Tax 2

Haystacks
Taxation Law II
Michael Vernon Guerrero Mendiola 2005 Shared under Creative Co ons !ttri"ution# $onCo ercial#Share!like %&0 'hili((ines license&
So e )i*hts )eserved&
Ta"le o+ Contents
issioner o+ Internal )evenue vs& !yala Securities Cor(& ,G) L#2-./50 21 $ove "er 1-/02 3&&&&&&&&& 1 Collector o+ Internal )evenue vs& 4eni(ayo ,G) L#1%5550 %1 6anuary 1-522 3&&&&&&&&& % 4utuan Saw ill vs& Court o+ Tax !((eals ,G) L#205010 2/ 7e"ruary 1-552 3&&&&&&&&& . CI) vs& 'hoenix !ssurance 8G) L#1-929& 20 May 1-55&: 3&&&&&&&&& 5 $ava vs& Co issioner o+ Internal )evenue ,G) L#1-.900 %0 6anuary 1-552 3&&&&&&&&& Tuason ; Le*arda Ltd& vs& Co issioner o+ Internal )evenue ,G) L#1/5520 %0 Se(te "er 1-552 3&&&&&&&&& 10 )o an Catholic !rch"isho( o+ Ce"u vs& Collector o+ Internal )evenue ,G) L#155/%0 %1 6anuary 1-522 3&&&&&&&&& 11 7ili(inas Invest ent ; 7inance Cor(oration vs& Co issioner o+ Internal )evenue ,G) L#2%5010 150 May 1-592 3&&&&&&&&& 1% Co issioner o+ Internal )evenue vs& Isa"ela Cultural Cor(oration ,G) 1%52100 11 6uly 20012 3&&&&&&&&& 1. Co issioner o+ Internal )evenue vs& <nion Shi((in* Cor(oration ,G) 551500 21 May 1--02 3&&&&&&&&& 15 issioner o+ Internal )evenue vs& 'hili((ine ! erican Li+e Insurance Co& ,G) 10520/0 2- May 1--52 3&&&&&&&&& 1/ !CC)! Invest ents Cor(oration vs& Court o+ !((eals ,G) -5%220 20 =ece "er 1--12 3&&&&&&&&& 21 >o((el ,'hils&2 Inc& vs& Collector o+ Internal )evenue ,G) L#105500 1- Se(te "er 1-512 3&&&&&&&&& 2% Co issioner o+ Internal )evenue vs& Victorias Millin* Co& ,G) L#2.10/0 % 6anuary 1-5/2 3&&&&&&&&& 25 Co issioner o+ Internal )evenue vs& Conce(cion ,G) L#2%-120 15 March 1-5/2 3&&&&&&&&& 29 'hili((ine 4ank o+ Co unications vs& Co issioner o+ Internal )evenue ,G) 11202.0 2/ 6anuary 1---2 3&&&&&&&&& 2/ <n*a" vs& Cusi 6r& ,G) L#.1-1-#250 %0 May 1-/02 3&&&&&&&&& %1 Co issioner o+ Internal )evenue vs& Court o+ !((eals ,G) 11-%220 . 6une 1--52 3&&&&&&&&& %2 Co Co
This collection contains eighteen (18) of twenty five (25) cases summarized in this format by Michael Vernon M !uerrero (as a "unior law student) during the #econd #emester$ school year 2%%&'2%%5 in the Ta(ation )aw ** class under +tty ,ommel -uebengco (.) at the +rellano /niversity #chool of )aw (+/#)) 0om1iled as 234$ 5uly 2%11 6erne !uerrero entered +/#) in 5une 2%%2 and eventually graduated from +/#) in 2%%7 8e 1assed the 2hili11ine bar e(aminations immediately after (+1ril 2%%9)
www&"erne*uerrero&co
Haystacks (Berne Guerrero)
[1] Commissioner of Internal Revenue vs. Ayala Securities Cor . (GR !"#$%&'( #1 )ovem*er 1$&+) First Division, Teehankee (J): 4 concur, 1 took no part. ,acts- An assessment made on 21 Februar 1!"1 b the #ommissioner o$ %nterna& 'evenue a(ainst the A a&a )ecurities #orporation (and received b the &atter on 22 *arch 1!"1) in the sum o$ +,-.,".,./4 on its surp&us o$ +2,,-.,442.0, $or its $isca& ear endin( 0/ )eptember 1!--. 'aised be$ore the #ourt o$ Ta1 Appea&s, the ta1 court reversed the assessment o$ the 2-2 surta1 and interest in the amount o$ +,-.,".,./4, and thereb cance&&ed and dec&ared o$ no $orce and e$$ect the assessment o$ the #ommissioner $or 1!--. 3n . Apri& 1!,", the )upreme #ourt a$$irmed the decision o$ the #ourt o$ Ta1 Appea&s and ru&ed that the assessment $e&& under the -4 ear prescriptive period provided in section 001 o$ the 5ationa& %nterna& 'evenue #ode (5%'#) and that the assessment had, there$ore, been made a$ter the e1piration o$ the said -4 ear prescriptive period and 6as o$ no bindin( $orce and e$$ect. The #ommissioner moved $or reconsideration. The )upreme #ourt set aside its decision o$ . Apri& 1!,", and rendered in &ieu thereo$ another 7ud(ment orderin( the corporation to pa the assessment in the sum o$ +,-.,".,./4 as 2-2 surta1 on its unreasonab& accumu&ated surp&us, p&us the -2 surchar(e and 12 month& interest thereon, pursuant to section -1 (e) o$ the 5%'#, as amended b 'A 20408 6ith costs. 1. .nite/ 01ui ment 2 Su ly Co. vs. CIR (C3A 14$'( 5+ 6cto*er 1$41) The provisions o$ sections 001 and 002 o$ the 5ationa& %nterna& 'evenue #ode $or prescriptive periods o$ - and 1/ ears a$ter the $i&in( o$ the return do not app& to the ta1 on the ta1pa er9s unreasonab& accumu&ated surp&us under section 2- o$ the Ta1 #ode since no return is re:uired to be $i&ed b &a6 or b re(u&ation on such undu& accumu&ated surp&us on earnin(s. The 2-2 surta1 is not sub7ect to an statutor prescriptive period. #. Section 551 )IRC7 8erio/ of limitation u on assessment an/ collection )ection 001 o$ the 'evenue #ode provides that ;<1cept as provided in the succeedin( section, interna& revenue ta1es sha&& be assessed 6ithin $ive ears a$ter the return 6as $i&ed, and no proceedin( in court 6ithout assessment $or the co&&ection o$ such ta1es sha&& be be(un a$ter the e1piration o$ such period. For the purpose o$ this section a return $i&ed be$ore the &ast da prescribed b &a6 $or the $i&in( thereo$ sha&& be considered as $i&ed on such &ast da 8 +rovided, That this &imitation sha&& not app& to cases a&read investi(ated prior to the approva& o$ this #ode. 5. Section 551 a lies to )ational Internal Revenue 3a9es :;ic; re1uires t;e filin< of returns )ection 001 app&ies to assessment o$ 5ationa& %nterna& 'evenue Ta1es 6hich re:uires the $i&in( o$ returns. A return the $i&in( o$ 6hich is necessar to start the runnin( o$ the $ive4 ear period $or makin( an assessment, must be one 6hich is re:uired $or the particu&ar ta1. #onse:uent& , it has been he&d that the $i&in( o$ an income ta1 return does not start the runnin( o$ the statute o$ &imitation $or assessment o$ the sa&es ta1. (=utuan )a6mi&&, %nc. v. #ourt o$ Ta1 Appea&s, >.'. 5o. ?42/"/1, Feb. 2., 1!"", 1" )#'A 2,,). %. )o return re1uire/ for im ro erly accumulate/ sur lus rofits7 3a9 t;ereon im ose/ as a enalty 5o return cou&d have been $i&ed, and the &a6 cou&d not possib& re:uire, $or obvious reasons, the $i&in( o$ a return coverin( unreasonab&e accumu&ation o$ corporate surp&us pro$its. A ta1 imposed upon unreasonab&e accumu&ation o$ surp&us is in the nature o$ a pena&t . (@e&verin( v. 5ationa& >rocer #o., 0/4 A.). 2.2). %t 6ou&d not be proper $or the &a6 to compe& a corporation to report improper accumu&ation o$ surp&us.
3a9ation !a: II( #++' ( 1 )
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Section 55# )IRC7 09ce tions as to erio/ of limitation of assessment an/ collection of ta9es )ection 002 provides that (a) %n the case o$ a $a&se or $raudu&ent return 6ith intent to evade ta1 or o$ $ai&ure to $i&e a return, the ta1 ma be assessed, or a proceedin( in court $or the co&&ection o$ such ta1 ma be be(un 6ithout assessment, at an time 6ithin ten ears a$ter the discover o$ the $a&sit , $raud, or omission. (b) Bhere be$ore the e1piration o$ the time prescribed in the precedin( section $or the assessment o$ the ta1, both the #ommissioner o$ %nterna& 'evenue and the ta1pa er have consented in 6ritin( to its assessment a$ter such time, the ta1 ma be assessed at an time prior to the e1piration o$ the period a(reed upon. The period so a(reed upon ma be e1tended b subse:uent a(reements in 6ritin( made be$ore the e1piration o$ the period previous& a(reed upon. (c) Bhere the assessment o$ an interna& revenue ta1 has been made 6ithin the period o$ &imitation above prescribed such ta1 ma be co&&ected b distraint or &ev b a proceedin( in court, but on& i$ be(un (1) 6ithin $ive ears a$ter the assessment o$ the ta1, or (2) prior to the e1piration o$ an period $or co&&ection a(reed upon in 6ritin( b the #ommissioner o$ %nterna& 'evenue and the ta1pa er be$ore the e1piration o$ such $ive4 ear period. The period so a(reed upon ma be e1tended b subse:uent a(reements in 6ritin( made be$ore the e1piration o$ the period previous& a(reed upon. =. Section 55# a lies to )ational Internal Revenue 3a9es :;ic; re1uires t;e filin< of returns )ection 002 has re$erence to nationa& interna& revenue ta1es 6hich re:uire the $i&in( o$ returns. This is %mp&ied $rom the provision that the ten4 ear period $or assessment speci$ied therein treats o$ the $i&in( o$ a $a&se or $raudu&ent return or o$ a $ai&ure to $i&e a return. There can be no $ai&ure or omission to $i&e a return 6here no return is re:uired to be $i&ed b &a6 or b re(u&ations. 4. Ri<;t of <overnment to assess is im rescri ti*le( in t;e a*sence of e9 ress statutory rovision7 >octrine?s a lica*ility to Section #' )IRC %t is 6e&& sett&ed &imitations upon the ri(ht o$ the (overnment to assess and co&&ect ta1es 6i&& not be presumed in the absence o$ c&ear &e(is&ation to the contrar . The e1istence o$ a time &imit be ond 6hich the (overnment ma recover unpaid ta1es is pure& dependent upon some e1press statutor provision, (-1 Am. Jur. .",8 1/ *ertens ?a6 on Federa& %ncome Ta1ation, par. -,. /2.). %t $o&&o6s that in the absence o$ e1press statutor provision, the ri(ht o$ the (overnment to assess unpaid ta1es is imprescriptib&e. )ince there is no e1press statutor provision &imitin( the ri(ht o$ the #ommissioner o$ %nterna& 'evenue to assess the ta1 on unreasonab&e accumu&ation o$ surp&us provided in )ection 2- o$ the 'evenue #ode, said ta1 ma be assessed at an time. %n $ine, &imitations upon the ri(ht o$ the (overnment to assess and co&&ect ta1es 6i&& not be presumed in the absence o$ c&ear &e(is&ation to the contrar and that 6here the (overnment has not b e1press statutor provision provided a &imitation upon its ri(ht to assess unpaid ta1es, such ri(ht is imprescriptib&e. &. 8ur ose of a//itional ta9 for a cor oration?s im ro erly accumulate/ rofits or sur lus The under& in( purpose o$ the additiona& ta1 in :uestion on a corporation9s improper& accumu&ated pro$its or surp&us is as set $orth in the te1t o$ section 2- o$ the Ta1 #ode itse&$ to avoid the situation 6here a corporation undu& retains its surp&us earnin(s instead o$ dec&arin( and pa in( dividends to its shareho&ders or members 6ho 6ou&d then have to pa the income ta1 due on such dividends received b them. $. Cor oration is a mere ;ol/in< com any t;rou<; its mot;er com any( a re<istere/ co" artners;i consistin< of family mem*ers A a&a )ecurities #orporation is a mere ho&din( compan o$ its shareho&ders throu(h its mother compan , a re(istered co4partnership then set up b the individua& shareho&ders be&on(in( to the same $ami& . )aid prima $acie evidence and presumption set up b the Ta1 #ode is app&ied 6ithout havin( been ade:uate& rebutted b the corporation. 1+. Ayala Securities Cor . fall un/er Revenue Re<ulations # The #orporation $a&&s under 'evenue 'e(u&ation 2, imp&ementin( the provisions o$ the income ta1 &a6 6hich provides on ho&din( and investment companies that ;A corporation havin( practica&& no activities e1cept ho&din( propert , and co&&ectin( the income there$rom or investin( therein sha&& be considered a
3a9ation !a: II( #++' ( # )
ho&din( compan 6ithin the meanin( o$ section 2-.C ()ection 2/) [#] Collector of Internal Revenue vs. Beni ayo (GR !"15='=( 51 @anuary 1$=#) <n =anc, DiDon (J): . concur, 1 took no part ,acts- A&berto D. =enipa o is the o6ner and operator o$ the ?ucena Theater &ocated in the municipa&it o$ ?ucena, EueDon. 3n 0 3ctober 1!-0 %nterna& 'evenue A(ent 'omeo de >uia investi(ated =enipa o9s amusement ta1 &iabi&it in connection 6ith the operation o$ said theater durin( the period $rom Au(ust 1!-2 to )eptember 1!-0. 3n 1- 3ctober 1!-0 De >uia submitted his report to the +rovincia& 'evenue A(ent to the e$$ect that =enipa o had disproportionate& issued ta14$ree 2/4centavo chi&dren9s tickets. @is $indin( 6as that durin( the ears 1!4! to 1!-1 the avera(e ratio o$ adu&ts and chi&dren patroniDin( the ?ucena Theater 6as 0 to 1, i.e., $or ever 0 adu&ts enterin( the theater, 1 chi&d 6as a&so admitted, 6hi&e durin( the period in :uestion, the proportion 6as reversed F 0 chi&dren to 1 adu&t. From this he conc&uded that =enipa o must have $raudu&ent& so&d 2 ta14$ree 2/4centavo tickets, in order to avoid pa ment o$ the amusement ta1 prescribe in )ection 2"/ o$ the 5ationa& %nterna& 'evenue #ode (5%'#). =ased on the avera(e ratio bet6een adu&t and chi&dren attendance in the past ears, <1aminer de >uia recommended a de$icienc amusement ta1 assessment a(ainst =enipa o in the sum o$ +11,1!0.4-, inc&usive o$ 2-2 surchar(e, p&us a su((ested compromise pena&t o$ +!//.// $or vio&ation o$ section 2"/ o$ the 5%'#, or a tota& sum o$ +12,/!0.4coverin( the period $rom Au(ust 1!-2 to )eptember 1!-0, inc&usive. 3n 14 Ju& 1!-4, the #o&&ector issued a de$icienc amusement ta1 assessment a(ainst =enipa o demandin( $rom the &atter the pa ment o$ the tota& sum o$ +12,1-2.!0 6ithin thirt da s $rom receipt thereo$. 3n 1" Au(ust 1!-4, =enipa o $i&ed the correspondin( protest 6ith the #on$erence )ta$$ o$ the =%'. A$ter due hearin(, the #on$erence )ta$$ submitted to the #o&&ector its $indin( to the e$$ect that the ;mea(er reports o$ these $ie&dmen are mere presumptions and conc&usions, devoid o$ $indin(s o$ $act o$ the a&&e(ed $raudu&ent practices o$ the herein ta1pa erC. %n vie6 thereo$, and as recommended b the #on$erence )ta$$, the #o&&ector re$erred the case back to the +rovincia& 'evenue A(ent o$ EueDon $or $urther investi(ation. The report submitted b +rovincia& 'evenue 3$$icer @. %. =ernardo a$ter this &ast investi(ation supported a(ent De >uia9s assessment. A$ter considerin( said report, the #on$erence )ta$$ recommended to the #o&&ector the issuance o$ the de$icienc amusement ta1 assessment in :uestion. The issue bein( raised in the #ourt o$ Ta1 Appea&s, said court, on 20 Januar 1!4., reversed the decision o$ the #o&&ector, re&ievin( =enipa o $rom the pa ment o$ the de$icienc amusement ta1 assessed a(ainst him in the tota& amount o$ +12,/!0.4-. The #o&&ector appea&ed to the )upreme #ourt. The )upreme #ourt a$$irmed the appea&ed 7ud(ment, 6ith costs. 1. )ature of an assessment7 Basis An assessment $i1es and determines the ta1 &iabi&it o$ a ta1pa er. As soon as it is served, an ob&i(ation arises on the part o$ the ta1pa er concerned to pa the amount assessed and demanded. @ence, assessments shou&d not be based on mere presumptions no matter ho6 reasonab&e or &o(ica& said presumptions ma be. %n order to stand the test o$ 7udicia& scrutin , the assessment must be based on actua& $acts. #. 8resum tion of correctness of assessment cannot rest u on anot;er resum tion The presumption o$ correctness o$ assessment bein( a mere presumption cannot be made to rest on another presumption that the circumstances in 1!-2 and 1!-0 are presumed to be the same as those e1istin( in 1!4! to 1!-1 and Ju& 1!--. Assumin( ar(uendo that the avera(e ratio o$ adu&ts and chi&dren patroniDin( the ?ucena Theater $rom 1!4! to 1!-1 6as 0 to 1, the same does not (ive rise to the in$erence that the same conditions e1isted durin( the ears in :uestion (1!-2 and 1!-0). The $act that a&most that same ratio e1isted
3a9ation !a: II( #++' ( 5 )
durin( the month o$ Ju& , 1!-- does not provide a su$$icient in$erence on the conditions in 1!-2 and 1!-0. 5. ,rau/ is a serious c;ar<e an/ must *e su orte/ *y clear an/ convincin< roof To sustain the de$icienc ta1 assessed a(ainst =enipa o 6ou&d amount, in e$$ect, to a $indin( that he had, $or a considerab&e period o$ time, cheated and de$rauded the (overnment b se&&in( to each adu&t patron 2 chi&dren9s ta14$ree tickets instead o$ 1 ticket sub7ect to the amusement ta1 provided $or in )ection 2"/ o$ the 5%'#. Fraud is a serious char(e and, to be sustained, it must be supported b c&ear and convincin( proo$ 6hich, in the present case, is &ackin(. %. Re*ate system /iscontinue/7 Conte9t of Beni ayo?s a/mission The c&aim that =enipa o admitted havin( resorted to the anoma&ous practice a&read mentioned is not entire& correct. Bhat =enipa o appears to have admitted 6as that durin( a certain &imited period he had adopted a sort o$ rebate s stem app&icab&e to cases 6here adu&ts and chi&dren came in (roups and 6ere a&& char(ed 2/ centavos admission tickets. This practice 6as, ho6ever, discontinued 6hen he 6as in$ormed b the =%' that it 6as not in accordance 6ith &a6. [5] Butuan Sa:mill vs. Court of 3a9 A <n =anc, 'e es J=? (J): 1/ concur eals (GR !"#+=+1( #& ,e*ruary 1$==)
,acts- Durin( the period $rom 01 Januar 1!-1 to . June 1!-0, the =utuan )a6mi&& %nc. so&d &o(s to Japanese $irms at prices F3= Gesse& *a(a&&anes, A(usan (in some cases F3= Gesse&, 5asipit a&so in A(usan). The F3= prices inc&uded costs o$ &oadin( 6har$a(e stevedorin( and other costs in the +hi&ippines. The :ua&it , :uantit and measurement speci$ications o$ the &o(s 6ere certi$ied b the =ureau o$ Forestr . That the $rei(ht 6as paid b the Japanese bu ers, and the pa ments o$ the &o(s 6ere e$$ected b means o$ irrevocab&e &etters o$ credit in $avor o$ =utuan )a6mi&& and pa ab&e throu(h the +hi&ippine 5ationa& =ank (+5=) or an other bank named b it. Apon investi(ation b the =ureau o$ %nterna& 'evenue (=%'), it 6as ascertained that no sa&es ta1 return 6as $i&ed b =utuan )a6mi&& and neither did it pa the correspondin( ta1 on the sa&es. 3n the basis o$ a(ent Antonio *o&e9s report dated 1, )eptember 1!-,, the #ommissioner o$ %nterna& 'evenue on 2, Au(ust 1!-., determined a(ainst =utuan )a6mi&& the sum o$ +4/,//4./1 representin( sa&es ta1, surchar(e and compromise pena&t o$ its sa&es Hta1, surchar(e and compromise pena&t o$ its sa&esI o$ &o(s $rom Januar 1!-1 to June 1!-0 pursuant to section 1.0, 1." and 2/! o$ the 5ationa& %nterna& 'evenue #ode (5%'#). %n conse:uence o$ a reinvesti(ation, the #ommissioner, on " 5ovember 1!-., amended the amount o$ the previous assessment to +0.,!1,.,4. )ubse:uent re:uests $or reconsideration o$ the amended assessment havin( been denied, =utuan )a6mi&& $i&ed a petition $or revie6 on , 5ovember 1!"/. The #ourt o$ Ta1 Appea&s uphe&d the uphe&d the &e(a&it and correctness o$ the amended assessment o$ the sa&es ta1 and surchar(e. The imposition o$ the compromise pena&t 6as, ho6ever, e&iminated there$rom $or 6ant o$ a(reement bet6een the ta1pa er and the #o&&ector (no6 #ommissioner) o$ %nterna& 'evenue. A motion to reconsider said decision havin( been denied, =utuan )a6mi&& interposed an appea& be$ore the )upreme #ourt. The )upreme #ourt a$$irmed the decision appea&ed $rom, 6ith costs a(ainst =utuan )a6mi&&. 1. 09 ort sales ;a/ *een consummate/ in t;e 8;ili ines an/ :ere su*Aect to sales ta9 t;erein7 3ali<aman !um*er Co. vs. Collector of Internal Revenue )imi&ar to the case o$ Ta&i(aman ?umbe #o. vs. #o&&ector o$ %nterna& 'evenue 6here ;it 6as admitted that the a(reed price 6as JF.3.=. A(usan9, thus indicatin(, a&thou(h prima $acie, that the parties intended the tit&e to pass to the bu er upon de&iver o$ the &o( in A(usan, on board the vesse&s that took the (oods to Japan. *oreover, said prima $acie proo$ 6as bo&stered up b the $o&&o6in( circumstances, name& : (1) %rrevocab&e
