American Tobacco v.
Camacho (2008)  Philip Morris Philippines Manufacturing Incorporated, Fortune
G.R. No. 163583 August 20, 2008
YNARES-SANTIAGO, J.
Lessons Applicable: Court of Tax Appeals Jurisdiction, Regional Trial
Court Jurisdiction, Equal Protection and Uniformity of Taxation
(constitutional issue), BIR Power to Conduct Resurvey and
Reclassification (delegated by express legislation)
Laws Applicable:
FACTS:
June 2001, petitioner British American Tobacco introduced and sold Lucky
Strike, Lucky Strike Lights and Lucky Strike Menthol Lights cigarettes w/
SRP P 9.90/pack - Initial assessed excise tax: P 8.96/pack (Sec. 145 [c])
 February 17, 2003: RR 9-2003: Periodic review every 2 years or
earlier of the current net retail price of new brands and variants
thereof for the purpose of the establishing and updating their tax
classification
 March 11, 2003: RMO 6-2003: Guidelines and procedures in
establishing current net retail prices of new brands of cigarettes and
alcohol products
 August 8, 2003: RR 22-2003: Implement the revised tax classification
of certain new brands introduced in the market after January 1, 1997
based on the survey of their current net retail prices. This increased
the excise tax to P13.44 since the average net retail price is above P
10/pack. This cause petitioner to file before the RTC of Makati a
petition for injunction with prayer for issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction sought to
enjoin the implementation of Sec. 145 of the NIRC, RR No. 1-97, 9-
2003, 22-2003 and 6-2003 on the ground that they discriminate
against new brands of cigarettes in violation of the equal protection
and uniformity provisions of the Constitution
 RTC: Dismissed
 While petitioner's appeal was pending, RA 9334 amending Sec. 145
of the 1997 NIRC among other took effect on January 1, 2005 which
in effect increased petitioners excise tax to P25/pack
 Petitioner filed a Motion to Admit attached supplement and a
supplement to the petition for review assailing the constitutionality of
RA 9334 and praying a downward classification of Lucky Strike
products at the bracket taxable at P 8.96/pack since existing brands
are still taxed based on their price as of October 1996 eventhough
they are equal or higher than petitioner's product price.
Tobacco Corp., Mighty Corp. and JT International Intervened.
 Fortune Tobacco claimed that the CTA should have the exclusive
appellate jurisdiction over the decision of the BIR in tax disputes
ISSUE:
1. W/N the RTC rather than the CTA has jurisdiction.
2. W/N RA 9334 of the classification freeze provision is unconstitutional
for violating the equal protection and uniformity provisions of the
Constitution
3. W/N RR Nos. 1-97, 9-2003, 22-2003 and RA 8243 even prior to its
amendment by RA 9334 can authorize the BIR to conduct resurvey
and reclassification.
HELD:
1. Yes. The jurisdiction of the CTA id defined in RA 1125 which confers on
the CTA jurisdiction to resolve tax disputes in general. BUT does NOT
include cases where the constitutionality of a law or rule is challenged
which is a judicial power is belonging to regular courts.
2. No. In Sison Jr. v. Ancheta, the court held that "xxx It suffices then that
the laws operate equally and uniformly on all persons under similar
circumstances or that all persons must be treated in the same manner, the
conditions not being different, both in the privileges conferred and the
liabilities imposed. If the law be looked upon in terms of burden on
charges, those that fall within a class should be treated in the same
fashion, whatever restrictions cast on some in the group equally binding
on the rest. xxx" Thus, classification if rational in character is allowable. In
Lutz v. Araneta: "it is inherent in the power to tax that a state be free to
select the subjects of taxation, and it has been repeatedly held that
'inequalities which result from a singling out of one particular class for
taxation, or exemption infringe no constitutional limitation" SC previously
held: "Equality and uniformity in taxation means that all taxable articles or
kinds of property of the same class shall be taxed at the same rate. The
taxing power has the authority to make reasonable and natural
classifications for purposes of taxation"
Under the the rational basis test, a legislative classification, to survive an
equal protection challenge, must be shown to rationally further a legitimate
state interest. The classifications must be reasonable and rest upon some
ground of difference having a fair and substantial relation to the object of
the legislation

