CS GARMENT, INC., v.

COMMISSIONER OF INTERNAL REVENUE

G.R. No. 182399, March 12, 2014
SERENO, CJ:
Facts: Petitioner [CS Garment] is a domestic corporation duly organized and
existing under and by virtue of the laws of the Philippines with principal office at
Road A, Cavite Ecozone, Rosario, Cavite. On the other hand, respondent is the duly
appointed Commissioner of Internal Revenue of the Philippines authorized under law
to perform the duties of said office, including, inter alia, the power to assess
taxpayers for [alleged] deficiency internal revenue tax liabilities and to act upon
administrative protests or requests for reconsideration/reinvestigation of such
assessments.
Petitioner [CS Garment] received from respondent [CIR] Letter of Authority,
authorizing the examination of petitioners books of accounts and other accounting
records for all internal revenue taxes covering the period January 1, 1998 to
December 31, 1998. Thereafter received five (5) formal demand letters with
accompanying Assessment Notices from respondent to pay the alleged deficiency
VAT, Income, DST and withholding tax assessments for taxable year 1998 in the
aggregate amount of P2,046,580.10; in return, within the 30-day period prescribed
under Section 228 of the Tax Code, as amended, petitioner filed a formal written
protest with the respondent assailing the above assessments and also additional
documents in support of its protest.
The CTA en banc affirmed the Decision and Resolution of the CTA Second Division.
As regards the first issue, the banc ruled that the CIR had duly apprised CS Garment
of the factual and legal bases for assessing the latters liability for deficiency
income tax, as shown in the attached Schedule of Discrepancies provided to
petitioner; and in the subsequent reference of the CIR to Rule XX, Section 2 of the
Rules and Regulations of R.A. 7916
CS Garment filed the present Petition for Review assailing the Decision of the CTA en
banc. However, on 26 September 2008, while the instant case was pending before
this Court, petitioner filed a Manifestation and Motion stating that it had availed
itself of the governments tax amnesty program under the 2007 Tax Amnesty Law. It
thus prays that we take note of its availment of the tax amnesty and confirm that it
is entitled to all the immunities and privileges under the law. It has submitted to this
Court the following documents, which have allegedly been filed with Equitable PCI
BankCavite EPZA Branch, a supposed authorized agent-bank of the BIR: 1. Notice
of Availment of Tax Amnesty under R.A. 9480, 2. Statement of Assets, Liabilities,
and Net worth (SALN), 3. Tax Amnesty Return (BIR Form No. 2116), 4. Tax Amnesty
Payment Form (Acceptance of Payment Form or BIR Form No. 0617), 5. Equitable PCI
Banks BIR Payment Form indicating that CS Garment deposited the amount
of P250,000 to the account of the Bureau of TreasuryBIR.
Issue: Whether or not CS Garment is already immune from paying the deficiency
taxes stated in the 1998 tax assessments of the CIR, as modified by the CTA.

Held: Yes, Considering the completion of the aforementioned requirements, we find

that petitioner has successfully availed itself of the tax amnesty benefits granted
under the Tax Amnesty Law. Therefore, we no longer see any need to further discuss
the issue of the deficiency tax assessments. CS Garment is now deemed to have
been absolved of its obligations and is already immune from the payment of taxes
including the assessed deficiency in the payment of VAT, DST, and income tax as
affirmed by the CTA en banc as well as of the additions thereto (e.g., interests and
surcharges). Furthermore, the tax amnesty benefits include immunity from "the
appurtenant civil, criminal, or administrative penalties under the NIRC of 1997, as
amended, arising from the failure to pay any and all internal revenue taxes for
taxable year 2005 and prior years. Tax amnesty refers to the articulation of
the absolute waiver by a sovereign of its right to collect taxes and power
to impose penalties on persons or entities guilty of violating a tax law. Tax
amnesty aims to grant a general reprieve to tax evaders who wish to come
clean by giving them an opportunity to straighten out their records. In
2007, Congress enacted R.A. 9480, which granted a tax amnesty covering"
all national internal revenue taxes for the taxable year 2005 and prior years, with or
without assessments duly issued therefor, that have remained unpaid as of
December 31, 2005." These national internal revenue taxes include (a) income tax;
(b) VAT; (c) estate tax; (d) excise tax; (e) donors tax; (f) documentary stamp tax;
(g) capital gains tax; and (h) other percentage taxes.
Amnesty taxpayers may immediately enjoy the privileges and immunities under the
2007 Tax Amnesty Law, as soon as they fulfill the suspensive conditions imposed
therein
While tax amnesty, similar to a tax exemption, must be construed strictly against
the taxpayer and liberally in favor of the taxing authority, it is also a well-settled
doctrine that the rule-making power of administrative agencies cannot be extended
to amend or expand statutory requirements or to embrace matters not originally
encompassed by the law.1wphi1