3a9ation !a: II( #++' ( % )
&etters o$ credit 6ere opened b the Japanese bu ers in $avor o$ the petitioners. (2) +a ment o$ $rei(ht char(es o$ ever shipment b the Japanese bu ers. (0) The Japanese bu ers chartered the ships that carried the &o(s the purchased $rom the +hi&ippines to Japan. (4) The Japanese bu ers insured the shipment o$ &o(s and co&&ected the insurance covera(e in case o$ &oss in transit. (-) The petitioner co&&ected the purchase price o$ ever shipment o$ &o(s b surrenderin( the coverin( &etter o$ credit, bi&& o$ &adin(, 6hich 6as indorsed in b&ank, ta&& sheet, invoice and e1port entr , to the correspondin( bank in *ani&a o$ the Japanese a(ent bank 6ith 6hom the Japanese bu ers opened &etters o$ credit. (") %n case o$ natura& de$ects in &o(s shipped to the bu ers discovered in Japan instead o$ returnin( such de$ective &o(s, accepted them, but 6ere (ranted a correspondin( credit based on the contract price. (,) The &o(s purchased b the Japanese bu ers 6ere measured b a representative o$ the Director o$ Forestr and such measurement 6as $ina&, thereb makin( the >overnment o$ the +hi&ippines a sort o$ a(ent o$ the Japanese bu ers,C and upon the authorit o$ =is&i( =a ?umber #o., %nc. vs. #o&&ector %nterna& 'evenue, (>.'. 5o. ?4101." Januar 2., 1!"1) *isamis ?umber #o., %nc. vs. #o&&ector o$ %nterna& 'evenue (-" 3$$. >aD. -1,) and Bestern *indanao ?umber Deve&opment #o., %nc. vs. #ourt o$ Ta1 Appea&s, et a&. (>.'. 5o. ?411,1/, June 0/, 1!-.), it is c&ear that said e1port sa&es had been consummated in the +hi&ippines and 6ere accordin(& , sub7ect to sa&es ta1 therein.C #. 8ara<ra ; #( Article 1'+5 of t;e Civil Co/e of t;e 8;ili ines That the speci$ication in the bi&& o$ &adin( to the e$$ect that the (oods are de&iverab&e to the order o$ the se&&er or his a(ent does not necessari& ne(ate the passin( o$ tit&e to the (oods upon de&iver to the carrier is c&ear $rom the second part o$ para(raph 2 o$ artic&e 1-/0 o$ the #ivi& #ode o$ the +hi&ippines. )aid provision provides that ;Bhere (oods are shipped, and b the bi&& o$ &adin( the (oods are de&iverab&e to the se&&er or his a(ent, or to the order o$ the se&&er or o$ his a(ent the se&&er thereb reserves the o6nership in the (oods. =ut, i$ e1cept $or the $orm o$ the bi&& o$ &adin(, the o6nership 6ou&d have passed to the bu er on shipment o$ the (oods, the se&&ers9 propert in the (oods sha&& be deemed to be on& $or the purpose o$ securin( per$ormance b the bu er o$ his ob&i(ation under the contract.C 5. 6nly 1uestions of la: may *e raise/ in etitions to revie: /ecisions of t;e C3A %t has been ;a sett&ed ru&e that in petitions to revie6 decisions o$ the #ourt o$ Ta1 Appea&s, on& :uestions o$ &a6 ma be raised and ma be passed upon b this #ourt.C %. Income ta9 return cannot *e consi/ere/ as return for com ensatin< ta9 for ur ose of com utin< rescri tion un/er Section 551 of t;e 3a9 Co/e An income ta1 return cannot be considered as a return $or compensatin( ta1 $or purposes o$ computin( the period o$ prescription under )ection 001 o$ the Ta1 #ode, and that the ta1pa er must $i&e a return $or the particu&ar ta1 re:uired b &a6 in order to avai& himse&$ o$ the bene$its o$ )ection 001 o$ the Ta1 #ode8 other6ise, i$ he does not $i&e a return, an assessment ma be made 6ithin the time stated in )ection 002(a) o$ the same #ode (=isa a ?and Transportation #o., %nc. vs. #o&&ector o$ %nterna& 'evenue K #o&&ector o$ %nterna& 'evenue vs. =isa a ?and Transportation #o., %nc. >.'. 5os. ?4121// K ?411.12. *a 2!, 1!-!). '. 1+ year rescri tion for failure to file return for /is ute/ sales As =utuan )a6mi&& $ai&ed to $i&e a return $or the disputed sa&es correspondin( to the ear 1!-1, 1!-2 and 1!-0, and this omission 6as discovered on& on )eptember 1,, 1!-,, and that under )ection 002(a) o$ the Ta1 #ode assessment thereo$ ma be made 6ithin ten (1/) ears $rom and a$ter the discover o$ the omission to $i&e the return, the assessment and co&&ection o$ the sa&es ta1 in :uestion has not et prescribed. [%] CIR vs. 8;oeni9 Assurance [GR !"1$4#4. #+ Bay 1$='.] Phoenix Assurance vs. CIR [GR L-19903] <n =anc, =en(Don J+ (J): 1/ concurrin(
3a9ation !a: II( #++' ( ' )
,acts- +hoeni1 Assurance #o. ?td., a $orei(n insurance corporation or(aniDed under the &a6s o$ >reat =ritain, is &icensed to do business in the +hi&ippines 6ith head o$$ice in ?ondon. Throu(h its head o$$ice it entered, in ?ondon, into 6or&d6ide reinsurance treaties 6ith various $orei(n insurance companies. %t a(reed to cede a portion o$ premiums received on ori(ina& insurances under6ritten b its head o$$ice, subsidiaries, and branch o$$ices throu(hout the 6or&d, in consideration $or assumption b the $orei(n insurance companies o$ an e:uiva&ent portion o$ the &iabi&it $rom such ori(ina& insurances. +ursuant to such reinsurance treaties, +hoeni1 Assurance #o., ?td. ceded portions o$ the premiums it earned $rom its under6ritin( business in the +hi&ippines (1!-2, +01",-2".,-8 1!-0, +24",/.2./48 1!-4, +2/0,0.4."!) upon 6hich the #ommissioner o$ %nterna& 'evenue, b &etter o$ " *a 1!-., assessed 6ithho&din( ta1 tota&in( +1.0,.0..42 (1!-2, +,-,!"".428 1!-0, -!,/-!.".8 1!-4, 4.,.12.02). 3n 1 Apri& 1!-1, +hoeni1 Assurance $i&ed its +hi&ippine income ta1 return $or 1!-/, c&aimin( therein, amon( others, a deduction o$ +0,,14,./4 as net addition to marine insurance reserve e:uiva&ent to 4/2 o$ the (ross marine insurance premiums received durin( the ear. The #ommissioner disa&&o6ed +11,,,2.-, o$ such c&aim $or deduction and subse:uent& assessed a(ainst +hoeni1 Assurance the sum o$ +1,..4.// as de$icienc income ta1. The disa&&o6ance resu&ted $rom the $i1in( b the #ommissioner o$ the net addition to the marine insurance reserve at 1//2 o$ the marine insurance premiums received durin( the &ast three months o$ the ear. The #ommissioner assumed that ;ninet and thirt da s are appro1imate& the &en(th o$ time re:uired be$ore shipments reach their destination or be$ore c&aims are received b the insurance companies.C 3n 1 Apri& 1!-0 +hoeni1 Assurance $i&ed its +hi&ippine income ta1 return $or 1!-2, dec&arin( therein a deduction $rom (ross income o$ +0-,!12.2- as part o$ the head o$$ice e1penses incurred $or its +hi&ippine business, computed at -2 on its (ross +hi&ippine income. 3n 0/ Au(ust 1!-- it amended its income ta1 return $or 1!-2 b e1c&udin( $rom its (ross income the amount o$ +01",-2".,- representin( reinsurance premiums ceded to $orei(n reinsurers and $urther e&iminatin( deductions correspondin( to the ceded premiums. The amended return sho6ed an income ta1 due in the amount o$ +2,-/2.//. The #ommissioner disa&&o6ed +1-,.2".0- o$ the c&aimed deduction $or head o$$ice e1penses and assessed a de$icienc ta1 o$ +-,"",.// on 24 Ju& 1!-.. 3n 0/ Apri& 1!-4 +hoeni1 Assurance $i&ed its +hi&ippine income ta1 return $or 1!-0 and c&aimed therein a deduction $rom (ross income o$ +00,/,/... as head o$$ice e1penses a&&ocab&e to its +hi&ippine business, e:uiva&ent to -2 o$ its (ross +hi&ippine income. 3n 0/ Au(ust 1!-- it amended its 1!-0 income ta1 return to e1c&ude $rom its (ross income the amount o$ +24",/.2./4 representin( reinsurance premiums ceded to $orei(n reinsurers. At the same time it re:uested the re$und o$ +20,4/!.// as overpaid income ta1 $or 1!-0. To avoid the prescriptive period provided $or in )ection 0/" o$ the Ta1 #ode, it $i&ed a petition $or revie6 on 11 Au(ust 1!-" in the #ourt o$ Ta1 Appea&s pra in( $or such re$und. A$ter veri$ication o$ the amended income ta1 return the #ommissioner disa&&o6ed +12,0/4.1/ o$ the deduction representin( head o$$ice e1penses a&&ocab&e to +hi&ippine business thereb reducin( the re$undab&e amount to +2/,1././/. 3n 2! Apri& 1!-- +hoeni1 Assurance $i&ed its +hi&ippine income ta1 return $or 1!-4 c&aimin( therein, amon( others, a deduction $rom (ross income o$ +2!,"24.,- as head o$$ice e1penses a&&ocab&e to its +hi&ippine business, computed at -2 o$ its (ross +hi&ippine income. %t a&so e1c&uded $rom its (ross income the amount o$ +2/0,0.4."! representin( reinsurance premiums ceded to $orei(n reinsurers not doin( business in the +hi&ippines. 3n 1 Au(ust 1!-. the =ureau o$ %nterna& 'evenue re&eased an assessment $or de$icienc income ta1 $or the ears 1!-2 and 1!-4 a(ainst +hoeni1 Assurance amountin( to +2,.4,. The assessment resu&ted $rom the disa&&o6ance o$ a portion o$ the deduction c&aimed b +hoeni1 Assurance as head o$$ice e1penses a&&ocab&e to its business in the +hi&ippines $i1ed b the #ommissioner at -2 o$ the net +hi&ippine income instead o$ -2 o$ the (ross +hi&ippine income as c&aimed in the returns. +hoeni1 Assurance protested a(ainst the assessments $or 6ithho&din( ta1 and de$icienc income ta1. @o6ever, the #ommissioner denied such protest. )ubse:uent& , +hoeni1 Assurance appea&ed to the #ourt o$ Ta1 Appea&s (#TA #ases 0/- and -40). %n a decision dated 14 Februar 1!"2, the #ourt o$ Ta1 Appea&s a&&o6ed in $u&& the deduction c&aimed b +hoeni1 Assurance $or 1!-/ as net addition to marine insurance reserve8 determined the a&&o6ab&e head o$$ice e1penses a&&ocab&e to +hi&ippine business to be -2 o$ the net income in the +hi&ippines8 dec&ared the ri(ht o$ the #ommissioner to assess de$icienc income ta1 $or 1!-2 to have prescribed8 abso&ved +hoeni1 Assurance $rom pa ment o$ the statutor pena&ties $or non4$i&in( o$ 6ithho&din( ta1 return. Thus, the court ordered
3a9ation !a: II( #++' ( = )
+hoeni1 Assurance to pa the #ommissioner the respective amounts o$ +,-,!"".42, +-!,/-!.". and +4.,.12.02, as 6ithho&din( ta1 $or the ears 1!-2, 1!-0 and 1!-4, and +2,.4,.// as income ta1 $or 1!-4, or the tota& sum o$ +1.",".-.42 6ithin 0/ da s $rom the date the decision becomes $ina&. Apon the other hand, the #ommissioner 6as ordered to re$und to +hoeni1 Assurance the sum o$ +2/,1./.// as overpaid income ta1 $or 1!-0, 6hich sum is to be deducted $rom the tota& sum o$ +1.",".-.42 due as ta1es8 and ordered $urther that i$ an amount o$ the ta1 is not paid 6ithin the time prescribed, there sha&& be co&&ected a surchar(e o$ -2 o$ the ta1 unpaid, p&us interest at the rate o$ 12 a month $rom the date o$ de&in:uenc to the date o$ pa ment, provided that the ma1imum amount that ma be co&&ected as interest sha&& not e1ceed the amount correspondin( to a period o$ 0 ears8 6ithout pronouncement as to costs. =oth parties appea&ed to the )upreme #ourt. The )upreme #ourt modi$ied the decision appea&ed $rom, and ordered +hoeni1 Assurance to pa the #ommissioner the amount o$ +,-,!"".42, +-!,/-!.". and +4.,.12.02 as 6ithho&din( ta1 $or the ears 1!-2, 1!-0 and 1!-4, respective& , and the sums o$ +-,"",.// and +2,.4,.// as income ta1 $or 1!-2 and 1!-4 or a tota& o$ +1!2,0-2.428 and ordered the #ommissioner to re$und to +hoeni1 Assurance the amount o$ +2/,1./.// as overpaid income ta1 $or 1!-0, 6hich shou&d be deducted $rom the amount o$ +1!2,0-2.428 and ordered $urther that i$ the amount o$ +1!2,0-2.42 or a portion thereo$ is not paid 6ithin 0/ da s $rom the date the 7ud(ment becomes $ina&, there sha&& be co&&ected a surchar(e and interest as provided $or in )ection -1 (e) (2) o$ the Ta1 #ode. 5o costs. 1. Britis; 3ra/ers? Insurance vs. CIR7 Reinsurance remiums ce/e/ to forei<n reinsurers not /oin< *usiness in t;e 8;ili ines ursuant to contracts e9ecute/ a*roa/ are income from sources :it;in t;e 8;ili ines su*Aect to :it;;ol/in< ta9 The :uestion o$ 6hether reinsurance premiums ceded to $orei(n reinsurers not doin( business in the +hi&ippines pursuant to contracts e1ecuted abroad are income $rom sources 6ithin the +hi&ippines sub7ect to 6ithho&din( ta1 under )ection -0 and -4 o$ the Ta1 #ode has a&read been reso&ved in the a$$irmative in =ritish Traders9 %nsurance #o. ?td. vs. #ommissioner o$ %nterna& 'evenue, ?42/-/1, 0/ Apri& 1!"-. #. Section 551 of t;e 3a9 Co/e7 8erio/ of limitation u on assessment an/ collection )ection 001 o$ the Ta1 #ode, 6hich &imits the ri(ht o$ the #ommissioner o$ %nterna& 'evenue to assess income ta1 6ithin $ive ears $rom the $i&in( o$ the income ta1 return, states: ;<1cept as provided in the succeedin( section, interna&4revenue ta1es sha&& be assessed 6ithin $ive ears a$ter the return 6as $i&ed, and no proceedin( in court 6ithout assessment $or the co&&ection o$ such ta1es sha&& be be(un a$ter the e1piration o$ such period. For the purposes o$ this section a return $i&ed be$ore the &ast da prescribed b &a6 $or the $i&in( thereo$ sha&& be considered as $i&ed on such &ast da : +rovided, That this &imitation sha&& not app& to cases a&read investi(ated prior to the approva& o$ this #ode.C 5. Runnin< of t;e rescri tive erio/ commence from filin< of ori<inal return The #ourt o$ Ta1 Appea&s ru&ed that the ori(ina& return 6as a comp&ete return containin( ;in$ormation on various items o$ income and deduction $rom 6hich respondent ma inte&&i(ent& compute and determine the ta1 &iabi&it o$ petitionerC, hence, the prescriptive period shou&d be counted $rom the $i&in( o$ said ori(ina& return8 the vie6 6hich the )upreme #ourt sustains. The ob7ect o$ the Ta1 #ode is to impose ta1es $or the needs o$ the >overnment, not to enhance ta1 avoidance to its pre7udice. To ho&d other6ise 6ou&d pave the 6a $or ta1pa ers to evade the pa ment o$ ta1es b simp& reportin( in their ori(ina& return heav &osses and amendin( the same more than $ive ears &ater 6hen the #ommissioner o$ %nterna& 'evenue has &ost his authorit to assess the proper ta1 thereunder. %. Ri<;t of Commissioner to assess t;e /eficiency ta9 ;as not rescri*e/ #onsiderin( that the de$icienc assessment 6as based on the amended return 6hich, as a$orestated, is substantia&& di$$erent $rom the ori(ina& return, the period o$ &imitation o$ the ri(ht to issue the same shou&d be counted $rom the $i&in( o$ the amended income ta1 return. From Au(ust 0/, 1!--, 6hen the amended return
3a9ation !a: II( #++' ( 4 )
6as $i&ed, to Ju& 24, 1!-., 6hen the de$icienc assessment 6as issued, &ess than $ive ears e&apsed. The ri(ht o$ the #ommissioner to assess the de$icienc ta1 on such amended return has not prescribed. '. Section 5#( ara<ra ; (a) of t;e 3a9 Co/e S ecial rovisions re<ar/in< income an/ /e/uctions of insurance com anies( :;et;er /omestic or forei<n( S ecial /e/uctions allo:e/ to insurance com anies +ara(raph (a) o$ )ection 02 o$ the Ta1 #ode states ;%n the case o$ insurance companies, e1cept domestic &i$e insurance companies and $orei(n &i$e insurance companies doin( business in the +hi&ippines, the net additions, i$ an , re:uired b &a6 to be made 6ithin the ear to reserve $unds and the sums other than dividends paid 6ithin the ear on po&ic and annuit contracts ma be deducted $rom their (ross income: +rovided, ho6ever, That the re&eased reserve be treated as income $or the ear o$ re&ease.C =. Section 1&= of t;e Insurance !a: )ection 1." o$ the %nsurance ?a6 re:uires the settin( up o$ reserves $or &iabi&it on marine insurance, thus ;. . . +rovided, That $or marine risks the insurin( compan sha&& be re:uired to char(e as the &iabi&it $or reinsurance $i$t per centum o$ the premiums 6ritten in the po&icies upon ear& risks, and the $u&& premiums 6ritten in the po&icies upon a&& other marine risks not terminated.C 4. >etermination of t;e re1uire/ reserve for marine insurance The reserve re:uired $or marine insurance is determined on t6o bases: -/2 o$ premiums under po&icies on ear& risks and 1//2 o$ premiums under po&icies o$ marine risks not terminated durin( the ear. )ection 02 (a) o$ the Ta1 #ode a&&o6s the $u&& amount o$ such reserve to be deducted $rom (ross income. %n the present case, the $ormu&as $or determinin( the marine reserve emp&o ed b +hoeni1 Assurance and the #ommissioner (4/2 o$ premiums received durin( the ear and 1//2 o$ premiums received durin( the &ast three months o$ the ear, respective& ) do not comp& 6ith )ection 1.". )aid determinations run short o$ the re:uirement. For purposes o$ the %nsurance ?a6, the #ourt there$ore cannot countenance the same. +hoeni1 Assurance9s c&aim $or deduction o$ +0,,14,./4 bein( &ess than the amount re:uired in )ection 1." o$ the %nsurance ?a6, the same cannot be and is not e1cessive, and shou&d there$ore be $u&& a&&o6ed. &. 8ur ose of t;e reserve7 C;at is ro;i*ite/ *y income ta9 la: The reserve ca&&ed $or in )ection 1." is a sa$e(uard to the (enera& pub&ic and shou&d be strict& $o&&o6ed not on& because it is an e1press provision but a&so as a matter o$ pub&ic po&ic . @o6ever, $or income ta1 purposes a ta1pa er is $ree to deduct $rom its (ross income a &esser amount, or not to c&aim an deduction at a&&. Bhat is prohibited b the income ta1 &a6 is to c&aim a deduction be ond the amount authoriDed therein. L $. Items of income not *elon<in< to t;e com any?s 8;ili ine *usiness e9clu/e/ from ;ea/ office e9 enses alloca*le to 8;ili ine Branc;7 8ara<ra ; #( su*section (a)( Section 5+ of t;e 3a9 Co/e The (ross income o$ +hoeni1 Assurance consists o$ income $rom its +hi&ippine business as 6e&& as reinsurance premiums received $or its head o$$ice in ?ondon and reinsurance premiums ceded to $orei(n reinsurers. )ince the items o$ income not be&on(in( to its +hi&ippine business are not ta1ab&e to its +hi&ippine branch, the shou&d be e1c&uded in determinin( the head o$$ice e1penses a&&ocab&e to said +hi&ippine branch. This conc&usion $inds support in para(raph 2, subsection (a), )ection 0/ o$ the Ta1 #ode, 6hich provides that ;<1penses a&&o6ab&e to non4resident a&ien individua&s and $orei(n corporations. F %n the case o$ a non4 resident a&ien individua& or a $orei(n corporation, the e1penses deductib&e are the necessar e1penses paid or incurred in carr in( on an business or trade conducted 6ithin the +hi&ippines e1c&usive& .C #onse:uent& , the de$icienc assessments $or 1!-2, 1!-0 and 1!-4, resu&tin( $rom partia& disa&&o6ance o$ deduction representin( head o$$ice e1penses, are sustained. 1+. Interest on ta9 ayment7 A*solution *ase/ on e1uita*le <roun/ The imposition o$ interest on unpaid ta1es is one o$ the statutor pena&ties $or ta1 de&in:uenc , $rom
