CE PHILIPPINES LTD. v. COMMISSIONER OF INTERNAL REVENUE Ponente: MINDARO -GRULLA, J. Date Promulgated: DEC.

23 2010 Topic: Regardless of the currency used in the transaction and regardless of the Functional Currency of a corporation when an investment is made in the Philippines by a non-resident foreign corporation the gain or less shall be computed in Philippine Peso and not in the currency utilized by the nonresident foreign corporation. The income tax liability under Sections 24 (C) and 25 (B) of the NIRC is computed in Philippine Peso despite availment of Functional Currency under Revenue Regulations No. 06-06 FACTS: On October 5, 2007, CE Philippines, a non-resident foreign corporation duly organized and existing under and by virtue of the lows of Bermuda with principal place of business at Clarendon House. Church St. Hamilton, Bermuda, filed an administrative claim for refund with the BIR Large taxpayers District Office No. 122, requesting for a refund of the amount of P 18,644,311.68 and P11,056,273.14, representing the alleged excess CGT paid on the gain realized from the redemption by CEP II of its Series A preferred shares owned by CE PHILIPPINES LTD on September 15, 2005 and October 17, 2005, respectively. The above administrative claim for refund by CE PHILIPPINES LTD was computed based on the following:

ISSUE: WoN CE PHILIPPINES LTD is entitled to the refund or issuance of a tax credit certificate amounting to P29,700,584.82, representing the excess CGT paid on the gains realized from the redemption by CEP II of its Series A preferred shares owned by petitioner DECISION: No. The CE PHILIPPINES LTD is not entitled to a refund.

HELD: Based on Sections 24(C), 25(B) and Section 42(E) of the NIRC of 1997, capital gains realized by a non-resident alien individual not engaged in trade or business in the Philippines from the sale of shares of stock in any domestic corporation shall be subject to the income tax prescribed under Section 24(C), with tax rates of five percent (5%), for the amount not over P100,000.00, and ten percent ( 10%), in excess thereof. The gain from the sale of shares of stock in a domestic corporation shall be treated as derived entirely from sources within the Philippines regardless of where the said shares are sold. In the instant case, it is undisputed that CEP II is a domestic corporation, while CE PHILIPPINES LTD is a non-resident alien individual not engaged in trade or business within the Philippines; which is made liable by the foregoing provisions for net capital gains tax, representing the gains realized from the redemption by CEP II On March 16, 2006, the Bureau of Internal Revenue issued Revenue Regulations No. 06-06, which defines "Functional Currency" as the currency of the primary economic environment in which the reporting entity operates; that is the currency of the environment in which on entity primarily generates and expends cost. On March 25, 2004, CEP II obtained approval from the SEC to use the US dollar as its functional currency in presenting its financial statements pursuant to SEC Memorandum Circular No. 14, Series of2003. Consequently, the financial statements of CEP II were presented in U.S. dollars beginning the taxable year 2003. Thus, CEP II effected the redemption of 1,113,260 Series A preferred shares at a redemption price of US$8.59, or a total redemption amount of US$9,562,903.4034 and the subsequent redemption of 662,290 Series A Preferred Shares at a redemption price of US$8.59, or a total redemption amount of US$5,689,071.1 instead of using the Philippine currency. As the absolute owner of 100% of CEP II, a domestic corporation whose capital stock is denominated in Philippine Peso, petitioner's investment clearly translates to Philippine Peso, even though the source of such investment may be in other foreign currency denominated unit (FCDU). CE PHILIPPINES LTD effectively makes an investment in Philippine Peso, and according to Revenue Regulations No. 06-06, it shall compute the gain or loss from sale of said investment using the Philippine Peso cost and Philippine Peso selling price . CE PHILIPPINES LTD computed its claim for refund by finding the difference of the redemption value per share in US dollars against the cost per share, also in US dollars, and such difference is multiplied by the number of shares redeemed by CEP II, resulting in its computed capital gains tax due in US dollars . Thereafter, the capital gains tax in US dollar is then multiplied by the Philippine Dealing System peso equivalent to one US dollar as of closing date of redemption. This computation lacks legal basis. It is evident from the provision of Section 24(C) of the NIRC that the capital gains considered in the computation thereof should be in Philippine Peso

considering that the applicable rate of 5% is based on the amount not over P 100.000.00, and the rate of 10% is based on the amount in excess of P1 00,000.00, which is in Philippine Peso. The law in fact did not provide for an FCDU or foreign exchange equivalent of the capital gains to be converted to Philippine Peso as of the date of transaction subject to said tax. Thus, it can be safely concluded that in computing the capital gains in this case, the redemption value per share, the cost per share, and the capital gains subject to tax, should all be in Philippine Peso. Revenue Regulations No. 06-06 reinforced such way of computing the capital gains by providing that "it shall compute the gain or loss from sale of said investment using the Philippine Peso cost and Philippine Peso selling" . Manila Electric Company v. CIR Ponente: Mindaro-Grulla, J. Date Promulgated: December 6, 2010 Topic: May a claim for a tax refund or credit of excess income tax payments be made under the principle of solutio indebiti within the prescriptive period of six (6) years, pursuant to Art. 1145 of the New Civil Code or within two (2) years, as provided in Section 229 of the 1997 Tax Code? FACTS: MERALCO is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines engaged in the business of distributing and supplying electric power within its franchise area. On December 23, 1993, MERALCO filed with the then Energy Regulatory Board an application for the revision of its rate schedules. On January 28, 1994, an ERB issued an Order granting a provisional increase of P0.184 per kwh, subject to the condition that after hearing and evaluation, should MERALCO be entitled to a lesser increase in rates, all excess collected by MERALCO shall be refunded to its customers or credited in their future consumption. On February 16, 1998, the Energy Regulatory Board (ERB) rendered a Decision granting only a rate increase of P0.17 per kwh and ordering MERALCO to refund or credit to its customers the average amount of P0.167 per kwh beginning February 1994. MERALCO appealed the Decision of the Energy Regulatory Board to the Court of Appeals which ruled in its favor. However, the Supreme Court reversed the CA's Decision and upheld the previous Decision of the ERB. 1 MERALCO claimed for a tax refund or credit of excess income tax payments for the taxable years 1994-1998 and 2000 in the total amount of P5,796,342,792.712. Their original claim for a tax refund or credit of excess income tax payments for the taxable years 1994-1998 and 2000-2001
1

Republic o f the Philippines, represented by the Energy Regula tory Board vs. Manila Electric Company, G. R. No. 141314. and Lawyers Against Monopoly and Poverty (LAMP), et. a l. vs. Manila Elec tric Company, G.R. No. 141 369, November 15, 2002.

amounted to P7, 107,534,282.00. CIR partly granted MERALCO's claim for the taxable year 2001 to the extent of P894,473,932.58. The Supreme Court in the consolidated cases of Republic of the Philippines, et. al. vs.Manila Electric Company, G.R. No. 141314 and Lawyers Against Monopoly, etc. vs. Manila Electric Company, G.R. No. 141369, which became final and executory on May 5, 2003, mandated MERALCO to refund the amount equivalent to P0.167 per kilowatt-hour of over billed electric charges to its customers for their electric consumption made from February 1994 up to December 2003. As a result, Meralco's gross electric revenue during the taxable years 1994- 1998 and 2000-2001, taxable income and income tax liability were reduced, thereby resulting to excess income tax payments. On November 27, 2003, MERALCO filed a claim for tax refund or credit of excess income tax payments with respondent CIR. On May 4, 2005, due to inaction, MERALCO appealed to this Court and filed a "Petition for Review (Ad Cautelam)". In a letter dated September 21, 2005 CIR partially granted MERALCO's claim for a tax refund or credit for the taxable year 2001 to the extent of P894, 473,932.58 but denied the claim with respect to the taxable years 1994-1998 and 2000 due to prescription. On November 22, 2005, MERALCO filed the instant Amended Petition for Review Meralcos Contention: 1) Meralco anchored its claim for a tax refund or credit of excess income tax payments under the principle of solutio indebiti within the prescriptive period of six (6) years, pursuant to Art. 1145 of the New Civil Code or within two (2) years, as provided in Section 229 of the 1997 Tax Code. MERALCO contends that it would be absurd to reckon the running of the prescriptive period whether it be two (2) years or six (6) years, from the date of payment of the tax-that is, on or before 15 April, for the years 1995-1999 and 2000- when the excess payments and the right to recover the same came about only on 5 May 2003 which is the date the Decision of the Supreme Court in G.R. Nos. 141314 & 141369 became final and executory. MERALCO maintains that based on the special circumstance of the aforementioned cases and this petition, equity and fairness dictate that the filing of the original petition (May 4, 2005) and the amended petition (November 22, 2005) before this Court are well within the prescriptive period of two (2) years or six (6) years. In sum, MERALCO states that its claim is within the prescriptive period because the prescriptive period for the recovery of erroneously or illegally collected tax under the principle of solutio indebiti is six (6) years, pursuant to Article 1145 of the New Civil Code. MERALCO states further that the counting of this period should be reckoned from May 5, 2003 when the Supreme Court Decision became final and executor since it was

only then that MERALCO's right of action for the recovery of excess income tax payments accrued. 2) MERALCO alleges that it did not charge to expense or to loss or offset against reported revenues in its Income Tax Returns (ITRs) for the taxable years 2003-2005 the amounts refunded or credited to customers arising from the Supreme Court's Decision in G.R. Nos. 141314 and 141369. Thus, it can still claim for a tax refund. 3) MERALCO posits that the Supreme Court's mandated refund is separate and distinct from the present claim for a tax refund or credit. MERALCO further argues that the Supreme Court's mandated refund is not dependent on the present claim for a tax refund or credit, or vice versa. Hence, MERALCO asserts that its right to recover its excess income tax payments for the taxable years 1994-1998 and 2000 cannot be subjected to the condition that the refund or credit to future consumption due the customers concerned in the average amount of P0.167 per kwh, has been actually given or credited to them by MERALCO. CIRs Contention: 1) This Honorable Court is without jurisdiction to entertain the instant petition. CIR maintains that MERALCO's claim for a tax refund or credit was filed beyond the two (2) - year prescriptive period pursuant to Section 229 of the NIRC of 1997. A tax refund, being in the nature of an exemption, should be construed strictissimi juris against the taxpayer. Section 229 of the "Tax Code" emphatically states that "In any case, no such suit or proceeding [Recovery of Tax Erroneously or Illegally Collected] shall be filed after the expiration o f two (2) years from the date of payment of the tax or penalty regard less of any supervening cause that may arise after payment. ... " The taxable years involved in this case are taxable years 1994, 1995, 1996, 1997, 1998 and 2000. The income tax returns for the said periods have been filed, and taxes due reflected thereon were paid, a t dates which are, concededly, well-beyond the 2-year period granted by law within which recovery of alleged erroneously paid or collected taxes ca n be had. Thus, petitioner is barred from even filing the instant petition for review. 2) Meralco has no cause of action under the provision of solutio indebiti. There was a perfect legal right on the part of CIR to demand the payment of these taxes during the taxable years where refund is being claimed. Furthermore, there was no delivery through mistake on the part of Meralco. It knew a t the time it paid that the income taxes it was paying were actually due. 3) As the party claiming for refund, it is incumbent upon the petitioner to show that every cent

it had been ordered to return has been duly returned before the taxes alleged to have been overpaid, pertaining to such amounts, can be claimed as refund. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund. Failure to sustain the burden is fatal to the claim for refund/credit. This is so because exemptions from taxation are highly disfavored in law, and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. {PI} v. Llanes, 49 Phil. 466 cited in Collector of Internal Revenue v. Manila Jockey Club, Inc. 98 Phil. 670); ISSUE/s: "1. Whether or not petitioner's right to recover its excess income tax payments in the total amount of P5,796,342,792.71 for the taxable years 1994-1998 and 2000 has prescribed; 2. Whether or not petitioner has charged to expense or to loss or offset against reported revenues in its Income Tax Returns (ITRs) for the taxable years 2003-2005 the amounts refunded or credited to customers arising from the Supreme Court Decision in G. R. Nos. 141314 and 141369; and 3. Whether or not petitioner's right to recover its excess income tax payments for the taxable years 1994-1998 and 2000 is subject to the condition that refund or credit to future consumption due the customers concerned in the average amount of P0.167 per kwh has been actually given or credited to them by the petitioner. HELD: CIRs denial due to prescription of MERALCO's claim for a tax refund or credit for the taxable years 1994-1998 and 2000 is REVERSED and SET ASIDE; CIR is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of MERALCO in the amount of P5,796,342,792.71, corresponding to the claim for a tax refund or credit for the taxable years 1994-1998 and 2000, subject to and in proportion that the refund or credit to future consumption due to the customers concerned in the average amount of P0.167 per kilowatthour arising from the Supreme Court's Decision in G. R. Nos. 141314 and 141369, has been actually given or credited to them by MERALCO. As to the first issue on the prescription of the action or claim for refund:

Section 229 of the 1997 National Internal Revenue Code, as amended, provides that taxpayers seeking a refund of any national internal revenue tax hereafter alleged to have been: ( 1 ) erroneously or illegally assessed or collected, or (2) of any penalty claimed to have been collected without authority, or (3) of any sum alleged to have been excessive or in any manner wrongfully collected, must file within two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment. However, under the New Civil Code, Article 22 12 and Article 2154 13 in relation to Article 1145 14 thereof provide that claims or an action based upon a quasi-contract shall be commenced within six (6) years thereafter under the principle of solutio indebiti, which apparently provides for a more lenient rule. A taxpayer suing for a refund of taxes collected under the Tax Code may NOT cite the principle of solutio indebiti as justification and basis as to its prescription, when the same has already prescribed under the Tax Code. A taxpayer may not anchor its claim for refund under Article 22 and Article 2154 in relation to Article 1145 of the New Civil Code since such claim has already prescribed under the Tax Code. MERALCO's right to recover its excess income tax payments for the taxable years 1994-1998 and 2000 has not prescribed. MERALCO is entitled to its claim for a tax refund or credit for the taxable years 1994-1998 and 2000 due to the special circumstance in the instant case, pursuant to section 229 of the 1997 NIRC. The two (2) - year prescriptive period should commence to run on May 5, 2003, the date the Supreme Court's Decision in G.R . Nos. 141314 and 141369 became final and executory. It is only at that time that the right to claim for a tax refund or credit becomes determinable and the basis for the excessive or erroneous payment arises. At first glance, it would appear that prescription has set in as the claim for refund for the taxable years 1994 to 1998 and 2000, both in the administrative level (November 27, 2003) and judicial level (May 4, 2005) were both filed beyond the two-year reglementary period from the filing of the final adjusted return . However, the special circumstance in the instant case demands that it be given a different treatment. While MERALCO diligently filed its final adjustment return and paid the income tax thereon, it is beyond cavil that neither the right to claim for refund can be determined nor there was basis for MERALCO to know that the income tax payments for the taxable years 1994-1998 and 2000 were erroneous and excessive. Such fact arose only when the Supreme Court's Decision in G.R. Nos. 141314 and 14136925 became final and executory on May 5, 2003. MERALCO aptly" relied in the case of CIR vs. Philippine American Life Insurance Co 26 , where the Supreme Court ruled that "The prescriptive period of two (2) years should commence to run only from the time that the

refund is ascertained, which can only be determined after a final adjustment return is accomplished, regardless of any supervening cause that may arise thereafter." In the instant case, it is clear that MERALCO's right to claim for a tax refund for the taxable years 1994-1998 and 2000 cannot yet be ascertained or determined at the filing of the final adjustment return. Hence, the two (2) year period should not yet commence to run. The instant case is one of the special circumstances where the two (2) - year prescriptive period may be suspended. In the case of CIR vs. Philippine American Life Insurance Co.3o, the Supreme Court, held that - "Moreover, even if the two-year period had already lapsed, the same is not jurisdictional and may be suspended for reasons of equity and other special circumstances. 2nd issue: Meralco did not charge to expense/loss nor deduct against its revenue for the said years While MERALCO's Audited Balance Sheets show that MERALCO has refunded/credited to its customers a total amount of P 1 0,566 million as of December 31, 2005, such amount does not reconcile with the figure of P 1 0,565 million 42 shown in the Manifestation43 dated September 25, 2006, which MERALCO filed with the Energy Regulatory Commission (ERC) on October 2, 2006. Apparently, there were discrepancies on the amounts actually refunded by MERALCO to the prejudice of the consuming public but this does not negate the findings of this Court that MERALCO did not charge to expense/loss nor deduct against its revenues for the said years the amounts to be refunded or credited to its customers pertaining to the period from February 1994 to December 31, 2002. 3. As to the third issue stipulated upon by the parties- "Whether or not petitioner's right to recover its excess income tax payments for the taxable years 1994-1998 and 2000 is subject to the condition that refund or credit to future consumption due the customers concerned in the average amount of PO. 1 67 per kwh has been actually given or credited to them by the petitioner." MERALCO's claim for a tax refund was not granted or denied by respondent CIR on the condition that MERALCO should have credited to bill or refunded to customers the Supreme Court's mandated refund by MERALCO. It cannot be said that MERALCO's right to recover its excess income tax payments was subject to the condition that the tax refund or credit to future consumption due the customers concerned in the average amount of P0.167 per kwh, has been actually given or credited to them by MERALCO. While the above-mentioned Decision of CIR was bereft of any legal justification to the conditional release/issuance of a Tax Credit Certificate (TCC) covering the granted tax refund, we find the same or that the "releases or issuances of the TCC be proportionate to the amount

actually disbursed", to be just and equitable not only for the MERALCO and the government but also the general public considering that there were discrepancies in the amount to be given and actually given or actually received by MERALCO's customers. In the exercise of this Court's jurisdiction also as a court of equity, it is only but fair to allow MERALCO to recover its excess income tax payments for the taxable years 1994-1998 and 2000, which would have prescribed if not for the special circumstance in the instant case, in proportion to or that the refund or credit to future consumption due the customers concerned in the average amount o f P0.167 per kwh should have been actually given or credited to them by MERALCO. It would be the height of injustice if MERALCO can recover all the excess income tax payments when it did not refund all to the customers what MERALCO is mandated to refund from which the excess income tax payments would arise. The reason for the exercise of this Court's jurisdiction also as a court of equity in the instant case is to prevent unjust enrichment and to ensure restitution. 2 To reiterate, we find that the "releases or issuances of the Tax Credit Certificate (TCC) be (in) proportion to the amount actually disbursed or given to MERALCO's customers", to be just and equitable. According to jurisprudence, claimant has the burden of proof to establish the factual basis of his or her claim for a tax refund or credit. Tax refunds, like tax exemptions, are construed strictly against the taxpayer. In the instant case, MERALCO was able to present sufficient evidence to prove its claim for a tax refund.

PROCTER & GAMBLE ASIA V. CIR Ponente: Casanova,J. Date Promulgated: November 22, 2012 Topic: In case of full or partial denial of claim for tax refund or tax credit, or failure on part of CIR to act on an application of taxpayer within 120-day period (from date of submission of complete documents in support of the applications filed, such taxpayer may within 30 days from receipt of decision denying the claim or after expiration of the 120 day period, appeal the decision with CTA. Authorized by Sec 112 (D), NIRC. FACTS: Procter and Gamble Asia PTE. Ltd. is seeking a refund of issuance of a tax credit certificate in the total amount of P165M Plus allegedly representing
2

David Reyes (Substituted by Vic toria R. Fabella) vs. Jose Lim, Chuy Cheng Keng and Harrison Lumber, Inc., G.R. No. 134241 , August 11, 2003]

Input VAT attributable to zero-rated sales (or Procter) for the fiscal year ending June 30, 2007. CIR Denies the claim. ISSUE: Before this claim of Procter can be affirmed by the Supreme Court, such High first wanted to determine the timeliness of the the Petition for Review WON it is necessary to resolve Procters compliance with other requisites for Input Vat refund. DECISION: No. HELD: Procter filed its administrative claim for refund with the BIR on April 15, 2008, which is well-within the 2-year prescriptive period counting from September 20, 2006, December 31, 2006, March 31, 2007 and June 30, 2007, the close of teh taxable quarters when the relevant sales pertaining to the claimed input VAT were made. However Procter filed its petition for revire on August 8, 2008. However, on August 8, 2008, petitioner filed its Petition for Review. Pursuant to the most recent Supreme Court ruling CIR vs. Aichi Forging Company of Asia/ Inc. compliance with the 120-30 day period under Section 112(0) of the 1997 NIRC is crucial. The Supreme Court ruled as follows: "The filing of the judicial claim was premature. However, notwithstanding the timely filing of the administrative claim, we are constrained to deny respondent's claim for tax refund/credit for having been filed in violation of Section 112(0) of the NIRC, which provides that : SEC. 112. Refunds or Tax Credits of Input Tax. X X X X. (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. In proper cases, the Commissioner shall grant a . refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within . thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis supplied) Section 112(0) of the NIRC clearly provides that the CIR has 120 days, from the date of the submission of the complete documents in support of the application [fortax refund/credit],' within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days. In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA premature. There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A) of the said provision states that 'any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.' The phrase 'within two (2) years x x x apply for the issuance of a tax credit certificate or refund' refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA.

This is apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has '120 days from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)' within which to decide on the claim. In fact, applying the two-year period to judicial claims would render nugatory Section 112(0) of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(0) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. Considering, therefore, that the judicial claim (the instant Petition for Review) was filed on August 8, 2008, or only 115 days from April 15, 2008 (the administrative claim filed with the BIR), petitioner, clearly, did not wait for the decision of the CIR or the lapse of the 120-day period, thus, the filing of the instant Petition for Review with this Court is premature. PROCTOR AND GAMBLE ASIA PTE. LTD. v. COMMISSIONER OF INTERNAL REVENUE Ponente: CASTANEDA, JR. Date Promulgated: NOV. 09, 2010 Topic: Under Sec. 112 (D) of the NIRC, in order to claim a tax refund or a tax credit the 120 day period within which the Commissioner may grant or deny the tax credit or refund (or 30 days in case of denial) must be exhausted before a judicial claim be made. FACTS: Procter and Gamble Asia, Pte., Ltd. is a foreign corporation duly organized and existing under the laws of Singapore alleged that it accumulated input taxes from its domestic purchases of goods and services during the period covering July 1 to December 31 , 2005 in the aggregate amount of P87,341 ,820.13. It also reported sales subject to ten percent (10%) VAT in the aggregate amount of P383, 336,027.70 and sales subject to zero percent (0%) VAT in the aggregate amount of P1, 132,160,726.03 during the same period. Procter and Gamble Asia, Pte., Ltd likewise asserted that the Amended Quarterly VAT Returns reflected refundable input VAT in the total amount of P53, 624,427.14 (P19,496,365.57 for the quarter ended September 30, 2005 and P34, 128,061.57 for the quarter ended December 31 , 2005) On August 21, 2007, Procter and Gamble Asia, Pte., Ltd filed an application and letter request with the BIR Revenue District Office (ROO) No. 49 for the refund of or issuance of tax credit certificate for the input VAT attributable to its zero-rated sales covering the periods of July 2005 to September 2005 and October 2005 to December 2005. To date, CIR has not acted on petitioner's

claim for refund, prompting Procter and Gamble Asia, Pte., Ltd to file the instant Petition for Review on September 27, 2007. CIR averred among others that Special and Affirmative Defense Procter and Gamble Asia, Pte., Ltd alleged claim for issuance of tax credit certificate is still subject to administrative routinary investigation/examination by the CIR's Bureau; that taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable; that petitioner's claim for refund or issuance of tax credit certificate in the aggregate amount of Php53,624,427.14, as alleged unutilized input VAT paid attributable to its zero-rated sales of goods and services for the period covering July to September 2005 and October to December 2005 were not fully substantiated by proper documents, such sales invoices, official receipts and Others; that in an action for refund/credit, the burden of proof is on the Procter and Gamble Asia, Pte., Ltd to establish its right to the claimed refund and failure to adduce sufficient proof is fatal to its claim ISSUE: WoN Procter and Gamble Asia, Pte., Ltd is entitled to a tax refund or credit of its alleged input VAT attributable to zero-rated sales for the periods covering July 2005 to September 2005 and October 2005 to December 2005 in the amount of P53, 624,427.14. DECISION: No. The action is premature. HELD: Procter and Gamble Asia, Pte., Ltd filed its claim for refund with the Bureau of Internal Revenue on August 21 , 2007, which is within the two-year prescriptive period counting from September 30, 2005 and December 31 , 2005, the close of the taxable quarters when the relevant sales pertaining to the Claimed input VAT were made. However, anent its filing of a judicial claim through the instant Petition for Review on September 27, 2007, the Court decided that the same was prematurely filed. Section 112(D) of the NIRC clearly provides that the CIR has '120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit],' within which to grant or deny the claim. In case of full or partial denial by the Cl R, the taxpayer's recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days. In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Obviously, CIR did not wait for the decision of the CIR or the lapse of the 120-day period. CIR's assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive period has no legal basis.

There is nothing in Section 112 of the NIRC to support CIR's view. Subsection (A) of the said provision states that 'any VAT -registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.' The phrase 'within two (2) years xxx apply for the issuance of a tax credit certificate or refund ' refers to applications for refund/credit filed with the CIR and not to appeals made to the CT A. This is apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has '120 days from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)' within which to decide on the claim. In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. Then the 120-day period is crucial in filing an appeal with the CTA. Considering that the filing of the judicial claim on September 27, 2007 and the filing of the administrative claim on August 21, 2007 were only thirtyseven (37) days apart, it is clear that petitioner did not wait for the decision of CIR or for the lapse of the 120-day period before filing the instant petition. Thus, the filing of the judicial claim with this Court is premature. St. Lukes Medical Center v. CIR Ponente: Mindaro-Grulla, J. Date Promulgated: August 26, 2010 Topic: Cancellation of assessments issued on the ground that St. Lukes is exempt from tax FACTS: On December 14, 2007, St. Lukes received from the Large Taxpayers Service-Document Processing and Quality Assurance Division assessment notices which assessed petitioner deficiency income tax in the amount of P78,617,434.54 for the taxable year 2005 and P57,119,867.33 for the taxable year 2006. St. Lukes filed an administrative protest on January 14, 2008. On April 25, 2008, St. Lukes received the Final Decision on Disputed Assessment, which modified the Audit Results/ Assessment Notices by increasing the amount of alleged deficiency income tax for the year 2005 to P82,419,522.21 and for the year 2006 to P60,259,885.94, or a total amount of Pl42,679,408.15.