A legislative classification that is reasonable does not offend the

constitutional guaranty of the equal protection of the laws. The
classification is considered valid and reasonable provided that: (1) it rests
on substantial distinctions; (2) it is germane to the purpose of the law; (3)
it applies, all things being equal, to both present and future conditions; and
(4) it applies equally to all those belonging to the same class.

Moreover, petitioner failed to clearly demonstrate the exact extent of such

impact as the price is not the only factor that affects competition.

3. NO. Unless expressly granted to the BIR, the power to reclassify

cigarette brands remains a prerogative of the legislature which cannot be
usurped by the former. These are however modified by RA 9334.

Jurisprudence: G.R. No. 168118 August 28, 2006
SECOND DIVISION
Manila Bank v. CIR (2006)
G.R. No. 168118 August 28, 2006
SANDOVAL-GUTIERREZ, J.
FACTS
Before us is a Petition for Review on Certiorari assailing the Decision of
the Court of Appeals dated May 11, 2005 in CA-G.R. SP No. 77177,
entitled The Manila Banking Corporation, petitioner, versus Commissioner
of Internal Revenue, respondent.
The Manila Banking Corporation, petitioner, was incorporated in 1961 and
since then had engaged in the commercial banking industry until 1987. On
May 22, 1987, the Monetary Board of the Bangko Sentral ng Pilipinas
(BSP) issued Resolution No. 505, pursuant to Section 29 of Republic Act
(R.A.) No. 265 (the Central Bank Act), prohibiting petitioner from engaging
in business by reason of insolvency. Thus, petitioner ceased operations
that year and its assets and liabilities were placed under the charge of a
government-appointed receiver.
Meanwhile, R.A. No. 8424, otherwise known as the Comprehensive Tax
Reform Act of 1997, became effective on January 1, 1998. One of the
changes introduced by this law is the imposition of the minimum corporate
income tax on domestic and resident foreign corporations. Implementing
this law is Revenue Regulations No. 9-98 stating that the law allows a four
(4) year period from the time the corporations were registered with the
Bureau of Internal Revenue (BIR) during which the minimum corporate
income tax should not be imposed.
On June 23, 1999, after 12 years since petitioner stopped its business
operations, the BSP authorized it to operate as a thrift bank. The following
year, specifically on April 7, 2000, it filed with the BIR its annual corporate
income tax return and paid P33,816,164.00 for taxable year 1999.
Prior to the filing of its income tax return, or on December 28, 1999,
petitioner sent a letter to the BIR requesting a ruling on whether it is
entitled to the four (4)-year grace period reckoned from 1999. In other
words, petitioners position is that since it resumed operations in 1999, it
will pay its minimum corporate income tax only after four (4) years
thereafter.
On February 22, 2001, the BIR issued BIR Ruling No. 007-2001 stating
that petitioner is entitled to the four (4)-year grace period. Since it
reopened in 1999, the minimum corporate income tax may be imposed
not earlier than 2002, i.e. the fourth taxable year beginning 1999. The
relevant portions of the BIR Ruling state:
In reply, we hereby confirm that the law and regulations allow new
corporations as well as existing corporations a leeway or adjustment
period of four years counted from the year of commencement of business
operations (reckoned at the time of registration by the corporation with the
BIR) during which the MCIT (minimum corporate income tax) does not
apply. If new corporations, as well as existing corporations such as those
registered with the BIR in 1994 or earlier, are granted a 4-year grace
period, we see no reason why TMBC, a corporation that has ceased
business activities due to involuntary closure for more than a decade and
is now only starting again to place its business back in order, may not be
given the same opportunity. It should be stressed that although TMBC had
been registered with the BIR before 1994, yet it did not have any business
from 1987 to June 1999 due to its involuntary closure. This Office is
therefore of an opinion, that for purposes of justice, equity and consistent
with the intent of the law, TMBC's reopening last July 1999 is akin to the
commencement of business operations of a new corporation, in
consideration of which the law allows a 4-year period during which MCIT
is not to be applied. Hence, MCIT may be imposed upon TMBC not earlier
than 2002, i.e., the fourth taxable year beginning 1999 which is the year
when TMBC reopened.
Likewise, we find merit in your position that for having just come out of