3a9ation !a: II( #++' ( & )
the pa ments o$ 6hich the #ourt o$ Ta1 Appea&s abso&ved the +hoeni1 Assurance on the e:uitab&e (round that the &atter9s $ai&ure to pa the 6ithho&din( ta1 6as due to the #ommissioner9s opinion that no 6ithho&din( ta1 6as due. #onse:uent& , the ta1pa er cou&d be &iab&e $or the pa ment o$ statutor pena&ties on& upon its $ai&ure to comp& 6ith the Ta1 #ourt9s 7ud(ment rendered on 14 Februar 1!"2, a$ter 'epub&ic Act 2040 took e$$ect. This part o$ the ru&in( o$ the court ou(ht not to be disturbed. ['] )ava vs. Commissioner of Internal Revenue (GR !"1$%4+( 5+ @anuary 1$=') <n =anc, 'e es J=? (J): ! concur, 1 took no part. ,acts- 3n 1- *a 1!-1, 5ava $i&ed his income ta1 return $or the ear 1!-/, and, on the same date, he 6as assessed b the #ommissioner ($ormer& #o&&ector) o$ %nterna& 'evenue in the sum o$ +4,!-2.//, based so&e& on said return. 5ava paid one4ha&$ o$ the ta1 due, &eavin( a ba&ance o$ +2,4!1.//. )ubse:uent& , 5ava o$$ered his backpa certi$icate to pa said ba&ance, but the #ommissioner re$used the o$$er. 3n 2. Ju& 1!-0, he re:uested the #ommissioner to ho&d in abe ance the co&&ection o$ said ba&ance unti& the :uestion o$ 6hether or not he 6as entit&ed to pa the same out o$ his backpa sha&& have been decided, but this 6as a&so re7ected b the &atter in a rep& &etter dated - Januar 1!-4. This re7ection 6as $o&&o6ed b t6o more &etters or notices demandin( pa ment o$ the ba&ance thereo$, the &ast o$ 6hich 6as dated 22 Februar 1!--. 3n 0/ *arch 1!--, a$ter investi(ation o$ 5ava9s 1!-/ income ta1 return, the #o&&ector issued a de$icienc income ta1 assessment notice re:uirin( 5ava to pa not &ater than 0/ Apri& 1!-- the sum o$ +!,124.-/, that inc&uded the ba&ance o$ +2,4!1.//, sti&& unpaid under the ori(ina& assessment, p&us a -/2 surchar(e. )evera& notices o$ this revised assessment are a&&e(ed to have been issued to the ta1pa er, but 5ava c&aims to have &earned o$ it $or the $irst time on 1! December 1!-", more than $ive ears since the ori(ina& ta1 return 6as $i&ed. %n a &etter o$ 1/ Januar 1!-,, 5ava ca&&ed attention to the $act that more than " ears had e&apsed, protested the assessment, and contended that it 6as a c&osed issue. The Director insisted upon his demand that the ne6 assessment be paid. 5ava asked $or reconsideration, and on 1" June 1!-. 6as in$ormed that reinvesti(ation 6ou&d be (ranted provided the ta1pa er 6aived the statute o$ &imitations, a condition that 6as re7ected. Thereupon, the reconsideration o$ the assessment 6as denied b the #o&&ector9s &etter o$ 22 Ju& 1!-.. 3n . Au(ust 1!-., 5ava $i&ed a petition $or revie6 6ith the #ourt o$ Ta1 Appea&s. 3n 2- )eptember 1!"1, the &atter reduced the de$icienc to +0,/-2.//, and cance&&ed the -/2 surchar(e. 5ava9s motion $or reconsideration 6as denied 1/ Februar 1!"2. 5ava appea&ed to the )upreme #ourt. The )upreme #ourt reversed the decision o$ the #ourt o$ Ta1 Appea&s under revie6, 6ithout costs. 1. 8resum tion t;at letter /uly /irecte/ an/ maile/ cannot *e a lie/7 )o su*stantial evi/ence from Commissioner 'e&iance 6as made main& on the dup&icate cop o$ the de$icienc income ta1 notice $ound in the =ureau o$ %nterna& 'evenue $i&e o$ 5ava. The 'evenue #ommissioner presented a 6itness (*r. +ab&o )an(i&, an emp&o ee Hc&erkI o$ the =.%.'.) 6ho attempted to estab&ish that the ori(ina& cop thereo$ 6as actua&& issued on 0/ *arch 1!--, but said 6itness disc&aimed havin( persona& kno6&ed(e o$ its issuance or re&ease on said date either b mai& or persona& de&iver because, accordin( to him, he 6as assi(ned in the income ta1 section o$ the =%' in 3ctober 1!-" on& . The 6itness a&so dec&ared that there is no notation 6hatsoever in said $i&e cop , nor even a s&ip o$ paper attached to the records, to sho6 that the ori(ina& cop o$ said e1hibit 6as ever actua&& issued or sent to the ta1pa er. There 6as a&so re&iance on the supposed notices, as 6e&& as on the supposed ;ca&&4upC or demand &etters re$erred to in a memorandum o$ an a(ent (*rs. #an&as) o$ the =%'. 5o 6itness $or the #ommissioner testi$ied to the issuance or sendin( o$ an o$ these supposed 6ritten demand &etters or notices, nor 6as there an dup&icate or even a simp&e cop thereo$ $ound in 5ava9s =%' $i&e. Thus, the #ommissioner utter& $ai&ed to prove b substantia& evidence that the assessment notice dated 0/ *arch 1!-- and the other supposed 6ritten demand &etters or notices subse:uent thereto 6ere in $act issued or sent
3a9ation !a: II( #++' ( $ )
to ta1pa er 5ava. The presumption that a &etter du& directed and mai&ed 6as received in the re(u&ar course o$ mai& cannot be app&ied to the present case. #. Re1uisites for t;e resum tion( t;at letter :as /uly /irecte/ an/ maile/ in re<ular course of mail( to arise The $acts to be proved to raise this presumption are (a) that the &etter 6as proper& addressed 6ith posta(e prepaid, and (b) that it 6as mai&ed. 3nce these $acts are proved, the presumption is that the &etter 6as received b the addressee as soon as it cou&d have been transmitted to him in the ordinar course o$ the mai&s. =ut i$ one o$ the said $acts $ai&s to appear, the presumption does not &ie.C (G% *oran, #omments on the 'u&es o$ #ourt, 1!"0 <d., -"4-,8 citin( <nri:ueD vs. )un ?i$e Assurance o$ #anada, 41 +hi&. 2"!) 5. >istinction *et:een receivin< a secon/ final notice an/ receivin< a final notice for secon/ time The $act that 5ava ackno6&ed(ed receipt o$ the second $ina& notice persona&& de&ivered to him is no proo$ that he received the $irst notice b mai&. There is a di$$erence bet6een receivin( a second $ina& notice and receivin( a $ina& notice $or the second time. %. @u/icial action to collect /eficiency ta9 for 1$'+ income ta9 ;as rescri*e/ As the ori(ina& assessment o$ 5ava9s 1!-/ income ta1 return 6as made on 1- *a 1!-1, and no va&id and e$$ective notice o$ the re4assessment havin( been made a(ainst 5ava a$ter that date, it is evident that the period under )ection 001 o$ the Ta1 #ode 6ithin 6hich to make a re4assessment e1pired on 1- *a 1!-". )ince the notice o$ said de$icienc income ta1 6as e$$ective& made on 1! December 1!-" at the ear&iest, the 7udicia& action to co&&ect an de$icienc ta1 on 5ava9s 1!-/ income ta1 return has a&read prescribed under )ection 002 (c) o$ the Ta1 #ode, it havin( been $ound b the Ta1 Appea&s court that said return 6as not $a&se or $raudu&ent. '. Bere notations on notice :it;out ta9 ayer?s intervention( :it;out a/e1uate su ortin< evi/ence( cannot suffice Bhi&e an assessment is made 6hen sent 6ithin the prescribed period, even i$ received b the ta1pa er a$ter its e1piration (#o&&. o$ %nt. 'ev. vs. =autista, ?4122-/ and ?4122-!, *a 2,, 1!-!), it is imperative that the re&ease, mai&in(, or sendin( o$ the notice be c&ear& and satis$actori& proved. *ere notations made 6ithout the ta1pa er9s intervention, notice, or contro&, 6ithout ade:uate supportin( evidence, cannot su$$ice8 other6ise, the ta1pa er 6ou&d be at the merc o$ the revenue o$$ices, 6ithout ade:uate protection or de$ense. [=] 3uason 2 !e<ar/a !t/. vs. Commissioner of Internal Revenue (GR !"1&''#( 5+ Se tem*er 1$=') <n =anc, DiDon (J): " concur ,acts- Tuason K ?e(arda ?td., a du& or(aniDed domestic corporation, is the o6ner o$ the ;?a 'osarioC disti&&er , operatin( since 1!1/ 6here it had in store, $or man ears, a stock o$ disti&&ed spirits and compounded &i:uors. 3n 1" December 1!-. the #ommissioner o$ %nterna& 'evenue served on the compan an assessment $or speci$ic ta1 in the amount o$ +0,-2-.4/ and +0//.// as pena&t on the stock o$ disti&&ed spirits a$oresaid. %n rep& thereto the #ompan in$ormed the #ommissioner on 1" Januar 1!-! that the stock had a&read o1idiDed and 6as un$it $or human consumption, and asked $or authorit to destro it in the presence o$ and under the supervision o$ a (overnment representative. 3n Februar 10 and 1", 1!-!, 'estituto *a(case and @ermini(i&do Ge&as:ueD, the compan 9s disti&&er supervisor and #hie$, )peci$ic Ta1 =ranch, respective& , recommended the destruction o$ said a&coho& and compounded &i:uors, havin( $ound them to be un$it $or human consumption. @o6ever, on Apri& 2! o$ the same ear, %nocencio >onDa&es, Jr., #hie$, ?aborator )ection, a$ter an ana& sis o$ the same substances, made a report to the contrar . As a resu&t, the #ommissioner denied the compan 9s re:uest $or authorit to destro the stock, but in his &etter o$ 0 Ju& 1!-! the #ommissioner reduced the ori(ina& assessment to +2,.14.!-, p&us +0//.// as a pena&t , cop o$
3a9ation !a: II( #++' ( 1+ )
6hich amended assessment 6as received b the #ompan on 12 Au(ust 1!-!. The #ommissioner, in his &etter dated 0/ )eptember 1!-! and received b the compan about the midd&e o$ 3ctober o$ the same ear denied the second 6ritten re:uest to destro the stock made b the #ompan on 1- Au(ust 1!-!, and demanded pa ment o$ the assessment and compromise pena&t . %n its rep& &etter dated 2- 5ovember 1!-! the #ompan reiterated its stand that the stock o$ disti&&ed spirits and compounded &i:uors in :uestion 6as dama(ed and un$it $or human consumption and asked $or the 6ithdra6a& o$ the assessment served on it pursuant to )ection 101 o$ the 5ationa& %nterna& 'evenue #ode (5%'#). The #ommissioner, instead o$ rep& in( to this &ast re:uest, served on petitioner on 2/ Januar 1!"/ a 6arrant o$ distraint and &ev $or +0,-2-.4/, (the ori(ina& assessment) p&us +0//.// as a pena&t , and the &atter, in turn, on 20 Januar 1!"/ tendered to the $ormer a&& the stock o$ (rain a&coho& and compounded &i:uors in :uestion in pa ment o$ the speci$ic ta1 and pena&t demanded provided that the 6arrant o$ distraint and &ev be 6ithdra6n and a $u&& re&ease and dischar(e be issued to it. The #ommissioner never rep&ied to this o$$er. 3n 11 Februar 1!"/, the #ompan $i&ed its petition $or revie6 6ith the #ourt o$ Ta1 Appea&s. A$ter tria& on the merits, the #ourt o$ Ta1 Appea&s dismissed the petition $or revie6 on the (round that the same 6as not $i&ed on time. A motion $or reconsideration and ne6 tria& on the (round o$ accident, mistake and e1cusab&e ne(&i(ence dated , Apri& 1!"1, 6as denied b the same #ourt on 14 June 1!"1 $or &ack o$ merit. The #ompan appea&ed. The )upreme #ourt a$$irmed the decision appea&ed $rom, 6ith costs. 1. Assessment final :;en etition for revie: file/ :it; C3A7 !ast :ritten re1uest of com any /i/ not sus en/ runnin< of rescri tive erio/ The &etter o$ the #ommissioner dated 0 Ju& 1!-! 6as, in &e(a& contemp&ation, the ru&in( or decision $rom 6hich the #ompan shou&d have appea&ed to the #ourt o$ Ta1 Appea&s8 that $rom 12 Au(ust 1!-! F 6hen the #ompan received said &etter F to the 1-th o$ the same month and ear F the date 6hen the #ompan , b 6a o$ a motion $or reconsideration, reiterated its 6ritten re:uest $or authorit to destro the disti&&ed spirits and compounded &i:uors in its possession F the #ompan consumed three (0) da s o$ the period o$ appea& that $rom 1- 3ctober 1!-! F the date 6hen the #ompan received the #ommissioner9s &etter o$ 0/ )eptember 1!-! den in( his second re:uest $or authorit to destro the merchandise ta1ed F to 11 Februar 1!"/ 6hen the petition $or revie6 6as $i&ed, more than 0 months e&apsed. %n computin( the period o$ appea&, the compan 9s &ast 6ritten re:uest $or authorit to destro the disti&&ed spirits and compounded &i:uors in :uestion did not suspend the runnin( o$ said period, because it 6as a mere reiteration o$ t6o previous petitions a&read denied b the #ommissioner. #onse:uent& , the conc&usion is inevitab&e that 6hen the #ompan $i&ed its petition $or revie6 6ith the #ourt o$ Ta1 Appea&s, the :uestioned assessment had a&read become $ina&, e1ecutor and incontrovertib&e. #. Botion for reconsi/eration or ne: trial on <roun/ of acci/ent( mistake an/ e9cusa*le ne<li<ence ro erly /enie/ The #ompan 9s motion $or reconsideration or ne6 tria& on the (round o$ accident, mistake and e1cusab&e ne(&i(ence 6as correct& denied. <ven assumin( in this connection that the #ommissioner9s &etter dated 0/ )eptember 1!-! 6as actua&& received b the #ompan on 2/ 5ovember 1!-! and not ;in the midd&e o$ 3ctoberC 1!-! as admitted b one o$ the #ompan 9s 6itnesses, the conc&usion 6ou&d sti&& be that the petition $or revie6 6as $i&ed out o$ time because $rom 2/ 5ovember 1!-! to 11 Februar 1!"/ 6hen said petition $or revie6 6as $i&ed, more than "/ da s had e&apsed. [4] Roman Cat;olic Arc;*is;o of Ce*u vs. Collector of Internal Revenue (GR !"1==&5( 51 @anuary 1$=#) <n =anc, 'e es J=? (J): . concur, 1 took no part
3a9ation !a: II( #++' ( 11 )
Facts: 3n 21 Februar 1!-", the 'oman #atho&ic Archbishop o$ #ebu, in beha&$ o$ the 'oman #atho&ic #hurch o$ #ebu, $i&ed an income ta1 return $or 1!--, reportin( a (ross income o$ +1/,0-".!/ $rom sa&es or e1chan(es o$ capita& assets, $rom renta&s and ro a&ties, and $rom dividends received. The Archbishop c&aimed deductions $rom depreciation o$ the Archbishop9s +a&ace =ui&din(, *a7or )eminar , *inor )eminar , and Furniture and Fi1ture in the tota& va&ue o$ +1!,.!../!. 3n 1. Februar 1!-,, the Archbishop, in beha&$ o$ the 'oman #atho&ic #hurch in #ebu, $i&ed an income ta1 return $or 1!-", sho6in( a (ross income o$ +1.,.-".42. The Archbishop c&aimed deductions $rom depreciation in the tota& va&ue o$ +2/,22".1-. 3n the theor that the (ross incomes in 1!-- and 1!-" 6ere rea&iDed independent& o$ the use o$ the bui&din(, $urniture and $i1tures, the #o&&ector o$ %nterna& 'evenue tota&& disa&&o6ed the deductions $or depreciation, thereb determinin( a(ainst the Archbishop, on 1- Ju& 1!-" and 0/ *arch 1!-,, income ta1 &iabi&ities $or 1!-- and 1!-" in the respective amounts o$ +1,.2-.// and +2,4!0.//. 3n *a 1/ and 14, 1!-,, the Archbishop re:uested $or the reconsideration o$ the determinations, 6hich re:uests 6ere denied b the #o&&ector in a &etter dated 10 Ju& 1!-,, 6herein he demanded the pa ment o$ +1,.2-.// and +2,4!0.//, inc&udin( -2 surchar(e and 12 &e(a& interest on the &atter amount. 3n 2. Au(ust 1!-,, the Archbishop re:uested $or the reconsideration o$ the denia& and the cance&&ation o$ the assessments. 3n - 5ovember 1!-,, the #o&&ector denied this re:uest $or reconsideration and demanded the pa ment o$ +4,01..//, p&us de&in:uenc pena&ties incident to &ate pa ment. A(ain, on 20 5ovember 1!-,, the Archbishop re:uested $or the reconsideration and cance&&ation o$ the assessments, 6hich re:uest 6as denied on 2/ Januar 1!-., 6ith a demand ;$or the &ast time to pa the tota& sum o$ +4,01..// p&us de&in:uenc pena&ties incident to &ate pa ment immediate& upon receipt hereo$ in order that no drastic action ma be taken b this o$$ice on the matter.C *ean6hi&e, on 4 December 4, 1!-,, the #o&&ector issued a 6arrant o$ distraint and &ev a(ainst the properties o$ the 'oman #atho&ic #hurch o$ D. Jakosa&em )t., #ebu #it , to satis$ the sums o$ +1,!1".2- and +2,"1,."- as de$$icienc income ta1 and surchar(e due $or 1!-- and 1!-". 3n , Februar 1!-., the Archbishop paid under protest the tota& amount o$ +-,2/1.-2 as income ta1 $or the ears 1!-- and 1!-", inc&udin( surchar(e and interests. 3n 1 Februar 1!-., the Archbishop $i&ed be$ore the #ourt o$ Ta1 Appea&s his petition $or revie6. The Ta1 #ourt, convinced that the &ack o$ a c&aim $or re$und 6as $ata& to the Archbishop9s appea&, dismissed the same $or &ack o$ 7urisdiction to take co(niDance thereo$. From this ru&in(, the Archbishop appea&ed to the )upreme #ourt. The )upreme #ourt a$$irmed the dismissa& o$ the Archbishop9s appea& b the #ourt o$ Ta1 Appea&s, 6ith costs a(ainst the Archbishop. 1. Section 4 of Re u*lic Act 11#' )ection , o$ 'epub&ic Act 112-, provides in part that ;(1) Decisions o$ the #o&&ector o$ %nterna& 'evenue in cases invo&vin( disputed assessments, re$unds o$ interna& revenue ta1es, $ees or other char(es, pena&ties imposed in re&ation thereto, or other matters arisin( under the 5ationa& %nterna& 'evenue #ode or other &a6 or part o$ the &a6 administered b the =ureau o$ %nterna& 'evenue8C #. RA 11#' allo:s a eal from /ecision of Collector in cases involvin< D/is ute/ assessmentsE as /istin<uis;e/ from cases involvin< Drefun/s of internal revenue ta9es( fees or ot;er c;ar<esE )ection , o$ 'epub&ic Act 5o. 112-, creatin( the #ourt o$ Ta1 Appea&s, a&&o6s an appea& $rom a decision o$ the #o&&ector in cases invo&vin( ;disputed assessmentsC as distin(uished $rom cases invo&vin( ;re$unds o$ interna& revenue ta1es, $ees or other char(es.C To ho&d that the ta1pa er has no6 &ost the ri(ht to appea& $rom the ru&in( on the disputed assessment but must prosecute his appea& under section 0/" o$ the Ta1 #ode, 6hich re:uires a ta1pa er to $i&e a c&aim $or re$und o$ the ta1es paid as a condition precedent to his ri(ht to appea&, 6ou&d in e$$ect re:uire o$ him to (o throu(h a use&ess and need&ess ceremon that 6ou&d on& de&a the disposition o$ the case, $or the #o&&ector (no6 #ommissioner) 6ou&d certain& disa&&o6 the c&aim $or re$und in the same 6a as he disa&&o6ed the protest a(ainst the assessment. The &a6 shou&d not be interpreted as to resu&t in absurdities.
3a9ation !a: II( #++' ( 1# )
5.
