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CIR vs. St.

Luke’s Medical Center

GR No. 203514, Feb. 13, 2017

On December 14, 2007, respondent St. Luke’s Medical Center, Inc. (SLMC) received from the Large
Taxpayers Service-Documents Processing and Quality Assurance Division of the Bureau of Internal
Revenue (BIR) Audit Results/Assessment Notice Nos. QA-07-000096 and QA-07-000097, assessing
respondent SLMC deficiency income tax under Section 27(B) of the 1997 National Internal Revenue
Code (NIRC), as amended, for taxable year 2005 in the amount of ₱78,617,434.54 and for taxable
year 2006 in the amount of ₱57,119,867.33.

On January 14, 2008, SLMC filed with petitioner Commissioner of Internal Revenue (CIR) an
administrative protest assailing the assessments. SLMC claimed that as a non-stock, non-profit
charitable and social welfare organization under Section 30(E) and (G) of the 1997 NIRC, as
amended, it is exempt from paying income tax.

On April 25, 2008, SLMC received petitioner CIR's Final Decision on the Disputed Assessment dated
April 9, 2008 increasing the deficiency income for the taxable year 2005 tax to ₱82,419,522.21 and
for the taxable year 2006 to ₱60,259,885.94, computed as follows:

Aggrieved, SLMC elevated the matter to the CTA via a Petition for Review, docketed as CTA Case No.

On August 26, 2010, the CTA Division rendered a Decision finding SLMC not liable for deficiency
income tax under Section 27(B) of the 1997 NIRC, as amended, since it is exempt from paying
income tax under Section 30(E) and (G) of the same Code.

CIR moved for reconsideration but the CTA Division denied the same in its December 28, 2010
Resolution. This prompted CIR to file a Petition for Review before the CTA En Banc.

On May 9, 2012, the CTA En Banc affirmed the cancellation and setting aside of the Audit
Results/Assessment Notices issued against SLMC. It sustained the findings of the CTA Division that
SLMC complies with all the requisites under Section 30(E) and (G) of the 1997 NIRC and thus, entitled
to the tax exemption provided therein. On September 17, 2012, the CTA En Banc denied CIR's
Motion for Reconsideration.

ISSUE: WON SLMC is liable for payment of income tax?

RULING: Yes, insofar as its revenues from paying patients are concerned. In CIR vs. St. Luke’s Medical
Center, Inc. (GR No. 195909 and 195960), the Court ruled that Sec. 27(B) of the NIRC does not
remove the tax exemption of proprietary non-profit hospitals under Sec. 30(E) and (G). Sec. 27(B) on
one hand, and Section 30(E) and (G) on the other hand, can be construed together without the
removal of such tax exemption. The effect of the introduction of Section 27(B) is to subject the
taxable income of two specific institutions, namely, proprietary non-profit educational institutions
and proprietary non-profit hospitals, among the institutions covered by Section 30, to the 10%
preferential rate under Section 27(B) instead of the ordinary 30% corporate rate under the last
paragraph of Section 30 in relation to Section 27(A)(l).

Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1) proprietary non-
profit educational institutions and (2) proprietary non-profit hospitals. The only qualifications for
hospitals are that they must be proprietary and non-profit. 'Proprietary' means private, following the
definition of a 'proprietary educational institution' as 'any private school maintained and
administered by private individuals or groups' with a government permit. 'Non-profit' means no net
income or asset accrues to or benefits any member or specific person, with all the net income or
asset devoted to the institution's purposes and all its activities conducted not for profit.

'Non-profit' does not necessarily mean 'charitable.' In Collector of Internal Revenue v. Club Filipino,
Inc. de Cebu, this Court considered as non-profit a sports club organized for recreation and
entertainment of its stockholders and members. The club was primarily funded by membership fees
and dues. If it had profits, they were used for overhead expenses and improving its golf course. The
club was non-profit because of its purpose and there was no evidence that it was engaged in a
profit-making enterprise.