receivership proceedings, which not only resulted in substantial losses but
actually brought about a complete cessation of all businesses, TMBC may
be qualified to ask for suspension of the MCIT. The law provides that the
Secretary of Finance, upon the recommendation of the Commissioner,
may suspend the imposition of the MCIT on any corporation which suffers
losses on account of prolonged labor dispute, or because of force
majeure, or because of legitimate business reverses. [NIRC, Sec.
27(E)(3)] Revenue Regulations 9-98 defines the term legitimate business
reverses to include substantial losses sustained due to fire, robbery, theft
or embezzlement, or for other economic reasons as determined by the
Secretary of Finance. Cessation of business activities as a result of being
placed under involuntary receivership may be one such economic reason.
But to be a basis for the recognition of the suspension of MCIT, such a
situation should be properly defined and included in the regulations, which
this Office intends to do. Pending such inclusion, the same cannot yet be
invoked. Nevertheless, it is the position of this Office that the counting of
the fourth taxable year, insofar as TMBC is concerned, begins in the year
1999 when TMBC reopened such that it will be only subject to MCIT
beginning the year 2002.
Pursuant to the above Ruling, petitioner filed with the BIR a claim for
refund of the sum of P33,816,164.00 erroneously paid as minimum
corporate income tax for taxable year 1999.
Due to the inaction of the BIR on its claim, petitioner filed with the Court of
Tax Appeals (CTA) a petition for review.
On April 21, 2003, the CTA denied the petition, finding that petitioners
payment of the amount of P33,816,164.00 corresponding to its minimum
corporate income tax for taxable year 1999 is in order. The CTA held that
petitioner is not entitled to the four (4)-year grace period because it is not
a new corporation. It has continued to be the same corporation, registered
with the Securities and Exchange Commission (SEC) and the BIR, despite
being placed under receivership, thus:
Moreover, it must be emphasized that when herein petitioner was placed
under receivership, there was merely an interruption of its business
operations. However, its corporate existence was never affected. The
general rule is that the appointment of the receiver does not terminate the
charter or work a dissolution of the corporation, even though the
receivership is a permanent one. In other words, the corporation continues
to exist as a legal entity, clothed with its franchises (65 Am. Jur. 2d, pp.
973-974). Petitioner, for all intents and purposes, remained to be the
same corporation, registered with the SEC and with the BIR. While it may
continue to perform its corporate functions, all its properties and assets
were under the control and custody of a receiver, and its dealings with the
public is somehow limited, if not momentarily suspended. x x x
On June 11, 2003, petitioner filed with the Court of Appeals a petition for
review. On May 11, 2005, the appellate court rendered a Decision
affirming the assailed judgment of the CTA.
Thus, this petition for review on certiorari.
The main issue for our resolution is whether petitioner is entitled to a
refund of its minimum corporate income tax paid to the BIR for taxable
year 1999.
Petitioner contends that the Court of Tax Appeals erred in holding that it is
not entitled to the four (4)-year grace period provided by law suspending
the payment of its minimum corporate income tax since it is not a newly
created corporation, having been registered as early as 1961.
For his part, the Commissioner of Internal Revenue (CIR), respondent,
maintains that pursuant to R.A. No. 8424, petitioner should pay its
minimum corporate income tax beginning January 1, 1998 as it did not
close its business operations in 1987 but merely suspended the same.
Even if placed under receivership, its corporate existence was never
affected. Thus, it falls under the category of an existing corporation
recommencing its banking business operations.
Section 27(E) of the Tax Code provides:
Sec. 27. Rates of Income Tax on Domestic Corporations. x x x
(E) Minimum Corporate Income Tax on Domestic Corporations. -
(1) Imposition of Tax. - A minimum corporate income tax of two percent
(2%) of the gross income as of the end of the taxable year, as defined
herein, is hereby imposed on a corporation taxable under this Title,
beginning on the fourth taxable year immediately following the year in
which such corporation commenced its business operations, when the
minimum corporate income tax is greater than the tax computed under
Subsection (A) of this Section for the taxable year.