Petition for Review was filed by St. Luke's Medical Center, Inc. seeking the cancellation and withdrawal of the assessments issued against them for alleged deficiency income taxes for the taxable years 2005 and 2006, in the total amount of Pl42,679,408.15, on the ground that St. Lukes exempt from tax. St. Lukes Contention: St. Lukes Medical Center is a non-stock, non-profit corporation which operates exclusively for charitable purposes and is exempt from payment of income tax under Section 30(E) and (G) of the NIRC of 1997. CIRs Contention: St. Lukes Medical Center is subject to 10% income tax under Section 27 (B) of the NIRC of 1997. The assessments arose from St. Lukes non-payment of income tax due per return for the taxable years 2005 and 2006 based on Section 27(B) of the National Internal Revenue Code, as amended, which provides, among others, that proprietary educational institutions and hospitals, which are non-profit, shall pay a tax of ten percent ( 1 0%) on their taxable income. Non-profit hospitals are now liable to pay ten percent ( 1 0%) on their taxable income except those covered by Section (D) of the same Code. This is a new provision introduced by the legislature unmistakably intended to amend the exemption on non-profit hospitals that were previously categorized as non-stock, non-profit corporations under Section 26 of the NIRC of 1977, as amended. Sec. 30(E) and (G) of the NIRC of 1997 will not apply. The basic difference between Section 27(8) and Section 30(E) is that the former particularly mentions non-profit hospitals, while the latter generally enumerates non-stock corporations organized and operated exclusively, among other things, for charitable purposes. The exemption letter issued in 1990 being used as a basis by St. Lukes is deemed repealed by Sec. 27 of the NIRC, as amended, which took effect in 1998. ISSUE/s: Whether petitioner is exempt from income tax under Section 30(E) and (G) of the NIRC of 1997, as amended, or liable to pay ten percent (10%) income tax, in accordance with Section 27(B) of the same Code. DECISION: Yes, since St. Lukes Medical Center is exempt from payment of income tax, CIRs assessment against petitioner for deficiency income tax and the included compromise penalties and surcharges should be cancelled and set aside. HELD:

St. Lukes Medical Center is exempt from income tax under Section 30(E) and (G) of the NIRC of 1997. The difference between Sections 27 (B) and 30 (E) of the NIRC of 1997, as amended, is clear. To fall under Section 27 (B) , the hospital must be a nonprofit corporation or association. However, unlike Section 30 (E) , Section 27 (B) does not require that the hospital must be a non-stock corporation. Since Section 27 (B) of the NIRC of 1997, as amended, expressly provides that 'proprietary educational institutions and hospitals which are non-profit shall pay a tax of ten percent (10%) on their taxable income', it necessarily follows that when a hospital is non-stock, non-profit, and operated exclusively for charitable purpose, it falls within the purview of Section 30 (E) of the NIRC of 1997, as amended, and not under Section 27 (B) of the same Code and the income received by it as such is exempt from income tax under Section 30(E) of the NIRC of 1997, as amended. The CTA further discussed that for Section 30(E) and (G) of the NIRC of 1997 to apply in the instant case, petitioner must establish ( 1) that it is a non-stock corporation; (2) that it is operated exclusively for charitable purpose; and (3) that no part of its net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any specific person. As to the first requirement, petitioner is registered with the Securities and Exchange Commission as a non-stock, non-profit corporation, as indicated in its Amended Articles of Incorporation. The CTA agrees with CIR that St. Luke's exemption from income tax does not extend to income of whatever kind from its properties, real or personal, or from any of its activities conducted for profit but noted that records show that petitioner had no "non-operating and other income" for the taxable years 2005 and 2006. PPL v. KINTANAR Ponente: Mindaro-Grulla,J. Date Promulgated: August 11, 2010 Topic: Registered Taxpayer Kintanar willfully failed to file his income tax return for taxable year 1999 in violation of Section 255, NIRC thus made criminally liable. FACTS: Accused Kintanar is engaged in business and earning income as distibutor of Forever Living Products Omc, with obligation under the law to file his income tax return (ITR) for the taxable year 1999 on or before the 15th day of April 2000.

Mr. Cabantac (prosecution witness) is the Revenue Officer IV of the National Investigation Division of the BIR and conducted an investigation on the tax liability of Kintanar based on a complaint filed by the BIR. Accused Kintanar was personally served the following letters and notices: a. the Letter of Authority (served by Mr. Cabantac) for the purpose of conducting a formal investigation (but accused failed to comply) b. A Second Request for presentation of record and a Final Notice (but accused failed to comply with the request of submission of records) c. A Subpoena Duces Tecum (requiring him to subit the records to the Chief of the Prosecution Division of the BIR) but accused still failed to comply. For failure of accused to comply with the foregoing notices, a Preliminary Assessment Notice was issued to him via registered mail and thereafter a Formal Letter of Demand with Assessment Notices but still the accused failed to comply. Mr Cabantac then recommended the filing of a criminal action against accused before the DOJ. ISSUE: whether accused Benjamin G. Kintanar is guilty beyond reasonable doubt for willfull failure to file his income tax return for the taxable year 1999 in violation of Section 255 of the 1997 NIRC. DECISION: Yes. HELD: Section 255 of the NIRC of 1997, as amended, reads: "SEC. 255. Failure to File Return, Supply Correct and Accurate Information, Pay Tax, Withhold and Remit Tax and Refund Excess Taxes Withheld on Compensation.- Any person required under this Code or by rules and regulations promulgated thereunder to pay any tax, make a return, keep any record, or supply correct and accurate information, who willfully foils to pay such tax, make such return, keep such record, or supply such correct and accurate information, or withhold or remit taxes withheld, or refund excess taxes withheld on compensation, at the time or times required by law or rules and regulations shall, in addition to other penalties provided by law, upon conviction thereof, be punished by o fine of not less than Ten thousand pesos (P 1 0,000.00) and suffer imprisonment of not less than one ( 1) year but not more than ten (1 0) years. xxx" [Emphasis supplied] Under the foregoing provision, there are three (3) essential elements: 1) accused is a person required by law to make or file a return; 2) accused failed to make or file the return at the time required by law; and 3) failure to make or file the return was willful.

On the first element, suffice it to say that accused' responsibility to make or file a return is clear from Sections 51 and 7 4 of the NIRC of 1997, as amended, the pertinent provisions of which read: "SEC. 51 . Individual Returns. (A) Requirements.( 1) Except os provided in paragraph (2) of this Subsection, the following individuals are required to file on income tax return: (a) Every Filipino citizen residing in .the Philippines; xxx" "SEC. 74. Declaration of Income Tax for Individuals. (A) In General. - Except as otherwise provided in this Section, every individual subject to income tax under Sections 24 and 25(A) of this Title, who is receiving self-employment income, whether it constitutes the sole source of his income or in combination with salaries, wages and other fixed or determinable income, shalf make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. In general, self-employment income consists of the earnings derived by the individual from the practice of profession or conduct of trade or business carried on by him as o sole proprietor or by a partnership of which he is a member. Nonresident Filipino citizens, with respect to income from without the Philippines, and nonresident aliens not engaged in trade or business in the Philippines, ore not required to render a declaration of estimated income tax. The declaration shall contain such pertinent information as the Secretory of Finance, upon recommendation of the Commissioner, may, by rules and regulations prescribe. An individual may make amendments of a declaration filed during the taxable year under the rules and regulations prescribed by the Secretory of Finance, upon recommendation of the Commissioner." [Emphasis supplied] In the instant case, the prosecution has sufficiently established that accused with TIN 186-677-853-000 is registered as an Income and VAT Taxpayer in Revenue District No. 052, Paranaque District, on January l , 1996, as evidenced by a Certificate of Registration issued in his favor. Moreover, accused himself admitted during the Preliminary Conference that he is engaged in the business and earning income as distributor or an independent contractor of FLPPI, a duly registered domestic corporation, during the taxable years 1999 to 2001 , and prior years thereto. Hence, accused, as a Filipino c itizen residing in the Philippines , duly engaged in the business as a distributor selling FLPPI products in the Philippines, 4B is required under the law, specifically Sections 51 and 7 4 of the NIRC of 1997, as amended, to make and file a declaration of his estimated income for the current taxable year on or before April 15 of the same taxable year. As to the second element that accused failed to file the return as required by law, Section 51 (8) and (C) of the NIRC of 1997, as amended, provides for the venue and prescribed period for filing Income Tax Returns, the pertinent provisions of which read:

"SEC. 51 . Individual Return. XXX (B) Where to File . - Except in c ases where the Commissioner otherwise permits, the return shall be filed with an authorized agent bank, Revenue Distric t Offic er, Collection Agent or duly authorized Treasurer of the c ity or municipality in which such person has his legal residence or principal place of business in the Philippines, or if there be no legal residence or place of business in the Philippines, with the Office of the Commissioner. (C) When to File.( 1) The return of any individual specified above shall be filed on or before the fifteenth (15th) day of April of each year covering income for the preceding taxable year. xxx [Emphasis supplied] The evidence presented by the prosecution sufficiently establish that accused indeed failed to file the required return as mandated by law. The prosecution presented a Certification dated September 1 7, 2002 issued by Ms. Carmelita R. Bacod, Revenue District Officer of Paranaque City, attesting to the fact that accused has no record on file for the years 1999 to 2001. This was corroborated by another Certification so dated February 19, 2007 issued by Atty. Christina C. Barroga, OIC-Asst. Revenue District Officer of Paranaque City, attesting to the fact therein that acc used did not file any Income Tax Return for the years 1999 to 2001. Atty. Barroga, a witness for the prosecution, testified that the foregoing Certification was issued based on the printed records stored in the BIR's computer database, which consists of registration information supplied by a taxpayer when he applies for registration. Further, another prosecution' witness, Ms. Annabel Alcantara, a Systems Analyst of the BIR, testified and affirmed that the Information Systems Operations Service (ISOS) had issued a Certification dated September 26, 2007 duly signed by Mr. Alberto A. Pio De Roda, Assistant Commissioner - ISOS, certifying that accused is a registered Professional taxpayer and that the BIR has no record that accused has filed his income tax returns for the years 1999 to 2001. COVANTA ENERGY PHILIPPINE HOLDINGS, INC. v. COMMISSIONER OF INTERNAL REVENUE Ponente: MINDARO-GRULLA, J. Date Promulgated: JULY 27, 2010 Topic: Payment of the amnesty tax and the submission and accomplishment of the pertinent forms by the taxpayer shall be deemed full compliance with the provisions of RA No. 9480. Compliance therewith exempts the person from the payment of taxes, including civil, criminal or administrative penalties under the Tax Code

FACTS: CIR assessed Covanta Energy Philippine Holdings Inc (CEPHI) and finding a deficiency of P465,593.21 and P288 ,903.78 in its VAT and expanded withholding tax issued demand letters. CEPHI protested several times but upon failure to render a decision of CEPHIs protest the latter elevated its claims before the CTA. After trial, CEPHI availed of tax amnesty under RA 9480 in lieu of his VAT deficiencies. ISSUE 1: WoN CEPHI validly availed of the tax amnesty DECISION: Yes. All the requirements for a tax amnesty was complied with HELD: Revenue Memorandum Circular (RMC) No. 19-2008, entitled "Circularizing the Full Text of A Basic Guide on the Tax Amnesty Act of 2007 for Taxpayers Who Wish to Avail of the Tax Amnesty Pursuant to Republic Act No. 9480 (Tax Amnesty Act of 2007)", specified the forms required to be submitted: 1. Notice of Availment of Tax Amnesty; 2. Statement of Assets , Liabilities and Net worth (SALN) ; 3. Tax Amnesty Return (BIR Form No. 2116); and 4. Payment Form (BIR Form No. 0617). The payment of the amnesty tax and the submission and accomplishment of the pertinent forms by the taxpayer shall be deemed full compliance with the provisions of RA No. 9480. A careful examination of the records shows that CEPHI duly complied with the requirements enumerated in RA No. 9480 as implemented by RMC No. 19-2008. Further, RA No. 9480 mandates that after a taxpayer qualifies for tax amnesty, he shall be exempt from the payment of taxes, including civil, criminal or administrative penalties under the Tax Code. The foregoing is corroborated by CIR's witness, Ms. Dolores E. Somera, Assistant Chief of the Assessment Division of Revenue Region No. 9, who testified that CEPHI availed of the tax amnesty granted under RA No. 9480 and that as a result, assessments on income and business taxes for taxable year 2005 and prior years, including the subject year 2001, are abated and only the deficiency tax assessment on withholding taxes remained due and enforceable. With the CEPHI 's availment of tax amnesty and compliance with the said requirements under RA No. 9480, all the stipulated issues raised in CTA Case No. 7338 and CTA Case No. 7365 were rendered moot and academic, except the issue as to whether CEPHI is liable for the deficiency expanded withholding tax amounting to P288,903.78. ISSUE 2: WoN CEPHI is liable for its EWT deficiency DECISION: Yes. CEPHI is liable HELD: The payment to Mr. Orillozo in the amount of P 15,000.00, as evidenced by Journal Voucher, was not listed under "Payroll ", but it was separately indicated in the Schedule of Professional Fees prepared by CEPH. Ms. Beleno, in her sworn statement, also stated that another payment under