The Court defined 'charity' in Lung Center of the Philippines v. Quezon City as 'a gift, to be applied
consistently with existing laws, for the benefit of an indefinite number of persons, either by bringing
their minds and hearts under the influence of education or religion, by assisting them to establish
themselves in life or [by] otherwise lessening the burden of government.' A nonprofit club for the
benefit of its members fails this test. An organization may be considered as non-profit if it does not
distribute any part of its income to stockholders or members. However, despite its being a tax
exempt institution, any income such institution earns from activities conducted for profit is taxable,
as expressly provided in the last paragraph of Section 30.

To be a charitable institution, however, an organization must meet the substantive test of charity
in Lung Center. The issue in Lung Center concerns exemption from real property tax and not income
tax. However, it provides for the test of charity in our jurisdiction. Charity is essentially a gift to an
indefinite number of persons which lessens the burden of government. In other words, charitable
institutions provide for free goods and services to the public which would otherwise fall on the
shoulders of government. Thus, as a matter of efficiency, the government forgoes taxes which
should have been spent to address public needs, because certain private entities already assume a
part of the burden. This is the rationale for the tax exemption of charitable institutions. The loss of
taxes by the government is compensated by its relief from doing public works which would have
been funded by appropriations from the Treasury.

Charitable institutions, however, are not ipso facto entitled to a tax exemption. The requirements for
a tax exemption are specified by the law granting it. The power of Congress to tax implies the power
to exempt from tax. Congress can create tax exemptions, subject to the constitutional provision that
'[n]o law granting any tax exemption shall be passed without the concurrence of a majority of all the
Members of Congress.' The requirements for a tax exemption are strictly construed against the
taxpayer because an exemption restricts the collection of taxes necessary for the existence of the

As a general principle, a charitable institution does not lose its character as such and its exemption
from taxes simply because it derives income from paying patients, whether outpatient, or confined
in the hospital, or receives subsidies from the government, so long as the money received is devoted
or used altogether to the charitable object which it is intended to achieve; and no money inures to
the private benefit of the persons managing or operating the institution.

For real property taxes, the incidental generation of income is permissible because the test of
exemption is the use of the property. The Constitution provides that '[c]haritable institutions,
churches and personages or convents appurtenant thereto, mosques, non-profit cemeteries, and all
lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable,
or educational purposes shall be exempt from taxation.' The test of exemption is not strictly a
requirement on the intrinsic nature or character of the institution. The test requires that the
institution use property in a certain way, i.e., for a charitable purpose. Thus, the Court held that the
Lung Center of the Philippines did not lose its charitable character when it used a portion of its lot
for commercial purposes. The effect of failing to meet the use requirement is simply to remove from
the tax exemption that portion of the property not devoted to charity.

The Constitution exempts charitable institutions only from real property taxes. In the NIRC, Congress
decided to extend the exemption to income taxes. However, the way Congress crafted Section 30(E)
of the NIRC is materially different from Section 28(3), Article VI of the Constitution. Section 30(E) of
the NIRC defines the corporation or association that is exempt from income tax. On the other hand,
Section 28(3), Article VI of the Constitution does not define a charitable institution, but requires that
the institution 'actually, directly and exclusively' use the property for a charitable purpose.

Section 30(E) of the NIRC provides that a charitable institution must be:

(1) A non-stock corporation or association;

(2) Organized exclusively for charitable purposes;
(3) Operated exclusively for charitable purposes; and
(4) No part of its net income or asset shall belong to or inure to the benefit of any member,
organizer, officer or any specific person.

Thus, both the organization and operations of the charitable institution must be devoted
'exclusively' for charitable purposes. The organization of the institution refers to its corporate form,
as shown by its articles of incorporation, by-laws and other constitutive documents. Section 30(E) of
the NIRC specifically requires that the corporation or association be non-stock, which is defined by
the Corporation Code as 'one where no part of its income is distributable as dividends to its
members, trustees, or officers' and that any profit 'obtain[ed] as an incident to its operations shall,
whenever necessary or proper, be used for the furtherance of the purpose or purposes for which the
corporation was organized.' However, under Lung Center, any profit by a charitable institution must
not only be plowed back 'whenever necessary or proper,' but must be 'devoted or used altogether to
the charitable object which it is intended to achieve.'

