Asia International Auctioneers vs CIR

Case Digest GR 179115 Sept 26 2012

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Facts:
Asia International Auctioneers (AIA), a duly organized corporation operating within the Subic Special
Economic Zone, is engaged in the importation of used motor vehicles and heavy equipment which it
sells to the public through auction. When the BIR assessed AIA for deficiency taxes, AIA filed a protest
which was not acted upon by the BIR. AIA filed a petition for review before the CTA. BIR filed a motion
to dismiss for AIA’s failure to timely appeal the protest, which was granted both by the CTA Division
and En Banc.

While the case was pending before the SC, AIA availed of the Tax Amnesty Program under RA 9840
to which it submitted a certificate of qualification issued by the BIR. The CIR contends however that
AIA is disqualified under Sec 8 (a) of the RA 9840 because it is “deemed” a withholding agent for the
deficiency taxes. Also, the CIR argues that AIA, being an accredited investor/taxpayer situated at the
Subic Special Economic Zone, should have availed of the tax amnesty granted under RA 9399 and
not under RA 9480.

Issue 1: W/N AIA is deemed a withholding agent for the deficiency VAT and excise taxes
No. The CIR did not assess AIA as a withholding agent that failed to withhold or remit the deficiency
VAT and excise tax to the BIR under relevant provisions of the Tax Code. Hence, the argument that
AIA is “deemed” a withholding agent for these deficiency taxes is fallacious.
Indirect taxes, like VAT and excise tax, are different from withholding taxes. In indirect taxes, the
incidence of taxation falls on one person but the burden thereof can be shifted or passed on to another
person, such as when the tax is imposed upon goods before reaching the consumer who ultimately
pays for it. On the other hand, in case of withholding taxes, the incidence and burden of taxation fall
on the same entity, the statutory taxpayer. The burden of taxation is not shifted to the withholding
agent who merely collects, by withholding, the tax due from income payments to entities arising from
certain transactions27and remits the same to the government. Due to this difference, the deficiency
VAT and excise tax cannot be “deemed” as withholding taxes merely because they constitute indirect
taxes.

Issue 2: W/N the tax amnesty under RA 9399 is the only available program for business enterprises operating
within special economic zones or freeports
No. RA 9399 was passed prior to the passage of RA 9480. RA 9399 does not preclude taxpayers
within its coverage from availing of other tax amnesty programs available or enacted in futuro like RA
9480. More so, RA 9480 does not exclude from its coverage taxpayers operating within
special economic zones. As long as it is within the bounds of the law, a taxpayer has the liberty to
choose which tax amnesty program it wants to avail.
 Team Energy Corp vs CIR
Case Digest GR 197760 Jan 13 2014
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Facts:
Team Energy, formerly Mirant Pagbilao, is a registered VAT taxpayer, filed on December 20 2006, an
administrative claim for cash refund or issuance of tax credit certificate for the input VAT it paid for the
first three quarters of 2005. TEC appealed the CIR’s inaction before the CTA on April 18, 2007. (The
CTA Division took cognizance of the judicial claim even if it was filed within the 120-day period,
pursuant to DA-489-03 which states that the taxpayer-claimant need not wait for the lapse of 120-day
period before it could seek judicial relief with the CTA. During that time, it was the rule applicable from
its issuance on December 3, 2003 before the promulgation of the Aichi case on October 6, 2010.)

However, on Nov 26, 2010, the CTA Division reversed its earlier decision on the ground that the CTA
has no jurisdiction over the case for being prematurely filed. It based its ruling on the Aichi case which
held that the 120-30 day rule in case of inaction under Section 112 (C) of the NIRC is mandatory and
jurisdictional.

Issue 1: W/N the CTA has jurisdiction over the claim even if it was prematurely filed
Yes. As a rule laid down by the SC in the San Roque case, the CTA may take cognizance of judicial
claims filed during the interim period from the promulgation of the BIR RR DA-489-03 on Dec 3 2003
until the adoption of the Aichi case on Oct 6 2010.
Since the Commissioner has exclusive and original jurisdiction to interpret tax laws, taxpayers acting
in good faith should not be made to suffer for adhering to general interpretative rules of the
Commissioner interpreting tax laws, should such interpretation later turn out to be erroneous and be
reversed by the Commissioner or by the SC. Section 246 of the Tax Code expressly provides that a
reversal of a BIR regulation or ruling cannot adversely prejudice a taxpayer who, in good faith, relied
on the BIR regulation or ruling prior to its reversal.