"Payroll" was mode to Institutional Synergy, Inc. in the amount of P45,500.0031, with corresponding expanded withholding tax of P2,250.00 Evaluation of the computation of deficiency EWT assessment showed, however; that CIR's examiner recognized the said income payment and the remittance of the related expanded withholding tax. As regards the professional fees paid to Mr. De Meso, Bejo, and Manalo, CEPHI was able to prove that the withholding taxes due thereon were duly remitted as evidenced by CEPHI's Journal Vouchers, General Ledger Botch Listing, Security Bonk Money Transfer Application Form, Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded), and Schedule of Tax on Compensation and Expanded, The CTA computed CEPHIs deficiency EWT liability for taxable year to only P 131,791.02 Stablewood Philippines, Inc. v CIR Ponente: Casanova, J. Date Promulgated: July 23, 2010 Topic: Having exercised the option of carry-over under Sec. 76 of the NIRC insofar as the claimed excess tax credit is concern and applying the irrevocability rule under the same section of the NIRC, a corporation is barred from claiming refund of its unutilized creditable withholding taxes and should just apply the same to the succeeding quarters/years until it is fully utilized. . FACTS: The Annual ITR of Stablewood for 2005 indicated that the excess CWT in 2005 is "to be refunded". Thus, an administrative claim for refund of the excess of CWT of petitioner for the year 2005, in the amount of Php4,125,251.76, was filed by petitioner with RR No. 8 (Makati City) on 20 December 2006. Since CIR has not acted upon the said claim for refund, Stablewood filed a Petition for Review which seeks the issuance of a tax credit certificate or refund in the amount of Php4,125,251.76, allegedly representing the excess creditable withholding tax for the year 2005 of Stablewood. Stablewood Philippines Contention: Stablewood has a right to claim for a refund of the tax that was paid in excess of the amount due the government under Sec. 76of the NIRC of 1997. Section 204 (C) of the Tax Code in relation to Section 229 grants authority to the Commissioner of Internal Revenue to refund taxes erroneously received. CIRs Contention: CIR presents the following arguments: 1) Stablewood failed to demonstrate that the tax, which is the subject of the case, was erroneously or illegally collected;

2) Taxes paid and collected are presumed to have been made in accordance with the laws and regulations, hence, not refundable; 3) Claims for refund are construed strictly against the claimant, the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs.Ledesma, 31 SCRA 95) and as such, these are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121)." ISSUE/s: Whether or not petitioner is entitled to the refund or issuance of tax credit certificate in the amount of amount of Php4, 125,251.76, allegedly representing excess/unutilized creditable withholding tax for taxable year 2005. DECISION: No. Applying the irrevocability rule under Sec 76 of the NIRC of 1997, Stablewood is barred from claiming refund of its unutilized creditable withholding taxes for taxable year 2005 in the amount of Php4,125,251.76 HELD: Petitioner's original option to refund (in the form of TCC) the amount of P4,125,251.76 was actually negated by its very act of carrying over said excess amount to the succeeding taxable quarters of 2006. Stablewood is bound by the irrevocability rule under Section 76 of the NIRC of 1997, as amended, and is barred from claiming refund of it unutilized creditable withholding taxes for taxable year 2005 in the amount of Php4,125,251. 76. Section 76 of the NIRC offers two options to a taxable corporation whose total quarterly income tax payments in a given taxable year exceed its total income tax due; These options are (1) filing for a tax refund (either in the form of cash or Tax Credit Certificate) or (2) carry over the excess credit. For the first option: Any tax on income that is paid in excess of the amount due the government may be refunded, provided that a taxpayer properly applies for the refund. Under the second option: the refundable amount, as shown on the Final Adjustment Return of a given taxable year, is applied against the estimated quarterly income tax liabilities of the succeeding taxable year. However, once the carry-over option is taken actually or constructively it becomes irrevocable for that taxable period . In exercising its option, the corporation must signify in its annual corporate adjustment return (by marking the option box provided in the BIR form) its intention either to carry over the excess credit or to claim a refund. To facilitate tax collection, these remedies are in the alternative and the choice of one precludes the other.3 Stablewoods Annual Income Tax Return for taxable year 2005 through the BIR's Electronic Filing and Payment System (EFPS) on 6 April 2006 shows an income tax overpayment of P22,310,994.85 which consisted of the prior
3

Philippine Bank of Communications vs. Commissioner oflnternal Revenue, G.R. No. 112024, January 28, 1999

year's excess credits of P18,185,743.09 and creditable taxes withheld in 2005 in the amount of P4,125,251. 76. While petitioner signified its intention to be issued a Tax Credit Certificate for the total overpayment of P22,310,994.85 (inclusive of the subject claim of P4,125,251.76) by marking the box corresponding to such option in its AITR for 2005, however, in its Quarterly Income Tax Returns for the first three quarters of taxable year 2006, petitioner carried-over the excess tax credits of P22,310,994.85 as "Prior Year's Excess Credits". Petitioner had actually exercised the option of carry-over insofar as the claimed 2005 excess tax credit of Php4,125,251.76 is concerned. Having exercised such option, the same is irrevocable pursuant to Section 76 of the NIRC of 1997, as amended. Even if the said excess amount was not utilized in the succeeding taxable quarters of 2006, petitioner cannot seek its refund; instead, it should just apply the same to the succeeding quarters/years until it is fully utilized. UST v. CIR Ponente: Mindaro-Grulla, J. Date Promulgated: May 20, 2010 Topic: Mere execution of the Omnibus Loan and Security Agreement (OLSA) by UST with the lender banks but without the requisite delivery of the loaned amount and the execution of the other documents evidencing the amount of drawings will not give rise to Documentary Stamp Tax (DST) liability on the part of UST. FACTS: UST designated as borrower signed and executed an Omnibus Loan adn Security Agreement (OLSA) with other contracting parties, designated as lenders (composed of 4 banking institutions). In the said Agreement, the lenders agreed to provide loans to UST in the aggregate amount of P3,000,000,000.00, for the purpose of financing USTs projects 3 and other general financing requirements for its operations. UST paid CIR the amount of P 15,000,000.00 as documentary stamp taxes (DST) for its approved credit line/ facility under the Omnibus Loan and Security Agreement. However, the credit line/facility, as contained in the Omnibus Loan and Security Agreement, was never implemented and/or availed of although the documentary stamp taxes were already paid. In fa ct, petitioner never made a "drawdown" on the same approved credit line/facility. Eventually, the approved credit line/facility was cancelled by UST after discovering that there were irregularities in the application for the said credit line/facility as well as in its execution.

Then UST filed an administrative claim for refund with the BIR District Office No. 32 of Manila, in the amount of P 15,000,000.00, representing erroneously paid DST for the approved credit line/facility under OLSA dated April 12, 2007. To date, CIR has yet to act on said administrative claim for refund. Hence, UST filed this Petition for Review. ISSUE: Whether UST is entitled to a tax refund in the amount of P 15,000,000.00, arising from the alleged errof}eous payment of documentary stomp taxes on the approved credit line/facility under the Omnibus Loon and Security Agreement DECISION: Yes. HELD: Section 179 of the NIRC of 1997, as amended by Republic Act No. 9243, provides: "SEC. 179. Stamp Tax on All Debt Instruments. - On every original issue of debt instruments, there sha ll be collected a docume ntary stomp tax of. One peso (Pl .OO) on each Two hundred pesos (P200), or fractional part thereof, of the issue price o f any such debt instruments: Provided, That for such debt instruments with terms of less than one ( 1) year, the documentary stomp tax to be collected shall be of a proportional amount in accordance with the ratio of its term in number of days to three hundred sixty-five (365) days: Provided, further, That only one documentary stomp tax shall be imposed on either loon agreement, or promissory notes issued to secure such loon. For purposes of this section, the term debt instrument shall mean instruments representing borrowing and lending transactions including but not limited to debentures, certificates of indebtedness, due bills, bonds, loan agreements, including those signed abroad wherein the object of contract is located or used in the Philippines, instruments and securities issued by the government or any of its instrumentalities, deposit substitute debt instruments, certificates or other evidences of deposits that ore either drawing interest significantly higher than the regular savings deposit taking into consideration the size of the deposit and the risks involved or drawing interest and having a specific maturity dote, orders for payment of any sum of money otherwise than at sight or on demand, promissory notes, whether negotiable or non-negotiable, except bonk notes issued for c irculation." (Emphasis supplied)

Further, Sections 3(b) and 6 of Revenue Regulations No. 9-94 state that: "SECTION 3. Definition of Terms. - For purposes of these Regulations, the following terms shall mean: XXX XXX XXX (b) 'Loon Agreement' - refers to a contract in writing where one of the parties delivers to another money or other consumable thing , upon the condition that the same amount of the same kind and quality shall be paid . The term sha ll include credit facilities, which may be evidenced by credit memo, advice or drawings. XXX XXX XXX SECTION 6. Stomp Tax on All Loon Agreements. -~.II loon agreements, whether mode or signed in the Philippines, or abroad when the obligation or right arises from the Philippine sources or the property or object of the contra c t is located or used in the Philippines shall be subject to the documentary stomp tax of thirty centavos (P0.30) on each two hundred pesos, or fractional port thereof, of the face value of any of such agreements, pursuant to Section 180 in relation to Section 173 of the Tax Code. In cases where no formal loan agreements or promissory notes have been executed to cover credit facilities, the documentary stamp tax shall be based on the amount of drawings or availment of the facilities, which may be evidenced by credit/ debit memo; advice or drawings by any form of check or withdrawal slip, under Section 180 of the Tax Code, as amended." (Emphasis supplied) Based on the foregoing, Section 179 of the NIRC of 199717, provides that debt instruments shall mean instruments representing borrowing and lending transactions including but not limited to debentures, certificates of indebtedness, due bills, bonds, and loan agreements. Under Sections 3(b) and 6 of Revenue Regulations No. 9-94, a loan agreement refers to a contract in writing where one of the parties delivers to 'another money or other consumable thing , upon the condition that the same amount of the same kind and quality shall be paid . Stated otherwise, for a loan agreement to be subject to DST, there must be delivery of money or other consumable thing by a lender to the borrower, with corresponding obligation of repayment. The debt instrument, which includes loan agreement, must represent borrowing and lending transaction . Clearly, if there is no delivery of money or other consumable thing upon the condition

that the same amount . of the same kind and quality shall also be paid, there will be no DST to be imposed on the document evidencing such loan agreement. It is undisputed that the OLSA doted April 12, 2007, executed by petitioner and a consortium o f creditor banks is on agreement/commitment th a t the lenders-creditorswill make available to petitioner a c redit line or credit facility in the total amount of P3,000,000,000.00, subject to certain conditions. Further, pursuant to the subject OLSA, a "Note" is required to be executed by the borrower once it makes a drowdown on the credit line/facility. However, as correctly pointed out by petitioner, there was no conveyance or delivery of the loaned amount in this case. In fact, the lenderscreditors certified that petitioner did not make on actual drowdown on the said credit line/fa c ility and that the some creditors cancelled the approved credit line/facility; hence, no DST accrued. Mere execution of the Omnibus Loon and Security Agreement, without the requisite delivery of the loaned amount and the execution of other documents evidencing the amount of drawings will not give rise to DST liability on the part of UST. TAGANITO MINING CORPORATION v. COMMISS IONER OF INTERNAL REVENUE Ponente: MINDARO-GRULLA, J. Date Promulgated: APRIL 08, 2010 Topic: Despite compliance with the requisites of Section 112(A) of the NIRC, a tax player claiming refund should be able to prove the same in accordance with the Revenue Regulations issued. FACTS: Taganito Mining Corporation (TMC) claims for refund in the amount of P22, 421, 260.26, allegedly representing unutilized input value-added tax (VAT) on importation/domestic purchases of capital goods and non-capital goods and services attributable to zero-rated sales for the period covering January 1, 2006 to December 31, 2006. The claimed amount was reduced to P4,611,123.00, after TMC filed a Supplemental Petition for Review to reflect the reduction of the refundable input VAT after CIR partially granted petitioner's administrative claim for refund or issuance of tax credit certificate. ISSUE: Whether or not TMC is entitled to the refund of the amount of P 4,611, 123.00, allegedly representing petitioner's unutilized input VAT paid on its importation of capital goods for taxable year 2006 DECISION: No. TMC is not entitled to the refund HELD: According to Section 112(A) of the NIRC of 1997, TMC must comply with the following requisites to be entitled to a refund: 1. that there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid;