The operations of the charitable institution generally refer to its regular activities. Section 30(E) of
the NIRC requires that these operations be exclusive to charity. There is also a specific requirement
that 'no part of [the] net income or asset shall belong to or inure to the benefit of any member,
organizer, officer or any specific person.' The use of lands, buildings and improvements of the
institution is but a part of its operations.

There is no dispute that St. Luke's is organized as a non-stock and non-profit charitable institution.
However, this does not automatically exempt St. Luke's from paying taxes. This only refers to the
organization of St. Luke's. Even if St. Luke's meets the test of charity, a charitable institution is
not ipso facto tax exempt. To be exempt from real property taxes, Section 28(3), Article VI of the
Constitution requires that a charitable institution use the property 'actually, directly and exclusively'
for charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that a
charitable institution must be 'organized and operated exclusively' for charitable purposes. Likewise,
to be exempt from income taxes, Section 30(G) of the NIRC requires that the institution be 'operated
exclusively' for social welfare.

The last paragraph of Section 30 provides that if a tax exempt charitable institution conducts 'any'
activity for profit, such activity is not tax exempt even as its not-for-profit activities remain tax
exempt. This paragraph qualifies the requirements in Section 30(E) that the '[n]on-stock corporation
or association [must be] organized and operated exclusively for . . . charitable . . . purposes . . . . ' It
likewise qualifies the requirement in Section 30(G) that the civic organization must be 'operated
exclusively' for the promotion of social welfare.

Thus, even if the charitable institution must be 'organized and operated exclusively' for charitable
purposes, it is nevertheless allowed to engage in 'activities conducted for profit' without losing its
tax exempt status for its not-for-profit activities. The only consequence is that the 'income of
whatever kind and character' of a charitable institution 'from any of its activities conducted for
profit, regardless of the disposition made of such income, shall be subject to tax.' Prior to the
introduction of Section 27(B), the tax rate on such income from for-profit activities was the ordinary
corporate rate under Section 27(A). With the introduction of Section 27(B), the tax rate is now 10%.
The Court finds that St. Luke's is a corporation that is not 'operated exclusively' for charitable or
social welfare purposes insofar as its revenues from paying patients are concerned. This ruling is
based not only on a strict interpretation of a provision granting tax exemption, but also on the clear
and plain text of Section 30(E) and (G). Section 30(E) and (G) of the NIRC requires that an institution
be 'operated exclusively' for charitable or social welfare purposes to be completely exempt from
income tax. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns
income from its for-profit activities. Such income from for-profit activities, under the last paragraph
of Section 30, is merely subject to income tax, previously at the ordinary corporate rate but now at
the preferential 10% rate pursuant to Section 27(B).
Edison (Bataan) Cogeneration Corporation vs. CIR
GR No. 201665, Aug. 30, 2017

FACTS: On February 2, 2004, Edison (Bataan) Cogeneration Corporation [EBCC] received from the
Commissioner of Internal Revenue (CIR) a Formal Letter of Demand and Final Assessment Notice
dated January 23, 2004 assessing EBCC of deficiency income tax, Value Added Tax (VAT), withholding
tax on compensation, Expanded Withholding Tax (EWT) and Final Withholding Tax (FWT) for taxable
year 2000 in the total amount of ₱84,868,390.16.

On March 3, 2004, EBCC filed with the CIR a letter-protest dated March 2, 2004 and furnished the
CIR with the required documents.

Due to the inaction of the CIR, EBCC elevated the matter to the CTA via a Petition for Review,
docketed as CTA Case No. 7104 and raffled to the Second Division of the CTA.
While the case was pending, EBCC availed itself of the Tax Amnesty Program under Republic Act (RA)
No. 9480. Thus, in a November 7, 2008 Resolution, the CTA Second Division deemed the Petition
partially withdrawn and the case closed and terminated with regard to EBCC's deficiency income tax
and VAT for the year 2000.

