Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,

Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban

LAND BANK OF THE PHILIPPINES VS. EDUARDO CACAYURAN
(G.R. No. 191667, April 22, 2015)
Land Bank of the Philippines (LBP) filed a Motion for
Reconsideration assailing the decision of the Supreme Court dated
April 17, 2013, which upheld the decision of the Court of Appeals
affirming the decision of the Regional Trial Court of Agoo, La Union,
Branch 31. LBP asserted that Cacayuran did not have a cause of
action since he was not a privy to the loan agreements entered into
by LBP and the Municipality of Agoo.
Petitioners Claim: LBP reiterated in its motion for
reconsideration that Eduardo Cacayuran (who filed a taxpayers
suit) had no legal standing to sue, and that Resolution Nos. 682005,. 139-2005, 126-2006 may be relied upon in validating the
two (2) subject loans entered into by the Municipality of Agoo with
LBP to wit: 1)P4 million, in financing the construction of ten (10)
kiosks as part of the Redevelopment Plan of Agoo Public Plaza, and
2) P28M for the construction a commercial center named Agoo
Peoples Center.
Respondents Claim: Cacayuran maintains that LBP did not raise
any new matter to warrant reconsideration of the decision of the
Supreme Court. Anent the Municipality of Agoos Motion to
Intervene, Cacayuran insists that the Municipality is not a real
party- in-interest to the instant case as his complaint is against the
municipal officers in their personal capacity for their ultra vires acts
which are not binding on the Municipality.
RTC of Agoo Ruling: RTC declared the subject loans null and void,
finding that the resolutions approving the procurement of the same
were passed in a highly irregular manner and thus ultra vires; that
the Municipality was not bound by the subject loans and that the
municipal officers be held personally liable; and that the Plaza lot is
a property for public use and thus it cannot be used as collateral for
the subject loans.
C.A. Ruling: CA affirmed the ruling of the RTC with modification
excluding the Vice Mayor from personal liability; that Cacayuran
has locus standi to file the instant complaint being a resident of the
Municipality and the issue involved public interest of
transcendental importance; Resolution was improperly passed due
to non-compliance with R.A. 7160; Plaza Lot is a property of public

dominion, hence, cannot be used as collateral; and procurement of

subject loans were ultra vires acts having been entered into without
proper authority and that the collaterals used constituted improper
disbursement of public funds.
Supreme Courts Decision on Petition for Review on
Certiorari: Court denied LBPs petition and affirmed the ruling of
the C.A. Hence, this motion for reconsideration by LBP.
ISSUE: Whether or not the Municipality of Agoo should be deemed
as an indispensable party to the instant case, and thus be ordered
impleaded herein.
HELD: The Supreme Court ruled in the affirmative and cited
Section 7, Rule 3 which provides that all indispensable parties
should be joined in a suit. The Municipality on whose land stands
and is found the Agoo Public Plaza, where the kiosks and
commercial building were under construction stands to be
benefited or injured by the judgment in the case so filed or the
party entitled to the avails of the case and is, therefore the real
party-in-interest.
Therefore, the decision of the RTC as affirmed by the CA decision,
which in turn was affirmed by the SC decision MUST NOT BE
BINDING upon the municipality, the real party-in-interest, the
indispensable party in fact, not impleaded as defendant in the case.
The Supreme Court is constrained to set aside all subsequent
actuations of the courts a quo including that of the Courts and
remand the case all the way back to the RTC which is directed to
order the respondent Cacayuran for the inclusion of all
indispensable parties to the case and its immediate disposition.
DPWH vs. ARLENE SORIANO
(G.R. No. 211666, February 25, 2015)
FACTS: On October 20, 2010, petitioner Republic of the Philippines,
represented by the Department of Public Works and Highways
(DPWH), filed a Complaint for expropriation against respondent
Arlene R. Soriano, the registered owner of a parcel of land
consisting of an area of 200 sq. m., situated at Gen. T. De Leon,
Valenzuela City. In its Complaint, petitioner averred that pursuant to
R.A. No. 8974, the property sought to be expropriated shall be used

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
in implementing the construction of the North Luzon Expressway
(NLEX)- Harbor Link Project (Segment 9) from NLEX to MacArthur
Highway, Valenzuela City.
On November 15, 2013, the RTC rendered its Decision,
declaring plaintiff to have lawful right to acquire possession and
title to the subject parcel of land, and likewise ordered plaintiff to
pay the defendant consequential damages, among others, which
shall include the value of the transfer tax necessary for the transfer
of the subject property from the name of the defendant to that of
the plaintiff.
On May 12, 2014, petitioner filed a petition for review under
Rule 45 invoking several arguments, one of which is that based on
the National Internal Revenue Code (NIRC) of 1997 and the Local
Government Code, it is the respondents obligation to pay the
transfer taxes, in the nature of Capital Gains Tax and Documentary
Stamp Tax.
ISSUE: Whether or not petitioner should be liable to pay the
transfer taxes
HELD: The petition is partly meritorious.
With respect to the capital gains tax, We find merit in
petitioners posture that pursuant to Sections 24(D) and 56(A)(3) of
the 1997 NIRC, capital gains tax due on the sale of real property is
a liability for the account of the seller. It has been held that since
capital gains is a tax on passive income, it is the seller, not the
buyer, who generally would shoulder the tax. Accordingly, the BIR,
in its BIR Ruling No. 476-2013, dated December 18, 2013,
constituted the DPWH as a withholding agent to withhold the 6%
final withholding tax in the expropriation of real property for
infrastructure projects. As far as the government is concerned,
therefore, the capital gains tax remains a liability of the seller since
it is a tax on the seller's gain from the sale of the real estate.
As to the documentary stamp tax, however, this Court
finds inconsistent petitioners denial of liability to the same.
Petitioner cites Section 196 of the 1997 NIRC as its basis, yet, a
perusal of the provision cited does not explicitly impute the
obligation to pay the documentary stamp tax on the seller. In fact,
according to the BIR, all the parties to a transaction are primarily
liable for the documentary stamp tax, as provided by Section 2 of
BIR Revenue Regulations No. 9-2000.
As a general rule, therefore, any of the parties to a
transaction shall be liable for the full amount of the documentary

