribed period. The BIR cannot claim the benefits of
extending the period when it was the BIRs inaction which is the proximate cause of
the defects of the waiver. A "Waiver of the Defense of Prescription Under the Statute
of Limitations of the National Revenue Code" should not be construed as a waiver of
the right to invoke the defense of prescription. The waiver is just an agreement
between the taxpayer and the BIR to extend the period to date certain, within which
the latter could still assess or collect taxes due. It has been emphasized also that a
waiver is not a unilateral act of the taxpayer but is a bilateral agreement between two
parties to extend the period to a date certain. (CIR vs. Stanley Works Sales, Phils.)
The Court emphasized the rule that the Commissioner of the BIR must first grant the
request for reinvestigation as a requirement for the suspension of the statute of
limitations. The act of requesting a reinvestigation alone does not suspend the
period. The request should first be granted, in order to effect suspension. Moreover,

the Court rejected the BIRs argument that the taxpayers act of elevating its protest
to the Court of Tax Appeals has fortified the continuing interruption of the BIRs
prescriptive period to collect. The Court found the argument flawed at best because
the taxpayer was merely exercising its right to resort to the proper Court and does
not in any way deter the BIRs right to collect taxes from the taxpayer under existing
laws. The Court also elucidated that the statute of limitations on the collection of
taxes was enacted to benefit and protect the taxpayers. (CIR vs. Oilink International
Corp.)
A Motion for Reconsideration of the denial of the administrative protest does not toll
the 30-day period to appeal to the Court of Tax Appeals. On petitioners final
contention that it has a meritorious case in view of the dismissal of the abovementioned criminal case filed against it for violation of the 1997 Internal Revenue
Code, the same fails. For the criminal complaint was instituted not to demand
payment, but to penalize the taxpayer for violation of the Tax Code. (Fishwealth
Canning vs. CIR)
Remedies Under LGC
MIAA is not a GOCC, it is an instrumentality of the government. MIAA is a
government instrumentality vested with corporate powers to perform efficiently its
governmental functions. Article 419 of the Civil Code provides, The Airport Lands
and Buildings of MIAA are property of public dominion and therefore owned by the
State or the Republic of the Philippines. The fact that the MIAA collects terminal fees
and other charges from the public does not remove the character of the Airport
Lands and Buildings as properties for public use. The operation by the government
of a toll way does not change the character of the road as one for public use. (MIAA
vs. CA)
CTA has exclusive jurisdiction to review decisions, orders or resolutions of the RTCs
in local tax cases originally decided or resolved by the RTCs in the exercise of their
original or appellate jurisdiction. A franchise tax is a tax on the privilege of
transacting business in the state and exercising corporate franchises granted by the
state. It is not levied simply for existing as a corporation upon its property or on its
income, but on its exercise of the rights or privileges granted to it by the
government. To be liable for local franchise tax: 1) one must have a franchise in the
sense of a secondary or special franchise; and 2) it must exercise its rights or
privileges under this franchise within the territory of the pertinent LGU. Being in the
nature of an excise tax, the situs of taxation is the place where the privilege is
exercised. CASURECO is liable because its exemption was only until May 4, 1992.
(City of Iriga vs. Camsur III Electric Corp.)

