2019 Taxation Law Reviewer

JUNE 2019
SAINT LOUIS UNIVERSITY

BAR EXAM REVIEWER
TAXATION LAW
BAR ACADEMICS COMMITTEE

Taxation Law Team Head:
Faculty Adviser: Roan Jill E. Haboc
Atty. Jerico G. Gay-ya
Members:
School of Law Dean: Alyk T. Calion
Atty. Lilybeth Sindayen-Libiran Ronald Allen H. Lizardo
Jose Fernando B. Masarate
Overall Chairperson: Charlene Joy W. Millares
Michael Vincent A. Bautista King Anthony M. Montereal
Kyth B. Pallogan
Vice Overall Chairperson: Victoriano R. Torio III
Francis Dominick P. Abril Irish Ruth L. Villanueva
TAXATION LAW TEAM COVER/LAYOUT:

Jose Fernando B. Masarate
Faculty Adviser: King Anthony M. Montereal
Atty. Christine Angelica Elveña- Prince Jan Ronald D. Wacnang
Carantes
Philippine Copyright 2019

All rights reserved
by The Bar Academics Committee of Saint Louis University School of
Law, 2600 Baguio City
No portion of this publication may be reproduced, stored in a retrieval

system, or transmitted in any form by any means without the prior
written permission of The Bar Academics Committee of Saint Louis
University School of Law.
TABLE OF CONTENTS
Statistical Data ............................................................................................. i
Statistical Data Per Topic ............................................................................... ii
GENERAL PRINCIPLES ............................................................................... ii
INCOME TAX ............................................................................................ iii
BUSINESS TAXES ..................................................................................... iv
TRANSFER TAXES .................................................................................... iv
LOCAL TAXATION ...................................................................................... v
REAL PROPERTY TAXATION ....................................................................... v
TAX REMEDIES ........................................................................................ vi
JUDICIAL REMEDIES................................................................................ vi
TARIFF & CUSTOMS ................................................................................ vii
I. GENERAL PRINCIPLES OF TAXATION ........................................................ 1

DUE PROCESS ..............................................................................................1
COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM
CORPORATION ..........................................................................................1
DOUBLE TAXATION .......................................................................................3
CITY OF MANILA v. COSMOS BOTTLING CORPORATION ............................3
II. NATIONAL TAXATION .............................................................................. 4

BUREAU OF INTERNAL REVENUE .................................................................4
BIR ISSUANCES.............................................................................................4
CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCEMENT OF
GOVERNMENT EMPLOYEES et. al,. v. COMMISSIONER, BUREAU OF
INTERNAL REVENUE, et. al. .......................................................................4
INCOME TAX .................................................................................................6
EXEMPTIONS FROM TAX ON CORPORATIONS ...............................................6
COMMISSIONER OF INTERNAL REVENUE v. J.P. MORGAN CHASE BANK,
N.A. – PHILIPPINE CUSTOMER CARE CENTER ...........................................6
CONCEPT OF WITHHOLDING TAXES .............................................................8
COMMISSIONER OF INTERNAL v. LA FLOR DELA ISABELA, INC.................8
VALUE-ADDED TAX ..................................................................................... 10
VAT EXEMPT TRANSACTIONS...................................................................... 10
COMMISSIONER OF INTERNAL REVENUE v. NEGROS CONSOLIDATED
FARMERS MULTI-PURPOSE COOPERATIVE ............................................. 10
IRREVOCABILITY RULE ............................................................................... 12
RHOMBUS ENERGY, INC. v. COMMISSIONER OF INTERNAL REVENUE....13
PERIOD TO FILE ADMINISTRATIVE CLAIM FOR REFUND............................. 14
KEPCO ILIJAN CORPORATION v. COMMISSIONER OF INTERNAL REVENUE
................................................................................................................ 14
PERIOD TO FILE JUDICIAL CLAIM FOR REFUND ......................................... 16
TEAM SUAL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE 16
SAN ROQUE POWER CORPORATION v. COMMISSIONER OF INTERNAL
REVENUE ................................................................................................ 17
................................................................................................................ 19
INVOICING REQUIREMENTS........................................................................ 21
NIPPON EXPRESS PHILIPPINES CORPORATION v. COMMISSIONER OF
INTERNAL REVENUE ............................................................................... 21
TAX REMEDIES UNDER THE NIRC .............................................................. 22
PRESCRIPTIVE PERIOD FOR ASSESSMENT ................................................. 22
CORPORATION ........................................................................................ 22
ASIAN TRANSMISSION CORPORATION v. COMMISSIONER OF INTERNAL
REVENUE ................................................................................................ 24
SUSPENSION OF THE RUNNING OF THE STATUTE OF
LIMITATIONS ............................................................................................... 26
COMMISSIONER OF INTERNAL v. LA FLOR DELA ISABELA, INC...............26
ISSUANCE OF PRELIMINARY ASSESSMENT NOTICE.................................... 28
TAXPAYER’S REMEDIES .............................................................................. 30
RECOVERY OF TAX ERRONEOUSLY OR ILLEGALLY COLLECTED ................30
COMMISSIONER OF INTERNAL REVENUE v. CEBU HOLDINGS, INC. ......30
III. LOCAL GOVERNMENT TAXATION .......................................................... 31

TAX ORDINANCES ....................................................................................... 31
CITY OF PASIG, et. al., v. MANILA ELECTRIC COMPANY ........................... 31
CITY OF MANILA v. COSMOS BOTTLING CORPORATION .......................... 32
TAXPAYER’S REMEDIES .............................................................................. 33
INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., v. THE CITY OF
MANILA et.al. ........................................................................................... 33
CLAIM FOR REFUND OF TAX ....................................................................... 35
CLAIM FOR REFUND OR TAX CREDIT FOR ERRONEOUSLY OR
ILLEGALLY COLLECTED TAX, FEE OR CHARGE .......................................... 37
MANILA et.al. ........................................................................................... 37
REAL PROPERTY TAXATION ........................................................................ 39
IMPOSITION OF REAL PROPERTY TAX ......................................................... 39
HERARC REALTY CORPORATION v. THE PROVINCIAL TREASURER OF
BATANGAS, et. al. .................................................................................... 39
METROPOLITAN WATERWORKS SEWERAGE SYSTEM v. LOCAL
GOVERNMENT OF QUEZON CITY, et al. ................................................... 40
REMEDIES OF LGUs FOR COLLECTION OF REAL PROPERTY
TAXES ......................................................................................................... 42
ISSUANCE OF NOTICE OF DELINQUENCY FOR REAL PROPERTY
TAX PAYMENT ............................................................................................. 42
NOEMI S. CRUZ AND HEIRS OF HERMENEGILDO T. CRUZ, REPRESENTED
BY NOEMI S. CRUZ v. CITY OF MAKATI, et. al........................................... 42
CONTESTING AN ASSESMENT OF VALUE OF REAL PROPERTY ...................44
APPEAL TO THE LOCAL BOARD OF ASSESSMENT APPEALS ........................ 44
ALLIANCE OF QUEZON CITY HOMEOWNERS' ASSOCIATION, INC., v. THE
QUEZON CITY GOVERNMENT .................................................................. 44
IV. JUDICIAL REMEDIES ............................................................................ 46

COURT OF TAX APPEALS............................................................................. 46
JURISDICTION OF THE COURT OF TAX APPEALS ........................................ 46
COMMISSIONER OF INTERNAL REVENUE v. BANK OF THE PHILIPPINE
ISLANDS .................................................................................................. 46
BASES CONVERSION AND DEVELOPMENT AUTHORITY v. COMMISSIONIER
OF INTERNAL REVENUE .......................................................................... 48
GOVERNMENT EMPLOYEES et. al,. v. COMMISSIONER, BUREAU OF
INTERNAL REVENUE et. al. ...................................................................... 49
MACARIO LIM GAW, JR. v. COMMISSION OF INTERNAL REVENUE ..........51
INTERNAL REVENUE ............................................................................... 52
BATANGAS, et. al. .................................................................................... 53
COMMISSIONER OF INTERNAL REVENUE v. STANDARD INSURANCE CO.,
INC. ......................................................................................................... 54
PROCEDURES ............................................................................................. 56
NON-AVAILABILITY OF INJUNCTION TO RESTRAIN COLLECTION
OF TAX ........................................................................................................ 56
COMMISSIONER OF INTERNAL REVENUE v. STANDARD INSURANCE CO.,
INC. ......................................................................................................... 56
INSTITUTION OF CIVIL ACTION IN CRIMINAL ACTION .................................. 58
MACARIO LIM GAW, JR. v. COMMISSION OF INTERNAL REVENUE ..........58
Statistical Data
Yearly Statistical Data
2005-2018 Taxation Bar Exams
SUBJECT MATTER 2005 2006 2007 2008 2009 2010 2011 2012
General Principles 16.21% 33.33% 36.84% 3.00% 22.00% 10.00% 14.67% 4.08%
Income Tax 37.84% 23.82% 26.32% 28.00% 22.00% 27.00% 33.33% 28.57%
Estate Tax 5.41% 4.76% 15.79% 14.00% 10.00% 10.00% 5.33% 2.04%
Donor's Tax 0.00% 0.00% 10.53% 10.00% 6.00% 0.00% 6.67% 3.06%
Value-Added Tax 0.00% 9.52% 0.00% 11.00% 6.00% 7.00% 1.33% 18.37%
Other Percentage Tax 0.00% 0.00% 0.00% 3.00% 0.00% 0.00% 0.00% 0.00%
Documentary Stamp Tax 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Tax Remedies 29.73% 23.81% 5.26% 7.00% 22.00% 26.00% 24.00% 27.55%
Local Taxation 2.70% 0.00% 0.00% 7.00% 6.00% 17.00% 4.00% 7.14%
Real Property Tax 2.70% 4.76% 5.26% 3.00% 0.00% 0.00% 4.00% 4.08%
Tariff and Customs 5.41% 0.00% 0.00% 14.00% 6.00% 3.00% 6.67% 5.11%
TOTAL 100% 100% 100% 100% 100% 100% 100% 100%
SUBJECT MATTER 2013 2014 2015 2016 2017 2018 TOTAL

General Principles 17.00% 14.00% 3.00% 20.00% 23.00% 5.26% 15.89%
Income Tax 32.00% 30.00% 49.00% 35.00% 15.50% 36.50% 30.35%
Estate Tax 6.00% 7.00% 4.00% 0.00% 8.00% 5.26% 6.97%
Donor's Tax 6.00% 3.00% 3.00% 5.00% 0.00% 5.26% 4.18%
Value-Added Tax 3.00% 17.00% 14.00% 12.50% 17.00% 10.52% 9.09%
Other Percentage Tax 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.21%
Documentary Stamp Tax 0.00% 0.00% 0.00% 0.00% 4.50% 0.00% 0.32%
Tax Remedies 20.00% 17.00% 9.00% 17.50% 23.00% 21.05% 19.49%
Local Taxation 9.00% 9.00% 6.00% 5.00% 3.00% 5.26% 5.79%
Real Property Tax 4.00% 0.00% 6.00% 5.00% 0.00% 7.89% 3.34%
Tariff and Customs 3.00% 3.00% 6.00% 0.00% 6.00% 3.00% 4.37%
TOTAL 100% 100% 100% 100% 100% 100% 100%
i
Statistical Data Per Topic
GENERAL PRINCIPLES
Inherent Limitations 3 6.00%
Doctrine of Set-off or Compensation 2 4.00%
Tax Evasion 3 6.00%
Stages of Taxation 4 8.00%
Tax Pyramiding 1 2.00%
Taxes Under NIRC 1 2.00%
Principles of Sound Tax System 3 6.00%
Constitutional Limitations 8 16.00%
Situs of Taxation 2 4.00%
Double Taxation 9 18.00%
Theory and Basis of Taxation 3 6.00%
Doctrine "Power to tax is power to destroy" 1 2.00%
Tax Amnesty 1 2.00%
Construction and Interpretation of Tax Laws 2 4.00%
Nature and Characteristic 3 6.00%
Penal Provisions 1 2.00%
Tax Avoidance 1 2.00%
Others 2 4.00%
TOTAL 50 100.00%
ii
INCOME TAX
Classification of Income Subject to Tax 12 7.19%
Income Tax on Individuals 19 11.38%
Income Tax on Corporations 18 10.78%
Situs of Income 5 2.99%
Tax Return 9 5.39%
Exemptions 9 5.39%
Special Corporation: Charitable Institutions 1 0.60%
Special Corporation: Proprietary Educational Institutions 3 1.80%
Special Corporation: Proprietary Hospitals 1 0.60%
Special Corporation: Joint Ventures 3 1.80%
Other Business Entities GPPs 4 2.40%
Dividend Income 2 1.20%
Gross Income 3 1.80%
Exclusions from Gross Income 10 5.99%
Deductions from Gross Income 7 4.19%
Capital Gains Tax 20 11.98%
Withholding Tax 3 1.80%
De Minimis Benefits 1 0.60%
Tests of Taxability of Income 10 5.99%
Optional Standard Deduction 2 1.20%
Itemized Deduction 3 1.80%
Kinds of Taxpayers 8 4.79%
Taxable Periods 1 0.60%
Types of Taxes 1 0.60%
Improperly Accumulated Earnings Tax 4 2.40%
Branch Profit Remittance Tax 3 1.80%
Tax Schedule 1 0.60%
Fringe Benefits 1 0.60%
Others 3 1.80%
TOTAL 167 100.00%
iii
BUSINESS TAXES
Concept of VAT 4 7.41%
Direct v. Indirect Tax 1 1.85%
VAT-Exempt Transactions 9 16.67%
Zero-Rated Transactions 5 9.26%
VAT on Sale of Goods or Services 4 7.41%
VAT on Importation 3 5.56%
Transactions Deemed Sale 2 3.70%
Determination of VAT Liability 4 7.41%
Threshold of VAT 2 3.70%
Persons Liable 2 3.70%
Claim for Refund 10 18.52%
Other Percentage Tax 4 7.41%
Who Can Avail of Tax Credits 1 1.85%
Period to Claim TCC 1 1.85%
Documentary Stamp Tax 2 3.70%
TOTAL 54 100.00%
TRANSFER TAXES
Concept of Donor's Tax 7 14.58%
Composition of Gross Gifts 1 2.08%
Exempt from Donor's Tax 5 10.42%
Classification of Donor 2 4.17%
Persons Liable for Donor's Tax 2 4.17%
Requisites of a Valid Donation 1 2.08%
Valuation of Gifts 1 2.08%
Concept of Estate Tax 3 6.25%
Gross Estate 10 20.83%
Deductions from Gross Estate 9 18.75%
Vanishing Deductions 1 2.08%
Exempt from Estate Tax 3 6.25%
Time and Transfer Estate Tax 1 2.08%
Estate Tax Return 2 4.17%
TOTAL 48 100.00%
iv
LOCAL TAXATION
Nature and Source of Taxing Power 2 8.70%
Franchise Tax 1 4.35%
Professional Tax 2 8.70%
Toll Fees or Charges 3 13.04%
Ceiling on Business Taxes 1 4.35%
Local Taxing Authority 3 13.04%
Limitations on LGU's Power to Tax 3 13.04%
Period to Pay 1 4.35%
Payment in Installment 1 4.35%
Taxing Power of Municipalities 1 4.35%
Protests 2 8.70%
Collection of Local Taxes 3 13.04%
TOTAL 23 100.00%
REAL PROPERTY TAXATION