Here, TEC filed its judicial claim on April 18, 2007 or after the issuance of BIR Ruling No. DA-489-03
on December 10, 2003 but before October 6, 2010, the date when the Aichi case was promulgated.
Thus, even though TEC’s judicial claim was prematurely filed without waiting for the expiration of the
120-day mandatory period, the CTA may still take cognizance of case as it was filed within the period
exempted from the 120-30-day mandatory period.

Issue 2: W/N DA-489-03 is a general interpretative rule applicable to all taxpayers

Yes. BIR Ruling No. DA-489-03 is a general interpretative rule because it is a response to a query
made, not by a particular taxpayer, but by a government agency tasked with processing tax refunds
and credits, that is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the
Department of Finance. This government agency is also the addressee, or the entity responded to, in
BIR Ruling No. DA-489-03. Thus, while this government agency mentions in its query to the
Commissioner the administrative claim of Lazi Bay Resources Development, Inc., the agency was, in
fact, asking the Commissioner what to do in cases like the tax claim of Lazi Bay Resources
Development, Inc., where the taxpayer did not wait for the lapse of the 120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR
Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this
Court in Aichi on 6 October 2010, where this Court held that the 120-130 day periods are mandatory
and jurisdictional. ##
 CIR vs Mindanao II Geothermal Partnership
Case Digest GR 191498 Jan 15 2014
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Facts:
Mindanao II is a registered taxpayer whose sales to NAPOCOR are all zero-rated pursuant to the
EPIRA Law. On Oct 6 2005, it filed with the BIR an application for the refund or credit of accumulated
unutilized creditable input taxes for the second, third, and fourth taxable quarters of the taxable year
2004. The administrative claim was not acted upon until Feb 3 2006, or 120 days after Oct 6 2005.
Believing that a judicial claim must be filed within the 2-year prescriptive period provided under Sec
112 (A) and that it must be reckoned from the date of filing of its VAT returns, Mindanao filed on July
26 2006 a petition for review before the CTA claiming inaction on the part of the CIR.

On Aug 12 2008, the CTA Division granted Mindanao II’s claim for refund/credit and held that
its judicial claim was timely filed within the 2-year prescriptive period. The CIR opposed the rulings
claiming that prescription had already set in when Mindanao II filed its judicial claim beyond the 30-
day period fixed in Section 112 (C).

CTA En Banc's Contentions

Issue 1: W/N Mindanao II’s administrative claim for refund/credit was timely filed
Yes. Pursuant to Section 112 (A) of the 1997 Tax Code, it is only the administrative claim which is to
be filed within the two-year prescriptive period, and the two-year prescriptive period begins to run from
the close of the taxable quarter when the sales were made. Here, Mindanao II filed its claim for
refund/credit for the second, third, and fourth quarters of 2004 on Oct 6 2005. Such date is well within
the two-year prescriptive period which runs from June 30 2004 (2nd Quarter), Sept 30 2004 (3rd
Quarter) and Dec 31 2004 (4th Quarter).
[The Atlas and Mirant rulings are simply not applicable in this case because Mindanao II’s application
for refund/credit on Oct 6 2005 was filed before their promulgation. The Atlas ruling is held to be
applicable only on cases filed from June 8 2007, the date of its promulgation, and up to Sept 12 2008,
the date when the Mirant case was promulgated.

In Atlas, the court laid down a rule that the 2-year prescriptive period is reckoned from the date of filing
of the return and payment of taxes. In Mirant, such rule was abandoned. Following the verba legis
doctrine, Mirant held that in administrative claims for refund/credit of unutilized input VAT, the 2-year
prescriptive period begins to run from the close of taxable quarter when the relevant sales were made.
This rule, which is obviously consistent with the plain wordings of Section 112 (A), was also affirmed
in the recent case of San Roque.]

Issue 2: W/N Mindanao II’s judicial claim for refund/credit was timely filed
 No. Under Section 112 (C), the judicial claim must be filed by the taxpayer within 30 days after the
120-day waiting period if its administrative claim was not acted upon by CIR. Here, Mindanao II filed
its application for refund on Oct 6 2005. When it was not acted upon, it filed a judicial claim but only
on July 21 2006, or 138 days after the lapse of the 30-day period on 5 March 2006. Its petition for
review before the CTA was therefore filed late.
Contrary to the erroneous contentions of the CTA En Banc, the correct interpretation of Section 112,
as held in San Roque, is that the 30-day period applies not only to instances of actual denial by the
CIR of the claim for refund or tax credit, but to cases of inaction by the CIR as well. Also, following the
verba legis doctrine, the 30-day period to appeal is both mandatory and jurisdictional. Section 112 (C)
is clear, plain and unequivocal in expressly providing that the taxpayer has a 30-day period to appeal
the decision or inaction of the Commissioner. ##