COMMISSIONER OF INTERNAL REVENUE v. TEAM [PHILIPPINES] OPERATIONS

CORPORATION [formerly MIRANT (PHILS) OPERATIONS CORPORATION]
G.R. No. 179260, April 2, 2014
PEREZ, J.:

Facts: Petitioner is the duly appointed Commissioner of Internal Revenue, charged with
the duty of enforcing the provisions of the National Internal Revenue Code (NIRC),
including the power to decide and approve administrative claims for refund.
Respondent, on the other hand, is a corporation duly organized and existing under and
virtue of the laws with its principal office at Bo. Ibabang Pulo, Pagbilao Grande Island,
Pagbilao, Quezon Province. It is primarily engaged in the business of designing,
constructing,
erecting,
assembling,
commissioning,
operating,
maintaining,
rehabilitating and managing gas turbine and other power generating plants and related
facilities for the conversion into electricity of coal, distillate and other fuels provided by
and under contract with the Government of the Republic of the Philippines, or any
subdivision, instrumentality or agency thereof, or any government owned or controlled
corporations or other entity engaged in the development, supply or distribution of
energy. Respondent is claiming for refund in the amount of P69,562,412.00 representing
unutilized tax credits for taxable period ending 31 December 2001.
Respondent filed with the BIR, a letter requesting for the refund or issuance of a tax
credit certificate corresponding to its reported unutilized creditable withholding taxes for
taxable year 2001 in the amount ofP69,562,412.00. Thereafter, on 27 March 2003,
respondent filed a Petition for Review before the CTA, in order to toll the running of the
two-year prescriptive period, thereafter CTA granted and ordered petitioner to refund or
issue a tax credit certificate in favor of the former the entire amount which based its
ruling on the numerous documentary evidence presented by respondent during the
proceedings, such as its Income Tax Returns (ITRs) for taxable years 2001 and 2002,
various Certificates of Creditable Tax Withheld at Source for taxable year 2001 duly
issued to it by its withholding agents, and Report of the Commissioned Independent
Certified Public Accountant dated 15 March 2004, among others. The court a quo
reasoned that respondent has indeed established its entitlement to a refund/tax credit
of its excess creditable withholding taxes in compliance with the following basic
requirements: (1) that the claim for refund (or issuance of a tax credit certificate) was
filed within the two-year prescriptive period prescribed under Section 204(C), in relation
to Section 229 of the NIRC of 1997, as amended; (2) that the fact of withholding is
established by a copy of a statement duly issued by the payor (withholding agent) to
the payee, showing the amount paid and the amount of tax withheld therefrom; and (3)
that the income upon which the taxes were withheld was included in the return of the
recipient.
Subsequently, petitioner herein filed for reconsideration but was then denied, then
appealed by filing a Petition for Review pursuant to Section 18 of Republic Act (RA) No.
1125.