stamp tax due, unless they agree among themselves on who shall
be liable for the same. In this case, there is no agreement as to the
party liable for the documentary stamp tax due on the sale of the
land to be expropriated.
But while petitioner rejects any liability for the same, this
Court must take note of petitioners Citizens Charter, issued by
petitioner DPWH itself on December 4, 2013, which explicitly
provides that the documentary stamp tax, transfer tax, and
registration fee due on the transfer of the title of land in the name
of the Republic shall be shouldered by the implementing agency of
the DPWH, while the capital gains tax shall be paid by the affected
property owner. Accordingly, it will be rather unjust for this Court
to blindly accede to petitioners vague rejection of liability in the
face of its issuance of the Citizens Charter, which contains a clear
and unequivocal assumption of accountability for the documentary
stamp tax. Had petitioner provided this Court with more convincing
basis, apart from a mere citation of an indefinite provision of the
1997 NIRC, its rejection of the payment of the same could have
been sustained.
BANCO DE ORO VS COMMISSIONER OF INTERNAL REVENUE
(G.R. No. 198756, January 13, 2015)
FACTS: The Bureau of Treasury issued 35 billion pesos worth of 10
years zero coupon treasury bonds denominated as PEACe bonds
(POVERTY ERADICATION AND ALLEVAITION CERTIFICATES). The
PEACe bonds would initially be purchased by a special purpose
vehicle on behalf of CODE- NGO, repackaged and sold at a premium
to the investors. The net proceeds of the sale will be used to endow
a permanent fund to finance meritorious activities and projects of
accredited NGOs in the country. In relation to this, CODE-NGO wrote
a letter to the BIR to inquire whether the said bonds are subject to
20% withholding tax. The BIR issued several rulings beginning with
BIR Ruling 020-2011 and was reiterated in BIR ruling no. 035200119 and BIR ruling DA-175-0120. These rulings say that in
determining whether financial assets such as a debt instrument are
deposit substitutes. Likewise, the phrase at any one time stated
in the rules should be construed as AT THE TIME OF ORIGINAL
ISSUANCE. With this Bureau of Treasury made a public offering of
the Peace bonds to the Government Securities Eligible Dealers
(GSED) whereby RCBC won as the highest bidder for approximately
10.17 billion resulting in a discount of approximately 24.83 billion.

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
RCBC Capital entered into an underwriting agreement with CODENGO whereby RCBC was appointed as the Issue Manager and Lead
underwriter for the offering of the Peace bonds. In October 7, 2011,
BIR Ruling 370-2011 was issued in response to Secretary of Finance
as to the proper tax treatment of the discounts and interest derived
from government bonds. It cited three other rulings in 2004 and
2005. The above ruling states that all treasury bonds (including
Peace binds) regardless of the number of purchases/lenders at the
time of origination or issuance are considered as deposit
substitutes. In the case of zero-coupon bonds, the discount
(difference between face value and purchase price or discounted
value of the bond) is treated as interest income of the purchaser or
holder.
ISSUE: Whether the PEACe Bonds are deposit substitutes and
thus subject to 20% final withholding tax under the 1997 National
Internal Revenue Code.
Related to this question is the
interpretation of the phrase borrowing from twenty (20) or more
individual or corporate lenders at any one time under Section
22(Y) of the 1997 National Internal Revenue Code, particularly on
whether the reckoning of the 20 lenders includes trading of the
bonds in the secondary market.
HELD: Bureau of Treasury is ordered to immediately release and
pay to the bondholders the amount corresponding to the 20% final
withholding tax that it withheld on October 18, 2011. The Bureau of
Internal Revenues interpretation in the three 2001 BIR Rulings is
inconsistent with law. Its interpretation of at any one time to
mean at the point of origination alone is unduly restrictive. BIR
Ruling No. 370-2011 is likewise erroneous insofar as it stated
(relying on the 2004 and 2005 BIR Rulings) that all treasury
bonds . . . regardless of the number of purchasers/lenders at the
time of origination/issuance are considered deposit substitutes. It is
thus declared void because it completely disregarded the 20 or
more lender rule added by Congress in the 1997 NIRC. It also
created a distinction for government debt instruments as against
those issued by private corporations when there was none in the
law. It may seem that there was only one lender RCBC on behalf
of CODE-NGO to whom the PEACe Bonds were issued at the time
of origination. However, a reading of the underwriting agreement
and RCBC term sheet reveals that the settlement dates for the sale
and distribution by RCBC Capital (as underwriter for CODE-NGO) of
the PEACe Bonds to various undisclosed investors at a purchase