***When reading the full text of this case, please note the difference in letterings of Section 112
particularly Section 112 (C) and (D) of the NIRC as amended by RA 9337 of 2005. In this digested
version, Section 112 (C) is used to refer to Section 112 (D) of the old NIRC. ***
Summary of Rules on Prescriptive Periods for Claiming Refund or Credit of Input Tax
Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year prescriptive period. (Aichi)
2. The proper reckoning date for the two-year prescriptive period is the close of the taxable quarter when the
relevant sales were made. (San Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June 2007 to12 September 2008. Atlas states
that the two-year prescriptive period for filing a claim for tax refund or credit of unutilized input VAT payments
should be counted from the date of filing of the VAT return and payment of the tax. (San Roque)
120 + 30 Day Period
1. The taxpayer can file an appeal in one of two ways:
(1) file the judicial claim within thirty days after the Commissioner denies the claim within the 120-day
period, or
(2) file the judicial claim within thirty days from the expiration of the 120-day period if the Commissioner
does not act within the 120-day period.

2. The 30-day period always applies, whether there is a denial or inaction on the part of the CIR.
3. As a general rule, the 30-day period to appeal is both mandatory and jurisdictional. (Aichi and San Roque)
4. As an exception to the general rule, premature filing is allowed only if filed between 10 December 2003 and 5
October 2010, when BIR Ruling No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR Ruling No. DA-489-03 was in force. (San
Roque)
*** See also: BIR Revenue Regulation 54-2014 (RR 54-2014) ***
 Fort Bonifacio vs CIR
Case Digest GR 173425 Jan 22 2013
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Facts:
In 1995, Fort Bonifacio Development Corporation purchased from the national government a portion
of the Fort Bonifacio reservation. On January 1, 1996, the enactment of RA 7716 extended the
coverage of VAT to real properties held primarily for sale to customers or held for lease in the ordinary
course of trade or business. Thus, FBDC sought to register by submitting to BIR an inventory of all its
real properties, the book value of which aggregated to about P71 B.

In October 1996, FBDC started selling Global City lots to interested buyers. For the first quarter of
1997, it paid the output VAT by making cash payments to the BIR and credited its unutilized input tax
credit on purchases of goods and services. Realizing that its 8% transitional input tax credit was not
applied in computing its output VAT for the first quarter of 1997, FBDC filed with the BIR a claim for
refund of the amount erroneously paid as output VAT for the said period.

The CTA denied refund on the ground that “the benefit of transitional input tax credit comes with the
condition that business taxes should have been paid first.” It contends that since FBDC acquired the
Global City property under a VAT-free sale transaction, it cannot avail of the transitional input tax
credit. The CTA likewise pointed out that under RR 7-95, implementing Section 105 of the old NIRC,
the 8% transitional input tax credit should be based on the value of the improvements on land such as
buildings, roads, drainage system and other similar structures, constructed on or after January 1, 1998,
and not on the book value of the real property.
Issue 1: W/N prior payment of taxes is required in availing of the transitional input tax credit
No. First, nothing in Sec 105 of the NIRC indicates that prior payment of taxes is necessary to avail of
the transitional input tax credit. Clearly, all it requires is for the taxpayer to file a beginning inventory
with the BIR. Courts cannot limit the application or coverage of a law nor can it impose conditions not
provided therein because to do so constitutes judicial legislation.
Second, prior payment of taxes is not required to avail of the transitional input tax credit because it is
not a tax refund per se but a tax credit. Tax credit is not synonymous to tax refund. Tax refund is
defined as the money that a taxpayer overpaid and is thus returned by the taxing authority. Tax credit,
on the other hand, is an amount subtracted directly from one’s total tax liability. It is any amount given
to a taxpayer as a subsidy, a refund, or an incentive to encourage investment. Thus, unlike a tax
refund, prior payment of taxes is not a prerequisite to avail of a tax credit.

Lastly, the fact that FBDC acquired the Global City property under a tax-free transaction makes no
difference as prior payment of taxes is not a pre-requisite.

Issue 2: W/N the transitional input tax credit applies only to the value of improvements
No. Section 4.105-1 of RR 7-95, insofar as it limits the transitional input tax credit to the value of
the improvement of the real properties, is a nullity. The 8% transitional input tax credit should not be
limited to the value of the improvements on the real properties but should include the value of the real
properties as well.
Hence, since FBDC is entitled to the 8% transitional input tax credit which is more than sufficient to
cover its output tax for the first taxable quarter, the amount of VAT output taxes erroneously paid must
be refunded.