3. that such input taxes are attributable to zero-rated sales or effectively zero-rated sales; 4. that the input taxes were not applied against any output VAT liability; and 5. that the claim for refund was filed within the two-year prescriptive period. The two-year prescriptive period for filing a claim for refund/credit of input VAT on zero-rated sales is counted from the date of filing of the return and payment of the tax due, as held in the case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue the Supreme Court explained that: "Lastly, although the taxpayer's refundable or creditable input VAT may not be considered as illegally or erroneously collected, its refund/credit is a privilege extended to qualified and registered taxpayers by the very VAT system adopted by the Legislature. Such input VAT, the same as any illegally or erroneously collected national internal revenue tax, consists of monetary amounts which are currently in the hands of the government but must rightfully be returned to the taxpayer. Therefore, whether claiming refund/credit of illegally or erroneously collected national internal revenue tax, or input VAT. The taxpayer must be given equal opportunity for filing and pursuing its claim. For the foregoing reasons, it is more practical and reasonable to count the two-year prescriptive period for filing a claim for refund/ credit of input VAT on zero -rated sales from the date of filing of the return and payment of the tax due which, according to the low then existing, should be mode within 20 days from the end of each quarter. Since the present claim involves petitioners alleged unutilized input VAT on its importation of capital goods for the first quarter of 2006, the two-year prescriptive period must be reckoned from April 24, 2006, when TMC filed its Original Quarterly VAT Return for the first quarter of 2006. Consequently, TMC had until April 24, 2008, within which to file its claim for refund, both in the administrative and the judicial levels. Clearly, petitioners administrative claim for refund filed on March 26, 2008 and the judicial claim for refund filed on April 17, 2008, were filed within the two-year prescriptive period. On petitioner's compliance with the other requisites, a careful evaluation of petitioner's Schedule of Purchases and Corresponding Input VAT, attached to the Report of the Court-commissioned Independent Certified Public the CTA found that the supporting official receipts do not prove petitioner's actual payment of the claimed input VAT in the amount of P4, 611,123.00. Also, there is no year indicated in the official receipt supporting the January 2006 claim of P 1,131,431.00. Hence, the input VAT claim of P4,611,123.00 should be denied for failure to meet the substantiation requirements under Section 4.11 0-8(a)( l) of Revenue Regulations No. 16-05, which reads: "SECTION 4.110-8. Substantiation of Input Tax Credits.(a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zerorated sales, or subjected to the 5% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau:

( l ) For the importation of goods - import entry or other equivalent document showing actual payment of VAT on the imported goods." Further, 4.113-3 of Revenue Regulations No. 16-05, as amended by Revenue Regulations No. 4-2007, provide as follows: A subsidiary record in ledger form shall be maintained for the acquisition, purchase or importation of depreciable assets or capital goods which shall contain, among others, information on the total input tax thereon as well as the monthly input tax claimed in VAT declaration or return." Applying the foregoing, TMC failed to prove that the importations pertaining to the input VAT claim of P4,611,123.00 are in the nature of "capital goods or properties" as defined under Section 4.1 1 0-3(b) of Revenue Regulations No. 16-05. Assuming arguendo that the subject importations qualify as capital goods or properties, the related input VAT of P4,611,123.00 shall be spread/amortized over the estimated useful life of the capital goods or properties, which will mean that the same amount would not be entirely refundable. Since there was no evidence presented for this purpose, petitioner's claim for refund must fail. It is a well settled rule that a taxpayer claimant, like herein petitioner, has the burden of proof to show that it is entitled to the refund of the amount claimed, considering that taxes are presumed to have been collected in accordance with laws and regulations. The burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a refund. For failure of TMC to establish the factual basis of its claim for refund, the CTA denied its claim. Pilipinas Total Gas, Inc. v CIR Ponente: Mindaro-Grulla, J. Date Promulgated: April 08, 2010 Topic: The invoicing requirement of "zero-rated" on VAT official receipts or invoices is mandatory. Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of the claim for input tax of the taxpayer claimant FACTS: Pilipinas Total Gas claims for tax refund or tax credit in the amount of Pl7,528,906.7l, allegedly representing unutilized and unapplied input valueadded tax (VAT) for taxable year 2006, arising from sales to Philippine Economic Zone Authority (PEZA)-registered and Clark Development Corporation (CDC)-registered entities. CIR had not issued a final decision on said claim for refund or tax credit. Hence, Pilipinas Total Gas filed the instant Petition for Review on April 24, 2008 Pilipinas Total Gas Contention:

Petitioner anchors its claim for refund on Section 1 06(A) (2) (c) of the Notional Internal Revenue Code (NIRC) of 1997, as amended, which provides: "SEC. 106. Value-added Tax on Sale of Goods or Properties. (A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sole, barter or exchange of goods or properties, a value-added tax equivalent to ten percent ( 1 0%) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor. XXX (2) The following soles by VAT-registered persons shall be subject to zero percent (0%) rote: XXX (c) Sales to persons or entities whose exemption under special lows or international agreements to which the Philippines is a signatory effectively subjects such so les to zero rate." Petitioner claims that under the afore-quoted laws, its sales PEZAregistered and CDC-registered entities are deemed zero-rated; that as a consequence, it is entitled to the refund of its unutilized input taxes. to

CIRs Contention: CIR posits that:

1) Petitioner's claim for refund has prescribed already in view of Section

112(C) of the 1997 Notional Internal Revenue Code 4;
4

Section 112. Refunds or Tax Credits of Input Tax(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty ( 120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit or the failure on the part of the Commissioner to act on the application within the period prescribed above,

2) It is imperative for Pilipinas Total Gas to prove its compliance with the following: a. The registration requirements of a value added taxpayer under the pertinent provision of the National Internal Revenue Code of 1997, as amended, and its implementing revenue regulations; b. The invoicing and accounting requirements for VATregistered persons, as well as the filing and payment of VAT pursuant to the provisions of Sections 113 and 114 of the Tax Code of 1997, as amended. Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of the claim for input tax of the taxpayer claimant (Revenue Memorandum Circular No. 42-2003); c. The submission of complete documents in support of the administrative claim for refund pursuant to Section 112 (C) of the Tax Code of 1997, as amended, otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with Section 229 of the Tax Code, as amended; ISSUE/s: Whether or not petitioner is entitled to a refund or issuance of tax credit certificate in the amount of P17,528,906.17, allegedly representing petitioner's unutilized input taxes for the taxable year 2006.

DECISION: NO. Petition for Review was denied for lack of merit and CTA denied Pilipinas Total Gas claim for refund. While Pilipinas Total Gas sales to PEZA and CDC-registered enterprises in the amount of Php 185,719,273.82 are subject to zero percent (0%) VAT. And even if consequently, Pilipinas Total Gas is not liable to pay any output VAT thereon and the reported unutilized input VAT attributable thereto may be a proper subject of a claim for refund/tax credit under Section 112(A) of the NIRC of 1997, records reveal that Pilipinas Total Gas failed to sufficiently substantiate its reported zero-rated sales to PEZA and CDC-registered enterprises, as well as the input VAT on its domestic purchases of goods and services for taxable year 2006.

the taxpayer affected may, within (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals'. - (Italics supplied)

HELD: This Court agrees with petitioner that sales transactions with PEZAregistered and CDC-registered entities are deemed zero-rated. In the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils .), Inc.5, the Supreme Court ruled that services rendered to a PEZA-registered enterprise effectively subjects the supply of such services to VAT at zero percent (0%). Further, the ruling made by the Supreme Court in the case entitled Commissioner of Internal Revenue vs. Sekisui Jushi Philippines, lnc. 6 further reaffirms that sales to ecozone are treated as export sales which are zerorated or subject to a tax rate of zero percent. Consequently, Pilipinas Total Gas is not liable to pay any output VAT thereon and the reported unutilized input VAT attributable thereto may be a proper subject of a claim for refund/tax credit under Section 112(A) of the NIRC of 1997.7 However, in the case of Commissioner of Internal Revenue vs. Manila Mining Corporation8 the Supreme Court reiterated the importance of substantiating the input VAT by purchase invoices or official receipts and presenting the same as evidence to the Court, in the following manner: "For a judicial claim for refund to prosper, however, respondent must not only prove that it is a VAT registered entity and that it filed its claims within the prescriptive period. It must substantiate the input VAT paid by purchase invoices or official receipts.

5 6

G.R. No. 150154, August 9, 2005 G.R. No. 149671, July 21, 2006

"SEC. 112. Refunds or Tax Credits of Input Tax.(A) Zero-rated or Effectively Zero-rated Sales. - Any VAT registered person, whose sales ore zero-rated or effectively zero rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such so les, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106 (A)( 2)(a)(1), (2) and (B) and Section 1 08(8) ( 1) and (2). the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) : Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-ra ted sale and also in taxable or exempt so le of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume o f so les."
8

G.R. No. 153204, August 31, 2005

Clearly, petitioner failed to sufficiently substantiate its reported zero-rated sales to PEZA and CDC-registered enterprises for the taxable year 2006. Needless to say, the failure of petitioner to formally offer said evidence is detrimental to its cause. SYNOVATE v PASIGCITY Ponente: Uy, J. Date Promulgated: January 8, 2010 Topic: Mayor's Permit may not be issued to any person, partnership and/or corporation who; violated any Ordinance or Regulation relative to permit and license granted, failed to pay the tax or fee of a business discovered operating without a license, and fails to pay the fine, penalty, basic tax or other liabilities from misdeclaration an underdeclaration of the taxable receipts/sales within Thirty (30) days from the date of the demand." Hence, Pasig City can refuse to issue business permit to Synovate on the basis of its tax deficiency. FACTS: Synovate Inc. is a domestic corporation primarily engaged in the business of management consulting. On December 7, 2004, Synovate received from respondent City Treasurer a Notice of Assessment for deficiency taxes due arising from undeclared taxable receipts in the sum of P718,340.91 for taxable years 2000 to 2004. In a letter dated January 12, 2005, Synovate assailed the assessment and asked respondent City Treasurer to recall the same. In another letter dated January 28, 2005 to respondent City Treasurer, Synovate protested the Notice of Assessment dated December 7, 2004. On January 28, 2005, Synovate also wrote respondent Business Permit and License Office (BPLO) after the latter denied petitioner's application for business permit for 2005. Synovate requested respondent BPLO to grant the application without need of prior payment of the assessed deficiency business tax or execution of the prescribed compromise agreement. Upon approval by the respondent Mayor on January 28, 2005, respondent BPLO accepted Synovates payment and issued a temporary business permit. On July 11, 2006, Synovate wrote respondent City Treasurer a request for: (1) the cancellation of assessment of local business taxes for taxable years 2000 to 2004 as contained in the Notice of Assessment dated December 7, 2004; (2) the issuance of the corresponding clearance of business tax liabilities for taxable years 2000 to 2004; and (3) the issuance of business permits for taxable years 2005 and 2006. On September 7, 2006, respondent City Treasurer sent petitioner a Letter of Authority for the examination of books of accounts and other records of

business, and for the assessment and collection of taxes, fees and charges due from petitioner for 2005 and prior unexamined years. On April 23, 2007, respondent City Treasurer wrote petitioner a letter,which served as the final notice for petitioner to immediately pay deficiency tax in the amount of P 1,152,833.00. Synovate files a Formal Protest Assessment but this not was acted upon hence, it filed before the RTC, Pasig City a Petition for the Cancellation of Local Business Tax Assessments for taxable years 1998-2005. RTC Pasig City Dismissed the petition arguing that:The subject assessments, the 2004 Assessment has become final and unappealable. As regards the issue on the withholding of Synovatesbusiness permit, Pasog City may validly withhold issuance of business permit for non payment of local business taxes/ fees and charges pursuant to Sec. 77 (d) of the Pasig Revenue Code of 1992/ which reads 'Mavor's permit mav not be issued to anvperson, partnership and/or corporation who: violated anvOrdinance or Regulation relative to permit and licenses oranted,failed to pay the tax or fee of a business discovered operating without a license/ and fails to pav the fine, penaltv, basic tax or other liabilities from misdec/aration an underdec/aration of the taxable receipts/sales within Thirty (30 davs from the date of the demand. Synovate contends: The 2004 Assessment has been superseded by the 2007 Assessment and therefore never became final and unappealable. Therefore, there is no basis for the Regional Trial Court's dismissal of the Petition on the ground that the 2004 Assessment has become final and unappealable --Hence this petition of Synovate, 1st ISSUE: Whether or not the 2004 Assessment has become final and unappealable DECISION: Yes. HELD: Section 195 of the Local Government Code (LGC) provides: "SECTION 195. Protest of Assessment - When the local treasurer or his duly authorized representative finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the nature of the tax, fee or charge, the amount of deficiency, the surcharges, interests and penalties. Within sixty (60) days from the receipt of the notice of assessment, the taxpayer may file a written protest with the local treasurer contesting the assessment; otherwise, the assessment shall become final and executory. The local treasurer shall decide