price of approximately P11.996 would fall on the same day, October

18, 2001, when the PEACe Bonds were supposedly issued to CODENGO/RCBC. In reality, therefore, the entire P10.2 billion borrowing
received by the Bureau of Treasury in exchange for the P35 billion
worth of PEACe Bonds was sourced directly from the undisclosed
number of investors to whom RCBC Capital/CODE-NGO distributed
the PEACe Bonds all at the time of origination or issuance. At
this point, however, we do not know as to how many investors the
PEACe Bonds were sold to by RCBC Capital. Should there have been
a simultaneous sale to 20 or more lenders/investors, the PEACe
Bonds are deemed deposit substitutes within the meaning of
Section 22(Y) of the 1997 National Internal Revenue Code and
RCBC Capital/CODE-NGO would have been obliged to pay the 20%
final withholding tax on the interest or discount from the PEACe
Bonds. Further, the obligation to withhold the 20% final tax on the
corresponding interest from the PEACe Bonds would likewise be
required of any lender/investor had the latter turned around and
sold said PEACe Bonds, whether in whole or part, simultaneously to
20 or more lenders.
Thus, should the PEACe Bonds be found to be within the
coverage of deposit substitutes, the proper procedure was for the
Bureau of Treasury to pay the face value of the PEACe Bonds to the
bondholders and for the Bureau of Internal Revenue to collect the
unpaid final withholding tax directly from RCBC Capital/CODE-NGO,
or any lender or investor if such be the case, as the withholding
agents. Thus, should it be found that RCBC Capital/CODE-NGO sold
the PEACe Bonds to 20 or more lenders/investors, the Bureau of
Internal Revenue may still collect the unpaid tax from RCBC
Capital/CODE-NGO within 10 years after the discovery of the
omission.
ING BANK vs. CIR (G.R. No. 167679; July 22, 2015)
(THIS IS THE SUMMARY OF THE DECISION, YOU MAY OPT TO
CHOOSE THIS IN WRITING THE RULING RATHER THE
DETAILED ONE) SC has definitively declared the exception
'[i]ssues and cases which were ruled by any court (even without
finality) in favor of the BIR prior to amnesty availment of the
taxpayer' under BIR [Revenue Memorandum Circular No.] 19-2008
as invalid, for going beyond the scope of the provisions of the 2007
Tax Amnesty Law." Only cases that involve final and executory
judgments are excluded from the tax amnesty program as
explicitly provided under Section 8 of Republic Act No. 9480.

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
Republic Act No. 9480 confers no discretion on respondent
Commissioner of Internal Revenue. Its authority under Republic Act
No. 9480 is limited to determining whether (a) the taxpayer is
qualified to avail oneself of the tax amnesty; (b) all the
requirements for availment under the law were complied with; and
(c) the correct amount of amnesty tax was paid within the period
prescribed by law. There is nothing in Republic Act No. 9480 which
can be construed as authority for respondent Commissioner of
Internal Revenue to introduce exceptions and/or conditions to the
coverage of the law nor to disregard its provisions and substitute
his own personal judgment.
FACTS:
ING Bank received a Final Assessment Notice dated
December 3, 1999.12 The Final Assessment Notice also contained
the Details of Assessment13 and 13 Assessment Notices issued by
the BIR. ING Bank paid the deficiency assessments for the 1996
compromise penalty, 1997 deficiency documentary stamp tax and
1997 deficiency final tax in the respective amounts of P1,000.00,
P1,000.00 and P75,013.25 [the original amount of P73,752.47 plus
additional interest]. ING Bank, however, protested the remaining
ten (10) deficiency tax assessments in the total amount of
P672,576,939.18. ING Bank filed a Petition for Review before the
CTA. The Petition was filed to seek "the cancellation and withdrawal
of the deficiency tax assessments for the years 1996 and 1997,
including the alleged deficiency documentary stamp tax on special
savings accounts, deficiency onshore tax, and deficiency
withholding tax on compensation. In CTAs decision accordingly,
petitioner is ORDERED to PAY the respondent the aggregate
amount of P240,106,928.94, plus 20% delinquency interest per
annum from February 3, 2000 until fully paid, pursuant to Section
249(C) of the National Internal Revenue Code of 1997.
ING Bank filed a Manifestation and Motion31 informing the
SC that it had availed itself of the tax amnesty authorized and
granted under Republic Act No. 9480 covering "all national internal
revenue taxes for the taxable year 2005 and prior years, with or
without assessments duly issued therefor, that have remained
unpaid as of December 31, 2005. ING Bank prayed that this court
issue a resolution taking note of its availment of the tax amnesty,
and confirming its entitlement to all the immunities and privileges
under Section 6 of Republic Act No. 9480, particularly with respect
to the "payment of deficiency documentary stamp taxes on its
special savings accounts for the taxable years 1996 and 1997 and