Issue 3: W/N the Tax Code allows either a cash refund or a tax credit for input VAT
Yes. First, a careful reading of Section 112 of the Tax Code shows that it does not prohibit cash refund
or tax credit of transitional input tax in the case of zero-rated or effectively zero-rated VAT registered
taxpayers, who do not have any output VAT.
The phrase “except transitional input tax” in Section 112 of the Tax Code was inserted to
distinguish creditable input tax fromtransitional input tax credit. Transitional input tax credits are input
taxes on a taxpayer’s beginning inventory of goods, materials, and supplies equivalent to 8% (then
2%) or the actual VAT paid on such goods, materials and supplies, whichever is higher. It may only
be availed of once by first-time VAT taxpayers. Creditable input taxes, on the other hand, are input
taxes of VAT taxpayers in the course of their trade or business, which should be applied within two
years after the close of the taxable quarter when the sales were made.

As regards Section 110, while the law only provides for a tax credit, a taxpayer who erroneously or
excessively pays his output tax is still entitled to recover the payments he made either as a tax credit
or a tax refund.

Here, since FBDC still has available transitional input tax credit, it filed a claim for refund to recover
the output VAT it erroneously or excessively paid for the 1st quarter of 1997. Thus, there is no reason
for denying its claim for tax refund/credit.
 Western Mindanao Power Corp vs CIR
Case Digest GR 181136 June 13 2012
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Facts:
WMPC, engaged in the production and sale of electricity, is registered as a VAT taxpayer. It sells
electricity solely to the National Power Corporation (NPC), which is in turn exempt from the payment
of all forms of taxes, duties, fees and imposts, pursuant to its charter. Also, pursuant to Section 108(B)
(3) of the NIRC, WMPC’s power generation services to NPC is zero-rated. Thus, WMPC tried to file
an application for tax credit certificates on input VAT paid to its zero-rated sales. However, its
application was denied because of WMPC’s failure to comply with the invoicing requirements under
Section 113 of the NIRC in relation to Sec 4.108-1 of RR 7-95.

Issue: W/N denial of application for tax refund or tax credit on the ground that the taxpayer’s Official
Receipts do not contain the phrase “zero-rated” is proper
Yes. Failure to indicate the term zero-rated in the invoice or receipt for zero-rated transactions is fatal.
In a claim for tax refund or tax credit, the taxpayer must prove not only entitled to the grant of claim
under substantive law, but must also show satisfaction of all the documentary and evidentiary
requirements for an administrative claim of a refund or tax credit. Hence, the mere fact that the
applicant’s zero-rating has been approved by the CIR does not, by itself, justify the grant of a refund
or tax credit. The taxpayer must further comply with the invoicing and accounting requirements
mandated by the NIRC, as well as the revenue regulations implementing them.

Under the NIRC, a creditable input tax should be evidenced by a VAT receipt or Official Receipt, which
may only be considered as such when it complies with the requirements of RR 7-95 particulary Section
4.108-1 thereof. This section requires, among others, that if the sale is subject to zero-percent VAT,
the term zero-rated sale shall be written or printed prominently on the invoice or receipt. ##
 CIR vs Shell
Case Digest GR 188497 Apr 25 2012
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Facts:
Petron filed for a tax refund for the excise taxes it paid for petroleum products sold to international
carriers of foreign registry for their use or consumption outside the Philippines. Petron claims that it is
entitled to a tax refund because those petroleum products it sold to international carriers are not
subject to excise tax as provided for in Section 135 (a), hence the excise taxes it paid upon withdrawal
of those products were erroneously or illegally collected and should not have been paid in the first
place. Petron argues that since the excise tax exemption attached to the petroleum products
themselves, the manufacturer or producer is under no duty to pay the excise tax thereon.

Issue: W/N manufacturers or producers of petroleum products are exempt from the payment of excise
tax on petroleum sold to international carriers
No. The intent of Section 135 is to grant excise tax exemption to international carriers and exempt
entities as buyers of petroleum products and not to the manufacturers or producers of said goods.
Since the excise taxes are collected from manufacturers or producers before removal of the domestic
products from the place of production, Petron paid the excise taxesas manufacturer or producer of the
petroleum products pursuant to Sec. 148 of the NIRC. Thus, regardless of who the buyer/purchaser
is, the excise tax on petroleum products attached to the said goods before their sale or delivery to
international carriers.
Sec. 135 (a) and (c) granting exemption from the payment of excise tax on petroleum products can
only be interpreted to mean that Petron cannot pass on to international carriers and exempt agencies
the excise taxes it paid as a manufacturer or producer. Hence, Petron is not entitled to a refund of the
excise taxes it paid for the petroleum products sold to international carriers.
 CIR vs Petron
Case Digest GR 185568 March 12 2012
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Facts:
For the taxable years of 1995-1998, Petron Corp paid its tax liabilities with the Tax Credit Certificates
(TCC) it received from different BOI-registered companies as consideration for the delivery of
petroleum products to these companies. Petron’s acceptance and use of the TCCs has been
continuously approved by the Department of Finance as well as the BIR Collection Program Division
through its surrender and subsequent issuance of Tax Debit Memos (TDMs). In a post-audit conducted
by the DOF, it was found out that the TCCs issued to the TCC transferors were fraudulently obtained
and fraudulently transferred to Petron. Thus, the TCCs and TDMs issued to Petron were cancelled by
the DOF.