>ismissal of a eal correct for *ein< file/ out of time The dismissa& o$ the Archbishop9s appea& is substantia&& correct, $or the reason that said appea& 6as not taken 6ithin the 0/ da period prescribed b section 11 o$ 'epub&ic Act 112-. The Archbishop has submitted not &ess than 0 motions or re:uests $or the reconsideration o$ his Ta1 Assessments. A&& motions $or reconsideration 6ere premised on the same (rounds, deduction o$ the depreciation o$ the bui&din(s in :uestion. The appea& to the Ta1 #ourt 6as $i&ed on& on 1! Februar 1!-.. = these successive motions $or reconsideration, the Archbishop mana(ed to de&a the revie6 o$ his case b the Ta1 #ourt $or near& t6o ears. )uch de&a s are p&ain& inimica& to the (enera& interest, ascertainment and co&&ection o$ ta1es bein( essentia& to the maintenance o$ the )tate. The decision b the #o&&ector dated - 5ovember 1!-,, den in( the second re:uest $or reconsideration o$ the assessment, 6as certain& revie6ab&e b the #ourt o$ Ta1 Appea&s. @ence, the 0/4da appea& period shou&d be counted $rom 21 5ovember 1!-,, 6hen the ta1pa er received cop o$ the #o&&ector9s ru&in(. The runnin( o$ the period 6as not interrupted b the $i&in( o$ the third re:uest $or reconsideration, because the &atter did not advance ne6 (rounds not previous& a&&e(ed, and 6as, there$ore, mere& pro $orma. There$ore, the Archbishop9s petition $or revie6 shou&d have been &od(ed 6ith the Ta1 #ourt not &ater than 21 December 1!-,, but it 6as actua&& $i&ed on& on 1 Februar 1!-.. %. >octrine in )ort; Camarines !um*er Co. vs. Collector of Internal Revenue( (1+$ 8;il. '11) The )upreme #ourt cannot countenance the theor that 6ou&d make the commencement o$ the statutor 0/4da period so&e& dependent on the 6i&& o$ the ta1pa er and p&ace the &atter in a position to put o$$ inde$inite& and at his convenience the $ina&it o$ a ta1 assessment. )uch an absurd procedure 6ou&d be detrimenta& to the interest o$ the >overnment, $or Jta1es are the &i$eb&ood o$ the (overnment, and their prompt and certain avai&abi&it an imperious need.9 (=u&& vs. A. ). 2!-, A. ). 24,).C [&] ,ili inas Investment 2 ,inance Cor oration vs. Commissioner of Internal Revenue (GR !"#5'+1( 1=( Bay 1$=4) <n =anc, 'e es J=? (J): . concur ,acts- The #ommissioner o$ %nterna& 'evenue, throu(h the Director o$ 'e(iona& District 0, issued a &etter dated 1. Apri& 1!"1, to Fi&ipinas %nvestment K Finance #orporation, assessin( a(ainst the &atter the sum o$ +-,//,.// as advance sa&es ta1 on an automobi&e 6hich it purchased $rom a ta14e1empt individua&, p&us +0//.// as compromise pena&t , or a tota& o$ +-,0/,.//. =e&ievin( itse&$ not &iab&e there$or, the #ompan , throu(h counse&, disputed the above assessment in a &etter dated 1- *a 1!"1, and re:uested that the same be cance&&ed andMor 6ithdra6n. *ean6hi&e, =%' Assistant 'e(iona& Director To&edo $o&&o6ed up said assessment 6ith a demand &etter dated 21 June 1!"1, to 6hich the #ompan rep&ied, ca&&in( the $ormer9s attention to its &etter o$ 1- *a 1!"1 6hich contested the assessment and has not et been acted upon. The #ommissioner denied the compan 9s re:uest $or cance&&ation andMor 6ithdra6a& o$ the assessment in a &etter dated 1, Au(ust 1!"2, 6hich 6as sent to the #ompan . The record does not, ho6ever, sho6 6hen the #ompan received this &etter o$ denia&8 but, in a &etter dated 2. )eptember 1!"2, 6hich the #ommissioner received on 1 3ctober 1!"2, the #ompan reiterated its re:uest that the said assessment be cance&&ed andMor 6ithdra6n. %n the meantime, the =%' record o$ the #ompan 6as transmitted, on 24 )eptember 1!"2 to its #o&&ection =ranch $or co&&ection b summar remedies8 and pursuant thereto, 'e(iona& Director Ta(&e sent direct& to the #ompan (not to its counse&) another demand &etter dated 2- )eptember 1!"2, enc&osin( there6ith a cop o$ the &etter o$ denia& o$ 1, Au(ust 1,, 1!"2. 3n 1. 3ctober 1!"2, the #ompna ans6ered the &etter, and on 20 Januar 1!"0, the #ompan , throu(h its counse&, $urther moved to reconsider the denia& o$ its ori(ina& re:uest $or cance&&ation andMor 6ithdra6a& o$ the assessment. 3n 22 Ju& 1!"0, the #ommissioner a(ain denied the #ompan 9s re:uests (o$ 2. )eptember 1!"1 and 20 Januar 1!"0) $or reconsideration o$ the assessment8 6hich &etter o$ denia&, the #ompan received on 12 Au(ust 1!"0. 3n 11 )eptember 1!"0, the #ompan $i&ed its petition $or revie6 in the Ta1 #ourt, (#TA #ase 14-/)
3a9ation !a: II( #++' ( 15 )
disputin( the &e(a&it o$ the imposition o$ advance sa&es ta1 on the purchase and subse:uent sa&e o$ the said automobi&e. The #ommissioner moved to dismiss on (round that the petition 6as $i&ed be ond the 0/4da period $i1ed in )ection 11 o$ 'epub&ic Act 112-. 3n . Au(ust 1!"4, the Ta1 #ourt, a$ter $indin( that petitioner consumed 00 da s in $i&in( its petition $or revie6 $rom the date o$ receipt o$ the #ommissioner9s ru&in( on the disputed assessment, issued its reso&ution, sustainin( the #ommissioner9s motion to dismiss. 5ot satis$ied, the #ompan appea&ed to the )upreme #ourt. The )upreme #ourt a$$irmed the appea&ed reso&ution8 6ith costs a(ainst the #ompan . 1. )ature of t;e letters The #ommissioner9s &etter4assessment o$ 1. Apri& 1!"1 became a ;disputedC assessment 6hen the #ompan re:uested $or the cance&&ation andMor 6ithdra6a& o$ the same in its &etter o$ 1- *a 1!"1 ()t. )tephen9s Association vs. #o&&ector o$ %nterna& 'evenue, 1/4 +hi&., 014). The #ommissioner9s &etter o$ 1, Au(ust 1!"2, den in( the #ompan 9s re:uest $or cance&&ation constitutes the decision on the ;disputedC assessment, 6hich is appea&ab&e to the Ta1 #ourt as contemp&ated under )ections , and 11 o$ 'epub&ic Act 112-. The #ompan 9s &etter o$ 2. )eptember 1!"2 6hich the #ommissioner received on 1 3ctober 1!"2 is a mere pro4$orma re:uest $or reconsideration o$ the &etter4decision o$ 1, Au(ust 1!"2 and did not adduce ne6 $acts or ar(uments. The #ommissioner9s &etter o$ 22 Ju& 1!"0 6hich the #ompan received on 12 Au(ust 1!"0 is the reso&ution on the said re:uest $or reconsideration (5orth #amarines ?umber #o., %nc. vs. #o&&ector o$ %nterna& 'evenue, >' ?4120-0, 0/ )eptember 1!"/). #. !etter"/ecision of 14 Au<ust 1$=# touc;e/ u on alle<ation of 1' Bay 1$=1 letter The contention, that the &etter4decision o$ 1, Au(ust 1!"2 did not touch on its a&&e(ation in its precedin( &etter (o$ 1- *a 1!"1) that the automobi&e had passed throu(h three previous non4 ta1 e1empt o6ners be$ore reachin( the #ompan 9s hands, is not tenab&e. The #ommissioner9s &etter e1press& dec&ared that, ;Accordin( to the $indin(s o$ our e1aminers, our c&ient is the $irst non4ta1 e1empt entit to ac:uire o6nership over the car in :uestionC8 and these 6ords direct& contradicted and overru&ed the #ompan 9s pretense. 5. 8etition ro erly /ismisse/7 8erio/ of a eal Auris/ictional an/ non"e9ten/i*le #onsiderin( that the period to appea& $rom a decision o$ the #ommissioner o$ %nterna& 'evenue to the Ta1 #ourt under 'epub&ic Act 112- is 7urisdictiona& and non4e1tendib&e, and that a ta1pa er ma not de&a inde$inite& a ta1 assessment b reiteratin( his ori(ina& de$enses over and over a(ain, 6ithout substantia& variation, the Ta1 #ourt correct& dismissed the petition $or revie6 $i&ed b the #ompan . [$] Commissioner of Internal Revenue vs. Isa*ela Cultural Cor oration (GR 15'#1+( 11 @uly #++1) Third Division, +an(aniban (J): 0 concur, 1 on &eave ,acts- %n an investi(ation conducted on the 1!." books o$ account o$ %sabe&a #u&tura& #orporation had the pre&iminar $indin( that the corporation incurred a tota& income ta1 de$icienc o$ +!,!.-,0!2.1-, inc&usive o$ increments. Apon protest b Hrespondent9sI counse&, the said pre&iminar assessment 6as reduced to the amount o$ +02-,."!.44. 3n 20 Februar 1!!/, the corporation received $rom the #ommissioner an assessment &etter, dated ! Februar 1!!/, demandin( pa ment o$ the amounts o$ +000,1!".." and +4,.!,.,! as de$icienc income ta1 and e1panded 6ithho&din( ta1 inc&usive o$ surchar(e and interest, respective& , $or the ta1ab&e period $rom 1 Januar 1!." to 01 December 1!.". %n a &etter, dated 22 *arch 1!!/, $i&ed 6ith the #ommissioner9s o$$ice on 20 *arch 1!!/, the corporation re:uested a reconsideration o$ the sub7ect assessment. )upp&ementa& to its protest 6as a &etter, dated 2 Apri& 1!!/, $i&ed 6ith the #ommissioner o$$ice on 1. Apri& 1!!/, to 6hich 6ere attached certain documents supportive o$ its protest, as 6e&& as a Baiver o$ )tatute o$ ?imitation, dated 1, Apri& 1!!/, 6here it 6as indicated that the #ommissioner 6ou&d on& have
3a9ation !a: II( #++' ( 1% )
unti& - Apri& 1!!1 6ithin 6hich to asses and co&&ect the ta1es that ma be $ound due $rom the corporation a$ter the re4investi(ation. 3n ! Februar 1!!-, the corporation received $rom the #ommissioner a Fina& 5otice =e$ore )eiDure, dated 22 December 1!!4. %n said &etter, the #ommissioner demanded pa ment o$ the sub7ect assessment 6ithin 1/ da s $rom receipt thereo$. 3ther6ise, $ai&ure on its part 6ou&d constrain the #ommissioner to co&&ect the sub7ect assessment throu(h summar remedies. The corporation considered said $ina& notice o$ seiDure as the #ommissioner9s $ina& decision. The corporation $i&ed a petition $or revie6 6ith the #ourt o$ Ta1 Appea&s (#TA) on ! *arch 1!!- (#TA #ase -211). The #TA havin( rendered 7ud(ment dismissin( the petition, the corporation $i&ed a petition 6ith the #ourt o$ Appea&s, anchored on the ar(ument that the #ommissioner9s issuance o$ the Fina& 5otice =e$ore )eiDure constitutes its decision on the corporation9s re:uest $or reinvesti(ation, 6hich the corporation ma appea& to the #TA. %n its Decision o$ 1! Au(ust 1!!. (#A4>' )+ 4"0.0), the #ourt o$ Appea&s reversed the #ourt o$ Ta1 Appea&s. The #A considered the $ina& notice sent b the #ommissioner as the &atter9s decision, 6hich 6as appea&ab&e to the #TA. The appe&&ate court reasoned that the $ina& 5otice be$ore seiDure had e$$ective& denied the corporation9s re:uest $or a reconsideration o$ the commissioner9s assessment. The appe&&ate court ordered the case be remanded to the #TA. The #ommissioner $i&ed a petition $or revie6 on certiorari be$ore the )upreme #ourt. The )upreme #ourt denied the petition and a$$irmed the assai&ed decision. 1. )ormal roce/ure as to assessment of /elin1uent ta9es7 ,inal /ecision %n the norma& course, the revenue district o$$icer sends the ta1pa er a notice o$ de&in:uent ta1es, indicatin( the period covered, the amount due inc&udin( interest, and the reason $or the de&in:uenc . %$ the ta1pa er disa(rees 6ith or 6ishes to protest the assessment, it sends a &etter to the =%' indicatin( its protest, statin( the reasons there$or, and submittin( such proo$ as ma be necessar . That &etter is considered as the ta1pa er9s re:uest $or reconsideration o$ the de&in:uent assessment. A$ter the re:uest is $i&ed and received b the =%', the assessment becomes a disputed assessment on 6hich it must render a decision. That decision is appea&ab&e to the #ourt o$ Ta1 Appea&s $or revie6. +rior to the decision on a disputed assessment, there ma sti&& be e1chan(es bet6een the commissioner o$ interna& revenue (#%') and the ta1pa er. The $ormer ma ask c&ari$icator :uestions or re:uire the &atter to submit additiona& evidence. @o6ever, the #%'9s position re(ardin( the disputed assessment must be indicated in the $ina& decision. %t is this decision that is proper& appea&ab&e to the #TA $or revie6. #. ,inal )otice Before SeiFure is t;e final /ecision of t;e Commissioner The Fina& 5otice =e$ore )eiDure, transmitted a$ter the corporation re:uested $or reconsideration o$ the assessment made b the #ommissioner as to de&in:uent ta1es, shou&d be considered as the commissioner9s decision disposin( o$ the re:uest $or reconsideration $i&ed b the corporation, 6ho received no other response to its re:uest. 5ot on& 6as the 5otice the on& response received8 its content and tenor supported the theor that it 6as the #%'9s $ina& act re(ardin( the re:uest $or reconsideration. The ver tit&e e1press& indicated that it 6as a $ina& notice prior to seiDure o$ propert . The &etter itse&$ c&ear& stated that respondent 6as bein( (iven ;this ?A)T 3++3'TA5%TNC to pa 8 other6ise, its properties 6ou&d be sub7ected to distraint and &ev . 5. Section ##& )IRC7 8rotestin< an Assessment )ection 22. o$ the 5ationa& %nterna& 'evenue #ode states that a de&in:uent ta1pa er ma neverthe&ess direct& appea& a disputed assessment, i$ its re:uest $or reconsideration remains unacted upon 1./ da s a$ter submission thereo$. )ection 22. provides that ;Bithin a period to be prescribed b imp&ementin( ru&es and re(u&ations, the ta1pa er sha&& be re:uired to respond to said notice. %$ the ta1pa er $ai&s to respond, the #ommissioner or his du& authoriDed representative sha&& issue an assessment based on his $indin(s. )uch assessment ma be protested administrative& b $i&in( a re:uest $or reconsideration or reinvesti(ation 6ithin thirt (0/) da s $rom receipt o$ the assessment in such $orm and manner as ma be prescribed b imp&ementin( ru&es and re(u&ations. Bithin si1t ("/) da s $rom $i&in( o$ the protest, a&& re&evant supportin(
3a9ation !a: II( #++' ( 1' )
documents sha&& have become $ina&. %$ the protest is denied in 6ho&e or in part, or is not acted upon 6ithin one hundred ei(ht (1./) da s $rom submission o$ documents, the ta1pa er adverse& a$$ected b the decision or inaction ma appea& to the #ourt o$ Ta1 Appea&s 6ithin (0/) da s $rom receipt o$ the said decision, or $rom the &apse o$ the one hundred ei(ht (1./)4da period8 other6ise the decision sha&& become $ina&, e1ecutor and demandab&e.C %. ,inal /eman/ letter for ayment of /elin1uent ta9es may *e consi/ere/ a /ecision on a /is ute/ or roteste/ assessment7 Commissioner of Internal Revenue v. Ayala Securities Cor oration %n #ommissioner o$ %nterna& 'evenue v. A a&a )ecurities #orporation, it 6as he&d that the &etter is tantamount to a denia& o$ the reconsideration o$ the corporation9s protest o$ the assessment made b the #ommissioner, considerin( that the said &etter 6as in itse&$ a reiteration o$ the demand b the =%' $or the sett&ement o$ the assessment a&read made, and $or the immediate pa ment o$ the amount in spite o$ the vehement protest o$ the corporation. This certain& is a c&ear indication o$ the $irm stand o$ the #ommissioner a(ainst the reconsideration o$ the disputed assessment, in vie6 o$ the continued re$usa& o$ the corporation to e1ecute the 6aiver o$ the period o$ &imitation upon the assessment in :uestion. '. ,inal /eman/ letter for ayment of /elin1uent ta9es may *e consi/ere/ a /ecision on a /is ute/ or roteste/ assessment7 Suri<ao 0lectric Co.( Inc. vs. Court of 3a9 A eals an/ CIR vs. .nion S;i in< )imi&ar& , in )uri(ao <&ectric #o., %nc. vs. #ourt o$ Ta1 Appea&s and a(ain in #%' v. Anion )hippin( #orp., it 6as he&d that the &etter o$ demand un:uestionab& constitutes the $ina& action taken b the commissioner on the compan 9s severa& re:uests $or reconsideration and re4computation. %n this &etter the commissioner not on& in e$$ect demanded that the compan pa the amount but a&so (ave 6arnin( that in the event it $ai&ed to pa , the said commissioner 6ou&d be constrained to en$orce the co&&ection thereo$ b means o$ the remedies provided b &a6. The tenor o$ the &etter, speci$ica&& the statement re(ardin( the resort to &e(a& remedies, unmistakab& indicated the $ina& nature o$ the determination made b the commissioner o$ the compan 9s de$icienc $ranchise ta1 &iabi&it . =. BIR s;oul/ al:ays in/icate to t;e ta9 ayer in clear an/ une1uivocal lan<ua<e :;at constitutes final action on a /is ute/ assessment7 8ur ose The =%' shou&d a&6a s indicate to the ta1pa er in c&ear and une:uivoca& &an(ua(e 6hat constitutes $ina& action on a disputed assessment. The ob7ect o$ this po&ic is to avoid repeated re:uests $or reconsideration b the ta1pa er, thereb de&a in( the $ina&it o$ the assessment and, conse:uent& , the co&&ection o$ the ta1es due. Furthermore, the ta1pa er 6ou&d not be (ropin( in the dark, specu&atin( as to 6hich communication or action o$ the =%' ma be the decision appea&ab&e to the ta1 court. 4. Commissioner vs. Al<ue not a lica*le #ommissioner v. A&(ue is not in point. %n that case, the Barrant o$ Distraint and ?ev , issued to the ta1pa er 6ithout an cate(orica& ru&in( on its re:uest $or reconsideration, 6as not deemed e:uiva&ent to a denia& o$ the re:uest. =ecause such re:uest cou&d not in $act be $ound in its records, the =%' cannot be presumed to have taken it into consideration. The re:uest 6as considered on& 6hen the ta1pa er (ave a cop o$ it, du& stamp4received b the =%'. @ence, the Barrant 6as deemed premature. %n the present case, petitioner does not den receipt o$ the #ompan 9s protest &etter. As a matter o$ $act, it cate(orica&& re&ates the $o&&o6in( in its ;)tatement o$ 'e&evant FactsC. @avin( admitted as a $act the compan 9s re:uest $or reconsideration, the #ommissioner must have passed upon it prior to the issuance o$ the Fina& 5otice =e$ore )eiDure. [1+] Commissioner of Internal Revenue vs. .nion S;i )econd Division, +aras (J): 4 concur in< Cor oration (GR ==1=+( #1 Bay 1$$+)
3a9ation !a: II( #++' ( 1= )
,acts- %n a &etter dated 2, December 1!,4, the #ommissioner o$ %nterna& 'evenue assessed a(ainst Nee Fon( @on(, ?td. andMor Anion )hippin( #orporation, the tota& sum o$ +-.0,1--.22 as de$icienc income ta1es due $or the ears 1!,1 and 1!,2. )aid &etter 6as received on 4 Januar 1!,-, and in a &etter dated 1/ Januar 1!,-, received b the #ommissioner on 10 Januar 1!,-, the #ompan protested the assessment. The #ommissioenr, 6ithout ru&in( on the protest, issued a Barrant o$ Distraint and ?ev , 6hich 6as served on the #ompan 9s counse&, #&emente #e&so, on 2- 5ovember 1!,". %n a &etter dated 2, 5ovember 1!,", received b the #ommissioner on 2! 5ovember 1!,", the #ompan reiterated its re:uest $or reinvesti(ation o$ the assessment and $or the reconsideration o$ the summar co&&ection thru the Barrant o$ Distraint and ?ev . The #ommissioner, a(ain, 6ithout actin( on the re:uest $or reinvesti(ation and reconsideration o$ the Barrant o$ Distraint and ?ev , $i&ed a co&&ection suit be$ore =ranch OO% o$ the then #ourt o$ First %nstance o$ *ani&a (#ivi& #ase 12/4-!) a(ainst the #ompan . )ummons in the said co&&ection case 6as issued to the #ompan on 2. December 1!,.. 3n 1/ Januar 1!,!, the #ompan $i&ed 6ith the #ourt o$ Ta1 Appea&s its +etition $or 'evie6 o$ the #ommissioner9s assessment o$ its de$icienc income ta1es in a &etter dated 2, December 1!,4 (#TA #ase 2!.!), 6herein it pra s that a$ter hearin(, 7ud(ment be rendered ho&din( that it is not &iab&e $or the pa ment o$ the income ta1 herein invo&ved, or 6hich ma be due $rom $orei(n shipo6ner Nee Fon( @on(, ?td. The Ta1 #ourt, in a decision dated ! December 1!.0, ru&ed in $avor o$ the #ompan , reversin( the decision o$ the #ommissioner 6hich assessed a(ainst and demanded $rom the #ompan the pa ment o$ de$icienc income ta1, inc&usive o$ -/2 surchar(e, interest and compromise pena&ties, in the amounts o$ +,0,!-..," and +-.0,1--.22 $or the ears 1!,1 and 1!,2, respective& . The #ommissioner $i&ed a +etition $or #ertiorari 6ith the )upreme #ourt. The )upreme #ourt dismissed the petition and a$$irmed the assai&ed decision o$ the #ourt o$ Ta1 Appea&s. 1. ,inal /etermination of /is ute/ assessment must *e in/icate/ in clear an/ une1uivocal lan<ua<e7 8ur ose The #ommissioner o$ %nterna& 'evenue shou&d a&6a s indicate to the ta1pa er in c&ear and une:uivoca& &an(ua(e 6henever his action on an assessment :uestioned b a ta1pa er constitutes his $ina& determination on the disputed assessment, as contemp&ated b sections , and 11 o$ 'epub&ic Act 112-, as amended. 3n the basis o$ this statement indubitab& sho6in( that the #ommissioner9s communicated action is his $ina& decision on the contested assessment, the a((rieved ta1pa er 6ou&d then be ab&e to take recourse to the ta1 court at the opportune time. Bithout need&ess di$$icu&t , the ta1pa er 6ou&d be ab&e to determine 6hen his ri(ht to appea& to the ta1 court accrues. This ru&e o$ conduct 6ou&d a&so obviate a&& desire and opportunit on the part o$ the ta1pa er to continua&& de&a the $ina&it o$ the assessment 4 and, conse:uent& , the co&&ection o$ the amount demanded as ta1es 4 b repeated re:uests $or recomputation and reconsideration. 3n the part o$ the #ommissioner, this 6ou&d encoura(e his o$$ice to conduct a care$u& and thorou(h stud o$ ever :uestioned assessment and render a correct and de$inite decision thereon in the $irst instance. This 6ou&d a&so deter the #ommissioner $rom un$air& makin( the ta1pa er (rope in the dark and specu&ate as to 6hich action constitutes the decision appea&ab&e to the ta1 court. 3$ (reater import, this ru&e o$ conduct 6ou&d meet a pressin( need $or $air p&a , re(u&arit , and order&iness in administrative action. #. 8resent case- 3a9 ayer left in t;e /ark as to :;ic; is t;e a eala*le /ecision @erein, the #ommissioner did not ru&e on the #ompan 9s motion $or reconsideration but, &e$t the #ompan in the dark as to 6hich action o$ the #ommissioner is the decision appea&ab&e to the #ourt o$ Ta1 Appea&s. @ad he cate(orica&& stated that he denies the #ompan 9s motion $or reconsideration and that his action constitutes his $ina& determination on the disputed assessment, the #ompan 6ithout need&ess di$$icu&t 6ou&d have been ab&e to determine 6hen his ri(ht to appea& accrues and the resu&tin( con$usion 6ou&d have been avoided.
3a9ation !a: II( #++' ( 14 )
5.