Issue: Whether or not respondent has established its entitlement for the refund or
issuance of a tax credit certificate in its favor the entire amount of P69,562,412.00
representing its unutilized tax credits for taxable year ended 31 December 2001,
pursuant to the applicable provisions of the NIRC of 1997?
Held: Yes, In order to be entitled to a refund claim or issuance of a tax credit certificate
representing any excess or unutilized creditable withholding tax, it must be shown that
the claimant has complied with the essential basic conditions set forth under pertinent
provisions of law and existing jurisprudential declarations. In Banco Filipino Savings and
Mortgage Bank v. Court of Appeals, this Court had previously articulated that there are
three essential conditions for the grant of a claim for refund of creditable
withholding income tax, to wit: (1) the claim is filed with the Commissioner of
Internal Revenue within the two-year period from the date of payment of the tax; (2) it
is shown on the return of the recipient that the income payment received was declared
as part of the gross income; and (3) the fact of withholding is established by a copy of a
statement duly issued by the payor to the payee showing the amount paid and the
amount of the tax withheld therefrom.
All told, respondent complied with all the legal requirements and it is entitled, as it
opted, to a refund of its excess creditable withholding tax for the taxable year 2001 in
the amount of P69,562,412.00.

DR. JOEL C. MENDEZ v. PEOPLE OF THE PHILIPPINES and COURT OF TAX

APPEALS
G.R. No. 179962, June 11, 2014
BRION, J.:
Facts: The Bureau of Internal Revenue (BIR) filed a complaint-affidavit with the
Department of Justice against the petitioner. The BIR alleged that the petitioner had
been operating as a single proprietor doing business and/or exercising his profession for
taxable years 2001 to 2003, alleged that petitioner failed to file his income tax returns
for taxable years 2001 to 2003 and, consequently evaded his obligation to pay the
correct amount of taxes due the government.
4

In his defense, the petitioner admitted that he has been operating as a single proprietor
under these trade names in Quezon City, Makati, Dagupan and San Fernando. However,
he countered that he did not file his income tax returns in these places because his
business establishments were registered only in 2003 at the earliest; thus, these
business establishments were not yet in existence at the time of his alleged failure to
file his income tax return.
After a preliminary investigation, State Prosecutor Juan Pedro Navera found probable
cause against petitioner for non-filing of income tax returns for taxable years 2001 and
2002 and for failure to supply correct and accurate information as to his true income for
taxable year 2003, in violation of the National Internal Revenue Code. Under the
National Internal Revenue Code (NIRC), a resident citizen who is engaged in the practice
of a profession within the Philippines is obligated to file in duplicate an income tax
return on his income from all sources, regardless of the amount of his gross income.
Issue: Whether or not the petitioner fails to file his income tax return?
Held: Yes, In complying with this obligation, this type of taxpayer ought to keep only
two basic things in mind: first is where to file the return; and second is when to file the
return. Under Section 51 B of the NIRC, the return should "be filed with an authorized
agent bank, Revenue District Officer, Collection Agent or duly authorized Treasurer of
the city or municipality in which such person has his legal residence or principal place of
business in the Philippines."
On the other hand, under Section 51 C of the NIRC, the same taxpayer is required to file
his income tax return on or before the fifteenth (15th) day of April of each year covering
income for the preceding taxable year. Failure to comply with this requirement would
result in a violation of Section 255 of the NIRC.