Congress did not intend it to operate as a blanket tax exemption to all

telecommunications entities. Applying the rule of strict construction of laws granting
tax exemptions and the rule that doubts should be resolved in favor of municipal
corporations in interpreting statutory provisions on municipal taxing powers, we
hold that section 23 of R.A. No. 7925 cannot be considered as having amended
petitioners franchise so as to entitle it to exemption from the imposition of local
franchise taxes. The tax exemption must be expressed in the statute in clear language
that leaves no doubt of the intention of the legislature to grant such exemption. And,
even if it is granted, the exemption must be interpreted in strictissimi juris against
the taxpayer and liberally in favor of the taxing authority. Mutatis mutandis also
applies to this case: When exemption is claimed, it must be shown indubitably to
exist. (PLDT vs. Province of Laguna)
The principle that when a company is taxed on its main business, it is no longer
taxable for engaging in an activity that is but a part of incidental to, and necessary to
such main business, applies to business taxes and not to taxes such as the sand and
gravel tax imposed by the provincial government. The reasoning was that the
incidental activity could not be treated as a business separate and distinct from the
main business of the taxpayer. The sand and gravel tax is an excise tax imposed on
the privilege of extracting sand and gravel. It is settled that provincial governments
can levy excise taxes on quarry resources independently from national government.
(Lepanto Consolidated vs. Ambanloc)
The Local Tax Code does not provide for professional basketball games but rather in
PD 1959. It is clear that the "proprietor, lessee or operator of professional basketball
games" is required to pay an amusement tax of 15% of their gross receipts to the BIR,
which payment is a national tax. The definition of gross receipts is broad enough to
embrace the cession of advertising and streamer spaces as the same embraces all the
receipts of the proprietor, lessee or operator of the amusement place. The law being
clear, there is no need for an extended interpretation. (PBA vs. CA)
The Local Government Code does not specifically prohibit an injunction enjoining
the collection of taxes. This is different in the case of national taxes where the Tax
Code expressly provides that no court shall have the authority to grant an injunction
to restrain the collection on national internal revenue tax, fee or charge with the sole
exception of when the CTA finds that the collection thereof may jeopardize the
interest of the government and/or the taxpayer. Requirements for injunction: clear
right to be protected and urgent necessity to prevent serious damage. (Angeles City
vs. Angeles City Electric Coop.)
The counting of the one (1) year redemption period of property sold at public
auction for its tax delinquency should be counted from the date of annotation of the
certificate of sale in the proper Register of Deeds. (City Mayor vs. RCBC)

Section 187 authorizes the Secretary of Justice to review only the constitutionality or
legality of the tax ordinance and, if warranted, to revoke it on either or both of these
grounds. When he alters or modifies or sets aside a tax ordinance, he is not also
permitted to substitute his own judgment for the judgment of the local government
that enacted the measure. (Act not of control but merely supervision). As regards the
issue of non-compliance with the prescribed procedure in the enactment of the
Manila Revenue Code, the Court has carefully examined every one of the exhibits
and agree with the trial court that the procedural requirements have indeed been
observed. Notices of the public hearings were sent to interested parties. The minutes
of the hearings are found in the exhibits and such show that the proposed
ordinances were published. (Drilon vs. Lim)
For a petition for Mandamus to lie, there must be no other plain, speedy and
adequate remedy in the ordinary course of law. In this case, the said condition was
not satisfied. A taxpayer who disagrees with a tax assessment made by a local
treasurer may file a written protest as prescribed by Sec. 195 of the LGC: The
taxpayer shall have thirty (30) days from the receipt of the denial of the protest or
from the lapse of the sixty-day (60) period prescribed herein within which to appeal
with the court of competent jurisdiction, otherwise the assessment becomes
conclusive and unappealable. Mandamus lies only to compel an officer to perform a
ministerial duty (one which is so clear and specific as to leave no room for the
exercise of discretion in its performance) but not a discretionary function (one which
by its nature requires the exercise of judgment). (San Juan vs. Castro)
The rule is settled that, as a special civil action, certiorari is available only if the
following essential requisites concur: (1) it must be directed against a tribunal,
board, or officer exercising judicial or quasi-judicial functions; (2) the tribunal, board,
or officer must have acted without or in excess of jurisdiction or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and, (3) there is no appeal nor
any plain, speedy, and adequate remedy in the ordinary course of law. Judicial
function entails the power to determine what the law is and what the legal rights of
the parties are, and then undertakes to determine these questions and adjudicate
upon the rights of the parties. Quasi-judicial function, on the other hand, refers to
the action and discretion of public administrative officers or bodies, which are
required to investigate facts or ascertain the existence of facts, hold hearings, and
draw conclusions from them as a basis for their official action and to exercise
discretion of a judicial nature. Narrow in scope and inflexible in character, certiorari
is an extraordinary remedy designed for the correction of errors of jurisdiction and
not errors of judgment. It is likewise considered mutually exclusive with appeal like
the one provided by Article 195 of the Local Government Code for a local treasurers
denial of or inaction on a protest. (Team Pacific vs. Daza)