Now, the CIR issued an assessment against Petron for deficiency excise taxes for the taxable years
1995-1998, inclusive of surcharges and interests, on the ground that the TCCs which Petron used to
pay its taxes were cancelled and therefore has the effect of nonpayment of taxes. The CIR also alleged
that Petron has the intent to evade its taxes, thus making the returns it filed fraudulent.

In the stipulation of facts between the parties, one of the judicial admissions was that Petron never
participated in the procurement and issuance of the TCCs to its transferors. Also, before the CTA En
Banc, it was held that Petron was an innocent purchaser in good faith and for value.

Issue: W/N the post-audit report has the effect of a suspensive condition that would determine the
validity of the TCCs
No. It is a well-settled rule in jurisprudence that TCCs are valid and effective from their issuance and
are not subject to a post-audit as a suspensive condition for their validity. Thus, Petron has the right
to rely on the validity and effectivity of the TCCs that were assigned to it. In finally determining their
effectivity in the settlement of Petron’s excise tax liabilities, the validity of those TCCs should not
depend on the results of the DOFs post-audit findings.
As an exception, the transferee/assignee may be held liable if proven to have been a party to the fraud
or to have had knowledge of the fraudulent issuance of the subject TCCs. But here, the parties entered
into a joint stipulation of facts stating that Petron did not participate in the procurement or issuance of
those TCCs. Thus, the exception to the rule is not applicable as Petron was an innocent transferee for
value of the TCCs.

Issue 2: W/N the doctrine of “non-applicability of estoppel to the government” apply in this case
No. As a general rule, the principle of estoppel does not apply to the government, especially on matters
of taxation. Taxes are the nation’s lifeblood through which government agencies continue to operate
and with which the State discharges its functions for the welfare of its constituents. The exception
however is that this rule cannot be applied it if it would work injustice against an innocent party.
Petron has not been proven to have had any participation in or knowledge of the CIR’s allegation of
fraudulent transfer and utilization of the TCCs. Petron’s status as an innocent purchaser for value has
been established and even stipulated upon by the CIR. Petron was thereby amply protected from the
adverse findings subsequently made by the DOF agency. ##

Relevant Laws
Petron vs CIR, 2007
 Lascona vs CIR
Case Digest GR 171251 March 5 2012
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Facts:
On March 27 1998, the CIR issued an assessment notice against Lascona Land Co., Inc informing
the latter of its deficiency income tax for the year 1993. On March 27 1998, Lascona filed a letter
protest. In its letter dated March 3, 1999, which was received by Lascona on March 12, 1999, the
Commissioner denied the protest on the ground that the assessment has become final and executory
when Lascona did not appeal before the CTA within 30 days after the lapse of 180-day period as
mandated by Sec 228 of the NIRC.

On April 12 1999, Lascona appealed the Commissioner’s decision before the CTA. Lascona averred
that the Commissioner erred in ruling that failure to file a timely appeal before the CTA resulted to the
finality of the assessment.

Issue: W/N the taxpayer’s failure to appeal before the CTA within 30 days after the lapse of the 180-
day reglementary period pursuant to Sec 228 resulted to the finality of the assessment
No. First, it must be clarified that the word “decision” does not signify the assessment itself. It is well-
established in jurisprudence that the word “decision” in the CTA Charter has been interpreted to mean
the decisions of the Commissioner on the protest of the taxpayer against the assessments.
Second, the filing of an appeal within 30 days after the lapse of 180-day period is not the only remedy
available in case of inaction by the CIR on the protested assessment. It is a well-settled rule in
jurisprudence, which is consistent with the Revised Rules of the CTA, that the taxpayer may also opt
to await the final decision of the Commissioner on the disputed assessment and appeal such decision
to the CTA within 30 days after the receipt of a copy of such decision. These options are mutually
exclusive and resort to one bars the application of the other.