On March 18, 2009, the CTA Second Division issued a Resolution setting aside the assessments
against EBC for deficiency income tax and VAT for the taxable year 2000 m view of its availment of
the Tax Amnesty Program.

CTA 2nd Division ruling provides, among other:

As to the deficiency FWT, the CTA Former Second Division found EBCC liable to pay FWT in a reduced
amount of ₱2,232,146.91.13 The CTA Former Second Division agreed with EBCC that it was not liable
for the deficiency FWT assessment of ₱7,707,504.96 on interest payments on loan agreements with
Ogden Power International Holdings, Inc. (Ogden) for taxable year 2000 since its liability for interest
payment became due and demandable only on June 1, 2002.

CTA en banc sustained such findings:

It sustained the findings of the CT A Former Second Division that the assessment over EBCC’s FWT on
interest payments arising from its loan from Ogden was without basis as EBCC had no obligation to
withhold any taxes on the interest payment for the year 2000.20 Under Revenue Regulation (RR) No.
02-98, the obligation to withhold only accrues when the loan is paid or becomes payable or when it
becomes due, demandable or legally enforceable, whichever comes first.21 In this case, the
obligation to withhold the interest over the loan only commenced on June 1, 2002.

ISSUE: WON RR No. 02-98 is applicable?

RULING: Yes. RR No. 02-98 provides:

SEC. 2.57.4. Time of Withholding. - The obligation of the payor to deduct and withhold the tax under
Section 2.57 of these regulations arises at the time an income is paid or payable, whichever comes
first, the term ‘payable’ refers to the date the obligation becomes due, demandable or legally
enforceable.In the case, EBCC’s liability for interest payment became due and demandable starting
June 1, 2002. Thus, EBCC had no obligation to withhold any taxes on the interest payment for the
year 2000 as the obligation to withhold only commenced on June 1, 2002, and thus cancelling the
assessment for deficiency FWT on interest payments arising from EBCC' s loan from Ogden.
Procter and Gamble Asia PTE LTD vs. CIR
GR No. 205652, Sep. 6, 2017

FACTS: P&G is a foreign corporation duly organized and existing under the laws of Singapore and is
maintaining a Regional Operating Headquarter in the Philippines. It is a registered VAT Taxpayer.

On March 22, 2007 and May 2, 2007, P&G filed its claim for refund/credit of its input VAT
attributable to its zero-rated sales covering taxable periods January 2005 to March 2005, and April
2005 to June 2005.

On March 28, 2007, P&G filed a petition for review with CTA regarding its claim for the 1st
Quarter of 2005.

On June 8, 2007, P&G filed with CTA another judicial claim with CTA for its 2nd Quarter of

On July 30, 2007, the two cases were consolidated.

On October 6, 2010, while P&G’s claim is pending, the Court promulgated CIR vs. Aichi
Forging Company of Asia, Inc. where it held that compliance with the 120-day period granted to the
CIR, within which to act on an administrative claim for refund or credit is mandatory and

On Nov. 17, 2010, CTA dismissed P&G’s claim for having been prematurely filed.

On Feb. 12, 2013, the Court decided CIR vs. San Roque Power Corporation, etc. where the
Court recognized BIR Ruling No. DA-489-03 as an exception to the mandatory and jurisdictional
nature of the 120-day waiting period.

On March 27, 2013, P&G filed the present petition.

ISSUE: WON P&G’s claim was timely filed?


In Visayas Geothermal Power Company v. Commissioner of Internal Revenue,32 the Court came
up with an outline summarizing the pronouncements in San Roque, to wit:
For clarity and guidance, the Court deems it proper to outline the rules laid down in San
Roque with regard to claims for refund or tax credit of unutilized creditable input VAT.