Sec. 143 of the Code specifically enumerates several types of business on which
municipalities and cities may impose taxes. However, the Corporation does not fall
under such law. Moreover, nowhere in the Makati Revenue code that would serve as
the legal authority for the collection of business taxes from condominiums in Makati.
We can elicit it from the Condominium Act that a condominium corporation is
precluded by statute from engaging in corporate activities other than the holding of
the common areas, the administration of the condominium project, and other acts
necessary, incidental or convenient to the accomplishment of such purposes. Even
though the Corporation is empowered to levy assessments or dues from the unit
owners, these amounts collected are not intended for the incurrence of profit by the
Corporation or its members, but to shoulder the multitude of necessary expenses
that arise from the maintenance of the Condominium Project. (Yamane vs. BA
Lepanto)
Other Doctrines
Taxpayers should not be prejudiced by an erroneous interpretation by the
Commissioner, particularly on a difficult question of law. The abandonment of the
Atlas doctrine is a proof that the recokning of the prescriptive periods for input VAT
tax refund or credit is a difficult question of law. Absent any fraud, bad faith or
misrepresentation, the reversal by this Court of a genereal interpretative rule issued
by the Commissioner, like the reversal of specific BIR ruling under Section 246,
should also apply prospectively. (Aichi Doctrine) 120+30 day periods is mandatory
and jurisdictional before a judicial claim can be filed. (CIR vs. San Roque Power
Corporation)
In a recent decision by the Supreme Court, the court held that a taxpayer may not
file a judicial claim for refund/tax credit with the CTA without compliance with the
120-day mandatory period given to the Commissioner of Internal Revenue (CIR) to
decide the claim for refund/tax credit or until BIR issued its decision denying in full
or in part the claim for refund/tax credit. Exception to the above rule is for those
claims for refund/tax credit filed prior to the SC decision on the case CIR v. Aichi
Forging Company of Asia, Inc. dated October 6, 2010 which relied on the BIR ruling
DA-489-03 which provided that judicial claim for refund/tax credit with the CTA
notwithstanding the 120-day mandatory period had not yet lapsed. In the same
decision, it was cleared that the judicial claim for refund/tax credit need not
necessarily be within the 2-year prescriptive period. The 2-year prescriptive period is
only applicable to administrative claim for refund/tax credit. (CIR vs. Team Sual
Corp.)
Even if the purchaser effectively pays the value of the tax, the owner or importer is
still regarded as the statutory taxpayers under the law. The statutory taxpayer who
is entitled to claim a tax refund based thereon and not the party who merely bears its