Here, considering that Lascona opted to await the final decision of the Commissioner on the protested
assessment, it then has the right to appeal such final decision to the CTA by filing a petition for review
within 30 days after receipt of copy of such decision or ruling, even after the expiration of the 180-day
period fixed by law for the CIR to act on the disputed assessments. Thus, Lascona, when it filed an
appeal on April 12 1999 before the CTA, after its receipt of the Letter dated March 3 1999 on March
12 1999, the appeal was timely made as it was filed within 30 days after receipt of copy of the decision.
#

Note ***RMC 54-2014

In the filing of administrative claims for refund or tax credit of input taxes, the option for the taxpayer
to wait for the Commissioner’s decision on its claim before filing an appeal may not be available.
Under the new rule promulgated by the BIR in 2014, if the claim for VAT refund or credit is not acted
upon by the Commissioner within the 120-day period as required by law, such inaction shall be deemed
a denial of the application for tax refund or credit. Further, the new regulation provides that the taxpayer
can appeal in one of the two ways: (1) File the judicial claim within 30 days after the Commissioner
denies the claim within the 120-day period, or (2) File the judicial claim within 30 days after the
expiration of the 120-day period if the Commissioner did not act on the claim.
This will have to mean that, unlike in the case of appealing before the CTA for disputed assessments,
the remedy of the taxpayer to wait for the Commissioner’s decision even after the 120-day period is
not available when it comes to claiming refund or tax credit of VAT input taxes.Thus, if the taxpayer
failed to file an appeal or judicial claim within 30 days after the lapse of the 120-day period of the
Commissioner’s inaction, the taxpayer loses its right to appeal to the CTA.

Relevant Laws
 Rieta vs People
GR 147817, 436 SCRA 273, August 12, 2004
Taxation Law, Criminal Law
Facts:
The authorities intercepted a cargo truck containing 305 cases of “blue-seal” or untaxed cigarettes,
which was escorted by a toyota car loaded with firearms. The cargo truck was driven by a civilian who
managed to escape. Among those caught in the act and charged with violations were two policemen
who accompanied the driver in the cargo truck, and another civilian and three policemen manning the
toyota car. Some of the policemen were found to be personnel of COSAC or Constabulary Off-Shore
Anti Crime battalion who have no mission orders. They were apprehended, charged with smuggling,
and the confiscated cigarettes were entrusted to the custody of the Bureau of Customs.

On appeal, the accused contended that the existence of the blue-seal cigarettes was not established
because the prosecution had not presented them as evidence, and that there was no crime because
the corpus delicti was never proven during the trial.

Issue 1: W/N the fact of the crime was sufficiently established

Held:
Yes. Corpus delicti may be proven by credible testimony of witnesses, not necessarily by physical
evidence. This means that the confiscated “blue-seal” cigarettes need not be presented as evidence
in court to prove smuggling. In this case, a custody receipt issued by the BOC was presented and the
testimonies of the apprehending authorities identifying the contraband items were found
credible. Such are sufficient to prove the fact of the crime.

Issue 2: W/N the accused committed smuggling

Held:
Yes. Under Section 3601 of the Tariff and Customs Code, persons found to be in possession of
smuggled items are presumed to be engaged in smuggling. In this case, the defendants were shown
to have had possession of illegally imported merchandise without offering any satisfactory
explanations. Hence, conviction is proper since they were not able to rebut the presumption. ##
Commissioner vs Kudos Metal Corporation
GR 178087, May 5, 2010
Facts:
The BIR reviewed and audited Kudos Metal’s records after the latter filed its income tax
return. Meanwhile, Pasco, the corporation’s accountant, executed two waivers of raising the defense
of prescription so that the BIR may complete its investigation even after the 3-year period of
assessment expires. The waivers, however, were executed with the following defects: first, Pasco was
not duly authorized to sign the waiver in behalf of Kudos; second, the date of acceptance by the
Commissioner were not indicated in the first waiver; and lastly, the fact of receipt by Kudos Metal of
its file copy was not indicated in the original copies of the waivers.

When BIR issued a PAN for the taxable year 1998, followed by FAN, which was dated September 3,
2003 and received by Kudos Metal on November 3, 2003, the latter protested the assessments. The
BIR insisted on collecting the tax so Kudos Metal brought the issue before the CTA, claiming that the
government’s right to assess taxes had prescribed.

Issue 1: W/N the notices of assessment were issued by BIR beyond the 3-year prescriptive period
Held:
Yes. The period for assessment prescribed already because the waivers allowing the extension of
the period were void. Section 222 of the NIRC and RMO-20-90, which lays down the procedure for
the proper execution of waivers, were not complied with. Most importantly, the date of acceptance by
the BIR was not indicated so there is no way to determine if the suspension was made within the
prescriptive period. The BIR as a result is now barred from collecting the unpaid taxes from Kudos
Metal.