Revie:a*le /ecision containe/ in letter of Commissioner( not in :arrants of /istraint The revie6ab&e decision o$ the =ureau o$ %nterna& 'evenue is that contained in the &etter o$ its #ommissioner, that such constitutes the $ina& decision on the matter 6hich ma be appea&ed to the #ourt o$ Ta1 Appea&s and not the 6arrants o$ distraint (Advertisin( Associates, %nc. v. #ourt o$ Appea&s, 100 )#'A ,"! H1!.4I). The procedure enunciated is demanded b the pressin( need $or $air p&a , re(u&arit and order&iness in administrative action. %. Reckonin< erio/ of rescri tive erio/ of a eal Ander the circumstances, the #ommissioner o$ %nterna& 'evenue, not havin( c&ear& si(ni$ied his $ina& action on the disputed assessment, &e(a&& the period to appea& has not commenced to run. Thus, it 6as on& 6hen the #ompan received the summons on the civi& suit $or co&&ection o$ de$icienc income on 2. December 1!,. that the period to appea& commenced to run. The re:uest $or reinvesti(ation and reconsideration 6as in e$$ect considered denied b the #ommissioner 6hen the &atter $i&ed a civi& suit $or co&&ection o$ de$icienc income. )o that on 1/ Januar 1!,! 6hen the #ompan $i&ed the appea& 6ith the #ourt o$ Ta1 Appea&s, it consumed a tota& o$ on& 10 da s 6e&& 6ithin the thirt da period to appea& pursuant to )ection 11 o$ 'A 112-. '. .nion S;i in< is t;e ;us*an/in< a<ent of vessel Gee ,on< Hon< !t/. Anion )hippin( is actua&& and &e(a&& the husbandin( a(ent o$ the vesse& o$ Nee Fon( @on(, ?td. as (1) it neither per$ormed nor transacted an shippin( business, $or and in representation, o$ Nee Fon( @on(, ?td. or its vesse&s or other6ise ne(otiated or procured car(o to be &oaded in the vesse&s o$ Nee Fon( @on(, ?td.8 (2) it never so&icited or procured car(o or $rei(ht in the +hi&ippines or e&se6here $or &oadin( in said vesse&s o$ Nee Fon( @on(, ?td.8 (0) it had not co&&ected an $rei(ht income or receipts $or the said Nee Fon( @on( ?td.8 (4) it never had possession or contro&, actua& or constructive, over the $unds representin( pa ment b +hi&ippine shippers $or car(o &oaded on said vesse&s8 it never remitted to Nee Fon( @on(, ?td. an sum o$ mone representin( $rei(ht incomes o$ Nee Fon( @on(, ?td.8 and (-) that the $rei(ht pa ments made $or car(o &oaded in the +hi&ippines $or $orei(n destination 6ere actua&& paid direct& b the shippers to the said Nee Fon( @on(, ?td. upon arriva& o$ the (oods in the $orei(n ports. =. Hus*an/in< a<ent not lia*le for income ta9 /ue from forei<n s;i o:ners an/ :it;;ol/in< ta9 The corporation bein( mere& a husbandin( a(ent is not &iab&e $or the pa ment o$ the income ta1es due $rom the $orei(n ship o6ners &oadin( car(oes in the +hi&ippines. 5either can the #ompan be &iab&e $or 6ithho&din( ta1 under )ection -0 o$ the %nterna& 'evenue #ode since it is not in possession, custod or contro& o$ the $unds received b and remitted to a non4resident ta1pa er. %$ an individua& or corporation, &ike Anion )hippin( herein, is not in the actua& possession, custod , or contro& o$ the $unds, it can neither be ph sica&& nor &e(a&& &iab&e or ob&i(ated to pa the so4ca&&ed 6ithho&din( ta1 on income c&aimed b the non4 resident ta1pa er, herein Nee Fon( @on(, ?td. 4. ,actual fin/in<s of t;e C3A *in/in< u on t;e Su reme Court The $actua& $indin(s o$ the #ourt o$ Ta1 Appea&s are bindin( on the )upreme #ourt. %t is 6e&&4sett&ed that in passin( upon petitions $or revie6 o$ the decisions o$ the #ourt o$ Ta1 Appea&s, the #ourt is (enera&& con$ined to :uestions o$ &a6. The $indin(s o$ $act o$ said #ourt are not to be disturbed un&ess c&ear& sho6n to be unsupported b substantia& evidence. [11] Commissioner of Internal Revenue vs. 8;ili ine American !ife Insurance Co. (GR 1+'#+&( #$ Bay 1$$') Third Division, 'omero (J): 2 concur, 1 took no part. ,acts- 3n 0/ *a 1!.0, the +hi&ippine American ?i$e %nsurance #o. (+hi&am&i$e) paid to the =ureau o$
3a9ation !a: II( #++' ( 1& )
%nterna& 'evenue (=%') its $irst :uarter& corporate income ta1 $or #a&endar Near (#N) 1!.0 amountin( to +0,24",141.//. 3n 2! Au(ust 1!.0, it paid +0!",.,4.// $or the )econd Euarter o$ 1!.0. For the Third Euarter o$ 1!.0, it dec&ared a net ta1ab&e income o$ +2,-1-,",1.// and a ta1 due o$ +,/.,4"4.//. A$ter creditin( the amount o$ +0,.!!,-2-.// it dec&ared a re$undab&e amount o$ +0,1-.,/"1.//. For its Fourth and Fina& :uarter endin( 01 December, +hi&am&i$e su$$ered a &oss and thereb had no income ta1 &iabi&it . %n return $or that Euarter, it dec&ared a re$und o$ +0,!!1,.41.// as 6ithho&din( ta1es on renta& income $or 1!.0 and +100,/.4.// representin( 1!.2 income ta1 re$und app&ied as 1!.0 ta1 credit. %n 1!.4, +hi&am&i$e a(ain su$$ered a &oss and dec&ared no income ta1 &iabi&it . @o6ever, it app&ied as ta1 credit $or 1!.4, the amount o$ +0,!!1,.41.// representin( its 1!.2 and 1!.0 overpaid income ta1es and the amount o$ +2-/,.",.// as 6ithho&din( ta1 on renta& income $or 1!.4. 3n 2" )eptember 1!.4, +hi&am&i$e $i&ed a c&aim $or its 1!.2 income ta1 re$und o$ +100,/.4.//. 3n 22 5ovember 1!.4, it $i&ed a petition $or revie6 6ith the #ourt o$ Ta1 Appea&s (#TA #ase 0.".) 6ith respect to its 1!.2 c&aim $or re$und o$ +100,/.4.//. 3n 1" December 1!.-, it $i&ed another c&aim $or re$und 6ith the #ommissioner9s appe&&ate division in the a((re(ate amount o$ +4,1/!,"24.// $or the period o$ 1!.2 to 1!.4 &ess the amount c&aimed in #TA #ase 0.".. 3n 2 Januar 1!." +hi&am&i$e $i&ed a petition $or revie6 6ith the #TA (#TA #ase 4/1. re(ardin( its 1!.0 and 1!.4 c&aims $or re$und) ?ater, it amended its petition b &imitin( its c&aim $or re$und to on& +0,.-.,,-,.//. 3n 1" )eptember 1!!1, the #TA rendered a decision, (rantin( +hi&am&i$e9s c&aim $or re$und $or +0,24",141.// and +0!",.,4.// representin( e1cess corporated income ta1 pa ments $or the $irst and second :uarters o$ 1!.0, respective& , or a tota& o$ +0,"40,/1-.//. The #ommissioner appea&ed. The #ourt o$ Appea&s a$$irmed the decision o$ the #ourt o$ Ta1 Appea&s on 2" *arch 1!!2 (#A4>' 2"-!.). The #ommissioner $i&ed a petition $or revie6 on certiorari. The )upreme #ourt dismissed the petition and a$$irmed the decision o$ the #ourt o$ Appea&s in toto8 6ithout costs. 1. Section #5+ )IRC7 Recovery of ta9 erroneously or ille<ally collecte/ )ection 20/ o$ the 5ationa& %nterna& 'evenue #ode ($ormer& )ection 2!2) provides that ;5o suit or proceedin( sha&& be maintained in an court $or the recover o$ an nationa& interna& revenue ta1 herea$ter a&&e(ed to have been erroneous& or i&&e(a&& assessed or co&&ected, or o$ an pena&t c&aimed to have been co&&ected 6ithout authorit , or o$ an sum a&&e(ed to have been e1cessive or in an manner 6ron($u&& co&&ected, unti& a c&aim $or re$und or credit has been du& $i&ed 6ith the #ommissioner8 but such suit or proceedin( ma be maintained, 6hether or not such ta1, pena&t , or sum has been paid under protest or duress. %n an case, no such suit or proceedin( sha&& be be(un a$ter the e1piration o$ t6o ears $rom the date o$ pa ment o$ the ta1 or pena&t re(ard&ess o$ an supervenin( cause that ma arise a$ter pa ment: +rovided, ho6ever, That the #ommissioner ma , even 6ithout a 6ritten c&aim there$or, re$und or credit an ta1, 6here on the $ace o$ the return upon 6hich pa ment 6as made, such pa ment appears c&ear& to have been erroneous& paid.C #. Section #5+ )IRC7 ,orfeiture of refun/ )ection 20/ o$ the 5ationa& %nterna& 'evenue #ode ($ormer& )ection 2!2) $urther provides that ;. F A re$und check or 6arrant issued in accordance 6ith the pertinent provisions o$ this #ode 6hich sha&& remain unc&aimed or uncashed 6ithin $ive (-) ears $rom the date said 6arrant or check 6as mai&ed or de&ivered sha&& be $or$eited in $avor o$ the (overnment and the amount thereo$ sha&& revert to the >enera& Fund.C 5. 8acific 8rocon !t/. vs. Court of 3a9 A eals overturne/ *y CIR vs. 3BH Sales A&thou(h it is true that in the +aci$ic +rocon case, the #ourt he&d that the ri(ht to brin( and action $or re$und had prescribed, the ta1 havin( been $ound to have paid at the end o$ the $irst :uarter 6hen the 6ithho&din( ta1 correspondin( thereto 6as remitted to the =ureau o$ %nterna& 'evenue, not at the time o$ $i&in( o$ the Fina& Ad7ustment return in Apri& o$ the $o&&o6in( ear8 said case 6as overturned b the #ourt in
3a9ation !a: II( #++' ( 1$ )
#ommissioner o$ %nterna& 'evenue v. T*O )a&es %ncorporated and the #ourt o$ Ta1 Appea&s, 6here the #ourt he&d that ;it is necessar to consider not on& )ection 2!2 (no6 )ection 20/) o$ the 5ationa& %nterna& 'evenue #ode but a&so the other provisions o$ the Ta1 #ode, particu&ar& )ections .4, .- (no6 both incorporated as )ection ".), )ection ." (no6 )ection ,/) and )ection ., (no6 )ection "!) on Euarter& #orporate %ncome Ta1 +a ment and )ection 021 (no6 )ection 202) on keepin( o$ books o$ accounts8 and that a&& these provisions o$ the Ta1 #ode shou&d be harmoniDed 6ith each other.C %. Section #$# (no: Section #5+) )IRC 1ualifie/ *y Sections =& an/ =$ of resent 3a9 Co/e )ection 2!2 (no6 )ection 20/) stipu&ates that the t6o4 ear prescriptive period to c&aim re$unds shou&d be counted $rom date o$ pa ment o$ the ta1 sou(ht to be re$unded. Bhen app&ied to ta1 pa ers $i&in( income ta1 returns on a :uarter& basis, the date o$ pa ment mentioned in )ection 2!2 (no6 )ection 20/) must be deemed to be :ua&i$ied b )ections ". and "! o$ the present Ta1 #ode. '. Section =& )IRC7 >eclaration of Iuarterly Income 3a9 )ection ". o$ the Ta1 #ode provides that ;<ver corporation sha&& $i&e in dup&icate a :uarter& summar dec&aration o$ its (ross income and deductions on a cumu&ative basis $or the precedin( :uarter or :uarters upon 6hich the income ta1, as provided in Tit&e %% o$ this #ode sha&& be &evied, co&&ected and paid. The Ta1 so computed sha&& be decreased b the amount o$ ta1 previous& paid or assessed durin( the precedin( :uarters and sha&& be paid not &ater than si1t ("/) da s $rom the c&ose o$ each o$ the $irst three (0) :uarters o$ the ta1ab&e ear. =. Section =$ )IRC7 ,inal A/Austment Return )ection "! o$ the Ta1 #ode provides that ;<ver corporation &iab&e to ta1 under )ection 24 sha&& $i&e a $ina& ad7ustment return coverin( the tota& net income $or the precedin( ca&endar or $isca& ear. %$ the sum o$ the :uarter& ta1 pa ments made durin( the said ta1ab&e ear is not e:ua& to the tota& ta1 due on the entire ta1ab&e net income o$ that ear the corporation sha&& either: (a) +a the e1cess sti&& due8 or (b) =e re$unded the e1cess amount paid, as the case ma be. %n case the corporation is entit&ed to a re$und o$ the e1cess estimated :uarter& income ta1es paid, the re$undab&e amount sho6n on its $ina& ad7ustment return ma be credited a(ainst the estimated :uarter& income ta1 &iabi&ities $or the ta1ab&e :uarters o$ the succeedin( ta1ab&e ear.C 4. Refun/ /ue is amount s;o:n in final a/Austment return an/ not on its 1uarterly returns The &ast para(raph o$ )ection "! o$ the Ta1 #ode provides that the re$undab&e amount, in case a re$und is due a corporation, is that amount 6hich is sho6n on its $ina& ad7ustment return and not on its :uarter& returns. This is in &i(ht o$ the $act that a&thou(h :uarter& ta1es due on are re:uired to be paid 6ithin si1t da s $rom the c&ose o$ each :uarter, the $act that the amount sha&& be deducted $rom the ta1 due $or the succeedin( :uarter sho6s that unti& a $ina& ad7ustment return sha&& have been $i&ed, the ta1es paid in the precedin( :uarters are mere& partia& ta1es due $rom a corporation. 5either amount can serve as the $ina& $i(ure to :uanti$ 6hat is due the (overnment nor 6hat shou&d be re$unded to the corporation. &. Reckonin< /ate /etermine/ after a final a/Austment return is accom lis;e/ The prescriptive period o$ t6o ears shou&d commence to run on& $rom the time that the re$und is ascertained, 6hich can on& be determined a$ter a $ina& ad7ustment return is accomp&ished. %n the present case, this date is 1" Apri& 1!.4, and t6o ears $rom this date 6ou&d be 1" Apri& 1!.". The record sho6s that the c&aim $or re$und 6as $i&ed on 1/ December 1!.- and the petition $or revie6 as brou(ht be$ore the #TA on 2 Januar 1!.". =oth dates are 6ithin the t6o4 ear re(&ementar period. +hi&am&i$e bein( a corporation, )ection 2!2 (no6 )ection 20/) cannot serve as the so&e basis $or determinin( the t6o4 ear prescriptive period $or re$unds. As ear&ier said in the T*O )a&es case, )ections "., "!, and ,/ on Euarter& #orporate %ncome Ta1 +a ment and )ection 021 shou&d be considered in con7unction 6ith it. $. 3:o"year erio/ not Auris/ictional <ven i$ the t6o4 ear period had a&read &apsed, the same is not 7urisdictiona& and ma be suspended
3a9ation !a: II( #++' ( #+ )
$or reasons o$ e:uit and other specia& circumstances. [1#] ACCRA Investments Cor oration vs. Court of A Third Division, >utierreD Jr. (J): 4 concur eals (GR $=5##( #+ >ecem*er 1$$1)
,acts- A##'A %nvestment #orporation is a domestic corporation en(a(ed in the business o$ rea& estate investment and mana(ement consu&tanc . 3n 1- Apri& 1!.2, the corporation $i&ed 6ith the =ureau o$ %nterna& 'evenue (=%') its annua& corporate income ta1 return $or the ca&endar ear endin( 01 December 1!.1 reportin( a net &oss o$ +2,!-,,142.//. %n the said return, the corporation dec&ared as creditab&e a&& ta1es 6ithhe&d at source b various 6ithho&din( a(ents (the *a&a an %nsurance #o., the An(ara #oncepcion 'e(a&a K #ruD ?a6 3$$ices, *J Deve&opment #orp. and+hi&ippine >&oba& #ommunications %nc., tota&in( +.2,,-1.!1. The 6ithho&din( a(ents paid and remitted amounts representin( ta1es on renta&, commission and consu&tanc income o$ the corporation to the =%' $rom Februar to December 1!.1. %n a &etter dated 2! December 1!.0 addressed to the #ommissioner o$ %nterna& 'evenue, the corporation $i&ed a c&aim $or re$und inasmuch as it had no ta1 &iabi&it a(ainst 6hich to credit the amounts 6ithhe&d. +endin( action o$ the #ommissioner on its c&aim $or re$und, the corporation, on 10 Apri& 1!.4, $i&ed a petition $or revie6 6ith the #ourt o$ Ta1 Appea&s (#TA) askin( $or the re$und o$ the amounts 6ithhe&d as overpaid income ta1es. 3n 2, Januar 1!.., the #TA dismissed the petition $or revie6 a$ter a $indin( that the t6o4 ear period 6ithin 6hich the corporation9s c&aim $or re$und shou&d have been $i&ed had a&read prescribed pursuant to )ection 2!2 o$ the 5ationa& %nterna& 'evenue #ode (5%'#) o$ 1!,,, as amended. Actin( on the corporation9s motion $or reconsideration, the #TA in its reso&ution dated 2, )eptember 1!.. denied the same $or havin( been $i&ed out o$ time. 3n 14 Januar 1!.!, the corporation $i&ed 6ith the )upreme #ourt its petition $or revie6, 6hich the #ourt re$erred to the appe&&ate court in the #ourt9s reso&ution dated 1- Februar 1!!/ $or proper determination and disposition. 3n 2. *a 1!!/, the appe&&ate court a$$irmed the decision o$ the #TA opinin( that the t6o4 ear prescriptive period in :uestion commences ;$rom the date o$ pa ment o$ the ta1C as provided under )ection 2!2 o$ the Ta1 #ode o$ 1!,, (no6 )ec. 20/ o$ the 5%'# o$ 1!."), i.e., ;$rom the end o$ the ta1 ear 6hen a ta1pa er is deemed to have paid a&& ta1es 6ithhe&d at sourceC, and not ;$rom the date o$ the $i&in( o$ the income ta1 returnC as posited b the corporation. %ts motion $or reconsideration 6ith the appe&&ate court havin( been denied in a reso&ution dated 2/ 5ovember 1!!/, the corporation e&evated this case to the )upreme #ourt. The )upreme #ourt (ranted the petition, reversed and set aside the 2. *a 1!!/ decision and 2/ 5ovember 1!!/ reso&ution o$ the #ourt o$ Appea&s, and directed the #ommissioner o$ %nterna& 'evenue to re$und to the corporation the amount o$ +.2,,-1.!1. 1. Section #5+ )IRC7 Recovery of ta9 erroneously or ille<ally collecte/ )ection 20/ o$ the Ta1 #ode provides that ; 5o suit or proceedin( sha&& be maintained in an court $or the recover o$ an nationa& interna& revenue ta1 herea$ter a&&e(ed to have been erroneous& or i&&e(a&& assessed or co&&ected, or o$ an pena&t c&aimed to have been co&&ected 6ithout authorit , or o$ an sum a&&e(ed to have been e1cessive or in an manner 6ron($u&& co&&ected, unti& a c&aim $or re$und or credit has been du& $i&ed 6ith the #ommissioner8 but such suit or proceedin( ma be maintained, 6hether or not such ta1, pena&t or sum has been paid under protest or duress. %n an case, no such suit or proceedin( sha&& be(in a$ter the e1piration o$ t6o ears $rom the date o$ pa ment o$ the ta1 or pena&t re(ard&ess o$ an supervenin( cause that ma arise a$ter pa ment: +rovided, ho6ever, that the #ommissioner ma , even 6ithout a 6ritten c&aim there$or, re$und or credit an ta1, 6here on the $ace o$ the return upon 6hich pa ment 6as made, such pa ment appears to have been erroneous& paid.C (<mphasis )upp&ied).
3a9ation !a: II( #++' ( #1 )
#.
