MITSUBISHI CORPORATION-MANILA BRANCH, petitioner, vs.

COMMISSIONER OF INTERNAL
REVENUE, respondent.
G.R. No. 175772.
June 5, 2017.

Facts:
Government of Japan and Philippines executed an Exchange of Notes (EN) for the implementation
of Calaca II Coal-Fired Thermal Power Plant Project. Under the EN, the Philippines, by itself or its
executing agencies, undertook to assume all taxes imposed by the Philippines on Japanese
contractors engaged in the project.

Thus, Napocor (Philippines executing agency) entered into contract with Mitsubishi Corporation
(Petitioners head office in Japan) for the execution of the project. Petitioner, however, erroneously
filed returns for income tax and branch profit remittance tax in 1998. Thus, on 2000, Petitioner
filed with the CIR an administrative claim for the refund thereof.

To suspend the running of the 2-year prescriptive period to file judicial claim for refund, Petitioner
then filed a petition for review with the CTA.

Issues:
1. WON the Petitioner is entitled to refund
2. Which Government agency should the refund be claimed

Ruling:
1. Yes. It is fairly apparent that the subject taxes were erroneously collected from petitioner,
considering that the obligation to pay the same had already been assumed by the Philippine
Government by virtue of its Exchange of Notes with the Japanese Government. Case law
explains that an exchange of notes is considered as an executive agreement, which is
binding on the State even without Senate concurrence.

Paragraph 5 (2) of the Exchange of Notes provides for a tax assumption provision that the
Government of the Republic of the Philippines will, by itself or through its executing
agencies or instrumentalities, assume all fiscal levies or taxes imposed in the Republic of the
Philippines on Japanese firms and nationals operating as suppliers, contractors or
consultants on and/or in connection with any income that may accrue from the supply of
products of Japan and services of Japanese nationals to be provided under the Loan

2. BIR. NIRC vests upon the CIR, being the head of the BIR, the authority to credit or refund
taxes which are erroneously collected by the government. This specific statutory mandate
cannot be overridden by averse interpretations made through mere administrative
issuances, such as RMC No. 42-99, which as argued by the CIR shifts to the executing
agencies (particularly, NPC in this case) the power to refund the subject taxes.

A revenue memorandum circular is an administrative ruling issued by the CIR to interpret

tax laws. It is widely accepted that an interpretation by the executive officers, whose duty is
to enforce the law, is entitled to great respect from the courts. However, such interpretation
is not conclusive and will be disregarded if judicially found to be incorrect. Verily, courts
will not tolerate administrative issuances that override, instead of remaining consistent and
in harmony with, the law they seek to implement, s in this case. Thus, Item B (3) of RMC No.
42-99, an administrative issuance directing petitioner to claim the refund from NPC, cannot
 prevail over Sections 204 and 229 of the NIRC, which provide that claims for refund of
erroneously collected taxes must be filed with the CIR.

MARUBENI PHILIPPINES CORPORATION, petitioner, vs. COMMISSIONER OF INTERNAL

REVENUE, respondent.
G.R. No. 198485
June 5, 2017

Facts:
Petitioner is a domestic corporation registered as VAT taxpayer. On April 25, 2000, Marubeni filed
its Quarterly VAT Return for the 1st quarter of Calendar Year (CY) 2000. In March 27, 2002, it filed
with the BIR a written claim for a refund and/or the issuance of a TCC (later amended on April 25,
2002). On the same date of amendment, April 25, 2002, Marubeni filed a petition for review before
the CTA claiming a refund and/or issuance of a TCC.

Issue:
1. WON the judicial claim for refund has been timely
2. WON the 120+30 day period is waivable

Ruling:
1. No. The judicial claim for refund is premature. A claim for tax refund or credit, like a claim
for tax exemption, is construed strictly against the taxpayer. One of the conditions for a
judicial claim of refund or credit under the VAT System is compliance with the 120+30 day
mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods
is necessary for such a claim to prosper, whether before, during, or after the effectivity of
the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on
10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again
reinstated the 120+30 day periods as mandatory and jurisdictional.