Real Property Tax 4 26.67%
Exempt Properties 3 20.00%
Classes of Real Properties 1 6.67%
Appraisal and Assessment of RP 1 6.67%
Imposition of RPT 1 6.67%
Collection of RPT 1 6.67%
Actual Use as Basis 1 6.67%
Auction Sale 2 13.33%
Refund or Credit of RPT 1 6.67%
TOTAL 15 100.00%
v
TAX REMEDIES
Compromise or Abatement of Taxes 8 10.26%
Tax Refund 5 6.41%
Concept/Procedure of Assessments 11 14.10%
Requisites of Valid Assessment 2 2.56%
Disputed Assessments 5 6.41%
Prescriptive Periods 11 14.10%
Issuance of PAN 4 5.13%
Protests 5 6.41%
Period to Act on Protests 2 2.56%
Remedy in case CIR Fails to Act on Protests 4 5.13%
Administrative Remedies - Distraint Levy 3 3.85%
Final Decision on Disputed Assessment 3 3.85%
Submission of Documents 3 3.85%
Suspension of the Running of the Statute of Limitations 4 5.13%
Suspension of Business Operations 1 1.28%
False, Fraudulent or Non-Filing of Returns 3 3.85%
BIR Rulings 3 3.85%
Functions of the BIR 1 1.28%
TOTAL 78 100.00%
JUDICIAL REMEDIES
Appeal to CTA 10 52.63%
Effect of Assessment on Criminal Complaint 1 5.26%
Criminal Action 2 10.53%
Civil Action 5 26.32%
Non-Availability of Injunction 1 5.26%
TOTAL 19 100.00%
vi
TARIFF & CUSTOMS
Dutiable Value 1 4.17%
Countervailing Duty v. Dumping Duty 1 4.17%
Personal Effects 1 4.17%
Jurisdiction 3 12.50%
Exemptions 1 4.17%
Period to Pay 1 4.17%
Forfeiture Proceedings 2 8.33%
Remedies of the Government 4 16.67%
Kinds of Duties 2 8.33%
Abandonment 1 4.17%
Taxable Importation 3 12.50%
Pretest 1 4.17%
Goods Declaration 2 8.33%
Technical and Outright Smuggling 1 4.17%
TOTAL 24 100.00%
vii
Taxation Law: General Principles: Due Process
I. GENERAL PRINCIPLES OF TAXATION
DUE PROCESS

CORPORATION
G.R. No. 197945/ 204119-20 July 9, 2018
FIRST DIVISION
(Leonardo-De Castro, J.)
FACTS:
Shell and Petron are domestic corporations registered with the Board of
Investments (BOI) and on different occasions, separately sold their products to other
BOI-registered export entities that used Tax Credit Certificates (TCC) for their
purchases. The BOI-registered export entities later on assigned their TCCs to Shell
and Petron which was approved by the Department of Finance (DOF). Thereafter,
Shell and Petron sought DOF’s permission to use the said TCCs for settling their
excise tax liabilities. DOF then issued a Tex Debit Memoranda (TDM) in their favor
which was subsequently presented to the Bureau of Internal Revenue (BIR) for
payment.
Later in 1998, BIR sent Collection Letters stating that the payments made
through the TCCs were invalid and hence, they were still liable for deficiency taxes.
BIR also issued a Warrant of Garnishment against Shell. The TCCs were
subsequently cancelled by DOF. Pursuant to the cancellation, BIR issued separate
assessment letters to Shell and Petron in 1999. In 2002, another Collection Letter
was sent by BIR to Shell.
ISSUE:
Can BIR collect deficiency taxes by mere issuance of Collection Letters?
RULING:
No, BIR cannot collect deficiency taxes by mere issuance of Collection Letters.
Under the law, the BIR’s power to collect taxes must yield to the fundamental
rule that no person shall be deprived of his/her property without due process of law.
The BIR must first make an assessment then enforce the collection of the amount
assessed. Hence, the BIR may only enforce collection when it has accorded the
taxpayer administrative due process, which includes a valid assessment.
In this case, CIR did not issue at all an assessment against Shell and Petron
prior to the issuance of the 1998 and 2002 Collection Letters. Absent a previously
issued assessment supporting the Collection Letters, CIR’s attempt to collect through
said collection letters as well as the subsequent Warrants of Garnishment and
1
Taxation Law: General Principles: Due Process
Distraint and/or Levy are void and ineffectual. Thus, the BIR cannot deficiency taxes
through collection letters alone.
2
Taxation Law: General Principles: Double Taxation
DOUBLE TAXATION
CITY OF MANILA v. COSMOS BOTTLING CORPORATION

G.R. No. 196681, 27 June 2018
THIRD DIVISION
(Martires, J.)
FACTS:
The City of Manila assessed Cosmos Bottling Corporation (Cosmos) local

business taxes. Cosmos protested the assessment through a letter, arguing that,
among others, the collection of local business tax under Section 21 of the Revenue
Code of Manila (RCM) in addition to Section 14 of the same Code constitutes double
taxation. The City Treasurer denied the protest. The City of Manila argued that there
is no double taxation because the tax imposed under Section 21 is imposed on a
different object and of a different nature as compared to that in Section 14.
ISSUE:
Does the collection of local business tax under Section 21 of the RCM in
addition to Section 14 of the same Code constitute double taxation?
RULING:
Yes, the collection of local business tax under Section 21 of the RCM in
addition to Section 14 of the same Code constitutes double taxation.
Under the law, there is direct double taxation when taxes of the same kind or
character are imposed on the same subject matter, for the same purpose, for same
taxable period, and within the same taxing jurisdiction by the same taxing authority.
While the City of Manila could impose against Cosmos a manufacturer's tax
under Section 14 of the RMC, it cannot at the same time impose the tax under Section
21 of the same code; otherwise, an obnoxious double taxation would set in. Indeed,
the following impositions under both Sections 14 and 21 of the RCM would constitute
double taxation:
(1) On the same subject matter — the privilege of doing business in the City of
Manila;
(2) For the same purpose — to make persons conducting business within the
City of Manila contribute to city revenues;
(3) By the same taxing authority —City of Manila;
(4) Within the same taxing jurisdiction — within the territorial jurisdiction of
the City of Manila;
(5) For the same taxing periods per calendar year; and
(6) Of the same kind or character — a local business tax imposed on gross
sales or receipts of the business.
3
Taxation Law: Bureau of Internal Revenue: BIR Issuances
II. NATIONAL TAXATION
BUREAU OF INTERNAL REVENUE

BIR ISSUANCES

GOVERNMENT EMPLOYEES et. al,. v. COMMISSIONER, BUREAU OF INTERNAL
REVENUE, et. al.
G.R. Nos. 213446 & 213658 July 3, 2018,
EN BANC
(Caguioa, J.)
FACTS:
Commissioner of Internal Revenue (CIR) issued the assailed Revenue

Memorandum Order (RMO) No. 23-2014 in order to clarify and consolidate the
responsibilities of the public sector to withhold taxes on its transactions as a
customer on its purchases of goods and services, and as an employer on
compensation paid to its officials and employees.
Confederation for Unity, Recognition and Advancement of Government

Employees (COURAGE) et al., organizations/unions of government employees,
alleged grave abuse of discretion on the part of the CIR in issuing RMO No. 23-2014,
as it classified as taxable compensation allowances, bonuses, compensation for
services granted to government employees which are considered by law as non-
taxable fringe and de minimis benefits. COURAGE further claimed that the subject
RMO constitutes a usurpation of legislative power and that it violates the equal
protection clause as it discriminates against government officials and employees by
imposing fringe benefit tax upon their allowances and benefits, as opposed to that of
the private sector, the fringe benefit tax of which is borne and paid by their employers.
Armando A. Yanga et al., likewise challenged RMO No. 23-2014 on the grounds
that the CIR is bereft of any authority to issue the assailed RMO; and that it violates
fiscal autonomy.
ISSUES:
a. Is RMO No. 23-2014 valid?
b. Is RMO No. 23-2014 constitutional?
RULING:
a. Sections III, IV and VII of RMO No. 23-2014 are valid; whereas, Section VI is
invalid.
Section III speaks of the obligation to withhold on compensation paid to

government officials and employees, while Section IV enumerates income received by
4
Taxation Law: Bureau of Internal Revenue: BIR Issuances
the officials and employees in the public sector which are not subject to income tax
and withholding tax on compensation.
The assailed Sections simply reinforced the rule that every form of
compensation for personal services received by all employees arising from
employer-employee relationship is deemed subject to income tax, and
consequently, to withholding tax, unless specifically exempted by or excluded
by the Tax Code; and the duty of the Government, as an employer, to withhold
and remit the correct amount of withholding taxes due thereon.
The Court also upholds the validity of Section VII, which prescribes penalty in
case of non-compliance of withholding agents of their obligations. Verily, tested
against the provisions of the Tax Code, the subject RMO does not define a crime and
prescribe a penalty thereof. Section VII simply mirrors the relevant provisions of the
NIRC of 1997, as amended, on the penalties for the failure of the withholding agent
to withhold and remit the correct amount of taxes.
However, with respect to Section VI, which enumerates the persons

responsible for withholding, the Court finds that the CIR overstepped the boundaries
of its authorities to interpret the provisions of the Tax Code. Nowhere in the NIRC of
1997, as amended, or in RR No. 2-98, as amended, would one find the Provincial
Governor, Mayor, Barangay Captain and the Head of Government Office or the
"Official holding the highest position (such as the President, Chief Executive Officer,
Governor, General Manager)" in an Agency or GOCC as one of the officials required
to deduct, withhold and remit the correct amount of withholding taxes. The CIR, in
imposing upon these officials the obligation not found in law nor in the implementing
rules, did not merely issue an interpretative rule designed to provide guidelines to the
law which it is in charge of enforcing; but instead, supplanted details thereon - a
power duly vested by law only to the Secretary of Finance under Section 244 of the
Tax Code.
b. Yes, the assailed provisions of RMO No. 23-2015 are constitutional and do not
contravene the Constitutional guarantee of equal protection
The equal protection clause is not violated by an executive issuance which was issued
to simply reinforce existing taxes applicable to both the private and public sector. The
withholding tax system embraces not only the private sector, but also covers the
Government of the Philippines, its agencies, instrumentalities and political
subdivisions. While the assailed RMO is a directive to the Government, it did not, in
any manner or form, alter or amend the provisions of the Tax Code, for or against the
Government or its employees.
5
Taxation Law: Income Tax: Tax on Corporations: Exemptions from Tax on
Corporations
INCOME TAX
EXEMPTIONS FROM TAX ON CORPORATIONS
COMMISSIONER OF INTERNAL REVENUE v. J.P. MORGAN CHASE BANK, N.A.

– PHILIPPINE CUSTOMER CARE CENTER
G.R. No. 210528, November 28, 2018
THIRD DIVISION
(Leonen, J.)
FACTS:
On May 1, 2007, J.P. Morgan Chase Bank, N.A. – Philippine Customer Care
Center (J.P. Morgan Philippines), entered into an Agreement with PeopleSupport
Philippines (PeopleSupport), a Philippine Economic Zone Authority (PEZA) -
registered Economic Zone IT (Export) Enterprise, which enjoys income tax holiday
period from May to July 2007. Under the Agreement, PeopleSupport would provide
and lease transmission facilities to J.P. Morgan Philippines for a fee.
From May to July 2007, J.P. Morgan Philippines paid to PeopleSupport its fee
and withheld the corresponding tax. J.P. Morgan Philippines filed its Monthly
Remittance Return of Creditable Income Taxes Withheld for July and paid the tax
which included the amount withheld from PeopleSupport. However, after having
realized that it erroneously withheld taxes on its payment to PeopleSupport,
J.P.Morgan Philippines reimbursed to PeopleSupport said and amount and likewise
filed before the Bureau of Internal Revenue (BIR) on April 7, 2008 an application for
refund of the amount of tax erroneously withheld. However, due the latter’s inaction,
J.P. Morgan Philippines filed on August 10, 2009 a Petition for Review before the
Court of Tax Appeals (CTA).
The CTA Division denied the claim for refund stating that the lease of transmission
facilities was outside PeopleSupport’s registered activities with PEZA. Thus, the
income from the lease was subject to regular income tax and was properly withheld.
However, upon a Motion for Reconsideration filed by the Commissioner on Internal
Revenue (CIR), CTA Dvision reversed itself and granted the claim for refund. The CTA
En Banc affirmed the resolution on appeal, hence, this present recourse before the
Supreme Court.
ISSUE:
Is the income derived by PeopleSupport from the lease of its facilities to J.P.
Morgan Philippines exempt from income tax?
RULING:
No.
Under BIR Rulings and the PEZA Memorandum Circular, registration of an

activity with PEZA is an essential requirement to enjoy incentives under the law, and
only income arising from or directly related to the conduct of the Ecozone Enterprises’
6
Taxation Law: Income Tax: Tax on Corporations: Exemptions from Tax on
Corporations
registered activities are covered by tax incentives under the Philippine Economic Zone
Act of 1995.
PeopleSupport is registered with PEZA as an Economic Zone Information

Technology (Export) Enterprise, not an Information Technology Facilities
Provider/Enterprise. Providing information technology-enabled services is different
from providing information technology facilities, infrastructure, or equipment.
A perusal of the Agreement between J.P. Morgan Philippines and

PeopleSupport would show that the Agreement pertains to the provision of physical
plant space, voice and data infrastructure, all workstation infrastructure, and
platform and support for inbound telemarketing services. In essence, PeopleSupport’s
leasing services to J.P. Morgan Philippines are in the nature of a facilities
provider/enterprise and not information technology-enabled services.
As such, the Agreement, which is essentially a lease of facilities, is outside

PeopleSupport’s registered activities, and thus, is subject to income tax. The tax is
properly withheld.
7
Taxation Law: Income Tax: Withholding of Taxes: Concept of Withholding Taxes
CONCEPT OF WITHHOLDING TAXES
COMMISSIONER OF INTERNAL v. LA FLOR DELA ISABELA, INC.