Rulin< in Gi**s v. Commissioner of Internal Revenue (1'' SCRA 51& [1$=']) +a ment is a mode o$ e1tin(uishin( ob&i(ations (Art. 1201, #ivi& #ode) and it means not on& the de&iver o$ mone but a&so the per$ormance, in an other manner, o$ an ob&i(ation (%d., Art 1201). A ta1pa er, resident or non4resident, does so not rea&& to deposit an amount to the #ommissioner o$ %nterna& 'evenue, but, in truth, to per$orm and e1tin(uish his ta1 ob&i(ation $or the ear concerned. %n other 6ords, he is pa in( his ta1 &iabi&ities $or that ear. #onse:uent& , a ta1pa er 6hose income is 6ithhe&d at source 6i&& be deemed to have paid his ta1 &iabi&it 6hen the same $a&&s due at the end o$ the ta1 ear. %t is $rom this &atter date then, or 6hen the ta1 &iabi&it $a&&s due, that the t6o4 ear prescriptive period under )ection 0/" (no6 part o$ )ection 20/) o$ the 'evenue #ode starts to run 6ith respect to pa ments e$$ected throu(h the 6ithho&din( ta1 s stem. 5. 8resent case- Alternative reckonin< /ates an/ )ature of refun/ claim The >ibbs ru&in( presents t6o a&ternative reckonin( dates, i.e., (1) the end o$ the ta1 ear8 and (2) 6hen the ta1 &iabi&it $a&&s due. @erein, the corporation9s 6ithho&din( a(ents had paid the correspondin( ta1es 6ithhe&d at source to the =%' $rom Februar to December 1!.1. %n havin( app&ied the $irst a&ternative date F ;the end o$ the ta1 earC in order to determine 6hether the corporation9s c&aim $or re$und had been seasonab& $i&ed, the appe&&ate court $ai&ed to appreciate proper& the attendin( circumstances o$ the case. The corporation is not c&aimin( a re$und o$ overpaid 6ithho&din( ta1es, per se. %t is askin( $or the recover o$ the sum o$ +.2,,-1.!1.//, the re$undab&e or creditab&e amount determined upon the petitioner corporation9s $i&in( o$ the its $ina& ad7ustment ta1 return on or be$ore 1- Apri& 1!.2 6hen its ta1 &iabi&it $or the ear 1!.1 $e&& due. The distinction is essentia& in the reso&ution o$ this case $or it spe&&s the di$$erence bet6een bein( barred b prescription and entit&ement to a re$und. %. Section %$ of 1$&= )IRC7 8ayment an/ assessment of income ta9 for in/ivi/uals an/ cor orations Ander )ection 4! o$ the 5ationa& %nterna& 'evenue #ode o$ 1!.", as amended, it is e1p&icit& provided that ;(a) +a ment o$ ta1 F (1) %n (enera&. F The tota& amount o$ ta1 imposed b this Tit&e sha&& be paid b the person sub7ect thereto at the time the return is $i&ed . . .C '. Section 4+ (*) of 1$&= )IRC7 3ime of filin< t;e income return )ection ,/, subpara(raph (b) o$ the Ta1 #ode states 6hen the income ta1 return 6ith respect to ta1pa ers &ike the petitioner corporation must be $i&ed. %t provides that ;The corporate :uarter& dec&aration sha&& be $i&ed 6ithin si1t ("/) da s $o&&o6in( the c&ose o$ each o$ the $irst three :uarters o$ the ta1ab&e ear. The $ina& ad7ustment return sha&& be $i&ed on or be$ore the 1-th da o$ the 4th month $o&&o6in( the c&ose o$ the $isca& ear, as the case ma be.C =. 8resent case- Cor oration com lie/ :it; filin< of final a/Austment return The corporation9s ta1ab&e ear is on a ca&endar ear basis, hence, 6ith respect to the 1!.1 ta1ab&e ear, A##'A%5 had unti& 1- Apri& 1!.2 6ithin 6hich to $i&e its $ina& ad7ustment return. The corporation du& comp&ied 6ith this re:uirement. 3n the basis o$ the corporate income ta1 return 6hich A##'A%5 $i&ed on 1Apri& 1!.2, it reported a net &oss o$ +2,!-,,142.//. #onse:uent& , as re$&ected thereon, the petitioner corporation, a$ter due computation, had no ta1 &iabi&it $or the ear 1!.1. @ad there been an , pa ment thereo$ 6ou&d have been due at the time the return 6as $i&ed pursuant to subpara(raph (c) o$ )ection ,/ o$ the 5%'#. 4. Section 4+ (c) of 1$&= )IRC7 3ime ayment of t;e income ta9 )ection ,/, subpara(raph (c) o$ the Ta1 #ode provides that ;The income ta1 due on the corporate :uarter& returns and the $ina& income ta1 returns computed in accordance 6ith )ection ". and "! sha&& be paid at the time the dec&aration or return is $i&ed as prescribed b the #ommissioner o$ %nterna& 'evenue.C &. Section & of BIR Revenue Re<ulation 15"4&7 Claims for ta9 cre/it or refun/
3a9ation !a: II( #++' ( ## )
Anent c&aims $or re$und, section . o$ 'evenue 'e(u&ation 5o. 104,. issued b the =ureau o$ %nterna& 'evenue re:uires that ;#&aims $or ta1 credit or re$und o$ income ta1 deducted and 6ithhe&d on income pa ments sha&& be (iven due course on& 6hen it is sho6n on the return that the income pa ment received 6as dec&ared as part o$ the (ross income and the $act o$ 6ithho&din( is estab&ished b a cop o$ the statement du& issued b the pa or to the pa ee (=%' Form 5o. 1 ,404A) sho6in( the amount paid and the amount o$ ta1 6ithhe&d there$rom.C $. Section =$ of 1$&= )IRC7 ,inal A/Austment Return The term ;return,C in the case o$ domestic corporation &ike A##'A%5, re$ers to the $ina& ad7ustment return as mentioned in )ection "! o$ the Ta1 #ode o$ 1!.", as amended, 6hich part& reads ;<ver corporation &iab&e to ta1 under )ection 24 sha&& $i&e a $ina& ad7ustment return coverin( the tota& ta1ab&e income $or the precedin( ca&endar or $isca& ear. %$ the sum o$ the :uarter& ta1 pa ments made durin( the said ta1ab&e ear is not e:ua& to the tota& ta1 due on the entire ta1ab&e income o$ that ear the corporation sha&& either: (a) +a the e1cess ta1 sti&& due8 or (b) =e re$unded the e1cess amount paid, as the case ma be.C 1+. )ee/ to file a return *efore a claim for refun/ There is the need to $i&e a return $irst be$ore a c&aim $or re$und can prosper inasmuch as the #ommissioner b his o6n ru&es and re(u&ations mandates that the corporate ta1pa er optin( to ask $or a re$und must sho6 in its $ina& ad7ustment return the income it received $rom a&& sources and the amount o$ 6ithho&din( ta1es remitted b its 6ithho&din( a(ents to the =ureau o$ %nterna& 'evenue. 11. Reckonin< /ate for t:o"year rescri tive erio/7 CIR vs. Asia Australia 09 ress !t/. %n the )upreme #ourt 'eso&ution dated 1/ Apri& 1!.! in the case o$ #ommissioner o$ %nterna& 'evenue v. Asia Austra&ia <1press, ?td. (>.'. 5o. .-!-"), the )upreme #ourt ru&ed that the t6o4 ear prescriptive period 6ithin 6hich to c&aim a re$und commences to run, at the ear&iest, on the date o$ the $i&in( o$ the ad7usted $ina& ta1 return. @ence, the corporation had unti& Apri& 1-, 1!.4 6ithin 6hich to $i&e its c&aim $or re$und. 1#. Rationale in com utin< t;e #"year rescri tive erio/ The rationa&e in computin( the t6o4 ear prescriptive period 6ith respect to the corporation9s c&aim $or re$und $rom the time it $i&ed its $ina& ad7ustment return is the $act that it 6as on& then that the corporation cou&d ascertain 6hether it made pro$its or incurred &osses in its business operations. The ;date o$ pa mentC, there$ore, 6as 6hen its ta1 &iabi&it , i$ an , $e&& due upon its $i&in( o$ its $ina& ad7ustment return. [15] Jo el (8;ils.) Inc. vs. Collector of Internal Revenue (GR !"1+''+( 1$ Se tem*er 1$=1) <n =anc, +aredes (J): ! concur, 1 took no part. ,acts- Poppe& (+hi&ippines) %nc., is a domestic corporation o$ American capita& du& or(aniDed and e1istin( b virtue o$ the +hi&ippine &a6s. Durin( the ear 1!42 to the ear& part o$ 1!4-, the #ompan sustained &osses arisin( $rom the occupation o$ the +hi&ippines b the Japanese *i&itar $orces $rom 1!41 to the batt&e o$ &iberation in 1!4-. 3n 2, *arch 1!42, the A.). #on(ress passed +ub&ic ?a6 -/" (Bar Dama(e %nsurance Act) to cover insurance o$ a&& properties in the +hi&ippines 6hich mi(ht be dama(ed, destro ed or &ost due to the operations o$ 6ar. The #ompan , re& in( on the provisions o$ this &e(is&ation, entered in its books as ;accounts receivab&eC $rom the A.). >overnment the entire va&ue o$ its properties dama(ed, destro ed and &ost durin( Bor&d Bar %%. 3n 0/ Apri& 1!4", the A.). #on(ress enacted +ub&ic ?a6 0,/ (+hi&ippine 'ehabi&itation Act o$ 1!4"), 6hich provided that the +hi&ippine Bar Dama(e #ommission supersedes the Bar Dama(e #ommission. [8rior Case- GR !"=4+1] 3n 1- Januar 1!4,, the A.).4+hi&ippine Bar Dama(e #ommission, the a(enc
3a9ation !a: II( #++' ( #5 )
entrusted 6ith the en$orcement o$ said +ub&ic ?a6 0,/, issued a notice to the e$$ect that 2- Februar 1!4,, 6as the date a(reed upon as the initia& date $or the issuance o$ $orms $or the c&aimants o$ 6ar dama(es and the c&aims cou&d not be $i&ed unti& a$ter 1 *arch 1!4,. %n 1!4,, the #ompan came to kno6 that its &osses e:uiva&ent to 2-2 or +2-",/-4... cou&d not be recovered, $or 6hich reason #ompan cou&d not c&aim deduction $or said &osses in its 1!4- and 1!4" income ta1 returns. #ompan , there$ore, in its book o$ accounts $or the ear 1!4,, 6rote o$$ as ;bad debtsC, the said amount o$ +2-",/-4.... 3n " June 1!4!, the #o&&ector o$ %nterna& 'evenue, assessed a(ainst the #ompan 9s income ta1 $or 1!4,, the sum o$ +04,"0".21, correspondin( to the amount o$ +2-",/-4... as 6ar &osses sustained and ascertained to be unrecoverab&e in 1!4". 3n 2! June 1!4!, the #ompan paid under protest 6ith the =%' the amount o$ +04,"0".21 as a&&e(ed de$icienc income ta1 due, based on the disa&&o6ed deduction o$ +2-",/-4.... The #ompan repeated& sou(ht $rom the #o&&ector a reconsideration o$ the assessment and the re$und o$ the amount o$ +04,"0".21 &ater reduced to +0/,,2".21, on the (round that said assessment 6as i&&e(a&. The then )ecretar o$ Finance, +io +edrosa, on 11 )eptember 1!-1, sustained #ompan 9s stand and that o$ other ta1pa ers simi&ar& situated, settin( ru&es to be $o&&o6ed. The #o&&ector issued >enera& #ircu&ar G4120 addressed to a&& %nterna& 'evenue o$$icers and income ta1 e1aminers to app& the ru&es in the investi(ation o$ income ta1 returns invo&vin( 6ar dama(e &osses. 3n 21 )eptember 1!-1, the #ompan reiterated its demand $or the re$und o$ the amount o$ +0/,,2".-0. The #ompan , on 2. Ju& 1!-0, received a communication den in( the re$und o$ the amount, on the (round that the ru&in( o$ Finance )ecretar +edrosa had a&read been revoked b his successor, )ecretar o$ Finance Aure&io *ontino&a. 3n 2, Au(ust 1!-0, the #ompan $i&ed a petition $or revie6 6ith the then =oard o$ Ta1 Appea&s (=TA #ase 1-,), pra in( that the #o&&ector be ordered to re$und to the #ompan the sum o$ +0/,,2".-0, to 6hich on )eptember 1!-0 the #o&&ector ans6ered, pra in( $or the dismissa& o$ the case. The case 6as submitted $or decision a$ter the parties had $i&ed their respective memoranda. 5ot6ithstandin( the &apse o$ "/ da s $rom the $i&in( o$ the petition $or revie6, the =oard o$ Ta1 Appea&s, had not rendered an decision. 3n 4 5ovember 1!-0, #ompan (ave notice o$ intention to $i&e an appea&, pursuant to section 21 o$ <1ecutive 3rder 4/14A. 3n 10 5ovember 1!-0, the #ompan received a cop o$ the decision o$ the =oard o$ Ta1 Appea&s dated 2" 3ctober 1!-0, con$irmin( the order o$ the #o&&ector, in den in( the re$und re:uested b the #ompan . A petition $or revie6 6as presented be$ore the )upreme #ourt (>' ?4-,/1). The )upreme #ourt, on 2! Apri& 1!-4, dismissed the #ompan 9s appea& in said case ;6ithout pre7udice, $o&&o6in( the decision in Aniversit o$ )to. Tomas vs. =oard o$ Ta1 Appea&s, >.'. 5o. ?4",/1C. [8resent Case- GR 1+''+] 3n 1. *a 1!-4, #ompan $i&ed a comp&aint 6ith the *ani&a #ourt o$ First %nstance (#ivi& #ase 22.!0), pra in( that the #o&&ector be ordered to re$und to the #ompan the sum o$ +0/,,2".-0. Apon motion o$ the )o&icitor >enera&, the *ani&a #F% remanded the case to the #ourt o$ Ta1 Appea&s, pursuant to section 22 o$ 'A 112-, in 6hich #ourt, on 14 December 1!--, the parties submitted a stipu&ation o$ $acts. 3n - *arch 1!-", the #ourt o$ Ta1 Appea&s rendered a decision, dec&arin( that it had no 7urisdiction over the dispute, on the (round that #ompan 9s cause o$ action to seek the re$und o$ +0/,,2".-0, had a&read prescribed under section 0/" o$ the 5ationa& %nterna& 'evenue #ode. The Ta1 #ourt a&so sustained the order o$ the #o&&ector, den in( the re$und o$ +0/,,2".-0, under section 0/ par. (d), sub4par. (2) and sec. 0/ par. (e) sub4par. (1), o$ the said revenue #ode. The #ompan appea&ed. The )upreme #ourt dismissed the appea&, 6ith costs. 1. Section 1+# of 8u*lic !a: 54+ )ection 1/2 o$ +ub&ic ?a6 0,/ states: ;+rovided $urther, that in case the a((re(ate amount o$ the c&aims 6hich 6ou&d be pa ab&e to an one c&aimant under the $ore(oin( provisions e1ceeds Q-//, the a((re(ate amount o$ the c&aims approved in $avor o$ such c&aimant sha&& be reduced b 2- per centum o$ the e1cess over Q-//.C #. Section 5+= )IRC
3a9ation !a: II( #++' ( #% )
)ection 0/" o$ the 5ationa& %nterna& 'evenue #ode provides that ;5o suit or proceedin( sha&& be maintained in an court $or the recover o$ an nationa& interna&4revenue ta1 herea$ter a&&e(ed to have been erroneous& or i&&e(a&& assessed or co&&ected, or o$ an pena&t c&aimed to have been co&&ected 6ithout authorit , or o$ an sum a&&e(ed to have been e1cessive or in an manner 6ron($u&& co&&ected, unti& a c&aim $or re$und or credit has been du& $i&ed 6ith the #o&&ector o$ %nterna& 'evenue8 but such suit or proceedin( ma be maintained, 6hether or not such ta1, pena&t , or sum has been paid under protest or duress. %n an case, no such suit or proceedin( sha&& be be(un a$ter the e1piration o$ t6o ears $rom the date o$ pa ment o$ the ta1 or pena&t .C 5. Section 5+= )IRC construe/7 Jiener Co. vs. >avi/ %n the case o$ Piener #o. ?td. vs. ). David, the #ourt dec&ared that ;To this end, and bearin( in mind that the ?e(is&ature is presumed to have understood the &an(ua(e it used to have acted 6ith $u&& idea o$ 6hat it 6anted to accomp&ish, it is $air and reasonab&e to sa , 6ithout doin( vio&ence to the conte1t o$ either o$ the t6o provisions, that b the $irst is meant simp& that the #o&&ector o$ %nterna& 'evenue sha&& be (iven an opportunit to consider his mistake, i$ mistake has been committed, be$ore he is sued but not, as the appe&&ant contends, that pendin( consideration o$ the c&aim, the period o$ the t6o ears provided in the &ast c&ause sha&& be deemed interrupted. 5o6here and in no 6ise does the &a6 imp& that the #o&&ector o$ %nterna& 'evenue must act upon the c&aim, or that the ta1pa er sha&& not (o to court be$ore he is noti$ied o$ the #o&&ector9s action. @avin( $i&ed his c&aim and the #o&&ector o$ %nterna& 'evenue havin( had amp&e time to stud it, the c&aimant ma , indeed shou&d, 6ithout the statutor period o$ t6o ears proceed 6ith his suit 6ithout 6aitin( $or the #o&&ector9s decision. Be understand the $i&in( o$ the c&aim 6ith the #o&&ector o$ %nterna& 'evenue to be intended primari& as a notice or 6arnin( that, un&ess the ta1 or pena&t a&&e(ed to have been co&&ected erroneous& or i&&e(a&& is re$unded, court action 6i&& $o&&o6. +revious and time& notice is, in other cases and $or diverse sa&utar reasons, made a prere:uisite to the prosecution o$ contemp&ated proceedin(s 6ithout imposin( on the part to 6hom the notice 6as sent an ob&i(ation to make an move.C %. 8resent case- Com any /i/ not act :it;in # years of ayment( :aite/ /ecision ma/e after % years from ayment The t6o ears 6ithin 6hich to $i&e an action in court $or the recover o$ the ta1 in the present case e1pired on 2! June 1!-1. Bithin the said period, the #ompan $ai&ed to $i&e an action $or re$und either in the #ourt o$ First %nstance or the =oard o$ Ta1 Appea&s, immediate& a$ter the creation o$ the =oard under <1ecutive 3rder 4/14A promu&(ated on - Januar 1!-1. The #ompan 7ust 6aited $or the decision o$ the #o&&ector in its c&aim $or re$und, 6hich 6as handed do6n on 2. Ju& 1!-0, a$ter more than 4 ears $rom pa ment. %t is c&ear& ru&ed in the Piener case that the #ompan shou&d not have $o&ded his arms and 6ait $or the decision, kno6in(, that the ;time $or brin(in( an action $or a re$und o$ income ta1, $i1ed b statute, is not e1tended b the de&a o$ the #o&&ector o$ %nterna& 'evenue in (ivin( notice o$ the re7ection o$ such c&aim. There 6as an assessment8 the #ompan paid8 the #ompan asked $or re$und8 it 6as denied8 a motion $or reconsideration 6as presented and no reso&ution 6as $orthcomin( $rom the #o&&ector. A6are o$ the provisions o$ the &a6, it 6as the dut o$ the #ompan to have ur(ed the #o&&ector $or his decision and 6ake him up $rom his &ethar( or $i&e his action 6ithin the time prescribed b &a6. '. !ac;es7 State not esto e/ *y errors an/ mistakes of its a<ents The court shou&d not (ive a premium to a &iti(ant 6ho s&eeps on his ri(hts. The &a6 ers o$ the #ompan ma not come no6 and invoke estoppe& 6hen the have been in &aches themse&ves. The (overnment is never estopped b error or mistake on the part o$ its a(ents (+ineda, et a&. v. #F% and #o&&. o$ %nt. 'ev., -2 +hi&., ./0). =. Reservation of t;e Su reme Court in GR!"'4+1 construe/7 A lica*ility of t;e Jiener case The reservation made b the )upreme #ourt in the case ?4-,/1 shou&d not be interpreted as permittin( the #ompan to $i&e another case under a&& circumstances, but as the $acts and circumstances mi(ht 6arrant under the &a6. The ru&in( in the Piener case is sti&& a sound one, and shou&d be, as it is app&ied, as a
3a9ation !a: II( #++' ( #' )
matter o$ pub&ic po&ic , in the en$orcement o$ ta1 &a6s. [1%] Commissioner of Internal Revenue vs. Kictorias Billin< Co. (GR !"#%1+&( 5 @anuary 1$=&) <n =anc, =en(Don J+ (J): 1/ concur ,acts- 3n 20 December 1!-, Gictorias *i&&in( #o., %nc. $i&ed a c&aim $or the re$und o$ the sum o$ +12,4"4.-0 representin( -/2 o$ the speci$ic ta1 paid on the manu$actured oi&s and $ue&s used in its a(ricu&tura& operation $or the period $rom 1. June 1!-2 to 1. June 1!-,. The #ommissioner o$ %nterna& 'evenue (ranted re$und in the sum o$ +0,41-.1. representin( the ta1 paid $or the period $rom 1 Januar 1!-" to 1. June 1!-, but denied the c&aim in the amount o$ +2,.1,./. 6hich corresponds to the ta1 paid durin( the period $rom 1. June 1!-2 to 01 December 1!-- $or the reason that the same 6as $i&ed a$ter the 24 ear period provided $or in )ection 0/" o$ the Ta1 #ode had e&apsed. Gictorias *i&&in( #o., %nc. appea&ed to the #ourt o$ Ta1 Appea&s contendin( that )ection 0/" does not app& to its c&aim. The #ourt o$ Ta1 Appea&s took the ta1pa er9s vie6 and ordered the #%' to re$und Gictorias *i&&in( the amount o$ +2,.1,./. representin( the -/2 o$ the speci$ic ta1 paid on the oi&s used b it in a(ricu&ture durin( the period $rom 1. June 1!-2 to 01 December 1!--. From said 7ud(ment, the #ommissioner o$ %nterna& 'evenue has appea&ed. The )upreme #ourt reversed the decision appea&ed $rom, and dismissed the petition $or re$und on the (round o$ prescription8 6ithout costs. 1. Section 5+= of t;e 3a9 Co/e )ection 0/" ('ecover o$ ta1 erroneous& or i&&e(a&& co&&ected) provides that ;5o suit or proceedin( sha&& be maintained in an court $or the recover o$ an nationa& interna& revenue ta1 herea$ter a&&e(ed to have been erroneous& or i&&e(a&& assessed or co&&ected, or o$ an pena&t c&aimed to have been co&&ected 6ithout authorit , or o$ an sum a&&e(ed to have been e1cessive or in an manner 6ron($u&& co&&ected, unti& a c&aim $or re$und or credit has been du& $i&ed 6ith the #o&&ector o$ %nterna& 'evenue8 but such suit or proceedin( ma be maintained, 6hether or not such ta1, pena&t , or sum has been paid under protest or duress. %n an case, no such suit or proceedin( sha&& be be(un a$ter the e1piration o$ t6o ears $rom the date o$ pa ment o$ the ta1 or pena&t .C #. A lica*ility of Section 5+= for refun/7 CIR vs. Insular !um*er Co. )ections 0/" and 0/! o$ the 5ationa& %nterna& 'evenue #ode 6ere intended to (overn a&& kinds o$ re$unds o$ interna& revenue ta1es F those ta1es imposed and co&&ected pursuant to the 5ationa& %nterna& 'evenue #ode. Thus, the )upreme #ourt stated that ;this provisionC re$errin( to )ection 0/", ;6hich is mandator , is not sub7ect to :ua&i$ication, and, hence, it app&ies re(ard&ess o$ the conditions under 6hich pa ment has been made.C A c&aim $or re$und o$ a speci$ic ta1, an interna& revenue ta1 imposed in )ection 142 o$ the 5ationa& %nterna& 'evenue #ode, is be ond the scope o$ )ections 0/" and 0/! is to th6art the a$oresaid intention and spirit under& in( said provisions. 5. 8rescri tion of claim of refun/( Reckonin< erio/7 CIR vs. Insular !um*er Co. The intention is c&ear that re$unds o$ interna& revenue ta1es are (enera&& (overned b )ections 0/" and 0/! o$ the Ta1 #ode. )ince in those cases the ta1 sou(ht to be re$unded 6as co&&ected &e(a&& , the runnin( o$ the t6o4 ear prescriptive period provided $or in )ection 0/" shou&d commence, not $rom the date the ta1 6as paid, but $rom the happenin( o$ the supervenin( cause 6hich entit&ed the ta1pa er to a ta1 re$und. And the c&aim $or re$und shou&d be $i&ed 6ith the #ommissioner o$ %nterna& 'evenue, and the subse:uent appea& to the #ourt o$ Ta1 Appea&s must be instituted, 6ithin the said t6o4 ear period.
3a9ation !a: II( #++' ( #= )
%.