Issue 2: W/N Kudos Metal is estopped from claiming prescription by executing the waivers
Held:
No. The doctrine of estoppel, which is predicated on equity, is not applicable here because there is a
detailed procedure for the proper execution of a waiver. The BIR failed to comply with the
requirements of such law, plain and simple. It cannot now use estoppel to make up for its failure most
especially because a waiver of the statute of limitations, which derogates a taxpayer’s right to security
against prolonged and unscrupulous investigations, must be carefully and strictly construed. ##
Koppel Philippines, Inc. vs Alfredo Yatco (Collector of Internal Revenue)
GR L47673, 77 Phil 496, October 10, 1946
Facts:
Koppel Industrial Car and Equipment company (KICE), a foreign company not doing business in the
Philippines, owned 995 shares out of the 1000 shares that comprise the capital stock of KPI, a
domestic corporation licensed as commercial broker in the Philippines. The remaining 5 shares were
owned by each of the officers of KPI. KICE is in the business of selling railway materials, machineries
and supplies. Buyers in the Philippines, when interested, asked for price quotations from KPI, and
KPI then cabled for the quotation desired from KICE. However, KPI quoted to the purchaser a selling
price above the figures quoted by KICE. On the basis of these quotations, orders were placed by the
local buyers. Between KICE and KPI, the arrangement nonetheless was that KICE controls how much
share of the profits goes to KPI. For these transactions, the BIR treated KPI as a subsidiary of KICE
and collected from KPI the merchants’ sales tax, which was a revenue law in force at the time the
sales took place.

KPI paid the taxes under protest, demanded for refund and contended that KPI could not be liable for
merchants’ sales tax because it was only acting as broker between KICE and the local buyers. The
lower court dismissed the complaint and ruled in favor of the government.

Issue 1: W/N KPI did business with the local buyers as an agent of KICE and not as broker
Held:
Yes. The facts that KICE unilaterally controls the amount of so-called “share in the profits” of KPI and
that KICE owns an overwhelming majority (99.5%) of the capital stock of the KPI are sufficient to
conclude that the latter is a mere dummy, agent or wholly-owned subsidiary of KICE. Such conclusion
is based on the doctrine that courts may ‘pierce the corporate veil’ to uncover the true intents of these
corporations.

Issue 2: W/N the application of “piercing the corporate veil” doctrine is proper
Held:
Yes. With regards only to the transactions involved, KPI and KICE were treated as one and the same
so that taxes could be rightly collected. The court has to disregard this “corporate fiction” to prevent
KICE / KPI from evading its taxes by contravening the local internal revenue laws.

The court did not deny legal personality to KPI; in fact, it had no power to hold so. The doctrine was
used only to adjudge the rights and liabilities of each parties in these kind of transactions. ##
Shell Corporation v. Vano (As Municipal Treasurer)
GR L-6093, 94 Phil 387, February 24, 1954
Facts:
The Municipal Council of Cordova, Cebu adopted Ordinance 10 which imposes an annual tax on
occupation or the exercise of the privilege of installation manager and Ordinance 11 imposing an
annual tax on tin can factories having a maximum output capacity of 30,000 tin cans. Shell, a foreign
corporation, disputed the ordinances and contended that: first, “installation manager” is a designation
made by the company and such designation cannot be deemed to be a “calling” as defined in Sec 178
of NIRC and that the installation manager employed by Shell is a salaried employee which may not
be taxed by the municipal council under the provisions of NIRC; second, the ordinance is
discriminatory and hostile because there is no other person in the locality who exercises such
designation or calling; and third, the imposition of tax on tin can factories having a 30,000 maximum
output capacity is unlawful because it is a percentage tax and falls under the exceptions provided in
the Tax Code.

Issue: W/N an installation manager, although a salaried employee, is liable for occupation tax
Ruling:
Yes. Even if the installation manager is a salaried employee of the corporation, still it is an
occupation. Further, one occupation or line of business does not become exempt by being conducted
with some other occupation or business for which such tax has been paid. The occupation tax must
be paid by each individual engaged in a calling subject to it.

Issue 2: W/N the ordinance is unconstitutional because it is hostile and discriminatory

Ruling:
No. The fact that there is no other person in the locality who exercises such a “designation” or calling
does not make the ordinance discriminatory and hostile, inasmuch as it is and will be applicable to any
person or firm who exercises such calling or occupation named or designated as “installation manager.