Since the petitioner operates as a sole proprietor from taxable years 2001 to 2003, the
petitioner should have filed a consolidated return in his principal place of business,
regardless of the number and location of his other branches. Consequently, we cannot
but agree with the CTA that the change and/or addition of the branches of the
petitioners operation in the information does not constitute substantial amendment
because it does not change the prosecutions theory that the petitioner failed to file his
income tax return.
Petitioner failed to file his income tax return for the taxable year 2001 did not change.
The prosecutions cause for filing an information remained the same as the cause in the
original and in the amended information. For emphasis, the prosecutions evidence
during the preliminary investigation of the case shows that petitioner did not file his
income tax return in his place of legal residence or principal place of business in Quezon
City or with the Commissioner.
COMMISSIONER OF INTERNAL REVENUE v. MANILA ELECTRIC COMPANY
(MERALCO)
G.R. No. 181459, June 9, 2014
PERALTA, J.:
Facts: Respondent Manila Electric Company (MERALCO) obtained a loan from
Norddeutsche Landesbank Girozentrale (NORD/LB) Singapore Branch in the amount of
USD120,000,000.00 with ING Barings South East Asia Limited (ING Barings) as the
Arranger. On September 4, 2000, respondent MERALCO executed another loan
agreement with NORD/LB Singapore Branch for a loan facility in the amount of
USD100,000,000.00 with Citicorp International Limited as Agent.
Under the foregoing loan agreements, the income received by NORD/LB, by way of
respondent MERALCOs interest payments, shall be paid in full without deductions, as
respondent MERALCO shall bear the obligation of paying/remitting to the BIR the
corresponding ten percent (10%) final withholding tax. Pursuant thereto, respondent
MERALCO paid/remitted to the Bureau of Internal Revenue (BIR) the said withholding tax
on its interest payments to NORD/LB Singapore Branch, covering the period from
January 1999 to September 2003 in the aggregate sum of P264,120,181.44.
However, sometime in 2001, respondent MERALCO discovered that NORD/LB Singapore
Branch is a foreign government-owned financing institution of Germany. Respondent
filed a request for a BIR Ruling with Petitioner CIR with regard to the tax exempt status
of NORD/LB Singapore Branch, in accordance with Section 32(B)(7)(a) of the 1997
National Internal Revenue Code (Tax Code), as amended. BIR issued a ruling that
NORD/LB Singapore Branch are exempt from the ten percent (10%) final withholding
tax, since it is a financing institution owned and controlled by the foreign government of
Germany. Relying on the aforesaid BIR Ruling, respondent filed with petitioner a claim
for tax refund or issuance of tax credit certificate in the aggregate amount
of P264,120,181.44, representing the erroneously paid or overpaid final withholding tax
on interest payments made to NORD/LB but it was denied on the basis that it had
already prescribed within the period of two (2) years from the date of payment of tax to
file a claim for refund before the BIR.
Issue: Whether or not respondent MERALCO is entitled to a tax refund/credit relative to
its payment of final withholding taxes on interest payments made to NORD/LB from
January 1999 to September 2003?

Held: No, In any case, no such suit or proceeding shall be filed after the expiration of
two (2) years from the date of payment of the tax or penalty regardless of any
supervening cause that may arise after payment: Provided, however, That the
Commissioner may, even without a written claim therefor, refund or credit any tax,
where on the face of the return upon which payment was made, such payment appears
clearly to have been erroneously paid (Sec. 229, NIRC). As can be gleaned from the
foregoing, the prescriptive period provided is mandatory regardless of any supervening
cause that may arise after payment. It should be pointed out further that while the
prescriptive period of two (2) years commences to run from the time that the refund is
ascertained, the propriety thereof is determined by law (in this case, from the date of
payment of tax), and not upon the discovery by the taxpayer of the erroneous or
excessive payment of taxes. Tax refunds are based on the general premise that taxes
have either been erroneously or excessively paid. Though the Tax Code recognizes the
right of taxpayers to request the return of such excess/erroneous payments from the
government, they must do so within a prescribed period. Further, "a taxpayer must
prove not only his entitlement to a refund, but also his compliance with the
procedural due process as non-observance of the prescriptive periods within
which to file the administrative and the judicial claims would result in the
denial of his claim."
COMMISSIONER OF INTERNAL REVENUE v. MINDANAO II GEOTHERMAL
PARTNERSHIP
G.R. No. 189440, June 18, 2014
VILLARAMA, JR., J.:

Facts: Respondent Mindanao II Geothermal Partnership filed with the Bureau of Internal
Revenue (BIR) its Quarterly VAT Returns for the four quarters of taxable year 2002. The
respondent declared zero-rated sales in the amount of P769,384,702.23 and input VAT
of P7,427,965.37 on domestic purchases of goods and services worth P74,279,653.78.
Respondent filed with BIR its Quarterly VAT Returns for the four quarters of taxable year
2002. The respondent declared zero-rated sales in the amount of P769,384,702.23 and
input VAT of P7,427,965.37 on domestic purchases of goods and services worth
P74,279,653.78.
Subsequently, respondents claim for refund or issuance of a TCC of its unutilized input
VAT attributable to its zero-rated sales for the taxable year 2002 in the amount of
P7,427,965.37. However, the petitioner failed to act on the claim. Thus, on March 31,
2004, the respondent filed a Petition for Review with the CTA First Division. Petitioner,
herein, issued to respondent in the amount of P6,251,065.74. The issuance of this TCC
belatedly and partially granted the claim of the respondent. For this reason, the
respondent filed a Motion for Leave of Court to File Attached Supplemental Petition for
Review which was granted by the CTA First Division. Upon petition for review filed before
the CTA which partially grant their claim, the respondent (CIR) is hereby ordered to
issue a tax credit certificate in favor of petitioner in the reduced amount of P689,313.37,
representing unutilized input VAT incurred by petitioner in connection with its zero-rated
sales for taxable year 2002. Petitioner (CIR) moved to reconsider the grant given, which
was denied. The CTA En Banc held, Record shows that petitioner CIRs argument that
respondent Mindanao II failed to file its judicial claim, within 30 days after the lapse of
the 120-day period provided under Section 112 (D) of the NIRC of 1997, as amended,
was raised for the first time by petitioner CIR in its present Motion for Reconsideration
before this Court En Banc. Said issue was never raised in petitioner CIRs Answer and

Amended Answer filed before the Court in Division. Neither was it raised by petitioner
CIR in his present Petition for Review before this Court En Banc.
Issue: Whether or not the court of tax appeals en banc decided a question of substance
which is not in accord with the law and prevailing jurisprudence that CIR is estopped of
its judicial claim?
Held: In Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., this
Court clarified the mandatory and jurisdictional nature of the 120+30 day
period provided under Section 112(C) of the NIRC. We clarified that the two-year
prescriptive period under Section 112(A) of the NIRC refers only to the filing of an
administrative claim with the BIR. Meanwhile, the judicial claim under Section 112(C) of
the NIRC must be filed within a mandatory and jurisdictional period of 30 days from the
date of receipt of the decision denying the claim, or within 30 days from the expiration
of the 120-day period for deciding the claim. Thus, we mandated strict compliance with
this"120+30" day period:
19

Section 112(D) [now Section 112(C)] of the NIRC clearly provides that the CIR has "120
days, from the date of the submission of the complete documents in support of the
application [for tax refund/credit]," within which to grant or deny the claim. In case of
full or partial denial by the CIR, the taxpayers recourse is to file an appeal before the
CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day
period the CIR fails to act on the application for tax refund/credit, the remedy of the
taxpayer is to appeal the inaction of the CIR to CTA within 30 days. In the present case,
the respondent filed its administrative claim on May 30, 2003.
The petitioner CIR therefore had only until September 27, 2003 to decide the claim, and
following the petitioners inaction, the respondent had until October 27, 2003, the last
day of the 30-day period to file its judicial claim. However, the respondent filed its
judicial claim with the CTA only on March 31, 2004 or 155 days late. Clearly, the
respondent's judicial claim has prescribed and the CTA did not acquire jurisdiction over
the claim. Well to remember, the right to appeal to the CTA from a decision or "deemed
a denial" decision of the CIR is merely a statutory privilege, not a constitutional right.
The exercise of such statutory privilege requires strict compliance with the conditions
attached by the statute for its exercise. The respondent failed to comply with the
statutory conditions and must thus bear the consequences. Further, well settled is the
rule that tax refunds or credits, just like tax exemptions, are strictly construed against
the taxpayer. The burden is on the taxpayer to show that he has strictly complied with
the conditions for the grant of the tax refund or credit.
22

23

Wherefore, the petition for review on certiorari is granted. The decision dated May 29,
2009 and Resolution dated September 4, 2009 of the CTA en banc are set aside. CTA
case no. 6909 is dismissed for being filed out of time.
Consequently, the amount of 116,251,065.74 previously issued to MINDANAO II
GEOTHERMAL PARTNERSHIP is hereby revoked/ cancelled.