(2) Carry Forward of Excess Minimum Tax. - Any excess of the minimum
corporate income tax over the normal income tax as computed under
Subsection (A) of this Section shall be carried forward and credited
against the normal income tax for the three (3) immediately succeeding
taxable years.
xxx
Upon the other hand, Revenue Regulation No. 9-98 specifies the period
when a corporation becomes subject to the minimum corporate income
tax, thus:
(5) Specific Rules for Determining the Period When a Corporation
Becomes Subject to the MCIT (minimum corporate income tax) -
For purposes of the MCIT, the taxable year in which business operations
commenced shall be the year in which the domestic corporation registered
with the Bureau of Internal Revenue (BIR).
Firms which were registered with BIR in 1994 and earlier years shall be
covered by the MCIT beginning January 1, 1998.
xxx
The intent of Congress relative to the minimum corporate income tax is to
grant a four (4)-year suspension of tax payment to newly formed
corporations. Corporations still starting their business operations have to
stabilize their venture in order to obtain a stronghold in the industry. It
does not come as a surprise then when many companies reported losses
in their initial years of operations. The following are excerpts from the
Senate deliberations:
Senator Romulo: x x x Let me go now to the minimum corporate income
tax, which is on page 45 of the Journal, which is to minimize tax evasion
on those corporations which have been declaring losses year in and year
out. Here, the tax rate is three-fourths, three quarter of a percent or .75%
applied to corporations that do not report any taxable income on the fourth
year of their business operation. Therefore, those that do not report
income on the first, second and third year are not included here.
Senator Enrile: We assume that this is the period of stabilization of new
company that is starting in business.
Senator Romulo: That is right.
Thus, in order to allow new corporations to grow and develop at the initial
stages of their operations, the lawmaking body saw the need to provide a
grace period of four years from their registration before they pay their
minimum corporate income tax.
Significantly, on February 23, 1995, Congress enacted R.A. No. 7906,
otherwise known as the Thrift Banks Act of 1995. It took effect on March
18, 1995. This law provides for the regulation of the organization and
operations of thrift banks. Under Section 3, thrift banks include savings
and mortgage banks, private development banks, and stock savings and
loans associations organized under existing laws.
On June 15, 1999, the BIR issued Revenue Regulation No. 4-95
implementing certain provisions of the said R.A. No. 7906. Section 6
provides:
Sec. 6. Period of exemption. All thrift banks created and organized under
the provisions of the Act shall be exempt from the payment of all taxes,
fees, and charges of whatever nature and description, except the
corporate income tax imposed under Title II of the NIRC and as specified
in Section 2(A) of these regulations, for a period of five (5) years from the
date of commencement of operations; while for thrift banks which are
already existing and operating as of the date of effectivity of the Act
(March 18, 1995), the tax exemption shall be for a period of five (5) years
reckoned from the date of such effectivity.
For purposes of these regulations, date of commencement of operations
shall be understood to mean the date when the thrift bank was registered
with the Securities and Exchange Commission or the date when the
Certificate of Authority to Operate was issued by the Monetary Board of
the Bangko Sentral ng Pilipinas, whichever comes later.