Issue 3: W/N the annual tax imposition on tin can factories having an annual output capacity of 30,000 is
valid
Ruling:
Yes. It is not a percentage tax because the maximum annual output capacity is not a percentage. It
is not a share or a tax based on the amount of the proceeds realized out of the sale of the tin cans
manufactured therein but on the business of manufacturing tin cans having a maximum annual output
capacity of 30,000 tin cans.
Issue 4: W/N the Municipal Treasurer should have been impleaded in this case
Ruling:
No. In an action for refund of municipal taxes claimed to have been paid and collected under an illegal
ordinance, it is not the municipal treasuer who is the real party-in-interest but the municipality
concerned that is empowered to sue and be sued.
##
Commissioner of Internal Revenue v. Melchor Javier
GR 78953, July 31, 1991
Taxation Law
Facts:
Javier’s wife received from Prudential Bank an amount of about $ 1M remitted by her sister abroad
through a US bank. It turned out that the amount of $ 1M was a clerical error and should have been
$1K only. The US bank sued the Javiers, one of which is estafa for failing to return what was not
theirs. Meanwhile, Javier filed his income tax return for that taxable year of 1977, stating his usual
gross and net income. Concerning the excess ‘income’, he added a footnote in his return stating
that: “Taxpayer was recipient of some money received from abroad which he presumed to be a gift
but turned out to be an error and is now subject of litigation.”

The BIR, however, assessed him for deficiency income and demanded that the tax for the amount
mistakenly received and which he was able to dispose be paid. A 50% fraud penalty for filing a
fraudulent return was likewise imposed.

Issue 1: W/N the remittance or income received by error and subject to litigation is taxable
Ruling:
Issue 2: W/N Javier is liable for 50% fraud penalty for merely stating in a footnote in his return an
income as erroneously received and not declaring it as his income
Ruling:
No. Javier is not liable for the 50% fraud penalty because he did not conceal the fact that he received
an income although it was subject of litigation. Fraud must be actual and constructive. This means
that there must be an intentional wrongdoing in order to evade taxes. Not declaring a certain income
but indicating it in a footnote for the BIR to investigate and determine if it is taxable is clearly not
fraudulent. ##
Commissioner of Internal Revenue v. Solidbank Corporation
GR 148191, November 25, 2003
Facts:
In a Court of Tax Appeal’s case (Asian Bank v. CIR), the CTA decided that the 20% final withholding
tax on a bank’s interest/passive income should not form part of its taxable gross receipts in computing
the taxable gross receipts. On the strength of such decision, Solidbank sent a letter-request to the
BIR claiming for refund or issuance of tax credit for the amount that was allegedly overpaid as gross
receipts tax. Without waiting for the BIR’s decision, Solidbank filed a petition for review before the
CTA in order to toll the running of 2-year prescriptive period. The CTA ruled in favor of Solidbank; the
CA affirmed the ruling. The Commissioner questioned the rulings before the SC via Rule 45.
Commissioner's Contention
Issue1:
W/N the 20% final withholding tax on a bank’s interest income forms part of the taxable gross receipts in
computing the 5% gross receipts tax
Held:
Yes. Under Sec 119, the earnings of banks from “passive” income are subject to a 20% FWT. This
tax is withheld at source and is thus not actually and physically received by the banks, because it is
paid directly to the government by the entities from which the banks derived the income. Apart from
the 20% FWT, banks are also subject to a 5% GRT which is imposed by Sec 24 (a)(1) on their gross
receipts, including the “passive” or interest income.

Since the 20% FWT is constructively received by the banks and forms part of their gross receipts or
earnings, it follows that it is subject to the 5% GRT. That they do not actually receive the amount does
not alter the fact that it is remitted for their benefit in satisfaction of their tax obligations.

Issue 2:
W/N there is double taxation
Held:
No. Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT is
not double taxation.
First, the taxes are imposed on two different subject matters. The subject matter of the FWT is the
passive income generated in the form of interest on deposits and yield on deposit substitutes, while
the subject matter of the GRT is the privilege of engaging in the business of banking.
A tax based on receipts is a tax on business rather than on the property; it is an excise rather than a
property tax. It is not an income tax, unlike the FWT. In fact, one can be taxed for engaging in business
and further taxed differently for the income derived therefrom. These two taxes are entirely distinct
and are assessed under different provisions.

Second, although both taxes are national in scope because they are imposed by the same taxing
authority — the national government under the Tax Code — and operate within the same Philippine
jurisdiction for the same purpose of raising revenues, the taxing periods they affect are different. The
FWT is deducted and withheld as soon as the income is earned, and is paid after every calendar
quarter in which it is earned. On the other hand, the GRT is neither deducted nor withheld, but is paid
only after every taxable quarter in which it is earned.
Lastly, these two taxes are of different kinds or characters. The FWT is an income tax subject to
withholding, while the GRT is a percentage tax not subject to withholding. ##