deficiency tax on onshore interest income derived under the foreign

currency deposit system for taxable year 1996.
Respondent CIR claims that petitioner ING Bank is not
qualified to avail itself of the tax amnesty granted under Republic
Act No. 9480 because both the Court of Tax Appeals En Banc and
Second Division ruled in its favor that confirmed the liability of
petitioner ING Bank for deficiency documentary stamp taxes,
onshore taxes, and withholding taxes. Respondent Commissioner of
Internal Revenue asserts that BIR Revenue Memorandum Circular
No. 19-2008 specifically excludes "cases which were ruled by any
court (even without finality) in favor of the BIR prior to amnesty
availment of the taxpayer" from the coverage of the tax amnesty
under Republic Act No. 9480. In any case, respondent
Commissioner of Internal Revenue argues that petitioner ING
Bank's availment of the tax amnesty is still subject to its
evaluation, that it is "empowered to exercise its sound discretion in
the implementation of a tax amnesty in favor of a taxpayer, and
petitioner cannot presume that its application would be granted[.]"
ISSUE:
Whether or not petitioner ING Bank may validly avail itself of the
tax amnesty granted by Republic Act No. 9480.
RULING:
Yes. SC has definitively declared the exception '[i]ssues and
cases which were ruled by any court (even without finality) in favor
of the BIR prior to amnesty availment of the taxpayer' under BIR
[Revenue Memorandum Circular No.] 19-2008 as invalid, for going
beyond the scope of the provisions of the 2007 Tax Amnesty Law."
Neither the law nor the implementing rules state that a court ruling
that has not attained finality would preclude the availment of the
benefits of the Tax Amnesty Law. Both R.A. 9480 and DOF Order No.
29-07 are quite precise in declaring that [tax cases subject of final
and executory judgment by the courts" are the ones excepted from
the benefits of the law. Only cases that involve final and executory
judgments are excluded from the tax amnesty program as explicitly
provided under Section 8 of Republic Act No. 9480. Petitioner ING
Bank showed that it complied with the requirements set forth under
Republic Act No. 9480. Respondent Commissioner of Internal
Revenue never questioned or rebutted that petitioner ING Bank
fully complied with the requirements for tax amnesty under the law.
Moreover, the contestability period of one (1) year from the time of

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
petitioner ING Bank's availment of the tax amnesty law on
December 14, 2007 lapsed. Correspondingly, it is fully entitled to
the immunities and privileges mentioned under Section 6 of
Republic Act No. 9480.
Contrary to respondent Commissioner of Internal Revenue's
stance, Republic Act No. 9480 confers no discretion on respondent
Commissioner of Internal Revenue. Its authority under Republic Act
No. 9480 is limited to determining whether (a) the taxpayer is
qualified to avail oneself of the tax amnesty; (b) all the
requirements for availment under the law were complied with; and
(c) the correct amount of amnesty tax was paid within the period
prescribed by law. There is nothing in Republic Act No. 9480 which
can be construed as authority for respondent Commissioner of
Internal Revenue to introduce exceptions and/or conditions to the
coverage of the law nor to disregard its provisions and substitute
his own personal judgment.
WINEBRENNER & IIGO INSURANCE BROKERS, INC., vs. CIR
(G.R. No. 206526; January 28, 2015)
Facts: On April 15, 2004, petitioner filed its Annual Income Tax
Return for CY 2003. About two years thereafter or on April 7, 2006,
petitioner applied for the administrative tax credit/refund claiming
entitlement to the refund of its excess or unutilized CWT for CY
2003, by filing BIR Form No. 1914 with the Bureau of Internal
Revenue (BIR).There being no action taken on the said claim, a
petition for review was filed by petitioner before the CTA on April
11, 2006. The case was docketed in the CTA.
CTA Division partially granted petitioners claim for refund of excess
and unutilized CWT for CY 2003 in the reduced amount
of P2,737,903.34 in its April 13, 2010 Decision (original decision).
Petitioner filed a Motion for Partial Reconsideration with Leave to
Submit Supplemental Evidence. It prayed that an amended
decision be issued granting the entirety of its claim for refund, or in
the alternative, that it be allowed to submit and offer relevant
documents as supplemental evidence.
Respondent Commissioner of Internal Revenue (CIR) also moved for
reconsideration, praying for the denial of the entire amount of
refund because petitioner failed to present the quarterly Income

Tax Returns (ITRs) for CY 2004. To the CIR, the presentation of the
2004 quarterly ITRs was indispensable in proving petitioners
entitlement to the claimed amount because it would prove that no
carry-over of unutilized and excess CWT for the four (4) quarters of
CY 2003 to the succeeding four (4) quarters of CY 2004 was made.
In the absence of said ITRs, no refund could be granted. In the CIRs
view, this was in accordance with the irrevocability rule under
Section 76 of the NIRC.
The CTA-Division reversed itself. In an Amended Decision, it denied
the entire claim of petitioner. It reasoned out that petitioner should
have presented as evidence its first, second and third quarterly
ITRs for the year 2004 to prove that the unutilized CWT being
claimed had not been carried over to the succeeding quarters.
Aggrieved, petitioner elevated the case to the CTA En Banc praying
for the reversal of the Amended Decision of the CTA Division.
The CTA-En Banc affirmed the Amended Decision of the CTADivision. It stated that before a cash refund or an issuance of tax
credit certificate for unutilized excess tax credits could be granted,
it was essential for petitioner to establish and prove, by presenting
the quarterly ITRs of the succeeding years, that the excess CWT
was not carried over to the succeeding taxable quarters
considering that the option to carry over in the succeeding taxable
quarters could not be modified in the final adjustment returns
(FAR).Because petitioner did not present the first, second and third
quarterly ITRs for CY 2004, despite having offered and submitted
the Annual ITR/FAR for the same year, The CTA-En Banc stated that
the petitioner failed to discharge its burden, hence, no refund could
be granted. Hence, this petition.
Issue: Whether or not the submission and presentation of the
quarterly ITRs of the succeeding quarters of a taxable year is
indispensable in a claim for refund.
Held: The Court finds for the petitioner. Proving that no carry-over
has been made does not absolutely require the presentation of the
quarterly ITRs. Requiring that the ITR or the FAR of the succeeding
year be presented to the BIR in requesting a tax refund has no
basis in law and jurisprudence.