the protest within sixty (60) days from the time of its filing. If the local treasurer finds the protest to be wholly or partly meritorious, he shall issue a notice canceling wholly or partially the assessment. However, if the local treasurer finds the assessment to be wholly or partly correct, he shall deny the protest wholly or partly with notice to the taxpayer. The taxpayer shall have thirty (30) days from the receipt of the denial of the protest or from the lapse of the sixty-day period prescribed herein within which to appeal with the court of competent jurisdiction otherwise the assessment becomes conclusive and unappealable." From the above-quoted provision, the Synovate has sixty (60) days from receipt of the notice of assessment to file a written protest with respondent City Treasurer; while the latter shall decide within sixty (60) days from the time of the filing of protest. Based on the records of the case, Synovate filed its protest within the sixty (60)-day period or on January 28, 2005. In turn, respondent City Treasurer had sixty (60) days or until March 29, 2005 to decide on the protest. As respondent City Treasurer did not act on the protest, petitioner had thirty (30) days from March 29, 2005 or until April 28, 2005 to file an appeal with the court of competent jurisdiction. The Petition for Cancellation of Local Business Tax Assesssment for taxable years 1998-2005 with Petition for Certiorari and Preliminary Mandatory Injunction was filed on October 4, 2007 before the court a quo. Based on Section 195 of the LGC, petitioner failed to observe the remedies provided under Section 195 of the LGC. It did not file an appeal within the period provided by law, and has therefore lost its right to appeal. Hence, the 2004 assessment became conclusive and unappealable. As the 2004 assessment covering taxable years 1999-2003 became conclusive and unappealable, respondent City Treasurer may not review, modify, or correct the same by issuing the 2007 assessment. Neither can petitioner treat the 2007 assessment as an act of respondent City Treasurer vacating the 2004 assessment, and from which it may file another protest for deficiency business tax assessments for the same taxable years. Section 195 of the LGC is clear. The assessment became conclusive and unappealable, and thus it can no longer be a subject of an appeal. 2nd ISSUE: Whether or not RTC erred in dismissing the petition. DECISION: Yes. HELD: In its petition before the court a quo, Synovate prayed, among others, for the cancellation of the Assessment dated April 23, 2007 (2007

Assessment). Hence, the subject of the petition was not merely the 2004 Assessment, but alsothe 2007 Assessment. The Regional Trial Court should have ruled on the issues pertaining to taxable years 1998, 2004, and 2005, subject of the 2007 Assessment. Pursuant to Section 19 of the Pasig Revenue Code of 1992, all taxes, fees and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be. In relation thereto, Section 194 of the LGC provides: "SECTION 194. Periods of Assessment and Collection.- (a) Local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. No action for the collection of such taxes, fees, or charges, whether administrative or judicial, shall be instituted after the expiration of such period: Provtded, That, taxes, fees or charges which have accrued before the effectivity of this Code may be assessed within a period of three (3) years from the date they became due. XXX XXX XXX (c) Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such action shall be instituted after the expiration of said period: Provided, however, That, taxes, fees, or charges assessed before the effectivity of this Code may be collected within a period of three (3) years from date of assessment. XXX XXX xxx" Clearly, the assessment for deficiency business taxes for taxable year 1998 had already prescribed. Respondents may assess petitioner for deficiency business taxes only for taxable years 2004 and 2005. In examining the 2007 Assessments for taxable years 2004 and 2005, this Court takes note of, and relies on, the Supreme Court's ruling in Ericsson Telecommunications, Inc. vs. City of Pasig, et a/. quoted as follows: "Respondent is authorized to levy business taxes under Section 143 in relation to Section 151 of the Local Government Code. Insofar as Synovate is concerned, the applicable provision is subsection (e), Section 143 of the same Code covering contractors and other independent contractors, to wit: SEC. 143. Tax on Business. -The municipality49 may

impose taxes on the following businesses: xxxx (e) On contractors and other independent contractors, in accordance with the following schedule: With gross receipts for the preceding calendar year in the amount of: xxxx (Emphasis supplied) Amount of Tax Per Annum The above provision specifically refers to gross receipts which is defined under Section 131 of the Local Government Code, as follows: (n) 'Gross Sales or Receipts'include the total amount of money or its equivalent representing the contract price, compensation or service fee, including the amount charged or materials supplied with the services and the deposits or advance payments actually or constructively received during the taxable quarter for the services performed or to be performed for another person excluding discounts if determinable at the time of sales, sales return, excise tax, and value-added tax (VAT); xxxx The law is clear. Gross receipts include money or its equivalent actually or constructively received in consideration of services rendered or articles sold, exchanged or leased, whether actual or constructive. XXX XXX XXX Revenue Regulations No. 16-2005 dated September 1, 2005 defined and gave examples of 'constructive receipt', to wit: SEC. 4.108-4. Definition of Gross Receipts. -- x x x 'Constructive receipt' occurs when the money consideration or its equivalent is placed at the control of the person who rendered the service without restrictions by the payor. The following are examples of constructive receipts: (1) deposit in banks which are made available to the seller of services without restrictions; (2) issuance by the debtor of a notice to offset any debt or obligation and acceptance thereof by the seller as payment for services rendered; and (3) transfer of the amounts retained by the payor to the account of the contractor. There is, therefore, constructive receipt, when the consideration for the articles sold, exchanged or leased, or the services rendered has already been placed under the control of the

person who sold the goods or rendered the services without any restriction by the payor. In contrast, gross revenue covers money or its equivalent actually or constructively received, including the value of services rendered or articles sold, exchanged or leased, the payment of which is yet to be received. This is in consonance with the International Financial Reporting Standards, which defines revenue as the gross inflow of economic benefits (cash, receivables, and other assets) arising from the ordinary operating activities of an enterprise (such as sales of goods, sales of services, interest, royalties, and dividends), which is measured at the fair value of the consideration received or receivable. As aptly stated by the RTC: '[R]evenue from services rendered is recognized when services have been performed and are billable.' It is 'recorded at the amount received or expected to be received.' (Section E [17] of the Statements of Financial Accounting Standards No. 1). In petitioner's case, its audited financial statements reflect income or revenue which accrued to it during the taxable period although not yet actually or constructively received or paid. This is because petitioner uses the accrual method of accounting, where income is reportable when all the events have occurred that fix the taxpayer's right to receive the income, and the amount can be determined with reasonable accuracy; the right to receive income, and not the actual receipt, determines when to include the amount in gross income. The imposition of local business tax based on petitioner's gross revenue will inevitably result in the constitutionally proscribed double taxation - taxing of the same person twice by the same jurisdiction for the same thing - inasmuch as petitioner's revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. Thus, respondent committed a palpable error when it assessed petitioner's local business tax based on its gross revenue as reported in its audited financial statements, as Section 143 of the Local Government Code and Section 22(e) of the Pasig Revenue Code clearly provide that the tax should be computed based on gross receipts."

As there is only one Supreme Court from whose decisions all other courts should take their bearings, this Court must adhere to its rulings. 5 Therefore, the 2007 Assessment for taxable years 2004 and 2005 should be cancelled for lack of basis. 3rd ISSUE: Whether or not Pasig City may not issue a business permit DECISION: Yes. HELD: For easy reference, Section 77(d) of Pasig Revenue Code of 1992 (Pasig Ordinance No. 25, Series of 1992, as amended) provides as follows: "d) Mayor's Permit may not be issued to any person, partnership and/or corporation who; violated any Ordinance or Regulation relative to permit and license granted, failed to pay the tax or fee of a business discovered operating without a license, and fails to pay the fine, penalty, basic tax or other liabilities from misdeclaration an underdeclaration of the taxable receipts/sales within Thirty (30) days from the date of the demand." (Emphases supplied) This Court will not be hasty in declaring a tax ordinance invalid or illegal, as it is mindful of the well-etched dictum by the Supreme Court in People v. Vera that: "A becoming modesty of inferior courts demands conscious realization of the position that they occupy in the interrelation and operation of the integrated judicial system of the nation." Especially so, the power to determine any question on the legality of tax ordinances, such as the Pasig Revenue Code of 1992, is not within the province of this Court, but is primarily lodged on the Secretary of Justice, pursuant to Section 187 of the LGC of 1991, and under certain conditions, is vested with the courts of general jurisdiction or the Regional Trial Courts. It must be emphasized that this Court is a court of special jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction. The Pasig Revenue Code of 1992, including Section 77(d) thereof, enjoys the presumption of validity, unless declared otherwise. There being no contrary declaration, respondent Mayor has the duty, inter alia, to ensure that all taxes and other revenues of the city are collected " and issue licenses and permits and suspend or revoke the same for any violation of the conditions

upon which said licenses or permits had been issued, pursuant to law or ordinance 4th ISSUE: Whether or not Pasig Citys refusal to issue a business permit in favor of Synovate on the basis of Section 77(b) is justified. DECISION: No. HELD: As We already ruled, the local business tax should not be based on Synovates gross revenues, but on its gross receipts. Thus, there being no underdeclaration on the part of Synovate, the issuance of the corresponding business permits for the years 2005 to 2007 is warranted. BANK OF COMMERCE V. COMMISSIONER OF INTERNAL REVENUE Ponente: CASTANEDA JR. J. Date Promulgated: JAN 08 2010 Topic: Under Section 203 of the NIRC of 1977, actions for deficiencies in withholding tax prescribe in three years after the last day prescribed by law for the filing of the return. FACTS: On June 21 , 2002, Bank of Commerce (BOC) received from CIR copies of the Formal Letter of Demand and Assessment Notice Nos. INC-97000043, WC-97-000025, EWT-97-000044, FT-97-000022, CWT-97-000001 , OT-97-000013, DST-97-000044, and DST2-97-000018, all dated June 14, 2002, assessing BOC deficiency income tax, withholding tax on compensation, expanded withholding tax, final tax, creditable withholding tax, onshore tax, and documentary stamp taxes in the aggregate amount of P119,457,207.24, inclusive of compromise penalty and increments for taxable year 1997. BOC protested the assessment via a letter filed with the BIR Large Taxpayer Service Division on July 19, 2002. BOC had until September 17, 2002 within which to submit its supporting documentary evidence. On March 16, 2003, the 180-day period within which CIR is mandated by law to render a decision on the protest lapsed without CIR's action on petitioner's protest. As such, BOC had thirty (30) days from said date, or until April 15, 2003, within which to appeal to the CTA. In order to protect its rights, BOC instituted the present action on April 14, 2003. On December 26, 2007, BOC filed a Motion (to Suspend Collection of Alleged Tax Liabilities), praying for the suspension of collection of its alleged tax liabilities pending the final disposition of the present case. The motion was denied by the Court in a Resolution dated April 1, 2008. BOC moved for the reconsideration of the said Resolution alleging, among others, its availment of the Tax Amnesty Law under Republic Act (R.A. ) No. 9480.10 Petitioner's Motion was treated by this Court as a Motion to Partially Withdraw the Petition, which was also granted in Resolution 11 dated August 8, 2008; hence, the instant case was deemed to be partially withdrawn and was

considered closed and terminated subject to the provisions of R.A. No. 9480. In the same Resolution, this Court set the case for the marking of CIR's documentary evidence and initial presentation of evidence on the issue of deficiency withholding taxes. BOC filed a Motion for Partial Judgment on October 23, 2008, praying for the cancellation of Assessment Notice Nos. WC97-000025, EWT-97-000044, and CWT-97-000001 dated June 14, 2002, on the ground of prescription. Consequently, on February 3, 2009, the Court promulgated a Resolution canceling and setting aside Assessment Notice Nos. EWT-97-000044 and CWT -97-000001; while sustaining the validity of Assessment Notice No. WC-97-000025. ISSUE: WoN BOC is liable for deficiency withholding tax on compensation in the amount of P11 ,946,818.96 under Assessment Notice No. WC-97 -000025. DECISION: No. BOC can longer be liable due to prescription HELD: It may be recalled that in Resolution dated February 3, 2009, the validity of Assessment Notice No. WC-97 -000025 was sustained due to petitioner's failure to formally submit to this Court its Monthly Withholding Tax Returns for Compensation. Such omission made this Court unable to determine which prescriptive period should apply, when such prescriptive period should begin to run, and when it should lapse. Thus, the Court ruled that the defense of prescription cannot be sustained. However, after petitioner's motion to reopen trial had been granted and after it had presented and formally offered to this Court its Monthly Withholding Tax Returns for Compensation for the months of taxable year 1997, the issue of whether the assessment of deficiency withholding tax on compensation is already barred by prescription may now be properly addressed and resolved Section 203 of the National Internal Revenue Code (NIRC) of 1977, as amended, provides: "SECTION 203. Period of Limitation Upon Assessment and Collection. - Except as provided in the succeeding section, internal revenue taxes shall be assessed within three years after the last day prescribed by law for the filing of the return, and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period: Provided, That in a case where a return is filed beyond the period prescribed by law, the three-year period shall be counted from the day the return was filed . For purposes of this Section, a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day." BOC presented to this Court its supplemental evidence to support its contention that Assessment Notice No. WC-97 -000025 was issued beyond the period provided by law for CIR to assess deficiency compensation withholding taxes. After a close scrutiny of the documents, the Court finds that the assessment for deficiency withholding tax on compensation was also issued beyond the three-year prescriptive period provided under Section 203 of the NIRC of