They are as follows:

1. When to file an administrative claim with the CIR:

a. General rule - Section 112(A) and Mirant
Within 2 years from the close of the taxable quarter when the sales were made.
b. Exception – Atlas
Within 2 years from the date of payment of the output VAT, if the administrative
claim was filed from June 8, 2007 (promulgation of Atlas) to September 12, 2008
(promulgation of Mirant).
2. When to file a judicial claim with the CT A:
a. General rule - Section 112(D); not Section 229
i. Within 30 days from the full or partial denial of the administrative claim by
the CIR; or
ii. Within 30 days from the expiration of the 120-day period provided to the
CIR to decide on the claim. This is mandatory and jurisdictional beginning
January 1, 1998 (effectivity of 1997 NIRC).
b. Exception-BIR Ruling No. DA-489-03
The judicial claim need not await the expiration of the 120-day period, if
such was filed from December 10, 2003 (issuance of BIR Ruling No. DA-489-
03) to October 6, 2010 (promulgation of Aichi).

In this case, records show that P&G filed its judicial claims for refund on March 28, 2007
and June 8, 2007, respectively, or after the issuance of BIR Ruling No. DA-489-03, but before
the date when Aichi was promulgated. Thus, even though P&G filed its judicial claim without
waiting for the expiration of the 120-day mandatory period, the CTA may still take cognizance of
the case because the claim was filed within the excepted period stated in San Roque.
CIR vs. Kepco Ilijan Corporation
GR No. 199422, June 21, 2016

FACTS: For the first and second quarters of the calendar year 2000, respondent filed its Quarterly
value-added tax (VAT) returns with the Bureau of Internal Revenue (BIR). It also filed the Application
for Zero Rated Sales for calendar year 2000 which was duly approved by the BIR.

Thereafter, respondent filed with the BIR its claim for refund in the amount of
₱49,569,448.73 representing input tax incurred for the first and second quarters of the calendar
year 2000 from its importation and domestic purchases of capital goods and services preparatory to
its production and sales of electricity to the National Power Corporation.

Petitioner did not act upon respondent's claim for refund or issuance of tax credit certificate
for the first and second quarters of the calendar year 2000. Consequently, respondent filed a
Petition for Review on March 21, 2002, and an Amended Petition for Review on September 12, 2003.

Respondent, thereafter, filed its Memorandum on September 1, 2008. For failure of

petitioner to file the required Memorandum despite notice, the CTA First Division issued a
Resolutioncdated September 12, 2008 submitting the case for decision.

On September 11, 2009, the CTA First Division rendered a Decision finding petitioner to be
entitled to a refund. There being no motion for reconsideration, the decision became final and
executor on October 10, 2009. On Feb. 16, 2010, a Writ of Execution was issued in favour of Kepco.

Petitioner alleges that she learned only of the Decision and the subsequent issuance of the
writ of March 7, 2011 when the Office of the Deputy Commissioner for Legal and Inspection Group
received a Memorandum from the Appellate Division of the National Office recommending the
issuance of a Tax Credit Certificate in favor of the respondent in the amount of ₱443,447,184.50.

Accordingly, on April 11, 2011 petitioner filed a petition for annulment of judgment with the
CTA En Banc.

ISSUE: WON CTA En Banc has jurisdiction to take cognizance of the petition for annulment of

Annulment of judgment, as provided for in Rule 47 of the Rules of Court, is based only on
the grounds of extrinsic fraud and lack of jurisdiction. It is a recourse that presupposes the filing of a
separate and original action for the purpose of annulling or avoiding a decision in another case.
Annulment is a remedy in law independent of the case where the judgment sought to be annulled is
rendered. It is unlike a motion for reconsideration, appeal or even a petition for relief from
judgment, because annulment is not a continuation or progression of the same case, as in fact the
case it seeks to annul is already final and executory. Rather, it is an extraordinary remedy that is
equitable in character and is permitted only in exceptional cases.

Annulment of judgment involves the exercise of original jurisdiction, as expressly conferred

on the Court of Appeals by Batas Pambansa Bilang (BP Blg.) 129, Section 9(2). It also implies power
by a superior court over a subordinate one, as provided for in Rule 47 of the Rules of Court, wherein
the appellate court may annul a decision of the regional trial court, or the latter court may annul a
decision of the municipal or metropolitan trial court.