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
First, Section 76 of the Tax Code does not mandate it. The law
merely requires the filing of the FAR for the preceding not the
succeeding taxable year. Indeed, any refundable amount
indicated in the FAR of the preceding taxable year may be credited
against the estimated income tax liabilities for the taxable quarters
of the succeeding taxable year. However, nowhere is there even a
tinge of a hint in any provisions of the [NIRC] that the FAR of the
taxable year following the period to which the tax credits are
originally being applied should also be presented to the BIR.
Second, Section 5 of RR 12-94, amending Section 10(a) of RR 6-85,
merely provides that claims for refund of income taxes deducted
and withheld from income payments shall be given due course only
(1) when it is shown on the ITR that the income payment received
is being declared part of the taxpayers gross income; and (2) when
the fact of withholding is established by a copy of the withholding
tax statement, duly issued by the payor to the payee, showing the
amount paid and the income tax withheld from that amount.
It has been submitted that Philam cannot be cited as a precedent
to hold that the presentation of the quarterly income tax return is
not indispensable as it appears that the quarterly returns for the
succeeding year were presented when the petitioner therein filed
an administrative claim for the refund of its excess taxes withheld
in 1997.
Indeed, an annual ITR contains the total taxable income earned for
the four (4) quarters of a taxable year, as well as deductions and
tax credits previously reported or carried over in the quarterly
income tax returns for the subject period. It goes without saying
that the annual ITR (including any other proof that may be
sufficient to the Court)can sufficiently reveal whether carry over
has been made in subsequent quarters even if the petitioner has
chosen the option of tax credit or refund in the immediately 2003
annual ITR. Section 76 of the NIRC requires a corporation to file a
Final Adjustment Return (or Annual ITR) covering the total taxable
income for the preceding calendar or fiscal year. The total taxable
income contains the combined income for the four quarters of the
taxable year, as well as the deductions and excess tax credits
carried over in the quarterly income tax returns for the same
period. Verily, the absence of any amount written in the Prior Year
excess Credit Tax Withheld portion of petitioners 2004 annual ITR
clearly shows that no prior excess credits were carried over in the
first four quarters of 2004. And since petitioner was able to

sufficiently prove that excess tax credits in 2003 were not carried
over to taxable year 2004 by leaving the item "Prior Years Excess
Credits" as blank in its 2004 annual ITR, then petitioner is entitled
to a refund. The petitioner having complied with the requirements
for refund, and without the CIR showing contrary evidence other
than its bare assertion of the absence of the quarterly ITRs, copies
of which are easily verifiable by its very own records, the burden of
proof of establishing the propriety of the claim for refund has been
sufficiently discharged. Hence, the grant of refund is proper.
The Court does not, and cannot, however, grant the entire claimed
amount as it finds no error in the original decision of the CTA
Division granting refund to the reduced amount of P2,737,903.34.
This finding of fact is given respect, if not finality, as the CTA, which
by the very nature of its functions of dedicating itself exclusively to
the consideration of the tax problems has necessarily developed an
expertise on the subject. It being the case, the Court partly grants
this petition to the extent of reinstating the April 23, 2010 original
decision of the CTA Division.
The Court reminds the CIR that substantial justice, equity and fair
play take precedence over technicalities and legalisms. The
government must keep in mind that it has no right to keep the
money not belonging to it, thereby enriching itself at the expense
of the law-abiding citizen or entities who have complied with the
requirements of the law in order to forward the claim for refund.
Under the principle of solution indebiti provided in Article 2154 of
the Civil Code, the CIR must return anything it has received.
Finally, even assuming that the Court reverses itself and
pronounces the indispensability of presenting the quarterly ITRs to
prove entitlement to the claimed refund, petitioner should not be
prejudiced for relying on Philam. The CTA En Banc merely based its
pronouncement on a case that does not enjoy the benefit of stare
decis et non quieta movere which means "to adhere to precedents,
and not to unsettle things which are established." 31 As between a
CTA En Banc Decision (Millennium) and this Court's Decision
(Philam), it is elementary that the latter should prevail.
The Court partly grants the petition. Respondent Commissioner of
Internal Revenue is ordered to REFUND to petitioner the amount of
P2,737,903.34 as excess creditable withholding tax paid for taxable
year 2003.