G.R. No. 211289, January 14, 2019
SECOND DIVISION
(Reyes, J. Jr., J.)
FACTS:
La Flor dela Isabela, Inc. (La Flor) filed monthly returns for the Expanded
Withholding Tax (EWT) and Withholding Tax on Compensation (WTC) for calendar
year 2005.
On January 7, 2010, La Flor received four Formal Letters of Demand and Final
Assessment Notices (FAN): (1) for penalties for late filing and payment of WTC; (2) for
penalties for late filing and payment of EWT; (3) for deficiency assessment for EWT;
and (4) for deficiency assessment for WTC. They were all dated December 17, 2009,
and covered deficiency taxes for the taxable year 2005.
The Commissioner of Internal Revenue (CIR) issued a Final Decision on

Disputed Assessment (FDDA) against La Flor involving the alleged deficiency
withholding taxes. Aggrieved, La Flor filed a petition for review before the Court of
Tax Appeals (CTA) Division.
The CTA Division ruled in favor of La Flor and cancelled the assessments. The
CTA En Banc affirmed the decision of the CTA division.
The CIR, in its petition to the Supreme Court, forwards a novel theory that
Section 203 is inapplicable in the present assessment of EWT and WTC deficiency
against La Flor. It argues that withholding taxes are not contemplated under the said
provision considering that they are not internal revenue taxes but are penalties
imposed on the withholding agent should it fail to remit the proper amount of tax
withheld.
ISSUE:
Are withholding taxes internal revenue taxes covered by Section 203 of the
National Internal Revenue Code (NIRC)?
RULING:
Yes.
In Chamber of Real Estate and Builders’ Associations, Inc. v. Hon. Executive

Secretary Romulo,1the Court had succinctly explained that the method of withholding
tax at source is a procedure of collecting income tax which is sanctioned by our tax
laws. Under the current system, the payee is the taxpayer, the person on whom the
tax is imposed, while the payor, a separate entity, acts as the government’s agent for
1 628 Phil. 508, 536 (2010)
8
Taxation Law: Income Tax: Withholding of Taxes: Concept of Withholding Taxes
the collection of the tax in order to ensure its payment. As a consequence of this
system, two distinct liabilities arise – one for the income earner/payee and another
for the withholding agent, who is a mere tax collector not a taxpayer. The agent is not
liable for the tax as no wealth flowed into him. The Tax Code only makes the agent
personally liable for the breach of its legal duty to withhold the tax and remit the
same to the government.
Nonetheless, the Court does not agree with the CIR that withholding tax
assessments are merely an imposition of penalty on the withholding agent, and thus,
outside the coverage of Section 203 of the NIRC.
The CIR cites National Development Company v. Commissioner of Internal

Revenue2 as basis that withholding taxes are only penalties imposed on the
withholding agent:
In effect, therefore, the imposition of the deficiency taxes on the NDC is

a penalty for its failure to withhold the same from the Japanese shipbuilders.
A careful analysis of the above-quoted decision, however, reveals that the

Court did not equate withholding tax assessments to the imposition of civil imposed
on tax deficiencies. The word “penalty” was used to underscore the dynamics in the
withholding tax system it is the income of the payee being subjected to tax and not
of the withholding agent. It was never meant to mean that withholding taxes do not
fall within the definition of internal revenue taxes, especially considering that income
taxes are the ones withheld by the withholding agent. Withholding taxes do not
cease to become income taxes just because it is collected and paid by the
withholding agent.
Thus, withholding tax assessments such as EWT and WTC clearly

contemplate deficiency internal revenue taxes. Their aim is to collect unpaid income
taxes and not merely to impose a penalty on the withholding agent for its failure to
comply with its statutory duty, and therefore, are within the application of Section
203 of the NIRC.
2
235 Phil. 477, 485-486 (1987)
9
Taxation Law: Value-Added Tax: VAT Exempt Transactions
VALUE-ADDED TAX
VAT EXEMPT TRANSACTIONS
COMMISSIONER OF INTERNAL REVENUE v. NEGROS CONSOLIDATED

FARMERS MULTI-PURPOSE COOPERATIVE
G.R. No. 212735, December 5, 2018
FIRST DIVISION
(Tijam, J.)
FACTS:
Negros Consolidated Farmers Multi-Purpose Cooperative (COFA) is a multi-

purpose agricultural cooperative. Its farmer-members deliver the sugarcane produce
to be milled and processed in COFA’s name with the sugar mill/refinery. Before the
refined sugar is released by the sugar mill, however, an Authorization Allowing the
Release of Refined Sugar (AARRS) from the Bureau of Internal Revenue (BIR) is
required from COFA. For several instances, the BIR issued the AARRS without
requiring COFA to pay advance VAT pursuant to COFA’s tax exemption.
However, in 2009, the BIR Bacolod required as a condition for the issuance of
the AARRS the payment of advance VAT on the premise that COFA is not the
“producer” of the sugarcane to be refined by the sugar refinery under Revenue
Regulation 13-2008 (RR 13-2008). COFA thus paid advanced VAT under protest and
sought the legal opinion of the BIR Legal Division who stated that COFA is considered
as the actual producer of the sugarcane because it primarily provided the various
production inputs, capital, and technology transfer and farm management.
In a Ruling by the BIR, it stated that the sales of sugar produce by COFA to
its members and non-members are exempt from VAT. With that said, COFA filed an
administrative claim for refund with the Commissioner of Internal Revenue (CIR).
Because of the CIR’s inaction, COFA brought the case for review with the Court of
Tax Appeals (CTA) who ordered the refund of the advance VAT to COFA.
ISSUE:
Is COFA exempt from paying VAT and, thus, are likewise exempt from
advanced VAT?
RULING:
Yes, COFA is exempt from paying VAT and advanced VAT.
While the sale of raw sugar, an agricultural product in its original state, is
exempt from VAT, the sale of refined sugar, on the other hand, is not so exempted as
refined sugar already went several refining processes and is no longer considered in
its original state. However, if the sale of the sugar, whether raw or refined, was made
by an agricultural cooperative to its members or non-members, such transaction is
still VAT-exempt.
10
Taxation Law: Value-Added Tax: VAT Exempt Transactions
As regards the BIR issued RR No. 13-2008, it requires that, for an agricultural
cooperative to be exempted from the payment of advanced VAT on refined sugar, it
must be (a) a cooperative in good standing duly accredited and registered with the
Cooperative Development Authority (CDA); and (b) the producer of the sugar.
COFA is a VAT-Exempt agricultural cooperative. It is likewise established that

COFA is a cooperative in good standing and was duly accredited and registered with
the CDA as evidenced by the issuance of the CDA Certificate of Registration.
Similarly, COFA is considered the producer of the sugar since its member farmers
provide the sugarcane it refines.
Having established that COFA is a cooperative in good standing and duly

registered with the CDA and is the producer of the sugar, COFA’s sale then of refined
sugar whether sold to members or non-members, is exempt from VAT. As a logical
and necessary consequence of its VAT exemption, COFA is likewise exempted from
the payment of advance VAT.
NOTE:
The CIR breeds confusion when it argues that the VAT exemption given to
cooperatives under the laws pertain only to the sale of the sugar but not to the
withdrawal of the sugar from the refinery. The withdrawal from the sugar refinery by
the cooperative is not the incident which gives rise to the imposition of VAT, but the
subsequent sale of the sugar. If at all, the withdrawal of the refined sugar gives rise
to the obligation to pay the VAT on the would-be sale. In other words, the advance
VAT which is imposed upon the withdrawal of the refined sugar is the very same VAT
which would be imposed on the sale of refined sugar following its withdrawal from
the refinery, hence, the term "advance." It is therefore erroneous to treat the
withdrawal of the refined sugar as a tax incident different from or in addition to the
sale itself.
11
Taxation Law: Irrevocability Rule
IRREVOCABILITY RULE
UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC. v.

COMMISSIONER OF INTERNAL REVENUE
G.R. No. 205955, March 7, 2018
THIRD DIVISION
(Martires, J.)
FACTS:
University Physicians Services Inc. – Management, Inc. (UPSI-MI) is a

corporation that filed its 2006 Annual Income Tax Return (ITR) which reflected an
income tax overpayment. In the same ITR, UPSI-MI elected the option "to be issued a
tax credit certificate" with respect to its unutilized excess creditable taxes for the
taxable year ending December 31, 2006.
The next year, UPSI-MI changed from calendar year to fiscal year, and so it
filed an annual ITR covering the short period fiscal year ending March 31 wherein
UPSI-MI opted to carry over as "Prior Year's Excess Credits" the 2006 income tax
overpayment which included the 2006 unutilized creditable withholding tax. UPSI-
MI also amended the return by excluding the sum subject of the refund claim from
the line "Prior Year's Excess Credits”.
ISSUE:
Does the irrevocability rule apply exclusively to the carry-over option?
RULING:
Yes, the irrevocability rule applies exclusively to the carry-over option.
The irrevocability rule enshrined in Section 76 of the National Internal

Revenue Code (NIRC) is limited only to the option of carry-over such that a
taxpayer is still free to change its choice after electing a refund of its excess tax credit.
Once a taxpayer opts to carry-over its excess creditable tax, after electing refund or
issuance of a tax credit certificate, the carry-over option becomes irrevocable.
Accordingly, the previous claim for refund, even if subsequently pursued, may no
longer be granted.
In this case, UPSI-MI may not be entitled to the refund of its 2006 excess tax
when it thereafter filed its income tax return for the short period ending March 31,
2007, indicating the option of carry-over. However, UPSI-MI is still entitled to the
benefit of carry-over and thus may apply the 2006 overpaid income tax as tax credit
in succeeding taxable years until fully exhausted since the option of carry-over under
Section 76 is not subject to any prescriptive period unlike the remedy of refund or
tax credit certificate.
12
Taxation Law: Irrevocability Rule
RHOMBUS ENERGY, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 206362, August 1, 2018
THIRD DIVISION
(Bersamin, J.)
FACTS:
Rhombus Energy, Inc. filed its 2005 Annual Income Tax Return (AITR) wherein
it indicated that its 2005 excess creditable withholding tax (CWT) amounting to
Php1.5M was “to be refunded.” The following year, the same amount was reflected as
prior year’s excess credits in Rhombus Energy’s first, second and third Quarterly
Income Tax Returns. Then, on December 29, 2006, Rhombus Energy filed a claim for
refund of its 2005 excess/unutilized CWT.
In 2007, Rhombus Energy filed its 2006 Annual ITR, showing prior year’s
excess credits of Php0.
ISSUE:
Is Rhombus Energy barred by the irrevocability rule in claiming for the refund
of its excess and/or unutilized creditable withholding tax?
RULING:
No, Rhombus Energy is not barred by the irrevocability rule in claiming for the
refund of its excess and/or unutilized creditable withholding tax.
Section 76 of the NIRC of 1997 is clear and unequivocal in providing that the
carry-over option, once actually or constructively chosen by a corporate taxpayer,
becomes irrevocable.
Although Rhombus Energy had actually exercised the option to be refunded,

Rhombus is not barred by the irrevocability rule in claiming for the refund of its
excess and/or unutilized creditable withholding tax. The irrevocability rule takes
effect when the option is exercised. The Supreme Court held that Rhombus Energy,
in marking the box "To be refunded" in its 2005 Annual ITR, constituted its exercise
of the option, and from then onwards Rhombus Energy was precluded from carrying-
over the excess creditable withholding tax. The fact that the prior year's excess credits
were reported in Rhombus Energy’s 2006 first, second, and third quarterly ITRs did
not reverse the option to be refunded which was exercised in its 2005 Annual ITR. All
told, Rhombus can validly claim for refund.
13
Taxation Law: Value-Added Tax: Period to File Administrative Claim for Refund
PERIOD TO FILE ADMINISTRATIVE CLAIM FOR REFUND

G.R. No. 205185, September 26, 2018
FIRST DIVISION
(Bersamin, J.)
FACTS:
Kepco Ilijan Corporation is engaged in the production and sale of electricity to

the National Power Corporation (NPC). It filed a claim for refund on April 13, 2004 for
the VAT incurred in taxable year 2002. On April 12, 2002, Kepco filed its Petition for
Review before the Court of Tax Appeals (CTA).
The CTA granted the refund but only as to Kepco's unutilized excess input VAT
attributable to its zero-rated sales to NPC for the 2nd, 3rd and 4th quarters of 2002.
The claim for the 1st quarter was denied on the ground of prescription.
Kepco moved for Partial Reconsideration, arguing that its claim for the 1st
quarter should not be denied because the rules and jurisprudence then prevailing
stated that the reckoning point of the two-year period for filing the claim for refund
of unutilized input taxes was the date of filing of the return and payment of the tax
due.
However, the CTA denied the entire claim, opining that it did not acquire
jurisdiction because of non-observance of the periods provided under the National
Internal Revenue Code (NIRC). Upon appeal, the CTA En Banc affirmed the Decision
of the CTA in Division.
Hence, this Petition before the Supreme Court.
ISSUES:
Should Kepco’s input VAT claim for the 1st quarter of taxable year 2002 be
denied?
RULING:
Yes.
Under the Section 112 of the NIRC, a VAT-registered taxpayer claiming a
refund or tax credit of excess and unutilized input VAT must file the administrative
claim within two years from the close of the taxable quarter when the sales were
made.
Specifically, the close of the quarters of taxable year 2002 took place on March
31, 2002, June 30, 2002, September 30, 2002 and December 31, 2002, giving Kepco
until March 31, 2004, June 30, 2004, September 30, 2004 and December 31, 2004
within which to file its administrative claims for the 1st, 2nd, 3rd and 4th quarters,
respectively. Under the circumstances, Kepco had belatedly filed its administrative
claim corresponding to the 1st quarter of taxable year 2002, as the claim for refund
14
Taxation Law: Value-Added Tax: Period to File Administrative Claim for Refund
was only made on April 13, 2004. Notwithstanding, the claims for the refund of the
input taxes corresponding to the 2nd to 4th quarters were timely filed.
15
Taxation Law: Value-Added Tax: Period to File Judicial Claim for Refund
PERIOD TO FILE JUDICIAL CLAIM FOR REFUND
TEAM SUAL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