Marubeni's judicial claim for refund was premature and the CTA was devoid of any
jurisdiction over the petition for review because of Marubeni's failure to strictly comply
with the 120+30 day periods required by Section 112 (C) of the 1997 Tax Code. To recall,
Marubeni filed its administrative claim on March 27, 2002. The CIR had 120 days from that
date within which to rule on that administrative claim. But within 29 days from March 27,
2002, or on April 25, 2002, Marubeni already filed its petition for review with the CTA.

MINDANAO SHOPPING DESTINATION CORPORATION, ACE HARDWARE PHILS., INC.,

INTERNATIONAL TOYWORLD, INC., STAR APPLIANCE CENTER, INC., SURPLUS MARKETING
CORPORATION, WATSONS PERSONAL CARE STORES (PHILS.), INC., and SUPERVALUE, INC.,
petitioners, vs. HON. RODRIGO R. DUTERTE, in his capacity as Mayor of Davao City, HON.
SARA DUTERTE, Vice-Mayor of Davao City, in her capacity as Presiding Officer of the
Sangguniang Panlungsod, and THE SANGGUNIANG PANLUNGSOD (CITY COUNCIL) NG DAVAO,
G.R. No. 211093.
June 6, 2017

Facts:
Respondent enacted the assailed City Ordinance (An Ordinance Approving the 2005 Revenue Code
of the City of Davao, as Amended). Petitioner alleges that the rate they would pay increased from
50% of 1% of the gross sales /receipts to 1.5%, or an increase of 200% from the previous rate.
Thus, it assails the constitutionality and legality of the said ordinance for being unjust, excessive,
oppressive, confiscatory and contrary to the 1987 Constitution and the provisions of the LGC.

Issue:
WON the ordinance is invalid.

Ruling:
No. Section 191 of the LGC presupposes that the following requirements are present for it to apply,
to wit: (i) there is a tax ordinance that already imposes a tax in accordance with the provisions of
the LGC; and (ii) there is a second tax ordinance that made adjustment on the tax rate fixed by the
first tax ordinance. In the instant case, both elements are not present. The old tax ordinance was
enacted before the LGC came into law. Thus, the assailed new ordinance was actually the first to
impose the tax on retailers in accordance with the provisions of the LGC.

Moreover, Section 191 of the LGC will not apply because with the assailed tax ordinance, there is no
outright or unilateral increase of tax to speak of. The resulting increase in the tax rate was merely
incidental. When the City enacted the assailed ordinance, it merely intended to rectify the glaring
error in the classification of wholesaler and retailer in the old ordinance.

An ordinance based on reasonable classification does not violate the constitutional guaranty of the
equal protection of the law. The requirements for a valid and reasonable classification are: (1) it
must rest on substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must
not be limited to existing conditions only; and (4) it must apply equally to all members of the same
class. For the purpose of rectifying the erroneous classification of wholesaler and retailer in the old
ordinance in order to conform to the classification and the tax rates as imposed by the LGC is
neither invalid nor unreasonable. The differentiation of wholesaler and retailer conforms to the
practical dictates of justice and equity and is not discriminatory within the meaning of the
Constitution. It is inherent in the power to tax that a State is free to select the subjects of taxation.
Inequities which result from a singling out of one particular class for taxation or exemption infringe
no constitutional limitation

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND

HIGHWAYS (DPWH), petitioner, vs. SPOUSES SENANDO F. SALVADOR and JOSEFINA R.
SALVADOR, respondents.
G.R. No. 205428.
June 7, 2017.

Facts:
Petitioner filed a complaint for expropriation of the Respondents registered land. The RTC ruled in
favor of the Petitioner but ordered the payment of CGT and other taxes, as part of consequential
damages. The Petitioner moved for partial reconsideration specifically on the issue of payment of
CGTs.