xxx
As mentioned earlier, petitioner bank was registered with the BIR in 1961.
However, in 1987, it was found insolvent by the Monetary Board of the
BSP and was placed under receivership. After twelve (12) years, or on
June 23, 1999, the BSP issued to it a Certificate of Authority to Operate as
a thrift bank. Earlier, or on January 21, 1999, it registered with the BIR.
Then it filed with the SEC its Articles of Incorporation which was approved
on June 22, 1999.
It is clear from the above-quoted provision of Revenue Regulations No. 4-
95 that the date of commencement of operations of a thrift bank is the
date it was registered with the SEC or the date when the Certificate of
Authority to Operate was issued to it by the Monetary Board of the BSP,
whichever comes later.
Let it be stressed that Revenue Regulations No. 9-98, implementing R.A.
No. 8424 imposing the minimum corporate income tax on corporations,
provides that for purposes of this tax, the date when business operations
commence is the year in which the domestic corporation registered with
the BIR. However, under Revenue Regulations No. 4-95, the date of
commencement of operations of thrift banks, such as herein petitioner, is
the date the particular thrift bank was registered with the SEC or the date
when the Certificate of Authority to Operate was issued to it by the
Monetary Board of the BSP, whichever comes later.
Clearly then, Revenue Regulations No. 4-95, not Revenue Regulations
No. 9-98, applies to petitioner, being a thrift bank. It is, therefore, entitled
to a grace period of four (4) years counted from June 23, 1999 when it
was authorized by the BSP to operate as a thrift bank. Consequently, it
should only pay its minimum corporate income tax after four (4) years
from 1999.
WHEREFORE, we GRANT the petition. The assailed Decision of the
Court of Appeals in CA-G.R. SP No. 77177 is hereby REVERSED.
Respondent Commissioner of Internal Revenue is directed to refund to
petitioner bank the sum of P33,816,164.00 prematurely paid as minimum
corporate income tax.
SO ORDERED.
Tax Case Digest: Manila Bank V. CIR (2006)
SECOND DIVISION
Manila Bank v. CIR (2006)
G.R. No. 168118 August 28, 2006
SANDOVAL-GUTIERREZ, J.
Lessons Applicable: 4-year grace period is based on the registration and
commencement (not only for newly formed corporation), MCIT law
encourages new business
Laws Applicable: MCIT
FACTS:
Manila Bank, after 12 years of being prohibited to operate due to
insolvency by the Monetary Board of the BSP, is granted to operate as a
thrift bank.
 It paid its taxed for 1999.
 Then, it asked the BIR whether it is entitled to the 4-year grace period
before it shall be subject to MCIT.
 BIR confirmed its entitlement.
 It filed a claim for refund erroneously paid as MCIT in 1999.
 Due to inaction, it filed a Petition for Review with the CTA who
denied it since it is not a new corporation and has continued its
registration with the SEC and BIR.
ISSUE: W/N Manila Bank is entitled to a 4-year grace period.
HELD: Yes. GRANT the petition.
 The intent of the Congress relative to the MCIT is to grant 4-year
grace period so that newly formed corporate can stabilize itself in
order to obtain a stronghold in the industry.
 Rev. Reg. No. 4-95 clearly provides that the date of commencement
of the operations of a thrift bank is the date that it was registered with
the SEC or the date when the certificate of authority to operate was
issued by the Monetary Board of the BSP, whichever comes later.
 Rev. Reg. No. 4-98, implementing RA 8424 imposing MCIT provides
for purposes of this tax, date when business operations commence is
the year which the company is registered with the BIR, thus in this
case only on June 23, 1999