GR No. 201225-26/201132/201133, April 18, 2018
SECOND DIVISION
(Reyes, Jr., J.)
FACTS:
On December 6, 2000, Team Sual Corporation (TSC) filed with the Bureau of
Internal Revenue (BIR) an application for zero-rating. The same was approved. As a
result, TSC filed its Value-Added Tax (VAT) returns. For the first, second, third, and
fourth quarters of the said year, TSC reported excess input VAT.
On March 20, 2003, TSC filed with the BIR an administrative claim for refund
of its aforesaid unutilized input VAT. On March 31, 2003, without waiting for the
resolution of its administrative claim for refund or tax credit, TSC filed with the Court
of Tax Appeals (CTA) Division a petition for review. It prayed for the refund or issuance
of a tax credit certificate for its alleged unutilized input VAT for the first quarter of
taxable year 2001. On July 23, 2003, TSC filed another petition for review, seeking
the refund or issuance of a tax credit certificate for its alleged unutilized input VAT
for the second, third, and fourth quarters of taxable year 2001.
ISSUE:
Was TSC entitled to its two (2) judicial claims for tax refund?
RULING:
TSC is only entitled to its second judicial claim for refund.
Section 112 (D) of the NIRC provides that the Commissioner has 120 days to
act on an administrative claim. This 120-day period is mandatory and jurisdictional.
Accordingly, a taxpayer can file a judicial claim either (1) only within 30 days after
the Commissioner partially or fully denies the claim within the 120-day period, or (2)
only within 30 days from the expiration of the 120-day period if the Commissioner
does not act within such period. The taxpayer cannot file the judicial claim prior to
the lapse of the 120-day period, unless the CIR partially or wholly denies the claim
within such period.
TSC's administrative claim was filed on March 20, 2003, giving the CIR 120
days or until July 18, 2003 to act on the same. Thus, the first judicial claim was
prematurely filed because TSC filed it 11 days after filing its administrative claim. On
the other hand, the second judicial claim filed by TSC filed on July 23, 2003 or five
days after the lapse of the 120-day period, was filed timely. Therefore, the CTA
division only acquired jurisdiction over TSC's second judicial claim for refund.
16
SAN ROQUE POWER CORPORATION v. COMMISSIONER OF INTERNAL

REVENUE
GR No. 203249, July 23, 2018
THIRD DIVISION
(Martires, J.)
FACTS:
San Roque Power Corporation (San Roque Power) was granted by the Bureau
of Internal Revenue (BIR) with a zero-rating on its sales of electricity. Later, on
December 22, 2005 and February 27, 2006, San Roque Power filed two separate
administrative claims for refund of its alleged unutilized input tax. The Commissioner
of Internal Revenue (CIR) failed to act on them. This prompted San Roque Power to
file petitions for review before the Court of Tax Appeals (CTA). The first petition was
filed on March 30, 2006, and the second on June 20, 2006.
The CTA En Banc dismissed the petitions on the ground that San Roque
Power’s judicial claims were prematurely filed in violation of the 120-day and 30-day
periods prescribed in Section 112 (D) of the National Internal Revenue Code (NIRC).
ISSUE:
Were the judicial claims of San Roque Power prematurely filed?
RULING:
Yes, the judicial claims of San Roque Power were prematurely filed.
Section 112 (D) of the NIRC provides that the Commissioner has 120 days to
act on an administrative claim. This 120-day period is mandatory and jurisdictional.
Accordingly, a taxpayer can file a judicial claim either (1) only within 30 days after
the Commissioner partially or fully denies the claim within the 120-day period, or (2)
only within 30 days from the expiration of the 120-day period if the Commissioner
does not act within such period. The taxpayer cannot file the judicial claim prior to
the lapse of the 120-day period, unless the CIR partially or wholly denies the claim
within such period. The taxpayer-claimant must strictly comply with the mandatory
period by filing an appeal to the CTA within 30 days from such inaction; otherwise,
the court cannot validly acquire jurisdiction over it.
In this case, San Roque Power timely filed its administrative claims for refund/credit
of its unutilized input VAT on December 22, 2005 and on February 27, 2006,
respectively, or within the two-year prescriptive period. The CIR had 120 days, or
until April 13, 2006, with respect to the first administrative claim, and until June 27,
2006, on the second administrative claim, to decide. However, San Roque Power,
without waiting for the full expiration of the 120-day period, immediately filed its
petitions for review with the Court of Appeals (CA) on March 30, 2006, or a mere 98
days for the first administrative claim; and on June 20, 2006, or only 113 days for
17
the second administrative claim, from the submission of the said claims. For having
been filed within the 120-day period where the CIR may act on the administrative
claims, the judicial claims of San Roque Power were prematurely filed.
18

G.R. No. 205185, September 26, 2018
FIRST DIVISION
(Bersamin, J.)
FACTS:
Kepco Ilijan Corporation is engaged in the production and sale of electricity to

the National Power Corporation (NPC). On April 13, 2004 it brought its
administrative claim for refund before the Bureau of Internal Revenue (BIR). Nine
days later or on April 22,2004, Kepco filed its judicial claim for refund before the
Court of Tax Appeals (CTA). Kepco did not await the lapse of the 120-day period
provided under the National Internal Revenue Code (NIRC), leading the Court of Tax
Appeals (CTA) En Banc to declare that Kepco’s appeal is premature.
Kepco moved for reconsideration, arguing that its claim should not be denied
because the rules and jurisprudence then prevailing stated that the reckoning point
of the two-year period for filing the claim for refund of unutilized input taxes was the
date of filing of the return and payment of the tax due.
However, the CTA denied the entire claim, opining that it did not acquire
jurisdiction because of non-observance of the periods provided under the NIRC. The
CTA En Banc affirmed the Decision of the CTA in Division on appeal.
Hence, this Petition before the Supreme Court.
ISSUES:
Was the judicial claim timely filed?
RULING:
Yes.
In Aichi3, the Court clarified that the 120-day period was mandatory and
jurisdictional; hence, the non-observance of the period was fatal to the filing of the
judicial claim in the CTA. However, in San Roque 4, the Court acknowledged an
instance when a premature filing in the CTA was allowed. The mandatory and
jurisdictional nature of the 120-30 period rule does not apply to claims for refund
that were filed during the interim period from the issuance of BIR Ruling No. DA-489-
03 on December 10, 2003 to October 6, 2010 when the Aichi doctrine was adopted.
In this case, Kepco filed its administrative and judicial claims for refund on
April 13, 2004 and April 22, 2004, respectively. Both claims were filed after BIR
Ruling No. DA-489-03 was issued on December 10, 2003, but before the
promulgation of the Aichi pronouncement on October 06, 2010. Thus,
notwithstanding the petitioner's having filed its judicial claim without waiting for the
3 G.R. No. 184823, October 6, 2010, 632 SCRA 422.

4 G.R. No. 187485, February 12, 2013, 690 SCRA 336.
19
decision of the respondent or for the expiration of the 120-day mandatory period, the
CTA could still take cognizance of the claims because they were filed within the period
exempted from the mandatory and jurisdictional 120-30 period rule.
20
Taxation Law: Value-Added Tax: Invoicing Requirements
INVOICING REQUIREMENTS

INTERNAL REVENUE
G.R. No. 191495, July 23, 2018
THIRD DIVISION
(Martires, J.)
FACTS:
Nippon Express filed an application for tax credit of its excess/unused input
taxes attributable to zero-rated sales. The Bureau of Internal Revenue (BIR) failed to
act on said application. In a petition for review before the Court of Tax Appeals (CTA),
the Commissioner of Internal Revenue (CIR) raised the defense that Nippon Express
presented sales invoices to substantiate its zero-rated sales of services which, under
Section 108 of the National Internal Revenue Code of 1997 (NIRC), as amended,
require official receipts.
ISSUE:
Can Nippon Express successfully claim for VAT refund?
RULING:
No, Nippon Express cannot successfully claim for VAT refund.
The burden of a claimant who seeks a refund of his excess or unutilized

creditable input VAT pursuant to Section 112 of the NIRC is two-fold: (1) prove
payment of input VAT to suppliers; and (2) prove zero-rated sales to purchasers.
When a VAT-taxpayer claims to have zero-rated sales of services under Section 108
of the NIRC, it must substantiate the same through valid VAT official receipts, not
any other document, not even a sales invoice which properly pertains to a sale
of goods or properties under Section 108.
In this case, the documentary proofs presented by Nippon Express to

substantiate its zero-rated sales of services consisted of sales invoices and other
secondary evidence like transfer slips, credit memos, cargo manifests, and credit
notes. It is very clear that these are inadequate to support their sales of services.
21
Taxation Law: Tax Remedies Under the NIRC: Prescriptive Period for Assessment
TAX REMEDIES UNDER THE NIRC

PRESCRIPTIVE PERIOD FOR ASSESSMENT

CORPORATION
G.R. No. 197945/ 204119-20 July 9, 2018
FIRST DIVISION
(Leonardo-De Castro, J.)
FACTS:
Shell and Petron are domestic corporations that paid their excise tax liabilities
with the Bureau of Internal Revenue (BIR) through a Tax Debit Memorandum (TDM)
issued in their favor by the Department of Finance (DOF) by virtue of their Tax Credit
Certificates (TCCs). Thus, excise tax returns for each of the taxable years of 1992 to
1997 were filed by Shell and Petron.
Later, BIR sought to collect from Shell and Petron excise tax deficiencies
pertaining to the covered years 1992 to 1997 through summary administrative
remedies. However, the Court held that this could not be done as the Collection
Letters were issued without a prior assessment.
ISSUE:
Has the period for assessment already prescribed?
RULING:
Yes, the period for assessment has already prescribed.
Under the 1977 National Internal Revenue Code, the governing law in this
case, BIR had five years from the filing of excise tax returns to issue an assessment
and/or to file a court action for collection without an assessment.
Here, Shell and Petron’s filed their returns for the covered years from 1992 to
1997; the five-year prescriptive period under Section 319 of the 1977 NIRC would
have prescribed accordingly from 1997 to 2002. Furthermore, as found in the 2007
Shell Case and the 2010 Petron Case, Commissioner of Internal Revenue (CIR) failed
to issue any valid assessment against Shell and Petron’s alleged deficiency excise
taxes for the covered years. Without a valid assessment, the five-year period to assess
continued to run and had in fact, expired in these cases. Thus, CIR is already barred
by prescription from issuing an assessment against Shell and Petron for deficiency
excise taxes for the covered years.
NOTE:
The issues concerning the transferred TCCs’ validity, qualifications of the
transferees of said TCCs and the valid use of the TCCs to pay for excise tax liabilities
22
had been finally settled in the 2007 Shell Case and 2010 Petron Case and are already
barred from being re-litigated by the doctrine of res judicata in the concept of
conclusiveness of judgment.
23
ASIAN TRANSMISSION CORPORATION v. COMMISSIONER OF INTERNAL

REVENUE
G.R. No. 230861, September 19, 2018
FIRST DIVISION
(Bersamin., J.)
FACTS:
Asian Transmission Corporation (ATC) filed its Annual Information Return of

Income Taxes Withheld on Compensation and Final Withholding Taxes and Annual
Information Return of Creditable Income Taxes Withheld (Expanded)/Income
Payments Exempt from Withholding Tax, respectively. Consequently, on various
dates, ATC, through its representative, executed several documents denominated as
"Waiver of the Defense of Prescription under the Statute of Limitations of the National
Internal Revenue Code" (Waiver).
ATC, thereafter, received a Formal Letter of Demand from the Commissioner

of Internal Revenue (CIR) for tax deficiencies. ATC filed its Protest Letter in regard
thereto, but a Final Decision on Disputed Assessment (FDDA) was later served on
ATC stating its liability for the deficiency tax. ATC filed an appeal letter for
reconsideration which was denied, hence, the instant Petition for Review before the
Court of Tax Appeals (CTA).
The CTA 2nd Division held that ATC was not estopped from raising the
invalidity of the waivers as Bureau of Internal Revenue (BIR) itself had caused the
defects of the waiver, namely:
a. the waivers were notarized by its own employee despite not being validly
commissioned to perform notarial acts;
b. the BIR did not indicate the date of its acceptance;
c. the BIR did not specify the amounts of and the particular taxes involved;
and
d. CIR did not sign the waivers despite the clear mandate of RMO No. 20-
90 to that effect.
However, the abovementioned defects rendered the waivers invalid. Such

waivers then did not operate to toll or extend the three-year period of prescription.
On Petition for Review, the CTA En Banc reversed and set aside the decision
of the CTA 2nd Division, and held that the waivers were valid. It held that CIR’s right
to assess deficiency withholding taxes against ATC had not yet prescribed.
ISSUE:
Are the waivers executed by ATC valid which operate to extend the three-year
period of prescription to assess deficiency taxes?
RULING:
Yes.
24
Adopting the ruling in CIR vs. Next Mobile Inc 5, the Court declared that as a
general rule, a waiver of statute of limitations in taxes that did not comply with the
requisites for validity specified in RMO No. 20-90 and RDAO 01-05 is invalid and
ineffective to extend the prescriptive period to assess the deficiency taxes. However,
as an exception to the rule, the following waivers could be treated as an exemption
and valid for the reason that the parties are in pari delicto or “in equal fault”.
In this case, the CTA in Division noted that the eight waivers of ATC contained
the following defects, to wit: (a) The notarization of the Waivers was not in accordance
with the 2004 Rules on Notarial Practice; (b) Several waivers clearly failed to indicate
the date of acceptance by the Bureau of Internal Revenue; (c) The Waivers were not
signed by the proper revenue officer; and (d) The Waivers failed to specify the type of
tax and the amount of tax due.
But these defects are not solely attributable to the BIR. RDAO 01-05 indicates
that the proper preparation of the waiver was primarily the responsibility of the
taxpayer or its authorized representative signing the waiver. Such responsibility did
not pertain to the BIR as the receiving party.
The execution of the waivers was to the advantage of ATC because the waivers
would provide ATC sufficient time to gather and produce voluminous records for the
audit. Yet, after enjoying these benefits, ATC challenges the validity of these waivers
only after the final assessment proved to be adverse. On the other hand, BIR’s
negligence in the performance of its duties was so gross that it also amounted to bad
faith. Since the parties are both at fault, they shall have no action against each other.
Therefore, the CTA En Banc did not err in ruling that ATC, after having
benefitted from the defective waivers, should not be allowed to assail them. The eight
waivers are thus considered valid.
5 G.R. NO. 212825, 07 December 2015
25
Taxation Law: Tax Remedies: Prescriptive Period for Assessment: Suspension of the
Running of the Statute of Limitations
SUSPENSION OF THE RUNNING OF THE STATUTE OF LIMITATIONS
COMMISSIONER OF INTERNAL v. LA FLOR DELA ISABELA, INC.