1977, as amended. The last Monthly Withholding Tax Return for Compensation was filed on January 26, 1998. Counting from said date, CIR should have issued Assessment Notice No. WC-97 -000025 on January 26, 2001. However, CIR belatedly assessed BOC on June 14, 2002. Clearly, the assessment for deficiency withholding tax on compensation was already barred by prescription at the time of its issuance. CIR argues that BOC failed to declare certain tax payments it was supposed to withhold and remit, making the ten (10)-year prescriptive period for issuance of assessment as provided under Section 223 of the NIRC of 1977, as amended, applicable to this case. CIR's argument is untenable It is noteworthy that while Section 223 of the NIRC of 1977 provides for certain exceptions as to the period of limitation, viz., in case of false or fraudulent return with intent to evade tax or failure to file a return , such is not present in this case to warrant the extension of the prescriptive period to ten years. BOC filed its Monthly Remittance Returns of Income Taxes Withheld for taxable year 1997. Moreover, CIR did not allege much less prove that the returns were false or fraudulent as contemplated under Section 223 of the NIRC of 1977, as amended. On the other hand, BOC has satisfactorily shown that it properly withheld and remitted the withholding taxes on its employees' compensation for taxable year 1997. Inasmuch as CIR's right to assess has already lapsed and BOC has sufficiently proven that it properly withheld and remitted the taxes due on the compensation of its employees for taxable year 1997, the cancellation of Assessment Notice No. WC-97 -000025 is in order Taganito Mining Corporation v CIR Ponente: Uy, J. Date Promulgated: January 28, 2010 Topic: Petition for review filed with the CTA (refund of input tax) is premature if made before the lapse of 120 days from the filing of the administrative claim. FACTS: Taxpayer filed the administrative claim for refund of input value-added taxes in the amount of Php8, 365, 664.38 for the period covering January 1 to December 31, 2004 on November 14, 2006 with the CIR. It likewise filed an Application for Tax Credits/Refunds for the period covering January 1 to December 31, 2005 for the same amount. As the statutory period within which to file a claim for refund for said input VAT is about to lapse without action on the part of the part of CIR, it later filed the petition for review with the CTA on February 14, 2007.

Taganitos Contention: Taganito asserts that it is primarily engaged in the business of exploring , producing and export beneficiated nickel silicate ores and chromite ores, and that these ores are 1 00% exported and/or shipped to foreign countries. Taganito also points out that evidence show that its input VAT were paid for by it in the course of its trade and business and are directly attributable to its zero-rated sales. Taganito further showed that the excess input VAT being claimed for refund or tax credits has not been applied against or are undiminished by any of its output VAT for the same or subsequent periods since it has no output VAT on its 100% export sales. Neither has the said input VAT been carried forward to the succeeding quarter or quarters as the same were deducted by Taganito upon filing of their application for refund with respondent. It also argues that excess input VAT being claimed has been properly supported by VAT-registered invoices and/or official receipts issued by its suppliers, and official receipts issued by the Bureau of Customs, in accordance with Section 113(A) of the NIRC CIRs Contention: CIR presented the following arguments: 1) The amount of P8,365,664.38 being claimed by Taganito as alleged unutilized input VAT on domestic purchases of goods and services and on importation of capital goods for the period January 1, 2005 to December 31, 2005 is not properly documented; 2) CIR asserts that Taganito is not entitled to a refund in the amount of Php8,365,664.38 because the alleged excess input VAT covering the period January 1, 2005 to December 31 , 2005 are not substantiated by proper invoices and official receipts. 1) Taganito should provide a proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund pursuant to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative claim for refund, the administrative claim thereof being mere pro-forma, which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the 1997 Tax Code. Further, Section 112 (D) of the Tax Code, as amended, requires the submission of complete documents in support of the application filed with the BIR before the 120- day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for review ISSUE/s: Whether or not Petitioner is entitled to the refund of alleged excess VAT input taxes paid from January 1, 2005 to December 31, 2005 in the amount of Eight

Million Three Hundred Sixty Five Thousand Six Hundred Sixty Four and 38/100 Philippine Pesos (PhP8, 365,664.38). DECISION: Yes. Petition for Review was partially granted by the CTA when it found that Taganito Mining Corporation sufficiently proved that it is entitled to a tax credit certificate in the amount of Php8,249,883.33 only representing unutilized input VAT for the four taxable quarters of 2005. HELD: Section 112(A) of the NIRC of 1997 9lays down the requisites to be entitled to the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to zero-rated or effectively zero-rated sales. Such requisites are as follows: 1. The claimant must be a VAT -registered person; 2. There must be zero-rated or effectively zero-rated sales; 3. That input taxes being claimed were due or paid ; 4. That such input taxes were attributable to zero-rated or effectively zerorated sales; 5. That the input taxes were not applied against any output VAT liability; and 6. That the claim for refund was filed within the two-year prescriptive period. CTA found that out of the Php 8,365,664.38 input VAT claim for the year 2005, only the amount of Php8,249,883.33 is duly substantiated for purposes of the instant claim. Finally, CTA confirmed that the records show that petitioner's administrative claim filed on November 14, 2006 which was amended on November 29, 2006, and the Petition for Review filed with this Court on February 14, 2007 are well within the two-year prescriptive period, reckoned from March 31 , 2005, June 30 , 2005, September 30 , 2005, and December 31 , 2005, respectively, the close of each taxable quarter covering the period January 1, 2005 to December 31 , 2005. TUTUBAN PROPERTIES V CIR
9

SEC. 112. Refunds or Tax Credits of Input Tax. (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2) (a) (1),(2) and (B) and Section 108 B(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with therules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales."

Ponente: Castaneda, J. Date Promulgated: January 8, 2010 Topic: Before Tutuban (Petitioner) can validly claim the refund or tax credit, it has the duty not only to establish the fact of double remittance but also, to prove that there was no double utilization of the claimed creditable withholding taxes on the part of petitioner's lessee, the PNR. In its attempt to establish that there was no double utilization of the subject EWT, it presented as evidence PNR's Annual Income Tax Returns andJudicial Affidavit The documents presented however are insufficient to prove that there was no double utilization of the claimed EWT. These returns cannot be given evidentiary value since this Court cannot determine who certified the same as no name appears below the signature and/or whether the same is the actual and authorized custodian of said documents FACTS: This case is about the Petition for Review filed by Tutuban Properties is a claim for refund or issuance of tax credit certificate in the amount of P984,375.00, allegedly representing expanded withholding taxes erroneously and doubly remitted in relation to petitioner's rental payments to Philippine National Railways (PNR) for the first quarter of calendar year 2005. Under a Lease Agreement executed on August 16, 1993, Tutuban shall pay PNR an annual fee for the rental of the Tutuban Terminal Compound, in C.M. Recto Avenue, Manila; and a share on gross sales, including rental income derived by Tutuban from the lease to third parties of commercial/office/parking spaces within its own building improvements. On April 18, 2007, Tutuban filed with the BIR a written request for refund or issuance of tax credit certificate in the amount of P984,375.00 allegedly representing the over-remitted expanded Withholding Taxes (EWT) on its rental payments to PNR for the period covering January 2005 to March 2005. As CIR has not acted on Tutubans written request, Tutuban filed this petition for review. ISSUE: Whether or not Tutuban is entitled to a claim for refund or the issuance of a Tax Credit Certificate (TCC) in the amount of Php 984,375.00 representing its erroneous payment of Expanded Withholding Tax?" DECISION: No. HELD: The alleged erroneous remittance of the amount of P984,375.00 arose from the remittance of withholding tax on rental payments to PNR for the quarter ending March 2005. Pursuant to revenue regulations and Tutubans accounting practice, remittance of the equivalent expanded withholding tax due on rentals is made upon the monthly accrual of rent payable. On the basis thereon, Tutuban filed with the BIR its Monthly Remittance Returns of Creditable

Income Taxes Withheld (Expanded) for the months of January, February, and March 2005 on February 14, 2005, March 14, 2005 , and April 13, 2005 , respectively. Tutuban correspondingly remitted, among others, the EWT on rentals paid to PNR19 on February 15, 2005 , March 15, 2005 , and April 15, 2005. On May 13, 2005, Tutuban filed its Monthly Remittance Return of Creditable Income Taxes Withheld (Expanded) for the month of April 2005. On May 16, 2005, tutuban remitted the EWT due thereon, which included the EWT due on rentals paid to PNR for the months of January to March 2005, and the EWT on accrued rent for the month of April 2005, in the sum of P1,368,136.91. The pieces of evidence presented by Tutuban, including the Report of Ms. Myra Celeste Dabalos, the Court-commissioned Independent Certified Public Accountant (CPA), prove that there was double remittance of EWT. The remittance made to BIR on May 16, 2005 included the EWT on rentals pertaining to January, February, and March 2005. However, the amount of double remittance amounts to P953,230.31 only, as against Tutubans claim of P984,375.00. Although Tutuban had over-remitted the EWT on the fixed component portion of the rental due to PNR by P984,375.00, it has under-remitted the EWT on the variable component of the rental (2% share in gross income) by P31,144.69. However, before Tutuban can validly claim the refund or tax credit, it has the duty not only to establish the fact of double remittance but also, to prove that there was no double utilization of the claimed creditable withholding taxes on the part of petitioner's lessee, the PNR. In its attempt to establish that there was no double utilization of the subject EWT, petitioner presented as evidence PNR's Annual Income Tax Returns (BIR Form 1702) for calendar years 2005 and 2006 , and the Judicial Affidavit of Tutubans Assistant Manager for Accounting, Ms. Myrna Revilla. The documents presented however are insufficient to prove that there was no double utilization of the claimed EWT. As a matter of fact, the Annual Income Tax Returns of PNR for calendar years 2005 and 2006 were merely stamped with the words "certified xerox copy." These returns cannot be given evidentiary value since this Court cannot determine who certified the same as no name appears below the signature and/or whether the same is the actual and authorized custodian of said documents. Without the presentation of the original Annual Income Tax Returns of PNR, the authenticity of the purported "certified xerox copies" thereof cannot be ascertained. It bears stressing that tax refunds, like tax exemptions, are construed strictly against the taxpayer. Tutuban, as claimant, has the burden of proof to establish the factual basis of its cla im for tax credit or refund . Its failure to overcome this burden will result in the denial of its refund claim. GST PHILIPPINES INC. v. COMMISSIONER OF INTERNAL REVENUE

Ponente: CASTANEDA JR. J. Date Promulgated: JAN 08 2010 Topic: In order to claim input VAT tax refunds it must comply Sec. 112 (A), which states that following requisites must be satisfied: 1. there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input taxes are attributable to zero-rated or effectively zerorated sales; 4. that the input taxes were not applied against any output VAT liability; 5. that the claim for refund was filed within the two-year prescriptive period. FACTS: In its final amended Quarterly VAT Returns covering the fourth quarter of 2005 to the second quarter of 2006 and fourth quarter of 2006 to the third quarter of 2007, petitioner reflected the following zero-rated sales in the amount of P205,884,108.30, taxable sales in the amount of P3,533,282.50, with the correspond ing output VAT of P423,993.90 and unutilized input VAT in the amount of P18, 192,151 .91 Petitioner avers that the reported zero-rated sales in the amount of P205,884,108.30 was derived from its domestic sales of goods to Philex Mining Corporation (PMC), Philippine Associated Smelting and Refining Corporation (PASAR) and Rapu-Rapu Processing, Inc. (hereinafter referred to as "Rapu-Rapu"), as well as from its export sales to CSR Building Materials (hereinafter referred to as "CSR"), GSI Lucchini SPA (hereinafter referred to as "GSI"), and Boroo Gold Mining Company, Ltd. (hereinafter referred to as "Boroo"). PMC is registered with the Board of Investments (BOI) pursuant to Executive Order No. 226, otherwise known as the "Omnibus Investments Code of 1987", whose manufactured products are one hundred percent (100%) exported to foreign countries. PASAR and Rapu-Rapu are both registered with the Philippine Economic Zone Authority (PEZA) CSR, GSI, and Boroo are companies allegedly based in Malaysia, Italy, and Mongolia, respectively. Petitioner's sales to the aforesaid entities are purportedly VAT zero rated pursuant to Revenue Memorandum Order (RMO) No. 9-00, Revenue Memorandum Circular (RMC) No. 74-99, and Section 106(A)(2)(a)(1) and (c) of the NIRC of 1997, as amended. As a result, petitioner allegedly was unable to utilize the input VAT which it incurred/paid on its domestic purchases of taxable goods and services from the fourth quarter of 2005 to the second quarter of 2006 and from the fourth quarter of 2006 to the third quarter of 2007, in the total amount of P18, 192,151.91. Relying on Section 112(A) of the NIRC of 1997, as amended, on September 19, 2006, petitioner filed with the BIR a letter together with duly accomplished BIR Form No. 1914 (Application for Tax Credits/Refunds) requesting the refund of the amount of P9,660,531.25, representing unutilized input VAT for the period covering October 1, 2005 to June 30, 2006. Likewise, on November 23, 2007, petitioner simultaneously filed with the BIR two letters with the corresponding duly accomplished BIR Forms No. 19147, asking refund of the amounts of P7, 924,833.14 and P606, 787.52,