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban

CHINA BANKING CORPORATION vs. CIR

(G.R. No. 172509, February 04, 2015)

FACTS: China Bank Corporation is a universal bank duly organized

and existing under Philippine laws. For the taxable years 1982 to
1986, it was assessed by the BIR of deficiency taxes its SWAP
transaction, in which they were charged for not paying the
documentary stamp tax on such transactions. A lengthy back and
forth ensued until on January 18, 2002, CBC filed a petition for
review and on March 2002, the CIR filed an answer with a demand
for CBC to pay the assessed documentary stamp tax. Such
continued until the court issued a resolution directing the parties to
issue their respective memoranda. CBC is raising as its defense: 1.
double taxation; 2. absence of liability; 3 due process violation; 4.
validity of assessment; 5. Exemption; and 6. Prescription, as more
than 12 years after the filing of the protest and request for
reinvestigation had lapsed before the CIR rendered a decision
reiterating the deficiency DST assessment and ordered the
payment thereof. Petitioner CBC states that the government has
three years from 19 April 1989, the date the former received the
assessment of the CIR, to collect the tax. Within that time frame,
however, neither a warrant of distraint or levy was issued, nor a
collection case filed in court.

ISSUE: whether or not the right of the BIR to collect the assessed
DST from CBC is barred by prescription

HELD: The Petition is granted on the ground that the right of the
BIR to collect the assessed DST is barred by the statute of
limitations.

Prescription has set in. The attempt of the BIR to collect the tax
through its Answer with a demand for CBC to pay the assessed DST
in the CTA on 11 March 2002 did not comply with Section 319(c) of
the 1977 Tax Code, as amended. The demand was made almost
thirteen years from the date from which the prescriptive period is
to be reckoned. Thus, the attempt to collect the tax was made way
beyond the three-year prescriptive period. The BIRs Answer in the
case filed before the CTA could not, by any means, have qualified
as a collection case as required by law.

The fact that the taxpayer in this case may have requested a
reinvestigation did not toll the running of the three-year
prescriptive period. A request for reinvestigation alone will not
suspend the statute of limitations. Two things must concur: there
must be a request for reinvestigation and the CIR must have
granted it. In the present case, there is no showing from the
records that the CIR ever granted the request for reinvestigation
filed by CBC. That being the case, it cannot be said that the running
of the three-year prescriptive period was effectively suspended.
([Note: you may opt not to include this in your digest] We
note that petitioner has raised the issue of prescription for the first
time only before this Court. While we are mindful of the established
rule of remedial law that the defense of prescription must be raised
at the trial court that has also been applied for tax cases. Thus, as
a rule, the failure to raise the defense of prescription at the
administrative level prevents the taxpayer from raising it at the
appeal stage. This rule, however, is not absolute. In the BPI vs CIR
case of 2014, an exception to the rule against raising the defense
of prescription for the first time on appeal was provided: the
exception arises when the pleadings or the evidence on record
show that the claim is barred by prescription. In this case, the fact
that the claim of the government is time-barred is a matter of
record.
Moreover, estoppel or waiver prevents the government from
invoking the rule against raising the issue of prescription for the
first time on appeal. The BIR could have crushed the defense by the
mere invocation of the rule against setting up the defense of
prescription only at the appeal stage. The government, however,
failed to do so. We are mindful of the rule in taxation

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
that estoppel does not prevent the government from collecting
taxes; however, this is also not absolute.)
CLARK INVESTORS AND LOCATORS ASSOCIATION, INC., vs.
SEC. OF FINANCE & COMM. of BIR
(G.R. No. 200670,
July 06, 2015)
FACTS: On March 13, 1992, Congress enacted RA No. 7227 which
mandated the accelerated conversion of the Clark and Subic
military reservations into special economic zones. Based on Section
12 (c) of the said law, in lieu of national and local taxes, all
businesses and enterprises operating within the Subic Special
Economic Zone shall pay a preferential gross income tax rate of
five percent (5%). In addition, Section 12 (b) also provides that
such businesses and enterprises shall be exempt from the payment
of all taxes and duties on the importation of raw materials, capital,
and equipment into the Subic Special Economic Zone.
This tax and fiscal incentives under RA No. 7227was further
extended to the Clark Freeport Zone upon enactment of RA No.
9400 on March 20, 2007. This made the businesses and enterprises
within the Clark Freeport Zone exempt from the payment of all
taxes and duties on the importation of raw materials, capital and
equipment.
On February 17, 2012, the Dept. of Finance, upon recommendation
of the BIR, issued RR 2-2012 which imposed VAT and excise tax on
the importation of petroleum and petroleum products from abroad
and into the Freeport or Economic Zones.
Herein petitioner, which represents the businesses and enterprises
within the Clark Freeport Zone, filed the instant petition alleging
that respondents acted with grave abuse of discretion in issuing RR
2-2012. It argues that by imposing the VAT and excise tax on the
importation of petroleum and petroleum products from abroad and
into the Freeport or Economic Zones, RR 2-2012 unilaterally
revoked the tax exemption granted by RA No. 7227 and RA No.
9400 to the businesses and enterprises operating within the Subic
Special Economic Zone and Clark Freeport Zone.
This petition for certiorari prays for the issuance of a TRO and/or
writ of preliminary injunction to annul and set aside RR 2-2012
issued by the Department of Finance upon recommendation of the
BIR.