G.R. No. 211289, January 14, 2019
SECOND DIVISION
(Reyes, J. Jr., J.)
FACTS:
La Flor dela Isabela, Inc. (La Flor) filed monthly returns for the Expanded
Withholding Tax (EWT) and Withholding Tax on Compensation (WTC) for calendar
year 2005. On September 3, 2008, La Flor, through its president, executed a Waiver
of the Statute of Limitations (Waiver) in connection with its internal revenue liabilities
for the calendar year ending December 31, 2005. On February 16, 2009, it executed
another Waiver to extend period of assessment until December 31, 2009, and then
another one on December 2, 2009.
On January 7, 2010, La Flor received four Formal Letters of Demand and Final
Assessment Notices (FAN) all dated December 17, 2009, and covered deficiency taxes
for the taxable year 2005. La Flor contested the assessment thru a Letter of Protest.
Thereafter, Commissioner of Internal Revenue (CIR) issued a Final Decision on
Disputed Assessment (FDDA) against La Flor involving the alleged deficiency
withholding taxes. Aggrieved, La Flor filed a petition for review before the Court of
Tax Appeals (CTA) Division.
The CTA Division ruled in favor of La Flor and cancelled the assessments. The
appellate court pointed out that the CIR only issued the FANs only on December 17,
2009. Thus, the assessment was barred by prescription. It was held that the Waivers
entered into by the CIR and La Flor did not effectively extend the prescriptive period
for the issuance of the tax assessments for the reason that only the February 16,
2009 Waiver was the only one stipulated upon since the other two Waivers were never
offered in evidence. In addition, the Waiver dated February 16, 2009 did not comply
with Revenue Memorandum Order (RMO) No. 20-90 because it failed to state the
nature and amount of the tax to be assessed.
The CTA En Banc affirmed the decision of the CTA division. Hence, the present
petition.
ISSUE: Did the Waivers executed by La Flor extend the running of the prescriptive
period for the issuance of tax assessments?
RULING:
No.
In Commissioner of Internal Revenue v. Systems Technology Institute, Inc., 6 the

Court had ruled that waivers extending the prescriptive period of tax assessments
must be compliant with RMO No. 20-90 and must indicate the nature and amount
6
G.R. No. 220835, July 26, 2017, 833 SCRA 285, 296-298.
26
Taxation Law: Tax Remedies: Prescriptive Period for Assessment: Suspension of the
Running of the Statute of Limitations
of the tax due. These requirements are mandatory and must strictly be followed. The
Court, in a number of cases, did not hesitate to strike down waivers which failed to
strictly comply with the provisions of RMO 20-90.
The Supreme Court also stated in Commissioner of Internal Revenue v.

Standard Chartered Bank 7 that a waiver of the statute of limitations is a bilateral
agreement between the taxpayer and the BIR to extend the period to assess or collect
deficiency taxes on a certain date. Logically, there can be no agreement if the kind
and amount of the taxes to be assessed or collected were not indicated.
In the present case, the September 3, 2008, February 16, 2009 and December
2, 2009 Waivers failed to indicate the specific tax involved and the exact amount of
the tax to be assessed or collected. These details are material as there can be no true
and valid agreement between the taxpayer and the CIR absent these information.
Clearly, the Waivers did not effectively extend the prescriptive period under Section
203 on account of their invalidity.
Therefore, the assessments made by the CIR on La Flor had prescribed as there was
no valid waiver.
7
G.R. No. 192173, July 29, 2015
27
Taxation Law: Tax Remedies Under the NIRC: Issuance of Preliminary
Assessment Notice
ISSUANCE OF PRELIMINARY ASSESSMENT NOTICE

ISLANDS
G.R. No. 224327, June 11, 2018
THIRD DIVISION
(Peralta, J.)
FACTS:
Citytrust Banking Corporation (CBC) filed its Annual Income Tax Returns
(AITR) for taxable year 1986 on April 15, 1987. Thereafter, on August 11, 1989, July
12, 1990 and November 8, 1990, CBC executed Waivers of the Statute of Limitations
under the National Internal Revenue Code (NIRC).
On March 7, 1991, the Commissioner of Internal Revenue (CIR) issued a Pre-

Assessment Notice (PAN) against CBC for deficiency income taxes, to which CBC’s
counsel filed its protest against on April 22, 1991. Another letter with attached
Assessment Notices was issued by the CIR on May 6, 1991 to which CBC’s counsel
filed its Protest against on May 27, 1991 and February 17, 1992.
Subsequently, a compromise settlement was reached between CBC and CIR.

But when the CBC made a request for the final reconsideration of compromise
settlement, the CIR disapproved the same and ordered CBC to pay its tax deficiency
liabilities. Later, The CIR issued a Warrant of Distraint and/or Levy against Bank of
the Philippine Islands (BPI); the Articles of Merger between BPI and CBC having been
approved by the Securities and Exchange Commission (SEC) beforehand, with BPI as
the surviving corporation.
Thus, BPI filed a Petition for Review with the Court of Tax Appeals (CTA),
wherein the court ruled that the Assessment Notices, being issued only on May 6,
1991, were already issued beyond the three-year period to assess, counting from April
15, 1987, when CBC filed its AITR for the taxable year 1986. The same court also
held that the Waivers of Statute of Limitations executed on July 12, 1990 and
November 8, 1990 were not in accordance with the proper form of a valid waiver
pursuant to RMO No. 20-90, thus, the waivers failed to extend the period given to the
CIR to assess. The CTA En Banc denied CIR’s motion for reconsideration, hence this
petition before the Supreme Court.
ISSUE:
Was there a valid notice of assessment issued by the CIR to BPI?
RULING:
None, there was no valid notice of assessment issued by the CIR to BPI.
Under the law, a valid notice of assessment is issued when it is sent, released,
or mailed to the taxpayer.
28
Taxation Law: Tax Remedies Under the NIRC: Issuance of Preliminary
Assessment Notice
While a mailed letter is deemed received by the addressee in the ordinary

course of mail, this is still merely a disputable presumption subject to controversy,
and a direct denial of the receipt thereof shifts the burden upon the party favored by
the presumption to prove that the mailed letter was indeed received by the addressee.
In this case, BPI denies receiving the assessment notice, and the CIR was
unable to present substantial evidence that such notice was, indeed, mailed or sent
before the BIR's right to assess had prescribed and that said notice was received by
BPI. In fact, there was even an express admission on the part of the CIR that there
was no proof that indeed the alleged Final Assessment Notice was ever sent to or
received by BPI. Therefore, the assessment notice dated May 6, 1991 should be
deemed as the final decision of the CIR on the matter, in which BPI timely protested
on May 27, 1991.
Therefore, the CTA was correct in ruling that the CIR failed to prove that it
sent a notice of assessment and that it was received by BPI. CIR’s failure to prove the
receipt of the assessment by BPI necessarily leads to the conclusion that no
assessment was issued.
29
Taxation Law: Taxpayer’s Remedies: Recovery of Tax Erroneously or Illegally
Collected
TAXPAYER’S REMEDIES
RECOVERY OF TAX ERRONEOUSLY OR ILLEGALLY COLLECTED
COMMISSIONER OF INTERNAL REVENUE v. CEBU HOLDINGS, INC.

G.R. No. 189792, June 20, 2018
SECOND DIVISION
(Carpio, J.)
FACTS:
On April 15, 2003, Cebu Holdings, Inc. filed with the Bureau of Internal
Revenue (BIR) its Income Tax Return (ITR) for the year ending December 31, 2002.
Cebu Holdings indicated in its ITR that it was opting to be issued a tax credit
certificate for the alleged overpayment of Php 18,992,055. Later, on March 4, 2005,
Cebu Holdings filed with the BIR a written claim for a tax credit certificate for the
said Php 18,992,055. When the Commissioner of Internal Revenue (CIR) failed to act
upon Cebu Holding's claim, the latter filed a Petition for Review with the Court of Tax
Appeals (CTA) First Division on April 15, 2005. The CTA granted the petition;
however, it found various discrepancies concerning some of the creditable
withholding taxes and disallowed such. The CTA en banc affirmed the decision of the
division.
ISSUE:
Was Cebu Holdings entitled to tax refund or tax credit?
RULING:
Yes, Cebu Holdings was entitled to tax refund or tax credit.
The requisites for claiming a refund of excess creditable withholding taxes are:
(1) the claim for refund was filed within the two-year prescriptive period; (2) the fact
of withholding was established by a copy of a statement duly issued by the payor
(withholding agent) to the payee, showing the amount of tax withheld therefrom; and
(3) the income upon which the taxes were withheld was included in the income tax
return of the recipient as part of the gross income.
All these requisites were followed by Cebu Holdings. It filed the claim for refund
within the two-year prescriptive period; submitted the Certificate Authorizing
Registration, Withholding Tax Remittance Returns, and Certificates of Creditable Tax
Withheld at Source, upon which the Independent CPA based his report; and
submitted its amended 2002 ITR to show that the income upon which the taxes were
withheld was included in its ITR. Thus, it is entitled to tax refund or tax credit.
30
Taxation Law: Local Government Taxation: Tax Ordinances
III. LOCAL GOVERNMENT TAXATION
TAX ORDINANCES
CITY OF PASIG, et. al., v. MANILA ELECTRIC COMPANY

G.R. No. 181710, March 7, 2018
THIRD DIVISION
(Martires, J.)
FACTS:
The Sangguniang Bayan of the Municipality of Pasig enacted an ordinance

which imposed a franchise tax on all business venture operations carried out through
a franchise within the municipality. Later, said municipality was converted into the
City of Pasig.
The City Treasurer’s Office informed Manila Electric Company (MERALCO)

that it was liable to pay franchise taxes. MERALCO protested the validity of the
demand, claiming that the same be withdrawn and cancelled for the following
reasons: (1) the ordinance was declared void ab initio by the Department of Justice
(DOJ) for being in contravention of law; and (2) The Regional Trial Court (RTC) of
Pasig City ordered the LGU of Pasig to refund MERALCO because municipalities are
not empowered by law to impose and collect franchise tax pursuant to Section 142
of the Local Government Code (LGC).
ISSUE:
Is MERALCO liable for franchise tax imposed by the LGU of Pasig?
RULING:
No, MERALCO is not liable for franchise tax imposed by the LGU of Pasig.
Under the Local Government Code (LGC) of 1991, a municipality is bereft of

authority to levy and impose franchise tax on franchise holders within its territorial
jurisdiction. That authority belongs to provinces and cities only. A franchise tax levied
by a municipality is, thus, null and void. The nullity is not cured by the subsequent
conversion of the municipality into a city.
Here, as the subject Ordinance was passed by Pasig when it was still a
municipality, it is bereft of the authority to levy and impose franchise tax. MERALCO
is not liable to pay said tax.
31
Taxation Law: Local Government Taxation: Tax Ordinances

G.R. No. 196681, 27 June 2018
THIRD DIVISION
(Martires, J.)
FACTS:
The City of Manila assessed Cosmos Bottling Corporation (Cosmos) local

business taxes. Cosmos protested the assessment arguing that Tax Ordinance Nos.
7988 and 8011, amending the Revenue Code of Manila (RCM), has been declared null
and void for failure to comply with the required publication for three (3) consecutive
days and thus cannot be the basis for the collection of business taxes. The City
Treasurer denied the protest.
ISSUE:
Are Tax Ordinance Nos. 7988 and 8011 valid bases for the imposition of
business taxes?
RULING:
No, Tax Ordinance Nos. 7988 and 8011 are not valid bases for the imposition
of business taxes.
Consistent with settled jurisprudence, taxes assessed based on void

ordinances must perforce be nullified.
Tax Ordinance Nos. 7988 and 8011, which amended Ordinance No. 7794, are null
and void for failure to comply with the required publication for three (3) consecutive
days. Thus, either cannot be the basis for the collection of business taxes.
32
Taxation Law: Local Government Taxation: Taxpayer’s Remedies
TAXPAYER’S REMEDIES

MANILA et.al.
G.R. No. 185622 October 17, 2018
THIRD DIVISION
(Leonen, J.)
FACTS:
International Container Terminal Services, Inc. (ICTSI) was assessed for local
business taxes. It paid under protest. When the City Treasurer failed to act on its
protest within the prescribed 60-day period, it filed for a petition for certiorari before
the Regional Trial Court (RTC).
The RTC dismissed the petition for failure to comply with the requirements
under Section 195 of the Local Government Code (LGC). ICTSI counterargued that
their petition was in the nature of a claim for refund under Section 196 of the LGC.
Meanwhile, ICTSI wrote a Letter to the City Treasurer, claiming refund for the taxes
paid from the 4th quarter of 1999 up to the 2nd quarter of 2003 and for the 3rd quarter
of 2003 up to the 2nd quarter of 2005. These claims were denied.
The CTA Division, on Petition for Review, ordered a partial refund representing
the erroneously paid business taxes for the first three quarters of 1999. Pursuant to
this decision, ICTSI sent its Letter to the City Treasurer claiming a refund of taxes
paid for the 3rd quarter of 2005 until the 4th quarter of 2006. These claims were
likewise denied. No separate written claims for refund were made for the taxes paid
thereafter as ICTSI believed that “there was not further necessity for it.”
Upon appeal, the CTA En Banc found that ICTSI raised the applicability of
Section 196 for the first time on appeal. It denied ICTSI’s Petition for Review and
affirmed the CTA Division Decision.
Hence, this petition before the Supreme Court.
ISSUE:
Did ICTSI’s failure to file written claims of refund amount to non-compliance

with the doctrine of exhaustion of administrative remedies?
RULING:
No.
To be entitled to a refund under Section 196 of the LGC, the taxpayer must
first file a written claim for refund or credit with the local treasurer.
Regarding this requirement, the records show that ICTSI made written claims
for refund for the taxes paid from the 4th quarter of 1999 until the 4th quarter of 2006
through the Letters to the City Treasurer. As for the taxes paid thereafter which were
33
Taxation Law: Local Government Taxation: Taxpayer’s Remedies
not covered by these Letters, ICTSI no longer made separate claims because of its
belief that any subsequent written claim would have likewise been denied or would
similarly not be acted upon.
The doctrine of exhaustion of administrative remedies requires recourse to the

pertinent administrative agency before resorting to court action, otherwise the case
shall be dismissed. If a party can prove that the resort to the administrative remedy
would be an idle ceremony such that it will be absurd and unjust for it to continue
seeking relief that evidently will not be granted it, then the doctrine will not apply.
In this case, the filing of written claims with the City Treasurer for every
collection of tax would have been denied by the City Treasurer every time. Thus,
ICTSI’s failure to file written claims of refund for all the taxes paid subsequent to the
4th quarter of 2006 is warranted and is an exception to the application of the doctrine
of exhaustion of administrative remedies.
34
Taxation Law: Local Government Taxation: Taxpayer’s Remedies: Claim for
Refund of Tax
CLAIM FOR REFUND OF TAX