Jurisprudence: G.R. No. 178090 February 8, 2010
DIVISION
Panasonic v. CIR (2010)
G.R. No. 178090 February 8, 2010
ABAD, J.:
This petition for review puts in issue the May 23, 2007 Decision of the
Court of Tax Appeals (CTA) en banc in CTA EB 239, entitled Panasonic
Communications Imaging Corporation of the Philippines v. Commissioner
of Internal Revenue, which affirmed the denial of petitioners claim for
refund.
The Facts and the Case
Petitioner Panasonic Communications Imaging Corporation of the
Philippines (Panasonic) produces and exports plain paper copiers and
their sub-assemblies, parts, and components. It is registered with the
Board of Investments as a preferred pioneer enterprise under the
Omnibus Investments Code of 1987. It is also a registered value-added
tax (VAT) enterprise.
From April 1 to September 30, 1998 and from October 1, 1998 to March
31, 1999, petitioner Panasonic generated export sales amounting to
US$12,819,475.15 and US$11,859,489.78, respectively, for a total of
US$24,678,964.93. Believing that these export sales were zero-rated for
VAT under Section 106(A)(2)(a)(1) of the 1997 National Internal Revenue
Code as amended by Republic Act (R.A.) 8424 (1997 NIRC), Panasonic
paid input VAT of P4,980,254.26 and P4,388,228.14 for the two periods or
a total of P9,368,482.40 attributable to its zero-rated sales.
Claiming that the input VAT it paid remained unutilized or unapplied, on
March 12, 1999 and July 20, 1999 petitioner Panasonic filed with the
Bureau of Internal Revenue (BIR) two separate applications for refund or
tax credit of what it paid. When the BIR did not act on the same,
Panasonic filed on December 16, 1999 a petition for review with the CTA,
averring the inaction of the respondent Commissioner of Internal Revenue
(CIR) on its applications.
After trial or on August 22, 2006 the CTAs First Division rendered
judgment, denying the petition for lack of merit. The First Division said
that, while petitioner Panasonics export sales were subject to 0% VAT
under Section 106(A)(2)(a)(1) of the 1997 NIRC, the same did not qualify
for zero-rating because the word zero-rated was not printed on
Panasonics export invoices. This omission, said the First Division, violates
the invoicing requirements of Section 4.108-1 of Revenue Regulations
(RR) 7-95.
Its motion for reconsideration having been denied, on January 5, 2007
petitioner Panasonic appealed the First Divisions decision to the CTA en
banc. On May 23, 2007 the CTA en banc upheld the First Divisions
decision and resolution and dismissed the petition. Panasonic filed a
motion for reconsideration of the en banc decision but this was denied.
Thus, petitioner filed the present petition in accordance with R.A. 9282.
The Issue Presented
The sole issue presented in this case is whether or not the CTA en banc
correctly denied petitioner Panasonics claim for refund of the VAT it paid
as a zero-rated taxpayer on the ground that its sales invoices did not state
on their faces that its sales were zero-rated.
The Courts Ruling
The VAT is a tax on consumption, an indirect tax that the provider of
goods or services may pass on to his customers. Under the VAT method
of taxation, which is invoice-based, an entity can subtract from the VAT
charged on its sales or outputs the VAT it paid on its purchases, inputs
and imports. For example, when a seller charges VAT on its sale, it issues
an invoice to the buyer, indicating the amount of VAT he charged. For his
part, if the buyer is also a seller subjected to the payment of VAT on his
sales, he can use the invoice issued to him by his supplier to get a
reduction of his own VAT liability. The difference in tax shown on invoices
passed and invoices received is the tax paid to the government. In case
the tax on invoices received exceeds that on invoices passed, a tax refund
may be claimed.
Under the 1997 NIRC, if at the end of a taxable quarter the seller charges
output taxes equal to the input taxes that his suppliers passed on to him,
no payment is required of him. It is when his output taxes exceed his input
taxes that he has to pay the excess to the BIR. If the input taxes exceed
the output taxes, however, the excess payment shall be carried over to
the succeeding quarter or quarters. Should the input taxes result from
zero-rated or effectively zero-rated transactions or from the acquisition of
capital goods, any excess over the output taxes shall instead be refunded
to the taxpayer.
Zero-rated transactions generally refer to the export sale of goods and
services. The tax rate in this case is set at zero. When applied to the tax
base or the selling price of the goods or services sold, such zero rate
results in no tax chargeable against the foreign buyer or customer. But,
although the seller in such transactions charges no output tax, he can
claim a refund of the VAT that his suppliers charged him. The seller thus
enjoys automatic zero rating, which allows him to recover the input taxes
he paid relating to the export sales, making him internationally
competitive.
For the effective zero rating of such transactions, however, the taxpayer
has to be VAT-registered and must comply with invoicing requirements.