ISSUE: Whether or not The Secretary of Finance acted with grave

abuse of discretion in issuing RR 2-2012 that imposes VAT and
excise tax on the importation of petroleum and petroleum products
from abroad and into Freeport or Economic Zones, as it is claimed
to have unilaterally revoked tax exemption granted by RA 7227 and
RA 9400.
HELD:
The Supreme Court denied the petition for being an improper
remedy.
A petition for certiorari under Rule 65 of the 1997 Rules of Civil
Procedure, as amended, is a special civil action that may be
invoked ONLY against a tribunal, board, or officer exercising judicial
or quasi-judicial functions.
Before a tribunal, board, or officer may exercise judicial or quasijudicial acts, it is necessary that there be a law that gives rise to
some specific rights of persons or property under which adverse
claims to such rights are made, and the controversy ensuing
therefrom is brought before a tribunal, board, or officer clothed with
power and authority to determine the law and adjudicate the
respective rights of the contending parties.
In determining whether a Revenue Regulation is quasi-legislative in
nature, the legal basis of the Secretary of Finance in the issuance
thereof must be examined. RR 2-2012 was issued by the Secretary
of Finance based on Section 244 of the NIRC. Section 244 is an
express grant of authority to the Secretary of Finance to
promulgate all needful rules and regulations for the effective
enforcement of the provisions of the NIRC. And since RR 2-2012
was issued by the Secretary of Finance based on Section 244 of the
NIRC, such administrative issuance is therefore quasi-legislative in
nature which is outside the scope of a petition for certiorari.
Supreme Court explained that it could not be denied that even if
the petition is filed as a certiorari, in real essence, it seeks the
declaration by the High Court of the unconstitutionality and
illegality of the questioned rule, thus partaking the nature, in
reality, of one for declaratory relief over which the SC has only
appellate, not original, jurisdiction.
Although the SC, the CA and the RTC have concurrent jurisdiction to
issue writs of certiorari, prohibition, mandamus, quo warranto,

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
habeas corpus and injunction, such concurrence does not give the
petitioner unrestricted freedom of choice of court forum, as
hierarchy of courts must be respected. That hierarchy is
determinative of the venue of appeals, and also serves as a general
determinant of the appropriate forum for petitions for the
extraordinary writs.

CIR vs STANDARD CHARTERED BANK

(G.R. No. 192173, July 29, 2015)
FACTS: SCB received a Formal Letter of Demand dated June 24,
2004 for deficiency taxes and increments for the taxable year
1998, amounting to P33.3M. On August 12, 2004, SCB protested
against said assessment and requested the CIR that it be
withdrawn and cancelled. CIR had not rendered a decision,
prompting SCB to file a Petition for Review before the CTA in
division.
The CTA in division granted the petition of SCB, canceled
and set aside the FLD and Assessment Notices on the ground that
CIRs right to assess was already barred by prescription. CIR
presented copies of Waivers of Statute of Limitations executed by
both parties. CTA in division, however, noted that these waivers did
not strictly comply with Revenue Memorandum Order No. 20-90.
CIR filed for MRecon, but it was denied.
CIR appealed with the CTA En Banc, but if affirmed in toto
the decision of CTA in division. Upon denial of CIRs Motion for
Reconsideration, it filed the instant Petition for Review on
Certiorari.
ISSUE: W/N petitioners right to assess respondent for deficiency
taxes for 1998 has already prescribed
RULING: YES.
The period for petitioner to assess and collect an internal
revenue tax is limited only to three years by Section 203 of the
NIRC of 1997. This mandate is primarily to safeguard the interests
of taxpayers from unreasonable investigation by not indefinitely
extending the period of assessment and depriving the taxpayer of
the assurance that it will no longer be subjected to further
investigation for taxes after the expiration of reasonable period of
time.

As an exception, Section 222 authorizes the extension of the

original three-year prescriptive period by the execution of a valid
waiver. RMO No. 20-90 outlines the procedure for the proper
execution of a waiver and failure to comply with any of the
requisites renders a waiver defective and ineffectual. The waivers
executed by CIR and SCB were in violation of RMO 20-90:
1. the CIR did not sign (assessment was more than P1M)
2. date of acceptance and the amount and kind of tax due were not
indicated
3. the waiver speaks of request to extend the period to file
additional documents, not the request for recon or reinvestigation
as required by RMO 20-90.
The period to assess the tax liabilities of respondent for
taxable year 1998 was never extended. Consequently, when the
succeeding waivers of Statute of Limitations were subsequently
executed covering the same tax liabilities of respondent, and there
being no assessment having been issued as of that time,
prescription has already set in.
[Although respondent paid the deficiency WTC and FWT
assessments, it did not waive the defense of prescription as regards
the remaining tax deficiencies, it being on record that respondent
continued to raise the issue of prescription. Doctrine of estoppel
not applicable.]
The Formal Letter of Demand and Assessment Notices are void.
Petition is denied.
MITSUBISHI MOTORS PHILIPPINES
BUREAU OF CUSTOMS
GR No. 209830. June 17, 2015

CORPORATION

vs.