G.R. No. 196681, 27 June 2018
THIRD DIVISION
(Martires, J.)
FACTS:
The City of Manila, through its City Treasurer, assessed Cosmos Bottling
Corporation (Cosmos) local business taxes. Cosmos protested the assessment. The
City Treasurer denied the protest. Nevertheless, Cosmos paid the amount assessed.
Cosmos filed a claim for refund.
Due to the inaction of the City Treasurer of Manila in the claim for refund,
Cosmos filed a complaint with the Regional Trial Court (RTC). The RTC ruled in favor
of Cosmos but denied the claim for refund. It then filed a Petition for Review before
the Court of Tax Appeals (CTA). The CTA ordered the refund of the amount paid.
The City of Manila sought reconsideration, but their motion was denied so they
appealed before the Supreme Court. The City of Manila submits that the assessment
against Cosmos became final and executory when the latter effectively abandoned its
protest and instead sued in court for the refund of the assessed taxes and charges.
ISSUE:
May a taxpayer who filed a protest and paid the disputed assessment later on
institute an action for refund?
RULING:
Yes, a taxpayer who had protested and paid an assessment may later on
institute an action for refund.
There are two conditions that must be satisfied in order to successfully

prosecute an action for refund in case the taxpayer had received an assessment:
(1) Pay the tax and administratively assail within 60 days the assessment
before the local treasurer, whether in a letter-protest or in a claim for
refund; and
(2) Bring an action in court within thirty (30) days from decision or inaction
by the local treasurer, whether such action is denominated as an appeal
from assessment and/or claim for refund of erroneously or illegally
collected tax.
Cosmos may resort to, as it actually did, the alternative procedure of seeking
a refund after timely protesting and paying the assessment. Considering that Cosmos
initiated the judicial claim for refund within 30 days from receipt of the denial of its
35
Taxation Law: Local Government Taxation: Taxpayer’s Remedies: Claim for
Refund of Tax
protest, it stands to reason that the assessment which was validly protested had not
yet attained finality. It could then validly institute the refund despite its previous
protest and payment of the assessment.
36
Taxation Law: Local Taxation: Taxpayer’s Remedies: Claim for Refund or Tax
Credit for Erroneously or Illegally Collected Tax, Fee or Charge
CLAIM FOR REFUND OR TAX CREDIT FOR ERRONEOUSLY OR ILLEGALLY

COLLECTED TAX, FEE OR CHARGE

MANILA et.al.
G.R. No. 185622 October 17, 2018
THIRD DIVISION
(Leonen, J.)
FACTS:
International Container Terminal Services, Inc. (ICTSI) was assessed for two
local business taxes pursuant to an ordinance. ICTSI paid the taxes under protest in
order to be issued its business permits. Such protest only covered the assessments
for the first three quarters of 1999.
When the City Treasurer failed to act within 60 days from the protest, ICTSI
filed a Petition for Certiorari and Prohibition before the Regional Trial Court (RTC).
However, the RTC dismissed the petition because the proper remedy should have
been an appeal within 60 days from the receipt of the denial of the city treasurer to
the Court of Tax Appeals (CTA) as prescribed under Section 195 of the Local
Government Code (LGC). The RTC held that for ICTSI’s failure to avail of the proper
remedy, the assessments made against it became conclusive and unappealable.
In a Petition for Review before the CTA Division, the Division ordered a partial
refund representing the erroneously paid business taxes for the first three quarters
of 1999. It did not order the City of Manila to refund the taxes paid by ICTSI beginning
the 4th quarter of 1999 because ICTSI failed to substantiate its claims under Section
195 of the LGC.
ICTSI, however, argued before the CTA En Banc that Section 196 of the LGC
should be applied because it was requesting for a refund for the erroneously paid
taxes. However, the CTA En Banc decided in favor of City of Manila finding that since
ICTSI paid the taxes under the assessment, its claim for refund assumed that the
assessment was wrong.
Hence, this petition before the Supreme Court. ICTSI argues that the taxes were
required for the issuance of its business permit, hence it was forced to pay the
assessment under protest. It states that it was exactly the situation contemplated
under Section 196 of the LGC, which involves the recovery of any tax, fee, or charge
erroneously or illegally collected, thus reiterating the applicability of Section 196 in
the present situation.
ISSUE:
Which between Section 195 or 196 of the Local Government Code governs
ICTSI’s claim for refund?
RULING:
37
Taxation Law: Local Taxation: Taxpayer’s Remedies: Claim for Refund or Tax
Credit for Erroneously or Illegally Collected Tax, Fee or Charge
Section 196 is applicable because there was no notice of assessment issued by

the Local Treasurer after the 3rd quarter of 1999.
Sections 195 and 196 of the LGC govern the remedies of a taxpayer for the
taxes collected by the local government units (LGUs), except for real property taxes.
Section 195 of the LGC is a proper remedy against a notice of assessment

issued by the Local Treasurer. If the taxpayer receives an assessment and does not
pay the tax, its remedy is strictly confined to Section 195. It is the written protest
with the local treasurer that constitutes the administrative remedy. On the other
hand, if no assessment notice is issued by the Local Treasurer, and the taxpayer
claims that it erroneously paid a tax, fee, or charge, or that the tax, fee, or charge has
been illegally collected from him, then Section 196 applies. In Section 196, it is the
written claim for refund with the local treasurer that constitutes the administrative
remedy.
Here, no notice of assessment for deficiency taxes was issued by the City
Treasurer to ICTSI for the taxes collected after the first three (3) quarters of 1999.
Thus, Section 195 cannot apply subsequent to these periods.
In order to apply Section 195 of the LGC, there is a need for the issuance of a
notice of assessment stating the nature of the tax, fee or charge, the amount of
deficiency, the surcharges, interests and penalties. Yet, the “assessments” from the
4th quarter of 1999 onwards were merely Municipal License Receipts, Mayor's Permit,
Business Taxes, Fees & Charges Receipts, and Official Receipts issued by the Office
of the City Treasurer for local business taxes, which must be paid as prerequisites
for the renewal of petitioner's business permit in respondent City of Manila. While
these receipts state the amount and nature of the tax assessed, they do not contain
any amount of deficiency, surcharges, interests, and penalties due from petitioner.
They cannot be considered the "notice of assessment" required under Section 195 of
the Local Government Code.
Hence, Section 196 of the LGC applies for claims arising out of the taxes paid
beginning the 4th quarter of 1999.
38
Taxation Law: Local Taxation: Real Property Taxation: Imposition of Real
Property Tax
REAL PROPERTY TAXATION

IMPOSITION OF REAL PROPERTY TAX

BATANGAS, et. al.
G.R. No. 201736, September 5, 2018
THIRD DIVISION
(Peralta, J.)
FACTS:
Thirteen (13) parcels of land in Batangas are registered under the name of
Herarc Realty Corporation (Herarc Realty), an entity whose real properties are subject
to real property tax (RPT). These properties had been in the actual possession of Dr.
Rafael Manalo, Grace Oliva, and Freida Yap from March 2006 up to August 12, 2009.
By virtue of a Writ of Execution ordered by the Makati Regional Trial Court (RTC),
Herarc Realty was only able to take full possession and control of the subject
properties on August 13, 2009.
The Provincial Treasurer of Batangas assessed Herarc Realty with unpaid RPT
over the properties which included the unpaid RPT for the years 2007, 2008 and
January to August 2009. Herarc Realty paid the assessment under protest,
contending that the RPT assessment is illegal and erroneous, because the subject
property was not in its possession during the covered period. It alleged that unpaid
tax is chargeable against Manalo, Oliva and Yap as they had actual or beneficial use
and possession of the properties regardless of whether or not he is the owner thereby
at the time the RPT accrued.
The Regional Trial Court (RTC) denied the petition stating that the real estate
property must be the one who would be responsible for the payment of RPT if the
beneficial user failed to pay the required RPT.
ISSUE:
Is Herarc Realty liable for the RPT assessed over the subject properties?
RULING:
Yes, Herarc Realty is liable and shall pay for the Real Property Tax over the
subject properties.
In real estate taxation, the unpaid tax attaches to the property. The personal
liability for the tax delinquency is generally on whoever is the owner of the real
property at the time the tax accrues. This is a necessary consequence that proceeds
from the fact of ownership. Therefore, as a rule, an entity not exempt from payment
of taxes must be responsible for the payment of the deficiency taxes under the theory
that unpaid taxes attach to the land. It follows then that a beneficial user of the
property owned by tax exempt entity must be answerable for the payment of RPT on
the real estate property owned by tax exempt entity.
39
Taxation Law: Local Taxation: Real Property Taxation: Imposition of Real Property
Taxes
METROPOLITAN WATERWORKS SEWERAGE SYSTEM v. LOCAL GOVERNMENT

OF QUEZON CITY, et al.
G.R. No. 194388, November 07, 2018
THIRD DIVISION
(Leonen, J.)
FACTS:
In 1971, Congress enacted Republic Act No. 6234, creating the Metropolitan
Waterworks and Sewerage System (MWSS).
Sometime in July 2007, the Local Government of Quezon City (Quezon City)
assessed MWSS with Real Property Tax (RPT) Delinquency for various taxable years.
MWSS filed for Certiorari with TRO with the Court of Appeals (CA). It argued
that its real properties were exclusively devoted to public use.
MWSS also contends that it is a government instrumentality exempt from said

tax under Section 133 (o) of the Local Government Code (LGC). It points out that
Section 18 of its charter expressly exempts it from the payment of RPT. Further,
MWSS argues that it is an instrumentality of the government holding properties of
the public dominion, even directing the attention of the court to Executive Order No.
596 issued in 2006 which categorized MWSS as a government agency that is exempt
from the payment of real property taxes, and to R.A. No. 10149 where the Congress
listed it as one of the government instrumentalities with corporate powers like the
Manila International Airport Authority and the Philippine Fisheries Development
Authority.
On the other hand, Quezon City points out that MWSS holds properties in the
exercise of its proprietary functions, and thus, are susceptible to real property tax.
They point out that the provision granting them exemption has since been repealed
by Section 234 of the LGC, enacted in 1990.
ISSUE:
Can the Local Government of Quezon City assess real property taxes on MWSS,
a government entity?
RULING:
No.
Under the LGC, local government units (LGUs) are granted the power to levy
taxes on real property not otherwise exempted under the law. The same Code also
provides two specific limitations on the LGU’s power to tax. The Court also ruled in
the case of Manila International Airport Authority v. Court of Appeals8, that government
instrumentalities are exempt from payment of RPT under Section 133 (o) of the LGC.
8
G.R. No. 155650. July 20, 2006.
40
Taxation Law: Local Taxation: Real Property Taxation: Imposition of Real Property
Taxes
A government-owned and controlled corporation (GOCC), on the other hand, is not

exempt from RPT under Section 234 of the same Code which withheld the exemption.
Applying these parameters, the Court concluded that MWSS is a GOCC. Thus,
under the LGC, only its machinery and equipment actually, directly and exclusively
used for public purposes is exempt from RPT. However, the Court's categorization
cannot supplant that which was previously made by the Executive and Legislative
Branches. Based on the facts, MWSS has already been expressly categorized by E.O.
No. 596, and by R.A. No. 10149 as a government instrumentality with corporate
powers exempt from RPT.
Therefore, MWSS is not liable to Quezon City for real property taxes, except if
the beneficial use of its properties has been extended to a taxable person. Quezon
City has not alleged that the beneficial use of any of MWSS’s properties was extended
to a taxable person. In the absence of any allegation to the contrary, MWSS’s
properties in Quezon City are not subject to the levy of real property taxes.
41
Taxation Law: Local Taxation: Remedies of LGUs for Collection of Real Property
Taxes: Issuance of Notice of Delinquency for Real Property Tax Payment
REMEDIES OF LGUs FOR COLLECTION OF REAL PROPERTY TAXES

ISSUANCE OF NOTICE OF DELINQUENCY FOR REAL PROPERTY TAX PAYMENT
NOEMI S. CRUZ AND HEIRS OF HERMENEGILDO T. CRUZ, REPRESENTED BY

NOEMI S. CRUZ v. CITY OF MAKATI, et. al.
G.R. No. 210894, September 12, 2018
FIRST DIVISION
(Del Castillo, J.)
FACTS:
Spouses Noemi and Hermenegildo T. Cruz (Spouses Cruz), were the registered
owners of the subject property in Makati City which was levied upon by the City of
Makati for non-payment of real property taxes thereon after their designated
employee-representative failed to remit the entrusted tax payments to the city and
appeared to have absconded with the money instead. Eventually, the subject property
was auctioned off and sold to the highest bidder, Laverne Realty and Development
Corporation (Laverne).
In 2007, Spouses Cruz filed a complaint before Makati Regional Trial Court
(RTC) alleging that the delinquency sale of their property was null and void because
of the following grounds:
a. no warrant of levy was ever received by them;

b. the notice of delinquency sale was not posted in the City Hall of Makati and
in the barangay where the property is located in compliance with Section
254 of the Code;
c. the notice of billing statements for real property were mistakenly sent to
Unit 1407 instead of Unit 407; and
d. the Makati Treasurer's Office did not notify the spouses of the warrant of
levy as required by the LGC.
ISSUE:
Is the levy by the City of Makati of the property and its subsequent sale
through auction valid?
HELD:
No.
Section 254 of the LGC provides for the posting and publication requirement
for the Notice of Delinquency in a tax delinquency sale. Section 258, meanwhile,
provides for the rules to be observed in the issuance and service of a Warrant of Levy
upon the taxpayer. And finally, Section 260 provides for the requirements to be
followed by the local treasurer in a public auction sale of the levied properties. These
requirements are mandatory. Strict adherence is imperative not only for the
protection of the taxpayers, but also to dispel any possible suspicion of collusion
42
Taxation Law: Local Taxation: Remedies of LGUs for Collection of Real Property
Taxes: Issuance of Notice of Delinquency for Real Property Tax Payment
between the buyer and the public officials. The non-fulfilment of these requirements
vitiates the sale.
In this case, there was no evidence presented that the Notice of Tax
Delinquency was posted in the City Hall of Makati and in the barangay where the
property is located in compliance with Section 254 of the Code. Instead, the records
showed that the City of Makati merely requested a Certification from the Barangay
indicating that the list of properties for public auction were posted in the said
barangay. However, the Barangay Certification itself was not presented in court.
Furthermore, a mere request for Certification is not sufficient compliance with the
law.
The law provides that the Notice of Tax Delinquency must be published twice
in a newspaper of general circulation, however, the evidence presented shows that
the Notice of Tax Delinquency was published only once on March 25, 2006. While the
Notice of Public Auction was published thrice, it must be again remembered that the
Notice of Public Auction is different from the Notice of Tax Delinquency.
Furthermore, there was no showing that the advertisement for the public sale
of the delinquent property, as required by the LGC, was actually served or received
by Noemi Cruz. The law requires service of the warrant of levy to the taxpayers. The
registry receipt merely proves that the same was mailed but the actual service or
receipt of the same by the delinquent taxpayer cannot be deduced therefrom.
Likewise, there is also doubt as to whether the billings were sent to the correct
address of the respondents as the notations in the upper portion of the billings
pertain to a Unit "1407" instead of Unit "407".
Therefore, having failed to meet the mandatory due process requirements

prescribed by the LGC regarding tax delinquency sales, the levy by the City of Makati
of the properties of the Spouses Cruz shall be rendered null and void.
43
Taxation Law: Local Taxation: Taxpayer’s Remedies: Contesting an Assessment of
Value of Real Property: Appeal to the Local Board of Assessment Appeals
CONTESTING AN ASSESMENT OF VALUE OF REAL PROPERTY