Interpreting these requirements, respondent CIR ruled that under
Revenue Memorandum Circular (RMC) 42-2003, the taxpayers failure to
comply with invoicing requirements will result in the disallowance of his
claim for refund. RMC 42-2003 provides:
A-13. Failure by the supplier to comply with the invoicing requirements on
the documents supporting the sale of goods and services will result to the
disallowance of the claim for input tax by the purchaser-claimant.
If the claim for refund/TCC is based on the existence of zero-rated sales
by the taxpayer but it fails to comply with the invoicing requirements in the
issuance of sales invoices (e.g., failure to indicate the TIN), its claim for
tax credit/refund of VAT on its purchases shall be denied considering that
the invoice it is issuing to its customers does not depict its being a VAT-
registered taxpayer whose sales are classified as zero-rated sales.
Nonetheless, this treatment is without prejudice to the right of the taxpayer
to charge the input taxes to the appropriate expense account or asset
account subject to depreciation, whichever is applicable. Moreover, the
case shall be referred by the processing office to the concerned BIR office
for verification of other tax liabilities of the taxpayer.
Petitioner Panasonic points out, however, that in requiring the printing on
its sales invoices of the word zero-rated, the Secretary of Finance unduly
expanded, amended, and modified by a mere regulation (Section 4.108-1
of RR 7-95) the letter and spirit of Sections 113 and 237 of the 1997
NIRC, prior to their amendment by R.A. 9337. Panasonic argues that the
1997 NIRC, which applied to its payments specifically Sections 113 and
237required the VAT-registered taxpayers receipts or invoices to indicate
only the following information:
(1) A statement that the seller is a VAT-registered person, followed by his
taxpayer's identification number (TIN);
(2) The total amount which the purchaser pays or is obligated to pay to the
seller with the indication that such amount includes the value-added tax;
(3) The date of transaction, quantity, unit cost and description of the goods
or properties or nature of the service; and
(4) The name, business style, if any, address and taxpayers identification
number (TIN) of the purchaser, customer or client.
Petitioner Panasonic points out that Sections 113 and 237 did not require
the inclusion of the word zero-rated for zero-rated sales covered by its
receipts or invoices. The BIR incorporated this requirement only after the
enactment of R.A. 9337 on November 1, 2005, a law that did not yet exist
at the time it issued its invoices.
But when petitioner Panasonic made the export sales subject of this case,
i.e., from April 1998 to March 1999, the rule that applied was Section
4.108-1 of RR 7-95, otherwise known as the Consolidated Value-Added
Tax Regulations, which the Secretary of Finance issued on December 9,
1995 and took effect on January 1, 1996. It already required the printing of
the word zero-rated on the invoices covering zero-rated sales. When R.A.
9337 amended the 1997 NIRC on November 1, 2005, it made this
particular revenue regulation a part of the tax code. This conversion from
regulation to law did not diminish the binding force of such regulation with
respect to acts committed prior to the enactment of that law.
Section 4.108-1 of RR 7-95 proceeds from the rule-making authority
granted to the Secretary of Finance under Section 245 of the 1977 NIRC
(Presidential Decree 1158) for the efficient enforcement of the tax code
and of course its amendments. The requirement is reasonable and is in
accord with the efficient collection of VAT from the covered sales of goods
and services. As aptly explained by the CTAs First Division, the
appearance of the word zero-rated on the face of invoices covering zero-
rated sales prevents buyers from falsely claiming input VAT from their
purchases when no VAT was actually paid. If, absent such word, a
successful claim for input VAT is made, the government would be
refunding money it did not collect.
Further, the printing of the word zero-rated on the invoice helps segregate
sales that are subject to 10% (now 12%) VAT from those sales that are
zero-rated. Unable to submit the proper invoices, petitioner Panasonic has
been unable to substantiate its claim for refund.
Petitioner Panasonics citation of Intel Technology Philippines, Inc. v.
Commissioner of Internal Revenue is misplaced. Quite the contrary, it
strengthens the position taken by respondent CIR. In that case, the CIR
denied the claim for tax refund on the ground of the taxpayers failure to
indicate on its invoices the BIR authority to print. But Sec. 4.108-1
required only the following to be reflected on the invoice:
1. The name, taxpayers identification number (TIN) and address of seller;
2. Date of transaction;
3. Quantity, unit cost and description of merchandise or nature of service;
4. The name, TIN, business style, if any, and address of the VAT-
registered purchaser, customer or client;
5. The word zero-rated imprinted on the invoice covering zero-rated sales;
and
6. The invoice value or consideration.