Rulin< in Buller 2 8;i s mo/ifie/7 CIR vs. Insular !um*er Co. %n $ine, 6hen the ta1 sou(ht to be re$unded is i&&e(a&& or erroneous& co&&ected, the period o$ prescription starts $rom the date the ta1 6as paid8 but 6hen the ta1 is &e(a&& co&&ected, the prescriptive period commences to run $rom the date o$ occurrence o$ the supervenin( cause 6hich (ave rise to the ri(ht o$ re$und. The ru&in( in *u&&er K +hipps is accordin(& modi$ied. '. Ri<;t of Kictorias Billin< to claim refun/ ;as rescri*e/ The c&aim $or re$und 6ith the =ureau o$ %nterna& 'evenue and the subse:uent appea& to the #ourt o$ Ta1 Appea&s must be $i&ed 6ithin the t6o4 ear period. %$, ho6ever, the #o&&ector takes time in decidin( the c&aim, and the period o$ t6o ears is about to end, the suit or proceedin( must be started in the #ourt o$ Ta1 Appea&s be$ore the end o$ the t6o4 ear period 6ithout a6aitin( the decision o$ the #o&&ector. %n the &i(ht o$ the ru&in( in #%' vs. %nsu&ar ?umber #o., the ri(ht o$ Gictorias *i&&in( #o,, %nc. to c&aim re$und o$ +2,.1,./. has prescribed. [1'] Commissioner of Internal Revenue vs. Conce cion (GR !"#5$1#( 1' Barc; 1$=&) <n =anc, Fernando (J): . concur, 1 on &eave ,acts- An assessment in the sum o$ +1,1.1.00 and +2,"1".1/ representin( estate and inheritance ta1es on -/ shares o$ stock o$ <d6ard J. 5e&& #ompan issued in the names o$ both spouses ;as 7oint tenants 6ith $u&& ri(hts o$ survivorship and not as tenants in commonC 6as made b the #ommissioner o$ %nterna& 'evenue on the (round that there 6as a transmission to the husband o$ one4ha&$ share thereo$ upon the death o$ the 6i$e, the above shares bein( con7u(a& propert . Jose #oncepcion, as anci&&ar administrator o$ the estate o$ *ar @. *itche&&4'oberts, and Jack F. *itche&&4'oberts, husband o$ the deceased, opposed and maintained that there 6as no transmission o$ propert since under <n(&ish &a6, o6nership o$ a&& propert ac:uired durin( the marria(e vests in the husband, and that the shares o$ stock 6ere issued to the spouses ;as 7oint tenants 6ith $u&& ri(hts o$ survivorship and not as tenants in common. 5ot bein( a(reeab&e to the theor entertained b the #ommissioner o$ %nterna& 'evenue, #oncepcion and *itche&&4'oberts, in #TA #ase 1"., appea&ed such a decision under 'A 112-. The #ourt o$ Ta1 Appea&s, ho6ever and on 2! Apri& 1!-,, dismissed such an appea& as the petition $or revie6 because it 6as $i&ed be ond the re(&ementar period o$ 0/ da s. That decision became $ina&. 3n 14 June 1!-,, #oncepcion and *itche&&4'oberts paid the ta1es in :uestion amountin( to +1,1.1.00 (as estate ta1) and +2,"1".1/ (as inheritance ta1), inc&usive o$ de&in:uenc pena&ties, and at the same time $i&ed a c&aim $or the re$und o$ said amounts. Bithout 6aitin( $or the decision o$ the #ommissioner o$ %nterna& 'evenue on the c&aim $or re$und, #oncepcion and *itche&&4'oberts instituted an appea& 6ith the #ourt o$ Ta1 Appea&s on 11 June 1!-! in order to avoid the prescriptive period o$ t6o ears provided $or in )ection 0/" o$ the 'evenue #ode. The #ourt o$ Ta1 Appea&s ordered the #ommissioner o$ %nterna& 'evenue to re$und the inheritance and estate ta1es paid in the amount o$ +0,,!,.40. The #ommissioner $i&ed a petition $or revie6 6ith the )upreme #ourt. The )upreme #ourt reversed the decision o$ the #ourt o$ Ta1 Appea&s under revie68 6ith costs a(ainst #oncepcion and *itche&&4'oberts. 1. Reliance on !a 8aF y Buen KiaAe Ci<ar 2 Ci<arette ,actory mis lace/ The ver same da the decision in ?a +aD =uen Gia7e #i(ar K #i(arette Factor 6as a$$irmed, the opinion in 'epub&ic o$ the +hi&ippines v. ?opeD 6as handed do6n. The case o$ 'epub&ic vs. ?opeD 6as an appea& b the 'epub&ic $rom an order o$ the #F% =a(uio dismissin( its comp&aint $or co&&ection o$ a de$icienc income ta1 a(ainst ?opeD on the (round that the action had prescribed. A$ter notin( that prescription as a de$ense did not &ie, the )upreme #ourt statedthat another (round $or reversin( the dismissa&
3a9ation !a: II( #++' ( #4 )
o$ the comp&aint is that the proper remed o$ the ta1pa er a(ainst the assessment comp&ained o$ 6as to appea& the ru&in( o$ the #o&&ector to the #ourt o$ Ta1 Appea&s. #. 0ffects of finality of assessment7 Re u*lic vs. !im 3ian 3en< Sons 2 Co( Borales vs. Collector of Internal Revenue The ta1pa er9s $ai&ure to appea& to the #ourt o$ Ta1 Appea&s in due time made the assessment in :uestion $ina&, e1ecutor and demandab&e. A subse:uent action to en$orce the de$icienc assessment 6as a&read barred $rom disputin( the correctness o$ the assessment or invokin( an de$ense that 6ou&d reopen the :uestion o$ his ta1 &iabi&it on the merits. Thus, once the matter has reached the sta(e o$ $ina&it in vie6 o$ the $ai&ure to appea&, it cou&d no &on(er be reopened throu(h the e1pedient o$ an appea& $rom the denia& o$ the ta1pa er9s re:uest $or cance&&ation o$ the 6arrant o$ distraint and &ev . 5. 8roce/ure in Section 5+= )IRC not availa*le to revive ri<;t to contest vali/ity of assessment :;en a eal not taken %n the same 6a that the e1pedient o$ an appea& $rom a denia& o$ a ta1 re:uest $or cance&&ation o$ 6arrant o$ distraint and &ev cannot be uti&iDed $or the purpose o$ testin( the &e(a&it o$ an assessment, 6hich had become conc&usive and bindin( on the ta1pa er, there bein( no appea&, the procedure set $orth in )ection 0/" o$ the 5ationa& %nterna& 'evenue #ode is not avai&ab&e to revive the ri(ht to contest the va&idit o$ an assessment once the same had been irretrievab& &ost not on& b the $ai&ure to appea& but &ike6ise b the &apse o$ the re(&ementar period 6ithin 6hich to appea& cou&d have been taken. %. 0state a/ministrator an/ /ecease/?s ;us*an/ lia*le for ta9es The &iabi&it o$ #oncepcion as an anci&&ar administrator o$ the estate o$ the deceased 6i$e and o$ *itche&&4'oberts as the husband $or the amount o$ +1,1.1.00 as estate ta1 and +2,"1",1/ as inheritance ta1 6as be ond :uestion. @avin( paid the same, the are c&ear& devoid o$ an &e(a& ri(ht to sue $or recover . [1=] 8;ili ine Bank of Communications vs. Commissioner of Internal Revenue (GR 11#+#%( #& @anuary 1$$$) )econd Division, Euisumbin( (J): 4 concur ,acts- The +hi&ippine =ank o$ #ommunications (+=#om), a commercia& bankin( corporation du& or(aniDed under +hi&ippine &a6s, $i&ed its :uarter& income ta1 returns $or the $irst and second :uarters o$ 1!.-, reported pro$its, and paid the tota& income ta1 o$ +-,/1",!-4.//. The ta1es due 6ere sett&ed b app& in( +=#om9s ta1 credit memos and accordin(& , the =ureau o$ %nterna& 'evenue (=%') issued Ta1 Debit *emo /,4"4.- and /,4,4.- $or +0,4/1,,/1.// and +1,"1-,2-0.//, respective& . )ubse:uent& , ho6ever, +=#om su$$ered &osses so that 6hen it $i&ed its Annua& %ncome Ta1 'eturns $or the ear4ended 01 December 1!.-, it dec&ared a net &oss o$ +2-,01,,22..//, thereb sho6in( no income ta1 &iabi&it . For the succeedin( ear, endin( 01 December 01, 1!.", +=#om &ike6ise reported a net &oss o$ +14,12!,"/2.//, and thus dec&ared no ta1 pa ab&e $or the ear. =ut durin( these t6o ears, +=#om earned renta& income $rom &eased properties. The &essees 6ithhe&d and remitted to the =%' 6ithho&din( creditab&e ta1es o$ +2.2,,!-.-/ in 1!.- and +204,/,,."! in 1!.". 3n , Au(ust 1!.,, +=#om re:uested the #ommissioner o$ %nterna& 'evenue, amon( others, $or a ta1 credit o$ +-,/1",!-4.// representin( the overpa ment o$ ta1es in the $irst and second :uarters o$ 1!.-. Therea$ter, on 2- Ju& 1!.., +=#om $i&ed a c&aim $or re$und o$ creditab&e ta1es 6ithhe&d b their &essees $rom propert renta&s in 1!.- $or +2.2,,!-.-/ and in 1!." $or +204,/,,."!. +endin( the investi(ation o$ the #ommissioner o$ %nterna& 'evenue, +=#om instituted a +etition $or 'evie6 on 1. 5ovember 1!.. be$ore the #ourt o$ Ta1 Appea&s (#TA). 3n 2/ *a 1!!0, the #TA dismissed the petition $or &ack o$ merit8 and thus denied +=#om9s c&aim $or re$undMta1 credit o$ overpaid income ta1 $or 1!.- in the amount o$ +-,2!!,,4!.!- $or havin( been $i&ed be ond the re(&ementar period, and &ike6ise
3a9ation !a: II( #++' ( #& )
denied the 1!." c&aim $or re$und amountin( to +204,/,,."! since +=#om has opted and automatica&& credited the same to the succeedin( ear. 3n 22 June 1!!0, +=#om $i&ed a *otion $or 'econsideration o$ the #TA9s decision but the same 6as denied due course $or &ack o$ merit. +=#om $i&ed a petition $or revie6 o$ #TA decision and reso&ution 6ith the #ourt o$ Appea&s. 3n 22 )eptember 1!!0, the #ourt o$ Appea&s a$$irmed in toto the #TA9s reso&ution dated 2/ Ju& 1!!0. @ence the petition $or revie6 6ith the )upreme #ourt. The )upreme #ourt denied the petition and a$$irmed the decision o$ the #ourt o$ Appea&s appea&ed $rom, 6ith costs a(ainst +=#om. 1. 8ur ose of ta9es( /ue rocess of la:( an/ claims for refun/ or ta9 cre/it =asic is the princip&e that ;ta1es are the &i$eb&ood o$ the nation.C The primar purpose is to (enerate $unds $or the )tate to $inance the needs o$ the citiDenr and to advance the common 6ea&. Due process o$ &a6 under the #onstitution does not re:uire 7udicia& proceedin(s in ta1 cases. This must necessari& be so because it is upon ta1ation that the (overnment chie$& re&ies to obtain the means to carr on its operations and it is o$ utmost importance that the modes adopted to en$orce the co&&ection o$ ta1es &evied shou&d be summar and inter$ered 6ith as &itt&e as possib&e. From the same perspective, c&aims $or re$und or ta1 credit shou&d be e1ercised 6ithin the time $i1ed b &a6 because the =%' bein( an administrative bod en$orced to co&&ect ta1es, its $unctions shou&d not be undu& de&a ed or hampered b incidenta& matters. #. Section #5+ )IRC (1$44) )ection 20/ o$ the 5ationa& %nterna& 'evenue #ode (5%'#) o$ 1!,, (no6 )ec. 22!, 5%'# o$ 1!!,) provides $or the prescriptive period $or $i&in( a court proceedin( $or the recover o$ ta1 erroneous& or i&&e(a&& co&&ected. )ection 20/ ('ecover o$ ta1 erroneous& or i&&e(a&& co&&ected) provides that ;no suit or proceedin( sha&& be maintained in an court $or the recover o$ an nationa& interna& revenue ta1 herea$ter a&&e(ed to have been erroneous& or i&&e(a&& assessed or co&&ected, or o$ an pena&t c&aimed to have been co&&ected 6ithout authorit , or o$ an sum a&&e(ed to have been e1cessive or in an manner 6ron($u&& co&&ected, unti& a c&aim $or re$und or credit has been du& $i&ed 6ith the #ommissioner8 but such suit or proceedin( ma be maintained, 6hether or not such ta1, pena&t , or sum has been paid under protest or duress. %n an case, no such suit or proceedin( sha&& be be(un a$ter the e1piration o$ t6o ears $rom the date o$ pa ment o$ the ta1 or pena&t re(ard&ess o$ an supervenin( cause that ma arise a$ter pa ment8 +rovided ho6ever, That the #ommissioner ma , even 6ithout a 6ritten c&aim there$or, re$und or credit an ta1, 6here on the $ace o$ the return upon 6hich pa ment 6as made, such pa ment appears c&ear& to have been erroneous& paid.C 5. Reckonin< erio/ for claim of refun/ or cre/it The ru&e states that the ta1pa er ma $i&e a c&aim $or re$und or credit 6ith the #ommissioner o$ %nterna& 'evenue, 6ithin t6o (2) ears a$ter pa ment o$ ta1, be$ore an suit in #TA is commenced. The t6o4 ear prescriptive period provided, shou&d be computed $rom the time o$ $i&in( the Ad7ustment 'eturn and $ina& pa ment o$ the ta1 $or the ear. %. A lication of Section #5+ of 1$44 )IRC7 CIR vs. 8;il"Am !ife Insurance Co. an/ CIR vs. 3BH Sales %n #ommissioner o$ %nterna& 'evenue vs. +hi&ippine American ?i$e %nsurance #o., the )upreme #ourt e1p&ained the app&ication o$ )ection 20/ o$ 1!,, 5%'#. Therein, the #ourt stated that the prescriptive period o$ t6o ears shou&d commence to run on& $rom the time that the re$und is ascertained, 6hich can on& be determined a$ter a $ina& ad7ustment return is accomp&ished. As ear&ier said in the T*O )a&es case, )ections "., 1" "!, 1, and ,/ 1. on Euarter& #orporate %ncome Ta1 +a ment and )ection 021 shou&d be considered in con7unction 6ith it. '. RBC 4"&' invali/ Bhen the Actin( #ommissioner o$ %nterna& 'evenue issued '*# ,4.-, chan(in( the prescriptive
3a9ation !a: II( #++' ( #$ )
period o$ t6o ears to ten ears on c&aims o$ e1cess :uarter& income ta1 pa ments, such circu&ar created a c&ear inconsistenc 6ith the provision o$ )ection 20/ o$ 1!,, 5%'#. %n so doin(, the =%' did not simp& interpret the &a68 rather it &e(is&ated (uide&ines contrar to the statute passed b #on(ress. =. )ature of Revenue memoran/um"circulars %t bears repeatin( that 'evenue memorandum4circu&ars are considered administrative ru&in(s (in the sense o$ more speci$ic and &ess (enera& interpretations o$ ta1 &a6s) 6hich are issued $rom time to time b the #ommissioner o$ %nterna& 'evenue. 4. Inter retation *y e9ecutive officers entitle/ to <reat res ect *ut not conclusive %t is 6ide& accepted that the interpretation p&aced upon a statute b the e1ecutive o$$icers, 6hose dut is to en$orce it, is entit&ed to (reat respect b the courts. 5everthe&ess, such interpretation is not conc&usive and 6i&& be i(nored i$ 7udicia&& $ound to be erroneous. Thus, courts 6i&& not countenance administrative issuances that override, instead o$ remainin( consistent and in harmon 6ith, the &a6 the seek to app& and imp&ement. As he&d in the case o$ +eop&e vs. ?im, the ru&es and re(u&ations issued b administrative o$$icia&s to imp&ement a &a6 cannot (o be ond the terms and provisions o$ the &atter. &. Bemoran/um"circular /oes not s;iel/ ta9 ayer from Au/icial action Fundamenta& is the ru&e that the )tate cannot be put in estoppe& b the mistakes or errors o$ its o$$icia&s or a(ents. Artic&e . o$ the #ivi& #ode reco(niDes 7udicia& decisions, app& in( or interpretin( statutes as part o$ the &e(a& s stem o$ the countr . =ut administrative decisions do not en7o that &eve& o$ reco(nition. A memorandum4circu&ar o$ a bureau head cou&d not operate to vest a ta1pa er 6ith a shie&d a(ainst 7udicia& action. For there are no vested ri(hts to speak o$ respectin( a 6ron( construction o$ the &a6 b the administrative o$$icia&s and such 6ron( interpretation cou&d not p&ace the >overnment in estoppe& to correct or overru&e the same. The non4retroactivit o$ ru&in(s b the #ommissioner o$ %nterna& 'evenue is not app&icab&e because the nu&&it o$ '*# ,4.- 6as dec&ared b the courts and not b the #ommissioner o$ %nterna& 'evenue. ?ast& , it must be noted that a c&aim $or re$und is in the nature o$ a c&aim $or e1emption and shou&d be construed in strictissimi 7uris a(ainst the ta1pa er. $. Section =$ of t;e 1$44 )IRC7 Availment of t;e e9clusive relief of refun/ or automatic ta9 cre/it )ection "! o$ the 1!,, 5%'# (no6 )ection ," o$ the 1!!, 5%'#) provides that an e1cess o$ the tota& :uarter& pa ments over the actua& income ta1 computed in the ad7ustment or $ina& corporate income ta1 return, sha&& either (a) be re$unded to the corporation, or (b) ma be credited a(ainst the estimated :uarter& income ta1 &iabi&ities $or the :uarters o$ the succeedin( ta1ab&e ear. The corporation must si(ni$ in its annua& corporate ad7ustment return (b markin( the option bo1 provided in the =%' $orm) its intention, 6hether to re:uest $or a re$und or c&aim $or an automatic ta1 credit $or the succeedin( ta1ab&e ear. To ease the administration o$ ta1 co&&ection, these remedies are in the a&ternative, and the choice o$ one prec&udes the other. 1+. 8BCom o te/ to a ly for automatic ta9 cre/it +=#om opted to app& $or automatic ta1 credit. This 6as the basis used (vis4a4vis the $act that the 1!., annua& corporate ta1 return 6as not o$$ered b the petitioner as evidence) b the #TA in conc&udin( that +=#om had indeed avai&ed o$ and app&ied the automatic ta1 credit to the succeedin( ear, hence it can no &on(er ask $or re$und, as to HsicI the t6o remedies o$ re$und and ta1 credit are a&ternative. )ince +=#om opted $or an automatic ta1 credit in accordance 6ith )ection "! o$ the 1!,, 5%'#, as speci$ied in its 1!." Fina& Ad7usted %ncome Ta1 'eturn, such a $indin( o$ $act must be respected b the )upreme #ourt. This, especia&& , in &i(ht that the 1!., annua& corporate ta1 return o$ +=#om 6as not o$$ered as evidence to controvert said $act. [14]
3a9ation !a: II( #++' ( 5+ )
.n<a* vs. Cusi @r. (GR !"%1$1$"#'( 5+ Bay 1$&+) )econd Division, #oncepcion Jr. (J): 4 concur ,acts- %n Ju& 1!,4, =%' <1aminer =en >arcia e1amined the income ta1 returns $i&ed b Euirico +. An(ab $or the ca&endar ear endin( 01 December 1!,0. %n the course o$ his e1amination, the e1aminer discovered that An(ab $ai&ed to report his income derived $rom sa&es o$ banana sap&in(s. As a resu&t, the =%' District 'evenue 3$$icer at Davao #it sent An(ab a ;5otice o$ Ta1pa erC in$ormin( him that there is due $rom him the amount o$ +1/4,!./..1, representin( income, business ta1 and $orest char(es $or the ear 1!,0 and invitin( An(ab to an in$orma& con$erence 6here An(ab, du& assisted b counse&, ma present his ob7ections to the $indin(s o$ the =%' <1aminer. Apon receipt o$ the notice, An(ab 6rote the =%' District 'evenue 3$$icer protestin( the assessment, c&aimin( that he 6as on& a dea&er or a(ent on commission basis in the banana sap&in( business and that his income, as reported in his income ta1 returns $or the said ear, 6as accurate& stated. The e1aminer, ho6ever, 6as $u&& convinced that An(ab had $i&ed a $raudu&ent income ta1 return so that he submitted a ;Fraud 'e$erra& 'eport,C to the Ta1 Fraud Anit o$ the =%'. A$ter e1aminin( the records o$ the case, the )pecia& %nvesti(ation Division o$ the =%' $ound su$$icient proo$ that An(ab is (ui&t o$ ta1 evasion $or the ta1ab&e ear 1!,0 and recommended his prosecution. %n a second indorsement to the #hie$ o$ the +rosecution Division, dated 12 December 1!,4, the #ommissioner approved An(ab9s prosecution. The )tate +rosecutor Jesus Acebes, 6ho had been desi(nated to assist a&& +rovincia& and #it Fisca&s throu(hout the +hi&ippines in the investi(ation and prosecution, i$ the evidence 6arrants, o$ a&& vio&ations o$ the 5%'#, as amended, and other re&ated &a6s, in Administrative 3rder 11" dated - December 1!,4, and to 6hom the case 6as assi(ned, conducted a pre&iminar investi(ation o$ the case, and $indin( probab&e cause, $i&ed " in$ormations a(ainst An(ab 6ith the #F% Davao #it . 3n 1" )eptember 1!,-, An(ab $i&ed a motion to :uash the in$ormations upon the (rounds that: (1) the in$ormations are nu&& and void $or 6ant o$ authorit on the part o$ the )tate +rosecutor to initiate and prosecute the said cases8 and (2) the tria& court has no 7urisdiction to take co(niDance o$ the above4entit&ed cases in vie6 o$ his pendin( protest a(ainst the assessment made b the =%' <1aminer. @o6ever, the tria& court denied the motion on 22 3ctober 1!,-. An(ab $i&ed a petition $or certiorari and prohibition 6ith pre&iminar in7unction and restrainin( order to annu& and set aside the in$ormations $i&ed in #rimina& #ases 1!"/ to 1!"- o$ the #F% Davao. The )upreme #ourt dismissed the petition, and set aside the temporar restrainin( order issued8 6ith costs a(ainst An(ab. 1. Rulin< in 0strella vs. 6ren/ain ;Ander )ections 1",! and 1"." o$ the 'evised Administrative #ode, in an instance 6here a provincia& or cit $isca& $ai&s, re$uses or is unab&e, $or an reason, to investi(ate or prosecute a case and, in the opinion o$ the )ecretar o$ Justice it is advisab&e in the pub&ic interest to take a di$$erent course o$ action, the )ecretar o$ Justice ma either appoint as actin( provincia& or cit $isca&, to hand&e the investi(ation or prosecution e1c&usive& and on& o$ such case, an practicin( attorne or some competent o$$icer o$ the Department o$ Justice or o$$ice o$ an cit or provincia& $isca&, 6ith comp&ete authorit to act therein in a&& respects as i$ he 6ere the provincia& or cit $isca& himse&$, or appoint an &a6 er in the (overnment service, temporari& to assist such cit o$ provincia& $isca& in the dischar(e o$ his duties, 6ith the same comp&ete authorit to act in dependent& o$ and $or such cit or provincia& $isca&, provided that no such appointment ma be made 6ithout $irst hearin( the $isca& concerned and never a$ter the correspondin( in$ormation has a&read been $i&ed 6ith the court b the correspondin( cit or provincia& $isca& 6ithout the con$ormit o$ the &atter, e1cept 6hen it can be patent& sho6n to the court havin( co(niDance o$ the case that said $isca& is intent on pre7udicin( the interests o$ 7ustice. The same sphere o$ authorit is true 6ith the prosecutor directed and authoriDed under )ection 0 o$ 'epub&ic Act 0,.0, as amended andMor inserted b 'epub&ic Act -1.4. ; #. Rule esta*lis;e/ in 0strella vs. 6ren/ain not violate/ :;en State 8rosecutor con/ucte/ investi<ation in t;e = cases a<ainst .n<a*
3a9ation !a: II( #++' ( 51 )
The ru&e estab&ished in <stre&&a vs. 3rendain had not been vio&ated. The )tate +rosecutor, a&thou(h be&ievin( that he can proceed independent& o$ the #it Fisca& in the investi(ation and prosecution o$ these cases, $irst sou(ht permission $rom the #it Fisca& o$ Davao #it be$ore he started the pre&iminar investi(ation o$ these cases, and the #it Fisca&, a$ter bein( sho6n Administrative 3rder 11", dated December 1!,4, desi(natin( the said )tate +rosecutor to assist a&& +rovincia& and #it $isca&s throu(hout the +hi&ippines in the investi(ation and prosecution o$ a&& vio&ations o$ the 5%'#, as amended, and other re&ated &a6s, (racious& a&&o6ed the )tate +rosecutor to conduct the investi(ation o$ said cases, and in $act, said investi(ation 6as conducted in the o$$ice o$ the #it Fisca&. 5. ,ilin< of informations not remature Bhat is invo&ved herein is not the co&&ection o$ ta1es 6here the assessment o$ the #ommissioner o$ %nterna& 'evenue ma be revie6ed b the #ourt o$ Ta1 Appea&s, but a crimina& prosecution $or vio&ations o$ the 5%'# 6hich is 6ithin the co(niDance o$ courts o$ $irst instance. Bhi&e there can be no civi& action to en$orce co&&ection be$ore the assessment procedures provided in the #ode have been $o&&o6ed, there is no re:uirement $or the precise computation and assessment o$ the ta1 be$ore there can be a crimina& prosecution under the #ode. %. Assessment of /eficiency ta9 not necessarily *efore criminal rosecution An assessment o$ the de$icienc ta1 due is not necessar be$ore the ta1pa er can be prosecuted crimina&& $or the char(es pre$erred. The crime is comp&ete 6hen the vio&ator has, as in this case, kno6in(& and 6i&&$u&& $i&ed $raudu&ent returns 6ith intent to evade and de$eat a part or a&& o$ the ta1. An assessment o$ a de$icienc is not necessar to a crimina& prosecution $or 6i&&$u& attempt to de$eat and evade the income ta1. A crime is comp&ete 6hen the vio&ator has kno6in(& and 6i&&$u&& $i&ed a $raudu&ent return 6ith intent to evade and de$eat the ta1. The perpetration o$ the crime is (rounded upon kno6&ed(e on the part o$ the ta1pa er that he has made an inaccurate return, and the (overnment9s $ai&ure to discover the error and prompt& to assess has no connections 6ith the commission o$ the crime. '. 8etition for reconsi/eration /oes not sus en/ rescri tive erio/ of a criminal action for violation of la: A petition $or reconsideration o$ an assessment ma a$$ect the suspension o$ the prescriptive period $or the co&&ection o$ ta1es, but not the prescriptive period o$ a crimina& action $or vio&ation o$ &a6. The protest o$ the ta1pa er a(ainst the assessment o$ the District 'evenue 3$$icer cannot stop his prosecution $or vio&ation o$ the 5%'#. [1&] Commissioner of Internal Revenue vs. Court of A First Division, Papunan (J): 1 concur eals (GR 11$5##( % @une 1$$=)
,acts- 3n 1 June 1!!0, the +resident issued a *emorandum creatin( a Task Force to investi(ate the ta1 &iabi&ities o$ manu$acturers en(a(ed in ta1 evasion scheme, such as se&&in( products throu(h dumm marketin( corporations to avoid pa ment o$ correct interna& revenue ta1, to co&&ect $rom them an ta1 &iabi&ities discovered $rom such investi(ation, and to $i&e the necessar crimina& actions a(ainst those 6ho ma have vio&ated the ta1 code. The task $orce 6as composed o$ the #ommissioner o$ %nterna& 'evenue as #hairman, a representative o$ the Department o$ Justice and a representative o$ the <1ecutive )ecretar . 3n 1 Ju& 1!!0, the #ommissioner o$ %nterna& 'evenue issued a 'evenue *emorandum #ircu&ar 0,4!0 rec&assi$ in( best se&&in( ci(arettes bearin( the brands ;@ope,C ;*ore,C and ;#hampionC as ci(arettes o$ $orei(n brands sub7ect to a hi(her rate o$ ta1. 3n 0 Au(ust 1!!0, the Fortune Tobacco #orporation (Fortune) :uestioned the va&idit o$ the rec&assi$ication o$ said brands o$ ci(arettes as vio&ative o$ its ri(ht to due process and e:ua& protection o$ &a6. +arenthetica&& , on . )eptember 1!!0, the #ourt o$ Ta1 Appea&s b reso&ution ru&ed that the rec&assi$ication made b the #ommissioner ;is o$ doubt$u& &e(a&it C and en7oined its en$orcement.