representing unutilized input VAT for the periods of October 1, 2006 to December 31 , 2006 and January 1, 2007 to September 30, 2007, respectively. Due to respondent's inaction on its claims totaling P18, 192,151 .91, petitioner filed before this Court a Petition for Review on January 11, 2008. ISSUE: WoN Petitioner, based on the facts and applicable laws, is entitled to a refund of its excess and unapplied input VAT payments for the period from October 1, 2005 to September 30, 2007. DECISION: Partially granted refund. HELD: The reckoning of the two-year prescriptive period for the filing of a claim for input VAT refund under Section 112(A) of the NIRC of 1997, as amended, starts from the close of the taxable quarter when the relevant sales were made pertaining to input VAT regardless of whether said tax was paid or not. Evidence shows that while petitioner's claim for the fourth quarter of 2005 was timely filed in the administrative level on September 19, 2006, however, the same was filed out of time before this Court on January 11 , 2008. Thus, petitioner is barred from claiming refund of the input taxes for the fourth quarter of 2005 in the amount of P5,222.87 due to prescription. Then, The Court proceeded to evaluate petitioner's remaining input VAT claim in the amount of P18,181 ,706.17, covering the first, second, and fourth quarters of 2006. Anent the first requisite, petitioner's Quarterly VAT Returns for the fourth quarter of 2006 and first two quarters of 2007 showed that it had no zerorated sales for the said quarters. However, in its Quarterly VAT Returns for the first and second quarters of 2006 and third quarter of 2007, petitioner reflected zero-rated sales in the respective amounts of P61 ,115,610.3516, P58,422,188.0017, and P29,298,379.7818, or in the sum of P148,836,178.13; which consisted of domestic sales in the amount of P100, 134,970.00 and export sales in the amount of P48,701 ,208. In order to substantiate its export sales of P48,701,208.13 and the foreign currency proceeds therefrom , petitioner presented various sales invoices, bills of lading , packing list, bank credit advices/memos, and judicial affidavits of Ms. Maria Lina P. Grecia , petitioner's Budget and Accounting Officer and of Mr. Roque S. Fado , the Court-commissioned Independent Certified Public Accountant (CPA). A perusal of these documents proved that petitioner shipped and sold its products abroad to the following entities: (1) CSR Building Materials SON BHD in Malaysia; (2) Boroo Gold Co. Ltd. in Mongolia; (3) UAC Berhad in Malaysia; and (4) GSI Lucchini Spa in Italy. In consideration thereof, petitioner received foreign currency payments, which were inwardly remitted in accordance with the BSP rules and regulations. These export sales fall within those transactions referred to as subject to zero percent (0%) VAT under Section 106(A)(2)(a)(1) of the NIRC of 1997 As to the domestic sales of P1 00, 134,970.00, records show that the same pertained to sales made by petitioner to PMC, a VAT taxpayer and BOI-

registered entity whose products are 100% exported; as well as to PASAR and Rapu-Rapu , both PEZA-registered entities. Sales to PMC are covered by VAT invoices and official receipts duly stamped with the word "zero-rated", the name of PMC, its corresponding BOI registry number, and registration date; while sales to PASAR and Rapu-Rapu are supported by VAT invoices and official receipts duly stamped with the word "zero-rated". Petitioner's domestic sales to the afore-mentioned BOI and PEZA registered entities qualify for VAT zero-rating, pursuant to Section 106(A)(2)(a)(5) of the NIRC of 1997. Sales by a VAT taxpayer from the Customs Territory to a PEZA registered entity are considered export sales under Executive Order No. 226 The VAT zero-rating of sales made by a VAT taxpayer, like herein petitioner, to a PEZA-registered entity was further clarified in Revenue Memorandum Circular No. 7 4-99 After resolving that petitioner's sales in the amount of P148,836, 178.13 qualifies for VAT zero-rating , the Court will now determine the amount of unutilized input VAT attributable thereto. Petitioner presented its Summary List of Purchases and the related suppliers' invoices and official receipts in support of the P18,580,664.58 excess input VAT, reflected in its Quarterly VAT Returns for the first, second, and fourth quarters of 2006 and the first three quarters of 2007 Since no amount of zero-rated sales/receipts was reported in petitioner's VAT returns for the fourth quarter of 2006, first, and second quarters of 2007, the declared input VAT for the said quarters in the amounts of P7,931,433.14, P608,710.11 , and P149,021.50, respectively, totaling P8,689, 164.75, cannot be the subject of a claim for refund under Section 112(A) of the NIRC of 1997, as amended. It is clear from Section 112(A) of the NIRC of 1997, as amended, that the refund/tax credit of input tax is premised on the existence of zero-rated or effectively zero-rated sales. With reference to the reported input VAT for the first and second quarters of 2006 and the third quarter of 2007 in the amounts of P8,819,658. 76, P906,252.44, and P165,588.63, respectively, totaling P9,891 ,499.83, this Court, upon verification of the Independent CPA Report and petitioner's supporting documents, finds that the following input taxes in the amount of P313,808.40 should be disallowed for failure to meet the substantiation requirements under Section 113(A) of the NIRC of 1997, as amended, in relation to Section 4.110-8 of Revenue Regulations No. 14-05, as amended by Section 4.110-7 of Revenue Regulations No. 16-05 Out of petitioner's reported input VAT for the first and second quarters of 2006 and the third quarter of 2007 in the amount of P9,891 ,499.83, only the input VAT of P9,577,691.43 was properly substantiated by VAT invoices or official receipts Regarding the issue of whether or not the said input VAT was applied against any output VAT and/or carried over to the succeeding taxable quarters, petitioner's Quarterly VAT Returns for the first and second quarters of 2006 and the third quarter of 2007 showed that petitioner had taxable sales in the

amount of P885,218.17 for the said period, with the related output tax liability in the amount of P1 06,226.18 portion of the substantiated input VAT of P9,577,691.43 shall be applied against petitioner's reported output VAT liability of P1 06,226.18. Hence, only the remaining input VAT of P9,471 ,465.25 can be attributed to the P148,836,178.13 zero-rated sales (domestic and exports) declared by petitioner for the first and second quarters of 2006 and third quarter of 2007, It was established that petitioner deducted the claimed excess input VAT for the first and second quarters of 2006 and the third quarter of 2007 as "VAT Refund/TCC Claimed" in its Quarterly VAT Returns for the third quarter of 2006 and the fourth quarter of 2007. Thus, no amount of the claimed excess input VAT was carried over or applied against any output tax in the succeeding taxable quarters In sum, the Court finds petitioner to have sufficiently proven its entitlement to the issuance of tax credit certificate in the amount of P9,471,465.25, representing unutilized input VAT attributable to zero-rated sales for the first and second quarters of 2006 and the third quarter of 2007. Philam Financial Advisory Services, Inc. v CIR Ponente: Uy, J. Date Promulgated: January 08, 2010 Topic: Irrevocability rule on income tax credits under the NIRC of 1997 FACTS: On April 11, 2008, petitioner filed an administrative claim for refund of its excess/unutilized creditable withholding taxes for taxable year 2005 with the BIR Revenue District Office No. 50 in the amount of Php3, 288,145.59. Due to the inaction by respondent on said claim for refund, petitioner elevated the matter to this Court by way of the instant Petition for Review on April 15, 2008 Petition for Review involving a claim for refund in the amount of Php3,288,145.59, allegedly representing excess/unutilized creditable withholding taxes of Philam Financial Advisory Services, Inc., for taxable year 2005. Philams Contention: Philam alleges that due to its loss position since taxable year 2002, it could not utilize its creditable withholding taxes for taxable year 2005. Such being the case, petitioner alleged that it could not utilize and did not carry-over said creditable withholding taxes to the succeeding taxable year 2006 Petitioner contends that it is entitled to the tax credit/refund of its excess/unutilized creditable withholding taxes amounting to Php3,288,145.59

under Section 204 in relation to Sections 229 and 76 of the National Internal Revenue Code (NIRC) of 1997. Philam further argues that the following requisites have been complied with (a) the claim for refund was filed within two years as prescribed under the NIRC; (b) the income upon which the taxes were withheld were included in the return of the recipient; and (c) the fact of withholding is established by a statement duly issued by the payor (withholding agent) to the payee showing the amount paid and the amount of tax withheld therefrom. CIRs Contention: CIR submits that the applicable tax provision is Section 76 of the NIRC of 1997 which gives the corporation three options as regards its excess quarterly income tax payments/creditable withholding taxes, namely: (a) to be refunded ; (b) to be issued a tax credit certificate; and (c) to carry-over as excess to the succeeding taxable quarters/years. CIR further avers that once the option to carry over has been chosen, the same becomes irrevocable for that taxable period and an application for cash refund or issuance of tax credit certificate shall no longer be allowed. CIR points out that Philams Quarterly Income Return and other exhibits petitioner allegedly failed to mark the option box that will indicate its intention that the taxes withheld are to be refunded for succeeding taxable years 2006 and that such omission is allegedly fatal to the claim for refund of withholding taxes Respondent further contends that based on the records, the petition was filed way beyond the two-year prescriptive period. ISSUE/s: "Whether or not petitioner is entitled to a refund of its alleged excess or unutilized creditable withholding taxes for taxable year 2005, in the amount of Php3,288,145.59 pursuant to Section 204 of the National Internal Revenue Code (NIRC), as amended, in relation to Sections 76 and 229 of the same Code." DECISION: No. CTA denied the Petition for Review. Philam failed to show on its return that the income payment subjected to withholding tax was declared as part of its gross income. Further, irrevocability rule under Section 76 of the NIRC of 1997 will still apply to Philam because: 1) it has exercised the option to carry-over and to apply the excess quarterly income tax against income tax due for the taxable quarters of the succeeding taxable years and 2) it does not fall within the exemption from the application of the irrevocability rule because Philam has failed to secure a certificate of tax clearance from the Bureau of Internal Revenue upon dissolution. . HELD:

The CTA cited conditions for the grant of a claim for refund of creditable withholding tax. Citing Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, et al., the CTA reiterated that the Supreme Court ruled that there are three (3) conditions for the grant of a claim for refund of creditable withholding income tax, to wit: 1) the claim is filed with the Commissioner of Internal Revenue within the two-year period from the date of payment of the tax; 2) it is shown on the return of the recipient that the income payment received was declared as part of the gross income; and, 3) the fact of withholding is established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the amount of the tax withheld therefrom. The CTA ruled that while Philam has complied with the first and third conditions, it has failed to convince the Court that it has complied with the second condition such that it failed to show on the return that the income payment subjected to withholding tax was declared as part of the gross income. The CTA also noted another discrepancy, pertaining to the amount of the refund being claimed supposedly representing the total amount of creditable tax withheld for taxable year 2005. Irrevocability rule under Section 76 of the NIRC of 1997 will not apply to a corporation who permanently ceases its operation before full utilization of the tax credits it opted to carry over but a certificate of tax clearance from the Bureau of Internal Revenue should be secured by the corporation upon dissolution CTA held that even if it is assumed that Philam has complied with all of the said conditions , it still failed to hurdle the other requirements of the law under Sec. 76 of the NIRC of 1997 which provides the corporation three options as regards its excess quarterly income tax payments/creditable withholding taxes wherein the corporation shall either: the corporation shall either: (A) Pay the balance of tax still due; or (B) Carry-over the excess credit; or (C) Be credited or refunded with the excess amount paid, as the case may be. Citing Paseo Realty and Development Corp. v. CA 10, the CTA further reiterated the rule that once the taxpayer has exercised the option to carryover and to apply the excess quarterly income tax against income tax due for the taxable quarters of the succeed ing taxable years, such option is irrevocable for that taxable period and no application for cash refund or issuance of a tax credit certificate shall be allowed. This is known as the irrevocability rule on income tax credits under the NIRC of 1997. However, the CTA said that when the corporation permanently ceases its operation before full utilization of the tax credits it opted to carry over, it may then be allowed to claim the refund of the remaining tax credits. In such a case, the remaining tax credits can no longer be carried over and the
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irrevocability rule ceases to apply. Philam has failed to secure a certificate of tax clearance and the Court held that absent a tax clearance, the CTA cannot ascertain if indeed petitioner has paid all its tax liabilities, nor can it accordingly conclude that it is already dissolved or has permanently ceased operations. But Philam still failed to show that it has indeed ceased its operation after the corporate existence of Philam expired and thus failed to show that it is excluded from the application of the irrevocability rule.