DOCTRINE: THE CTA (& NOT THE CA) HAS EXCLUSIVE APPELLATE
JURISDICTION OVER JUDGMENTS, RESOLUTIONS OR ORDERS OF
THE RTC IN TAX COLLECTION CASES ORIGINALLY DECIDED BY THEM
WITHIN THEIR RESPECTIVE TERRITORIAL JURISDICTION
(BAYANI)
FACTS:
Respondent BOC filed a collection suit for unpaid
taxes and customs duties against petitioner MMPC before the RTC.

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
It alleged that petitioner, made several importations and utilized
Tax Credit Certificates (TCCs) it secured from various transportation
companies, to pay for various customs duties and taxes in the
aggregate amount of P46,844,385. However, a post-audit
investigation by the Dept of Finance revealed that the TCCs used
were fraudulently secured with the use of fake commercial & bank
documents, thus respondent BOC deemed that petitioner never
settled its taxes and customs duties and demanded payment, but
to no avail.
In its defense, petitioner MMPC maintained that it acquired the
TCCs from their original holders in good faith and that they were
authentic and thus their remittance should be considered as proper
settlement of their taxes & customs duties.
The RTC dismissed the collection case for insufficiency of evidence.
It found that respondent had not shown any proof or substantial
evicence of fraud or conspiracy on the part of petitioner in the
procurement of the TCCs. It opined that fraud is never presumed &
must be established by clear & convincing evidence, which
petitioner failed to do.
Respondent appealed to the CA. In a Resolution, the CA referred
to records of the collection case to the CTA for proper disposition of
the appeal. While it admitted that it had no jurisdiction to take
cognizance of the respondents appeal, as jurisdiction is properly
lodged with the CTA, it nevertheless opted to relax the procedural
rules in not dismissing the appeal outright. Instead, it deemed it
appropriate to simply refer the matter to the CTA, considering that
the government stands to lose the amount of tax & custom duties
being sought to be collected.
In a Motion for Reconsideration, petitioner argued that since the CA
does not have jurisdiction over the respondents appeal, it cannot
perform any action on it except to order its dismissal.
ISSUE: Whether or not the CA correctly referred the records of the
collection case to the CTA for proper disposition of the appeal taken
by respondent
RULING: NO.
The CA erred in referring the records of the collection case to the
CTA for proper disposition of the appeal taken by respondent. RA

1125 as amended by RA 9282; and the Revised Rules of the Court

of Tax Appeals both provide that it is the CTA which has exclusive
appellate jurisdiction over appeals from the judgments, resolutions,
or orders of the RTC in tax collection cases originally decide by
them in their respective territorial jurisdiction.
The CA had no jurisdiction over respondents appeal. Hence, it
cannot perform any action on the same except to order its
dismissal. Therefore, the act of the CA in referring the respondents
wrongful appeal before it to the CTA under the guise of furthering
the interests of substantial justice is blatantly erroneous.
Petition is GRANTED. The Resolutions of the CA are REVERSED &
SET ASIDE, DISMISSING the appeal of the respondent BOC to the
CA.
BATANGAS
CITY
TREASURER
PETROLEUM CORPORATION
(G.R. NO. 187631; July 8, 2015)

vs

PILIPINAS

SHELL

FACTS: In 2002, respondent was only paying the amount of

P98,964.71 for fees and other charges which include the amount of
P1,180.34 as Mayor's Permit. However, on February 20, 2001,
petitioner Batangas City sent a notice of assessment to respondent
demanding the payment of P92,373,720.50 and P312,656,253.04
as business taxes for its manufacture and distribution of petroleum
products. In addition, respondent was also required and assessed to
pay the amount of P4,299,851.00 as Mayor's Permit Fee based on
the gross sales of its Tabagao Refinery. The assessment was
allegedly pursuant of Section 134 of the LGC of 1991 and Section
23 of its Batangas City Tax Code of 2002.
Respondent filed a protest contending among others that it is not
liable for the payment of the local business tax either as a
manufacturer or distributor of petroleum products. It further argued
that the Mayor's Permit Fees are exorbitant, confiscatory, arbitrary,
unreasonable and not commensurable with the cost of issuing a
license.
ISSUE: whether or not an LGU is empowered under the LGC to
impose business taxes on persons or entities engaged in the
business of manufacturing and distribution of petroleum products.

Tax Rev Case Digest 4-S and 4-B 2016 |Reyes, Role, Perez, Quitco, Francisco,
Gonzales, Baesa, Roque, Manuel-Bayani, Panganiban
HELD: No. It is already well-settled that although the power to tax
is inherent in the State, the same is not true for the LGUs to whom
the power must be delegated by Congress and must be exercised
within the guidelines and limitations that Congress may provide.
Section 133(h) clearly specifies the two kinds of taxes which cannot
be imposed by LGUs: (1) excise taxes on articles enumerated under
the NIRC, as amended; and (2) taxes, fees or charges on petroleum
products.
Indisputably, the power of LGUs to impose business taxes derives
from Section 143 of the LGC. However, the same is subject to the

explicit statutory impediment provided for under Section 133(h) of

the same Code which prohibits LGUs from imposing "taxes, fees or
charges on petroleum products." It can, therefore, be deduced that
although petroleum products are subject to excise tax, the same is
specifically excluded from the broad power granted to LGUs under
Section 143(h) of the LGC to impose business taxes.