Issue:
WON CGTs on expropriated property can be considered as consequential damages
Ruling:
No. It is settled that the transfer of property through expropriation proceedings is a sale or
exchange within the meaning of Sections 24 (D) and 56 (A) (3) of the National Internal Revenue
Code, and profit from the transaction constitutes capital gain. Since capital gains tax is a tax on
passive income, it is the seller, or respondents in this case, who are liable to shoulder the tax.

In fact, the Bureau of Internal Revenue (BIR), in BIR Ruling No. 476-2013 dated December 18, 2013,
has constituted the DPWH as a withholding agent tasked to withhold the 6% final withholding tax
in the expropriation of real property for infrastructure projects. Thus, as far as the government is
concerned, the capital gains tax in expropriation proceedings remains a liability of the seller, as it is
a tax on the seller's gain from the sale of real property.

Besides, as previously explained, consequential damages are only awarded if as a result of the
expropriation, the remaining property of the owner suffers from an impairment or decrease in
value. In this case, no evidence was submitted to prove any impairment or decrease in value of the
subject property as a result of the expropriation. More significantly, given that the payment of
capital gains tax on the transfer of the subject property has no effect on the increase or decrease in
value of the remaining property, it can hardly be considered as consequential damages that may be
awarded to respondents.

PILIPINAS SHELL PETROLEUM CORPORATION, petitioner, vs. COMMISSIONER OF CUSTOMS,

respondent.
G.R. No. 195876.
June 19, 2017

Doctrines:

WON Petitioner is guilty of fraud.

No. Documents which may have been identified and marked as exhibits during pre-trial or trial but
which were not formally offered in evidence cannot in any manner be treated as evidence. The
mere fact that a particular document is identified and marked as an exhibit does not mean that it
has already been offered as part of the evidence. It must be emphasized that any evidence which a
party desires to submit for the consideration of the court must formally be offered by the party;
otherwise, it is excluded and rejected.

No scintilla of proof was ever offered in evidence by respondent Commissioner of Customs to

substantiate the claim that Pilipinas Shell acted in a fraudulent manner. At best, the allegation of
fraud on the part of Pilipinas Shell is mere conjecture and purely speculative. Settled is the rule that
a court cannot rely on speculations, conjectures or guesswork, but must depend upon competent
proof and on the basis of the best evidence obtainable under the circumstances. We emphasize that
litigations cannot be properly resolved by suppositions, deductions, or even presumptions, with no
basis in evidence, for the truth must have to be determined by the hard rules of admissibility and
proof.

Effect of Fraud on Period on Prescription

Section 1603. Finality of Liquidation. When articles have been entered and passed free of duty
or final adjustments of duties made, with subsequent delivery, such entry and passage free of duty
or settlements of duties will, after the expiration of one (1) year, from the date of the final payment
of duties, in the absence of fraud or protest or compliance audit pursuant to the provisions of this
Code, be final and conclusive upon all parties, unless the liquidation of the import entry was merely
tentative.

Pursuant to the above-quoted provision, the attendance of fraud would remove the case from the
ambit of the statute of limitations, and would consequently allow the government to exercise its
power to assess and collect duties even beyond the one-year prescriptive period, rendering it
virtually imprescriptible.

WON the shipments were abandoned

No. As expressly provided in Sec. 1801 (b) of the TCC, the failure to file the IEIRD within 30 days
from entry is not the only requirement for the doctrine of ipso facto abandonment to apply. The law
categorically requires that this be preceded by due notice demanding compliance.

To recapitulate, the notice in this case was only served upon petitioner four (4) years. The Court
cannot rule that due notice was given, for when public respondent served the notice demanding
payment from petitioner, it no longer had the right to do so. By that time, the prescriptive period for
liquidation had already elapsed, and the assessment against petitioner's shipment had already
become final and conclusive. Consequently, Sec. 1801 (b) failed to operate in favor of the
government for failure to demand payment for the discrepancy prior to the finality of the
liquidation. The government cannot deem the imported articles as abandoned without due notice.