economic burden. HOWEVER, the rule does not apply to instances where the law
clearly grants the party to which the economic burden of the tax is shifted an
exemption from both direct and indirect taxes. In which case, the latter must be
allowed to claim a tax refund even if it is not the statutory taxpayer. (CIR vs. PAL)
In case the corporation is entitled to a refund of the excess estimated quarterly
income taxes paid, the refundable amount shown on its final adjustment return may
be credited against the estimated quarterly income tax liabilities for the taxable
quarters of the succeeding taxable years. Once the option to carry-over and apply the
excess quarterly income tax against income tax due for the taxable quarters of the
succeeding taxable years has been made, such option shall be considered irrevocable
for that taxable period and no application for tax refund or issuance of a tax credit
certificate shall be allowed therefore. The options are alternative. (CIR vs. PL
Management International)
Tax refunds are based on the general premise that taxes have either been
erroneously or excessively paid. Though the Tax Code recognizes the right of
taxpayers to request the return of such excess/erroneous payments from the
government, they must do so within a prescribed period. Further, "a taxpayer must
prove not only his entitlement to a refund, but also his compliance with the
procedural due process as non-observance of the prescriptive periods within which
to file the administrative and the judicial claims would result in the denial of his
claim." (CIR vs. Manila Electric Company)
It is incumbent upon the taxpayer to reflect in his return the income upon which any
creditable tax is required to be withheld at the source. The Supreme Court added
that the fact that the Commissioner failed to present any evidence or to refute the
evidence presented by the Bank does not automatically entitle the Bank to a tax
refund. It is not the duty of the government to disprove a taxpayers claim for
refund. Rather, the burden of establishing the factual basis of a claim for a refund
rests on the taxpayer. And while the petitioner has the power to make an
examination of the returns and to assess the correct amount of tax, his failure to
exercise such powers does not create a presumption in favor of the correctness of the
returns. The taxpayer must still present substantial evidence to prove his claim for
refund. Since tax refunds partake of the nature of tax exemptions, which are
construed strictissimi juris against the taxpayer, evidence in support of a claim must
likewise be strictissimi scrutinized and duly proven. (CIR vs. Far East Bank)
Section 76 (on irrevocability of option to carry-over excess income tax credit) of the
1997 National Internal Revenue Code (1997 NIRC) and its companion provisions
should be applied following the general rule on the prospective application of laws
such that they operate to govern the conduct of corporate taxpayers the moment the
1997 NIRC took effect on January 1, 1998. (CIR vs. McGeorge Food Industries)

The approval of the court, sitting in probate or as a settlement tribunal over the
deceaseds estate, is not a mandatory requirement in the collection of estate taxes.
There is nothing in the Tax Code, and in the pertinent remedial laws that implies the
necessity of the probate or estate settlement court's approval of the state's claim for
estate taxes, before the same can be enforced and collected. (Marcos vs. CA)
What is involved here is not the collection of taxes where the assessment of the
Commissioner of Internal Revenue may be reviewed by the Court of Tax Appeals,
but a criminal prosecution for violations of the National Internal Revenue Code
which is within the cognizance of courts of first instance. While there can be no civil
action to enforce collection before the assessment procedures provided in the Code
have been followed, there is no requirement for the precise computation and
assessment of the tax before there can be a criminal prosecution under the Code. An
assessment of a deficiency is not necessary to a criminal prosecution for wilful
attempt to defeat and evade the income tax. (Ungab vs. Cusi)
In plain words, for criminal prosecution to proceed before assessment, there must be
a prima facie showing of a wilful attempt to evade taxes. There was a wilful attempt
to evade tax in Ungab because of the taxpayer's failure to declare in his income tax
return "his income derived from banana sapplings." In the mind of the trial court
and the Court of Appeals, Fortune's situation is quite apart factually since the
registered wholesale price of the goods, approved by the BIR, is presumed to be the
actual wholesale price, therefore, not fraudulent and unless and until the BIR has
made a final determination of what is supposed to be the correct taxes, the taxpayer
should not be placed in the crucible of criminal prosecution. (CIR vs. CA)
In several cases, we have already ruled that income taxes remitted partially on a
periodic or quarterly basis should be credited or refunded to the taxpayer on the
basis of the taxpayers final adjusted returns, not on such periodic or quarterly basis.
When applied to taxpayers filing income tax returns on a quarterly basis, the date of
payment mentioned in Sec. 230 must be deemed to be qualified by Sec. 68 and 69 of
the present. Tax Code. It may be observed that although quarterly taxes due are
required to be paid within 60 days from the close of each quarter, the fact that the
amount shall be deducted from the tax due for the succeeding quarter shows that
until a final adjustment return shall have been filed, the taxes paid in the preceding
quarters are merely partial taxes due from a corporation. (Citibank vs. CA)
In the present case, the return attached to the companys motion for reconsideration
clearly showed that it suffered a net loss in 1990. Contrary to the holding of the CA
and CTA, BPI could not have applied the amount as a tax credit. When it is
undisputed that a taxpayer is entitled to a refund, the State should not invoke
technicalities to keep money not belonging to it. (BPI Family Savings Bank vs. CA)