3a9ation !a: II( #++' ( 5# )
%n a &etter o$ 10 Au(ust 1!!0 6hich 6as received b Fortune on 24 Au(ust 1!!0, the #ommissioner assessed a(ainst Fortune the tota& amount o$ +,,".-,!42,221."" representin( de$icienc income, ad va&orem and va&ue4 added ta1 $or the ear 1!!2 6ith the re:uest that the said amount be paid 6ithin 0/ da s upon receipt thereo$. Fortune on 1, )eptember 1!!0 moved $or reconsideration o$ the assessments. 3n , )eptember 1!!0, the #ommissioner $i&ed a comp&aint 6ith the Department o$ Justice a(ainst Fortune, its corporate o$$icers, ! other corporations and their respective corporate o$$icers $or a&&e(ed $raudu&ent ta1 evasion $or supposed non4 pa ment b Fortune o$ the correct amount o$ income ta1, ad va&orem ta1 and va&ue4added ta1 $or the ear 1!!2. The comp&aint (%) !04-/.), 6as re$erred to the Department o$ Justice Task Force on revenue cases 6hich $ound su$$icient basis to $urther investi(ate the a&&e(ations that Fortune, throu(h $raudu&ent means, evaded pa ment o$ income ta1, ad va&orem ta1, and va&ue4added ta1 $or the ear 1!!2 thus, deprivin( the (overnment o$ revenues in the amount o$ +,.- =i&&ion. 3n . )eptember 1!!0, the Department o$ Justice Task Force issued a subpoena directin( private respondents to submit their counter4a$$idavits not &ater than 2/ )eptember 1!!0. %nstead o$ $i&in( their counter4a$$idavits, Fortune, et. a&. on 1- 3ctober 1!!0 $i&ed a Geri$ied *otion to Dismiss8 A&ternative& *otion to )uspend. The pane& o$ prosecutors denied the motion to dismiss and treated the same as Fortune, et. a&.9s counter4 a$$idavits. 3n 2/ 3ctober 1!!0, Fortune, et. a&. $i&ed a motion $or reconsideration o$ the order. 3n 21 3ctober 1!!0, Fortune, et. a&. $i&ed a motion to re:uire the submission b the =%' o$ certain documents in $urther support o$ their Geri$ied *otion to Dismiss. 3n 2" 3ctober 1!!0, Fortune, et. a&. moved $or the inhibition o$ the )tate +rosecutors assi(ned to the case $or a&&e(ed &ack o$ impartia&it . Fortune, et. a&. a&so sou(ht the production o$ the ;Dai& *anu$acturer9s )6orn )tatementsC submitted b certain ci(arette companies simi&ar& situated as Fortune but 6ere not proceeded a(ainst, on the premise that Fortune and its o$$icers 6ere bein( sin(&ed out $or crimina& prosecution 6hich is discriminator and in vio&ation o$ the e:ua& protection c&ause o$ the #onstitution. 3n 2/ December 1!!0, the pane& o$ prosecutors issued an 3mnibus 3rder den in( Fortune, et. a&.9s motion $or reconsideration, motion $or suspension o$ investi(ation, motion to inhibit the )tate +rosecutors, and motion to re:uire submission b the =%' o$ certain documents to $urther support Fortune, et. a&.9s motion to dismiss. 3n 4 Januar 1!!4, Fortune, et. a&. $i&ed a petition $or certiorari and prohibition 6ith pra er $or pre&iminar in7unction 6ith the 'T# EueDon #it (=ranch .., #ase E4!441.,!/), pra in( that the comp&aint o$ the #ommissioner and the orders o$ the prosecutors be dismissed or set aside, a&ternative& , the proceedin(s on the pre&iminar investi(ation be suspended pendin( $ina& determination b the #ommissioner o$ Fortune9s motion $or reconsiderationMreinvesti(ation o$ the 10 Au(ust 1!!0 assessment o$ the ta1es due. 3n 1, Januar 1!!4, the #ommissioner, et. a&. $i&ed a motion to dismiss the petition. 3n 2- Januar 1!!4, the tria& court issued an order (rantin( the pra er $or the issuance o$ a pre&iminar in7unction. 3n 2" Januar 1!!4, Fortune, et. a&. $i&ed 6ith the tria& court a *otion to Admit )upp&ementa& +etition and sou(ht the issuance o$ a 6rit o$ pre&iminar in7unction to en7oin the )tate +rosecutors $rom continuin( 6ith the pre&iminar investi(ation $i&ed b them a(ainst Fortune et. a&. 6ith the EueDon #it +rosecutor9s 3$$ice $or a&&e(ed $raudu&ent ta1 evasion, committed b Fortune, et. a&. $or the ta1ab&e ear 1!!/. 3n 2. Januar 1!!4, Fortune, et. a&. $i&ed 6ith the tria& court a second supp&ementa& petition, a&so seekin( to sta the pre&iminar investi(ation in a third comp&aint $i&ed a(ainst Fortune et. a&. 6ith the D3J $or a&&e(ed $raudu&ent ta1 evasion $or the ta1ab&e ear 1!!1. 3n 01 Januar 1!!4, the &o6er court admitted the 2 supp&ementa& petitions and issued a temporar restrainin( order in %.). !041,!42 and %.). !04-.4. A&so, on the same da , the #ommissioner, et. a&. $i&ed an Ar(ent *otion $or %mmediate 'eso&ution o$ the #ommissioner, et. a&.9s motion to dismiss. 3n , Februar 1!!4, the tria& court issued an order den in( the #ommissioner, et. a&.9s motion to dismiss Fortune, et. a&9s petition seekin( to sta pre&iminar investi(ation in %.). !04-/.. 3n 14 Februar 1!!4, the tria& court issued an order (rantin( Fortune, et. a&.9s petition $or a supp&ementa& 6rit o$ pre&iminar in7unction, &ike6ise en7oinin( the pre&iminar investi(ation o$ the 2 other comp&aints $i&ed 6ith the EueDon #it +rosecutor9s 3$$ice and the D3J $or $raudu&ent ta1 evasion, %.). !041,!42 and %.). !04 -.4, $or a&&e(ed ta1 evasion $or the ta1ab&e ears 1!!/ and 1!!1, respective& . 3n , *arch 1!!4, the #ommissioner, et. a&. $i&ed a petition $or certiorari and prohibition 6ith pra er $or
3a9ation !a: II( #++' ( 55 )
pre&iminar in7unction be$ore the )upreme #ourt. @o6ever, the petition 6as re$erred to the #ourt o$ Appea&s $or disposition b virtue o$ its ori(ina& concurrent 7urisdiction over the petition. 3n 1! December 1!!4, the #ourt o$ Appea&s (#A4>' )+4 00-!!) rendered a decision den in( the petition. Their motion $or reconsideration havin( been denied b appe&&ate court on 20 Februar 1!!-, the #ommissioner, et. a&. $i&ed a petition $or revie6. The )upreme #ourt dismissed the petition. 1. Section 1#4 (*) )IRC )ection 12, (b) HDetermination o$ (ross se&&in( price o$ (oods sub7ect to ad va&orem ta1I provides that ;An&ess other6ise provided, the price, e1c&udin( the va&ue4 added ta1, at 6hich the (oods are so&d at 6ho&esa&e in the p&ace o$ production or throu(h their sa&es a(ents to the pub&ic sha&& constitute the (ross se&&in( price. %$ the manu$acturer a&so se&&s or a&&o6s such (oods to be so&d at 6ho&esa&e price in another estab&ishment o$ 6hich he is the o6ner or in the pro$its at 6hich he has an interest, the 6ho&esa&e price in such estab&ishment sha&& constitute the (ross se&&in( price. )hou&d such price be &ess than the costs o$ manu$acture p&us e1penses incurred unti& the (oods are $ina&& so&d, then a proportionate mar(in o$ pro$it, not &ess than 1/2 o$ such manu$acturin( costs and e1penses, sha&& be added to constitute the (ross se&&in( price. #. Section 1%# (c) )IRC )ection 142 (c) H#i(arettes packed in t6entiesI provides that ;There sha&& be &evied, assessed and co&&ected on ci(arettes packed in t6enties an ad va&orem ta1 at the rates prescribed be&o6 based on the manu$acturer9s re(istered 6ho&esa&e price.C 5. 8ro er *asis of a/ valorem ta9 Ander )ection 12,(b), the ad va&orem ta1 shou&d be based on the correct price e1c&udin( the va&ue4 added ta1, at 6hich (oods are so&d at 6ho&esa&e in the p&ace o$ production. Amon( the (oods sub7ect to ad va&orem ta1, the &a6 F speci$ica&& )ection 142(c) F re:uires that the correspondin( ta1 on ci(arettes sha&& be &evied, assessed and co&&ected at the rates based on the ;manu$acturer9s re(istered 6ho&esa&e price.C %. Su ervision of ci<arette com anies7 BIR an/ t;e )ational 3o*acco A/ministration The reason ;6h the 6ho&esa&e price need to be re(istered and the purpose o$ the re(istrationC is se&$4 evident, i.e. to ensure the pa ment o$ the correct ta1es b the manu$acturers o$ ci(arettes throu(h c&ose supervision, monitorin( and checkin( o$ the business operations o$ the ci(arette companies. 5o industr is as intense& supervised b the =%' and a&so b the 5ationa& Tobacco Administration (5TA). Thus, the purchase and use o$ ra6 materia&s are sub7ect to prior authoriDation and approva& b the 5TA. %mportations o$ bobbins or ci(arette paper, the manu$acture, sa&e, and uti&iDation o$ the same, are sub7ect to =%' supervision and approva&. '. Su ervision of ci<arette com anies7 8ro/uction For purposes o$ c&oser supervision b the =%' over the production o$ ci(arettes, 'evenue <n$orcement 3$$icers are detai&ed on a 244hour basis in the premises o$ the manu$acturer to secure production and remova& o$ $inished products. #omposite *obi&e Teams conduct counter4securit on the business operations as 6e&& as the per$ormance o$ the 'evenue <n$orcement 3$$icers detai&ed thereat. <ver trans$er o$ an ra6 materia& is not a&&o6ed un&ess, in addition to the re:uired permits, accompanied b 'evenue <n$orcement 3$$icer. =. Su ervision of ci<arette com anies7 ,ilin< of Banufacturer?s >eclaration For the purpose o$ determinin( the ;*anu$acturer9s 'e(istered Bho&esa&e +riceC a ci(arette manu$acturer is re:uired to $i&e a *anu$acturer9s Dec&aration (=%' Form 01./0) $or each brand o$ ci(arette manu$actured, statin(: a.) *ateria&s8 b) ?abor8 c) 3verhead8 d) Ta1 =urden and the Bho&esa&e +rice b #ase. The data submitted there6ith is veri$ied b the 'evenue 3$$icers and approved b the #ommission o$ %nterna& 'evenue. An chan(e in the manu$acturer9s re(istered 6ho&esa&e price o$ an brand cannot be e$$ected 6ithout submittin( the correspondin( )6orn *anu$acturer9s Dec&aration and veri$ied b the 'evenue 3$$icer
3a9ation !a: II( #++' ( 5% )
and approved b the #ommissioner on %nterna& 'evenue. The amount o$ ad va&orem ta1 pa ments to(ether 6ith the +a ment 3rder and #on$irmation 'eceipt 5os. must be indicated in the sa&es and de&iver invoices and to(ether 6ith the *anu$acturer9s )6orn Dec&arations on (a) the :uantit o$ ra6 materia&s used durin( the da 9s operations8 (b) the tota& :uantit produced accordin( to brand8 and (c) the correspondin( :uantit removed durin( the da , the correspondin( 6ho&esa&e price thereo$, and the GAT paid thereon must be presented to the correspondin( =%' representative $or authentication be$ore remova&. 4. Conclusion t;at ,ortune ma/e frau/ulent returns or :illfully attem te/ to eva/e ayment of ta9es /ue remature %$ ever step in the production o$ ci(arettes 6as c&ose& monitored and supervised b the =%' personne& speci$ica&& assi(ned to Fortune9s premises, and considerin( that the *anu$acturer9s )6orn Dec&arations on the data re:uired to be submitted b the manu$acturer 6ere scrutiniDed and veri$ied b the =%' and, $urther, since the manu$acturer9s 6ho&esa&e price 6as du& approved b the =%', then it is presumed that such re(istered 6ho&esa&e price is the same as, or appro1imates ;the price, e1c&udin( the va&ue4added ta1, at 6hich the (oods are so&d at 6ho&esa&e in the p&ace production,C other6ise, the =%' 6ou&d not have approved the re(istered 6ho&esa&e price o$ the (oods $or purposes o$ imposin( the ad va&orem ta1 due. %n such case, and in the absence o$ contrar evidence, it 6as precipitate and premature to conc&ude that Fortune, et. a&. made $raudu&ent returns or 6i&$u&& attempted to evade pa ment o$ ta1es due. &. DCillfulE an/ D,rau/E ;Bi&$u&C means ;premeditated8 ma&icious8 done 6ith intent, or 6ith bad motive or purpose, or 6ith indi$$erence to the natura& conse:uence.C ;FraudC in its (enera& sense, ;is deemed to comprise an thin( ca&cu&ated to deceive, inc&udin( a&& acts, omissions, and concea&ment invo&vin( a breach o$ &e(a& or e:uitab&e dut , trust or con$idence 7ust& reposed, resu&tin( in the dama(e to another, or b 6hich an undue and unconscionab&e advanta(e taken o$ another.C $. ,rau/ not resume/ Fraud cannot be presumed. %$ there 6as $raud or 6i&$u& attempt to evade pa ment o$ ad va&orem ta1es b Fortune, et. a&. throu(h the manipu&ation o$ the re(istered 6ho&esa&e price o$ the ci(arettes, it must have been 6ith the connivance or cooperation o$ certain =%' o$$icia&s and emp&o ees 6ho supervised and monitored Fortune9s production activities to see to it that the correct ta1es 6ere paid. =ut there is no a&&e(ation, much &ess evidence, o$ =%' personne&9s ma&$easance. %n the ver &east, there is the presumption that the =%' personne& per$ormed their duties in the re(u&ar course in ensuin( that the correct ta1es 6ere paid b Fortune. 1+. 3a9 /ue rove/ *efore one is rosecute/ for :illful attem t to eva/e =e$ore one is prosecuted $or 6i&$u& attempt to evade or de$eat an ta1 under )ections 2-0 and 2-- o$ the Ta1 #ode, the $act that a ta1 is due must $irst be proved. =e$ore Fortune, et. a&. cou&d be prosecuted $or ta1 evasion under )ections 2-0 and 2-- o$ the Ta1 #ode, the $act that the de$icienc income, ad va&orem and va&ue4added ta1es 6ere due $rom Fortune $or the ear 1!!2 shou&d $irst be estab&ished. The #ommissioner has not reso&ved Fortune, et. a&.9s re:uest $or reconsideration up to the present. The #ourt cannot subscribe to the #ommissioner, et. a&.9s9 thesis citin(, An(ad v. #usi, that the &ack o$ a $ina& determination o$ Fortune9s e1act or correct ta1 &iabi&it is not a bar to crimina& prosecution, and that 6hi&e a precise computation and assessment is re:uired $or a civi& action to co&&ect ta1 de$iciencies, the Ta1 #ode does not re:uire such computation and assessment prior to crimina& prosecution. 11. 8ro er construction of .n<a/ vs. Cusi rulin<7 Cillful attem t to eva/e ta9es must *e s;o:n 'eadin( An(ad care$u&& , the pronouncement therein that de$icienc assessment is not necessar prior to prosecution is pointed& and de&iberate& :ua&i$ied b the #ourt 6ith $o&&o6in( statement :uoted $rom >uDik v. A.).: ;The crime is comp&ete 6hen the vio&ator has kno6in(& and 6i&$u&& $i&ed a $raudu&ent return 6ith intent to evade and de$eat apart or a&& o$ the ta1.C %n p&ain 6ords, $or crimina& prosecution to proceed
3a9ation !a: II( #++' ( 5' )
be$ore assessment, there must be a prima $acie sho6in( o$ a 6i&$u& attempt to evade ta1es. There 6as a 6i&$u& attempt to evade ta1 in An(ad because o$ the ta1pa er9s $ai&ure to dec&are in his income ta1 return ;his income derived $rom banana sapp&in(s.C 1#. Criminal rosecutions cannot *e enAoine/7 09ce tions As a (enera& ru&e, crimina& prosecutions cannot be en7oined: @o6ever, there are reco(niDed e1ceptions 6hich, as summariDed in =rocka v. <nri&e are: (a) To a$$ord ade:uate protection to the constitutiona& ri(hts o$ the accused8 (b) Bhen necessar $or the order& administration o$ 7ustice or to avoid oppression or mu&tip&icit o$ actions8 (c) Bhen there is a pre7udicia& :uestion 6hich is sub 7udice8 (d) Bhen the acts o$ the o$$icer are 6ithout or in e1cess o$ authorit 8 (e) Bhere the prosecution is under an inva&id &a6, ordinance or re(u&ation8 ($) Bhen doub&e 7eopard is c&ear& apparent8 (() Bhere the court had no 7urisdiction over the o$$ense8 (h) Bhere it is a case o$ persecution rather than prosecution8 (i) Bhere the char(es are mani$est& $a&se and motivated b the &ust $or ven(eance8 and (7) Bhen there is c&ear& no prima $acie case a(ainst the accused and a motion to :uash on that (round has been denied. 15. Basis of issuance of :rit of reliminary inAunction *y t;e trial court %n issuin( the orders (rantin( the issuance o$ a 6rit o$ pre&iminar in7unction, the tria& court be&ieved that said orders 6ere 6arranted to a$$ord Fortune, et. a&. ade:uate protection o$ their constitutiona& ri(hts, particu&ar& in re$erence to presumption o$ innocence, due process and e:ua& protection o$ the &a6s. The tria& court a&so $ound merit in Fortune, et. a&.9s contention that pre&iminar in7unction shou&d be issued to avoid oppression and because the acts o$ the state prosecutors 6ere 6ithout or in e1cess o$ authorit and $or the reason that there 6as a pre7udicia& :uestion. 1%. 8reliminary investi<ation may *e enAoine/ +re&iminar investi(ation ma be en7oined 6here e1ceptiona& circumstances so 6arrant. %n @ernandeD v. A&bano and Fortun v. ?aban(, in7unction 6as issued to en7oin a pre&iminar investi(ation. %ndeed, the purpose o$ a pre&iminar in7unction is to secure the innocent a(ainst hast , ma&icious and oppressive prosecution and to protect him $rom an open and pub&ic accusation o$ crime, $rom the4troub&e, e1pense and an1iet o$ a pub&ic tria& and a&so to protect the state $rom use&ess and e1pensive tria&s. 1'. Section 5( Rule 11# (8roce/ure) of t;e Rules of Court )ection 0 provides that ;e1cept as provided $or in )ection , hereo$, no comp&aint or in$ormation $or an o$$ense4co(niDab&e b the 'e(iona& Tria& #ourt sha&& be $i&ed 6ithout a pre&iminar investi(ation havin( been $irst conducted in the $o&&o6in( manner: (a) The comp&aint sha&& state the kno6n address o$ the respondent and be accompanied b a$$idavits o$ the comp&ainant and his 6itnesses as 6e&& as other supportin( documents, in such number o$ copies as there are respondents, p&us t6o (2)4copies $or the o$$icia& $i&e. The said a$$idavits sha&& be s6orn to be$ore an $isca&, state prosecutor or (overnment o$$icia& authoriDed to administer oath, or, in their absence or unavai&abi&it , a notar pub&ic, 6ho must certi$ that he persona&& e1amined the a$$iants and that he is satis$ied that the vo&untari& e1ecuted and understood their a$$idavits. (b) Bithin ten (1/) da s a$ter the $i&in( o$ the comp&aint, the investi(atin( o$$icer sha&& either dismiss the same i$ he $inds no (round to continue 6ith the in:uir , or issue a subpoena to the respondent, attachin( thereto a cop o$ the comp&aint, a$$idavits and other supportin( documents. Bithin ten (1/) da s $rom receipt thereo$, the respondent sha&& submit counter4a$$idavits and other supportin( documents. @e sha&& have the ri(ht to e1amine a&& other evidence submitted b the comp&ainant. (c) )uch counter4a$$idavits and other supportin( evidence submitted b the respondent sha&& a&so be s6orn to and certi$ied as prescribed in para(raph (a) hereo$ and copies thereo$ sha&& be $urnished b him to the comp&ainant. (d) %$ the respondent cannot be subpoenaed, or i$ subpoenaed does not submit counter4a$$idavits 6ithin the ten (1/) da period, the investi(atin( o$$icer sha&& base his reso&ution on the evidence presented b the comp&ainant. (e) %$ the investi(atin( o$$icer be&ieves that there are matters to be c&ari$ied, he ma set a hearin( to propound c&ari$icator :uestions to the parties or their 6itnesses, durin( 6hich the parties sha&& be a$$orded an opportunit to be present but 6ithout the ri(ht to e1amine or cross4e1amine. %$ the parties so desire, the ma
3a9ation !a: II( #++' ( 5= )
submit :uestions to the investi(atin( o$$icer 6hich the &atter ma propound to the parties or 6itnesses concerned. ($) Therea$ter, the investi(ation sha&& be deemed conc&uded, and the investi(atin( o$$icer sha&& reso&ve the case 6ithin ten (1/) da s there$rom. Apon the evidence thus adduced, the investi(atin( o$$icer sha&& determine 6hether or not there is su$$icient (round to ho&d the respondent $or tria&. 1=. 6*vious ;aste in t;e issuance of su* oena There 6as obvious haste b 6hich the subpoena 6as issued to Fortune, et. a&., 7ust the da a$ter the comp&aint 6as $i&ed, hence, 6ithout the investi(atin( prosecutors bein( a$$orded materia& time to e1amine and stud the vo&uminous documents appended to the comp&aint $or them to determine i$ pre&iminar investi(ation shou&d be conducted. The precipitate haste in the issuance o$ the subpoena 7usti$ied Fortune et. a&.9s mis(ivin(s re(ardin( the ob7ectivit and neutra&it o$ the prosecutors in the conduct o$ the pre&iminar investi(ation and so, the appe&&ate court conc&uded, the (rant o$ pre&iminar investi(ation b the tria& court to a$$ord ade:uate protection to Fortune, et. a&.9s constitutiona& ri(hts and to avoid oppression does not constitute (rave abuse o$ discretion amountin( to &ack o$ 7urisdiction. 14. A eal vis"L"vis s ecial action of Certiorari The burden is upon the #ommissioner, et. a&. to demonstrate that the :uestioned orders constitute a 6himsica& and capricious e1ercise o$ 7ud(ment, 6hich the have not. For certiorari 6i&& not be issued to cure errors in proceedin(s or correct erroneous conc&usions o$ &a6 or $act. As &on( as a court acts 6ithin its 7urisdiction, an a&&e(ed errors committed in the e1ercise o$ its 7urisdiction 6i&& amount to nothin( more than errors o$ 7ud(ment 6hich are revie6ab&e b time& appea& and not b a specia& civi& action o$ certiorari. @erein, the 'e(iona& Tria& #ourt acted correct& and 7udicious& , and as demanded b the $acts and the &a6, in issuin( the orders (rantin( the 6rits o$ pre&iminar in7unction, in den in( the #ommissioner9s motion to dismiss and in admittin( the supp&ementa& petitions. Bhat the shou&d have 6as to $i&e an ans6er to the petition $i&ed in the tria& court, proceed to the hearin( and appea& the decisions o$ the court i$ adverse to them.
3a9ation !a: II( #++' ( 54 )

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