But the law and the rules are silent when it comes to a situation similar to the case at bar, in
which a court, in this case the Court of Tax Appeals, is called upon to annul its own judgment. More
specifically, in the case at bar, the CTA sitting en banc is being asked to annul a decision of one of its
divisions. However, the laws creating the CTA and expanding its jurisdiction (RA Nos. 1125 and 9282)
and the court's own rules of procedure (the Revised Rules of the CTA) do not provide for such a

It is the same situation among other collegial courts. To illustrate, the Supreme Court or the
Court of Appeals may sit and adjudicate cases in divisions consisting of only a number of members,
and such adjudication is already regarded as the decision of the Court itself. It is provided for in the
Constitution, Article VIII, Section 4(1) and BP Blg. 129, Section 4, respectively. The divisions are not
considered separate and distinct courts but are divisions of one and the same court; there is no
hierarchy of courts within the Supreme Court and the Court of Appeals, for they each remain as one
court notwithstanding that they also work in divisions. The Supreme Court sitting en banc is not an
appellate court vis-a-vis its divisions, and it exercises no appellate jurisdiction over the latter. As for
the Court of Appeals en banc, it sits as such only for the purpose of exercising administrative,
ceremonial, or other non-adjudicatory functions.

Thus, the Revised Rules of the CTA and even the Rules of Court which apply suppletorily
thereto provide for no instance in which the en banc may reverse, annul or void a final decision of a
division. Verily, the Revised Rules of the CTA provide for no instance of an annulment of judgment at
all. On the other hand, the Rules of Court, through Rule 47, provides, with certain conditions, for
annulment of judgment done by a superior court, like the Court of Appeals, against the final
judgment, decision or ruling of an inferior court, which is the Regional Trial Court, based on the
grounds of extrinsic' fraud and lack of .jurisdiction. The Regional Trial Court, in turn, also is
empowered to, upon a similar action, annul a judgment or ruling of the Metropolitan or Municipal
Trial Courts within its territorial jurisdiction. But, again, the said Rules are silent as to whether a
collegial court sitting en banc may annul a final judgment of its own division.

Nevertheless, there will be extraordinary cases, when the interest of justice highly demands
it, where final judgments of the Court of Appeals, the CTA or any other inferior court may still be
vacated or subjected to the Supreme Court's modification, reversal, annulment or declaration as
void. But it will be accomplished not through the same species of original action or petition for
annulment as that found in Rule 47 of the Rules of Court, but through any of the actions over which
the Supreme Court has original jurisdiction as specified in the Constitution, like 65 of the Rules of
CIR vs. GJM Philippines Manufacturing Inc.
GR No. 202695, Feb 29, 2016

FACTS: On April 12, 2000, GJM filed its Annual Income Tax Return for the year 1999. Thereafter, its
parent company, Warnaco (HK) Ltd., underwent bankruptcy proceedings, resulting in the transfer of
ownership over GJM and its global affiliates to Luen Thai Overseas Limited in December 2001. On
August 26, 2002, GJM informed the Revenue District Officer of Trece Martirez, through a letter, that
on April 29, 2002, it would be cancelling its registered address in Makati and transferring to Rosario,
Cavite, which is under Revenue District Office (RDO) No. 54. On August 26, 2002, GJM's request for
transfer of its tax registration from RDO No. 48 to RDO No. 54 was confirmed through Transfer
Confirmation Notice No. OCN ITR 000018688.

On October 18, 2002, the Bureau of Internal Revenue (BIR) sent a letter of informal
conference informing GJM that the report of investigation on its income and business tax liabilities
for 1999 had been submitted. The report disclosed that GJM was still liable for an income tax
deficiency and the corresponding 20% interest, as well as for the compromise penalty in the total
amount of P1,192,541.51. Said tax deficiency allegedly resulted from
certaindisallowances/understatements, to wit: (a) Loading and Shipment/Freight Out in the amount
of P2,354,426.00; (b) Packing expense, P8,859,975.00; (c) Salaries and Wages, P2,717,910.32; (d)
Staff Employee Benefits, P1,191,965.87; and (e) Fringe Benefits Tax, in the amount of P337,814.57.
On October 24, 2002, GJM refuted said findings through its Financial Controller.