It was in the year 2000 that petitioner derived excess tax credits and exercised the
irrevocable option to carry them over as tax credits for the next taxable year. The
excess credits will only be applied against income tax due for the taxable quarters
of the succeeding taxable years." Section 76 of the present tax c ode formulates an
irrevocability rule which stresses and fortifies the nature of the remedies or options
as alternative, not cumulative. It also provides that the excess tax credits may be
carried over and credited against the estimated quarterly income tax liabilities for
the taxable quarters of the succeeding taxable years until fully utilized. Nevertheless,
the amount will not be forfeited in favor of the government but will remain in the
taxpayers account. (Systra vs. CIR)
It is true that the counting of the two-year prescriptive period shall begin to run
from the date of payment. But in the case of corporations which are paying quarterly
taxes, there is a qualification to be made. The prescriptive period for taxpayers
paying quarterly shall commence from the time the refund is ascertained or from the
time a final adjustment return has been accomplished. The rationale behind this is
that, a taxpayer paying quarterly, like Philamlife, at the time it paid the quarterly
taxes is not expected to ascertain if a tax refund is feasible. It could not have known
in May and August 1983 that at the end of the year it will be incurring losses. (CIR
vs. Philam Life)
The assessment of the tax is deemed made and the three-year period for collection of
the assessed tax begins to run on the date the assessment notice had been released,
mailed or sent by the BIR to the taxpayer. Thus, failure of the BIR to file a warrant of
distraint or serve a levy on taxpayer's properties nor file collection case within the
three-year period is fatal. Also, the attempt of the BIR to collect the tax through its
Answer with a demand for the taxpayer to pay the assessed DST in the CTA is not
deemed compliance with the Tax Code. (China Banking Corp. vs. CIR)
There is a distinction between a request for reconsideration and a request for
reinvestigation. A reinvestigation which entails the reception and evaluation of
additional evidence will take more time than a reconsideration of a tax assessment,
which will be limited to the evidence already at hand; this justifies why the
reinvestigation can suspend the running of the statute of limitations on collection of
the assessed tax, while the reconsideration cannot. Hence, the period for BIR to
collect the deficiency DST already prescribed as the protest letter of BPI was a
request for reconsideration, which did not suspend the running of the prescriptive
period to collect. (BPI vs. CIR)
The appellate jurisdiction of the CTA is not limited to cases which involve decisions
of the CIR on matters relating to assessments or refunds. The CTA law clearly
bestows jurisdiction to the CTA even on other matters arising under the National
Internal Revenue Code. Thus, the issue of whether the right of the CIR to collect has

prescribed, collection being one of the duties of the BIR, is considered covered by the
term other matters. The fact that assessment has become final for failure to protest
only means that the validity or correctness of the assessment may no longer be
questioned on appeal. However, this issue is entirely distinct from the issue of
whether the right to collect has in fact prescribed. The Court ruled that the right to
collect has indeed prescribed since there was no proof that the request for
reinvestigation was in fact granted/acted upon by the CIR. Thus, the period to collect
was never suspended. (CIR vs. Hambrecht & Quist)
In this case, the Court ruled that tax evasion is deemed complete when the violator
has knowingly and willfully filed a fraudulent return with intent to evade and defeat
a part or all of the tax. Corollarily, an assessment of the tax deficiency is not required
in a criminal prosecution for tax evasion. However, in Commissioner of Internal
Revenue v. Court of Appeals, we clarified that although a deficiency assessment is
not necessary, the fact that a tax is due must first be proved before one can be
prosecuted for tax evasion. (BIR vs. CA)