APPEAL TO THE LOCAL BOARD OF ASSESSMENT APPEALS
ALLIANCE OF QUEZON CITY HOMEOWNERS' ASSOCIATION, INC., v. THE

QUEZON CITY GOVERNMENT
G.R. No. 230651, September 18, 2018
EN BANC
(Perlas-Bernabe, J.)
FACTS:
In 2010, the Department of Interior and Local Government (DILG) and the
Department of Finance (DOF) issued a Memorandum directing all Local Government
Units (LGUs) to implement Section 219 of the Local Government Code (LGC), which
requires assessors to revise the real property assessments in their jurisdictions.
Hence, the preparation of the Quezon City (QC) Assessor of a revised schedule of the
fair market values (FMVs) which was later on approved by the LGU of QC.
Alliance filed a Petition directly before the Supreme Court, claiming that the
2016 Ordinance is unconstitutional for violating substantive due process,
considering that the increase in FMVs, which resulted in an increase in the taxes to
be paid, was unjust, excessive, oppressive, arbitrary, and confiscatory as proscribed
under Section 130 of the LGC.
Quezon City Government countered that Alliance failed to exhaust its

administrative remedies as they should have first filed a protest before the City
Treasurer, as well as assailed the constitutionality of the 2016 Ordinance before the
Secretary of Justice.
In its Reply, Alliance argued that the exhaustion of such remedies is

inapplicable in this case because of the strong public interest involved.
ISSUES:
Is the petition infirm for violating the doctrine of exhaustion of administrative

remedies?
RULING:
No.
The doctrine requires that before a party may seek intervention from the court,
he or she should have already exhausted all the remedies in the administrative level.
The LGC provides two remedies in relation to real property tax assessments or
tax ordinances. First, an appeal to Local Board of Assessment Appeals to question
the reasonableness of the amount assessed; and, second an appeal before the
Secretary of Justice to question the validity or legality of a tax ordinance. However,
the rule has exceptions, one of which is when strong public interest is involved.
44
Taxation Law: Local Taxation: Taxpayer’s Remedies: Contesting an Assessment of
Value of Real Property: Appeal to the Local Board of Assessment Appeals
An LGU’s authority to increase the FMVs of properties for purposes of local

taxation is a question that affects the public at large. In this case, the effect of the
2016 Ordinance is apparent, considering that QC has a land area of 16,112.8
hectares, which is almost ¼ of Metro Manila. Furthermore, QC holds 23.3% of Metro
Manila’s total population. Accordingly, the Court exempts this case from the rule on
administrative exhaustion.
45
Taxation Law: Judicial Remedies: Jurisdiction of the CTA
IV. JUDICIAL REMEDIES

COURT OF TAX APPEALS
JURISDICTION OF THE COURT OF TAX APPEALS

ISLANDS
G.R. No. 224327, June 11, 2018
THIRD DIVISION
(Peralta, J.)
FACTS:
Citytrust Banking Corporation (CBC) filed its Annual Income Tax Returns
(AITR) for taxable year 1986. Afterwards, the Commissioner of Internal Revenue (CIR)
issued a Pre-Assessment Notice (PAN) and demand letters against CBC for deficiency
income taxes. In turn, CBC’s counsel offered a compromise settlement on its
deficiency Income Tax assessment which the CIR approved. CBC’s request for
reconsideration of the amount of the compromise was ultimately denied by the CIR.
Pursuant to the said denial, the CIR issued a Notice of Denial addressed to the
Bank of the Philippine Islands (BPI), requesting for the payment of CBC's deficiency
Income Tax for taxable year 1986. The CIR also issued a Warrant of Distraint and/or
Levy against BPI, prompting the latter to file a Petition for Review with the Court of
Tax Appeals (CTA).
The CTA Special Third Division held that BPI can validly assail the Warrant of
Distraint and/or Levy, as its appellate jurisdiction was not limited to cases which
involve decisions of the CIR on matters relating to assessments or refunds. Aggrieved,
the CIR filed a petition for review with the CTA En Banc. The CTA En Banc affirmed
the ruling of the division. Hence, this petition was filed before the Supreme Court.
ISSUE:
Does the CTA have jurisdiction over cases asking for cancellation and
withdrawal of a warrant of distraint or levy?
RULING:
Yes, the CTA has jurisdiction over cases asking for cancellation and
withdrawal of a warrant of distraint or levy.
Pursuant to Section 7 of Republic Act (R.A.) No. 9282, CTA has exclusive
appellate jurisdiction to review by appeal when there is inaction by the CIR in cases
involving disputed assessments, refunds of internal revenue taxes, fees or other
charges, penalties in relation thereto, or other matters arising under the National
Internal Revenue Code or other laws administered by the BIR.
The instant case falls under the “other matters” cognizable by the CTA in view of
its appellate jurisdiction. Thus, CTA did not err in its ruling that it has jurisdiction
46
over cases asking for the cancellation and withdrawal of a warrant of distraint and/or
levy.
47
BASES CONVERSION AND DEVELOPMENT AUTHORITY v. COMMISSIONIER OF

INTERNAL REVENUE
G.R. No. 205925 June 20, 2018
SECOND DIVISION
(Reyes, Jr., J.)
FACTS:
Bases Conversion and Development Authority (BCDA) filed a petition for review
with Court of Tax Appeals (CTA) in order to preserve its right to pursue its claim for
refund of Creditable Withholding Tax (CWT) in connection with its sale of the BCDA-
allocated units as its share in the Serendra Project pursuant to the Joint
Development Agreement with Ayala Land, Inc.
The petition for review was filed with a Request for Exemption from payment
of Filing Fees. The CTA First Division denied BCDA’s Request for Exemption. The
Motion for Reconsideration and appeal with the CTA En Banc was likewise denied
stating that due to BCDA’s non-payment of the prescribed legal fees, the Court has
not acquired jurisdiction over the case. BCDA emphasized its position that it is
exempt from the payment of such fees, hence this petition.
ISSUE:
Is BCDA exempt from the payment of docket/legal fees to the Court of Tax
Appeals?
RULING:
Yes, BCDA is exempt from the payment of docket/legal fees to the Court of Tax
Appeals.
In view of Section 3 of Republic Act (R.A.) No. 7227, also known as The Bases
Conversion and Development Act of 1992, BCDA is a government instrumentality
vested with corporate powers. It has an authorized capital of Php100 Billion not
divided into shares of stock. BCDA has no voting shares and likewise has no provision
which authorizes the distribution of dividends and allotments of surplus and profits
to BCDA’s stockholders. Hence, BCDA is not a stock corporation. It also does not
qualify as a non-stock corporation because it was organized for the purpose of
owning, holding and/or administering the military reservations in the country and
implement its conversion to other productive uses.
All told, it is clear that BCDA is a government instrumentality which is exempt from
the payment of docket fees required under Section 21, Rule 141 of the Rules of Court.
48

GOVERNMENT EMPLOYEES et. al,. v. COMMISSIONER, BUREAU OF INTERNAL
REVENUE et. al.
G.R. Nos. 213446 & 213658 July 3, 2018,
EN BANC
(Caguioa, J.)
FACTS:
Commissioner of Internal Revenue (CIR) issued the assailed Revenue

Memorandum Order (RMO) No. 23-2014.
Confederation for Unity, Recognition and Advancement of Government

Employees (COURAGE) et al., immediately filed a Petition for Prohibition and
Mandamus imputing grave abuse of discretion on the part of the CIR before the
Supreme Court.
ISSUE:
a. Is there a violation of the doctrine of exhaustion of administrative

remedies?
b. Is there a violation of the rule on hierarchy of courts?
RULING:
(a) Yes, there is a violation of the doctrine of exhaustion of administrative

remedies.
The plain, speedy and adequate remedy expressly provided by law is an appeal
of the assailed RMO with the Secretary of Finance under Section 4 of the National
Internal Revenue Code (NIRC) which provides that “the power to interpret the
provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the CIR, subject to review by the Secretary of Finance.”
Clearly, the assailed RMO falls under the revenue issuances that are subject
to the review of the Secretary of Finance. Therefore, a taxpayer who is aggrieved by
the CIR’S ruling is granted a period of thirty (30) days from receipt of the adverse
ruling by the CIR to file with the Office of the Secretary of Finance a request for review
in writing and under oath.
In this case, since COURAGE, et.al, failed to file an administrative appeal to

the Secretary of Finance and to prove the existence of any of the recognized exceptions
to the salutary rule of the Doctrine of Exhaustion of Administrative Remedy, there
exists a ground to dismiss the Petition.
(b) Yes, there is a violation of the rule on hierarchy of courts.
49
Rulings of the Secretary of Finance in the exercise of its power of review under
Section 4 of the NIRC of 1997, as amended, are appealable to the Court of Tax Appeals
(CTA). The Court explained that while there is no law which explicitly provides where
rulings of the Secretary of Finance under the adverted to NIRC provision are
appealable, Section 7(a) of RA No. 1125, the law creating the CTA, is nonetheless
sufficient, albeit impliedly, to include appeals from the Secretary's review under
Section 4 of the NIRC. That is, the CTA has exclusive appellate jurisdiction to review,
on certiorari, the constitutionality or validity of revenue issuances, even without a
prior issuance of an assessment.
Here, COURAGE, et.al. violated the rule on hierarchy of courts as the petitions
should have been initially filed with the CTA, having the exclusive appellate
jurisdiction to determine the constitutionality or validity of revenue issuances.
Nevertheless, despite the procedural infirmities of the petitions that warrant their
outright dismissal, the Supreme Court deemed it prudent, if not crucial, to take
cognizance of, and accordingly act on, the petitions as they assail the validity of the
actions of the CIR that affect thousands of employees in the different government
agencies and instrumentalities.
50
MACARIO LIM GAW, JR. v. COMMISSION OF INTERNAL REVENUE

G.R. NO. 222837, JULY 23, 2018
FIRST DIVISION
(Tijam, J.)
FACTS:
Macario Lim Gaw Jr. (Gaw) was confused as to whether he had to pay docket
fees on the belief that the civil action for recovery of civil liability for taxes and
penalties of 2008 was deemed instituted in the criminal case of tax evasion.
Gaw filed a motion in order to clarify whether he has to file a separate petition
to question the deficiency assessment. CTA division held that the recovery of the civil
liability is deemed instituted with the criminal case. As a caution, petitioner still filed
a Petition for Review Ad Cautelam (with Motion for Consolidation with CTA Criminal
Case). Upon filing of the said petition, the clerk of court of the CTA assessed Gaw
with "zero filing fees."
CTA division dismissed the case on the ground that Gaw did not pay the filing
fees. The CTA En Banc affirmed the said decision of the CTA division.
ISSUE:
Did the CTA en banc err in affirming the dismissal of the case?
RULING:
Yes, CTA en banc erred in affirming the dismissal of the case.
Basic is the rule that the payment of docket and other legal fees is both
mandatory and jurisdictional. The court acquires jurisdiction over the case only upon
the payment of the prescribed fees.
In this case, records reveal that Gaw has no intention to defraud the
government in not paying the docket fees. In fact, when he appealed the FDDA insofar
as the taxable year 2007 was concerned, he promptly paid the docket fees when he
filed his Petition for Review. Confusion resulted when the FDDA also covered tax
deficiencies pertaining to taxable year 2008 which was also the subject of the
consolidated criminal cases for tax evasion. The CTA Division even stated that the
civil action was already deemed instituted with the criminal case. Gaw merely relied
in good faith that he is no longer required to pay the docket fees. As such, CTA erred
in simply dismissing the case on the ground of non-payment of docket fees.
51

INTERNAL REVENUE
G.R. No. 191495, July 23, 2018
THIRD DIVISION
(Martires, J.)
FACTS:
On 30 March 2005, Nippon Express filed with the Bureau of Internal Revenue
(BIR) an application for tax credit of its excess/unused input taxes attributable to
zero-rated sales. By reason of the inaction by the BIR, Nippon Express filed a Petition
for Review before the Court of Tax Appeals (CTA) on 31 March 2006.
The CTA Division ruled in favor of the CIR. Nippon Express filed a Motion for
Reconsideration but was denied by the CTA in its Resolution. Hence, Nippon Express
filed a Petition for Review with the CTA En Banc. The CTA En Banc affirmed the
decision of the CTA Division.
ISSUE:
Did the CTA validly obtain jurisdiction over the case?
RULING:
No, the CTA did not validly obtain jurisdiction over the case.
Section 112 of the National Internal Revenue Code (NIRC) states that a VAT-
registered taxpayer may file its claim for refund with the BIR within two (2) years from
the close of the taxable quarter when the pertinent zero-rated sales were made. The
CIR is given a 120-day period to decide. In case of whole or partial denial of or inaction
on the administrative claim, the taxpayer may appeal to the CTA within thirty (30)
days counted from the receipt of the decision or inaction by the CIR. This 30-day
period of appeal is mandatory and jurisdictional.
In this case, Nippon Express timely filed its administrative claim on 30 March
2005, or within the two-year prescriptive period. The CIR had 120 days, or until 28
July 2005, the last day of the 120-day period, to decide the claim. The CIR did not
act on it. Thus, Nippon Express had until 27 August 2005, the last day of the 30-day
period, within which to appeal to the CTA. However, Nippon Express filed its petition
for review with the CTA only on 31 March 2006, or two hundred forty-six (246) days
from the inaction by the CIR. In other words, the petition of Nippon Express was
belatedly filed with the CTA and the court ought to have dismissed it for lack of
jurisdiction.
52