On February 12, 2003, the Bureau of Internal Revenue (BIR) issued a PAN and Details of
Discrepancies against GJM. On April 14, 2003, it issued an undated Assessment Notice, indicating a
deficiency income tax assessment in the amount of P1,480,099.29. On July 25, 2003, the BIR issued a
Preliminary Collection Letter requesting GJM to pay said income tax deficiency for the taxable year
1999. Said letter was addressed to GJM's former address in Pio del Pilar, Makati. On August 18,
2003, although the BIR sent a Final Notice Before Seizure to GJM's address in Cavite, the latter
claimed that it did not receive the same.

On December 8, 2003, GJM received a Warrant of Distraint and/or Levy from the BIR RDO
No. 48-West Makati. The company then filed its Letter Protest on January 7, 2004, which the BIR
denied on January 15, 2004. Hence, GJM filed a Petition for Review before the CTA.

On January 26, 20 l 0, the CTA First Division rendered a Decision in favor of GJM.

When its Motion for Reconsideration was denied, the CIR brought the case to the CT A En
On March 6, 2012, the CTA En Banc denied the CIR's petition.

ISSUE: WON GJM was assessed within the prescriptive period?

SEC. 203. Period of Limitation Upon Assessmentand Collection. - Except as provide0 in
Section 222, internal revenue taxes shall be assessed within three (3) years after the last day
prescribed by law for the filing of the return, and no proceeding in court without assessment for the
collection of such taxes shall be begun after the expiration of such period: Provided, That in a case
where a return is filed beyond the period prescribed by law, the three (3)-year period shall be
counted from the day the return was filed. For purposes of this Section, a return filed before the last
day prescribed by law for the filing thereof shall be considered as filed on such last day.
Thus, the CIR has three (3) years from the date of the actual filing of the return or from the
last day prescribed by law for the filing of the return, whichever is later, to assess internal revenue

Here, GJM filed its Annual Income Tax Return for the taxable year 1999 on April 12, 2000.
The three (3)-year prescriptive period, therefore, was only until April 15, 2003. The records reveal
that the BIR sent the FAN through registered mail on April 14, 2003, well-within the required period.
The Court has held that when an assessment is made within the prescriptive period, as in the case at
bar, receipt by the taxpayer may or may not be within said period. But it must be clarified that the
rule does not dispense with the requirement that the taxpayer should actually receive the
assessment notice, even beyond the prescriptive period. GJM, however, denies ever having received
any FAN.

If the taxpayer denies having received an assessment from the BIR, it then becomes incumbent upon
the latter to prove by competent evidence that such notice was indeed received by the addressee.

To prove the fact of mailing, it is essential to present the registry receipt issued by the Bureau of
Posts or the Registry return card which would have been signed by the taxpayer or its authorized
representative. And if said documents could not be located, the CIR should have, at the very least,
submitted to the Court a certification issued by the Bureau of Posts and any other pertinent
document executed with its intervention. The Court does not put much credence to the self-serving
documentations made by the BIR personnel, especially if they are unsupported by substantial
evidence establishing the fact of mailing. While it is true that an assessment is made when the notice
is sent within the prescribed period, the release, mailing, or sending of the same must still be clearly
and satisfactorily proved. Mere notations made without the taxpayer's intervention, notice or
control, and without adequate supporting evidence cannot suffice. Otherwise, the defenseless
taxpayer would be unreasonably placed at the mercy of the revenue offices.

HENCE, The BIR's failure to prove GJM's receipt of the assessment leads to no other conclusion but
that no assessment was issued. Consequently, the government's right to issue an assessment for the
said period has already prescribed.