This Court held that, since the BIR authority to print is not one of the items
required to be indicated on the invoices or receipts, the BIR erred in
denying the claim for refund. Here, however, the ground for denial of
petitioner Panasonics claim for tax refundthe absence of the word zero-
rated on its invoicesis one which is specifically and precisely included in
the above enumeration. Consequently, the BIR correctly denied
Panasonics claim for tax refund.

This Court will not set aside lightly the conclusions reached by the CTA
which, by the very nature of its functions, is dedicated exclusively to the
resolution of tax problems and has accordingly developed an expertise on
the subject, unless there has been an abuse or improvident exercise of
authority. Besides, statutes that grant tax exemptions are construed
strictissimi juris against the taxpayer and liberally in favor of the taxing
authority. Tax refunds in relation to the VAT are in the nature of such
exemptions. The general rule is that claimants of tax refunds bear the
burden of proving the factual basis of their claims. Taxes are the lifeblood
of the nation. Therefore, statutes that allow exemptions are construed
strictly against the grantee and liberally in favor of the government.

WHEREFORE, the petition is DENIED for lack of merit.

Costs against petitioner.
SO ORDERED.
Tax Case Digest: Filipinas Synthentic Fiber V. CA (1999)

THIRD DIVISION
Filipinas Synthentic Fiber v. CA (1999)
G.R. Nos. 118498 & 124377 October 12, 1999
PURISIMA, J.

Lessons Applicable: Apply accrual method equally for both deduction and
income, estoppel applies in CTA tax disputes

Laws Applicable:

FACTS:

 Filipinas Synthetic Fiber Corp. received a letter of demand for

deficiency withholding tax on interest loans, royalties and guarantee
fees paid by it non-resident corporations.
 It filed a protest on the ground that: "For Philippine Internal Revenue
Tax purposes, the liability to withhold is from the time of accrual or
remittance citing BIR ruling No. 71-3003 and 24-71-003-154-84.
 It then filed a Petition for Review at the CTA and CA who denied its
petition that it can be paid upon remittance.

ISSUE: W/N liability to withhold tax at source on income payments to non-

resident foreign corporations arises upon remittance of the amount due
rather than upon accrual.

HELD: No. CA AFFIRMED in toto.

 Section 53 (c) he is held personally liable for the tax he is duty bound
to withhold; whereas, the Commissioner of Internal Revenue and his
deputies are not made liable to law.
 Since there was a definite clear liability and imminent certainty that it
was going to earn income it should already be taxable.
 Moreover, petitioner is estopped for he has already claimed
deductions as there were incurred as a business expense in the form
of interest and royalties paid.