BATANGAS, et. al.
G.R. No. 201736, September 5, 2018
THIRD DIVISION
(Peralta, J.)
FACTS:
The Provincial Treasurer of Batangas assessed Herarc Realty with unpaid Real
Property Tax (RPT) over its Batangas properties covering the periods 2007, 2008 and
January to August 2009. The demand was reiterated in letters later on.
Herarc Realty paid the assessment under protest contending that Manalo,
Oliva and Yap should be the ones charged with RPT as they had its actual or
beneficial use and possession of the properties at the time the RPT accrued. Less
than a month later, Herarc Realty also filed a Petition for Prohibition and Mandamus
before the Regional Trial Court (RTC) against the Provincial Treasurer of Batangas
which was denied. When Herarc Realty’s Motion for Reconsideration before the RTC
was likewise denied, Herarc Realty directly filed before the Supreme Court a Rule 45
Petition.
ISSUE:
Was the direct recourse of Herarc Realty to the Supreme Court proper?
RULING:
No.
The right to appeal is a statutory right, thus, the party who intends to appeal
must comply with the procedures and rules governing appeals; otherwise, the right
of appeal may be lost or squandered.
Under Republic Act (R.A.) 9282, the appellate jurisdiction of the CTA over
decisions, orders, or resolutions of the RTC becomes operative when the latter has
ruled on a local tax case. Among the possible issues are the legality or validity of the
RPT assessments, protest of assessments, disputed assessments, surcharges or
penalties, legality or validity of a tax ordinance, claims for tax refund/credit, claims
for tax exemption, actions to collect taxes due and even prescription of assessment.
Evidently, Herarc Realty erred in its appeal. Herarc Realty’s direct
recourse to the RTC is warranted since the issue of the legality or validity of the
assessment is a question of law. However, as a taxpayer not satisfied with the RTC
decision, it should have filed a petition for review before the Court of Tax Appeals
(CTA). The decision, ruling or resolution of the CTA, sitting as Division, may further
be reviewed by the CTA En Banc. It is only after this procedure has been exhausted
that the case may be elevated to the Supreme Court.
53
COMMISSIONER OF INTERNAL REVENUE v. STANDARD INSURANCE CO., INC.

G.R. NO. 219340, November 07, 2018
FIRST DIVISION
(Bersamin, J.)
FACTS:
Standard Insurance Co., Inc. (Standard Insurance) received from the Bureau
of Internal Revenue (BIR) a Preliminary Assessment Notice (PAN) for deficiency in
payment of Documentary Stamp Tax (DST) for taxable year 2011. Standard Insurance
contested the PAN, but the BIR sent a formal letter of demand. Later, Standard
Insurance received the Final Decision on Disputed Assessment (FDDA). It sought
reconsideration of the FDDA and objected to the tax imposed pursuant to Section
184 of the National Internal Revenue Code (NIRC) as violative of the constitutional
limitations on taxation.
Instead of filing an appeal before the Court of Tax Appeals (CTA), Standard
Insurance filed a civil case before the Regional Trial Court (RTC) for declaratory relief
with a prayer of TRO and/or a writ of preliminary injunction.
The RTC issued a TRO, and eventually issued a writ of preliminary injunction
enjoining the BIR to implement the provisions of the NIRC and collect the assessed
taxes from Standard Insurance.
The Commissioner of Internal Revenue (CIR) appealed directly to the Supreme

Court.
ISSUE:
Is declaratory relief procedurally proper as a remedy?
RULING:
No.
Standard Insurance’s proper remedy upon receipt of the FDDA for the DST
deficiency for taxable year 2011 was not the action for declaratory relief but an appeal
taken in due course to the CTA.
In this case, instead of appealing in due course to the CTA, it resorted to the
RTC to seek and obtain declaratory relief. By choosing the wrong remedy, Standard
Insurance lost its proper and true recourse.
Worse, the choice of the wrong remedy rendered the assessment for the DST
deficiency for taxable year 2011 final as a consequence. As such, the petition for
declaratory relief, assuming its propriety as a remedy for Standard Insurance,
became mooted by the finality of the assessment.
54

G.R. No. 196681, 27 June 2018
THIRD DIVISION
(Martires, J.)
FACTS:
The City of Manila, through its City Treasurer, assessed Cosmos Bottling
Corporation (Cosmos) local business taxes. Cosmos protested the assessment. The
City Treasurer denied the protest. Nevertheless, Cosmos paid the amount as
assessed. Later, Cosmos filed a claim for refund.
Due to the inaction of the City Treasurer of Manila in the claim for refund,
Cosmos filed a complaint with the Regional Trial Court (RTC). The RTC ruled for
Cosmos but denied the claim for refund. Cosmos then filed a petition for review before
the Court of Tax Appeals (CTA). The CTA Division affirmed the finding of the RTC and
ordered the refund of the amount paid.
Aggrieved, the City of Manila filed a petition for review directly with the CTA
En Banc. The CTA En Banc ruled that the direct resort to it without prior motion for
reconsideration or new trial before the CTA Division violates rules of procedure.
ISSUE:
Is the filing of a motion for reconsideration or new trial before the CTA Division
an indispensable requirement for filing an appeal before the CTA En Banc?
RULING:
Yes, the filing of a motion for reconsideration or new trial before the CTA
Division is an indispensable requirement for filing an appeal before the CTA En Banc
Failure to file such motion for reconsideration or new trial is cause for
dismissal of the appeal before the CTA En Banc. Section 1, Rule 8 of the CTA Rules
provides:
Section 1. Review of cases in the Court en banc. — In cases falling

under the exclusive appellate jurisdiction of the Court en banc,
the petition for review of a decision or resolution of the Court in
Division must be preceded by the filing of a timely motion for
reconsideration or new trial with the Division.
It is clear from the cited rule that the filing of a motion for reconsideration or new
trial is mandatory – not merely directory – as indicated by the word "must." Thus,
CTA En Banc did not acquire jurisdiction over the petition of the City of Manila.
55
Taxation Law: Procedures: Non-Availability of Injunction to Restrain Collection of Tax
PROCEDURES
NON-AVAILABILITY OF INJUNCTION TO RESTRAIN COLLECTION OF TAX
COMMISSIONER OF INTERNAL REVENUE v. STANDARD INSURANCE CO., INC.

G.R. NO. 219340, November 07, 2018
FIRST DIVISION
(Bersamin, J.)
FACTS:
Standard Insurance Co., Inc. (Standard Insurance) received from Bureau of

Internal Revenue (BIR) assessment notices regarding its liability arising from a
deficiency taxes for taxable year 2011, and subsequently received a Final Decision on
Disputed Assessment (FDDA). Standard Insurance objected to the tax imposed
pursuant to Section 184 of the National Internal Revenue Code (NIRC) as violative of
the constitutional limitations on taxation.
Later, Standard Insurance received a demand for payment of its deficiency

income taxes, VAT, and other taxes for taxable year 2012 and deficiency
Documentary Stamp Tax (DST) for 2013.
Standard Insurance filed a civil case before the Regional Trial Court (RTC),
with a prayer for issuance of Temporary Restraining Order (TRO) or of a writ of
preliminary injunction, for judicial determination of constitutionality of Sections 108
and 184 of the NIRC with respect to the tax to be paid by non-life insurance
companies.
The RTC issued the TRO with respect to the FDDA, and to the pending
assessments for taxable years 2012 and 2013. Later, the RTC issued a writ of
preliminary injunction. The Commissioner of Internal Revenue (CIR) moved for
reconsideration but was denied.
The CIR appealed directly to the Supreme Court.
ISSUE:
Is the injunctive relief available as a remedy to assail the collection of taxes?
RULING:
No.
Section 218 of the NIRC expressly provides that "No court shall have the
authority to grant an injunction to restrain the collection of any national internal
revenue tax, fee or charge imposed by the NIRC.”
Thus, the RTC not only grossly erred in giving due course to the petition for
declaratory relief, and in ultimately deciding to permanently enjoin the enforcement
56
Taxation Law: Procedures: Non-Availability of Injunction to Restrain Collection of Tax
of the specified provisions of the NIRC against Standard Insurance. Even worse, RTC
acted without jurisdiction.
57
Taxation Law: Procedures: Institution of Civil Action in Criminal Actions
INSTITUTION OF CIVIL ACTION IN CRIMINAL ACTION
MACARIO LIM GAW, JR. v. COMMISSION OF INTERNAL REVENUE

G.R. No. 222837, JULY 23, 2018
FIRST DIVISION
(Tijam, J.)
FACTS:
Macario Lim Gaw Jr. (Gaw) conveyed ten parcels of land to Eagle I. Gaw and
paid the assessed Capital Gains Tax (CGT) and Documentary Stamp Tax (DST) arising
from the sale of the parcels of land. After payment, the Revenue District Officer (RDO)
issued the corresponding Certificates Authorizing Registration (CAR) and Tax
Clearance Certificates.
Two years later, the Commissioner on Internal Revenue (CIR) opined that Gaw
was not liable for the CGT but for the 32% regular income tax and 12% value added
tax because the properties sold were ordinary assets. Two criminal information for
tax evasion was filed against Gaw. Halfway through the trial, CIR issued a Final
Decision on Disputed Assessment (FDDA) against Gaw, assessing him of deficiency
taxes for the years 2007 and 2008. With respect to the deficiency assessment for
2008, which is already covered by the criminal case, Gaw filed a Petition for Review
Ad Cautelam with the Court of Tax Appeals (CTA). The CTA dismissed the Petition for
Review Ad Cautelam due to Gaw’s non-payment of filing fee.
Gaw argued that the civil aspect of the criminal case, which is the Petition for
Review Ad Cautelam, is deemed instituted upon the filing of the criminal action.
Thus, the CTA had long acquired jurisdiction over the civil aspect of the consolidated
criminal cases. Therefore, the CTA erred in dismissing the case.
ISSUES:
Is the civil action questioning the FDDA deemed instituted with the criminal
case for tax evasion?
RULING:
No, the civil action questioning the FDDA is not deemed instituted with the
criminal case for tax evasion.
It is well-settled that the taxpayer's obligation to pay the tax is an obligation

that is created by law and does not arise from the offense of tax evasion, as such, the
same is not deemed instituted in the criminal case.
Here, contrary to Gaw’s contention, the civil aspect is not deemed included in
the tax evasion case; the CTA had not acquired jurisdiction over the civil case.
58
Taxation Law: Procedures: Institution of Civil Action in Criminal Actions
—oOo—
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JUNE 2019

SAINT LOUIS UNIVERSITY

BAR ACADEMICS COMMITTEE

TAXATION LAW TEAM COVER/LAYOUT:

Philippine Copyright 2019

No portion of this publication may be reproduced, stored in a retrieval

I. GENERAL PRINCIPLES OF TAXATION ........................................................ 1

II. NATIONAL TAXATION .............................................................................. 4

III. LOCAL GOVERNMENT TAXATION .......................................................... 31

IV. JUDICIAL REMEDIES ............................................................................ 46

SUBJECT MATTER 2013 2014 2015 2016 2017 2018 TOTAL

REAL PROPERTY TAXATION

I. GENERAL PRINCIPLES OF TAXATION

COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM

Can BIR collect deficiency taxes by mere issuance of Collection Letters?

CITY OF MANILA v. COSMOS BOTTLING CORPORATION

The City of Manila assessed Cosmos Bottling Corporation (Cosmos) local

II. NATIONAL TAXATION

BUREAU OF INTERNAL REVENUE

CONFEDERATION FOR UNITY, RECOGNITION AND ADVANCEMENT OF

Commissioner of Internal Revenue (CIR) issued the assailed Revenue

Confederation for Unity, Recognition and Advancement of Government

Section III speaks of the obligation to withhold on compensation paid to

However, with respect to Section VI, which enumerates the persons

COMMISSIONER OF INTERNAL REVENUE v. J.P. MORGAN CHASE BANK, N.A.

Under BIR Rulings and the PEZA Memorandum Circular, registration of an

PeopleSupport is registered with PEZA as an Economic Zone Information

A perusal of the Agreement between J.P. Morgan Philippines and

As such, the Agreement, which is essentially a lease of facilities, is outside

CONCEPT OF WITHHOLDING TAXES

COMMISSIONER OF INTERNAL v. LA FLOR DELA ISABELA, INC.

The Commissioner of Internal Revenue (CIR) issued a Final Decision on

In Chamber of Real Estate and Builders’ Associations, Inc. v. Hon. Executive

1 628 Phil. 508, 536 (2010)

The CIR cites National Development Company v. Commissioner of Internal

In effect, therefore, the imposition of the deficiency taxes on the NDC is

A careful analysis of the above-quoted decision, however, reveals that the

Thus, withholding tax assessments such as EWT and WTC clearly

COMMISSIONER OF INTERNAL REVENUE v. NEGROS CONSOLIDATED

Negros Consolidated Farmers Multi-Purpose Cooperative (COFA) is a multi-

Yes, COFA is exempt from paying VAT and advanced VAT.

COFA is a VAT-Exempt agricultural cooperative. It is likewise established that

Having established that COFA is a cooperative in good standing and duly

UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC. v.

University Physicians Services Inc. – Management, Inc. (UPSI-MI) is a

Does the irrevocability rule apply exclusively to the carry-over option?

Yes, the irrevocability rule applies exclusively to the carry-over option.

The irrevocability rule enshrined in Section 76 of the National Internal

RHOMBUS ENERGY, INC. v. COMMISSIONER OF INTERNAL REVENUE

Although Rhombus Energy had actually exercised the option to be refunded,

PERIOD TO FILE ADMINISTRATIVE CLAIM FOR REFUND

KEPCO ILIJAN CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

Kepco Ilijan Corporation is engaged in the production and sale of electricity to

Hence, this Petition before the Supreme Court.

PERIOD TO FILE JUDICIAL CLAIM FOR REFUND

TEAM SUAL CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

TSC is only entitled to its second judicial claim for refund.

SAN ROQUE POWER CORPORATION v. COMMISSIONER OF INTERNAL

Were the judicial claims of San Roque Power prematurely filed?

KEPCO ILIJAN CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

Kepco Ilijan Corporation is engaged in the production and sale of electricity to

Hence, this Petition before the Supreme Court.

Was the judicial claim timely filed?

3 G.R. No. 184823, October 6, 2010, 632 SCRA 422.